Ann: Notification of cessation of securities - IVZ, page-48

You're correct with you being better off by $2,000. But you are looking at it from a view with different exposure of shares and a hindsight IVZ share price of 7.5 cents. But you would have been $6,100 worse off if the IVZ share price was 40 cents.

If you then look at it from a view with same exposure of number of shares it paints a different picture again.

See the 2 tables below, hopefully it's clear enough for you to see and realise that you would have been better off by selling 65,000 FPO, use $6,500 for yourself, and then from the surplus of $9,100 buy-back the 65,000 lapsed shares at a cost of $4,875, leaving you better off by $9,100 minus $4,875 which is $4,425.


Table 1: Different exposure of shares

	Starting point: x FPO shares and 65,000 IVZAK
1	PLAY 1 - JAK
2	exercise IVZAK, sell them @ 24
3	Nett: $6,500 cash, x FPO shares, 0 IVZAK shares (total exposure of x shares)
4	PLAY 2 - UMW
5	sell 27,000 FPO @ 24, you get $6,480
6	Nett: $6,500 cash, x - 27,000 (FPO shares), and 65,000 IVZAK shares (total exposure of x + 38,000 shares)
7
8	18-24 months later, lets look at 3 different possible scenarios
9	SCENARIO 1 - share price @ 7.5 cents
10	OPTION 1 - JAK
11	x FPO shares
12	OPTION 2 - UMW
13	need to buy back those 27,000 FPO shares @ 7.5 cents on market (cost $2,025) to have x FPO shares again
14
15	RESULT: JAK better off by $2,025
16	SCENARIO 2 - share price stays the same
17	OPTION 1 - JAK
18	x FPO shares
19	OPTION 2 - UMW
20	convert all options (cost $9,100), sell 65,000-27,000 FPO shares, return of $9,200, nett result $100 and x FPO shares
21
22	RESULT: DRAW
23	SCENARIO 3 - share price @ 40 cents
24	OPTION 1 - JAK
25	x FPO shares
26	OPTION 2 - UMW
27	convert all options (cost $9,100), sell 65,000 - 27,000 FPO shares, return of $15,200, nett result $6,100 and x FPO shares
28
29	RESULT: UMW better off by $6,100

Table 2: Same exposure of shares

	Starting point: x FPO shares and 65,000 IVZAK
1	PLAY 1 - JAK
2	exercise IVZAK, sell them @ 24
3	Nett: $6,500 cash, x FPO shares, 0 IVZAK shares (total exposure of x shares)
4	PLAY 2 - UMW
5	sell 65,000 FPO @ 24
6	Nett: $15,600 cash ($9,100 surplus), x - 65,000 (FPO shares), and 65,000 IVZAK shares (total exposure of x shares)
7
8	18-24 months later, lets look at 3 different possible scenarios
9	SCENARIO 1 - share price @ 7.5 cents
10	OPTION 1 - JAK
11	x FPO shares
12	OPTION 2 - UMW
13	need to buy back those 65,000 FPO shares @ 7.5 cents on market (cost $4,875) to have x FPO shares again
14
15	RESULT: UMW better off by $4,225 ($9,100 surplus minus $4,875 cost)
16	SCENARIO 2 - share price stays the same
17	OPTION 1 - JAK
18	x FPO shares
19	OPTION 2 - UMW
20	convert all options (cost $9,100) for a nett result of x FPO shares
21
22	RESULT: DRAW
23	SCENARIO 3 - share price @ 40 cents
24	OPTION 1 - JAK
25	x FPO shares
26	OPTION 2 - UMW
27	convert all options (cost $9,100) for a nett result of x FPO shares
28
29	RESULT: DRAW