rrs/rrso value, page-29

re: rrs/rrso The fair value of the ops will always be a function of the daily price of the FPO's - when these are in the money they should be around the FPO - Exercise Price + time value. You will have levearage at the exercise ratio, ie 1:1, hence there should be ~ a 1 cent move up or down for the same move in the FPO.

The time value will reduce. When the FPO = Exercise Price you can estimate the time value. It was about 2 -3 cents last Dec. Now it will be much less as it fades to 0 by exercise date. At the moment I estimate time value to be about 1.1 cents. Rule of thumb is that time value reduces by 2/3 as the time reduces by 1/3.

At the moment, I think with the right issue, the fundamental position is that the FPO will drop to say 4 cents due to dilution (using current price as base). Hence the ops are being priced relative to the ex date, because there is no news yet that would further elevate the post ex FPO price.

Other impact on ops pricing is obviously the liquididy / sentiment and this will cause some quite large abbherations in price both ways. Risk is far higher in the Ops.

Cheers.