timpb 13.75 cents fully franked, page-2

Hi Watford - I think the market is still pricing in a bit of uncertainty in whether or not the dividend will be paid and what the price of TIM will be at the end of the quarter or in September. I don't think the price rise of TIM this week is necessarily a good indication the dividend will be paid.

A little while ago you asked why there appears to be a mismatch in the price of TIMPB relative to TIM and why anyone would want to hold TIMPB over TIM. Myself and I believe another poster suggested liquidity as one reason. I believe another is that (despite your best efforts to inform people!) that TIMPB is just not that well known. In attempting again to understand the pricing differential this afternoon, I think the second point is exacerbated by the complexity of the terms of the TIMPB offer.

I know that the first time I considered buying TIMPB I was put off by the prospectus and without the time to go through it thoroughly, I decided to go with TIM (but I now have TIMPB as well). I have now gone through the prospectus at least 5 times and again this afternoon and I'd say I still don't really understand all possible outcomes of TIMPB.

We can exchange, for example, at the end of any quarter. But if we do, we can only receive the minimum conversion amount (not a good idea right now!). But conversion can also be triggered by the failure to pay a fully franked dividend. I believe that in this instance the normal conversion rules apply eg a max of 4 TIM shares, but I am not 100% certain. But it also says that conversion can be triggered by the failure to pay the full dividend, but this takes two consecutive periods to cause the trigger. In this instance, if they only pay half but that half is fully franked is conversion not triggered? Or is it triggered because the franking isn't 100% of the full dividend? I suspect it is the former, but again I'm not sure.

What all this means is that I don't know what time period to consider the valuation of TIMPB Do I use the end of this quarter? Or September? This will make some difference and I will therefor have to factor of uncertainty in my valuation. March may come and go without an update on asset sales (good or bad), but I don't think September will. I might be able to convert profitably at the end of the March quarter if TIM is 16 cents, but not at say single digits (or less) in september if there is an unfavourable outcome in the asset sales (eg no sale or a low price). I would therefore be less willing to pay the full TIMPB price as implied by the current price of TIM.

I based my decision to buy based on my understanding of the terms of the first reset date, which I believe valuation still stands (eg at 50 cents it is a worthwhile punt, more so at 40 cents). Some people may not want to have to hold something to September and will either not buy at all, or offer well below the odds to do so.