RE: p/l adj due to option liquidations

Your numbers amount to a adjustment of (1,746,675), were the total 2nd order from Jun 29 was (1,891,851), now I understand that I would receive a some negative 2nd order to explain some of this difference I just thought that (145,176) difference (i.e. (1,891,851-1,746675) which should be the true 2nd order) was a bit high.

-----Original Message-----
From: Postlethwaite, John
Sent: Tuesday, July 17, 2001 5:58 PM
To: Punja, Karim; Zufferli, John
Cc: Reeves, Kathy; Dupuy, Mark
Subject: p/l adj due to option liquidations

I wanted to update you on what we have found regarding the liquidations for the financial options and the 2nd order. The problem began at the end of June when coding in enpower was changed for how the delta was reported for put options only. This change to the delta did not carry through to the liquidation values for and as a result the options were liquidating showing a loss instead of a gain. This resulted in large losses in 2nd order because the p/l that could not be explained due to the incorrect liquidations was placed there. The IT group is working to fix the problem which should be done in the next day or two. Until then, Karim and myself will manually reflect the correct liquidations and p/l in the DPR until Enpower is fixed going forward starting with July 18th p/l.

Karim and I have figured the p/l adjustment that needs to be made for July and the last day of June. The total adjustment is $1,746,675 as follows:

July = $1,529,869 (July 1 - 17)
June 29th = $216,806

The July adj was captured on July 17th p/l. The June adjustment needs to be captured as PMA adjustment. As result of the DPR being incorrect for June against the financial liquidations report, the liq rec should be out of balance by at least the adjustment noted above. An FYI for accounting, the financial liquidations report is reporting the correct liquidations numbers for any financial put options!!! The problem lies within the Enpower portcalc not the Financial liq report and that is why the lic rec should be out of balance.

John