ASX Participants and ASX Clear Pty Limited (ASXCL) Participants are advised that Telstra Corporation Limited (ASX Code: TLS) announced on 15 February 2018 a special dividend of $0.035 and an ordinary dividend of $0.075 (both fully franked). The special dividend and ordinary dividend have the same record date of Thursday, 1 March 2018.

This Notice sets out the adjustment implications for TLS ETOs on account of the special dividend with an ex-date of Wednesday, 28 February 2018.

The Indicative Timetable relevant to TLS ETOs is as follows:

Last date cum-dividend                     Tuesday, 27 February 2018

Ex-dividend                                          Wednesday, 28 February 2018

Record date                                          Thursday, 01 March 2018

ASX, in consultation with ASXCL, advises that under ASX Operating Rule 2230 and the ETO adjustment policy for special dividends set out in Derivatives Notice No. 124 of 16 August 2000, an adjustment will be made to TLS ETOs for the special dividend amount. 

Method of Adjustment

The special dividend method of adjustment set out in Derivatives Notice No. 027 dated 15 February 2008 titled as “ETO Adjustment Calculation Method For Special Dividends Where Paid With Ordinary Dividends With Same Ex-Date” effective from 1 July 2008 will be applied.

In the TLS ETO case, since the ordinary dividend has the same ex-date, OD = $0.075 in the formula below.

Theoretical New Contract Size = Old Contract Size + (total special dividend paid per Old Contract Size)/(S – OD – SD)

Where

S = VWAP of the last cum-dividend share price (expressed in dollars)

OD = amount of ordinary regular dividend per share, if any (OD = $0.075, expressed in Australian dollars)

SD = amount of special dividend per share (SD=$0.035, expressed in Australian dollars)

The theoretical new contract size (TC) will be calculated to 4 decimal places.

The theoretical new contract size (TC) will be truncated using the TMC threshold (see Cash Equalisation Payment further below).

The existing contract size is 100.

New Exercise Price = Old Exercise Price x Old Contract Size/ Theoretical New Contract Size

The strike factor (OC/TC) for all contract sizes will be based on the result calculated for the standard 100 contract size.

The theoretical new contract size is calculated to the nearest four decimal points in the intermediate calculation for the new exercise price. 

To illustrate: 

For 100 contract size:

New Size               = 100 + 100 x 0.035/(cumVWAP-0.075-0.035)

                             = 100 + 3.5/(cumVWAP-0.11), subject to TMC threshold truncation 

New Strike            = Old Strike x 100/Theoretical New Contract Size, calculated to 4 decimal places

                             = Old Strike x strike factor, rounded to 6 decimal places.

What do I need to do by when?

Participants should be aware of the content of this Notice as it sets out the treatment of the special dividend with respect to open positions in ASX TLS ETO contracts.

Effective Date

Participants will be notified of the contract specifications of the adjusted series by way of a further ASX Notice after the close of trading on the last cum-dividend date, Tuesday, 27 February 2018.

All trading in TLS ETO contracts will be on an adjusted basis effective on the ex-date, Wednesday, 28 February 2018.

Need more information?

Issued by

Brendan Laird, Senior Manager, Post Trade Operations

Contact information

Chris Mitchell
1800 623 571
cad@asx.com.au

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