UPDATE (24/10/2018) -  Please be advised a listing restriction will be applied from 24/10/2018 and will be lifted on Wednesday 31/10/2018. The December 2019 ETO series will be terminated. 

UPDATE (15/10/2018) - In line with the updated timetable released by the company on the 18/10/18, the adjustment will be processed on Tuesday, 30/10/18, to be effective on Wednesday, 31/10/18

Insurance Australia Group Limited (ASX Code: IAG) announced a capital management initiative.  The initiative will provide investor a payment of $0.25 per share through a capital return of $0.195 per share and the payment of a fully franked special dividend of $0.055 per share.  The capital return and special dividend will be accompanied by an equal and proportionate consolidation of ordinary shares.  To achieve the consolidation, every ordinary share will be converted into 0.9760 ordinary shares post consolidation. 

The capital management initiative is subject to shareholder approval. 

Indicative timetable impacting IAG ETOs

Effective Date

All trading in IAG ETO contracts will be on an adjusted basis effective on the ex-date, Wednesday, 31 October 2018.

This standard method of adjustment will be processed on Tuesday, 30 October 2018 after market close. ASX will calculate and perform the following 3 adjustments to your open positions.

Contract Size

TC = BC   +     ____R______                             

                       (S - r)(OC/BC)

Where

TC = theoretical new contract size (prior to any rounding) which is used in intermediate calculations

OC = old contract size (currently 100)

BC = number of consolidated shares attributable to each OC (BC = 0.976*100 = 97.6)

r = the value of the cash return attributable to each Underlying Financial Product (r = $0.195 + $0.055 = $0.25)

R = is the value of cash return attributable to each OC (R = ($0.195 + $0.055) * 100 = $25)

S = VWAP of the Underlying Financial Product on the last date of cum and pre-consolidated trading (30 October 2018) 

Cash Adjustment Payments made for Contract Size Rounding

The theoretical new contract size (TC) will be calculated to 4 decimal places and will be truncated using the TMC threshold so that if the theoretical new contract size falls between 100 and to up to but not including 102, the new contract size will be truncated to the standard 100.

The difference, due to truncation, between the theoretical contract size and the adjusted (new) contract size, will be cash adjusted using the ETO cash equalization adjustment payment formula detailed in the final notice.

For cash equalization payments for any contract size rounding, takers (buyer) will be credited and writers (sellers) will be debited. (Note, for share consolidations, it is possible for a LEPO taker (buyer) to be debited if the LEPO strike is adjusted back to 1 cent after initial rounding).

Exercise Price

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.

eg;

For 100 contract size:

New Size               = 97.6 + 25/((VWAP-0.25)*(100/97.6)) 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.

OTC series

Any OTC series cleared by ASXCL under the ASX Equity OTC Clear service will be adjusted using the same formula as the ETOs as shown in this Notice.

To maintain anonymity, the adjusted OTC series details will not be published in the Notice but will be available to clearing participants the following morning via their own clearing systems.

ETO exercise restrictions in relation to an adjustment may occur during the period of 10 business days prior to and including expiry and will also apply to OTC series. However such exercise restrictions will not apply on expiry day of an OTC.

What do I need to do by when?

Specific Cover

As the contract size may be changing arrangements may need to be made for additional lodgement of underlying securities for any collateral denoted as specific cover.

A further notice will be issued after close of trading, Tuesday 30 October 2018 which will list the adjusted series.

Need more information?

Issued by

Brendan Laird, Senior Manager, Post Trade Operations

Contact information

Cheng Zhang
1800 623 571
cad@asx.com.au

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