Fortescue Metals Group Ltd (FMG) $0.11 Special Dividend

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Fortescue Metals Group Ltd $0.11 Special Dividend – Adjustment implications for ETOs

ASX Notice No. 0126.19.02 dated 22 Feb 2019 described the adjustment method that applied to ETOs over Fortescue Metals Group Ltd (ASX Code: FMG) relating to the $0.11 special dividend and ordinary dividend of $0.19 with ex-dividend date of 28 February 2019.

Effective Date

The effective date of the adjustment is Thursday, 28 February 2019, when the underlying security commences trading on an ex-dividend basis.

ASX determined that the last cum-dividend VWAP based on trading on ASX markets on Wednesday, 27 February 2019 was $6.4438

Standard Method of Adjustment

For an old contract size of 100 shares, the new contract size will be adjusted, using TMC threshold truncation.

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

Theoretical New Contract Size = 100 + ($0.11*100)/($6.4438-$0.19-$0.11)

=101.7904 truncated to 100 where the difference of 1.7904 will be cash adjusted based on the below formula.

Strike Factor = Old Contract Size/Theoretical New Contract Size

Strike Factor = 100/101.7904

= 0.982411

Cash Equalisation Adjustment Payments for Contract Size Roundings

The cash adjustment is calculated by taking the difference between the contract value of the option before and after the adjustment. Variants to the formula apply for rights style adjustments and when the adjustment occurs on the day of the option’s expiry.

Cash adjustment = (BOP * BUV) – (AOP * AUV)

Where

BUV =Before (adjustment) Unit Value = BP * BU rounded to nearest cent

AUV =After (adjustment) Unit Value = AP * AU rounded to nearest cent

BU = units per lot (multiplier) before the adjustment (old traded entity)

AU = units per lot (multiplier) after the adjustment (old traded entity)

BP = for rights style, =SP/Adjustment Factor, for non-rights style=SP.

AP = for rights style, =SP, for non-rights style=SP * Adjustment Factor.

SP = settlement price of the option if not the options expiry day, otherwise the intrinsic price (underlying price-strike price for calls, strike-underlying price for puts) if on expiry date. Refer Notes 1 and 2 below

BOP =pre-adjusted open position Refer Notes 1 and 3 below

AOP =post-adjusted open position Refer Notes 1 and 3 below

Note:

1. Cash adjustments on expiry will apply to exercised positions only.

2. The intrinsic price used for exercised positions on expiry is based on the adjusted strike price for rights style adjustments and the pre-adjusted strike price for non-rights style adjustments. Set negative intrinsic prices to zero i.e. if an out of the money is exercised, the intrinsic price and hence cash adjustment is zero.

3. Pre and post adjusted positions will be the same unless there is a position adjustment factor applied to the open position associated with the adjustment. For rights style use the start of day position (i.e. exclude any UA trading activity), for non-rights style use the (end-of-day) position prior to the adjustment.

4. Cash adjustments will also apply to LEPO positions.

5. For short positions, the result of the cash adjustment formula should have its sign reversed (multiply by -1). For non-LEPO positions the truncation approach ensures that the seller (writer) is always debited and the buyer (taker) is credited. Because the LEPO strike is usually returned to 1c after the adjustment, the holder of a short LEPO position may be credited and long position may be debited.

Refer to table below for adjusted strike and contract size

OLD SIZE	NEW SIZE	OLD STRIKE (CENTS)	NEW STRIKE (CENTS)	Exercise
100	100	1	1	E
100	100	180	177	A
100	100	200	196	A
100	100	220	216	A
100	100	240	236	A
100	100	260	255	A
100	100	280	275	A
100	100	290	285	A
100	100	300	295	A
100	100	301	296	E
100	100	310	305	A
100	100	320	314	A
100	100	321	315	E
100	100	330	324	A
100	100	331	325	E
100	100	340	334	A
100	100	341	335	E
100	100	350	344	A
100	100	351	345	E
100	100	360	354	A
100	100	361	355	E
100	100	370	363	A
100	100	371	364	E
100	100	380	373	A
100	100	381	374	E
100	100	390	383	A
100	100	391	384	E
100	100	400	393	A
100	100	401	394	E
100	100	410	403	A
100	100	411	404	E
100	100	420	413	A
100	100	421	414	E
100	100	430	422	A
100	100	431	423	E
100	100	440	432	A
100	100	441	433	E
100	100	450	442	A
100	100	451	443	E
100	100	460	452	A
100	100	461	453	E
100	100	470	462	A
100	100	471	463	E
100	100	480	472	A
100	100	481	473	E
100	100	490	481	A
100	100	491	482	E
100	100	500	491	A
100	100	501	492	E
100	100	525	516	A
100	100	526	517	E
100	100	550	540	A
100	100	551	541	E
100	100	575	565	A
100	100	576	566	E
100	100	600	589	A
100	100	601	590	E
100	100	625	614	A
100	100	626	615	E
100	100	650	639	A
100	100	651	640	E
100	100	675	663	A
100	100	676	664	E
100	100	700	688	A
100	100	701	689	E
100	100	725	712	A
100	100	726	713	E
100	100	750	737	A
100	100	775	761	A
100	100	800	786	A
100	100	825	810	A
100	100	850	835	A
100	100	875	860	A
100	100	900	884	A
100	100	925	909	A

Need more information?

Issued by

Brendan Laird, Senior Manager, Post Trade Operations

Contact information

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

Notice

Fortescue Metals Group Ltd (FMG) $0.11 Special Dividend – Adjustment Implication for ETOs

Need more information?

Issued by

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Disclaimer

OLD SIZE	NEW SIZE	OLD STRIKE (CENTS)	NEW STRIKE (CENTS)	Exercise
100	100	1	1	E
100	100	180	177	A
100	100	200	196	A
100	100	220	216	A
100	100	240	236	A
100	100	260	255	A
100	100	280	275	A
100	100	290	285	A
100	100	300	295	A
100	100	301	296	E
100	100	310	305	A
100	100	320	314	A
100	100	321	315	E
100	100	330	324	A
100	100	331	325	E
100	100	340	334	A
100	100	341	335	E
100	100	350	344	A
100	100	351	345	E
100	100	360	354	A
100	100	361	355	E
100	100	370	363	A
100	100	371	364	E
100	100	380	373	A
100	100	381	374	E
100	100	390	383	A
100	100	391	384	E
100	100	400	393	A
100	100	401	394	E
100	100	410	403	A
100	100	411	404	E
100	100	420	413	A
100	100	421	414	E
100	100	430	422	A
100	100	431	423	E
100	100	440	432	A
100	100	441	433	E
100	100	450	442	A
100	100	451	443	E
100	100	460	452	A
100	100	461	453	E
100	100	470	462	A
100	100	471	463	E
100	100	480	472	A
100	100	481	473	E
100	100	490	481	A
100	100	491	482	E
100	100	500	491	A
100	100	501	492	E
100	100	525	516	A
100	100	526	517	E
100	100	550	540	A
100	100	551	541	E
100	100	575	565	A
100	100	576	566	E
100	100	600	589	A
100	100	601	590	E
100	100	625	614	A
100	100	626	615	E
100	100	650	639	A
100	100	651	640	E
100	100	675	663	A
100	100	676	664	E
100	100	700	688	A
100	100	701	689	E
100	100	725	712	A
100	100	726	713	E
100	100	750	737	A
100	100	775	761	A
100	100	800	786	A
100	100	825	810	A
100	100	850	835	A
100	100	875	860	A
100	100	900	884	A
100	100	925	909	A

OLD SIZE	NEW SIZE	OLD STRIKE (CENTS)	NEW STRIKE (CENTS)	Exercise
100	100	1	1	E
100	100	180	177	A
100	100	200	196	A
100	100	220	216	A
100	100	240	236	A
100	100	260	255	A
100	100	280	275	A
100	100	290	285	A
100	100	300	295	A
100	100	301	296	E
100	100	310	305	A
100	100	320	314	A
100	100	321	315	E
100	100	330	324	A
100	100	331	325	E
100	100	340	334	A
100	100	341	335	E
100	100	350	344	A
100	100	351	345	E
100	100	360	354	A
100	100	361	355	E
100	100	370	363	A
100	100	371	364	E
100	100	380	373	A
100	100	381	374	E
100	100	390	383	A
100	100	391	384	E
100	100	400	393	A
100	100	401	394	E
100	100	410	403	A
100	100	411	404	E
100	100	420	413	A
100	100	421	414	E
100	100	430	422	A
100	100	431	423	E
100	100	440	432	A
100	100	441	433	E
100	100	450	442	A
100	100	451	443	E
100	100	460	452	A
100	100	461	453	E
100	100	470	462	A
100	100	471	463	E
100	100	480	472	A
100	100	481	473	E
100	100	490	481	A
100	100	491	482	E
100	100	500	491	A
100	100	501	492	E
100	100	525	516	A
100	100	526	517	E
100	100	550	540	A
100	100	551	541	E
100	100	575	565	A
100	100	576	566	E
100	100	600	589	A
100	100	601	590	E
100	100	625	614	A
100	100	626	615	E
100	100	650	639	A
100	100	651	640	E
100	100	675	663	A
100	100	676	664	E
100	100	700	688	A
100	100	701	689	E
100	100	725	712	A
100	100	726	713	E
100	100	750	737	A
100	100	775	761	A
100	100	800	786	A
100	100	825	810	A
100	100	850	835	A
100	100	875	860	A
100	100	900	884	A
100	100	925	909	A

OLD SIZE	NEW SIZE	OLD STRIKE (CENTS)	NEW STRIKE (CENTS)	Exercise
100	100	1	1	E
100	100	180	177	A
100	100	200	196	A
100	100	220	216	A
100	100	240	236	A
100	100	260	255	A
100	100	280	275	A
100	100	290	285	A
100	100	300	295	A
100	100	301	296	E
100	100	310	305	A
100	100	320	314	A
100	100	321	315	E
100	100	330	324	A
100	100	331	325	E
100	100	340	334	A
100	100	341	335	E
100	100	350	344	A
100	100	351	345	E
100	100	360	354	A
100	100	361	355	E
100	100	370	363	A
100	100	371	364	E
100	100	380	373	A
100	100	381	374	E
100	100	390	383	A
100	100	391	384	E
100	100	400	393	A
100	100	401	394	E
100	100	410	403	A
100	100	411	404	E
100	100	420	413	A
100	100	421	414	E
100	100	430	422	A
100	100	431	423	E
100	100	440	432	A
100	100	441	433	E
100	100	450	442	A
100	100	451	443	E
100	100	460	452	A
100	100	461	453	E
100	100	470	462	A
100	100	471	463	E
100	100	480	472	A
100	100	481	473	E
100	100	490	481	A
100	100	491	482	E
100	100	500	491	A
100	100	501	492	E
100	100	525	516	A
100	100	526	517	E
100	100	550	540	A
100	100	551	541	E
100	100	575	565	A
100	100	576	566	E
100	100	600	589	A
100	100	601	590	E
100	100	625	614	A
100	100	626	615	E
100	100	650	639	A
100	100	651	640	E
100	100	675	663	A
100	100	676	664	E
100	100	700	688	A
100	100	701	689	E
100	100	725	712	A
100	100	726	713	E
100	100	750	737	A
100	100	775	761	A
100	100	800	786	A
100	100	825	810	A
100	100	850	835	A
100	100	875	860	A
100	100	900	884	A
100	100	925	909	A