On 17 February 2021, Rio Tinto Limited (ASX Code: RIO) announced a special dividend of $1.1963 (fully franked) and an ordinary dividend of $3.9748 (fully franked). The special dividend and ordinary dividend have the same record date of Friday, 05 March 2021.

Indicative timetable impacting RIO ETOs

Effective Date

All trading in RIO ETO contracts will be on an adjusted basis effective on the ex-date, Thursday, 04 March 2021.

This standard method of adjustment will be processed on Wednesday, 03 March 2021 after market close. ASX will calculate and perform the following 3 adjustments to your open positions.

Contract Size

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 = $3.9748)

SD = amount of special dividend per share (SD= $1.1963).

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.  If the theoretical new contract size falls above 102, then the new contract size will be truncated down to the nearest whole number.

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 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               = 100 + 100 x 1.1963/($VWAP – 3.9748 – 1.1963)

                             = 100 + 119.63/($VWAP – 5.1711), 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

Contract sizes may change due to this adjustment. Therefore, lodgment of underlying securities may be required for specific covered positions.

After the completion of the adjustment, ASX will undertake a collateral review to identify specific cover accounts that do not have sufficient units lodged to cover their positions.  The identified accounts will have their specific cover reclassified as general cover and be required to meet margins on these positions.

A further notice will be issued after close of trading, Wednesday, 03 March 2021, which will list the adjusted series.

Need more information?

Issued by

Brendan Laird, Senior Manager, Settlement Operations

Contact information

Eldon Hernando
1800 814 051
CHESSHelp@asx.com.au

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