Telstra Corporation Limited (TLS) $0.035 Special Dividend

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Telstra Corporation Limited $0.035 Special Dividend – Adjustment implications for ETOs

ASX Notice No. 0921.18.08 dated 21 August 2018 described the adjustment method that applied to ETOs over Telstra Corporation Limited (ASX Code: TLS) relating to the $0.035 special dividend and ordinary dividend of $0.075 with ex-dividend date of 29 August 2018.

Effective Date

The effective date of the adjustment is Wednesday, 29 August 2018, 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 Tuesday, 28 August 2018 was $3.1814

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 + ($0.035*100)/($3.1814-$0.075-$0.035)

=101.1395 truncated to 100 where the difference of 1.1395 will be cash adjusted based on the below formula.

Strike Factor = Old Contract Size/Theoretical New Contract Size

Strike Factor = 100/101.1395

= 0.988733

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	10	10	A
100	100	11	11	E
100	100	188	186	A
100	100	190	188	A
100	100	193	191	A
100	100	195	193	A
100	100	198	196	A
100	100	200	198	A
100	100	208	206	A
100	100	209	207	E
100	100	210	208	A
100	100	218	216	A
100	100	220	218	A
100	100	228	225	A
100	100	229	226	E
100	100	230	227	A
100	100	238	235	A
100	100	239	236	E
100	100	240	237	A
100	100	247	244	A
100	100	248	245	E
100	100	250	247	A
100	100	257	254	A
100	100	258	255	E
100	100	260	257	A
100	100	267	264	A
100	100	268	265	E
100	100	270	267	A
100	100	277	274	A
100	100	278	275	E
100	100	280	277	A
100	100	281	278	E
100	100	287	284	A
100	100	288	285	E
100	100	290	287	A
100	100	291	288	E
100	100	297	294	A
100	100	298	295	E
100	100	300	297	A
100	100	301	298	E
100	100	307	304	A
100	100	308	305	E
100	100	310	307	A
100	100	311	308	E
100	100	317	313	A
100	100	318	314	E
100	100	320	316	A
100	100	321	317	E
100	100	327	323	A
100	100	328	324	E
100	100	330	326	A
100	100	331	327	E
100	100	337	333	A
100	100	338	334	E
100	100	340	336	A
100	100	341	337	E
100	100	346	342	A
100	100	347	343	E
100	100	350	346	A
100	100	356	352	A
100	100	357	353	E
100	100	360	356	A
100	100	361	357	E
100	100	366	362	A
100	100	367	363	E
100	100	370	366	A
100	100	376	372	A
100	100	377	373	E
100	100	380	376	A
100	100	386	382	A
100	100	387	383	E
100	100	390	386	A
100	100	396	392	A
100	100	397	393	E
100	100	400	395	A
100	100	406	401	A
100	100	407	402	E
100	100	410	405	A
100	100	411	406	E
100	100	416	411	A
100	100	417	412	E
100	100	420	415	A
100	100	421	416	E
100	100	426	421	A
100	100	427	422	E
100	100	430	425	A
100	100	431	426	E
100	100	436	431	A
100	100	437	432	E
100	100	440	435	A
100	100	441	436	E
100	100	445	440	A
100	100	446	441	E
100	100	450	445	A
100	100	451	446	E
100	100	455	450	A
100	100	456	451	E
100	100	460	455	A
100	100	461	456	E
100	100	465	460	A
100	100	466	461	E
100	100	470	465	A
100	100	471	466	E
100	100	475	470	A
100	100	476	471	E
100	100	495	489	A
100	100	496	490	E
100	100	520	514	A
100	100	521	515	E
100	100	544	538	A
100	100	545	539	E
100	100	569	563	A
100	100	570	564	E
100	100	594	587	A
100	100	595	588	E
100	100	643	636	A
100	100	644	637	E
100	100	693	685	A
100	100	742	734	A
100	100	792	783	A

Need more information?

Issued by

Brendan Laird, Senior Manager, Post Trade Operations

Contact information

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

Notice

Telstra Corporation Limited (TLS) $0.035 Special Dividend – Adjustment Implication or ETOs

Need more information?

Issued by

Contact information

Disclaimer

OLD SIZE	NEW SIZE	OLD STRIKE (CENTS)	NEW STRIKE (CENTS)	Exercise
100	100	1	1	E
100	100	10	10	A
100	100	11	11	E
100	100	188	186	A
100	100	190	188	A
100	100	193	191	A
100	100	195	193	A
100	100	198	196	A
100	100	200	198	A
100	100	208	206	A
100	100	209	207	E
100	100	210	208	A
100	100	218	216	A
100	100	220	218	A
100	100	228	225	A
100	100	229	226	E
100	100	230	227	A
100	100	238	235	A
100	100	239	236	E
100	100	240	237	A
100	100	247	244	A
100	100	248	245	E
100	100	250	247	A
100	100	257	254	A
100	100	258	255	E
100	100	260	257	A
100	100	267	264	A
100	100	268	265	E
100	100	270	267	A
100	100	277	274	A
100	100	278	275	E
100	100	280	277	A
100	100	281	278	E
100	100	287	284	A
100	100	288	285	E
100	100	290	287	A
100	100	291	288	E
100	100	297	294	A
100	100	298	295	E
100	100	300	297	A
100	100	301	298	E
100	100	307	304	A
100	100	308	305	E
100	100	310	307	A
100	100	311	308	E
100	100	317	313	A
100	100	318	314	E
100	100	320	316	A
100	100	321	317	E
100	100	327	323	A
100	100	328	324	E
100	100	330	326	A
100	100	331	327	E
100	100	337	333	A
100	100	338	334	E
100	100	340	336	A
100	100	341	337	E
100	100	346	342	A
100	100	347	343	E
100	100	350	346	A
100	100	356	352	A
100	100	357	353	E
100	100	360	356	A
100	100	361	357	E
100	100	366	362	A
100	100	367	363	E
100	100	370	366	A
100	100	376	372	A
100	100	377	373	E
100	100	380	376	A
100	100	386	382	A
100	100	387	383	E
100	100	390	386	A
100	100	396	392	A
100	100	397	393	E
100	100	400	395	A
100	100	406	401	A
100	100	407	402	E
100	100	410	405	A
100	100	411	406	E
100	100	416	411	A
100	100	417	412	E
100	100	420	415	A
100	100	421	416	E
100	100	426	421	A
100	100	427	422	E
100	100	430	425	A
100	100	431	426	E
100	100	436	431	A
100	100	437	432	E
100	100	440	435	A
100	100	441	436	E
100	100	445	440	A
100	100	446	441	E
100	100	450	445	A
100	100	451	446	E
100	100	455	450	A
100	100	456	451	E
100	100	460	455	A
100	100	461	456	E
100	100	465	460	A
100	100	466	461	E
100	100	470	465	A
100	100	471	466	E
100	100	475	470	A
100	100	476	471	E
100	100	495	489	A
100	100	496	490	E
100	100	520	514	A
100	100	521	515	E
100	100	544	538	A
100	100	545	539	E
100	100	569	563	A
100	100	570	564	E
100	100	594	587	A
100	100	595	588	E
100	100	643	636	A
100	100	644	637	E
100	100	693	685	A
100	100	742	734	A
100	100	792	783	A

OLD SIZE	NEW SIZE	OLD STRIKE (CENTS)	NEW STRIKE (CENTS)	Exercise
100	100	1	1	E
100	100	10	10	A
100	100	11	11	E
100	100	188	186	A
100	100	190	188	A
100	100	193	191	A
100	100	195	193	A
100	100	198	196	A
100	100	200	198	A
100	100	208	206	A
100	100	209	207	E
100	100	210	208	A
100	100	218	216	A
100	100	220	218	A
100	100	228	225	A
100	100	229	226	E
100	100	230	227	A
100	100	238	235	A
100	100	239	236	E
100	100	240	237	A
100	100	247	244	A
100	100	248	245	E
100	100	250	247	A
100	100	257	254	A
100	100	258	255	E
100	100	260	257	A
100	100	267	264	A
100	100	268	265	E
100	100	270	267	A
100	100	277	274	A
100	100	278	275	E
100	100	280	277	A
100	100	281	278	E
100	100	287	284	A
100	100	288	285	E
100	100	290	287	A
100	100	291	288	E
100	100	297	294	A
100	100	298	295	E
100	100	300	297	A
100	100	301	298	E
100	100	307	304	A
100	100	308	305	E
100	100	310	307	A
100	100	311	308	E
100	100	317	313	A
100	100	318	314	E
100	100	320	316	A
100	100	321	317	E
100	100	327	323	A
100	100	328	324	E
100	100	330	326	A
100	100	331	327	E
100	100	337	333	A
100	100	338	334	E
100	100	340	336	A
100	100	341	337	E
100	100	346	342	A
100	100	347	343	E
100	100	350	346	A
100	100	356	352	A
100	100	357	353	E
100	100	360	356	A
100	100	361	357	E
100	100	366	362	A
100	100	367	363	E
100	100	370	366	A
100	100	376	372	A
100	100	377	373	E
100	100	380	376	A
100	100	386	382	A
100	100	387	383	E
100	100	390	386	A
100	100	396	392	A
100	100	397	393	E
100	100	400	395	A
100	100	406	401	A
100	100	407	402	E
100	100	410	405	A
100	100	411	406	E
100	100	416	411	A
100	100	417	412	E
100	100	420	415	A
100	100	421	416	E
100	100	426	421	A
100	100	427	422	E
100	100	430	425	A
100	100	431	426	E
100	100	436	431	A
100	100	437	432	E
100	100	440	435	A
100	100	441	436	E
100	100	445	440	A
100	100	446	441	E
100	100	450	445	A
100	100	451	446	E
100	100	455	450	A
100	100	456	451	E
100	100	460	455	A
100	100	461	456	E
100	100	465	460	A
100	100	466	461	E
100	100	470	465	A
100	100	471	466	E
100	100	475	470	A
100	100	476	471	E
100	100	495	489	A
100	100	496	490	E
100	100	520	514	A
100	100	521	515	E
100	100	544	538	A
100	100	545	539	E
100	100	569	563	A
100	100	570	564	E
100	100	594	587	A
100	100	595	588	E
100	100	643	636	A
100	100	644	637	E
100	100	693	685	A
100	100	742	734	A
100	100	792	783	A

OLD SIZE	NEW SIZE	OLD STRIKE (CENTS)	NEW STRIKE (CENTS)	Exercise
100	100	1	1	E
100	100	10	10	A
100	100	11	11	E
100	100	188	186	A
100	100	190	188	A
100	100	193	191	A
100	100	195	193	A
100	100	198	196	A
100	100	200	198	A
100	100	208	206	A
100	100	209	207	E
100	100	210	208	A
100	100	218	216	A
100	100	220	218	A
100	100	228	225	A
100	100	229	226	E
100	100	230	227	A
100	100	238	235	A
100	100	239	236	E
100	100	240	237	A
100	100	247	244	A
100	100	248	245	E
100	100	250	247	A
100	100	257	254	A
100	100	258	255	E
100	100	260	257	A
100	100	267	264	A
100	100	268	265	E
100	100	270	267	A
100	100	277	274	A
100	100	278	275	E
100	100	280	277	A
100	100	281	278	E
100	100	287	284	A
100	100	288	285	E
100	100	290	287	A
100	100	291	288	E
100	100	297	294	A
100	100	298	295	E
100	100	300	297	A
100	100	301	298	E
100	100	307	304	A
100	100	308	305	E
100	100	310	307	A
100	100	311	308	E
100	100	317	313	A
100	100	318	314	E
100	100	320	316	A
100	100	321	317	E
100	100	327	323	A
100	100	328	324	E
100	100	330	326	A
100	100	331	327	E
100	100	337	333	A
100	100	338	334	E
100	100	340	336	A
100	100	341	337	E
100	100	346	342	A
100	100	347	343	E
100	100	350	346	A
100	100	356	352	A
100	100	357	353	E
100	100	360	356	A
100	100	361	357	E
100	100	366	362	A
100	100	367	363	E
100	100	370	366	A
100	100	376	372	A
100	100	377	373	E
100	100	380	376	A
100	100	386	382	A
100	100	387	383	E
100	100	390	386	A
100	100	396	392	A
100	100	397	393	E
100	100	400	395	A
100	100	406	401	A
100	100	407	402	E
100	100	410	405	A
100	100	411	406	E
100	100	416	411	A
100	100	417	412	E
100	100	420	415	A
100	100	421	416	E
100	100	426	421	A
100	100	427	422	E
100	100	430	425	A
100	100	431	426	E
100	100	436	431	A
100	100	437	432	E
100	100	440	435	A
100	100	441	436	E
100	100	445	440	A
100	100	446	441	E
100	100	450	445	A
100	100	451	446	E
100	100	455	450	A
100	100	456	451	E
100	100	460	455	A
100	100	461	456	E
100	100	465	460	A
100	100	466	461	E
100	100	470	465	A
100	100	471	466	E
100	100	475	470	A
100	100	476	471	E
100	100	495	489	A
100	100	496	490	E
100	100	520	514	A
100	100	521	515	E
100	100	544	538	A
100	100	545	539	E
100	100	569	563	A
100	100	570	564	E
100	100	594	587	A
100	100	595	588	E
100	100	643	636	A
100	100	644	637	E
100	100	693	685	A
100	100	742	734	A
100	100	792	783	A