Arrangements if Li & Fung Options, Futures and Structured Products Need to be Adjusted
Market Operations
27 Jun 2014
Hong Kong Exchanges and Clearing Limited (HKEx) has announced arrangements for adjustments to Li & Fung Limited (Li & Fung) options, futures and structured products if Li & Fung's board decides to spin off Global Brands Group Holding Limited (GBG) and list it on the Stock Exchange’s Main Board. Li & Fung has announced its board will consider the proposed spin-off and listing of GBG on the Main Board by way of a 100 per cent distribution of its entire issued share capital to Li & Fung shareholders when the board meets on 1 July 2014.
Highlights of proposed spin-off and listing of GBG
* According to the Listing Document of GBG issued on 26 June 2014.
Arrangements for adjustments if Li & Fung's board decides to spin off and list GBG
Structured Products with shares of Li & Fung as underlying asset
The listing documents of all existing structured products with the shares of Li & Fung as underlying asset contain provisions that deal with a corporate action of the underlying company. Subject to the approval of the proposed distribution, structured product issuers shall make announcements in the evening of 9 July 2014 regarding the relevant adjustments to the terms of structured products (including the entitlement and exercise price as appropriate). Investors should study carefully the contents of such announcements.
Li & Fung futures
Trading arrangements
| 1. |
Transfer of Outstanding Positions
Outstanding positions of Li & Fung stock futures which exist after the market close on the business day immediately before the ex-date will be transferred to a temporary trading symbol LIA. Since the value of the Entitlement cannot be determined until the value of GBG is determined, trading of outstanding positions under temporary trading symbol LIA will be suspended from the ex-date to the listing day of GBG, both days inclusive.
|
| 2. |
Introduction of New Contract for Trading
On the ex-date, new Li & Fung stock futures (2,000 Li & Fung shares per contract on an ex-entitlement basis) will be introduced for trading under the standard trading symbol LIF.
|
| 3. |
Capital Adjustment to Outstanding Positions under Trading Symbol LIA upon the Determination of GBG's Value
The value of GBG will be determined by the volume weighted average price of the auto-matched trades of GBG shares on their listing day. When the value of the Entitlement has been determined, capital adjustment will be made to outstanding positions under trading symbol LIA and the adjusted positions will be transferred to trading symbol LIB. Positions under trading symbol LIB will commence trading from the business day immediately after the listing day of GBG. |
Details of the adjustment procedures are as follows:
|
Adjustment Term |
Formula |
Remarks |
|
Adjustment Ratio (AR) |
(Underlying stock closing price before the ex-date minus Entitlement) / (Underlying stock closing price before the ex-date) |
Rounded to the nearest
4 decimal places |
|
Adjusted Contracted Price (ACP) |
Contracted price of outstanding stock futures contracts x AR |
Rounded to the nearest
2 decimal places |
|
Adjusted Contract Multiplier (ACM) |
(Contracted price of outstanding stock futures contracts x 2,000 shares) / ACP |
Rounded to the nearest
4 decimal places |
Note: Entitlement will be GBG’s value times the Entitlement Ratio for each Li & Fung share.
|
Contract |
Trading Symbol |
Underlying Stock |
Contract Multiplier(Shares) |
Introduction Date |
Available for Trading |
Addition of New Contract Months on and after Ex-date |
|
Standard |
LIF |
Li & Fung
(ex-entitlement) |
2,000 |
Ex-date |
From the ex-date onwards |
Yes |
|
Adjusted |
LIA |
Li & Fung & Entitlement |
2,000 |
Ex-date |
Nil |
No |
|
Adjusted |
LIB |
Li & Fung
(ex-entitlement) |
ACM |
First business day after listing day of GBG |
From introduction date to 30 Mar 2015 |
No |
Li & Fung options
Trading arrangements
The trading arrangements for the existing Li & Fung stock options will be as follows:
| 1. |
Transfer of Outstanding Positions
Outstanding positions of Li & Fung stock options which exist after the market close on the business day immediately before the ex-date will be transferred to a temporary trading symbol LIA. Since the value of the Entitlement cannot be determined until the value of GBG is determined, trading of outstanding positions under temporary trading symbol LIA will be suspended from the ex-date to the listing day of GBG, both days inclusive.
|
| 2. |
Introduction of New Series for Trading
On the ex-date, a new series of Li & Fung stock options (deliverable is 2,000 Li & Fung shares per contract on an ex-entitlement basis) will be introduced for trading under the standard trading symbol LIF.
|
| 3. |
Capital Adjustment to Outstanding Positions under Trading Symbol LIA upon the Determination of GBG's
The value of the GBG will be determined by the volume weighted average price of those auto-matched trades of GBG shares on their listing day. When the value of the Entitlement has been determined, capital adjustment will be made to outstanding positions under trading symbol LIA and the adjusted positions will be transferred to trading symbol LIB. Positions under trading symbol LIB will commence trading from the business day immediately after the listing day of GBG. |
Details of the adjustment procedures are as follows:
|
Adjustment Term |
Formula |
Remark |
|
Adjustment Ratio (AR) |
(Underlying stock closing price before the ex-date minus Entitlement) / (Underlying stock closing price before the ex-date) |
Rounded to the nearest 4 decimal places |
|
Adjusted Exercise Price (AEP) |
Exercise price of outstanding stock options series x AR |
Rounded to the nearest 2 decimal places |
|
Adjusted Contract Size (ACS) |
(Exercise price of outstanding stock options series x 2,000 shares) / AEP |
Rounded to the nearest 4 decimal places |
Note: Entitlement will be GBG' value times the Entitlement Ratio for each Li & Fung share.
|
Contract |
Trading Symbol |
Underlying Stock |
Contract Size(Shares) |
Introduction Date |
Availability For Trading |
Addition of New Series |
|
Standard |
LIF |
Li & Fung
(ex-entitlement) |
2,000 |
Ex-date |
From the ex-date onwards |
Yes |
|
Adjusted |
LIA |
Li & Fung & Entitlement |
2,000 |
Ex-date |
Nil |
No |
|
Adjusted |
LIB |
Li & Fung
(ex-entitlement) |
ACS |
First business day after listing day of GBG |
From introduction date to 29 Jun 2015 |
No |
For details of the proposed spin-off and listing of GBG, please refer to the announcements by the company on 20 March 2014, 15 May, 21 May 2014 and 19 June 2014.
Investors should consult their brokers for further details, or if they have any questions on the matters covered above.
Ends