SEHK Options Clearing House Limited will adjust the contract terms of all open options contracts on shares of CITIC Pacific Limited (CIP) as at the close of business on October 25, 1999, to take account of the special interim dividend of $2 declared by CIP.
The adjusted exercise for each contract will be R (the adjustment ratio) times the old exercise price. The adjusted contract size will be the old contract value (1000 shares times the old exercise price) divided by the adjusted exercise price.
R is determined according to the formula (S-D)/S where S is the CIP closing price on October 25, 1999 and D is the dividend amount. R can only be determined with reference to the CIP stock closing price on October 25, 1999. Consequently, the result of the adjustment to CIP options contracts will not be known until after the market closes. Investors should consult their brokers for the adjustment result on or after October 26, 1999.
From October 26, 1999, the adjusted series will be denoted as Version 1. Due to rounding during the adjustment, there will be odd lots and share fractions. Upon exercise, the fractional shares in each contract will be settled in cash on the day of exercise. The integral portion, including odd lots, will be settled in the Central Clearing and Settlement System. Price information on the Version 1 series will be displayed in Teletext pages 3073-4.
The new series of standard contract size, denoted as Version 0, will be generated in accordance with the Operational Trading Procedures after the capital adjustment. The standard contract size will be 1000 shares per contract. Price information on Version 0 series will be displayed in Teletext pages 3007-8.
Version 1 and Version 0 series will be available for trading in parallel until all Version 1 series expire on June 29, 2000, when only Version 0 will remain.
The two versions are distinct series and positions under each version cannot be offset against each other. Investors should consult their options brokers for further details, and pay attention to the series specifications whenever dealing with CIP options contracts, particularly when placing orders or exercising instructions.
Corporate Communications Department