| Fri 12 Jun 2009, 11:15 | | INVS - Investec Bank - Clarification To The Adjustment To The Terms And |
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JSE
INVS
INVS - Investec Bank - Clarification To The Adjustment To The Terms And
Conditions Of TKGIDF and TKGIHE
INVESTEC BANK LIMITED
CLARIFICATION TO THE ADJUSTMENT TO THE TERMS AND CONDITIONS OF TKGIDF AND TKGIHE
We refer to the issues surrounding the final adjustment to the terms and
conditions of TKGIDF and TKGIHE as a result of the recent special dividend paid
by Telkom SA Limited.
It is normal practice for Investec to distribute any declared dividends to
holders of any affected Enhanced Dividend Securities (EDS) or Hot Enhanced
Dividend Securities (HotEDS). Should, however, the distribution of the dividend
directly result in a stop-loss event and the subsequent termination of the
listing, the terms and conditions of the warrant may be adjusted in lieu of a
dividend distribution. This will normally occur in cases of exceptionally large
dividends where the value of the dividend is greater than the differential
between the current share price level and the stop-loss level. The alternative
adjustment process, as described in the Offering Circular, is designed to
restore holders to an equivalent economic position as prior to the distribution
of the dividend, thereby protecting them from any loss of value associated with
early termination.
A SENS notice was distributed on 28 April 2009 stating that the special dividend
of 1900 cents per ordinary share would be payable on Monday, 1 June 2009. Two
subsequent notices were then distributed on May 20th 2009 (indicative) and May
22nd 2009 (actual) detailing the final adjustment to the terms and conditions,
as it was determined that this would better serve the interests of the warrant
holders as in both cases the stop-loss barrier was to be breached.
Had both securities been allowed to terminate, given the theoretical ex.
dividend TKG price of 39.01 on the 25th May 2009 and no subsequent market
movement, holders of TKGIDF (EDS) would have lost 4.8% of value and holders of
TKGIHE (HOT EDS) would have lost 6.13% (see calculations below). Importantly,
this is assuming that the VWAP achieved in the stock over the two days post the
barrier event remained at R39.01 (as stipulated in the Offering Circular, upon
barrier Investec will then sell stock over the following two days and the VWAP
price thereby achieved over the strike price will be the intrinsic value rebated
back to holders via STRATE). In actuality TKG fell further on the 26th and 27th
June, meaning that the losses would have been far greater.
A full barrier scenario analysis assuming the 39.01 ex. dividend price is
provided below, which should be read in conjunction with the actual SENS` issued
on 22 May 2009. The SENS` distributed on the 22nd clearly highlight the
preservation of the rand value of 100 units held in either security on that
date, using the precise dividend adjustment factor on the share price of (58.01-
19.00)/58.01=0.67247.
1. Enhanced Dividend Securities (TKGIDF):
Prior to Barrier: Actual Adjustment:
Strike Price R30.07 Adjusted Strike (Old*factor) R20.22
Barrier Level R41.01 Adjusted Barrier (Old*factor) R27.58
Price R29.35 New Price R19.72
Spot R58.01 Spot R39.01
Position 100 New Position (100/factor) 148
Value R2935.00 Value R2918.56
+Cash R16.44
=R2935.00
Factor: TKG Theoretical close EX (25 May 2009) / TKG close LDT Date (22 May
2009) = 0.672470
Post Barrier upon dividend payout:
Spot R39.01
Strike R30.07
Rebate (Spot-Strike) R8.94
Dividend R19.00
R27.94
Position 100
Therefore value R2794.00
2. Hot Enhanced Dividend Securities (TKGIHE)
Prior to Barrier: Actual Adjustment:
Strike Price R41.10 Adjusted Strike (Old*factor) R27.64
Barrier Level R46.58 Adjusted Barrier (Old*factor) R31.32
Price R20.24 New Price R13.51
Spot R58.01 Spot R39.01
Position 100 New Position (100/factor) 148
Value R2024.00 Value R1999.48
+Cash R24.52
R2024.00
Factor: TKG Theoretical close EX (25 May 2009) / TKG close LDT Date (22 May
2009) = 0.672470
Post Barrier:
Spot R39.01
Strike R41.10
Rebate (Spot-Strike) R0.00
Dividend R19.00
R19.00
Position 100
Therefore value R1900.00
Investec accordingly chose to act in the best interests of all warrant holders
by adjusting the terms and conditions of both securities as of Friday the 22nd
May 2009, and is not responsible for any delay in additional securities hitting
client accounts via STRATE and affected Stockbrokers through the normal 5 day
settlement process.
Copies of the offering circular may be obtained from:
Investec Bank Limited
100 Grayston Drive
Sandown
Sandton
2196
For further information contact:
Investec Warrants
Tel.: 0860 103 343
E-mail: warrants@investec.co.za
Internet: www.investecwarrants.com
Sponsor
Investec Securities Limited
Member of the JSE
Registration number. 1972/008905/06)
Date: 12/06/2009 11:15:02 Produced by the JSE SENS Department.
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