Extraordinary dividend - Example n.2

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Amendment of the payment policy in the course of the year, with payment of a dividend advance based on the results of the current financial year.

Overview of the operation

On July 31^st 2005, the company Alpha informs that the Board has agreed to pay an advance on the dividend for 2005 equal to 0.50 euro per share to be distributed in October. The minimum lot size of Alpha’s stock option and stock future contracts is 500, whereas the official price of the security in the day prior to the detachment is 23 euro.

Alpha has amended its dividend payment policy in the course of the year and deliberated the distribution of an advance on dividend.

This advance has to be considered as extraordinary because it is not included in the payment policy communicated by the company in accordance with art. 2, section IA.2.1, item IA.2 of the Instructions, and also because the time period between the communication of the payment date and the actual payment of the dividend is less than three months.

However, the adjustment is made on all the expiries up to the one in which the following dividend is paid. If this expiry is not indicated, the payment date of the last dividend distributed during the year will be considered instead.

Therefore, in relation to stock option contracts, the adjustment operation affects both the strike price and the number of securities included in the contract (lot size), and the adjustments is applied until the May(*) expiry.

Similarly, in relation to stock future contracts, the adjustment operation affects both the daily closing price and the number of securities included in the contract (lot size), and the adjustments is applied until the May(*) expiry.

The adjustment is made on the basis of the coefficient (K), calculated as follows:

23 – 0.50            
K = -------------- = 0.978261
23          

Adjustment of strike prices (daily closing prices)

E_ex = E_cum x 0.978261

where:

• E_cum = strike price (daily closing price) before the adjustment
• E_ex = strike price (daily closing price) after the adjustment

Adjustment to the number of shares included in the stock option and stock future contracts (lot)

  1
A_ex = 500 x ------------- = 511
         0.978261

where:

• A_ex = number of shares after the adjustment

(*) = In our example, the company paid the previous dividend in May

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