Cash Settlement

Most warrants issued in Hong Kong are on a cash settlement basis and shares delivery does not occur. If the warrant expires In-The-Money, the cash settlement amount paid by the issuer will be transferred to the warrantholder's account. This amount will be calculated as:

The difference between the five day average closing price of the underlying (if it is an equity warrant) and the strike price divided by the entitlement ratio and multiplied by the number of warrants held.

Example:

9907.HK call warrant on Company A expired on May 30, 2000 with a strike price of HKD 27.09. The five day average closing pricing of Company A prior to the expiry date was HKD 49.64. The cash settlement amount of 9907.HK was calculated by subtracting the strike price from the average price and divide by the entitlement ratio [(HKD 49.64 - HKD 27.090) /10 = HKD 2.255]. The warrantholder therefore received HKD 2.255 for every warrant bought.

Calculating the Average Closing Price

For warrants on stocks, the settlement price of the underlying stock is calculated based on the five day average closing price prior to and excluding the expiry day.

For index warrants, the settlement price is based on the EAS price calculated by the Futures Exchanges. The EAS price
is a 5 minute average price of the last trading day of the same month expiry Hang Seng Index futures contract. Note the EAS price is different then the closing level of the futures contract.

Last Trading Date

Last trade date is four exchange trading days prior to the expiry date.