Chapter 1 General Principles
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| Article 1 | These Guidelines are adopted pursuant to Article 13 of the Regulations Governing the Issuance of Call (Put) Warrants by Issuers and Article 9 of the Taiwan Stock Exchange Corporation (TWSE) Rules Governing the Review of Warrants Listings.
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| Article 2 | The basic principles governing the preparation of a public offering prospectus are as follows:
- All of the content recorded in a prospectus shall be detailed, truthful, and clear and unambiguous. The wording shall be concise and easy to understand, and may not contain misrepresentations, nondisclosures, or omissions.
- Information published in a prospectus shall be timely and up to date. Trades or other significant events occurring prior to printing that could influence the judgment of beneficial owners shall be disclosed.
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| Article 3 | The following items shall be printed in the order below on the cover of a public offering prospectus:
- Issuing company name and seal.
- This public offering prospectus is prepared for the purpose of issuing call (put) warrants.
- The following items in summary description:
- The date of issuance and duration of the warrants.
- Detailed information on the underlying instruments or basket of instruments.
- The type of call (put) warrants, units issued, and the issue's total value. In the case of an issue of extendable callable bull contracts or extendable callable bear contracts, the type of warrant shall be annotated with the wording "extendable".
- Terms and conditions of issuance (including the issuance price, strike price or strike point, and exercise period) , provided that in the case of an issue of capped call or put warrants (or callable bull or bear contracts), the following matters shall be printed in conspicuous typeface:
- For issuance of capped call warrants or capped put warrants, the day on which the capped call (or put) price or point and the closing price of the underlying security/securities, closing index of the underlying index, or simple arithmetic mean trade price of the underlying future during the last minute before 1:30 p.m. reaches the capped call (or put) price or point is deemed the final trading day for the warrants, in which case such warrants will expire on the second following business day, requiring automatic cash settlement based upon the closing price of the underlying security/securities, closing index of the underlying index, or simple arithmetic mean trade price of the underlying futures during the last minute before 1:30 p.m. on the warrants' final trading day.
- For issuance of callable bull contracts or callable bear contracts, or callable bull or callable bear contracts whose period of validity is extendable, the day on which the capped call (or put) price or point and the closing price of the underlying securities, closing index of the underlying index, or simple arithmetic mean trade price of the underlying futures during the last minute before 1:30 p.m. reaches the knock-out price or point is deemed the contract's last trading day, in which case such warrants will expire on the second following business day, requiring automatic cash settlement based on the simple arithmetic mean trade price of the underlying securities, underlying settlement index or settlement price of the underlying futures on the first business day following the last trading day of the contract. If there is no trade price for the underlying security, the auction reference price for the opening of trading of the underlying security on the expiration date of the contract shall be used. If the trading of the underlying security or underlying future is halted or suspended on the first business day following the last trading day of the contracts or on the expiration date, the closing price of the underlying security or daily settlement price of the underlying futures on the last trading day of the contracts shall be used. The aforementioned underlying settlement index and settlement price daily settlement price of the underlying futures shall be calculated pursuant to Article 11, subparagraphs F and G, and subparagraph H, item g of the TWSE Rules Governing Review of Call (Put) Warrant Listings.
- The method of calculating the issuance price, including the price or underlying point level, strike price or strike point, duration of the warrants, interest rate, volatility of the underlying instrument, and other reference factors, and a comparison table showing other warrants in the preceding year with the same underlying instrument However, for issuance of callable bull contracts or callable bear contracts, the issuance price shall be calculated pursuant to Article 11, subparagraph H, item e of the Taiwan Stock Exchange Corporation Rules Governing Review of Call (Put) Warrant Listings.
- The leverage effect and premium.
- The number of shares (or beneficial interest units, or depositary receipt units, or index points or futures points) represented by each issuance unit.
- The following statements shall be set off in a distinctive typeface:
- Call (put) warrants involve a high degree of risk. Purchasers should understand that call (put) warrants may have no value at maturity, and should be prepared for the possibility of losing the subscription price. Call (put) warrants whose underlying instrument is an exchange-traded fund (ETF) with foreign component securities, a futures ETF that tracks a foreign futures index, an offshore ETF, or a foreign security or index, are not subject to any price fluctuation limit. Purchasers and sellers of call (put) warrants whose underlying instrument is a foreign security or index should also consider the exchange rate and other risks. Where call (put) warrants are traded with futures as the underlying instrument, attention shall be paid to the possible price risk of the underlying futures that may arise during the period of validity from the difference in the trading hours prescribed in the respective futures contracts.
- An issuer may not use the fact of having obtained approval of qualification for issuance of call (put) warrants or TWSE approval for listing of its planned call (put) warrants issue in any promotion as proof of the matters under application or as a guarantee of the value of the call (put) warrants.
- The issuer, the issuer's responsible person, and other persons whose seal or signature appear on the prospectus bear legal liability for any misrepresentation or nondisclosure within the prospectus.
- The printing date.
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| Article 4 | Items related to a particular issue, as follows, shall be printed in order on the inside front cover of the prospectus:
- The plan for distribution of the prospectus, information on where it will be displayed, how it will be distributed, and how it can be obtained upon request.
- The name, address, and telephone number, if any, of the call (put) warrant underwriter.
- The issuer's name, address, and telephone number.
- The name, address, and telephone number of the credit rating institution.
- The name of the attorney, and the name, address, and telephone number of his/her firm.
- The name of the CPA who certified the annual financial report for the most recent fiscal year, and the name, address and telephone number of the CPA's accounting firm.
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| Article 5 | The back cover of the prospectus shall be signed or seal-stamped by the responsible person of the issuer. When an underwriter duly performs call (put) warrant underwriting in accordance with regulation, the underwriter and its responsible person shall sign or seal-stamp the sections of the prospectus for which they are responsible.
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| Article 6 | A public offering prospectus shall include the following items:
- Details of the plan for issuance of the call (put) warrants.
- A CPA's audit opinion.
- A lawyer's opinion on the legality of the issue.
- The issuer's relevant information.
- Information on the underlying instruments or basket of instruments.
- The governing law for all disputes arising from the call (put) warrant issue shall be the law of the Republic of China.
- In the event of legal action, the Taiwan Taipei District Court shall be the court of competent jurisdiction; where arbitration is stipulated, the terms and conditions governing the arbitration shall control.
- Other important stipulations.
- Other items required by the competent authority or the TWSE.
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| Article 7 | A public offering prospectus shall include all the content prescribed in these Guidelines and shall be published with a paginated table of contents and a summary. If required information is not available or the TWSE approves an omission, the notations "not available" or "omitted" shall be added after the respective items.
When items to be recorded in the prospectus are repeated, they need be printed in one place only, with page reference notations used in other places.
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Chapter 2 Content of the Prospectus
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Section 1 Issuance Plan for Call (Put) Warrants
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| Article 8 | The issuance plan shall list the following items:
- The date of issuance and duration of the warrants.
- Detailed information on the underlying instruments or basket of instruments. If the underlying instrument is a domestic stock for which the CPA audited or reviewed financial report of the issuer of said stock for the most recent period shows losses, a statement of the reason for issuing warrants on the underlying instrument, if the underlying instrument is a foreign stock or depositary receipt, a statement on the status of their liquidity; if the underlying instrument is a future, a statement of name and delivery month of the futures contract.
- The type of call (put) warrant, units issued, and total value of the issue. In the case of an issue of extendable callable bull contracts or extendable callable bear contracts, the type of warrant shall be annotated with the wording "extendable".
- Terms and conditions of issuance, including issuance price, strike price or strike point, exercise period, and the number of shares (or beneficial interest units, or depositary receipt units, or index points or futures points) etc. represented by each issuance unit. In the case of extendable callable bull or bear contracts, the information set forth in Article 11, subparagraph H, item d of the TWSE Rules Governing Review of Call (Put) Warrant Listings shall be stated.
- The method of calculating the issuance price, including the price or point of the underlying instrument, strike price or strike point, duration of the warrants, interest rate, volatility, and other reference factors, and a comparison table showing other warrants in the preceding year with the same underlying instrument. However, for issuance of callable bull contracts or callable bear contracts, the issuance price shall be calculated pursuant to the provisions under Article 11, subparagraph H of the TWSE Rules Governing Review of Call (Put) Warrant Listings.
- Issuance of capped call or put warrants (or callable bull or bear contracts) shall, conform to the provisions of the preceding five subparagraphs and, in addition, the cap or knock-out price or point shall be specified, and matters prescribed in Article 11, subparagraph H, item f of the TWSE Rules Governing Review of Call (Put) Warrant Listings shall be stated in a prominent typeface. In the case of extendable contracts, the matters required for extension under Article 7, subparagraph C of the TWSE Procedures for Review of Call (Put) Warrant Listings shall be included.
- For a capped call warrant or capped put warrant:
- "The capped call (or put) price or index" and "the day on which the closing price of the underlying securities or the closing index of the underlying index reaches the capped call (or put) price or index is deemed the warrant's last trading day; such warrants reach maturity on the second business day thereafter, and the automatic cash settlement performance method is adopted based on the closing price of the underlying securities or the closing index of the underlying index on the last trading day of the warrant" shall be printed in conspicuous typeface.
- The capped call price or index level shall be set at no less than 150 percent of the strike price or strike index; the capped put price or index level shall be set at no more than 50 percent of the strike price or strike index.
- For a callable bull contract or callable bear contract, or a callable bull/bear contract whose period of validity may be extended:
- "The knock-out price or index level" and "the day on which the closing price of the underlying securities or the closing index of the underlying index reaches the knock-out price or index is deemed the contract's last trading day. Such contract reaches maturity on the second business day thereafter, and the automatic cash settlement performance method is adopted based on the simple arithmetic mean trade price of the underlying securities or the underlying settlement index on the first business day following the last trading day of the contract. If there is no trade price for the underlying security, the auction reference price for the opening of trading of the underlying security on the expiration date of the contracts shall be used. If the trading of underlying security is halted or suspended on the first business day following the last trading day of the contracts or on the expiry date, the closing price of the underlying security on the last trading day of the contracts shall be used. The aforementioned underlying settlement index shall be calculated in accordance with Article 10, subparagraph 6 of the TWSE Rules Governing Review of Call (Put) Warrant Listings" shall be printed in conspicuous typeface.
- The bull/bear contract knock-out price or index level shall be set within a range between the closing price of the underlying securities or the closing index of the underlying index and the strike price or the strike index (inclusive thereof), and the bull contract or index knock-out price or index level shall be set at no more than 90 percent of the closing price of the underlying securities or the closing index of the underlying index, or the bear contract or index knock-out price or index level shall be set at no less than 110 percent of the closing price of the underlying securities or the closing index of the underlying index. For callable bull/bear contracts whose period of validity may be extended, the bull contract or index knock-out price or index level shall be set at no more than 70 percent of the closing price of the underlying securities or the closing index of the underlying index, or the bear contract or index knock-out price or index level shall be set at no less than 130 percent of the closing price of the underlying securities or the closing index of the underlying index.
- The issuer shall also specify that in the event that any of the terms of issuance is re-set, any adjustment to the bull/bear contract strike price and knock-out price, or to the bull/bear contract strike index and knock-out index level, shall take effect from the first day of TWSE listing, and the price or index level thereof shall still be required to conform with the requirements set out above. For callable bull/bear contracts whose period of validity may be extended, the issuer shall specify the matters to be conducted under Article 7, subparagraph 3 of the TWSE Procedures for Review of Call (Put) Warrant Listings.
- The required particulars as specified in Article 8 of the TWSE Operating Rules Governing Liquidity Providers for Call (Put) Warrants.
- Procedures for exercising the warrants, and the terms requiring cancellation of call (put) warrants when surrendered for exercise.
- Procedures for exercise/delivery when the warrant holder exercises the option. When the issuer may opt for cash settlement of call warrants to be paid in securities, or when the warrant holder may opt for cash settlement of put warrants to be paid in securities, the conditions shall be set off in a distinctive typeface.
- Strategies for offsetting foreseeable risks.
- Stipulations regarding adjustment of the strike price of the call (put) warrants and related matters due to distributions of dividends or bonuses, increases or decreases in capital, stock splits or consolidations, or other related action by the issuer of the underlying securities, or the distribution of dividends or other related action on the underlying ETF by the securities investment trust enterprise (SITE), on the underlying futures ETF by the futures trust enterprise, or on the underlying offshore ETF by the offshore fund manager or its designated institution. If the issuer's adjustments are not made according to the TWSE reference formula (see attachment), that fact shall be noted in a distinctive typeface in the public offering prospectus. If the underlying instrument is a foreign security, the issuer shall adopt its own formula for adjustment.
- The methods for handling a merger by the issuer of the underlying securities, alteration of the trading method, halt of trading, suspension of trading, or de-listing of the stock, or the de-listing of the ETF or futures ETF as a result of dissolution or bankruptcy of the SITE or futures trust enterprise or a voidance of the approval, or the announcement of delisting by the TWSE of the beneficial certificates, fund shares, or investment units of an underlying offshore ETF, or the discontinuation, by the provider of the underlying index, of compilation of the index, or a halt of trading, suspension of trading, or delisting imposed by the TAIFEX on the underlying future.
- The methods for handling the listing of the call (put) warrants or the de-listing, suspension of sale, or halt of trading of the warrants by the stock exchange.
- Clarification regarding whether or not there are plans for a reverse issue of call (put) warrants against the same underlying instrument within the coming three months.
- Source of data and method of disclosure for the halt of trading, suspension of trading, or delisting, of foreign underlying securities by the securities exchange on which the security is traded, or for the suspension of compilation of the underlying foreign index as announced by the index provider.
- Other items required by the competent authority or the TWSE.
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Section 2 Matters Regarding the Issuer
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| Article 9 | The prospectus shall list the following items in regard to the issuer:
- The issuer's date of incorporation.
- The address and telephone number of the issuer's headquarters and branch offices.
- The names, any positions concurrently held in other companies, and the dates on which their positions were assumed for the general manager, assistant general manager, directors and supervisors, and heads of all departments and divisions.
- The issuer's principal lines of business and the share of each as a percentage of the issuer's total business.
- Any pending litigious or non-litigious matters or administrative suits of a material nature involving the issuer, for which the facts of the dispute, the date proceedings commenced, the main parties to the dispute, and the current status of the proceedings shall be disclosed.
- Condensed balance sheets and statements of comprehensive income for the most recent two years.
- The financial analysis shall at least include the following items:
- Financial structure
- The debt/asset ratio.
- The long-term capital/real estate and equipment ratio.
- Solvency
- The current ratio.
- The quick ratio.
- The interest coverage ratio.
- Cash flow
- The cash flow ratio.
- The cash flow adequacy ratio.
- The cash flow reinvestment ratio.
- Operations involving off-balance-sheet financial instruments and other essential information.
A foreign issuer may adjust the information in its prospectus required by the subparagraphs of the preceding paragraph, with the approval of the TWSE, pursuant to the laws of its home country.
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Section 3 Information on the underlying instrument |
| Article 10 | Particulars related to the underlying instrument shall include the following:
- Introduction of the underlying instrument. If the underlying instrument is a stock or depositary receipt, the company profile shall be provided; if the underlying instrument is an ETF, a futures ETF, or an offshore ETF, the name of the component companies of the fund, and the name of the tracked foreign futures index shall be indicated; if the underlying instrument is an index, its name shall be indicated; if the underlying instrument is a future, the specification of the futures contract shall be provided.
- Trade information on the underlying instrument. If the underlying instrument is a security, the trading volumes, highest and lowest prices, and monthly closing prices for the most recent year; if the underlying instrument is an index, the highest and lowest prices, and monthly closing indexes for the most recent year; if the underlying instrument is a future, the average daily volume each month for the preceding quarter, daily turnover of the preceding month, and open interest of the preceding day.
- If the underlying instrument is a stock or depositary receipt, the condensed balance sheets and statements of comprehensive income for the most recent two years.
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| Article 11 | These Guidelines shall take effect after having been submitted to and approved by the competent authority. Subsequent amendments thereto shall be effected in the same manner.
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