| Title： |
Taiwan Stock Exchange Corporation Guidelines Governing the Particulars to be Recorded in a Public Offering Prospectus for Call (Put) Warrants(2014.06.17) |
| Date： |
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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 index, underlying securities or basket of securities.
- The type of call (put) warrants, units issued, and the issue's total value.
- Terms and conditions of issuance (including the issuance price, strike price or strike index, 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 conditions regarding the capped call (or put) price or index caps and the fact that the date on which the closing price of the underlying security/securities or the closing index of the underlying index reaches the capped call (or put) price or index is deemed the final trading day for the warrants. The contract reaches maturity on the second following business day, and the automatic cash settlement performance method is adopted at the closing price of the underlying security/securities or the closing index of the underlying index on the warrants' final trading day.
- For issuance of callable bull contract or callable bear contracts, 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. The contract reaches maturity on the second following business day, and the automatic cash settlement performance method is adopted based on the simple arithmetic mean trade price of the underlying securities or the simple arithmetic mean of the underlying 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 contract shall be used. If the trading of the underlying security 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 on the last trading day of the contracts shall be used.
- The method of calculating the issuance price, including the price of the underlying security or underlying index, strike price or strike index, 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 listed underlying security or index However, for issuance of callable bull contracts or callable bear contracts, the issuance price shall be calculated pursuant to Article 10, paragraph 1, subparagraph 5, item 5 of the Taiwan Stock Exchange Corporation Rules Governing Review of Call (Put) Warrant Listings.
- Detailed information on the guarantor and the guaranty agreement or collateral.
- The leverage effect and premium.
- The number of shares (or beneficial interest units, or depositary receipt units, or index 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 is an exchange-traded fund (ETF) with foreign component securities, a futures ETF that tracks a foreign commodity 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 is a foreign security or index should also consider the exchange rate and other risks.
- 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.
- The name, address, and telephone number, if any, of the guarantor.
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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 and guarantor's credit ratings.
- Information on the underlying indexes, underlying securities or basket of securities.
- 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 indexes, underlying securities, or basket of securities (including, if the underlying securities of the warrants are domestic stocks for which the CPA audited or reviewed financial report for the most recent period shows losses, a statement of the reason for issuing warrants on the underlying securities, or if the underlying securities are foreign stocks or depositary receipts, a statement on the status of their liquidity).
- The type of call (put) warrant, units issued, and total value of the issue.
- Terms and conditions of issuance (including issuance price, strike price or strike index, duration, and the number of shares (or beneficial interest units, or depositary receipt units, or index points) represented by each issuance unit).
- The method of calculating the issuance price, including the price of the underlying security or the underlying index, strike price or strike index, 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 listed underlying security. However, for issuance of callable bull contracts or callable bear contracts, the issuance price shall be calculated pursuant to the provisions under Article 10, paragraph 1, subparagraph 5, item 5 of the Taiwan Stock Exchange Corporation Rules Governing Review of Call (Put) Warrant Listings.
- Issuance of capped call or put warrants (or callable bull or bear contracts) shall, in addition to the provisions of the preceding five subparagraphs, comply with the following requirements:
- For a capped call warrant or capped put warrant, 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; the aforementioned conditions 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, 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 simple arithmetic mean of the underlying 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 conditions 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. 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.
- Detailed information on the guarantor and the guaranty agreement or collateral.
- 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 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.
- 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 securities 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 income statements 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/fixed asset 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.
When the issuer is a foreign institution, it 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 index and underlying securities |
| Article 10 | The prospectus shall list the following items related to the underlying index and underlying securities:
- If the underlying object is not an index, the company profile (if the underlying 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 commodities futures index shall be indicated).
- Information on the price of the underlying securities or index (to include trading volumes, highest and lowest prices, and monthly closing prices for the most recent year; if the underlying object is an index, include the highest and lowest prices, and monthly closing indexes for the most recent year).
- If the underlying securities are stocks or depositary receipts, the condensed balance sheets and income statements for the underlying securities for the most recent two years.
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| Article 11 | These Guidelines and any subsequent amendments shall come into force upon approval by the competent authority.
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