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Article 10
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An application for TSEC listing approval for an issue of call (put) warrants shall conform to each of the following conditions:
1. The issue shall comprise 20 million or more issuance units, or 10 million or more units with a total value of NT$200 million or more.
An issuance unit shall represent one share (one beneficial unit) or a basket of single shares, or every 2 issuance units shall represent one share (one beneficial unit) or a basket of single shares, or every 5 issuance units shall represent one share (one beneficial unit) or a basket of single shares, or every 10 issuance units shall represent one share (one beneficial unit) or a basket of single shares, or every 100 issuance units shall represent one share (one beneficial unit) or a basket of single shares. The price of the underlying security must be NT200 (inclusive) or higher, however, before there may be an issuance in which every 100 issuance units represent one share (one beneficial unit) or a basket of single shares.
2. Distribution of warrant holders:
(1) There must be 100 or more warrant holders. At least 80 warrant holders must hold between 1,000 and 50,000 issuance units, and their cumulative holdings must comprise 20% or more of the total listed issuance units.
(2) The number of issuance units held by any single warrant holder may not exceed 10% of the total volume of listed issuance units; where a warrant holder is the issuer, the number of issuance units held may not exceed 30% of the total volume of listed issuance units, provided that where the issuer entrusts another institution with risk management, the risk management institution in question may not hold the warrants issued.
(3) The total number of issuance units held by the issuer and the issuer's associated persons and employees may not exceed 35% of the total volume of listed issuance units.
(4) During the sale of the call (put) warrants, the issuer shall restrict the directors, supervisors, and managers of the company whose securities are represented in the call (put) warrants, as well as major shareholders with shareholdings of 10% or more in that company, from holding warrants through which they may subscribe to a number of shares in excess of the number of shares of the underlying security they already hold, with the exception of the TSEC Taiwan 50 Index exchange-traded fund (below, "the Taiwan 50 Index").
3. Period of validity: Calculated from the date of listing, the period of validity shall be between six months and two years, inclusive.
4. Restriction on total issuance volume of the underlying represented by a warrant: The total number of shares of the underlying security that may be called (or put) through the call (put) warrants and the shares of the same underlying security represented by other existing call (put) warrants already listed on the TSEC, combined with those issued overseas by the issuer or its correspondent institution overseas and representing the same underlying, may not exceed 17.5% of the total number of outstanding shares of the issuing company after deduction of each of the following types of shareholdings:
(1) The total percentage of shares held by directors and supervisors under statutory shareholding ratio requirements.
(2) Already pledged securities.
(3) The number of centrally deposited shares mandatory for newly listed companies.
(4) Shares already repurchased under the Rules Governing Share Repurchase by Listed and OTC Companies and not yet cancelled.
(5) Shares with restrictions on listing or trading imposed by the competent authority. When the underlying security is the Taiwan 50 Index, the total number of shares of the underlying that may be called (or put) through the call (put) warrants and the shares of the same underlying represented by other existing call (put) warrants already listed on the TSEC, combined with those issued overseas by the issuer or its correspondent institution overseas and representing the same underlying, may not exceed 40% of the total number of outstanding shares of the issuing company, provided that this shall not affect the validity of any call (put) warrants already issued.
5. When the underlying security is the Taiwan 50 Index, consent shall be obtained from the institution creating the fund's underlying index.
6. The issuance plan shall contain the following terms and conditions:
(1) The issuance date and the period of validity.
(2) Detailed information on the underlying security or basket of securities (for the underlying securities of the warrants issued, in addition to the financial statement of the most recent period audited or certified by a certified public accountant and showing no losses, there shall also be a statement of the reason for issuing warrants based on the underlying securities).
(3) The type of call (put) warrant, the volume of issuance units and total value of the issue.
(4) Terms of issuance (such terms, including issuance price, strike price, exercise period and number of shares or beneficial units represented per issuance unit; conditions regarding upper and lower price caps for knock-out call or put warrants; and the fact that when the closing price of the underlying security reaches the upper or lower price cap, it will be the final trading day for the given warrant, which will be deemed to be at maturity on the following business day, with automatic cash settlement taking place uniformly at the closing price of the underlying security on the last day of trading, shall be set out in a prominent typeface). For a call warrant, the strike price referred to may not exceed 150% of the underlying security's price at market close on the date of application; for a put warrant, the strike price may not be lower than 50% of the underlying security's price at market close on the date of application, provided that the above ratios may be exceeded when the strike price and the
closing price of the underlying security differ by less than NT$30. There shall be reasonable cause and explanation for any terms of issuance that do not conform to the above standards, and full disclosure shall be given to investors.
(5) The method by which the issuance price is calculated, including the price of the underlying security, the strike price, the period of validity, the interest rate, the rate of fluctuation of the underlying security and other elements used in the calculation, and a table of comparison with other warrants in the preceding year that took the same listed security as the underlying security.
(6) Detailed information on the guarantor and the guaranty agreement or collateral.
(7) Procedures for exercising the option and the terms for cancellation of already-exercised call (put) warrants.
(8) Strategies for offsetting foreseeable risks.
(9) The policy of the issuer regarding adjustment of the strike price of the call (put) warrant and related items along with the distribution of dividends and bonuses, increases or decreases in capitalization, stock splits or consolidations, and handling of other related matters by the issuing company of the underlying securities, or the distribution of Taiwan 50 Index exchange-traded fund dividends and handling of other matters by the securities investment trust enterprise. Where the issuer does not make such adjustments in accordance with the TSEC reference formula, that fact shall be noted in bold lettering in the issuance prospectus.
(10) Methods of handling merger by the company issuing the underlying securities, or alteration in the trading method, suspension of sale, or de-listing of the securities, or delisting when the securities investment trust enterprise of the underlying Taiwan 50 Index fund undergoes dissolution or bankruptcy, or its approval its revoked
(11) Methods of handling market listing of the call (put) warrants, or suspension of trading or de-listing of the warrants by the TSEC.
(12) Terms stipulating that upon expiration of the period of validity, where the market price of the underlying securities is higher than the strike price of a call warrant (or the strike price of a put warrant is higher than the market price of the underlying securities) and where there is value in the exercise of the option and the terms of exercise require cash settlement, the warrant holder shall be deemed to have exercised the warrant and to have given notice to that effect.
(13) Terms stipulating that the warrant issuer may not substitute another warrant with a period of validity longer than that of the original warrant, or any other security, for the originally issued warrant.
(14) Procedures for delivery and payment when the warrant holder exercises the option.
(15) Terms stipulating that where settlement after exercise of the option referred to in the preceding paragraph shall be in cash, the cash settlement amount shall be calculated based on the closing price of the underlying securities on the exercise date.
(16) Terms stipulating the methods for handling distribution of securities centrally deposited in the Taiwan Central Depository Corporation account where the issuer fails to perform its delivery of the underlying securities or the cash price differential.
(17) Clarification of whether or not there are plans for a reverse issue of call (put) warrants against the same underlying securities within the coming three months.
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