Rulebooks: Contents

Rulebooks
Mainboard Rules
Definitions and Interpretation
Chapter 1 Introduction
Chapter 2 Equity Securities
Chapter 3 Debt Securities
Chapter 4 Investment Funds
Chapter 5 Structured Warrants
Chapter 6 Prospectus, Offering Memorandum and Introductory Document
Chapter 7 Continuing Obligations
Chapter 8 Changes in Capital
Chapter 9 Interested Person Transactions
Chapter 10 Acquisitions and Realisations
Chapter 11 Takeovers
Chapter 12 Circulars, Annual Reports and Electronic Communications
Chapter 13 Trading Halt, Suspension and Delisting
Chapter 14 Disciplinary and Appeals Procedures, and Enforcement Powers of the Exchange
Appendices
Practice Notes
Practice Note 5.1 Term Sheet for Structured Warrants
Report of the Committee and Code of Corporate Governance
Catalist Rules
SGX-ST Rules
CDP Clearing Rules
DVP Rules
CDP Depository Rules
Futures Trading Rules
SGX-DC Clearing Rules
SIAC DT Arbitration Rules
SIAC DC Arbitration Rules
Rule Amendments

  Versions
(2 versions)
 
Up to Jul 31 2011Aug 1 2011 onwards

Practice Note 5.1 Term Sheet for Structured Warrants

Details Cross References
Issue date: Jan 2003
20 June 2011
Effective date: Jan 2003
1 August 2011
Listing Rule 518

1. Introduction

1.1 This Practice Note provides guidance on the disclosure of information for a term sheet for structured warrants issuance.

2. Listing Rule 518

2.1 Listing Rule 518 states:—

"When applying for the listing of structured warrants, an issuer must submit an indicative term sheet to the Exchange for its consideration. The indicative term sheet must set out the principal features of the structured warrants."

3. Disclosure in Term Sheet

3.1 As a guide, the term sheet submitted to the Exchange and used in connection with the marketing of the structured warrants should include the following information:—
(1) The nature and amount of the structured warrants for which listing is sought.
(2) A statement on the investment objective, experience or knowledge required of investors to invest in the structured warrants.
(3) A summary of the principal terms of the structured warrants including the contract type, issue price, strike price or level, conversion ratio or multiplier, board lot size, the exercise period or date, the expiry or maturity date, and the expected listing date.
(4) Whether the structured warrants will be physically settled or cash settled. If cash settled, the method or formula for calculating the cash settlement amount.
(5) Key numerical measures such as the historical and implied volatility of the underlying financial instrument, gearing and premium.
(6) Whether the structured warrants are at, in, or out of, the money.
(7) The potential gains or losses from an investment in the structured warrant, including the worst case scenario.
(8) A description of the key risk factors that are specific to the issuer and the issue of structured warrants.
(9) Applicable Fees and charges.
(10) Rights and ranking of the investors vis-à-vis other creditors in the event of an issuer default.
(11) Summary information on the issuer and the guarantor (if any), including key financial information, credit rating and whether supervised by a monetary or securities regulatory authority.
(12) Where the structured warrants are issued on securities of an entity (or entities) listed on an exchange, the identity of the exchange and how investors can obtain financial information on the entity (or entities). Where the structured warrants are based on an index, summary information about the index.
(13) Whether the issuer or another person will make a market in the structured warrants. If so, the identity of the Designated Market-Maker, the maximum spread between the bid and offer quotations, the minimum quantity to which the quotations apply, and the circumstances in which no quotation will be provided.
(14) Whether the issuer has authority to issue further structured warrants which will form a single series with the existing issue of structured warrants.
(15) The identity of the manager, distributor, placing agent, paying agent, depository and warrant agent (if applicable).
(16) Details on how copies of the offering memorandum, or base and supplemental listing documents, will be made available to the public.
(17) The governing law and any selling restrictions under that law or otherwise.
(18) Contact details of the issuer (including the contact number, email address and issuer's website).
3.2 Where the issuer proposes an issue of a structured warrant which consists of novel features as approved by the Exchange, other than the information above, the term sheet should also consist of the following:—
(1) a description of the additional features of the structured warrant;
(2) circumstances where the issue will terminate prior to expiry (where applicable);
(3) circumstances where the investor will only receive the capped amount of return (where applicable);
(4) additional risks of the structured contract in relation to these features;
(5) description of the methodology for determining the cash settlement amount if the issue terminates prior to expiry (where applicable);
(6) description of the methodology for determining the periodic accumulation amount (where applicable);
(7) description of the methodology for determining the cash settlement amount if there exists a multiplier effect on the amount of return (where applicable); and
(8) scenario analysis to illustrate the variation in cash settlement methodology due to the additional features
3.3 Other information may be required depending on the circumstances of the issue.
3.4 The term sheet should highlight key features and risks of the structured warrants to investors in a clear and concise manner in the formats provided below. The term sheets should not contain any information that is:
(1) not included in the listing documents; or
(2) false or misleading.
3.5 An indicative term sheet should be submitted to SGX-ST at the time of the submission of the listing application. Launch announcements should be accompanied by a term sheet and the final term sheet should form part of the listing documents to be made available to investors.

4. Format for term sheets

4.1 This section sets out the formats for the term sheets of structured warrants. Issuers are responsible for preparing the term sheets in accordance with the guidelines and formats provided in this Practice Note.
4.2 The term sheet must be easily accessible by investors together with the base listing document, supplemental listing document, prospectus, pricing supplement or any other listing documents.
4.3 Issuers should answer the questions provided in the templates in clear and simple language that investors can easily understand. Issuers should avoid using technical terms in the term sheet. Where technical terms are unavoidable, issuers should attach a glossary to the term sheet to explain these technical terms.
4.4 The use of diagrams such as graphs, charts, flowcharts, tables or numerical explanations to explain structures or payoffs of the investment products to investors is encouraged.
4.5 Information in the term sheets should be presented in a font size of at least 10-point Times New Roman. It should not be longer than four pages. Diagrams and a glossary, if included, would not count towards the four-page limit. However, the term sheet including diagrams and the glossary should not exceed eight pages.
4.6 Where the structured warrant has different features, the format for term sheets provided in this Practice Note should be used with necessary adaptations.
4.7 When changes are made to the base listing document, supplemental listing document, prospectus, pricing supplement or any other listing documents, the term sheet should be updated if the change has a material effect on the key features and risks of the structured warrants.
4.8 Format for term sheet of structured warrants:—
KEY TERMS SHEET

Issuer's
Company
Logo


[Name of Issuer]

XX million European Style [Cash/Physically] Settled [Call/Put] Warrants due [expiry date] relating to [Underlying]
•   The terms set out in this term sheet are a summary of, and are subject to the terms and conditions set out in the Issuer's base listing document dated [dd/mm/yyyy] (the "Base Listing Document"), the addendum to the Base Listing Document dated [dd/mm/yyyy] (the "Addendum") and the supplemental listing documents to be dated on or about [dd/mm/yyyy] (the "Supplemental Listing Documents" together with the Base Listing Document and the Addendum, the "Listing Documents").
•   If you are in doubt whether the product is suitable for you, please consult your financial advisers or such advisers to the extent you consider necessary.
•   Please read the Listing Documents and the risk factors stated in the Supplemental Listing Document and this term sheet carefully. You should not invest in the product if you do not understand the risks or are not willing to assume the risks.
A. TERMS OF THE ISSUE
SGX counter name (SGX stock code)   Issue Size XX million warrants
Type European style cash/physically settled call/put warrants Launch Date dd/mm/yyyy
Underlying Reference Asset (To also state the Reuters Instrument Code (RIC) of the underlying) Expiry Date dd/mm/yyyy
Board Lot   Initial Settlement Date dd/mm/yyyy
Issue Price   Expected Listing Date dd/mm/yyyy
Exercise Price   Settlement Date dd/mm/yyyy
Price Source for Underlying Reuters/Bloomberg etc. Valuation Dates  
Last Trading Date dd/mm/yyyy Gearing  
Entitlement Ratio xx warrant(s) : 1 share/index unit Volatility (Implied & Historical)  
Warrant Agent   Premium  
Clearing System The Central Depository (Pte) Limited Listing SGX-ST
Settlement Method   Settlement Currency  
Governing Law   Reference Currency  
Cash Settlement Amount  
Form  
Final Reference Level  
Exchange Rate  
Adjustments and Extraordinary Events  
Further Issuance  
Documents The Base Listing Document, Addendum and the relevant Supplemental Listing Document are/will be available for inspection at the following address: [Address]
Selling Restrictions  


B. INFORMATION ON THE ISSUER AND GUARANTOR
Name of Issuer  
Name of Guarantor (if any)  
Credit Rating of the Issuer / Guarantor Moody's Investors Service Inc.: Standard & Poor's Ratings Group: Fitch Ratings Ltd., London:
Issuer / Guarantor Regulated by  
Issuer's / Guarantor's Website and any other Contact Information  


C. INFORMATION ON MARKET MAKING
Name of Designated Market Maker  
Maximum bid and offer spread  
Minimum quantity subject to bid and offer spread  
Circumstances where a quote will/may not be provided  


D. PRODUCT SUITABILITY
WHO IS THE PRODUCT SUITABLE FOR?
•   This product is only suitable for investors who:
•   believe that the price level of the underlying reference asset will increase/decrease and are seeking a short term leveraged exposure to the underlying reference asset.
Further Information
Key Product Features
WHAT ARE YOU INVESTING IN?
•   You are investing in cash-settled call/put warrants that allow you to take advantage of any increase/decrease in the price level of the underlying reference asset, which is <Name of underlying>.
Information relating to the underlying can be obtained from
Refer to Section xx on Pg xx of the Supplemental Listing Document.
Calculation of Cash Settlement Amount
•   The Cash Settlement Amount in respect of each Exercise Amount of Warrants, shall be an amount (if positive) payable in the Settlement Currency equal to the Entitlement in respect of each Exercise Amount for the time being multiplied by:
(i)
(a) the arithmetic mean of the closing prices of one underlying unit (as derived from the daily publications of the Relevant Stock Exchange subject to any adjustments to such closing prices determined by the Issuer to be necessary) for each Valuation Date LESS
(b) the Exercise Price (subject to adjustment as provided in the Terms and Conditions of the Warrants) and divided by
(ii) the Exchange Rate.
WHAT WOULD YOU GAIN OR LOSE IN DIFFERENT SITUATIONS?
•   Best case scenario:
•   The value of the underlying index increases substantially resulting in a significant increase in the price of the Warrants. You then sell the warrants and realise a profit. The issuer is required to provide liquidity in the warrants to ensure that there will generally be a market price available for the purchase and sale of the warrants.
•   Worst case scenario:
•   If you buy the warrants and the value of the underlying reference asset decreases sharply. If you have not sold the warrants, you will lose your entire investment.
 
E. KEY RISKS
WHAT ARE THE KEY RISKS OF THIS INVESTMENT?  
Market Risks
•   Market price of the warrants may be affected by many factors
•   Investors should note that the market price of the warrants may be affected by different factors, including but not limited to the level and volatility of the underlying reference asset, the time left to the expiry of the warrants, the strike level of the warrants, the prevailing interest rate climate, the currency exchange rates and the creditworthiness of the Issuer.
•   You may lose your entire investment
•   If the underlying reference asset falls to levels such that the cash settlement amount at expiry is calculated to be less than or equal to zero, you will lose your entire investment.
•   You are exposed to the credit risk of <Issuer>
•   The warrants are unsecured contractual obligations of <Issuer> and of no other person. If <Issuer> is unable to meet its obligations under the warrants, you may lose your entire investment.
•   As <Issuer> is not incorporated in Singapore, any insolvency proceedings in respect of <Issuer> will be subject to foreign insolvency laws and procedures.
Liquidity Risks
•   The secondary market may be illiquid.
•   The issuer acting through its designated market-maker may be the only market participant buying and selling the warrants. Therefore, the secondary market for the warrants may be limited and you may not be able to realise the value of the warrants. Do note that the bid-ask spread increases with illiquidity.
 
Product Specific Risks
•   Exchange rate risks
•   There may be exchange rate risks as the warrants will be issued and traded in Singapore dollars while <the underlying> are traded in <foreign currency>. The value of the warrants may therefore be affected by, amongst other factors, the relative exchange rates of the Singapore dollar and the <foreign currency>.
Refer to “Risk Factors” on Pg xx in the Supplemental Listing Document for the complete list of risks and details of the risks.
F. FEES AND CHARGES
WHAT ARE THE FEES AND CHARGES OF THIS INVESTMENT?
•   Normal transaction and brokerage fees apply, similar to fees that you would pay for other transactions on SGX-ST.
 

Amended on 1 August 2011.