No. SorChor. (Wor.) 0004 / October 2017

Transcription

1 (Translation) No. SorChor. (Wor.) 0004 / October 2017 Subject: Guideline for Calculation of Financial Benefit used to calculate Fine as Compensation to Pending Receiver To: Managing Director TCH s Members Other persons authorized by TCH to carry out the securities clearing and settlement on Member s behalf ( Settlement Agent ) Attachment: Guideline for Calculation of Financial Benefit Whereas the Thailand Clearing House Co., Ltd. ( TCH ) has used the procedure for the management of default in securities settlement by using Pending Settlement instead of delivered securities settlement in an event of default in securities settlement. The TCH may impose fine on Members who default in securities settlement as compensation to Pending Receiver in case of payment of financial benefit according to the categories determined by the TCH during such default, and the TCH hereby informs the criteria as follows: 1. There are 8 categories of benefit that the TCH shall assist in calculating the value i.e. XD, XR, XI, XN, XA, XE, XP and XB (details as attached); and 2. The formulae for calculating 8 categories of financial benefit and the rate of fine imposed on defaulting Members as compensation for Pending Receiver determined by the Notification of the TCH Re: Rate of Fine as Compensation to Pending Receiver are formulae and rate jointly agreed upon by Members and Settlement Agent. On this basis, the TCH hereby submits the Guideline for Calculation of Financial Benefit that the TCH shall use to calculate such fine. Submitted for your kind acknowledgement Best regards, (sign) Pataravasee Suvarnsorn (Ms. Pataravasee Suvarnsorn) Managing Director Securities Clearing Department Tel Ext

2 Guideline for Calculation of Financial Benefit

3 Background The adjustment of procedure in an event of default in securities settlement from Debit Balance to Pending Settlement to enhance readiness for T+2. The Pending Receiver may miss out the benefit and the defaulter may thus be obliged to compensate for such loss of opportunity. The TCH has the duty to coordinate in the collection of compensation in relation to financial benefit only. 2

4 Assessment Principle The TCH shall assess the 8 categories of benefit i.e. XD, XR, XI, XN, XA, XE, XP and XB. o Principle: The TCH shall calculate the value of benefit theoretically taking into account the value of compensation ought to be received as a result of failure to receive the securities. o The TCH shall assist in collecting benefit from defaulting Members to deliver to Members who have been affected. o In an event Members object to the assessment guideline, they can refuse the assessment and enter into an agreement with their respective parties. Summary There are 3 categories of benefit that should be more appropriate when jointly agreed upon by the two contractual parties i.e. XW, XT and XM. o Some categories of benefit are non-financial benefit and are not able to be assess. o Securities in the category of warrant possess long lifespan, are of pseudo type and have numerous hypotheses. 3

5 Summary of categories of corporate action for which the TCH shall assess the value of compensation: CA Explanation CA Explanation XD Securities purchaser not entitled to receive dividend XR Securities purchaser not entitled to subscribe to newly issued shares XI Securities purchaser not entitled to receive interest XN Securities purchaser not entitled to receive money back from capital decrease XA XP Securities purchaser not entitled to any type of right announced by the company on that occasion Securities purchaser not entitled to receive principal announced to be returned by the company on that occasion XE XB Closing of register to entitle shareholder to exercise option Securities purchaser not entitled to subscribe to newly issued shares 4

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7 Appendix Examples of Calculation of Benefit under various Circumstances 6

8 Formula: XD Payment of Benefit when posting XD Sign Members affected by the failure to receive securities will miss out the opportunity to receive the benefit. On this basis, there are 3 forms of dividend payment as follows: Cash Dividend Payment: Financial benefit that ought to be received, shall equal the value of cash dividend. Benefit = Dividend N Calculation of price as a result of dilution effect shall be in accordance with the guideline for the calculation of Reference Price of SET. Cash and Stock Dividend Payment: Financial benefit that ought to be received shall equal the price of share as a result of dilution effect from cash and stock dividend payment and the cash dividend received. Stock Dividend Payment: Financial benefit that ought to be received shall equal the price of share as a result of dilution effect from stock dividend payment. Benefit = M Calculation of the amount of stock dividend to be received, shall be based on the same principle as the Registrar. Fraction of share shall be paid as cash dividend according to the value determined by listed company paying dividend, and fraction shall be rounded off as the company may determine. Benefit = M + (Dividend N) P BC = closing price of share before the date the sign is posted Dividend = price of cash dividend to be received per share (Cash Dividend) Ratio Old = ratio of existing share Ratio New = ratio of new share received N = amount of existing share M = amount of new share that ought to be received from CA 7

9 Formula: XD Examples of Calculation of Benefit when posting XD Sign Cash Dividend Payment: AAA securities declare dividend payment of 2 Baht per share, whereby a Member possesses 100 undelivered shares. Benefit = 2 x 100 = 200 Baht Stock Dividend Payment: BBB securities declare stock dividend payment of 5 existing shares per 1 new share, whereby the closing price of share before the date XD sign is posted equals 60 Baht and a Member possesses 100 undelivered shares. Amount of new share that ought to be received = = 20 shares Benefit = บาท 8

10 Formula: XD Examples of Calculation of Benefit when posting XD Sign Cash and Stock Dividend Payment: CCC securities declare dividend payment of 6 Baht per share and stock dividend payment of 5 existing shares per 1 new share, whereby the closing price of share before the date XD sign is posted equals to 60 Baht and a Member possesses 100 undelivered shares. Amount of new share that ought to be received = = 20 shares Benefit = Baht 9

11 Formula: XD Examples of Calculation of Benefit when posting XD Sign Stock Dividend Payment in case of Fraction: DDD securities declare stock dividend payment of 6 existing shares per 1 new share. In case of fraction, the issuer shall instead pay cash dividend at the rate of 0.5 Baht per share, whereby the closing price of share before the date XD sign is post equals 60 Baht and a Member possesses 100 undelivered shares. Amount of new share that ought to be received = = new share existing share 16 4 Fraction of share not calculated as stock dividend Benefit = Baht 4 existing shares calculated from 100 (16 x 6) 10

12 Formula: XR Payment of Benefit when posting XR Sign Members affected by the failure to receive securities will miss out the entitlement to subscribe to newly issued securities. This entitlement shall be of any value when the Adjusted Price of securities is higher than the purchase price of securities pursuant to the entitlement. Financial Benefit per share shall be received equals to the difference between Adjusted Price less the purchase price of securities pursuant to the entitlement. Adjusted Price is a guideline in calculating Reference Price of the Stock Exchange. Benefit = MAX (Adjusted Price P exercise, 0) x M Adjusted Price = (P BC x Ratio old ) + (P exercise x Ratio new ) Ratio old + Ratio new Remark: The amount of new share that ought to be received shall be calculated in 4 decimal places, and the financial benefit shall be calculated in 2 decimal places. P BC = closing price of share before the date the sign is posted P exercise = purchase price of share pursuant to the entitlement Ratio Old = ratio of existing share Ratio New = ratio of new share received M = amount of new share that ought to be received 11

13 Formula: XR Examples of Calculation of Benefit when posting XR Sign In case of Amount of Share without Fraction: AAA securities declare that existing shareholders are entitled to subscribe to newly issued shares, whereby the offer price is 80 Baht per share at the ratio of 1 existing share per 4 new shares. The closing price of securities before the date XR sign is posted equals 100 Baht and a Member possesses 100 undelivered shares. Adjusted Price = Amount of new share that ought to be received = shares Benefit = max (84 80, 0) x 400 = 1,600 Baht 12

14 Formula: XR Examples of Calculation of Benefit when posting XR Sign In case of Amount of share with Fraction: BBB securities declare that existing shareholders are entitled to subscribe to newly issued shares, whereby the offer price is 80 Baht per share at the ratio of 3 existing shares per 1 new share. The closing price of securities before the date XR sign is posted equals 100 Baht and a Member possesses 100 undelivered shares. Adjusted Price = Amount of new share that ought to be received = Shares Benefit = max (95 80, 0) x = Baht Remark: In case the calculation yields a fraction, calculation shall be in 4 decimal places, and the financial benefit shall be calculated in 2 decimal places. 13

15 Formulae: XI and XP Payment of Benefit when posting XI Sign Members affected by the failure to receive securities will miss out the opportunity to receive the interest as announced. Financial Benefit per share shall be received equals to the interest as announced. Benefit/share = rate of interest received pursuant to entitlement Payment of Benefit when posting XP Sign Members affected by the failure to receive securities will miss out the opportunity to receive the principal announced to be returned by the company on that occasion. Financial Benefit per share shall be received equals to the principal announced to be returned by the company Benefit/share = principal announced to be returned by the company 14

16 Formula: XE Payment of Benefit when posting XE Sign Members affected by the failure to receive securities will miss out the entitlement to convert warrant into share. This entitlement shall be of any value when the Adjusted Price of share is higher than the value to be exercised pursuant to the entitlement to purchase such share. Financial Benefit per share shall be received equals to the difference between Adjusted Price less the value to be exercise pursuant to the entitlement to purchase share. Benefit = Adjusted Price = Adjusted Price is a guideline in calculating Reference Price of the Stock Exchange. P BC = closing price of share before the date the sign is posted P exercise = purchase price of share pursuant to the entitlement received by warrant holder N = total amount of existing share before conversion W = total amount of warrant to be converted into share E = Exercise Ratio Y = amount of warrant that be pending settlement 15

17 Formula: XE Examples of Calculation of Benefit when posting XE Sign CCC securities declares that existing shareholders are entitled to convert warrant into shares, whereby the offer price is 50 Baht per share at the ratio of 10 units of warrant per 1 new share, the closing price of the underlying securities before the date XR sign is posted equals to 80 Baht and a Member possesses 100 units of undelivered warrant. The company has 100,000 shares before the conversion of warrant and 10,000 units of warrant to be converted into share. Exercise Ratio = Adjusted Price = Baht Benefit = max ( , 0) x 0.1 x 100 = 297 Baht 16

18 Formula: XB Payment of Benefit when posting XB Sign Members affected by the failure to receive securities will miss out the entitlement to subscribe to newly issued shares which is divided into 4 forms: Right to subscribe to preference share allocated to ordinary shareholders: Financial Benefit per share shall be received equals to the value of preference share less the purchase price of preference share pursuant to the entitlement received. Benefit/share = price of preference share P exercise Right to subscribe to ordinary shares allocated to preference shareholders Right to subscribe to securities offered for sale to the public (Public Offering) by allocating to the company s existing shareholders Right to subscribe to affiliate s securities Financial Benefit that ought to be received shall be calculated on the same principle as XR. Price of preference share = Dividend Paid r P exercise r = purchase price of preference share pursuant to the entitlement received = interest rate 17

19 Formulae: XN and XA Payment of Benefit when posting XN Sign Members affected by the failure to receive securities will miss out the entitlement to receive money back from capital decrease. Benefit/share = value of money paid for capital decrease Payment of Benefit when posting XA Sign Members affected by the failure to receive securities will miss out the entitlement to any type of right announced by the company on that occasion. The benefit that the persons affected are to receive shall depend on the announcement on each occasion. 18

20 Formulae: XW and XT Payment of Benefit when posting XW and XT Signs Members affected by the failure to receive securities will miss out the opportunity to receive warrant or transferable subscription right, respectively. At present, the Stock Exchange has not adjusted Reference Price from the posting of XW sign. The warrant possesses a long lifespan, is of pseudo type and has numerous hypotheses. The TCH opines that it may be more appropriate for both contractual parties to joint determine the benefit among themselves. 19

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