Employee Share Options Service (ESOS)

What is Employee Share Options Service (ESOS)?

Board of directors, managers, executives and selected employees are granted share options from their company as a form of staff reward or as part of their compensation scheme.

If your company rewards you with share options, you will have the right but not an obligation to purchase a given number of shares of your company in the future at a predetermined price (exercise price). Share options can be highly rewarding if your company performs well. When the market share price rises above the exercise price, you can benefit from selling the shares after exercising your share options, thereby realizing a capital gain.

However, the exercise process takes time and the shares can only be sold after the exercise process is completed. As a result, you would not be able to sell the shares at your desired selling price since the market price would most probably have moved. Also, when the time comes to exercising your share options, large amounts of cash may be required. As a result, you may not be able to exercise all your entitlements at one go.

Important Notes:

  1. No Short-Selling is allowed. It is the employee’s responsibility to ensure that the shares are credited into his account before a sell order is placed with his Trading Representative or via POEMS. Alternatively, the employee may sign up for the Shares Borrowing and Lending (SBL) facility to perform an “immediate sell with best effort”.
  2. Number of share options exercised MUST MATCH the number of shares borrowed and sold in SBL.
  3. It is recommended that the employee should only exercise his share options if they are “in the money”. You may wish to consult your Trading Representative on this matter.

Share Options Exercising Procedures

  1. The Employee is to furnish Phillip Securities (PSPL) with the Original Option Exercise Notice Form, duly completed and signed.
  2. Indicate to your Trading Representative if “Immediate Sale with Best Effort” is to be used.
  3. If financing is obtained, a cheque for the full exercise amount will be issued to the Employer directly by Phillip.
  4. The Employer will process the Exercise Notice in accordance with the listing requirements.

Enquiry

    How share options financing works

    When employees choose to initiate an “immediate sell with best effort” option and at the same time exercise their share options, they are not required to put in any collateral or cash.


    Example 1: Full Financing and Immediate Sell with Best Effort

    An Employee exercised 10,000 shares options at an exercise price of $1.50 per share and sold them on the same day at a market price of $2.50 per share.

    Description 100% Financing with “Immediate Sell”
    Exercise cost (incl. CDP fee on exercise) $15,010.70
    ESOS processing fee $20.00
    Total ESOS Loan $15,030.70
    ESOS financing interest (7% p.a.)** $57.65
    Sub-to-sub transfer charges $107.00
    Total ESOS exercise costs $15,195.35
    Gross Sales proceeds $25,000
    Less Sales costs:
    (1) Brokerage rate (min S$40 or 0.5%) $125.00
    (2) Clearing fee $10.00
    (3) SGX access fee $1.88
    GST on (1)+(2)+(3) $9.58
    (4) SBL borrowing fee (10% p.a.)** $136.99
    (5) SBL admin fee $20.00
    (6) SBL contract settlement fee $0.50
    GST on (4)+(5)+(6) $11.02
    $24,685.03
    Estimated net profit due to client $9,489.68
    Employees can also opt for immediate sell, while self-financing the option exercise.


    Example 2: Self-finance and Immediate Sell with Best Effort

    An Employee exercised 10,000 shares options at an exercise price of $1.50 per share and sold them on the same day at a market price of $2.50 per share.

    Description 100% Financing with “Immediate Sell”
    Exercise cost (incl. CDP fee on exercise) $15,010.70
    ESOS processing fee $10.00
    Sub-to-sub transfer charges $107.00
    Total ESOS exercise costs payable $15,127.70
    Gross Sales proceeds $25,000
    Less Sales costs:
    (1) Brokerage rate (min S$40 or 0.5%) $125.00
    (2) Clearing fee $10.00
    (3) SGX access fee $1.88
    GST on (1)+(2)+(3) $9.58
    (4) SBL borrowing fee (10% p.a.)** $136.99
    (5) SBL admin fee $20.00
    (6) SBL contract settlement fee $0.50
    GST on (4)+(5)+(6) $11.02
    $24,685.03
    Estimated net profit due to client $9,557.33
    **ESOS financing and SBL borrowing for 20 days. Actual duration depends on processing time taken.

    Enquiry

      Fees & Charges

      Financing
      Financing Interest 7% p.a.
      Processing Fee – SBL with financing or financing only 0.1% on each loan drawn down/option(s) exercised (min S$20, max S$150) (subject to GST)
      Processing Fee – Self-financing $10 per option (s) exercised. (subject to GST)
      Cancellation Fee for ESOS S$100 if employee withdraws, or exercises invalid options after application has been processed. (subject to GST)
      Transfer Fee (for depositing of share collateral)
      1. S$10 (subject to GST) per counter from CDP to PFPL.
      2. S$20 (subject to GST) per counter for transfer out of Phillip.
      Quarterly Sub-Account Maintenance Fee $15.00. Waiver is on the condition of 1 trade done in that quarter. (subject to GST)
      Securities Borrowing & Immediate Sell
      SBL Borrowing Fee 10 % p.a.
      SBL Admin Fee S$20.00 (subject to GST)
      SBL Contract Settlement Fee S$0.50 (subject to GST)
      Sub-to-sub transfer charge S$10 (subject to GST) per counter per lot, subject to a maximum of S$100.00 (subject to GST) per counter.
      Sale of shares Standard brokerage and fees apply.
      Miscellaneous
      CDP Processing Fee $10 (subject to GST) per option exercise.
      Dividend Charges (applicable for shares held in PFPL Share Financing Account) <=S$100 – $1.00 (subject to GST)
      >S$100 – 1% of Net Dividend, max. S$50 (subject to GST)

      *In addition, handling charges are also imposed by foreign custodians for foreign shares
      * Charges subject to change. Please contact your trading representative for the latest charge schedule.

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      IMPORTANT INFORMATION

      This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

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      Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
      250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
      Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com