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Financial circumstances:
- Prepare an analysis of the issuing company's financial ratios for the most current term and most recent three fiscal years (or the current term and the most recent two fiscal years in the case of an application for listing of stocks on the Taiwan Innovation Board), compare changes against at least three listed companies and unlisted companies in the same industry sector, and explain why these companies are chosen for the comparison. For an applicant for listing of shares in accordance with Article 4, paragraph 2 or 3, or Article 28-1, paragraph 5 or 6 of the Rules Governing Review of Securities Listings or as a technology-based enterprise or cultural and creative enterprise, obtain information about the equity belonging to the owner of the parent company for the most recent fiscal year and as in the current financial statement, and ascertain the details of the issuing company's business plan for the upcoming year, to evaluate the possibility that the equity belonging to the owner of the parent company in the upcoming year continues to exceed two-thirds of its paid-in capital. For issuers of shares with no par value or with a par value per share that is not NT$10, the underwriter shall evaluate the possibility that the equity belonging to the owner of the parent company in the upcoming year drops below two-thirds of the sum of stock capital and capital reserve - share premium.
In the event of an applicant for listing of stocks on the Taiwan Innovation Board, obtain a forecast of cash receipts and disbursements for the month of such application and each of the 12 months after the scheduled listing, and evaluate whether the applicant complies with Article 29, paragraph 1, subparagraph 3 of the Rules Governing Review of Securities Listings.
- Review the financial reports certified by a CPA and obtain the issuing company's statements or attorney letters to ascertain if there are any major litigations or financial difficulties in the current term and most recent three fiscal years (or the current term and the most recent two fiscal years in the case of an application for listing of stocks on the Taiwan Innovation Board); also obtain the endorsements and guarantees, major undertakings and lending to others, trading of derivatives and major assets transactions of the issuing company and all its subsidiaries (including transactions between parent company and subsidiaries) for the current term and the most recent three fiscal years (or the current term and the most recent two fiscal years in the case of an application for listing of stocks on the Taiwan Innovation Board), to evaluate their impact on the financial position of the issuing company.
The underwriter shall perform the following assessment and auditing procedures for the above major asset transactions:
- Obtain a summary statement of major asset transactions for the current term and most recent three fiscal years (or the current term and the most recent two fiscal years in the case of an application for listing of stocks on the Taiwan Innovation Board), and check if any counterparty in such transactions is a related party and whether there are any major restrictive clauses.
- Obtain materials relating to the above major asset transactions, such as purchase contracts, records of actual receipts and disbursements, internal decision-making procedures etc., to ascertain whether the transactions violate relevant laws and regulations and involve irregularities.
- Perform necessary procedures to verify the authenticity and completeness of the above materials
- Obtain information about the issuing company's plant expansion plans as of the current term of the application year, evaluate its funding sources, expected benefits, and feasibility, and ascertain the progress of work.
- Reinvested enterprises and major investment projects:
- general information about enterprise reinvested by the issuing company and any of its subsidiaries (including transactions between parent company and subsidiaries):
- obtain the financial statements of the reinvested enterprises and relevant information to ascertain their major business activities and general operation;
- obtain minutes of meetings of the board of directors of the issuing company to ascertain its purpose of investment, years of investment, original investment amounts, number of shares and its shareholding ratio in the invested companies;
- review the issuing company's financial reports and account books to ascertain how share of profits and losses of its subsidiaries, affiliate and joint ventures is recognized by using the equity method;
- review information such as financial reports and account books for the current term and the most recent three fiscal years (or the current term and the most recent two fiscal years in the case of an application for listing of stocks on the Taiwan Innovation Board) to evaluate if there is any violation of Article 13 of the Company Act;
- where the issuing company in the fiscal year in which it applies for listing satisfies, or its subsidiaries in the preceding fiscal year satisfies, any of the criteria of major subsidiaries as in Article 2-1, Paragraph 2 of the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants or Article 5 of the Regulations for Auditing and Attestation of Financial Statements of Financial Institutions by Appointed Certified Public Accountants, the underwriter shall send its staff to provide on-site counseling services and evaluate how its internal control measures are implemented;
- In regard to important subsidiaries meeting the above criteria, the underwriter shall additionally perform the following evaluation and examination procedures respecting the implementation of their internal control systems:
- Ascertain the organization, production, business and other operations of these important subsidiaries; obtain introductions and operating procedures about the cycles of collection of sales payments, cycles of payments for procurement, cycles of production and warehousing, and cycles of research and development; and perform on-site random inspections on information about the above cycles to ascertain if they are being operated in a reasonable way according to the written accounting system and evaluate if there are any major defects and if the cycles are effectively implemented.
- Ascertain the operating procedures for procurement by these important subsidiaries of real properties, plants and factories, equipment, and real estate for investment purposes, perform on-site random inspections on the relevant procurement information, and evaluate if there are any major defects.
- Visit the important subsidiaries to inspect their maintenance of inventories and properties, and obtain catalogues of the inventories, real properties, plants and factories, equipment, and real estate for investment purposes of these companies, to conduct random inspections on the real properties, plants and factories, equipment, real estate for investment purposes, and inventories.
- Major investment projects:
- review information about the purposes, starting time and expected completion dates of the investment projects in the minutes of meetings of the board of directors, and obtain information about the operation of the investment projects;
- funding sources of the investments: in case of loans, the underwriter shall evaluate the impact on the future operation of the issuing company; in case of own funds, the underwriter shall calculate the lost interest income or returns on reinvestment;
- collect supply-and-demand information about the markets of the products of the enterprises in the investment projects to ascertain if the projected market supply and demand is reasonable, and based on the projected operation plan calculate the returns on investment and period of recovery of costs;
- obtain the financial reports of the invested companies or operation reports of the projects to ascertain their operation and financial positions;
- ascertain the estimated investment benefits based on business or technology experts' evaluation opinions.
- If a public enterprise applies for listing of shares and the financial reports it submitted has not been certified by a CPA, the underwriter shall obtain and ascertain the CPA's comments on the difference in applying the Generally Accepted Accounting Principles against certification by an auditing agency, and its impact on the financial reports.
- The underwriter shall evaluate the fairness of the regulations governing issue of employee subscription warrants and equity securities by the issuing company that is a foreign company according to the laws and regulations of the jurisdiction where it was incorporated, and the impact on the shareholders' equity.
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