| Title： |
Criteria Governing Information to be Published in Annual Reports of Public Companies(2003.03.13) |
| Date： |
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Chapter 2 Content of the Annual Report
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| Article 16 | The section on mergers, acquisitions, and issuance of new shares due to acquisition of shares of other companies shall specify the following matters:
1. Where, during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, the company has completed a merger, acquisition, or issuance of new shares due to acquisition of shares of other companies, the annual report shall specify the following matters:
(1) For companies whose shares are listed on a stock exchange ("listed companies") or whose shares are have been approved for trading on an over-the-counter market (either in accordance with the provisions of Article 3 or Article 3-1 of the ROC Over-the-Counter Securities Exchange Criteria Governing Review of Securities Traded on Over-the-Counter Markets, or in accordance with the provisions of Article 3 [as this article read at the time of the company's application for an OTC listing] of the GreTai Securities Market Criteria Governing Review of Second (TIGER) Board Stocks Traded on Over-the-Counter Markets), the annual report shall include a clear opinion prepared by the managing underwriter concerning any merger, acquisition, or issuance of new shares due to acquisition of shares of other companies within the past quarter.
(2) In addition to requirements set forth in the preceding sub-subparagraph, the annual report shall also disclose the state of implementation of the aforementioned matters during the most recent quarter. If the progress or benefits of such implementation were not as good as expected, the annual report shall explain specifically how the situation is likely to affect shareholders' equity, and shall put forward a plan for corrective action.
2. Where the board of directors has, during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, adopted a resolution approving a merger, acquisition, or issuance of new shares due to acquisition of shares of other companies, the annual report shall disclose the state of the plan's implementation together with the basic identifying information of the company (or companies) to be merged, acquired, and/or purchased through acquisition of shares (see Table 16). Where a merger, acquisition, or issuance of new shares due to acquisition of shares of other companies is currently in progress, the annual report shall disclose the state of the plan's implementation and its effect upon shareholders' equity. |
| Article 17 | The overview of business operations shall include the following:
1. a description of the business:
(1) the company's major lines of business and the relative weight of each, current products (services), and new products (services) planned for development;
(2) an overview of the company's technologies and its research and development work: a listing of research and development expenditures as well as technologies and/or products successfully developed during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report.
2. an analysis of the market as well as the production and marketing situation, including:
(1) market analysis: analysis of the geographic areas where the main products (services) of the company are provided (supplied), the company's market share, demand and supply conditions for the market in the future, the market's growth potential, the company's competitive niche, positive and negative factors for future development, and the company's response to such factors.
(2) usage and manufacturing processes for the company's main products;
(3) supply situation for the company's major raw materials;
(4) a list of the company's top ten suppliers and clients for the two most recent fiscal years, the amounts bought from (sold to) each, the percentage of total procurement (sales) accounted for by each, and an explanation of the reason for increases or decreases in the above figures. Where the company is prohibited by contract from revealing the name of a client, it may use a code in place of the actual name provided that permission to do so has been obtained from the SFC.
(5) an indication of the production volume for the two most recent fiscal years (see Table 17);
(6) an indication of the volume of units sold for the two most recent fiscal years (see Table 18);
3. the number of employees employed for the two most recent fiscal years, and during the current fiscal year up to the date of printing of the annual report, their average years of service, average age, and education levels (including the percentage of employees at each level) (see Table 19);
4. disbursements for environmental protection: total losses and fines for environmental pollution for the two most recent fiscal years, and during the current fiscal year up to the date of printing of the annual report, and an explanation of the measures (including corrective measures) and possible disbursements to be made in the future (including an estimate of losses, fines, and compensation resulting from any failure to adopt responsive measures, or if it is not possible to provide such an estimate, an explanation of the reason why it is not possible);
5. labor relations: losses resulting from labor disputes during the two most recent fiscal years, and during the current fiscal year up to the date of printing of the annual report, and an indication of the estimated amount of losses which might occur at the present time and in the future, as well as measures to be taken in response;
6. important contracts: the contracting parties, major content, restrictive clauses, and the commencement dates and expiration dates of supply/distribution contracts, technical cooperation contracts, engineering/construction contracts, long-term loan contracts, and other contracts that would affect shareholders' equity, where said contracts were either still effective as of the date of printing of the annual report, or expired in the most recent fiscal year (see Table 20);
7. litigious and non-litigious matters: major litigious, non-litigious or administrative disputes, where said disputes: (1) list as an interested party the company and/or the company's directors, auditors, president, the person with actual responsibility for the firm, major shareholders holding a stake of greater than 10 percent, and/or any company or companies controlled by the company; and (2) have been concluded by means of a final and unappealable judgment during the past two fiscal years or during the current fiscal year up to the date of printing of the annual report, or were still under litigation as of the date of printing of the annual report. Where such a dispute could materially affect shareholders' equity or the prices of the company's securities, the annual report shall disclose the facts of the dispute, amount under dispute, date of litigation commencement, the main parties to the dispute, and the status of the dispute as of the date of printing of the annual report.
8. Acquisition and/or disposal of assets: all major assets purchased or sold by the company and its subsidiaries in the preceding fiscal or year or during the current fiscal year in the period up to the date of printing of the annual report (see Table 21). |
| Article 18 | The section on implementation of the company's funds utilization plans shall include the following:
1. a description of the plans: For each uncompleted public issue or private placement of securities, and for such issues and placements that were completed in the most recent three years but have not yet fully yielded the planned benefits, the annual report shall provide a detailed description of the plan for each such public issue and private placement. Such descriptions shall include any and all changes to the plan, the source of funds and the manner of their utilization, the reason(s) for any changes to the plan, the benefits yielded by the funds before and after any change to the plan, the date on which the change to the plan was reported at a shareholders' meeting, and the date on which such information was uploaded to the website specified by the SFC for reporting of information.
2. status of implementation: With respect to funds usage under the plans referred to in the preceding subparagraph, the annual report shall (for the period as of the quarter preceding the date of printing of the annual report) analyze the status of implementation and compare actual benefits with expected benefits. Where implementation has failed to yield the expected progress or benefits, the annual report shall provide specific reasons for such failure, explain any effect it might have upon shareholders' equity, and outline the plan for correcting the situation. Where any of the following sub-subparagraphs apply to the funds usage plan descriptions referred to in the preceding subparagraph, the annual report shall further disclose the items set forth in the relevant sub-subparagraph:
(1) If the funds are used to merge, acquire, or purchase another company through share acquisition, to expand fixed assets, or to acquire new fixed assets, the annual report shall compare and explain fixed assets, operating revenues, operating costs, and operating income.
(2) If the funds are invested in another company, the annual report shall describe the condition of the invested company and explain the effect of the investment upon gain or loss from investments.
(3) If the funds are used to strengthen the company's working capital or pay off debts, the annual report shall: (1) note any increase or decrease in the company's current assets, current liabilities, and total liabilities; (2) compare and explain the company's interest expenses, operating revenues, and earnings per share; and (3) analyze the company's financial structure. |
| Article 19 | The overview of the company's financial status shall include the following:
1. abbreviated balance sheets and income statements for the past five fiscal years, showing the name of the certified public accountant and the auditor's opinion given thereby (see Table 22).
2. financial analyses for the past five years: including information on the company's financial structure, solvency, operating performance, profitability, cash flow, and leverage (see Table 23).
3. supervisors' report for the most recent year's financial statement.
4. financial statement for the most recent fiscal year, including an auditor's report prepared by a certified public accountant, a two-year comparative balance sheet and income statement, statement of changes in shareholders' equity, cash flow chart, and any related footnotes or attached tables.
5. a consolidated financial statement for the parent company and its subsidiaries for the most recent year, certified by a CPA.
6. If the company or its affiliates have experienced financial difficulties in the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, the annual report shall explain how said difficulties will affect the company's financial situation.
7. The annual report shall indicate how well the company has succeeded in meeting its financial forecasts for the two most recent fiscal years. Where there is a discrepancy between the forecasted and actual figures, the annual report shall explain the reasons for the discrepancy, and where the financial forecast has been revised (corrected), the annual report shall indicate the dates, amounts, and reasons for such revisions (corrections). Where the company has been penalized by the Taiwan Stock Exchange Corporation, the GreTai Securities Market, or the SFC, the annual report shall indicate the reason for the penalty (see Table 24).
The term "affiliates" as used in Paragraph (6) above refers to entities meeting the requirements set forth under Article 369-1 of the Company Law. |
| Article 20 | The company shall review and analyze its financial condition and business performance, and shall describe the status of its risk management activities. In this regard, the annual report shall cover the following points (see Table 25):
1. financial condition: The annual report shall list the main reasons for any material change in the company's assets, liabilities, or shareholders' equity during the past two fiscal years, and describe the effect thereof. Where the effect is of material significance, the annual report shall describe the measures to be taken in response.
2. business performance: The annual report shall list the main reasons for any material change in operating revenues, operating income, or income before tax during the past two fiscal years, provide a sales volume forecast and the basis therefor, and describe the effect upon the company's financial operations as well as measures to be taken in response.
3. cash flow: The annual report shall describe and analyze any cash flow changes during the most recent fiscal year, describe corrective measures to be taken in response to illiquidity, and provide a liquidity analysis for the coming year.
4. The annual report shall describe the effect upon financial operations of any major capital expenditures during the most recent fiscal year.
5. The annual report shall describe the company's reinvestment policy for the most recent fiscal year, the main reasons for the profits/losses generated thereby, the plan for improving investment profitability, and investment plans for the coming year.
6. The section on risk management shall analyze and assess the following matters:
(1) the effect upon the company's profits (losses) of interest and exchange rate fluctuations and changes in the inflation rate during the most recent fiscal year, and response measures to be taken in the future.
(2) the company's policy in the most recent fiscal year regarding high-risk investments, highly leveraged investments, loans to other parties, endorsements, guarantees, and derivatives transactions; the main reasons for the profits/losses generated thereby; and response measures to be taken in the future.
(3) research and development work carried out during the most recent fiscal year; the progress of unfinished research and development work; further expenditures required for research and development work; schedule for putting the results of research and development work into mass production; and the main factor(s) affecting the success of research and development work.
(4) effect on the company's financial operations of important policies adopted and changes in the legal environment in the most recent fiscal year at home and abroad, and measures to be taken in response.
(5) effect on the company's financial operations of developments in science and technology during the most recent fiscal year, and measures to be taken in response.
(6) effect on the company's crisis management of changes in the company's corporate image during the most recent fiscal year, and measures to be taken in response.
7. other important matters. |
| Article 21 | Special items to be included:
1. information related to the company's affiliates: the consolidated business report, consolidated financial statement, and affiliation report for the most recent fiscal year, compiled in accordance with the SFC's "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises."
2. information on enforcement of the internal control system shall include the following:
(1) an internal control declaration;
(2) Where a company has retained a CPA to audit its internal control system, the auditor's report issued by the CPA shall be disclosed.
3. Where, during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, some party has expressed a dissenting opinion with respect to a major resolution passed by the board of directors, and said dissenting opinion has been recorded or prepared as a written declaration, the principal content of the dissenting opinion shall be disclosed in the annual report.
4. The annual report of any listed or OTC company shall describe the state of the company's corporate governance during the most recent fiscal year and during the current fiscal year up to the date of printing of the annual report. The annual report shall further describe any corrective measures or response measures that the company plans to implement (see Table 26).
5. Where the company has carried out a private placement of marketable securities during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, the annual report shall disclose the amount of the placement, the date on which the placement was approved by the board of directors or by a shareholders' meeting, the amount thus approved, the criteria for the pricing of the placement, the reasons why such pricing was reasonable, the manner in which the specified persons were selected, and the necessity of using the private placement method (see Table 27).
6. holding or disposal of shares in the company by the company's subsidiaries during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report (see Table 28).
7. Major resolutions approved by the company's board of directors or at meetings of its shareholders during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report.
8. Where, during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, any penalties have been imposed in accordance with the law upon the company or its in-house personnel, or the company has taken disciplinary action against its in-house personnel for violations of the company's internal control regulations, the annual report shall describe the principal problem(s) and what it has done to improve the situation.
9. other matters that require additional description.
The provisions of Subparagraph 4 of the preceding paragraph shall apply to any securities firm that is a publicly traded company. |
| Article 22 | If any of the situations listed in Subparagraph 2 of Paragraph 2 of Article 36 of the Securities and Exchange Law, which might materially affect shareholders' equity or the price of the company's securities, has occurred during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, such situations shall be listed one by one. |
Chapter 3 Supplementary Provisions |
| Article 23 | Prior to the day on which a shareholders' meeting is to be held, the company shall upload an electronic file containing its annual report to the website specified by the SFC for reporting of information. |
| Article 24 | These Guidelines shall enter into force from January 1, 1989.
The date for enforcement of any amendment to these Guidelines shall be prescribed by order of the Competent Authority. |