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Article 8
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The report to the shareholders shall include the operating results for the previous fiscal year, a summary of the business plan for the current fiscal year, the company's future development strategy, and the effect of external competition, the legal environment, and the overall business environment.
In the description of operating results for the previous fiscal year, the annual report shall: review the implementation of the business plan; review budget implementation; provide an analysis of receipts, expenditures, and profitability; and examine research and development work.
The summary of the business plan for the current year shall explain the business policy, furnish a sales volume forecast and the basis thereof, and provide other important production and sales policies for the same year.
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Article 9
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The company overview shall include the following information:
1. Date of incorporation.
2. A brief history of the company: This section shall, with respect to the most recent fiscal year as well as the current fiscal year up to the date of printing of the annual report, include information on the following: merger and acquisition activities; strategic investments in affiliated enterprises; corporate reorganization; instances in which a major quantity of shares belonging to directors, supervisors, or shareholders holding greater than a 10 percent stake in the company is transferred or otherwise changes hands; any change in managerial control; any material change in operating methods or type of business; and any other matters of material significance that could affect shareholders' equity. This section shall further explain how the above matters will affect the company. If there is information related to earlier fiscal years that can help provide a significantly clearer understanding of the company's situation, such information may also be included in the annual report.
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Article 10
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The section on company organization shall set forth the following items:
1. An organizational chart: This chart shall specify the company's structure and the tasks of its principal divisions.
2. Information on the company's directors, supervisors, general manager, assistant general managers, deputy assistant general managers, and the chiefs of all the company's divisions and branches, as follows:
(1) Directors and supervisors: names; principal work experience and academic qualifications; position(s) held concurrently in the company and/or in any other company, date on which current position was assumed; term of contract; the commencement date of the first term, shares held by directors/supervisors and their spouses, children of minor age, other persons holding shares in their name; professional knowledge; whether they are independent directors/supervisors. For directors and supervisors acting as the representative of institutional shareholders, this section shall indicate the names of the institutional shareholders, and shall further indicate the names of those institutional shareholder that hold a stake of greater than ten percent or rank among the company's ten largest shareholders (see Appendix 1).
(2) The general manager, assistant general managers, deputy assistant general managers, and the chiefs of all the company's divisions and branches: names; principal work experience and academic qualifications; date on which current position was assumed; term of contract; and shares held by directors/supervisors and their spouses, children of minor age, and other persons holding shares in their name (see Appendix 2).
(3) Remuneration paid during the most recent fiscal year to directors, supervisors, the general manager, and assistant general managers (see Appendix 2-1 and Appendix 2-2).
(4) Separately compare and describe total remuneration as a percentage of net income as paid by this company, and by each other company included in the consolidated financial statements, during the past two fiscal years to its directors, supervisors, the general manager, and assistant general managers, and analyze and describe remuneration policies, standards, and packages, the procedure for setting remuneration, and linkage to performance.
3. Equity transfers and equity pledges (or changes thereto) during the preceding fiscal year or in the current fiscal year up to the date of printing of the annual report, involving equity interests belonging to directors, supervisors, managers, and shareholders with a stake of 10 percent or more in the company. Where the recipient of the equity transfer or equity pledge is an affiliated person of the company, the recipient's name shall be disclosed along with a note explaining: (a) the nature of his or her affiliation to the company, to any directors or supervisors, and to any shareholders with a stake of 10 percent or more; and (b) the number shares that he or she has received or been pledged (see Appendix 3).
4. The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers, and any companies controlled either directly or indirectly by the company (see Appendix 4).
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Article 11
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The section on capital and shares shall include the following information:
1. Source of capital: Disclose the types of shares issued by the company during the preceding fiscal year and in the current fiscal year up to the date of the printing of the report. If approval has been granted to offer and issue securities by shelf registration, additionally disclose the approved amount and information regarding securities to be issued or already issued (see Appendix 5).
2. Shareholder structure: Provide statistics on the ratios between the various types of shareholders (see Appendix 6).
3. Diffusion of ownership: Describe the diffusion of ownership of common shares and preferred shares. Provide a table that groups shareholders according to the number of shares held, and that further indicates the percentage of shares held by each different group (see Appendix 7).
4. List of principal shareholders: List all shareholders with a stake of 5 percent or greater, or the names of the top ten shareholders, specifying the number of shares and stake held by each shareholder on the list (see Appendix 8).
5. Provide share prices for the past two fiscal years, together with the company's net worth per share, earnings per share, dividends per share, and related information. If shares are distributed in connection with a capital increase out of earnings or capital reserve, further disclose information on market prices and cash dividends retroactively adjusted based on the number of shares after distribution (see Appendix 9).
6. Company's dividend policy and implementation thereof: Disclose the dividend policy adopted in the company's articles of incorporation, as well as the dividend distributions proposed at the most recent shareholders' meeting. If a material change in dividend policy is expected, provide an explanation.
7. Effect upon business performance and earnings per share of any stock dividend distribution proposed or adopted at the most recent shareholders' meeting.
8. Employee dividends and compensation of directors and supervisors:
(1) The percentages or ranges with respect to employee dividends and director/supervisor compensation, as set forth in the company's articles of incorporation.
(2) Information on any employee dividend distribution proposals adopted at shareholders' meetings:
(i) Distribution of cash dividends or stock dividends to employees, and compensation for directors and supervisors.
(ii) the number of shares in any proposed distribution of employee stock dividends, and the size of such a distribution as a percentage of capital increase paid out of earnings.
(iii) The annual report shall assess the effect upon imputed earnings per share of any proposed distribution of employee dividends and director/supervisor compensation.
(3) Use of earnings in the preceding fiscal year for distribution of employee dividends and director/supervisor compensation: The annual report shall disclose: (i) actual distributions of employee dividends and director/supervisor compensation at the time of the preceding fiscal year's earnings distributions; (ii) the amount of such distributions as set forth in the proposal adopted at the director's meeting; and (iii) the degree of discrepancy between the two.
9. Share repurchases: Where a company has applied in the preceding fiscal year or during the current fiscal year up to the date of printing of the annual report, to repurchase its own shares, the company shall explain the purpose, period, and price range of the repurchase, the types, quantity, and total value of shares repurchased, the number of shares retired or resold, the quantity of total treasury stock holdings, and total treasury stock holdings as a percentage of total shares issued (see Appendix 10).
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Article 17
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The overview of business operations shall include the following:
1. A description of the business:
(1) Scope of business: 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 industry: the current status and development of the industry, the links between the upstream, midstream, and downstream segments of the industry supply chain, and development trends and competition for the company's products.
(3) 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.
(4) The company's long- and short-term business development plans.
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 any suppliers and clients accounting for 10 percent or more of the company's total procurement (sales) amount in either of 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, or where a trading counterpart is an individual person who is not a related party, it may use a code in place of the actual name.
(5) An indication of the production volume for the two most recent fiscal years (see Appendix 17).
(6) An indication of the volume of units sold for the two most recent fiscal years (see Appendix 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 Appendix 19).
4. Disbursements for environmental protection: total losses (including damage awards) 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:
(1) List any employee benefit plans, continuing education, training, retirement systems, and the status of their implementation, and the status of labor-management agreements and measures for preserving employees' rights and interests.
(2) List any loss sustained as a result of labor disputes in the most recent fiscal year, and during the current fiscal year up to the date of printing of the annual report, disclose an estimate of losses incurred to date or likely to be incurred in the future, and indicate mitigation measures being or to be taken. If the loss cannot be reasonably estimated, make a statement to that effect.
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 Appendix 20).
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Article 19
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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 Appendix 22).
2. Financial analyses for the past five years: Include information on the company's financial structure, solvency, operating ability, profitability, cash flows, and leverage, and explain changes in financial ratios over the past two fiscal years (see Appendix 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 appendices.
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.
The term "affiliates" as used in Paragraph (6) above refers to entities meeting the requirements set forth under Article 369-1 of the Company Act.
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Article 20
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The company shall review and analyze its financial condition and business performance, and shall assess its risks. In this regard, the annual report shall cover the following points:
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 re-investment profitability, and investment plans for the coming year.
6. The section on risks shall analyze and assess the following matters during the most recent fiscal year and as they stood on the date of printing of the annual report:
(1) The effect upon the company's profits (losses) of interest and exchange rate fluctuations and changes in the inflation rate, and response measures to be taken in the future.
(2) The company's policy 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 to be carried out in the future, and further expenditures expected for research and development work.
(4) Effect on the company's financial operations of important policies adopted and changes in the legal environment 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 as well as industrial change, and measures to be taken in response.
(6) Effect on the company's crisis management of changes in the company's corporate image, and measures to be taken in response.
(7) Expected benefits and possible risks associated with any merger and acquisitions, and mitigation measures being or to be taken.
(8) Expected benefits and possible risks associated with any plant expansion, and mitigation measures being or to be taken.
(9) Risks associated with any consolidation of sales or purchasing operations, and mitigation measures being or to be taken.
(10) Effect upon and risk to the company in the event a major quantity of shares belonging to a director, supervisor, or shareholder holding greater than a 10 percent stake in the company has been transferred or has otherwise changed hands, and mitigation measures being or to be taken.
(11) Effect upon and risk to company associated with any change in governance personnel or top management, and mitigation measures being or to be taken.
(12) Litigious and non-litigious matters. List major litigious, non-litigious or administrative disputes that: (1) involve the company and/or any company director, any company supervisor, the general manager, any person with actual responsibility for the firm, any major shareholder 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, or are still under litigation. 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 of money at stake in the dispute, the 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.
(13) Other important risks, and mitigation measures being or to be taken.
7. Other important matters.
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Article 20-2
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A company shall disclose the following information regarding its certified public accountant:
1. Information on professional fees: Given any one of the following conditions, a company shall disclose information on the professional fees of the certified public accountant:
(1) When non-audit fees paid to the certified public accountant, to the accounting firm of the certified public accountant, and/or to any affiliated enterprise of such accounting firm are equivalent to one quarter or more of the audit fees paid thereto, or when non-audit fees amount to NT$500,000 or more, the amounts of both audit and non-audit fees as well as details of non-audit services shall be disclosed (see Appendix 26-1).
(2) When the FCM changes its accounting firm and the audit fees paid for the fiscal year in which such change took place are lower than those for the previous year, the reduction in the amount of audit fees, reduction percentage, and reason(s) therefor shall be disclosed.
(3) When the audit fees paid for the current year are lower than those for the previous fiscal year by 15 percent or more, the reduction in the amount of audit fees, reduction percentage, and reason(s) therefor shall be disclosed.
The professional fees for auditing services referred to in item (1) means the professional fees paid by the company to a certified public accountant for auditing, review, and secondary reviews of financial reports, financial forecast reviews, and tax certification.
2. Information on replacement of certified public accountant: If the company has replaced its certified public accountant within the last two fiscal years or any subsequent interim period, it shall disclose the following information: (see Appendix 26-2)
(1) Regarding the former certified public accountant:
(i) Date of and reason for replacement of the certified public accountant, specifying whether the certified public accountant or the company terminated or discontinued the engagement.
(ii) If the former certified public accountant has issued an audit report expressing other than an unqualified opinion during the two most recent years, furnish the opinion and reason.
(iii) Indicate whether there was any disagreement between the company and the former certified public accountant relating to any of the following matters:
(a) Accounting principles or practices.
(b) Financial report disclosure.
(c) Auditing scope or procedure.
If any disagreements did exist, the company shall describe in detail the nature of each such disagreement, how the company handled them (including whether the company has authorized the former certified public accountant to respond fully to the inquiries of the successor certified public accountant concerning the subject matter of each such disagreement), and how the disagreements were finally handled.
(iv) If any of the following matters has arisen, they shall also be disclosed:
(a) The former certified public accountant advised the company that it lacked the sound internal controls necessary for the preparation of reliable financial reports.
(b) The former certified public accountant advised the company that he or she was unable to rely on the company's written representations, or was unwilling to be associated with the financial report prepared by the company.
(c) The former certified public accountant advised the company of the need to expand the scope of the audit, or of information showing that an expanded audit might impact the reliability of either a previously issued financial report or the financial report to be issued but, due to replacement of the certified public accountant or for any other reason, the former certified public accountant did not expand the scope of the audit.
(d) The former certified public accountant advised the company that information collected might impact the reliability of either a previously issued financial report or the financial report to be issued, but due to the replacement of the certified public accountant or for any other reason, the certified public accountant did not deal with the issue.
(2) Regarding the successor certified public accountant:
(i) Name of the successor accounting firm, name of the certified public accountant, and date of engagement.
(ii) If prior to the formal engagement of the successor certified public accountant, the company consulted the newly engaged accountant regarding the accounting treatment of or application of accounting principles to a specified transaction, or the type of audit opinion that might be rendered on the company's financial report, the company shall state and identify the issues that were the subjects of the those consultations and the consultation results.
(iii) The company shall consult and obtain written views from the successor certified public accountant regarding the matters on which the FCM did not agree with the former certified public accountant, and shall make disclose thereof.
(3) The company shall mail to the former certified public accountant a copy of the disclosures it is making pursuant to items (1) and (2)(III) of this subparagraph, and advise the accountant of the need to respond by mail within 10 days should the accountant disagree.
3. Where the company's chairperson, general manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its certified public accountant or at an affiliated enterprise of such accounting firm, the name and position of the person, and the period during which the position was held, shall be disclosed.
The term "affiliated enterprise of a certified public accountant's accounting firm" as used in the preceding paragraph means one in which the certified public accountants at the accounting firm of the attesting certified public accountant hold more than 50% of the shares, or of which such accountants hold more than half of the directorships, or a company or institution listed as an affiliated enterprise in the external publications or printed materials of the accounting firm of the attesting certified public accountant.
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Article 21
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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 FSC's "Regulations Governing Preparation of Consolidated Business Reports Covering Affiliated Enterprises, Consolidated Financial Statements Covering Affiliated Enterprises, and Reports on Affiliations."
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. Where the company has carried out a private placement of securities during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, disclose the date on which the placement was approved by the board of directors or by a shareholders' meeting, the amount thus approved, the basis for and reasonableness of the pricing, the manner in which the specified persons were selected, and the reasons why the private placement method was necessary. If implementation of the funds utilization plan has been completed, state how the funds were utilized from receipt of payment in full through the time when implementation of the plan was completed; if implementation of the funds utilization plan is still in progress, describe the progress of the plan's implementation (see Appendix 27).
5. 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 Appendix 28).
6. 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.
7. 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.
8. other matters that require additional description.
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