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Amended Article

Title:

Taiwan Stock Exchange Corporation Directions Governing the Particulars to be Recorded in the Securities Underwriter's Assessment Report  CH

Amended Date: 2018.03.31 
Categories: Primary Market > Review
4     Industrial circumstances and operational risks:
  1. Operational risks of the sector in which the issuing company runs its business:
  2. The underwriter shall list by way of example, taking into consideration the macro economy, the operational risks of the sector in which the issuing company runs its business (e.g. economic cycles, changes in the upstream/downstream of the industry, future development of the business, and product substitution).
  3. Operational risks of the issuing company:
  4. The underwriter shall list by way of example the operational risks such as to the issuing company's business operation, technical capabilities, R&D, patents, human resources, finance (including costs and exchange rate fluctuations).
    Where the listing application is filed in accordance with Article 4, paragraph 2 or 3, or Article 28-1, paragraph 5 or 6 of the Taiwan Stock Exchange Corporation Rules Governing Review of Securities Listings, the information about operation model and its risks, and the future development plan shall be described and explained.
    For a technology-based enterprise, cultural and creative enterprise or information software enterprise, the underwriter shall also describe the following:
    1. assessment of the probability of accomplishment of projected production time schedules and costs, market positioning, needs and estimates on future revenue benefits, and the internal control and security measures for research and development based on the level, sources, certainty and advancement of technologies employed for its product production and development, and competitive price trends, life cycles, sustainability, and R&D programs for new products; and
    2. information about the background (work experiences, academic background, job positions and seniority) of the company's directors participating in the operation and decision making, shareholders holding more than 5% of the total number of outstanding shares of the issuing company, shareholders contributing capital with patents or expertise, and officers controlling manufacturing technologies and technical developments, their shareholding ratios, share transfers by them within the past three fiscal years and the year of application, and how much time these technical shareholders and officers spend on and how they are actually involved in operation, and assessment of the impact on the finance and business of the issuing company and its action plans if these people discontinue their participation in the operation.
6     Financial circumstances:
  1. Explain in tabular form the analysis of the financial ratio and comparison with the financial ratios of listed companies and unlisted companies in the same sector of business for the last period and the last three fiscal years, including financial structure, solvency, operational capability and profitability.
  2. If the listing application is filed in accordance with Article 4, paragraph 2 or 3, or Article 28-1, paragraph 5 or 6 of the Taiwan Stock Exchange Corporation Rules Governing Review of Securities Listings or if the applicant for listing of shares is a technology-based enterprise, cultural and creative enterprise or information software enterprise, the equity belonging to the owner of the parent company for the last financial year and the last period as in the financial statement shall be specified. The underwriter shall also evaluate the possibility that the equity belonging to the owner of the parent company in the year of application and the following year continues to exceed two-thirds of its paid-in capital. For issuers of shares with no par value or 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 following year drops below two-thirds of the sum of stock capital and capital reserve - share premium.
  3. Description of endorsements and guarantees, major undertakings and lendings 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 last period and the last three fiscal years, and assessment of their impact on the financial position of the issuing company.
  4. List the plant expansion plans as of the last period of the application year and the funding sources, progress of work, and expected benefits, and evaluate the feasibility.
  5. Reinvested enterprise of the issuing company and all its subsidiaries (including transactions between parent company and subsidiaries):
    1. Provide an outline as of the latest financial report of the application year and assess the operation and profitability of the major reinvested enterprises (holding 20% or more shares or whose book value or original investment amount is at least NT$ 50 million) for the last period and the last fiscal year, and the share of profits and losses and distribution of share dividends of the subsidiaries, affiliates and joint ventures recognized by the equity method for the last period and the last three fiscal years (for offshore reinvested enterprises, the amount of profits remitted back should also be specified). In case of use of the resources and technologies of the issuing company, the fairness of consideration and technology compensation should also be assessed. If the reinvested enterprise experiences difficulties in operation or funding, the impact on the issuing company should also be evaluated.
    2. For applicants already investing or planning to invest in the Mainland Area, the underwriter shall describe their investments, and the share of profits and losses and amount of profits remitted back of the subsidiaries, affiliates and joint ventures recognized by equity method for the last period and the last three fiscal years, and evaluate the impact on the financial position of the issuer.
    3. For ongoing investment projects as of the latest financial report of the application year with the projected total investment amount accounting for at least 20% of the paid-in capital for the last fiscal year or exceeding NT$ 500 million, assessment and description of the following are required: in case of issuers of shares with no par value or a par value per share that is not NT$ 10, the above 20% of the paid-in capital shall be replaced with 10% of the equity belonging to the owner of the parent company:
      1. purpose, starting time and expected completion date of the investment;
      2. funding sources of the investment: 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;
      3. benefits of investment: including projected market supplies and demands after completion of investment, annual returns on investment, and expected period for recovery of costs;
      4. current business and financial positions of the invested enterprise or project; and
      5. business experts' or technology experts' assessment and opinions on the investment project.
  6. If the underwriter is counseling the major subsidiaries of the issuing company in accordance with Article 6 of the TWSE "Assessment and Auditing Procedures for Securities Underwriters Handling Initial Listing", the underwriter shall provide the assessment and opinions stating whether there are any major operational risks or other significant irregularities.
  7. Based on the offer price and the average listed price of the issuing company on the Emerging Stock Market for the last month, the underwriter shall calculate, using the intrinsic value, the possible impact of the issued employee subscription warrants, for which the last day of stock-based payment transaction has not arrived, on the financial statement after listing of shares of the issuing company.
  8. If a state-owned enterprise applies for listing of shares and the financial reports it submits have not been certified by a CPA, the underwriter shall contact and ask the CPA to comment on the difference between certification according to the generally accepted accounting principles and certification by an auditing agency, and its impact on the financial report.
  9. If a financial enterprise applies for listing of shares, the underwriter shall clearly describe its provision of allowance and assess if the amount is adequate.
  10. The underwriter shall evaluate the fairness of the regulations governing issue of employee subscription warrants and equity securities established by the applicant that is a foreign company as required according to the law of the jurisdiction where it was incorporated, and the impact on the shareholders' equity.
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