| 4 |
IV. Except when shareholders of a secondary exchange-listed (or OTC-listed) company engage a depository institution to issue TDRs in Taiwan for issued shares held by them, contents of evaluations shall be as below (for shelf registrations for TDRs to be issued in tranches, assessments for both the initial issue and each subsequent tranche shall be prepared in accordance with Point 18):
1. An explanation and analysis of the overall economic situation, applicable laws and regulations, exchange rate policy, and relevant tax and risk factors in the home country of the foreign issuer, in its principal operating location(s), and in the country in which it is listed.
2. An evaluation of the business and financial status of the foreign issuer:
(For a primary exchange-listed or OTC-listed company or emerging stock company, the evaluation may be based solely on the consolidated financial report.)
(1) Business status:
a. The main scope of business, the current goods and their purposes or service items.
b. The supply situation of the key raw materials, and the main sales area of the main goods or businesses of the foreign issuer.
c. An analysis of changes in the company's main customers and suppliers for the three most recent fiscal years and for the current fiscal year up to the date of the financial statement for the most recent period (the top 10, or those accounting for 5 percent or more of net operating revenues or net purchasing for those fiscal years): For the three most recent fiscal years, the analysis shall specify the name, dollar amount, and proportion of annual operating revenues of each main customer, the reason for changes in main customers, and shall analyze the reasonableness of any such change and whether there is a sales concentration risk, and briefly state the company's sales policy. For the three most recent fiscal years and for the current fiscal year up to the date of the financial statement for the most recent period, the analysis shall specify the name of each main supplier, and the net amount purchased from each as a percentage of net purchasing and as a dollar amount. For the three most recent fiscal years, the analysis shall analyze the reason for changes in main suppliers and whether there is risk of supplier concentration. However, if it is contractually stipulated that a customer's name may not be disclosed, or if a trading counterparty is an individual and a non-related party, a code may be substituted for the name.
d. For the two most recent fiscal years and for the current fiscal year up to the date of the financial statements for the most recent period, with respect to the foreign issuer itself and its consolidated financial statements, an evaluation of the reasonableness of changes in receivables, the adequacy of its allowance for bad debts and likelihood of collection, and a comparative evaluation against peers in the same industry.
e. For the two most recent fiscal years and the current fiscal year, with respect to the foreign issuer itself and its consolidated financial statements, an evaluation of the reasonableness of changes in net inventory and the adequacy of allowances for losses on decline in market value of inventory and on obsolete and slow-moving inventory, and a comparative evaluation against peers in the same industry.
f. For the three most recent fiscal years and the current fiscal year up to the date of the financial statement for the most recent period, state the foreign issuer's operating revenues, gross income, and operating income, with a comparison against peers in the same industry, and explain, on a segment or key product basis, whether changes in operating revenues and gross income are reasonable.
g. An evaluation of transactions between the foreign issuer and related parties in the three most recent fiscal years and the current fiscal year up to date of the financial statement for the most recent period: evaluate the circumstances of business transactions between the foreign issuer and affiliated enterprises to determine whether they involve non-arms length transactions. If a transaction is a sale by the foreign issuer to an affiliated enterprise, then evaluate the foreign issuer's credit policy, the transaction terms and conditions, payment collection, and the circumstances and reasonableness of the subsequent production use or resale by the affiliated enterprise with respect to the sold product, and if such transaction does not conform to ordinary transaction rules, evaluate the reason for and reasonableness of the discrepancy. Evaluate whether the principal businesses or products (i.e. any business or product that accounted for 30 percent or more of total operating revenues for each of the two most recent fiscal years) of the issuer and the affiliated enterprises are mutually competitive.
h. The long and short term business development plans of the foreign issuer.
i. The general situation and the future development trends of the industry to which the foreign issuer belongs, and analysis of the position and growth of the industry to which the foreign issuer belongs in the nation in which the main operation office is located.
(2) Financial status:
a. List the condensed income status from the three most recent fiscal years and the current fiscal year up to the date of the financial statement for the most recent period and analyze changes.
b. State the financial analyses for the three most recent fiscal years and for the current fiscal year up to the date of the financial statement for the most recent period (including analyses of financial structure, solvency, operating capabilities, profitability, and cash flow), and compare against peers in the same industry.
c. If the foreign issuer has invested in another company, holds 20 percent or more of its shares, and that company's total assets are 10 percent or more of the foreign issuer's total assets, state such company's operations and profit status for the most recent fiscal year and for the current fiscal year up to the date of the financial statement for the most recent period. In addition, if as of the most recent quarter operations or financial turnover difficulties have occurred at the aforementioned invested company, evaluate the company's impact on the foreign issuer.
d. List any endorsements, guarantees, material commitments, or loans made to or on behalf of others, derivatives transactions, or asset transactions of material significance during the three most recent fiscal years or during the year of filing up to the date of the financial statements for the most recent period, and in addition, evaluate the impact thereof on the company's financial status.
(3) If the foreign issuer is a holding company, the company shall, in addition to evaluating the operational and financial status of the holding group, list the organization and the related parties of such group, and evaluate the reasonableness of transactions with the related parties.
(4) An integrated analysis of the operational and financial status.
3. Collect information regarding the implementation of each previous plan by the foreign issuer for the public offering and issuance or private placement of securities and explain the audit procedures and the conclusions obtained. (This evaluation is not necessary in the case of a primary exchange-listed (or OTC-listed) company issuing new shares in connection with a merger, a transfer of shares from another company, or an acquisition or demerger, or in the case of a secondary exchange-listed (or OTC-listed) company issuing new shares, or sponsoring the issuance of TDRs, in connection with a merger, a transfer of shares from another company, or an acquisition or demerger, or in cases in which more than three years has passed from the date of actual completion of the plan to the date of filing.)
(1) The implementation status of any previous public offering and issuance or private placement of securities that has not been completed. If a plan's progress fails to meet the projected target, provide a concrete evaluation of the reasonableness of the cause of the delay, the impact on shareholder equity, and whether there is a concrete improvement plan.
(2) If any previous plan for public offering and issuance or private placement of securities has undergone a material change and has not yet been completed, then the content of the change to the plan, the source and use of the funds, the reason for the change, and the benefits both before and after the change shall be explained.
(3) For any previous offering and issuance or private placement of securities for which three years has not yet passed from the date of actual completion of the plan to the date of filing, evaluate whether the expected benefits materialized. Where the results of implementation did not meet the expected target, the report shall concretely evaluate the reasonableness of the cause and state its impact on shareholder equity.
(4) If the foreign issuer has previously issued corporate bonds or taken on long-term debt, the report shall indicate whether all principal and interest have been returned on schedule, shall note any material restrictive covenants applying to the company's current finances, operations, or other matters, and shall explain whether it has experienced any cash flow difficulties during the three most recent fiscal years.
4. List the amounts of the preferred shares, convertible corporate bonds, corporate bonds with warrants, or other securities which the foreign issuer has issued, and evaluate the impact of the terms and the limitation for such previous issuance on the rights and benefits of the buyers of this issuance.
5. Evaluation of the feasibility of this offering and issuance, its necessity, the reasonableness of the method to decide the price, the plan for of the capital usage, the predicted progress and the predicted possible effect and benefit. (In the case of a primary exchange-listed (or OTC-listed) company carrying out a cash capital increase through the issuance of new shares by public sale prior to initial exchange listing or OTC listing, the part of the evaluation regarding necessity is not required; where issued shares are used to publicly offer and issue TDRs or stocks, this evaluation is not necessary except with respect to the method to decide the price.) Any other elements which will affect the feasibility of this issuance shall also be explained.
6. List the stock price trend chart of the last five years for the securities representing the secondary exchange-listed (OTC-listed) company on the securities exchange markets where they are listed and analyze the change in the stock price and trade volume for the last six months (including the highest, lowest, and average market prices, up to the closing prices for the last business day prior to the registration date, the trend of the change in trade volumes, the average rate of rise and fall, and the comparison with the main stock price index published by the securities exchange of the nation in which the foreign issuer lists its stocks). Except when carrying out the public sale of TDRs prior to an initial exchange listing (or OTC listing), the evaluation shall also list the difference in the various above-mentioned market prices between the exchange markets on which the listed security is traded. If the period of listing is less than a full six months, then the period for which the above-mentioned items shall be listed may be the actual period of listing, and a note of explanation shall be added.
7. Legal compliance
(1) Specify whether, in the review opinions of qualified lawyers retained by the foreign issuer in its home country, its principal operating location(s), and the country in which it is exchange listed, in the most recent fiscal year and up to the date of the securities firm evaluation report, the foreign issuer has violated any labor-related laws or regulations of that country; any employee strikes have occurred; any material litigious, non-litigious, or administrative proceedings, the signing of any material contract or arbitration matters have occurred, and whether the foreign issuer has violated any rules relating to pollution control.
(2) Indicate whether any circumstances set forth in Article 7, Article 8, or Article 39 of the Criteria Governing the Offering and Issuance of Securities by Foreign Securities Issuers exist.
(3) Indicate whether the foreign issuer is in compliance with the Self-regulatory Rules Governing the Provision of Advisory Services by Underwriter Members to Issuing Companies Offering and Issuing Securities of the Taiwan Securities Association.
(4) State that none of the following circumstances apply to the lawyer retained by the foreign issuer to issue the legal opinion and review form in accordance with FSC requirements, or to the lawyer retained by the foreign issuer to issue the Chinese-language version of the opinion stating that there are no material discrepancies with respect to that securities public offering and issuance case:
a. Has been disciplined by the Ministry of Justice Lawyer Discipline Committee during the past year.
b. Has one of the following relationships with the issuing company, the certified public accountant who certified the issuer's financial report for the most recent period, or the lead underwriter:
(i) related parties as defined in Statement of Financial Accounting Standards No. 6;
(ii) either party directly or indirectly controls the personnel, financial, or business operations of the other party, as prescribed by other law or regulation or as evidenced by facts.
8. If the foreign issuer has filed for registration of the securities public offering and issuance with the Financial Supervisory Commission (FSC), Executive Yuan and the issuance rules have been flexibly adopted in accordance with legal provisions, indicate whether the following matters have been evaluated (if previously issued shares are used to offer and issue TDRs or stocks, this evaluation may be omitted):
(1) If the foreign issuer conducts a cash capital increase through an issuance of common shares for which existing shareholders have not waived their preemptive rights and adopts the public subscription method to conduct underwriting, it shall specify the preliminary issue price, and that the actual issuance price must be adjusted due to market changes pursuant to Article 6, paragraphs 1 and 3 of the Self-regulatory Rules Governing the Provision of Advisory Services by Underwriter Members to Issuing Companies Offering and Issuing Securities. The foreign issuer shall also explain how any undersubscription will be handled, or in the event of an increase in the amount of funds raised, how the funds will be used and the expected benefits, and the legality and reasonableness thereof.
(2) If the foreign issuer conducts a cash capital increase, and a shareholders meeting has resolved that all shareholders waive their preemptive rights, and underwriting for all shares is conducted by means of book building or competitive auction, it shall specify the preliminary issue price and volume interval, and that the actual issuance must be adjusted due to market fluctuations pursuant to Article 7, paragraph 1 of the Self-regulatory Rules Governing the Provision of Advisory Services by Underwriter Members to Issuing Companies Offering and Issuing Securities. The foreign issuer shall in addition explain how any undersubscription will be handled, or in the event of an increase in the amount of funds raised, how the funds will be used and the expected benefits, and the legality and reasonableness thereof.
(3) If the foreign issuer applies for an exchange listing (or OTC listing) by means of a cash capital increase through the issuance of common shares, at the time the foreign issuer files with the FSC it shall set a preliminary price in a reasonable manner, and explain how any undersubscription resulting from a change in the actual issuance price will be handled, or in the event of an increase in the amount of funds raised, how the funds will be used and the expected benefits, and the legality and reasonableness thereof.
(4) When a foreign issuer sponsors the issuance of TDRs through issuance of new shares in a cash capital increase, the preliminary issue price and volume interval shall be listed, as well as the fact that the actual issue must be adjusted, in the event of market fluctuations, in accordance with Articles 48 and 49 of the Self-regulatory Rules Governing the Provision of Advisory Services by Underwriter Members to Issuing Companies Offering and Issuing Securities; in addition, the method of handling in the event of insufficient subscription proceeds shall be set out, along with the utilization of the funds and anticipated benefits in cases where there is an increase in the offering amount, and the legality and reasonableness of such an increase.
(5) When a foreign issuer makes a shelf registration for TDRs that are to be issued in tranches, the preliminary issue price and volume interval shall be listed, as well as the fact that the actual issue must be adjusted, in the event of market fluctuations, in accordance with Article 49 of the Self-regulatory Rules Governing the Provision of Advisory Services by Underwriter Members to Issuing Companies Offering and Issuing Securities; in addition, the method of handling in the event of insufficient subscription proceeds shall be set out, along with the utilization of the funds and anticipated benefits when there is an increase in the offering amount and the legality and reasonableness of such an increase.
(6) If corporate bonds are undersubscribed, it is necessary to indicate the reasonableness of how the undersubscription will be handled.
9. State whether an event set forth in any subparagraph of paragraph 2, Article 36 of the Securities and Exchange Act has occurred with respect to the foreign issuer during the time period from the balance sheet date of its submitted financial report from the most recent period to the date of the securities firm evaluation report, disclose any such event and evaluate its impact on shareholder equity or the price of the securities.
10. A primary exchange-listed (or OTC-listed) company that files for registration of an issue of overseas stocks shall list or evaluate the items in Points 1 through 9 above, and in addition, the provisions of paragraphs 2(1), 3, 4, 7, 8, 9, 10, 11, and 12 under Point 4 of the Taiwan Securities Association Directions for Information to be Published in Securities Underwriter Evaluation Reports for the Public Offering and Issuance of Overseas Securities by Securities Issuers shall apply mutatis mutandis.
11. A primary exchange-listed (or OTC-listed) company that files for registration of a cash capital increase through issuance of new shares, or a depository institution's issuance of overseas depository receipts sponsored with issued shares, shall list or evaluate the items in Points 1 through 9 above, and in addition, the provisions of paragraphs 2(1), 3, 4, 7, 8, 9, 10, 11, 12, 13 and 14 under Point 5 of the Taiwan Securities Association Directions for Information to be Published in Securities Underwriter Evaluation Reports for the Public Offering and Issuance of Overseas Securities by Securities Issuers shall apply mutatis mutandis.
12. A primary exchange-listed (or OTC-listed) company or emerging stock company that files for registration for the offering and issuance of overseas corporate bonds shall list or evaluate the items in Points 1 through 9 above, and in addition, the provisions of paragraphs 2(1), 3, 4, 7, 8, 9, 10, 11, 12, 13 and 14 under Point 5 of the Taiwan Securities Association Directions for Information to be Published in Securities Underwriter Evaluation Reports for the Public Offering and Issuance of Overseas Securities by Securities Issuers shall apply mutatis mutandis.
13. With the exception of a primary exchange-listed (or OTC-listed) company or emerging stock company that files for registration of the offering and issuance of overseas corporate bonds, explain the audit procedures and conclusions obtained regarding the reasonableness of the rules for the current issuance (or conversion) of corporate bonds with respect to each of the items listed below and any impact on the equity interests of the original shareholders and the holders of the convertible corporate bonds: (if the issuance (or conversion) rules do not include an item listed below, please indicate "Not Addressed")
(1) The method for setting the issuance price and conversion price.
(2) Yield rate.
(3) Ownership of bond interest and dividends during the fiscal year of conversion.
(4) Call and redemption provisions.
(5) Early redemption rights of bond holders.
(6) Restrictive covenants.
(7) Adjustment of the conversion price.
(8) Method by which conversion obligations will be satisfied (whether by issuing new shares or delivering previously issued shares).
(9) Method for evaluating the various factors that influence the conditions of issuance, which shall include a concrete description.
(10) Other important stipulations.
14. With the exception of a primary exchange-listed (or OTC-listed) company or emerging stock company that files for registration of the offering and issuance of overseas corporate bonds, explain, for the current issuance of corporate bonds with warrants and exercise of such warrants, the audit procedures and conclusions obtained with respect to the reasonableness, and impact on the interests of existing shareholders and holders of the corporate bonds with warrants, of the issuance and warrant exercise rule items listed below: (if the issuance or warrant exercise rules do not include an item listed below, please indicate "Not Addressed")
(1) The method for setting the issue price, exercise price, and the shares per warrant ratio.
(2) Yield rate.
(3) Ownership of bond interest and dividends during the fiscal year of warrant exercise.
(4) Call and redemption provisions.
(5) Early redemption rights of bond holders.
(6) Restrictive covenants.
(7) Adjustment of the exercise price or the shares per warrant ratio.
(8) Method by which warrant obligations will be satisfied.
(9) How shares will be paid for (in cash or in bonds of the issuer).
(10) Method for evaluating the various factors influencing the conditions of issuance, which shall include a concrete description.
(11) Other important stipulations.
15. With the exception of a primary exchange-listed (or OTC-listed) company or emerging stock company that files for registration of the offering and issuance of overseas corporate bonds, if the foreign issuer files to issue convertible corporate bonds, it shall separately explain each of the factors listed below with respect to the imputed theoretical value of the current issue of convertible corporate bonds (if the issuance and conversion rules do not include an item listed below, please indicate "Not Addressed"):
(1) Coupon rate.
(2) Original maturity.
(3) Conversion price.
(4) Conversion period.
(5) Conversion price reset.
(6) Early redemption.
(7) Issuer's early redemption right.
(8) Items incorporated into the discount factor (e.g. liquidity discount, bond credit risk)
(9) Standard deviation for the annual rate of return on share prices.
(10) The reference share price used to calculate the warrant exercise price.
(11) Other factors determining the issue price.
16. With the exception of a primary exchange-listed (or OTC-listed) company or emerging stock company that files for registration of the offering and issuance of overseas corporate bonds, if the foreign issuer registers to issue corporate bonds with warrants, it shall also explain each of the factors listed below with respect to the imputed theoretical value of the current corporate bonds with warrants (if the issuance or conversion rules do not include an item listed below, please indicate "Not Addressed"):
(1) Coupon rate.
(2) Original maturity.
(3) Exercise price.
(4) Exercise period.
(5) Exercise price reset.
(6) Early redemption.
(7) Issuer's early redemption right.
(8) Items incorporated into the discount factor (e.g. liquidity discount, bond credit risk).
(9) Standard deviation for annual rate of return on share prices.
(10) The reference share price used to calculate the warrant exercise price.
(11) Other factors determining the issue price.
17. With the exception of a primary exchange-listed (or OTC-listed) company or emerging stock company that files for registration of the offering and issuance of overseas corporate bonds, if a foreign issuer registers to issue corporate bonds, it shall in addition explain the situation with respect to ensuring the creditors' rights for the current corporate bonds. If the bonds are rated by a credit rating institution, obtain its relevant rating items and rating results.
18. In the case of a shelf registration by a foreign issuer for TDRs that are to be issued in tranches, the evaluations of individual tranches, except for the initial issue, shall apply mutatis mutandis the provisions of paragraphs 2, 3, 4, 6, 8, and 9 herein, and in addition, shall evaluate whether the foreign issuer complies with Article 39 and Article 40, paragraphs 4 and 5 of the Regulations Governing the Offering and Issuance of Securities by Foreign Securities Issuers.
19. Any other matters requiring supplementary explanation.IV. Except when shareholders of a secondary exchange-listed (or OTC-listed) company engage a depository institution to issue TDRs in Taiwan for issued shares held by them, contents of evaluations shall be as below (for shelf registrations for TDRs to be issued in tranches, assessments for both the initial issue and each subsequent tranche shall be prepared in accordance with Point 18):
1. An explanation and analysis of the overall economic situation, applicable laws and regulations, exchange rate policy, and relevant tax and risk factors in the home country of the foreign issuer, in its principal operating location(s), and in the country in which it is listed.
2. An evaluation of the business and financial status of the foreign issuer:
(For a primary exchange-listed or OTC-listed company or emerging stock company, the evaluation may be based solely on the consolidated financial report.)
(1) Business status:
a. The main scope of business, the current goods and their purposes or service items.
b. The supply situation of the key raw materials, and the main sales area of the main goods or businesses of the foreign issuer.
c. An analysis of changes in the company's main customers and suppliers for the three most recent fiscal years and for the current fiscal year up to the date of the financial statement for the most recent period (the top 10, or those accounting for 5 percent or more of net operating revenues or net purchasing for those fiscal years): For the three most recent fiscal years, the analysis shall specify the name, dollar amount, and proportion of annual operating revenues of each main customer, the reason for changes in main customers, and shall analyze the reasonableness of any such change and whether there is a sales concentration risk, and briefly state the company's sales policy. For the three most recent fiscal years and for the current fiscal year up to the date of the financial statement for the most recent period, the analysis shall specify the name of each main supplier, and the net amount purchased from each as a percentage of net purchasing and as a dollar amount. For the three most recent fiscal years, the analysis shall analyze the reason for changes in main suppliers and whether there is risk of supplier concentration. However, if it is contractually stipulated that a customer's name may not be disclosed, or if a trading counterparty is an individual and a non-related party, a code may be substituted for the name.
d. For the two most recent fiscal years and for the current fiscal year up to the date of the financial statements for the most recent period, with respect to the foreign issuer itself and its consolidated financial statements, an evaluation of the reasonableness of changes in receivables, the adequacy of its allowance for bad debts and likelihood of collection, and a comparative evaluation against peers in the same industry.
e. For the two most recent fiscal years and the current fiscal year, with respect to the foreign issuer itself and its consolidated financial statements, an evaluation of the reasonableness of changes in net inventory and the adequacy of allowances for losses on decline in market value of inventory and on obsolete and slow-moving inventory, and a comparative evaluation against peers in the same industry.
f. For the three most recent fiscal years and the current fiscal year up to the date of the financial statement for the most recent period, state the foreign issuer's operating revenues, gross income, and operating income, with a comparison against peers in the same industry, and explain, on a segment or key product basis, whether changes in operating revenues and gross income are reasonable.
g. An evaluation of transactions between the foreign issuer and related parties in the three most recent fiscal years and the current fiscal year up to date of the financial statement for the most recent period: evaluate the circumstances of business transactions between the foreign issuer and affiliated enterprises to determine whether they involve non-arms lengt |