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Title: Guidelines for Disclosure of Financial Forecasts by Public Companies
Date: 2002.11.14 ( Announced )
Date: 2002.11.14 ( Amended )

Article Content

 
1     A public company shall comply with these Guidelines when it publicizes the financial forecast made according to Article 15 of the "Guidelines for Preparation of Financial Reports by Securities Issuers.".
2     Public companies to which circumstances hereinbelow apply shall publicize their financial forecast under these Guidelines:
  1. A listed company or OTC company which has the following events shall publicize their financial forecast, unless otherwise provided by the Securities and Futures Commission (SFC) of the Ministry of Finance:
    1. A Company that files (applies) to issue new shares for cash capital increase, issue convertible corporate bonds, issue corporate bonds with warrants, or issue other securities pursuant to the Criteria Governing the Offering and Issuance of Securities by Securities Issuers (the "Criteria") shall publicize financial forecast and continue to do so the next year after the registration comes into effect or the application is approved.
    2. A company holding re-election of directors upon expiry of a term of office or changing 1/3 or more of its directors during the same term of office shall publicize financial forecast and continue to do so the next year. However, where a juristic person shareholder of the company replaces its representative on the board of directors and such replacement is not due to occurrence of any material change in management control, such replacement need not be counted among changes to directors.
    3. A company which has one of the events prescribed in Paragraph 1 of Article 185 of the Company Law shall publicize financial forecast and continue to do so the next year.
    4. A company which merges with another company shall publicize financial forecast and continue to do so the next year. However, this restriction shall not apply to mergers carried out pursuant to Article 18, Paragraph 6, or Article 19 of the Enterprise Merger and Acquisition Law, or Article 316-2 of the Company Law.
  2. A public company that is not a listed company or a OTC company shall publicize the financial forecast if it publicly offers and issues securities under the Criteria.
  3. A company that applies with the Taiwan Stock Exchange Corporation ("TSE") for listing its stock or applies with the R.O.C. Over-The-Counter Securities Exchange ("ROSE") for trading of its stock over-the-counter shall publicize the financial forecast unless otherwise provided by the SFC, and shall continue to publicize its financial forecast for the continuing three years after the competent authorities in charge approve of the listing or OTC listing.
  4. The company which publicizes financial forecast voluntarily.
    If a public company discloses forecasted information on operating revenue or profit in any news, magazine, broadcast, television, network, or other broadcast media, or in a presentation on business performance, a press conference, or other forum, it shall be considered voluntary disclosure, and the company shall publicize the financial forecast.
3     Except as otherwise regulated under these Guidelines, the preparation of the financial forecast shall be subject to Statements of Financial Accounting Standards No. 16 "Preparation of Financial Forecasts" published by Accounting Research and Development Foundation of R.O.C.
4     A public company shall establish the complete written budget system and prepare the monthly budget for cash, production, sale, cost and capital as the reference for preparing the financial forecast.
5     The preparation of the financial forecast shall establish reasonable and proper assumption based on the principle of good faith, and pay attention professionally, and disclose the relevant information appropriately. The financial forecast shall be submitted to the board of directors for approval after it is finished. If it is not submitted to the board of directors for approval for some reasons, it may be submitted to the board of directors for ratification.
6     A public company shall carefully and reasonably plan the cash and capital budget for the whole year as the basis for preparing the financial forecast. As to the items which can be reasonably planned during the preparation of financial forecast, (for example, to increase the capital stock by issuing shares, to issue the corporate bonds, to raise the long term loan, or to purchase and sell the important assets, etc.) the addition, deletion or amendment thereof after the publication of the financial report which will affect the amount up to the standard for revision prescribed in Article 18 of these Guidelines shall be deemed as the error of basic assumption; provided that if the company has properly renewed the financial forecast during the registration of the newest financial report, it shall not be so limited.
7     The financial forecast shall refer to the complete form of the historic basic financial report, and express per the individual amount, and combine the financial report of last two years and the financial forecast of this year. A company shall prepare the financial forecast for next year nine months after the end of the previous business year, and it shall list together the financial report of the last two years, the financial forecast of this year and financial forecast of next year. A company preparing the renewed or corrected financial forecast shall list together the financial report of the last two years, and the financial forecast before and after the renewal or correction.
    When a company prepare or revise (or correct) the financial forecast of this year, if the financial report of last year has not been audited by a certified public accountant ("CPA"), it may list the self produced financial numbers but it shall clearly bear the words "unaudited."
8     In addition to the forecasted financial reports, the content of the financial forecast shall include the following items:
  1. The date of completion and the purpose of preparing the financial forecast.
  2. The statement which states that the financial forecast is an estimation and may not be completely achieved.
  3. The overall explanation for the important accounting policy.
  4. The overall explanation of important basic assumptions.
  5. The forecasted amount of the operating revenue, operating cost, gross profit, and the pretax loss or profit for each quarter. If the company does not publicize the financial forecast until the period has commenced, the information for each quarter before the publication date shall be listed in real amount.
  6. The real achievement of forecasted income statement included in the previous financial forecast: include the comparison on the original forecasted amount, the amended amount and the actually achieved amount; if the difference between the pretax loss and profit is 20% or more, the analysis of the reason, the publication date of original forecasted amount, the date of amendment, the reason for amendment, and the amount affected shall be included.
  7. The actual achievement of financial forecast of this year up to the end of the latest quarter before the completion of the financial forecast. If the financial report has not been audited by a CPA, the company may list the amount produced by the company itself, but it shall clearly bear the words "unaudited."
  8. The company which revises the financial forecast shall add the following items:
    1. To analyze the situations and reasons for the change of basic assumptions before and after the revision item by item.
    2. The impact on the business gross profit, the business loss and profit and pretax loss and profit.
    3. To analyze the price and amount per the main products item by item, if the variation between the business gross profit before and after renewal is 20 % or more.
  9. A company which prepares the corrected financial forecast shall explain the reason and the nature of the mistake, and the impact for the gross business profit, business loss and profit and pretax loss and profit.
9     In the overall explanation of the important basic assumptions disclosed in the financial forecast, the company shall, in addition to handling matters according to paragraph 23 of the Statements of Financial Accounting Standards No. 16 "Preparation of Financial Forecasts", fully disclose the following items:
  1. The important basic assumptions which are very sensitive to the result of forecast or the possibility of deviation may be very high, for example: the exchange rate, the interest rate, the cost of important materials, etc., and the sensitivity analysis for such assumptions.
  2. The sources of information and the relevant percentage which form the basic assumptions, for example: the sales volume of products, the price and the cost, etc.
  3. The forecasted loss and profit of the long-term investment evaluated and estimated by equity method, the name of the invested companies, the shareholding percentage, the forecasted amount of investment loss and profit, and the basis for acknowledging the above said investment loss and profit. When the acknowledged amount of the investment loss and profit is 20 % or more of the forecasted pretax loss and profit, and the amount affected is NT$10,000,000 or more, the company shall disclose whether the invested company prepared its financial forecast according to the Statement of Financial Accounting Standards No. 16.
  4. When the forecasted loss and profit for the disposal of long-term investment or the real estate is 20% or more of the forecasted pretax loss and profit, and the amount affected is NT$10,000,000 or more, the company shall disclose the location, the book cost, the basis for decision of the disposal price, and the execution of the agreement or the purchase situation of the long-term investment or real estate, and the concrete evidence on the amount of profits which may be acknowledged this year.
  5. A company which plans to increase the capital by issuing shares for cash shall disclose the impact of the projected payment and the effect of this year on the relevant items of financial report.
10     The financial forecast does not require the combined financial forecast report of the parent company and the subsidiary company.
11     The financial forecast shall be reviewed by a CPA in accordance with the Statements of Financial Accounting Standards No. 19."Development Stage Accounting" published by the Accounting Research and Development Foundation of the R.O.C.
12     The CPA who reviews the financial forecast shall be the same one who verifies the financial report, except for the adjustment of CPA within the same accounting firm.
13     The deadlines for reporting the financial forecast are prescribed as follows:
  1. A company that publicizes its financial forecast because it offers and issues securities, applies for listing of its stock on the stock exchange, or applies for over-the-counter trading of its stock pursuant to the Criteria shall publicly announce and report within two days from the filing (application) date.
  2. A company that publicizes its financial forecast because one third or more of its directors have changed shall publicly announce and report within one month from the date of taking office of the new directors.
  3. A company that publicizes its financial forecast because it has one of the situations stipulated in Paragraph 1 of Article 185 of the Company Law shall publicly announce and report within one month from the decision date of the shareholders' meeting.
  4. A company that publicizes its financial forecast because it merges with another company shall publicly announce and report within one month after the merger and the convening of the first shareholders meeting.
  5. A company that shall continue to publicize its financial forecast in accordance with Article 2, Paragraph 1, Subparagraphs 1 and 3 of these Guidelines shall publicly announce and report the financial forecast of the current year within four months after the end of the business year.
  6. A company that publicizes its financial forecast voluntarily in accordance with Article 2, Paragraph 1, Subparagraph 4, and Paragraph 2 of these Guidelines shall publicly announce and report within two days from the disclosure date.
14     The content of the financial forecast publication of a public company shall include at least the following items:
  1. Date of completion of the financial forecast.
  2. The kind of opinion provided in the review report of the CPA; if the CPA has submitted a non-standard review report, the explanation and conclusion shall also be included.
  3. The financial forecast (including the corrected amount and the original predicted amount) and the historical data from the previous period, including:
    1. condensed balance sheet;
    2. condensed income statement.
  4. To bear clearly the following words "this information is a forecast, and may not be completely achieved; for detailed information, reference should be made to the consolidated important accounting policies and the basic assumptions."
  5. If the financial forecast has been corrected or revised, the reason for the correction or revision and the impact on the forecast information.
15     A company which has publicized its financial forecast of this year shall publish the originally prepared date, and the corrected date of the predicted income statement as well as the achieved rate up to the date of the report at the same time that it publicly announces its quarterly, semi-annual, and annual financial reports.
16     When the company which has publicized its financial forecast discovered that there are mistakes in its financial forecast so that it may mislead the judgment of the users, it shall publicly announce and report the date of completion of the original financial forecast, the date of review by the CPA, and the circumstances and the effect of the discovered mistakes that had caused the originally published information to be inappropriate within two days from the date of discovery, and publicly announce and report the corrected financial forecast which has been reviewed by the CPA within ten days after the discovery.
    If the above said items which shall be corrected have been discovered at the end of the year, the company shall publicly announce and report the date of completion of the original financial forecast, the date of reviews by the CPA, the circumstance of the discovered mistakes that had caused the originally published information to be inappropriate and the affected amount for the items in the balance sheet and the income statement within two days from the date of discovery, and the above paragraph will not apply.
17     If the company which has publicized its financial forecast has one of the following events, it shall re-prepare the financial forecast and publicly announce and report after the CPA reviewed it. Article 16 shall apply mutatis mutandis to the above public announcement and reporting procedures.
  1. The publicly announced and reported date of financial forecast is more than one month from the date of preparation.
  2. The change of the certifying CPA, excluding the adjustment inside the same accounting firm.
  3. The company is required to publicize its financial forecast in accordance with Article 2 of these Guidelines.
    If the basic assumptions for the financial forecast did not change materially and the management level of the company has provided the statement stating that the basic assumptions are effective and asked the CPA to express the opinion regarding whether the basic assumptions have materially changed and publicly announce and report within ten days after the events happen, the company may be exempted from repreparing the financial forecast pursuant to the above Paragraph.
18     A company which has publicized its financial forecast shall evaluate from time to time the impact of the change of the basic assumption which is very sensitive to the result of the financial forecast. When the key element and basic assumption for the preparation of financial forecast have changed and caused the pretax loss and profit to vary by 20% or more and the affected amount is NT$30,000,000 or more and 0.5% of the paid-in capital, the company shall publicly announce and report the revised financial forecast.
    Article 16 shall apply mutatis mutandis to the procedure of public announcement and report of the revised financial forecast.
    If the items stated in the first Paragraph have been discovered after the end of the year, within two days of the date of discovery, the company shall publicly announce and report the date of completion of the original financial forecast, the date of review by the CPA, the circumstances of the discovered mistakes that had caused the originally published information to be inappropriate, the affected amount for the items in the balance sheet and the income statement, the achieved and projected monthly pretax loss and profit after the publication of the original financial forecast, and report the situations stated in Paragraph (8)A, C of Article 8 and the basis and conclusion for the evaluation that a revised financial forecast is not necessary, and the preceding Paragraph shall not apply.
19     If there is any sudden event which cannot be reasonably planned during the preparation of financial forecast, for example: the loss arising from the serious disaster, and the impact of the accident on the result of the financial forecast has reached the standard for revising the financial forecast, the company shall revise the financial forecast according to the prescribed procedure.
20     A company which has publicized its financial forecast shall compare the actually achieved amount and forecasted amount of pretax loss and profit for each quarter. If up to the current quarter the difference is 20% or more, the company shall, upon publicly announcing the financial report, explain the reason why they did not revise the financial forecast and ask the CPA to express the opinion as to the reasonableness of the non-revision and report to this Commission together.
21     A company which has publicized its financial forecast shall compare the actually achieved amount and the predicted amount of income statement at the end of the business year. If the difference between the pretax loss and profit is 20% or more, the company shall analyze the reason and request the CPA to express the opinion as to the reasonableness of the analysis, and report together with the financial report and list them as part of the business report, and submit the same to the shareholders meeting.
22     The term business gross profit referred to in these Guidelines shall be substituted with the business profit for special business which does not have an item for business gross profit.
23     If the company which has publicized its financial forecast has one of the following events, it shall be corrected and be considered as a possible case for review of insider trading according to the severity of the situation:
  1. The company does not revise or correct the financial forecast timely according to these Guidelines.
  2. The basic assumption of the financial forecast has not been evaluated reasonably.
  3. Without a reasonable reason the financial forecast has not been submitted for approval by the board of directors.
  4. The company does not report the relevant events according to these Guidelines.

24     If the issuer has one of the following events, it shall be punished according to Article 178 of Securities and Exchange Law, and may be reported to TSE and ROSE according to the relevant regulations:
  1. The company does not prepare, revise, correct or re-prepare the financial forecast according to these Guidelines.
  2. The company has gross mistake or omission while processing matters according to Paragraph 2 of Article 16 and Paragraph 3 of Article 18 of these Guidelines.
  3. The company violates the regulations of these Guidelines and does not improve or correct timely after the notice of this Commission.
25     The management level of the company shall in good faith prepare and revise the financial forecast timely based on reasonable assumption. If they intentionally or with gross negligence cause the content of the financial forecast to be fraudulent or concealing, they shall be punished according to Article 174 of the Securities and Exchange Law and shall be responsible to compensate the loss of the bona fide purchaser or seller according to Article 20 of Securities and Exchange Law.
26     The publication and reporting of the information with regard to the financial forecast shall be submitted to the Securities and Futures Institute, ROC, where it shall be available for public inspection. Where the stock is listed on the stock exchange, it shall also be copied to the TSE and the Chinese Securities Association; where it is traded on over-the-counter markets, it shall also be copied to the ROSE and the Chinese Securities Association.