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PSC AGM Information 2018

Jun 27, 2018

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TSE: 2855

2018 General Shareholders’ Meeting

Meeting Agenda

Jun. 21, 2018 at 9:00am

B1, No. 8, Dongxing Rd.,

Taipei City, Taiwan, R.O.C.

Translation – In case of any discrepancy between the Chinese and English versions,

the Chinese version shall prevail.

Table of Contents

Page
1 Meeting Agenda 3
2 Report Items 4
3 Items to be Adopted 4
4 Election item 5
5 Extraordinary Motions 5
6 Meeting Adjourned 5
Attachment: List of Candidates for 11th Directors Appendixes 6
I 2017 Business Report 15
II 2017 Audit Committee's Review Report 17
III 2017 Consolidated Financial Statements and Financial Statements 18
IV 2017 Earnings Distribution Proposal 43
V Rules for Election of Directors 44
VI Rules and Procedures of Shareholders’ Meeting 46
VII Articles of Incorporation 53
VIII The Impact of the Stock Dividend Issuance on Business Performance, EPS and Shareholders Return Rate 58
IX Shareholdings of Directors 59

President Securities Corp.

2018 Annual Shareholders’ Meeting Agenda

  1. Time： 9:00 a.m., June 21, 2018
  2. Place： B1, No. 8, Dongxing Rd., Taipei City, Taiwan, R.O.C.
  3. Agenda for the 2018 General Shareholders’ Meeting
  4. Meeting called to order (Report on the total number of shareholders and shareholder representatives in attendance)
  5. Opening Remarks from the Chairman
  6. Report Items
  7. 2017 Business Report
  8. 2017 Audit Committee's Review Report
  9. 2017 Remuneration of Employees and Directors

(4) Items to be Adopted

  1. 2017 Business Report, Consolidated Financial Statements and Financial Statements
  2. 2017 Earnings Distribution Proposal

(5) Election Items

(6) Extraordinary Motions

(7) Meeting Adjourned

  1. Report Items

(1) 2017 Business Report

Explanation: The Company’s Business Report for 2016, please see

Appendix I (page 15 )

(2) 2017 Audit Committee's Review Report

Explanation: For 2017 Audit Committee's Review Report, please see Appendix II (page 17 )

(3) 2017 Remuneration of Employees and Directors

Explanation:

    1. Comply with the Ordinance No. 10402413890(June 11, 2015) and the Ordinance No. 10402427800(October 15, 2015) issued by the Ministry of Economic Affair.
  • In accordance with Article 23 of the Company’s bylaws , the Company will distribute compensation to employees and the Directors from pre-tax profits. Where the company has pre-tax profits, the total value of funds to be distributed among employees shall not be less than 1.6% of pre-tax profits; while the total value of funds to be distributed among the Directors shall not be more than 2% of pre-tax profits. If the company has losses carried forward, compensation should only be paid to employees and Directors after funds have been set aside as reserve for such losses.

  • The proposal of 2017 Remuneration of Employees and Directors has been approved by the 8th meeting of the 3th Remuneration Committee and the 17th meeting of 10th Board of Directors. It is proposed that a total of NT$56,440,689 to be distributed to employees and NT$56,440,689 to be distributed to Directors in accordance with the allocation rules of the 1st meeting of the10th Board of Directors. The above mentioned compensation will be in cash.

  • Items to be Adopted

  • Motion 1 (proposed by the Board of Directors)

Topic: Adoption of the 2017 business report, consolidated financial statements and financial statements

Explanation:

(1) The 2017 consolidated financial statements and the financial statements have already been successfully audited by CPA Hsiao, Chin-Mu and CPA Chang, Ming-Hui of PricewaterhouseCoopers Taiwan.

    1. The business report, the consolidated financial statements and the financial statements have been reviewed by the Audit Committee and approved by the Board of Directors (March 26, 2018)

(3) For the business report, the consolidated financial statements and the financial statements, please see Appendix I (page 15 ) and Appendix III (page 18- 42 ).

  • Motion 2 (Proposed by the Board of Directors)

Topic: Adoption of the Proposal for the 2017 earnings distribution

Explanation:

(1) The proposal for distribution of 2017 earnings are prepared in accordance with regulations and the Company’s Articles of Incorporation. Please refer to the 2017 Earnings Distribution Proposal as Appendix IV (Page 43 ).

(2) After first being decreased by $106,387,716 as a result of actuarial losses on remeasurement of defined benefit plans, and then setting aside legal reserve(10%) , special reserve(20%) and 0.5% as special reserve for employees' training in response to development in financial technology, in compliance with Jing-Guang-Zheng-Chuan Letter No.10500278285 and Zheng-Chi (Chuan) Letter No.1060005703, and reversing special reserve in line with relevant letters, unappropriated earnings available for distribution for 2017 is $1,695,854,812. Proposed cash dividend is $1,668,513,634, which is equivalent to $1.2 per share. Upon the approval of Shareholders' Meeting, it is proposed that the Board of Directors be authorized to resolve the ex-dividend date.

(3) In the event that the shares outstanding changes, it is proposed that the Board of Directors be authorized to adjust the amount per share to be distributed to shareholders based on the number of actual shares outstanding on the record date for distribution. Dividends of less than $1 shall be transferred to the Company's Employee Benefit Council.

  1. Election item

Topic: To elect the 11th board of Directors of the company (Proposed by the Board of Directors).

Explanation: The term of the Company’s tenth board of directors shall expire on June 21, 2018. The eleventh board of directors shall be elected during the general shareholders meeting of this year.

  1. In accordance with Article 13 of the Company’s bylaws, the Company shall have 19 directors, of which 4 shall be independent, 15 shall be non-independent. They shall serve a 3-year term (from their appointment at the shareholders’ meeting to be held on June 21, 2018, to June 20, 2021) and are eligible for reelection. Directors shall be elected from among the nominees listed in the roster of candidates by adopting candidate nomination system.
  2. The list of director candidates, as vetted and approved by the board, is as the attachment:
  3. The election of independent and non-independent shall be held together but the votes shall be calculated separately.
  4. Election-related matters shall be handled in accordance with the Company’s Rules Governing the Election of Directors.(refer to Appendix V, page 44)
  5. Please cast your vote.
  6. Extraordinary Motions
  7. Meeting Adjourned

Attachment: List of Candidates for 11th Directors
Title Name Education Experience Current Positions Number of shares owned Remarks
Director KAO, SHIOW-LING * Marymount College U.S.A * Chairman/ General Manager of Kao Chyuan Inv.Corp. * Chairman of President Being Corp. * Chairman of Uni-President Department Store Corp. * Chairman of President Pharmaceutical Corp. * Chairman of President Fair Development Corp. * Chairman of President Drugstore Business Corp. * Director of President Securities Corp./Uni-President Enterprises Corp./ President Chain Store Corp./Ton Yi Industrial Corp./Scino Pharm Taiwan Ltd./President International Development Corp. / Prince Housing &Development Corp./Uni-President Development Corp. /Time Square International Co., Ltd./Uni-Wonder Corp./President (Sanghai) Health Product Trading Company Ltd. * Chairman/ General Manager of Kao Chyuan Inv.Corp. * Chairman of President Being Corp. * Chairman of Uni-President Department Store Corp. * Chairman of President Pharmaceutical Corp. * Chairman of President Fair Development Corp. * Chairman of President Drugstore Business Corp. * Director of President Securities Corp.,/Uni-President Enterprises Corp.,/ President Chain Store Corp.,/Ton Yi Industrial Corp. /Scino Pharm Taiwan Ltd./President International Development Corp./ Prince Housing &Development Corp. /Uni-President Development Corp./ Time Square International Co. Ltd./Uni-Wonder Corp./President (Sanghai) Health Product Trading Company Ltd. 3,788,631 N/A
Director TENE, WEN- HWI * Ph.D in Education, University of San Francisco * Master’s Degree in Education ,Harvard University * MBA , George Washington University * Chairman of Canking Investment Corp. * Director of President Securities Corp. * Director of Cayenne Entertainment Technology Co., Ltd. * Chairman of Canking Investment Corp. * Director of President Securities Corp. 16,918,851 Canking Investment Corp.
Director LEE, CHE-MING * Department of International Business, Soochow University * Vice Chairman of Hui Tung Co., Ltd. * Director of HHB Geriatric Healthcare Corp. * Director of Hui Tung Investment Co., Ltd. * Vice Chairman of Hui Tung Co., Ltd. * Director of HHB Geriatric Healthcare Corp. * Director of Hui Tung Investment Co., Ltd. 10,199,544 Hui Tung Investment Co., Ltd.
Director CHANG, MING- CHEN * Department of Accounting, Soochow University * Accounting Manager of Leg Horn Investment Co., Ltd. * Director of Leg Horn Investment Co., Ltd. * Director of President Securities Corp. * Accounting Manager of Leg Horn Investment Co., Ltd. * Director of Leg Horn Investment Co., Ltd. * Director of President Securities Corp. 12,408,018 Leg Horn Investment Co., Ltd.
Director TU, LI-YANG * National Tainan Girls’ Senior High School * Chairman of Ta Leh Investment Holding Co., Ltd. * Supervisor of De Xing Long Co., Ltd. * Director of Strong Team International Ltd. * Director of President Securities Corp. * Chairman of Ta Leh Investment Holding Co., Ltd. * Supervisor of De Xing Long Co., Ltd. * Director of Strong Team International Ltd. * Director of President Securities Corp. 7,172,615 Ta Leh Investment Holding Co., Ltd.
Director LEE, SHU-FEN * Ming Chuan College * Director of President Securities Corp. * Manager of Auditing Office /Assistant Manager of Accounting Department / Deputy Section Manager of Business section of Eternal Materials Co., Ltd. * Director of President Securities Corp. 5,392,415 China F.R.P. Corporation.
Director DUH, BOR-TSANG * MBA, University of Dallas * Chairman of Shun Fu Tai Industrial Co., Ltd., * Chairman of Yao Rong Technology Co., Ltd. * Chairman of Ming Yang Semiconductor Inc. * Director of President Securities Corp./Shin Lin Investment Inc./I-King Co., Ltd./Morioka Investment Inc./Lillian Investment Inc./Midori Inc. * Supervisor of Konton Network Inc./Nantex Industry Co., Ltd. * Chairman of Shun Fu Tai Industrial Co.,Ltd., * Chairman of Yao Rong Technology Co., Ltd. * Chairman of Ming Yang Semiconductor Inc. * Director of President Securities Corp./Shin Lin Investment Inc./I-King Co., Ltd./Morioka Investment Inc./Lillian Investment Inc./Midori Inc. * Supervisor of Konton Network Inc./Nantex Industry Co., Ltd. 4,189,946 N/A
Director LEE , SHY-LOU * Taiwan Provincial Agricultural College * Chairman of De Long warehousing stevedoring. * Chairman of Grownfield Enterprise Co., Ltd * Director of President Securities Corp. * Chairman of De Long warehousing stevedoring. * Chairman of Grownfield Enterprise Co., Ltd * Director of President Securities Corp. 8,380,640 N/A
Director JUANG, JING-YAU * MBA in Finance, Golden Gate University * Executive Assistant of Tainan Spinning Co., Ltd. * Chairman of Biostory Inc. * Executive Assistant of Tainan Spinning Co., Ltd. * Chairman of Biostory Inc. 3,000 N/A
Director LIN,CHUNG-SHEN * Department of Business Administration ,Fu Jen Catholic University * Chairman of President Securities Corporation. * Director of President Tokyo Corporation. * Director of President Tokyo Auto Leasing Corporation. * Director of Uni-President Tc-Lease (CAYMAN) Corporation. * Director of Tong-Sheng Finance Leasing Co., Ltd. * Director of Tong-Sheng (Suzhou) Car Rental Co., Ltd. * General Manager of President Tokyo Corporation. * General Manager of President Tokyo Auto Leasing Corporation. * Chief Financial Officer of Uni-President Enterprises Corporation. * Assistant Vice President of Finance Department of Uni-President Enterprises Corporation. * Vice President of Nanlien International Corporation. * Chinese Professional Management Association National Manager Excellence Award 1988 * The 5th Outstanding Financial moderator of the Republic of China. * Chairman of President Securities Corporation. * Director of President Tokyo Corporation. * Director of President Tokyo Auto Leasing Corporation. * Director of Uni-President Tc-Lease (CAYMAN) Corporation. * Director of Tong-Sheng Finance Leasing Co., Ltd. * Director of Tong-Sheng (Suzhou) Car Rental Co., Ltd. 39,831,460 Kai Nan Investment Co., Ltd
Director LIN,KUAN-CHEN * Taiwan Provincial Junior College of Physical Education * Vice Chairman and General Manager of President Securities Corp. * Director of Taiwan Futures Exchange. * Chairman of Richness Cereal Trading Co., Ltd. * Director and General Manager of Fonmau Cereal Ind. Co., Ltd. * Director of Q-WARE Systems & Services Corp. * Director/Vice Chairman/General Manager of President Securities Corp. * Vice Chairman and General Manager of President Securities Corp. * Director of Taiwan Futures Exchange. * Chairman of Richness Cereal Trading Co., Ltd. * Director and General Manager of Fonmau Cereal Ind. Co., Ltd. * Director of Q-WARE Systems &Services Corp. 39,831,460 Kai Nan Investment Co., Ltd
Director LIU, TSUNG-YI * MBA, National Taiwan University * Director of President International Development Corp. * Director of Presco Netmarketing Inc. * Vice President of Uni-President Enterprises Corp. * Director of President Securities Corp. * Director of Kuang Chuan Dairy Co., Ltd./ Kuang Chuan Foods Co., Ltd./ Tait Marketing & Distribution Co., Ltd./ Yantai North Andre Juice Co., Ltd./ Shanghai Liuhe Shunfeng Dining Co., Ltd./ Heilongjiang Wondersun Dairy Co./ Champ Green Capital limited./ United Advisor Venture Management Ltd./SMS Capital Management Limited./ SMS Investment Management Co., Ltd./ SMS Capital./ SMS Partners Limited./ Huasui Tomato Investment Company./ Changhua County Chang Chun-Ya Social Welfare Foundation. * General Manager of Champ Green (Shanghai) Consulting Co. Ltd./ United Advisor Venture Management Ltd. * Manager of President International Development Corp. * Director of President International Development Corp. * Director of Presco Netmarketing Inc. * Vice President of Uni-President Enterprises Corp. * Director of President Securities Corp. * Director of Kuang Chuan Dairy Co., Ltd./ Kuang Chuan Foods Co., Ltd./ Tait Marketing & Distribution Co., Ltd./ Yantai North Andre Juice Co., Ltd./ Shanghai Liuhe Shunfeng Dining Co., Ltd./ Heilongjiang Wondersun Dairy Co./ Champ Green Capital limited./ United Advisor Venture Management Ltd./SMS Capital Management Limited./ SMS Investment Management Co., Ltd./ SMS Capital./ SMS Partners Limited./ Huasui Tomato Investment Company./ Changhua County Chang Chun-Ya Social Welfare Foundation. * General Manager of Champ Green (Shanghai) Consulting Co. Ltd./ United Advisor Venture Management Ltd. 39,831,460 Kai Nan Investment Co., Ltd
Director CHEN,KUO-HUI * MBA, University of Strathclyde * CFO of Uni-President Enterprises Corp. * Director of Uni-President China Holdings Ltd. * Director of President Securities Corp. * Director of Uni-President Enterprises (China) Investment Co., Ltd. * Director of Wondersun Dairy Co., Ltd. * Supervisor of Jinan / Taizhou / Zhanjiang President Enterprises Co., Ltd. * Supervisor of Kunming President Enterprises Food Co., Ltd./ Champ Green (Shanghai) Consulting Co., Ltd./ United Advisor Venture Management./Tong Ren Corp Limited. * CFO of Uni-President China Holdings Ltd. * CFO of Uni-President Enterprises Corp. * Director of Uni-President China Holdings Ltd. * Director of President Securities Corp. * Director of Uni-President Enterprises (China) Investment Co., Ltd. * Director of Wondersun Dairy Co., Ltd. * Supervisor of Jinan / Taizhou / Zhanjiang President Enterprises Co., Ltd. * Supervisor of Kunming President Enterprises Food Co., Ltd./ Champ Green (Shanghai) Consulting Co., Ltd./ United Advisor Venture Management./ Tong Ren Corp Limited. 39,831,460 Kai Nan Investment Co., Ltd
Director HSIEH HUNG,HUI-TZU * MBA, National Cheng-kung University * Chief Audit Executive- Assistant Vice President of President Chain Store Corp. * Director of President Securities Corp. * Vice President of Administration Management Center of ScinoPharm Taiwan, Ltd. * Vice President of Administration Management Dept. of President International Development Corporation. * Chief Audit Executive- Assistant Vice President of President Chain Store Corp. * Director of President Securities Corp. 39,831,460 Kai Nan Investment Co., Ltd
Director LU,LI-AN * Master‘s Degree in Finance , National Sun Yat-sen University * Division Head of Treasury Division of Uni-President Enterprises Corp. * Director of President Transnet Corp. /President Collect Services Co., Ltd. * Supervisor of Tung Guan Enterprises Co., Ltd. * Director of President Securities Corp. * Division Head of Treasury Division of Uni-President Enterprises Corp. * Director of President Transnet Corp. /President Collect Services Co., Ltd. * Supervisor of Tung Guan Enterprises Co., Ltd. * Director of President Securities Corp. 39,831,460 Kai Nan Investment Co., Ltd.
Independent Director LIANG, YANN- PING * MBA, The George Washington University * Associate Professor/Assistant professor of Department of Finance, Shin Hsin University. * Independent Director of President Securities Corp. * Vice President of Hua Nan Investment. * Vice President of Polaris International Securities Investment Trust Co., Ltd. * Associate Profess of Department of Finance, Shin Hsin University. * Independent Director of President Securities Corp. 0 N/A
Independent Director PAI, CHUN-NAN * Ph. D. in Law, Institute of Economics, Chinese Culture University * Vice Chairman of China Petrochemical Development Corporation. * Chairman of the First Leasing Corp. * Chairman of Bo-Mong Investment Co., Ltd. * Independent Director of Concord Securities Co., Ltd. * Independent Director of Megaforce Company Limited. * Director of BES Engineering Corporation. * Director of Living Mall. * Director of Thaivex Therapeutics Corporation. * Director of Weilih Food Industrial Co., Ltd. * Vice Chairman of China Petrochemical Development Corporation. * Chairman of the First Leasing Corp. * Chairman of Bo-Mong Investment Co., Ltd. * Independent Director of Concord Securities Co., Ltd. * Independent Director of Megaforce Company Limited. * Director of BES Engineering Corporation. * Director of Living Mall. * Director of Thaivex Therapeutics Corporation. * Director of Weilih Food Industrial Co., Ltd. 0 N/A
Independent Director SONG, YUNG-FONG * MBA, The University of Iowa * Senior Executive Vice President of Chunghwa Telecom Co., Ltd. * Director of Chunghwa Investment Co., Ltd. * General Manager of Chunghwa Investment Co., Ltd. * Managing Director/ Head of Global Banking of Deutsche Bank AG, Taipei Branch. * Senior Executive Vice President of Chunghwa Telecom Co., Ltd. * Director of Chunghwa Investment Co., Ltd. 0 N/A
Independent Director HORNG, YUAN-CHUAN * BA in Economics, Soochow University * Independent Director of Himax Technologies, Inc. * Vice President of the Finance Division of China Steel Corporation. * Chairman of Gains Investment Corporation. * Director of Kaohsiung Rapid Transit Corp. * Independent Director of Himax Technologies, Inc. 0 N/A

APPENDIX I

2017 Business Report

[Macroeconomic Environment and Business Plan]

The trading volume of TAIEX increased in 2017. In the first half of the year, TAIEX performed well, which was encouraged by the Trump euphoria and a big boost in U.S and European stock market. In April, foreign investors remitted funds oversea due to the geopolitical tensions in Northeast Asia. Still, TAIEX remained strong and reached 10,000 point. In the second half of the year, as U.S and the global stock market continue to thrive, TAIEX surge to a record high at 10,882.65 on November 22 nd, 2017 and closed the year at 10,642.86, culminating in an 15% annual growth of 1,389 points. Under the economic environment with loose monetary policies and soaring TAIEX, the Company observed global market trends, adjusted investment strategy flexibly and searched for opportunities to make profit in all business sectors.

[Implementation and Results]

TAIEX gained 1,389 points in 2017, with a 1,647 point difference between its highest and lowest, and the average daily trading volume amounted to NT$ 138 billion, an increase of 39% from NT$ 99.3 billion in 2016. In brokerage business, the average market share in 2017 was 3.23% and we ranked 8th among the top 12 domestic securities firms, and the overall profit was greater than 2016. In underwriting business, the Company served as lead underwriter and co-underwriter in a total of 36 cases in 2017, and the total amount of cases ranked 7th in the industry. In our proprietary trading business, the Company followed industry trends timely. Based on fundamental analysis, the company selected investment targets which benefited from the new economy, and the stock and future trading made strong profits. Since the global bond markets remained bullish, our fixed income business made an outstanding profits from oversea bond market. In the future, the Company’s management team will continue to monitor risks, gain an insight into macroeconomic and policies shifts, and carefully select investment targets and the timing for placing orders in order to diversify risks and facilitate investment.

[Profitability Analysis, Operating Income and Budget Execution]

With the implementation of reducing securities transaction tax for day trades by half, domestic funds have returned to the market. Moreover, the global stock market surged to a record high. The Company continued its robust operations and strict risk management system to achieve outstanding annual profit in 2017. Net income was NT$6.4 billion, net profit after tax was 2.6 billion and earnings per share was NT$1.88, which ranked 2nd among the top 12 domestic securities firms. ROA was 3.99%, ROE was 10.81%, and annual budget achievement rate was 257%, which was a remarkable performance in recent years.

[Future Operations]

Looking ahead in 2018, we expect to see the US economy remains strengthening. However, the Federal Reserve intends to shrink the balance sheet and raise interest rates which may lead to a concern of inflation. The bull stock market caused by low interest rates may be adjust on the effects of inflation and raising interest rates. The change in the financial environment could lead to a more volatile financial market. Furthermore, TAIEX is highly related to global financial market, which means that the volatility of TAIEX will increase, so the difficulty of trading might be more severe. The Company’s management team shall continue to evaluate benefits and make the best use of the Group's advantages to follow market trends, to respond to the change in the financial market cautiously, and to make steady investments. The Company shall strictly implement risk management, provide quality product services, fulfill social responsibilities, and adopt a robust and pragmatic strategy to create maximum value for the Company and shareholders.

Chairman of the Board President Head of Accounting Dept.

Lin,Chung-Shen Lin, Kuan-Chen An, Chi-Li

APPENDIX II

APPENDIX IIl
REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR17003445

To the Board of Directors and Shareholders of President Securities Corporation

Opinion

We have audited the accompanying consolidated balance sheets of President Securities Corporation and its subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of President Securities Corporation and its subsidiaries as at December 31, 2017 and 2016, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparations of Financial Reports by Securities Firms”, “Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants”, and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of President Securities Corporation and its subsidiaries in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

The key audit matters of the consolidated financial statements of the current period as below:

Impairment assessment of investments accounted for under equity method

Description

Please refer to Note 4(15) for accounting policies on investments accounted for under equity method and its impairment, Note 5(2) for the uncertainty of accounting estimates and assumptions applied on asset impairment, and Note 6(13) for details of investments accounted for under equity method.

President Securities Corporation and its subsidiaries held 42.49% of equity of Uni-President Asset Management Corp. which was accounted for under equity method. As of December 31, 2017, the amount was $496,497 thousand New Taiwan Dollars. Impairment assessment is based on the expected future cash flow of the investments accounted for under equity method, discounted at appropriate discount rate, to measure the recoverable amount of the cash generating unit.

The recoverable amount of the investee is based on its expected future cash flows which involve multiple estimates and assumptions on discount rate and financial forecast. They are subjective judgements, have high degree of uncertainties, and are material to the recoverable amount. Thus, we consider the impairment assessment of investments accounted for under equity method as one of the matters of most significance to our audit.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

1.Obtained the impairment assessment report prepared by an external expert who was commissioned by the management, and reviewed results of financial forecast in the past to assess its ability of execution;

2.Assessed the reasonableness of expected future cash flow, discount rate and other significant assumptions applied in the cash flow model; and

3.Inspected valuation model parameters, formula setting and the accuracy of calculation.

Impairment assessment of goodwill

Description

Please refer to Note 4(19) for accounting policies on goodwill, Note 5(2) for the uncertainty of accounting estimates and assumptions applied on goodwill, and Note 6(16) for details of goodwill.

The goodwill resulted from President Securities Corporation and its subsidiaries’s acceptance of transfer of the retail banking security brokerage business amounting to $42,004 thousand New Taiwan Dollars as of December 2017. Impairment assessment is based on the expected future cash flow of the security brokerage segment, discounted at appropriate discount rate, to measure the recoverable amount of the cash generating unit.

The recoverable amount of the investee is based on its expected future cash flows which involve multiple estimates and assumptions on discount rate and financial forecast. They are subjective judgements, have high degree of uncertainties, and are material to the recoverable amount. Thus we consider the impairment assessment of goodwill as one of the matters of most significance to our audit.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

1.Obtained the impairment assessment report prepared by an external expert who was commissioned by the management;

2.Assessed the reasonableness of expected future cash flow, discount rate and other significant assumptions applied in the cash flow model; and

3.Inspected valuation model parameters, formula setting and the accuracy of calculation.

Other matter – Parent company only financial reports

We have audited and expressed an unmodified opinion on the parent company only financial statements of President Securities Corporation, as at and for the years ended December 31, 2017and 2016.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the “Regulations Governing the Preparations of Financial Reports by Securities Firms”, “Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants”, and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing President Securities Corporation and its subsidiaries’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate President Securities Corporation and its subsidiaries or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including audit committee, are responsible for overseeing President Securities Corporation and its subsidiaries’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1.Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2.Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of President Securities Corporation and its subsidiaries’s internal control.

3.Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4.Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the President Securities Corporation and its subsidiaries’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause President Securities Corporation and its subsidiaries to cease to continue as a going concern.

5.Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

6.Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within President Securities Corporation and its subsidiaries to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Hsiao, Chin-Mu Chang, Ming-Hui

For and on behalf of PricewaterhouseCoopers, Taiwan

March 26, 2018
------------------------------------------------------------------------------------------------------------------------------------------------- The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.
December 31, 2017 December 31, 2016
Assets Notes AMOUNT % AMOUNT %
110000 Current assets
111100 Cash and cash equivalents 6(1) $ 6,463,345 8 $ 6,909,469 8
112000 Financial assets at fair value through profit or loss - current 6(2) 38,692,385 45 41,521,141 48
113400 Available-for-sale financial assets - current 6(3) 1,044,031 1 1,332,776 2
114010 Bonds purchased under resale agreements 6(4) - - 2,093,498 3
114030 Margin loans receivable 6(5) 11,415,870 13 8,692,164 10
114040 Refinancing security deposits 79,350 - 18,694 -
114050 Receivables from refinance guaranty 67,160 - 33,381 -
114070 Customer margin account 6(6) 9,918,089 11 12,100,445 14
114090 Receivables from security lending 88,318 - 157,775 -
114100 Security lending deposits 745,882 1 261,136 -
114110 Notes receivable 1,471 - 1,080 -
114130 Accounts receivable 6(7) 11,154,566 13 6,104,874 7
114150 Prepayments 30,749 - 44,517 -
114170 Other receivables 6(8) 66,900 - 64,190 -
114600 Current tax assets 584 - 683 -
119000 Other current assets 6(9) 1,792,864 2 1,939,900 2
110000 Total current assets 81,561,564 94 81,275,723 94
120000 Noncurrent assets
122000 Financial assets at fair value through profit or loss - noncurrent 6(2) 50,342 - 50,621 -
123100 Financial assets at cost - noncurrent 6(12) 40,173 - 41,581 -
123400 Available-for-sale financial assets - noncurrent 6(3) - - 74,401 -
124100 Investments accounted for under equity method 6(13) 496,497 1 440,676 1
125000 Property and equipment, net 6(14) 2,434,389 3 2,467,163 3
126000 Investment property, net 6(15) 276,803 - 278,903 -
127000 Intangible assets 6(16) 112,096 - 129,771 -
128000 Deferred tax assets 6(45) 140,740 - 64,681 -
129000 Other assets - noncurrent 6(17) 1,199,090 2 1,232,676 2
120000 Total noncurrent assets 4,750,130 6 4,780,473 6
906001 Total Assets $ 86,311,694 100 $ 86,056,196 100

(Continued)
December 31, 2017 December 31, 2016
Liabilities and Equity Notes AMOUNT % AMOUNT %
210000 Current liabilities
211100 Short-term loans 6(18) $ 6,445,318 8 $ 7,180,550 8
211200 Commercial papers payable 6(19) 3,649,631 4 6,298,316 7
212000 Financial liabilities at fair value through profit or loss - current 6(20) 1,206,401 1 2,419,106 3
214010 Bonds sold under repurchase agreements 6(21) 20,911,658 24 23,085,262 27
214040 Deposits on short sales 1,861,947 2 1,286,589 2
214050 Short sale proceeds payable 2,197,656 3 1,516,795 2
214070 Guarantee deposit received on borrowed securities 225,395 - 59,196 -
214080 Futures traders' equity 6(6) 9,892,808 12 12,090,637 14
214130 Accounts payable 6(22) 9,280,487 11 6,305,245 7
214150 Advance receipts 955 - 1,417 -
214160 Collections on behalf of third parties 439,578 1 413,491 -
214170 Other payables 6(23) 1,185,207 1 742,505 1
214200 Other financial liabilities - current 6(24) 3,199,298 4 1,392,297 2
214600 Current tax liability 292,629 - 80,691 -
219000 Other current liabilities 11,952 - 5,537 -
210000 Total current liabilities 60,800,920 71 62,877,634 73
220000 Noncurrent liabilities
228000 Deferred tax liability 6(45) 15,939 - 35,823 -
229000 Other liabilities-noncurrent 6(25) 59,873 - 13,110 -
220000 Total noncurrent liabilities 75,812 - 48,933 -
906003 Total Liabilities 60,876,732 71 62,926,567 73
300000 Equity attributable to owners of the parent company
301000 Capital
301010 Common stock 6(27) 13,904,281 16 13,356,658 16
302000 Capital reserve 142,702 - 142,702 -
304000 Retained earnings 6(27)
304010 Legal reserve 2,503,765 3 2,423,914 3
304020 Special reserve 6,373,559 7 6,209,865 7
304040 Unappropriated earnings 2,519,721 3 798,507 1
305000 Other equity interest ( 58,374 ) - 149,284 -
300000 Total 25,385,654 29 23,080,930 27
306000 Non-controlling interests 49,308 - 48,699 -
906004 Total Equity 25,434,962 29 23,129,629 27
906002 Total liabilities and equity $ 86,311,694 100 $ 86,056,196 100
Year ended December 31
2017 2016
Items Notes AMOUNT % AMOUNT %
400000 Revenues
401000 Securities brokerage fees 6(29) $ 2,333,171 32 $ 1,779,466 39
404000 Underwriting fees 6(30) 56,114 1 46,521 1
406000 Net income of wealth management 16,233 - 14,286 -
410000 Gains on trading of securities 6(31) 2,938,178 40 102,203 2
421100 Stock custodian income 77,280 1 71,080 2
421200 Interest income 6(32) 1,471,954 20 1,248,274 27
421300 Dividend income 232,339 3 428,497 9
421500 Gains (losses) on valuation of trading securities 6(33) 329,459 5 ( 102,873 ) ( 2 )
421600 (Losses) gains on short covering and trading securities - RS financing covering 6(34) ( 102,116 ) ( 1 ) 22,947 -
421610 Gains on valuation of borrowed securities and bonds with resale agreements 6(35) 2,975 - 1,986 -
422200 Gain on warrants issuance 6(36) 305,912 4 486,183 11
424400 (Losses) gains on derivative financial instruments 6(37) ( 142,478 ) ( 2 ) 208,150 5
428000 Other operating (losses) income 6(38) ( 248,955 ) ( 3 ) 255,896 6
Total revenues 7,270,066 100 4,562,616 100
500000 Expenses
501000/
502000/
503000 Handling charges 6(39) ( 392,276 ) ( 5 ) ( 316,519 ) ( 7 )
521200 Interest expenses 6(40) ( 395,054 ) ( 5 ) ( 226,225 ) ( 5 )
524100 Futures commission expense ( 88,968 ) ( 1 ) ( 108,328 ) ( 2 )
524300 Clearing charges ( 108,737 ) ( 2 ) ( 115,828 ) ( 3 )
528000 Other operating costs ( 36 ) - ( 141 ) -
531000 Employee benefits 6(41) ( 2,309,829 ) ( 32 ) ( 1,800,920 ) ( 39 )
532000 Depreciation and amortization 6(42) ( 106,949 ) ( 2 ) ( 120,542 ) ( 3 )
533000 Other operating expenses 6(43) ( 1,474,299 ) ( 20 ) ( 1,290,510 ) ( 28 )
Total expenditures and expenses ( 4,876,148 ) ( 67 ) ( 3,979,013 ) ( 87 )

(Continued)
Year ended December 31
2017 2016
Items Notes AMOUNT % AMOUNT %
Operating profit $ 2,393,918 33 $ 583,603 13
601000 Share of the profit or loss of associates and joint ventures accounted for under the equity method 6(13) 79,787 1 64,393 1
602000 Other gains and losses 6(44) 370,268 5 289,515 6
902001 Profit before tax 2,843,973 39 937,511 20
701000 Income tax expense 6(45) ( 219,316 ) ( 3 ) ( 104,469 ) ( 2 )
902005 Net income $ 2,624,657 36 $ 833,042 18
Other comprehensive income
Components of other comprehensive income that will not be reclassified to profit or loss
805510 Remeasurements of defined benefit plan ( $ 128,158 ) ( 2 ) ( $ 48,693 ) ( 1 )
805550 Other comprehensive gain of associates and joint ventures accounted for under equity method 29 - 3,187 -
805599 Income tax benefit relating to components of other comprehensive income 21,787 1 8,278 -
Items may be reclassified to profit of loss subsequently
805610 Translation loss on the financial statements of foreign operating entities ( 213,712 ) ( 3 ) ( 46,151 ) ( 1 )
805620 Unrealized gain (loss) on financial instruments 5,096 - ( 5,086 ) -
Current other comprehensive income (post-tax) ( 314,958 ) ( 4 ) ( 88,465 ) ( 2 )
902006 Total current comprehensive income $ 2,309,699 32 $ 744,577 16
Income attributable to:
913100 Parent company $ 2,618,769 36 $ 826,690 18
913200 Non-controlling interests $ 5,888 - $ 6,352 -
Current comprehensive income attributable to:
914100 Parent company $ 2,304,724 32 $ 737,775 16
914200 Non-controlling interests $ 4,975 - $ 6,802 -
Earnings per share 6(46)
975000 Basic earnings per share (in dollars) $ 1.88 $ 0.59
985000 Diluted earnings per share (in dollars) $ 1.88 $ 0.59
For the year ended December 31, 2016
Balance at January 1, 2016 $ 13,231,191 $ 256,116 $ 2,328,253 $ 6,018,542 $ 960,922 $ 193,772 $ 7,242 ( $ 278,026 ) $ 22,718,012 $ 46,039 $ 22,764,051
Appropriations of 2015 earnings:
Legal reserve 6(27) - - 95,661 - ( 95,661 ) - - - - - -
Special reserve 6(27) - - - 191,323 ( 191,323 ) - - - - - -
Cash dividends 6(28) - - - - ( 260,759 ) - - - ( 260,759 ) - ( 260,759 )
Stock dividends 6(28) 404,177 - - - ( 404,177 ) - - - - - -
Net income for the year ended December 31, 2016 - - - - 826,690 - - - 826,690 6,352 833,042
Other comprehensive (loss) income for the year ended December 31, 2016 - - - - ( 37,185 ) ( 46,151 ) ( 5,579 ) - ( 88,915 ) 450 ( 88,465 )
Acquisition of treasury stocks 6(27) - - - - - - - ( 114,098 ) ( 114,098 ) - ( 114,098 )
Retirement of treasury shares 6(27) ( 278,710 ) ( 113,414 ) - - - - - 392,124 - - -
Changes in non-controlling interests - - - - - - - - - ( 4,142 ) ( 4,142 )
Balance at December 31, 2016 $ 13,356,658 $ 142,702 $ 2,423,914 $ 6,209,865 $ 798,507 $ 147,621 $ 1,663 $ - $ 23,080,930 $ 48,699 $ 23,129,629
For the year ended December 31, 2017
Balance at January 1, 2017 $ 13,356,658 $ 142,702 $ 2,423,914 $ 6,209,865 $ 798,507 $ 147,621 $ 1,663 $ - $ 23,080,930 $ 48,699 $ 23,129,629
Appropriations of 2016 earnings:
Legal reserve 6(27) - - 79,851 - ( 79,851 ) - - - - - -
Special reserve 6(27) - - - 163,694 ( 163,694 ) - - - - - -
Stock dividends 6(28) 547,623 - - - ( 547,623 ) - - - - - -
Net income for the year ended December 31, 2017 - - - - 2,618,769 - - - 2,618,769 5,888 2,624,657
Other comprehensive (loss) income for the year ended December 31, 2017 - - - - ( 106,387 ) ( 213,712 ) 6,054 - ( 314,045 ) ( 913 ) ( 314,958 )
Changes in non-controlling interests - - - - - - - - - ( 4,366 ) ( 4,366 )
Balance at December 31, 2017 $ 13,904,281 $ 142,702 $ 2,503,765 $ 6,373,559 $ 2,519,721 ( $ 66,091 ) $ 7,717 $ - $ 25,385,654 $ 49,308 $ 25,434,962
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax $ 2,843,973 $ 937,511
Adjustments
Adjustments to reconcile profit (loss)
Depreciation 6(42) 73,833 88,754
Amortization 6(42) 33,116 31,788
Write-off of bad debts classified as income 6(17) ( 6,068 ) ( 9,317 )
Provision for bad debts 6(7)(17) 63,471 22,032
(Gain) loss on valuation of trading securities 6(33) ( 329,459 ) 102,873
Gain on valuation of borrowed securities and bonds with resale agreements 6(35) ( 2,975 ) ( 1,986 )
Financial expense 6(40) 395,054 226,225
Interest income (include financial income) 6(32)(44) ( 1,599,755 ) ( 1,395,801 )
Dividend income ( 252,056 ) ( 445,901 )
Share of the profit of associates and joint ventures accounted for under the equity method 6(13) ( 79,787 ) ( 64,393 )
Loss on disposal of property and equipment 6(14) 550 1,769
Loss on disposal of investments(financial assets measured at cost) 280 -
Gain on disposal of investments(available-for-sale financial assets) ( 45,348 ) -
(Gain) loss on valuation of non-operating financial instrument 6(44) ( 32,156 ) 2,164
Changes in operating assets and liabilities
Changes in operating assets
Financial assets at fair value through profit or loss 3,192,130 ( 11,649,456 )
Available-for-sale financial assets - current 322,825 ( 949,823 )
Bonds purchased under resale agreements 2,093,498 ( 1,323,145 )
Margin loans receivable ( 2,781,548 ) 1,720,832
Refinancing security deposits ( 60,656 ) ( 16,535 )
Receivables from refinance guaranty ( 33,779 ) ( 29,246 )
Customer margin account 2,182,356 ( 4,413,891 )
Receivables from security lending 69,457 ( 83,430 )
Security lending deposits ( 484,746 ) ( 185,433 )
Notes receivable ( 391 ) 2,062
Accounts receivable ( 5,244,522 ) ( 425,572 )
Prepayments 13,768 ( 6,306 )
Other receivables ( 13,532 ) ( 9,801 )
Other current assets 147,036 1,611,417
Changes in operating liabilities
Financial liabilities at fair value through profit or loss - current ( 1,209,730 ) 981,011
Bonds sold under repurchase agreements ( 2,173,604 ) 7,482,702
Deposits on short sales 575,358 ( 222,669 )
Short sale proceeds payable 680,861 ( 227,478 )
Guarantee deposit received on borrowed securities 166,199 ( 289,374 )
Futures traders’ equity ( 2,197,829 ) 4,412,480
Accounts payable 3,134,327 871,442
Advance receipts ( 462 ) ( 255 )
Collections on behalf of third parties 26,087 ( 673,536 )
Other payables 441,768 ( 77,317 )
Other financial liabilities - current 1,807,001 540,501
Other current liabilities 6,415 ( 324 )

(Continued)
Cash inflow (outflow) generated from operations $ 1,720,960 ( $ 3,465,426 )
Dividends received 320,335 517,173
Interest received 1,638,289 1,409,488
Income tax paid ( 81,435 ) ( 133,586 )
Net cash flows from (used in) operating activities 3,598,149 ( 1,672,351 )
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of available-for-sale financial assets 90,765 -
Proceeds from disposal of financial assets at cost 6(12) 1,128 -
Acquisition of property and equipment 6(14) ( 20,520 ) ( 17,705 )
Disposal of property and equipment 134 70
Acquisition of intangible assets ( 8,651 ) ( 9,796 )
(Increase) decrease in other non-current assets ( 41,179 ) 28,169
Increase in prepayment for equipment ( 31,467 ) ( 29,105 )
Acquisition of investments accounted for under equity method ( 42,682 ) -
Net cash flows used in investing activities ( 52,472 ) ( 28,367 )
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in short-term loans ( 735,232 ) 3,444,111
(Decrease) increase in commercial papers payable ( 2,650,000 ) 700,000
(Decrease) increase in other non-current liabilities ( 1,076 ) 1,262
Acquisition of treasury stocks 6(27) - ( 114,098 )
Interest paid ( 387,415 ) ( 225,653 )
Changes in non-controlling interest ( 4,366 ) ( 4,142 )
Distribution of cash dividends 6(27) - ( 260,759 )
Net cash flows (used in) from financing activities ( 3,778,089 ) 3,540,721
Effect of exchange rate changes ( 213,712 ) ( 46,151 )
Net (decrease) increase in cash and cash equivalents ( 446,124 ) 1,793,852
Cash and cash equivalents at beginning of year 6,909,469 5,115,617
Cash and cash equivalents at end of year $ 6,463,345 $ 6,909,469
REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR17002469

To the Board of Directors and Shareholders of President Securities Corporation

Opinion

We have audited the accompanying balance sheets of President Securities Corporation as of December 31, 2017 and 2016, and the related statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of President Securities Corporation as at December 31, 2017 and 2016, and its financial performance and its cash flows for the years then ended in accordance with the “Regulations Governing the Preparations of Financial Reports by Securities Firms”, “Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants”.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of President Securities Corporation in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

The key audit matters of the financial statements of the current period as below:

Impairment assessment of investments accounted for under equity method

Description

Please refer to Note 4(14) for accounting policies on investments accounted for under equity method and its impairment, Note 5(2) for the uncertainty of accounting estimates and assumptions applied on asset impairment, and Note 6(12) for details of investments accounted for under equity method.

President Securities Corporation held 42.46% of equity of Uni-President Asset Management Corp. which was accounted for under equity method. As of December 31, 2017, the amount was $496,093 thousand New Taiwan Dolllars. Impairment assessment is based on the expected future cash flow of the investments accounted for under equity method, discounted at appropriate discount rate, to measure the recoverable amount of the cash generating unit.

The recoverable amount of the investee is based on its expected future cash flows which involve multiple estimates and assumptions on discount rate and financial forecast. They are subjective judgements, have high degree of uncertainties, and are material to the recoverable amount. Thus we consider the impairment assessment of investments accounted for under equity method as one of the matters of most significance to our audit.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

1.Obtained the impairment assessment report prepared by an external expert who was commissioned by the management, and reviewed results of financial forecast in the past to assess its ability of execution;

  1. Assessed the reasonableness of expected future cash flow, discount rate and other significant assumptions applied in the cash flow model; and

  2. Inspected valuation model parameters, formula setting and the accuracy of calculation.

Impairment assessment of goodwill

Description

Please refer to Note 4(18) for accounting policies on goodwill, Note 5(2) for the uncertainty of accounting estimates and assumptions applied on goodwill, and Note 6(15) for details of goodwill.

The goodwill resulted from President Securities Corporation’s acceptance of transfer of the retail banking security brokerage business amounting to $42,004 thousand New Taiwan Dollars as of December 2017. Impairment assessment is based on the expected future cash flow of the security brokerage segment, discounted at appropriate discount rate, to measure the recoverable amount of the cash generating unit.

The recoverable amount of the investee is based on its expected future cash flows which involve multiple estimates and assumptions on discount rate and financial forecast. They are subjective judgements, have high degree of uncertainties, and are material to the recoverable amount. Thus we consider the impairment assessment of goodwill as one of the matters of most significance to our audit.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

  1. Obtained the impairment assessment report prepared by an external expert who was commissioned by the management;

  2. Assessed the reasonableness of expected future cash flow, discount rate and other significant assumptions applied in the cash flow model; and

  3. Inspected valuation model parameters, formula setting and the accuracy of calculation.

Responsibilities of management and those charged with governance for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the “Regulations Governing the Preparations of Financial Reports by Securities Firms”, “Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants”, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing President Securities Corporation’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate President Securities Corporation or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including audit committee, are responsible for overseeing President Securities Corporation’s financial reporting process.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1.Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

  1. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of President Securities Corporation’s internal control.

  2. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

  3. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on President Securities Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause President Securities Corporation to cease to continue as a going concern.

  4. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

  5. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within President Securities Corporation to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the company audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Hsiao, Chin-Mu Chang, Ming-Hui

For and on behalf of PricewaterhouseCoopers, Taiwan

March 26, 2018
------------------------------------------------------------------------------------------------------------------------------------------------- The accompanying parent company only financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying parent company only financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.
December 31, 2017 December 31, 2016
Assets Notes AMOUNT % AMOUNT %
110000 Current assets
111100 Cash and cash equivalents 6(1) $ 4,036,336 6 $ 3,902,508 5
112000 Financial assets at fair value through profit or loss - current 6(2) 37,805,199 50 40,325,632 56
113400 Available-for-sale financial assets - current 6(3) 1,044,031 2 1,332,776 2
114010 Bonds purchased under resale agreements 6(4) - - 2,093,498 3
114030 Margin loans receivable 6(5) 11,415,870 15 8,692,164 12
114040 Refinancing security deposits 79,350 - 18,694 -
114050 Receivables from refinance guaranty 67,160 - 33,381 -
114090 Receivables from security lending 88,318 - 157,775 -
114100 Security lending deposits 745,882 1 261,136 -
114110 Notes receivable 1,365 - 932 -
114130 Accounts receivable 6(6) 10,748,383 14 5,590,493 8
114140 Accounts receivable - related parties 6(6) 5,546 - 4,793 -
114150 Prepayments 25,114 - 40,024 -
114170 Other receivables 6(7) 8,005 - 17,044 -
119000 Other current assets 6(8) 783,916 1 1,045,235 2
110000 Total current assets 66,854,475 89 63,516,085 88
120000 Noncurrent assets
122000 Financial assets at fair value through profit or loss - noncurrent 6(2) 50,342 - 50,621 -
123100 Financial assets at cost - noncurrent 6(11) 9,058 - 10,466 -
124100 Investments accounted for under equity method 6(12) 4,652,492 6 4,700,549 7
125000 Property and equipment, net 6(13) 2,260,981 3 2,295,097 3
126000 Investment property, net 6(14) 276,803 1 278,903 1
127000 Intangible assets 6(15) 62,317 - 85,761 -
128000 Deferred tax assets 6(44) 136,166 - 62,027 -
129000 Other assets - noncurrent 6(16) 957,894 1 991,791 1
120000 Total noncurrent assets 8,406,053 11 8,475,215 12
906001 Total Assets $ 75,260,528 100 $ 71,991,300 100

(Continued)
December 31, 2017 December 31, 2016
Liabilities and Equity Notes AMOUNT % AMOUNT %
210000 Current liabilities
211100 Short-term loans 6(17) $ 6,281,968 8 $ 6,055,925 8
211200 Commercial papers payable 6(18) 3,649,631 5 6,298,316 9
212000 Financial liabilities at fair value through profit or loss - current 6(19) 1,205,864 2 2,419,024 3
214010 Bonds sold under repurchase agreements 6(20) 20,911,658 28 23,085,262 32
214040 Deposits on short sales 1,861,947 3 1,286,589 2
214050 Short sale proceeds payable 2,197,656 3 1,516,795 2
214070 Guarantee deposit received on borrowed securities 225,395 - 59,196 -
214130 Accounts payable 6(21) 8,459,592 11 5,618,474 8
214150 Advance receipts 117 - 384 -
214160 Collections on behalf of third parties 436,180 1 411,815 1
214170 Other payables 6(22) 1,075,914 1 637,933 1
214200 Other financial liabilities - current 6(23) 3,199,298 4 1,392,297 2
214600 Current tax liability 6(44) 279,092 - 67,783 -
219000 Other current liabilities 4,260 - 2,952 -
210000 Total current liabilities 49,788,572 66 48,852,745 68
220000 Noncurrent liabilities
228000 Deferred tax liability 6(44) 15,173 - 35,670 -
229000 Other liabilities - noncurrent 6(24) 71,129 - 21,955 -
220000 Total noncurrent liabilities 86,302 - 57,625 -
906003 Total Liabilities 49,874,874 66 48,910,370 68
301000 Capital
301010 Common stock 6(26) 13,904,281 19 13,356,658 19
302000 Capital reserve 142,702 - 142,702 -
304000 Retained earnings 6(27)
304010 Legal reserve 2,503,765 3 2,423,914 3
304020 Special reserve 6,373,559 9 6,209,865 9
304040 Unappropriated earnings 2,519,721 3 798,507 1
305000 Other equity interest ( 58,374 ) - 149,284 -
906004 Total equity 25,385,654 34 23,080,930 32
906002 Total liabilities and equity $ 75,260,528 100 $ 71,991,300 100
Year ended December 31
2017 2016
Items Notes AMOUNT % AMOUNT %
400000 Revenues
401000 Securities brokerage fees 6(28) $ 1,566,042 24 $ 1,046,975 29
404000 Underwriting fees 6(29) 56,114 1 46,521 1
406000 Net income of wealth management 16,233 - 14,286 -
410000 Gains on trading of sercurities 6(30) 2,911,156 46 119,485 3
421100 Stock custodian income 77,346 1 71,146 2
421200 Interest income 6(31) 1,416,803 22 1,187,572 33
421300 Dividend income 231,203 4 424,628 12
421500 Gains (losses) on valuation of trading securities 6(32) 372,744 6 ( 114,198 ) ( 3 )
421600 (Losses) gains on short covering and trading securities-RS financing covering 6(33) ( 102,116 ) ( 2 ) 22,947 1
421610 Gains on valuation of borrowed securities and bonds with resale agreements 6(34) 2,975 - 1,986 -
422200 Gains on warrants issuance 6(35) 305,912 5 486,183 14
424100 Futures commision income 51,466 1 56,701 2
424400 (Losses) gains on derivative financial instruments 6(36) ( 205,752 ) ( 3 ) 61,655 2
428000 Other operating (losses) income 6(37) ( 340,141 ) ( 5 ) 144,775 4
Total revenues 6,359,985 100 3,570,662 100
500000 Expenses
501000/
502000/
503000 Handling charges 6(38) ( 246,831 ) ( 4 ) ( 172,698 ) ( 5 )
521200 Interest expenses 6(39) ( 380,537 ) ( 6 ) ( 210,952 ) ( 6 )
524200 Securities commision expense ( 277 ) - ( 136 ) -
524300 Clearing charges ( 16,342 ) - ( 23,404 ) -
528000 Other operaring costs ( 35 ) - ( 138 ) -
531000 Employee benefits 6(40) ( 1,989,321 ) ( 31 ) ( 1,497,857 ) ( 42 )
532000 Depreciation and amortization 6(41) ( 93,012 ) ( 2 ) ( 108,730 ) ( 3 )
533000 Other operaring expenses 6(42) ( 1,299,732 ) ( 20 ) ( 1,094,927 ) ( 31 )
Total expenditures and expenses ( 4,026,087 ) ( 63 ) ( 3,108,842 ) ( 87 )
Operating profit 2,333,898 37 461,820 13
601100 Share of the profit or loss of associates and joint ventures accounted for under the equity method 6(12) 324,762 5 285,797 8
602000 Other gains and losses 6(43) 149,541 2 148,393 4
902001 Profit before tax 2,808,201 44 896,010 25
701000 Income tax expense 6(44) ( 189,432 ) ( 3 ) ( 69,320 ) ( 2 )
902005 Net income $ 2,618,769 41 $ 826,690 23

(Continued)
Year ended December 31
2017 2016
Items Notes AMOUNT % AMOUNT %
Other comprehensive income
Components that will not be reclassified to profit or loss subsequently
805510 Remeasurement of defined benefit plans ( $ 129,591 ) ( 2 ) ( $ 46,677 ) ( 1 )
805560 Other comprehensive gain of associates and joint ventures accounted for under equity method 1,173 - 1,557 -
805599 Income tax benefit relating to components of other comprehensive income 22,031 - 7,935 -
Items may be reclassified to profit or loss subsequently
805610 Translation loss on the financial statements of foreign operating entities ( 213,712 ) ( 3 ) ( 46,151 ) ( 1 )
805620 Unrealized gain (loss) on financial instruments 34,080 - ( 20,008 ) -
805660 Other comprehensive income of associates and joint ventures accounted for under equity method ( 28,026 ) - 14,429 -
805000 Current other comprehensive income (post-tax) ( $ 314,045 ) ( 5 ) ( $ 88,915 ) ( 2 )
902006 Total current comprehensive income $ 2,304,724 36 $ 737,775 21
Earnings per share 6(45)
975000 Basic earnings per share (in dollars) $ 1.88 $ 0.59
985000 Diluted earnings per share (in dollars) $ 1.88 $ 0.59
For the year ended December 31, 2016
Balance at January 1, 2016 $ 13,231,191 $ 256,116 $ 2,328,253 $ 6,018,542 $ 960,922 $ 193,772 $ 7,242 ( $ 278,026 ) $ 22,718,012
Appropriations of 2015 earnings:
Legal reserve 6(26) - - 95,661 - ( 95,661 ) - - - -
Special reserve 6(26) - - - 191,323 ( 191,323 ) - - - -
Cash dividends 6(27) - - - - ( 260,759 ) - - - ( 260,759 )
Stock dividends 6(27) 404,177 - - - ( 404,177 ) - - - -
Net income for the year ended December 31, 2016 - - - - 826,690 - - - 826,690
Other comprehensive (loss) income for the year ended December 31, 2016 - - - - ( 37,185 ) ( 46,151 ) ( 5,579 ) - ( 88,915 )
Acquisition of treasury stocks 6(26) - - - - - - - ( 114,098 ) ( 114,098 )
Retirement of treasury shares 6(26) ( 278,710 ) ( 113,414 ) - - - - - 392,124 -
Balance at December 31, 2016 $ 13,356,658 $ 142,702 $ 2,423,914 $ 6,209,865 $ 798,507 $ 147,621 $ 1,663 $ - $ 23,080,930
For the year ended December 31, 2017
Balance at January 1, 2017 $ 13,356,658 $ 142,702 $ 2,423,914 $ 6,209,865 $ 798,507 $ 147,621 $ 1,663 $ - $ 23,080,930
Appropriations of 2016 earnings:
Legal reserve 6(26) - - 79,851 - ( 79,851 ) - - - -
Special reserve 6(26) - - - 163,694 ( 163,694 ) - - - -
Stock dividends 6(27) 547,623 - - - ( 547,623 ) - - - -
Net income for the year ended December 31, 2017 - - - - 2,618,769 - - - 2,618,769
Other comprehensive (loss) income for the year ended December 31, 2017 - - - - ( 106,387 ) ( 213,712 ) 6,054 - ( 314,045 )
Balance at December 31, 2017 $ 13,904,281 $ 142,702 $ 2,503,765 $ 6,373,559 $ 2,519,721 ( $ 66,091 ) $ 7,717 $ - $ 25,385,654
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax $ 2,808,201 $ 896,010
Adjustments
Adjustments to reconcile profit (loss)
Depreciation 6(41) 66,114 81,605
Amortization 6(41) 26,898 27,125
Write-off of bad debts classified as income 6(16) ( 6,068 ) ( 9,317 )
Provision for bad debts 6(6)(16) 63,471 22,032
(Gain) loss on valuation of trading securities 6(2)(32) ( 372,744 ) 114,198
Gain on valuation of borrowed securities and bonds with resale agreements 6(34) ( 2,975 ) ( 1,986 )
Financial expense 6(39) 380,537 210,952
Interest income (include financial income) 6(31)(43) ( 1,426,810 ) ( 1,212,806 )
Dividend income ( 239,054 ) ( 428,931 )
Share of the profit of associates and joint ventures accounted for using the equity method 6(12) ( 324,762 ) ( 285,797 )
Loss on disposal of property and equipment 6(13) 658 1,746
Loss on disposal of investments(financial assets measured at cost) 6(11) 280 -
(Gain) loss on valuation of non-operating financial instrument 6(2) ( 332 ) 2,885
Changes in operating assets and liabilities
Changes in operating assets
Financial assests at fair value through profit or loss 2,895,268 ( 11,424,729 )
Available -for-sale financial assets - current 322,825 ( 949,823 )
Bonds purchased under resale agreements 2,093,498 ( 1,323,145 )
Margin loans receivable ( 2,781,548 ) 1,720,832
Refinancing security deposits ( 60,656 ) ( 16,535 )
Receivables from refinance guaranty ( 33,779 ) ( 29,246 )
Receivables from security lending 69,457 ( 83,430 )
Security lending deposits ( 484,746 ) ( 185,433 )
Notes receivable ( 433 ) 2,210
Accounts receivable ( 5,352,489 ) ( 841,857 )
Accounts receivable - related parties ( 753 ) ( 684 )
Prepayments 14,910 ( 7,801 )
Other receivables ( 1,484 ) ( 359 )
Other current assets 261,319 1,458,498
Changes in operating liabilities
Financial liabilities at fair value through profit or loss - current ( 1,210,185 ) 981,035
Bonds sold under repurchase agreements ( 2,173,604 ) 7,482,702
Deposits on short sales 575,358 ( 222,669 )
Short sale proceeds payable 680,861 ( 227,478 )
Guarantee deposit received on borrowed securities 166,199 ( 289,374 )
Accounts payable 3,000,203 1,061,870
Advance receipts ( 267 ) 35
Collections on behalf of third parties 24,365 ( 672,912 )
Other payables 436,677 ( 71,826 )
Other financial liabilities - current 1,807,001 540,501
Other current liabilities 1,308 93

(Continued)
Cash inflow (outflow) generated from operations $ 1,222,719 ( $ 3,681,809 )
Dividends received 485,188 648,569
Interest received 1,466,416 1,225,503
Income tax paid ( 50,728 ) ( 94,932 )
Net cash flows from (used in) operating activities 3,123,595 ( 1,902,669 )
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of financial assets at cost 1,128 -
Acquisition of property and equipment 6(13) ( 16,996 ) ( 8,131 )
Disposal of property and equipment - 70
Acquisition of intangible assets ( 2,128 ) ( 4,981 )
Acquisition of investments accounted for under equity method ( 92,682 ) -
(Increase) decrease in other non-current assets ( 41,044 ) 24,594
Increase in prepayment for equipment ( 20,036 ) ( 18,422 )
Net cash flows used in investing activities ( 171,758 ) ( 6,870 )
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans 226,043 2,932,637
(Decrease) increase in commercial papers payable ( 2,650,000 ) 700,000
(Decrease) increase in other non-current liabilities ( 326 ) 621
Acquisition of treasury stocks 6(26) - ( 114,098 )
Interest paid ( 372,528 ) ( 210,326 )
Distribution of cash dividends 6(26) - ( 260,759 )
Net cash flows (used in) from financing activities ( 2,796,811 ) 3,048,075
Effect of exchange rate changes ( 21,198 ) ( 3,393 )
Net increase in cash and cash equivalents 133,828 1,135,143
Cash and cash equivalents at beginning of year 3,902,508 2,767,365
Cash and cash equivalents at end of year $ 4,036,336 $ 3,902,508

APPENDIX IV
President Securities Corporation
2017 Earnings Distribution Proposal
Unit:：NT$
Unappropriated earnings as of January 1, 2017 (Note 1) $7,339,716
Less：Adjustment to unappropriated earnings of 2017 (Note 2) (106,387,716)
Unappropriated earnings after adjustment (99,048,000)
Add ：Net profit after tax of 2017 2,618,769,015
Subtotal 2,519,721,015
Less：Legal Reserve (10%) (Note 3) (251,972,102)
Special Reserve (20%) (Note 3) (503,944,203)
Special Reserve for debit balance on other equity items (Note 4) (58,374,050)
Special Reserve (0.5%) (Note 5) (12,598,606)
Reversing Special Reserve(Note 5) 3,022,758
Unappropriated earnings Available for Distribution 1,695,854,812
Distribution items
─ Cash dividend (NT$ 1.2 / per share) 1,668,513,634
Unappropriated earnings as of December 31, 2017 $27,341,178

Note 1:The amount of unappropriated earnings in the earning distributions resolved by the shareholders’ meeting of 2017

Note 2:The Company has adopted T-IFRSs since 2017, unappropriated earnings was decreased by $106,387,716 due to actuarial loss from defined benefits plan (included in other comprehensive income).

Note 3:According to Article 237 of the Company Act, Jingshan Letter No.10102268370 and No.10202433490, Paragraph 1 of Article 41 of the Securities and Exchange Act, Article 14 of Regulations Governing Securities Firms, and Article 23 of the Company’s Article of Incorporation, 10% and 20% were set aside as legal reserve and special reserve.

Note 4:Special Reserve for debit balance on other equity items was set aside in accordance with Paragraph 1 of Article 41 of the Securities and Jing-Guang-Zheng-Fa Letter No. 1010012865.

Note 5:Special reserve shall be provided for employees' transition in response to development in financial technology, according to Jing-Guang-Zheng-Chuan Letter No.10500278285 and Zheng-Chi (Chuan) Letter No. 1060005703. 0.5% was approved to be provided as special reserve in the 17th meeting of the 10th term of the Board of Directors of the Company and reversing special reserve in line with relevant letters.

Note 6:Prior years’ unappropriated earnings shall not be appropriated unless the current year’s unappropriated earnings is insufficient for distribution.

Note 7:Total common shares outstanding as of December 31, 2017 was 1,390,428,028 shares

APPENDIX V

Rules for Governing the Election of Directors of President Securities Corp.

  1. Election of directors of the President Securities Corporation (hereinafter referred to as the Corporation), unless otherwise provided in the Company Act, Securities and Exchange Act or the Corporation’s bylaws, shall be conducted in accordance with these rules.
  2. Election of directors of the Corporation shall be conducted at the shareholders’ meeting.
  3. Election of directors of the Corporation shall be conducted through cumulative voting; each share shall confer voting rights equal in number to the number of directors to be elected; votes may be cast for a single candidate or allocated to multiple candidates.

3-1 Election of directors of the Corporation shall be conducted using the candidate nomination system. The Corporation’s independent directors and non-independent directors shall be concurrently elected, but with their ballots separately calculated.

3-2 For election of directors, shareholders can exercise voting rights either through present or electronic.

  1. At an election of directors of the Corporation as conducted in accordance with the quota as provided by the laws, candidates that receive the highest number of voting rights shall be elected as directors. When two or more candidates receive identical number of votes and the number of elected candidates exceeds the stipulated number of posts, said candidates shall draw lots to decide the appointments, and the chairperson shall draw lots on behalf of non-attendee(s).
  2. Matters pertaining to the monitoring and counting of ballots shall be handled by ballot counters and a scrutineer as designated by the chairperson at the start of the election.
  3. During the preparation of ballots, the Corporation shall indicate the number of voting rights on each ballot in accordance with the respective shareholder attendance identification number. This is not applicable to voters exercising their voting rights through electronic means and ballots shall not be separately prepared for such voters. Said voters shall carry out voting through the website platform as indicated in the notice of meeting.
  4. Should a candidate be a shareholder, voters are required to fill in said candidate’s name and shareholder number in the “Candidate” column of the ballot; should a candidate be a non-shareholder, voters shall fill in said candidate’s full-name and ID number. In the event that the candidate is a shareholder that is a government agency or juristic person, voters shall fill in said government agency or juristic person’s name in the “Candidate” column of the ballot, and may also fill in the name of said government agency or juristic person’s representative. Should there be more than one representative, only one representative’s name may be included in the ballot.
  5. A ballot shall be deemed invalid under any of the following circumstances:
  6. Ballot cast was not prepared by the Corporation.
  7. Blank ballot cast into the ballot box.
  8. Handwriting is illegible.
  9. Name (full name) of election candidate in ballot is identical to that of another shareholder, and it is not distinguished by the inclusion of a shareholder number or ID number.
  10. Name and/or shareholder number of candidate, who is a shareholder, is inconsistent with records in shareholder register; name and/or ID number of candidate, who is a non-shareholder, is found to be inconsistent after verification.
  11. A single ballot containing names of two or more candidates.
  12. Other texts, excluding the name (full name) and shareholder number (ID number) of candidates, are found within the ballot. Not applicable if ballot was handled in accordance with Article VII.
  13. Counting of votes will commence immediately after voting is completed, and election results will be announced at the meeting by the chairperson or master of ceremonies.
  14. The Board of Directors shall respectively issue notices of appointment to elected directors.
  15. These rules are required to be passed at a shareholders’ meeting before their implementation; any amendment to these rules are also required to be approved at a shareholders’ meeting.

The company will set up an audit committees to replace supervisors since the tenth Board of Meeting. The adjustment of supervisors’ regulations will cease to apply till the tenth Board election.

AppendixVI

President Securities Corp.

Rules and Procedures of Shareholders’ Meeting

Article01. These Rules are prescribed in accordance with Article 5 of the Corporate Governance Best-Practice Principles for TSE/GTSM Listed Companies for the purpose of establishing good governance, strengthening the supervisory functions and administration by the shareholders’ meeting.

Article02. Except as otherwise provided by the laws and regulations or the Articles of Incorporation of the Company, the shareholders’ meetings of the Company shall be in accordance with these Rules.

Article03. Except as otherwise provided by the laws and regulations, the shareholders’ meeting of the Company shall be convened by the Board of Directors.

The company shall prepare electronic files of the meeting announcement, proxy form, explanatory materials relating to proposals for ratification, matters for deliberation, election or dismissal of directors or Indepen directors , and other matters on the shareholders’ meeting agenda, and upload them to the MOPS website thirty (30) days prior to a regular shareholders’ meeting or fifteen (15) days prior to a temporary shareholders’ meeting Twenty-one (21)days before a company is to convene an ordinary shareholders’ meeting, or fifteen (15) days before an temporary shareholders' meeting, it shall prepare an electronic file of the shareholders’ meeting agenda handbook and the supplemental materials, and upload it to the MOPS website. Fifteen (15) days before a company is to convene a shareholders’ meeting, it shall prepare the shareholders’ meeting agenda handbook and supplemental materials and make them available for the shareholders to obtain and review at any time. In addition, the handbook shall be displayed at the company and its stock registrar and transfer agent, and distributed on-site at the meeting.

The meeting notice and the public announcement of the shareholders meeting shall expressly indicate the reasons for convening the meeting.

The meeting notice can be served by means of electricity facilities if

agreed by the noticed party .

Election or dismissal of directors, supervisors, proposed amendment to the Articles of Incorporation, proposed dissolution, merger, or split of the Company, event(s) of the conditions provided in the first paragraph of Article 185 of the Company Act, or Article 26-1, or Article 43-6 of the Securities And Exchange Act must be indicated item by item in the reasons for convening the meeting in the meeting notice and none of them can be proposed by way of extempore motion.

A shareholder who holds 1% or more of the total issued shares of the Company may propose in writing one and only one proposal in advance to be included in the agenda for discussion and resolution at the shareholders meeting. All additional proposals, if any, proposed by the shareholder shall be excluded from the agenda. The Board of Directors may decide to exclude from the agenda any proposal proposed by the shareholder which runs into any of the conditions provided in the fourth paragraph of Article 172 -1 of the Company Act.

The Company shall make public announcement about when and where to submit proposal prior to the commencement date of the suspension of transfer of shares in the Company and the opening period for proposal acceptance shall not less than 10 days.

The proposal proposed by the shareholder shall be written in not more than 300 Chinese characters or shall otherwise be excluded from the agenda. The shareholder who has proposed a proposal shall personally attend the general shareholders meeting and participate in the discussion of his/her proposal or he/she may duly designate a proxy to act on his/her behalf at the meeting.

The Company shall give a notice to the shareholder prior to the meeting date regarding the Company’s handling of the proposal he/she has proposed. The Company shall, item by item, indicate in the meeting notice all of the proposals submitted in conformity to this Article and the reasons why the other proposals are excluded from the agenda.

Article04. The shareholder may designate a proxy to attend the shareholders meeting on his/her behalf by signing and indicating the scope of authority in the proxy form prepared by the Company.

Each shareholder may sign one and only one proxy form to designate one and only one proxy. The signed proxy form must be served to the Company five days prior to the meeting day. In case of multiple signed proxies from the same shareholder, the first one served to the Company shall prevail except when the shareholder has expressed to cancel the proxy.

The shareholder who, after his/her signed proxy has been served to the Company, is to attend the meeting in person or to exercise his/her voting power by way of electronic transmission shall notify the Company in writing no later than two days prior to the meeting day of his/her intention to cancel his/her signed proxy or the ballots cast by his/her designated proxy present at the meeting shall govern for the purpose of vote counting.

Article05. The shareholders meeting shall be convened at the place where the Company is located or any other appropriate place convenient for shareholders to attend and shall commence no earlier than 9:00AM and no later than 3:00PM on the meeting date. The venue, date and hour of the meeting shall be determined in consideration of the opinion of the independent director.

Article06. The company shall, in the meeting notice, state the reporting time, reporting venue and other items of importance for accepting shareholders.

The abovementioned accepted shareholders shall report at least 30 minutes before the start of the meeting; the reporting venue shall be clearly identifiable and managed by an adequate number of staff who are adequately competent.

Shareholders or agents authorized by shareholders (hereinafter referred to as shareholders) shall present their attendance ID, attendance cards or other attendance certificates at the shareholders' meeting; solicitors soliciting proxy forms shall bring along their identification documents for verification purposes.

The shareholder or his/her proxy who attends the meeting may turn in his/her signed attendance card instead of signing in the attendance book.

The Company shall deliver to each shareholder the agenda, annual report, attendance ID, speaking request form, ballots, other meeting materials and, where applicable, the ballots for election of directors and/or Independent Directors.

The shareholder shall present his/her attendance ID, signed attendance card or other pre-approved attendance documentation to attend the meeting. Those to attend the meeting as requesters shall also present their identification paper for verification.

A government agency shareholder or an institutional shareholder may be represented at the shareholders’ meeting by one or more proxies. An institution acting as the proxy for a shareholder may appoint one and only one representative to act on behalf of the principal of the proxy at the meeting.

Article07. Where the shareholders meeting is convened by the Board of Directors, the meeting shall be presided by the chairman of the Board of Directors. If the chairman is for whatever reason unable to carry out his/her functions at the meeting, the vice chairman shall act in his/her stand. If the Company has no vice chairman or the vice chairman is for whatever reason unable to carry out the function at the meeting either, the chairman shall appoint a standing director to act in his/her stand at the meeting. If the Company has no standing director, the chairman shall appoint a director to act in his/her stand. If above are not applicable, the directors or standing directors (if any) shall elect one from among themselves to preside the meeting.

If the abovementioned position of chairman be filled by a managing director or director, said managing director or director shall be one who has held office for more than six months and understands the company's financial and business conditions. The same applies if the position of chairman is held by a corporate director’s representative.

Where the shareholders meeting is convened by any person legally authorized to do so other than the Board of Directors, the meeting shall be presided by the convener.

Where there are two or more conveners, they shall elect one from among themselves to preside the meeting.

The Company may appoint legal counsel(s), certified public accountant(s) and/or the relevant personnel to attend the shareholders’ meeting without the right to vote.

Article08. The company shall record the entire meeting either through audio or video.

The abovementioned video and audio materials shall be kept for at least one year. However, in the event that a lawsuit has been filed by shareholder(s) in accordance with Article 189 of the Company Act, said video and audio recordings shall be kept until the end of said lawsuit.

Article09. Whether the shareholders’ meeting meets the quorum shall be determined based on the total amount of shares represented at the meeting which shall be counted according to the numbers of attendance cards received plus voting power exercised by way of electronic transmission.

The chairperson shall call the meeting to order as scheduled, provided that where the number of shares represented at the meeting accounts for less than the majority of the total issued shares, the chairperson may announce to postpone calling the meeting to order twice and only twice for a total duration of not more than one hour. If the quorum is still not met after the above postponement duration has expired and the total number of shares represented at the meeting still accounts for less than one third of the total issued shares of the Company, the chairperson shall announce to abort the meeting.

If the quorum is still not met after the meeting has been twice postponed as provided in the preceding paragraph but the number of shares represented at the meeting exceeds one third of the total issued shares of the Company, temporary resolutions may be adopted in accordance with the first paragraph of Article 175 of the Company Act, in which case, the temporary resolutions adopted shall be notified to all shareholders and the shareholders meeting shall reconvene within one month.

If, before the meeting ends, the total shares represented at the meeting account for half or more of the total issued shares of the Company, the chairperson may submit the temporary resolution adopted to the meeting for voting pursuant to Article 174 of the Company Act.

Article10. Where the shareholders’ meeting is convened by the Board of Directors, the agenda shall be determined by the Board of Directors and the meeting shall proceed according to the agenda except otherwise changed by the resolution adopted by the shareholders’ meeting.

Where the shareholders’ meeting is convened by any person legally authorized to do so other than the Board of Director, the preceding paragraph shall apply.

The chairperson shall not forthwith announce to adjourn the meeting before the agenda provided in the two preceding paragraphs (including extempore motions) is duly completed except on the resolution adopted by the shareholders’ meeting for him/her to do so. In the event the chairperson announces to adjourn the meeting in contravention to these Rules, the other members of the Board of Directors present shall promptly assist the shareholders present at the meeting to duly elect, by a majority vote, one from among the directors present to preside to continue the meeting.

The chairperson shall allow sufficient time for explanation to be given and discussion on each proposal on the agenda and each amendment or extempore motion proposed by the shareholders. The chairperson may announce to conclude the discussion as he/she sees fit and submit the proposal to voting for resolution.

Article11. The shareholder shall fill out the speaking request form floor before making statement at the meeting and he/she will indicate the gist of his/her statement to make, shareholder account number (or attendance card number) and shareholder name. The chairperson will decide the order for the shareholders to make their statement.

The shareholder who has only filled out the speaking request form floor without actually doing so shall be deemed not having made any statement. In case of any discrepancy between the gist of statement indicated in the shareholder’s speaking request and the actual statement made, the actual statement made shall govern.

The shareholder may speak on each proposal twice and only twice for not more than five minutes each except otherwise approved by the chairperson, provided that the chairperson may stop at any time the shareholder from taking the floor if such shareholder has acted in contravention of these Rules or is making statement out of the scope of the proposal being discussed.

No shareholder may interrupt the shareholder taking the floor without the consent of both of the chairperson and the shareholder taking the floor. The chairperson shall restrain any shareholder from acting in breach of the above.

An institutional shareholder who is represented by two or more appointed representatives at the meeting will have its statement on the same proposal made (if any) by one and only one of its appointed representatives.

The chairperson may personally respond to the statement made by the shareholder or appoint the relevant personnel to do so.

Article12. The votes at the shareholders’ meeting will be counted based on the number of shares.

The non-voting shares represented at the meeting shall be disregarded for the purpose of counting votes for adopting the resolution.

Shareholders who have personal conflict of interests against the Company on certain proposal shall not vote on that proposal, either for himself/herself or for another shareholder by proxy.

The non-voting shares provided in the preceding paragraph shall be excluded from the calculation of voting shares represented at the meeting.

Except trust businesses or stock affair agency approved by the competent securities authority, a proxy acting on behalf of two or more shareholders at the meeting will have the voting right by proxy representing not exceeding 3% of the total issued shares of the Company. Any vote cast by the proxy in excess of the said representation limit will be ignored.

Article13. The shareholder will have one vote for each share held except where there is limitation on the voting right or the voting right is denied by operation of the second paragraph of Article 179 of the Company Act.

The voting power at a shareholders' meeting may be exercised by way of electronic transmission described in the shareholders' meeting notice. A shareholder who exercises his/her voting power at a shareholders meeting by way of electronic transmission shall be deemed to have attended the said shareholders' meeting in person, but shall be deemed to have waived his/her voting power in respective of any extemporary motion(s) and/or the amendment(s) to the contents of the original proposal(s) at the said shareholders' meeting.

In case a shareholder elects to exercise his/her/its voting power by way of electronic transmission, his/her declaration of intention shall be served to the company two days prior to the scheduled meeting date of the shareholders' meeting, whereas if two or more declarations of the same intention are served to the company, the first declaration of such intention received shall prevail; unless an explicit statement to revoke the previous declaration is made in the declaration which comes later.

In case a shareholder who has exercised his/her voting power by way of electronic transmission intends to attend the shareholders' meeting in person, he/she shall serve a separate declaration of intention to rescind his/her previous declaration of intention made in exercising the voting power two days prior to the meeting date of the scheduled shareholders' meeting and in the same manner previously used in exercising his/her/its voting power. In the absence of a timely rescission of the previous declaration of intention, the voting power exercised by way of electronic transmission shall prevail.

In case a shareholder has exercised his/her voting power by way of electronic transmission, and has also authorized a proxy to attend the shareholders' meeting in his/her behalf, then the voting power exercised by the authorized proxy for the said shareholder shall prevail.

Except as otherwise provided by the Company Act or the Articles of Incorporation of the Company, the resolution of a shareholders meeting shall be adopted by the majority vote represented at the meeting. For the purpose of voting, the chairperson shall announce the total number of votes represented and currently present at the meeting or appoint a personnel to do so each time before calling for voting on each proposal. The resolutions, whether agreement/disagreement/waiver, shall be uploaded to the MOPS website on the day which shareholder’ meeting was held.

Upon voting for resolution on a proposal, if no opposition is expressed by shareholders present at the meeting, and shareholders either through electronic or written form, in response to the chairperson’s invitation for opinion on that proposal, the resolution shall be deemed adopted unanimously and operate as one adopted by voting. In case an opposition is expressed, the proposal shall be voted in accordance with the preceding paragraph.

Where there is revision or substitute proposal on the same proposal, the chairperson shall combine them with that proposal for the purpose of determining their order of voting. If one of the proposals is adopted, the other proposals shall be deemed vetoed and no voting on them will be necessary.

The chairperson shall appoint vote supervisor and vote counter during the voting and the vote supervisor shall also be a shareholder. The vote counting for voting or election motions at the shareholders' meeting shall be conducted publicly at the meeting venue, after vote counting has been completed, the voting results shall be announced on the spot (including the tallied number of votes) and recorded accordingly.

Article14. The election of a director and or supervisor shall be in accordance with the relevant bylaw of the Company and the result of the election, including list of elected directors and Independent Directors and the number of votes they received, shall be announced on site.

The ballots of the election provided in the preceding paragraph shall be sealed and signed by the personnel supervising the voting and properly kept for at least one year or up through the conclusion of the shareholder action (if any) initiated under Article 189 of the Company Act.

Article15. Each resolution adopted by the shareholders’ meeting must be taken down in the meeting minutes which must be signed or impressed with the seal of the chairperson with a copy thereof sent to the shareholders each within twenty (20) after the end of the meeting.

The Company may publish the meeting minutes provided in the preceding paragraph on the MOPS website.

The meeting minutes shall accurately indicate the year, month, date, venue, name of the chairperson, method of adopting resolutions, gist of the proceeding and the conclusion of the meeting and shall be properly kept throughout the standing of the Company.

(Delete this item)

Article16. The Company shall count the number of shares represented by the requesters and proxies present at the meeting, produce and clearly display at the meeting a statistic statement thereof according to the required form.

For each resolution adopted the publication of which is required by law or which belongs to the TWSE-required material information, the Company shall, within the applicable time limit, transmit it to the MOPS.

Article17. The working staff of the meeting shall each wear an ID tag or badge.

The chairperson may direct the order-maintaining personnel or security guard to maintain the order of the meeting. The order-maintaining personnel or security guard shall each wear a badge or ID tag bearing their designation when performing their functions at the meeting.

The chairperson may stop the shareholder from making statements by using any equipment other than those readily facilitated by the meeting (if any).

If the shareholder ignores the chairperson’s request for him/her to retrain himself/herself from acting in contravention of these Rules at the cost of the proceeding of the meeting, the chairperson may direct the order-maintaining personnel or security guard at the meeting to escort such shareholder out of the venue of the meeting.

Article18. The chairperson may call the meeting to a break as he/she sees fit. In the event of force majeure. the chairperson may suspend the meeting and announce the appropriate date and hour to resume the meeting. In the event that the venue of the shareholders’ meeting is kept from being available for use before the agenda (including extempore motions) is discussed in full, the shareholders’ meeting may adopt the resolution for continuing the meeting elsewhere. The shareholders’ meeting may adopt the resolution pursuant to Article 182 of the Company Act to re-schedule or resume the meeting within five days.

Article19. These Rules and all subsequent amendments shall come into force after being adopted by the shareholders’ meeting.

These Rules were duly established on April 16th,1998 and the first amendment was approved on June 25th,2010. The second amendment was approved on June 24th,2011. The third amendment was approved on June 22th,2012. The fourth amendment was approved on June 19th,2013.The fifth amendment was approved on June 18th,2014.

The sixth amendment was approvedamendment on June 22 th,2017.

Appendix VII

ARTICLES OF INCORPORATION OF

PRESIDENT SECURITIES CORP.

Chapter I General Provisions

Article 1:

This Company is duly incorporated under the provisions set forth Company Law regarding companies limited by shares in the full name of PRESIDENT SECURITIES

CORP. (Hereinafter referred to as the Company).

Article 2:

The Company shall engage in the following business:

  1. H301011, a securities dealer.

  2. H408011, an aid on futures transaction

  3. H401011, a futures dealer

  4. H105011, a trustee

Article 2-1

The scope of business of the Corporation shall be as follows:

  1. To underwriter valuable securities
  2. To buy and sell valuable securities in centralized trading markets as a principal;
  3. To be consigned to buy and sell valuable securities in centralized trading markets;
  4. To buy and sell valuable securities in its own business location;
  5. To be consigned to buy and sell valuable securities in its own business location;
  6. To act as an agent for stock affairs in valuable securities;
  7. To engage in short-buy and margin sales for trading in valuable securities;
  8. To render aid in futures trading;
  9. To be consigned to buy and sell foreign valuable securities;
  10. To engage concurrently in proprietary futures trading.
  11. To engage concurrently in trustee
  12. To be consigned to buy and sell foreign valuable securities;
  13. To Operate securities-related business of foreign exchange and permit by the Central Bank of Republic of China. (Taiwan)
  14. To engage in other securities related businesses as approved by the competent authorities.

Article 2-2:

The Company may, within the scope as permitted by law, render guarantee services to subsidiaries.

Article 3:

The Company is headquartered in Taipei and may have branches duly set in appropriate locations elsewhere as approved by the government.

Article 4:

This article was deleted.

Chapter II Shares

Article 5:

The Company has New Taiwan Dollars Fifteen Billion Only, divided into 1.5 billion shares at Ten New Taiwan Dollars par value for which the board of directors is authorized with full powers to issue in installments.

Article 5-1:

When the Company acts as a shareholder of limited liabilities, the total amount of external investment by the Company is free of the maximum limitation at 40% of the paid-in capital as set forth in Article 13 of the Company Law.

Article 6:

The share certificates hereof shall be duly signed and sealed by three directors, affixed with Company seal and duly authenticated by the competent authorities or their authorized organization before issuance.

The company may be exempted from printing any share certificate or it may either print a single share certificate or a consolidated share certificate for the shares issued. The Company shall appoint a centralized securities custody institution to make recordation of the issue of such shares.

Article 7:

For transfer of the Company’s shares, both the shareholder and the transferee shall jointly apply hereto for transfer procedures and entry into roster of shareholders, provided, that no transfer of shares shall be made within one month prior to a shareholders' regular meeting or fifteen days prior to an extraordinary meeting or within five days prior to allocation of dividend, bonus or other interests.

Article 8:

The share certificates hereof are the registered ones. The shareholders hereof shall have their names and addresses duly registered into roster of shareholders and have their impression cards of registered seals filed herein. The same is required in case of a change. The stock affairs of the Company shall be duly handled according to “Regulations Governing Stock Affairs of Public Offering Companies” promulgated by the competent authorities of the government except as otherwise provided by the laws and securities regulations.

Chapter III Shareholders' meeting

Article 9:

The shareholders' meeting hereof is in regular and extraordinary ones.

The former is called once per annum within six months from closing of each fiscal year.

The latter may be duly called when considering it is necessary.

Article 10:

The notices to a shareholders’ meeting shall be duly served to shareholders in accordance with Company Law or other laws concerned.

Article 11:

Each share hereof is entitled to one voting power. A shareholder who is unavailable to attend a shareholders' meeting may duly issue a power of attorney with the Company provided form with scope of authorized power to appoint a proxy for the meeting. In the event a proxy is authorized by two or more shareholders, the voting power exceeding 3% of the total issued shares shall be discarded.

The aforementioned power of attorney shall be served to the Company five days in advance of the Company. In case of multiple authorization, it shall be taken on the first come first served basis unless the preceding authorization is declared withdrawn.

Article 12:

The following issues are subject to resolutions to be adopted in the shareholders’ meeting:

  1. Establishment and amendment of the Articles of Incorporation.

  2. Election of directors.

  3. Approval of reports worked out by the board of directors and profit allocation of profit and coverage of loss.

  4. Increase, decrease of capital.

  5. Major affairs otherwise and issues as required by the Company.

Unless otherwise provided for in the Company Law, resolutions in the shareholders' meeting shall be adopted by a majority vote in the meeting attended by shareholders representing a majority of the total issued shares.

Chapter IV Directors

Article 13:

The Company has nineteen directors (four independent and fifteen non-independent directors), to be elected by shareholders’ meeting from among the persons with disposing capacity, both having three-year tenure of office and eligible for reelection. The candidates’ qualifications shall live up to requirements of Company Law, Securities and Exchange Law and related regulations.

Directors shall be elected from among the nominees listed in the roster of candidates by adopting candidate nomination system.

The election of independent and non-independent shall be held together but the votes shall be calculated separately.

Article 13-1:

The Company according to Article14-4, Securities and Exchange Law, establish the Audit Committee, composed of the entire number of independent directors.
Audit Committee and among independent directors shall compliance and follow by internal rules in this company and the Government related regulations.

Article 14:

The total registered shares held by all directors shall not be less than specified percentage and the shareholding and auditing shall be subject to requirements promulgated by the competent authorities of the government.

Article 15:

By attendance of two-thirds majority of directors and a majority vote of the attending directors, three~five managing directors shall be elected and, in the same manner, one chairman shall be duly elected. In case of no managing directors, one chairman and one vice chairman shall be elected from among directors in the same manner. The chairman shall chair the shareholders’ meeting, board of directors meeting and board of managing directors meeting internally, and represent the Company externally.

Article 16:

Meetings of the board of directors shall be convened by the chairman of the board of directors. Unless otherwise provided for in the Company Law, the resolutions in the board of directors meeting shall be adopted by a majority vote in the meeting attended by a majority of directors.

The Convene Notice of the meeting of board may serve to the directors by writing, E-mail or facsimile.

In the chairman’s absence, the vice chairman shall act in the place. In absence of both, the chairman shall appoint a managing director to act in place otherwise one managing director shall be elected from among themselves to act in the place. A director unavailable to the meeting may duly authorize another director to attend a board meeting on his behalf.

Article 17:

The board of directors shall have the following functions:

  1. To work out the Company’s business plans;

  2. To work out organizational regulations, major articles and contracts;

  3. To work out budgeting and account closing;

  4. To propose for capital increase, decrease;

  5. To propose profit allocation or loss coverage;

  6. To appoint, discharge managerial officers and key staff;

  7. To resolve establishment and dissolution of a branch;

  8. To resolve major business affairs otherwise;

  9. To exercise other functions endowed by laws and shareholders’ meeting.

Article 17-1:

The Board of Directors may, complying with the law or taking into account the necessity, set up any functional committees whose functions, responsibilities, qualifications of committee members, process of exercising the power and so forth to be formulated by the board of directors.

Article 18:

This article was deleted.

Article 19:

The board of directors is authorized to determine the remuneration for directors taking into account the extent and value of the participation for the management of the Corporation and the standards of the industry. Independent directors receive fixed monthly compensation and shall not participate in the allocation of remuneration to directors and supervisors set forth in Article 23.

Article 19-1

The Company may act as a policyholder of liability insurance for the benefit of directors, supervisors, and managers. The board of directors is authorized to determine the limit of liability and the related matters.

Chapter V Managerial officers

Article 20:

The Company has one president to enforce issues as resolved in the board of directors and take charge of overall business operation of the Company, to be nominated by the chairman and duly appointed and discharged in the board of directors. The Company has a certain number of vice president, be nominated by the president and duly appointed and discharged in the board of directors.

Chapter VI Accounting

Article 21:

The fiscal year hereof is beginning January 1 until December 31 each calendar year.

Article 22:

Upon closing of each fiscal year, the board of directors shall work out the following documents according to Article 228 of the Company Law to be audited by Audit Committee thirty days in advance of shareholders' regular meeting and the Audit Committee shall issue a report accordingly to be approved by the shareholders' meeting:

  1. Business report

  2. Financial statements

  3. Proposals of profit allocation or loss coverage

Article 23:

In an effort to encourage employees and management, the Company will distribute compensation to employees and the Directors from pre-tax profits. Where the company has pre-tax profits, the total value of funds to be distributed among employees shall not be less than 1.6% of pre-tax profits; while the total value of funds to be distributed among the Directors shall not be more than 2% of pre-tax profits. If the company has losses carried forward, compensation should only be paid to employees and Directors after funds have been set aside as reserve for such losses.

Employees’ compensation should be paid in the form of cash or company shares. A resolution regarding compensation to be distributed should be passed at a Board of Director’s meeting by a majority vote at a meeting attending by two-thirds or more of the Directors, after which the results should be reported to the shareholders.

Only those individuals meeting the specific criteria of employees shall be considered employees for the purposes of the employees’ compensation distributions.

Article 23-1:

If there are surplus profits after the closing of the books in a given fiscal year, then, after paying applicable taxes and making up losses from previous years, the company should set aside 10% of remaining profits as legal reserve, 20% as special reserve, and any other reserves as required by applicable laws or regulations, and, if any profits still remain, the board of directors shall put forth a motion to the shareholders for distribution of the remaining profits to shareholders.

In the event that the remaining profits represent less than 5% of the value of the company’s paid-in capital, then no such distribution is necessary.

The Company’s dividend policy should be based on the long-term financial structure and stability of the Company so as to allow for continued growth, which creates the best value for shareholders. The dividend distribution in a given year shall not be less than 70% of the surplus profits available for distribution. Stock dividends should not account for less than 10% of the total dividend distributed, and cash shall not account for more than 50% of the total dividend distributed. However, the Company may take into consideration the actual status of the Company’s operations and future capital needs when determining an appropriate ratio of cash and shares for the dividend distribution.

Chapter VII Bylaws

Article 24:

The organizational rules and operational rules shall be separately worked out by the board of directors.

Article 25:

Any matters inadequately provided for herein shall be subject to Company Law and managerial regulations concerned.

Article 26:

hese Articles were duly established on November 26, 1988 and the first amendment was approved on December 28, 1988; ------------; the twenty sixth amendment on June 14, 2016.

Appendix VIII

The Impact of the Stock Dividend Issuance on Business Performance, EPS and Shareholders Return Rate

In accordance with the regulation of Letter No. (91)Tai-Tsai-Zheng-1-002534 issued by the Securities and Futures Commission on 16 April 2002, the Company is not obligated to disclose these information since it did not publish any financial forecasts.

Appendix IX

Shareholdings of Directors

  1. In accordance with Article 26 of the Securities and Exchange Act:

The aggregate minimum shareholding for all directors is 32,055,977 shares.

  1. As of the date of record for the General Shareholder Meeting, i.e., April 23, 2018, the total shareholdings of directors were as follows:
Title Name Shares Held Shares Ratio %
Chairman KAI NAN INVESTMENT CO.,LTD 39,831,460 2.865
Director LIN,KUAN-CHEN 3,250,000 0.23
Director LEG HORN INVESTMENT CO.,LTD 12,408,018 0.89
Director DUH, BOR-TSANG 4,189,946 0.30
Director HUI TUNG INVESTMENT CO.,LTD 10,199,544 0.73
Director TA LEH INVESTMENT HOLDING CO.,LTD 7,172,615 0.525
Director LEE , SHY-LOU 8,380,640 0.60
Director KAO, XIU-LING 3,788,631 0.27
Director TENE, WEN- HWI 2,320,671 0.17
Director China F.R.P. Corporation 5,392,415 0.39
Independent Director Liang, Yann Ping 0 0
Independent Director WU,TSAI-YI 0 0
Independent Director LEE, KWANG- CHOU 0 0
Independent Director FU, KAI- YUN 0 0
TOTAL 96,933,940 6.97

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