Stock Code: 2855 www.pscnet.com.tw

2013 Annual Report

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This English version annual report is a summary translation of the Chinese version and is not an official document of the shareholders’ meeting. If there is any discrepancy between the English version and Chinese version, the Chinese version shall prevail.

3 6

I. Letter to Shareholders 3 II. Company Profile 6 1 Date of incorporation 2 Company History
III. Corporate Governance 8 1 Organization Chart 2 Major Corporate Functions 3 Compensation for Directors and Supervisors 4 Implementation of Corporate Governance 5 Integrity Management Application 6 Long-term Investment Ownership
IV. Capital Structure 30 1 Capital and Shares 2 Dividend Policy & Implementation Status 3 Buyback of Common Stock 4 Status of Corporate Bonds
V. Overview of Business Operation 34 1 Business Activities 2 Analysis of the Securities Industry 3 R&D for Derivative Products 4 Future Business Development 5 Market Conditions 6 Employee Data 7 Corporate Social Responsibility 8 Labor Relations
VI. Financial Information 52 1 Balance Sheet from 2009 to 2014Q1 2 Income Statement from 2009 to 2014Q1 3 Financial Analysis from 2009 to 2014Q1 Financial Status, Operating Results & Risk
VII. 60 Management 1 Analysis of Financial Status 2 Analysis of Operating Results 3 Long-term Investment Policy and Results 4 Analysis of Risk Management
VIII Other Disclosures 69 1 Affiliated Companies Chart 2 Basic Information of Affiliates 3 Operational Highlights of Affiliated Companies 4 Capital Adequacy Ratio

CONSOLIDATED FINANCIAL STATEMENTS 73

I. Letter to Shareholders

Looking back 2013, global economy appeared to have slow recovery. As for Europe, despite the Cyprus bank run in March, which ECB promptly interfered and well-controlled, the eurozone economy was out of recession in the third quarter and beginning its recovery. On the US side, although financial market was disturbed by the dispute between two parties leading turbulence of Federal Government, and FED released information of bond purchase limitation, US economy is still uprising due to low interest rate and breakthrough of energy technology. As corporate accelerated profits, federal budget reached consensus, and investors regained their confidence, overall US had relatively outstanding economic performance in developed countries. China, on the other hand, is at structural adjustment. With slower growth in economy, its financial market has potential risk of local government debt problems and the shadow Bank default rate, which led money shortage of short-term interest rates rose aggressively.

Domestically, the taxation of capital gains on securities started in first half year and trading volume in Taiwan stock market therefore remained low. However, benefited from economic recovery, TSEC weighted index rose from 7,699 to 8,398 in May. June’s lowest point of 7,663 was caused by FED Chairman’s announcement on reducing debt purchase. Taiwan stock market rose in the last half year due to the great adjustment on the taxation of capital gains on securities, new FSC Chairman promoting stock revitalization polices, and massive foreign investment. Annual TSEC weighted index rose from 7,699 to 8,611, reached 11.85% growth. Still, the daily average volume in stock market (listed and OTC) was 95.7 billion, not yet reaching 100 billion level. The securities industry still faced difficult environment.

Affected by the low average daily trading volume, our brokerage business did not perform well in 2013. But the proprietary trading business and underwriting business gained well with timely following mainstream in market trends and good management. The company’s profit is still in front line of business. Year 2013 annual operating profit is $3.879401 billion; operating cost $335.373 million; gross profit $3.544028 billion; operating expense $2.403694 billion; non-operating net income $327.338 million; net profit before tax $1.467672 billion; net profit after tax $1.361715 billion; net profit before tax per share $1.11; net profit after tax per share $1.03. Compared with top 10 competitors, our company’s net profit after tax ranked top 4, EPS ranked Top 1, remaining leading position within industry.

For brokerage business, 2013 annual brokerage average market share reach 3.44%, ranked 8 in overall market, and top 3 in market share per branch. Although faced with hostile environment, our team dedicates to expand new business and various products through progressive training; with hope to build a multiple-sale distribution team, who can enhance the added value and strengthen the core competitiveness of the brokerage channel. As for the electronic trading platform, we will continue to create diverse, stable, fast, convenient, and complete full range of trading platforms for customers.

For underwriting business, the overall cases are 62 in 2013, including 7 host cases and 55 co-host cases, ranked top 4 among competitors. We also won 3[rd] prize in SPO funding at “seminar on intermediaries business of securities market” held by TWSE in 2013. Choosing cases discreetly on credit risks, we offer professional opinion to help well-organized companies raising capital or publicly listed. Last year, the company had set up a venture capital company. We will also expand business scale on well-organized new ventures through venture capital platform, to increase business opportunities in capital markets.

For proprietary trading business, aside from adjusting trading strategies for shrinking trading volume in Taiwan stock market, we actively utilize American market ETF and American depository receipt (ADR) to globalize our Equity Trading business. Since there is limited profitability in local bond markets, our bond trading business has shifted our focus at foreign bond. Although foreign bond did not perform well last year due to FED’s QE policy, our department has gradually acquired global financial experience and logic throughout past two years. For warrants business, the company will focus on local market, delicate to enhance market transparency and brand building to gain investors’ trust, also extend product line to seek profitable opportunities. For options, due to shrinking trading volume and disturbance of policy, option volatility still remains low and limited in profit. Our team will carefully adjust trading strategy and rebuild the appropriate profit model.

With an effort to create excellent performance, our company will continue to strengthen corporate governance system, enhance information transparency, and improve code of conduct. We were rewarded the highest level 「 A++ 」 in the 10[th ] "listed company information disclosure evaluation."Our company policies, based on professional ethics to protect the interests of employees and the company's sustainable business principles, were evaluated Top 9 among “corporate citizenship in the World Top 50” by the Commonwealth magazine. Also, to comply with government personal information protection law, our company established personal information protection system to enhance full control on operating process, and passed the "BS 10012"certification, same international standard certification as TWSE and Taifex. This proves our company values highly about customers’ personal information security. Taiwan Ratings Corporation has also consistently recognized the company's healthy operating performance and financial structure, having given it the long-term and short-term credit rating of twA and twA-1 respectively.

Global economy will remain optimistic despite the fluctuation in 2013. With America’s QE policy slow exit, inflation remaining within control, the economy has a steady recovery of low interest rate environment. Eurozone would also show optimistic recovery due to reduction of political risk and ECB’s effort on maintaining loose currency policy. As for Japan, the effect of Abenomics promoted by current prime minister of Japan, Shinzo Abe, is still up for observation. Generally believed that Japan’s central bank will continue to maintain super loose currency policy to achieve 2% Inflation target despite others native factors such as raising consumption tax. In China, they will still undergo transformation, from high growth to smooth, from quantity expansion to quality upgrade. For Emerging Markets, they might still face capital withdraw, affected by America’s limitation of purchase bond. This may lead pressure on stock and foreign exchange market, and cause disturbance of financial market.

Domestically, in February the DGBAS relatively conservative forecast Taiwan GDP growth rate of 2.82%, with soft recovery of economy and lack of growth momentum. For stock market performance, policies of revitalizing the stock market promoted by the FSC had gradually effect on trading volume in the first quarter. The securities industry should expect a positive future. In addition, the authorities actively promote various business categories and undo limitation of policies. In the long run it will definitely help securities industry’s diversification and internationalization. Still, the actual benefit relies on the management team’s strategic planning and concrete implementation.

Financial market changes every second. It is remarkable that President Securities Corp. continually has excellent performance in such highly completive and changing environment. Despite the challenging future, our company will remain long-term viability; strengthen risk control while pursuing profit, enhance management effectiveness and

operating efficiency, and create maximum value for the company, customers and investors

We are wholeheartedly grateful for long-term trust and supports from every stockholder. Our best wishes to you for your health and wealth.

Sincerely Yours,

A-Hua Teng Chairman

Kuan-Chen Lin President

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II. COMPANY PROFILE

1. Date of incorporation: December 17, 1988

2. Company History

	2.Co	mpany History
	Year	Major Events
	1988	Itd D 17 1988 Pidt Siti C iill d
		ncorporae on ec. , – resen ecures orp. (orgnay name President Securities Co., Ltd.) is a joint investment of Tung-Fu Investment Co., Ltd., Hsiang-Fa Investment Development Co., Ltd., Eternal Chemical Co., Ltd., Tung-Yi Investment Co., Ltd., and Uni-President Enterprises. Company was incorporated through the memorandum of Securities and Futures Commission, Ministry of Finance with no. (77) Tai-tsai-cheng-II-tzu-ti-20093 dated November 19, 1988.
	1989	Amended business name to President Securities Corp on March 4. Commencement of official operations on April 3.
	1991	Merged with Tung-Hsin, Tung-Yung, Tung-Wen, Tung-Ku, Tung-Fu, Tung-Yu, Tung-Hsing, Tung-Wang, Tung-Lai securities agencies under the President Securities banner on September 30; original place of business became a branch office. Founding capital of NT$1.4 Billion increased to actual paid-in capital of NT$3.362 Billion after the merger.
	1994	Performed capital infusion; capital stock after infusion amounted to NT$4.02 Billion.

	1995	Opening of new branches (Sanmin, New Taichung, and Hsinying), thereby bringing number of nationwide offices to 16. Business expansion and a capital infusion that bolstered capital to NT$7.03 Billion and made President Securities the largest securities company in the country. Then became the first Asian securities company to acquire the ISO9002 service quality certification.
	1996	Opened new branches in Yenping, Taoyuan, Sanchung, Tunghsing, and Fengyuan.
	1997	Opened new branches in Tienmu, Panchiao, Hankou, Tali, and Santo; thus bringing total offices to 26. Processed capital infusion; capital stock after infusion amounted to NT$8.08 Billion.
	1998	Processed capital infusion; capital stock after infusion amounted to NT$10.18 Billion in May.
	1999	In February, obtained official approval for OTC listing. In March, passed the credit rating of Taiwan Ratings Corporation with long-term twBBB and short-term twA-3 rating and “stable” outlook. In May,listed on the OTC. Relocated Hanko Branch to Szichih and was renamed Szichih Branch. In June, converted retained earnings to paid-in capital, capital stock after infusion amounted to NT$10.91 Billion.
	2000	In August, acquired Ta Feng Securities Co., Ltd.; opened two more branches – Sungshan and Tucheng. Converted retained earnings to paid-in capital, capital stock after infusion amounted to NT$12.255 Billion. In September, opened the Kinmen Branch, total offices numbered 29.

	2001	Opened new branches in Yuanlin, Ilan, total branches amounted to 30; total number of offices including head office is 31. In October, executed capital reduction through cancellation of treasury stock, capital stock after asset reduction amounted to NT$11.279 Billion.	Opened new branches in Yuanlin, Ilan, total branches amounted to 30; total number of offices including head office is 31. In October, executed capital reduction through cancellation of treasury stock, capital stock after asset reduction amounted to NT$11.279 Billion.
	2002	Closed Sungshan Branch in March, bringing total offices down to 30. In July, converted retained earnings to paid-in capital, capital stock after infusion amounted to NT$11.836 Billion. Listed on the main board in September. Executed capital reduction through cancellation of treasury stock, capital stock after asset reduction amounted to NT$11.406 Billion.

	2003	Ku Ting Branch (July) and Song Jiang Branch (November) were established, expanding the number of operational branches to 32 (including Business Branch). Obtained business license for structured notes in July; Fixed Income business unit licensed as the main dealer for business operation of government bonds issued by Central Bank of China in September.
	2004	East Tainan Branch (April), Nei Hu Branch (April) and Renai Branch was established, expanding the number of operational branches to 35 (including Business Branch). In August, PSC performed a capital reduction action on its treasury stocks, bringing the net worth of common stocks to NT$11.45billion. In September, PSC was upgraded from twBBB to twBBB+. Following that, PSC was again upgraded to twA- in December.
	2006	Obtained business license for wealth management in February. In June, PSC performed a capital reduction action on its treasury stocks, bringing the net worth of common stocks to NT$11.37 billion. Received the 6th annual National Charity Award, and was the only for-profit business entity among twelve recipients.

	2007	In August, converted retained earnings to paid-in capital, capital stock after infusion amounted to NT$11.768 billion. In December, PSC long-term credit rating was upgraded from TwA- to TwA, and short-term credit rating was upgraded from twA-2 to twA-1.
	2008	Issued the first unsecured convertible corporate bond in Taiwan, and received NT$ 3 billion from the offering in May. In August, converted retained earnings to paid-in capital, capital stock after infusion amounted to NT$12.157 billion. Established PSC Xiamen business office in China on August 22nd.
	2009	In April, executed capital reduction through cancellation of treasury stock, capital stock after asset reduction amounted to NT$11.857 Billion.
	2010	Closed East Tainan Branch and established Ta An Branch in March. The number of operational branches remained 35 (including Business Branch). In August, converted retained earnings to paid-in capital, capital stock after infusion amounted to NT$12.319 billion. In Sept. obtained trust business license issued by FSC.
	2011	In August, established remuneration Committee and converted retained earnings to paid-in capital. The capital stock after infusion amounted to NT$13.046 billion. In December, executed capital reduction through cancellation of treasury stock, capital stock after asset reduction amounted to NT$12.845 Billion.
	2012	In August, converted retained earnings to paid-in capital, capital stock after infusion amounted to NT$13.231billion.
	2013	In September Daan branch relocated and renamed as Xindian branch. The total branches remain 35 (including head office.) In October established a subsidiary, PSCVenture Capital Investment Co.,Ltd.

III. Corporate Governance

1. Organization Chart

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2. Major Corporate Functions

	Brokerage	�Accept orders from clients to buy/sell listed securities and forward to TSE for execution. �Accept orders from clients to buy/sell listed securities and forward to the OTC exchange for execution. �Manage custodial services for clients. �Provide margin financing for securities trading. �Securities Borrowing and Lending Business �Consigned Trading of Foreign Securities
		�Futures Introducing Broker Business �Electronic transaction operations �Customer service coordination process
	Financial Products	� Underwrite equity warrants and conduct option-based hedging strategies � Develop and issue structured-note products. � Convertible bond asset swap and option business � Trading of equity derivatives � New financial product design and development. � Other financial products approved by the competent authority
	Proprietary Trading	� Trading of publicly listed securities on the TSE and OTC, using President Securities’ own funds. � Hedge positions via futures and options markets � Expand international investment business involving legally-permitted overseas spot/futures market research and investments
	Fid I	� Pit tdi i t bd t bd d
	xe ncome Dealing	ropreary rang n governmen on, corporae ons, an Convertible Bond. � Proprietary trading in foreign negotiable securities and other products � Accept orders from clients to buy/sell government bonds. � Repo and Reverse-Repo transactions. � Engage in NTD interest rate swap and government bond option business
	Underwriting (Corporate Finance)	�Assist corporations in application for public listing on TSE or OTC. �Assess and advise clients with respect to capital increase plans and applications to convert private equity into publicly traded stocks �Underwrite euro-convertible bonds and foreign depository receipts. �Assist in M&A activities; provide consulting services on corporate finance and other specialized areas �Other various types of underwriting business
	Futures Proprietary Trading	� Trading of futures contracts on the TAIFEX (Taiwan Futures Exchange) using President Securities’ own funds.
	Shareholder Services Coordinator	� Coordinate shareholder services on behalf of publicly listed companies. � Manage delivery of shareholder materials. � Assist in the coordination of shareholder meetings. � Coordinate the issue and transfer of cash and/or stock dividends to shareholders. � Manage the creation and delivery of tax forms to shareholders. � Respond to shareholder enquiries and legal issues.

	Wealth Management & Trust	� Provide customers with the most complete asset arrangement and finance service planning service. � Conduct asset allocation for customers through trusts � Negotiable securities trust lending business � Provide branch customers with service of international securities asset allocation, wealth consulting service, foreign securities or otherauthorizedforeign financialproducts.
	Overseas Business	� Establish development strategy in China for President Securities Group, engage in mainland joint ventures, equity participation and the establishment of new companies, and plan and take charge of operations at such companies and execute the investment and
		operation plan. � Develop the business cooperation in cross-strait capital market. � Strengthen the operation performance of our Hong Kong subsidiary to increase the earning ability of brokerage services, investment banking, proprietary trading, and wealth management. � Generate profit-making synergy though resource integration among the Group subsidiaries. � Evaluate overseas investment opportunities to strengthen President Securities Group as international financial services group.

3. Compensation for Directors & Supervisors

� For Directors

Title/Name					Compensation	Compensation			Sum of A, B, C and D / after-tax profit (%)	Sum of A, B, C and D / after-tax profit (%)	Compensation received by part-time employees	Compensation received by part-time employees	Compensation received by part-time employees	Compensation received by part-time employees	Compensation received by part-time employees	Compensation received by part-time employees	Compensation received by part-time employees	Compensation received by part-time employees	Compensation received by part-time employees	Compensation received by part-time employees	Compensation received by part-time employees	Compensation received by part-time employees	Sum of A,B,C,D,E,F and G/ after-tax	Sum of A,B,C,D,E,F and G/ after-tax	Whether or not any compensatio n is received from other re-invested businesses than subsidiaries
	Rewards (A)		Pensions And superannuation (B)		Earning Distribution (C)		Business Affairs Expense (D)				Salary, Bonus and		Pensions And superannu		Employee Bonus				Employee share subscriptio		n Limited l
											Special Disbursem (E)		ation (F)		distribution(G)				warrants( H)		empoyee share (I)		profit (%)
	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC		Consolidation		PSC	Consolidation	PSC	Consolidation	PSC	Consolidation
															Cash Dividend	Stock Dividen	Cash Dividend	Stock Dividen
Chairman / TENG, A-HUA Delegate of CANKING INVESTMENT CO.,LTD	0	0	0	0	25,463	25,463	13,967	13,967	2.8956 %	2.8956%	0	0	0	0	0	0	0	0	0	0	0	0	2.8956 %	2.8956 %	none
Director / LIN,KUAN-CHEN
Director / CHANG,MING CHEN Delegate of LEG HORN INVESTMENT CO.,LTD
Director /
PI, CHIEN-KUO Delegate of HUI TUNG INVESTMENT CO.,LTD
Director / HSIEH, CHIH-PENG Delegate of KAI NAN INVESTMENT CO.,LTD
~~Dit /~~

~~Director /~~


Title/Name					Compensation				Sum of A, B, C and D / after-tax profit (%)		Compensation received by part-time employees												Sum of A,B,C,D,E,F and G/ after-tax		Whether or not any compensatio n is received from other re-invested businesses than subsidiaries
	Rewards (A)		Pensions And superannuation (B)		Earning Distribution (C)		Business Affairs Expense (D)				Salary, Bonus and		Pensions And superannu		Employee Bonus				Employee share subscriptio		n Limited l
											Special Disbursem (E)		ation (F)		distribution(G)				warrants( H)		empoyee share (I)		profit (%)
	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC		Consolidation		PSC	Consolidation	PSC	Consolidation	PSC	Consolidation
															Cash Dividend	Stock Dividen	Cash Dividend	Stock Dividen
LIN, CHENG-TE
Delegate of KAI NAN INVESTMENT CO.,LTD
Director / HSIEH,HUNG HUI-TZU Delegate of KAI NAN INVESTMENT CO.,LTD
Director / LEE, SHY-LOU
Director / TU, LI-YANG Delegate of TA LE INVESTMENT HOLDING CO., LTD.
Director / CHENG, KAO-HUEI
Director /
CHANG, LI-HSUN
Director / DUH, BOR-TSANG
Director / KaoXiuLing
Independent Director / WU, TSAI-YI
Independent
Director /


Title/Name					Compensation				Sum of A, B, C and D / after-tax profit (%)		Compensation received by part-time employees												Sum of A,B,C,D,E,F and G/ after-tax		Whether or not any compensatio n is received from other re-invested businesses than subsidiaries
	Rewards (A)		Pensions And superannuation (B)		Earning Distribution (C)		Business Affairs Expense (D)				Salary, Bonus and		Pensions And superannu		Employee Bonus				Employee share subscriptio		n Limited l
											Special Disbursem (E)		ation (F)		distribution(G)				warrants( H)		empoyee share (I)		profit (%)
	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC	Consolidation	PSC		Consolidation		PSC	Consolidation	PSC	Consolidation	PSC	Consolidation
															Cash Dividend	Stock Dividen	Cash Dividend	Stock Dividen
LEE,KWANG-
CHOU
Independent Director / FU, KAI-YUN

� For Supervisors

							Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
Title/Name	Compensation						SUM of A,B and C / After-tax profit (%)		Whether or not any compensation is received from other re-invested businesses than subsidiaries
	Rewards(A)		Pension(B)		Earning Distribution(C)
	PSC	Consoli- dation	PSC	Consoli- dation	PSC	Consoli- dation	PSC	Consoli- dation
Supervisor /
Lee, Shu-Fen China F.R.P Corp.	0	0	5,456	5,456	1,080	1,080	0.48%	0.48%	None
Supervisor / Chuang,Tsai-Fa
Supervisor / Lu, Li-An

4. Implementation of Corporate Governance

4-1 Attendance of Board of Directors Meeting

Total of 5 meetings of the board of directors were held in the year of 2013. Directors’ attendance condition was as follows:

		Attendance		Attendance

Title	Name	in Person	By Proxy	rate(%)

Chairman	Canking Investment Co., Ltd. Rep. Teng, A-Hua	5	0	100%
Independent Director	Wu, Tsai-Yi	4	0	80%
Independent Director	Fu, Kai-Yun	5	0	100%
Independent Director	Lee, Kwang-Chou	4	1	80%
Director	Lin, Kuan-Chen	5	0	100%
Director	Cheng, Kao-Huei	2	3	40%
Director	Kao Xiu Ling	1	1	50%
Director	Leg Horn Investment Co., Ltd. Rep. Chang,Ming-Chen	5	0	100%
Director	Kai Nan Investment Co., Ltd. Rep. Hsieh, HongHui-Zi	5	0	100%
Director	Kai Nan Investment Co., Ltd. Rep. Lin, Cheng-Teh	3	2	60%
Director	Kai Nan Investment Co., Ltd. Rep. Hsieh, Chih-Peng	4	1	80%
Director	Hui Tung Investment Co., Ltd Rep. Pi, Chien-Kuo	3	2	60%
Director	Lee, Shy-Lou	5	0	100%

Director	Ta Le Investment Holding Co., Ltd. Rep. Tu, Li-Yang	4	1	80%
Director	Duh, Bor-Tsang	5	0	100%
Director	Chang, Li-Hsun	0	0	-

4-2 Attendance of Supervisors for Board Meeting

Total of 5 meetings of the board of directors were held in the year of 2013. Supervisors’ attendance condition was as follows:

Title	Name	Attendance in Person	Attendance rate (%)
Supervisor	Chuang, TsaI-Fa	5	100%
Supervisor	Lu, Li-An	5	100%
Supervisor	Kaiyo Investment Co. Ltd. Rep. Lee, Shu-Fen	4	80%

4-3 Status of Corporate Governance

The status of our corporate governance efforts, any discrepancies between our organization and what is outlined in the “Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies”, and the reasons for these differences.

Item	Status	Actual differences
1. Company Share Structure and Shareholder Rights i) Methods for handling shareholder suggestions and disputes. ii) Maintain effective control over key shareholders and maintain the most up-to-date lists of key shareholders iii) Risk-control mechanism in form of fire-wall among subsidiaries.	i) We have assigned a spokesperson and a shareholder services representative to deal with any suggestions, complaints, or other problems from shareholders. On our corporate website, we have set up an “Investor’s Area” as well as a “Investor Suggestion Box”, which is managed by our shareholder spokesperson and by other management personnel who organize and forward all shareholder comments and questions on to the appropriate department for further action, if necessary. ii) PSC maintains close relationships with key shareholders and assigns dedicated shareholder services personnel to continually monitor any changes in the shareholdings of these key shareholders. iii) The finance and business of our company and its subsidiaries are in separate operation. In terms of management right/obligation there is a clear line between our company and its subsidiaries. All the relations and trades are dealt with in accordance	No Differences

Item	Status	Actual differences
	with law.「Surveillance governing internal-control system for branch offices」has also been set up as a controlling and governing mechanism for our branchoffices.
2. The Board of Directors, its organization and obligations	i) At the 8thBoard meeting (2009) PSC established 3 board seats specifically for independent directors. ii) Based on regulation of corporate governance of securities dealers, the Board evaluates and	No Differences
i) The company has independent directors serving on its Board of Directors ii) Regularly evaluate the independence of the company’s accounting firm	assigns the appointment of independent accountants annually. According to Accountants’ Law article 47, "honesty, impartiality, objectivity and independence,” the company sets up the independent items of declaration, which issued by the certified public detached accountants. Accountant Lin Se Kai, Huang Jin Ze, and Shu Chi Zhan from PricewaterhouseCoopers Taiwan proved to be qualified as CPA for company's financialand taxaccountants.
3. Lines of communication for company founders and with otherInterested parties	i) The Finance Department has assigned personnel specifically to deal with banks and creditors that we deal with regularly. ii) The Management Department has assigned personnel specifically to deal with employees, investments, and sales business partners. iii) On our website, we have set up an “Investor	No Differences
	Area” where users can access a “Customer’s Suggestion Box” and an “Investor Suggestion Box”, which are managed by our Customer Service Department and our Administration Department respectively. These departments are responsible for responding to all messages received. For our internal-use website, we have set up an “Employee Suggestion Box”, which is manned by our Administration Department, responsible for responding to allcommentsreceived.
4. Information Disclosure i) On the company website, we disclose our financial information and the status of our corporate governance. ii) The company also uses other methods of disclosure (e.g., English version of our website, personnel assigned to collect	i) “Investor Area” on our website (www.pscnet.com.tw ), where we regularly disclose company financial information. We also post periodical and non periodical financial and operating information on the government-operated MOPS website. ii) We have assigned a spokesperson tasked with disseminating company information to investors and shareholders. We have also setup an “Investor Area” on our website where investors and shareholders can obtain information on the following: �Company introduction in Chinese & English �Company financial statements �Board of Director meeting minutes �Investor Suggestion Box, which is manned by Administration Department Personnel who are responsible for replyingto all comments	No Differences

Item	Status	Actual differences
and disclose information, a spokesperson, full records of everything that takes place at institutional investor meetings are posted to our	received.
website)
5. The operations of company nominated or other functional committees	Establishment a Risk Control Committee by the Company: i) In accordance with governing principles approved by the Board of Directors, the Risk Control Committee shall: �Establish enterprise risk control policies and structures, and delegate to the appropriate departments. �Establish enterprise risk measurement standards. �Establish enterprise risk tolerance limits and department specific risk tolerance limits. ii) The Risk Control Committee is comprised of three members; including one independent Board director, one Board supervisor, and the highest	All such key strategies are handled in accordance with the company’s AOI and Board Meeting resolutions. With the exception of the Risk Management Committee,
	ranking officer from the Risk Control Office. Risk Control Committee meetings are convened quarterly, aiming to assist the Board of Directors with planning and monitoring of all risk related issues, reporting implementation progress, and recommending when appropriate. Establishment of Remuneration Committee by the Company: i) Our Board of Directors passes the organizational rules of the Remuneration Committee and thus establishes said committee. The responsibilities of the Remuneration Committee are as follows: �Establish and regularly review remuneration policy, system, standards and structure for directors, supervisors and managers. �Regularly evaluate and determine remuneration for directors, supervisors and managers. ii) Committee members shall be appointed by via Board resolution and the committee shall comprise at least three members. We shall appoint independent directors in accordance with the Securities and Exchange Act, and the committee shall comprise at least one independent director. Members of the committee elect an independent director as the convener. iii) The committee shall meet at least twice every year and may meet at any time should it be necessary to do so.	all other committees are still under review and evaluation. On August 30, 2011, the Company’s Board of Directors passed the organizational rules of the Remuneratio n Committee and thus established said committee. The company appointed three independent directors as committee members, and the committee’s

	Item	Status	Actual differences	Actual differences
			first meeting was held in accordance with the rules on December 20, 2011, during which members elected a
			convener.
	6. If the company has implemented a set of practices in accordance with “Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies”, describe what practices were implemented and any differences between the practices implemented and those described in the abovementioned Principles The company has implemented a set off operating principles that are in line with “Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies” and with “Corporate Governance Best-Practice Principles for Securities Firms”. The principles implemented serve to protect shareholder rights, to strengthen board effectiveness, to enhance monitoring functions, to respect the rights of interested parties, to increase information transparency, and to help us achieve our operating goals.		No Differences
	’
	7. Other important information that can help shed light on the companys corporate governance operations (i.e., employee rights, hiring concerns, investor relations, supplier relations, the rights of interested parties, training for directors and supervisors, implementation of risk management policies and risk evaluation standards, implementation of customer policies, liability insurance purchased by the company for directors and supervisors): i) Environmental Protection Measures The company is a securities house and, therefore, has no environmental concerns to be addressed. ii)Customer Rights We have assigned a spokesperson to be responsible for providing information to shareholders and investors, and for posting periodical and non periodical financial and operating information on the government-operated MOPS website. We have also setup an “Investor Area” on our website where investors and shareholders can obtain information on the following: � Company introduction in Chinese and English � Company financial statements � Board of Director meeting Minutes � Investor Suggestion Box, which is manned by Public Affairs personnel who are responsible for replying to all comments received. iii) Employee Rights and Hiring Concerns 1. To boost work efficiency and solidarity among our employees, we place particular emphasis on benefits programs and labor relations, and thus ensures employee welfare in a comprehensive manner. 2. General accident insurance has been purchased for each of our branches and work premises so as to protect customer rights. Employer insurance has also beenpurchased so as toprotect the interests of all employees.		No Differences

	Item	Status	Actual differences	Actual differences
	iv)Interested parties Rights Our company respects the right of Interested parties to voice their opinions and we have constructed lines of communication specifically for interested parties, such as: �The Finance Department has assigned personnel specifically to deal with banks and creditors whom we deal with regularly. �The Manaement Deartment has assined ersonnel secificall to
	g p g p py deal with employees, investments, and sales business partners. �On the company website, we have set up an “Investor Area” where users can find a “Customer Suggestion Box” and an “Investor’s Suggestion box”, which are managed by our Customer Service Department and our Administration Department, respectively, who are responsible for responding to all messages received. On our internal corporate website, we have set up an “Employee Suggestion Box”, which is manned by our Management Department, who is responsible for responding to all comments received. v)Implementation of Customer Policy Our Policy: “3 Goods and One Fair”, “Good Quality”, “Good Trust”, “Good Service”, and “Fair Price”. This is combined with “Passion for Excellence and Service”, in providing all customers with comprehensive services. Implementation: We have established a Customer Services Department—The
	Customer Service Center, which offers customers an avenue through which to register complaints, which operates a customer service hotline which is manned by customer service specialists who help to solve customer problems, and which ensures that all account correspondence sent to clients includes clear product risk warnings. vi)Training for Directors and Supervisors In addition to supporting directors and supervisors who choose to attend external training on their own, we will periodically organize corporate governance training classes and invite our directors and supervisors to attend these classes. In 2013, for example, besides Board of Directors and Supervisors’ self courses, the company and the Taiwan Securities Association co-hosted management courses. We particularly invited former President of Justice, Lai Yi Chun to lecture on "business integrity and legal responsibility", giving a better understanding of the spirit and practices of corporate governance for Board of Directors and Supervisors. vii) Risk Management Policy and Risk Evaluation Standards A. Risk Management Policy i) Ensure that we can operate various types of business from a position of solid risk management; and continue to enhance profitability, create shareholder value, and achieve return on capital targets using reasonable risk tolerance levels. ii) Set well-defined risk controls for every business area, implement risk management checks and balances, and set clear obligations for each department so as to enhance risk management effectiveness by breaking it down into manageable pieces. iii) Our risk management operations take into accounts all key forms of risk: market risk,credit risk,liquidityrisk,operational risk,legal risk,model

	Item	Status	Actual differences	Actual differences
	risk. B. Risk Evaluation Standards The company has set risk management principles. In order to ensure that all of our organization’s businesses adhere to our operating policies, operating goals, and capital levels, we have set suitability evaluation policies that can react to changes in our business and in the market: � Market Risk Evaluation i) We use RiskMetrics market risk management system to manage our company’s exposure to market risk In addition to producing daily risk
	. value tables, we perform simulation analysis and historical analysis so as to supplement missing risk values. ii) We evaluate the completeness of our evaluation models on various business areas, and review the assumptions, parameters, and data used for various product models, and then test that the models for the various products are reasonable. iii) We evaluate the effectiveness of risk control models: regularly perform back-testing to ensure the effectiveness of the models used. �Credit Risk Evaluation i) Our company undergoes credit rating evaluations from Moody’s, Standard & Poor’s, Fitch, and Taiwan Ratings Corp. ii) Trading counter-party credit risk: we assess our company’s maximum exposure in the event that a trading counterparty defaults, and then use maximum exposure limits set by the board of directors, in determining the credit risk of a trading counterparty. iii) Issuer’s Credit Risk: we use KVM model to perform internal evaluations,
	and combine that with financial data and stock price data to calculate the probability of a default. Then, based on these measurements, we developed “Z-Score”, an in-depth internal evaluation model of the company, and then use this to protect ourselves from potential credit risks and potential capital shortfalls. �Operational Risk Evaluation i) Operational risk is risk that is created when internal processes, employees, or systems, are inappropriate or cause errors; or risk that is caused by external factors. This type of risk is related to legal risks but not strategic risk or credit risk. ii) We create operations risk policy handbooks that entail every level of operations. iii) Through our risk report and audit report, we ensure that risk is appropriately evaluated, disclosed, and controlled. C. Risk Management Categories Our risk management takes into account market risk, credit risk, liquidity risk, operational risk, legal risk, etc., for both on-balance sheet business and off-balance sheet businesses. Each day, every level of operations, every manager, and every trader is given fresh figures on position risk and key sensitivity values. Through this, the company’s risk controls and trading strategies can be properly analyzed and necessary alerts can initiated. Setting risk control guidelines for each level of operations allows for comprehensive monitoring of risk. D. Our Risk Control Architecture As part of our risk control measures, we have created an independent risk control department and constructed an integrated risk control architecture that encompasses all facets of the organization, including the Board of Directors,the Risk Control Committee,the Office of the CEO,the

	Item	Status	Actual differences	Actual differences
	Assets/liabilities Committee, the Risk Control Office, the Auditing office, the Legal Compliance and Legal Matters Department, the Finance Department, and all sales departments. Each segment of the company has clearly spelled-out obligations and every level of the company has clearly defined authorities. � Board of Directors audits the company’s risk management policy, supervises sales business strategies, approves all business proposals and trading permissions, is ultimately responsible for risk management
	. � Risk Control Committee is a committee established by the Board of Directors tasked with integrating all risk management operations, with supervising and assisting all the various risk management and related operations. The committee is also tasked with setting the various risk authorities, limits, and targets, for a centralized supervision of the status of all of the company’s risk management efforts. � Office of the CEO Supervises the daily implementation of all of the company’s risk management operations and authorizes any exceptions to the risk management protocols. � Assets/Liabilities Committee controls the company’s overall asset structure, collects and analyzes domestic and international interest rates, exchange rates, and economic changes. � Risk Control Office has been established the Trading Business Risk Management Team and the Operating Risk Management Team tasked with monitoring daily risk management operations:
	� Trading Business Risk Management Team is responsible for trading department risk management, for amendments to the business operational risk regulations, for the construction of a back-office risk control system, for ensuring compliance with trading regulations, and for creating trading business risk reports. � Operating Risk Management Team is responsible for the drafting of risk policies and regulations, for monitoring market and credit risks, for monitoring liquidity risks, for compiling data on operational risk control and management, for constructing and maintaining the risk management system, for implementation of risk management systems and for ensuring company-wide regulatory compliance. � Auditing Office sets operations risk controls, sets the standards for risk control systems, puts in place internal auditing controls, and implements daily check routines. � Legal Compliance and Legal Matters Department implements legal risk controls and ensures that all businesses and risk management operations are in compliance with relevant laws and regulations. � Finance Department monitors capital adequacy rates and liquidity risks, and analyzes the company’s asset/liability structure and other key financial ratios. Sales Department based on the company’s risk management policies and regulations sets risk management guidelines for various businesses, and produces a report on abnormal risk items for the Risk Control Office. viii) The Purchase of Liability Insurance for Directors and Supervisors Our company has already purchase liability insurance from ACE Insurance, Federal Insurance, and Fubon Insurance. (The policy is for US$10 million with a term of Sept. 1st, 2013 to Sept. 1st, 2014.)
	iii) Anyother corporategovernance evaluations conducted either by		No


	Item Status	Actual differences
	President Securities itself or by an external institution, the findings	Differences
	of this report, its main recommendations, and the status of any
	changes made:
	In accordance with securities exchange requirements, we completed its
	corporate governance self-evaluation report in December 2011 and uploaded
	said report to the Market Observation Post System where investors may
	review it. The latest amendment was made in Dec. 2013.

4-4 Compensation review committee

(If the company has established a compensation review committee, the composition of this committee, its obligations, and operation, should be disclosed.)

The company has established the Remuneration Committee by Sept. 30[th] , 2011 in accordance with the order from government.
Operation: i) The committee is composed of three members. ii) The tenure of the committee is effective from July. 2[rd] , 2012 to July 1[st] , 2015. Total of 4 meetings of the committee were held recently and the attendance condition was as follows:

Title	Name	Attendance in Person	By Proxy	Attendance rate (%)
convener	Wu Tsai-Yi	4	0	100%
	,
member	Lee, Kwang-Chou	4	0	100%
member	Fu, Kai-Yun	4	0	100%

4-5 Corporate Citizenship

Item	Status	Actual Differences

Item		Status	Actual Differences
1. Carry out company governance (1) Company sets up enterprise social obligation policies or systems and reviews implementation effects.	(1)	For the implementation of the corporate governance, the Company’s Board of Directors approved the “President Securities Corporate Social Responsibility Best practice Principles’’ on July 2rd, 2012. Our company has worked out “President Securities Social Obligation Report”, which is put on our website. (Website: www.pscnet.com.tw )	No Differences No
(2) Company sets up an enterprise social obligation office (full or part time) (3) Company holds moral education training and guidance for Directors, Supervisors and staff members, and Integrate it into staff performance assessment system. Establish effective rewarding and punishment regulations.	(2) (3)	The management Dept. is in charge of the enterprise social obligation. Some social obligation activities such as social contribution, social welfare, and community participation are held annually. All of our Directors, Supervisors have completed the related advanced studies and trainings as required by regulations. The Company also gives guidance to staff members. The results of the internal control and the related system will be included into assessment mechanism.	Differences There is no difference between training and guidance. It will be connected with evaluation and included into assessment.
2. Develop sustainable	1	Th t th it
environment (1) Company dedicates to elevate the effiency of all resources, and use the recycled materials to minimize the impact to environment. (2) Company establishes the suitable environmental management system based on the industry characteristics.	() (2)	e company suppors e green envronmen concept. We require the contractors to recycle the wrapping materials for machines. Other disposables wastes are also strictly classified and recycled. Our company is in financial field with no environmental pollution. However, we still try to minimize the possible effect on environment when performing operating business.	No Differences
(3) Set up environmental management unit or related personnel to maintain the environment (4)Emphasize on the change of climate impact to business operation. Set up policies of Energy Conservation and Carbon Reduction.	(3) Office Of General Affairs is responsible for company’s environment protection, which plan, promote and supervise the related policies’ execution. The office announced the improved way to save the electricity and water of office and business units. They also require Procurement unit to put energy saving for top priority when purchase. They delicate to raise equipment’s utilization efficacy and create other substituted policy to minimize the unnecessary waste. (4) Control air condition of working places, gradually replace energy-consuming machines, and review equipments on regular basis. The CO2 amount caused by electricity was 2.96 million kgIn 2012 and 2.55 million kg

Item	Status	Actual Differences
	in 2013. The carbon reduction has been executed effectively.
3. Maintain social interest or welfare (1) Company abides by the related labor regulations, safeguard emloee’s leal	(1) In taking care of our employees, besides setting up internal regulations in accordance with the Labor Law, we also conduct regular checks on the differences between our internal regulations and the Labor Law. We also provide opinion boxes for employees as communication channel in order to rotect emloee’s leal rihts The related	No Differences
py g rights, and sets up proper management measures and procedures.	p py g g. mechanisms are as below: i) Setting up a complaints review access In accordance with sexual harassment protection bill and sex equality in work place bill, our company has worked out measures of preventing, grievance-airing, investigating and handling sexual harassment. A committee is also set up to take charge of the related matters in order to prevent sexual harassment and protect victim’s rights, including providing sexual harassment free environment. Sexual harassment Tel.: (02)2746-3850 Fax: (02)2746-3799 E-mail:[email protected]
	ii) Attaching importance to office safety (a) All the branches have selected some employees for training and obtaining certificate of fire-prevention. We also work out fire-prevention plans for offices. (b) Public accident obligation insurance is also filed to protect customer’s right. Employee accident obligation insurance is also filed to protect employee’s rights.
(2) Company provides employees with safe and healthy working environment and provides with the related courses on regular basis.	(2) The company focuses on the safety and health of the employees’ working environment. Aside from improving the dangerous factors within the environment, we also hire a health management specialist, establish health consulting room, and offer employee health inspections on annual basis, with hope to let employee understand and manage theirown healthstatusinadvance.	No Differences

Item	Status	Actual Differences
(3) Company has a system in place to ensure regular communications with employees, it also notifies employees in an appropriate manner regarding changes to operational changes that may significantly affect	(3)The company has a system in place to enable smooth communication, it also provides its employees with the relevant information and application channels, thus ensuring that their working environment is a good and fair one. i) The company has labor and employer representatives, who regularly hold labor-employer meetings to ensure sufficient communications between the two sides	No Differences
them.	. ii) Each department holds regular department meetings, employees' views and needs are sounded out during manager-level meetings and appropriate measures are taken thereafter. III) All our employees can file their complains based on the labor law, labor safety hygiene bill, employee welfare fund bill, labor insurance bill, labor investigation bill etc. The channel is as below: e-mail: [email protected] iv) The company announces relevant changes through an internal announcement system, thereby upholding the principles of openness and transparency.
(4) Company sets up and ’	(4) Given the nature of financial service, we provide	No
publicizes its consumers right policy and provides them with transparent and effective complaining procedures for its products and service.	customers with the related handling procedures and rules in a speedy, transparent, stable and cautious manner. i) Procedures of customer service Our customer service center was established in 2000, providing customers with service telephone line and the first on-line customer service system in the brokerage field in a “special person special service” (consideration, efficiency, satisfaction, contentment ) manner. ii) Procedures of handling problems According to reactions of customers, we deal with and follow the cases individually and by classification. (a) of service nature: we solve problems by giving clear explanations and clear guidance (b) of issue nature: to clarify situation, we focus on key points, explain in good manner, deal in fair manner. (c) of customer right nature: we treat customer with empathy, communicate with consensus, protect customer’s right and deal in fair manner iii) Customer personal information protection The company has gained BSI Company’s BS-1002 verification. We will protect customers’ rights with more professional and discrete attitude.	Differences

Item	Status	Actual Differences
(5) Company cooperates with suppliers and works together to fulfill enterprise social obligation	(5) In our procurement regulations, we require to buy facilities that use green construction materials so as to play our role in energy saving and environment protection.	No Differences
(6) Company participates community development and welfare activities through commercial	(6) Since 2001, our company has held “Love-giving activities” for 13 consecutive years, calling for all the employees in our business group including brokerage futures investment trust investment	No Differences
activities, donation, and volunteer work.	, , , consulting, insurance agent, and comprehensive insurance business to participate the activities. Due to our long-term commitment to public welfare, our group was honored with the 6thNational Public Welfare Award, and the 2013 thankful enterprise from the Taiwan Fund for Children and Families (TFCF). We have been for long term devoted to social responsibility, and was rewarded sixth annual national social responsibility award, 2013 most thankful Enterprises by Taiwan Fund for Children and Family’s’ Association, and top 9 corporate citizenship among top 50 by Commonwealth Magazine.
4. Step up information exposure	Our company has worked out “President Securities Social Obligation report”, which has been put on	No Differences
(1) Reveal company’s social responsibility and other related information (2) Compile company’s social responsibility report, reveal execution of social responsibility	our website (website: www.pscnet.com.tw)
5. If a company has worked out its enterprise social obligation regulations based on“Enterprise social obligation regulations for listed companies/over-counter companies”」, please elaborate the differences of its operation and regulations. For the implementation of the corporate governance, the Company’s Board of Directors approved the “President Securities Corporate Social Responsibility Best Practice Principles’’ on July 2nd, 2012 and the 2013 Execution Report has been submitted at the tenth term of the ninth board meeting。		No Differences
6. Other information about social obligation fulfillment � Environmental Measures As a securities firm, our company does not have any environmental or polluting concerns. � Social Participation, Social Contribution, Social Service, Social Causes In light of our long-standing commitment to supporting key social causes, we were awarded the7th annual Wenxin Award, theNationalCivic ServiceAward,

	Item	Status	Actual Differences	Actual Differences
	the Award of 2013 thankful enterprise from the Taiwan Fund for Children and Families (TFCF), and top 9 corporate citizenship among top 50 by Commonwealth Magazine.Over the last several years, President Securities Corp. has planned and coordinated a number of charitable activities with the TFCF to help school children from poor family. We assist TFCF by mobilizing all company extensive employees, and customers. We contribute real money and resources to causes that we believe in and, in doing so, meet our social responsibilities as a good corporate citizen.		No Differences
	� Customer Rights Our company has assigned a spokesperson to be responsible for providing information to shareholders and investors, and to post periodical and non-periodical financial and operational information on the government-operated MOPS website. We have also setup an “Investor Area” on our website where investors and shareholders can obtain information on the following: i) Company introduction in English and Chinese ii) Company financial statements iii) Board of Director meeting minutes iv) Investor Suggestion Box, which is manned by Administration Department Personnel who are responsible for replying to all comments received. ’
	� Employees rights and welfare i) To boost work efficiency and solidarity among its employees, we place particular emphasis on benefits programs and labor relations, and thus ensure employee welfare in a comprehensive manner. ii) All the company’s branches and work locations are covered by public liability insurance to protect clients’ interests and covered by employers’ liability insurance to protect employees’ interests. � Interested parties’ rights We respect the right of interested parties to express their opinions and has thus established the following communication channels: i) Our financial department has dedicated personnel serving corresponding banks and other creditors. ii) Our administration department has dedicated personnel serving employees, investors and companies that we have business dealings with. iii) We have set up mailboxes for our clientele and investors on our company website, which are respectively managed by dedicated personnel from our customer service center and administration department also set up mailboxes for our employees on our internal website, which we have managed by dedicated personnel from our administration department. �Implementation status of clientele policy i) Our Policy: “3 Goods and One Fair”, “Good Quality”, “Good Trust”, “Good Service”, and “Fair Price”. This is combined with “Passion for Excellence and Service”, in providing all customers with comprehensive services.

	Item	Status	Actual Differences	Actual Differences
	ii) Implementation: We have established a Customer Service Center, and offers customers an avenue through which to register complaints, which operates a customer service hotline which is manned by customer service specialists who help to solve customer problems, and which ensures that all account correspondence sent to clients includes clear product risk warnings.
	7. If company’s products or enterprise social obligation reports have passed the checking standards set by the related institutes be sure to describe its details		No Differences
	, . Our company’s enterprise social obligation report was worked out by ourselves and has not been certified by the related institutes.

5. Integrity Management Application

5-1 Our company has always applied the principle of “integrity and sustainable management,” to serve our customers sincerely. We also inherit the spirit of “”three greatness and one fairness.” We protect clients ' rights with flawless service. We pursuit long-term, steady and balanced growth in the spirit of integrity management.

(1) Establish independent Director system
(2) With years of dedication on information transparency, the company had awarded A+ level evaluation. In 2012 and 2013 even A++.
(3) Insure company directors, supervisors, and managers ' liability insurance, also employees’ credit insurance
(4) Actively participates in social benefit activities.

4-2 Integrity management execution:

(1) On August 23, 2012, the Board of Directors issued “Ethical Corporate Management Best Practice Principles” and revealed the principle in 2013 shareholders’ meeting. This proves the management’s commitment to Integrity management.
(2) To execute integrity management and prevent dishonesty, the company adds related rules to corporate governess. (Chapter 10 article 48), which authorized by the Ministry of Labor and publicly announced.
(3) To prevent dishonest behaviors, the rules are clearly set in the corporate governess and publicly announced.

6. Long-term Investment Ownership

			As of 31/03/2014 Direct/Indirect Ownership by Directors and Management (2) Total Ownership (1) + (2) Shares % Shares % Shares % Shares % 0 0 0 0 0 0 0 0 182,600,000 94.81% 192,600,000 100.00% 0 0 0 0	As of 31/03/2014 Direct/Indirect Ownership by Directors and Management (2) Total Ownership (1) + (2) Shares % Shares % Shares % Shares % 0 0 0 0 0 0 0 0 182,600,000 94.81% 192,600,000 100.00% 0 0 0 0	As of 31/03/2014 Direct/Indirect Ownership by Directors and Management (2) Total Ownership (1) + (2) Shares % Shares % Shares % Shares % 0 0 0 0 0 0 0 0 182,600,000 94.81% 192,600,000 100.00% 0 0 0 0	As of 31/03/2014 Direct/Indirect Ownership by Directors and Management (2) Total Ownership (1) + (2) Shares % Shares % Shares % Shares % 0 0 0 0 0 0 0 0 182,600,000 94.81% 192,600,000 100.00% 0 0 0 0
			Direct/Indirect Ownership
	Ownership by President				Total Ownership
			by Directors and
	Securities (1)				(1) + (2)
			Management (2)
Long-term Investment


	Shares %	Shares %	Shares %	Shares %	Shares %	Shares %

President Futures Corp.	63,817,303	96.69%	0	0	0	0
President Capital Management Corp.	12,400,000	100.00%	0	0	0	0
President Securities (HK) LTD	10,000,000	5.19%	182,600,000	94.81%	192,600,000	100.00%
President Securities (BVI) LTD	67,746,000	100.00%	0	0	0	0

			Direct/Indirect Ownership	Direct/Indirect Ownership
	Ownership by President				Total Ownership
			by Directors and
	Securities (1)				(1) + (2)
			Management (2)
Long-term Investment


	Shares %	Shares %	Shares %	Shares %	Shares %	Shares %

Uni-President Assets Management Corp.	13,570,830	38.66%	12,000	0.03%	13,582,830	38.69%
President Personal InsuranceAgency Co.,Ltd.	500,000	100.00%	0	0	0	0
President Insurance Agency Co.,Ltd.	500,000	100.00%	0	0	0	0
PSC Venture Capital Investment Co.,Ltd.	30,000,000	100.00%	0	0	0	0

IV. Capital Structure

1. Capital and Shares

1-1 Capitalization

		Authorized Share	Authorized Share
				Capital Stork		Remark
	Issue	Capital

	Price						Capital
Month/Year			Amount		Amount
	(Per	1,000		1,000		Sources of	Increase by
			(NT$		(NT$
	Share)	Shares		Shares		Capital	Assets Other
			thousands)		thousands)		thanCash

Jul-2002	10	1,500,000	15,000,000	1,183,651	11,836,510	Capital Increase by Earning	None
Dec-2002	10	1,500,000	15,000,000	1,140,673	11,406,730	Cancellation of Treasury Shares	None
Aug-2004	10	1,500,000	15,000,000	1,140,499	11,404,990	Cancellation of Treasury Shares	None
Jun-2006	10	1,500,000	15,000,000	1,137,072	11,370,720	Cancellation of Treasury Shares	None
Aug-2007	10	1,500,000	15,000,000	1,176,869	11,768,695	Capital Increase by Earning	None
Aug-2008	10	1,500,000	15,000,000	1,215,706	12,157,062	Capital Increase by	None
						Earning
Apr-2009	10	1,500,000	15,000,000	1,185,706	11,857,062	Cancellation of Treasury Shares	None
Aug-2010	10	1,500,000	15,000,000	1,231,933	12,319,334	Capital Increase by Earning	None
Aug-2011	10	1,500,000	15,000,000	1,304,646	13,046,456	Capital Increase by Earning	None
Dec-2011	10	1,500,000	15,000,000	1,284,582	12,845,816	Cancellation of Treasury Shares	None
Aug-2012	10	1,500,000	15,000,000	1,323,119	13,231,191	Capital Increase by Earning	None

1-2 Capital and Shares

Unit ： Share

	Authorized Share Capital	Authorized Share Capital	Authorized Share Capital
Type of Stock
	Issued Shares	Unissued Shares	Total


Common Stock	1,323,119,054	176,880,946	1,500,000,000

1-3 Structure of Shareholders

As of 20/04/2014


Structure of					Foreign

Shareholders	Government	Financial	Other	Pl	Iii
			Iiil	ersona	nsttutons	Total
	Agencies	Institutions	nsttutona	Shhld	d Pl
			Shhld	areoers	an ersona
Quantity			areoers		Shareholders


Number of Holders	0	1	112	30,699	145	30,957
Shares	0	26,478,046	798,189,422	384,355,153	114,096,433	1,323,119,054

%	0	2.00%	60.33%	29.05%	8.62%	100%

1-4 Distribution Profile of Share Ownership

Common Shares

As of 20/04/2014

Shareholder Ownership (Unit：Share)	Number of
		Ownership	Ownership (%)
	Shareholders

1 ~999	16,121	2,373,558	0.18
1,000~5,000	7,569	17,134,305	1.30
5,001 ~ 10,000	2,522	17,939,328	1.35
10,001 ~ 15,000	1,471	17,950,035	1.36
15,001 ~ 20,000	549	9,689,156	0.73

20,001 ~30,000	794	19,352,115	1.46
30,001 ~ 40,000	349	12,166,858	0.92
40,001 ~50,000	262	11,819,951	0.89
50,001 ~ 100,000	587	41,553,780	3.14
100,001 ~ 200,000	335	46,635,088	3.53
200,001 ~ 400,000	191	53,563,184	4.05
400,001 ~600,000	67	31,572,542	2.39
600,001 ~800,000	31	21,814,330	1.65
800,001 ~ 1,000,000	21	18,572,725	1.40
Over 1,000,001	88	1,000,982,099	75.65
Total	30,957	1,323,119,054	100

1-5 Major Shareholders

Major Shareholders
	As of 20/04/2014 Number of Shares Ownership (%) 366,644,096 27.71 106,138,260 8.02 37,104,849 2.80 35,604,872 2.69 31,907,681 2.41
Shareholders	Number of Shares	Ownership (%)

Uni-Present Enterprises Corp.	366,644,096	27.71
Nan Shan Life Insurance Company, Ltd	106,138,260	8.02
Kai Nan Investment Co., Ltd.	37,104,849	2.80
President Chain Store Corp.	35,604,872	2.69
Eternal Chemical Co., Ltd	31,907,681	2.41

Tainan Spinning Co., Ltd	29,941,647	2.26
Fubon Life Assurance Co., Ltd	28,823,520	2.18
Golo Chang Investment Co., Ltd.	26,715,948	2.02
President Securities’ comprehensive Employee Stock Ownership Trust under Chinatrust's custody	26,478,046	2.00
Kao Chin-Yen Memorial and Education Foundation	16,663,300	1.26

1-6 Market Price Per Share, Net Value, Earnings & Dividends for Latest Two Years

	Item	Item	2012	2013	2014Q1

Market Price Per Share	Highest		16.88	18.23	18.85
	Lowest		12.59	16.00	16.7
	Average		14.61	16.85	17.72
Net Worth Per Share	Before Distribution		16.34	16.90	17.26
	After Distribution		-	-	-
Earnings Per Sh	Weighted Average Shares (thousand shares)		1,323,119	1,323,119	1,323,119
	Earnings Per	Before Distribution	0.88	1.03	0.35
are	Share
		After Distribution	0.88	1.03	-
Dividends Per Share	Cash Dividends (NT$)		0.52	0.74	-
	Stock Dividends	Retained Earnings	-	-	-
		Additionalpaid-in Capital.	-		-
	Accumulated Undistributed Dividend		-	-
Return on Investment	Price/Earnings Ratio		16.60	16.36
	Price/Dividend Ratio		28.09	22.76
	Cash Dividend Yield		3.56	4.39

2. Dividend Policy & Implementation Status

2-1 Dividend Policy

We take a policy of dividend payment to maintain sound long-term financial structure and stabilize continual growth to maximize benefits to shareholders, in the following manners:

With regard to the surplus for the year (net of taxes payable and losses from previous years), after portions have been set aside in surplus reserves in accordance with the law and set aside or transferred to the special reserve in accordance with regulations, the balance and undistributed earnings (beginning of the year) may not be distributed if they do not make up at least five percent of paid-in capital.
The total amount of dividend shall not be below 70% of the allocable profit as per the preceding paragraph.

Out of the dividend which can be allocated according to the preceding paragraph, stock dividend shall not be below 50% and cash dividend shall not exceed 50%.
Taking the operation situation of the year and the fiscal plan of next year into consideration, the company may decide the best stock and cash dividend on its discretion.

2-2 Distribution of Profit

The Board adopted a proposal for 2013 profit distribution at its Meeting on March 26[th] , 2014, and the proposal to distribute 2013 profits is listed as follows:

Cash Dividends NT$0.74 per share

The company's bylaws require that, should there be any surplus remaining at the end of a fiscal year (excluding that used to pay taxes and offset prior-year losses), 10% and 20% of said surplus shall be respectively set aside in a statutory surplus reserve and special surplus reserve; should there be any remaining surplus, 3% and 2% of said surplus shall be respectively distributed as remuneration to directors and supervisors and as bonuses to employees, the remaining portion shall be distributed as shareholder dividends; should total distributable surplus be lower than 5% of paid-in capital, the company may choose not to distribute its surplus.

i) Board of Director passes proposed distribution of employee bonuses:
On March 26[ th] , 2014, our Board of Directors passed the proposed allocation of employee bonuses and remuneration for directors and supervisor as follows: Total cash bonus of NT$20,612,802 for employees and total remuneration of NT$30,919,203 for directors and supervisors. There was no difference between the estimates and the actual distributions approved at the Board Meeting for Employee bonus and Director/Supervisor compensation.
In 2012, estimated employee bonus amounted to NT$14,484,672 while remuneration for directors and supervisors amounted to NT$21,727,007. There was no difference between the estimates and the actual distributions approved at the Board Meeting.

3. Buyback of Common Stock ： None

4. Status of corporate bonds (including overseas bonds)

4-1 Issuance of Corporate Bond ： None

4-2 Information of Convertible Corporate Bond ： None

V. Overview of Business Operation

1. Description of Business Activities

1-1 Business Scope

Underwriting business
Proprietary trading of listed securities
Brokerage for listed securities
Proprietary trading of listed securities through retail locations
Brokerage for listed securities through retail locations
Consignment trading of foreign securities
Securities borrowing and lending
Shareholder services coordination
Support for futures trading through equity-related business
Concurrent operation of futures proprietary trading
Engaging in short-buy and margin sales for trading securities
Wealth Management business
Trust business
Financial derivatives products approved by the SFC
Other business areas approved by the SFC

1-2 Breakdown of Revenues for Latest Three Years

			Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
	2011		2012		2013
Item	Operating		Operating		Operating
		(%)		(%)		(%)
	revenue		revenue		revenue

Brokerage	2,926,076	66.27	2,126,068	57.97	1,943,584	50.10
Proprietary Trading	1,397,223	31.65	1,285,253	35.04	1,581,671	40.77
Underwriting	91,819	2.08	256,498	6.99	354,146	9.13
Total	4,415,118	100.00	3,667,819	100.00	3,879,401	100.00

1-3 Products and Services

We offer a comprehensive range of financial services- brokerage, underwriting, proprietary trading, fixed income dealing, financial product development, wealth management, and shareholder services. The following is a brief description of our primary business units.

Business Area Business highlights 1. In 2013, the market share for our brokerage business stood at 3.44%, ranking us as the 8[th] largest brokerage house.
1. We currently operate 35 branches, and THE COMPANY currently holds the 1st market share position in each individual market for which we operate a branch—clear proof of our exceptional operating efficiency.
Brokerage 3. Our company dedicates to promote electronic transactions, which accounted for 35.4% of company’s trading volume in 2012 and up to 37.9% in 2013 with sustained growth.
We have developed an integrated online order entry system that allows

	Business Area	Business highlights	Business highlights
		customers to trade equities, futures, and options, all from the same application. This allows our customers to take full control of their trading objectives and, at the same time, encourages clients to trade a wider range of products. 5. By offering a more all-inclusive market monitoring and order entry environment, we can provide services to a larger client base. 6. We integrate our sales of all types of products available in the market and thereby offer morevalue to ourexisting clients.
		1. Market positioning
		Over the past three years, our proprietary trading division has been among the top performers in the industry. Regardless of changes in the market, it was able to swiftly adjust positions and conduct investment analysis that closely reflected market changes. Thus it was able to effectively grasp swing trading trends and mainstream stocks, strictly control risk with futures hedging strategies. And supported by a diversified range of products and trading models, the company was able to make big profits, maintain a stable personnel structure with experienced traders, and leverage on its brand. 2. Specialty product System application supported by quantitative analysis and technical indicator modules
	Proprietary
	Trading

		1. In 2013, President Securities was ranked 17th in terms of market share for the monthly outright purchase and sales of government bonds with a monthly average market share of 1.63%. As bond trading volume shrinks alongside diminishing market opportunities, we are gradually reducing our
	Fixed Income
	Dealing	domestic bond trading volume and shifting our attention to the international bond market. 2. In 2013, we held 15.42% of the market in Interest Rate Swap brokerage, giving us an overall 4thplace ranking within the industry.

		1. In 2013, the profit gained from options came up on top among competitors. 2. New Products/Services in Development As regulators continue to liberalize the industry and allow new financial products, we stand ready to add these new products to our trading and, in turn, to add to our revenue streams.
	Futures
	Proprietary
	Trading

		In 2013, our Financial Products Division was primarily engaged in issuing new warrants, structured note products, convertible bond assets swaps, and other derivative products authorized by the Taiwan’s regulators. 1. Market Position (1) Warrants: We issued a total of 1,226 warrants in 2013, for a total dollar value of NT$13,335,547,000. (2) Structured Products: in 2013, the company undertook contracts amounting to a principal. of NT$2,929,300 thousand and had a total NT$93,400 thousand worth of structure note products in the market. 2. New Products/Services in Development We will focus on applying for permission to issue newly approved financial products and use leverage our financial engineering expertise to help those products bear fruit. We have a professional team that brings together skills from finance, information technology, and statistics, in developing profitable newproducts that helpdiversifyour revenue streams.
	Financial
	Products

	Business Area	Business highlights	Business highlights
		1. Market Position The company underwrote 62 issues in 2013, for a total dollar value of NT$5.681 billion. 2. New Products/Services in Development Our goal is to provide professional corporate financial services, to simultaneously act as both an effective market maker and also as a top-notch service provider, all with the aim of increasing the company’s overall added value. Going forward we will continue to focus our energy on landing mid- and large-sized deals, and will continue to bolster our
	Underwriting
	(Capital
	Markets)

		presence within the Greater China Region (i.e., TDRs, IPOs (including primary listings on the TWSE/GreTai Market, M&A, Private Equity, and consulting, etc.), so as to become a more competitive securities firm.
		1. Market Position (1) By the end of 2013, we served as shareholder services representative for 135 companies, giving us a ranking of 7thin the industry. (2) The average size of companies that we represent has increased. As of the end of 2013, the total number of shareholders that we serviced stood at roughly 1.60million, giving us a ranking of 8thin the industry. 2. Operating Performance (1) The number of companies we represented in 2013 stayed the same as the previous year. (2) The average number of shareholders we serviced in 2013 also stayed the same as the previous year, thus allowing us to achieve a higher economy of scale and more efficient operations. 3. Long-term objectives
	Shareholder
	Services

		Work with other departments within the company so as to implement cross-selling strategies and thereby become a shareholder services provider that can alsoprovide financial management functions.
		1. Market ranking (1) The 1stand the only securities dealer in Taiwan that has started fortune management business, a brokerage that assists customers to do assets arrangement under the “asset management account”. (2) The 1stbrokerage that has got the approval letter of having a side business of trust business (3) First domestic securities dealer to receive the Central Bank's foreign exchange license and be permitted to engage in trust-related wealth management。 2. Operation performance (1) As of end of 2013, the number of the fortune management account customer totals 90 and the amount of the management customers assets totals NT$32,187,936. (2) As of end of 2013, the number of the trust account customer totals 2,686 and the amount of the management customers assets totals NT$1,411,465,589。83 trust customers for securities loaned, and $415,865,709 for asset management. 3. Vision of our department (1) Establish "wealth management platform" for Taiwan customers through wealth management and trust (2) Develop “characteristic cross-strait financial business” through international securities business branches.
	Wealth
	Management
	& Trust

1-4 New Products and Services to be developed

To comply with liberalization of the authorities, our company will set up international securities subsidiary branches, explore foreign individuals and corporate customers, introduce foreign goods, and participate in large international funding case.

■ Business of Wealth Management and Trust

(1) Individually managed non-discretionary monetary trust
Expansion of trust product lines: continually increase new domestic and foreign funds, plan US stocks ETF artificial transactions
Enhance convenience of transactions: establish authorized fund transactions
Enhanced services: provide trust customer electronic billing services, plan on-line customer accounts instant enquiry service
Apply for trust subsidiaries: Our company plans to submit applications to the authorities for 35 branches to operate trust business
(2) Lending securities business

The key to success is the efficiency of lending and control information of borrow side. We plan to achieve such goals through the operations of company borrow vouchers Centre, with hope to expand business scale.

(3) The wealth management planning in international securities business The company applied set-up of international securities subsidiary branches to the authorities in February, 2014. We could provide foreign securities or other authorized foreign financial products to foreign customers and domestic professional investors with asset allocation or financial consulting service in the future..

2. Analysis of the Securities Industry

2-1 Overall Economic Environment

For the past year global economy had steady recovery through the turbulence. First of all, in Europe, despite the Cyprus bank run in March, which ECB promptly interfered and well-controlled, the Eurozone economy was out of recession in the third quarter and beginning its recovery after successively five quarters of recession. As for the US, with breakthrough of energy technology and strengthen of corporates confidence, the employment situation is improved. Political uncertainty also decreased due to Federal Government ‘s budget problems solved. However, the global financial market may still be affected if FED fiercely decreases bond purchase. China, on the other hand, will continue structural adjustment. Its financial growth may be affected by incidents like money shortage and the shadow Bank default rate.

As for Taiwan, in year 2013 domestic economic growth rate had increased from 1.48% in the previous year to 2.11%, mainly benefited from private investment and consumption. However, affected by China’s structural reform of the economy, Taiwan’s export did not perform well as previous years. In the domestic stock market, affected by the taxation of capital gains on securities started in first half year, and FED’s contious announcement on reducing debt purchase, trading volume in Taiwan stock market remained low. Fortunately, Taiwan stock market rose in the last half year due to the great adjustment on the taxation of capital gains on securities, FSC’s stock revitalization polices, and massive foreign investment. Annual TSEC weighted index rose from 7,699 to 8,611, reached 11.85% growth.

In 2013, America’s economy will remain stable expansion. Main countries in Europe would adjust economy estimate due to improvement of domestic demand and labor market. This indicates the economy recovery in advanced countries. However, emerging

markets may still be unstable due to QE and international capital withdraw. For Taiwan, along with the robust recovery in advanced countries, and the atmosphere of improved domestic consumption, exports and private consumption should sustain growth as expected. However, affected by China’s industrial structure adjustment, and their local supply chain growth, our business gradually faced pressure. In February the DGBAS forecasted this year's economic growth rate will reach to 2.82%. In securities industry, FSC Minister Zeng Mingzong, who started term of office since August1, actively communicated with industry, releasing policies such as "open proprietary securities parties to buy (sold) securities when market rose (fell) ", "increase sold objective for Securities Lending" and "open investors apply buy-first, sell-later rule for daily reversed trading", all contribute to the growth in trading volume. In addition, the authorities also gradually expand the business scope of securities dealers. On February 18, securities firms could apply for the establishment of offshore securities unit (OSU), and expand their Asian business scale. With such favorable policies, securities industry is expected to have diversified development.

2-2 Product Trends and Relevant Competition

� Proprietary Trading

A. Equities Markets

In 2013 global economy had mild recovery due to temporarily mitigation of European debt crisis, main countries remaining loose currency policy, and the positive effect of Japan’s “Abenomics”. The annual global economic growth rate rose from 0.8% in 2012 to 2.02% in 2013. The better-performed stock markets are the advanced countries like Europe and America. Dow Jones annual ROI reached 26.5 ％ due to recovery of consumption and real estate. In European stock market, after temporarily mitigation of European debt crisis, Ireland and Portugal exit bailout programme, other countries average gain in stock market up to 16.3%, Germany even up to 25.48 ％ . In Asian market, facing China’s leadership shift, overall market did not perform well. Although Shanghai index fell 6.75%, Hong Kong’s Hang Seng Indexes rose only 2.87 ％ and Korea stock rose only 0.72%, Taiwan market perform relatively well by annual rose 912 points, growth 11.8 ％ . Benefited from Cross-Strait meetings and Cross-Strait Service Trade Agreement, "biotechnology industry regulation" leading development of biotech industry, and the tax amendment in June, Taiwan’s stock market is expected to have greater performance.

Over a year which saw an overall gain of 900 points, the proprietary trading division responded by taking on short positions, and to adapt to market changes, it adjusted its treasury stock position to minimize systemic risk, kept a close watch on the fundamentals of listed companies so as to adjust positions accordingly and weed out weak stocks, and further hedged against risk and losses through futures positions. For the entire year, the division managed to post a profit of NT$820 million and its performance was among the best within the industry. Going forward, global economic research will become more in-depth and operation guidelines will focus the adjustment of positions and strategies. Also, investments will be diversified to expand the division's revenue sources. It is hopeful that we will continue to achieve industry-leading profit levels and retain our competitive strengths.

B. Risk Management

In addition to using VaR figures provided by the proprietary trading department’s risk control office, stop losses and limit alerts are set for the stocks that each trader trades. Each trader is given trading limits and trading performances are updated in real time and,

when necessary, trading authorizations can be immediately revoked. The effect of all of these measures is to ensure maximum protections for our shareholders.

C. Hedging Operations

Futures and options are our primary hedging tools. By nimbly adjusting our market positions and by using futures and options for effective hedging, the company achieved the best return on assets rate in the industry in 2013.

� Fixed Income Dealing

A. Outright Purchases and Sales of Government Bonds

In 2013, since there has been continuously low trading volume and liquidity shortage in local bond markets, focus has shifted to foreign bond for better profitable opportunities. We expect more transactions on foreign market in the future.

B. Convertible Bonds

In 2013, convertible bond decreased from 2.2 billion to 1.8 billion in the end of the year because of profit-taking. As December, 2013, the guaranteed position is 0.16 billion, 8.8% of total portfolio.

Compared to other industry players, the company's investment strategy for convertible bonds was centered on downside risk considerations and there were hence fewer positions in unsecured SME convertible bonds. This made it difficult to generate higher profits since the market indexes did not undergo significant shifts over the year. But when the European debt crisis struck and systemic risk rippled through the indexes, the company's positions had a comparatively limited loss ratio.

C. Government Bond Futures

As the trading volume in domestic bond market continued to shrink and stock borrow mechanism was not yet completed, all traders in the market, our company included, have no willingness to participate in, and the authorities do not require dealers’ obligations to make market. The trading volume therefore remained zero last year.

D. Bond Options

Since the bond market is highly concentrated, and the trading volume continued to shrink, fluctuations of the bond yield rate remained low. Buyers and sellers had low intentions, and overall trading stayed thin. With fewer profit opportunities, bond options played a non-existent role in 2013.

E. Interest Rate Swaps (IRS)

Because of Taiwan market’s low interest rates and funds deluge, IRS rates remained low. Under such circumstance, it was hard to gain profit in IRS market. The company has gradually decreased IRS operations with observing strategy.

F. Foreign Bonds

With the gradual liberalization of the OSU Business brokerages, we will seize this opportunity and continue expanding foreign bond transactions. Aside from Asian bonds, we also expand our business to European and emerging market bond business. Our team

has successfully transferred the Taiwan bond experience to foreign bond market through rigorous analysis and a detailed analysis of the economic fundamentals. The profit gained from foreign bond business has increased in recent years.

� Financial Products Business

A. Equity Warrants

2013 saw strong expansion in Taiwan’s equity warrant market, with all securities firms aggressively issuing warrant products. A total of 20,476 equity warrants were issued in 2013, for a total dollar value of just over NT$281.409 billion.

The total dollar value of all equity warrants issued by THE COMPANY in 2013 was NT$13.336billion, giving us a market share of 4.74%, making 9th in the market. Issue focuses mainly on the selection of stock performance with good Return on Equity (ROE) to creat a win-win situation with investors and stable profits through different derivatives, futures, and options, etc., with hope to effectively lower hedging costs.

B. Structured Note Products

In 2013, for the whole year, a total of NT$30.175 billion in structure note products were issued with NT$183.24billion. For the year of 2013, the company undertook contracts amounting to a principal of NT$29.293billion and was ranked sixth in the market.

C. Convertible Bond Asset Swaps

Fixed Income Trading with a total of NT$28.85billion worth of contracts currently outstanding, the company had an accumulated trading volume of NT$64.309 billion for 2013.

Option Trading with a total of NT$54.845 billion worth of contracts currently outstanding, the company had an accumulated trading volume of NT$83.222 billion for 2013.

For the year of 2013, the company undertook contracts amounting to a principal of NT$4.675 billion and became one of its stable income sources.

� Underwriting Business (Capital Markets)

A. Domestic Bond and Equity Underwriting

As of the end of 2013, there were a total of 838 companies listed on the TWSE, and a total of 658 companies listed on the GreTai Market, representing an annual increase of 3.58% and3.13%, respectively. In 2013 the number of lead manager case totals 7deals, including Edimax Technology Co., Ltd. $400 million secured Convertible Bonds 、 Fu Ta Material 、 Technology Co., Ltd. $300 million secured Convertible Bonds CTBC Financial Holding 、 Co., Ltd. raised $20 billion capital injection Jaan Cherng Technologological Co., Ltd. $300 million secured Convertible Bonds 、 UDE Corp. $300 million unsecured Convertible

Bonds 、 SciVision Biotech Inc. first listing 、 Johnson & Johnson Pharmaceuticals Ltd., first listing. We will continue to adhere to a strict screening process and select only high quality companies to underwrite, all the while being mindful of prudent risk controls.

B. Financial Advisory

We take great pride in providing professional corporate finance services. In recent years, our financial advisory business has also made great progress and expanded into advisory services dealing with employee stock option exercise prices, offering price for preferred stocks and stock repurchase by listed companies. In year 2013 we handled Union

Insurance Co., Ltd. and Data International Co., Ltd.’s financial advisory. We will no doubt continue to develop our financial advisory services business with a particular emphasis securities related consulting (i.e., IPOs, mergers, private placements, and other consulting services) around the Greater China Region.

C. Offshore Underwriting

In March 2008, the Executive Yuan allowed foreign enterprises to conduct initial listings in OTC and offer emerging stocks in Taiwan, thus expanding the local securities market. In 2013, our department assisted the Knorr-Brems, located in the Cayman Islands, listed their stocks. We also actively seek overseas enterprises coming to Taiwan for listing. We would also look on the market condition of Southeast Asia and Hong Kong-listed companies to issue TDR in Taiwan.

D. Emerging Market Exchange

The domestic economy continued growing in 2013, there were 261 companies listed on the Emerging Stock Board, 18 less than 2012's 279 and representing a 6.45% reduction. To capture more IPOs, the department has also been actively positioning itself with respect to emerging board targets. However, the IFRS's launch in 2013 has changed the way emerging board stocks will be assessed, and to take risk control into account, the number of emerging board companies being recommended will tentatively be no more than 35. As of the end of 2013, the number of officially recommended emerging board companies is 29. This year, the division will continue to compete for quality clients while maintaining risk control, and issue recommendations for emerging stocks based on the progress of its client counseling.

� Wealth Management

In September 2009, the Financial Supervisory Commission (FSC) allowed securities dealers to engage in monetary trust and negotiable securities trust businesses. At the end of 2013, there are 7 securities firms offered particular individual money trust, less 1 comparing year 2012. (KGI securities and Grand Cathay Securities mergered) In year 2012, there are 2 securities trust firms, later increased to 5 in 2013. The main direction of securities trust firms in 2013 was completion of authorized business categories. In 2013, the total asset of specific individual management of trust fund was 30.9 billion, securities trust fund was 18 billion, total asset was 48.9 billion, which largely increased 22.1 billion comparing to 2012. The market share did not change much since dealers have their own niche. Besides the existing business line, securities firms would also apply to the authorities for allocation of trust business, hoping to increase the asset scale. OSU provides another opportunity of wealth management, which main brokers actively engaged in.

3. R&D for Derivative Product

Various Technical Expertise and R&D

We have put together a complete and well-rounded financial engineering research team that is capable of researching both trading strategies and derivative products themselves. Our team is comprised of professionals from the areas of finance, statistics, and information technology. They are able to effectively synergize their diverse talents in developing valuable hardware and software for trading and product valuation. By coupling cutting-edge financial engineering techniques with comprehensive product research and substantial trading experience, we are able to design various new financial products and

thus provide our clients with derivatives products and services that they need.

Our Research Analysts, Their Training, and Our R&D Costs for the Most Recent 5 years

The company has been aggressively developing new products and working diligently to secure regulatory approvals for new products. Over the past 5-year period, we have spent an average of NT$4.5 million per year on R&D efforts.

New products or Techniques Successfully Developed Within the Last 5 years

The company has been successful in the design and pricing of many structured note products, equity swaps, credit derivative products, as well as equity-linked forex derivative products, bonds and interest rates, and we stand ready to issue these products whenever appropriate market timing emerges.

We have successfully developed several market operating strategies, as well as option market making models and strategies.

� Electronic trading system improvements

The electronic trading market continues to grow and the company is able to raise customer service quality through an e-trading platform that is stable, convenient and diversified.

(1) President Securities 2013 Electronic Trading System R&D Plan

	System	R&Dcapabilities
		1. Provide the most functional AP system for
	Promotion of PSC Golden island Trading system	customers, free of charge 2. Explore new customers and assure previous customers who love research for more actuate judgment on investment
	Electronic trading backup system	1. Update transaction system, lower errors caused by aged machines 2. Expand service volume triple more than year 2012, prepareforera ofactive transaction.
	Set up website for teaching electronic trading	1. Timely update for user guideline of on-line transactions 2. Clear description of main functions of electronic trading system 3. Establishment of learning electronic trading channel forsales andnewemployee
	Customized market watch and order placement system for mid-levelcustomers	Customize and introduced VIP program based on customers' needs.

(2) R&D investment plan and progress

Project plan	Project content and outcome	Estimated R&D expense	Estimated time of completion

Customized AP software	1. Simplify application process, minimize customers’ questions, and increase customers’ trust towards company 2. Decrease processing time to help customers in need	NT$700 thousand	June 2014
	1. Optimization of user interface of specialist order placement system.
Function improvements for electronic transaction system	2. Optimization of mobile transaction platform functions 3. Recommend optimizations for AP Order Placement System based on customers' needs. 4. Customize operation interface for VIPs.	NT$3 million	undergoing
Key production and system application for mobile device	1. Currently mobile required computer application, then send verification to mobile for completion 2. It’s More complicated for new customers to require customer service support to finish application 3. After receiving confirmation, customer can directly use mobile to download system	NT$1 million	December 2014

Financial Trust Management System	Trust account immediate payment system	NT$4 million	December 2014
	Customers’ authorization for the payment
	Trust customers’ electronic bill service
	CRMS timely data transmittion

4. Future Business Development

In an effort to establish our core competitiveness, it is essential that we have a clear understanding of future trends in the securities industry and then establish a corresponding business development plan. We must also develop strategies that will allow us to accommodate business areas newly approved by regulators so that we are in a position to move quickly in these new markets. Accordingly, we see our business developing in the following ways:

Continue to recruit exceptional talent, and thereby improve our competiveness and, in doing so, increase our market share.
Implement risk management practices and technologies, thereby improving profitability and stabilizing overall business operations.
Improve IT and enhance e-business infrastructure.
Offer professional asset management and provide personalized financial planning services.

Develop foreign market to maximize profit
Be ready to move on market liberalizations and, in particular, business opportunities across the Hong Kong-PRC-Taiwan market.
Groom talented researchers and thus raise our abilities in designing new products.
Move forward with consolidation within the President Group, thereby enhancing our securities business and financial services.
Build and maintain alliances with financial institutions and corporations outside of the finance industry, relationships that allow for mutual cooperation and mutual benefit.

5. Market Conditions

5-1 Breakdown of Market Share According to Business Area


Business Area	Component	Market Share	Rank

Brokerage	Equity Brokerage Trading Volume	3.44%	8
	Individual Branch	0.098%	1
Financial Products	Warrants Issued (Value)	4.74%	9
	Structure Commodity Business Volume	1.60%	6
	Property Exchange Option Business Volume	0.07%	13
	Repo Transactions	0.83%	10
Fixed Income Dealing
	Outright Purchases / Sales	1.63%	17
	Interest Rate Swaps	15.42%	4
Underwriting	Lead Underwriting Deals No./Value	7 / 3.74%	13 / 7
	Co-Lead Underwriting Deals No./Value	62 / 5.09%	4 / 5

5-2 A Look at Future Growth as well as Supply and Demand in the Market

In 2014, America’s economy will remain stable expansion and Eurozone also exit recession. This indicates the economy recovery in advanced countries. With FED continusly decreased purchase debt, leading international capital withdrawn from emerging markets to advanced countries like Europe and the US. Under such circumstance, the stock and foreign exchange market in emerging markets might face disturbance. As China underwent economic structure adjustment, its economic growth would affected by money shortage, the shadow Bank default rate, and the local government debt problems. In domestic economy, export and private consumptions would increase with help from the stable recovery in advanced countries, and improvement of consumers’ confidence, which lead to economic growth.

In securities business, the trading volume has increased due to FSC’s multiple policies, which helped a lot for brokerage business. In addition, FSC would continue open new business. Following last year's opening of securities dealers to establish venture capital company, this year they could apply for the establishment of branches for international securities business. The authorities assist securities firms to explore overseas markets through various ways like

tax concessions. However, in the short term, human resources, introduction of products, and customers exploring were still problems; its effectiveness remains to be observed.

In the brokerage business, the authorities have already open securities-related business, such as: day-trade, RMB-denominated commodity, re-consigned trade of A share, international securities business, etc, to stimulating the market, expanding overall brokerage business scale. Our company also hopes to provide more completed product service to customers in the future.

Following the market trend in brokerage business, our company would also increase operating sites, hoping to accelerate growth pace of brokerage-related business and promote economies of scale and generating revenue.

As of this year our electronic trade has grown over 37%. We intend to enhance our online trading platform by adding and integrating new functionalities thereby giving the company an upper hand in the online trading. At the same time, we will keep expanding our electronic trade business and integrate the function of our trade platform, keeping our advantageous position in the field of electronic trade.

Looking at our underwriting business, given the intense competition that exists within the domestic securities industry for corporate underwriting deals, the reality is that not all deals end up being profitable endeavors. Accordingly, it is very important to carefully select convertible bond deals for high-quality companies with solid creditworthiness and sufficient assets. Having said that, the number of high-quality companies not yet publically listed are indeed fewer and harder to find. From increasing competition within certain industries is forcing a greater appetite for restructurings, which, in turn, driving the need for, and thus opportunities for, private placements, mergers, acquisitions, capital increases and reductions, and general financial consulting services.

Over the last few years, the Taiwan government has begun allowing access to more international business areas. This is allowing domestic underwriters to not only become more internationalized but more diversified. To this end, the Taiwan government hopes will encourage foreign companies to consider a primary, secondary listings, or TDR listing in Taiwan. Also the authorities open the application of offshore securities unit (OSU). It is the future trend of securities firms to go internationally..

Going forward, then, the company intends to offer investment banking services across the greater Hong Kong-PRC-Taiwan market, while continuing to search out quality foreign companies with an interest in listing their shares and/or raising capital in Taiwan.

Looking at our proprietary trading, with global capital flows moving so rapidly, a global investment strategy is the key to the future of our proprietary trading operations. As regulators begin allowing domestic securities firms to participate more in global financial markets, domestic securities firms will be able to better diversify their investments. Thus, going forward, those securities firms that can best understand global industries and can best grasp global economic trends will be the ones that will turn in the most profits.

With respect to our financial products business, in response to the authorities, we would provide multiple customized financial products based on customers’ needs, to enhance hedge trading skill and risk control model, lower risk, and pursuit stable profit. Since the authorities has gradually open the international securities business, our company has also sent applications to explore foreign derivatives and increase multiple profit.

For our wealth management business, the development of wealth management would benefit from the authorities’ policies and securities firms positive attitudes. Allowing sales to do wealth management business could expand the business line, lower cost, and escalate sales’ quality.

Following the OSU business, we would increase customers of financial management and recruit good salesperson. All factors are in favor of financial management market growth.

5-3 Market supply forecast, growth opportunity, and business competitiveness

� Our Competitive Strengths

a. Our corporate image is solid.
b. We respect professional management and leadership.
c. Our organization is flat and human resource costs are well-controlled.
d. Our brokerage business market share grows up steadily.
e. Our position management performance is outstanding in winning percentage.
f. Our operating costs and risk management are both well-controlled.

� Positive Factors

a. The global economy is in recovery; consumption and investment are picking up, which will drive domestic economic growth.
b. Capital is readily available and the cost of capital is quite low.
c. Open day trading to boost volume of market, and increase company profit.
d. With competent authorities gradually widening the business scope of securities firms, the breadth of the company's operations will also be increased as well.
e. Proprietary trading and brokerage business are both industry leaders. Market share for individual retail branches is quite high. Solid management practices are having a positive effect on the entire organization.
f. Free from the shackles of a financial holding company and from restructuring and consolidation activities that would result from such M&A activities, employees can focus more on tasks at hand and the organization can enjoy smooth and unfettered development.
g. Growth in online trading shows no signs of slowing down. The company’s fast and reliable online trading technology is well-positioned to attract a new, young client base.
h. The level of computerization and automation of information and processes is one of the highest in the industry. Such organization translates into increased efficiency for the organization, overall.
i. Through President Group, the firm and our employees have access to superb sales channels and myriad resources.
j. The government is continuing to open up new areas of business to domestic securities firms and allowing new forms of investments.
k. With structured note products now available, products can be custom designed for either retail clients or institutional clients, thereby retaining clients who would have otherwise been drawn to banks and financial holding companies.
l. The government is planning to bring tax policies on financial products in line with international standards and this will encourage financial product innovation and spur new business.
m. The company encourages a corporate culture that emphasizes innovation and rising to challenges.
n. As financial markets continue to mature and become increasingly democratized, overall efficiency in these markets will also rise.

� Obstacles

a. Financial holding companies have the advantage of capital employment and crisscross integration
b. It is hard to mark up brokerage handling charge due to fierce competition.

c. Exit of QE policy
d. Due to a rising rate of foreign investment, local securities firms are hard to explore foreign customers

� Strategies for Dealing with the Obstacles Identified

	Business Area	Strategy
		1. Encourage various departments and subsidiaries to work together to develop new business. 2 I ii iiil li’ i l f f
	Brokerage	. ncrease exstng nsttutona cents tradng voume and requency o position turnover. 3. Modify client structure so as to reduce the concentration of risks. 4. Expand our spread trading business, increase mid-level customer trading volumes and position turnovers rates. 5. Enhance internal auditing procedures, reduce client complaints 6. Customer- made online brokerage system for institutional investors. 7. Increase revenues from borrowed securities service to investors. 8. Cultivate all employees’ abilities to cross-sell a range of financial products, particularly personal financial planning products and wealth management services. 9. Push forward with online brokerage business; implement comprehensive platform that integrates both information and trading systems. Bolster online trading system stability and order entry quality. 10. Improve our employee training, assistance in preparation for related licenses, performance management, and information system knowledge, to upgrade our employee’s professionalism and
		productivity. 11. Continue to bring in new blood, groom strong management trainees and financial planning professionals who are familiar with a wide range of products. Train back-office staff to take on sales roles thereby streamlining HR costs. 12. Strengthen expense and cost controls in base areas, adjust and optimizelogistics staffing.
	Proprietary Trading	1. Recognize and adjust to different market conditions, switching between “Range Trading” and “Trend Trading” strategies, thereby maintaining an optimal market position. 2. Strictly implement risk control regulations to effectively reduce the impact of systemic risk. 3. Improve our research and trading of Emerging Market Exchange equities, foreign-listed equities, and futures markets, to create more diverse sources of revenue. 4. Add quantitative analysis and technical indicator model analysis to our operating systems.
	Fixed Income Dealing	1. Expand internal databases and develop additional system tools to aid in increasing profitability. 2. Expand the flexibility of our traders and the range of products they trade 3. Enhance judgment ability of global trend to deepen trading ability 4. Strengthen foreign bond research and trading personnel lineup to meet the growingneeds ofexpanding businesses.
	Financial Products	1. In terms of future opening to day trade of stocks and warrants, aim to increase tools of futures and options, enhance transaction system effectiveness, lower transaction cost, and maximize profit 2. Be more responsive to consumer demand and develop new products to meet these demands.

	Business Area	Strategy	Strategy
		3. Strengthen market research and investment analysis of foreign market objectives and commodities to explore international securities business
	Future Proprietary Trading	1. Diversify our trading strategies to better react to market changes. 2. Continue to improve the skills of our traders. 3. Increased the sharing of resources across multiple departments, thereby creating better synergies. 4. Expand our range of foreign products traded and increase profitability in foreign products.
	Underwriting (Capital Markets)	1. Prior to taking initial steps on a given underwriting deal, consultations should be conducted with colleagues throughout the company’s various departments and divisions so as to accurately access to the realistic profit opportunities and risks of the deal. Once a deal is ongoing, regular reassessments and revisions should be made in order to ensure the quality of the overall project. 2. When acting as exclusive sales agent for an issue, a risk assessment report must be generated to determine if risks fall within the firm’s accepted parameters. Afterwards, daily risk values should be generated and market simulations should be conducted to as so have a clear and timely picture of risk exposure and thus determine when to initiate stop losses or when to take profits. The net effect of all of these efforts will be to lower overall risk while pursuing the largest possible profit. . 3. Leverage clients from across our Brokerage Division, Financial Products Division, Shareholder Services Coordination Division, President Investment Consulting Corp., and our President Investment Trust Corp. and provide these clients with financial planning products customized for
		either retail or institutional business, thereby implementing an effective cross-selling network. 4. Leverage contacts from our International Business Department to search out foreign companies interested in a primary listing or TDR issue in Taiwan (such as Hong Kong H-shares issuing TDRs).
	Shareholder Services Coordination	1. Improve quality of service a) Respond quickly to legal changes which affect procedures and materials. Improve efficiency of training cycles. Develop employee knowledge on various regulations and procedures. Enhance mutual support and flexibility among employees. Increase efficiency of human resource utilization. b) Enhance inter-department cooperation and verifications, thereby ensuring accuracy and security of processes. 2. Enhance efficiency of operations Follow the internal objective of “Customer satisfaction, unceasing improvement and innovation; strive to become a shareholder services coordinator that can provide investment planning functions”. Implementation of this philosophy will mean making this division an important conduit for developing new cross-selling opportunities from throughout thefirm’svarious divisions.
	Wealth Management & Trust	1. Help business personnel to obtain the relevant wealth management licenses and raise their professional competence. 2. Aside from providing multiple products, we focus more on the depth of product service 3. Strengthen securties firms’ niche on lending securities to differ from banking trust business 4.Following the open policy of international securities business branches, provide customers with segmentation and differentiatedproducts

Business Area Strategy services

6. Employee Data

Analysis of Average Tenure, Age, and Education, for Sales Force in 2012, 2013, and the first quarter of 2014



	Year	2012	2013	2014 Q1

Number of Employees	Management	102	103	100
	Regular Staff	1,399	1,396	1,391
	Total	1,500	1,499	1,491
Average Age		41.69	42.54	42.78
Average Tenure		10.74	11.32	11.53
Education (%)	Doctorate Degree	0.07	0.07	0.07
	Master’s Degree	11.13	11.87	11.53
	Bachelor Degree / Junior College Graduate	72.4	72.05	72.30

	Senior High School	16.40	16.01	16.10
	High School or Less	--	--	--

Note: Management figures include position of “Manager” or senior.

7. Environmental Protection and Corporate Citizenship

7-1 Environmental Protection

Based on governmental order #0950007006, each company is required to disclose in its annual report its compliance with the European Union’s Restriction of hazardous Substances Directive (RoHS). The company is classified as a securities service business and, accordingly, pollution and other environmental concerns do not apply.

7-2 Corporate Citizenship

President Securities Group has been a long-standing supporter of important social charitable activities and, for its efforts, has been recognized with the 7[th] annual Wenxin Award and the National Civic Service Award, and Top 9 among Top 50 by the Commonwealth magazine. Indeed, over the last several years, President Securities Corp. has planned and run a number of activities with groups such as the Taiwan Fund for Children and Families, the Taiwan Foundation for Rare Disorders, and the United Way of Taiwan. We assist these organizations by mobilizing all of our group’s extensive resources, employees, and customers. We contribute real money and resources to causes that we believe in and, in doing so, meet our responsibilities as a good corporate citizen.

Every year since 2001, the company has called together all staff members from across all of our different divisions, along with many of our clients, to participate in the “Send Them Our Love” charity event, which raises money for donation to charity groups .we began working with the Taiwan Fund for Children and Families to provide scholarships for underprivileged primary school students.

In August 2006, the company held what would be its first annual employee blood donation drive. From the following year, in 2007, this successful annual blood donation drive was scaled up to twice a year. In 2010, the blood donation drive was increased to three times a year and was further expanded to bring in members of the local community to participate.

President Securities Group will continue to hold the spirit of “giving to society what you get from society”, and will continue to support underprivileged groups and strive to support charitable activities.

7-3 Work Environment Safety and Precautions

The company is classified as a securities service business and, accordingly, pollution and other environmental concerns do not apply. Each branch office is required to select an individual to undergo training to be certified as a fire safety manager, and must establish a fire safety plan for the work premises in accordance with the law, and thereby ensure the overall safety of the work premises. General accident insurance has been purchased for each of the company’s branches and work premises so as to protect customer rights. Employer insurance has also been purchased so as to protect the interests of all employees.

8 Labor Relations

8-1 Employee Benefits

The company has always maintained a harmonious relationship with its employees. We have spared no expense in providing attractive employee benefits, in providing opportunities for personal growth, in providing a pleasant work environment, and in providing clear and accessible communication channels to all levels of management.

In addition, we go beyond simply offering benefits prescribed by domestic labor laws, such as annual leave time and number of working hours. Employees also enjoy additional benefits such as group life insurance, worker’s compensation coverage, and employee accident insurance. As well, we offer employees funds for weddings and in time of bereavement, and organizes and subsidized employee outings aimed at strengthening relationships between the firm and our employees, and among employees themselves.

The company is committed to creating a reasonable, friendly, and efficient work environment for its employees, an environment that includes strong lines of communication for employees to express opinions and suggestions about the firm. With this in mind, the firm has established an “Employee Suggestion Center” and also organizes regular employee workshops to actively solicit, discuss, and then respond to employee concerns and suggestions.

In January of 2004, the company expanded its employee benefits to include an “Employee Savings Program”, allowing those employees who participate to have a set portion of their monthly pay automatically deducted and placed in a special trust account, where matching funds will be provided by the company. The aim of this program is to promote long-term commitments from employees as well as encourage healthy savings habits and encourage responsible retirement planning.

Essentially, all such benefits and programs are designed to foster a harmonious relationship between employees and the company. Going forward, we are optimistic to continue to improve

upon these relationships, always with the ultimate aim of allowing both the company and our employees to enjoy mutual benefit and growth.

8-2 Employee Disputes and Protection of Employee Rights

In accordance with the Labor Standards Act, the company has instituted its own set of work rules and has submitted a copy of these work rules to the Taipei City Government Department of Labor for approval. In addition to notifying all employees via internet of the content of these work rules, we also have posted a copy of these work rules on the company’s internal corporate web site where employees may view a copy of these rules at any time.

To date, the company has made every effort to maintain a harmonious and fulfilling work environment for all of its employees and, as such, has not suffered any loss or damage resulting from any employee disputes, in the firm’s entire history. And, the company has every reason to believe that this harmonious dynamic will continue.

8-3 Loss or Damages Suffered as a result of Employee Disputes for recent 3 years: None.
8-4 Value of Present and Future Events with the Potential to Result in Financial Loss, and Corresponding Strategies for Dealing with These Events: None
8-5 Internal Legal Compliance and Material Information Management
a) On June 29, 2010, our Board of directors has passed and promulgated “ internal material information handling procedures ” , assigning the Compliance Office to be in charge of internal major information in order to do coordination and prevent internal trading. In accordance with the “Taiwan Stock Exchange Corporation Procedures for Verification and Disclosure of Material Information of Listed Companies” and with the “Taiwan Stock Exchange Corporation Procedures for Press Conferences Concerning Material Information of Listed Companies”, we have posted all such information on the company’s internal corporate website where employees and managers may view it.
b) Within the Office of the CEO, we have established a Legal Compliance Department, which is tasked with ensuring that all of the company’s processes and administrative procedures are in compliance with the most recent laws and regulations, that all activities are conducted in accordance with relevant laws and regulations. This department is also tasked with conducting regular legal compliance evaluations of each department and each branch office and then conducting legal compliance training specific to their needs.
c) We have created a legal compliance section on our internal corporate website where we routinely post information on any recent amendments made to relevant laws and regulations. We have also set up a hotline where employees can call to learn more about insider trading, its key principles, definitions, and the potential civil and criminal exposures involved. All of these measures, taken together, provide our employees with comprehensive legal guidance.
d) To comply with government personal information protection law, our company established personal information protection system in 2013. We also gained "BS 10012"certification of England Standard Association in November 22, 2013.

VI. Financial Information

1. Balance Sheet

Adoption of financial accounting standards (consolidated)

						Unit: NT$ thousands 2013 2014Q1 54,044,709 63,669,639	Unit: NT$ thousands 2013 2014Q1 54,044,709 63,669,639
Item		2009	2010	2011	2012	2013	2014Q1
Current Assets						54,044,709	63,669,639
Property, plant and						2,583,250	2,591,770
equipment
Intangible Assets						25,648	65,979
Other Assets						2,129,369	2,179,032
Total Assets						58,782,976	68,506,420
						36,354,161	45,589,618
Current	before distri.
Liabilities
	after distri.					-	-

Non-current liabilities						22,612	32,937
						36,376,773	45,622,555
Total	before distri.
Liabilities
	after distri.					-	-

Attributable to						22365280	22842122
parent's ownership
						,,	,,
interest
Common Stock						13,231,191	13,231,191
Capital Surplus						256,116	256,116
						8,877,942	9,341,234
Retained	before distri.
Earnings
	after distri.					-	-

						31	13,581
Other interests

						-	-
Treasury Stocks

						40,923	41,743
Non-controlling interests

						22,406,203	22,883,865
Total	before distri.
Equity
	after distri.					-	-

2. Balance Sheet

Adoption of financial accounting standards (consolidated)

� Adoption of financial accounting standards (consolidated)	� Adoption of financial accounting standards (consolidated)	� Adoption of financial accounting standards (consolidated)	� Adoption of financial accounting standards (consolidated)	� Adoption of financial accounting standards (consolidated)	� Adoption of financial accounting standards (consolidated)
Unit: NT$ thousands Item 2009 2010 2011 2012 Current Assets 41,378,988 48,667,628 41,231,652 42,679,412 Funds and Investments 654,218 529,625 545,467 551,409 Fixed Assets 2,474,530 2,607,443 2,675,521 2,657,269
Item		2009	2010	2011	2012
Current Assets		41,378,988	48,667,628	41,231,652	42,679,412
Funds and Investments		654,218	529,625	545,467	551,409
Fixed Assets		2,474,530	2,607,443	2,675,521	2,657,269
Intangible Assets		349	663	902	1,166
Other Assets		2,068,868	1,917,078	1,729,615	1,561,969
Total Assets		46,688,371	54,010,570	46,364,836	47,749,837
		23,862,740	33,091,572	25,591,544	25,937,950
Current	before distri.
Liabilities
	after distri.	24,810,399	33,661,151	25,591,544	26,625,972

Long-term	Liabilities	2,865,024	-	-	-
Other Liabilities		454,093	433,101	4,533	4,845
		27,181,857	33,524,673	25,596,077	25,942,795
Total	before distri.
Liabilities
	after distri.	28,129,516	34,094,252	25,596,077	26,630,817

Common Stock		11,857,062	12,319,334	12,845,816	13,231,191
Citl Sl
apa urpus		317,109	399,809	409,826	255,676
		7,670,170	8,063,587	7,684,986	8,567,531
Retained	before distri.
Earnings
	after distri.	6,260,239	6,766,886	7,453,761	7,879,509

Unrealized Gain/Loss on		18,281	256,992	11,794	1,134
Financial Instruments
Cumulative Translation		-87,565	-285,973	-211,249	-288,029
Adjustments
		-	-	-	-
Net loss on Cost

		19,506,514	20,485,897	20,768,759	21,807,042
Total	before distri.
Equity
	after distri.	18,558,855	19,916,318	20,768,759	21,119,020

Adoption of international financial reporting standards (individual)

Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1 CurrentAssets 44,043,845 53,605,145 Property, plant and equipment 2,409,970 2,419,855 IntangibleAssets 13,644 19,921 Other Assets 5,456,000 5,552,420 Total Assets 51,923,459 61,597,341	Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1 CurrentAssets 44,043,845 53,605,145 Property, plant and equipment 2,409,970 2,419,855 IntangibleAssets 13,644 19,921 Other Assets 5,456,000 5,552,420 Total Assets 51,923,459 61,597,341	Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1 CurrentAssets 44,043,845 53,605,145 Property, plant and equipment 2,409,970 2,419,855 IntangibleAssets 13,644 19,921 Other Assets 5,456,000 5,552,420 Total Assets 51,923,459 61,597,341	Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1 CurrentAssets 44,043,845 53,605,145 Property, plant and equipment 2,409,970 2,419,855 IntangibleAssets 13,644 19,921 Other Assets 5,456,000 5,552,420 Total Assets 51,923,459 61,597,341	Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1 CurrentAssets 44,043,845 53,605,145 Property, plant and equipment 2,409,970 2,419,855 IntangibleAssets 13,644 19,921 Other Assets 5,456,000 5,552,420 Total Assets 51,923,459 61,597,341	Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1 CurrentAssets 44,043,845 53,605,145 Property, plant and equipment 2,409,970 2,419,855 IntangibleAssets 13,644 19,921 Other Assets 5,456,000 5,552,420 Total Assets 51,923,459 61,597,341	Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1 CurrentAssets 44,043,845 53,605,145 Property, plant and equipment 2,409,970 2,419,855 IntangibleAssets 13,644 19,921 Other Assets 5,456,000 5,552,420 Total Assets 51,923,459 61,597,341	Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1 CurrentAssets 44,043,845 53,605,145 Property, plant and equipment 2,409,970 2,419,855 IntangibleAssets 13,644 19,921 Other Assets 5,456,000 5,552,420 Total Assets 51,923,459 61,597,341
Item		2009	2010	2011	2012	2013	2014Q1
CurrentAssets						44,043,845	53,605,145
Property, plant and equipment						2,409,970	2,419,855
IntangibleAssets						13,644	19,921
Other Assets						5,456,000	5,552,420
Total Assets						51,923,459	61,597,341

Current Liabilities	before distri.					29,525,131	38,711,743
						-	-
	after distri.

Non-currentliabilities						33,048	43,476
Total Liabilities	before distri.					29,558,179	38,755,219
	afterdistri.					-	-
Common Stock						13,231,191	13,231,191
Capital Surplus						256,116	256,116
Retained	before distri.					8,877,942	9,341,234
Earnings	afterdistri.					-	-
Other interests						31	13,581
Treasury Stocks						-	-
Non-controllinginterests						-	-
Total Equity	before distri.					22,365,280	22,842,122
	after distri.					-	-

Adoption of financial accounting standards (individual)

		Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
Item		2009	2010	2011	2012

Current Assets		33,703,331	40,453,654	32,231,838	33,145,665
Funds and Investments		3,730,479	3,693,808	3,770,141	3,631,900
Fixed Assets		2,291,386	2,418,697	2,489,825	2,476,474
Intangible Assets		-	-	-	-
Other Assets		1,869,513	1,699,346	1,486,815	1,342,837
Total Assets		41,594,709	48,265,505	40,063,280	40,596,876
	before distri.	18,896,419	27,479,848	19,292,981	18,758,995
Current
Liabilities	after distri.	19,844,078	28,049,427	19,292,981	19,447,017


Long-term Liabilities		2,865,024	-	-	-
Other Liabilities		342,278	323,441	29,126	21,476
	before distri.	22,111,374	27,803,478	19,322,107	18,829,373

Total Liabilities	afterdistri.	23,059,033	28,373,057	19,322,107	19,517,395

Common Stock		11,857,062	12,319,334	12,845,816	13,231,191
Capital Surplus		317,109	399,809	409,826	255,676
Retained	before distri.	7,670,170	8,063,587	7,684,986	8,567,531
Earnings	afterdistri.	6,260,239	6,766,886	7,453,761	7,879,509
Unrealized Gain/Loss on		18,281	256,992	11,794	1,134
Financial Instruments

Cumulative Translation	Cumulative Translation	-87,565	-285,973	-211,249	-288,029
Adjustments
Net loss on Cost		-	-	-	-
T o t a l Eq u i t y	before distri.	19,483,335	20,462,027	20,741,173	21,767,503
	after distri.	18,535,676	19,892,448	20,741,173	21,079,481

3. Condensed Income Statements

� Adoption of international financial accounting standards (consolidated)

Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
Item	2009	2010	2011	2012	2013	2014Q1
OperatingRevenue					4,613,318	1,503,083
GrossProfit					4,026,842	1,355,521
OperatingIncome					1,213,703	533,635
Non-operatingIncome					275,784	-4,001
Pure profit before tax					1,489,487	529,634
Pure profit of continued operating units					1,365,453	464,136
Loss of Suspension units					-	-
Pure profit (loss)					1,365,453	464,136
Other total profit and loss (after tax)					67,690	13,526
Totalrofitandloss					1,433,143	477,662
p
Pure frofit attributable to parent company owners ' interests					1,361,715	463,292
Pure frofit belong to Non-controllinginterests					3,738	844
Total profit and loss attributable to parent company owners' interests					1,429,496	476,842
Total profit and loss belong to Non-controllinginterests					3,647	820
Earnings Per Share					1.03	0.35

� Adoption of financial accounting standards (consolidated)

			Unit: NT$ thousands	Unit: NT$ thousands
Item	2009	2010	2011	2012
OperatingRevenue	6,072,763	6,134,209	5,026,620	4,218,013
Gross Profit	5,461,260	5,322,536	3,635,418	3,580,145
OperatingIncome	1,992,975	1,836,383	447,352	785,133
Non-operatingIncome	457,873	275,440	446,876	556,495
Non-operatingExpenses	182,651	223,596	183,781	101,799
Income(Loss) from Continuing	2,268,197	1,888,227	710,447	1,239,829
Operations - before Income
Taxes
Income(Loss) from Continuing	2,026,971	1,805,364	570,200	1,116,860
Operations-after IncomeTaxes

Cumulative Effect of Changes in	-	-	-	-
AccountingPrinciples
Net Income(Loss)	2,026,971	1,805,364	570,200	1,116,860
E a r n i ng s P e r S h a r e	1.55	1.38	0.43	0.84

Adoption of international financial reporting standards (individual)

Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1	Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1	Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1	Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1	Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1	Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1	Unit: NT$ thousands Item 2009 2010 2011 2012 2013 2014Q1
Item	2009	2010	2011	2012	2013	2014Q1

OperatingRevenue					3,879,401	1,287,566
Gross Profit					3,544,028	1,196,572
OperatingIncome					1,140,334	489,080
Non-operating profit and expense					327,338	34,955
Pureprofit before tax					1,467,672	524,035
Pure profit of continued operating units					1,361,715	463,292
Loss of Suspension units					-	-
Pure profit (loss)					1,361,715	463,292
Other total profit and loss (aftertax)					67,781	13,550
Non-operating profit and expense					1,429,496	476,842

Earnings Per Share					1.03	0.35

� Adoption of financial reporting standards (individual)

Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
Item	2009	2010	2011	2012

OperatingRevenue	5,253,354	5,173,586	4,415,118	3,667,819
Gross Profit	4,907,951	4,594,514	3,370,794	3,258,045
OperatingIncome	1,856,462	1,513,063	610,507	894,851
Non-operatingIncome	523,184	523,230	246,812	402,403
Non-operatingExpenses	147,739	173,016	166,343	77,230
Income(Loss) from Continuing	2,231,907	1,863,277	690,976	1,220,024
Operations - before Income
Taxes
Income(Loss) from Continuing	2,025,194	1,803,348	566,895	1,113,770
Operations-after IncomeTaxes
Cumulative Effect of Changes in	-	-	-	-
AccountingPrinciples
Net Income(Loss)	2,025,194	1,803,348	566,895	1,113,770
Earnings Per Share	1.55	1.38	0.43	0.84

4. Financial Analysis for the Past 5 Years

Adoption of international financial accounting standards (consolidated)

Item		2013	2014Q1

Capital Stt	Debt Ratio	61.88	66.60
rucure Analysis	Ratio of long term asset versus	868.24	884.21
（％）	property and equipment

Liquidity		148.66	139.66
	Current Ratio
Analysis

(%)	Quick Ratio	148.51	139.60
	Return on Assets (%)	2.63	0.78
	Return on Equity (%)	6.20	2.05
Profitability	Ratio of profit before tax versus	11.26	4.00
Analysis	actualcapital
	Net income ratio(%)	29.60	30.88
	Earnings Per Share (NT$)	1.03	0.35

		-	-
	Cash Flow Ratio (%)
	Cash Flow AdequacyRatio(%)	513.83	505.62
Cash Flow
	Cash Flow Reinvestment Ratio	-

	(%)
	Debt to EquityRatio	162.35	199.37
	Ratio of property and equipment	5.34	4.58
	verus totalasset
	Total Underwriting to Quick	1.53	0.26
Other Ratio
(%)	Assets Ratio
	Total Margin Loan Balance to	51.40	54.80

	EitRti
	quy ao
	Total Short Sales Amount to	7.14	4.55
	EquityRatio

� international financial accounting standards (consolidated)

			Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
Item		2009	2010	2011	2012

Capital	D e b t R a t i o	58.22	62.07	55.21	54.33
Structure Analysis （％）	Long-term Fund to	904.07	785.67	776.25	820.66
	Fixed Assets Ratio
Liquidity Analysis	Current Ratio	173.40	147.07	161.11	164.54
(%)	Quick Ratio	173.29	146.97	161.02	164.43
	Returnon Assets (%)	5.15	3.84	1.41	2.64
Profitability Analysis	Return on Equity (%)	11.02	9.03	2.76	5.25
	Operating Income to Paid-in Capital Ratio (%)	16.81	14.91	3.48	5.93
	Pre-tax Income to Paid-in Capital Ratio (%)	19.13	15.33	5.53	9.37
	Net income ratio(%)	33.38	29.43	11.34	26.48
	Earnings Per Share (NT$)	1.55	1.38	0.43	0.84
	Cash Flow Ratio (%)	-	-	51.87	-
Cash Flow	Cash Flow Adequacy Ratio (%)	324.05	412.46	688.18	907.63


	Cash Flow ReinvestmentRatio (%)	-	-	60.37	-
	Debt to Equity Ratio	139.35	163.65	123.24	118.97
	Fixed Assets to Total A s s e t s R a t i o	6.84	6.16	6.75	6.64
Other Ratio (%)	Total Underwriting to Quick AssetsRatio	0.92	1.33	1.50	1.43
	Total Margin Loan Balance toEquityRatio	82.10	94.52	51.44	44.81
	Total Short Sales Amount to EquityRatio	12.02	9.64	8.38	7.37

� Adoption of international financial reporting standards (individual)

	Unit: NT$ thousands 2009 2010 2011 2012 2013 2014Q1 Debt Ratio 56.93 62.92 Ratio of long term asset versus property and equipment 928.03 945.74 Current Ratio 149.17 138.47 Quick Ratio 149.09 138.42 Return on Assets (%) 2.99 0.87 Return on Equity (%) 6.19 2.05 Ratio of profit before tax versus	Unit: NT$ thousands 2009 2010 2011 2012 2013 2014Q1 Debt Ratio 56.93 62.92 Ratio of long term asset versus property and equipment 928.03 945.74 Current Ratio 149.17 138.47 Quick Ratio 149.09 138.42 Return on Assets (%) 2.99 0.87 Return on Equity (%) 6.19 2.05 Ratio of profit before tax versus	Unit: NT$ thousands 2009 2010 2011 2012 2013 2014Q1 Debt Ratio 56.93 62.92 Ratio of long term asset versus property and equipment 928.03 945.74 Current Ratio 149.17 138.47 Quick Ratio 149.09 138.42 Return on Assets (%) 2.99 0.87 Return on Equity (%) 6.19 2.05 Ratio of profit before tax versus	Unit: NT$ thousands 2009 2010 2011 2012 2013 2014Q1 Debt Ratio 56.93 62.92 Ratio of long term asset versus property and equipment 928.03 945.74 Current Ratio 149.17 138.47 Quick Ratio 149.09 138.42 Return on Assets (%) 2.99 0.87 Return on Equity (%) 6.19 2.05 Ratio of profit before tax versus	Unit: NT$ thousands 2009 2010 2011 2012 2013 2014Q1 Debt Ratio 56.93 62.92 Ratio of long term asset versus property and equipment 928.03 945.74 Current Ratio 149.17 138.47 Quick Ratio 149.09 138.42 Return on Assets (%) 2.99 0.87 Return on Equity (%) 6.19 2.05 Ratio of profit before tax versus	Unit: NT$ thousands 2009 2010 2011 2012 2013 2014Q1 Debt Ratio 56.93 62.92 Ratio of long term asset versus property and equipment 928.03 945.74 Current Ratio 149.17 138.47 Quick Ratio 149.09 138.42 Return on Assets (%) 2.99 0.87 Return on Equity (%) 6.19 2.05 Ratio of profit before tax versus	Unit: NT$ thousands 2009 2010 2011 2012 2013 2014Q1 Debt Ratio 56.93 62.92 Ratio of long term asset versus property and equipment 928.03 945.74 Current Ratio 149.17 138.47 Quick Ratio 149.09 138.42 Return on Assets (%) 2.99 0.87 Return on Equity (%) 6.19 2.05 Ratio of profit before tax versus
Item		2009	2010	2011	2012	2013	2014Q1

Capital	Debt Ratio					56.93	62.92
Structure						928.03	945.74
	Ratio of long term asset versus
Analysis
（％）	property and equipment

Liquidity	Current Ratio					149.17	138.47
Analysis (%)	Quick Ratio					149.09	138.42
						2.99	0.87
	Return on Assets (%)

	Return on Equity (%)					6.19	2.05
Profitability	Ratio of profit before tax versus
Analysis	actualcapital					11.09	3.96
	Net income ratio(%)					35.10	35.98
						1.03	0.35
	Earnings Per Share (NT$)

	Cash Flow Ratio(%)					-	-
	Cash Flow Adequacy Ratio (%)					482.87	487.61
Cash Flow	Cash Flow Reinvestment Ratio					-	-

	(%)
	D e b t t o Equ i tyR a t i o					132.16	169.67
	Fixed Assets to Total Assets					5.53	4.66
	Ratio
	Total Underwriting to Quick					1.87	0.31
Other Ratio
	AssetsRatio
(%)
	Total Margin Loan Balance to					51.49	54.90

	EquityRatio
	Total Short Sales Amount to					7.15	4.56
	EquityRatio

� Adoption of financial reporting standards (individual)

Unit: NT$ thousands

Item Year	Item Year	2009	2010	2011	2012

Capital	Debt Ratio	53.16	57.61	48.23	46.38
Structure
Analysis	Long-term Fund to	975.32	845.99	833.04	878.97
（％）	Fixed Assets Ratio
Liquidity Ali	Current Ratio	178.36	147.21	167.07	176.69
nayss (%)	Quick Ratio	178.24	147.11	166.96	176.56

	Return on Assets (%)	5.75	4.15	1.51	3.03
	Return on Equity (%)	11.03	9.03	2.75	5.24
		15.66	12.28	4.75	6.76
	Operating Income to
Profitabilit	Paid-in Capital Ratio
y Analysis	(%)
	Pre-tax Income to	18.82	15.12	5.38	9.22
	Paid-in Capital Ratio
	(%)
		38.55	34.86	12.84	30.37
	Net income ratio (%)

	Earnings Per Share	1.55	1.38	0.43	0.84
	(NT$)
	Cash Flow Ratio (%)	-	-	67.98	0.46
	Cash Flow Adequacy	284.19	340.73	574.00	939.77
Cash Flow
	Ratio (%)
	Cash Flow	-	-4.42	59.57	0.39
	ReinvestmentRatio (%)
		113.49	135.88	93.16	86.50
	Debt to Equity Ratio


	Fixed Assets to Total	7.05	6.33	7.15	7.15
Other
Ratio (%)	AssetsRatio
	Total Underwriting to	1.13	1.60	1.92	1.84

	Quick Assets Ratio
	Total Margin Loan	82.19	94.63	51.52	44.91
	Balance toEquityRatio
	Total Short Sales	12.03	9.65	8.39	7.38
	Amount to EquityRatio

VII. Financial Status ,Operation Performance & Risk Management

1. Financial Status

Unit: NT$ thousands

Year			Fluctuation	Fluctuation
	2013	2012
Item			Amount	(%)

Current Assets	54,044,709	48,049,990	5,994,719	12.48%
Non -CurrentAssets	4,738,267	4,798,267	-60,000	-1.25%
Total Assets	58,782,976	52,848,257	5,934,719	11.23%
CurrentLiabilities	36,354,161	31,168,823	5,185,338	16.64%
Non-current Liabilities	22,612	16,183	6,429	39.73%
Total Liabilities	36,376,773	31,185,006	5,191,767	16.65%
Capital Stock	13,231,191	13,231,191	0	0%
CapitalSurplus	256,116	256,116	0	0%
Retained Earnings	8,877,942	8,210,050	667,892	8.14%
Other interests	31	(73,551)	73,582	100.04%
Attributable to parent's ownershipinterest	22,365,280	21,623,806	741,474	3.43%
Non-controllinginterests	40,923	39,445	1,478	3.75%
Total Equity	22,406,203	21,663,251	742,952	3.43%

2. Analysis of Operating Results

Unit: NT$ thousands

Year
	2013	2012	Amount	(%)
Item

OperatingRevenue	4,613,318	4,085,093	528,225	12.93%
Operating Expenses	3,399,615	3,310,870	88,745	2.68%
OperatingIncome	1,213,703	774,223	439,480	56.76%
Non-operatingIncome	275,784	531,555	-255,771	-48.12%
Pure profit before tax	1,489,487	1,305,778	183,709	14.07%
Income tax expense	124,034	132,592	-8,558	-6.45%
Profit and loss	1,365,453	1,173,186	192,267	16.39%
Othertotalprofit andloss (aftertax)	67,690	-38,685	106,375	N/A
Totalprofit andloss	1,433,143	1,134,501	298,642	26.32%
Pure profit attributable to
parent's ownership	1,361,715	1,170,034	191,681	16.38%
Non-controllinginterests	3,738	3,152	586	18.59%
Total profit and loss attributable to
parent's ownership	1,429,496	1,131,229	298,267	26.37%
Non-controllinginterests	3,647	3,272	375	11.46%

3. Long-term Investment Policy and Results

In 2013, the company's domestic reinvestment operations generated healthy profits while its foreign reinvestment business was affected by factors. Benefited from economic recovery in 2013, our proprietary trading began to make profit. Each subsidiary's operations will still be

subject to strict risk control with timely stop-loss and stop-gain orders, so as to reduce risk and maintain steady development.

As for our present direct investment policy, we consider all areas of business currently permitted by Taiwan’s regulators and look for effective cross-selling strategies and other possible synergies, with the overall aim of best leveraging all of the company’s resources. Looking to the coming year, we expect regulators to again open up many new areas of business and we intend to be ready to move on each of these.

We are building international alliances with other industry players so as to expand into new business areas, to develop and promote new financial products. In particular, we are looking to Hong Kong and the PRC as key areas of expansion to bolster our presence in international financial services and our cross-strait business.

4. Analysis of Risk Management

4-1 Our Risk Management Policies

In order to ensure that we have a solid and effective risk management system in place, our system has been developed so as to encompass all of our business areas. Then, with appropriate risk tolerance levels in place, we can effectively raise profits, create value for the company, and achieve our return on asset targets.
By constructing risk controls for each individual business area, we are able to achieve a measured approach to risk management. Accordingly, each department is assigned risk parameters based on its respective responsibilities, thereby achieving layered yet comprehensive risk management.
The company’s risk management measures take into account the following forms of risk, market risk, credit risk, liquidity risk, operational risk, legal risk, and model risk.

4-2 Related Risk Management System Architecture

Board of Directors audits the company’s risk management policy, supervises sales business strategies, approves all business proposals and trading permissions, and is ultimately responsible for risk management.
Risk Control Committee is a committee established by the Board of Directors tasked with integrating all risk management operations, with supervising and assisting all the various risk management and related operations. The committee is also tasked with setting the various risk authorities, limits, and targets, for a centralized supervision of the status of all of the company’s risk management efforts.
Office of the CEO Supervisors the daily implementation of all of the company’s risk management operations and authorizes any exceptions to the risk management protocols.
Assets/Liabilities Committee controls the company’s overall asset structure, sets limits for different businesses, collects and analyzes domestic and international interest rates, exchange rates, and economic changes.
Risk Control Office has been established the Trading Business Risk Management Team and the Operating Risk Management Team tasked with monitoring daily risk management operations:
Trading Business Risk Management Team is responsible for trading department risk management, for amendments to the business operational risk regulations, for the construction of a back-office risk control system, for ensuring compliance with trading regulations, and for creating trading business risk reports.
Operating Risk Management Team is responsible for the drafting of risk policies and regulations, for monitoring market and credit risks, for monitoring liquidity risks, for compiling data on operational risk control and management, for constructing and

maintaining the risk management system, for implementation of risk management systems, and for ensuring company-wide regulatory compliance.
Auditing Office sets operations risk controls, sets the standards for risk control systems, puts in place internal auditing controls, and implements daily check routines.
Legal Compliance and Legal Matters Department implements legal risk controls and ensures that all businesses and risk management operations are in compliance with relevant laws and regulations.
Finance Department monitors capital adequacy rates and liquidity risks, and analyzes the company’s asset/liability structure and other key financial ratios.
Sales Department based on the company’s risk management policies and regulations sets risk management guidelines for various businesses, and produces a report on abnormal risk items for the General Manager Office.

4-3 Risk Evaluation Standards

The company has set risk management principles. In order to ensure that all of our organizations businesses adhere to our operating policies, operating goals, and capital levels, we must set suitability evaluation policies that can react to changes in our business and in the market:

Market Risk Evaluation
i) We use RiskMetrics market risk management system to manage our company’s exposure to market risk. In addition to producing daily risk value tables, we perform simulation analysis and historical analysis to supplement missing risk values.
ii) We evaluate the completeness of the evaluation models on different business areas, and evaluate the assumptions, parameters, and data for various product models, and then test if the models for the various products are reasonable.
iii) We valuate the effectiveness of risk control models, and regularly perform Back Testing to ensure the reasonableness of the models used.
Credit Risk Evaluation
i) Our company undergoes credit rating evaluations from Moody’s, Standard & Poor’s, Fitch, and Taiwan Ratings Corp.
ii) Trading counter-partner credit risk: assess our company’s maximum exposure in the event that the counterparty defaults, and use maximum exposure limits set by the board of directors in determining the credit risk of a trading counterparty
iii) Issuer’s Credit Risk: we use KVM models to perform an internal evaluation, and combine that with financial data and stock price data, to calculate a probability of default. Based on these measurements, we then develop an internal evaluation, Z-Score model, to control the external credit risk gaps from issuers and augment.
Operational Risk Evaluation
i) Operational risk is risk that is created when internal processes, employees, or systems are inappropriate or cause errors; or risk that is caused by external factors. This type of risk is related to legal risks but not strategic risk or credit risk.
ii) We create operations risk policies handbooks that encompass every level of operations.
iii) Through our risk report and audit report, we ensure that risk is appropriately evaluated, disclosed, and controlled.

4-4 Risk Factors and Corresponding Responses

Management Crisis Risk : Management Crisis Risk refers to significant market changes, a lack of access to capital, or significant losses from direct investments, that affect a company’s operations and cause losses.

Response: We have implemented a “Management Crisis Response Policy” that clearly lays out what steps should be followed in the event of a serious crisis so as to ensure normal operation of the company.

Market Risk : Market risk refers to dramatic changes in pricing or volatility in interest rates, equities, or foreign exchange rate, that can result in serious losses to open positions.

Response: We will attempt to lessen the impact of such market risks through prudent business analysis, product analysis, and process analysis, so as to clearly identify sources of market risk. Based on this, we then set effective management controls, we monitor investment position risk levels, risk structure, and risk changes, to ensure that they are all in line with our forecasts.

Credit Risk : Credit risk refers to the exposure for underwriters for the terms and conditions of the securities that underwrite and for losses that may result from a counterparty being unable to fulfill its obligations to the security.

Response: In an effort to shield ourselves from potential credit risk, we conduct extensive credit risk evaluations prior to a deal being executed and then conduct repeated evaluations after the deal has been executed. Based on these evaluations and a worst-case scenario for the counterparty in question, we set credit risk limits for that counterparty. In evaluating the risk to the underwriter for debt-related securities, we look not only at the TCRI rating, but also at default rates based on KMV models.

Operational Risk : Operational risk refers to the risk created when internal processes, employees, or systems are inappropriate or cause errors, or the risks caused by external factors. This type of risk is related to legal risks but not strategic risk or credit risk.

Response: In order to reduce the probability of such operation risk occurring, we have created an operating manual that addresses every level of our operations, we perform regular audits of every business segment, as well as every work flow, every legal risk point, and every risk control point. Finally, we compile an audited risk report that helps us to ensure that our operating quality is properly balanced, controlled, and disclosed.

Legal/Regulatory Risk : Legal/Regulatory risk refers risk related to non-compliance with laws and regulations governing our investment strategies and our business operations, and any resulting corrective orders or penalties from relevant authorities, or any civil or criminal actions taken against us. It also refers to risk related to our inability to perform our obligations under agreements that we have entered into with other parties.

Response: In order to reduce our exposure to legal/regulatory risks, we have created a Legal Compliance and Legal Matters Department.

Liquidity Risk : Liquidity risk refers to position liquidity risks and capital liquidity risks. Sometimes losses can be suffered as a result of illiquid markets that make it difficult to open or close a position at normal market prices requiring that a position be either bought at a premium or sold at a discount. Capital liquidity risks result when positions are increased beyond planned levels, leaving the company with insufficient funds to meet settlement requirements for a position.

Response: In an effort to better manage liquidity risks, we have created centralized risk

management standards that take into consideration all departments and that set position limits for each department. We also have a team that performs daily forecasts of capital requirements based on the needs of all company guarantees and of departments that are required to service loans, and then monitors daily capital adjustments accordingly. We also produce a monthly “Capital Liquidity Risk Simulation Analysis Table” that analyzes multiple scenarios, forecasts the potential liquidity risks for those scenarios, and estimates the capital levels that each such scenario would require.

Model Risk : Model risk refers to potential situations where market values and other variables are beyond normal and predictable conditions and therefore exceed the ability of the model to handle.

Response: We effectively maintain and manage our models, with particular emphasis on financial product risk management. We have created a set of “Model Use Management Procedures” that clearly spell out procedures for developing models, for validating models, for managing variables, and for discontinuing the use of problem models.

4-5 An Evaluation of Key Risks

An Evaluation of Key Risks in Recent Years and the Status of those Risks at the Time of Printing of this Annual Report

Effects of recent interest rates, foreign exchange rate fluctuations, and inflation concerns on our company and our strategies for dealing with these concerns
i. Interest Rates: Changes in interest rates have a direct impact on the income we derive from our fixed income-related businesses. In addition to conducting our own thorough research on domestic and foreign interest rate trends, we utilize various interest rate derivative tools as well a risk control system that manages our interest rate-related risks, that creates an effective interest rate hedging system for our fixed income-related businesses. Changes in interest rates also affect our company’s financing costs. Going forward, we intend to utilize interest rate hedging and other capital raising avenues as ways to control our company’s financing costs.
(A) Bond and interest derivative product business:

The amount of our company’s major interest products in 2014Q1 and the likely loss of NT$109,002 thousand due to the 1% interest rate change

item	Amount (in thousand dollars)	Profit/loss based on 1% Interest rate change (inthousand dollars)
Government bond	700,000	-27,318
Corporate bond, financialbond	5,320,544	-75,334
Interest rate exchange	797,996	-6,350
Sum	6,818,540	-109,002

Countermeasures: Our Company has risk management rules and operational procedures on government bond, corporate bond, foreign/international bond and interest rate exchange. Our company has put the interest risk under good control by means of buying by evaluation beforehand and risk control afterward.

(B) Borrowing: The main risk of borrowing is the fluctuation of interest rate. Our company can adjust methods, conditions and terms of borrowing according to the

likely interest changing trend. We can also avert risks through the product of interest exchange etc.

Our total debt amount of short-term borrowing, and payable short-term bill totals NT$10.927 billion. They are both borrowing with interest rate risks. With every 1bp change in market interest rate, our company has to pay NT$1,092,700 more interest every year.

Looking into 2014, according to Central Bank, despite the improvement of international economic performance, there is still full of uncertainty. It is beneficial to maintain current credit rate for sustaining the market price and financial stability. Domestically, the rate in financial market hopefully stay stable for the future year, and our company’s loan rate will not be dramatically raised.

ii. Exchange rate: The company's principal business targets and place of business are domestic; hence the impact of currency fluctuations is minimal . Potential foreign exchange risks include not just that arising from the par of exchange for foreign currency assets, but also that from foreign currency investment with respect to foreign reinvested or reinvested companies (when future earnings are repatriated or disposed). Whenever the company invests in foreign currency assets, FX swaps will always be in place to avoid foreign exchange risk. Since its overseas subsidiaries are running perpetual operations, the impact of exchange rate movements on long-term equity investments is limited to the changes to book value and does not affect profits and losses.

At Mar. 2014, the company's main exchange rate product positions, and 1% exchange rates fluctuation may result in a loss of NT$58.835 million (as show in the following table).

Unit: NT$

item	Position (thousand)	loss resulted by 1% exchange ratesfluctuation(thousand)
stocks	582,181	-10,246
bonds	5,320,544	-48,589
total	5,902,725	-58,835

Response: Our company’s transactions of US stock, HK stock, international bond, and foreign bond have risk management and standard operating process. The business above was lower the risk of exchange rate by trading foreign exchange swap.

iii. Inflation: The CPI growth rate in 1Q 2014 was 0.79%. Inflation had no meaningful effect on operations or on profits

Recent High-Risk or High-Leverage Investments, Loans to Third Parties, Pledges Given for Third Parties, Derivative Products Trading Policy and Profitability and Losses, Reasons for Losses and Strategies for Correcting Such Losses Going Forward.
i) In Q1 2014, we did not engage in any high-risk or highly-leveraged investments, did not provide any loans to third parties, and did not provide any pledge for any third parties.
ii) We only trade those derivative products which have been approved by the relevant authorities and which are permitted by our company’s Articles of Incorporation. We have also created and follow a “Derivatives Trading Procedures” in an effort to further reduce our exposure to related risk.
Future Development Plans and Expected R&D Investments

To assist with our development of ever-better products and trading strategies, we have assembled a professional financial engineering team, which brings together experts from

finance, statistics, mathematics, and information technology, to create trading and valuation software and hardware resources. Our annual spending on human resources and R&D in this area is in the millions of dollars every year. Please see Chapter 5 for more information on the status of our operations and on our R&D efforts.

Our company’s wealth management trust business has significant growth on number of clients and assets managed. In 2014 we plan to set up Internet platform for authorized fund transaction, payment system, electronic bill, and customer relationship management, with hope to provide customers more convenient and instant transaction platform and explore potential trust customers. The set-up expense is around $4 million. For brokerage business, we plan to invest $ 3 million for developing and improving electronic transaction system.

Effects of Significant Policy and Legal Changes both in Taiwan and Abroad and Measure for Dealing with These Issues

We are constantly on watch for significant policy and legal changes both inside Taiwan and abroad and, to that end, routinely enlists the help of professional legal and accounting firms to assist in evaluating these changes, to help create effective responses to these changes, and to ensure compliance with these changes, thereby working to reduce the effects of policy and legal changes on our business. In recent years, we have been quite effective in adjusting to policy and legal changes both within and beyond Taiwan and, thus, our overall solid financial health has seen little impact from such changes.

� Article 36 of Securities and Exchange Act

Unless under special circumstances as otherwise provided by the Competent Authority, an issuer under this Act shall perform public announcement and registration with the Competent Authority as follows:

within three months after the close of each fiscal year, publicly announce and register with the Competent Authority financial reports duly audited and attested by a certified public accountant, approved by the board of directors, and recognized by the supervisors. 2. within 45 days after the end of the first, second, and third quarters of each fiscal year publicly announce and register with the Competent Authority financial reports duly reviewed by a certified public accountant and reported to the board of directors.
within the first ten days of each calendar month publicly announce and register with the Competent Authority the operating status for the preceding month.

Regulations governing the applicable scope of “special circumstances” as referred to in the preceding paragraph, deadlines for public announcement and registration under such special circumstances, and other matters for compliance in connection therewith, shall be prescribed by the Competent Authority.

� Article 11 of Regulations Governing the Preparation of Financial Reports by Securities Firms

A securities firm shall prepare consolidated financial reports in accordance with Chapter II of these Regulations and IAS 27, and shall prepare annual parent company only financial reports in accordance with Chapter IV of these Regulations. A securities firm preparing interim financial reports shall follow the provisions of Chapters II and III of these Regulations as well as IAS 34. A securities firm, when preparing semi-annual financial reports, shall also prepare semi-annual parent company only financial reports pursuant to Articles 25 to 27, or semi-annual individual financial reports pursuant to Article 27.

Article 21 of Regulations Governing Securities Firms

Within 3 months after the close of each fiscal year, a securities firm shall publicly announce and report to the FSC the annual financial reports audited and attested by certified public accounts, approved by the board of directors, and recognized by the supervisors; within 2 months after close of each half fiscal year, it shall publish and report to the FSC the financial reports audited and attested by certified public accountants, approved by the board of directors, and recognized

by the supervisors.

Effects of Industry Changes and Technological Changes and Measures for Dealing with These Changes

In response to changes in technology and subsequent increases in online trading in recent years, we moved to meet this market demand and has invested considerable effort and resources into developing and improving our online trading platform and ultimately providing a system that matches the habits of Taiwan’s online traders.

Significant Impairment of Corporate Image and Measures for Dealing with that Damage

Our company has a core philosophy of “3 Goods and One Fair” (“Good Quality”, “Good Trust”, “Good Service”, and “Fair Price”). This is combined with “Professional Leadership, Kind Service”. We have no negative corporate image issues to report.

Expected Benefits from On-Going M&A Activities, Potential Risks, and Measures for Dealing with Those Risks

None.

Expected Benefits from Expansion of Facilities, Potential Risks, and Measures for Dealing with Those Risks

Following the market trend in brokerage business, our company will seek to merge securities brokerage firm or open new branches. Related risks will be evaluated by professional financial assessment.

Potential Inventory Risks and Measures for Dealing with Those Risks

N/A

Effects of Large Transfers or Large Conversions of Company Stock by Directors, Supervisors, or Shareholders Holding More than 10% of the Company’s Shares, Potential Risks, and Measures for Dealing with Those Risks

None.

Effects of Change in Management Control, Potential Risks, and Measures for Dealing with Those Risks

None.

Litigation and Non-litigation Issues
i) Judgments already handed down or any ongoing litigation, non-litigation, or administrative action over the previous two years up to the time that this annual report was published, the potential effects on shareholder rights and on the company’s share price, the key facts of the dispute, dollar values involved, the date that the litigation was initiated, the key parties involved, and the current status of said litigation(s): None
ii) Any Company director, supervisor, manager, responsible person, or company shareholder holding more than 10% of the company’s shares that is involved in any judgments already handed down or any ongoing litigation, non-litigation, or administrative action over the previous two years up to the time that this annual report

was published, the potential effects on shareholder rights and on the company’s share price, the key facts of the dispute, dollar values involved, the date that the litigation was initiated, the key parties involved, and the current status of said litigation(s): None.

iii) Any company director, supervisor, manager, responsible person, or company shareholder holding more than 10% of the company’s shares that has been found in violation of Article 157 of the Securities and Exchange Act over the previous two-year period and up to the time that this annual report was published, and the current status of any related action taken or being taken against that person: None.
Other Important Risks:

To comply with Personal Information Protection Act and Foreign Account Tax Compliance Act (FATCA), the company will enhance customers’ information management and identification when opening accounts. In addition, we will continuously educate employees on personal information processing protection, anti money laundry, and related law risks.

==> picture [595 x 212] intentionally omitted <==

VIII. Other Disclosures

1. Affiliated Companies Chart

==> picture [595 x 470] intentionally omitted <==

----- Start of picture text -----

PRESIDENT SECURITIES CORPORATION
Shareholding Shareholding Shareholding Shareholding Shareholding Shareholding Shareholding
38.66% 100% 100% 100% 100% 100% 96.69%
President President PSC Venture President President Capital President
Insurance Personal Capital Securities (BVI) Management Futures Corp.
Agency Co., Insurance Investment LTD Corp.
Ltd
Agency Co., Co., Ltd.
Ltd.
Shareholding 0.03% Shareholding 5.19%
Shareholding Shareholding Shareholding
94.81% 100% 100%
UNI-PRESDIENT ASSET
MANAGEMENT CORP.
President PRESIDENT WEALTH President
Securities (HK) MANAGEMENT Securities
LTD (HONG KONG) LTD (Nominee) LTD
----- End of picture text -----

2. Basic Information of Affiliates

Unit: NT$ thousands As of April 30, 2014

Company	Established Date	Address	Currenc y	Paid-in Capital	Main business
President Futures Corp.	1994.03.01	B1.,No.8, Dongxing Rd., Taipei City	NTD	660,000	Futures brokerage
President Capital Management Corp.	1997.04.15	3F.,No.8, Dongxing Rd., Taipei City	NTD	124,000	Securities Investment Consulting
President Securities (HK) Ltd.	1994.07.26	Unit 2603-6,26/F., Infinitus Plaza ,199 Des Voeux Road, Central , Hong Kong	HKD	192,600	Securities proprietary, brokerage, underwriting , and consulting
President Securities (BVI) Ltd.	1998.02.26	Unit 2603-6,26/F., Infinitus Plaza ,199 Des Voeux Road, Central , Hong Kong	USD	67,746	Securities Investment and holding company
President		Unit 2603-6,26/F.,
Securities (Nominee) Ltd.	1999.08.06	Infinitus Plaza ,199 Des Voeux Road, Central , Hong Kong	HKD	1,000	Nominee Service
President Wealth Management (Hong Kong) Ltd.	2002.03.31	Unit 2603-6,26/F., Infinitus Plaza ,199 Des Voeux Road, Central , Hong Kong	HKD	23,400	Wealth Management
Uni-President Asset Management Corp.	1992.09.03	8F.,No.8, Dongxing Rd., Taipei City	NTD	351,000	Investment Trust
President Personal Insurance Agency Co., Ltd.	2006.12.21	6F.,No.8, Dongxing Rd., Taipei City	NTD	5,000	Insurance Agent
President Insurance Agency Co., Ltd.	2008.05.06	6F.,No.8, Dongxing Rd., Taipei City	NTD	5,000	Insurance Agent
PSC Venture Capital Investment Co., Ltd.	2013.10.29	2F.,No.8, Dongxing Rd., Taipei City	NTD	300,000	Investment, management consultant, and venture capital investment

3. Operational Highlights of Affiliated Companies

					As of	31/12/2013	Unit: NT$	thousands Net Income (Loss) EPS 112,957 1.71 (563) (0.05)	thousands Net Income (Loss) EPS 112,957 1.71 (563) (0.05)
Company	Currency	Capital	Total Assets	Total Liabilities	Total Equity	Operating Revenue	Operating Income	Net Income (Loss)	EPS
President Futures Corp.	NTD	660,000	7,560,205	6,331,346	1,228,859	594,400	35,370	112,957	1.71
President Capital	NTD	124,000	151,454	5,975	145,479	36,761	(2,171)	(563)	(0.05)
Management Corp.
Uni-Presdient Asset Management Corp	NTD	351,000	738,926	128,270	610,656	576,155	165,910	143,500	4.09
President Personal Insurance Agency Co., Ltd.	NTD	5,000	13,102	3,835	9,267	14,623	2,782	3,178	6.36
President Insurance Agency Co., Ltd.	NTD	5,000	12,944	1,560	11,384	11,355	2,392	4,383	8.77
PSC Venture Capital Investment	NTD	300,000	300,791	135	300,656	0	(117)	656	0.02
Co. Ltd.
President Securities (HK)Ltd.	HKD	192,600	801,382	494,940	306,442	47,924	8,121	19,531	0.1
President Securities (Nominee) Ltd.	HKD	1,000	625	19	606	0	(14)	(10)	(0.01)
President Wealth Management (Hong Kong) Ltd.	HKD	23,400	14,680	20	14,660	0	(29)	57	0.00
President Securities (BVI)Ltd.	USD	67,746	63,143	4	63,139	0	(68)	3,126	0.05

Notes ： Foreign exchange rates for balance sheet amounts as follows: USD/NTD=29.6913 HKD/NTD ： 3.8277

Foreign exchange rates for income statement amounts as follows: USD/NTD=29.8050 HKD/NTD ： 3.8430

4. Capital Adequacy Ratio:

Within the securities industry, a company’s capital adequacy rate is viewed as a key performance indicator. Many BIS regulations require that a securities firm has a minimum capital adequacy rate of 200% in order to be permitted to operate in many key business areas. As such, this level can be seen as an important benchmark in evaluating a securities firm’s

business performance and risk management measures. As of March of 2014, our capital adequacy rate stood at 478%, well above this key 200% level.

5. Market Share Rate

Market share of various business could be used for performance indicators. It could represent company’s weighted market share and perceptive of future trend, which help to analyze management performance.

Our company’s Brokerage market share was 3.44% in 2013, ranked 8 among top 10 competitors. Average single branch market share was 0.098%, ranked top 1 among top 10 competitors. Compared with other securities firms, our performance was more efficient and competitive.

Currently our company continues to build comprehensive and personalized information platform to improve stability of electronic transactions and orders, train sales with multiple financial ability, hoping to explore international market, create more profit for customers and company .

==> picture [595 x 212] intentionally omitted <==

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS

DECEMBER 31, 2013 AND 2012

For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

PRESIDENT SECURITIES CORPORATION AND ITS SUBSIDIARIES

Declaration of Consolidated Financial Statements of Affiliated Enterprises

The companies included in the consolidated financial statements of affiliated enterprises prepared by the Company for 2013 (from January 1, 2013 to December 31, 2013) in accordance with Article 33 of the “Regulations Governing the Preparation of Financial Reports by Securities Firms” and “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” are identical with those to be included in the consolidated financial statements of the parent company and subsidiaries in accordance with IAS 27, “Consolidated and Separate Financial Statements” The relevant information to be disclosed in the consolidated financial statements of affiliated enterprises has already been disclosed in the consolidated financial statements of the parent company and subsidiaries. Therefore, the Company does not prepare the consolidated financial statements of affiliated enterprises separately.

Hereby declare

PRESIDENT SECURITIES CORPORATION

AND ITS SUBSIDIARIES Responsible person: DENG, A-HUA March 26, 2014

Report of Independent Accountants Translated from Chinese

PWCR13003402

To the Board of Directors and Shareholders of President Securities Corporation

We have audited the accompanying consolidated balance sheets of President Securities Corporation and its subsidiaries as of December 31, 2013, December 31, 2012 and January 1, 2012, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years ended December 31, 2013 and 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of President Securities Corporation and its subsidiaries as of December 31, 2013, December 31, 2012 and January 1, 2012 and their financial performance and cash flows for the years ended December 31, 2013 and 2012 in conformity with the “Regulations Governing the Preparation 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.

We have audited the parent company only financial statements of President Securities Corporation as of and for the years ended December 31, 2013 and 2012 on which we have issued an unqualified opinion thereon.

PricewaterhouseCoopers, Taiwan March 26, 2014

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

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

ASSETS	Note 6(1) 6(2) 6(3) 6(4) 6(5)	December31,2013 Amount % $ 5,287,484 9 19,714,198 34 349,870 1 184,897 - 11,516,164 20 24,695 - 59,634 -	December31,2013 Amount % $ 5,287,484 9 19,714,198 34 349,870 1 184,897 - 11,516,164 20 24,695 - 59,634 -	December31,2012 Amount % $ 4,933,426 9 17,791,194 34 218,050 - - - 9,772,570 19 374 - 12,901 - 5,637,662 11 45,803 - 41,382 - 1,674 - 5,499,832 10 28,722 - 412,497 1 2,364 - 3,651,539 7 48,049,990 91 50,885 - 83,244 - 407,188 1 2,653,310 5 287,304 1 - - 38,137 - 1,278,199 2 4,798,267 9 $ 52,848,257 100 $ 3,816,336 7 1,999,639 4 448,956 1 7,979,713 15 1,245,017 2	January1,2012	January1,2012
		Amount $ 5,287,484 19,714,198 349,870 184,897 11,516,164 24,695 59,634		Amount $ 4,933,426 17,791,194 218,050 - 9,772,570 374 12,901 5,637,662 45,803 41,382 1,674 5,499,832 28,722 412,497 2,364 3,651,539 48,049,990 50,885 83,244 407,188 2,653,310 287,304 - 38,137 1,278,199 4,798,267 $ 52,848,257 $ 3,816,336 1,999,639 448,956 7,979,713 1,245,017	Amount $ 4,002,165 15,420,684 746,733 230,044 10,683,585 2,820 36,522 5,234,807 176,124 160,393 1,630 4,134,181 23,663 83,254 113 4,098,046 45,034,764 51,635 98,027 385,300 2,657,258 289,404 - 64,301 1,459,352 5,005,277 $ 50,040,041 $ 3,620,887 1,499,781 427,237 8,616,273 1,478,214	%
Current assets Cash and cash equivalents Financial assets at fair value through profit or loss - current Available-for-sale financial assets - current Bonds purchased under resale agreements Margin loans receivable Refinancing security deposits Receivables from refinance guaranty						8 31 2 1 21 - - 11 - - - 8 - - - 8
Customer margin account Receivables from security lending Security lending deposits Notes receivable Accounts receivable - net Prepayments Other receivables Current tax assets Other current assets Total current assets Noncurrent assets Financial assets at fair value through profit or loss - noncurrent Financial assets at cost - noncurrent Investments in associates Property and equipment Investment property Intangible assets Deferred tax assets Other assets - noncurrent Total noncurrent assets	6(6) 6(7) 6(8) 6(9) 6(2) 6(10) 6(11) 6(12) 6(13) 6(42) 6(14)	4,917,434 29,993 49,617 3,360 8,379,629 54,278 173,323 2,676 3,297,457 54,044,709 50,174 71,759 401,608 2,583,250 285,204 25,648 53,466 1,267,158 4738267	8 - - - 14 - - - 6 92 - - 1 4 1 - - 2 8
						90
						- - 1 5 1 - - 3
						10
TOTAL ASSETS LIABILITIES AND EQUITY	,, $ 58,782,976 6(15) $ 3,479,260 6(16) 6,947,845 6(17) 1,232,154 6(18) 6,272,115 1,235,843 (Continued)		100 6 12 2 11 2
						100
						7 3 1 17 3
Current liabilities Short-term loans Commercial papers payable Financial liabilities at fair value through profit or loss - current Bonds sold under repurchase agreements Deposits on short sales

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

LIABILITIESAND EQUITY	Note 6(19)	December 31, 2013 Amount % $ 1,599,806 3 529,309 1 4,917,434 8 8,598,138 15 450	December 31, 2013 Amount % $ 1,599,806 3 529,309 1 4,917,434 8 8,598,138 15 450	December 31, 2013 Amount % $ 1,599,806 3 529,309 1 4,917,434 8 8,598,138 15 450
		Amount $ 1,599,806 529,309 4,917,434 8,598,138 450
Short sale proceeds payable Guarantee deposit received on borrowed securities Futures traders' equity Accounts payable Advance receits
p Collections on behalf of third parties Other payables Other financial liabilities - current Current tax liability Other current liabilities Total current liabilities Noncurrent liabilities Deferred tax liability Other liabilities-noncurrent Total noncurrent liabilities Total liabilities Equity attributable to owners of the parent company Capital Common stock Capital reserve Retained earnings Legal reserve	6(20) 6(21) 6(42) 6(42) 6(22) 6(25)		428,091 951,286 93,398 64,432 4,600 36,354,161 14,210 8,402 22,612 36,376,773 13,231,191 256,116	- 1 1 - - - 62 - - - 62 22 -
Special reserve Unappropriated earnings Other equity Total Non-controlling interests Total equity TOTAL LIABILITIES AND EQUITY		2,071,935 5,792,801 1,013,206 31 22,365,280 40,923 22,406,203 $ 58,782,976

The accompanying notes are an integral part of these financial statements.

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS) EXCEPT FOR EARNINGS PER SHARE AMOUNT)

Revenues Securities brokerage fees Underwriting fees	For theyears ended December 31,	For theyears ended December 31,
	2013	2012
Gains (losses) on trading of securities Interest income Gain on valuation of trading securities Gain on short covering and trading securities - RS financing covering Gain on valuation of borrowed securities and bonds with resale agreements Gain on warrants issuance Gain on derivative financial instruments Other operating income Total revenues Expenses Handling charges Interest expenses F ii
utures commsson expense Clearing charges Employee benefits Depreciation and amortization Other operating expenses Total expenditures and expenses

(Continued)

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS) (EXCEPT FOR EARNINGS PER SHARE AMOUNT)

Non-operating gains and losses Share of the profit or loss of associates and joint ventures accounted for using the equity method Other gains and losses	Note 6(11) 6(41)	For theyears ended December 31,	For theyears ended December 31,
		2013	2012
Total non-operating gains and losses Profit before tax Income tax expense Income from continuing operations Income from discontinued operations Net income Other comprehensive income (loss) Translation gain and loss on the financial statements of foreign operating entities Unrealized gain (loss) on financial instruments Net actuarial (losses) gains on defined benefit plans Other comprehensive (loss) income of associates and joint ventures accounted for under equity method Income tax benefit (expense) relating to components of other comprehensive income Current other comprehensive income (loss) (post-tax) Total current comprehensive income Income attributable to:	6(42) ( (
Parent company Non-controlling interests Current comprehensive income attributable to: Parent company Non-controlling interests Earnings per share Basic earnings per share (in dollars) Diluted earnings per share (in dollars)	6(43)
		$

The accompanying notes are an integral part of these financial statements.

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

For the year ended December 31, 2012 Balance as of January 1, 2012			Equityattributable to owne	Equityattributable to owne	rs	of theparent company					Non-controlling interest	Totalequity
	Share capital	Capital reserve		Retained earnings			Other	equity		Total
	Commonstock		Legal reserve	Special reserve		Unappropriated earnings	Translation gain and loss on the financial statements of foreign operating entities		Unrealized gain or loss on financial instruments
	$ 12,845,816	$ 409,826	$ 1,903,868	$ 5,198,754		$ 122,078	$ -		$ 11,794 - - - - - - ( 10,660 ) - $ 1,134 $ 1,134 - - - - 26,616 - $ 27,750		$ 27,393 - - - - - 3,152 120 8,780 $ 39,445 $ 39,445 - - - 3,738 ( 91 ) ( 2,169 ) $ 40,923	$ 20,519,529 - - - - 440 1,173,186 ( 38,684 ) 8,780 $ 21,663,251 $ 21,663,251 - - ( 688,022 ) 1,365,453 67,690 ( 2,169 ) $ 22,406,203
Appropriations of 2012 earnings: Legal reserve Special reserve Stock dividends Change in capital reserve: Retained earnings transferred to capital Difference between proceeds from disposal of subsidiary and carrying amount Net income for the year Other comprehensive income for the year Changes in non-controlling interests Balance at December 31, 2012 For the year ended December 31, 2013 Balance as of January 1, 2013	- - 231,225 154,150 - - - - $ 13,231,191 $ 13,231,191	- - - ( 154,150 ) 440 - - - $ 256,116 $ 256,116	56,690 - - - - - - - $ 1,960,558 $ 1,960,558	- 283,853 - - - - - - $ 5,482,607 $ 5,482,607		( 56,690 ) ( 283,853 ) ( 231,225 ) - - 1,170,034 46,541 - $ 766,885 $ 766,885	- - - - - - ( 74,685 ) - ($ 74,685 ) ($ 74,685 )
Appropriations of 2013 earnings: Legal reserve Special reserve Cash dividends Net income for the year Other comprehensive income for the year Changes in non-controlling interests Balance at December 31, 2013	- - - - - - $ 13,231,191	- - - - - - $ 256,116	111,377 - - 310,194 - - - - - - - - $ 2,071,935 $ 5,792,801 The accompanying no		te	( 111,377 ) ( 310,194 ) ( 688,022 ) 1,361,715 ( 5,801 ) - $ 1,013,206 s are an integral p	- - - - 46,966 - ($ 27,719 )

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

	CASH FLOWS FROM OPERATING ACTIVITIES: Profit before tax from continuing operations Income from discontinued operations before tax Profit before tax Adjustments to reconcile profit before tax to net cash (used in) provided by operating activities:	For theyears ended December 31, 2013 2012 $ 1,489,487 $ 1,305,778 - - 1,489,487 1,305,778
		2013 $ 1,489,487 - 1,489,487
	Income and expenses without cash flow impact Depreciation 103,752 103,161 Amortization 10,795 8,369 Write-off of bad debts classified as income ( 512 ) ( 2,594 ) Provision for bad debts 12,846 331 Gain on valuation of trading securities ( 303,088 ) ( 74,720 ) Financial expense 126,838 151,360 Interest income ( 932,506 ) ( 1,008,563 ) Dividend income ( 143,868 ) ( 171,198 ) Share of the profit of associates and joint ventures accounted for using the equity method ( 55,919 ) ( 71,805 ) Loss on disposal of property and equipment 402 193 Income on valuation of open-ended funds and money-market instruments 3,850 ( 82,604 ) Impairment loss on financial assets measured at cost 5,600 - Changes in operating assets and liabilities Changes in operating assets Financial assets at fair value through profit or loss ( 1,624,152 ) ( 2,218,830 )
	Available-for-sale financial assets - current ( 105,204 ) 518,023 Bonds purchased under resale agreements ( 184,897 ) 230,044 Margin loans receivable ( 1,744,158 ) 910,678 Refinancing security deposits ( 24,321 ) 2,446 Receivables from refinance guaranty ( 46,733 ) 23,621 Customer margin account 720,228 ( 402,855 ) Receivables from security lending 15,810 130,321 Security lending deposits ( 8,235 ) 119,011 Notes receivable ( 1,686 ) ( 44 ) Accounts receivable ( 2,917,055 ) ( 1,443,122 ) Prepayments ( 25,556 ) ( 5,059 ) Other receivables 5,809 18,072 Other current assets 354,082 446,507 Changes in operating liabilities Financial liabilities at fair value through profit or loss - current 783,198 21,719 Bonds sold under repurchase agreements ( 1,707,598 ) ( 636,560 ) Deposits on short sales ( 9,174 ) ( 233,197 ) Short sale proceeds payable ( 6,971 ) ( 134,245 ) Guarantee deposit received on borrowed securities ( 614,980 ) ( 651,043 ) Futures traders' equity ( 720,228 ) 402,855 Accounts payable 2,863,349 1,905,992 Advance receipts ( 6,712 ) 7,087 Collections on behalf of third parties 168,198 25,875 Other payables 51,016 9,781 Other financial liabilities - current ( 28,199 ) 38,099 Other current liabilities ( 420 ) 1,898 (Continued)

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

For theyears ended December 31,
2013
2012
Cash used in operations
( $ 4,496,912 )
( $ 755,218 )
Dividends received
219,408
208,652
Interest received
942,208
1,099,823
Income tax aid
(
87716)
(
138065)

p

,

,
Net cash (used in) provided by operating activities
(
3,423,012 )
415,192
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment
(
715 )
-
Proceeds from capital reduction of financial assets measured at cost
6,600
14,783
Acquisition of property and equipment
(
17,629 )
(
39,960 )
Changes in intangible assets
(
11,867 )
-
Decrease in other non-current assets
3,708
159,570
Increase in prepayment for equipment
(
41,364 )
(
44,694 )
Net cash (used in) provided by investing activities
(
61,267 )
89,699
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in short-term loans
(
337,076 )
195,449
Increase in commercial papers payable
4,950,000
500,000
Decrease in other non-current liabilities
(
7,605 )
(
54,514 )
Cash dividends paid
(
688,022 )
-

Disposal of subsidiaries (without loss of control)
-
12,540
Changes in non-controlling interest
(
2,169 )
(
3,320 )
Interest paid
(
123,757 )
(
149,100 )
Net cash provided by financing activities
3,791,371
501,055
Effect of exchange rate changes
46,966
(
74,685 )
Net increase in cash and cash equivalents
354,058
931,261
Cash and cash equivalents, beginning of year
4,933,426
4,002,165
Cash and cash equivalents, end of year
$ 5,287,484
$ 4,933,426

The accompanying notes are an integral part of these financial statements.

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 30, 2013 AND 2012

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS,

EXCEPT AS OTHERWISE INDICATED)

1. HISTORY AND ORGANIZATION

1) President Securities Corporation (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China (R.O.C.) on December 17, 1988, and was renamed as President Securities Corporation on March 4, 1989. The Company started commercial operations on April 3, 1989. As of December 31, 2013, the Company had 35 operating branches (including the head office).
2) The Company and its subsidiaries (collectively referred herein as the “Group”) are primarily engaged in underwriting of securities, dealing or brokerage business of securities at the securities exchange markets and business premises, registration and transfer agency service for securities, margin loans and short sales business of securities, securities lending and borrowing business, futures introducing brokerage services, futures dealing, issuance of call (put) warrants, new financial instrument transactions, wealth management business, and trust business.
3) The Company’s shares are listed on the Taiwan Stock Exchange.
THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION
These consolidated financial statements were authorized for issuance by the Board of Directors on March 26, 2014.
APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS.
1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

Not applicable as it is the first-time adoption of IFRSs by the Group this year.

2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group
A. IFRS 9, ‘Financial Instruments: Classification and measurement of financial instruments
- (A) The International Accounting Standards Board (“IASB”) published IFRS 9, ‘Financial Instruments’, in November 2009, which will take effect on January 1, 2013 with early application permitted. (Through the amendments to IFRS 9 published on November 19, 2013, the IASB has removed the previous mandatory effective date, but the standard is available for immediate application). Although the FSC has endorsed IFRS 9, FSC does not permit early application of IFRS 9 when IFRSs are adopted in R.O.C. in 2013. Instead, enterprises should apply International Accounting Standard No. 39 (“IAS 39”), ‘Financial Instruments: Recognition and Measurement’ reissued in 2009.
- (B) IFRS 9 was issued as the first step to replace IAS 39. IFRS 9 outlines the new classification and measurement requirements for financial instruments, which might affect the accounting treatments for financial instruments of the Group. With respect to the overall effect of the IFRS 9 adoption, it was noted that the IFRS 9 adoption might have an impact on those instruments classified as ‘available-for-sale financial assets’ held by the Group based on preliminary evaluation. The reason is that IFRS 9 specifies the fair value changes in the

equity instruments that meet certain criteria may be reported in other comprehensive income, and such amount that has been recognized in other comprehensive income should not be reclassified to profit or loss when such assets are derecognized. IFRSs issued by IASB but not yet endorsed by the FSC.

B. The following are the assessments of the new standards, interpretations and amendments issued by IASB but not yet endorsed by the FSC. Application of the new standards, interpretations and amendments should follow the regulations of the FSC. Except for assessment on the following which may have relevant impact, the rests do not have significant impact on the consolidated financial statements:

New Standards, Interpretations and Amendments	Main Amendments	Effective Date
Limited exemption from comparative IFRS 7 disclosures for first-time adopters (amendment to IFRS 1)	The amendment provides first-time adopters of IFRSs with the same transition relief that existing IFRS preparers received in IFRS 7, ‘Financial Instruments: Disclosures’ and exempts first-time adopters from providing the additional comparative disclosures.	July 1, 2010
Improvements to IFRSs	Amendments to IFRS 1, IFRS 3, IFRS 7, IAS 1,	January 1, 2011
2010	IAS 34 and IFRIC 13.
IFRS 9, ‘Financial instruments: Classification and measurement of financial liabilities’	1. IFRS 9 requires gains and losses on financial liabilities designated at fair value through profit or loss to be split into the amount of change in the fair value that is attributable to changes in the credit risk of the liability, which shall be presented in ‘other comprehensive income’, and cannot be reclassified to profit or loss when derecognising the liabilities; and all other changes in fair value are recognized in profit or loss. The new guidance allows the recognition of the full amount of change in the fair value in the profit or loss only if there is reasonable evidence showing on initial recognition that the recognition of changes in the liability's credit risk in ‘other comprehensive income’ would create or enlarge an accounting mismatch (inconsistency) in ‘profit or loss’. (That determination is made at initial recognition and is not reassessed subsequently.) 2. Separate application of regulations set out above is permitted.	After publication dated November 19, 2013, any version of the standard and amendments published by IASB is available for immediate application, and the previous mandatory effective date has been removed.
Disclosures - transfers of financial assets	The amendment enhances qualitative and quantitative disclosures for all transferred financial	July 1, 2011

		Effective Date January 1, 2012
New Standards, Interpretations and Amendments	Main Amendments	Effective Date
(amendment to IFRS 7)	assets that are not derecognized and for any continuing involvement in transferred assets, existing at the reporting date.
Deferred tax: recovery of underlying assets	The amendment gives a rebuttable presumption that the carrying amount of investment properties	January 1, 2012
(amendment to IAS 12)	measured at fair value is recovered entirely by sale, unless there exists any evidence that could rebut this presumption. The amendment also replaces SIC 21, ‘Income taxes—recovery of revalued non-depreciable assets’.
IFRS 10, ‘Consolidated financial statements’	The standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where it is difficult to assess.	January 1, 2013
IFRS 12,‘Disclosure of	The standard requires the disclosure of interests in	January 1, 2013
interests in other entities’	other entities including subsidiaries, joint arrangements, associates and unconsolidated structured entities.
IAS 27,‘Separate financial statements’ (as amended in 2011)	The standard removes the requirements of consolidated financial statements from IAS 27 and those requirements are addressed in IFRS 10, ‘Consolidated financial statements’.	January 1, 2013
IAS 28,‘Investments in associates and joint ventures’(as amended in 2011)	As consequential amendments resulting from the issuance of IFRS 11, ‘Joint arrangements’, IAS 28 (revised) sets out the requirements for the application of the equity method when accounting for investments in joint ventures.	January 1, 2013
IFRS 13, ‘Fair value measurement’	IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs.	January 1, 2013
IAS 19 revised, ‘Employee benefits’(as amended in	The revised standard eliminates corridor approach and requires actuarialgains and losses to be	January 1, 2013

	Main Amendments Effective Date recognized immediately in other comprehensive income. Past service costs will be recognized immediately in the period incurred. Net interest expense or income, calculated by applying the discount rate to the net defined benefit asset or liability replace the finance charge and expected	Main Amendments Effective Date recognized immediately in other comprehensive income. Past service costs will be recognized immediately in the period incurred. Net interest expense or income, calculated by applying the discount rate to the net defined benefit asset or liability replace the finance charge and expected
New Standards, Interpretations and Amendments	Main Amendments	Effective Date
2011)	recognized immediately in other comprehensive income. Past service costs will be recognized immediately in the period incurred. Net interest expense or income, calculated by applying the discount rate to the net defined benefit asset or liability replace the finance charge and expected
	, return on plan assets. The return of plan assets, excluding net interest expense, is recognized in other comprehensive income.
Presentation of items of other comprehensive income (amendment to IAS 1)	The amendment requires profit or loss and other comprehensive income (OCI) to be presented separately in the statement of comprehensive income. Also, the amendment requires entities to separate items presented in OCI into two groups based on whether or not they may be recycled to profit or loss subsequently.	July 1, 2012
Disclosures—Offsetting financial assets and financial liabilities d IFRS 7	The amendment requires disclosures to include quantitative information that will enable users of an entity’s financial statements to evaluate the ff il ff f i	January 1, 2013
(amenment to )	eect or potenta eect o nettng arrangements.
Offsetting financial assets and financial liabilities (amendment to IAS 32)	The amendments clarify the requirements for offsetting financial instruments on the statement of financial position: (i) the meaning of 'currently has a legally enforceable right to set off the recognised amounts'; and (ii) that some gross settlement mechanisms with certain features may be considered equivalent to net settlement.	January 1, 2014
Improvements to IFRSs 2009-2011	Amendments to IFRS 1, IAS 1, IAS 16, IAS 32 and IAS 34.	January 1, 2013
Consolidated financial statements, joint arrangements and disclosure of interests in other entities: Transition guidance (amendments to IFRS 10, IFRS 11 and IFRS 12)	The amendment clarifies that the date of initial application is the first day of the annual period in which IFRS 10, 11 and 12 is adopted.	January 1, 2013
Investment entities (amendments to IFRS 10, IFRS 12 and IAS 27)	The amendments define ‘Investment Entities’ and their characteristics. The parent company that meets the definition of investment entities should measure its subsidiaries usingfair value through	January 1, 2014

	Main Amendments Effective Date profit of loss instead of consolidating them. The interpretation addresses the accounting for levies imposed by governments in accordance with legislation (other than income tax). A liability to pay a levy shall be recognized in accordance with January 1, 2014	Main Amendments Effective Date profit of loss instead of consolidating them. The interpretation addresses the accounting for levies imposed by governments in accordance with legislation (other than income tax). A liability to pay a levy shall be recognized in accordance with January 1, 2014
New Standards, Interpretations and Amendments	Main Amendments	Effective Date
	profit of loss instead of consolidating them.
IFRIC 21, ‘Levies’	The interpretation addresses the accounting for levies imposed by governments in accordance with legislation (other than income tax). A liability to pay a levy shall be recognized in accordance with	January 1, 2014
	IAS 37, ‘Provisions, contingent liabilities and contingent assets’.
Recoverable amount disclosures for non-financial assets (amendments to IAS 36)	The amendments remove the requirement to disclose recoverable amount when a cash generating unit (CGU) contains goodwill or intangible assets with indefinite useful lives that were not impaired.	January 1, 2014
Novation of derivatives and continuation of hedge accounting (amendments to IAS 39)	The amendment states that where the original counterparties to the derivatives agree to use one or more clearing counterparties as the new counterparties to each of the parties and when the derivatives that are being novated complies with specified criteria, the novation of derivatives would not be considered an expiration or	January 1, 2014
	termination giving rise to the discontinuation of hedge accounting.
IFRS 9 "Financial assets: hedge accounting" and amendments to IFRS 9, IFRS 7 and IAS 39	1. IFRS 9 relaxes the requirements for hedged items and hedging instruments and removes the bright line of effectiveness to better align hedge accounting with the risk management activities of an entity. 2. An entity can elect to early adopt the requirement to recognize the changes in fair value attributable to changes in an entity's own credit risk from financial liabilities that are designated under the fair value option in ‘other comprehensive income’.	After publication dated November 19, 2013, any version of the standard and amendments published by IASB is available for immediate application, and the previous mandatory effective date has been removed.
Services related contributions from employees or third parties	The amendment allows contributions from employees or third parties that are linked to service, and do not vary with the length of employee service,to be deducted from the cost of	July 1, 2014

		Effective Date
New Standards, Interpretations and Amendments	Main Amendments	Effective Date
(amendments to IAS 19R)	benefits earned in the period that the service is provided. Contributions that are linked to service, and vary according to the length of employee service, must be spread over the service period using the same attribution method that is applied to the benefits
	.
Improvements to IFRSs 2010-2012	Amendments to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38.	July 1, 2014
Improvements to IFRSs 2011-2013	Amendments to IFRS 1, IFRS 3, IFRS 13 and IAS 40.	July 1, 2014

A. The Group is assessing the potential impact of the new standards, interpretations and amendments above and has not yet been able to reliably estimate their impact on the consolidated financial statements.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements are prepared in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Firms”, “Rules Governing the Preparation of Financial Statements by Futures Commission Merchants” and generally accepted accounting principles in the Republic of China. The Company’s significant accounting policies are described below:

1) Compliance statement

A. These consolidated financial statements are the first consolidated financial statements prepared by the Group in accordance with the “Regulations Governing the Preparation 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 FSC (collectively referred herein as the “IFRSs”).
B. In the preparation of the balance sheet of January 1, 2012 (“the opening IFRSs balance sheet”), the Group has adjusted the amounts that previously were reported in the consolidated financial statements in accordance with R.O.C. GAAP. Please refer to Note 22 for the impact of transitioning from R.O.C. GAAP to the IFRSs on the Group’s financial position, operating results and cash flows.

2) Basis of preparation

A. Except for the following items, these consolidated financial statements have been prepared under the historical cost convention:
(A) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
(B) Available-for-sale financial assets measured at fair value.
(C) Defined benefit liabilities are recognized based on the net amount of pension fund assets plus unrecognized past service cost and present value of defined benefit obligation.
B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its

judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

3) Basis of consolidation

A. Basis for preparation of consolidated financial statements:
(A) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies. In general, control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. The existence and effect of potential voting rights that are currently exercisable or convertible have been considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
(B) Intercompany transactions, balances and unrealized gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
(C) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
(D) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity.
(E) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. Any difference between fair value and carrying amount is recognized in profit or loss. All amounts previously recognized in other comprehensive income in relation to the subsidiary are reclassified to profit or loss, on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognized in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.
B. Subsidiaries included in the consolidated financial statements:

Name of Investor	Name of Subsidiary President Futures Corp. (President Futures) President Capital Management Corp. (President Capital Management) President Securities (HK)	Main Business Activities Futures brokerage Securities investment consulting Securities dealer,	Ownership (%)	Ownership (%)
			December 31, 2013 96.69% 100% 5.19%	December 31, 2012
The Company The Company 〃				96.69% 100% 5.19%

Name of Investor	Name of Subsidiary Ltd.(“President Securities (HK)”) (Note 1) President Securities (BVI) Ltd.(“President Securities (BVI)”) President Personal Insurance Agency Co., Ltd. (President Pl I A	Main Business Activities brokerage, underwriting and consulting Securities investment and holding company Insurance Agent	Ownership (%) December 31, 2013 December 31, 2012 100% 100% 100% 100%	Ownership (%) December 31, 2013 December 31, 2012 100% 100% 100% 100%
			December 31, 2013 100% 100%
〃〃
〃〃 President Securities (BVI) 〃〃	ersona nsurance gency) President Insurance Agency Corp. (President Insurance Agency) PSC Venture Capital Investment Limited Company (President Venture Capital) President Securities (HK) Ltd.(“President Securities (HK)”) (Note 1) President Wealth Management (HK) Ltd.(“President Wealth Management (HK)”) President Securities (Nominee) Ltd. (President Securities (Nominee))	Insurance Agent Venture Capital Securities dealer, brokerage, underwriting and consulting Wealth management Nominee Service	100% 100% 94.81% 100% 100%	100% - 94.81% 100% 100% January 1, 2012
The Company 〃〃〃〃〃 President Securities (BVI) Ltd. 〃〃	President Futures Corp. President Capital Management Corp. President Securities (HK) Ltd. (President Securities (HK)) (Note 1) President Securities (BVI) Ltd. President Personal Insurance Agency Co., Ltd. (President Personal Insurance Agency) President Insurance Agency Corp. (President Insurance Agency) President Securities (HK) Ltd. (Note 1) President Wealth Management (HK) Ltd. President Securities (Nominee) Ltd.	Futures brokerage Securities investment consulting Securities dealer, brokerage, underwriting and consulting Securities investment and holding company Insurance Agent Insurance Agent Securities dealer, brokerage, underwriting and consulting Wealth management Nominee Service		97.69% 100% 5.19% 100% 100% 100% 94.81% 100% 100%

Note 1: The Company holds all the shares of President Securities (HK) with President Securities (BVI).

4) Classification of current and non-current items

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
- (A) Assets arising from operating activities that are expected to be realized, or are intended to be sold or consumed within the normal operating cycle;
- (B) Assets held mainly for trading purposes;
- (C) Assets that are expected to be realized within twelve months from the balance sheet date;
- (D) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.
B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
- (A) Liabilities that are expected to be paid off within the normal operating cycle;
- (B) Liabilities arising mainly from trading activities;
- (C) Liabilities that are to be paid off within twelve months from the balance sheet date;
- (D) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
5) Translation of foreign currency transactions
A. Foreign currency translation and presentation
- Items included in the consolidated financial statements of the Group are measured using the currency of the primary economic environment in which the Group operates (the “functional currency”). Functional currency and bookkeeping currency of the Company and its domestic subsidiaries are all New Taiwan Dollars; functional currency and bookkeeping currency of overseas subsidiaries-President Securities (HK), President Wealth Management (HK), and President Securities (Nominee) are Hong Kong Dollars; and functional currency and bookkeeping currency of President Securities (BVI) are US Dollars. The consolidated financial statements are presented in New Taiwan Dollars.
B. Foreign currency transactions and balances
- Foreign currency transactions denominated in a foreign currency or required to settle in a foreign currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
- Assets and liabilities denominated in foreign currency are translated by the closing exchange rate at balance sheet date. The closing exchange rate is determined by the market exchange rate. Non-monetary assets and liabilities denominated in foreign currencies which are carried at historical cost are re-translated at the exchange rates prevailing at the original transaction date.
- Non-monetary assets and liabilities denominated in foreign currencies which are held at fair value through profit or loss are re-translated at the exchange rates prevailing at the date at which the fair value is determined.
- Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other

comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income.

6) Cash and cash equivalents
A. In the consolidated statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with banks, and other short-term highly liquid investments.
B. Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.
7) Financial assets and financial liabilities at fair value through profit or loss
A. Financial assets and financial liabilities at fair value through profit or loss are financial assets and financial liabilities held for trading or financial assets and financial liabilities designated as at fair value through profit or loss on initial recognition. Financial assets and financial liabilities are classified in this category of held for trading if acquired principally for the purpose of selling or repurchasing in the short-term. Derivatives are also categorized as financial instruments held for trading unless they are designated as hedges.
B. On a regular way purchase or sale basis, financial assets held for trading are recognized and derecognized using trade date accounting.
C. Financial assets at fair value through profit or loss are initially recognized at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in profit or loss. Derivative assets, that are linked to equity instruments which do not have a quoted market price in an active market and cannot be measured reliably at fair value, and that must be settled by delivery, of such unquoted equity instruments are presented in ‘financial assets measured at cost, if their fair value cannot be reliably measured. Derivative liabilities that are linked to equity instruments which do not have a quoted market price in an active market and cannot be measured reliably at fair value, and that must be settled by delivery of such unquoted equity instruments are presented in ‘financial liabilities measured at cost’, if their fair value cannot be reliably measured.
8) Available-for-sale financial assets
A. Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories.
B. On a regular way purchase or sale basis, available-for-sale financial assets are recognized and derecognized using trade date accounting.
C. Available-for-sale financial assets are initially recognized at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in other comprehensive income. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in ‘financial assets measured at cost’.
D. If there has been objective evidence of impairment, the Group will account for impairment. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring

after the impairment loss was recognized, then such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognized in profit or loss shall not be reversed through profit or loss. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

9) Notes and accounts receivable, other receivables and margin loans receivable

A. Notes and accounts receivable and margin loans receivable are claims resulting from the sales of goods or services; other receivables are receivables other than the above. Notes and accounts receivable and margin loans receivable are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method less provision for impairment loss.
B. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A provision for impairment of financial asset is established when there is objective evidence that it is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the fair value of the asset subsequently increases and the increase can be objectively related to an event occurring after the impairment loss being recognized in profit or loss, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss. Such recovery of impairment loss shall not make the asset’s carrying amount greater than its amortized cost without impairment loss being recognized. The recoveries of amounts are recognized in profit or loss.
10) Bonds sold under repurchase agreements and bonds purchased under resale agreements Bonds transactions under repurchase or resale agreements are stated at the amount of actual payment or receipt. When transactions of bonds with a condition of resale agreements occur, the actual payment or receipt shall be recognized in ‘bonds purchased under resale agreements’ under current assets. When transactions of bonds with a condition of repurchase agreements occur, the actual payment or receipt shall be recognized in ‘bonds sold under repurchase agreements’ under current liabilities. Any difference between the actual payment/receipt and predetermined redemption (repurchase) price is recognized in interest income or interest expense.
11) Financial assets at cost – non-current
A. Financial assets measured at cost are initially recognized at fair value plus transaction costs of acquisition. On a regular way purchase or sale basis, financial assets measured at cost are recognized and derecognized using trade date accounting.
B. If the variability in the range of reasonable fair value estimate vary significantly, and the probabilities of the various estimates cannot be reasonably measured, the financial assets should be measured at cost.
C. With respect to impairment assessment of the said financial asset, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognized in profit or loss. Impairment loss recognized for this category shall not be reversed subsequently. Impairment loss is recognized by adjusting the carrying amount of the asset directly.
12) Impairment of financial assets
A. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more

events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

B. The criteria that the Group uses to determine whether there is an objective evidence of an impairment loss is as follows:
- (A) Significant financial difficulty of the issuer or debtor;
- (B) A breach of contract, such as a default or delinquency in interest or principal payments;
- (C) The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granted the borrower a concession that a lender would not otherwise consider;
- (D) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
- (E) The disappearance of an active market for that financial asset because of financial difficulties;
- (F) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;
- (G) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered; or
- (H) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
C. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made in accordance with aforesaid accounting policies of various financial assets.
13) Derecognition of financial instruments
A. Derecognition of financial assets

The Group derecognizes a financial asset when one of the following conditions is met:

  - (A) The contractual rights to receive cash flows from the financial asset expire.

  - (B)The contractual rights to receive cash flows from the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.

  - (C)The contractual rights to receive cash flows of the financial asset have been transferred; however, the Group has not retained control of the financial asset.

B. Derecognition of financial liabilities
- A financial liability is derecognized when the obligation under the liability specified in the contract is discharged or cancelled or expires.
14) Offsetting financial instruments
Financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.
15) Investments accounted for under the equity method

A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognized at cost.
B. The Group’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred statutory/constructive obligations or made payments on behalf of the associate.
C. When changes in an associate’s equity that are not recognized in profit or loss or other comprehensive income of the associate and such changes not affecting the Group’s ownership percentage of the associate, the Group recognizes its share of change in equity of the associate in ‘capital surplus’ in proportion to its ownership.
D. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
E. In the case that an associate issues new shares and the Group does not subscribe or acquire new shares proportionately, which results in a change in the Group’s ownership percentage of the associate but maintains significant influence on the associate, then ‘capital reserve’ and ‘investments accounted for under the equity method’ shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Group’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.
F. Upon loss of significant influence over an associate, the Group remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognized in profit or loss.
G. When the Group disposes its investment in an associate, if it loses significant influence over this associate, the amounts previously recognized in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it still retains significant influence over this associate, then the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach.
H. When the Group disposes its investment in an associate, if it loses significant influence over this associate, the amounts previously recognized as capital surplus in relation to the associate are transferred to profit or loss. If it still retains significant influence over this associate, then the amounts previously recognized as capital surplus in relation to the associate are transferred to profit or loss proportionately.
16) Property and equipment
A. Property and equipment are initially recorded at cost. Borrowing costs incurred during

the construction period are capitalized.

B. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
C. Land is not depreciated. Other property and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of property and equipment are as follows:

ows:
Buildings Furniture and fixtures Computer equipment Electrical equipment	Useful lives
	5~50 years 4~10 years 3~5 years 3~10 years
Leasehold improvements	5 years

D. When an asset is sold or retired, the cost and accumulated depreciation are removed from the respective accounts and the resulting gain or loss is included in current operations.
17) Investment property
A. Investment property of the Group is the property held either to earn long-term rental income or for capital appreciation or for both.
B. Part of the property may be held by the Group for self-use purpose and the remaining are used to generate rental income or capital appreciation. If the property held by the Group can be sold individually, then the accounting treatment should be made respectively. If each part of the property cannot be sold individually and the self-use proportion is not material, then the property is deemed as investment property in its entirety.
C. When the future economic benefit related to the investment property is highly likely to flow into the Group and the costs can be reliably measured, the investment property shall be recognized as assets. When the future economic benefit generated from subsequent costs is highly likely to flow into the entity and the costs can be reliably measured, the subsequent expenses of the assets shall be capitalized. All maintenance cost are recognized in profit or loss as incurred.
D. Investment property is subsequently measured using the cost model. Depreciated cost is used to calculate amortization expense after initial measurement. The depreciation method, remaining useful life and residual value should apply the same rules as applicable for property and equipment.

18) Intangible assets

The cost of computer software is amortized using the straight-line method over the useful lives based on acquisition cost, with an amortization period of 4 years.

19) Impairment of non-financial assets

The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss.

20) Liabilities reserve, contingent liabilities and contingent assets

A. The Group recognizes liabilities when all of the following three conditions are met: (A) Present obligation (legal or constructive) has arisen as a result of past event; (B) The outflow of economic benefits is highly probable upon settlement; and (C) The amount is reliably measurable.
If there are several similar obligations, the outflow of economic benefit as a result of settlement is determined based on the overall obligation. Liability reserve should be recognized when the outflow of economic benefits is probable in order to settle the obligation as a whole even if the outflow of economic benefits from any one of the obligation is remote.

Provisions for liabilities are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation.

B. Contingent liability is a possible obligation that arises from past event, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. Or it could be a present obligation as a result of past event but the payment is not probable or the amount cannot be measured reliably. The Group did not recognize any contingent liabilities but made appropriate disclosure in compliance with relevant regulations.
C. Contingent asset is a possible obligation that arises from past event, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. The Group did not recognize any contingent assets and made appropriate disclosure in compliance with relevant regulations when the economic inflow is probable.
21) Employee benefits
A. Short-term employee benefits
Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognized as expenses in that period when the employees render service.
B. Termination benefits
Termination benefit is paid to the employees who are eligible for retirement and terminated or voluntarily dismissed in exchange of termination benefit. The Group has made commitments in the formal detailed employment termination plan which is irrevocable, and shall recognize liabilities and expenses when providing termination benefit to employees who voluntarily resign as a result of encouragement. Termination benefit not paid in 12 months after the balance sheet date should be discounted.
C. Pensions

(A) Defined contribution plans
Effective July 1, 2005, the Group established the defined contribution plan for employees of R.O.C. nationality. The employees have the option to participate in the New Plan. Under the New Plan, the Company contributes monthly an amount equivalent to 6% of employees’ salaries to the employees’ personal pension accounts with the “Bureau of Labor Insurance”. Benefits accrued under the New Plan are portable upon termination of employment. Prepaid pension assets can only be recognized when there is a cash refund or elimination in the future accrued pension liabilities.
(B) Defined benefit plans

In a defined benefit plan, the pension paid is determined based on the amount that an employee shall receive upon retirement, which could vary with age, work seniority and salary compensations. The Group recognizes the employee benefit liabilities reserve in the consolidated balance sheet based on the net amount of actuarial present value of defined benefit obligation less the fair value of fund, which is adjusted with the net of past service cost recognized as liabilities. Defined benefit obligation is assessed annually using projected unit credit method by the actuary. The present value of the defined benefit obligation is determined using the market yield of government bonds of a currency and maturity consistent with the currency and maturity of the defined benefit obligation to discount the future cash flow.

Actuarial pension gain or loss of defined benefit plans is recognized in other comprehensive income in the period as incurred.

Past service costs are recognized immediately in profit or loss if vested immediately; if not, the past service costs are amortized on a straight-line basis over the vesting period.

D. Employees’ bonus and directors’ and supervisors’ remuneration
- Employees’ bonus and directors’ and supervisors’ remuneration are recognized as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. However, if the accrued amounts for employees’ bonus and directors’ and supervisors’ remuneration are different from the actual distributed amounts as resolved by the stockholders at their stockholders’ meeting subsequently, the differences should be recognized based on the accounting for changes in estimates.
22) Revenues and expenses

The Group’s revenues and expenses are recognized as incurred, which mainly include:

A. Gains (losses) on sale of securities, securities brokerage fees, and commissions on brokerage and trading are recognized on the transaction date.
B. Underwriting fees and related service charges: application fees are recognized upon collection; underwriting fees and service charges are recognized when the contract is completed.
C. Gains (losses) on futures contracts: The margin of futures transaction is recognized as cost. Costs and expenses are recognized as incurred.
D. Operating expenses: operating expenses refer to required expenses invested in the Group’s operations, which primarily include employee benefit expense, depreciation and amortization, and other business and administrative expenses.
23) Income tax
A. Current income tax

Income tax payable (refundable) is calculated on the basis of the tax laws enacted in the countries where a company operates and generates taxable income. Except for the transactions or other matters directly recognized in other comprehensive income or equity, in which cases the related income taxes in the period are recognized in other comprehensive income or directly derecognized from equity, all the others should be recognized as income or expense for the period.

B. Deferred income tax
Deferred income tax assets and liabilities are measured based on the tax rate of the anticipated period that the future assets realization or the liabilities settlement requires, which is based on the effective or existing tax rate at the consolidated balance sheet date. The carrying amounts and temporary differences of assets and liabilities included in the consolidated balance sheet are calculated using the liability method and recognized as deferred income tax. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit (loss). Deferred income tax assets are recognized only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. If the future taxable income is probable to provide unused loss carryforwards or deferred income tax credit which can be realized in the future, the proportion of realization is deemed as deferred income tax asset.
C. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions for income tax liabilities where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.
D. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realize the asset and settle the liability simultaneously.

24) Share capital

Incremental costs directly attributable to the issuance of new shares are shown as a deduction, net of tax, from equity. Dividends from common stocks are recognized as equity in the financial period in which they are approved by the Group’s shareholders. If the date of dividends declared is later than the consolidated balance sheet date, common stocks are disclosed in the subsequent events.

25) Earnings per share
A. Earnings per share is calculated by dividing net income by the weighted average number of shares outstanding during the year after taking into consideration the retroactive effect of stock dividends and capital reserve capitalized.
B. When the Group calculates earnings per share, basic earnings per share and diluted earnings per share for all potential ordinary shares shall all be disclosed in accordance

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with IAS 33 “Earnings per share”.

26) Operating segment
The Group’s operating segments are reported in a manner consistent with the internal reports provided to the chief operating decision-maker. The chief operating decision-maker, who may be a person or a team, is responsible for allocating resources and assessing performance of the operating segments.
5.CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY
1) As the consolidated financial statements of the Group may be affected by the adoption of accounting policy, accounting estimate and assumption, the Group’s management shall properly exercise its professional judgment, estimates, and assumptions on the information of the key risks that is hardly obtained from other resources and could affect the carrying amounts of financial assets and liabilities in the next fiscal year while adopting critical accounting policies as stated in Note 4. Estimates and assumptions of the Group are the best estimates made in compliance with IFRSs as endorsed by the FSC. Estimates and assumptions are made based on past experience and other factors deemed relevant; however, the actual results may differ from the estimates. The Group evaluates the estimates and assumptions on an ongoing basis and recognizes the adjustment of the estimates only in the period which is affected by the adjustment. If the adjustment simultaneously affects both the current and future periods, it should be recognized in both periods.
2) Relevant information on key assumptions to be made in the future, key sources of assumption uncertainty made at balance sheet date, and assumptions and estimates that may cause key risks that could affect the carrying amounts of financial assets and liabilities are as follows: A. Fair value of financial instruments Financial instruments with no active market or quoted price use valuation technique to determine the fair value. Under such condition, fair value is assessed through the observable information or models of similar financial instruments. If there is no observable input available in a market, the fair value of financial instrument is assessed through appropriate assumptions. When valuation models are adopted to determine the fair value, all the models should be calibrated to ensure that the output can actually reflect actual information and market price. Models should try to take only observable information as much as possible.
B. Reliability of deferred income tax assets
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. Assessment of the reliability of deferred income tax assets involves critical accounting judgments and estimates of the management, including the assumptions of expected future sales revenue growth rate and profit rate, tax exempt duration, available tax credits, tax planning, etc. Any variations in global economic environment, industrial environment, and laws and regulations might cause material adjustments to deferred income tax assets.
C. Calculation of accrued pension obligations
When calculating the present value of defined pension obligations, the Group must apply judgments and estimates to determine the actuarial assumptions on balance sheet date, including discount rates and expected rate of return on plan assets. Any changes in these assumptions could significantly impact the carrying amount of defined pension

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obligations.

6.DETAILS OF SIGNIFICANT ACCOUNTS 1) Cash and cash equivalents

obligations. 6. DETAILS OF SIGNIFICANT ACCOUNTS 1) Cash and cash equivalents
Petty cash Checking deposits Current deposits: Deposits denominated in NTD	December 31, 2013 $ 173 560,334 517,306	December 31, 2012 $ 170 525,304 560,630
Deposits denominated in foreign currencies Time deposits Petty cash Checking deposits Current deposits: Deposits denominated in NTD Deposits denominated in foreign currencies Time deposits	637,181 3,572,490 $ 5,287,484	905,687 2,941,635 $ 4,933,426 January 1, 2012 $ 215 226,226 364,291 436,503 2,974,930 $ 4,002,165

As of December 31, 2013, December 31, 2012 and January 1, 2012, the annual interest rates of time deposits, including foreign time deposits were 0.22% ~ 3.7%, 0.22% ~ 1.365%, and 0.35% ~ 1.90%, respectively.

2) Financial assets at fair value through profit or loss

Current items: Open-end funds and money market instruments and securities investment by brokers Open-end mutual funds beneficiary certificates Overseas stocks and funds Money market instruments Listed (TSE and OTC) stocks Subtotal Adjustment of open-end mutual funds beneficiary certificates ( Total Trading securities-dealer Listed (TSE and OTC) stocks Government bonds Corporate bonds	December 31, 2013 $ 416,843 229,039 140,003 36,024 821,909 49,573 ) ( 772,336 3,066,132 956,471 1,203,650	December 31, 2012 $ 505,000 217,074 - - 722,074 49,762 ) 672,312 1,191,365 4,316,367 220,000

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	Convertible corporate bonds Emerging stocks Exchange traded funds Overseas stocks Subtotal Adjustment of trading securities - dealer Total	December 31, 2013 1,980,835 174,668 - 7,114,809 14,496,565 162,369 ( 14,658,934	December 31, 2012 2,012,191 173,771 45,298 5,747,553 13,706,545 40,189 ) 13,666,356
	Trading securities-underwriter Listed (TSE and OTC) stocks Convertible corporate bonds Subtotal Adjustment of trading securities - underwriter Total Trading securities-hedging Listed (TSE and OTC) stocks Convertible corporate bonds Warrants Exchange traded funds Others Subtotal	282,895 599,915 882,810 113,444 996,254 1,501,830 93,660 18,494 131,413 403 1745800	187,679 619,939 807,618 23,716 831,334 544,727 127,837 21,313 270,500 - 964377
Adjustment of trading securities - hedging Total Buy option-futures Futures guarantee deposits receivable Derivative financial instrument assets- OTC Total Non-current items: Trading securities - dealer - government bonds Adjustment of trading securities ( Total Current items: Open-end funds and money market instruments and securities investment by brokers Open-end mutual funds beneficiary certificates Overseas stocks and funds Securities investing Subtotal		,, 26,914 1,772,714 9,185 1,461,550 43,225 $ 19,714,198 $ 51,889 1,715 ) ( $ 50,174	, 29,600 993,977 12,627 1,559,320 55,268 $ 17,791,194 $ 52,001 1,116 ) $ 50,885 January 1, 2012 $ 390,000 226,306 3,838 620,144

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	Adjustment of open-end mutual funds beneficiary certificates ( Total Trading securities-dealer Listed (TSE and OTC) stocks Government bonds Corporate bonds	January 1, 2012 136,177 ) 483,967 690,702 6,453,767 1,499,296
	Convertible corporate bonds Emerging stocks Overseas stocks Subtotal Adjustment of trading securities - dealer ( Total Trading securities-underwriter Listed (TSE and OTC) stocks Convertible corporate bonds Subtotal Adjustment of trading securities - underwriter ( Total Tradin securities-hedin	1,831,857 246,153 1,266,976 11,988,751 84,790 ) 11,903,961 135,595 608,000 743,595 11,860 ) 731,735
ggg Listed (TSE and OTC) stocks Convertible corporate bonds Warrants Exchange-traded funds Subtotal Adjustment of trading securities - hedging ( Total Buy option-futures Futures guarantee deposits receivable Derivative financial instrument assets- OTC Total Non-current items: Trading securities - dealer - government bonds Adjustment of trading securities ( Total		298,313 221,008 54,281 63,291 636,893 16,460 ) 620,433 8,032 1,516,582 155,974 $ 15,420,684 $ 52,114 479 ) $ 51,635

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3) Available-for-sale financial assets

3)	Available-for-sale financial assets
	Current items: Trading securities - dealer Listed stocks Exchange traded funds Subtotal	December 31, 2013 $ 322,120 - 322,120	December 31, 2012 $ 61,833 155,083 216,916
	Adjustment of trading securities - dealer Current items: Trading securities - dealer Listed stocks Adjustment of trading securities - dealer Trading securities - underwriter Listed stocks Adjustment of trading securities - dealer	27,750 $ 349,870	1,134 $ 218,050 January 1, 2012 $ 494,678 5,387 500,065 240,261 6,407 246,668 $ 746,733
4)	Bonds purchased under resale agreements Overseas bonds Government bonds	December 31, 2013 $ 184,897	December 31, 2012 $ - January 1, 2012 $ 230,044

A. The above bonds purchased under resale agreements as of December 31, 2013, December 31, 2012 and January 1, 2012 were due within one year and were contracted to be resold at the agreed-upon price plus interest charge on the specific date after transaction. The total resale amounts were $184,881, $0 and $230,066, respectively. The annual interest rates of every currency were as follows:

	Currency NTD Foreign currencies(Note) Currency NTD Foreign currencies(Note)	December 31, 2013 - -0.10% ~ -0.3125%	December 31, 2012
			- - January 1, 2012
			0.76% ~ 0.78% -

(Note)：Foreign currencies include USD and Euro.

B. The fair value of bonds purchased under resale agreements’ collateral as of December 31, 2013, December 31, 2012 and January 1, 2012 were $173,043, $0, and $288,564, respectively.

5) Margin loans receivable

Margin loans receivable were secured by the securities purchased by customers under

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margin loans. The annual interest rate was adjusted to 6.4% starting from November 1, 2012, and the annual interest rates before October 31, 2012 and the year 2011 were both 6.525%.

6) Customer margin account

Customer margin account
Bank deposit F li h	December 31, 2013 $ 3,738,046 842846	December 31, 2012
		$ 4,745,807 599076
utures cearng ouse Other futures commission merchant Securities Total Bank deposit Futures clearing house Other futures commission merchant Securities Total	, 333,105 3,437 $ 4,917,434	, 284,022 8,757
		$ 5,637,662
		January 1, 2012
		$ 4,437,339 529,092 267,214 1,162
		$ 5,234,807

The Group’s re-consigned upstream future commission merchant for foreign futures trade, MF Global (S) Pte. Ltd., Taiwan branch’s parent company has filed for bankruptcy protection in USA. As a result, the headquarters, MF Global (S) Pte. Ltd., also initiated the liquidation procedures on November 1, 2011. MF Global (S) Pte. Ltd. has transferred clients’ subscriptions to other futures commission merchants and suspended the customer margin deposit account. As of December 5, 2013, self-owned capital amounting to USD6,177.08 and customer margin deposit amounting to USD1,562,222.52 were fully recovered with non-operating income amounting to USD128,182.44 recognized under other gains and losses.

7) Accounts receivable

other gains and losses. Accounts receivable
Accounts receivable - non related parties Settlement price receivable - brokers Settlement price Interest receivable Settlement price receivable - dealer Others Accounts receivable - non related parties Settlement price receivable - brokers Settlement price Interest receivable Settlement price receivable - dealer Others	December 31, 2013 $ 5,755,424 937,251 244,600 1,363,971 78,383 $ 8,379,629	December 31, 2012
		$ 4,044,062 789,721 258,252 336,023 71,774
		$ 5,499,832
		January 1, 2012
		$ 2,741,315 697,343 349,976 273,090 72,457
		$ 4,134,181

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8) Other receivables

8)	Other receivables
	Other receivables-FX Swap Interest receivables Others Interest receivables	December 31, 2013 $ 101,870 30,220 41,233 $ 173,323	December 31, 2012 $ 340,258 25,173 47,066 $ 412,497 January 1, 2012 $ 18315
9)	Others Other current assets Pending settlements Pledged time deposits Deposits-in for foreign currency securities Others Pending settlements Pledged time deposits Deposits-in for foreign currency securities Others	December 31, 2013 $ 739,384 1,738,910 579,598 239,565 $ 3,297,457	, 64,939 $ 83,254 December 31, 2012 $ 674,122 1,765,581 1,184,108 27,728 $ 3,651,539 January 1, 2012 $ 504,783 1,899,223 1,672,841 21,199
10) Financial assets at cost–non-current Taiwan Depository & Clearing Corp. Taiwan Futures Exchange Hua Liu Venture Capital Corporation Cathay Venture Capital I Taiwan Integrated Shareholder Service Company Total Taiwan Depository & Clearing Corp. Taiwan Futures Exchange Hua Liu Venture Capital Corporation Cathay Venture Capital I Taiwan Integrated Shareholder Service Company Total		December 31, 2013 $ 2,450 35,115 17,391 1,408 15,395 $ 71,759	$ 4,098,046 December 31, 2012 $ 2,450 34,400 17,391 13,608 15,395 $ 83,244 January 1, 2012 $ 2,450 34,400 32,174 13,608 15,395 $ 98,027

Assets above are measured at cost as the variability in the range of reasonable fair value estimate could vary significantly and the probabilities of the various estimates cannot be reasonably measured.

As of December 31, 2013 and 2012, investment values of certain investees above were impaired based on the Company’s assessment. Details are as follows:

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For the year ended December 31, 2013 Cathay Venture Capital I $ 5,600 11) Investments accounted for under the equity method December 31, 2013 Uni-President Assets Management Corp. $ 401,608 Uni-President Assets Management Corp.	For the year ended December 31, 2012
	$ -
	December 31, 2012
	$ 407,188
	January 1, 2012 $ 385,300

B. The Group’s share of its associates’ profits or losses recognized in long-term equity investment accounted for under the equity method for the years ended December 31,
2013 and 2012 was $55,919 and $71,805, respectively.
C. The financial information of the Group’s principal associates is summarized as follows:

	follows:
						For the year ended
		December 31, 2013				December 31, 2013	December 31, 2013
		Assets		Liabilities		Revenue Profit	% interest held
	Uni-President Assets
	Management Corp. $	738,926	$	128,270 $		756,155 $ 143,500	38.69%
						For the year ended
		December 31, 2012				December 31, 2012	December 31, 2012
		Assets		Liabilities		Revenue Profit	% interest held
	Uni-President Assets
	Management Corp. $	765,698	$	139,623	$	602,487 $ 186,198	38.69%
		January		1, 2012		January 1, 2012
		Assets		Liabilities		% interest held
	Uni-President Assets
	Management Corp. $	710,475	$	141,604		38.69%
12)	Property and equipment

								Leasehold
		Land		Buildings		Equipment	improvements			Total
January 1, 2013
Cost	$	1,680,129	$	1,099,486	$	268,470	$	117,603	$	3,165,688
Accumulated
depreciation
and impairment		-	(	311,945 )	(	146,359 )	(	54,074 )	(	512,378 )
Total	$	1,680,129	$	787,541	$	122,111	$	63,529	$	2,653,310
From the year ended
December 31, 2013
January 1, 2013	$	1,680,129	$	787,541	$	122,111	$	63,529	$	2,653,310
Additions		-		620		14,286		2,723		17,629
Disposals		-		-	(	127)	(	275)	(	402)
Reclassifications		-		4,694		224		9,447		14,365
Depreciation		-	(	32,436 )	(	48,437 )	(	20,779 )	(	101,652 )
December 31, 2013	$	1,680,129	$	760,419	$	88,057	$	54,645	$	2,583,250
December 31, 2013
Cost	$	1,680,129	$	1,101,174	$	246,315	$	109,939	$	3,137,557
Accumulated
depreciation
and impairment		-	(	340,755 )	(	185,258 )	(	55,294 )	(	554,307 )
Total	$	1,680,129	$	760,419	$	88,057	$	54,645	$	2,583,250

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	January 1, 2012 Cost Accumulated depreciation and impairment Total From the year ended December 31, 2012	Land $ 1,680,129 - $ 1,680,129	Land $ 1,680,129 - $ 1,680,129	Buildings $ 1,107,662 ( 288,355 ) $ 819,307	Equipment $ 236,631 ( 121,077 ) $ 115,554	Equipment $ 236,631 ( 121,077 ) $ 115,554	Leasehold improvements $ 85,463 ( 43,195 ) $ 42,268	Total $ 3,109,885 ( 452,627 ) $ 2,657,258
	January 1, 2012 $ 1,680,129 $ 819,307 $ 115,554 $ 42,268 $ 2,657,258 Additions - 1,350 36,820 1,790 39,960 Disposals - - ( 193) - ( 193) Reclassifications - - 17,559 39,787 57,346 Depreciation - ( 33,116 ) ( 47,629 ) ( 20,316 ) ( 101,061 ) December 31, 2012 $ 1,680,129 $ 787,541 $ 122,111 $ 63,529 $ 2,653,310 December 31, 2012 Cost $ 1,680,129 $ 1,099,486 $ 268,470 $ 117,603 $ 3,165,688 Accumulated depreciation and impairment - ( 311,945 ) ( 146,359 ) ( 54,074 ) ( 512,378 ) Total $ 1,680,129 $ 787,541 $ 122,111 $ 63,529 $ 2,653,310 A. No interest was capitalized for property and equipment as of December 31, 2013 and 2012. B. The information on property and equipment pledged or restricted as of December 31, 2013, December 31, 2012 and January 1, 2012 is described in Note 8.
13) Investment property January 1, 2013 Cost Accumulated depreciation and impairment Total For the year ended December 31, 2013 January 1, 2013 Depreciation December 31, 2013 December 31, 2013 Cost Accumulated depreciation and impairment Total January 1, 2012 Cost Accumulated depreciation and impairment Total For the year ended December 31,			Land $ 198,099 - ( $ 198,099 $ 198,099 - ( $ 198,099 $ 198,099 - ( $ 198,099 Land $ 198,099 - ( $ 198,099			Buildings Total $ 107,076 $ 305,175 17,871 ) ( 17,871 ) $ 89,205 $ 287,304 $ 89,205 $ 287,304 2,100 )( 2,100 ) $ 87,105 $ 285,204 $ 107,076 $ 305,175 19,971 ) ( 19,971 ) $ 87,105 $ 285,204 Buildings Total $ 107,076 $ 305,175 15,771 ) ( 15,771 ) $ 91,305 $ 289,404

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	2012 January 1, 2012 Depreciation December 31, 2012 December 31, 2012 Cost Accumulated depreciation	Land $ 198,099 - ( $ 198,099 Land $ 198,099	Buildings Total $ 91,305 $ 289,404 2,100 )( 2,100 ) $ 89,205 $ 287,304 Buildings Total $ 107,076 $ 305,175	Buildings Total $ 91,305 $ 289,404 2,100 )( 2,100 ) $ 89,205 $ 287,304 Buildings Total $ 107,076 $ 305,175	Buildings Total $ 91,305 $ 289,404 2,100 )( 2,100 ) $ 89,205 $ 287,304 Buildings Total $ 107,076 $ 305,175

	and impairment Total	- ( $ 198,099	17,871 ) ( $ 89,205		17,871 ) $ 287,304

A. For the years ended December 31, 2013 and 2012, rental income from the lease of the investment property was $17,247, and $16,491, respectively, and direct operating expenses arising from the investment property was $3,521, and $3,159, respectively. Direct operating expenses arising from investment property that did not generate rental income was $0 and $668, respectively, and relevant depreciation charge was $2,100.
B.The fair value of investment property held by the Group as of December 31, 2013,December 31, 2012 and January 1, 2012 was $619,647, $600,519, and $475,762, respectively, which were assessed by external valuation experts using comparison approach and income approach.

14) Other noncurrent assets

approach and income approach. ) Other noncurrent assets
Operation guaranteed deposits	December 31, 2013 $ 842,000	December 31, 2012
		$ 842,000
Clearing and settlement fund Refundable deposits Deferred expenses Prepaid pension expenses Prepayment for equipment Operation guaranteed deposits Clearing and settlement fund Refundable deposits Deferred expenses Prepaid pension expenses Prepayment for equipment	306,030 39,958 15,486 42,433 21,251 $ 1,267,158	364,961 36,363 29,879 1,037 3,959
		$ 1,278,199
		January 1, 2012
		$ 842,000 505,941 57,997 33,579 1,572 18,263
		$ 1,459,352

15) Short-term loans

Refundable deposits Deferred expenses Prepaid pension expenses Prepayment for equipment ) Short-term loans		57,997 33,579 1,572 18,263 $ 1,459,352
Secured loans Unsecured loans Total Interest rates Secured loans Unsecured loans Total	December 31, 2013 $ 1,124,485 2,354,775 $ 3,479,260 0.95%~1.85%	December 31, 2012
		$ 2,397,141 1,419,195
		$ 3,816,336
		1.01%~1.25%
		January 1, 2012
		$ 2,106,490 1,514,397
		$ 3,620,887

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	December 31, 2013	December 31, 2013	December 31, 2013		December 31, 2012	December 31, 2012
Secured loans	$		1,124,485		$	2,397,141
Unsecured loans			2,354,775			1,419,195
Total	$		3,479,260		$	3,816,336
Interest rates						0.95%~1.50%
16) Commercial papers payable
	December 31, 2013				December 31, 2012
Face value		$	6,950,000		$	2,000,000
Less: discount on commercial papers
payable	(		2,155 ) (			361 )
Total		$	6,947,845		$	1,999,639
Interest rates			0.63%~0.77%			0.80%~0.875%
						January 1, 2012
Face value					$	1,500,000
Less: discount on commercial papers
payable				(		219 )
Total					$	1,499,781
Interest rates						0.79%~0.87%
The commercial papers payable were	secured		by the bills-financing institutions and
banks.

17) Financial liabilities at fair value through profit or loss-current	17) Financial liabilities at fair value through profit or loss-current	17) Financial liabilities at fair value through profit or loss-current
	December 31, 2013			December 31, 2012
Investments in bonds with resale agreements
- short sales	$	323,980		$	-
Valuation adjustment of financial assets held
for trading	(	2,557	)		-
Subtotal		321,423			-
Liabilities on sale of borrowed securities -
hedged		39,719			148,617
Valuation adjustment on liabilities on sale of
borrowed securities - hedged		944			2,879
Liabilities on sale of borrowed securities -
non-hedged		46,705			-
Valuation adjustment on liabilities on sale of
borrowed securities - non-hedged		55			-
Subtotal		87,423			151,496
Liabilities on covering of bonds		397,889			-
Valuation adjustment on covering of bonds	(	114 )			-
Subtotal		397,775			-
Issuance of call ( put ) warrants		6,173,925			7,343,510
(Gain) loss on price fluctuation		281,463	(		1,351,547 )
Market value (A)		6,455,388			5,991,963
Warrants redeemed	(	5,835,702	) (		7,052,979)
(Gain) loss on price fluctuation	(	331,026	)		1,203,431

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Market value (B) ( Warrants - net (A+B) Sell option - TAIFEX Derivative financial liabilities - OTC Total Liabilities on sale of borrowed securities - hedged	Market value (B) ( Warrants - net (A+B) Sell option - TAIFEX Derivative financial liabilities - OTC Total Liabilities on sale of borrowed securities - hedged	6,166,728 )( 288,660 11,660 125,213 $ 1,232,154	5,849,548 ) 142,415 28,005 127,040 $ 448,956 January 1, 2012 $ 178567
, Valuation adjustment on liabilities on sale of borrowed securities - hedged ( 14,285 ) Subtotal 164,282 Issuance of call ( put ) warrants 7,271,841 (Gain) loss on price fluctuation ( 2,526,876 ) Market value (A) 4,744,965 Warrants redeemed ( 6,879,139 ) (Gain) loss on price fluctuation 2,221,958 Market value (B) ( 4,657,181 ) Warrants - net (A+B) 87,784 Sell option - TAIFEX 1,201 Derivative financial liabilities - OTC 173,970 Total $ 427,237 Among the warrants issued by the Group, except for contract-based warrants which are Etl t ll th t Aitl t Wt
18)	uropean-sye warrans, a oer warrans are mercan-sye warrans. arrans are stated as liabilities for issuance of warrants at issuance price prior to expiration. Upon repurchase of warrants after issuance, the repurchased amounts are recognized as warrants repurchase and charged as a deduction to liabilities for issuance of warrants. The warrants have six to twelve months exercise period from the date of issuance. The issuer has the option to settle either by cash or stock delivery. Bonds sold under repurchase agreements
	Government bonds Corporate bonds Foreign bonds Total Government bonds Corporate bonds Foreign bonds Total	December 31, 2013 $ 1,013,761 - 5,258,354 $ 6,272,115	December 31, 2012
			$ 4,513,568 220,000 3,246,145
			$ 7,979,713
			January 1, 2012
			$ 7,062,746 1,500,015 53,512
			$ 8,616,273

	December 31, 2013	December 31, 2013	December 31, 2012	December 31, 2012
Government bonds	$	1,013,761	$	4,513,568
Corporate bonds		-		220,000
Foreign bonds		5,258,354		3,246,145
Total	$	6,272,115	$	7,979,713
				January 1, 2012
Government bonds			$	7,062,746
Corporate bonds				1,500,015
Foreign bonds				53,512
Total			$	8,616,273

The above bonds sold under repurchase agreements as of December 31, 2013, December 31, 2012 and January 1, 2012 were due within one year and were contracted to be repurchased at the agreed-upon price plus interest charge on the specific date after the transaction. The total repurchase amounts were $6,286,603 $7,987,973 and $8,618,119, respectively, and the annual interest rates in every currency were shown as follows: Currency December 31, 2013 December 31, 2012 NTD 0.58%~0.59% 0.60%~0.82%

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Foreign currencies (Note) 0.05556%~3.31111% Currency NTD Foreign currencies (Note) Note: Foreign currencies include AUD, EURO, and USD. 19) Accounts payable December 31, 2013 Settlement accounts payable - brokered	Foreign currencies (Note) 0.05556%~3.31111% Currency NTD Foreign currencies (Note) Note: Foreign currencies include AUD, EURO, and USD. 19) Accounts payable December 31, 2013 Settlement accounts payable - brokered	0.19%~3.83% January 1, 2012 0.65%~0.90% 1.22% December 31, 2012


trading Settlement proceeds Settlement accounts payable-operating Accounts payable- foreign bonds Others Total Settlement accounts payable - brokered trading Settlement proceeds Settlement accounts payable-operating Others Total	$ 6,460,821 650,318 537,504 881,500 67,995	$ 4,818,640 383,690 128,944 348,116 50,222 $ 5,729,612 January 1, 2012 $ 3,526,770 237,274 35,068 22,930 $ 3,822,042
	$ 8,598,138

20) Other payables Salary and bonus payable Employees’ bonus and directors’ compensation payable Other payables -Fx Swap Others Salary and bonus payable Employees’ bonus and directors’ compensation payable Others 21) Other financial liabilities-current Equity-linked notes (ELN) - Options Principal guaranteed notes (PGN) - fixed income Total Equity-linked notes (ELN) - Options	December 31, 2013	December 31, 2012 $ 427,200 39,386 340,258 332,140 $ 1,138,984 January 1, 2012 $ 521,209 18,160 248,859 $ 788,228 December 31, 2012 $ 41,600 79,997 $ 121,597 January 1, 2012 $ 33,500
	$ 399,838 55,314 101,867 394,267
	$ 951,286
	December 31, 2013
	$ 53,400 39,998
	$ 93,398

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Principal guaranteed notes (PGN) - fixed income Total	December 31, 2013	December 31, 2012
		49,998
		$ 83,498

The Group deals in equity linked products and combines fixed income instruments with call or put options. These products are categorized into ELN (Equity-Linked Notes) and PGN (Principal Guaranteed Notes). On trade date, the contracted amounts are collected in full from the counterparties. The payout amount on maturity will depend on the price fluctuation of the instruments linked to these contracts and be calculated as trading price less option strike price on maturity. All the linked products are financial instruments under the supervision of the SFB (Securities and Futures Bureau). 22) Other liabilities-non-current

under the supervision of the SFB (Securities and Other liabilities-non-current	Futures Bureau).
Accrued pension obligations Guarantee deposits received Total Accrued pension obligations Guarantee deposits received Total	December 31, 2013 $ 5,490 2,912 $ 8,402	December 31, 2012
		$ 11,161 4,846
		$ 16,007
		January 1, 2012
		$ 123,505 4,533
		$ 128,038

23) Pension plan A. Defined benefit plans

(A) The Group has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 46 months prior to retirement. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. The Group contributes monthly an amount which ranges between 1.2% and 7.2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Under the defined benefit pension plan, the Group recognized the pension costs for the years ended December 31, 2013 and 2012 in the statement of comprehensive income in the amount of $6,226 and $9,394, respectively.

(B) The amounts recognized in the balance sheet are determined as follows:

Present value of funded obligations Fair value of plan assets ( Net liability (asset) in the balance sheet ( Present value of funded obligations Fair value of plan assets Accrued pension liability	December 31, 2013 $ 635,385 672,328 ) ( $ 36,943 ) (	December 31, 2012
		$ 616,290 606,166 ) $ 10,124 January 1, 2012 $ 669,647 547,714 ) $ 121,933

114

Present value of defined benefit
obligation at January 1

Current service cost
Interest cost
Actuarial gains and losses
Benefits paid
(
Present value of defined benefit

For the year ended
December 31, 2013
For the year ended
December 31, 2012
$ 616,290 $ 669,647
6,074
7,261
9,244
11,718
7,806 (
61,574 )

4,029
) (
10,762
)

obligation at December 31
$ 635,385
$ 616,290
(D) Changes in fair value of plan assets are as follows:
For the year ended
December 31, 2013
For the year ended
December 31, 2012
Fair value of plan assets at January 1 $ 606,166 $ 547,714
Expected return on plan assets
9,092
9,585
Actuarial losses
(
1,951 ) (
4,619 )
Employer contributions
63,050
64,248
Benefits paid
(
4,029
) (
10,762
)
Fair value of plan assets at December
31
$ 672,328
$ 606,166
(E) Amounts of expenses recognized in comprehensive income statements are as
follows:
For the year ended
Db 31 2013
For the year ended
Db 31 2012

ecemer ,
ecemer ,
Current service cost
$ 6,074 $ 7,261
Interest cost
9,244
11,718
Expected return on plan assets
(
9,092
) (
9,585
)
Current pension costs
$ 6,226
$ 9,394
Details of cost and expenses recognized in comprehensive income statements are
as follows:
For the year ended
December 31, 2013
For the year ended
December 31, 2012
Operating expenses
$ 6,226
$ 9,394
(F) Actuarial gains and losses recognized in other comprehensive income are as
follows:
For the year ended
December 31, 2013
For the year ended
December 31, 2012
Recognition for current period
$ 9,756
($ 56,955
)
Accumulated amount
($ 47,199
) ($ 56,955
)

(G) The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements

115

shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. The constitution of fair value of plan assets as of December 31, 2013 and 2012 is given in the Annual Labor Retirement Fund Utilisation Report published by the government.

Expected return on plan assets was a projection of overall return for the obligations period, which was estimated based on historical returns and by reference to the status of Labor Retirement Fund utilisation by the Labor Pension Fund Supervisory Committee and taking into account the effect that the Fund’s minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks.

(H) The principal actuarial assumptions used were as follows:

reference to the status of Labor Retirement Fund utilisation by the Labor Pension Fund Supervisory Committee and taking into account the effect that the Fund’s minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. (H) The principal actuarial assumptions used were as follows:	reference to the status of Labor Retirement Fund utilisation by the Labor Pension Fund Supervisory Committee and taking into account the effect that the Fund’s minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. (H) The principal actuarial assumptions used were as follows:	reference to the status of Labor Retirement Fund utilisation by the Labor Pension Fund Supervisory Committee and taking into account the effect that the Fund’s minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. (H) The principal actuarial assumptions used were as follows:	reference to the status of Labor Retirement Fund utilisation by the Labor Pension Fund Supervisory Committee and taking into account the effect that the Fund’s minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. (H) The principal actuarial assumptions used were as follows:
For the year ended December 31, 2013 For the year ended December 31, 2012 Discount rate 2.00% 1.50% Future salary increases 2.50%~3.00% 2.50%~3.00% Expected return on plan assets 2.00% 1.50% For the year ended December 31, 2011 Discount rate 1.75% Future salary increases 2.50%~3.00% Expected return on plan assets 1.75% (I) Historical information of experience adjustments was as follows:
For the year ended December 31, 2013 For the year ended December 31, 2012 Present value of defined benefit obligation $ 635,385 $ 616,290 Fair value of plan assets ( 672,328 )( 606,166 ) (Surplus)/deficit in the contribution ($ 36,943 ) $ 10,124 Experience adjustments on plan liabilities ($ 15,003 )($ 85,733 ) Experience adjustments on plan assets ($ 1,951 )($ 4,619 )
	( ( ( (	$ 635,385 672,328 )( $ 36,943 ) $ 15,003 )( $ 1,951 )(	$ 616,290 606,166 ) $ 10,124 $ 85,733 ) $ 4,619 )

Assumptions regarding future mortality rate are set based on the Taiwan Standard Ordinary Experience Mortality Table (2011).

(J) Expected contributions to the defined benefit pension plans of the Group within one year from December, 2013 amounts to $63,509.

B. Defined contribution plans:

Effective from July 1, 2005, the Group established a defined contribution plan pursuant to the “Labor Pension Act”, which covers employees with R.O.C. nationality and those who chose or are required to apply the “Labor Pension Act”. The contributions are made monthly based on not less than 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The payment of pension benefits is based on the employees’ individual pension fund accounts and the cumulative profit in such accounts. The employees can choose to receive such pension benefits monthly or in lump sum. The pension costs under defined contribution pension plans of the Group for the years ended December 31, 2013 and 2012 were＄52,917 and $55,428, respectively.
C. President Securities (HK), President Wealth Management, and President Securities

116

(Nominee) have defined benefit pension plans in accordance with local laws, and recognized the current pension expenses by contributing to the accrued pension assets. President Securities (HK) recognized pension expenses of $2,094 and $1,493, respectively, for the years ended December 31, 2013 and 2012.

24) Equity
A. Common stock

As of December 31, 2013, the Company’s authorized capital was $15,000,000 with a par value of $10 (in dollars) per share. As of December 31, 2013, December 31, 2012 and January 1, 2012, the common stocks issued were 1,323,119 thousand shares, 1,323,119 thousand shares, and 1,284,582 thousand shares, respectively, and the outstanding common stocks were 1,323,119 thousand shares, 1,323,119 thousand shares, and 1,284,582 thousand shares, respectively.

Because the beginning and the ending outstanding shares for the year ended December 31, 2013 were the same, there was no need to reconcile. For the difference between the beginning and ending outstanding shares for the year ended December 31, 2012, the Company increased its capital by capitalizing the unappropriated earnings by distribution of stock dividends amounting to $231,225, equivalent to 23,122 thousand shares, and the capital surplus amounting to $154,150, equivalent to 15,415 thousand shares as resolved by the stockholders at the stockholders’ meeting dated June 22, 2012. The capital increase has been approved by the Securities and Futures Bureau of FSC with the effective date set on August 13, 2012.

B. Capital reserve
Pursuant to the R.O.C. Company Law, capital reserve arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided it should not exceed 10% of the paid-in capital each year. Capital reserve should not be used to cover accumulated deficit unless the legal reserve is insufficient.

As of December 31, 2013 and 2012, components of the Company’s capital surplus included share premium of $25,524, treasury share transactions of $230,152, and difference between proceeds from disposal of subsidiary and carrying amount of $440.

C. Legal reserve
Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as legal reserve. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company’s paid-in capital.
D. Special reserve

According to the “Rules Governing the Administration of Securities Firms”, 20% of the current year's earnings, after paying all taxes and offsetting prior years' operating losses, if any, shall be set aside as special reserve until the cumulative balance equals the total amount of paid-in capital. The special reserve shall be used exclusively to cover accumulated deficit or to increase capital and shall not be used for any other purpose. Such capitalization shall not be permitted unless the Company had already accumulated a special reserve of at least 50% of its paid-in capital stock and only half

117

of such special reserve may be capitalized.

In accordance with the regulations, the Company shall set aside an equivalent amount of special reserve from accumulated unappropriated retained earnings of the current year based on the decreased amount of equity. If there is any subsequent reversal of the decrease in equity, the earnings may be distributed based on the reversal proportion.

25) Unappropriated earnings and dividends policy

A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall be used to pay all taxes and offset prior years’ operating losses first, and then set aside as legal reserve, accounted for as 10% of the remaining amount, and special reserve, accounted for as 20% of the remaining amount. Upon provision or reversal of special reserve in accordance with the law, any remaining amount together with unappropriated earnings at beginning of the period shall be distributed according to the following resolution adopted at the shareholders’ meeting: 3% as directors’ and supervisors’ remuneration, 2% as employees’ bonus, and 95% as dividends to shareholders. Distribution shall not be made if the balance of distributable earnings is less than 5% of paid-in capital.
B. In addition, the total amount of dividends declared every year shall be at least 70% of distributable earnings, of which stock dividends shall be at least 50% and cash dividends shall be lower than 50%.
C. The Company may determine a better proportion of cash and stock dividends distribution based on its actual operating conditions and capital utilization plan for the following year.
D. The Company’s earnings distributions for 2012 and 2011 were resolved by the stockholders at the stockholders’ meeting dated June 19, 2013 and June 22, 2012, respectively. Details are as follows:

Legal reserve Special reserve Stock dividends Cash dividends Total		2012 Dividends per share (in dollars) $ 0.52		2011
	Amount $ 111,377 310,194 - 688,022 $ 1,109,593		Amount	Dividends per share (in dollars) $ 0.18
			$ 56,690 283,853 231,225 - $ 571,768

The Company distributed stock dividends from capital reserve of $0.12 per share, amounting to $154,150, equivalent to 15,415 thousand shares, as approved during the shareholders’ meeting on June 22, 2012.

E. Information on the appropriation of the Company’s earnings as resolved by the Board of Directors and approved by the shareholders would be posted in the “Market Observation Post System” on the Taiwan Stock Exchange official website. With respect to the earnings distribution for 2012 as resolved by the stockholders, actual distributed amount for employees’ bonus and directors’ and supervisors’ remuneration was $14,485 and $21,727, respectively, which were in agreement with those amounts accrued in 2012.
F. For the years ended December 31, 2013 and 2012, the accrued amounts for employees’ bonus was $20,613, and $14,485, respectively; and the accrued amounts

118

for directors’ and supervisors’ remuneration was $30,919, and $21,727, respectively. Aforesaid amounts were estimated based on certain percentages (prescribed by the Company's Articles of Incorporation) of net income in the current period after taking into account the legal reserve and other factors, and were accrued as operating expenses for the years ended December 31, 2013 and 2012, respectively.

G. The earnings distribution for 2013 as resolved by the Board of Directors on March 26, 2014 is set forth below:

	2014 is set forth below:
			2013 Dividends per share

Amount (in dollars) Legal reserve $ 101,321 Special reserve 202,641 Special reserve ( 286,895 ) Cash dividends 979,108 $ 0.74 $ 996,175 26) Brokerage handling fee revenue For the year ended December 31, 2013 For the year ended December 31, 2012 Revenues from brokered trading - TWSE $ 917,230 $ 1,070,346 Revenues from brokered trading - OTC 290,161 227,847 Revenues from brokered trading - Futures 500,863 485,958 Others 95,897 77,393 Total $ 1,804,151 $ 1,861,544
27) Revenues from underwriting business For the year ended December 31, 2013 For the year ended December 31, 2012 Revenues from underwriting securities on a firm commitment basis $ 39,149 $ 33,272 Others 31,259 55,761 Total $ 70,408 $ 89,033 28) Gain on trading of securities-dealer For the year ended December 31, 2013 For the year ended December 31, 2012 Dealer: - TAIEX $ 507,859 $ 217,589 - OTC 261,149 55,078 - Overseas trading 80,326 98,324 Subtotal 849,334 370,991 Underwriters: - TAIEX 78,227 36,064 - OTC 25,608 28,604 Subtotal 103,835 64,668 Hedging: - TAIEX 11,468 ( 48,470) - OTC 51,215 26,784 Subtotal 62,683 ( 21,686 ) Total $ 1,015,852 $ 413,973 With respect to information shown above, amounts recognized for trading of securities

119

generated from available-for-sale financial assets for the years ended December 31, 2013 and 2012 was $18,445 and $35,529, respectively.

29) Interest income

29) Interest income
Interest income from margin loans Interest income from bonds Others	For the year ended December 31, 2013	For the year ended December 31, 2012 $ 670,348 191,433 3,451
	$ 641,549 144,551 2,132
Total 30) Gain on valuation of securities-dealer Gain on sale of securities - dealer Gain on sale of securities - underwriting Gain on sale of securities - hedging Total 31) Gain on covering of borrowed securities and Gain from the bond investments under resale t	$ 788,232
	For the year ended December 31, 2013
	For the year ended December 31, 2013
	$ 77183
agreemens , Gain from securities borrowing transactions - warrants 4,665 3,328 Loss from covering - warrants ( 7,661) ( 5,929) Gain from securities borrowing transactions - dealer 20,796 4,434 Total $ 94,983 $ 2,606 32) Valuation gain or loss on borrowed securities and bonds with resale agreements-short sales For the year ended December 31, 2013 For the year ended December 31, 2012 Valuation gain from the bond investments under resale agreements $ 2,558 $ - Valuation (loss) gain from securities borrowing transactions - dealer ( 55) 15,297 Valuation loss from securities borrowing transactions - warrants ( 1,031) ( 13,700) Valuation gain (loss) from covering - warrants 2,966 ( 18,761 ) Total $ 4,438 ($ 17,164 ) 33) Gain on warrants issuance For the year ended December 31, 2013 For the year ended December 31, 2012 Gain on changes in fair value of call ( put ) warrant liabilities and redemption $ 120,886 $ 135,955

120

Loss on exercise of call ( put ) warrants before maturity Expenses arising out of issuance of call ( put ) warrants Total 34) Gain on derivative financial instruments Futures contract ains	( 52,030) ( 27,140) ( 51,308 )( 28,559 ) $ 17,548 ) $ 80,256 For the year ended December 31, 2013 For the year ended December 31, 2012 $ 426275$ 520977	( 52,030) ( 27,140) ( 51,308 )( 28,559 ) $ 17,548 ) $ 80,256 For the year ended December 31, 2013 For the year ended December 31, 2012 $ 426275$ 520977	( 52,030) ( 27,140) ( 51,308 )( 28,559 ) $ 17,548 ) $ 80,256 For the year ended December 31, 2013 For the year ended December 31, 2012 $ 426275$ 520977
	$ 426275
g Option trading losses Gain (loss) from asset swap options Others 35) Other operating income Income from securities lending Revenue from providing agency service for stock affairs Handling fee revenues from funds Dividend income Others Total	, , ( 230,502) ( 104,392) 8,192 ( 53,540) 2,955 ( 12,863 ) $ 206,920 $ 350,182 For the year ended December 31, 2013 For the year ended December 31, 2012 $ 20,546 $ 49,330 72,675 80,329 36,981 36,931 128,735 157,282 48,761 40,839 $ 307,698 $ 364,711
		$ 20,546 72,675 36,981 128,735 48,761 $ 307,698
36) Handling charges Brokerage handling fee expense Dealer handling fee expenses Refinancing processing fee expense Total 37) Financial expenses Repurchase agreement interest Loans interest Other interests Total 38) Employee benefits Salaries Labor and health insurance Pension Other employee benefits Total 39) Depreciation and amortization	For the year ended December 31, 2013		For the year ended December 31, 2012 $ 178,311 76,766 1,409 $ 256,486 For the year ended December 31, 2012 $ 72,643 66,502 12,215 $ 151,360 For the year ended December 31, 2012 $ 1,441,422 98,773 66,870 74,652 $ 1.681,717
	$ 169,753 105,389 1,023 $ 276,165 For the year ended December 31, 2013
	$ 42,253 72,753 11,832 $ 126,838 For the year ended December 31, 2013
		$ 1,466,376 103,840 61,236 82,252 $ 1,713,704

For the year ended For the year ended

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Depreciation Amortization Total 40) Other operating expenses Rentals Taxes	December 31, 2013	December 31, 2013	December 31, 2012 $ 103,161 8,369 $ 111,530 For the year ended December 31, 2012 $ 119,734 257438
	$ 103,752 10,795 $ 114,547 For the year ended December 31, 2013
		$ 115,513 328935
Computer information expenses Others Total 41) Other gains and losses Financial income Gains (losses) on disposal of investments Valuation (losses) gains from open-end funds and money market instruments Net currency exchange gains (losses) Other non-operating revenues and gains Total 42) Income tax AI t	, 154,005 386,435 $ 984,888 For the year ended December 31, 2013		, 152,705 411,836 $ 941,713 For the year ended December 31, 2012 $ 143,423 ( 13,874) 82,604 124,925 122,672 $ 459,750
	$ 144,364 18,818 ( 3,850) ( 24,262) 84,795 $ 219,865
. ncome ax expense a)Components of income tax expense: For the year ended December 31, 2013 For the year ended December 31, 2012 Current tax: Current tax on profits for the periods $ 121,555 $ 99,771 Over provision of prior year’s income tax 2,210 17,073 Prior year income tax underestimation ( 95 ) 91 Total current tax 123,670 116,935 Deferred taxes: Temporary differences 364 15,657 Total deferred taxes 364 15,657 Income tax expense $ 124,034 $ 132,592 b)The income tax (charge)/credit relating to components of other comprehensive income is as follows: For the year ended December 31, 2013 For the year ended December 31, 2012 Actuarial gains (losses) on defined benefit obligations ( $ 1,659) $ 9,682 B.Reconciliation between income tax expense and accounting profit: For the year ended December 31, 2013 For the year ended December 31, 2012 Tax calculated based on profit before tax and statutory tax rate $ 273,176 $ 238,900 Effects from items disallowed by tax 5,306 1,327	For the year ended December 31, 2013

122

	For the year ended	For the year ended	For the year ended	For the year ended	For the year ended
	December 31, 2013			December 31, 2012
regulation
Prior year income tax underestimation		2,210			17,073
Effects from tax exempt income	(	212,157	)	(	124,799 )
Minimum tax		55,594			-
Offshore income tax payment (refund)	(	95	)		91
Income tax expense		$ 124,034		$	132,592
C.Deferred income tax assets or liabilities		arising from temporary differences, loss
carryforwards, and investment tax credits are as follows:

Temporary differences: Deferred income tax assets Bad debts expense Others Subtotal Deferred income tax liabilities Others Subtotal Total		For the year ended December 31, 2013 Items recognized in Items recognized in other comprehensive January 1 profit or loss income December 31 $ 13,286 $ - $ - $ 13,286 24,851 13,550 1,779 40,180 $ 38,137 $ 13,550 $ 1,779 $ 53,466 $ 176 )($ 13,914 ) ($ 120 )($ 14,210 ) $ 176 )($ 13,914 ) ( 120 )( 14,210 ) $ 37,961 ($ 364 ) $ 1,659 $ 39,256	For the year ended December 31, 2013 Items recognized in Items recognized in other comprehensive January 1 profit or loss income December 31 $ 13,286 $ - $ - $ 13,286 24,851 13,550 1,779 40,180 $ 38,137 $ 13,550 $ 1,779 $ 53,466 $ 176 )($ 13,914 ) ($ 120 )($ 14,210 ) $ 176 )($ 13,914 ) ( 120 )( 14,210 ) $ 37,961 ($ 364 ) $ 1,659 $ 39,256	For the year ended December 31, 2013 Items recognized in Items recognized in other comprehensive January 1 profit or loss income December 31 $ 13,286 $ - $ - $ 13,286 24,851 13,550 1,779 40,180 $ 38,137 $ 13,550 $ 1,779 $ 53,466 $ 176 )($ 13,914 ) ($ 120 )($ 14,210 ) $ 176 )($ 13,914 ) ( 120 )( 14,210 ) $ 37,961 ($ 364 ) $ 1,659 $ 39,256
		January 1 $ 13,286 24,851 $ 38,137 $ 176 )( $ 176 )( $ 37,961 (	Items recognized in profit or loss $ - 13,550 $ 13,550 $ 13,914 ) $ 13,914 ) $ 364 )	Items recognized in other comprehensive income $ - 1,779 $ 1,779 ($ 120 ) ( 120 ) $ 1,659
	( (			( (
Temporary differences: Deferred income tax assets Bad debts expense Others Subtotal Deferred income tax liabilities Others Subtotal Total		For the year ended December 31, 2012 Items recognized in Items recognized in other comprehensive January 1 profit or loss income December 31 $ 13,286 $ - $ - $ 13,286 51,015 ( 16,387 ) ( 9,777 ) 24,851 $ 64,301 ($ 16,387 ) ($ 9,777 ) $ 38,137 $ 1,001 ) $ 730 $ 95 ($ 176 ) 1,001 ) 730 95 ( 176 ) $ 63,300 ($ 15,657 ) ($ 9,682 ) $ 37,961
		January 1 $ 13,286 51,015 ( $ 64,301 ( $ 1,001 ) 1,001 ) $ 63,300 (	Items recognized in profit or loss $ - 16,387 ) $ 16,387 ) $ 730 730 $ 15,657 )	Items recognized in other comprehensive income $ - ( 9,777 ) ($ 9,777 ) $ 95 95 ($ 9,682 )
	( (			( (

D. As of December 31, 2013, the Company’s income tax returns through 2011 have been assessed by the National Tax Authority. Income tax returns of the subsidiaries, President Futures, President Capital Management, President Personal Insurance Agency and President Insurance Agency have also been assessed through 2011.

E. Unappropriated earnings

Unappropriated earnings
1998 and onwards 1998 and onwards	December 31, 2013 $ 1,013,206	December 31, 2012
		$ 766,885
		January 1, 2012
		$ 122,078

F. Imputation tax system

a) As of December 31, 2013, December 31, 2012 and January 1, 2012, the balance of

123

the imputation tax credit account and the creditable tax rate are $640,034, $723,179, and $681,267, respectively.

  - b) Creditable tax rate = balance of imputation credit account / cumulative unappropriated balance of account

     - The imputation tax credit rate based on the appropriation of 2011 earnings was 21.07% in 2012; the imputation tax credit rate based on the appropriation of 2012 earnings is estimated to be 20.48% in 2013.

G. With respect to the income tax returns of the Company for 2008, 2010 and 2011, the Tax Authority assessed to increase income tax payable by $18,779. However, the Company disagreed with the assessments and had filed for administrative litigation. Moreover, the Company had recognized the income tax expense relating to the additional income tax payable.
43) Earnings per share

		Basic earnings per share Net income attributable to common shareholders Dilutive effect of common stock	For theyear ended December	For theyear ended December	For theyear ended December
			After tax $ 1,361,715	Weighted-average outstanding common shares (In thousands)
				1,323,119 1165
		equivalents El b
7.	mpoyee onus - , Diluted earnings per share $ 1,361,715 1,324,284 $ 1.03 For theyear ended December 31,2012 After tax Weighted-average outstanding common shares (In thousands) Earnings per share (In dollars) Basic earnings per share Net income attributable to common shareholders $ 1,170,034 1,323,119$ 0.88 Dilutive effect of common stock equivalents Employee bonus - 857 Diluted earnings per share $ 1,170,034 1,323,976 $ 0.88 RELATED PARTY TRANSACTIONS 1) Names and relationships of related parties Names of related parties Relationship with the Company UNI-President Enterprises Corp. Major shareholder Uni-President Assets Management Corp. Majority-owned subsidiory President Chain Store Corp. (PCSC) Affiliate company President Pharmaceutical Corporation Affiliate company Ton Yi Industrial Corp. Affiliate company	mpoyee onus Diluted earnings per share Basic earnings per share Net income attributable to common shareholders Dilutive effect of common stock	- , $ 1,361,715 1,324,284 For theyear ended December	,
				1,324,284
				Weighted-average outstanding common shares (In thousands)
					1,323,119 857
					1,323,976

	1)
		UNI-President Enterprises Corp. Uni-President Assets Management Corp. President Chain Store Corp. (PCSC) President Pharmaceutical Corporation Ton Yi Industrial Corp.

124

Names of related parties Relationship with the Company
President Tokyo Co., LTD. Affiliate company
Ttet Union Corp. Affiliate company
Prince Housing & Development Corp. Affiliate company(Note)
Note: The general manager of UNI-President Enterprises Corp. became the director of
Prince Housing & Development Corp. on June 18, 2013. Indirectly, the Group was the
related party in substance with Prince Housing & Development Corp. mutually.

2) Significant related party transactions and balances A. Handling charge revenue from sales of funds on behalf of others

Associates: Uni-President Assets Management Corp.	For the year ended December 31, 2013	For the year ended December 31, 2012
	$ 34,799	$ 34,453

The revenues were collected on a monthly basis in accordance with contract terms. B. Rent revenue

B.	Rent revenue
	Associates: Uni-President Assets Management Corp. Other related party President Pharmaceutical Corp. President Tokyo Co., Ltd. Others	Period		Deposit		For the years ended December 31
						2013	2012
		2011.05.01~2014.06.30 2012.08.01~2015.07.31 2012.04.01~2015.03.31 2013.01.01~2014.09.30		$ 512 110 - -	$	8,177 5,880 6,533 547	$ 8,177 4,556 6,528 711
					$	21,137	$ 19,972
C.	Stock custodian income Other related party: Uni-President Enterprise Corp. Prince Housing & Development Corp. President Chain Store Corp. (PCSC) Others		For the year ended December 31, 2013 $ 3,481 2,441 1,708 7,636 $ 15,266			For the year ended December 31, 2012 $ 3,726 2,289 1,799 5,934 $ 13,748

D. Purchases of trading securities – dealer

Other related parties： UNI-President Enterprises Corp. Ton Yi Industrial Corp. President Chain Store Corp. Ttet Union Corp. Prince Housing & Development Corp. Total Other related parties：	December 31, 2013 For year ended December 31, 2013 Ending Shares Ending Balance Gain (loss) 431 $ 22,213 ($ 1,328) 37 1,154 9,882 22 4,546 102 - - ( 68) - - ( 1,264 ) $ 27,913 $ 7,324 December 31, 2012 For year ended December 31, 2012 Ending Shares Ending Balance Gain (loss)
	Ending Shares

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	E.	UNI-President Enterprises Corp. 1,010 $ 53,425 $ 5.332 Ton Yi Industrial Corp. - - ( 174) President Chain Store Corp. - - 1,166 Prince Housing & Development Corp. - - ( 57 ) Total $ 53,425 $ 6,267 Compensation of key management personnel The compensation of key management such as directors, supervisors, general managers, vice general managers were as follows: For the ear ended For the ear ended	UNI-President Enterprises Corp. 1,010 $ 53,425 $ 5.332 Ton Yi Industrial Corp. - - ( 174) President Chain Store Corp. - - 1,166 Prince Housing & Development Corp. - - ( 57 ) Total $ 53,425 $ 6,267 Compensation of key management personnel The compensation of key management such as directors, supervisors, general managers, vice general managers were as follows: For the ear ended For the ear ended	UNI-President Enterprises Corp. 1,010 $ 53,425 $ 5.332 Ton Yi Industrial Corp. - - ( 174) President Chain Store Corp. - - 1,166 Prince Housing & Development Corp. - - ( 57 ) Total $ 53,425 $ 6,267 Compensation of key management personnel The compensation of key management such as directors, supervisors, general managers, vice general managers were as follows: For the ear ended For the ear ended
8.	y December 31, 2013 y December 31, 2012 Salary and short-term employee benefits $ 107,634 $ 125,851 Retirement benefits 1,728 1,729 Other long-term employee benefits - - Termination benefits - - Share-based payment - - Total $ 109,362 $ 127,580 PLEDGED ASSETS The Company’s assets pledged or restricted for use were as follows: Assets December 31, 2013 December 31, 2012 Purposes Financial assets at fair value through profit or loss - current: Trading securities (par value) - Corporate bonds $ - $ 220,000 Securities for bonds sold under repurchase agreements
	Financial assets at fair value through profit or loss - current: Trading securities (par value) - Corporate bonds		$ 220,000
	- Government bonds - Overseas bonds Financial assets at fair value through profit or loss- non-current (par value) - Government bonds Restricted assets: - Demand deposits - Pledged time deposits Property and equipment - Land and buildings (book value) Pledged time deposits - Operating guarantee deposits - Clearing and settlement fund Investment property - Land and buildings (book value)	917,100 5,640,689 50,000 239,489 1,738,910 1,333,347 842,000 306,030 37,935	4,135,800 3,697,422 50,000 27,648 1,765,581 1,341,028 842,000 78,000 38,177	Securities for bonds sold under repurchase agreements Securities for bonds sold under repurchase agreements Trust fund deposit-out Collections on behalf of third parties and reimbursement for wages and stocks Securities for short-term loans and guarantees for issuance of commercial papers Securities for short-term loans and guarantees for issuance of commercial papers Security deposits Security deposits Securities for short-term loans and guarantees for issuance of commercial papers

January 1, 2012 Purposes

Assets

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Assets December 31, 2013 December 31, 2012 Purposes Financial assets at fair value through profit or loss - current: Trading securities (par value) - Corporate bonds $ 1,500,000 Securities for bonds sold under repurchase agreements - Government bonds 6,408,000 Securities for bonds sold under repurchase agreements - Overseas bonds 60,550 Securities for bonds sold under repurchase agreements Financial assets at fair value through profit or lossnon-current (par value) - Government bonds 50,000 Trust fund deposit-out Restricted assets: - Demand deposits 20,895 Collections on behalf of third parties and reimbursement for wages and stocks - Pledged time deposits 1,899,223 Securities for short-term loans and guarantees for issuance of commercial papers Property and equipment - Land and buildings (book 1,351,710 Securities for short-term loans and value) guarantees for issuance of commercial papers Pledged time deposits - Operating guarantee deposits 842,000 Security deposits - Clearing and settlement fund 78,000 Security deposits Investment property - Land and buildings (book 38,418 Securities for short-term loans and value) guarantees for issuance of commercial papers

9. SIGNIFICANT COMMITMENTS

None.

10. SIGNIFICANT LOSS FROM NATURAL DISASTER

None.

11. SIGNIFICANT SUBSEQUENT EVENTS

12. INFORMATION ON THE FAIR VALUES AND HIERARCHY OF THE FINANCIAL

INSTRUMENTS

B. Fair values of the financial instruments

Except for those listed in the table below, the carrying amounts of the Group’s financial instruments not measured at fair value (including cash and cash equivalents, bonds purchased under resale agreements, margin loans receivable, refinancing guaranty deposits, guaranteed proceeds receivable from refinancing, guaranteed price deposits for security borrowing, security borrowing deposits, customer margin deposit account, notes and accounts receivable, other receivables, other assets-current, short-term loans, commercial paper payable, bonds sold under repurchase agreements, guarantee deposit received from short sales, guaranteed price deposits received from securities borrowers, security borrowing deposits, equity of futures traders, accounts payable, collection for others, and other payables) approximate their fair values. The fair value information of financial instruments measured at fair value is provided in Note 12(2).

December 31, 2013

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Other financial assets Other financial liabilities Other financial assets Other financial liabilities	Book value	Book value
	$ 4,485,369
	$ 93,398
	Book value
Other financial assets Other financial liabilities	$ 5,503,680	$ 5,503,680 $ 83,498
	$ 83,498

2)Fair value hierarchy of the financial instruments

A. Definitions for the hierarchy classifications of financial instruments measured at fair value
(A)Level 1

That is the quoted prices in active markets for identical assets or liabilities. An active market has to satisfy all the following conditions:

  - a. The products traded in the market share a common nature; and

  - b. The willing buying and selling parties can be readily found in the market and the prices are observable for the public. The fair value of the investments of the Group, such as listed stocks investment, bonds with a quoted price in an active market, are deemed as level 1.

(B)Level 2
- Inputs, other than quoted prices in active market, are those observable prices, either directly or indirectly in an active market. Investments of the Group such as non-popular government bonds, corporate bonds, financial bonds, convertible corporate bonds, currency swaps, interest rate swaps, options, asset swaps, and most derivatives are all classified within level 2. For the years ended December 31, 2013 and 2012, there was no significant transfer of financial instruments between Level 1 and Level 2.
(C)Level 3
- Input for the asset or liabilities that is not based on observable market data. There is no financial instrument in level 3.
B. For financial instruments held for trading purposes which are classified as non-derivative instruments, their fair values are based on their quoted prices in an active market. For those classified as derivative instruments, their fair values are based on their market prices if their quoted prices are available from an active market. However, if they have no quoted prices in an active market, their fair values are determined based on the amounts to be received or paid assuming that the contracts are settled as of the reporting date.
C. When available-for-sale financial assets have quoted market prices available in an active market, the fair value is determined using the market price. If there is no quoted market price for reference, a valuation technique will be adopted to measure the fair value. Estimates and assumptions of valuation technique adopted by the Group are in agreement with the information of estimates and assumptions adopted by market users for financial instrument pricing and the said information shall be accessible to the Group.

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D.Hierarchy of fair value estimation of financial instruments

		December	31, 2013

Non-derivative financial instruments Assets Financial assets at fair value through profit or loss-current Stock investments Bond investments Others Available-for-sale financial assets Financial assets at fair value through profit or loss -noncurrent Liabilities	Total	Level 1	Level 2	Level 3 $ - - - - -
	$ 6,106,643 11,370,027 723,569 349,870 50,174	$ 5,959,474 10,266,708 583,566 349,870 -	$ 147,169 1,103,319 140,003 - 50,174
Financial liabilities at fair value through profit or loss Derivative financial instruments Assets Financial assets at fair value through profit or loss-current Liabilities Financial liabilities at fair value through profit or loss- noncurrent Non-derivative financial instruments Assets Financial assets at fair value through profit or loss-current Stock investments Bond investments Others Available-for-sale financial assets	806,621 1,513,960 425,533	806,621 1,470,735 300,320 December	- 43,225 125,213 31, 2012	- - - Level 3 $ - - - -
	Total	Level 1	Level 2
	$ 2,828,021 12,433,841 902,117 218,050	$ 2,760,403 8,649,033 743,123 218,050	$ 67,618 3,784,808 158,994 -

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		Financial assets at fair value through profit or loss- noncurrent Liabilities Financial liabilities at fair value through profit or loss Derivative financial instruments Assets Financial assets at fair value	50,885 151,496	- 50,885 151,496 -	- 50,885 151,496 -	- -
		through profit or loss-current Liabilities Financial liabilities at fair value through profit or loss- noncurrent Non-derivative financial instruments Assets Financial assets at fair value through profit or loss-current Stock investments	1,627,215 297,460	1,571,947 55,268 170,420 127,040 January 1, 2012		- - Level 3 $ -
			Total	Level 1	Level 2
			$ 1,698,429	$ 1,485,721	$ 212,709
13.	Bond investments Others Available-for-sale financial assets Financial assets at fair value through profit or loss- noncurrent Liabilities Financial liabilities at fair value through profit or loss Derivative financial instruments Assets Financial assets at fair value through profit or loss-current Liabilities Financial liabilities at fair value through profit or loss- noncurrent MANAGEMENT OBJECTIVE AND		11,448,699 5,061,629 6,387,070 592,968 484,735 108,233 746,733 746,733 - 51,635 - 51,635 164,282 164,282 - 1,680,588 1,524,614 155,974 262,955 88,985 173,970 POLICY OF FINANCIAL RISKS			- - - - - - -

1) Summary

A. Risk management objective

The Group continually strengthens risk culture to every employee and makes sure that the Group can actively develop various businesses under a healthy and effective risk management system. At the same time, by creating value of an entity and continually increasing profit, profit maximization may be achieved within appropriate risk

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tolerance.

B. Risk management system
Risk management system is to ensure that the Group is actively engaged in development of various businesses under a healthy and effective system and continually increases profit and creates company value to achieve maximization of capital return under an appropriate risk tolerance.
The Group’s risk management system covers risks incurred from businesses in and off the balance sheet, such as market risk, credit risk, liquidity risk, operating risk, legal risk, model risk which are all included in the risk management.
C. Risk management organization
Risk management organization: Board of Directors, Risk Management Committee, Risk Control Office, Business units and other related segments (such as Office of Auditing, Office of General Manager, Compliance segment, Legal segment and Finance segment) are in charge of planning, supervising and execution.
(A) The Board of Directors should ensure the effectiveness of risk management and be responsible for the ultimate result and the following duties:
- a. To establish proper risk management system, operating process, and risk management culture in the Group with allocation of necessary resource for better execution and operation
- b. Policy of risk management review
- c. Review and approval of business application, transaction authorization and risk limit
(B) The Risk Management Committee reports to the Board of Directors and is responsible for the following:
- a. Review risk management policy
- b. Review the highest risk tolerance
- c. Submit regular report to the Board of Directors in relation to the risk management status of the whole Group
(C) The General Manager supervises daily risk management of the whole Group and is responsible for the following:
- a. Supervise and monitor daily risk management of the whole Group
- b. Approval of management exceptions
(D) Assets and liabilities committee reports to the General Manager and is responsible for the following:
- a. Set up the ultimate guidelines for assets and liabilities management of the whole Group
- b. Analyze and control the whole Group’s assets and liabilities portfolio
- c. Approval of various businesses’ quotas
- d. Gather and analyze information on domestic and offshore interest rate, exchange rate, prosperity fluctuation, political and economic environmental changes, and predict the financial trend in the future
(E) Risk Control Office implements risk management policy and related regulations and reports to the Risk Management Committee. Risk Control Office also reports daily risk management to the General Manager and is responsible for the following:
- a. Establish Risk Management Policy of the whole Group
- b. Develop effective method for measurement and risk management in an entity
- c. Review risk management system of business units

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d. Generate risk report through information gathering and consolidation
e. Analyze various business risks and report to the General Manager
f. Report the risk management situation to the Risk Management Committee according to a meeting’s nature and needs
g. Carry out duties as designated by the Risk Management Committee and control risks of business units
(F) Auditing Office is responsible for the following:
a. Execute operating risk control
b. Include the risk management system into internal audit program and carry out the daily audit schedule.
c. Assess the effectiveness of internal control and verify the executed result.
(G) Compliance segment and legal segment under the Office of General Manager are responsible for the following:
a. Compliance segment should make sure that the business operation and risk management system are in compliance with relevant regulations.
b. Legal segment is responsible for legal risk control
(H) Finance segment is responsible for the followings:
a. Verify the correctness of position information and reasonability of profit and loss calculation.
b. Control and analyze self-owned capital adequacy ratio.
c. Analyze the appropriateness of structures of the assets and liabilities.
(I) Business units are responsible for the following:
a. Set up risk management details of various businesses according to the risk management policy and other related regulations.
b. Provide sufficient position information and risk control information to the Risk Control Office.

D. Risk management policy

In order to ensure the wholeness of risk management system, run the balancing mechanism of risk management, and improve the division efficiency of risk management, the Group sets up “Risk Management Policy”. Such policy aims to establish internal system compliance and the guiding tools for policies communication within the Group and enable every layer of the Group engaged in different tasks to identify, evaluate, monitor, and control various risks with establishment of consistent compliance rules for risks of each business so that the risks can be controlled within the limits set in advance.

Risk management processes include risk identification, risk evaluation, risk supervision and various risk control. Each kind of risk evaluations and responding strategies are described as follows:

(A) Market risk management

The Group has implemented risk management information system (Risk Manager) in relation to market risk control. All trading positions of the Group have been included in the daily risk control system for the calculation of Value at Risk (VaR). Limit exceeding indicators are mainly the nominal principal, stop-loss, sensitivity (Greeks) and VaR. The risk management report is presented on a daily basis for implementation of regular control and limit exceeding handling procedures.

(B) Credit risk management

In relation to risk control, the quantitative model of default rate adopts KMV

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model to calculate the default rate of issuers with credit exposure of the issuing company and the trading counterparties, and credit risk of securities disclosed in the report. The credit exposure is mitigated through regular review of credit status.

Unit in charge of fund procurement regularly predicts future fund demand and supply, and consolidates company guarantee or endorsement and capital lending businesses to monitor the condition of fund procurement on a daily basis.

E. Hedging and risk-offsetting strategy
- (A) Policies of hedging and risk mitigating are parts of the Group’s risk management policies, and the hedging position and hedged trading position are supposed to be one portfolio, of which the gain and loss and risk information are measured on a consolidated basis.
- (B)The overall position (hedging position and trading position) is included in the daily risk management system to calculate Value at Risk and other relevant information. Limit exceeding indicators mainly include nominal principal, stop-loss point, price sensitivity and VaR. With the presentation of daily risk management report, routine control and limit exceeding treatment can be executed.
2) Credit risk
A. Source and definition of credit risk

The credit risks exposed to the Group as a result of engagement in financial transactions include issuer’s credit risk, credit risk of counterparty and credit risk of underlying assets:

(A) Credit risk of the issuer refer to the financial debt instruments held by the Group fails to repay its obligation due to the fact that the issuer breaches the contract resulting the risk of financial loss occurred to the Group.
(B) Credit risk of counterparty refers to risk of financial loss to the Group arising from default by the counterparty of financial instruments on the settlement or payment obligation.
(C) Credit risk of the underlying assets happens when the credit rating of the underlying assets linked to the financial instrument is downgraded by the rating agency or when the losses occur as a result of contract default.

The financial assets held by the Group which could result in credit risk include bank deposit, debt securities, derivatives transactions in OTC, bonds purchased/sold under resale/repurchase agreements, refundable deposit of securities lending, futures trade margins, other refundable deposits and receivables.

B. Maximum credit risk exposure and credit risk concentration

The maximum exposure to credit risk of financial assets in the consolidated balance sheet, without consideration of the collateral or other credit strengthening instruments, is equivalent to the carrying amount. In Taiwan, the sources of credit risk of the Group are primarily resulted from cash deposited with banks or other financial institutions, debt securities issued or guaranteed by a bank, derivative instruments transaction underwritten by the Group, and all counterparties of customer margin deposits accounts being financial institutions. Credit risks of various financial assets are as follows:

(A)Cash and cash equivalent

Cash and cash equivalent include time deposit, demand deposits, checking

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deposits and short-term bills. Correspondent institutions are mainly domestic financial institutions.

(B)Financial assets at fair value through profit and loss -current a.Fund

The funds held by the Group are bond funds. As the positions held are not significant, credit risk is deemed low.

b.Debt securities

Debt securities are mainly positions like government bonds, convertible corporate bonds and foreign bonds and the issuers are primarily R.O.C. government, domestic and foreign legal entities. Details are as follows:

(a)Bonds

The bonds held by the Group are mostly government bonds (inclusive of central and local government). As a whole, the credit risk of the bonds held by the Group is low.

(b)Convertible corporate bond
The convertible corporate bonds held by the Group are mostly issued by the domestic legal entities. The Group mitigates highly risky credit exposure of the issuers by control through TCRI. Currently, no highly risky convertible corporate bonds are held.
(c)Foreign bonds

The foreign bonds held by the Group are mainly underlying investment with good credit rating and those with rating above (S&P BB).

c.Derivatives- futures trade margin

When engaging in futures trades in stock exchange market, the Group needs to deposit margin into a margin deposit account of a financial institution designated by the futures merchants as a guarantee to fulfill contractual obligation in the future. As a result, the credit risk is remote.

d.Derivatives-OTC

The Group signs ISDA with each counterparty when engaging in OTC derivatives as an agreement regarding such transactions for both parties. In the agreement, it provides a fundamental contractual model for OTC derivative transactions. If any party breaches the contract or terminate the transactions early, then all the open interest covered in the agreement should be settled by net amount as bound in the contract. When the ISDA is signed, the Credit Support Annex (CSA) is also signed. According to CSA, collateral will be transferred from a party to the other during transaction process to mitigate the risk of counterparty in open interest.

Types of OTC derivative transactions in which the Group is engaged include interest rate swap and swap transaction. The counterparties are all from financial service industry and mainly located in Taiwan.

e.Bonds investment under a resale agreement

Bonds sold under a resale agreement are the bonds that the client sold to the Group at a price, interest rate, length of period as agreed by two parties and the client shall repurchase the bonds at the specified price upon maturity. The Group needs to assume credit risk from counterparties when underwriting such business, as the payment being delivered to the other party. With consideration of good collateral obtained, the net of credit risk exposure from counterparties can be effectively reduced. As all the counterparties are financial institutions with good

134

credit rating, the credit risks from counterparties are extremely low.

f.Margin loans receivable
Margin loans receivable are the loans provided to the client in order to process businesses of margin trading and short sale using the securities purchased through financing as collateral. The Group monitors the clients’ margin ratio through information system on a daily basis. As the margin ratio of margin trading is set at 120% according to Regulations Governing the Conduct of Securities Trading Margin Purchase and Short Sale Operations by Securities Firms, the credit risk is extremely low.
g.Guaranteed price for securities lending
’
Guaranteed price for securities lending is the sale price of the Group s securities sold by other securities firms through margin trading after deduction of securities transactions tax and service fee, which is deposited in other securities firms as collateral. As all the counterparties are financial institutions with good credit rating, the credit risk from counterparties is extremely low.
h.Refundable deposits for securities lending
Refundable deposits for securities lending are the margins deposited in other securities firm as collateral when the Group’s securities are sold. As all the counterparties are financial institutions with good credit, the credit risk from counterparties is extremely low.
i.Receivables

Receivables are the credit rights arising from the securities business including settlement receivables of consignment trading, settlement receivables of operating securities sold, financing interest receivables of self-operating credit transaction, and receivables of consignment trading for securities. As the majority of the Group’s receivables from the consignment businesses and self-operating businesses are settlement of securities from OCT or TWSE, the credit risk is extremely low.

j.Other receivables

Other receivables are the receivables primarily from banks’ underwriting on foreign exchange transactions and foreign fund demand, interest receivable from self-owed bonds position, and financing interest receivable from brokerage business. As the foreign exchange transactions are simply the receipt or payment of different currencies and the correspondent banks are of good credit rating, the credit risk is extremely low. Also, since the self-owed bond positions are government bonds or domestic and foreign bonds with credit rating of BBB or above, the credit risks from counterparties are low. As to the financing interest receivable of credit transactions from brokerage business, with strict control over overall margin ratio of credit transactions and regular impairment assessment, the overall credit exposure is extremely low.

k.Other current assets
Other current assets are mainly the collateral deposited in the bank for application for short-term debt limit and guarantee for application for issuance of commercial papers. As the correspondent banks are all financial institutions with good credit rating, the credit risk is extremely low.
l.Financial assets at fair value through profit and loss – non-current In order to underwrite trust business, the Group deposits central government bonds in the Central Bank as collateral. Regardless of the bonds themselves or

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the financial institutions where the bonds deposited, the credit risk is extremely low.

m.Other non-current assets
- Other non-current assets mainly comprise operating guarantee deposits, settlement funds, and refundable deposits. Operating guarantee deposits are mainly deposited in domestic banks with good credit rating. Settlement funds are deposited in securities exchange. Settlement funds are used as compensation when a party to a marketable securities transaction fails to fulfill the settlement obligation. The credit risks from the institutions where these two assets are deposited are extremely low. The refundable deposits refer to cash or other assets which are deposited externally by the Group and can be used as refundable deposits. Because deposits are placed in various financial institutions and each deposit amount is small, the credit risk is dispersed and the credit exposure of overall refundable deposit is extremely low.
C. Credit quality rating

The Group’s internal credit rating can be categorized into low risk, medium risk and high risk. Definition of each rating is as follows:

(A) Low risk: a company or the underlying position is capable of fulfilling the financial commitment to a stable extent even when facing with a significant uncertain factor or being exposed to adverse condition.
(B) Medium risk: a company or the underlying position’s capability to fulfill the financial commitment is weak. Any adverse operation, financial or economic movement shall further weaken its ability to fulfill the financial commitment.
(C) High risk: a company or the underlying position’s capability to fulfill the financial commitment is uncertain. The capability to fulfill the financial commitment shall be determined by whether the operating environment and financial position are favorable.
(D) Impairment: a company or the underlying position fails to fulfill its obligation and the potential impairment assessed has reached the standard for recognition.
The Group uses internal and external credit rating as specified in below table. In the table below, above-mentioned two credit ratings are not directly correlated. They are mainly used to represent the similarity of credit quality. The internal credit rating is based on credit rating of Taiwan Ratings and TCRI. Default rate of certain foreign bonds is calculated using bond pricing method. The credit risk classification and management are based on historical default rate (1 year).

Internal credit rating Low risk Medium risk High risk Impairment	Credit rating of Taiwan Ratings twAAA ~twBBB- twBB+ ~ twBB twBB- ~ twC D	Credit rating of TCRI 1~4 5~6 7~9 D	Historical default rate (1 year)
			0.03%~1.21% 1.21%~5.10% 5.10%~26.85% -

The Group has classified financial assets into three categories based on the credit quality including normal asset, assets overdue but not impaired and impaired assets:

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The table of the credit quality of financial assets As of December 31, 2013:

As of December 31, 2013:
Financial assets Cash and cash equivalents Financial assets at fair value through profit or loss – current Open-end mutual funds beneficiary certificates and money market instruments		Normal assets		Impaired	Provisions		Total
	Low risk		High risk
					$ - - - - - - - - - - - - - - - - - - -	$ 5,287,484 415,450 11,370,027 9,185 1,461,550 43,225 184,897 11,516,164 24,695 59,634 4,917,434 29,993 49,617 3,360 8,379,629 173,323 3,297,457 50,174 1,187,988 $ 48,461,286
Debt security investments Buy Option – TAIFEX Derivative instruments-Futures Margin Derivative instruments-OTC Bonds purchased under resale agreements Margin loans receivable Refinancing security deposits Receivables from refinance guaranty Customer margin account Receivables from security lending Security lending deposits Notes receivable Accounts receivable Other receivables Other current assets
Financial assets at fair value through profit or loss – non current Other assets – non current Total	,, 50,174 - 1,187,988 -		- -
	$ 47,613,820	$ 829,744	$ 17,722	$ -	$ -

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The table of the credit quality of financial assets As of December 31, 2012: Normal assets Low risk Medium risk High risk Cash and cash equivalents $ 4,933,168 $ 258 $ - Financial assets at fair value through profit or loss – current Funds 416,468 - -	The table of the credit quality of financial assets As of December 31, 2012: Normal assets Low risk Medium risk High risk Cash and cash equivalents $ 4,933,168 $ 258 $ - Financial assets at fair value through profit or loss – current Funds 416,468 - -	The table of the credit quality of financial assets As of December 31, 2012: Normal assets Low risk Medium risk High risk Cash and cash equivalents $ 4,933,168 $ 258 $ - Financial assets at fair value through profit or loss – current Funds 416,468 - -	The table of the credit quality of financial assets As of December 31, 2012: Normal assets Low risk Medium risk High risk Cash and cash equivalents $ 4,933,168 $ 258 $ - Financial assets at fair value through profit or loss – current Funds 416,468 - -		Impaired	Total
			High risk
					$ - - - - - - - - - - - - - - - - - - -	$ 4,933,426 416,468 12,592,835 12,627 1,559,320 55,268 - 9,772,570 374 12,901 5,637,662 45,803 41,382 1,674 5,499,832 412,497 3,651,539 50,885 1,243,324 $ 45,940,387
Debt security investments Buy Option – TAIFEX Derivative instruments-Futures Margin Derivative instruments-OTC Bonds purchased under resale agreements Margin loans receivable Refinancing security deposits Receivables from refinance guaranty Customer margin account Receivables from security lending Security lending deposits Notes receivable Accounts receivable Other receivables Other current assets	12,205,657 387,178 - 12,627 - - 1,559,320 - - 55,268 - - - - - 9,772,570 - - 374 - - 12,901 - - 5,637,662 - - 45,803 - 41,382 - - 1,674 - - 5,499,832 - - 412,497 - - 3651539 - -
Financial assets at fair value through profit or loss – non current Other assets – non current Total	,, 50,885 - 1,243,324 -		- -
	$ 45,552,951	$ 387,436	$ -	$ -	$ -

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The table of the credit quality of financial assets As of January 1, 2012: Normal assets Low risk Medium risk High risk Cash and cash equivalents $ 4,001,840 $ 325 $ - Financial assets at fair value through profit or loss - current Funds 89,358 50,182 -	The table of the credit quality of financial assets As of January 1, 2012: Normal assets Low risk Medium risk High risk Cash and cash equivalents $ 4,001,840 $ 325 $ - Financial assets at fair value through profit or loss - current Funds 89,358 50,182 -	The table of the credit quality of financial assets As of January 1, 2012: Normal assets Low risk Medium risk High risk Cash and cash equivalents $ 4,001,840 $ 325 $ - Financial assets at fair value through profit or loss - current Funds 89,358 50,182 -	The table of the credit quality of financial assets As of January 1, 2012: Normal assets Low risk Medium risk High risk Cash and cash equivalents $ 4,001,840 $ 325 $ - Financial assets at fair value through profit or loss - current Funds 89,358 50,182 -		Impaired	Total
			High risk
					$ - - - - - - - - - - - - - - - - - - -	$ 4,002,165 139,540 11,556,932 8,032 1,516,582 155,974 230,044 10,683,585 2,820 36,522 5,234,807 176,124 160,393 1,630 4,134,181 83,254 4,098,046 51,635 1,405,938 $ 43,678,204
Debt security investments Buy Option - TAIFEX Derivative instruments-Futures Margin Derivative instruments-OTC Bonds purchased under resale agreements Margin loans receivable Refinancing security deposits Receivables from refinance guaranty Customer margin account Receivables from security lending Security lending deposits Notes receivable Accounts receivable Other receivables Other current assets	10,920,253 636,679 - 8,032 - - 1,516,582 - - 155,974 - - 230,044 - - 10,683,585 - - 2,820 - - 36,522 - - 5,234,807 - - 176,124 - - 160,393 - - 1,630 - - 4,134,181 - - 83,254 - - 4098046 - -
Financial assets at fair value through profit or loss – non current Other assets – non current Total	,, 51,635 - 1,405,938 -		- -
	$ 42,991,018	$ 687,186	$ -	$ -	$ -

139

3) Liquidity risk

A.Definition and source of liquidity risk
Liquidity risk refers to possible financial losses arising from the incapability to realize the asset or to obtain sufficient fund to fulfill the financial liabilities soon to be matured. Above situations may weaken the sources of cash from the Group’s trading and investment activities.
B.Liquidity risk management procedure and stimulation test
In order to prevent operational crisis as a result of liquidity risk, the Group has established responding crisis process with regular monitoring over liquidity gap of fund.
(A)Procedure

In addition to the operating capital for various business and long-term investment, the Group needs to maintain revolving funds at a certain level for daily operation. The use of remaining fund shall avoid high concentration and should be based on the principle of holding sound earning assets with high liquidity and treated in compliance with policies of the Group.

The responsive unit for fund procurement adjusts the liquidity gap to ensure proper liquidity according to the daily volume and movement in the market.

(B)Stimulation test
a.The Group reviews fund liquidity risk from a perspective of supply and demand of fund every month with simulation analysis of available fund for emergency including scenario analysis of cash, funding limit of financial institutions, margin loans and short sale, and value of disposal of position in order to compute maximum available fund and fund demand. Finally, safety stock of fund is reviewed to monitor liquidity risk.
b. Above liquidity risk is generally reviewed monthly. However, if the available limit of increment banking credit risk in financing limit of a financial institution is lower than a certain amount (that is, the amount may be timely adjusted according to the fund liquidity in the market and the actual fund demand and supply in an entity), the safety stock will be reviewed weekly. After the early warning report for fund is submitted, the head of finance segment will call for a fund control meeting.
c. Other than individual funding liquidity risk of an entity, stress test of minimization funding supply and maximization funding demand in the event of significant crisis is simulated, including:
(a)When there is a significant crisis in the market, the financing limit of the financial institutions and the value of disposal of position can be deemed the minimized ratio of fund supply which is then adjusted according to actual condition to compute the total fund supply under maximum stress.
(b)Except for the operating expense, the stock concept is adopted for the calculation of total fund demand under maximum stress.
(c) The Group should conduct a review to see whether the total minimized fund supply is more than maximized total fund demand. The Group should further review how long (by month) the difference may cover the operating expenses so that the safety stock of fund (by month) under stress test can be computed.
(d)The minimum safety stock of fund under stress test (by month) may be adjusted according to the crisis itself and only operating expense for at least 6 months under a normal stimulation can be deemed safe.

140

(C) Maturity analysis for the financial assets and financial liabilities held for liquidity risk management
a. The Group holds cash and sound earning assets with high liquidity in order to fulfill the payment obligation and potential emergency fund demand in the market. Financial assets held for liquidity risk management are mainly cash and cash equivalents, among which, all time deposits mature within a year. Financial assets at fair value through profit and loss are mainly listed stocks, convertible bonds and debt securities. As all of them have positions in active market, the liquidity risk is deemed low.
b. Maturity analysis for the financial liabilities is as follows:

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141

As of December 31, 2013

As of December 31, 2013
Short-term loans Commercial papers payable Financial liabilities at fair value through profit or loss Non-derivative financial liabilities Derivative financial liabilities	Immediately $ 1,350,000 - 806,621 340,028	Less than 3 months $ 2,129,260 6,950,000 - 2,959	3-12 months $ - - - 2,312	1-5 years $ - - - 80,823 - - - - - - 94,340 41,889 - $ 217,052	Over 5 years $ - - - - - - - - - - - - - $ -	Total $ 3,479,260 6,950,000 806,621 426,122 6,286,603 1,235,843 1,599,806 529,309 4,917,434 8,598,138 428,091 951,286 93,398 $ 36,301,911
Bonds sold under repurchase agreements Deposits on short sales Deposits payable for securities financing Securities lending refundable deposits Futures traders’ equity Accounts payable Collections on behalf of third parties Other payables Other financial liabilities -current	- 1,235,843 1,599,806 529,309 4,917,434 8,576,532 328,167 101,867 - $ 19,785,607	6,286,603 - - - - 21,606 5,584 185,530 93,398 $ 15,674,940	- - - - - - - 622,000 - $ 624,312

142

As of December 31, 2012

As of December 31, 2012
Short-term loans Commercial papers payable Financial liabilities at fair value through profit or loss Nditi fiil libiliti	Immediately $ 300,000 200,000 151496	Less than 3 months	3-12 months $ - -	1-5 years $ - - - 140,334 - - - - - - 93,559 - - $ 233,893	1-5 years	Over 5 years	Total $ 3,816,336 2,000,000 151,496 299,068 7,987,973 1,245,017 1,606,777 1,144,289 5,637,662 5,729,612 259,893 1,138,984 121,597 $ 31,138,704	Total
		$ 3,516,336 1,800,000				$ - - - - - - - - - - - - - $ -
on-ervave nanca aes Derivative financial liabilities Bonds sold under repurchase agreements Deposits on short sales Deposits payable for securities financing Securities lending refundable deposits Futures traders’ equity Accounts payable Collections on behalf of third parties Other payables Other financial liabilities -current	, 170,467 - 1,245,017 1,606,777 - 5,637,662 5,728,255 160,769 - -	- 17,764 7,987,973 - - 507,690 - 1,357 5,565 501,197 121,597	- ( 29,497) - - - 636,599 - - - 637,787 -
	$ 15,200,443	$ 14,459,479	$ 1,244,889

143

As of January 1, 2012

As of January 1, 2012
Short-term loans Commercial papers payable Financial liabilities at fair value hh fi l	Immediately $ 1,050,000 -	Less than 3 months	3-12 months	1-5 years $ - - - 67,915 - - - - - - 97,009 - - $ 164,924	1-5 years	Over 5 years $ - - - - - - - - - - - - - $ -	Total $ 3,620,887 1,500,000 164,282 284,051 8,618,119 1,478,214 1,741,022 1,795,332 5,234,807 3,822,042 234,018 788,228 83,498 $ 29,364,500	Total
		$ 2,570,887 1,500,000	$ - -
troug prot or oss Securities borrowing transactions Warrants liabilities Non-hedging derivatives Bonds sold under repurchase agreements Deposits on short sales Deposits payable for securities financing Securities lending refundable deposits Futures traders’ equity Accounts payable Collections on behalf of third parties	164,282 96,672 - 1,478,214 1,741,022 - 5,234,807 3,795,564 127698	- ( 1,667) 8,618,119 - - 995,313 - 26,478 9311	- 121,131 - - - 800,019 - - -
Other payables Other financial liabilities -current	, - - $ 13,688,259	, 153,818 83,498 $ 13,955,757	634,410 - $ 1,555,560

144

(D) Maturity analysis for lease contracts and capital expenditures Operating lease commitment is the total minimum lease payments that the Group should make as a lessee or minimum lease income as lessor under an operating lease term which is not cancelable. The capital expenditure commitment is the contract commitment signed for acquisition of capital expenditure of construction and equipment.

The following table illustrates maturity analysis for lease contract and capital expenditure commitment of the Group:

Years 2014 2015 2016 2017 2018 and above Total	Operating leases expenditures (Lessee) $ 95,477 81,107 53,746 23,967 12,306 $ 266,603	Operating leases income (Lessor)
		$ 14,218 6,130 384 - -
		$ 20,732

4) Market risk
A. Definition of market risk

Market risk refers refer to the risk of decrease in the Group’s revenue or value of investment portfolio as a result of the changes in exchange rate, commodity price, interest rate, and stock price or other market risk factors. The Group continually exercises risk management tools such as sensitivity analysis, Value at Risk, stress test and so on to completely and effectively measure, monitor and manage market risk.

B. Value at Risk (VaR)

Value at Risk is used to measure the possible maximum potential losses in investment portfolio as a result of movement in market risk factor in a specified period and confidence level. The Group currently uses confidence level of 95% to calculate Value at Risk of one day.

A VaR model must reasonably, completely and accurately measure the maximum potential risks of financial instruments or investment portfolio before being adopted as a risk management model by the Group. The VaR model used in risk management is continually certified and retrospectively tested to demonstrate that the model can reasonably and effectively measure the maximum potential risks of financial instruments or investment portfolios.

nstruments or investment portfolios.	nstruments or investment portfolios.
Statistical table for one-day VaR of transactions		Statistical table for one-day VaR of transactions
For the year ended December 31, 2013	Amount	For the year ended December 28, 2012	Amount
December 31, 2013 VaR Maximum VaR Average VaR Minimum	58,001 150,136 55,550 22,493	December 28, 2012 VaR Maximum VaR Average VaR Minimum	45,150 139,906 56,946 20,596

145

Statistical table for VaR of various risk indicators of For the year ended December 31, 2013 Foreign exchange	Statistical table for VaR of various risk indicators of For the year ended December 31, 2013 Foreign exchange	transactions: Interest	Share ownership
December 31, 2013 VaR Maximum VaR Average VaR Minimum	$ 2,000 $ 10,629 $ 59,092 19,345 22,447 146,906 6,437 7,682 56,201 865 1,962 19,179

Statistical table for VaR of various risk indicators of For the year ended December 28, 2012 Foreign exchange	Statistical table for VaR of various risk indicators of For the year ended December 28, 2012 Foreign exchange	transactions: Interest	Share ownership
December 28, 2012 VaR Maximum VaR Average VaR Minimum	$ 3,559 $ 8,085 $ 47,417 56,768 15,813 144,948 7,713 8,217 60,845 1,351 4,273 23,417

C. Information on gap of foreign exchange risk The following table summarizes financial instruments of foreign assets or liabilities by currency and the foreign exchange exposure presented by book value as of December 31, 2013, December 31, 2012 and January 1, 2012:

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146

Financial assets in foreign currencies Cash and cash equivalents Financial assets at fair value through profit or loss Bonds purchased under resale agreements Other current assets			December 31, 2013	December 31, 2013	December 31, 2013
	USD	EUR	AUD	RMB	HKD	Others
	$ 824,461 4,220,373 29,832 1,550,062	$ 32,305 1,141,497 155,065 16,415	$ 3,715 1,074,570 - -	$ 1,320,353 2,103,939 - 646

	USD	EUR	AUD	RMB	HKD	Others
	$ 863,131 3,238,657 1,394,293	$ 36,582 1,250,884 1,450	$ 185,380 588,389 -	$ 323,277 819,314 508	$ 490,517 202,055 717,719 - -	$ 115 12,946 21 - -
Financial liabilities in foreign currencies Bonds sold under repurchase agreements Other liabilities-deposits-in	2,043,479 1,184,108	1,028,581 -	174,085 -	- -

Note: As of December 31, 2012, foreign exchange rates of the above currencies to TWD were 1 USD = 29.040 TWD; 1 EUR=38.490 TWD; 1 AUD=30.165 TWD;

1 RMB=4.6642 TWD; and 1 HKD=3.747 TWD, respectively.

147

Financial assets in foreign currencies Cash and cash equivalents Financial assets at fair value through profit or loss Bonds purchased under resale agreements Financial liabilities in foreign				January 1, 2012	January 1, 2012
	USD	EUR	AUD	RMB	HKD	Others
	$ 593,043 654,454 1,801,519	$ 29,032 18,380 16	$ 280 - -	$ 238,992 742,401 437
currencies Bonds sold under repurchase agreements 53,512 - - Other liabilities-deposits-in 1,672,841 - - Note: As of January 1, 2012, foreign exchange rates of the above currencies to TWD TWD, respectively.

148

14. CAPITAL MANAGMENT

1) Objective of capital management
A.The represented capital adequacy ratio basically shall not be lower than 200% in compliance with the warning standard addressed in the “Rules Governing Securities Firms”.
B.The Group includes all risks involved in the investment position as a part of risk management, such as market risk, credit risk, liquidity risk, operating risk, legal risk, and model risk and so on. Each risk management responsive unit should identify, evaluate, monitor and control various risks in order to enable the Group to defend impact from financial market, reflect the current operating strategies and make the investment portfolio applied to business planning and development.
2) Capital management policy and procedure
In order to secure the long-term and stable development of various businesses and effectively assume risks, the Group manages capital based on the business development, related regulations and financial market environment. Major capital evaluation processes include:
A. Each segment should provide accurate and valid source of information to maintain calculation accuracy of capital adequacy ratio.
B. After the reporting at the 10th of each month, capital adequacy ratio should be computed by the end of every month. If the result is close to the legal standard, every unit will be called to attend a meeting for discussion and strategic planning to ensure that the basic objective of capital adequacy ratio is not less than 200%.
C. Both the risk limits and economic capital of the Group should be agreed by the Board of Directors. The Group should quarterly report details of risk control with disclosure of investment condition in order to assess whether the risk position exceeds the limit and whether the investment direction is in line with the market trend. Within the authorized risk limits, the Group is actively engaged in development of various businesses and continually increases profit, creates company value, and complies with the capital management objective.

The Group calculates and reports the capital adequacy ratio according to “Rules Governing Securities Firms”. According to Jin-Guan-Zeng-Chuan Letter No. 1010016685, from July 2012, advanced calculation method applied to capital adequacy ratio for securities firms is applicable to non-financial-holdings securities firms who file the report about information on capital adequacy ratio for June 2012. As of December 31, 2013, December 31, 2012 and January 1, 2012, the capital adequacy ratio were 509%, 564% and 505%, respectively as required by the regulations.

15. ASSETS AND LIABILITIES OF TRUST ACCOUNTS

Pursuant to Article 17 of Enforcement Rules of the Trust Enterprise Act, balance sheet, income statement, and property list of trust accounts shall be disclosed in the financial statements on a semiannual basis. Details are as follows:

149

A. Balance sheet of trust accounts

Trust assets Bank savings Structured notes Stock Fund Securities lending Accounts receivable		December 31 2013 2012 141,982 $ 119,678 53,107 - 339,383 - 792,684 708,042 76,426 - 7,884 816
	$	2013 141,982 53,107 339,383 792,684 76,426 7,884
Total of trust assets $ 1,411,466 $ 828,536 Trust liabilities Accounts payable $ 11,131 $ 13,597 Trust capital 1,373,838 814,650 Retained earnings 26,497 289 Total of trust liabilities $ 1,411,466 $ 828,536 B. Income statement of trust accounts For the Years ended December 31 Item 2013 2012 Trust income Interest income $ 112 $ 14 Cash dividends received 613 - Income from stocks lending 392 - Investment gains- realized 8,652 190 Investment loss- unrealized 27,097 113	$
	$
	$
Subtotal 36,866 317 Trust expenses Management fee ( 21 )( 3 ) Service fee ( 22 ) - Borrowing costs ( 76 ) - Income before income tax 36,747 314 Income tax expense ( 11 )( 1 ) Net income $ 36,736 $313 C. Property list of trust accounts December 31 Items 2013 2012 Bank savings $ 141,982 $ 119,678 Structured notes 53,107 - Funds 792,684 708,042 Bank savings 339,383 - Securities lending 76,426 - Others 7,884 816 Total $ 1,411,466$ 828,536

150

16. STATUS OF THE COMPANY IN THE LIMITATIONS ON FINANCIAL RATIOS IMPOSED BY FUTURES TRADING ACT, AND THE RELATED IMPLEMENTATION

“ ” The table below is prepared according to Regulations Governing Futures Commission Merchants .

Article	Calculation formula	December31,2013	December31,2013	December	31,2012	Standard	Enforcement
		Calculation	Ratio	Calculation	Ratio
	Stockholders’equity (Total liability－futures trader’s equity	2,896,911	42.05	2,859,555	26.29	≧1	Met the requirement
		68,883		108,778
17	－reserve for trading losses －reserve for breach of contractlosses)
17	Current assets Currentliabilities	2,949,995	176.5	2,954,892	84.11	≧1	Met the requirement
		16,714		35,132
22	Stockholders’equity Minimumpaid-incapital	2,896,911	724.23%	2,859,555	714.89%	≧60% ≧40%	Met the requirement
		400,000		400,000
22	Adjusted net capital Total amount of customer margins required for the open positions of futures traders	2,769,432	3394.43%	2,743,594	1711.55%	≧20% ≧15%	Met the requirement
		81,588		160,298

151

17. STATUS OF THE SUBSIDIARY IN THE LIMITATIONS ON FINANCIAL RATIOS IMPOSED BY THE FUTURES TRADING ACT AND THE RELATED IMPLEMENTATION

“ ” The table below is prepared according to Regulations Governing Futures Commission Merchants .

	Article	Calculation formula	December31,2013	December31,2013	December	31,2012	Standard	Enforcement
			Calculation	Ratio	Calculation	Ratio
		Stockholders’equity (Ttl libilit－ftr trdr’ it	1,228,860	11.21	1,187,166	11.29	≧1	Met the requirement
			15		105,149
oa ayuues aes equy －reserve for trading losses 17 －reserve for breach of contractlosses) Current assets 17 Currentliabilities Stockholders’equity 22 Minimumpaid-incapital Adjusted net capital 22 Total amount of customer margins required for the open positions of futures traders 18. PROSPECTIVE RISK FOR FUTURES TRADING	17	oa ayuues aes equy －reserve for trading losses －reserve for breach of contractlosses)	09,89
	17	Current assets Currentliabilities	7,092,199	1.13	7,828,786	1.11	≧1	Met the requirement
			6,287,527		7,049,792
	22	Stockholders’equity Minimumpaid-incapital	1,228,860	190.52%	1,187,166	184.06%	≧60% ≧40%	Met the requirement
			645,000		645,000
	22	Adjusted net capital Total amount of customer margins required for the open positions of futures traders	908,851	110.13%	906,968	127.26%	≧20% ≧15%	Met the requirement
			825,271		712,689

The main risk for futures merchants engaging in futures trading is credit risk, which could happen if the margin call cannot be made when it should have been made. While being consigned to conduct the futures trading, the Group pays attention to the individual margin account on a daily basis and request additional margin call or reduction in trading volume when necessary according to the condition of individual customer transactions in order to control the credit risk accordingly. The main risk faced by the Group while engaging in self-operating businesses is market price risk- that is risk of changes in market prices of futures or options contracts as a result of fluctuation in underlying investment index. Losses may occur if the market index price and underlying investment move adversely. However, the Group has set up stop-loss point to control such risk for reasons of risk management.

152

19. OPERATING SEGMENTS

1) General information

Financial information by the Group’s segments is disclosed in accordance with IFRS 8. Management has determined the reportable operating segments based on the reports reviewed by the CODM that are used to make strategic decisions. The Group’s operating segments are classified into brokerage, capital market, dealing, and reinvestment according to the sources of income. The remaining operating results which have not reached the threshold requirements are consolidated in ‘other operating segments’. Sources of income from products and services rendered by each segment are as follows:
A.Brokerage segment: consigned trading of the listed securities, margin trading and short sale, assistance in futures trading and other instruments trading as approved by the regulations.
B.Capital market segment: providing services such as assisting enterprises in application for going public, handling assessment of cash capital increase, financial certificate issuance for domestic and foreign convertible bonds, as well as underwriting or financial consulting businesses
C.Self-operating segment: using the self-owned equity to conduct securities trading such as stocks and bonds trading, and futures and options hedging in Stock Exchange and OTC
D.Reinvestment segment: companies reinvested by the consolidated entities.
E.Other operating segment includes futures dealing segment, financial instrument segment, and stock agency segment.
2) Segments information
The accounting policies applied to the Group’s operating segments and summary of accounting policies disclosed in notes to the financial statements are consistent and identical. The operating gains and losses are measured by the amount before tax and used as basis for performance appraisal. Income and expense attributable to each operating segment are attributed to the segmental gains and losses. Non-attributable indirect expenses and expenses from logistic support segment are amortized to each operating segment based “ ”
on reasonable calculation standards and the expense nature. Those that cannot be reasonably amortized are listed under Others .

3) Profit or loss of segments information

			For theyear ended December 31,2013	For theyear ended December 31,2013	For theyear ended December 31,2013
	Brokerage segment	Capital market segment	Self-operating segment	Reinvestment segment	Other operating segment	Others	Total
Segment revenues	$ 1,864,956	$ 344,636	$ 1,120,104	$ 840,580	$ 476,086	($ 33,044)	$ 4,613,318
Segmentprofit or loss	$ 205,254	$ 260,045	$ 891,431	$ 235,381	($ 95,626)	($ 6,998)	$ 1,489,487
			For theyear ended December 31,2012
	Brokerage segment	Capital market segment	Self-operating segment	Reinvestment segment	Other operating segment	Others	Total
Segment revenues	$ 2,037,950	$ 181,873	$ 387,649	$ 657,346	$ 885,458	($ 65,183)	$ 4,085,093

153

Segment profit or loss $ 327,660 $ 108,120 $ 247,771 $ 69,820 $ 486,167 $ 66,240 $ 1,305,778

Note 1: As operating income (loss) in total is consistent with consolidated statement of comprehensive income, there is no need for adjustment.
Note 2: the Company measures the performance of reportable operating segment based on specific performance indicators instead of assets and liabilities. The performance of reportable operating segment is regularly reviewed and assessed by the operating decision-maker as a referene for making resources allocation decision.
4) Informations on products and service: The Group’s reportable segments are based on different products and services with disclosure of general information about types of products and services of the reportable segments’ income sources. There is no requirement for additional disclosure of income from products and services.
5) Informations on regions: There was no disclosure since the revenues from foreign customers were not significant.
6) Informations on major customers: There was no disclosure because no customers accounted for 10% of the Group’s operating revenues for the current period.

20.SIGNIFICANT TRANSACTIONS BETWEEN PARENT COMPANY AND SUBSIDIARIES

1. For the year ended December 31, 2013

					Details of transactions	Details of transactions
							Percentage (%) of total
No.			Relationship
	Company	Counterparty					consolidated net
(Note 1)			(Note 2)	Account	Amount	Conditions
							revenues or assets

							(Note 3)
0	President Securities Corp.	President Futures Corp.	1	Futures Margin - Own Funds	$ 1,304,322	Note 4	2.22%
0	President Securities Corp.	President Futures Corp.	1	Deposit-out	38,000	Note 4	0.06%
0	President Securities Corp.	President Futures Corp.	1	Accounts receivable	3,476	Note 4	0.01%
					44,200	Note 4	0.96%
0	President Securities Corp.	President Futures Corp.	1	Future commission revenue
0	President Securities Corp.	President Futures Corp.	1	Expense of clearingand settlement	37,563	Note 4	0.81%
0	President Securities Corp.	President Futures Corp.	1	Deposit-in	16,000	Note 4	0.03%
0	President Securities Corp.	President Futures Corp.	1	Other non-operatingrevenues	2,039	Note 4	0.04%
0	President Securities Corp.	President Futures Corp.	1	Otherpayables	1,002	Note 4	0.00%
0	President Securities Corp.	President Futures Corp.	1	Accounts receivable	1,661	Note 4	0.00%
0	President Securities Corp.	President Capital Management	1	Other payables	1,723	Note 4	0.00%
		Corp.
0	President Securities Corp.	President Capital Management	1	Expense from investment advisory	21,432	Note 4	0.46%
		Corp.
0	President Securities Corp.	President Capital Management	1	Rental income	3,362	Note 4	0.07%

154


					Details of transactions
							Percentage (%) of total
No.			Relationship
	Company	Counterparty					consolidated net
(Note 1)			(Note 2)	Account	Amount	Conditions
							revenues or assets

							(Note 3)
		Corp.
0	President Securities Corp.	President Capital Management	1	Charge for books and magazines	1,285	Note 4	0.03%
		Corp.
0	President Securities Corp.	President Securities(HK)Ltd.	1	Cash and cash equivalents	55,347	Note 4	0.09%
					1,633	Note 4	0.04%
0	President Securities Corp.	President Securities(HK)Ltd.	1	Service expense on self-operation
0	President Securities Corp.	President Securities(HK)Ltd.	1	Accounts receivable	2,701	Note 4	0.00%
0	President Securities Corp.	President Securities(HK)Ltd.	1	Accountspayable	5,482	Note 4	0.01%
1	President Capital Management	President Securities Corp.	2	Accounts receivable	1,723	Note 4	0.00%
	Corp.
1	President Capital Management	President Securities Corp.	2	Revenue from investment advisory	21,432	Note 4	0.46%
	Corp.
1	President Capital Management	President Securities Corp.	2	Rent expense	3,362	Note 4	0.07%
	Corp.
1	President Capital Management	President Securities Corp.	2	Other operating revenues	1,285	Note 4	0.03%
	Corp.
2	President Futures Corp.	President Securities Corp.	2	Customer margin account /Futures	1,304,322	Note 4	2.22%
				traders’ equity
2	President Futures Corp.	President Securities Corp.	2	Deposit-in	38,000	Note 4	0.06%
2	President Futures Corp.	President Securities Corp.	2	Accountspayable	3,476	Note 4	0.01%
2	President Futures Corp.	President Securities Corp.	2	Futures commission expense - futures	44,200	Note 4	0.96%
				introducingbroker
2	President Futures Corp.	President Securities Corp.	2	Revenue from consignment of	37,563	Note 4	0.81%
				clearingand settlement
2	President Futures Corp.	President Securities Corp.	2	Deposit-out	16,000	Note 4	0.03%
2	President Futures Corp.	President Securities Corp.	2	Other operatingexpenses	2,039	Note 4	0.04%
2	President Futures Corp.	President Securities Corp.	2	Other receivable	1,002	Note 4	0.00%
2	President Futures Corp.	President Securities Corp.	2	Otherpayables	1,661	Note 4	0.00%
3	President Securities(HK)Ltd.	President Securities Corp.	2	Handlingfee revenue	1,633	Note 4	0.04%
3	President Securities(HK)Ltd.	President Securities Corp.	2	Accountspayable	52,566	Note 4	0.09%

Note 1：The numbers in the No. column are represented as follows:

The number zero is for parent company.

155

According to the sequential order, subsidiaries are numbered from 1.
Note 2：There are three kinds of transactions between related parties and numbered from 1 to 3 were shown as follows:
Parent company to subsidiaries.
Subsidiaries to parent company.
Subsidiaries to subsidiaries.
Note 3：The calculation basis of the trading amount accounting for the total consolidated net revenues or assets is that the account ending balance is divided by the total consolidated assets if it is attributed to the balance sheet accounts, and the accumulated trading amount of the interim period is divided by the total consolidated net revenues if it is attributed to the profit or loss accounts.
Note 4：All the prices of the service revenues and consulting service provided between related parties were traded by contracts. Note 5：Based on materiality, only the amounts of the transactions that were above $1 million would be shown in the table.

21.OTHER DISCLOSURE ITEMS

1) Information about significant transactions
A. Lending to others: Excluding security margin trading and conditional bond trading business, there is no lending of funds to either the shareholders or other parties.
B. Endorsements and guarantees for others：None.
C. Acquisitions of real estate exceeding $100,000 or 20 percent of contributed capital：None.
D. Disposals of real estate exceeding $100,000 or 20 percent of contributed capital：None.
E. Purchases or sales transactions discount on brokers’ charges with related parties in excess of $5,000：None.
F. Receivables from related parties exceeding $100,000 or 20 percent of contributed capital：None.
2) Related information of investee companies
A. Related information of investee companies

				Original	investment	Ending balance	Ending balance	Book value $ 1,188,210 145,479 61,140 1,882,216 401,250 9,267 11,384	Net income (loss) of investee company	Investment income (loss) recognized by the Company	Notes
Name of the investor	Name of the investee company	Location	Major operating activities Futures brokerage Securities investment consulting Securities dealer , brokerage, underwriting and consulting Securities investment and holding company Investment Trust Insurance Agent Insurance Agent	Balance on December 31, 2013	Balance on January 1, 2013	Shares	Percentage 96.69% 100.00% 5.19% 100.00% 38.66% 100.00% 100.00%
President Securities Corp.	President Futures Corp. President Capital Management Corp. President Securities (HK) Ltd. President Securities (BVI) Ltd. Uni-President Assets Management Corp. President Personal Insurance Agency Co., Ltd. President Insurance Agency Corp.	Taipei Taipei Hong Kong British Virgin Islands Taipei Taipei Taipei		$ 644,650 150,000 34,030 2,264,573 624,940 5,000 5,000	$ 644,650 150,000 34,030 2,264,573 624,940 5,000 5,000	63,817,303 12,400,000 10,000,000 67,746,000 13,570,830 500,000 500,000			$ 112,957 ( 563) 74,758 92,813 143,500 3,178 4,383	$ 107,794 ( 563) 3,899 93,160 55,870 3,178 4,383	Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Note Subsidiary of the Company Subsidiary of the Company

156

	PSC Venture Capital	Taipei	Venture capital	300,000 - 30,000,000	100.00% 300,656 656 656Subsidiary of the
	Investment Limited				Company
	Company
President	President Securities (HK) Ltd.	Hong Kong	Securities dealer ,	814,705 814,705 182,600,000	94.81% 1,116,883 74,758 71,223Subsidiary of the
Securities (BVI)			brokerage, underwriting		Company
Ltd.			and consulting
	President Wealth Management	Hong Kong	Wealth management	92,091 92,091 23,400,000	100.00% 56,338 217 217Indirect subsidiary of
	(HK) Ltd.				the Company
	President Securities (Nominee)	Hong Kong	Nominee Service	3,403 3,403 1,000,000	100.00% 2,328 ( 37) ( 37)Indirect subsidiary of
	Ltd.				the Company
President	Uni-President Assets	Taipei	Investment Trust	478 478 12,000	0.03% 358 143,500 49Note
Insurance	Management Corp.
Agency Corp.

Note: Investee company accounted for under the equity method.

B. Lending to others: Excluding security margin trading and conditional bond trading business, there is no lending of funds to either the shareholders or other parties.
C. Endorsements and guarantees for others：None.
D. Acquisitions of real estate exceeding $100,000 or 20 percent of contributed capital：None.
E. Disposals of real estate exceeding $100,000 or 20 percent of contributed capital：None.
F. Purchases or sales transactions discount on brokers’ charges with related parties in excess of $5,000：None. G. Receivables from related parties exceeding $100,000 or 20 percent of contributed capital：None.
H. In accordance with Jin-Guan-Zheng-Quan-Zi Letter No. 10100371661, the Group is required to disclose details of businesses run by foreign enterprises that were incorporated in the countries identified as non-signatories to the IOSCO MMoU or have not obtained securities or futures license of signatories to the IOSCO MMoU： a) Securities held as of December 31, 2013 of President Securities (BVI) Ltd

			Expressed in U.S. Dollars Carrying value Fair value Unit price Amount Unit price Amount $1.000 $ 2,500,000 $0.640 $ 1,599,890 0.995 4,975,000 0.679 3,396,362 7,475,000 4,996,252 (2,000,000) - $ 5,475,000 $ 4,996,252	Expressed in U.S. Dollars Carrying value Fair value Unit price Amount Unit price Amount $1.000 $ 2,500,000 $0.640 $ 1,599,890 0.995 4,975,000 0.679 3,396,362 7,475,000 4,996,252 (2,000,000) - $ 5,475,000 $ 4,996,252	Expressed in U.S. Dollars Carrying value Fair value Unit price Amount Unit price Amount $1.000 $ 2,500,000 $0.640 $ 1,599,890 0.995 4,975,000 0.679 3,396,362 7,475,000 4,996,252 (2,000,000) - $ 5,475,000 $ 4,996,252
Securities types and name Financial assets at fair value through profit or loss - current Open-end mutual funds beneficiary certificates and money market instruments FL. R GSC EUROPEAN CDO FL. R ARES VIR Less : impairment loss Total	Type	Number of shares 2,500,000 5,000,000	Unit price $1.000 0.995	Unit price Amount $0.640 $ 1,599,890 0.679 3,396,362 4,996,252 - $ 4,996,252
	STRUCTURED NOTES STRUCTURED NOTES
					4,996,252 -
					$ 4,996,252

157

Investments in associates President Securities (HK) Ltd. STOCK 182,600,000 $0.205 President Wealth Management (HK) Ltd. STOCK 23,400,000 0.081 President Securities (Nominee) Ltd. STOCK 1,000,000 0.078 Total	$ 37,461,371 $0.205 $ 37,461,371 1,890,209 0.081 1,890,209 78,112 0.078 78,112 $39,429,692 $39,429,692

b) Derivative financial instrument transactions and the source of capital of President Securities (BVI) Ltd: As of December 31, 2013, the carrying value of USD5,475,000 of asset securitization for derivatives was undertaken with the Company's own capital of USD 7,475,000
c) Revenue from assets management business, service contents and litigation：None.
d) Balance Sheet

PRESIDENT SECURITIES (BVI) LTD.

BALANCE SHEETS

December 31,

Assets Current assets Cash and cash equivalents Financial assets at fair value through profit or loss - current Other receivables Current assets Investment in associates	2013	% 29 9 - 38 62	2012 Amount % $ 17,491,567 29 5,475,000 9 13,636 - 22,980,203 38 37,062,127 62	Expressed in U.S. dollars 2013 2012 Liabilities and equity Amount % Amount % Current liabilities Other payables $ 3,331 -$ 3,212 - Total liabilities 3,331 - 3,212 - Equity Capital 67,746,000 107 67,746,000 113 Capital reserve 757,813 1 757,813 1 Retained earnings Unappropriated earnings ( 6,100,697 ) ( 10 ) ( 9,226,648 ) ( 15) ) Other equity Translation gain or loss on the financial statements of foreign operating entities adjustments 736,288 2 761,953 1 Total equity 63,139,404 100 60,039,118 100 Total liabilities and equity $63,142,735 100$60,042,330 100
	Amount $ 18,209,398 5,475,000 28,645 23,713,043 39,429,692
Total asset	$63,142,735	100	$ 60,042,330 100	operating entities adjustments Total equity Total liabilities and equity

158

President Wealth Management (HK) Ltd BALANCE SHEETS

December 31,

Assets Current assets Cash and cash equivalents Other receivables Current assets	2013	% 100 - 100	2012 Amount % $ 14,612,164 100 1,036 - 14,613,200 100	Liabilities and equity Current liabilities Other payables Total liabilities Equity Capital
	Amount $ 14,649,489 30,532 14,680,021
Total asset	$14,680,021	100	$ 14,613,200 100

Assets Current assets Cash and cash equivalents Other receivables Current assets	2013	% 100 - 100				Expressed in Hong Kong dollars 2013 2012 Amount % Amount % $ 19,000 3$ 9,500 2 19,000 3 9,500 2 1,000,000 160 1,000,000 160 ( 394,190 ) ( 63 )( 384,538 ) ( 62 ) 605,810 97 615,462 98 $ 624,810 100$ 624,962 100
				% 100 - 100
	Amount $ 624,292 518 624,810		Amount $ 624,952 10 624,962			Amount $ 19,000 19,000 1,000,000 ( 394,190 ) 605,810 $ 624,810
Total asset	$ 624,810	100	$ 624,962	100	Retained earnings Unappropriated earnings Total equity Total liabilities and equity

159

e) Consolidated statement of comprehensive income

PRESIDENT SECURITIES (BVI) LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31,

	For the years ended December 31,	he years ended December 31,
	2013 Accounts Amount Expenditures and expenses Interest expenses ( $ 1) Employee benefits ( 50,356 ) Other operating expenses ( 17,668 )	2013	Expressed in U.S. dollars 2012 % Amount % - $ - - ( 54,342 ) - - ( 17,227 ) - - ( 71,569 ) - - ( 3,929,611 ) - - 2,523,362 - - ( 1,406,249) - - ( 1,477,818 ) - - - - - ( 1,477,818 ) - - - - ($ 1,477,81) -
	Total expenditures and expenses ( 68,039 ) Non-operating gains and losses Share of the profit or loss of associates and joint ventures accounted for using the equity method 2,393,230 Other gains and losses 800,760 Total non-operating gains and losses 3,193,990 Profit (loss) before tax 3,125,951 Income tax expense - Income from continuing operations 3,125,951 Income from discontinuing operations - Net income $ 3,125,95

160

President Wealth Management(HK) Ltd CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31,

	For the years ended December 31,	he years ended December 31,
Accounts	2013 Amount ($ 28,50) ( 28,500 )	2013
Expenditures and expenses Other operating expenses Total expenditures and expenses Non-oeratin ains and losses
pg g Other gains and losses Profit (loss) before tax Income tax expense Income from continuing operations Income from discontinuing operations Net income (loss) Accounts
	For the years ended December 31, 2013 Amount ($ 14,35) ( 14,350 ) 4,698 ( 9,652 ) -
Expenditures and expenses Other operating expenses Total expenditures and expenses Non-operating gains and losses Other gains and losses Loss before tax Income tax expense
Income from continuing operations Income from discontinuing operations Net loss	( 9,652) - ($ 9,65)

f)Transactions between related parties and foreign business：None.

3). Disclosure of investment in Mainland China：Not applicable.

161

22.INITIAL APPLICATION OF IFRSs

These consolidated financial statements are the first consolidated financial statements prepared by the Group in accordance with IFRSs. The Group has adjusted the amounts as appropriate that are reported in the previous R.O.C. GAAP consolidated financial statements to those amounts that should be presented under IFRSs in the preparation of the opening IFRS balance sheet. Information about exemptions selected by the Group, exceptions to the retrospective application of IFRSs in relation to first-time adoption of IFRSs, and how it affects the Group’s financial position, operating results and cash flows in transition from R.O.C. GAAP to the IFRSs is set out below:

1) Exemptions selected by the Group
i. Business combinations The Group has elected not to apply the requirements in IFRS 3, ‘Business Combinations’, retrospectively to business combinations that occurred prior to the date of transition to IFRSs (“the transition date”). This exemption also applies to the Group’s previous acquisitions of investments in associates.
ii. Designation of previously recognized financial instruments The Group has elected to designate investments which were originally measured at cost, as available-for-sale financial assets at the transition date.
iii. Decommissioning liabilities included in the cost of property, plant and equipment The Group has elected to measure the decommissioning liabilities included in the cost of property, plant and equipment at the transition date in accordance with IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’.
iv. Unrecognized actuarial gains or losses The Group has elected to recognize all cumulative actuarial gains and losses relating to all employee benefit plans in ‘retained earnings’ at the transition date, and to disclose the information of present value of defined benefit obligation, fair value of plan assets, gain or loss on plan assets and experience adjustments under the requirements of paragraph 120A (P), IAS 19, ‘Employee Benefits’, based on their prospective amounts for financial periods from the transition date.
v. Compound financial instruments The Group has elected not to segregate between liability components and equity components of compound financial instruments whose liability components were no longer outstanding at the transition date.
vi. Share-based payment transactions The Group has elected not to apply the requirements in IFRS 2, ‘Share-based Payment’, retrospectively to equity instruments that were vested arising from share-based payment transactions prior to the transition date.
vii. Cumulative translation differences The Group has elected to reset the cumulative translation differences arising on the translation of the financial statements of foreign operations under R.O.C. GAAP to zero at the transition date, and to deal with translation differences arising subsequent to the transition date in accordance with IAS 21, ‘The Effects of Changes in Foreign Exchange Rates’.
2) Except for hedge accounting and non-controlling interest to which exceptions to the retrospective application of IFRSs specified in IFRS 1 are not applied as they have no relation with any transaction of the Group, other exceptions to the retrospective application are set out below:
A.Accounting estimates

162

Accounting estimates made under IFRSs on January 1, 2012 are consistent with those made under R.O.C. GAAP on that day.

B. Derecognition of financial assets and financial liabilities

The derecognition requirements in IAS 39, ‘Financial Instruments: Recognition and Measurement’ shall be applied prospectively to transactions occurring on or after January 1, 2004.

3) Requirement to reconcile from R.O.C. GAAP to IFRSs at the time of initial application IFRS 1 requires that an entity should prepare reconciliations for equity, comprehensive income and cash flows for the comparative periods. Reconciliations for equity and comprehensive income for the comparative periods as to transition from R.O.C. GAAP

to IFRSs is shown as follows:

Reconciliation for equity on January 1, 2012:

R.O.C GAAP		Effect of transition From R.O.C. GAAP to IFRSs	Effect of transition From R.O.C. GAAP to IFRSs	IFRSs	IFRSs
Description	Amount	Recognition	Presentation	Amount	Description	Remark
Current assets					Current assets
Cash and cash equivalents	$ 4,002,165	$ -	$ -	$ 4,002,165	Cash and cash equivalents
Financial assets at fair value throughprofit or loss - current	15,385,022	( 13,845)	49,507	15,420,684	Financial assets at fair value throughprofit or loss - current	(1)
	-	-	746,733	746,733	Available-for-sale financial assets-current	(11)
Bonds purchased under resale agreements	230,044	-	-	230,044	Bonds purchased under resale agreements
Margin loans receivable	10,683,585	-	-	10,683,585	Margin loans receivable
Refinancingsecuritydeposits	2,820	-	-	2,820	Refinancingsecuritydeposits
Receivables from refinance guaranty	36,522	-	-	36,522	Receivables from refinance guaranty
Customer margin account	5,234,807	-	-	5,234,807	Customer margin account
Receivables from security lending	176,124	-	-	176,124	Receivables from security lending
Securitylendingdeposits	160,393	-	-	160,393	Securitylendingdeposits
Notes receivable	1,630	-	-	1,630	Notes receivable
Accounts receivable	332,970	3,800,099	1,112	4,134,181	Accounts receivable	(8),(9)
Prepayments	23,698	-	( 35)	23,663	Prepayments	(11)
Prepaid pension expense - current	119,561	( 117,989)	( 1,572)	-	Prepaid pension expense - current	(2)
Other receivable	486,073	( 352,201)	( 50,618)	83,254	Other receivable	(1),(3) (9)
	-	113	-	113	Current tax assets	(3)
	-	505,053	3,592,993	4,098,046	Other current assets	(8),(9) (11)
Restricted assets	3,592,959	-	( 3,592,959)	-		(11)
Deferred tax assets-current	16,546	( 16,546)	-	-		(3)
Available-for-sale financial assets - current	746,733	-	( 746,733)	-		(11)
Total current assets	41,231,652			45,034,764	Total current assets
Funds and investments					Non-current assets
Investments accounted for under the equitymethod	395,805	( 10,505)	( 385,300)	-		(4),(11)
Available-for-sale financial assets – non-current	98,027	-	( 98,027)	-		(11)
Financial assets at fair value	51,635	-	-	51,635	Financial assets at fair value

163

						Remark (11) (11) (5),(11)
R.O.C GAAP		Effect of transition From R.O.C. GAAP to IFRSs		IFRSs
Description	Amount	Recognition	Presentation	Amount	Description	Remark
through profit or loss – non-current					through profit or loss – non-current
Total funds and investments	545,467
		-	98,027	98,027	Financial assets at cost – non-current	(11)
		-	385,300	385,300	Investments in associates	(11)
Fixed assets		-	2,657,258	2,657,258	Propertyand equipment	(5),(11)
Land	1,680,129	-	( 1,680,129)	-		(11)
Buildings	1,107,661	-	( 1,107,661)	-		(11)
Equipment	236,631	-	( 236,631)	-		(11)
Prepayments for equipment	18,263	( 18,263)	-	-		(10)
Leasehold improvements	85,463	-	( 85,463)	-		(11)
Less: accumulated depreciation	( 452,626)	-	452,626	-		(11)
Total fixed assets	2,675,521
Deferredpension costs	902	( 902)	-	-		(2)
Other assets
Operating guarantee deposits	842,000	-	( 842,000)	-		(11)
Exchange clearingdeposits	505,941	-	( 505,941)	-		(11)
Deposits-out	57,997	-	( 57,997)	-		(11)
Deferred debits	33,578	-	( 33,578)	-		(11)
Rental assets	250,985	-	( 250,985)	-		(11)
Idle assets	38,419	-	( 38,419)	-		(11)
	-	-	289,404	289,404	Investmentproperty	(5),(11)
Deferred tax assets - non-current	695	63,606	-	64,301	Deferred tax assets	(2),(3),(5)
		18,264	1,441,088	1,459,352	Other assets-non-current	(10),(11)
Total other assets	1,729,615	-	-	-
Securities brokerage debit accounts - net	181,679	( 181,679)	-	-
				5,005,277	Total non-current assets
Total assets	$ 46,364,836	$ 3,675,205	$ -	$ 50,040,041	Total assets

Current liabilities					Current liabilities
Short-term loans	$ 3,620,887	$ -	$ -	$ 3,620,887	Short-term loans
Commercialpaperspayable	1,499,781	-	-	1,499,781	Commercialpaperspayable
Bonds sold under repurchase agreements	8,616,273	-	( 8,616,273)	-		(11)
Financial liabilities at fair value through profit or loss - current	427,237	-	-	427,237	Financial liabilities at fair value through profit or loss - current
		-	8,616,273	8,616,273	Bonds sold under repurchase agreements	(11)
Deposits on short sales	1,478,214	-	-	1,478,214	Deposits on short sales
Short saleproceedspayable	1,741,022	-	-	1,741,022	Short saleproceedspayable
Guarantee deposit received on borrowed securities	1,795,332	-	-	1,795,332	Guarantee deposit received on borrowed securities
Futures traders’ equity	5,234,807	-	-	5,234,807	Futures traders’ equity
Accounts payable	46,917	3,773,992	1,133	3,822,042	Accounts payable	(8),(9) (11)
Advance receipts	45	-	30	75	Advance receipts	(11)
Collections on behalf of third parties	230,578	-	3,440	234,018	Collections on behalf of third parties	(11)

164

						Remark (2),(3) (6),(9) (11) (3) (11) (9)
R.O.C GAAP		Effect of transition From R.O.C. GAAP to IFRSs		IFRSs
Description	Amount	Recognition	Presentation	Amount	Description	Remark
Other payables	816,953	(24,122)	( 4,603)	788,228	Other payables	(2),(3) (6),(9)
		-	83,498	83,498	Other financial liabilities-current	(11)
		46,937	-	46,937	Current tax liabilities	(3)
Other financial liabilities-current	83,498		( 83,498)	-		(11)
		3,122	-	3,122	Other current liabilities	(9)
Total current liabilities	25,591,544			29,391,473	Total current liabilities
Other liabilities
Deposit-in	4,533	-	( 4,533)	-		(11)
Total other liabilities	4,533
Total liabilities	$ 25,596,077
					Non-current liabilities
		1,001	-	1,001	Deferred tax liabilities	(2),(3),(6)
		123,505	4,533	128,038	Other non-current liabilities	(2),(11)
				129,039	Total non-current liabilities
				$ 29,520,512	Total liabilities
Shareholders’ equity					Equity attributable to owners of theparent company
Common stock	12,845,816	-	-	12,845,816	Common stock
Capital reserve			409,826	409,826	Capital reserve	(11)
Common stock	13,558	-	( 13,558)	-		(11)
Treasurystock	396,268	-	( 396,268)	-		(11)
Retained earnings					Retained earnings
Legal reserve	1,903,868	-	-	1,903,868	Legal reserve
Special reserve	5,198,754	-	-	5,198,754	Special reserve
Unappropriated earnings	582,364	( 460,286)	-	122,078	Unappropriated earnings	(1),(2),(3) (4),(6),(7)
Other adjustments to shareholders' equity					Other adjustments to shareholders' equity
Cumulative translation adjustments	( 211,249)	211,249	-	-	Translation gain or loss on the financial statements of foreign operatingentities	(7)
Unrealized gain or loss on financial instruments	11,794	-	-	11,794	Unrealized gain or loss on financial instruments
Minority interest	27,586	( 193)	-	27,393	Non-controlling interest	(2 ),( 6)
Total shareholders' equity	20,768,759			20,519,529	Total equity
Total liabilities and shareholders’ equity	$ 46,364,836	$ 3,675,205	$ -	$ 50,040,041	Total liabilities and equity

Reasons for reconciliation are outlined below:

The Group therefore designated emerging stocks at cost to be measured at fair value with provision of evaluation losses and decrease in both financial assets at fair value through profit

165

or loss-current by ($13,845) and retained earnings by ($13,845) at the transition date. The Group also reclassified futures guarantee deposit of $49,507 from other receivables of the subsidiary, President Securities (HK), into financial assets at fair value through profit or loss-current.

(2) The discount rate used to calculate pensions shall be determined with reference to the factors specified in R.O.C. SFAS 18, paragraph 23. However, IAS 19, ‘Employee Benefits’, requires an entity to determine the rate used to discount employee benefits with reference to market yields at the balance sheet date on high quality corporate bonds of a currency and term consistent with the currency and term of the benefit obligation; when there is no deep market in corporate bonds, an entity is required to use market yields on government bonds (at the balance sheet date) instead. The Group has elected to recognize all cumulative actuarial gains and losses relating to all employee benefit plans in ‘retained earnings’ at the transition date, and the Group adjusted the actuarial difference based on the actuarial report, to decrease retained earnings by ($204,380), to decrease prepaid pension expenses-current by ($117,989), to increase other payables by $4,039, to increase other liabilities-noncurrent by $123,505, to decrease deferred pension cost by ($902), to decrease non-controlling interest by ($161), to increase deferred tax assets-non-current by $41,898, and to increase deferred tax liability-non-current by $4.
(3) In accordance with IAS 12 ‘Income taxes’, tax refundable of $113 in other receivables was reclassified into current tax assets, and tax payable of $46,937 in other payables was reclassified into current tax liability. In accordance with R.O.C. GAAP, a deferred tax asset or liability should, according to the classification of its related asset or liability, be classified as current or noncurrent. Previously under ROC GAAP, deferred tax assets or liabilities are categorized into current or non-current items according to the categorization of related liabilities or assets. Deferred tax assets or liabilities that are not related to any liabilities or assets in the financial statements should be classified as current or non-current items according to their expected time period to realize or settle. However, under IAS 1, ‘Presentation of Financial Statements’, an entity should not classify a deferred tax asset or liability as current, and accordingly, deferred tax assets-current of $16,546 was reclassified to deferred tax assets-non-current. Under IAS 12, the deferred income tax asset (liability)-non-current which was originally presented in net value should be presented in gross amounts resulting in an adjustment of $1,082 in deferred income tax asset-non-current and deferred income tax liability-non-current .
(4) The Group adjusted difference in profits or losses of the investee incurred after IFRS transition resulted in the decrease of the investment accounted for using equity method by ($10,505) and retained earnings by ($10,505).
(5) In accordance with Rules Governing the Preparation of Financial Statements by Securities Firms, the property and equipment, investment property and intangible assets designated such initial cost as ‘deemed cost’, and were measured subsequently using the cost model.
(6) The current accounting standards in R.O.C. do not specify the rules on the cost recognition for accumulated unused compensated absences. The Group recognizes such costs as expenses upon actual payment. However, IAS 19, ‘Employee Benefits’, requires that the costs of accumulated unused compensated absences should be accrued as expenses at the end of the reporting period. However, the Group adjusted the GAAP differences at the transition date to decrease retained earnings by ($20,306), to decrease non-controlling interest by ($32), to increase deferred tax assets-non-current by $4,080, to decrease deferred tax liability-non-current by ($85), and increase other payable by $24,503.
(7) The Group has elected to reset the cumulative translation differences of ($211,249) arising on

166

the translation of the financial statements of foreign operations under R.O.C. GAAP to zero at the transition date, and to deal with translation differences arising subsequent to the transition date in accordance with IAS 21, ‘The Effects of Changes in Foreign Exchange Rates’.

(8) The Securities brokerage debit and credit accounts were not in conformity with the offsetting of financial assets and financial liabilities requirements of IAS 32, ‘Financial Instruments: Presentation’. As a result, the Group adjusted the GAAP difference to increase accounts receivable by $3,448,281, to increase other current assets by $504,783, to increase accounts payable by $3,771,385, and to decrease securities brokerage debit and credit accounts by ($181,679).
(9) According to “Criteria Governing the Preparation of Financial Reports by Securities Firms” adopted in R.O.C. in 2013, creditor’s right and liabilities arising from business of securities firms which were recorded under other receivables of $352,088 and other payables of $5,729 should be recognized in accounts receivable of $351,818, accounts payable of $2,607, other current assets of $270 and other current liabilities of $3,122.
(10) Prepayment for acquisition of property, plant and equipment is presented in ‘Property, plant and equipment’ in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Firm”. However, such prepayment should be presented in ‘Other non-current assets’ based on its nature under IFRSs.
(11) To coordinate the differences in presentation of accounts in assets and liabilities and comprehensive income according to the newly revised chart of account code, Criteria Governing the Preparation of Financial Reports by Securities Firms, and Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants, the Group has made reclassification to these accounts after transition to IFRSs.

2. Reconciliation for equity on December 31, 2012:

R.O.C GAAP	R.O.C GAAP	Effect of transition From R.O.C. GAAP to IFRSs	Effect of transition From R.O.C. GAAP to IFRSs	IFRSs	IFRSs
Description	Amount	Recognition	Presentation	Amount	Description	Remark
Current assets					Current assets
Cash and cash equivalents	$ 4,933,426	$ -	$ -	$ 4,933,426	Cash and cash equivalents
Financial assets at fair value through profit or loss - current	17,796,364	( 5,170)	-	17,791,194	Financial assets at fair value through profit or loss - current	(1)
	-	-	218,050	218,050	Available-for-sale financial assets-current	(10)
Bonds purchased under resale agreements	-	-	-	-	Bonds purchased under resale agreements
Margin loans receivable	9,772,570	-	-	9,772,570	Margin loans receivable
Refinancingsecuritydeposits	374	-	-	374	Refinancingsecuritydeposits
Receivables from refinance guaranty	12,901	-	-	12,901	Receivables from refinance guaranty
Customer margin account	5,637,662	-	-	5,637,662	Customer margin account
Receivables from security lending	45,803	-	-	45,803	Receivables from security lending
Securitylendingdeposits	41,382	-	-	41,382	Securitylendingdeposits
Notes receivable	1,674	-	-	1,674	Notes receivable
Accounts receivable	378,104	5,121,728	-	5,499,832	Accounts receivable	(7),(8)
Prepayments	28,722	-	-	28,722	Prepayments
Prepaid pension expense - current	142,048	( 141,011)	( 1,037)	-	Prepaid pension expense - current	(2)
Other receivable	683,252	( 270,755)	-	412,497	Other receivable	(3),(7),(8)
	-	2,364	-	2,364	Current tax assets	(3)

167

						Remark (7),(8),(10) (10) (3) (10)
R.O.C GAAP		Effect of transition From R.O.C. GAAP to IFRSs		IFRSs
Description	Amount	Recognition	Presentation	Amount	Description	Remark
	-	674,202	2,977,337	3,651,539	Other current assets	(7),(8),(10)
Restricted assets	2,977,337	-	( 2,977,337)	-		(10)
Deferred tax assets-current	9,743	( 9,743)	-	-		(3)
Available-for-sale financial assets - current	218,050	-	( 218,050)	-		(10)
Total current assets	42,679,412			48,049,990	Total current assets
Funds and investments					Non-current assets
Investments accounted for under the equitymethod	417,280	( 10,092)	( 407,188)	-		(4),(10)
Available-for-sale financial assets – non-current	83,244	-	( 83,244)	-		(10)
Financial assets at fair value through profit or loss – non-current	50,885	-	-	50,885	Financial assets at fair value through profit or loss – non-current
Total funds and investments	551,409	-	-	-
		-	83,244	83,244	Financial assets at cost – non-current	(10)
		-	407,188	407,188	Investments in associates	(4),(10)
Fixed assets		-	2,653,310	2,653,310	Propertyand equipment	(5),(10)
Land	1,680,129	-	( 1,680,129)	-		(10)
Buildings	1,099,486	-	( 1,099,486)	-		(10)
Equipment	268,470	-	( 268,470)	-		(10)
Prepayments for equipment	3,959	( 3,959)	-	-		(9)

Leasehold improvements	117,603	-	( 117,603)	-		(10)
Less: accumulated depreciation	( 512,378)	-	512,378	-		(10)
Total fixed assets	2,657,269
Deferredpension costs	1,166	( 1,166)	-	-		(2)
Other assets
Operating guarantee deposits	842,000	-	( 842,000)	-		(10)
Exchange clearingdeposits	364,961	-	( 364,961)	-		(10)
Deposits-out	36,363	-	( 36,363)	-		(10)
Deferred debits	29,879	-	( 29,879)	-		(10)
Rental assets	249,127	-	( 249,127)	-		(10)
Idle assets	38,177	-	( 38,177)	-		(10)
		-	287,304	287,304	Investmentproperty	(5),(10)
Deferred tax assets - non-current	1,462	36,675	-	38,137	Deferred tax assets	(2),(3),(5)
		3,959	1,274,240	1,278,199	Other assets-non-current	(9),(10)
Total other assets	1,561,969
Securities brokerage debit accounts - net	298,612	( 298,612)	-	-		(7)
				4,798,267	Total non-current assets
Total assets	$ 47,749,837	$ 5,098,420	$ -	$ 52,848,257	Total assets
Current liabilities					Current liabilities
Short-term loans	$ 3,816,336	$ -	$ -	$ 3,816,336	Short-term loans
Commercialpaperspayable	1,999,639	-	-	1,999,639	Commercialpaperspayable
Bonds sold under repurchase agreements	7,979,713	-	( 7,979,713)	-		(10)
Financial liabilities at fair value throughprofit or loss -	448,956	-	-	448,956	Financial liabilities at fair value throughprofit or loss - current

168

						Remark (10)
R.O.C GAAP		Effect of transition From R.O.C. GAAP to IFRSs		IFRSs
Description	Amount	Recognition	Presentation	Amount	Description	Remark
current
		-	7,979,713	7,979,713	Bonds sold under repurchase agreements	(10)
Deposits on short sales	1,245,017	-	-	1,245,017	Deposits on short sales
Short saleproceedspayable	1,606,777	-	-	1,606,777	Short saleproceedspayable
Guarantee deposit received on borrowed securities	1,144,289	-	-	1,144,289	Guarantee deposit received on borrowed securities
Futures traders’equity	5,637,662	-	-	5,637,662	Futures traders’ equity
Accountspayable	494,514	5,234,591	507	5,729,612	Accountspayable	(7),(8),(10)
Advance receipts	7,179	-	( 17)	7,162	Advance receipts	(10)
Collections on behalf of third parties	258,385	-	1,508	259,893	Collections on behalf of third parties	(10)
Otherpayables	1,177,886	( 36,903)	( 1,999)	1,138,984	Otherpayables	(2),(5)
		-	121,597	121,597	Other financial liabilities-current	(10)
		28,166	-	28,166	Current tax liabilities	(3)
Other financial liabilities-current	121,597		( 121,597)	-		(10)
		5,020	-	5,020	Other current liabilities	(8),(10)
Total current liabilities	25,937,950			31,168,823	Total current liabilities
Other liabilities
Deposit-in	4,845	-	( 4,845)	-		(10)
Total other liabilities	4,845			-
Total liabilities	$ 25,942,795
					Non-current liabilities
		176	-	176	Deferred tax liabilities	(3)
		11,161	4,846	16,007	Other non-current liabilities	(2),(10)
				16,183	Total non-current liabilities
				$ 31,185,006	Total liabilities
Shareholders’ equity					Equity attributable to owners of theparent company
Common stock	13,231,191	-	-	13,231,191	Common stock
Capital reserve			256,116	256,116	Capital reserve	(10)
Common stock	25,524	440	( 25,964)	-		(4),(10)
Treasurystock	230,152	-	( 230,152)	-
Retained earnings					Retained earnings
Legal reserve	1,960,558	-	-	1,960,558	Legal reserve
Special reserve	5,482,607	-	-	5,482,607	Special reserve
Unappropriated earnings	1,124,366	( 357,481)	-	766,885	Unappropriated earnings	(1),(2),(4), (5),(6)
Other adjustments to shareholders' equity					Other adjustments to shareholders' equity
Cumulative translation adjustments	( 288,029)	213,344	-	( 74,685)	Translation gain and loss on the financial statements of foreign operatingentities	(6),(10)
Unrealized gain or loss on financial instruments	1,134	-	-	1,134	Unrealized gain or loss on financial instruments
Minorityinterest	39,539	( 94)	-	39,445	Non-controllinginterest	(2),(5)
Total shareholders' equity	21,807,042			21,663,251	Total equity
Total liabilities and shareholders’ equity	$ 47,749,837	$ 5,098,420	$ -	$ 52,848,257	Total liabilities and equity

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Reconciliation for comprehensive income for the year ended December 31, 2012:

R.O.C GAAP	R.O.C GAAP	Effect of transition From R.O.C. GAAP to IFRSs	Effect of transition From R.O.C. GAAP to IFRSs	IFRSs	IFRSs
Description	Amount	Recognition	Presentation	Amount	Description	Remark
Revenues
Securities brokerage fees	$ 1,861,251	$ -	$ 293	$ 1,861,544	Securities brokerage fees	(10)
Securitylending	49,330	-	( 49,330)	-		(10)
Underwritingfees	89,033	-	-	89,033	Underwritingfees
	-	-	413,973	413,973	Gain on tradingof securities	(10)
Gain on trading of securities -						(10)
dealer	370,991	-	( 370,991)	-
Gain on trading of securities - underwriting	64,668	-	( 64,668)	-		(10)
Stock custodian income	80,329	-	( 80,329)	-		(10)
Interest income	865,232	-	-	865,232	Interest income	(10)
Dividend income	157,283	-	( 157,283)	-		(10)
Gain on valuation of trading securities	66,045	8,675	-	74,720	Gain on valuation of trading securities	(1)
Gain on short covering and trading securities - RS financing covering	2,606	-	-	2,606	Gain on short covering and trading securities - RS financing covering
	-	-	( 17,164)	( 17,164)	Gain on valuation of borrowed securities and bonds with resale agreements	(10)
Gain on warrants issuance	108,814	-	( 28,558)	80,256	Gain on warrants issuance	(10)
R f it f						(10)
evenue rom consgnmen o clearingand settlement	12	-	( 12)	-
	-	-	350,182	350,182	Gain on derivative financial instruments	(10)
Gain on derivative financial instruments - futures	416,585	-	( 416,585)	-		(10)
Revenue from futures advisory	12,140	-	( 12,140)	-		(10)
Other operatingincome	73,694	-	291,017	364,711	Other operatingincome	(10)
Non-operatingincome	556,495	-	( 556,495)	-		(10)
	4,774,508			4,085,093	Total revenues
Expenses
Handlingcharges - brokerage	( 178,311)	-	178,311	-		(10)
		-	( 256,486)	( 256,486)	Handlingcharges	(10)
Handlingcharges – dealing	( 76,766)	-	76,766	-		(10)
Service charges - refinancing	( 1,409)	-	1,409	-		(10)
Loss on trading of securities - hedging	( 21,686)	-	21,686	-		(10)
Interest expense	( 78,303)	-	( 73,057)	( 151,360)	Interest expense	(10)
Loss on valuation of borrowed securities and bonds with resale agreements	( 17,164)	-	17,164	-		(10)
Warrants issuance expenses	( 28,559)	-	28,559	-		(10)
Futures commission expense	( 81,932)	-	-	( 81,932)	Futures commission expense
Clearingcharges	( 86,132)	-	-	( 86,132)	Clearingcharges
Loss on derivative financial instruments - OTC	( 66,403)	-	66,403	-		(10)
Operatingexpenses	( 2,795,012)	-	2,795,012	-		(10)
Other operatingexpenses	( 1,203)	-	1,203	-		(10)

170

						Remark (10) (2),(10) (10) (10) (4),(10)
R.O.C GAAP		Effect of transition From R.O.C. GAAP to IFRSs		IFRSs
Description	Amount	Recognition	Presentation	Amount	Description	Remark
Non-operatingexpenses	( 101,799)	-	101,799	-		(10)
	( 3,534,679)			-
	-	56,607	( 1,738,324)	( 1,681,717)	Employee benefits	(2),(10)
	-	-	( 111,530)	( 111,530)	Depreciation and amortization	(10)
	-	-	( 941,713)	( 941,713)	Other operatingexpenses	(10)
				( 3,310,870)	Total cost and expenses
					Share of the profit of associates	(4),(10)
	-	1,025	70,780	71,805	and joint ventures accounted for usingthe equitymethod
	-	( 358)	460,108	459,750	Othergain and loss	(4),(10)
Profit before tax	1,239,829			1,305,778	Profit before tax
Income tax expense	( 122,969)	( 9,623)	-	( 132,592)	Income tax expense	(2),(5)
Net income	$ 1,116,860	$ 56,326	$ -	$ 1,173,186	Net income
					Other comprehensive income
	-	( 74,685)	-	( 74,685)	Translation gain or loss on the financial statements of foreign operatingentities	(6)
	-	( 10,660)	-	( 10,660)	Unrealized loss on financial instruments
	-	56,955	-	56,955	Actuarial gain and loss of defined benefitplans	(2)
					Share of the comprehensive profit of associates and joint ventures accounted for using	(4)
	-	( 613)	-	( 613)	the equitymethod
	-	( 9,682)	-	( 9,682)	Income tax relating to components of other comprehensive income	(2)
	-	( 38,685)	-	( 38,685)	Current other comprehensive income
				$ 1,134,501	Current comprehensive income
Consolidated income attributable					Income attributable :
Consolidated net income	1,113,770	56,264	-	1,170,034	Parent company
Income for minority	3,090	62	-	3,152	Non-controllinginterests
Consolidated net income	$ 1,116,860	$ 56,326	$ -	$ 1,173,186
					Comprehensive income attributable :
	-	$ 1,131,229	-	$ 1,131,229	Parent company
	-	3,272	-	3,272	Non-controllinginterests
				$ 1,134,501

Reasons for reconciliation for December 31, 2012 are outlined below:

(1)In accordance with IAS 39, ‘Financial Instruments: Recognition and Measurement’, investments in equity instruments without an active market but with reliable fair value measurement (i.e. the variability in the range of reasonable fair value estimates is insignificant for that instrument, or the probabilities of the estimates within the range can be reasonably assessed and used in estimating fair value) should be measured at fair value. The Group therefore designated emerging stocks at cost to be measured at fair value with provision of evaluation losses and decreased both financial assets at fair value through profit or loss-current by ($5,170) and retained earnings by ($13,845) at the transition date. The Group also increased

171

net gain of trading securities at fair value through profit or loss by $8,675.

(2)The discount rate used to calculate pensions shall be determined with reference to the factors specified in R.O.C. SFAS 18, paragraph 23. However, IAS 19, ‘Employee Benefits’, requires an entity to determine the rate used to discount employee benefits with reference to market yields at the balance sheet date on high quality corporate bonds of a currency and term consistent with the currency and term of the benefit obligation; when there is no deep market in corporate bonds, an entity is required to use market yields on government bonds (at the balance sheet date) instead.
In accordance with previous accounting standards in R.O.C., actuarial pension gain or loss of the Group is recognized in net pension cost of current period using the corridor method. However, in accordance with IAS 19, ‘Employee Benefits’, the Group elects to recognize actuarial pension gain or loss immediately in other comprehensive income. As a result, the Group decreased retained earnings by ($204,380) and prepaid pension cost-current by ($141,011); increased other payables by $4,039 and accrued pension obligations by $11,161 (recognized in other liabilities-noncurrent); decreased deferred pension cost by ($1,166) and the minority interest by ($26); increased deferred income tax asset-non-current by $26,758; decreased pension expenses by ($32,103); increased actuarial gains under a defined benefit plan-net by $56,955, income tax expense by $5,457, and income tax expense recognized in other comprehensive income by $9,682.
(3) In accordance with IAS 12 ‘Income taxes’, the tax refundable of $2,364 in prepayment was reclassified into current tax assets and tax payable in other payables of $28,166 was reclassified into current tax liability. Previously under ROC GAAP, deferred tax assets or liabilities are categorized into current or non-current items according to the categorization of related liabilities or assets. Deferred tax assets or liabilities that are not related to any liabilities or assets in the financial statements should be classified as current or non-current items according to their expected time period to realize or settle. However, under IAS 1, ‘Presentation of Financial Statements’, an entity should not classify a deferred tax asset or liability as current, and accordingly, deferred tax assets-current of $9,743 was reclassified to deferred tax assets-non-current. Under IAS 12, the deferred income tax asset (liability)-non-current which was originally presented in net value should be presented in gross amounts resulting in an adjustment of $176 in deferred income tax asset-non-current and deferred income tax liability-non-current.
(4) The Group adjusted difference in profits or losses of the investee incurred after IFRS transition resulted in the decrease of the investment accounted for using equity method by ($10,092), the retained earnings by ($10,505), shares of profits or losses of the associates by $1,025, shares of comprehensive income by ($613) of the associated, and joint ventures accounted for using the equity method. The Group also sold the 1% of shares of the investeePresident Futures in 2012. As the Group still had control over President Futures, the Group reclassified the resulting gain on disposal of $440 into capital surplus.
(5) In accordance with Rules Governing the Preparation of Financial Statements by Securities Firms, the Group designated such initial cost of property and equipment, investment property and intangible assets as ‘deemed cost’, and were measured subsequently using the cost model.
(6) The Group has elected to reset the cumulative translation differences of $211,249 arising on the translation of the financial statements of foreign operations under R.O.C. GAAP to zero at the transition date, and to deal with translation differences of $74,685 arising subsequent to the transition date in accordance with IAS 21, ‘The Effects of Changes in Foreign Exchange Rates’ in the current year.
(7) The Securities brokerage debit and credit accounts were not in conformity with the offsetting

172

of financial assets and financial liabilities requirements of IAS 32, ‘Financial Instruments: Presentation’. As a result, the Group adjusted the GAAP difference to increase accounts receivable by $4,851,344, to increase other current assets by $674,122, to increase accounts payable by $5,226,854, and to decrease securities brokerage debit and credit accounts by ($298,612).

(8) According to “Criteria Governing the Preparation of Financial Reports by Securities Firms” adopted in R.O.C. in 2013, creditor’s right and liabilities arising from business of securities firms should be reclassified from other receivables of $270,464 and other payables of $12,757 into accounts receivable of $270,384, accounts payable of $7,737, other current assets of $80 and other current liabilities of $5,020.
(9) Prepayment for acquisition of property, plant and equipment is presented in ‘Property, plant and equipment’ in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Firm”. However, such prepayment should be presented in ‘Other non-current assets’ based on its nature under IFRSs.
(10) To coordinate the differences in presentation of accounts in assets and liabilities according to newly revised chart of account code, Criteria Governing the Preparation of Financial Reports by Securities Firms, and Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants, the Group has made reclassification to these accounts after transition to IFRSs.

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AI assistant

PSC — Annual Report 2013

52209_rns_2014-06-26_c71f0820-a2d6-48b9-9c3e-e2b827091476.pdf

2013 Annual Report

Table of Contents

I. Letter to Shareholders

II. COMPANY PROFILE

1. Date of incorporation: December 17, 1988

2. Company History

III. Corporate Governance

1. Organization Chart

2. Major Corporate Functions

3. Compensation for Directors & Supervisors

� For Directors

� For Supervisors

4. Implementation of Corporate Governance

4-1 Attendance of Board of Directors Meeting

4-2 Attendance of Supervisors for Board Meeting

4-3 Status of Corporate Governance

4-4 Compensation review committee

4-5 Corporate Citizenship

5. Integrity Management Application

6. Long-term Investment Ownership

IV. Capital Structure

1. Capital and Shares

1-1 Capitalization

1-2 Capital and Shares

1-3 Structure of Shareholders

1-4 Distribution Profile of Share Ownership

1-5 Major Shareholders

1-6 Market Price Per Share, Net Value, Earnings & Dividends for Latest Two Years

2. Dividend Policy & Implementation Status

2-1 Dividend Policy

2-2 Distribution of Profit

3. Buyback of Common Stock ： None

4. Status of corporate bonds (including overseas bonds)

4-1 Issuance of Corporate Bond ： None

4-2 Information of Convertible Corporate Bond ： None

V. Overview of Business Operation

1. Description of Business Activities

1-1 Business Scope

1-2 Breakdown of Revenues for Latest Three Years

1-3 Products and Services

1-4 New Products and Services to be developed

■ Business of Wealth Management and Trust

2. Analysis of the Securities Industry

2-1 Overall Economic Environment

2-2 Product Trends and Relevant Competition

� Proprietary Trading

A. Equities Markets

B. Risk Management

C. Hedging Operations

� Fixed Income Dealing

A. Outright Purchases and Sales of Government Bonds

B. Convertible Bonds

D. Bond Options

E. Interest Rate Swaps (IRS)

F. Foreign Bonds

� Financial Products Business

A. Equity Warrants

B. Structured Note Products

C. Convertible Bond Asset Swaps

� Underwriting Business (Capital Markets)

A. Domestic Bond and Equity Underwriting

B. Financial Advisory

C. Offshore Underwriting

D. Emerging Market Exchange

� Wealth Management

3. R&D for Derivative Product

� Electronic trading system improvements

4. Future Business Development

5. Market Conditions

5-1 Breakdown of Market Share According to Business Area

5-2 A Look at Future Growth as well as Supply and Demand in the Market

5-3 Market supply forecast, growth opportunity, and business competitiveness

� Our Competitive Strengths

� Positive Factors

� Obstacles

� Strategies for Dealing with the Obstacles Identified

6. Employee Data

PSC Annual Report 2013