PSC — Annual Report 2015

Aug 30, 2016

Stock Code: 2855 www.pscnet.com.tw

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2015 Annual Report

Notice to readers

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 and Chinese versions, the Chinese version shall prevail.

Taiwan Stock Exchange Market Observation Post System: http://newmops.twse.com.tw 2015 Annual Report is available at: www.pscnet.com.tw

Table of Contents

• I. Letter to Shareholders 1 II. Company Profile 4 III. Corporate Governance 8 1 Business Organization 2 Directors, Supervisors and Management Team 3 Corporate Governance 4 Other Disclosures

• IV. Capital Structure 44 1 Capital and Shares 2 Dividend Policy & Implementation Status 3 Employee Bonus and Directors’ and Supervisors’ Remuneration

• 4 Buyback of Common Stock 5 Long-Term Borrowings 6 Issuance of Preferred Stocks 7 Issuance of Global Depositary Receipts 8 Issuance of Employees’ Stock Options 9 Merge and Acquisition 10 Working Capital Plans

• V. Overview of Business Operation 49 1 Description of 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 Environmental Protection and Corporate Citizenship 8 Labor Relations

• VI. Financial Information (Business Review) 70 1 Balance Sheet from 2011 to 2016Q1

• 2 Income Statement from 2011 to 2016Q1

• 3 Financial Analysis from 2011 to 2016Q1

• 4 Auditors’ Opinions from 2011 to 2015

• 5 Audit Committee’s Report for the Most Recent Year

• VII. Financial Status, Operating Results & Risk Management 79 1 Financial Status 2 Analysis of Operating Results 3 Long-term Investment Policy and Results 4 Analysis of Risk Management

• VIII Other Disclosures 88 1 Affiliated Companies Chart 2 Basic Information of Affiliates

• 3 Operational Highlights of Affiliated Companies 4 Capital Adequacy Ratio 5 Market Share Rate

CONSOLIDATED FINANCIAL STATEMENTS

92

[I. Letter to Shareholders ]

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I. Letter to Shareholders

I. Letter to Shareholders

2 015 was a challenging year for securities market. Global commodity prices fell, global trade

slowed, the European refugee crisis worsened, growth in emerging markets slowed, Paris came under attack, and MERS broke out. All of these events together conspired to drag down economic growth which leads to a global economy growth slower than expected. The US economy has started to show a recovery after implementing three rounds of quantitative easing, making the FED symbolically raise interest rate by 0.25%, being the first time in the past ten years. Since some of the economic statistics still show concerns, the economic growth is still uncertain. On the other hand, the Eurozone has suffered from the serious problems created by the potential Grexit and the refugee crisis, and has implemented quantitative easing policies following the US, but the recovery status remains unclear. China has taken steps in recent years to transform its economic structure from an investment-driven one into that based on expanded domestic consumption. After 15 consecutive years of growth rate beyond 8%, 2015 GDP growth rate fell to 6.4% due to weak global economy, domestic consumption going downward, and foreign investors’ withdrawal.

Looking domestically, according to the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, R.O.C, annual growth for 2015 was a mere 0.75%, which is not only less than 1%, but the worst year since the Financial Crisis. In the domestic stock market, the first half of the year saw stocks rise in step with most other global markets, and boosted by the talk about a Taipei-Shanghai stock connect. These factors together helped to push the market index up to a high 10,014 in April. However, dramatic sell-off in China and slowing global growth later in the year dragged the Taiwan index down to its low for the year of 7,203 in August. At the end of the year in December, the US FED finally decided to begin raising interest rates, resulting in a rebound in the markets, allowing the markets to close out the year at 8,338, for a drop of 969 points, or 10.4%. Average daily trading volume was 116.9 billion and was down by 2.66% for the year.

Amidst all of the market turmoil in 2015, all departments with the Company worked hard to maintain stable revenues, and ended the year with gross revenues of NT$3.51 billion, operating costs of 534 million, gross profits of NT$2.98 billion, operating expenses of NT$2.91 billion, non-operating income of NT$1 billion, pre-tax profits of NT$1.07 billion, after-tax profits of NT$956 million, pre-tax EPS of NT$0.81, and after-tax EPS of NT$0.72. When comparing our performance to our major competitors, we see that President ranked 7th in terms of after-tax profits, and 6th in terms of EPS.

Looking at our brokerage business, we held a solid market share of 3.26%, keeping us firmly among the top-10 firms in Taiwan and securing the 8th position, and bringing our total number of branches from 39 to 40. Trading volume in Taiwan in 2015 held steady at the NT$100 billion level, though the proportion of foreign investors continued to rise and the balance of margin loan had still not recovered, plus a continuing effecting of bank3.0, the securities business still show no sign of recovery after the turmoil of securities transaction tax. Our company should think outside of the box in brokerage business, via organization restructuring, business model transformation, process and procedures improvement, and branches reoriented to increase our business channels value and competitiveness.

Looking at our underwriting business, we handled 39 deals for the year, serving as lead underwriter for 6 issues and co-underwriter for 33 issues, placing us 10th within the industry in terms of number of deals, with a total deal value of NT$2.77 billion. President will continue to be rigorous

1

I. Letter to Shareholders

in its selection of appropriate underwriting deals with a strict emphasis on credit risk, and our top-notch team will actively pursue quality clients, and use our strong experience to provide solid guidance in assisting companies to achieve their public listing goals. At the same time, we actively monitor local venture capital platforms so as to uncover quality new companies so that we can be first in line to win their business.

Looking at our proprietary trading business, we see that stable and exceptional traders are the key to identifying and seizing market opportunities, to making appropriate adjustments to positions and controlling risk, and to generating trading returns that are the talk of the industry. In our Fixed Income Department, we saw trading volumes in domestic bond markets shrink, as the government began allowing securities firms to establish Offshore Securities Units, and this shift has resulted in a refocusing within in the industry towards offshore bond markets. President has established an Offshore Securities Unit and has begun making this shift, gaining solid experience in this area, and seeing stable gains in profitability. Our warrant trading and market-making business has become increasingly stable and transparent and has gained a strong brand reputation step by step within the industry, which has translated into steady profitability. As for our future proprietary trading efforts, we have combined effective trading strategies with strong risk control measures to produce solid profits. Looking forward, we intend to invest in more foreign futures contracts in an effort to produce long-term stable profits.

In addition to expanding our business in pursuit of increasingly attractive performance, we are also committed to increased information transparency and implementing strong corporate governance principles into all aspects of our operations. At the same time, we adhere to all government orders and rulings regarding adjustments to our Articles of Incorporation that are aimed at bolstering internal controls, and our efforts in this regard have won warm praise from the authorities. Indeed, in 2015, we were awarded a the highest A++ rating in the Securities and Futures Institute’s annual “Information Disclosure and Transparency Ranking System”, marking the 8th consecutive year that we were awarded the highest ranking. We also received the highest ranking available for the 1st Annual Corporate Governance Evaluation System from among Taiwan’s 1,393 listed companies in 2015, and the 2nd Annual Corporate Governance Evaluation System in 2016, making us the only securities firm to receive the honor for two consecutive years. Taiwan Ratings also recognized our long-term stable business performance when it maintained our long-term and short-term credit ratings of “twA and twA-1, respectively.

Looking forward to the coming year, we see China economy slowing down, commodity prices falling, and US interest rates rising, all of which indicate global economics still show concerns, and it leads to the shrinking exports of Taiwan. Therefore, the government implements expanding fiscal policies such as stimulating short-term consumer spending to boom the economy. At the same time, Taiwan faces the uncertainty of party alternation. The Directorate-General of Budget, Accounting and Statistics predicts the economic growth can reach 1.47% for 2016, slightly above the figure for last year of 0.75%. Looking at domestic equities markets, the Financial Supervisory Commission (“FSC”) actively implemented a new phase of a program to boost securities market that included expanding crowdfunding platform with equity characteristics, allowing for non-designated loans to be issued by securities firms, and enlarging the scope of targets for day-trading of spot shares. As for underwriting, the government is now allowing venture capital firms to publicly list, and is also currently evaluating whether to permit individual investors from Mainland China to invest in Taiwan funds and foreign currency bonds. The FSC fully expects that its efforts will bring in new business opportunity.

2

I. Letter to Shareholders

In this challenging environment, PSC seizes every opportunity to make profits. Not only proprietary trading business has already internationalized, but the board has also passed the motion to establish a full-licensed joint venture securities firm with Xiamen Financial Investment Group CO., LTD. to rattle thriving Chinese securities market and to bring benefit to our company. I’m confident that everyone is aware of the solid performance of President Securities has delivered over the years. However, it is also plain for all to see that the road ahead will be full of risks and challenges. But, our management team will remain ever vigilant and competitive and will continue to improve our internal management and increase operating performance. At the same time, new technologies will allow for greater convenience, speed and stability, allowing us to meet the IT needs of our customers. Also, as the regulators continue to open up new avenues of business, we will actively push forward in developing those new areas and seek new profit opportunities, and thereby forging our unique identify and business strengths. I am confident that our management team will work hard to improve the overall operations throughout the company, to create solid corporate and shareholder value, and to honor the trust that you, as shareholders, have placed in us.

Let me take this opportunity to thank all of you for your long-standing faith and support for President Securities.

I wish all of you good health, wealth, and happiness.

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Chung-Shen Lin Chairman

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Kuan-Chen Lin President

3

I. Letter to Shareholders

II. Company Profile

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II. Company Profile

II. COMPANY PROFILE

1988

 President Securities Co., Ltd. was incorporated through the memorandum of Securities and Futures Commission, Ministry of Finance with no. (77) Tai-tsai-cheng-II Letter NO. 20093.

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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.

• Founding capital of NT$1.4 Billion increased to actual paid-in capital of NT$3.36 Billion after the merger.

1994

• Performed capital infusion; capital stock after infusion amounted to NT$4.02 Billion.

1995

• Bolstered capital to NT$7.03 Billion and made President Securities the largest securities company in the country.

• Became the first Asian securities company to acquire the ISO9002 service quality certification.

1996

 Opened new branches in Yenping, Taoyuan, Sanchung, Tunghsing, and Fengyuan.

1998

 Processed capital infusion; capital stock after infusion amounted to NT$10.18 Billion in May.

4

II. Company Profile

1999

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• Obtained official approval for OTC listing.

• 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.

• Converted retained earnings to paid-in capital, capital stock after infusion amounted to NT$12.26 Billion.

2001

• Executed capital reduction through cancellation of treasury stock, capital stock after asset reduction amounted to NT$11.28 Billion.

2002

• Listed on the main board in September.

• Executed capital reduction through cancellation of treasury stock, capital stock after asset reduction amounted to NT$11.41 Billion.

2003

• Obtained business license for structured notes; Fixed Income business unit licensed as the main dealer for business operation of government bonds issued by Central Bank of China.

2004

 East Tainan Branch, Nei Hu Branch and Renai Branch was established.

• Was upgraded from twBBB to twBBB+, and was again upgraded to twA-.

5

II. Company Profile

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2006

• Obtained business license for wealth management.

• Received the 6th annual National Charity Award, and was the only for-profit business entity among twelve recipients.

2007

• 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.

• Established PSC Xiamen business office in China on August 22nd.

2009

• Executed capital reduction through cancellation of treasury stock, capital stock after asset reduction amounted to NT$11.86 Billion.

2010

 Obtained trust business license issued by FSC.

6

II. Company Profile

2011

• Established remuneration Committee.

• Converted retained earnings to paid-in capital. The capital stock after infusion amounted to NT$13.05 billion.

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2012

• Converted retained earnings to paid-in capital, capital stock after infusion amounted to NT$13.23billion.

2013

• The total branches remain 35 (including head office.) .

• Established a subsidiary, PSC Venture Capital Investment Co., Ltd.

2014

• Established an Offshore Securities Unit (OSU) in July of 2014.

• Opened new branchs in Xinzhuang, Zhubei, Zhunan, and Xin Taoyuan, bringing the total number of branches to 39.

• Acquired the brokerage business of Standard Chartered Bank in Taiwan.

2015-2016

In June, 2015, we established an Auditing Committee. In October, we opened a new branch in Ping-Zhen, bringing our total number of branches to 40 (Including our headquarters). In February, 2016, we conducted a capital reduction, resulting in capital stock of NT$13.04 billion.

In May, 2016, we conducted a capital reduction, resulting in capital stock of NT$12.95 billion (as of the printing of this Annual Report).

Note. To get a full understanding about President Securities’ capital structure in recent years, please see chapter IV.

7

II. Company Profile

[III. Corporate Governance]

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8

III. Corporate Governance

III. Corporate Governance

1. Business Organization

1-1 Organization Chart

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8

III. Corporate Governance

1-2 Major Corporate Functions

Brokerage	 Accept orders from clients to buy/sell listed securities and forward to TWSE for execution.  Accept orders from clients to buy/sell listed securities and forward to the TPEx exchange for execution.  Manage custodial services for clients.  Provide margin financing for securities trading.  Securities Borrowing and Lending Business.  Accepting orders to trade Foreign Securities.  Futures Introducing Broker Business.  Electronic transaction operations.  Customer service coordinationprocess.
Financial Products	 Underwrite equity warrants and conduct option-based hedging strategies.  Develop and issue structured products.  Convertible bond asset swap and option business.  Trading of equity derivatives.  New financial product design and development.  Other financialproducts approved bythe competent authority.
Proprietary Trading	 Trading of publicly listed securities on the TWSE and TPEx, using President Securities’ own funds.  Hedge positions via futures and options markets as a future trader.  Expand international investment business involving legally-permitted overseas spot/futures market research and investments.
Fixed Income Dealing	 Use own capital to buy and sell domestic and foreign corporate and government bonds over the TPEx market.  Use interest rate swaps and other interest rate derivatives, and matches that with physical government bond trading, to create diverse trading strategies and products.  Offer tendering services of Taiwan government bonds.  Repo and Reverse-Repo transactions.  Trade overseas convertible bonds.  Assist with the sales of primary listings of corporate debt and financial debt issues.  Provide securities market services to financial institutions and corporate clients.
Capital Market (Underwriting)	 Assist corporations in application for public listing on TWSE or TPEx.  Assess and advise clients with respect to capital increase plans and applications to convert private equity into publicly traded stocks.  Underwrite bonds and foreign depository receipts.  Assist in M&A activities; provide consulting services on corporate finance and other specialized areas.  Other various types of underwritingbusiness.
Futures Proprietary Trading	 Trading of futures contracts on the TAIFEX (Taiwan Futures Exchange) using President Securities’ own funds.

9

III. Corporate Governance

Shareholder Services Coordinator

 Coordinate shareholder services on behalf of publicly listed companies.  Assist in the coordination of shareholders’ meetings.  Coordinate the distribution of cash and/or stock dividends to shareholders.  Manage the issuance 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 Offshore Securities Unit (OSU) customers with service of international securities asset allocation, wealth consulting service, foreign securities or other authorized foreign financialproducts.

Note: The official English name of the Taipei Exchange Market, formerly known as the GreTai Securities Market (GTSM), was changed to the “Taipei Exchange” (abbreviated as “TPEx”) on 24[th] , Feb, 2015.

2. Directors, Supervisors and Management Team

2-1Professional qualifications and independence analysis of directors and supervisors

	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work
				Independence Criteria(Note)
														Number of
Criteria		Experience
														Other Public
	An Instructor or Higher	A Judge, Public Prosecutor,	Have Work	1	2	3	4	5	6	7	8	9	10	Companies
	Position in a Department	Attorney, Certified Public	Experience in the											in Which the
	of Commerce, Law,	Accountant, or Other	Areas of											Individual is
	Finance, Accounting, or	Professional or Technical	Commerce, Law,											Concurrently
	Other Academic	Specialist Who has Passed	Finance, or											Serving as
	Department Related to th Bin Nd f	a National Examination and bn Ardd Crtifit	Accounting, or Othri											an
Name	e usess ees o the Company in a Public	ee wae a ecae in a Profession Necessary	ewse Necessary for											Independent Director
	or Private Junior College, College orUniversity	for the Business of the	the Business of
		Company	the Company
Chairman /				V		V	V	V	V	V	V	V
Lin, Chung-Shen
Delegate of			V											0
Kai Nan
Investment Co.,
Ltd.
Director /			V	V		V		V	V	V	V	V	V	0
Lin, Kuan-Chen
Director /Cheng,			V	V		V			V	V		V	V	0
Kao-Huei
Director /			V	V						V	V	V	V	0
Kao, Shiow- Ling
Director /	V		V	V		V	V	V	V	V	V	V	V	0
Teng, Wen- Hwi
Director /				V		V	V	V	V	V	V	V
Lee, Tong-Liang
Delegate of Hui			V											0
Tung
Investment
Co.,Ltd.
Director /				V		V	V	V	V	V	V	V
Chang, Ming-
Chen
Delegate of			V											0
Leg Horn
Investment
Co.,Ltd.

10

III. Corporate Governance

Director /				V		V	V	V	V	V	V	V
Tu, Li-Yang
Delegate of			V											0
Ta Le Investment
Holding
Co., Ltd.
Director /			V	V			V	V	V	V	V	V	V	0
Lee, Shy-Lou
Director /Duh,			V	V				V	V	V		V	V	0
Bor-Tsang
Director /				V		V	V	V	V	V	V	V
Lee, Shu-Fen			V											0
Delegate of
**China F.R.P. Corp. **
Director / Hsieh				V		V	V		V	V	V	V
Hong, Hui-Tzu
Delegate of			V											0
Kai Nan
Investment Co.,
Ltd.
Director / Liu,				V		V	V		V	V	V	V
Tsung-Yi
Delegate of			V											0
Kai Nan
Investment Co.,
Ltd.
Director / Lin,				V		V	V		V	V	V	V
Cheng-Te
Delegate of			V											0
Kai Nan
Investment Co.,
Ltd.
Director / Lu,				V		V	V		V	V	V	V
Li-An Delegate of
Kai Nan			V											0
Investment Co.,
Ltd.
Independent				V	V	V	V	V	V	V	V	V	V
Director/Wu,	V													0
Tsai-Yi
Independent				V	V	V	V	V	V	V	V	V	V
Director/ Lee,			V											1
Kwang-Chou
Independent				V	V	V	V	V	V	V	V	V	V
Director/ Fu,			V											0
Kai-Yun
Independent				V	V	V	V	V	V	V	V	V	V
Director /Liang,	V		V											0
Yann-Ping

Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during the term of office.

1. Not an employee of the Company or any of its affiliates.

2. Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.

3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.

4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs.

5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings.

6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company.

7. Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof. These restrictions do not apply to any member of the remuneration committee who exercises powers pursuant to Article 7 of the “Regulations Governing the Establishment and Exercise of Powers of Remuneration Committees of Companies whose Stock is Listed on the TWSE or Traded on the TPEx“.

8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.

9. Not been a person of any conditions defined in Article 30 of the Company Law.

11

III. Corporate Governance

10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

2-2 Compensation for Directors& Supervisors

 For Directors

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Unit: NT$ thousands
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Compensation
Compensation
Paid to Directors
Ratio of Total
from an Invested
Title Compensation Base (A) Severance Pay (B) Compensation Directors to Allowances (D) Net Income (%) Remuneration (A+B+C+D) to Company Other Company’s than the
(C) Subsidiary
PSC PSC PSC PSC PSC
PSC PSC PSC PSC PSC
Group Group Group Group Group
0 0 0 0 22, 293 22,293 10,699 10,699 3.4488 3.4488 None
Total Directors
(including Independent Directors)
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Chairman: Lin, Chung-Shen (Note 3)

Former Chairman: Teng, A-Hua (Note 3)

Director: Lin, Kuan-Chen/ Chang, Ming-Chen/ Pi, Chien-Kuo& Lee, Tong-Liang (Note 4)

• / Hsieh, Chih-Peng& Liu, Tsung-Yi (Note 5)/ Lin, Cheng-Te /Hsieh Hong, Hui-Tzu/ Lu, Li-An (Note 6)/ Lee, Shy-Lou/ Tu, Li-Yang/ Cheng, Kao-Huei/ Duh, Bor-Tsang/ Kao, Shiow-Ling/ Teng, Wen- Hwi (Note 7) / Lee, Shu-Fen (Note 8)/ Wu, Tsai-Yi/ Lee, Kwang-Chou/ Fu, Kai-Yun/ Liang,Yann-Ping (Note 7)

• Note 1: 2015 After-tax profit: for President Securities and for President Securities on a consolidated basis: NT$956 million.

• Note 2: Compensation was calculated as of December 31, 2015; Compensation distribution proposal is based on said earnings..

• Note 3: The Company called a board meeting on June 29, 2015, and Lin, Chung-Shen was chosen as Chairman.

• Note 4: Lee, Tong-Liang was elected as the Director Representative for Hui Tung Investment Co., Ltd. on July 20, 2015 , replacing outgoing representative Pi, Chien-Kuo.

• Note 5: Liu, Tsung-Yi was elected as the Director Representative for Kai Nan Investment Co., Ltd. on June 18, 2015, replacing outgoing representative Hsieh, Chih-Peng.

• Note6: Lu, Li-An, who was a former Supervisor, became the Director representative of Kai Nan Investment Co. Ltd. on June 18, 2015.

• Note7: Teng, Wen- Hwi and Liang, Yann-Ping were chosen as Director and Independent Director, respectively, on June 18, 2015.

• Note8: Lee, Shu-Fen, who was a former Supervisor and representative of China F.R.P Corp., became simply the Director Representative of China F.R.P Corp. on June 18, 2015.

12

III. Corporate Governance

	Name of Directors
	Total of (A+B+C+D)		Total of (A+B+C+D+E+F+G)
Range of Remuneration
		Companies in the
				Companies in the
		consolidated
	The company		The company	consolidated
		financial
				financial statements
		statements
Under NT$ 2,000,000(Note1)	17	17	17	17
NT$2,000,001 ~ NT$5,000,000 (Note2)	2	2	2	2
NT$5,000,001 ~ NT$10,000,000 (Note3)	1	1	1	1
NT$10,000,001 ~ NT$15,000,000	0	0	0	0
NT$15,000,001 ~ NT$30,000,000	0	0	0	0
NT$30,000,001~ NT$50,000,000	0	0	0	0
NT$50,000,001 ~ NT$100,000,000	0	0	0	0
Over NT$100,000,000	0	0	0	0
Total	20	20	20	20

• Note 1: Leg Horn Investment Co., Ltd. / Hui Tung Investment Co., Ltd. / Kai Nan Investment Co., Ltd.(4 seats) / Ta Le Investment Holding Co., Ltd. / China F.R.P. Corp. / Lee , Shy-Lou / Duh, Bor-Tsang / Cheng, Kao-Huei / Kao, Shiow-Ling/ Teng, Wen- Hwi/ Wu, Tsai-Yi/ Lee, Kwang-Chou/ Fu, Kai-Yun/ Liang, Yann-Ping

• Note 2: Canking Investment Co., Ltd. / Lin, Kuan-Chen

Note 3: Kai Nan Investment Co., Ltd.: Lin, Chung-Shen

 For Supervisor

Unit: NT$ thousands

Title/Name							Ratio of Total Remuneration (A+B+C) to Net Income (%)	Ratio of Total Remuneration (A+B+C) to Net Income (%)	Compensation Paid to Supervisors from an Invested Company Other than the Company’s Subsidiary
			Compensation
	Base Compensation (A)		Bonus to Supervisors (B)
					Allowances (C)
	PSC	PSC Group	PSC	PSC	PSC	PSC	PSC	PSC
				Group		Group		Group
Supervisor / Lee, Shu-Fen China F.R.P Corp.	0	0	0	0	484	484	0.0506	0.0506	None
Supervisor / Chuang, Tsai-Fa
Supervisor / Lu, Li-An

• Note 1: On June 18, 2015, the company held a board meeting at which an Audit Committee was established and the Supervisor positions were eliminated.

• Note 2: On June 18, 2015, Director representative, Lee, Shu-Fen ended her term as Supervisor and representative of China F.R.P Corp., and was then elected as Director and representative of China F.R.P Corp..

• Note 3: On June 18, 2015, Director Representative, Lu, Li-An ended her term as Supervisor, and was then elected as Director and representative of Kai Nan Investment Co. Ltd.

13

III. Corporate Governance

	Name of Supervisors	Name of Supervisors
Range of Remuneration	Total of (A+B+C)
		Companies in the consolidated
	The company
		financial statements
Under NT$ 2,000,000(Note)	3	3
NT$2,000,001 ~ NT$5,000,000	0	0
NT$5,000,001 ~ NT$10,000,000	0	0
NT$10,000,001 ~ NT$15,000,000	0	0
NT$15,000,001 ~ NT$30,000,000	0	0
NT$30,000,001 ~ NT$50,000,000	0	0
NT$50,000,001 ~ NT$100,000,000	0	0
Over NT$100,000,000	0	0
Total	3	3

Note : China F.R.P. Corp. / Chuang, Tsai-Fa/ Lu, Li-An

 For President、Vice President and Chief Auditor

Unit: NT$ thousands

Title/Name			Compensation	Compensation	Compensation	Compensation			Ratio of total compensation (A+B+C+D) to net income (%)	Ratio of total compensation (A+B+C+D) to net income (%)	Whether or not any compensation is received from
	Salary(A)		Severance Pay (B)		Bonuses and Allowances (C)		Profit Sharing- Employee Compensation (D)
											other re-invested
	PSC	PSC Group	PSC	PSC Group	PSC	PSC Group	PSC	PSC Group	PSC	PSC Group	businesses than subsidiaries
President 、Vice President and Chief Auditor	26,567	26,567	1,292	1,292	47,300	47,300	845	845	7.9451	7.9451	None

• Note 1: 2015 After-tax profit: for President Securities and for President Securities on a consolidated basis: NT$956 million.

• Note 2: Compensation was calculated as of December 31, 2015; Employee Compensation was booked as of December 31, 2015.

• Note 3: Lin, Chung-Heng ended his term as Vice President on September 17, 2015, and was replaced by Peng, Bow-Win on September 17, 2015.

14

III. Corporate Governance

	Name of President and Vice President	Name of President and Vice President
Range of Remuneration		Companies in the consolidated
	The company
		financial statements
Under NT$ 2,000,000( Note 1)	1	1
NT$2,000,000 ~ NT$5,000,000 ( Note 2)	7	7
NT$5,000,000 ~ NT$10,000,000( Note 3)	1	1
NT$10,000,000 ~ NT$15,000,000 ( Note 4)	2	2
NT$15,000,000 ~ NT$30,000,000( Note 5)	1	1
NT$30,000,000 ~ NT$50,000,000	0	0
NT$50,000,000 ~ NT$100,000,000	0	0
Over NT$100,000,000	0	0
Total	12	12

Note 1: Peng, Bow-Win(Elected as Vice President on September 17, 2015) Note 2: An, Chi-Li/ Lee, Wen-Sheng/ Lin, Chung-Heng(ended his term as Vice President on September 17, 2015)/ Kuo, Li-Yun/ Chen, Kai-Ching/ Huang, Chiung-Huang/ Pan, Chun-Hsien Note 3: Huang, Jun-Jen Note 4: Lin, Kuan-Chen/ Tsai, Sen-Bu Note 5: Yang, Kai-Chih

 Comparison of Remuneration for Directors, Supervisors, Presidents and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, Presidents and Vice Presidents

Year	Ratio of total remuneration paid to directors, supervisors, presidents and vice presidents to net income (%)	Ratio of total remuneration paid to directors, supervisors, presidents and vice presidents to net income (%)
	The company	Companies in the consolidated financial statements
2014	8.94％	8.94％
2015	11.45％	11.45％

15

III. Corporate Governance

2-3 Information regarding directors, supervisors, management team and branch manager

	Nationality/		D
								Shareholding by Nominee
				Current Shareholding		Spouse & Minor Shareholding
Title	Country of Origin	Name	ate Elected					Arrangement		Experience（Education）	Other Position
								Share
				Shares	％	Shares	％		%
								s
											1.Director of President Futures Corp.
											2.Director of President Securities (HK) Ltd.
											3.Director of President Securities (BVI) Ltd.
										1.Chairman of President Futures Corp.	4.Director of President Securities (Nominee) Ltd.
	Republic Of
President		Lin, Kuan-Chen	2005.01.21	3,000,000	0.23	0	0	0	0	2.Vice Chairman and President of President	5.Director of President Wealth Management (HONG KONG) Ltd.
	China
										Securities Corp.	6. Chairman of PSC Venture Capital Investment Co., Ltd.
											7. Director of Taiwan Futures Exchange
											8. Director of Q-WARE Systems &Services Corp.
											9. Chairman of Feng-Shuo Corp.
Shareholder
	Republic Of	Huang, Chiung-								1.Assistant Vice President of President
Services Department			2000.06.08	0	0	0	0	0	0		N/A
	China	Huang								Securities Corp.
Vice President
										1.Vice President of Grand Asia Asset
Capital Market
	Republic Of									Management
Department		Kuo, Li-Yun	2000.06.08	178,465	0.01	0	0	0	0		1.Director of PSC Venture Capital Investment Co., Ltd.
	China									2. Assistant Vice President of Yuanta Securities
Vice President
										Co., Ltd
Information System
										1.Assistant Vice President of President
Department &
	Republic Of									Securities Corp.	1.Director of President Futures Corp.
Administration		Lee, Wen-Sheng	2002.06.26	58	0	15	0	0	0
	China									2.Assistant Vice President of China Securities	2. Director of President Insurance Agency Corp.
Department
										Co., Ltd.
Vice President
Fixed Income										1.Senior Deputy Manager of China Bills
	Republic Of
Department		Tsai, Sen-Bu	2003.06.18	291,818	0.02	0	0	0	0	Finance Corporation	N/A
	China
Vice President										2.Project Manager of President Securities Corp.
										1.Assistant Vice President of MasterLink	1.Director of President Securities (HK) Ltd.
										Securities Corp.	2.Director of President Securities (BVI) Ltd.
Finance Department	Republic Of
		An, Chi-Li	2004.06.30	145,546	0.01	0	0	0	0	2.SVP of Ta Chong Bank LTD.	3.Director of President Securities (Nominee) Ltd.
Vice President	China
										3.Head of Treasury of Barclays Bank PLC	4.Director of President Wealth Management (HONG KONG) Ltd.
										4.Treasurer of Societe Generale	5. Supervisor of President Insurance Agency Corp.

16

III. Corporate Governance

	Nationality/		D
								Shareholding by Nominee
				Current Shareholding		Spouse & Minor Shareholding
Title	Country of Origin	Name	ate Elected					Arrangement		Experience（Education）	Other Position
								Share
				Shares	％	Shares	％		%
								s
Proprietary Trading										1.Assistant Vice President of President Securities
	Republic Of
Department		Yang , Kai-Chih	2006.03.21	127,085	0.01	0	0	0	0	Corp.	N/A
	China
Vice President										2.Manager of President Securities Corp.
Derivatives										1.Vice President of Oriental Securities
Proprietary Trading	Republic Of									Corporation
		Huang, Jun-Jen	2009.03.26	100,008	0.01	0	0	0	0		N/A
Department	China									2.Assistant Vice President of MasterLink
Vice President										Securities Corp.
Financial Product										1.Sales Assistant Vice President of MasterLink
	Republic Of
Department		Pan, Chun-Hsien	2011.09.01	28,605	0	0	0	0	0	Securities Corp.	N/A
	China
Vice President										2.Manager of President Securities Corp.
Auditing Office	Republic Of									1.Senior Manager of President Securities
		Chen, Kai-Ching	1996.03.02	90,350	0.01	0	0	0	0		N/A
Chief Auditor	China									2.Chief Auditor of President Securities
Settlement &
Clearing Department	Republic Of	Cheng,								1.Manager of President Securities
			2005.06.21	63,016	0.01	0	0	0	0		N/A
Assistant Vice	China	Yao-Tung								2.Deputy Manager of President Securities
President
Capital Market										1.Senior Vice President of Capital Securities
	Republic Of	Chueh,
Department			2014.06.01	0	0	0	0	0	0	2.Assistant Manager of First Taiwan Securities	N/A
	China	Chih-Chung
Sales Vice President										Inc.
President Office										1.Vice President of President Securities Corp.
	Republic Of
Project Vice		Lin, Chung-Heng	2015.11.23	649,271	0.05	0	0	0	0	2.Special Assistant of Uni-President Assets	N/A
	China
President										Management Corp.
Compliance Division										1.Manager, Deputy Manager of President
	Republic Of
Assistant Vice		Hung, Ying-Che	2008.03.19	50,909	0	0	0	0	0	Securities	N/A
	China
President										2.Specialist of Sam Shin TradingCo. Ltd.
Human Resource
Division	Republic Of									1.Senior Manager of President Securities
		Yu, Hung-Chieh	2010.08.15	0	0	0	0	0	0		N/A
Assistant Vice	China									2.Special Assistant of President Securities
President
President Office
	Republic Of									1.Senior Manager of President Securities
Assistant Vice		Chen, Nai-Chen	2013.06.01	356	0	0	0	0	0		N/A
	China									2.Manager of President Securities
President

17

III. Corporate Governance

	Nationality/		D
								Shareholding by Nominee
				Current Shareholding		Spouse & Minor Shareholding
Title	Country of Origin	Name	ate Elected					Arrangement		Experience（Education）	Other Position
								Share
				Shares	％	Shares	％		%
								s
Mainland China										1.Project Assistant Vice President of President
Business Division	Republic Of	Chen,								Securities
			2013.06.01	86	0	0	0	0	0		N/A
Assistant Vice	China	Long-Chien								2.Branch Assistant Vice President of President
President										Securities
Finance Department											Accountant In Charge of President Personal Insurance Agency Co., Ltd.
	Republic Of									1.Senior Manager of President Securities
Assistant Vice		Lu, Chia-Chen	2013.06.01	2,183	0	0	0	0	0		Accountant In Charge of President Insurance Agency Co., Ltd
	China									2.Manager of President Securities
President											Accountant In Charge of PSC Venture Capital Investment Co., Ltd
Capital Market
Department	Republic Of	Chang,								1.Senior Manager of President Securities
			2013.06.01	0	0	0	0	0	0		N/A
Assistant Vice	China	Chin-Yung								2.Manager of President Securities
President
Capital Market
Department	Republic Of									1.Senior Manager of President Securities
		Tsai, Pao-Sheng	2013.06.01	38,908	0	203	0	0	0		N/A
Assistant Vice	China									2.Manager of President Securities
President
Risk Control Office	Republic Of	Chang,								1.Senior Manager of President Securities
			2015.11.09	14,059	0	0	0	0	0		N/A
Senior Manager	China	Ping-Chuan								2.Manager of President Securities
Brokerage
	Republic Of									1.Assistant Vice President of President Securities	1.Director of President Futures Corp.
Department		Peng, Bow-Win	2015.09.17	72,277	0	0	0	0	0
	China									2.Senior Manager of President Securities	2.Director of President Insurance Agency Co., Ltd.
Vice President
Brokerage
Department										1.Assistant Vice President of Hua Nan Securities
	Republic Of	Chang,
Senior District			2003.05.21	1,310	0	0	0	0	0	2.Assistant Vice President of Sino-Trade	N/A
	China	Hung-Shuo
Assistant Vice										Securities
President
Brokerage
Department
	Republic Of									1.Manager of President Securities
District Assistant		Chuang, Chi-Hung	2006.10.01	154,392	0.01	0	0	0	0		N/A
	China									2.Deputy Manager of President Securities
Vice President

18

III. Corporate Governance

	Nationality/		D
								Shareholding by Nominee
				Current Shareholding		Spouse & Minor Shareholding
Title	Country of Origin	Name	ate Elected					Arrangement		Experience（Education）	Other Position
								Share
				Shares	％	Shares	％		%
								s
Brokerage
Department	Republic Of									1.Manager of President Securities
		Chiu, Shyh-Tyng	2008.01.01	1,000	0	7,000	0	0	0		N/A
District Assistant	China									2.Deputy Manager of President Securities
Vice President
Brokerage
Department	Republic Of									1.Assistant Vice President of President Securities
		Lin, Li-Lin	2014.04.01	5,693	0	0	0	0	0		N/A
District Assistant	China									2.Manager of Dafeng Securities
Vice President
Customer Service
Center	Republic Of									1.Manager of President Securities
		Huang, Hsien-Yi	2007.05.01	0	0	0	0	0	0		N/A
Assistant Vice	China									2.Manager of International Securities
President
Global Institutional
										1.Manager of Jih Sun Securities
Service Dept.	Republic Of
		Wang, Shi-Cheng	2010.06.29	0	0	0	0	0	0	2.Analyst of Solomon Smith Barney New York,	N/A
Assistant Vice	China
										Citigroup
President
Wealth Management
										1.Deputy Manager of Tai An Securities
and Trust	Republic Of
		Lin, Yu-Ming	2015.06.01	0	0	0	0	0	0	2.Assistant Project Manager of President	N/A
Department	China
										Securities
Manager
Tunghsing Equity
Department	Republic Of									1.Manager of Taiwan Securities Co., Ltd.
		Kao, Jung	2009.04.01	379	0	0	0	0	0		N/A
Branch Assistant	China									2.Manager of Yuanta Securities
Vice President
Tunghsing Equity
	Republic Of
Department		Hung, Yu-Ting	2014.07.01	0	0	0	0	0	0	1.Manager of President Futures Corp.	N/A
	China
Manager
Tunghsing Equity
	Republic Of									1.Deputy Manager of President Securities
Department		Chen, Te-Chang	2015.07.01	0	0	0	0	0	0		N/A
	China									2.Sales of President Securities
Manager
Kaohsiung Branch	Republic Of									1.Assistant Vice President of KGI Securities
		Wu, Huan-Chung	2013.04.01	0	0	0	0	0	0		N/A
Manager	China									2.Manager of Taiwan Securities Co., Ltd.

19

III. Corporate Governance

	Nationality/		D
								Shareholding by Nominee
				Current Shareholding		Spouse & Minor Shareholding
Title	Country of Origin	Name	ate Elected					Arrangement		Experience（Education）	Other Position
								Share
				Shares	％	Shares	％		%
								s
Dunnan Branch										1.Sales Vice President of KGI Securities
	Republic Of
Branch Assistant		Liao, Shun-Ping	2013.12.01	0	0	0	0	0	0	2.Sales Vice President of Taiwan Securities Co.,	N/A
	China
Vice President										Ltd.
Zhongli Branch
	Republic Of	Chiang,								1.Manager of President Securities
Branch Assistant			2007.12.19	0	0	0	0	0	0		N/A
	China	Tsong-Shyan								2.Manager of Kurn Bern Machinery Company
Vice President
Chengzhong Branch	Republic Of	Chen,								1.Manager of President Securities
			2014.10.01	0	0	0	0	0	0		N/A
Manager	China	Chih-Lung								2.Manager of President Futures Corp.
Tainan Branch	Republic Of									1.Manager of President Securities
		Tu, Ching-Feng	2009.12.17	225,651	0.02	0	0	0	0		Supervisor of Integrated Service Technology
Manager	China									2.Vice President of Shun Fu Tai Industrial Co.
Taichung Branch
	Republic Of									1.President of Jiu Ding Securities Company
Branch Assistant		Liao, Chen-Yin	2001.11.12	0	0	0	0	0	0		N/A
	China									2.Vice President of Tian Fa Securities Company
Vice President
										1.Deputy Manager of President Securities
Hsinchu Branch	Republic Of
		Lee, Chin-Yi	2014.09.01	0	0	0	0	0	0	2.Sales Assistant Manager of Taiwan Securities	N/A
Manager	China
										Co., Ltd.
Chiayi Branch										1.Assistant Vice President of China Securities
	Republic Of
Assistant Vice		Tai, Kuo-Chun	2005.06.01	0	0	0	0	0	0	Co., Ltd.	N/A
	China
President										2.Manager of Yuanta Securities
Pingtung Branch	Republic Of									1.Sales Manager of President Securities
		Wang, Chien-Min	2009.04.01	0	0	0	0	0	0		N/A
Manager	China									2.Deputy Manager of President Securities
Keelung Branch	Republic Of	Huang,								1.Manager of President Securities
			2013.04.01	86	0	0	0	0	0		N/A
Senior Manager	China	Ming- Fa								2.Deputy Manager of Yuanta Securities
Yonghe Branch	Republic Of	Tseng,								1.Deputy Manager of President Securities
			2012.01.01	0	0	0	0	0	0		N/A
Manager	China	Chien-Ming								2.DeputyProject Manager of SinoPac Bank

20

III. Corporate Governance

	Nationality/		D
								Shareholding by Nominee
				Current Shareholding		Spouse & Minor Shareholding
Title	Country of Origin	Name	ate Elected					Arrangement		Experience（Education）	Other Position
								Share
				Shares	％	Shares	％		%
								s
Sanmin Branch
	Republic Of									1.Manager of President Securities
District Assistant		Chuang, Chi-Hung	2015.09.01	154,392	0.01	0	0	0	0		N/A
	China									2.Deputy Manager of President Securities
Vice President
Xin Taichung Branch
	Republic Of									1.Manager of President Securities
Branch Assistant		Yang, Kuo-Chen	2011.01.01	0	0	0	0	0	0		N/A
	China									2.Deputy Manager of SAMPO Securities
Vice President
Hsinying Branch	Republic Of	Hsiao,								1.Deputy Manager of President Securities
			2013.04.01	4,367	0	0	0	0	0		N/A
Manager	China	Pai-Cheng								2.Sales of President Securities
										1.Senior Assistant Vice President of KGI
Changhua Branch
	Republic Of									Securities
Assistant Vice		Huo, Ju-Liang	2009.08.27	0	0	0	0	0	0		N/A
	China									2.Senior Assistant Vice President of Pacific
President
										Securities
Yenping Branch	Republic Of									1.Deputy Manager of President Securities
		Shao, Yun-Wen	2014.12.01	0	0	0	0	0	0		N/A
Manager	China									2.Project Manager of First Securities Inc.
Taoyuan Branch	Republic Of									1.Manager of Yuanta Core Pacific Securities
		Tung, Chiu-An	2013.04.01	191	0	0	0	0	0		N/A
Manager	China									2.Assistant Manager of National Securities
Yuanlin Branch	Republic Of									1.Manager of Yuanta Securities
		Yu, Fu-Tsun	2005.06.21	0	0	0	0	0	0		N/A
Manager	China									2.Sales of Yuanta Securities
Sanchung Branch
	Republic Of									1.Deputy Manager of Ta Shin securities company
Branch Assistant		Kao, Hao-Chen	2013.04.01	0	0	0	0	0	0		N/A
	China									2.Deputy Manager of Yuanta Securities
Vice President
Fengyuan Branch	Republic Of	Lin,								1.Manager of President Securities
			2011.01.01	40,170	0	0	0	0	0		N/A
Manager	China	Cheng-Feng								2.Manager of Tai Yu Securities
Shilin Branch	Republic Of									1.Deputy Manager of Yuanta Securities Co., Ltd.
		Hsu, Fu-Chiang	2014.10.01	0	0	0	0	0	0		N/A
Manager	China									2.Senior DeputyManager of KGI Securities
Tali Branch	Republic Of									1.Deputy Manager of President Securities
		Fang, Wu- Hsin	2015.05.01	261	0	0	0	0	0		N/A
Manager	China									2.Sales DeputyManager of President Securities
Panchiao Branch	Republic Of									1.Deputy Manager of President Securities
		Yu, Ping-Tse	2012.01.01	0	0	0	0	0	0		N/A
Manager	China									2.Sales Executive of Hua Nan Securities

21

III. Corporate Governance

	Nationality/		D
								Shareholding by Nominee
				Current Shareholding		Spouse & Minor Shareholding
Title	Country of Origin	Name	ate Elected					Arrangement		Experience（Education）	Other Position
								Share
				Shares	％	Shares	％		%
								s
Sanduo Branch	Republic Of									1.Manager of President Securities
		Tsai, Yi-Chen	2006.03.21	0	0	0	0	0	0		N/A
Manager	China									2.Sales Manager of SinoPac Holding
										1.Manager of Retail Securities Brokerage Business
Sanduo Branch	Republic Of									of Standard Chartered Bank (Taiwan)Ltd
		Chen, Chih-Yang	2014.10.10	0	0	0	0	0	0		N/A
Manager	China									2.Assistant Vice President of Taiwan International
										Securities Co.
Szichih Branch										1.Assistant Vice President of Concord Securities
	Republic Of
Branch Assistant		Hu, Wen-Chieh	2013.04.01	0	0	0	0	0	0	Co., Ltd.	N/A
	China
Vice President										2.Manager of Polaris Securities Co., Ltd.
Ilan Branch	Republic Of	Chiang,								1.Manager of KGI Securities
			2014.12.01	0	0	0	0	0	0		N/A
Senior Manager	China	Jen- Chu								2.Manager of Capital Securities
Nanjing Branch
	Republic Of									1.Sales Deputy Manager of President Securities
Assistant Vice		Chang, Wen-Lung	2009.04.01	0	0	0	0	0	0		N/A
	China									2.Sales of President Securities
President
Kuting Branch	Republic Of									1.Sales Manager of China Securities Co., Ltd.
		Chiu, Ming-Kai	2013.12.01	0	0	0	0	0	0		N/A
Manager	China									2.Administrator of Panasonic Taiwan Co., Ltd.
Kinmen Branch	Republic Of									1.Deputy Manager of Capital Securities
		Li, Yu- Min	2014.04.01	0	0	0	0	0	0		N/A
DeputyManager	China									2.Specialist of President Securities
Tucheng Branch
	Republic Of									1.Manager of President Securities
Branch Assistant		Chu, Po-Lin	2012.01.01	.0	0	0	0	0	0		N/A
	China									1.Deputy Manager of President Securities
Vice President
Songjiang Branch	Republic Of									1.Deputy Manager of Capital Securities
		Lai, Chueh-An	2015.07.01	0	0	0	0	0	0		N/A
Manager	China									2. Manager of Horizon Securities
Neihu Branch
	Republic Of									1.Manager of President Securities
Branch Assistant		Chen, Chi-Heng	2014.10.01	0	0	0	0	0	0		N/A
	China									2.Manager of China Securities
Vice President
Renai Branch
	Republic Of									1.Manager of President Securities
Branch Assistant		Yang, Chun-Chen	2013.12.01	0	0	0	0	0	0		N/A
	China									2.Sales Deputy Manager of President Securities
Vice President

22

III. Corporate Governance

	Nationality/		D
								Shareholding by Nominee
				Current Shareholding		Spouse & Minor Shareholding
Title	Country of Origin	Name	ate Elected					Arrangement		Experience（Education）	Other Position
								Share
				Shares	％	Shares	％		%
								s
										1. Manager of Retail Securities Brokerage
Renai Branch	Republic Of									Business of Standard Chartered Bank (Taiwan)
		Peng, Chi-Chao	2014.10.10	0	0	0	0	0	0		N/A
Manager	China									Ltd.
										2.Manager of Taiwan Business Bank
Xindian Branch	Republic Of	Huang,								1.Senior Manager of KGI Securities
			2013.09.11	0	0	0	0	0	0		N/A
Senior Manager	China	Chien-Hsin								2.Manager of Taiwan Securities Co., Ltd.
Xinzhuang Branch	Republic Of									1.Manager of KGI Securities
		Kao , Min-Chou	2014.07.21	0	0	0	0	0	0		N/A
Manager	China									2.Sales Deputy Manager of Capital Securities
Xinzhuang Branch	Republic Of									1.Deputy Manager of KGI Securities
		Chen, I-Ju	2014.07.21	0	0	0	0	0	0		N/A
Manager	China									2.DeputyManager of Taiwan Securities Co., Ltd.
Zhubei Branch
	Republic Of									1.Manager of President Securities
District Assistant		Chiu, Shyh-Tyng	2016.03.22	1,000	0	7,000	0	0	0		N/A
	China									2.Deputy Manager of President Securities
Vice President
										1.Manager of Retail Securities Brokerage
Xin Taoyuan Branch	Republic Of									Business of Standard Chartered Bank (Taiwan)
		Wu, Shao-Kuang	2014.10.10	0	0	0	0	0	0		N/A
Manager	China									Ltd.
										2.Manager of Hsinchu International Bank
										1.Manager of Retail Securities Brokerage
Xin Taoyuan Branch	Republic Of									Business of Standard Chartered Bank (Taiwan)
		Chang, Hung-Ren	2014.10.10	0	0	0	0	0	0		N/A
Manager	China									Ltd.
										2.DeputyManager of Hsinchu International Bank
										1.Manager of Retail Securities Brokerage
Zhunan Branch	Republic Of									Business of Standard Chartered Bank (Taiwan)
		Peng, Hsiu-Chin	2014.10.10	0	0	0	0	0	0		N/A
Manager	China									Ltd.
										2.Manager of Hsinchu International Bank
										1.Manager of Retail Securities Brokerage
										Business of Standard Chartered Bank (Taiwan)
Pingzhen Branch	Republic Of
		Li, Shu-Jung	2015.10.26	0	0	0	0	0	0	Ltd.	N/A
Manager	China
										2.Bank Teller of Hsinchu International Bank

23

III. Corporate Governance

	Nationality/		D
								Shareholding by Nominee
				Current Shareholding		Spouse & Minor Shareholding
Title	Country of Origin	Name	ate Elected					Arrangement		Experience（Education）	Other Position
								Share
				Shares	％	Shares	％		%
								s
Offshore Securities
	Republic Of									1.Deputy Manager of President Securities
Unit		Lai, Chung-Chih	2014.07.07	0	0	0	0	0	0		N/A
	China									2.Deputy Project Manager of President Securities
DeputyManager

24

III. Corporate Governance

3. Corporate Governance

In an effort to implement prudent corporate governance measures in line with the “Principles for Corporate Governance for Securities Firms” and with relevant laws and regulations, President Securities adopted such guidelines by the 13th meeting of the 9th Board of the company held on August 7, 2014, and will abide by said principles.

3-1 Protection of Shareholders' Equity

firewall and confidentiality procedures, the disclosure of important events, educational guidance rules, etc.

3-2 Board Composition and Operation

 When selecting directors, President Securities uses a comprehensive approach so as to put together a professional yet independent team that can exercise its duties in an objective manner. Overall, we ensure that our directors posse the following skills:

 Communicate with Shareholders

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:

i) President Securities’ design and sale of financial products adheres to all relevant laws and regulations.

ii) Company introduction in Chinese and English.

iii) Company financial statements.

iv) Board of Director meeting Minutes.

v) Investor Suggestion Box, which is manned by Public Affairs personnel who are responsible for replying to all comments received.

 Ownership Structure and Shareholders’ Rights

i) 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.

ii) The finance and business of our company and its subsidiaries are in separate operation. In term 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 with law. “Surveillance governing internal-control system for branch offices” has also been set up as a controlling and governing mechanism for our branch offices. iii) In an effort to prevent insider trading and to protect the interests of investors, we have adopted and implemented the “Important Event Internal Handling Procedures”, which outlines clear division of responsibilities, adequate

i) Operational decision-making ability. ii) Accounting and financial analysis ability. iii) Management ability. iv) Crisis management ability.

v) Industry knowledge. vi) Knowledge of international markets. vii) Leadership ability. viii) Strategic knowledge. ix) Risk management knowledge.

 Based on regulation of corporate governance of securities dealers, the Board evaluates and assigns the appointment of independent accountants annually. According to article 46 and article 47 of Certified Public Accountant Act, "honesty, impartiality, objectivity and independence,” the company sets up the independent items of declaration, which issued by the certified public detached accountants. Accountant Lin, SK, Huang, James, and Hsu, Chi-Chang from PricewaterhouseCoopers Taiwan proved to be qualified as CPA for company's financial and tax accountants.

 President Securities has already added independent directors to its board, has established a remuneration committee, a risk management committee, and an audit committee.

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III. Corporate Governance

 President Securities has yet to establish a “Board Performance Evaluation” procedure. The board conducts its business in accordance with Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies and in accordance with the companies own Rules of Procedure for Board of Directors Meetings.

 Remuneration Committee

i) The company has established the Remuneration Committee by Sept. 30[th] , 2011 in accordance with the order from government.

ii) Operation:

The committee is composed of four members. The tenure of the committee is effective from June 29[th] , 2015 to June 17[th] , 2018. Total of 2 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	2	0	100%
member	Lee, Kwang-Chou	2	0	100%
member	Fu, Kai-Yun	2	0	100%
member	Liang, Yann-Ping	2	0	100%

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III. Corporate Governance

 Professional Qualifications and Independence Analysis of Remuneration Committee Members

		Meets One of the Following Professional Qualification	Meets One of the Following Professional Qualification	Meets One of the Following Professional Qualification
					Independence Criteria
		Requirements Together with at Least Five Years’											Number of
		, Work Experience			(Note)								Other
													Public
	Criteria	An instructor or	A judge, public	Has work experience
													Cmni
		higher position in a	prosecutor, attorney,	in the areas of									opaes in Which
		department of	Certified Public	commerce, law,									the
		commerce, law,	Accountant, or other	finance, or									Individual
		fi i	fil	i
		nance, accountng,	proessona or	accountng, or									is
		or other academic	technical specialist	otherwise necessary
		department related to	who has passed a	for the business of	1	2	3	4	5	6	7	8	Concurren
		the business needs of	national examination	the Company									tly Serving
		the Company in a	and been awarded a										as an
													Remunerat
	Name	public or private	certificate in a
													ion
		junior college,	profession necessary										Committee
		college or university	for the business of
													Member
			the Company
Independent Director					V	V	V	V	V	V	V	V
	Wu, Tsai-Yi	V											0
Independent Director	Lee,				V	V	V	V	V	V	V	V
				V									0
	Kwang-Chou
Independent Director					V	V	V	V	V	V	V	V
	Fu, Kai-Yun			V									0
Independent Director	Liang,				V	V	V	V	V	V	V	V
		V		V									0
	Yann-Ping

 Attendance of Board of Directors Meeting

Total of 6 meetings of the board of directors were held in the year of 2015. Directors’ attendance condition was as follows:

		Attendance		Attendance
Title	Name		By Proxy
		in Person		rate (%)
	Kai Nan Investment Co., Ltd.
Chairman		4	0	100%
	Rep. Lin,Chung-Shen
Independent Director	Wu, Tsai-Yi	6	0	100%
Independent Director	Fu, Kai-Yun	6	0	100%
Independent Director	Lee, Kwang-Chou	6	0	100%
Independent Director	Liang, Yann-Ping	4	0	100%
Director	Lin, Kuan-Chen	6	0	100%
Director	Cheng, Kao-Huei	1	5	17%
Director	Kao, Shiow-Ling	1	5	17%
	Kai Nan Investment Co., Ltd.
Director		5	1	83%
	Rep. Hsieh Hong,Hui-Tzu
	Kai Nan Investment Co., Ltd.
Director		4	2	67%
	Rep. Lin,Cheng-Te
	Kai Nan Investment Co., Ltd.
Director		4	0	100%
	Rep. Liu,Tsung-Yi

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III. Corporate Governance

		Attendance		Attendance
Title	Name		By Proxy
		in Person		rate (%)
	Kai Nan Investment Co., Ltd.
Director		4	0	100%
	Rep. Lu,Li-An
Director	Duh, Bor-Tsang	6	0	100%
	Leg Horn Investment Co., Ltd.
Director		6	0	100%
	Rep. Chang, Ming-Chen
Director	Teng, Wen-Hwi	1	3	25%
	Hui Tung Investment Co., Ltd.
Director		3	1	75%
	Rep. Lee,Tong-Liang
	China F.R.P Corp.
Director		4	0	100%
	Rep. Lee,Shu-Fen
Director	Lee, Shy-Lou	5	1	83%
	Ta Le Investment Holding Co.,
Director	Ltd.	5	1	83%
	Rep. Tu,Li-Yang
	Canking Investment Co., Ltd.
Former Chairman		2	0	100%
	Rep.Teng,A-Hua
	Hui Tung Investment Co., Ltd
Director		2	0	100%
	Rep. Pi,Chien-Kuo
	Kai Nan Investment Co., Ltd.
Director		0	2	0%
	Hsieh,Chih-Peng.

Nominee Directors and Independent Directors	Those recused themselves for conflicts of interest with the party to in the left column
Kai Nan Investment Co., Ltd. Rep. Lin, Chung-Shen/ Liu, Tsung-Yi/ Lin, Cheng -Te/ Hsieh Hong, Hui-Tzu/ Lu,Li-An,	Chang, Ming-Chen (Chang, Ming-Chen serves on behalf of Hsieh Hong, Hui-Tzu)/ Lin, Cheng -Te/ Lu, Li-An
Lin,Kuan-Chen	Lin,Kuan-Chen
Cheng, Kao-Huei	Duh, Bor-Tsang (Duh, Bor-Tsang serves on behalf of Cheng, Kao-Huei, and the two are relatives)
Duh,Bor-Tsang	Duh,Bor-Tsang
Kao, Shiow-Ling	Lin, Kuan-Chen (Lin, Kuan-Chen serves on behalf of Kao,Shiow-Ling)
Teng, Wen-Hwi	Teng, Wen-Hwi (Teng, Wen-Hwi and Teng,A-Hua are relatives)
Leg Horn Investment Co. Ltd. Rep. Chang,Ming-Chen	Chang, Ming-Chen
Hui Tung Investment Co. Ltd. Rep. Pi,Chien-Kuo	Pi, Chien-Kuo
Ta Le Investment Co. Ltd. Rep. Tu,Li-Yang	Tu, Li-Yang
Lee,Shy-Lou	Lee,Shy-Lou
China F.R.P. Corp. Rep. Lee,Shu-Fen	Lee, Shu-Fen
Wu,Tsai-Yi	Wu,Tsai-Yi

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III. Corporate Governance

Nominee Directors and Independent Directors	Those recused themselves for conflicts of interest with the party to in the left column
Lee,Kwang-Chou	Lee,Kwang-Chou
Fu,Kai-Yun	Fu,Kai-Yun

• Status of the operations of the Audit Committee and participation of the Supervisors in Board Meetings: number of meetings held, attendance rate of Independent Directors and Supervisors, and other items that are to be recorded.

• The Audit Committee was established in June of 2015. The status of the Audit Committee and the Supervisor(s) is laid out as below.

• Attendance rate by Supervisors at Board of Directors Meetings

There were 2 (A) Board of Directors Meetings held between January 1, 2015, and June 21, 2015. The Supervisors’ attendances at these meetings were as follows:

Title	Name	Actually Number of Times Attended(B)	Actual Attendance Rate (%) (B/A)	Remarks
Supervisor	Kai Nan Investment Co., Ltd. / Chuang, Tsai-Fa	2	100%	After the dismissal of the Board on June18, 2015 there were two Board meetings held
Supervisor	Kai Nan Investment Co., Ltd./ Lu, Li-An	1	50%	After the dismissal of the Board on June18, 2015, there were two Board meetings held
Supervisor	China F.R.P Corp. / Lee, Shu-Fen	2	100%	After the dismissal of the Board on June18, 2015, there were two Board meetings held

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III. Corporate Governance

 Status of the operation of the Audit Committee

The Company established its Audit Committee in June of 2015.There were 4(A) meetings held in 2015. The attendance by Independent Directors was as follows:

Title	Name	Actually Number of Times Attended (B) (Note 1)	Number of Times Attended by Proxy	Actual Attendance Rate (%) (B/A) (Note 2)	Remarks
Independent Director	Liang, Yann-Ping	4	0	100%	The Audit Committee met 4 times between the period of June 18, 2015, and the end of theyear.
Independent Director	Lee, Kwang-Chou	4	0	100%	The Audit Committee met 4 times between the period of June 18, 2015, and the end of theyear.
Independent Director	Fu, Kai-Yun	4	0	100%	The Audit Committee met 4 times between the period of June 18, 2015, and the end of theyear.
Independent Director	Wu, Tsai-Yi	4	0	100%	The Audit Committee met 4 times between the period of June 18, 2015, and the end of theyear.

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III. Corporate Governance

 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. Taking 2015 as an example, in addition to the training courses that Directors attended on their own, we also worked with the Taiwan Corporate Governance Association to hold a class for our entire board and management team. In May, we invited attorney, Luo, Ming-Wei, to give a presentation entitled, “New Principles and Developments in Preventing Insider Trading in Taiwan”, and in August, we invited accountant, Wang, Jin-Lai, to give a presentation entitled, “Strengthening Corporate Governance and Corporate Responsibility”. These seminars were important to giving our Directors and Supervisors a better understanding of both the spirit and real-life principles of good corporate governance. For more details on the training undergone by the Directors and Supervisors, please refer to Chapter 11: Directors and Supervisors Training.

 The Purchase of Liability Insurance for Directors and Supervisors

President Securities has already purchased liability insurance from ACE insurance and AIG insurance for all of its directors, supervisors, and key employees (Policy Value: US$10 million; Policy Term: September 1, 2015, to September 1, 2016).

3-3 Information Transparency

 On President Securities corporate website, we have clearly stated our “Corporate Responsibility” values and policy, which details the company’s economic, social, and environmental aspirations. President Securities has also published a report, entitled, “President Securities Corporate Responsibility Report” which can be viewed either on the company’s corporate website (www.pscnet.com.tw) or on the MOPS website maintained by the TWSE. 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. On our website where investors and shareholders can

obtain information on the following: i) Company introduction in English and Chinese.

ii) Disclosure of company’s financial and business information, and corporate governance.

iii) Investor Suggestion Box, which is manned by Administration Department Personnel who are responsible for replying to all comments received.

3-4 Corporate Social Responsibility

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. Our company has worked out “President Securities Social Obligation Report”, which is put on our website. Implemental reports of “President Securities Corporate Responsibility Principles” were proposed in board meeting every year, and report of the year 2014 was proposed in the 16th meeting of the 9th Board of the company.

In 2011, the Company published its first ever “President Securities 2010 Securities Corporate Responsibility Report”, and has produced subsequent annual reports every since. The reports are available online for download at the Company’s corporate website, www.pscnet.com.tw . Our corporate social responsibility report for 2015 was published in October of that year and was certified by a third party (PwC Taiwan), using the ISAE 3000 “Non-Financial Information Auditing and Certification Letter” format that is in compliance with the Good Reporting Initiative (GRI) G4 guidelines and that covers all items required by GRI G4 reporting policies.

In 2015 the company again received the highest top 5% ranking in the 2nd Annual Corporate Governance Evaluation System (Among 824 Taiwan’s listed companies that join the evaluation system, only 41 have received the honor), making us the only securities firm to receive the top 5% ranking.

 Employee Rights and Hiring Concerns i) To boost work efficiency and solidarity among our employees, we place particular

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III. Corporate Governance

emphasis on benefits programs and labor relations, and thus ensure employee welfare in a comprehensive manner.

ii) General accident insurance has been purchased for each of our 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. iii) 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 protect employee’s legal rights. The related mechanisms are as below: 1. Established Employee Complaint Window The company has established a complaint window where employees can register complaints regarding the Labor Standards Act, Labor Safety and Health Law, the Employee Welfare Fund Regulations, the Labor Insurance Regulations, the Labor Inspection Act, the Employment Welfare Act, etc., and, thereby diffuse potential management-labor disputes.

Complaints can be submitted via email at: hr@uni-psg.com

1. 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)2746-3637 Fax: (02)2746-3799 E-mail: PSC.HEAR@uni-psg.com

iv) 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 their own health status in advance. President Securities provides health counseling, followed by follow-up health assessments. We organize regular health

seminars and an online health and sanitation guidance system that provides preventative health information; we offer an employee activity center, gym, table tennis and billiards room, and we actively encourage employee clubs and groups, all to promote the physical and emotional wellbeing of our employees.

v) 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. 1. The company has labor and employer representatives, who regularly hold labor-employer meetings to ensure sufficient communications between the two sides. 2. Each department holds regular department meetings, employees' views and needs are sounded out during manager-level meetings and appropriate measures are taken thereafter. vi) The company has a clear salary and bonus policy that is based on employee performance, which makes our salary and bonus system not only extremely competitive but also very effective in motivating employee our employees. vii) In an effort to respond to trends in the finance industry, and the advent of the Internet of Things and the Bank 3.0 initiative, we have developed a number of employee training classes aimed at financial innovation, with each class tailored to each specific department, e.g., training camp for management trainees, cross-selling project training, special training for managers, etc. We attempt to build strong skills and a keen sense of direction in every department and at all levels of the Company.

 Environmental protection measures Although the Company is a securities firm that does not produce any environmental pollutants, we still care deeply about protecting the environment, about reducing our impact on the environment, and about our responsibility for sustainability. The Company is also committed to green energy, environmental protection, and reducing waste in a sustainable manner. To this end, the Company place waste sorting receptacles on all floors of its facilities and is strict about adhering to recycling principles. All maintenance performed and all equipment purchased must be certified as environmentally friendly. The aim is to reduce the Company’s overall environmental impact as the Company strives to reduce its overall carbon footprint.

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III. Corporate Governance

i) President Securities operate financial services and, therefore, does not produce any environmental pollutants or waste. The main source of greenhouse gases that we produce is from our power consumption. In an effort to be increasingly environmentally friendly and to reduce our carbon footprint, we have implemented many initiatives aimed at replacing company equipment with low power consumption equipment. We have also implemented an electronic internal document management system and electronic account statements for our customers, so as to reduce our consumption of paper products. We also send out regular emails to all employees that discuss key environmental concepts

ii) In an effort to reduce our carbon footprint, the Company adheres to government policies on indoor climate controls, as well as removing and replacing outdated equipment with more energy-efficient models, followed-up by regular inspections. Every year a table is generating showing monthly water and electricity usage by department and any department that has exceeded its pre-determined limits must submit an explanation for the abnormality and its plan for corrective action. Plus, all departments are encouraged to keep environmental concerns and conservation in mind when making purchasing decisions so as to select and use equipment that is most energy-efficient. Another way that we help to lower our carbon footprint and greenhouse gas emissions is to regularly encourage employees to take elevators less and opt for taking the stairs as this is a very effective way to reduce carbon emissions. In all employee washrooms and kitchens, we have placed water conservation reminders and all taps have been outfitted with water stream reduction devices. Indeed, we have implemented environmentally friendly policies at all levels of the Company, by encouraging a high level of online trading, electronic processing of administrative affairs, all offices outfitted with environmentally friendly equipment and materials, water and electricity conservation initiatives, waste paper reduction policies, etc. Between October of 2014 and the end of 2015, we opened four new branches, which resulted in an overall increase of 1.9% in power consumption. Going forward, the Company will continue to emphasize environmentally friendliness throughout the organization, and we have set a target of a 2%

reduction in carbon emissions for 2016, in an effort to make the Company an increasingly environmentally responsible and green company.

Overall results from the last two calendar years for the Company headquarters and all branches:

Total power consumption

Item	2014	2015
Power Consumption	6,169,485 units	6,288,696 units
Carbon Emissions	3,282,166 kg	3,345,586 kg

Total water consumption for the last two calendar years:

Item	2014	2015	Increase / Decrease
Water Consumption	20,079 units	18,573 units	-1,506 units
Carbon Emissions	3,112kg	2,879 kg	-233 kg

iii) President Securities endeavors to use green materials and environmentally friendly equipment for all of the equipment and materials that it orders and for all maintenance or renovation performed, all with the aim of achieving low-energy consumption and low carbon emissions. We also strive to include such provisions in any currently effective contracts once they have terminated and are to be renewed.

 Corporate Citizenship

Our Company uses multiple avenues by which to promote corporate responsibility education, including holding corporate governance training classes (May 8, 2015, and August 6, 2015, for 6 hours each time); another such class is scheduled for March and August of 2016. We will continue to imbue the concepts of corporate responsibility into all Company activities and future development and thereby achieve real corporate governance. Corporate responsibility and corporate governance concepts have already been engrained in our corporate operations and development plans. Every year, our administration department organizes corporate responsibility events, such as charity events, and, by April of every year, puts together a report for the board of directors on the activities implemented by each department.

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III. Corporate Governance

3-5 Protection of Interested parties Rights

 Communicate with Interested Parties i) We have also taken steps to address corporate responsibility concerns of our interested parties. We have established a platform with dedicated staff to handle feedback from investors, employees, clients, and other organizations so as to maintain strong lines of communication. This allows us to stay aware of the issues that are of importance to our interested parties and to ensure that all of our actions are responding to the needs of our interested parties.

 Protect Customer Rights

i) Implementation of Customer Policy

Our Policy: “3 Goods and 1 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.

ii) 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.

iii) In keeping with the laws and regulations laid out by the regulators, and in an effort to protect the rights of our customers, we have established a complaint hotline where customers may seek assistance. We have put in place processes that protect the personal information and rights of the customers. Also, President Securities has received BSI and BS-10012 certification for its new account application process, and undergoes two audits each year for this. We pay close attention to the protection of customer information so as to protect the rights of our customers.

iv) We adhere to all relevant laws and regulations with regard to product marketing and product disclaimers.

v) We have put into place a supplier approval process, and also conduct regular reviews of those suppliers so as to ensure that they are all partners in good standing that are worthy of our continued business.

 Investor Relations (Please see: 2-1 Protection of Shareholders’ Equity)  Employee Relations (Please see: 2-4 Corporate Social Responsibility)

3-6 Risk Management Policy and Risk Evaluation Standards

 Risk Management Policy

i) Ensure that we can operate various types of business from a position of solid risk management. Using reasonable risk tolerance levels, continue to enhance profitability, create shareholder value, and achieve return on capital targets.

ii) Set well-defined risk controls for every business area, implement risk management checks and balances, 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, liquidity risk, operational risk, legal risk, model risk.

 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:

• i) Market Risk

• 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.

• 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.

• We evaluate the effectiveness of risk control models: regularly perform backtesting to ensure the effectiveness of the models used.

ii) Credit Risk

1. Our company undergoes credit rating evaluations from Moody’s, Standard & Poor’s, Fitch, and Taiwan Ratings Corp.

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III. Corporate Governance

1. Trading counterparty 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.

2. Issuer’s Credit Risk: we use KMV 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 of the company, and then use this to protect ourselves from potential credit risks and potential capital shortfalls.

iii) Operational Risk

1. 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.

2. We create operations risk policy handbooks that entail every level of operations.

3. Through our risk report and audit report, we ensure that risk is appropriately evaluated, disclosed, and controlled.

 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.

 Our Risk Management

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 Assets/liabilities Committee, the Risk Control Office, the Auditing office, the Legal Compliance and Legal Matters Department, the Finance Department, and all business units. Each segment of the company has clearly spelled-out obligations and every level of the company has clearly defined authorities. i) 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.

ii) 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.

iii) 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. iv) Assets/Liabilities Committee controls the company’s overall asset structure, collects and analyzes domestic and international interest rates, exchange rates, and economic changes. v) Risk Control Office 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. vi) Auditing Office sets operations risk controls, sets the standards for risk control systems, puts in place internal auditing controls, and implements daily check routines.

vii) Compliance Division and Legal Affairs implements legal risk controls and ensures that all businesses and risk management operations are in compliance with relevant laws and regulations.

viii) Finance Department monitors capital adequacy rates and liquidity risks, and analyzes the company’s asset/liability structure and other key financial ratios.

ix) Business units 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.

3-7 Integrity Application

 Our company has always applied the principle of “integrity and sustainable management,” to serve our customers sincerely.

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III. Corporate Governance

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.

i) The company has established “Ethical Corporate Management Best Practices Principles” and “Fair Client Treatment Principles”, and strives to adhere to these concepts.

ii) The Company makes its corporate management and financial data publically available in a transparent manner as is required by the competent authority and underwent the authority’s first annual corporate governance evaluation in 2014, scoring in the top-5 percent among listed company in Taiwan.

iii) Insure company directors, supervisors, and managers’ liability insurance, also employees’ credit insurance.

iv) The Company is active in participating in community activities, and in fostering sustainable development sustainable development.

 Integrity policies

i) 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.

ii) 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.

iii) To prevent dishonest behaviors, the rules are clearly set in the company’s Work Rules and publicly announced.

auditing office under the Board of Directors would periodically assesses whether the principles have been properly implemented, and then provides a report on the same to the Board of Directors.

iii) President Securities’ board is subject to a high degree of self-regulation, whereby any board motion that is suspected of having the potential to create any conflict of interest with the board or with any of its representatives or proxies must undergo evaluation and may not be included in the board agenda or voted upon by such party, and also may not be voted on by any representative or proxy of such party. Board members should exercise self-regulation and should not conspire to support one another’s improper actions.

iv) In order to ensure healthy and honest operations, the auditing office is required to submit a report on the adoption of the company’s principles for honest operation in its annual audit report, and should ensure that such principles are included in the company’s Work Rules. The Committee should also publish on the company website procedures for reporting problems and the corresponding punishments for such offenses.

v) The company regularly publishes honest operation standards, and implements training courses on these standards for all new employees.

 The Company has established “Guidelines for Handling Reports of Unlawful or Unethical Behavior”. Please see the following for more information:

• i) We have established a clear window for receiving complaints:

• Complaint Hotline: (02) 2747-3637

 Integrity management execution:

i) Before engaging in any business relationship with any agent, supplier, customer, or any other enterprise, we conduct a thorough examination of that party’s creditworthiness, so as to avoid entering into any transactions with non-creditworthy parties. Included in all agreements with third parties are provisions which allow for the early termination of such agreement in the event of any deceitful acts by that party.

ii) President Securities designates clear divisions of responsibilities among its employees, and, in 2012, the Management Department established the “President Securities Principles for Honest Operations,” whereby a special

1. Complaint Email: hr@uni-psg.com.tw

2. Written Complaints: Complaints can be mailed or faxed to administration department

ii) Clear protocols for handling complaints have been established as have confidentiality measures.

iii) Clear measures have been put in place to protect those who register complaints.

 Enhanced information disclosure In keeping with the company’s honest operation principles, we endeavor to disclose procedures for ethical corporate management both via our internal corporate network and via our corporate website (www.pscnet.com.tw).

36

III. Corporate Governance

4. Other Disclosures

4-1 Information Regarding Independent Auditor

Accounting Firm	Name of CPA	Period Covered by CPA’s Audit	Remarks
PwC Taiwan	Lin, SK Huang, James		Attestation of Financial Statements
PwC Taiwan	Hsu, Chi-Chang	2015.01.01- 2015.12.31	Attestation of Tax Returns

 Independent auditor fee

Unit: NT$ thousands

				Non-audit Fee	Non-audit Fee	Non-audit Fee		Period
								Cover
Accounting
	Name of CPA	Audit	System	Company	Human			ed by	Remarks
Firm
		Fee	of	Registration	Resource	Other	Subtotal	CPA’s
			Design					Audit
	Lin, SK								Attestation
Pricewater	Huang,	6,277							of Financial
houseCoo	James					380			Statements
			-	-	-		380	2015
pers (PwC)						(Note)			Attestation
	Hsu,
Taiwan		980							of Tax
	Chi-Chang
									Returns

Note: CSR report attestation fee and transfer pricing report fee.

Unit: NT$ thousands

Fee Items Fee Range	Fee Items Fee Range	Audit Fee	Non-audit Fee	Total
1	Under NT$2,000	0	380	380
2	NT$2,000 ~ NT$4,000	0	0	0
3	NT$4,000 ~ NT$6,000	0	0	0
4	NT$6,000 ~ NT$8,000	7,257	0	7,257
5	NT$8,000 ~ NT$10,000	0	0	0
6	Over NT$10,000	0	0	0

37

III. Corporate Governance

 Replacement of CPA

i) Regarding the former CPA

Replacement Year	2015
Replacement reasons
	PricewaterhouseCoopers (PwC) Taiwan job rotation.
and explanations
	Parties
				CPA	The Company
Describe whether the	Status
Company terminated or
the CPA did not accept
the appointment	PricewaterhouseCoope			Lin, SK
					PSC
	rs (PwC) Taiwan job			Huang, James
	rotation
Other issues (except
for unqualified
	None
issues) in the audit
reports within the last
two years
		-
			Accounting principles or practices
		-
			Disclosure of Financial Statements
	Yes	-	Audit scope or steps
Differences with the
company		-	Others
	None	
	Remarks/specifydetails:
Other Revealed	None
Matters

38

III. Corporate Governance

ii) Regarding the successor CPA

Name of accounting firm	PricewaterhouseCoopers (PwC) Taiwan
Name of CPA	Hsiao, Chin-Mu and Chang, Ming-Hui
Year of appointment	2016
Consultation results and opinions on accounting treatments or principles with respect to specified transactions and the company's financial reports that the CPA might issue prior to the engagement.	None
Succeeding CPA’s written opinion of disagreement toward the former CPA	None

4-2 Ownership of Shares in Affiliated Enterprises

As of 31/3/2016

Affiliated Enterprises			Direct or Indirect Ownership by	Direct or Indirect Ownership by
	Ownership by the
			Directors, Supervisors,		Total Ownership
	Company
			Managers
	Shares	%	Shares	%	Shares	%
President Futures Corp.
	63,817,303	96.69%	0	0	63,817,303	96.69%
President Capital Management Corp.
	12,400,000	100.00%	0	0	12,400,000	100.00%
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	67,746,000	100.00%
Uni-President Asset Management Corp.
	13,570,830	38.66%	12,000	0.03%	13,582,830	38.69%
President Personal Insurance Agency Co.,Ltd.
	500,000	100.00%	0	0	500,000	100.00%
President Insurance AgencyCo., Ltd.
	500,000	100.00%	0	0	500,000	100.00%
PSC Venture Capital Investment Co., Ltd.
	30,000,000	100.00%	0	0	30,000,000	100.00%

39

III. Corporate Governance

4-3 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders

		2015	2015	As of Mar. 31, 2016	As of Mar. 31, 2016
Title	Name	Holding	Pledged	Holding	Pledged
			Holding		Holding
		Increase	Increase	Increase	Increase
		(Decrease)		(Decrease)
			(Decrease)		(Decrease)
	Kai Nan Investment Co.,
Chairman		0	0	0	138,000
	Ltd.
Director and President	Lin, Kuan-Chen	0	0	0	0
Director	Cheng, Kao-Huei	0	0	0	0
	Leg Horn Investment
Director		0	0	0	0
	Co.,Ltd.
Director	Teng, Wen- Hwi	0	0	0	0
	Hui Tung Investment
Director		0	0	0	0
	Co.,Ltd.
	Ta Le Investment Holding
Director		0	0	0	0
	Co.,Ltd.
Director	Lee, Shy-Lou	0	0	0	0
Director	Duh, Bor-Tsang	0	0	0	0
Director	Kao, Shiow-Ling	0	0	0	0
Director	China F.R.P Corp.	0	0	0	0
Independent Director	Wu, Tsai-Yi	0	0	0	0
Independent Director	Lee, Kwang-Chou	0	0	0	0
Independent Director	Fu, Kai-Yun	0	0	0	0
Independent Director	Liang, Yann-Ping	0	0	0	0
Shareholder Services Department
	Huang, Chiung-Huang	0	0	0	0
Vice President
Capital Market Department
	Kuo, Li-Yun	0	0	0	0
Vice President
Information System Department &
	Lee, Wen-Sheng	0	0	0	0
Administration Department
Fixed Income Department
	Tsai, Sen-Bu	0	0	0	0
Vice President
Derivatives Proprietary Trading
Department	Huang, Jun-Jen	0	0	0	0
Vice President
Finance Department
	An, Chi-Li	0	0	0	0
Vice President
Financial Product Department	Pan,Chun- Hsien	0	0	0	0

40

III. Corporate Governance

		2015	2015	As of Mar. 31, 2016	As of Mar. 31, 2016
Title	Name	Holding	Pledged	Holding	Pledged
			Holding		Holding
		Increase	Increase	Increase	Increase
		(Decrease)		(Decrease)
			(Decrease)		(Decrease)
Vice President
Proprietary Trading Department
	Yang, Kai-Chih	0	0	0	0
Vice President
President Office
	Lin, Chung-Heng	20,000	0	0	0
Project Vice President
Auditing Office Chief Auditor	Chen, Kai-Ching	0	0	0	0
Settlement & Clearing Department
	Cheng, Yao-Tung	-20,000	0	0	0
Assistant Vice President
Capital Market Department
	Chueh, Chih-Chung	-21,836	0	0	0
Vice President
Compliance Division
	Hung, Yung-Che	0	0	0	0
Assistant Vice President
Human Resource Division
	Yu, Hung-Chieh	0	0	0	0
Assistant Vice President
President Office
	Chen, Nai-Chen	0	0	0	0
Assistant Vice President
Mainland China Business Division
	Chen, Long-Chien	0	0	0	0
Assistant Vice President
Finance Department
	Lu, Chia-Chen	0	0	0	0
Assistant Vice President
Capital Market Department
	Chang, Chin-Yung	0	0	0	0
Assistant Vice President
Capital Market Department
	Tsai, Pao-Sheng	0	0	0	0
Assistant Vice President
Risk Control Office
	Chang, Ping-Chuan	0	0	0	0
Senior Manager
Brokerage Department
	Peng, Bow-Win	0	0	0	0
Vice President
Brokerage Department
	Chang, Hung-Shuo	0	0	0	0
District Vice President
Brokerage Department
	Chiu, Shyh-Tyng	0	0	0	0
Assistant Vice President
Brokerage Department
	Chuang, Chi-Hung	0	0	0	0
Assistant Vice President
Brokerage Department
	Lin, Li-Lin	0	0	0	0
Assistant Vice President
Customer Service Center
	Huang, Hsien-Yi	0	0	0	0
Assistant Vice President
Global Institutional Service
Department	Wang, Shi-Cheng	0	0	0	0
Assistant Vice President
Wealth Management and Trust
Department	Lin, Yu-Ming	0	0	0	0
Manager
Tunghsing Equity Department
	Kao, Jung	0	0	0	0
Branch Assistant Vice President
KaohsiungBranch	Wu,Huan-Chung	0	0	0	0

41

III. Corporate Governance

		2015	2015	As of Mar. 31, 2016	As of Mar. 31, 2016
Title	Name	Holding	Pledged	Holding	Pledged
			Holding		Holding
		Increase	Increase	Increase	Increase
		(Decrease)		(Decrease)
			(Decrease)		(Decrease)
Manager
Dunnan Branch
	Liao, Shun-Ping	0	0	0	0
Branch Assistant Vice President
Zhongli Branch
	Chiang, Tsong-Shyan	0	0	0	0
Branch Assistant Vice President
Chengzhong Branch
	Chen, Chih-Lung	0	0	0	0
Manager
Tainan Branch
	Tu, Ching-Feng	0	0	0	0
Manager
Taichung Branch
	Liao, Chen-Yin	0	0	0	0
Manager
Hsinchu Branch
	Lee, Chin-Yi	0	0	0	0
Manager
Chiayi Branch
	Tai, Kuo-Chun	0	0	0	0
Assistant Vice President
Pingtung Branch
	Wang, Chien-Min	0	0	0	0
Manager
Keelung Branch
	Huang, Ming-Fa	0	0	0	0
Senior Manager
Yonghe Branch
	Tseng, Chien-Ming	0	0	0	0
Manager
Sanmin Branch
	Chuang, Chi-Hung	0	0	0	0
Manager
Xin Taichung Branch
	Yang, Kuo-Chen	0	0	0	0
Branch Assistant Vice President
Hsinying Branch
	Hsiao, Pai-Cheng	0	0	0	0
Manager
Changhua Branch
	Huo, Ju-Liang	0	0	0	0
Assistant Vice President
Yenping Branch
	Shao, Yun-Wen	0	0	0	0
Manager
Taoyuan Branch
	Tung, Chiu-An	-1,000	0	0	0
Manager
Yuanlin Branch
	Yu, Fu-Tsun	0	0	0	0
Manager
Sanchung Branch
	Kao, Hao-Chen	0	0	0	0
Branch Assistant Vice President
Fengyuan Branch
	Lin, Cheng -Feng	0	0	0	0
Manager
Shilin Branch
	Hsu, Fu-Chiang	0	0	0	0
Manager
Tali Branch
	Fang, Wu- Hsin	0	0	0	0
Manager
Panchiao Branch
	Yu, Ping-Tse	0	0	0	0
Manager
Sanduo Branch	Tsai,Yi-Chen	0	0	0	0

42

III. Corporate Governance

		2015	2015	As of Mar. 31, 2016	As of Mar. 31, 2016
Title	Name	Holding	Pledged	Holding	Pledged
			Holding		Holding
		Increase	Increase	Increase	Increase
		(Decrease)		(Decrease)
			(Decrease)		(Decrease)
Manager
Szichih Branch
	Hu, Wen-Chieh	0	0	0	0
Branch Assistant Vice President
Ilan Branch
	Chiang, Jen-Chu	0	0	0	0
Senior Manager
Nanjing Branch
	Chang, Wen-Lung	0	0	0	0
Assistant Vice President
Kuting Branch
	Chiu, Ming-Kai	0	0	0	0
Manager
Kinmen Branch
	Li, Yu- Min	0	0	0	0
DeputyManager
Tucheng Branch
	Chu, Po-Lin	0	0	0	0
Branch Assistant Vice President
Songjiang Branch
	Lai, Chueh-An	0	0	0	0
Manager
Neihu Branch
	Chen, Chi-Heng	0	0	0	0
Branch Assistant Vice President
Renai Branch
	Yang, Chun-Chen	0	0	0	0
Manager
Xindian Branch
	Huang, Chien-Hsin	0	0	0	0
Senior Manager
Xinzhuang Branch
	Kao, Min-Chou	0	0	0	0
Manager
Zhubei Branch
	Chiu, Shyh-Tyng	0	0	0	0
Manager
Xin Taoyuan Branch
	Wu, Shao-Kuang	0	0	0	0
Manager
Zhunan Branch
	Peng, Hsiu-Chin	0	0	0	0
Manager
Pingzhen Branch
	Li, Shu-Jung	0	0	0	0
Manager
Offshore Securities Unit
	Lai, Chung-Chih	0	0	0	0
Deputy Manager
	Uni-President
10% Shareholder		0	0	0	0
	Enterprises Corp.

43

IV. Capital Structure

==> picture [383 x 576] intentionally omitted <==

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

9
----- End of picture text -----

IV. Capital Structure

IV. Capital Structure

1. Capital and Shares

1-1 Capitalization

		Authorized Share	Authorized Share
				Capital Stork		Remark
	Issue	C	apital
	Price						Capital
Month/Year
	(Per	1,000	Amount	1,000	Amount	Sources of	Increase by
			(NT$		(NT$
	Share)	Shares		Shares		Capital	Assets Other
			thousands)		thousands)
							than Cash
						Cancellation
Aug-2004	10	1,500,000	15,000,000	1,140,499	11,404,990	of Treasury	None
						Shares
						Cancellation
Jun-2006	10	1,500,000	15,000,000	1,137,072	11,370,720	of Treasury	None
						Shares
						Capital
Aug-2007	10	1,500,000	15,000,000	1,176,869	11,768,695	Increase by	None
						Earning
						Capital
Aug-2008	10	1,500,000	15,000,000	1,215,706	12,157,062	Increase by	None
						Earning
						Cancellation
Apr-2009	10	1,500,000	15,000,000	1,185,706	11,857,062	of Treasury	None
						Shares
						Capital
Aug-2010	10	1,500,000	15,000,000	1,231,933	12,319,334	Increase by	None
						Earning
						Capital
Aug-2011	10	1,500,000	15,000,000	1,304,646	13,046,456	Increase by	None
						Earning
						Cancellation
Dec-2011	10	1,500,000	15,000,000	1,284,582	12,845,816	of Treasury	None
						Shares
						Capital
Aug-2012	10	1,500,000	15,000,000	1,323,119	13,231,191	Increase by	None
						Earning
						Cancellation
Mar-2016	10	1,500,000	15,000,000	1,303,796	13,037,961	of Treasury	None
						Shares
						Cancellation
May-2016	10	1,500,000	15,000,000	1,295,248	12,952,481	of Treasury	None
						Shares

1-2 Capital and Shares

	Authorized Share Capital	Authorized Share Capital	Authorized Share Capital
Type of Stock
	Issued Shares	Unissued Shares	Total
Common Stock			1,500,000,000
	1,295,248,054	204,751,946

Unit：Share

44

IV. Capital Structure

1-3 Structure of Shareholders

As of 16/04/2016

	f				Foreign
Structure o
			Other
Shareholder	s Government	Financial		Personal	Institutions	Treasury
			Institutional				Total
	Agencies	Institutions		Shareholders	and Personal	Shares
			Shareholders
Quantity					Shareholders
Number of Holders	0	1	116	34,266	167	1	34,551
Shares	0	33,904,740	760,290,076	390,147,434	110,905,804	8,548,000	1,303,796,054
%	0	2.6%	58.31%	29.92%	8.51%	0.66%	100%

1-4 Distribution Profile of Share Ownership

As of 16/04/2016

Shareholder Ownership	Number of
		Ownership	Ownership (%)
(Unit：Share)	Shareholders
1 ~ 999	19,691	2,169,863	0.166
1,000 ~ 5,000	7,648	17,407,680	1.335
5,001 ~ 10,000	2,489	18,053,928	1.385
10,001 ~ 15,000	1,357	16,562,878	1.270
15,001 ~ 20,000	589	10,536,766	0.808
20,001 ~ 30,000	780	19,217,885	1.474
30,001 ~ 40,000	367	12,888,185	0.989
40,001 ~ 50,000	272	12,337,568	0.946
50,001 ~ 100,000	605	42,857,783	3.287
100,001 ~ 200,000	349	49,047,817	3.762
200,001 ~ 400,000	199	54,865,845	4.208
400,001 ~ 600,000	67	33,020,369	2.533
600,001 ~ 800,000	31	22,062,320	1.692
800,001 ~ 1,000,000	23	20,648,998	1.584
Over 1,000,001	84	972,118,169	74.561
Total	34,551	1,303,796,054	100

1-5 Major Shareholders

As of 16/04/2016

Shareholders	Number of Shares	Ownership (%)
Uni-Present Enterprises Corp.	366,644,096
		28.12
Nan Shan Life Insurance Company, Ltd	109,835,260
		8.42
Kai Nan Investment Co., Ltd.	37,104,849
		2.85

45

IV. Capital Structure

Shareholders	Number of Shares	Ownership (%)
President Chain Store Corp.
	35,604,872	2.73
President Securities’ comprehensive
Employee Stock Ownership Trust under	33,904,740	2.60
Chinatrust's custody
Eternal Chemical Co., Ltd
	31,907,681	2.45
Tainan Spinning Co., Ltd
	29,941,647	2.30
Kao Chyuan Investment Co., Ltd.
	27,915,948	2.14
Dr. C. Y. Kao’s Non-Profit Foundation of
	16,663,300	1.28
Culture &Education (In Memory of His Mother)
CANKING INVESTMENT Co., Ltd.
	15,760,694	1.21

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

	Item	Item	2014	2015	2016Q1
	Highest		18.11	17.99	14.40
Market Price Per
Share	Lowest		14.85	10.25	11.70
	Average		16.12	14.49	13.07
	Before Distribution		17.41	17.42	17.59
Net Worth Per
Share	After Distribution		-	-	-
	Weighted Average Shares (thousand shares)		1,323,119	1,319,707	1,301,231
Earnings Per		Before Distribution	1.20	0.72	0.15
Share	Earnings Per
	Share	After Distribution	1.20	0.72	-
	Cash Dividends (NT$)		0.81	0.20	-
Dividends Per	Stock	Retained Earnings	-	0.31	-
Share	Dividends	Additionalpaid-in Capital.	-	-	-
	Accumulated Undistributed Dividend		-	-	-
	Price/Earnings Ratio		13.43	20.13	-
Return on	Price/Dividend Ratio		19.90	72.46	-
Investment
	Cash Dividend Yield		5.02	1.38	-

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

46

IV. Capital Structure

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 2015 profit distribution at its Meeting on March 22[th] , 2016, and the proposal to distribute 2015 profits is listed as follows:

Cash Dividends	NT$0.2 per share
Stock Dividends	NT$0.31 per share

3. Employee Bonus and Directors' and Supervisors' Remuneration

3-1 Articles of Incorporation

• i) Based on the Articles of Incorporation, the distribution of profits should be allocated at the following ratios:

• Remuneration to directors 3%

• Bonus to employees 2%

• Bonus to shareholders 95%

The profit may be retained and not allocated if the total allocable profit is not up to 5% of the paid-in capital. According to an amendment of the Company Act on May 20th, 2015, a fixed amount or ratio of profit of the current year distributable as employees' compensation shall be definitely specified in the Articles of Incorporation. However, the company's accumulated losses shall have been covered. Employees’ compensation should be paid in the form of cash or company shares. A resolution regarding compensation to be distributed should be passed at a Board of Director’s meeting by a majority vote at a meeting attending by two-thirds or more of the Directors, after which the results should be reported to the shareholders.

• ii) The Board of Directors passed a motion on January 27[th] , 2016 amending the Company’s Articles of Incorporation, which stated the company will distribute compensation to employees and the Directors from pre-tax profits. Where the company has pre-tax profits, the total value of funds to be distributed among employees shall not be less than 1.6% of pre-tax profits; while the total value of funds to be distributed among the Directors shall not be more than 2% of pre-tax profits. If the company has losses carried forward, compensation should only be paid to employees and Directors after funds have been set aside as reserve for such losses. This amendment will be addressed to the 2016 shareholders’ meeting for approval.

47

IV. Capital Structure

• 3-2 Estimate Foundation of Employee Bonus and Directors’ and Supervisors’ Remuneration

The company estimated employee bonus in 2015 and 2014 to the amount of NT$22,292,609 and NT$22,562,661, respectively; And NT$22,292,609 and NT$33,843,993 for Directors’ and Supervisors’ Remuneration. These amounts are estimated as the account of salary expenses.

3-3 Board of Director passes proposed distribution of employee bonuses:

On March 22[nd] , 2016, our Board of Directors passed the proposed allocation of employee bonuses and remuneration for directors and supervisor as follows: Total cash bonus of NT$22,292,609 for employees and total remuneration of NT$22,292,609 for directors. There was no difference between the estimates and the actual distributions approved at the Board Meeting for Employee bonus and Director/Supervisor compensation. In the event of any difference between the expected compensation and the actual compensation eventually paid out, such discrepancy will be booked in the Company’s Income Statement for 2016.

• 3-4 Actual distribution of employee bonus and directors’ and supervisors’ remuneration for the former Year

In 2015, estimated employee bonus amounted to NT$22,292,609 while remuneration for directors and supervisors amounted to NT$22,292,609. There was no difference between the estimates and the actual distributions approved at the Board Meeting.

4. Buyback of Common Stock：

On Sep. 17th, 2015, the 3rd meeting of the 10th board approved to buy back 19,323,000 shares. On Jan. 27th, 2016, the 5th meeting of the 10th board approved to buy back 8,548,000 shares.

5. Long-Term Borrowings ： None.

6. Issuance of Preferred Stocks ： None.

7. Issuance of Global Depositary Receipts ： None.

8. Issuance of Employee’s Stock Options ： None.

9. Merge and Acquisition ： None.

10. Working Capital Plans ： None.

48

IV. Capital Structure

V. Overview of Business Operation

==> picture [383 x 575] intentionally omitted <==

49

V. Overview of Business Operation

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

• Offshore Securities business

• Other business areas approved by the SFC

1-2 Breakdown of Revenues for Latest Three Years

Unit: NT$ thousands

	2013	2013	2014	2014	2015	2015
Item	Operating		Operating		Operating
		(%)		(%)		(%)
	revenue		revenue		revenue
Brokerage	1,943,584	50.10	2,323,736	53.09	2,170,495	61.82
Proprietary Trading	1,581,671	40.77	1,900,716	43.43	1,195,609	34.06
Underwriting	354,146	9.13	152,400	3.48	144,715	4.12
Total	3,879,401	100.00	4,376,852	100.00	3,510,819	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 2015, the market share for our brokerage business stood at 3.26%,
	ranking us as the 8thlargest brokerage house.
	2. With 40 branches currently in operation, President has a per branch
	average market share of 0.081%, putting president 4rd among the top-10
Brokerage	largest firms in Taiwan, showing that President is able to outperform other
	securities firms.
	3. Our company dedicates to promote electronic transactions, which
	accounted for 37.9% of company’s trading volume in 2013 and up to
	43.43% in 2014 and 45.05% in 2015 with sustained growth.

49

V. Overview of Business Operation

Business Area	Business highlights
	4. We have developed an integrated online order entry system that allows
	customers to trade equities, futures, options, emerging stock, and
	sub-brokerage foreign 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 more value to our existing clients.
	1. Market positioning
	over the past 10 years, our proprietary trading department has been
	among the top every year. Regardless of the market trend, our
	proprietary trading department is able to accurately read the market and
	adjust its strategy accordingly and pick out the key trends and sectors.
	And, they are able to match this with effective futures hedging, risk
Proprietary
	management, and a diverse range of product trading strategies, resulting
Trading	in big gains, and small losses. This has allowed us to retain a core
	proprietary trading team with considerable experience, which has
	become the envy of the industry.
	2. Specialty product
	System application supported by quantitative analysis and technical
	indicator modules
	1. In 2015, President Securities was ranked 12thin terms of market share for
	the monthly outright purchase and sales of government bonds with a
	monthly average market share of 0.73%. As bond trading volume shrinks
Fixed Income	alongside diminishing market opportunities, we are gradually reducing
Dealing	our domestic bond trading volume and shifting our attention to the
	international bond market.
	2. In 2015, we held 3.48% of the market in Interest Rate Swap brokerage,
	giving us an overall 7thplace ranking within the industry.
	1. We have consistently ranked among the top brokerage houses and
	futures proprietary trading department for the last 3 years
	2. New Products/Services in Development
Futures
	As regulators continue to liberalize the industry and allow new financial
Proprietary
	products, we stand ready to add these new products to our trading and, in
Trading
	turn, to add to our revenue streams.
	In 2015, 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 1,326 warrants in 2015, for a total dollar
	value of NT$17.22 billion.
Financial	(2) Structured Products: in 2015, the company undertook contracts
Products	amounting to a principal of NT$6.19 billion, an overall 8thplace ranking
	within the industry, and had a total NT$3.98billion worth of structure
	note products in the market.
	2. New Products/Services in Development
	We persist in maintain transparency for our warrant products, fully
	disclosure of market making volatility, and providing reasonable pricing
	warrant productsfor investors.

50

V. Overview of Business Operation

Business Area

Business highlights

1. Market Position

The company underwrote 39 issues in 2015, for a total dollar value of NT$2.77 billion.

1. New Products/Services in Development

Our goal is to provide professional corporate financial services, to Capital simultaneously act as both an effective market maker and also as a Market top-notch service provider, all with the aim of increasing the company’s (Underwriting) 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 presence within the Greater China Region (i.e., TDRs, IPOs (including primary listings on the TWSE/TPEx 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 2015, we served as shareholder services representative for 138 companies, giving us a ranking of 11[th] in the industry.

• (2) The average size of companies that we represent has increased. As of the end of 2015, the total number of shareholders that we serviced stood at roughly 1.6million, giving us a ranking of 8[th] in the industry.

• Operating Performance

Shareholder Services

• (1) The number of companies we represented in 2015 stayed the same as the previous year.

• (2) The average number of shareholders we serviced in 2015 also stayed the same as the previous year, thus allowing us to achieve a higher economy of scale and more efficient operations.

• Long-term objectives

Work with other departments within the company so as to implement cross-selling strategies and thereby become a shareholder services provider that can also provide financial management functions.

1. Market ranking

2. (1) The 1[st] and the only securities dealer in Taiwan that has started wealth management business, a brokerage that assists customers to do assets arrangement under the “asset management account”.

3. (2) The 1[st] brokerage that has got the approval letter of having a side business of trust business

4. (3) First domestic securities dealer to receive the Central Bank's foreign exchange license and be permitted to engage in trust-related wealth management。

Wealth 2. Operation performance Management & Trust

As of end of 2015, the number of the trust account customer totals 4,791 and the amount of the management customers’ assets totals NT$4.09 billion, ranked the 7[ th] in the industry. Among all customers, 437 customers are with securities trust account, in the amount of NT$1.07 billion.

1. Vision of our department

2. (1) Establish "wealth management platform" for Taiwan customers through wealth management and trust.

3. (2) Develop “characteristic cross-strait financial business” through Offshore Securities Unit.

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V. Overview of Business Operation

1-4 New Products and Services to be developed

The Company intends to apply for permission to begin concurrently operating discretionary investment consulting businesses that allow for managed accounts. We also intend to apply for operating Collective Investment Trust Funds businesses via existing trusted service management platform, and thereby expand our range of wealth management services. Plus, the Company intends to construct a platform so as to accommodate the burgeoning “Bank 3.0” initiatives and, thereby, offer more convenient services to our clients. And, our proprietary trading department will continue to expand their base of investments as the regulators open up new areas of investment, allowing them to operate both long and short positions, and thereby avoid risk that can come with over-concentration of positions.

As the regulators continue to relax their restrictions on derivative products, President will be able to develop new products. Plus, President has applied for permission to establish an Offshore Securities Unit (OSU), which will allow us to operate FOREX-related derivative products, to conduct FOREX dealing, and to create new products that can leveraging our financial engineering skills, as well as our prowess in finance, IT, and statistics to create sophisticated new products and multiple revenue streams.

.

2. Analysis of the Securities Industry

• 2-1 Overall Economic Environment

Over the past year, we have seen international financial markets experience significant volatility. In the first half of the year, we saw the European Central Bank announcing its plans for massive debt repurchases, we saw China lowering its interest rates, and we saw the US FED delaying its expected interest rate hikes. All together, these events helped to drive markets up. But, in the second half of the year, we saw a deepening debt crisis in Greece and rising tension with the IMF, not to mention a public referendum on the bailout package, all of which conspired to rattle the markets. In China, efforts by the authorities to stabilize the markets actually ended up spooking them even more, resulting, at one point, in a near 30-percent drop in Shanghai Stock Exchange Index in just three weeks. Subsequent to that, authorities attempted a number of different stabilization efforts, but was unable to restore investor confidence. Then, in August, China’s central bank announced a lowering of the pegged exchange rate between the RMB and the US Dollar, sparking off further devaluations of the RMB in currency markets. This resulted in increased volatility in markets overall.

In Taiwan, the economic growth rate for 2015 slipped from 3.92% to 0.75%, primarily as a result of the overall slowdown in global economic growth, of supply chains in China becoming more self-reliant, of agricultural prices sliding, and of exports falling 0.21%. Luckily, falling oil prices and rising trading volume combined with the fading of memories of the previous year’s food safety scandals allowed for a recovery in consumer demand. Plus, the semiconductor industry saw investments in new production technologies, which spurred domestic investments, and saw domestic demand rise by 1.57%, effectively offsetting the slump in exports. Looking at domestic stock markets, the first half of the

52

V. Overview of Business Operation

year saw the European Central Bank easing monetary policy and in China there was talk of a potential cooperation between exchanges in Shanghai and Taipei (Shanghai-Taipei Stock Connect), and these factors together helped to push the Taiwan benchmark index to its high for the year of 10,014 points in April. However, later in the year saw Chinese markets collapse and an overall worsening global economic outlook, which dragged the Taiwan main index down to its low of 7,203 in August. Eventually, the FED decided to hold off on raising interest rates, which helped the markets to rebound, pushing the index to a close for the year of 8,338, representing an overall drop from 9,307 of 10.4% for the year.

Looking forward, in January the IMF forecasts global economic growth of 3.4% for 2016, saying that it expects to see growth in emerging markets cool slightly, to see China’s economy to continue undergoing restructuring, to see commodity prices falling, and to see US interest rates begin to rise. All of which will put downward pressure on economic growth. The effect will be lower foreign demand, which is expected to be offset by domestic policies aimed at stimulating short-term consumer spending. Accordingly, the Directorate-General of Budget, Accounting and Statistics predicted, in February of this year, an annual economic growth rate of 1.47% for this year, up from 0.75% last year. In the Securities Industry, the Financial Supervisory Commission (“FSC”) began implementing a new phase of the Program to boost securities market in December of 2015 that included expanding crowdfunding platform with equity characteristics, as well as allowing for non-designated loans to be issued by securities firms, and Enlarging the scope of targets for day-trading of spot shares. Also, the FSC is making it easier for venture capital firms to apply for public listing, as well as making it easier for individual investors in Mainland China to invest in Taiwan equities and foreign-denominated bonds. The regulators hope that, by expanding the range of products available for trading, as well as the depth of investors in the market, that investors will more easily be able to participate in the markets and that overall trading volumes will increase. We are confident that the new initiatives of the regulators will result in solid growth for the various business areas within the domestic securities industry.

2-2 Product Trends and Relevant Competition

 Brokerage

In 2015, massive drops in financial markets in china and around the world, not to mention slowing overall global growth, all had an impact on investor confidence resulting in a noticeable drop in the value of trading on the TWSE by 2.3%, for a total trading volume for the year of roughly NT$22.5 trillion. As for the Taipei Exchange (formerly known as Gretai exchange), an increase in trading volume of 1.96%, or NT$ 58.1 trillion overall for the year was primarily results from the increase in international bond trading volume, by 71.98%.

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V. Overview of Business Operation

 Proprietary Trading

i) Equities Markets

2015 saw many global challenges, from the Greek debt crisis, to plunging oil prices, to weakness in China, to the devaluation of the RMB, to the FED raising interest rates. Stock markets in China dropped significantly, as did the value of the RMB, which then dragged down other Asian currencies, resulting in disastrous effects on global financial markets. Add to that OPEC’s decision not to reduce oil production, Iran’s reentrance into the global oil market, and continued weakness in the Chinese economy, and we saw global economic growth slide from 3.4% in 2014 to 3.1% in 2015.

Among emerging markets, the Venezuela stock market saw the largest rise of 278.06%, while most emerging markets were hit with a triple-punch of weakness in the Chinese economy, weakness in commodity prices, and rising US interest rates. One of the effects was a 13.31% drop in the market in Brazil. Argentine, on the other hand, rose by 36.09%, taking the top spot among all of North American and South American markets. The NASDAQ saw a 5.7% increase for the year. The story for US interest rates was full of twists and turns, with US and international markets reacting to the expected interest rate hikes. US equities struggled, with the S&P500 falling 0.73% for the year, and the Dow Jones Industrial Average falling 2.23% for the year. In Europe, loose monetary policies and economic stimulus packages led to a rise in the Italian FTSE MID of 15.38% and a rise of 9.56% on the Frankfurt DAX, while the Greek debt crisis dragged the ASE down 23.58%. In Asia, with China’s economy continuing a downward path, with deflationary pressures increasing, with the PBC suddenly devaluing the RMB, not to mention the worries about interest rate hikes in the US, it was little surprise that the whole year it was a fight between the bulls and the bears on the Chinese and Hong Kong markets, with big spikes and dips, and aggressive stabilization measures by the PBC, resulting in the Shanghai index being up 9.41% for the year, making it the top performing market in Asia for the year, and certainly the most volatile, with the Hong Kong index ending the year down 7.16%.

In Taiwan, the regulators did their best to encourage the markets, by implementing a program to boost securities market, which includes easing the price fluctuation limit to 10%, enlarging the scope of targets for day-trading of spot shares, and easing limits on margin trading and short sales, etc. But, these efforts were ultimately hurt by new severe tax policies that scared away investors, resulting in low trading volumes and low prices, and putting significant downward pressure on the markets. The markets were down 20% at one point, and down 969 points for the whole year. Our proprietary trading department was able to react quickly to these market changes and adjust its positions accordingly, all the while maintaining adequate protocols to reduce risk. Ultimately, we were able to use strong fundamental analysis to take positions in stronger companies while weeding out the weak ones. These efforts were bolstered by strong futures hedging operations. At the same time, our trading in overseas financial markets was also quite successful, resulting in full year trading gains of NT$890million, making the Company one of the top proprietary trading teams in the industry. Going forward, we will continue to conduct in-depth analysis of international market trends, and nimbly adjust market positions

54

V. Overview of Business Operation

based on our overall strategy. We will also diversify our investments so as to increase our revenue streams. In doing so, we hope to continue to be one of the most profitable proprietary trading departments in the industry.

ii) 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.

iii) Hedging Operations

Futures and options are our primary hedging tools. Going forward, we will continue to use these financial products to adequately hedge our proprietary trading department’s exposure.

 Fixed Income Dealing

• A. Outright Purchases and Sales of Government Bonds

In 2015, President’s ranking in terms of outright purchases and sales of bonds was fairly low as we transitioned away from the domestic market towards the international market. With trading volumes in the domestic markets still low, we expect our positions in bonds to also continue to be below average.

• B. Convertible Bonds and Futures and Options

In 2015, President slightly increase its convertible bond position, from NT$1 billion up to roughly NT$1.2 billion, primarily because of our discovery of fine investment opportunities. When compared to the rest of the industry, President uses a lower-risk strategy for convertible bond investment, and has relatively small position in unsecured convertible bonds issued by small and medium-sized companies. Thus, fluctuations in the market have less effect on our positions. Accordingly, we also do not benefit significantly from large gains in the broader market. Given the low trading volumes for domestic convertible bonds, we currently hold a position of about NT$300 million, and will continue to pursue foreign convertible bond issues. Indeed, we already have a team in place ready to capitalize on such opportunities when they appear, and are ready to increase our position accordingly.

• C. 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.

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V. Overview of Business Operation

D. Foreign Bonds

The government has been loosening restrictions on OSUs, and on domestic securities firms investing in foreign convertible bonds. President has been active in foreign government bond and corporate bond markets for several years and has achieved impressive profits, and currently actively investing in USD-denominated bonds, Euro-denominated bonds, AUD-denominated bonds, and RMB-denominated bonds.

• Financial Products Business

• i) Equity Warrants

2015 saw strong expansion in Taiwan’s equity warrant market, with all securities firms aggressively issuing warrant products. A total of 27,229 equity warrants were issued in 2015, for a total dollar value of just over NT$306.79 billion.

The total dollar value of all equity warrants issued by the company in 2015 was NT$17.22 billion, giving us a market share of 5.61%, making 8th in the market. Issue focuses mainly on the selection of stock performance with good Return on Equity (ROE) to create a win-win situation with investors and stable profits through different derivatives, futures, and options, etc., with hope to effectively lower hedging costs.

• ii) Structured Note Products

In 2015, for the whole year, a total of NT$597.85 billion in structure note products were issued with NT$464.97billion. For the year of 2015, the company undertook contracts amounting to a principal of NT$6.19billion and was ranked 8th in the market.

 Underwriting Business (Capital Markets)

• i) Domestic Bond and Equity Underwriting

As of the end of 2015, there were a total of 874 companies listed on the TWSE, and a total of 712 companies listed on the Taipei Exchange Market, an increase of 2.34% and 3.94%respectedly. With the US raising interest rates and China implementing its “circuit-breaker” protocols in 2015, most international markets were quite volatile; yet, Taiwan markets were comparatively stable. With strong risk management protocols in mind, we continued to aggressively pursue potential clients and ultimately was lead underwriter for 6 deals in 2015. We conducted a NT$400 million convertible bond issue for Sysgration; a NT$700 million convertible bond issue for Right Way Industrial; a NT$300 million convertible bond issue for Candmark Electroptics; a NT$700 million convertible bond issue for L&K Engineering; a NT$193 million rights issue for Johnson Chemical Pharmaceutical Works; and an IPO on the Taipei Exchange (formerly known as Gretai exchange) for Advanced Connection Technology. 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.

56

V. Overview of Business Operation

ii) 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. 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.

iii) 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 2014, the underwriting department handled several large deals, including a US$120 million secured convertible bond for Neo Solar Power Corp., and a RMB 1 billion Formosa Bond for Uni-President China Holdings. Our underwriting department is also actively pursuing companies in mainland China, Hong Kong, and Southeast Asia to issue TDRs on the Taiwan exchange.

iv) Emerging Market Exchange

The domestic economy faced a moderate growth in 2015, there was 284 companies listed on the Emerging Stock Board, remains the same as 2014. 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 officially recommended emerging board companies is 28 at the end of 2015. 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 of 2009, the FSC opened up trust fund and stock trust businesses for Taiwan’s domestic brokerage houses; but, it wasn’t until 2013 that the regulators relaxed the qualifications for securities specialists to hold a concurrent post, allowing sales personnel with wealth management and trust sales qualification to concurrently provide wealth management services, and to open up new wealth management business opportunities for Taiwan’s domestic brokerage houses. By the end of 2015, there were 11 domestic brokerage houses engaged in specified trust fund business (the same number as the year before), 9 brokerage houses engaged in stock trust businesses (one more than the previous year, Hua Nan Securities). Nearly all major brokerage houses are now engaged in these two types of trust businesses and the market has reached significant asset levels, which means that competition now shifts to product lines and platforms. In 2015, the total asset of specific individual management of trust fund was 64.55 billion, securities trust fund was 59.54 billion, total asset was 124.09 billion, which largely

57

V. Overview of Business Operation

increased 42.25 billion comparing to 2014. With total assets under management growing by 51.6%, it is clear that the trust and wealth management businesses are becoming a major priority for domestic brokerage houses. Our Company currently has NT$3.015 billion in assets under our money trust business, and NT$1.07 billion under our stock trust business, for a total of NT$4.09 billion, putting us in 7th place among our peers in the industry. Our main wealth management products include: re-consigned foreign securities, foreign ETFs, domestic funds, foreign funds, structured ELN and PGN products, securities lending trusts, in an effort to provide our clients with investment options beyond domestic stocks and derivatives.

In the marketplace, it’s the big that get bigger. Each firm leverages its own strengths in order to grow, with securities arms of financial holding companies, in particular, trying to get into the trust services business. As for other new business recently permitted by the regulators, the authorities have now authorized domestic brokerage houses to begin offering collective investment trust fund services. However, many brokerage houses are still evaluating this new business area and none has yet applied to the regulators for permission to begin offering such services. In addition, Offshore Securities Unit (OSU) provides another opportunity for growth in our wealth management business. All major securities firms are actively developing this business area .

3. R&D for Derivative Product

• Various Technical Expertise and R&D

We have a complete financial engineering team that brings together talented individuals from finance and statistics with access to top-notch trading and valuation software, so that they can develop innovative product and trading strategies. With cutting-edge financial engineering at the forefront, we bring together comprehensive product development and advanced trading experience in designing new products, and in providing sophisticated derivatives products and consulting services for our customers. Plus, every year, we invest heavily in modernizing our warrant software so as to make our systems faster and more stable, and so as to offer a broader range of services to our customers.

• 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

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V. Overview of Business Operation

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 2015 Electronic Trading System R&D Plan

System	R&Dcapabilities
	 Provide clients with multiple trading environments,
Cross-platform electronic trading	making our services more competitive.
system	 Allow both Apple and Non-Internet Explorer users to
	view market data andplace orders.
	 Enhance system trading functions.
	 Fight for clients who are used to placing conditional
	order.
Smart Order Trading Function
	 Allow customers to be more disciplined with profit
	points and stop losses, thereby encouraging more
	frequentposition turnover.
	 Currently, the statement reader can only be installed on
Account Statements for Mobile	a PC.
Devices	 Need to make statement reader available for cell phones
	and tablets,therebyofferingmore flexibilityto clients.
	 Enhance system processes, and add international order
	execution (China Stock)
Optimized Sub-brokerage Order
	 Allow for sub-brokerage orders to be placed on cell
Entry System
	phones.
	 Allow for sub-brokerage orders to beplaced via app.
	 Strengthen development of in-house systems
Online in-house Futures Systems	 Integrate functions for new business development and
	new tradingmodels.

• (2) 2016 R&D investment plan and progress

Project Name	Details of Plan and Benefits	Project Plan	Expected Cost Outlay	Current Progress	Expected Completion	Critical Success Factors
Bank 3.0	Enhance Company’s competitiveness and create a finance-based technology environment, thereby integrating services and digitalizing operations.	First stage is to implement online account opening ; subsequently roll out additional services	30 million	Ongoing	Achieve phased objective	Completed project and all testing completed.

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V. Overview of Business Operation

Project Name	Details of Plan and Benefits	Project Plan	Expected Cost Outlay	Current Progress	Expected Completion	Critical Success Factors
Improvement of Electronic Trading System	 Better electronic trading for wealth management business.  Better foreign securities SBT system.  Bettersub-brokerage orders entry.  Automated online banking operations.	Respond to the roll out of new business			Q3 of 2016	Complete the project; process designed; business process planning.
		areas and improve	11 million	Ongoing
		service quality while optimizing processes

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 proprietary trading 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
	Equity Brokerage Trading Volume	3.26%	8
Brokerage
	Individual Branch	0.081%	4
	Warrants Issued (Volume)	5.61%	8
Financial Products
	Structure Commodity Business
		2.00%	8
	Volume
	Repo Transactions	1.37%	8
Fixed Income
	Outright Purchases / Sales	0.73%	12
Dealing
	Interest Rate Swaps	3.48%	7

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V. Overview of Business Operation

Business Area	Component	Market Share	Rank
	Lead Underwriting Deals
		6 /2.13%	15/13
	No./Volume
Udii
nerwrtng	Co-Lead Underwriting Deals
		39 /2.45%	10/13
	No./Volume

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

Looking ahead in this year, It is hoped that the regulators will being allowing a wider range of funding sources for equities and derivatives, and allowing brokerage firms to issue non-designated loans, plus expanding the number of stocks available for day-trading, and permitting Mainland Chinese individual investors to invest in Taiwan equities and bonds. Also, to help encourage the domestic capital markets, it is hoped that the regulator will allow venture capital firms to list on the public exchanges. Hopefully these new efforts by the regulators will translate into products, new customers, and new businesses, and will help to create new opportunities for added value services and for profit generation.

Looking at our brokerage business, in 2015, the FSC introduced a program to boost securities market primarily by enlarging the scope of targets for day-trading of spot shares, by easing the price fluctuation limit to 10%, by easing limits on margin trading and short sales, by relaxing restrictions to the sources from which securities firms may obtain securities for lending purposes , by expanding the scope of financing and collateral for money borrowing and lending by securities firms in connection with securities business, etc. As a result, average daily trading volume was held steady at NT$115.6 billion, which was beneficial to our brokerage business.

The regulators also opened up new brokerage related businesses, including promote products such as dual currency ETFs, RMB currency futures, in the hopes of boosting trading volumes and throwing a lifeline to domestic brokerage houses. We are working aggressively to integrate these new businesses into our product line so as to be able to offer our clients a more complete range of products and services.

In response to the roll-out of Bank 3.0, we are continuing to strengthen our electronic trading platform and integrate our trading platforms. In 2015, over 45.05% of our overall trading came from electronic trading. Providing clients with secure market information and trading, plus instant and accurate orders, is the key to creating an advantage for our electronic trading. Beyond this, we intend to develop a fully global trading platform so that, as our business matures, we will be able to offer our clients more international and diversified investment options, thereby satisfying the needs of our clients and bolstering our solid reputation so as to generate additional revenues.

As for our underwriting business, with competition for corporate fund raising deals increasingly intense, many corporations are learning that they have many options available to meet their financing needs, and that equity issues are not always their best option. As a result, companies that are properly screened and that demonstrate sufficient creditworthiness can often be better off turning to convertible bonds. Plus, with the number of large companies that have not already publicly listed shrinking and the

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V. Overview of Business Operation

demand for integration due to competition within industries increasing, financial advisory business and corporate funding such as private equity, mergers and acquisitions, capital reductions are growing.

The Taiwan government has also recently been actively encouraging foreign companies to consider Taiwan for primary and secondary listings, forcing most domestic underwriting departments to think more broadly and internationally. Add to this the regulators opening up of Offshore Securities Units (OSU), which allow domestic brokerage houses to become more international in scope. Going forward, the Company intends to pursue more international integrated investment banking business in the Greater China Region, and to pursue more foreign companies to list in Taiwan, thereby breathing new energy into Taiwan’s equity markets.

As for our proprietary trading department, with the “New Mediocre” age upon us, with the US dollar strengthening, with equities outperforming bonds, with markets neither bull nor bear and more like snakes, we are optimistic about US, Japan, European markets, and emerging markets like China and India, and service industries outperforming manufacturing industries. The old economy is on the way out, and the new economy is coming in. Such erratic markets make for difficult trading environments for proprietary trading efforts. With global “black swans” converging, shaking the rhythms of the markets, and with global structures changing, investment norms are being rewritten, forcing proprietary trading department that are caught in the middle of these storms to become particularly careful.

As for our financial products business, we will continue to pursue increasingly tailored products to meet the needs of our clients as the regulators open up new areas of business. This will require enhancing our hedging activities and risk management models, so as to lower risk and ensure stable returns. Going forward, as the regulators allow greater access to Offshore Securities Units business, we will pursue global equity business and develop foreign derivatives services so as to better diversify our revenue streams.

The regulators have also continued to open up new areas in wealth management, which we have been adept in taking advantage of. We expect all of our branches to be able to offer wealth management services so that they are available to all of our customers, thereby expanding the depth of our business. At the same time, we want to offer a full line of active wealth management products so as to offer more diverse assets allocation options. And, in accordance with the government’s “Bank 3.0” initiatives, we will be improving our online trading platform, which will include a downloadable smart phone APP, and it is expected that these added services will translate into increased revenues. Plus, with our new Offshore Securities Unit business, we will have the opportunity to expand our client base and to attract exceptional foreign talent. We believe that there are several key factors that will drive the appetite for and growth of our wealth management business both domestically and abroad.

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V. Overview of Business Operation

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

 Our Competitive Strengths

• i) Our corporate image is solid.

• ii) We respect professional management and leadership.

• iii) Our horizontal organization and human resource costs are well-controlled.

• iv) Our brokerage business market share grows up steadily.

• v) Our position management performance is outstanding in winning percentage.

• vi) 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. FSC permits 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. Top-notch proprietary trading and brokerage business, high market share for individual retail branches, and solid management practices.

• 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 leading to management practices with high efficiency

• 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 and expand the range of investment objective.

• 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 establish 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 the numbers of participants continue to increase, market liquidity and efficiency keep rising.

 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. Foreign investors are an increasing proportion of the market; domestic firms are at a disadvantage in terms of developing overseas clients.

• e. The Shanghai-Hong Kong Stock Connect has sucked capital out of Taiwan, and will make it more difficult to see expansion of trading volumes going forward.

63

V. Overview of Business Operation

 Strategies for Dealing with the Obstacles Identified

Business Area	Strategy
	1. Encourage various departments and subsidiaries to work together to
	develop new business.
	2.Develop our institutional client business, using asset management
	business to pursue corporate clients and combine that with our OSU
	business, and provide added-value services beyond our conventional
	securities services.
	3. Utilize the discretionary services of President Capital Management
	Corp. and our wealth management “Collective funds management”
	business, and marry this with the trading performance of our proprietary
	trading department and of Uni-President Asset Management Corp., to
	create a comprehensive brand for President Securities’ discretionary
	services.
	4. Modify client structure so as to reduce the concentration of risks.
	5. Expand our spread trading business, increase mid-level customer
	trading volumes and position turnovers rates.
	6. Enhance internal auditing procedures, reduce client complaints.
	7. Customer- made online brokerage system for institutional investors.
	8. Increase revenues from securities lending service to investors.
	9. Identify under-performing brokers and refocus them towards
	“Marketing” efforts as a means of making a breakthrough, or refocusing
	their efforts on cross-selling of non-traditional products.
	10. Cultivate all employees’ abilities to cross-sell a range of financial
Brokerage	products, particularly personal financial planning products and wealth
	management services.
	11. Focus on tiered, wealth management sales efforts that take into
	consideration client preferences, trading habits, and that provide
	appropriate product information and that increase trading frequency.
	12. 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.
	13. Improve our employee training, assistance in preparation for related
	licenses, performance management, and information system
	knowledge, to upgrade our brokers’ professionalism and productivity.
	14. 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.
	15. Evaluate the feasibility of digitalizing all back-office operations so as to
	increase efficiency and to control costs at individual branches.
	16. Implement succession mechanisms for each level of the organization,
	strengthen our incubation center functions, retain good talent, solid
	management training programs, set incentive programs, encourage
	successors, smooth generational gaps.
	17. Set break-even point for each branch, consider the linkage between
	target customers and brokers’ performance and branches’ operation
	outcome, evaluate potential for future profitability, and adjust business
	direction.

64

V. Overview of Business Operation

Business Area	Strategy
	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
Proprietary	of systemic risk.
Trading	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.
	1. Expand internal databases and develop additional system tools to aid in
	increasing profitability.
Fixed Income	2. Expand the flexibility of our traders and the range of products they trade
Dealing	3. Enhance judgment ability of global trend to deepen trading ability.
	4. Strengthen foreign bond research and trading personnel lineup to meet
	the growing needs of expanding businesses.
	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
Financial
	2. Be more responsive to consumer demand and develop new products to
Products
	meet these demands.
	3. Strengthen market research and investment analysis of foreign market
	objectives and commodities to explore international securities business
	1. Diversify our trading strategies to better react to market changes.
	2. Aggressively pursue market-maker roles in foreign futures and options
	markets.
Future	3. Expand our range of foreign products traded and increase profitability
Proprietary	in foreign products.
Trading	4. Increase the proportion of order placements via automatic trading
	programs.
	5. Increased the sharing of resources across multiple departments,
	thereby creating better synergies.
	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
Underwriting	and market simulations should be conducted to as so have a clear and
(Capital	timely picture of risk exposure and thus determine when to initiate stop
Markets)	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 Department, Financial
	Products Department, Shareholder Services Coordination Department,
	President Capital Management Corp., and Uni-President Asset
	Management Corp,. and provide these clients with financial planning
	products customized for either retail or institutional business, thereby
	implementing an effective cross-selling network.
	4. Actively work with foreign units to pursue foreign companies to conduct
	primary or secondary listings in Taiwan.

65

V. Overview of Business Operation

Business Area	Strategy
	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.
Shareholder	b) Enhance inter-department cooperation and verifications, thereby
Services	ensuring accuracy and security of processes.
Coordination	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.
	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
Wealth	3.Strengthen securities firms’ niche on lending securities to differ from
Management	banking trust business
& Trust	4.Following the open policy of Offshore Securities Unit, provide customers
	with segmentation and differentiated products services
	5.Construct mobile platforms that allow orders to be placed for all types of
	products, thereby offering clients added convenience and achieving
	Bank3.0 objectives.

6. Employee Data

Analysis of Average Tenure, Age, and Education, for Sales Force in 2014, 2015, and the first quarter of 2016

	Year	2014	2015	2016 Q1
	Management	107	108	107
Number of
	Regular Staff	1,508	1,500	1,479
Employees
	Total	1,615	1,608	1,586
Average Age		42.93	43.36	43.65
Average Tenure		11.01	11.53	11.79
	Doctorate Degree	0.06	0.06	0.06
	Master’s Degree	11.70	12.19	11.92
	Bachelor Degree / Junior
Education (%)		72.94	72.70	73.01
	College Graduate
	Senior High School	15.30	15.05	15.01
	High School or Less	--	--	--

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

66

V. Overview of Business Operation

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 6[ th] National Civic Service Award, and Top 50 by the Commonwealth magazine in 2013 and 2015. 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 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 Labor Standard Act, such as

67

V. Overview of Business Operation

annual leave time and number of working hours. Employees also enjoy additional benefits such as group insurance for worker’s compensation and accident medical care. 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 Stock Ownership Trust, (ESOT)”, 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

68

V. Overview of Business Operation

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.

69

V. Overview of Business Operation

VI. Financial Information

==> picture [383 x 575] intentionally omitted <==

70

VI. Financial Information

2015 Business Review

 Breakdown of Revenues

ITEM	2015	**Percentage **
**Brokerage **	2,170,495	61.82%
Proprietary Trading	1,195,609	34.06%
Underwriting	144,715	4.12%
Total	3,510,819	100%

• Operation Overview (Consolidated basis)

2013 4,613,318 Operating 2014 5,163,297 Revenue 2015 4,580,843

2013 1,361,715 Net Income 2014 1,583,169 2015 956,613

==> picture [237 x 157] intentionally omitted <==

==> picture [259 x 156] intentionally omitted <==

• Credit Ratings

Rating Agency	Long-Term Ratings	Song-Term Ratings	Outlook
Taiwan Ratings	TWA	TWA-1	Stable

• Outstanding Performances

Description	Rank
The 1st and 2nd Annual Corporate Governance Evaluation System	top 5%
12th Information Disclosure and Transparency Ranking System	A++
2015 Taiwan’s Top50 Excellence in CSR Award	12

70

VI. Financial Information

1. Balance Sheet

 Adoption of international financial reporting standards (consolidated)

Unit: NT$ thousands

Item	Item	2013	2014	2015	2016Q1
Current Assets		54,044,709	59,972,212	65,185,471	76,427,703
Proert and
py equipment		2,583,250	2,562,705	2,520,596	2,509,420
Intangible Assets		25,648	160,276	144,659	141,142
Other Assets		2,129,369	2,252,353	2,238,807	2,287,557
Total Assets		58,782,976	64,947,546	70,089,533	81,365,822
Current	before distri.	36,354,161	41,811,986	47,265,147	58,463,150
Liabilities	afterdistri.	37,333,270	42,883,712	Note.	Note.
Non-current liabilities		22,612	60,084	60,335	74,303
Total	before distri.	36,376,773	41,872,070	47,325,482	58,537,453
Liabilities	afterdistri.	37,355,882	42,943,796	Note.	Note.
Equity attributable to
shareholders of the		22,365,280	23,032,624	22,718,012	22,780,319
parent
Capital Common Stock		13,231,191	13,231,191	13,231,191	13,037,961
Capital Reserve		256,116	256,116	256,116	171,320
Retained	before distri.	8,877,942	9,431,778	9,307,717	9,497,898
Earnings	after distri.	7,898,833	8,360,052	Note.	Note.
Other equity interest		31	113,539	201,014	187,238
Treasury Stocks		-	-	-278,026	-114,098
Non-controlling
		40,923	42,852	46,039	48,050
interests
Total	before distri.	22,406,203	23,075,476	22,764,051	22,828,369
Equity	afterdistri.	21,427,094	22,003,750	Note.	Note.

Note. Distributed earnings from 2015 have yet to be approved by shareholders.

 Adoption of financial accounting standards (consolidated)

Unit: NT$ thousands

Item	Item	2011	2012
Current Assets		41,231,652	42,679,412
Funds & Long-term investments		545,467	551,409
Fixed Assets		2,675,521	2,657,269
Intangible Assets		902	1,166
Other Assets		1,729,615	1,561,969
Total Assets		46,364,836	47,749,837
	before distri.	25,591,544	25,937,950
Current Liabilities
	after distri.	25,591,544	26,625,972
Long-term Liabilities		-	-
Other Liabilities		4,533	4,845
	before distri.	25,596,077	25,942,795
Total Liabilities	after distri.	25,596,077	26,630,817
Capital Common Stock		12,845,816	13,231,191
Capital Reserve		409,826	255,676
Retained Earnings	before distri.	7,684,986	8,567,531
	after distri.	7,453,761	7,879,509
Unrealized gain or	loss on	11,794	1,134
financial instruments
Cumulative Translation
Adjustments		-211,249	-288,029
Net loss unrecognized as
		-	-
pension cost
	before distri.	20,768,759	21,807,042
Total Equity
	after distri.	20,768,759	21,119,020

71

VI. Financial Information

 Adoption of international financial reporting standards (individual)

Unit: NT$ thousands

Item	Item
		2013	2014	2015	2016Q1
Current Assets		44,043,845	48,083,939	52,172,205	58,328,383
Propertyand equipment		2,409,970	2,393,640	2,354,427	2,342,355
Intangible Assets		13,644	115,878	103,000	99,312
Other Assets		5,456,000	5,914,021	6,121,445	6,187,133
Total Assets		51,923,459	56,507,478	60,751,077	66,957,183
	before distri.	29,525,131	33,408,421	37,963,799	44,093,071
Current
Liabilities	after distri.	30,504,240	34,480,147	Note.	Note.
Non-currentliabilities		33,048	66,433	69,266	83,793
Total	before distri.	29,558,179	33,474,854	38,033,065	44,176,864
Liabilities	afterdistri.	30,537,288	34,546,580	Note.	Note.
Capital Common Stock		13,231,191	13,231,191	13,231,191	13,037,961
Capital Reserve		256,116	256,116	256,116	171,320
Retained	before distri.	8,877,942	9,431,778	9,307,717	9,497,898
Earnings	after distri.	7,898,833	8,360,052	Note.	Note.
Other interests		31	113,539	201,014	187,238
Treasury Stocks		-	-	-278,026	-114,098
Non-controllinginterests		-	-	-	-
Total Equity	before distri.	22,365,280	23,032,624	22,718,012	22,780,319
	afterdistri.	21,386,171	21,960,898	Note.	Note.

Note. Distributed earnings from 2015 have yet to be approved by shareholders.

 Adoption of financial accounting standards (individual)

Unit: NT$ thousands

Item	Item
		2011	2012
Current Assets		32,231,838	33,145,665
Funds & Long-term		3770141	3631900
investments		,,	,,
Fixed Assets		2,489,825	2,476,474
Intangible Assets		-	-
Other Assets		1,486,815	1,342,837
Total Assets		40063280	40596876
	before distri.	,, 19,292,981	,, 18,758,995
Current
Liabilities	after distri.	19,292,981	19,447,017
Long-term Liabilities		-	-
Other Liabilities		29,126	21,476
Total	before distri.	19,322,107	18,829,373
Liabilities	after distri.	19,322,107	19,517,395
Capital Common Stock		12,845,816	13,231,191
Capital Reserve		409,826	255,676
Retained	before distri.	7,684,986	8,567,531
Earnings	afterdistri.	7,453,761	7,879,509
Unrealized gain or loss
on financial		11,794	1,134
instruments
Cumulative Translation
		-211,249	-288,029
Adjustments
Net loss unrecognized
		-	-
as pensioncost
Total	before distri.	20,741,173	21,767,503
Equity	afterdistri.	20,741,173	21,079,481

72

VI. Financial Information

2. Condensed Income Statements

• Adoption of international financial accounting standards (consolidated)

Unit: NT$ thousands

Item
	2013	2014	2015	2016Q1
Operating Revenue	4,613,318	5,163,297	4,580,843	1,220,957
Gross Profit	4,026,842	4,509,102	3,709,350	1,018,648
Income from operations	1,213,703	1,237,025	252,740	184,890
Non-operating Income	275,784	554,338	855,964	36,058
Income before tax	1,489,487	1,791,363	1,108,704	220,948
Net income (Loss) from operations
	1,365,453	1,587,281	962,535	192,114
ofcontinued segments
Net income (Loss) from
discontinued operations	-	-	-	-
Net income (Loss)	1,365,453	1,587,281	962,535	192,114
Other comprehensive income
	7	7	7	1
(income aftertax)	6,690	63,56	8,630	-3,698
Total comprehensive income	1,433,143	1,650,848	1,041,165	178,416
Net income attributable to
	1,361,715	1,583,169	956,613	190,181
shareholders ofthe parent
Net income attributable to
	3,738	4,112	5,922	1,933
non-controllinginterests
Comprehensive income
attributable to Shareholders of the	1,429,496	1,646,453	1,035,140	176,405
parent
Comprehensive income
attributable to non-controlling	3,647	4,395	6,025	2,011
interests
Earnings Per Share	1.03	1.20	0.72	0.15

• Adoption of financial accounting standards (consolidated)

Unit: NT$ thousands

Item	2011	2012
Operating Revenue	5,026,620	4,218,013
Gross Profit	3,635,418	3,580,145
Operating Income	447,352	785,133
Non-operating
	446,876	556,495
Income
	183781	101799
Non-operating
Expenses	,	,
Income before tax	710,447	1,239,829
Income from
operations of
	570,200	1,116,860
continued segments
-aftertax
Income from
discontinued	-	-
operations
Net income	570,200	1,116,860
Earnings Per Share	0.43	0.84

73

VI. Financial Information

 Adoption of international financial reporting standards (individual)

 Adoption of financial reporting standards (individual)

	Unit: NT$ thousands 2013 2014 2015 2016Q1 3,879,401 4,376,852 3,510,819 940,717 3,544,028 4,001,642 2,976,415 829,325	Unit: NT$ thousands 2013 2014 2015 2016Q1 3,879,401 4,376,852 3,510,819 940,717 3,544,028 4,001,642 2,976,415 829,325	Unit: NT$ thousands 2013 2014 2015 2016Q1 3,879,401 4,376,852 3,510,819 940,717 3,544,028 4,001,642 2,976,415 829,325	Unit: NT$ thousands 2013 2014 2015 2016Q1 3,879,401 4,376,852 3,510,819 940,717 3,544,028 4,001,642 2,976,415 829,325	Unit: NT$ thousands 2013 2014 2015 2016Q1 3,879,401 4,376,852 3,510,819 940,717 3,544,028 4,001,642 2,976,415 829,325		Unit: NT$ thousands	Unit: NT$ thousands
Item						Item
	2013	2014	2015	2016Q1			2011	2012
Operating Revenue	3,879,401	4,376,852	3,510,819	940,717		Operating Revenue	4,415,118	3,667,819
Gross Profit	3,544,028	4,001,642	2,976,415	829,325		Gross Profit	3,370,794	3,258,045
Income from operations	1,140,334	1,161,197	65,588	128,308		Operating Income	610,507	894,851
Non-operating Income	327,338	606,199	1,004,456	83,903		Non-operating
							246,812	402,403
						Income
Income before tax	1,467,672	1,767,396	1,070,044	212,211
						Non-operating
							166,343	77,230
Net income (Loss) from						Expenses
operations of continued	1,361,715	1,583,169	956,613	190,181
segments
Net income (Loss) from						Income before tax	690,976	1,220,024
	-	-	-	-
discontinued operations
Net income (Loss)	1,361,715	1,583,169	956,613	190,181		Income from
						operations of
							566,895	1,113,770
Other comprehensive						continued segments -
income	67,781	63,284	78,527	-13,776		aftertax
(income after tax)						Income from
Total comprehensive						discontinued	-	-
	1,429,496	1,646,453	1,035,140	176,405
income						operations
						Net income	566,895	1,113,770
Earnings Per Share	1.03	1.20	0.72	0.15
						Earnings Per Share	0.43	0.84

74

VI. Financial Information

3. Financial Analysis for the Past 5 Years

 Adoption of international financial accounting standards (consolidated)

				Unit: NT$ thousands	Unit: NT$ thousands
Item
		2013	2014	2015	2016Q1
Financial	Debt Ratio	61.88	64.47	67.52	71.94
Structure	Ratio of long-term
(%)	capital to property and	867.36	900.43	903.12	909.71
	equipment
Solvency	Current Ratio	148.66	143.43	137.91	130.73
(%)	Quick Ratio	148.51	143.37	137.83	130.66
	Return on total assets
		263
	(%)	.	2.80	1.87	0.33
	Return on
	stockholders' equity	6.20	6.98	4.20	0.84
Profitability	(%)
Analysis	Pre-tax income to paid-in capital(%)	11.26	13.54	8.38	1.69
	Profit ratio(%)	29.60	30.74	21.01	15.73
	Ernin Pr Shr
	ags e ae (NT$)	1.03	1.20	0.72	0.15
	Cash Flow Ratio (%)	-	0.92	7.59	-
Cash Flow	Cash Flow Adequacy Ratio(%)	513.83	366.25	452.90	135.03
	Cash Reinvestment	-	-	10.82	-
	Ratio(%)
	Debt to EquityRatio	162.35	181.46	207.90	256.42
	Ratio of property and
	equipment to total asset	5.34	4.82	4.46	3.84
Other Ratio (%)	Total Underwriting to Quick Assets Ratio	1.53	0.49	0.35	0.15
	Total Margin Loan	51.40	58.11	45.84	40.69
	Balance to EquityRatio
	Total Short Sales
		7.14	7.98	7.66	3.24
	Amount to EquityRatio

 international financial accounting standards (consolidated)

		Unit: NT$ thousands	Unit: NT$ thousands
Item		2011	2012
Financial	Debt Ratio	55.21	54.33
Structure (%)	Ratio of long-term itl t fid t	776.25	820.66
	capa o xe asses
Solvency	Current Ratio	161.11	164.54
(%)	Quick Ratio	161.02	164.43
	Return on total assets
		141	264
	(%)	.	.
	'
	Return on stockholders	2.76	5.25
	i
	equty (%)
Profitability	Operating Income to	3.48	5.93
Analysis	Paid-in Capital Ratio(%)
	Pre-tax Income to
		5.53	9.37
	Paid-in Capital Ratio(%)
	Profit ratio(%)	11.34	26.48
	Earnings Per Share	0.43	0.84
	(NT$)
	Cash Flow Ratio (%)	51.87	-
Cash Flow	Cash Flow Adequacy Ratio(%)	688.18	907.63
	Cash Reinvestment Ratio(%)	60.37	-
	Debt to Equity Ratio	123.24	118.97
	Ratio of fixed assets to
		6.75	6.64
	total asset
Other Ratio (%)	Total Underwriting to Quick Assets Ratio	1.50	1.43
	Total Margin Loan Balance to EquityRatio	51.44	44.81
	Total Short Sales Amount to EquityRatio	8.38	7.37

75

VI. Financial Information

 Adoption of international financial reporting standards (individual)

Unit: NT$ thousands

Item
		2013	2014	2015	2016Q1
Financial	Debt Ratio	56.93	59.24	62.60	65.98
Structure	Ratio of long-term
(%)	capital to property	928.03	962.24	964.91	972.54
	and equipment
Solvency	Current Ratio	149.17	143.93	137.43	132.28
(%)	Quick Ratio	149.09	143.86	137.34	132.21
	Return on total
		299
	assets (%)	.	3.16	2.11	0.38
	Return on
	stockholders' equity	6.19	6.97	4.18	0.84
Profitability Analysis	(%) Pre-tax income to
	paid-incapital(%) Profit ratio(%)	11.09 35.10	13.36 36.17	8.09 27.25	1.63 20.22
	Earnings Per Share (NT$)
		1.03	1.20	0.72	0.15
	Cash Flow Ratio(%)	-	1.08	8.51	-
	Cash Flow Adequacy Ratio(%)	482.87	358.52	432.31	128.01
Cash Flow	Cash Reinvestment
	Ratio(%)	-	-	9.33	-
	Debt to EquityRatio	132.16	145.34	167.41	193.93
	Ratio of property and
	equipment to total	5.53	5.06	4.70	4.26
	asset
	Total Underwriting to
		1.87	0.61	0.44	0.2
Other Ratio	Quick AssetsRatio
(%)	Total Margin Loan
	Balance to Equity	51.49	58.22	45.93	40.78
	Ratio
	Total Short Sales
	Amount to Equity	7.15	8.00	7.68	3.25
	Ratio

Adoption of financial reporting standards (individual)



Unit: NT$ thousands

Item
		2011	2012
Financial	Debt Ratio	48.23	46.38
Structure	Ratio of lon-term caital
(%)	g p tofixed assets	833.04	878.97
	Current Ratio	167.07	176.69
Solvency
(%)	Quick Ratio	166.96	176.56
	Return on total assets	1.51	3.03
	(%)
	Return on stockholders'
		2.75	5.24
Profitability	equity (%)
	Operating Income to Paid-inCapital Ratio (%)	4.75	6.76
Analysis	Pre-tax Income to Paid-inCapital Ratio (%)	5.38	9.22
	Profit ratio (%)	12.84	30.37
	Earnings Per Share (NT$)	0.43	0.84
	Cash Flow Ratio (%)	67.98	0.46
Cash Flow	Cash Flow Adequacy	57400	93977
	Ratio (%)	.	.
	Cash Reinvestment	59.57	0.39
	Ratio (%)
	Debt to Equity Ratio	93.16	86.50
	Ratio of fixed assets to	7.15	7.15
	totalasset
	Total Underwriting to
Other Ratio (%)	Quick AssetsRatio	1.92	1.84
	Total Margin Loan
		51.52	44.91
	Balance toEquityRatio
	Total Short Sales
		8.39	7.38
	Amount toEquityRatio

76

VI. Financial Information

4. Auditors’ Opinions from 2011 to 2015

Year	Accounting Firm	CPA	Audit Opinion
	PricewaterhouseCoopers
2011		Lin, SK / Chang, Dexter	Unqualified Opinion
	(PwC)Taiwan
	PricewaterhouseCoopers
2012		Lin, SK / Huang, James	Unqualified Opinion
	(PwC)Taiwan
	PricewaterhouseCoopers
2013		Lin, SK / Huang, James	Unqualified Opinion
	(PwC)Taiwan
	PricewaterhouseCoopers
2014		Lin, SK / Huang, James	Unqualified Opinion
	(PwC)Taiwan
	PricewaterhouseCoopers
2015		Lin, SK / Huang, James	Unqualified Opinion
	(PwC) Taiwan

77

VI. Financial Information

5. Audit Committee’s Report for the Most Recent Year

78

VII. Financial Status , Operation Performance

VII. Financial Status, Operation Performance

& Risk Management

& Risk Management

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VII. Financial Status , Operation Performance

& Risk Management

VII. Financial Status ,Operation Performance & Risk Management

1. Financial Status

Unit: NT$ thousands

Year			Fluctuation	Fluctuation
	21	214
Item	05	0	Amount	(%)
CurrentAssets	65,185,471	59,972,212	5,213,259	8.69%
Non -CurrentAssets	4,904,062	4,975,334	(71,272)	(1.43%)
Total Assets	70,089,533	64,947,546	5,141,987	7.92%
CurrentLiabilities	47,265,147	41,811,986	5,453,161	13.04%
Non-currentLiabilities	60,335	60,084	251	0.42%
Total Liabilities	47,325,482	41,872,070	5,453,412	13.02%
CapitalStock	13,231,191	13,231,191	0	0.00%
Capital Surplus	256,116	256,116	0	0.00%
RetainedEarnings	9,307,717	9,431,778	(124,061)	(1.32%)
Other interests	201,014	113,539	87,475	77.04%
Attributable to
	22,718,012	23,032,624	(314,612)	(1.37%)
parent's ownershipinterest
Non-controllinginterests	46,039	42,852	3,187	7.44%
Total Equity	22,764,051	23,075,476	(311,425)	(1.35%)

2. Analysis of Operating Results

Unit: NT$ thousands

Year			Fluctuation
	2015	2014		Fluctuation (%)
Item			Amount
Operating Revenue	4,580,843	5,163,297	(582,454)	(11.28%)
Operating Expenses	4,328,103	3,926,272	401,831	10.23%
OperatingIncome	252,740	1,237,025	(984,285)	(79.57%)
Non-operating Income	855,964	554,338	301,626	54.41%
Pure profit before tax	1,108,704	1,791,363	(682,659)	(38.11%)
Income tax expense	146,169	204,082	(57,913)	(28.38%)
Profit and loss	962,535	1,587,281	(624,746)	(39.36%)
Othertotalprofit andloss (aftertax)	78,630	63,567	15,063	23.70%
Total profit and loss	1,041,165	1,650,848	(609,683)	(36.93%)
Pure profit
attributable to
parent's ownership	956,613	1,583,169	(626,556)	(39.58%)
Non-controlling interests	5,922	4,112	1,810	44.02%
Total profit and loss attributable to
parent's ownership	1,035,140	1,646,453	(611,313)	(37.13%)
Non-controlling interests	6,025	4,395	1,630	37.09%

3. Long-term Investment Policy and Results

In 2015, the company's domestic reinvestment operations generated healthy profits. 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

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VII. Financial Status , Operation Performance & Risk Management

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, andis ultimatelyresponsiblefor risk management.
Risk Control 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.
President Office	Supervisors the daily implementation of all of the company’s risk management operations and authorizes any exceptions to the risk management protocols.
Assets & Liabilities Management 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 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

80

VII. Financial Status , Operation Performance

& Risk Management

	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.
Compliance Division 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/liabilitystructure and other keyfinancial 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 KMV 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

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VII. Financial Status , Operation Performance & Risk Management

• 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

82

VII. Financial Status , Operation Performance & Risk Management

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.

1. Bond and interest derivative product business:

The amount of our company’s major interest products At March 31[st] , 2016, and the likely loss of NT$498,301 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	2,898,300	-8,163
Corporate bond	200,000	-1,175
Financial bond	1,200,000	-223
International bond	5,732,112	-132,012
Foreign bond	9,530,128	-355,975
Interest rate exchange	-3,000,000	-753
Sum	16,560,540	-498,301

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.

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VII. Financial Status , Operation Performance & Risk Management

1. 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$13.69billion on the end of 2016 Q1. They are both borrowing with interest rate risks. With every 1bp change in market interest rate, our company has to pay NT$1.36 million more interest every year.

Response Measures: looking at a potential rise in interest rates, we will keep a close watch on the markets and on business demands and will make adjustments to our positions accordingly. In a resolution adopted by the Taiwan Central Bank in December of 2015, a downward shift was predicted in the global economic structure which will result in slower economic growth in the coming year, which, in turn, will result in a lower domestic economic growth for the coming year, a widening negative domestic output gap, and lowered inflation forecasts. All of these factors are led the central bank to adjust its interest rate policy downwards, to maintain its M2 target of 2.5%-6.5% growth, to maintain a loose monetary policy, all in the hopes of stimulating the economy. It is expected that interest rates will fall over the coming year and that our Company’s lending rates will also be lowered.

• 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 March 31[st] , 2016, the company's main exchange rate product positions, and 1% exchange rates fluctuation may result in a loss of NT$155,673 thousand (as show in the following table).

Unit: NT$

item	Position (thousand)	loss resulted by 1% exchange rates fluctuation (thousand)
US stock	580,994	-3,526
HK stock	411,567	-6,937
China stock	199,518	-5,419
international bond	5,732,112	-47,943
foreign bond	9,530,128	-91,848
total	16,454,319	-155,673

Response: Our company’s transactions of US stock, HK stock, China 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 2016 Q1 was 1.74%, which 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.

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VII. Financial Status , Operation Performance & Risk Management

• i) In 2016 Q1, 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.

Looking at our wealth management and trust business, we saw a clear increase in both our number of clients and in total assets managed. In 2016, we are planning to implement a new account system architecture that will allow for online trading of mutual funds and for automatic withdrawals. We will also launch a mobile trading app. All of these efforts, together, we believe will strengthen our connections with our clients. We will also continue to follow the government’s initiative towards an integrated product platform, or Bank 3.0, so as to offer clients more convenience and instantaneous trading, and will also expand our trust client base.

•  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.

• On March 4, 2014, Chin-kuan-cheng-chuan Letter No. 1030005615, the FSC announced that all listed companies would be required to adopt the International Financial Reporting Standards (IFRS), across the board. The first stage would involve bringing all financial statements from 2015 onwards up to IFRS standards (not including #9 financial instruments). We do not expect the adoption of IFRS to have any effect on our financial records. In 2015, all of our financial statements will adopt IFRS and will use footnotes to disclose the changes.

• On January 29, 2015, the FSC issued order Chin-kuan-cheng-chuan Letter No. 1030048726, which relaxed the restrictions on brokerage houses trading in offshore securities. This will give our Company greater flexibility and efficiency in its investments, and will allow us to offer professional investors more investment options, thereby allowing us to attract more professional investors and their capital.

• On February 26, 2015, the FSC issued order Chin-kuan-cheng-chuan Letter No. 1030052033, which allows securities firms to trade and underwrite subordinated debt, which will allow for flexibility for our proprietary trading and underwriting business, and will help generate greater profitability.

• On April 2, 2015, the TWSE issued order Tai-cheng-chiao Letter No. 1040005841, which eased the price fluctuation limit to 10%, and which increased the margin maintenance ratio to 130%, effectively reducing the difference between Taiwan and international markets in this area, thereby making Taiwan more attractive to foreign investors, which translates into increased trading volumes.

• On April 30, 2015, the FSC issued order Chin-kuan-cheng-chuan Letter No. 10400140146, which allows securities firms to build online systems for crowd-funding for securities, which will

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allow capital to be raised from the general public through small contributions via an online system. This will allow individuals and groups to achieve their funding objectives and thereby breathe new life into Taiwan’s venture capital funding scale, and will also enhance securities firms’ ability to raise capital. Our Company is currently evaluating this new business area and intends to submit an application for approval to begin operating in this area at the appropriate time.

• On May 18, 2015, the FSC issued order Chin-kuan-cheng-chuan Letter No. 1040009945, which allowed proprietary trading department, starting from June 1, 2015, to offset their day-trading security gaps by borrowing the securities they need via a day-trading securities lending platform. This allows for a more complete offset of day-trading positions and an overall increase in trading volumes.

• On June 5, 2015 the FSC issued order Chin-kuan-cheng-chuan Letter No. 1040013428, which relaxed the calculation method for the maximum foreign currency position that a domestic brokerage house may hold. Firms no longer need to include foreign currency positions held for their proprietary trading and underwriting business when calculating whether they firm’s overall foreign currency position exceeds the current cap of 30% of the firm’s net value. This significantly increases President’s flexibility in operating its Offshore Securities Unit business.

• On December 28, 2015, the FSC issued order Tai-cheng-chiao Letter No. 1040051986, which stipulated that, as of from January 1, 2016, all listed companies in Taiwan conducting IPOs or SPOs should use the competitive auction method based on the US standard. This will have the effect of increasing efficiency in our underwriting competitive auction business and of lowering costs.

• On January 18, 2016, the FSC issued order Chin-kuan-cheng-chuan Letter No. 1040053607, which permits securities firms to issues non-designated loans, with a maximum loan term of 18 months, and broadened the range of assets that may be used as collateral to include listed stocks, domestic equity funds, commodity trading pools, and gold assets registered with the Taipei Exchange (formerly known as Gretai exchange). This will help to improve asset efficiency and allow investors to use their current securities positions for additional investments.

• 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.

In response to the government’s Bank 3.0 initiative, we fully intend to invest significant manpower and resources into responding to all of the opportunities and risks that these new changes will bring. We intend to utilize specific project teams and our own superb information systems to keep pace with the timelines laid out by the regulators and provide clients with stable and effective online systems that will that will translate into new wealth generation. With this goal in mind, we will embark on system upgrades and the development of new systems and thereby generate new business and new products that will expand our overall business scope.

• 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.

86

VII. Financial Status , Operation Performance & Risk Management

• 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.

87

VIII. Other Disclosures

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88

VIII. Other Disclosures

VIII. Other Disclosures

1. Affiliated Companies Chart

PRESIDENT SECURITIES CORPORATION

==> picture [491 x 258] intentionally omitted <==

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

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

88

VIII. Other Disclosures

2. Basic Information of Affiliates

Unit: NT$ thousands As of April 30, 2016

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 Securities (Nominee) Ltd.	1999.08.06	Unit 2603-6,26/F., 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.	2006.12.15	13F.,No.8, Dongxing Rd., Taipei City	NTD	5,000	Insurance Agent
President Insurance Agency Co., Ltd.	2008.04.29	13F.,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

89

VIII. Other Disclosures

3. Operational Highlights of Affiliated Companies

						**As of 31/12/2015 **	**As of 31/12/2015 **	**Unit: NT$ **	thousands
Company	Currency	Capital	Total Assets	Total Liabilities	Total Equity	Operating Revenue	Operating Income	Net Income (Loss)	EPS
President Futures Corp.	NTD	660,000	10,678,284	9,294,989	1,383,295	831,286	124,771	178,915	2.71
President Capital Management Corp.	NTD	124,000	153,076	6,736	146,340	39,052	(829)	681	0.05
Uni-Presdient Asset Management Corp	NTD	351,000	901,616	179,532	722,084	705,673	242,805	210,975	6.01
President Personal Insurance Agency Co., Ltd.	NTD	5,000	40,085	12,225	27,860	57,379	23,576	19,753	39.51
President Insurance Agency Co., Ltd.	NTD	5,000	16,139	2,133	14,006	14,865	3,702	5,342	10.68
PSC Venture Capital Investment Co.,Ltd.	NTD	300,000	309,726	1,758	307,968	7,822	4,105	5,371	0.18
President Securities (HK) Ltd.	HKD	192,600	707,966	373,449	334,517	55,704	6,160	10,528	0.05
President Securities (Nominee)Ltd.	HKD	1,000	569	15	554	0	(41)	(39)	(0.04)
President Wealth Management (Hong Kong) Ltd.	HKD	23,400	14,775	18	14,757	0	(64)	13	0.0005
President Securities (BVI)Ltd.	USD	67,746	70,369	4	70,365	0	(67)	1,662	0.02

Notes：Foreign exchange rates:

USD/NTD ( end of 2015 )=32.8250 USD/NTD ( 2015 average )=31.7507 HKD/NTD ( end of 2015 )=4.2350 HKD/NTD ( 2015 average )=4.0952

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 2016, our capital adequacy rate stood at 414%, well above this key 200% level.

90

VIII. Other Disclosures

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 3.26% in 2015, ranked 8[th] among top 10 competitors. Average single branch market share was 0.081%, ranked the 4[rd] 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 .

91

VIII. Other Disclosures

CONSOLIDATED

FINANCIAL STATEMENTS

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92

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2015 AND 2014

---

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.

～92～

PRESIDENT SECURITIES CORPORATION

Declaration of Consolidated Financial Statements of Affiliated Enterprises

The companies included in the consolidated financial statements of affiliated enterprises prepared by the Company for 2015 (from January 1, 2015 to December 31, 2015) 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 IFRS 10,“Consolidated 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

Responsible person:

LIN, CHUNG-SHEN

March 22, 2016

～93～

Report of Independent Accountants Translated from Chinese

PWCR15003313

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, 2015, and 2014, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended. These consolidated financial statements are the responsibility of the Group’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 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, 2015 and 2014, and their financial performance and cash flows for the years then ended, 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.

～94～

We have audited the parent company only financial statements of President Securities Corporation ( not presented herein ) as of and for the years ended December 31, 2015 and 2014 on which we have issued an unqualified opinion thereon.

PricewaterhouseCoopers, Taiwan March 22, 2016

---

The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept liability for the use of, or reliance on, the English translation or for any errors or misunderstanding that may derive from the translation.

～95～

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) 6(6) 6(7) 6(8) 6(9) 6(2) 6(12) 6(3) 6(13) 6(14) 6(15) 6(44) 6(16) 6(17) 6(18) 6(19) 6(20)	December31,2015	% 7 43 1 1 15 - - 11 - - - 8 - 2 - 5 93 - - - 1 4 - - - 2 7 100 5 8 2 22 2	December31,2014
		Amount $ 5,115,617 29,976,972 402,961 770,353 10,434,581 2,159 4,135 7,686,554 74,345 75,703 3,142 5,517,496 38,211 1,530,833 1,092 3,551,317 65,185,471 50,980 41,581 59,479 444,541 2,520,596 281,003 144,659 56,331 1,304,892 4,904,062 $ 70,089,533 $ 3,736,439 5,599,149 1,440,081 15,602,560 1,509,258		Amount $ 6,355,219 22,714,617 - 1,502,364 13,408,762 219 1,670 5,569,228 12,224 11,042 994 6,905,877 27,794 354,054 1,590 3,106,558 59,972,212 50,518 49,408 56,115 426,021 2,562,705 283,104 160,276 47,451 1,339,736 4,975,334 $ 64,947,546 $ 8,760,977 3,749,032 2,068,250 9,084,470 1,519,052	%
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 Customer margin account Receivables from security lending Security lending deposits Notes receivable Accounts receivable 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 Available-for-sale financial assets - noncurrent Investments in associates Property and equipment, net Investment property, net Intangible assets Deferred tax assets Other assets - noncurrent Total noncurrent assets TOTAL ASSETS LIABILITIES AND EQUITY					10 35 - 2 21 - - 8 - - - 11 - - - 5
					92
					- - - 1 4 1 - - 2
					8
					100
					14 6 3 14 2
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

(Continued)

～96～

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

LIABILITIES AND EQUITY	Note	December 31,2015	% 3 1 11 8 - 2 3 1 - - 68 - - - 68 19 - 3 9 1 - - 32 - 32 100	December 31,2014	% 3 1 9 10 - - 2 - - - 64 - - - 64 20 1 3 9 3 - - 36 - 36 100
		Amount $ 1,744,273 348,570 7,678,157 5,267,876 1,672 1,087,027 2,294,947 851,796 97,481 5,861 47,265,147 48,487 11,848 60,335 47,325,482 13,231,191 256,116 2,328,253 6,018,542 960,922 201,014 ( 278,026 ) 22,718,012 46,039 22,764,051 $ 70,089,533		Amount $ 1,842,391 935,571 5,553,149 6,435,497 484 269,955 1,159,281 294,585 134,160 5,132 41,811,986 49,100 10,984 60,084 41,872,070 13,231,191 256,116 2,173,255 5,708,547 1,549,976 113,539 - 23,032,624 42,852 23,075,476 $ 64,947,546
Short sale proceeds payable Guarantee deposit received on borrowed securities Futures traders' equity Accounts payable Advance receipts 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 Special reserve Unappropriated earnings Other equity Treasury shares Total Non-controlling interests Total equity TOTAL LIABILITIES AND EQUITY	6(6) 6(21) 6(22) 6(23) 6(44) 6(44) 6(24) 6(26) 6(27) 6(26)

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

～97～

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT EARNINGS PER SHARE AMOUNT)

Revenues Securities brokerage fees Underwriting fees Gains on trading of securities Interest income (Loss) gain on valuation of trading securities Gain on short covering and trading securities - RS financing covering Gain (loss) 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 Futures commission expense Clearing charges Other operating expenditures Employee benefits Depreciation and amortization Other operating expenses Total expenditures and expenses

For theyears ended December 31, 2015 2014 Note Amount % Amount % 6(28) $ 2,135,628 47 $ 2,132,591 41 6(29) 67,179 1 51,230 1 6(30) 377,810 8 948,258 19 6(31) 1,332,497 29 1,051,309 20 6(32) ( 500,565 ) ( 11 ) 111,138 2 6(33) 9,048 - 195 - 6(34) 55,208 1 ( 52,378 ) ( 1 ) 6(35) 618,375 14 246,305 5 6(36) 93,895 2 195,678 4 6(37) 391,768 9 478,971 9 4,580,843 100 5,163,297 100 6(38) ( 324,188 ) ( 7 ) ( 311,754 ) ( 6 ) 6(39) ( 357,778 ) ( 8 ) ( 178,055 ) ( 4 ) ( 79,729 ) ( 2 ) ( 73,655 ) ( 1 ) ( 109,729 ) ( 2 ) ( 90,731 ) ( 2 ) ( 69 ) - - - 6(40) ( 1,922,879 ) ( 42 ) ( 1,978,845 ) ( 38 ) 6(41) ( 123,702 ) ( 3 ) ( 117,581 ) ( 2 ) 6(42) ( 1,410,029 ) ( 31 ) ( 1,175,651 ) ( 23 ) ( 4,328,103 ) ( 95 )( 3,926,272 )( 76 )

(Continued)

～98～

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT EARNINGS PER SHARE AMOUNT)

Operating profit Share of the profit or loss of associates and joint ventures accounted for using the equity method Other gains and losses Profit before tax Income tax expense Net income Other comprehensive income Components that will not be reclassified to profit of loss subsequently Remeasurement of defined benefit plans Other comprehensive loss of associates and joint ventures accounted for under equity method Income tax benefit relating to components of other comprehensive income Items may be reclassified to profit of loss subsequently Translation gain on the financial statements of foreign operating entities Unrealized loss on financial instruments Current other comprehensive income (post-tax) Total current comprehensive income Income attributable to: 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)	Note 6(13) 6(43) 6(44) ( ( ( ( 6(45)	For the	years ended December 31,	years ended December 31,
		2015		2014
		$

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

～99～

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

For the year ended December 31, 2014 Balance as of January 1, 2014 Appropriations of 2013 earnings: Legal reserve Special reserve Reversal of special reserve Cash dividends Net income for the year Other comprehensive (loss) income for the year Changes in non-controlling interests Balance at December 31, 2014 For the year ended December 31, 2015 Balance as of January 1, 2015 Appropriations of 2014 earnings: Legal reserve Special reserve Cash dividends Net income for the year Other comprehensive (loss) income for the year Acquisition of treasury stocks Changes in non-controlling interests Balance at December 31, 2015	Note 6(27) 6(27) 6(27) 6(27) 6(27) 6(27) 6(27) 6(26)							Equityattributabl	e t	o owners of theparent company	o owners of theparent company	o owners of theparent company								Non-controlling interest	Total equity
		Common stock		Capital reserve				Retained earnings				Other	equity			Treasury stock		Total
						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
		$ 13,231,191 - - - - - - - $ 13,231,191 $ 13,231,191 - - - - - - - $ 13,231,191		$ 256,116 - - - - - - - $ 256,116 $ 256,116 - - - - - - - $ 256,116		$ 2,071,935 101,320 - - - - - - $ 2,173,255 $ 2,173,255 154,998 - - - - - - $ 2,328,253		$ 5,792,801 - 202,641 ( 286,895) - - - - $ 5,708,547 $ 5,708,547 - 309,995 - - - - - $ 6,018,542		$ 1,013,206 ( 101,320) ( 202,641) 286,895 ( 979,109) 1,583,169 ( 50,224) - $ 1,549,976 $ 1,549,976 ( 154,998) ( 309,995) ( 1,071,726) 956,613 ( 8,948) - - $ 960,922		($ 27,719) - - - - - 130,913 - $ 103,194 $ 103,194 - - - - 90,578 - - $ 193,772		$ 27,750 - - - - - ( 17,405) - $ 10,345 $ 10,345 - - - - ( 3,103) - - $ 7,242		$ - - - - - - - - $ - $ - - - - - - ( 278,026) - ($ 278,026)		$ 22,365,280, - - - ( 979,109) 1,583,169 63,284 - $23,032,624 $ 23,032,624 - - ( 1,071,726) 956,613 78,527 ( 278,026) - $22,718,012		$ 40,923 - - - - 4,112 283 ( 2,466) $ 42,852 $ 42,852 - - - 5,922 103 - ( 2,838) $ 46,039	$ 22,406,203 - - - ( 979,109) 1,587,281 63,567 ( 2,466) $ 23,075,476 $ 23,075,476 - - ( 1,071,726) 962,535 78,630 ( 278,026) ( 2,838) $ 22,764,051

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

～100～

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

				For the year ended			For the year ended
	Note			December 31,2015			December 31,2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit before tax			$	1,108,704		$	1,791,363
Adjustments to reconcile profit before tax to net cash provided by
operating activities:
Income and expenses without cash flow impact
Depreciation	6(41)			94,478			99,490
Amortization	6(41)			29,224			18,091
Write-off of bad debts classified as income	6(16)	(		176 )	(		353 )
Provision for bad debts	6(16)			161,237			2,638
Loss (gain) on valuation of trading securities - current	6(32)			500,565	(		111,138 )
Financial expense	6(39)			357,778			178,055
Interest income	6(31),(43)	(		1,476,709 )	(		1,300,487 )
Dividend income	6(13)	(		162,216 )	(		266,970 )
Share of the profit of associates and joint ventures accounted
for using the equity method	6(14)	(		82,130 )	(		71,854 )
Loss on disposal of property and equipment	6(12)			1,234			2
Loss on disposal of investments (financial assets measured at
cost)	6(43)			-			448
Loss (gain) on valuation of open-ended funds and
money-market instruments				1,664	(		4,531 )
Changes in operating assets and liabilities
Changes in operating assets
Financial assets at fair value through profit or loss		(		7,765,047 )	(		2,887,007 )
Available-for-sale financial assets - current		(		409,316 )			322,120
Bonds purchased under resale agreements				732,011	(		1,317,467 )
Margin loans receivable				2,976,169	(		1,895,243 )
Refinancing security deposits		(		1,940 )			24,476
Receivables from refinance guaranty		(		2,465 )			57,964
Customer margin account		(		2,117,326 )	(		651,794 )
Receivables from security lending		(		62,121 )			17,769
Security lending deposits		(		64,661 )			38,575
Notes receivable		(		2,148 )			2,366
Accounts receivable				1,329,922			1,548,437
Prepayments		(		10,417 )			26,484
Other receivables				287,732	(		288,473 )
Other current assets		(		444,759 )			190,899
Changes in operating liabilities
Financial liabilities at fair value through profit or loss -
current		(		628,169 )			836,096
Bonds sold under repurchase agreements				6,518,090			2,812,355
Deposits on short sales		(		9,794 )			283,209
Short sale proceeds payable		(		98,118 )			242,585
Guarantee deposit received on borrowed securities		(		587,001 )			406,262
Futures traders' equity				2,125,008			635,715
Accounts payable		(		1,162,767 )	(		2,169,058 )
Advance receipts				1,188			34
Collections on behalf of third parties				817,072	(		158,136 )
Other payables		(		341,651 )			307,120
Other financial liabilities - current				557,211			201,187
Other current liabilities				729			532

(Continued)

～101～

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Cash provided by (used in) operations Dividends received Interest received Income tax paid Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of available-for-sale financial assets - noncurrent Proceeds from capital reduction of financial assets measured at cost Acquisition of property and equipment Proceeds from disposal of property and equipment Acquisition of intangible assets Decrease (increase) in other non-current assets Increase in prepayment for equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: (Decrease) increase in short-term loans Increase (decrease) in commercial papers payable Increase in other non-current liabilities Payments of cash dividend Acquisition of treasury stocks Interest paid Changes in non-controlling interest Net cash (used in) provided by financing activities Effect of exchange rate changes Net (decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year

Note For the year ended December 31,2015 For the year ended December 31,2014 $ 2,171,085 ( $ 1,078,239 ) 221,921 310,042 1,384,375 1,233,955 ( 190,463 ) ( 82,959 ) 3,586,918 382,799 6(3) - ( 45,416 ) 6(12) 7,827 21,903 6(14) ( 26,668 ) ( 36,025 ) 183 56 ( 3,825 ) ( 143,252 ) 31,239 ( 146,510 ) ( 39,314 ) ( 31,490 ) ( 30,558 ) ( 380,734 ) ( 5,024,538 ) 5,281,717 1,850,000 ( 3,200,000 ) 864 2,402 6(27) ( 1,071,726 ) ( 979,109 ) 6(26) ( 278,026 ) - ( 360,276 ) ( 167,729 ) ( 2,838 ) ( 2,466 ) ( 4,886,540 ) 934,815 90,578 130,855 ( 1,239,602 ) 1,067,735 6,355,219 5,287,484 $ 5,115,617 $ 6,355,219

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

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PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

(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, 2015, the Company had 40 operating branches (including the Head Office), and established Offshore Securities Unit in July 2014.

• 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.

• 4) The number of employees of the Group was 1,837 and 1,840 as of December 31, 2015 and 2014, respectively.

• 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 22, 2016.

• 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”)

  • According to Financial-Supervisory-Securities-Auditing No. 1030010325 issued by FSC on April 3, 2014, commencing 2015, companies with shares listed on the TWSE or traded on the Taipei Exchange or Emerging Stock Market shall adopt the 2013 version of IFRS (not including IFRS 9, ‘Financial instruments’) as endorsed by the FSC and Regulations Governing the Preparation of Financial Reports by Securities Issuers effective January 1,2015 (collectively referred herein as the “ 2013 version of IFRS”) in preparing the consolidated financial statements. The impact of adopting the 2013 version of IFRS is listed below:

A.IAS 19 (revised), ‘Employee benefits’

• The revised standard makes amendments that net interest amount, calculated by applying the discount rate to the net defined benefit asset or liabilities, replaces the finance charge and expected return on plan assets. The revised standard eliminates the accounting policy choice that the actuarial gains and losses could be recognised based on corridor approach or recognised in profit or loss. The revised standard requires that the actuarial gains and losses can only be recognised immediately in other

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comprehensive income when incurred. Past service cost will be recognised immediately in the period incurred and will no longer be amortised using straight-line basis over the average period until benefits become vested. An entity is required to recognise termination benefits at the earlier of when the entity can no longer withdraw an offer of those benefits and when it recognises any related restructuring costs, rather than when the entity is demonstrably committed to a termination. Based on the Group’s assessment, the adoption of the standard has no impact on its consolidated financial statements, and the Group has disclosed additional information about defined benefit plans accordingly.

• B.IAS 1, ‘Presentation of financial statements’

The amendment requires entities to separate items presented in OCI classified by nature into two groups on the basis of whether they are potentially reclassifiable to profit or loss subsequently when specific conditions are met. If the items are presented before tax then the tax related to each of the two groups of OCI items (those that might be reclassified and those that will not be reclassified) must be shown separately. Accordingly, the Group has adjusted its presentation of the statement of comprehensive income.

C.IFRS 12, ‘Disclosure of interests in other entities’

The standard integrates the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. Also, the Group has disclosed additional information about its interests in consolidated entities and unconsolidated entities accordingly.

• D.IFRS 13, ‘Fair value measurement’

• The standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard sets out a framework for measuring fair value from market participants’ perspective, and requires disclosures about fair value measurements. For non-financial assets only, fair value is determined based on the highest and best use of the asset. Based on the Group’s assessment, the adoption of the standard has no significant impact on its consolidated financial statements, and the Group has disclosed additional information about fair value measurements accordingly.

• E. Disclosures - Transfers of financial assets (amendments to IFRS 7)

• The amendment enhances qualitative and quantitative disclosures for all transferred financial assets that are not derecognised and for any continuing involvement in transferred assets, existing at the reporting date. The Group includes qualitative and quantitative disclosures for all transferred financial assets.

• F. Disclosures - Offsetting financial assets and financial liabilities (amendments to IFRS 7)

• The revised standard now requires IFRS 32, ‘Financial instruments: Presentation’: 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 recognised amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. Under transactions that are similar to net settled master netting arrangements, the gross amount of financial instruments of which may or may not be offset in accordance with IFRS 32, ‘Financial instruments: Presentation’, should be presented and quantified based on the net amount of financial assets and liabilities.

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2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group

None.

3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the 2013 version of IFRSs as endorsed by the FSC:

the 2013 version of IFRSs as endorsed by the FSC:
	Effective Date by
	International
	Accounting
New Standards,Interpretations andAmendments	Standards Board
IFRS 9, ‘Financial instruments’	January 1, 2018
Sale or contribution of assets between an investor and its associate or joint venture (amendments to IFRS 10 and IAS 28)	To be determined by International
	Accounting Standards
	Board
Investment entities: applying the consolidation exception (amendments to IFRS 10, IFRS 12 and IAS 28)	January 1, 2016
IFRS 15, ‘Revenue from contracts with customers’	January 1, 2018
IFRS 16, ‘Leases’	January 1, 2019
Disclosure initiative (amendments to IAS 1)	January 1, 2016
Disclosure initiative (amendments to IAS 7)	January 1, 2017
Recognition of deferred tax assets for unrealized losses	January 1, 2017
(amendments to IAS 12)
Clarification of acceptable methods of depreciation and	January 1, 2016
amortisation (amendments to IAS 16 and IAS 38)
Services related contributions from employees or third	July 1, 2014
parties (amendments to IAS 19)
Equity method in separate financial statements (amendments	January 1, 2016
to IAS 27)
Recoverable amount disclosures for non-financial assets	January 1, 2014
(amendments to IAS 36)
Novation of derivatives and continuation of hedge	January 1, 2014
accounting (amendments to IAS 39)
Improvements to IFRSs 2010-2012	July 1, 2014
Improvements to IFRSs 2011-2013	July 1, 2014
Improvements to IFRSs 2012-2014	January 1, 2016

The Group is assessing the impact of the new standards, interpretations and amendments above on the consolidated financial statements and will disclose relevant impact on completion of assessment.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Group’s significant accounting policies are described below:

• 1) Compliance statement

• The consolidated financial statements of the Group have been prepared 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”).

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 recognised based on the net amount of pension fund assets less present value of defined benefit obligations.

• 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 judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement 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 structured entities) control by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidated of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

• (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 recognised directly in equity.

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• (E) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised 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 recognised 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	Main Business Activities Futures brokerage Securities investment consulting Securities dealer, brokerage, underwriting and consulting Securities investment and holding company Insurance Agent Insurance Agent Venture Capital Securities dealer, brokerage, underwriting and consulting Wealth management Nominee Service	Ownership (%)	Ownership (%)
			December 31, 2015	December 31, 2014
The Company 〃 〃 〃 〃 〃 〃 President Securities (BVI) 〃 〃	President Futures Corp. (President Futures) President Capital Management Corp. (President Capital Management) President Securities (HK) Ltd.(President Securities (HK)) (Note 1) President Securities (BVI) Ltd.(President Securities (BVI)) President Personal Insurance Agency Co., Ltd. (President Personal Insurance Agency) President Insurance Agency Corp. (President Insurance Agency) PSC Venture Capital Investment Company Limited (President Venture Capital) President Securities (HK) Ltd. (Note 1) President Wealth Management (HK) Ltd.(President Wealth Management (HK)) President Securities (Nominee) Ltd. (President Securities (Nominee))		96.69% 100% 5.19% 100% 100% 100% 100% 94.81% 100% 100%	96.69% 100% 5.19% 100% 100% 100% 100% 94.81% 100% 100%

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

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• 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 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 recognised 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 recognised in other comprehensive income.

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• C. Translation of foreign operations

  • The operating results and financial position of all the group entities, associates and joint arrangements that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

  • (A) Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;

  • (B) Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

  • (C) All resulting exchange differences are recognised 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 recognised and derecognised using trade date accounting.

• C. Financial assets at fair value through profit or loss are initially recognised 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 recognised 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 recognised and derecognised using trade date accounting.

• C. Available-for-sale financial assets are initially recognised at fair value plus transaction

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costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised 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 recognised, then such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognised in profit or loss shall not be reversed through profit or loss. Impairment loss is recognised 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 recognised initially at fair value and subsequently measured at amortised 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 recognised in profit or loss, the impairment loss shall be reversed to the extent of the loss previously recognised in profit or loss. Such recovery of impairment loss shall not make the asset’s carrying amount greater than its amortised cost without impairment loss being recognised. The recoveries of amounts are recognised in profit or loss.

• 10) Bonds sold under repurchase agreements and bonds purchased under resale agreements Bond 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 recognised 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 recognised in ‘bonds sold under repurchase agreements’ under current liabilities. Any difference between the actual payment/receipt and predetermined redemption (repurchase) price is recognised in interest income or interest expense.

• 11) Financial assets at cost – non-current

• A. Financial assets measured at cost are initially recognised at fair value plus transaction costs of acquisition. On a regular way purchase or sale basis, financial assets measured at cost are recognised and derecognised 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.

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• 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 recognised in profit or loss. Impairment loss recognised for this category shall not be reversed subsequently. Impairment loss is recognised 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 derecognises 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

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transferred; however, the Group has not retained control of the financial asset.

• B. Derecognition of financial liabilities

  • A financial liability is derecognised 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 recognised 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 recognised at cost.

• B. The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised 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 recognise 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 recognised 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 recognises 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.

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 recognised 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 derecognised. 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 are subsequently measured using the cost model and depreciated using the straight-line method to allocate their cost over their estimated useful lives.

• D. 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

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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:

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

• E. 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 recognised 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 recognised 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

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

• B. Customer relationships is amortised evenly over its estimated useful life of 3.6 years.

• C. In accordance with IFRS 3 ‘Business combinations’ as endorsed by FSC, goodwill arises when the acquisition cost exceeds the fair value of identifiable assets and liabilities of the consolidated subsidiary on the consolidation date. The goodwill arising from the consolidated subsidiary is included in the intangible asset. Goodwill is tested annually for impairment and any impairment loss will be recognised when impairment occurs. Impairment losses on goodwill are not reversed.

• 19) Impairment of non-financial assets

• A. 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 recognised

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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. Except for goodwill, when the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognized.

• B. The recoverable amounts of goodwill, intangible assets with an indefinite useful life and intangible assets that have not yet been available for use are evaluated periodically. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognised in profit or loss shall not be reversed in the following years.

• C. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that is expected to benefit from the synergies of the business combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

20) Contingent liabilities

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 recognise any contingent liabilities but made appropriate disclosure in compliance with relevant regulations.

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 recognised as expenses in that period when the employees render service.

• B. Termination benefits

Termination benefits are employee benefits provided in exchange for the termination of employment as a result from either the Group’s decision to terminate an employee’s employment before the normal retirement date, or an employee’s decision to accept an offer of redundancy benefits in exchange for the termination of employee. The Group recognised expense as it can no longer withdraw an offer of termination benefit or it recognises relating restructuring costs, whichever is earlier. Benefits that are expected to be due more than 12 months after balance sheet date shall be discounted to their present value.

• 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

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Plan are portable upon termination of employment. Net defined benefit asset can only be recognised 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 recognises the accrued pension obligations 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 recognised 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 term consistent with the currency and term of the employment benefit obligations.

Remeasurement arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.

• D. Employees’ remuneration and directors’ and supervisors’ remuneration

• Employees’ bonus and directors’ and supervisors’ remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates.

22) Revenues and expenses

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

• A. Gains (losses) on sale of securities, securities brokerage fees, and commissions on brokerage and trading are recognised on the transaction date.

• B. Underwriting fees and related service charges: application fees are recognised upon collection; underwriting fees and service charges are recognised when the contract is completed.

• C. Gains (losses) on futures contracts: The margin of futures transaction is recognised as cost. Costs and expenses are recognised 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 recognised in other comprehensive income or equity, in which cases the related income taxes in the period are recognised in other comprehensive income or directly derecognised from equity, all the others should be recognised 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,

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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 recognised 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 recognised 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 recognised 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

• A. 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 recognised as equity in the financial period in which they are approved by the Company’s shareholders. If the date of dividends declared is later than the consolidated balance sheet date, common stocks are disclosed in the subsequent events.

• B. Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

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 with IAS 33 “Earnings per share”.

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26) Business combinations

• A. The Group uses the acquisition method to account for business combinations. The consideration transferred for an acquisition is measured as the fair value of the assets transferred, liabilities incurred or assumed and equity instruments issued at the acquisition date, plus the fair value of any assets and liabilities resulting from a contingent consideration arrangement. All acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

• B. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree over the fair value of the identifiable assets acquired and the liabilities assumed is recorded as goodwill at the acquisition date. If the total of consideration transferred, non-controlling interest in the acquire recognised and the fair value of previously held equity interest in the acquiree is less than the fair value of the identifiable assets acquired and the liabilities assumed, the difference is recognised directly in profit or loss on the acquisition date.

27) Operating segments

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 is responsible for allocating resources and assessing performance of the operating segments.

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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 judgement, estimates, and assumptions on the information of the key risks that is 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 recognises 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 recognised 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. Calculation of net defined benefit liabilities

  • When calculating the present value of defined pension obligations, the Group must apply judgements 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 obligations.

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6.DETAILS OF SIGNIFICANT ACCOUNTS

1) Cash and cash equivalents

AILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Petty cash Checking deposits Current deposits: Deposits denominated in NTD Deposits denominated in foreign currencies Time deposits	December 31, 2015 $ 188 533,845 376,246 589,484 3,615,854 $ 5,115,617	December 31, 2014
		$ 185 600,088 407,745 916,327 4,430,874
		$ 6,355,219

As of December 31, 2015 and 2014, the annual interest rates of time deposits, including foreign time deposits were 0.20% ~ 5.18% and 0.10% ~ 3.40%, respectively.

2) Financial assets at fair value through profit or loss

Current items: Open-ended funds and money market instruments and securities investment by brokers Open-ended mutual funds beneficiary certificates Overseas stocks and funds Money market instruments Listed (TSE and OTC) stocks Subtotal Adjustment of open-ended mutual funds beneficiary certificates Total Trading securities-dealer Listed (TSE and OTC) stocks Government bonds Corporate bonds Convertible corporate bonds Emerging stocks Overseas stocks Exchange-traded funds Others Subtotal Adjustment of trading securities - dealer Total		December 31, 2015 $ 227,000 245,367 - 56,714 529,081 58,257) 470,824 2,517,841 3,055,644 5,699,163 1,209,904 81,265 12,881,521 33,389 41,000 25,519,727 20,419) 25,499,308		December 31, 2014 $ 351,980 236,584 50,000 - 638,564 53,988) 584,576 2,600,419 1,052,118 1,495,525 1,367,501 280,973 10,290,680 93,099 39,000 17,219,315 264,014 17,483,329
	( (		(

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December 31, 2015 December 31, 2014

3)	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 Subtotal Adjustment of trading securities - hedging ( Total Options bought-futures Futures guarantee deposits receivable Derivative financial instrument assets- OTC Total Non-current items: Trading securities - dealer - government bonds Adjustment of trading securities Total Available-for-sale financial assets Current items: Trading securities - dealer Listed (TSE and OTC) stocks Overseas bonds Adjustment of trading securities - dealer ( Total Non-current items: Listed (TSE and OTC) stocks Adjustment of trading securities Total	$ 137,777 232,134 369,911 46,091 416,002 1,406,312 20,232 22,152 69,975 1,518,671 28,753) 1,489,918 33,288 1,860,069 207,563 $ 29,976,972 $ 50,271 709 $ 50,980 December 31, 2015 $ 306,677 102,654 6,370) $ 402,961 $ 45,416 14,063 $ 59,479	$ 187,643 469,423
			657,066 87,989
			745,055
			1,562,343 92,935 12,181 516,313
			2,183,772 51,383
			2,235,155
			2,517
			1,626,959
			37,026
			$ 22,714,617
			$ 50,368 150
			$ 50,518
			December 31, 2014
			$ - - -
			$ -
			$ 45,416 10,699
			$ 56,115

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4) Bonds purchased under resale agreements

Bonds purchased under resale agreements
Overseas bonds	December 31, 2015 $ 770,353	December 31, 2014
		$ 1,502,364

The above bonds purchased under resale agreements as of December 31, 2015 and 2014 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 $771,380 and $1,504,222, respectively. The annual interest rates of every currency were as follows:

Currency December 31, 2015 December 31, 2014 Foreign currencies (Note) -0.3125%~2.14% -0.25% ~ 2.45% (Note)：Foreign currencies include USD and AUD.

5) Margin loans receivable

Margin loans receivable were secured by the securities purchased by customers under margin loans. The annual interest rate was 6.4%.

6) Customer margin account

Customer margin account
Bank deposit Futures clearing house Other futures commission merchant Securities Total	December 31, 2015 $ 5,412,834 902,890 1,366,153 4,677 $ 7,686,554	December 31, 2014
		$ 3,998,522 884,855 677,462 8,389
		$ 5,569,228

The difference between the customer margin deposits accounts and futures traders’ equity as of December 31, 2015 and 2014 were outlined below:

	December 31, 2015	December 31, 2015	December 31, 2014	December 31, 2014
Customer margin deposits accounts	$	7,686,554	$	5,569,228
Add: Early customer margin deposits		645		1,158
Receivable for futures trading margin		-		3
Less: Service fee income pending for	(	6,681 )	(	12,918 )
transfer
Futures exchange tax pending for	(	438 )	(	453 )
transfer
Net interest income pending for		505	(	1,309 )
transfer
Temporary receipts	(	1,418)	(	2,560)
Futures traders' equity	$	7,678,157	$	5,553,149

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7) Accounts receivable

7)	Accounts receivable
8) 9)	Accounts receivable - non related parties Settlement price receivable-brokers Settlement price receivable-dealer Accounts receivable-foreign bonds Interest receivable Settlement price Others Other receivables Other receivables-FX Swap Interest receivable Others Other current assets Pending settlements Pledged time deposits Deposits-in for foreign currency securities Underwriting share proceeds collected on behalf of customers Others	December 31, 2015 $ 4,128,216 37,181 - 414,394 893,860 43,845 $ 5,517,496 December 31, 2015 $ 1,475,078 21,205 34,550 $ 1,530,833 December 31, 2015 $ 680,508 1,634,368 458,073 775,119 3,249 $ 3,551,317	December 31, 2014
			$ 4,604,670 228,617 1,119,303 318,940 589,191 45,156
			$ 6,905,877
			December 31, 2014
			$ 283,160 24,325 46,569
			$ 354,054
			December 31, 2014
			$ 472,210 1,697,624 935,571 56 1,097
			$ 3,106,558

10) Transfer of financial assets

A. During the Group’s activities, the transferred financial assets that do not meet derecognition conditions are mainly debt instruments with purchase agreements or debt instruments lent out in accordance with securities borrowing and lending agreement. The cash flow of the contract has been transferred and related liabilities of transferred financial assets that will be repurchased at a fixed price in the future have been reflected. The Group may not use, sell or pledge the transferred financial assets during the valid period of the transaction. The financial assets were not derecognised as the Group is still exposed to interest rate risk and credit risk.

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• B. Financial assets that do not meet the derecognition conditions and related financial liabilities are analysed below:

liabilities are analysed below:	liabilities are analysed below:
December 31, 2015
Financial assets category Carrying amount of transferred financial assets Financial assets measured at fair value through profit or loss Repurchase agreement $ 16,464,422 December 31, 2014		Carrying amount of related financial liabilities $ 15,602,560
Financial assets category Financial assets measured at fair value through profit or loss Repurchase agreement	Carrying amount of transferred financial assets $ 9,543,170	Carrying amount of related financial liabilities $ 9,084,470

• 11) Offsetting financial assets and financial liabilities

• A.The Group has transactions that are or are similar to net settled master netting arrangements but do not meet the offsetting criteria, i.e. derivative financial instruments, resale and repurchase agreements. If one party breaches the contract, the counterparty can choose to use net settlement for the above transactions.

• B.The offsetting of financial assets and financial liabilities are set as follows:

(Blank below)

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1. The offsetting of financial assets and financial liabilities are set as follows:

(1) Financial assets

December 31, 2015

Financial assets			December 31,2015	December 31,2015	December 31,2015	December 31,2015	December 31,2015	December 31,2015
Financial assets that	are offset,or can be		settled under agreements of net settled master nettingarrangements o						r similar arrangements
Description Derivative financial instruments Bonds purchased under resale agreements Total	Gross amounts of recognised financial assets $ 207,544 770,353 $ 977,897		Gross amounts of recognised financial liabilities set off in the balance sheet $ - - $ -		Net amounts of financial assets presented in the balance sheet		Not set off in the		balance sheet		Net amount
							Financial instruments		Cash collateral received
					$ 207,544 770,353		$ 51,566 734,662 $ 786,228		$ - - $ -		$ 155,978 35,691 $ 191,669
					$ 977,897

December 31, 2014

Financial assets that are offset, or can be settled under agreements of net settled master netting arrangements or similar arrangements

Description Derivative financial instruments Bonds purchased under resale agreements Total	Gross amounts of recognised financial assets $ 36,818 1,502,364 $ 1,539,182		Gross amounts of recognised financial liabilities set off in the balance sheet $ - - $ -		Net amounts of financial assets presented in the balance sheet $ 36,818 1,502,364 $ 1,539,182	Not set off in the	Not set off in the	balance sheet		Net amount
						Financial instruments		Cash collateral received
						$ 11,987 1,460,264 $ 1,472,251		$ - - $ -		$ 24,831 42,100 $ 66,931

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(2) Financial liabilities

December 31, 2015

Financial liabilities that are offset, or can be settled under agreements of net settled master netting arrangements or similar arrangements

Description Derivative financial instruments Bonds sold under repurchase agreements Total	Gross amounts of recognised financial liabilities $ 66,221 10,014,973 $ 10,081,194		Gross amounts of recognised financial assets set off in the balance sheet $ - - $ -		Net amounts of financial liabilities presented in the balance sheet		Not set off in the	Not set off in the	balance sheet		Net amount
							Financial instruments		Cash collateral pledged
					$ 66,221 10,014,973		$ 51,566 10,014,973 $ 10,066,539		$ - - $ -		$ 14,655 - $ 14,655
					$ 10,081,194

December 31, 2014

		December 31,2014	December 31,2014	December 31,2014	December 31,2014	December 31,2014	December 31,2014	December 31,2014	December 31,2014	December 31,2014	December 31,2014
Financial liabilities that are offset,or can		be settled under agreements of net settled master nettingarrangements or similar arrangements
Description Derivative financial instruments Bonds sold under repurchase agreements Total	Gross amounts of recognised financial liabilities $ 72,523 7,134,113 $ 7,206,636		Gross amounts of recognised financial assets set off in the balance sheet $ - - $ -		Net amounts of financial liabilities presented in the balance sheet		Not set off in the		balance sheet		Net amount
							Financial instruments		Cash collateral pledged
					$ 72,523 7,134,113		$ 11,987 7,134,113 $ 7,146,100		$ - - $ -		$ 60,536 - $ 60,536
					$ 7,206,636

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12) Financial assets at cost – non-current

) Financial assets at cost–non-current
Taiwan Depository & Clearing Corp. Taiwan Futures Exchange Hua Liu Venture Capital Corporation Cathay Venture Capital I Total	December 31, 2015 $ 2,450 35,115 2,608 1,408 $ 41,581	December 31, 2014
		$ 2,450 35,115 10,435 1,408
		$ 49,408

• A. 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.

• B. A stockholders’ meeting of Taiwan Integrated Shareholder Service Company was held on February 6, 2014 and approved the business combination with Taiwan Depository & Clearing Corp. with March 24, 2014 as the record date.

• C. In June, 2015, Hua Liu Venture Capital Corporation resolved for a capital reduction of $90,000 through the Meeting of Shareholders, cancelling 9,000 thousand shares. The Company received a refund of $7,827 in accordance with its shareholding ratio and reduced the carrying amount by $7,827.

13) Investments accounted for under the equity method

Uni-President Asset Management Corp.	December 31, 2015 $ 444,541	December 31, 2014
		$ 426,021

• A. The Group’s share of its associates’ profits or losses recognised in long-term equity investment accounted for under the equity method for the years ended December 31, 2015 and 2014 were $82,130 and $71,854, respectively.

• B. The financial information of the Group’s principal associates is summarized as follows:

• (a)The basic information of the joint ventures that are material to the Group is as follows:

follows:
Company name	Principal place of business Taipei city	Shareholding ratio		Nature of relationship	Methods of measurement Equity method
Uni-President Asset Management Corp.		December 31, 2015 38.69%	December 31, 2014	Associate
			38.69%

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(b)The summarized financial information of the joint ventures that are material to the Group is as follows:

Balance sheet

Balance sheet
Current assets Non-current assets Current liabilities Non-current liabilities Total net assets Share in joint venture’s net assets Goodwill and others Carrying amount of the joint venture		Uni-President Asset Management Corp.
	( (	December 31, 2015 $ 376,603 525,013 135,692 ) ( 43,840) ( $ 722,084 $ 279,429 165,112 $ 444,541	December 31, 2014 $ 342,187 501,497 131,262 ) 36,931) $ 675,491 $ 261,398 164,623 $ 426,021

Statement of comprehensive income

Statement of comprehensive income
Revenue Profit for the period from continuing operations Other comprehensive loss- net of tax Total comprehensive income		Uni-President Asset Management Corp.
	(	For the year ended December 31, 2015 $ 705,673 $ 210,975 5,730) ( $ 205,245	For the year ended December 31, 2014 $ 657,431 $ 187,431 11,329) $ 176,102

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14) Property and equipment

January 1, 2015 Cost Accumulated depreciation and impairment Total For the year ended December 31, 2015 January 1, 2015 Additions Disposal Reclassifications Depreciation December 31, 2015 December 31, 2015 Cost Accumulated depreciation and impairment Total January 1, 2014 Cost Accumulated depreciation and impairment Total For the year ended December 31, 2014 January 1, 2014 Additions Disposal Reclassifications Depreciation Translation gain (loss) December 31, 2014 December 31, 2014 Cost Accumulated depreciation and impairment Total	Land Buildings $ 1,680,129 $ 1,093,542 - ( 358,220) $ 1,680,129 $ 735,322 $ 1,680,129 $ 735,322 - 3,375 - - - - - ( 31,282) $ 1,680,129 $ 707,415 $ 1,680,129 $ 1,081,785 - ( 374,370) $ 1,680,129 $ 707,415 Land Buildings $ 1,680,129 $ 1,101,174 - ( 340,755) ( $ 1,680,129 $ 760,419 $ 1,680,129 $ 760,419 - 2,630 - - ( - 3,488 - ( 31,207)( - ( 8) $ 1,680,129 $ 735,322 $ 1,680,129 $ 1,093,542 - ( 358,220) ( $ 1,680,129 $ 735,322	Equipment Leasehold improvements Total $ 248,456 $ 108,684 $ 3,130,811 ( 146,134) ( 63,752) ( 568,106) $ 102,322 $ 44,932 $ 2,562,705 $ 102,322 $ 44,932 $ 2,562,705 22,000 1,293 26,668 ( 1,417) - ( 1,417) 9,487 15,530 25,017 ( 42,058) ( 19,037) ( 92,377) $ 90,334 $ 42,718 $ 2,520,596 $ 249,195 $ 118,360 $ 3,129,469 ( 158,861) ( 75,642) ( 608,873) $ 90,334 $ 42,718 $ 2,520,596 Equipment Leasehold improvements Total $ 246,315 $ 109,939 $ 3,137,557 158,258) ( 55,294) ( 554,307) $ 88,057 $ 54,645 $ 2,583,250 $ 88,057 $ 54,645 $ 2,583,250 30,486 2,909 36,025 58) - ( 58) 29,822 7,510 40,820 45,993) ( 20,190) ( 97,390) 8 58 58 $ 102,322 $ 44,932 $ 2,562,705 $ 248,456 $ 108,684 $ 3,130,811 146,134) ( 63,752) ( 568,106) $ 102,322 $ 44,932 $ 2,562,705	Total $ 3,130,811 ( 568,106) $ 2,562,705 $ 2,562,705 26,668 ( 1,417) 25,017 ( 92,377)

• A. No interest was capitalized for property and equipment for the years ended December 31, 2015 and 2014.

• B. The information on property and equipment pledged or restricted as of December 31, 2015 and 2014 is described in Note 8.

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15) Investment property

January 1, 2015 Cost Accumulated depreciation and impairment Total For the year ended December 31, 2015 January 1, 2015 Depreciation December 31, 2015 December 31, 2015 Cost Accumulated depreciation and impairment Total January 1, 2014 Cost Accumulated depreciation and impairment Total For the year ended December 31, 2014 January 1, 2014 Depreciation December 31, 2014 December 31, 2014 Cost Accumulated depreciation and impairment Total	Land $ 198,099 - ( $ 198,099 $ 198,099 - ( $ 198,099 $ 198,099 - ( $ 198,099 Land $ 198,099 - ( $ 198,099 $ 198,099 - ( $ 198,099 $ 198,099 - ( $ 198,099	Buildings $ 107,076 22,071) ( $ 85,005 $ 85,005 2,101) ( $ 82,904 $ 107,076 24,172) ( $ 82,904 Buildings $ 107,076 19,971) ( $ 87,105 $ 87,105 2,100) ( $ 85,005 $ 107,076 22,071) ( $ 85,005	Total $ 305,175 22,071) $ 283,104 $ 283,104 2,101) $ 281,003 $ 305,175 24,172) $ 281,003 Total $ 305,175 19,971) $ 285,204 $ 285,204 2,100) $ 283,104 $ 305,175 22,071) $ 283,104

A. For the years ended December 31, 2015 and 2014, rental income from the lease of the investment property were $16,888 and $17,499, respectively, and direct operating expenses arising from the investment property were $3,495 and $3,493, respectively.

B. Details of fair value of investment property are provided in Note 12(5).

• C. Information about the investment property that was pledged to others as collaterals is provided in Note 8.

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16) Other noncurrent assets

Other noncurrent assets
Operation guaranteed deposits Clearing and settlement fund Refundable deposits Deferred expenses Prepaid pension expenses Prepayment for equipment Delinquent accounts Others Less: Allowance for uncollectible accounts-overdue receivables (	December 31, 2015 $ 722,000 325,827 173,948 17,385 58,239 7,313 166,572 180 1,471,464 166,572) $ 1,304,892	December 31, 2014 $ 902,000 335,502 51,268 16,852 31,374 2,560 12,532 180 1,352,268 ( 12,532) $ 1,339,736
		(

17) Short-term loans

17) Short-term loans
December 31, 2015 Secured loans $ 2,551,248 Unsecured loans 1,185,191 Total $ 3,736,439 Interest rates 0.85%~5.00% 18) Commercial papers payable December 31, 2015 Face value $ 5,600,000 Less: discount on commercial papers payable ( 851) Total $ 5,599,149 Interest rates 0.40%~0.53% The commercial papers payable were secured by banks. 19) Financial liabilities at fair value through profit or loss-current December 31, 2015 Investments in bonds under resale agreements - short sales $ 727,782 Valuation adjustment of financial assets held for trading 13,952 Subtotal 741,734 Liabilities on sale of borrowed securities - hedged 150,537 Valuation adjustment on liabilities on sale of borrowed securities - hedged ( 8,588 ) Liabilities on sale of borrowed securities - non-hedged 131,059 Valuation adjustment on liabilities on sale of borrowed securities - non-hedged ( 8,593)	December 31, 2014 $ 3,956,313 4,804,664 $ 8,760,977 0.87%~4.70% December 31, 2014 $ 3,750,000 ( 968) $ 3,749,032 0.72%~0.94% December 31, 2014 $ 1,422,218 51,944 1,474,162 36,222 1,405 26,363 841
	(

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	December 31, 2015	December 31, 2015	December 31, 2014	December 31, 2014
Subtotal	$	264,415	$	64,831
Issuance of call ( put ) warrants		12,708,263		7,967,607
Gain on price fluctuation	(	5,603,884)	(	1,373,061)
Market value (A)		7,104,379		6,594,546
Warrants redeemed	(	9,603,429 )	(	6,497,130 )
Loss on price fluctuation		2,856,284		356,306
Market value (B)	(	6,747,145)	(	6,140,824)
Warrants - net (A+B)		357,234		453,722
Options sold - TAIFEX		10,019		1,663
Derivative financial liabilities - OTC		66,679		73,872
Total	$	1,440,081	$	2,068,250

Among the warrants issued by the Group, except for contract-based warrants which are European-style warrants, all other warrants are American-style warrants. Warrants are stated as liabilities for issuance of warrants at issuance price prior to expiration. Upon repurchase of warrants after issuance, the repurchased amounts are recognised as warrants repurchase and charged as a deduction to liabilities for issuance of warrants. The warrants have six to eighteen months exercise period from the date of issuance. The issuer has the option to settle either by cash or stock delivery.

20) Bonds sold under repurchase agreements

) Bonds sold under repurchase agreements
Government bonds Corporate bonds Bank debentures International bonds Foreign bonds Total	December 31, 2015 $ 3,182,003 300,000 1,100,693 1,004,891 10,014,973 $ 15,602,560	December 31, 2014
		$ 1,000,357 950,000 - - 7,134,113
		$ 9,084,470

The above bonds sold under repurchase agreements as of December 31, 2015 and 2014 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 $15,641,269 and $9,105,545, respectively, and the annual interest rates in every currency were shown as follows:

every currency were shown as follows:
Currency NTD Foreign currencies (Note)	December 31, 2015 0.20%~0.47% 0.00%~7.00%	December 31, 2014
		0.53%~0.65% 0.00%~3.94118%

(Note)：Foreign currencies include AUD, Euro, USD and RMB.

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21) Accounts payable

21) Accounts payable
Settlement accounts payable - brokered trading Settlement proceeds Settlement accounts payable - operating Accounts payable - foreign bonds Others Total 22) Other payables Salary and bonus payable Employees’ bonus and directors’ and supervisors’ remuneration payable Other payables - Fx Swap Others 23) Other financial liabilities-current Equity-linked notes (ELN) - Options Principal guaranteed notes (PGN) - fixed income Total	December 31, 2015 $ 4,157,408 882,689 162,619 - 65,160 $ 5,267,876 December 31, 2015 $ 405,832 54,088 1,475,981 359,046 $ 2,294,947 December 31, 2015 $ 5,200 846,596 $ 851,796	December 31, 2014
		$ 4,514,790 475,397 251,168 1,123,963 70,179
		$ 6,435,497
		December 31, 2014
		$ 476,847 60,546 283,068 338,820
		$ 1,159,281
		December 31, 2014
		$ 32,600 261,985
		$ 294,585

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).

24) Other liabilities-non-current

Other liabilities-non-current
Net defined benefit obligation Guarantee deposits received Total	December 31, 2015 $ 7,271 4,577 $ 11,848	December 31, 2014
		$ 7,821 3,163
		$ 10,984

25) 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 6 months prior to retirement.

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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 2.0% 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 supervisory committee of workers' retirement reserve fund, and with Cathay United Bank, under the name of the management committee of employees’ retirement fund. Also, the Group would assess the balance in the aforementioned labor pension reserve account by the end of December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method, to the employees expected to be qualified for retirement next year, the Group will make contributions to cover the deficit by next March.

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

Present value of defined benefit obligations Fair value of plan assets ( Net defined benefit assets (	December 31, 2015 $ 688,840 739,808) ( $ 50,968) (	December 31, 2014
		$ 673,820 697,373) $ 23,553)

(C) Movements in net defined benefit liabilities (assets) are as follows:

Year ended December 31, 2015 Balance at January 1 Current service cost Interest expense (income) Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Paid pension Balance at December 31		Present value of defined benefit obligations		Fair value of plan assets		Net defined benefit assets
		$ 673,820 5,322 13,477 692,619 - 22,368 ( 12,539) 9,829 - ( 13,608) ( 13,608) $ 688,840		($ 697,373) - ( 13,947) ( 711,320) ( 1,709) - - ( 1,709) ( 40,387) 13,608 ( 26,779) $ 739,808		($ 23,553) 5,322 ( 470) ( 18,701) ( 1,709) 22,368 ( 12,539) 8,120 ( 40,387) - ( 40,387) ($ 50,968)

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Year ended December 31, 2014 Balance at January 1 Current service cost Interest expense (income) Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Experience adjustments Pension fund contribution Paid pension Balance at December 31		Present value of defined benefit obligations		Fair value of plan assets		Net defined benefit assets
		$ 635,385 5,728 12,708 653,821 - 54,997 54,997 - ( 34,998) ( 34,998) $ 673,820		($ 672,328) - ( 13,447) ( 685,775) 318 - 318 ( 46,914) 34,998 ( 11,916) ($ 697,373)		($ 36,943) 5,728 ( 739) ( 31,954) 318 54,997 55,315 ( 46,914) - ( 46,914) ($ 23,553)

• (D) 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 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 composition of fair value of plan assets as of December 31, 2015 and 2014 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. In addition, for retirement fund deposits with Cathay United Bank, under the name of the management committee of employees’ retirement fund, the fund invests in time deposit accounts under Cathay United Bank.

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

Discount rate Future salary increases	For the year ended December 31, 2015 For the year ended December 31, 2014	For the year ended December 31, 2015 For the year ended December 31, 2014
	1.70% 2.50%~3.00%	2.00% 2.50%~3.00%

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

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

December 31, 2015 Effect on present value of defined benefit obligation December 31, 2014 Effect on present value of defined benefit obligation	Discount rate Increase 1% Decrease 1% ( $ 70,868) $ 82,276 ( $ 72,668) $ 84,736	Future salary increases Increase 1% Decrease 1% $ 73,299 ( $ 64,913) $ 76,078 ( $ 67,069)
	Increase 1% ( $ 70,868) ( $ 72,668)	Increase 1% $ 73,299 $ 76,078

• (F) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2016 amounts to $40,585.

• 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, 2015 and 2014 were $60,789 and $58,112, respectively.

• C. President Securities (HK), President Wealth Management (HK), and President Securities (Nominee) have defined benefit pension plans in accordance with local laws, and recognised the current pension expenses by contributing to the accrued pension assets. President Securities (HK) recognised pension expenses of $2,713 and $2,299, respectively, for the years ended December 31, 2015 and 2014.

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26) Equity

• A. Common stock

• (A) As of December 31, 2015, the Company’s authorized capital was $15,000,000 with a par value of $10 (in dollars) per share. As of December 31, 2015 and 2014, the common stocks issued were all 1,323,119 thousand shares, and the outstanding common stocks were 1,303,796 and 1,323,119 thousand shares. Movements in the number of the Company’s ordinary shares outstanding are as follows:

Movements in the number of the Company’s ordinary follows:	shares outstanding are as
For the year ended December 31,2015 January 1 1,323,119 Acquisition of treasury stocks ( 19,323 ) December 31 1,303,796	(Expressed in thousands) For the year ended December 31,2014
	1,323,119 -
	1,323,119

• (B) Treasury shares

In order to maintain the Company’s integrity and stockholders’ equity, the Company’s Board of Directors resolved to buy back outstanding shares with a total limit of $9,564,471 on September 17, 2015. The expected period of the buyback is from September 18, 2015 to November 17, 2015, and the expected number of shares expected to be bought back is 40,000 shares. The buyback price is set between $9.03 and $18.77 per share and the buyback shares are expected to be 3.02% of total shares issued by the Company.

The movement of the number of treasury shares from the Group’s buyback and its period end amount is as follows:

buyback is from September 18, 2015 to November 17, 2015, and the expected number of shares expected to be bought back is 40,000 shares. The buyback price is set between $9.03 and $18.77 per share and the buyback shares are expected to be 3.02% of total shares issued by the Company. The movement of the number of treasury shares from the Group’s buyback and its period end amount is as follows:	buyback is from September 18, 2015 to November 17, 2015, and the expected number of shares expected to be bought back is 40,000 shares. The buyback price is set between $9.03 and $18.77 per share and the buyback shares are expected to be 3.02% of total shares issued by the Company. The movement of the number of treasury shares from the Group’s buyback and its period end amount is as follows:	buyback is from September 18, 2015 to November 17, 2015, and the expected number of shares expected to be bought back is 40,000 shares. The buyback price is set between $9.03 and $18.77 per share and the buyback shares are expected to be 3.02% of total shares issued by the Company. The movement of the number of treasury shares from the Group’s buyback and its period end amount is as follows:	buyback is from September 18, 2015 to November 17, 2015, and the expected number of shares expected to be bought back is 40,000 shares. The buyback price is set between $9.03 and $18.77 per share and the buyback shares are expected to be 3.02% of total shares issued by the Company. The movement of the number of treasury shares from the Group’s buyback and its period end amount is as follows:	buyback is from September 18, 2015 to November 17, 2015, and the expected number of shares expected to be bought back is 40,000 shares. The buyback price is set between $9.03 and $18.77 per share and the buyback shares are expected to be 3.02% of total shares issued by the Company. The movement of the number of treasury shares from the Group’s buyback and its period end amount is as follows:
(Expressed in thousands) For theyear ended December 31,2015
Reason for buyback	Shares at the beginning of theperiod	Period increase	Shares at the end of the period	Period-end amount
To maintain the Company’s integrity and stockholders’ equity	-	19,323	19,323	$ 278,026

• a. Pursuant to the R.O.C. Securities and Exchange Law, the number of shares bought back as treasury share should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital surplus.

• b. Pursuant to the R.O.C. Securities and Exchange Law, treasury shares should not be pledged as collateral and is not entitled to dividends before it is reissued.

• c. Pursuant to the R.O.C. Securities and Exchange Law, treasury shares should be reissued to the employees within three years from the reacquisition date and shares not reissued within the three-year period are to be retired. Treasury shares to enhance the Company’s credit rating and the stockholders’ equity should be retired within six months of acquisition.

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• 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, 2015 and 2014, 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 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.

• 27) 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 stockholders’ meeting: 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.

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• D. The Company’s earnings distributions for 2014 and 2013 were resolved by the stockholders at the stockholders’ meeting dated June 18, 2015 and June 18, 2014,respectively. Details are as follows:

Legal reserve Special reserve Reversal of special reserve Cash dividends Total		2014			2013 Amount Dividends per share (in dollars) $ 101,320 202,641 286,895 ) 979,109 $ 0.74 $ 996,175
	Amount $ 154,998 309,995 - 1,071,726 $ 1,536,719	Dividends per share (in dollars)	(
		$ 0.81

• E. The earnings distribution for 2015 as resolved by the Board of Directors on March 22 , 2016 is set forth below:

2015

Legal reserve Special reserve Cash dividends Stock dividends Total	Amount $ 95,661 191,323 260,759 404,177 $ 951,920	Dividends per share (in dollars)
		$ 0.20 0.31

• F. For details on employees’ remuneration (bonuses) and directors’ and supervisors’ remuneration, please refer to Note 6(40).

28) Brokerage handling fee revenue

remuneration, please refer to Note 6(40). Brokerage handling fee revenue
Revenues from brokered trading - TWSE Revenues from brokered trading - OTC Revenues from brokered trading - Futures Others Total		For the year ended December 31, 201 5		For the year ended December 31, 201 4
		$ 943,529 381,072 673,724 137,303 $ 2,135,628		$ 1,030,920 424,157 565,008 112,506
				$ 2,132,591

29) Revenues from underwriting business

Revenues from underwriting business
Revenues from underwriting securities on a firm commitment basis Others Total		For the year ended December 31, 2015		For the year ended December 31, 2014
		$ 23,212 43,967 $ 67,179		$ 19,487 31,743
				$ 51,230

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30) Gain on trading of securities

Gain on trading of securities
Dealer: - TAIEX - OTC - Overseas trading - Unlisted stocks trading Subtotal Underwriters: - TAIEX - OTC Subtotal Hedging: - TAIEX - OTC Subtotal Total	For the year ended December 31, 201 5		For the year ended December 31, 201 4
	$ 321,490 256,562 ( 9,444) - 568,608 18,116 24,237 42,353 ( 155,384) ( 77,767) ( 233,151) $ 377,810		$ 381,209 320,733 227,654 4,737 934,333 24,498 21,874 46,372 22,770 ( 55,217) ( 32,447) $ 948,258

With respect to information shown above, amounts recognised for trading of securities generated from available-for-sale financial assets for the years ended December 31, 2015 and 2014 were $8,240 and $47,525, respectively.

31) Interest income

Interest income
Interest income from margin loans Interest income from bonds Others Total	For the year ended December 31, 201 5	For the year ended December 31, 201 4
	$ 771,559 557,734 3,204	$ 777,091 272,530 1,688
	$ 1,332,497	$ 1,051,309

32) (Loss) gain on valuation of securities

(Loss) gain on valuation of securities
(Loss) gain on sale of securities - dealer Loss on sale of securities - underwriting (Loss) gain on sale of securities - hedging Liabilities on covering of bonds Total	For the year ended December 31, 201 5	For the year ended December 31, 201 4
	( $ 378,532) ( 41,898) ( 80,135) - ( $ 500,565)	$ 112,238 ( 25,455) 24,469 ( 114) $ 111,138

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33) Gain on covering of borrowed securities and bonds with resale agreements-short sales For the year ended December 31, 201 5 For the year ended December 31, 201 4 (Loss) gain from the bond investments under resale agreements ( $ 23,035) $ 4,439 Gain (loss) from securities borrowing transactions - warrants 4,075 ( 7,241) Gain (loss) from covering - warrants 700 ( 5,711) Gain from securities borrowing transactions - dealer 27,308 8,708 Total $ 9,048 $ 195 34) Valuation gain (loss) on borrowed securities and bonds with resale agreements- short sales For the year ended December 31, 201 5 For the year ended December 31, 201 4 Valuation gain (loss) from the bond investments under resale agreements $ 38,389 ( $ 53,403) Valuation gain from securities borrowing transactions - dealer 6,826 1,486 Valuation gain (loss) from securities borrowing transactions - warrants 4,931 ( 1,833) Valuation gain from covering - warrants 5,062 1,372 Total $ 55,208 ( $ 52,378) 35) Gain on warrants issuance For the year ended December 31, 201 5 For the year ended December 31, 201 4 Gain on changes in fair value of call ( put ) warrant liabilities and redemption $ 783,416 $ 368,943 Losses on exercise of call ( put ) warrants before maturity ( 99,991) ( 75,278) Expenses arising out of issuance of call ( put ) warrants ( 65,050) ( 47,360) Total $ 618,375 $ 246,305 36) Gain on derivative financial instruments For the year ended December 31, 201 5 For the year ended December 31, 201 4 Futures contract gains $ 132,558 $ 87,047 Option trading (loss) gain ( 36,342) 78,644 (Loss) gain from asset swap options ( 2,059) 31,044 Others ( 262) ( 1,057) $ 93,895 $ 195,678	33) Gain on covering of borrowed securities and bonds with resale agreements-short sales For the year ended December 31, 201 5 For the year ended December 31, 201 4 (Loss) gain from the bond investments under resale agreements ( $ 23,035) $ 4,439 Gain (loss) from securities borrowing transactions - warrants 4,075 ( 7,241) Gain (loss) from covering - warrants 700 ( 5,711) Gain from securities borrowing transactions - dealer 27,308 8,708 Total $ 9,048 $ 195 34) Valuation gain (loss) on borrowed securities and bonds with resale agreements- short sales For the year ended December 31, 201 5 For the year ended December 31, 201 4 Valuation gain (loss) from the bond investments under resale agreements $ 38,389 ( $ 53,403) Valuation gain from securities borrowing transactions - dealer 6,826 1,486 Valuation gain (loss) from securities borrowing transactions - warrants 4,931 ( 1,833) Valuation gain from covering - warrants 5,062 1,372 Total $ 55,208 ( $ 52,378) 35) Gain on warrants issuance For the year ended December 31, 201 5 For the year ended December 31, 201 4 Gain on changes in fair value of call ( put ) warrant liabilities and redemption $ 783,416 $ 368,943 Losses on exercise of call ( put ) warrants before maturity ( 99,991) ( 75,278) Expenses arising out of issuance of call ( put ) warrants ( 65,050) ( 47,360) Total $ 618,375 $ 246,305 36) Gain on derivative financial instruments For the year ended December 31, 201 5 For the year ended December 31, 201 4 Futures contract gains $ 132,558 $ 87,047 Option trading (loss) gain ( 36,342) 78,644 (Loss) gain from asset swap options ( 2,059) 31,044 Others ( 262) ( 1,057) $ 93,895 $ 195,678	33) Gain on covering of borrowed securities and bonds with resale agreements-short sales For the year ended December 31, 201 5 For the year ended December 31, 201 4 (Loss) gain from the bond investments under resale agreements ( $ 23,035) $ 4,439 Gain (loss) from securities borrowing transactions - warrants 4,075 ( 7,241) Gain (loss) from covering - warrants 700 ( 5,711) Gain from securities borrowing transactions - dealer 27,308 8,708 Total $ 9,048 $ 195 34) Valuation gain (loss) on borrowed securities and bonds with resale agreements- short sales For the year ended December 31, 201 5 For the year ended December 31, 201 4 Valuation gain (loss) from the bond investments under resale agreements $ 38,389 ( $ 53,403) Valuation gain from securities borrowing transactions - dealer 6,826 1,486 Valuation gain (loss) from securities borrowing transactions - warrants 4,931 ( 1,833) Valuation gain from covering - warrants 5,062 1,372 Total $ 55,208 ( $ 52,378) 35) Gain on warrants issuance For the year ended December 31, 201 5 For the year ended December 31, 201 4 Gain on changes in fair value of call ( put ) warrant liabilities and redemption $ 783,416 $ 368,943 Losses on exercise of call ( put ) warrants before maturity ( 99,991) ( 75,278) Expenses arising out of issuance of call ( put ) warrants ( 65,050) ( 47,360) Total $ 618,375 $ 246,305 36) Gain on derivative financial instruments For the year ended December 31, 201 5 For the year ended December 31, 201 4 Futures contract gains $ 132,558 $ 87,047 Option trading (loss) gain ( 36,342) 78,644 (Loss) gain from asset swap options ( 2,059) 31,044 Others ( 262) ( 1,057) $ 93,895 $ 195,678	33) Gain on covering of borrowed securities and bonds with resale agreements-short sales For the year ended December 31, 201 5 For the year ended December 31, 201 4 (Loss) gain from the bond investments under resale agreements ( $ 23,035) $ 4,439 Gain (loss) from securities borrowing transactions - warrants 4,075 ( 7,241) Gain (loss) from covering - warrants 700 ( 5,711) Gain from securities borrowing transactions - dealer 27,308 8,708 Total $ 9,048 $ 195 34) Valuation gain (loss) on borrowed securities and bonds with resale agreements- short sales For the year ended December 31, 201 5 For the year ended December 31, 201 4 Valuation gain (loss) from the bond investments under resale agreements $ 38,389 ( $ 53,403) Valuation gain from securities borrowing transactions - dealer 6,826 1,486 Valuation gain (loss) from securities borrowing transactions - warrants 4,931 ( 1,833) Valuation gain from covering - warrants 5,062 1,372 Total $ 55,208 ( $ 52,378) 35) Gain on warrants issuance For the year ended December 31, 201 5 For the year ended December 31, 201 4 Gain on changes in fair value of call ( put ) warrant liabilities and redemption $ 783,416 $ 368,943 Losses on exercise of call ( put ) warrants before maturity ( 99,991) ( 75,278) Expenses arising out of issuance of call ( put ) warrants ( 65,050) ( 47,360) Total $ 618,375 $ 246,305 36) Gain on derivative financial instruments For the year ended December 31, 201 5 For the year ended December 31, 201 4 Futures contract gains $ 132,558 $ 87,047 Option trading (loss) gain ( 36,342) 78,644 (Loss) gain from asset swap options ( 2,059) 31,044 Others ( 262) ( 1,057) $ 93,895 $ 195,678
		For the year ended December 31, 201 5	For the year ended December 31, 201 4 ( $ 53,403) 1,486 ( 1,833) 1,372 ( $ 52,378) For the year ended December 31, 201 4 $ 368,943 ( 75,278) ( 47,360) $ 246,305 For the year ended December 31, 201 4 $ 87,047 78,644 31,044 ( 1,057) $ 195,678
		$ 38,389 6,826 4,931 5,062 $ 55,208 For the year ended December 31, 201 5
	$ 783,416 ( 99,991) ( 65,050) $ 618,375 For the year ended December 31, 201 5
	$ 132,558 ( 36,342) ( 2,059) ( 262) $ 93,895		(

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37) Other operating income

37) Other operating income
Income from securities lending Revenue from providing agency service for stock affairs Handling fee revenues from funds Dividend income Others Total 38) Handling charges Brokerage handling fee expense Dealer handling fee expense Refinancing processing fee expense Total 39) Financial expenses Interest expense from repurchase agreements Loans interest expense Other interest expense Total	For the year ended December 31, 201 5	For the year ended December 31, 201 4
	$ 7,696 69,157 37,131 147,095 130,689 $ 391,768 For the year ended December 31, 201 5	$ 8,456 71,117 34,562 253,209 111,627
		$ 478,971
		For the year ended December 31, 201 4
	$ 234,647 88,198 1,343 $ 324,188 For the year ended December 31, 201 5	$ 215,801 95,471 482
		$ 311,754
		For the year ended December 31, 201 4
	$ 206,096 140,356 11,326 $ 357,778	$ 59,764 107,966 10,325
		$ 178,055

40) Employee benefits

Employee benefits
Salaries Labor and health insurance Pension Other employee benefits Total	For the year ended December 31, 201 5	For the year ended December 31, 201 4
	$ 1,635,124 119,515 68,354 99,886 $ 1,922,879	$ 1,714,758 114,548 65,400 84,139
		$ 1,978,845

• A. In accordance to the Company’s Article of Incorporation, when the Company distributes earnings, 3% should be appropriated as directors’ and supervisors’ remuneration, 2% should be appropriated as employees’ bonuses and 95% should be appropriated as dividends to shareholders. The aforementioned distributions shall not be made if total distributable earnings are less than 5% of paid-in capital. However, in accordance to the Company Act amendment on May 20, 2015, companies should distribute earnings for employees’ remuneration on a fixed or pro-rata basis. When a company has an accumulated deficit, earnings should be channeled to cover losses. The aforementioned employees’ remuneration are distributable by stock or cash and should be resolved by stockholders at the stockholders’ meeting, with a majority of the shareholders present who represent two-thirds or more of the total number of its outstanding shares. A report of such remunerations shall be submitted to the stockholders' meeting.

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The Board of Directors of the Company has approved the amended Articles of Incorporation of the Company on January 27, 2016. According to the amended Articles, the remainder of the year-end income before taxes less income before appropriating employees’ compensation and directors’ remuneration, if any, shall appropriate an employees’ compensation no less than 1.6% and directors’ remuneration no more than 2%. However, when the Company has an accumulated deficit, earnings to cover the deficit shall first be retained before appropriating employees’ compensation and directors’ remuneration. The amended Articles will be resolved in the stockholders’ meeting in 2016.

In addition, on January 27, 2016, the Board of Directors resolved the 2015 appropriation rate for employees’ compensation at 2% and directors’ remuneration at 2%. The method of distribution was elected to be in cash.

• B. For the years ended December 31, 2015 and 2014, employees’ compensation was accrued at $22,293 and $22,563, respectively; directors’ and supervisors’ remuneration was accrued at $22,293 and $33,844, respectively. The aforementioned amounts were recognised in salary expenses.

• C. For 2015, employees’ compensation was estimated at 2% and directors’ remuneration at 2%, based on the year-end income before taxes less income before appropriating employees’ compensation and directors’ remuneration. Employees’ compensation to be distributed was $22,293 and directors’ remuneration to be distributed was $22,293. The amounts were resolved by the Board of Directors on March 22, 2016 and were elected to be distributed by cash. There were no differences between the above-mentioned employees’ compensation and directors’ remuneration amounts to be distributed and the estimated amounts in 2014. Where 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 are accounted for as changes in estimates.

• D. For 2014, the estimates, after considering factors such as legal reserve, were 2% and 3% of income after taxes. Where 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 are accounted for as changes in estimates.

• The actual distributed amount of employees’ bonus and directors’ remuneration for 2014 as resolved at the stockholders’ meeting was $22,563 and $33,844, respectively; this was in agreement with the estimates in the 2014 financial statements.

• 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.

41) Depreciation and amortization

Depreciation and amortization
Depreciation Amortization Total	For the year ended December 31, 201 5	For the year ended December 31, 201 4
	$ 94,478 29,224 $ 123,702	$ 99,490 18,091
		$ 117,581

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42) Other operating expenses

Other operating expenses
Rentals Taxes Computer information expenses Postage Bad debt expenses Others Total	For the year ended December 31, 201 5 $ 126,400 528,641 165,337 70,937 161,237 357,477 $ 1,410,029	For the year ended December 31, 201 4
		$ 120,706 492,697 150,955 67,961 2,638 340,694 $ 1,175,651

For the years ended December 31, 2015 and 2014, as a result of the principal being unable to pay off outstanding margin loans within the agreed term, the Group, after evaluating the risk of future defaults, for all margin loans receivables has recognised bad debt expenses of $153,791 and $0, respectively.

43) Other gains and losses

Other gains and losses
Financial income Net gain on disposal of investments Net currency exchange gain Other non-operating revenues and gains Total	For the year ended December 31, 201 5 $ 135,809 30,308 380,894 226,823 $ 773,834	For the year ended December 31, 201 4
		$ 149,642 151,537 29,372 151,933 $ 482,484

44) Income tax

A. Income tax expense

a)Components of income tax expense:

come tax Income tax expense a)Components of income tax expense:
Current tax: Current tax on profits for the periods (Over) under provision of prior year’s income tax Tax on undistributed earnings Total current tax Deferred taxes: Temporary differences Total deferred taxes Income tax expense	For the year ended December 31, 201 5 $ 159,813 ( 5,531) - 154,282 ( 8,113) ( 8,113) $ 146,169	For the year ended December 31, 201 4
		$ 159,996 ( 7,926) 1,703 153,773 50,309 50,309 $ 204,082

b) The income tax charge relating to components of other comprehensive income is as follows:

follows:
Remeasurement loss of defined benefit plan		For the year ended December 31, 201 5 ($ 1,380)	For the year ended December 31, 201 4
			($ 9,404)

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B. Reconciliation between income tax expense and accounting profit: For the year ended December 31, 201 5 For the year ended December 31, 201 4 Tax calculated based on profit before tax and statutory tax rate $ 223,183 $ 331,643 Effects from items disallowed by tax regulation 18,089 14,998 Prior year income tax (over) underestimation ( 5,531 ) ( 7,926 ) Effects from tax exempt income ( 105,731 ) ( 156,243 ) Minimum tax 16,159 19,907 Tax on undistributed earnings - 1,703 Income tax expense $ 146,169 $ 204,082	B. Reconciliation between income tax expense and accounting profit: For the year ended December 31, 201 5 For the year ended December 31, 201 4 Tax calculated based on profit before tax and statutory tax rate $ 223,183 $ 331,643 Effects from items disallowed by tax regulation 18,089 14,998 Prior year income tax (over) underestimation ( 5,531 ) ( 7,926 ) Effects from tax exempt income ( 105,731 ) ( 156,243 ) Minimum tax 16,159 19,907 Tax on undistributed earnings - 1,703 Income tax expense $ 146,169 $ 204,082	B. Reconciliation between income tax expense and accounting profit: For the year ended December 31, 201 5 For the year ended December 31, 201 4 Tax calculated based on profit before tax and statutory tax rate $ 223,183 $ 331,643 Effects from items disallowed by tax regulation 18,089 14,998 Prior year income tax (over) underestimation ( 5,531 ) ( 7,926 ) Effects from tax exempt income ( 105,731 ) ( 156,243 ) Minimum tax 16,159 19,907 Tax on undistributed earnings - 1,703 Income tax expense $ 146,169 $ 204,082	B. Reconciliation between income tax expense and accounting profit: For the year ended December 31, 201 5 For the year ended December 31, 201 4 Tax calculated based on profit before tax and statutory tax rate $ 223,183 $ 331,643 Effects from items disallowed by tax regulation 18,089 14,998 Prior year income tax (over) underestimation ( 5,531 ) ( 7,926 ) Effects from tax exempt income ( 105,731 ) ( 156,243 ) Minimum tax 16,159 19,907 Tax on undistributed earnings - 1,703 Income tax expense $ 146,169 $ 204,082
	$ 223,183 18,089 ( 5,531 ) ( 105,731 ) 16,159 - $ 146,169	( (	$ 331,643 14,998 7,926 ) 156,243 ) 19,907 1,703 $ 204,082

• C. Deferred income tax assets or liabilities arising from temporary differences, loss carryforwards, and investment tax credits are as follows:

			For	For	the year ended December	the year ended December	31, 2015	31, 2015	31, 2015
						Items recognized in
					Items	other
				recognized in		comprehensive
	January 1			profit or loss		income			December 31
Temporary differences:
Deferred income tax assets
Bad debts expense	$	5,053		$	8,018	$	-	$		13,071
Others		42,398		(	431)		1,293			43,260
Subtotal	$	47,451		$	7,587	$	1,293	$		56,331
Deferred income tax
liabilities
Unrealized exchange gain	($	27,153)		($	5,009)	$	-	($		32,162)
Others	(	21,947)			5,535		87	(		16,325)
Subtotal	($	49,100)		$	526	$	87	($		48,487)
Total	($	1,649)		$	8,113	$	1,380	$		7,844
			For		the year ended December		31, 2014
						Items recognized in
					Items	other
				recognized in		comprehensive
	January 1			profit or loss		income			December 31
Temporary differences:
Deferred income tax assets
Bad debts expense	$	13,286		($	8,233)	$	-	$		5,053
Others		40,180		($	7,081)		9,299			42,398
Subtotal	$	53,466		($	15,314)	$	9,299	$		47,451
Deferred income tax
liabilities
Unrealized exchange gain	($	13,694)		($	13,459)	$	-	($		27,153)
Others	(	516)		(	21,536)		105	(		21,947)
Subtotal	($	14,210)		($	34,995)	$	105	(		49,100)
Total	$	39,256		($	50,309)	$	9,404	($		1,649)

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• D. As of December 31, 2015, the Company’s income tax returns through 2013 have been assessed by the National Tax Authority. The income tax returns through 2013 of President Futures, President Capital Management, President Venture Capital, President Personal Insurance Agency and President Insurance Agency have also been assessed.

• E. Unappropriated earnings

• December 31, 2015 December 31, 2014

• 1998 and onwards $ 960,922 $ 1,549,976

• F. Imputation tax system

• a) As of December 31, 2015 and 2014, the balance of the imputation tax credit account and the creditable tax rate are $498,637 and $635,656, respectively.

• b) The imputation tax credit rate based on the appropriation of 2014 earnings is 20.63% in 2015; the imputation tax credit rate is 20.66% for 2015.

• 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 recognised the income tax expense relating to the additional income tax payable.

45) Earnings per share

additional income tax payable. ) Earnings per share
Basic earnings per share Net income attributable to common shareholders Dilutive effect of common stock	For theyear ended December		31,2015
	Amount after tax Weighted-average outstanding common shares (In thousands) $ 956,613 1,319,707 - 1,670 $ 956,613 1,321,377 For theyear ended December	Weighted-average outstanding common shares (In thousands)	Earnings per share (In dollars) $ 0.72 $ 0.72 31,2014
		1,319,707 1,670
equivalents Employee bonus Basic earnings per share Net income attributable to common shareholders Dilutive effect of common stock
		1,321,377
	Amount after tax $ 1,583,169 - $ 1,583,169	Weighted-average outstanding common shares (In thousands)	Earnings per share (In dollars) $ 1.20
		1,323,119 1,355
			$ 1.20
equivalents Employee bonus
		1,324,474

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46) Business combinations

• A. The Company completed acquisition of the securities brokerage business of Standard Charted (Taiwan) Bank's consumer finance business through transfer on October 9, 2014. This transaction is to expand scale of securities brokerage business, raising market share of securities brokerage business and enforce customer basis to develop business synergy. The consideration for the transfer is $99,312. Net value of customers' margin loan receivable and short sale deposit as of the record date totaled $557,005 and the total amount of the transaction is $656,317.

• B. The Company engaged Diwan Financial Advisory Services Co., Ltd. to conduct purchase price allocation analysis as of October 9, 2014 as the record date. The consideration paid, the fair value of assets acquired and liabilities assumed on the acquisition date are presented below:

acquisition date are presented below:
		October 9, 2014
Purchase consideration – Cash paid	$	656,317
Fair value of the identifiable assets acquired
and liabilities assumed
Margin loans receivable		575,094
Refinancing security deposits		1,120
Receivables from refinance guaranty		1,222
Interest on margin loans receivable		9,475
Property and equipment		3,148
Intangible assets		54,160
Deposits on short sales	(	14,224)
Short sale proceeds payable	(	15,680)
Interest on short sale proceeds payable	(	2)
Total identifiable net assets		614,313
Goodwill	$	42,004

7. RELATED PARTY TRANSACTIONS

1) Names and relationships of related parties

LATED PARTY TRANSACTIONS Names and relationships of related parties
Names of related parties Uni-President Asset Management Corp. Uni-President Enterprises Corp. President Chain Store Corp. (PCSC) President Pharmaceutical Corporation Ton Yi Industrial Corp. President Tokyo Co., LTD.	Relationship with the Company
	Associate Entity having significant influence on the Company Other related party Other related party Other related party Other related party

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

Associates: Uni-President Assets Management Corp.	For the year ended December 31, 201 5	For the year ended December 31, 201 4
	$ 41,292	$ 37,941

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

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B. Rent income

Rent income
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
			2015	2014
	2014.05.01~2016.06.30 2012.08.01~2015.10.05 2014.04.01~2018.03.31	$ 521 - 1,335 -	$ 6,985 4,496 7,138 391	$ 6,949 5,880 6,588 396
			$ 19,010	$ 19,813

Rental income mentioned above is derived from leasing part of the Group’s office space and business premises to various related parties and calculated as agreed by both parties. Lease payments are collected on schedule in accordance with the terms of the lease contracts.

C. Stock custodian income

lease contracts. Stock custodian income
Associate: Uni-President Assets Management Corp. Other related party: Uni-President Enterprise Corp. President Chain Store Corp. (PCSC) Ton Yi Industrial Corp. Others		For the year ended December 31, 201 5		For the year ended December 31, 201 4
		$ 130 3,692 1,603 1,244 2,700 $ 9,369		$ 129 3,786 1,593 1,426 2,470 $ 9,404

D. Equipment rental

Equipment rental
Other related party: President Tokyo Co., Ltd. Others	For the year ended December 31, 2015	For the year ended December 31, 2014
	$ 5,718 1,382 $ 7,100	$ 6,022 996
		$ 7,018

E. Purchases of trading securities – dealer

Other related parties: Uni-President Enterprises Corp. Ton Yi Industrial Corp. President Chain Store Corp. Total	December 31, 2015 Ending Shares Ending Balance 129 $ 7,082 67 1,059 - - $ 8,141	For the year ended December 31, 2015 Gain (loss) ($ 1,018) ( 352) ( 754) ($ 2,124)
	Ending Shares 129 67 -

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Other related parties: Uni-President Enterprises Corp. Ton Yi Industrial Corp. President Chain Store Corp. Total	December 31, 2014 For the year ended December 31, 2014 Ending Shares Ending Balance Gain (loss) 150 $ 7,530 ($ 1,696) 60 1,200 ( 3,216) 35 8,558 2,034 $ 17,288 ($ 2,878)
	Ending Shares 150 60 35

F. Compensation of key management personnel The compensation of key management such as directors, supervisors, general managers, vice general managers were as follows:

vice general managers were as follows:
Salary and short-term employee benefits Retirement benefits Other long-term employee benefits Termination benefits Share-based payment Total	For the year ended December 31, 201 5	For the year ended December 31, 201 4
	$ 113,506 1,944 - - - $ 115,450	$ 124,588 1,795 - - -
		$ 126,383

(Blank below)

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8. PLEDGED ASSETS

The Company’s assets pledged or restricted for use were as follows:

Assets	December 31, 2015 $ 300,000 3,012,600 11,012,078 1,009,490 1,100,000 50,000 777,045 1,634,368 1,308,985 722,000 800 37,451	December 31, 2014	Purposes
Financial assets at fair value through profit or loss - current: Trading securities (par value) - Corporate bonds - Government bonds - Overseas bonds - International bonds - Bank debentures Financial assets at fair value through profit or loss- non-current - Government bonds (par value) 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)		$ 950,000 995,100 7,593,791 - - 50,000 838 1,697,624 1,319,666 902,000 800 37,693	Securities for bonds sold under repurchase agreements Securities for bonds sold under repurchase agreements Securities for bonds sold under repurchase agreements 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

9. SIGNIFICANT COMMITMENTS

None.

10. SIGNIFICANT LOSS FROM NATURAL DISASTER

• None.

11. SIGNIFICANT SUBSEQUENT EVENT

None.

12. OTHER

1) Management objective and policy of financial risks

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 tolerance.

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• B. Risk management system

• In order to ensure the completeness 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.

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 reports 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 entire Group and is responsible for the following:

• a. Supervise and monitor daily risk management of the entire 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 entire Group

• b. Analyze and control the entire 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:

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  - a. Establish Risk Management Policy of the entire Group

  - b. Develop effective method for measurement and risk management in an entity

  - c. Review risk management system of business units

  - 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 following:

  • 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 completeness 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

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handling procedures.

• (B) Credit risk management

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

• (C) Fund liquidity risk

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.

  • (C) The continued effectiveness of hedging and risk-offsetting strategy is measured by the gain and loss of overall position (hedging position and trading position), in order to track reasonableness of the profit or loss of hedging position and the offsetting relationship with the profit or loss of trading position, and to control them within a reasonable range.

• 2) Credit risk

• A. Source and definition of credit risk

The credit risk exposure of 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 refers to the issuers of financial debt instruments held by the Group failing to repay its obligation due to the fact that the issuer breaches the contract resulting in the risk of financial loss 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 enhancements, is

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equivalent to the carrying amount. In Taiwan, the sources of credit risk of the Group are primarily resulting 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 equivalents

Cash and cash equivalents include time deposit, demand deposits and checking deposits. 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. 41% of convertible corporate bond is guaranteed by banks. 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 Taiwan Corporate Credit Risk Index (TCRI).

• (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 fulfil contractual obligation in the future. As a result, the credit risk is low.

• d. Derivatives-OTC

The Group signs International Swaps and Derivatives Association (ISDA) agreements 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 terminates 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 agreement is signed, the Credit Support Annex (CSA) is also signed. According to the CSA, collateral will be transferred from a party to the other during transaction process to mitigate the risk of counterparty in open interest. Please refer to Note 6(11).

Types of OTC derivative transactions in which the Group is engaged include interest rate swap and swap transaction. The counterparties are all from

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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 credit rating, the credit risks from counterparties are extremely low. Please refer to Note 6(11).

• 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 130% 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. 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.

• 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

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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 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 fulfil 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 fulfil the financial commitment is weak. Any adverse operation, financial or economic movement shall further weaken its ability to fulfil the financial commitment.

• (C) High risk: a company or the underlying position’s capability to fulfil the financial commitment is uncertain. The capability to fulfil 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 fulfil 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 Credit rating of Credit rating of Historical default
Taiwan Ratings TCRI rate (1 year)
Low risk twAAA ~twBBB- 1~4 0.03%~1.21%
Medium risk twBB+ ~ twBB 5~6 1.21%~5.10%
High risk twBB- ~ twC 7~9 5.10%~26.85%
Impairment D D -

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

	The table of the credit quality of financial assets	The table of the credit quality of financial assets	The table of the credit quality of financial assets	The table of the credit quality of financial assets
As of December 31, 2015: 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 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	Normal assets Impaired Low risk Medium risk High risk $ 5,115,225 $ 392 $ - $ - 210,502 - - - 21,537,341 676,374 62,395 - 33,288 - - - 1,860,069 - - - 207,563 - - - 770,353 - - - 10,439,247 - - - 2,159 - - - 4,135 - - - 7,686,554 - - - 74,345 - - - 75,703 - - - 3,142 - - - 5,517,496 - - - 1,530,833 - - - 3,551,317 - - - 50,980 - - - 1,221,955 - - - $ 59,892,207 $ 676,766 $ 62,395 $ -				Provisions	Total Recognised losses		Net $ 5,115,617 210,502 22,276,110 33,288 1,860,069 207,563 770,353 10,434,,581 2,159 4,135 7,686,554 74,345 75,703 3,142 5,517,496 1,530,833 3,551,317 50,980 1,221,955 $ 60,626,702
					$ - - - - - - - - - - - - - - - - - - 166,572 $ 166,572	$ 5,115,617 $ - 210,502 - 22,276,110 - 33,288 - 1,860,069 - 207,563 - 770,353 - 10,439,247 4,666 2,159 - 4,135 - 7,686,554 - 74,345 - 75,703 - 3,142 - 5,517,496 - 1,530,833 - 3,551,317 - 50,980 - 1,388,527 166,572
		$ 676,766	$ 62,395	$ -		$ 60,797,940	$ 171,238

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The table of the credit quality of financial assets

As of December 31, 2014: 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 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	Normal assets	Normal assets	Normal assets	Impaired $ - - - - - - - - - - - - - - - - - - -	Provisions	Total Recognised losses $ 6,355,219 $ - 242,193 - 13,695,794 - 2,517 - 1,626,959 - 37,026 - 1,502,364 - 13,415,416 6,654 219 - 1,670 - 5,569,228 - 12,224 - 11,042 - 994 - 6,905,877 - 354,054 - 3,106,558 - 50,518 - 1,301,482 12,532 $ 54,191,354 $ 19,186	Total Recognised losses $ 6,355,219 $ - 242,193 - 13,695,794 - 2,517 - 1,626,959 - 37,026 - 1,502,364 - 13,415,416 6,654 219 - 1,670 - 5,569,228 - 12,224 - 11,042 - 994 - 6,905,877 - 354,054 - 3,106,558 - 50,518 - 1,301,482 12,532 $ 54,191,354 $ 19,186	Net $ 6,355,219 242,193 13,695,794 2,517 1,626,959 37,026 1,502,364 13,408,762 219 1,670 5,569,228 12,224 11,042 994 6,905,877 354,054 3,106,558 50,518 1,288,950 $ 54,172,168
	Low risk	Medium risk High risk $ 317 $ - - - 911,333 29,378 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $ 911,650 $ 29,378
	$ 6,354,902 242,193 12,755,083 2,517 1,626,959 37,026 1,502,364 13,415,416 219 1,670 5,569,228 12,224 11,042 994 6,905,877 354,054 3,106,558 50,518 1,288,950 $ 53,237,794				$ - - - - - - - - - - - - - - - - - - 12,532
			$ 29,378	$ -	$ 12,532		$ 19,186

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3) Liquidity risk

• A. Definition and source of liquidity risk

Liquidity risk refers to possible financial losses arising from the inability to realize the asset or to obtain sufficient fund to fulfil 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.

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  - (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.

• 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 fulfil 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:

(Blank below)

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As of December 31, 2015

As of December 31, 2015
Short-term loans Commercial papers payable Financial liabilities at fair value through profit or loss-current Non-derivative financial liabilities 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	Immediately $ - - 1,006,149 410,406 - 1,509,258 1,744,273 - 7,678,157 5,225,039 987,259 1,477,639 - $ 20,038,180	Less than 3 months $ 3,736,439 5,600,000 - 7,189 15,641,269 - - 290,144 - 42,837 6,857 219,548 851,796 $ 26,396,079	3-12 months $ - - - 7,166 - - - 58,426 - - - 597,760 - $ 663,352	1-5 years $ - - - 9,283 - - - - - - 92,911 - - $ 102,194	Over 5 years $ - - - - - - - - - - - - - $ -	Total
						$ 3,736,439 5,600,000 1,006,149 434,044 15,641,269 1,509,258 1,744,273 348,570 7,678,157 5,267,876 1,087,027 2,294,947 851,796 $ 47,199,805

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As of December 31, 2014

Short-term loans Commercial papers payable Financial liabilities at fair value through profit or loss-current Non-derivative financial liabilities 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	Immediately $ - - 1,538,993 478,383 - 1,519,052 1,842,391 - 5,553,149 6,419,589 170,783 283,068 - $ 17,805,408	Less than 3 months $ 8,760,977 3,750,000 - 1,091 9,105,545 - - 892,780 - 15,908 5,135 193,001 294,585 $ 23,019,022	3-12 months $ - - - 9,519 - - - 42,791 - - - 683,212 - $ 735,522	1-5 years $ - - - 40,685 - - - - - - 94,037 - - $ 134,722	Over 5 years $ - - - - - - - - - - - - - $ -	Total $ 8,760,977 3,750,000 1,538,993 529,678 9,105,545 1,519,052 1,842,391 935,571 5,553,149 6,435,497 269,955 1,159,281 294,585 $ 41,694,674

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• (C) 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:

December 31, 2015 Not later than one year Later than one year but not later than five years Over five years Total December 31, 2014 Not later than one year Later than one year but not later than five years Over five years Total	Operating leases expenditures (Lessee) $ 89,497 125,106 6,720 $ 221,323 Operating leases expenditures (Lessee) $ 130,065 159,883 8,967 $ 298,915	Operating leases income (Lessor)
		$ 7,025 3,541 -
		$ 10,566
		Operating leases income (Lessor)
		$ 19,333 3,925 -
		$ 23,258

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.

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Statistical table		Statistical table
for one-day VaR of transactions		for one-day VaR of transactions
For the year ended		For the year ended
December 31, 2015 Amount		December 31, 2014	Amount
December 31, 2015 $	76,201	December 31, 2014 $ 75,603
VaR Maximum	161,498	VaR Maximum	128,930
VaR Average	72,794	VaR Average	74,968
VaR Minimum	27,851	VaR Minimum	27,243
Statistical table for VaR of various risk indicators of transactions:
For the year ended	Foreign		Share
December 31, 2015	exchange Interest		ownership
December 31, 2015	$	20,875 $ 22,788 $	69,843
VaR Maximum		49,727 58,129	166,019
VaR Average		17,236 29,805	65,912
VaR Minimum		3,691 17,989	19,157
Statistical table for VaR of various risk indicators of transactions:
For the year ended	Foreign		Share
December 31, 2014	exchange Interest		ownership
December 31, 2014	$	4,966 $ 21,712 $	69,387
VaR Maximum		28,810 31,443	122,663
VaR Average		7,086 13,353	72,535
VaR Minimum		656 4,605	25,844

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, 2015 and 2014：

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Financial assets in foreign currencies Cash and cash equivalents Financial assets at fair value through profit or loss Available-for-sale financial assets - current Bonds purchased under resale agreements Available-for-sale financial assets - non current Others Financial liabilities in foreign currencies Short-term loans Financial liabilities at fair value through profit or loss Bonds sold under repurchase agreements Others			December 31, 2015	December 31, 2015	December 31, 2015		Total $ 2,172,986 17,671,995 102,191 770,353 59,479 7,085,137 2,391,439 784,817 11,019,864 4,756,641
	USD	EUR	AUD	RMB	HKD	Others
	$ 728,871 8,038,864 102,191 717,592 59,479 4,744,871 1,617,539 732,305 7,895,002 3,642,918	$ 1,687 855,281 - - - 12,065 - - 541,649 7,187	$ 4,694 757,283 - 52,761 - 4,124 30,221 52,409 638,183 1,297	$ 666,430 7,794,732 - - - 226,468 320,179 103 1,945,030 132,615	$ 718,677 158,308 - - - 1,958,133 423,500 - - 871,110	$ 52,627 67,527 - - - 139,476 - - - 101,514

Note: As of December 31, 2015, foreign exchange rates of the above currencies to TWD were 1 USD =32.825 TWD; 1 EUR=35.880 TWD; 1 AUD=23.985 TWD; 1 RMB=4.995TWD; and 1 HKD=4.235 TWD, respectively.

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Financial assets in foreign currencies Cash and cash equivalents Financial assets at fair value through profit or loss Bonds purchased under resale agreements Available-for-sale financial assets - non current Others Financial liabilities in foreign currencies Short-term loans Financial liabilities at fair value through profit or loss Bonds sold under repurchase agreements Others			December 31, 2014	December 31, 2014	December 31, 2014		Total $ 3,733,376 11,398,188 1,502,364 56,115 5,587,519 3,288,977 1,496,996 7,134,113 4,038,625
	USD	EUR	AUD	RMB	HKD	Others
	$ 1,808,123 6,126,415 1,062,685 56,115 3,253,253 2,077,627 1,050,140 3,722,437 3,050,646	$ 5,594 1,909,970 - - 18,820 3,847 - 1,571,202 4,659	$ 6,307 969,842 439,679 - 15,193 - 446,856 869,437 7,819	$ 1,062,735 1,606,930 - - 387,377 467,191 - 971,037 119,107	$ 849,859 775,469 - - 1,899,529 734,400 - - 832,932	$ 758 9,562 - - 13,347 5,912 - - 23,462

Note: As of December 31, 2014, foreign exchange rates of the above currencies to TWD were 1 USD =31.650 TWD; 1 EUR=38.470 TWD; 1 AUD=25.905 TWD; 1 RMB=5.092TWD; and 1 HKD=4.080 TWD, respectively.

• D. The total exchange gain, including realized and unrealized, arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2015 and 2014, amounted to $380,894 and $29,372, respectively. For the current year, the USD appreciated as compared to other currencies, resulting in foreign exchange gains and losses. Consequently, the Group’s USD bonds sold under resale/repurchase agreements resulted in a realized foreign exchange loss of approximately $96,398. In addition, due to the functional currency of the Offshore Securities Unit being USD, and the EUR and RMB depreciating as compared to the USD, realized foreign exchange gains arising from foreign currency denominated liabilities were $312,067 and $132,860, respectively.

• E. In addition, foreign securities of the Group’s trading securities recognised gains (losses) on trading of securities and net gains (losses) of trading securities measured at fair value through profit or loss due to the appreciation of the USD respective to other currencies as well as variations in interests and prices. For the year ended December 31, 2015, gains (losses) on trading of securities denominated under EUR, USD and RMB was ($227,523), $193,496 and $176,351, respectively, and net losses of trading securities measured at fair value through profit or loss of foreign bonds denominated under EUR, USD and RMB was $20,050, $122,565 and $247,128, respectively.

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• 5) Information on the fair values and hierarchy of the financial instruments

• A. Financial instruments and non-financial instruments not measured at fair value 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, 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(5)3.

12(5)3.
Asset items Non-financial assets Investment property Asset items Non-financial assets Investment property	Total			December 31,2015
			Quoted prices of the same assets in active markets (level 1) $ -	Other significant observable inputs (level 2) $ 666,669 December 31,2014	Significant non-observable inputs (level 3)
					$ -
			Quoted prices of the same assets in active markets (level 1) $ -	Other significant observable inputs (level 2) $ 659,287	Significant non-observable inputs (level 3)
					$ -

The fair value of investment property held by the Group was assessed by external valuation experts using comparison approach and income approach.

• B. Valuation techniques

• (A) 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. 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. 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. If quoted market prices in an active market are not available, SWAP and IRS are valued at the discounted cash flow method, and options are valued at the Black-Scholes model.

• (B) When available-for-sale financial assets have quoted market prices available in an active market, the fair value is determined using the market price.

• C. Fair value hierarchy of the financial instruments

• (A) Definitions for the hierarchy classifications of financial instruments measured at fair value

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• a. Level 1

• Level 1, are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date. An active market has to satisfy all the following conditions: a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The Group’s investments in listed stocks, beneficiary certificates, on-the-run Taiwan central government bonds and derivative instruments with quoted market prices, are deemed as level 1.

• b. Level 2

• Inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Investments of the Group such as off-the-run issue of government bonds, corporate bonds, bank debentures, 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, 2015 and 2014, there was no significant transfer of financial instruments between Level 1 and Level 2.

• c. Level 3

There is no financial instrument in level 3.

• (B) Hierarchy of fair value estimation of financial instruments

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Financial instrument items measured at fair value Recurring fair value 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-current Stock investments Bond investments Financial assets at fair value through profit or loss -noncurrent Available-for-sale financial assets-noncurrent Stock investments Liabilities Financial liabilities at fair value through profit or loss-current Derivative financial instruments Assets Financial assets at fair value through profit or loss-current Liabilities Financial liabilities at fair value through profit or loss- current		December	31, 2015
	Total	Level 1	Level 2	Level 3
	$ 5,044,988 22,276,110 554,954 300,770 102,191 50,980 59,479 1,006,149 2,100,920 433,932	$ 4,952,140 1,783,082 554,954 300,770 102,191 - 59,479 1,006,149 1,893,357 367,253	$ 92,848 20,493,028 - - - 50,980 - - 207,563 66,679	$ - - - - - - - - - -

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Financial instrument items measured at fair value Recurring fair value Non-derivative financial instruments Assets Financial assets at fair value through profit or loss-current Stock investments Bond investments Others Financial assets at fair value through profit or loss -noncurrent Available-for-sale financial assets-noncurrent Stock investments Liabilities Financial liabilities at fair value through profit or loss-current Derivative financial instruments Assets Financial assets at fair value through profit or loss-current Liabilities Financial liabilities at fair value through profit or loss- current		December	31, 2014
	Total	Level 1	Level 2	Level 3
	$ 5,977,609 13,695,794 1,374,712 50,518 56,115 1,538,993 1,666,502 529,257	$ 5,777,331 11,380,244 1,374,712 - 56,115 1,538,993 1,629,476 455,385	$ 200,278 2,315,550 - 50,518 - - 37,026 73,872	$ - - - - - - - -

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6) Capital management

• A. 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.

• B. 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, 2015 and 2014, the capital adequacy ratios were 500% and 524%, respectively as required by the regulations.

• 7) Assets and liabilities of trust accounts

• The Group commenced its trust business in December 2011. 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 consolidated financial statements on a semiannual basis. Details are as follows:

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A. Balance sheet of trust accounts

			December 31	December 31
Trust assets			2015		2014
Bank savings		$	240,765	$		97,096
Structured notes			230,020			172,995
Stock			261,346			566,943
Fund			2,480,182			1,186,816
Securities lending			702,467			631,513
Accounts receivable			85,776			18,398
Total of trust assets		$	4,000,556	$		2,673,761
Trust liabilities
Accounts payable		$	3,173	$		4,446
Trust capital			4,047,862			2,550,517
Retained earnings	(		50,479 )			118,798
Total of trust liabilities		$	4,000,556	$		2,673,761
Investment (loss) gain- unrealized(
B. Income statement of trust	accounts
			For theyears ended	December	31
Item			2015		2014
Trust income
Interest income
		$	280	$		185
Cash dividends received			11,844			4,040
Income from stocks lending			29,742			19,416
Investment gains- realized			64,196			20,452
Investment (loss) gain-
unrealized	(		94,723 )			105,576
Other gains			9			-
Subtotal			11,348			149,669
Trust expenses
Management fee	(		60 )(			49)
Service fee	(		8 )(			3)
Borrowing costs	(		3,373 )(			2,637)
Remittance fee	(		2 )(			6)
Income before income tax			7,905			146,974
Income tax expense	(		28 )(			18)
Net income		$	7,877	$		146,956
C. Property list of trust accounts
			December 31
Items			2015		2014
Bank savings		$	240,765	$		97,096
Structured notes			230,020			172,995
Funds			2,480,182			1,186,816
Stock			261,346			566,943
Securities lending			702,467			631,513
Others			85,776			18,398
Total		$	4,000,556	$		2,673,761
Investment (loss) gain- unrealized(

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8) 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		December31,2015	December31,2015	December	31,2014	Standard	Enforcement
			Calculation	Ratio	Calculation	Ratio
17	Stockholders’equity (Total liability－futures trader’s equity)		3,042,810	11.49	3,036,606	32.84	≧1	Met the requirement
			264,716		92,460
17	Current assets Current liabilities		3,287,734	156.42	3,112,790	171.98	≧1	Met the requirement
			21,019		18,100
22	Stockholders’equity Minimumpaid-in capital		3,042,810 400,000	760.70%	3,036,606	759.15%	≧60% ≧40%	Met the requirement
					400,000
22	Adjusted net capital Total amount of customer margins required for the open positions of futures traders		2,929,829	4615.51%	2,853,677	3782.15%	≧20% ≧15%	Met the requirement
			63,478		75,451

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9) 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		December31,2015	December31,2015	December	31,2014	Standard	Enforcement
			Calculation	Ratio	Calculation	Ratio
17	Stockholders’equity (Total liability－futures trader’s equity)		1,383,295	7.62	1,287,073	9.62	≧1	Met the requirement
			181,471		133,851
17	Current assets Current liabilities		10,128,952	1.10	7,783,573	1.11	≧1	Met the requirement
			9,244,639		6,995,045
22	Stockholders’equity Minimumpaid-in capital		1,383,295	214.46%	1,287,073	199.55%	≧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		861,244 1,371,682	62.79%	842,142	88.53%	≧20% ≧15%	Met the requirement
					951,278

10) Prospective risk for futures trading

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.

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13. 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 $300,000 or 20 percent of contributed capital：None.

• D. Disposals of real estate exceeding $300,000 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.

• G. Significant transactions between parent company and subsidiaries

					Details of transactions	Details of transactions
No.			Relationship				Percentage (%) of total
	Company	Counterparty
(Note 1)			(Note 2)	Account	Amount	Conditions	consolidated net revenues or
							assets(Note 3)
0	President Securities Corp.	President Futures Corp.	1	Futures Margin - Own Funds	$ 1,435,361	Note 4	2.05%
0	President Securities Corp.	President Futures Corp.	1	Deposit-out	43,000	Note 4	0.06%
0	President Securities Corp.	President Futures Corp.	1	Accounts receivable	4,109	Note 4	0.01%
0	President Securities Corp.	President Futures Corp.	1	Future commission revenue	54,294	Note 4	1.19%
0	President Securities Corp.	President Futures Corp.	1	Clearingcharges	15,506	Note 4	0.34%
0	President Securities Corp.	President Futures Corp.	1	Deposit-in	16,000	Note 4	0.02%
0	President Securities Corp.	President Futures Corp.	1	Otherpayables	1,783	Note 4	0.00%
0	President Securities Corp.	President Futures Corp..	1	Other non-operatingrevenues	3,777	Note 4	0.08%
0		President Capital Management	1		3,362		0.07%
	President Securities Corp.			Other non-operating revenues		Note 4
		Corp.
0		President Capital Management	1		36,000		0.79%
	President Securities Corp.			Expense from investment advisory		Note 4
		Corp.
0		President Capital Management	1		1,224		0.03%
	President Securities Corp.			Charge for books and magazines		Note 4
		Corp.
0	President Securities Corp.	President Securities(HK)Ltd	1	Cash and cash equivalents	95,334	Note 4	0.14%
	President Securities Corp.	President Securities(HK)Ltd	1	Accounts Receivable	10,385	Note 4	0.01%
0	President Securities Corp.	President Securities (HK) Ltd	1	Dealing handling fee	2,760	Note 4	0.06%

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

• The number zero is for parent company.

• 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 (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.)

• 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.

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2) Related information of investee companies

A. Related information of investee companies

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 Venture capital Securities dealer , brokerage, underwriting and consulting Wealth management Nominee Service Investment Trust	Original	investment	Ending balance
				Balance on December 31, 2015	Balance on January 1, 2015	Shares
President Securities Corp. President Securities (BVI) Ltd. President Insurance Agency Corp.	President Futures Corp. President Capital Management Corp. President Securities (HK) Ltd. President Securities (BVI) Ltd. Uni-President Asset Management Corp. President Personal Insurance Agency Co., Ltd. President Insurance Agency Corp. PSC Venture Capital Investment Limited Company President Securities (HK) Ltd. President Wealth Management (HK) Ltd. President Securities (Nominee) Ltd. Uni-President Asset Management Corp.	Taipei Taipei Hong Kong British Virgin Islands Taipei Taipei Taipei Taipei Hong Kong Hong Kong Hong Kong Taipei		$ 644,650 150,000 34,030 2,264,573 624,940 5,000 5,000 300,000 814,705 92,091 3,403 478	$ 644,650 150,000 34,030 2,264,573 624,940 5,000 5,000 300,000 814,705 92,091 3,403 478	63,817,303 12,400,000 10,000,000 67,746,000 13,570,830 500,000 500,000 30,000,000 182,600,000 23,400,000 1,000,000 12,000

Note: Associates

• 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 $300,000 or 20 percent of contributed capital：None.

• E. Disposals of real estate exceeding $300,000 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. 10300375782, 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

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securities or futures license of signatories to the IOSCO MMoU：

a) Securities held as of December 31, 2015 of President Securities (BVI) Ltd：

	Securities types and name Financial assets at fair value through profit or loss-current FL. R GSC EUROPEAN CDO FL. R ARES VIR Less : impairment loss Total Investments in associates President Securities (HK) Ltd. President Wealth Management (HK) Ltd. President Securities (Nominee) Ltd. Total	Type	Number of shares 2,500,000 5,000,000 182,600,000 23,400,000 1,000,000	Expressed in U.S. Carrying value Fair Unit price Amount Unit price $ 1.000 $ 2,500,000 $ 0.655 0.995 4,975,000 0.784 7,475,000 ( 1,919,365) $ 5,555,635 $ 0.224 $40,918,667 $ 0.224 0.081 1,903,935 0.081 0.071 71,461 0.071 $ 42,894,063	Expressed in U.S. Carrying value Fair Unit price Amount Unit price $ 1.000 $ 2,500,000 $ 0.655 0.995 4,975,000 0.784 7,475,000 ( 1,919,365) $ 5,555,635 $ 0.224 $40,918,667 $ 0.224 0.081 1,903,935 0.081 0.071 71,461 0.071 $ 42,894,063	Dollars value
				Unit price $ 1.000 0.995 $ 0.224 0.081 0.071	Unit price $ 0.655 0.784 $ 0.224 0.081 0.071	Amount
		STRUCTURED NOTES STRUCTURED NOTES STOCK STOCK STOCK				$ 1,637,396 3,918,239
						5,555,635 -
						$ 5,555,635
						$ 40,918,667 1,903,935 71,461
						$ 42,894,063

b) Derivative financial instrument transactions and the source of capital of President Securities (BVI) Ltd :

As of December 31, 2015, the carrying value of USD5,555,635 of asset securitization for derivatives was undertaken with the Company's own capital of USD 7,475,000.

• c) Revenue from engagement in consultation on assets management business, service contents and litigation：None.

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d) Balance sheets

PRESIDENT SECURITIES (BVI) LTD.

BALANCE SHEETS

DECEMBER 31 , 2015 AND 2014

			DECEMBER 31	, 2015 AND 2014
Assets Current assets Cash and cash equivalents Financial assets at fair value through profit or loss - current Other receivables Total current assets Investment in associates Total assets	December 31, 2015		December 31, 2014 Amount % $ 21,590,739 31 5,457,454 8 48,400 - 27,096,593 39 41,574,924 61 $ 68,671,517 100	Liabilities and shareholders’equity Current liabilities Others payable Total liabilities Shareholders’ equity Share capital Capital reserve Retained earnings Retained earnings (accumulated deficit) Other equity Translation gain or loss on the financial statements of foreign operating entities Total shareholders’ equity Total liabilities and shareholders’ equity		Expressed in U.S. dollars December 31, 2015 December 31, 2014 Amount % Amount % $ 3,601 - $ 3,469 - 3,601 - 3,469 - 67,746,000 96 67,746,000 99 757,813 1 757,813 1 1,099,177 2 ( 562,944) ( 1) 762,257 1 727,179 1 70,365,247 100 68,668,048 100 $ 70,368,848 100 $ 68,671,517 100
	Amount	%	Amount			Amount $ 3,601 3,601 67,746,000 757,813 1,099,177 762,257 70,365,247 $ 70,368,848
	$ 21,879,489 5,555,635 39,661	31 8 -	$ 21,590,739 5,457,454 48,400
	27,474,785	39	27,096,593
	42,894,063	61	41,574,924
	$ 70,368,848	100	$ 68,671,517

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PRESIDENT WEALTH MANAGEMENT (HK) LTD.

BALANCE SHEETS

DECEMBER 31 , 2015 AND 2014

Assets	December 31, 2015 Amount % $ 14,757,410 100 17,505 - 14,774,915 100 $ 14,774,915 100	December 31, 2014 Amount % $ 14,749,530 100 25,220 - 14,774,750 100 $ 14,774,750 100	Liabilities and shareholders’equity Current liabilities Others payable Total liabilities Shareholders’ equity Share capital Retained earnings Accumulated deficit Total shareholders’ equity Total liabilities and shareholders’ equity		December 31, 2015	December 31, 2015	Expressed in HK dollars December 31, 2014 Amount % $ 30,300 - 30,300 - 23,400,000 159 ( 8,655,550) ( 59) 14,744,450 100 $ 14,774,750 100
	Amount $ 14,757,410 17,505 14,774,915 $ 14,774,915	Amount $ 14,749,530 25,220 14,774,750 $ 14,774,750				% - - 158 ( 58) 100 100
Current assets Cash and cash equivalents Other receivables Total current assets Total assets

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PRESIDENT SECURITIES (NOMINEE) LTD.

BALANCE SHEETS

DECEMBER 31 , 2015 AND 2014

Assets Current assets Cash and cash equivalents Other receivables Total current assets Total assets	December 31,	2015	December 31, 2014 Amount % $ 620,289 100 806 - 621,095 100 $ 621,095 100	Liabilities and shareholders’equity Current liabilities Others payable Total liabilities Shareholders’ equity Share capital Retained earnings Accumulated deficit Total shareholders’ equity Total liabilities and shareholders’ equity				Expressed in HK dollars December 31, 2014 Amount % $ 28,500 5 28,500 5 1,000,000 161 ( 407,405) ( 66) 592,595 95 $ 621,095 100	Expressed in HK dollars December 31, 2014 Amount % $ 28,500 5 28,500 5 1,000,000 161 ( 407,405) ( 66) 592,595 95 $ 621,095 100
	Amount	%	Amount $ 620,289 806			Amount
	$ 568,720 575	100 -			$ 15,410		3 3 175 ( 78) 97 100		5 5 161 ( 66) 95 100
					15,410			28,500
	569,295	100	621,095		1,000,000 ( 446,115)			1,000,000 ( 407,405)
	$ 569,295	100	$ 621,095
					553,885 $ 569,295			592,595
								$ 621,095

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e) Statements of comprehensive income

PRESIDENT SECURITIES (BVI) LTD.

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

Accounts Expenditures Interest expenses Employee benefits Other operating expenses Total expenditures and expenses 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 Total non-operating gains and losses Profit before tax Income tax expense Net income	2015	% - - - - - - - - - -	Expressed in U.S. dollars 2014 Amount % ($ 32 ) - ( 50,473 ) - ( 17,736 ) - ( 68,241 ) - 2,154,341 - 3,451,654 - 5,605,995 - 5,537,754 - - - $ 5,537,754 -
	Amount ($ 27 ) ( 50,504 ) ( 16,773 ) ( 67,304 ) 1,284,060 445,365 1,729,425 1,662,121 - $ 1,662,121		Amount ($ 32 ) ( 50,473 ) ( 17,736 ) ( 68,241 ) 2,154,341 3,451,654 5,605,995 5,537,754 - $ 5,537,754

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PRESIDENT WEALTH MANAGEMENT (HK) LTD.

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

Accounts Expenditures Other operating expenses Total expenditures and expenses Non-operating gains and losses Other gains and losses Profit before tax Income tax expense Net income		2015	% - - - - - -		Expressed in HK dollars 2014 Amount % ($ 28,750) - ( 28,750) - 113,379 - 84,629 - - - $ 84,629 -
		Amount ($ 63,680) ( 63,680) 76,415 12,735 - $ 12,735			Amount ($ 28,750) ( 28,750) 113,379 84,629 - $ 84,629

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PRESIDENT SECURITIES (NOMINEE) LTD.

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

2015 Accounts Amount Expenditures Other operating expenses ($ 41,150) Total expenditures and expenses ( 41,150) Non-operating gains and losses Other gains and losses 2,441 Loss before tax ( 38,709) Income tax expense - Net loss ($ 38,709)	2015	% - - - - - -		Expressed in 2014	HK dollars % - - - - - -

f) Transactions between related parties and foreign business：None

3) Disclosure of investment in Mainland China：Not applicable

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14. SEGMENTS INFORMATION

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 Chief Operating Decision-Maker (CODM) that are used to make strategic decisions. The Group’s operating segments are classified into Brokerage, Proprietary Trading, Fixed Income 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. Proprietary Trading 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.

• C. Fixed Income segment: bonds segment is engaged in central government bonds, ordinary corporate bonds, convertible corporate bonds, and bills and bonds under repurchase or resale agreements transactions in OTC.

• D. Reinvestment segment: companies reinvested by the consolidated entities.

• E. Other operating segment includes Capital Market segment, Derivatives Proprietary Trading segment, Financial Product segment and Shareholder Service segment.

2) Segments information

The accounting policies applied to the Group’s operating segments and summary of accounting policies disclosed in the 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 amortised to each operating segment based on reasonable calculation standards and the expense nature. Those that cannot be reasonably amortised are listed under “Others”.

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3) Profit or loss of segments information

			For theyear ended December 31,2015	For theyear ended December 31,2015	For theyear ended December 31,2015
	Brokerage segment	Proprietary Trading segment	Fixed Income segment	Reinvestment segment	Other operating segments	Others	Total
Segment revenues	$ 2,083,114	$ 859,659	($ 7,306)	$ 1,178,521	$ 493,775	($ 26,920)	$ 4,580,843
Segment profit or loss	$ 123,189	$ 563,016	$ 133,424	$ 297,811	($ 5,611)	($ 3,125)	$ 1,108,704
			For theyear ended December 31,2014
	Brokerage segment	Proprietary Trading segment	Fixed Income segment	Reinvestment segment	Other operating segments	Others	Total
Segment revenues	$ 2,223,699	$ 807,912	$ 612,343	$ 891,348	$ 640,511	($ 12,516)	$ 5,163,297
Segment profit or loss	$ 386,427	$ 447,758	$ 518,206	$ 354,901	$ 202,442	($ 118,371)	$ 1,791,363

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 CODM as a reference for making resources allocation decision.

• 4) Informations on products and services: 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 single customer accounted for 10% or more of the Group’s operating revenues for the current period.

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