PSC - Annual Report 2018 | FinancialReports.eu

Stock Code: 2855 www.pscnet.com.tw

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PRESIDENT SECURITIES CORP.

2017 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.

2017Annual Report is available at: Taiwan Stock Exchange Market Observation Post System http://mops.twse.com.tw/

ANNUAL REPORT

Spokesperson

Name: Chi-Li An Title: Vice President Tel: (02)2747-8266 Email: [email protected]

Deputy Spokesperson

Name: Nai-Chen Chen Title: Assistant Vice President Tel: (02)2747-8266 Email: [email protected]

Stock Transfer Agent

President Securities Corp., Shareholder Services Department Address: B1, No.8, Dongxing Rd., Songshan Dist, Taipei City 105, Taiwan (ROC) Tel: (02)2747-8266 Website: www.pscnet.com.tw

Auditors

PricewaterhouseCoopers (PwC) Taiwan Auditors: Chin-Mu Hsiao, Ming-Hui Chang Address: 27F, No. 333, Keelung Road, Sec. 1, Taipei 110, Taiwan, R.O.C. Tel: (02)2729-6666 Website: www.pwc.com/tw

Overseas Securities Exchange

None

Headquarters

Address: 1F, No.8, Dongxing Rd., Songshan Dist, Taipei City 105, Taiwan (ROC) Tel: (02)2747-8266

Corporate Website

www.pscnet.com.tw

I. Letter to Shareholders 1

II. Company Profile 3 III. Corporate Governance 5 Organization Chart Major Corporate Functions Professional qualifications and independence analysis Compensation and Remuneration

Information regarding directors, supervisors, management team and branch manager Corporate Covernance How can PSC make a contribution to the UN Sustainable Development Goals (SDGs)? Corporate Social Responsibility Integrity Application

Other Disclosures

Capital Structure 31

IV.

Capital and Shares Dividend Policy & Implementation Status Employees’, Directors’ and Supervisors’ Remuneration V. Overview of Business Operation 36

Description of Business Activities Analysis of the Securities Industry Product Trends and Relevant Competition R&D for Derivative Products Future Business Development Market Conditions Employee Data Environmental Protection and Corporate Citizenship Labor Relations

VI. Financial Information (Business Review) 51 Balance Sheet from 2012 to 2017Q1 Income Statement from 2012 to 2017Q1 Financial Analysis from 2012 to 2017Q1 Auditors’ Opinions from 2012 to 2016

Audit Committee’s Report for the Most Recent Year

VII. Financial Status, Operating Results & Risk Management 60 Financial Status

Analysis of Operating Results Long-term Investment Policy and Results Analysis of Risk Management

VIII Other Disclosures 69

Affiliated Companies Chart Basic Information of Affiliates Operational Highlights of Affiliated Companies Capital Adequacy Ratio Market Share Rate

CONSOLIDATED FINANCIAL STATEMENTS 73

I. Letter to Shareholders

Dear Shareholders,

The global economy has slowly recovered in 2017, leading to growth in global stock markets.

The United States has continued to attract investment in domestic manufacturing and provided tax incentives after President Trump assumed office. Although the Federal Reserve has increased interest rates and shrunk its balance sheet, U.S. stocks continued to rise in the wake of increasing oil prices, and due to advancement in artificial intelligence and the introduction of new Apple devices.

In Europe, the European Central Bank continued quantitative easing policies and the results of the French elections resolved the disintegration crisis of the European Union, which served to increase investor confidence.

China has continued to reduce its excess production capacity, rein in high-polluting industries, and strengthen its financial supervision. To prevent excessive disruptions, the People's Bank of China also lowered interest rates for small and medium-sized businesses to maintain financial stability and promote economic growth.

On the domestic front, according to statistics of the Directorate-General of Budget, Accounting and Statistics (DGBAS), Executive Yuan, the economic growth rate increased from 1.41% to 2.86% in 2017, and the Taiwan Capitalization Weighted Stock Index also rose from 9,253 points to 10,642 points, marking an increase of 15%. With the continuous recovery of the domestic economy and the implementation of favorable tax rates for day trades, domestic funds have returned to the market. Consequently, the stock daily average trading volume on TWSE and the Taipei Exchange grew by 39% from the previous year to NT$138 billion.

With the increase in TWSE market prices and increased trading volume in 2017, total profits of all securities dealers reached NT$39.7 billion, marking substantial growth from the previous year, and achieving record high profits relative to the past eight years.

The Company has achieved great results in business operations including brokerage, proprietary trading, and in its underwriting business. The annual revenue amounted to NT$6,359,985 thousand; the operating cost was NT$644,022 thousand; the operating expenses amounted to NT$3,382,065 thousand; net non-operating income was NT$474,303 thousand; net profit before tax was NT$2,808,201 thousand; net profit after tax was NT$2,618,769 thousand; and the earnings per share was NT$1.88. These positive results allowed the Company to achieve its highest earnings per share after tax since its establishment.

Compared to its competitors, the Company's net profit after tax ranked 5th and its EPS ranked 2nd. The Company's profitability continues to be among the top in the industry.

For its brokerage operations, the Company's market share was 3.23% in 2017, which ranks it 8th among the top 10 securities dealers.

The lowered day trade tax introduced by the Ministry of Finance encouraged the return of domestic funds and contributed to profits for all brokerage businesses. As digital technologies continue to develop and the business environment for securities dealers continues to evolve, investors have gradually shifted to electronic transactions, and the demand for counter services has gradually decreased. Due to mounting pressure for business and branch integration, the Company continues to adjust its agency business model although we currently have 36 branches. We shall continue to keep abreast of trends in financial technologies and comply with open and relaxed regulations to formulate comprehensive business plans. The Company shall also expand its diverse wealth management services and services for unitary channels with the goal of integrating old and new resources to improve competitiveness and strengthen the value of the Company's marketing channels.

For its underwriting business, the Company served as lead underwriter or co-underwriter in a total of 36 cases in 2017; more specifically, the Company served as lead underwriter for 5 cases and co-underwriter for 31 cases. The total underwriting amount was NT$2.273 billion, which ranked the Company 7th in the total number of cases for the industry.

The increase in TWSE market trading increased public companies' willingness to raise capital. According to FSC statistics, market capitalization in 2017 reached NT$544.98 billion, a 59% increase from the previous year. The Company continues to attentively screen cases, carefully select industries, and focus on company credit risks. The refined management team continues to focus on high-quality customers and uses its extensive experience to provide high-quality consulting services to help companies complete their IPOs and achieve fund-raising goals while actively identifying high-quality start-up companies.

The proprietary trading performed by the professional proprietary trading team generated abundant profits for the Company. Revenue from overseas investments also grew steadily as sophisticated analysis and unique

transaction strategies contributed to nearly 50% of the Company's overall net profit after tax.

The Company's proprietary bond trading continues to integrate with global financial markets as we diversify our investments. The outstanding operating strategies also maximized our performance and contributed to a stable profit model.

For its warrant business, the issuance amount of call (put) warrants ranked 5th in the industry, and ranked 7th for the number of warrants issued. Our reputable market-making quality also won the hearts of our investors.

The Company's proprietary futures business continued to maintain a healthy balance between risks and profits with the goal of diversifying risks and maximizing profits. We seek to maximize profits while implementing strict risk management measures, and to increase diversity in our international products, which will collectively contribute to maintaining stable profits.

The management team is committed to performance, and to strengthening corporate governance systems while complying with amended regulations promulgated by competent authorities. We have strengthened money laundering prevention, our internal auditing procedures, and our internal controls to implement comprehensive corporate governance in all aspects of business.

In the 3th round of the Corporate Governance Evaluation scheduled in 2017, the Company was again awarded the highest honors and was the only securities dealer to receive the highest honors for three consecutive years. The award serves as a testament to the Company's continued commitment and dedication to corporate governance.

In addition, the Company also actively supports corporate social responsibilities and made contributions to the encouragement of enterprise commitment, social participation, and environmental protection. The Company received recognition from CommonWealth magazine, and was also awarded the “Excellence in Corporate Social Responsibility Award” for the fourth time in 2017; once again, we were the only securities dealer to receive this award.

Additionally, the Company fully implemented the competent authority's requirements for risk management and provided integrated management for risks confronted by the business model for all securities dealers. We have established comprehensive risk management mechanisms, and have received the highest honors in the Risk Management Evaluation for four consecutive years. As a result, the Company's financial structure received "twA" and "twA-1" long-term and short-term credit ratings from the Taiwan Ratings Corporation.

Looking ahead in 2018, the IMF has adjusted the global economic growth rate to 3.9% in January due to the continuous recovery of the global economy and economic stimulation expected from U.S. tax incentive policies.

In Taiwan, the forecast of the Directorate General of Budget, Accounting and Statistics placed the annual economic growth rate domestically at 2.42% due to the continuous expansion of the automobile electronics, IoT, artificial intelligence, and other technology applications.

In terms of the securities industry, the Ministry of Finance tentatively reduced the securities transaction tax for day trades by half for the brokerage business last year by establishing a one-year trial period. With support from the FSC, the transaction tax reduction could be extended to three years, and expanded proprietary businesses. This tax reduction is expected to increase market transaction volume and reduce transaction costs of proprietary businesses, which would prove favorable to the bottom-line performance of all securities dealers.

Shareholders have witnessed the outstanding performance of President Securities in the past. Faced with a future full of opportunities and challenges, the Company shall continue to work diligently to uphold our stable long-term business strategies and implement a multitude of mechanisms for risk and internal management as we actively enhance the Company's operations while simultaneously increasing business competitiveness. As we expand into niche markets overseas, we will continue to provide better domestic services with the goal of providing high value-added and comprehensive financial services for customers to maximize value for both the Company and our shareholders.

I hereby extend my most sincere gratitude to our shareholders for your long-term trust and support of President Securities. I wish you all good health and prosperity for the rest of 2018.

Chung-Shen Lin / Chairman

Kuan-Chen Lin / President

President Securities Corp. 2017 Annual

II. Company Profile

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II. Company Profile

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Incorporated
1988 1991 1995 1998 2000
President Securi�es Co., Ltd. was incorporated Merged with Tung-Hsin, Tung-Yung, Bolstered capital to NT$7.03 billion.
through the memorandum of Securi�es and Futures Commission, Ministry of Finance with the Tung-Wen, Tung-Ku, Tung-Fu, Tung-Yu, Tung-Hsing, Tung-Wang, Tung-Lai securi�es Became the first Asian securi�es company to acquire the ISO9002 service quality Processed capital infusion; capital stock a�er infusion amounted to NT$10.18 In August, acquired Ta Feng Securi�es Co., Ltd.Converted retained earnings to paid-in capital,
le�er No. (77) Taiwan-Finance-Securi�es-(II)- 20093 in November 19th . agencies. cer�fica�on. billion in May. capital stock a�er infusion amounted to
Founding capital of NT$1.4 billion increased NT$12.26 billion.
to actual paid-in capital of NT$3.36 billion
a�er the merger.
Amended business name to President Performed capital infusion; capital stock Opened new branches in Processed capital infusion; capital Obtained official approval for OTC lis�ng. Executed capital reduc�on through
Securi�es Corp. on March 4th. a�er infusion amounted to NT$4.02 billion. Yenping, Taoyuan, Sanchung, Tunghsing, and Fengyuan. stock a�er infusion amounted to NT$8.08billion. Converted retained earnings to paid-in capital, capital stock a�er infusion cancella�on of treasury stock, capital stock a�er asset reduc�on amounted to
Commencement of official opera�ons on amounted to NT$10.91 billion. NT$11.28 billion.
April 3rd.
1989 1994 1996 1997 1999 2001
2009 2007 2006 2003
Executed capital reduc�on through Long-term credit ra�ng was Obtained business license for wealth Obtained business license for structured
cancella�on of treasury stock, capital upgraded from twA- to twA, and management. notes; Fixed Income business unit
stock a�er asset reduc�on amounted to short-term credit ra�ng was Received the 6th annual Na�onal Charity licensed as the main dealer for business
NT$11.86 billion. upgraded from twA-2 to twA-1. Award, and was the only for-profit opera�on of government bonds issued by
Central Bank of the Republic of China.
business en�ty among twelve recipients.
Obtained trust business license Issued the first unsecured conver�ble corporate bond in Taiwan, and received NT$ 3 billion from East Tainan Branch, Neihu Branch and Renai Branch were established. Listed on the main board in September.
issued by FSC. the offering in May. Executed capital reduc�on through
Established PSC Xiamen business office in China on August 22nd. Long term credit ra�ng was upgraded from twBBB to twBBB+ in September, and was again upgraded to twA- in December. cancella�on of treasury stock, capital stock a�er asset reduc�on amounted to
NT$11.46 billion.
2010 2008 2004 2002
2012 2014 2016
Converted retained earnings to paid-in Established an Offshore Securi�es Unit (OSU) in July . Conducted a capital reduc�on by canceling treasury stocks in
capital, capital stock a�er infusion amounted to NT$13.23 billion. Opened new branches in Xinzhuang, Zhubei, Zhunan, and Xin Taoyuan, bringing the total number of February and May. The capital became NT$13.037 billion and NT$12.95 billion.
branches to 39. Converted earnings to capital in August, growing the capital to
NT$13.36 billion.
Acquired the brokerage business of Standard
Chartered Bank in Taiwan. The branches in Tali, Yenping, and SanMin terminated opera�ons in
October , causing that the total number of branches reduced to
37(including our headquarters).
Established remunera�on Commi�ee.Converted retained earnings to paid-in capital. The The total branches remain 35 (including head office.) . Established an Audi�ng Commi�ee in June. The branch in Zhubei terminated opera�ons in May, causing that the total number of
branches reduced to 36(including our
capital stock a�er infusion amounted to NT$13.05 Opened a new branch in Pingzhen, bringing our total headquarters).
billion. number of branches to 40 (Including our
headquarters) in October. The Company transferred earnings to capital
Conducted a capital reduc�on by canceling treasury in August. The capital a�er capital increase
stocks in December. The capital became NT$12.85 was NT$13.904 billion.
billion.
2015
2011 2013 2017
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President Securities Corp. 2017 Annual Report

III. Corporate Governance

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III. Corporate Governance

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President
Securities
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Organiza�on Chart

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Administration Dept.
Shareholders’ Meeting
Finance Dept.
Board of Directors
Information System Dept.
Risk Management
Committee Settlement & Clearing Dept.
Audit Committee
Remuneration
Committee Financial Product Dept.
Risk Control Office
Auditing Office
Proprietary Trading Dept.
Chairman of the Board
Fixed Income Dept.
President
Capital Market Dept.
Quantitative Trading Dept.
Assets & Liabilities
Management Committee
Shareholder Services Dept.
President Office
Wealth Management and
Trust Dept.
Compliance Division
Brokerage Dept.
Global Institutional
Service Dept.
Offshore Securities Unit
E-Trade Department
Branches
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Professional Leadership
&
Kind Service
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III. Corporate Governance

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Ma or Cor orate Func�ons j p

Fixed Income Dealing

Brokerage

Accept orders from clients to buy/sell listed securi�es and forward to TWSE for execu�on.

Use own capital to buy and sell domes�c and foreign corporate and government bonds over the TPEx market.

Accept orders from clients to buy/sell listed securi�es and forward to TPEx for execu�on.

bonds.

Manage custodial services for clients.

Repo and Reverse-Repo transac�ons.

Securi�es Borrowing and Lending Business. Borrowing or Lending Money in Connec�on with Securi�es Business

Trade overseas and domes�c conver�ble bonds. Assist with the sales of primary lis�ngs of corporate

Provide securi�es market services and product selling to financial ins�tu�ons and corporate clients.

Accep�ng orders to trade Foreign Securi�es. Futures Introducing Broker Business.

Electronic transac�on opera�ons. Customer service coordina�on process.

Quan�ta�ve Trading

Proprietary Trading

Market making and trading of futures and op�ons contracts on the TAIFEX.

Trading of publicly listed securi�es on the TWSE and TPEx, using President Securi�es’ own funds. Hedge posi�ons via futures and op�ons markets as a futures trader.

Market making and trading of legally-permi�ed foreign futures and op�ons contracts.

ETF arbitrage, market making, hedging, and trading. Spot and futures arbitrage and trading.

Expand interna�onal investment business involving legally-permi�ed overseas spot/futures market research and investments.

Structured products issuing and trading. Spread and vola�lity arbitrage of domes�c and foreign futures/op�ons products.

Wealth Management & Trust

Capital Market (Underwri�ng)

Provide customers with the most complete asset arrangement and finance service planning service. Conduct asset alloca�on for customers through trusts.

Assist corpora�ons in applica�on for public lis�ng on TWSE or TPEx.

Assess and advise clients with respect to capital increase plans and applica�ons to convert private equity into publicly traded stocks.

Nego�able securi�es trust lending business. Provide Offshore Securi�es Unit (OSU) customers with service of interna�onal securi�es asset alloca�on, wealth consul�ng service, foreign securi�es or other authorized foreign financial products.

Underwrite bonds and foreign depository receipts. Assist in M&A ac�vi�es; provide consul�ng services on corporate finance and other specialized areas. Other various types of underwri�ng business.

Shareholder Services

Financial Products

Coordinate shareholder services on behalf of publicly listed companies.

Underwrite equity warrants and conduct hedging strategies.

Assist in the coordina�on of shareholders’ mee�ngs. Coordinate the distribu�on of cash and/or stock dividends to shareholders.

Develop and issue structured products. Conver�ble bond asset swap and op�ons business. Trading of equity deriva�ves.

Manage the issuance and delivery of tax forms to shareholders.

Other deriva�ves financial products approved by the competent authority.

Respond to shareholder enquiries and legal issues.

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For Directors and Supervisors

Criteria Name	Meet One of the Following Professional Qualifca�on Requirements, Together with at Least Five Years Work Experience	Meet One of the Following Professional Qualifca�on Requirements, Together with at Least Five Years Work Experience	Meet One of the Following Professional Qualifca�on Requirements, Together with at Least Five Years Work Experience	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director
	An Instructor or Higher Posi�on in a Department of Commerce, Law, Finance, Accoun�ng, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University	A Judge, Public Prosecutor, A�orney, Cer�fed Public Accountant, or Other Professional or Technical Specialist Who has Passed a Na�onal Examina�on and been Awarded a Cer�fcate in a Profession Necessary for the Business of the Company	Have Work Experience in the Areas of Commerce, Law, Finance, or Accoun�ng, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10
Lin, Chung-Shen Delegate of Kai Nan Investment Co., Ltd.	V			V V V V V V V V										0
Lin, Kuan-Chen	V			V V V V V V										0
Kao, Shiow- Ling	V			V V V V V										0
Teng, Wen- Hwi	V V			V V V V V V V V V										0
Lee, Tong-Liang Delegate of Hui Tung Investment Co.,Ltd.	V			V V V V V V V V										0
Chang, Ming- Chen Delegate of Leg Horn Investment Co.,Ltd.	V			V V V V V V V V										0
Tu, Li-Yang Delegate of Ta Le Investment Holding Co., Ltd.	V			V V V V V V V V										0
Lee,Shy-Lou	V			V V V V V V V V										0
Duh, Bor-Tsang	V			V V V V V V V										0
Lee, Shu-Fen Delegate of China F.R.P. Corp.	V			V V V V V V V V										0
Hsieh Hong, Hui-Tzu Delegate of Kai Nan Investment Co., Ltd.	V			V V V V V V										0
Liu, Tsung-Yi Delegate of Kai Nan Investment Co., Ltd.	V			V V V V V V V										0
Lu, Li-An Delegate of Kai Nan Investment Co., Ltd.	V			V V V V V V V										0
Chen, Kuo-Hui Delegate of Kai Nan Investment Co., Ltd.	V V			V V V V V V										0
Wu, Tsai-Yi	V			V V V V V V V V V V										0
Lee, Kwang-Chou	V			V V V V V V V V V V										1
Fu, Kai-Yun	V			V V V V V V V V V V										0
Liang, Yann-Ping	V V			V V V V V V V V V V										0

President Securities Corp. 2017 Annual Report

III. Corporate Governance

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company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the vo�ng shares.
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.
Not a spouse, rela�ve within the second degree of kinship, or lineal rela�ve within the third degree of kinship, of any of the persons in the preceding three subparagraphs.
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.
rela�onship with the Company.
provides commercial, legal, financial, accoun�ng services or consulta�on to the Company or to any affiliate of the Company, or a spouse thereof. These restric�ons do not apply to any member of the remunera�on commi�ee who exercises powers pursuant to Ar�cle 7 of the “Regula�ons Governing the Establishment and Exercise of Powers of Remunera�on Commi�ees of Companies whose Stock is Listed on the TWSE or Traded on the TPEx“.
Not having a marital rela�onship, or a rela�ve within the second degree of kinship to any other director of the Company.

For Remunera�on Commi�ee

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Meets One of the Following Professional Qualifica�on Requirements, Together Independence Criteria Number of Other
with at Least Five Years’ Work Experience (Note) Public Companies
in Which the
Individual is
An instructor or higher A judge, public prosecutor, Has work experience
Criteria Name academic department related posi�on in a department of commerce, law, finance, accoun�ng, or other specialist who has passed a a�orney, Cer�fied Public professional or technical Accountant, or other commerce, law, in the areas of accoun�ng, or finance, or 1 2 3 4 5 6 7 8 Remunera�on Serving as an Concurrently Commi�ee Member
to the business needs of the na�onal examina�on and otherwise necessary
Company in a public or been awarded a cer�ficate in for the business of
private junior college, college a profession necessary for the the Company
or university business of the Company
Independent Wu, Tsai-Yi V V V V V V V V V 0
Director
Independent Lee, V V V V V V V V V 0
Director Kwang-Chou
Independent V V V V V V V V V 0
Director Fu, Kai-Yun
Independent Liang, V V V V V V V V V V 0
Director Yann-Ping
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parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the vo�ng shares.
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.
Not a spouse, rela�ve within the second degree of kinship, or lineal rela�ve within the third degree of kinship, of any of the persons in the preceding three subparagraphs.
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.
rela�onship with the Company.
provides commercial, legal, financial, accoun�ng services or consulta�on to the Company or to any affiliate of the Company, or a spouse thereof.

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Compensa�on and Remunera�on

For Directors

Unit: NT$ thousands

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Remunera�on Ra�o of Total Relevant Remunera�on Received by Directors Ra�o of Total Compensa�on Paid
Remunera�on Who are Also Employees Compensa�on to Directors from an
Base Severance Bonus to Allowances (A+B+C+D) to (A+B+C+D+E+F+G) Invested Company
�tle Name Compensa�on(A) Pay (B) Directors (C) (D) Net Income (%) Allowances (E) Bonuses, and Salary, Severance Pay (F) Profit Sharing- Employee Bonus (G) to Net Income (%) Other than the Company’s Subsidiary
PSC PSC
PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group Cash Stock Cash Stock PSC Group
Kai Nan
Director Investment 0 0 0 0 21,580 21,580 0 0 0.8240 0.8240 0 0 0 0 0 0 0 0 0.8240 0.8240 None
Co., Ltd.
Unit: NT$ thousands
Remunera�on Ra�o of Total Relevant Remunera�on Received by Directors Who are Also Employees Ra�o of Total Compensa�on Paid
�tle Compensa�onBase (A) Severance Pay (B) Directors (C)Bonus to Allowances (D) Remunera�on (A+B+C+D) to Net Income (%) Allowances (E) Bonuses, and Salary, Severance Pay (F) Profit Sharing- Employee Bonus (G) Op�ons (H)Exercisable Employee Stock Restricted Employee Shares (I)New (A+B+C+D+E+F+G) to Net Income (%)Compensa�on to Directors from an Invested Company Other than the Company’s Subsidiary
PSC PSC
PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group Cash Stock Cash Stock PSC Group PSC Group PSC Group
Total
Directors
(Including 18,385 18,385 0 0 34,861 34,861 1,535 1,535 2.0919 2.0919 28,789 28,789 185 185 490 0 490 0 0 0 0 0 3.2170 3.2170 None
Independent
Directors)
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Note 2: Compensa�on was calculated as of December 31, 2017; Compensa�on distribu�on proposal is based on said earnings.

Range of Remunera�on	Name of Directors	Name of Directors	Name of Directors	Name of Directors
	Total of (A+B+C+D)		Total of (A+B+C+D+E+F+G)
	The company	Companies in the consolidated fnancial statements	The company	Companies in the consolidated fnancial statements
Under NT$ 2,000,000 NT$2,000,000 ~ NT$5,000,000 NT$5,000,000 ~ NT$10,000,000 NT$10,000,000 ~ NT$15,000,000 NT$15,000,000 ~ NT$30,000,000 NT$30,000,000~ NT$50,000,000 NT$50,000,000 ~ NT$100,000,000 Over NT$100,000,000 Total	9(Note1) 1(Note3) 1(Note3) 0 0 1(Note4)) 1(Note4) 9(Note1) 9(Note1) 9(Note1) 9(Note2) 9(Note2) 1(Note4) 1(Note4) 0 0 0 0 0 0 0 0 20 20 20 20 9(Note2) 9(Note2) 0 0 1(Note3) 1(Note3) 0 0 0 0

Note 1: Wu, Tsai-Yi/ Lee, Kwang-Chou/ Fu, Kai-Yun/ Liang, Yann-Ping/ Delegate of Kai Nan Investment Co., Ltd. Liu, Tsung-Yi/ Hsieh Hong, Hui-Tzu / Lu, Li-An/ Lin, Cheng-Te、Chen, Kuo-Hui

Note 2: Leg Horn Investment Co., Ltd. / Hui Tung Investment Co., Ltd. / 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

Note 3: Lin, Kuan-Chen

Note 4: Kai Nan Investment Co., Ltd. representa�ve Lin, Chung-Shen

For President、 Vice President and Chief Auditor

Unit: NT$ thousands

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Compensa�on
Ra�o of total Whether or
Title/Name Salary(A) Severance Pay (B) Allowances (C)Bonuses and Compensa�on (D)Profit Sharing- Employee (A+B+C+D) to net compensa�on income (%) not any compensa�on is re-invested businesses received from other
than subsidiaries
PSC Group PSC Group PSC Group PSC Group PSC Group
President,
Vice
President, 21,531 21,531 1,028 1,028 87,557 87,557 2,300 2,300 4.2927 4.2927 None
and Chief
Auditor
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Note 2: Compensa�on was calculated as of December 31, 2017; Employee Compensa�on was booked as of December 31, 2017.

Range of Remunera�on	Name of President and Vice President	Name of President and Vice President	Comparison of Remunera�o in the Most Recent Two Fisc 3.54 8.69 4.04 2016 2017 4.29 Year Ra�o of total remunera�on paid to directors, supervisors, presidents and vice presidents to net income (%) To presidents and vice presidents To directors
	The company	Companies in the consolidated fnancial statements
Under NT$ 2,000,000 NT$2,000,000 ~ NT$5,000,000(Note1) NT$5,000,000 ~ NT$10,000,000(Note2) NT$10,000,000 ~ NT$15,000,000 NT$15,000,000 ~ NT$30,000,000(Note3) NT$30,000,000~ NT$50,000,000 NT$50,000,000 ~ NT$100,000,000 Over NT$100,000,000 Total	0 3 3 0 3 0 0 0 9 0 3 3 0 3 0 0 0 9

Comparison of Remunera�on in the Most Recent Two Fiscal Years

Note 1: Chen, Kai-Ching/ Kuo, Li-Yun/ Pan, Chun-Hsien Note 2: An, Chi-Li/ Lee, Wen-Sheng/ Huang, Jun-Jen Note 3: Lin, Kuan-Chen/ Yang , Kai-Chih/ Tsai, Sen-Bu

President Securities Corp. 2017 Annual Report

III. Corporate Governance

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Informa�on regarding directors, supervisors, management team and branch manager

As of April 23, 2018

Title	Current Shareholding	Current Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement
	Shares	%	Shares	％	Shares	%
President Republic Of China Lin, Kuan -Chen M 2005.01.21 3,250,000 0.23 0 0 0 0 1.Chairman of President Futures Corp. 2.Vice Chairman and President of President Securities Corp. 1.Director of President Futures Corp. 2.Director of President Securities (HK) Ltd. 3.Director of President Securities (BVI) Ltd. 4.Director of President Securities (Nominee) Ltd. 5.Director of President Wealth Management (HK) Ltd. 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 Richness Cereal Trading Co., Ltd 10. Director and President of Fonmau Cereal Ind. Co., Ltd.
Capital Market Department Vice President Republic Of China Kuo, Li -Yun F 2000.06.08 191,578 0.01 0 0 0 0 1.Vice President of Grand Asia Asset Management Ltd. 2. Assistant Vice President of Yuanta Securities Co., Ltd 1.Director of PSC Venture Capital Investment Co., Ltd.
Fixed Income Department Vice President Republic Of China Tsai, Sen -Bu M 2003.06.18 313,261 0.02 0 0 0 0 1.Senior Deputy Manager of China Bills Finance Corp. 2.Project Manager of President Securities Corp. N/A
Finance Department Vice President Republic Of China An, Chi -Li F 2004.06.30 156,240 0.01 0 0 0 0 1.Assistant Vice President of MasterLink Securities Corp. 2.SVP of Ta Chong Bank LTD. 3.Head of Treasury of Barclays Bank PLC 4.Treasurer of Societe Generale 1.Director of President Securities (HK) Ltd. 2.Director of President Securities (BVI) Ltd. 3.Director of President Securities (Nominee) Ltd. 4.Director of President Wealth Management (HK) Ltd. 5. Supervisor of President Insurance Agency Co., Ltd
Proprietary Trading Department Vice President Republic Of China Yang , Kai -Chih M 2006.03.21 136,423 0.01 0 0 0 0 1.Assistant Vice President of President Securities Corp. 2.Manager of President Securities Corp. N/A
Quantitative Trading Department Vice President Republic Of China Huang, Jung -Jen M 2009.03.26 107,356 0.01 0 0 0 0 1.Vice President of Oriental Securities Corp. 2.Assistant Vice President of MasterLink Securities Corp. N/A
Financial Product Department Vice President Republic Of China Pan, Chun -Hsien M 2011.09.01 6,763 0 0 0 0 0 1.Sales Assistant Vice President of MasterLink Securities Corp. 2.Manager of President Securities Corp. N/A
Auditing Office Chief Auditor Republic Of China Huang, Sha -Mei F 2018.03.14 817 0 0 0 0 0 1.Senior Manager of President Securities 2.Senior Project Manager of President Securities N/A
Settlement & Clearing Department Assistant Vice President Republic Of China Cheng, Yao -Tung M 2005.06.21 67,646 0 0 0 0 0 1.Manager of President Securities 2.Deputy Manager of President Securities N/A
Capital Market Department Sales Vice President Republic Of China Chueh, Chih -Chung M 2014.06.01 0 0 0 0 0 0 1.Senior Vice President of Capital Securities 2.Assistant Manager of First Taiwan Securities Inc N/A
. President Office Project Vice President Republic Of China Lin, Chung -Heng M 2015.11.23 675,512 0.05 0 0 0 0 1.Vice President of President Securities Corp. 2.Special Assistant of Uni-President Asset Management Corp. N/A
Compliance Division Assistant Vice President Republic Of China Hung, Ying -Che M 2008.03.19 54,649 0 0 0 0 0 1.Manager, Deputy Manager of President Securities 2Specialist of Sam Shin Trading Co Ltd N/A
. . . President Office Assistant Vice President Republic Of China Chen, Nai -Chen F 2013.06.01 382 0 0 0 0 0 1.Senior Manager of President Securities 2.Manager of President Securities Director (Representative of President Securities) of Hua VI Venture Capital Co.,Ltd
Mainland China Business Division Assistant Vice President Republic Of China Chen, Long -Chien M 2013.06.01 65,060 0 0 0 0 0 1.Project Assistant Vice President of President Securities 2.Branch Assistant Vice President of President Securities N/A
Finance Department Assistant Vice President Republic Of China Lu, Chia-Chen F 2013.06.01 2,343 0 0 0 0 0 1.Senior Manager of President Securities 2.Manager of President Securities 1.Accountant In Charge of President Insurance Agency Co., Ltd 2.Accountant In Charge of PSC Venture Capital Investment Co., Ltd
Capital Market Department Assistant Vice President Republic Of China Chang, Chin- Yung M 2013.06.01 0 0 0 0 0 0 1.Senior Manager of President Securities 2.Manager of President Securities N/A
Capital Market Department Assistant Vice President Republic Of China Tsai, Pao-Sheng M 2013.06.01 41,767 0 217 0 0 0 1.Senior Manager of President Securities 2.Manager of President Securities N/A
Finance Department Assistant Vice President Republic Of China Su, Wei-Lun M 2016.06.20 0 0 0 0 0 0 1.Senior Manager of President Securities 2.Manager of President Securities N/A
Financial Product Department Assistant Vice President Republic Of China Chang, Chung-Lin M 2016.08.01 0 0 0 0 0 0 1.Senior Manager of President Securities 2.Manager of President Securities Director of Shan Ben Engineering Co., Ltd
Administration Department Assistant Vice President Republic Of China Yu, Hung-Chieh M 2016.09.01 5,725 0 0 0 0 0 1.Senior Manager of President Securities 2.Special Assistant of President Securities Director of President Insurance Agency Co., Ltd
Shareholder Services Department Assistant Vice President Republic Of China Chang,Shao-Ping M 2016.09.01 18,833 0 0 0 0 0 1.Senior Manager of President Securities 2.Manager of President Securities N/A
Republic Of China Lin,Jung-Hui M 2016.09.01 85 0 0 0 0 0 1.Senior Manager of President Securities 2.Manager of President Securities Director of President Futures Corp. Information System Department Assistant Vice President

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Title	Current Shareholding	Current Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement
	Shares	%	Shares	％	Shares	%
Fixed Income Department Assistant Vice President Republic Of China Yeh, Ming -Chieh M 2017.01.01 0 0 0 0 0 0 1.Manager of President Securities 2.Deputy Manager of President Securities N/A
President Office Senior Project Assistant Vice President Republic Of China Chen, Kai-Ching M 2018.01.01 96,988 0.01 0 0 0 0 1.Senior Manager of President Securities 2.Chief Auditor of President Securities N/A
Risk Control Office Senior Manager Republic Of China Chang, Ping-Chuan M 2015.11.09 15,091 0 0 0 0 0 1.Senior Manager of President Securities 2.Manager of President Securities N/A
Brokerage Department Vice President Republic Of China Lee, Wen-Sheng M 2016.09.01 61 0 15 0 0 0 1.Assistant Vice President of President Securities Corp. 2.Assistant Vice President of China Securities Co., Ltd. 1.Director of President Futures Corp. 2. Director of President Insurance Agency Corp.
Brokerage Department District Assistant Vice President Republic Of China Chang, Hung-Shuo M 2003.05.21 1,405 0 0 0 0 0 1.Assistant Vice President of Hua Nan Securities 2.Assistant Vice President of Sino -Trade Securities N/A
Brokerage Department District Assistant Vice President Republic Of China Chuang, Chi-Hung M 2006.10.01 165,736 0.01 0 0 0 0 1.Manager of President Securities 2.Deputy Manager of President Securities N/A
Brokerage Department District Assistant Vice President Republic Of China Chiu, Shyh-Tyng M 2008.01.01 1,073 0 3,219 0 0 0 1.Manager of President Securities 2.Deputy Manager of President Securities N/A
Brokerage Department District Assistant Vice President Republic Of China Lin, Li-Lin F 2014.04.01 6,110 0 0 0 0 0 1.Assistant Vice President of President Securities 2.Manager of Dafeng Securities N/A
Brokerage Department District Assistant Vice President Republic Of China Tu, Ching-Feng M 2016.08.08 242,232 0.02 0 0 0 0 1.Manager of President Securities 2.Vice President of Shun Fu Tai Industrial Co. 1.Supervisor of Integrated Service Tech nology 2. Chairman of Sin Lin Investment Co. 3. Supervisor of Li Ling Investment Co. 4. Supervisor of Shun Fu Tai Industrial Co. 5. Director of Pin Win Co.
Customer Service Center Assistant Vice President Republic Of China Huang, Hsien-Yi M 2007.05.01 0 0 0 0 0 0 1.Manager of President Securities 2.Manager of International Securities N/A
Wealth Management and Trust Department Senior Manager Republic Of China Chu, Po-Lin M 2016.08.08 0 0 0 0 0 0 1.Branch Assistant Vice President of President Securities 2.Manager of President Securities N/A
Global Institutional Service Dept. Manager Republic Of China Chung, Chih-Hung M 2016.05.05 0 0 0 0 0 0 1.Supervisor of Capital Securities 2.Analyst of China Asset Management Limted N/A
Tunghsing Equity Department Manager Republic Of China Kao, Jung M 2009.04.01 405 0 0 0 0 0 1.Manager of Taiwan Securities Co., Ltd. 2.Manager of Yuanta Securities N/A
Tunghsing Equity Department Manager Republic Of China Hung, Yu-Ting M 2014.07.01 0 0 0 0 0 0 1.Manager of President Futures Corp. N/A
Tunghsing Equity Department Manager Republic Of China Tsai,Shu - Mei F 2016.04.01 0 0 0 0 0 0 1. Manager of President Securities 2. Senior Manager of President Securities N/A
Kaohsiung Branch Manager Republic Of China Wu, Huan -Chung M 2013.04.01 0 0 0 0 0 0 1.Assistant Vice President of KGI Securities 2.Manager of Taiwan Securities Co., Ltd. N/A
Kaohsiung Branch Manager Republic Of China Li, Yu - Min M 2016.10.01 0 0 0 0 0 0 1.Manager of President Securities 2.Deputy Manager of President Securities N/A
Dunnan Branch Manager Republic Of China Liao, Shun -Ping M 2013.12.01 0 0 0 0 0 0 1.Sales Vice President of KGI Securities 2.Sales Vice President of Taiwan Securities Co., Ltd. N/A
Zhongli Branch Manager Republic Of China Chiang, Tsong -Shyan M 2007.12.19 0 0 0 0 0 0 1.Manager of President Securities 2.Manager of Kurn Bern Machinery Company N/A
Chengzhong Branch Manager Republic Of China Chen, Chih- Lung M 2014.10.01 0 0 0 0 0 0 1.Manager of President Securities 2.Manager of President Futures Corp. N/A
Chengzhong Branch Manager Republic Of China Huang, Chien -Hsin M 2017.09.01 0 0 0 0 0 0 1.Senior Manager of KGI Securities 2.Manager of Taiwan Securities Co., Ltd. N/A 1Suervisor of Interated Service Technolo
Tainan Branch Manager Republic Of China Tu, Ching- Feng M 2009.12.17 242,232 0.02 0 0 0 0 1.Manager of President Securities 2.Vice President of Shun Fu Tai Industrial Co. .p g gy 2. Chairman of Sin Lin Investment Co. 3. Supervisor of Li Ling Investment Co. 4. Supervisor of Shun Fu Tai Industrial Co. 5. Director of Pin Win Co.
Taichung Branch Manager Republic Of China Liao, Chen-Yin F 2001.11.12 67,511 0 0 0 0 0 1.President of Jiu Ding Securities Company 2.Vice President of Tian Fa Securities Company N/A 1Manaer of President Securities
Taichung Branch Manager Republic Of China Fang, Wu- Hsin M 2016.10.01 280 0 0 0 0 0 .g 2.Deputy Manager of President Securities N/A
Hsinchu Branch Manager Republic Of China Lee, Chin-Yi M 2014.09.01 0 0 0 0 0 0 1.Deputy Manager of President Securities 2.Sales Assistant Manager of Taiwan Securities Co., Ltd. N/A
Chiayi Branch Manager Republic Of China Tai, Kuo-Chun M 2005.06.01 0 0 0 0 0 0 1.Assistant Vice President of China Securities Co., Ltd. 2.Manager of Yuanta Securities N/A

President Securities Corp. 2017 Annual Report

III. Corporate Governance

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Title	Current Shareholding	Current Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement
	Shares	%	Shares	％	Shares	%
Pingtung Branch Manager Republic Of China Wang, Chien-Min M 2009.04.01 0 0 0 0 0 0 1.Sales Manager of President Securities 2.Deputy Manager of President Securities N/A
Keelung Branch Manager Republic Of China Huang, Ming-Fa M 2013.04.01 91 0 0 0 0 0 1.Manager of President Securities 2.Deputy Manager of Yuanta Securities N/A
Yonghe Branch Manager Republic Of China Tseng, Chien -Ming M 2012.01.01 0 0 0 0 0 0 1.Deputy Manager of President Securities 2.Deputy Project Manager of SinoPac Bank N/A
Xin Taichung Branch Manager Republic Of China Yang, Kuo-Chen M 2011.01.01 0 0 0 0 0 0 1.Manager of President Securities 2.Deputy Manager of SAMPO Securities N/A
Hsinying Branch Manager Republic Of China Hsiao, Po-Ming M 2016.04.01 0 0 0 0 0 0 1.Deputy Manager of President Securities 2.Sales of President Securities N/A
Changhua Branch Manager Republic Of China Yu, Fu -Tsun M 2017.05.22 0 0 0 0 0 0 1.Manager of Yuanta Core Pacific Securities 2.Sales of Yuanta Securities N/A
Taoyuan Branch Manager Republic Of China Tung, Chiu-An M 2013.04.01 204 0 0 0 0 0 1.Manager of Yuanta Core Pacific Securities 2.Assistant Manager of National Securities N/A
Yuanlin Branch Manager Republic Of China Liu,Ming -Hsi M 2018.01.01 0 0 0 0 0 0 1.Deputy Manager of President Securities 2.Sales Assistant Manager of Yuanta Core Pacific Securities N/A
Sanchung Branch Manager Republic Of China Kao, Hao-Chen M 2013.04.01 0 0 0 0 0 0 1.Deputy Manager of Ta Shin securities company 2.Deputy Manager of Yuanta Securities N/A
Fengyuan Branch Manager Republic Of China Lin, Cheng -Feng M 2011.01.01 43,121 0 0 0 0 0 1.Manager of President Securities 2.Manager of Tai Yu Securities N/A
Shilin Branch Manager Republic Of China Hsu, Fu-Chiang M 2014.10.01 0 0 0 0 0 0 1.Deputy Manager of Yuanta Securities Co., Ltd. 2.Senior Deputy Manager of KGI Securities N/A
Panchiao Branch Manager Republic Of China Yu, Ping-Tse M 2012.01.01 0 0 0 0 0 0 1.Deputy Manager of President Securities 2.Sales Executive of Hua Nan Securities N/A
Sanduo Branch Manager Republic Of China Tsai, Yi-Chen F 2006.03.21 0 0 0 0 0 0 1.Manager of President Securities 2.Sales Manager of SinoPac Holding N/A
Xizhi Branch Manager Republic Of China Hu, Wen-Chieh M 2013.04.01 0 0 0 0 0 0 1.Assistant Vice President of Concord Securities Co., Ltd. 2.Manager of Polaris Securities Co., Ltd. N/A
Ilan Branch Manager Republic Of China Chiang, Jen- Chu F 2014.12.01 0 0 0 0 0 0 1.Manager of KGI Securities 2.Manager of Capital Securities N/A
Nanjing Branch Manager Republic Of China Chang, Wen-Lung M 2009.04.01 0 0 0 0 0 0 1.Sales Deputy Manager of President Securities 2.Sales of President Securities N/A
0 0 0 0 0 0 Kuting Branch Manager Republic Of China Chen, Te-Chang M 2018.01.01 1.Manager of President Securities 2.Deputy Manager of President Securities N/A
Kinmen Branch Manager Republic Of China Chung, Hui-Ju F 2016.07.01 0 0 0 0 0 0 1.Sales Manager of President Securities 2.Sales Deputy Manager of President Securities N/A
Tucheng Branch Manager Republic Of China Chen, Chun-Ming M 2017.03.23 0 0 0 0 0 0 1.Deputy Manager of President Securities 2.Sales Manager of President Securities N/A
Songjiang Branch Manager Republic Of China Lin, Yu-Ju F 2017.08.01 0 0 0 0 0 0 1. Senior Deputy Manager of KGI Securities 2. Sales Manager of Jih Sun Securities N/A
Songjiang Branch Manager Republic Of China Yeh, Yun-Sheng M 2017.04.05 0 0 0 0 0 0 1.Assistant Vice President of Hua Nan Securities 2.Assistant Vice President of Mega Securities Co., Ltd N/A
Neihu Branch Manager Republic Of China Chen, Chi-Heng M 2014.10.01 0 0 0 0 0 0 1.Manager of China Securities Co., Ltd. 2. Deputy Manager of China Securities N/A
Renai Branch Manager Republic Of China Yang, Chun-Chen M 2013.12.01 0 0 0 0 0 0 1.Manager of President Securities 2.Sales Deputy Manager of President N/A
Xindian Branch Manager Republic Of China Chiu, Shyh -Tyng M 2018.01.01 1,073 0 3,219 0 0 0 1.Manager of President Securities 2.Deputy Manager of President Securities N/A
Xinzhuang Branch Manager Republic Of China Chen, I-Ju F 2014.07.21 0 0 0 0 0 0 1.Deputy Manager of KGI Securities 2.Deputy Manager of Taiwan Securities Co., Ltd. N/A
Pingzhen Branch Manager Republic Of China Li, Shu -Jung F 2015.10.26 0 0 0 0 0 0 1.Manager of Retail Securities Brokerage Business of Standard Chartered Bank (Taiwan) Ltd. 2.Bank Teller of Hsinchu International Bank N/A
Xin Taoyuan Branch Manager Republic Of China Wu, Shao-Kuang M 2014.10.10 0 0 0 0 0 0 1.Manager of Retail Securities Brokerage Business of Standard Chartered Bank (Taiwan) Ltd. 2.Manager of Hsinchu International Bank N/A
Zhunan Branch Manager Republic Of China Peng, Hsiu-Chin F 2014.10.10 0 0 3 0 0 0 1.Manager of Retail Securities Brokerage Business of Standard Chartered Bank (Taiwan) Ltd. 2.Manager of Hsinchu International Bank N/A
Zhunan Branch Manager Republic Of China Su,Yung-Sheng M 2016.04.01 0 0 0 0 0 0 1.Deputy Manager of Jih Sun Securities 2 Sales Assistant Manager of Polaris Securities Co., Ltd. N/A
Offshore Securities Unit Branch Manager Republic Of China Lai, Chung-Chih M 2014.07.07 0 0 0 0 0 0 1.Deputy Manager of President Securities 2.Deputy Project Manager of President Securities Chairman of UnImoat Technology Co., Ltd

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Corporate Governance

Ownership Structure and Shareholders’ Rights

4 pillars of corporate governance

The Company has a spokesperson and shareholder service personnel to process shareholders' sugges�ons, ques�ons, and disputes. The Company has established an "Investor Area" and "Investor Mailbox" on the Company website, which are run by the spokesperson and dedicated personnel of the Administra�on Department. Shareholders' sugges�ons or disputes are forwarded to relevant departments for processing.

Ownership Structure and Shareholders’ Rights

Board Opera�on

Communicate with stakeholers Risk Management

PSC maintains close rela�onships with key shareholders and assigns dedicated shareholder services personnel to con�nually monitor any changes in the shareholdings of these key shareholders.

separate opera�on. In term of management right/obliga�on there is a clear line between our company and its subsidiaries.

corporate governance measures in line with the “Principles for Corporate Governance for Securi�es Firms” and with relevant laws and regula�ons, President Securi�es adopted such guidelines by the 13th mee�ng of the 9th Board of the company held on August 7, 2014, and will abide by said principles.

All the rela�ons and trades are dealt with in accordance with law. “Surveillance governing internal-control system for affiliated companies” has also been set up as a controlling and governing mechanism for our affiliated companies. 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 responsibili�es, adequate firewall and confiden�ality procedures, the disclosure of important events, educa�onal guidance rules, etc.

President Securities Corp. 2017 Annual Report

III. Corporate Governance

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Corporate Governance

Board Opera�on

4 pillars of corporate governance

Member of the board

Abiding by ar�cle 10 of our Principles for Corporate Governance, when selec�ng directors, President Securi�es uses a comprehensive approach so as to put together a professional yet independent team that can exercise its du�es in an objec�ve manner.

Ownership Structure and Shareholders’ Rights

Board Opera�on

The Company currently has 18 Directors of which 8 are female (including 1 independent director); therefore, women account for 44% of all Directors. Directors with exper�se in leadership, business decision-making, management, crisis management, industrial knowledge and decision-making capabili�es include Kao, Shiow-Ling Lin, Chung-Shen, Lin, Kuan-Chen, and Lee, Tong-Liang. Directors with exper�se in technology, warehousing, and educa�on include Duh, Bor-Tsang, Lee, Shy-Lou, and Teng, Wen-Hwi. Directors with exper�se and experience in finance and accoun�ng include Chen, Kuo-Hui, Hsieh Hong, Hui-Tzu, Lu, Li-An, Chang, Ming-Chen, and Lee, Shu-Fen. Directors with exper�se in financing, and investments include Liang, Yann-Ping, Fu, Kai-Yun, Lee, Kwang-Chou, Liu, Tsung-Yi, and Tu, Li-Yang. Independent Director Wu, Tsai-Yi specializes in economics and currently serves as the President of the Taiwan Research Ins�tute.

Communicate with stakeholers Risk Management

Training for Directors

The Company's Directors shall conduct independent studies and the Company shall also organize related corporate governance courses periodically and invite all Directors to par�cipate in the courses. In 2017, in addi�on to independent studies conducted by Directors themselves, the Company collaborated with the Taiwan Corporate Governance Associa�on and jointly organized courses for all Directors and the management team of the Company.

The Company invited Mr. Peter Pu, the president of Bri�sh Standards Ins�tu�on (BSI) to speak on "The Opportuni�es and the Challenges of the Digi�za�on of Finance, and Corporate Governance" in May, and invited Mr. Daniel Chu, the chairman of PricewaterhouseCoopers Sustainability Services Company Ltd to speak on “The Prac�ces of Corporate Governance and Corporate Social Responsibili�es’ Trends” in August to provide Directors with a more profound understanding of corporate governance.

3 commi�ees

President Securi�es has already added independent directors to its board, has established a remunera�on commi�ee, a risk management commi�ee, and an audit commi�ee.

Company's business, the Board of Directors has passed the Ar�cles of Organiza�on developed by the Risk Management Commi�ee on June 26, 2008 and established the Risk Management Commi�ee in the Board of Directors to implement supervision of day-to-day risk management. The Commi�ee is charged with the following du�es:

i) Establishment of Company risk management policies and organiza�on and assignment of du�es to related units.

ii) Establishment of the Company's risk measurement standards. iii) Management of limits for the Company's overall and departmental risk.

The Risk Management Commi�ee consists of three members. At least one member shall be an Independent Director and the other two members shall be Directors (or Independent Directors) or supervisors determined by Board mee�ng resolu�ons. The Risk Management Commi�ee shall convene mee�ngs at least once every quarter to assist the Board of Directors in planning and supervising the Company's related risk management affairs. This commi�ee shall report the implementa�on of risk management to the Board of Directors periodically and propose sugges�ons for necessary improvements.

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Board Performance Evalua�on

Board of Directors Mee�ng

President Securi�es has yet to establish a “Board Performance Evalua�on” procedure. The board conducts its business in accordance with Corporate Governance Best Prac�ce Principles for TWSE/TPEx Listed Companies and in accordance with the companies own Rules of Procedure for Board of Directors Mee�ngs.

Total of 6 mee�ngs of the board of directors were held in the year of 2017. Directors’ a�endance condi�on

Board of Directors Mee�ng Total of 6 mee�ngs of the board of directors were held in the year of 2017. Directors’ a�endance condi�on Board Performance Evalua�on President Securi�es has yet to establish a “Board Performance Evalua�on” procedure. The board conducts ts business in accordance with Corporate Governance	Board of Directors Mee�ng Total of 6 mee�ngs of the board of directors were held in the year of 2017. Directors’ a�endance condi�on Board Performance Evalua�on President Securi�es has yet to establish a “Board Performance Evalua�on” procedure. The board conducts ts business in accordance with Corporate Governance	Board of Directors Mee�ng Total of 6 mee�ngs of the board of directors were held in the year of 2017. Directors’ a�endance condi�on Board Performance Evalua�on President Securi�es has yet to establish a “Board Performance Evalua�on” procedure. The board conducts ts business in accordance with Corporate Governance
Audit Commi�ee The Company established its Audit Commi�ee in June of 2015. Total of 6 mee�ngs of the Audit Commi�ee were held in the year of 2017. Independent Directors’ a�endance condi�on Title Name A�endance in Person By Proxy A�endance rate (%) Chairman Vice Chairman Director Director Director Director Director Director Director Director Director Director Director Independent Director Independent Director Independent Director Independent Director Director Director Kai Nan Investment Co., Ltd. Rep. Lin, Chung-Shen Lin, Kuan-Chen Cheng, Kao-Huei Kao, Shiow-Ling Teng, Wen-Hwi Hui Tung Investment Co., Ltd. Rep. Lee, Tong-Liang Leg Horn Investment Co., Ltd. Rep. Chang, Ming-Chen Ta Le Investment Holding Co., Ltd. Rep. Tu, Li-Yang Kai Nan Investment Co., Ltd. Rep. Hsieh Hong, Hui-Tzu Kai Nan Investment Co., Ltd. Rep. Liu, Tsung-Yi Kai Nan Investment Co., Ltd. Rep. Lin, Cheng-Te Kai Nan Investment Co., Ltd. Rep. Lu, Li-An Lee, Shy-Lou Wu, Tsai-Yi Lee, Kwang-Chou Fu, Kai-Yun Liang, Yann-Ping Duh, Bor-Tsang China F.R.P Corp. Rep. Lee, Shu-Fen 0 0 3 3 4 2 1 1 2 0 0 1 1 0 1 0 0 3 0 100% 100% 0% 50% 33% 67% 83% 83% 100% 67% 100% 83% 83% 100% 83% 100% 100% 50% 100% 6 6 0 3 2 4 5 5 6 4 4 5 Director Kai Nan Investment Co., Ltd. Rep.Chen,Kuo-Hui 0 100% 2 5 6 5 6 6 3 6 Title Name Actually Number of Times A�ended (B) Number of Times A�ended by Proxy Actual A�endance Rate (%) (B/A) Independent Director Independent Director Independent Director Independent Director Liang, Yann-Ping Lee, Kwang-Chou 6 6 6 6 0 0 0 0 100% 100% 100% 100% Fu, Kai-Yun Wu, Tsai-Yi Remunera�on Commi�ee The commi�ee is composed of four members. The tenure of the commi�ee is efec�ve from June 29th, 2015 to June Best Prac�ce Principles for TWSE/TPEx Listed Companies and in accordance with the companies own Rules of Procedure for Board of Directors Mee�ngs. Evalua�ng the independence of accountants Based on regula�on of corporate governance of securi�es dealers, the Board evaluates and assigns the appointment of independent accountants annually. According to ar�cle 46 and ar�cle 47 of Cer�fed Public Accountant Act, "honesty, impar�ality, objec�vity and independence,” the company sets up the independent items of declara�on, which issued by the cer�fed public detached accountants. Accountant Hsiao, Chin-Mu, Chang, Ming-Hui and Hsu, Chi-Chang from PricewaterhouseCoopers Taiwan proved to be qualifed as CPA for company's fnancial and tax accountants. The Purchase of Liability Insurance for Directors and Supervisors President Securi�es has already purchased liability nsurance from ACE insurance and AIG insurance for all of ts directors, and key employees (Policy Value: US$10 million; Policy Term: September 1, 2017, to September 1, 2018).
	Chairman Vice Chairman Director Director Director Director Director Director Director Director Director Director Director Independent Director Independent Director Independent Director Independent Director Director Director Director	Kai Nan Investment Co., Ltd. Rep. Lin, Chung-Shen Lin, Kuan-Chen Cheng, Kao-Huei Kao, Shiow-Ling Teng, Wen-Hwi Hui Tung Investment Co., Ltd. Rep. Lee, Tong-Liang Leg Horn Investment Co., Ltd. Rep. Chang, Ming-Chen Ta Le Investment Holding Co., Ltd. Rep. Tu, Li-Yang Kai Nan Investment Co., Ltd. Rep. Hsieh Hong, Hui-Tzu Kai Nan Investment Co., Ltd. Rep. Liu, Tsung-Yi Kai Nan Investment Co., Ltd. Rep. Lin, Cheng-Te Kai Nan Investment Co., Ltd. Rep. Lu, Li-An Lee, Shy-Lou Wu, Tsai-Yi Lee, Kwang-Chou Fu, Kai-Yun Liang, Yann-Ping Duh, Bor-Tsang China F.R.P Corp. Rep. Lee, Shu-Fen 0 0 3 3 4 2 1 1 2 0 0 1 1 0 1 0 0 3 0 100% 100% 0% 50% 33% 67% 83% 83% 100% 67% 100% 83% 83% 100% 83% 100% 100% 50% 100% 6 6 0 3 2 4 5 5 6 4 4 5 Kai Nan Investment Co., Ltd. Rep.Chen,Kuo-Hui 0 100% 2 5 6 5 6 6 3 6

The commi�ee is composed of four members. The tenure of the commi�ee is effec�ve from June 29th, 2015 to June 17th, 2018.

Title Name A�endance in Person By Proxy A�endance rate (%) Remark	Title Name A�endance in Person By Proxy A�endance rate (%) Remark
Convener Member Member Member	3 3 3 3 0 0 0 0 100% 100% 100% 100% Liang, Yann-Ping Lee, Kwang-Chou Fu, Kai-Yun Wu, Tsai-Yi Reappointment 2015.6.29 Reappointment 2015.6.29 Reappointment 2015.6.29 Newly appointed 2015.6.29

President Securities Corp. 2017 Annual Report

III. Corporate Governance

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Corporate Governance

Shareholder Employee 4 pillars of corporate governance Salary and benefits Ethical business opera�ons Ownership Structure and Corporate governance Opera�ng performance Shareholders’ Rights Informa�on disclosure transparency Talent development and cul�va�on Opera�ons performance Corporate governance Board Opera�on Shareholder interest Employee care Risk & Crisis management Brand image Communicate with stakeholers Social welfare i) Company informa�on is provided i) The employee sugges�on mailbox and Risk Management through investor emails and employee complaint mailbox are used for announcements on the official website. communica�on. The Company established “the investor ii) The Company organizes employee sec�on” on our website to provide seminars every month. The Company investors with transparent and also announces internal news reports We have also taken steps to comprehensive informa�on. The Company and organizes large-scale family day address corporate responsibility also established the investor rela�ons events to reward employees and concerns of our interested contact window to respond to ques�ons facilitate communica�on and employee raised by shareholders. par�es. We have established a exchanges. pla�orm with dedicated staff to ii) Announcements of opera�ons and iii) To boost work efficiency and solidarity handle feedback from investors, financial performance periodically and the issuance of material informa�on in among our employees, we place par�cular emphasis on benefits programs par�cular emphasis on benefits programs employees, clients, and other Chinese and English on the Market and labor rela�ons, and thus ensure organiza�ons so as to maintain Observa�on Post System. employee welfare in a comprehensive strong lines of communica�on. iii) Organiza�on of one ins�tu�onal manner. This allows us to stay aware of the investor conference every six months to iv) General accident insurance has been issues that are of importance to report business status to shareholders. purchased for each of our branches and our interested par�es. and to iv) On President Securi�es Corpora�on work premises so as to protect customer ensure that all of our ac�ons are website, we have clearly stated our rights. Employer insurance has also been “Corporate Responsibility” values and purchased so as to protect the interests responding to the needs of our policy, which details the company’s of all employees. interested par�es.

i) The employee sugges�on mailbox and employee complaint mailbox are used for communica�on.

ii) The Company organizes employee seminars every month. The Company also announces internal news reports and organizes large-scale family day events to reward employees and facilitate communica�on and employee exchanges.

among our employees, we place par�cular emphasis on benefits programs par�cular emphasis on benefits programs and labor rela�ons, and thus ensure employee welfare in a comprehensive manner.

iv) 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.

our interested par�es. and to iv) On President Securi�es Corpora�on ensure that all of our ac�ons are website, we have clearly stated our “Corporate Responsibility” values and responding to the needs of our policy, which details the company’s interested par�es. economic, social, and environmental aspira�ons. President Securi�es has also published a report, en�tled, “President Securi�es Corporate Responsibility Report” which can be viewed either on The Company has established a the company’s corporate website stakeholder sec�on and corporate (www.pscnet.com.tw) or on the MOPS social responsibility sec�on on the website maintained by the TWSE. official website to explain the v) Our company has assigned a spokesperson to be responsible for Company's corporate social providing informa�on to shareholders and responsibility (CSR) ideas and investors, and to post periodical and policies and describe the non-periodical financial and opera�onal Company's accomplishments informa�on on the government-operated including the Company’s MOPS website. On our website where investors and shareholders can obtain economic, social, and informa�on on the following: environmental achievements. The Company introduc�on in English and Company has formulated the Chinese. 'President Securi�es Corp. Disclosure of company’s financial and Corporate Social Responsibility business informa�on, and corporate Report' every year for publica�on governance. on the Company's website (URL: Investor Sugges�on Box, which is www.pscnet.com.tw) and manned by Administra�on Department publica�on in the Market Personnel who are responsible for Observa�on Post System. replying to all comments received. The Company has disclosed the briefing and video files of ins�tu�onal investor conference proceedings and other related informa�on on the Company's website.

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Clients Supplier Others Customer interests Ethical business opera�ons Charity Product innova�on Brand image Environmental conserva�on Service quality Risk & Crisis management Sustainability Customer complaint Mechanisms mobile services i) The Company communicates with i) President Securi�es operate financial i) The Company organizes charity events customers regularly through the services and, therefore, does not produce every year. customer service hot line and email and any environmental pollutants or waste. ii) The Company par�cipates in courses monthly statements are delivered every ii) The Company organizes periodic price and seminars organized by the month. nego�a�on mee�ngs, announces government. ii) The Company organizes investment informa�on on the public tendering and wealth management seminars informa�on sec�on on the official periodically and organizes large-scale website, and organizes public tendering investment seminars to communicate briefings. and interact with customers. iii) The Company has established the Our Policy: 'Supplier Evalua�on and Management “3 Goods and 1 Fair” ─ “Good Quality”, Regula�ons' to evaluate suppliers. The “Good Credibility”, “Good Service”, and evalua�ons include preliminary, periodic, “Fair Price”. This is combined with and unscheduled evalua�ons and classify “Professional Leadership, Kind Service”, suppliers into A, B, C, and D categories in in providing all customers with accordance with the results of the comprehensive services. evalua�ons, which are used as the basis for future coopera�on.

Implementa�on:

iv) The Company cooperates with suppliers to jointly commit to fulfilling corporate social responsibili�es and sign the 'Corporate Social Responsibili�es Commitment Le�er.' The materials used in decora�on construc�on and equipment procurement must be green building materials and equipment with environmental protec�on labels to increase the Company's dedica�on to environmental protec�on, energy conserva�on, and carbon emissions reduc�on.

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.

President Securities Corp. 2017 Annual Report

III. Corporate Governance

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Corporate Governance

4 pillars of corporate governance Risk Management

Risk Evalua�on Standards

Ownership Structure and Shareholders’ Rights

The company has set risk management principles. In order to ensure that all of our organiza�on’s businesses adhere to our opera�ng policies, opera�ng goals, and capital levels, we have set suitability evalua�on policies that can react to changes in our business and in the market:

Board Opera�on

Communicate with stakeholers

Market Risk

Risk Management

i) We use RiskMetrics market risk management system to manage our company’s exposure to market risk. In addi�on to producing daily risk value tables, we perform simula�on analysis and historical analysis so as to supplement missing risk values. ii) We evaluate the completeness of our evalua�on models on various business mareas, and review the assump�ons, parameters, and data used for various product models, and then test that the models for the various products are reasonable.

Risk Management Categories Our risk management takes into account market risk, credit risk, liquidity risk, opera�onal risk, legal risk, etc., for both on-balance sheet business and off-balance sheet businesses. Each day, every level of opera�ons, every manager, and every trader is given fresh figures on posi�on risk and key sensi�vity values. Through this, the company’s risk controls and trading strategies can be properly analyzed and necessary alerts can ini�ated. Se�ng risk control guidelines for each level of opera�ons allows for comprehensive monitoring of risk.

perform backtes�ng to ensure the effec�veness of the models used.

Credit Risk

i) Our company undergoes credit ra�ng evalua�ons from Moody’s, Standard & Poor’s, Fitch, and Taiwan Ra�ngs Corp.

ii) 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.

iii) Issuer’s Credit Risk: we use KMV model to perform internal evalua�ons, 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 evalua�on of the company, and then use this to protect ourselves from poten�al credit risks and poten�al capital shor�alls.

Opera�onal Risk

i) Opera�onal 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 opera�ons risk policy handbooks that entail every level of opera�ons.

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

Risk Management Policy

Ensure that we can operate various types of business from a posi�on of solid risk management. Using reasonable risk tolerance levels, con�nue to enhance profitability, create shareholder value, and achieve return on capital targets. Set well-defined risk controls for every business area, implement risk management checks and balances, set clear obliga�ons for each department so as to enhance risk management effec�veness by breaking it down into manageable pieces. Our risk management opera�ons take into accounts all key forms of risk: market risk, credit risk, liquidity risk, opera�onal risk, legal risk, model 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 organiza�on, including the Board of Directors, the Risk Control Commi�ee, the Office of the CEO, the Assets/liabili�es Commi�ee, the Risk Control Office, the Audi�ng office, the Legal Compliance and Legal Ma�ers Department, the Finance Department, and all business units. Each segment of the company has clearly spelled-out obliga�ons and every level of the company has clearly defined authori�es.

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Our Risk Management Organiza�on

Board of Directors

Audits the company’s risk management policy, supervises sales business strategies, approves all business proposals and trading permissions, is ul�mately responsible for risk management.

Risk Management Commi�ee

Is a commi�ee established by the Board of Directors tasked with integra�ng all risk management opera�ons, with supervising and assis�ng all the various risk management and related opera�ons. The commi�ee is also tasked with se�ng the various risk authori�es, limits, and targets, for a centralized supervision of the status of all of the company’s risk management efforts.

Supervises the daily implementa�on of all of the company’s risk management opera�ons and authorizes any excep�ons to the risk management protocols.

Assets/Liabili�es Management Commi�ee Controls the company’s overall asset structure, collects and analyzes domes�c and interna�onal interest rates, exchange rates, and economic changes.

Is responsible for the dra�ing of risk policies and regula�ons, for monitoring market and credit risks, for monitoring liquidity risks, for compiling data on opera�onal risk control and management, for construc�ng and maintaining the risk management system, for implementa�on of risk management systems and for ensuring company-wide regulatory compliance.

Sets opera�ons risk controls, sets the standards for risk control systems, puts in place internal audi�ng controls, and implements daily check rou�nes.

Compliance Division

Implements legal risk controls and ensures that all businesses and risk management opera�ons are in compliance with relevant laws and regula�ons.

Finance Department

Monitors capital adequacy rates and liquidity risks, and analyzes the company’s asset/liability structure and other key financial ra�os.

Business units

Based on the company’s risk management policies and regula�ons sets risk management guidelines for various businesses, and produces a report on abnormal risk items for the Risk Control

Se�lement & Clearing Department

Implementa�on of risk control and management for se�lement, clearing, and short-sale business opera�ons. Implementa�on of risk management and business department risk management for transac�ons.

President Securities Corp. 2017 Annual Report

III. Corporate Governance

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How can PSC make a contribu�on to the UN Sustainable Development Goals (SDGs)?

	How can PSC make a contribu�on to the UN Sustainable Development Goals (SDGs)?
	Our 3 CSR Targets What we have done? Relevence to SDGs Exercising Corporate Governance Holding corporate governance training classes. Engraining CSR concept into our our corporate opera�ons and development plans. Organizing corporate responsibility events.

	Pos�ng water conserva�on reminders and installing automa�c sensing faucet. The use of eco-friendly equipment and supplies. Increasing the usage of E-trading & E-processing of administra�ve afairs. Removing and replacing outdated equipment with more energy-efcient models, followed-up by regular inspec�ons. Fostering a Sustainable Environment
	Se�ng up an “Investor Area” on our website for easily obtain more informa�on. Establishing a complaint hotline for customer to seek assistance. Preserving Public Welfare

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Reques�ng our main suppliers to sign the "Supplier Social Responsibility Commitment Le�er".

Se�ng up a supplier approval process and regularly review our suppliers.

Annual employee blood dona�on drive.

Working with the Taiwan Fund for Children and Families to provide scholarships for underprivileged primary school students.

Se�ng up a complaints review access handling sexual harassment.

Having employee Complaint Window and a smooth communica�on system. Holding professional training courses for individual needs. Providing a series of health-care services and a clear salary and bonus policy.

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Corporate Social Responsibility

For the implementa�on of the corporate governance, the Company’s Board of Directors approved the “President Securi�es Corporate Social Responsibility Best prac�ce Principles’’ on July 2nd, 2012. Our company has worked out “President Securi�es Social Responsibility Report”, which indicates the related performance and has been put on our website. Implemental reports of “President Securi�es Corporate Responsibility Principles” were proposed in board mee�ng every year, and report of the year 2017 was proposed in the 17th mee�ng of the 10th Board of the company.

3 pillars of Corporate Social Responsibility Exercising Corporate Governance Fostering a Sustainable Environment Preserving Public Welfare

The Corporate Governance Evalua�on System

System in 2016 was 94.85, which was among the top 5% of all listed companies. The Company was also the only listed securi�es company that received such recogni�on in three consecu�ve years and it received an award from the competent authority for the achievement.

However, the Company will not slow down a�er such impressive achievements. The Company is now ac�vely seeking improvement measures for the few items where it failed to score such as lowering energy consump�on and carbon emissions, lowering greenhouse gas, reducing water consump�on, and other waste management. The Company is now planning and strengthening improvement measures.

In addi�on, the Company has organized ins�tu�onal investor conferences in March 2017 and August 2017 to allow general investors to learn about the Company's opera�ons and performance. With regard to 1. Whether the Company voluntarily establishes more Independent Director seats than required by regula�ons; 2. Periodic board performance evalua�ons; and 3. Voluntarily disclosure of remunera�on to individual Directors and Supervisors -- the Company is currently ac�vely studying these issues.

The Implementa�on of the Corporate Governance Our Company uses mul�ple avenues by which to promote corporate responsibility educa�on, including holding corporate governance training classes (May 9th, 2017, and August 23rd, 2017, for 6 hours in total); another such class is scheduled for May and August of 2018. We will con�nue to imbue the concepts of corporate responsibility into all Company ac�vi�es and future development and thereby achieve real corporate governance. Corporate responsibility and corporate governance concepts have already been engrained in our corporate opera�ons and development plans. Every year, our administra�on department plans CSR strategy and promo�on projects, 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 ac�vi�es implemented by each department.

President Securities Corp. 2017 Annual Report

III. Corporate Governance

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Corporate Social Responsibility

2010 Securi�es Corporate Responsibility Report”, and has produced subsequent annual reports ever since. The reports are available online for download at the Company’s corporate website, www.pscnet.com.tw. Our corporate social responsibility report for 2016 was published in November, 2017 and was cer�fied by a third party (PwC Taiwan), using the “Non-Financial Informa�on Audi�ng and Cer�fica�on Le�er” format that is in compliance with the Good Repor�ng Ini�a�ve (GRI) G4 guidelines and that covers all items required by GRI G4 repor�ng policies.

3 pillars of Corporate Social Responsibility

Exercising Corporate Governance

Fostering a Sustainable Environment

Environmental Protec�on Measures

any environmental pollutants, we s�ll care deeply about protec�ng the environment, about reducing our impact on the environment, and about our responsibility for sustainability. The Company is also commi�ed to green energy, environmental protec�on, and reducing waste in a sustainable manner. To this end, the Company place waste sor�ng receptacles on all floors of its facili�es and is strict about adhering to recycling principles. All maintenance performed and all equipment purchased must be cer�fied as environmentally friendly. The aim is to reduce the Company’s overall environmental impact as the Company strives to reduce its overall carbon footprint.

Preserving Public Welfare

In 2017, the Company's headquarters consumed :

21,848 cubic meters of water which accounts for 1,573kg carbon emissions.

not produce any environmental pollutants or waste. The main source of greenhouse gases that we produce is from our power consump�on. In an effort to be increasingly environmentally friendly and to reduce our carbon footprint, we have implemented many ini�a�ves aimed at replacing company equipment with low power consump�on equipment. We have also implemented an electronic internal document management system and electronic account statements for our customers, so as to reduce our consump�on of paper products. We also send out regular emails to all employees that discuss key environmental concepts.

1,507,797 kilowa�-hours of electricity which accounts for 797,625kg emissions.

A�er deduc�ng 100,000 kWh of Green Power Purchase, the annual carbon emissions were reduced by approximately 6.84% from 2016.

The Company shall con�nue to promote environmental protec�on awareness among colleagues and it has established a goal of reducing carbon emissions by 1-2% in 2018 to build a greener enterprise.

government policies on indoor climate controls, as well as removing and replacing outdated equipment with more energy-efficient models, followed-up by regular inspec�ons. Every year a table is genera�ng showing monthly water and electricity usage by department and any department that has exceeded its pre-determined limits must submit an explana�on for the abnormality and its plan for correc�ve ac�on. Plus, all departments are encouraged to keep environmental concerns and conserva�on 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 effec�ve way to reduce carbon emissions. In all employee washrooms and kitchens, we have placed water conserva�on reminders and all taps have been ou�i�ed with water stream reduc�on 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 administra�ve affairs, all offices ou�i�ed with environmentally friendly equipment and materials, water and electricity conserva�on ini�a�ves, waste paper reduc�on policies, etc.

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Corporate Social Responsibility

Employee Rights and Hiring Concerns

Established Employee Complaint Window

3 pillars of Corporate Social Responsibility

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 Regula�ons, the Labor Insurance Regula�ons, the Labor Inspec�on Act, the Employment Welfare Act, etc., and, thereby diffuse poten�al management-labor disputes. Complaints can be submi�ed via email at: [email protected]

Exercising Corporate Governance

Fostering a Sustainable Environment

Se�ng Up a Complaints Review Access

In accordance with sexual harassment protec�on bill and sex equality in work place bill, our company has worked out measures of preven�ng, grievance-airing, inves�ga�ng and handling sexual harassment. A commi�ee is also set up to take charge of the related ma�ers in order to prevent sexual harassment and protect vic�m’s rights, including providing sexual harassment free environment.

Preserving Public Welfare

Sexual harassment Tel.: (02)2746-3637 Fax: (02)2746-3799 E-mail: [email protected]

among our employees, we place par�cular emphasis on benefits programs and labor rela�ons, and thus ensure employee welfare in a comprehensive manner. 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. In taking care of our employees, besides se�ng up internal regula�ons in accordance with the Labor Law, we also conduct regular checks on the differences between our internal regula�ons and the Labor Law. We also provide opinion boxes for employees as communica�on channel in order to protect employee’s legal rights.

Safety Workplace

We 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 consul�ng room, and offer employee health inspec�ons on annual basis, with hope to let employee understand and manage their own health status in advance. President Securi�es provides health counseling, followed by follow-up health assessments. We organize regular health seminars and an online health and sanita�on guidance system that provides preventa�ve health informa�on; we offer an employee ac�vity center, gym, table tennis and billiards room, and we ac�vely encourage employee clubs and groups, all to promote the physical and emo�onal wellbeing of our employees.

Communica�on System

We have a system in place to enable smooth communica�on, it also provides its employees with the relevant informa�on and applica�on channels, thus ensuring that their working environment is a good and fair one.

i) The company has labor and employer representa�ves, who regularly hold labor-employer mee�ngs to ensure sufficient communica�ons between the two sides.

ii) Each department holds regular department mee�ngs, employees' views and needs are sounded out during manager-level mee�ngs and appropriate measures are taken therea�er.

iii)The company could achieve transparency through internal Official Document Post System.

Career Planing and Career Development for Empolyees The company provides a series of employee training about the Finance 3.0 and Internet in respone to the trends of financial market. We create career planning and career development base on indivisual needs of staff’s posi�ons, such as the project of cross-selling for diversified products, human capacity building, stregthening occupa�onal management and so on.

President Securities Corp. 2017 Annual Report

III. Corporate Governance

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Corporate Social Responsibility

Par�cipa�on in Public Service

3 pillars of Corporate Social Responsibility

The Company has taken concrete ac�ons to cooperate with the Taiwan Fund for Children and Families from 2007 to 2017 to help children from financially challenged families with their studies. The Company also mobilized all employees and customers for joint par�cipa�on and invested actual funds and various equipment to social welfare ac�vi�es to fulfill corporate social responsibili�es. The Company raised a total of NT$2.1 million from 1,194 par�cipants in 2017.

Exercising Corporate Governance

Fostering a Sustainable Environment

Since 2001, the Company has organized all employees in securi�es, futures, investment trusts, investment consul�ng, insurance brokerage, and President Securi�es Venture Capital as well as allowing customers to par�cipate in the 'Love Delivery Ac�vi�es' that provide children from financially challenged families with scholarships. A total of approximately 7,600 elementary school, junior high school, and senior high school students were beneficiaries. The ac�vi�es have provided school children from poor families with opportuni�es to explore different academic disciplines for their own development and growth.

Preserving Public Welfare

2006 and received a passionate response. Star�ng in 2007, the Company has organized two employee blood dona�on events every year and expanded the event to include community residents who have provided strong support. Star�ng in 2010, the Company organized three blood dona�on ac�vi�es every year and a total of 223 bags of blood were donated in 2017. A total of 2,515 bags of blood have been donated from 2006 to 2017 and the Company has become a permanent partner of the Blood Center. The Company receives a le�er of gra�tude and commenda�on from the Blood Center every year.

President Securi�es Corp. upholds the spirit of 'giving back to the community what we take,' and we con�nue to dedicate ourselves to helping disadvantaged groups and to promote social welfare ac�vi�es.

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Customer Rights

Our Service (and produc�on) Policy

We pay close a�en�on to the protec�on of customer informa�on so as to protect the rights of our customers. We adhere to all relevant laws and regula�ons with regard to product marke�ng and product disclaimers.

A Supplier Approval Process

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 con�nued business.

In keeping with the laws and regula�ons 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 informa�on and rights of the customers.

Sign with Main Suppliers

The Company has requested main suppliers to sign the "Supplier Social Responsibility Commitment Le�er" that requests suppliers to commit to the Interna�onal Bill of Human Rights, follow labor regula�ons, provide employees with a fair, healthy, and safe work environment, abolish discrimina�on and unfair treatment, and follow related environmental protec�on regula�ons. Suppliers who violate the Commitment Le�er may be requested to terminate contracts or suspend coopera�on rela�ons.

Also, President Securi�es has received BSI and BS-10012 cer�fica�on for its new account applica�on process. We dedicated ourself in rising professional ability of persional informa�on protec�on, and will cau�ously processing client informa�on in order to protect customer rughts.

We have assigned a spokesperson to be responsible for providing informa�on to shareholders and investors, and for pos�ng periodical and non-periodical financial and opera�ng informa�on on the government-operated MOPS website. We have also setup an “Investor Area” on our website where investors and shareholders can obtain informa�on on the following:

products adheres to all relevant laws and regula�ons.

Company introduc�on in Chinese and English. Company financial statements.

Board of Director mee�ng Minutes. Investor Sugges�on Box, which is manned by Public Affairs personnel who are responsible for replying to all comments received.

Indeed, over the last several years, President Securi�es Corp. has planned and run a number of ac�vi�es with groups such as the Taiwan Fund for Children and Families, the Taiwan Founda�on for Rare Disorders, and the United Way of Taiwan. We assist these organiza�ons 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 responsibili�es as a good corporate ci�zen.

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President Securities Corp. 2017 Annual Report

III. Corporate Governance

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Integrity Applica�on

Integrity Policies

Enhanced Informa�on Disclosure

Our company has always applied the principle of “integrity and sustainable management,” to serve our customers sincerely. We also inherit the spirit of “3 Goods and 1 Fair.” We protect clients’ rights with flawless service. We pursuit long-term, steady and balanced growth in the spirit of integrity management.

In keeping with the company’s honest opera�on 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).

Integrity Management Execu�on

Our Commitment

Before engaging in any business rela�onship with any agent, supplier, customer, or any other enterprise, we conduct a thorough examina�on of that party’s creditworthiness, so as to avoid entering into any transac�ons with non-creditworthy par�es. Included in all agreements with third par�es are provisions which allow for the early termina�on of such agreement in the event of any decei�ul acts by that party. President Securi�es designates clear divisions of responsibili�es among its employees, and, in 2012, the Management Department established the “President Securi�es Principles for Honest Opera�ons,” whereby a special audi�ng 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.

The company has established “Ethical Corporate Management Best Prac�ces Principles” and “Fair Client Treatment Principles”, and strives to adhere to these concepts.

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 3rd annual corporate governance evalua�on in 2016, scoring in the top-5 percent among listed company in Taiwan.

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

The Company is ac�ve in par�cipa�ng in community ac�vi�es, and in fostering sustainable development sustainable development.

President Securi�es’ board is subject to a high degree of self-regula�on, whereby any board mo�on that is suspected of having the poten�al to create any conflict of interest with the board or with any of its representa�ves or proxies must undergo evalua�on and may not be included in the board agenda or voted upon by such party, and also may not be voted on by any representa�ve or proxy of such party. Board members should exercise self-regula�on and should not conspire to support one another’s improper ac�ons.

Policies

On August 23, 2012, the Board of Directors issued “Ethical Corporate Management Best Prac�ce Principles” and revealed the principle in 2013 shareholders’ mee�ng. This proves the management’s commitment to Integrity management.

To execute integrity management and prevent dishonesty, the company adds related rules to corporate governess (Chapter 10 ar�cle 48), which authorized by the Ministry of Labor and publicly announced. To prevent dishonest behaviors, the rules are clearly set in the company’s Work Rules and publicly announced.

In order to ensure healthy and honest opera�ons, the audi�ng office is required to submit a report on the adop�on of the company’s principles for honest opera�on in its annual audit report, and should ensure that such principles are included in the company’s Work Rules. The Commi�ee should also publish on the company website procedures for repor�ng problems and the corresponding punishments for such offenses.

The Company has established “Guidelines for Handling Reports of Unlawful or Unethical Behavior”.

We have established a clear window for receiving complaints:

i) Complaint Hotline: (02) 2747-3637

The company regularly publishes honest opera�on standards, and implements training courses on these standards for all new employees.

ii) Complaint Email: [email protected]

iii) Wri�en Complaints: Complaints can be mailed or faxed to administra�on department.

Clear protocols for handling complaints have been established as have confiden�ality measures.

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

Other Disclosure

Informa�on Regarding the Company’s Audit Fee and Independent Auditor

Accoun�ng Firm	Name of CPA	Period Covered by CPA’s Audit	Remarks
PwC Taiwan	Hsiao, Chin-Mu Chang, Ming-Hui	2017.01.01- 2017.12.31	A�esta�on of Financial Statements
PwC Taiwan	Hsu, Chi-Chang		A�esta�on of Tax Returns

Independent Auditor Fee

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Unit: NT$ thousands
Non-audit Fee Period
Accoun�ng Name of CPA Audit Covered Remarks
Firm Fee System of Company Human Other Subtotal by CPA’s
Design Registra�on Resource Audit
Hsiao,
Chin-Mu A�esta�on
5,590 of Financial
Statements
PwC Taiwan Chang, - 40 - 430 470 2017
Ming-Hui (Note)
A�esta�on
Hsu, 980 of Tax
Chi-Chang Returns
----- End of picture text -----

Note: Transfer pricing report fee and IFRS9 consul�ng fee.

Unit: NT$ thousands

Fee Range Fee Items	Audit Fee	Non-audit Fee	Total
Under NT$ 2,000 NT$2,000 ~ NT$4,000 NT$4,000 ~ NT$6,000 NT$6,000 ~ NT$8,000 NT$8,000 ~ NT$10,000 Over NT$10,000	0 470 470 0 0 0 0 0 0 6,570 0 6,570 0 0 0 0 0 0

Replacement of CPA Regarding the Former CPA

Replacement Year	2016	2016	2016	2016	2016
Replacement reasons and explana�ons	PricewaterhouseCoopers (PwC) Taiwan job rota�on. Par�es CPA The Company Status
Describe whether the Company terminated or the CPA did not accept the appointment				CPA	The Company
	PricewaterhouseCoopers (PwC) Taiwan job rota�on Lin, SK Huang, James PSC
Other issues (except for unqualifed issues) in the audit reports within the last two years		None
Diferences with the company Other Revealed Ma�ers	Yes	-	Accoun�ng principles or prac�ces
		-	Disclosure of Financial Statements
		-	Audit scope or steps
		-	Others
	None	V
	Remarks/specify details: None None

==> picture [44 x 79] intentionally omitted <==

President Securities Corp. 2017 Annual Report

III. Corporate Governance

==> picture [43 x 79] intentionally omitted <==

==> picture [44 x 79] intentionally omitted <==

Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders

Regarding the Successor CPA

Name of accoun�ng frm	PricewaterhouseCoopers (PwC) Taiwan
Name of CPA	Hsiao, Chin-Mu and Chang, Ming-Hui
Year of appointment	2016
Consulta�on results and opinions on accoun�ng treatments or principles with respect to specifed transac�ons and the company's fnancial reports that the CPA might issue prior to the engagement.	None
Succeeding CPA’s wri�en opinion of disagreement toward the former CPA	None

As of March 31, 2018 Unit: NT$ thousands

Afliated Enterprises	Ownership by the Company	Ownership by the Company	Direct or Indirect Ownership by Directors, Supervisors, Managers	Direct or Indirect Ownership by Directors, Supervisors, Managers	Total Ownership	Total Ownership
	Shares	%	Shares	%	Shares	%
President Futures Corp. 63,817,303 96.69% 96.69% 0 0 63,817,303
100.00% 100.00% 0 0 17,400,000 17,400,000 President Capital Management Corp.
5.19% 94.81% 100.00% 10,000,000 182,600,000 192,600,000 President Securi�es (HK) Ltd.
100.00% 100.00% 0 0 67,746,000 67,746,000 President Securi�es (BVI) Ltd.
42.46% 42.49% 12,000 0.03% 14,904,630 14,916,630 Uni-President Asset Management Corp.
100.00% 100.00% 0 0 1,000,000 1,000,000 President Insurance Agency Co., Ltd.
100.00% 100.00% 0 0 30,000,000 30,000,000 PSC Venture Capital Investment Co.,Ltd.

Title	2017	2017	As of Mar. 31, 2018	As of Mar. 31, 2018				2017	2017	As of Mar. 31, 2018	As of Mar. 31, 2018
	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Title Name Holding Increase (Decrease) Pledged Holding Increase (Decrease) Holding Increase (Decrease) Pledged Holding Increase (Decrease) Tunghsing Equity Department Manager Kao, Jung 15 0 0 0 Tunghsing Equity Department Manager Hung, Yu-Ting 0 0 0 0 Tunghsing Equity Department Manager Tsai,Shu- Mei 0 0 0 0 Kaohsiung Branch Manager Wu, Huan-Chung 0 0 0 0 Kaohsiung Branch Manager Li, Yu- Min 0 0 0 0 Dunnan Branch Manager Liao, Shun-Ping 0 0 0 0 Zhongli Branch Manager Chiang, Tsong-Shyan 0 0 0 0 Chengzhong Branch Manager Chen, Chih-Lung 0 0 0 0 Chengzhong Branch Manager Huang, Chien-Hsin 0 0 0 0 Tainan Branch Manager Tu, Ching-Feng 9,540 0 0 0 Taichung Branch Manager Fang, Wu- Hsin 0 0 0 0 Taichung Branch Manager Liao, Chen-Yin 67,511 0 0 0 Hsinchu Branch Manager Lee, Chin-Yi 0 0 0 0 Chiayi Branch Manager Tai, Kuo-Chun 0 0 0 0 Pingtung Branch Manager Wang, Chien-Min 0 0 0 0 Keelung Branch Manager Huang, Ming- Fa 3 0 0 0 Yonghe Branch Manager Tseng, Chien-Ming 0 0 0 0 Xin Taichung Branch Manager Yang, Kuo-Chen 0 0 0 0 Hsinying Branch Manager Hsiao, Po-Ming 0 0 0 0 Changhua Branch Manager Yu, Fu-Tsun 0 0 0 0 Taoyuan Branch Manager Tung, Chiu-An 8 0 0 0 Yuanlin Branch Manager Liu, Ming-Hsi 0 0 0 0 Sanchung Branch Manager Kao, Hao-Chen 0 0 0 0 Fengyuan Branch Manager Lin, Cheng -Feng 1,698 0 0 0 Shilin Branch Manager Hsu, Fu-Chiang 0 0 0 0 Panchiao Branch Manager Yu, Ping-Tse 0 0 0 0 Sanduo Branch Manager Tsai, Yi-Chen 0 0 0 0 Xizhi Branch Manager Hu, Wen-Chieh 0 0 0 0 Ilan Branch Manager Chiang, Jen- Chu 0 0 0 0 Nanjing Branch Manager Chang, Wen-Lung 0 0 0 0 Kuting Branch Manager Chen, Te-Chang 0 0 0 0 Kinmen Branch Manager Chung,Hui-Ju 0 0 0 0 Tucheng Branch Manager Chen, Chun-Ming 0 0 0 0 Songjiang Branch Manager Lin, Yu-Ju 0 0 0 0 Songjiang Branch Manager Yeh, Yun-Sheng 0 0 0 0 Neihu Branch Manager Chen, Chi-Heng 0 0 0 0 Renai Branch Manager Yang, Chun-Chen 0 0 0 0 Xindian Branch Manager Chiu, Shyh-Tyng 0 0 0 0 Xinzhuang Branch Manager Chen, I-Ju 0 0 0 0 Xin Taoyuan Branch Manager Wu, Shao-Kuang 0 0 0 0 Zhunan Branch Manager Peng, Hsiu-Chin 0 0 0 0 Zhunan Branch Manager Su,Yung-Sheng 0 0 0 0 Pingzhen Branch Manager Li, Shu-Jung 0 0 0 0 Offshore Securities Unit Branch Manager Lai, Chung-Chih 0 0 0 0 10% Shareholder Uni-President Enterprises Corp. 15,501,487 0 0 0	Title	Name	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)

Director Kai Nan Investment Co., Ltd. 1,568,770 0 0 0						Tunghsing Equity Department Manager Kao, Jung 15 0 0 0
Director and President Lin, Kuan-Chen 149,387 0 0 0						Tunghsing Equity Department Manager Hung, Yu-Ting 0 0 0 0
Director Leg Horn Investment Co., Ltd. 488,692 0 0 0						Tunghsing Equity Department Manager Tsai,Shu- Mei 0 0 0 0
Director Teng, Wen- Hwi 91,400 0 0 0						Kaohsiung Branch Manager Wu, Huan-Chung 0 0 0 0
Director Hui Tung Investment Co., Ltd. 401,711 0 0 0						Kaohsiung Branch Manager Li, Yu- Min 0 0 0 0
Director Ta Le Investment Holding Co., Ltd. 282,494 0 0 0						Dunnan Branch Manager Liao, Shun-Ping 0 0 0 0
Director Lee, Shy-Lou 330,073 0 0 0						Zhongli Branch Manager Chiang, Tsong-Shyan 0 0 0 0
Director Duh, Bor-Tsang 165,021 0 0 0						Chengzhong Branch Manager Chen, Chih-Lung 0 0 0 0
Director Kao, Shiow-Ling 149,216 0 0 0						Chengzhong Branch Manager Huang, Chien-Hsin 0 0 0 0
Director China F.R.P Corp. 212,381 0 0 0
						Tainan Branch Manager Tu, Ching-Feng 9,540 0 0 0
Independent Director Wu, Tsai-Yi 0 0 0 0						Taichung Branch Manager Fang, Wu- Hsin 0 0 0 0
Independent Director Lee, Kwang-Chou 0 0 0 0						Taichung Branch Manager Liao, Chen-Yin 67,511 0 0 0
Independent Director Fu, Kai-Yun 0 0 0 0						Hsinchu Branch Manager Lee, Chin-Yi 0 0 0 0
Independent Director Liang, Yann-Ping 0 0 0 0						Chiayi Branch Manager Tai, Kuo-Chun 0 0 0 0
Capital Market Department Vice President Kuo, Li-Yun 7,545 0 0 0
						Pingtung Branch Manager Wang, Chien-Min 0 0 0 0
Fixed Income Department Vice President Tsai, Sen-Bu 12,337 0 0 0
						Keelung Branch Huang, Ming- Fa 3 0 0 0
Quantitative Trading Department Vice President Huang, Jun g -J en 4,228 0 0 0						Manager Yonghe Branch Manager Tseng, Chien-Ming 0 0 0 0
Finance Department Vice President An, Chi-Li 6,153 0 0 0
						Xin Taichung Branch Manaer Yang, Kuo-Chen 0 0 0 0
Financial Product Department Vice President Pan, Chun- Hsien -22,734 0 0 0						g Hsinying Branch Manager Hsiao, Po-Ming 0 0 0 0 Chanhua Branch
Auditing Office Chief Auditor Huang, Sha-Mei 32 0 0 0
Proprietary Trading Department Vice President Yang, Kai-Chih 5,373 0 0 0						g Manager Yu, Fu-Tsun 0 0 0 0
President Office Project Vice President Lin, Chung-Heng 26,605 0 0 0						Taoyuan Branch Manager Tung, Chiu-An 8 0 0 0
President Office Senior Project Assistant Vice President Chen, Kai-Ching 3,819 0 0 0						Yuanlin Branch M Liu, Ming-Hsi 0 0 0 0
Settlement & Clearing Department Assistant Vice President Cheng, Yao-Tung 2,664 0 0 0						anager Sanchung Branch Manager Kao, Hao-Chen 0 0 0 0
Capital Market Department Sales Vice President Chueh, Chih-Chung 0 0 0 0						Fengyuan Branch Manaer Lin, Cheng -Feng 1,698 0 0 0
Compliance Division Assistant Vice President Hung, Yung-Che 2,152 0 0 0						g Shilin Branch Manager Hsu, Fu-Chiang 0 0 0 0
Administration Department Assistant Vice President Yu, Hung-Chieh 225 0 0 0						Panchiao Branch Manager Yu, Ping-Tse 0 0 0 0
Shareholder Services Department Assistant Vice President Chang,Shao-Ping 28,833 0 -10,000 0 Pridnt Offi
						Sanduo Branch Manager Tsai, Yi-Chen 0 0 0 0
ese ce Assistant Vice President Chen, Nai-Chen 15 0 0 0						Xizhi Branch Manager Hu, Wen-Chieh 0 0 0 0
Mainland China Business Division Assistant Vice President Chen, Long-Chien 3 0 64,969 0
						Ilan Branch Manager Chiang, Jen- Chu 0 0 0 0
Finance Department Assistant Vice President Lu, Chia-Chen 92 0 0 0
Finance Department Assistant Vice President Su, Wei-Lun 0 0 0 0						Nanjing Branch Manager Chang, Wen-Lung 0 0 0 0
Financial Product Department Chang, Chung-Lin 0 0 0 0						Kuting Branch Manager Chen, Te-Chang 0 0 0 0
Assistant Vice President Information System Department Assistant Vice President Lin,Jung-Hui 0 0 0 0						Kinmen Branch Manager Chung,Hui-Ju 0 0 0 0
						Tucheng Branch Manager Chen, Chun-Ming 0 0 0 0
Capital Market Department Assistant Vice President Chang, Chin-Yung 0 0 0 0
Capital Market Department Assistant Vice President Tsai, Pao-Sheng 1,645 0 0 0						Songjiang Branch Manager Lin, Yu-Ju 0 0 0 0
						Songjiang Branch Manager Yeh, Yun-Sheng 0 0 0 0
Fixed Income Department Assistant Vice President Yeh, Ming-Chieh 0 0 0 0
Risk Control Office Senior Manager Chang, Ping-Chuan 594 0 0 0						Neihu Branch Manager Chen, Chi-Heng 0 0 0 0
						Renai Branch Manager Yang, Chun-Chen 0 0 0 0
Brokerage Department Vice President Lee, Wen-Sheng 2 0 0 0
Brokerage Department District Vice President Chang, Hung-Shuo 55 0 0 0						Xindian Branch Manager Chiu, Shyh-Tyng 0 0 0 0
						Xinzhuang Branch Manager Chen, I-Ju 0 0 0 0
Brokerage Department District Vice President Chiu, Shyh-Tyng 42 0 0 0
						Xin Taoyuan Branch Manager Wu, Shao-Kuang 0 0 0 0
Brokerage Department District Vice President Chuang, Chi-Hung 6,527 0 0 0
						Zhunan Branch Manager Peng, Hsiu-Chin 0 0 0 0
Brokerage Department District Vice President Lin, Li-Lin 240 0 0 0
						Zhunan Branch Manager Su,Yung-Sheng 0 0 0 0
Brokerage Department District Vice President Tu, Ching-Feng 9,540 0 0 0						Pingzhen Branch Manager Li, Shu-Jung 0 0 0 0
Customer Service Center Assistant Vice President Huang, Hsien-Yi 0 0 0 0						Offshore Securities Unit Branch Manager Lai, Chung-Chih 0 0 0 0
Global Institutional Service Dept. Manager Chung, Chih-Hung 0 0 0 0
						10% Shareholder Uni-President Enterprises Corp. 15,501,487 0 0 0
Wealth Management and Trust Department Senior Manager Chu, Po-Lin 0 0 0 0

President Securities Corp. 2017 Annual Report

==> picture [1191 x 351] intentionally omitted <==

IV. Capital Structure

President Securities

Professional Leadership & Kind Service

IV. Capital Structure

==> picture [43 x 79] intentionally omitted <==

Capital and Shares

Capitaliza�on

Month /Year	Authorized Share Capital	Authorized Share Capital	Authorized Share Capital	Capital Stock	Capital Stock	Capital Stock	Remark	Remark	Remark
	1,000 shares		Amount (NT$ thousands)	1,000 shares		Amount (NT$ thousands)	Sources of Capital		Capital Increase by Assets Other than Cash
Aug-2007 10 1,500,000 15,000,000 1,176,869 11,768,695 Capital Increase by Earning None
Aug-2008 10 1,500,000 15,000,000 1,215,706 12,157,062 Capital Increase by Earning None
Apr-2009 10 1,500,000 15,000,000 1,185,706 11,857,062 Cancella�on of Treasury Shares None
Aug-2010 10 1,500,000 15,000,000 1,231,933 12,319,334 Capital Increase by Earning None
Aug-2011 10 1,500,000 15,000,000 1,304,646 13,046,456 Capital Increase by Earning None
Dec-2011 10 1,500,000 15,000,000 1,284,582 12,845,816 Cancella�on of Treasury Shares None
Aug-2012 10 1,500,000 15,000,000 1,323,119 13,231,191 Capital Increase by Earning None
Mar-2016 10 1,500,000 15,000,000 1,303,796 13,037,961 Cancella�on of Treasury Shares None
May-2016 10 1,500,000 15,000,000 1,295,248 12,952,481 Cancella�on of Treasury Shares None
July-2016 10 1,500,000 15,000,000 1,335,666 13,356,657 Capital Increase by Earning None
Aug-2017 10 1,500,000 15,000,000 1,390,428 13,904,280 Capital Increase by Earning None
Capital and Shares Unit:Share
Type of Stock		Authorized Share Capital
		Issued Shares			Unissued Shares			Total
Common Stock 1,390,428,028 109,571,972 1,500,000,000

Structure of Shareholders

As of April 23, 2018

Structure of Shareholders Quan�ty	Government Agencies	Financial Ins�tu�ons	Other Ins�tu�onal Shareholders	Personal Shareholders	Foreign Ins�tu�ons and Personal Shareholders	Total
Number of Holders Shares %	0 1 124 38,618 158 38,901 0 40,141,992 762,372,593 458,934,606 128,978,837 1,390,428,028 0 2.887% 54.831% 33.007% 9.276% 100%

==> picture [44 x 79] intentionally omitted <==

Major Shareholders

1 ~ 999 22,951 1,000 ~ 5,000 7,943 2,160,612 0.155 5,001 ~ 10,000 2,622 18,215,439 1.310 10,001 ~ 15,000 1,455 18,905,779 1.360 15,001 ~ 20,000 714 17,618,185 1.267 20,001 ~ 30,000 853 12,496,306 0.899 30,001 ~ 40,000 430 20,973,656 1.508 40,001 ~ 50,000 285 14,910,540 1.072 50,001 ~ 100,000 741 12,911,280 0.929 100,001 ~ 200,000 424 52,658,873 3.787 200,001 ~ 400,000 250 59,071,929 4.248 68,377,785 4.918 400,001 ~ 600,000 77 600,001 ~ 800,000 41 37,641,502 2.707 800,001 ~ 1,000,000 31 28,187,619 2.027 Over 1,000,001 84 27,520,715 1.979 Total 38,901 998,777,808 71.832 1,390,428,028 100 Shareholders Ownership (Unit:Share) Number of Shareholders Ownership Ownership (%) Uni-Present Enterprises Corp. 393,586,559 28.306 Nan Shan Life Insurance Company, Ltd 69,023,461 4.964 Kai Nan Investment Co., Ltd. 40,141,992 2.887 President Securi�es’ comprehensive Employee Stock Ownership Trust under Chinatrust's custody 39,831,460 2.864 President Chain Store Corp. 38,221,259 2.748 Eternal Chemical Co., Ltd 34,252,383 2.463 Tainan Spinning Co., Ltd 32,141,877 2.311 Kao Chyuan Investment Co., Ltd. 31,098,066 2.236 Dr. C. Y. Kao’s Non-Proft Founda�on of Culture & Educa�on (In Memory of His Mother) 18,588,293 1.336 Vanguard Emerging Markets Stock Index Fund, a Series of Vanguard Interna�onal Equity Index Funds 17,887,785 1.286 Shareholders Number of Shares Ownership (%) As of April 23, 2018 As of April 23, 2018	1 ~ 999 22,951 1,000 ~ 5,000 7,943 2,160,612 0.155 5,001 ~ 10,000 2,622 18,215,439 1.310 10,001 ~ 15,000 1,455 18,905,779 1.360 15,001 ~ 20,000 714 17,618,185 1.267 20,001 ~ 30,000 853 12,496,306 0.899 30,001 ~ 40,000 430 20,973,656 1.508 40,001 ~ 50,000 285 14,910,540 1.072 50,001 ~ 100,000 741 12,911,280 0.929 100,001 ~ 200,000 424 52,658,873 3.787 200,001 ~ 400,000 250 59,071,929 4.248 68,377,785 4.918 400,001 ~ 600,000 77 600,001 ~ 800,000 41 37,641,502 2.707 800,001 ~ 1,000,000 31 28,187,619 2.027 Over 1,000,001 84 27,520,715 1.979 Total 38,901 998,777,808 71.832 1,390,428,028 100 Shareholders Ownership (Unit:Share) Number of Shareholders Ownership Ownership (%) Uni-Present Enterprises Corp. 393,586,559 28.306 Nan Shan Life Insurance Company, Ltd 69,023,461 4.964 Kai Nan Investment Co., Ltd. 40,141,992 2.887 President Securi�es’ comprehensive Employee Stock Ownership Trust under Chinatrust's custody 39,831,460 2.864 President Chain Store Corp. 38,221,259 2.748 Eternal Chemical Co., Ltd 34,252,383 2.463 Tainan Spinning Co., Ltd 32,141,877 2.311 Kao Chyuan Investment Co., Ltd. 31,098,066 2.236 Dr. C. Y. Kao’s Non-Proft Founda�on of Culture & Educa�on (In Memory of His Mother) 18,588,293 1.336 Vanguard Emerging Markets Stock Index Fund, a Series of Vanguard Interna�onal Equity Index Funds 17,887,785 1.286 Shareholders Number of Shares Ownership (%) As of April 23, 2018 As of April 23, 2018	1 ~ 999 22,951 1,000 ~ 5,000 7,943 2,160,612 0.155 5,001 ~ 10,000 2,622 18,215,439 1.310 10,001 ~ 15,000 1,455 18,905,779 1.360 15,001 ~ 20,000 714 17,618,185 1.267 20,001 ~ 30,000 853 12,496,306 0.899 30,001 ~ 40,000 430 20,973,656 1.508 40,001 ~ 50,000 285 14,910,540 1.072 50,001 ~ 100,000 741 12,911,280 0.929 100,001 ~ 200,000 424 52,658,873 3.787 200,001 ~ 400,000 250 59,071,929 4.248 68,377,785 4.918 400,001 ~ 600,000 77 600,001 ~ 800,000 41 37,641,502 2.707 800,001 ~ 1,000,000 31 28,187,619 2.027 Over 1,000,001 84 27,520,715 1.979 Total 38,901 998,777,808 71.832 1,390,428,028 100 Shareholders Ownership (Unit:Share) Number of Shareholders Ownership Ownership (%) Uni-Present Enterprises Corp. 393,586,559 28.306 Nan Shan Life Insurance Company, Ltd 69,023,461 4.964 Kai Nan Investment Co., Ltd. 40,141,992 2.887 President Securi�es’ comprehensive Employee Stock Ownership Trust under Chinatrust's custody 39,831,460 2.864 President Chain Store Corp. 38,221,259 2.748 Eternal Chemical Co., Ltd 34,252,383 2.463 Tainan Spinning Co., Ltd 32,141,877 2.311 Kao Chyuan Investment Co., Ltd. 31,098,066 2.236 Dr. C. Y. Kao’s Non-Proft Founda�on of Culture & Educa�on (In Memory of His Mother) 18,588,293 1.336 Vanguard Emerging Markets Stock Index Fund, a Series of Vanguard Interna�onal Equity Index Funds 17,887,785 1.286 Shareholders Number of Shares Ownership (%) As of April 23, 2018 As of April 23, 2018
Shareholders	Number of Shares	Ownership (%)
Uni-Present Enterprises Corp. 393,586,559 28.306
Nan Shan Life Insurance Company, Ltd 69,023,461 4.964
40,141,992 2.887 President Securi�es’ comprehensive Employee Stock Ownership Trust under Chinatrust's custody
Kai Nan Investment Co., Ltd. 39,831,460 2.864
President Chain Store Corp. 38,221,259 2.748
Eternal Chemical Co., Ltd 34,252,383 2.463
Tainan Spinning Co., Ltd 32,141,877 2.311
Kao Chyuan Investment Co., Ltd. 31,098,066 2.236
18,588,293 1.336 Vanguard Emerging Markets Stock Index Fund, a Series of Vanguard Interna�onal Equity Index Funds
Dr. C. Y. Kao’s Non-Proft Founda�on of Culture & Educa�on (In Memory of His Mother) 17,887,785 1.286

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

Item Years	Item Years	Item Years	2016
Market Price Per Share	Highest		13.77 15.6 15.7
	Lowest		10.5 10.9 13.9
	Average		11.51 13.45 14.83
Net Worth Per Share	Before Distribu�on		17.28 18.26 18.71
	A�er Distribu�on		16.60 - -
Earnings Per Share	Weighted Average Shares (thousand shares)		1,337,200 1,390,428 1,390,428
Dividends Per Share	Earnings Per Share	Before Distribu�on	0.62 0.08 -
		A�er Distribu�on	- - 0.59
	Cash Dividends (NT$)		- 1.2 -
	Stock Dividends	Retained Earnings	0.41 - -
		Addi�onal paid-in Capital	- - -
	Accumulated Undistributed Dividend		- - -
Return on Investment	Price/Earnings Ra�o		18.56 7.15 -
	Price/Dividend Ra�o		- 11.21 -
	Cash Dividend Yield		- 8.92% -

President Securities Corp. 2017 Annual Report

IV. Capital Structure

==> picture [43 x 80] intentionally omitted <==

Dividend Policy & Implementa�on Status

Dividend Policy

structure and stabilize con�nual growth to maximize benefits to shareholders, in the following manners:

The Board adopted a proposal for 2017 profit distribu�on at its Mee�ng on March 26th, 2018, and the proposal to distribute 2017 profits is listed as follows:

With regard to the surplus for the year (net of taxes payable and losses from previous years), a�er por�ons have been set aside in surplus reserves in accordance with the law and set aside or transferred to the special reserve in accordance with regula�ons, 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.

as per the preceding paragraph.

Cash Dividend

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%.

NT$1.2

per share

into considera�on, the company may decide the best stock and cash dividend on its discre�on.

Employees’, Directors' and Supervisors' Remunera�on

Es�mate Founda�on of Employees’, Directors’ and Supervisors’ Remunera�on

Ar�cles of Incorpora�on

The Board of Directors passed a mo�on on January 27th, 2016 amending the Company’s Ar�cles of Incorpora�on, which stated the company will distribute compensa�on 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, compensa�on should only be paid to employees and Directors a�er funds have been set aside as reserve for such losses. This amendment was approved in the 2016 shareholders’ mee�ng.

The company es�mated employees’ compensa�on in 2017 and 2016 to the amount of NT$56,440,689 and NT$18,079,749 , respec�vely; And NT$56,440,689 and NT$18,079,749 for Directors’ and Supervisors’ Remunera�on. These amounts are es�mated as the account of salary expenses.

Actual Distribu�on of Employees’, Directors’ and Supervisors’ Remunera�on for the Former Year

Board of Director Passes Proposed Distribu�on of Employees’, Directors’ and Supervisors’ Remunera�on:

On March 23rd, 2017, the Board of Directors passed the proposed alloca�on of employees’ compensa�on and remunera�on for directors and supervisor in 2016 as follows: Employees’ compensa�on amounted to NT$18,079,749 while remunera�on for directors and supervisors amounted to NT$18,079,749 . There was no difference between the es�mates and the actual distribu�ons approved at the Board Mee�ng.

On March 26th, 2018, our Board of Directors passed the proposed alloca�on of employees’ compensa�on and remunera�on for directors and supervisor in 2017 as follows:

Total employees’ compensa�on of NT$56,440,689 (2% of pre-tax profits) and total directors’ remunera�on of NT$56,440,689 (2% of pre-tax profits).

distribu�ons approved at the Board Mee�ng for Employee bonus and Director/Supervisor compensa�on.

==> picture [597 x 271] intentionally omitted <==

V. Overview of Business Operation

President Securities

Professional Leadership & Kind Service

President Securities Corp. 2017 Annual Report

V. Overview of Business Operation

==> picture [43 x 80] intentionally omitted <==

Business Environment

Descrip�on of Business Ac�vi�es

Business Scope

Underwri�ng business

Securi�es borrowing and lending Shareholder services coordina�on

Proprietary trading of listed securi�es Brokerage for listed securi�es

Support for futures trading through equity-related business

Proprietary trading of listed securi�es through retail loca�ons Brokerage for listed securi�es through retail loca�ons Consignment trading of foreign securi�es Securi�es margin purchase and short sale

Concurrent opera�on of futures proprietary trading Wealth Management business Trust business

Financial deriva�ves products approved by the SFC

Money borrowing or lending in connec�on with securi�es business

Breakdown of Revenues for Latest Three Years

					Unit: NT$ thousands	Unit: NT$ thousands
	2015		2016		2017
Item	Opera�ng revenue	%	Opera�ng revenue	%	Opera�ng revenue	%
Brokerage	2,170,495	61.82	1,712,998	49.04	2,338,014	36.76
Proprietary Trading	1,195,609	34.06	1,580,483	45.24	3,771,989	59.31
Underwri�ng	144,715	4.12	199,953	5.72	249,982	3.93
Total	3,510,819	100.00	3,493,434	100.00	6,359,985	100.00

New Products and Services to be developed The Company will comply with the opening of business by the competent authority and establish mul�ple pla�orms for new business such as loans for

open-ended funds lending, spot foreign exchange transac�ons, and se�lement accounts ledgers to sa�sfy customers' diverse wealth management requirements.

Fixed Income Dealing

Monthly average Market Share

Purchase and Sales of Government bonds

0.62% the 14th largest among the industry

Underwri�ng (Capital Market)

Lead /CO 36 issued underwrite NT$ 2.27 BN

New Products/Services in Development：

services, to simultaneously act as both an effec�ve market maker and also as a top-notch service provider, all with the aim of increasing the company’s overall added value. Going forward we will con�nue to focus our energy on landing mid- and large-sized deals, and will con�nue to bolster our presence within the Greater China Region (i.e., TDRs, IPOs (including primary lis�ngs on the TWSE/TPEx Market, M&A, Private Equity, and consul�ng, etc.), so as to become a more compe��ve securi�es firm.

==> picture [44 x 80] intentionally omitted <==

New Products/Services in Development：

We persist in maintain transparency for our warrant products, fully disclosure of market making vola�lity, and providing reasonable pricing warrant products for investors.

Shareholder Services

==> picture [73 x 126] intentionally omitted <==

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Stock
affairs
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Representa�ve for 145 companies (86 listed or OTC companies/ 59.31% of all companies serviced)

the total number of shareholders served

1.77M

Opera�ng Performance：

The number of serviced companies in 2017 had a 4.3% growth compared to the number of service companies in 2016.

The average number of shareholders we serviced in 2017 had a 5.36% growth compared to the previous year, thus allowing us to achieve a higher economy of scale and more efficient opera�ons.

Long-term Objec�ves：

Business highlights in 2017

Products and Services：

brokerage, underwri�ng, proprietary trading, fixed income dealing, financial product development, wealth management, and shareholder services.

The following is a brief descrip�on of our primary business units.

Brokerage

Market Posi�on	36 branches
Market Share	Market Share per branch
3.22%	0.09%
the 8th largest	the 4th largest
brokerage house	brokerage house
% of Electronic Transac�ons
2015 2014	2017 2016
45.05% 43.43%	54.00% 49.71%

order entry environment, we can provide services to a larger client base.

We integrate our sales of all types of products available in the market and thereby offer more value to our exis�ng clients.

The trading system has integrated the trading func�ons of all products, and customers can use the same electronic trading pla�orm for trading securi�es, futures, op�ons, OTC stocks, sub-brokerage, fund, and overseas futures products.

Proprietary Trading

Market posi�on：

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 effec�ve futures hedging, risk management, and a diverse range of product trading strategies, resul�ng 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.

Specialty product：

System applica�on supported by quan�ta�ve analysis and technical indicator modules.

Quan�ta�ve Trading

Opera�ng Performance：

division was among the top in the industry.

New Products/Services in Development：

As regulators con�nue to liberalize the industry and allow new financial products, we stand ready to add these new products to our trading and, in turn, to add to our revenue streams.

Financial Products

Warrents	Structured Products
	contractsundertook
	NT$9.4BN
1,405issued NT$ 20.04BN the 5th	the 7th among the industry Outstanding
among the industry	NT$3.2BN
	the 5th
	among the industry

In 2017, our Financial Products Division was primarily engaged in issuing new warrants, structured note products, and other deriva�ve products authorized by the Taiwan’s regulators.

Ac�vely expand the number of serviced companies to increase revenues.

Wealth Management & Trust

	account customer
Trust Opera�ons	8,526
	securi�es trusts
management assets NT$3.39BN the 10th	non-discre�onary NT$0.78BN
among the industry	money trusts
	NT$2.62BN

Long-term Objec�ves：

Establish "wealth management pla�orm" for Taiwan customers through wealth management and trust.

New Products/Services in Development：

The Department is expected to complete the establishment of the online fund network pla�orm online seal verifica�on and bank authoriza�on payment deduc�on func�ons in 2018. It also plans to revise the wealth management website to provide customers more convenient transac�on func�ons

President Securities Corp. 2017 Annual Report

V. Overview of Business Operation

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Analysis of the Securi�es Industry

Overall Economic Environment

Market Condi�ons

The global economy has con�nued to recover in the past year, leading to growth in the global stock markets. The United States con�nued to improveadvance domes�c manufacturing and implemented tax incen�ves a�er President Trump assumedtook office. Although the U.S. Federal Reserve has increased increase in interest rates and started shrinking its balance sheet, U.S. stocks s�ll con�nued to rise. In Europe, the European Central Bank con�nued its relaxa�on policies and the results of the French elec�ons ensured the solidarity of the European Union and increased investor confidence. Although China has con�nued to reduce excess produc�on capacity and implemented housing market adjustments and financial supervision, it has also con�nued to lower interest rates for small and medium-sized businesses and maintained appropriate levels of liquidity to maintain financial growth and economic growth.

Breakdown of Market Share According to Business Area

	Business Area	Component	Market Share	Rank
	Brokerage Financial Products Fixed Income Dealing Underwri�ng	Equity Brokerage Trading Volume Individual Branch Warrants Issued (Volume) Structure Commodity Business Volume Repo Transac�ons Outright Purchases / Sales Lead Underwri�ng Deals(No./ Volume) Co-Lead Underwri�ng Deals(No./ Volume)	3.22% 0.09% 7.77% 2.77% 1.23% 0.62% 5/1.49% 36/2.81%	8 4 5 7 13 14 10/10 5/7

In Taiwan, the domes�c economic growth rate rose from 1.41% to 2.86% in 2017 mainly due to the launch of new mobile devices that increased demand for panels and semiconductors. Produc�on of automated tooling machines propelledincreased the growth in the manufacturing industry by 4.35%. The service sector saw rapid growth in the e-commerce market, strong demand in logis�cs, and increased stock market transac�ons which allowed it to grow by 2.26%. In the domes�c stock market, although the strong apprecia�on of the NTD has affected companies' profitability forecasts and the North Korean nuclear development and and missile tests have led to tensions between the United States and North Korea, the lowered taxes for day trading and con�nuous growth in the European and U.S. stock markets have rallied Taiwanese stocks to over 10,000 points. The TWSE weighted index rose by 15.0% from 9,253 to 10,642 in 2017. With the recovery of the domes�c economy and the s�mula�on of lower tax rates for day trades, domes�c funds have returned to the market and the daily average trading volume on the stock market rose substan�ally from NT$77.5 billion to NT$104.9 billion.

Future Business Development

essen�al that we have a clear understanding of future trends in the securi�es 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 posi�on to move quickly in these new markets. Accordingly, we see our business developing in the following ways:

Con�nue to recruit excep�onal talent, and thereby improve our compe�veness and, in doing so, increase our market share.

Looking ahead in 2018, the IMF has adjusted the global economic growth rate upward from 3.7% to 3.9% in January mainly due to the con�nuous recovery of the global economy and U.S. tax incen�ve policies. In Taiwan, the automobile electronics, IoT, ar�ficial intelligence, and other technology applica�ons gradually gained steam and increased the demand in the semiconductor industry. Forecasts of the Directorate General of Budget, Accoun�ng and Sta�s�cs in February placed the annual economic growth rate in Taiwan at 2.42%.

Implement risk management prac�ces and technologies, thereby improving profitability and stabilizing overall business opera�ons.

Improve IT and enhance e-business infrastructure.

personalized financial planning services.

Develop foreign market to maximize proprietary trading profit.

Be ready to move on market liberaliza�ons and, in par�cular, business opportuni�es across the Hong Kong-PRC-Taiwan market.

In the securi�es industry, the one-year tax rate reduc�on scheme advocated by the FSC began in April last year and it is expected to be extended to three years and expanded to proprietary securi�es traders. In addi�on, the FSC intends to review criteria for companies to be listed on the stock exchange and the OTC in order to expand the capital market. The goal is to adopt diversified standards to a�ract companies of different opera�ng scales to go public in Taiwan. These measures are expected to expand the scale of the primary and secondary markets and benefit the opera�ons of securi�es firms.

Groom talented researchers and thus raise our abili�es in designing new products.

Move forward with consolida�on within the President businesses, thereby enhancing our securi�es business

and corpora�ons outside of the finance industry, rela�onships that allow for mutual coopera�on and

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

Looking ahead this year, the FSC will nego�ate with the Ministry of Finance to extend the tax reduc�on for day trades and expand the eligibility to proprietary securi�es traders. This is expected to reduce investors' investment costs. In addi�on, the FSC intends to review diversified criteria for companies to be listed on the stock exchange and the OTC to allow companies that have not turned a profit to apply for entry to the market. It is expected to a�ract mul�ple companies of different scales of opera�ons to apply for entry to the market and expand the scale of the capital market.

With regard to the brokerage business, the FSC has advanced the "Ten Arrows for Stock Market S�mulus" in 2017 that included “"expanding securi�es dealers’' scope of commissioned foreign ETF purchases by non-professional investors,", "encouraging government founda�ons to invest in TWSE ETFs periodically at designated amounts,”', "reducing the securi�es transac�on tax for day trading by half", and "relaxing restric�ons on commissioned sales for daily securi�es lending". As a result, the daily average trading volume on TWSE in 2017 grew to NT$135.88 billion. This measure breathed life into the securi�es brokerage business.

In addi�on, the competent authority con�nued to open related bond business, including allowing securi�es dealers to issue exchange-traded note (ETN) products, allowing securi�es dealers to operate private equity. The opening of new business means new opportuni�es that could s�mulate increased market transac�ons. The Company has also remained ac�ve in planning related business in hopes of providing customers with more comprehensive product services.

In response to Finance 3.0 trends, the Company shall con�nue to enhance electronic ordering businesses and integrate func�ons on the transac�on pla�orm. The ra�o of electronic transac�on opera�ons has reached 54.00% in 2017 and the Company will provide customers with safer informa�on transac�ons to ensure the promptness and accuracy of orders and create advantages for the Company's electronic orders. In addi�on, the Company shall con�nue to develop a global transac�on pla�orm and provide customers with more interna�onal and diversified op�ons once business development matures. It shall also provide quality services to increase customer sa�sfac�on and build company reputa�on to achieve be�er performance.

As for our underwri�ng business, with compe��on for corporate fund raising deals increasingly intense, many corpora�ons are learning that they have many op�ons available to meet their financing needs, and that equity issues are not always their best op�on. As a result, companies that are properly screened and that demonstrate sufficient creditworthiness , as well as the preferred stock that issued by financial holdings companies and commercial banks, can o�en be be�er off turning to conver�ble bonds. Plus, with the number of large companies that have not already publicly listed shrinking and the demand for integra�on due to compe��on within industries increasing, financial advisory business and corporate funding such as private equity, mergers and acquisi�ons, capital reduc�ons are growing.

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The Taiwan government has also recently been ac�vely encouraging foreign companies to consider Taiwan for primary and secondary lis�ngs, forcing most domes�c underwri�ng departments to think more broadly and interna�onally. Add to this the regulators opening up of Offshore Securi�es Units (OSU), which allow domes�c brokerage houses to become more interna�onal in scope. Going forward, the Company intends to pursue more interna�onal 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.

in 2018 are due to interna�onal poli�cs and whether the basics of the global economy are sustainable. The implementa�on of President Trump's financial policies, uncertain�es in European elec�ons, North Korean issues, and China's rela�ons with the United States and Japan could all affect stock market developments in the future. In the current period, economy growth in the United States is expanding and remains bullish. China's main policy goal this year is to extend the risk preven�on and financial control policies from the previous year, and therefore offers rela�vely limited investment opportuni�es. The favorable investment period will occur in the first half of the year where there are fewer variables and the fundamentals of the economy remain strong. The uncertain�es in the market in the first half of this year are similar to those experienced in 2017, and the base period factors, infla�on issues, probability of trade wars, and increased P/E ra�os could increase in the second half of the year. We have limited room for opera�ons and the Proprietary Trading Department shall con�nue to adopt ac�ve strategies and mount a vigilant defense to maximize the profitability of the Department. As for our financial products business, we will con�nue 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 ac�vi�es an risk management models, so as to lower risk and ensure stable returns. Going forward, as the regulators allow greater access to Offshore Securi�es Units business, we will pursue global equity business and develop foreign deriva�ves services so as to be�er diversify our revenue streams.

As for our wealth mamagement business, we have already opened up 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 �me, we want to offer a full line of ac�ve wealth management products so as to offer more diverse assets alloca�on op�ons. In addi�on, we have established fund trading func�on for our trading APP for portable devices,and it is expected that these added services will translate into increased revenues.

President Securities Corp. 2017 Annual Report

V. Overview of Business Operation

2017

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Product Trends and Relevant Compe��on

Proprietary Trading

Wealth Management

i) Equi�es Markets

The total assets under the Company's non-discre�onary individual management in 2017 was NT$105.691 billion. The total assets in securi�es trust management was NT$36.311 billion. The total assets under management was NT$142.002 billion which was a 6% increase of NT$8.079 billion from the NT$133.923 billion at the end of 2016. Money trust business con�nued to grow and the scale of total managed assets grew by NT$11.607 billion, equaling YOY growth of 12.33%. The securi�es trust and lending business declined as the scale of total managed assets dropped by NT$3.522 billion, represen�ng a YOY decline of 8.84%. The main reason for this development was the competent authority began to allow natural person dual-direc�on securi�es lending on the Taiwan Exchange which gradually dispersed customer groups.

The Taiwan Stock Exchange rose by 1,389 points in 2017 as it posted its strongest growth rate (of 15%) since 2009. Since the index rallied above 10,000 points in May, it has stayed above 10,000 points for 156 days and rose to 10,600 before closing for the year above 10,000 points for the first �me. Interna�onal markets also performed well. The U.S. labor market has remained strong as purchasing power rose, leading to increased GDP each quarter. New industrial trends including 5G, AI, and IoT contributed to large capital expenditures. The PHLX Semiconductor Index rose by 38% in 2017, NASDAQ rose by 28.24%, and the Dow Jones Industrial Average also rose by 20.4%. Europe con�nued to relax the money markets and experienced an 8% growth due to improvements in the labor market. Emerging markets remained the centerpiece of growth in Asian stocks as the stock market in Vietnam grew by 48%, Hong Kong grew by 35%, and India grew by 28%. Only the Chinese stock market had its growth reduced to 8% due to adjustments in its risk preven�on policies. The Taiwan Stock Exchange has trailed only the Dow in terms of growth in points and percentage. The main reasons for the be�er than expected performance included the recovery of the economy in the interna�onal environment as economic indicators for export growth returned to 29 points for the first �me since 2014. The policies also con�nue to promote growth and the day trade tax rate reduc�on also substan�ally increased the average daily transac�ons from the NT$77.5 billion in 2016. In addi�on, TWD appreciated rela�ve to the USD from 32.36 to 29.60 by the end of the year and the money market contributed to the high levels of the Taiwan Stock Exchange as it rose from 9,253 points in January to 10,882 in November. As foreign capital con�nued to flow, the average daily transac�ons have reached NT$138.03 billion, the highest in the last seven years. The turnover ra�o rose past 80% and ended mul�ple years of stagna�on. The weighted index rose 15% by 2017 rose and the OTC index rose by 18.65%. The TWSE index reached record levels rela�ve to the past 10 years in the first quarter of 2018 and the Proprietary Trading Department achieved its best performance in TWSE opera�ons last year.

The assets under the Company's special-purpose money trusts in 2017 amounted to NT$2.617 billion. The total assets in securi�es trust management were NT$775 million. The total assets under management were NT$3.392 billion. This ranked thee Company 10th among securi�es firms. The main products for wealth management were: sub-brokerage for foreign stocks, foreign ETFs, domes�c funds, foreign funds, structural products ELN and PGN, and securi�es trust lending. The Company introduced the overseas bonds product line in 2017 and provided customers with more investment op�ons in addi�on to Taiwan stocks and op�ons.

The Proprietary Trading Department used opportuni�es in the growth of primary materials, substan�al growth in Apple related stocks, growth trends in 5G, AI, IoT, and semiconductors and took long-term investment and quick short-term investment posi�ons to make flexible adjustments to the stock inventory posi�ons in accordance with changes in the stock market to minimize systemic risks. It also remained vigilant of the changes in the fundamentals of listed companies to conduct real-�me adjustments of posi�ons to exchange weak posi�ons for strong posi�ons. Coupled with hedging posi�ons in futures to lower risks and losses, its performance in the TWSE led the industry. Overseas stock market opera�ons also performed well overall with the Department's investment of vast numbers of personnel for research to fully grasp emerging interna�onal trends. The overall performance last year was outstanding. In the future, the Department will con�nue to intensify global macroeconomic research and flexibly adjust domes�c and foreign posi�ons and strategies as the founda�onits of its opera�ons. It will grasp opportuni�es for profits in bull markets and diversify investments to expand sources for Department revenue. The Department plans to be among the leaders of profitability in the industry while maintaining its past compe��ve advantages.

In terms of the overall market, the trust securi�es lending business declined for all securi�es dealers due to the dispersion of customer groups. In terms of the money trust business, the overall scale of assets under securi�es dealers con�nued to grow, and grew by 12% from the previous year. However, the distribu�on has concentrated into two different groups as money trust assets of certain securi�es dealers con�nued to rise while others have experienced declines. Compared to the across-the-board growth for all securi�es dealers in previous years, the current trend indicates market compe��on has gradually intensified.

ii) Risk Management

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 �me and, when necessary, trading authoriza�ons can be immediately revoked. The effect of all of these measures is to ensure maximum protec�ons for our shareholders. iii) Hedging Opera�ons

Futures and op�ons are our primary hedging tools. Going forward, we will con�nue to use these financial products to adequately hedge our proprietary trading department’s exposure.

Underwri�ng Business (Capital Markets)

i) Domes�c Bond and Equity Underwri�ng

As of the end of 2017, there were a total of 907 companies listed on the TWSE, and a total of 744 companies listed on the Taipei Exchange Market, a growth of 1.68% and 1.64% from 2016 respec�vely. The Taiwan Stock Exchange rose above 10,000 points in 2017, and the domes�c market has achieved growth and stabilized. The Department has ac�vely fought for cases while maintaining risk management. Six underwri�ng cases led by the Company were submi�ed in 2017. Listed companies included NT$400 million in secured conver�ble corporate bonds by PCL Technologies, NT$200 million in secured conver�ble corporate bonds by Tung Kai Technology Engineering, a cash capital increase of NT$1.19 billion for Capital Futures, a NT$1.8 billion cash capital increase for the Bank of Kaohsiung, a NT$1.62 billion cash capital increase for Ta Chen Steel, and a NT$332 million cash capital increase for I Yuan Precision Industrial.

The Company shall con�nue to a�en�vely screen cases, carefully select industries, and focus on company credit risks to provide public lis�ng/OTC lis�ng and fundraising services for companies with healthy finances or those in industries with an excellent outlook.

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 op�on exercise prices, offering price for preferred stocks and stock repurchase by listed companies. We will no doubt con�nue to develop our financial advisory services business with a par�cular emphasis securi�es related consul�ng (i.e., IPOs mergers, private placements, and other consul�ng services) around the Greater China Region.

overseas corporate bonds in 2017 including US$14 million for the Export–Import Bank of Korea, US$30 million for ABN AMRO, US$20 million for the Export–Import Bank of India, US$20 million for Hana Financial Group, and US$20 million for the Korea Development Bank.

The Company is also ac�vely pursuing public lis�ng and OTC lis�ng opera�ons of Taiwanese companies returning from China, Hong Kong, and Southeast Asia in accordance with market condi�ons.

iv) Emerging Market Exchange

The domes�c economy faced a moderate growth in 2017. There were 274 companies listed on the Emerging Stock Board, a 1.11% growth from 2016. To capture more IPOs, the department has also been ac�vely posi�oning 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 2017. This year, the division will con�nue to compete for quality clients while maintaining risk control, and issue recommenda�ons for emerging stocks based on the progress of its client counseling.

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The return of the weighted index to levels above 10,000 points increased the confidence of domes�c investors and increased total transac�ons of the stock market and OTC market in 2017 by 7.8% rela�ve to the previous year.

Financial Products Fixed Income Dealing Business

i) Outright Purchases and Sales of Government Bonds

i) Equity Warrants In 2017, there was a strong expansion in Taiwan’s equity warrant market, with all securi�es firms aggressively issuing warrant products. A total of 26,910 equity warrants were issued in 2017, for a total dollar value of just over NT$258 billion. The total dollar value of all equity warrants issued by the company in 2017 was NT$20 billion and the market share was 7.77%, ranked 5th in the market. Issue focuses mainly on the selec�on of stock performance with good Return on Equity (ROE) to create a win-win situa�on with investors and stable profits through different deriva�ves, futures, and op�ons, etc., with hope to effec�vely lower hedging costs. ii) Structured Note Products In 2017, for the whole year, a total of NT$59.22 billion in structure note products were issued with NT$340.75 billion. For the year of 2017,President undertook contracts amoun�ng to a principal of NT$9.43 billion and was ranked 7th in the market.

President gradually shi�ed its development focus to overseas bond markets and the market share in outright purchase and sales in the bond market have been rela�vely low. As liquidity in the overall public debt market has not significantly increased, we expect transac�ons in public debt this year to remain at low levels.

ii) Conver�ble Bonds ,Futures and Op�ons

The Fixed Income Department of President Securi�es Corp. has con�nued to reduce its conver�ble bond posi�ons in 2017 mainly due to evalua�ons which concluded there were fewer sizable projects that provided profitable opportuni�es. The newly issued bonds were also at rela�vely high points on the market and the old bonds con�nued to expire or were converted. We have also reaped profits for our posi�ons. Compared to the industry, the Company's investment strategy for conver�ble bonds mainly involves investment targets with low downside risks. The primary investments included bank-guaranteed conver�ble bonds and unsecured conver�ble bonds with stable cash flows that were issued by large companies. The Company holds fewer unsecured conver�ble bonds of smaller companies and therefore assumes lower overall risk when the market dips. Conversely, when the market goes up, it has smaller room for growth.The Company's mainly stable opera�ons are unlikely to cause major losses. Domes�c conver�ble bonds mainly include issuance of exis�ng projects with investment value and downside protec�on. Issuance of foreign conver�ble bonds has increased in recent periods and is expected to con�nue to increase. The Company shall also increase investment opportuni�es in foreign conver�ble bonds while maintaining control of overall risks.

iii) Interest Rate Swaps (IRS)

A�er the IRS posi�ons of the Fixed Income Department of President Securi�es Corp. expired in 2017, we have withdrawn from the market due to a lack of demand for related hedging for Taiwanese debt transac�ons.

iv) Foreign Bonds

With the opening of OSU opera�ons, the domes�c supervision authori�es have con�nued to relax restric�ons on domes�c securi�es firms' investment in foreign bonds. The Fixed Income Department of President Securi�es has maintained outstanding profitability since it began transac�ons in foreign public debt and company debt markets. Its current strategy is to maintain robust growth while ac�vely par�cipa�ng in transac�ons of USD, Euro, AUD, GBP and RMB-denominated public and corporate bonds. We have developed new transac�on sectors in U.S. corporate bonds and emerging market fixed income products.

President Securities Corp. 2017 Annual Report

V. Overview of Business Operation

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R&D for Deriva�ve Product

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

Various Technical Exper�se and R&D

that brings together talented individuals from finance and sta�s�cs with access to top-notch trading and valua�on so�ware, so that they can develop innova�ve product and trading strategies. With cu�ng-edge financial engineering at the forefront, we bring together comprehensive product development and advanced trading experience in designing new products, and in providing sophis�cated deriva�ves products and consul�ng services for our customers. Plus, every year, we invest heavily in modernizing our warrant so�ware so as to make our systems faster and more stable, and so as to offer a broader range of services to our customers.

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 deriva�ve products, as well as equity-linked deriva�ve products, bonds and interest rates, and we stand ready to issue these products whenever appropriate market �ming emerges. We have successfully developed several market opera�ng strategies, as well as op�on market making models and strategies.

Electronic trading system improvements

The electronic trading market con�nues to grow and the company is able to raise customer service quality through an e-trading pla�orm that is stable, convenient

i) President Securi�es 2017 Electronic Trading System R&D Plan

System R&D capabili�es	System R&D capabili�es
Enhanced electronic customer services	Enhanced digital services are provided for convenience so customers do not have to visit a branch ofce. Use of OTP mechanisms to strengthen security for obtaining transac�on codes for online mobile account openings. Customers can use the web to remove the transac�on password lock online.
Op�miza�on of the wealth management trading func�ons	Adjustment to the asset overview and investment por�olio for ofshore bonds. New func�ons for customers to inquire about realized gains and losses. New single-login password modifca�on func�on for the wealth management web service. Establishment of the mobile wealth management pla�orm and integra�on of the exis�ng President Securi�es app to add new wealth management fund transac�on func�ons.
Futures electronic trading and electronic services	Online opera�ons for electronic a�er-hours futures trading to increase transac�on opportuni�es. Added electronic agreement signature func�ons to allow signatures for agreement forms by mobile phone or tablet computer. Added func�ons for online modifca�ons of basic informa�on for customers using handheld devices to allow customers to avoid the inconvenience of visi�ng a branch ofce.
Enhanced electronic trading stability	Update and upgrade of the electronic trading database. Expansion and replacement of related servers for diferent systems. Adop�on of load balancing equipment to increase system availability.
Online account opening services for mobile devices	Provide a mul�-func�on system in response to Finance 3.0 trends. Provide new customers with online account opening applica�on services via mobile devices.
Online applica�on for margin trading	In response to trading pla�orm digitaliza�on. Allow customers to open margin trading account through PC browser.
Op�mized Sub-brokerage Order Entry System	Enhance order placing processes and interface, our trading APP & AP, and add interna�onalorder execu�on (Shenzhen Stock). Added ETF risk declara�on management func�ons.

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ii) 2018 R&D investment plan and progress

Project Name Details of Plan and Benefts Project Plan Expected Cost Outlay Current Progress Expected Comple�on Cri�cal Success Factors	Project Name Details of Plan and Benefts Project Plan Expected Cost Outlay Current Progress Expected Comple�on Cri�cal Success Factors	Project Name Details of Plan and Benefts Project Plan Expected Cost Outlay Current Progress Expected Comple�on Cri�cal Success Factors	Project Name Details of Plan and Benefts Project Plan Expected Cost Outlay Current Progress Expected Comple�on Cri�cal Success Factors	Project Name Details of Plan and Benefts Project Plan Expected Cost Outlay Current Progress Expected Comple�on Cri�cal Success Factors	Project Name Details of Plan and Benefts Project Plan Expected Cost Outlay Current Progress Expected Comple�on Cri�cal Success Factors	Project Name Details of Plan and Benefts Project Plan Expected Cost Outlay Current Progress Expected Comple�on Cri�cal Success Factors
Mobile Pla�orm Introduc�on and Func�on Enhancements	The digital age is upon us and the [Mobile Operator Pla�orm] enhances the power of all employees. It is a new tool for staf to provide services outside the ofce. The Mobile Service App Portal func�on con�nues to be op�mized to provide quicker, more accurate, and more efcient professional customer service.	The mobile pla�orm for staf integrates all informa�on required to be flled out by employees. Mobile Service App Portal: Integrates wealth management informa�on and convenient services.	15 million	Ongoing	Excepted to provide services in forth-quarter, 2018.	Completed project and all tes�ng process fnished step by step.
Improvement of Electronic Trading System	New online authoriza�on and real-�me payment deduc�on func�ons for the wealth management website. Op�miza�on of the sub-brokerage trading website. Op�miza�on of the wealth management trading website. Backup plan for the mobile transac�on app. Mobile smart order func�ons. Enhanced backup for electronic trading. Establishment of cross-pla�orm electronic service mechanisms.	Respond to the roll out of new business areas and improve service quality while op�mizing processes and intergrading systems.	22 million	Ongoing	Excepted to provide services in forth-quarter, 2018.	Completed design process; business process planning.

President Securities Corp. 2017 Annual Report

V. Overview of Business Operation

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Market Supply forecast, growth opportunity, and business compe��vemess

Our Compe��ve Strengths

Obstacles

Our corporate image is solid.

Financial holding companies have the advantage of capital employment and crisscross integra�on.

We respect professional management and leadership. Our horizontal organiza�on and human resource costs are well-controlled.

It is hard to mark up brokerage handling charge due to fierce compe��on.

The FED is gradually normalizing interest rates.

Our brokerage business market share grows up steadily. Our posi�on management performance is outstanding in winning percentage.

Foreign investors are an increasing propor�on of the market; domes�c firms are at a disadvantage in terms of developing overseas clients.

Our opera�ng costs and risk management are both well-controlled.

demand for investments.

The salary growth rate of the youth popula�on grows slowly and the low amount of savings makes it difficult to begin investments.

Posi�ve Factors

The global economy is in recovery; consump�on and investment are picking up, which will drive domes�c economic growth.

have access to superb sales channels and myriad resources.

Capital is readily available and the cost of capital is quite low.

FSC permits day trading to boost volume of market, and increase company profit.

The government con�nues to open up new business opera�ons and expand the scope of investment. The large account taxa�on clause in the securi�es transac�on taxa�on has been abolished.

With competent authori�es gradually widening the business scope of securi�es firms, the breadth of the company's opera�ons will also be increased as well. Flexibility in proprietary trading business with industry-leading performance.

With structured note products now available, products can be custom designed for either retail clients or ins�tu�onal clients, thereby retaining clients who would have otherwise been drawn to banks and financial holding companies.

and from restructuring and consolida�on ac�vi�es that would result from such M&A ac�vi�es, employees can focus more on tasks at hand and the organiza�on can enjoy smooth and unfe�ered development.

The government is planning to establish tax policies on financial products in line with interna�onal standards and this will encourage financial product innova�on and spur new business.

Growth in online trading shows no signs of slowing down. The company’s fast and reliable online trading technology is well-posi�oned to a�ract a new, young client base.

The company encourages a corporate culture that emphasizes innova�on and rising to challenges. As financial markets con�nue to mature and the numbers of par�cipants con�nue to increase, market liquidity and efficiency keep rising.

The level of computeriza�on and automa�on of informa�on and processes is one of the highest in the industry leading to management prac�ces with high efficiency.

Shareholder Services Coordina�on

Fixed Income Dealing

Improve quality of service :

Expand internal databases and develop addi�onal

procedures and materials. Improve efficiency of training cycles. Develop employee knowledge on various regula�ons and procedures. Enhance mutual support and flexibility among employees. Increase efficiency of human resource u�liza�on.

products they trade.

Enhance judgment ability of global trend to deepen trading ability.

Strengthen foreign bond research and trading personnel lineup to meet the growing needs of expanding businesses.

Enhance inter-department coopera�on and verifica�ons, thereby ensuring accuracy and security of processes.

Recruit experts for bond sales and underwri�ng opera�ons to expand the business scope in bonds.

Follow the internal objec�ve of “Customer sa�sfac�on, unceasing improvement and innova�on”, we will keep Increasing the sa�sfac�on rate of agency business.

Brokerage

Encourage various departments and subsidiaries to work together to develop new business.

Develop our ins�tu�onal client business, using asset management business to pursue corporate clients and combine that with our OSU business, and provide added-value services beyond our conven�onal securi�es services.

Modify client structure so as to reduce the concentra�on of risks.

Expand our spread trading business, increase mid-level customer trading volumes and posi�on turnovers rates. Enhance internal audi�ng procedures, reduce client complaints.

Customized online brokerage system for ins�tu�onal and mid-level investors.

Increase revenues from securi�es lending service to investors.

Iden�fy under-performing brokers and refocus them towards “Marke�ng” efforts as a means of making a breakthrough, or refocusing their efforts on cross-selling of non-tradi�onal products.

Cul�vate all employees’ abili�es to cross-sell a range of financial products, par�cularly personal financial planning products and wealth management services.

take into considera�on client preferences, trading habits, and that provide appropriate product informa�on and that increase trading frequency.

Push forward with online brokerage business; implement comprehensive pla�orm that integrates both informa�on and trading systems. Bolster online trading system stability and order entry quality.

Improve our employee training, assistance in prepara�on for related licenses, performance management, and informa�on system knowledge, to upgrade our brokers’ professionalism and produc�vity.

Con�nue 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.

opera�ons so as to increase efficiency and to control costs at individual branches.

Implement succession mechanisms for each level of the organiza�on, strengthen our incuba�on center func�ons, retain good talent, solid management training programs, set incen�ve programs, encourage successors, smooth genera�onal gaps.

Set break-even point for each branch, consider the linkage between target customers and brokers’ performance and branches’ opera�on outcome, evaluate poten�al for future profitability, and adjust business direc�on.

Financial Products

In terms of future opening to daily trade of stocks and warrants, we have already increased tools of futures and op�ons, enhance transac�on system effec�veness, lower transac�on cost, and maximize profit.

Be more responsive to consumer demand and develop new products to meet these demands.

Strengthen market research and investment analysis of foreign market objec�ves and commodi�es to explore interna�onal securi�es business.

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Underwri�ng (Capital Markets)

Prior to taking ini�al steps on a given underwri�ng deal, consulta�ons should be conducted with colleagues throughout the company’s various departments and divisions so as to accurately access to the realis�c profit opportuni�es 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.

When ac�ng 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. A�erwards, daily risk values should be generated and market simula�ons should be conducted to as so have a clear and �mely picture of risk exposure and thus determine when to ini�ate stop losses or when to take profits. The net effect of all of these efforts will be to lower overall risk while pursuing the largest possible profit.

Leverage clients from across our Brokerage Department, Financial Products Department, Shareholder Services Coordina�on Department, President Capital Management Corp., and Uni-President Asset Management Corp.

customized for either retail or ins�tu�onal business, thereby implemen�ng an effec�ve cross-selling network.

Ac�vely work with foreign business en��es to seek IPOs or fundraising opera�ons for foreign companies in Taiwan.

Wealth Management & Trust

Help business personnel to obtain the relevant wealth management licenses and raise their professional competence.

Aside from providing mul�ple products, we focus more on the depth of product service.

differ from banking trust business.

Construct mobile pla�orms that allow orders to be placed for all types of products, thereby offering clients added convenience and achieving Bank 3.0 objec�ves.

Quan�ta�ve Trading

Diversify our trading strategies to be�er react to market changes.

Aggressively pursue market-maker roles in foreign futures and op�ons markets.

Expand our range of foreign products traded and increase profitability in foreign products.

Increase the propor�on of order placements via automa�c trading programs.

Increased the integra�on of resources across mul�ple departments, thereby crea�ng be�er synergies.

Proprietary Trading

switching between “Range Trading” and “Trend Trading” strategies, thereby maintaining an op�mal market posi�on.

reduce the impact of systemic risk.

Improve our research and trading of Emerging Market Exchange equi�es, foreign-listed equi�es, and futures markets, to create more diverse sources of revenue. Add quan�ta�ve analysis and technical indicator model analysis to our opera�ng systems.

President Securities Corp. 2017 Annual Report

V. Overview of Business Operation

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Environmental Protec�on and Corporate Ci�zenship

Corporate Ci�zenship

Environmental Protec�on

Based on governmental order #0950007006, each company is required to disclose in its annual report its compliance with the European Union’s Restric�on of hazardous Substances Direc�ve (RoHS). The company is classified as a securi�es service business and, ccordingly, pollu�on and other environmental concerns do not apply.

President Securi�es Group has been a long-standing supporter of important social charitable ac�vi�es and, for its efforts, has been recognized with the 7th annual Wenxin Award and the 6th Na�onal Civic Service Award, and Top 50 by the Commonwealth magazine in 2013, 2015、2016 and 2017. The Company has taken concrete ac�ons to cooperate with the Taiwan Fund for Children and Families from 2007 to 2017 to help children from financially challenged families with their studies. The Company also mobilized all employees and customers for joint par�cipa�on and invested actual funds and various equipment to social welfare ac�vi�es to fulfill corporate social responsibili�es. The Company raised a total of NT$2.1 million from 1,194 par�cipants in 2017.

Work Environment Safety and Precau�ons The company is classified as a securi�es service business and, accordingly, pollu�on and other environmental concerns do not apply. Each branch office is required to select an individual to undergo training to be cer�fied 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.

Labor Rela�ons

The company has always maintained a harmonious rela�onship with its employees. We have spared no expense in providing a�rac�ve employee benefits, in providing opportuni�es for personal growth, in providing a pleasant work environment, and in providing clear and accessible communica�on channels to all levels of management.

dona�on event in 2006 and received a passionate response. Star�ng in 2007, the Company has organized two employee blood dona�on events every year and expanded the event to include community residents who have provided strong support. Star�ng in 2010, the Company organized three blood dona�on ac�vi�es every year and a total of 223 bags of blood were donated in 2017. A total of 2,515 bags of blood have been donated from 2006 to 2017 and the Company has become a permanent partner of the Blood Center. The Company receives a le�er of gra�tude and commenda�on from the Blood Center every year.

prescribed by Labor Standard Act, such as annual leave �me and number of working hours. Employees also enjoy addi�onal benefits such as group insurance for worker’s compensa�on and accident medical care. As well, we offer employees funds for weddings and in �me of bereavement, and organizes and subsidized employee ou�ngs aimed at strengthening rela�onships between the firm and our employees, and among employees themselves.

The company is commi�ed to crea�ng a reasonable, friendly, and efficient work environment for its employees, an environment that includes strong lines of communica�on for employees to express opinions and sugges�ons about the firm. With this in mind, the firm has established an “Employee Sugges�on Center” and also organizes regular employee workshops to ac�vely solicit, discuss, and then respond to employee concerns and sugges�ons.

To encourage employees to live healthier lives, the Company provides all employees with a smoke-free work environment and arranges annual health checks for employees to improve their physical health. The arrangements are superior to legal requirements. In addi�on, the Company also conducts periodic blood dona�on ac�vi�es and physical and spiritual health seminars from �me to �me to improve employees' overall health. The ac�vi�es include sanita�on educa�on, policy, and the environment.

In January of 2004, the company expanded its employee benefits to include an “Employee Stock Ownership Trust, (ESOT)”, allowing those employees who par�cipate to have a set por�on of their monthly pay automa�cally 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 re�rement planning.

The Company also provides a spacious 200-ping sports center which is equipped with comprehensive sports facili�es. It also ac�vely promotes various club ac�vi�es to promote healthier lifestyles for employees. Essen�ally, all such benefits and programs are designed to foster a harmonious rela�onship between employees and the company. Going forward, we are op�mis�c to con�nue to improve upon these rela�onships, always with the ul�mate aim of allowing both the company and our employees to enjoy mutual benefit and growth.

Educa�on and training courses, expenditures,

and number of hours

The Company values educa�on, training, and talent development. The effects of training in 2017 are described as follows:

Assis�ng the brokerage system with training and project execu�on

i) Diversify product sales capabili�es:

We con�nue to arrange basic training (product sales capabili�es) for the sale of diverse products and expert training (management capabili�es) for high-net-worth customers. We also use performance management mechanisms and con�nuous encouragement from supervisors to strengthen management measures and improve the sales capabili�es and business goals of our products.

ii) Talent training:

A. Sales talents: Con�nue to recruit and train salesclerks and replace those with weak performances with those who have stronger performance to strengthen the business team.

B. Industry-academia collabora�on: Con�nue to advance industry-academia collabora�on with finance departments of major universi�es to reduce the gap between students' studies and their careers and fulfill our corporate social responsibili�es.

iii) Industry trends:

The monthly President Class focuses on analyses of trending industries to provide colleagues with a greater understanding of industry trends to provide be�er service to our customers.

iv) Strengthening of management roles:

In response to the impact and business opportuni�es of financial technologies on the opera�ons of the securi�es industry, supervisors must adopt ac�ve and responsible a�tudes and understand the cri�cal need for change. They must have innova�ve management and leadership capabili�es to lead their teams to proac�vely respond to changes.

Finance 3.0 Digital Transforma�on Training Program

i) FinTech lectures:

Lectures are organized for employees to con�nue to learn about trends in the development of the digital economy and robo�c automa�on so allow them to adopt innova�ve thinking and “think outside- the- box” to respond to challenges.

ii) Digital marke�ng applica�on courses:

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marke�ng strategies and uses content marke�ng to increase the “s�ckiness” of customers. It effec�vely uses content marke�ng to reduce marke�ng costs and improves marke�ng impacts and improves sales performance.

iii) Digital analysis tool applica�on courses -Tableau and Excel VBA:

The Company assists professional (project) employees in each department to make use of daily opera�ons and marke�ng sta�s�cs by using data analysis tools to analyze and deconstruct data. This analysis is also used for decision-making and organiza�onal execu�on. Repe��ve daily tasks are made simple to improve work efficiency.

E-training

i) The training system has been upgraded to version LMS6.4 and its func�ons are upgraded to improve the Company's management and implementa�on of training programs.

ii) The Company introduced the MPS mobile learning module to enable employees to learn on their mobile devices. QR codes are used for registra�on and sign out in actual courses which facilitates real-�me management while reducing the use of paper. The module can be linked with Outlook for course �me management and the supervisors can review employees' training results on the mobile pla�orm and sign off on training documents.

iii) The Company purchases and produces training materials based on job requirements, integrates free resources, and selects various online materials suitable for various roles to encourage employees to learn on their own at any �me. This allows learning to be more diverse and spontaneous.

iv) Marke�ng ac�vi�es are used to encourage employees to make use of online resources and cul�vate habits for con�nuous learning. The goal is to strengthen mo�va�on for learning and improve their ambi�ons for improving digital transi�on.

Cross-department communica�on

The Company organized three cross-sales project discussion mee�ngs in 2017 to learn about business departments' strategies and key business goals of the current year to plan suitable courses and op�ons to ensure the efficacy of studies and performance output. It also allowed employees to learn about the departments' ideas on training and establishes good communica�on channels.

Applica�on for government subsidies to reduce training expenditures

Human resources improve program: NT$56,800

The Company received the Bronze Award based on the Taiwan Talent Quality Management System (TTQS) of the Workforce Development Agency of the Ministry of Labor in 2017 & 2018, and won the Silver Award for six consecu�ve years from 2010 to 2016. We were the only winners in the securi�es industry.

President Securities Corp. 2017 Annual Report

V. Overview of Business Operation

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Environmental Protec�on and Corporate Ci�zenship

Employee Data

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 �me. 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 resul�ng from any employee disputes, in the firm’s en�re history. And, the company has every reason to believe that this harmonious dynamic will con�nue.

Analysis of Average Tenure, Age, and Educa�on, for Sales Force in 2016, 2017, and the first quarter of 2018

Item 2016 2017 2018Q1	Item 2016 2017 2018Q1
Number of Employees	Management 108 110 112 Regular Staf 1,390 Total 1,498 1,353 1,463 1,356 1,468
Average Age 44.18 Average Tenure 12.39 45.05 13.09 45.27 13.18
Educa�on (%)	Doctorate Degree 0.13 Master’s Degree 11.95 Bachelor Degree / Junior College Graduate 73.43 Senior High School 14.49 High School or Less - 0.20 12.37 72.80 14.63 0.20 12.60 72.55 14.65 - -

Employee Data

Cer�fca�ons and Qualifca�ons Reveived by Employees	Audi�ng Ofce/47 employees	Audi�ng Ofce/47 employees
	Qualifed	Ra�o(%)
Qualifca�on Exam for Senior Securi�es Specialist 83.0 39
Qualifca�on Exam for Securi�es Specialist 17.0 8
Qualifca�on Exam for Futures 100 47
Cer�fcate of Margin Trading and Short Selling 87.2 41
Qualifca�on Exam for Securi�es Investment Trust and Consul�ng Professional 30 63.8
Profciency Test for Trust Opera�ons Personnel 87.2 41
Qualifca�on Exam for Personal Insurance Representa�ve 85.1 40
Qualifca�on Test for Sales Personnel of Structured Products 4.3 2
Basic Profciency Test for Bank Lending Personnel 8.5 4
Profciency Test for Financial Planning Personnel 30.0 14
Basic Profciency Test for Bank Internal Controls 48.9 23
Qualifca�on Exam for Non-Life Insurance Representa�ve 87.2 41
12.8 6 Qualifca�on Exam for Stock Afair Specialist
Professional Capacity of Bonds Specialist 2 4.3
Bill Finance Specialist exam 2.1 1
Qualifca�on Exam for Investment-orientated Insurance Product Representa�ve 44.7 21
Profciency test for corporate basic internal control 14.9 7
Wealth management salespersons 91.5 43
8 Qualifca�on Exam for Securi�es Investment Trust and Consul�ng Regula�ons 17.0
Trust laws exam 4 8.5

or senior.

Re�rement System and Implementa�on Status i) To encourage employees' long-term services and professional development, protect employee rights, and improve work efficiency, the Company has established the Employee Re�rement Regula�ons in accordance with the approval granted in the Na�onal Taxa�on Bureau's (1989) Cai-Bei-Guo-Shiu-Shen-1 No. 112955 Le�er dated November 12, 1989.

ii) The Company established the Employee Pension Fund Management Commi�ee on October 11, 1994 with the approval of the Department of Labor of the Taipei City Government. A�er the implementa�on of the Labor Standards Act in March 1998, the Company established the Supervisory Commi�ee of Labor Re�rement Reserve in accordance with the laws. Related organiza�on charters and re�rement regula�ons have been approved by the Department of Labor of the Taipei City Government. The Company appropriates funds to the Trust Department of the Bank of Taiwan according to the appropria�on ra�o calculated by the actuary.

iii) The government implemented the new re�rement system in the "Labor Pension Act" in July 2005 to handle employees’ re�rement. As of today, the Company has close to 1,400 employees enrolled in the new labor pension system. The Company complies with government policies and appropriates 6% of employees' salaries to the pension account in the Bureau of Labor Insurance each month.

Employee Disputes and Protec�on of Employee Rights

In accordance with the Labor Standards Act, the company has ins�tuted its own set of work rules and has submi�ed a copy of these work rules to the Taipei City Government Department of Labor for approval. In addi�on to no�fying all employees via internet of the content of these work rules, we also have posted a copy of these work rules on

Cer�fca�ons and Qualifca�ons Reveived by Employees	Risk Control Ofce / 4 employees	Risk Control Ofce / 4 employees
	Qualifed	Ra�o(%)
Qualifca�on Exam for Senior Securi�es Specialist 100.0 4
Qualifca�on Exam for Futures 100.0 4
Cer�fcate of Margin Trading and Short Selling 25.0 1
Qualifca�on Exam for Securi�es Investment Trust and Consul�ng Professional 75.0 3
Qualifca�on Exam for Personal Insurance Representa�ve 25.0 1
Qualifca�on Exam for Non-Life Insurance Representa�ve 25.0 1
Bill Finance Specialist exam 50.0 2

Cer�fca�ons and Qualifca�ons Reveived by Employees	Finance Department/ 35 employees
	Qualifed	Ra�o(%)
Qualifca�on Exam for Senior Securi�es Specialist 85.7 30
Qualifca�on Exam for Securi�es Specialist 11.4 4
Qualifca�on Exam for Futures 34.3 12
Cer�fcate of Margin Trading and Short Selling 14.3 5
Qualifca�on Exam for Securi�es Investment Trust and Consul�ng Professional 22.9 8
Profciency Test for Trust Opera�ons Personnel 20.0 7
Qualifca�on Exam for Personal Insurance Representa�ve 20.0 7
Basic Profciency Test for Bank Lending Personnel 5.7 2
Profciency Test for Financial Planning Personnel 11.4 4
Basic Profciency Test for Bank Internal Controls 17.1 6
Qualifca�on Exam for Non-Life Insurance Representa�ve 14.3 5
Professional Capacity of Bonds Specialist 5.7 2
Bill Finance Specialist exam 8.6 3
Profciency test for corporate basic internal control 5.7 2
Qualifca�on Exam for Securi�es Investment Trust and Consul�ng Regula�ons 2.9 1

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Internal Legal Compliance and Material Informa�on Management

We have set an “internal material informa�on handling procedures” and assigned the Compliance Office to be in charge of internal major informa�on in order to do coordina�on and prevent internal trading. In addi�on, our HR promotes educa�on advocacy toward board members, managerial officers, and employees each year. In accordance with the “Taiwan Stock Exchange Corpora�on Procedures for Verifica�on and Disclosure of Material Informa�on of Listed Companies” and with the “Taiwan Stock Exchange Corpora�on Procedures for Press Conferences Concerning Material Informa�on of Listed Companies”, we have posted all such informa�on on the company’s internal corporate website where employees and managers may view it.

Compliance Department, which is tasked with ensuring that all of the company’s processes and administra�ve procedures are in compliance with the most recent laws and regula�ons, that all ac�vi�es are conducted in accordance with relevant laws and regula�ons. And in accordance with “Standard Direc�ons for the Content and Procedures of Assessment of Legal Compliance of Securi�es Firms”, this department is also tasked with conduc�ng regular legal compliance evalua�ons of each department and each branch office and then conduc�ng legal compliance training specific to their needs.

We have created a legal compliance sec�on on our internal corporate website where we rou�nely post informa�on on any recent amendments made to relevant laws and regula�ons. We have also set up a hotline where employees can call to learn more about insider trading, its key principles, defini�ons, and the poten�al civil and criminal exposures involved. All of these measures, taken together, provide our employees with appropriate and adequate legal guidance.

To comply with Personal Informa�on Protec�on Act, our company established personal informa�on protec�on system in 2013. We also gained "BS 10012"cer�fica�on of England Standard Associa�on in November 22, 2013. And we con�nue to undergo a three-year cer�fica�on consul�ng toward our Shareholder Services department, started from 2017.

President Securities Corp. 2017 Annual Report

VI.Financial Information

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VI. Financial Information

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2017 Business Review

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Number of Employees
Corporate Governance Evaluation System in 2017 Top 5% 1,463
BIS ratio in 2017/12 : 417%
E-trading in 2017/12 : 54%
Taiwan Ratings in 2017: Long-term / TWA
Short-term / TWA-1
Outlook / Stable
Capital
NTD13.9 Billion
Number of Branches
36
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Number of Affiliated Companies Product and Services 5 in Taiwan and 2 overseas Brokerage, Proprietary Trading, Underwriting, Fixed Income Dealing, Financial Products, Shareholder Services, Wealth Management& Trust, Offshore Securities Units

Date of Incorporation Dec. 17, 1988

Revenue Composition

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President
Securities
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ROE Underwriting
ROE & ROA 10.81% 4%
Brokerage
37%
2017
6.97%
6.19% Marketshare
( )3.22%
ROA
4.18% 3.61% 3.99%
3.16%
2.99%
2.11%
1.51%
Proprietary Trading
2013 2014 2015 2016 2017 59%
Operation Performance REVENUE Stable payout ratio
1.88
6.4b
1.2
EPS(Note) EPS 1.03 1.2(Proposed)
3.9b 4.4b 1.88 DIVIDEND 0.74 0.81 0.72 0.62
3.5b 3.5b 0.51
0.41
1.2
1.03
0.72 0.62 IncomeNet 2013 2014 2015 2016 2017
1.4b 1.6b 1.0b 0.8b 2.6b PAYOUT 72% 68% 71% 66% 64%
RATE
2013 2014 2015 2016 2017
Note: Before retrospec�ve adjustment due to applying changes in
accoun�ng principle and earnings distribu�ons.
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ROE
ROE & ROA
10.81%
9%
6.97%
6.19%
6%
ROA
4.18% 3.61% 3.99%
3.16%
2.99%
3% 2.11% 1.51%
2013 2014 2015 2016 2017
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Professional Leadership & Kind Service

VI.Financial Information

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Consolidated Balance Sheet

						Unit: NT$ thousands	Unit: NT$ thousands
Item		2013	2014	2015	2016	2017	2018Q1
Current Assets		54,044,709	59,972,212	65,185,471	81,275,723	81,561,564	80,913,134
Property and Equipment		2,583,250	2,562,705	2,520,596	2,467,163	2,434,389	2,438,000
Intangible Assets		25,648	160,276	144,659	129,771	112,096	108,070
Other Assets		2,129,369	2,252,353	2,238,807	2,183,539	2,203,645	2,880,902
Total Assets		58,782,976	64,947,546	70,089,533	86,056,196	86,311,694	86,340,106
Current	before	36,354,161	41,811,986	47,265,147	62,877,634	60,800,920	60,197,053
Liabili�es	distri.
	a�er	37,333,270	42,883,712	47,525,906	62,877,634	Note	Note
	distri.
Non-Current	Liabili�es	22,612	60,084	60,335	48,933	75,812	62,357
Total Liabili�es	before distri.	36,376,773	41,872,070	47,325,482	62,926,567	60,876,732	60,259,410
	a�er distri.	37,355,882	42,943,796	47,586,241	62,926,567	Note	Note
Equity A�ributable to Shareholders of the Parent		22,365,280	23,032,624	22,718,012	23,080,930	25,385,654	26,015,584
Capital Common Stock		13,231,191	13,231,191	13,231,191	13,356,658	13,904,281	13,904,281
Capital Reserve		256,116	256,116	256,116	142,702	142,702	142,702
Retained	before	8,877,942	9,431,778	9,307,717	9,432,286	11,397,045	11,397,045
Earnings	distri.
	a�er	7,898,833	8,360,052	8,642,781	8,884,663	Note	Note
	distri.
Other Equity	Interest	31	113,539	201,014	149,284	-58,374	429,418
Treasury Stocks		-	-	-278,026	-	-	-
Non-controlling Interests		40,923	42,852	46,039	48,699	49,308	65,112
Total	before	22,406,203	23,075,476	22,764,051	23,129,629	25,434,962	26,080,696
Equity	distri.
	a�er distri.	21,427,094	22,003,750	22,503,292	23,129,629	Note	Note

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Individual Balance Sheet

						Unit: NT$ thousands	Unit: NT$ thousands
Item		2013	2014	2015	2016	2017	2018Q1
Current Assets		44,043,845	48,083,939	52,172,205	63,516,085	66,854,475	63,455,624
Property and Equipment		2,409,970	2,393,640	2,354,427	2,295,097	2,260,981	2,264,751
Intangible Assets		13,644	115,878	103,000	85,761	62,317	57,482
Other Assets		5,456,000	5,914,021	6,121,445	6,094,357	6,082,755	6,781,208
Total Assets		51,923,459	56,507,478	60,751,077	71,991,300	75,260,528	72,559,065
Current	before	29,525,131	33,408,421	37,963,799	48,852,745	49,788,572	46,470,419
Liabili�es	distri.
	a�er	30,504,240	34,480,147	38,224,558	48,852,745	Note	Note
	distri.
Non-Current	Liabili�es	33,048	66,433	69,266	57,625	86,302	73,062
Total	before	29,558,179	33,474,854	38,033,065	48,910,370	49,874,874	46,543,481
Liabili�es	distri.
	a�er distri.	30,537,288	34,546,580	38,293,824	48,910,370	Note	Note
Capital Common Stock		13,231,191	13,231,191	13,231,191	13,356,658	13,904,281	13,904,281
Capital Reserve		256,116	256,116	256,116	142,702	142,702	142,702
Retained	before	8,877,942	9,431,778	9,307,717	9,432,286	11,397,045	11,539,183
Earnings	distri.
	a�er	7,898,833	8,360,052	8,642,781	8,884,663	Note	Note
	distri.
Other Equity	Interest	31	113,539	201,014	149,284	-58,374	429,418
Treasury Stocks		-	-	-278,026	-	-	-
Non-controlling Interests		-	-	-	-	-	-
Total	before	22,365,280	23,032,624	22,718,012	23,080,930	25,385,654	26,015,584
Equity	distri.
	a�er	21,386,171	21,960,898	22,457,253	23,080,930	Note	Note
	distri.

Note.:Distributed earnings from 2017 have yet to be approved by shareholders.

President Securities Corp. 2017 Annual Report

VI.Financial Information

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Consolidated Condensed Income Statements

					Unit: NT$	thousands
Item	2013	2014	2015	2016	2017	2018Q1
Opera�ng Revenue	4,613,318	5,163,297	4,580,843	4,497,543	7,270,066	1,275,846
Gross Proft	4,026,842	4,509,102	3,709,350	3,730,502	6,284,995	995,469
Opera�ng Income	1,213,703	1,237,025	252,740	518,530	2,393,918	52,239
Non-Opera�ng Income	275,784	554,338	855,964	418,981	450,055	83,768
Income Before Tax	1,489,487	1,791,363	1,108,704	937,511	2,843,973	136,007
Net Income (Loss) from Opera�ons of	1,365,453	1,587,281	962,535	833,042	2,624,657	114,885
Con�nued Segments
Net Income (Loss) from	-	-	-	-	-	-
Discon�nued Opera�ons
Net Income (Loss)	1,365,453	1,587,281	962,535	833,042	2,624,657	114,885
Other Comprehensive	67,690	63,567	78,630	-88,465	-314,958	-55,695
Income (Income a�er Tax)
Total Comprehensive Income	1,433,143	1,650,848	1,041,165	744,577	2,309,699	59,190
Net Income A�ributable
to Shareholders of the	1,361,715	1,583,169	956,613	826,690	2,618,769	112,714
Parent
Net Income A�ributable
to non-controlling	3,738	4,112	5,922	6,352	5,888	2,171
Interests
Comprehensive Income A�ributable to	1,429,496	1,646,453	1,035,140	737,775	2,304,724	56,679
Shareholders of the Parent
Comprehensive income
a�ributable to	3,647	4,395	6,025	6,802	4,975	2,511
non-controlling
interests
Earnings Per Share	0.96	1.11	0.68	0.59	1.88	0.08

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Individual Condensed Income Statements

					Unit: NT$	thousands
Item	2013	2014	2015	2016	2017	2018Q1
Opera�ng Revenue	3,879,401	4,376,852	3,510,819	3,493,434	6,359,985	953,840
Gross Proft	3,544,028	4,001,642	2,976,415	3,086,106	5,715,963	772,844
Opera�ng Income	1,140,334	1,161,197	65,588	384,592	2,333,898	-17,432
Non-Opera�ng Income	327,338	606,199	1,004,456	511,418	474,303	139,274
Income Before Tax	1,467,672	1,767,396	1,070,044	896,010	2,808,201	121,842
Net Income (Loss) from Opera�ons of	1,361,715	1,583,169	956,613	826,690	2,618,769	112,714
Con�nued Segments
Net Income (Loss) from	-	-	-	-	-	-
Discon�nued Opera�ons
Net Income (Loss)	1,361,715	1,583,169	956,613	826,690	2,618,769	112,714
Other Comprehensive Income (Income a�er Tax)	67,781	63,284	78,527	-88,915	-314,045	-56,035
Total Comprehensive	1,429,496	1,646,453	1,035,140	737,775	2,304,724	56,679
Income Earnings Per Share	0.96	1.11	0.68	0.59	1.88	0.08

Auditors’ Opinions from 2013 to 2017	Auditors’ Opinions from 2013 to 2017	Auditors’ Opinions from 2013 to 2017	Auditors’ Opinions from 2013 to 2017
Year	Accoun�ng Firm	CPA	Audit Opinion
2013	PricewaterhouseCoopers (PwC) Taiwan	Lin, SK / Huang, James	Unqualifed Opinion
2014
2015
2016		Hsiao, Chin-Mu / Chang, Ming-Hui
2017

President Securities Corp. 2017 Annual Report

VI.Financial Information

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Consolidated Financial Analysis for the Past 5 Years

Unit: NT$ thousands

Item		2013	2014	2015	2016	2017	2018Q1
Financial	Debt Ra�o	61.88	64.47	67.52	73.12	70.53	69.79
Structure	Ra�o of
(%)	Long-term Capital to property and	867.36	900.43	903.12	937.50	1044.82	1069.76
	equipment
	Current Ra�o	148.66	143.43	137.91	129.26	134.15	134.41
Solvency
(%)	Quick Ra�o	148.51	143.37	137.83	129.19	134.09	134.36
	Return on Total Assets	2.63	2.80	1.87	1.31	3.43	0.22
	Return on Stockholders’	6.20	6.98	4.20	3.63	10.81	0.45
	Equity (%)
Proftability Analysis	Pre-tax Income to Paid-in Capital (%)	11.26	13.54	8.38	7.02	20.45	0.98
	Proft Ra�o (%)	29.60	30.74	21.01	18.52	36.10	9.00
	Earnings Per Share(NT$)	1.00	1.16	0.70	0.59	1.88	0.08
	Cash Flow	-	0.92	7.59	-	5.92	-
	Ra�o (%)
Cash Flow	Cash Flow Adequacy	513.83	366.25	452.90	123.28	214.36	271.36
	Ra�o (%)
	Cash Reinvestment	-	-	10.82	-	13.84	-
	Ra�o(%)
	Debt to Equity	162.35	181.46	207.90	272.06	239.34	231.05
	Ra�o
	Ra�o of Property and Equipment to	5.34	4.82	4.46	3.55	3.48	3.47
	Total Asset
Other Ra�o (%)	Total Underwri�ng to Quick Assets Ra�o	1.53	0.49	0.35	0.75	0.61	0.22
	Total Margin Loan Balance to Equity	51.40	58.11	45.84	37.58	44.88	45.37
	Ra�o
	Total Short Sales Amount to Equity	7.14	7.98	7.66	6.56	8.64	4.25
	Ra�o

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Individual Financial Analysis for the Past 5 Years

Unit: NT$ thousands

Item		2013	2014	2015	2016	2017	2018Q1
Financial	Debt Ra�o	56.93	59.24	62.60	67.94	66.27	64.15
Structure	Ra�o of Long-term
(%)	Capital to property and equipment	928.03	962.24	964.91	1,005.66	1,122.77	1,148.72
Solvency	Current Ra�o	149.17	143.93	137.43	130.02	134.28	136.55
(%)	Quick Ra�o	149.09	143.86	137.34	129.93	134.23	136.49
	Return on Total Assets	2.99	3.16	2.11	1.51	3.99	0.25
	Return on Stockholders’	6.19	6.97	4.18	3.61	10.81	0.44
	Equity (%)
Proftability Analysis	Pre-tax Income to Paid-in Capital (%)	11.09	13.36	8.09	6.71	20.20	0.88
	Proft Ra�o (%)	35.10	36.17	27.25	23.66	41.18	11.82
	Earnings Per Share (NT$)	1.00	1.16	0.70	0.59	1.88	0.08
	Cash Flow Ra�o (%)	-	1.08	8.51	-	6.27	-
Cash Flow	Cash Flow Adequacy	482.87	358.52	432.31	118.15	183.46	255.64
	Ra�o (%)
	Cash Reinvestment	-	-	9.33	-	12.08	-
	Ra�o (%)
	Debt to Equity	132.16	145.34	167.41	211.91	196.47	178.91
	Ra�o
	Ra�o of Property and Equipment to	5.53	5.06	4.70	3.86	3.61	3.73
	Total Asset
Other Ra�o	Total Underwri�ng	1.87	0.61	0.44	0.95	0.74	0.28
(%)	to Quick Assets Ra�o
	Total Margin Loan Balance to Equity	51.49	58.22	45.93	37.66	44.97	45.48
	Ra�o
	Total Short Sales
	Amount to Equity	7.15	8.00	7.68	6.57	8.66	4.26
	Ra�o

President Securities Corp. 2017 Annual Report

VI.Financial Information

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Audit Commi�ee’s Report for the Most Recent Year

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Audit Committee’s Review Report

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VII. Financial Status, Operating Results and Risk Management

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President Securities

Professional Leadership & Kind Service

59 President Securities Corp. 2017 Annual Report

VII. Financial Status, Operating Results

VII. Financial Status, Operating Results and Risk Management

and Risk Management

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Financial Status and Opera�on performance

Financial Status

Financial Status
			Unit: NT$ thousands
Item	2017	2016	Amount (%) Fluctua�on
Current Assets	81,561,564	81,275,723	285,841	0.35%
Non-Current Assets	4,750,130	4,780,473	(30,343)	(0.63%)
Total Assets	86,311,694	86,056,196	255,498	0.30%
Current Liabili�es	60,800,920	62,877,634	(2,076,714)	(3.30%)
Non-Current Liabili�es	75,812	48,933	26,879	54.93%
Total Liabili�es	60,876,732	62,926,567	(2,049,835)	(3.26%)
Capital Stock	13,904,281	13,356,658	547,623	4.10%
Capital Surplus	142,702	142,702	0	0.00%
Retained Earnings	11,397,045	9,432,286	1,964,759	20.83%
Other Equity	(58,374)	149,284	(207,658)	(139.10%)
A�ributable to Parent’s ownership interest	25,385,654	23,080,930	2,304,724	9.99%
Non-controlling interests	49,308	48,699	609	1.25%
Total Equity	25,434,962	23,129,629	2,305,333	9.97%

Analysis of Opera�ng Results

Unit: NT$ thousands

Item	2017	2016	Fluctua�on Amount (%)	Fluctua�on Amount (%)
Opera�ng Revenue	7,270,066	4,562,616	2,707,450	59.34%
Opera�ng Expenses	4,876,148	3,979,013	897,135	22.55%
Opera�ng Income	2,393,918	583,603	1,810,315	310.20%
Non-Opera�ng Income	450,055	353,908	96,147	27.17%
Income before Tax	2,843,973	937,511	1,906,462	203.35%
Income Tax Expense	219,316	104,469	114,847	109.93%
Net Income	2,624,657	833,042	1,791,615	215.07%
Other Comprehensive Income (a�er Tax)	(314,958)	(88,465)	(226,493)	256.03%
Total Comprehensive Income	2,309,699	744,577	1,565,122	210.20%
Net Income A�ributable to
Shareholders of the Parent	2,618,769	826,690	1,792,079	216.78%
Non-controlling Interests	5,888	6,352	(464)	(7.30%)
Comprehensive Income
A�ributable to Shareholders	2,304,724	737,775	1,566,949	212.39%
of the Parent
Non-controlling Interests	4,975	6.802	(1,827)	(26.86%)

Analysis of Cash Flow

Cash Flow Analysis for the Current Year (2017)

nalysis of Cash Flow	nalysis of Cash Flow	nalysis of Cash Flow	nalysis of Cash Flow	nalysis of Cash Flow	nalysis of Cash Flow
Cash Flow Analysis for the Current Year (2017) Unit: NT$ thousands
Cash and Cash Equivalents, Beginning of Year (1)	Net Cash Flow from Opera�ng Ac�vi�es (2)	Cash Ou�low (3)	Cash Surplus (Defcit) (1)+(2)-(3)	Leverage of Cash Defcit
				Investment Plans	Financing Plans
6,909,469 3,598,149 213,712 10,293,906 -52,472 -3,778,089

Item Year	2017	2016	Variance (%)
Cash Flow Ra�o (%) Cash Flow Adequacy Ra�o (%) Cash Reinvestment Ra�o (%)	5.99 - - 215.65 123.28 74.93% 14.01 - -

Cash Flow Analysis for the Coming Year (2018)


Cash Flow Analysis for the Coming Year (2018) Unit: NT$ thousands
Es�mated Cash and Cash Equivalents, Beginning of Year (1)	Es�mated Net Cash Flow from Opera�ng Ac�vi�es (2)	Es�mated Cash Ou�low (Infow) (3)	Cash Surplus (Defcit) (1)+(2)-(3)	Leverage of Cash Surplus (Defcit)
				Investment Plans	Financing Plans
6,463,345 1,530,896 3,761,013 4,233,228 - -

Long-term Investment Policy

In 2017, the company's domes�c reinvestment opera�ons generated healthy profits. Each subsidiary's opera�ons will s�ll be subject to strict risk control with �mely stop-loss and stop-gain orders, so as to reduce risk and maintain steady development.

Looking to the coming year, we expect regulators to again open up many new areas of business. We will expand into these new business areas, develop and promote new financial products. In par�cular, we are looking to Hong Kong and the PRC as key areas of expansion to bolster our presence in interna�onal financial services and our cross-strait business.

As for our present direct investment policy, we consider all areas of business currently permi�ed by Taiwan’s regulators and look for effec�ve cross-selling strategies and other possible synergies, with the overall aim of best leveraging all of the company’s resources.

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President Securities Corp. 2017 Annual Report

VII. Financial Status, Operating Results and Risk Management

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Related Risk Management System Architecture

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Risk Management Commi�ee

Established by the Board of Directors tasked with integra�ng all risk management opera�ons, with supervising and assis�ng all the various risk management and related opera�ons. The commi�ee is also tasked with se�ng the various risk authori�es, limits, and targets, for a centralized supervision of the status of all of the company’s risk management efforts.

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Board of Directors

The Board of Directors has established the Trading Business Risk Management Team and the Opera�ng Risk Management Team tasked with monitoring daily risk management opera�ons.

Audits the company’s risk management policy,supervises sales business strategies, approves all business proposals and trading permissions, and is ul�mately responsible for risk management.

Trading Business Risk Management Team is responsible for trading department risk management, for amendments to the business opera�onal risk regula�ons, for the construc�on of a back-office risk control system, for ensuring compliance with trading regula�ons, and for crea�ng trading business risk reports.

Opera�ng Risk Management Team is responsible for the dra�ing of risk policies and regula�ons, for monitoring market and credit risks, for monitoring liquidity risks, for compiling data on opera�onal risk control and management, for construc�ng and maintaining the risk management system, for implementa�on of risk management systems, and for ensuring company-wide regulatory compliance.

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Sets opera�ons risk controls, sets the standards for risk control systems, puts in place internal audi�ng controls, and implements daily check rou�nes.

President

Supervisors the daily implementa�on of all of the company’s risk management opera�ons and authorizes any excep�ons to the risk management protocols.

Finance Department

Monitors capital adequacy rates and liquidity risks, and analyzes the company’s asset/liability structure and other key financial ra�os.

Assets & Liabili�es Management Commi�ee

Sales Department

Based on the company’s risk management policies and regula�ons sets risk management guidelines for various businesses, and produces a report on abnormal risk items for the General Manager Office.

Controls the company’s overall asset structure, sets limits for different businesses, collects and analyzes domes�c and interna�onal interest rates, exchange rates, and economic changes.

Compliance Division

Se�lement & Clearing Department

Compliance Division and Legal Ma�ers Department implements legal risk controls and ensures that all businesses and risk management opera�ons are in compliance with relevant laws and regula�ons.

Risk Management Policies

In order to ensure that we have a solid an effec�ve 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 effec�vely raise profits, create value for the company, and achieve our return on asset targets.

By construc�ng 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 respec�ve responsibili�es, 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, opera�onal risk, legal risk, and model risk.

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Analysis of Risk Management

Risk Evalua�on Standards

The company has set risk management principles. In order to ensure that all of our organiza�ons businesses adhere to our opera�ng policies, opera�ng goals, and capital levels, we must set suitability evalua�on policies that can react to changes in our business and in the market:

Market Risk Evalua�on

We use RiskMetrics market risk management system to manage our company’s exposure to market risk. In addi�on to producing daily risk value tables, we perform simula�on analysis and historical analysis to supplement missing risk values.

We evaluate the completeness of the evalua�on models on different business areas, and evaluate the assump�ons, parameters, and data for various product models, and then test if the models for the various products are reasonable.

and regularly perform Back Tes�ng to ensure the reasonableness of the models used.

Opera�onal Risk Evalua�on

Opera�onal risks refer to risks of damage caused by internal opera�ons, inappropriate ac�ons or errors of personnel or systems, or external incidents. The defini�on includes legal risks but does not include risks in strategies and reputa�on.

We create opera�ons risk policies handbooks that encompass each level of opera�ons.

Ensure the appropriate measurement, disclosure, and control of the opera�ng quality based on risk assessment reports and audi�ng reports.

Credit Risk Evalua�on

Our company undergoes credit ra�ng evalua�ons from Moody’s, Standard & Poor’s, Fitch, and Taiwan Ra�ngs Corp.

Trading counter-partner credit risk: We 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.

Issuer’s Credit Risk: We use KMV models to perform an internal evalua�on, 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 evalua�on, Z-Score model, to control the external credit risk gaps from issuers and augment.

President Securities Corp. 2017 Annual Report

VII. Financial Status, Operating Results and Risk Management

VII. Financial Status, Operating Results

and Risk Management

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Risk Factors and Corresponding Responses

Risk Factors

Response:

Management Crisis Risk market changes, a lack of access to capital, or significant losses from direct investments, which affect a company’s opera�ons and cause losses.

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 opera�on of the company.

We will a�empt to lessen the impact of such market risks through prudent business analysis, product analysis, and process analysis, so as to clearly iden�fy sources of market risk. Based on this, we then set effec�ve management controls; we monitor investment posi�on risk levels, risk structure, and risk changes to ensure that they are all in line with our forecasts.

Market risk refers to drama�c changes in pricing or vola�lity in interest rates, equi�es, or foreign exchange rate that can result in serious losses to open posi�ons.

conduct extensive credit risk evalua�ons prior to a deal being executed and then conduct repeated evalua�ons a�er the deal has been executed. Based on these evalua�ons and a maximum credit exposure scenario for the counterparty in ques�on, we set credit risk limits for that counterparty. In evalua�ng the risk to the underwriter for debt-related securi�es, we look not only at the TCRI ra�ng, but also at default rates based on KMV models.

Credit risk refers to the exposure for underwriters for the terms and condi�ons of the securi�es that underwrite and for losses that may result from a counterparty being unable to fulfill its obliga�ons to the security.

In order to reduce the probability of such opera�on risk occurring, we have created an opera�ng manual that addresses every level of our opera�ons, 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 opera�ng quality is properly balanced, controlled, and disclosed.

Opera�onal 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.

Legal/Regulatory risk refers risk related to non-compliance with laws and regula�ons governing our investment strategies and our business opera�ons, and any resul�ng correc�ve orders or penal�es from relevant authori�es, or any civil or criminal ac�ons taken against us. It also refers to risk related to our inability to perform our obliga�ons under agreements that we have entered into with other par�es.

In order to reduce our exposure to legal/regulatory risks, we have created a Compliance Division and Legal Ma�ers Department. Compliance Division ensures that all businesses and risk management opera�ons are in compliance with relevant laws and regula�ons.

Legal Ma�ers Department implements legal risk controls.

centralized risk management standards that take into considera�on all departments and that set posi�on limits for each department. We also have a team that performs daily forecasts of capital requirements based on the needs of all company guarantees and service loans, and then monitors daily capital adjustments accordingly. We also produce a monthly “Capital Liquidity Risk Simula�on Analysis Table” that analyzes mul�ple scenarios, forecasts the poten�al liquidity risks for those scenarios, and es�mates the capital levels that each such scenario would require.

Liquidity risk refers to posi�on liquidity risks and capital liquidity risks. Some�mes losses can be suffered as a result of illiquid markets that make it difficult to open or close a posi�on at normal market prices requiring that a posi�on be either bought at a premium or sold at a discount. Capital liquidity risks result when posi�ons are increased beyond planned levels, leaving the company with insufficient funds to meet se�lement requirements for a posi�on.

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 valida�ng models, for managing variables, and for discon�nuing the use of problem models.

Model risk refers to poten�al situa�ons where market values and other variables are beyond normal and predictable condi�ons and therefore exceed the ability of the model to handle.

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An Evalua�on of Key Risks

company and our strategies for dealing with these concerns.

income-related usinesses. In addi�on to conduc�ng our own thorough research on domes�c and foreign interest rate trends, we u�lize various interest rate deriva�ve tools as well a risk control system that manages our interest rate-related risks, that creates an effec�ve 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 u�lize interest rate hedging and other capital raising avenues as ways to control our company’s financing costs.

Interest Rate

Bond and Interest Deriva�ve Product Business:

Borrowing:

The amount of our company’s major interest products At March 31st, 2018, and the likely loss of NT$180,463 thousand due to the 1% interest rate change (as show in the following table).

Our company can adjust methods, condi�ons and terms of borrowing according to the likely interest changing trend. We can also avert risks through the product of interest exchange etc. Our total debt amount of short-term borrowing and payable short-term bill totals NT$10.75 billion on the end of 2018 Q1. They are both borrowing with interest rate risks. With every 1bp change in market interest rate, our company has to pay NT$1.08 million more interest every year.

Item	Amount	Proft/loss based on 1% Interest rate change Unit: NT$ thousands
Government bond	2,596,232	-2,539
Financial bond	1,509,365	-1,555
Interna�onal bond Foreign bond	2,797,750 12,355,448	-30,212 -146,157
Sum	19,258,795	-180,463

Countermeasures:

Looking at a poten�al rise in interest rates, we will keep a close watch on the markets and on business demands and will make adjustments to our posi�ons accordingly. In a resolu�on adopted by the Taiwan Central Bank in March of 2018, With uncertain�es in the global economic outlook for 2018, the moderate pace of domes�c economic recovery and infla�onary pressure, combined with future infla�on expecta�ons, �ghtening of financial condi�ons, and real interest rate levels that are considered to be appropriate -- the interest rate for current policies (annualized rediscount rate, secured financing interest rate, and short-term financing interest rate are 1.375%, 1.75%, and 3.625% respec�vely) is helpful for stablizing prices and market order, and triggering economic growth.

Countermeasures:

Our Company has risk management rules and opera�onal procedures on government bond, financial bond, foreign/interna�onal bond. Our company has put the interest risk under good control by pre-purchase assessment and risk control a�erward.

It is expected that interest rates will remain stable over the coming year and that our Company’s risks related to the changes of the rates will remain low.

The company's principal business targets and place of business are domes�c; hence the impact of currency fluctua�ons is minimal. Poten�al 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 opera�ons, 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.

Exchange Rate

At March 31st, 2018, the company's main exchange rate product posi�ons, and 1% exchange rates fuctua�on may result in a loss of NT$164,723 thousand (as show in the following table).	Item	Posi�on	Loss resulted by 1% exchange rates fuctua�on Unit: NT$ thousands
	Foreign Stock	1,277,968	-26,797
Countermeasures: Our company’s transac�ons of foreign stock, interna�onal bond,	Interna�onal Bond	2,797,750	-16,534
and foreign bond have risk management and standard opera�ng	Foreign Bond	12,355,448	-121,392
process. The business above was lower the risk of exchange rate by trading foreign exchange swap.	Total	16,431,166	-164,723

profits.

President Securities Corp. 2017 Annual Report

VII. Financial Status, Operating Results and Risk Management

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Recent High-Risk or High-Leverage Investments, Loans to Third Par�es, Pledges Given for Third Par�es, Deriva�ve Products Trading Policy and Profitability and Losses, Reasons for Losses and Strategies for Correc�ng Such Losses Going Forward.

In 2017 Q4, we did not engage in any high-risk or highly-leveraged investments, did not provide any loans to third par�es, and did not provide any pledge for any third par�es.

We only trade those deriva�ve products which have been approved by the relevant authori�es and which are permi�ed by our company’s Ar�cles of Incorpora�on. We have also created and follow a “Deriva�ves 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-be�er products and trading strategies, we have assembled a professional financial engineering team, which brings together experts from finance, sta�s�cs, mathema�cs, and informa�on technology, to create trading and valua�on so�ware 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 informa�on on the status of our opera�ons and on our R&D efforts.

The Company's wealth management trust ac�vi�es have grown significantly in both the number of customers and managed assets. Under the exis�ng account system structure, we plan to complete the establishment of online transac�on approvals and authorized payment deduc�ons for funds using the online pla�orm in 2018 to provide customers with a more convenient transac�on pla�orm and a more extensive product line. We also seek to op�mize the customer rela�onship management system (CRMS) to increase the trust of our customers.

Changes and Measures for Dealing with These Changes.

environment, the Company shall create a diversified, fast, stable, and secure electronic ordering pla�orm a top development priority. In the pursuit of this goal, the Company shall con�nue to promote system upgrades and development to steadily increase the ra�o of the Company's electronic orders in the coming years.

innova�on, the Company is planning to upgrade our internet pla�orm from PC-based so�ware systems to mobile device pla�orms; and thus provide our clients an integrated APP investment service pla�orm. Via the upgraded system, we can provide our employee a more instant and interac�ve customer service pla�orm, and will bring more revenue and new business opportuni�es.

In addi�on, in response to the FSC's requirements for strengthening informa�on security in the financial market, the Company will con�nue to use exis�ng informa�on security management regula�ons (ISO-27001), internal audi�ng and periodic reviews by third-party cer�fica�on ins�tu�ons to enhance the management system. The Company shall also invest specific amounts in the annual budget on the enhancement of the protec�on of the informa�on security framework. The Company shall also invest specific amounts in the annual budget on the enhancement of the protec�on of the informa�on security framework.

In 2017, the Company has arranged third par�es to conduct tests on the informa�on security opera�ons center (SOC), dual ISP backup architecture, and periodic joint preven�on tests. The Company also seeks to enhance the stability of the opera�ons and maintenance of the computer center, establish ISP informa�on security defense mechanisms, and update informa�on security equipment in accordance with annual project plans. The goal is to increase the stability of the informa�on system and prevent risks in external informa�on security a�acks in order to achieve the goal of fair transac�ons with investors and create wealth with customers.

Measures for Dealing with that Damage.

Our company has a core philosophy of “Good Quality, Good Credibility, Good Service and Fair Prices”. This is combined with the concept of “Professional Leadership, Kind Service”. President has been a long-standing supporter of important social charitable ac�vi�es and devoted to fulfill corporate social responsibility. Since the date of the establishment, President has no nega�ve corporate image issues to report.

Li�ga�ons or non-conten�ous ma�ers.

Major lawsuits, non-conten�ous ma�ers or administra�ve procedures with a determined court ruling or that are s�ll pending, that may significantly affect the shareholders’ equity or the stock price of the Company (over the previous two years and up to the �me that this annual report was published): The loss had already been designated for li�ga�on. The conclusion of judgement will not cause significant effect on shareholder rights and the company’s share price.

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 li�ga�on, non-li�ga�on, or administra�ve ac�on over the previous two years up to the �me that this annual report was published, the poten�al effects on shareholder rights and on thecompany’s share price, the key facts of the dispute, dollar values involved, the date that the li�ga�on was ini�ated, the key par�es involved, and the current status of said li�ga�on(s): None.

Any company director, supervisor, manager, responsible person, or company shareholder holding more than 10% of the company’s shares that has been found in viola�on of Ar�cle 157 of the Securi�es and Exchange Act over the previous two-year period and up to the �me that this annual report was published, and the current status of any related ac�on taken or being taken against that person: None.

Taiwan and Abroad and Measure for Dealing with These Issues.

changes both inside Taiwan and abroad and, to that end, rou�nely enlists the help of professional legal and accoun�ng firms to assist in evalua�ng these changes, to help create effec�ve 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 effec�ve in adjus�ng to policy and legal changes both within and beyond Taiwan and, thus, our overall solid financial health has seen li�le impact from such changes.

The FSC issued the Jin-Guan-Zheng-Tou No. 1060005227 Order on April 20, 2017 to allow financial ins�tu�ons to apply for tax abatement for research and development ac�vi�es and for an applica�on of deferred taxa�on for shares allocated as remunera�on for employees. This measure encourages financial professionals to conduct research and development of patents and encourages financial innova�on. It also provides companies with tax abatement for investment in research and development. The Company shall make applica�ons in the future to meet these policy requirements.

The FSC issued the Jin-Guan-Zheng-Quan No. 1060001736 Order on May 18, 2017 to allow securi�es dealers to lease their places of opera�ons to other businesses provided there are obvious signs of segmenta�on. The Company shall make proper arrangements a�er planning its overall brokerage business strategy.

The FSC issued the Jin-Guan-Zheng-Quan No. 10600272096 Order on August 18, 2017 to require offshore securi�es units (OSUs) to verify customer iden�ty in accordance with the Money Laundering Control Act and related domes�c regula�ons and to integrate such procedures into internal control and audi�ng items. It also allowed OSU branches to conduct verifica�on of customer iden�ty for foreign customers with the assistance of third-party foreign ins�tu�ons or professionals. The purpose of these regula�ons is to strengthen the appropriateness and legi�macy of obtaining sufficient informa�on from foreign customers and use objec�ve professional third-party ins�tu�ons to verify the validity of foreign companies established by customers u�lizing verifica�on of this important informa�on.

The Jin-Guan-Zheng-Jiao No. 1050046067 Order extended the security lending transac�on �me star�ng January 9, 2017. The Jin-Guan-Zheng-Jiao No. 1060004431 Order amended the restric�ons on the total shor�ng of stocks star�ng February 23, 2017 to allow for the increase of the maximum ra�o of security lending proxy quan��es to 30% of the average transac�on volume of the marketable securi�es from the previous 30 business days. The Jin-Guan-Zheng- Quan No. 1060004899 Order allowed offshore foreign ins�tu�onal investors to act as lenders in the security lending system star�ng July 31, 2017. It canceled the QFII restric�ons for the par�cipants of the security lending system and relaxed restric�ons for renewed lendings. The aforemen�oned measures will help the Company expand its securi�es lending business.

The Ministry of Finance, pursuant to FSC policies, added Ar�cle 2-2 to the Securi�es Transac�on Tax Act and reduced the tax rate for day trade transac�ons by way of the Order of the President under Hua-Zong-Yi-Yi No. 10600050391 issued April 26, 2017. The measure is implemented for one year from April 28, 2017. This means that when securi�es dealers are commissioned to purchase the same type and same quan�ty of stocks listed on the Stock Exchange or OTC and sell them on the same business day in the same account, each securi�es transac�on shall be imposed with a securi�es transac�on tax of 1.5 thousandths of the transac�on strike price. This measure has effec�vely increased market transac�on volume and liquidity. It not only encourages investors to invest in the market, but also helps the capital

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markets raise funds. It revitalizes the securi�es market and increased the momentum of the Taiwan Stock Exchange.

The Taiwan Stock Exchange issued the Tai-Zheng-Fu No. 1060015757 Order announcement on August 24, 2017 to allow securi�es dealers or securi�es transac�on brokers to establish centralized hot-line centers for different regions. Centralized hot-line centers may be established in special transac�on rooms that accept non-face-to-face proxies. If securi�es dealers establish centralized hot-line centers whose business ac�vi�es do not accept face-to-face proxies, they do not have to establish a branch for opera�ons or transac�on rooms. The Company shall make proper arrangements a�er appropriate analyses and evalua�on.

The Taiwan Stock Exchange issued the Tai-Zheng-Zuo No. 1060702117 Order announcement on October 5, 2017 to allow securi�es dealers to apply for co-loca�on services. The service effec�vely increased the speed of the Company's proxy orders and market informa�on. The connec�on system no longer passes through the wide area network (WAN), but instead uses a direct connec�on in the same server room. In addi�on to increasing the network transmission efficiency, it also greatly improves the security and stability of the work environment. The Company is a “Stage One” user.

The Ministry of Jus�ce issued the "Terrorism Financing Control Act" in the Hua-Zong-1-Yi No. 10500080971 Presiden�al Order on July 27, 2016 and amended the "Money Laundering Control Act" on December 28, 2016 (enters into force on June 1, 2017). On June 28, 2017, the FSC issued the "Direc�ons Governing An�-Money Laundering and Countering Terrorism Financing of Securi�es and Futures Sector." The regula�ons require securi�es firms to enhance Know Your Client (KYC) measures and evaluate and classify customers based on their risk a�ributes to build monitoring mechanisms for anomalies in day-to-day transac�ons. If suspected money laundering transac�ons are discovered, the competent authori�es shall be no�fied immediately. In addi�on, sufficient numbers of an�-money laundering supervision managers shall be established in all business units. The FSC issued the Jin-Guan-Zheng-Quan No. 1060045983 Order on December 5, 2017 to relax the total external debt of securi�es dealers from four �mes to six �mes its net value. This amendment would increase the flexibility of the Company's financial opera�ons and efficiency of capital use and help respond to requirements for the future development of new businesses.

The Taiwan Securi�es Associa�on issued the Zhong-Zheng-Shang-Qi No. 1060005829 Le�er on October 17, 2017 to amend the "DSU Accoun�ng System Template" and "OSU Accoun�ng System Template." The Company shall process these template revisions in accordance with instruc�ons in the Le�er.

Other Important Risks:

In response to the Personal Informa�on Protec�on Act, our company will con�nue to enforce the consciousness of the importance and the legal risk of personal informa�on processing, money laundry preven�ng, and financial consumer protec�on.

President Securities Corp. 2017 Annual Report

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VIII. Other Disclosures

President Securities

Professional Leadership & Kind Service

VIII. Other Disclosures

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Other Disclosures

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PRESIDENT SECURITIES CORPORATION
Shareholding Shareholding Shareholding Shareholding Shareholding Shareholding
42.46% 100% 100% 100% 100% 96.69%
President PSC Venture President
President
Insurance Capital Capital President
Securities (BVI)
Agency Investment Co., Ltd. Management Futures Corp.
Co., Ltd. Ltd. Corp.
Shareholding Shareholding Shareholding Shareholding Shareholding
0.03% 5.19% 94.81% 100% 100%
President
President Securities
Uni-President Asset President Securities Wealth
Nominee
Manangement Corp. (HK) Ltd. Management
(HK) Ltd.
(HK) Ltd.
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As of April 30, 2018 Unit: NT$ thousands

Company	Established Date	Address	Currency	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 174,000 Securi�es Investment Consul�ng
President Securi�es (HK) Ltd. 1994.07.26 Unit 2603-6,26/F., Infnitus Plaza ,199 Des Voeux Road, Central , Hong Kong HKD 192,600 Securi�es proprietary, brokerage, underwri�ng ,and consul�ng
President Securi�es (BVI) Ltd. 1998.02.26 Unit 2603-6,26/F., Infnitus Plaza ,199 Des Voeux Road, Central , Hong Kong USD 67,746 Securi�es Investment and holding company
President Securi�es Nominee (HK) Ltd. 1999.08.06 Unit 2603-6,26/F.,Infnitus Plaza ,199 Des Voeux Road, Central , Hong Kong HKD 1,000 Nominee Service
2002.03.31 Unit 2603-6,26/F., Infnitus Plaza ,199 Des Voeux Road, Central , Hong Kong HKD 23,400 Wealth Management President Wealth Management (HK) Ltd.
1992.09.03 8F.,No.8, Dongxing Rd., Taipei City NTD 351,000 Investment Trust Uni-President Asset Management Corp.
2008.04.29 13F.,No.8, Dongxing Rd., Taipei City NTD 10,000 Insurance Agent (Note) President Insurance Agency Co., Ltd.
2013.10.29 2F.,No.8, Dongxing Rd., Taipei City NTD 300,000 Consulta�on of investment management and venture capital; other unprohibited or unrestricted businesses beyond the permit PSC Venture Capital Investment Co.,Ltd.

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Opera�onal Highlights of Afliated Companies	Opera�onal Highlights of Afliated Companies	Opera�onal Highlights of Afliated Companies	Opera�onal Highlights of Afliated Companies	Opera�onal Highlights of Afliated Companies	Opera�onal Highlights of Afliated Companies	Opera�onal Highlights of Afliated Companies	Opera�onal Highlights of Afliated Companies	Opera�onal Highlights of Afliated Companies	Opera�onal Highlights of Afliated Companies
As of December 31, 2017 Unit: NT$ thousands
Company	Currency	Capital	Total Assets	Total Liabili�es	Total Equity	Opera�ng Revenue	Opera�ng Income	Net Income (Loss)	EPS
President Futures Corp. 660,000 13,113,202 11,630,487 1,482,715 729,986 39,335 178,051 2.70 NTD
President Capital Management Corp. 174,000 202,815 5,917 196,898 41,629 129 973 0.06 NTD
351,000 907,798 162,269 745,529 Uni-President Asset Management Corp. 679,240 222,479 190,717 5.43 NTD
10,000 42,981 10,986 31,995 President Insurance Agency Co., Ltd. 65,399 16,105 15,742 15.74 NTD
300,000 248,254 478 247,776 (55,495) (58,620) (56,382) (1.88) PSC Venture Capital Investment Co.,Ltd. NTD
192,600 602,609 254,494 348,115 President Securi�es (HK) Ltd. 57,914 11,125 19,651 0.10 HKD
President Securi�es Nominee (HK) Ltd. 1,000 530 17 513 0 (25) (23) (0.02) HKD
President Wealth Management (HK) Ltd. 23,400 14,855 19 14,835 0 (40) 31 0.001 HKD
President Securi�es (BVI) Ltd. 67,746 73,164 4 73,161 0 (68) 3,571 0.053 USD

Notes：Foreign exchange rates: USD/NTD ( end of 2017 )=29.7600 USD/NTD ( 2017 average )=30.4099 HKD/NTD ( end of 2017 )=3.8070 HKD/NTD ( 2017 average )=3.9015

KPI Performance Indicator

Capital Adequacy Ra�o

Within the securi�es industry, a company’s capital adequacy rate is viewed as a key performance indicator. Many BIS regula�ons require that a securi�es firm has a minimum capital adequacy rate of 200% in order to be permi�ed to operate in many key business areas. As such, this level can be seen as an important benchmark in evalua�ng a securi�es firm’s business performance and risk management measures. As of March of 2018, our capital adequacy rate stood at 447%, well above this key 200% level.

Market Share Rate

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

Our company’s Brokerage market share was 3.22% in 2017, ranked 8th among top 10 compe�tors. Average single branch market share was 0.09%, ranked the 4th among top 10 compe�tors. Compared with other securi�es firms, our performance was more efficient and compe��ve.

Currently our company con�nues to build comprehensive and personalized informa�on pla�orm to improve stability of electronic transac�ons and orders, train sales with mul�ple financial ability, hoping to explore interna�onal market, create more profit for customers and company.

Note: President Personal Insurance Agency Co., Ltd. was merged by President Insurance Agency Co., Ltd. on July 1, 2016. A�er the merger, President Insurance Agency provides both property and life insurance services.

President Securities Corp. 2017 Annual Report

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Consolidated Financial Statements

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President
Securities
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Professional Leadership & Kind Service

PRESIDENT SECURITIES CORPORATION AND

SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT ACCOUNTANTS

December 31, 2017 and 2016

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.

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR17003445

To the Board of Directors and Shareholders of President Securities Corporation

Opinion

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

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

Basis for opinion

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

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Key audit matters

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

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

Impairment assessment of investments accounted for under equity method

Description

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

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

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

How our audit addressed the matter

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

1.Obtained the impairment assessment report prepared by an external expert who was commissioned by the management, and reviewed results of financial forecast in the past to assess its ability of execution;
2.Assessed the reasonableness of expected future cash flow, discount rate and other significant

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assumptions applied in the cash flow model; and

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

Impairment assessment of goodwill

Description

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

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

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

How our audit addressed the matter

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

1.Obtained the impairment assessment report prepared by an external expert who was commissioned by the management;
2.Assessed the reasonableness of expected future cash flow, discount rate and other significant assumptions applied in the cash flow model; and
3.Inspected valuation model parameters, formula setting and the accuracy of calculation.

Other matter – Parent company only financial reports

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

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

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

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

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

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

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

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

1.Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks,

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and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2.Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of President Securities Corporation and its subsidiaries’s internal control.
3.Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
4.Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the President Securities Corporation and its subsidiaries’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause President Securities Corporation and its subsidiaries to cease to continue as a going concern.
5.Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
6.Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within President Securities Corporation and its subsidiaries to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all

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relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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

Hsiao, Chin-Mu Chang, Ming-Hui For and on behalf of PricewaterhouseCoopers, Taiwan March 26, 2018

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

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

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PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Assets	December 31, 2017 AMOUNT % `$` `6,463,345` `8` `38,692,385` `45` `1,044,031` `1` `-` `-` `11,415,870` `13` `79,350` `-` `67,160` `-` `9,918,089` `11` `88,318` `-` `745,882` `1` `1,471` `-` `11,154,566` `13` `30,749` `-` `66,900` `-` `584` `-` `1,792,864` `2` `81,561,564` `94` `50,342` `-` `40,173` `-` `-` `-` `496,497` `1` `2,434,389` `3` `276,803` `-` `112,096` `-` `140,740` `-` `1,199,090` `2` `4,750,130` `6` `$` `86,311,694` `100`	December 31, 2016	December 31, 2016
	AMOUNT `$` `6,463,345` `38,692,385` `1,044,031` `-` `11,415,870` `79,350` `67,160` `9,918,089` `88,318` `745,882` `1,471` `11,154,566` `30,749` `66,900` `584` `1,792,864` `81,561,564` `50,342` `40,173` `-` `496,497` `2,434,389` `276,803` `112,096` `140,740` `1,199,090` `4,750,130` `$` `86,311,694`	AMOUNT `$` `6,909,469` `41,521,141` `1,332,776` `2,093,498` `8,692,164` `18,694` `33,381` `12,100,445` `157,775` `261,136` `1,080` `6,104,874` `44,517` `64,190` `683` `1,939,900` `81,275,723` `50,621` `41,581` `74,401` `440,676` `2,467,163` `278,903` `129,771` `64,681` `1,232,676` `4,780,473` `$` `86,056,196`	%
110000 Current assets 111100 Cash and cash equivalents 112000 Financial assets at fair value through profit or loss - current 113400 Available-for-sale financial assets - current 114010 Bonds purchased under resale agreements 114030 Margin loans receivable 114040 Refinancing security deposits 114050 Receivables from refinance guaranty 114070 Customer margin account 114090 Receivables from security lending 114100 Security lending deposits 114110 Notes receivable 114130 Accounts receivable 114150 Prepayments 114170 Other receivables 114600 Current tax assets 119000 Other current assets 110000 Total current assets 120000 Noncurrent assets 122000 Financial assets at fair value through profit or loss - noncurrent 123100 Financial assets at cost - noncurrent 123400 Available-for-sale financial assets - noncurrent 124100 Investments accounted for under equity method 125000 Property and equipment, net 126000 Investment property, net 127000 Intangible assets 128000 Deferred tax assets 129000 Other assets - noncurrent 120000 Total noncurrent assets 906001 Total Assets			`8` `48` `2` `3` `10` `-` `-` `14` `-` `-` `-` `7` `-` `-` `-` `2`
			`94`
			`-` `-` `-` `1` `3` `-` `-` `-` `2`
			`6`
			`100`

(Continued)

~81~

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	December 31, 2016	December 31, 2016
	AMOUNT `$` `7,180,550` `6,298,316` `2,419,106` `23,085,262` `1,286,589` `1,516,795` `59,196` `12,090,637` `6,305,245` `1,417` `413,491` `742,505` `1,392,297` `80,691` `5,537` `62,877,634` `35,823` `13,110` `48,933` `62,926,567` `13,356,658` `142,702` `2,423,914` `6,209,865` `798,507` `149,284` `23,080,930` `48,699` `23,129,629` `$` `86,056,196`	%
210000 Current liabilities 211100 Short-term loans 211200 Commercial papers payable 212000 Financial liabilities at fair value through profit or loss - current 214010 Bonds sold under repurchase agreements 214040 Deposits on short sales 214050 Short sale proceeds payable 214070 Guarantee deposit received on borrowed securities 214080 Futures traders' equity 214130 Accounts payable 214150 Advance receipts 214160 Collections on behalf of third parties 214170 Other payables 214200 Other financial liabilities - current 214600 Current tax liability 219000 Other current liabilities 210000 Total current liabilities 220000 Noncurrent liabilities 228000 Deferred tax liability 229000 Other liabilities-noncurrent 220000 Total noncurrent liabilities 906003 Total Liabilities 300000 Equity attributable to owners of the parent company 301000 Capital 301010 Common stock 302000 Capital reserve 304000 Retained earnings 304010 Legal reserve 304020 Special reserve 304040 Unappropriated earnings 305000 Other equity interest 300000 Total 306000 Non-controlling interests 906004 Total Equity 906002 Total liabilities and equity		`8` `7` `3` `27` `2` `2` `-` `14` `7` `-` `-` `1` `2` `-` `-`
		`73`
		`-` `-`
		`-`
		`73`
		`16` `-` `3` `7` `1` `-`
		`27`
		`-`
		`27`
		`100`

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

~82~

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

(Expressed in thousands of New Taiwan dollars, except earnings per share amounts)

Items Year ended December 31
2017
2016
Notes
AMOUNT
%
AMOUNT
%
6(29)
$
2,333,171
32
$
1,779,466
39
6(30)
56,114
1
46,521
1
16,233
-
14,286
-
6(31)
2,938,178
40
102,203
2
77,280
1
71,080
2
6(32)
1,471,954
20
1,248,274
27
232,339
3
428,497
9

6(33)
329,459
5 (
102,873) (
2 )
6(34)
(
102,116 ) (
1)
22,947
-
6(35)
2,975
-
1,986
-
6(36)
305,912
4
486,183
11
6(37)
(
142,478 ) (
2)
208,150
5
6(38)
(
248,955 ) (
3)
255,896
6
7,270,066
100
4,562,616
100
6(39)
(
392,276 ) (
5) (
316,519) (
7 )
6(40)
(
395,054 ) (
5) (
226,225) (
5 )
(
88,968 ) (
1) (
108,328) (
2 )
(
108,737 ) (
2) (
115,828) (
3 )
(
36 )
- (
141)
-
6(41)
(
2,309,829 ) (
32) (
1,800,920) (
39 )
6(42)
(
106,949 ) (
2) (
120,542) (
3 )
6(43)
(
1,474,299 ) (
20) (
1,290,510) (
28 )
(
4,876,148 ) (
67) (
3,979,013) (
87 )

400000 Revenues
401000
Securities brokerage fees
404000
Underwriting fees
406000
Net income of wealth
management
410000
Gains on trading of securities
421100
Stock custodian income
421200
Interest income
421300
Dividend income
421500
Gains (losses) on valuation of
trading securities
421600
(Losses) gains on short
covering and trading
securities - RS financing
covering
421610
Gains on valuation of
borrowed securities and
bonds with resale agreements
422200
Gain on warrants issuance
424400
(Losses) gains on derivative
financial instruments
428000
Other operating (losses)
income
Total revenues
500000 Expenses
501000/
502000/
503000
Handling charges
521200
Interest expenses
524100
Futures commission expense
524300
Clearing charges
528000
Other operating costs
531000
Employee benefits
532000
Depreciation and
amortization
533000
Other operating expenses
Total expenditures and
expenses

Items	Year ended December 31 2017 2016 Notes AMOUNT % AMOUNT % 6(29) `$` `2,333,171` `32` `$` `1,779,466` `39` 6(30) `56,114` `1` `46,521` `1` `16,233` `-` `14,286` `-` 6(31) `2,938,178` `40` `102,203` `2` `77,280` `1` `71,080` `2` 6(32) `1,471,954` `20` `1,248,274` `27` `232,339` `3` `428,497` `9` 6(33) `329,459` `5 (` `102,873) (` `2 )` 6(34) `(` `102,116 ) (` `1)` `22,947` `-` 6(35) `2,975` `-` `1,986` `-` 6(36) `305,912` `4` `486,183` `11` 6(37) `(` `142,478 ) (` `2)` `208,150` `5` 6(38) `(` `248,955 ) (` `3)` `255,896` `6` `7,270,066` `100` `4,562,616` `100` 6(39) `(` `392,276 ) (` `5) (` `316,519) (` `7 )` 6(40) `(` `395,054 ) (` `5) (` `226,225) (` `5 )` `(` `88,968 ) (` `1) (` `108,328) (` `2 )` `(` `108,737 ) (` `2) (` `115,828) (` `3 )` `(` `36 )` `- (` `141)` `-` 6(41) `(` `2,309,829 ) (` `32) (` `1,800,920) (` `39 )` 6(42) `(` `106,949 ) (` `2) (` `120,542) (` `3 )` 6(43) `(` `1,474,299 ) (` `20) (` `1,290,510) (` `28 )` `(` `4,876,148 ) (` `67) (` `3,979,013) (` `87 )`
400000 Revenues 401000 Securities brokerage fees 404000 Underwriting fees 406000 Net income of wealth management 410000 Gains on trading of securities 421100 Stock custodian income 421200 Interest income 421300 Dividend income 421500 Gains (losses) on valuation of trading securities 421600 (Losses) gains on short covering and trading securities - RS financing covering 421610 Gains on valuation of borrowed securities and bonds with resale agreements 422200 Gain on warrants issuance 424400 (Losses) gains on derivative financial instruments 428000 Other operating (losses) income Total revenues 500000 Expenses 501000/ 502000/ 503000 Handling charges 521200 Interest expenses 524100 Futures commission expense 524300 Clearing charges 528000 Other operating costs 531000 Employee benefits 532000 Depreciation and amortization 533000 Other operating expenses Total expenditures and expenses

(Continued)

~83~

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

(Expressed in thousands of New Taiwan dollars, except earnings per share amounts)

Items Year ended December 31
2017
2016
Notes
AMOUNT
%
AMOUNT
%
$
2,393,918
33
$
583,603
13
6(13)
79,787
1
64,393
1
6(44)
370,268
5
289,515
6
2,843,973
39
937,511
20
6(45)
(
219,316 ) (
3) (
104,469) (
2 )
$
2,624,657
36
$
833,042
18
($
128,158 ) (
2) ( $
48,693) (
1 )
29
-
3,187
-
21,787
1
8,278
-
(
213,712 ) (
3) (
46,151) (
1 )
5,096
- (
5,086)
-
(
314,958 ) (
4) (
88,465) (
2 )
$
2,309,699
32
$
744,577
16
$
2,618,769
36
$
826,690
18
$
5,888
-
$
6,352
-
$
2,304,724
32
$
737,775
16
$
4,975
-
$
6,802
-
6(46)
$
1.88
$
0.59
$
1.88
$
0.59

Operating profit
601000
Share of the profit or loss of
associates and joint ventures
accounted for under the
equity method
602000
Other gains and losses
902001 Profit before tax
701000
Income tax expense
902005 Net income
Other comprehensive income
Components of other
comprehensive income that
will not be reclassified to
profit or loss
805510
Remeasurements of defined
benefit plan
805550
Other comprehensive gain of
associates and joint ventures
accounted for under equity
method
805599
Income tax benefit relating to
components of other
comprehensive income
Items may be reclassified to
profit of loss subsequently
805610
Translation loss on the
financial statements of
foreign operating entities
805620
Unrealized gain (loss) on
financial instruments
Current other
comprehensive income
(post-tax)
902006 Total current comprehensive
income
Income attributable to:
913100
Parent company
913200
Non-controlling interests
Current comprehensive
income attributable to:
914100
Parent company
914200
Non-controlling interests
Earnings per share
975000
Basic earnings per share (in
dollars)
985000
Diluted earnings per share
(in dollars)

Items	Year ended December 31 2017 2016 Notes AMOUNT % AMOUNT % `$` `2,393,918` `33` `$` `583,603` `13` 6(13) `79,787` `1` `64,393` `1` 6(44) `370,268` `5` `289,515` `6` `2,843,973` `39` `937,511` `20` 6(45) `(` `219,316 ) (` `3) (` `104,469) (` `2 )` `$` `2,624,657` `36` `$` `833,042` `18` `($` `128,158 ) (` `2) ( $` `48,693) (` `1 )` `29` `-` `3,187` `-` `21,787` `1` `8,278` `-` `(` `213,712 ) (` `3) (` `46,151) (` `1 )` `5,096` `- (` `5,086)` `-` `(` `314,958 ) (` `4) (` `88,465) (` `2 )` `$` `2,309,699` `32` `$` `744,577` `16` `$` `2,618,769` `36` `$` `826,690` `18` `$` `5,888` `-` `$` `6,352` `-` `$` `2,304,724` `32` `$` `737,775` `16` `$` `4,975` `-` `$` `6,802` `-` 6(46) `$` `1.88` `$` `0.59` `$` `1.88` `$` `0.59`
Operating profit 601000 Share of the profit or loss of associates and joint ventures accounted for under the equity method 602000 Other gains and losses 902001 Profit before tax 701000 Income tax expense 902005 Net income Other comprehensive income Components of other comprehensive income that will not be reclassified to profit or loss 805510 Remeasurements of defined benefit plan 805550 Other comprehensive gain of associates and joint ventures accounted for under equity method 805599 Income tax benefit relating to components of other comprehensive income Items may be reclassified to profit of loss subsequently 805610 Translation loss on the financial statements of foreign operating entities 805620 Unrealized gain (loss) on financial instruments Current other comprehensive income (post-tax) 902006 Total current comprehensive income Income attributable to: 913100 Parent company 913200 Non-controlling interests Current comprehensive income attributable to: 914100 Parent company 914200 Non-controlling interests Earnings per share 975000 Basic earnings per share (in dollars) 985000 Diluted earnings per share (in dollars)

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

~84~

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Notes					Equity att	ributableto owners	of the parent	of the parent				Totalequity
	Commonstock	Capital reserve		R	etainedEarnings		Otherequityinterest		Treasury stock	Total
			Legal reserve		Special reserve	Unappropriate d earnings	Translation gain and loss on the financial statements of foreign operating entities	Unrealized gain or loss on financial instruments
6(27) 6(27) 6(28) 6(28) 6(27) 6(27) 6(27) 6(27) 6(28)	`$ 13,231,191` `-` `-` `-` `404,177` `-` `-` `-` `(` `278,710 )` `-` `$ 13,356,658` `$ 13,356,658` `-` `-` `547,623` `-` `-` `-` `$ 13,904,281`	`$ 256,116` `-` `-` `-` `-` `-` `-` `-` `( 113,414 )` `-` `$ 142,702` `$ 142,702` `-` `-` `-` `-` `-` `-` `$ 142,702`	`$ 2,328,253` `95,661` `-` `-` `-` `-` `-` `-` `-` `-` `$ 2,423,914` `$ 2,423,914` `79,851` `-` `-` `-` `-` `-` `$ 2,503,765`		`$ 6,018,542` `-` `191,323` `-` `-` `-` `-` `-` `-` `-` `$ 6,209,865` `$ 6,209,865` `-` `163,694` `-` `-` `-` `-` `$ 6,373,559`	`$ 960,922` `(` `95,661 )` `(` `191,323 )` `(` `260,759 )` `(` `404,177 )` `826,690` `(` `37,185 )` `-` `-` `-` `$ 798,507` `$ 798,507` `(` `79,851 )` `(` `163,694 )` `(` `547,623 )` `2,618,769` `(` `106,387 )` `-` `$ 2,519,721`	`$` `193,772` `-` `-` `-` `-` `-` `(` `46,151 )` `-` `-` `-` `$` `147,621` `$` `147,621` `-` `-` `-` `-` `(` `213,712 )` `-` `($` `66,091 )`	`$` `7,242` `-` `-` `-` `-` `-` `(` `5,579 )` `-` `-` `-` `$` `1,663` `$` `1,663` `-` `-` `-` `-` `6,054` `-` `$` `7,717`	`($ 278,026` `)` `-` `-` `-` `-` `-` `-` `(` `114,098` `)` `392,124` `-` `$` `-` `$` `-` `-` `-` `-` `-` `-` `-` `$` `-`	`$ 22,718,012` `-` `-` `(` `260,759 )` `-` `826,690` `(` `88,915 )` `(` `114,098 )` `-` `-` `$ 23,080,930` `$ 23,080,930` `-` `-` `-` `2,618,769` `(` `314,045 )` `-` `$ 25,385,654`	`$` `46,039` `-` `-` `-` `-` `6,352` `450` `-` `-` `(` `4,142` `)` `$` `48,699` `$` `48,699` `-` `-` `-` `5,888` `(` `913` `)` `(` `4,366` `)` `$` `49,308`	`$ 22,764,051` `-` `-` `(` `260,759` `)` `-` `833,042` `(` `88,465` `)` `(` `114,098` `)` `-` `(` `4,142` `)` `$ 23,129,629` `$ 23,129,629` `-` `-` `-` `2,624,657` `(` `314,958` `)` `(` `4,366` `)` `$ 25,434,962`

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

~85~

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

				Years ended December	31
	Notes			2017	2016
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax			`$`	`2,843,973` `$`	`937,511`
Adjustments
Adjustments to reconcile profit (loss)
Depreciation	6(42)			`73,833`	`88,754`
Amortization	6(42)			`33,116`	`31,788`
Write-off of bad debts classified as income	6(17)	`(`		`6,068` `)` `(`	`9,317` `)`
Provision for bad debts	6(7)(17)			`63,471`	`22,032`
(Gain) loss on valuation of trading securities	6(33)	`(`		`329,459` `)`	`102,873`
Gain on valuation of borrowed securities and bonds with resale	6(35)
agreements		`(`		`2,975` `)` `(`	`1,986` `)`
Financial expense	6(40)			`395,054`	`226,225`
Interest income (include financial income)	6(32)(44)	`(`		`1,599,755` `)` `(`	`1,395,801` `)`
Dividend income		`(`		`252,056` `)` `(`	`445,901` `)`
Share of the profit of associates and joint ventures accounted for under	6(13)
the equity method		`(`		`79,787` `)` `(`	`64,393` `)`
Loss on disposal of property and equipment	6(14)			`550`	`1,769`
Loss on disposal of investments(financial assets measured at cost)				`280`	`-`
Gain on disposal of investments(available-for-sale financial assets)		`(`		`45,348` `)`	`-`
(Gain) loss on valuation of non-operating financial instrument	6(44)	`(`		`32,156` `)`	`2,164`
Changes in assets/liabilities relating to operating activities
Changes in operating assets
Financial assets at fair value through profit or loss				`3,192,130` `(`	`11,649,456` `)`
Available-for-sale financial assets - current				`322,825` `(`	`949,823` `)`
Bonds purchased under resale agreements				`2,093,498` `(`	`1,323,145` `)`
Margin loans receivable		`(`		`2,781,548` `)`	`1,720,832`
Refinancing security deposits		`(`		`60,656` `)` `(`	`16,535` `)`
Receivables from refinance guaranty		`(`		`33,779` `)` `(`	`29,246` `)`
Customer margin account				`2,182,356` `(`	`4,413,891` `)`
Receivables from security lending				`69,457` `(`	`83,430` `)`
Security lending deposits		`(`		`484,746` `)` `(`	`185,433` `)`
Notes receivable		`(`		`391` `)`	`2,062`
Accounts receivable		`(`		`5,244,522` `)` `(`	`425,572` `)`
Prepayments				`13,768` `(`	`6,306` `)`
Other receivables		`(`		`13,532` `)` `(`	`9,801` `)`
Other current assets				`147,036`	`1,611,417`
Changes in operating liabilities
Financial liabilities at fair value through profit or loss - current		`(`		`1,209,730` `)`	`981,011`
Bonds sold under repurchase agreements		`(`		`2,173,604` `)`	`7,482,702`
Deposits on short sales				`575,358` `(`	`222,669` `)`
Short sale proceeds payable				`680,861` `(`	`227,478` `)`
Guarantee deposit received on borrowed securities				`166,199` `(`	`289,374` `)`
Futures traders’ equity		`(`		`2,197,829` `)`	`4,412,480`
Accounts payable				`3,134,327`	`871,442`
Advance receipts		`(`		`462` `)` `(`	`255` `)`
Collections on behalf of third parties				`26,087` `(`	`673,536` `)`
Other payables				`441,768` `(`	`77,317` `)`
Other financial liabilities - current				`1,807,001`	`540,501`
Other current liabilities				`6,415` `(`	`324` `)`
(Continued)

~86~

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

Cash inflow (outflow) generated from operations
Dividends received
Interest received
Income tax paid
Net cash flows from (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of available-for-sale financial assets
Proceeds from disposal of financial assets at cost

Acquisition of property and equipment

Disposal of property and equipment
Acquisition of intangible assets
(Increase) decrease in other non-current assets
Increase in prepayment for equipment
Acquisition of investments accounted for under equity method
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in short-term loans
(Decrease) increase in commercial papers payable
(Decrease) increase in other non-current liabilities
Acquisition of treasury stocks

Interest paid
Changes in non-controlling interest
Distribution of cash dividends

Net cash flows (used in) from financing activities
Effect of exchange rate changes
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year Years ended December 31
Notes
2017
2016
$
1,720,960 ( $
3,465,426 )
320,335
517,173
1,638,289
1,409,488
(
81,435 ) (
133,586 )
3,598,149 (
1,672,351 )
90,765
-
6(12)
1,128
-
6(14)
(
20,520 ) (
17,705 )
134
70
(
8,651 ) (
9,796 )
(
41,179 )
28,169
(
31,467 ) (
29,105 )
(
42,682 )
-
(
52,472 ) (
28,367 )
(
735,232 )
3,444,111
(
2,650,000 )
700,000
(
1,076 )
1,262
6(27)
- (
114,098 )
(
387,415 ) (
225,653 )
(
4,366 ) (
4,142 )
6(27)
- (
260,759 )
(
3,778,089 )
3,540,721
(
213,712 ) (
46,151 )
(
446,124 )
1,793,852
6,909,469
5,115,617
$
6,463,345 $
6,909,469

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

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PRESIDENT SECURITIES CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2017 AND 2016

(Expressed in thousands of New Taiwan dollars)

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, 2017, the Company had 36 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 1,706 and 1,744 as of December 31, 2017 and 2016, respectively.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED

FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were authorized for issuance by the Board of Directors on March 26, 2018.

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”)

New standards, interpretations and amendments endorsed by FSC effective from 2017 are as follows:

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	Effective Date by
	International Accounting
New Standards,Interpretations andAmendments	StandardsBoard
Amendments to IFRS 10, IFRS 12 and IAS 28, ‘Investment entities:	January 1, 2016
applying the consolidation exception’
Amendments to IFRS 11, ‘Accounting for acquisition of interests in joint operations’	January 1, 2016
IFRS 14,‘Regulatory deferral accounts’	January 1, 2016
Amendments to IAS 1,‘Disclosure initiative’	January 1, 2016
Amendments to IAS 16 and IAS 38, ‘Clarification of acceptable	January 1, 2016
methods of depreciation and amortisation’
Amendments to IAS 16 and IAS 41,‘Agriculture:bearer plants’	January 1, 2016
Amendments to IAS 19,‘Defined benefit plans: employee contributions’	July 1, 2014
Amendments to IAS 27,‘Equity method in separate financial	January 1, 2016
statements’
Amendments to IAS 36, ‘Recoverable amount disclosures for non-	January 1, 2014
financial assets’
Amendments to IAS 39,‘Novation of derivatives and continuation of	January 1, 2014
hedge accounting’
IFRIC 21,‘Levies’	January 1, 2014
Annual improvements to IFRSs 2010-2012 cycle	July 1, 2014
Annual improvements to IFRSs 2011-2013 cycle	July 1, 2014
Annual improvements to IFRSs 2012-2014 cycle	January 1, 2016
The above standards and interpretations have no significant impact to the Group’s financial
condition and financial performance based on the Group’s assessment.

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

New standards, interpretations and amendments endorsed by FSC effective from 2018 are as follows:

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Effective Date by
International Accounting
New Standards, Interpretations and Amendments Standards Board
----- End of picture text -----

New Standards,Interpretations andAmendments	StandardsBoard
Amendments to IFRS 2, ‘Classification and measurement of share-	January 1, 2018
based payment transactions’
Amendments to IFRS 4, ‘Applying IFRS 9 Financial instruments with	January 1, 2018
IFRS 4Insurance contracts’
IFRS 9,‘Financial instruments’	January 1, 2018
IFRS 15,‘Revenue from contracts with customers’	January 1, 2018
Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from	January 1, 2018
contracts with customers’
Amendments to IAS 7,‘Disclosure initiative’	January 1, 2017
Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealised losses’	January 1, 2017
Amendments to IAS 40,‘Transfers of investment property’	January 1, 2018
IFRIC 22,‘Foreign currency transactions and advance consideration’	January 1, 2018
Annual improvements to IFRSs 2014-2016 cycle- Amendments to
IFRS 1,‘First-time adoption of international financial reporting	January 1, 2018
standards’
Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 12,‘Disclosure of interests in other entities’	January 1, 2017
Annual improvements to IFRSs 2014-2016 cycle- Amendments to IAS 28,‘Investments in associates and joint ventures’	January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

A. IFRS 9, “Financial instruments”
(a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortized cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.
(b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognize 12-month expected credit losses (‘ECL’) or lifetime ECL (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Group shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.
(c) The amended general hedge accounting requirements align hedge accounting more -
closely with an entity’s risk management strategy. Risk components of non

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financial items and a group of items can be designated as hedged items. The standard relaxes the requirements for hedge effectiveness, removing the 80-125% bright line, and introduces the concept of ‘rebalancing’; while its risk management objective remains unchanged, an entity shall rebalance the hedged item or the hedging instrument for the purpose of maintaining the hedge ratio.

B. When adopting the new standards endorsed by the FSC effective from 2018, the Group will apply the new rules under IFRS 9 retrospectively from January 1, 2018, with the practical expedients permitted under the statement. The significant effects of applying the new standard as of January 1, 2018 are summarized below:

Consolidated balance sheet Affecteditems	2017 version IFRSs amount	Effect of adoption of new standards	2018 version IFRSs amount	2018 version IFRSs amount	Remark
January1,2018	38,742,727 $ 1,044,031 - 40,173 496,497 40,323,428 $ 2,519,721 $ 58,374) ( 49,308 2,510,655 2,510,655 $	20,146 $ 1,044,031) ( 1,611,338 40,173) ( 39,264 586,544 $ 17,538 $ 555,713 13,293 586,544 586,544 $		38,762,873 $ - 1,611,338 - 535,761 40,909,972 $ 2,537,259 $ 497,339 62,601 3,097,199 3,097,199 $	(b) (a) (a)~(b) (c) (b) (a)、(c) (d)
Financial assets at fair value through profit or loss Available-for-sale financial assets Financial asssets at fair value through other comprehensive income Financial assets at cost Investments accounted for under equity method Total affected assets Unappropriated earnings Other equity interest Non-controlling interest Total affected equity Total affect liabilities and equity

(a) In accordance with IFRS 9, the Group expects to reclassify financial assets at cost in the amounts of $37,565, and make an irrevocable election at initial recognition on equity instruments not held for dealing or trading purpose, by increasing financial assets at fair value through other comprehensive income and other equity interest in the amounts of $567,307 and $516,449, respectively.
(b) In accordance with IFRS 9, the Group expects to reclassify financial assets at cost in the amounts of $2,608, by increasing financial assets at fair value through profit or loss and increasing retained earnings in the amounts of $20,146 and $17,538, respectively.
(c) In accordance with IFRS 9, the Group expects to increase $39,264 for both investments accounted for under equity method and other equity interest by share of other comprehensive income of associates accounted for under equity method.
(d) In accordance with IFRS 9, the Group expects to increase non-controlling interests in

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the amount of $13,293 by share of book value of subsidiaries’ other equity attributable to non-controlling interests.

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 IFRSs endorsed by the FSC are as follows:

Effective Date by International Accounting New Standards, Interpretations and Amendments Standards Board Amendments to IFRS 9, ‘ Prepayment features with negative January 1, 2019 compensation’ ‘ To be determined by Amendments to IFRS 10 and IAS 28, Sale or contribution of International Accounting assets between an investor and its associate or joint venture’ Standards Board IFRS 16, ‘Leases’ January 1, 2019 IFRS 17, ‘Insurance contracts’ January 1, 2021 Amendments to IAS 19, ‘Plan amendment, curtailment or settlem January 1, 2019 Amendments to IAS 28, ‘Long-terminterests in associates and January 1, 2019 joint IFRIC 23, ‘Uncertainty over income tax treatments’ January 1, 2019 Annual improvements to IFRSs 2015-2017 cycle January 1, 2019

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. The quantitative impact will be disclosed when the assessment is complete. A. IFRS 16, “Leases”

IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognize a 'right-of-use asset' and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

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 Accounting Standards No.34, ‘Interim financial reporting’ endorsed by the FSC.

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

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B. The preparation of financial statements in conformity with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretation as endorsed by the FSC (collectively referred herein as the “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 noncontrolling 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 noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity.
- (E) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. 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 recognized in profit or loss. All amounts previously recognized in other comprehensive income in relation to the subsidiary are reclassified to profit or loss, on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognized in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.

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B. Subsidiaries included in the consolidated financial statements:

Name of Investor	Name ofSubsidiary	Main Business Activities Futures brokerage Securities investment consulting Securities dealer, brokerage, underwriting and consulting Securities investment and holding company Insurance Agent Consultation of investment management and venture capital; other unprohibited or unrestricted businesses beyond the permit Securities dealer, brokerage, underwriting and consulting Wealth management Nominee Service	Ownership (%)	Ownership (%)
			December31,2017 96.69% 100% 5.19% 100% 100% 100% 94.81% 100% 100%	December31,2016
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 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% 94.81% 100% 100%

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

4) Classification of current and non-current items

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
(A) Assets arising from operating activities that are expected to be realized, or are intended to be sold or consumed within the normal operating cycle;
(B) Assets held mainly for trading purposes;

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  - (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 retranslated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income.
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 recognized in other comprehensive income.

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

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impairment allowance account.

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

12) Impairment of financial assets

A. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
B. The criteria that the Group uses to determine whether there is an objective evidence of an impairment loss is as follows:

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(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 reorganization;
(E) The disappearance of an active market for that financial asset because of financial difficulties;
(F) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;
(G) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered; or
(H) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
C. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made in accordance with aforesaid accounting policies of various financial assets.

13) Derecognition of financial instruments

A. Derecognition of financial assets

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

(A) The contractual rights to receive cash flows from the financial asset expire.
(B) The contractual rights to receive cash flows from the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.
(C) The contractual rights to receive cash flows of the financial asset have been transferred; however, the Group has not retained control of the financial asset.
B. Derecognition of financial liabilities
A financial liability is derecognized when the obligation under the liability specified in the contract is discharged or cancelled or expires.

14) Offsetting financial instruments

Financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

15) Investments accounted for under the equity method

A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost.

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B. The Group’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred statutory/constructive obligations or made payments on behalf of the associate.
C. When changes in an associate’s equity that are not recognized in profit or loss or other comprehensive income of the associate and such changes not affecting the Group’s ownership percentage of the associate, the Group recognizes its share of change in equity of the associate in ‘capital surplus’ in proportion to its ownership.
D. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
E. When there are objective evidences of impairment, as stated in Note 4 (12), at balance sheet date, the Group considers the whole investment carrying amount as single asset, and compares its recoverable amount (value in use or fair value less costs of disposal) with the carrying amount, to test its impairment. Value in use is determined by the present value of the Group’s share of the expected future cash flow from the associates. If the recoverable amount is less than its carrying amount, an impairment loss should be recognized. The loss will not be allocated to any of the components (including goodwill), which comprise the carrying amount of the investment. An impairment loss recognized in prior periods shall be reversed if circumstances of impairment no longer exist or have decreased.

16) Property and equipment

A. Property and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalized.
B. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
C. Land is not depreciated. Other property and equipment are subsequently measured using the cost model and depreciated using the straight-line method to allocate their cost over their estimated useful lives.

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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 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 recognized as assets. When the future economic benefit generated from subsequent costs is highly likely to flow into the entity and the costs can be reliably measured, the subsequent expenses of the assets shall be capitalized. All maintenance cost are recognized in profit or loss as incurred.
D. Investment property is subsequently measured using the cost model. Depreciated cost is used to calculate amortization expense after initial measurement. The depreciation method, remaining useful life and residual value should apply the same rules as applicable for property and equipment.

18) Intangible assets

A. The cost of computer software is amortized using the straight-line method over the useful lives based on acquisition cost, with an amortization period of 4 years.
B. Customer relationships is amortized evenly over its estimated useful life of 3.6 years.
C. Membership in a foreign futures exchange is stated at acquisition cost and has an indefinite useful life as it was assessed to generate continuous net cash inflow in the foreseeable future. It is not amortized, but is tested annually for impairment.
D. 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 recognized when impairment occurs.

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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 recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. 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 amortized 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 recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognized 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 recognize 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 recognized 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 recognized expense as it can no longer withdraw an offer of termination benefit or it recognizes 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

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equivalent to 6% of employees’ salaries to the employees’ personal pension accounts with the “Bureau of Labor Insurance”. Benefits accrued under the New Plan are portable upon termination of employment. Net defined benefit asset can only be recognized when there is a cash refund or elimination in the future accrued pension liabilities.

(B) Defined benefit plans
a. In a defined benefit plan, the pension paid is determined based on the amount that an employee shall receive upon retirement, which could vary with age, work seniority and salary compensations. The Group recognizes the 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 recognized as liabilities. Defined benefit obligation is assessed annually using projected unit credit method by the actuary. The present value of the defined benefit obligation is determined using the market yield of government bonds of a currency and term consistent with the currency and term of the employment benefit obligations.
b. Remeasurement arising on defined benefit plans are recognized in other comprehensive income in the period in which they arise and are recorded as retained earnings.
c. Pension cost for the interim period is calculated on a year-to-date basis by using the pension cost rate derived from the actuarial valuation at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-off events. And, the related information is disclosed accordingly.
D. Employees’ remuneration and directors’ remuneration
Employees’ and directors’ remuneration are recognized as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. 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 recognized as incurred, which mainly include:

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

23) Income tax

A. Current income tax

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

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B. Deferred income tax
Deferred income tax assets and liabilities are measured based on the tax rate of the anticipated period that the future assets realization or the liabilities settlement requires, which is based on the effective or existing tax rate at the consolidated balance sheet date. The carrying amounts and temporary differences of assets and liabilities included in the consolidated balance sheet are calculated using the liability method and 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 recognized only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. If the future taxable income is probable to provide unused loss carryforwards or deferred income tax credit which can be realized in the future, the proportion of realization is deemed as deferred income tax asset.
C. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions for income tax liabilities where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.
D. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realize the asset and settle the liability simultaneously.
E. The interim period income tax expense is recognized based on the estimated average annual effective income tax rate expected for the full financial year applied to the pretax income of the interim period, and the related information is disclosed accordingly.

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 recognized 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

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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”.

26) 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 Group’s performance of segment profit (loss) is assessed based on the profit (loss) before tax, but not segment income, assets and liabilities. The Chief Operating Decision-Maker is responsible for allocating resources and assessing performance of the operating segments.

(Blank below)

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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 recognizes the adjustment of the estimates only in the period which is affected by the adjustment. If the adjustment simultaneously affects both the current and future periods, it should be recognized in both periods.
2) Relevant information on key assumptions to be made in the future, key sources of assumption uncertainty made at balance sheet date, and assumptions and estimates that may cause key risks that could affect the carrying amounts of financial assets and liabilities are as follows:
- A. Fair value of financial instruments
  - Financial instruments with no active market or quoted price use valuation technique to determine the fair value. Under such condition, fair value is assessed through the observable information or models of similar financial instruments. If there is no observable input available in a market, the fair value of financial instrument is assessed through appropriate assumptions. When valuation models are adopted to determine the fair value, all the models should be calibrated to ensure that the output can actually reflect actual information and market price. Models should try to take only observable information as much as possible.
- B. Impairment assessment on investment accounted for under equity method When there are impairment indicators that show the investments accounted for under equity method are impaired and the carrying amount can no longer be recovered, the Group will assess the impairment of the investment. The Group assess its share of the recoverable amount which is based on the discounted value of expected cash flow, and assess the reasonableness of relevant assumptions, including revenue growth rate, operating profit margin, net profit margin, financial forecast, and discount rate.
- C. Impairment assessment of goodwill Impairment assessment of goodwill includes allocation of assets, liabilities, and goodwill to brokerage segment, and determines the recoverable amount based on brokerage segment’s present value of expected future cash flow. The assessment also analyzes reasonableness of relevant assumptions, including expected future trading volumes, market share, segment’s operating profit margin, and discount rates.

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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 Total	December31,2017 169 $ 697,155 477,200 1,718,591 3,570,230 6,463,345 $	December31,2016
		181 $ 621,365 348,409 2,657,709 3,281,805
		6,909,469 $

As of December 31, 2017 and December 31, 2016, the annual interest rates of time deposits, including foreign time deposits were 0.04% ~ 3.72% and 0.04% ~ 4. 80%, respectively.

(Blank below)

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2) Financial assets at fair value through profit or loss

		December31,2017	December31,2017		December31,2016	December31,2016
Current items:
Open-ended funds and money market instruments
and securities investment by brokers
Open-ended mutual funds beneficiary
certificates		$	456,960		$	90,000
Overseas stocks and funds			148,056			241,068
Listed (TSE and OTC) stocks			133,524			77,151
Subtotal			738,540			408,219
Adjustment of open-ended funds
and money market instruments
and securities investment by brokers	(		23,649)	(		59,317)
Total			714,891			348,902
Trading securities-dealer
Listed (TSE and OTC) stocks			2,605,879			3,441,347
Government bonds			1,699,413			3,417,519
Corporate bonds			4,383,130			8,958,921
Convertible corporate bonds			441,134			845,892
Emerging stocks			98,271			151,026
Overseas stocks			20,659,710			19,146,988
Exchange-traded funds			1,976,561			623,026
Others			31,185			66,548
Subtotal			31,895,283			36,651,267
Adjustment of trading securities - dealer			156,608			117,895
Total			32,051,891			36,769,162
Trading securities-underwriter
Listed (TSE and OTC) stocks			613,026			507,139
Convertible corporate bonds			327,788			236,415
Subtotal			940,814			743,554
Adjustment of trading securities - underwriter			137,563			66,010
Total			1,078,377			809,564
Trading securities-hedging
Listed (TSE and OTC) stocks			2,064,014			1,489,455
Convertible corporate bonds			13,182			21,157
Warrants			104,756			4,859
Overseas stocks			-			5,678
Exchange traded funds			477,618			174,751
Subtotal			2,659,570			1,695,900
Adjustment of trading securities - hedging	(		77,804)	(		3,595)
Total			2,581,766			1,692,305

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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	December31,2017 15,040 $ 2,230,377 20,043 38,692,385 $ 50,076 $ 266 50,342 $	December31,2016
		3,272 $ 1,833,511
		64,425
		41,521,141 $
		50,173 $ 448
		50,621 $

3) Available-for-sale financial assets

Bonds purchased under resale agreements 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 Overseas bonds	December31,2017 December31,2016 - $ 538,757 $ 1,036,521 820,389 7,510 26,370) ( 1,044,031 $ 1,332,776 $ - $ 45,416 $ - 28,985 - $ 74,401 $ December31,2017 December31,2016 - $ 2,093,498 $

4) Bonds purchased under resale agreements

The above bonds purchased under resale agreements as of December 31, 2017 and December 31, 2016 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 $2,088,567. The annual interest rates of every currency were as follows:

December 31, 2016 Foreign currencies (Note) -4.0625%~0.00% (Note) ： Foreign currencies include USD and EUR.

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%.

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6) Customer margin account

Customer margin account
Bank deposit Futures clearing house Other futures commission merchant Securities Total	December31,2017 7,159,942 $ 1,726,793 1,027,317 4,037 9,918,089 $	December31,2016
		9,915,890 $ 1,029,502 1,150,283 4,770
		12,100,445 $

The difference between the customer margin deposits accounts and futures traders’ equity as of December 31, 2017 and December 31, 2016 were outlined below:

Accounts receivable
December31,2017
December31,2016
Customer margin deposits accounts
9,918,089
$ 12,100,445
$ Add: Early customer margin deposits
8,647
2,734
Futures exchanges margins receivable
2
-
Loss on error trading
23
-
Less: Service fee income pending for transfer
25,087)
(
11,062)
(
Futures exchange tax pending for transfer
695)
(
473)
(
Net interest income pending for transfer
916)
(
22)
(
Temporary receipts
7,255)
(
985)
(
Futures traders' equity
9,892,808
$ 12,090,637
$ December31,2017
December31,2016
Accounts receivable - non related parties
Settlement price receivable-brokers
7,308,697
$ 4,120,802
$ Settlement price receivable-dealer
293,630
273,506
Accounts receivable-international bonds
591,328
-
Accounts receivable-foreign bonds
1,742,322
93,400
Spot exchange receivable, foreign currencies
-
164,658
Interest receivable
372,205
402,851
Settlement price
789,062
989,094
Others
61,681
60,563
11,158,925
6,104,874
Less: Allowance for uncollectable accounts
4,359)
(
-
Total
11,154,566
$ 6,104,874
$

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8) Other receivables

8)	Other receivables
9)	Other current assets Dividends receivable Interest receivable Others Total Pending settlements Pledged time deposits Deposits-in for foreign currency securities Underwriting share proceeds collected on behalf of customers Temporary payments Others Total	December31,2017 277 $ 10,302 56,321 66,900 $ December31,2017 815,110 $ 639,815 228,016 108,673 357 893 1,792,864 $	December31,2016
			1,731 $ 19,670 42,789
			64,190 $
			December31,2016
			570,970 $ 1,256,835 58,608 50,703 1,949 835
			1,939,900 $

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 derecognized as the Group is still exposed to interest rate risk and credit risk.
B. Financial assets that do not meet the derecognition conditions and related financial liabilities are analysed below:

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December 31,2017	December 31,2017	Carrying amount of related financial liabilities
Financial assets category Carrying amount of transferred financial assets Financial assets measured at fair value through profit or loss Repurchase agreement 22,148,171 $ Available-for-sale financial assets Repurchase agreement 1,044,031 December31,2016	Carrying amount of transferred financial assets
		19,879,319 $ 1,032,339 Carrying amount of related financial liabilities
Financial assets category Financial assets measured at fair value through profit or loss Repurchase agreement Available-for-sale financial assets Repurchase agreement	Carrying amount of transferred financial assets
	23,788,419 $ 658,290	22,455,060 $ 630,202

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:

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(1) Financial assets

nancial assets	nancial assets
		December31,2017
Financial assets that are offset,or can		be settled under agreements of		net settled master nettingarrangements or similar arrangements
Derivative financial instruments Total Description	Gross amounts of recognised financial assets		Gross amounts of recognised financial liabilities set off in the balance sheet		Net amounts of financial assets presented in the balance sheet	Financial instruments Cash collateral received 19,982 $ - $ 19,982 $ - $ Not set off in the balance sheet		Net amount
						Financial instruments
	19,982 $ 19,982 $					19,982 $ 19,982 $		- $
								- $

Financial assets that are offset,or can		be settled under agreements of		net settled master nettingarrangements or similar			arrangements
Derivative financial instruments Bonds purchased under resale agreements Total Description	Gross amounts of recognised financial assets		Gross amounts of recognised financial liabilities set off in the balance sheet		Net amounts of financial assets presented in the balance sheet	Financial instruments Cash collateral received 35,925 $ - $ 2,017,512 - 2,053,437 $ - $ Not set off in the balance sheet		Net amount
						Financial instruments
	64,396 $ 2,093,498 2,157,894 $		- $ - - $		64,396 $ 2,093,498 2,157,894 $	35,925 $ 2,017,512 2,053,437 $		28,471 $ 75,986
								104,457 $

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(2) Financial liabilities

December 31, 2017

			December31,2017	December31,2017	December31,2017
Financial liabilities that are offset,or ca		n	be settled under agreements of net settled master nettingarrangements or similar arrangements
Derivative financial instruments Bonds sold and repurchase agreements Total Description	Gross amounts of recognised financial liabilities		Gross amounts of recognised financial assets set off in the balance sheet	Net amounts of financial liabilities presented in the balance sheet	Financial instruments Cash collateral received 19,982 $ - $ 17,974,440 - 17,994,422 $ - $ Not set off in the balance sheet	Net amount
					Financial instruments
	205,841 $ 17,974,440 18,180,281 $				19,982 $ 17,974,440 17,994,422 $	185,859 $ -
						185,859 $

Derivative financial instruments 205,841 $ Bonds sold and repurchase agreements 17,974,440 Total 18,180,281 $	Derivative financial instruments 205,841 $ Bonds sold and repurchase agreements 17,974,440 Total 18,180,281 $		- $ 205,841 $ 19,982 $ - $ - 17,974,440 17,974,440 - - $ 18,180,281 $ 17,994,422 $ - $ December31,2016	- $ 205,841 $ 19,982 $ - $ - 17,974,440 17,974,440 - - $ 18,180,281 $ 17,994,422 $ - $ December31,2016	- $ 205,841 $ 19,982 $ - $ - 17,974,440 17,974,440 - - $ 18,180,281 $ 17,994,422 $ - $ December31,2016	185,859 $ - 185,859 $
Financial liabilities that are offset,or ca		n	be settled under agreements of net settled master nettingarrangements or similar arrangements
Derivative financial instruments Bonds sold and repurchase agreements Total Description	Gross amounts of recognised financial liabilities		Gross amounts of recognised financial assets set off in the balance sheet	Net amounts of financial liabilities presented in the balance sheet	Financial instruments Cash collateral received 35,925 $ - $ 14,395,018 - 14,430,943 $ - $ Not set off in the balance sheet	Net amount
					Financial instruments
	37,300 $ 14,395,018 14,432,318 $		- $ - - $	37,300 $ 14,395,018 14,432,318 $	35,925 $ 14,395,018 14,430,943 $	1,375 $ -
						1,375 $

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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	December31,2017 2,450 $ 35,115 2,608 - 40,173 $	December31,2016
		2,450 $ 35,115 2,608 1,408
		41,581 $

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. In January 2017, the shareholders’ meeting acknowledged that the liquidation of Cathay Venture Capital I had completed and reported to Taipei District Court. The Company had collected $1,128 as remaining assets based on shareholding ratio.
13) Investments accounted for under the equity method

Uni-President Asset Management Corp.	December31,2017 496,497 $	December31,2016
		440,676 $

A. The Group’s share of its associates’ profits or losses recognized in long-term equity investment accounted for under the equity method for the years ended December 31, 2017 and 2016 were $79,787 and $64,393, respectively.
B. On March 31, 2017, the Company acquired 1,333,800 shares of Uni-President Asset Management Corp. for a cash consideration of $42,682.

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C. 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:

Princial place Companyname of businesss Uni-President Asset Management Corp. Taipei city	December31,2017 December31,2016 42.49% 38.69% Shareholdingratio	Nature of Methods of relationship measurement Associate Equity method
	December31,2017 42.49%

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

Balance sheet

Balance sheet
			Uni-President		AssetManagement Corp.
			December31,2017		December31,2016
Current assets		$	466,401	$	388,911
Non-current assets			441,397		466,982
Current liabilities	(		128,739)	(	110,416)
Non-current liabilities	(		33,530)	(	33,837)
Total net assets		$	745,529	$	711,640
Share in joint venture's
net assets		$	316,831	$	275,387
Goodwill and others			179,666		165,289
Carrying amount of the
joint venture		$	496,497	$	440,676

Statement of comprehensive income

Revenue Profit for the period from continuing operations Other comprehensive loss- net of tax Total comprehensive income Dividends received from associates		Uni-PresidentAsset	Year ended December 31, 2016 Management Corp.	Year ended December 31, 2016 Management Corp.
		Year ended December 31, 2017
		679,240 $ 190,717 $ 69 190,786 $ 66,678 $		635,267 $ 165,944 $ 8,238 174,182 $ 71,446 $

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14) Property and equipment

January1,2017	Land	Buildings	Equipment	Leasehold improvements	Total
Cost Accumulated depreciation and impairment Total For the year ended December31,2017	1,680,129 $ - 1,680,129 $ 1,680,129 $ - - - - 1,680,129 $ Land	1,054,964 $ 373,896) ( 681,068 $ 681,068 $ 250 - 7,080 23,710) ( 664,688 $ Buildings	221,249 $ 145,977) ( 75,272 $ 75,272 $ 20,270 684) ( 12,043 35,113) ( 71,788 $ Equipment	102,769 $ 72,075) ( 30,694 $ 30,694 $ - - - 12,910) ( 17,784 $ Leasehold improvements	3,059,111 $ 591,948) ( 2,467,163 $ 2,467,163 $ 20,520 684) ( 19,123 71,733) ( 2,434,389 $ Total
January 1, 2017 Additions Disposal Reclassifications Depreciation December 31, 2017 December31,2017
Cost Accumulated depreciation and impairment Total January1,2016	1,680,129 $ - 1,680,129 $ Land	1,052,401 $ 387,713) ( 664,688 $ Buildings	212,645 $ 140,857) ( 71,788 $ Equipment	60,419 $ 42,635) ( 17,784 $ Leasehold improvements	3,005,594 $ 571,205) ( 2,434,389 $ Total
Cost Accumulated depreciation and impairment Total For the year ended December31,2016	1,680,129 $ - 1,680,129 $ 1,680,129 $ - - - - 1,680,129 $ Land	1,081,785 $ 374,370) ( 707,415 $ 707,415 $ 210 - 1,420 27,977) ( 681,068 $ Buildings	249,195 $ 158,861) ( 90,334 $ 90,334 $ 16,039 723) ( 9,235 39,613) ( 75,272 $ Equipment	118,360 $ 75,642) ( 42,718 $ 42,718 $ 1,456 1,116) ( 6,700 19,064) ( 30,694 $ Leasehold improvements	3,129,469 $ 608,873) ( 2,520,596 $ 2,520,596 $ 17,705 1,839) ( 17,355 86,654) ( 2,467,163 $ Total
January 1, 2016 Additions Disposal Reclassifications Depreciation December 31, 2016 December31,2016
Cost Accumulated depreciation and impairment Total	1,680,129 $ - 1,680,129 $	1,054,964 $ 373,896) ( 681,068 $	221,249 $ 145,977) ( 75,272 $	102,769 $ 72,075) ( 30,694 $	3,059,111 $ 591,948) ( 2,467,163 $

A. No interest was capitalized for property and equipment for the years ended December 31, 2017 and 2016.

B. The information on property and equipment pledged or restricted as of December 31, 2017 and 2016 is described in Note 8.

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15)	Investment property January1,2017 Cost Accumulated depreciation and impairment Total For the year ended December31,2017 January 1, 2017 Depreciation December 31, 2017 December31,2017 Cost Accumulated depreciation and impairment Total January1,2016 Cost Accumulated depreciation and impairment Total For the year ended December31,2016 January 1, 2016 Depreciation December 31, 2016 December31,2016 Cost Accumulated depreciation and impairment Total	Land Buildings Total 198,099 $ 107,076 $ 305,175 $ - 26,272) ( 26,272) ( 198,099 $ 80,804 $ 278,903 $ 198,099 $ 80,804 $ 278,903 $ - 2,100) ( 2,100) ( 198,099 $ 78,704 $ 276,803 $ Land Buildings Total 198,099 $ 107,076 $ 305,175 $ - 28,372) ( 28,372) ( 198,099 $ 78,704 $ 276,803 $ Land Buildings Total 198,099 $ 107,076 $ 305,175 $ - 24,172) ( 24,172) ( 198,099 $ 82,904 $ 281,003 $ 198,099 $ 82,904 $ 281,003 $ - 2,100) ( 2,100) ( 198,099 $ 80,804 $ 278,903 $ Land Buildings Total 198,099 $ 107,076 $ 305,175 $ - 26,272) ( 26,272) ( 198,099 $ 80,804 $ 278,903 $

A. For the years ended December 30, 2017 and 2016, rental income from the lease of the investment property were $17,652 and $16,269, respectively, and direct operating expenses arising from the investment property were $3,267 and $3,490, 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.

~117~

16) Intangible assets

Intangible assets
January1,2017 Computer software Cost 122,313 $ Accumulated depreciation and impairment 90,367) ( Total 31,946 $ For the year ended December31,2017 January 1, 2017 31,946 $ Additions 8,651 Reclassifications 6,062 Depreciation 17,274) ( December 31, 2017 29,385 $ December31,2017 Computer software Cost 121,650 $ Accumulated depreciation and impairment 92,265) ( Total 29,385 $ January1,2016 Computer sofware Cost 105,707 $ Accumulated depreciation and impairment 73,988) ( Total 31,719 $ For the year ended December31,2016 January 1, 2016 31,719 $ Additions 9,796 Reclassifications 6,810 Depreciation 16,379) ( December 31, 2016 31,946 $ December31,2016 Computer software Cost 122,313 $ Accumulated depreciation and impairment 90,367) ( Total 31,946 $	Goodwill	Customer relationships and others Total 89,829 $ 254,146 $ 34,008) ( 124,375 ( 55,821 $ 129,771 $ 55,821 $ 129,771 $ - 8,651 - 6,062 15,114) ( 32,388 ( 40,707 $ 112,096 $ Customer relationships and others Total 89,829 $ 253,483 $ 49,122) ( 141,387 ( 40,707 $ 112,096 $ Customer relationships and others Total 89,829 $ 237,540 $ 18,893) ( 92,881 ( 70,936 $ 144,659 $ 70,936 $ 144,659 $ - 9,796 - 6,810 15,115) ( 31,494 ( 55,821 $ 129,771 $ Customer relationships and others Total 89,829 $ 254,146 $ 34,008) ( 124,375 ( 55,821 $ 129,771 $	Total
	42,004 $ - 42,004 $ 42,004 $ - - - 42,004 $ Goodwill
	42,004 $ - 42,004 $ Goodwill
	42,004 $ - 42,004 $ 42,004 $ - - - 42,004 $ Goodwill
	42,004 $ - 42,004 $
			129,771 $

A. No interest was capitalized for intangible assets for the years ended December 31, 2017 and 2016.
B. Goodwill and customer relationships were acquired through acceptance of transfer of the securities brokerage business of Standard Chartered (Taiwan) Bank's retail banking business, and were all allocated to the Group’s brokerage segment.
C. The recoverable amount of goodwill was determined based on its value in use.

~118~

Calculations of value in use after-tax cash flow projections are based on financial budgets approved by the management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The recoverable amount calculated based on the value in use exceeded the carrying amount, thus the goodwill was not impaired. The key assumptions used for calculation of value in use are as follows:

17)

Management determined the growth rate based on past performance and its
expectations of market development. The discount rates were based on the weighted
average financing cost rates determined by the Company’s capital asset pricing model.
The discount rates also reflect specific risks related to relevant operating segments.
Other noncurrent assets
2017
2016
Growth rate
0.00%
0.00%
Discount rate
17.49%
17.89%
Brokerage Segment

18)
19)

Short-term loans
Commercial papers payable
December31,2017
December31,2016
Operation guaranteed deposits
682,000
$ 692,000
$ Clearing and settlement fund
321,962
313,505
Refundable deposits
159,977
151,659
Deferred expenses
16,414
18,219
Prepaid pension expenses
22
44,860
Prepayment for equipment
18,535
12,253
Delinquent accounts
136,443
157,702
Others
180
180
Subtotal
1,335,533
1,390,378
Less: Allowance for uncollectible
accounts-overdue receivables
136,443)
(
157,702)
(
Total
1,199,090
$ 1,232,676
$ December31,2017
December31,2016
Secured loans
1,021,140
$ 1,317,700
$ Unsecured loans
5,424,178
5,862,850
Total
6,445,318
$ 7,180,550
$ Interest rates
0.70%~3.25%
0.70%~2.20%
December31,2017
December31,2016
Face value
3,650,000
$ 6,300,000
$ Less: discount on commercial papers payable
369)
(
1,684)
(
Total
3,649,631
$ 6,298,316
$ Interest rates
0.370%~0.485%
0.38%~0.72%

~119~

20) Financial liabilities at fair value through profit or loss - current

		December31,2017	December31,2017		December31,2016	December31,2016
Investments in bonds under resale
agreements - short sales		$	-		$	1,845,632
Valuation adjustment of financial assets held
for trading			-			8,849
Subtotal			-			1,854,481
Liabilities on sale of borrowed securities
- hedged			151,745			250,298
Valuation adjustment on liabilities on sale of
borrowed securities - hedged	(		10,481)	(		12,318)
Liabilities on sale of borrowed securities
- non-hedged			207,280			28,884
Valuation adjustment on liabilities on sale of
borrowed securities - non-hedged			1,982			746
Subtotal			350,526			267,610
Issuance of call ( put ) warrants			12,851,599			12,652,477
Gain on price fluctuation	(		5,599,183)	(		5,939,748)
Market value (A)			7,252,416			6,712,729
Warrants redeemed	(		9,460,551)	(		10,034,465)
Loss on price fluctuation			2,813,270			3,559,923
Market value (B)	(		6,647,281)	(		6,474,542)
Warrants - net (A+B)			605,135			238,187
Options sold - TAIFEX			4,112			3,695
Derivative financial liabilities - OTC			246,628			55,133
Total		$	1,206,401		$	2,419,106

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 sixteen months exercise period from the date of issuance. The issuer has the option to settle either by cash or stock delivery.

~120~

21) Bonds sold under repurchase agreements

Bonds sold under repurchase agreements
Government bonds Corporate bonds Bank debentures International bonds Foreign bonds Total	December31,2017 1,684,569 $ 400,139 - 852,510 17,974,440 20,911,658 $	December31,2016
		3,136,034 $ 1,595,591 1,102,701 2,855,918 14,395,018
		23,085,262 $

The above bonds sold under repurchase agreements as of December 31, 2017 and 2016 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 $20,984,849 and $23,117,190, respectively, and the annual interest rates in every currency were shown as follows:

Currency NTD Foreign currencies (Note) (Note)`：`Foreign currencies	December31,2017 December31,2016 0.24%~0.43% 0.20%~0.52% -0.30%~4.30% -0.20%~9.50% include AUD, Euro, USD and RMB.	December31,2016

22) Accounts payable

22)	Accounts payable
23)	Other payables Settlement accounts payable - brokered trading Settlement proceeds Settlement accounts payable - operating Accounts payable - foreign bonds Spot exchange payable, foreign currencies Others Total Salary and bonus payable Employees’ and directors’ remuneration payable Others Total	December31,2017 7,716,481 $ 660,024 407,612 395,809 - 100,561 9,280,487 $ December31,2017 659,644 $ 122,415 403,148 1,185,207 $	December31,2016
			4,093,975 $ 922,064 327,836 721,093 164,475 75,802
			6,305,245 $
			December31,2016
			381,528 $ 45,927 315,050
			742,505 $

~121~

24) Other financial liabilities - current

Other financial liabilities-current
Equity-linked notes (ELN) - Options Principal guaranteed notes (PGN) - fixed income Total	December31,2017 3,000 $ 3,196,298 3,199,298 $	December31,2016
		3,600 $ 1,388,697
		1,392,297 $

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).

25) Other liabilities-non-current

Other liabilities-non-current
Net defined benefit obligation Guarantee deposits received Total	December31,2017 55,177 $ 4,696 59,873 $	December31,2016
		8,053 $ 5,057
		13,110 $

26) 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. 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:

	December	31,2017	December	31,2016
Present value of defined benefit obligations	$	833,570	$	717,768
Fair value of plan assets	(	778,415)	(	754,575)
Net defined benefit (liabilities) assets	$	55,155	($	36,807)

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

==> picture [363 x 320] intentionally omitted <==

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

Present value of Fair value Net defined
defined benefit of plan benefit
obligations assets assets
Year ended
December 31, 2017
Balance at January 1 $ 717,768 ($ 754,575) ($ 36,807)
Current service cost 5,185 - 5,185
Interest expense (income) 10,762 ( 11,314) ( 552)
733,715 ( 765,889) ( 32,174)
Remeasurements:
Return on plan assets
(excluding amounts included
-
in interest income or expense) 6,190 6,190
-
Change in financial 24,273 24,273
Experience adjustments 97,695 - 97,695
121,968 6,190 128,158
Pension fund contribution - ( 40,829) ( 40,829)
Paid pension ( 22,113) 22,113 -
( 22,113) ( 18,716) ( 40,829)
Balance at December 31 $ 833,570 ($ 778,415) $ 55,155
----- End of picture text -----

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Year ended December31,2016		Present value of defined benefit obligations	Fair value of plan assets	Net defined benefit assets
	688,840 $ 5,208 11,710 705,758 - 6,286 14,593 21,614 42,493 - 30,483) ( 30,483) ( 717,768 $		739,808) ($ - 12,576) ( 752,384) ( 6,200 - - - 6,200 38,874) ( 30,483 8,391) ( 754,575) ($	50,968) ($ 5,208 866) ( 46,626) ( 6,200 6,286 14,593 21,614 48,693 38,874) ( - 38,874) ( 36,807) ($
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 demographic assumptions Change in financial Experience adjustments Pension fund contribution Paid pension Balance at December 31

(D) The Bank of Taiwan was commissioned to manage the Fund of the Group’s 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. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorized by the Regulator. The Group has no right to participate in managing and operating that fund and hence the Group is unable to disclose the classification of plan asset fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2017 and 2016 is given in the Annual Labor Retirement Fund Utilisation Report published by the government. 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.

~124~

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

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: For the year ended December 31, 2017 For the year ended December 31, 2016 Discount rate 1.20%~1.30% 1.40%~1.50% Future salary increases 2.00%~3.00% 2.00%~3.00%		For the year ended December 31, 2017	For the year ended December 31, 2016

Increase 0.25% Decrease 0.25% December31,2017 Effect on present value of defined benefit obligation 20,626) ($ 21,352 $ December31,2016 Effect on present value of defined benefit obligation 18,643) ($ 19,328 $ Discountrate	Increase 0.25% Decrease 0.25% 18,946 $ 18,429) ($ 17,294 $ 16,797) ($ Future salaryincreases

(F) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2018 amounts to $45,187.

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, 2017 and 2016 were $59,860 and $59,907, 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 $2,231 and $2,585, respectively, for the years ended December 31, 2017 and 2016.
27) Equity
A. Common stock
- (A) As of December 31, 2017, the Company’s authorized capital was $15,000,000 with a par value of $10 (in dollars) per share. As of December 31, 2017 and 2016, the common stocks issued were 1,390,428 and 1,335,666 thousand shares, respectively, and the outstanding common stocks were 1,390,428 and 1,335,666 thousand shares, respectively.

~125~

Movements in the number of the Company’s ordinary shares outstanding are as follows:

follows:
January 1 Acquisition of treasury stocks Stock dividends December 31		Year ended December 31,2017	(Expressed in thousands) Year ended December 31,2016
		1,335,666 - 54,762 1,390,428	1,303,796 8,548) ( 40,418 1,335,666

The Company increased capital through capitalization of unappropriated retained earnings of $547,623 by issuing 54,762 thousand shares at par value of $10 per share approved by the Board of Director on March 23, 2017 and resolved by stockholders’ meeting on June 22, 2017. The effective date was set on August 9, 2017. After the capital increase, the issued share capital was expected to be $13,904,281, consisting of 1,390,428 thousand shares of ordinary stock at par value of $10 per share.

(B) Treasury shares

In order to maintain the Company’s integrity and stockholders’ interest, the Company’s Board of Directors resolved to buy back outstanding shares totaling 30,000 thousand shares on January 27, 2016.

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

Reason for buy back		YearendedDecember31,2016	YearendedDecember31,2016	YearendedDecember31,2016	YearendedDecember31,2016	YearendedDecember31,2016			Period-end amount
		Shares at the beginning of the period		Period increase		Period decrease		Shares at the end of the period
To maintain the Company’s integrity and stockholders’ equity		19,323		8,548		(27,871)		-	- $

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.

~126~

d. On January 27 and May 5, 2016, the Board of Directors resolved to retire the treasury shares. On March 7 and May 20, 2016, the Company completed the registration of changes in capital. On March 8 and May 23, 2016, the Company obtained the Jing-Shou-Shang Zi. No. 10501036780 and No. 10501102910 issued by the Ministry of Economic Affairs as an approval for retirement of the treasury shares.

B. Capital reserve

Capital reserve
December 31, 2017 December 31, 2016		Sharepremium		Treasury share transactions		Expired stock options		Difference between consideration and carrying amount of subsidiaries acquired or disposed		Total
		24,986 $ 24,986 $		116,793 $ 116,793 $		483 $ 483 $		440 $ 440 $		142,702 $ 142,702 $

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.

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 25% of its paid-in capital stock and only quarter 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. According to Jing-Guan-Zheng-Chuan Letter No. 10500278285, from fiscal year 2016 to 2018, securities firm shall provide 0.5% to 1% of profit after tax as special reserve before distributing earnings. According to Jin-Guan-Zheng-Chuan Letter No. 1060005703, special provision shall be provide after accumulated deficit is covered. From fiscal year 2017, the amount of employees’ training for transition, transfer or arrangement expenditure arising from financial technology development can be reversed up to the amount of the abovementioned special reserve.

~127~

28) 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.
D. The appropriation of 2016 and 2015 earnings was resolved by the shareholders on June 22, 2017 and June 14, 2016, respectively. Detail is as follows:

Legal reserve Special reserve Special reserve (Note) Cash dividends Stock dividends		For the year ended December 31,2016	For the year ended December 31,2016		For the year ended December 31,2015	For the year ended December 31,2015
		Amount	share (in dollars)		Amount	share (in dollars)
		79,851 $ 159,701 3,993 - 547,623 791,168 $	- $ 0.41		95,661 $ 191,323 - 260,759 404,177 951,920 $	0.20 $ 0.31

Note ： Special reserve was provided for employees’ transition for financial technology development according to Jin-Guan-Zheng-Chuan Letter No. 10500278285 and JinGuan-Zheng-Qi-Chuan Letter No. 1060005703, and can be reversed for employees’ transition. The Board of Directors of the Company resolved to provide 0.5% as special reserve on March 23, 2017.

E. The earnings distribution for 2017 as resolved by the Board of Directors on March 26, 2018 is set forth below:

2018 is set forth below:
Legal reserve Special reserve Special reserve (Note1) Reversal of special reserve (Note1) Special reserve (Note2) Cash dividends		For the year ended December 31,2017
	Amount 251,972 $ 503,944 12,599 3,023) ( 58,374 1,668,514 2,492,380 $		Dividends per share(in dollars)
			1.20 $

~128~

Note1 ： Special reserve was provided for employees’ transition for financial technology development according to Jin-Guan-Zheng-Chuan Letter No. 10500278285 and Jin-Guan-Zheng-Qi-Chuan Letter No. 1060005703, and can be reversed for employees’ transition. The Board of Directors of the Company resolved to provide 0.5% as special reserve on March 26, 2018.
Note2 ： Special reserve shall be set aside in the same amount of net debit amount of other equity interest recorded in current year from the profit or loss of current year and the accumulated unappropriated earnings pursuant to paragraph 1 of Article 41 of Securities and Exchange Act and Jin-GuanZheng-Fa-Zi Letter No. 1010012865.
F. For details on employees’ remuneration and directors’ remuneration, please refer to Note 6 (41).

29) Brokerage handling fee revenue

Note 6 (41). Brokerage handling fee revenue
Revenues from underwriting business Revenues from brokered trading - TWSE Revenues from brokered trading - OTC Revenues from brokered trading - Futures Others Total Revenues from underwriting securities on a firm Others Total	Year ended December31,2017	Year ended December31,2016
	1,058,621 $ 454,994 649,259 170,297 2,333,171 $ Year ended December31,2017	726,177 $ 304,537 673,129 75,623 1,779,466 $ Year ended December31,2016
	23,043 $ 33,071 56,114 $	17,387 $ 29,134 46,521 $

30) Revenues from underwriting business

~129~

31) Gain on trading of securities

Gain on trading of securities
Dealers: -TAIEX -OTC -Overseas trading -Dealings of non-listed securities Subtotal Underwriters: -TAIEX -OTC Subtotal Hedging: -TAIEX -OTC -Overseas trading Subtotal Total		Year ended December31,2017	Year ended December31,2016
		1,121,790 $ 492,660 1,019,502 - 2,633,952 12,784 18,424 31,208 141,332 131,021 665 273,018 2,938,178 $	262,516 $ 173,461) ( 84,705 1,000 174,760 35,996 18,044 54,040 64,423) ( 61,292) ( 882) ( 126,597) ( 102,203 $

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, 2017 and 2016 were $9,448 and $59,875, respectively.

32) Interest income

Interest income
Gain (loss) on valuation of securities Interest income from margin loans Interest income from bonds Others Total Gain (loss) on sale of securities - dealer Gain on sale of securities - underwriting (Loss) gain on sale of securities - hedging Total		Year ended December31,2017	Year ended December31,2016 581,767 $ 663,706 2,801 1,248,274 $ Year ended December31,2016
		621,487 $ 847,936 2,531 1,471,954 $ Year ended December31,2017
	332,115 $ 71,553 74,209) ( 329,459 $		147,950) ($ 19,919 25,158 102,873) ($

33) Gain (loss) on valuation of securities

~130~

34) (Loss) gain on covering of borrowed securities and bonds with resale agreements - short sales

	sales
35) 36)	Valuation gain on borrowed securities and bonds with resale agreements-short sales Gain on warrants issuance Year ended December31,2017 Year ended December31,2016 (Loss) gain from the bond investments under resale agreements 116,598) ($ 17,809 $ (Loss) gain from securities borrowing transactions - warrants 479) ( 2,299 Loss from covering - warrants 15,683) ( 6,372) ( Gain from securities borrowing transactions - dealer 30,644 9,211 Total 102,116) ($ 22,947 $ Year ended December31,2017 Year ended December31,2016 Valuation gain from the bond investments under resale agreements 7,866 $ 5,442 $ Valuation loss from securities borrowing transactions - dealer 6,339) ( 2,367) ( Valuation gain (loss) from securities borrowing transactions - warrants 423 4,059) ( Valuation gain from covering - warrants 1,025 2,970 Total 2,975 $ 1,986 $ Year ended December31,2017 Year ended December31,2016 Gain on changes in fair value of call ( put ) warrant liabilities and redemption 417,304 $ 571,670 $ Loss on exercise of call ( put ) warrants before maturity 43,480) ( 19,248) ( Expenses arising out of issuance of call ( put ) warrants 67,912) ( 66,239) ( Total 305,912 $ 486,183 $	Year ended December31,2017	Year ended December31,2016
	Gain on warrants issuance Valuation gain from the bond investments under resale agreements Valuation loss from securities borrowing transactions - dealer Valuation gain (loss) from securities borrowing transactions - warrants Valuation gain from covering - warrants Total Gain on changes in fair value of call ( put ) warrant liabilities and redemption Loss on exercise of call ( put ) warrants before maturity Expenses arising out of issuance of call ( put ) warrants Total	Year ended December31,2017
		7,866 $ 6,339) ( 423 1,025 2,975 $ Year ended December31,2017	5,442 $ 2,367) ( 4,059) ( 2,970 1,986 $ Year ended December31,2016
		417,304 $ 43,480) ( 67,912) ( 305,912 $	571,670 $ 19,248) ( 66,239) ( 486,183 $

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37) (Loss) gain on derivative financial instruments

Year ended December31,2017	Year ended December31,2017	Year ended December31,2016	Year ended December31,2016
110,603) ($ 73,378 - 52,462) ( 52,791) ( 142,478) ($ Year ended December31,2017		77,287) ($ 196,551 1,800 117,202 30,116) ( 208,150 $ Year ended December31,2016
70,403 $ 480,116) ( 40,827 119,931 248,955) ($ Year ended December31,2017			20,447 $ 65,073 38,577 131,799 255,896 $ Year ended December31,2016
	255,418 $ 135,238 1,620 392,276 $ Year ended December31,2017		208,323 $ 106,799 1,397 316,519 $ Year ended December31,2016
	272,675 $ 110,300 12,079 395,054 $		144,012 $ 69,039 13,174 226,225 $

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41) Employee benefits

Employee benefits
Salaries Labor and health insurance Pension Other employee benefits Total		Year ended December31,2017		Year ended December31,2016
		2,006,176 $ 117,230 66,724 119,699 2,309,829 $		1,534,259 $ 114,518 66,834 85,309 1,800,920 $

A. In accordance to the Company’s Article of Incorporation, the remainder of the yearend 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.
B. For the year ended December 31, 2017 and 2016, employees’ compensation was accrued at $56,441 and $18,080, respectively; directors’ remuneration was accrued at $56,441 and $18,080, respectively. The aforementioned amounts were recognised in salary expenses.
C. For the year ended December 31, 2017, 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.
D. The actual distributed amount of employees’ and directors’ remuneration for 2016 as resolved by the Board of Directors was in agreement with the estimates in the 2016 financial statements.
E. Information on the appropriation of the Company’s earnings as resolved by the Board of Directors would be posted in the “Market Observation Post System” on the Taiwan Stock Exchange official website.

42) Depreciation and amortization

42)	Stock Exchange official website. Depreciation and amortization
43)	Other operating expenses Depreciation Amortization Total Rentals Taxes Computer information expenses Postage Bad debt expenses Others Total	Year ended December31,2017	Year ended December31,2016
		73,833 $ 33,116 106,949 $ Year ended December31,2017	88,754 $ 31,788 120,542 $ Year ended December31,2016
		121,558 $ 687,379 156,037 69,128 63,471 376,726 1,474,299 $	127,594 $ 563,239 168,004 69,984 22,032 339,657 1,290,510 $

For the year ended December 31, 2017 and 2016, as a result of the principal being unable

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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 recognized bad debt expenses of $55,964 and $0, respectively.

44) Other gains and losses

$55,964 and $0, respectively. Other gains and losses
Financial income Gain (loss) on disposal of investments Gain (loss) on valuation of open-ended funds and money-market instruments Net currency exchange loss Other non-operating revenues Total	Year ended December31,2017	Year ended December31,2016
	127,861 $ 64,574 32,156 14,194) ( 159,871 370,268 $	141,866 $ 1,836) ( 2,164) ( 2,067) ( 153,716 289,515 $

45) Income tax

A. Income tax expense
(a)Components of income tax expense:

		Year ended		Year ended
	December31,2017		December31,2016
Current tax:
Current tax on profits for the
periods	$	304,692	$	120,761
Over provision of prior year’s
income tax	(	11,220)	(	3,556)
Total current tax		293,472		117,205
Deferred taxes:
Temporary differences	(	74,156)	(	12,736)
Total deferred taxes	(	74,156)	(	12,736)
Income tax expense	$	219,316	$	104,469
(b)The income tax expense relating to components of other comprehensive income is
as follows`：`
	For the year ended		For	the year ended
	Decmeber31,2017		Decmeber31,2016
Remeasurement of defined benefit
obligations	($	21,787)	($	8,278)

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B. Reconciliation between income tax expense and accounting profit

Tax calculated based on profit before tax and statutory tax rate Expenses disallowed by tax regulation Prior year income tax overestimation Tax exempt income by tax regulation Effect from Alternative Minimum Tax Income tax expenses	Decmeber 31, 2017	Decmeber 31, 2016
	505,999 $ 16,901) ( 11,220) ( 416,902) ( 158,340 219,316 $	199,493 $ 9,479) ( 3,556) ( 140,428) ( 58,439 104,469 $

C. Amounts of deferred tax assets or liabilities as a result of temporary differences, tax losses and investment tax credits are as follows ：

(Blank below)

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For the year ended Decmeber 31, 2017

Deferred tax assets： -Temporary differences： Losses on doubtful debts Others Subtotal Deffered tax liabilities： -Temporary differences： Unrealised exchange gain Others Subtotal Total		January1		Recognised in profit or loss		other comprehensive income	December31
	12,798 $ 51,883 64,681 25,633) ( 10,190) ( 35,823) ( 28,858 $			4,199 $ 50,112 54,311 10,458 9,387 19,845 74,156 $		- $ 21,748 21,748 - 39 39 21,787 $	16,997 $ 123,743 140,740 15,175) ( 764) ( 15,939) ( 124,801 $

Deferred tax assets： -Temporary differences： Losses on doubtful debts Others Subtotal Deffered tax liabilities： -Temporary differences： Unrealised exchange gain Others Subtotal Total		Forthe yearendedDecmeber31,2016	Forthe yearendedDecmeber31,2016	Forthe yearendedDecmeber31,2016	Forthe yearendedDecmeber31,2016	Forthe yearendedDecmeber31,2016
		January1	Recognised in profit or loss		other comprehensive income	December31
	13,071 $ 43,260 56,331 32,162) ( 16,325) ( 48,487) ( 7,844 $		273) ($ 423 150 6,529 6,057 12,586 12,736 $		- $ 8,200 8,200 - 78 78 8,278 $	12,798 $ 51,883 64,681 25,633) ( 10,190) ( 35,823) ( 28,858 $

D. As of December 31, 2017, the Company’s income tax returns through 2013 and 2015 have been assessed by the National Tax Authority. The income tax returns through 2015 of President Futures, President Capital Management, President Venture Capital and President Insurance Agency have also been assessed.

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E. With the abolishment of the imputation tax system under the amendments to the Income Tax Act promulgated by the President of the Republic of China in February, 2018, the information on unappropriated retained earnings and the balance of the imputation credit account as of December 31, 2017, as well as the estimated creditable tax rate for the year ended December 31, 2017 is no longer disclosed.
Unappropriated retained earnings on December 31, 2016:

1998 and onwards

December 31, 2016 $ 798,507

F. As of December 31, 2016, the balance of the imputation tax credit account and the creditable tax rate are $540,187.
The imputation tax credit rate based on the appropriation of 2015 earnings is 20.63% in 2016;

46) Earnings per share

Earnings per share
Basic earnings per share Net income attributable to common shareholders Diluted earnings per share Employee bonus Basic earnings per share Net income attributable to common shareholders Diluted earnings per share Employee bonus	Amount aftertax Weighted-average outstanding common shares (Inthousands) Earnings per share (Indollars) 2,618,769 $ 1,390,428 1.88 $ - 3,933 2,618,769 $ 1,394,361 1.88 $ Amount aftertax Weighted-average outstanding common shares (Inthousands) Earnings per share (Indollars) 826,690 $ 1,392,025 0.59 $ - 1,532 826,690 $ 1,393,557 0.59 $ YearendedDecember31,2017 YearendedDecember31,2016
	Amount aftertax	Weighted-average outstanding common shares (Inthousands)

	Amount aftertax	Weighted-average outstanding common shares (Inthousands)
	826,690 $ - 826,690 $	1,392,025 1,532 1,393,557	0.59 $ 0.59 $

The abovementioned weighted average number of outstanding shares was retrospectively adjusted proportionately to the capitalized amount of unappropriated earnings for the year ended December 31, 2016.

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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 Enterprises Corp. Uni-President Asset Management Corp. President Chain Store Corp. (PCSC) Ton Yi Industrial Corp. President Tokyo Co., LTD	Relationship withthe Company
	Entity having significant influence on the Company Associate Other related party Other related party Other related party

2) Significant related party transactions and balances A. Account Receivables

A. Account Receivables
B. Other receivables C. Guarantee deposit received D. Income of wealth management-trust income from sales of funds The revenues were collected on a monthly basis in accordance with contract terms. December31,2017 December31,2016 Entity having significant influence on the company: Uni-President Enterprises Corp. 304 $ 286 $ Other related party: Others 583 726 Total 887 $ 1,012 $ December31,2017 December31,2016 Other related party: Others 9 $ 9 $ December31,2017 December31,2016 Associate: Uni-President Assets Management Corp. 530 $ 531 $ Other related party: President Tokyo Co., Ltd. 1,393 1,393 Total 1,923 $ 1,924 $ Year ended December31,2017 Year ended December31,2016 Associates: Uni-President Assets Management Corp. 9,553 $ 6,224 $	December31,2017	December31,2016
	304 $ 583 887 $ December31,2017	286 $ 726 1,012 $ December31,2016
	9 $ December31,2017	9 $ December31,2016

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E. Other operating revenue - handling charge revenue

				Year ended	Year ended	Year ended	Year ended	Year ended	Year ended	Year ended
		December31,2017						December31,2016
Associates:
Uni-President Assets Management Corp.		$				39,807		$		37,426
The revenues were collected on a monthly basis in accordance with contract terms.
F. Rent income
							Year ended			Year ended
							December 31,			December 31,
	Period			Deposit			2017			2016
Associates:
Uni-President Assets
Management Corp.	2016.05.01~2019.04.30			$	530	$		7,103		7,078 $
Other related party:
President Tokyo Co., Ltd.	2015.04.01~2019.03.31				1,393			9,422		9,117
Others					-			396		351
Total						$		16,921		16,546 $
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.
G. Stock custodian income
				Year ended					Year ended
			December31,2017					December31,2016
Entity having significant influence on
the company:
Uni-President Enterprises Corp.			$				3,659	$		3,526
Associate:
Uni-President Assets Management Corp.							129			129
Other related party:
Ton Yi Industrial Corp.							1,225			1,230
President Chain Store Corp. (PCSC)							1,603			1,593
Others							3,018			2,904
Total			$				9,634	$		9,382
H. Other operating expenses-equipment rental and					copy expense
				Year ended					Year ended
			December31,2017					December31,2016
Other related party:
President Tokyo Co., Ltd.			$				6,563	$		6,372
Others							1,302			1,382
Total			$				7,865	$		7,754

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I. Purchases of trading securities – dealer

Ending Shares 127 171 - Ending Shares - - - December December	Balance 31,2017
		208 $ 33) ($ 136 311 $ Year ended December 31, 2016 Gain(loss)
	8,382 $ 2,385 - 10,767 $ Balance 31,2016
		2,880) ($ 142) ( 27) ( 3,049) ($ Gain(loss)
- - -	- $ - - - $

J. Compensation of key management personnel

The compensation of key management such as directors, general managers, vice general managers were as follows:

anagers were as follows:
Salary and short-term employee benefits Retirement benefits Other long-term employee benefits Termination benefits Share-based payment Total		Year ended December31,2017		Year ended December31,2016
		232,069 $ 1,725 - - - 233,794 $		155,724 $ 1,906 - - - 157,630 $

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8. PLEDGED ASSETS

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

Assets Trading securities (par value) - Corporate bonds - Government bonds - Overseas bonds - International bonds - Bank debentures Available-for-sale financial assets - current - Overseas bonds (par value) Restricted assets: - Demand deposits - Pledged time deposits - Government bonds (par value) Property and equipment - Land and buildings (book value) Investment property - Land and buildings (book value) Pledged time deposits - Operating guarantee deposits - Refundable deposits Financial assets at fair value through profit or loss - current: Financial assets at fair value through profit or loss - non-current:	December31,2017 400,000 $ 1,683,000 18,999,562 920,297 - 1,071,360 109,566 639,815 50,000 1,259,648 - 682,000 2,000	December31,2016 1,600,000 $ 3,105,400 15,000,383 2,972,075 1,100,000 677,250 51,537 1,256,835 50,000 1,298,303 37,209 692,000 400	Purposes
			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 Securities for bonds sold under repurchase agreements Collections on behalf of third parties and reimbursement for wages and stocks Securities for short-term loans and guarantees for issuance of commercial papers Trust fund deposit-out 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

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

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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.

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

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following:

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 handling procedures.

(B) Credit risk management

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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, stoploss 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 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

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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. 57% 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) Corporate bonds

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

(c)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).

(d)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).

(D) 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.

(E) 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 financial service industry and mainly located in Taiwan.

(F) Bonds investment under a resale agreement

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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).

(G) 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.
(H) 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.
(I) 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.
(J) 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, receivables of consignment trading for securities, and receivables from banks’ underwriting on foreign exchange transactions and foreign fund demand. As the majority of the Group’s receivables from the consignment businesses and selfoperating businesses are settlement of securities from OCT or TWSE, the credit risk is extremely low. 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 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

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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	Credit rating of	Credit rating of	Historical default
rating	Taiwan Ratings	TCRI	rate (1year)
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

As of December 31, 2017 Financial assets				Normal assets		High risk		Past due but not impaired		Impaired		Total		Recognised losses		Net
		Lowrisk		Medium risk
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 Available-for-sale financial assets-current Debt security investments 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		6,463,056 $ 332,494 26,527,537 15,040 2,230,377 20,043 1,044,031 - 11,449,543 79,350 67,160 9,918,089 88,318 745,882 1,471 11,154,566 66,900 1,792,864 50,342 1,164,119 73,211,182 $		289 $ - 565,897 - - - - - - - - - - - - - - - - - - 566,186 $		- $ - 60,068 - - - - - - - - - - - - - - - - - - 60,068 $		- $ - - - - - - - - - - - - - - - - - - - - $		- $ - - - - - - - 50,420 - - - - - - 4,359 - - - 136,443 191,222 $		6,463,345 $ 332,494 27,153,502 15,040 2,230,377 20,043 1,044,031 - 11,499,963 79,350 67,160 9,918,089 88,318 745,882 1,471 11,158,925 66,900 1,792,864 50,342 1,300,562 74,028,658 $		- $ - - - - - - - 84,093 - - - - - - 4,359 - - - 136,443 224,895 $		6,463,345 $ 332,494 27,153,502 15,040 2,230,377 20,043 1,044,031 - 11,415,870 79,350 67,160 9,918,089 88,318 745,882 1,471 11,154,566 66,900 1,792,864 50,342 1,164,119 73,803,763 $

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The table of the credit quality of financial assets

As of December 31, 2016 Financial assets				Normal assets		High risk		Past due but not impaired		Impaired		Total		Recognised losses		Net
		Lowrisk		Medium risk
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 Available-for-sale financial assets-current Debt security investments 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		6,909,209 $ 84,158 30,957,471 3,272 1,833,511 64,425 821,042 2,093,498 8,718,415 18,694 33,381 12,100,445 157,775 261,136 1,080 6,104,874 64,190 1,939,900 50,621 1,157,344 73,374,441 $		260 $ - 781,488 - - - - - - - - - - - - - - - - - - 781,748 $		- $ - - - - - - - - - - - - - - - - - - - - - $		- $ - - - - - - - - - - - - - - - - - - - - $		- $ - - - - - - - - - - - - - - - - - - 157,702 157,702 $		6,909,469 $ 84,158 31,738,959 3,272 1,833,511 64,425 821,042 2,093,498 8,718,415 18,694 33,381 12,100,445 157,775 261,136 1,080 6,104,874 64,190 1,939,900 50,621 1,315,046 74,313,891 $		- $ - - - - - - - 26,251 - - - - - - - - - - 157,702 183,953 $		6,909,469 $ 84,158 31,738,959 3,272 1,833,511 64,425 821,042 2,093,498 8,692,164 18,694 33,381 12,100,445 157,775 261,136 1,080 6,104,874 64,190 1,939,900 50,621 1,157,344 74,129,938 $

~149~

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.

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  - (c)The Group should conduct a review to see whether the total minimized fund supply is more than maximized total fund demand. The Group should further review how long (by month) the difference may cover the operating expenses so that the safety stock of fund (by month) under stress test can be computed.

  - (d)The minimum safety stock of fund under stress test (by month) may be adjusted according to the crisis itself and only operating expense for at least 6 months under a normal stimulation can be deemed safe.

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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December 31, 2017

Short-term loans Commercial papers payable 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 Financial liabilities at fair value through profit or loss-current		Immediately		Less than 3months		3-12 months		1-5 years		Over5 years - $ - - - - - - - - - - - - - $	Total
		3,814,864 $ 650,000 350,526 855,875 - 1,861,947 2,197,656 - 9,892,808 9,226,922 340,746 - - 29,191,344 $		2,630,454 $ 3,000,000 - - 20,984,849 - - 224,317 - 53,565 9,363 225,489 1,745,075 28,873,112 $		- $ - - - - - - 1,078 - - - 959,718 1,454,223 2,415,019 $		- $ - - - - - - - - - 89,469 - - 89,469 $			6,445,318 $ 3,650,000 350,526 855,875 20,984,849 1,861,947 2,197,656 225,395 9,892,808 9,280,487 439,578 1,185,207 3,199,298
											60,568,944 $

~152~

December 31, 2016

Short-term loans Commercial papers payable 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 Financial liabilities at fair value through profit or loss-current		Immediately		Less than 3months		3-12 months		1-5 years	Over5 years - $ - - - - - - - - - - - - - $	Total
		1,160,000 $ - 2,122,091 294,528 - 1,286,589 1,516,795 - 12,090,637 6,263,062 319,044 334 - 25,053,080 $		6,020,550 $ 6,300,000 - 1,347 23,117,190 - - 2,819 - 42,183 5,601 204,125 1,392,297 37,086,112 $		- $ - - 1,144 - - - 56,377 - - - 538,046 - 595,567 $		- $ - - - - - - - - - 88,846 - - 88,846 $		7,180,550 $ 6,300,000 2,122,091 297,019 23,117,190 1,286,589 1,516,795 59,196 12,090,637 6,305,245 413,491 742,505 1,392,297
										62,823,605 $

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D. Maturity analysis for lease contracts and capital expenditures

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

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

December31,2017 Not later than one year Later than one year but not later than five years Over five years Total December31,2016 Not later than one year Later than one year but not later than five years Over five years Total		Operating leases expenditures (Lessee)		Operating leases income (Lessor)
		97,785 $ 187,215 3,402 288,402 $ Operating leases expenditures (Lessee)		19,867 $ 5,654 - 25,521 $ Operating leases income (Lessor)
		111,323 $ 206,673 5,569 323,565 $		11,396 $ 12,195 - 23,591 $

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 for one-dayVaR of transactions	Statistical table for one-dayVaR of transactions	Statistical table for one-dayVaR of transactions
		Amount 84,613 $ 137,764 83,221 37,793 Share ownership 74,195 $ 147,304 74,079 26,425 Share ownership 80,364 $ 133,598 77,828 24,266

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, 2017 and December 31, 2016 ：

~155~

Financialassetsin foreigncurrencies Cash and cash equivalents Financial assets at fair value through profit or loss Available-for-sale financial assets - current Others Financial liabilitiesin foreigncurrencies Short-term loans Financial liabilities at fair value through profit or loss Bonds sold under repurchase agreements Others			December31,2017	December31,2017	December31,2017
	USD 2,037,145 $ 12,739,390 1,044,031 5,219,360 5,404,143 67,793 11,692,454 4,312,745	EUR 62,713 $ 5,627,013 - 173,275 - 6,105 4,963,725 157,394	AUD 2,541 $ 2,007,103 - 53,706 - 2,206 1,819,404 50,254	RMB 302,247 $ 3,993,940 - 130,839 - 230,014 351,367 696,610	HKD 849,364 $ 380,856 - 1,459,687 95,175 115 - 844,253	Others 107,898 $ 50,751 - 51,654 - 1,155 - 53,974	Total
							3,361,908 $ 24,799,053 1,044,031 7,088,521 5,499,318 307,388 18,826,950 6,115,230

Note: As of December 31, 2017, foreign exchange rates of the above currencies to TWD were 1 USD = 29.760 TWD; 1 EUR= 35.570 TWD; 1 AUD= 23.185 TWD; 1 RMB= 4.565 TWD; and 1 HKD= 3.807 TWD, respectively.

~156~

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			December31,2016	December31,2016	December31,2016
	USD 1,378,962 $ 18,140,043 821,042 2,023,201 74,401 5,482,147 3,481,050 1,882,531 14,218,532 6,066,295	EUR 26,326 $ 2,904,133 - 70,297 - 43,442 - 69,609 2,372,405 59,566	AUD 2,513 $ 146,011 - - - 703 - - 139,207 439	RMB 752,266 $ 4,331,706 - - - 128,949 - 21,083 520,792 723,216	HKD 1,920,542 $ 460,894 - - - 1,355,878 1,039,498 8,090 - 683,996	Others 829 $ 115 - - - 72,427 - - - 68,926	Total
							4,081,438 $ 25,982,902 821,042 2,093,498 74,401 7,083,546 4,520,548 1,981,313 17,250,936 7,602,438

Note: As of December 31, 2016, foreign exchange rates of the above currencies to TWD were 1 USD =32.250 TWD; 1 EUR=33.90 TWD; 1 AUD=23.285 TWD; 1 RMB=4.617 TWD; and 1 HKD=4.158 TWD, respectively.

~157~

D. The total exchange gain (loss), including realized and unrealized, arising from significant foreign exchange variation on the monetary items held by the Group for the year ended December 31, 2017 and 2016, amounted to ($494,310) and $63,006, respectively.
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.

	December31,2017	December31,2017	Significant non- observable inputs(level3)
Total 674,449 $	Quoted prices of the same assets in active markets (level 1)	Other significant observable inputs (level 2)
			- $ Significant non- observable inputs (level3)
Total 674,884 $	Quoted prices of the same assets in active markets (level 1)	Other significant observable inputs (level 2)
	- $	674,884 $	- $

The fair value of investment property held by the Group was assessed by external valuation experts using comparison approach and income approach, or the fair value can be assessed based on the market price of the area adjacent to the location where the Group’s investment property is located.

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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
- 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 nine months ended December 31, 2017 and 2016, 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.

~159~

(B) Hierarchy of fair value estimation of financial instruments

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 Bond investments Financial assets at fair value through profit or loss - noncurrent 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	31,2017
	Total 6,200,330 $ 27,153,502 3,073,092 1,044,031 50,342 350,526 2,265,460 855,875	Level 1 6,135,260 $ 746,714 3,073,092 1,044,031 - 350,526 2,245,417 609,247	Level 2 65,070 $ 26,406,788 - - 50,342 - 20,043 246,628	Level3
				- $ - - - - - - -

~160~

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	31,2016
	Total 6,865,969 $ 31,738,959 1,015,005 511,734 821,042 50,621 74,401 2,122,091 1,901,208 297,015	Level 1 6,704,176 $ 1,676,426 1,015,005 511,734 821,042 - 74,401 2,122,091 1,836,783 241,882	Level 2 161,793 $ 30,062,533 - - - 50,621 - - 64,425 55,133	Level3
				- $ - - - - - - - - -

~161~

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 31,2017 and December 31, 2016, the capital adequacy ratios were 417% and 442%, respectively as required by the regulations.

7) Assets and liabilities of trust accounts

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

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A. Balance sheet of trust accounts

. Balance sheet of trust accounts
Trust assets	Decmeber31,2017		Decmeber31,2016
Bank savings Structured notes Stock Bond Fund Securities lending Accounts receivable Total of trust assets Trustliabilites	209,606 $ 362,297 488,210 8,044 2,097,002 383,355 23,943 3,572,457 $ Decmeber31,2017		149,652 $ 494,813 482,075 - 2,705,174 280,572 9,765 4,122,051 $ Decmeber31,2016
. Income statement of trust accounts Accounts payable Trust capital Retained earnings Total of trust liabilities Item		37,124 $ 3,346,934 188,399 3,572,457 $ Year ended Decmeber 31, 2017	11,763 $ 4,221,745 111,457) ( 4,122,051 $ Year ended Decmeber 31, 2016
Trust income Interest income Cash dividends received Income from stocks lending Investment gains- realized Investment gains (losses)- unrealized Subtotal Trust expenses Management fee Service fee Borrowing costs Remittance fee Income (loss) before income tax Income tax expense Net income (loss)	75 $ 15,116 16,110 61,346 141,135 233,782 1 3) ( 2,781) ( 1) ( 230,998 - 230,998 $		60 $ 15,542 36,147 17,760 143,200) ( 73,691) ( 1 1) ( 4,567) ( 2) ( 78,260) ( 5) ( 78,265) ($

B. Income statement of trust accounts

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C. Property list of trust accounts

. Property list of trust accounts
Items	December31,2017		December31,2016
Bank savungs Structured notes Funds Bond Stock Securities lending Others Total		209,606 $ 362,297 2,097,002 8,044 488,210 383,355 23,943 3,572,457 $		149,652 $ 494,813 2,705,174 - 482,075 280,572 9,765 4,122,051 $

(Blank below)

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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	December 31,2017	December 31,2017	December 31,2016	December 31,2016	Standard	Enforcement
		Calculation	Ratio	Calculation	Ratio
17	Stockholders’equity (Total liability－futures trader’s equity)	3,238,147 267,403	12.11	3,086,113 167,563	18.42	`≧`1	Met the requirement
17	Current assets Current liabilities	3,487,310 70,786	49.27	3,234,545 17,669	183.06	`≧`1	Met the requirement
22	Stockholders’equity Minimumpaid-in capital	3,238,147 400,000	809.54%	3,086,113 400,000	771.53%	`≧`60% `≧`40%	Met the requirement
22	Adjustednet capital Total amount of customer margins required for the open positions of futures traders	3,111,005 174,411	1783.72%	2,940,372 178,080	1651.15%	`≧`20% `≧`15%	Met the requirement

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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	December 31,2017	December 31,2017	December 31,2016	December 31,2016	Standard	Enforcement
		Calculation	Ratio	Calculation	Ratio
17	Stockholders’equity (Total liability－futures trader’s equity)	1,482,715 185,733	7.98	1,464,268 172,363	8.50	`≧`1	Met the requirement
17	Current assets Current liabilities	12,602,199 11,585,048	1.09	14,391,672 13,451,931	1.07	`≧`1	Met the requirement
22	Stockholders’equity Minimumpaid-in capital	1,482,715 645,000	229.88%	1,464,268 645,000	227.02%	`≧`60% `≧`40%	Met the requirement
22	Adjustednet capital Total amount of customer margins required for the open positions of futures traders	1,158,127 1,573,458	73.60%	1,153,456 1,749,892	65.92%	`≧`20% `≧`15%	Met the requirement

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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.

11) Presentation of the financial report

In line with the amendment to the ‘‘foreign exchange gains (losses)’’ disclosure as required by Tai-Zheng-Fu-Zi Letter No.1060500122, issued by the Taiwan Stock Exchange (TWSE) on January 10, 2017, for the year ended December 31, 2016, the effect of the above regulation on the accounts and amounts is as follows:

Statement ofComprehensiveIncome Others operating (losses) income Net currency exchange loss Others gains and losses		For the year ended December31,2017	For the year ended December31,2016
	After Reclassification 65,073 $ 2,067) (		BeforeReclassification - $ 63,006

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.

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G. Significant transactions between parent company and subsidiaries

No.(Note1)	Company	Counterparty	Relationship (Note 2)	Details of transactions	Details of transactions	Details of transactions	Details of transactions
				Account	Amount	Conditio ns	Percentage (%) of total consolidated net revenues or assets(Note 3)
0	President Securities Corp.	President Futures Corp.	1	Futures Margin - Own Funds	$1,551,945	Note 4	1.80%
0	President Securities Corp.	President Futures Corp.	1	Deposit-out	39,000	Note 4	0.05%
0	President Securities Corp.	President Futures Corp.	1	Accounts receivable	5,546	Note 4	0.01%
0	President Securities Corp.	President Futures Corp.	1	Deposit-in	16,000	Note 4	0.02%
0	President Securities Corp.	President Futures Corp.	1	Future commission revenue	51,466	Note 4	0.71%
0	President Securities Corp.	President Futures Corp.	1	Clearingcharges	16,342	Note 6	0.22%
0	President Securities Corp.	President Futures Corp.	1	Other non-operatingrevenues	10,921	Note 4	0.15%
0	President Securities Corp.	President Capital Management Corp.	1	Expense from investment advisory	36,000	Note 4	0.50%
0	President Securities Corp.	President Capital Management Corp.	1	Other non-operating revenues	3,556	Note 4	0.05%

~168~

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.
2) Related information of investee companies
A. Related information of investee companies

~169~

Name of the investor	Name of the investee company	Location	Date of registration	Reference number and the date of approval letter issued byFSC	Major operating activities	Balance on December31,2017 Balance on January1,2017 644,650 $ 644,650 $ 200,000 150,000 34,030 34,030 2,264,573 2,264,573 667,622 624,940 10,000 10,000 300,000 300,000 Original investment	EndingBalanc	EndingBalanc	e	Revenue of investee company	Net income (loss) of investee company	Investment income (loss) recognised by the Company	Cash dividends
							Shares 63,817,303 17,400,000 10,000,000 67,746,000 14,904,630 1,000,000 30,000,000	Percentage 96.69% 100.00% 5.19% 100.00% 42.46% 100.00% 100.00%	Bookvlaue
President Securities Corp.	President Futures Corp. President Capital Management Corp. President Securities (HK) Ltd. President Securities (BVI) Ltd. Uni-President Asset Management Corp. President Insurance Agency Corp. PSC Venture Capital Investment Limited Company	Taipei Taipei Hong Kong British Virgin Islands Taipei Taipei Taipei	1994.03.01 1997.04.15 1994.07.26 1998.02.26 2000.08.18 2008.04.29 2013.10.29	1994.03.01 Jing- Tou-Shen (83) Gong-Shang Letter No.1114 (Note 1) 1997.02.25 (86) Tai-Cai-Zheng (2) Letter No.17769 1993.11.4 (82) Tai- Cai-Zheng (2) Letter No.40913 1997.10.27 (86) Tai-Cai-Zheng (2) Letter No.04840 2000.07.19 (89) Tai-Cai-Zheng (2) Letter No.56407 (Note2) 2013.08.08 Jing- Guan-Zheng-Chuan Letter No.1020028529	Futures brokerage Securities investment consulting Securities dealer, brokerage, underwriting and consulting Securities investment and holding company Investment Trust Insurance Agent Consultation of investment management and venture capital; other unprohibited or unrestricted businesses beyond the permit				1,433,680 $ 196,897 68,782 2,177,269 496,093 31,995 247,776	729,986 $ 41,629 225,953 - 679,240 65,399 45,618) (	178,052 $ 973 76,667 108,595 190,717 15,742 56,382) (	172,163 $ 973 3,979 108,595 79,692 15,742 56,382) (	127,635 $ 49 - - 66,624 42,608 9,218

~170~

Name of the investor	Name of the investee company	Location	Date of registration	Reference number and the date of approval letter issued byFSC	Major operating activities	Balance on June 30,2017 Original in	Balance on January1,2017 vestment	EndingBalanc	EndingBalanc	e	Revenue of investee company	Net income (loss) of investee company	Investment income (loss) recognised by the Company	Cash dividends
								Shares 12,000 182,600,000 23,400,000 1,000,000	Percentage 0.03% 94.81% 100.00% 100.00%	Bookvlaue
President Insurance Agency Corp. President Securities (BVI) Ltd.	Uni-President Asset Management Corp. President Securities (HK) Ltd. President Wealth Management (HK) Ltd. President Securities (Nominee) Ltd.	Taipei Hong Kong Hong Kong Hong Kong	2000.08.18 1994.07.26 2002.03.31 1999.08.06	2000.07.19 (89) Tai-Cai-Zheng (2) Letter No.56407 1993.11.4 (82) Tai- Cai-Zheng (2) Letter No.40913 2001.12.11 (90) Tai-Cai-Zheng (2) Letter No.166728 1997.10.27 (86) Tai-Cai-Zheng (2) Letter No.04840	Investment Trust Securities dealer, brokerage, underwriting and consulting Wealth management Nominee Service	478 814,705 92,091 3,403	478 814,705 92,091 3,403			404 1,256,493 56,477 1,953	679,240 225,953 - -	190,717 76,667 121 88) (	95 72,688 121 88) (	54 - - -

Note1 ： As FSC was established in July, 2004, President Futures Corp. was apporved by the Investment Commission, Ministry of Economic Affairs.
Note2 ： When securities corporations invest in domestic business within FSC's limitation, there is no need to obtain the approval from FSC in advance, according to Tai-Cai-Zheng (2) Letter No.0930000005. Therefore, there was no reference numbers for President Personal Insurance Agency Co., Ltd. and President Insurance Agency Corp.
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. 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 securities or futures license of signatories to the IOSCO MMoU ：

~171~

a) Securities held as of December 31, 2017 of President Securities (BVI) Ltd `：`

Securities types andname	Type	Number of shares	Carrying value	Expressed in U.S. Dollars Fair vaule	Expressed in U.S. Dollars Fair vaule
			Unit price Amount 0.995 $ 4,975,000 $ 923,046) ( 4,051,954 $ 0.231 $ 42,220,875 $ 0.081 1,897,765 0.066 65,626 44,184,266 $	Unit price 0.811 $ 0.231 $ 0.081 0.066	Amount 5,051,954 $ - 5,051,954 $ 42,220,875 $ 1,897,765 65,626 44,184,266 $
Financial assets at fair value through profit or loss-current	STRUCTURED NOTE STOCK STOCK STOCK	5,000,000 182,600,000 23,400,000 1,000,000
Open-end mutual funds beneficiary certificates and money market instruments FL.R ARES VIR Less`：`impairment Total Investmentsinassociates
President Securities (HK) Ltd. President Wealth Management (HK) President Securities (Nominee) Ltd. Total

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

As of December 31, 2017, the carrying value of USD 4,051,954 of asset securitization for derivatives was undertaken with the Company's own capital of USD 4,975,000.

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

~172~

d) Balance sheets

PRESIDENT SECURITIES (BVI) LTD. BALANCE SHEETS DECEMBER 31, 2017 AND 2016

Assets		Decmeber31,2017	Decmeber31,2017	Decmeber31,2017		December31,2016	December31,2016	December31,2016	Liabilitiesand shareholders’equity		Amount % Amount % 3,571 $ - 3,598 $ - 3,571 - 3,598 - 67,746,000 93 67,746,000 97 757,813 1 757,813 1 4,260,476 6 689,439 1 396,638 - 732,608 1 73,160,927 100 69,925,860 100 73,164,498 $ 100 69,929,458 $ 100 December31,2017 December31,2016 Expressed in U.S. dollars	Amount % Amount % 3,571 $ - 3,598 $ - 3,571 - 3,598 - 67,746,000 93 67,746,000 97 757,813 1 757,813 1 4,260,476 6 689,439 1 396,638 - 732,608 1 73,160,927 100 69,925,860 100 73,164,498 $ 100 69,929,458 $ 100 December31,2017 December31,2016 Expressed in U.S. dollars	Amount % Amount % 3,571 $ - 3,598 $ - 3,571 - 3,598 - 67,746,000 93 67,746,000 97 757,813 1 757,813 1 4,260,476 6 689,439 1 396,638 - 732,608 1 73,160,927 100 69,925,860 100 73,164,498 $ 100 69,929,458 $ 100 December31,2017 December31,2016 Expressed in U.S. dollars	Amount % Amount % 3,571 $ - 3,598 $ - 3,571 - 3,598 - 67,746,000 93 67,746,000 97 757,813 1 757,813 1 4,260,476 6 689,439 1 396,638 - 732,608 1 73,160,927 100 69,925,860 100 73,164,498 $ 100 69,929,458 $ 100 December31,2017 December31,2016 Expressed in U.S. dollars	Amount % Amount % 3,571 $ - 3,598 $ - 3,571 - 3,598 - 67,746,000 93 67,746,000 97 757,813 1 757,813 1 4,260,476 6 689,439 1 396,638 - 732,608 1 73,160,927 100 69,925,860 100 73,164,498 $ 100 69,929,458 $ 100 December31,2017 December31,2016 Expressed in U.S. dollars	Amount % Amount % 3,571 $ - 3,598 $ - 3,571 - 3,598 - 67,746,000 93 67,746,000 97 757,813 1 757,813 1 4,260,476 6 689,439 1 396,638 - 732,608 1 73,160,927 100 69,925,860 100 73,164,498 $ 100 69,929,458 $ 100 December31,2017 December31,2016 Expressed in U.S. dollars	Amount % Amount % 3,571 $ - 3,598 $ - 3,571 - 3,598 - 67,746,000 93 67,746,000 97 757,813 1 757,813 1 4,260,476 6 689,439 1 396,638 - 732,608 1 73,160,927 100 69,925,860 100 73,164,498 $ 100 69,929,458 $ 100 December31,2017 December31,2016 Expressed in U.S. dollars
		Amount		%		Amount		%			Amount		%		Amount		%
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		24,810,955 $ 4,051,954 117,323 28,980,232 44,184,266 73,164,498 $		34 6 - 40 60 100		22,082,892 $ 5,654,010 63,673 27,800,575 42,128,883 69,929,458 $		32 8 - 40 60 100	Current liabilties Other payables Total liabilities Shareholders’equity Share capital Capital reserve Retained earnings Retained earnings Other equity Translation gain or loss on the financial statements of foreign Total shareholders’ equity Total liabilities and shareholders’ equity		3,571 $ 3,571 67,746,000 757,813 4,260,476 396,638 73,160,927 73,164,498 $		- - 93 1 6 - 100 100		3,598 $ 3,598 67,746,000 757,813 689,439 732,608 69,925,860 69,929,458 $		- - 97 1 1 1 100 100

~173~

PRESIDENT WEALTH MANAGEMENT (HK) LTD. BALANCE SHEETS DECEMBER 31, 2017 AND 2016

Assets		Decmeber31,2017	Decmeber31,2017	Decmeber31,2017		December31,2016	December31,2016	December31,2016	Liabilitiesand shareholders’equity
		Amount		%		Amount		%			Amount		%		Amount		%
Current assets Cash and cash equivalents Other receivables Total current assets Total assets		14,832,782 $ 21,795 14,854,577 14,854,577 $		100 - 100 100		14,798,570 $ 23,424 14,821,994 14,821,994 $		100 - 100 100	Current liabilities Other payables Total liabilities Shareholders’ equity Share capital Retained earnings (accumulated deficit) Total shareholders’ equity Total liabilities and shareholders’ equity	19,410 $ 19,410 23,400,000 8,564,833) ( 14,835,167 14,854,577 $		- - 158 58) ( 100 100		17,730 $ 17,730 23,400,000 8,595,736) ( 14,804,264 14,821,994 $		- - 158 58) ( 100 100

~174~

PRESIDENT SECURITIES (NOMINEE) LTD. BALANCE SHEETS DECEMBER 31, 2017 AND 2016

Expressed in HK dollars

Assets		Decmeber31,2017	Decmeber31,2017	Decmeber31,2017		December31,2016	December31,2016	December31,2016	Liabilitiesand shareholders’equity		December31,2017	December31,2017	December31,2017		December31,2016	December31,2016	December31,2016
		Amount		%		Amount		%			Amount		%		Amount		%
Current assets Cash and cash equivalents Other receivables Total current assets Total assets		528,954 $ 674 529,628 529,628 $		100 - 100 100		550,253 $ 674 550,927 550,927 $		100 - 100 100	Current liabilities Other payables Total liabilities Shareholders’ equity Share capital Retained earnings (accumulated deficit) Total shareholders’ equity Total liabilities and shareholders’ equity	16,620 $ 16,620 1,000,000 486,992) ( 513,008 529,628 $		3 3 189 92) ( 97 100		15,410 $ 15,410 1,000,000 464,483) ( 535,517 550,927 $		3 3 182 84) ( 97 100

~175~

e) Statements of comprehensive income

PRESIDENT SECURITIES (BVI) LTD.

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

==> picture [450 x 214] intentionally omitted <==

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

Expressed in U.S. dollars
Year ended December 31, 2017 Year ended December 31, 2016
Accounts Amount % Amount %
Expenditures
Employee benefits ($ 50,243) $ - ($ 50,430) -
Other operating expenses ( 17,541) - ( 17,647) -
Total expenditures and expenses ( 67,784) - ( 68,077) -
Non-operating gains and losses
Share of the profit or loss of associates and joint
ventures accounted for using the equity method 2,391,353 - ( 735,531) -
Other gains and losses 1,247,468 - 393,870 -
Total non-operating gains and losses 3,638,821 - ( 341,661) -
(Loss) profit before tax 3,571,037 - ( 409,738) -
- - - -
Income tax expense
Net (loss) income $ 3,571,037 - ($ 409,738) -
----- End of picture text -----

~176~

PRESIDENT WEALTH MANAGEMENT (HK) LTD

STATEMENTS OF COMPREHENSIVE INCOME

	PRESIDENT WEALTH MANAGEMENT (HK) LTD STATEMENTS OF COMPREHENSIVE INCOME	PRESIDENT WEALTH MANAGEMENT (HK) LTD STATEMENTS OF COMPREHENSIVE INCOME
Accounts	Expressed in HK dollars Amount % Amount % 30,920) ($ - 39,710) ($ - 30,920) ( - 39,710) ( - 70,824 - 86,789 - 39,904 - 47,079 - - - - - 39,904 $ - 47,079 $ - FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 Year ended December 31,2017 Year ended December 31,2016
		%
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		-
		-
		-
		- -
		-

~177~

PRESIDENT WEALTH MANAGEMENT (HK) LTD STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

						Expressed in HK dollars	Expressed in HK dollars
		Year ended December 31,2017				Year ended December 31,2016
Accounts		Amount	%			Amount	%
Expenditures
Other operating expenses	($		24,660)	-	($	20,995)	-
Total expenditures and expenses	(		24,660)	-	(	20,995)	-
Non-operating gains and losses
Other gains and losses			2,152	-		2,626	-
Profit before tax	(		22,508)	-	(	18,369)	-
Income tax expense			-	-		-	-
Net income	($		22,508)	-	($	18,369)	-

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

3) Information of overseas branches and representative office

Overseas branches and representative office	Nationality	Date of registration	Reference number and the date of approval letter given by Securities and Futures Bureau of FSC	Main business activities	Operating income	(Loss) profit before tax (Note 1)	Assignment of workingcapital	Assignment of workingcapital	Assignment of workingcapital	Assignment of workingcapital	Material transaction account with head office	Note
							Balance on January 1, 2017	Increase of working capital	Deduction of working capital	Balance on June 30, 2017
Representative office of President Securities Corp. in Xiamen	Xiamen	2008.08.22	2008.01.21 Jing-Guan- Zheng-Chuan Letter No.0960073542	Non-operating activities of securities business consultation, contact, and market survey	-	($ 5,829)	-	-	-	-	-	-

Note 1: Operating expenses generated by the representative office.

~178~

4) Disclosure of investment in Mainland China `：` Not applicable

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 segments include Capital Market segment, Quantitative Trading segment, Financial Product segment, and Shareholder Services 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”.

~179~

3) Profit or loss of segments information

Year ended December 31, 2017

Brokerage segment	Proprietary Trading segment	Fixed Income segment	Reinvestment segment	Reinvestment segment	Total
2,296,187 $ 368,235 $	1,789,971 $ 1,348,730 $				7,270,066 $
					2,843,973 $

Brokerage segment	Proprietary Trading segment	Fixed Income segment	Reinvestment segment	Other operating segments Others 794,382 $ 30,806) ($ 217,355 $ 52,177) ($	Total
1,672,670 $ 34,385 $	96,166 $ 219,321) ($	973,138 $ 717,344 $	1,057,066 $ 239,925 $		4,562,616 $
					937,511 $

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.

~180~

AI assistant

PSC — Annual Report 2018

52209_rns_2018-06-27_f31fe7c0-6a8c-483b-8da0-ed4043e20b89.pdf

PRESIDENT SECURITIES CORP.

2017 ANNUAL REPORT

Notice to readers

ANNUAL REPORT

Spokesperson

Deputy Spokesperson

Stock Transfer Agent

Auditors

Overseas Securities Exchange

Headquarters

Corporate Website

Table of Contents

IV.

I. Letter to Shareholders

Dear Shareholders,

II. Company Profile

III. Corporate Governance

Organiza�on Chart

Ma or Cor orate Func�ons j p

Fixed Income Dealing

Brokerage

Quan�ta�ve Trading

Proprietary Trading

Wealth Management & Trust

Capital Market (Underwri�ng)

Shareholder Services

Financial Products

For Remunera�on Commi�ee

Compensa�on and Remunera�on

For Directors

Unit: NT$ thousands

For President、 Vice President and Chief Auditor

Informa�on regarding directors, supervisors, management team and branch manager

Corporate Governance

Ownership Structure and Shareholders’ Rights

Corporate Governance

Board Opera�on

4 pillars of corporate governance

Member of the board

Board Opera�on

Training for Directors

3 commi�ees

Board Performance Evalua�on

Board of Directors Mee�ng

Corporate Governance

Corporate Governance

4 pillars of corporate governance Risk Management

Risk Evalua�on Standards

Market Risk

Risk Management

Credit Risk

Opera�onal Risk

Risk Management Policy

Our Risk Management

Our Risk Management Organiza�on

Board of Directors

Risk Management Commi�ee

Compliance Division

Finance Department

Business units

Se�lement & Clearing Department

How can PSC make a contribu�on to the UN Sustainable Development Goals (SDGs)?

Corporate Social Responsibility

Corporate Social Responsibility

Fostering a Sustainable Environment

Environmental Protec�on Measures

Corporate Social Responsibility

Employee Rights and Hiring Concerns

Preserving Public Welfare

Safety Workplace

Communica�on System

Corporate Social Responsibility

Par�cipa�on in Public Service

Customer Rights

Our Service (and produc�on) Policy

Sign with Main Suppliers

Integrity Applica�on

PSC Annual Report 2018