PSC - Annual Report 2019 | FinancialReports.eu

Stock Code: 2855 www.pscnet.com.tw

201 8 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.

2018 Annual Report is available at: Taiwan Stock Exchange Market Observation Post System http://mops.twse.com.tw/

Table of Contents
I. A Letter to Shareholders	1
II. Company Profile	3
III. Corporate Governance	5
Business Organization	6
Directors’, Supervisors’ and Managers’ Information	8
Implementation of Corporate Governance	39
Information Regarding the Company’s Audit Fee and Independent Auditor	99
Replacement of CPA	100
Information Regarding the Company’s Chairman, President, or managers responsible for financial and
accounting affairs who have held any position in the accounting firm or its affiliates	101
Net Change in shareholdings and in shares pledged by directors, supervisors, management, and
shareholders holding more than a 10% share in the Company.	102
Information Disclosing the Relationship between any of the Company’s Top Ten Shareholders	107
Ownership of Shares in Affiliated Enterprises	108
Name and position of the employees with the top ten amounts of bonuses as well as the total amounts
of the top ten bonuses	109
Directors and corporate auditors training	109
Manager learning	114
IV. Capital Structure	116
Shareholders’ equity	117
Long-Term Borrowings	121
Issuance of Preferred Stocks	121
Issuance of Global Depositary Receipts	121
Issuance of Employee’s Stock Options	121
Merge and Acquisition	121
Working Capital Plans	121
V. Business Environment	122
Description of Business Activities	123
Market Conditions	138
Employee Data	145
Environmental Protection and Corporate Citizenship	146
Labor Relations & Employee Benefit	147
Material Contracts and Agreements	154

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I
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VI. Financial Information	155
Five-Year Financial Summary	156
Financial Analysis for the Past 5 Years	160
Audit Committee’s Review Report on the Company’s 2018 Financial Statement	164
Financial Difficulties that will Affect the Company’s Financial Situation	165
Status of the Achievement in Financial Forecasts for the Latest Two Years	165
Provisioning Methods of the Company’s Assets and Liabilities’ Valuation Accounts	165
Accounting Treatment of Impairment of Assets of the Company	165
Methods and Assumptions used for Evaluating Fair Value of Financial Instruments	166
Hedge Accounting Applied to Financial Instruments	166
VII. Financial Status, Operating Results and Risk Management	167
Financial Status	168
Analysis of Operating Results	168
Analysis of Cash Flow	169
Effects of Major Capital Expenditures in the Most Recent Fiscal Year on Financial Operations	170
Long-term Investment Policy	170
Analysis of Risk Management	170
Other significant events: None.	180
VIII. Other Disclosures	181
Consolidated Business Report of Affiliated Companies, Consolidated Financial Statements of Affiliated
Companies, and Reports of Affiliation	182
Private placement of marketable securities	185
Holding or disposal of the company’s shares by the subsidiaries	185
Other Necessary Supplement	185
IX. Occurrences of items that may give rises to substantial impact on shareholders’
interests and/or stock price	186
X. Financial Statements	187

I. Letter to Shareholders

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I. A Letter to Shareholders

Dear Shareholders,

Although the global economy continued to recover in 2018, the interest rate hikes in major countries and the rise of trade protectionism have caused global stock markets to fall. Although the U.S. has measures such as, tax cuts, expansion of infrastructure construction, and retreat of manufacturing, the US-China trade war has brought a great deal of uncertainties to the global economy, and the Fed’s continued interest rate hikes and shrinking of the balance sheet have caused US stocks to fall. In Europe, the rise of trade protectionism led to a decline in its export growth rates, coupled with the government’s austerity measures and the quantitative easing policy ended by the European Central Bank, investors’ confidence turned to relatively conservative. Since China has been impacted by the US-China trade war and the collapse of online P2P lending platforms, the central government has tightened its supervision, and financial regulation was conducted by local governments, causing the economic growth rate to decline. In Taiwan, according to statistics from the Directorate-General of Budget, Accounting, and Statistics, the economic growth rate decreased from 3.08% in 2017 to 2.63% in 2018; with the economic growth rate decline, the Taiwan Stock Exchange Capitalization Weighted Stock Index also fell from 10,642 points to 9,727 points at a rate of 8.6%. However, the government has extended its day trading policy by three years and expanded it to securities proprietary traders, coupled with expansion of launch of exchange traded funds (ETF) by each major securities investment trust company, which diversified the markets and enhanced investors’ trading motivations. The average daily volume of Taiwan Stock Exchange and Taipei Exchange increased from NT$138 billion to NT$166 billion, up by 20.3% compared with the previous year.

Although the global stock market dropped in 2018, we maintained a stable profit by grasping economic trends and implementing strict risk control. The revenue was NT$ 4,687,890 thousand, the operating cost was NT$756,174 thousand, the operating expense was NT$3,051,375 thousand, the net non-operating revenue was NT$505,305 thousand, the profit before taxes was NT$1,385,646 thousand, the profit after taxes was NT$1,210,323 thousand, and the net profit after taxes per share was NT$0.87. Among the twelve largest integrated securities firms, we ranked 5th, so in terms of the profitability we remained the leading company in the industry.

For the brokerage business, the market share in 2018 stood at 3.16%. With the development of digital technology and the changing business environment of securities firms, the ratio of electronic orders by investors has gradually increased, and the demand for the over-the-counter service has gradually decreased. Under the pressure of integration of business and branches, we has adjusted the brokerage business model with the number of branches maintained at 36 and continued to adopt the trends of financial technology, while conducting overall business planning in line with the relaxation of laws and regulations and expanding the diversified wealth management business and multi-platform order-placing services at the same time, in the hope of combining new and old resources to enhance competitiveness and strengthen the values of distribution channels.

As for the underwriting business, we organized six cases and co-organized 35 cases throughout the year, and the total underwriting amount was NT$3.762 billion, ranking 7th in the industry. We, with a professional and experienced team, has striven for clients in the forward-looking development industry. We provide high-quality counseling services and assist clients to go initial public offering or raise funds from the primary market. We was ranked 1st by the Taipei Exchange in the performance of assisting Taipei Exchange listed companies in fundraising in 2018. Furthermore, we will also develop business with corporates to provide corporate clients with financial counseling, wealth management, and risk planning services.

I. Letter to Shareholders

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In terms of each proprietary trading business activity, although the international political and economic situations were uncertain in 2018, our stock proprietary team has made great profits through global allocation and precise forecasr. On the front of the proprietary bonds business, influenced by the continued increase in interest rates in major countries, the bond market became a bear market, but under the strict control of the position size, as well as rigorous risk control, the losses were under control. For the warrant business, the amount of the warrants issued ranked 5th in the industry, and the number of the warrants issued ranked 7th. As the long-term commitment to the quality of market making has been recognized by investors, hopefully, with the brand effect, profitability will be increased. As for the proprietary futures trading business, we sought for profitable inter-market arbitrage opportunities through a high winning percentage measuring approach in the hope of creating a stable profit by diversifying risks.

In addition to business activities, we also take corporate social responsibility. In terms of talent cultivation and competence development, we was awarded the iCAP Quality Accreditation for Competency-Based Program by the Ministry of Labor. We will improve our digital marketing skill to achieve the goal of digital transformation. Furthermore, we has also strengthened corporate governance and implemented anti-money laundering measures, as well as amended relevant internal control systems in line with the laws promulgated by the competent authority. Taiwan Ratings Corporation has evaluated our market presence and financial structure and rated us as “twA” and “twA-1”for long-term and short-term credits, respectively.

Looking into 2019, because of the US-China trade conflict, the IMF’s estimate of global economic growth was revised downward from 3.7% to 3.5% this January. In Taiwan, due to the increasing uncertainty in the global economy, businesses have turned cautious about investments. Meanwhile, smartphone sales stalled, and the popularity of cryptocurrencies waned, the Directorate-General of Budget, Accounting, and Statistics estimated that Taiwan’s annual economic growth rate would drop to 2.27%. In the securities industry, the Financial Supervisory Commission permitted securities firms to launch exchange traded notes (ETNs), which will be officially listed on the exchange this year. With the launch of new products, it is expected that the diversification of the securities market will be enhanced, investors will have more products to choose from, and securities firms will be able to take this opportunity to enter the asset management field to increase the sources of management fee revenue, which is beneficial to the performance of securities firms. Shareholders have witnessed our past performance. Faced with a future full of opportunities and challenges, we 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 our 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 2019.

Chairman: Lin, Kuan-Chen

President: Tsai, Sen-Bu

II. Company Profile

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Incorporated
1988 1991 1995
President Securi�es Co., Ltd. was incorporated Merged with Tung-Hsin, Tung-Yung, Increased capital to NT$7.03 billion.
through the memorandum of Securi�es and Futures Commission, Ministry of Finance with the le�er No. (77) Taiwan-Finance-Securi�es-(II)- Tung-Wen, Tung-Ku, Tung-Fu, Tung-Yu, Tung-Hsing, Tung-Wang, Tung-Lai securi�es agencies. Became the first Asian securi�es company to acquire the ISO9002 service quality cer�fica�on.
20093 in November 19th. Established new branches in SanMin, Xin Taichung,
Founding capital of NT$1.4 billion increased and Hsinying, bringing the total number of branches
to actual paid-in capital of NT$3.362 billion to 16.
a�er the merger.
Amended business name to President Performed capital infusion; capital stock Established new branches in
Securi�es Corp. on March 4th. a�er infusion amounted to NT$4.02 Yenping, Taoyuan, Sanchung,
Commencement of official opera�ons on billion. Tunghsing, and Fengyuan.
April 3rd.
1996
1989 1994
2009 2007
Executed capital reduc�on through Long-term credit ra�ng was upgraded from twA-
cancella�on of treasury stock, capital to twA, and short-term credit ra�ng was
stock a�er asset reduc�on amounted to upgraded from twA-2 to twA-1.
NT$11.857 billion. Converted retained earnings to paid-in capital,
capital stock a�er infusion amounted to
NT$11.768 billion.
Obtained trust business license issued by FSC. Issued the first unsecured conver�ble corporate bond in Taiwan, and received NT$ 3 billion from the offering in May.Established PSC Xiamen business office in China on August
Converted retained earnings to paid-in 22nd.
capital, capital stock a�er infusion
amounted to NT$12.319 billion. Converted retained earnings to paid-in capital, capital stock
a�er infusion amounted to NT$12.157 billion.
2010 2008
2012 2014
Converted retained earnings to paid-in Established an Offshore Securi�es Unit (OSU) in July .
capital, capital stock a�er infusion Established new branches in Xinzhuang, Zhubei,
amounted to NT$13.231 billion. Zhunan, and Xin Taoyuan, bringing the total number
of branches to 39.
Acquired the brokerage business of Standard
Chartered Bank in Taiwan.
Established remunera�on Commi�ee. The total branches remain 35 (including head office.) .
Converted retained earnings to paid-in capital. The
capital stock a�er infusion amounted to NT$13.046
billion.
Conducted a capital reduc�on by canceling treasury
stocks in December. The capital became NT$12.845
billion.
2011 2013
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President Securities Corp. 2018 Annual Report

II. Company Profile

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1998 2000
Executed capital infusion; capital stock In August, acquired Ta Feng Securi�es Co., Ltd.
a�er infusion amounted to NT$10.18
Converted retained earnings to paid-in capital,
billion in May. capital stock a�er infusion amounted to
NT$12.255 billion.
Executed capital infusion; capital stock a�er Obtained official approval for OTC lis�ng.
infusion amounted to NT$8.08billion. Converted retained earnings to paid-in Executed capital reduc�on through
Established new branches in Tianmu, Banqiao, Hankou, Tali, and Sanduo. The capital, capital stock a�er infusion amounted to NT$10.91 billion. cancella�on of treasury stock, capital stock a�er asset reduc�on amounted to
business offices were increased to 26 Rated as “twBBB” and “twA-3” for long-term NT$11.279 billion.
(including head office). and short-term credits, respec�vely, by
Taiwan Ra�ng Corp.
1997 1999 2001
2006 2003
Obtained business license for wealth management.
Received the 6th annual Na�onal Charity Award, Obtained business license for structured
and was the only for-profit business en�ty among twelve recipients. notes; Fixed Income business unit licensed as the main dealer for business
opera�on of government bonds issued by
Executed capital reduc�on through cancella�on of Central Bank of the Republic of China.
treasury stock, capital stock a�er asset reduc�on
amounted to NT$11.37 billion.
Opened East Tainan Branch, Neihu Branch and Renai Branch. The
business offices increased to 35 (including head office). Listed on TWSE in September.
Long term credit ra�ng was upgraded from twBBB to twBBB+ in Executed capital reduc�on through
September, and was again upgraded to twA- in December. cancella�on of treasury stock, capital
Executed capital reduc�on through cancella�on of treasury stock, stock a�er asset reduc�on amounted to
capital stock a�er asset reduc�on amounted to NT$11.4499 billion. NT$11.46 billion.
2004 2002
2019
2016
Conducted a capital reduc�on by canceling treasury
Conducted a capital reduc�on by canceling treasury stocks in
stocks in May. The capital became NT$13.723 billion.
February and May. The capital became NT$13.037 billion and
NT$12.952 billion.
Converted earnings to paid-in capital in August, growing the capital
to NT$13.356 billion.
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).
The branch in Zhubei terminated opera�ons
Established an Audi�ng Commi�ee in June.
in May, causing that the total number of
Opened a new branch in Pingzhen, bringing our total branches reduced to 36(including our
number of branches to 40 (Including our headquarters).
headquarters) in October.
The Company transferred earnings to paid-in
capital in August. The capital a�er capital
increase was NT$13.904 billion.
2015 2017
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III. Corporate Governance

President Securities

Professional Leadership & Kind Service

III. Corporate Governance

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I. Business Organization

A. Organizational 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.
Corporate Client Dept.
Offshore Securities Unit
E-Trade Department
Branches
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III. Corporate Governance

B. Function of Each Division

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Division Function
 Accept orders from clients to buy/sell listed securities and forward to TWSE for execution.
 Accept orders from clients to buy/sell listed securities and forward to TPEx for execution.
 Manage custodial services for clients.
 Provide margin financing for securities trading.
 Securities Borrowing and Lending Business.
Brokerage  Borrowing or Lending Money in Connection with Securities Business
 Conduct Borrowing and Lending of Funds for Unrestricted Purposes.
 Accepting orders to trade Foreign Securities.
 Futures Introducing Broker Business.
 Electronic transaction operations.
 Customer service coordination process.
 Issue equity warrants and conduct hedging strategies.
 Launch structured products and conduct hedging strategies.
Financial  Convertible bond asset swap and options business.
Products  Trading of equity derivatives.
 New financial product design and development.
 Other derivatives financial products approved by the competent authority.
 Trading of publicly listed securities on the TWSE and TPEx, using President Securities’ own funds.
Proprietary  Hedge positions via futures and options markets as a futures trader.
Trading  Expand international investment business involving legally-permitted overseas spot/futures market
research and investments.
 Use own capital to trade domestic and foreign corporate and government bonds in the OTC market.
 Offer tendering services of Taiwan government bonds.
 Repo and Reverse-Repo transactions.
Fixed Income  Trade overseas and domestic convertible bonds.
 Provide debt capital market services for overseas and domestic issuers.
 Provide financial market services and product to financial institutions and corporate clients.
 Provide customized structured products for clients.
 Assist corporations in application for public listing on TWSE or TPEx.
 Assess and advise clients with respect to capital increase plans and applications to convert private
Capital Market equity into publicly traded stocks.
(Underwriting)  Underwrite bonds and foreign financial products.
 Assist in M&A activities; provide consulting services on corporate finance and other specialized areas.
 Other various types of underwriting business.
 Market making and trading of futures and options contracts on the TAIFEX.
 Market making and trading of legally-permitted foreign futures and options contracts.
Quantitative  ETF arbitrage, market making, hedging, and trading.
Trading  Spot and futures arbitrage and trading.
 Structured products issuing and trading.
 Spread and volatility arbitrage of domestic and foreign futures/options products.
 Coordinate shareholder services on behalf of publicly listed companies.
 Assist in the coordination of shareholders’ meetings.
Shareholder
 Coordinate the distribution of cash and/or stock dividends to shareholders.
Services
 Manage the issuance and delivery of tax forms to shareholders.
 Respond to shareholder enquiries and legal issues.
 Provide customers with the most complete asset arrangement and finance service planning service.
Wealth  Conduct asset allocation for customers through trusts.
Management &  Negotiable securities trust lending business.
Trust
 Provide Offshore Securities Unit (OSU) customers with service of international securities asset
allocation, wealth consulting service, foreign securities or other authorized foreign financial products.
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President Securities Corp. 2018 Annual Report

II. Directors’, Supervisors’ and Managers’ Information

A. Directors

1. Information Regarding Directors

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April 20, 2019
Executives, Directors
Shareholding when Current Spouse & Minor Shareholding or Supervisors Who are
Title Nationality Name ElectedDate Gender Term(Yr.) Date (FirstElected) Elected Shareholding Shareholding Arrangementby Nominee Experience (Education) Current Position with PSC and Other Company Spouses or within Two Degrees of Kinship
Shares % Shares % Shares % Shares % Title Name Relation
Kai Nan
Investment 2018.6.21 3 2000.6.8 39,831,460 2.86 39,831,460 2.86 0 0 0 0 NA NA NA NA NA
Co., Ltd.
1. National Taiwan Sport University 1. PSC: NA
2. Vice Chairman and President of 2. Other Company:
President Securities Corp. • Chairman:
3. Chairman of President Futures Corp. Richness Cereal Trading Co., Ltd.
4. Director of Taiwan Futures Exchange • Director:
5. Chairman of Richness Cereal Trading President Futures Corp., Taiwan
Delegate: Co., Ltd. Futures Exchange, Q-WARE
Chairman Republic of China Lin, Kuan-Chen 2018.6.21 M 3 2018.6.21 3,750,000 0.27 3,950,000 0.28 0 0 0 0 6. Director and President of Fonmau Cereal Industrial Co., Ltd. Systems & Services Corp., President Securities (HK) Ltd., NA NA NA
President Securities (BVI)
7. Director of Q-WARE Systems & Ltd., President Securities
Services Corp. (Nominee) Ltd., President Wealth
Management (HONG KONG)
8. Director of President Securities Corp. Ltd.
• Director and President:
Fonmau Cereal Industrial Co.,
Ltd.
8
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Executives, Directors
Shareholding when Current Spouse & Minor Shareholding or Supervisors Who are
Title Nationality Name ElectedDate Gender Term(Yr.) Date (FirstElected) Elected Shareholding Shareholding Arrangementby Nominee Experience (Education) Current Position with PSC and Other Company Spouses or within Two Degrees of Kinship
Shares % Shares % Shares % Shares % Title Name Relation
1. MBA of National Taiwan University, 1. PSC: NA
R.O.C.
2. Other Company:
2. Manager of President International
Development Corp. • Vice President:
3. Manager of Uni-President Enterprises Uni-President Enterprises Corp.
Corp., Treasury Division • President:
4. Vice President of Uni-President Champ Green (Shanghai)
Enterprises Corp, Business Consulting Co., Ltd.
Integration Division • Director and President:
5. Director of President Securities Corp. United Advisor Venture
6. Director of President International Management Ltd.
Development Corp. • Director:
7. Director of Presco Netmarketing, Inc. President International
8. Director of Kuang Chuan Dairy Co., Development Corp., Presco
Ltd. Netmarketing, Inc., Kuang
9. Director of Kuang Chuan Foods Ltd. Chuan Dairy Co., Ltd., Kuang
Chuan Foods Ltd., Tait
10. Director of Tait Marketing & Marketing & Distribution Co.,
Distribution Co., Ltd. Ltd., Changhua County Chang
11. Director of Changhua County Chang Chun-Ya Private Social Welfare
Chun-Ya Private Social Welfare Charity Foundation, Yantai
Charity Foundation North Andre Juice Co Ltd.,
Delegate:
Director Republic of China Liu, Tsung-Yi 2018.6.21 M 3 2015.6.18 0 0 0 0 0 0 0 0 12. Director of Yantai North Andre Juice Co Ltd. Champ Green Capital Limited, SMS Capital Management Ltd., NA NA NA
SMS Investment Management
13. Director of Champ Green Capital Co.,Ltd., SMS Capital Co.,Ltd.,
14. Director of SMS Capital Management SMS Partners Limited, Shanghai
Ltd. Shunfeng Restaurant Group Co.,
15. Director of SMS Investment Ltd., Huasui Tomato Investment
Management Co.,Ltd. Company, Heilongjiang
16. Director of SMS Capital Co.,Ltd. Wondersun Dairy Co., Ltd,
17. Director of SMS Partners Limited Woongjin Foods Co., Ltd.,
Daeyoung Foods Co., Ltd.
18. Director of Shanghai Shunfeng
Restaurant Group Co., Ltd.
19. Director of Huasui Tomato
Investment Company
20. Director of Heilongjiang Wondersun
Dairy Co., Ltd
21. Director of Woongjin Foods Co., Ltd.
22. Director of Daeyoung Foods Co.,
Ltd.
23. President of Champ Green (Shanghai)
Consulting Co., Ltd.
24. Director and President of United
Advisor Venture Management Ltd.
10
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Executives, Directors
Shareholding when Current Spouse & Minor Shareholding or Supervisors Who are
Title Nationality Name ElectedDate Gender Term(Yr.) Date (FirstElected) Elected Shareholding Shareholding Arrangementby Nominee Experience (Education) Current Position with PSC and Other Company Spouses or within Two Degrees of Kinship
Shares % Shares % Shares % Shares % Title Name Relation
1. MBA of University of Strathclyde 1. PSC: NA
2. CFO of Uni-President Enterprises 2. Other Company:
Corp. • Director:
3. CFO of Uni-President China Uni-President China Holdings
Holdings Ltd. Ltd. , President Enterprises
4. Director of President Securities Corp. (China) Investment Co., Ltd. ,
Heilongjiang Wondersun Dairy
5. Director of President Enterprises Co., Ltd. , President International
(China) Investment Co., Ltd., Development Corp. , Kai Yu
Director Republic of China Chen, Kuo-Delegate:Hui 2018.6.21 M 3 2017.11.3 0 0 0 0 0 0 0 0 Heilongjiang Wondersun Dairy Co., Ltd. (BVI) Investment Co., LtdPresident China Holdings Co., 、 Uni- NA NA NA
6. Supervisor of Jinan/ Taizhou/ Ltd.
Zhanjiang President Enterprises Co., • Supervisor:
Ltd. , Kunming President Enterprises
Food Co., Ltd. 、 Champ Green Tone Ren Enterprise Co., Ltd.,
Champ Green (Shanghai)
(Shanghai) Consulting Co., Ltd. ,
Consulting Co., Ltd., United
United Advisor Venture Management
Advisor Venture Management
Co., Ltd. , Tone Ren Enterprise Co.,
Co., Ltd.
Ltd.
• Assistant Vice President:
Uni-President Enterprises Corp.
1. M.S., Dept. of Business 1. PSC: NA
Administration, National Cheng
2. Other Company:
Kung University
• Vice President:
2. Vice President of ScinoPharm Taiwan
Delegate: Ltd.(Administraion Center ) President Chain Store Corp.
Director Republic of Hsieh 2018.6.21 F 3 2001.3.21 54,569 0 54,569 0 17,542 0 0 0 3. Vice President of President NA NA NA
China Hong, Hui-
Tzu International Development Corp.
(F&A Divison)
4. Chief Audit Officer of President
Chain Store Corp.
5. Director of President Securities Corp.
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Executives, Directors
Shareholding when Current Spouse & Minor Shareholding or Supervisors Who are
Title Nationality Name ElectedDate Gender Term(Yr.) Date (FirstElected) Elected Shareholding Shareholding Arrangementby Nominee Experience (Education) Current Position with PSC and Other Company Spouses or within Two Degrees of Kinship
Shares % Shares % Shares % Shares % Title Name Relation
Hui Tung
Investment 2018.6.21 3 1994.10.29 10,199,544 0.73 10,199,544 0.73 0 0 0 0 NA NA NA NA NA
Co.,Ltd.
1. Department of International Business 1. PSC: NA
Soochow University
2. Other Company:
2. Vice Chairman of Hui Tung • Vice Chairman:
Investment Co.,Ltd.
Hui Tung Investment Co.,Ltd.
Director Republic of Lee, Che-Delegate: 2018.6.21 M 3 2018.6.21 0 0 0 0 0 0 0 0 3. Director of HHB Geriatric Healthcare Corp. • Director: NA NA NA
China
Ming 4. Director of Hui Tung Investment Co., Hui Tung Investment Co.,Ltd. ,
Ltd. HHB Geriatric Healthcare Corp. ,
Japan Asia Specialities Co., Ltd.
5. Director of Japan Asia Specialities
Co., Ltd.
6. Director of President Securities Corp.
Leg Horn
Investment 2018.6.21 3 1988.11.26 12,408,018 0.89 12,408,018 0.89 0 0 0 0 NA NA NA NA NA
Co.,Ltd.
1. BBA in Business Administration, 1. PSC: NA
Soochow University
2. Other Company:
Delegate: 2. Accounting Manager of Leg Horn
Director Republic of China Chang, Ming- 2018.6.21 F 3 1990.3.30 1,185,670 0.09 1,185,670 0.09 0 0 0 0 Investment Co., Ltd. • Director and Accounting Manager: NA NA NA
Chen 3. Director of Leg Horn Investment Co., Leg Horn Investment Co., Ltd.
Ltd.
4. Director of President Securities Corp.
Ta Le
Investment
2018.6.21 3 2000.6.8 7,172,615 0.52 7,172,615 0.52 0 0 0 0 NA NA NA NA NA
Holding
Co., Ltd.
1. National Tainan Girl’s Senior High 1. PSC: NA
School
2. Other Company:
2. Chairman of Ta Le Investment
• Chairman:
Holding Co., Ltd.
Delegate: Ta Le Investment Holding Co.,
Director Republic of Tu, Li- 2018.6.21 F 3 2000.6.8 504,024 0.04 504,024 0.04 0 0 0 0 3. Supervisor of Litz's Enterprise Ltd. Ltd. NA NA NA
China
Yang 4. Director of Strong Team International • Director:
Inc.
Strong Team International Inc.
5. Director of President Securities Corp. • Supervisor:
Litz’s Enterprise Ltd.
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Executives, Directors
Shareholding when Current Spouse & Minor Shareholding or Supervisors Who are
Title Nationality Name ElectedDate Gender Term(Yr.) Date (FirstElected) Elected Shareholding Shareholding Arrangementby Nominee Experience (Education) Current Position with PSC and Other Company Spouses or within Two Degrees of Kinship
Shares % Shares % Shares % Shares % Title Name Relation
China
2018.6.21 3 1994.10.29 5,392,415 0.39 5,392,415 0.39 0 0 0 0 NA NA NA NA NA
F.R.P Corp.
1. Ming Chuan University 1. PSC: NA
Delegate: 2. Accounting Deputy Manager, 2. Other Company: NA
Director Republic of China Lee, Shu- 2018.6.21 F 3 2015.6.18 0 0 0 0 0 0 0 0 Auditing Manager of Eternal NA NA NA
Fen Materials Co., Ltd.
3. Director of President Securities Corp.
1. Master of Business Administration, 1. PSC: NA
University of Dallas
2. Other Company:
2. Chairman of Shun Fu Tai Industrial
• Chairman:
Co., Ltd.
Shun Fu Tai Industrial Co., Ltd. ,
3. Chairman of Yao-Jun Technology Yao-Jun Technology Inc. , My-
Inc. Semi Inc. Area Tu,
Director Republic of China Duh, Bor-Tsang 2018.6.21 M 3 2012.6.22 4,189,946 0.3 4,189,946 0.3 2,200,881 0.16 0 0 4. Chairman of My-Semi Inc. • Director: Supervisor Ching- Brother
5. Director of President Securities Corp. Midori Inc. , Shin Lin Investment (Note 2) Feng
6. Director of Shin Lin Investment Inc. , Inc.Lillian Investment Co., Ltd. , Morioka Investment Inc. ,
Morioka Investment Inc., Lillian
Investment Co., Ltd , Midori Inc. • Supervisor:
7. Supervisor of Konten Networks Inc. , Konten Networks Inc. ,
NANTEX Industry Co., Ltd. NANTEX Industry Co., Ltd.
1. National Pingtung University of 1. PSC: NA
Science and Technology of Forestry
2. Other Company:
Director Republic of China Lee, Shy-Lou 2018.6.21 M 3 1997.6.23 8,380,640 0.6 8,380,640 0.6 5,241,974 0.38 0 0 2. Chairman of Teh Long Warehousing & Stevedoring Co., Ltd. • Chairman: NA NA NA
Teh Long Warehousing &
3. Chairman of Grown Field Co., Ltd. Stevedoring Co., Ltd. , Grown
4. Director of President Securities Corp. Field Co., Ltd.
1. Golden Gate University, MBA in 1. PSC: NA
Finance
2. Other Company:
2. Chairman of United Investment Ptd.
• Chairman:
Ltd.
United Investment Ptd. Ltd.
Director Republic of China Jing-YauJuang, 2018.6.21 M 3 2018.6.21 3,000 0 3,000 0 0 0 0 0 3. Assistant Vice President of Tainan Spinning Co., Ltd. • Director: NA NA NA
T.S.Mall, Q-Ware Systems &
4. Director of President Securities Corp.
Services Corp., eten Technologies
Inc.
• Assistant Vice President:
Tainan Spinning Co., Ltd.
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Executives, Directors
Shareholding when Current Spouse & Minor Shareholding or Supervisors Who are
Title Nationality Name ElectedDate Gender Term(Yr.) Date (FirstElected) Elected Shareholding Shareholding Arrangementby Nominee Experience (Education) Current Position with PSC and Other Company Spouses or within Two Degrees of Kinship
Shares % Shares % Shares % Shares % Title Name Relation
1. MBA, George Washington University 1. PSC: Member of Audit
Committee / Remuneration
2. Department of Finance, Shih Hsin
Committee / Risk Management
University Associate Professor / Assistant Professor Committee , Supervisory
personnel of Trust
3. Independent Director of President
2. Other Company:
Independent Director Republic of China Yann-PingLiang, 2018.6.21 F 3 2015.6.18 0 0 0 0 0 0 0 0 4. Vice President of Hua Nan Securities Corp. • Associate Professor: NA NA NA
Investment Trust Shih Hsin University
5. Vice President of Polaris Securities • Member of Self-disciplinary
Investment Trust Committee:
Unique Satellite Television
6. Chairman of Department of Finance,
(USTV)
MingDao University
1. Ph.D. in Law, Chinese Culture 1. PSC: Member of Audit
University Committee / Remuneration
2. Vice Chariman of China Committee / Risk Management
Committee
Petrochemical Development
Corporation 2. Other Company:
3. Chariman of The First Leasing Corp. • Chairman:
4. Chairman of Bo-Meng Investment The First Leasing Corp. , Bo-
Co., Ltd. Meng Investment Co., Ltd.
Independent Republic of Pai, Chun- 2018.6.21 M 3 2018.6.21 0 0 0 0 0 0 0 0 5. Independent Director of President • Vice Chairman: NA NA NA
Director China Nan Securities Corp. China Petrochemical
Development Corporation
6. Independent Director of Megaforce
Company Ltd. • Independent Director:
7. Director of Core Pacific City Co., Megaforce Company Ltd.
Ltd. • Director:
8. Director of Taivex Therapeutics Core Pacific City Co., Ltd., Wei
Corporation Lih Food Industrial Co., Ltd.,
Taivex Therapeutics Corporation
9. Director of Wei Lih Food Industrial
Co., Ltd.
15
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Note1: The shareholding ratio was calculated based on the 1,390,428,028 shares of the share capital of President Securities Corp. Note2: Brokerage Department District Assistant Vice President, Tu, Ching-Feng, was resigned on April 24, 2019.

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2. Major Shareholders of PSCʹs Institutional Shareholders

March 31, 2019

PSC's Institutional Shareholders (Note1)	Major Shareholders of PSC's Institutional Shareholders (Holding Percentage) (Note2)
Leg Horn Investment Co., Ltd. Chang, Pin-Tang (45.05%), Chang, Benjamin Pin-Yen (49.25%) Hui Tung Investment Co.,Ltd. Lee, Tong-Liang (44.88%), Hsu, Jui-Chung (15%), Lee, Pei-Shan (12.44%), Lee, Chi-Hung (12.44%), Lee, Che-Ming (12.44%) Ta Le Investment Holding Co., Ltd. Lee Ou Yang, Li-Chen (27.69%), Tu, Li-Yang (3.62%), Lee, Chia-Rong (4.62%) Kai Nan Investment Co., Ltd. Uni-President Enterprises Corp. (100%) Canking Investment Co., Ltd. Teng, Wen-Hwi (26.35%), Teng, Jun-Tse (26.69%), Teng, Wen-Hsuan (26.35%), Yang, Yu-Chiao (10.67%) China F.R.P Corp. Jhang, Li-Sheng (1.25%), Wu Hong, Siao-Gui (2.5%), Lee, Chia-Rong (3.8%), Lee, Shan-Heng (1.05%), Wu, Su-Yun (1.45%), Kao, Ying-Shin (18.43%), Cheng, Li-Hua (4.96%)		Kao
Note 1: As the Company’s Directors and Supervisors belong to institutional shareholder representatives, the name of the institutional shareholders.
Note 2: The name of the major shareholders of the institutional shareholders and their shareholding ratio. If the major shareholders are corporations, their information is listed in the table below.
	Institutional Shareholders of the Major Shareholders
	August 10, 2018
Institutional Shareholders	Major Shareholders of the Institutional Shareholders (Holding Percentage) (Note)
	Kao Chyuan Inv. Co., Ltd. (4.91%), HSBC in custody for BNP Paribas Wealth Management Hong Kong Branch (3.04%), Hou, Po-Ming (2.60%),
Uni-President Enterprises Corp	Hou, Po-Yu (2.27%), Citi in custody for Government of Singapore-GOS-EFMC (1.76%), HSBC Acting as Custodian for First State Investments ICVC - Stewart Investors Asia Pacific Leaders Fund (1.70%), Kao, Shiow-Ling (1.64%), JPMorgan Chase Bank N.A. Taipei Branch in custody for Saudi Arabian Monetary Agency (1.47%), Vanguard Emerging Markets Stock Index Fund (1.30%), and Vanguard Total International Stock Index Fund , a
	series of Vanguard Star Funds (1.20%)

Note: Name and holding percentage of the top ten shareholders of the Company’s institutional shareholders.

3. Professional qualifications and independence analysis of directors

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Meet One of the Following Professional Qualification Requirements, Together with
Independence Criteria (Note)
at Least Five Years Work Experience
Criteria Number of
Other Public
An Instructor or Higher A Judge, Public Prosecutor,
Have Work Companies
Position in a Department of Attorney, Certified Public
Experience in the in Which the
Commerce, Law, Finance, Accountant, or Other
Areas of Commerce, Individual is
Accounting, or Other Professional or Technical
Law, Finance, or Concurrently
Academic Department Specialist Who has Passed a 1 2 3 4 5 6 7 8 9 10
Accounting, or Serving as an
Related to the Business Needs National Examination and
Otherwise Necessary Independent
of the Company in a Public been Awarded a Certificate
Name for the Business of Director
or Private Junior College, in a Profession Necessary for
the Company
College or University the Business of the Company
Lin, Kuan-Chen Delegate
of Kai Nan Investment P P P P P P P 0
Co., Ltd.
Lin, Chung-Shen
Delegate of Kai Nan P P P P P P P P P P 0
Investment Co., Ltd.
Liu, Tsung-Yi Delegate
of Kai Nan Investment P P P P P P P P P 0
Co., Ltd.
Chen, Kuo-Hui Delegate
of Kai Nan Investment P P P P P P P P P 0
Co., Ltd.
Hsieh Hong, Hui-Tzu
Delegate of Kai Nan P P P P P P P P P 0
Investment Co., Ltd.
Lu, Li-An Delegate of
Kai Nan Investment Co., P P P P P P P P P 0
Ltd.
Teng, Wen-Hwi Delegate
of Canking Investment P P P P P P P P P P P 0
Co., Ltd.
Lee, Che-Ming Delegate
of Hui Tung Investment P P P P P P P P P P 0
Co., Ltd.
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Meet One of the Following Professional Qualification Requirements, Together with
Independence Criteria (Note)
at Least Five Years Work Experience
Criteria Number of
Other Public
An Instructor or Higher A Judge, Public Prosecutor,
Have Work Companies
Position in a Department of Attorney, Certified Public
Experience in the in Which the
Commerce, Law, Finance, Accountant, or Other
Areas of Commerce, Individual is
Accounting, or Other Professional or Technical
Law, Finance, or Concurrently
Academic Department Specialist Who has Passed a 1 2 3 4 5 6 7 8 9 10
Accounting, or Serving as an
Related to the Business Needs National Examination and
Otherwise Necessary Independent
of the Company in a Public been Awarded a Certificate
Name for the Business of Director
or Private Junior College, in a Profession Necessary for
the Company
College or University the Business of the Company
Chang, Ming-Chen
Delegate of Leg Horn P P P P P P P P P P 0
Investment Co., Ltd.
Tu, Li-Yang Delegate
of Ta Le Investment P P P P P P P P P P 0
Holding Co., Ltd.
Lee, Shu-Fen Delegate P P P P P P P P P P 0
of China F.R.P Corp
Duh, Bor-Tsang P P P P P P P P P P 0
Lee, Shy-Lou P P P P P P P P P P 0
Juang, Jing-Yau P P P P P P P P P P P 0
Liang, Yann-Ping P P P P P P P P P P P P 0
Pai, Chun-Nan P P P P P P P P P P P P 1
Song, Yung-Fong P P P P P P P P P P P 0
Horng, Yuan-Chuan P P P P P P P P P P P 1
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Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during the term of office. Explanation of independence criteria 1 to 10 are as follows: 1.Not an employee of the Company or any of its affiliates.

2.Not a director or supervisor of the Company’s affiliates. Not applicable in cases where the person is an independent director of the Company’s parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.
3.Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.

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

5.Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings.
6.Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company.
7.Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof. These restrictions do not apply to any member of the remuneration committee who exercises powers pursuant to Article 7 of the “Regulations Governing the Establishment and Exercise of Powers of Remuneration Committees of Companies whose Stock is Listed on the TWSE or Traded on the TPEx”.
8.Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.
9.Not been a person of any conditions defined in Article 30 of the Company Law.
10.Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

B. Information regarding directors, supervisors, management team and branch manager

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April 20, 2019
Shareholding The status
Current Spouse & Minor Managers who are Spouses or
by Nominee of obtaining
Nationality/ Shareholding Shareholding Within Two Degrees of Kinship
Arrangement employee
Title Country of Name Gender Date Elected Experience (Education) Other Position
stock option
Origin
Shares % Shares % Shares % Title Name Relation certificates by
Managers
1. Director of President Futures Corp.
2. Director of President Securities (HK) Ltd.
3. Director of President Securities (BVI) Ltd.
1. Senior Deputy Manager of China
President Republic Of China Tsai, Sen-Bu M 2018.06.29 313,261 0.02 0 0 0 0 2. Project Manager of President Bills Finance Corp. 4. Director of President Securities (Nominee) Ltd. NA NA NA NA
Securities Corp. 5. Director of President Wealth Management
(HK) Ltd.
6. Chairman of PSC Venture Capital
Investment Co., Ltd.
Proprietary 1. Vice President of President
Trading Department Republic Of Yang , Kai-Chih M 2018.08.29 136,423 0.01 0 0 0 0 Securities. N/A NA NA NA NA
Executive Vice China 2. Senior Vice President Manager of
President Securities.
President
1. Vice President of Grand Asia Asset
Capital Market Department Republic Of Kuo, Li-Yun F 2000.06.08 191,578 0.01 0 0 0 0 Management Ltd. 1. Director of PSC Venture Capital NA NA NA NA
Vice President China 2. Assistant Vice President of Yuanta Investment Co., Ltd.
Securities Co., Ltd
1. Director of President Securities (HK) Ltd.
1. Assistant Vice President of 2. Director of President Securities (BVI) Ltd.
MasterLink Securities Corp.
Finance Department Republic Of An, Chi-Li F 2004.06.30 156,240 0.01 0 0 0 0 2. SVP of Ta Chong Bank LTD. 3. Director of President Securities (Nominee) Ltd. NA NA NA NA
Vice President China 3. Head of Treasury of Barclays Bank 4. Director of President Wealth Management
PLC (HK) Ltd.
4. Treasurer of Societe Generale 5. Supervisor of President Insurance Agency
Co., Ltd
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Shareholding The status
Current Spouse & Minor Managers who are Spouses or
by Nominee of obtaining
Nationality/ Shareholding Shareholding Within Two Degrees of Kinship
Arrangement employee
Title Country of Name Gender Date Elected Experience (Education) Other Position
stock option
Origin
Shares % Shares % Shares % Title Name Relation certificates by
Managers
Quantitative 1. Vice President of Oriental Securities
Trading Republic Of Huang, Jung- M 2009.03.26 107,356 0.01 0 0 0 0 Corp. N/A NA NA NA NA
Department China Jen 2. Assistant Vice President of
Vice President MasterLink Securities Corp.
Financial 1. Project Vice President of President
Product Republic Of Pu, Chien-Heng M 2019.03.22 0 0 0 0 0 0 Securities . N/A NA NA NA NA
Department China 2. Assistan Manager of Capital
Vice President Securities
1. Senior Manager of President
Auditing Office Republic Of Huang, Sha-Mei F 2018.03.14 0 0 0 0 0 0 Securities N/A NA NA NA NA
Chief Auditor China 2. Senior Project Manager of President
Securities
Administration 1. Assistant Vice Manager of President
Department Republic Of Yu, Hung-Chieh M 2018.07.01 5,725 0 0 0 0 0 Securities Director of President Insurance Agency Co., NA NA NA NA
Senior Assistant China 2. Special Assistant of President Ltd
Vice President Securities
Settlement
& Clearing 1. Manager of President Securities
Department Republic Of China Cheng,Yao-Tung M 2005.06.21 47,646 0 0 0 0 0 2. Deputy Manager of President N/A NA NA NA NA
Assistant Vice Securities
President
Capital Market 1. Senior Vice President of Capital
Department Republic Of Chueh, Chih- M 2014.06.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
Sales Vice China Chung 2. Assistant Manager of First Taiwan
President Securities Inc.
1. Vice President of President Securities
President Office Project Vice Republic Of Lin, Chung- M 2015.11.23 675,512 0.05 0 0 0 0 Corp. N/A NA NA NA NA
President China Heng 2. Special Assistant of Uni-President
Asset Management Corp.
Compliance 1. Manager, Deputy Manager of
Division Republic Of Hung, Ying-Che M 2008.03.19 54,649 0 0 0 0 0 President Securities N/A NA NA NA NA
Assistant Vice China 2. Specialist of Sam Shin Trading Co.
President Ltd.
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Shareholding The status
Current Spouse & Minor Managers who are Spouses or
by Nominee of obtaining
Nationality/ Shareholding Shareholding Within Two Degrees of Kinship
Arrangement employee
Title Country of Name Gender Date Elected Experience (Education) Other Position
stock option
Origin
Shares % Shares % Shares % Title Name Relation certificates by
Managers
President Office 1. Senior Manager of President
Assistant Vice Republic Of Chen, Nai-Chen F 2013.06.01 382 0 0 0 0 0 Securities Director (Representative of President NA NA NA NA
President China 2. Manager of President Securities Securities) of HuaVI Venture Capital Co.,Ltd
Mainland
1. Project Assistant Vice President of
China Business Division Republic Of Chen, Long- M 2013.06.01 2,060 0 0 0 0 0 President Securities N/A NA NA NA NA
Assistant Vice China Chien 2. Branch Assistant Vice President of
President Securities
President
Finance 1. Accountant In Charge of President
1. Senior Manager of President
Department Republic Of Lu, Chia-Chen F 2013.06.01 2,343 0 0 0 0 0 Securities Insurance Agency Co., Ltd NA NA NA NA
Assistant Vice China 2. Accountant In Charge of PSC Venture
President 2. Manager of President Securities Capital Investment Co., Ltd
Capital Market
1. Senior Manager of President
Department Republic Of Chang, Chin- M 2013.06.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
Assistant Vice China Yung
President 2. Manager of President Securities
Capital Market
1. Senior Manager of President
Department Republic Of Tsai, Pao-Sheng M 2013.06.01 41,767 0 217 0 0 0 Securities N/A NA NA NA NA
Assistant Vice China
President 2. Manager of President Securities
Finance
1. Senior Manager of President
Department Republic Of Su, Wei-Lun M 2016.06.20 0 0 0 0 0 0 Securities N/A NA NA NA NA
Assistant Vice China
President 2. Manager of President Securities
Financial
Product 1. Senior Manager of President
Department Republic Of China Chang, Chung-Lin M 2016.08.01 0 0 0 0 0 0 Securities Director of Shan Ben Engineering Co., Ltd NA NA NA NA
Assistant Vice 2. Manager of President Securities
President
Shareholder
Services 1. Senior Manager of President
Department Republic Of Chang,Shao- M 2016.09.01 18,833 0 0 0 0 0 Securities N/A NA NA NA NA
China Ping
Assistant Vice 2. Manager of President Securities
President
22
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Shareholding The status
Current Spouse & Minor Managers who are Spouses or
by Nominee of obtaining
Nationality/ Shareholding Shareholding Within Two Degrees of Kinship
Arrangement employee
Title Country of Name Gender Date Elected Experience (Education) Other Position
stock option
Origin
Shares % Shares % Shares % Title Name Relation certificates by
Managers
Information
System 1. Senior Manager of President
Department Republic Of Lin, Jung-Hui M 2016.09.01 85 0 0 0 0 0 Securities N/A NA NA NA NA
China
Assistant Vice 2. Manager of President Securities
President
Fixed Income
1. Manager of President Securities
Department Assistant Vice Republic Of China Yeh, Ming-Chieh M 2017.01.01 0 0 0 0 0 0 2. Deputy Manager of President N/A NA NA NA NA
Securities
President
Quantitative
Trading 1. Senior Manager of President
Department Republic Of Lee, Chien-Hsin M 2019.03.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
China
Assistant Vice 2. Manager of Waterland Futures.
President
Risk Control 1. Senior Manager of President
Office Republic Of Chang, Ping- M 2015.11.09 15,091 0 0 0 0 0 Securities N/A NA NA NA NA
China Chuan
Senior Manager 2. Manager of President Securities
1. Assistant Vice President of President
Brokerage Department Vice President Republic Of China Lee, Wen-Sheng M 2016.09.01 61 0 15 0 0 0 2. Assistant Vice President of China Securities Corp. 1. Director of President Futures Corp.2. Director of President Insurance Agency Corp. NA NA NA NA
Securities Co., Ltd.
Brokerage 1. Assistant Vice President of Hua Nan
Department Senior District Republic Of Chang, Hung- M 2003.05.21 1,405 0 0 0 0 0 Securities N/A NA NA NA NA
Assistant Vice China Shuo 2. Assistant Vice President of Sino-
Trade Securities
President
Brokerage
Department 1. Manager of President Securities
District Republic Of China Chuang, Chi-Hung M 2006.10.01 165,736 0 0 0 0 0 2. Deputy Manager of President N/A NA NA NA NA
Assistant Vice Securities
President
Brokerage
Department 1. Assistant Vice President of President
District Republic Of Lin, Li-Lin F 2014.04.01 6,110 0 0 0 0 0 Securities N/A NA NA NA NA
China
Assistant Vice 2. Manager of Dafeng Securities
President
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Shareholding The status
Current Spouse & Minor Managers who are Spouses or
by Nominee of obtaining
Nationality/ Shareholding Shareholding Within Two Degrees of Kinship
Arrangement employee
Title Country of Name Gender Date Elected Experience (Education) Other Position
stock option
Origin
Shares % Shares % Shares % Title Name Relation certificates by
Managers
1. Supervisor of Integrated Service
Brokerage Technology
Department
1. Manager of President Securities 2. Chairman of Sin Lin Investment Co.
District Assistant Vice Republic Of China Tu, Ching-Feng M 2016.08.08 242,232 0.02 0 0 0 0 2. Vice President of Shun Fu Tai 3. Supervisor of Li Ling Investment Co. Yes Duh, Bor-Tsang Brother NA
Industrial Co.
President 4. Supervisor of Shun Fu Tai Industrial Co.
(Note 2)
5. Director of Pin Win Co.
Brokerage 1. District Assistant Vice President of
Department Republic Of Chiu, Shyh- M 2018.10.01 6,000 0 3,219 0 0 0 President Securities N/A NA NA NA NA
Assistant Vice China Tyng 2. Assistant Vice President of President
President Securities
Wealth
Management 1. Branch Assistant Vice President of
and Trust Republic Of Chu, Po-Lin M 2018.07.01 0 0 0 0 0 0 President Securities N/A NA NA NA NA
Department China
Assistant Vice 2. Manager of President Securities
President
Global
1. Supervisor of Capital Securities
Institutional Service Dept. Republic Of China Chung, Chih-Hung M 2016.05.05 0 0 0 0 0 0 2. Analyst of China Asset Management N/A NA NA NA NA
Limted
Manager
1. Assistant Vice President of Hua Nan
Corporate Client Dept. Republic Of Chang, Hung- M 2019.04.01 1,405 0 0 0 0 0 Securities N/A NA NA NA NA
China Shuo 2. Assistant Vice President of Sino-
Manager
Trade Securities
Tunghsing
Equity Republic Of Chen, Chih- M 2018.12.01 0 0 0 0 0 0 1. Manager of President Securities N/A NA NA NA NA
Department China Lung 2. Manager of President Futures Corp.
Manager
Tunghsing
Equity Republic Of Hung, Yu-Ting M 2014.07.01 37,000 0 0 0 0 0 1. Manager of President Futures Corp. N/A NA NA NA NA
Department China
Manager
24
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Shareholding The status
Current Spouse & Minor Managers who are Spouses or
by Nominee of obtaining
Nationality/ Shareholding Shareholding Within Two Degrees of Kinship
Arrangement employee
Title Country of Name Gender Date Elected Experience (Education) Other Position
stock option
Origin
Shares % Shares % Shares % Title Name Relation certificates by
Managers
Tunghsing
1. Manager of President Securities
Equity Department Republic Of China Tsai, Shu-Mei F 2016.04.01 46,807 0 0 0 0 0 2. Senior Manager of President N/A NA NA NA NA
Securities
Manager
1. Assistant Vice President of KGI
Kaohsiung Branch Republic Of Wu, Huan- M 2013.04.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
Manager China Chung 2. Manager of Taiwan Securities Co.,
Ltd.
1. Branch Assistant Vice President of
Dunnan Branch Republic Of Hsu, Yung-Hau M 2018.07.01 0 0 0 0 0 0 President Securities N/A NA NA NA NA
Manager China
2. Manager of KGI
1. Manager of President Securities
Zhongli Branch Manager Republic Of China Chiang, Tsong-Shyan M 2007.12.19 0 0 0 0 0 0 2. Manager of Kurn Bern Machinery N/A NA NA NA NA
Company
Chengzhong 1. Manager of Taiwan Securities Co.,
Branch Republic Of Kao, Jung M 2018.12.01 405 0 0 0 0 0 Ltd. N/A NA NA NA NA
China
Manager 2. Manager of Yuanta Securities
1. Deputy Manager of President
Tainan Branch Republic Of Hsieh,Chia-Hsi M 2019.01.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
Manager China 2. Sales Assistant Manager of President
Securities.
1. President of Jiu Ding Securities
Taichung Branch Republic Of Liao, Chen-Yin F 2001.11.12 0 0 0 0 0 0 Company N/A NA NA NA NA
China 2. Vice President of Tian Fa Securities
Manager
Company
1. Deputy Manager of President
Taichung Branch Republic Of Fang, Wu-Hsin M 2016.10.01 280 0 0 0 0 0 Securities N/A NA NA NA NA
Manager China 2. Sales Deputy Manager of President
Securities
1. Deputy Manager of President
Hsinchu Branch Republic Of Lee, Chin-Yi M 2014.09.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
Manager China 2. Sales Assistant Manager of Taiwan
Securities Co., Ltd.
25
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Shareholding The status
Current Spouse & Minor Managers who are Spouses or
by Nominee of obtaining
Nationality/ Shareholding Shareholding Within Two Degrees of Kinship
Arrangement employee
Title Country of Name Gender Date Elected Experience (Education) Other Position
stock option
Origin
Shares % Shares % Shares % Title Name Relation certificates by
Managers
1. Assistant Vice President of China
Chiayi Branch Republic Of Tai, Kuo-Chun M 2005.06.01 0 0 0 0 0 0 Securities Co., Ltd. N/A NA NA NA NA
Manager China
2. Manager of Yuanta Securities
1. Sales Manager of President
Pingtung Branch Republic Of Wang, Chien- M 2009.04.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
Manager China Min 2. Deputy Manager of President
Securities
1. Deputy Manager of President
Keelung Branch Republic Of Yu, Ping-Tse M 2019.04.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
Manager China 2. Sales Executive of Hua Nan
Securities
1. Deputy Manager of President
Yonghe Branch Republic Of Tseng, Chien- M 2012.01.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
Manager China Ming 2. Deputy Project Manager of SinoPac
Bank
1. Deputy Manager of Hua Nan
Yonghe Branch Republic Of Liao, Chan- M 2019.04.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
Manager China Chen 2. Deputy Manager of Jih Sun
Securities
Xin Taichung 1. Manager of President Securities
Branch Republic Of China Yang, Kuo-Chen M 2011.01.01 0 0 0 0 0 0 2. Deputy Manager of SAMPO N/A NA NA NA NA
Manager Securities
Hsinying 1. Deputy Manager of President
Branch Republic Of Hsiao, Po-Ming M 2016.04.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
China
Manager 2. Sales of President Securities
Changhua 1. Manager of Yuanta core pacific
Branch Republic Of Yu, Fu-Tsun M 2018.01.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
China
Manager 2. Sales of Yuanta Securities
1. Senior Deputy Manager of KGI
Taoyuan Branch Republic Of Hsiao, Ju-un F 2019.04.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
Manager China 2. Deputy Manager of Sino Pac
Securities
26
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Shareholding The status
Current Spouse & Minor Managers who are Spouses or
by Nominee of obtaining
Nationality/ Shareholding Shareholding Within Two Degrees of Kinship
Arrangement employee
Title Country of Name Gender Date Elected Experience (Education) Other Position
stock option
Origin
Shares % Shares % Shares % Title Name Relation certificates by
Managers
1. Deputy Manager of President
Yuanlin Branch Republic Of Liu,Ming-Hsi M 2018.01.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
Manager China 2. Sales Assistant Manager of Yuanta
core pacific Securities
Sanchung 1. Manager of Concord securities.
Branch Republic Of China Chang,Shih-Min M 2019.01.01 0 0 0 0 0 0 2. Sales Manager of President N/A NA NA NA NA
Manager Securities
Fengyuan Branch Republic Of Lin, Cheng M 2011.01.01 43,121 0 0 0 0 0 1. Manager of President Securities N/A NA NA NA NA
Manager China -Feng 2. Manager of Tai Yu Securities
1. Deputy Manager of Yuanta Securities
Shilin Branch Republic Of Hsu, Fu-Chiang M 2014.10.01 0 0 0 0 0 0 Co., Ltd. N/A NA NA NA NA
Manager China 2. Senior Deputy Manager of KGI
Securities
Panchiao Branch Republic Of Lo, Shih-Hong M 2019.04.01 0 0 0 0 0 0 1. Manager of KGI Securities N/A NA NA NA NA
Manager China 2. Manager of Capital Securities
Sanduo Branch Republic Of Tsai, Yi-Chen F 2006.03.21 0 0 0 0 0 0 1. Manager of President Securities N/A NA NA NA NA
Manager China 2. Sales Manager of SinoPac Holding
Szichih Branch Republic Of Huang, Ming-Fa M 2019.04.01 91 0 0 0 0 0 1. Manager of President Securities N/A NA NA NA NA
Manager China 2. Deputy Manager of Yuanta Securities
Ilan Branch Republic Of Chiang, Jen- F 2014.12.01 0 0 0 0 0 0 1. Manager of KGI Securities N/A NA NA NA NA
Manager China Chu 2. Manager of Capital Securities
1. Manager of President of China
Nanjing Branch Republic Of Chen, Chi-Heng M 2018.12.01 0 0 0 0 0 0 Securities Co., Ltd. N/A NA NA NA NA
Manager China
2. Deputy Manager of China Securities
1. Manager of President Securities
Kuting Branch Manager Republic Of China Chen, Te-Chang M 2018.01.01 0 0 0 0 0 0 2. Deputy Manager of President N/A NA NA NA NA
Securities
27
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Shareholding The status
Current Spouse & Minor Managers who are Spouses or
by Nominee of obtaining
Nationality/ Shareholding Shareholding Within Two Degrees of Kinship
Arrangement employee
Title Country of Name Gender Date Elected Experience (Education) Other Position
stock option
Origin
Shares % Shares % Shares % Title Name Relation certificates by
Managers
1. Sales Manager of President
Kinmen Branch Republic Of Chung, Hui-Ju F 2016.07.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
Manager China 2. Sales Deputy Manager of President
Securities
1. Deputy Manager of President
Tucheng Branch Republic Of Chen, Chun- M 2017.03.23 0 0 0 0 0 0 Securities N/A NA NA NA NA
Manager China Ming 2. Sales Manager of President
Securities
Songjiang 1. Senior Deputy Manager of KGI
Branch Republic Of Lin, Yu-Ju F 2017.08.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
China
Manager 2. Sales Manager of Jih Sun Securities
1. Assistant Vice President of Concord
Neihu Branch Republic Of Hu, Wen-Chieh M 2018.12.01 0 0 0 0 0 0 Securities Co., Ltd. N/A NA NA NA NA
Manager China 2. Manager of Polaris Securities Co.,
Ltd.
1. Manager of President Securities
Renai Branch Manager Republic Of China Yang, Chun-Chen M 2013.12.01 0 0 0 0 0 0 2. Sales Deputy Manager of President N/A NA NA NA NA
Securities
1. Sales Vice President of KGI
Xindian Branch Republic Of Liao, Shun-Ping M 2018.07.01 0 0 0 0 0 0 Securities N/A NA NA NA NA
Manager China 2. Sales Vice President of Taiwan
Securities Co., Ltd.
Xinzhuang Branch Republic Of Kao, Ming- M 2019.04.01 0 0 0 0 0 0 1. Manager of President Securities N/A NA NA NA NA
Manager China Chou 2. Manager of KGI Securities
1. Manager of Retail Securities
Pingzhen Brokerage Business of Standard
Branch Republic Of Li, Shu-Jung F 2015.10.26 0 0 0 0 0 0 Chartered Bank (Taiwan) Ltd. N/A NA NA NA NA
China
Manager 2. Bank Teller of Hsinchu International
Bank
1. Manager of Retail Securities
Xin Taoyuan Brokerage Business of Standard
Branch Republic Of Wu, Shao- M 2014.10.10 0 0 0 0 0 0 Chartered Bank (Taiwan) Ltd. N/A NA NA NA NA
China Kuang
Manager 2. Manager of Hsinchu International
Bank
28
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Note1: The shareholding ratio was calculated based on the 1,390,428,028 shares of the share capital of President Securities Corp.

Note2: Brokerage Department District Assistant Vice President, Tu, Ching-Feng, was resigned on April 24, 2019.

C. Remuneration of Directors, Supervisors, President, and Vice Presidents

1. Remuneration of Directors

Remuneration of Directors (Independent Directors Included)

Unit: NT$ thousands

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Remuneration Ratio of Total Relevant Remuneration Received by Directors Who are Also Employees Ratio of Total Compensation
Remuneration Compensation Paid to Directors
Base Salary, Bonuses, Exercisable New Restricted
Severance Pay Bonus to (A+B+C+D) to Severance Pay Profit Sharing- Employee Bonus (A+B+C+D+E+F+G) from an Invested
Compensation Allowances (D) and Allowances Employee Stock Employee
Title Name (B) Directors (C) Net Income (%) (F) (G) to Net Income (%) Company
(A) (E) Options (H) Shares (I)
Other than the
PSC PSC Company’s
PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group Subsidiary
Cash Stock Cash Stock
Lin, Kuan-Chen
Chairman Delegate of Kai
Nan Investment
Co., Ltd.
Lin, Chung- 17,363 17,363 - - 28,867 28,867 3,233 3,233 4.0868 4.0868 14,515 14,515 85 85 192 - 192 - - - - - 5.3089 5.3089 None
Shen
Director Delegate of Kai
Nan Investment
Co., Ltd.
(Note 3)
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Remuneration Ratio of Total Relevant Remuneration Received by Directors Who are Also Employees Ratio of Total Compensation
Remuneration Compensation Paid to Directors
Base Salary, Bonuses, Exercisable New Restricted
Severance Pay Bonus to (A+B+C+D) to Severance Pay Profit Sharing- Employee Bonus (A+B+C+D+E+F+G) from an Invested
Compensation Allowances (D) and Allowances Employee Stock Employee
Title Name (B) Directors (C) Net Income (%) (F) (G) to Net Income (%) Company
(A) (E) Options (H) Shares (I)
Other than the
PSC PSC Company’s
PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group Subsidiary
Cash Stock Cash Stock
Chang, Ming-
Chen
Director Delegate of
Leg Horn
Investment
Co.,Ltd.
Lee, Tong-
Liang/ Lee,
Che-Ming
Director Delegate of
Hui Tung
Investment
Co.,Ltd.
(Note 4)
Liu, Tsung-Yi
Director Delegate of Kai
Nan Investment
Co., Ltd.
Chen, Kuo-Hui
Director Delegate of Kai 17,363 17,363 - - 28,867 28,867 3,233 3,233 4.0868 4.0868 14,515 14,515 85 85 192 - 192 - - - - - 5.3089 5.3089 None
Nan Investment
Co., Ltd.
Hsieh Hong,
Hui-Tzu
Director Delegate of Kai
Nan Investment
Co., Ltd.
Lu, Li-An
Director Delegate of Kai
Nan Investment
Co., Ltd.
Director Lee, Shy-Lou
Tu, Li-Yang
Delegate of Ta
Director Le Investment
Holding Co.,
Ltd.
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Remuneration Ratio of Total Relevant Remuneration Received by Directors Who are Also Employees Ratio of Total Compensation
Remuneration Compensation Paid to Directors
Base Salary, Bonuses, Exercisable New Restricted
Severance Pay Bonus to (A+B+C+D) to Severance Pay Profit Sharing- Employee Bonus (A+B+C+D+E+F+G) from an Invested
Compensation Allowances (D) and Allowances Employee Stock Employee
Title Name (B) Directors (C) Net Income (%) (F) (G) to Net Income (%) Company
(A) (E) Options (H) Shares (I)
Other than the
PSC PSC Company’s
PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group Subsidiary
Cash Stock Cash Stock
Director Duh, Bor-Tsang
Director Juang, Jing-Yau
(Note 5)
Kao, Shiow-
Director Ling
(Note 6)
Director Teng, Wen-Hwi
(Note 7)
Teng, Wen-Hwi
Delegate
Director of Canking
Investment Co.,
Ltd.
(Note 7)
Lee, Shu-Fen
Director Delegate of 17,363 17,363 - - 28,867 28,867 3,233 3,233 4.0868 4.0868 14,515 14,515 85 85 192 - 192 - - - - - 5.3089 5.3089 None
China F.R.P.
Corp.
Independent Liang, Yann-
Director Ping
Independent Pai, Chun-Nan
Director (Note 8)
Song, Yung-
Independent
Director Fong
(Note 8)
Horng, Yuan-
Independent Chuan
Director
(Note 8)
Independent Wu, Tsai-Yi
Director (Note 8)
Lee, Kwang-
Independent Chou
Director
(Note 8)
Independent Fu, Kai-Yun
Director (Note 8)
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Note 1: 2018 After-tax profit: for President Securities and for President Securities on a consolidated basis: NT$1,210,323 thousand.

Note 2: Compensation was calculated as of December 31, 2018; Compensation distribution proposal is based on said earnings.

Note 3: The Company held a Board meeting on June 21, 2018 where Lin, Kuan-Chen, Delegate of Kai Nan Investment Co., Ltd., was elected as the chairman, and Lin, Chung-Shen, Delegate of Kai Nan Investment Co., Ltd., retired as the chairman and was re-appointed as the legal representative of Kai Nan Investment Co., Ltd..
Note 4: Lee, Tong-Liang Delegate of Hui Tung Investment Co., Ltd. resigned on June 21, 2018 and was replaced with Lee, Che-Ming.

Note 5: Juang, Jing-Yau was appointed on June 21, 2018.

Note 6: Kao, Shiow-Ling resigned on July 6, 2018.

Note 7: Teng, Wen-Hwi resigned as Director on June 21, 2018, and was appointed as a legal representative of Canking Investment Co., Ltd.

Note 8: Independent Directors Wu, Tsai-Yi, Lee, Kwang-Chou, Fu, Kai-Yun resignedon June 21, 2018 and elected Pai, Chun-Nan, Song, Yung-Fong, Horng, Yuan-Chuan as independent directors.

Note 9: Total remuneration paid to drivers is NT$1.419 million, which was not included in consideration.

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III. Corporate Governance

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Range of remuneration for directors

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Name of Directors
Total of (A+B+C+D) Total of (A+B+C+D+E+F+G)
Range of Remuneration
Companies in
Companies in the
the consolidated
The company consolidated financial The company
financial
statements
statements
Under NT$ 2,000,000 12 (Note 1, 2) 12 (Note 1, 2) 11 (Note 2) 11 (Note 2)
NT$2,000,000 ~ NT$5,000,000 10 (Note 3) 10 (Note 3) 10 (Note 3) 10 (Note 3)
NT$5,000,000 ~ NT$10,000,000 2 (Note 4, 5) 2 (Note 4, 5) 2 (Note 4, 5) 2 (Note 4, 5)
NT$10,000,000 ~ NT$15,000,000 0 0 0 0
NT$15,000,000 ~ NT$30,000,000 0 0 1 (Note 1, 5) 1 (Note 1, 5)
NT$30,000,000~ NT$50,000,000 0 0 0 0
NT$50,000,000 ~ NT$100,000,000 0 0 0 0
Over NT$100,000,000 0 0 0 0
Total 24 24 24 24
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Note 1: Lin, Kuan-Chen

Note 2: Kao, Shiow-Ling, Juang, Jing-Yau, Teng, Wen-Hwi, Teng, Wen-Hwi Delegate of Canking Investment Co., Ltd., Liang, Yann-Ping, Pai, Chun-Nan, Song, Yung-Fong, Horng, Yuan-Chuan, Wu, Tsai-Yi, Lee, Kwang-Chou, Fu, Kai-Yun

Note 3: Liu, Tsung-Yi, Hsieh Hong, Hui-Tzu, Lu, Li-An, Chen, Kuo-Hui, Delegate of Kai Nan Investment Co., Ltd., 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

Note 4: Lin, Chung-Shen Delegate of Kai Nan Investment Co., Ltd.

Note 5: Lin, Kuan-Chen Delegate of Kai Nan Investment Co., Ltd.

2. Remuneration of the President and Vice Presidents

Unit: NT$ thousands

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Ratio of total
Number of Number of
Salary(A) Severance Pay Bonuses and Profit Sharing- Employee compensation employee stock restricted stock Whether or not
(B) Allowances (C) Compensation (D) (A+B+C+D) to net
option certificates unit any compensation
income (%) is received from
Title Name
other re-invested
PSC Group
businesses than
PSC Group PSC Group PSC Group PSC Group PSC Group PSC Group
subsidiaries
Cash Stock Cash Stock
Former Lin,
President Kuan-
(Note 3) Chen
President Tsai, Sen-
(Note 4) Bu
Vice An, Chi-
President Li
Vice Lee, Wen-
President Sheng
Vice Kuo, Li-
20,540 20,540 909 909 55,901 55,901 1,092 0 1,092 0 6.4811 6.4811 0 0 0 0 None
President Yun
Pan,
Vice
Chun-
President
Hsien
Vice Huang,
President Jun-Jen
Vice Yang,
President Kai-Chih
Chief Huang,
Auditor Sha-Mei
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Note 1: 2018 After-tax profit: for President Securities and for President Securities on a consolidated basis: NT$1,210,323 thousand.

President Securities Corp. 2018 Annual Report

III. Corporate Governance

Note 2: Compensation was calculated as of December 31, 2018; Employee remuneration was decided through discussion. Note 3: Former President Lin Kuan-Chen resigned on June 21, 2018. Note 4: Vice President Tsai Sen-Bu was appointed as President on June 29, 2018.

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Range of remuneration for president and vice president

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Name of President and Vice President
Range of Remuneration
Companies in the consolidated
The company
financial statements
Under NT$ 2,000,000 0 0
NT$2,000,000 ~ NT$5,000,000(Note1) 3 3
NT$5,000,000 ~ NT$10,000,000(Note2) 3 3
NT$10,000,000 ~ NT$15,000,000(Note3) 2 2
NT$15,000,000 ~ NT$30,000,000(Note4) 1 1
NT$30,000,000 ~ NT$50,000,000 0 0
NT$50,000,000 ~ NT$100,000,000 0 0
Over NT$100,000,000 0 0
Total 9 9
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Note 1: An, Chi-Li, Huang, Sha-Mei, Pan, Chun-Hsien Note 2: Lee, Wen-Sheng, Kuo, Li-Yun, Huang, Jun-Jen Note 3: Lin, Kuan-Chen, Tsai, Sen-Bu Note 4: Yang, Kai-Chih Note 5: The sequence above is arranged based on the number of strokes.

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

(1) Ratio of total remuneration paid to directors, supervisors, presidents and vice presidents to net income (%)

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Unit: %
To presidents and vice presidents
Year To directors(Note1)
(Note1)
2017 4.04 4.29
2018 4.09 6.48
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Note1: Ratio of total remuneration to net income (%)

(2) The policies, standards, and portfolios for the payment of remuneration, and the procedures for determining remuneration

The policy and standards for the Directors and Supervisors’ remuneration are set out in accordance with the Company’s Articles of Incorporation.

The President’s and Vice President’s remuneration are paid in accordance with the remuneration-related regulations of the Company. The principles of the remuneration system are based on the operating performance and contribution of each unit to share the Company’s operating results. The Company also adopts professional institutions to understand the market standards and refers to the remuneration standards in the industry to set remuneration policies by considering the factors of competitiveness, motivation, and reasonableness and bring the Company’s overall annual remuneration at the average level of the industry.

(3) The correlation with risks and business performance

The reasonableness of the remuneration paid to the Directors, Supervisors, President and Vice President shall be reviewed on a regular basis. In addition to considering their contributions to the Company’s operational performance, the Company will also consider the degrees of risk they pose to the Company and adjust the remuneration accordingly.

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III. Corporate Governance

E. President, senior vice president and senior manager remuneration

Unit: NT$ thousands

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Employee
Employee Ratio of Total
Compensation
Title Name Compensation Total Amount to Net
- in Stock (Fair
- in Cash Income(%)
Market Value)
President Tsai, Sen-Bu
Proprietary Trading
Department Yang , Kai-Chih
Executive Vice President
Capital Market Department
Kuo, Li-Yun
Vice President
Finance Department
An, Chi-Li
Vice President
Quantitative Trading
Department Huang, Jung-Jen
Vice President
Financial Product
Department Pu,Chien-Heng
Vice President
Auditing Office
Huang, Sha-Mei
Chief Auditor
Administration Department
Senior Assistant Vice Yu, Hung-Chieh
President
Settlement & Clearing
Department Cheng,Yao-Tung
Assistant Vice President
Capital Market Department
Chueh, Chih-Chung 0 4,233 4,233 0.3497
Sales Vice President
President Office
Lin, Chung-Heng
Project Vice President
Compliance Division
Hung, Ying-Che
Assistant Vice President
President Office
Chen, Nai-Chen
Assistant Vice President
Mainland China Business
Division Chen, Long-Chien
Assistant Vice President
Finance Department
Lu, Chia-Chen
Assistant Vice President
Capital Market Department
Chang, Chin-Yung
Assistant Vice President
Capital Market Department
Tsai, Pao-Sheng
Assistant Vice President
Finance Department
Su, Wei-Lun
Assistant Vice President
Financial Product
Department Chang, Chung-Lin
Assistant Vice President
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President Securities Corp. 2018 Annual Report

III. Corporate Governance

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Employee
Employee Ratio of Total
Compensation
Title Name Compensation Total Amount to Net
- in Stock (Fair
- in Cash Income(%)
Market Value)
Shareholder Services
Department Chang,Shao-Ping
Assistant Vice President
Information System
Department Lin,Jung-Hui
Assistant Vice President
Fixed Income Department
Yeh, Ming-Chieh
Assistant Vice President
Quantitative Trading
Department Lee,Chien-Hsin
Assistant Vice President
Risk Control Office
Chang,Ping-Chuan
Senior Manager
Brokerage Department
Lee, Wen-Sheng
Vice President
Brokerage Department
Senior District Assistant Chang, Hung-Shuo
Vice President
Brokerage Department
District Assistant Vice Chuang, Chi-Hung
President
Brokerage Department
District Assistant Vice Lin, Li-Lin 0 4,233 4,233 0.3497
President
Brokerage Department
Chiu, Shyh-Tyng
Assistant Vice President
Wealth Management and
Trust Department Chu, Po-Lin
Assistant Vice President
Global Institutional Service
Dept. Chung, Chih-Hung
Manager
Corporate Client Dept.
Chang, Hung-Shuo
Manager
Tunghsing Equity
Department Chen, Chih-Lung
Manager
Tunghsing Equity
Department Hung, Yu-Ting
Manager
Tunghsing Equity
Department Tsai,Shu-Mei
Manager
Kaohsiung Branch
Wu, Huan-Chung
Manager
Dunnan Branch
Hsu, Yung-Hau
Manager
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III. Corporate Governance

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Employee
Employee Ratio of Total
Compensation
Title Name Compensation Total Amount to Net
- in Stock (Fair
- in Cash Income(%)
Market Value)
Zhongli Branch
Chiang, Tsong-Shyan
Manager
Chengzhong Branch
Kao, Jung
Manager
Tainan Branch
Hsieh,Chia-Hsi
Manager
Taichung Branch
Liao, Chen-Yin
Manager
Taichung Branch
Fang, Wu-Hsin
Manager
Hsinchu Branch
Lee, Chin-Yi
Manager
Chiayi Branch
Tai, Kuo-Chun
Manager
Pingtung Branch
Wang, Chien-Min
Manager
Keelung Branch
Yu, Ping-Tse
Manager
Yonghe Branch
Tseng, Chien-Ming
Manager
Yonghe Branch
Liao, Chan-Chen 0 4,233 4,233 0.3497
Manager
Xin Taichung Branch
Yang, Kuo-Chen
Manager
Hsinying Branch
Hsiao, Po-Ming
Manager
Changhua Branch
Yu, Fu-Tsun
Manager
Taoyuan Branch
Hsiao, Ju-un
Manager
Yuanlin Branch
Liu, Ming-Hsi
Manager
Sanchung Branch
Chang, Shih-Min
Manager
Fengyuan Branch
Lin, Cheng-Feng
Manager
Shilin Branch
Hsu, Fu-Chiang
Manager
Panchiao Branch
Lo, Shih-Hong
Manager
Sanduo Branch
Tsai, Yi-Chen
Manager
Szichih Branch
Huang, Ming-Fa
Manager
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President Securities Corp. 2018 Annual Report

III. Corporate Governance

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Employee
Employee Ratio of Total
Compensation
Title Name Compensation Total Amount to Net
- in Stock (Fair
- in Cash Income(%)
Market Value)
Ilan Branch
Chiang, Jen-Chu
Manager
Nanjing Branch
Chen, Chi-Heng
Manager
Kuting Branch
Chen, Te-Chang
Manager
Kinmen Branch
Chung, Hui-Ju
Manager
Tucheng Branch
Chen, Chun-Ming
Manager
Songjiang Branch
Lin, Yu-Ju
Manager
Neihu Branch
Hu, Wen-Chieh 0 4,233 4,233 0.3497
Manager
Renai Branch
Yang, Chun-Chen
Manager
Xindian Branch
Liao, Shun-Ping
Manager
Xinzhuang Branch
Kao, Ming-Chou
Manager
Pingzhen Branch
Li, Shu-Jung
Manager
Xin Taoyuan Branch
Wu, Shao-Kuang
Manager
Zhunan Branch
Su, Yung-Sheng
Manager
Offshore Securities Unit
Lai, Chung-Chih
Branch Manager
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Note: 2018 after-tax profit: NT$1,210,323 thousand; Employee remuneration was decided through discussion.

III. Corporate Governance

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III. Implementation of Corporate Governance

A. Board of Directors Meeting

Total of 8 meetings of the board of directors were held in the year of 2018. Directors’ attendance condition:

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Attendance Attendance rate
Title Name By Proxy Remark
in Person (%)
New election
Lin, Kuan-Chen
Six board meetings were
Chairman Delegate of Kai Nan 6 0 100%
held during the term of
Investment Co., Ltd.
office.
Re-election
Resigned on 2018.07.06
Director Kao, Shiow-Ling 1 3 25% Four board meetings
were held during the
term of office.
Re-election
Director Lin, Chung-Shen
Eight board meetings
(former Delegate of Kai Nan 8 0 100%
were held during the
chairman) Investment Co., Ltd.
term of office.
Re-election
Liu, Tsung-Yi Delegate
Eight board meetings
Director of Kai Nan Investment 7 1 88%
were held during the
Co., Ltd.
term of office.
Re-election
Chen, Kuo-Hui Delegate
Eight board meetings
Director of Kai Nan Investment 8 0 100%
were held during the
Co., Ltd.
term of office.
Re-election
Hsieh Hong, Hui-Tzu
Eight board meetings
Director Delegate of Kai Nan 7 1 88%
were held during the
Investment Co., Ltd.
term of office.
Re-election
Lu, Li-An Delegate of
Eight board meetings
Director Kai Nan Investment Co., 8 0 100%
were held during the
Ltd.
term of office.
New election
Teng, Wen-Hwi Delegate
Six board meetings were
Director of Canking Investment 3 3 50%
held during the term of
Co., Ltd.
office.
Elected on 2018.06.21
Lee, Che-Ming Delegate
Six board meetings were
Director of Hui Tung Investment 6 0 100%
held during the term of
Co., Ltd.
office.
Re-election
Chang, Ming-Chen
Eight board meetings
Director Delegate of Leg Horn 8 0 100%
were held during the
Investment Co., Ltd.
term of office.
Re-election
Tu, Li-Yang Delegate
Eight board meetings
Director of Ta Le Investment 7 1 88%
were held during the
Holding Co., Ltd.
term of office.
Re-election
Lee, Shu-Fen Delegate Eight board meetings
Director 7 1 88%
of China F.R.P Corp. were held during the
term of office.
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President Securities Corp. 2018 Annual Report

III. Corporate Governance

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Re-election
Eight board meetings
Director Duh, Bor-Tsang 6 2 75%
were held during the
term of office.
Re-election
Eight board meetings
Director Lee, Shy-Lou 6 2 75%
were held during the
term of office.
Elected on 2018.06.21
Six board meetings were
Director Juang, Jing-Yau 5 1 83%
held during the term of
office.
Re-election
Independent Eight board meetings
Liang, Yann-Ping 8 0 100%
Director were held during the
term of office.
Elected on 2018.06.21
Independent Six board meetings were
Pai, Chun-Nan 5 1 83%
Director held during the term of
office.
Elected on 2018.06.21
Independent Six board meetings were
Song, Yung-Fong 5 1 83%
Director held during the term of
office.
Elected on 2018.06.21
Independent Six board meetings were
Horng, Yuan-Chuan 6 0 100%
Director held during the term of
office.
Resigned on 2018.06.21
Lee, Tong-Liang
Two board meetings
Director Delegate of Hui Tung 2 0 100%
were held during the
Investment Co., Ltd.
term of office.
Resigned on 2018.06.21
Two board meetings
Director Lin, Kuan-Chen 2 0 100%
were held during the
term of office.
Resigned on 2018.06.21
Two board meetings
Director Teng, Wen-Hwi 0 2 0%
were held during the
term of office.
Resigned on 2018.06.21
Independent Two board meetings
Wu, Tsai-Yi 2 0 100%
Director were held during the
term of office.
Resigned on 2018.06.21
Independent Two board meetings
Lee, Kwang-Chou 2 0 100%
Director were held during the
term of office.
Resigned on 2018.06.21
Independent Two board meetings
Fu, Kai-Yun 2 0 100%
Director were held during the
term of office.
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III. Corporate Governance

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Other mentionable items:

A. If any of the following circumstances occur, the dates of the meetings, sessions, contents of motion, all independent directors’ opinions and the company’s response should be specified:
Matters referred to in Article 14-3 of the Securities and Exchange Act: PSC held 10 board meetings over the past fiscal year and did not have any matters listed in Article 14-3 of the Securities and Exchange Act or other matters not passed by the independent directors.
Other matters involving objections or expressed reservations by independent directors that were recorded or stated in writing that require a resolution by the board of directors: None.
B. If there are directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified:
For the 9th proposal for the review of the nomination for Directors and Independent Directors at the 18th board meeting of the 10th Board of Directors, in accordance with the provisions of Article 15 of the Company’s Rules of Meetings, the current Directors and Independent Directors, who have personal interests involved with the nominated candidates for Directors and Independent Directors under review, shall avoid the review session (as shown below).
The required documents of the Company’s nominated candidates for the Directors and Independent Directors, such as education and experience as well as a letter of commitment and declaration for the willingness to be a Director after being elected, and their qualifications shall be reviewed by the Board of Directors based on the review standards. When the Chairman Lin, Chung-Shen avoided the review session, Director Lin, Kuan-Chen and Director Lee, Tong-Liang were appointed as the acting Chairmen to host the review session. The proposal has been passed unanimously by the Directors present (the Directors with personal interests involved have avoided the voting).

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The Reviewed nominees for Directors/
Avoiding Stakeholders
Independent Directors
Lin, Kuan-Chen
Kao, Shiow-Ling (Kao, Shiow-Ling entrusted Lin, Kuan-Chen to
attend on her behalf.)
Lin, Chung-Shen
Teng, Wen-Hwi Delegate of Canking Investment (Teng, Wen-Hwi entrusted Lin, Chung-Shen to
Co., Ltd. attend on her behalf. Lin, Chung-Shen appointed
Lin, Kuan-Chen as the acting Chairman.)
Lee, Che-Ming Delegate of Hui Tung Investment Lee, Tong-Liang
Co., Ltd. (Lee, Tong-Liang and Lee, Che-Ming are relatives)
Chang, Ming-Chen Delegate of Leg Horn
Chang, Ming-Chen
Investment Co., Ltd.
Tu, Li-Yang Delegate of Ta Le Investment
Tu, Li-Yang
Holding Co., Ltd.
Lee, Shu-Fen Delegate of China F.R.P Corp. Lee, Shu-Fen
Duh, Bor-Tsang Duh, Bor-Tsang
Lee, Shy-Lou Lee, Shy-Lou
Kai Nan Investment Co., Ltd. Delegate: Lin, Chung-Shen, Lin, Kuan-Chen, Liu, Tsung-Yi,
Chen, Kuo-Hui, Hsieh Hong, Hui-Tzu, Lu, Li-An
Lin, Chung-Shen, Lin, Kuan-Chen, Liu, Tsung-
Yi, Chen, Kuo-Hui, Hsieh Hong, Hui-Tzu, Lu, (Lin, Chung-Shen appointed Lee, Tong-Liang as
Li-An the acting Chairman.)
Liang, Yann-Ping Liang, Yann-Ping
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President Securities Corp. 2018 Annual Report

III. Corporate Governance

2.	For the 5th proposal for adjustment of Independent Directors’ remuneration at the 18th board meeting of the 10th Board
	of Directors, in accordance with the provisions of Article 19 of the Company’s Articles of Incorporation, the Board of
	Directors were authorized to determine the Directors’ remuneration based on the degree of individual participation in
	and contribution to the Company’s as well as the standards in the industry. Independent Directors are paid monthly with
	a fixed amount and are not involved in the distribution of Directors’ remuneration set out in Article 23. Based on the
	adjustment of prices and same-sector levels, the Independent Directors’ monthly fixed remuneration was planned to be
	adjusted, and they would not participate in earnings distribution.
	Since this proposal concerned Independent Director’s remuneration, Independent Director Wu, Tsai-Yi, Independent
	Director Lee, Kwang-Chou, Independent Director Fu, Kai-Yun, Independent Director Liang, Yann-Ping all avoided the
	discussion and voting of the proposal. This proposal has been passed unanimously by the Directors present (Independent
	Directors avoided the voting) without any objection.
3.	For the 15th proposal for adjustment of Independent Directors’ remuneration at the 1st board meeting of the 11th Board
	of Directors, in accordance with the provisions of Article 19 of the Company’s Articles of Incorporation, the Board of
	Directors were authorized to determine the Directors’ remuneration based on the degree of individual participation in and
	contribution to the Company’s as well as the standards in the industry. Independent Directors are paid monthly with a
	fixed amount and are not involved in the distribution of Directors’ remuneration set out in Article 23. Since this proposal
	concerned Independent Director’s remuneration, Independent Director Liang, Yann-Ping, Independent Director Pai, Chun-
	Nan (entrusted Liang, Yann-Ping to attend on his behalf), Independent Director Song, Yung-Fong (entrusted Horng, Yuan-
	Chuan to attend on his behalf), and Independent Director Horng, Yuan-Chuan all avoided the discussion and voting of the
	proposal. This proposal has been passed unanimously by the Directors present (Independent Directors avoided the voting)
	without any objection.
4.	For the 22th proposal for the 11th Chairman’s remuneration at the 2nd board meeting of the 11th Board of Directors, in
	accordance with the provisions of Article 196 of the Company Act and the provisions of Article 19 of the Company's
	Articles of Incorporation, the remuneration with a reference to the same-sector levels was proposed to the Board of
	Directors, and the Chairman might participate in the distribution of profit bonuses according to the Company's operational
	performance. This proposal was made after the discussion of the Remuneration Committee. In accordance with the
	provisions of Article 15 of the Rules Governing Board Meetings, the Chairman appointed by Director Liu, Tsung-Yi as
	the acting Chairman to preside over the discussion of this proposal; Chairman Lin, Kuan-Chen avoided the discussion
	and voting of the proposal The proposal has been passed unanimously by the Directors present (the Chairman avoided the
	voting) without any objection.
C.	Measures taken to strengthen the functionality of the board (e.g. The Board of Directors has established an Audit
	Committee and a Remuneration Committee to assist the board in carrying out its various duties.) :
	To strengthen the competencies of the Board of Directors and the overall risk management system, the Board of Directors set
	up Independent Directors and established the Audit Committee, Remuneration Committee, and Risk Management Committee
	to meet the governance requirements of listed companies. To enhance the implementation of corporate governance, the
	Company has established the “Procedures for Handling Material Inside Information”, “Corporate Social Responsibility Best
	Practice Principles”, “Ethical Corporate Management Best Practice Principles”, and “Corporate Governance Best Practice
	Principles”, each of which is handled by relevant units level-by-level. On August 29, 2018, the second board meeting of the
	11th Board of Directors passed the “Board of Directors Performance Evaluation Measures”, based on which Directors’ 2018
	self-evaluation the self-evaluation of the board meeting unit were completed at the end of November; the evaluation results
	were reported to the 4th board meeting of the 11th Board of Directors on December 20, 2018, for reference.

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Note: The term of office of the 10th Board of Directors expired on June 17, 2018. The Directors were entirely re-elected on June 21, 2018. The term of office of the 11th Board of Directors is from June 21, 2018 through June 20, 2021.

III. Corporate Governance

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Independent director attendance is detailed below:

◎: Attendance in Person; ☆ : Proxy Attendance; ＊ : Absence

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Board
2018.03.26 2018.05.04 2018.06.21 2018.06.29 2018.08.29 2018.11.08 2018.12.20 2018.12.28
meetings
Wu, Tsai-Yi ◎ ◎
Lee, Kwang-
◎ ◎
Chou
Fu, Kai-Yun ◎ ◎
Liang, Yann-
◎ ◎ ◎ ◎ ◎ ◎ ◎ ◎
Ping
Pai, Chun-Nan ◎ ☆ ◎ ◎ ◎ ◎
Song, Yung-
◎ ☆ ◎ ◎ ◎ ◎
Fong
Horng, Yuan-
◎ ◎ ◎ ◎ ◎ ◎
Chuan
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B. Operations of the Audit Committee: Number of Meetings, Actual Attendance Rate of each Independent Director, and other mentionable items

The Company established its Audit Committee in June of 2015. The main key points of functional authority to be audited are as follows:

Adoption or amendment of internal control systems in accordance with Article 14-1 of the Securities and Exchange Act.
Evaluation of the effectiveness of internal control systems.
Adoption or amendment, pursuant to Article 36-1 of the Act, of handling procedures for financial or operational actions of material significance, such as acquisition or disposal of assets, derivatives trading, extension of monetary loans to others, and endorsements or guarantees for others.
Items involving the interests of Directors.
Major assets or derivative trading.
Major loaning of funds, making of endorsements or provision of guarantees.
Offering, issuance, or private placement of any equity-type securities.
Appointment, dismissal and compensation of CPAs.
Appointments and dismissal of finance, accounting and internal audit managers.
Annual and semi-annual financial statements.
Other major items required by other companies or the competent authority.

Total of 7 meetings of the Audit Committee were held in the year of 2018. Independent Directors’ attendance condition:

President Securities Corp. 2018 Annual Report

III. Corporate Governance

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Actually Number Number of Actual
Title Name of Times Times Attended Attendance Rate Remark
Attended (B) by Proxy (%) (B/A)
Re-election
Independent Liang, Yann-
Director Ping 7 0 100% Seven board meetings were held
during the term of office.
Elected on 2018.06.21
Independent
Director Pai, Chun-Nan 4 0 100% Four board meetings were held
during the term of office.
Elected on 2018.06.21
Independent Song, Yung-
Director Fong 3 0 75% Four board meetings were held
during the term of office.
Elected on 2018.06.21
Independent Horng, Yuan-
Director Chuan 4 0 100% Four board meetings were held
during the term of office.
Resigned on 2018.06.21
Independent Lee, Kwang-
Director Chou 3 0 100% Three board meetings were held
during the term of office.
Resigned on 2018.06.21
Independent
Director Fu, Kai-Yun 3 0 100% Three board meetings were held
during the term of office.
Resigned on 2018.06.21
Independent
Director Wu, Tsai-Yi 3 0 100% Three board meetings were held
during the term of office.
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III. Corporate Governance

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Other mentionable items:

I. If any of the following circumstances occur, the dates of meetings, sessions, contents of motion, resolutions of the Audit Committee and the Company’s response to the Audit Committee’s opinion should be specified.

Matters referred to in Article 14-5 of the Securities and Exchange Act: Total of 9 meetings were held in 2018 and 2019 to the publish date of the annual report. The resolutions of the Audit Committee and results are as specified in Note 1. (At the first meeting of the first interim Audit Committee on June 7, 2018, only reports were given, and no proposals were put forward for resolution.) For matters referred to in Article 14-5 of the Securities and Exchange Act, all members present voted in favor of the resolution without any objection.
Other matters which were not approved by the Audit Committee but were approved by two-thirds or more of all directors: None.

II. If there are independent directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified: None.

III. Communications between the independent directors, the Company’s internal audit supervisors and CPAs (e.g. the material items, methods and results of audits of corporate finance or operations, etc.):

A. Communications with the internal audit supervisors:
Communication methods:
(1) The Company shall compile a written report about improvements and follow-up on the deficiencies discovered in the audit in the previous month, and submit it to the Independent Directors for review.
(2) The Company’s auditors shall discuss and review the deficiencies in the internal control system with the Directors at each workshop on internal control deficiencies.
(3) At each Audit Committee meeting, the internal audit supervisor shall report to Independent Directors regarding internal audit execution and communicate with them face-to-face.
Summary of communication between Independent Directors and the internal auditors:

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Item Communication Execution period
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Item	Communication	Execution period

Monthly written report to independent directors	1. Summary of deficiencies identified in the audit report	2018.01~2018.12 (12 times in total)
Internal control deficiencies workshop	1. Report of deficiencies identified in internal auditing 2. Summary Report on Deficiencies from the Competent Authority	2018.01~2018.12 (6 times in total)
Audit Committee meeting	1. Internal audit report 2. General Financial Examination Business and Anti-Money Laundering and Counter- Terrorist Financing Project and Improvement Report	2018.01~2018.12 (6 times in total)

President Securities Corp. 2018 Annual Report

III. Corporate Governance

B. Communications with the CPA:

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1. 2.	Communication methods: The Company’s Audit Committee comprises all the Independent Directors. The CPA holds a meeting with the Audit Committee at least twice a year. At the meeting, the auditing of the Company’s financial status and audit results shall be reported and updates on important regulations shall also be reported. Summary of communication between Independent Directors and the certified public accountant (CPA) and results of implementation:	Communication methods: The Company’s Audit Committee comprises all the Independent Directors. The CPA holds a meeting with the Audit Committee at least twice a year. At the meeting, the auditing of the Company’s financial status and audit results shall be reported and updates on important regulations shall also be reported. Summary of communication between Independent Directors and the certified public accountant (CPA) and results of implementation:
	Date of meetings	Communication and results of implementation
	2018.03.14 1. Reporting audit findings and key audit items of financial statements of 2017. 2. The CPA explains the applicable time tables and impact of IFRS 16 Leases, the latest tax reforms of the Ministry of Finance and their expected implementation schedule. 3. Reporting effects of opening balance through the financial instrument IFRS 9 on financial statements. 4. Reporting audit planning of 2018. 5. Independent Directors’ suggestions: None. 6. Reporting to the Board of Directors after approval.
	2018.08.24 1. Reporting audit findings and key audit items of financial statements of 2018 Q2. 2. The CPA explains recent important changes in the Company Act. 3. Independent Directors’ suggestions: None. 4. Reporting to the Board of Directors after approval.
	2018.12.07 1. Reporting initial view on risk assessment and key audit items. 2. The CPA explains recent important changes in laws and regulations. (Changes in the Company Act and its impacts. Additional Disclosure of Remuneration Information for Listed Companies.) 3. Independent Directors’ suggestions: None. 4. Inform all the Directors on the Board of this report.
	2019.03.08 1. Reporting audit findings and key audit items of financial statements of 2018. 2. Reporting audit planning of 2019. 3. The CPAs stated compliance with the amendments to IFRS 16 on regulations governing the acquisition and disposal of assets. 4. The CPA explains recent important changes in laws and regulations (New regulations on additional information disclosure. Amendments to profit distribution in the Company Act. Changes in the contents of the Corporate Governance Evaluation System and its impacts.) 5. Independent Directors’ suggestions: None. 6. Reporting to the Board of Directors after approval.

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III. Corporate Governance

Note: Major Resolutions during the Auditing Meetings in 2018 and 2019 to the publish date of the annual report: Executed according to the resolution of the Audit Committee.

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Meeting Item Resolution
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Meeting	Item	Resolution

2018.03.14 The 16th Auditing Meeting of the 1st Audit Committee	1. Review of 2017 Consolidated and Individual Financial Reports 2. Accountant independence and competency evaluation. 3. Submitted the Statement of the 2017 Internal Control System. 4. Revised the anti-money laundering and counter- terrorist financing procedures and plans. 5. Formulated the Company's money laundering and terrorist financing risk assessment report. 6. Submitted the statement of the Internal Control of anti-money laundering and counter-terrorist financing.	All members of the committee present voted in favor of the resolution without any objection and submitted it to the Board of Directors for discussion.
2018.04.19 The 17th Auditing Meeting of the 1st Audit Committee	1. Audited the operating report and profit distribution of year 2017.	All members of the committee present voted in favor of the resolution without any objection.
2018.06.26 The 1st Auditing Meeting of the 2nd Interim Audit Committee	1. Convener of the Audit Committee election. 2. Revised the Internal Control System. 3. Revised the anti-money laundering and counter- terrorist financing policy. 4. Revised the anti-money laundering and counter- terrorist financing procedures and plans.	Proposal 1 was that the Independent Director Liang, Yann-Ping served as the convener of the 2nd Audit Committee. All members of the committee present voted in favor of the resolution without any objection. For proposal 2 to proposal 4, all members of the committee present voted in favor of the resolution without any objection and submitted it to the Board of Directors for discussion.
2018.08.24 The 1st Auditing Meeting of the 2nd Audit Committee	1. Review of the 2018 semi-annual Individual Financial Report and 2018 second quarter Consolidated Financial Report. 2. Revised the Internal Control System. 3. The Head Office applied for the concurrent operation of the trust business for handling specific securities, which can be managed and utilized separately. 4. Formulated the Codes of Ethical Conduct for Directors and Managers. 5. Renewal of liability insurance for Directors and key personnel. 6. Revised the Company's money laundering and terrorist financing risk assessment report. 7. Revision of the Directions of the Company's money laundering and terrorist financing.	All members of the committee present voted in favor of the resolution without any objection and submitted it to the Board of Directors for discussion.
2018.10.26 The 2nd Auditing Meeting of the 2nd Audit Committee	1. Revised the Internal Control System. 2. The Head Office applied for operating the money trust business, which can be managed and utilized separately, in a designated operational scope or method. 3. Revising the handling procedures for reporting illegal and unethical behavior.	All members of the committee present voted in favor of the resolution without any objection and submitted it to the Board of Directors for discussion.

President Securities Corp. 2018 Annual Report

III. Corporate Governance

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Meeting Item Resolution
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Meeting	Item	Resolution

2018.12.07 The 3rd Auditing Meeting of the 2nd Audit Committee	1. Submitted the Audit Plan of 2019. 2. Revised the anti-money laundering and counter- terrorist financing procedures and plans. 3. Applied for the issuance the TIP TAIEX+ Dividend Appreciation 150 Total Return Index- linked ETN. 4. Branch organizations applied for operating the securities business, which can be managed and utilized separately, in a specific operational scope or method.	All members of the committee present voted in favor of the resolution without any objection and submitted it to the Board of Directors for discussion.
2019.03.08 The 4th Auditing Meeting of the 2nd Audit Committee	1. Review of the 2018 Individual Financial Report and 2018 Consolidated Financial Report. 2. Accountant independence and competency evaluation. 3. Amended the Regulations Governing the Acquisition and Disposal of Assets. 4. Amended the Regulations Governing Implementation of Endorsement. 5. Submitted the Statement of the 2018 Internal Control System. 6. Formulated the internal control system of conducting the discretionary investment business through trust while operating the securities investment consulting business by the head office. 7. Revised the Internal Control System of Information System Department. 8. Submitted the Overall Information Security Implementation Statement. 9. Amended the joint venture agreement and charter regarding Jin Yuan President Securities Corporation Ltd.. 10. Amended the Articles of Incorporation. 11. Revised the Company's money laundering and terrorist financing risk assessment report. 12. Submitted the statement of the Internal Control of anti-money laundering and counter-terrorist financing.	All members of the committee present voted in favor of the resolution without any objection and submitted it to the Board of Directors for discussion.
2019.04.19 The 5th Auditing Meeting of the 2nd Audit Committee	1. Audited the operating report and profit distribution of year 2018. 2. Applied for conducting the business of creating customer ledgers of securities firms' settlement accounts 3. Formulated a standard operating procedures for handling the Company's Directors' requests	All members of the committee present voted in favor of the resolution without any objection.

III. Corporate Governance

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C. Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best -Practice Principles for TWSE/TPEx Listed Companies”

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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
I. Does the company establish ✓ In an effort to implement prudent corporate None
and disclose the Corporate governance measures in line with the "Principles
Governance Best-Practice for Corporate Governance for Securities Firms"
Principles based on “ Corporate
and with relevant laws and regulations, President
Governance Best- Practice
Securities adopted such guidelines by the 13th
Principles for TWSE/TPEx
Listed Companies ” ? meeting of the 9th Board of the company held on
August 7, 2014, and will abide by said principles.
The Principle was amended on June 14, 2016 for
the first time and March 22, 2019 for the second
time.
II. Shareholding structure &
shareholders’ rights
A. Does the company establish an ✓ A. The Company has a spokesperson and None
internal operating procedure shareholder service personnel to process
to deal with shareholders' shareholders’ suggestions, questions, and
suggestions, doubts, disputes disputes. The Company has established an
and litigations, and implement “Investor Section” and “Investor Mailbox” on
based on the procedure? the Company website, which are run by the
spokesperson and dedicated personnel of the
Administration Department. Shareholders’
suggestions or disputes are forwarded to
relevant departments for processing.
B. Does the company possess the ✓ B. PSC maintains close relationships with None
list of its major shareholders as key shareholders and assigns dedicated
well as the ultimate owners of shareholder services personnel to continually
those shares? monitor any changes in the shareholdings of
these key shareholders.
C. Does the company establish and ✓ C. The finance and business of our company None
execute the risk management and its subsidiaries are in separate operation.
and firewall system within its In term of management right/obligation
conglomerate structure? there is a clear line between our company
and its subsidiaries. All the relations and
trades are dealt with in accordance with law.
“Surveillance governing internal-control
system for affiliated companies” has also
been set up as a controlling and governing
mechanism for our affiliated companies.
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Evaluation Item	Evaluation Item	Implementation Status	Implementation Status	Implementation Status
		Yes	No	Abstract Illustration

Name Gender Lin, Kuan- Chen M Lin, Chung- Shen M Liu, Tsung- Yi M Chen, Kuo-Hui M Hsieh Hong, Hui-Tzu F Lu, Li- An F Teng, Wen- Hwi F Lee, Che- Ming M Chang, Ming- Chen F Tu, Li- Yang F Lee, Shu-Fen F Duh, Bor- Tsang M Lee, Shy-Lou M Juang, Jing- Yau M Liang, Yann- Ping F Pai, Chun- Nan M Song, Yung- Fong M Horng, Yuan- Chuan M	Comprehensive Abilities 1. Operational Judgement 2. Accoutning & Financial Analysis 3. Operating Management 4. Crisis Management 5. Industrial Knowledge 6. International Points of View 7. Leadership 8. Decision- making Ability 9. Risk Management Konwledge & Ability V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V V

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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
B. Does the company voluntarily ✓ B. President Securities has already added None
establish other functional independent directors to its board, has
committees in addition to the established a remuneration committee, a
Remuneration Committee and risk management committee, and an audit
the Audit Committee? committee.
1. Based on the expertise, consistency, and
time-based effectiveness of the Company’s
business, the Board of Directors has passed the
Articles of Organization developed by the Risk
Management Committee on June 26, 2008 and
established the Risk Management Committee
in the Board of Directors to implement
supervision of day-to-day risk management.
The Committee is charged with the following
duties:
(1) Establishment of Company risk
management policies and organization and
assignment of duties to related units.
(2) Establishment of the Company’s risk
measurement standards.
(3) Management of limits for the Company’s
overall and departmental risk.
2. The Risk Management Committee consists
of three members. At least half of them are
Independent Directors, and the committee
members shall be selected via resolution of
Board of Directors. The Risk Management
Committee shall convene meetings at least
once every quarter to assist the Board of
Directors in planning and supervising
the Company’s related risk management
affairs. This committee shall report the
implementation of risk management to the
Board of Directors periodically and propose
suggestions for necessary improvements.
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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
C. Does the company establish ✓ C. In accordance with the “Corporate Governance None
a standard to measure the Best-Practice Principles for Securities
performance of the Board, and Firms,” the Company cooperated with the
implement it annually? competent authority to promote corporate
governance and adopted the “Board of
Directors Performance Evaluation Measures”
at the 2nd board meeting of the 11th Board
of Directors on August 29, 2018. According
to the Measures, the Company shall conduct
an internal performance evaluation of the
Board of Directors every year; evaluation
shall be performed by an external professional
independent institution or a team of external
experts once every three years. The Directors’
self-evaluation and the self-evaluation of the
board meeting unit were completed at the end
of November 2018.
Results of self-evaluation are as follow:
(1) Directors’ self-evaluation: Among 18
Directors, 15 Directors’s self-evaluation
attainment rate reached 100% and 3
reached 96%, indicating that the Directors
fully demonstrated their functions in the
operation of the Company’s Board of
Directors.
(2) Self-evaluation of the board meeting unit:
Except for item 45 that was not applicable
for this year, the rest were up to standard.
(3) A total of 46 items were evaluated, of which
45 met the standards, and the attainment
rate was 98%. The evaluation results were
submitted to the 4th board meeting of the
11th Board of Directors on December 20th
2018 for reference.
The remuneration of the Company’s Directors
shall be in accordance with the provisions of
Article 23 of the Articles of Incorporation.
The Company shall allocate no more than
2% of the total profit of the current year to
the Directors as a consideration and give
them reasonable remuneration based on the
Company’s operational performance and their
contribution the Company’s performance.
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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
IV. Does the Company established ✓ The Company’s Board of Directors adopted a None
a full- (or part-) time resolution on May 3, 2019, that Assistant Vice
corporate governance unit or President Chen, Nai-Chen at the President Office
personnel to be in charge of
would be appointed as the Corporate Governance
corporate governance affairs
Officer in charge of corporate governance-related
(including but not limited to
affairs. Assistant Vice President Chen has served
furnish information equired
as a supervisor in President Office related to
for business execution by
corporate governance for more than three years,
directors, handle matters
relating to board meetings as set out in Article 21 in accordance with Article
and shareholders' meetings 23 of the “Operation Directions for Compliance
according to laws, handle with the Establishment of Board of Directors
corporate registration and by TWSE Listed Companies and the Board’s
amendment registration, Exercise of Powers”. As a new officer, she will
produce (or record?) minutes complete 18 hours of professional training courses
of board meetings and
in accordance with Article 24. The Company’s
shareholders meetings, etc.
corporate governance-related affairs are
handled and completed by relevant departments
collectively. Corporate governance-related affairs
(terms of reference) shall include matters related
to holding of meetings of the Board of Directors
and shareholders’ meetings, minutes recording
for meetings of the Board of Directors and
shareholders’ meetings, assistance to Directors
with taking office and continuous education and
training, provision of information required for
the Directors to conduct business, assistance to
Directors with compliance, and other matters set
out in the Company’s Articles of Incorporation or
contracts.
Key points for business execution in 2019:
1. Matters related to meetings of the Board
of Directors and shareholders’ meetings in
accordance with the law.
2. Minutes recording for meetings of the Board
of Directors and shareholders’ meetings.
3. Assistance to the Directors with taking office
and continuous education and training.
4. Provision of the information required for the
Directors to conduct business.
5. Other matters set out in the Company’s
Articles of Incorporation or contracts.
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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
V. Does the company establish Communication methods:
a communication channel
(1) The Company organizes periodic
and build a designated
section on its website for price negotiation meetings, announces
stakeholders, as well as handle information on the public tendering
all the issues they care for information section on the official website,
in terms of corporate social and organizes public tendering briefings.
responsibilities?
(2) The Company has established the 'Supplier
Evaluation and Management Regulations' to
evaluate suppliers. The evaluations include
preliminary, periodic, and unscheduled
evaluations and classify suppliers into A, B,
C, and D categories in accordance with the
results of the evaluations, which are used as
the basis for future cooperation.
(3) The Company cooperates with suppliers to
jointly commit to fulfilling corporate social
responsibilities and sign the 'Corporate
Social Responsibilities Commitment
Letter.' The materials used in decoration
construction and equipment procurement
must be green building materials and
equipment with environmental protection
labels to increase the Company's dedication
to environmental protection, energy
conservation, and carbon emissions
reduction.
E. Competent authority
Issues concerned: ethical business operation,
corporate governance, transparency and
disclosure of information, financial and capital
market functions maintenance, and financial
inclusion
Communication methods:
The Company participates in courses and
seminars organized by the government.
F. Community/NGO
Issues concerned: social welfare, responsible
Investment/sustainable finance, and
environmental protection
Communication methods:
The Company organizes charity events every
year.
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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
V. Does the company establish The Company has established a stakeholder
a communication channel section and corporate social responsibility
and build a designated section on the official website to explain the
section on its website for Company's corporate social responsibility
(CSR) ideas and policies and describe the
stakeholders, as well as handle
Company's accomplishments including the
all the issues they care for
Company’s economic, social, and environmental
in terms of corporate social
achievements. The Company has formulated
responsibilities?
the 'President Securities Corp. Corporate Social
Responsibility Report' every year for publication
on the Company's website (URL: www.
pscnet.com.tw) and publication in the Market
Observation Post System.
VI. Does the company appoint ✓ Affairs of shareholders' meetings are handled None
a professional shareholder by the Shareholder Services Department of
service agency to deal with the Company; the Department obtained the
shareholder affairs? certification of the Professional Shareholder
Services Institution from Taiwan Depository &
Clearing Corporation (TDCC).
VII. Information Disclosure
A. Does the company have a ✓ A. On President Securities Corporation website, None
corporate website to disclose we have disclosed the Company’s financial
both financial standings and the and business information, and corporate
status of corporate governance? governance. We also post periodical and
non-periodical financial and operational
information on the government-operated
MOPS website.
B. Does the company have other ✓ B. Our company has assigned a spokesperson to None
information disclosure channels be responsible for providing information to
(e.g. building an English shareholders and investors. On our website
website, appointing designated where investors and shareholders can obtain
people to handle information information on the following:
collection and disclosure,
(1) Company introduction in English and
creating a spokesman
Chinese.
system, webcasting investor
conferences)? (2) Disclosure of company’s financial and
business information, and corporate
governance.
(3) Investor Suggestion Mailbox, which is
manned by Administration Department
Personnel who are responsible for replying to
all comments received.
(4) The Company has disclosed the briefing and
video files of institutional investor conference
proceedings and other related information on
the Company’s website.
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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
VIII. Is there any other important ✓ A. Environmental Protection Measures None
information to facilitate
President Securities operate financial
a better understanding of
services and, therefore, does not produce any
the company's corporate
environmental pollutants or waste.
governance practices
(e.g., including but not B. Investor relations
✓ None
limited to employee rights,
Our company has assigned a spokesperson
employee wellness, investor
to be responsible for providing information
relations, supplier relations,
to shareholders and investors, and to post
rights of stakeholders,
directors' and supervisors' periodical and non-periodical financial and
training records, the operational information on the government-
implementation of risk operated MOPS website. The Company
management policies and established “the investor section” on our
risk evaluation measures, the website to provide investors with transparent
implementation of customer and comprehensive information. The company
relations policies, and
will continue to strengthen investor relations
purchasing insurance for
and maintain good communication and
directors and supervisors)?
interaction with investors.
✓ C. Employee rights and wellness None
(1) To boost work efficiency and solidarity
among our employees, we place particular
emphasis on benefits programs and labor
relations, and thus ensure employee welfare
in a comprehensive manner.
(2) General accident insurance has been
purchased for each of our branches and
work premises so as to protect customer
rights. Employer insurance has also been
purchased so as to protect the interests of
all employees.
✓ D. Rights of the stakeholders None
We have also taken steps to address corporate
responsibility concerns of our stakeholders.
We have established a platform with dedicated
staff to handle feedback from investors,
employees, clients, competent authority and
community/NGO so as to maintain strong
lines of communication. This allows us to stay
aware of the issues that are of importance to
our interested parties and to ensure that all of
our actions are responding to the needs of our
stakeholders.
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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
VIII. Is there any other important ✓ E. Customer policy None
information to facilitate
(1) Policy: "3 Goods and 1 Fair" ─"Good
a better understanding of
Quality", "Good Credibility", "Good
the company's corporate
governance practices Service", and "Fair Price". This is combined
(e.g., including but not with "Professional Leadership, Kind
limited to employee rights, Service", in providing all customers with
employee wellness, investor comprehensive services.
relations, supplier relations,
(2) Implementation: We have established a
rights of stakeholders,
directors' and supervisors' Customer Services Department—The
training records, the Customer Service Center, which offers
implementation of risk customers an avenue through which to
management policies and register complaints, which operates a
risk evaluation measures, the customer service hotline which is manned
implementation of customer by customer service specialists who help to
relations policies, and
solve customer problems, and which ensures
purchasing insurance for
that all account correspondence sent to
directors and supervisors)?
clients includes clear product risk warnings.
✓ F. Directors training None
The Company's Directors shall carry out
independent studies and the Company shall
also organize related corporate governance
courses periodically and invite all Directors
to participate in the courses. Take 2018
for example, in addition to the Directors'
independent training courses, the Company
cooperated with Taiwan Corporate Governance
Association to jointly organize courses for all
the Company's Directors, Executive Directors,
and managers of the company. In May, Mr.
Hung-Lie Liang, lawyer from PwC Legal,
was invited to give a lecture on "The Latest
Developments and Practices in Anti-money
laundering and Counter-terrorist Financing."
In August, Ms. Philippa Tsai, Director of
Group-Vision Transnational Attorneys-at-
law, was invited to lecture on "Enterprise
Transformation, Upgrading, and Innovation
as well as Social Responsibility" to enable the
Directors to further understand the spirit of
corporate governance and practice. For details
of the Directors' on-the-job training in 2018,
please refer to Chapter 3 XI. Directors and
Corporate Auditors Training.
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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
VIII. Is there any other important ✓ G. Implementation status for Risk Management None
information to facilitate Policy and Measurement:
a better understanding of
(1) Risk Management Policy
the company's corporate
governance practices
i. Ensure that we can operate various types
(e.g., including but not
of business from a position of solid risk
limited to employee rights,
management. Using reasonable risk
employee wellness, investor
tolerance levels, continue to enhance
relations, supplier relations,
profitability, create shareholder value, and
rights of stakeholders,
directors' and supervisors' achieve return on capital targets.
training records, the
ii. Set well-defined risk controls for every
implementation of risk
business area, implement risk management
management policies and
checks and balances, set clear obligations
risk evaluation measures, the
for each department so as to enhance risk
implementation of customer
relations policies, and management effectiveness by breaking it
purchasing insurance for down into manageable pieces.
directors and supervisors)?
iii. Our risk management operations take into
accounts all key forms of risk: market risk,
credit risk, liquidity risk, operational risk,
legal risk, model risk.
(2) Risk Measurement
The company has set risk management
principles. In order to ensure that all of our
organization’s businesses adhere to our
operating policies, operating goals, and capital
levels, we have set suitability evaluation
policies that can react to changes in our
business and in the market:
 Market risk measurement
i. We use RiskMetrics market risk
management system to manage our
company’s exposure to market risk. In
addition to producing daily risk value
tables, we perform simulation analysis
and historical analysis so as to supplement
missing risk values.
ii. We evaluate the completeness of our
evaluation models on various business
mareas, and review the assumptions,
parameters, and data used for various
product models, and then test that the models
for the various products are reasonable.
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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
VIII. Is there any other important iii. We evaluate the effectiveness of risk
information to facilitate control models: regularly perform
a better understanding of backtesting to ensure the effectiveness of
the company's corporate the models used.
governance practices
(e.g., including but not  Credit risk measurement
limited to employee rights,
i. Our company undergoes credit rating
employee wellness, investor
evaluations from Moody’s, Standard &
relations, supplier relations,
Poor’s, Fitch, and Taiwan Ratings Corp.
rights of stakeholders,
directors' and supervisors'
ii. Trading counterparty credit risk: we assess
training records, the
our company’s maximum exposure in the
implementation of risk
event that a trading counterparty defaults,
management policies and
and then use maximum exposure limits set
risk evaluation measures, the
by the board of directors, in determining
implementation of customer
relations policies, and the credit risk of a trading counterparty.
purchasing insurance for iii. Issuer’s Credit Risk: we use KMV model
directors and supervisors)?
to perform internal evaluations, and
combine that with financial data and stock
price data, to calculate the probability
of a default. Then, based on these
measurements, we developed "Z-Score",
an in-depth internal evaluation of the
company, and then use this to protect
ourselves from potential credit risks and
potential capital shortfalls.
 Operational risk measurement
i. Operational risk is the risk that occurs
when internal processes, employees, or
systems, are inappropriate or cause errors;
or risk that is caused by external factors.
This type of risk is related to legal risks but
not strategic risk or credit risk.
ii. We create operations risk policy handbooks
that entail every level of operations.
iii. Through our risk report and audit report,
we ensure that risk is appropriately
evaluated, disclosed, and controlled.
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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
VIII. Is there any other important (3) Risk Management
information to facilitate
Our risk management takes into account
a better understanding of
market risk, credit risk, liquidity risk,
the company's corporate
governance practices operational risk, legal risk, etc., for both
(e.g., including but not on-balance sheet business and off-balance
limited to employee rights, sheet businesses. Each day, every level of
employee wellness, investor operations, every manager, and every trader
relations, supplier relations, is given fresh figures on position risk and
rights of stakeholders, key sensitivity values. Through this, the
directors' and supervisors'
company’s risk controls and trading strategies
training records, the
can be properly analyzed and necessary alerts
implementation of risk
can initiated. Setting risk control guidelines
management policies and
for each level of operations allows for
risk evaluation measures, the
comprehensive monitoring of risk.
implementation of customer
relations policies, and
(4) Our Risk Management Organization
purchasing insurance for
directors and supervisors)? As part of our risk control measures, we
have created an independent risk control
department and constructed an integrated
risk control architecture that encompasses
all facets of the organization, including the
Board of Directors, the Risk Management
Committee, the President Office, the Assets/
Liabilities Management Committee, the
Risk Control Office, the Auditing Office,
the Compliance Division, the Finance
Department, the Business units and Settlement
& Clearing Department. Each segment of the
company has clearly spelled-out obligations
and every level of the company has clearly
defined authorities.
i. Board of Directors: Audits the company’s
risk management policy, supervises sales
business strategies, approves all business
proposals and trading permissions, is
ultimately responsible for risk management.
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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
VIII. Is there any other important ii. Risk Management Committee: Is a
information to facilitate committee established by the Board of
a better understanding of Directors tasked with integrating all risk
the company’s corporate
management operations, with supervising
governance practices (e.g.,
and assisting all the various risk
including but not limited to
management and related operations. The
employee rights, employee
committee is also tasked with setting the
wellness, investor relations,
various risk authorities, limits, and targets,
supplier relations, rights of
stakeholders, directors’ and for a centralized supervision of the status
supervisors’ training records, of all of the company’s risk management
the implementation of risk efforts.
management policies and
iii. President Office: Supervises the daily
risk evaluation measures, the
implementation of all of the company’s
implementation of customer
risk management operations and authorizes
relations policies, and
purchasing insurance for any exceptions to the risk management
directors and supervisors)? protocols.
iv. Assets/Liabilities Management Committee:
Controls the company’s overall asset
structure, collects and analyzes domestic
and international interest rates, exchange
rates, and economic changes.
v. Risk Control Office: Is responsible for the
drafting of risk policies and regulations,
for monitoring market and credit risks,
for monitoring liquidity risks, for
compiling data on operational risk control
and management, for constructing and
maintaining the risk management system,
for implementation of risk management
systems and for ensuring company-wide
regulatory compliance.
vi. Auditing Office: Sets operations risk
controls, sets the standards for risk control
systems, puts in place internal auditing
controls, and implements daily check
routines.
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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
VIII. Is there anyother important vii. Compliance Division: Implements
information to facilitate legal risk controls and ensures that all
a better understanding of businesses and risk management operations
the company's corporate
are in compliance with relevant laws
governance practices
and regulations. Compliance Division
(e.g., including but not
concurrently is responsible for anti-
limited to employee rights,
money laundering and counter-terrorist
employee wellness, investor
financing, developing relevant regulations
relations, supplier relations,
rights of stakeholders, and systems, monitoring internal
directors' and supervisors' control and transactions, supervising the
training records, the implementation by business units, holding
implementation of risk training sessions, and reporting cases
management policies and suspicious of money laundering.
risk evaluation measures, the
viii. Finance Department: Monitors capital
implementation of customer
relations policies, and adequacy rates and liquidity risks, and
purchasing insurance for analyzes the company’s asset/liability
directors and supervisors)? structure and other key financial ratios.
ix. Business units: Based on the company’s
risk management policies and regulations
sets risk management guidelines for
various businesses, and produces a report
on abnormal risk items for the Risk Control
Office.
x. Settlement & Clearing Department:
Implementation of risk control and
management for settlement, clearing,
and short-sale business operations.
Implementation of risk management and
business department risk management for
transactions.
✓ H. President Securities has already purchased None
liability insurance from ACE insurance and
AIG Asia Pacific Insurance Pte. Ltd. for all of
its directors, and key employees (Policy Value:
US$10 million; Policy Term: September 1,
2018, to September 1, 2019).
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Implementation Status Deviations from
“the Corporate
Governance
Best-Practice
Evaluation Item Principles
Yes No Abstract Illustration for TWSE/
TPEx Listed
Companies” and
Reasons
IX. The improvement status ✓ In the Corporate Governance Evaluation of None
for the result of Corporate 2018, the Company's final evaluation score
Governance Evaluation was 94.06, placing the Company between
announced by Taiwan Stock
6% and 20% of the total listed companies.
Exchange.
The Company has been actively seeking
improvement to improve the items for
which not point was scored. For example,
the Company has established the "Board of
Directors Performance Evaluation Method,"
approved by the Board of Directors on
August 29, 2018, and conducted the 2018
Board of Directors Performance Evaluation
Report for the first time on December 20,
2018. In addition, since June 29, 2018, four
Independent Directors have served as the
Risk Management Committee members. For
other items for which point was not scored,
the Company has been actively discussing and
studying relevant matters.
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D. Composition, responsibilities, and operation of the Remuneration Committee

In accordance with the “Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter” published by the competent authority on March 18, 2011, the Company has completed the discussion and resolution of the proposal by September 30, 2011, as required. Please refer to the description of the Remuneration Committee on page 68 of the Annual Report for the information on the operations.

1. Information Regarding Remuneration Committee

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Criteria Meets One of the Following Professional Qualification Requirements, Independence Criteria (Note)
Together with at Least Five Years’ Work Experience
Number of
An instructor or A judge, public Other Public
higher position in prosecutor, attorney, Has work Companies
a department of Certified Public experience in in Which the
Title commerce, law, Accountant, or the areas of Individual is Remark
finance, accounting, other professional or commerce, Concurrently
or other academic technical specialist who law, finance, Serving as an
1 2 3 4 5 6 7 8
department related has passed a national or accounting, Remuneration
to the business needs examination and been or otherwise Committee
of the Company in awarded a certificate in necessary for the Member
a public or private a profession necessary business of the
Name junior college, college for the business of the Company
or university Company
Independent Pai, Chun-
✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 1
Director Nan
Independent Liang, Yann-
✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 0
Director Ping
Independent Horng, Yuan-
✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 1
Director Chuan
Independent Song, Yung-
✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 0
Director Fong
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III. Corporate Governance

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

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Not an employee of the Company or any of its affiliates.
Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.
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, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs.
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.
Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company.
Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof.
Not been a person of any conditions defined in Article 30 of the Company Law.

2. Operations of the Remuneration Committee

(1) The committee is composed of four members.

(2) Term of the 3rd committee members: From June 29, 2015 through June 17, 2018. Term of the incumbent committee members: From June 21, 2018 through June 20, 2021. The Remuneration Committee met four times (A) in the most recent year. The qualifications and attendance of the members are listed below:

Title	Name	Attendance in Person (B)	By Proxy	Attendance rate (%) (B/A) (Note)	Remark (Note)
Convener Wu, Tsai-Yi 2 0 100% Resigned on 2018.6.17
Member Lee, Kwang- Chou 2 0 100% Resigned on 2018.6.17
Member Fu, Kai-Yun 2 0 100% Resigned on 2018.6.17
Member Liang, Yann- Ping 4 0 100% Reappointment on 2018.6.21
Convener Pai, Chun- Nan 2 0 100% New appointment on 2018.6.21
Member Horng, Yuan- Chuan 2 0 100% New appointment on 2018.6.21
Member Song, Yung- Fong 2 0 100% New appointment on 2018.6.21
Other mentionable items: 1. If the board of directors declines to adopt or modifies a recommendation of the remuneration committee, it should specify the date of the meeting, session, content of the motion, resolution by the board of directors, and the Company’s response to the remuneration committee’s opinion (eg., the remuneration passed by the Board of Directors exceeds the recommendation of the remuneration committee, the circumstances and cause for the difference shall be specified): None. 2. Resolutions of the remuneration committee objected to by members or expressed reservations and recorded or declared in writing, the date of the meeting, session, content of the motion, all members’ opinions and the response to members’ opinion should be specified: None.

Note 1: When a member of the Remuneration Committee resigns before the end of the year, the remark column shall be annotated with the date of resignation. Actual attendance rate (%) shall be calculated based on the number of meetings held by the Remuneration Committee and the number of actual attendance during the term of service.
Note 2: When an election is held for the Remuneration Committee before end of the year, members of both the new and old committee shall be listed in separate columns and noted as new, old or re-elected members, along with the elected date, in the “Remark” column. The actual attendance rate (%) shall be calculated based on the number of meetings held during the member’s term in the Remuneration Committee and the number of actual attendance of this member.

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III. Corporate Governance

(3) 2018 remuneration committee proposal discussion and resolution:

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Remuneration Committee Item Resolution
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Remuneration Committee	Item	Resolution

2018.03.14 The 8th Meeting of the 3rd Remuneration Committee	1. Proposal regarding 2017 Employees and Directors Bonus Distribution Ratio. 2. Proposal regarding 2017 Employees and Directors Bonus Allocation.	All members of the committee present voted in favor of the resolution without any objection and submitted it to the Board of Directors for discussion.
2018.04.19 The 9th Meeting of the 3rd Remuneration Committee	1. Proposal regarding the amount of bonuses distributed to managers and employees of 2017. 2. The proposal regarding the remuneration adjustment of the Independent Directors.	Proposal 1: All members of the committee present voted in favor of the resolution without any objection and submitted it to the Board of Directors for discussion. Proposal 2: Because of avoidance of conflicts of interest, this proposal was not discussed, and submitted it to the Board of Directors for discussion and resolution.
2018.08.23 The 1st Meeting of the 4th Remuneration Committee	Nomination: 1. Proposal regarding the nomination and election of the convener of the “Remuneration Committee”, and will be submitted for discussion. Items to be discussed: 1. Periodic review and evaluation of the policy and structure for the remuneration of the Directors. 2. Formulation of performance management measures of the Board. 3. Proposal regarding the remuneration of the 11th Board of Directors. 4. Proposal regarding the remuneration of the 11th Chairman. 5. Proposal regarding the remuneration of the President.	Nomination: Proposal 1: Pai, Chun-Nan was elected through mutual selection as the convener and chairman without any objection. Items to be discussed: All members of the committee present voted in favor of the resolution without any objection and submitted it to the Board of Directors for discussion.
2018.12.20 The 2nd Meeting of the 4th Remuneration Committee	1. Periodic review and evaluation of the policy and structure for the remuneration of the senior executives and managers.	All members of the committee present voted in favor of the resolution without any objection and submitted it to the Board of Directors for discussion.

President Securities Corp. 2018 Annual Report

III. Corporate Governance

E. Corporate Social Responsibility (CSR)

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Implementation Status Deviations from
Corporate Social
Responsibility(CSR)
Best Practice
Evaluation Item
Principles of TWSE/
Yes No Abstract Explanation
GTSM Listed
Companies” and
Reasons
I. Corporate Governance
Implementation
A. Does the company declare its ✓ A. For the implementation of the corporate None
corporate social responsibility governance, the Company’s Board of
policy and examine the results Directors approved the “President Securities
of the implementation? Corporate Social Responsibility Best practice
Principles” on July 2, 2012, and within four
months after the end of each year, the results
of implementation of each relevant department
shall be submitted to the Board of Directors.
Our company has worked out “President
Securities Social Responsibility Report”,
which indicates the related performance and
has been put on our website. (URL: www.
pscnet.com.tw) Please refer to the PSC CSR
Report for a detailed description of CSR
policy effectiveness.
B. Does the company provide ✓ B. Our Company uses multiple avenues by which None
educational training on to promote corporate responsibility education,
corporate social responsibility including holding corporate governance
on a regular basis? training classes (May 4, 2018, and August 29,
2018, for 6 hours in total); another such class
is scheduled for May and August of 2019.
We will continue to imbues the concepts of
corporate responsibility into all Company
activities and future development and thereby
achieve real corporate governance.
C. Does the company establish ✓ C. Corporate responsibility concepts have already None
exclusive (or concurrently) been engrained in our corporate operations
dedicated first-line managers and development plans. Every year, our
authorized by the board to administration department plans CSR strategy
be in charge of proposing the and promotion projects, organizes corporate
corporate social responsibility responsibility events, such as charity events,
policies and reporting to the and, within four months after the end of each
board? year, puts together a report for the board of
directors on the activities implemented by
each department.
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III. Corporate Governance

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Implementation Status Deviations from
Corporate Social
Responsibility(CSR)
Best Practice
Evaluation Item
Principles of TWSE/
Yes No Abstract Explanation
GTSM Listed
Companies” and
Reasons
D. Does the company declare a ✓ D. Based on the Company’s business plan None
reasonable salary remuneration and allocation of talent, the Company joins
policy and integrate the professional institutions in the salary survey
employee performance appraisal of the industry every year to understand
system with its corporate social the situation in the market and set a
responsibility policy, as well as reasonable pay and remuneration policy.
establish an effective reward Through the performance management
and disciplinary system? system, the Company communicated
career and competency development with
its employees, and formulated a reward
policy linked to performance and bonuses,
to enhance employee performance, sustain
growth, as well as protect employees’ rights
and interests. Furthermore, to strengthen
personnel management, we have set up
relevant regulations for employee’s rewards
and punishments, in order to establish a fair
and justice rule.
II. Sustainable Environment
Development
A. Does the company endeavor ✓ A. Although the Company is a securities firm None
to utilize all resources more that does not produce any environmental
efficiently and use renewable pollutants, we still care deeply about protecting
materials which have low the environment, about reducing our impact on
impact on the environment? the environment, and about our responsibility
for sustainability. The Company is also
committed to green energy, environmental
protection, and reducing waste in a sustainable
manner. To this end, the Company place waste
sorting receptacles on all floors of its facilities
and is strict about adhering to recycling
principles. All maintenance performed and
all equipment purchased must be certified as
environmentally friendly. The aim is to reduce
the Company’s overall environmental impact
as the Company strives to reduce its overall
carbon footprint.
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III. Corporate Governance

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Implementation Status Deviations from
Corporate Social
Responsibility(CSR)
Best Practice
Evaluation Item
Principles of TWSE/
Yes No Abstract Explanation
GTSM Listed
Companies” and
Reasons
B. Does the company establish ✓ B. President Securities operate financial None
proper environmental services and, therefore, does not produce
management systems based any environmental pollutants or waste. The
on the characteristics of their main source of greenhouse gases that we
industries? produce is from our power consumption. In
an effort to be increasingly environmentally
friendly and to reduce our carbon footprint,
we have implemented many initiatives aimed
at replacing company equipment with low
power consumption equipment. We have
also implemented an electronic management
system of internal document and electronic
account statements for our customers, so as to
reduce our consumption of paper products. We
also send out regular emails to all employees
that discuss key environmental concepts.
C. Does the company monitor ✓ C. In an effort to reduce our carbon footprint, the None
the impact of climate change Company adheres to government policies on
on its operations and conduct indoor climate controls, as well as removing
greenhouse gas inspections, and replacing outdated equipment with
as well as establish company more energy-efficient models, followed-
strategies for energy up by regular inspections. Every year a
conservation and carbon table is generating showing monthly water
reduction? and electricity usage by department and
any department that has exceeded its pre-
determined limits must submit an explanation
for the abnormality and its plan for corrective
action. Plus, all departments are encouraged to
keep environmental concerns and conservation
in mind when making purchasing decisions
so as to select and use equipment that is most
energy-efficient. Another way that we help to
lower our carbon footprint and greenhouse gas
emissions is to regularly encourage employees
to take elevators less and opt for taking the
stairs as this is a very effective way to reduce
carbon emissions.
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III. Corporate Governance

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

Implementation Status Deviations from
Corporate Social
Responsibility(CSR)
Best Practice
Evaluation Item
Principles of TWSE/
Yes No Abstract Explanation
GTSM Listed
Companies” and
Reasons
C. Does the company monitor In all employee washrooms and kitchens, we
the impact of climate change have placed water conservation reminders
on its operations and conduct and all taps have been outfitted with water
greenhouse gas inspections, stream reduction devices. Indeed, we have
as well as establish company implemented environmentally friendly
strategies for energy policies at all levels of the Company, by
conservation and carbon encouraging a high level of online trading,
reduction? electronic processing of administrative affairs,
all offices outfitted with environmentally
friendly equipment and materials, water and
electricity conservation initiatives, waste paper
reduction policies, etc. In 2018, the Company’s
headquarters consumed 17,555 cubic meters
of water which accounts for 1,222.83 kg
carbon emissions, 2% lower than last year and
1,392,369 kilowatt-hours of electricity which
accounts for 736,563 kg emissions, 7.4% lower
than last year. The Company shall continue to
promote environmental protection awareness
among colleagues and it has established a goal
of reducing carbon emissions by 2% in 2019 to
build a greener enterprise.
III. Preserving Public Welfare
✓
A. Does the company formulate A. In taking care of our employees, besides None
appropriate management setting up internal regulations in accordance
policies and procedures with the Labor Law, we also conduct regular
according to relevant regulations checks on the differences between our
and the International Bill of internal regulations and the Labor Law. The
Human Rights? Company also convey relevant information to
the employees through its public channels, to
protect the employees’ legitimate interests and
respect the basic labor human rights principles
recognized by the international community,
including the freedom of association,
collective-bargaining right, care for the
underprivileged, the prohibition of child labor,
and elimination of all forms of forced labor,
employment discrimination, as well as matters
detrimental to labor’s fundamental rights.
B. Has the company set up an ✓ B. In taking care of our employees, besides None
employee hotline or grievance setting up internal regulations in accordance
mechanism to handle complaints with the Labor Law, we also conduct regular
with appropriate solutions? checks on the differences between our
internal regulations and the Labor Law. We
also provide opinion boxes for employees as
communication channel in order to protect
employee’s legal rights.
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Implementation Status Deviations from
Corporate Social
Responsibility(CSR)
Best Practice
Evaluation Item
Principles of TWSE/
Yes No Abstract Explanation
GTSM Listed
Companies” and
Reasons
B. Has the company set up an (1) Established Employee Complaint Channel
employee hotline or grievance
The company has established a complaint
mechanism to handle complaints
channel where employees can register
with appropriate solutions?
complaints regarding the Labor Standards
Act, Labor Safety and Health Law, the
Employee Welfare Fund Regulations, the
Labor Insurance Regulations, the Labor
Inspection Act, the Employment Welfare
Act, etc., and, thereby diffuse potential
management-labor disputes. Complaints can
be submitted via email at: [email protected]
(2) In accordance with sexual harassment
protection bill and sex equality in work place
bill, our company has worked out measures
of preventing, grievance-airing, investigating
and handling sexual harassment. A
committee is also set up to take charge of
the related matters in order to prevent sexual
harassment and protect victim’s rights,
including providing sexual harassment free
environment.
Sexual harassment Tel.: (02)2746-3637
Fax: (02)2746-3799
E-mail: [email protected]
C. Does the company provide ✓ C. We focuses on the safety and health of the None
a healthy and safe working employees’ working environment. Aside
environment and organize from improving the dangerous factors within
training on health and safety the environment, we also hire a health
for its employees on a regular management specialist, establish health
basis? consulting room, and offer employee health
inspections on annual basis, with hope to let
employee understand and manage their own
health status in advance. President Securities
provides health counseling, followed by
follow-up health assessments. We organize
regular health seminars and an online health
and sanitation guidance system that provides
preventative health information; we offer an
employee activity center, gym, table tennis
and billiards room, and we actively encourage
employee clubs and groups, all to promote
the physical and emotional wellbeing of our
employees.
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III. Corporate Governance

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Implementation Status Deviations from
Corporate Social
Responsibility(CSR)
Best Practice
Evaluation Item
Principles of TWSE/
Yes No Abstract Explanation
GTSM Listed
Companies” and
Reasons
D. Does the company setup a ✓ D. We have a system in place to enable smooth None
communication channel with communication, it also provides its employees
employees on a regular basis, with the relevant information and application
as well as reasonably inform channels, thus ensuring that their working
employees of any significant environment is a good and fair one.
changes in operations that may
(1) The company has labor and employer
have an impact on them?
representatives, who regularly hold labor-
employer meetings to ensure sufficient
communications between the two sides.
(2) Each department holds regular department
meetings, employees’ views and needs are
sounded out during manager-level meetings
and appropriate measures are taken
thereafter.
(3) The company could achieve transparency
through internal Official Document Post
System.
✓ E. The company provides a series of employee None
E. Does the company provide
training about the Finance 3.0 and Internet in
its employees with career
respone to the trends of financial market. We
development and training
sessions? create career planning and career development
base on indivisual needs of staff’s positions,
such as the project of cross-selling for
diversified products, human capacity building,
stregthening occupational management and so
on.
F. Does the company establish ✓ F. We pay close attention to the protection of None
any consumer protection customer information so as to protect the
mechanisms and appealing rights of our customers. In keeping with the
procedures regarding research laws and regulations laid out by the regulators,
development, purchasing, and in an effort to protect the rights of our
producing, operating and customers, we have established a complaint
service? hotline where customers may seek assistance.
We have put in place processes that protect
the personal information and rights of the
customers.
Also, President Securities has received BSI
and BS-10012 certification for its new account
application process. We dedicated ourself
in rising professional ability of persional
information protection, and will cautiously
processing client information in order to
protect customer rights.
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III. Corporate Governance

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Implementation Status Deviations from
Corporate Social
Responsibility(CSR)
Best Practice
Evaluation Item
Principles of TWSE/
Yes No Abstract Explanation
GTSM Listed
Companies” and
Reasons
G. Does the company advertise ✓ G. We adhere to all relevant laws and regulations None
and label its goods and services with regard to product marketing and product
according to relevant regulations disclaimers.
and international standards?
H. Does the company evaluate the ✓ H. We have put into place a supplier approval None
records of suppliers' impact on process, and also conduct regular reviews of
the environment and society those suppliers so as to ensure that they are all
before taking on business partners in good standing that are worthy of
partnerships? our continued business.
I. Do the contracts between the ✓ I. The Company has requested main suppliers None
company and its major suppliers to sign the "Supplier Social Responsibility
include termination clauses Commitment Letter" that requests suppliers
which come into force once the to commit to the International Bill of Human
suppliers breach the corporate Rights, follow labor regulations, provide
social responsibility policy and employees with a fair, healthy, and safe work
cause appreciable impact on the environment, abolish discrimination and unfair
environment and society? treatment, and follow related environmental
protection regulations. Suppliers who violate
the Commitment Letter may be requested to
terminate contracts or suspend cooperation.
IV. Enhancing Information
Disclosure
Does the company disclose ✓ The Company has established a stakeholder None
relevant and reliable information section and corporate social responsibility
regarding its corporate social section on the official website to explain the
responsibility on its website and Company's corporate social responsibility
the Market Observation Post (CSR) ideas and policies and describe the
System (MOPS)? Company's accomplishments including the
Company’s economic, social, and environmental
achievements. The Company has formulated
the "President Securities Corp. Corporate
Social Responsibility Report" every year for
publication on the Company's website (URL:
www.pscnet.com.tw) and publication in the
Market Observation Post System.
V. If the Company has established the corporate social responsibility principles based on “the Corporate Social
Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”, please describe any discrepancy between
the Principles and their implementation:
For the implementation of the corporate governance, the Company’s Board of Directors approved the "President Securities
Corporate Social Responsibility Best practice Principles" on July 2, 2012. Implemental reports of "President Securities
Corporate Responsibility Principles" were proposed in board meeting every year, and report of the year 2018 was proposed
in the 6th meeting of the 11th Board of the company.
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Implementation Status Deviations from
Corporate Social
Responsibility(CSR)
Best Practice
Evaluation Item
Principles of TWSE/
Yes No Abstract Explanation
GTSM Listed
Companies” and
Reasons
VI. Other important information to facilitate better understanding of the Company’s corporate social responsibility
practices:
A. Environmental Protection Measures
Although the Company is a securities firm that does not produce any environmental pollutants, we still care deeply about
protecting the environment, about reducing our impact on the environment, and about our responsibility for sustainability.
B. Participation in Public Service
President Securities Corp. has been a long-standing supporter of important social charitable activities and, for its efforts,
has been recognized with the 7th annual Wenxin Award and the 6th National Civic Service Award, and Top 50 by the
Commonwealth magazine in 2013, 2015, 2016, and 2017. Besides, the Company was recognized and reward by the Taiwan
Fund for Children abd Families in 2013.
The Company has taken concrete actions to cooperate with the Taiwan Fund for Children and Families from 2007 to 2018
to help children from financially challenged families with their studies. The Company also mobilized all employees and
customers for joint participation and invested actual funds and various equipment to social welfare activities to fulfill
corporate social responsibilities. The Company raised a total of NT$2.3 million from 1,259 participants in 2018.
Since 2001, the Company has organized all employees in PSC, PFC, PAMC, PCHC, PIAC, and PSC Venture Capital as
well as allowing customers to participate in the “Love Delivery Activities” that provide children from financially challenged
families with scholarships. A total of approximately 8,158 elementary school, junior high school, and senior high school
students were beneficiaries. The activities have provided school children from poor families with opportunities to explore
different academic disciplines for their own development and growth.
The Company organized the first employee blood donation event in 2006 and received a passionate response. Starting
in 2007, the Company has organized two employee blood donation events every year and expanded the event to include
community residents who have provided strong support. Starting in 2010, the Company organized three blood donation
activities every year and a total of 233 bags of blood were donated in 2018. A total of 3,273 bags of blood have been donated
from 2006 to 2018 and the Company has become a permanent partner of the Blood Center. The Company receives a letter of
gratitude and commendation from the Blood Center every year.
President Securities Corp. upholds the spirit of “giving back to the community what we take”, and we continue to dedicate
ourselves in helping disadvantaged groups and to promote social welfare activities.
C. Customer Rights
We have assigned a spokesperson to be responsible for providing information to shareholders and investors, and for posting
periodical and non-periodical financial and operating information on the government-operated MOPS website. We have also
setup an "Investor Section" on our website where investors and shareholders can obtain information on the following:
(1) President Securities’ design and sale of financial products adheres to all relevant laws and regulations.
(2) Company introduction in Chinese and English.
(3) Company financial statements.
(4) Board of Director meeting Minutes.
(5) Investor Suggestion Box, which is manned by Public Affairs personnel who are responsible for replying to all comments
received.
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Implementation Status Deviations from
Corporate Social
Responsibility(CSR)
Best Practice
Evaluation Item
Principles of TWSE/
Yes No Abstract Explanation
GTSM Listed
Companies” and
Reasons
D. Employee Rights and Hiring Concerns
(1) To boost work efficiency and solidarity among our employees, we place particular emphasis on benefits programs and
labor relations, and thus ensure employee welfare in a comprehensive manner.
(2) General accident insurance has been purchased for each of our branches and work premises so as to protect customer
rights. Employer insurance has also been purchased so as to protect the interests of all employees.
E. Rights of the stakeholders
The Company respects rights of the stakeholders in expressing their opinions and has established a stakeholder section on
the official website to build up a communication channel and to explain the Company’s corporate social responsibility (CSR)
ideas and policies. For investors, employees, suppliers, customers, competent authority and community/NGO, the Company
has established a communication platform, on which there are dedicated personnel to respond to any questions, to maintain
good communication with the employees.
F. Customer policy
(1) Policy: "3 Goods and 1 Fair" ─ "Good Quality", "Good Credibility", "Good Service", and "Fair Price". This is combined
with "Professional Leadership, Kind Service", in providing all customers with comprehensive services.
(2) Implementation: We have established a Customer Services Department—The Customer Service Center, which offers
customers an avenue through which to register complaints, which operates a customer service hotline which is manned by
customer service specialists who help to solve customer problems, and which ensures that all account correspondence sent
to clients includes clear product risk warnings.
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VII. A clear statement shall be made below if the corporate social responsibility reports were verified by external certification institutions.

In 2011, the Company published its first ever "President Securities 2010 Securities 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 2017 was published in October, 2018 and was certified by a third party (PwC Taiwan), using the "Non-Financial Information Auditing and Certification Letter" format that is in compliance with the Good Reporting Initiative (GRI) G4 guidelines and that covers all items required by GRI G4 reporting policies.

F. Ethical business operation at the Company and related implementation

1. Ethical business operation

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 pursue long-term, steady and balanced growth in the spirit of integrity management.

(1) The company has established “Ethical Corporate Management Best Practices Principles” and “Fair Client Treatment Principles”, and strives to adhere to these concepts.
(2) 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 evaluation in 2016, scoring in the top-5 percent among listed company in Taiwan.
(3) Insure company directors, supervisors, and managers’ liability insurance, also employees’ credit insurance.
(4) The Company is active in participating in community activities, and in fostering sustainable development sustainable development.

III. Corporate Governance

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2. Ethical Corporate Management:

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Implementation Status Deviations from
the Ethical
Corporate
Management
Evaluation Item Best Practices
Yes No Abstract Illustration Principles for
TWSE listed
companies and
reasons
I. Establishment of ethical
corporate management
policies and programs
A. Does the company declare its ✓ A. On August 23, 2012, the Board of Directors None
ethical corporate management issued "Ethical Corporate Management Best
policies and procedures in Practice Principles" and revealed the principle
its guidelines and external in 2013 shareholders’ meeting. This proves
documents, as well as the the management’s commitment to Integrity
commitment from its board to management.
implement the policies?
B. Does the company establish ✓ B. To execute integrity management and prevent None
policies to prevent unethical dishonesty, the company adds related rules to
conduct with clear statements corporate governess (Chapter 10 article 48)
regarding relevant procedures, in 2012, which authorized by the Ministry of
guidelines of conduct, Labor and publicly announced.
punishment for violation, rules
of appeal, and the commitment
to implement the policies?
✓
C. Does the company establish C. To prevent dishonest behaviors, the rules are None
appropriate precautions against clearly set in the company’s Work Rules and
high-potential unethical conduct publicly announced.
or listed activities stated in
Article 2, Paragraph 7 of the
ethical corporate management
best-practice principles for
TWSE listed companies?
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Implementation Status Deviations from
the Ethical
Corporate
Management
Evaluation Item Best Practices
Yes No Abstract Illustration Principles for
TWSE listed
companies and
reasons
II. Fufill ethical management
A. Does the company evaluate ✓ A. Before engaging in any business relationship None
business partners’ ethical with any agent, supplier, customer, or any
records and include ethics- other enterprise, we conduct a thorough
related clauses in business examination of that party’s creditworthiness,
contracts? so as to avoid entering into any transactions
with non-creditworthy parties. Included in all
agreements with third parties are provisions
which allow for the early termination of such
agreement in the event of any deceitful acts by
that party.
B. Does the company establish ✓ B. President Securities designates clear divisions None
an exclusively dedicated unit of responsibilities among its employees,
supervised by the Board to be and, in 2012, the Management Department
in charge of corporate ethical established the “President Securities Principles
management and report to the for Honest Operations”, whereby a special
board on a regular basis? auditing office under the Board of Directors
would periodically assesses whether the
principles have been properly implemented,
and then provides a report on the same to the
Board of Directors.
C. Does the Company establish ✓ C. President Securities’ board is subject to a None
policies to prevent conflicts of high degree of self-regulation, whereby any
interest and provide appropriate board motion that is suspected of having the
communication channels for potential to create any conflict of interest with
complaints and implement it? the board or with any of its representatives
or proxies must undergo evaluation and may
not be included in the board agenda or voted
upon by such party, and also may not be voted
on by any representative or proxy of such
party. Board members should exercise self-
regulation and should not conspire to support
one another’s improper actions.
In addition, in order to enable the Directors’
and managers’ conduct to be in line with the
ethical standards and stakeholders to better
understand the Company’s ethical standards,
the Company has established the “Codes of
Ethical Conduct for Directors and Managers of
President Securities Corp.” in August 2018.
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Implementation Status Deviations from
the Ethical
Corporate
Management
Evaluation Item Best Practices
Yes No Abstract Illustration Principles for
TWSE listed
companies and
reasons
D. Has the company established ✓ D. In order to ensure healthy and honest None
effective systems for both operations, the auditing office is required
accounting and internal control to submit a report on the adoption of the
to facilitate ethical corporate company’s principles for honest operation in
management, and are they its annual audit report, and should ensure that
audited by either internal such principles are included in the company’s
auditors or CPAs on a regular Work Rules. The Committee should also
basis? publish on the company website procedures
for reporting problems and the corresponding
punishments for such offenses.
E. Does the company regularly ✓ E. The company regularly publishes honest None
hold internal and external operation standards, and implements training
educational trainings on ethical courses on these standards for all new
management? employees.
III. Whistle-blowing system The Company has established “Guidelines for
Handling Reports of Unlawful or Unethical
Behavior”.
A. Does the company establish a ✓ A. We have established a clear channel for None
clear whistleblowing and reward receiving complaints:
system and set up a convenient
(1) Complaint Hotline: (02) 2748-8173
channel for reporting unethical
activities and reward system? (2) Complaint Email: [email protected]
Can the accused be reached
(3) Written Complaints: Complaints can be
by an appropriate person for
mailed or faxed to our auditing office.
follow-up?
B. Does the company establish ✓ B. Clear protocols for handling complaints None
standard operating procedures have been established as have confidentiality
for confidential reporting on measures.
investigating accusation cases?
C. Does the company provide ✓ C. Clear measures have been put in place to None
proper whistleblower protect those who register complaints.
protection?
IV. Strengthening information ✓ In keeping with the company’s honest operation None
disclosure principles, we endeavor to disclose procedures
for ethical corporate management both via
Does the company disclose its intranet and via our offical website (www.pscnet.
ethical corporate management com.tw).
policies and results of its
implementation on the
company's website and MOPS?
V. If the company has established the ethical corporate management policies based on the Ethical Corporate
Management Best-Practice Principles for TWSE/TPExListed Companies, please describe any discrepancy between
the policies and their implementation: There have been no differences.
VI. Other important information to facilitate a better understanding of the company's ethical corporate management
practices (e.g., review and amend its policies): None.
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President Securities Corp. 2018 Annual Report

III. Corporate Governance

G. Corporate Governance Guidelines and Regulations

Except for the Corporate Governance Best Practice Principles, the Company has disclosed relevant rules and regulations that shall be established by law on the Company’s website (Investor Section/Corporate Governance) and the Market Observation Post System (MOPS).

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H. Other Important Information Regarding Corporate Governance

The Company has disclosed relevant important information regarding corporate governance on the Company’s website (Investor Section/Corporate Governance) and the Market Observation Post System (MOPS).

I. Internal Control Systems:

1. Internal Control Declaration:

Internal control declaration

Implementation of the internal control system of President Securities Corp.

Date: March 22, 2019.

The Company hereby declares the following based on its self -assessment result on the internal control system of 2018:

I. The Company is fully aware that the Board of Directors and the management are responsible for the establishment, implementation, and maintenance of the internal control system and it is established accordingly. The purpose of establishing the internal control system is to reasonably ensure the fulfillment of operational effectiveness and efficiency (including profit, performance, and protection of assets safety), financial report reliability, timeliness, transparency and compliance with applicable rules, laws and regulations. II. The internal control system is designed with inherent limitations. No matter how perfect the internal control system is, it can only provide a reasonable assurance to the fulfillment of the three objectives referred to above. Moreover, the effectiveness of the internal control system could be affected by the changes of environment and circumstances. The Company’s internal control system is designed with a self-monitoring mechanism; therefore, the Company will take corrective actions upon identifying any nonconformity. III. The Company has assessed the design and operating effectiveness of the internal control system in accordance with the criteria provided in the “Regulations Governing the Establishment of Internal Control Systems by Service Enterprises in Securities and Futures Markets” (referred to as “the Regulations” hereinafter). The criteria defined in “the Regulations” include five elements depending on the management control process: 1. environment control, 2. risk assessment, 3. control process, 4. information and communication, and 5. supervision. Each of the five elements is then divided into a sub-category. Please refer to “the Regulations” for details. IV. The Company has implemented the criteria of the internal control system referred to above to inspect the design and operating effectiveness of internal control system. V. The Company, based on the inspection approach referred to above, has concluded that the internal control system (including the supervision and management over the subsidiaries) on December 31, 2018 is reasonably effective in achieving the objectives of operational effectiveness and efficiency, financial report reliability, timeliness, transparency and compliance with applicable rules, laws and regulations. Except for the attachment all above mentioned are valid. VI. The Statement is the main contents of the Company’s annual report and prospectus and will be made public. Any illegalities such as misrepresentations or concealments in the published contents mentioned above will be considered a breach of Articles 20, 32, 171, and 174 of the Securities and Exchange Act and Article 115 of Futures and Exchange Act, and entail legal responsibilities.

VII. The Statement was resolved in the directors’ meeting with the 0 objection from the 16 attending board directors on March 22, 2019. The contents of the Statement have been accepted without any objection.

President Securities Corp. Chairman: Lin, Kuan-Chen President: Tsai, Sen-Bu CFO: An, Chi-Li Chief Auditor: Huang, Sha-Mei

III. Corporate Governance

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2018 Internal Control System Improvement and Corrective Action Plan

Required Improvement	Corrective Action	Improvement Scheduled to be Completed
The FSC conducted a project AML/CFT & CPF examination in May. The Company was found the following deficiency and was fined NT$500,000 by the FSC accordingly: 1. Failed to retain shareholder register to verify the beneficial owner of a cooperate customer when dealing with account opening procedure. 2. Failed to take reasonable measures to understand the sources of wealth and funds of the customer in enhanced due diligence (EDD) procedures for high- risk customers.	1. Prohibit the customer from position increase. 2. Already requested the sources of wealth and funds from the customer.	1. Completed. 2. Completed.

Note: The penalties imposed by the Financial Supervisory Commission, including warnings or above or any fine of NT240,000 or more, shall be listed one by one as well.

2. If the company has commissioned external auditors to review the company’s internal control system, the external auditor’s report should be disclosed: Not applicable.

President Securities Corp. 2018 Annual Report

III. Corporate Governance

J. Conviction of corporate or employees’ wrongdoings, Company’s punishment on employee for violation of internal control, major faults and improvements during recent fiscal period and to the publish date of the annual report.

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1. Punishments imposed on the Company and its internal personnel in accordance with laws

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Major faults

Improvements

Jin-Guan-Zheng-Quan No. 1070300517 Order on March 7, 2018
The Financial Examination Bureau sent personnel to the
Company's to conduct audits regarding the AML/CFT project
from June 16, 2017 through June 25, 2017. The deficiencies were
found as follows:
1. The Company's relevant internal regulations on AML/CFT
were not amended in accordance with "Directions Governing
the Internal Control System for Anti-Money Laundering and
Countering Terrorism Financing of the Securities and Futures
Sector".
2. The Company's assessment indicators of the overall money
laundering and financing of terrorism were not complete.
3. Failure to conduct risk assessment procedures for money
laundering and the financing of terrorism before launching a
new type of business.
4. Corporate customer identity review operation was not
appropriate.
5. Failure to keep a record when conducting customer name
check.
6. Customer risk level review was not handled in accordance
with the grading rules.
7. No negative news report monitoring mechanism and
suspicious transaction assessment and reporting procedures
were established.
8. The audit unit did not include "risk assessment of money
laundering and the financing of terrorism", "whether the
AML/CFT projects are implemented and meet the legal
requirements", and "effectiveness of the AML/CFT projects"
in the items of auditing.
Violated the Regulations Governing Anti-Money Laundering of
Financial Institutions, Directions Governing the Internal Control
System for Anti-Money Laundering and Countering Terrorism
Financing of the Securities and Futures Sector, and Guidelines
Governing Anti-Money Laundering and Countering Terrorism
Financing of the Securities and Futures Sector. Verified and
handled the Company's punishments for rectification.

1. All relevant units with deficiencies have
formulated improvement plans to respond.
2. Improve the operating procedures related
to money laundering prevention and
incorporate internal control systems and
internal audits to strengthen internal
auditing.

III. Corporate Governance

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Major faults	Improvements

Jin-Guan-Zheng-Quan No. 1070300760 Order, Jin-Guan-Zheng-Quan No. 10703007601 Order, Jin-Guan-Zheng-Quan No. 10703007602 Order on March 7, 2018 The deficiencies made by the clerks and managers of Business Department 3 at the headquarters during the execution of the business were identified as follows: The business personnel (1) used customer accounts to trade marketable securities. (2) Illegal sources of advance payments were adopted between the business personnel and customers. (3) When the business personnel were summoned by an investigation agency, they failed to report to the competent authority in accordance with the regulations. The managers failed to supervise and manage their business personnel’s behavior of (1)-(3) in a timely manner. Violated Subparagraphs 7 and 9 of Paragraph 2 of Article 18 and Paragraph 3 of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms, Paragraph 2 of Article 2 of the Regulations Governing Securities Firms, Article 56 of the Securities and Exchange Act, and Paragraph 3 of Article 18 of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms. Verified and handled the Company's punishments for rectification.	1. Non-compliant in-service business personnel will get a demerit; a non- compliant supervisor will be prohibited from executing the business for a month and get a demerit. 2. To ensure the implementation and compliance of internal control operations of the business and prevent employees from violating laws and regulations by accident, the Company reminds the employees of compliance with relevant regulations of the business operations when performing the business.
Zheng-Gui-Fu No. 10706001842 Order on June 6, 2018 The TWSE conducted a special audit at the Xindian branch on May 21, 2018. The following deficiencies were found: 1. The business personnel failed to pay attention to the changes in customers' financial status at any time based on professionalism and risk considerations to re-assess their financial status through credit checking in a timely manner. The supervisors at the business counter and branch managers shall be liable for inappropriate business supervision and management. 2. After an investor's breach of contract was reported, the transaction control operation should be performed; since the branch (backstage) supervisor failed to perform the necessary control operation, sales were still made through the account reported. The branch managers shall be liable for inappropriate business supervision and management. 3. The Taipei Exchange announced on May 16, 2018, that the Shenghua stock would become an unlisted security in the altered-trading-method on May 18, 2018, which was big news; however, the Company delayed listing the stock as a high-risk stock until 9:56 a.m. on May 17, 2018, which was a negligence in control and management. Violated Articles 18 and 19 of the Rules Governing Understanding Clients and Management of Credit Investigation and Credit Line for Transactions Conducted by Members of the Taiwan Securities Association and CA-11120 Customer Credit Investigation and Approval (1)-5 of the Internal Control System Standards of Securities Dealers, and Subparagraph 1 of Paragraph 2 of Article 47 of Operating Rules.	1. Non-compliant personnel will get a warning and a non-compliant manager will get a demerit. 2. To ensure the implementation and compliance of internal control operations of the business and prevent employees from violating laws and regulations by accident, the Company reminds the employees of compliance with relevant regulations of the business operations when performing the business.

President Securities Corp. 2018 Annual Report

III. Corporate Governance

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Major faults

Improvements

Jin-Guan-Zheng-Quan No. 1070315951 Order on July 5, 2018
The Financial Examination Bureau conducted a general business
examination in the Company from December 12, 2017 through
December 27, 2017, and the deficiencies were found as follows:
1. The Global Institutional Service Department worked with
customers in contacting the owner of the Singatron No.2
convertible bond provided by a bank to agree upon the number
of the convertible bond, price, and transaction time for the
underlying investment; through the equivalent system of
Taipei Exchange, a corresponding transaction was carried out
for buying and selling, and the proportion of the total volume
in the transaction to the total volume of the underlying bond in
the market on the day was a bit higher.
2. In the bookbuilding subscription and placing of underwriting
projects for convertible bonds, the underwriting projects for
the L&K Engineering No.3 and JEM No.2 convertible bonds,
there was an over-allotment of shares to the bank, and the
bank was engaged in bookbuilding subscription in the name of
others.
3. Operational procedures for analyses, decision-making,
execution, change, and review were not established and
incorporated into the internal control system when the
operation of self-sale and self-purchase of domestic (foreign)
stocks was conducted; there were unreasonable grounds or
contradictions between trading decisions in analysis reports.
4. In subscription or redemption of funds on behalf of wealth
management customers, there were business clerks conducting
subscription or redemption of funds electronically.
5. When handling non-professional investors' account opening
operations, in order to allow customers to purchase funds
with a higher risk, business clerks re-conducted KYC to
increase the customer risk level in a short period of time
without verifying the authenticity of the customer information
and specifying the reason for the change, so that there were
contradictions between the items or unreasonable grounds in
the risk attribute assessment.

1. Each unit has improved each deficiency and
notified the competent authority via written
reports accordingly.
2. Require the supervisors of each unit to pay
attention to and improve deficiencies and
strengthen education and training.

III. Corporate Governance

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6. The filing of information on stakeholders was not confirmed, so that the annual report failed to disclose the concurrent positions taken by the Directors, Supervisors, and managers accordingly. 7. For account opening operations in the wealth management business, the basic customer information listed on the general agreement of account opening in relation to cost, maximum loss of investment, exchange rate risk involved in products borne by financial consumers was not highlighted in a prominent font or manner; the development of the agreement was inappropriate. Violated Paragraph 2 of Article 2 of the Regulations Governing Securities Firms, Paragraph 1 of Article 28 of the Regulations Governing Securities Firms, Paragraph 31 of Article 1 of the Regulations Governing Securities Firms, Subparagraph 17 of Paragraph 2 of Article 18 of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms, Paragraph 3 of Article 22 of the Regulations Governing the Scope of Business, Restrictions on Transfer of Beneficiary Rights, Risk Disclosure, Marketing, and Conclusion of Contract by Trust Enterprises, Paragraph 2 of Article 10 of the Regulations Governing Information to be Published in Annual Reports of Public Companies, and Article 7 of the Regulations Governing the Explanation of Important Contents of Contract and Disclosure of Risks Before Provision of Financial Products and Services by the Financial Service Industry. Verified and handled the Company's punishments for rectification.	1. Each unit has improved each deficiency and notified the competent authority via written reports accordingly. 2. Require the supervisors of each unit to pay attention to and improve deficiencies and strengthen education and training.
Tai-Zheng-Fu No. 1070502251 Order on July 6, 2018 The TWSE conducted an audit on May 17, 2018, at the Taichung Branch, and the deficiencies were found as follows: 1. The business personnel at the Chongde Branch of Yuanta Securities provided a customer account to a manager of the Taichung Branch during the period of 2010 for bookbuilding subscription of the Gourmet-KY stock and provided employees of the Gourmet Master Co. Ltd. with subscription of the existing seals or passbooks in custody. 2. The Manager, who was summoned by the Mobile Workstation in the Central Area of the Investigation Bureau of the Ministry of Justice via telephone, failed to report to the TWSE for subsequent actions. Violated Subparagraph 8 and 11 of Paragraph 2 of Article 18 of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms, Paragraph 2 of Article 18 and Subparagraph 6 of Article 75 of the Operating Rules of the Taiwan Stock Exchange Corporation, Compliance of CA-11120 Trading and Deal Operations (41) of the Internal Control System Standards of Securities Dealers and the Internal Control System established by the Company in accordance with the aforementioned regulations, Article 29 of the Operating Rules of the Taiwan Stock Exchange Corporation, and the Jin-Guan-Zheng-Quan No. 0990055656 Order issued by the former Financial Supervisory Commission of the Executive Yuan on November 10, 2010.	1. Non-compliant supervisor will be prohibited from executing the business for a month and get a demerit. 2. To ensure the implementation and compliance of internal control operations of the business and prevent employees from violating laws and regulations by accident, the Company reminds the employees of compliance with relevant regulations of the business operations when performing the business.

President Securities Corp. 2018 Annual Report

III. Corporate Governance

Major faults Improvements
Tai-Zheng-Fu No. 1070502593 Order on August 3, 2018 1. Non-compliant personnel will get a The TWSE conducted an audit on June 26, 2018, at the Head warning. Office, and the deficiencies were found as follows: 2. To ensure the implementation and
1. From May 22, 2017 through June 3, 2017, order-placing compliance of internal control operations of information was transmitted via LINE on mobile phone to the business and prevent employees from the representative of the customer's account, and stocks were violating laws and regulations by accident, sold from the customer's account on May 22, 2017; from May the Company reminds the employees of 23, 2017 through June 3, 2017, for the trading of stocks from compliance with relevant regulations of the the customer's account, the customer requests for trading of business operations when performing the marketable securities were accepted via mobile phone, and business.
From May 22, 2017 through June 3, 2017, order-placing information was transmitted via LINE on mobile phone to the representative of the customer's account, and stocks were sold from the customer's account on May 22, 2017; from May 23, 2017 through June 3, 2017, for the trading of stocks from the customer's account, the customer requests for trading of marketable securities were accepted via mobile phone, and audio recordings were not kept.
After the aforementioned period, the customer's account was authorized for trading by an agent with Power of Attorney signed on September 25, 2017, and June 29, 2017. The Bank shall also be authorized to deal with the transaction. There were cases where trade was not conducted by an agent rather than the owner of the customer's account without Power of Attorney signed. Violated Paragraph 2 of Article 18, Subparagraph 6 of Article 75, and Paragraph 4 of Article 85 of the Operating Rules of the Taiwan Stock Exchange Corporation, Article 18 (note: Subparagraph 20 of Paragraph 2 of Article 18) of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms shall not be violated when the person in charge of the company, the business personnel at all levels, and other employees accept customers' request for trading of marketable securities or engage in the securities business set out in Compliance of CA-11210 Trading and Deal Operations (41) of the Internal Control System Standards of Securities Dealers as well as the Internal Control System established by the Company in accordance with the aforementioned regulations. Tai-Zheng-Fu No. 1070503392 Order on October 11, 2018 The TWSE conducted an audit on August 23 and 24, 2018 at the Xindian Branch, and the deficiencies were found as follows:
Non-compliant personnel will be prohibited from executing the business for a month and get a demerit. 2. To ensure the implementation and compliance of internal control operations of the business and prevent employees from violating laws and regulations by accident, the Company reminds the employees of compliance with relevant regulations of the business operations when performing the business.
Through an audit of the recordings of three customers' requests for trading via phone, it was found that a member of business personnel accepted a customer's request to buy Abocom stock on margin through the customer's account managed by a former member of business personnel on October 17, 2017; a former member of business personnel represented customers to trade marketable securities; business personnel traded marketable securities on behalf of a customer represented by a former member of business personnel.

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After examining the relevant contents of LINE between December 2017 and April 2017, business personnel accepted requests to trade on behalf of customers without Power of Attorney signed and issued notifications regarding settlement. Violated Paragraph 2 of Article 18 and Paragraph 7 of Article 75 of the Operating Rules of the Taiwan Stock Exchange Corporation and CA-11210 Trading and Deal Operations (41) of the Internal Control System Standards of Securities Dealers.

III. Corporate Governance

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Major faults	Improvements

Tai-Zheng-Fu No. 1070503659 Order on November 5, 2018 The TWSE conducted an audit at the Keelung Branch from September 20 through 21, 2018; the deficiencies were found as follows: 1. To help customers to lend marketable securities in a lending auction, the business personnel kept false phone recordings with a colleague's phone. 2. The business personnel failed to conduct a detailed review of customers' financial statements. 3. The business personnel conducted trade for marketable securities on behalf of customers without Power of Attorney signed. 4. The business personnel kept customers' seals or passbooks on behalf of customers. 5. The branch's manager shall be responsible for negligence in supervision of the business personnel who fail to conduct a detailed review of customers' financial statements. Violated Paragraph 2 of Article 18 of the Operating Rules of the Taiwan Stock Exchange Corporation and Compliance of CA- 11120 Trading and Deal Operations (41) of the Internal Control System Standards of Securities Dealers as well as the Internal Control System established by the Company in accordance with the aforementioned regulations.	1. There are seven non-compliant personnel; each gets a warning. 2. Non-compliant supervisors and business personnel: In addition to the suspension of executing the business for a month by the competent authority, the Company will give a demerit. 3. To ensure the implementation and compliance of internal control operations of the business and prevent employees from violating laws and regulations by accident, the Company reminds the employees of compliance with relevant regulations of the business operations when performing the business.
Zheng-Gui-Fu No. 1070610091 Order on November 7, 2018. The Taipei Exchange conducted a special audit on October 3, 2018, at the Hsinchu Branch. The deficiencies were found as follows: 1. The business personnel failed to re-evaluate the one-day maximum trading volume when investors' financial resources decreased and went through significant changes. 2. The business personnel accepted requests to trade marketable securities from representatives without Power of Attorney. Violated Paragraph 1 of Article 18 of the Rules Governing Understanding Clients and Management of Credit Investigation and Credit Line for Transactions Conducted by Members of the Taiwan Securities Association, CA-11120-(1)-5 of the Internal Control System Standards of Securities Dealers, and Paragraph 3 of Article 45-1 of the Rules Governing Securities Trading.	1. Non-compliant personnel will be prohibited from executing the business for a month and get a warning. 2. To ensure the implementation and compliance of internal control operations of the business and prevent employees from violating laws and regulations by accident, the Company reminds the employees of compliance with relevant regulations of the business operations when performing the business.

President Securities Corp. 2018 Annual Report

III. Corporate Governance

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Major faults	Improvements

Jin-Guan-Zheng-Quan-Fa No. 1070333160 Order, Jin-Guan-Zheng-Quan No. 10703331601 Order on December 6, 2018 From May 10, 2018 through May 18, 2018, an audit was conducted of the project of AML/CFT and counter proliferation. The deficiencies were found as follows: 1. Accepted accounts opened by legal entities without requesting information, such as register of shareholders, to identify the beneficial owner of customers. 2. The enhanced due diligence (EDD) procedure for high-risk customers failed to adopt reasonable measures to understand the source of customers' wealth and funds. 3. For the customer accounts that have been reported as cases suspected of involvement in money laundering, the Company failed to reconfirm customer identity and grade the risks and managed the accounts based on low-risk standards. 4. Failed to establish the name-check policies and procedures for customers and transaction-related parties and include AML/ CFT in the internal control system. Violated Item 1 of Subparagraph 7 of Article 3 of the Regulations Governing Anti-Money Laundering of Financial Institutions, Paragraph 2 of Article 2 of the Regulations Governing Securities Firms, and Item 2 of Subparagraph 1 of Paragraph 1 of Article 6 of the Regulations Governing Anti-Money Laundering of Financial Institutions. Verified and handled the Company's punishments for rectification, where the Company was fined NT$500,000.	To ensure the implementation and compliance of internal control operations in the business and prevent the occurrence of similar events in the future, relevant non-compliant units will be warned with a written notice to require the supervisors of each unit to pay attention to and improve deficiencies and enhance the education and training.
Tai-Zheng-Fu No. 1070504285 Order on December 26, 2018 The Taipei Exchange conducted an audit at the Head Office on October 12, 2018 and from October 17, 2018 through October 22, 2018, and the deficiencies were found as follows: A business clerk accepted a customer's request for short sale of the listed Taiwan Prosperity Chemical stocks on May 22, 2018, which was done without a phone recording; the clerk's transactions of stocks on behalf of customers were not carried out via phone, letter, telegram, or face-to-face. Violated Paragraph 2 of Article 18 of the Operating Rules of the Taiwan Stock Exchange Corporation and Paragraph 1 of Article 4 of Taiwan Stock Exchange Corporation Regulations Governing Brokerage Contracts of Securities Brokers.	1. Non-compliant personnel will get a warning. 2. To ensure the implementation and compliance of internal control operations of the business and prevent employees from violating laws and regulations by accident, the Company reminds the employees of compliance with relevant regulations of the business operations when performing the business.
Tai-Zheng-Fu No. 1070504286 Order on December 26, 2018 The Taipei Exchange conducted an audit at the Ilan Branch on October 29, 2018 through October 30, 2018, and the deficiencies were found as follows: When a business clerk assisted a customer in handling the change of the settlement bank on October 26, 2018, the clerk kept the passbook on behalf of the customer's relatives/friends. Violated Paragraph 2 of Article 18 of the Operating Rules of the Taiwan Stock Exchange Corporation and Compliance of CA- 11210 Trading and Deal Operations (41) of the Internal Control System Standards of Securities Dealers as well as the Internal Control System established by the Company in accordance with the aforementioned regulations.	1. Non-compliant personnel will get a warning. 2. To ensure the implementation and compliance of internal control operations of the business and prevent employees from violating laws and regulations by accident, the Company reminds the employees of compliance with relevant regulations of the business operations when performing the business.

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III. Corporate Governance

K. Major Resolutions of Shareholders Meeting and Board of Directors Meeting

1. Major resolutions of 2018 General Shareholders Meeting: Executed according to the resolution of the General Shareholders Meeting.

(1) Matters to be ratified

Proposal 1 Proposed for approval of 2017 Business Report and Consolidated and Individual Financial Statements	Proposal 1 Proposed for approval of 2017 Business Report and Consolidated and Individual Financial Statements
Explanation	1. 2017 Consolidated and Individual Financial Statements of the Company was audited and certified by accountant Hsiao, Chin-Mu, Chang, Ming-Hui from PwC. 2. Business Report as well as Consolidated and Individual Financial Statements were approved by the 17th Meeting of the 10th Board of Directors on March 26, 2018, and reviewed by the Audit Committee.
Resolution	The Chairman announced that because of shareholders' objection to electronic voting, shareholders needed to take a vote on the proposal. The Company's shareholders present have total votes of 980,368,738, of which approval votes 968,659,039 (including electronic votes of 699,080,653), disapproval votes 177,043 (including electronic votes of 177,043), abstention votes/no votes 11,532,656 (including electronic votes of 11,476,707), and invalid votes 0; the approval votes account for 98.8056%, over half of the total votes of the shareholders present. The proposal made by the Board of Directors was approved as it was.
Proposal 2 Proposed for approval of 2017 profit distribution
Explanation	1. The Company's 2017 earnings distribution was conducted in accordance with laws and the Company's Articles of Incorporation. For the calculation of the 2017 profit to be distributed, a loss of NT$106,387,716 in the remeasurement of defined benefit plan shall be reduced first; in addition, legal reserve (10%) and special reserve (20%) shall be listed by law. In accordance with Jin-Guan-Zheng-Tou No. 10500278285 and Zheng-Qi-Tou No. 1060005703, special reserve (0.5%) shall be allocated for the transformation of employees in response to the development of financial technology. With the special reserve reversed in accordance with the provisions of the official letters, for the year of 2017, distributable earnings amounted to NT$1,695,854,812, and the cash dividends to be paid was NT$1,668,513,634; a cash dividend of NT$1.2 would be paid per share. After approved at the shareholders' meeting, it is planned to invite the shareholders' meeting to authorize the Board of Directors to set the base date for ex-dividends. 2. In the future, if there is a change in the number of outstanding shares, it is planned to authorize the Board of Directors to adjust the allocation ratio according to the total number approved by the the shareholders' meeting via resolution and the number of the Company's ordinary shares actually in circulation on the record date for ex-dividends; if the dividend allocated to shareholders is less than NT$1, the amount will be transferred to the Company's Employee Welfare Committee.
Resolution	The Chairman announced that because of shareholders' objection to electronic voting, shareholders needed to take a vote on the proposal. The Company's shareholders present have total votes of 980,368,738, of which approval votes 968,668,318 (including electronic votes of 699,080,932), disapproval votes 167,769 (including electronic votes of 167,769), abstention votes/no votes 11,532,651 (including electronic votes of 11,476,702), and invalid votes 0; the approval votes account for 98.8065%, over half of the total votes of the shareholders present. The proposal made by the Board of Directors was approved as it was.
Execution	On June 29, 2018, the Company announced that the ex-dividend date was July 31, 2018, and the payout of cash dividends was completed on August 24, 2018.

President Securities Corp. 2018 Annual Report

III. Corporate Governance

(2) Election Matters

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Proposal The 11th Board of Directors election
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Proposal The 11th Board of Directors election	Proposal The 11th Board of Directors election

Explanation	1. The term of office of the 10th Board of Directors expires on June 21, 2018; comprehensive re- election at the shareholders' meeting is planned. 2. In accordance with the provisions of Article 13 of the Company's Articles of Incorporation, ther Company set up 19 Directors, including 4 Independent Directors and 15 Non-Independent Directors. The term of office is three years (The term began after the Annual General Meeting (AGM) ended on June 21, 2018 through June 20, 2021.) and individuals can be re-elected for a second term. The nomination approach shall be adopted for the Company's Directors election; shareholders shall vote based on the list of nominated candidates. 3. The list of candidates for Directors and Independent Directors and their basic information approved by the Board of Directors. 4. The Independent Directors and Non-Independent Directors elections were held together; the number of the elected persons were calculated separately. 5. Relevant election matters shall be handled in accordance with the Company's Directors election measures.
Resolution	Total of 19 Directors of the 11th Board of Directors were elected and appointed by all shareholders present.

III. Corporate Governance

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2. Major Resolutions during the Board of Directors Meetings in 2018 and to the Publish Date of the Annual Report: Executed according to the resolution of the Board of Directors Meeting.

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Meeting Item Resolution
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Meeting	Item	Resolution

2018.03.26 The 17th Board meeting of the 10th Board of Directors	1. Review of 2017 Business Report and Consolidated and Individual Financial Reports. 2. Proposal regarding 2017 Employees and Directors Bonus Distribution Ratio. 3. Proposal regarding 2017 Employees and Directors Bonus Allocation. 4. The proposal regarding appropriation of 0.5% profit after taxes for 2017 as special capital reserve. 5. Profit distribution of year 2017. 6. Accountant independence and competency evaluation. 7. Applied for credit line for short-term loans from financial institutions. 8. Applied for credit line for short-term loans in foreign currencies from financial institutions for OSU. 9. Applied for credit line for short-term loans from financial institutions for overseas subsidiaries. 10. Submitted the Statement of the 2017 Internal Control System. 11. Disclosed qualitative information about risk management. 12. Revised risk control management policies. 13. Revised the anti-money laundering and counter-terrorist financing procedures and plans. 14. Formulated the Company’s money laundering and terrorist financing risk assessment report. 15. Submitted the statement of the Internal Control of anti- money laundering and counter-terrorist financing. 16. Reduced the business area of Nanjing Branch. 17. Increased the number of upstream securities firms for commissioned transactions in foreign securities business. 18. Changes in managers. 19. Proposal regarding holding the General Shareholders Meeting of 2018. 20. Proposal regarding the election of the 11th Board of Directors. 21. Shareholders' proposals and nominations for Directors in 2018. 22. List of candidates nominated by the Board of Directors.	All Directors present voted in favor of the resolution without any objection.

President Securities Corp. 2018 Annual Report

III. Corporate Governance

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Meeting Item Resolution
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Meeting	Item	Resolution

2018.05.04 The 18th Board meeting of the 10th Board of Directors	1. Changes in managers. 2. Proposal regarding the amount of bonuses distributed to managers and employees of 2017. 3. The proposal regarding representatives (managers) concurrently serving as Directors of investee enterprises. 4. The proposal regarding re-appointment and remuneration of consultants for the Fixed Income Department. 5. The proposal regarding the remuneration adjustment of the Independent Directors. 6. Applied for credit line for short-term loans from financial institutions. 7. Applied for credit line for short-term loans in foreign currencies from financial institutions for OSU. 8. Applied for credit line for short-term loans from financial institutions for overseas subsidiaries. 9. Review of the list of nominees for Directors and Independent Directors.	For proposal 1 to 4 and 6 to 8, all Directors present voted in favor of the resolution without any objection. For proposal 5, all Directors present (Independent Directors excluded) voted in favor of the resolution without any objection. For proposal 9, all Directors present (excluded recused Directors) voted in favor of the resolution without any objection.
2018.06.21 The 1st Board meeting of the 11th Interim Board of Directors	1. Proposal regarding the election of the Chairman of the 11th Board of Directors.	All Directors present voted in favor of the resolution of Lin, Kuan-Chen as the Chairman of the 11th Board of Directors without any objection.
2018.06.29 The 1st Board meeting of the 11th Board of Directors	1. The proposal regarding appointment of President. 2. The proposal regarding appointment of members of the Audit Committee. 3. The proposal regarding appointment of members of the Remuneration Committee. 4. Amended the Risk Management Committee Charter. 5. The proposal regarding appointment of members of the Risk Management Committee. 6. Proposal regarding trust supervisors assignment. 7. Proposal regarding adjustment of the limit of value at risk of the Proprietary Trading Department. 8. Revised the Internal Control System. 9. Revised the anti-money laundering and counter-terrorist financing policy.	For proposal 1 to 14, all Directors present voted in favor of the resolution without any objection. For proposal 15, all Directors present (Independent Directors excluded) voted in favor of the resolution without any objection.

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Meeting	Item	Resolution

2018.06.29 The 1st Board meeting of the 11th Board of Directors	10. Revised the anti-money laundering and counter-terrorist financing procedures and plans. 11. Proposal regarding setting the record date for ex- dividends. 12. Changed of the authorized signatory of the financial institution. 13. Changes in department supervisors. 14. Changes in managers. 15. The proposal regarding the remuneration of the Independent Directors of the 11th Board of Directors.	For proposal 1 to 14, all Directors present voted in favor of the resolution without any objection. For proposal 15, all Directors present (Independent Directors excluded) voted in favor of the resolution without any objection.
2018.08.29 The 2nd Board meeting of the 11th Board of Directors	1. Review of the 2018 semi-annual Individual Financial Statements and 2018 second quarter Consolidated Financial Statements. 2. Applied for credit line for short-term loans from financial institutions. 3. Applied for credit line for short-term loans in foreign currencies from financial institutions for OSU. 4. Applied for credit line for short-term loans from financial institutions for overseas subsidiaries. 5. Revised the Internal Control System. 6. Formulated investment regulations for the subsidiary PSC Venture Capital Investment Company Limited. 7. Application for engaging in non-discretionary individually managed securities trust. 8. Amended the operating procedures for the wealth management business. 9. Increased the number of upstream securities firms in foreign bonds business. 10. Renewal of liability insurance for Directors and key personnel. 11. Revised the Company’s money laundering and terrorist financing risk assessment report. 12. Revision of the Directions of the Company’s money laundering and terrorist financing. 13. Applied for credit risk limit for carrying out derivative financial product transactions with financial institutions. 14. Application for signing GMRA of foreign bond with financial institutions. 15. Formulated the Codes of Ethical Conduct for Directors and Managers. 16. Formulated Board of Directors Performance Evaluation Measures.	For proposal 1 to 21, all Directors present voted in favor of the resolution without any objection. For proposal 22, all Directors present (Chairman excluded) voted in favor of the resolution without any objection. For proposal 23, all Directors present voted in favor of the resolution without any objection. (President avoided)

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Meeting	Item	Resolution

2018.08.29 The 2nd Board meeting of the 11th Board of Directors	17. Periodic review and evaluation of the policy and structure for the remuneration of the Directors. 18. The proposal regarding the Company’s representatives (managers) serving as Directors of investee enterprises. 19. The proposal regarding the promotion of department supervisors. 20. Changes in managers. 21. The proposal regarding the remuneration of the 11th Board of Directors. 22. The proposal regarding the remuneration of the Chairman of the 11th Board of Directors. 23. The proposal regarding the remuneration of President.	For proposal 1 to 21, all Directors present voted in favor of the resolution without any objection. For proposal 22, all Directors present (Chairman excluded) voted in favor of the resolution without any objection. For proposal 23, all Directors present voted in favor of the resolution without any objection. (President avoided)
2018.11.08 The 3rd Board meeting of the 11th Board of Directors	1. Revised the Internal Control System. 2. Applied for credit risk limit for carrying out derivative financial product transactions with financial institutions. 3. Revising the handling procedures for reporting illegal and unethical behavior. 4. Changes in managers. 5. Application for the head office to engage in non- discretionary individually managed money trust, in a designated operational scope or method. 6. Amended the operating procedures for the wealth management business. 7. Formulated regulations governing the review and management of offshore structured products. 8. Applied for credit line for short-term loans from financial institutions. 9. Applied for credit line for short-term loans in foreign currencies from financial institutions for OSU. 10. Applied for credit line for short-term loans from financial institutions for overseas subsidiaries.	All Directors present voted in favor of the resolution without any objection.

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Meeting	Item	Resolution

2018.12.20 The 4th Board meeting of the 11th Board of Directors	1. Submitted the Audit Plan of 2019. 2. Revised the anti-money laundering and counter-terrorist financing procedures and plans. 3. Set the 2019 risk limit for the Company as a whole and each department. 4. Applied for the issuance the TIP TAIEX+ Dividend Appreciation 150 Total Return Index-linked ETN. 5. Application for the branches to engage in non- discretionary individually managed securities trust, in a designated operational scope or method. 6. Amended the operating procedures for the wealth management business. 7. Added partners for overseas structured products. 8. Changes in managers. 9. Budget and operating plan of 2019.	All Directors present voted in favor of the resolution without any objection.
2018.12.28 The 5th Board meeting of the 11th Board of Directors	1. Carried out Company's 12th repurchase of the treasury stocks.	All Directors present voted in favor of the resolution without any objection.
2019.03.22 The 6th Board meeting of the 11th Board of Directors	1. Review of 2018 Business Report and Consolidated and Individual Financial Reports. 2. Proposal regarding 2018 Employees and Directors Bonus Distribution Ratio. 3. Proposal regarding 2018 Employees and Directors Bonus Allocation. 4. The proposal regarding appropriation of 0.5% profit after taxes for 2018 as special capital reserve. 5. Profit distribution of year 2018. 6. Submitted the Statement of the 2018 Internal Control System. 7. Disclosed qualitative information about risk management. 8. Application for signing GMRA of foreign bond with financial institutions. 9. Revised the Internal Control System of Information System Department. 10. Submitted the Overall Information Security Implementation Statement. 11. Amended the joint venture agreement and charter regarding the Jin Yuan President Securities Corporation Ltd.. 12. Periodic review and evaluation of the policy and structure for the remuneration of the senior executives and managers. 13. Changes in department supervisors. 14. Changes in managers.	All Directors present voted in favor of the resolution without any objection.

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Meeting	Item	Resolution

2019.03.22 The 6th Board meeting of the 11th Board of Directors	15. Formulated the internal control system of conducting the discretionary investment business through trust while operating the securities investment consulting business by the head office. 16. Reduced the business area of Xin Taichung Branch. 17. The Xindian Branch terminated its business. 18. Amended the Articles of Incorporation. 19. Revised the Company's money laundering and terrorist financing risk assessment report. 20. Submitted the statement of the Internal Control of anti- money laundering and counter-terrorist financing. 21. Amended Corporate Governance Best Practice Principles. 22. Accountant independence and competency evaluation. 23. Amended the Regulations Governing the Acquisition and Disposal of Assets. 24. Amended the Regulations Governing Implementation of Endorsement. 25. Applied for credit line for short-term loans from financial institutions. 26. Applied for credit line for short-term loans in foreign currencies from financial institutions for OSU. 27. Applied for foreign currencies interbank call loan limits from financial institutions. 28. Applied for credit line for short-term loans from financial institutions for overseas subsidiaries. 29. Adjusted the Company's foreign currency risk limits upward. 30. Proposal regarding holding the General Shareholders Meeting of 2019. 31. Director by-election for the 11th Board of Directors. 32. Shareholders' proposals and nominations for Director by-election in 2019. 33. Proposal regarding candidates nominated by the Board of Directors.	All Directors present voted in favor of the resolution without any objection.

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Meeting	Item	Resolution

2019.05.03 The 7th Board meeting of the 11th Board of Directors	1. Applied for conducting the business of creating customer ledgers of securities firms’ settlement accounts. 2. Amendments to the performance bonus for the Proprietary Trading Department. 3. Amendments to the performance bonus for the Financial Product Department. 4. The proposal regarding re-appointment and remuneration of consultants. 5. Establishment of a corporate governance officer position. 6. Changes in managers. 7. Applied for credit line for short-term loans from financial institutions. 8. Applied for credit line for short-term loans in foreign currencies from financial institutions for OSU. 9. Applied for credit line for short-term loans from financial institutions for overseas subsidiaries. 10. Retirement of the 12th redemption of treasury stocks. 11. Formulated a standard operating procedures for handling the Company’s Directors’ requests.	For proposal 1 to 4 and 6 to 11, all Directors present voted in favor of the resolution without any objection. For proposal 5, all Directors present (Assistant Vice President Chen, Nai-Chen avoided) voted in favor of the resolution without any objection.

L. Document or written statement that states different opinions by board members or supervisors against the approved major resolutions by the board meeting in recent fiscal period and to the publish date of the annual report: None.
M. Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D:

Position	Former	Incumbent	Handover Date
President	Lin, Kuan-Chen	Tsai, Sen-Bu	2018.06.29

IV. Information Regarding the Company’s Audit Fee and Independent Auditor

A. Range of Auditing Fee

Accounting Firm		Name of CPA	Period Covered by CPA’s Audit		Remarks
PwC Taiwan		Hsiao, Chin-Mu Lin, Se-Kai	2018.01.01- 2018.12.31		Attestation of Financial Statements
		Chen, Li-Yuan			Attestation of Tax Returns

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Unit: NT$ thousands

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Fee Items Non-audit
Audit Fee Total
Fee Range Fee
Under NT$ 2,000 0 760 760
NT$2,000 ~ NT$4,000 0 0 0
NT$4,000 ~ NT$6,000 0 0 0
NT$6,000 ~ NT$8,000 6,340 0 6,340
NT$8,000 ~ NT$10,000 0 0 0
Over NT$10,000 0 0 0
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B. Disclosure of Auditing Fee

Unit: NT$ thousands

Accounting Firm	Name of CPA	Audit Fee	Non-audit Fee	Non-audit Fee	Non-audit Fee	Non-audit Fee	Non-audit Fee	Period Covered by CPA’s Audit	Remarks
			System of Design	Company Registration	Human Resource	Other	Subtotal
PwC Taiwan	Hsiao, Chin- Mu Lin, Se-Kai	5,360	0	0	0	760 (Note)	760	2018	Attestation of Financial Statements
	Chen, Li- Yuan	980							Attestation of Tax Returns

Note: Transfer pricing report fee, consulting fee for IFRSs introduction, and the professional advising fee for Corporate Social Responsibility Report.

C. The amount of non-auditing relevant fees charged by the appointed independent auditors and the related parties reach 25 % of the Company’s annual auditing expenses: Not Applicable.
D. If there is any change in the appointed in dependent auditors and the Company’s annual auditing expenses decreased simultaneously, information regarding the amount, percentage and reasons for the decrease in auditing expenses shall be disclosed: Not Applicable.
E. Auditing expenses decreased by 15% in comparison to the previous year, information regarding the amount, percentage and reason for the decrease in auditing expenses shall be disclosed: Not Applicable.

V. Replacement of CPA:

According to the Statements on Auditing Standards No.46, the CPA shall be replaced on a regular basis. Starting from the beginning of 2018, the financial report CPA Chang, Ming-Hui was replaced with Lin, Se-Kai, and the taxation CPA Hsu, Chi-Chang was replaced with Chen, Li-Yuan.

100

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A. Regarding the Former CPA

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Replacement Year 2018
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Replacement Year	2018	2018	2018	2018	2018	2018

Replacement reasons and explanations	PricewaterhouseCoopers (PwC) Taiwan job rotation.
Describe whether the Company terminated or the CPA did not accept the appointment	Parties				CPA	The Company
	PricewaterhouseCoopers (PwC) Taiwan job rotation				Attestation of Financial Statements: Hsiao, Chin-Mu Chang, Ming-Hui	PSC
					Attestation of Tax Returns: Hsu, Chi-Chang
Other issues (except for unqualified issues) in the audit reports within the last two years				None
Differences with the company	Yes		-		Accounting principles or practices
			-		Disclosure of Financial Statements
			-		Audit scope or steps
			-		Others
	None			V
		Remarks/specify details: None
Other Revealed Matters (The provisions of Item 1-4 of Subsection 6 of Article 10 of the Guidelines shall be disclosed.)		None

B. Regarding the Successor CPA

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Name of accounting firm PricewaterhouseCoopers (PwC) Taiwan
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Name of accounting firm	PricewaterhouseCoopers (PwC) Taiwan
Name of CPA	Attestation of Financial Statements: Hsiao, Chin-Mu and Lin, Se-Kai Attestation of Tax Returns: Chen, Li-Yuan
Year of appointment	2018
Consultation results and opinions on accounting treatments or principles with respect to specified transactions and the company's financial reports that the CPA might issue prior to the engagement.	None
Succeeding CPA’s written opinion of disagreement toward the former CPA	None

C. The official letter from former CPA in response to the provisions of Item 1 and 2-3 of Subsection 5 of Article 10 of the Guidelines: None.

VI. If the Company’s Chairman, President, or managers responsible for financial and accounting affairs have held any position in the accounting firm or its affiliates during the past year, all relevant information should be disclosed: None.

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VII. Net Change in shareholdings and in shares pledged by directors, supervisors, management, and shareholders holding more than a 10% share in the Company.

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Unit: Share

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2018 As of Mar. 31, 2019
Pledged Pledged
Title Name Holding Holding
Holding Holding
Increase Increase
Increase Increase
(Decrease) (Decrease)
(Decrease) (Decrease)
Kai Nan Investment
Director 0 0 0 0
Co., Ltd.
Canking Investment
Director 0 0 0 0
Co., Ltd.
Leg Horn Investment
Director 0 0 0 0
Co., Ltd.
Hui Tung Investment
Director 0 0 0 0
Co., Ltd.
Ta Le Investment
Director 0 0 0 0
Holding Co., Ltd.
Director Lee, Shy-Lou 0 0 0 0
Director Duh, Bor-Tsang 0 0 0 0
Director Juang, Jing-Yau 0 0 0 0
Director China F.R.P. Corp. 0 0 0 0
Independent Director Pai, Chun-Nan 0 0 0 0
Independent Director Song, Yung-Fong 0 0 0 0
Independent Director Horng, Yuan-Chuan 0 0 0 0
Independent Director Liang, Yann-Ping 0 0 0 0
President Tsai, Sen-Bu 0 0 0 0
Capital Market Department
Kuo, Li-Yun 0 0 0 0
Vice President
Quantitative Trading
Department Huang, Jung-Jen 0 0 0 0
Vice President
Finance Department
An, Chi-Li 0 0 0 0
Vice President
Financial Product
Department Pu, Chien-Heng 0 0 0 0
Vice President
Auditing Office Chief
Huang, Sha-Mei -817 0 0 0
Auditor
Proprietary Trading
Department Yang, Kai-Chih 0 0 0 0
Executive Vice President
President Office
Lin, Chung-Heng 0 0 0 0
Project Vice President
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2018 As of Mar. 31, 2019
Pledged Pledged
Title Name Holding Holding
Holding Holding
Increase Increase
Increase Increase
(Decrease) (Decrease)
(Decrease) (Decrease)
Settlement & Clearing
Department Cheng, Yao-Tung -20,000 0 0 0
Assistant Vice President
Compliance Division
Hung, Ying-Che 0 0 0 0
Assistant Vice President
Capital Market Department
Chueh, Chih-Chung 0 0 0 0
Sales Vice President
Administration Department
Senior Assistant Vice Yu, Hung-Chieh 0 0 0 0
President
Shareholder Services
Department Chang, Shao-Ping -10,000 0 0 0
Assistant Vice President
President Office
Chen, Nai-Chen 0 0 0 0
Assistant Vice President
Mainland China Business
Division Chen, Long-Chien 1,969 0 0 0
Assistant Vice President
Finance Department
Lu, Chia-Chen 0 0 0 0
Assistant Vice President
Finance Department
Su, Wei-Lun 0 0 0 0
Assistant Vice President
Financial Product
Department Chang, Chung-Lin 0 0 0 0
Assistant Vice President
Information System
Department Lin, Jung-Hui 0 0 0 0
Assistant Vice President
Capital Market Department
Chang, Chin-Yung 0 0 0 0
Assistant Vice President
Capital Market Department
Tsai, Pao-Sheng 0 0 0 0
Assistant Vice President
Fixed Income Department
Yeh, Ming-Chieh 0 0 0 0
Assistant Vice President
Quantitative Trading
Department Lee, Chien-Hsin 0 0 0 0
Assistant Vice President
Risk Control Office
Chang, Ping-Chuan 0 0 0 0
Senior Manager
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2018 As of Mar. 31, 2019
Pledged Pledged
Title Name Holding Holding
Holding Holding
Increase Increase
Increase Increase
(Decrease) (Decrease)
(Decrease) (Decrease)
Brokerage Department
Lee, Wen-Sheng 0 0 0 0
Vice President
Brokerage Department
Chang, Hung-Shuo 0 0 0 0
District Vice President
Brokerage Department
Chuang, Chi-Hung 0 0 0 0
District Vice President
Brokerage Department
Lin, Li-Lin 0 0 0 0
District Vice President
Brokerage Department
District Vice President Tu, Ching-Feng 0 0 0 0
(Note)
Brokerage Department
Chiu, Shyh-Tyng 4,927 0 0 0
Assistant Vice President
Global Institutional Service
Dept. Chung, Chih-Hung 0 0 0 0
Manager
Wealth Management and
Trust
Chu, Po-Lin 0 0 0 0
Department
Assistant Vice President
Corporate Client Dept.
Chang, Hung-Shuo 0 0 0 0
Manager
Tunghsing Equity
Department Chen, Chih-Lung 0 0 0 0
Manager
Tunghsing Equity
Department Hung, Yu-Ting 37,000 0 0 0
Manager
Tunghsing Equity
Department Tsai,Shu-Mei 0 0 0 0
Manager
Kaohsiung Branch
Wu, Huan-Chung 0 0 0 0
Manager
Dunnan Branch
Hsu, Yung-Hau 0 0 0 0
Manager
Zhongli Branch
Chiang, Tsong-Shyan 0 0 0 0
Manager
Chengzhong Branch
Kao, Jung 0 0 0 0
Manager
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2018 As of Mar. 31, 2019
Pledged Pledged
Title Name Holding Holding
Holding Holding
Increase Increase
Increase Increase
(Decrease) (Decrease)
(Decrease) (Decrease)
Tainan Branch
Hsieh, Chia-Hsi 0 0 0 0
Manager
Taichung Branch
Fang, Wu-Hsin 0 0 0 0
Manager
Taichung Branch
Liao, Chen-Yin -67,511 0 0 0
Manager
Hsinchu Branch
Lee, Chin-Yi 0 0 0 0
Manager
Chiayi Branch
Tai, Kuo-Chun 0 0 0 0
Manager
Pingtung Branch
Wang, Chien-Min 0 0 0 0
Manager
Keelung Branch
Yu, Ping-Tse 0 0 0 0
Manager
Yonghe Branch
Liao, Chan-Chen 0 0 0 0
Manager
Yonghe Branch
Tseng, Chien-Ming 0 0 0 0
Manager
Xin Taichung Branch
Yang, Kuo-Chen 0 0 0 0
Manager
Hsinying Branch
Hsiao, Po-Ming 0 0 0 0
Manager
Changhua Branch
Yu, Fu-Tsun 0 0 0 0
Manager
Taoyuan Branch
Hsiao, Ju-un 0 0 0 0
Manager
Yuanlin Branch
Liu, Ming-Hsi 0 0 0 0
Manager
Sanchung Branch
Chang, Shih-Min 0 0 0 0
Manager
Fengyuan Branch
Lin, Cheng-Feng 0 0 0 0
Manager
Shilin Branch
Hsu, Fu-Chiang 0 0 0 0
Manager
Panchiao Branch
Lo, Shih-Hong 0 0 0 0
Manager
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2018 As of Mar. 31, 2019
Pledged Pledged
Title Name Holding Holding
Holding Holding
Increase Increase
Increase Increase
(Decrease) (Decrease)
(Decrease) (Decrease)
Sanduo Branch
Tsai, Yi-Chen 0 0 0 0
Manager
Xizhi Branch
Huang, Ming-Fa 0 0 0 0
Manager
Ilan Branch
Chiang, Jen-Chu 0 0 0 0
Manager
Nanjing Branch
Chen, Chi-Heng 0 0 0 0
Manager
Kuting Branch
Chen, Te-Chang 0 0 0 0
Manager
Kinmen Branch
Chung, Hui-Ju 0 0 0 0
Manager
Tucheng Branch
Chen, Chun-Ming 0 0 0 0
Manager
Songjiang Branch
Lin, Yu-Ju 0 0 0 0
Manager
Neihu Branch
Hu, Wen-Chieh 0 0 0 0
Manager
Renai Branch
Yang, Chun-Chen 0 0 0 0
Manager
Xindian Branch
Liao, Shun-Ping 0 0 0 0
Manager
Xinzhuang Branch
Kao, Ming-Chou 0 0 0 0
Manager
Xin Taoyuan Branch
Wu, Shao-Kuang 0 0 0 0
Manager
Zhunan Branch
Su,Yung-Sheng 0 0 0 0
Manager
Pingzhen Branch
Li, Shu-Jung 0 0 0 0
Manager
Offshore Securities Unit
Lai, Chung-Chih 0 0 0 0
Branch Manager
Uni-President
10% Shareholder 0 0 0 0
Enterprises Corp
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Note: Brokerage Department District Assistant Vice President, Tu, Ching-Feng, was resigned on April 24, 2019.

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VIII. Information Disclosing the Relationship between any of the Company’s Top Ten Shareholders

2019.4.20

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Shareholding The relationship between
Shareholding Spouse & Minor by Nominee any of the Company’s Top
Name Arrangement Ten Share holders Remarks
Shares % Shares % Shares % Name Relation
1. President Investees
Chain for whom
Uni-President Store Corp. valuation is
393,586,559 28.31 0 0 0 0 conducted NA
Enterprises Corp. 2. Kai Nan under the
Investment equity
Co., Ltd. method
Kao, Shiow-
Lo, Chih-Hsien
Ling
Delegate of 0 0 3,788,631 0.27 0 0 Delegate of Spouse NA
Uni-President
Kao Chyuan
Enterprises Corp.
Inv. Co., Ltd.
Nan Shan
Life Insurance 46,468,461 3.34 0 0 0 0 NA NA NA
Company, Ltd.
President
Securities’
comprehensive
Employee Stock 44,511,590 3.20 0 0 0 0 NA NA NA
Ownership Trust
under Chinatrust's
custody
Kai Nan Uni-President
Investment Co., 39,831,460 2.86 0 0 0 0 Enterprises Note 2 NA
Ltd. Corp.
Kao, Shiow-
Lo, Chih-Hsien
Ling
Delegate of Kai 0 0 3,788,631 0.27 0 0 Delegate of Spouse NA
Nan Investment
Kao Chyuan
Co., Ltd.
Inv. Co., Ltd.
Uni-President
President Chain
38,221,259 2.75 0 0 0 0 Enterprises Note 2 NA
Store Corp.
Corp
Kao, Shiow-
Lo, Chih-Hsien
Ling
Delegate of 0 0 3,788,631 0.27 0 0 Delegate of Spouse NA
President Chain
Kao Chyuan
Store Corp.
Inv. Co., Ltd.
Eternal Materials
34,252,383 2.46 0 0 0 0 NA NA NA
Co., Ltd.
Tainan Spinning
32,141,877 2.31 0 0 0 0 NA NA NA
Co., Ltd.
Kao Chyuan Inv.
31,098,066 2.24 0 0 0 0 NA NA NA
Co., Ltd.
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Name		Shareholding	Shareholding	Spouse & Minor	Spouse & Minor	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	The relationship between any of the Company’s Top Ten Share holders	The relationship between any of the Company’s Top Ten Share holders
		Shares	%	Shares	%	Shares	%	Name	Relation
Kao, Shiow- Ling Delegate of Kao Chyuan Inv. Co., Ltd.	3,788,631 0.27 0 0 0 0 Lo, Chih- Hsien Delegate of Uni-President Enterprises Corp. Spouse NA
Vanguard Emerging Markets Stock Index Fund	18,774,293 1.35 0 0 0 0 NA NA NA
President Securities Corporation Treasury Stock Account	18,038,000 1.30 0 0 0 0 NA NA NA

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Note 1: The shareholding ratio was calculated based on the 1,390,428,028 shares of the share capital of President Securities Corp. Note 2: Affiliates of Uni-President Enterprises Corp.

IX. Ownership of Shares in Affiliated Enterprises

As of March 31, 2019

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Direct or Indirect
Ownership by the
Ownership by Directors, Total Ownership
Company
Supervisors, Managers
Affiliated Enterprises
Shares % Shares % Shares %
President Futures Co., LTD 63,817,303 96.69 0 0 63,817,303 96.69
President Capital Management Corp. 17,400,000 100.00 0 0 17,400,000 100.00
President Securities (Hong Kong)
10,000,000 5.19 182,600,000 94.81 192,600,000 100.00
Limited
President Securities (BVI) Limited 67,746,000 100.00 0 0 67,746,000 100.00
Uni-President Asset Management
14,904,630 42.46 12,000 0.03 14,916,630 42.49
Corporation
President Insurance Agency Co., Ltd. 1,000,000 100.00 0 0 1,000,000 100.00
PSC Venture Capital Investment
30,000,000 100.00 0 0 30,000,000 100.00
Company Limited
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X. Name and position of the employees with the top ten amounts of bonuses as well as the total amounts of the top ten bonuses

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Unit: NT$ thousands
Name Title Bonuses (Note 1)
Lin, Kuan-Chen (Note 2) Chairman
Tsai, Sen-Bu (Note 3) President
An, Chi-Li Vice President
Lee, Wen-Sheng Vice President
Lin, Chung-Heng Project Vice President
2,518
Kuo, Li-Yun Vice President
Chang, Hung-Shuo Senior District Assistant Vice President
Huang, Jun-Jen Vice President
Yang, Kai-Chih Executive Vice President
Pan, Chun-Hsien Investment Vice President
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Note 1: Receive employee bonuses for 2017 in 2018.

Note 2: Former President, Lin, Kuan-Chen, resigned on June 21, 2018 and was elected as Chairman. Note 3: Vice President, Tsai, Sen-Bu, was elected as President on June 29, 2018.

Note 4: The sequence above is arranged based on the number of strokes of the last name in Chinese.

XI. Directors and Corporate Auditors Training

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Date of
Title Name Date Organization Course Credit
Inauguration
Enterprise
Lin, Kuan-Chen Taiwan
Transformation,
Delegate of Kai Corporate
Chairman 2018.06.21 2018.08.29 Upgrading, and 3
Nan Investment Governance
Innovation as well as
Co., Ltd Association
Social Responsibility
The Latest
Taiwan Developments and
Corporate Practices in Anti-
2018.05.04 3
Governance money laundering
Association and Counter-terrorist
Financing
Director Lin, Kuan-Chen 2015.06.18
2018 Workshop on
Taiwan Stock Promotion of Anti-
2018.02.22 Exchange Money Laundering 3
Corporation Operations for
Securities Dealers
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Social Responsibility
The Latest
Lin, Chung-Shen
Taiwan Developments and
Delegate of Kai
Director 2018.06.21 Corporate Practices in Anti-
Nan Investment 2018.05.04 3
Governance money laundering
Co., Ltd.
Association and Counter-terrorist
Financing
The 100% E-Voting
Taiwan Stock
and Enhancement
2018.03.05 Exchange 6
of Corporate Value
Corporation
Forum
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President Securities Corp. 2018 Annual Report

III. Corporate Governance

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

Date of
Title Name Date Organization Course Credit
Inauguration
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Liu, Tsung-Yi Social Responsibility
Delegate of Kai
Director 2018.06.21
Nan Investment The Latest
Co., Ltd. Taiwan Developments and
Corporate Practices in Anti-
2018.05.04 3
Governance money laundering
Association and Counter-terrorist
Financing
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Social Responsibility
The Latest
Chen, Kuo-Hui Taiwan Developments and
Delegate of Kai Corporate Practices in Anti-
Director 2018.06.21 2018.05.04 3
Nan Investment Governance money laundering
Co., Ltd. Association and Counter-terrorist
Financing
Online Economy
‧ New Challenges
Taiwan Institute
2018.04.27 in Governance for 3
of Directors
Future Technology
Companies
The Rise of
Innovative Economy
Taiwan Institute
2018.10.26 - the Transformation 3
of Directors
and Challenges of
Business Management
[Summit] The 14th
Taiwan Corporate Governance
Corporate International Forum
2018.09.19 6
Governance - Compliance and
Hsieh Hong, Hui- Association Supervision of
Tzu Directors
Director Delegate of Kai 2018.06.21
Nan Investment The Latest
Co., Ltd. Taiwan Developments and
Corporate Practices in Anti-
2018.05.04 3
Governance money laundering
Association and Counter-terrorist
Financing
Online Economy
‧ New Challenges
Taiwan Institute
2018.04.27 in Governance for 3
of Directors
Future Technology
Companies
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110

III. Corporate Governance

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Date of
Title Name Date Organization Course Credit
Inauguration
The Rise of
Innovative Economy
Taiwan Institute
2018.10.26 - the Transformation 3
of Directors
and Challenges of
Business Management
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Lu, Li-An Social Responsibility
Delegate of Kai
Director 2018.06.21
Nan Investment The Latest
Co., Ltd. Taiwan Developments and
Corporate Practices in Anti-
2018.05.04 3
Governance money laundering
Association and Counter-terrorist
Financing
Online Economy
‧ New Challenges
Taiwan Institute
2018.04.27 in Governance for 3
of Directors
Future Technology
Companies
Enterprise
Teng, Wen-Hwi Taiwan
Transformation,
Delegate of Kai Corporate
Director 2018.06.21 2018.08.29 Upgrading, and 3
Nan Investment Governance
Innovation as well as
Co., Ltd. Association
Social Responsibility
The Latest
Taiwan Developments and
Corporate Practices in Anti-
Director Teng, Wen-Hwi 2015.06.18 2018.05.04 3
Governance money laundering
Association and Counter-terrorist
Financing
The practical
Taiwan application of
2018.11.14 Securities forensic accounting 3
Association in corporate fraud
detection
Explored window
Taiwan dressing and frauds
2018.10.03 Securities of financial reports 3
Lee, Che-Ming Association from problematic
Delegate of Hui enterprises
Director 2018.06.21
Tung Investment
Co., Ltd. Countermeasures
Taiwan
taken by enterprises
2018.09.05 Securities 3
for exchange rate
Association
fluctuation
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Social Responsibility
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III. Corporate Governance

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

Date of
Title Name Date Organization Course Credit
Inauguration
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Chang, Ming-Chen Social Responsibility
Delegate of Leg
Director 2018.06.21
Horn Investment The Latest
Co., Ltd. Taiwan Developments and
Corporate Practices in Anti-
2018.05.04 3
Governance money laundering
Association and Counter-terrorist
Financing
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Tu, Li-Yang Social Responsibility
Delegate of Ta
Director 2018.06.21
Le Investment The Latest
Holding Co., Ltd. Taiwan Developments and
Corporate Practices in Anti-
2018.05.04 3
Governance money laundering
Association and Counter-terrorist
Financing
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Social Responsibility
Lee, Shu-Fen
Director Delegate of China 2018.06.21
The Latest
F.R.P. Corp.
Taiwan Developments and
Corporate Practices in Anti-
2018.05.04 3
Governance money laundering
Association and Counter-terrorist
Financing
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Social Responsibility
Director Duh, Bor-Tsang 2018.06.21
The Latest
Taiwan Developments and
Corporate Practices in Anti-
2018.05.04 3
Governance money laundering
Association and Counter-terrorist
Financing
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Social Responsibility
Director Lee, Shy-Lou 2018.06.21
The Latest
Taiwan Developments and
Corporate Practices in Anti-
2018.05.04 3
Governance money laundering
Association and Counter-terrorist
Financing
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112

III. Corporate Governance

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

Date of
Title Name Date Organization Course Credit
Inauguration
The practical
Taiwan application of
2018.11.14 Securities forensic accounting 3
Association in corporate fraud
detection
Explored window
Taiwan dressing and frauds
2018.10.03 Securities of financial reports 3
Association from problematic
enterprises
Director Juang, Jing-Yau 2018.06.21
Countermeasures
Taiwan
taken by enterprises
2018.09.05 Securities 3
for exchange rate
Association
fluctuation
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Social Responsibility
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Social Responsibility
Independent
Liang, Yann-Ping 2018.06.21
Director The Latest
Taiwan Developments and
Corporate Practices in Anti-
2018.05.04 3
Governance money laundering
Association and Counter-terrorist
Financing
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Independent Social Responsibility
Pai, Chun-Nan 2018.06.21
Director
Taiwan
Corporate How Directors Do
2018.05.18 3
Governance Their Best Attentions
Association
Corporate Legal
Taiwan Attack and Defense
2018.12.19 Securities Strategies and 3
Association Analyses of Crisis
Management Cases
Independent
Song, Yung-Fong 2018.06.21
Director
Enterprise
Taiwan
Transformation,
Corporate
2018.08.29 Upgrading, and 3
Governance
Innovation as well as
Association
Social Responsibility
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III. Corporate Governance

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Date of
Title Name Date Organization Course Credit
Inauguration
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Title	Name	Date of Inauguration	Date	Organization	Course	Credit

Independent Director Horng, Yuan- Chuan 2018.06.21 2018.08.29 Taiwan Corporate Governance Association Enterprise Transformation, Upgrading, and Innovation as well as Social Responsibility 3 2018.08.24 Taiwan Corporate Governance Association Analysis and Practice of Anti- Money Laundering and Combating the Financing of Terrorism 3 2018.08.15 Taiwan Securities Association How High Asset Group Responds to Foreign Account Tax Compliance Act (FATCA) 3 2018.07.27 Taiwan Corporate Governance Association Tax Issues Before and After Corporate Mergers and Acquisitions 3

XII. Manager Learning

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

Title Name Date Organization Credit Course
The Latest Developments
Taiwan Corporate Governance and Practices in Anti-money
2018.05.04 3
Association laundering and Counter-terrorist
Financing
Chairman Lin, Kuan-Chen
Enterprise Transformation,
Taiwan Corporate Governance
2018.08.29 3 Upgrading, and Innovation as
Association
well as Social Responsibility
The Latest Developments
Taiwan Corporate Governance and Practices in Anti-money
2018.05.04 3
Association laundering and Counter-terrorist
Financing
President Tsai, Sen-Bu
Enterprise Transformation,
Taiwan Corporate Governance
2018.08.29 3 Upgrading, and Innovation as
Association
well as Social Responsibility
The Latest Developments
Taiwan Corporate Governance and Practices in Anti-money
2018.05.04 3
Association laundering and Counter-terrorist
Executive
Financing
Vice Yang, Kai-Chih
President
Enterprise Transformation,
Taiwan Corporate Governance
2018.08.29 3 Upgrading, and Innovation as
Association
well as Social Responsibility
The Latest Developments
Vice Taiwan Corporate Governance and Practices in Anti-money
Lee, Wen-Sheng 2018.05.04 3
President Association laundering and Counter-terrorist
Financing
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114

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III. Corporate Governance

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

Title Name Date Organization Credit Course
The Latest Developments
Taiwan Corporate Governance and Practices in Anti-money
2018.05.04 3
Association laundering and Counter-terrorist
Vice Financing
An, Chi-Li
President
Enterprise Transformation,
Taiwan Corporate Governance
2018.08.29 3 Upgrading, and Innovation as
Association
well as Social Responsibility
The Latest Developments
Taiwan Corporate Governance and Practices in Anti-money
2018.05.04 3
Association laundering and Counter-terrorist
Vice Financing
Huang, Jun-Jen
President
Enterprise Transformation,
Taiwan Corporate Governance
2018.08.29 3 Upgrading, and Innovation as
Association
well as Social Responsibility
The Latest Developments
Taiwan Corporate Governance and Practices in Anti-money
2018.05.04 3
Association laundering and Counter-terrorist
Vice Financing
Kuo, Li-Yun
President
Enterprise Transformation,
Taiwan Corporate Governance
2018.08.29 3 Upgrading, and Innovation as
Association
well as Social Responsibility
The Latest Developments
Taiwan Corporate Governance and Practices in Anti-money
2018.05.04 3
Association laundering and Counter-terrorist
Vice Financing
Pan, Chun-Hsien
President
Enterprise Transformation,
Taiwan Corporate Governance
2018.08.29 3 Upgrading, and Innovation as
Association
well as Social Responsibility
The Latest Developments
Taiwan Corporate Governance and Practices in Anti-money
2018.05.04 3
Association laundering and Counter-terrorist
Chief Financing
Huang, Sha-Mei
Auditor
Enterprise Transformation,
Taiwan Corporate Governance
2018.08.29 3 Upgrading, and Innovation as
Association
well as Social Responsibility
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115

President Securities Corp. 2018 Annual Report

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IV. Capital Structure

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President
Securities
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Professional Leadership & Kind Service

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IV. Capital Structure

I. Shareholders’ equity

A. Source of Capital

Types of shares issued in the most recent year prior to the publication date of this annual report

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Authorized Share Capital Capital Stock Remark
Month/ Issue Price
Capital Increase
Year (Per Share) 1,000 Amount (NT$ 1,000 Amount (NT$ Sources of
by Assets Other Other
shares thousands) shares thousands) Capital
than Cash
Aug- Capital Increase
10 1,500,000 15,000,000 1,215,706 12,157,062 None Note 1
2008 by Earning
Apr- Treasury Stock
10 1,500,000 15,000,000 1,185,706 11,857,062 None Note 2
2009 Retired
Aug- Capital Increase
10 1,500,000 15,000,000 1,231,933 12,319,334 None Note 3
2010 by Earning
Aug- Capital Increase
10 1,500,000 15,000,000 1,304,646 13,046,456 None Note 4
2011 by Earning
Dec- Treasury Stock
10 1,500,000 15,000,000 1,284,582 12,845,816 None Note 5
2011 Retired
Aug- Capital Increase
10 1,500,000 15,000,000 1,323,119 13,231,191 None Note 6
2012 by Earning
Mar- Treasury Stock
10 1,500,000 15,000,000 1,303,796 13,037,961 None Note 7
2016 Retired
May- Treasury Stock
10 1,500,000 15,000,000 1,295,248 12,952,481 None Note 8
2016 Retired
July- Capital Increase
10 1,500,000 15,000,000 1,335,666 13,356,657 None Note 9
2016 by Earning
Aug- Capital Increase
10 1,500,000 15,000,000 1,390,428 13,904,280 None Note 10
2017 by Earning
May- Treasury Stock
10 1,500,000 15,000,000 1,372,390 13,723,900 None Note 11
2019 Retired
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Note 1: Approved by the Financial Supervisory Commission Jin Kuan Cheng2 Tzu No.0970033756 on July 7, 2008.
Note 2: Approved by the Financial Supervisory Commission Jin Kuan Cheng3 Tzu No.0980003793 on January 23, 2009.
Note 3: Approved by the Financial Supervisory Commission Jin Kuan Cheng1 Tzu No.0990037293 on July 19, 2010.
Note 4: Approved by the Financial Supervisory Commission Jin Kuan Cheng1 Tzu No.1000033006 on July 15, 2011.
Note 5: Approved by the Financial Supervisory Commission Jin Kuan Cheng1 Tzu No.0970064519 on November 24, 2008 and approved by the Financial Supervisory Commission Jin Kuan Cheng1 Tzu No.1010002095 on January 18, 2012 for the capital change.
Note 6: Approved by the Financial Supervisory Commission Jin Kuan Cheng1 Tzu No.1010030875 on July 12, 2012.
Note 7: Approved by the Financial Supervisory Commission Jin Kuan Cheng Jiao Tzu No.1040048944 on November 23, 2015.
Note 8: Approved by the Financial Supervisory Commission Jin Kuan Cheng Jiao Tzu No.1050010487 on March 31, 2016.
Note 9: Effective after reporting to the Financial Supervisory Commission on July 5, 2016 and approved by Ministry of Economic Affairs Jin So Sun Tzu No.10501197070 on August 10, 2016.
Note 10: Effective after reporting to the Financial Supervisory Commission on July 3, 2017 and approved by Ministry of Economic Affairs Jin So Sun Tzu No.10601121960 on August 28, 2017.
Note 11: Approved by the Financial Supervisory Commission Jin Kuan Cheng Jiao Tzu No.1080305980 on March 5, 2019.
Note 12: As of May 31, 2019, there are no cases where the shares are issued below the par value, and nothing other than cash is used as payments and private placement.

117

President Securities Corp. 2018 Annual Report

IV. Capital Structure

1. Type of Stock

Unit: Share

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Type of Stock		Authorized Share Capital	Authorized Share Capital	Authorized Share Capital	Remark
		Issued Shares (Note)	Unissued Shares	Total
Common Stock	1,372,390,028 127,609,972 1,500,000,000 Listed on TWSE

Shelf Registration: None.

B. Structure of Shareholders

As of April 20, 2019

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Structure of Foreign
Shareholders Government Financial Other Personal Institutions
Institutional Total
Agencies Institutions Shareholders and Personal
Quantity Shareholders Shareholders
Number of Holders 0 1 155 39,083 187 39,426
Shares 0 44,511,590 762,061,536 436,816,130 147,038,772 1,390,428,028
% 0 3.201 54.808 31.416 10.575 100
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C. Distribution Profile of Share Ownership

1. Common Shares

As of April 20, 2019

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Shareholders Ownership Number of
Ownership Ownership (%)
(Unit:Share) Shareholders
1 ~ 999 22,857 2,108,906 0.152
1,000 ~ 5,000 8,590 19,538,359 1.405
5,001 ~ 10,000 2,674 19,569,836 1.407
10,001 ~ 15,000 1,432 17,494,108 1.258
15,001 ~ 20,000 718 12,600,058 0.906
20,001 ~ 30,000 835 20,644,663 1.485
30,001 ~ 40,000 408 14,165,708 1.019
40,001 ~ 50,000 307 13,953,573 1.004
50,001 ~ 100,000 731 52,360,100 3.766
100,001 ~ 200,000 406 56,640,862 4.074
200,001 ~ 400,000 240 65,336,336 4.699
400,001 ~ 600,000 81 39,837,230 2.865
600,001 ~ 800,000 34 23,197,145 1.668
800,001 ~ 1,000,000 25 21,836,173 1.570
Over 1,000,001 88 1,011,144,971 72.722
Total 39,426 1,390,428,028 100
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2. Preferred Shares: None.

D. Major Shareholders

As of April 20, 2019

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Shareholding Shareholders Number of Shares Ownership (%)
Uni-President Enterprises Corp. 393,586,559 28.306
Nan Shan Life Insurance Company, Ltd. 46,468,461 3.342
President Securities’ comprehensive Employee Stock
44,511,590 3.201
Ownership Trust under Chinatrust's custody
Kai Nan Investment Co., Ltd. 39,831,460 2.864
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118

IV. Capital Structure

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Shareholding Shareholders Number of Shares Ownership (%)
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
Vanguard Emerging Markets Stock Index Fund, a
18,774,293 1.350
Series of Vanguard International Equity Index Funds
PSC Treasury Stock Account 18,038,000 1.297
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Note: The shareholding ratio was calculated based on the 1,390,428,028 shares of the share capital of President Securities Corp.

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

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Years
2017 2018 2019Q1
Item
Highest 15.6 14.5 14.1
Market Price
Per Share Lowest 10.9 10.85 11.8
(Note 1)
Average 13.45 12.97 13.12
Before Distribution 18.26 18.44 19.25
Net Worth
Per Share
- - -
After Distribution (Note 2)
Weighted Average Shares
1,390,428 1,390,428 1,390,428
(thousand shares)
Earnings Per
Share Before Adjustment 1.88 0.87 0.67
Earnings
Per Share
- - -
After Adjustment
Cash Dividends (NT$) 1.2 0.69 -
- - -
Retained Earnings
Stock
Dividends
Dividends Additional Paid-in
Per Share - - -
Capital
Accumulated Undistributed
Dividend - - -
Price/Earnings Ratio (Note 3) 7.15 14.90 -
Return on
Price/Dividend Ratio (Note 4) 11.21 18.79 -
Investment
Cash Dividend Yield (Note 5) 8.92% 5.32% -
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Note 1: The market price per share is adjusted retrospectively based on earnings distribution.

Note 2: The net worth per share after distribution is filled in based on the distribution determined via resolution at the shareholders’ meeting in the next year.

Note 3: Price / Earning Ratio = Average Market Price / Earnings per Share

Note 4: Price / Dividend Ratio = Average Market Price / Cash Dividends per Share

Note 5: Cash Dividend Yield Rate = Cash Dividends per Share / Average Market Price

F. Dividend Policy and Implementation Status

1. Dividend Policy

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

119

President Securities Corp. 2018 Annual Report

IV. Capital Structure

(1) With regard to the surplus for the year (net of taxes payable and losses from previous years), after portions have been set aside in surplus reserves in accordance with the law and set aside or transferred to the special reserve in accordance with regulations, the balance and undistributed earnings (beginning of the year) may not be distributed if they do not make up at least five percent of paid-in capital.

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(2) The total amount of dividend shall not be below 70% of the allocable profit as per the preceding paragraph.
(3) 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%.
(4) Taking the operation situation of the year and the fiscal plan of next year into consideration, the company may decide the best stock and cash dividend on its discretion.

2. Proposed Distribution of Dividend

The Board adopted a proposal for 2018 profit distribution at its Meeting on March 22, 2019, and the proposal to distribute 2018 profits is a cash dividend of NT$0.69 per share.

G. Impacts of Stock Dividends on Operation Results and EPS: Not Applicable.

H. Compensation of Employees, Directors and Supervisors

1. Information Relating to Compensation of Employees, Directors and Supervisors in the Articles of Incorporation

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

2. Estimate Foundation of Employee Compensation and Directors’ Remuneration

The Company’s profit in 2018 was based on the income before taxes after deducting the bonuses to the employees and Directors; it was estimated that the bonuses for the employees and Directors accounted for 2% of the income before taxes, respectively. If there were differences between the actual amount and the estimated figures, the profit and loss of 2019 would be adjusted accordingly.

3. Profit Distribution of Year 2018 Approved in Board of Directors Meeting for Compensation of Employees and Directors

(1) The amount of bonuses to the employees, Directors, and Supervisors in the forms of cash or shares. If differences are found in the estimated expenses of the year, the differences, cause, and handling of the differences shall be disclosed.

On March 22, 2019, our Board of Directors passed the proposed allocation of employees’ compensation and remuneration for directors and supervisor in 2018 as follows:

Total employees’ compensation of NT$28,867,634 (2% of pre-tax profits) and total directors’ remuneration of NT$28,867,634 (2% of pre-tax profits).

There was no difference between the estimates and the actual distributions approved at the Board Meeting for Employee bonus and Director/Supervisor compensation.

(2) Ratio of employee bonuses in shares on net profit and total employee bonuses for the period:

There were no employee bonuses in shares for the current period.

120

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IV. Capital Structure

4. Information of 2017 Distribution of Compensation of Employees, Directors and Supervisors

On March 26, 2018, the Board of Directors passed the proposed allocation of employees’ compensation and remuneration for directors and supervisor in 2017 as follows: Employees and directors bonus appropriation ratio was 2%, respectively, and distributed in cash.

Employees’ compensation amounted to NT$56,440,689 while remuneration for directors and supervisors amounted to NT$56,440,689. There was no difference between the estimates and the actual distributions approved at the Board Meeting.

I. Buyback of Treasury Stock:

On December 28, 2018, at the 5th meeting of the 11th Board of Directors, it was decided to repurchase treasury stocks via resolution. It was planned to repurchase 30,000,000 shares and actually repurchased 18,038,000 shares from January 2, 2019 to February 27, 2019.

II. Long-Term Borrowings: None.

A. Unpaid corporate bonds: None.

B. Corporate bonds due within one year: None.

III. Issuance of Preferred Stocks: None.

IV. Issuance of Global Depositary Receipts: None.

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

VI. Merge and Acquisition: None.

VII. Working Capital Plans:

Any incomplete share issuance or private placement or any completed share issuance or private placement over the past three years from which benefits have not yet been reported as of April 30, 2019: None.

121

President Securities Corp. 2018 Annual Report

V. Overview of Business Operation

V. Overview of Business Operation

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President
Securities
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Professional Leadership & Kind Service

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President Securities Corp. 2018 Annual Report

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V. Overview of Business Operation

I. Description of Business Activities

A. Business Scope

1. Main areas of Business Operations

Underwriting business
Proprietary trading of listed securities
Brokerage for listed securities
Proprietary trading of listed securities through retail locations
Brokerage for listed securities through retail locations
Consignment trading of foreign securities
Securities margin purchase and short sale
Money borrowing or lending in connection with securities business
Securities borrowing and lending
Borrowing and Lending of Funds for Unrestricted Purposes
Shareholder services coordination
Support for futures trading through equity-related business
Concurrent operation of futures proprietary trading
Wealth Management business
Trust business
Financial derivatives products approved by the SFC
Offshore Securities business
Other relevant operations approved by the competent authority

2. Breakdown of Revenues for Latest Three Years

Unit: NT$ thousands

Item	2016	2016	2017	2017	2018	2018
	Operating Revenue	%	Operating Revenue	%	Operating Revenue	%
Brokerage	1,712,998	49.04	2,338,014	36.76	2,483,267	52.97
Proprietary Trading	1,580,483	45.24	3,771,989	59.31	2,006,020	42.79
Underwriting	199,953	5.72	249,982	3.93	198,603	4.24
Total	3,493,434	100.00	6,359,985	100.00	4,687,890	100.00

3. Products and Services

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

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V. Overview of Business Operation

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Business Area Products and Services Description
1. Accept orders from clients to buy/sell 1. The market share of brokerage business was 3.24%
listed securities and forward to TWSE in March 2019, ranked 10th among the top ten
for execution. Taiwanese securities firms.
2. Accept orders from clients to buy/sell 2. The Company has 36 branches in total. The
listed securities and forward to TPEx market share in a single location is 0.09% and
for execution. ranked 3rd among the top ten Taiwanese securities
firms, indicating that the Company’s operational
3. Manage custodial services for clients.
efficiency was better than other firms.
4. Provide margin financing for securities
3. The Company has been active in promoting
trading.
electronic trading, where proportion of transactions
5. Securities Borrowing and Lending through electronic trading in the entire Company
Business. was 43.43% in 2014, 45.05% in 2015, 49.71%
in 2016, 54.44% in 2017, 62.45% in average in
6. Accepting orders to trade Foreign
Brokerage Securities. 2018 and 65.42% in March 2019. The proportion
of transactions through electronic trading has
7. Futures Introducing Broker Business. demonstrated significant growth every year.
4. The trading system has integrated the trading
functions of all products, and customers can use
the same electronic trading platform for trading
securities, futures, options, OTC stocks, sub-
brokerage, fund, and overseas futures products.
5. By offering a more all-inclusive market monitoring
and order entry environment, we can provide
services to a larger client base.
6. We integrate our sales of all types of products
available in the market and thereby offer more
value to our existing clients.
1. Trading of publicly listed securities on 1. Market Position
the TWSE and TPEx, using President Over the past 10 years, our proprietary trading
Securities’ own funds. department has been among the top every year.
2. Hedge positions via futures and options Regardless of the market trend, our proprietary
markets. trading department is able to accurately read the
market and adjust its strategy accordingly and pick
3. Legally-permitted foreign marketable out the key trends and sectors. And, they are able
Proprietary securities trading; international to match this with effective futures hedging, risk
investment expanding, such as management, and a diverse range of product trading
Trading
American stocks, Hong Kong stocks, strategies, resulting in big gains, and small losses.
A-shares in Shanghai-Hong Kong Stock This has allowed us to retain a core proprietary
Connect and Shenzhen-Hong Kong trading team with considerable experience, which
Stock Connect, Japan stocks, global has become the envy of the industry.
ETFs.
2. Specialty Product
System application is supported by quantitative
analysis and technical indicator modules.
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V. Overview of Business Operation

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Business Area Products and Services Description
1. Use own capital to trade domestic and The Fixed Income Department mainly focuses on
foreign corporate and government fixed income proprietary trading business, sales,
bonds in the OTC market. and DCM business, supplemented with the issuance
of structured products. The proprietary trading
2. Offer tendering services of Taiwan
business is mainly based on foreign currency-
government bonds.
denominated notes, supplemented by New Taiwan
3. Repo and Reverse-Repo transactions. dollar-denominated notes. The main products are US
Fixed Income dollar-denominated and euro-denominated notes.
4. Trade overseas and domestic convertible
Business The fixed income sales, underwriting and issuance of
bonds.
structured products are being developed continuously.
5. Provide debt capital market services for To expand fee businesses via proprietary trading
overseas and domestic issuers. business support.
6. To trade government and corporate
bonds with customers.
7. Interest rate structured products trading.
1. Futures Proprietary Trading Division: 1. Operating Performance
Market making and trading of legally- In 2018, profitability of our futures proprietary
permitted foreign futures and options trading division was among the top in the industry.
Quantitative contracts.
2. New Products/Services in Development
Trading 2. Strategic Trading Division: As regulators continue to liberalize the industry and
ETF arbitrage, market making, allow new financial products, we stand ready to add
structured products issuing and trading. these new products to our trading and, in turn, to
add to our revenue streams.
1. Equity Warrants (including OTC In 2018, our Financial Products Division was
contract-based warrants) and issuance primarily engaged in issuing new warrants, structured
of callable bull/bear contracts. note products, and other derivative products
authorized by the Taiwan’s regulators.
2. Structured products trading.
1. Market Position
3. Convertible bond asset swap business.
(1) Equity Warrants: A total of 1,483 warrants were
4. Trading of equity derivatives. issued in 2018, for a total dollar value of just
over NT$21,709,640 thousand, ranked 5th in the
5. Other derivatives financial products
market.
approved by the competent authority.
(2) Structured note products: For the year of 2018,
Financial the Company undertook contracts amounting
Products to a principal of NT$24,991,397 thousand
and was ranked 5th in the market. A total of
NT$2,692,480 thousand in structure note
products were outstanding at the end of 2018,
ranked 5th in the market.
2. New Products/Services in Development
The Company's call (put) warrants have maintained
excellent quality in the dealer market, and the
Company has been developing the content of "We-
media instructions", making it easier for investment
novices to understand the warrant business.
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V. Overview of Business Operation

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Business Area Products and Services Description
1. Assist corporations in application for 1. Market Position
public listing on TWSE or TPEx. In 2018, PSC had 41 lead and co-lead underwriting
deals, for a total dollar value of NT$3.762 billion.
2. Assess and advise clients with respect to
capital increase plans. 2. New Products/Services in Development
3. Underwrite domestic and foreign bonds. Our goal is to provide professional corporate
financial services, to simultaneously act as both
4. Assist in M&A activities.
an effective market maker and also as a top-notch
Underwriting
5. Assess and advise clients with respect service provider, all with the aim of increasing the
(Capital Market)
to applications to convert private equity company’s overall added value. Going forward we
into publicly traded stocks, treasury will continue to focus our energy on landing mid-
stocks, capital increase plans and and large-sized deals, and will continue to bolster
employee’s stock options. our presence within the Greater China Region
(i.e., TDRs, IPOs (including primary listings on
6. Other businesses relate to underwriting
the TWSE/TPEx Market, M&A, Private Equity,
and consulting.
and consulting, etc.), so as to become a more
competitive securities firm.
1. Coordinate shareholder services on 1. The scale of the Company’s agency
behalf of publicly listed companies. (1) The number of serviced companies in 2018 was
2. Assist in the coordination of 147, where 83 were listed companies, amounted
shareholders’ meetings. to 56.46 %.
(2) The scale of the Company’s agency is larger.
3. Coordinate the distribution of cash and/
The average number of shareholders we serviced
or stock dividends to shareholders.
in 2018 was 1.82 million.
4. Manage the issuance and delivery of tax
2. Operating Performance
forms to shareholders.
Shareholder (1) The number of serviced companies in 2018 had
5. Respond to shareholder enquiries and a 1.36% growth compared to the number of
Services legal issues. service companies in 2017.
(2) The average number of shareholders we serviced
in 2018 had a 2.82% growth compared to the
previous year, thus allowing us to achieve a
higher economy of scale and more efficient
operations.
3. Long-term Objectives
Actively expand the number of serviced companies
to increase revenues.
1. Provide customers with the most 1. Market Position
complete asset arrangement and finance At the end of March 2019, the number of customers
service planning service. in the wealth management trust account reached
2. Conduct asset allocation for customers 11,162; the client trust assets reached NT$3.509
Wealth through trust. billion, including NT$3.182 billion for non-
discretionary money trust assets and NT$327
Management & 3. Coordinate the funds of domestic and million for marketable securities trust assets. The
Trust foreign commodities, marketable asset size ranked 9th among securities firms.
securities, and structured products on
the Trust Platform. 2. Long-term Objectives
Establish "wealth management platform" for
Taiwan customers through wealth management and
trust.
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4. New Products/Services in Development

The Company will comply with the opening of business by the competent authority. Design and launch Exchange-traded notes (ETNs), which provide investors with low-cost financial instruments to increase the diversity of domestic financial markets; plan the launch of the employee welfare trust in the trust business to meet the diversified financial needs of customers’ financial needs for financial management. Furthermore, the Company will utilize information technology to transform the internal processes to improve the efficiency of decision-making and service quality.

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V. Overview of Business Operation

B. Industry Overview

1. Overall Economic Environment

Although the global economy continued to recover in the past year, the interest rate hikes in major countries and the rise of trade protectionism have caused global stock markets to fall. Although the U.S. has measures such as tax reform, expansion of infrastructure construction, and retreat of manufacturing, the US-China trade war has brought a great deal of uncertainties to the global economy, and the Fed’s continued interest rate hikes and shrinking of the balance sheet have caused US stocks to fall. In Europe, the impact of trade protectionism led to a decline in its export growth rates, coupled with the government’s austerity measures and the quantitative easing policy ended by the European Central Bank, investors’ confidence turned to relatively conservative. Since China has been impacted by the USChina trade war, and the collapse of online lending platforms, the central government has tightened its supervision, and financial regulation was conducted by local governments, causing the economic growth rate to decline.

In Taiwan, the domestic economic growth rate in 2018 was reduced from 3.08% to 2.63%, which was mainly due to the US-China trade conflict and the poor sales of new smartphones. In the domestic stock market, affected by increasing bond yields and the US-China trade war, the Taiwan Stock Exchange Capitalization Weighted Stock Index fell in 2018 from 10,642 points to 9,727 points with an 8.6% decrease. Under the stimulus of the three-year extension of the reduction of the stock transaction tax for day trading by half and the inclusion of proprietary traders, the average daily volume in Taiwan Stock Exchange has grown from NT$104.9 billion to NT$130.2 billion.

Looking ahead in 2019, IMF has revised the global economic growth from 3.7% to 3.5% in January, mainly due to the impact of the US-China trade war. In Taiwan, due to the increasing global economic uncertainties, corporate investment has become more cautious, coupled with slowing of the smartphone business and decline of bitcoin, triggering the semiconductor industry to adjust its inventory. The Directorate-General of Budget, Accounting, and Statistics put the estimate of the 2019 economic growth rate at 2.27% in February.

In the securities industry, the Financial Supervisory Commission permitted securities firms to launch ETNs, which was officially listed on the exchange in April this year. It is expected that securities firms can thus enter the asset management field and provide investors with exchange traded products to enhance the diversity of the securities market.

2. Current Status and Future Development

(1) Primary Market

Unit: NT$ 100 Million

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Corporate Bond
Over-The-Counter
Listed Company Government Bond
Year (OTC) Company Ordinary Corporate Convertible Bond
Bond
Total
Number Capital Number Capital Number Net total Number Net total Number Net total
1993 669 47,252.8 423 6,394.7 80 25,870.7 2,666 7,998.5 235 1,218.1 9,216.6
1994 697 50,580.8 466 6,261.0 86 28,506.7 2,882 8,993.8 349 1,522.1 10,515.9
1995 691 54,159.6 503 6,431.8 88 31,417.2 2,784 9,355.2 322 1,549.0 10,904.2
1996 688 55,226.7 531 7,262.0 90 33,823.2 2,397 9,710.2 292 1,830.1 11,540.3
1997 698 56,016.2 547 7,148.1 88 35,184.7 1,744 8,773.4 276 2,108.0 10,881.4
1998 718 57,354.4 539 7,030.7 91 37,351.7 1,142 9,476.1 269 1,857.7 11,333.8
1999 741 58,695.9 546 7,727.3 93 39,708.5 783 9,413.9 208 1,405.2 10,819.1
2000 758 59,279.5 564 7,059.9 94 43,341.5 512 10,002.1 246 1,373.7 11,375.8
2011 790 61,523.8 607 7,319.2 97 46,441.5 425 11,242.6 299 1,660.3 12,902.9
2012 809 63,849.5 638 6,674.5 100 49,343.0 433 13,641.2 314 1,594.5 15,235.7
2013 838 66,100.3 658 6,618.5 103 52,209.5 468 15,776.1 294 1,542.4 17,318.5
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V. Overview of Business Operation

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Reference: Securities and Futures Bureau, FSC

(2) Overview of total market value of the securities market in the past three years

Unit: NT$ billions

Item	2016	2017	2018
Taiwan Stock Exchange
Stocks	16,771.1	23,972.2	29,608.9
ETF	1,707.4	1,231.7	1,834.1
Beneficiary Securities	7.1	4.3	4.2
Equity Warrants	425.5	584.5	712.6
TDR	4.4	6.2	2.7
Subtotal	18,915.5	25,798.9	32,162.4
Taipei Exchange
Stocks	5,050.3	7,683.5	8,145.5
Equity Warrants	128.5	226.5	211.7
ETF	0.1	68.1	316.8
Bonds	49,696.5	45,815.3	48,217.5
Subtotal	54,875.5	53,793.4	56,891.4
Total	73,790.8	79,592.2	89,053.8
TAIEX	9,253.50	10,642.86	9,727.41

Reference: Securities and Futures Bureau, FSC

The three-year extension of the reduction of the stock transaction tax for day trading by half and the inclusion of proprietary traders have motivated investors to trade, making the total trading volume of Taiwan Stock Exchange and Taipei Exchange in 2018 increase by 11.9% compared with the previous year.

3. Relationship with Up-, Middle- and Downstream Companies

The securities market is a part of the financial market as a direct transaction channel between fund seekers and fund providers; industrial and commercial enterprises usually raise funds through the issuance of marketable securities, and investing in marketable securities has become an important way for people to manage their savings and personal wealth. The mission of the securities market is to pool savings and turn them into investment, and thus facilitate economic growth.

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Upstream Midstream Downstream
Funds Suppliers Funds Mediator Funds Funds Demanders
Listed Companies
Individual Investors Financial
Securities Firms
Institutional Investors Institutions
Securities Securities Government
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V. Overview of Business Operation

4. Product Trends and Relevant Competition

 Proprietary Trading

(1) Equities Markets

Since May 2017, TWSE Index have stood at more than 10,000 points for 17 months, reaching a record high. However, in the second half of 2018, due to the escalation of the US-China trade war and Fed’s continued shrinking the balance sheet, the IMF and other major institutions all revised the global economic forecast of 2019 downward. In the fourth quarter, under the impact of the negative news, the total market capitalization of Taiwan-listed companies reduced more than NT$2,500 billion; foreign buyers also sold out what they bought in the previous year, which led to a decline of 915 points in Taiwan stocks in 2018 with a drop of 8.6%. In the international stock market, the performance of US stocks was relatively stable. Due to the relatively strong performance of US economic data and rising of the GDP quarter by quarter, the Nasdaq Composite Index fell only by 3.88% in 2018; the Philadelphia Semiconductor Index by 7.8%, and the Dow Jones Composite Average by 7.2%. In Europe, affected by the interference of the trade war, the budget dispute between Italy and the EU, and Brexit, the German Stock Index DAX fell by as much as 18.2%, the Italy Stock Market also drop by 16.1%. As for the Asian emerging stock markets, due to the exchange rate depreciation and the trade war, the performance was poor; only Indian stock market rose by 5.9%, while the South Korea Stock Market fell by 17.3%, and the Hong Kong stock market dropped by 13.6%; Chinese stocks fell by as high as 21.2% due to export recession and depreciation of RMB from de-leveraging and the trade war. The decline in Taiwan stocks was relatively stable compared with the drop of 10-20% in the European and emerging markets. The main reason of the better-than-expected performance was that the Taiwan dollar exchange rate was relatively stable. The Taiwan stock yield rate of 4.5% was far better than 2-2.5% in the developed countries; plus, with the long position during the period of the Five Metropolitan Elections, the Taiwan stock market remained high. From the beginning of this year through the third quarter, the Taiwan stocks fluctuated in the box of 10,500-11,200 and would not drop by 14% in line with the international stock markets until the escalation of the US-China trade war. The Taiwan stock weighted index fell by 8.6% and the OTC index by 16.82%. In 2018, the performance of the Proprietary Trading Department in terms of the operations in Taiwan stocks was still in the leading position in the industry through effective control and grasp of the risk trends.

The Proprietary Trading Department used opportunities in the growth trends in 5G, AI, IoT, and shortage of passive components and silicon wafers and took long-term investment and quick short-term investment positions to make flexible adjustments to the stock inventory positions in accordance with changes in the stock market to minimize systemic risks in 2018. It also remained vigilant of the changes in the fundamentals of listed companies to conduct real-time adjustments of positions to exchange weak positions for strong positions. Coupled with hedging positions in futures to lower risks and losses, its performance in the TWSE led the industry. Overseas stock market operations also performed well overall with the Department’s investment of vast numbers of personnel for research to fully grasp emerging international trends. Overall performance was better than index fluctuations. In the future, the Department will continue to intensify global macroeconomic research and flexibly adjust domestic and foreign positions and strategies as the foundation of its operations. It will grasp opportunities 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 competitive advantages.

(2) Risk Management

In addition to using VaR figures provided by the proprietary trading department’s risk control office, stop losses and limit alerts are set for the stocks that each trader trades. Each trader is given trading limits and trading performances are updated in real time and, when necessary, trading authorizations can be immediately revoked. The effect of all of these measures is to ensure maximum protections for our shareholders.

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V. Overview of Business Operation

(3) Hedging Operations

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

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 Fixed Income Dealing

(1) Outright Purchases and Sales of Government Bonds

Because of the different trading time zone of the U.S. treasury, main trading strategy is following mid to long term trend. In Taiwan government bond market, the economy condition and domestic demand will support market. According to expectation, to long TGB as interest rate relative high is the major strategy. We keep controlling liquidity risk.

(2) Convertible Bonds, Futures and Options

For convertible bonds, two strategies will be carried out. The first is to invest in bonds with large issuance size and limited downside risk, because better liquidity, capital structure, and limited risk are good for long term strategy to capture the trend. The second is to invest in notes with rally potential for short term trading. Because of high volatility, traders will control total positions for risk managing. Keep following equity market performance to make investment decision, CB issuers with large market capital will be influenced by macro economy significantly.

(3) Foreign Bonds

With the Fed’s signal to ease the interest rate hike at the end of last year, the global fixed income market is expected to achieve better performance this year after a huge correction last year. The Department is expected to take an aggressive strategy with controllable risk this year. High-rated notes and better credit profile EM notes in Asia such as Indonesia, Thailand and Malaysia are major investment targets. Furthermore, Middle East notes have better credit rating and higher yield are the key investment this year. The department expects fixed income trading business will obtain better performance this year.

 Financial Products Business

(1) Equity Warrants

In 2018, there was a strong expansion in Taiwan’s equity warrant market, with all securities firms aggressively issuing warrant products. A total of 31,440 equity warrants were issued in 2018, for a total dollar value of just over NT$338.8 billion.

The total dollar value of all equity warrants issued by the company in 2018 was NT$21.7 billion and the market share was 6.41%, ranked 5th in the market. Issue focuses mainly on the selection of stock performance with good Return on Equity (ROE) to create a win-win situation with investors and stable profits through different derivatives, futures, and options, etc., with hope to effectively lower hedging costs.

(2) Structured Note Products

In 2018, for the whole year, a total of NT$48.018 billion in structure note products were issued with NT$308.763 billion. For the year of 2018, the Company undertook contracts amounting to a principal of NT$24.99 billion and was ranked 5th in the market.

 Underwriting Business (Capital Markets)

(1) Domestic Bond and Equity Underwriting

As of the end of 2018, there were a total of 928 companies listed on the TWSE, compared to 907 companies in 2017, and a total of 766 companies listed on the Taipei Exchange Market, compared to 744 companies in 2017, a growth of 2.32% and 2.96% from 2017, respectively. The Department has actively fought for cases while maintaining risk management. The underwriting of the main cases that have been listed in 2018 include the capital increase in cash in the amount of NT$332 million for I-Yuan

130

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V. Overview of Business Operation

Precision Industrial Co. Ltd., NT$300 million of guaranteed convertible bonds and the capital increase in cash in the amount of NT$40 million for UDE Corp., the listing in the over-the-counter market of Concord International Securities Co. Ltd., the capital increase in cash in the amount of NT$11.76 billion for BRIGHTON-BEST INTERNATIONAL, and the capital increase in cash in the amount of NT$10.5 billion for TA CHEN STAINLESS PIPE CO..

The Company shall continue to attentively screen cases, carefully select industries, and focus on company credit risks to provide public listing/OTC listing and fundraising services for companies with healthy finances or those in industries with an excellent outlook.

(2) Financial Advisory

We take great pride in providing professional corporate finance services. In recent years, our financial advisory business has also made great progress and expanded into advisory services dealing with employee stock option exercise prices, offering price for preferred stocks and stock repurchase by listed companies. We will no doubt continue to develop our financial advisory services business with a particular emphasis securities related consulting (i.e., IPOs, mergers, private placements, and other consulting services) around the Greater China Region.

(3) Offshore Underwriting

The Company is actively pursuing public listing and OTC listing operations of Taiwanese companies returning from China, Hong Kong, and Southeast Asia in accordance with market conditions.

(4) Emerging Market Exchange

The domestic economy faced a moderate growth in 2018. There were 256 companies listed on the Emerging Stock Board, a 6.57% decrease from 2017 with 274 companies listed. To capture more IPOs, the department has also been actively positioning itself with respect to emerging board targets. However, the IFRS’s launch in 2013 has changed the way emerging board stocks will be assessed, and to take risk control into account, the number of officially recommended emerging board companies is 20 at the end of 2018. This year, the division will continue to compete for quality clients while maintaining risk control, and issue recommendations for emerging stocks based on the progress of its client counseling.

 Wealth Management & Trust

The total assets under overall securities firms’ non-discretionary individual management in 2018 was NT$104.303 billion. The total assets in securities trust management was NT$33.227 billion. The total assets under management was NT$137.531 billion which was a 3.15% decrease of NT$4.471 billion from the NT$142.002 billion at the end of 2017. Money trust business dropped slightly and the scale of total managed assets decreased by NT$1.388 billion, equaling YOY decline of 1.31%. The securities trust and lending business declined as the scale of total managed assets dropped by NT$3.084 billion, representing a YOY decline of 8.49%. The main reason for this development was the competent authority began to allow natural person dual-direction securities lending on the Taiwan Exchange which gradually dispersed customer groups.

The assets under the Company’s non-discretionary money trusts in March 2019 amounted to NT$3.182 billion. The total assets in securities trust management were NT$327 million. The total assets under management were NT$3.509 billion. This ranked the Company 9th among securities firms. The main products for wealth management were: domestic funds, foreign funds, structural products ELN and PGN, overseas bonds, securities trust lending, sub-brokerage for foreign stocks, foreign ETFs. The Company planned to introduce the overseas structural product line in 2019 and provided customers with more investment options in addition to Taiwan stocks and options.

In terms of the overall market, the trust securities lending business declined for all securities dealers due to the dispersion of customer groups. In terms of the money trust business, the overall scale of assets under securities dealers slightly declined compared with last year due to the impact of great changes in the international trend. However, the distribution has concentrated into two different groups as money

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V. Overview of Business Operation

trust assets of certain securities dealers continued to rise, up to 40%, while others have experienced declines, declined by up to 24%. Compared to the across-the-board growth for all securities dealers in previous years, the current trend indicates market competition has gradually intensified.

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C. Research and Development Overview

In line with the competent authority’s requirements for the professionalism of underwriting personnel, this year, based on the courses offered by the Taiwan Securities Association, on-the-job training and further training are arranged; personnel are sent to participate in the professional courses offered by the Taiwan Stock Exchange Corporation (TWSE) and Taipei Exchange on a quarterly basis for intermediaries to be equipped with the knowledge of relevant laws and professionalism as the country is increasingly open to overseas business.

 R&D for Derivative Product

Various Technical Expertise and R&D

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

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

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

Unit: Person

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

Year 2016 2017 2018 Mar. 31, 2019
Number Number Number Number
Education level % % % %
of people of people of people of people
Master&PhD 35 83.34 38 84.45 39 81.25 38 80.85
Bachelor 5 11.9 5 11.11 6 12.50 6 12.77
Others 2 4.76 2 4.44 3 6.25 3 6.38
Total 42 100.00 45 100.00 48 100.00 47 100.00
Average
years of 3.48 3.94 4.53 4.55
service
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New products or Techniques Successfully Developed Within the Last 5 years
(1) The company has been successful in the design and pricing of many structured note products, equity swaps, credit derivative products, as well as equity-linked derivative products, bonds and interest rates, and we stand ready to issue these products whenever appropriate market timing emerges.
(2) We have successfully developed several market operating strategies, as well as option market making models and strategies.

 Electronic Trading System Improvements

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

132

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V. Overview of Business Operation

(1) President Securities 2018 Electronic Trading System R&D Plan

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System R&D Capabilities
1. Major parent-subsidiary accounts
2. Backup plan for the mobile transaction app
3. Add Electronic Direct Debit Authorization (eDDA) and Enhanced
Automated Clearing House (eACH) for financial management
4. Move the electronic trading system to the IDC in Banqiao district
Enhanced electronic customer
services 5. Enhance digital services so customers do not have to visit a branch office
6. Provide an instant process, through which the trading system will be
active after 15 minutes of account opening
7. Provide detailed data inquiry about online "loan services"
8. Provide a fast information channel for "instant inquiry about the balance
of security margin trading"
1. The President e-finger app optimizes trading order placing and the account
inquiry function
2. Add the function of authorizing deductions from external bank accounts
for mutual funds SIP
Optimization of the wealth
management trading 3. Add a risk control factor for the underprivileged group of customers in the
functions
KYC questionnaire
4. Plan to add calculation of rate of return (including interest), the product
line of triple-leverage structured notes (SN3), and setting of the individual
customer's commission rate
1. Dynamic return of orders
2. New futures products are launched
Futures electronic trading and
electronic services 3. Digitalize commissions on domestic options
4. Strengthen the handling of money laundering typology in line with the
Association
1. Optimize the FIX order placing platform
Optimize the FIX order
placing platform
2. Revise the quotation system
1. App Portal
2. LINE@ Platforms
Financial innovation based
on artificial intelligence
3. Diversified product push notification services
4. Integrate Strategic Stock Picking and Marketing Platforms
1. Assist specialists in the transformation of the content and type of the work
Mobile trading system 2. Place more emphasis on communication and interaction with customers,
planning of higher-value products and services, and interdisciplinary
coordination
Optimized Sub-brokerage
Improvement of electronic trading system and interface
Order Entry System
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(3) 2019 R&D investment plan and progress

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V. Overview of Business Operation

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

Critical
Details of Plan and Expected Current Expected
Project Name Project Plan Success
Benefits Cost Outlay Progress Completion
Factors
1. Place an
immediate order
at any time, Expected Completed
which can be Modify the to project and
schedule in provide all testing
Continuous traded instantly
line with 23 million Ongoing services process
trading
2. Information the security in first- finished
disclosure speed exchange quarter, step by
2020 step
3. Information
transparency
1. Mobile trading
system
2. Establishment of
cross-platform
electronic
service
mechanisms
3. Strengthen the
cross-region
backup support
for the electronic
trading system
4. Establish the
continuous
Respond to the
trading roll out of new
environment business areas Expected Completed
Improvement in line with and improve to design
provide
of Electronic the competent service 25 million Ongoing services process;
Trading authority to quality while in fourth- business
System provide instant optimizing process
quarter,
and fast services processes and 2019 planning
intergrading
5. Digitize data systems
to provide
the function
of changing
online basic
information
6. Strengthen the
trading function
and introduce
fast certificate
verification
7. Optimize the
platform for
the securities
lending business
1. New version
of the official
website
Expected
Completed
2. Provide more to
design
New version extensive New version provide
of the official information of the official 3.5 million Ongoing services process; business
website website in fourth-
and better flow process
quarter,
of browsing to planning
2019
provide investors
with better use
experience
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134

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V. Overview of Business Operation

D. Future Business Development

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

Continue to recruit exceptional talent, and thereby improve our competiveness and, in doing so, increase our market share.
Implement risk management practices and technologies, thereby improving profitability and stabilizing overall business operations.
Improve IT and enhance e-business infrastructure.
Offer professional asset management and provide personalized financial planning services.
Develop foreign market to maximize proprietary trading profit.
Be ready to move on market liberalizations and, in particular, business opportunities across the Hong Kong-PRC-Taiwan market.
Cultivate talented researchers and thus raise our abilities in designing new products.
Move forward with consolidation within the President Move forward with consolidation within the President and financial services.
Build and maintain alliances with financial institutions and corporations outside of the finance industry, relationships that allow for mutual cooperation and mutual benefit.

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Business Short-term Development Long-term Development
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Business	Short-term Development	Long-term Development

Brokerage 1. Promote marketing activities to increase customer transaction frequency and increase revenue. 2. Enhance the construction of various transaction platforms to provide customers with a more convenient and real-time transaction system. 3. Enhance risk management to lower rates of errors. 4. Enhance operators' ordering system. 5. Optimize the customer relationship management system. 6. Construct a self-help service framework. 7. Communicate with customers and revitalize static accounts. 8. Implement operators' education and training to cultivate versatile operators. 9. Promote the wealth management business and provide customers with professional and diversified financial wealth management services. 10. Borrowing and lending of funds for unrestricted purposes. 11. Start two-way natural person bond loan businesses. 12. Promote the OSU business. 1. Provide professional research and service quality to acquire institutional and foreign investor customers. 2. Promote cross (and regional) marketing. 3. Integrate electronic transaction platforms for diversified products. 4. Increase smart self-help services. 5. Conduct periodic personnel training and replace ineffective employees. 6. Adjust customer structure to reduce the concentration of risks. 7. Promotion and integration of wealth management services.

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Business Short-term Development Long-term Development
1. Intensify operations in international stock 1. Enhance internal division of labor and
markets: in addition to authorization of use the risk management system to
transactions in the existing US and Hong increase performance of operations and
Kong stock markets, A shares, and overseas aid supervisors in adjusting strategies and
funds, transaction targets in A shares of positions at appropriate times.
Shenzhen-Hong Kong Stock Connect were
2. Conduct more extensive company visits and
added in December 2016.
Proprietary maintain information exchanges with other
Trading 2. Implementation of various instruments: Use companies in the industry to increase the
foreign options to conduct hedging and non- Company's knowledge of individual listed
hedging transactions. companies and thereby increase profits.
3. Usage of bear-side channels: Use the sales 3. Expand international investment businesses
of borrowed bonds to increase resistance to in foreign spot transactions as well as
bear markets. research and investment in futures market
that are permitted by laws.
1. Diversify the scope of transactions by 1. Construct a complete global financial
developing different types of foreign product database and a comprehensive
currencies note trading. foreign bond transaction platform.
2. Increase domestic and foreign trade 2. Strengthen the judgment of global trends
counterparties to acquire better and risk awareness and strengthen sovereign
opportunities. debt trading to diversify the risks of trading
corporate bonds.
3. Increase Ropo counterparties to enhance
foreign currencies funding. 3. Expand customers for bonds denominated
in foreign currencies and provide them with
4. Enhance control over the supply end in
diversified bond products.
international bonds to increase opportunities
for profits. 4. Develop a product line for structured
Fixed Income products to satisfy risk preferences and
Business 5. Increase the proportion of foreign currencies
requirements of different customers.
bond trading to achieve better performance
than trading in domestic market. 5. Increase relevant commission revenue
to balance the risk-related revenue from
6. Increase the proportion of secured
proprietary trading.
convertible bonds with strictly risk
management to keep high profits.
7. Enhance the sales and underwriting
capabilities in fixed income products to
expand fee profits other than proprietary
trading.
8. Expand corporate-related business and
strengthen the connection.
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136

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V. Overview of Business Operation

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Business Short-term Development Long-term Development
1. Warrants business 1. Provide diversified customized financial
(1) Increase the efficiency in the issuance and products based on customer requirements.
sales of warrants and carefully formulate 2. Strictly execute risk-monitoring system for
issuance strategies based on main derivatives.
investment targets in stocks with good
historical performance in shareholders' 3. Diversify hedging products and flexibly
return on equity. Provide diversified implement options in stocks with the same
product lines with different strike prices targets, convertible bonds, equity options
and different maturity dates. etc. to effectively lower various Greeks risks
of derivatives.
(2) Enhance hedging transaction skills and
increase the performance of transaction 4. Comply with the openness of the competent
systems to increase profits in warrant authority in the future and apply for related
hedging. foreign currency derivative financial
(3) Diversify hedging products and flexibly product businesses with branch companies
Financial implement options in stocks with the same of international financial securities firms.
Products targets, convertible bonds, equity options Continue to demonstrate the performance
etc. in addition to warrant subjects in of the Company's financial engineering
current stocks to effectively lower various team and integrate expertise in financial,
Greeks risks. information, mathematical disciplines to
enrich the product line of financial products
2. Structured products and disperse revenue sources.
(1) Design products that are suited for various
market situations, demand-oriented,
and profitable, with the aim of allowing
customers to achieve stable profitability
through carrying out transactions of
quality target products.
(2) Provide customized products for
individuals and institutions.
(3) Establish stable transaction strategies for
hedging.
1. Continue to develop transaction strategies 1. Enhance strategic real-time measurement
and modules to create profits for the and analysis capabilities and build a
department. comprehensive foreign remuneration risk
decision-making and analytical system
2. Strengthen the automated risk control ability
module.
for each strategic module.
2. Completely systemize and automate the
3. Expand cross-market arbitrage and price
order-placing module and the risk control
Quantitative difference transactions for foreign products.
Trading mechanism.
4. Actively seek market maker qualifications
for domestic and foreign futures and options.
5. Increase the ratio of automated ordering in
the department program.
6. Design and issue structured products to
increase the source of profit.
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Business Short-term Development Long-term Development
1. Respond to changes in the underwriting 1. Seek private equity businesses and actively
market, actively seek lead underwriting operate related investment banking
cases for IPOs, enhance fixed profits; businesses in the Greater China Region.
carefully select SPO (including CB and
2. Collaborate across industries for the group to
ECB) industries and focus on lowering
expand customer base in the Greater China
the Company's credit risks while targeting
Region.
medium to large projects.
Underwriting
(Capital 2. Seek public listing (OTC listing) operations
Market) of returning Taiwanese companies.
3. Coordinate with OSU operations in
expansion of related investment banking
operations. Cooperate with the Fixed Income
Department to invite foreign financial
institutions to issue international bonds in
Taiwan.
1. Assisting companies with handling stock- 1. Actively expand the number of serviced
Shareholder related affairs as an agent. companies.
Services
2. Update operating models in accordance with
laws at any time.
1. Continue to increase the product lines for 1. Develop a wealth management platform
the non-discretionary money trust and for the development of the whole asset
marketable securities trust. allocation through financial management
trusts.
2. Actively promote FinTech to provide more
Wealth
real-time and convenient cross-device 2. Expand the international financial business
Management
& Trust service models and diversified electronic and increase the competitiveness through
transaction platforms. offshore securities units.
3. Actively explore corporate business and
strive for stable sources of profit in response
to the launch of employee welfare trusts.
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II. Market Conditions

A. Analysis of the Securities Industry

1. Sales and Services Area

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Unit: NT$ thousands
2016 2017 2018
Area
Amount % Amount % Amount %
North 1,310,968 71.65 1,732,693 71.47 2,413,724 73.48
Central 320,793 17.53 438,569 18.09 498,522 15.18
South 197,921 10.82 253,006 10.44 372,741 11.34
Total 1,829,682 100 2,424,268 100 3,284,987 100
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Note 1: The amounts in the table above are brokerage fee revenue.
Note 2: The distribution area of the headquarters and branches is as follows:
Northern area: Taipei Headquarters and branches in Hsinchu and north of Hsinchu. Central area: Branches extending from south of Miaoli to north of Chiayi. Southern area: Branches south of Tainan and in Kinmen.

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2. Breakdown of Market Share According to Business Area

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Business Area Component Market Share Rank
Equity Brokerage Trading
3.16% 10
Volume
Brokerage
Individual Branch 0.09% 4
Warrants Issued (Volume) 6.41% 5
Financial Products
Structure Commodity
8.09% 5
Business Volume
Repo Transactions 0.62% 12
Fixed Income Business
Outright Purchases / Sales 1.08% 13
Lead Underwriting Deals 6 (3.16%)/
10/7
(No./ Volume) 2.117 billion (2.80%)
Underwriting
Co-Lead Underwriting Deals 41 (4.92%)/
7/7
(No./ Volume) 3.762 billion (3.89%)
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3. A Look at Future Growth as well as Supply and Demand in the Market

It is expected that each major investment trust company will continue to launch ETFs in the current year. In addition, the Financial Supervisory Commission permitted securities dealers to launch ETNs last year; they are gradually listed on an exchange in April this year. With the launch of new products, the product category in the domestic securities market will be more diversified, investors’ demand will be satisfied, and the trading volume will thus increase.

In the brokerage business, the Financial Supervisory Commission has been studying diversified financial products, such as “permitting securities dealers to launch ETNs” and “permitting warrants to be linked to domestic futures”, so as to continue to expand the size of the capital market, build a well-developed securities market, and enhance the competitiveness of the securities and futures industry in 2018. The opening of new business means new opportunities that could stimulate increased market transactions. The Company has also remained active in planning related business in hopes of providing customers with more comprehensive product services.

Furthermore, the competent authority cut the stock transaction tax for day trading by half and implemented the policy for one year; extension of the implementation period to the end of 2021 was passed through the third reading in the Legislative Yuan Sittings on April 13, 2018. The overall trading volume has increased significantly since the implementation of the reduction of the stock transaction tax for day trading, helping to improve market liquidity. Therefore, the daily average turnover of Taiwan stocks in 2018 has increased tremendously to NT$162.91 billion. This measure breathed life into the securities brokerage business.

In response to Finance 3.0 trends, the Company shall continue to enhance electronic ordering businesses and integrate functions on the transaction platform. The ratio of electronic transaction operations has reached 62.45% in 2018 and the Company will provide customers with safer information transactions to ensure the promptness and accuracy of orders and create advantages for the Company’s electronic orders. In addition, the Company shall continue to develop a global transaction platform and provide customers with more international and diversified options once business development matures. It shall also provide quality services to increase customer satisfaction and build company reputation to achieve better performance.

As for our underwriting business, with competition for corporate funds raising deals increasingly intense, many corporations are learning that they have many options available to meet their financing needs, and that equity issues are not always their best opinion. As a result, companies that are properly

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V. Overview of Business Operation

screened and that demonstrate sufficient creditworthiness, as well as the preferred stock that issued by financial holdings companies and commercial banks, can often be better off turning to convertible bonds. Plus, with the number of large companies that have not already publicly listed shrinking and the demand for integration due to competition within industries increasing, financial advisory business and corporate funding such as private equity, mergers and acquisitions, capital reductions are growing.

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

The most significant variables in proprietary operations in 2019 are due to subsequent development of the US-China trade war and whether the basics of the global economy are sustainable. Whether U.S. President Donald Trump will continue to up the ante in his fiscal policies proposed before the presidential election, the impact and uncertainties of Brexit, inflation and Fed attitude, and whether China will develop relevant policies and lay a solid foundation for its economy successfully could all affect stock market developments in the future. In the current stage, the US economy growth is in the “plateau” period with relatively limited space for growth; China has relaxed its monetary policy under the pressure of the trade war, including the reduction of the bank reserves and the relaxation of the margin collateral rate, while enhancing the consumption subsidy; plus, China stocks have been at the lowest point in the past five years, relatively increasing investment opportunities. The favorable investment period will occur in the first quarter of the year where there are fewer variables and the fundamentals of the economy remain strong. Looking at the various variables and risks, there is uncertainty as to whether the market this year would return to the normal growth momentum after de-stocking. In the second half of the year, there would be opportunities for long position during the election period and more flexible for operations in the stock market with the recovering of fundamentals. The Proprietary Trading Department shall continue to adopt active strategies and mount a vigilant defense to maximize the profitability of the Department.

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

As for our wealth management 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 time, we want to offer a full line of active wealth management products so as to offer more diverse assets allocation options. In addition, we adopt responsive design and launch an independent wealth management app in response to the electronic trading of funds in 2019, and it is expected that these added services will translate into increased revenues.

4. Market Supply forecast, growth opportunity, and business competitiveness

(1) Our Competitive Strengths
Our corporate image is solid.
We respect professional management and leadership.
Our horizontal organization and human resource costs are well-controlled.
Our brokerage business market share is steady.
Our position management performance is outstanding in winning percentage.
Our operating costs and risk management are both well-controlled.

140

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V. Overview of Business Operation

(2) Positive Factors
The global economy is in recovery; consumption and investment are picking up, which will drive domestic economic growth.
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.
With competent authorities gradually widening the business scope of securities firms, the breadth of the company’s operations will also be increased as well.
Flexibility in proprietary trading business with industry-leading performance.
Free from the shackles of a financial holding company and from restructuring and consolidation activities that would result from such M&A activities, employees can focus more on tasks at hand and the organization can enjoy smooth and unfettered development.
Growth in online trading shows no signs of slowing down. The company’s fast and reliable online trading technology is well-positioned to attract a new, young client base.
The level of computerization and automation of information and processes is one of the highest in the industry leading to management practices with high efficiency.
Through President Group, the firm and our employees have access to superb sales channels and myriad resources.
The government continues to open up new business operations and expand the scope of investment. The large account taxation clause in the securities transaction taxation has been abolished.
With structured note products now available, products can be custom designed for either retail clients or institutional clients, thereby retaining clients who would have otherwise been drawn to banks and financial holding companies.
The government is planning to establish tax policies on financial products in line with international standards and this will encourage financial product innovation and drive new business.
The company encourages a corporate culture that emphasizes innovation and rising to challenges.
As financial markets continue to mature and the numbers of participants continue to increase, market liquidity and efficiency keep rising.

(3) Weakness

Financial holding companies have the advantage of capital employment and crisscross integration.
It is hard to mark up brokerage handling charge due to fierce competition.
The Fed is gradually normalizing interest rates.
Foreign investors are an increasing proportion of the market; domestic firms are at a disadvantage in terms of developing overseas clients.
The aging of domestic population lowers demand for investments.
The salary growth rate of the youth population grows slowly and the low amount of savings makes it difficult to begin investments.

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(4) Strategies for Dealing with the Weakness Identified

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Business Unit Strategy
1. Encourage various departments and subsidiaries to work together to develop new business.
2. Develop our institutional client business, using asset management business to pursue corporate
clients and combine that with our OSU business, and provide added-value services beyond
our conventional securities services.
3. Modify client structure so as to reduce the concentration of risks.
4. Expand our spread trading business, increase mid-level customer trading volumes and position
turnovers rates.
5. Enhance internal auditing procedures, reduce client complaints.
6. Customized online brokerage system for institutional and mid-level investors.
7. Increase revenues from securities lending service to investors.
8. Identify under-performing brokers and refocus them towards “Marketing” efforts as a means
of making a breakthrough, or refocusing their efforts on cross-selling of non-traditional
products.
9. Cultivate all employees’ abilities to cross-sell a range of financial products, particularly
personal financial planning products and wealth management services.
10. Focus on tiered, wealth management sales efforts that take into consideration client
Brokerage preferences, trading habits, and that provide appropriate product information and that increase
trading frequency.
11. Push forward with online brokerage business; implement comprehensive platform that
integrates both information and trading systems. Upgrade online trading system stability and
order entry quality.
12. Improve our employee training, assistance in preparation for related licenses, performance
management, and information system knowledge, to upgrade our brokers’ professionalism
and productivity.
13. Continue to recruit new employees, cultivate 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.
14. Evaluate the feasibility of digitizing all back-office operations so as to increase efficiency and
to control costs at individual branches.
15. Implement succession mechanisms for each level of the organization, strengthen our
incubation center functions, retain good talent, solid management training programs, set
incentive programs, encourage successors, smooth generational gaps.
16. Set break-even point for each branch, consider the linkage between target customers
and brokers’ performance and branches’ operation outcome, evaluate potential for future
profitability, and adjust business direction.
1. Recognize and adjust to different market conditions, switching between “Range Trading” and
“Trend Trading” strategies, thereby maintaining an optimal market position.
2. Strictly implement risk control regulations to effectively reduce the impact of systemic risk.
Proprietary
Trading
3. Improve our research and trading of Emerging Market Exchange equities, foreign-listed
equities, and futures markets, to create more diverse sources of revenue.
4. Add quantitative analysis and technical indicator model analysis to our operating systems.
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142

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V. Overview of Business Operation

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Business Unit Strategy
1. Make good use of macroeconomic databases and develop systematic tools to enhance
profitability.
2. Appropriately adjust traders’ mandate and increase traders’ mandates gradually.
3. Enhance traders’ decision making and trading ability.
4. Strengthen foreign bond research and trading team to meet the growing needs of expanding
Fixed Income
businesses.
Business
5. Recruit experts for sales and debt capital market to expand the business scope in fixed income
market.
6. Develop structured products in different themes with the advantages in the proprietary trading
business.
7. Strengthen corporate-related business and diversify the risk of proprietary trading business.
1. In terms of future opening to daily trade of stocks and warrants, we have already increased
tools of futures and options, enhance transaction system effectiveness, lower transaction cost,
and maximize profit.
Financial
Products 2. Be more consumer-oriented and develop new products to meet these demands.
3. Strengthen market research and investment analysis of foreign market objectives and
commodities to expand international securities business.
1. Diversify our trading strategies to better react to market changes.
2. Aggressively pursue market-maker roles in foreign futures and options markets.
Quantitative 3. Expand our range of foreign products traded and increase profitability in foreign products.
Trading
4. Increase the proportion of order placements via automatic trading programs.
5. Increased the integration of resources across multiple departments, thereby creating better
synergies.
1. Prior to taking initial steps on a given underwriting deal, consultations should be conducted
with colleagues throughout the company’s various departments and divisions so as to
accurately access to the realistic profit opportunities and risks of the deal. Once a deal is
ongoing, regular reassessments and revisions should be made in order to ensure the quality of
the overall project.
2. When acting as exclusive sales agent for an issue, a risk assessment report must be generated
to determine if risks fall within the firm’s accepted parameters. Afterwards, daily risk values
should be generated and market simulations should be conducted to as so have a clear and
Underwriting timely picture of risk exposure and thus determine when to initiate stop losses or when to take
(Capital profits. The net effect of all of these efforts will be to lower overall risk while pursuing the
Markets) largest possible profit.
3. Leverage clients from across our Brokerage Department, Financial Products Department,
Shareholder Services Coordination Department, President Capital Management Corp., and
Uni-President Asset Management Corp.
4. Provide these clients with financial planning products customized for either retail or
institutional business, thereby implementing an effective cross-selling network.
5. Actively work with foreign business entities to seek IPOs or fundraising operations for foreign
companies in Taiwan.
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Business Unit Strategy
1. Improve quality of service:
(1) Respond quickly to legal changes which affect procedures and materials. Improve
efficiency of training cycles. Develop employee knowledge on various regulations and
procedures. Enhance mutual support and flexibility among employees. Increase efficiency
Shareholder of human resource utilization.
Services
(2) Enhance inter-department cooperation and verifications, thereby ensuring accuracy and
Coordination
security of processes.
2. Enhance efficiency of operations:
Follow the internal objective of “Customer satisfaction, unceasing improvement and
innovation”, we will keep increasing the satisfaction rate of agency business.
1. Help business personnel to obtain the relevant professional licenses and raise their wealth
management competence.
Wealth 2. Aside from providing multiple products, we focus more on the depth of product service.
Management &
Trust 3. Strengthen securities firms’ niche on lending securities to differ from banking trust business.
4. Construct cross-device platforms that allow orders to be placed for all types of products,
thereby offering clients added convenience and achieving Bank 3.0 objectives.
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V. Overview of Business Operation

B. Productions Procedures of Main Products

The Company is a securities service provider. The business and services provided by the Company do not involve the production processes for physical products, so it is not applicable.

C. Supply Status of Main Materials

The securities business and services conducted by the Company are in accordance with the laws and regulations of the competent authority. There is no supply of physical materials, so it is not applicable.

D. Major Suppliers and Clients

The Company’s main customers include individuals, legal entities, approved foreign professional investment institutions and natural persons. In the past two years, each customer’s purchase (sales) of products failed to reach 10% of the purchase (sales) of products of the Company per year.

E. Production in the Last Two Years

The value of the securities business and services conducted by the Company cannot be provided as in the general manufacturing industry.

F. Shipments and Sales in the Last Two Years

The value of the securities business and services conducted by the Company cannot be provided as in the general manufacturing industry. The revenue and its ratio of the Company’s main businesses in the past two years are as follow:

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Unit: NT$ thousands
Item 2017 % 2018 %
Brokerage 2,338,014 36.76% 2,483,267 52.97%
Proprietary
3,771,989 59.31% 2,006,020 42.79%
Trading
Underwriting 249,982 3.93% 198,603 4.24%
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III. Employee Data

Analysis of Average Tenure, Age and Education, for Sales Force in 2017, 2018, and the first quarter of 2019

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Unit: Person
Year 2017 2018 2019Q1
Management 110 111 111
Number of
Regular Staff 1353 1353 1349
Employees
Total 1463 1464 1460
Average Age 45.05 45.49 45.65
Average Tenure 13.09 13.49 13.59
Doctorate Degree 0.20 0.20 0.20
Master’s Degree 12.37 13.46 13.49
Bachelor Degree / Junior
Education (%) 72.80 71.86 71.99
College Graduate
Senior High School 14.63 14.48 14.32
-- -- --
High School or Less
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Note: Directors and part-time employees are excluded.

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Revenue Per Employee

Revenue Per Employee	Revenue Per Employee	Revenue Per Employee
Unit: NT$ thousands
Item	2017	2018
Revenue Per Employee	4,347	3,202

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Note: Revenue per employee = total revenue /number of employees

IV. Environmental Protection and Corporate Citizenship

A. Environmental Protection

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

B. Corporate Citizenship

President Securities Group has been a long-standing supporter of important social charitable activities and, for its efforts, has been recognized with the 7th annual Wenxin Award and the 6th National Civic Service Award, and Top 50 by the Commonwealth magazine in 2013, 2015, 2016 and 2017. The Company has taken concrete actions to cooperate with the Taiwan Fund for Children and Families from 2007 to 2018 to help children from financially challenged families with their studies, and has received a certificate of Appreciation in 2013. The Company also mobilized all employees and customers for joint participation and invested actual funds and various equipment to social welfare activities to fulfill corporate social responsibilities. The Company raised a total of NT$2.3 million from 1,259 participants in 2018. Since 2001, the Company has organized all employees in PSC, PFC, PAMC, PCMC, PIAC, and President Securities Venture Capital as well as allowing customers to participate in the “Love Delivery Activities” that provide children from financially challenged families with scholarships. A total of approximately 8,158 elementary school, junior high school, and senior high school students were beneficiaries. The activities have provided school children from poor families with opportunities to explore different academic disciplines for their own development and growth.

The Company organized the first employee blood donation event in 2006 and received a passionate response. Starting in 2007, the Company has organized two employee blood donation events every year and expanded the event to include community residents who have provided strong support. Starting in 2010, the Company organized three blood donation activities every year and a total of 233 bags of blood were donated in 2018. A total of 3,273 bags of blood have been donated from 2006 to 2018 and the Company has become a permanent partner of the Blood Center. The Company receives a letter of gratitude and commendation from the Blood Center every year.

President Securities Corp. upholds the spirit of “giving back to the community what we take”, and we continue to dedicate ourselves to helping disadvantaged groups and to promote social welfare activities.

C. Work Environment Safety and Precautions

The Headquarters has formulated relevant preventive plans in accordance with the “Regulations Governing the Occupational Safety and Health Management” promulgated by the Ministry of Labor to protect the employees’ work environment. We set up AED devices in the public space for emergency use for our employees and clients.

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V. Overview of Business Operation

V. Labor Relations & Employee Benefit

A. Employee Benefits, Education and Training

1. Employee Benefits

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

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

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

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

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 addition, the Company also conducts periodic blood donation activities and physical and spiritual health seminars from time to time to improve employees’ overall health. The activities include sanitation education, policy, and the environment.

The Company also provides a spacious 200-ping sports center which is equipped with comprehensive sports facilities. It also actively promotes various club activities to promote healthier lifestyles for employees. Essentially, all such benefits and programs are designed to foster a harmonious relationship between employees and the company. In addition, the Company was awarded two stars as Best Companies to work for by Department of Labor, Taipei City Government in 2012. Going forward, we are optimistic to continue to improve upon these relationships, always with the ultimate aim of allowing both the company and our employees to enjoy mutual benefit and growth.

2. Education and training courses, expenditures, and number of hours

The Company values education, training, and talent development. The effects of training in 2018 are described as follows:

 Assisting the brokerage system with training and project execution

(1) Diversify product sales capabilities:

We continue to arrange expert training (management capabilities) for high-net-worth customers. We also use performance management mechanisms and continuous encouragement from supervisors to strengthen management measures and improve the sales capabilities and business goals of our products.

(2) Talent training:

Continue to advance industry-academia collaboration with finance departments of major universities to reduce the gap between students’ studies and their careers and fulfill our corporate social responsibilities.

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(3) Industry trends:

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

 Finance 3.0 Digital Transformation Training Program

(1) FinTech lectures:

In response to the advent of the era of financial technology, the Company strives to inspire employees through the dangers, customer type, behavior patterns, and service methods in the future development in the securities industry and will continue to promote personnel transformation and grasp the future development trends of FinTech.

(2) Digital marketing application courses:

These courses help departments plan effective content marketing strategies and uses content marketing to increase the “stickiness” of customers. It effectively uses content marketing to reduce marketing costs and improves marketing impacts and improves sales performance.

(3) Digital analysis tool application courses – Excel VBA
(4) Strengthening of management roles:

In response to the impact and business opportunities of financial technologies on the operations of the securities industry, the Company will train supervisors to understand the three most important factors for the success of changes. As leaders of the team, they should have an appropriate mentality and exert their influence and apply what they have learned to management on the ground, so as to facilitate the handover of the management experience.

 E-training

(1) The training system has been upgraded to version LMS6.4 and its functions are upgraded to improve the Company’s management and implementation of training programs.
(2) The Company introduced the MPS mobile learning module to enable employees to learn on their mobile devices and learn on their own at any time.
(3) 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 time. This allows learning to be more diverse and spontaneous.
(4) Marketing activities are used to encourage employees to make use of online resources and cultivate habits for continuous learning. The goal is to strengthen motivation for learning and improve their ambitions for improving digital transition.

 Cross-department communication

The Company organized cross-sales project discussion meetings in 2018 to learn about business departments’ strategies and key business goals of the current year to plan suitable courses and options to ensure the efficacy of studies and performance output. It also allowed employees to learn about the departments’ ideas on training and establishes good communication channels.

 Application for government subsidies to reduce training expenditures

Human resources improvement program: NT$209,117

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 from 2017 to 2019, and won the Silver Award for six consecutive years from 2010 to 2016. We were the only winners in the securities industry.

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V. Overview of Business Operation

B. Retirement System and Implementation Status

To encourage employees’ long-term services and professional development, protect employee rights, and improve work efficiency, the Company has established the Employee Retirement Regulations in accordance with the approval granted in the National Taxation Bureau’s (1989) Cai-Bei-Guo-ShiuShen-1 No. 112955 Letter dated November 12, 1989.
The Company established the Employee Pension Fund Management Committee on October 11, 1994 with the approval of the Department of Labor of the Taipei City Government. After the implementation of the Labor Standards Act in March 1998, the Company established the Supervisory Committee of Labor Retirement Reserve in accordance with the laws. Related organization charters and retirement regulations 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 appropriation ratio calculated by the actuary.
The government implemented the new retirement system in the “Labor Pension Act” in July 2005 to handle employees’ retirement. 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.

C. Employee Disputes and Protection of Employee Rights

In accordance with the Labor Standards Act, the company has instituted its own set of work rules and has submitted a copy of these work rules to the Taipei City Government Department of Labor for approval. In addition to notifying all employees via internet of the content of these work rules, we also have posted a copy of these work rules on rules, we also have posted a copy of these work rules on the company’s internal corporate website where employees may view a copy of these rules at any time.
To date, the company has made every effort to maintain a harmonious and fulfilling work environment for all of its employees and, as such, has not suffered any loss or damage resulting from any employee disputes, in the firm’s entire history. And, the company has every reason to believe that this harmonious dynamic will continue.

D. Loss caused by labor dispute in the most recent three years: None.

E. An estimate of losses incurred to date or likely to be incurred in the future, and mitigation measures being or to be taken: None.

F. Certification Details of Employees Whose Jobs are Related to the Release of the Company’s Financial Information

Certification details of employees whose jobs are related to the release of the Company’s financial information are disclosed in the table below. In response to the competent authorities’ requirements for risk management implemented by the risk management unit and the qualifications for operators and internal auditors, the Company’s relevant personnel have also completed the training and obtained relevant qualifications in accordance with the regulations. Currently, three employees in charge of risk verification have obtained the Financial Risk Manager (FRM) Certificate and two employees in charge of auditing have also obtained Certified Financial Service Auditor (CFSA) Certificate.

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Risk Controls Office/4 employees
Certifications and Qualifications Received by Employees
Qualified Ratio (%)
Qualification Exam for Senior Securities Specialist 4 100.0
Qualification Exam for Futures 4 100.0
Certificate of Margin Trading and Short Selling 1 25.0
Qualification Exam for Securities Investment Trust and
3 75.0
Consulting Professional
Qualification Exam for Personal Insurance Representative 1 25.0
Qualification Exam for Non-Life Insurance Representative 1 25.0
Bill Finance Specialist exam 2 50.0
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Finance Department/37 employees
Certifications and Qualifications Received by Employees
Qualified Ratio (%)
Qualification Exam for Senior Securities Specialist 30 81.1
Qualification Exam for Securities Specialist 1 2.7
Qualification Exam for Futures 12 32.4
Certificate of Margin Trading and Short Selling 5 13.5
Qualification Exam for Securities Investment Trust and
8 21.6
Consulting Professional
Proficiency Test for Trust Operations Personnel 7 18.9
Qualification Exam for Personal Insurance Representative 7 18.9
Basic Proficiency Test for Bank Lending Personnel 2 5.4
Proficiency Test for Financial Planning Personnel 3 8.1
Basic Proficiency Test for Bank Internal Controls 6 16.2
Qualification Exam for Non-Life Insurance Representative 4 10.8
Professional Capacity of Bonds Specialist 2 5.4
Bill Finance Specialist exam 3 8.1
Proficiency test for corporate basic internal control 2 5.4
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Auditing Office/47 employees
Certifications and Qualifications Received by Employees
Qualified Ratio(%)
Qualification Exam for Senior Securities Specialist 40 85.1
Qualification Exam for Securities Specialist 7 14.9
Qualification Exam for Futures 47 100.0
Certificate of Margin Trading and Short Selling 39 83.0
Qualification Exam for Securities Investment Trust and
31 66.0
Consulting Professional
Proficiency Test for Trust Operations Personnel 43 91.5
Qualification Exam for Personal Insurance Representative 40 85.1
Qualification Test for Sales Personnel of Structured Products 1 2.1
Basic Proficiency Test for Bank Lending Personnel 3 6.4
Proficiency Test for Financial Planning Personnel 13 27.7
Basic Proficiency Test for Bank Internal Controls 24 51.1
Qualification Exam for Non-Life Insurance Representative 40 85.1
Qualification Exam for Stock Affair Specialist 5 10.6
Professional Capacity of Bonds Specialist 1 2.1
Bill Finance Specialist exam 1 2.1
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Auditing Office/47 employees
Certifications and Qualifications Received by Employees
Qualified Ratio(%)
Qualification Exam for Investment-orientated Insurance
19 40.4
Product Representative
Proficiency test for corporate basic internal control 7 14.9
Wealth management salespersons 41 87.2
Qualification Exam for Securities Investment Trust and
6 12.8
Consulting Regulations
Trust laws exam 3 6.4
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G. Conduct and Ethics of Employees

The Company has formulated the “Work Rules” and “The Regulations and Declaration” signed with employees for their conduct and ethics. The content is summarized below:

All the Company’s employees shall comply with the following standards and rules in the daily life for the Company’s development and all employees’ welfare:
(1) Environmental sanitation: Maintain sanitation in the surrounding environment and keep documents and supplies tidy.
(2) Clothing and appearance: Dress in a simple and tidy manner; have a haircut and shave from time to time; barefoot, slippers, flip-flops, and jeans are prohibited; wear in uniform from Monday through Thursday.
(3) Interaction with people: Focus on manners, punctuality, and promise-keeping, respect others, cherish public property, work hard, and be efficient.
(4) Commitment: Be active and responsible at work; do not shirk responsibilities; do not be perfunctory; never put off till tomorrow what may be done today.
(5) Customer first: Receive customers in a cordial and attentive manner; put services first; place emphasis on customers’ rights and interests.
(6) Public property: Ensure proper safekeeping and strengthened management of supplies and equipment.
(7) Profit boosting and cost cutting: Assist in the expansion of business, actively strive for the Company’s interests, reduce and save expenses, as well as eliminate waste.
(8) The Company strictly prohibits gambling, noise, and physical fights.
All of the Company’s employees shall comply with the following service standards and rules for maintaining the Company’s interest.
(1) During employment, employees shall not take on part-time (concurrent) duties other than the work designated by the Company. If it is not in conflict with the Company’s operating interests and will not interfere with the full-time work, employees shall report to their supervisors beforehand. Except for the purpose of business, employees shall not use the Company’s name without permission.
(2) Employees shall not look through documents, correspondence, and books of accounts that are not part of their business and present their business documents to irrelevant parties.
(3) Never leak, transfer, or otherwise the Company’s business or technological secretes, including but not limited to all documents, information, products, or objects or rights with property value, to people.
(4) Employees guarantee that when leaving the Company, all the Company’s information kept related to the work shall be handed over to the unit supervisor, and that Company’s property and relevant documents shall not be taken away.
(5) Employees shall not bring prohibited items and flammable materials into the company; they shall not bring people who do not work at the Company to the Company without permission.
(6) Employees are not allowed to absent the Company’s major meetings without any reason.
(7) The Company’s employees shall report their duties and business to supervisors from the first level all the way up and shall not bypass supervisors in the middle and report to those at higher levels directly, unless

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it is an emergency or special circumstance.

(8) The Company’s employees shall not take the Company’s property or documents out of the Company without permission, unless with the responsible supervisor’s approval.

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(9) The Company’s employees shall not have a loan relationship or guarantee relationship with the Company’s customers.
(10) The Company has prohibited inappropriate lending or loan brokerage among employees.
(11) During employment, employees shall comply with the Company’s assignment of work as well as management and supervision; the Company may adjust the employees’ job duties and workplace location based on business needs in accordance with labor laws.
(12) To protect the Company’s reputation, the Company strictly prohibits employees’ comments that are not verified or may damage the Company’s reputation on any social websites.
To maintain the Company’s corporate culture, the Company’s employees shall comply with the following ethical standards and rules.
(1) When conducting business, employees shall not directly or indirectly offer, promise to offer, request, or accept any improper benefits, including kickbacks, commissions, facilitation fees, or otherwise offer or accept improper benefits to or from customers, agents, contractors, suppliers, public servants, or other stakeholders.
(2) When directly or indirectly offering a donation to political parties or organizations or individuals participating in political activities, employees shall comply with the Political Donations Act and its own relevant internal operational procedures, and shall not make such donations in exchange for commercial gains or business advantages.
(3) For charitable donations or sponsorships, employees shall comply with relevant laws and regulations and shall commit bribery in disguise.
(4) Employees shall not directly or indirectly offer or accept any unreasonable presents, hospitality or other improper benefits to establish business relationship or influence commercial transactions.
(5) Managers shall not take advantage of their positions in the Company to obtain improper benefits for themselves, their spouses, parents, children or any other person.
I will comply with relevant securities laws; in the case of any violations, I am willing to accept the Company’s punishment.
If personal behavior is detrimental to the social public order, good social customs, or personal misconduct has constituted sexual harassment of other colleagues, with specific evidence proving that it has damaged a business unit’s or colleague’s image or reputation, the Company may terminate the employment relationship without notice.
I will strictly abide by the Company’s regulations on copyright protection, do not use computer programs that are not legally authorized on the Company’s personal computers, and will never reproduce or infringe any programs that are legally authorized on the Company’s personal computers. If violating the above-mentioned regulations, I am willing to accept the Company’s severe punishment and accept all the criminal and civil liability.
Corporate information confidentiality
(1) The ownership, patent rights, and other rights of the business information, research results, or inventions and technologies, which are obtained because of or through my duties, belong to the Company, and I agree to assist the Company in conducting the necessary procedures for obtaining or protecting the rights, whether I am employed.
(2) I agree that the author of the work, which I plan with the fund from the Company or I accomplish through the equipment or information provided by the Company, is the Company, and that the Company owns the copyright.
(3) Never help the Company’s competitors or provide them with relevant materials or information without

152

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V. Overview of Business Operation

approval.

(4) Never use Company’s confidential information to threaten the Company as a means of promotion or getting a pay raise.
(5) Never investigate (snoop about) the Company’s confidential information that is not related to the work; never discuss the Company’s confidential information with colleagues.
(6) The salary and bonuses of the Company’s employees are regarded as confidential; I shall not tell other people about my own salary and bonuses and must not inquire about other colleagues’ salaries and bonuses.
(7) If violating the above-mentioned regulations, I am willing to accept the Company’s punishment and take the responsibility for compensation for the resulting damage or losses to the Company.
Regulations on e-mail

Comply with the Company’s relevant regulations on intranet connected to the Internet and e-mail accounts; any violator is willing to accept the Company’s punishment.

H. Internal Legal Compliance and Material Information Management

We have set an “internal material information handling procedures” and assigned the Compliance Office to be in charge of internal major information in order to do coordination and prevent internal trading. In addition, our HR promotes education advocacy toward board members, managerial officers, and employees each year. In accordance with the “Taiwan Stock Exchange Corporation Procedures for Verification and Disclosure of Material Information of Listed Companies” and with the “Taiwan Stock Exchange Corporation Procedures for Press Conferences Concerning Material Information of Listed Companies”, we have posted all such information on the company’s internal corporate website where employees and managers may view it.
Within the Office of the CEO, we have established a Legal Compliance Department, which is tasked with ensuring that all of the company’s processes and administrative procedures are in compliance with the most recent laws and regulations, that all activities are conducted in accordance with relevant laws and regulations. And in accordance with “Standard Directions for the Content and Procedures of Assessment of Legal Compliance of Securities Firms”, this department is also tasked with conducting regular legal compliance evaluations of each department and each branch office and then conducting legal compliance training specific to their needs.
We have created a legal compliance section on our internal corporate website where we routinely post information on any recent amendments made to relevant laws and regulations. We have also set up a hotline where employees can call to learn more about insider trading, its key principles, definitions, and the potential civil and criminal exposures involved. All of these measures, taken together, provide our employees with appropriate and adequate legal guidance.
To comply with Personal Information Protection Act, we established personal data protection system in 2013. We also gained “BS 10012” certification of England Standard Association in November 22, 2013. And we continue to undergo certification consulting toward our Shareholder Services department from 2017.

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VI. Material Contracts and Agreements

A. Operating lease contract: For each leased asset with more than NT$5 million of rent per annum as of April 30, 2019

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Unit: NT$

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

Area Payment Restrictive
Type Asset Lease Term Rental Lessee
(Ping) Method Covenant
Assets
Lin, Ching-Hua
leased Zhongli Branch
320 2017.01-2018.12 509,000/month and other four Quarterly NA
by the Office
persons
Company
Assets
leased Nanjing Branch Chen, Ting-
218 2017.01-2021.12 458,000/month Half a year NA
by the Office Yuan
Company
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B. Non-operating lease contract: For each leased asset with more than NT$5 million of rent per annum as of April 30, 2019

Unit: NT$

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

Area Payment Restrictive
Type Asset Lease Term Rental Lessee
(Ping) Method Covenant
Assets Uni-President
President
leased 2016.05-2019.04 Asset
Securities 307.06 522,000/month Monthly NA
to other (Note 1) Management
Building
entities Corporation
Assets Uni-President
President
leased Asset
Securities 307.06 2019.04-2024.03 522,000/month Monthly NA
to other Management
Building
entities Corporation
Assets
President
leased President Tokyo
Securities 417.14 2017.01-2019.03 709,000/month Monthly NA
to other Corp.
Building
entities
Assets
President
leased President Tokyo
Securities 417.14 2019.04-2024.03 709,000/month Monthly NA
to other Corp.
Building
entities
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Note 1:This contract was terminated early on March 31, 2019, and was renewed on April 1, 2019.

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VI. Financial Information

VI. Financial Information

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President
Securities
----- End of picture text -----

Professional Leadership & Kind Service

155

VI. Financial Information

I. Five-Year Financial Summary

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A. Condensed Balance Sheet

1. Consolidated Condensed Balance Sheet – Based on IFRS

Unit: NT$ thousands

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

Year Financial Summary for the last five years (Note1)
2019Q1
(Note1)
2014 2015 2016 2017 2018
Item
----- End of picture text -----

Current Assets		59,972,212	65,185,471	81,275,723	81,561,564	64,915,856	84,179,112
Property and Equipment (Note2)		2,562,705	2,520,596	2,467,163	2,434,389	2,442,370	2,433,946
Intangible Assets		160,276	144,659	129,771	112,096	124,210	120,213
Other Assets		2,252,353	2,238,807	2,183,539	2,203,645	2,898,837	3,242,234
Total Assets		64,947,546	70,089,533	86,056,196	86,311,694	70,381,273	89,975,505
Current	Before distribution	41,811,986	47,265,147	62,877,634	60,800,920	44,636,888	63,299,327
Liabilities	After distribution	42,883,712	47,525,906	62,877,634	62,469,434	Note3	Note3
Non-Current Liabilities		60,084	60,335	48,933	75,812	31,938	185,811
Total	Before distribution	41,872,070	47,325,482	62,926,567	60,876,732	44,668,826	63,485,138
Liabilities	After distribution	42,943,796	47,586,241	62,926,567	62,545,246	Note3	Note3
Equity Attributable to Shareholders of the Parent		23,032,624	22,718,012	23,080,930	25,385,654	25,645,985	26,420,611
Capital Common	Stock	13,231,191	13,231,191	13,356,658	13,904,281	13,904,281	13,904,281
Capital Reserve		256,116	256,116	142,702	142,702	142,702	142,702
Retained	Before distribution	9,431,778	9,307,717	9,432,286	11,397,045	10,979,662	11,903,306
Earnings	After distribution	8,360,052	8,642,781	8,884,663	9,728,531	Note3	Note3
Other Equity Interest		113,539	201,014	149,284	-58,374	619,340	702,144
Treasury Stocks		-	-278,026	-	-	-	-231,822
Non-controlling Interests		42,852	46,039	48,699	49,308	66,462	69,756
	Before distribution	23,075,476	22,764,051	23,129,629	25,434,962	25,712,447	26,490,367
Total Equity
	After distribution	22,003,750	22,503,292	23,129,629	23,766,448	Note3	Note3

Note 1: Financial information for the years of above-mentioned was audited and certified by CPAs. The financial information for the first quarter of 2019 has been reviewed by CPAs.

Note 2: No asset revaluation has been conducted.

Note 3: Distributed earnings from 2018 have yet to be approved by shareholders.

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VI. Financial Information

2. Individual Balance Sheet

Unit: NT$ thousands

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

Year Financial Summary for the last five years (Note1)
2019Q1
(Note1)
Item 2014 2015 2016 2017 2018
----- End of picture text -----

Current Assets		48,083,939	52,172,205	63,516,085	66,854,475	48,293,715	68,169,795
Property and Equipment (Note2)		2,393,640	2,354,427	2,295,097	2,260,981	2,269,210	2,260,439
Intangible Assets		115,878	103,000	85,761	62,317	67,004	65,630
Other Assets		5,914,021	6,121,445	6,094,357	6,082,755	6,965,559	7,280,768
Total Assets		56,507,478	60,751,077	71,991,300	75,260,528	57,595,488	77,776,632
Current	Before distribution	33,408,421	37,963,799	48,852,745	49,788,572	31,913,301	51,213,484
Liabilities	After distribution	34,480,147	38,224,558	48,852,745	51,457,086	Note3	Note3
Non-Current Liabilities		66,433	69,266	57,625	86,302	36,202	142,537
Total	Before distribution	33,474,854	38,033,065	48,910,370	49,874,874	31,949,503	51,356,021
Liabilities	After distribution	34,546,580	38,293,824	48,910,370	51,543,388	Note3	Note3
Capital Common	Stock	13,231,191	13,231,191	13,356,658	13,904,281	13,904,281	13,904,281
Capital Reserve		256,116	256,116	142,702	142,702	142,702	142,702
Retained	Before distribution	9,431,778	9,307,717	9,432,286	11,397,045	10,979,662	11,903,306
Earnings	After distribution	8,360,052	8,642,781	8,884,663	9,728,531	Note3	Note3
Other Equity Interest		113,539	201,014	149,284	-58,374	619,340	702,144
Treasury Stocks		-	-278,026	-	-	-	-231,822
Non-controlling Interests		-	-	-	-	-	-
	Before distribution	23,032,624	22,718,012	23,080,930	25,385,654	25,645,985	26,420,611
Total Equity
	After distribution	21,960,898	22,457,253	23,080,930	23,717,140	Note3	Note3

Note 1: Financial information for the years of above-mentioned was audited and certified by CPAs. The financial information for the first quarter of 2019 has been reviewed by CPAs.

Note 2: No asset revaluation has been conducted.

Note 3: Distributed earnings from 2018 have yet to be approved by shareholders.

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VI. Financial Information

B. Condensed Income Statements

1. Consolidated Condensed Income Statements

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Unit: NT$ thousands

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Year Financial Summary for the last five years (Note1)
2019Q1
(Note1)
Item
2014 2015 2016 2017 2018
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Operating Revenue	5,163,297	4,580,843	4,497,543	7,270,066	5,774,276	2,109,293
Gross Profit	4,509,102	3,709,350	3,730,502	6,284,995	4,644,268	1,798,368
Operating Income	1,237,025	252,740	518,530	2,393,918	1,021,143	845,304
Non-Operating Income	554,338	855,964	418,981	450,055	415,744	120,783
Income Before Tax	1,791,363	1,108,704	937,511	2,843,973	1,436,887	966,087
Net Income (Loss) from
Operations of Continued	1,587,281	962,535	833,042	2,624,657	1,217,633	924,825
Segments
Net Income (Loss) from	-	-	-	-	-	-
Discontinued Operations
Net Income (Loss)	1,587,281	962,535	833,042	2,624,657	1,217,633	924,825
Other Comprehensive Income (Income after Tax)	63,567	78,630	-88,465	-314,958	145,968	84,917
Total Comprehensive Income	1,650,848	1,041,165	744,577	2,309,699	1,363,601	1,009,742
Net Income Attributable to Shareholders of the Parent	1,583,169	956,613	826,690	2,618,769	1,210,323	923,644
Net Income Attributable to non-controlling Interests	4,112	5,922	6,352	5,888	7,310	1,181
Comprehensive Income
Attributable to Shareholders of	1,646,453	1,035,140	737,775	2,304,724	1,355,594	1,006,448
the Parent
Comprehensive income
attributable to non-controlling	4,395	6,025	6,802	4,975	8,007	3,294
interests
Earnings Per Share (Note2)	1.11	0.68	0.59	1.88	0.87	0.67

Note 1: Financial information for the years of above-mentioned was audited and certified by CPAs. The financial information for the first quarter of 2019 has been reviewed by CPAs.

Note 2: Earnings per share is calculated based on the number of shares that were adjusted retrospectively. The unit is NTD.

158

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VI. Financial Information

2. Individual Condensed Income Statements

Unit: NT$ thousands

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Year Financial Summary for the last five years (Note1)
2019Q1
(Note1)
Item
2014 2015 2016 2017 2018
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Operating Revenue	4,376,852	3,510,819	3,493,434	6,359,985	4,687,890	1,904,430
Gross Profit	4,001,642	2,976,415	3,086,106	5,715,963	3,931,716	1,662,521
Operating Income	1,161,197	65,588	384,592	2,333,898	880,341	840,688
Non-Operating Income	606,199	1,004,456	511,418	474,303	505,305	118,503
Income Before Tax	1,767,396	1,070,044	896,010	2,808,201	1,385,646	959,191
Net Income (Loss) from
Operations of Continued	1,583,169	956,613	826,690	2,618,769	1,210,323	923,644
Segments
Net Income (Loss) from	-	-	-	-	-	-
Discontinued Operations
Net Income (Loss)	1,583,169	956,613	826,690	2,618,769	1,210,323	923,644
Other Comprehensive Income (Income after Tax)	63,284	78,527	-88,915	-314,045	145,271	82,804
Total Comprehensive Income	1,646,453	1,035,140	737,775	2,304,724	1,355,594	1,006,448
Earnings Per Share (Note2)	1.11	0.68	0.59	1.88	0.87	0.67

Note 1: Financial information for the years of above-mentioned was audited and certified by CPAs. The financial information for the first quarter of 2019 has been reviewed by CPAs.

Note 2: Earnings per share is calculated based on the number of shares that were adjusted retrospectively. The unit is NTD.

C. Auditors’ Opinions from 2014 to 2018

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Year CPA Audit Opinion
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Year	CPA	Audit Opinion

2014	Lin, Se-Kai / Huang, James	Unqualified Opinion
2015
2016	Hsiao, Chin-Mu / Chang, Ming-Hui
2017
2018	Lin, Se-Kai / Hsiao, Chin-Mu

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VI. Financial Information

II. Financial Analysis for the Past Five Years

1. Consolidated Financial Analysis for the Past Five Years

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Year Financial Summary for the last five years (Note1)
2019Q1
(Note1)
Item
2014 2015 2016 2017 2018
Debt Ratio 64.47 67.52 73.12 70.53 63.42 70.56
Financial
Structure
Ratio of Long-term Capital to
(%) 900.43 903.12 937.5 1044.82 1052.77 1088.37
property and equipment
Current Ratio 143.43 137.91 129.26 134.15 145.43 132.99
Solvency
(%)
Quick Ratio 143.37 137.83 129.19 134.09 145.39 132.88
Return on Total Assets (%) 2.80 1.87 1.31 3.43 1.98 1.27
Return on Stockholders’ Equity
6.98 4.20 3.63 10.81 4.76 3.54
(%)
Profitability Pre-tax Income to Paid-in
13.54 8.38 7.02 20.45 10.33 6.95
Analysis Capital (%)
Profit Ratio (%) 30.74 21.01 18.52 36.10 21.09 43.85
Earnings Per Share (NT$)
1.16 0.70 0.59 1.88 0.87 0.67
(Note2)
Cash Flow Ratio 0.92 7.59 - 5.92 24.26 -6.62
Cash Flow
Cash Flow Adequacy Ratio 366.25 452.90 123.28 214.36 404.72 542.38
(%)
Cash Reinvestment Ratio - 10.82 - 13.84 35.71 -
Debit to Equity Ratio 181.46 207.90 272.06 239.34 173.72 239.65
Ratio of Property and Equipment
4.82 4.46 3.55 3.48 4.3 3.36
to Total Asset
Total Underwriting to Quick
Other Ratio 0.49 0.35 0.75 0.61 1.32 0.04
Assets Ratio
(%)
Total Margin Loan Balance to
58.11 45.84 37.58 44.88 31.19 32.5
Equity Ratio
Total Short Sales Amount to
7.98 7.66 6.56 8.64 7.81 5.34
Equity Ratio
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160

VI. Financial Information

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Analysis of financial ratio differences for the last two years (for variations above 20%)

(1) Profitability: Great performance on U.S. corporate financial reports and strong economic data affected the international stock market early this year and stimulated the three major U.S. stock indices to close at a record high. However, the rising US Treasury yields, US-China trade war, Brexit, confrontation between Italy and the EU, sanctions imposed on Iran by the U.S., China's debt crisis, capital flight from developing countries, and Fed's continued interest rate hikes in the second half of the year had caused the global stock market to collapse. These resulted in a decrease in the overall Company's net profit after taxes compared with the previous period, leading to a decrease in the return on asset, return on equity, the ratio of net profit before taxes to paid-in capital, and net profit margin compared with 2017.
(2) Cash flow ratio: Net cash flow from operating activities turned from net cash outflow in 2017 to net cash inflow in 2018, causing the cash flow ratio to increase compared with 2017.

Net cash flows adequacy ratio: The ratio increased compared with 2017 due to the increase in cash inflow from operating activities in latest five years.

Cash flow reinvestment ratio: Net cash flow from operating activities turned from net cash outflow in 2017 to net cash inflow in 2018, causing the cash flow reinvestment ratio to increase compared with 2017.

(3) Debt to equity ratio: Short-term loans and bonds sold under repurchase agreement in 2018 decreased, causing the debt to equity ratio to decrease compared to 2017.
(4) Property and equipment to total assets ratio: The amount of total assets in 2018 decreased, causing property and equipment to total assets ratio to increase compared to 2017.
(5) Total underwriting to quick assets ratio: The amount of underwriting undertaken in 2018 increased, causing the total underwriting to quick assets ratio to increase compared to 2017.
(6) Total margin loan balance to equity ratio: Margin loan receivables in 2018 decreased, causing the total margin loan balance to equity ratio to decrease compared to 2017.
Note 1: Financial information for the years of above-mentioned was audited and certified by CPAs. The financial information for the first quarter of 2019 has been reviewed by CPAs.

Note 2: Earnings per share is calculated based on the number of shares that were adjusted retrospectively. The unit is NTD.

Note 3: Equations for analysis items:

(1) Financial structure
i. Liability to total assets ratio = Total liabilities/total assets
ii. Ratio of long-term capital to property, plant and equipment = (total equity + non-current liabilities) /net worth of property, plant and equipment
(2) Solvency
i. Current ratio = Current assets / Current liabilities
ii. Quick ratio = (Current assets - inventory - prepaid expenses) / Current liabilities
(3) Profitability
i. Return on assets = [after-tax income (loss) + interest expense × (1- tax rate)]/average total assets
ii. Return on equity = net income / average total equity
iii. Profit margin before tax = net income / net sales
iv. Earnings per share = (profit and loss attributable to owners of the parent – dividends on preferred shares) / weighted average number of issued shares
(4) Cash flow
i. Cash flow ratio = Net cash flow from operating activities / current liabilities
ii. Net cash flow adequacy ratio = Net cash flow from operating activities for the most recent five years / (capital expenditures + inventory increase + cash dividend) for the most recent five years
iii. Cash flow reinvestment ratio = (Net cash flow from operating activities – cash dividend) / (gross property, plant and equipment value + long-term investment + other non-current assets + working capital)

(5) Other ratio

i. Debt to equity ratio = total liabilities/ shareholders’ equity
ii. Property and equipment to total assets ratio = net fixed assets / total assets
iii. Total underwriting to quick asset ratio = total underwriting / (current assets - prepayments)
iv. Total margin loan balance to equity ratio = total margin loan balance / shareholders’ equity
v. Total short sales amount to equity ratio = total short sales amount / shareholders’ equity

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VI. Financial Information

2. Individual Financial Analysis for the Past Five Years

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Year Financial Summary for the last five years (Note1)
2019Q1
(Note 1)
Item 2014 2015 2016 2017 2018
Debt Ratio 59.24 62.60 67.94 66.27 55.47 66.03
Financial
Structure
Ratio of Long-term Capital to
(%) 962.24 964.91 1005.66 1122.77 1130.17 1168.83
property and equipment
Current Ratio 143.93 137.43 130.02 134.28 151.33 133.11
Solvency (%)
Quick Ratio 143.86 137.34 129.93 134.23 151.28 133.07
Return on Total Assets (%) 3.16 2.11 1.51 3.99 2.3 1.50
Return on Stockholders’ Equity
6.97 4.18 3.61 10.81 4.74 3.55
(%)
Profitability
Pre-tax Income to Paid-in Capital
Analysis 13.36 8.09 6.71 20.20 9.97 6.9
(%)
Profit Ratio (%) 36.17 27.25 23.66 41.18 25.82 48.5
Earnings Per Share (NT$) (Note2) 1.16 0.70 0.59 1.88 0.87 0.67
Cash Flow Ratio 1.08 8.51 - 6.27 33.44 -
Cash Flow
Cash Flow Adequacy Ratio 358.52 432.31 118.15 183.46 398.65 528.43
(%)
Cash Reinvestment Ratio - 9.33 - 12.08 34.72 -
Debit to Equity Ratio 145.34 167.41 211.91 196.47 124.58 194.38
Ratio of Property and Equipment
5.06 4.70 3.86 3.61 4.74 3.5
to Total Asset
Total Underwriting to Quick
Other Ratio 0.61 0.44 0.95 0.74 1.77 0.05
Assets Ratio
(%)
Total Margin Loan Balance to
58.22 45.93 37.66 44.97 31.27 32.58
Equity Ratio
Total Short Sales Amount to
8.00 7.68 6.57 8.66 7.83 5.35
Equity Ratio
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162

VI. Financial Information

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Analysis of financial ratio differences for the last two years (for variations above 20%)

(1) Profitability: The strong U.S. corporate financial reports and economic data affected the international stock market early this year and stimulated the three major U.S. stock indices to close at a record high. However, the rising US Treasury yields, Sino-US trade war, Brexit, confrontation between Italy and the EU, sanctions imposed on Iran by the U.S., China's debt crisis, capital flight from developing countries, and Fed's continued interest rate hikes in the second half of the year had caused the global stock market to collapse. This resulted in a decrease in the overall Company's net profit after taxes compared with the previous period, leading to a decrease in the return on asset, return on equity, the ratio of net profit before taxes to paid-in capital, and net profit margin compared with 2017.
(2) Cash flow ratio: Net cash flow from operating activities turned from net cash outflow in 2017 to net cash inflow in 2018, causing the cash flow ratio to increase compared with 2017.

Net cash flows adequacy ratio: The ratio increased compared with 2017 due to the increase in cash inflow from operating activities in latest five years.

(3) Debt to equity ratio: Short-term borrowings and bonds sold under repurchase agreement in 2018 decreased, causing the debt to equity ratio to decrease compared to 2017.
(4) Property and equipment to total assets ratio: The amount of total assets in 2018 decreased, causing property and equipment to total assets ratio to increase compared to 2017.
(5) Total underwriting to quick assets ratio: The amount of underwriting undertaken in 2018 increased, causing the total underwriting to quick assets ratio to increase compared to 2017.
(6) Total margin loan balance to equity ratio: Margin loan receivables in 2018 decreased, causing the total margin loan balance to equity ratio to decrease compared to 2017.
Note 1: Financial information for the years of above-mentioned was audited and certified by CPAs. The financial information for the first quarter of 2019 has been reviewed by CPAs.
Note 2: Earnings per share is calculated based on the number of shares that were adjusted retrospectively. The unit is NTD.
Note 3: Equations for analysis items:
(1) Financial structure
i. Liability to total assets ratio = Total liabilities/total assets
ii. Ratio of long-term capital to property, plant and equipment = (total equity + non-current liabilities) /net worth of property, plant and equipment
(2) Solvency
i. Current ratio = Current assets / Current liabilities
ii. Quick ratio = (Current assets - inventory - prepaid expenses) / Current liabilities

(3) Profitability

i. Return on assets = [after-tax income (loss) + interest expense × (1- tax rate)]/average total assets
ii. Return on equity = net income / average total equity
iii. Profit margin before tax = net income / net sales
iv. Earnings per share = (profit and loss attributable to owners of the parent – dividends on preferred shares) / weighted average number of issued shares
(4) Cash flow
i. Cash flow ratio = Net cash flow from operating activities / current liabilities
ii. Net cash flow adequacy ratio = Net cash flow from operating activities for the most recent five years / (capital expenditures + inventory increase + cash dividend) for the most recent five years
iii. Cash flow reinvestment ratio = (Net cash flow from operating activities – cash dividend) / (gross property, plant and equipment value + long-term investment + other non-current assets + working capital)

(5) Other ratio

i. Debt to equity ratio = total liabilities/ shareholders’ equity
ii. Property and equipment to total assets ratio = net fixed assets / total assets
iii. Total underwriting to quick asset ratio = total underwriting / (current assets - prepayments)
iv. Total margin loan balance to equity ratio = total margin loan balance / shareholders’ equity
v. Total short sales amount to equity ratio = total short sales amount / shareholders’ equity

163

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VI. Financial Information

III. Audit Committee’s Review Report on the Company’s 2018 Financial Statement

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164

VI. Financial Information

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IV. Financial Difficulties Experienced by the Company or Its Affiliates in the Most Recent Year or up to the Date of Publication of the Report that will Affect the Company’s Financial Situation: None.

V. Status of the Achievement in Financial Forecasts for the Latest Two Years: Not Applicable.

VI. Provisioning Methods of the Company’s Assets and Liabilities’ Valuation Accounts

The methodology and assumptions applied by the Company in evaluating fair value of financial instruments are based on the requirements of IFRS 9 as well as “Regulations Governing the Preparation of Financial Reports by Securities Firms” to appropriately categorize and evaluate financial assets and liabilities.

Except that impairment loss of bond interest receivables are evaluated along with investments in bonds, that of receivables and overdue receivables are evaluated based on the lifetime expected credit loss.

In the assessment of impairment and calculation of expected credit losses in bond interest receivables, the Company considers reasonable and supporting information about past events, current conditions and future economic conditions. The Company determines at the balance sheet date whether there has been a significant increase in credit risk since initial recognition or whether credit impairment has occurred, and recognizes expected credit loss according to which stage the asset belongs: no significant increase in credit risk or low credit risk at balance sheet date (Stage 1), significant increase in credit risk (Stage 2), and credit impaired (Stage 3). 12-month expected credit losses are recognized for assets in Stage 1, and lifetime expected credit losses are recognized for assets in Stage 2 and Stage 3.

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Accounts to be evaluated Description of evaluating methodology
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Accounts to be evaluated	Accounts to be evaluated	Description of evaluating methodology

1. Notes receivables 2. Accounts receivables 3. Other receivables 4. Margin loans receivables 5. Delinquent accounts		1. Impairment losses and recoverable amounts are individually assessed. (1) Claims from default of brokerage trades are reclassified as other receivables and reviewed when necessary. Impairment loss is assessed individually and the receivables shall be reclassified as delinquent accounts for those with no progress being made. (2) If margin ratio of the margin account is lower than required even after disposal, and the margin account has not been replenished within required period, the margin loans are evaluated and reclassified as delinquent accounts. Impairment loss shall be provided at 100% if no progress is made. If securities within margin accounts of brokerage segments cannot be disposed, the margin loans are transferred to other receivables. Impairment loss is provided at 100% and recourse. It shall be transferred to delinquent accounts if no progress can be made. Impairment loss is not recognized if agreements with borrowers are reached and proceeded, but it should be recognized based on the rules above if repayments are not made in line with the agreements. (3) Impairment loss is assessed based on the recoverable amount of the receivables of claims.
		2. Impairment loss is evaluated based on simplified method and historical data of its lifetime expected credit loss.

VII. Accounting Treatment of Impairment of Assets of the Company

In line with the accounting treatment of IAS 36, The Company recognizes impairment loss when the recoverable amount of the asset is lower than its carrying amount. Recoverable amount is the higher of the asset’s fair value less costs to sell and value in use. Fair value less cost to sell is the amount received from fair trade less cost for disposal, and value in use is the discounted amount of expected cash flow in the asset’s usable years.

165

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VI. Financial Information

When the circumstances for recognizing impairment loss in prior years no longer exist, it is reversed in within the amount of impairment loss recognized in prior years, except that impairment loss of goodwill shall not be reversed.

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VIII. Methods and Assumptions used for Evaluating Fair Value of Financial Instruments

A. The fair value of short-term financial instruments is evaluated at their book value since the effect of discounting is not significant. This method is applied to cash and cash equivalents, bonds purchased under resale agreements, margin loans receivable, refinancing guaranty deposits, receivable from refinance guaranty, receivables from security lending, security lending deposits, restricted assets, operation deposits, clearing and settlement fund, short-term loans, commercial paper payable, bonds sold under repurchase agreements, deposits on short sales, guarantee deposit received on borrowed securities, short sale proceeds payable, notes and accounts payable, collection for others, other payables (excluding income tax payable) and deposits received.
B. Financial instruments at fair value through profit and loss, when they are traded in active markets, their fair value are based on their quoted prices. If there are no quoted market prices which can be used as benchmarks, evaluating methods will be adopted to measure the fair value. Estimates and assumptions used in evaluating methods adopted by the Group are consistent with those adopted by market participants for financial instrument pricing.

Methods of evaluating fair value of financial instruments are as follows:

Equity Securities: Fair value refers to the closing prices as at the balance sheet. For open-ended funds, fair value refers to the net asset value of the fund as at the balance sheet.
Bonds: Government bonds and corporate bonds are based on the market prices derived from average bond yields published by the Taipei Exchange; foreign bonds are based on the transaction prices from Bloomberg.
Interest rate instruments: For IRS, interest rate quotations of CP with same durations in the same markets in the representative quotation system (e.g. Reuters) are used as reference interest rates. In addition, average bid/offer interest rates at certain point of time daily are used as interest rate parameters. Along with other parameters, they are then used in the valuation models to calculate fair value.
Futures: Closing prices of respective futures exchanges on that day.
Options: Closing prices of the exchanges of the options on that day.
Warrants: Closing prices of the instruments in the listed market.
Convertible Bond Asset Swap: Closing prices of the CB and of underlying shares in the listed exchanges are used as parameters along with others in the valuation model to calculate the fair value.
Structured instruments: Closing prices of underlying instruments or bond yields published by the Taipei Exchange are used as parameters along with others in the valuation models to calculate the fair value.
Other derivatives: For listed derivatives, fair value is based on the quoted prices. For unlisted ones, fair value is based on average bid or offer prices from quotation platforms or other quoted prices.
C. For financial assets at fair value through other comprehensive income, if there are quoted prices in active markets, they are used as their fair value. If there are no quoted prices, a valuation methods are adopted to measure the fair value.

IX. Hedge Accounting Applied to Financial Instruments: Not applicable.

166

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VII. Financial Status, Operating Results
and Risk Management
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VII. Financial Status, Operating Results and Risk Management

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President
Securities
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Professional Leadership & Kind Service

167

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VII. Financial Status, Operating Results and Risk Management

Financial Status and Operation performance

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I. Financial Status

Unit: NT$ thousands

Year Item	Fluctuation	Fluctuation
	Amount	Variance (%)
Current Assets 64,915,856 81,561,564 (16,645,708) (20.4%) Non-Current Assets 5,465,417 4,750,130 715,287 15.06%
Total Assets 70,381,273 86,311,694 (15,930,421) (18.46%)
Current Liabilities 44,636,888 60,800,920 (16,164,032) (26.59%) Non-Current Liabilities 31,938 75,812 (43,874) (57.87%)
Total Liabilities 44,668,826 60,876,732 (16,207,906) (26.62%) Capital Stock 13,904,281 13,904,281 0 0.00% Capital Surplus 142,702 142,702 0 0.00% Retained Earnings 10,979,662 11,397,045 (417,383) (3.66%) Other Equity 619,340 (58,374) 677,714 NA Attributable to Parent’s Ownership Interest 25,645,985 25,385,654 260,331 1.03% Non-Controlling Interests 66,462 49,308 17,154 34.79%
Total Equity 25,712,447 25,434,962 277,485 1.09%
Note: Financial information for the years of above-mentioned (based on IFRS) was audited and certifed by CPAs. (1) Main reasons for material changes in assets, liabilities and shareholders' equity items within the last two years (changes over 20% between the frst and second periods, and the change amount reaches NT$ 10 million), its efects, and future response plans: Current assets decreased mainly due to the decrease of fnancial assets at fair value through proft or loss – current in 2018. Current liabilities decreased mainly due to the decrease of repurchase agreement bonds purchased under resales agreements in 2018. Non-current liabilities decreased mainly due to the decrease of net defned beneft liabilities– non-current in 2018. Other equity items increased due to the increase of unrealized gains on FVTOCI fnancial assets in 2018. (2) Main reasons for the changes in the Company's current liabilities over the last two years and in long-term liabilities that mature within a year, its efects, and future response plans: The decrease in current liabilities is mainly caused by a decrease in the demand for capital that caused short- term loans, commercialpaperpayable andrepurchase agreement bonds to decreasefromthelevelsin 2017.

II. Analysis of Operating Results

Unit: NT$ thousands

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Year 2018 2017
Item (Note) (Note) Amount Variance (%)
Operating Revenue 5,774,276 7,270,066 (1,495,790) (20.57%)
Operating Expenses 4,753,133 4,876,148 (123,015) (2.52%)
Operating Income 1,021,143 2,393,918 (1,372,775) (57.34%)
Non-Operating Income 415,744 450,055 (34,311) (7.62%)
Income before Tax 1,436,887 2,843,973 (1,407,086) (49.48%)
Income Tax Expense 219,254 219,316 (62) (0.03%)
Net Income 1,217,633 2,624,657 (1,407,024) (53.61%)
Other Comprehensive Income
145,968 (314,958) 460,926 NA
(after Tax)
Total Comprehensive Income 1,363,601 2,309,699 (946,098) (40.96%)
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168

VII. Financial Status, Operating Results and Risk Management

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Year Item	2018 (Note)	2017 (Note)	Amount	Variance (%)
Net Income Attributable to Shareholders of the Parent 1,210,323 2,618,769 (1,408,446) (53.78%) Non-controlling Interests 7,310 5,888 1,422 24.15% Comprehensive Income Attributable to Shareholders of the Parent 1,355,594 2,304,724 (949,130) (41.18%) Non-controlling Interests 8,007 4,975 3,032 60.94%
Note: Financial information for the years of above-mentioned (based on IFRS) was audited and certifed by CPAs. Explanation to major variations in the last two years (changes over 20%):  Operating income: Due to the decrease in net proft from operating securities in 2018.  Operating proft: Due to the decrease in net proft from operating securities in 2018.  Proft before tax: Due to the decrease in net proft from operating securities in 2018.  Net income: Due to the decrease in net proft from operating securities in 2018.  Other comprehensive income: Due to the increase of translation gain on the fnancial statements of foreign operating entities in 2018.  Totalcomprehensiveincome:Due to the decreasein net proftfromoperating securitiesin 2018.

III. Analysis of Cash Flow

A. Cash Flow Analysis for the Current Year (2018)

(1) Operating activities: Net cash inflow from operating activities was NT$10,829,692 thousand, which was mainly because of an decrease in FVPL financial assets-current in the same period last year, so that the net cash in operating activities increased.
(2) Investing activities: Net cash outflow from investing activities was NT$154,964 thousand, which was mainly because of an increase in the investments under equity method to acquire the equity of subsidiaries and affiliated companies in the same period last year, so that the net cash in investing activities in the same period last year was higher. This was not seen in the current period.
(3) Financing activities: Net cash outflow from financing activities was NT$11,290,746 thousand, which was mainly because of a decrease in commercial paper payable and short-term loans in the current period.

B. Remedy for Cash Deficit and Liquidity Analysis

The Company has maintained a good credit relationship with banks for a long time and maintained mid-and short-term credit lines sufficient to meet the Company’s funding needs.

Year Item	2017	2018	Variance (%)
Cash Flow Ratio (%)	5.92	24.26	309.80%
Cash Flow Adequacy Ratio (%)	214.36	404.72	88.80%
Cash Reinvestment Ratio (%)	13.84	35.71	158.02%
Explanation to major variations: Cash Flow Ratio increased mainly due to the increase of net cash fow from operating activities and the decrease of current liabilities. Cash Flow Adequacy Ratio increased mainly due to the increase of net cash fow from operating activities. Cash Reinvestment Ratio increased mainly due to the increase of cash dividends.

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VII. Financial Status, Operating Results and Risk Management

C. Cash Flow Analysis for the Coming Year (2019)

C. Cash Flow Analysis for the Coming Year (2019)	C. Cash Flow Analysis for the Coming Year (2019)	C. Cash Flow Analysis for the Coming Year (2019)	C. Cash Flow Analysis for the Coming Year (2019)
				Unit: NT$ thousands
Estimated Cash and Cash	Estimated Net	Estimated Cash			Leverage of Cash Surplus (Defcit)
Equivalents, Beginning of Year (1)	Cash Flow from Operating Activities (2)	Outfow (Infow) (3)	Cash Surplus (Defcit) (1)+(2)-(3)		Investment Plans	Financing Plans
5,932,669	1,455,215	828,484	6,559,400		-	-

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IV. Effects of Major Capital Expenditures in the Most Recent Fiscal Year on Financial Operations: Not Applicable.

V. Long-term Investment Policy

In 2018, the company’s domestic reinvestment operations generated healthy profits. Each subsidiary’s operations will still be subject to strict risk control with timely stop-loss and stop-gain orders, so as to reduce risk and maintain steady development.

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

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

The profitability of each investment in 2018 is detailed in VIII. Other Disclosures-Operational Highlights of Affiliated Companies.

VI. Analysis of Risk Management

A. The Company’s risk management policies, organizational structure, measurement standards, as well as the impact of various risks and response measures

1. Risk Management Policies

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

2. Related Risk Management System Architecture

(1) Board of Directors: Audits the company’s risk management policy, supervises sales business strategies, approves all business proposals and trading permissions, and is ultimately responsible for risk management.
(2) Risk Management Committee: Established by the Board of Directors tasked with integrating all risk management operations, with supervising and assisting all the various risk management and related operations. The committee is also tasked with setting the various risk authorities, limits, and targets, for a centralized supervision of the status of all of the company’s risk management efforts.

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(3) President Office: Supervises the daily implementation of all of the company’s risk management operations and authorizes any exceptions to the risk management protocols.
(4) Assets & Liabilities Management Committee: Controls the company’s overall asset structure, sets limits for different businesses, collects and analyzes domestic and international interest rates, exchange rates, and economic changes.
(5) Risk Control Office: Is responsible for the drafting of risk policies and regulations, for monitoring market and credit risks, for monitoring liquidity risks, for compiling data on operational risk control and management, for constructing and maintaining the risk management system, for implementation of risk management systems and for ensuring company-wide regulatory compliance.
(6) Auditing Office: Sets operations risk controls, sets the standards for risk controls systems, puts in place internal auditing controls, and implements daily check routines.
(7) Compliance Division: Implements legal risk controls and ensures that all businesses and risk management operations are in compliance with relevant laws and regulations. Compliance Division concurrently is responsible for anti-money laundering and counter-terrorist financing, developing relevant regulations and systems, monitoring internal control and transactions, supervising the implementation by business units, holding training sessions, and reporting cases suspicious of money laundering.
(8) Finance Department: Monitors capital adequacy rates and liquidity risk, and analyzes the company’s asset/liability structure and other key financial ratios.
(9) Business units: Based on the company’s risk management policies and regulations sets risk management guidelines for various businesses, and produces a report on abnormal risk items for the Risk Control Office.
(10) Settlement & Clearing Department: Implementation of risk control and management for settlement, clearing, and short-sale business operations. Implementation of risk management and business department risk management for transactions.

3. Risk Evaluation Standards

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

Market Risk Evaluation
(1) We use RiskMetrics market risk management system to manage our company’s exposure to market risk. In addition to producing daily risk value tables, we perform simulation analysis and historical analysis to supplement missing risk values.
(2) We evaluate the completeness of the evaluation models on different business areas, and evaluate the assumptions, parameters, and data for various product models, and then test if the models for the various products are reasonable.
(3) We evaluate the effectiveness of risk control models, and regularly perform Back Testing to ensure the reasonableness of the models used.
Credit Risk Evaluation
(1) Our company undergoes credit rating evaluations from Moody’s, Standard & Poor’s, Fitch, Taiwan Ratings Corp., and Taiwan Corporate Credit Risk Index, TCRI)
(2) 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.
(3) Issuer’s Credit Risk: We use KMV models to perform an internal evaluation, and combine that with financial data and stock price data, to calculate a probability of default. Based on these measurements, we

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then develop an internal evaluation, Z-Score model, to control the external credit risk gaps from issuers and augment.

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Operational Risk Evaluation
(1) Operational risks refer to risks of damage caused by internal operations, inappropriate actions or errors of personnel or systems, or external incidents. The definition includes legal risks but does not include risks in strategies and reputation.
(2) We create operations risk policies handbooks that encompass each level of operations.
(3) Ensure the appropriate measurement, disclosure, and control of the operating quality based on risk assessment reports and auditing reports.

4. Risk Factors and Corresponding Responses

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

B. An Evaluation of Key Risks

1. Effects of recent interest rates, foreign exchange rate fluctuations, and inflation concerns on our company and our strategies for dealing with these concerns.

(1) Interest rate: Changes in interest rates have a direct impact on the income we derive from our fixed income-related businesses. In addition to conducting our own thorough research on domestic and foreign interest rate trends, we utilize various interest rate derivative tools as well a risk control system that manages our interest rate-related risks, that creates an effective interest rate hedging system for our fixed income-related businesses. Changes in interest rates also affect our company’s financing costs. Going forward, we intend to utilize interest rate hedging and other capital raising avenues as ways to control our company’s financing costs.
i. Bond and Interest Derivative Product Business: The amount of our company’s major interest products At March 31, 2019, and the likely loss of NT$595,956 thousand due to the 1% interest rate change (as show in the following table).

Unit: NT$ thousands

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Item Amount Profit/loss based on 1%
Interest rate change
----- End of picture text -----

Government bond	5,832,729	-11,363
Corporate bond	806,268	-759
International bond	1,211,521	-228
Foreign bond	16,776,834	-583,606
Sum	24,627,352	-595,956

Countermeasures: Our Company has risk management rules and operational procedures on government bond, corporate bond, foreign/international bond. Our company has put the interest risk under good control by pre-purchase assessment and risk control afterward.

ii. Borrowing: The main risk of borrowing is the fluctuation of interest rate. Our company can adjust methods, conditions and terms of borrowing according to the likely interest changing trend. We can also avert risks through the product of interest exchange etc. Our total debt amount of short-term borrowing and payable short-term bill totals NT$6.21 billion on the end of 2019 Q1. They are both borrowing with interest rate risks. With every 1bp change in market interest rate, our company has to

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pay NT$0.621 million more interest every year.

Countermeasures: Looking at a potential rise in interest rates, we will keep a close watch on the markets and on business demands and will make adjustments to our positions accordingly. In a resolution adopted by the Taiwan Central Bank in March of 2019, Considering the economic and financial situations at home and abroad, the downward revision of the global economic and trade growth forecast this year, and the uncertain international economic, trade, and financial prospects, the domestic economic growth is slightly slow, and the actual output is still lower than the potential output; the inflation pressure is expected to be moderate. The current interest rate (annualized rediscount rate, secured financing interest rate, and short-term financing interest rate are 1.375%, 1.75%, and 3.625% respectively) and the target area of the M2 currency growth (2.5%~6.5%) remain unchanged.

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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.

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

At March 31, 2019, the company’s main exchange rate product positions, and 1% exchange rates fluctuation may result in a loss of NT$279,727 thousand (as show in the following table).

Unit: NT$ thousands

Item Position Loss resulted by 1% exchange rates fuctuation	Item Position Loss resulted by 1% exchange rates fuctuation	Item Position Loss resulted by 1% exchange rates fuctuation
Foreign Stock	1,437,021	-51,638
International Bond	1,211,521	-8,074
Foreign Bond	16,776,834	-220,015
Total	19,425,376	-279,727

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

(3) Inflation: The CPI growth rate in 2019 Q1 was 0.33%, which had no meaningful effect on operations or on profits.

2. Recent High-Risk or High-Leverage Investments, Loans to Third Parties, Pledges Given for Third Parties, Derivative Products Trading Policy and Profitability and Losses, Reasons for Losses and Strategies for Correcting Such Losses Going Forward.

(1) In 2019 Q1, we did not engage in any high-risk or highly-leveraged investments, did not provide any loans to third parties, and did not provide any pledge for any third parties.
(2) We only trade those derivative products which have been approved by the relevant authorities and which are permitted by our company’s Articles of Incorporation. We have also created and followed a “Derivatives Trading Procedures” in an effort to further reduce our exposure to related risk.

3. Future Development Plans and Expected R&D Investments.

To assist with our development of ever-better products and trading strategies, we have assembled a professional financial engineering team, which brings together experts from finance, statistics, mathematics, and information technology, to create trading and valuation software and hardware

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resources. Our annual spending on human resources and R&D in this area is in the millions of dollars every year. Please see Chapter 5 for more information on the status of our operations and on our R&D efforts.

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

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

The “Company Act” was amended in accordance with the Hua-Zong-1-Jing No.10700083291 Presidential Order on August 1, 2018, and announced on October 26, 2018 in accordance with the TaiJing No.1070037184 Order to take effect on November 1, 2018. The Company and its subsidiaries have gradually adjusted the relevant operations after considering the overall corporate strategy planning.
The Financial Supervisory Commission issued the Jin-Guan-Zheng-Quan No.1060046870 Order on January 11, 2018 to stipulate the simplified calculation and advanced calculation formulas for the equity capital adequacy ratio of securities dealers. The Company plans to respond in accordance with the regulation.
The Financial Supervisory Commission issued the Jin-Guan-Zheng-Quan No.1070302423 Order on February 9, 2018 to permit futures contracts that are not stock futures listed on Taiwan Futures Exchange to issue linked underlyings of call (put) warrants for issuers. The Company plans to respond in accordance with relevant regulations.
The Financial Supervisory Commission issued the Jin-Guan-Zheng-Quan No.10703209012 Order on June 1, 2018, permitting securities dealers to apply for a permit from the Commission to invest in venture capital, private equity funds, venture capital management consulting companies, and financial consulting companies in Mainland China; after approved by the Financial Supervisory Commission, a permit shall be applied for from the Investment Commission, Ministry of Economic Affairs. This measure is to relax investment in Mainland China for securities dealers who meet certain conditions. After considering the overall corporate strategic planning, the Company will apply for a permit when necessary.
The Financial Supervisory Commission issued the Jin-Guan-Zheng-Tou No.1070340254 Order on November 5, 2018, requiring securities dealers, futures commission merchants, futures trusts, managed futures enterprises, securities investment trust enterprises, securities investment consulting enterprises and securities finance enterprises allocate surplus or make up for losses in accordance with Paragraph 1 of Article 228-1 of the Company Act with the financial statements audited by the CPA. The Company plans to respond in accordance with the regulation.
The Financial Supervisory Commission issued the Jin-Guan-Zheng-Fa No.10703407285 Order to abolish the “Directions Governing the Internal Control System for Anti-Money Laundering and Countering Terrorism Financing of the Securities and Futures Sector” on November 9, 2018, and formulated the “Regulations Governing Internal Audit and Internal Control System of Anti-Money Laundering and Countering Terrorism Financing of Securities and Futures Business and Other Financial Institutions Designated by the Financial Supervisory Commission” in accordance with the Jin-GuanZheng-Fa No.1070340728 Order. The Company plans to amend the Company’s policies and practices on AML/CFT in accordance with relevant regulations.
According to the amendment to Article 2-2 of the Securities Transactions Tax Act promulgated by the President on April 27, 2018 (the Hua-Zong-1-Yi No.10700047611 Presidential Order) and came into effect on April 29, 2018, when the same securities dealer is entrusted to buy (in cash) or sell (with

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the equivalent of marketable securities) or buys (in cash) or sells (with the equivalent of marketable securities) the same type or same number of listed stocks or unlisted stocks with the same account on the same business day, the Securities Transactions Tax will be levied at a rate of 1.5‰ of the strike price per transaction. The reduction of the securities transaction tax for day trading by half is extended till December 31, 2021. In the principle of fair taxation, the tax reduction measure has also applied to securities dealers when trading in day trading, since April 28, 2018.

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In accordance with the Hua-Zong-1-Yi No.10700012031 Presidential Order issued on January 31, 2018, “Financial Technology Development and Innovative Experimentation Act” was formulated the “Financial Technology Development and Innovation Laboratory,” also known as “Regulatory Sandbox,” and the relevant sub-laws were published gradually. Financial innovation players involved in the experiment in the regulatory sandbox are exempt from the financial criminal liability temporarily and allowed to try new forms of financial business or fundraising activities that have not yet been approved to operate, thereby accelerating business innovation and expanding new business models. The above-mentioned provisions and its sub-laws can also adjust the approach of positive listings and getting approval in advance in traditional regulation, so as to develop standards in practical terms and facilitate the development of the inclusive financial business.
In accordance with the Jin-Guan-Zheng-Qi No.10703202423 Order issued on June 8, 2018 by the Financial Supervisory Commission, in order to place more emphasis on information security, securities dealers are required to set up a information security dedicated unit and supervisors, allocate appropriate human resources and equipment for the planning of the information security system, and monitor and implement information security management based on the scale for difference management.
The Financial Supervisory Commission issued the Jin-Guan-Zheng-Qi No.1060051123 Order on January 15, 2018, permitting introducing brokers to open trading accounts and process brokerage contracts and risk disclosure statement as well as conduct futures trading procedures electronically. This measure can increase introducing brokers’ flexibility of explaining risks of opening accounts and shorten the time required for traders to open accounts at business premises.
The Financial Supervisory Commission issued the Jin-Guan-Zheng-Quan No.1060046293 Order on January 8, 2018, relaxing the conditional transactions of foreign bonds to not be limited to professional investors, that is, permitting securities dealers and non-professional investors to conduct conditional transactions of foreign bonds and formulating the scope of the underlying, the method of interest calculation, and credit rating requirements. This regulation can strengthen the protection of nonprofessional investors and also increase the channels for investors’ foreign currency-based investment as well as increase the vibrancy of the book-entry securities market.
The Taiwan Stock Exchange Corporation (TWSE) issued the Tai-Zheng-Jiao No.1070003945 Order on March 7, 2018, permitting securities dealers to launch the marketable securities lending business, in which “collateral renewal” is allowed in accordance with the mutual agreement, as securities dealers may take the collateral that shall be returned within the due date to guarantee another loan transaction or to increase the collateral ratio of another securities loan, that is, securities dealers are permitted to return the collateral and the collateral that is used to guarantee another securities loan when a customer repays the securities loan. This regulation can simplify the Company’s operating procedures and reduce the cost of issuing securities loans to enhance the flexibility of the Company’s securities lending business, while satisfying customers’ the needs for investing in marketable securities.
The Financial Supervisory Commission issued the Jin-Guan-Zheng-Quan No.1060046807 Order on February 13, 2018, adding directions governing foreign marketable securities trading by securities dealers, permitting securities dealers to accept investors’ requests to purchase and sell foreign marketable securities with a fixed number of shares on a regular basis. This measure can strengthen the competitiveness of securities dealers’ financial services and satisfy investors’ needs.
The Financial Supervisory Commission issued the Jin-Guan-Zheng-Quan No.1070302617 Order on March 31, 2018, permitting the account opening and preparation work by securities dealers for foreign

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marketable securities trading on behalf of customers to be registered through securities dealers’ Head Office and branches and conducted by personnel at a branch in a different district. This regulation enables the Company to allocate manpower effectively and reduce operating costs and allows makes it easier for investors to select a branch of a securities dealer to open an account and trade, making the execution of the overall business more flexible.

The TWSE issued the Tai-Zheng-Fu No.1070008762 Order on May 16, 2018, announcing that professional institutional investors with the monthly turnover of more than NT$50 million are exempt from sampling and confirmation. This regulation can simplify securities dealers’ business operations and avoid causing customers trouble. The Company will conduct the case in according with the regulation.
The Taiwan Securities Association issued the Zhong-Zheng-Shang-Ye No.1070003687 Order on July 10, 2018, permitting the adjustment of the single-day trading amount online where those who opened accounts through the the 2nd and 3rd types of identity authentication without need of adjusting the single-day trading amount over the counter. This measure is conducive to the Company’s continuous promotion of online account opening and increasing the flexibility of investors’ transactions and meeting their real-time needs.
The TWSE and Taipei Exchange issued the Tai-Zheng-Fu No.10700158471 Order and the Zheng-GuiFu No.10700226552 Order on August 17, 2018 and on August 24, 2018, respectively, relaxing the restrictions governing the places of business for storage of brokerage contracts by securities dealers where securities dealers, under the precondition of establishing supporting measures, such as data protection and internal control, the brokerage contracts signed by clients, which was not allowed to be placed in the places of business, may be stored electronically. This regulation enables the Company to utilize the space of the places of business effectively and consider the possibility of subleases in the future.
The Financial Supervisory Commission issued the Jin-Guan-Zheng-Quan No.1070320986 Order on June 28, 2018, formulating “Regulations Governing the Issuance of Exchange Traded Notes by Securities Firms” to permit integrated securities dealers that meet certain conditions to raise funds and issue ETNs. This measure not only expands the scope of securities dealers’ business but also satisfies investors’ needs for diversified commodities and makes Taiwan’s securities market more active.
The Financial Supervisory Commission issued the Jin-Guan-Zheng-Tou No.1070340802 Order on December 21, 2018, permitting the securities investment consulting business to provide financial technology consulting services related to automated investment consulting services, that is allowing the securities investment consulting business to provide financial technology consulting services related to automated investment consulting services in terms of establishment and importing of automated investment consulting systems and relevant integration work. The Company will consider the overall strategic planning and conduct the business when necessary.

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

In response to the changing financial and technological environment, the Company shall create a diversified, fast, stable, and secure electronic ordering platform as a top development priority. In the pursuit of this goal, the Company shall continue to promote system upgrades and development to steadily increase the ratio of the Company’s electronic orders in the coming years.

In view of the phenomenal growth in the use of mobile devices in the Internet generation, the role of securities dealers is bound to be transformed from a purely “broker and platform” to a “digital business” supported by FinTech and AI. Therefore, the Company has set up the “Digital Financial Division” and transformed the physical branches on a trial basis to integrate the virtual and physical channels, so as to promote the digitalization and paperless operations of business procedures. It is planned to gradually complete the online digital services starting from electronic trading in the directions of diverting customer flows, differentiation, and customized services. In addition, the internal operations will be improved to expand the introduction of electronic procedures to enhance efficiency and provide

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customers with safe and efficient trading platforms.

In response to the increasing trend of placing orders via mobile devices and customized trading in the overall market, customers are provided with the all-round app of the digital integrated financial investment service platform with the app interface adjusted according to customer feedback. In addition, in response to the FSC’s requirements for strengthening information security in the financial market, the Company will continue to use existing information security management regulations (ISO-27001), internal auditing and periodic reviews by third-party certification institutions to enhance the management system. The Company shall also invest specific amounts in the annual budget on the enhancement of the protection of the information security framework.

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In 2019, the Company has arranged third parties to conduct tests on the information security operations center (SOC), dual ISP backup architecture, and periodic joint prevention tests. The Company also seeks to enhance the stability of the operations and maintenance of the computer center, establish ISP information security defense mechanisms, and update information security equipment in accordance with annual project plans. The goal is to increase the stability of the information system and prevent risks in external information security attacks in order to achieve the goal of fair transactions with investors and create wealth with customers.

6. Significant Impairment of Corporate Image and 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”. the Company has been a long-standing supporter of important social charitable activities and devoted to fulfill corporate social responsibility. Since the date of the establishment, the Company has no negative corporate image issues to report.

7. Expected effect of acquisition and the possible risk: None.

8. Expected effect and possible risk of expanding business locations and the countermeasures: None.

9. Expected effect and possible risk of excessive concentration of purchasing sources and excessive customer concentration: Not Applicable.

10. Effects of, Risks Relating to and Response to Large Share Transfers or Changes in Shareholdings by Directors, Supervisors, or Shareholders with Shareholdings of over 10%: None.

11. Effects of, Risks Relating to and Response to the Changes in Management Rights: None.

12. Litigation or Non-litigation Matters

(1) Major lawsuits, non-contentious matters or administrative procedures with a determined court ruling or that are still pending, that may significantly affect the shareholders’ equity or the stock price of the Company (over the previous two years and up to the time that this annual report was published):

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

Parties
Amount
The major claims involved in Date The current progress Remark
(Unit:NT$)
major lawsuits
At the Hsinchu Branch of the Company, Plaintiff: 2009.1.13 The trial of 2nd Customer Lei: The loss had
customer Lei, ○-Yun claimed that the Lei, ○-Yun, instance of this NT$11,994,630 already been
former business clerk Lu, ○-Chen has Hu, ○-Nan case ruled that the designated
Customer Hu:
committed payment frauds through Company shall, in for
Defendant: NT$1,306,600
handling domestic and overseas fund conjunction with Lu, litigation.
subscription and paying back stock Lu, ○-Chen, ○-Chen, pay Lei, Total: The
PSC
loans in the account on behalf of the ○-Yun NT$9,263,570 NT$13,301,230 conclusion
customer since 2006. in compensation of
and Hu, ○-Nan judgement
In addition, customer Hu, ○-Nan NT$1,306,600 will not
also claimed that that Lu, ○-Chen in compensation, cause
has swindled fund subscription fees
totaling significant
through handling fund subscription on NT$10,570,170, effect on
behalf of the customer since 2005. The
with the annual shareholder
Company shall be jointly liable for the interest rate of 5% rights
indemnities from the aforementioned
starting from January and the
appeals and claims made by the
13, 2009. After the company’s
customers.
Company filed an share price.
appeal, the Supreme
Court abandoned the
judgment before it
was returned to the
Taiwan High Court
for re-trial.
The plaintiff Wang, ○-Cheng (did not Plaintiff: 2010.7.15 The court ruled in the NT$9,007,179 The loss had
open an account at a branch and traded Wang, trial of 2nd instance already been
stocks) claimed that he borrowed a ○-Cheng of the case that the designated
customer account from 2004 through Company was not for
Defendant:
2008 and entrusted business clerk Chu, liable for paying any litigation.
Chu,
○-Jung at the Tucheng Branch to buy compensation, and The
and sell stocks. However, Chu, ○-Jung ○-Jung, the plaintiff refused to conclusion
PSC
sold the stocks in the account secretly accept the ruling and of
and expropriated the proceeds from filed an appeal; the judgement
the stocks. In addition, due to Chu, case is currently being will not
○-Jung's fraud, Wang, ○-Cheng was tried by the Supreme cause
required to pay a guarantee deposit and Court. significant
suffered loss; thus, he claimed that the effect on
Company shall be jointly liable for the shareholder
indemnity and filed this lawsuit. rights
and the
company’s
share price.
----- End of picture text -----

(2) Any Company director, supervisor, manager, responsible person, or company shareholder holding more than 10% of the company’s shares that is involved in any judgments already handed down or any ongoing litigation, non-litigation, or administrative action over the previous two years up to the time that this annual report was published, the potential effects on shareholder rights and on the company’s share price, the key facts of the dispute, dollar values involved, the date that the litigation was initiated, the key parties involved, and the current status of said litigation(s): None.
(3) Any company director, supervisor, manager, responsible person, or company shareholder holding more than 10% of the company’s shares that has been found in violation of Article 157 of the Securities and Exchange Act over the previous two-year period and up to the time that this annual report was published, and the current status of any related action taken or being taken against that person: None.

13. Other Important Risks:

(1) In response to the Personal Information Protection Act, our company will continue to enforce the consciousness of the importance and the legal risk of personal information processing, money laundry preventing, and financial consumer protection.
(2) Impact of information system damage on the Company’s financial operations and response measures:

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VII. Financial Status, Operating Results and Risk Management

The increasingly frequent security attacks may cause disruption to business operations and in turn affect business revenue and damage the corporate image. President Securities Corp. has begun to import the Information Security Management System (ISMS) since 2013, and obtained ISO 27001 certification on August 23, 2013 and continued to maintain the validity of the certification. The information security governance has been gradually developed and implemented, with the strict requirements of various information security standards.

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In view of the increasing threat of cyberattacks recently, in order to ensure that computer systems have certain security protection capabilities, it is necessary to upgrade the protection capabilities in each aspect from computer facilities, servers and hosts, user equipment, the internet all the way to e-mail, so as to implement control measures in the technical and management aspects and improve and enhance the security protection capabilities of the internet and information systems. In addition to completing the revision and formulation of relevant information security management regulations, the security updates and version upgrades of relevant equipment will be completed gradually. Furthermore, external units are invited to conduct independent inspection, tests, and assessment to identify potential information security risks early.

This year, the information security response speed of relevant units was also strengthened through exercises. The information security response strengthening exercises are as follows:

Social Engineering Exercises for Prevention of Malicious Email
Application System Recovery Exercises
Distributed Denial-of-Service (DDoS) Attack and Defense Exercises
2018 Financial Supervisory Commission and Its Affiliated Institutions (Organizations) Annual Financial Security Notification Exercises
Information Security and Checkup Assessment
The ultimate goal of hierarchical security protection in the securities and futures industry is to strengthen information security awareness and arrange information security education and training, which includes:
Information Security Regulations and Compliance with Company Policies
Email Security and Social Engineering Prevention
Safe Use of Personal Computer and Understanding of Personal Computer Management Regulations.

It aims to improve the security, reliability, availability of information systems and reduce the risks that relevant information security incidents may pose to the Company’s finance.

VII. Other significant events: None.

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VIII. Other Disclosures

VIII. Other Disclosures

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

President
Securities
----- End of picture text -----

Professional Leadership & Kind Service

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VIII. Other Disclosures

I. Consolidated Business Report of Affiliated Companies, Consolidated Financial Statements of Affiliated Companies, and Reports of Affiliation

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A. Summary of Affiliated Companies

1. Affiliated Companies Chart

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

PRESIDENT SECURITIES CORPORATION
Shareholding Shareholding Shareholding Shareholding Shareholding
100% 100% 100% 100% 96.69%
President President
PSC Venture President
Insurance Capital President
Capital Investment Securities (BVI)
Agency Company Limited Limited Management Futures Co., Ltd
Co., Ltd. Corp.
Shareholding Shareholding Shareholding Shareholding
5.19% 94.81% 100% 100%
President
President Securities Wealth President Securities
(Hong Kong) Limited Management Nominee Limited
(Hong Kong) Limited
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2. Basic Information of Affiliates

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

As of April 30, 2019
Established Paid-in Capital
Company Address Currency Main Business
Date (in thousands)
President Futures B1.,No.8, Dongxing Rd., Taipei
1994.03.01 NTD 660,000 Futures and brokerage
Co., Ltd City
President Capital 3F.,No.8, Dongxing Rd., Taipei Securities investment
1997.04.15 NTD 174,000
Management Corp. City and consulting
Securities proprietary,
President Securities Unit 2603-6,26/F., Infinitus Plaza
brokerage,
(Hong Kong) 1994.07.26 ,199 Des Voeux Road, Central , HKD 192,600
underwriting ,and
Limited Hong Kong
consulting
President Securities Unit 2603-6,26/F., Infinitus Plaza Securities investment
1998.02.26 ,199 Des Voeux Road, Central , USD 67,746
(BVI) Limited and holding company
Hong Kong
President Securities Unit 2603-6,26/F., Infinitus Plaza
1999.08.06 ,199 Des Voeux Road, Central , HKD 1,000 Nominee service
Nominee Limited
Hong Kong
President Wealth Unit 2603-6,26/F., Infinitus Plaza
Management (Hong 2002.03.31 ,199 Des Voeux Road, Central , HKD 23,400 Wealth management
Kong) Limited Hong Kong
President Insurance 13F.,No.8, Dongxing Rd., Taipei
2008.04.29 NTD 10,000 Insurance agent (Note)
Agency Co., Ltd. City
----- End of picture text -----

182

VIII. Other Disclosures

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

Established Paid-in Capital
Company Address Currency Main Business
Date (in thousands)
----- End of picture text -----

Company	Established Date	Address	Currency	Paid-in Capital (in thousands)	Main Business

PSC Venture Capital Investment Company Limited 2013.10.29 2F.,No.8, Dongxing Rd., Taipei City NTD 300,000 Consultation of investment management and venture capital; other unprohibited or unrestricted businesses beyond the permit

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

3. Rosters of Directors, Supervisors, and Presidents of PSC’s Subsidiaries

As of April 30, 2019

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

Holding Shares
Company Title Representative
Shares Shareholding Ratio
Chairman Han, Li-Chun
Director & President Huang, Yi-Ming
PSC holds
Director Lin, Kuan-Chen 96.69%
63,817,303 shares
Director Lee, Wen-Sheng
President Futures Co., Ltd
Director Tsai, Sen-Bu
Supervisor Yang, Ya-Ting 0 0
PIDC holds
Supervisor Lin, Chiun-Ya 1.00%
660,000 shares
Chairman & President Li, Fang-Kuo
President Capital Management Director Huang, Tseng-Hui PSC holds
100%
Corp. Director Wu, Fang-Ling 17,400,000 shares
Supervisor Pan, Lung-Ching
Director Lin, Kuan-Chen
PSBVI holds
Director & President Ma, Chun-Wah
182,600,000
President Securities (Hong Director An, Chi-Li shares; 100%
Kong) Limited
PSC holds
Director Tsai, Sen-Bu
10,000,000 shares
Director Lu, Fang-Jun
Director Lin, Kuan-Chen
President Securities (BVI) Director & President Ma, Chun-Wah PSC holds
100%
Limited Director An, Chi-Li 67,746,000 shares
Director Tsai, Sen-Bu
Director Lin, Kuan-Chen
President Securities Nominee Director & President Ma, Chun-Wah PSBVI holds
100%
Limited Director An, Chi-Li 1,000,000 shares
Director Tsai, Sen-Bu
Director Lin, Kuan-Chen
President Wealth Management Director & President Ma, Chun-Wah PSBVI holds
100%
(Hong Kong) Limited Director An, Chi-Li 23,400,000 shares
Director Tsai, Sen-Bu
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President Securities Corp. 2018 Annual Report

VIII. Other Disclosures

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

Holding Shares
Company Title Representative
Shares Shareholding Ratio
Chairman & President Lu, Hsiang-Chung
President Insurance Agency Co., Director Yu, Hung-Chieh PSC holds
100%
Ltd. Director Lee, Wen-Sheng 1,000,000 shares
Supervisor An, Chi-Li
Chairman Tsai, Sen-Bu
PSC Venture Capital Investment Director & President Lu, Mu-Sheng PSC holds
100%
Company Limited Director Kuo, Li-Yun 30,000,000 shares
Supervisor Huang, Ya-Ping
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4. Operational Highlights of Affiliated Companies

As of December 31, 2018 Unit: thousands

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

Net
Total Total Total Operating Operating EPS
Company Currency Capital Income
Assets Liabilities Equity Revenue Income ($)
(Loss)
President
Futures Co., NTD 660,000 15,452,352 13,450,957 2,001,395 921,841 124,716 221,008 3.35
Ltd
President
Capital
NTD 174,000 203,859 9,028 194,831 43,034 (3,493) (2,167) (0.12)
Management
Corp.
President
Insurance
NTD 10,000 43,057 11,146 31,911 54,159 14,569 14,048 14.05
Agency Co.,
Ltd.
PSC Venture
Capital
Investment NTD 300,000 246,392 1,320 245,072 (3,760) (7,033) (2,704) (0.09)
Company
Limited
President
Securities
(Hong HKD 192,600 607,093 249,396 357,697 48,155 2,145 9,582 0.05
Kong)
Limited
President
Securities
HKD 1,000 511 17 494 0 (25) (19) (0.02)
Nominee
Limited
President
Wealth
Management
HKD 23,400 14,994 21 14,973 0 (42) 138 0.006
(Hong
Kong)
Limited
President
Securities
USD 67,746 74,829 3 74,826 0 (68) 1,756 0.026
(BVI)
Limited
----- End of picture text -----

Note: Foreign exchange rates:

USD/NTD (end of 2018) =30.7150 USD/NTD (2018 average) =30.1751 HKD/NTD (end of 2018) =3.9210 HKD/NTD (2018 average) =3.8493

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VIII. Other Disclosures

B. Consolidated Financial Statements of Affiliated Companies

In 2018, in accordance with Article 33 of Regulations Governing the Preparation of Financial Reports by Securities Firms and Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises, the companies that shall be included in the preparation of the consolidated financial statements of affiliated companies were the same as the companies that shall be included in the consolidated financial statements of the parent company and subsidiaries in accordance with the International Financial Reporting Standards No. 10. Please refer to the Financial Statement of Chapter Six Financial Overview V. The Consolidated Financial Statements of the Parent Company and Subsidiaries Certified by the CPAs for the Year of 2018.

C. Reports of Affiliation

Since the Company is a controlling company, it does not need to prepare such reports.

II. In the most recent year up to the publication date of this annual report, as for the private placement of marketable securities, the quantity approved by the shareholders’ meeting or the Board of Directors and the approval date, the basis for price determination and the reasonableness, the specific person selection method, and necessary reasons for the private placement shall be disclosed: None.

III. Holding or disposal of the company’s shares by the subsidiaries in the most recent year up to the publication date of this annual report: None.

IV. Other Necessary Supplement

A. KPI Performance Indicator

1. Capital Adequacy Ratio

Within the securities industry, a company’s capital adequacy rate is viewed as a key performance indicator. Many BIS regulations require that a securities firm has a minimum capital adequacy rate of 200% in order to be permitted to operate in many key business areas. As such, this level can be seen as an important benchmark in evaluating a securities firm’s business performance and risk management measures. As of March 2019, our capital adequacy rate stood at 351%, well above this key 200% level.

2. Market Share Rate

Market share of various business could be used for performance indicators. It could represent company’s weighted market share and perceptive of future trend, which help to analyze management performance. Our company’s Brokerage market share was 3.24% in March 2019, ranked the 10th among top 10 competitors. Average single branch market share was 0.09%, ranked the 3rd among top 10 competitors. Compared with other securities firms, our performance was more efficient and competitive. Currently our company continues to build comprehensive and personalized information platform to improve stability of electronic transactions and orders, train sales with multiple financial ability, hoping to explore international market, create more profit for customers and company.

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President Securities Corp. 2018 Annual Report

IX. Occurrences of items that may give rises to substantial impact on shareholders’ interests and/or stock price

IX. Occurrences of items that may give rises to substantial impact on shareholders’ interests and/or stock price as defined in NO.3-2 Article 36 of Securities and Exchange Law in the latest fiscal year including the days counting to the publication of the annual reports: None.

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Financial Statements

President Securities

Professional Leadership & Kind Service

PRESIDENT SECURITIES CORPORATION

PARENT COMPANY ONLY FINANCIAL

STATEMENTS AND REPORT OF INDEPENDENT

ACCOUNTANTS DECEMBER 31, 2018 AND 2017

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.

188

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR18002374

To the Board of Directors and Shareholders of President Securities Corporation

Opinion

We have audited the accompanying parent company only balance sheets of President Securities Corporation (the “Company) as at December 31, 2018 and 2017, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of President Securities Corporation as at December 31, 2018 and 2017, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Firms”, and “Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants”.

Basis for opinion

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

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the parent company only financial statements of the current period. These matters were addressed in the context of our audit of the parent company only financial statements as a whole and, in

189

forming our opinion thereon, we do not provide a separate opinion on these matters.

The key audit matters of the parent company only financial statements of the current period are as follows:

Fair value measurement of unlisted stocks without active market

Description

Please refer to Note 4(7) for the accounting policies on unlisted stocks without active market (shown as “financial assets at fair value through other comprehensive income”) and Note 5 for details of critical accounting judgements, estimates and assumption uncertainty. As at December 31, 2018, the unlisted stocks without active market held by the Company totalled $146,545 thousand and were shown as “financial assets at fair value through other comprehensive income” (Level 3 fair value).

Due to the lack of an active market, the fair value of the unlisted stocks held by the Company was determined using valuation method. Management measured its fair value by using comparable listed companies in the market approach. The main assumption of the market approach is calculation based on the latest published price-to-book ratio of comparable listed companies in similar industries, and considering discounts on market liquidity or risk particularity.

Above-mentioned estimation of fair value involves various assumptions and material unobservable inputs, which has high uncertainty and relies on the subjective judgement of management. Any changes in judgements and estimates may affect the ultimate result of accounting estimates and have an impact on the financial statements of the Company. Thus, we have included the fair value measurement of unlisted stocks without active market as a key audit matter in our audit.

How our audit addressed the matter

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

Obtained an understanding and assessed policy documents, internal control system, fair value measurement models and approval processes that are related to fair value measurement of unlisted stocks;
Ascertained whether the measurement methods used by the management is commonly used by the industry;
Assessed the reasonableness of parameter of similar companies used by management;
Examined inputs and calculation formulas used in valuation models and agreed such data to supporting documents.

190

Impairment assessment of investments accounted for under equity method

Description

Please refer to Note 4(13) 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(11) for details of investments accounted for under equity method.

The Company held 42.46% of equity of Uni-President Asset Management Corp. which was accounted for under equity method. As of December 31, 2018, the amount was $569,230 thousand. Impairment assessment is based on the expected future cash flow of the security brokerage segment, discounted at an appropriate discount rate, to measure the recoverable amount of the cash generating unit.

The recoverable amount of the security brokerage segment is based on its expected future cash flows which involve multiple estimates and assumptions on discount rate and financial forecast. These are subjective judgements, have a high degree of uncertainties, and are material to the recoverable amount. Thus, we consider the impairment assessment of goodwill as a key audit matter in 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 valuation expert who was commissioned by the management;
2.Assessed the reasonableness of expected future cash flows, 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.

191

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

Management is responsible for the preparation and fair presentation of the parent company only financial statements 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 for such internal control as management determines is necessary to enable the preparation of parent company only financial statement that are free from material misstatement, whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for assessing the Company’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 the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including audit committee, are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the parent company only financial statements

Our objectives are to obtain reasonable assurance about whether the parent company only 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, parent company onlyly or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these parent company only financial statements.

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

Identify and assess the risks of material misstatement of the parent company only financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one

192

resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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 the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
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 Company’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 parent company only 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 the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the 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.

193

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the parent company only 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.

Lin, Se-Kai

Independent Accountants

Hsiao, Chin-Mu

For and on behalf of PricewaterhouseCoopers, Taiwan March 22, 2019

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

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

194

PRESIDENT SECURITIES CORPORATION

PARENT COMPANY ONLY BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Assets	December31,2018 AMOUNT % `$` `3,493,138` `6` `26,802,010` `47` `296,304` `1` `-` `-` `93,193` `-` `8,020,488` `14` `4,402` `-` `8,387` `-` `78,316` `-` `785,431` `1` `735` `-` `8,236,367` `14` `3,895` `-` `16,287` `-` `7,264` `-` `447,498` `1` `48,293,715` `84` `66,354` `-` `-` `-` `146,545` `-` `5,347,315` `9` `2,269,210` `4` `274,703` `1` `67,004` `-` `120,661` `-` `1,009,981` `2` `9,301,773` `16` `$` `57,595,488` `100`	December31,2017	December31,2017
	AMOUNT `$` `3,493,138` `26,802,010` `296,304` `-` `93,193` `8,020,488` `4,402` `8,387` `78,316` `785,431` `735` `8,236,367` `3,895` `16,287` `7,264` `447,498` `48,293,715` `66,354` `-` `146,545` `5,347,315` `2,269,210` `274,703` `67,004` `120,661` `1,009,981` `9,301,773` `$` `57,595,488`	AMOUNT `$` `4,036,336` `37,805,199` `-` `1,044,031` `-` `11,415,870` `79,350` `67,160` `88,318` `745,882` `1,365` `10,748,383` `5,546` `25,114` `8,005` `783,916` `66,854,475` `50,342` `9,058` `-` `4,652,492` `2,260,981` `276,803` `62,317` `136,166` `957,894` `8,406,053` `$` `75,260,528`	%
110000 Current assets 111100 Cash and cash equivalents 112000 Financial assets at fair value through profit or loss - current 113200 Financial assets at fair value through other comprehensive income - 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 114090 Receivables from security lending 114100 Security lending deposits 114110 Notes receivable 114130 Accounts receivable 114140 Accounts receivable - related parties 114150 Prepayments 114170 Other receivables 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 123200 Financial assets at fair value through other comprehensive income - noncurrent 124100 Investments in associates 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			`6` `50` `-` `2` `-` `15` `-` `-` `-` `1` `-` `14` `-` `-` `-` `1`
			`89`
			`-` `-` `-` `6` `3` `1` `-` `-` `1`
			`11`
			`100`

(Continued)

195

PRESIDENT SECURITIES CORPORATION

PARENT COMPANY ONLY BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	December31,2018 December31,2017 AMOUNT % AMOUNT % `$` `939,879` `2 $` `6,281,968` `8` `-` `-` `3,649,631` `5` `865,530` `1` `1,205,864` `2` `15,066,599` `26` `20,911,658` `28` `1,767,269` `3` `1,861,947` `3` `2,007,202` `3` `2,197,656` `3` `621` `-` `225,395` `-` `7,292,947` `13` `8,459,592` `11` `55` `-` `117` `-` `361,033` `1` `436,180` `1` `790,369` `1` `1,075,914` `1` `2,687,009` `5` `3,199,298` `4` `126,192` `-` `279,092` `-` `8,596` `-` `4,260` `-` `31,913,301` `55` `49,788,572` `66` `14,274` `-` `15,173` `-` `21,928` `-` `71,129` `-` `36,202` `-` `86,302` `-` `31,949,503` `55` `49,874,874` `66` `13,904,281` `24` `13,904,281` `19` `142,702` `1` `142,702` `-` `2,755,737` `5` `2,503,765` `3` `6,945,453` `12` `6,373,559` `9` `1,278,472` `2` `2,519,721` `3` `619,340` `1 (` `58,374)` `-` `25,645,985` `45` `25,385,654` `34` `$` `57,595,488` `100 $` `75,260,528` `100`	December31,2017
	AMOUNT `$` `939,879` `-` `865,530` `15,066,599` `1,767,269` `2,007,202` `621` `7,292,947` `55` `361,033` `790,369` `2,687,009` `126,192` `8,596` `31,913,301` `14,274` `21,928` `36,202` `31,949,503` `13,904,281` `142,702` `2,755,737` `6,945,453` `1,278,472` `619,340` `25,645,985` `$` `57,595,488`	%
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 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 301000 Capital 301010 Common stock 302000 Capital reserve 304000 Retained earnings 304010 Legal reserve 304020 Special reserve 304040 Unappropriated earnings 305000 Other equity interest 906004 Total equity 906002 Total liabilities and equity		`8` `5` `2` `28` `3` `3` `-` `11` `-` `1` `1` `4` `-` `-`
		`66`
		`-` `-`
		`-`
		`66`
		`19` `-` `3` `9` `3` `-`
		`34`
		`100`

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

196

PRESIDENT SECURITIES CORPORATION

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

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

Items Years ended December 31
2018
2017
Notes
AMOUNT
%
AMOUNT
%
6(27)
$
1,709,656
36
$
1,566,042
24
6(28)
53,228
1
56,114
1
18,665
-
16,233
-
6(29)
277,015
6
2,911,156
46
74,882
2
77,346
1
6(30)
1,256,294
27
1,416,803
22
207,302
4
231,203
4
6(31)
(
366,829 ) (
8)
372,744
6
6(32)
27,788
1 (
102,116) (
2)
6(33)
22,067
-
2,975
-
6(34)
(
24,289 )
-
-
-
6(35)
1,060,385
23
305,912
5
59,189
1
51,466
1
6(36)
200,152
4 (
205,752) (
3)
6(37)
(
52,082 ) (
1)
-
-
6(38)
164,467
4 (
340,141) (
5)
4,687,890
100
6,359,985
100
6(39)
(
344,064 ) (
7) (
246,831) (
4)
6(40)
(
397,110 ) (
9) (
380,537) (
6)
(
148 )
- (
277)
-
(
14,806 )
- (
16,342)
-
(
46 )
- (
35)
-
6(41)
(
1,787,401 ) (
38) (
1,989,321) (
31)
6(42)
(
75,875 ) (
2) (
93,012) (
2)
6(43)
(
1,188,099 ) (
25) (
1,299,732) (
20)
(
3,807,549 ) (
81) (
4,026,087) (
63)
880,341
19
2,333,898
37
6(11)
379,275
8
324,762
5
6(44)
126,030
3
149,541
2
1,385,646
30
2,808,201
44
6(45)
(
175,323 ) (
4) (
189,432) (
3)
$
1,210,323
26
$
2,618,769
41

400000Revenues
401000
Brokerage handling fee revenue
404000
Revenues from underwriting
business
406000
Gain on wealth management
410000
Gain on sale of trading securities
421100
Revenue from providing agency
service for stock affairs
421200
Interest revenue
421300
Dividend revenue
421500
Valuation (loss) gain on
operating securities at fair value
through profit or loss
421600
Gain (loss) on covering of
borrowed securities and bonds
with resale agreements-short
sales
421610
Valuation gain on borrowed
securities and bonds with resale
agreements-short sales at fair
value through profit or loss
421750
Realised loss on financial assets
measured at fair value through
other comprehensive income-
bonds
422200
Gain from issuance of call (put)
warrants
424100
Future commission revenue
424400
Gain (loss) from derivatives
425300
Impairment loss
428000
Other operating income (loss)
Total revenue
500000Total expenditure and expense
501000/
502000/
503000
Handling charges
521200
Finance costs
524200
Securities commission expense
524300
Expense of clearing and
settlement
528000
Other operating expenditure
531000
Employee benefits expense
532000
Depreciation and amortization
533000
Other operating expense
Total expenditure and
expense
Net operating income
601100
Share of profit of subsidiaries,
associates and joint ventures
accounted for under the using
equity method
602000
Other gains and losses
902001Profit before tax
701000
Income tax expense
902005Net income

(Continued)

197

PRESIDENT SECURITIES CORPORATION

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

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

Items Years ended December 31
2018
2017
Notes
AMOUNT
%
AMOUNT
%
$
14,773
- ($
129,591) (
2)
12,307
-
-
-
26,141
1
1,173
-
8,931
-
22,031
-
85,342
2 (
213,712) (
3)
(
2,223 )
-
-
-
-
-
34,080
-
-
- (
28,026)
-
$
145,271
3 ($
314,045) (
5)
$
1,355,594
29
$
2,304,724
36
6(46)
$
0.87
$
1.88
$
0.87
$
1.88

Other comprehensive income
Components of other
comprehensive income that will
not be reclassified to profit or
loss
805510
Remeasurements of defined
benefit plan
805540
Unrealised gain from
investments in equity
instruments at fair value through
other comprehensive income
805560
Other comprehensive gain of
subsidiaries, 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 gain (loss) on the
financial statements of foreign
operating entities
805615
Unrealised loss from
investments in debt instruments
at fair value through other
comprehensive income
805620
Unrealised gain on available-for-
sale financial assets
805660
Share of other comprehensive
income of subsidiaries,
associates and joint ventures
accounted for using equity
method, components of other
comprehensive income that will
be reclassified to profit or loss
805000
Current other
comprehensive income(post-
tax)
902006Total current comprehensive
income
Earnings per share
975000
Basic earnings per share
985000
Diluted earnings per share

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

198

PRESIDENT SECURITIES CORPORATION PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

For the year ended December 31,2017 Balance at January 1, 2017 Appropriations of 2016 earnings Legal reserve appropriated Special reserve appropriated Stock dividends of ordinary shares Net income for the year ended December 31, 2017 Other comprehensive income (loss) for the year ended December 31, 2017 Total comprehensive income Balance at December 31, 2017 For the year ended December 31, 2018 Balance at January 1, 2018 Effects of retrospective application and retrospective restatement Balance at January 1, 2018 after adjustments Appropriations of 2017 earnings Legal reserve appropriated Special reserve appropriated Cash dividends of ordinary shares Net income for the year ended December 31, 2018 Other comprehensive income for the year ended December 31, 2018 Total comprehensive income Balance at December 31, 2018	Notes		Commonstock		Capital reserve				Retained earnings			O	therequityinterest			Totalequity
							Legal reserve		Special reserve	Unappropriated earnings	Translation gain and loss on the financial statements of foreign operating entities	a	Unrealised gain or loss on financial ssets measured at fair value through other comprehensive income		Unrealised gain or loss on available- for-sale financial assets
	6(25) 6(25) 6(26) 6(25) 6(25) 6(26)		`$ 13,356,658` `-` `-` `547,623` `-` `-` `-` `$ 13,904,281` `$ 13,904,281` `-` `13,904,281` `-` `-` `-` `-` `-` `-` `$ 13,904,281`		`$` `142,702` `-` `-` `-` `-` `-` `-` `$` `142,702` `$` `142,702` `-` `142,702` `-` `-` `-` `-` `-` `-` `$` `142,702`		`$ 2,423,914` `79,851` `-` `-` `-` `-` `-` `$ 2,503,765` `$ 2,503,765` `-` `2,503,765` `251,972` `-` `-` `-` `-` `-` `$ 2,755,737`		`$ 6,209,865` `-` `163,694` `-` `-` `-` `-` `$ 6,373,559` `$ 6,373,559` `-` `6,373,559` `-` `571,894` `-` `-` `-` `-` `$ 6,945,453`	`$` `798,507` `(` `79,851 )` `(` `163,694 )` `(` `547,623 )` `2,618,769` `(` `106,387 )` `2,512,382` `$ 2,519,721` `$ 2,519,721` `17,538` `2,537,259` `(` `251,972 )` `(` `571,894 )` `(` `1,668,514 )` `1,210,323` `23,270` `1,233,593` `$ 1,278,472`	`$` `147,621` `-` `-` `-` `-` `(` `213,712 )` `(` `213,712 )` `($` `66,091 )` `($` `66,091 )` `-` `(` `66,091 )` `-` `-` `-` `-` `85,342` `85,342` `$` `19,251`		`$` `-` `-` `-` `-` `-` `-` `-` `$` `-` `$` `-` `563,430` `563,430` `-` `-` `-` `-` `36,659` `36,659` `$` `600,089`	`$` `1,663` `-` `-` `-` `-` `6,054` `6,054` `$` `7,717` `$` `7,717` `(` `7,717 )` `-` `-` `-` `-` `-` `-` `-` `$` `-`		`$ 23,080,930` `-` `-` `-` `2,618,769` `(` `314,045 )` `2,304,724` `$ 25,385,654` `$ 25,385,654` `573,251` `25,958,905` `-` `-` `(` `1,668,514 )` `1,210,323` `145,271` `1,355,594` `$ 25,645,985`

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

199

PRESIDENT SECURITIES CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Income and expense having no effect on cash flows
Depreciation

Amortization

Write-off of bad debts classified as income

Provision for bad debts
Impairment gain and reversal of impairment loss

Valuation gains (loss) on operating securities at fair value
through profit or loss

Valuation gain (loss) on borrowed securities and bonds with
resale agreements-short sales at fair value through profit or
loss

Interest costs
Interest income (include financial income)

Dividend income
Share of profit of subsidiaries, associates and joint ventures
accounted for under the equity method

Loss on disposal of property and equipment

Loss on disposal of investments(financial assets measured at
cost)
Loss (gain) on valuation of non-operating financial
instrument

Changes in operating assets and liabilities
Changes in operating assets
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive
income - current
Available-for-sale financial assets - current
Bonds purchased under resale agreements
Margin loans receivable
Refinancing security deposits
Receivables from refinance guaranty
Receivables from security lending
Security lending deposits
Notes receivable
Accounts receivable
Accounts receivable - related parties
Prepayments
Other receivables
Other current assets
Changes in operating liabilities
Financial liabilities at fair value through profit or loss -
current
Bonds sold under repurchase agreements
Deposits on short sales
Short sale proceeds payable
Guarantee deposit received on borrowed securities
Accounts payable
Advance receipts
Collections on behalf of third parties
Other payables
Other financial liabilities - current
Other current liabilities Years ended December 31
Notes
2018
2017
$
1,385,646 $
2,808,201
6(42)
61,944
66,114
6(42)
13,931
26,898
6(15)
- (
6,068 )
-
63,471
6(37)
52,798
-
6(2)(31)
366,829 (
372,744 )
6(33)
(
22,067 ) (
2,975 )
397,110
380,537
6(30)(44)
(
1,274,766 ) (
1,426,810 )
(
214,549 ) (
239,054 )
6(11)
(
379,275 ) (
324,762 )
6(12)
11
658
-
280
6(44)
4,013 (
332 )
10,624,601
2,895,268
741,883
-
-
322,825
(
93,193 )
2,093,498
3,417,807 (
2,781,548 )
74,948 (
60,656 )
58,773 (
33,779 )
10,002
69,457
(
39,549 ) (
484,746 )
630 (
433 )
2,404,487 (
5,352,489 )
1,651 (
753 )
8,827
14,910
1,239 (
1,484 )
336,418
261,319
(
318,267 ) (
1,210,185 )
(
5,845,059 ) (
2,173,604 )
(
94,678 )
575,358
(
190,454 )
680,861
(
224,774 )
166,199
(
1,167,642 )
3,000,203
(
62 ) (
267 )
(
75,147 )
24,365
(
285,908 )
436,677
(
512,289 )
1,807,001
4,336
1,308

(Continued)

200

PRESIDENT SECURITIES CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

Cash inflow generated from operations
Dividends received
Interest received
Income tax paid
Net cash flows from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of financial assets at cost
Acquisition of property and equipment

Acquisition of intangible assets

Acquisition of investments accounted for under equity method
Increase in other non-current liabilities
Increase in prepayment for equipment
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in short-term loans
Decrease in commercial papers payable
Decrease in other non-current liabilities
Interest paid
Payments of cash dividends

Net cash flows used in financing activities
Effect of exchange rate changes on cash and cash equivalents
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
2018
2017
$
9,230,205 $
1,222,719
423,184
485,188
1,322,076
1,466,416
(
304,686 ) (
50,728 )
10,670,779
3,123,595
-
1,128
6(12)
(
38,643 ) (
16,996 )
6(14)
(
10,187 ) (
2,128 )
- (
92,682 )
(
42,016 ) (
41,044 )
(
33,171 ) (
20,036 )
(
124,017 ) (
171,758 )
(
5,342,089 )
226,043
(
3,650,000 ) (
2,650,000 )
(
49,201 ) (
326 )
(
395,381 ) (
372,528 )
6(26)
(
1,668,514 )
-
(
11,105,185 ) (
2,796,811 )
15,225 (
21,198 )
(
543,198 )
133,828
4,036,336
3,902,508
$
3,493,138 $
4,036,336

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

201

PRESIDENT SECURITIES CORPORATION

NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(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, 2018, the Company had 36 operating branches (including the Head Office), and established Offshore Securities Unit in July 2014.
2) The Company is 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 Company were both 1,483, as of December 31, 2018 and 2017.
THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These parent company only financial statements were authorized for issuance by the Board of Directors on March 22, 2019.
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 2018 are as follows:

202

New Standards,Interpretations and Amendments

Effective Date by
International
Accounting Standards
Board

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

January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2018

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

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

203

credit allowance).

(c) The amended general hedge accounting requirements align hedge accounting more closely with an entity’s risk management strategy. Risk components of non-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.
(d) The Company has elected not to restate prior period financial statements using the modified retrospective approach under IFRS 9. For details of the significant effect as at January 1, 2018, please refer to Note 12(8).
2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Company

New standards, interpretations and amendments endorsed by FSC effective from 2019 are as follows:

New Standards,Interpretations and Amendments Amendments to IFRS 9, ‘Prepayment features with negative compensation’ IFRS 16, ‘Leases’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	Effective Date by International Accounting Standards Board
	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

Except for the following, the above standards and interpretations have no significant impact

to the Company’s financial condition and financial performance based on the Company’s assessment.

IFRS 16, ‘Leases’

IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise 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.

The Company expects to recognise the lease contract of lessees in line with IFRS 16. However, the Company does not intend to restate the financial statements of prior period (collectively referred herein as the “ modified retrospective approach ” ), and the effects

204

will be adjusted on January 1, 2019. The Company will increase right-of-use asset by $203,511 and lease liability by $200,880, and decrease prepayments by $2,631 and this has no effect on retained earnings.

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 effective are as follows:

IFRSs endorsed by the FSC effective are as follows:
	Effective Date by
	International Accounting
New Standards,Interpretations and Amendments	Standards Board
Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative- Definition of Material’	January 1, 2020
Amendments to IFRS 3, ‘Definition of a business’	January 1, 2020
Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’	To be determined by International Accounting Standards Board
IFRS 17, ‘Insurance contracts’	January 1, 2021
The above standards and interpretations have no significant impact to the Company’s
financial condition and financial performance based on the Company’s assessment.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies are described below:

1) Compliance statement

The financial statements of the Company have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Firms” and “Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants”.

2) Basis of preparation

A. Except for the following items, these 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) Financial assets at fair value through other comprehensive income/Available-forsale 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.
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

205

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

C. In adopting IFRS 9 effective January 1, 2018, the Company has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was recognised as retained earnings or other equity as of January 1, 2018 and the financial statements for the year ended December 31, 2017 and 2016 were not restated. The financial statements for the year ended December 31, 2017 and 2016 were prepared in compliance with International Accounting Standard 39 (‘IAS 39’) and related financial reporting interpretations. Please refer to Note 12(8) for details of significant accounting policies.

3) 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 realised, or are intended to be sold or consumed within the normal operating cycle;
- (B) Assets held mainly for trading purposes;
- (C) Assets that are expected to be realised 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.
4) Translation of foreign currency transactions
A. Foreign currency translation and presentation
- Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (the “functional currency”). Functional currency and bookkeeping currency of the Company is New Taiwan Dollars.

206

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 company entities, associates and joint arrangements that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

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

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

  - (C) All resulting exchange differences are recognised in other comprehensive income.

5) Cash and cash equivalents
A. In the 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.

6) Financial assets and financial liabilities at fair value through profit or loss

Effective 2018

A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income.
B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting.

207

C. At initial recognition, the Company measures the financial assets at fair value and recognises the transaction costs in profit or loss. The Company subsequently measures the financial assets at fair value, and recognises the gain or loss in profit or loss.
D. The Company recognises the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.
7) Financial assets at fair value through other comprehensive income Effective 2018
A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Company has made an irrevocable election at initial recognition to recognise changes in fair value in other comprehensive income and debt instruments which meet all of the following criteria:
- (a)The objective of the Company’s business model is achieved both by collecting contractual cash flows and selling financial assets; and
- (b)The assets’ contractual cash flows represent solely payments of principal and interest.
B. On a regular way purchase or sale basis, available-for-sale financial assets are recognized and derecognized using trade date accounting.
C. At initial recognition, the Company measures the financial assets at fair value plus transaction costs. The Company subsequently measures the financial assets at fair value:
- (a)The changes in fair value of equity investments that were recognised in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognised as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.
- (b)Except for the recognition of impairment loss, interest income and gain or loss on foreign exchange which are recognised in profit or loss, the changes in fair value of debt instruments are taken through other comprehensive income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss.
8) Notes and accounts receivable, other receivables and margin loans receivable
A. Accounts and notes receivable and margin loans receivables entitle the Company a legal right to receive consideration in exchange for transferred goods or rendered services.
B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

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9) 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.

10) Impairment of financial assets

Effective 2018

For debt instruments measured at fair value through other comprehensive income, at each reporting date, the Company recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Company recognises the impairment provision for lifetime ECLs.

11) Derecognition of financial instruments
A. Derecognition of financial assets

The Company 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 Company 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 Company 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.

12) 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 realise the asset and settle the liability simultaneously.

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13) Investments accounted for under the equity method/Subsidiaries and associates

A. Subsidiaries are all entities (including structured entities) controlled by the Company. The Company controls an entity when the Company 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. Investments in subsidiaries are accounted for using the equity method and are initially recognised at cost.
B. Unrealised gains on transactions between the Company and its subsidiaries are eliminated to the extent of the Company’s interest in the subsidiaries. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company.
C. The Company’s share of its subsidiaries’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Company’s share of losses in a subsidiary equals or exceeds its interest in the subsidiary, including any other unsecured receivables, the Company does not recognise further losses.
D. Associates are all entities over which the Company 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.
E. The Company’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 Company’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Company does not recognise further losses, unless it has incurred statutory/constructive obligations or made payments on behalf of the associate.
F. 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 Company’s ownership percentage of the associate, the Company recognizes its share of change in equity of the associate in ‘capital surplus’ in proportion to its ownership.
G. Unrealised gains on transactions between the Company and its associates are eliminated to the extent of the Company’s interest in the associates. Unrealised 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 Company.
H. According to "Regulations Governing the Preparation of Financial Reports by

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Securities Firms", the profit or loss for the period and other comprehensive income presented in parent company only financial reports shall be the same as the allocations of profit or loss for the period and of other comprehensive income attributable to owners of the parent presented in the financial reports prepared on a consolidated basis, and the owners' equity presented in the parent company only financial reports shall be the same as the equity attributable to owners of the parent presented in the financial reports prepared on a consolidated basis.

I. When there are objective evidences of impairment at balance sheet date, the Company 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 Company’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.

14) 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 Company 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.
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:

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

15) Investment property

A. Investment property of the Company 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 Company for self-use purpose and the remaining are used to generate rental income or capital appreciation. If the property held by the Company can be sold individually, then the accounting treatment should be made respectively. If each part of the property cannot be sold individually and the selfuse 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 Company 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.

16) 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. 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. Impairment losses on goodwill are not reversed.

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17) Impairment of non-financial assets

A. The Company 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.

18) Financial liabilities at fair value through profit or loss

A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.
B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.
19) 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 Company. 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 Company did not recognize any contingent liabilities but made appropriate disclosure in compliance with relevant regulations.

20) 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.

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B. Termination benefits

Termination benefits are employee benefits provided in exchange for the termination of employment as a result from either the Company’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 Company 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 Company established the defined contribution plan for employees of R.O.C. nationality. The employees have the option to participate in the New Plan. Under the New Plan, the Company contributes monthly an amount equivalent to 6% of employees’ salaries to the employees’ personal pension accounts with the “Bureau of Labor Insurance”. Benefits accrued under the New Plan are portable upon termination of employment. 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 Company recognizes the accrued pension obligations in the 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.
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.

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21) Revenues and expenses

The Company’s revenues and expenses 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 incurred in the Company’s operations, which primarily include employee benefit expense, depreciation and amortization, and other business and administrative expenses.
22) Income tax
A. Current income tax

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

B. Deferred income tax
Deferred income tax assets and liabilities are measured based on the tax rate of the anticipated period that the future assets realisation or the liabilities settlement requires, which is based on the effective or existing tax rate at the balance sheet date. The carrying amounts and temporary differences of assets and liabilities included in the 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 realised in the future, the proportion of realisation 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 Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax

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regulations. It establishes provisions for income tax liabilities where appropriate based on the amounts expected to be paid to the tax authorities. An additional 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 realise 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 realise the asset and settle the liability simultaneously.

23) 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 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.

24) Earnings per share

A. Earnings per share is calculated by dividing net income by the weighted average number of shares outstanding during the year after taking into consideration the retroactive effect of stock dividends and capital reserve capitalized.
B. When the Company calculates earnings per share, basic earnings per share and diluted earnings per share for all potential ordinary shares shall all be disclosed in accordance with IAS 33 “Earnings per share”.

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5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

1) As the financial statements of the Company may be affected by the adoption of accounting policy, accounting estimate and assumption, the Company’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 Company 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 Company 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. Expected credit losses
- For financial assets, the measurement of expected credit losses uses complex models and multiple assumptions. These models and assumptions take into account future macro-economic conditions and credit behaviors of borrowers (e.g. probability of customer default and loss). Please refer to Note 12(2) for detailed information on parameters, assumptions, and estimation methods used in measuring expected credit losses and disclosure of the sensitivity of credit loss to the aforementioned factors. The measurement of expected credit losses according to applicable accounting rules involves significant judgement in several areas, for example:
- (A)The criteria used to judge whether there is significant increase in credit risk.

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(B)The selection of appropriate models and assumptions for measuring expected credit losses.

For judgements and estimations of the above expected credit losses, please refer to Note 12(2).

C. 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 Company will assess the impairment of the investment. The Company assesses its share of the recoverable amount which is based on the discounted value of expected cash flow, and assesses the reasonableness of relevant assumptions, including revenue growth rate, operating profit margin, net profit margin, financial forecast, and discount rate.
D. 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.

6. DETAILS OF SIGNIFICANT ACCOUNTS

1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Checking deposits Current deposits: Deposits denominated in NTD Deposits denominated in foreign currencies Time deposits Total	December31,2018 372,001 $ 225,347 544,590 2,351,200 3,493,138 $	December31,2017
		301,595 $ 223,199 1,637,042 1,874,500
		4,036,336 $

As of December 31, 2018 and 2017, the annual interest rates of time deposits, including foreign time deposits were 0.040% ~ 1.065% and 0.040% ~ 0.600%, respectively.

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2) Financial assets at fair value through profit or loss

Effective 2018

Financial assets at fair value through profit or loss Effective 2018
		December 31,2018
Current items:
Financial assets mandatorily measured at fair value through profit or loss:
Open-ended funds, money market instruments
and securities investment by brokers
Open-ended mutual funds beneficiary
certificates	$	225,000
Listed (TSE and OTC) stocks		1,384,265
Subtotal		1,609,265
Adjustment of open-ended funds
and money market instruments
and securities investment by brokers		781
Total		1,610,046
		December 31,2018
Trading securities-dealer
Listed (TSE and OTC) stocks		203,034
Government bonds		4,700,905
Corporate bonds		3,265,038
Convertible corporate bonds		148,279
Emerging stocks		67,424
Overseas stocks		9,551,592
Exchange-traded funds		2,765,819
Unlisted stocks		1,514
Subtotal		20,703,605
Adjustment of trading securities - dealer	(	40,892)
Total		20,662,713
Trading securities-underwriter
Listed (TSE and OTC) stocks		837,441
Convertible corporate bonds		479,500
Unlisted stocks		14,400
Subtotal		1,331,341
Adjustment of trading securities - underwriter		123,837
Total		1,455,178
Trading securities-hedging
Listed (TSE and OTC) stocks		584,558
Convertible corporate bonds		613
Warrants		39,229
Exchange traded funds		154,782
Subtotal		779,182
Adjustment of trading securities - hedging		6,164
Total		785,346

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Options bought-futures Futures guarantee deposits receivable Derivative financial instrument assets-OTC Total Non-current items: Financial assets mandatorily measured at fair value through profit or loss: Trading securities - dealer - government bonds Unlisted stocks Subtotal Adjustment of trading securities Total	24,463
	2,260,964
	3,300
	26,802,010 $
	49,895 $ 2,609
	52,504 13,850
	66,354 $

a. For the year ended December 31, 2018, net realised and unrealised gains on financial assets and liabilities at fair value through profit or loss amounted to $1,220,578.
b. Details of the Company’s financial assets at fair value through profit or loss pledged to others as collateral are provided in Note 8.
c. Information relating to credit risk is provided in Note 12(2).
d. Information on financial assets at fair value through profit or loss as of December 31, 2017 is provided in Note 12(8).
3) Financial assets at fair value through other comprehensive income

Effective 2018

d. Information on financial assets at fair value through profit or loss 2017 is provided in Note 12(8). Financial assets at fair value through other comprehensive income Effective 2018	as of December 31,
Current items: Debt instruments Trading securities-dealer Overseas bonds Adjustment of trading securities - dealer Total Non-current items: Equity instruments Unlisted stocks Adjustment of trading securities Total	December 31,2018
	290,816 $ 5,488
	296,304 $
	6,449 $ 140,096
	146,545 $

a. The Company has elected to classify unlisted stocks that are considered to be strategic investments as financial assets at fair value through other comprehensive income. The fair value of such investments amounts to $146,545 as at December 31, 2018.
b. Amounts recognised in profit or loss and other comprehensive income in relation to the financial assets at fair value through other comprehensive income are listed below:

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Equity instruments at fair value through other comprehensive income		Year ended December 31,2018
Fair value change recognised in other comprehensive income Debt instruments at fair value through other comprehensive income	12,307 $ 22,066 $ 24,289) ($ 8,415 $
Fair value change recognised in other comprehensive income Cumulative other comprehensive income reclassified to profit or loss Due to derecognition Interest income recognised in profit or loss

c. Details of the Company’s financial assets at fair value through other comprehensive income pledged to others as collateral are provided in Note 8.
d. Information relating to credit risk is provided in Note 12(2).
e. Information on financial assets at fair value through other comprehensive income as of December 31, 2017 is provided in Note 12(8).

4) Bonds purchased under resale agreements

Overseas bonds

December31,2018 93,193 $	December31,2017
	- $

The above bonds purchased under resale agreements as of December 31, 2018 was 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 $93,705. The annual interest rates of every currency were as follows:

annual interest rates of every currency were as follows:
Foreign currencies (Note)	December31,2018
	2.20%

(Note) `：` Foreign currencies include USD.

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) Accounts receivable

Accounts receivable
		December 31,2018			December 31,2017
Accounts receivable - related parties	$		3,895	$		5,546
Accounts receivable - non related parties
Settlement price receivable-brokers	$		6,289,700	$		6,923,656
Settlement price receivable-dealer			668,765			293,630
Accounts receivable-international bonds			-			591,328
Accounts receivable-foreign bonds			142,329			1,742,322
Interest receivable			338,710			371,304
Settlement price			722,004			775,878
Others			77,520			54,624
Subtotal			8,239,028			10,752,742
Less: Allowance for uncollectible accounts	(		2,661)	(		4,359)
Total	$		8,236,367	$		10,748,383

A. The ageing analysis of accounts receivable that were past due but not impaired is as follows:

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		December	31,2018		Total
Upto 30 days	31 to90 days	91 to 180 days	181 days to 12 months	More than 12 months
3,895 $ 7,906,191 7,910,086 $	- $ 36,760 36,760 $		- $ 138,336 138,336 $ 31,2017	- $ 67,282 67,282 $	3,895 $ 8,239,028 8,242,923 $ Total
Upto 30 days	31 to90 days	91 to 180 days	181 days to 12 months	More than 12 months
5,546 $ 10,398,608 10,404,154 $	- $ 64,005 64,005 $	- $ 99,597 99,597 $	- $ 146,605 146,605 $	- $ 43,927 43,927 $	5,546 $ 10,752,742 10,758,288 $

The above ageing analysis was based on invoice day.

B. Information related to credit risk is provided in Note 12(2).

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7) Other receivables

Other receivables
December 31,2018 Interest receivable 3,745 $ Others 3,807 Less: Impairment loss 288) ( Total 7,264 $	December 31,2017
	2,959 $ 5,046 -
	8,005 $

Information relating to credit risk is provided in Note 12(2).

8) Other current assets

Other current assets
Pending settlements Pledged time deposits Deposits-in for foreign currency securities Underwriting share proceeds collected on behalf of customers Temporary payments Others Total	December 31,2018 27,379 $ 400,000 - 18,542 746 831 447,498 $	December 31,2017
		45,977 $ 400,000 228,016 108,673 357 893
		783,916 $

9) Transfer of financial assets

A. During the Company’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 Company 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 Company 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, 2018

Financial assets category Carrying amount of transferred financial assets Financial assets measured at fair value through profit or loss Repurchase agreement 15,506,358 $ Available-for-sale financial assets Repurchase agreement 296,304 December 31,2017	Carrying amount of transferred financial assets	Carrying amount of related financial liabilities
		14,775,766 $ 290,833 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
	22,148,171 $ 1,044,031	19,879,319 $ 1,032,339

10) Offsetting financial assets and financial liabilities

A. The Company 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

December 31, 2018

			December 31,2018	December 31,2018	December 31,2018
Financial	assets that are offset,or ca	n	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 3,300 $ - $ 92,663 - 95,963 $ - $ Not set off in the balance sheet	Net amount
					Financial instruments
	3,300 $ 93,193 96,493 $		- $ 3,300 $ - 93,193 - $ 96,493 $ December 31,2017		3,300 $ 92,663 95,963 $	- $ 530
						530 $

Financial	assets that are offset,or ca	n	be settled under agreements of net settled master nettingarrangements or similar arrangements
Derivative financial instruments 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 $ - $ Not set off in the balance sheet	Net amount
					Financial instruments
	19,982 $		- $	19,982 $	19,982 $	- $

226

(2) Financial liabilities

December 31, 2018

Financial liabilities that are offset, or can be settled under agreements of net settled master netting arrangements 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 3,300 $ - $ 8,713,387 - 8,716,687 $ - $ Not set off in the balance sheet	Financial instruments Cash collateral received 3,300 $ - $ 8,713,387 - 8,716,687 $ - $ Not set off in the balance sheet	Net amount
				Financial instruments
	11,112 $ 8,713,387 8,724,499 $	- $ 11,112 $ - 8,713,387 - $ 8,724,499 $ December 31,2017		3,300 $ 8,713,387 8,716,687 $		7,812 $ -
						7,812 $

Financial liabilities that are offset,or c		an 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 $	- $ - - $	205,841 $ 17,974,440 18,180,281 $	19,982 $ 17,974,440 17,994,422 $		185,859 $ -
						185,859 $

227

11) Investments accounted for under the equity method

Subsidiaries President Futures Corp. President Securities (HK) Ltd. President Capital Management Corp. President Securities (BVI) Ltd President Insurance Agency Corp. PSC Venture Capital Investment Limited Company Joint ventures Uni-President Asset Management Corp.	December 31,2018 1,935,207 $ 72,792 194,831 2,298,272 31,911 245,072 4,778,085 569,230 5,347,315 $	December 31,2017
		1,433,680 $ 68,782 196,897 2,177,269 31,995 247,776
		4,156,399
		496,093
		4,652,492 $

A. The Company’s share of its associates’ profits or losses recognised in long-term equity investment accounted for under the equity method for the years ended December 31, 2018 and 2017 were $379,275 and $ 324,762, respectively.
B. Details of information of subsidiaries are provided in Note 4(3) of consolidated financial statements of 2018.
C. On March 31, 2017 and October 13, 2017, the Company acquired 1,333,800 shares of UniPresident Asset Management Corp. and 5,000,000 shares of President Capital Management Corp. for a cash consideration of $42,682 and $50,000, respectively.
D. The financial information of the Company’s principal associates is summarized as follows: (a)The basic information of the joint ventures that are material to the Company is as follows:

Princial place Companyname of businesss Uni-President Asset Management Corp. Taipei city Uni-President Asset Management Corp. Taipei city	Shareholdingratio December 31,2018 42.46% December 31,2017 42.46%	Nature of relationship Associate Associate	Methods of measurement Equity method Equity method

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

Balance sheet

Balance sheet
		Uni-President Asset	Management Corp.
		December 31,2018	December 31,2017
Current assets	$	502,419	$	466,401
Non-current assets		599,619		441,397
Current liabilities	(	156,138)	(	128,739)
Non-current liabilities	(	27,364)	(	33,530)
Total net assets	$	918,536	$	745,529
Share in joint venture's
net assets	$	390,041	$	316,576
Goodwill and others		179,189		179,517
Carrying amount of the joint venture	$	569,230	$	496,093

Statement of comprehensive income

Revenue Profit for the period from continuing operations Other comprehensive income- net of tax Total comprehensive income Dividends received from associates		Year ended December 31,2018 Year ended December 31,2017 791,291 $ 679,240 $ 239,809 $ 190,717 $ 11,569 69 251,378 $ 190,786 $ 72,511 $ 66,624 $ Uni-President Asset Management Corp.	Year ended December 31,2018 Year ended December 31,2017 791,291 $ 679,240 $ 239,809 $ 190,717 $ 11,569 69 251,378 $ 190,786 $ 72,511 $ 66,624 $ Uni-President Asset Management Corp.	Year ended December 31,2018 Year ended December 31,2017 791,291 $ 679,240 $ 239,809 $ 190,717 $ 11,569 69 251,378 $ 190,786 $ 72,511 $ 66,624 $ Uni-President Asset Management Corp.
		Year ended December 31,2018
		791,291 $ 239,809 $ 11,569 251,378 $ 72,511 $		679,240 $ 190,717 $ 69 190,786 $ 66,624 $

229

12) Property and equipment

January1,2018	Land	Buildings	Equipment	Leasehold improvements	Total
Cost Accumulated depreciation and impairment Total For the year ended December 31,2018	1,573,570 $ - 1,573,570 $ 1,573,570 $ - - - - 1,573,570 $ Land	978,310 $ 360,022) ( 618,288 $ 618,288 $ - - 1,390 22,928) ( 596,750 $ Buildings	123,708 $ 72,032) ( 51,676 $ 51,676 $ 37,888 11) ( 20,704 27,969) ( 82,288 $ Equipment	42,008 $ 24,561) ( 17,447 $ 17,447 $ 755 - 7,347 8,947) ( 16,602 $ Leasehold improvements	2,717,596 $ 456,615) ( 2,260,981 $ 2,260,981 $ 38,643 11) ( 29,441 59,844) ( 2,269,210 $ Total
January 1, 2018 Additions Disposals Reclassifications Depreciation December 31, 2018 December 31,2018
Cost Accumulated depreciation and impairment Total January1,2017	1,573,570 $ - 1,573,570 $ Land	978,012 $ 381,262) ( 596,750 $ Buildings	138,552 $ 56,264) ( 82,288 $ Equipment	41,252 $ 24,650) ( 16,602 $ Leasehold improvements	2,731,386 $ 462,176) ( 2,269,210 $ Total
Cost Accumulated depreciation and impairment Total For the year ended December 31,2017	1,573,570 $ - 1,573,570 $ 1,573,570 $ - - - - 1,573,570 $ Land	980,873 $ 347,423) ( 633,450 $ 633,450 $ 250 - 7,080 22,492) ( 618,288 $ Buildings	137,413 $ 79,554) ( 57,859 $ 57,859 $ 16,746 658) ( 6,480 28,751) ( 51,676 $ Equipment	83,474 $ 53,256) ( 30,218 $ 30,218 $ - - 12,771) ( 17,447 $ Leasehold improvements	2,775,330 $ 480,233) ( 2,295,097 $ 2,295,097 $ 16,996 658) ( 13,560 64,014) ( 2,260,981 $ Total
January 1, 2017 Additions Disposals Reclassification Depreciation December 31, 2017 December 31,2017
Cost Accumulated depreciation and impairment Total	1,573,570 $ - 1,573,570 $	978,310 $ 360,022) ( 618,288 $	123,708 $ 72,032) ( 51,676 $	42,008 $ 24,561) ( 17,447 $	2,717,596 $ 456,615) ( 2,260,981 $

A. No interest was capitalized for property and equipment for the years ended December 31, 2018 and 2017.

B. The information on property and equipment pledged or restricted as of December 31, 2018 and 2017 is described in Note 8.

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13) Investment property

January1,2018
Cost
Accumulated depreciation
and impairment
Total
For the year
ended December 31,2018
January 1, 2018
Depreciation
December 31, 2018
December 31,2018
Cost
Accumulated depreciation
and impairment
Total
January1,2017
Cost
Accumulated depreciation
and impairment
Total
For the year
ended December 31,2017
January 1, 2017
Depreciation
December 31, 2017
December 31,2017
Cost
Accumulated depreciation
and impairment
Total

Land
Buildings
Total
198,099
$ 107,076
$ 305,175
$ -
28,372)
(
28,372)
(
198,099
$ 78,704
$ 276,803
$ 198,099
$ 78,704
$ 276,803
$ -
2,100)
(
2,100)
(
198,099
$ 76,604
$ 274,703
$ Land
Buildings
Total
198,099
$ 107,076
$ 305,175
$ -
30,472)
(
30,472)
(
198,099
$ 76,604
$ 274,703
$ 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
$

A. For the years ended December 31, 2018 and 2017, rental income from the lease of the investment property were both $17,652, and direct operating expenses arising from the investment property were $3,611 and $3,267, respectively.
B. Details of fair value of investment property are provided in Note 12(5).

231

14) Intangible assets

) Intangible assets
January1,2018 Computer software Cost 41,212 $ Accumulated depreciation and impairment 25,937) ( Total 15,275 $ For the year ended December 31,2018 January 1, 2018 15,275 $ Additions 10,187 Reclassifications 8,431 Depreciation 8,893) ( December 31, 2018 25,000 $ December 31,2018 Computer software Cost 43,167 $ Accumulated depreciation and impairment 18,167) ( Total 25,000 $ January1,2017 Computer sofware Cost 53,135 $ Accumulated depreciation and impairment 29,530) ( Total 23,605 $ For the year ended December 31,2017 January 1, 2017 23,605 $ Additions 2,128 Reclassifications 1,326 Depreciation 11,784) ( December 31, 2017 15,275 $ December 31,2017 Computer software Cost 41,212 $ Accumulated depreciation and impairment 25,937) ( Total 15,275 $	Goodwill	Customer relationships and others Total 54,160 $ 137,376 $ 49,122) ( 75,059) ( 5,038 $ 62,317 $ 5,038 $ 62,317 $ - 10,187 - 8,431 5,038) ( 13,931) ( - $ 67,004 $ Customer relationships and others Total 54,160 $ 139,331 $ 54,160) ( 72,327) ( - $ 67,004 $ Customer relationships and others Total 54,160 $ 149,299 $ 34,008) ( 63,538) ( 20,152 $ 85,761 $ 20,152 $ 85,761 $ - 2,128 - 1,326 15,114) ( 26,898) ( 5,038 $ 62,317 $ Customer relationships and others Total 54,160 $ 137,376 $ 49,122) ( 75,059) ( 5,038 $ 62,317 $
	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 $

A. No interest was capitalized for intangible assets for the years ended December 31, 2018 and 2017.

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

232

were all allocated to the Company’s brokerage segment.

C. The recoverable amount of goodwill was determined based on its value in use. 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:

of value in use are as follows:
Growth rate Discount rate	Brokerage	2017 0.00% 17.49% Segment
	2018 0.00% 11.96%

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.

(Blank below)

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15) Other noncurrent assets

Other noncurrent assets
		December 31,2018		December 31,2017
Operation guaranteed deposits		$	540,000	$	542,000
Clearing and settlement fund			224,205		219,713
Refundable deposits			239,359		185,647
Defined benefit obiligations			44		-
Prepayment for equipment			5,653		10,354
Overdue receivables			213,075		136,443
Others			720		180
Subtotal			1,223,056		1,094,337
Less: Allowance for uncollectible
accounts-overdue receivables	(		213,075)	(	136,443)
Total		$	1,009,981	$	957,894
Short-term loans

		December 31,2018		December 31,2017
Secured loans		$	-	$	945,000
Unsecured loans			939,879		5,336,968
Total		$	939,879	$	6,281,968
Interest rates			3.411%~3.500%		0.700%~3.250%
Commercial papers payable
		December 31,2018		December 31,2017
Face value		$	-	$	3,650,000
Less: discount on commercial papers payable			-	(	369)
Total		$	-	$	3,649,631
Interest rates			-		0.370%~0.485%

16) Short-term loans

17) Commercial papers payable

Face value Less: discount on commercial papers payable Total Interest rates

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

		December 31,2018		December 31,2017
Investments in bonds under resale
agreements - short sales	$	90,545	$	-
Valuation adjustment of financial assets held
for trading		3,069		-
Subtotal		93,614		-
Liabilities on sale of borrowed securities
- hedged		148,009		151,745
Valuation adjustment on liabilities on sale of
borrowed securities - hedged	(	15,145)	(	10,481)
Liabilities on sale of borrowed securities
- non-hedged		391,436		207,280
Valuation adjustment on liabilities on sale of
borrowed securities - non-hedged	(	19,457)		1,982
Subtotal		504,843		350,526
Issuance of call ( put ) warrants		15,115,760		12,851,599
Gain on price fluctuation	(	7,549,321)	(	5,599,183)
Market value (A)		7,566,439		7,252,416
Warrants redeemed	(	11,955,149)	(	9,460,551)
Loss on price fluctuation		4,622,139		2,813,270
Market value (B)	(	7,333,010)	(	6,647,281)
Warrants - net (A+B)		233,429		605,135
Options sold - TAIFEX		8,954		3,575
Derivative financial liabilities - OTC		24,690		246,628
Total	$	865,530	$	1,205,864

Among the warrants issued by the Company, except for contract-based warrants which are Europeanstyle 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.

235

19) Bonds sold under repurchase agreements

Bonds sold under repurchase agreements
Government bonds Corporate bonds International bonds Foreign bonds Total	December 31,2018 4,100,351 $ 1,298,032 954,829 8,713,387 15,066,599 $	December 31,2017
		1,684,569 $ 400,139 852,510 17,974,440
		20,911,658 $

The above bonds sold under repurchase agreements as of December 31, 2018 and 2017 were due within one year and were contracted to be repurchased at the agreed-upon price plus interest charge on the specific date after the transaction. The total repurchase amounts were $15,134,144 and $20,984,849, respectively, and the annual interest rates in every currency were shown as follows:

Currency December 31,2018 NTD 0.33%~0.62% Foreign currencies (Note) -0.30%~4.20% (Note)`：`Foreign currencies include AUD, EUR, USD and RMB.	December 31,2017
	0.24%~0.43% -0.30%~4.30%

20) Accounts payable

Other payables Settlement accounts payable - brokered trading Settlement proceeds Settlement accounts payable - operating Settlement Accounts payable-foreign bonds Settlement Accounts payable-International bonds Others Total Salary and bonus payable Employees’ and directors’ remuneration payable Others Total	December 31,2018 4,974,010 $ 1,811,674 256,985 172,208 78 77,992 7,292,947 $ December 31,2018 415,980 $ 57,735 316,654 790,369 $	December 31,2017
		6,933,143 $ 660,024 407,612 395,809 - 63,004
		8,459,592 $
		December 31,2017
		598,279 $ 112,882 364,753
		1,075,914 $

21) Other payables

236

22) Other financial liabilities - current

Other financial liabilities-current
Equity-linked notes (ELN) - Options Principal guaranteed notes (PGN) - fixed income Total	December 31,2018 - $ 2,687,009 2,687,009 $	December 31,2017
		3,000 $ 3,196,298
		3,199,298 $

The Company 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).

23) Other liabilities-non-current

Other liabilities-non-current
Net defined benefit obligation Guarantee deposits received Total	December 31,2018 21,928 $ - 21,928 $	December 31,2017
		21,629 $ 49,500
		71,129 $

24) Pension plan

A. Defined benefit plans

(A) The Company 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 Company contributes monthly an amount 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 Company 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 Company will make contributions to cover the deficit by next March.

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

	December	31,2018	December	31,2017
Present value of defined benefit obligations	$	785,853	$	799,549
Fair value of plan assets	(	785,897)	(	750,049)
Net defined benefit (assets) liabilities	($	44)	$	49,500

237

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

Year ended December 31,2018		Fair value ofplan assets
	799,549 $ 5,583 9,595 814,727 - 7,429 8,337) ( 908) ( - 27,966) ( 27,966) ( 785,853 $ Present value of defined benefit obligations	750,049) ($ - 9,001) ( 759,050) ( 13,865) ( - - 13,865) ( 40,948) ( 27,966 12,982) ( 785,897) ($ Fair value ofplan assets	49,500 $ 5,583 594 55,677 13,865) ( 7,429 8,337) ( 14,773) ( 40,948) ( - 40,948) ( 44) ($ Net defined benefit (assets) liabilities
Balance at January 1 Current service cost Interest expense (income) Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Paid pension Balance at December 31 Year ended December 31,2017
	682,712 $ 5,185 10,241 698,138 - 23,465 100,059 123,524 - 22,113) ( 22,113) ( 799,549 $	727,323) ($ - 10,910) ( 738,233) ( 6,067 - - 6,067 39,996) ( 22,113 17,883) ( 750,049) ($	44,611) ($ 5,185 669) ( 40,095) ( 6,067 23,465 100,059 129,591 39,996) ( - 39,996) ( 49,500 $
Balance at January 1 Current service cost Interest expense (income) Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Paid pension Balance at December 31

(D) The Bank of Taiwan was commissioned to manage the Fund of the Company’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

238

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 Company has no right to participate in managing and operating that fund and hence the Company 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, 2018 and 2017 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.

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

Discount rate Future salary increases		For the year ended December31,2018		For the year ended December31,2017
		1.10% 2.50%		1.20% 2.50%

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:

Increase 0.25% Decrease 0.25% December 31,2018 Effect on present value of defined benefit obligation 18,392) ($ 19,010 $ December 31,2017 Effect on present value of defined benefit obligation 19,620) ($ 20,303 $ Discount rate	Increase 0.25% Decrease 0.25% 16,758 $ 16,327) ($ 18,000 $ 17,517) ($ Future salaryincreases

(F) Expected contributions to the defined benefit pension plans of the Company for the year ending December 31, 2019 amounts to $38,690.

B. Defined contribution plans:

Effective from July 1, 2005, the Company established a defined contribution plan pursuant to the “Labor Pension Act”, which covers employees with R.O.C. nationality and those who chose or

239

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 Company for the years ended December 31, 2018 and 2017 were $58,509 and $53,263, respectively.

25) Equity

A. Common stock

(A) As of December 31, 2018, the Company’s authorized capital was $15,000,000 with a par value of $10 (in dollars) per share. As of December 31, 2018 and 2017, the common stocks issued and the outstanding common stocks were both 1,390,428 thousand shares.

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

(Expressed in thousands)

January 1 Stock dividends December 31, 2018 (As January 1, 2018)		Year ended December 31, 2018		Year ended December 31, 2017
		1,390,428 - 1,390,428		1,335,666 54,762 1,390,428

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. Capital reserve

December 31, 2018 December 31, 2017		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

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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 Zheng-Chi (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.

26) 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 2017 and 2016 earnings was resolved by the shareholders on June 21, 2018 and June 22, 2017, respectively. Detail is as follows:

241

Legal reserve Special reserve Special reserve(Note 1) Reversal special reserve(Note 1) Special reserve(Note 2) Cash dividends Stock dividends Total	For the year ended December 31,2017	For the year ended December 31,2017		For the year ended December 31,2016	For the year ended December 31,2016
	Amount	Dividends per share (in dollars)		Amount	Dividends per share (in dollars)
	251,972 $ 503,944 12,599 3,023) ( 58,374 1,668,514 - 2,492,380 $	1.20 $ -		79,851 $ 159,701 3,993 - - - 547,623 791,168 $	- $ 0.41

Note 1 ： Special reserve was provided for employees’ transition for financial technology development according to Jin-Guan-Zheng-Chuan Letter No. 10500278285, and can be reversed for employees’ transition. The Board of Directors of the Company resolved to provide 0.5% as special reserve and made reversal of the special reserve on March 26, 2018 and March 23, 2017.
Note 2 ： 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-Guan-Zheng-Chuan Letter No. 1010028514.
E. The earnings distribution for 2018 as resolved by the Board of Directors on March 22, 2019 is set forth below:

set forth below:
Legal reserve Special reserve Special reserve(Note 3) Reversal special reserve(Note 3) Special reserve(Note 4) Cash dividends Total	For theyear ended December 31,2018
	Amount	Dividends per share (in dollars)
	121,032 $ 242,064 6,052 4,365) ( 58,374) ( 959,395 1,265,804 $	0.69 $

Note 3 ： Special reserve was provided for employees’ transition for financial technology development according to Jin-Guan-Zheng-Chuan Letter No. 10500278285, and can be reversed in line with relevant letters. The Board of Directors of the Company resolved to provide 0.5% as special reserve and made reversal of the special reserve

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on March 22, 2019.

Note 4 ： 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-Guan-Zheng-Chuan Letter No. 1010028514. If there is any subsequent reversal of the decrease in equity, the earnings may be distributed based on the reversal proportion.
F. For details on employees’ remuneration and directors’ remuneration, please refer to Note 6 (41).

27) Brokerage handling fee revenue

Brokerage handling fee revenue
Revenues from brokered trading - TWSE Revenues from brokered trading - OTC Others Total		Year ended December 31,2018		Year ended December 31,2017
		1,217,135 $ 439,747 52,774 1,709,656 $		1,058,726 $ 454,994 52,322 1,566,042 $

28) Revenues from underwriting business

Revenues from underwriting business
Revenues from underwriting securities on a firm commitment basis Others Total		Year ended December 31,2018		Year ended December 31,2017
		22,306 $ 30,922 53,228 $		23,043 $ 33,071 56,114 $

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29) Gain on sale of trading securities

Gain on sale of trading securities
Dealers: -TAIEX -OTC -Overseas trading Subtotal Underwriters: -TAIEX -OTC Subtotal Hedging: -TAIEX -OTC -Overseas trading Subtotal Total	Year ended December 31,2018		Year ended December 31,2017
	1,119,471 $ 57,940) ( 79,821) ( 981,710 46,174 11,969 58,143 630,593) ( 123,985) ( 8,260) ( 762,838) ( 277,015 $		1,121,790 $ 495,212 989,928 2,606,930 12,784 18,424 31,208 141,332 131,021 665 273,018 2,911,156 $

30) Interest revenue

Interest revenue
Interest income from margin loans Interest income from bonds Others Total		Year ended December 31,2018		Year ended December 31,2017
		623,031 $ 632,528 735 1,256,294 $		577,570 $ 838,572 661 1,416,803 $

31) Valuation (loss) gain on trading securities at fair value through profit or loss

(Loss) gain on sale of securities - dealer (Loss) gain on sale of securities - underwriting Gain (loss) on sale of securities - hedging Total	Year ended December 31,2018	Year ended December 31,2017
	437,071) ($ 13,726) ( 83,968 366,829) ($	375,400 $ 71,553 74,209) ( 372,744 $

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32) Gain (loss) on covering of borrowed securities and bonds with resale agreements - short sales

			Year ended			Year ended
		December 31,2018			December 31,2017
Gain (loss) from the bond investments under
resale agreements	$		7,117	($		116,598)
Loss from securities borrowing
transactions - warrants			-	(		479)
Gain (loss) from covering - warrants			1,816	(		15,683)
Gain from securities borrowing transactions
- dealer			18,855			30,644
Total	$		27,788	($		102,116)
33) Valuation gain on borrowed securities and bonds	with		resale agreements-short			sales at fair value
through profit or loss
			Year ended			Year ended
		December 31,2018			December 31,2017
Valuation (loss) gain from the bond
investments under resale agreements	($		3,015)	$		7,866
Valuation gain (loss) from securities
borrowing transactions - dealer			27,237	(		6,339)
Valuation gain from securities
borrowing transactions - warrants			-			423
Valuation (loss) gain from covering - warrants	(		2,155)			1,025
Total	$		22,067	$		2,975

34) Realised loss on financial assets measured at fair value through other comprehensive income

35) Gain from issuance of call (put) warrants Foreign bonds 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 December 31,2018		Year ended December 31,2017
	24,289) ($ Year ended December 31,2018		- $ Year ended December 31,2017
	1,180,875 $ 35,750) ( 84,740) ( 1,060,385 $	417,304 $ 43,480) ( 67,912) ( 305,912 $

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36) Gain (loss) from derivatives

Futures contract gain (loss) Option trading gain Loss on foreign exchange derivatives Others Total	Year ended December 31,2018	Year ended December 31,2017
	194,926 $ 120,606 47,348) ( 68,032) ( 200,152 $	187,711) ($ 87,212 52,462) ( 52,791) ( 205,752) ($

37) Impairment loss and reversal of impairment loss

Year ended December 31,2018	Year ended December 31,2018		Year ended December 31,2017
52,798) ($ 716 52,082) ($ Year ended December 31,2018			- $ - - $ Year ended December 31,2017
	87,487 $ 28,872 44,277 3,831 164,467 $ Year ended December 31,2018	70,403 $ 476,136) ( 40,778 24,814 340,141) ($ Year ended December 31,2017
	138,569 $ 203,842 1,653 344,064 $		119,231 $ 125,980 1,620 246,831 $

38) Other operating income (loss)

39) Handling charges

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40) Financial costs

Interest expense from repurchase agreements Loans interest expense Other interest expense Total		Year ended December 31,2018		Year ended December 31,2017
		291,956 $ 99,398 5,756 397,110 $		272,675 $ 102,271 5,591 380,537 $

41) Employee benefits expense

Salaries Labor and health insurance Pension Other employee benefits Total		Year ended December 31,2018		Year ended December 31,2017
		1,512,061 $ 115,499 64,686 95,155 1,787,401 $		1,719,703 $ 103,626 57,779 108,213 1,989,321 $

A. In accordance to the Company’s Article of Incorporation, the remainder of the year-end income before taxes less income before appropriating employees’ compensation and directors’ remuneration, if any, shall appropriate an employees’ compensation no less than 1.6% and directors’ remuneration no more than 2%. However, when the Company has an accumulated deficit, earnings to cover the deficit shall first be retained before appropriating employees’ compensation and directors’ remuneration.
B. For the years ended December 31, 2018 and 2017, employees’ compensation was accrued at $28,868 and $56,441, respectively; directors’ remuneration was accrued at $28,868 and $56,441, respectively. The aforementioned amounts were recognised in salary expenses.
C. For years ended December 31, 2018, employees’ compensation was estimated at 2% and directors’ remuneration at 2%, based on the period-end income before taxes less income before appropriating employees’ compensation and directors’ remuneration.
D. The actual distributed amount of employees’ and directors’ remuneration for 2017 as resolved by the Board of Directors was in agreement with the estimates in the 2017 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

Depreciation Amortization Total		Year ended December 31,2018		Year ended December 31,2017
		61,944 $ 13,931 75,875 $		66,114 $ 26,898 93,012 $

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43) Other operating expenses

Other operating expenses
Rentals Taxes Computer information expenses Postage Bad debt expenses Others Total		Year ended December 31,2018		Year ended December 31,2017
		55,419 $ 592,509 89,040 102,273 - 348,858 1,188,099 $		56,203 $ 644,434 96,351 104,945 63,471 334,328 1,299,732 $

44) Other gains and losses

Other gains and losses
Financial income (Loss) gain on disposal of investments Loss on valuation of open-ended funds and money-market instruments Net currency exchange (loss) gain Other non-operating revenues Total	Year ended December 31,2018	Year ended December 31,2017
	18,521 $ 11,703) ( 11) ( 4,013) ( 123,236 126,030 $	10,060 $ 9,766 658) ( 332 130,041 149,541 $

(Blank blow)

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45) Income tax

A. Income tax expense

(a)Components of income tax expense:

ome tax Income tax expense (a)Components of income tax expense:
				Year ended				Year ended
			December 31,2018				December 31,2017
Current tax:
Current tax on profits for the
periods		$		144,310		$		271,183
Prior year income tax
underestimation (overestimation)				5,476		(		9,146)
Tax on undistributed surplus earnings				2,000					-
Total current tax				151,786				262,037
Deferred taxes:
Origination and reversal of temporary differences				33,003		(		72,605)
Impact of change in tax rate		(		9,466)					-
Total deferred taxes				23,537		(		72,605)
Income tax expense		$		175,323		$		189,432
(b)The income tax expense relating to components		of		other comprehensive income is as follows`：`
		Year ended December				Year ended December
				31,2018				31,2017
Remeasurement of defined benefit obligations		$		2,955		($		22,031)
Impact of change in tax rate		($		11,886)		$			-
Reconciliation between income tax expense and accounting profit
	Year			ended December Year				ended December
				31,2018				31,2017
Tax calculated based on profit before tax and statutory tax rate	$			277,129	$			477,394
Expenses disallowed by tax regulation				23,150 (				17,690)
Prior year income tax underestimation (overestimation)				5,476 (				9,146)
Tax exempt income by tax regulation	(			256,066) (				419,466)
Effect from Alternative Minimum Tax				133,100				158,340
Effect from changes in tax regulation	(			9,466)				-
Tax on undistributed earnings				2,000				-
Income tax expense	$			175,323	$			189,432

B. Reconciliation between income tax expense and accounting profit

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

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For the year ended Decmeber 31, 2018

	January1	Recognised in profit or loss	Recognised in other comprehensive income		December 31
16,997 $ 47,559 71,610 136,166 15,173) ( 15,173) ( 120,993 $ For
	January1	Recognised in profit or loss	Recognised in other comprehensive income		December 31
12,798 $ - 49,229 62,027 10,148) ( 25,522) ( 35,670) ( 26,357 $		4,199 $ 47,559 350 52,108 10,148 10,349 20,497 72,605 $	- $ - 22,031 22,031 - - - 22,031 $	16,997 $ 47,559 71,610 136,166 - 15,173) ( 15,173) ( 120,993 $

D. As of December 31, 2018, the Company’s income tax returns through 2013, 2015 and 2016 have been assessed by the National Tax Authority.
E. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China in February, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Company has assessed the impact of the change in income tax rate.

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F. With respect to the income tax returns of the Company for 2016 and 2015, the Tax Authority assessed to increase income tax payable by $24,696. The Company disagreed with the assessment and had filed for administrative remedy and had recognised the income tax expense based on the assessment.
G. The Company did not provide deferred tax liabilities arising from unremitted retained earnings of the subsidiary, President Securities (BVI) Ltd., and may have to pay related taxes. The above unremitted retained earnings is expected to be reinvested in the future.
46) Earnings per share

Amount after tax Weighted-average outstanding common shares (In thousands) Earnings per share (In dollars) 1,210,323 $ 1,390,428 0.87 $ - 2,510 1,210,323 $ 1,392,938 0.87 $ Amount after tax Weighted-average outstanding common shares (In thousands) Earnings per share (In dollars) 2,618,769 $ 1,390,428 1.88 $ - 3,933 2,618,769 $ 1,394,361 1.88 $ Year ended December 31,2018 Year ended December 31,2017	Amount after tax Weighted-average outstanding common shares (In thousands) Earnings per share (In dollars) 1,210,323 $ 1,390,428 0.87 $ - 2,510 1,210,323 $ 1,392,938 0.87 $ Amount after tax Weighted-average outstanding common shares (In thousands) Earnings per share (In dollars) 2,618,769 $ 1,390,428 1.88 $ - 3,933 2,618,769 $ 1,394,361 1.88 $ Year ended December 31,2018 Year ended December 31,2017	Amount after tax Weighted-average outstanding common shares (In thousands) Earnings per share (In dollars) 1,210,323 $ 1,390,428 0.87 $ - 2,510 1,210,323 $ 1,392,938 0.87 $ Amount after tax Weighted-average outstanding common shares (In thousands) Earnings per share (In dollars) 2,618,769 $ 1,390,428 1.88 $ - 3,933 2,618,769 $ 1,394,361 1.88 $ Year ended December 31,2018 Year ended December 31,2017
Amount after tax	Weighted-average outstanding common shares (In thousands)

Amount after tax	Weighted-average outstanding common shares (In thousands)
2,618,769 $ - 2,618,769 $	1,390,428 3,933 1,394,361	1.88 $ 1.88 $

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7. RELATED PARTY TRANSACTIONS

1) Names and relationships of related parties

Names of related parties

Relationship with the Company

Uni-President Enterprises Corp. Entity having significant influence on the Company President Capital Management Corp. Subsidiary of the Company President Futures Corp. Subsidiary of the Company President Securities (BVI) Ltd Subsidiary of the Company President Securities (HK) Ltd. Subsidiary of the Company President Insurance Agency Corp. Subsidiary of the Company PSC Venture Capital Investment Limited Subsidiary of the Company President Securities (Nominee) Ltd. Indirect subsidiary of the Company President Wealth Management (HK) Ltd. Indirect subsidiary of the Company Uni-President Asset Management Corp. Associate President Chain Store Corp. (PCSC) Other related party Ton Yi Industrial Corp. Other related party President Tokyo Co., Ltd. Other related party Cayman President Holdings Ltd. Other related party

2) Significant related party transactions and balances

A. Futures guarantee deposits receivable

Significant related party transactions and balances A. Futures guarantee deposits receivable
B. Accounts receivable Subsidiary of the Company: President Futures Corp. Entity having significant influence on the company: Uni-President Enterprises Corp. Subsidiary of the Company: President Futures Corp. Company President Securities (HK) Ltd. Associate: Uni-President Assets Management Corp. Other related party: Others Total	December 31,2018	December 31,2017
	1,670,689 $ December 31,2018	1,551,945 $ December 31,2017
	288 $ 3,900 6,372 - 597 11,157 $	304 $ 5,551 251 - 583 6,689 $

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C. Other receivables

C. Other receivables
D. Refundable deposits E. Accounts payable F. Guarantee deposit received G. Bonds sold under repurchase agreements Subsidiary of the Company: President Futures Corp. Others Other related party: Others Total Subsidiary of the Company: President Futures Corp. Subsidiary of the Company: President Futures Corp. Other related party: Others Total Subsidiary of the Company: President Futures Corp. Others Associate: Uni-President Assets Management Corp. Other related party: President Tokyo Co., Ltd. Total Other related party: Cayman President Holdings Ltd.	December 31,2018	December 31,2017
	$ 363 21 9 393 $ December 31,2018	$ 771 23 9 803 $ December 31,2017
	`39,000` `$` December 31,2018	`39,000` `$` December 31,2017
	`24` `$` 460 `484` `$` December 31,2018	`621` `$` 217 `838` `$` December 31,2017
	$ 16,137 806 530 1,393 18,866 $ Year ended December 31,2018	$ 16,137 795 530 1,393 18,855 $ Year ended December 31,2017
	184,290 $	- $

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H. Futures commission income

H. Futures commission income	H. Futures commission income	H. Futures commission income	H. Futures commission income
I. Gains on wealth management-trust income from sales of funds The revenues were collected on a monthly basis in accordance with contract terms. J. Other operating income-handling charge revenue The revenues were collected on a monthly basis in accordance with contract terms. K. Rent income Year ended December 31,2018 Year ended December 31,2017 Subsidiary of the Company: President Futures Corp. 59,190 $ 51,466 $ Year ended December 31,2018 Year ended December 31,2017 Associates: Uni-President Assets Management Corp. 9,453 $ 9,553 $ Year ended December 31,2018 Year ended December 31,2017 Associates: Uni-President Assets Management Corp. 43,461 $ 39,807 $ Period Deposit Year ended December 31, 2018 Year ended December 31, 2017 Subsidiary of the Company Uni-President Enterprises Corp. 2017.06.01~2020.09.30 597 $ $ 3,644 $ 3,556 Others 346 3,288 3,216 Associates: Uni-President Assets Management Corp. 2016.05.01~2019.06.30 530 7,085 7,103 Other related party: President Tokyo Co., Ltd. 2015.04.01~2021.03.31 1,393 9,422 9,422 Total 23,439 $ 23,297 $
		$ 3,644 3,288 7,085 9,422 23,439 $	$ 3,556 3,216 7,103 9,422 23,297 $

Rental income mentioned above is derived from leasing part of the Company’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.

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L. Revenue from providing agency service for stock affairs

Entity having significant influence on the company: Uni-President Enterprises Corp. Subsidiary of the Company Uni-President Enterprises Corp. Associate: Uni-President Assets Management Corp. Other related party: Ton Yi Industrial Corp. President Chain Store Corp. Others Total		Year ended December 31,2018		Year ended December 31,2017
		3,600 $ 68 133 1,708 1,227 3,078 9,814 $		3,659 $ 66 129 1,603 1,225 3,018 9,700 $

M. Gain (loss) from derivatives

M. Gain (loss) from derivatives
N. Other operating expenses-equipment rental and copy expense O. Clearing charges-futures P. Service expense Year ended December31,2018 Other related party: Cayman President Holdings Ltd. 1,584) ($ Year ended December 31,2018 Other related party: President Tokyo Co., Ltd. 7,115 $ Others 1,143 Total 8,258 $ Year ended December 31,2018 Subsidiary of the Company: President Futures Corp. 14,806 $ Year ended December 31,2018 Subsidiary of the Company: President Capital Management Corp. 36,000 $	Year ended December31,2018		Year ended December31,2017
			- $ Year ended December 31,2017

		7,115 $ 1,143 8,258 $ Year ended December 31,2018	6,563 $ 1,302 7,865 $ Year ended December 31,2017
		14,806 $ Year ended December 31,2018	16,342 $ Year ended December 31,2017
		36,000 $	36,000 $

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Q. Financial costs R. Purchases of trading securities–dealer Other related party: Cayman President Holdings Ltd. Entity having significant influence on the company: Uni-President Enterprises Corp. Other related parties: Ton Yi Industrial Corp. President Chain Store Corp. Total Entity having significant influence on the company: Uni-President Enterprises Corp. Other related parties: Ton Yi Industrial Corp. President Chain Store Corp. Total		Year ended December 31,2018	Year ended December 31,2018
		$	66 December 31,	$ 2018	$

Entity having significant influence on the company: Uni-President Enterprises Corp. Other related parties: Ton Yi Industrial Corp. President Chain Store Corp. Total Entity having significant influence on the company: Uni-President Enterprises Corp. Other related parties: Ton Yi Industrial Corp. President Chain Store Corp. Total
	EndingShares
	- - -
	EndingShares
	127 171 -

S. Compensation of key management personnel

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

ere as follows:
Salary and short-term employee benefits Retirement benefits Other long-term employee benefits Termination benefits Share-based payment Total		Year ended December 31,2018		Year ended December 31,2017
		130,701 $ 908 - - - 131,609 $		187,868 $ 1,028 - - - 188,896 $

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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 Financial assets at fair value through other comprehensive income - current - Overseas bonds (par value) 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) Pledged time deposits - Operating guarantee deposits Financial assets at fair value through profit or loss - current: Financial assets at fair value through profit or loss - non-current:	December 31,2018 1,300,000 $ 4,100,000 9,157,965 977,874 307,150 - 19,373 400,000 50,000 - 540,000	December 31,2017 400,000 $ 1,683,000 18,999,562 920,297 - 1,071,360 109,566 400,000 50,000 1,259,648 542,000	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 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 Security deposits

9. SIGNIFICANT COMMITMENTS

None.

10. SIGNIFICANT LOSS FROM NATURAL DISASTER

None.

11. SIGNIFICANT SUBSEQUENT EVENT

None.

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12. OTHER

1) Management objective and policy of financial risks

A. Risk management objective

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

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 Company sets up “Risk Management Policy”. Such policy aims to establish internal system compliance and the guiding tools for policies communication within the Company and enable every layer of the Company 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 Company’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 Company 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

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(E) Risk Control Office implements risk management policy and related regulations and reports to the Risk Management Committee. Risk Control Office also reports daily risk management to the General Manager and is responsible for the following:
- a. Establish Risk Management Policy of the 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
- c. Compliance segment also provides services of Anti-Money Laundering and Counter Terrorism Financing, including designs specification and internal control, establishes transaction monitoring, oversees the effective implementation of business units, conducts the employee training and reports any suspicion of money laundering.
(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.
(J) Settlement division is responsible for:
- a. Clearing and settlement; risk control and management of margin purchase and short sale of securities.
- b. Risk control and management of trading middle office and enforcement of rules governing risk management of business segments.
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 Company sets up “Risk Management Policy”. Such policy aims to establish internal system compliance and the guiding tools for policies communication within the Company and enable every layer of the Company 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

259

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

  - (B) Credit risk management

     - In relation to risk control, the quantitative model of default rate adopts KMV 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 Company’s risk management policies, and the hedging position and hedged trading position are supposed to be one portfolio, of which the gain and loss and risk information are measured on a consolidated basis.
- (B) The overall position (hedging position and trading position) is included in the daily risk management system to calculate Value at Risk and other relevant information. Limit exceeding indicators mainly include nominal principal, stop-loss point, price sensitivity and VaR. With the presentation of daily risk management report, routine control and limit exceeding treatment can be executed.
- (C) The continued effectiveness of hedging and risk-offsetting strategy is measured by the gain and loss of overall position (hedging position and trading position), in order to track reasonableness of the profit or loss of hedging position and the offsetting relationship with the profit or loss of trading position, and to control them within a reasonable range.
2) Credit risk

Effective 2018

A. Source and definition of credit risk

The credit risk exposure of the Company 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 Company failing to repay its obligation due to the fact that the issuer breaches the contract resulting in the risk of financial loss to the Company.
(B) Credit risk of counterparty refers to risk of financial loss to the Company 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 Company which could result in credit risk include bank

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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 parent company only 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 Company 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 Company, and all counterparties of customer margin deposits accounts being financial institutions. Credit risks of various financial assets are as follows:
(A) Cash and cash equivalents

Cash and cash equivalents include time deposit, demand deposits and checking deposits. Correspondent institutions are mainly domestic financial institutions.

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

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

b. Commercial papers

The commercial papers held by the Company are under resale agreements. As all the counterparties are financial institutions with good credit, the credit risk from counterparties is extremely low.

c. 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. 27% of convertible corporate bond is guaranteed by banks. Details are as follows:

(a)Bonds

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

(b) Corporate bonds

The corporate bonds held by the Company 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 Company are mostly issued by the domestic legal entities. The Company 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 Company are mainly underlying investment with good credit rating and those with rating above (S&P BB).

(C) Financial assets at fair value through other comprehensive income - current The foreign government bonds held by the Company are classified as debt instruments at fair value through other comprehensive income. In general, the bonds held by the Company are with lower credit risk.
(D) Derivatives- futures trade margin

When engaging in futures trades in stock exchange market, the Company 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

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risk is low.

(E) Derivatives-OTC

The Company 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(10).

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

(F) Bonds investment under a resale agreement Bonds sold under a resale agreement are the bonds that the client sold to the Company 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 Company 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(10).
(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 Company 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 Company’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 Company’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 Company’s receivables from the consignment businesses and self-operating 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

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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 shortterm 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 Company deposits central government bonds in the Central Bank as collateral. Regardless of the bonds themselves or the financial institutions where the bonds deposited, the credit risk is extremely low.
(M) Other non-current assets
- Other non-current assets mainly comprise operating guarantee deposits, settlement funds, and refundable deposits. Operating guarantee deposits are mainly deposited in domestic banks with good credit rating. Settlement funds are deposited in securities exchange. Settlement funds are used as compensation when a party to a marketable securities transaction fails to fulfil the settlement obligation. The credit risks from the institutions where these two assets are deposited are extremely low. The refundable deposits refer to cash or other assets which are deposited externally by the Company 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. Expected credit loss assessment
In the assessment of impairment and calculation of expected credit losses, the Company considers reasonable and supporting information about past events, current conditions and future economic conditions. The Company determines at the balance sheet date whether there has been a significant increase in credit risk since initial recognition or whether credit impairment has occurred, and recognises expected credit loss according to which stage the asset belongs: no significant increase in credit risk or low credit risk at balance sheet date (Stage 1), significant increase in credit risk (Stage 2), and credit impaired (Stage 3). 12-month expected credit losses are recognised for assets in Stage 1, and lifetime expected credit loses are recognised for assets in Stage 2 and Stage 3.

The definition of and expected credit losses recognised for each stage are as follows:

Item	Stage1	Stage2	Stage 3
Definition	No significant deterioration of credit quality of the financial asset since initial recognition, or the financial asset is considered low-risk at the balance sheetdate.	Significant deterioration of credit quality of the financial asset since initial recognition, but the asset is not yet credit impaired.	The financial asset is credit impaired at the financial reporting date.
Expected credit losses recognition	12-month expected credit losses	Lifetime expected credit losses	Lifetime expected credit losses

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(A) Judgements of the significant increase in credit risk since initial recognition Judgements and assumptions used to determine whether the credit risk has a significant increase since initial recognition when the Company calculates expected credit loss under IFRS 9 are as follows:
a. If contractual payments are over 30 days past due according to the payment terms, the financial asset is considered to have significant increase in credit risk since initial recognition.
b. There is significant increase in credit risk at the reporting date if the credit rating of the issuer has been downgraded by more than 2 grades and the final external credit rating at the reporting date is non-investment grade, if the interest payments are over 30 days past due, or if there has been a default in the past.
(B) Definition of default and credit-impaired financial assets
According to the definition of credit impairment set by IFRS 9, a financial asset is creditimpaired when one or more events that have occurred and have a significant impact on the expected future cash flows of the financial asset. The criteria used to judge whether a financial asset is credit-impaired since initial recognition includes but is not limited to the following:
a. Contractual payments or principal or interest payments on bonds are over 3 months (90 days) past due.
b. Bond investment is rated as “in default” by external credit rating agencies.
c. Bond issuer has filed for bankruptcy, restructure, or other debt clearance procedures.
d. Issuer or counterparty has financial difficulties.
(C) Writing-off policy

If any of the following condition applies, the Company will write off the non-recoverable portion of the overdue receivables as bad debt.

a. Debt cannot be fully or partially recovered due to dissolution of, disappearance of, settlement with, bankruptcy declaration by the debtor, or any other reason.
b. The collateral and the assets of the primary and secondary debtors could not be auctioned off after multiple attempts and multiple price discounts, and the Company has not received any real benefits in assuming the collateral.
c. Payments are over two years past due and could not be recovered after attempts to collect.
(D) Measurement of expected credit losses
The Company considers reasonable supporting information which shows significant increase in credit risk since initial recognition when calculating expected credit losses. Main indexes include: internal/external credit rating, information of past due, credit spread, other market information in relation to the borrower, issuer or counterparty, and significant increase in credit risk of other financial instrument of the same borrower.

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a. Investments in bills and bonds
(a)Probability of default was based on external credit rating, which include forwardlooking information.
(b)Loss given default was based on the average loss given default of external credit rating of investment position and counterparties.
(c)Exposure at default

Stage 1, Stage 2 and Stage 3: Total carrying amount (including interest receivable).

(E)Consideration of forward-looking information
- Historical loss rate (based on the historical experience in the past 3 to 5 years) as obtained and compared with economic environment in the past, nowadays and future (forward-looking factor) to see whether there is any significant change, and then to properly adjust future loss rate standards. If any significant default event occurs, the loss rate in the current year will be included in the calculation of future loss rate standard.
D. Table of movements in loss provision of the Company
(A) For the year ended December 31, 2018, there were no changes in the loss allowance for investments in debt instruments measured at fair value through other comprehensive income.
(B) Except for bond interest receivable which was evaluated along with debt investments, the Company applies the simplified approach to measure the loss allowance at an amount equal to lifetime expected credit losses for marginal receivables, accounts receivable, other receivable-others and overdue receivables. The movements in loss provision of marginal receivables, accounts receivable, other receivable-others and other non-current assetsoverdue receivables of the Company are as follows:

December 31, 2018

At January 1_IAS 39 Adjustments under new standards At January 1_IFRS 9 Provision (reversal of provision) for impairment Transfers At December 31		Marginal receivable		Accounts receivable		Other receivable		Other non- current assets- overdue receivables
	84,093 $ - 84,093 27,996 50,420) ( 61,669 $		4,359 $ - 4,359 2,648 4,346) ( 2,661 $			- $ - - 288 - 288 $		136,443 $ - 136,443 21,866 54,766 213,075 $

3) Liquidity risk

A. Definition and source of liquidity risk Liquidity risk refers to possible financial losses arising from the inability to realise the asset or

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to obtain sufficient fund to fulfil the financial liabilities soon to be matured. Above situations may weaken the sources of cash from the Company’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 Company 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 Company 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 Company.

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

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`December 31, 2018`

Short-term loans 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 Accounts payable (includes notes payable) Collections on behalf of third parties Other payables Other financial liabilities -current Total Financial liabilities at fair value through profit or loss-current		Immediately		Less than 3 months		3-12 months	1-5years - $ - - - - - - - 87,780 - - 87,780 $	Total
		623,514 $ 598,457 267,073 - 1,767,269 2,007,202 - 7,275,941 268,589 648 - 12,808,693 $		316,365 $ - - 15,134,144 - - 621 17,006 4,664 129,223 1,378,506 16,980,529 $		- $ - - - - - - - - 660,498 1,308,503 1,969,001 $		939,879 $ 598,457 267,073 15,134,144 1,767,269 2,007,202 621 7,292,947 361,033 790,369 2,687,009
								31,846,003 $

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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 Accounts payable (includes notes payable) Collections on behalf of third parties Other payables Other financial liabilities -current Total Financial liabilities at fair value through profit or loss-current		Immediately		Less than 3 months	3-12 months	1-5years - $ - - - - - - - - 89,469 - - 89,469 $	Total
		3,814,864 $ 650,000 350,526 855,338 - 1,861,947 2,197,656 - 8,443,584 340,747 - - 18,514,662 $		2,467,104 $ 3,000,000 - - 20,984,849 - - 224,317 16,008 5,964 132,664 1,745,075 28,575,981 $	- $ - - - - - - 1,078 - - 943,250 1,454,223 2,398,551 $		6,281,968 $ 3,650,000 350,526 855,338 20,984,849 1,861,947 2,197,656 225,395 8,459,592 436,180 1,075,914 3,199,298
							49,578,663 $

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D. Maturity analysis for lease contracts and capital expenditures
Operating lease commitment is the total minimum lease payments that the Company 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 Company:

ent of the Company:
December 31,2018 Not later than one year Later than one year but not later than five years Over five years Total December 31,2017 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)
	76,982 $ 123,565 2,808 203,355 $ Operating leases expenditures(Lessee)	12,633 $ 3,882 - 16,515 $ Operating leases income(Lessor)
	76,162 $ 181,554 3,402 261,118 $	26,257 $ 13,213 - 39,470 $

4) Market risk

A. Definition of market risk

Market risk refers to the risk of decrease in the Company’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 Company 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 Company 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 Company. 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 75,324 $ 142,356 81,328 39,969 Share ownership 52,543 $ 264,509 111,320 27,951 Share ownership 73,897 $ 146,524 73,721 26,568

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, 2018 and 2017 ：

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Financial assets in foreign currencies Cash and cash equivalents Financial assets at fair value through profit or loss Financial assets at fair value through comprehensive income - current Bonds purchased under resale agreements Investments under equity method Others Financial liabilities in foreign currencies Short-term loans Financial liabilities at fair value through profit or loss Bonds sold under repurchase agreements Others			December 31,2018	December 31,2018	December 31,2018
	USD 350,128 $ 7,249,134 296,304 93,193 2,298,272 257,087 939,879 159,839 6,980,674 1,461,060	EUR 1,378 $ 1,368,025 - - - 3,609 - 1,479 1,167,834 -	AUD 2,651 $ 755,860 - - - 4,570 - 1 700,087 2,691	RMB 3,237 $ 1,827,805 - - - 43,961 - 6,433 819,621 206,660	HKD 433 $ 63,507 - - 72,792 2,287 - - - 1,493	Others 186,763 $ 1,707 - - - - - 5,137 - -	Total
							544,590 $ 11,266,038 296,304 93,193 2,371,064 311,514 939,879 172,889 9,668,216 1,671,904

Note: As of December 31, 2018, foreign exchange rates of the above currencies to TWD were 1 USD = 30.715 TWD; 1 EUR= 35.200 TWD; 1 AUD= 21.665 TWD; 1 RMB= 4.472 TWD; and 1 HKD= 3.921 TWD, respectively.

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Financial assets in foreign currencies Cash and cash equivalents Financial assets at fair value through profit or loss Available-for-sale financial assets - current Investments under equity method Others Financial liabilities in foreign currencies Short-term loans Financial liabilities at fair value through profit or loss Bonds sold under repurchase agreements Others			December 31,2017	December 31,2017	December 31,2017
	USD 980,198 $ 12,550,717 1,044,031 2,177,269 2,510,440 5,335,968 67,793 11,692,454 1,625,530	EUR 61,768 $ 5,627,013 - - 161,504 - 6,105 4,963,725 145,662	AUD 2,320 $ 2,007,103 - - 53,706 - 2,206 1,819,404 50,254	RMB 196,438 $ 3,991,806 - - 97,594 - 230,014 351,367 665,203	HKD 288,493 $ 256,286 - 68,782 13,497 - 115 - 19,129	Others 107,825 $ 49,968 - - - - 1,155 - 2,542	Total
							1,637,042 $ 24,482,893 1,044,031 2,246,051 2,836,741 5,335,968 307,388 18,826,950 2,508,320

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.

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D. The total exchange gain (loss), including realised and unrealised, arising from significant foreign exchange variation on the monetary items held by the Company for the years ended December 31, 2018 and 2017, amounted to $28,872 and ($476,136), respectively.
5) Fair value and hierarchy information
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 Company’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, 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.

	December 31,2018	December 31,2018	Significant non-observable inputs(level 3)
Total 663,672 $	Quoted prices of the same assets in active markets (level 1)	Other significant observable inputs (level 2)
			- $ Significant non-observable inputs(level 3)
Total 674,449 $	Quoted prices of the same assets in active markets (level 1)	Other significant observable inputs (level 2)
	- $	674,449 $	- $

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

B. Valuation techniques
(A)For financial instruments held for trading purposes which are classified as non-derivative instruments, their fair values are based on their quoted prices in an active market. If there is no quoted market price for reference, a valuation technique will be adopted to measure the fair value. Estimates and assumptions of valuation technique adopted by the Company 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 Company. 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 Company 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 Company’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 Company such as emerging stock without active markets, off-the-run issue of government bonds, corporate bonds, bank debentures, convertible corporate bonds, currency swaps, interest rate swaps, options, asset swaps, and most derivatives are all classified within level 2. For the years ended December 31, 2018 and 2017, there was no significant transfer of financial instruments between Level 1 and Level 2.
- c. Level 3 Unobservable inputs for the assets or liability. The fair value of the Company’s investment in unlisted stocks is included in Level 3.

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(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 Financial assets at fair value through comprehensive income-current Bond investments Financial assets at fair value through profit or loss - noncurrent Stock investments Bond investments Financial assets at fair value through comprehensive income-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	31,2018
	Total 1,811,467 $ 18,173,118 4,528,698 296,304 16,445 49,909 146,545 598,457 2,288,727 267,073	Level 1 1,794,143 $ 1,064,491 4,528,698 296,304 - - - 598,457 2,285,427 242,383	Level 2 17,324 $ 17,108,627 - - - 49,909 - - 3,300 24,690	Level3
				- $ - - - 16,445 - 146,545 - - -

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Financial instrument items measured at fair value Recurring fair value Non-derivative financial instruments Assets Financial assets at fair value through profit or loss-current Stock investments Bond investments Others Available-for-sale financial assets-current Bond investments Financial assets at fair value through profit or loss - noncurrent Bond 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	31,2017
	Total 5,992,547 $ 26,913,464 3,007,585 1,044,031 50,342 350,526 1,891,603 855,338	Level 1 5,987,352 $ 746,714 3,007,585 1,044,031 - 350,526 1,871,560 608,710	Level 2 5,195 $ 26,166,750 - - 50,342 - 20,043 246,628	Level3
				- $ - - - - - - -

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31, 2018:
		Year ended December 31,2018
Financial assets at fair value through profit or loss - non-current Equity investments Financial assets at fair value through other comprehensive income - non-current Equity investments	January1	Valuation amount		Increased		Decreased		December 31
		Recorded in profit or loss	Recorded in other comprehensive income(loss)	Acquired/ Issued	Transfers into level 3	Sold/ Settled	Transfers out from level 3
	20,147 $ 134,238	3,702) ($ -	- $ 12,307	- $ -	- $ -	- $ -	- $ -	16,445 $ 146,545

(D) The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

value measurement:
December 31,2018	Fair value	Valuation technique	Significant unobservable input	(weighted average)	Relationship of inputs to fair value
Financial assets at fair value through profit or loss - non-current Venture capital shares Financial assets at fair value through other comprehensive income - non-current Unlisted stocks	16,445 146,545	Net asset value Market approach	Not applicable Price to earnings ratio multiple Discount for lack of marketability	Not applicable 1.91~2.05 30%	Not applicable The higher the multiple,the higher the fair value The higher the discount for lack of marketability, the lower the fair value

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(E)Valuation process for fair value at Level 3
The parent company’s risk management department is responsible for the verification of fair value categorised in Level 3. The department assesses the independence, reliability, consistency and representativeness of the source information, regularly verifies the valuation models and calibrates the parameters to ensure the valuation process and results are in compliance with IFRSs.
(F) For the fair value measurement of Level 3, the sensitivity analysis of the fair value to the reasonable alternative hypothesis shows that the fair value measurement of the financial assets by the Company is reasonable. However, use of different valuation models or assumptions may result in different measurement. The following is the impact to profit or loss or to other comprehensive income from financial assets and liabilities categorised within Level 3 if the inputs used in valuation models have changed up or down by 1%:

December 31,2018	Recognised inprofit or loss	Recognised inprofit or loss	Recognised in other comprehensive income	Recognised in other comprehensive income
	Favourable change	Unfavourable change	Favourable change	Unfavourable change
Financial assets at fair value through profit or loss -non-current Venture capital shares Financial assets at fair value through other comprehensive income - non-current Unlisted stocks	Not applicable -	Not applicable -	- 1,465	- 1,465) (

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 Company 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 Company 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 Company 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%.

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(C) Both the risk limits and economic capital of the Company should be agreed by the Board of Directors. The Company 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 Company is actively engaged in development of various businesses and continually increases profit, creates company value, and complies with the capital management objective.

The Company 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 December 31,2018 and 2017, the capital adequacy ratios were 567% and 417%, 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 parent company only financial statements on a semiannual basis.
A. Balance sheet of trust accounts

inancial statements on a semiannual basis. . Balance sheet of trust accounts
Trust assets December 31,2018 Bank savings 179,211 $ Structured notes 380,552 Stock 187,279 Bond 252,251 Fund 2,019,812 Securities lending 164,989 Accounts receivable 29,429 Total of trust assets 3,213,523 $ Trust liabilities December 31,2018 Accounts payable 4,862 $ Trust capital 3,574,783 Retained earnings 366,122) ( Total of trust liabilities 3,213,523 $	December 31,2017
	209,606 $ 362,297 488,210 8,044 2,097,002 383,355 23,943
	3,572,457 $
	December 31,2017
	37,124 $ 3,346,934 188,399
	3,572,457 $

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B. Income statement of trust accounts

Year ended December 31, Year ended December 31,

B. Income statement of trust accounts	Year ended December 31,		Year ended December 31,
Item Trust income Interest income Cash dividends received Income from stocks lending Investment gains - realised Investment (losses) gains - unrealised Subtotal Trust expenses Management fee Service fee Borrowing costs Remittance fee Income before income tax Income tax expense Net income	2018		2017
	8,028 $ 11,334 117,957 556 387,327) ( 249,452) ( - 18) ( 4,041) ( 1) ( 253,512) ( 5) ( 253,517) ($	75 $ 15,116 16,110 61,346 141,135 233,782 1 3) ( 2,781) ( 1) ( 230,998 - 230,998 $

C. Property list of trust accounts

C. Property list of trust accounts
Item Bank savings Structured notes Funds Bond Stock Securities lending Others Total	December 31,2018 179,211 $ 380,552 2,019,812 252,251 187,279 164,989 29,429 3,213,523 $	December 31,2017
		209,606 $ 362,297 2,097,002 8,044 488,210 383,355 23,943
		3,572,457 $

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8) Effects on initial application of IFRS9 and information on application of IAS 39 in 2017 A.Summaries of adopting significant accounting policies in 2017
(A) 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.
(B)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 Company 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

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

(C) 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.
(D) Impairment of financial assets
a.The Company 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 Company uses to determine whether there is an objective evidence of an impairment loss is as follows:
(a)Significant financial difficulty of the issuer or debtor;
(b)A breach of contract, such as a default or delinquency in interest or principal payments;
(c)The Company, 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

282

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 Company 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.
B. The reconciliations of carrying amount of financial assets transfered from December 31, 2017, IAS 39, to January 1, 2018, IFRS 9, were as follows:

(Blank below)

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Financial assets at fair value through profit or loss - noncurrent Add: Equity investments Transferred in from financial assets at cost (IAS 39) Financial assets at fair value through other comprehensive income - current Add: Debt investments Transferred in from available-for-sale financial assets (IAS 39) Financial assets at fair value through other comprehensive income - noncurrent Add: Equity investments Transferred in from financial assets at cost (IAS39)	IAS 39 December 31, 2017 Carryingamount	Reclassifications	Remeasurements	IFRS 9 January 1, 2018 Carryingamounts	Effects	Effects
					January 1, 2018 Retained earnings	January 1, 2018 Other equityinterest
	50,342 $ - 50,342 $ - $ - - $ - $ - - $	- $ 2,609 2,609 $ - $ 1,044,031 1,044,031 $ - $ 6,449 6,449 $	- $ 17,538 17,538 $ - $ - - $ - $ 127,789 127,789 $	50,342 $ 20,147 70,489 $ - $ 1,044,031 1,044,031 $ - $ 134,238 134,238 $	- $ 17,538 17,538 $ - $ - - $ - $ - - $	- $ - - $ - $ - - $ - $ 127,789 127,789 $

a. Debt instruments within "Available-for-sale" under IAS 39, which amounted to $1,044,031, were reclassified as "Financial assets at fair value through other comprehensive income (debt instruments)" at initial adoption of IFRS 9 as they met the condition that their cash flows are solely payments of principal and the interest on outstanding principal and the objective to hold them is to collect cash flow and to sell.
b. Equity instruments within "Financial assets at cost" under IAS 39 which amounted to $6,449 were elected by the Company to be reclassified as "Financial assets at fair value through other comprehensive income (equity instruments)" at initial adoption of IFRS 9 as they were not held for trading purposes. "Financial assets at fair value through other comprehensive income (equity

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instruments)" was increased by $134,238, and other equity was increased by $127,789.

c. Equity instruments within "Financial assets at cost" under IAS 39, which amounted to $2,609, were reclassified as "Financial assets at fair value through profit or loss (equity instruments)" in compliance with IFRS 9. "Financial assets at fair value through profit or loss (equity instruments)" was increased by $20,147 and retained earnings was increased by $17,538.

(Blank below)

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C. The significant accounts as of December 31, 2017 is as follows:
(A)Financial assets at fair value through profit or loss

significant accounts as of December 31, 2017 is as follows: Financial assets at fair value through profit or loss
Current items: Open-ended funds and money market instruments and securities investment by brokers Open-ended mutual funds beneficiary certificates Adjustment of open-ended funds and money market instruments and securities investment by brokers Total Trading securities-dealer Listed (TSE and OTC) stocks Government bonds Corporate bonds Convertible corporate bonds Emerging stocks Overseas stocks Exchange-traded funds Others Subtotal Adjustment of trading securities - dealer Total Trading securities-underwriter Listed (TSE and OTC) stocks Convertible corporate bonds Subtotal Adjustment of trading securities - underwriter Total	December 31,2017
	434,960 $ 651
	435,611
	2,596,657 1,699,413 4,383,130 441,134 37,878 20,426,840 1,976,561 525
	31,562,138 255,704
	31,817,842
	613,026 327,788
	940,814 137,563
	1,078,377

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		December 31,2017	December 31,2017
Trading securities-hedging
Listed (TSE and OTC) stocks			2,064,014
Convertible corporate bonds			13,182
Warrants			104,756
Overseas stocks			-
Exchange-traded funds			477,618
Subtotal			2,659,570
Adjustment of trading securities - hedging	(		77,804)
Total			2,581,766
Options bought-futures			14,644
Futures guarantee deposits receivable			1,856,916
Derivative financial instrument assets-OTC			20,043
Total	$		37,805,199
		December 31,2017
Non-current items:
Trading securities - dealer - government bonds	$		50,076
Adjustment of trading securities			266
Total	$		50,342
Available-for-sale financial assets
		December 31,2017
Current items:
Trading securities-dealer
Overseas bonds		$	1,036,521
Adjustment of trading securities - dealer			7,510
Total		$	1,044,031
Financial assets at cost-non-current
		December 31,2017
Taiwan Depository & Clearing Corp.	$		2,450
Taiwan Futures Exchange			4,000
Hua Liu Venture Capital Corporation			2,608
Total	$		9,058

(B)Available-for-sale financial assets

(C)Financial assets at cost-non-current

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 been completed and reported to the Taipei District Court. The Company had collected $1,128 as remaining assets based on shareholding ratio.

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(D)Gain on trading of securities

With respect to information shown in Note 6(30), amounts recognised for trading of securities generated from available-for-sale financial assets for the year ended December 31, 2017 was $9,448.

D.Credit risk for December 31, 2017 was as follows:
(A) Source and definition of credit risk

The credit risk exposure of the Company 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 Company failing to repay its obligation due to the fact that the issuer breaches the contract resulting in the risk of financial loss to the Company.
b.Credit risk of counterparty refers to risk of financial loss to the Company 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 Company 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 parent company only 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 Company 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 Company, and all counterparties of customer margin deposits accounts being financial institutions. Credit risks of various financial assets are as follows:
a.Cash and cash equivalents

Cash and cash equivalents include time deposit, demand deposits and checking deposits. Correspondent institutions are mainly domestic financial institutions.

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

The funds held by the Company 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 were guaranteed by banks at

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December 31, 2017. Details are as follows:

i.Bonds

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

ii.Corporate bonds

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

iiii.Foreign bonds

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

c.Available-for-sale financial assets-current

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

d.Derivatives- futures trade margin

e.Derivatives-OTC

Types of OTC derivative transactions in which the Company 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

Bonds sold under a resale agreement are the bonds that the client sold to the Company 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 Company needs to assume credit risk from counterparties when underwriting such business, as the payment being delivered to

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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 Company 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 Company’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 Company’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 Company’s receivables from the consignment businesses and self-operating 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 shortterm 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 Company deposits central government bonds in

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the Central Bank as collateral. Regardless of the bonds themselves or the financial institutions where the bonds deposited, the credit risk is extremely low.

m.Other non-current assets

Other non-current assets mainly comprise operating guarantee deposits, settlement funds, and refundable deposits. Operating guarantee deposits are mainly deposited in domestic banks with good credit rating. Settlement funds are deposited in securities exchange. Settlement funds are used as compensation when a party to a marketable securities transaction fails to fulfil the settlement obligation. The credit risks from the institutions where these two assets are deposited are extremely low. The refundable deposits refer to cash or other assets which are deposited externally by the Company 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 Company’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 Company 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).

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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 table of the credit quality of financial assets

As of December 31, 2017

As of December 31, 2017
Financial assets		Normal assets	High risk	Impaired	Provisions	Total	Recognised losses	Net
	Low risk	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 Margin loans receivable Refinancing security deposits Receivables from refinance guaranty Receivables from security lending Security lending deposits Notes receivable Accounts receivable Accounts receivable-related parties Other receivables Other current assets Financial assets at fair value through profit or loss-non current Other assets-non current Total	4,036,047 $ 310,278 26,527,537 14,644 1,856,916 20,043 1,044,031 11,449,543 79,350 67,160 88,318 745,882 1,365 10,748,383 5,546 8,005 783,916 50,342 947,540 58,784,846 $	289 $ - 325,859 - - - - - - - - - - - - - - - - 326,148 $	- $ - 60,068 - - - - - - - - - - - - - - - - 60,068 $	- $ - - - - - - - - - - - - - - - - - - - $	- $ - - - - - - 50,420 - - - - - 4,359 - - - - 136,443 191,222 $	4,036,336 $ 310,278 26,913,464 14,644 1,856,916 20,043 1,044,031 11,499,963 79,350 67,160 88,318 745,882 1,365 10,752,742 5,546 8,005 783,916 50,342 1,083,983 59,362,284 $	- $ - - - - - - 84,093 - - - - - 4,359 - - - - 136,443 224,895 $	4,036,336 $ 310,278 26,913,464 14,644 1,856,916 20,043 1,044,031 11,415,870 79,350 67,160 88,318 745,882 1,365 10,748,383 5,546 8,005 783,916 50,342 947,540 59,137,389 $

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13. OTHER DISCLOSURE ITEMS

1) Information about significant transactions

A. Lending to others: Excluding security margin trading and conditional bond trading business, there is no lending of funds to either the shareholders or other parties.
B. Endorsements and guarantees for others ： None.
C. Acquisitions of real estate exceeding $300 million or 20 percent of contributed capital ： None.
D. Disposals of real estate exceeding $300 million or 20 percent of contributed capital ： None.
E. Purchases or sales transactions discount on brokers’ charges with related parties in excess of $5 million ： None.
F. Receivables from related parties exceeding $100 million or 20 percent of contributed capital ： None.
G. Significant transactions between parent company and subsidiaries are provided in Note 7.

2) Related information of investee companies

A. Related information of investee companies

293

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 December 31,2018 Original in	Balance on December 31, 2017 vestment	EndingBalance	EndingBalance		Revenue of investee company	Net income (loss) of investee company	Investment income (loss) recognised by the Company	Cash dividends	Notes
								Shares 63,817,303 17,400,000 10,000,000 67,746,000 14,904,630 1,000,000	Percentage 96.69% 100.00% 5.19% 100.00% 42.46% 100.00%	Book vlaue
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.	Taipei Taipei Hong Kong British Virgin Islands Taipei Taipei	1994.03.01 1997.04.15 1994.07.26 1998.02.26 2000.08.18 2008.04.29	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)	Futures brokerage Securities investment consulting Securities dealer, brokerage, underwriting and consulting Securities investment and holding company Investment Trust Insurance Agent	644,650 $ 200,000 34,030 2,264,573 667,622 10,000	644,650 $ 200,000 34,030 2,264,573 667,622 10,000			1,935,207 $ 194,831 72,792 2,298,272 569,230 31,911	921,841 $ 43,034 185,365 - 791,291 54,159	221,008 $ 2,167) ( 36,883 52,981 239,809 14,048	213,699 $ 2,167) ( 1,914 52,981 101,504 14,048	121,253 $ 704 - - 72,511 14,167	Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Associates Subsidiary of the Company

294

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 December 31,2018 Original in	Balance on December 31, 2017 vestment	EndingBalance	EndingBalance		Revenue of investee company	Net income (loss) of investee company	Investment income (loss) recognised by the Company	Cash dividends	Notes
								Shares 30,000,000 12,000 182,600,000 23,400,000 1,000,000	Percentage 100.00% 0.03% 94.81% 100.00% 100.00%	Book vlaue
President Securities Corp. President Insurance Agency Corp. President Securities (BVI) Ltd.	PSC Venture Capital Investment Limited Company Uni-President Asset Management Corp. President Securities (HK) Ltd. President Wealth Management (HK) Ltd. President Securities (Nominee) Ltd.	Taipei Taipei Hong Kong Hong Kong Hong Kong	2013.10.29 2000.08.18 1994.07.26 2002.03.31 1999.08.06	2013.08.08 Jing- Guan-Zheng-Chuan Letter No.1020028529 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	Consultation of investment management and venture capital; other unprohibited or unrestricted businesses beyond the permit Investment Trust Securities dealer, brokerage, underwriting and consulting Wealth management Nominee Service	300,000 478 814,705 92,091 3,403	300,000 478 814,705 92,091 3,403			245,072 463 1,329,739 58,711 1,936	3,760) ( 791,291 185,365 - -	2,704) ( 239,809 36,883 532 74) (	2,704) ( 82 34,969 532 74) (	- 58 - - -	Subsidiary of the Company Associates Subsidiary of the Company Indirect subsidiary of the Company Indirect subsidiary of the Company

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.

295

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 million or 20 percent of contributed capital ： None.
E. Disposals of real estate exceeding $300 million or 20 percent of contributed capital ： None.
F. Purchases or sales transactions discount on brokers’ charges with related parties in excess of $5,000,000 ： None.
G. Receivables from related parties exceeding $100 million or 20 percent of contributed capital ： None.
H. Accordance with Jin-Guan-Zheng-Quan-Zi Letter No. 10300375782, the Company is required to disclose details of businesses run by foreign enterprises that were incorporated in the countries identified as non-signatories to the IOSCO MMoU or have not obtained securities or futures license of signatories to the IOSCO MMoU ：
a) Securities held as of December 31, 2018 of President Securities (BVI) Ltd ：

296

Securities types and name	Type	Number of shares	Carryingvalue	Carryingvalue	Expressed in U.S. Dollars Fair vaule	Expressed in U.S. Dollars Fair vaule
			Unit price 0.929 $ 0.237 $ 0.082 0.063	Amount	Unitprice	Amount
Financial assets at fair value through profit or loss - current	Zero-Coupon Bond STOCK STOCK STOCK	4,340,000 $ 182,600,000 23,400,000 1,000,000		4,030,558 $ 43,292,815 $ 1,911,477 63,046 45,267,338 $	0.942 $ 0.237 $ 0.082 0.063	4,090,016 $ 43,292,815 $ 1,911,477 63,046 45,267,338 $
Open-end funds, mony market instruments and securities investment by brokers: United States of America DL-Zero Principal 15.5.2021 Investments in associates
President Securities (HK) Ltd. President Wealth Management (HK) Ltd. President Securities (Nominee) Ltd. Total

b) Derivative financial instrument transactions and the source of capital of President Securities (BVI) Ltd.: None.

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

297

d) Balance sheets

PRESIDENT SECURITIES (BVI) LTD. BALANCE SHEETS DECEMBER 31, 2018 AND 2017

Assets		December 31,2018	December 31,2018	December 31,2018		December 31,2017	December 31,2017	December 31,2017	Liabilities and shareholders’equity		December 31,	December 31,	2018		Expressed in U.S. dollars December 31,2017	Expressed in U.S. dollars December 31,2017	Expressed in U.S. dollars December 31,2017
		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		25,277,023 $ 4,090,016 194,910 29,561,949 45,267,338 74,829,287 $		34 6 - 40 60 100		24,810,955 $ 4,051,954 117,323 28,980,232 44,184,266 73,164,498 $		34 6 - 40 60 100	Current liabilties Other payables Total liabilities Shareholders’equity Share capital Capital reserve Retained earnings Retained earnings Other equity Exchange differences on translation of foreign financial statements Total shareholders’ equity Total liabilities and shareholders’ equity		3,563 $ 3,563 67,746,000 757,813 6,016,267 305,644 74,825,724 74,829,287 $		- - 91 1 8 - 100 100		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

298

PRESIDENT WEALTH MANAGEMENT (HK) LTD. BALANCE SHEETS

DECEMBER 31, 2018 AND 2017

Assets		December 31,2018	December 31,2018	December 31,2018		December 31,2017	December 31,2017	December 31,2017	Liabilities and shareholders’equity		December 31,	December 31,	2018		Expressed in HK dollars December 31,2017	Expressed in HK dollars December 31,2017	Expressed in HK dollars December 31,2017
		Amount		%		Amount		%			Amount		%		Amount		%
Current assets Cash and cash equivalents Other receivables Total current assets Total assets		14,943,066 $ 50,492 14,993,558 14,993,558 $		100 - 100 100		14,832,782 $ 21,795 14,854,577 14,854,577 $		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	20,075 $ 20,075 23,400,000 8,426,517) ( 14,973,483 14,993,558 $		- - 156 56) ( 100 100		19,410 $ 19,410 23,400,000 8,564,833) ( 14,835,167 14,854,577 $		- - 158 58) ( 100 100

299

PRESIDENT SECURITIES (NOMINEE) LTD. BALANCE SHEETS DECEMBER 31, 2018 AND 2017

Assets		December 31,2018	December 31,2018	December 31,2018		December 31,2017	December 31,2017	December 31,2017	Liabilities and shareholders’equity		December 31,	December 31,	2018		Expressed in HK dollars December 31,2017	Expressed in HK dollars December 31,2017	Expressed in HK dollars December 31,2017
		Amount		%		Amount		%			Amount		%		Amount		%
Current assets Cash and cash equivalents Other receivables Total current assets Total assets		509,539 $ 1,516 511,055 511,055 $		100 - 100 100		528,954 $ 674 529,628 529,628 $		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	17,190 $ 17,190 1,000,000 506,135) ( 493,865 511,055 $		3 3 196 99) ( 97 100		16,620 $ 16,620 1,000,000 486,992) ( 513,008 529,628 $		3 3 189 92) ( 97 100

300

e) Statements of comprehensive income

PRESIDENT SECURITIES (BVI) LTD. STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

							Expressed in U.S. dollars	Expressed in U.S. dollars	Expressed in U.S. dollars
		December 31,2018					December 31,2017
Accounts		Amount		%			Amount		%
Expenditures
Employee benefits	($	49,965)	(		3)	($	50,243)	(	1)
Other operating expenses	(	18,427)	(		1)	(	17,541)	(	1)
Total expenditures and expenses	(	68,392)	(		4)	(	67,784)	(	2)
Non-operating gains and losses
Share of the profit or loss of associates and joint
ventures accounted for using the equity method		1,174,066			67		2,391,353		67
Other gains and losses		650,116			37		1,247,468		35
Total non-operating gains and losses		1,824,182			104		3,638,821		102
Profit before tax		1,755,790			100		3,571,037		100
Income tax expense		-			-		-		-
Net income	$	1,755,790			100	$	3,571,037		100

301

PRESIDENT WEALTH MANAGEMENT (HK) LTD STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

							Expressed	in HK dollars
		December 31,2018				December 31,2017
Accounts		Amount		%		Amount		%
Expenditures
Other operating expenses	($	41,570)	(	30)	($	39,920)	(	129)
Total expenditures and expenses	(	41,570)	(	30)	(	39,920)	(	129)
Non-operating gains and losses
Other gains and losses		179,886		130		70,824		229
Profit before tax		138,316		100		30,904		100
Income tax expense		-		-		-		-
Net income	$	138,316		100	$	30,904		100

302

President Securities (Nominee) Ltd. STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

						Expressed	in HK dollars
		December 31,2018				December 31,2017
Accounts		Amount		%		Amount	%
Expenditures
Other operating expenses	($	24,590)		128	($	24,660)	110
Total expenditures and expenses	(	24,590)		128	(	24,660)	110
Non-operating gains and losses
Other gains and losses		5,447	(	28)		2,152 (	10)
Loss before tax	(	19,143)		100	(	22,508)	100
Income tax expense		-		-		-	-
Net loss	($	19,143)		100	($	22,508)	100

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, 2018	Increase of working capital	Deduction of working capital	Balance on December 31, 2018
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	-	($ 5,630)	-	-	-	-	-	-

Note 1: Operating expenses generated by the representative office.

4) Disclosure of investment in Mainland China ： Not applicable

303

PRESIDENT SECURITIES CORPORATION AND

SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2018 AND 2017

304

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR18002107

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 subsidiaries as at December 31, 2018 and 2017, 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 subsidiaries as at December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Firms”, and “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 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.

305

Key audit matters

Key audit matters are those matters that, in our professional judgement, 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 are as follows:

Fair value measurement of unlisted stocks without active market

Description

Please refer to Note 4(8) for the accounting policies on unlisted stocks without active market (shown as “financial assets at fair value through other comprehensive income”) and Note 5(2) for details of critical accounting judgements, estimates and assumption uncertainty. As at December 31, 2018, the unlisted stocks without active market held by the President Securities Corporation and subsidiaries totalled $604,579 thousand and were shown as “financial assets at fair value through other comprehensive income” (Level 3 fair value).

Due to the lack of an active market, the fair value of the unlisted stocks held by the President Securities Corporation and subsidiaries was determined using valuation method. Management measured their fair value by using comparable listed companies in the market approach. The main assumption of the market approach is calculation based on the latest published price-to-book ratio of comparable listed companies in similar industries, and considering discounts on market liquidity or risk particularity.

Above-mentioned estimation of fair value involves various assumptions and material unobservable inputs, which has high uncertainty and relies on the subjective judgement of management. Any changes in judgements and estimates may affect the ultimate result of accounting estimates and have an impact on the financial statements of the President Securities Corporation and subsidiaries. Thus, we have included the fair value measurement of unlisted stocks without active market as a key audit matter in our audit.

How our audit addressed the matter

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

Obtained an understanding and assessed policy documents, internal control system, fair value measurement models and approval processes that are related to fair value measurement of

306

unlisted stocks;

Ascertained whether the measurement methods used by the management is commonly used by the industry;
Assessed the reasonableness of parameter of similar companies used by management;
Examined inputs and calculation formulas used in valuation models and agreed such data to supporting documents.

Impairment assessment of investments accounted for under equity method

Description

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

President Securities Corporation and subsidiaries held 42.49% of equity of Uni-President Asset Management Corp. which was accounted for under equity method. As of December 31, 2018, the amount was $569,693 thousand. Impairment assessment is based on the expected future cash flow of the security brokerage segment, discounted at an appropriate discount rate, to measure the recoverable amount of the cash generating unit.

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 valuation expert who was commissioned by the management;
2.Assessed the reasonableness of expected future cash flows, 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

307

statements of President Securities Corporation, as at and for the years ended December 31, 2018 and 2017.

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 Preparation of Financial Reports by Securities Firms”, “Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants”, and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statement 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 subsidiaries’ 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 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 subsidiaries’ 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.

308

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

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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 subsidiaries’ internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on President Securities Corporation and subsidiaries’ 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 subsidiaries to cease to continue as a going concern.
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.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within President Securities Corporation and 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.

309

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.

Lin, Se-Kai

Independent Accountants

Hsiao, Chin-Mu

For and on behalf of PricewaterhouseCoopers, Taiwan March 22, 2019

------------------------------------------------------------------------------------------------------------------------------------------------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.

310

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Assets	December 31, 2018 AMOUNT % `$` `5,932,669` `9` `27,680,473` `39` `296,304` `1` `-` `-` `93,193` `-` `8,020,488` `11` `4,402` `-` `8,387` `-` `11,591,302` `17` `78,316` `-` `785,431` `1` `1,185` `-` `8,726,852` `12` `19,116` `-` `31,973` `-` `5,542` `-` `1,640,223` `2` `64,915,856` `92` `66,354` `-` `-` `-` `604,579` `1` `569,693` `1` `2,442,370` `4` `274,703` `-` `124,210` `-` `125,448` `-` `1,258,060` `2` `5,465,417` `8` `$` `70,381,273` `100`	December 31, 2017	December 31, 2017
	AMOUNT `$` `5,932,669` `27,680,473` `296,304` `-` `93,193` `8,020,488` `4,402` `8,387` `11,591,302` `78,316` `785,431` `1,185` `8,726,852` `19,116` `31,973` `5,542` `1,640,223` `64,915,856` `66,354` `-` `604,579` `569,693` `2,442,370` `274,703` `124,210` `125,448` `1,258,060` `5,465,417` `$` `70,381,273`	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`	%
110000 Current assets 111100 Cash and cash equivalents 112000 Financial assets at fair value through profit or loss - current 113200 Financial assets at fair value through other comprehensive income - 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 123200 Financial assets at fair value through other comprehensive income - noncurrent 124100 Investments accounted for under equity method 125000 Property and equipment, net 126000 Investment property 127000 Intangible assets 128000 Deferred tax assets 129000 Other assets - noncurrent 120000 Total noncurrent assets 906001 Total Assets			`8` `45` `-` `1` `-` `13` `-` `-` `11` `-` `1` `-` `13` `-` `-` `-` `2`
			`94`
			`-` `-` `-` `1` `3` `-` `-` `-` `2`
			`6`
			`100`

(Continued)

311

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	December 31, 2018 December 31, 2017 AMOUNT % AMOUNT % `$` `939,879` `1 $` `6,445,318` `8` `-` `-` `3,649,631` `4` `866,097` `1` `1,206,401` `1` `15,066,599` `21` `20,911,658` `24` `1,767,269` `3` `1,861,947` `2` `2,007,202` `3` `2,197,656` `3` `621` `-` `225,395` `-` `11,574,634` `16` `9,892,808` `12` `8,289,115` `12` `9,280,487` `11` `975` `-` `955` `-` `362,578` `1` `439,578` `1` `916,900` `1` `1,185,207` `1` `2,687,009` `4` `3,199,298` `4` `136,729` `-` `292,629` `-` `21,281` `-` `11,952` `-` `44,636,888` `63` `60,800,920` `71` `16,073` `-` `15,939` `-` `15,865` `-` `59,873` `-` `31,938` `-` `75,812` `-` `44,668,826` `63` `60,876,732` `71` `13,904,281` `20` `13,904,281` `16` `142,702` `-` `142,702` `-` `2,755,737` `4` `2,503,765` `3` `6,945,453` `10` `6,373,559` `7` `1,278,472` `2` `2,519,721` `3` `619,340` `1 (` `58,374)` `-` `25,645,985` `37` `25,385,654` `29` `66,462` `-` `49,308` `-` `25,712,447` `37` `25,434,962` `29` `$` `70,381,273` `100 $` `86,311,694` `100`	December 31, 2017
	AMOUNT `$` `939,879` `-` `866,097` `15,066,599` `1,767,269` `2,007,202` `621` `11,574,634` `8,289,115` `975` `362,578` `916,900` `2,687,009` `136,729` `21,281` `44,636,888` `16,073` `15,865` `31,938` `44,668,826` `13,904,281` `142,702` `2,755,737` `6,945,453` `1,278,472` `619,340` `25,645,985` `66,462` `25,712,447` `$` `70,381,273`	%
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` `4` `1` `24` `2` `3` `-` `12` `11` `-` `1` `1` `4` `-` `-`
		`71`
		`-` `-`
		`-`
		`71`
		`16` `-` `3` `7` `3` `-`
		`29`
		`-`
		`29`
		`100`

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

312

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

Items Years ended December 31
2018
2017
Notes
AMOUNT
%
AMOUNT
%
6(28)
$
2,551,963
44
$
2,333,171
32
6(29)
53,228
1
56,114
1
18,665
-
16,233
-
6(30)
255,087
4
2,938,178
40
74,814
1
77,280
1
6(31)
1,308,644
23
1,471,954
20
209,781
4
232,339
3
6(32)
(
352,009 ) (
6)
329,459
5
6(33)
27,788
1 (
102,116) (
1)
6(34)
22,067
-
2,975
-
6(35)
(
24,289 )
-
-
-
6(36)
1,060,385
18
305,912
4
6(37)
396,874
7 (
142,478) (
2)
6(38)
(
63,261 ) (
1)
-
-
6(39)
234,539
4 (
248,955) (
3)
5,774,276
100
7,270,066
100
6(40)
(
512,618 ) (
9) (
392,276) (
5)
6(41)
(
414,308 ) (
7) (
395,054) (
5)
(
83,305 ) (
1) (
88,968) (
1)
(
119,731 ) (
2) (
108,737) (
2)
(
46 )
- (
36)
-
6(42)
(
2,155,691 ) (
37) (
2,309,829) (
32)
6(43)
(
93,698 ) (
2) (
106,949) (
2)
6(44)
(
1,373,736 ) (
24) (
1,474,299) (
20)
(
4,753,133 ) (
82) (
4,876,148) (
67)

400000 Revenues
401000
Brokerage handling fee revenue
404000
Revenues from underwriting
business
406000
Gain on wealth management
410000
Gain on sale of operating
securities
421100
Revenue from providing agency
service for stock affairs
421200
Interest revenue
421300
Dividend revenue
421500
Valuation (loss) gain on
operating securities at fair value
through profit or loss
421600
Gain (loss) on covering of
borrowed securities and bonds
with resale agreements-short
sales
421610
Valuation gain on borrowed
securities and bonds with resale
agreements-short sales at fair
value through profit or loss
421750
Realised loss on financial assets
measured at fair value through
other comprehensive income-
bonds
422200
Gain from issuance of call (put)
warrants
424400
Gain (loss) on derivatives
425300
Impairment loss
428000
Other operating income (loss)
Total revenues
500000 Expenses
501000/
502000/
503000
Handling charges
521200
Financial costs
524100
Futures commission expense
524300
Expense of clearing and
settlement
528000
Other operating expenditure
531000
Employee benefits expense
532000
Depreciation and amortization
533000
Other operating expenses
Total expenditures and
expenses

(Continued)

313

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

Items
Operating profit
601000
Share of 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 plans
805540
Unrealised gain from investments
in equity instruments at fair value
through other comprehensive
income
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 gain (loss) on the
financial statements of foreign
operating entities
805615
Unrealised losses from
investments in debt instruments at
fair value through other
comprehensive income
805620
Unrealised gain on available-for-
sale financial assets
Current other comprehensive
income (post-tax)
902006 Total current comprehensive
income
Income attributable to:
913100
Parent company
913200
Non-controlling interest
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) Years ended December 31
2018
2017
Notes
AMOUNT
%
AMOUNT
%
$
1,021,143
18
$
2,393,918
33
6(12)
101,586
2
79,787
1
6(45)
314,158
5
370,268
5
1,436,887
25
2,843,973
39
6(46)
(
219,254 ) (
4) (
219,316) (
3)
$
1,217,633
21
$
2,624,657
36
$
9,671
- ($
128,158) (
2)
37,273
1
-
-
4,915
-
29
-
10,990
-
21,787
1
85,342
2 (
213,712) (
3)
(
2,223 )
-
-
-
-
-
5,096
-
145,968
3 (
314,958) (
4)
$
1,363,601
24
$
2,309,699
32
$
1,210,323
21
$
2,618,769
36
$
7,310
-
$
5,888
-
$
1,355,594
24
$
2,304,724
32
$
8,007
-
$
4,975
-
6(47)
$
0.87
$
1.88
$
0.87
$
1.88

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

314

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

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

Notes	Equityattributableto o	ners of the paren												Non-controlling interests	Totalequity
	Commonstock	Capital reserve		R	etainedEarnings					Otherequityinterest			Total
			Legal reserve		Special reserve	Unappropriated earnings		s	Translation gain and loss on the financial tatements of foreign operating entities	Unrealised gain or loss on financial assets measured at fair value through other comprehensive income	l	Unrealised gain or oss on available-for- salefinancial assets
6(26) 6(26) 6(27) 6(26) 6(26) 6(27)	`$` `13,356,658` `-` `-` `547,623` `-` `-` `-` `-` `$` `13,904,281` `$` `13,904,281` `-` `13,904,281` `-` `-` `-` `-` `-` `-` `-` `$` `13,904,281`	`$ 142,702` `-` `-` `-` `-` `-` `-` `-` `$ 142,702` `$ 142,702` `-` `142,702` `-` `-` `-` `-` `-` `-` `-` `$ 142,702`	`$` `2,423,914` `79,851` `-` `-` `-` `-` `-` `-` `$` `2,503,765` `$` `2,503,765` `-` `2,503,765` `251,972` `-` `-` `-` `-` `-` `-` `$` `2,755,737`		`$` `6,209,865` `-` `163,694` `-` `-` `-` `-` `-` `$` `6,373,559` `$` `6,373,559` `-` `6,373,559` `-` `571,894` `-` `-` `-` `-` `-` `$` `6,945,453`		`$ 798,507` `(` `79,851` `)` `(` `163,694` `)` `(` `547,623` `)` `2,618,769` `(` `106,387` `)` `2,512,382` `-` `$2,519,721` `$2,519,721` `17,538` `2,537,259` `(` `251,972` `)` `(` `571,894` `)` `( 1,668,514` `)` `1,210,323` `23,270` `1,233,593` `-` `$1,278,472`		`$` `147,621` `-` `-` `-` `-` `(` `213,712 )` `(` `213,712 )` `-` `($` `66,091 )` `($` `66,091 )` `-` `(` `66,091 )` `-` `-` `-` `-` `85,342` `85,342` `-` `$` `19,251`	`$` `-` `-` `-` `-` `-` `-` `-` `-` `$` `-` `$` `-` `563,430` `563,430` `-` `-` `-` `-` `36,659` `36,659` `-` `$` `600,089`		`$` `1,663` `-` `-` `-` `-` `6,054` `6,054` `-` `$` `7,717` `$` `7,717` `(` `7,717 )` `-` `-` `-` `-` `-` `-` `-` `-` `$` `-`	`$` `23,080,930` `-` `-` `-` `2,618,769` `(` `314,045 )` `2,304,724` `-` `$` `25,385,654` `$` `25,385,654` `573,251` `25,958,905` `-` `-` `(` `1,668,514 )` `1,210,323` `145,271` `1,355,594` `-` `$` `25,645,985`	`$` `48,699` `-` `-` `-` `5,888` `(` `913 )` `4,975` `(` `4,366 )` `$` `49,308` `$` `49,308` `13,293` `62,601` `-` `-` `-` `7,310` `697` `8,007` `(` `4,146 )` `$` `66,462`	`$` `23,129,629` `-` `-` `-` `2,624,657` `(` `314,958 )` `2,309,699` `(` `4,366 )` `$` `25,434,962` `$` `25,434,962` `586,544` `26,021,506` `-` `-` `(` `1,668,514 )` `1,217,633` `145,968` `1,363,601` `(` `4,146 )` `$` `25,712,447`

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

315

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Income and expenses having no effect on cash flows
Depreciation

Amortization

Write-off of bad debts classified as income

Provision for bad debts
Impairment loss and reversal of impairment loss

Valuation (loss) gain on trading securities at fair value
through profit or loss

Valuation gain on borrowed securities and bonds with resale
agreements-short sales at fair value through profit or loss

Financial costs

Interest income (include financial income)

Dividend income
Share of the profit of associates and joint ventures accounted
for under the equity method

Loss on disposal of property and equipment

Loss on disposal of investments(financial assets measured at
cost)
Gain on disposal of investments(available-for-sale financial
assets)
Loss (gain) on valuation of non-operating financial
instrument

Changes in assets/liabilities relating to operating activities
Changes in operating assets
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive
income - current
Available-for-sale financial assets - current
Bonds purchased under resale agreements
Margin loans receivable
Refinancing security deposits
Receivables from refinance guaranty
Customer margin account
Receivables from security lending
Security lending deposits
Notes receivable
Accounts receivable
Prepayments
Other receivables
Other current assets
Changes in operating liabilities
Financial liabilities at fair value through profit or loss -
current
Bonds sold under repurchase agreements
Deposits on short sales
Short sale proceeds payable
Guarantee deposit received on borrowed securities
Futures traders’ equity
Accounts payable
Advance receipts
Collections on behalf of third parties
Other payables
Other financial liabilities - current
Other current liabilities Years ended December 31
Notes
2018
2017
$
1,436,887 $
2,843,973
6(43)
71,559
73,833
6(43)
22,139
33,116
6(16)
- (
6,068 )
-
63,471
6(38)
63,977
-
6(32)
352,009 (
329,459 )
6(34)
(
22,067 ) (
2,975 )
6(41)
414,308
395,054
6(31)(45)
(
1,465,878 ) (
1,599,755 )
(
235,041 ) (
252,056 )
6(12)
(
101,586 ) (
79,787 )
6(13)
17
550
-
280
- (
45,348 )
6(45)
9,166 (
32,156 )
10,642,991
3,192,130
741,883
-
-
322,825
(
93,193 )
2,093,498
3,417,807 (
2,781,548 )
74,948 (
60,656 )
58,773 (
33,779 )
(
1,673,213 )
2,182,356
10,002
69,457
(
39,549 ) (
484,746 )
286 (
391 )
2,319,284 (
5,244,522 )
11,633
13,768
27,947 (
13,532 )
152,641
147,036
(
318,237 ) (
1,209,730 )
(
5,845,059 ) (
2,173,604 )
(
94,678 )
575,358
(
190,454 )
680,861
(
224,774 )
166,199
1,681,826 (
2,197,829 )
(
992,369 )
3,134,327
20 (
462 )
(
77,000 )
26,087
(
268,655 )
441,768
(
512,289 )
1,807,001
9,329
6,415

(Continued)

316

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

Cash inflow generated from operations
Dividends received
Interest received
Income tax paid
Net cash flows from 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

Proceeds from disposal of property and equipment
Acquisition of intangible assets

Increase 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 in short-term loans
Decrease in commercial papers payable
Decrease in other non-current liabilities
Interest paid
Changes in non-controlling interest
Payments of cash dividends
Net cash flows used in financing activities
Effect of exchange rate changes
Net decrease 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
2018
2017
$
9,365,390 $
1,720,960
307,887
320,335
1,510,111
1,638,289
(
353,696 ) (
81,435 )
10,829,692
3,598,149
-
90,765
-
1,128
6(13)
(
47,404 ) (
20,520 )
-
134
6(15)
(
19,004 ) (
8,651 )
(
50,517 ) (
41,179 )
(
38,039 ) (
31,467 )
- (
42,682 )
(
154,964 ) (
52,472 )
(
5,505,439 ) (
735,232 )
(
3,650,000 ) (
2,650,000 )
(
50,053 ) (
1,076 )
(
412,594 ) (
387,415 )
(
4,146 ) (
4,366 )
(
1,668,514 )
-
(
11,290,746 ) (
3,778,089 )
85,342 (
213,712 )
(
530,676 ) (
446,124 )
6,463,345
6,909,469
$
5,932,669 $
6,463,345

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

317

PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2018 AND 2017

(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 1,722 and 1,706 as of December 31, 2018 and 2017, respectively.
THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED
FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were authorized for issuance by the Board of Directors on March 22, 2019.

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 2018 are as follows:

318

New Standards,Interpretations and Amendments

Effective Date by
International
Accounting
Standards Board

January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
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.

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

319

impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance).

(c) The amended general hedge accounting requirements align hedge accounting more closely with an entity’s risk management strategy. Risk components of non-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.
(d) The Group has elected not to restate prior period financial statements using the modified retrospective approach under IFRS 9. For details of the significant effect as at January 1, 2018, please refer to Note 12(11).
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 2019 are as follows:

as follows:
New Standards,Interpretations and Amendments Amendments to IFRS 9,‘Prepayment features with negative compensation’ IFRS 16,‘Leases’ Amendments to IAS 19,‘Plan amendment, curtailment or settlement’ Amendments to IAS 28,‘Long-term interests in associates and joint ventures’ IFRIC 23,‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	Effective Date by International Accounting Standards Board
	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 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.

IFRS 16, ‘Leases’

The Group expects to recognise the lease contract of lessees in line with IFRS 16. However, the Group does not intend to restate the financial statements of prior period (collectively

320

referred herein as the “ modified retrospective approach ” ), and classify the effects on the lease contract of lessee on January 1, 2019. The Group will increase right-of-use asset by $214,658 and lease liability by $212,027, and decrease prepayments by $2,631 and this has no effect on retained earnings.

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 effective are as follows:

Effective Date by International Accounting New Standards, Interpretations and Amendments Standards Board Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative’ January 1, 2020 Definition of Material Amendments to IFRS 3, ‘Definition of a business’ January 1, 2020 ‘ 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 17, ‘Insurance contracts’ January 1, 2021

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Group’s significant accounting policies are described below:

1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Firms”, “Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants”, and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretation as endorsed by the FSC (collectively referred herein as the “IFRSs”) .

2) Basis of preparation

A. Except for the following items, these consolidated financial statements have been prepared under the historical cost convention:
(A) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
(B) Financial assets at fair value through other comprehensive income/Available-forsale 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.
B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its

321

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.

C. In adopting IFRS 9 effective January 1, 2018, the Group has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was recognised as retained earnings or other equity as of January 1, 2018 and the financial statements for the year ended December 31, 2017 and the third quarter of 2017 were not restated. The financial statements for the year ended December 31, 2017 and the third quarter of 2017 were prepared in compliance with International Accounting Standard 39 (‘IAS 39’) and related financial reporting interpretations. Please refer to Note 12(11) for details of significant accounting policies.
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) controlled 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 unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
- (C) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
- (D) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the 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

322

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. B. Subsidiaries included in the consolidated financial statements:

Name of Investor	Name of Subsidiary	Main Business Activities Futures brokerage Securities investment consulting Securities dealer, brokerage, underwriting and consulting Securities investment and holding company Insurance Agent 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 (%)
			December 31,2018 96.69% 100% 5.19% 100% 100% 100% 94.81% 100% 100%	December 31,2017
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%

323

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 realised, or are intended to be sold or consumed within the normal operating cycle;
- (B) Assets held mainly for trading purposes;
- (C) Assets that are expected to be realised 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

324

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.

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 Effective 2018
A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income.
B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting.
C. At initial recognition, the Group measures the financial assets at fair value and recognises the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair value, and recognises the gain or loss in profit or loss.
D. The Group recognises the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

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8) Financial assets at fair value through other comprehensive income Effective 2018
A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Group has made an irrevocable election at initial recognition to recognise changes in fair value in other comprehensive income and debt instruments which meet all of the following criteria:
- (a)The objective of the Group’s business model is achieved both by collecting contractual cash flows and selling financial assets; and
- (b)The assets’ contractual cash flows represent solely payments of principal and interest.
B. On a regular way purchase or sale basis, available-for-sale financial assets are recognized and derecognized using trade date accounting.
C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. The Group subsequently measures the financial assets at fair value:
- (a)The changes in fair value of equity investments that were recognised in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognised as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.
- (b)Except for the recognition of impairment loss, interest income and gain or loss on foreign exchange which are recognised in profit or loss, the changes in fair value of debt instrumentsare taken through other comprehensive income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss.
9) Notes and accounts receivable, other receivables and margin loans receivable
A. Accounts and notes receivable and margin loans receivables entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.
B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.
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.

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11) Impairment of financial assets

Effective 2018

For debt instruments measured at fair value through other comprehensive income, at each reporting date, the Group recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not containa significant financing component, the Group recognises the impairment provision for lifetime ECLs.

12) 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.

13) Offsetting financial instruments

14) Investments accounted for under the equity method

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

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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. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised 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.

15) 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.
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

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of the change. The estimated useful lives of property and equipment are as follows:

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

16) 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.

17) 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

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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. Impairment losses on goodwill are not reversed.

18) 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.

19) Financial liabilities at fair value through profit or loss

A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.
B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.
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.

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21) Employee benefits

A. Short-term employee benefits

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 Group contributes monthly a certain amount 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.

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

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in estimates.

22) Revenues and expenses

The Group’s revenues and expenses 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 incurred in the Group’s operations, which primarily include employee benefit expense, depreciation and amortization, and other business and administrative expenses.

23) Income tax

A. Current income tax
Income tax payable (refundable) is calculated on the basis of the tax laws enacted in the countries where a company operates and generates taxable income. Except for the transactions or other matters directly recognized in other comprehensive income or equity, in which cases the related income taxes in the period are recognized in other comprehensive income or directly derecognized from equity, all the others should be recognized as income or expense for the period.
B. Deferred income tax
Deferred income tax assets and liabilities are measured based on the tax rate of the anticipated period that the future assets realisation 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 realised in the future, the proportion of realisation 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

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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 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 realise 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 realise the asset and settle the liability simultaneously.

24) Share capital

A. Incremental costs directly attributable to the issuance of new shares are shown as a deduction, net of tax, from equity. Dividends from common stocks are 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 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

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allocating resources and assessing performance of the operating segments.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

1) As the consolidated financial statements of the Group may be affected by the adoption of accounting policy, accounting estimate and assumption, the Group’s management shall properly exercise its professional 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. Expected credit losses
- For financial assets, the measurement of expected credit losses uses complex models and multiple assumptions. These models and assumptions take into account future macro-economic conditions and credit behaviors of borrowers (e.g. probability of customer default and loss). Please refer to Note 12(2) for detailed information on parameters, assumptions, and estimation methods used in measuring expected credit losses and disclosure of the sensitivity of credit loss to the aforementioned factors. The measurement of expected credit losses according to applicable accounting rules involves significant judgement in several areas, for example:

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(A)The criteria used to judge whether there is significant increase in credit risk.

(B)The selection of appropriate models and assumptions for measuring expected credit losses.

For judgements and estimations of the above expected credit losses, please refer to Note 12(2).

C. 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 assesses its share of the recoverable amount which is based on the discounted value of expected cash flow, and assesses the reasonableness of relevant assumptions, including revenue growth rate, operating profit margin, net profit margin, financial forecast, and discount rate.
D. 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.

6. DETAILS OF SIGNIFICANT ACCOUNTS

1) Cash and cash equivalents

TAILS 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	December 31,2018 170 $ 751,462 347,576 833,204 4,000,257 5,932,669 $	December 31,2017
		169 $ 697,155 477,200 1,718,591 3,570,230
		6,463,345 $

As of December 31, 2018 and 2017, the annual interest rates of time deposits, including foreign time deposits were 0.04% ~ 3.93% and 0.04%~3.72%, respectively.

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2) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss
Effective 2018
		December 31,2018
Current items:
Financial assets mandatorily measured at fair value through profit or loss:
Open-ended funds, money market instruments
and securities investment by brokers
Open-ended mutual funds beneficiary
certificates	$	245,000
Commercial bonds		1,384,265
Overseas stocks and funds		123,799
Listed (TSE and OTC) stocks		102,168
Subtotal		1,855,232
Adjustment of open-ended funds
and money market instruments
and securities investment by brokers	(	1,172)
Total		1,854,060
Trading securities-dealer
Listed (TSE and OTC) stocks		299,776
Government bonds		4,700,905
Corporate bonds		3,265,038
Convertible corporate bonds		148,279
Emerging stocks		79,091
Overseas stocks		9,631,148
Exchange-traded funds		2,765,819
Unlisted stocks		50,924
Subtotal		20,940,980
Adjustment of trading securities - dealer	(	134,579)
Total		20,806,401
Trading securities-underwriter
Listed (TSE and OTC) stocks		837,441
Unlisted stocks		14,400
Convertible corporate bonds		479,500
Subtotal		1,331,341
Adjustment of trading securities - underwriter		123,837
Total		1,455,178
Trading securities-hedging
Listed (TSE and OTC) stocks		584,558
Convertible corporate bonds		613
Warrants		39,229
Exchange traded funds		154,782
Subtotal		779,182
Adjustment of trading securities - hedging		6,164
Total		785,346

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Options bought-futures Futures guarantee deposits receivable Derivative financial instrument assets-OTC Total Non-current items: Financial assets mandatorily measured at fair value through profit or loss: Trading securities - dealer - government bonds Unlisted stocks Subtotal Adjustment of trading securities Total	December 31,2018
	26,140 $
	2,750,048
	3,300
	27,680,473 $
	49,895 $ 2,609
	52,504 13,850
	66,354 $

a. For the year ended December 31, 2018, net realised and unrealised (loss) gains on financial assets and liabilities at fair value through profit or loss amounted to $1,410,192.
b. Details of the Group’s financial assets at fair value through profit or loss pledged to others as collateral are provided in Note 8.
c. Information relating to credit risk is provided in Note 12(2).
d. Information on financial assets at fair value through profit or loss as of December 31, 2017 is provided in Note 12(11).

3) Financial assets at fair value through other comprehensive income

others as collateral are provided in Note 8. c. Information relating to credit risk is provided in Note 12(2). d. Information on financial assets at fair value through profit or loss 2017 is provided in Note 12(11). Financial assets at fair value through other comprehensive income	as of December 31,
Effective 2018 Current items: Debt instruments Trading securities - dealer Overseas bonds Adjustment of trading securities - dealer Total Non-current items: Equity instruments Unlisted stocks Adjustment of trading securities Total	December 31,2018
	290,816 $ 5,488
	296,304 $
	37,565 $ 567,014
	604,579 $

a. The Group has elected to classify unlisted stocks that are considered to be strategic investments as financial assets at fair value through other comprehensive income. The fair value of such investments amounts to $604,579 as at December 31, 2018.

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b. Amounts recognised in profit or loss and other comprehensive income in relation to the financial assets at fair value through other comprehensive income are listed below:

Equity instruments at fair value through other comprehensive
income
Fair value change recognised in other comprehensive income -
parent company
Fair value change recognised in other comprehensive income -
non-controlling interest
Total
Debt instruments at fair value through other comprehensive
income
Fair value change recognised in other comprehensive income
Cumulative other comprehensive income reclassified to profit
or loss
Due to derecognition

Interest income recognised in profit or loss

Year ended
December 31,2018

36,448
$ 825
37,273
$ 22,066
$ 24,289)
($ 8,415
$

c. Details of the Group’s financial assets at fair value through other comprehensive income pledged to others as collateral are provided in Note 8.
d. Information relating to credit risk is provided in Note 12(2).
e. Information on financial assets at fair value through other comprehensive income as of December 31, 2017 are provided in Note 12(11).
4) Bonds purchased under resale agreements

Overseas bonds	December 31,2018 93,193 $	December 31,2017
		- $

The above bonds purchased under resale agreements as of December 31, 2018 was 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 amount was $93,705. The annual interest rates of every currency were as follows:

annual interest rates of every currency were as follows:
(Note)`：`Foreign currencies include USD. Foreign currencies (Note)	December 31,2018
	2.20%

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5) Margin loans receivable

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

6) Customer margin account

margin loans. The annual interest rate was 6.4%. Customer margin account
Bank deposit Futures clearing house Other futures commission merchant Securities Total	December 31,2018 8,342,444 $ 1,309,128 1,939,362 368 11,591,302 $	December 31,2017
		7,159,942 $ 1,726,793 1,027,317 4,037
		9,918,089 $

The difference between the customer margin deposits accounts and futures traders’ equity as of December 31, 2018 and 2017 were outlined below:

		December 31,2018		December	31,2017
Customer margin deposits accounts	$	11,591,302	$	9,918,089
Add: Early customer margin deposits		10,736			8,647
Futures trading margins receivable		-			2
Loss on error trading		-			23
Less: Service fee income pending for transfer	(	12,294)	(		25,087)
Futures exchange tax pending for transfer	(	609)	(		695)
Net interest income pending for transfer	(	2,412)	(		916)
Temporary receipts	(	12,089)	(		7,255)
Futures traders' equity	$	11,574,634	$	9,892,808

7) Accounts receivable

Accounts receivable
		December 31,2018			December 31,2017
Accounts receivable - non related parties
Settlement price receivable-brokers	$		6,767,737	$		7,308,697
Settlement price receivable-dealer			672,850			293,630
Accounts receivable-international bonds			-			591,328
Accounts receivable-foreign bonds			142,329			1,742,322
Interest receivable			338,710			372,205
Settlement price			724,602			789,062
Others			83,285			61,681
Subtotal			8,729,513			11,158,925
Less: Allowance for uncollectable accounts	(		2,661)	(		4,359)
Total	$		8,726,852	$		11,154,566

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A. The ageing analysis of accounts receivable that were past due but not impaired is as follows:

follows:
Accounts receivable Accounts receivable - non related parties Accounts receivable Accounts receivable - non related parties			December	31,2018		Total
	Upto 30 days	31 to90 days	91 to 180 days	181 days to 12 months	More than 12 months
	8,396,560 $	36,819 $	90,459 $ December	138,362 $ 31,2017	67,313 $	8,729,513 $ Total
	Upto 30 days	31 to90 days	91 to 180 days	181 days to 12 months	More than 12 months
	10,804,575 $	64,173 $	99,612 $	146,613 $	43,952 $	11,158,925 $

The above ageing analysis was based on invoice date.

B. Information relating to credit risk is provided in Note 12(2).
8) Other receivables

Other receivables
		December	31,2018		December	31,2017
Dividends receivable	$		-	$		277
Interest receivable			15,577			10,797
Others			27,729			56,321
Subtotal			43,306			67,395
Less: Allowance for uncollectable account	(		11,333)	(		495)
Total	$		31,973	$		66,900

Information relating to credit risk is provided in Note 12(2).

9) Other current assets

Other current assets
Pending settlements Pledged time deposits Deposits-in for foreign currency securities Underwriting share proceeds collected on behalf of customers Temporary payments Others Total	December 31,2018 984,841 $ 635,263 - 18,542 746 831 1,640,223 $	December 31,2017
		815,110 $ 639,815 228,016 108,673 357 893
		1,792,864 $

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.

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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:

iabilities are analysed below:	iabilities are analysed below:
December 31,2018		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 15,506,358 $ Available-for-sale financial assets Repurchase agreement 296,304 December 31,2017	Carrying amount of transferred financial assets
		14,775,766 $ 290,833 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
	22,148,171 $ 1,044,031	19,879,319 $ 1,032,339

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
		December 31,2018
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 3,300 $ - $ 92,663 - 95,963 $ - $ Not set off in the balance sheet	Net amount
				Financial instruments
	3,300 $ 93,193 96,493 $	- $ 3,300 $ - 93,193 - $ 96,493 $ December 31,2017		3,300 $ 92,663 95,963 $	- $ 530
					530 $

Derivative financial instruments 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 $ - $ Not set off in the balance sheet	Net amount
				Financial instruments
	19,982 $	- $	19,982 $	19,982 $	- $

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(2) Financial liabilities

Financial liabilities
		December 31,2018
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 3,300 $ - $ 8,713,387 - 8,716,687 $ - $ Not set off in the balance sheet	Net amount
				Financial instruments
	11,112 $ 8,713,387 8,724,499 $	- $ 11,112 $ - 8,713,387 - $ 8,724,499 $ December 31,2017		3,300 $ 8,713,387 8,716,687 $	7,812 $ -
					7,812 $

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 $	- $ - - $	205,841 $ 17,974,440 18,180,281 $	19,982 $ 17,974,440 17,994,422 $	185,859 $ -
					185,859 $

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12) Investments accounted for under the equity method

December 31, 2018 December 31, 2017 Uni-President Asset Management Corp. $ 569,693 $ 496,497

A. The Group’s share of its associates’ profits or losses recognised in long-term equity investment accounted for under the equity method for the years ended December 31, 2018 and 2017 were $101,586 and $79,787, 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.
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	December 31,2018 December 31,2017 42.49% 42.49% Shareholdingratio	Nature of relationship Associate	Methods of measurement
	December 31,2018 42.49%		Equity method

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

Balance sheet

ollows: Balance sheet
		Uni-President Asset	Management Corp.
		December 31,2018	December 31,	2017
Current assets	$	502,419	$	466,401
Non-current assets		599,619		441,397
Current liabilities	(	156,138)	(	128,739)
Non-current liabilities	(	27,364)	(	33,530)
Total net assets	$	918,536	$	745,529
Share in joint venture's
net assets	$	390,355	$	316,831
Goodwill and others		179,338		179,666
Carrying amount of the
joint venture	$	569,693	$	496,497

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Statement of comprehensive income

Uni-President Asset Management Corp.

Revenue Profit for the period from continuing operations Other comprehensive income - net of tax Total comprehensive income Dividends received from associates		Year ended December 31, 2018		Year ended December 31, 2017
		791,291 $ 239,809 $ 11,569 251,378 $ 72,569 $		679,240 $ 190,717 $ 69 190,786 $ 66,678 $

(Blank below)

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13) Property and equipment

) Property and equipment
January1,2018	Land	Buildings	Equipment	Leasehold improvements	Total
Cost Accumulated depreciation and impairment Total For the year ended December 31,2018	1,680,129 $ - 1,680,129 $ 1,680,129 $ - - - - 1,680,129 $ Land	1,052,401 $ 387,713) ( 664,688 $ 664,688 $ 155 - 2,261 24,290) ( 642,814 $ Buildings	212,645 $ 140,857) ( 71,788 $ 71,788 $ 45,377 16) ( 21,316 36,087) ( 102,378 $ Equipment	60,419 $ 42,635) ( 17,784 $ 17,784 $ 1,872 1) ( 6,476 9,082) ( 17,049 $ Leasehold improvements	3,005,594 $ 571,205) ( 2,434,389 $ 2,434,389 $ 47,404 17) ( 30,053 69,459) ( 2,442,370 $ Total
January 1, 2018 Additions Disposals Reclassifications Depreciation December 31, 2018 December 31,2018
Cost Accumulated depreciation and impairment Total January1,2017	1,680,129 $ - 1,680,129 $ Land	1,053,129 $ 410,315) ( 642,814 $ Buildings	234,426 $ 132,048) ( 102,378 $ Equipment	57,963 $ 40,914) ( 17,049 $ Leasehold improvements	3,025,647 $ 583,277) ( 2,442,370 $ Total
Cost Accumulated depreciation and impairment Total For the year ended December 31, 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 Disposals Reclassifications Depreciation December 31, 2017 December 31,2017
Cost Accumulated depreciation and impairment Total	1,680,129 $ - 1,680,129 $	1,052,401 $ 387,713) ( 664,688 $	212,645 $ 140,857) ( 71,788 $	60,419 $ 42,635) ( 17,784 $	3,005,594 $ 571,205) ( 2,434,389 $

A. No interest was capitalized for property and equipment for the years ended December 31, 2018 and 2017.

B. The information on property and equipment pledged or restricted as of December 31, 2018 and 2017 is described in Note 8.

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14) Investment property

January1,2018
Cost
Accumulated depreciation
and impairment
Total
For the year ended
December 31,2018
January 1, 2018
Depreciation
December 31, 2018
December 31,2018
Cost
Accumulated depreciation
and impairment
Total
January1,2017
Cost
Accumulated depreciation
and impairment
Total
For the year ended
December 31,2017
January 1, 2017
Depreciation
December 31, 2017
December 31,2017
Cost
Accumulated depreciation
and impairment
Total

A. For the years ended December 31, 2018 and 2017, rental income from the lease of the investment property were both $17,652, and direct operating expenses arising from the investment property were $3,611 and $3,267, respectively.

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

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15) Intangible assets

) Intangible assets
January1,2018 Computer software Cost 121,650 $ Accumulated depreciation and impairment 92,265) ( Total 29,385 $ For the year ended December 31,2018 January 1, 2018 29,385 $ Additions 19,004 Reclassifications 14,628 Depreciation 16,480) ( December 31, 2018 46,537 $ December 31,2018 Computer software Cost 138,619 $ Accumulated depreciation and impairment 92,082) ( Total 46,537 $ January1,2017 Computer sofware Cost 122,313 $ Accumulated depreciation and impairment 90,367) ( Total 31,946 $ For the year ended December 31,2017 January 1, 2017 31,946 $ Additions 8,651 Reclassifications 6,062 Depreciation 17,274) ( December 31, 2017 29,385 $ December 31,2017 Computer software Cost 121,650 $ Accumulated depreciation and impairment 92,265) ( Total 29,385 $	Goodwill	Customer relationships and others Total 89,829 $ 253,483 $ 49,122) ( 141,387) ( 40,707 $ 112,096 $ 40,707 $ 112,096 $ - 19,004 - 14,628 5,038) ( 21,518) ( 35,669 $ 124,210 $ Customer relationships and others Total 89,829 $ 270,452 $ 54,160) ( 146,242) ( 35,669 $ 124,210 $ 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 $	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 $
			112,096 $

A. No interest was capitalized for intangible assets for the years ended December 31, 2018 and 2017.

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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. 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:

of value in use are as follows:
Growth rate Discount rate	Brokerage	2017 0.00% 17.49% Segment
	2018 0.00% 11.96%

16) Other noncurrent assets

Other noncurrent assets
		December 31,2018			December 31,2017
Operation guaranteed deposits		$	680,000		$	682,000
Clearing and settlement fund			327,619			321,962
Refundable deposits			220,511			159,977
Deferred expenses			16,307			16,414
Prepaid pension expenses			1,010			22
Prepayment for equipment			11,893			18,535
Overdue receivables			213,075			136,443
Others			720			180
Subtotal			1,471,135			1,335,533
Less: Allowance for uncollectible
accounts	(		213,075)	(		136,443)
Total		$	1,258,060		$	1,199,090
Short-term loans

		December 31,2018			December 31,2017
Secured loans		$	-		$	1,021,140
Unsecured loans			939,879			5,424,178
Total		$	939,879		$	6,445,318
Interest rates			3.411%~3.500%			0.700%~3.250%

17) Short-term loans

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18) Commercial papers payable

Commercial papers payable
		December 31,2018			December 31,2017
Face value	$		-	$		3,650,000
Less: discount on commercial papers payable			-	(		369)
Total	$		-	$		3,649,631
Interest rates			-			0.370%~0.485%
Financial liabilities at fair value through profit or loss		-current
		December 31,2018			December 31,2017
Investments in bonds under resale
agreements - short sales	$		90,545	$		-
Valuation adjustment of financial assets held
for trading			3,069			-
Subtotal			93,614			-
Liabilities on sale of borrowed securities
- hedged			148,009			151,745
Valuation adjustment on liabilities on sale of
borrowed securities - hedged	(		15,145)	(		10,481)
Liabilities on sale of borrowed securities
- non-hedged			391,436			207,280
Valuation adjustment on liabilities on sale of
borrowed securities - non-hedged	(		19,457)			1,982
Subtotal			504,843			350,526
Issuance of call ( put ) warrants			15,115,760			12,851,599
Gain on price fluctuation	(		7,549,321)	(		5,599,183)
Market value (A)			7,566,439			7,252,416
Warrants redeemed	(		11,955,149)	(		9,460,551)
Loss on price fluctuation			4,622,139			2,813,270
Market value (B)	(		7,333,010)	(		6,647,281)
Warrants - net (A+B)			233,429			605,135
Options sold - TAIFEX			9,521			4,112
Derivative financial liabilities - OTC			24,690			246,628
Total	$		866,097	$		1,206,401

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

Among the warrants issued by the Group, except for contract-based warrants which are Europeanstyle 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.

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20) Bonds sold under repurchase agreements

Bonds sold under repurchase agreements
Government bonds Corporate bonds International bonds Foreign bonds Total	December 31,2018 4,100,351 $ 1,298,032 954,829 8,713,387 15,066,599 $	December 31,2017
		1,684,569 $ 400,139 852,510 17,974,440
		20,911,658 $

The above bonds sold under repurchase agreements as of December 31, 2018 and 2017 and were due within one year and were contracted to be repurchased at the agreed-upon price plus interest charge on the specific date after the transaction. The total repurchase amounts were $15,134,144 and $20,984,849, respectively, and the annual interest rates in every currency were shown as follows:

Currency December 31,2018 NTD 0.33%~0.62% Foreign currencies (Note) -0.30%~4.20% (Note)`：`Foreign currencies include AUD, EUR, USD and RMB.	December 31,2017
	0.24%~0.43% -0.30%~4.30%

21) Accounts payable

Settlement accounts payable - brokered trading Settlement proceeds Settlement accounts payable - operating Accounts payable - foreign bonds Others Total	December 31,2018 5,939,260 $ 1,811,674 257,063 172,208 108,910 8,289,115 $	December 31,2017
		7,716,481 $ 660,024 407,612 395,809 100,561
		9,280,487 $

22) Other payables

Other payables
Salary and bonus payable Employees’and directors’remuneration payable Others Total	December 31,2018 493,821 $ 69,568 353,511 916,900 $	December 31,2017
		659,644 $ 122,415 403,148
		1,185,207 $

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23) Other financial liabilities - current

Other financial liabilities-current
Equity-linked notes (ELN) - Options Principal guaranteed notes (PGN) - fixed income Total	December 31,2018 - $ 2,687,009 2,687,009 $	December 31,2017
		3,000 $ 3,196,298
		3,199,298 $

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

24) Other liabilities-non-current

Other liabilities-non-current
Net defined benefit obligation Guarantee deposits received Total	December 31,2018 10,881 $ 4,984 15,865 $	December 31,2017
		55,177 $ 4,696
		59,873 $

25) Pension plan

A. Defined benefit plans

(A) The Group has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. 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.

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

		December 31,2018		December 31,2017
Present value of defined benefit obligations	$	826,184	$	833,570
Fair value of plan assets	(	816,313)	(	778,415)
Net defined benefit liabilities	$	9,871	$	55,155

For the year ended December 31,2018		Present value of defined benefit obiligations	Fair value of plan assets		Net defined benefit (liabilities)assets
	833,570 $ 5,583 10,032 849,185 - 8,189 3,225) ( 4,964 - 27,965) ( 27,965) ( 826,184 $		778,415) ($ - 9,364) ( (787,779) 14,635) ( - - 14,635) ( 41,864) ( 27,965 13,899) ( 816,313) ($	55,155 $ 5,583 668 61,406 14,635) ( 8,189 3,225) ( 9,671) ( 41,864) ( - 41,864) ( 9,871 $
Blance at January 1 Current service cost Interest expense(income) Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Paid pension Blance at December 31

353

For the year ended December 31,2017		Present value of defined benefit obiligations	Fair value of plan assets	Net defined benefit (liabilities)assets
	717,768 $ 5185.00 10,762 733,715 - $ 24,273 97,695 121,968 - 22,113) ( 22,113) ( 833,570 $		754,575) ($ - 11,314) ( (765,889) 6,190 $ - - 6,190 40,829) ( 22,113 18,716) ( 778,415) ($	36,807) ($ 5,185 552) ( (32,174) 6,190 $ 24,273 97,695 128,158 40,829) ( - 40,829) ( 55,155 $
Blance at January 1 Current service cost Interest expense(income) Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Paid pension Balance at December 31

(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, 2018 and 2017 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.

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

Discount rate Future salary increases	For the year ended December 31,2018	For the year ended December 31,2017
	1.10%	1.20%~1.30%
	2.00%~3.00%	2.00%~3.00%

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

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

December 31,2018 Effect on present value of defined benefit obligation December 31,2017 Effect on present value of defined benefit obligation	Increase 0.25% Decrease 0.25% 19,387) ($ 20,048 $ 20,626) ($ 21,352 $ Discount rate	Increase 0.25% Decrease 0.25% 19,387) ($ 20,048 $ 20,626) ($ 21,352 $ Discount rate	Future salaryincreases	Future salaryincreases
	Increase 0.25%		Increase 0.25%	Decrease 0.25%
	19,387) ($ 20,626) ($		17,695 $ 18,946 $	17,232) ($ 18,429) ($

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, 2018 and 2017 were $65,703 and $59.860, 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 $1,766 and $2,231, respectively, for the years ended December 31, 2018 and 2017.

26) Equity

A. Common stock

(A) As of December 31, 2018, the Company’s authorized capital was $15,000,000 with a par

355

value of $10 (in dollars) per share. As of December 31, 2018 and 2017 , the common stocks issued were all 1,390,428 thousand shares, and the outstanding common stocks were both 1,390,428 thousand shares.

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

(Expressed in thousands)

				(Expressed in thousands)
January 1 Stock dividends December 31, 2018 (As of January 1, 2018)		Year ended December 31, 2018		Year ended December 31, 2017
		1,390,428 - 1,390,428		1,335,666 54,762 1,390,428

B. Capital reserve

Capital reserve
December 31, 2018 December 31, 2017	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 $

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.

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

27) Unappropriated earnings and dividends policy
A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall be used to pay all taxes and offset prior years’ operating losses first, and then set aside as legal reserve, accounted for as 10% of the remaining amount, and special reserve, accounted for as 20% of the remaining amount. Upon provision or reversal of special reserve in accordance with the law, any remaining amount together with unappropriated earnings at beginning of the period shall be distributed according to the following resolution adopted at the stockholders’ meeting: Distribution shall not be made if the balance of distributable earnings is less than 5% of paid-in capital.
B. In addition, the total amount of dividends declared every year shall be at least 70% of distributable earnings, of which stock dividends shall be at least 50% and cash dividends shall be lower than 50%.
C. The Company may determine a better proportion of cash and stock dividends distribution based on its actual operating conditions and capital utilization plan for the following year.
D. The appropriation of 2017 and 2016 earnings was resolved by the shareholders on June 21, 2018 and June 22, 2017, respectively. Detail is as follows:

Legal reserve Special reserve Special reserve (Note 1) Reversal of special reserve (Note 1) Special reserve (Note 2) Cash dividends Stock dividends Total	For the year ended December 31,2017	For the year ended December 31,2017		For the year ended December 31,2016	For the year ended December 31,2016
	Amount	Dividends per share (in dollars)		Amount	Dividends per share (in dollars)
	251,972 $ 503,944 12,599 3,023) ( 58,374 1,668,514 - 2,492,380 $	1.20 $ -		79,851 $ 159,701 3,993 - - - 547,623 791,168 $	- $ 0.41

Note 1 ： Special reserve was provided for employees’ transition for financial technology development according to Jin-Guan-Zheng-Chuan Letter No. 10500278285, and can be reversed for employees’ transition. The Board of Directors of the Company resolved to provide 0.5% as special reserve and made reversal of the special reserve on March 26, 2018 and March 23, 2017.

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Note 2 ： 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-Guan-Zheng-Chuan Letter No. 1010028514.
E. The earnings distribution for 2018 as resolved by the Board of Directors on March 22, 2019 is set forth below:

forth below:
Legal reserve Special reserve Special reserve (Note 3) Reversal of special reserve (Note 3) Reversal special reserve (Note 4) Cash dividends Total	For theyear ended December 31,2018
	Amount	Dividends per share (in dollars)
	121,032 $ 242,064 6,052 4,365) ( 58,374) ( 959,395 1,265,804 $	0.69 $

  - Note 3 `：` Special reserve was provided for employees’ transition for financial technology development according to Jin-Guan-Zheng-Chuan Letter No. 10500278285, and can be reversed in line with relevant letters. The Board of Directors of the Company resolved to provide 0.5% as special reserve and made reversal of the special reverse on March 22, 2019.

  - Note 4 `：` 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-Guan-Zheng-Chuan Letter No. 1010028514. If there is any subsequent reversal of the decrease in equity, the earnings may be distributed based on the reversal proportion.

F. For details on employees’ remuneration and directors’ remuneration, please refer to Note 6 (42).
28) Brokerage handling fee revenue

Brokerage handling fee revenue
Revenues from brokered trading - TWSE Revenues from brokered trading - OTC Revenues from brokered trading - Futures Others Total		Year ended December 31,2018		Year ended December 31,2017
		1,217,068 $ 439,747 720,606 174,542 2,551,963 $		1,058,621 $ 454,994 649,259 170,297 2,333,171 $

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29) Revenues from underwriting business

Revenues from underwriting business
Revenues from underwriting securities on a firm commitment basis Others Total		Year ended December 31,2018		Year ended December 31,2017
		22,306 $ 30,922 53,228 $		23,043 $ 33,071 56,114 $

30) Gain on sale of trading securities

Gain on sale of trading securities Revenues from underwriting securities on a firm commitment basis Others Total	22,306 $ 30,922 53,228 $		23,043 $ 33,071 56,114 $
Dealers: -TAIEX -OTC -Overseas trading Subtotal Underwriters: -TAIEX -OTC Subtotal Hedging: -TAIEX -OTC -Overseas trading Subtotal Total	Year ended December 31,2018		Year ended December 31,2017
	1,119,476 $ 77,620) ( 82,074) ( 959,782 46,174 11,969 58,143 630,593) ( 123,985) ( 8,260) ( 762,838) ( 255,087 $		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 $

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31) Interest revenue

31) Interest revenue
32) Valuation (loss) gain on trading securities at fair value through profit or loss 33) Gain (loss) on covering of borrowed securities and bonds with resale agreements-short sales 34) Valuation gain on borrowed securities and bonds with resale agreements-short sales at fair value through profit or loss Year ended December 31,2018 Year ended December 31,2017 Interest income from margin loans 656,327 $ 621,487 $ Interest income from bonds 649,262 847,936 Others 3,055 2,531 Total 1,308,644 $ 1,471,954 $ Year ended December 31,2018 Year ended December 31,2017 (Loss) gain on sale of securities - dealer 422,251) ($ 332,115 $ (Loss) gain on sale of securities - underwriting 13,726) ( 71,553 Gain (loss) on sale of securities - hedging 83,968 74,209) ( Total 352,009) ($ 329,459 $ Year ended December 31,2018 Year ended December 31,2017 Gain (loss) from the bond investments under resale agreements 7,117 $ 116,598) ($ Loss from securities borrowing transactions - warrants - 479) ( Gain (loss) from covering - warrants 1,816 15,683) ( Gain from securities borrowing transactions - dealer 18,855 30,644 Total 27,788 $ 102,116) ($ Year ended December 31,2018 Year ended December 31,2017 Valuation (loss) gain from the bond investments under resale agreements 3,015) ($ 7,866 $ Valuation gain (loss) from securities borrowing transactions - dealer 27,237 6,339) ( Valuation gain from securities borrowing transactions - warrants - 423 Valuation (loss) gain from covering - warrants 2,155) ( 1,025 Total 22,067 $ 2,975 $		Year ended December 31,2018		Year ended December 31,2017
				621,487 $ 847,936 2,531 1,471,954 $ Year ended December 31,2017
	Year ended December 31,2018
	3,015) ($ 27,237 - 2,155) ( 22,067 $		7,866 $ 6,339) ( 423 1,025 2,975 $

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35) Realised loss on financial assets measured at fair value through other comprehensive income

Year ended December 31,2018		Year ended December 31,2017
24,289) ($ Year ended December 31,2018		- $ Year ended December 31,2017
1,180,875 $ 35,750) ( 84,740) ( 1,060,385 $ Year ended December 31,2018	417,304 $ 43,480) ( 67,912) ( 305,912 $ Year ended December 31,2017
430,058 $ 82,196 47,348) ( 68,032) ( 396,874 $	110,603) ($ 73,378 52,462) ( 52,791) ( 142,478) ($

36) Gain from issuance of call (put) warrants

37) Gain (loss) from derivatives

38) Impairment loss and reversal of impairment loss

Impairment loss and reversal of impairment loss
Other operating income (loss) Provision for impairment Recovery of bad debts Total Income from securities lending Net currency exchange gain (loss) Handling fee revenues from funds Others Total	Year ended December 31,2018			Year ended December 31,2017
	63,977) ($ 716 63,261) ($ Year ended December 31,2018			- $ - - $ Year ended December 31,2017
		87,487 $ 24,514 44,314 78,224 234,539 $	70,403 $ 480,116) ( 40,827 119,931 248,955) ($

39) Other operating income (loss)

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40) Handling charges

Handling charges
Brokerage handling fee expense Dealer handling fee expense Refinancing processing fee expense Total		Year ended December 31,2018		Year ended December 31,2017
		290,709 $ 220,256 1,653 512,618 $		255,418 $ 135,238 1,620 392,276 $

41) Financial costs

Financial costs Brokerage handling fee expense Dealer handling fee expense Refinancing processing fee expense Total		290,709 $ 220,256 1,653 512,618 $		255,418 $ 135,238 1,620 392,276 $
Interest expense from repurchase agreements Loans interest expense Other interest expense Total		Year ended December 31,2018		Year ended December 31,2017
		291,956 $ 108,524 13,828 414,308 $		272,675 $ 110,300 12,079 395,054 $

42) Employee benefits expense

Employee benefits expense Interest expense from repurchase agreements Loans interest expense Other interest expense Total		291,956 $ 108,524 13,828 414,308 $		272,675 $ 110,300 12,079 395,054 $
Salaries Labor and health insurance Pension Other employee benefits Total		Year ended December 31,2018		Year ended December 31,2017
		1,843,674 $ 129,687 73,720 108,610 2,155,691 $		2,006,176 $ 117,230 66,724 119,699 2,309,829 $

A. In accordance to the Company’s Article of Incorporation, the remainder of the year-end income before taxes less income before appropriating employees’ compensation and directors’ remuneration, if any, shall appropriate an employees’ compensation no less than 1.6% and directors’ remuneration no more than 2%. However, when the Company has an accumulated deficit, earnings to cover the deficit shall first be retained before appropriating employees’ compensation and directors’ remuneration.
B. For the years ended December 31, 2018 and 2017, employees’ compensation was accrued at $28,868 and $56,441, respectively; directors’ remuneration was accrued at $28,868 and $56,441, respectively. The aforementioned amounts were recognised in salary expenses.
C. For the year ended December 31, 2018, employees’ compensation was estimated at 2% and directors’ remuneration at 2%, based on the period-end income before taxes less income before appropriating employees’ compensation and directors’ remuneration.
D. The actual distributed amount of employees’ and directors’ remuneration for 2017 as resolved by the Board of Directors was in agreement with the estimates in the 2017 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.

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43) Depreciation and amortization

Depreciation and amortization
Depreciation Amortization Total		Year ended December 31,2018		Year ended December 31,2017
		71,559 $ 22,139 93,698 $		73,833 $ 33,116 106,949 $

44) Other operating expenses

Other operating expenses Depreciation Amortization Total		December 31,2018 71,559 $ 22,139 93,698 $		December 31,2017 73,833 $ 33,116 106,949 $
Rentals Taxes Computer information expenses Postage Bad debt expenses Others Total		Year ended December 31,2018		Year ended December 31,2017
		112,270 $ 654,999 159,812 70,018 - 376,637 1,373,736 $		121,558 $ 687,379 156,037 69,128 63,471 376,726 1,474,299 $

45) Other gains and losses

Other gains and losses
Financial income (Loss) gain on disposal of investments (Loss) gain on valuation of non-operating financial instruments Net currency exchange gain (loss) Other non-operating revenues Total	Year ended December 31,2018	Year ended December 31,2017
	157,292 $ 15,723) ( 9,166) ( 3,474 178,281 314,158 $	127,861 $ 64,574 32,156 14,194) ( 159,871 370,268 $

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46) Income tax

A. Income tax expense

(a)Components of income tax expense:

e tax ome tax expense Components of income tax expense:
The income tax expense relating to components of other comprehensive income is as follows Year ended December 31,2018 Year ended December 31,2017 Current tax: Current tax on profits for the periods 184,551 $ 304,692 $ Prior year income tax underestimation (overestimation) 6,287 11,220) ( Tax on undistributed surplus 2,000 - Total current tax 192,838 293,472 Deferred taxes: Origination and reversal of temporary differences 36,278 74,156) ( Impact of change in tax rate 9,862) ( - Total deferred taxes 26,416 74,156) ( Income tax expense 219,254 $ 219,316 $ Year ended December 31,2018 Year ended December 31,2017 Remeasurement of defined benefit obligations $ 1,934 ($ 21,787) Impact of change in tax rate 12,924) ( - Total 10,990) ($ 21,787) ($		Year ended December 31,2018	Year ended December 31,2017
	$ 1,934 12,924) ( 10,990) ($		($ 21,787) - 21,787) ($

(b)The income tax expense relating to components of other comprehensive income is as follows `：`

B. Reconciliation between income tax expense and accounting profit

Tax calculated based on profot befor tax and statutory tax rate Expenses disallowed by tax regulation Prior year income tax underestimation (overestimation) Tax exempt income by tax regulation Effect from Alternative Minimum Tax Tax on undistributed earnings Effect from changes in tax regulation Income tax expense	Year ended December 31,2018	Year ended December 31,2018	Year ended December 31,2017
	336,929 $ 23,971 6,287 273,171) ( 133,100 2,000 9,862) (		505,999 $ 16,901) ( 11,220) ( 416,902) ( 158,340 - - 219,316 $
		219,254 $

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

		For theyear ended	For theyear ended	December 31,2018	December 31,2018	December 31,2018
	January1	Recognised in profit or loss		Recognised in other comprehensive income		December 31
16,997 $ 123,743 140,740 $ 15,175) ($ 764) ( 15,939) ($ 124,801 $		12,638 $ 39,059) ( 26,421) ($
		131 $ 126) ( 5 $ 26,416) ($
	January1		Recognised in profit or loss	Recognised in other comprehensive income		December 31
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 $

D. As of December 31, 2018, the Company’s income tax returns through 2013, 2015 and 2016 have been assessed by the National Tax Authority. The income tax returns through 2017 of President Capital Management, President Venture Capital, and President Insurance Agency have also been assessed, except for President Futures, the income tax returns not through 2017 but through 2016 has been assessed.

E. Under the amendments to the Income Tax Act which was promulgated by the President of the

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Republic of China in February, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Group has assessed the impact of the change in income tax rate.

F. With respect to the income tax returns of the Company for 2016 and 2015, the Tax Authority assessed to increase income tax payable by $24,696. The Company disagreed with the assessment and had filed for administrative remedy and had recognised the income tax expense relating to the additional income tax payable.
G. The Company did not provide deferred tax liabilities arising from unremitted retained earnings of the subsidiary, President Securities (BVI) Ltd., and may have to pay related taxes. The above unremitted retained earnings is expected to be reinvested in the future.

47) Earnings per share

) Earnings per share
Basic earnings per share Net income attributable to common shareholders Dilutive effect of common stock equivalents Employee bonus Basic earnings per share Net income attributable to common shareholders Dilutive effect of common stock equivalents Employee bonus	Amount after tax Weighted-average outstanding common shares (In thousands) Earnings per share (In dollars) 1,210,323 $ 1,390,428 0.87 $ - 2,510 1,210,323 $ 1,392,938 0.87 $ Amount after tax Weighted-average outstanding common shares (In thousands) Earnings per share (In dollars) 2,618,769 $ 1,390,428 1.88 $ - 3,933 2,618,769 $ 1,394,361 1.88 $ Year ended December 31,2018 Year ended December 31,2017
	Amount after tax	Weighted-average outstanding common shares (In thousands)

	Amount after tax	Weighted-average outstanding common shares (In thousands)
	2,618,769 $ - 2,618,769 $	1,390,428 3,933 1,394,361	1.88 $ 1.88 $

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7. RELATED PARTY TRANSACTIONS

1) 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. Cayman President Holdings Ltd.

Relationship with the Company Entity having significant influence on the Company Associate Other related party Other related party Other related party Other related party

2) Significant related party transactions and balances

A. Accounts receivable

Significant related party transactions and balances A. Accounts receivable
B. Other receivables C. Guarantee deposit received D. Bonds sold under repurchase agreements Entity having significant influence on the company: Uni-President Enterprises Corp. Other related party: Others Total Other related party: Others Associate: Uni-President Assets Management Corp. Other related party: President Tokyo Co., Ltd. Total Other related party: Cayman President Holdings Ltd.	December 31,2018	December 31,2017
	288 $ 597 885 $ December 31,2018	304 $ 583 887 $ December 31,2017
	$9 December 31,2018	$9 December 31,2017
	530 $ 1,393 1,923 $ December 31,2018	530 $ 1,393 1,923 $ December 31,2017
	184,290 $	- $

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E. Gains on wealth management-trust income from sales of funds

The revenues were collected on a monthly basis in accordance with contract F. Other operating income-handling charge revenue The revenues were collected on a monthly basis in accordance with contract G. Rent income Year ended December 31,2018 Associates: Uni-President Assets Management Corp. 9,453 $ Year ended December 31,2018 Associates: Uni-President Assets Management Corp. 43,461 $		Year ended December 31,2018		Year ended December 31,2017
				terms. 9,553 $ Year ended December 31,2017
				terms. 39,807 $

H.	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. Revenue from providing agency service for stock affairs Period Deposit Year ended December 31,2018 Year ended December 31,2017 Associates: Uni-President Assets Management Corp. 2016.05.01~2019.06.30 530 $ 7,085 $ 7,103 $ Other related party: President Tokyo Co., Ltd. 2015.04.01~2021.03.31 1,393 9,422 9,422 Total 16,507 $ 16,525 $ Year ended December 31,2018 Year ended December 31,2017 Entity having significant influence on the company: Uni-President Enterprises Corp. 3,600 $ 3,659 $ Associate: Uni-President Assets Management Corp. 133 129 Other related party: Ton Yi Industrial Corp. 1,227 1,225 President Chain Store Corp. (PCSC) 1,708 1,603 Others 3,078 3,018 Total 9,746 $ 9,634 $	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. Revenue from providing agency service for stock affairs Period Deposit Year ended December 31,2018 Year ended December 31,2017 Associates: Uni-President Assets Management Corp. 2016.05.01~2019.06.30 530 $ 7,085 $ 7,103 $ Other related party: President Tokyo Co., Ltd. 2015.04.01~2021.03.31 1,393 9,422 9,422 Total 16,507 $ 16,525 $ Year ended December 31,2018 Year ended December 31,2017 Entity having significant influence on the company: Uni-President Enterprises Corp. 3,600 $ 3,659 $ Associate: Uni-President Assets Management Corp. 133 129 Other related party: Ton Yi Industrial Corp. 1,227 1,225 President Chain Store Corp. (PCSC) 1,708 1,603 Others 3,078 3,018 Total 9,746 $ 9,634 $	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. Revenue from providing agency service for stock affairs Period Deposit Year ended December 31,2018 Year ended December 31,2017 Associates: Uni-President Assets Management Corp. 2016.05.01~2019.06.30 530 $ 7,085 $ 7,103 $ Other related party: President Tokyo Co., Ltd. 2015.04.01~2021.03.31 1,393 9,422 9,422 Total 16,507 $ 16,525 $ Year ended December 31,2018 Year ended December 31,2017 Entity having significant influence on the company: Uni-President Enterprises Corp. 3,600 $ 3,659 $ Associate: Uni-President Assets Management Corp. 133 129 Other related party: Ton Yi Industrial Corp. 1,227 1,225 President Chain Store Corp. (PCSC) 1,708 1,603 Others 3,078 3,018 Total 9,746 $ 9,634 $		Year ended December 31,2018	Year ended December 31,2018	Year ended December 31,2018		Year ended December 31,2017
	Entity having significant influence on the company: Uni-President Enterprises Corp. Associate: Uni-President Assets Management Corp. Other related party: Ton Yi Industrial Corp. President Chain Store Corp. (PCSC) Others Total
			3,600 $ 133 1,227 1,708 3,078 9,746 $				3,659 $ 129 1,225 1,603 3,018 9,634 $

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I. Loss from derivatives

I. Loss from derivatives
J. Other operating expenses-equipment rental and copy expense K. Financial costs L. Purchases of trading securities–dealer Year ended December 31,2018 Year ended December 31,2017 Other related party: Cayman President Holdings Ltd. 1,584) ($ - $ Year ended December 31,2018 Year ended December 31,2017 Other related party: President Tokyo Co., Ltd. 7,115 $ 6,583 $ Others 1,143 1,302 Total 8,258 $ 7,885 $ Year ended December 31,2018 Year ended December 31,2017 Other related party: Cayman President Holdings Ltd. 66 $ - $ Year ended December 31,2018 Ending Shares Ending Balance Entity having significant influence on the company: Uni-President Enterprises Corp. - - $ 579 $ Other related parties: Ton Yi Industrial Corp. - - 16 President Chain Store Corp. - - 944) ( Total - $ 349) ($ December 31,2018 Gain(loss)	Year ended December 31,2018

	7,115 $ 1,143 8,258 $ Year ended December 31,2018
	$ Ending Shares - - - December		$

				579 $ 16 944) ( 349) ($ Gain(loss)
	- - -	- $ - - - $

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Compensation of key management personnel he compensation of key management such as directors, general managers, vice general managers ere as follows: Year ended December 31,2017 Ending Shares Ending Balance Entity having significant influence on the company: Uni-President Enterprises Corp. 127 8,382 $ 208 $ Other related parties: Ton Yi Industrial Corp. 171 2,385 33) ( President Chain Store Corp. - - 136 Total 10,767 $ 311 $ Gain(loss) December 31,2017 Year ended December 31,2018 Year ended December 31,2017 Salary and short-term employee benefits 186,989 $ 232,069 $ Retirement benefits 1,579 1,725 Other long-term employee benefits - - Termination benefits - - Share-based payment - - Total 188,568 $ 233,794 $		December	December	December	December	Ending Balance 31,2017	Ending Balance 31,2017		Year ended December 31,2017
		Ending Shares
				186,989 $ 1,579 - - - 188,568 $				232,069 $ 1,725 - - - 233,794 $

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

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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 Financial assets at fair value through other comprehensive income - current - Overseas bonds (par value) 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) 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:	December 31,2018 1,300,000 $ 4,100,000 9,157,965 977,874 307,150 - 19,373 635,263 50,000 - 680,000 2,000	December 31,2017 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	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 Security deposits Security deposits

9. SIGNIFICANT COMMITMENTS

None.

10. SIGNIFICANT LOSS FROM NATURAL DISASTER

None.

11. SIGNIFICANT SUBSEQUENT EVENT

None.

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12. OTHER

1) Management objective and policy of financial risks

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

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(E) Risk Control Office implements risk management policy and related regulations and reports to the Risk Management Committee. Risk Control Office also reports daily risk management to the General Manager and is responsible for the following:
- a. Establish Risk Management Policy of the 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
- c. Compliance segment also provides services of Anti-Money Laundering and Counter Terrorism Financing, including designs specification and internal control, establishes transaction monitoring, oversees the effective implementation of business units, conducts the employee training and reports any suspicion of money laundering.
(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.
(J) Settlement division is responsible for:
- a. Clearing and settlement; risk control and management of margin purchase and short sale of securities.
- b. Risk control and management of trading middle office and enforcement of rules governing risk management of business segments.
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

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controlled within the limits set in advance.

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

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

  - (B) Credit risk management In relation to risk control, the quantitative model of default rate adopts KMV model to calculate the default rate of issuers with credit exposure of the issuing company and the trading counterparties, and credit risk of securities disclosed in the report. The credit exposure is mitigated through regular review of credit status.

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

E. Hedging and risk-offsetting strategy
- (A) Policies of hedging and risk mitigating are parts of the Group’s risk management policies, and the hedging position and hedged trading position are supposed to be one portfolio, of which the gain and loss and risk information are measured on a consolidated basis.
- (B) The overall position (hedging position and trading position) is included in the daily risk management system to calculate Value at Risk and other relevant information. Limit exceeding indicators mainly include nominal principal, stop-loss point, price sensitivity and VaR. With the presentation of daily risk management report, routine control and limit exceeding treatment can be executed.
- (C) The continued effectiveness of hedging and risk-offsetting strategy is measured by the gain and loss of overall position (hedging position and trading position), in order to track reasonableness of the profit or loss of hedging position and the offsetting relationship with the profit or loss of trading position, and to control them within a reasonable range.
2) Credit risk Effective 2018
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

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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 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. Commercial papers

The commercial papers held by the Group are under resale agreements. As all the counterparties are financial institutions with good credit, the credit risk from counterparties is extremely low.

c. 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. 27% 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).

(C) Financial assets at fair value through other comprehensive income - current The foreign government bonds held by the Group are classified as debt instruments at fair value through other comprehensive income. In general, the bonds held by the Group are with lower credit risk.
(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

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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 swap transaction. The counterparties are all from financial service industry and mainly located in Taiwan and United Kingdom.

(F) Bonds investment under a resale agreement Bonds sold under a resale agreement are the bonds that the client sold to the Group at a price, interest rate, length of period as agreed by two parties and the client shall repurchase the bonds at the specified price upon maturity. The Group needs to assume credit risk from counterparties when underwriting such business, as the payment being delivered to the other party. With consideration of good collateral obtained, the net of credit risk exposure from counterparties can be effectively reduced. As all the counterparties are financial institutions with good credit rating, the credit risks from counterparties are extremely low. Please refer to Note 6(11).
(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 self-operating 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-

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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 are deposited, the credit risk is extremely low.
(M) Other non-current assets Other non-current assets mainly comprise operating guarantee deposits, settlement funds, and refundable deposits. Operating guarantee deposits are mainly deposited in domestic banks with good credit rating. Settlement funds are deposited in securities exchange. Settlement funds are used as compensation when a party to a marketable securities transaction fails to fulfil the settlement obligation. The credit risks from the institutions where these two assets are deposited are extremely low. The refundable deposits refer to cash or other assets which are deposited externally by the Group and can be used as refundable deposits. Because deposits are placed in various financial institutions and each deposit amount is small, the credit risk is dispersed and the credit exposure of overall refundable deposit is extremely low.
C. Expected credit loss assessment
In the assessment of impairment and calculation of expected credit losses, the Group considers reasonable and supporting information about past events, current conditions and future economic conditions. The Group determines at the balance sheet date whether there has been a significant increase in credit risk since initial recognition or whether credit impairment has occurred, and recognises expected credit loss according to which stage the asset belongs: no significant increase in credit risk or low credit risk at balance sheet date (Stage 1), significant increase in credit risk (Stage 2), and credit impaired (Stage 3). 12-month expected credit losses are recognised for assets in Stage 1, and lifetime expected credit loses are recognised for assets in Stage 2 and Stage 3. The definition of and expected credit losses recognised for each stage are as follows:

Item	Stage1	Stage2	Stage 3
Definition	No significant deterioration of credit quality of the financial asset since initial recognition, or the financial asset is considered low-risk at the balance sheetdate.	Significant deterioration of credit quality of the financial asset since initial recognition, but the asset is not yet credit impaired.	The financial asset is credit impaired at the financial reporting date.
Expected credit losses recognition	12-month expected credit losses	Lifetime expected credit losses	Lifetime expected credit losses

(A) Judgements of the significant increase in credit risk since initial recognition
Judgements and assumptions used to determine whether the credit risk has a significant increase since initial recognition when the Group calculates expected credit loss under IFRS

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9 are as follows:
a. If contractual payments are over 30 days past due according to the payment terms, the financial asset is considered to have significant increase in credit risk since initial recognition.
b. There is significant increase in credit risk at the reporting date if the credit rating of the issuer has been downgraded by more than 2 grades and the final external credit rating at the reporting date is non-investment grade, if the interest payments are over 30 days past due, or if there has been a default in the past.
(B) Definition of default and credit-impaired financial assets
According to the definition of credit impairment set by IFRS 9, a financial asset is creditimpaired when one or more events that have occurred and have a significant impact on the expected future cash flows of the financial asset. The criteria used to judge whether a financial asset is credit-impaired since initial recognition includes but is not limited to the following:
a. Contractual payments or principal or interest payments on bonds are over 3 months (90 days) past due.
b. Bond investment is rated as “in default” by external credit rating agencies.
c. Bond issuer has filed for bankruptcy, restructure, or other debt clearance procedures.
d. Issuer or counterparty has financial difficulties.
(C) Writing-off policy

If any of the following condition applies, the Group will write off the non-recoverable portion of the overdue receivables as bad debt.

a. Debt cannot be fully or partially recovered due to dissolution of, disappearance of, settlement with, bankruptcy declaration by the debtor, or any other reason.
b. The collateral and the assets of the primary and secondary debtors could not be auctioned off after multiple attempts and multiple price discounts, and the Company has not received any real benefits in assuming the collateral.
c. Payments are over two years past due and could not be recovered after attempts to collect.
(D) Measurement of expected credit losses
The Group considers reasonable supporting information which shows significant increase in credit risk since initial recognition when calculating expected credit losses. Main indexes include: internal/external credit rating, information of past due, credit spread, other market information in relation to the borrower, issuer or counterparty, and significant increase in credit risk of other financial instrument of the same borrower.
a. Investments in bills and bonds
- (a)Probability of default was based on external credit rating, which include forwardlooking information.
- (b)Loss given default was based on the average loss given default of external credit rating

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of investment position and counterparties.

(c)Exposure at default

Stage 1, Stage 2 and Stage 3: Total carrying amount (including interest receivable).

(E)Consideration of forward-looking information
- Historical loss rate (based on the historical experience in the past 3 to 5 years) as obtained and compared with economic environment in the past, nowadays and future (forward-looking factor) to see whether there is any significant change, and then to properly adjust future loss rate standards. If any significant default event occurs, the loss rate in the current year will be included in the calculation of future loss rate standard.
D. Table of movements in loss provision of the Group
(A) For the year ended December 31, 2018, there were no changes in the loss allowance for investments in debt instruments measured at fair value through other comprehensive income.
(B) Except for bond interest receivable which was evaluated along with debt investments, the Group applies the simplified approach to measure the loss allowance at an amount equal to lifetime expected credit losses for marginal receivables, accounts receivable, other receivable-others and overdue receivables. The movements in loss provision of marginal receivables, accounts receivable, other receivable-others and other non-current assetsoverdue receivables of the Group are as follows:

December 31, 2018

At January 1_IAS 39 Adjustments under new standards At January 1_IFRS 9 Provision (reversal of provision) for impairment Write-offs Effect of foreign exchange Transfers At December 31		Marginal receivable		Accounts receivable		Other receivable - other		Other non- current assets- overdue receivables
	84,093 $ - 84,093 27,996 - - 50,420) ( 61,669 $		4,359 $ - 4,359 2,648 - - 4,346) ( 2,661 $		495 $ - 495 11,467 645) ( 16 - 11,333 $			136,443 $ - 136,443 21,866 - - 54,766 213,075 $

E.Credit risk information as of December 31, 2017 is provided in Note 12(11).

3) Liquidity risk

A. Definition and source of liquidity risk

Liquidity risk refers to possible financial losses arising from the inability to realise 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

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In order to prevent operational crisis as a result of liquidity risk, the Group has established responding crisis process with regular monitoring over liquidity gap of fund.

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

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

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

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`December 31, 2018`

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 (includes notes payable) Collections on behalf of third parties Other payables Other financial liabilities -current Total Financial liabilities at fair value through profit or loss-current		Immediately		Less than 3 months		3-12 months		1-5years `-` `$` `-` `-` `-` `-` `-` `-` `-` `-` `-` `87,780` `-` `-` `87,780` `$`	Total
		`623,514` `$` `-` `598,457` `267,640` `-` `1,767,269` `2,007,202` `-` `11,574,634` `8,241,191` `268,589` `648` `-` `25,349,144` `$`		`316,365` `$` `-` `-` `-` `15,134,144` `-` `-` `621` `-` `47,924` `6,209` `237,112` `1,378,506` `17,120,881` `$`		`-` `$` `-` `-` `-` `-` `-` `-` `-` `-` `-` `-` `679,140` `1,308,503` `1,987,643` `$`			`939,879` `$` `-` `598,457` `267,640` `15,134,144` `1,767,269` `2,007,202` `621` `11,574,634` `8,289,115` `362,578` `916,900` `2,687,009`
									`44,545,448` `$`

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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 (includes notes payable) Collections on behalf of third parties Other payables Other financial liabilities -current Total Financial liabilities at fair value through profit or loss-current		Immediately		Less than 3 months	3-12 months	1-5years - $ - - - - - - - - - 89,469 - - 89,469 $	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 $		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 $

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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:

ent of the Group:
December 31,2018 Not later than one year Later than one year but not later than five years Over five years Total December 31,2017 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)
	84,135 $ 127,303 2,808 214,246 $ Operating leases expenditures(Lessee)	6,244 $ 1,239 - 7,483 $ Operating leases income(Lessor)
	97,785 $ 187,215 3,402 288,402 $	19,867 $ 5,654 - 25,521 $

4) Market risk

A. Definition of market risk

Market risk refers 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)

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	Statistical table for one-dayVaR of transactions
Year ended December 31,2018 December 31, 2018 VaR Maximum VaR Average VaR Minimum	Amount 54,865 $ 261,016 112,458 32,838	Year ended December 31,2017 December 31, 2017 VaR Maximum VaR Average VaR Minimum	Amount 75,863 $ 142,801 81,509 39,915

December 31,2018 December 31, 2018 VaR Maximum VaR Average VaR Minimum	Amount December 31,2017 Amount 54,865 $ December 31, 2017 75,863 $ 261,016 VaR Maximum 142,801 112,458 VaR Average 81,509 32,838 VaR Minimum 39,915	Amount December 31,2017 Amount 54,865 $ December 31, 2017 75,863 $ 261,016 VaR Maximum 142,801 112,458 VaR Average 81,509 32,838 VaR Minimum 39,915	Amount December 31,2017 Amount 54,865 $ December 31, 2017 75,863 $ 261,016 VaR Maximum 142,801 112,458 VaR Average 81,509 32,838 VaR Minimum 39,915	Amount December 31,2017 Amount 54,865 $ December 31, 2017 75,863 $ 261,016 VaR Maximum 142,801 112,458 VaR Average 81,509 32,838 VaR Minimum 39,915	Amount December 31,2017 Amount 54,865 $ December 31, 2017 75,863 $ 261,016 VaR Maximum 142,801 112,458 VaR Average 81,509 32,838 VaR Minimum 39,915	Amount December 31,2017 Amount 54,865 $ December 31, 2017 75,863 $ 261,016 VaR Maximum 142,801 112,458 VaR Average 81,509 32,838 VaR Minimum 39,915
Statistical	table for VaR of various risk indicators of transactions
Year ended
December 31,2018	Foreign exchange			Interest		Share ownership
December 31, 2018	$	3,520	$	8,222	$	53,425
VaR Maximum		39,655		33,483		266,250
VaR Average		11,374		16,584		112,550
VaR Minimum		2,852		7,429		27,704
Year ended
December 31,2017	Foreign exchange			Interest		Share ownership
December 31, 2017	$	8,402	$	20,441	$	74,195
VaR Maximum		47,229		71,511		147,304
VaR Average		15,492		34,960		74,079
VaR Minimum		4,643		12,030		26,425

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, 2018 and 2017 ：

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Financial assets in foreign currencies Cash and cash equivalents Financial assets at fair value through profit or loss Financial assets at fair value through comprehensive income - current Bonds purchased under resale agreements Others Financial liabilities in foreign currencies Short-term loans Financial liabilities at fair value through profit or loss Bonds sold under repurchase agreements Others			December 31,2018	December 31,2018	December 31,2018
	USD 1,271,343 $ 7,413,891 296,304 93,193 3,819,366 939,879 159,839 6,980,674 4,997,071	EUR 1,818 $ 1,368,025 - - 14,015 - 1,479 1,167,834 10,399	AUD 2,859 $ 755,860 - - 4,570 - 1 700,087 2,691	RMB 196,244 $ 1,830,128 - - 70,935 - 6,433 819,621 228,763	HKD 562,346 $ 68,767 - - 1,726,076 - - - 1,010,705	Others 187,005 $ 4,071 - - 177,703 - 5,137 - 177,326	Total
							2,221,615 $ 11,440,742 296,304 93,193 5,812,665 939,879 172,889 9,668,216 6,426,955

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Financial assets in foreign currencies Cash and cash equivalents Financial assets at fair value through profit or loss Available-for-sale financial assets - current Others Financial liabilities in foreign currencies Short-term loans Financial liabilities at fair value through profit or loss Bonds sold under repurchase agreements Others			December 31,2017	December 31,2017	December 31,2017
	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

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D. The total exchange gain (loss), including realised and unrealised, arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2018 and 2017, amounted to $27,988 and ($494,310) respectively.
5) Fair value and hierarchy information
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.

December 31, 2018

Total 663,672 $	Quoted prices of the same assets in active markets (level 1)	Other significant observable inputs (level 2)	Significant non-observable inputs(level 3)
			- $ Significant non-observable inputs(level 3)
Total 674,449 $	Quoted prices of the same assets in active markets (level 1)	Other significant observable inputs (level 2)
	- $	674,449 $	- $

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

B. Valuation techniques
(A)For financial instruments held for trading purposes which are classified as non-derivative instruments, their fair values are based on their quoted prices in an active market. If there is no quoted market price for reference, a valuation technique will be adopted to measure the fair value. Estimates and assumptions of valuation technique adopted by the Group are in agreement with the information of estimates and assumptions adopted by market users for financial instrument pricing and the said information shall be accessible to the Group. For those classified as derivative instruments, their fair values are based on their market prices if their quoted prices are available from an active market. If quoted market prices in an active market are not available, SWAP and IRS are valued at the discounted cash flow method, and options are valued at the Black-Scholes model.
(B) When available-for-sale financial assets have quoted market prices available in an active market, the fair value is determined using the market price.
C. Fair value hierarchy of the financial instruments
(A) Definitions for the hierarchy classifications of financial instruments measured at fair value
- 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 emerging stock without active markets, off-the-run issue of government bonds, corporate bonds, bank debentures, convertible corporate bonds, currency swaps, interest rate swaps, options, asset swaps, and most derivatives are all classified within level 2. For the years ended December 31, 2018 and 2017, there was no significant transfer of financial instruments between Level 1 and Level 2.
- c. Level 3 Unobservable inputs for the assets or liability. The fair value of the Group’s investment in unlisted stocks are is included in Level 3.

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(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 Financial assets at fair value through comprehensive income-current Bond investments Financial assets at fair value through profit or loss - noncurrent Stock investments Bond investments Financial assets at fair value through comprehensive income-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	31,2018
	Total 2,053,362 $ 18,298,742 4,548,881 296,304 16,445 49,909 604,579 598,457 2,779,488 267,640	Level 1 1,997,291 $ 1,190,116 4,548,881 296,304 - - - 598,457 2,776,188 242,950	Level 2 39,097 $ 17,108,626 - - - 49,909 - - 3,300 24,690	Level3
				16,974 $ - - - 16,445 - 604,579 - - -

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Financial instrument items measured at fair value Recurring fair value Non-derivative financial instruments Assets Financial assets at fair value through profit or loss-current Stock investments Bond investments Others Available-for-sale financial assets-current Bond investments Financial assets at fair value through profit or loss - noncurrent Bond 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	31,2017
	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
				- $ - - - - - - -

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31, 2018:
		Year ended December 31,2018
Financial assets at fair value through profit or loss- current Equity investments Financial assets at fair value through profit or loss - noncurrent Equity investments Financial assets at fair value through other comprehensive income - noncurrent Equity investments	January1	Valuation amount		Increased		Decreased		December 31
		Recorded in profit or loss	Recorded in other comprehensive income(loss)	Acquired/ Issued	Transfers into level 3	Sold/ Settled	Transfers out from level 3
	- $ 20,147 567,306	1,776) ($ 3,702) ( -	- $ - 37,273	18,750 $ - -	- $ - -	- $ - -	- $ - -	16,974 $ 16,445 604,579

December 31,2018	Fair value	Valuation technique	Significant unobservable input	Range (weighted average)	Relationship of inputs to fair value
Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - noncurrent Equity investments Financial assets at fair value through other comprehensive income - noncurrent Unlisted stocks Unlisted stocks	16,445 16,974 $ 604,579	Net asset value Market approach Market approach	Price to earnings ratio multiple Discount for lack of marketability Not applicable Price to earnings ratio multiple Discount for lack of marketability	21.25 25% Not applicable 1.91~2.05 30%	The higher the multiple, the higher the fair value The higher the discount for lack of marketability, the lower the fair value Not applicable The higher the multiple, the higher the fair value The higher the discount for lack of marketability, the lower the fair value

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(E)Valuation process for fair value at Level 3
The parent company’s risk management department is responsible for the verification of fair value categorised in Level 3. The department assesses the independence, reliability, consistency and representativeness of the source information, regularly verifies the valuation models and calibrates the parameters to ensure the valuation process and results are in compliance with IFRSs.
(F) For the fair value measurement of Level 3, the sensitivity analysis of the fair value to the reasonable alternative hypothesis shows that the fair value measurement of the financial assets by the Group is reasonable. However, use of different valuation models or assumptions may result in different measurement. The following is the impact to profit or loss or to other comprehensive income from financial assets and liabilities categorised within Level 3 if the inputs used in valuation models have changed up or down by 1%:

December 31,2018	Recognised inprofit or loss	Recognised inprofit or loss	Recognised in other comprehensive income	Recognised in other comprehensive income
	Favourable change	Unfavourable change	Favourable change	Unfavourable change
Financial assets at fair value through profit or loss - current Unlisted stocks Financial assets at fair value through profit or loss -noncurrent Venture capital shares Financial assets at fair value through other comprehensive income - noncurrent Unlisted stocks	170 $ Not applicable -	170) ($ Not applicable -	- $ - 6,046	- $ - 6,046) (

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

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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, 2018 and 2017, the capital adequacy ratios were 567% and 417%, 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.

A. Balance sheet of trust accounts

ements on a semiannual basis. A. Balance sheet of trust accounts
Trust assets		December 31,2018	December 31,2017
Bank savings Structured notes Stock Bond Fund Securities lending Accounts receivable Total of trust assets Trust liabilities		179,211 $ 380,552 187,279 252,251 2,019,812 164,989 29,429 3,213,523 $ December 31,2018	209,606 $ 362,297 488,210 8,044 2,097,002 383,355 23,943 3,572,457 $ December 31,2017
Accounts payable Trust capital Retained esrnings Total of trust liabilities	4,862 $ 3,574,783 366,122) ( 3,213,523 $		37,124 $ 3,346,934 188,399 3,572,457 $

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B. Income statement of trust accounts

Item	Year ended December 31,2018		Year ended December 31,2017
Trust income Interest income Cash dividends received Income from stock lending Investment gains-realised Investment gains(losses)-unrealised Subtotal Trust expenses Management fee Service fee Borrowing costs Remittance fee (Loss) income before income tax Income tax expense Net (loss) income	8,028 $ 11,334 117,957 556 387,327) (	75 $ 15,116 16,110 61,346 141,135 233,782 1 3) ( 2,781) ( 1) ( 230,998 - 230,998 $
	249,452) ( - 18) ( 4,041) ( 1) ( 253,512) ( 5) ( 253,517) ($

C. Property list of trust accounts Items Bank savings Structured notes Fund Bond Stock Securities lending Others Total		December 31,2018		December 31,2017
		179,211 $ 380,552 2,019,812 252,251 187,279 164,989 29,429 3,213,523 $		209,606 $ 362,297 2,097,002 8,044 488,210 383,355 23,943 3,572,457 $

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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, 2018	December 31, 2018	December 31, 2017	December 31, 2017	Standard	Enforcement
		Calculation	Ratio	Calculation	Ratio
17	Stockholders’equity (Total liability－futures trader’s equity)	3,415,060 72,636	47.02	3,238,147 267,403	12.11	`≧`1	Met the requirement
17	Current assets Current liabilities	4,090,550 72,636	56.32	3,487,310 70,786	49.27	`≧`1	Met the requirement
22	Stockholders’equity Minimumpaid-in capital	3,415,060 400,000	853.77%	3,238,147 400,000	809.54%	`≧`60% `≧`40%	Met the requirement
22	Adjusted net capital Total amount of customer margins required for the open positions of futures traders	3,271,606 200,263	1633.65%	3,111,005 174,411	1783.72%	`≧`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, 2018	December 31, 2018	December 31, 2017	December 31, 2017	Standard	Enforcement
		Calculation	Ratio	Calculation	Ratio
17	Stockholders’equity (Total liability－futures trader’s equity)	2,001,395 205,634	9.73	1,482,715 185,733	7.98	`≧`1	Met the requirement
17	Current assets Current liabilities	14,509,077 13,399,689	1.08	12,602,199 11,585,048	1.09	`≧`1	Met the requirement
22	Stockholders’equity Minimumpaid-in capital	2,001,395 645,000	310.29%	1,482,715 645,000	229.88%	`≧`60% `≧`40%	Met the requirement
22	Adjusted net capital Total amount of customer margins required for the open positions of futures traders	1,662,315 2,001,479	83.05%	1,158,127 1,573,458	73.60%	`≧`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) Effects on initial application of IFRS9 and information on application of IAS 39 in 2017

A.Summaries of adopting significant accounting policies in 2017
(A) 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.
(B)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

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and derecognized using trade date accounting.

c.Available-for-sale financial assets are initially recognized at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in other comprehensive income. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in ‘financial assets measured at cost’.
d.If there has been objective evidence of impairment, the Group will account for impairment. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring after the impairment loss was recognized, then such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognized in profit or loss shall not be reversed through profit or loss. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.
(C) 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.
(D) Impairment of financial assets
a.The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
b.The criteria that the Group uses to determine whether there is an objective evidence of an impairment loss is as follows:
(a)Significant financial difficulty of the issuer or debtor;
(b)A breach of contract, such as a default or delinquency in interest or principal payments;

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(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.
B. The reconciliations of carrying amount of financial assets transfered from December 31, 2017, IAS 39, to January 1,2018 , IFRS 9, were as follows:

(Blank below)

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Financial assets at fair value through profit or loss - noncurrent Add: Equity investments Transferred in from financial assets at cost (IAS 39) Financial assets at fair value through other comprehensive income - current Add: Debt investments Transferred in from available-for-sale financial assets (IAS 39) Financial assets at fair value through other comprehensive income - noncurrent Add: Equity investments Transferred in from financial assets at cost (IAS39)	IAS 39 December 31, 2017 Carryingamount	Reclassifications	Remeasurements	IFRS 9 January 1, 2018 Carryingamounts		Effects
					January 1, 2018 Retained earnings	January 1, 2018 Other equityinterest	January 1, 2018 Non-controlling interest
	50,342 $ - 50,342 $ - $ - - $ - $ - - $	- $ 2,609 2,609 $ - $ 1,044,031 1,044,031 $ - $ 37,564 37,564 $	- $ 17,538 17,538 $ - $ - - $ - $ 529,742 529,742 $	50,342 $ 20,147 70,489 $ - $ 1,044,031 1,044,031 $ - $ 567,306 567,306 $	- $ 17,538 17,538 $ - $ - - $ - $ - - $	- $ - - $ - $ - - $ - $ 516,449 516,449 $	- $ - - $ - $ - - $ - $ 13,293 13,293 $

a. Debt instruments within "Available-for-sale" under IAS 39, which amounted to $1,044,031, were reclassified as "Financial assets at fair value through other comprehensive income (debt instruments)" at initial adoption of IFRS 9 as they met the condition that their cash flows are solely payments of principal and the interest on outstanding principal and the objective to hold them is to collect cash flow and to sell.
b. Equity instruments within "Financial assets at cost" under IAS 39 which amounted to $37,564 were elected by the Group to be reclassified as "Financial assets at fair value through other comprehensive income (equity instruments)" at initial adoption of IFRS 9 as they were not held for trading purposes. "Financial assets at fair value through other comprehensive income (equity instruments)" was increased by $567,306, other equity was increased by $516,449 and non-controlling interest was increased by $13,293.
c. Equity instruments within "Financial assets at cost" under IAS 39, which amounted to $2,609, were reclassified as "Financial assets

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at fair value through profit or loss (equity instruments)" in compliance with IFRS 9. "Financial assets at fair value through profit or loss (equity instruments)" was increased by $20,147 and retained earnings was increased by $17,538.

(Blank below)

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C. The significant accounts as of December 31, 2017 is as follows:
(A)Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss
	December 31,2017
Current items:
Open-ended funds and money market instruments
and securities investment by brokers
Open-ended mutual funds beneficiary
certificates	$	456,960
Overseas stocks and funds		148,056
Listed (TSE and OTC) stocks		133,524
Subtotal		738,540
Adjustment of open-ended funds
and money market instruments
and securities investment by brokers	(	23,649)
Total		714,891
Trading securities-dealer
Listed (TSE and OTC) stocks		2,605,879
Warrants		-
Government bonds		1,699,413
Corporate bonds		4,383,130
Convertible corporate bonds		441,134
Emerging stocks		98,271
Overseas stocks		20,659,710
Exchange-traded funds		1,976,561
Others		31,185
Subtotal		31,895,283
Adjustment of trading securities - dealer		156,608
Total		32,051,891
Trading securities-underwriter
Listed (TSE and OTC) stocks		613,026
Convertible corporate bonds		327,788
Subtotal		940,814
Adjustment of trading securities - underwriter		137,563
Total		1,078,377

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		December 31,2017	December 31,2017
Trading securities-hedging
Listed (TSE and OTC) stocks			2,064,014
Convertible corporate bonds			13,182
Warrants			104,756
Overseas stocks			-
Exchange-traded funds			477,618
Subtotal			2,659,570
Adjustment of trading securities - hedging	(		77,804)
Total			2,581,766
Options bought-futures			15,040
Futures guarantee deposits receivable			2,230,377
Derivative financial instrument assets-OTC			20,043
Total	$		38,692,385
		December 31,2017
Non-current items:
Trading securities - dealer - government bonds	$		50,076
Adjustment of trading securities			266
Total	$		50,342
Available-for-sale financial assets
		December 31,2017
Current items:
Trading securities - dealer
Overseas bonds		$	1,036,521
Adjustment of trading securities - dealer			7,510
Total		$	1,044,031
Financial assets at cost-non-current
		December 31,2017
Taiwan Depository & Clearing Corp.	$		2,450
Taiwan Futures Exchange			35,115
Hua Liu Venture Capital Corporation			2,608
Total	$		40,173

(B)Available-for-sale financial assets

(C)Financial assets at cost-non-current

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 been completed and reported to the Taipei District Court. The Company had collected $1,128 as remaining assets based on the shareholding ratio.
(D)Gain on trading of securities

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With respect to information shown in Note 6(30), amounts recognised for trading of securities generated from available-for-sale financial assets for the year ended December 31, 2017 was $9,448.

D.Credit risk for December 31, 2017 was as follows:
(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.

(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 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 was guaranteed by banks at December 31, 2017. Details are as follows:

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i.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. ii.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).

iii.Convertible corporate bond

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

c.Available-for-sale financial assets-current

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

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

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

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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 self-operating 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 shortterm 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.

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m.Other non-current assets

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

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

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	-

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The table of the credit quality of financial assets

As of December 31, 2017

As of December 31, 2017
Financial assets		Normal assets		High risk	Impaired	Provisions	Total	Recognised losses	Net
	Low risk		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 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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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 million or 20 percent of contributed capital ： None.
D. Disposals of real estate exceeding $300 million or 20 percent of contributed capital ： None.
E. Purchases or sales transactions discount on brokers’ charges with related parties in excess of $5 million ： None.
F. Receivables from related parties exceeding $100 million or 20 percent of contributed capital ： None.
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	Conditions	Percentage (%) of total consolidated net revenues or assets (Note 3)
0	President Securities Corp.	President Futures Corp.	1	Futures Margin - Own Funds	$1,670,689	Note 4	2.37%
0	President Securities Corp.	President Futures Corp.	1	Deposit-out	39,000	Note 4	0.06%
0	President Securities Corp.	President Futures Corp.	1	Accounts receivable	3,895	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	59,190	Note 4	1.03%
0	President Securities Corp.	President Futures Corp.	1	Settlement accounts receivable	14,806	Note 6	0.26%
0	President Securities Corp.	President Futures Corp.	1	Other non-operatingrevenues	5,753	Note 4	0.10%
0	President Securities Corp.	President Capital Management Corp.	1	Expense from investment advisory	36,000	Note 4	0.62%
0	President Securities Corp.	President Capital Management Corp.	1	Other non-operating revenues	3,644	Note 4	0.06%
0	President Securities Corp.	President Securities (HK) Ltd.	1	Accounts receivable	6,371	Note 4	0.01%

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

The number zero is for parent company.
According to the sequential order, subsidiaries are numbered from 1.
Note 2 ： There are three kinds of transactions between related parties and numbered from 1 to 3 were shown as follows (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.)
Parent company to subsidiaries.
Subsidiaries to parent company.
Subsidiaries to subsidiaries.
Note 3 ： The calculation basis of the trading amount accounting for the total consolidated net revenues or assets is that the account ending balance is divided by the total consolidated assets if it is attributed to the balance sheet accounts, and the accumulated trading amount of the interim period is divided by the total consolidated net revenues if it is attributed to the profit or loss accounts.
Note 4 ： All the prices of the service revenues and consulting service provided between related parties were traded by contracts. Note 5 ： Based on materiality, only the amounts of the transactions that were above $1 million would be shown in the table.

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2) Related information of investee companies

A. Related information of investee companies

Name of the investor	Name of the investee company	Location	Date of registration	Reference number and the date of approval letter issued byFSC	Major operating activities	Balance on December 31, 2018 Original i	Balance on December 31, 2017 nvestment	EndingBalance	EndingBalance		Revenue of investee company	Net income (loss) of investee company	Investment income (loss) recognised by the Company	Cash dividends	Notes
								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%	Book vlaue
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	644,650 $ 200,000 34,030 2,264,573 667,622 10,000 300,000	644,650 $ 200,000 34,030 2,264,573 667,622 10,000 300,000			1,935,207 $ 194,831 72,792 2,298,272 569,230 31,911 245,072	921,841 $ 43,034 185,365 - 791,291 54,159 3,760) (	221,008 $ 2,167) ( 36,883 52,981 239,809 14,048 2,704) (	213,699 $ 2,167) ( 1,914 52,981 101,504 14,048 2,704) (	121,253 $ 704 - - 72,511 14,167 -	Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Associates Subsidiary of the Company Subsidiary of the Company

411

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 December 31, 2018 Original i	Balance on December 31, 2017 nvestment	EndingBalance	EndingBalance		Revenue of investee company	Net income (loss) of investee company	Investment income (loss) recognised by the Company	Cash dividends	Notes
								Shares 12,000 182,600,000 23,400,000 1,000,000	Percentage 0.03% 94.81% 100.00% 100.00%	Book vlaue
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			463 1,329,739 58,711 1,936	791,291 185,365 - -	239,809 36,883 532 74) (	82 34,969 532 74) (	58 - - -	Associates Subsidiary of the Company Indirect subsidiary of the Company Indirect subsidiary of the Company

Note1 ： As FSC was established in July, 2004, President Futures Corp. was apporved by the Investment Commission, Ministry of Economic Affairs.

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 million or 20 percent of contributed capital ： None.
E. Disposals of real estate exceeding $300 million or 20 percent of contributed capital ： None.
F. Purchases or sales transactions discount on brokers’ charges with related parties in excess of $5,000,000 ： None.
G. Receivables from related parties exceeding $100 million 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 ：

412

a) Securities held as of December 31, 2018 of President Securities (BVI) Ltd ：

Securities types and name	Type	Number of shares	Carryingvalue	Carryingvalue	Expressed in U.S. Dollars Fair vaule	Expressed in U.S. Dollars Fair vaule
			Unit price	Amount	Unitprice	Amount
Financial assets at fair value through profit or loss - current	Zero-Coupon Bond STOCK STOCK STOCK	4,340,000 $ 182,600,000 23,400,000 1,000,000	0.929 $ 0.237 $ 0.082 0.063	4,030,558 $ 43,292,815 $ 1,911,477 63,046 45,267,338 $	0.942 $ 0.237 $ 0.082 0.063	4,090,016 $ 43,292,815 $ 1,911,477 63,046 45,267,338 $
Open-end mutual funds, money market instruments and securities investment by brokers: United States of America DL-Zero Principal 15.5.2021 Investments in associates
President Securities (HK) Ltd. President Wealth Management (HK) Ltd. President Securities (Nominee) Ltd. Total

b) Derivative financial instrument transactions and the source of capital of President Securities (BVI) Ltd. ： None.

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

413

d) Balance sheets

PRESIDENT SECURITIES (BVI) LTD. BALANCE SHEETS DECEMBER 31, 2018 AND 2017

Assets		December 31,2018	December 31,2018	December 31,2018		December 31,2017	December 31,2017	December 31,2017	Liabilities and shareholders’equity		December 31,	December 31,	2018		Expressed in U.S. dollars December 31,2017	Expressed in U.S. dollars December 31,2017	Expressed in U.S. dollars December 31,2017
		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		25,277,023 $ 4,090,016 194,910 29,561,949 45,267,338 74,829,287 $		34 6 - 40 60 100		24,810,955 $ 4,051,954 117,323 28,980,232 44,184,266 73,164,498 $		34 6 - 40 60 100	Current liabilties Other payables Total liabilities Shareholders’equity Share capital Capital reserve Retained earnings Retained earnings Other equity Exchange differences on translation of foreign financial statements Total shareholders’equity Total liabilities and shareholders’equity		3,563 $ 3,563 67,746,000 757,813 6,016,267 305,644 74,825,724 74,829,287 $		- - 91 1 8 - 100 100		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

414

PRESIDENT WEALTH MANAGEMENT (HK) LTD. BALANCE SHEETS DECEMBER 31, 2018 AND 2017

Assets		December 31,2018	December 31,2018	December 31,2018		December 31,2017	December 31,2017	December 31,2017	Liabilities and shareholders’equity		December 31,	December 31,	2018		Expressed in HK dollars December 31,2017	Expressed in HK dollars December 31,2017	Expressed in HK dollars December 31,2017
		Amount		%		Amount		%			Amount		%		Amount		%
Current assets Cash and cash equivalents Other receivables Total current assets Total assets		14,943,066 $ 50,492 14,993,558 14,993,558 $		100 - 100 100		14,832,782 $ 21,795 14,854,577 14,854,577 $		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	20,075 $ 20,075 23,400,000 8,426,517) ( 14,973,483 14,993,558 $		- - 156 56) ( 100 100		19,410 $ 19,410 23,400,000 8,564,833) ( 14,835,167 14,854,577 $		- - 158 58) ( 100 100

415

PRESIDENT SECURITIES (NOMINEE) LTD. BALANCE SHEETS DECEMBER 31, 2018 AND 2017

Assets		December 31,2018	December 31,2018	December 31,2018		December 31,2017	December 31,2017	December 31,2017	Liabilities and shareholders’equity		December 31,	December 31,	2018		Expressed in HK dollars December 31,2017	Expressed in HK dollars December 31,2017	Expressed in HK dollars December 31,2017
		Amount		%		Amount		%			Amount		%		Amount		%
Current assets Cash and cash equivalents Other receivables Total current assets Total assets		509,539 $ 1,516 511,055 511,055 $		100 - 100 100		528,954 $ 674 529,628 529,628 $		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	17,190 $ 17,190 1,000,000 506,135) ( 493,865 511,055 $		3 3 196 99) ( 97 100		16,620 $ 16,620 1,000,000 486,992) ( 513,008 529,628 $		3 3 189 92) ( 97 100

416

e) Statements of comprehensive income

PRESIDENT SECURITIES (BVI) LTD. STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

							Expressed in U.S. dollars	Expressed in U.S. dollars	Expressed in U.S. dollars
		December 31,2018					December 31,2017
Accounts		Amount		%			Amount		%
Expenditures
Employee benefits	($	49,965)	(		3)	($	50,243)	(	1)
Other operating expenses	(	18,427)	(		1)	(	17,541)	(	1)
Total expenditures and expenses	(	68,392)	(		4)	(	67,784)	(	2)
Non-operating gains and losses
Share of the profit or loss of associates and joint
ventures accounted for using the equity method		1,174,066			67		2,391,353		67
Other gains and losses		650,116			37		1,247,468		35
Total non-operating gains and losses		1,824,182			104		3,638,821		102
Profit before tax		1,755,790			100		3,571,037		100
Income tax expense		-			-		-		-
Net income	$	1,755,790			100	$	3,571,037		100

417

PRESIDENT WEALTH MANAGEMENT (HK) LTD

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

							Expressed	in HK dollars
		December 31,2018				December 31,2017
Accounts		Amount		%		Amount		%
Expenditures
Other operating expenses	($	41,570)	(	30)	($	39,920)	(	129)
Total expenditures and expenses	(	41,570)	(	30)	(	39,920)	(	129)
Non-operating gains and losses
Other gains and losses		179,886		130		70,824		229
Profit before tax		138,316		100		30,904		100
Income tax expense		-		-		-		-
Net income	$	138,316		100	$	30,904		100

418

PRESIDENT SECURITIES (NOMINEE) LTD. STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

						Expressed	in HK dollars
		December 31,2018				December 31,2017
Accounts		Amount		%		Amount	%
Expenditures
Other operating expenses	($	24,590)		128	($	24,660)	110
Total expenditures and expenses	(	24,590)		128	(	24,660)	110
Non-operating gains and losses
Other gains and losses		5,447	(	28)		2,152 (	10)
Profit (loss) before tax	(	19,143)		100	(	22,508)	100
Income tax expense		-		-		-	-
Net income (loss)	($	19,143)		100	($	22,508)	100

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, 2018	Increase of working capital	Deduction of working capital	Balance on December 31, 2018
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	-	($ 5,630)	-	-	-	-	-	-

Note 1: Operating expenses generated by the representative office.

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

419

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 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. Reinvestment segment: companies reinvested by the consolidated entities.
D. Other operating segments include Capital Market segment, Quantitative Trading segment, Fixed Income 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”.

420

3) Profit or loss of segments information

		Year ended December 31,2018	Year ended December 31,2018
Brokerage segment	Proprietary Trading segment	Reinvestment segment		Total
2,427,154 $ 535,277 $	953,022 $ 533,484 $			5,774,276 $
				1,436,887 $

Brokerage segment	Proprietary Trading segment	Reinvestment segment	Other operating segments Others 2,221,823 $ 51,284) ($ 958,519 $ 112,353) ($	Total
2,296,187 $ 368,235 $	1,789,971 $ 1,348,730 $	1,013,369 $ 280,842 $		7,270,066 $
				2,843,973 $

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.

421

AI assistant

PSC — Annual Report 2019

52209_rns_2019-12-19_1752d2c6-aabd-409e-a347-54b148f4a943.pdf

201 8 ANNUAL REPORT

Notice to readers

Table of Contents

I. A Letter to Shareholders

III. Corporate Governance

President Securities

I. Business Organization

A. Organizational Chart

III. Corporate Governance

B. Function of Each Division

II. Directors’, Supervisors’ and Managers’ Information

A. Directors

1. Information Regarding Directors

2. Major Shareholders of PSCʹs Institutional Shareholders

3. Professional qualifications and independence analysis of directors

B. Information regarding directors, supervisors, management team and branch manager

C. Remuneration of Directors, Supervisors, President, and Vice Presidents

1. Remuneration of Directors

Remuneration of Directors (Independent Directors Included)

Range of remuneration for directors

2. Remuneration of the President and Vice Presidents

Range of remuneration for president and vice president

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

III. Corporate Governance

E. President, senior vice president and senior manager remuneration

III. Implementation of Corporate Governance

A. Board of Directors Meeting

Other mentionable items:

Independent director attendance is detailed below:

B. Operations of the Audit Committee: Number of Meetings, Actual Attendance Rate of each Independent Director, and other mentionable items

Other mentionable items:

III. Corporate Governance

C. Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best -Practice Principles for TWSE/TPEx Listed Companies”

D. Composition, responsibilities, and operation of the Remuneration Committee

1. Information Regarding Remuneration Committee

2. Operations of the Remuneration Committee

III. Corporate Governance

E. Corporate Social Responsibility (CSR)

VII. A clear statement shall be made below if the corporate social responsibility reports were verified by external certification institutions.

F. Ethical business operation at the Company and related implementation

1. Ethical business operation

2. Ethical Corporate Management:

G. Corporate Governance Guidelines and Regulations

H. Other Important Information Regarding Corporate Governance

I. Internal Control Systems:

1. Internal Control Declaration:

Internal control declaration

Implementation of the internal control system of President Securities Corp.

2018 Internal Control System Improvement and Corrective Action Plan

III. Corporate Governance

K. Major Resolutions of Shareholders Meeting and Board of Directors Meeting

IV. Information Regarding the Company’s Audit Fee and Independent Auditor

III. Corporate Governance

B. Disclosure of Auditing Fee

V. Replacement of CPA:

A. Regarding the Former CPA

B. Regarding the Successor CPA

C. The official letter from former CPA in response to the provisions of Item 1 and 2-3 of Subsection 5 of Article 10 of the Guidelines: None.

VII. Net Change in shareholdings and in shares pledged by directors, supervisors, management, and shareholders holding more than a 10% share in the Company.

VIII. Information Disclosing the Relationship between any of the Company’s Top Ten Shareholders

IX. Ownership of Shares in Affiliated Enterprises

X. Name and position of the employees with the top ten amounts of bonuses as well as the total amounts of the top ten bonuses

XI. Directors and Corporate Auditors Training

XII. Manager Learning

III. Corporate Governance

IV. Capital Structure

IV. Capital Structure

I. Shareholders’ equity

A. Source of Capital

1. Type of Stock

B. Structure of Shareholders

C. Distribution Profile of Share Ownership

1. Common Shares

2. Preferred Shares: None.

D. Major Shareholders

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

F. Dividend Policy and Implementation Status

PSC Annual Report 2019