PSC — Audit Report / Information 2018

Nov 13, 2018

PRESIDENT SECURITIES CORPORATION AND

SUBSIDIARIES

CONSOLIDATED 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.

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.

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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:

1. 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

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unlisted stocks;

1. Ascertained whether the measurement methods used by the management is commonly used by the industry;

2. Assessed the reasonableness of parameter of similar companies used by management;

3. 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.

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.

Other matter – Parent company only financial reports

We have audited and expressed an unmodified opinion on the parent company only financial

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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.

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

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

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

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

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on 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.

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

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within President Securities Corporation and 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.

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

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

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

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.

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

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PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(3) 6(4) 6(5) 6(6) 6(7) 6(8) 6(9) 6(2) 6(3) 6(12) 6(13) 6(14) 6(15) 6(46) 6(16)	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)

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PRESIDENT SECURITIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	Notes 6(17) 6(18) 6(19) 6(20) 6(6) 6(21) 6(22) 6(23) 6(46) 6(24) 6(26) 6(26)	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	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.

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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)

400000Revenues 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 500000Expenses 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)

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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 902001Profit before tax 701000 Income tax expense 902005Net 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) 902006Total 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.

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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)

For the year ended December 31, 2017 Balance at January 1, 2017 Appropriations of 2016 earnings: Legal reserve Special reserve Stock dividends Net income for the year ended December 31, 2017 Other comprehensive (loss) income for the year ended December 31, 2017 Total comprehensive income Changes in non-controlling interests 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 Special reserve Cash dividends Net income for the year ended December 31, 2018 Other comprehensive income for the year ended December 31, 2018 Total comprehensive income Changes in non-controlling interests Balance at December 31, 2018	Notes	Equityattributableto o	Equityattributableto o	w	ners of the paren	t															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.

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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)

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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.

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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.

1. 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:

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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 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

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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’

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 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

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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 InitiativeJanuary 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

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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

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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%

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  - 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

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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

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.

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

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognized as expenses in that period when the employees render service.

• B. Termination benefits

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

• C. Pensions

• (A) Defined contribution plans

Effective July 1, 2005, the Group established the defined contribution plan for employees of R.O.C. nationality. The employees have the option to participate in the New Plan. Under the New Plan, the 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

~29~

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

Effective 2018

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 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 $
	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 31,2018		December	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

Uni-President Asset Management Corp.	December31,2018 569,693 $	December31,2017
		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

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).

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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.

~44~

• 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%

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.

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

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

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

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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 $ 5,185 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

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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

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

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

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.

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.

• 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
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

Gain from issuance of call (put) warrants Gain (loss) from derivatives 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 Futures contract gain (loss) Option trading gain Loss on foreign exchange derivatives Others 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 $ 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
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
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
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 ：

Deferred tax assets: -Temporary differences: Losses on doubtful debts Others Subtotal Deferred tax liabilities: -Temporary differences: Unrealised exchange gain Others Subtotal Total Deferred tax assets: -Temporary differences: Losses on doubtful debts Others Subtotal Deferred tax liabilities: -Temporary differences: Unrealised exchange gain Others Subtotal Total			For theyear ended	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)

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

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

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Statistical table for one-dayVaR of transactions	Statistical table for one-dayVaR of transactions	Statistical table for one-dayVaR of transactions	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

Statistical	table for VaR of various risk indicators of transactions	table for VaR of various risk indicators of transactions	table for VaR of various risk indicators of transactions	table for VaR of various risk indicators of transactions	table for VaR of various risk indicators of transactions	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

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 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

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 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

Non-financial assets Investment property Non-financial assets Investment property Asset and liabilities items Asset and liabilities items	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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• (C) The following table is the movement of financial assets at Level 3 for the year ended December 31, 2018:

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

(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:

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)

~95~

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

~96~

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)

~97~

• 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

~98~

		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
(B)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
(C)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

• 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

~99~

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.

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

• (B) Maximum credit risk exposure and credit risk concentration

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

~100~

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 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). iiii.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.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

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

• e.Derivatives-OTC

The Group signs International Swaps and Derivatives Association (ISDA) agreements with each counterparty when engaging in OTC derivatives as an agreement regarding such transactions for both parties. In the agreement, it provides a fundamental contractual model for OTC derivative transactions. If any party breaches the contract or terminates the transactions early, then all the open interest covered in the agreement should be settled by net amount as bound in the contract. When the ISDA agreement is signed, the Credit Support Annex (CSA) is also signed. According to the CSA, collateral will be transferred from a party to the other during transaction process to mitigate the risk of counterparty in open interest. Please refer to Note 6(11).

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

• f.Bonds investment under a resale agreement

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

~101~

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.

~102~

• 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	-

~103~

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 $

~104~

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%

~105~

• 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.

~106~

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

~107~

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.

Note2 ： When securities corporations invest in domestic business within FSC's limitation, there is no need to obtain the approval from FSC in advance, according to Tai-Cai-Zheng (2) Letter No.0930000005. Therefore, there was no reference numbers for President Personal Insurance Agency Co., Ltd. and President Insurance Agency Corp.

• B. Lending to others: Excluding security margin trading and conditional bond trading business, there is no lending of funds to either the shareholders or other parties.

• C. Endorsements and guarantees for others ： None.

• D. Acquisitions of real estate exceeding $300 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 ：

~108~

a) Securities held as of December 31, 2018 of President Securities (BVI) Ltd ：

Securities types and name	Type		Number of shares	Carryingvalue	Carryingvalue	Carryingvalue	Expressed in U.S. Dollars Fair vaule	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.

~109~

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

~110~

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

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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

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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

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PRESIDENT WEALTH MANAGEMENT (HK) LTD

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

							Expressed	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

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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

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14. SEGMENTS INFORMATION

1) General information

Financial information by the Group’s segments is disclosed in accordance with IFRS 8. Management has determined the reportable operating segments based on the reports reviewed by the Chief Operating Decision-Maker (CODM) that are used to make strategic decisions. The Group’s operating segments are classified into Brokerage, Proprietary Trading 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”.

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3) Profit or loss of segments information

Segment revenues Segment profit or loss Segment revenues Segment profit or loss						Year ended December 31,2018	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.

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