TWSE: 1907 YFY Inc. 2016 Annual Report

YFY Inc.

2016Annual Report

Company Website: http://www.yfy.com YFY Inc. TWSE Website: http://mops.twse.com.tw/ Publishing Date: 4/30/2017 No. 51, Chongqing S. Road Sec. 2, Tel／(02)2396-1166 I. Name, title, contact number, and email of the Company's spokesperson:

Assistant Vice President Yin, K. T. Tel: (02) 2396-1166 E-mail: [email protected]

II. Addressed and phone numbers of the company headquarters, branch offices, and plants:

YFY Inc. No. 14, Jioutang Road, Jioutang Village, Dashu , Tel: (07) 651-2611~9

Taipei branch 15F, No. 51, Chongqing S. Road Sec. 2, Taipei Tel: (02) 2396-1166 (x50)

YFY Packaging Inc.:

Taoyuan plant No. 1078, Sec. 3, Fuguo Road, Luzhu Village, Luzhu , Taoyuan Tel: (03) 322-2411~5322-1699

Changhua plant No. 8, Gongxi Second Road, Xidi Village, Shengang Township, Changhua Tel: (04) 798-9567

Jhunan plant No. 8-1, Dapuding, Seventh Neighborhood, Gongguan Village, Jhunan Township, Miaoli Tel: (037) 635-192

Kaohsiung plant No. 21, Yongfeng Road, Alian Village, Alian District, Kaohsiung Tel: (07) 631-7181

Chenggong plant No. 546, Sec. 3, Zhongshan Road, Rongchuan Village, Wuri District, Tel: (04) 2338-1126~7

Xinwu plant No. 281 Yongfu Road, Yongan Village, Xinwu District, Taoyuan City Tel: (03) 486-1701

YFY Consumer Products Co., Ltd.:

Yangmei plant No. 41-2, Beigao Shanding, Gaorong Village, Yangmei District, Taoyuan City Tel: (03) 490-2631

Qingshui plant No. 22-1, Jiuzhuang Road, Haifeng Village, Qingshui Township, Taichung Tel: (04) 2620-1200 YFY Inc.

Chung Hwa Pulp Corp.:

Jioutang plant No. 112, Jioutang Road, Jioutang Village, , Kaohsiung Tel: (07) 651-2611~9

Taitung plant No. 371, Sec. 4, Zhongxing Road, , Taitung Tel: (089) 382-250~5

Hualien plant No. 100, Guanghua Street, Ji-an Township, Hualien County Tel: (03) 842-1171~80

Taipei branch 12F, No. 51, Chongqing S. Road Sec. 2, Taipei Tel: (02) 2396-1166 (x50)

Taichung branch 5F, No. 188, Zhonggong Second Road,, Taichung Tel: (04) 2359-6021 2359-9584

Tainan branch 3F, No. 502, Sec. 2, Yonghua Road, Tel: (06) 295-4799

3. Stock administration name, address, URL, and telephone No.:

Sinopac Securities Company Limited - Share Registration Services Department

3F, No. 17, Boai Road, , Taipei http://www.sinotrade.com.tw Tel: (02) 2381-6288

4. Auditor's name, company, address, URL, and telephone No.:

Chih-Ming Shao, Cheng-Hong Kuo, CPA Chairman Deloitte and Touche

12F, No. 156, Sec. 3, Minsheng East Road, Taipei http://www2.deloitte.com Tel: (02) 2545-9988

5. Stock exchange(s) on which the stock is traded overseas and ways to obtain relevant information: None

6. Company website: http://www.yfy.com Contents

2 Letter to Shareholders

4 Company profile 5 1. Date of Establishment 5 2. Company History

8 Corporate 9 1. Organization 10 2. Information on Directors, Supervisors, Presidents, Vice Presidents, Governance Assistant Vice Presidents, and the Management Team Report 14 3. Remuneration of Directors, Supervisors, Presidents, and Vice Presidents 18 4. Implementation of Corporate Governance 33 5. Auditors' Fees 33 6. Change of Certified Public Accountant (CPA) 33 7. The Chairman, President and Financial or Accounting Manager of the Company who had Worked for the CPA Firm or the Related Parties in The Last Year 34 8. Shareholding Transferred or Pledged by Directors, Management, and Major Shareholders Who Holds 10% of The Company Shares or More 35 9. Information disclosing the spouse, kinship within second degree, and relationship between any of the top ten shareholders 36 10. Comprehensive Shareholding Information Relating to Company, Directors, Management, and Companies Affiliated through Direct and Indirect Investment

37 Capital and 38 1. YFY's Capital and Shares, Corporate Bonds, Preferred Shares, Global Depositary Receipts, Employee Stock Options, New Shares Shares to Employees with Restricted Rights (including Mergers and Acquisitions, or after Company Split) 40 2. Utilization of Funds

41 Business 42 1. Scope of Business 45 2. Market and Sales Outlook overview 47 3. Employee Information in the Last Two Fiscal Years and Up to the Publishing Date of this Annual Report 48 4. Environmental Protection Expenditures 50 5. Employer-Employee Relationship 52 6. Material Contracts

53 Financial 54 1. Condenced Balance Sheets and Statement of Comprehensive Income from the Past Five Years summary 62 2. Financial Analysis of the Past Five Years 68 3. Audit Committee Review Report 69 4. Financial Statements 82 5. Any Financial Difficulty and the Impact on YFY's Finance in the Last Fiscal Year and Up to the Publishing Date of this Annual Report

83 Review of 84 1. Financial Comparison Analysis 85 2. Financial Performance Review and Analysis financial 85 3. Cash Flow Analysis conditions and 86 4. Major Capital Expenditures and Impact on Financial Operations in the Last Fiscal Year performance, 86 5. Subsidiary Investment Policy, Reasons for Profit or Loss, operating Improvement Plans, and Investment Plans for the Next Year results, and 86 6. Risk Analysis and Assessment in the Last Fiscal Year and Up to the Publishing Date for this Annual Report risks 90 7. Other Material Items

91 Special 92 1. Affiliate Information 110 2. Privately Purchased Securities in the Last Fiscal Year and Up to the disclosures Publishing Date of this Annual Report 110 3. YFY's Shares Held or Disposed of by Subsidiaries in the Last Fiscal Year and Up to the Publishing Date of this Annual Report 110 4. Other Information Which Should be Disclosed 110 5. Any Incidents That have a Material Impact on Shareholders Equity or Share Price as Described Under Article 36, Paragraph 3, Subparagraph 2 of the Securities and Exchange Act in the Last Fiscal Year and Up to the Publishing Date of this Annual Report

Appendix

Contents 1 Letter to Shareholders

Dear Shareholders, In our medtech portfolio, Lumosa Therapeutics (6365) became publicly listed in 2016, while Taigexyn®, a new treatment for 2016 was a difficult year for YFY. Business transformation and operational drug-resistant bacterial infections developed by TaiGen Biotechnology (4157), obtained China FDA approval. TaiGen also realignment across multiple portfolio companies were ongoing as we faced a entered into a joint venture with Yichang HEC Changjiang Pharmaceutical Co. Ltd. to develop an all-oral hepatitis C drug volatile market with adverse conditions. While these efforts will improve our future for the Chinese market. Medeon Biodesign (6499), was also successfully listed in 2016. competitiveness, 2016 results were disappointing. YFY recorded a consolidated Global ePaper leader E Ink Holdings (8069) has grown beyond eReader markets in recent year. In 2016, E Ink furthered its operating revenue of NT$63.354 billion, flat compared to 2015; however, net push into wearable, portable and medical devices, smart packaging, and digital signage. Profits continue to grow through profit after taxes was only NT$126 million, with an EPS of NT$0.08. innovative products created in collaboration with leading brands across multiple fields. Across the globe, economic recovery lacked momentum in 2016, resulting in Notwithstanding strong competition in 2016, Arizon actively entered new markets and became the world’s No. 1 ODM of the lowest growth rate since the 2008 financial crisis. Financial markets were RFID inlays, special labels and tags. In addition to market leading capacity and capabilities, Arizon is also the leader in volatile, with delayed US interest rate hike weakening the US dollar during the customized designs. Shin Foong Specialty and Applied Materials also became a leading global supplier for synthetic latex first half, and the eventual rate increase in the second half driving fund flows back medical gloves. Backed by its steady and excellent profitability performance, Shin Foong registered on the Emerging to the United States. RMB continued its depreciation, but fluctuated dramatically Stock Market this year and is applying to go public on TWSE in 2017. Chairman: Ho, Felix through the year. Major events such as Brexit and Trump’s victory added further Market consensus believe the global economy will make steps toward recovery in 2017, with IMF estimating global instability to global markets. Taiwan’s economy only began to slowly climb out economic growth of 3.4%, from 3.1% this year. Taiwan’s economy is expected to improve slightly, but the overall outlook of the doldrums in Q3 and ended the year with an annual growth rate of 1.4%, a slight increase over 2015. The Chinese remains relatively conservative, with economic growth predicted to rise to 1.7%. China’s “New Normal” will continue to economy continued with its “new normal”, marked by slower growth, tighter funds, and policy induced fluctuation in raw have an impact on the overall economy, although growth will likely remain steady around 6.5%. Around the world, volatility material prices. is likely to persist: Trump’s US economic and trade policies will have a major influences on the world’s supply chains; YFY began investing in Mainland China in the 1990s. With funding strategy based primarily around offshore debt, the Brexit negotiations will impact UK and European Union; while the Dutch election narrowly avoided a shift to a far-right company enjoyed benefits of interest rate spread between domestic RMB and offshore USD funding, as well as exchange government, the jury is out on the ensuing French and German elections. All in all, rapid fluctuations in global raw material gains due to RMB appreciation. For almost two decades, we booked currency gains while minimizing our funding costs. prices will inevitably lead to substantial increases in operating costs. However, starting in 2015, RMB reversed course and started to depreciate. Unfortunately, due to cross-strait regulations In face of changes and challenges, YFY marches ahead. Top on our 2017 agenda is alignment of teams and business and high domestic funding cost on the Mainland, changes in our funding strategy and investment structure were not strategies across our portfolio. People is our most valuable asset and foundation of our sustainable growth. Continuing our immediately actionable. Making matters worse, with market consensus turning towards RMB depreciation, direct hedging action in recent years, we strive to keep cultivating talents and realign roles and organizations to accelerate our momentum. options are both costly and limited. As such, we were only able to react with limited and indirect hedging, resulting in As we move forward, we strive to generate fair returns for our shareholders, and to uphold our sustainability and social significant exchange losses in both 2015 and 2016. We were further impacted after May 2016 due to the appreciation of responsibility commitments: to contribute what we ought to, receive the rewards we deserve, maximize our positive impact NTD against RMB, where the two had been essential lockstep for many years. Despite action taken quickly correct for NTD while minimize our footprint on the environment. appreciation in the second half, earnings were still substantially impacted. I wish you all great health and success! The Pulp and Fine Paper Business Group faced low global pulp prices and continued contraction of the printing and writing paper market. However, we were able to greatly reduce our reliance on the spot market through integration of YFY Group resources. Investment into tissue and toilet paper production by the Guangdong Dingfeng in cooperation with YFY’s Chairman & CEO Consumer Product Business Group has reduced Dingfeng’s operating risks and improved operational efficiency. Growth in new products and new markets resulted in positive results to offset losses in the pulp business as prices declined. To upgrade quality and improve service, the Packaging Business Group invested in the latest manufacturing equipment, centralizing Taiwan medium and liner production to Xinwu mill. 2016 was a year of reorganization at the Yangzhou mill. While Yangzhou was a drag on our performance in recent years, after a lot of hard work, by the end of the year, it has become a key contributing asset to our packaging business as policy mandates in China crimped medium and liner supply during peak season. Meanwhile, Pingyang facility opened in Q3 to further enhance our market leadership in Vietnam. Despite intense competition on both sides of the , the Consumer Product Business Group still grew at a steady pace. New capacity at Qingshui mill and collaboration with the Pulp and Fine Paper Business Group in Southern China both came online smoothly. Our household paper brands remain at the top of the Taiwanese market with No. 1 market share in both retail and commercial segments. In the mainland, Mayflower has aggressively pursued e-commerce sales, and garnered enough shares to be among top-five brands.

2 Annual Report 2016 Letter to Shareholders 3 Company profile 1. Date of Establishment: February 20, 1950. 2. Company History:

5 1. Date of Establishment 1950 5 2. Company History ● Founded by Mr. Chuan Ho and his brother in Spring 1950 to promote cultural development. The first privately owned paper manufacturing plant was constructed in Jioutang Village, Dashu District, Kaohsiung City. 1966 ● Merged with Yuen Foong Paper Co., Ltd. (headquarters established at No. 21 Gushan Third Road, Kaohsiung City). 1968 ● Invested in Chung Hwa Pulp Corp. to secure pulp supply. 1972 ● Merged with Guo Guang Paper Co., Ltd. 1977 ● Became a publicly listed company on the Taiwan Stock Exchange. 1980 ● Built Taiwan's first R&D center to develop and innovate paper manufacturing technology. 1984 ● Established Thai Paper Co., Ltd. in Thailand through a joint investment with the Siam Cement Group. Exported Taiwan’s first set of whole-plant equipment , which produced the only paper product to receive Thailand's national quality standard (TISI) and created a new era of whole-plant exports by Taiwan’s paper manufacturing industry to Southeast Asia. 1986 ● Set up subsidiary Thai Union Paper Co., Ltd. in second joint venture with Siam Cement Group and exported Taiwan’s second set of whole-plant equipment to the paper production plant in Thailand. ● New paper product plant in Taoyuan commenced production, taking its first step into the paper product market. ● Launched "NT$10-Billion Grand Vision Investment Plan" as a roadmap to diversification. 1987 ● Yangmei plant commenced production to elevate competitiveness in the household product market. 1988 ● Issued the first exchangeable bond in Taiwan with the shares of YFY subsidiary Chung Hwa Pulp Corp. as underlying stock. ● Issued the first convertible preferred stock in Taiwan, Series B registered preferred shares. ● Officially merged with Yuen Foong Yuan Paper Manufacturing Co., Ltd. and issued Series A registered preferred shares. 1989 ● Completed construction of Kaohsiung plant and commenced production. ● Issued Taiwan's first foreign convertible corporate bonds. 1990 ● Xinwu plant commenced production as YFY's first fully-automated plant equipped with a computerized integrated manufacturing (CIM) system. 1992 ● Manufactured Chung Hwa Pulp Corp.'s No. 2 paper dryer machine, completed installation and commenced production. ● Established paper companies in Guangzhou and Xiamen.

4 Annual Report 2016 Company profile 5 1993 ● Subsidiary YFY Paper Co., Ltd. (Vietnam) acquired plant in Đồng Nai. ● Acquired Tian Ren Paper Product Co. ● Signed strategic alliance memorandum of cooperation with Japan’s Nippon Paper Group, Inc. (NPG). ● Established Jiangyin Yuen Foong Yu Paper MFG. Co., Ltd. 2008 1994 ● Became Taiwan's first paper manufacturer to obtain Forest Stewardship Council (FSC) certification. ● Guangzhou paper container plant officially commenced production. ● Established Effion Enertech Co., Ltd. in a joint venture with Chung Hwa Pulp Corp. as YFY's first step into 1995 the energy sector. ● No. 2 paper dryer machine at Yangmei plant commenced production. 2009 ● Purchased land and equipment of Ta Tung Paper Container Co., Ltd. to establish Changhua plant. ● YFY Packaging Inc. established package testing center and obtained international certification from ● Established Yuen Foong Yu Paper Enterprise (Kunshan) Co., Ltd. Taiwan Accreditation Foundation (TAF) to become the only ISO/IEC 17025 certified paper packaging ● Set up Yuen Yuan Paper Container Co., Ltd. in a joint venture with Hwa Yuan Paper. laboratory. 1996 ● Acquired Jupiter Group, one of the top-three packaging and brand design companies in the United ● Kunshan Paper Container plant officially commenced production. States, and established YFY Jupiter. 1997 2010 ● Xiamen paper container plant officially commenced production. ● Acquired Arizon RFID Technology (Yangzhou) Co., Ltd. ● No. 21 paper dryer machine at Jioutang plant officially commenced production. ● Established Yuen Foong Yu Blue Economy Natural Resources (Yangzhou) Co., Ltd., to utilize agricultural 1998 straw in the biopulping process. ● Household paper machine at Kunshan plant in China officially commenced production. ● Cogeneration plant at YFY's Jioutang plant commenced operations. 2000 2011 ● Invested in the establishment of Guangdong Dingfeng Pulp & Paper Co., Ltd. ● YFY Jupiter launched brand packaging development center in Shenzhen, extending the reach of its ● Set up Yuen Foong Yu Biotech Co., Ltd. as a first step into the field of biotechnology. services to Chinese brands and businesses. 2001 2012 ● Set up YFY Biotech Co., Ltd. (Kunshan) to tap into China's environmental protection and agricultural ● No. 5 and No. 6 household paper commenced production in Yangzhou. technology markets. ● Transferred Paper & Paperboard division to Chung Hwa Pulp Corp. to combine management of pulp 2002 and paper operations. ● Nanjing, Zhongshan, Suzhou and Tianjin paper container plants officially commenced production. ● Yuen Foong Yu renamed Yuen Foong Yu Investment Holding Co., Ltd. 2003 2013 ● Shanghai and Qingdao Paper Container plants officially commenced production. ● Officially commenced nPulp mass production at Yangzhou plant. ● The subsidiary Laiya signed a purchase agreement with P&G Taiwan to acquire Qingshui plant. 2014 2004 ● No. 3 paper mill at Yangzhou plant commenced production. ● Qingshui Paper Container plant commenced production under the new management of subsidiary ● No. 7 and No. 8 paper household paper mills commenced production in Yangzhou. Laiya. ● YFY Shop established to develop a platform for e-commerce and monetary services. ● Dongguan paper container plant officially commenced production. 2015 ● E Ink Holdings commenced trading on the OTC market. ● Completed expansion of household paper production machine at Guangdong Dingfeng. ● Signed joint venture agreement in Vietnam to set up YFY Paper Co., Ltd. (Vietnam) as a step into the 2016 Vietnamese market. ● Shin Foong Specialty and Applied Materials Co., Ltd. officially registered with the Taiwan Emerging ● Set up subsidiary YFY Paper Manufacturing Co., Ltd. (Yangzhou) to officially enter China's Stock Market and is scheduled for public listing in 2017. containerboard and packaging paper market. ● No. 9 paper mill at Qingshui plant completed and commended operations. 2005 ● Corrugator and flexo printer machines at Vietnam's Bình Dương plant commended operations. ● Jiaxing paper container plant officially commenced production; Suzhou plant completed its relocation and expansion. ● Containerboard and Packaging Paper division spun off and renamed YFY Packaging Inc. 2006 ● The subsidiary Laiya renamed Yuen Foong Yu Consumer Products Co., Ltd. ● No. 1 paper mill at Yangzhou plant commenced production. 2007 ● Fuzhou plant officially commenced production; No. 2 paper mill at Yangzhou plant commenced production. ● Businesses under Consumer Product Division spun off into Yuen Foong Yu Consumer Products Co., Ltd.

6 Annual Report 2016 Company profile 7 Corporate governance report 1. Organization

9 1. Organization 10 2. Information on Directors, Supervisors, Presidents, Vice Presidents, Assistant Vice Presidents, and the Management Team Shareholders' Meeting 14 3. Remuneration of Directors, Supervisors, Presidents, and Vice Presidents 18 4. Implementation of Corporate Governance 33 5. Auditors' Fees Audit Committee 33 6. Change of Auditors 33 7. The Chairman, President and Financial or Accounting Manager of the Company who Board of Directors had Worked for the CPA Firm or the Related Parties in the Last Year 34 8. Shareholding Transferred or Pledged by Directors, Management, and Major Auditing and Compliance Office Shareholders Who Holds 10% of The Company Shares or More 35 9. Information Disclosing the Spouse, Kinship Chairman Within Second Degree, and Relationship Between any of the Top Ten Shareholders 36 10. The Total Number of Shares and Total Equity Stake Held in any Single Enterprise by the CSO CFO Company, its Directors and Supervisors,

Managers, and any Companies Controlled Corporate either Directly or Indirectly by the Company Administration Office

Pulp and Fine Paper Containerboard and Consumer Product Business Group Packaging Business Group Business Group Other Businesses

Operations Operations Operations Operations

Manufacturing, sales and Manufacturing, processing and Manufacturing, sales and Manufacturing, sales and distribution of pulp, paper and sales of container board and distribution of household paper distribution of electronics, paperboard. corrugated carton. and cleaning products. chemical related products.

8 Annual Report 2016 Corporate governance report 9 2. Information on Directors, Supervisors, Presidents, Vice Presidents, Assistant Vice Presidents, and the Management Team (1) Information on directors and supervisors December 31, 2016

Executives, Directors or Supervisors Shares held by spouse & Shares held in names of Nationality Shares held when elected Shares held currently who are spouses or within second Term children who are minors third parties Title or place of Name Gender Date elected First elected Experience (Education) Positions held at the Company or other companies degree of kinship (Year) registration Number of Percentage of Number of Percentage of Number of Percentage of Number of Percentage of Title Name Relation shares shares shares shares shares shares shares shares

Shin-Yi Enterprise Republic Co., Ltd. 77,794,610 4.69 77,794,610 4.69 MIT Sloan School of Chairman Male 2015/06/30 3 2003/05/05 0 0 0 0 Management Note 1 Father of China Representative: * 15,529,953 0.94 * 25,529,953 1.54 Director Ho, S. C. MBA and son Ho, Felix

Shin-Yi Enterprise Republic Master of Mechanical Co., Ltd. 77,794,610 4.69 77,794,610 4.69 Engineering, Univ. of Note 2 Father Director of China Representative: Male 2015/06/30 3 1972/02/10 0 0 0 0 Chairman Ho, Felix *188,615,028 11.36 *178,615,028 10.76 Wisconsin and son Ho, S. C.

Shin-Yi Enterprise 77,794,610 4.69 77,794,610 4.69 Republic Co., Ltd. YFY Inc. Director Female 2015/06/30 3 2006/06/23 0 0 0 0 Note 3 None None None of China Representative: 0 0.00 0 0.00 Chairman Chiu, Melody

Han Tang Management Republic 30,000 0.00 30,000 0.00 CSO, YFY Inc. Director Consulting Co., Ltd. Male 2015/06/30 3 2016/11/30 0 0 0 0 CSO, YFY Inc. None None None of China 0 0.00 0 0.00 Director, Jiangyin Yuen Foong Yu Paper MFG Co., Ltd. Representative Chen, Hsiang Ming

Han Tang Management Republic 30,000 0.00 30,000 0.00 Assistant Vice President, Director Consulting Co., Ltd. Male 2015/06/30 3 1994/03/23 88,024 0.01 0 0 Yuen Foong Yu Paper Vice President, YFY Inc. None None None of China * 19,361,456 1.17 * 1,000,000 0.06 Representative: MFG. Co., Ltd. Director, Yu Gin Social Welfare Foundation Ho, Richard

Han Tang Management Republic 30,000 0.00 30,000 0.00 President, Chung Hwa Director Consulting Co., Ltd. Male 2015/06/30 3 2016/03/16 0 0 0 0 Note 4 None None None of China * 51,909 0.00 * 51,909 0.00 Pulp Corp. Representative Huang, Kirk

Chairman, Guo Fu Management Consulting Co. Independent director, E-CMOS Corp. Independent director, Chenbro Micom Independent Republic Huang, MBA, National Independent director, Enterex International Ltd. Male 2015/06/30 3 2012/06/27 0 0.00 0 0.00 0 0 0 0 None None None Director of China Wen-Cheng Chengchi University Director, TungThih Electronic Co., Ltd. Director, eLand Information Co. Ltd. Director, ACES Electronics Co., Ltd. Supervisor, SNSplus Inc.

Independent Republic MBA, Indiana University, Independent Director, E Ink Holdings Inc. Chen, Thomas Male 2015/06/30 3 2012/06/27 0 0.00 0 0.00 0 0 0 0 USA None None None Director of China Supervisor, Advantech Corp. Business Management

Independent Republic Ph.D. in Industrial Professor, National Taiwan University of Science and Lu, Hsi-Peng Male 2015/06/30 3 2015/06/30 0 0.00 0 0.00 0 0 0 0 Engineering, University Technology None None None Director of China of Wisconsin - Madison Independent director, CTCI Advanced Systems Inc.

*Personal holdings Note 1. Chairman, Arizon RFID Technology (Yangzhou) Co., Ltd. Director, San Ying Enterprise Co., Ltd. Director, YFY Biotechnology Co., Ltd. Chairman, Pre-school Education Magazine of Hsin yi Foundation Director, YFY Biopulp Technology Ltd. Director, SinoPac Holdings Co., Ltd. Chairman, YFY Packaging (Yangzhou) Investment Co., Ltd. Director, Taiwan Global Biofund Co., Ltd. Director, YFY Global Investment BVI Corp. Chairman, Foundation of Fire Fighting Development Director, San Ying Enterprise Co., Ltd. Vice Chairman, Bank SinoPac Co., Ltd. Chairman, YFY Investment Co., Ltd. Director, Hsinex International Corp. Director, YFY Paradigm Investment Co., Ltd. Chairman, Shang Shan Human Culture Foundation Director, YFY Inc. Chairman, YFY Packaging Inc. Chairman, YFY Cayman Co., Ltd. Director, Shin-Yi Enterprise Co., Ltd. Director, YFY Cayman Co., Ltd. Director, Liver Disease Prevention & Treatment Research Foundation Chairman, YFY (Shanghai) Financial Services Co., Ltd. Chairman, Yuen Foong Yu Consumer Products Co., Ltd. Chairman, Yuen Foong Yu Paper MFG (Yangzhou) Co., Ltd. Director, Shin-Yi Investment Co., Ltd. Director, Yuen Foong Yu Consumer Products Investment Ltd. Director, Hsin Yi Foundation Director, YFY Cayman Co., Ltd. Chairman, YFY Holding Management Co., Ltd. Director, Jupiter Prestige Group Holding Ltd. Director, Shin-Yi Recreation Co., Ltd. Director, Yuen Foong Yu Consumer Products Co., Ltd. Director, Straits Exchange Foundation Director, YFY Mauritius Corp. Chairman, Yuen Foong Co., Ltd. Executive Director, Shanghai Yuen Foong Yu International Co., Ltd. Director, YFY Biotech Management Company Director, Eihoyo Shoji Co., Ltd. Director, The Eisenhower Fellows Association in the Republic of China Director, Yuen Foong Yu Paper MFG (Yangzhou) Co., Ltd. Chairman, Yuen Foong Paper Co., Ltd. Director, Yuen Foong International (Samoa) Ltd. Executive Director, China Investment and Development Co., Ltd. Director, YFY International BVI Corp. Executive Director, Development Center for Biotechnology Director, Fu-Ji Management Consulting Co., Ltd. Chairman, Yuen Foong Shop Co., Ltd. Director, Yuen Foong Precision (Hong Kong) Ltd. Director, China Color Printing Co., Ltd. Director, Yuen Foong Yu Paper MFG (Yangzhou) Co., Ltd. Executive Director, Yuan T. Lee Foundation Science Education for All Supervisor, Janie Color Works Ltd. Chairman, Ever Growing Agriculture Bio-tech Co., Ltd. Director, Yuen Foong Yu Consumer Products Investment Ltd. Director, E Ink Holdings Inc. Director, YFY Venture Capital Investment Co., Ltd. Executive Director, Chinese International Economic Cooperation Association Chairman, Taiwan Global Biofund Co., Ltd. Chairman, Shin-Yi Investment Co., Ltd. Director, Eihoyo Shoji Co., Ltd. Director, Aidatek Electronics Inc. Director, YFY Mauritius Corp. Chairman, EFFION Enertech Co., Ltd. Director, Shin-Yi Enterprise Co., Ltd. Director, YFY Mauritius Corp. Director, TaiGen Biotechnology Co., Ltd. Director, SinoCell Technologies Co., Ltd Note3. Chairman, Shin Foong Specialty and Applied Materials Co., Ltd. Director, Prime View International Co., Ltd. Chairman, The Eisenhower Fellows Association in the Republic of China Director, TaiGen Biopharmaceuticals Holdings Ltd. Director, Ru Yi Enterprise Co., Ltd. Director, TaiGen Biotechnology Co., Ltd. Director, Jiangyin Yuen Foong Yu Paper MFG. Co., Ltd. Director, Aidatek Electronics Inc. Chairman, Association of Corporate Patent Executives Director, Taitung Enterprise Co. Director, Chen Yu Co., Ltd. Director, TaiGen Biopharmaceuticals Holdings Ltd. Director, Hwa Fong Paper (Hong Kong) Ltd. Director, Xing Yuen Investment Inc. Director, Epoch Foundation Director, Taiwan Genome Sciences Co., Ltd. Director, Champion Culture Enterprise Co., Ltd. Director, Yuen Foong Yu Consumer Products Co., Ltd. Director, Ho Tien Life Co., Ltd. Director, Fu Hwa Enterprise Co., Ltd. Director, New Taiwanese Cultural Foundation Director, Taiwan Stock Exchange Co. Director, Xing Yuan Investment Co., Ltd. Chairman, YFY Investment Co., Ltd. Director, Dongguan HEC TaiGen Biopharmaceuticals Co., Ltd. Director, Artone Investment (H.K.) Ltd. Director, Monte Jade Taiwan Science & Tech Association Director, Yong-An Leasing Co., Ltd. Director, Shen's Art Print Co., Ltd. Chairman, YFY Venture Capital Investment Co., Ltd. Director, Artone Specialties Co., Ltd. Director, Ever Growing Agriculture Bio-tech Co., Ltd. Director, Fu Hwa Enterprise Co., Ltd. Director, SinoPac Securities Co., Ltd. Note 4. Director, eCrowd Media Inc. Note 2. Director, Yuen Shin Yi Enterprise Co., Ltd. Director, HuaDong Industrial Co., Ltd. Chairman, Lotus Ecoscings & Engineering Co., Ltd. CTO, YFY Inc. Director, Livebricks Inc. Chairman, SinoPac Financial Holdings Co., Ltd. Director, Arizon RFID Technology (Yangzhou) Co., Ltd. Director, Hwa Fong Paper (Hong Kong) Ltd. Director, Taiwan Genome Sciences Inc. Chairman, Chung Hwa Pulp Corp. Director, Chen Yu Co., Ltd. Director, Bank SinoPac Co., Ltd. Director, Y F Chemical Co., Ltd. Director, Artone Investment (H.K.) Ltd. Chairman, Cupid InfoTech Co., Ltd. Chairman, Hwa Fong Investment Co., Ltd Chairman, E Inc Corporation Chairman, SinoPac Venture Capital Co., Ltd. Director, Yuen Foong Co., Ltd. Director, Synmax Biochemical Co., Ltd. Director, Chung Hwa Pulp Corp. Director, Guandong Dingfung Pulp & Paper Co., Ltd. Chairman, Willpower Industries Ltd. Director of SinoPac Life Insurance Agent Co., Ltd. Director, EFFION Enertech Co., Ltd. Director, Pioneer Chemical Co., Ltd. Director, YFY Jupiter(BVI) Inc. Director, Zhaoqing Dingfung Forestry Co., Ltd. Chairman, YFY Jupiter(BVI) Inc. Director, E Inc Corporation Director, Yuen Foong International (Samoa) Ltd. Executive Shareholder, Ho Jei Lai Kosan Unlimited Company Director, YFY RFID Co., Ltd. Director, Shin Foong Specialty and Applied Materials Co., Ltd. Chairman, Yuen Foong Yu Paper Enterprise (Vietnam) Co., Ltd. Director, YFY Jupiter(BVI) Inc. Director, Yuen Foong Precision (Hong Kong) Ltd. Chairman, Taiwan Research-based Biopharmaceutical Manufacturers Association Supervisor, Eihoyo Shoji Co., Ltd. Director, CHP International (BVI) Corporation.

10 Annual Report 2016 Corporate governance report 11 December 31, 2016 (2) Information on Presidents, Vice Presidents, Assistant Vice Presidents, and the Management Team December 31, 2016 Has at least 5 years of work experience and Fulfillment of independence criteria (Note) meet one of the following professional qualifications Shares held by spouse Shares held in names Manager who is a spouse Requirement Number of and underage children of third parties or family member within Lecturer or a higher post at A judge, public prosecutor, Work experience required concurrent posts Shares held a public/private university/ attorney, certified public for operations in commerce, Nationality Experience Positions held at other second degree of kinship college in the field of commerce, accountant, or other professional law, finance, accounting, or at other listed 1 2 3 4 5 6 7 8 9 10 companies as Title or place of Name Gender Date elected (Education) companies law, finance, accounting, or or technical specialist who has another field relevant to YFY's registration another subject relevant to YFY's passed a national examination operations independent director Number Number Name operations and been awarded a certificate Number of Percentage of Percentage of Percentage Title Name Relation shares in a profession necessary for the of shares shares of shares shares of shares business of the company.

Ho, Felix V V V Ho, S. C. V V V V MIT Director, SinoPac Holdings President and Republic Ho, Male 2014/06/17 Sloan School of Director, E Ink Holdings Inc. Chiu, Melody 25,529,953 1.54 0 0 0 0 V V V V V V V V V CEO of China Felix Management Director/Supervisor, YFY Inc. N/A Chen, Hsiang Ming V V V V V V V V V MBA subsidiaries Huang, Kirk V V V V V V V V Chen, Ho, Richard V V V V V V Republic Director/Supervisor, YFY Inc. CSO Hsiang Male 2016/09/01 0 0 0 0 0 0 CSO, YFY Inc. N/A Huang, Wen-Cheng V V V V V V V V V V V 3 of China subsidiaries Ming Chen, Thomas V V V V V V V V V V V 1 Director, Chung Hwa Pulp Corp. Lu, Hsi-Peng V V V V V V V V V V V 1 Director, TaiGen Republic Chiu, Chairman, CFO Female 2016/08/12 0 0 0 0 0 0 Biopharmaceuticals Holdings N/A Note: Please tick the corresponding boxes with a "V" if a director or supervisor has served as any of the following during the two years prior to being elected or of China Melody YFY Inc. Director/Supervisor, YFY Inc. during the term of office. (1) Not an employee of the Company or any of its affiliates. subsidiaries

(2) Not a director or supervisor of the Company's affiliates (the same does not apply if the person is an independent director of the Company or its parent Chairman, Chung Hwa Pulp company, or any subsidiary established by following this measure or local regulations). Chung Hwa Pulp Republic Huang, Corp. (3) Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under others' CTO Male 2016/01/01 51,909 0.00 0 0 0 0 Corp. N/A of China Kirk Director/Supervisor, YFY Inc. names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. President (4) Not a spouse, relative within second degree of kinship, or lineal relative within third degree of kinship of any of the persons in the preceding three subsidiaries paragraphs. Assistant Vice (5) Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of the Company Assistant Vice Republic President, Yuen or that holds shares ranking in the top five in holdings. Ho, Male 1992/10/01 1,000,000 0.06 88,024 0.00 0 0 N/A N/A Foong Yu Paper (6) Not a director, supervisor, officer, or shareholder holding 5% or more of the share, of a specified company or institution that has a financial or business President of China Richard relationship with the Company. MFG. Co., Ltd. (7) Not a professional or an owner, partner, director, supervisor, managerial officer or a spouse of the abovementioned who provides commercial, legal, Procurement Assistant Vice financial, accounting services or consultation to the Company or an affiliate of the Company. However, those Remuneration Committee members who Department Republic President, Yuen Director/Supervisor, YFY Inc. meet the provisions in Paragraph 7 of the Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Leu, 4,355 0.00 820 0.00 0 0 Assistant Vice Male 2002/04/01 Foong Yu Paper N/A Whose Stock is Listed on the Stock Exchange or Traded Over the Counter are excluded. of China S. R. subsidiaries President (8) Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company. MFG. Co., Ltd. (9) Not having any of the situations set forth in Article 30 of the Company Act of the R.O.C. Center of Assistant Vice (10) Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law. Corporate Republic Yin, President, Yuen Director/Supervisor, YFY Inc. Finance Male 2007/05/01 0 0 0 0 0 0 N/A Foong Yu Paper subsidiaries 1. Major Direct and Indirect Institutional Shareholders Assistant Vice of China K. T. MFG. Co., Ltd. President (1) Major Shareholders of Institutional Shareholders of the Company December 31, 2016 Accounting Assistant Vice Department Republic Wu, President, Yuen Director/Supervisor, YFY Inc. Name of corporate shareholders Major Direct and Indirect Institutional Shareholders Male 2011/07/01 0 0 3,162 0.00 0 0 N/A Assistant Vice of China C. F. Foong Yu Paper subsidiaries President MFG. Co., Ltd. Ho, S. C. 27.84% Jucheng Investment & Management Co., Ltd. 12.50% IT Department Assistant Vice BRILLIANT PRIDE LIMITED 12.50% Gao Da Global Ltd. 12.50% Republic Chien, Director/Supervisor, YFY Inc. Assistant Vice Male 2013/06/03 0 0 0 0 0 0 President, N/A of China Ray subsidiaries Ho, Mei Yu 12.50% Guan Yu Investment Co., Ltd. 5.91% President YFY Inc. Shin-Yi Enterprise Co., Ltd. Ho, Tsai Hui Shin 4.35% Ho, Richard 2.18% Legal Zhan, Assistant Vice Department Republic Director/Supervisor, YFY Inc. Jin Jie Investment Ltd. 1.52% Jing Dian Cultural Foundation 1.48% Shun Male 2015/07/01 5,470 0.00 2,109 0.00 0 0 President, N/A Assistant Vice of China subsidiaries Dian Mei Cultural Foundation 1.48% Xiang YFY Inc. President Shin-Yi Enterprise Co., Ltd. 45.00% Kao Hsiang Investment Co., Ltd. 40.00% Han Tang Management Consulting Co., Ltd. Assistant Vice Yuen Foong Paper Co., Ltd. 15.00% President, Human Huang, Assistant Vice Republic Resources Yu Male 2015/11/02 0 0 0 0 0 0 President, N/A N/A of China Department Ren YFY Inc. (2) Major Indirect Institutional Shareholders December 31, 2016 (Left the Company on 2016/06/01) Assistant Vice Name of the legal person Main shareholders of corporate shareholders President, Human Zhan, Assistant Vice Republic Resources Ming Male 2016/07/04 0 0 0 0 0 0 President, N/A N/A of China Jucheng Investment & Management Co., Ltd. Samoa vendor RAINBOW TIME LIMITED 100.00% Department Rui YFY Inc.. BRILLIANT PRIDE LIMITED Teo Lily 100.00% (Took office on 2016/07/04) Public Affairs Gao Da Global Ltd. Jin Xing Lin 100.00% Xiao Assistant Vice Department Republic Wei Female 2016/07/12 0 0 0 0 0 0 President, N/A N/A Ho, Tsai Hui Shin 57.49% Jie Ru He 7.50% Wen Hua He 7.50% Yi Jin Huang 6.25% Assistant Vice of China Huang YFY Inc. Guan Yu Investment Co., Ltd. Yi Xuan Huang 6.25% Jie Xi Liu 3.75% Jie Ya Liu 3.75% Jie Xiu Ka 3.75% President

Jie Ke Ka 3.75% Ho, Richard 0.01% Auditing and Jin Jie Investment Ltd. Guan Yu Investment Co., Ltd. 100.00% Compliance Republic Cheng, Manager, Female 2012/11/01 0 0 0 0 0 0 N/A N/A Office of China Irene YFY Inc. Shin-Yi Enterprise Co., Ltd. 27.39% Ho, S. C. 16.65% Manager Hsinex International Corp. 9.92% Yu Hai Investment Corp. 9.69% Yuen Foong Paper Co., Ltd. Ru Hai Investment Corp. 5.81% Ho, Mei Yu 3.59% Jucheng Investment & Management Co., Ltd. 3.59% Gao Da Global Ltd. 3.59% BRILLIANT PRIDE LIMITED 3.59% Ho, Tsai Hui Shin 3.18% Kao Hsiang Investment Co., Ltd. Shi Ren Xiao 33.33% Jia Ying Huang 33.33% Zhan, Shun Xiang 33.33%

12 Annual Report 2016 Corporate governance report 13 3. Remuneration of Directors, Supervisors, Presidents, and Vice Presidents (1) Remuneration to directors December 31, 2016 Unit: NT$1,000

Director's remuneration Ratio of total compensation Employee's remuneration Ratio of total compensation Compensation (A+B+C+D) to Salary, bonus and Remuneration for Employees (G) (A+B+C+D+E+ F+G) to net Remuneration for Performance from Compensation (A) Pension and severance (B) Pension and severance (F) income (%) Directors (C) compensation (D) net income (%) allowances (E) (Note) Title Name YFY Consolidated Companies investments

Amount Amount Amount in Amount that are not Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated Consolidated YFY YFY YFY YFY YFY YFY YFY in Cash in Stocks Cash in Stocks YFY Companies Companies Companies Companies Companies Companies Companies Companies subsidiaries

Chairman Representative of Shin-Yi Enterprise Co., Ltd.: Ho, Felix

Director Representative of Shin-Yi Enterprise Co., Ltd.: Ho, S. C.

Director Representative of Shin-Yi Enterprise Co., Ltd.: Chiu, Melody Representative of Han Tang Management Consulting Director Co., Ltd.: Ho, Richard Representative of Han Tang Management Consulting Director Co., Ltd.: Chen, Hsiang Ming Representative of Han Tang Management Consulting Director Co., Ltd.: Huang, Kirk 3,000 3,000 0 0 0 0 696 1,686 2.93% 3.72% 20,122 33,144 108 130.5 0 0 0 0 18.97% 30.10% None Representative of Han Tang Management Consulting Director Co., Ltd.: Chang, C J (dismissed on 2016/03/16) Representative of Han Tang Management Consulting Director Co., Ltd.: Chang, Michael (dismissed on 2016/11/30) Independent Director Huang, Wen-Cheng Independent Chen, Thomas Director Independent Lu, Hsi-Peng Director Shin-Yi Enterprise Co., Ltd.

Han Tang Management Consulting Co., Ltd.

*In addition to the information disclosed above, other remuneration collected by directors during the past year for providing services listed in the financial statements (such as serving as a consultant for non-employees): None. Note: Including car rental expenses of approximately NT$917,000. (2) Remuneration for Supervisors Name Starting in 2015, supervisors are replaced by the Audit Committee. Range of remuneration to director (A+B+C+D) (A+B+C+D+E+F+G)

YFY Consolidated Companies YFY Consolidated Companies

Ho, S. C. Ho, S. C. Ho, Felix Ho, Felix Ho, S. C. Chiu, Melody Chiu, Melody Ho, S. C. Chang, Michael Ho, Richard Ho, Richard Chang, Michael Chen, Hsiang Ming Chang, Michael Chang, Michael Chen, Hsiang Ming Chang, C J Chen, Hsiang Ming Chen, Hsiang Ming Chang, C J Huang, Kirk Chang, C J Chang, C J Huang, Wen-Cheng < NT$2,000,000 Huang, Wen-Cheng Huang, Kirk Huang, Kirk Chen, Thomas Chen, Thomas Huang, Wen-Cheng Huang, Wen-Cheng Lu, Hsi-Peng Lu, Hsi-Peng Chen, Thomas Chen, Thomas Shin-Yi Enterprise Co., Ltd. Shin-Yi Enterprise Co., Ltd. Lu, Hsi-Peng Lu, Hsi-Peng Han Tang Management Han Tang Management Shin-Yi Enterprise Co., Ltd. Shin-Yi Enterprise Co., Ltd. Consulting Co., Ltd. Consulting Co., Ltd. Han Tang Management Han Tang Management Consulting Co., Ltd. Consulting Co., Ltd. NT$2,000,000 ≤ NT$5,000,000 Ho, Richard Ho, Richard Ho, Felix NT$5,000,000 ≤ NT$10,000,000 Huang, Kirk Chiu, Melody

Ho, Felix NT$10,000,000 ≤ NT$15,000,000 Chiu, Melody NT$15,000,000 ≤ NT$30,000,000 NT$30,000,000 ≤ NT$50,000,000 NT$50,000,000 ≤ NT$100,000,000 > NT$100,000,000 Total 13 13 13 13

14 Annual Report 2016 Corporate governance report 15 (3) Remuneration for Presidents and Vice Presidents Unit: NT$1,000

Employee bonus (D) Bonuses and allowances (C) Ratio of total compensation Salary (A) Pension and severance (B) (Note) YFY Consolidated Companies (A+B+C+D) to net income (%) Compensation from Compensation from investments Title Name investments that are not that aresubsidiaries not subsidiaries YFY Consolidated Companies YFY Consolidated Companies YFY Consolidated Companies Amount in Cash Amount in Stocks Amount in Cash Amount in Stocks YFY Consolidated Companies

President and CEO Ho, Felix

6,769 6,769 135 135 2,833 6,008 0 0 0 0 7.72% 10.24% None

CSO Chen, Hsiang Ming

Note: Including car rental expenses of approximately NT$207,000. (5) Detailed ratios of total remuneration of YFY's directors, supervisors, president, and vice presidents to net profit after tax with respect to Name the individual financial statements in the past two fiscal years for YFY and all companies included in the consolidated statement, and Range of remuneration to president or vice president description of the remuneration policy, standards and combinations, determination, and links to business performance and future risks YFY Consolidated Companies

< NT$2,000,000 Chen, Hsiang Ming Chen, Hsiang Ming Ratio of total remuneration to net profit after tax NT$2,000,000 ≤ NT$5,000,000 2 016 2 015 Difference Recipient NT$5,000,000 ≤ NT$10,000,000 Ho, Felix Consolidated Consolidated Consolidated YFY YFY YFY NT$10,000,000 ≤ NT$15,000,000 Ho, Felix Companies Companies Companies NT$15,000,000 ≤ NT$30,000,000 Directors 18.97% 30.10% 5.35% 7.39% 13.62% 22.71% NT$50,000,000 ≤ NT$100,000,000 Supervisor 0% 0% 0.01% 0.01% ( 0.01%) ( 0.01%) > NT$100,000,000 President and vice president 7.72% 10.24% 1.11% 2.22% 6.61% 8.02% Total 2 2

1. Remuneration for directors is determined by the Board of Directors and reported to the shareholders' meeting. (4) Names of managers who distribute employee salaries and distribution status: N/A. 2. The remunerations of the president and vice presidents are paid on a monthly basis, including a monthly salary and allowance (e.g. supervisory differential, meal expenses) and other regular compensation. The annual bonuses and benefits are paid separately. The salary standards are determined at the beginning of employment, while supervisory differential is determined by the position, performance bonus and other bonuses are based on business performance and personal performance.

16 Annual Report 2016 Corporate governance report 17 4. Implementation of Corporate Governance (1) Board of Directors operating status A total of 4 board of directors meetings were held in 2016. Directors' attendance information are described below: (2) Operation of the Audit Committee A total of 4 Audit Committee meetings were held in 2016. Independent directors' attendance information are described Attendance (voting/ Actual times of Attendance rate below: Title Name attendance by Notes non-voting) in person proxy (%) Actual times of Title Name Attendance in person Attendance (%) Notes Ho, Felix became the chairman on Chairman Representative of Shin-Yi Enterprise Co., Ltd.: Ho, Felix 4 0 100% attendance by proxy 2016/08/12 Independent Huang, Director Representative of Shin-Yi Enterprise Co., Ltd.: Ho, S. C. 2 2 50% Director Wen-Cheng 4 0 100% Independent Chen, Thomas Chiu, Melody resigned from the Director Representative of Shin-Yi Enterprise Co., Ltd.: Chiu, Melody 4 0 100% Director 4 0 100% chairman position on 2016/08/12 Independent Lu, Hsi-Peng Representative of Han Tang Management Consulting Director Director 4 0 100% Co., Ltd.: Ho, Richard 4 0 100%

Representative of Han Tang Management Consulting Huang, Kirk was appointed as the director Other statutory information: Director 1. If any of the following circumstances have occurred during the operation of the Audit Committee, specify the date, period, case content, resolution from Co., Ltd.: Chang, C J 3 0 100% on 2016/03/16 the Audit Committee meeting, and the handling of the opinions of the Audit Committee by the Company: Representative of Han Tang Management Consulting Became the director on 2016/03/16 1. Items listed under Article 14-5 of the Securities and Exchange Act. Director 1 0 100% Co., Ltd.: Huang, Kirk 2. Besides the items listed above, other matters which did not receive the approval of the Audit Committee but were agreed upon by more than 2/3 of all Representative of Han Tang Management Consulting Chen, Hsiang Ming was appointed as the directors. Director Co., Ltd.: Chang, Michael 1 2 33% director on 2016/11/30 Audit Committee operations which did not receive the approval of the Audit Committee but were agreed upon by more than 2/3 of all directors. 2. Any independent directors who had to excuse him/herself to prevent conflicts of interest: Representative of Han Tang Management Consulting Became the director on 2016/11/30 Independent directors who had to excuse him/herself without any conflict of interest. Director 1 0 100% Co., Ltd.: Chen, Hsiang Ming 3. Communications between independent directors, internal audit managers, and accountants: Independent 1. On a regular basis Huang, Wen-Cheng 4 0 100% Director Each month, completed audit reports are sent via emails to each Audit Committee member. If there are questions or instructions, members can contact the auditing officer via emails or the telephone. Each quarter, the Audit Committee submits an Audit Progress Report; it contains audit procedures, findings, and Independent Chen, Thomas 3 1 75% items which require additional improvement for the Company as well as its subsidiaries. Director 2. On a non-regular basis Through telephone calls, emails, and meetings, discussions are held concerning how to increase the Company's audit value and enhance operational Independent Lu, Hsi-Peng 4 0 100% Director efficiency and effectiveness. If any serious violations are discovered, auditors must be notified according to regulations. There are many open channels of communication for the Company's internal auditing officers to communicate with the Audit Committee. Other statutory information: 1. If any of the following circumstances have occurred during the operation of the board of directors, specify the date, period, case content, the opinions of all Recent communications among independent directors, internal audit managers, and accountants: independent directors, and the handling of the opinions of the independent directors: 1. Items listed under Article 14-3 of the Securities and Exchange Act. Date Communication Method Participating Members Key Points of Communication 2. Besides the items listed above, other resolutions of the Board of Directors which received objections or reserved comments from independent directors that are supported by appropriate records or written declarations. Operations of the Board of Directors which did not receive objections or reserved comments from independent directors that are supported by appropriate 2015/11/11 Audit Committee auditing, accounting, finance, business 1. August - September 2015 audit progress report records or written declarations. management, and legal affairs managers 2. Q3 2015 financial statements 2. Any directors who had to excuse him/herself to prevent conflicts of interest: 1. October - November 2015 audit progress report The Board meeting that was conducted on Aug. 12, 2016 to discuss the appointment of Chiu, Melody to serve as the Group's chief adviser and CFO. A 2015/12/14 Audit Committee auditing, accounting, finance, business conflict of interest existed for Director Chiu on this matter, therefore she excused herself from the discussion as well as the voting process. management, and legal affairs managers 2. 2016 audit plan report 3. Evaluation of targets and performances of the Board's functions for the current and most recent year: 2016/03/16 Audit Committee auditing, accounting, finance, business 1. December 2015 - February 2016 audit progress report 1. Three independent directors form the Company's Audit Committee for taking over as supervisors. The chairman of the Audit Committee is responsible for management, and legal affairs managers 2. Report of the statement of declaration on the Internal Control System reporting resolutions passed by the Audit Committee to the Board of Directors. Certified Public Accountant 3. 2015 financial statements 2. The Company will disclose information regarding director training, attendance for board/shareholders' meetings, and important resolutions passed during board meetings. 2016/05/11 Audit Committee auditing, accounting, finance, business 1. March - April 2016 audit progress report 3. In order to increase information transparency, the Company will post all important resolutions passed during shareholders/board meetings on the management, and legal affairs managers 2. Q1 2016 financial statements company website immediately following the meetings. 2016/08/10 Audit Committee auditing, accounting, finance, business 1. May - June 2016 audit progress report 4. In consideration of legal risks faced by directors, the Company has purchased directors and officers liability insurance. management, and legal affairs managers 2. Q2 2016 financial statements 1. July - September 2016 audit progress report

2016/11/09 Audit Committee auditing, accounting, finance, business 2. 2017 audit plan report management, and legal affairs managers 3. Q3 2016 financial statements Certified Public Accountant 4. Applicable questions and initial evaluation of Statement of Auditing Standards No. 58 "communication about key review items in audit reports" 2017/03/14 Audit Committee auditing, accounting, finance, business 1. Audit progress report and report of the statement of declaration on the management, and legal affairs managers Internal Control System for Q4 2016 Certified Public Accountant 2. 2016 Auditors' report and annual financial report

18 Annual Report 2016 Corporate governance report 19 (3) Corporate Governance Execution Status and Deviations from Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies (Continued from previous page)

Practice Compliance with Best-Practice Principles Practice Compliance with Best-Practice Principles Assessment Item Assessment Item Yes No Brief description and reasons for any discrepancies Yes No Brief description and reasons for any discrepancies 8. Does the Company have other important Already notified each director of the related 1. Does the Company abide by the Corporate Has not established a corporate governance information to facilitate better understanding regulations, and directors are notified immediately Governance Best Practice Principles for TWSE/ code, but has established an internal control Changes are made GTSM Listed Companies when establishing and V system in accordance with the relevant laws and gradually in response to of the its corporate governance practices when there are regulation changes. Regulations disclosing its corporate governance code of regulations to protect the rights and interests of changes in the law (including without limitation employee rights, relevant to insider trading of listed companies are conduct? shareholders. employee wellness, investor relations, supplier also described to directors at board meetings. Best Practice Principles 2. Shareholding structure & shareholders' rights relations, rights of stakeholders, directors' and V When a material issue that may impact the compliant supervisors' training records, the implementation Company's stock prices is encountered during a (1) Doe the Company have the internal operating of risk management policies and risk evaluation board meeting, the Legal Department will remind procedure for handling shareholders' A service department is already in place to Best Practice Principles V measures, the implementation of customer all directors and managers present that insider suggestions, questions, disputes, or legal action handle related matters. compliant in place and abide by it? relations policies, and purchasing insurance for trading is strictly forbidden according to Article directors and supervisors)? 157-1 of the Securities and Exchange Act. (2) Does the Company possess a list of major Information can be obtained through shareholder shareholders and a list of ultimate owners of Best Practice Principles V service agents at anytime. 9. Improvements were made according to the corporate governance evaluation results released by TWSE's Governance Center; priority has been given to these major shareholders? compliant matters and measures that have not yet been improved. (3) Does the Company have a risk management The companies stay financially independent Best Practice Principles The Company is committed to strengthening information disclosure in order to enhance corporate governance, and plans to disclose indices which did mechanism and firewall against its affiliates in from each other, and business performance is V compliant place or implement it? evaluated on a regular basis. not receive points during the corporate governance evaluation. The following section will explain some of the items: Index 2.1: Did the Company disclose contact information for investors or functions to answer questions from shareholders on its website? (4) Does the Company have internal regulations A dedicated section for stakeholders was established on the company website in 2016, where contact information for employees, customers, in place to prevent its people from trading Signed letters of undertaking related to the Best Practice Principles suppliers/contractors, shareholders/investors, consumers, press members, and other stakeholders are listed for responding to questions securities based on information yet to be V confidentiality clause. compliant public on the market? concerning corporate social responsibility. 3. Composition and responsibilities of the Board of Index 3.34: Did the Company disclose information on its website related to the communication between independent directors, internal audit officers, Directors and accountants (such as the communication method, items, and results with respect to financial statements and financial/operational status)? (1) Does the Board of Directors establish and Already established independent directors and On the company website, a section titled "Communications between Independent Directors, Internal Audit Managers, and Accountants" was consolidate the diversification policy for its members including former president of listed Best Practice Principles added under "Corporate Governance". Regular updates are made with respect to communications between independent directors, internal composition? V companies, supervisors from other companies, as compliant audit managers, and accountants. well as university professors. Index 2. 9: Does the Company also release meeting announcement in English 30 days prior to the shareholders' meeting? (2) Besides the Remuneration Committee and This is a mandatory improvement which must be made. Investor Relations Dept. and Legal Dept. are working with other units to implement this the Audit Committee set up according to The Remuneration Committee and Audit Changes are made request for the 2017 self-evaluation of corporate governance. law, does the Company have other types V Committee are already in place, committee gradually in response to Index 2.15: Does the Company also release a handbook for the shareholders' meeting in English 21 days prior to the scheduled meeting? of functional committees in place that it members are all independent directors. changes in the law This is a mandatory improvement which must be made. Investor Relations Dept. and Legal Dept. are working with other units to implement this spontaneously set up? request for the 2017 self-evaluation of corporate governance. (3) Does the Company have Board of Directors The Company's major resolutions must be passed Changes are made performance assessment guidelines and V by the board of directors, there is no evidence of gradually in response to assessment methods in place and perform the poor performance. changes in the law assessments periodically on a yearly basis? (4) Does the Company evaluate CPAs' Each year, the Audit Committee evaluates independence regularly? auditors' independence and accountability, results are reported to the board of directors. 1. Independence declaration for auditors. 2. Survey evaluation results for auditors'

independence and accountability. V Best Practice Principles 3. The same accountant has not participated in the compliant Company's auditing services for more than seven years. 4. Proper communication channels have been established between accountants and the Audit Committee. 4. Did the TWSE/TPEx listed company establish exclusively (or concurrently) dedicated units Each department within the Company is or personnel to be in charge of corporate responsible for corporate governance-related governance (including but not limited to matters including regulatory compliance, providing information for directors and improving internal management, protecting the Best Practice Principles supervisors, convene board and shareholders' V rights and interests of shareholders, strengthen compliant meetings according to regulations, processing the functions of the board of directors, and company registration/registration change, establishing the Audit Committee and other and taking meeting minutes during board/ functional committees according to regulations. shareholders' meetings)? 5. Does the Company have a communication The Company has set up a dedicated section channel in place with stakeholders (including for stakeholders on its website, where contact but not limited to shareholders, employees, information for employees, customers, suppliers/ Best Practice Principles customers, and suppliers) and set up a V contractors, shareholders/investors, consumers, compliant stakeholders only section on its website to press members, and other stakeholders are listed properly address stakeholders' concerns such for responding to questions concerning corporate important corporate social responsibilities? social responsibility. 6. Does the Company hire professional stock Commissioned SinoPac Securities - Share Best Practice Principles agencies to take care of shareholders' meetings- V Registration Services Department. related affairs? compliant 7. Information disclosure (1) Has the Company set up a corporate Regularly disclose information on the corporate website to disclose information regarding the Best Practice Principles website regarding the Company's financial, Company's financial, business, and corporate V compliant business, and corporate governance status. governance status? (2) Does the Company adopt other ways to Create an official company website in both disclose information (e.g., maintaining Chinese and English, appoint the Public Relations an English-language website, appointing Department to compile and organize information Best Practice Principles responsible people to handle information for release to the public. Each unit has also set V compliant collection and disclosure, appointing up a dedicated contact window; information will spokespersons, webcasting investors also be disclosed through a spokesperson or press conference)? conference.

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20 Annual Report 2016 Corporate governance report 21  Director/supervisor training in 2016: (4) Companies that have assembled remuneration committees shall disclose the names and responsibilities of its members and committee operations Study Period (1) List of Remuneration Committee members Job Title Name Organizing Unit Course Title Hours Studied From To Has at least 5 years of work experience and Fulfillment of independence criteria (Note 1) Requirement meet one of the following professional qualifications Number of other public companies Representative 2016/02/19 2016/02/19 Taiwan Academy of Banking and A judge, public prosecutor, attorney, Lecturer or a higher post at certified public accountant, or Work experience required in which the Ho, Felix Corporate Governance Workshop 6.5 Position a public/private university/ Notes Director Finance other professional or technical for operations in commerce, 1 2 3 4 5 6 7 8 committee member college in the field of specialist who has passed a national law, finance, accounting, also serves as commerce, law, finance, Representative Taiwan Academy of Banking and Name examination and been awarded a or another field relevant to a remuneration accounting, or another subject certificate in a profession necessary YFY's operations committee member Ho, S. C. 2016/07/15 2016/07/15 Financial Seminar for Auditors 8 relevant to YFY's operations Director Finance for the business of the company. Independent Huang, Wen-Cheng Not Taiwan Academy of Banking and V V V V V V V V V 3 2016/02/19 2016/02/19 Corporate Governance Workshop 6.5 Director applicable Representative Chiu, Finance Independent Chen, Thomas Not Director V V V V V V V V V 2 applicable Director Melody Taiwan Academy of Banking and Corporate Governance Forum - Wealth Management 2016/04/13 2016/04/13 3 Independent Lu, Hsi-Peng V Not Finance and Tax Planning for High-net-worth Clients Director V V V V V V V V 1 applicable Representative Huang, Taiwan Academy of Banking and 2016/02/19 2016/02/19 Corporate Governance Workshop 6.5 Note 1: Please tick the corresponding boxes with a "V" if a member meets any of the following conditions during the two years prior to being elected or during Director Kirk Finance the term of office. Representative Ho, Taiwan Academy of Banking and (1) Not an employee of the Company or any of its affiliates. 2016/02/19 2016/02/19 Corporate Governance Workshop 6.5 Director Richard Finance (2) Not a director or supervisor of the Company or any of its affiliates. The same does not apply if the person is an independent director of the Company or its parent company, or any subsidiary established by following this measure or local regulations. ROC Accounting Research and Professional Training Courses (3) Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under others' 2016/01/21 2016/01/21 3 Huang, Development Foundation Independent names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. Wen- Obligations and Responsibilities of Companies (4) Not a spouse, relative within second degree of kinship, or lineal relative within third degree of kinship of any of the persons in the preceding three Director Taiwan Corporate Governance Cheng 2016/08/11 2016/08/12 and Directors under the Securities Exchange 6 paragraphs. Association Act/How to Prevent Corruption - Case Study (5) Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares ranking in the top five in holdings. Discussion on employee reward strategies and 2016/08/03 2016/08/03 Securities & Futures Institute 3 (6) Not a director, supervisor, officer, or shareholder holding 5% or more of the share, of a specified company or institution that has a financial or business tool use relationship with the Company. Independent Chen, How directors/supervisors can guide the (7) Not a professional or an owner, partner, director, supervisor, managerial officer or a spouse of the abovementioned who provides commercial, legal, financial, accounting services or consultation to the Company or an affiliate of the Company. Director Thomas Taiwan Corporate Governance Company to properly implement risk 2016/11/18 2016/11/18 3 (8) Not having any of the situations set forth in Article 30 of the Company Act of the R.O.C. Association management measures and strengthen corporate governance (2) Operations of the Remuneration Committee Platform revolution: challenges and 2016/04/28 2016/04/28 TWIoD 3 1. The Company's Remuneration Committee consists of 3 members. countermeasures for the new economy Independent Lu, 2. Term of office for current members: From August 2015 to June 2017; the Remuneration Committee met twice during Corporate governance trends - 2016 Board of the most recent year, member qualifications and attendance information are listed below: Director Hsi-Peng Taiwan Corporate Governance 2016/05/06 2016/05/06 Directors 3 Association The six main issues of concern Actual times of Attendance Title Name Attendance in person Notes attendance by proxy (%)

Re-elected Convener Huang, Wen-Cheng 2 0 100% (Previous term expires on: June 30, 2015 New election date: August 13, 2015) Re-elected Committee member Chen, Thomas 2 0 100% (Previous term expires on: June 30, 2015 New election date: August 13, 2015)

Newly appointed Committee member Lu, Hsi-Peng 2 0 100% (Date elected: August 13, 2015)

Other statutory information: 1. The Board of Directors did not accept or make corrections based on recommendations submitted by the Remuneration Committee, specify the date, period, case content, resolution from the Board of Directors, and the handling of the opinions of the Remuneration Committee by the Company: None. 2. With respect to resolutions passed by the Remuneration Committee, if there are documented items opposed by members or received reserved comments, please specify the date of the Remuneration Committee meeting, period, project content, all member opinions, and steps taken in response to member opinions: None.

22 Annual Report 2016 Corporate governance report 23 (5) Performance of Social Responsibility

(Continued from previous page) Discrepancies with corporate social Practice Assessment Item responsibility codes of practice of listed Discrepancies with corporate social Yes No Brief description Practice companies and their causes Assessment Item responsibility codes of practice of listed Exercising Corporate Governance Yes No Brief description companies and their causes (1) Does the company have the corporate The Company has not formulated a corporate social responsibility policy or system in place social responsibility policy but has cooperated (4) Does the company have a reasonable The department heads will raise the awareness of and examine its performance? with suppliers to promote the implementation remuneration policy in place that the practice through interviews at the semiannual of corporate social responsibility. We require combines the employee performance performance review. The department heads will Changes are made Changes are made all suppliers and third parties to sign the evaluation system with the corporate social V also inspect whether the employees under their gradually in response to gradually to relevant policies V "Honesty and Integrity Declaration Form", which responsibility policy and also have an supervision are observing a corporate culture of changes in the law in response to changes in guarantees their commitment when dealing with explicit and effective reward and discipline honesty and integrity when conducting business, the law our personnel to fulfill their obligations of honesty, system in place? and reward or reprimand accordingly. integrity, protecting the environment, and 2. Fostering a Sustainable Environment employment. In 2016, 100% of our suppliers signed (1) Does the Company endeavor to utilize The Company achieves the dual goal of reducing the "Honesty and Integrity Declaration Form". all resources more efficiently and use fossil fuel usage and surplus output through (2) Does the Company hold social responsibility Courses focusing on corporate social responsibility renewable materials which have a low continuously improving production processes Best Practice Principles educational trainings regularly? V are organized for new employees and throughout impact on the environment? to increase output per unit input, deslagging, compliant various training programs. and other techniques to turn surplus output into alternative fuels. The R&D of biopulping Best Practice Principles (3) Does the company have exclusively On April 1, 2013, YFY established the Sustainability V (or concurrently) dedicated units to be and Social Responsibility Office (SSR); its mission technology helps to convert agricultural waste to compliant in charge of proposing and enforcing is to accomplish each goal set by YFY in terms raw materials for papermaking. The recycling rate corporate social responsibilities and let the of sustainable development and fulfilling social of YFY Packaging Inc. has reached 96.7%, with Board of Directors entrust the high-ranking responsibility. By strengthening and promoting the recycling rate for corrugated paper (the raw management with the implementation and internal/external relationships through continuous material for the corrugated center of corrugated the latter will report to the Board of Directors communication and cooperation, the SSR aims paperboard) reaching 100%. on the implementation status? to coordinate business operations through a (2) Does the Company have proper Each plant in China and Taiwan has passed contact window within the Group's companies. environmental management systems based ISO 14001 certification for environmental The leader and director of the SSR is Allen Ronald, on the characteristics of its industries in management, and dedicated personnel have Best Practice Principles V and there are two dedicated staff working under place? been assigned to maintain the environmental compliant him. Seven task groups have been formed based management systems to ensure effective on the projects as detailed below: operation. 1. Target control: Develop a strong foundation (3) Does the Company pay attention to the YFY spares no effort in promoting energy within YFY to fulfill our responsibilities to the impacts that the climate change has on conservation and carbon reduction to mitigate environment, society, and employees. the operation activities and implement the impact of climate change and fulfill our social 2. Sustainable actions: Control and guide greenhouse gas inventory, and establish responsibility. In addition to passing ISO50001 all plants to achieve their short, mid, and energy-saving, carbon reduction, and certification for energy management systems, long-term energy saving and carbon greenhouse gas reduction strategies? each plant must also implement GHG inventory reduction goals. Propose response measures and energy conservation measures. with respect to climate change and (1) Greenhouse emission checks: obtain various environmental protection In response to climate change and global certifications. greenhouse gas management trends and to 3. Employee training: Increase fully grasp relevant issues associated with the employee awareness of environmental Company's business risks and opportunities, protection and green subjects; share the Company continues to pay attention the goals and vision of the Company to disclosures of carbon emissions by other with employees and encourage them to organizations as well as domestic regulations propose ideas on social responsibility and and requirements. At the same time, we sustainability. request all corresponding units to voluntarily 4. Community involvement: Strengthen YFY's Best Practice Principles V participate in greenhouse emission checks Best Practice Principles green image, establish good relationships compliant V and register their results with the National compliant between plants and surrounding Greenhouse Gas Registry. communities; encourage employees (2) Energy conservation and carbon reduction: to participate in local environmental At the end of 2014, the Company set up a protection, cultural, and volunteer activities. resource recycling platform to promote the 5. Corporate responsibility exchanges: integration and reuse of resources within the Continue to hold discussions with Group. Each quarter, all plants under the stakeholders; increase the transparency Group will inspect each other to continue the for enforcing corporate management and promotion of energy saving projects, which driving social responsibility. include changing to LED lights and high- 6. Supply chain management: Monitor and efficiency motors, etc. At the same time, a control all personnel involved in the quarterly technological exchange is held production line (including contractors) to introduce energy-saving technologies to provide a healthy and safe work to improve each plant's energy efficiency environment; establish standards that must and progress along the path of energy be met by all suppliers, including health and conservation and environmental protection. safety, social responsibility, sustainable The platform has set an energy reduction development, etc. goal of 1% per year. 7. Technological innovations: Integrate R&D, production, and market demands to maximize efficiency and profit; ensure all (continued on next page) production processes meet international environmental standards; combine internal and external R&D results to obtain certification and support from non- governmental organizations. The director of SSR reports directly to the Chairman; annual plans and implementation status are also reported to the chairman each month by the SSR, which are included in the board meeting agenda as necessary.

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24 Annual Report 2016 Corporate governance report 25 (Continued from previous page) (Continued from previous page)

Discrepancies with corporate social Discrepancies with corporate social Practice Practice Assessment Item responsibility codes of practice of listed Assessment Item responsibility codes of practice of listed Yes No Brief description companies and their causes Yes No Brief description companies and their causes

3. Preserving Public Welfare (1) Awards & recognitions (1) Does the Company comply with relevant laws 1. YFY was the recipient of an "Outstanding Energy Conservation Award for Business Groups" issued by the Ministry of Economic Affairs, ROC. and regulations and internationally recognized A set of rules has been implemented in By switching to high-efficiency motors, changing to LED lights, installing windmills and motor frequency control equipment, setting water pump volume Best Practice Principles covenants on human rights, and has related V accordance with applicable regulations to compliant restrictions, and improving wastewater treatment in deep aeration tanks, YFY saved 18,110,000 kWh of electricity for the year, equivalent to having management policies and procedures in protect employee rights as specified by law. reduced 9,433 metric tons of CO2 emissions. YFY also received an "Exemplary Enterprise for Energy Conservation" award from the Bureau of Energy, place? Ministry of Economic Affairs. (2) Does the Company have a complaint 2. Hualien plant's hydrogen energy project, implemented by Chung Hwa Pulp Corp., was the recipient of an Asia Responsible Entrepreneurship Award. mechanism and channel in place for A dedicated contact window and open Best Practice Principles V Chung Hwa Pulp Corp. is the first corporation in the country to recycle electrolytic sodium by-products during pulp production to generate hydrogen employees and address employees' communication channels have been established. compliant energy with its "purification" technology. YFY emerged from more than 300 finalists from 28 countries to be awarded a Green Leadership prize at the complaints properly? Asian Responsible Entrepreneurship Awards (AREA), which has been described as the “Nobel Prize for sustainability”. (3) Does the Company provide its employees with An occupational safety management platform 3. YFY's Xinwu plant was the recipient of an "Adopt a River by Outstanding Enterprises" award from the Taoyuan City Government safe and healthy workplaces, and organize has been established at the Company's Over the years, the Xinwu plant of YFY’s Containerboard and Packaging Business Group has actively participated in the conservation of the Nankan training on safety and health for its employees investment holdings level. Units at each level River and also adopted a section of the She-zi River near the ocean. For these efforts, it received an "Adopt a River by Outstanding Enterprises" award on a regular basis? have dedicated safety and health management from the Taoyuan City Government. personnel responsible for the development of 4. Chung Hwa Pulp Corp's Jioutang plant was the recipient of an Kaohsiung City Green Procurement Performance Award occupational safety and health management The Jioutang plant has complied with the government's green procurement policy since 2011 and annually increased its expenditure on green plans to promote the identification of procurements from NT$300 million in 2011 to NT$956 million in 2015. It has received the Kaohsiung City Green Procurement Performance Award every occupational and operational hazards, as well as to assess and control various safety and Best Practice Principles year during this period. V health management matters. Each plant carries compliant (2) Community participation out automatic pre-operation inspections of all equipment and work environment monitoring 1. Organized the "Creative Paper Art" exhibition event with the National Science and Technology Museum and renowned papercraft artist and continues to improve safety and health Chung Hwa Pulp Corp. collaborated with the National Science and Technology Museum and the Netherlands Trade and Investment office to invite facilities. We are actively striving to create a papercraft artist Noa Haim from the Netherlands to assemble a giant, 4.8-meter-tall windmill robot together with the public. For this event, Chung Hwa safe, healthy, comfortable, and friendly work Pulp Corp. supplied 1,000 sheets of corrugated paper and 10,000 sheets of matte finish paper. environment to achieve our "zero accident" goal. 2. Worked with universities to participate in Asia's large-scale creative competition "Cardboard Box Wars" We not only meet health and safety standards; all YFY helped organize "Cardboard Box Wars" hosted by the Taiwan Paper Industry Association. Through industry-academia collaboration, students were of our plants are also OHSAS18001 certified. able to transform cardboard boxes into uniforms, weapons, and tanks. A total of 500 students in 38 teams participated in the competition. Through (4) Does the Company have a mechanism for promotion on social media, campus announcements, and a Facebook fan page, over 10,000 people participated in the event, raising awareness on regular communications with employees We use official letters, internal publications, public environmental protection issues among students and inspiring their creativity. in place and keep employees informed announcements, public displays, and other Best Practice Principles 3. Helped sponsor the "MovISee" exhibition organized by National Cheng Kung University's Institute of Creative Industries Design V of changes in company operations that mechanisms to convey the Company's operating compliant YFY Containerboard and Packaging 's Kaohsiung plant worked with National Cheng Kung University's Institute of Creative Industries Design to host the might have significant impacts on them in a policies and related tasks. "MovISee" exhibition, which featured student-made artworks constructed out of corrugated paper. reasonable manner? 4. Invited students from Xinwu Elementary School to experience the "Guji-Guji" puppet show from Spain (5) Does the Company offer its employees To uphold the concept of coexisting with local communities, YFY Containerboard and Packaging's Xinwu plant joined the Hsin-Yi Foundation in inviting We organize professional training based on Best Practice Principles effective occupational empowerment training V different positions and job grades. compliant a total of 180 people, including students and teachers from four local schools as well as children from the South Taipei Family Support Center, to enjoy programs? the "Guji-Guji" puppet show performed by Periferia Teatro from Spain. (6) Does the Company have policies on consumer rights and interests in place and (3) Social contributions The company website provides complete provides a clear and effective procedure Best Practice Principles 1. Annual material donations V product information and a dedicated service for accepting consumer complaints relating compliant In 2016, YFY Consumer Products Co., Ltd. donated 529,873 household products totaling NT$4,639,779 to 83 non-profit organizations throughout Taiwan. window. research and development, procurement, 2. Sponsoring the Venice Architecture Biennale: Leading a new architectural revolution with nPulp production, operation, and services? YFY sponsored the "15th Venice Architecture Biennale - Taiwan Pavilion", which featured the international debut of a green building called the "Nest", (7) Does the Company comply with applicable constructed using rice and straw as raw materials. As the biggest highlight of the Taiwan Pavilion, the "Nest" showcased to the world the practical laws, regulations, and international guidelines Product marketing and labeling comply with Best Practice Principles architectural application of innovative green materials developed by Taiwan and YFY’s active contribution to environmental sustainability. V in the marketing and labeling of its products legal requirements. compliant and services? (4) Community service 1. YFY classroom in Taitung (8) Does the Company evaluate its suppliers Since 2013, the Company has requested all In 2015, YFY kicked off it's first wave of a 3-year volunteer project. From September 2015, volunteers began visiting the Taiwan Fund for Children and and see if they had records of impacting the new suppliers and contractors to sign the Families in Taitung every Wednesday afternoon to read books with 20 children. During the summer of 2016, a 2-day/1-night event was arranged for environment and society from the past before Honesty and Integrity Declaration Form, which volunteers and children to bring them even closer together. establishing a partnership with them? covers the commitments and specific actions Best Practice Principles V relating to each supplier's corporate social compliant (5) Public welfare responsibility, including compliance with the 1. Taitung - Post-typhoon recovery project principles of honesty, trustworthiness and integrity, environmental and labor laws, as well as liabilities In 2016, Typhoon Nepartak struck Taitung, causing severe damage. After visiting local neighborhoods and local social welfare institutions, YFY for a breach of contract. headquarters and staff from the Taitung plant launched a post-typhoon recovery project to assist reconstruction. Through using the Taitung plant as a crisis center, the project first took care of employee's family members and surrounding neighborhoods before reaching out to non-profit organizations (9) Does the contracts that the Company enters When the Company signs a contract with a throughout the Taitung area, providing material donations, building repairs, and scholarships. Scholarship donations from 372 employees of 22 into with its major suppliers include terms supplier, declarations are made with respect companies under the Group plus a double-up donation by YFY Inc. totaled NT$1,600,000, helping 560 disadvantaged students from Taitung pay for and conditions that allow termination or to environmental protection and labor law dismissal of the contract at any time if the compliance as well as compensation for any Best Practice Principles their annual tuition. V supplier is found with any violation against losses. We request that all contractors commit to compliant 2. Joint donation of NT$16 million by YFY, the Hsin-Yi Foundation, and SinoPac Holdings to assist victims of the Tainan earthquake the Company's corporate social responsibility their corporate social responsibility; in the event After a major earthquake at the beginning of 2016 caused severe damage in Tainan, YFY, the Hsin-Yi Foundation, and SinoPac Holdings fulfilled their policy that results in significant impacts on the of a violation, the Company has the right to corporate social responsibilities by jointly donating NT$16 million to help victims rebuild their homes. environment or society? terminate and void the contract. (6) Health and safety 4. Improving Information Disclosure 1. Established an occupational safety management platform (1) Does the Company disclose relevant and The Group established an occupational safety management platform in July 2016, which adopts a system of "layered responsibility", "incentives reliable information relating its corporate Charity achievements are regularly disclosed on Best Practice Principles V reprimands", and combines employee training, safety reviews, and work environment upgrades to strive toward our "zero accident" goal. social responsibilities on its website or public the company website and reported in the media. compliant information observatory sites? 7. The Company's products have passed the international environmental protection standards of the Forest Stewardship Council and the Programme for the 5. If the company has implemented corporate social responsibility guidelines by following the Corporate Social Responsibility Best Practice Principles for Endorsement of Forest Certification (PEFC), satisfying international market requirements for recycled paper. Consumer product production lines have also TWSE/GTSM-Listed Companies, please describe the practice and any discrepancies with regard to the Best-Practice Principles: passed the HACCP food safety control system, ISO22000 food safety and health management system, and CNS certification. Changes are made gradually to relevant policies in response to changes in the law. 6. Other important information to facilitate better understanding of the Company's corporate social responsibility practices (e.g., systems and measures that the Company has adopted with respect to environmental protection, community participation, contribution to society, service to society, social and public interests, consumer rights and interests, human rights, safety and health, other corporate social responsibilities and activities, and current implementation status):

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26 Annual Report 2016 Corporate governance report 27 6. Ethical corporate management and measures adopted (Continued from previous page)

Discrepancy with Best-Practice Discrepancy with Best-Practice Practice Practice Assessment Item Principles for TWSE/GTSM Listed Assessment Item Principles for TWSE/GTSM Listed Yes No Brief description Companies and reasons Yes No Brief description Companies and reasons 1. Establishment of ethical corporate management (2) Does the Company have a standard 1. Once a reported case is accepted, policy and approaches operating procedure and a related information is recorded and forwarded to the confidentiality mechanism in place for responsible unit for an investigation. (1) Does the Company state ethical corporate While the Company has not formulated a set of investigating reported matters? management policies and practices in its guidelines for honest operations, its principle and While the Company has 2. After conducting a careful investigation, results internal rules and external documents, as well spirit of abiding laws, including the prohibition of not formulated a set of are submitted to the responsible authority for as the commitment of the board of directors dishonest behavior or bribery, respect for guidelines for honest review. and management to actively implement intellectual property rights, and avoiding conflicts operations, its principle and 3. If violations of rules relating to dishonest V Best Practice Principles management polices? of interest, are incorporated into other company spirit of abiding laws have V behavior are confirmed for a reported documents such as employment contracts, already been incorporated case, penalties will be issued in accordance compliant intellectual property non-disclosure agreements, into other company policies with the "Procedures for Issuing Employee insider trading prevention agreements, staff and documents. Incentives and Reprimands", which include a regulations, and rules of the Board of Directors. major demerit or termination of employment contract. (2) Does the Company have dishonest act The Company's prevention methods against preventive plans that state operating dishonest behavior are listed below: 4. The identity of the informant and the procedures, conduct guidelines, discipline 1. Prevention of dishonest behavior and investigation process and outcome are kept and complaint systems for violations in place prohibition of bribery: Clearly stipulated in confidential. and enforce them? Chapter Four of the Company’s policies, with (3) Does the Company adopt measures to Personnel who process complaint reports should detailed information on disciplinary action Best Practice Principles prevent reporters from improper treatment for declare that the identity of the informant as V and the reporting system set out in “Service filing the report? well as the content of the report will be kept Best Practice Principles compliant V Regulations”. confidential. The Company is committed to compliant 2. Protection of intellectual property rights: protecting the informant from mistreatment for Achieved by requiring employees to sign filing the report. an "intellectual property non-disclosure 4. Improving Information Disclosure agreement" and through the employment contract. (1) Does the Company disclose contents Important internal policies and the operation of its honest operation guidelines and Best Practice Principles (3) Does the Company have preventive measures Before doing business, the Company requires V of audit units are disclosed on the company implementation status on its website or public compliant in place against business operations at a all suppliers to sign a “good faith declaration website. information observatory sites? relatively high risk of dishonest behavior as form”, which clear stipulates conformity with the Best Practice Principles indicated in respective subparagraphs under V principles of honesty, integrity, and trustworthiness 5. If the Company has implemented corporate social responsibility guidelines by following the Ethical Corporate Management Best Practice Principles for TWSE/ compliant Article 7 Paragraph 2 of the Ethical Corporate to prevent company personnel from accepting GTSM-Listed Companies, please describe the practice and any discrepancies with regard to the Best-Practice Principles: Management Best Practice Principles for improper benefits and to ensure the integrity of Although a set of honest operation guidelines has not been formulated, but the principle and the spirit have already been incorporated into other company TWSE/GTSM Listed Companies? transactions. policies. 2. Implementation of ethical corporate 6. Other important information to facilitate better understanding of the company's implementation of ethical corporate management: (e.g. declare the management company's commitment to practice and policy for ethical corporate management to its business counterparties, and invite them to join the company's training program, and review/revision of the company's ethical corporate management principles): (1) Does the Company evaluate credit records of In the credit evaluation process of suppliers, we The Company requires all suppliers and third parties to sign the "Honesty and Integrity Declaration Form" to guarantee their commitment to fulfill their its counterparts and specify good faith terms assess their ability to keep proper records. Further, Best Practice Principles obligations of conducting honest business operations. and conditions in the contracts entered into? V it is clearly stated in the procurement contract compliant All contracts between the Company and its suppliers require both parties to comply with the ethical corporate management policy. If the supplier is involved and good faith declaration form bribery and in any dishonest activity, the Company may terminate or void the contract at any time. dishonest behavior are absolutely prohibited. (2) Does the Company have a dedicated No dedicated (or concurrent) unit has been (concurrent) department responsible for established to promote ethical corporate (7) If the Company has established corporate governance principles and related guidelines, the means of accessing this information should promoting ethical corporate management in management at the present time. If there are place that reports periodically to the Board of related reports or investigations involving acts of Changes are made be disclosed: None. Directors on the implementation status? V dishonesty, auditing units will work jointly with the gradually in response to Legal Department to conduct an investigation. changes in the law. (8) The Company should also disclose other significant information that may improve the understanding of its governance and operation: If the investigation confirms that a violation took 1. Please refer to item (3) above, Corporate Governance Execution Status and Deviations from Corporate Governance Best-Practice place, the case will be reviewed and reported according to our internal procedures. Principles for TWSE/GTSM Listed Companies. (3) Does the Company have policies that 2. Training and education for managers who participate in corporate governance: Directors who may have a conflict of interest with help prevent against conflict of interests respect to a motion being discussed during a Best Practice Principles Key managers who received corporate governance training in 2016 and appropriate channels for filing related V board meeting must excuse themselves from the compliant complaints in place and precisely enforce meeting. them? Course Title Organizing Unit Study Period Hours Studied Names of Key Management Personnel (4) Does the Company have an effective accounting system and internal control system An effective accounting system and internal Huang, C. C.; Yin, K. T.; Zhan, Shun Xiang; in place to enforce honest operations and control system are already in place; internal audit Best Practice Principles V let the internal audit unit perform periodic staff also carry out inspections according to the compliant Wu, C. F.; Chien, Ray; Huang, Yu Ren; inspections or authorize a CPA to perform the audit plan passed by the board of directors. Wang, Yu Yang; Cheng, Irene; Chang, inspections? (5) Does the Company organize internal and Y. C.; Pu, Shen Xiu; Liao, De Ming; Chang, The Company organizes regular training sessions Best Practice Principles external educational trainings periodically to V on related topics and promotes ethical conduct. compliant Operational risks for Human Resources Department 2016/02/19 6 C. T.; Ou, Zhe Hong; Huang, Kirk; Peng, help enforce honest operations? companies in the China region Cheng Yang; Lin, Gu Feng; Huang, Zhi 3. Implementation status of the Company's reporting system Cheng; Chen, Rui He; Huang, Rong Ming; (1) Does the Company have a substantial Lin, Guan Jun; Hou, Si Yi ; Liu, Shi Wei ; Dai, reporting and reward system as well as a The Company has open and diversified reporting Best Practice Principles convenient reporting channel in place with V Pei Ling; Chang, Chung Yi; Chen, J. G., channels. compliant appropriate personnel to be assigned to assist Lin, Bing Yi; Min, Zhi Qing; Xu, Zhi Min the party being reported on?

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28 Annual Report 2016 Corporate governance report 29 (9) Implementation status of the internal control system: 2. Auditor's internal control review report: None. 1. Statement of declaration on the Internal Control System (10) Penalties issued on the Company and its personnel, punishment imposed by the Company on personnel in violation of internal control system regulations, major deficiencies and improvement measures taken during the current fiscal year up to the date of publication of the annual report: None. YFY Inc. Statement of Declaration on the Internal Control System (11) Important resolutions of the shareholders meeting and the board of directors in last fiscal year and up to the printing date of this Date: March 16, 2017 annual report: In 2016, the Company conducted an internal audit in accordance with its Internal Control Regulations and 1. Important resolutions of the 2016 shareholders meeting (June 15, 2016) (abstract) hereby declares as follows: (1) Amendments approved for YFY's Articles of Incorporation. 1. The Company acknowledges and understands that the establishment, implementation and maintenance (2) Acknowledgment of YFY's 2015 financial statements. of the internal control system are the responsibility of the Board and managerial officers, and that the (3) Acknowledgment of YFY's 2015 earnings distribution proposal. Company has already established such a system. The purpose is to provide reasonable assurance to the effectiveness and efficiency of business operations (including profitability, performance and security Implementation of resolutions of the 2016 shareholders meeting: of assets); reliability, timeliness, and information transparency of reports and compliance with relevant (1) In response to the new provision of Article 235-1 of the Company Law related to employee remuneration, as well as regulatory requirements. the amendment of Article 235 which removed staff dividend requirements, the Board has approved the amendment 2. There are inherent limitations to even the most well designed internal control systems. As such, an of the Company's Articles of Incorporation; registration was completed on July 5, 2016. effective internal control system can only reasonably ensure the achievement of the aforementioned (2) The Board of Directors followed Article 230 of the Company Act and prepared and submitted the financial statements goals. Moreover, the operating environment and situation may change, impacting the effectiveness of the internal control system. Nonetheless, YFY's internal control system has a built-in self-supervision to the shareholders meeting for acknowledgment. Once acknowledged by the shareholders meeting, the Board mechanism and once a flaw is detected, the Company is able to make immediate corrections. of Directors will distribute the financial statements and earnings distribution resolutions to the shareholders through 3. In compliance with the "Regulations Governing Establishment of Internal Control Systems by Public announcements. Companies" (the "Regulations"), YFY has adopted a checklist of items for the internal control system (3) In 2015, the Company's cash dividend was NT$0.3 per share; the base date for the interest rate was July 11, 2016, and in judging the effectiveness of system design and implementation. The Regulations are instituted for the payment date for dividends was August 2, 2016. judging the effectiveness of the design and implementation of the internal control system. There are five components of effective internal control as specified in the Regulations with which the procedure for YFY have completed the implementation of all tasks in accordance with the resolutions of the shareholders meeting. effective internal control is measured, namely: 1. Control Environment, 2. Risk Evaluation, 3. Control 2. Important resolutions of the 5th meeting of the 26th board meeting (March 18, 2016) (abstract) Operations, 4. Information and Communication, and 5. Supervision Operations. Each element comprises (1) Approved YFY's 2015 financial statements. several items as detailed in the Regulations. (2) Approved YFY's 2015 earnings distribution proposal. 4. The Company has adopted the aforementioned internal control system to evaluate the effectiveness of the YFY's net profit after tax in 2015 was NT$501,903,856, which was added to the undistributed earnings of NT$5,314,180,812 design and enforcement of the internal control system. from the previous year before subtracting a recognized change of NT$49,366,334 in net value of shares held in the 5. Based on the aforementioned evaluation results, the Company holds that it has reasonably preserved the achievement of the aforementioned with the internal control system as of December 31, 2016 investment portfolio and subtracting re-measurement of NT$266,420,374 for defined benefit plan to arrive at a total of (including the monitoring over the subsidiaries), including understanding the effectiveness and efficiency NT$5,500,297,960 in distributable surplus. In addition to a statutory reserve of NT$50,190,386, a cash dividend of NT$0.3 in operation, reliability and transparency in timely reporting, and compliance with relevant regulatory per share, NT$498,111,449 in total, will be distributed to leave a balance of NT$4,951,996,125 to be allocated to the requirements, and that the design and enforcement of internal control are effective. following year. 6. This statement shall form an integral part of the annual report and (3) Approval of YFY's 2015 remunerations for directors and employees. prospectus of the Company and will be publicly announced. If there are any deceptive or concealed statements herein, the Company shall be liable for In 2015, the Company has set aside NT$487,641 as remuneration for employees and NT$5,635,000 as remuneration for violations of Articles 20, 32, 171 and 174 of the Securities Exchange Act. directors. 7. This statement of declaration was approved by the Board on March 16, (4) Approved the Company's "Employee Compensation Distribution" plan. 2017; all 9 directors present concurred unanimously. (5) Approved the time, location, agenda, and other relevant matters regarding the 2016 shareholders' meeting. YFY Inc. (6) Approved YFY's 2015 statement of declaration on the Internal Control System. (7) Approved YFY's application of loan credit line with correspondent banks. (8) Approved YFY to be the joint promissory note maker of subsidiaries' loan credit line with correspondent banks, and the Chairman: Signature approval of YFY to issue a letter of commitment/support for subsidiaries. (9) Approved subsidiaries' application to provide endorsements and guarantees for external parties. (10) Acknowledgment of the total amount of liabilities in endorsements and guarantees as of December 2015 to be NT$12,457,598,000. President: Signature 3. Important resolutions of the 6th meeting of the 26th board meeting (May 13, 2016) (abstract) (1) Approved YFY's application of loan credit line with correspondent banks. (2) Approved YFY to be the joint promissory note maker of subsidiaries' loan credit line with correspondent banks, and the approval of YFY to issue a letter of commitment/support for subsidiaries. (3) Acknowledgment of the total amount of liabilities in endorsements and guarantees as of Q1 2016 to be NT$12,457,598,000.

30 Annual Report 2016 Corporate governance report 31 4. Important resolutions of the 7th meeting of the 26th board meeting (August 12, 2016) (abstract) (14) Approved a resolution to allow the Company's subsidiaries to serve as the joint promissory note maker and joint (1) YFY's application of loan credit line with correspondent banks. guarantor in the interbank lending credit line applications by YFY's subsidiaries. (2) Approved the company to serve as the joint promissory note maker in the interbank lending credit line applications (15) Acknowledgment of the total amount of liabilities in endorsements and guarantees as of Q4 2016 to be by YFY's subsidiaries, and to issue letters of undertaking/guarantee for the interbank lending credit line applications by NT$13,830,284,000. YFY's subsidiaries. (12) The content of any resolution of the board of directors which received any objections or reserved comments from a director or (3) Acknowledgment of the total amount of liabilities in endorsements and guarantees as of Q2 2016 to be supervisor that are supported by appropriate records or written statements: The Company is not faced with such scenario. NT$12,886,338,000. (13) Resignation and dismissal of Company chairman, president, chief accounting officer, chief internal auditor and chief R&D officer (4) Approved the change of the management structure: Ho, Felix will become the Company's chairman; Chiu, Melody will during the current fiscal year and up to the date of publication of the annual report: April 30, 2017 serve as the Group's chief adviser and CFO; Chen, Hsiang Ming as the Company's CSO.

5. Important resolutions of the 8th meeting of the 26th board meeting (November 11, 2016) (abstract) Reason for Job Title Name Date of Taking Office Date of Dismissal (1) Approved YFY's 2017 annual operational budget. Resignation/Dismissal

(2) Approved YFY's 2017 annual audit plan. Re-election of the (3) Approved the amendment of YFY's Procedures for Applying and Resuming Trading Operations. Chairman Chiu, Melody 2006/06/23 2016/08/12 Board (4) Approved a resolution to finance via a five-year syndicated loan in the amount of NT$7 billion; the total amount of credit and distribution quota of the syndicated loan must be adjusted in accordance with the organization status within a range of ± 20%. 5. Auditors' Fees (5) Approved a resolution to finance the subsidiary YFY Packaging Inc. via a syndicated loan in the amount of NT$3 billion; Bracket Table of Auditors' Fees the total amount of credit and distribution quota of the syndicated loan must be adjusted in accordance with the organization status within a range of ± 20%; a letter of support must be submitted. Name of the accountant's office Name of the accountant Audit period Notes (6) Approved YFY's application of loan credit line with correspondent banks.

(7) Approved YFY to be the joint promissory note maker of subsidiaries' loan credit line with correspondent banks, and the Shao, Chih-Ming Deloitte and Touche 2016/1/1 - 2016/12/31 approval of YFY to issue a letter of commitment/support for subsidiaries. Kuo, Cheng-Hong

(8) Acknowledgment of the total amount of liabilities in endorsements and guarantees as of Q3 2016 to be Unit: NT$1,000 NT$13,588,214,000. Fee category 6. Important resolutions of the 9th meeting of the 26th board meeting (March 16, 2017) (abstract) Audit fee Non-audit fee Total Scale of amount (1) Approved YFY's 2016 financial statements. (2) Approved YFY's 2016 earnings distribution proposal. 1 < NT$2,000,000 V 2 NT$2,000,000 ≤ NT$4,000,000 V YFY's net profit after tax in 2016 was NT$126,117,094, which was added to the undistributed earnings of NT$4,951,996,125 3 NT$4,000,000 ≤ NT$6,000,000 from the previous year before subtracting a recognized change of NT$23,755,504 in net value of shares held in 4 NT$6,000,000 ≤ NT$8,000,000 the investment portfolio and subtracting re-measurement of NT$105,905,510 for defined benefit plan to arrive at a 5 NT$8,000,000 ≤ NT$10,000,000 total of NT$4,948,452,205 in distributable surplus. In addition to a statutory reserve of NT$12,611,709, the balance of 6 > NT$10,000,000 NT$4,935,840,496 will be reserved to be allocated for the incoming year. (3) Approval of YFY's 2016 remunerations for directors and employees. 1. The Company did not change its accounting firm in 2016, audit fee remains the same as the previous year. 2. Non-audit fees paid to CPAs, Deloitte and Touche, and other related enterprises totaled NT$378,000, which included In 2016, the Company has set aside NT$92,009 as remuneration for employees and no remuneration for directors was service fees for outside investments and administrative relief; the amount did not reach 1/4 of the audit fee. set aside. (4) Approved the time, location, agenda, and other relevant matters regarding the 2017 shareholders' meeting. 6. Changing accountants: the Company has not changed its accountants in the past two years. (5) Approved YFY's 2016 statement of declaration on the Internal Control System. (6) Approved the amendment of YFY's Asset Acquisition and Disposal Procedure. 7. Chairman, president and financial or accounting manager of the Company who had worked for the (7) Approved the amendment of YFY's Procedure for Processing Transactions with Related Parties. independent auditor or the related party in the past year: None. (8) Approved the amendment of YFY's Procedure for Processing Derivative Transactions. (9) Approved the amendment of YFY's Procedure for Corporate Consolidation, Partition, Acquisition, or Share Transfer. (10) Approved the amendment of YFY's Review Authority Table. (11) Approved the resolution to establish the Company's "Long- and Short-Term Investment on Stocks". (12) Approved YFY's application of loan credit line with correspondent banks. (13) Approved a resolution to allow YFY to serve as the joint promissory note maker and joint guarantor in the interbank lending credit line applications by YFY's subsidiaries, and to issue letters of support for the interbank lending credit line applications by YFY's subsidiaries.

32 Annual Report 2016 Corporate governance report 33 8. Equity Transfers & Changes of Equity Interests by Directors, Supervisors, Managers, and Major 9. Information disclosing the spouse, kinship within second degree, and relationship between any of the top ten shareholders Shareholders Holding More Than 10% of the Shares in the Last Fiscal Year and Up to the Printing Date of Shares held by spouse and Combination of shares by Titles, Names and Relationships of Top 10 this Annual Report Shares held by the individual (1) Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders underage children nominee arrangement Shareholders with Relationships, Spousal Name Notes Relationships, or Kinship within the Second Degree Percentage Percentage Percentage 2 016 Current fiscal year up to April 30 Number of shares Number of shares Number of Title Name of shares of shares shares of shares Name Relation Increase (decrease) in Increase (decrease) in Increase (decrease) in Increase (decrease) in shares held pledged shares shares held pledged shares 1. Shin-Yi 1. Director Foundation Chairman, general manager, and CEO Ho, Felix - - 10,000,000 - 2. Shin-Yi Enterprise 2. Director Director Ho, S. C. - - (10,000,000) - Co., Ltd. 3. Representatives 3. Spouse Director and CFO Chiu, Melody - - - - of Shin-Yi Ho, S. C. 168,615,028 10.16% 0 0 0 0 Foundation and N/A Director (dismissed on 2016/11/30) Chang, Michael - - - - Shin-Yi Enterprise Director and CSO (newly appointed on 2016/11/30) Chen, Hsiang Ming - - - - Co., Ltd. Chang, Sing-Ju Director (dismissed on 2016/03/16) Chang, C J - - - - 4. Ho, Mei Yu 4. Siblings 5. Ho, Felix 5. Father and son Director (newly appointed on 2016/03/16) Huang, Kirk - - - - 1. Ho, S. C. 1. Director is the and CTO (newly appointed on 2016/01/01) representative's spouse Director and assistant VP Ho, Richard (18,361,456) - - - 2. Ho, Mei Yu 2. Related to the representative Independent Director Huang, Wen-Cheng - - - - Shin-Yi Foundation by blood or 94,004,485 5.66% 0 0 0 0 N/A Independent Director Chen, Thomas - - - - Representative: 0 0 * 168,615,028 10.16% marriage within Chang, Sing-Ju the second Independent Director Lu, Hsi-Peng - - - - degree 3. Ho, Felix 3. Is related to the Director Shin-Yi Enterprise Co., Ltd. - - - - representative as Director Han Tang Management Consulting Co., Ltd. - - - - mother and son 1. Ho, S. C. 1. Director is the Procurement Department Assistant Vice President Leu, S. R. - - - - representative's spouse Center of Corporate Finance Assistant Vice President Yin, K. T. - - - - 2. Ho, Mei Yu 2. Directors who are Accounting Department Assistant Vice President Wu, C. F. - - - - related to the representative IT Department Assistant Vice President Chien, Ray - - - - Shin-Yi Enterprise Co., Ltd. by blood or Representative: 77,794,610 4.69% 0 0 0 0 marriage within N/A Legal Department Assistant Vice President Zhan, Shun Xiang - - - - Chang, Sing-Ju 0 0 * 168,615,028 10.16% the second Human Resources Department Assistant degree Huang, Yu Ren - - - - 3. Ho, Felix 3. Director is Vice President (resigned on 2016/06/01) related to the representative as Human Resources Department Assistant mother and son Zhan, Ming Rui - - - - 1. Ho, Rong Ting Vice President (resigned on 2017/04/01) Ho, Cheng Ting Siblings N/A 46,544,959 2.80% 1,878,837 0.11% 0 0 2. Ho, Min Ting Assistant Vice President, Public Affairs YFY Inc. Huang, Xiao Wei - - - - Labor Retirement Department (took office on 2016/07/12) 46,396,624 2.79% 0 0 Reserve Supervisory 0 0 N/A N/A N/A * 4,355 0.00% * 820 0.00% Auditing and Compliance Office, Manager Cheng, Irene - - - - Committee Representative: Leu, S. R. 1. Ho, S. C. 1. Siblings (2) Equity transfer 2. Shin-Yi Enterprise 2. Director Co., Ltd. 3. Related to the Relationships between the person 3. Representatives Ho, Mei Yu of Shin-Yi representative N/A traded with and the Company, 44,556,664 4,462,112 0 0 Name Reason for equity transfer Transaction date Traded to its directors, supervisors, and No. of shares Trade value 2.68% 0.27% Foundation and by blood or shareholders who own more than Shin-Yi Enterprise marriage within 10% of the shares Co., Ltd. the second Chang, Sing-Ju degree Ho, S. C. Gifted 2017/02/22 Ho, Felix Father and son 10,000,000 Not applicable 1. Ho, Cheng Ting Ho, Rong Ting 38,194,486 Siblings N/A 2.30% 0 0 0 0 2. Ho, Min Ting NEW TALENT LIMITED 37,806,132 2.28% 0 0 Representative: 0 0 N/A N/A N/A (3) Pledge of stock rights: None. Modern Victory Limited 0 0 0 0 1. Ho, S. C. 1. Father and son 2. Shin-Yi Enterprise 2. Director Co., Ltd. 3. Representatives 3. Mother and son Ho, Felix 35,529,953 2.14% 0 0 0 0 of Shin-Yi N/A Foundation and Shin-Yi Enterprise Co., Ltd. Chang, Sing-Ju 1. Ho, Cheng Ting Ho, Min Ting 34,444,233 2.07% Siblings 0 0 0 0 2. Ho, Rong Ting N/A

34 Annual Report 2016 Corporate governance report 35 10. The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers, and any companies controlled either directly or indirectly by the company Capital and Shares December 31, 2016; Unit: 1,000 shares; %

Investments by directors, supervisors, Investment by the Company presidents and directly or indirectly Total investment 38 1. YFY's Capital and Shares, Corporate Bonds, Investments made under the Equity Method controlled enterprises Preferred Shares, Global Depositary Receipts, Number of shares Shareholding ratio Number of shares Shareholding ratio Number of shares Shareholding ratio Employee Stock Options, New Shares to YFY Consumer Products Co., Ltd. 214,562 100.0 0 0 214,562 100.0 Employees with Restricted Rights (including

Union Paper Corp. 19,584 18.9 6,654 6.4 26,238 25.3 Mergers and Acquisitions, or after Company Split) Yuen Yuan Paper Container Co., Ltd. 6,179 50.9 9 0.1 6,188 51.0 40 2. Utilization of Funds

China Color Printing Co., Ltd. 32,896 49.7 0 0 32,896 49.7

YFY Capital Co., Ltd. 26,840 100.0 0 0 26,840 100.0

E Ink Holdings Inc. 133,473 11.9 94,136 8.3 227,609 20.2

Cupid InfoTech Co., Ltd. 1,847 100.0 0 0 1,847 100.0

Taiwan Global Biofund 51,688 23.0 70,543 31.4 122,231 54.4

Taiwan Genome Sciences Inc. 1,226 19.4 209 3.6 1,435 23.0

Shin Foong Specialty and Applied Materials Co., Ltd. 52,182 55.3 756 0.8 52,938 56.1

YFY Paradigm Investment Co., Ltd. 60,050 100.0 0 0 60,050 100.0

YFY Venture Capital Investment Co., Ltd. 44,994 100.0 0 0 44,994 100.0

San Ying Enterprises Co., Ltd. 12,600 100.0 0 0 12,600 100.0

YFY Global Investment BVI Corp. 79,000 100.0 0 0 79,000 100.0

YFY International BVI Corp. 550,099 100.0 0 0 550,099 100.0

Eihoyo Shoji Co., Ltd. 0.2 100.0 0 0 0.2 100.0

Lotus Ecoscings & Engineering Co., Ltd. 23,704 100.0 0 0 23,704 100.0

Effion Enertech Co., Ltd. 34,300 49.0 35,700 51.0 70,000 100.0

Chung Hwa Pulp Corp. 627,827 56.9 69,251 6.3 697,078 63.2

YFY Holding Management Co., Ltd. 25,000 100.0 0 0 25,000 100.0

36 Annual Report 2016 Fundraising 37 1. YFY's capital and shares, corporate bonds, preferred shares, global depositary receipts, employee stock (5) Share prices for the past two fiscal years, together with the company's net worth per share, earnings per share, dividends per share, options, new shares to employees with restricted rights (including mergers and acquisitions, or after and related information company split) Year Current fiscal year up to 2 015 2 016 (1) Source of share capital Unit: NT$1,000; 1,000 shares Item April 30, 2017

Authorized share capital Paid-in share capital Notes Highest 13.80 11.00 12.70

Year/Month Issue price Source of Shares acquired by Number of shares Amount Number of shares Amount Others Market price Lowest 8.50 8.86 9.68 share capital non-cash assets per share Average 11.51 9.72 11.36 Undistributed 2011/8/26 Jing-Shou-Shang No. 2011.08 10 2,200,000 22,000,000 1,660,372 16,603,715 - earnings No. 10001196670 Before distribution 21.41 19.38 - Net worth per share Unit: 1,000 shares After distribution 21.11 - -

Authorized share capital Weighted average number of shares Shareholding type Notes 1,660,372 1,660,372 1,660,372 Earnings per share (1,000 shares) Outstanding shares Un-issued shares Total Total

Earnings per share 0.30 0.08 - Common stock 1,660,372 539,628 2,200,000 Listed stocks

Cash dividend 0.30 - - (2) Shareholder structure April 30, 2017 Stock grants Stock dividend Shareholder Foreign institutions & Dividend per from retained structure Government agencies Financial institutions Other institutions Individuals Total - - - Quantity natural persons earnings share No. of people 6 7 202 91,322 190 91,727 Surplus shares - - - Shares held 1,241,583 199,126 546,960,352 841,753,422 270,217,012 1,660,371,495 Accumulated undistributed dividends - - - Shareholding ratio 0.08% 0.01% 32.94% 50.70% 16.27% 100.00%

PE ratio 38.37 121.5 - (3) Shareholding distribution status April 30, 2017 Return on Price-dividend ratio 38.37 - - Shareholding range Number of shareholders Shares held Shareholding ratio investment 1 to 999 55,217 6,997,274 0.42% Cash dividend yield (%) 2.61 - - 1,000 to 5,000 23,893 53,201,262 3.20% Note 1: Price-earnings (P/E) ratio = Average market price/Earnings per share 5,001 to 10,000 5,606 42,007,701 2.53% Note 2: Price-dividend (P/D) ratio = Average market price/Cash dividend per share 10,001 to 15,000 2,217 26,564,698 1.60% Note 3: Cash dividend yield = Cash dividends per share/Average market closing value per share over the year 15,001 to 20,000 1,161 21,373,053 1.29% Note 4: Distribution of dividends from 2016 has yet to be approved by the 2017 shareholders meeting. 20,001 to 30,000 1,170 28,982,155 1.75% 30,001 to 40,000 572 20,028,470 1.21% (6) Company's dividend policy and implementation: 40,001 to 50,000 401 18,576,368 1.12% 1. Dividend policy: 50,001 to 100,000 715 51,361,330 3.09% In making its dividend policy, the Company takes into account future capital expenditures and working capital 100,001 to 200,000 399 56,169,984 3.38% requirements. Based on this policy, an appropriate percentage of the remaining surplus will be retained as needed 200,001 to 400,000 162 46,483,589 2.80% to support the ongoing business operations, dividends shall be distributed in a way that at least 0% - 20% is distributed 400,001 to 600,000 63 30,798,419 1.86% as cash dividends and 20% - 100% as share dividends. However, for the purpose of meeting other capital expenditure 600,001 to 800,000 21 14,671,676 0.88% requirements, the company may distribute the aforementioned remaining surplus in the form of share dividends only. 800,001 to 1,000,000 23 21,393,025 1.29% 2. Dividend distribution proposed at this shareholders meeting: 1,000,001 and above 107 1,221,762,491 73.58% The Company's 2016 annual surplus is not to be distributed. Total 91,727 1,660,371,495 100.00% (7) Effect of free-gratis dividend proposed in the current shareholders' meeting on the Company's business performance and earnings per Note: The Company does not have any outstanding preferred shares. share: Not applicable. (8) Remuneration for employees, directors, and supervisors: (4) List of major shareholders April 30, 2017 1. Percentages or ranges of employee, director, and supervisor remunerations specified in the Articles of Incorporation:

Shares Shares held Shareholding ratio Name

Ho, S. C. 168,615,028 10.16%

Shin-Yi Foundation 94,004,485 5.66%

38 Annual Report 2016 Fundraising 39 According to current policies, if the Company sustains profit every year, 0.1% or more of the income shall be set aside as remunerations to employees, and 2% or less shall be distributed as director remuneration. However, an amount shall be Business overview set aside first to compensate cumulative losses, if any. Directors' remuneration may be distributed by way of cash dividend, and employees' remuneration may be distributed by way of cash dividend or stock dividend. The Board of Director shall be authorized to define the qualification requirements 42 1. Scope of Business of employees, including the employees of subsidiaries of the company meeting certain specific requirements, entitled to receive shares or cash. The distribution ratio of directors' remunerations and the method of distribution and ratio of 45 2. Market and Sales Outlook employees' remunerations shall be resolved by a majority vote at a meeting attended by more than two thirds of the 47 3. Employee Information in the Last Two Fiscal directors and shall be reported at the shareholders' meeting. Employee and director remunerations are calculated deducting the cumulative losses from the profit for the year (i.e., the Years and Up to the Publishing Date of this profit before employee and director remunerations are deducted from profit before tax). Annual Report 2. The accounting treatments for any difference between the estimation assumptions for employee, director, and supervisor remunerations for the current period, the assumptions for number of shares entitled to receive dividends, and the actual amounts of distribution: 48 4. Environmental Protection Expenditures The estimated employee and director remunerations are recorded as expenses at the likely amounts to be distributed 50 5. Employer-Employee Relationship for the current year according to Articles of Incorporation. Any change in the amounts on the date of resolution by the board meeting will be entered as accounting adjustments and recorded as adjustments for realized net profit and 52 6. Material Contracts loss approved by the board meeting. If it is decided in the board meeting to distribute employee remuneration in the form of shares, the number of shares will be determined by dividing the approved remuneration by the fair price of the shares. The fair price of the shares will be calculated based on the closing price on the day before the date of the board meeting. 3. Approval of remuneration distribution by the Board of Directors: 1. Distributed NT$92,009 in cash as employee remuneration, no shares of stock were distributed; no remuneration was set aside for directors. The amounts listed above are not different from the expense estimates for 2016. 2. Amount in stock distribution as employee remuneration as a percentage with respect to the net profit after tax in current period's individual financial statement and total employee remuneration: None. 4. Any difference between actual distribution (including number, amount, and price of shares) of employee remuneration and director and supervisor remunerations from the previous year and recorded employee remuneration and director and supervisor remunerations and the reasons as well as corresponding treatments: In 2015, the actual remuneration distributed to employees was NT$487,641 in cash and no shares of stock were distributed. Director and supervisor remunerations were NT$5,635,000. There is no difference between the Board Resolution and the amount described above. (9) Share buyback by the Company: The Company did not buy back its own shares. (10) Issuing corporate bonds: The Company did not issue corporate bonds. (11) Issuing preferred stocks: The Company did not issue preferred stocks. (12) Issuing global depositary receipts: The Company did not issue global depositary receipts. (13) Employee stock options: The Company was not involved in employee stock options. (14) New shares to employees with restricted rights: the Company did not issue new shares to employees with restricted rights. (15) Mergers and acquisitions or shares transferred from another company through issuance of new shares of its own: The Company was not involved in mergers and acquisitions or providing shares transferred from another company through issuance of new shares of its own.

2. Utilization of Funds (1) Plan details: The Company has no plans to use special funds. (2) Implementation status: None.

40 Annual Report 2016 Business Overview 41 1. Scope of Business 2. Containerboard and Packaging Business Group (1) Business scope (2) Industry overview Based on statistics released by the Taiwan Paper Industry Association, the total sales volume of industrial-use paper in Taiwan The global economy remained weak in 2016 as trade in 2016 was 2.43 million tons, an increase of 190,000 tons over the 2.24 million tons from 2015. Domestic market sales volume 1 Key areas of business: ● General investment. growth continued to decline. Rising uncertainties stemming was 1.55 million tons, a 0.8% drop from 2015. Total export volume was 890,000 tons, up 30.6%. The total sales volume of paper 2. Major operating content and products of the investment from the United Kingdom’s exit from the European Union products in Taiwan in 2016 was 2.022 billion square meters, 105 million square meters less than the 2.127 billion square meters companies: and the election of a new government in the United States recorded in 2015. Pulp and Fine Paper Business Group further exacerbated the global economic downturn. Industrial cardboard and processed paper products are used for packaging in electronics, IT, food, textiles, and other ● Production, marketing, and distribution of pulp, paper, China's economy continued to face a decline in export industries. In response to the demand of Taiwanese markets for small quantity, greater variety, and higher quality, the and paperboard. volume, sluggish domestic demand, and overproduction, Company continued to replace old equipment and introduce automated production machinery, aiming to win the trust of Containerboard and Packeging Business Group which also affected emerging countries including Taiwan. customers through developing differentiated products and improving service quality and delivery. ● Paperboard for industrial use, production, machining, Taiwan’s Export performance in the first quarter was 3. Consumer Product Business Group and marketing of cardboard boxes. unsatisfactory, resulting in external demand contributing Statistics released by the Taiwan Paper Industry Association indicate that domestic household paper consumption was 390,000 Consumer Product Business Group -1.83% to domestic economic growth. This was the primary tons in 2016, a 2% increase from the 380,000 tons in 2015. Most of the consumption came from domestic sales, with only 30,000 ● Household paper products, production, marketing, and reason for the slow economic growth. Taiwan's real tons exported. In the face of Taiwan's maturing market, YFY is committed to the R&D and innovation of household paper and distribution of cleaning products. GDP growth rate in 2016 was 1.17%, which was still 0.18 focusing on product quality and brand value. We will continue to offer high-quality products to solidify our market position. Other Businesses percentage points lower than the value predicted by the Relationships with upstream, mid-stream, and downstream companies: ● Production, marketing, and distribution of electronic Directorate-General of Budget, Accounting and Statistics. related products. As a result of the downturn, IMF estimated global economic

● Production and marketing of chemical products. growth in 2016 to be 3.4%, slightly higher than last year's The publishing industry 3.1%. The growth mainly came from emerging markets and Imported pulp Manufacturing, sales and distribution of special material application in 3. Revenue distribution: pulp, papaer and paperboard various industries ● Manufacturing and trading of paper products account developing economies, but developed markets continued for the largest portion of revenue at approximately 88%. to lag behind. Global raw material prices are rising in ● Other items account for approximately 12%. 2017, with international crude oil prices increasing at a steady pace. American trade protectionism could ignite Wood Income from sources other than In-house pulp Manufacturing, sales and distribution of a global trade war, while political uncertainty in Europe is chips The paperboard and corrugated the production and trading of containerboard and corrugated also affecting investment decisions. As such, global growth cartons paper industries paper products: 12% prospects continue to riddled with risks. According to the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, Taiwan's economic growth in is forecasted Recycles paper Production and trading to be around 1.92% in 2017. recycled pulp Manufacturing, sales and distribution of of paper products: 88% Consumers, distributors Market sales of main business units: household papaer products 1. Pulp and Fine Paper Business Group According to statistics released by the Taiwan Paper

4. New products in development: Industry Association, domestic fine paper and paperboard Upstream industries Upstream paper industry Mid-stream paper industry Downstream paper industry ● Special purpose paper development. consumption in 2016 totaled 4.2 million tons, a decrease of Fiber raw material Pulp plant + waste paper Paper production plant The packaging industry and 1.4% from 2015. Per capita consumption was 179 kg (181 plant industry end users kg in 2015). Taiwan's paper and paperboard production in 2016 increased slightly by 2.1% over 2015. Over the same (3) Technology and R&D overview period, domestic sales decreased by 3.2% and export volume 1. R&D investments over the past year increased by 15%. 2016 R&D expenditures: NT$141,491 thousand. Demand for writing and printing paper has dropped globally 2017 R&D expenditures (up to the publishing of this report): NT$36,786 thousand. every year due to changes in reading habits, digitization, 2. Launching and application of new technology products and families having less children. In terms of packaging We have continued to target growth industries such as labeling, food, and health care to develop specialty paper products paper demand, the market is trending upward due to the with niche and growth potential, offering more convenient and diverse choices for customers. In terms of technical aspects, rapid growth of e-commerce. The development of diverse we are developing coating formulas and nano-cellulose applications with different functions in order to satisfy different composite materials for other types of paper is also expected areas of application. In the field of smart green living, we have worked with academic units to invest in the R&D of recycling to grow in the processing industry. With respect to paper paper by-products, lignin-based bio-adhesives, and enzyme cleaners to provide consumers and the environment with safer prices, plants all over the world are raising their prices starting product options. in Q3 due to China’s influence.

42 Annual Report 2016 Business Overview 43 (4) Long/short-term business plans: 2. Market and Sales Outlook 1. Pulp and Fine Paper Business Group (1) Market Analysis Short-term development plans Analysis of each business unit's product market is as follows: (1) Continue to develop new clientele; reinforce market segregation and clearly define product positioning; develop 1. Pulp and Fine Paper Business Group partnerships with clients. Sales of writing and printing paper and paperboard grew slightly in 2016. The production volume of paper products in 2016 (2) Extend product line and adjust product packages; develop diverse base materials. was 560,000 tons, an increase of 4.9% from 2015. Within the total volume produced, 440,000 tons were from domestic sales, a (3) Continue to transform product composition by developing high value-added products such as processed paper. drop of 1.5% from 2015; 270,000 tons were from exports, an increase of a 26.4% compared to 2015. In terms of sales, domestic (4) Improve production and management processes; offer more competitive products on the market. sales of paper products reached NT$10 billion in 2016, an annual drop of 2.3%. This was primarily due to falling demand Long-term development plans for writing and printing paper, which lowered sales in the domestic market. Export sales reached NT$8.3 billion in 2016, an (1) Reinforce R&D of niche products; focus on applications in growth industries such as packaging, food, and medical increase of 22.7%. The Pulp and Fine Paper Business Unit focused on the development of special purpose paper products care; develop multi-purpose special paper products. through gradually transforming writing and printing paper products into special purpose paper products with high added- (2) Continue to promote environmental protection, energy conservation, and carbon reduction. After receiving FSC value for use in the medical, packaging, food, and electronics industries. Customer demand for special purpose paper certification in 2007, the Pulp and Fine Paper Business Group also received PEFC certification in 2010 to become a products is on the rise Asia, Europe, and the United States, becoming the driving force behind revenue growth. Looking company certified by two international environmental protection organizations. In 2011, we also completed the first forward into 2017, in addition to improving product quality, the Company will also look to optimize production lines, continue carbon footprint verification for B2B writing and printing paper products, and was recognized with a certification mark to expand the market for product applications, and offer localized services to increase market share. for excellence in energy saving and carbon reduction in 2010 and 2011. 2. Containerboard and Packaging Business Group 2. Containerboard and Packaging Business Group The production volume of industrial paperboard reached 1.2 million tons in 2016, a 6.3% decrease from the 1.28 million tons Short-term development plans produced in 2015. The overall production volume for 2016 was lower due to the Yangzhou plant undergoing operational (1) Continue to enhance efficiency of manufacturing equipment and product quality while strengthening customer adjustments and plants in Taiwan switching to new equipment. At the end of the year, a wave of sharp price increases for services and increasing end-market competitiveness. raw materials and China's forceful execution of its environmental protection policies also caused prices in the base paper (2) Increase quality and production capacity of corrugated paper products. market to rise significantly. This not only partially eliminated the industrial paper overproduction problem in China, but (3) Inspect the value chain of each process; improve manufacturing processes and eliminate production bottlenecks. also adjusted the structure of the industry. Together with a series of organizational management reforms, the overall profit (4) Adjust structure of clientele and develop high-quality end customers. situation in China has gradually improved, with the Yangzhou plant starting to generate profits from the end of the year. Long-term development plans Looking forward into 2017, the completion of the Xinwu plant is expected to elevate the total production volume of industrial (1) Continue to promote projects that reduce energy costs and carbon emissions. paper in Taiwan from 450,000 tons to 690,000 tons. The new generation of consumers in China have a much greater demand (2) Continue to increase marketing and operational capacity; improve customer satisfaction through the provision of for e-commerce, and with online shopping transactions reaching record highs, demand for packaging and cardboard high-quality services. boxes is also on the rise. In the future, paper plants will focus on developing new customers and new markets, improving (3) Increase the percentage of automated production. product quality and added value, and enhancing overall competitiveness through the vertical integration of upstream and (4) Continue to promote the use of surplus production materials as resources; implement green industry management downstream supply chains. practices. 3. Consumer Product Business Group 3. Consumer Product Business Group In 2016, domestic sales of household paper products totaled NT$4.15 billion, a 13.3% increase from 2015. Export volume Short-term development plans reached 6.87 billion, a significant growth of 17%. For the year, the total production volume of household paper products (1) Invest in R&D of innovative products for household and personal use; diversify management of commercial products manufactured by the Consumer Product Business Group reached 248,000 tons, a major improvement of 22.4% from 2015. to satisfy market demands and create business opportunities. With sales volumes growing steadily, we continue to occupy the No. 1 spot in the Taiwanese market. The development of (2) Continue to enhance management of high-end markets; expand high value-added products and marketing the Taiwan market is mature, and demand for high-quality household paper products and brand preference keep rising channels; strengthen investment efficacy. each year. The Consumer Product Business Group will continue to introduce innovative products and enhance all aspects of (3) Create word-of-mouth sales, improve sales performance, and elevate brand reputation of cleaning products by brand management to extend our lead in the market and increase market competitiveness. taking advantage of marketing channels and e-commerce platforms. Our market share for laundry detergent increased by 0.6% in 2016, led by our main household cleaning product range Long-term development plans “Orange House”. Looking into 2017, in addition to continuing our focus on health-conscious consumers, we will also aim to (1) Focus on the needs of each paper market and consumers; reinforce brand positioning; provide differentiated, upgrade the entire series of products to extend our lead over competitors and solidify the leading position of the Orange innovative products; cultivate target consumer groups. House brand. (2) Strengthen management of cleaning products in the premium and high-end markets under two brands; increase (2) Application and Production of Key Products market share. Pulp and Fine Paper Business Group (3) Re-position brands to accumulate and enhance brand value. ● Pulp - Suitable tree species are selected based on the requirements of the paper plant. Different types of pulp are produced through the process of peeling, slicing, distilling, cleaning, bleaching, and drying. ● Paper products - The main raw material is pulp. Different types of paper are produced through a series of processes including pulp dispersion, blending, cleaning, shape forming, dehydrating, drying, coiling. High-quality printing paper is made by coating the surface, which makes it suitable for premium quality text and color printing. Special purpose papers such as glassine paper and masking paper are suitable for various types of industrial use.

44 Annual Report 2016 Business Overview 45 Containerboard and Packaging Business Group 3. Employee Information ● Industrial-use paper - The main raw material is recycled paper. Various types of paper used as raw material for different (1) Employee information in the last two fiscal years and up to the publishing date of this annual report:

types of corrugated cardboard and boxes are produced through a series of processes including pulp dispersion, debris Current year as of the print date of Year 2 015 2 016 removal, washing and screening, de-inking, pulp cleaning, pulp grinding, mixing, forming, drying, and reforming. this annual report

● Corrugated cardboard boxes - Cardboard boxes are made by putting kraft paper or corrugated paper through Regular employees 4,872 4,972 4,991 cardboard machines (pressing, fitting, lining, and cutting) and cutting machines (printing, slitting, and fitting). Used as No. of employees technicians 5,604 5,651 5,674 packaging for various products. Consumer Product Business Group Total 10,476 10,623 10,665

● Household paper products - The main raw material is pure wood pulp. Different types of everyday necessities are Average age 40 41.5 41.6 produced through a series of processes including pulp dispersion, blending, cleaning, shape forming, dehydrating, drying, Average years of service 8.7 10.1 10.2 coiling, and machine processing. Products include toilet paper, facial tissues, hand wipes, and paper towels, etc.. (3) Supply of key raw materials Distribution ratio by level of education Graduate and above University/College High school and others Main products (services) Key raw material(s) Division Name Primary market(s) Distribution Name Main source(s) Supply 7.07% 7.20% 7.61% Distribution Different types of Paper product Types of paper Taiwan and Asia and direct marketing fiber raw materials Foreign import Stable supply for making paper 42.21% 41.70% 40.27% (4) List of clients who purchased and sold at least 10% of total sales in one of last two years and corresponding amounts and percentages 1. Information concerning major suppliers in the last two years No client has purchased more than 10% of the total purchase in the last two years. 2. Information related to major merchandise customers in the last two years No client has sold more than 10% of the total sales in the last two years. 50.72% 51.10% 52.12%

(5) YFY Production Volume/Value Table for the Past Two Years Unit: NT$1,000; metric tons 2 015 2 016 Current year as of the publishing 2 015 2 016 Year date of this annual report

Volume Amount Volume Amount Main business units (2) Specific licenses and permits for personnel related to financial information transparency: Paper 392,342 7,398,235 386,017 6,303,982

Pulp and paper Paperboard 412,582 12,225,324 441,824 12,936,255 Certification Title Financial Accounting Auditing business units Pulp 126,026 2,241,515 123,026 2,205,858

Paperboard 1,284,035 15,747,877 1,196,357 14,406,982 CPA from Taiwan 2 - Industrial paper business units Processed paper CPA from the US 2 - 679,792 12,948,415 634,060 12,666,700 products Certified information systems auditor - 1 Consumer product Paper 202,947 9,644,203 248,456 10,779,078 Certified internal auditor organized by internal audit associations 2 4 business units

(6) YFY's sales volumes and values for the past two years Unit: NT$1,000; metric tons

Year 2 015 2 016

Domestic sales Export Domestic sales Export Main business units Volume Amount Volume Amount Volume Amount Volume Amount

Paper 63,487 1,217,274 144,639 2,707,274 94,289 1,570,432 122,948 1,977,231

Pulp and paper Paperboard 263,747 7,150,383 179,989 5,998,073 262,866 6,991,561 227,049 7,352,760 business units Pulp 179,104 3,078,850 36,890 762,847 173,220 3,006,190 47,121 944,527

Paperboard 317,586 4,091,870 564,057 6,607,350 306,837 3,894,859 583,305 6,662,675 Industrial paper business units Processed 299,714 5,058,332 393,352 7,554,766 247,344 5,000,005 412,331 7,709,413 paper products Consumer product Paper 58,438 3,663,398 123,146 5,872,448 60,935 4,152,065 166,197 6,869,859 business units

46 Annual Report 2016 Business Overview 47 4. Environmental Protection Expenditures 3. Policies for energy conservation/carbon reduction, GHG reduction, water conservation, and other measures related to (1) Losses and penalties sustained due to environmental pollution violations during the last fiscal year and up to the publishing of this surplus materials annual report (1) Energy conservation/carbon reduction measures and performance: The Company continued its efforts to protect water resources and control air quality in 2016. Measures were implemented The Company formulated 32 important energy conservation/carbon reduction measures in 2016. The key energy to process left-over production materials and manage noise levels, and new pollution prevention and control equipment conservation measures are as follows: were installed. All abnormal incidents were dealt with immediately. Through 2016 and up to the publishing of this report, ● Switched production systems to high efficiency motors. there were 12 total cases of violations for which the Company was fined by various authorities. The sum of all fines totaled ● Increased the power grid's power factor; reduced reactive power to save electricity. NT$10,547 thousand, with water pollution violations accounting for the majority of penalties. The Company has already taken ● Recycled left-over production materials as burning fuel to reduce coal use. immediate measures to rectify the violations identified by authorities. The results of each energy conservation measure are listed in the following table:

(2) Environmental protection expenditures Metric tons of Energy conservation items Metric tons of coal 1,000 kWh of electricity In 2016, the Company invested a total of NT$333,773 thousand in environmental protection expenditures, of which water production steam treatment facilities accounted for 83.36%, air quality control equipment accounted for 1.81%, and facilities for reducing left- Energy conservation performance 10,585 3,316 266,484 over production materials accounted for 14.83%. GHG reduction results (t-co2e) 26,832 8,406 139,104 In response to the plans to expand production lines and to increase reliability of existing equipment, the focus of investment The reduction in GHG emissions as a result of the Company's energy conservation efforts is projected to be for the next three years will be on improving water resource treatment systems, installing air quality monitoring systems, and approximately 174,342 metric tons of CO e. updating existing equipment. The total investment is projected to be approximately NT$500 million. 2 (2) Total water consumption and left-over materials generated from production: (3) Environmental sustainability In accordance with standard checking methods, the detailed statistics of each business unit's water consumption and 1. Status of designated environmental management unit / staff allocation volume of left-over production materials produced are listed in the table below: All production plants in Taiwan, aside from the five paper plants not required to have environmental management specialists as specified by law, have dedicated environmental management units and personnel in place. In addition to 2 015 2 016 equipment operators for general pollution control, there are 55 certified professionals with valid licenses in environmental Business units Leftover materials generated Leftover materials generated Water consumption (m3) Water consumption (m3) protection. Detailed numbers are as follows: from production (t) from production (t) Pulp and Fine Paper Business Group 28,867,886 102,349 28,349,826 109,122 Dedicated personnel for Dedicated personnel for Professional environmental wastewater management preventing air pollution Dedicated personnel for waste removal management personnel Containerboard and Packeging Business Grade A Grade B Grade A Grade B Grade A Grade B 8,491,133 121,653 8,991,791 114,768 Group No. of licensed employees 18 10 9 0 11 7 Consumer Product Business Group 722,938 2,876 1,267,504 5,884

2. CO2 or GHG emissions over the past two years Total 38,081,957 226,878 38,609,121 229,774 Total volume of emissions measured by 2016 GHG checks was 1,482,464 metric tons of CO2e. Detailed emission statistics are listed in the table below: 4. Environmental management certifications 2 015 2 016 All of the Company’s main production units implement ISO 14001 environmental management systems. Systems are Business units Scope 1 Scope 2 Total Scope 1 Scope 2 Total inspected on a regular basis by certification units such as DNV, SGS, BSMI, and the Bureau of Standards, Metrology and

Pulp and Fine Paper Business Group 665,573 156,823 822,396 658,330 167,962 826,292 Inspection. Internal and external audits are held regularly to maintain system effectiveness and improve environmental protection performance. Valid certificates for related systems are kept by each production unit. In addition to the ISO 14001 Containerboard and Packeging 407,620 106,511 514,131 426,446 100,267 526,713 environmental management systems, we also encourage upstream suppliers and downstream consumers to protect our Business Group environment through environmental certifications with respect to products and raw materials. Product and raw material

Consumer Product Business Group 61,201 47,094 108,295 74,259 55,200 129,459 certifications include the Forest Stewardship Council - Chain of Custody (FSC - CoC), Pan European Forest Certification (PEFC - CoC), ISO 50001, and Product Carbon Footprint (PCF). Total 1,134,394 310,428 1,444,822 1,159,035 323,429 1,482,464 (PEFC website: http://www.pefc.org/) (FSC website: https://ic.fsc.org/) Scope 1: Direct emissions; Refers to emissions produced by the reporting company, such as from discharge pipes, production processes, ventilation systems, and transportation owned or controlled by the company. Scope 2: Indirect emissions associated with purchasing energy; Refers to emissions produced by other companies as a result of performing the reporting company's operations, such as the emissions produced from electricity purchased.

48 Annual Report 2016 Business Overview 49 5. Employer-employee Relationship (4) Employee conduct and ethics (1) Present status of employer-employee relationship Employee service regulations are already clearly defined within the Company's work policies for company employees 1. Employee benefits to follow. In response to the amendments of the Trade Secrets Act in 2013, the Company formulated a new intellectual ● Annual holidays; Labor Day and birthday gifts property non-disclosure agreement to strengthen the protection of trade secrets, business profits, and competitive ● Wedding, bereavement, childbirth, hospitalization, and disability allowances, self-improvement programs, and other advantages. The agreement must be signed by all new employees. The “Code of Conduct for YFY Employees” was benefits introduced in May 2016 and further explains employee conduct requirements in the course of performing their daily duties ● Scholarships for employees' children and continuing education incentives for staff and responsibilities. While at work, employees must voluntarily avoid situations where a conflict of interest may occur, ● Books, periodicals, and magazines for pre-school children of employees handle official duties appropriately, and make effective use of company resources and public property. The code also ● Retirement compensations contains information on reporting problems and the case investigation process. Through regular education and training, the ● Subsidies for field personnel Company aims to help employees understand the value the Company places on employee ethics. ● Annual recognition for outstanding performance, celebrations of senior staff (5) Employee safety and health ● Group insurance for employees and their families The Company has the responsibility as well as the obligation to protect each staff member's health and safety. In addition ● Nurse's office in plant facilities to ensure employee health and safety to ensuring each plant passes OHSAS 18001 certification for work safety and health, YFY has also clearly evinced its ● Regular health exams for employees; checkups are more comprehensive than that required by national guidelines for determination to promote employee safety and its vision to create a safe corporate culture. employee health protection To fulfill our promise to ensure employee health and safety, the Company established the Occupational Safety and Health 2. Leisure activities for employees Management Platform in July of 2016. In line with the safety concepts described above, the following measures have been ● Club activities implemented: ● Employee birthday parties, sports competitions, and travel tours 1. Layered responsibility: The first layer is the Occupational Safety and Health Management Platform, which includes an ● Cultural and recreational facilities and multimedia entertainment equipment work safety task group. Professional occupational safety and health personnel are responsible for cross-departmental 3. Retirement program coordination, as well as the direct supervision and management of each business unit's health and security policies, A retirement program for full-time employees has been formulated in compliance with the Labor Standards Act. The management practices, and implementation. The second layer is the business group itself. Each business unit must Company has assembled a labor retirement fund supervisory committee in accordance with law and makes monthly appoint an occupational safety and health manager who will report to the Platform and be responsible for establishing pension contributions to a dedicated Bank of Taiwan account supervised and managed by the committee. In addition, in health and safety guidelines for each plant as well as providing guidance, supervision, and auditing in respect of the compliance with the Labor Pension Act, the Company makes monthly contributions to individual pension accounts at the health and safety measures. The third layer comprises the work safety team of each plant, which is directly responsible for Bureau of Labor Insurance for existing employees who have opted for the new system. the promotion, execution, and on-site management of work safety-related matters. 4. Communication between labor and management 2. Promotion of safe operations: The safety management functions of management have been strengthened through safety Regular meetings are organized between labor and management to facilitate communication and make policy education and an industrial safety system to gradually establish a set of unified safety values and standards, as well as the adjustments in conformity with the mutual understanding of both sides. joint promotion of safe operations. (2) Losses resulting from labor disputes during the last fiscal year and up to the publishing of this annual report 3. Standardization of operations: Standard operating procedures and a work safety analysis system have been established. There were two cases of labor disputes during 2016 and up to the printing of this report. Both cases remain under negotiation 4. Employee health management: The Company conducts regular employee health exams; checkups are more and the Company has incurred no losses to date. The Company has organized meetings between labor and management comprehensive than that required by national guidelines for employee health protection. Health promotion programs are to resolve issues and provide additional channels to facilitate communication, including a dedicated email account and offered to employees in accordance with the results of their health exams. employee satisfaction surveys. 5. Employee safety training: Employees and contractors are required to receive safety training upon entering the Company (3) Continuing education and training for employees or following a job reassignment. Each department must organize ad hoc work safety training and education seminars to In response to rapid industry and policy changes caused by vertical integration, the Company has actively invested in large raise the safety awareness of all employees. scale projects to cultivate new talent, develop strategies for and build consensus among management, and enhance the 6. Accident reporting and investigation: Any accident that occurs at a plant must be reported to the person responsible for professional skills of all employees. We also provide various learning resources for our colleagues, including corporate culture the business group's occupational health and safety management as well as the Platform within 24 hours. An investigation training for new staff, training for management personnel, professional skills training, and self-development opportunities. In must be held and improvement measures must be submitted within one week. All employees will be informed of the addition, the Company offers subsidies for continuing education to encourage employees to better themselves. incident to prevent reoccurrence. 7. Work safety reviews and disaster drills: In addition to regular disaster drills and monthly Occupational Safety and Health Course category No. of courses Total No. of people Total hours Total cost (NT$1,000) Management Platform meetings, equipment safety inspections have also been reinforced to actively improve workplace

Professional skills 1,433 40,269 114,313 5,189 and safety measures. Management and general skills 54 2,446 4,976 2,698

Corporate culture cultivation for new employees 49 851 3,354 173 Continuing education - 6 - 420

50 Annual Report 2016 Business Overview 51 6. Material Contracts Financial summary Contract Type Parties Involved Contract Period Main Businesses Restrictive Clauses

Organized jointly by Mega 5-year syndicated loan with 30% to be International Commercial repaid after the fourth year from the first 54 1. Condenced Balance Sheets and Statements of Long term loan Bank, Fubon Bank, and Taiwan 2013/11/25 - 2018/11/25 N/A day of activation and 70% after the fifth contract Cooperative Bank with 7 year. Comprehensive Income from the Past Five participating banks 5-year syndicated loan with 30% to be 62 2. Financial Analysis of the Past Five Years Organized jointly by Bank of Taiwan, Long term loan repaid after the fourth year from the first First Bank, and Bank of China with 7 N/A 2014/12/23 - 2019/12/23 day of activation and 70% after the fifth 68 3. Audit Committee Review Report contract participating banks year. 69 4. Financial Statements Organized jointly by First Bank, Hua Long term loan Nan Bank, Bank of Taiwan, and A 5-year syndicated loan repaid at 2016/12/29 - 2021/12/29 N/A 82 5. Any Financial Difficulty and the Impact on YFY's contract Fubon Bank with 10 participating maturity. banks Finance in the Last Fiscal Year and Up to the Long term loan A 5-year floating interest rate loan, O-Bank 2016/12/28 - 2021/12/28 N/A contract interests are paid monthly. Publishing Date of this Annual Report Long term loan Mega International Commercial To be repaid in lump sum at maturity with N/A contract Bank 2016/07/30 - 2019/07/29 interest paid monthly. Long term loan To be repaid in lump sum at maturity with First Commercial Bank N/A contract 2016/01/16 - 2018/01/16 interest paid monthly. Long term loan To be repaid in lump sum at maturity with Bank of Taiwan N/A contract 2016/11/08 - 2018/11/08 interest paid monthly. Long term loan To be repaid in lump sum at maturity with E.SUN Commercial Bank N/A contract 2016/08/02 - 2018/08/02 interest paid monthly. Long term loan To be repaid in lump sum at maturity with Cathay United Bank N/A contract 2016/11/17 - 2018/10/30 interest paid monthly. Long term loan To be repaid in lump sum at maturity with KGI Bank N/A contract 2016/11/11 - 2018/11/11 interest paid monthly. Long term loan To be repaid in lump sum at maturity with Far Eastern International Bank N/A contract 2016/05/25 - 2018/05/25 interest paid monthly. Long term loan Mega International Commercial To be repaid in lump sum at maturity with N/A contract Bank 2016/04/14 - 2018/04/13 interest paid monthly. Long term loan To be repaid in lump sum at maturity with Chang Hwa Bank N/A contract 2016/11/25 - 2018/11/24 interest paid monthly. Payments are made semiannually with Long term loan the principal divided into 10 equal N/A contract Chang Hwa Bank 2015/09/22 - 2020/09/22 payments; interests are paid monthly. Payments are made annually with the Long term loan principal divided into 5 equal payments; N/A contract Bank of Taiwan 2015/06/12 - 2020/06/12 interests are paid monthly. Long term loan To be repaid in lump sum at maturity with KGI Bank 2016/06/15 - 2018/06/14 N/A contract interest paid monthly.

52 Annual Report 2016 Financial Summary 53 1. Condenced Balance Sheets and Statements of Comprehensive Income from the Past Five Years 2. Condenced Statements of Comprehensive Income - IFRSs - Consolidated Unit: NT$1,000 (1) Condenced balance sheets and statements of comprehensive income - IFRSs- Consolidated 1. Condenced balance sheet - IFRSs - Consolidated Year Financial data of the past five years Unit: NT$1,000 Item 2 012 2 013 2 014 2 015 2 016

Year Financial data of the past five years Operating income 53,959,724 56,733,425 60,896,397 63,579,997 63,354,152 Item 2 012 2 013 2 014 2 015 2 016

Current assets 35,565,161 35,997,365 38,326,319 39,714,896 37,655,208 Gross profit 9,418,004 7,974,159 9,393,395 10,664,872 10,528,171

Real estate, factories and equipment 37,660,186 43,875,931 46,616,218 47,178,242 46,766,595 Operating profit and loss 2,043,544 ( 69,586) 629,599 1,685,747 1,114,818 Intangible assets 243,933 243,422 487,566 507,114 498,022 Non-operating revenue Other assets 18,530,955 20,317,360 26,863,706 25,990,648 25,783,096 4,300,652 1,120,372 617,932 ( 58,509) ( 151,117) and expenses

Total Assets 92,000,235 100,434,078 112,293,809 113,390,900 110,702,921 Net income before tax 6,344,196 1,050,786 1,247,531 1,627,238 963,701 Before distribution 28,200,834 30,917,206 30,050,351 34,985,804 28,735,154 Current liabilities Net income from After distribution 28,864,982 31,581,354 30,714,499 35,483,915 Note 1 6,344,196 1,050,786 1,247,531 1,627,238 963,701 continuing operations

Non-current liabilities 20,723,064 25,948,030 32,408,176 33,128,068 40,325,638 Net profit for the current period 5,860,048 568,019 864,057 1,182,194 555,107

Before distribution 48,923,898 56,865,236 62,458,527 68,113,872 69,060,792 Other consolidated 1,641,290 4,108,973 6,413,136 (4,261,556) ( 3,402,286) Total liabilities After distribution 49,588,046 57,529,384 63,122,675 68,611,983 Note 1 income/loss (after tax)

Stockholders' equity attributable to parent 30,133,059 33,595,432 39,756,572 35,546,220 32,181,859 Total consolidated income 7,501,338 4,676,992 7,277,193 ( 3,079,362) ( 2,847,179)

Share capital 16,603,715 16,603,715 16,603,715 16,603,715 16,603,715 Net income belongs to 3,283,050 610,546 594,779 501,904 126,117 Capital surplus 344,334 458,885 618,282 685,256 823,793 the parent company Net income belongs to Before distribution 13,704,289 13,354,143 13,201,682 12,723,650 12,221,994 2,576,998 ( 42,527) 269,278 680,290 428,990 Retained earnings non-controlling interests After distribution 13,040,141 12,689,995 12,537,534 12,225,539 Note 1 Total comprehensive income (loss) 5,017,100 4,432,951 6,685,733 ( 3,611,713) ( 3,028,403) attributable to parent company Other equity ( 519,279) 3,178,689 9,332,893 5,533,599 2,532,357 Total comprehensive income (loss) Non-controlling Interests 12,943,278 9,973,410 10,078,710 9,730,808 9,460,270 2,484,238 244,041 591,460 532,351 181,224 attributable to non-controlling interests

Before distribution 43,076,337 43,568,842 49,835,282 45,277,028 41,642,129 Total equity Earnings per share 1.98 0.37 0.36 0.30 0.08 After distribution 42,412,189 42,904,694 49,171,134 44,778,917 Note 1 Note 1: Financial statements from Q1 2017 to the printing date of this report have not been audited by a CPA. Note 1: Earnings distribution proposal from 2016 has yet to be approved by the 2017 shareholders meeting. Note 2: On October 1, 2012, Paper & Paperboard divisions were merged with Chung Hwa Pulp Corp. Note 2: Financial statements from Q1 2017 to the printing date of this report have not been audited by a CPA. Note 3: On October 1, 2012, Paper & Paperboard divisions were merged with Chung Hwa Pulp Corp.

54 Annual Report 2016 Financial Summary 55 (2) Condenced Balance Sheets and Statements of Comprehensive Income - IFRSs -Stand Alone

1. Condenced balance sheets - IFRSs - Stand alone Unit: NT$1,000 2. Condenced Statements of Comprehensive Income - IFRSs - Stand alone Unit: NT$1,000

Year Financial data of the past five years Year Financial data of the past five years Item 2 012 2 013 2 014 2 015 2 016 Item 2 012 2 013 2 014 2 015 2 016

Current assets 321,718 44,389 84,865 62,652 92,183 Operating income 16,096,300 839,066 774,851 648,609 441,038 Real estate, factories and equipment 626,420 611,635 608,990 620,347 621,529

Other assets 44,615,509 54,195,979 62,695,709 59,149,503 55,715,666 Gross profit 4,751,438 839,066 774,851 648,609 441,038

Total Assets 45,563,647 54,852,003 63,389,564 59,832,502 56,429,378 Operating profit and loss 3,645,915 644,421 563,143 454,644 107,448 Before distribution 4,869,514 5,302,024 4,654,800 4,629,474 1,904,594 Current liabilities Non-operating revenue ( 263,591) ( 23,875) 6,029 25,260 ( 17,331) After distribution 5,533,662 5,966,172 5,318,948 5,127,585 Note 1 and expenses

Non-current liabilities 10,561,074 15,954,547 18,978,192 19,656,808 22,342,925 Net income before tax 3,382,324 620,546 569,172 479,904 90,117

Before distribution 15,430,588 21,256,571 23,632,992 24,286,282 24,247,519 Total liabilities Net income from 3,382,324 620,546 569,172 479,904 90,117 After distribution 16,094,736 21,920,719 24,297,140 24,784,393 Note 1 continuing operations

Share capital 16,603,715 16,603,715 16,603,715 16,603,715 16,603,715 Net profit for the current period 3,283,050 610,546 594,779 501,904 126,117

Capital surplus 344,334 458,885 618,282 685,256 823,793 Other consolidated 1,734,050 3,822,405 6,090,954 ( 4,113,617) ( 3,154,520) Before distribution 13,704,289 13,354,143 13,201,682 12,723,650 12,221,994 income/loss (after tax) Retained earnings Total After distribution 13,040,141 12,689,995 12,537,534 12,225,539 Note 1 5,017,100 4,432,951 6,685,733 ( 3,611,713) ( 3,028,403) consolidated income Other equity ( 519,279) 3,178,689 9,332,893 5,533,599 2,532,357 Earnings per share 1.98 0.37 0.36 0.30 0.08 Before distribution 30,133,059 33,595,432 39,756,572 35,546,220 32,181,859 Total equity Note 1: On October 1, 2012, Paper & Paperboard divisions were merged with Chung Hwa Pulp Corp. After distribution 29,468,911 32,931,284 39,092,424 35,048,109 Note 1

Note 1: Earnings distribution proposal from 2016 has yet to be approved by the 2017 shareholders meeting. Note 2: On October 1, 2012, Paper & Paperboard divisions were merged with Chung Hwa Pulp Corp.

56 Annual Report 2016 Financial Summary 57 (3) Condenced Balance Sheets and Income Statement - Financial Accounting Standards in Taiwan - Consolidated 1. Condenced balance sheets - Financial Accounting Standards in Taiwan- Consolidated Unit: NT$1,000 2. Condenced income statement - Financial Accounting Standards in Taiwan - Consolidated Unit: NT$1,000

Financial data of the past five years Year Financial data of the past five years Year

Item 2 012 Item 2 012

Current assets 32,577,795 Operating income 53,959,724

Funds and investments 12,695,082

Gross profit 9,414,551 Fixed assets 36,909,307

Intangible assets 493,879 Operating profit and loss 2,023,092

Other assets 5,220,043 Non-operating revenue ( 1,951) Total Assets 87,896,106 and expenses

Before distribution 28,081,241 Pre-tax profit 2,021,141 Current liabilities After distribution 28,745,389 Net income 1,484,912 Long-term liabilities 18,474,515

0.66 Other liabilities 1,072,040 Earnings per share

Before distribution 47,627,796 Note 1: On October 1, 2012, Paper & Paperboard divisions were merged with Chung Hwa Pulp Corp. Total liabilities Note 2: Starting in 2013, IFRSs were adopted for compiling consolidated financial statements. After distribution 48,291,944

Share capital 16,603,715

Capital surplus 4,521,591

Before distribution 5,043,537 Retained earnings After distribution 4,379,389

Unrealized valuation gain or loss on ( 803,576) financial instruments

Cumulative translation adjustments 333,469

Net loss not recognized as pension cost ( 559,500)

Unrealized revaluation increments 3,227,313

Minority interests 11,901,761

Before distribution 40,268,310 Stockholders' equity Total After distribution 39,604,162

Note 1: On October 1, 2012, Paper & Paperboard divisions were merged with Chung Hwa Pulp Corp. Note 2: Starting in 2013, IFRSs were adopted for compiling consolidated financial statements.

58 Annual Report 2016 Financial Summary 59 (4) Condenced Balance Sheets and Income Statement - Financial Accounting Standards in Taiwan - Stand Alone 1. Condenced balance sheets - Financial Accounting Standards in Taiwan - Stand alone Unit: NT$1,000 2. Condensed income statement - Financial Accounting Standards in Taiwan - Stand alone Unit: NT$1,000

Financial data of the past five years Year Financial data of the past five years Year

Item 2 012 Item 2 012

Current assets 321,718 Operating income 12,901,570

Funds and investments 40,685,295

Gross profit 1,556,708 Fixed assets 613,226

Intangible assets - Operating profit and loss 419,355

Other assets 1,945,080 Non-operating revenue and 770,574 Total Assets 43,565,319 expenses

Before distribution 4,867,431 Pre-tax profit 1,189,929 Current liabilities After distribution 5,531,579 Net income 1,090,929 Long-term liabilities 9,782,923

Earnings per share 0.66 Other liabilities 548,416

Before distribution 15,198,770 Note 1: On October 1, 2012, Paper & Paperboard divisions were merged with Chung Hwa Pulp Corp. Total liabilities Note 2: Starting in 2013, IFRSs are adopted for compiling stand alone financial statements. After distribution 15,862,918

Share capital 16,603,715 (3) Auditors' Names and Opinions for Fiscal Year over the Last Five Years: Capital surplus 4,521,591 1. Names of Certified Public Accountant: Before distribution 5,043,537 2012 - 2013: Lin, Shu-Wan and Shao, Chih-Ming from Deloitte and Touche. Retained earnings 2014 - 2016: Shao, Chih-Ming and Kuo, Cheng-Hong from Deloitte and Touche. After distribution 4,379,389 2. Auditors' reviews: 2012 - 2015: Unqualified opinion with explanatory notes. Unrealized valuation gain or loss on 2016: Unqualified opinion plus other matters paragraph. ( 803,576) financial instruments

Cumulative translation adjustments 333,469

Cash flow hedge -

Net loss not recognized as pension cost ( 559,500)

Unrealized revaluation increments 3,227,313

before distribution 28,366,549 Stockholders' equity Total After distribution 27,702,401

Note 1: On October 1, 2012, Paper & Paperboard divisions were merged with Chung Hwa Pulp Corp. Note 2: Starting in 2013, IFRSs were adopted for compiling stand alone financial statements.

60 Annual Report 2016 Financial Summary 61 2. Financial analysis of the past five years (2) Financial analysis - IFRSs - Stand alone (1) Financial analysis - IFRSs - Consolidated Year Financial analysis of the past five years Financial analysis of the past five years Year Analysis item 2 012 2 013 2 014 2 015 2 016

Analysis item 2 012 2 013 2 014 2 015 2 016 Financial Liabilities to total assets 33.87 38.75 37.28 40.59 42.97

Financial Liabilities to total assets 53.18 56.62 55.62 60.07 62.38 Structure Ratio of real estate, factories, and equipment 6,372.08 8,001.31 9,644.62 8,898.73 8,772.69 Structure (%) (%) Ratio of real estate, factories, and equipment 169.41 158.44 176.43 166.19 175.27 Current ratio 6.61 0.84 1.82 1.35 4.84

Current Ratio 126.11 116.43 127.54 113.52 131.04 Solvency Quick ratio 4.64 0.29 0.23 0.14 1.11 Solvency (%) Quick Ratio 79.92 72.37 80.64 66.43 82.45 (%) Interest coverage (times) 1,643.11 336.07 264.02 225.86 124.95

Interest coverage (times) 1,191.96 259.15 243.89 282.49 202.97 Receivable turnover (times) 18.19 - - - -

Receivable turnover (times) 5.07 5.06 4.92 4.56 4.57 Days receivables 20.07 - - - -

Days receivables 71.99 72.13 74.19 80.04 79.86 Inventory turnover (times) 12.78 - - - -

Inventory turnover (times) 5.75 5.55 5.65 5.55 5.85 Operational Payable turnover (times) 9.62 - - - - Operational Efficiency Payable turnover (times) 7.77 9.22 8.90 7.32 6.60 Efficiency Days inventory 28.56 - - - -

Days inventory 63.48 65.77 64.60 65.77 62.39 Turnover rate of real estate, factories and equipment (times) 25.70 - - - -

Turnover rate of real estate, factories and equipment (times) 1.43 1.29 1.35 1.36 1.35 Asset turnover (times) 0.35 - - - -

Asset turnover (times) 0.59 0.56 0.57 0.56 0.57 Return on assets (%) 7.76 1.65 1.49 1.33 0.73

Return on assets (%) 7.69 1.16 1.49 1.70 1.19 ROE (%) 11.69 1.92 1.62 1.33 0.37

ROE (%) 15.73 1.31 1.85 2.49 1.28 Profitability Pre-tax profit to paid-in capital ratio (%) 20.37 3.74 3.43 2.89 0.54

Profitability Pre-tax profit to paid-in capital ratio (%) 38.21 6.33 7.51 9.80 5.80 Net margin (%) 20.40 - - - -

Net margin (%) 10.86 1.00 1.42 1.86 0.88 Earnings per share (NT$) 1.98 0.37 0.36 0.30 0.08

Earnings per share (NT$) 1.98 0.37 0.36 0.30 0.08 Operating cash flow ratio (%) 1.61 2.00 1.05 6.42 26.87

Operating cash flow ratio (%) 12.44 4.41 7.78 12.86 19.68 Cash Flows Cash flow adequacy ratio (%) 17.86 16.62 2.44 5.09 9.05

Cash Flows Cash flow adequacy ratio (%) 55.73 30.53 33.33 43.26 50.52 Cash flow reinvestment ratio (%) - - - - 0.02

Cash flow reinvestment ratio (%) 2.09 0.62 1.30 3.01 3.88 Operating leverage 1.10 1.01 1.01 1.01 1.10 Leverage Operating leverage 1.96 - 6.15 3.06 4.12 Leverage Financial leverage 1.06 1.69 2.61 6.20 - Financial leverage 1.40 0.10 - 2.12 6.23 Note: Explanation of changes in percentage increase/decrease 1. Changes in current ratio and quick ratio are caused mainly by the decrease in current liabilities. Note: Explanation of changes in percentage increase/decrease 2. Changes in interest protection multiples, ROA, ROE, pre-tax profit to paid-in capital ratio, ratio of operating income to paid-in capital, net profit ratio, 1. Changes in current ratio and quick ratio are caused mainly by the decrease in current liabilities. operating leverage, and financial leverage are caused mainly by the decrease in operating income. 2. Changes in interest protection multiples, ROA, ROE, pre-tax profit to paid-in capital ratio, net profit ratio, operating leverage, and financial leverage are 3. The increase in operating cash flow ratio, cash flow adequacy ratio, and cash reinvestment ratio are caused mainly by the increase in net cash flow of caused mainly by the decrease in operating income. operating activities. 3. The increase in operating cash flow ratio, cash flow adequacy ratio, and cash reinvestment ratio are caused mainly by the increase in net cash flow of operating activities. 4. Financial statements from Q1 2017 to the printing date of this report have not been audited by a CPA.

62 Annual Report 2016 Financial Summary 63 1. Financial Structure (3) Financial Analysis-Financial Accounting Standards in Taiwan- Consolidated (1) Ratio of liabilities to assets = Total liabilities/Total assets Year Financial analysis of the past five years

(2) Ratio of long-term capital to real estate properties, factories and equipment = (Total equity + Non-current Analysis item 2 012 liabilities)/net amount of real estate properties, factories and equipment Financial Liabilities to total assets 54.19 2. Solvency Structure (%) Long-term funds to fixed assets 159.15 (1) Current ratio = Current assets/Current liabilities Current Ratio 116.01 (2) Quick Ratio = (Current assets - Inventories - Prepaid expenses)/Current liabilities Solvency Quick Ratio 80.35 (3) Interest Protection Multiples = PBIT/Interests paid during for this period (%) 3. Operational Efficiency Interest coverage (times) 447.88 (1) Receivable turnover (including accounts receivable and notes receivable from operations) = Net sales/Average Receivable turnover (times) 5.07

balance of receivables (including accounts receivable and notes receivable from operations) Days receivables 71.99

(2) Days receivables = 365/Receivable turnover Inventory turnover (times) 5.79 (3) Inventory turnover = Cost of goods sold/Average inventory Operational Payable turnover (times) 7.77 Efficiency (4) Payable turnover (including accounts payable and notes payable from operations) = Cost of goods sold/ Days inventory 63.04 Average balance of payables (including accounts payable and notes payable from operations) Fixed asset turnover (times) 1.46 (5) Average inventory turnover days = 365/Inventory turnover Asset turnover (times) 0.61 (6) Turnover of real estate properties, factories and equipment = net sales/average net amount of real estate properties, factories and equipment Return on assets (%) 2.45 (7) Asset turnover = Net sales/Average total assets Return on equity (%) 4.14

4. Profitability Operating income 12.18 Profitability Paid-in capital ratio (%) (1) ROA = (Income after tax + interest expense x (1 - Tax rate))/Average total assets EBT 12.17

(2) ROE = Income after tax/Net average equity Net margin (%) 2.75 (3) Net profit ratio = Income after tax/Net sales Earnings per share (NT$) 0.66 (4) EPS = (Income belonging to parent company - Stock dividend of preferred stocks)/Weighted average number Operating cash flow ratio (%) 14.28 of issued shares Cash Flows Cash flow adequacy ratio (%) 58.14 5. Cash Flow Cash flow reinvestment ratio (%) 2.69 (1) Operating cash flow ratio = Net cash flow from operations/Current liabilities (2) Net cash flow adequacy ratio = Net cash flow of operating activities in the last 5 years/(Capital expenditure + Operating leverage 2.14 Leverage Addendum of inventory + Cash dividend) in the last 5 years Financial leverage 1.40 (3) Cash reinvestment ratio = (Net cash flow of operating activities - Cash dividend)/(Gross amount of real estate properties, factories and equipment + Long-term investment + Other non-current assets + Operating capital) 6. Leverage (1) Operating leverage = (Net sales - Variable operating costs and expenses)/Operating income (2) Financial leverage = Operating income/(Operating income - Interest expenses)

64 Annual Report 2016 Financial Summary 65 (4) Financial Analysis-Financial Accounting Standards in Taiwan-Stand alone 1. Financial Structure (1) Ratio of liabilities to assets = Total liabilities/Total assets Year Financial analysis of the past five years

Analysis item 2 012 (2) Ratio of long-term capital to fixed assets = (Net shareholders' equity + Long-term liabilities)/Net fixed assets 2. Solvency Financial Liabilities to total assets 34.89 Structure (1) Current ratio = Current assets/Current liabilities Long-term funds to fixed assets 6,221.11 (%) (2) Quick Ratio = (Current assets - Inventories - Prepaid expenses)/Current liabilities Current Ratio 6.61 (3) Interest Protection Multiples = PBIT/Interests paid during for this period Solvency Quick Ratio 4.64 3. Operational Efficiency (%) Interest coverage (times) 462.88 (1) Receivable turnover (including accounts receivable and notes receivable from operations) = Net sales/Average balance of receivables (including accounts receivable and notes receivable from operations) Receivable turnover (times) 14.58 (2) Days receivables = 365/Receivable turnover Days receivables 25.03 (3) Inventory turnover = Cost of goods sold/Average inventory Inventory turnover (times) 12.78 (4) Payable turnover (including accounts payable and notes payable from operations) = Cost of goods sold/Average Operational Payable turnover (times) 9.72 balance of payables (including accounts payable and notes payable from operations) Efficiency Days inventory 28.56 (5) Average inventory turnover days = 365/Inventory turnover

Fixed asset turnover (times) 21.04 (6) Fixed asset turnover = Net sales/Average net fixed assets (7) Asset turnover = Net sales/Average total assets Asset turnover (times) 0.30 4. Profitability Return on assets (%) 2.92 (1) ROA = (Income after tax + Interest expense x (1 - Tax rate))/Average total assets Return on equity (%) 4.01 (2) ROE = Income after tax/Net average shareholders' equity Operating income 2.53 (3) Net profit ratio = Income after tax/Net sales Profitability Paid-in capital ratio (%) EBT 7.17 (4) EPS = (Net profit after tax - Stock dividend of preferred stocks)/Weighted average number of issued shares

Net margin (%) 8.46 5. Cash Flow (1) Operating cash flow ratio = Net cash flow from operations/Current liabilities Earnings per share (NT$) 0.66 (2) Net cash flow adequacy ratio = Net cash flow of operating activities in the last 5 years/(Capital expenditure + Operating cash flow ratio (%) 1.82 Addendum of inventory + Cash dividend) in the last 5 years Cash Flows Cash flow adequacy ratio (%) 17.95 (3) Cash reinvestment ratio = (Net cash flow of operating activities - Cash dividend)/(Gross fixed assets + Long-term Cash flow reinvestment ratio (%) - investment + Other assets + Operating capital) Operating leverage 1.9 6. Leverage Leverage Financial leverage 2.10 (1) Operating leverage = (Net sales - Variable operating costs and expenses)/Operating income (2) Financial leverage = Operating income/(Operating income - Interest expenses)

66 Annual Report 2016 Financial Summary 67 3. Audit Committee Review Report 4. Financial Statements

INDEPENDENT AUDITORS’ REPORT

YFY Inc. The Board of Directors and Shareholders YFY Inc. Audit Committee Review Report Opinion

We have audited the accompanying consolidated financial statements of YFY Inc. and its The Company's 2016 business report, financial statements, proposal for allocation of profits, and auditors' reports subsidiaries (the Group), which comprise the consolidated balance sheets as of December 31, 2016 and 2015, and the consolidated statements of comprehensive income, changes in equity and cash relating to the financial statements have been examined by and determined to be correct and accurate by the Audit flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies. Committee in accordance with Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Law. In our opinion, based on our audits and the reports of other auditors (refer to Other Matter section), We hereby submit the report to the 2017 shareholders' meeting. the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2016 and 2015, 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 Issuers, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

Audit Committee Convener Huang, Wen-Cheng We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2016. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

March 16, 2017

68 Annual Report 2016 Financial Summary 69 Key audit matters of the Group’s consolidated financial statements for the year ended December 31, Other Matter 2016 are stated as follows: We did not audit the financial statements of Jupiter Prestige Group Holdings Limited and its Impairment of Property, Plant and Equipment subsidiaries, Lotus Ecoscings & Engineering Co., Ltd., Cupid InfoTech Co., Ltd., YFY Biotech Management Company, Systax Communication (H.K.) Ltd. and Ever Growing Agriculture Biotech The containerboard and packaging segment of the Group has been accumulating losses. Because Co., Ltd, subsidiaries include in the consolidated financial statements of the Group, but such of the accounting uncertainty and estimations involved in measuring the related impairment loss, statements were audited by other auditors, whose reports have been furnished to us, and our this segment is considered significant. According to IAS 36 “Impairment of Assets”, the Group’s opinion, insofar as it relates to the amounts included in the Group’s consolidated financial management evaluates impairment based on the estimated future cash flows of the related impaired statements for these subsidiaries, is based solely on the reports of other auditors. The assets of item. The estimation of the future cash flows comprise many assessments and evaluations, which these subsidiaries as of December 31, 2016 and 2015 were about 1% (NT$1,294,932 thousand) and has a significant level of uncertainty; thus, the impairment of property, plant and equipment has 1% (NT$1,145,190 thousand), respectively, of the total consolidated assets. The net sales of these been identified as a key audit matter. subsidiaries for the years ended December 31, 2016 and 2015 were about 1% (NT$611,103 thousand) and 1% (NT$696,948 thousand), respectively, of the consolidated net sales. In addition, For related policies and relevant information on the impairment of property, plant and equipment, the financial statements as of and for the years ended December 31, 2016 and 2015 of Taiwan refer to Notes 4, 5 and 16 to the accompanying consolidated financial statements. Genome Sciences Co., Ltd., an investment accounted for using the equity method, were audited by other auditors. Thus, our opinion, insofar as it relates to the calculation of the Group’s share in For the audit procedures performed in respect of the above area, we: this investee’s profit or loss and other comprehensive income, is based solely on the report of other auditors. As of December 31, 2016 and 2015, the carrying values of this investee were 1. Inquire after the Group management’s major assumptions regarding future cash flows and NT$24,446 thousand and NT$3,962 thousand, respectively. Included in the Group’s total confirm the reasonableness of the major assumptions used by the Group’s management based comprehensive income and loss for the years ended December 31, 2016 and 2015 were NT$20,484 on our understanding of the industry and business. thousand and NT$97 thousand, respectively, of this investee’s net profit.

2. Test for the appropriateness of the major assumptions and compare them with the expected We have also audited the parent company only financial statements of YFY Inc. as of and for the economic situation and the actual operations. years ended December 31, 2016 and 2015 on which we have issued an unmodified opinion, including an other matter, and a modified unqualified report, respectively. 3. Evaluate the appropriateness of the major assumptions of the discount rate used by the Group’s management. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements 4. Perform an observation on the physical count of the idle property, plant and equipment. Management is responsible for the preparation and fair presentation of the consolidated financial Impairment of Investments Accounted for Using the Equity Method statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Financial Reporting Standards (IFRS), International The Group had investments in associates which were accounted for under the equity method. The Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) amount of accounting uncertainty and estimations involved in measuring the goodwill arising from endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, such investments indicated that goodwill is significant to the Group. According to IAS 36 and for such internal control as management determines is necessary to enable the preparation of “Impairment of Assets”, the Group’s management evaluates the relevant impairment based on the consolidated financial statements that are free from material misstatement, whether due to fraud or estimated future cash flows from the cash-generating units acquired from such a transaction. The error. estimation of the future cash flows comprise many assessments and evaluations, which have a significant level of uncertainty; thus, impairment of investments accounted for by using the equity In preparing the consolidated financial statements, management is responsible for assessing the method has been identified as a key audit matter. Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to For related policies and relevant information on the impairment of investments accounted for by liquidate the Group or to cease operations, or has no realistic alternative but to do so. using the equity method, refer to Notes 4, 5 and 15 of the consolidated financial statements. Those charged with governance, including the audit committee, are responsible for overseeing the For the audit procedures performed in respect of the above area, we: Group’s financial reporting process.

1. Inquire after the Group management’s major assumptions of future cash flows and confirm the reasonableness of the major assumptions used by the Group’s management based on our understanding of the industry and business.

2. Test for the appropriateness of the major assumptions and compare them with the expected economic situation and the actual operations.

3. Evaluate the appropriateness of the major assumptions of the discount rate used by the Group’s management.

70 Annual Report 2016 Financial Summary 71 Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements 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 Our objectives are to obtain reasonable assurance about whether the consolidated financial relationships and other matters that may reasonably be thought to bear on our independence, and statements as a whole are free from material misstatement, whether due to fraud or error, and to where applicable, related safeguards. issue an auditors’ 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 the auditing standards From the matters communicated with those charged with governance, we determine those matters generally accepted in the Republic of China will always detect a material misstatement when it that were of most significance in the audit of the consolidated financial statements for the year exists. Misstatements can arise from fraud or error and are considered material if, individually or ended December 31, 2016 and are therefore the key audit matters. We describe these matters in in the aggregate, they could reasonably be expected to influence the economic decisions of users our auditors’ report unless law or regulation precludes public disclosure about the matter or when, taken on the basis of these consolidated financial statements. 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 As part of an audit in accordance with the auditing standards generally accepted in the Republic of public interest benefits of such communication. China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: The engagement partners on the audit resulting in this independent auditors’ report are Chin-Ming Shao and Cheng-Hung Kuo. 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. Deloitte & Touche Taipei, Taiwan 2. Obtain an understanding of internal control relevant to the audit in order to design audit Republic of China procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. March 16, 2017

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

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ 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 auditors’ report. However, future events or conditions may cause the Group 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. Notice to Readers

6. Obtain sufficient and appropriate audit evidence regarding the financial information of entities The accompanying consolidated financial statements are intended only to present the consolidated or business activities within the Group to express an opinion on the consolidated financial financial position, financial performance and cash flows in accordance with accounting principles statements. We are responsible for the direction, supervision, and performance of the group and practices generally accepted in the Republic of China and not those of any other jurisdictions. audit. We remain solely responsible for our audit opinion. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China. 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 For the convenience of readers, the auditors’ report and the accompanying consolidated financial in internal control that we identify during our audit. statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.

72 Annual Report 2016 Financial Summary 73 YFY INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars) YFY INC. AND SUBSIDIARIES

2016 2015 ASSETS Amount % Amount % CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CURRENT ASSETS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 Cash and cash equivalents (Notes 4 and 6) $ 3,710,869 3 $ 2,380,644 2 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) Financial assets at fair value through profit or loss (Notes 4 and 7) 1,330,912 1 987,404 1 Available-for-sale financial assets (Notes 4 and 8) 3,780,274 3 4,274,542 4 Debt investments with no active market (Notes 4, 6 and 29) 1,724,436 2 1,014,100 1 Notes receivable (Notes 4, 11 and 29) 2,951,293 3 3,490,802 3 Accounts receivable (Notes 4 and 11) 10,190,730 9 11,075,094 10 2016 2015 Accounts receivable from related parties (Notes 4 and 28) 4,028 - 17,605 - Inventories (Notes 4 and 12) 8,288,246 8 9,761,552 8 Amount % Amount % Biological assets (Notes 4 and 13) 3,275,503 3 3,622,185 3 Prepayments 1,069,855 1 1,183,304 1 Other current assets (Notes 4, 9 and 28) 1,329,062 1 1,907,664 2 OPERATING REVENUE (Notes 4 and 28) Sales $ 55,851,439 88 $ 55,459,099 87 Total current assets 37,655,208 34 39,714,896 35 Other operating revenue 7,502,713 12 8,120,898 13 NON-CURRENT ASSETS Available-for-sale financial assets (Notes 4 and 8) 8,777,617 8 9,709,107 9 Financial assets measured at cost (Notes 4 and 10) 1,555,879 1 1,733,666 2 Total operating revenue 63,354,152 100 63,579,997 100 Debt investments with no active market (Notes 4 and 28) 400,000 - 400,000 - Investments accounted for using the equity method (Notes 4, 5 and 15) 6,953,129 6 6,814,794 6 Property, plant and equipment (Notes 4, 5, 16 and 29) 46,766,595 42 47,178,242 42 OPERATING COSTS (Notes 12, 19, 21 and 28) Investment properties (Notes 4 and 17) 2,748,430 3 2,803,012 2 Goodwill (Note 4) 498,022 - 507,114 - Cost of goods sold 47,957,893 76 47,540,458 75 Deferred tax assets (Notes 4 and 22) 564,640 1 551,817 - Other operating cost 4,868,088 7 5,374,667 8 Long-term prepayments for lease (Note 21) 1,083,150 1 1,206,625 1 Prepayments for equipment 2,985,675 3 2,029,249 2 Other non-current assets (Notes 4, 19 and 21) 714,576 1 742,378 1 Total operating costs 52,825,981 83 52,915,125 83 Total non-current assets 73,047,713 66 73,676,004 65

TOTAL $ 110,702,921 100 $ 113,390,900 100 GROSS PROFIT 10,528,171 17 10,664,872 17

LIABILITIES AND EQUITY LOSS ARISING FROM CHANGES IN FAIR VALUE LESS COSTS TO SELL BIOLOGICAL ASSETS CURRENT LIABILITIES Short-term borrowings (Notes 18, 29 and 30) $ 9,304,726 9 $ 10,403,060 9 (Notes 4 and 13) (13,295) - (740) - Short-term bills payable (Note 18) 6,964,751 6 11,279,300 10 Notes payable 1,146,338 1 2,002,570 2 Accounts payable 6,402,653 6 6,363,477 6 OPERATING EXPENSES (Notes 19, 21 and 28) Accounts payable to related parties (Note 28) 26,850 - 70,321 - Selling and marketing 5,408,560 9 5,113,942 8 Other payables (Note 16) 3,268,437 3 2,702,884 2 Current tax liabilities (Notes 4 and 22) 192,329 - 175,543 - General and administrative 3,850,007 6 3,716,004 6 Current portion of long-term borrowings (Notes 18 and 29) 161,564 - 448,250 1 Other current liabilities (Notes 4, 7 and 9) 1,267,506 1 1,540,399 1 Research and development 141,491 - 148,439 -

Total current liabilities 28,735,154 26 34,985,804 31 Total operating expenses 9,400,058 15 8,978,385 14 NON-CURRENT LIABILITIES Long-term borrowings, net of current portion (Notes 18 and 29) 35,173,100 32 28,002,204 25 Deferred tax liabilities (Notes 4 and 22) 3,385,935 3 3,396,715 3 PROFIT FROM OPERATIONS 1,114,818 2 1,685,747 3 Net defined benefit liabilities (Notes 4 and 19) 1,545,398 1 1,558,220 1 Other non-current liabilities 221,205 - 170,929 - NON-OPERATING INCOME AND EXPENSES Total non-current liabilities 40,325,638 36 33,128,068 29 Finance costs (Notes 4 and 21) (935,866) (1) (892,141) (1) Total liabilities 69,060,792 62 68,113,872 60 Share of profit of associates (Notes 4 and 15) 457,807 1 150,480 -

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 4 and 20) Interest income 221,713 - 247,177 - Share capital 16,603,715 15 16,603,715 15 Rental income (Notes 17 and 28) 56,521 - 59,884 - Capital surplus 823,793 1 685,256 - Retained earnings Dividend income 532,245 1 602,366 1 Legal reserve 3,242,110 3 3,191,920 3 Other income 288,447 - 398,022 1 Special reserve 4,031,432 4 4,031,432 3 Unappropriated earnings 4,948,452 4 5,500,298 5 Gain (loss) on disposal of property, plant and Total retained earnings 12,221,994 11 12,723,650 11 equipment 3,616 - (8,742) - Other equity 2,532,357 2 5,533,599 5 Gain on disposal of investments (Notes 4 and 25) 182,308 - 195,881 - Total equity attributable to owners of the Company 32,181,859 29 35,546,220 31 Foreign exchange loss (1,114,045) (2) (603,262) (1) NON-CONTROLLING INTERESTS 9,460,270 9 9,730,808 9 Other losses (49,605) - (88,126) -

Total equity 41,642,129 38 45,277,028 40 Gain (loss) arising on financial instruments at FVTPL (Notes 4 and 27) 318,341 1 (71,842) - TOTAL $ 110,702,921 100 $ 113,390,900 100 (Continued)

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

(With Deloitte & Touche audit report dated March 16, 2017) 74 Annual Report 2016 Financial Summary 75 YFY INC. AND SUBSIDIARIES YFY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2016 2015 2016 2015 Amount % Amount % Amount % Amount %

Impairment loss recognized on financial assets TOTAL COMPREHENSIVE INCOME (LOSS) (Notes 4 and 10) $ (99,717) - $ (48,206) - ATTRIBUTABLE TO: Impairment loss recognized on property, plant and Owners of the Company $ (3,028,403) (5) $ (3,611,713) (6) equipment (Notes 4 and 16) (12,882) - - - Non-controlling interests 181,224 1 532,351 1

Total non-operating income and expenses (151,117) - (58,509) - $ (2,847,179) (4) $ (3,079,362) (5) PROFIT BEFORE INCOME TAX 963,701 2 1,627,238 3 EARNINGS PER SHARE (Note 23) Basic $ 0.08 $ 0.30 INCOME TAX EXPENSE (Notes 4 and 22) (408,594) (1) (445,044) (1) Diluted $ 0.08 $ 0.30 NET PROFIT FOR THE YEAR 555,107 1 1,182,194 2

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 4 and 20) The accompanying notes are an integral part of the consolidated financial statements. Items that will not be reclassified subsequently to profit or loss: (With Deloitte & Touche audit report dated March 16, 2017) (Concluded) Remeasurement of defined benefit plans (177,379) - (306,598) (1) Share of the other comprehensive income (loss) of associates (1,495) - (3,798) - (178,874) - (310,396) (1) Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations (1,971,288) (3) (258,802) - Unrealized loss on available-for-sale financial assets (890,545) (1) (3,402,530) (5) Cash flow hedges (25,019) - 16,221 - Share of the other comprehensive income (loss) of associates (336,560) (1) (306,049) (1) (3,223,412) (5) (3,951,160) (6)

Other comprehensive income (loss) for the year, net of income tax (3,402,286) (5) (4,261,556) (7)

TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR $ (2,847,179) (4) $ (3,079,362) (5)

NET PROFIT ATTRIBUTABLE TO: Owners of the Company $ 126,117 - $ 501,904 1 Non-controlling interests 428,990 1 680,290 1

$ 555,107 1 $ 1,182,194 2 (Continued)

76 Annual Report 2016 Financial Summary 77 YFY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

Equity Attributable to Owners of the Company Other Equity Exchange Unrealized Differences on Gain (Loss) on Share Capital Capital Surplus Retained Earnings Translating Available-for- Share Consolidation Unappropriated Foreign sale Financial Cash Flow Non-controlling (Thousands) Amount Treasury Stock Excess Other Total Legal Reserve Special Reserve Earnings Total Operations Assets Hedges Total Interests Total Equity

BALANCE AT JANUARY 1, 2015 1,660,372 $ 16,603,715 $ 14,947 $ 293,124 $ 310,211 $ 618,282 $ 3,131,658 $ 4,031,432 $ 6,038,592 $ 13,201,682 $ 3,004,110 $ 6,334,530 $ (5,747) $ 39,756,572 $ 10,078,710 $ 49,835,282

Appropriation of the 2014 earnings Legal reserve ------60,262 - (60,262) ------Cash dividends distributed by the Company ------(664,148) (664,148) - - - (664,148) - (664,148)

Cash dividends distributed by subsidiaries ------(296,799) (296,799)

Adjustments for the changes in equity of associates - - - - 42,082 42,082 - - (1,465) (1,465) - - - 40,617 2,644 43,261

Partial acquisition of interests in subsidiaries - - - - 19,287 19,287 ------19,287 (577,930) (558,643)

Adjustments for the changes in equity of subsidiaries - - - - 5,605 5,605 ------5,605 (8,168) (2,563)

Net profit for the year ended December 31, 2015 ------501,904 501,904 - - - 501,904 680,290 1,182,194

Other comprehensive income (loss) for the year ended December 31, 2015, net of income tax ------(314,323) (314,323) (280,019) (3,532,903) 13,628 (4,113,617) (147,939) (4,261,556)

Total comprehensive income (loss) for the year ended December 31, 2015 ------187,581 187,581 (280,019) (3,532,903) 13,628 (3,611,713) 532,351 (3,079,362)

BALANCE AT DECEMBER 31, 2015 1,660,372 16,603,715 14,947 293,124 377,185 685,256 3,191,920 4,031,432 5,500,298 12,723,650 2,724,091 2,801,627 7,881 35,546,220 9,730,808 45,277,028

Appropriation of the 2015 earnings Legal reserve ------50,190 - (50,190) ------Cash dividends distributed by the Company ------(498,111) (498,111) - - - (498,111) - (498,111)

Cash dividends distributed by subsidiaries ------(494,611) (494,611)

Adjustments for the changes in equity in associates - - - - 51,965 51,965 - - 23,616 23,616 - - - 75,581 2,946 78,527

Partial acquisition of interests in subsidiaries - - - - 78,573 78,573 ------78,573 31,084 109,657

Adjustments for the changes in equity in subsidiaries - - - - 7,999 7,999 ------7,999 8,819 16,818

Net profit for the year ended December 31, 2016 ------126,117 126,117 - - - 126,117 428,990 555,107

Other comprehensive income (loss) for the year ended December 31, 2016, net of income tax ------(153,278) (153,278) (1,925,435) (1,056,743) (19,064) (3,154,520) (247,766) (3,402,286)

Total comprehensive income (loss) for the year ended December 31, 2016 ------(27,161) (27,161) (1,925,435) (1,056,743) (19,064) (3,028,403) 181,224 (2,847,179)

BALANCE AT DECEMBER 31, 2016 1,660,372 $ 16,603,715 $ 14,947 $ 293,124 $ 515,722 $ 823,793 $ 3,242,110 $ 4,031,432 $ 4,948,452 $ 12,221,994 $ 798,656 $ 1,744,884 $ (11,183) $ 32,181,859 $ 9,460,270 $ 41,642,129

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

(With Deloitte & Touche audit report dated March 16, 2017)

78 Annual Report 2016 Financial Summary 79 YFY INC. AND SUBSIDIARIES YFY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars)

2016 2015 2016 2015

CASH FLOWS FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Income before income tax $ 963,701 $ 1,627,238 Purchase of financial instruments at fair value through profit or loss $ (9,706,063) $ (18,660,044) Adjustments for: Proceeds from sale of financial instruments at fair value through profit Depreciation and amortization expenses 3,477,016 3,473,770 or loss 9,685,968 18,502,089 Impairment loss recognized on accounts receivable 438,347 1,705 Purchase of available-for-sale financial assets (131,024) (32,588) Net loss (gain) on fair value change of financial instruments at fair Proceeds from sale of available-for-sale financial assets 856,525 88,582 value through profit or loss (318,341) 71,842 Purchase of debt investments with no active market (715,547) (400,000) Finance costs 935,866 892,141 Proceeds from sale of debt investments with no active market - 1,053,998 Interest income (221,713) (247,177) Purchase of financial assets measured at cost - (261,237) Dividend income (532,245) (602,366) Proceeds from sale of financial assets measured at cost 39,186 157,156 Share of profit of associates (457,807) (150,480) Proceeds from the return of capital upon investees’ capital reduction on Loss (gain) on disposal of property, plant and equipment (3,616) 8,742 financial assets measured at cost - 23,670 Gain on disposal of investments (182,308) (195,881) Payments to acquire financial assets for hedging - (7,205) Impairment loss recognized on financial assets 99,717 48,206 Acquisition of associates (36,000) - Impairment loss recognized on property, plant and equipment 12,882 - Proceeds from sale of investments accounted for using the equity Write-down (reversal of write-down) of inventories (39,949) 31,070 method 2,509 574 Net unrealized loss on foreign currency exchange 699,106 814,093 Acquisition of subsidiaries - (50,092) Loss arising from changes in fair value less cost to sell biological Net cash outflow on disposal of subsidiaries - (6,775) assets 13,295 740 Payments for property, plant and equipment (3,982,967) (4,602,832) Other items - 2,565 Proceeds from disposal of property, plant and equipment 72,592 55,502 Changes in operating assets and liabilities Payments for investment properties (7,547) (13,219) Notes receivable 480,153 (922,158) Proceeds from the disposal of investment properties 75,350 89,075 Accounts receivable 351,211 (437,193) Increase in prepayments for equipment (1,313,517) (1,439,026) Accounts receivable from related parties (219,115) 390,531 Increase in prepayments for lease - (188,715) Inventories 1,444,914 (456,431) Decrease (increase) in other non-current assets (59,313) 158,566 Biological assets 44,985 (706,480) Prepayments 99,260 (217,627) Net cash used in investing activities (5,219,848) (5,532,521) Other current assets 369,783 (951,780) Notes payable (809,511) 1,855,576 CASH FLOWS FROM FINANCING ACTIVITIES Accounts payable 163,117 422,900 Repayments of short-term borrowings (987,337) (1,717,438) Accounts payable to related parties (486,387) (555,219) Proceeds from short-term bills payable - 5,108,369 Other payables (79,090) 113,671 Repayments of short-term bills payable (4,297,246) - Other current liabilities 131,104 572,849 Repayments of bond payables - (1,250,000) Net defined benefit liabilities (226,532) 16,387 Proceeds from long-term borrowings 7,099,481 140,186 Cash generated from operations 6,147,843 4,901,234 Increase (decrease) in other non-current liabilities 87,126 (16,870) Interest received 239,935 170,970 Cash dividends paid (498,111) (664,148) Dividends received 620,422 756,741 Decrease in non-controlling interest (384,742) (953,395) Interest paid (997,622) (876,497) Income tax paid (355,620) (453,938) Net cash generated from financing activities 1,019,171 646,704

Net cash generated from operating activities 5,654,958 4,498,510 EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE (Continued) OF CASH HELD IN FOREIGN CURRENCIES (124,056) (5,156) (Continued)

80 Annual Report 2016 Financial Summary 81 YFY INC. AND SUBSIDIARIES Review of financial conditions and CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars) performance, operating results, and risks

84 1. Financial Comparison Analysis 2016 2015 85 2. Financial Performance Review and Analysis 85 3. Cash Flow Analysis NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 1,330,225 $ (392,463) 86 4. Major Capital Expenditures and Impact on Financial Operations in the Last Fiscal Year CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 2,380,644 2,773,107 86 5. Subsidiary Investment Policy, Reasons for Profit or Loss, Improvement Plans, and Investment CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 3,710,869 $ 2,380,644 Plans for the Next Year 86 6. Risk analysis and assessment in the last fiscal year and up to the printing date for this annual The accompanying notes are an integral part of the consolidated financial statements. report

(With Deloitte & Touche audit report dated March 16, 2017) (Concluded) 90 7. Other Important Items

5. Any financial difficulty and the impact on YFY's finance in the last fiscal year and up to the printing date of this annual report: None.

82 Annual Report 2016 Financial Review, Performance Analysis, and Risks 83 1. Financial Comparison Analysis 2. Financial Performance Review and Analysis Unit: NT$1,000 Unit: NT$1,000

Year Year 2 016 2 015 Difference 2 016 2 015 Increase/decrease Item Item Change (%) Amount %

Current assets 37,655,208 $ 39,714,896 ( 2,059,688) ( 5) Net sales 63,354,152 63,579,997 ( 225,845) -

Real estate, factories and equipment 46,766,595 47,178,242 ( 411,647) ( 1) Cost of goods sold 52,825,981 52,915,125 ( 89,144) -

Intangible assets 498,022 507,114 ( 9,092) ( 2) Gross profit 10,528,171 10,664,872 ( 136,701) ( 1)

Losses sustained by changes in fair value less the Other assets 25,783,096 25,990,648 ( 207,552) ( 1) ( 13,295) ( 740) ( 12,555) 1,697 cost to sell a biological asset

Total assets 110,702,921 113,390,900 ( 2,687,979) ( 2) Operating expenses 9,400,058 8,978,385 421,673 5

Current liabilities 28,735,154 34,985,804 ( 6,250,650) ( 18) Net operating profit 1,114,818 1,685,747 ( 570,929) ( 34)

Non-current liabilities 40,325,638 33,128,068 7,197,570 22 Non-operating revenue and expenses ( 151,117) ( 58,509) ( 92,608) 158

Total liabilities 69,060,792 68,113,872 946,920 1 Net income before tax 963,701 1,627,238 ( 663,537) ( 41)

Share capital 16,603,715 16,603,715 - - Income tax expenses ( 408,594) ( 445,044) 36,450 ( 8)

Capital surplus 823,793 685,256 138,537 20 Net income for the current year 555,107 1,182,194 ( 627,087) ( 53)

Retained earnings 12,221,994 12,723,650 ( 501,656) ( 4) Notes/Analysis on changes in increase or decrease percentage: 1. Losses sustained by changes in fair value less the cost to sell a biological asset; mainly caused by the loss of fair value of the biological asset. Other equity 2,532,357 5,533,599 ( 3,001,242) ( 54) 2. The decrease in net operating profit was mainly due to the increase in operating expenses. 3. The decline of non-operating revenue and expenses was mainly caused by losses on foreign currency exchange. Non-controlling Interests 9,460,270 9,730,808 ( 270,538) ( 3) 4. The decrease in net income before tax and in net income for the year were mainly due to the decrease in net operating profit.

Total equity 41,642,129 45,277,028 ( 3,634,899) ( 8)

Notes on changes in increase or decrease percentage: 1. Increase in non-current liabilities was mainly due to increase in long-term borrowing. 3. Cash flow analysis 2. Capital surplus mostly comes from partial equity disposed of from a subsidiary. 3. The reduction in other equities is mainly due to the unrealized gains/losses from the sale of financial products and the decrease in the exchange rate Net cash flows from Inflow (outflow) of net cash Cash balance Liquidity contingency plan difference while converting financial statements by overseas institutions. CASH, BEGINNING OF YEAR operating activities from other activities Investment Financial planning

$ 2,380,644 $ 5,654,958 ($ 4,324,733) $ 3,710,869 - -

(1) Analysis of cash flow changes in the current year: 1. Net cash inflows from operating activities was mainly due to business profits. 2. Net cash outflow from the Company's other activities was mainly attributable to the increase in acquisition of real estate, plants, and equipment as well as long-term loans. (2). Liquidity contingency plan and liquidity analysis: None (3) Cash Flow Analysis for the Coming Year:

Net cash flows from Inflow (outflow) of net cash Cash balance Liquidity contingency plan CASH, BEGINNING OF YEAR operating activities from other activities Investment Financial planning

$ 3,710,869 $ 5,824,606 ($ 5,793,475) $ 3,742,000 - -

84 Annual Report 2016 Financial Review, Performance Analysis, and Risks 85 4. Major Capital Expenditures and Impact on Financial Operations in the Last Fiscal Year: None. consecutive quarters in the first half of the year. With continued foreign investments flowing into the country, however, the New Taiwan dollar showing an upward trend, but the US dollar grew stronger under expectations that the US Federal 5. Investment Policy, Main Causes for Gains or Losses, Improvement Plans, and Investment Plans for the Reserve would raise interest rates, and the New Taiwan dollar began depreciating in Q4. The major exchange rate risk Coming Year: faced by the Company are foreign currency loans in US dollars from mainland China; exchange losses caused by RMB (1) Investment Policy, Main Causes for Gains or Losses, and Improvement Plans devaluation were sustained in 2016. Major investments by the Company and its subsidiaries are coordinated with our long-term development strategy and are Response measure: Looking ahead into 2017, the global economy is expected to recover slowly. The United States has predominantly focused on the fields of papermaking and printing, advanced energy conservation technologies, medical proposed expansionary fiscal policies, which will drive economic growth, but growth momentum will remain weak given biotechnology, finance, and new innovations. In recent years, the Company has also continued to streamline its non-core the rise of US trade protectionism, major elections in the eurozone, Brexit, and China continuing to adjust its economic investment targets, focusing resources on strategic investments consistent with the Company's long-term development structure. The global economy still faces many uncertainties, and relevant foreign exchange rate movements are also concept to deepen vertical integration benefits and pursue maximum return on investment. filled with variables. The Company will take into account exchange rate risks and hedging costs in taking appropriate Investment assessments include analyses of sales growth, enhancing R&D capacity, increasing production efficiency, financial and hedging strategies to reduce the negative impact of exchange rate fluctuations on the Company's improving product quality, and the potential for future profits. The investment projects and values are decided after taking overall operations. into account the benefits of the investment and the corresponding risks. In terms of post-investment management, the 3. Inflation Company regularly reviews the performance of each investment project. If there is a significant drop in performance or Taiwan's consumer price index (CPI) rose by 1.40% in 2016, according to data released by the Directorate-General of deviation from the standards of similar industries, we require the investment target to develop improvement plans so as to Budget, Accounting and Statistics, Executive Yuan. Taiwan’s Central Bank expects crude oil and other raw material achieve our original investment objectives. prices to increase in 2017, but the recent appreciation of the New Taiwan dollar will help to reduce the pressure caused by imported inflation. The Central Bank forecasts this year's CPI to be 1.25%; inflation is expected to be moderate and (2) Investment Plans for the Coming Year will not have a significant impact on the Company. 1. Investments will mainly focus on expanding into related and ancillary industries of core investment projects, enhancing vertical integration, and developing new businesses. A key consideration will be whether the investment can facilitate (2) Policies with Respect to High-risk, High-leverage Investments, Lending or Endorsement Guarantees, and Derivatives Transactions, Main the development of the Company's business groups so that they can complement each other and achieve synergies. Causes of Gains or Losses, and Future Response Measures 2. We plan to strengthen resource integration, resource complementation, and core competitiveness in order to enhance The Company is not involved in any high risk and high-leverage investments. The utilization of idle funds focuses on the the performance of investments. trading of notes or bonds with repurchase agreements and subscriptions of money market funds in the short term, and relevant industry-leading investment projects in the long term. The Company in principle does not provide endorsements or guarantees or lend to others except to a controlled subsidiary or as needed to conduct business activities. All transactions 6. Risk analysis and assessment in the last fiscal year and up to the publishing of this annual report: comply with the Company's “Procedures for Lending Funds to Other Parties and Making of Endorsements and Guarantees”. (1) Effects of Changes in Interest Rate, Exchange Rate, and Inflation on the Company's Finances, and Future Response Measures All transactions involving derivatives must follow the “Procedures for Processing Derivative Transactions”, clearly define 1. Interest rate whether the purpose of the transaction is trading or hedging, and have the primary goal of avoiding risks. The cost of Recovery of developed economies was weak in the first half of 2016. The growth of emerging economies such as China derivatives that directly hedge the RMB was high last year as the RMB continued to depreciate, so the Company took into was also slow, affecting the export volume in the Asia region as well as global trade growth. After the United Kingdom account hedging costs and adopted an alternative hedging strategy that sustained losses due to depreciation of the New withdrew from the European Union, global financial markets became even more volatile. Taiwan's economic growth did Taiwan dollar against RMB in May of 2016. Rapid adjustments were made in the second half of year to change to direct- not perform as well as expected due to weakening exports and growing conservatism among investors. In both Q1 and hedge derivatives, while decentralized operations were implemented to reduce the various impacts on exchange rate Q2, Taiwan’s Central Bank lowered the discount rate by 0.125%. Interest rates have been left unchanged starting from markets. Q3, after the domestic economy showed signs of a steady recovery during the second half of the year. (3) Future R&D Projects and Expected R&D Investments: Response measure: Though the United States raised interest rates in December 2016, Taiwan's Central Bank will proceed The Company's major R&D investment projects in 2017 include: with quantitative easing due to slow economic recovery and moderate inflationary pressure. The Company will regularly ● Specialty paper development------NT$19,736,000. evaluate the liability positions and financing policies to effectively reduce interest expenses. ● Specialized material development------NT$26,348,000. 2. Exchange rate ● Biotechnology development------NT$6,434,000. In August 2015, the People's Bank of China announced the formation of a mechanism to improve the setting of the ● Cleaning product development------NT$9,719,000. RMB exchange rate, triggering market participants to expect the RMB to depreciate and resulting in a significant ● Paper product development------NT$18,242,000. reference rate depreciation of the RMB against the US dollar. In 2016, the RMB continues to depreciate under China's R&D expenses listed above do not include investments in product development, new technology development, and slow economic growth. Further, the Taiwanese economy remained weak in 2016, leading to interest rate cuts in two equipment modifications.

86 Annual Report 2016 Financial Review, Performance Analysis, and Risks 87 (4) Effects of and Responses to Changes in Policies and Regulations Relating to Corporate Finance and Sales YFY, changing the corporate image and managing business risks are closely related — they are both crucial issues with a The Company has set up a legal department for the purposes of managing legal risks as a whole. Under the management common goal, and they guide operating strategies we will keep improving to help us respond to societal needs and global of company headquarters, the department is responsible for preventing legal risks resulting from regulatory changes. The trends in the future.

legal department will immediately notify any potential impacts on the Company's financial or sales performance due to (7) Expected Benefits from, Risk Relating to and Response to Merger and Acquisition Plans: None. important policy and legislative changes in Taiwan and overseas to relevant departments and jointly devise the Company's (8) Expected Benefits from, Risk Relating to and Response to Factory and Expansion Plans: None. response measures. If the Company's internal guidelines and operating procedures do not comply with any new laws, the (9) Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration: The relevant departments will work with the legal department to make changes necessary to effectively manage and reduce Company's source of purchase and sales channels remain stable, there are no concentration risks. the Company's legal risks. The Labor Standards Act was amended in 2016 to stipulate that employees must have one fixed day off and one flexible rest (10) Effects of, Risks Relating to and Response to Large Share Transfers or Changes in Shareholdings by Directors, Supervisors, or day per week. In response to the amendment, the Company also modified related company regulations and work policies, Shareholders with Shareholdings of over 10%: and convened a labor management meeting to discuss various response measures. The work hours and work schedule for The composition of directors, supervisors, or shareholders holding more than 10% of the Company's shares and the each company (plant) under the YFY umbrella were adjusted accordingly, and employee vacation days and money for shareholding ratio is stable. As of the printing date of this annual report, there have not been any large transfers. Equity unused vacation days were issued to employees in accordance with regulations. transfers or conversion is considered a normal financial transaction for shareholders and does not have a significant impact on the Company. The Company's directors and major shareholders always maintain open channels of communication. (5) Effects of and Response to Changes in Technology and in the Industry Relating to Corporate Finance and Sales: The Company invests in industries that strive for new achievements in innovation and R&D. In the development of these (11) Impact and Risks of Control Transfers: The Company is not facing any risks related to the transfer of management rights. industries, the Company pursues sustainable management through the use of various technologies to enhance product (12) Litigation or Non-contentious Cases: There were no major litigation or non-contentious cases in 2016. quality, production capacity and volume, and strengthen existing competitive advantages. (13) Other Material Risks and Response Measures: (6) Impact on Crisis Management from Changes in Corporate Image, and Response Measures 1. Other major risks: Operating a business involves a variety of potential risks, including workplace safety, environmental, financial, product In addition to implementing management guidelines for internal management in accordance with the law, the Company quality, and marketing risks. Especially with today's diverse mass media, news of an incident that poses risks to the Company also devises rules to be followed by different departments. Business risks are diversified and managed by each business can be passed on rapidly through social media and often evolves into a major crisis. In this environment where risks are group based on their respective functions, and the management of each functional unit is coordinated by management difficult to predict, having a good corporate image has become the Company's best protection. Whether it is from actual headquarters. cases or the maturing corporate social responsibility indices from different countries, it is clear that focusing on corporate 2. Organizational structure of response measures and risk management: social responsibility, having a good corporate image, and earning the trust of consumers and investors during a major crisis The Company's business risks are decentralized and managed by each business group according to their respective can effectively reduce both visible and invisible damage to a company. The Company believes that its corporate image functions, and the management of each functional unit is coordinated by management headquarters. Business group cannot merely be shaped by packaging from the outside, and requires a fundamental change to corporate structure in responsibilities are as follows: order to enhance our corporate image from the inside out. Ever since YFY was founded, the management team has always adhered to the mission of sustainable development through its three major areas of focus — "employees", "the community", and "the environment". With proactive and concrete methods and by taking real action, we aim to achieve external transformation of the Company image via internal adjustments. In terms of staff community involvement, we seek to improve employee awareness of environmental protection and green subjects, share our goals and vision with them, and encourage them to participate in local environmental protection, cultural, and charitable events. In respect of supply chain management, we incorporate environmental protection, labor safety, and other standards into guidelines that ought to be followed in the work process and employee contracts. To protect employee rights, we also strive to continue improving staff health and provide a safe work environment. In 2013, YFY established the "Sustainability and Social Responsibility Office". In 2016, we also created the "Resource Recycling Platform", "Water Resource Recycling Platform", and "Occupational Safety and Health Management Platform" to make continuous improvements within the Group and serve as information exchange platforms to inject our corporate responsibility objectives toward the environment, society and human resources into all YFY companies. We strive to comprehensively elevate YFY's threshold for safety and health, social responsibility, and sustainable development. From the Company's leadership to all employees, everyone needs to change their mentality when dealing with relevant issues. Only then can the risks stemming from work safety and environmental protection can be fundamentally and significantly reduced. At the same time, we use our actual achievements to improve the Company’s image. For

88 Annual Report 2016 Financial Review, Performance Analysis, and Risks 89 Unit Operation management (function) Corresponding risks Special disclosures Management of stationery paper, special paper, Risks related to operation and Pulp and paper business units paperboard, pulp, and chemical products. market change 92 1. Affiliate information Operations in industrial paper, cardboard boxes, Risks related to operation and 110 2. Privately Purchased Securities in the Last Industrial paper business units color boxes, and food containers. market change Fiscal Year and Up to the Printing Date of this Operations in household paper and cleaning Risks related to operation and Annual Report Consumer product business units products. market change 110 3. YFY's Shares Held or Disposed of by Responsible for legal risk-related matters, Subsidiaries in the Last Fiscal Year and Up to important changes in domestic and international the Printing Date of this Annual Report policies and regulations, those who may impact Risks related to management and 110 4. Other Information which should be Disclosed the Company's operation or finance, notify Corporate Administration Office regulation change 110 5. Any incidents that have a material impact related authorities, develop response measures, on shareholders equity or security price as well as other legal responsibilities including as described under Article 36, Paragraph contracts, patents, and intellectual property 3, Subparagraph 2 of the Securities and rights. Exchange Act in the last fiscal year and up to the printing date of this annual report 7. Other Important Factors: The Company was originally divided into three main operating departments in accordance with product characteristics. After-tax profit or loss was used as a measure of departmental performance, which was disclosed in the Company's quarterly financial statements. Due to adjustments of the Company’s management structure and performance indicators, starting from Q1 of 2017, the three main operating departments are reclassified as the Pulp and Fine Paper Business Group, the Containerboard and Packaging Business Group, and the Consumer Products Business Group. The main performance indicator of each business group has been changed to its operating income.

90 Annual Report 2016 Special Disclosures 91 Yuen Foong Yu Blue Economy Natural YFY Firstpack Packaging (Yangzhou) 100% YFY International BVI Corp. 100% Resources (Yangzhou) Co., Ltd. 70% Co., Ltd.

100% Shenzhen Jinglun Paper Co., Ltd. 100% Eihoyo Shoji Co., Ltd. 100% Hwa Fong Paper (Hong Kong) Co., Ltd.

100% YFY Packaging Capital Corp. 1. Affiliate information 100% YFY Holding Management Co., Ltd.

Yuen Foong Yu Papers (Guangzhou) YFY Advertising & Printing (Kunshan) (1) Organization chart of affiliates 100% 51% Shanghai Yuen Foong Yu Printing Co., Ltd. YFY Cayman Co., Ltd. 57.8% YFY Mauritius Corp. 93.8% Co., Ltd. 50% Co., Ltd. 100% Cupid InfoTech Co., Ltd. Yuen Foong Yu Papers (Xiamen) 50% 42.2% 100% Co., Ltd. Yuen Foong Yu Paper Enterprise 100% (Kunshan) Co., Ltd.

Yuen Foong Yu Paper Enterprise 100% (Zhongshan) Co., Ltd.

Yuen Foong Yu Paper Enterprise 90% (Nanjing) Co., Ltd.

Jiangyin Yuen Foong Yu Paper MFG. Yuen Foong Yu Paper Enterprise (Tianjin) 94% Co., Ltd. 100% Co., Ltd. Yuen Foong Yu Paper Enterprise 100% (Suzhou) Co., Ltd. 100% Syntax Communication (H.K.) Ltd. Yuen Foong Yu Paper Enterprise 100% (Shanghai) Co., Ltd.

Yuen Foong Yu Paper Enterprise 60% YFY Biopulp Technology Ltd. 100% (Qingdao) Co., Ltd. Yuen Foong Yu Paper Enterprise 100% (Dongguan) Co., Ltd. Guangdong Dingfung Pulp & Paper 49.7% China Color Printing Co., Ltd. 40% Co., Ltd. 60% Yuen Foong Yu Paper Enterprise 100% (Fuzhou) Co., Ltd.

66.3% Yuen Foong Yu Paper Enterprise 100% (Jiaxing) Co., Ltd. 13.5% Zhaoqing Dingfung Forestry Co., Ltd. 20.2% YFY Packaging (Yangzhou) Investment 100% Co., Ltd. 18.8% Yuen Foong Yu Paper MFG (Yangzhou) 81.2%

Yuen Foong Yu Investment Holding Co., Ltd. Co., Ltd.

100% YFY International Labuan Co., Ltd. 100% YFY Packaging Inc. 100% YFY Packaging(BVI) Corp.

YFY (Shanghai) Commercial Factoring 66.8% 49% Effion Enertech Co., Ltd. 100% YFY Capital Holdings Corp. 100% Co., Ltd. Pek Crown Paper Co., Ltd.

1% 1% 100% YFY Venture Capital Investment Co., Ltd. 49%

100% Hwa Fong Investment Co., Ltd. 100% Guang Hwa Fertilizer Corp. 100% YFY Capital Co., Ltd.

0.1% 0.86%

56.9% Chung Hwa Pulp Corp. 100% CHP International(BVI) Corporation

0.7%

100% YFY Paradigm Investment Co., Ltd. 100% YFY Biotech Management Company

4.1%

18.9% Union Paper Corp. 100% LiVEBRiCKS Inc. 50%

100% Yuen Foong Yu Family Paper (Beijing) 100% YFY Consumer Products Co., Ltd. 50% YFY Shop 100% YFY International Trading (Shanghai) Co. Co., Ltd.

Yuen Foong Yu Family Care (Kunshan) 100% 85% Ever Growing Agriculture Bio-tech Co., Ltd. Co., Ltd.

Yuen Foong Yu Consumer Products 100% 100% Yuen Foong Yu Consumer Products 100% Investment Limited YFY Investment Co., Ltd. (Yangzhou) Co., Ltd.

82.5% Opal BPM Limited 100% Opal BPM India Private Limited

Kunshan Actview Carbon Technology 100% San Ying Enterprises Co., Ltd. 66.4% Co., Ltd. 57% Jupiter Prestige Group Holdings Limited. 100% Rimagine Limited 100% Rimagine Design (Shanghai) Co., Ltd.

YFY Jupiter Ltd. Jupiter prestige Group Australia PTY Ltd. 100% Rimagine Group Limited 100% Lotus Ecoscings & Engineering Co., Ltd. 0.03% Pek Crown Paper Co., Ltd. 100% 100%

0.07% Jupiter prestige Group Europe Ltd. Jupiter prestige Group Asia Ltd. 100% YFY Jupiter Singapore PTE. Ltd. 100% 100% 50.9% Yuen Yuan Paper Container Co., Ltd. 0.01% Chung Hwa Pulp Corp.

Jupiter prestige Group North America Inc. Shin Foong Specialty and Applied 100% Mobius105 (HK) Ltd. 100% 55.3% Materials Co., Ltd.

100% YFY Jupiter US, Inc. 51% Innovativ Packaging Worldwide,LLC

99% YFY Jupiter Malaysia SDN. BHD. 1% YFY Jupiter Mexico,S.de R.L. 99% 38.45% 1%

100% Kunshan YFY Jupiter Green Packing Ltd. 100% YFY Global Investment BVI Corp. 38.45% YFY Jupiter (BVI) Inc. 100% Mobius105 Ltd. 100% YFY Jupiter Trading (Shenzhen) Ltd.

Jupiter Supply Chain Management 100% Services (Shenzhen) Co. 100% Arizon RFID Technology (Yangzhou) 100% Yangzhou YEON Technologies Co., Ltd. YFY RFID Co., Ltd. 100% Co., Ltd.

100% YFY RFID Technologies Co., Ltd. 100% YEON Technologies Co., Ltd.

92 Annual Report 2016 Special Disclosures 93 (2) Profiles of YFY affiliates Unit: NT$1,000 (currency is in NTD unless otherwise specified)

Company name DateDate of establishment of establishment Address Paid-in capital Main businesses/products

YFY Packaging Inc. 2005/04/26 12F, No. 51, Chongqing S. Road Sec. 2, Taipei 3,201,500 Paper and paper product manufacturing and trading.

Pek Crown Paper Co., Ltd. 1983/10/29 No. 46, Ju Yi Rd., Da Jia District, Taichung County 300,000 Production, trading and import/export of containers and related materials.

Yuen Yuan Paper Container Co., Ltd. 1995/10/16 No. 8-1, Dapuding, Gongguan Village, Jhunan Township, Miaoli County 121,275 Production, trade and import/export of corrugated boards and corrugated boxes.

Union Paper Corp. 1973/05/08 No. 65, Juinung Rd., Linchung Village, Linnei Township, Yunlin County 1,035,300 Paper production and marketing.

China Color Printing Co., Ltd. 1961/09/27 No. 229, Baoqiao Rd., , 662,486 Printing, photography, plate making, binding and related design and planning.

YFY Capital Co., Ltd. 1986/12/30 14F, No. 51, Chongqing S. Road Sec. 2, Taipei 268,400 Sale of paper and related products.

YFY Consumer Products Co., Ltd. 1986/10/29 16F, No. 51, Chongqing S. Road Sec. 2, Taipei 2,145,622 Production and sales of paper, paper products and household cleaning products.

YFY Shop 2014/09/19 16F, No. 51, Chongqing S. Road Sec. 2, Taipei 50,000 Production and sales of paper, paper products and household cleaning products.

Shin Foong Specialty and Applied Materials Co., Ltd. 1979/07/17 No. 55, Section 3, Zhongshan Road, Fangliao Township, Pingtung County 943,451 Production and sale of latex and adhesives.

YFY Venture Capital Investment Co., Ltd. 1988/09/20 15F, No. 51, Chongqing S. Road Sec. 2, Taipei 449,936 General investment.

YFY Paradigm Investment Co., Ltd. 1987/10/23 14F, No. 51, Chongqing S. Road Sec. 2, Taipei 600,500 General investment.

Lotus Ecoscings & Engineering Co., Ltd. 1989/01/05 16F, No. 51, Chongqing S. Road Sec. 2, Taipei 237,040 Water and sewage water treatment.

San Ying Enterprises Co., Ltd. 1962/04/14 11F, No. 51, Chongqing S. Road Sec. 2, Taipei 126,000 Water treatment and design/construction of measurement facilities used in environmental pollution prevention engineering.

Cupid InfoTech Co., Ltd. 2000/07/06 15F, No. 51, Chongqing S. Road Sec. 2, Taipei 18,470 Software, information processing and electronic information service as well as the wholesale and retail sale of related equipment.

Ever Growing Agriculture Bio-tech Co., Ltd. 1999/11/27 16F, No. 51, Chongqing S. Road Sec. 2, Taipei 171,827 Agricultural services, production and wholesale of fertilizers and wholesale of cleaning products.

LiVEBRiCKS Inc. 2012/02/09 16F, No. 51, Chongqing S. Road Sec. 2, Taipei 77,000 Information processing services.

YEON Technologies Co., Ltd. 2006/09/22 1F, No. 51, Chongqing S. Road Sec. 2, Taipei 60,000 Design and sales of RFID products and related system integration services.

YFY Biotech Management Company 2003/11/27 14F, No. 51, Chongqing S. Road Sec. 2, Taipei 35,700 General investment.

Effion Enertech Co., Ltd. 2008/12/08 14F, No. 51, Chongqing S. Road Sec. 2, Taipei 700,000 Management of cogeneration, heat supply, and energy technology services.

YFY Holding Management Co., Ltd. 2012/12/22 15F, No. 51, Chongqing S. Road Sec. 2, Taipei 250,000 Management consultant and related services.

Chung Hwa Pulp Corp. 1968/07/05 No. 100, Guanghua Street, Ji-an Township, Hualien County 11,028,353 Pulp and paper production, sale and afforestation operations.

Guang Hwa Fertilizer Corp. 2010/08/30 No. 100, Guanghua Street, Ji-an Township, Hualien County 5,000 Fertilizer production.

Hwa Fong Investment Co., Ltd. 1994/02/04 12F, No. 51, Chongqing S. Road Sec. 2, Taipei 36,000 General investment.

Eihoyo Shoji Co., Ltd. 1990/11/26 Room 316, Sanshin Bld. 4-1, Yuraku-cho. 1-chome, chiyoda-ku, Tokyo 100-0006, Japan JPY 10,000 Import and export of paper and related chemical materials; trading of related equipment.

Representative of YFY Mauritius Corp. 2003/01/16 2nd Floor, Cerne House, La Chaussee, Port Louis, Mauritius USD 262,502 General investment.

YFY International BVI Corp. 1989/11/30 Portcullis TrustNet Chambers, P.O. Box 3444 Road Town, Tortola, British Virgin Islands USD 550,099 General investment.

YFY Global Investment BVI Corp. 1989/11/30 Portcullis TrustNet Chambers, P.O. Box 3444 Road Town, Tortola, British Virgin Islands USD 79,000 General investment.

YFY Packaging (BVI) Corp. 2007/10/18 Portcullis TrustNet Chambers, P.O. Box 3444 Road Town, Tortola, British Virgin Islands USD 150,050 General investment.

YFY Biopulp Technology Limited 2012/10/30 OMC Chambers, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands USD 150 General investment.

Yuen Foong Yu Consumer Products Investment Limited 2004/11/08 Offshore Chambers, P. O. Box217, Apia, Samoa USD 150,013 General investment.

YFY RFID Technologies Co., Ltd. 2004/08/05 Palm Grove House P.O. Box 438, Road Town, Tortola, British Virgin Islands USD 5,330 General investment.

YFY RFID Co., Ltd. 2010/06/25 13F, No. 70, Amber Commercial Building, Morrison Hill Rd., Wan Chai, Hong Kong USD 25,600 General investment.

YFY Cayman Co., Ltd. 2007/03/27 The Grand Pavilion Commercial Centre Oleander Way, 802 West Bay Road, Grand Cayman, KY1-1208 Cayman Islands USD 309,918 General investment.

YFY International Labuan Co., Ltd. 2006/08/18 Level 15(A2), Main Office Tower, Financial Park, 87000 Labuan FT, Malaysia USD 135,901 General investment.

YFY Packaging Capital Corp. 2015/01/05 Portcullis TrustNet Chambers 4th Floor Ellen Skelton Building 3076 Sir Francis Drake Highway Road Town, Tortola British Virgin Islands VG1110 USD 200,000 General investment.

CHP International (BVI) Corporation 1990/03/15 Citco Building, P.O.BOX 662, Road Town, Tortola, British Virgin Islands USD 61,040 General investment.

YFY Packaging (Yangzhou) Investment Co., Ltd. 2012/12/05 No. 168, Chuen Jiang Rd., Economic Development Park, Yangzhou, Jiangsu Province USD 36,707 General investment and trading of paper products.

Yuen Foong Yu Papers (Guangzhou) Co., Ltd. 1990/10/30 No. 5 Xiayuan Rd., Dongji Industrial Park, Huangpu Economic Technology Development Zone, Guangzhou City, Guangdong Province USD 9,500 Production, printing and sale of all types of paper and paperboard.

Yuen Foong Yu Papers (Xiamen) Co., Ltd. 1990/03/26 No.6-12 Changhe Rd., Upper Warehouse District, Huli Zhai, Xiamen, Fujian USD 6,500 Production, printing and sale of all types of paper and paperboard.

Yuen Foong Yu Paper Enterprise (Zhongshan) Co., Ltd. 2001/05/16 No. 189, Yixian Highway, Torch Development District, Zhong Shan, Guangdong Province USD 6,000 Production, printing and sale of all types of paper and paperboard.

Yuen Foong Yu Paper Enterprise (Dongguan) Co., Ltd. 2003/03/11 Hongying Industrial Park, Yantian Section, Longping Rd., Fenggang Town, Dongguan, Guangdong Province USD 6,000 Production, printing and sale of all types of paper and paperboard.

Yuen Foong Yu Paper Enterprise (Nanjing) Co., Ltd. 2001/08/24 No. 1-2 Hengtai Rd. Nanjing Economic and Technological Development Zone USD 9,959 Production, printing and sale of all types of paper and paperboard.

Yuen Foong Yu Paper Enterprise (Qingdao) Co., Ltd. 2002/11/15 Liu Ting Industrial Park, Liu Ting, Cheng Yang District, Qingdao, Shan Dong USD 8,000 Production, printing and sale of all types of paper and paperboard.

Yuen Foong Yu Paper Enterprise (Jiaxing) Co., Ltd. 2003/11/24 No. 795 Zhong Shan W. Rd. and Xiuxin Rd., Xiu Zhou Industrial District, Jiaxing, Zhejiang USD 5,000 Production, printing and sale of all types of paper and paperboard.

Yuen Foong Yu Paper Enterprise (Kunshan) Co., Ltd. 1996/08/10 No. 999, YFY Rd., Yu Shan Town, Kunshan, Jiangsu Province USD 11,000 Production, printing and sale of all types of paper and paperboard.

(continued on next page)

94 Annual Report 2016 Special Disclosures 95 (Continued from previous page) Unit: NT$1,000 (currency is in NTD unless otherwise specified)

Company name Date of establishment Address Paid-in capital Main businesses/products

Yuen Foong Yu Paper Enterprise (Suzhou) Co., Ltd. 2002/01/31 No. 168 Yin Zhong S. Rd. and Jiang Xing Rd., Hedong Industrial Zone, Wuzhong Economic Development Area, Suzhou Industrial District, Jiangsu USD 7,000 Production, printing and sale of all types of paper and paperboard.

Yuen Foong Yu Paper Enterprise (Shanghai) Co., Ltd. 2003/01/24 No. 1236, Guinan Road, Shihudang Town, Songjiang District, Shanghai City USD 8,000 Production, printing and sale of all types of paper and paperboard.

Yuen Foong Yu Paper Enterprise (Tianjin) Co., Ltd. 2001/11/08 No. 19 Shuangchenzhong Rd., Beichen Development District, Tianjin USD 8,000 Production, printing and sale of all types of paper and paperboard.

Yuen Foong Yu Paper Enterprise (Fuzhou) Co., Ltd. 2004/02/11 No. 17, Changxing East Road, Mawei District, Fujian County, Fuzhou City USD 5,000 Production, printing and sale of all types of paper and paperboard.

Yuen Foong Yu Paper MFG (Yangzhou) Co., Ltd. 2004/11/24 No. 168, Chuen Jiang Rd., Economic Development Park, Yangzhou, Jiangsu Province USD 194,695 Production, printing and sale of all types of paper and paperboard.

Yuen Foong Yu Family Care (Kunshan) Co., Ltd. 2004/12/28 No. 999, YFY Rd., Yu Shan Town, Kunshan, Jiangsu Province USD 30,000 Production and sales of toilet paper, paper towels and napkins.

Yuen Foong Yu Family Paper (Beijing) Co., Ltd. 2004/12/23 No. 35, Jinma N. Rd., Beijing USD 35,000 Production and sales of toilet paper, paper towels and napkins.

Yuen Foong Yu Consumer Products (Yangzhou) Co., Ltd. 2011/11/18 No. 168, Chuen Jiang Rd., Economic Development Park, Yangzhou, Jiangsu Province USD 30,000 Production and sales of toilet paper, paper towels and napkins.

YFY Investment Co., Ltd. 2008/11/26 22F No. 1111 Changshou Road, Shanghai USD 95,000 General investment and trading of paper products.

YFY International Trading (Shanghai) Co. 2015/05/13 Room 4029, 4F, No. 173 Meisheng Rd., Pilot Free Trade Zone, Shanghai RMB 1,000 General investment.

Jiangyin Yuen Foong Yu Paper MFG. Co., Ltd. 1993/11/08 No. 258 South River Rd., Cheng Jiang Town, Jiang Yin City, Jiangsu Province USD 14,900 Production, processing and sale of all types of paper and paperboard.

Shenzhen Jinflun Paper Co., Ltd. 2008/06/24 21E Caihong Xindu Building, Caitian S. Rd., Futian District, Shenzhen, Guangdong Province RMB 3,200 Sale of paper products and cargo and technology imports/exports.

YFY Advertising & Printing (Kunshan) Co., Ltd. 2004/09/07 No. 999, YFY Rd., Yu Shan Town, Kunshan, Jiangsu Province USD 3,000 Design, production and distribution of various domestic advertising materials, plate making and printing.

Shanghai Yuen Foong Yu Printing Co., Ltd. 1992/12/19 No. 1130, Building 2, District 10, Jinge Rd., Jinshan Industrial Park, Shanghai RMB 2,000 Pre-printing, printing, and post-printing services; packaging and business card printing; sale of paper and printing equipment.

Kunshan Actview Carbon Technology Co., Ltd. 2002/01/15 No. 11, Cai Mao Rd., Zhou Shi Town, Kunshan, Jiangsu Province USD 1,260 R&D, manufacturing and sales of active carbon and related products.

Yuen Foong Yu Blue Economy Natural Resources (Yangzhou) Co., Ltd. 2011/05/18 No. 168, Chuen Jiang Rd., Economic Development Park, Yangzhou, Jiangsu Province USD 8,000 Development of agricultural recycling and production technologies and related consulting and services.

YFY Firstpack Packaging (Yangzhou) Co., Ltd. 2014/08/29 No. 168, Chuen Jiang Rd., Economic Development Park, Yangzhou, Jiangsu Province RMB 28,000 General investment.

Arizon RFID Technology (Yangzhou) Co., Ltd. 2004/06/11 No. 8 Wuzhou W. Rd., Economic Development Park, Yangzhou, Jiangsu Province USD 25,000 Production of various high-frequency and ultra-high frequency RFID INLAY and label cards.

Yangzhou YEON Technologies Co., Ltd. 2007/09/18 No. 88 Wuzhou E. Rd., Economic Development Park, Yangzhou, Jiangsu Province RMB 8,000 Design and distribution of RFID and related assemblies, as well as smart identification systems and reception antennas.

YFY Capital Holdings Corp. 2013/03/28 TMF(B.V.I) Ltd. of Palm Gove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands USD 8,060 General investment.

YFY (Shanghai) Commercial Factoring Co., Ltd. 2013/07/01 Room 20, Building 49, No. 6999, Chuansha Rd., Pudong New Area, Shanghai RMB 50,000 Export factoring, domestic factoring, and business factoring-related consulting services; development of credit risk management platforms.

Guangdong Dingfung Pulp & Paper Co., Ltd. 2000/08/18 Shouyue Village, Nanjie Township, Guangning County, Zhaoqing, Guangdong Province USD 85,630 Production and marketing of pulp, writing/printing paper, and dowling paper.

Zhaoqing Dingfung Forestry Co., Ltd. 2006/04/01 Shouyue Village, Nanjie Township, Guangning County, Zhaoqing, Guangdong Province USD 21,880 Cultivating and marketing seedlings; afforestation, logging and other forestry businesses including sales, processing, and transportation.

Hwa Fong Paper (Hong Kong) Co., Ltd. 1993/06/14 2F, No. 22-28, Shatin Industrial Building, Wo Shui Rd., Fo Tan, Shatin, NT, HK HKD 116,000 Trading, printing and sales of all types of paper products; paper-related businesses.

Syntax Communication (H.K.) Ltd. 1985/05/31 2F, No. 22-28, Shatin Industrial Building, Wo Shui Rd., Fo Tan, Shatin, NT, HK HKD 20,500 Trading, printing and sales of all types of paper products; paper-related businesses.

YFY Jupiter (BVI) Inc. 2005/11/30 Portcullis TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands. USD 1,189 General investment.

YFY Jupiter Ltd. 1997/06/02 15F Yen Sheng Centre, 64 Hoi Yuen Road Kwun Tong, Kow1oon, Hong Kong HKD 0.003 Packaging design and paper trading.

Mobius105 (HK) Ltd. 2006/11/16 15F Yen Sheng Centre, 64 Hoi Yuen Road Kwun Tong, Kow1oon, Hong Kong HKD 10 Packaging design and paper trading.

YFY Jupiter US, Inc. 2014/09/27 180 West Adams, 2nd Floor, Chicago, IL 60603, USA USD 1 Packaging design and paper trading.

Innovativ Packaging Worldwide, LLC 2015/03/09 1256 Park Road, Chanhassen, Minnesota 55317, USA USD 0.1 Packaging design and paper trading.

Mobius105 (HK) Ltd. 2006/07/25 15F Yen Sheng Centre, 64 Hoi Yuen Road Kwun Tong, Kowloon, Hong Kong HKD 10 General investment.

YFY Jupiter Trading (Shenzhen) Ltd. 2007/11/27 Room 101, Technology Building 2-B, No. 1057, Nanhai Avenue, Shekou, Nanshan District, Shenzhen, Guangdong Province USD 140 Packaging design and paper trading.

Kunshan YFY Jupiter Green Packing Ltd. 2012/01/17 Plant 4, No. 999, YFY Rd., Yu Shan Town, Kunshan, Jiangsu Province RMB 2,000 Packaging design and paper trading.

Jupiter Supply Chain Management Services (Shenzhen) Co. 2015/05/21 Room 201, Building A, No. 1, Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone, Shenzhen, Guangdong Province RMB 0 Supply chain management-related services.

Rimagine Limited 2004/10/21 Rm 1301 Bank of America Tower, 12 Harcourt Road, Central, Hong Kong HKD 0.1 General investment.

Rimagine Group Limited 2007/01/05 Akara Bldg., 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, BVI. USD 0.1 General investment.

Rimagine Design (Shanghai) Co., Ltd. 2008/01/10 Room 412-413, No. 721, Lingshi Rd., Zhabei District, Shanghai EUR 320 Photography.

Jupiter Prestige Group Holdings Limited 2012/05/01 TAH House, Aviation Way, Southend-on-Sea, Essex SS2 6UN GBP 100 General investment.

Jupiter Prestige Group North America Inc. 2005/07/13 180 West Adams, 2nd Floor, Chicago, IL 60603, USA USD 1 Packaging design and paper trading.

Opal BPM Limited 2013/11/08 48-50 St. John Street London, BC1M 4DG GBP 1 Design and support of workflow systems.

Opal BPM India Private Limited 2015/10/21 436, Level-4, 6/24, East Patel Nagar, New Delhi 110008, Delhi, India GBP 1 System process coding operations.

Jupiter Prestige Group Australia PTY Ltd. 2012/01/19 Coles Store Support Centre, L2 M7 800 Toorak Road, Hawthom East, VIC 3123 AUD 0.1 Graphic design.

Jupiter Prestige Group Europe Ltd. 2003/02/03 TAH House, Aviation Way, Southend-on-Sea, Essex SS2 6UN GBP 30 Graphic design.

Jupiter Prestige Group Asia Ltd. 2010/06/17 15/F Yen Sheng Centre, 64 Hoi Yuen Road Kwun Tong, Kowloon, Hong Kong HKD 0.1 Graphic design.

YFY Jupiter Malaysia SDN. BHD. 2016/01/12 Level 2, No.11, Jalan PJU 1A/41B, NZX Commercial Centre, Ara Jaya, 47301 Petaling Jaya, Selangor MYR 0.1 Packaging design.

YFY Jupiter Singapore PTE. Ltd. 2016/01/22 60 Paya Lebar Road #11-29 Paya Lebar Square, Singapore 409051 SGD 0.001 Packaging design.

YFY Jupiter Mexico, S. de R.L. 2016/03/14 Ciudad Juarez, Chihuahua, Mexico MXN 3 Packaging design.

96 Annual Report 2016 Special Disclosures 97 (3) Directors, supervisors and executives of YFY affiliates Unit: No. of shares/shares, investment amount/NTD (Continued from previous page)

Shares held Shares held Company name Title Name or representative Company name Title Name or representative Number of shares Shareholding ratio (%) Number of shares Shareholding ratio (%)

YFY Packaging Inc. Chairman Peng, Cheng Yang (Representative of YFY International Labuan Co., Ltd.) 320,150,000 100.0 YFY Shop Chairman Ho, Felix (Representative of YFY Consumer Products Co., Ltd.) 2,500,000 50.0

Director Ho, Felix (Representative of YFY International Labuan Co., Ltd.) Director Shi Wei Liu (Representative of YFY Consumer Products Co., Ltd.)

Director Tian Wang Wu (Representative of YFY International Labuan Co., Ltd.) Director Hua Mei (Representative of YFY Consumer Products Co., Ltd.)

Director Huang, C. C. (Representative of YFY International Labuan Co., Ltd.) Supervisor Zhi Qing Min (Representative of YFY Paradigm Investment Co., Ltd.) 2,500,000 50.0

Director Zhe Hong Ou (Representative of YFY International Labuan Co., Ltd.) President Shi Wei Liu

Supervisor Yu Yang Wang (Representative of YFY International Labuan Co., Ltd.) Shin Foong Specialty and Applied Chairman Chiu, Melody (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 52,182,248 55.3 Materials Co., Ltd. President Peng, Cheng Yang Director Huang, Kirk (Representative of Yuen Foong Yu Investment Holding Co., Ltd.)

Pek Crown Paper Co., Ltd. Chairman Y. C. Chang (Representative of YFY Packaging Inc.) 20,027,557 66.8 Director Zhi Min Xu (Representative of Yuen Foong Yu Investment Holding Co., Ltd.)

Director Zhe Hong Ou (Representative of YFY Packaging Inc.) Director Yu Hui Ho (Representative of Ho Shi Investment Co. Ltd.) 1,806,466 1.9

Director Yuan Huang Zhang (Representative of YFY Packaging Inc.) Independent Director Chiu, Po-Young

Supervisor De Ming Liao (Representative of YFY Packaging Inc.) Independent Director Xi Cheng Yan

President Yuan Huang Zhang Independent Director Chang Mou Yang

Yuen Yuan Paper Container Co., Ltd. Chairman Y. C. Chang (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 6,178,500 50.9 President Zhi Min Xu

Director Zhe Hong Ou (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) YFY Venture Capital Investment Chairman Chiu, Melody (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 44,993,600 100.0 Co., Ltd. Director S.R. Liao (Representative of Hwa Yuan Enterprises Co., Ltd.) 1,980,000 16.3 Director Ho, S. C. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.)

Supervisor T. H. Lin (Representative of Lotus Ecoscings & Engineering Co., Ltd.) 9,000 0.07 Director Zhi Qing Min (Representative of Yuen Foong Yu Investment Holding Co., Ltd.)

Supervisor Y.M. Kuo (Rep of Hwa Yuan Enterprises Co., Ltd.) 3,960,000 32.7 Supervisor Wu, C. F. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.)

President Rong Jie Yang YFY Paradigm Investment Co., Ltd. Chairman Chiu, Melody (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 60,050,000 100.0

Union Paper Corp. Chairman Kun Lung Lin (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 19,584,000 18.9 Director Ho, S. C. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.)

Director Peng, Cheng Yang (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Director Zhi Qing Min (Representative of Yuen Foong Yu Investment Holding Co., Ltd.)

Director Zhi Cheng Huang (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Supervisor Wu, C. F. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.)

Director Rui He Chen (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) President Zhi Qing Min

Director Lee Zhu Chang 1,081,200 1.0 Lotus Ecoscings & Engineering Co., Ltd. Chairman Chiu, Melody (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 23,704,000 100.0

Supervisor Wu, C. F. (Representative of Kao Hsiang Investment Co., Ltd.) 1,000 0.0 Director Yin, K. T. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.)

President Kun Lung Lin Director Zhi Qing Min (Representative of Yuen Foong Yu Investment Holding Co., Ltd.)

China Color Printing Co., Ltd. Chairman Chung Yi Chang (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 32,896,330 49.7 Supervisor Wu, C. F. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.)

Vice Hung Yi Ho (Representative of Shin Kang Jie BVI Corp.) 27 0.0 San Ying Enterprises Co., Ltd. Chairman Huang, C. C. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 12,600,000 100.0 Chairman Director Ho, S. C. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Director Pi Yao Lin (Representative of Shin Kang Jie BVI Corp.) Director Chiu, Melody (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Director Jian Nan Liao (Representative of Shin Kang Jie BVI Corp.) Supervisor Wu, C. F. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Director Ho, S. C. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) President Huang, C. C. Director Zhan, Shun Xiang (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Cupid InfoTech Co., Ltd. Chairman Chen, Hsiang Ming (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 1,847,000 100.0 Director Li Ren Guo (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Director Chien, Ray (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Supervisor Zhi Qing Min (Representative of Gao Cheng Investment Co.) 1,000 0.0 Director Shi Wei Liu (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Supervisor Wu, C. F. (Representative of Gao Cheng Investment Co.) Supervisor Wu, C. F. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Supervisor Yau Chung Ho (Representative of Motai Investments Ltd.) 2,000,000 3.0 President Chien, Ray President Chung Yi Chang Ever Growing Agriculture Bio-tech Chairman Ho, Felix (Representative of YFY Consumer Products Co., Ltd.) 14,612,209 85.0 YFY Capital Co., Ltd. Chairman Shiao, Li Jun (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 26,840,000 100.0 Co., Ltd. Director Xian Ming Guo (Representative of YFY Consumer Products Co., Ltd.) Director Yin, K. T. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Director Zhi Hong Xu (Representative of YFY Consumer Products Co., Ltd.) Director Shang Ming Chen (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Supervisor Pao Yu Hsieh (Representative of Cheng Yu Co., Ltd.) 2,570,539 15.0 Supervisor Wu, C. F. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) President Xian Ming Guo President Shiao, Li Jun LiVEBRiCKS Inc. Chairman Shi Wei Liu (Representative of YFY Paradigm Investment Co., Ltd.) 7,700,002 100.0 YFY Consumer Products Co., Ltd. Chairman Ho, Felix (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 2,145,622 100.0 Director Ho, Felix (Representative of YFY Paradigm Investment Co., Ltd.) Director Ho, S. C. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Director Hua Mei (Representative of YFY Paradigm Investment Co., Ltd.) Director Chiu, Melody (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Supervisor Zhi Qing Min (Representative of YFY Paradigm Investment Co., Ltd.) Director Zong Chun Li (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) President Shi Wei Liu Director Pei Wen Chen (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) (Continued on next page) Supervisor Yin, K. T. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.)

President Zhi Hong Xu

(Continued on next page)

98 Annual Report 2016 Special Disclosures 99 (Continued from previous page) (Continued from previous page)

Shares held Shares held Company name Title Name or representative Company name Title Name or representative Number of shares Shareholding ratio (%) Number of shares Shareholding ratio (%)

YEON Technologies Co., Ltd. Chairman Lin, Bing Yi (Representative of YFY RFID Technologies Co., Ltd.) 6,000,001 100.0 YFY RFID Technologies Co., Ltd. Director YFY Global Investment BVI Corp. Investment amount USD 5,330,000 Investment percentage 100.0

Director Zhi Qing Min (Representative of YFY RFID Technologies Co., Ltd.) YFY RFID Technologies Co., Ltd. Director YFY Global Investment BVI Corp. 25,600,000 100.0

Director Guo Feng Gao (Representative of YFY RFID Technologies Co., Ltd.) Director Ho, Felix

Supervisor Su Ping Lian (Representative of YFY RFID Technologies Co., Ltd.) YFY Cayman Co., Ltd. Chairman Ho, Felix

President Guo Feng Gao Director Ho, S. C. (Representative of YFY International BVI Corp.) Investment amount USD 309,918,142.15 Investment percentage 100.0

YFY Biotech Management Company Chairman Hong Jen Chang (Representative of YFY Paradigm Investment Co., Ltd.) 3,570,000 100.0 Director Chiu, Melody

Director Ho, S. C. (Representative of YFY Paradigm Investment Co., Ltd.) YFY International Labuan Co., Ltd. Director YFY Cayman Co., Ltd. Investment amount USD 135,901,098.99 Investment percentage 100.0

Director Guo Zhi You (Representative of YFY Paradigm Investment Co., Ltd.) YFY Packaging Capital Corp. Director YFY Cayman Co., Ltd. Investment amount USD 200,000,000 Investment percentage 100.0

Supervisor Shiao, Li Jun (Representative of YFY Paradigm Investment Co., Ltd.) CHP International (BVI) Director Huang, Kirk (Representative of Chung Hwa Pulp Corp.) Investment amount USD 61,040,000 Investment percentage 100.0

President Hong Jen Chang Corporation Director Gu Feng Lin (Representative of Chung Hwa Pulp Corp.)

Effion Enertech Co., Ltd. Chairman Chiu, Melody (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 34,300,000 49.0 YFY Packaging (Yangzhou) Chairman Ho, Felix (Representative of YFY Mauritius Corp.) Investment amount USD 36,707,159.45 Investment percentage 100.0

Director Ho, S. C. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Investment Co., Ltd. Director Jun Lang Huang (Representative of YFY Mauritius Corp.)

Director Huang, C. C. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Director Zheng Wei Zhou (Representative of YFY Mauritius Corp.)

Supervisor Gu Feng Lin (Representative of YFY Investment Holding Co., Ltd.) 700,000 1.0 Supervisor Yu Yang Wang (Representative of YFY Mauritius Corp.)

President Huang, C. C. President Jun Lang Huang

YFY Holding Management Co., Ltd. Chairman Ho, Felix (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 25,000,000 100.0 Yuen Foong Yu Papers (Guangzhou) Chairman Y. C. Chang (Representative of YFY Mauritius Corp.) Investment amount USD 8,906,250 Investment percentage 93.75

Director Leu, S. R. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Co., Ltd. Director Zhong Cheng Dou (Representative of YFY Mauritius Corp.)

Director Zhan, Shun Xiang (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Director Bin Lin (Representative of Industrial Development Corp. of Investment amount USD 593,750 Investment percentage 6.25

Supervisor Wu, C. F. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Guangzhou Economic and Technology Development Zone)

President Ho, Felix Supervisor Zhan, Shun Xiang (Representative of YFY Mauritius Corp.)

Chung Hwa Pulp Corp. Chairman Huang, Kirk (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 627,827,989 56.9 President Hong Ming Chu

Director Chiu, Melody (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Yuen Foong Yu Papers (Xiamen) Chairman Y. C. Chang (Representative of YFY Mauritius Corp.) Investment amount USD 6,500,000 Investment percentage 100.0

Director Ho, Felix (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Co., Ltd. Director Sheng Jing Xie (Representative of YFY Mauritius Corp.)

Director Gu Feng Lin (Representative of Lotus Ecoscings & Engineering Co., Ltd.) 117,247 0.01 Director Zhong Cheng Dou (Representative of YFY Mauritius Corp.)

Director Zhi Cheng Huang (Representative of Lotus Ecoscings & Engineering Co., Ltd.) Supervisor T. H. Lin (Representative of YFY Mauritius Corp.)

Director Rui He Chen (Representative of Lotus Ecoscings & Engineering Co., Ltd.) President Sheng Jing Xie

Independent Director Si Kuan Chen Yuen Foong Yu Paper Enterprise Chairman Y. C. Chang (Representative of YFY Mauritius Corp.) Investment amount USD 6,000,000 Investment percentage 100.0

Independent Director Ling Han Zhang (Zhongshan) Co., Ltd. Director Yu Hsu Chang (Representative of YFY Mauritius Corp.)

Independent Director Shi Lei Lu Director Zhong Cheng Dou (Representative of YFY Mauritius Corp.)

President Zhi Cheng Huang Supervisor T. H. Lin (Representative of YFY Mauritius Corp.)

Guang Hwa Fertilizer Corp. Director Ren Yong Dai (Representative of Hwa Fong Investment Co., Ltd.) Investment amount 5,000,000 Investment percentage 100.0 President Yu Hsu Chang

Hwa Fong Investment Co., Ltd. Chairman Huang, Kirk (Representative of Chung Hwa Pulp Corp.) 3,600,000 100.0 Yuen Foong Yu Paper Enterprise Chairman Y. C. Chang (Representative of YFY Mauritius Corp.) Investment amount USD 6,000,000 Investment percentage 100.0

Director Gu Feng Lin (Representative of Chung Hwa Pulp Corp.) (Dongguan) Co., Ltd. Director Zhong Cheng Dou (Representative of YFY Mauritius Corp.)

Director Yin, K. T. (Representative of Chung Hwa Pulp Corp.) Director Chiu Shong Lu (Representative of YFY Mauritius Corp.)

Supervisor Guan Jun Lin (Representative of Chung Hwa Pulp Corp.) Supervisor T. H. Lin (Representative of YFY Mauritius Corp.)

Eihoyo Shoji Co., Ltd. Director Naoki Ochiai (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) 200 100.0 President Chiu Shong Lu

Director Ho, S. C. (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Yuen Foong Yu Paper Enterprise Chairman Zhao Kun Wang (Representative of YFY Mauritius Corp.) Investment amount USD 8,958,825.93 Investment percentage 90.0

Director Ho, Felix (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) (Nanjing) Co., Ltd. Director Ming Gui Luo (Representative of YFY Mauritius Corp.)

Supervisor Chiu, Melody (Representative of Yuen Foong Yu Investment Holding Co., Ltd.) Director De Ming Liao (Representative of YFY Mauritius Corp.)

YFY Mauritius Corp. Director Ho, Felix Director Wei Yue Ma (Representative of Nanjing Light Industry Investment amount USD 1,000,000 Investment percentage 10.0

Director Chiu, Melody Enterprise Group Co., Ltd.)

Director Chen, Hsiang Ming Supervisor Zhan, Shun Xiang (Representative of YFY Mauritius Corp.)

Director Pines Ltd. President Ming Gui Luo

YFY International BVI Corp. Director Yuen Foong Yu Investment Holding Co., Ltd. 550,098,758 100.0 Yuen Foong Yu Paper Enterprise Chairman Y. C. Chang (Representative of YFY Mauritius Corp.) Investment amount USD 8,000,000 Investment percentage 100.0

YFY Global Investment BVI Corp. Director Yuen Foong Yu Investment Holding Co., Ltd. 790,000,000 100.0 (Qingdao) Co., Ltd. Director Hong Yi Zhang (Representative of YFY Mauritius Corp.)

YFY Packaging (BVI) Corp. Director YFY Packaging Inc. Investment amount USD 150,050,000 Investment percentage 100.0 Director Wen Nan Sun (Representative of YFY Mauritius Corp.)

YFY Biopulp Technology Ltd. Director Chiu, Melody Supervisor T. H. Lin (Representative of YFY Mauritius Corp.)

Yuen Foong Yu Consumer Products Director Ho, S. C. President Hong Yi Zhang

Investment Limited Director Ho, Felix (Continued on next page) (Continued on next page)

100 Annual Report 2016 Special Disclosures 101 (Continued from previous page) (Continued from previous page)

Shares held Shares held Company name Title Name or representative Company name Title Name or representative Number of shares Shareholding ratio (%) Number of shares Shareholding ratio (%)

Yuen Foong Yu Paper Enterprise Chairman Zhao Kun Wang (Representative of YFY Mauritius Corp.) Investment amount USD 5,000,000 Investment percentage 100.0 Yuen Foong Yu Consumer Products Chairman Zong Chun Li (Representative of YFY Investment Co., Ltd.) Investment amount USD 30,000,000 Investment percentage 100.0

(Jiaxing) Co., Ltd. Director De Ming Liao (Representative of YFY Mauritius Corp.) (Yangzhou) Co., Ltd. Director Zhong Min Chen (Representative of YFY Investment Co., Ltd.) Director Ming Fa Tang (Representative of YFY Investment Co., Ltd.) Director Jun Min Hong (Representative of YFY Mauritius Corp.) Supervisor Shao Yu Chen (Representative of YFY Investment Co., Ltd.) Supervisor Yu Yang Wang (Representative of YFY Mauritius Corp.) President Zong Chun Li President Jun Min Hong YFY Investment Co., Ltd. Chairman Ho, Felix (Representative of Yuen Foong Yu Consumer Investment amount USD 95,000,000 Investment percentage 100.0 Yuen Foong Yu Paper Enterprise Chairman Zhao Kun Wang (Representative of YFY Mauritius Corp.) Investment amount USD 11,000,000 Investment percentage 100.0 Products Investment Limited) Director Zong Chun Li (Representative of Yuen Foong Yu Consumer Products Investment Limited) (Kunshan) Co., Ltd. Director De Ming Liao (Representative of YFY Mauritius Corp.) Director Yin, K. T. (Representative of Yuen Foong Yu Consumer Products Investment Limited) Director Zhi Ren Wang (Representative of YFY Mauritius Corp.) Supervisor Pei Wen Chen (Representative of Yuen Foong Yu Consumer Products Investment Limited) Supervisor Yu Yang Wang (Representative of YFY Mauritius Corp.) President Zong Chun Li President Zhi Ren Wang YFY International Trading (Shanghai) Co. Managing Ho, Felix (Representative of YFY Shop) Investment amount RMB 1,000,000 Investment percentage 100.0

Yuen Foong Yu Paper Enterprise Chairman Zhao Kun Wang (Representative of YFY Mauritius Corp.) Investment amount USD 7,000,000 Investment percentage 100.0 director Supervisor Zhi Qing Min (Rep of YFY Shop) (Suzhou) Co., Ltd. Director De Ming Liao (Representative of YFY Mauritius Corp.) President Shi Wei Liu Director Zhi Ren Wang (Representative of YFY Mauritius Corp.) Jiangyin Yuen Foong Yu Paper Chairman Jun Lang Huang (Representative of YFY International Investment amount USD 14,006,000 Investment percentage 94.0 Supervisor Yu Yang Wang (Representative of YFY Mauritius Corp.) MFG. Co., Ltd. BVI Corp.) President Zhi Ren Wang Director Chiu, Melody (Representative of YFY International BVI Corp.)

Yuen Foong Yu Paper Enterprise Chairman Zhao Kun Wang (Representative of YFY Mauritius Corp.) Investment amount USD 8,000,000 Investment percentage 100.0 Director Chen, Hsiang Ming (Representative of YFY International BVI Corp.) Director Zhan, Shun Xiang (Representative of YFY International BVI Corp.) (Shanghai) Co., Ltd. Director De Ming Liao (Representative of YFY Mauritius Corp.) Director Guo Xing Zhang (Representative of Cheng Jiang Investment amount USD 894,000 Investment percentage 6.0 Director Jun Min Hong (Representative of YFY Mauritius Corp.) Town Investment Co., Ltd.) Supervisor Yu Yang Wang (Representative of YFY Mauritius Corp.) Supervisor Yin, K. T. (Representative of YFY International BVI Corp.) President Jun Min Hong President Jun Lang Huang Shenzhen Jinglun Paper Co., Ltd. Chairman Zhi Cheng Huang (Representative of Hwa Fong Paper Investment amount RMB 3,200,000 Investment percentage100.0 Yuen Foong Yu Paper Enterprise Chairman Y. C. Chang (Representative of YFY Mauritius Corp.) Investment amount USD 8,000,000 Investment percentage 100.0 (Hong Kong) Co., Ltd.) (Tianjin) Co., Ltd. Director Wen Nan Sun (Representative of YFY Mauritius Corp.) Director Rui He Chen (Representative of Hwa Fong Paper (Hong Kong) Co., Ltd.) Director Jin Tong Huang (Representative of YFY Mauritius Corp.) Director Wei Yen Liu (Representative of Hwa Fong Paper (Hong Kong) Co., Ltd.) Supervisor T. H. Lin (Representative of YFY Mauritius Corp.) Director Zhan, Shun Xiang (Representative of Hwa Fong Paper (Hong Kong) Co., Ltd.)

President Jin Tong Huang President Wei Yen Liu YFY Advertising & Printing (Kunshan) Director Chang, C J (Representative of Yuen Foong Yu Papers ) Investment amount USD 1,500,000 Investment percentage 50.0 Yuen Foong Yu Paper Enterprise Chairman Y. C. Chang (Representative of YFY Mauritius Corp.) Investment amount USD 5,000,000 Investment percentage 100.0 Co., Ltd. (Xiamen) Co., Ltd. (Fuzhou) Co., Ltd. Director Ren De Fu (Representative of YFY Mauritius Corp.) Director Jian Wang (Representative of Yuen Foong Yu Papers (Guangzhou) Co., Ltd.) Director Zhong Cheng Dou (Representative of YFY Mauritius Corp.) Supervisor Yu Yang Wang (Representative of Yuen Foong Yu Investment amount USD 1,500,000 Investment percentage 50.0 Supervisor T. H. Lin (Representative of YFY Mauritius Corp.) Papers (Guangzhou) Co., Ltd.)

President Ren De Fu Shanghai YFY Printing Co., Ltd. Director Zhan, Shun Xiang (Representative of YFY Advertising & Investment amount RMB 1,020,000 Investment percentage 51.0 Printing (Kunshan) Co., Ltd.) Yuen Foong Yu Paper MFG Chairman Peng, Cheng Yang (Representative of YFY Mauritius Corp.) Investment amount USD 194,694,899.74 Investment percentage 100.0 Director Yao Liu (Representative of Shanghai ECNU Asset Management Co., Ltd.) (Yangzhou) Co., Ltd. Director Ho, Felix (Representative of YFY Mauritius Corp.) Supervisor Yun Chiu Chang (Representative of Shanghai ECNU Asset Investment amount RMB 980,000 Investment percentage 49.0 Director Chiu, Melody (Representative of YFY Mauritius Corp.) Management Co., Ltd.) Director Jun Lang Huang (Representative of YFY Mauritius Corp.) Kunshan Actview Carbon Technology Chairman Huang, C. C. (Representative of San Ying Enterprises Co., Ltd.) Investment amount USD 836,080 Investment percentage 66.4 Co., Ltd. Director Zhi Qing Min (Representative of San Ying Enterprises Co., Ltd.) Director Tian Wang Wu (Representative of YFY Mauritius Corp.) Director Jin Bang Zhang (Representative of San Ying Enterprises Co., Ltd.) Supervisor Yin, K. T. (Representative of YFY Mauritius Corp.) Director He Xin Li (Representative of China Carbon Technology) Investment amount USD 424,000 Investment percentage 33.6 President Tian Wang Wu Director Ruei Shui Lee (Representative of China Carbon Technology) Yuen Foong Yu Family Care Chairman Zong Chun Li (Representative of YFY Investment Co., Ltd.) Investment amount USD 30,000,000 Investment percentage 100.0 Supervisor Shao Yu Chen (Representative of San Ying Enterprises Co., Ltd.)

(Kunshan) Co., Ltd. Director Shi Yang Zeng (Representative of YFY Investment Co., Ltd.) President Huang, C. C. Yuen Foong Yu Blue Economy Natural Chairman Jun Lang Huang (Representative of YFY International BVI Corp.) Investment amount USD 8,000,000 Investment percentage 100.0 Director Ming Fa Tang (Representative of YFY Investment Co., Ltd.) Resources (Yangzhou) Co., Ltd. Director Huang, C. C. (Representative of YFY International BVI Corp.) Supervisor Shao Yu Chen (Representative of YFY Investment Co., Ltd.) Director Jui Chih Huang (Representative of YFY International BVI Corp.) President Zong Chun Li Supervisor Zhan, Shun Xiang (Representative of YFY International BVI Corp.) Yuen Foong Yu Family Paper Chairman Zong Chun Li (Representative of YFY Investment Co., Ltd.) Investment amount USD 35,000,000 Investment percentage 100.0 President Jui Chih Huang

(Beijing) Co., Ltd. Director Zhong Min Chen (Representative of YFY Investment Co., Ltd.) YFY Firstpack Packaging (Yangzhou) Chairman Shen Xiu Pu (Representative of Yuen Foong Yu Blue Investment amount RMB 210,000,000 Investment percentage 70.0 Co., Ltd. Economy Natural Resources Co., Ltd.) Director Shi Yang Zeng (Representative of YFY Investment Co., Ltd.) Director Zhi Qing Min (Representative of Yuen Foong Yu Blue Economy Natural Resources Co., Ltd.) Supervisor Shao Yu Chen (Representative of YFY Investment Co., Ltd.) Director Da Ming Yuan (Representative of Firstpak International Ltd.) Investment amount RMB 84,000,000 Investment percentage 30.0 President Zong Chun Li Supervisor Zhan, Shun Xiang (Representative of Yuen Foong Yu Blue Economy Natural Resources Co., Ltd.) (Continued on next page) (Continued on next page)

102 Annual Report 2016 Special Disclosures 103 (Continued from previous page) (Continued from previous page)

Shares held Shares held Company name Title Name or representative Company name Title Name or representative Number of shares Shareholding ratio (%) Number of shares Shareholding ratio (%)

Arizon RFID Technology (Yangzhou) Chairman Ho, Felix (Representative of YFY RFID Co., Ltd.) Investment amount USD 25,000,000 Investment percentage 100.0 YFY Jupiter US, Inc. Director Crews Mitch

Co., Ltd. Director Ho, S. C. (Representative of YFY RFID Co., Ltd.) Director Chen, Wen Fu

Director Lin, Bing Yi (Representative of YFY RFID Co., Ltd.) Director Da, Pei Ling

Supervisor Zhi Qing Min (Representative of YFY RFID Co., Ltd.) Innovativ Packaging Director Allen Ronald

President Hong Shi Wen worldwide, LLC Director Da, Pei Ling Yangzhou YEON Technologies Co., Ltd. Chairman Lin, Bing Yi (Representative of Arizon RFID Technology Investment amount RMB 8,000,000 Investment percentage 100.0 Mobius105 Ltd. Director Sean James Murphy (Yangzhou) Co., Ltd.) Director Chen, Wen Fu Director Hong Shi Wen (Representative of Arizon RFID Technology (Yangzhou) Co., Ltd.) Director YFY Jupiter (BVI) Inc. 10,000 100.0 Director Yong Long Xu (Representative of Arizon RFID Technology (Yangzhou) Co., Ltd.) YFY Jupiter Trading (Shenzhen) Ltd. Director Chen, Wen Fu Supervisor Su Ping Lian (Representative of Arizon RFID Technology (Yangzhou) Co., Ltd.) Director Li Jia Chen President Yong Long Xu Director Xing Jun Lin YFY Capital Holdings Corp. Director Chiu, Melody Supervisor Da, Pei Ling YFY (Shanghai) Commercial Factoring Chairman Chiu, Melody (Representative of YFY Capital Holdings Corp.) Investment amount RMB 50,000,000 Investment percentage 100.0 Co., Ltd. Director Yin, K. T. (Representative of YFY Capital Holdings Corp.) President Chen, Wen Fu Director Zheng Wei Zhou (Representative of YFY Capital Holdings Corp.) Kunshan YFY Jupiter Green Director Wen Fu Chen Supervisor Zhan, Shun Xiang (Representative of YFY Capital Holdings Corp.) Packing Ltd. Director Lee, Kuo-Lung President Chiu, Melody Director Xue Yi Lu

Guangdong Dingfung Pulp & Paper Chairman Gu Feng Lin (Representative of CHP International (BVI) Corp.) Investment amount USD 51,378,000 Investment percentage 60.0 Supervisor Da, Pei Ling

Co., Ltd. Director Zhen Kun Liu (Representative of CHP International (BVI) Corp.) President Chen, Wen Fu

Director Zheng Fa Qian (Representative of CHP International (BVI) Corp.) Jupiter Supply Chain Management Chairman Chen, Wen Fu

Director Huang, Kirk (Representative of YFY International BVI Corp.) Investment amount USD 34,252,000 Investment percentage 40.0 Services (Shenzhen) Co. Director Li Jia Chen Director Zhi Cheng Huang (Representative of YFY International BVI Corp.) Director Xing Jun Lin Supervisor Yin, K. T. (Representative of YFY International BVI Corp.) Supervisor Da, Pei Ling President Gu Feng Lin President Chen, Wen Fu Zhaoqing Dingfung Forestry Co., Ltd. Chairman Gu Feng Lin (Representative of Guangdong Dingfung Investment amount USD 14,500,000 Investment percentage 66.3 Rimagine Limited Director Paul John Fraine Pulp & Paper Co., Ltd.) Director Sean James Murphy Director Huang, Kirk (Representative of CHP International (BVI) Corp.) Investment amount USD 4,428,000 Investment percentage 20.2 Director Lorenz Dieter Wagener Director Zhi Cheng Huang (Representative of YFY International Investment amount USD 2,952,000 Investment percentage 13.5 Director Da, Pei Ling BVI Corp.) Rimagine Group Limited Director Paul John Fraine Supervisor Zhan, Shun Xiang (Representative of YFY International BVI Corp.) President Gu Feng Lin Director Sean James Murphy Hwa Fong Paper (Hong Kong) Co., Ltd. Director Huang, Kirk Director Lorenz Dieter Wagener Director Chiu, Melody Director Da, Pei Ling Director Zhi Cheng Huang Rimagine Design (Shanghai) Co., Ltd. Director Lorenz Dieter Wagener

Director Wei Yen Liu Director Sean James Murphy

Director Zhan, Shun Xiang Director Paul John Fraine

Syntax Communication (H.K.) Ltd. Director YFY International BVI Corp. 20,500,000 100.0 Supervisor Da, Pei Ling

Director Wei Yen Liu President Chen, Wen Fu President Wei Yen Liu Jupiter Prestige Group Director Mark Raymond White YFY Jupiter (BVI) Inc. Chairman Ho, Felix Holdings Limited Director Crews Mitch Director Ho, S. C. Director Ho, Felix Director Lin, Bing Yi Jupiter Prestige Group North Director Crews Mitch Director Chen, Wen Fu America Inc. Director Nancy A. Schachtner Director Crews Mitch 761,905 6.6 Director Da, Pei Ling Director Sean James Murphy 761,905 6.6 Director Mark Raymond White Director Nancy A. Schachtner 761,905 6.6 Director Paul John Fraine YFY Jupiter Ltd. Director Sean James Murphy Director Chen, Wen Fu (Continued on next page) Director YFY Jupiter (BVI) Inc. 3 100.0

Mobius105 (HK) Ltd. Director Sean James Murphy Director Chen, Wen Fu

Director YFY Jupiter (BVI) Inc. 10,000 100.0

(Continued on next page)

104 Annual Report 2016 Special Disclosures 105 (Continued from previous page) (4) Financial overview and performance of affiliated companies Unit: NT$1,000 Shares held Company name Title Name or representative Earnings per Number of shares Shareholding ratio (%) Operating Net income Company name Capital Total Assets Total liabilities Net worth Operating profit share (NTD) income (after tax) Opal BPM Limited Director Mark Raymond White (after taxes)

Director Paul John Fraine YFY Packaging Inc. 3,201,500 15,950,308 10,337,384 5,612,924 9,478,762 ( 106,057) ( 993,980) ( 3.10)

Director Christopher Ebbs Pek Crown Paper Co., Ltd. 300,000 771,131 344,762 426,369 939,624 41,794 39,043 1.30

Director Mattew Mintman Yuen Yuan Paper Container Co., Ltd. 121,275 139,972 1,148 138,824 - ( 3,120) 6,691 0.55 Union Paper Corp. 1,035,300 1,726,114 532,124 1,193,990 2,079,351 32,922 27,668 0.27 Director Da, Pei Ling China Color Printing Co., Ltd. 662,486 1,199,923 286,513 913,410 810,229 43,125 46,798 0.71 Director Lin, Bing Yi YFY Capital Co., Ltd. 268,400 1,927,439 1,570,724 356,715 968,920 ( 30,656) 34,553 1.29 Opal BPM India Private Limited Director Da, Pei Ling YFY Consumer Products Co., Ltd. 2,145,622 7,351,851 4,937,282 2,414,569 5,617,562 307,213 85,103 0.40 Director Paul Fraine YFY Shop 50,000 188,398 183,404 4,994 765,376 ( 2,715) ( 4,861) ( 0.97) Director Christopher Ebbs Shin Foong Specialty and Applied Materials Co., Ltd. 943,451 3,012,548 621,014 2,391,534 3,047,677 714,474 594,056 6.30 Director Vimal Kumar YFY Venture Capital Investment Co., Ltd. 449,936 1,963,563 1,200,154 763,409 - ( 463) 84,717 1.88

Jupiter Prestige Group Australia Director Paul John Fraine YFY Paradigm Investment Co., Ltd. 600,500 2,174,715 1,007,089 1,167,626 - ( 13,451) 225,243 3.75 Lotus Ecoscings & Engineering Co., Ltd. 237,040 445,114 184,293 260,821 - ( 453) 22,013 0.93 PTY Ltd. Director Mark Raymond White San Ying Enterprises Co., Ltd. 126,000 152,382 28,480 123,902 81,113 3,092 ( 11,389) ( 0.90) Director Mark Edward Ingman Cupid InfoTech Co., Ltd. 18,470 102,289 70,965 31,324 87,650 5,373 6,857 3.71 Director Alison Jane Crisp Ever Growing Agriculture Bio-tech Co., Ltd. 171,827 480,518 247,906 232,612 227,977 30,647 25,574 1.49 Director Justin McCartney LiVEBRiCKS Inc. 77,000 1,864 4,936 ( 3,072) 8,796 ( 6,182) ( 6,235) ( 0.81) Director Nancy A. Schachtner YEON Technologies Co., Ltd. 60,000 32,703 42,394 ( 9,691) 46,300 ( 4,444) ( 6,091) ( 1.02) Director Sean James Murphy YFY Biotech Management Company 35,700 50,523 5,557 44,966 29,308 2,550 1,903 0.53

Jupiter Prestige Group Europe Ltd. Director Mark Raymond White Effion Enertech Co., Ltd. 700,000 714,191 12,259 701,932 13,289 ( 633) 5,990 0.09

Director Alison Jane Crisp YFY Holding Management Co., Ltd. 250,000 302,897 52,920 249,977 174,913 6,616 6,982 0.28 Chung Hwa Pulp Corp. 11,028,353 26,339,691 10,625,734 15,713,957 19,433,094 493,268 391,114 0.35 Director Mark Edward Ingman Guang Hwa Fertilizer Corp. 5,000 10,972 1,570 9,402 10,011 3,475 2,969 5.94 Director Paul John Fraine Hwa Fong Investment Co., Ltd. 36,000 46,366 175 46,191 - ( 165) 3,104 0.86 Director Nancy A. Schachtner Eihoyo Shoji Co., Ltd. 2,756 135,873 53,258 82,615 420,253 ( 997) 100 500.24 Director Sean James Murphy YFY Mauritius Corp. 8,788,181 5,232,526 50 5,232,476 - ( 438) ( 1,748,357) ( 6.42) Director Da, Pei Ling YFY International BVI Corp. 17,740,685 23,902,364 4,409,622 19,492,742 - ( 11,827) ( 1,259,088) ( 2.29)

Jupiter Prestige Group Asia Ltd. Director Mark Raymond White YFY Global Investment BVI Corp. 2,547,750 5,539,185 781,777 4,757,408 - ( 19,451) 279,897 3.54 YFY Packaging (BVI) Corp. 4,839,113 3,372,519 - 3,372,519 - ( 85) ( 690,528) ( 4.60) Director Alison Jane Crisp YFY Biopulp Technology Ltd. 4,838 2,193 3,576 ( 1,383) - ( 1,456) ( 1,494) ( 9.96) Director Mark Edward Ingman Yuen Foong Yu Consumer Products Investment Limited 4,837,919 2,729,647 - 2,729,647 - - ( 145,847) ( 0.97) Director Lee, Mark YFY RFID Technologies Co., Ltd. 171,893 7,296 9,691 ( 2,395) - ( 63) ( 6,064) ( 1.14) Director Crews Mitch YFY RFID Co., Ltd. 825,600 1,878,370 46 1,878,324 - ( 70) 412,187 16.10 Director Da, Pei Ling YFY Cayman Co., Ltd. 9,994,860 23,604,269 11,449,058 12,155,211 - ( 49,337) ( 1,398,720) ( 4.51)

YFY Jupiter Malaysia SDN. BHD. Director Chen, Wen Fu YFY International Labuan Co., Ltd. 4,382,810 6,026,206 - 6,026,206 - - ( 969,975) ( 7.14) YFY Packaging Capital Corp. 5,923,661 6,005,016 - 6,005,016 - - 53,586 0.04 Director Da, Pei Ling CHP International (BVI) Corporation 1,968,539 5,282,943 262 5,282,681 - ( 6,291) ( 42,356) ( 0.69) Director Lin, Jian Zhou YFY Packaging (Yangzhou) Investment Co., Ltd. 1,183,801 3,325,061 3,121,223 203,838 6,993,708 703 ( 315,450) Director Lun, Shiaw Tat Yuen Foong Yu Papers (Guangzhou) Co., Ltd. 306,375 1,138,867 705,994 432,873 1,011,154 45,427 18,946 Director Fang, Chan Chea Yuen Foong Yu Papers (Xiamen) Co., Ltd. 209,625 491,795 626,779 ( 134,984) 595,639 ( 8,416) ( 15,465) YFY Jupiter Singapore PTE. LTD. Director Chen, Wen Fu Yuen Foong Yu Paper Enterprise (Zhongshan) Co., Ltd. 193,500 1,141,919 417,299 724,620 830,384 45,685 32,975

Director Da, Pei Ling Yuen Foong Yu Paper Enterprise (Dongguan) Co., Ltd. 193,500 730,966 425,791 305,175 676,828 1,962 ( 10,214) Yuen Foong Yu Paper Enterprise (Nanjing) Co., Ltd. 321,178 1,093,042 893,983 199,059 706,526 13,251 ( 32,144) Director Lun, Shiaw Tat Yuen Foong Yu Paper Enterprise (Qingdao) Co., Ltd. 258,000 1,209,004 432,559 776,445 515,331 59,467 46,931 YFY Jupiter Mexico, S. de R.L. Director Chen, Wen Fu Yuen Foong Yu Paper Enterprise (Jiaxing) Co., Ltd. 161,250 566,050 462,379 103,671 554,198 10,419 ( 12,485) Director Da, Pei Ling Yuen Foong Yu Paper Enterprise (Kunshan) Co., Ltd. 354,750 1,275,944 816,298 459,646 525,237 3,715 12,502 Director Allen Ronald Yuen Foong Yu Paper Enterprise (Suzhou) Co., Ltd. 225,750 618,758 501,242 117,516 590,771 ( 16,670) ( 44,038) Director Crews Mitch Yuen Foong Yu Paper Enterprise (Shanghai) Co., Ltd. 258,000 805,745 677,754 127,991 636,734 32,134 3,295 Yuen Foong Yu Paper Enterprise (Tianjin) Co., Ltd. 258,000 1,133,176 524,612 608,564 692,351 46,445 21,259 Yuen Foong Yu Paper Enterprise (Fuzhou) Co., Ltd. 161,250 487,464 608,773 ( 121,309) 332,774 ( 35,245) ( 53,078) Yuen Foong Yu Paper MFG (Yangzhou) Co., Ltd. 6,278,914 18,107,822 16,506,822 1,601,000 7,163,371 ( 728,403) ( 1,550,936) Yuen Foong Yu Family Care (Kunshan) Co., Ltd. 967,500 1,554,725 1,080,077 474,648 2,136,678 63,177 28,127 Yuen Foong Yu Family Paper (Beijing) Co., Ltd. 1,128,750 765,142 268,033 497,109 932,765 21,631 21,186 Yuen Foong Yu Consumer Products (Yangzhou) Co., Ltd. 967,500 1,927,382 958,646 968,736 2,442,848 106,586 13,885 YFY Investment Co., Ltd. 3,063,750 3,628,063 1,599,388 2,028,675 8,150,504 ( 132,171) ( 169,147) YFY International Trading (Shanghai) Co. 4,649 84 1,662 ( 1,578) 469 ( 1,954) ( 1,975)

(Continued on next page)

106 Annual Report 2016 Special Disclosures 107 (Continued from previous page) Unit: NT$1,000 (5) Consolidated financial statements of various affiliated enterprises:

Earnings per Operating Net income Company name Capital Total Assets Total liabilities Net worth Operating profit share (NTD) income (after tax) (after taxes)

Jiangyin Yuen Foong Yu Paper MFG. Co., Ltd. 480,525 269,440 1,100,172 ( 830,732) 6,305 ( 51,288) ( 85,109) Explanatory note regarding consolidated financial statements of affiliates. Shenzhen Jinglun Paper Co., Ltd. 14,877 441,679 373,160 68,519 930,081 21,839 950 YFY Advertising & Printing (Kunshan) Co., Ltd. 96,750 1,391 454,419 ( 453,028) - ( 378) ( 10,095) Shanghai Yuen Foong Yu Printing Co., Ltd. 9,298 5,215 4,040 1,175 - ( 1,490) ( 1,491) Kunshan Actview Carbon Technology Co., Ltd. 40,635 43,013 1,289 41,724 - ( 3,189) ( 845) For the 2016 year (from January 1 to December 31, 2016), companies that should be included in the consolidated Yuen Foong Yu Blue Economy Natural 258,000 150,592 7,165 143,427 64,948 ( 2,767) ( 61,564) Resources (Yangzhou) Co., Ltd. financial statement of affiliates as provided by the "Criteria Governing Preparation of Affiliation Reports, Consolidated YFY Firstpack Packaging (Yangzhou) Co., Ltd. 130,172 150,063 142,759 7,304 - ( 92,940) ( 92,835) Arizon RFID Technology (Yangzhou) Co., Ltd. 806,250 2,115,768 243,897 1,871,871 1,578,015 436,635 394,550 Business Reports and Consolidated Financial Statements of Affiliated Enterprises" are the same as what should be included Yangzhou YEON Technologies Co., Ltd. 37,192 117,302 64,654 52,648 289,071 15,751 10,383 YFY Capital Holdings Corp. 232,449 301,495 - 301,495 - - 16,197 2,009.52 in the consolidated financial statements of parent and subsidiary companies as provided in IFRSs No. 10, and the YFY (Shanghai) Commercial Factoring Co., Ltd. 232,449 615,456 314,234 301,222 - ( 24,023) 16,196 Guangdong Dingfung Pulp & Paper Co., Ltd. 2,761,568 6,944,660 2,099,820 4,844,840 2,357,599 ( 209,223) ( 106,185) relevant information that should be disclosed in the consolidated financial statements of affiliates has been disclosed in the Zhaoqing Dingfung Forestry Co., Ltd. 705,630 3,845,550 825,690 3,019,860 550,190 21,235 21,235 Hwa Fong Paper (Hong Kong) Co., Ltd. 482,328 72,727 76 72,651 - ( 156) 879 0.01 consolidated financial statements of the parent and its subsidiaries. The Company shall not be required to prepare separate Syntax Communication (H.K.) Ltd. 85,239 21,886 71,959 ( 50,073) 41,420 8,022 6,291 0.31 YFY Jupiter (BVI),Inc. 38,345 1,739,762 1,124,136 615,626 - ( 104) 58,306 7.39 consolidated financial statements of affiliates. YFY Jupiter Ltd. 1 676,916 490,661 186,255 1,142,747 36,403 36,637 12,212,290.25 Mobius105(HK) Ltd. 41 41 - 41 - ( 83) ( 83) ( 8.27) Hereby solemnly and sincerely declared by YFY Jupiter US, Inc. 32 150,226 150,148 78 29,444 11,951 ( 300) ( 3.00) Innovativ Packaging Worldwide, LLC 3 36,209 83,550 ( 47,341) 36,824 ( 26,622) ( 26,349) ( 263.49) Mobius105 Ltd. 41 82,250 56,406 25,844 124,640 9,737 59,695 5,969.50 YFY Jupiter Trading (Shenzhen) Ltd. 4,515 362,827 261,824 101,003 709,952 1,720 1,673 Kunshan YFY Jupiter Green Packing Ltd. 9,298 301,849 240,558 61,291 614,565 27,388 26,553 Jupiter Supply Chain Management - 46,433 7,023 39,410 - 29,181 24,855 Services (Shenzhen) Co. Rimagine Limited 11,375 945 77 868 - ( 39) 291 2,913.97 Rimagine Group Limited 3 30,078 18,078 12,000 13,396 5,945 5,981 59,813.11 Rimagine Design (Shanghai) Co., Ltd. 10,848 1,455 786 669 3,633 297 379 Jupiter Prestige Group Holding Limited 13,917 125,192 75,870 49,322 - ( 14,053) ( 48,935) Jupiter Prestige Group North America Inc. 32 53,758 45,198 8,560 133,452 ( 27,125) ( 26,158) ( 261.58) Company name: YFY Inc. Opal BPM Limited 54 41,887 33,175 8,712 46,633 873 675 Opal BPM India Private Limited 49 1,061 590 471 6,508 695 501 501.00 Jupiter Prestige Group Australia PTY Ltd. 3 18,252 27,319 ( 9,067) 73,051 ( 5,516) ( 5,516) ( 55,162.98) Jupiter Prestige Group Europe Ltd. 1,624 160,925 109,104 51,821 103,985 ( 26,108) ( 18,092) ( 603.06) Jupiter Prestige Group Asia Pacific Ltd. 1 167,637 95,259 72,378 211,205 7,955 7,545 75,445.01 Chairman: Ho, Felix YFY Jupiter Malaysia SDN. BHD. 1 422 497 ( 75) 64 ( 83) ( 82) ( 820.12) YFY Jupiter Singapore PTE. Ltd. 1 1 - 1 - - - YFY Jupiter Mexico, S. de R. L. 5 5 - 5 - - -

Exchange rate at the end of 2016 USD: 32.25 JPY: 0.2756 HKD: 4.1580 RMB: 4.648984 EUR: 33.9 SGD: 22.29 MXN: 1.564

March 16, 2017

108 Annual Report 2016 Special Disclosures 109 2. Privately purchased securities in the last fiscal year and up to the printing date of this annual report: None.

3. YFY's shares held or disposed of by subsidiaries in the last fiscal year and up to the printing date of this annual report: None.

4. Other information which should be disclosed: None.

5. Any incidents that have a material impact on shareholders equity or security price as described under Article 36, Paragraph 3, Subparagraph 2 of the Securities and Exchange Act in the last fiscal year and up to the printing date of this annual report: A new chairman was elected for the Company on August 12, 2016, the election had no significant impact on shareholders' equity or share price of the Company.

110 Annual Report 2016 YFY INC. AND SUBSIDIARIES Appendix NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

YFY Inc. (the Company) was incorporated in Kaohsiung in February 1950. The Company’s shares have been listed on the Taiwan Stock Exchange (TWSE) since February 1977.

The Company originally manufactured, packaged, tested and sold various integrated circuit products. To increase its competitiveness and sales through organization restructuring and specialization, the Company spun off the assets, liabilities, and operations of its consumer products and packaging segments to its subsidiaries, YFY Consumer Products Co., Ltd. in October 2007 and YFY Packaging Inc. in September 2005.

In addition, the Company spun off the assets, liabilities and operations of its paper and cardboard business segment to Chung Hwa Pulp Co., Ltd. (CHPC) and acquired the shares issued by CHPC on October 1, 2012. After this transaction, CHPC became a subsidiary of the Company, and the Company became an investment holding company, with investment and holding as its main business.

The consolidated financial statements of the Company and its subsidiaries, hereto forth collectively referred to as the Group, are presented in the Company’s functional currency, the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors on March 16, 2017.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

a. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the Financial Supervisory Commission (FSC) for application starting from 2017

Rule No. 1050050021 and Rule No. 1050026834 issued by the FSC stipulated that starting January 1, 2017, the Group should apply the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) issued by the IASB and endorsed by the FSC for application starting from 2017.

New, Amended or Revised Standards and Interpretations Effective Date (the “New IFRSs”) Announced by IASB (Note 1)

Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 Annual Improvements to IFRSs 2012-2014 Cycle January 1, 2016 (Note 3) Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities: January 1, 2016 Applying the Consolidation Exception” (Continued)

01 Appendix The amendments also require additional disclosure if there is a significant difference between the actual New, Amended or Revised Standards and Interpretations Effective Date operation after business combination and the expected benefit on acquisition date. (the “New IFRSs”) Announced by IASB (Note 1) The disclosures of related party transactions and impairment of goodwill will be enhanced when the Amendment to IFRS 11 “Accounting for Acquisitions of Interests in January 1, 2016 above amendments are retrospectively applied in 2017. Joint Operations” IFRS 14 “Regulatory Deferral Accounts” January 1, 2016 Except for the above impacts, as of the date the consolidated financial statements were authorized for Amendment to IAS 1 “Disclosure Initiative” January 1, 2016 issue, the Group continues assessing other possible impacts that application of the aforementioned Amendments to IAS 16 and IAS 38 “Clarification of Acceptable January 1, 2016 amendments and the related amendments to the Regulations Governing the Preparation of Financial Methods of Depreciation and Amortization” Reports by Securities Issuers will have on the Group’s financial position and financial performance, and Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” January 1, 2016 will disclose these other impacts when the assessment is completed. Amendment to IAS 19 “Defined Benefit Plans: Employee July 1, 2014 Contributions” b. New IFRSs in issue but not yet endorsed by the FSC Amendment to IAS 27 “Equity Method in Separate Financial January 1, 2016 Statements” The Group has not applied the following IFRSs issued by the IASB but not yet endorsed by the FSC. Amendment to IAS 36 “Impairment of Assets: Recoverable Amount January 1, 2014 Disclosures for Non-financial Assets” The FSC announced that amendments to IFRS 4 (only the overlay approach can be applied), IFRS 9 Amendment to IAS 39 “Novation of Derivatives and Continuation of January 1, 2014 and IFRS 15 will take effect starting January 1, 2018. As of the date the consolidated financial Hedge Accounting” statements were authorized for issue, the FSC has not announced the effective dates of other new IFRIC 21 “Levies” January 1, 2014 IFRSs. (Concluded) Effective Date Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on New IFRSs Announced by IASB (Note 1) or after their respective effective dates. Annual Improvements to IFRSs 2014-2016 Cycle Note 2 Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or Amendment to IFRS 2 “Classification and Measurement of January 1, 2018 after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition Share-based Payment Transactions” date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments with January 1, 2018 remaining amendments are effective for annual periods beginning on or after July 1, 2014. IFRS 4 Insurance Contracts” IFRS 9 “Financial Instruments” January 1, 2018 Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of January 1, 2018 occur in annual periods beginning on or after January 1, 2016; the remaining amendments are IFRS 9 and Transition Disclosures” effective for annual periods beginning on or after January 1, 2016. Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets To be determined by IASB between an Investor and its Associate or Joint Venture” The initial application in 2017 of the above IFRSs and related amendments to the Regulations IFRS 15 “Revenue from Contracts with Customers” January 1, 2018 Governing the Preparation of Financial Reports by Securities Issuers would not have any material Amendments to IFRS 15 “Clarifications to IFRS 15 Revenue from January 1, 2018 impact on the Group’s accounting policies, except for the following: Contracts with Customers” IFRS 16 “Leases” January 1, 2019 Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers Amendment to IAS 7 “Disclosure Initiative” January 1, 2017 Amendments to IAS 12 “Recognition of Deferred Tax Assets for January 1, 2017 The amendments include additions of several accounting items and requirements for disclosures of Unrealized Losses” impairment of non-financial assets as a consequence of the IFRSs endorsed by the FSC for application Amendments to IAS 40 “Transfers of Investment Property” January 1, 2018 starting from 2017. In addition, as a result of the post implementation review of IFRSs in Taiwan, the IFRIC 22 “Foreign Currency Transactions and Advance January 1, 2018 amendments also include emphasis on certain recognition and measurement considerations and add Consideration” requirements for disclosures of related party transactions and goodwill. Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on The amendments stipulate that other companies or institutions of which the chairman of the board of or after their respective effective dates. directors or president serves as the chairman of the board of directors or the president, or is the spouse or second immediate family of the chairman of the board of directors or president of the Group are Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after deemed to have a substantive related party relationship, unless it can be demonstrated that no control, January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods joint control, or significant influence exists. Furthermore, the amendments require the disclosure of beginning on or after January 1, 2018. the names of the related parties and the relationship with whom the Group has significant transaction. If the transaction or balance with a specific related party is 10% or more of the Group’s respective total transaction or balance, such transaction should be separately disclosed by the name of each related party.

Appendix 02 03 Appendix The initial application of the above New IFRSs, whenever applied, would not have any material impact Hedge accounting on the Group’s accounting policies, except for the following: The main changes in hedge accounting amended the application requirements for hedge accounting  IFRS 9 “Financial Instruments” to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening Recognition and measurement of financial assets the risks eligible for hedge accounting of non-financial items; (2) changing the way hedging derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 retrospective effectiveness assessment with the principle of economic relationship between the “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized hedging instrument and the hedged item. cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below. Transition

For the Group’s debt instruments that have contractual cash flows that are solely payments of Financial instruments that have been derecognized prior to the effective date of IFRS 9 cannot be principal and interest on the principal amount outstanding, their classification and measurement are reversed to apply IFRS 9 when it becomes effective. Under IFRS 9, the requirements for as follows: classification, measurement and impairment of financial assets are applied retrospectively with the difference between the previous carrying amount and the carrying amount at the date of initial 1) For debt instruments, if they are held within a business model whose objective is to collect the application recognized in the current period and restatement of prior periods is not required. The contractual cash flows, the financial assets are measured at amortized cost and are assessed for requirements for general hedge accounting shall be applied prospectively and the accounting for impairment continuously with impairment loss recognized in profit or loss, if any. Interest hedging options shall be applied retrospectively. revenue is recognized in profit or loss by using the effective interest method; Except for the above impact, as of the date the consolidated financial statements were authorized for 2) For debt instruments, if they are held within a business model whose objective is achieved by issue, the Group is continuously assessing the possible impact that the application of other standards both the collecting of contractual cash flows and the selling of financial assets, the financial and interpretations will have on the Group’s financial position and financial performance, and will assets are measured at fair value through other comprehensive income (FVTOCI) and are disclose the relevant impact when the assessment is completed. assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss. a. Statement of compliance

Except for the above, all other financial assets are measured at fair value through profit or loss. The consolidated financial statements have been prepared in accordance with the Regulations However, the Group may make an irrevocable election to present subsequent changes in the fair Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued value of an equity investment (that is not held for trading) in other comprehensive income, with into effect by the FSC. only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other b. Basis of preparation comprehensive income cannot be reclassified from equity to profit or loss. The consolidated financial statements have been prepared on the historical cost basis except for Impairment of financial assets financial instruments which are measured at fair value.

IFRS 9 requires that impairment loss on financial assets to be recognized by using the “Expected The fair value measurements are grouped into Levels 1 to 3 on the basis of the degree to which the fair Credit Losses Model”. The credit loss allowance is required for financial assets measured at value measurement inputs are observable and the significance of the inputs to the fair value amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets measurement in its entirety, are described as follows: arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for risk has increased significantly since initial recognition and is not low. However, a loss allowance the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction. 3) Level 3 inputs are unobservable inputs on the asset or liability.

For purchased or originated credit-impaired financial assets, the Group takes into account the c. Classification of current and non-current assets and liabilities expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a Current assets include: corresponding gain or loss recognized in profit or loss. 1) Assets held primarily for the purpose of trading;

Appendix 04 05 Appendix 2) Assets expected to be realized within twelve months after the reporting period; and The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 “Financial 3) Cash and cash equivalents, unless the asset is restricted from being exchanged or used to settle a Instruments: Recognition and Measurement,” or, when applicable, as the cost on initial recognition of liability for at least 12 months after the reporting period. an investment in an associate.

Current liabilities include: See Note 14 and Tables 8 and 9 for more information on subsidiaries (including the percentage of ownership and main business). 1) Liabilities held primarily for the purpose of trading; e. Business combinations 2) Liabilities due to be settled within 12 months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs and before the consolidated financial statements are authorized for issue; and are generally recognized in profit or loss as they are incurred.

3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any 12 months after the reporting period. Terms of a liability that could, at the option of the non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity counterparty, result in its settlement by the issue of equity instruments do not affect its interests in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired classification. and the liabilities assumed. If, after re-assessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the Assets and liabilities that are not classified as current are classified as non-current. amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interests in the acquiree, the excess is recognized immediately in profit or loss as a bargain d. Basis of consolidation purchase gain.

Principles for preparing consolidated financial statements Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value The consolidated financial statements incorporate the financial statements of the Company and the or at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s entities controlled by the Company (i.e. its subsidiaries). identifiable net assets. The choice of the measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value. Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of f. Foreign currencies acquisition or up to the effective date of disposal, as appropriate. In preparing the financial statements of each individual group entity, transactions in currencies other When necessary, adjustments are made to the financial statements of subsidiaries to bring their than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange accounting policies into line with those used by the Company. prevailing at the dates of the transactions.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or non-controlling interests even if this attribution results in the non-controlling interests having a deficit translation are recognized in profit or loss in the period in which they arise. balance. Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control at the rates prevailing at the date when the fair value was determined. Exchange differences arising over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s from the retranslation of non-monetary items are included in profit or loss for the period except for interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in exchange differences arising from the retranslation of non-monetary items in respect of which gains and the subsidiaries. Any difference between the amount by which the non-controlling interests are losses are recognized directly in other comprehensive income, in which case, the exchange differences adjusted and the fair value of the consideration paid or received is recognized directly in equity and are also recognized directly in other comprehensive income. attributed to the owners of the Company. Non-monetary items that are measured at historical cost in a foreign currency are not retranslated. When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and For the purpose of presenting consolidated financial statements, the functional currencies of the any investment retained in the former subsidiary at its fair value at the date when control is lost and (ii) Company and the Group entities (including subsidiaries and associates in other countries that use the assets (including any goodwill) and liabilities and any non-controlling interests of the former currency different from the currency of the Company) are translated into the presentation currency - the subsidiary at their carrying amounts at the date when control is lost. The Group accounts for all New Taiwan dollars as follows: Assets and liabilities are translated at the exchange rates prevailing at amounts recognized in other comprehensive income in relation to that subsidiary on the same basis as the end of the reporting period; income and expense items are translated at the average exchange rates would be required if the Group had directly disposed of the related assets or liabilities. for the period. The resulting currency translation differences are recognized in other comprehensive income (attributed to the owners of the Company and non-controlling interests as appropriate).

Appendix 06 07 Appendix On the disposal of a foreign operation (i.e. a disposal of the Company’s entire interest in a foreign The entire carrying amount of the investment (including goodwill) is tested for impairment as a single operation, or a disposal involving the loss of control over a subsidiary that includes a foreign operation, asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized or a partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation forms part of the carrying amount of the investment. Any reversal of that impairment loss is of which the retained interest becomes a financial asset), all of the exchange differences accumulated in recognized to the extent that the recoverable amount of the investment subsequently increases. equity in respect of that operation are reclassified to profit or loss. The Group discontinues the use of the equity method from the date on which its investment ceases to be In relation to a partial disposal of a subsidiary that does not result in the Company losing control over an associate. Any retained investment is measured at fair value at that date and the fair value is the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to regarded as its fair value on initial recognition as a financial asset. The difference between the non-controlling interests of the subsidiary and is not recognized in profit or loss. For all other partial previous carrying amount of the associate attributable to the retained interest and its fair value is disposals, the proportionate share of the accumulated exchange differences recognized in other included in the determination of the gain or loss on disposal of the associate. The Group accounts for comprehensive income is reclassified to profit or loss. all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. g. Inventories When a group entity transacts with its associate, profits and losses resulting from the transactions with Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the the associate are recognized in the Group’ consolidated financial statements only to the extent of lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be interests in the associate that are not related to the Group. appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are i. Property, plant and equipment recorded at weighted-average cost on the balance sheet date. Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and h. Investment in associates subsequent accumulated impairment loss.

An associate is an entity over which the Group has significant influence and that is not a subsidiary. Properties, plant and equipment in the course of construction are carried at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. The Group uses the equity method to account for its investments in associates. Such assets are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Under the equity method, investments in an associate are initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the Depreciation on property, plant and equipment is recognized using the straight-line method. Each associate. The Group also recognizes the changes in the Group’s share of equity of associates. significant part is depreciated separately. If the lease term is shorter than the useful lives, assets are depreciated over the lease term. The estimated useful lives, residual values and depreciation methods Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable are reviewed at the end of each reporting period, with the effect of any changes in estimates accounted assets and liabilities of an associate at the date of acquisition is recognized as goodwill, which is for on a prospective basis. included within the carrying amount of the investment and is not amortized. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost acquisition, after On derecognition of an item of property, plant and equipment, the difference between the sales proceeds reassessment, this is recognized immediately in profit or loss. and the carrying amount of the asset is recognized in profit or loss.

When the Company subscribes for additional new shares of the associate at a percentage different from j. Investment properties its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate. The Group records such a difference as Investment properties are properties held to earn rentals or for capital appreciation. Investment an adjustment to investments, with the corresponding amount charged or credited to capital surplus - properties also include land held for a currently undetermined future use. changes in the Group’s share of equity of associates. If the Group’s ownership interest is reduced due to the additional subscription of the new shares of associate, the proportionate amount of the gains or Investment properties are measured initially at cost, including transaction costs. Subsequent to initial losses previously recognized in other comprehensive income in relation to that associate is reclassified recognition, investment properties are measured at cost less accumulated depreciation and accumulated to profit or loss on the same basis as would be required if the investee had directly disposed of the impairment loss. Depreciation is recognized using the straight-line method. related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is On derecognition of an investment property, the difference between the net disposal proceeds and the debited to retained earnings. carrying amount of the asset is included in profit or loss.

When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which k. Goodwill includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group Goodwill arising from the acquisition of a business is carried at cost as established at the date of discontinues recognizing its share of further losses. Additional losses and liabilities are recognized acquisition of the business less accumulated impairment loss. only to the extent that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate. For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units or groups of cash-generating units (referred to as cash-generating units) that is expected to benefit from the synergies of the combination.

Appendix 08 09 Appendix A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more i. Financial assets at fair value through profit or loss frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a Financial assets at fair value through profit or loss are stated at fair value, with any gains or cash-generating unit was acquired in a business combination during the current annual period, that unit losses arising on remeasurement recognized in profit or loss. The net gain or loss shall be tested for impairment before the end of the current annual period. If the recoverable amount recognized in profit or loss does not incorporate any dividend on the financial asset. Fair of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to value is determined in the manner described in Note 27. reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized Investments in equity instruments under financial assets at fair value through profit or loss directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent that do not have a quoted market price in an active market and whose fair value cannot be periods. reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are subsequently measured at cost less any identified l. Impairment of tangible and intangible assets other than goodwill impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial At the end of each reporting period, the Group reviews the carrying amounts of its tangible and assets can be reliably measured, the financial assets are remeasured at fair value. The intangible assets, excluding goodwill, to determine whether there is any indication that those assets difference between the carrying amount and the fair value is recognized in profit or loss. have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate ii. Available-for-sale financial assets the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual Available-for-sale financial assets are nonderivatives that are either designated as cash-generating units on a reasonable and consistent basis of allocation. available-for-sale or are not classified as loans and receivables or financial assets at fair value through profit or loss. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Available-for-sale financial assets are measured at fair value. Dividends on available-for- sale equity investments are recognized in profit or loss. Other changes in the carrying The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of available-for-sale financial assets are recognized in other comprehensive income amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying and will be reclassified to profit or loss when the investment is disposed of or is determined amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting to be impaired. impairment loss recognized in profit or loss. Dividends on available-for-sale equity instruments are recognized in profit or loss when the When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating Group’s right to receive the dividends is established. unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or Available-for-sale equity investments that do not have a quoted market price in an active cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss. market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost m. Financial instruments less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair Financial assets and financial liabilities are recognized when a group entity becomes a party to the value of the financial assets can be reliably measured, the financial assets are remeasured at contractual provisions of the instruments. fair value. The difference between carrying amount and fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are and loss. directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted iii. Loans and receivables from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair Loans and receivables (including notes receivables, accounts receivable, account receivable value through profit or loss are recognized immediately in profit or loss. from related parties, cash and cash equivalent and debt investments with no active market) are measured at amortized cost using the effective interest method, less any impairment, 1) Financial assets except for short-term receivables when the effect of discounting is immaterial.

All regular way purchases or sales of financial assets are recognized and derecognized on a trade Cash equivalent includes time deposits and repurchase agreements collateralized by bonds date basis. with original maturities within three months from the date of acquisition, highly liquid, readily convertible to a known amount of cash and be subject to an insignificant risk of a) Measurement category changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments. Financial assets are classified into the following categories: Financial assets at fair value through profit or loss, available-for-sale financial assets, and loans and receivables.

Appendix 010 011 Appendix b) Impairment of financial assets The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of notes receivable and accounts receivable, where the Financial assets, other than those at fair value through profit or loss, are assessed for indicators carrying amount is reduced through the use of an allowance account. When a notes receivable of impairment at the end of each reporting period. Financial assets are considered to be and accounts receivable are considered uncollectible, it is written off against the allowance impaired when there is objective evidence that, as a result of one or more events that occurred account. Subsequent recoveries of amounts previously written off are credited against the after the initial recognition of the financial asset, the estimated future cash flows of the allowance account. Changes in the carrying amount of the allowance account are recognized investment have been affected. in profit or loss except for uncollectible notes receivable and accounts receivable that are written off against the allowance account. For financial assets carried at amortized cost, such as notes receivable and accounts receivable, assets are assessed for impairment on a collective basis even if they were assessed not to be c) Derecognition of financial assets impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, as well as observable changes in The Group derecognizes a financial asset only when the contractual rights to the cash flows national or local economic conditions that correlate with default on receivables. from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future On derecognition of a financial asset in its entirety, the difference between the asset’s carrying cash flows, discounted at the financial asset’s original effective interest rate. amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after 2) Financial liabilities the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment a) Subsequent measurement is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. Except for financial liabilities at fair value through profit or loss, all the financial liabilities are measured at amortized cost using the effective interest method. Financial liabilities are For available-for-sale equity investments, a significant or prolonged decline in the fair value of classified as at fair value through profit or loss when the financial liability is either held for the security below its cost is considered to be objective evidence of impairment. trading or it is designated as at fair value through profit or loss.

For all other financial assets, objective evidence of impairment could include significant Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or financial difficulty of the issuer or counterparty, breach of contract, such as a default or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized delinquency in interest or principal payments, it becoming probable that the borrower will enter in profit or loss does not incorporate any interest or dividend paid on the financial liability. bankruptcy or financial re-organization, or the disappearance of an active market for that Fair value is determined in the manner described in Note 27. financial asset because of financial difficulties. b) Derecognition of financial liabilities When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in The difference between the carrying amount of the financial liability derecognized and the the period. consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss. In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an 3) Derivative financial instruments impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, the impairment loss is subsequently reversed through profit or loss if an increase The Group enters into derivative financial instruments to manage its exposure to foreign exchange in the fair value of the investment can be objectively related to an event occurring after the rate risks, including foreign exchange contracts. recognition of the impairment loss. Derivatives are initially recognized at fair value at the date the derivative contracts are entered into For financial assets that are carried at cost, the amount of the impairment loss is measured as the and are subsequently remeasured to their fair value at the end of each reporting period. The difference between the asset’s carrying amount and the present value of the estimated future resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated cash flows discounted at the current market rate of return for a similar financial asset. Such and effective as a hedging instrument, in which event the timing of the recognition in profit or loss impairment loss will not be reversed in subsequent periods. depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability.

Appendix 012 013 Appendix n. Hedge accounting 2) Rendering of services The Group designates certain hedging instruments as cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges. Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract or when services are provided. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective 3) Dividend and interest income portion is recognized immediately in profit or loss. Dividend income from investments is recognized when the shareholder’s right to receive payment The associated gains or losses that were recognized in other comprehensive income are reclassified has been established provided that it is probable that the economic benefits will flow to the Group from equity to profit or loss as a reclassification adjustment in the line item relating to the hedged item and the amount of income can be measured reliably. in the same period when the hedged item affects profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the associated Interest income from a financial asset is recognized when it is probable that the economic benefits gains and losses that were recognized in other comprehensive income are removed from equity and are will flow to the Group and the amount of income can be measured reliably. Interest income is included in the initial cost of the non-financial asset or non-financial liability. accrued on a time basis, by reference to the principal outstanding and at the applicable effective interest rate. Hedge accounting is discontinued prospectively when the Group revokes the designated hedging relationship, or when the hedging instrument expires or is sold, terminated, or exercised, or when it no q. Borrowing costs longer meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument that has been previously recognized in other comprehensive income from the period when the hedge Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets was effective remains separately in equity until the forecast transaction occurs. When a forecast are added to the cost of those assets, until such time as the assets are substantially ready for their transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized intended use or sale. immediately in profit or loss. Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which o. Provisions they are incurred.

Provision is measured at the best estimate of the discounted cash flows of the consideration required to r. Employee benefits settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. 1) Short-term employee benefits

p. Revenue recognition Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service. Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Allowance for sales returns and 2) Retirement benefits liability for returns are recognized at the time of sale based on the seller’s reliable estimate of future returns and based on past experience and other relevant factors. Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions. 1) Sale of goods Defined benefit costs (including service cost, net interest and remeasurement) under the defined Revenue from the sale of goods is recognized when all the following conditions are satisfied: benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost) and net interest on the net defined benefit liability (asset) are a) The Group has transferred to the buyer the significant risks and rewards of ownership of the recognized as employee benefits expense in the period they occur. Remeasurement, comprising goods; actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other b) The Group retains neither continuing managerial involvement to the degree usually associated comprehensive income is reflected immediately in retained earnings and will not be reclassified to with ownership nor effective control over the goods sold; profit or loss.

c) The amount of revenue can be measured reliably; Net defined benefit liability (asset) represents the actual deficit (surplus) in the Group’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any d) It is probable that the economic benefits associated with the transaction will flow to the Group; refunds from the plans or reductions in future contributions to the plans. and

e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

Appendix 014 015 Appendix s. Taxation Agricultural produce harvested from biological assets is initially measured at fair value less costs to sell at the point of harvest, subsequently transferred to inventory and accounted for accordingly. Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax 5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY According to the Income Tax Law of the Republic of China, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain In the application of the Group’s accounting policies, management is required to make judgments, estimates the earnings. and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax that are considered relevant. Actual results may differ from these estimates. provision. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting 2) Deferred tax estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. a. Impairment loss of property, plant and equipment

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax The impairment loss of property, plant and equipment was based on the recoverable amounts of those assets are generally recognized for all deductible temporary differences and unused loss carry assets, which is the higher of their fair value less costs of disposal and their value in use. Any changes forward to the extent that it is probable that taxable profits will be available against which those in the market prices or future cash flows will affect the recoverable amounts of those assets and may deductible temporary differences can be utilized. lead to the recognition of additional impairment losses or the reversal of impairment losses.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments b. Impairment loss of investments accounted for using the equity method in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the The Group immediately recognizes any impairment loss on its net investments in associates when there foreseeable future. Deferred tax assets arising from deductible temporary differences associated is any indication that an investment may be impaired and that the carrying amount may not be with such investments and interests are only recognized to the extent that it is probable that there recoverable. The Group’s management evaluates the impairment based on the estimated future cash will be sufficient taxable profits against which to utilize the benefits of the temporary differences flows of the investment. The Group also takes into consideration the market conditions, industry and they are expected to reverse in the foreseeable future. development and economic fluctuations to evaluate the appropriateness of the relevant assumptions.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to 6. CASH AND CASH EQUIVALENTS allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become December 31 probable that future taxable profit will allow the deferred tax asset to be recovered. 2016 2015

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the Cash on hand $ 6,378 $ 7,189 period in which the liability is settled or the asset realized, based on tax rates and tax laws that have Checking accounts and demand deposits 2,441,127 1,730,707 been enacted or substantively enacted by the end of the reporting period. The measurement of Cash equivalents deferred tax liabilities and assets reflects the tax consequences that would follow from the manner Time deposits 1,246,864 597,748 in which the Group expects, at the end of the reporting period, to recover or settle the carrying Repurchase agreements collateralized by bonds 16,500 45,000 amount of its assets and liabilities. $ 3,710,869 $ 2,380,644 3) Current and deferred tax for the year The market interest rates for time deposits with original maturities of more than 3 months, which have been Current and deferred tax are recognized in profit or loss, except when they relate to items that are reclassified to debt investments with no active market - current, were 0.22%-3.25% and 0.71%-4.35% per recognized in other comprehensive income or directly in equity, in which case, the current and annum, respectively, as of December 31, 2016 and 2015. deferred tax are also recognized in other comprehensive income or directly in equity respectively.

t. Biological assets

Biological assets are measured at cost plus transaction costs on initial recognition, and subsequently measured at fair value less costs to sell. The gains and losses arising from the change in fair value less costs to sell are recognized in profit or loss when they are incurred.

Appendix 016 017 Appendix 7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31 December 31 2016 2015 2016 2015

Financial assets at FVTPL - current Current

Financial assets held for trading (not under hedge accounting) Domestic investments Derivative financial assets Listed shares $ 3,780,274 $ 4,274,542 Exchangeable bonds $ 289,860 $ 295,084 Foreign exchange forward contracts 285,093 530 Non-current Non-derivative financial assets Mutual funds 661,132 598,595 Domestic investments Listed shares 94,827 93,195 Listed shares $ 8,777,617 $ 9,709,107

$ 1,330,912 $ 987,404 9. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING Financial liabilities at FVTPL - current (accounted as other current liabilities) December 31 2016 2015 Financial liabilities held for trading Derivative financial liabilities Derivative financial assets under hedge accounting - current Foreign exchange forward contracts $ 10,883 $ 2,435 (accounted as other current assets)

The Group signed a supplemental agreement with the issuer of its exchangeable bonds on January 24, 2017. Foreign exchange forward contracts $ 3,380 $ 23,189 If the Group does not exercise the conversion before June 2017 or if the issuer redeems the bonds in advance of that date, the issuer should pay the agreed upon rate of return on the basis of the principal Derivative financial liabilities under hedge accounting - current amount. (accounted as other current liabilities)

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge Foreign exchange forward contracts $ 606 $ - accounting were as follows: The Group’s hedge strategy is to enter foreign exchange forward contracts to avoid its foreign currency Notional Amount exposure to certain foreign currency receipts and payments and to manage its foreign currency exposure in Currency Maturity Date (In Thousands) relation to foreign currency forecast sales and purchases. When forecast sales and purchases actually take place, the carrying amounts of the non-financial hedged items will be adjusted accordingly. December 31, 2016 The terms of the foreign exchange forward contracts were negotiated to match the terms of the respective Buy EUR:USD 2017.01.30 EUR2,305 designated hedged items. The outstanding foreign exchange forward contracts at the end of the reporting Buy JPY:USD 2017.01.19 JPY200,000 period were as follows: Buy USD:NTD 2017.01.13-2017.05.03 USD9,500 Buy USD:RMB 2017.06.12-2017.12.12 USD280,800 Notional Amount Sell USD:NTD 2017.01.09-2017.05.03 USD36,798 Currency Maturity Date (In Thousands) Sell JPY:NTD 2017.01.23 JPY50,000 Sell RMB:NTD 2017.01.06-2017.02.24 RMB52,600 December 31, 2016 Sell RMB:USD 2017.01.05-2017.12.11 RMB948,381 Buy EUR:NTD 2017.01.23-2017.01.26 EUR4,872 December 31, 2015 Buy USD:NTD 2017.01.03-2017.03.03 USD4,123 Buy JPY:NTD 2017.01.19-2017.01.26 JPY348,232 Buy EUR:USD 2016.01.14 EUR2,305 Buy JPY:USD 2016.01.07-2016.01.29 JPY217,600 December 31, 2015 Sell USD:NTD 2016.01.05-2016.01.29 USD15,510 Sell JPY:NTD 2016.01.12 JPY17,000 Buy EUR:NTD 2016.01.04-2016.03.09 EUR22,613 Buy USD:NTD 2016.01.14-2016.03.17 USD15,713 The Group entered into foreign exchange forward contracts to manage exposures to exchange rate fluctuations of foreign currency denominated assets and liabilities.

Appendix 018 019 Appendix 10. FINANCIAL ASSETS MEASURED AT COST The aging of receivables was as follows:

December 31 December 31 2016 2015 2016 2015

Non-current Not past due $ 12,678,927 $ 13,358,463 Up to 90 days 487,054 900,813 Domestic and foreign unlisted shares $ 1,540,362 $ 1,616,258 91-180 days 81,597 85,802 Domestic emerging market shares 9,642 78,176 181-360 days 89,965 226,885 Foreign beneficiary certificates 5,875 39,232 More than 360 days 434,303 291,354

$ 1,555,879 $ 1,733,666 $ 13,771,846 $ 14,863,317

Classified according to financial asset measurement categories The above aging schedule was based on the past due date. Available-for-sale financial assets $ 1,555,879 $ 1,733,666 The aging of receivables that were past due but not impaired was as follows: Management believed that the above unlisted equity investments held by the Group, whose fair value cannot be reliably measured due to the range of reasonable fair value estimates was so significant; therefore December 31 they were measured at cost less impairment at the end of reporting period. 2016 2015

The Group recognized impairment losses on financial assets measured at cost of $99,717 thousand in 2016 Up to 90 days $ 441,624 $ 874,701 and $48,206 thousand in 2015. 91-180 days 33,726 75,339 181 days-360 days 87,131 129,270 More than 360 days 70,366 179,692 11. NOTES RECEIVABLES AND ACCOUNTS RECEIVABLE $ 632,847 $ 1,259,002 December 31 2016 2015 The above aging schedule was based on the past due date.

Notes receivable For the accounts receivable that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss, because there was no significant change in credit quality and Notes receivable $ 2,958,495 $ 3,497,816 the amounts were still considered recoverable. The Group held collaterals or other credit enhancements Less: Allowance for impairment loss (7,202) (7,014) for most of these receivables.

$ 2,951,293 $ 3,490,802 The movements of the allowance for doubtful accounts receivable were as follows:

Accounts receivable Individually Collectively Assessed for Assessed for Accounts receivable $ 10,813,351 $ 11,365,501 Impairment Impairment Total Less: Allowance for impairment loss (622,621) (290,407) Balance at January 1, 2016 $ 166,051 $ 131,370 $ 297,421 $ 10,190,730 $ 11,075,094 Add: Impairment losses recognized on receivables 420,975 17,372 438,347 Notes receivable and accounts receivable were generated by operating activities. Less: Amounts written off during the year as uncollectible (46,117) (30,700) (76,817) In determining the recoverability of accounts receivable, the Group considered any change in the credit Foreign exchange translation gains and losses (2,231) (26,897) (29,128) quality of the accounts receivable since the date credit was initially granted to the end of the reporting period. The Group’s customer base is vast and irrelevant; no concentration of credit risk was observed on Balance at December 31, 2016 $ 538,678 $ 91,145 $ 629,823 these transactions. (Continued)

Appendix 020 021 Appendix 13. BIOLOGICAL ASSETS Individually Collectively Assessed for Assessed for For the Year Ended December 31 Impairment Impairment Total 2016 2015

Balance at January 1, 2015 $ 169,352 $ 132,391 $ 301,743 Balance at January 1 $ 3,622,185 $ 2,990,129 Add: Impairment losses recognized on Increases due to planting 229,253 845,818 receivables 1,705 - 1,705 Decreases due to harvest (274,238) (139,338) Less: Amounts written off during the year as Loss arising from changes in fair value less costs to sell (13,295) (740) uncollectible (8,664) (2,363) (11,027) Net exchange differences (288,402) (73,684) Foreign exchange translation gains and losses 3,658 1,342 5,000 Balance at December 31 $ 3,275,503 $ 3,622,185 Balance at December 31, 2015 $ 166,051 $ 131,370 $ 297,421 (Concluded) The Group’s biological assets are eucalyptus located in Guangdong Province, Zhaoqing City. The eucalyptus is mainly grown for paper manufacturing. The aging of individually impaired receivables was as follows: The fair values of biological assets (before deducting costs to sell) were as follows: December 31 2016 2015 December 31 2016 2015 Up to 90 days $ 45,430 $ 26,112 91-180 days 47,871 10,463 Eucalyptus (Level 3) $ 3,370,430 $ 3,730,495 181-360 days 2,834 97,615 More than 360 days 363,937 111,662 For the Year Ended December 31 2016 2015 $ 460,072 $ 245,852 Balance at January 1 $ 3,730,495 $ 3,072,341 The above aging of accounts receivable before deducting the allowance for impairment was presented Increases due to planting 248,511 879,610 based on the past due date. Decreases due to harvest (297,275) (144,905) Loss arising from changes in fair value less costs to sell (14,412) (770) The carrying amount of notes receivable pledged as collateral was disclosed in Note 29. Net exchange differences (296,889) (75,781)

Balance at December 31 $ 3,370,430 $ 3,730,495 12. INVENTORIES

December 31 14. SUBSIDIARIES 2016 2015 a. Subsidiaries included in the consolidated financial statements (diagram of investment structure of the Finished and purchased goods $ 3,832,694 $ 4,827,539 Group in December 31, 2016, please refer to Table 1): Materials 3,696,527 3,858,927 Work-in-process 757,408 1,073,469 Proportion of Ownership December 31 Construction-in-progress 1,617 1,617 Investor Investee Main Business 2016 2015 Remark

YFY Inc. Chung Hwa Pulp Corporation Manufacture and sale of pulp 56.90 56.90 $ 8,288,246 $ 9,761,552 YFY International BVI Corp. Investment and holding 100.00 100.00 YFY Global Investment BVI Corp. Investment and holding 100.00 100.00 YFY Consumer Products Co., Ltd. Production and sale of high quality paper and 100.00 100.00 The cost of goods sold included a reversal of write-downs of inventories of $39,949 thousand and paper - related merchandise Shin Foong Specialty and Applied Production and sale of SBR (styrene butadiene 55.30 56.70 13) write-downs of $31,070 thousand, respectively. Previous write-downs were reversed as a result of Materials Co (formerly Shin Foong rubber) latex increased selling prices in certain markets. Chemical Industry Co., Ltd.) China Color Printing Co., Ltd. Design and print of magazines, posters and 49.70 49.70 15) books YFY Venture Capital Investment Co., Investment and holding 100.00 100.00 Ltd. Effion Enertech Co., Ltd. To operate cogeneration and provide power 49.00 49.00 technology YFY Capital Co., Ltd. Sale of paper and paper-related merchandise 100.00 100.00 YFY Operation Management Consulting 100.00 100.00 Consulting Co., Ltd. (Continued)

Appendix 022 023 Appendix Proportion of Ownership Proportion of Ownership December 31 December 31 Investor Investee Main Business 2016 2015 Remark Investor Investee Main Business 2016 2015 Remark

Union Paper Co., Ltd. Manufacture and sale of paper 18.90 18.90 15) YFY Jupiter US, Inc. Innovativ Packaging Worldwide, LLC Design of packaging and sale of paper 51.00 51.00 3) YFY Paradigm Investment Co., Ltd. Investment and holding 100.00 100.00 YFY Jupiter Mexico, S. de R.L. Design of packaging and sale of paper 1.00 - 12) San Ying Enterprise Co., Ltd. Design and construct water processing 100.00 100.00 Mobius 105 Ltd. YFY Jupiter (Shenzhen) Ltd. Design of packaging and sale of paper 100.00 100.00 construction and environmental facilities YFY Jupiter Malaysia Sdn. Bhd. Design of packaging and sale of paper 1.00 - 9) Lotus Ecoscings & Engineering Co., Construction of sewage treatment plants and 100.00 100.00 YFY Jupiter Mexico, S. de R.L. Design of packaging and sale of paper 99.00 - 12) Ltd. incinerators YFY Jupiter (Shenzhen) Kunshan YFY Jupiter Green Design of packaging and sale of paper 100.00 100.00 Eihoyo Shoji Co., Ltd. Trade of paper, chemical material and 100.00 100.00 Ltd. Packaging Ltd. machinery YFY Jupiter Supply Chain Design of packaging and sale of paper 100.00 100.00 6) Yuen Yan Paper Container Co., Ltd. Sale and manufacture of corrugated paper and 50.90 50.90 Management Services (Shenzhen) materials Limited Cupid InfoTech Co., Ltd. a. To provide service in information software 100.00 100.00 Jupiter Prestige Group Rimagine Limited Investment and holding 100.00 100.00 and information processing. Holdings Limited Jupiter Prestige Group Europe Ltd. Graphic design 100.00 100.00 b. Wholesale of information software and Jupiter Prestige Group Australia PTY Graphic design 100.00 100.00 electric appliance. Ltd. YFY International BVI YFY Cayman Co., Ltd. Investment and holding 100.00 100.00 Opal BPM Limited Design of process system and assistance of 82.50 82.50 Corp. Guangdong Ding Feng Pulp & Paper The marketing business of pulp, writing and 40.00 40.00 graphic design Co., Ltd. printing paper, and wood free. Jupiter Prestige Group North America Design of packaging and sale of paper 100.00 100.00 Zhaoqing Ding Feng Forestry Ltd. Seedling cultivation and sales, reforestation, 13.50 13.50 Inc. (formerly YFY Jupiter Inc.) sales-cum-forest logging and other forestry, Rimagine Limited Rimagine Group Limited Investment and holding 100.00 100.00 processing and transportation. Rimagine Design (Shanghai) Co., Photograph 100.00 100.00 Hwa Fong Paper (H.K.) Ltd. Sale and print of paper merchandise 100.00 100.00 Ltd. Systax Communication (H.K.) Ltd. Sale and print of paper merchandise 100.00 100.00 Jupiter Prestige Group Jupiter Prestige Group Asia Ltd. Graphic design 100.00 100.00 YFY Paper Mfg. (Jiangyin) Co., Ltd. Manufacture, sale and print of cardboard and 94.00 94.00 Europe Ltd. paper Opal BPM Limited Opal BPM India Private Limited Workflow system coding 100.00 100.00 7) Yuen Foong Yu Blue Economy Development the technology of agricultural 100.00 100.00 YFY Paper Enterprise Kunshan YFY Advertising and Design and print of advertisements 50.00 50.00 Natural Resource (Yangzhou) Co., resource recycling (Guangzhou) Co., Ltd. Printing Co., Ltd. Ltd. YFY Paper Enterprise Kunshan YFY Advertising and Design and print of advertisements 50.00 50.00 YFY Biopulp Technology Limited Investment and holding 60.00 60.00 (Xiamen) Co., Ltd. Printing Co., Ltd. Yuen Foong Yu Blue YFY Firstpak Packaging (YangZhou) General trade 70.00 70.00 Kunshan YFY Advertising Shanghai YFY Advertising and Printing service of publications 51.00 51.00 Economy Natural Co., Ltd. and Printing Co., Ltd. Printing Co., Ltd. Resource (Yangzhou) YFY Packaging Inc. YFY Packaging (BVI) Corp. Investment and holding 100.00 100.00 Co., Ltd. Pek Crown Paper Co., Ltd. Manufacture and sale of containers 66.80 66.80 YFY Mauritius Corp. YFY Paper Mfg. (Yangzhou) Co., Manufacture and sale of paper 81.20 85.50 YFY Packaging (BVI) YFY Mauritius Corp. Investment and holding 42.20 40.00 Ltd. Corp. YFY Packaging (Yangzhou) Investment and holding 100.00 100.00 YFY Global Investment YFY RFID Co., Ltd. Investment and holding 100.00 100.00 Investment Co., Ltd. BVI Corp. YFY Jupiter (BVI) Inc. Investment and holding 38.45 38.62 YFY Paper Enterprise (Qingdao) Co., Manufacture and sale of paper and card board 100.00 100.00 YFY RFID Technologies Co., Ltd. Investment and holding 100.00 100.00 Ltd. YFY RFID Co., Ltd. Arizon RFID Technology (Yangzhou) Sale and design RFID (radio frequency 100.00 100.00 YFY Paper Enterprise (Kunshan) Co., Manufacture and sale of paper and card board 100.00 100.00 Co., Ltd. identification) products Ltd. Arizon RFID Technology Yeon Technologies (Yang Zhou) Co., Sale and design RFID (radio frequency 100.00 100.00 4) YFY Paper Enterprise (Zhongshan) Manufacture and sale of paper and card board 100.00 100.00 (Yangzhou) Co., Ltd. Ltd. identification) products Co., Ltd. YFY RFID Technologies Yeon Technologies Co., Ltd. Sale and design of RFID (radio frequency 100.00 100.00 YFY Paper Enterprise (Guangzhou) Manufacture and sale of paper and card board 93.80 93.80 Co., Ltd. identification) products Co., Ltd. YFY Consumer Products Yuen Foong Yu Consumer Products Investment and holding 100.00 100.00 YFY Paper Enterprise (Dongguan) Manufacture and sale of paper and card board 100.00 100.00 Co., Ltd. Investment Limited (formerly Co., Ltd. Trifaith Ltd.) YFY Paper Enterprise (Tianjin) Co., Manufacture and sale of paper and card board 100.00 100.00 Ever Growing Agriculture Biotech Wholesale of agriculture products 85.00 85.00 Ltd. Co., Ltd. YFY Paper Enterprise (Suzhou) Co., Manufacture and sale of paper and card board 100.00 100.00 Livebricks Inc. Information processing services - 75.00 11) Ltd. Yuen Foong Shop Company Limited Sale of paper 50.00 50.00 2) YFY Paper Enterprise (Xiamen) Co., Manufacture and sale of paper and card board 100.00 100.00 Yuen Foong Yu Consumer YFY Investment Co., Ltd. Investment and holding and sale of paper 100.00 100.00 Ltd. Products Investment YFY Paper Enterprise (Shanghai) Manufacture and sale of paper and card board 100.00 100.00 Limited (formerly Co., Ltd. Trifaith Ltd.) YFY Paper Enterprise (Jiaxing) Co., Manufacture and sale of paper and card board 100.00 100.00 YFY Investment Co., Ltd. YFY Family Paper (Beijing) Co., Ltd. Manufacture and sale of tissue paper and 100.00 100.00 Ltd. napkins YFY Paper Enterprise (Nanjing) Co., Manufacture and sale of paper and card board 90.00 90.00 YFY Family Care (Kunshan) Co., Manufacture and sale of tissue paper and 100.00 100.00 Ltd. Ltd. napkins YFY Paper Enterprise (Fuzhou) Co., Manufacture and sale of paper and card board 100.00 100.00 Yuen Foong Yu Consumer Product Manufacture and sale of high quality tissue 100.00 100.00 Ltd. (Yangzhou) Co., Ltd. paper and napkin YFY Packaging YFY Paper Mfg. (Yangzhou) Co., Manufacture and sale of paper 18.80 14.50 YFY Capital Co., Ltd. Chung Hwa Pulp Corporation Manufacture and sale of pulp 0.10 0.10 (Yangzhou) Ltd. YFY Venture Capital Effion Enertech Co., Ltd. Sale and manufacture of TFT-LCD 1.00 1.00 Investment Co., Ltd. Investment Co., Ltd. Chung Hwa Pulp Corporation Manufacture and sale of pulp 0.86 0.64 8) Hwa Fong Paper (H.K.) Shenzhen Systax Paper Co., Ltd. Sale of paper merchandise and import/export 100.00 100.00 Effion Enertech Co., Ltd. YFY Capital Holdings Corp. Investment and holding 100.00 100.00 Ltd. business YFY Capital Holdings YFY (Shanghai) Financial Services Export factoring, domestic factoring, business 100.00 100.00 YFY Cayman Co., Ltd. YFY International Labuan Co., Ltd. Investment and holding 100.00 100.00 Corp. Co., Ltd. factoring and related consulting services, YFY Mauritius Corp. Investment and holding 57.80 60.00 develop credit risk management platform. YFY Packaging Capital Corp. Investment and holding 100.00 100.00 1) YFY Paradigm Investment Union Paper Co., Ltd. Manufacture and sale of paper 4.10 4.00 15) YFY International Labuan YFY Jupiter (BVI) Inc. Investment and holding 38.45 38.62 Co., Ltd. YFY Biotech Management Company Consulting 100.00 100.00 Co., Ltd. YFY Packaging Inc. Production and sale of high-quality craft paper 100.00 100.00 Chung Hwa Pulp Corporation Pulp and paper production, trading and forestry 0.70 0.70 and corrugated paper business YFY Jupiter (BVI) Inc. Mobius 105 Ltd. Investment and holding 100.00 100.00 Yuen Foong Shop Company Limited Sale of paper 50.00 50.00 2) YFY Jupiter Ltd. Design of packaging and sale of paper 100.00 100.00 Livebricks Inc. Information processing services 100.00 - 11) Jupiter Prestige Group Holdings Investment and holding 57.00 57.00 Yuen Foong Shop Shanghai YFY International Trade General trade 100.00 100.00 5) Limited Company Limited Co., Ltd. YFY Jupiter US, Inc. Design of packaging and sale of paper 100.00 100.00 Mobius 105 (HK) Ltd. Design of packaging and sale of paper 100.00 100.00 (Continued) YFY Jupiter Malaysia Sdn. Bhd. Design of packaging and sale of paper 99.00 - 9) YFY Jupiter Singapore Pte Ltd. Design of packaging and sale of paper 100.00 - 10) (Continued)

Appendix 024 025 Appendix 11) YFY Consumer Products Co., Ltd. sale of all ownership of Livebricks Inc. to YFY Paradigm Proportion of Ownership Investment Co., Ltd. in February 2016. December 31 Investor Investee Main Business 2016 2015 Remark

Lotus Ecoscings & Yuen Yan Paper Container Co., Ltd. Sale and manufacture of corrugated paper and 0.07 0.07 12) YFY Jupiter Mexico, S. de R.L. was established in March 2016 and has been included in the Engineering Co., Ltd. materials consolidated financial statements since then. Shin Foong Specialty and Applied Production and sale of SBR (styrene butadiene - 0.01 14) Materials Co. (formerly Shin rubber) latex Foong Chemical Industry Co., Ltd.) 13) YFY Inc. disposed of partially ownership of Shin Foong Specialty and Applied Materials Co Pek Crown Paper Co., Ltd. Manufacture and sale of containers 0.03 0.03 Chung Hwa Pulp Corporation Pulp and paper production, trading and forestry 0.01 0.01 (formerly Shin Foong Chemical Industry Co., Ltd.) in June 2016. business San Ying Enterprise Co., Kunshan Actview Carbon Manufacture and sale of active carbon 66.40 66.40 Ltd. Technology Co., Ltd. 14) Lotus Ecoscings & Engineering Co., Ltd. disposed of all ownership of Shin Foong Specialty and Chung Hwa Pulp CHP International (BVI) Corporation Investment and holding 100.00 100.00 Corporation Effion Enertech Co., Ltd. To operate cogeneration and provide power 49.00 49.00 Applied Materials Co (formerly Shin Foong Chemical Industry Co., Ltd.) in June 2016. technology Hwa Fong Investment Co., Ltd. Investment and holding 100.00 100.00 CHP International (BVI) Guangdong Ding Feng Pulp & Paper Pulp and paper production, trading and forestry 60.00 60.00 15) China Color Printing Co., Ltd. and Union Paper Co., Ltd. were deemed as subsidiaries because the Corporation Co., Ltd. business Group had actual control over them even if the Group held less than 50% equity interests in each of Zhaoqing Ding Feng Forestry Ltd. Seedling cultivation and sales, reforestation, 20.20 20.20 sales-cum-forest logging and other forestry, the subsidiaries’ voting shares. processing and transportation Hwa Fong Investment Co., Effion Enertech Co., Ltd. To operate cogeneration and provide power 1.00 1.00 Ltd. technology See Table 8 and Table 9 for the information on place of incorporation and principal place of business. Kuang Hwa Fertilizer Limited To produce fertilizer 100.00 100.00 Company Guangdong Ding Feng Zhaoqing Ding Feng Forestry Ltd. Seedling cultivation and sales, reforestation, 66.30 66.30 b. Details of subsidiaries that have material non-controlling interests Pulp & Paper Co., Ltd. sales-cum-forest logging and other forestry, processing and transportation (Concluded) Proportion of Ownership and Voting Rights Held by Remarks: Non-controlling Interests December 31 1) YFY Packing Capital Corp. was established in January 2015 and has been included in the Name of Subsidiary 2016 2015 consolidated financial statements since then. Chung Hwa Pulp Corporation 41.40% 41.62% 2) YFY Paradigm Investment Co., Ltd. acquired 50% of ownership of Yuen Foong Shop Company Limited by buying its newly issued shares in January 2015. The summarized financial information below represents amounts before intragroup eliminations:

3) YFY Jupiter US, Inc. acquired 51% of ownership of Innovativ Packaging Worldwide, LLC in Chung Hwa Pulp Corporation and subsidiaries March 2015, and the latter has been included in the consolidated financial statements since then. December 31 4) Arizon RFID Technology (Yangzhou) Co., Ltd. acquired 100% of ownership of Yeon Technologies 2016 2015 (Yang Zhou) Co., Ltd. in April 2015, and the latter has been included in the consolidated financial statements since then. Current assets $ 11,884,530 $ 13,080,307 Non-current assets 17,768,363 17,345,832 5) Shanghai YFY International Trade Co., Ltd. was established in May 2015 and has been included in Current liabilities (7,308,126) (7,770,394) the consolidated financial statements since then. Non-current liabilities (4,285,440) (3,553,031) Equity 18,059,327 19,102,714 6) YFY Jupiter Supply Chain Management Services (Shenzhen) Limited was established in July 2015 Consolidated adjustments 94,109 94,109 and has been included in the consolidated financial statements since then. Adjusted equity $ 18,153,436 $ 19,196,823 7) Opal BPM India Private Limited was established in October 2015 and has been included in the consolidated financial statements since then. Equity attributable to: Owners of Chung Hwa Pulp Corporation $ 9,263,621 $ 9,692,265 8) YFY Venture Capital Investment Co., Ltd. acquired 0.22%, 0.60% and 0.04% of ownership of Non-controlling interests of Chung Hwa Pulp Corporation 6,544,445 6,911,301 Chung Hwa Pulp Corporation in February 2016, December 2015 and October 2015, respectively. Non-controlling interests of Chung Hwa Pulp Corporation’s subsidiaries 2,345,370 2,593,257 9) YFY Jupiter Malaysia Sdn. Bhd. was established in January 2016 and has been included in the consolidated financial statements since then. $ 18,153,436 $ 19,196,823

10) YFY Jupiter Singapore Pte Ltd. was established in January 2016 and has been included in the consolidated financial statements since then.

Appendix 026 027 Appendix a. Material associates For the Year Ended December 31 2016 2015 Proportion of Ownership and Voting Rights Revenue $ 22,001,536 $ 20,990,843 December 31 Name of Associate 2016 2015 Profit for the year $ 349,718 $ 845,778 Other comprehensive income (loss) for the year (742,077) (379,152) E Ink Holdings Inc. 16.5% 16.2%

Total comprehensive income (loss) for the year $ (392,359) $ 466,626 The investments in E Ink Holdings Inc. was accounted for by using the equity method since the Group had significant influence over E Ink Holdings Inc. even if the Company held less than 20% of the Profit attributable to: investee’s voting shares. Owners of Chung Hwa Pulp Corporation $ 228,995 $ 450,202 Non-controlling interests of Chung Hwa Pulp Corporation 162,119 329,515 In 2013, the Group increased its investment in E Ink Holdings Inc. by buying 40,000 thousand shares of Non-controlling interests of Chung Hwa Pulp Corporation’s the investee’s privately placed common shares for $658,000 thousand. Under related regulations, subsidiaries (41,396) 66,061 privately placed common shares should not be transferred within three years from the date of acquisition. The other rights and obligations are the same as those of common stocks. $ 349,718 $ 845,778 Fair values (Level 1) of investments in E Ink Holdings Inc. with available published price quotation are Total comprehensive income (loss) attributable to: summarized as follows (exclude the privately placed common shares): Owners of Chung Hwa Pulp Corporation $ (84,862) $ 276,197 Non-controlling interests of Chung Hwa Pulp Corporation (59,610) 202,172 December 31 Non-controlling interests of Chung Hwa Pulp Corporation’s 2016 2015 subsidiaries (247,887) (11,743) $ 3,320,204 $ 2,664,104 $ (392,359) $ 466,626 The summarized financial information below represents amounts shown in the E Ink Holdings Inc. Net cash inflow (outflow) from: financial statements prepared in accordance with IFRSs adjusted by the Group for equity accounting Operating activities $ 2,046,183 $ 1,559,761 purposes: Investing activities (1,400,726) (1,609,449) Financing activities (477,888) 21,066 December 31 Effects of exchange rate changes (16,654) (2,811) 2016 2015

Net cash inflow (outflow) $ 150,915 $ (31,433) Current assets $ 14,707,222 $ 13,730,805 Non-current assets 18,706,341 19,694,421 Dividends paid to non-controlling interest $ 273,940 $ 51,681 Current liabilities (5,143,950) (6,036,805) Return of capital reduction paid to non-controlling interest $ - $ 504,137 Non-current liabilities (1,180,474) (804,891) Equity 27,089,139 26,583,530 Non-controlling interests 876 96,281 15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD $ 27,090,015 $ 26,679,811 December 31 2016 2015 Proportion of the Group’s ownership 16.5% 16.2%

Material associates Equity attributable to the Group $ 4,464,905 $ 4,320,128 E Ink Holdings Inc. $ 4,718,365 $ 4,573,588 Goodwill 253,460 253,460 Associates that are not individually material 2,234,764 2,241,206 Carrying amount $ 4,718,365 $ 4,573,588 $ 6,953,129 $ 6,814,794

Refer to Table 8 “Information on Investees” for the nature of activities, principal place of business and country of incorporation of the associates.

Appendix 028 029 Appendix For the Year Ended December 31 Machinery and Miscellaneous Construction Freehold Land Buildings Equipment Equipment in Progress Total 2016 2015 Effect of foreign currency exchange differences $ - $ (166,283) $ (815,835) $ (190,999) $ - $ (1,173,117) Operating revenue $ 14,006,206 $ 13,306,503 Others (388) 9,740 (8,437) (915) - - Profit from continuing operations $ 2,057,909 $ 2,429,173 Balance at December 31, 2016 $ 2,597 $ 5,873,779 $ 36,951,746 $ 7,981,077 $ - $ 50,809,199 Loss from discontinued operations (64,588) (1,861,568) Carrying amounts at Net profit for the year 1,993,321 567,605 December 31, 2016 $ 12,346,193 $ 7,157,265 $ 21,132,739 $ 3,597,859 $ 2,532,539 $ 46,766,595 Other comprehensive income (loss) (591,333) (481,085) Cost

Total comprehensive income (loss) for the year $ 1,401,988 $ 86,520 Balance at January 1, 2015 $ 12,582,215 $ 12,613,268 $ 56,033,446 $ 10,910,167 $ 1,069,701 $ 93,208,797 Additions 525 119,936 1,418,482 494,978 2,568,911 4,602,832 Acquisitions through business b. Aggregate information of associates that are not individually material combinations - - - 2,832 - 2,832 Disposals - (36,640) (462,328) (187,115) - (686,083) Effect of foreign currency For the Year Ended December 31 exchange differences - (171,709) (563,847) (86,466) (20,225) (842,247) 2016 2015 Transfer out through disposal of subsidiaries - (133,351) (9,940) (44,122) (740) (188,153) Transfer from prepaid The Group’s share of: equipment 18,639 7,041 173,309 73,327 - 272,316 Net profit for the year $ 144,918 $ 70,849 Transfer from construction - 475,892 245,860 44,326 (766,078) - Transfer to investment Other comprehensive income (loss) (226,642) (228,994) properties (252,589) (19,745) - - - (272,334) Total comprehensive income (loss) for the year $ (81,724) $ (158,145) Balance at December 31, 2015 $ 12,348,790 $ 12,854,692 $ 56,834,982 $ 11,207,927 $ 2,851,569 $ 96,097,960 Accumulated depreciation and Except for E Ink Holdings Inc., Taiwan Global BioFund Co., Ltd., Willpower Industry Ltd., Taiwan impairment Genome Sciences Co., Ltd., YFY Biotech Co., Ltd. and YFY Bio Technology (Yangzhou) Co., Ltd., Balance at January 1, 2015 $ 2,985 $ 5,389,369 $ 33,985,472 $ 7,214,753 $ - $ 46,592,579 investments accounted for using the equity method and the share of profit or loss and other Depreciation expense - 398,498 2,283,015 663,209 - 3,344,722 comprehensive income (loss) of those investments were calculated based on the unaudited financial Acquisitions through business combinations - - - 866 - 866 statements. Management believes there is no material impact on the equity method accounting or the Disposals - (17,748) (405,891) (172,606) - (596,245) calculation of the share of profit or loss and other comprehensive income, from the financial statements Effect of foreign currency of associates that have been audited. exchange differences - (42,607) (210,549) (40,061) - (293,217) Transfer out through disposal of subsidiaries - (78,726) (6,281) (30,337) - (115,344) Transfer to investment 16. PROPERTY, PLANT AND EQUIPMENT properties - (13,643) - - - (13,643) Balance at December 31, 2015 $ 2,985 $ 5,635,143 $ 35,645,766 $ 7,635,824 $ - $ 48,919,718 Machinery and Miscellaneous Construction Freehold Land Buildings Equipment Equipment in Progress Total Carrying amounts at December 31, 2015 $ 12,345,805 $ 7,219,549 $ 21,189,216 $ 3,572,103 $ 2,851,569 $ 47,178,242 Cost (Concluded) Balance at January 1, 2016 $ 12,348,790 $ 12,854,692 $ 56,834,982 $ 11,207,927 $ 2,851,569 $ 96,097,960 Additions - 139,042 772,487 384,106 3,413,924 4,709,559 The above items of property, plant and equipment were depreciated on a straight-line basis over the Disposals - (8,751) (279,505) (134,418) - (422,674) Effect of foreign currency estimated useful life of the asset: exchange differences - (636,215) (2,059,077) (357,467) (70,910) (3,123,669) Transfer from prepaid Buildings equipment - 25,577 174,291 114,750 - 314,618 Transfer from construction - 646,565 2,649,619 365,860 (3,662,044) - Main buildings 15-55 years Others - 10,134 (8,312) (1,822) - - Others 3-50 years Machinery and equipment 3-20 years Balance at December 31, 2016 $ 12,348,790 $ 13,031,044 $ 58,084,485 $ 11,578,936 $ 2,532,539 $ 97,575,794 Miscellaneous equipment 3-50 years Accumulated depreciation and impairment

Balance at January 1, 2016 $ 2,985 $ 5,635,143 $ 35,645,766 $ 7,635,824 $ - $ 48,919,718 Depreciation expense - 401,647 2,316,629 667,019 - 3,385,295 Impairment loss - - 12,882 - - 12,882 Disposals - (6,468) (199,259) (129,852) - (335,579) (Continued)

Appendix 030 031 Appendix The non-cash investing activities of the Group for the years ended December 31, 2016 and 2015 were as The fair values of the investment properties owned by the Group were $7,043,127 thousand and $7,119,275 follows: thousand as of December 31, 2016 and 2015, respectively. The valuation was made by the Group using market transaction prices for similar properties and not by independent qualified professional valuers. The For the Year Ended December 31 rental incomes were $44,115 thousand for 2016 and $39,279 thousand for 2015, respectively. 2016 2015 The investment properties held by the Group were depreciated over their estimated useful lives of 20 to 55 Acquisition of property, plant and equipment $ 4,709,559 $ 4,602,832 years, using the straight-line method. Changes in payment of payable on equipment (accounted as other payables) (726,592) - All of the Group’s investment property was held under freehold interests.

$ 3,982,967 $ 4,602,832 18. BORROWINGS For the amounts of collaterals pledged for bank borrowings, please refer to Note 29. a. Short-term borrowings

17. INVESTMENT PROPERTIES December 31 2016 2015 Cost Bank credit loans $ 9,304,726 $ 10,363,060 Balance at January 1, 2016 $ 2,973,367 Bank secured loans - 40,000 Additions 7,547 Disposals (59,416) $ 9,304,726 $ 10,403,060

Balance at December 31, 2016 $ 2,921,498 As of December 31, 2016 and 2015, the interest rates of short-term borrowings was 0.90%-4.92% per annum and 0.80%-4.37% per annum, respectively. Accumulated depreciation and impairment b. Short-term bills payable Balance at January 1, 2016 $ 170,355 Depreciation expense 4,898 Short-term bills payable are commercial papers due within one year. Interest rates on these bills Disposals (2,185) payable were 0.91%-1.17% per annum and 0.46%-1.54% per annum as of December 31, 2016 and 2015, respectively. Balance at December 31, 2016 $ 173,068 c. Long-term borrowings Carrying amounts at December 31, 2016 $ 2,748,430 December 31 Cost 2016 2015

Balance at January 1, 2015 $ 2,762,311 Long-term bank loans $ 35,334,664 $ 28,450,454 Transfer from property, plant and equipment 272,334 Less: Current portion 161,564 448,250 Transfer from prepayment for equipment 4,017 Additions 13,219 $ 35,173,100 $ 28,002,204 Disposals (78,514) Long-term bank loans included secured, credit and syndicated loans. Secured and credit loans Balance at December 31, 2015 $ 2,973,367 interests were 0.99%-3.99% per annum and 1.11%-3.78% per annum as of December 31, 2016 and 2015, respectively; syndicated loan expired in December 2021, with interest rates were 1.63%-2.85% Accumulated depreciation and impairment per annum and 1.45%-1.93% per annum as of December 31, 2016 and 2015, respectively.

Balance at January 1, 2015 $ 162,577 Transfer from property, plant and equipment 13,643 19. RETIREMENT BENEFIT PLANS Depreciation expense 6,603 Disposals (12,468) a. Defined contribution plans

Balance at December 31, 2015 $ 170,355 The Company and certain subsidiaries of the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes Carrying amounts at December 31, 2015 $ 2,803,012 monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

Appendix 032 033 Appendix b. Defined benefit plans Present Value The Company and certain subsidiaries of the Group in accordance with the Labor Standards Law is of the Defined Net Defined operated by the government. Pension benefits are calculated on the basis of the length of service and Benefit Fair Value of Benefit average monthly salaries of the 6 months before retirement. The Company and certain subsidiaries Obligation the Plan Assets Liability contribute amounts equal to certain percentage of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Balance at January 1, 2015 $ 3,647,766 $ (2,414,873) $ 1,232,893 Bank of Taiwan in the committee’s name. The pension fund is managed by the Bureau of Labor Service cost Funds, Ministry of Labor (“the Bureau”); the Group has no right to influence the investment policy and Current service cost 58,947 - 58,947 strategy. Past service cost and loss on settlements 4,646 - 4,646 Net interest expense (income) 77,124 (60,851) 16,273 The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans Recognized in profit or loss 140,717 (60,851) 79,866 were as follows: Remeasurement Return on plan assets (excluding amounts December 31 included in net interest) - 138,332 138,332 2016 2015 Actuarial loss - changes in demographic assumptions 156 - 156 Present value of defined benefit obligation $ 3,660,848 $ 3,741,865 Actuarial loss - changes in financial Fair value of plan assets (2,116,446) (2,183,645) assumptions 160,252 - 160,252 Actuarial loss - experience adjustments 70,655 - 70,655 Net defined benefit liability $ 1,544,402 $ 1,558,220 Recognized in other comprehensive income (loss) 231,063 138,332 369,395 Net defined asset by subsidiaries were $996 thousand as of December 31, 2016 (accounted as other Contributions from the employer - (121,687) (121,687) non-current assets). Benefits paid (275,434) 275,434 - Liabilities extinguished on settlement (2,247) - (2,247) Movements in net defined benefit liability were as follows: Balance at December 31, 2015 $ 3,741,865 $ (2,183,645) $ 1,558,220 Present Value (Concluded) of the Defined Net Defined Benefit Fair Value of Benefit An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit Obligation the Plan Assets Liability plans is as follows:

Balance at January 1, 2016 $ 3,741,865 $ (2,183,645) $ 1,558,220 For the Year Ended December 31 Service cost 2016 2015 Current service cost 66,084 - 66,084 Net interest expense (income) 63,727 (49,705) 14,022 Operating costs $ 51,864 $ 52,658 Recognized in profit or loss 129,811 (49,705) 80,106 Operating expenses 28,242 27,208 Remeasurement Return on plan assets (excluding amounts $ 80,106 $ 79,866 included in net interest) - 67,885 67,885 Actuarial loss - changes in demographic Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the assumptions 77 - 77 following risks: Actuarial loss - experience adjustments 145,748 - 145,748 Recognized in other comprehensive income 1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, (loss) 145,825 67,885 213,710 bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the Contributions from the employer - (297,559) (297,559) mandated management. However, in accordance with relevant regulations, the return generated by Benefits paid (346,578) 346,578 - plan assets should not be below the interest rate for a two-year time deposit with local banks. Liabilities extinguished on settlement (10,075) - (10,075) 2) Interest risk: A decrease in the government bond interest rate will increase the present value of the Balance at December 31, 2016 $ 3,660,848 $ (2,116,446) $ 1,544,402 defined benefit obligation; however, this will be partially offset by an increase in the return on the (Continued) plan’s debt investments.

3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

Appendix 034 035 Appendix The actuarial valuations of the present value of the defined benefit obligation were carried out by b. Capital surplus qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows: Depending on the source, capital surplus may be used in these ways: (1) arising from shares issued in excess of par (including share premium from issuance of common shares for merger, treasury share December 31 transactions, and excess of the consideration received over the carrying amount of the subsidiaries’ net 2016 2015 assets during disposal or acquisition) - may be used to offset a deficit; in addition, when the Company has no deficit, this capital surplus may be distributed as cash dividends, or may be transferred to share Discount rates 1.75% 1.75% capital once a year within a certain percentage of the Company’s capital surplus; (2) arising from the Expected rates of salary increase 1.00-1.50% 1.00-1.50% effect of changes in ownership interest in a subsidiary due to equity transactions other than actual disposal or acquisition - may be used to offset a deficit.; (3) arising from changes in equity in associates If possible reasonable change in each of the significant actuarial assumptions will occur and all other - may be used in compliance with related regulations if the capital surplus source is either of the assumptions will remain constant, the present value of the defined benefit obligation would increase foregoing two sources. (decrease) as follows: c. Retained earnings and dividend policy December 31 2016 2015 In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The shareholders held their regular Discount rates meeting on June 15, 2016 and, in that meeting, had resolved amendments to the Company’s Articles of 0.125% increase $ (37,916) $ (40,467) Incorporation (the “Articles”), particularly the amendment to the policy on dividend distribution and the 0.125% decrease $ 38,792 $ 41,601 addition of the policy on distribution of employees’ compensation. Expected rates of salary increase 0.125% increase $ 38,840 $ 41,681 Under the dividend policy as set forth in the amended Articles, where the Company made profit in a 0.125% decrease $ (38,110) $ (40,880) fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in The sensitivity analysis presented above might not have been representative of the actual change in the accordance with the laws and regulations or in the necessary situation, and then any remaining profit present value of the defined benefit obligation because it was unlikely that the changes in assumptions together with any undistributed retained earnings shall be used for distribution of dividends and bonus had occurred in isolation of one another, i.e., some of the assumptions might have been correlated. to shareholders.

December 31 In making its dividend policy, the Company takes into account future capital expenditures and working 2016 2015 capital requirements. Based on this policy, dividends should be distributed as follows:

The expected contributions to the plan for the next year $ 561,690 $ 1,177,308 1) At least 20% as cash dividends; and

The average duration of the defined benefit obligation 8.0-12.7 years 6.8-12.0 years 2) Remainder, as stock dividends. If there is a requirement of capital expenditures, the Company may distribute only stock dividends.

20. EQUITY Appropriation of earnings to the legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. The legal reserve may be used to offset deficits. If the Company has no a. Ordinary shares deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash. December 31 2016 2015 Items referred to under Rule No. 1010012865, Rule No. 1010047490 and Rule No. 1030006415 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Numbers of shares authorized (in thousand) 2,200,000 2,200,000 Following Adoption of IFRSs” should be appropriated to or reverse from a special reserve by the Shares authorized $ 22,000,000 $ 22,000,000 Company. For the subsequent decrease in the deduction amount to stockholders’ equity, to be Number of shares issued and fully paid (in thousand) 1,660,372 1,660,372 appropriate for the net debit balance reverses. Shares issued $ 16,603,715 $ 16,603,715 Except for non-ROC resident shareholders, all shareholders are allowed a tax credit equal to their Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to proportionate share of the income tax paid by the Company; however, based on the revised Article 66-6 dividends. of the Income Tax Law, the creditable ratio for individual shareholders residing in the Republic of China will be half of the original creditable ratio.

Appendix 036 037 Appendix The appropriations of earnings for 2015 and 2014 approved in the shareholders’ meetings on June 15, 2016 and June 30, 2015, respectively were as follows: Exchange Differences Unrealized Dividends Per Share Arising on Gain (Loss) on (NT$) Translating Available-for- Appropriation of Earnings For the Year Ended the Foreign sale Financial Cash Flow For the Year Ended December 31 December 31 Operations Assets Hedge Total 2015 2014 2015 2014 Cash flow hedge $ - $ - $ 13,628 $ 13,628 Legal reserve $ 50,190 $ 60,262 $ - $ - Share of associates accounted Cash dividends 498,111 664,148 0.3 0.4 for using the equity method (18,570) (268,961) - (287,531)

The appropriations of earnings for 2016 had been proposed by the Company’s board of directors on Balance at December 31 $ 2,724,091 $ 2,801,627 $ 7,881 $ 5,533,599 March 16, 2017. The appropriations and dividends per share were as follows: (Concluded)

Appropriation Dividends Per e. Non-controlling interests of Earnings Share (NT$) For the Year Ended December 31 Legal reserve $ 12,612 $ - 2016 2015

The appropriations of earnings are subject to the resolution of the shareholders’ meeting to be held on Balance at January 1 $ 9,730,808 $ 10,078,710 June 7, 2017. Attributable to non-controlling interests: Share of profit for the year 428,990 680,290 d. Others equity items Cash dividend (494,611) (296,799) Exchange difference arising on translation of foreign entities (163,695) 2,647 Exchange Unrealized losses on available-for-sale financial assets (29,705) (138,588) Differences Unrealized Loss on fair value changes of cash flow hedges (5,955) 2,593 Arising on Gain (Loss) on Actuarial loss on defined benefit plans (25,529) 4,100 Translating Available-for- Share of other comprehensive income of associates accounted the Foreign sale Financial Cash Flow for using the equity method (22,882) (18,691) Operations Assets Hedge Total Adjustment relating to changes in equity of associates 2016 accounted for using the equity method 2,946 2,644 Adjustment for the changes in equity of subsidiaries 8,819 (8,168) Balance at January 1 $ 2,724,091 $ 2,801,627 $ 7,881 $ 5,533,599 Proceed of the return of capital on investments accounted for Exchange differences arising on using the equity method - (510,737) translating the foreign Disposal or acquisition of subsidiaries 31,084 (67,193) operations (1,807,593) - - (1,807,593) Unrealized gain (loss) on Balance at December 31 $ 9,460,270 $ 9,730,808 available-for-sale financial assets - (860,840) - (860,840) Cash flow hedge - - (19,064) (19,064) 21. NET PROFIT Share of associates accounted for using the equity method (117,842) (195,903) - (313,745) a. Finance costs

Balance at December 31 $ 798,656 $ 1,744,884 $ (11,183) $ 2,532,357 For the Year Ended December 31 2016 2015 2015 Interest on bank loans $ 963,886 $ 905,574 Balance at January 1 $ 3,004,110 $ 6,334,530 $ (5,747) $ 9,332,893 Less: Amounts included in the cost of qualifying assets (28,020) (13,433) Exchange differences arising on translating the foreign $ 935,866 $ 892,141 operations (261,449) - - (261,449) Unrealized gain (loss) on available-for-sale financial assets - (3,263,942) - (3,263,942) (Continued)

Appendix 038 039 Appendix Information about capitalized interest was as follows: 1) Employees’ compensation and remuneration of directors for 2016 and 2015

For the Year Ended December 31 Incorporation of the Company approved by the shareholders in their meeting in June 2016, the 2016 2015 Company accrued employees’ compensation and remuneration of directors at the rates no less than 0.1% and no higher than 2%, respectively, of net profit before income tax, employees’ Capitalization rate 1.00-1.49% 1.30-2.16% compensation, and remuneration of directors. The employees’ compensation and remuneration of directors for the years ended December 31, 2016 and 2015 which have been approved by the b. Depreciation and amortization Company’s board of directors on March 16, 2017 and March 18, 2016, respectively, were as follows: For the Year Ended December 31 2016 2015 Accrual rate

Property, plant and equipment $ 3,385,295 $ 3,344,722 For the Year Ended December 31 Investment properties 4,898 6,603 2016 2015

$ 3,390,193 $ 3,351,325 Employees’ compensation 0.10% 0.10% Remuneration of directors - 1.15% Long-term prepayments for lease and other non-current assets $ 86,823 $ 122,445 Amount An analysis of deprecation by function Operating costs $ 3,110,473 $ 3,073,568 For the Year Ended December 31 Operating expenses 279,720 277,757 2016 2015 Cash Cash $ 3,390,193 $ 3,351,325 Employees’ compensation $ 92 $ 488 An analysis of amortization by function Remuneration of directors - 5,635 Operating costs $ 36,424 $ 60,369 Operating expenses 50,399 62,076 If there is a change in the amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in the accounting estimate. $ 86,823 $ 122,445 There was no difference between the amounts of the bonus to employees and the remuneration to c. Employee benefit expense directors proposed by the board of directors and approved in the shareholders’ meetings on June 15, 2016 and the amounts recognized in the consolidated financial statements for the year ended For the Year Ended December 31 December 31, 2015. 2016 2015 Information on the employees’ compensation and remuneration of directors resolved by the Post-employment benefits Company’s board of directors in 2017 and 2016 is available at the Market Observation Post System Defined contribution plans $ 171,270 $ 157,763 website of the Taiwan Stock Exchange. Defined benefit plans 80,106 79,866 251,376 237,629 2) Employees’ compensation and remuneration of directors and supervisors for 2014 Other employee benefits 7,345,861 7,168,374 The bonus to employees and remuneration of directors and supervisors for 2014 which have been Total employee benefit expense $ 7,597,237 $ 7,406,003 approved in the shareholders’ meeting on June 30, 2015 were as follows:

An analysis of employee benefit expense by function For the Year Operating costs $ 4,313,121 $ 4,161,250 Ended Operating expenses 3,284,116 3,244,753 December 31, 2014 $ 7,597,237 $ 7,406,003 Cash

Bonus to employees $ 285 Remuneration of directors and supervisors 5,630

Appendix 040 041 Appendix There was no difference between the amounts of the bonus to employees and the remuneration of directors and supervisors proposed by the board of directors and approved in the shareholders’ b. Income tax recognized in other comprehensive income (loss) meeting on June 30, 2015 and the amounts recognized in the consolidated financial statements for the year ended December 31, 2014. For the Year Ended December 31 2015 2014 Information on the bonus to employees and remuneration of directors and supervisors resolved by the shareholders in their meeting in 2015 is available at the Market Observation Post System Deferred tax website of the Taiwan Stock Exchange. In respect of the current year: Remeasurement on defined benefit plan $ 36,331 $ 62,797 22. INCOME TAXES Share of the other comprehensive income (loss) of associates 306 778

a. Major components of tax expense income tax recognized in profit or loss Share of other comprehensive income $ 36,637 $ 63,575

For the Year Ended December 31 c. Deferred tax assets and liabilities 2016 2015 The movements of deferred tax assets and deferred tax liabilities were as follows: Current tax In respect of the current year $ (371,459) $ (367,992) For the year ended December 31, 2016 Income tax on unappropriated earnings (6,783) (403) In respect of prior periods (24,109) (23,108) Recognized in Deferred tax Other Opening Recognized in Comprehensive Exchange In respect of the current year (16,238) (53,547) Balance Profit or Loss Income Differences Closing Balance In respect of prior periods 9,995 6 Deferred tax assets Income tax expense recognized in profit or loss $ (408,594) $ (445,044) Defined benefit plan $ 257,007 $ (39,934) $ 36,331 $ - $ 253,404 Loss carryforwards 168,738 22,890 - (2,464) 189,164 A reconciliation of accounting profit and income tax expenses is as follows: Allowance for impaired receivables 22,182 (1,787) - (639) 19,756 For the Year Ended December 31 Investment tax credits 20,059 (20,059) - - - 2016 2015 Payable for annual leave 15,683 7,173 - (94) 22,762 Unrealized loss on inventories 10,642 (2,485) - (367) 7,790 Profit before tax $ 963,701 $ 1,627,238 Deferred revenue 13,237 (7,056) - - 6,181 Others 44,269 24,276 - (2,962) 65,583 Income tax expense calculated at the statutory rate $ (163,829) $ (276,630) Nondeductible expenses in determining taxable income (12,154) (79,928) $ 551,817 $ (16,982) $ 36,331 $ (6,526) $ 564,640 Additional income tax under the Alternative Minimum Tax Act (19,969) (949) Deferred tax liabilities Tax-exempt income 57,880 193,787 Unrecognized loss carryforwards and deductible temporary Reserve for land revaluation differences (620,846) (347,375) increment tax $ 3,313,013 $ - $ - $ - $ 3,313,013 Others 83,702 (10,739) - (41) 72,922 Income tax on unappropriated earnings (6,783) (403) Investment tax credits - 22,578 $ 3,396,715 $ (10,739) $ - $ (41) $ 3,385,935 Loss carryforwards 2,818 - Overseas company withholding income taxes (43,791) (24,622) Effect of different tax rate of group entities operating in other jurisdictions 412,194 91,606 Adjustments for prior years’ tax (14,114) (23,108)

Income tax expense recognized in profit or loss $ (408,594) $ (445,044)

The applicable tax rate used above is the corporate tax rate of 17% payable by the Group in ROC, while the applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

As the status of 2017 appropriations of earnings is uncertain, the potential income tax consequences of 2016 unappropriated earnings are not reliably determinable.

Appendix 042 043 Appendix For the year ended December 31, 2015 e. Information about unused loss carryforwards

Recognized in Loss carryforwards as of December 31, 2016 comprised of: Other Opening Recognized in Comprehensive Exchange Balance Profit or Loss Income Differences Closing Balance Unused Amount Expiry Year

Deferred tax assets $ 481,315 2017 447,308 2018 Defined benefit plan $ 215,580 $ (21,370) $ 62,797 $ - $ 257,007 1,208,692 2019 Loss carryforward 175,105 (6,346) - (21) 168,738 Allowance for impaired 1,947,266 2020 receivables 21,560 787 - (165) 22,182 2,384,362 2021 Investment tax credits 33,783 (13,724) - - 20,059 47,923 2022 Payable for annual leave 13,792 1,916 - (25) 15,683 657,077 2023 Unrealized loss on inventories 9,022 1,720 - (100) 10,642 178,982 2024 Deferred revenue 6,735 6,502 - - 13,237 59,266 2025 Others 70,463 (25,663) - (531) 44,269 357,718 2026

$ 546,040 $ (56,178) $ 62,797 $ (842) $ 551,817 $ 7,769,909 Deferred tax liabilities f. Integrated income tax Reserve for land revaluation increment tax $ 3,313,013 $ - $ - $ - $ 3,313,013 December 31 Others 86,283 (2,637) - 56 83,702 2016 2015 $ 3,399,296 $ (2,637) $ - $ 56 $ 3,396,715 Unappropriated earnings d. Unused loss carryforwards and unused investment credits for which no deferred tax assets have been Generated on and after January 1, 1998 $ 4,948,452 $ 5,500,298 recognized in the consolidated balance sheets Imputation credits accounts $ 720,710 $ 628,445 December 31 2016 2015 For the Year Ended December 31 2016 Loss carryforwards (Expected) 2015 Expire in 2016 $ - $ 327,507 Expire in 2017 474,292 557,533 Creditable ratio for distribution of earning 14.56% 12.01% Expire in 2018 447,308 539,956 Expire in 2019 1,124,296 1,593,515 Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputation Expire in 2020 1,938,083 2,084,361 credits allocated to ROC resident shareholders of the Company was calculated based on the creditable Expire in 2021 2,261,433 19,318 ratio as of the date of dividend distribution. The actual imputation credits allocated to shareholders of Expire in 2022 24,395 206,413 the Company was based on the balance of the Imputation Credit Accounts (ICA) as of the date of Expire in 2023 16,353 32,310 dividend distribution. Therefore, the expected creditable ratio for the 2016 earnings may differ from Expire in 2024 81,165 81,163 the actual creditable ratio to be used in allocating imputation credits to the shareholders. Expire in 2025 49,791 50,824 Expire in 2026 338,601 - g. Income tax assessments

$ 6,755,717 $ 5,492,900 Final Approved Year

Investment tax credits The Company 2011 Newly emerging, important and strategic industries - expire in Chung Hwa Pulp Co., Ltd. 2013 2016 $ - $ 152,894 Hwa Fong Investments Co., Ltd. 2014 Investments in areas of scanty natural resources or slow Effion Enertech Co., Ltd. 2015 development - 10,424 YFY Packaging Inc. 2014 YFY Consumer Products Co., Ltd. 2011 $ - $ 163,318 Shin Foong Specialty and Applied Materials Co (formerly Shin Foong 2014 Chemical Industry Co., Ltd.) (Continued)

Appendix 044 045 Appendix Final Approved Year If the Group offered to settle compensation paid to employees in cash or shares, the Group assumed the entire amount of the compensation would be settled in shares and the resulting potential shares were China Color Printing Co., Ltd. 2014 included in the weighted average number of shares outstanding used in the computation of diluted earnings YFY Capital Co., Ltd. 2014 per share, if the effect is dilutive. Such dilutive effect of the potential shares was included in the Union Investment Co., Ltd. 2013 computation of diluted earnings per share until the shareholders resolve the number of shares to be YFY Venture Capital Investment Co., Ltd. 2014 distributed to employees at their meeting in the following year. YFY Paradigm Investment Co., Ltd. 2014 Lotus Ecoscings & Engineering Co., Ltd. 2014 Yuen Yan Paper Container Co., Ltd. 2014 24. BUSINESS COMBINATIONS San Ying Enterprise Co., Ltd. 2014 Cupid InfoTech Co., Ltd. 2014 a. Subsidiaries acquired Ever Growing Agriculture Biotech Co., Ltd. 2013 Pek Crown Paper Co., Ltd. 2014 Proportion of Yeon Technologies Co., Ltd. 2014 Voting YFY Biotech Management Company 2015 Equity Kuang Hwa Fertilizer Limited Company 2014 Date of Interests Consideration YFY Operation Management Consulting Co., Ltd. 2014 Principal Activity Acquisition Acquired (%) Transferred Livebricks Inc. 2014 Yuen Foong Shop Company Limited 2014 Innovativ Packaging Design of packaging and March 2015 51.0 $ 7,199 (Concluded) Worldwide, LLC sale of paper Yeon Technologies (Yang Sale and design of RFID April 2015 100.0 $ 45,076 Zhou) Co., Ltd. (radio frequency 23. EARNINGS PER SHARE identification) products

Unit: NT$ Per Share In 2015, the Group acquired Innovativ Packaging Worldwide, LLC and Yeon Technologies (Yang Zhou) Co., Ltd. in order to continue the expansion of the Group’s operation. For the Year Ended December 31 2016 2015 b. Considerations transferred

Basic earnings per share $ 0.08 $ 0.30 For the Year Ended Diluted earnings per share $ 0.08 $ 0.30 December 31, 2015 Innovativ Yeon The earnings and weighted average number of ordinary shares outstanding in the computation of earnings Packaging Technologies per share from continuing operations were as follows: Worldwide, (Yang Zhou) LLC Co., Ltd. Net Profit for the Year Cash $ 7,199 $ 45,076 For the Year Ended December 31 2016 2015 c. Assets acquired and liabilities incurred at the date of acquisition

Profit for the period attributable to owners of the Company $ 126,117 $ 501,904 Innovativ Yeon Earnings used in the computation of diluted earnings per share $ 126,117 $ 501,904 Packaging Technologies Worldwide, (Yang Zhou) Weighted average number of ordinary shares outstanding (in thousand shares): LLC Co., Ltd.

For the Year Ended December 31 Current assets 2016 2015 Cash $ 1,873 $ 310 Accounts receivable 3,969 29,414 Weighted average number of ordinary shares in computation of basic Inventories 1,834 26,035 earnings per share 1,660,372 1,660,372 Other current assets 19,537 20,485 Effect of potentially dilutive ordinary shares: Non-current assets Employee’s compensation 19 58 Property, plant and equipment 1,309 657 Deferred tax assets - 1,006 Weighted average number of ordinary shares used in the (Continued) computation of diluted earnings per share 1,660,391 1,660,430

Appendix 046 047 Appendix Innovativ Yeon Packaging Technologies In July 2015, Jupiter Prestige Group Europe Ltd. lost its control over Foster and Balyis (Prestige) Ltd.; Worldwide, (Yang Zhou) hence, this investment was reclassified under investments accounted for using the equity method and has LLC Co., Ltd. been excluded from the consolidated financial statements since then.

Current liabilities a. Analysis of assets and liabilities on the date control was lost Short-term borrowings $ (15,739) $ - Accounts and other payables (11,265) (23,964) YFY Other current liabilities (1,518) (8,867) Foster and BioTechnology Balyis (Prestige) (Kunshan) Co., $ - $ 45,076 Ltd. Ltd. (Concluded) Current assets Cash $ 1,676 $ 5,099 d. Goodwill arising on acquisition Debt investments with no active market - 23,907 Accounts and notes receivable 6,823 150,920 Innovativ Yeon Inventories - 62,737 Packaging Technologies Prepayments 919 17,617 Worldwide, (Yang Zhou) Other current assets 4,888 66,726 LLC Co., Ltd. Non-current assets Property, plant and equipment 2,721 70,088 Consideration transferred $ 7,199 $ 45,076 Other non-current assets - 2,389 Less: Fair value of identifiable net assets acquired - (45,076) Current liabilities Borrowings - (374,160) Goodwill arising on acquisition $ 7,199 $ - Accounts payable (1,329) (18,532) Other payables - - Goodwill arose in the acquisition of Innovativ Packaging Worldwide, LLC, because the cost of the Other current liabilities (3,940) (187,388) combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, and future Net assets disposed of $ 11,758 $ (180,597) market development. These benefits were not recognized separately from goodwill because they did not meet the recognition criteria for identifiable intangible assets. b. Gain on disposal of subsidiaries

The total amount of acquisition goodwill was not deductible for tax purposes. The proceeds of the disposal of YFY BioTechnology (Kunshan) Co., Ltd. were $0, and the recognized gain on the disposal of investments was $108,104 thousand. e. Net cash outflow on acquisition of subsidiaries c. Net cash outflow on disposal of subsidiary Innovativ Yeon Packaging Technologies For the Year Worldwide, (Yang Zhou) Ended LLC Co., Ltd. December 31, 2015 Consideration paid in cash $ 7,199 $ 45,076 Less: Cash balances acquired (1,873) (310) Consideration received in cash $ - Less: Cash disposed of (6,775) $ 5,326 $ 44,766 $ (6,775) f. Impact of acquisitions on the results of the Group

There acquirees’ operating results from the acquisition date to the consolidated financial reporting date 26. CAPITAL MANAGEMENT had no material impact on the Group’s financial performance. The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity 25. DISPOSAL OF SUBSIDIARIES balance. The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and equity of the Group (comprising issued capital, reserves, retained earnings, other equity In August 2015, YFY International BVI Corp. disposed of its entire equity interests in YFY BioTechnology and non-controlling interests). (Kunshan) Co., Ltd.

Appendix 048 049 Appendix 27. FINANCIAL INSTRUMENTS Level 1 Level 2 Level 3 Total a. Fair value of financial instruments that are not measured at fair value Available-for-sale financial The management of the Group considers that the carrying amounts of those financial assets and assets financial liabilities that are not measured at fair value recognized in the consolidated financial Listed shares $ 13,983,649 $ - $ - $ 13,983,649 statements approximate their fair values or their fair values cannot be reliably measured. Financial liabilities at b. Fair value of financial instruments that are measured at fair value on a recurring basis FVTPL Derivative financial 1) Fair value hierarchy liabilities $ - $ 2,435 $ - $ 2,435 (Concluded) December 31, 2016 There were no transfers between Levels 1 and 2 for the years ended December 31, 2016 and 2015. Level 1 Level 2 Level 3 Total 2) Reconciliation of Level 3 fair value measurements of financial instruments Financial assets at FVTPL Derivative financial For the year ended December 31, 2016 assets $ - $ 285,093 $ 289,860 $ 574,953 Non-derivative financial Financial Assets assets held for trading 755,959 - - 755,959 at FVTPL

$ 755,959 $ 285,093 $ 289,860 $ 1,330,912 Balance at January 1, 2016 $ 295,084 Total gains or losses Financial assets held for In profit or loss (5,224) hedging $ - $ 3,380 $ - $ 3,380 Balance at December 31, 2016 $ 289,860 Available-for-sale financial assets For the year ended December 31, 2015 Listed shares $ 12,557,891 $ - $ - $ 12,557,891 Financial Assets Financial liabilities at at FVTPL FVTPL Derivative financial Balance at January 1, 2015 $ 282,799 liabilities $ - $ 10,883 $ - $ 10,883 Total gains or losses In profit or loss 12,285 Financial liabilities held for hedging $ - $ 606 $ - $ 606 Balance at December 31, 2015 $ 295,084

December 31, 2015 The total gains or losses for the years ended December 31, 2016 and 2015 included a loss of $5,224 thousand and a gain of $12,285 thousand relating to assets measured at fair value on Level 3 fair Level 1 Level 2 Level 3 Total value measurement and held at the end of reporting date (accounted as gain (loss) arising on financial instruments at FVTPL). Financial assets at FVTPL Derivative financial 3) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value assets $ - $ 530 $ 295,084 $ 295,614 measurement Non-derivative financial assets held for trading 691,790 - - 691,790 Financial Instruments Valuation Techniques and Inputs

$ 691,790 $ 530 $ 295,084 $ 987,404 Derivatives - foreign currency Each determined using the average exchange rates (i.e., forward contracts difference between the highest and the lowest exchange rates) Financial assets held for (a) For a certain period by the counterparties’ financial hedging $ - $ 23,189 $ - $ 23,189 institutions in accordance with the Reuters quoting system, or (Continued) (b) Daily for spot exchange rates quoted by financial institutions.

Appendix 050 051 Appendix 4) Valuation techniques and inputs used to make Level 3 fair value measurement 1) Market risk

The fair value of exchangeable bonds is determined using the applicable valuation model as well as The Group’s activities exposed it primarily to the financial risks of changes in foreign currency the value analysis report provided by a financial institution, for which the significant unobservable exchange rates, interest rates and equity prices. inputs used are the net asset value of each share, interest rate fluctuation, risk-free rate, risk premium and discount. The fair value of exchangeable bonds would increase if the net asset value a) Foreign currency risk of each share increases, and the fair value would decrease if the interest rate, risk-free rate, risk premium or discount decreases. The Group and most subsidiaries had foreign currency assets and liabilities, which exposed it primarily to the financial risks of changes in foreign currency exchange rates. The Group used c. Categories of financial instruments foreign exchange forward contracts to eliminate currency exposure. These foreign exchange forward contracts could reduce the influence of the exchange rate fluctuations on the Group’s December 31 income. 2016 2015 Financial assets Sensitivity analysis

Fair value through profit or loss (FVTPL) For the position of financial assets and liabilities that had significant influence on the Group, the Held for trading $ 1,330,912 $ 987,404 risk was measured by considering the net position of foreign currency forward contract that is Derivative instruments in designated hedge accounting undue. relationships 3,380 23,189 Loans and receivables (1) 18,981,356 18,378,245 The Group was mainly exposed to the USD and RMB. Available-for-sale financial assets (2) 14,113,770 15,717,315 The following table details the Group’s sensitivity to a 5% increase and decrease in the Financial liabilities functional currency against the relevant foreign currencies. 5% represents management’s assessment of the reasonably possible change in foreign exchange rate. The sensitivity Fair value through profit or loss (FVTPL) analysis included only outstanding foreign currency denominated monetary items and adjusts Held for trading 10,883 2,435 their translation at the end of the reporting period for a 5% change in foreign currency rates. A Derivative instruments in designated hedge accounting positive number below indicates an increase in pre-tax profit associated with New Taiwan relationships 606 - dollars strengthen 5% against the relevant currency. For a 5% weakening of New Taiwan Amortized cost (3) 62,448,419 61,272,066 dollars against the relevant currency, there would be an equal and opposite impact on pre-tax profit and the balances below would be negative. 1) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, debt investments with no active market, notes receivable, accounts receivable and For the Year Ended December 31 accounts receivable from related parties. 2016 2015

2) The balances included the carrying amount of available-for-sale financial assets measured at cost. Influence to profit or loss at 5% variance USD $ 240,248 $ 254,261 3) The balances included financial liabilities measured at amortized cost, which comprise short-term RMB $ 296,492 $ 120,350 borrowings, short-term bills payable, notes payable, accounts payable, accounts payable to related parties, other payables, current portion of long-term borrowings and long-term borrowings. b) Interest rate risk

d. Financial risk management objectives and policies The Group was exposed to interest rate risk arising from borrowing at both fixed and floating interest rates. The Group’s main target of financial risk management was to manage the market risk related to operating activity (including foreign currency risk, interest rate risk and other price risk), credit risk and The carrying amount of the Group’s financial assets and financial liabilities with exposure to liquidity risk. To reduce the potential and detrimental influence of the fluctuations in market on the interest rates at the end of the reporting period were as follows: Group’s financial performance, the Group was devoted to identify, estimate and hedge the uncertainties of the market. December 31 2016 2015 The Group sought to minimize the effects of these risks by using both derivative and nonderivative financial instruments to avoid risk exposures. The use of financial instruments was governed by the Fair value interest rate risk Group’s policies approved by the board of directors, which provided written principles on foreign Financial assets $ 3,387,800 $ 2,056,848 exchange risk, interest rate risk, credit risk, the use of financial derivatives and nonderivative financial Financial liabilities 6,964,751 11,279,300 instruments, and the investment of excess liquidity. Compliance with policies and exposure limits was Cash flow interest rate risk reviewed by the internal auditors on a continuous basis. The Group did not enter into or trade Financial assets 2,441,127 1,730,707 financial instruments, derivative financial instruments, for speculative purposes. Financial liabilities 44,639,390 38,853,514

Appendix 052 053 Appendix Sensitivity analysis 3) Liquidity risk

The sensitivity analysis below were determined based on the Group’s floating interest rate The objective of liquidity risk management is to maintain adequate cash and cash equivalents with financial assets and liabilities at the end of the reporting period. Management adjusted the high liquidity and sufficient bank facilities that business operation requires and to ensure the Group sensitivity rate of 0.25% for assessing interest rate risk after considering the impact of the has sufficient financial flexibility. volatile financial market conditions. The future cash flows of the Group’s floating interest rate financial assets and financial liabilities will change by the variance of market interest. As of December 31, 2016 and 2015, the amount of unused financing facilities were $34,059,111 thousand and $31,771,649 thousand, respectively. For the Group’s portion of floating interest rate financial assets, if interest rates had been 0.25% higher/lower and all other variables were held constant, the Group’s pre-tax profit for the years The following table details the Group’s remaining contractual maturity for its non-derivative ended December 31, 2016 and 2015 would increase/decrease by $6,103 thousand and $4,327 financial liabilities with agreed repayment periods by financial institutions. The tables had been thousand, respectively. drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The tables included both interest and principal cash For the Group’s portion of floating interest rate financial liabilities, if interest rates had been flows. Specifically, loans with a repayment on demand clause were included in the earliest time 0.25% higher/lower and all other variables were held constant, the Group’s pre-tax profit for the band regardless of the probability of the financial institutes choosing to exercise their rights. years ended December 31, 2016 and 2015 would decrease/increase by $111,598 thousand and $97,134 thousand, respectively. To the extent that interest flows are floating rate, the undiscounted amount was derived from the interest rate curve at the end of the reporting period. c) Other price risk December 31, 2016 The Group was exposed to equity price risk through its investments in listed equity securities and mutual funds. Less than 1 Year 1-5 Years Sensitivity analysis Non-derivative financial liabilities The sensitivity analyses below were determined based on the exposure to equity price risks at the end of the reporting period. Variable interest rate liabilities $ 9,499,420 $ 37,280,477 Fixed interest rate liabilities 6,980,000 - If equity prices had been 5% higher/lower, the changes in fair value of held-for-trading investments and available-for-sale investments for the years ended December 31, 2016 and $ 16,479,420 $ 37,280,477 2015 would increase/decrease by $665,693 thousand and $733,772 thousand, respectively. December 31, 2015 2) Credit risk Less than Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in 1 Year 1-5 Years financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation Non-derivative financial liabilities by the counterparties is arising from the carrying amount of the respective recognized financial assets which comprise receivables from operating activities and financial assets from investing Variable interest rate liabilities $ 10,885,523 $ 29,209,925 activities as stated in the consolidated balance sheets. Fixed interest rate liabilities 11,289,000 -

The Group’s customer base is vast and various industries. The Group continuously evaluated the $ 22,174,523 $ 29,209,925 financial conditions of those customers.

To maintain the quality of the accounts receivable, the Group has built a credit risk management 28. TRANSACTIONS WITH RELATED PARTIES procedure to reduce the credit risk from specific customer. The credit evaluation of individual customer includes considering factors that will affect its payment ability such as financial condition, Balances and transactions between the Company and its subsidiaries, which are related parties of the past transaction records and current economic conditions. Credit risk of bank deposits, Company, have been eliminated on consolidation and are not disclosed in this note. Details of fixed-income investments and other financial instruments with banks is evaluated and monitored by transactions between the Group and other related parties are disclosed below. the Group’s financial department. Since the counterparties are creditworthy banks and financial institutions with good credit rating, thus, there’s no significant credit risk. a. Operating Revenue

For the Year Ended December 31 Related Parties Types 2016 2015

Associates and others $ 98,519 $ 178,626

Appendix 054 055 Appendix For sales of goods to related parties, the prices and terms of receivables were made by the agreements f. Compensation of key management personnel between parties. For the Year Ended December 31 b. Purchases of goods 2016 2015

For the Year Ended December 31 Salaries and benefits $ 36,275 $ 46,798 Related Parties Types 2016 2015 Bonus and executive fees 1,686 1,943

Associates and others $ 60,480 $ 171,074 $ 37,961 $ 48,741

For purchases of goods related parties, the prices and terms of payables were made by the agreements The remuneration of directors and key executives was determined by the remuneration committee between parties. having regard to the performance of individuals and market trends.

c. Receivables from related parties 29. ASSETS PLEDGED OR MORTGAGED December 31 Related Parties Types 2016 2015 The following assets had been pledged or mortgaged as collaterals for the portion of bank loans, guarantees provided on certain commitments and other credit accommodation: Associates and others $ 4,028 $ 17,605 December 31 The outstanding accounts receivable from related parties are unsecured and unrecognized impairment 2016 2015 loss. Notes receivable $ 1,255,890 $ 1,381,859 d. Payables to related parties Property, plant and equipment 502,647 731,422 Pledged time deposits (accounted as debt investments with no active December 31 market - current) 294,201 757,234 Related Parties Types 2016 2015 $ 2,052,738 $ 2,870,515 Associates and others $ 26,850 $ 70,321

The outstanding accounts payable to related parties are unsecured. 30. SIGNIFICANT COMMITMENTS AND CONTINGENT LIABILITIES

e. Others As of December 31, 2016 and 2015, unused letters of credit for purchases of raw materials and machinery and equipment amounted to approximately $904,840 thousand and $1,609,294 thousand, respectively. Rental Income For the Year Ended December 31 Related Parties Types 2016 2015 31. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES Associates and others $ 313 $ 353 The Group entities’ significant financial assets and liabilities denominated in foreign currencies aggregated Rental Expenses (Accounted as by the foreign currencies other than functional currencies and the related exchange rates between foreign Operating Expenses) currencies and respective functional currencies were as follow: For the Year Ended December 31 Related Parties Types 2016 2015 December 31, 2016 Foreign Carrying Associates and others $ 45,536 $ 43,885 Currencies Exchange Rate Amount

Depending on the agreements, rental income and expenses were received or paid by per month or per Financial assets half-year. Monetary items In November 2015, the Group bought Bank SinoPac 3rd unsecured perpetual non-cumulative USD $ 49,909 32.25 (USD:NTD) $ 1,609,579 subordinated financial debentures issue in 2015, which amounted to $400,000 thousand (accounted for USD 32,437 6.94 (USD:RMB) 1,046,102 as debt investment with no active market - non-current) and had an interest rate of 3.9%. As of RMB 1,129,570 0.144 (RMB:USD) 5,251,351 December 31, 2016 and 2015, the interest receivable (accounted for under other current assets) were (Continued) $2,600 thousand and $1,300 thousand, respectively.

Appendix 056 057 Appendix 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the December 31, 2016 paid-in capital. (Table 6) Foreign Carrying Currencies Exchange Rate Amount 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital. (Table 7) Financial liabilities 9) Information on investees. (Table 8) Monetary items USD $ 488,962 6.94 (USD:RMB) $ 15,769,028 10) Trading in derivative instruments. (Notes 7 and 9) RMB 1,404,103 0.144 (RMB:USD) 6,527,651 (Concluded) 11) Intercompany relationships and significant intercompany transactions. (Table 10)

December 31, 2015 b. Information on investments in mainland China: Foreign Carrying Currencies Exchange Rate Amount 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, Financial assets ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of Monetary items investment in the mainland China area. (Table 9) USD $ 52,163 32.825 (USD:NTD) $ 1,712,239 RMB 208,551 5.05 (RMB:NTD) 1,054,221 2) Any of the following significant transactions with investee companies in mainland China, either RMB 500,917 0.154 (RMB:USD) 2,532,126 directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses: Financial liabilities a) The amount and percentage of purchases and the balance and percentage of the related payables Monetary items at the end of the period. (None) USD 514,498 6.49 (USD:RMB) 16,888,401 RMB 1,185,633 0.154 (RMB:USD) 5,993,346 b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period. (Table 6) For the years ended December 31, 2016 and 2015, realized and unrealized net foreign exchange loss were $1,114,045 thousand and $603,262 thousand, respectively. It is impractical to disclose net foreign c) The amount of property transactions and the amount of the resultant gains or losses. (None) exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the group entities. d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes. (Table 3)

32. SEPARATELY DISCLOSED ITEMS e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds. (Table 2) a. Information about significant transactions and investees: f) Other transactions that have a material effect on the profit or loss for the period or on the 1) Financing provided to others. (Table 2) financial position, such as the rendering or receiving of services. (None)

2) Endorsements/guarantees provided. (Table 3) 33. SEGMENT INFORMATION 3) Marketable securities held (excluding investment in subsidiaries, associates and joint controlled entities). (Table 4) The following was an analysis of the Group’s revenue and results by reportable segment.

4) Marketable securities acquired and disposed at costs or prices at least NT$300 million or 20% of the Business Unit Business Unit of Container - Business Unit Adjustment paid-in capital. (Table 5) of Pulp and Board and of Consumer and Fine Paper Packaging Products Other Segment Elimination Total For the year ended 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in December 31, 2016 capital. (None) Revenue from external customers $ 24,361,273 $ 21,709,008 $ 12,041,651 $ 5,242,220 $ - $ 63,354,152 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital. Revenue from other internal (None) operating segments $ 2,021,320 $ 1,988,226 $ 93,696 $ 778,887 $ (4,882,129) $ - Segment profit or loss $ 970,705 $ (1,389,176) $ 86,096 $ 104,400 $ 783,082 $ 555,107 (Continued)

Appendix 058 059 Appendix The Group’s revenue from continuing operations from external customers by location of operations and Business Unit information about its non-current assets by location of assets are detailed below. Business Unit of Container - Business Unit Adjustment of Pulp and Board and of Consumer and Fine Paper Packaging Products Other Segment Elimination Total Revenue from External Customers For the year ended December 31, 2015 For the Year Ended Non-current Assets December 31 December 31 Revenue from external customers $ 24,919,229 $ 22,504,231 $ 10,833,023 $ 5,323,514 $ - $ 63,579,997 2016 2015 2016 2015 Revenue from other internal operating segments $ 1,286,291 $ 1,986,619 $ 60,365 $ 1,097,699 $ (4,430,974) $ - Segment profit or loss $ 1,653,958 $ (855,521) $ (171,649) $ 533,302 $ 22,104 $ 1,182,194 Taiwan $ 35,750,473 $ 36,159,240 $ 30,083,103 $ 24,290,900 (Concluded) Mainland China 24,281,530 23,452,612 23,997,298 29,355,701 Others 3,322,149 3,968,145 716,047 820,019 The Group classifies its products into three segments in accordance with their characteristics, as follows: $ 63,354,152 $ 63,579,997 $ 54,796,448 $ 54,466,620 a. Pulp and fine paper segment Information about Major Customers Manufacture and sale of cardboard, paper and pulp. No single customer contributed 10% or more to the Group’s revenue for both 2016 and 2015. b. Containerboard and packaging segment

Manufacture and sale of paper for cardboard cases, colored cases and food containers.

c. Consumer product segment

Manufacture and sale of tissue paper, napkins and detergents.

The accounting policies of each segment are the same as those accounting policies stated in Note 4. The performance of segments is measured at income after tax. Revenue and profit between segments have been adjusted; these adjustments include the elimination of intra-segment transactions to reconcile the segment information with that reported for the Group as a whole.

December 31 2016 2015 Segment assets

Business unit of pulp and fine paper $ 37,431,315 $ 38,532,280 Business unit of containerboard and packaging 42,061,394 42,719,599 Business unit of consumer products 9,055,365 9,446,676 Other segments 66,534,986 69,878,258 Adjustment and elimination (44,380,139) (47,185,913)

Consolidated total assets $ 110,702,921 $ 113,390,900

Geographical Information

The Group operates in two principal geographical areas - Taiwan and Mainland China.

Appendix 060 061 Appendix TABLE 1

YFY INC. AND SUBSIDIARIES

DIAGRAM OF INVESTMENT STRUCTURE FOR THE YEAR ENDED DECEMBER 31, 2016

YFY Inc.

18.9% 49% 55.3% 50.9% 49.7%

YFY Venture Shin Foong YFY Consumer YFY Paradigm YFY YFY HOLDING Effion Yuen Yan Paper Lotus Ecoscings San Ying China Color YFY Global Union Paper Capital Specialty and Cupid InfoTech Eihoyo Shoji Products Co ., 4.1% Investment Co., International MANAGEMEN Enertech Co., 1% Container Co ., & Engineering Enterprise Co ., Printing Co., Investment BVI Co., Ltd. Investment Co., Applied Co., Ltd. Co., Ltd. Ltd. Ltd. BVI Corp. T CO., LTD. Ltd. Ltd. Co., Ltd. Ltd. Ltd. Corp. Ltd. Materials Co 56.9% 49% 0.86% 0.07% 66.4% 50% 0.7%

YFY Capital 1% Kunshan YFY RFID Yuen Foong YFY Biotech Chung Hwa Chung Hwa YFY Capital Actview Carbon YFY RFID 50% Shop Company Management Pulp Holdings Pulp 0.1% Technologies Co., Ltd . Technology Co., Co., Ltd. Limited Company Corporation Corp. Corporation Ltd. Co., Ltd.

0.01% Livebricks 0.03% Shanghai YFY Inc. CHP Arizon RFID YFY (Shanghai) Hwa Fong Yeon International International 38.45% Technology Financial Technologies Trade Co ., Ltd. Investment (BVI ) Pek Crown (Yangzhou) Co., Services Co., Co., Ltd. Ltd. Co., Ltd. Corporation Paper Co., Ltd. Ltd. Ever Growing 85% Agriculture 60% 20.2% Biotech Co., Ltd. Yeon Kuang Hwa Guangdong Zhaoqing Fertilizer Ding Feng Pulp YFY Jupiter Technologies 66.3% Ding Feng (BVI) Inc. (Yang Zhou) Limited & Paper Co ., 38.45% Company Ltd. Forestry Ltd. 66.8% Co. ,Ltd

40% 13.5%

94% 60% 57% 99%

Yuen Foong Yu Systax YFY Paper Yuen Foong Yu Hwa Fong YFY Biopulp YFY YFY Jupiter Jupiter Prestige YFY Jupiter Comsumer Communicati Mfg. YFY Cayman Blue Economy Mobius105 YFY Jupiter YFY Jupiter Mobius105 Products Paper (H.K.) Natural Resource Technology Packaging Singapore Group Holdings Malaysia 1% on (H.K.) (Jiangyin) Co., Ltd. (HK) Ltd. Limited Ltd. US, Inc. Ltd. Investment Ltd . (Yangzhou) Co., Ltd. Inc. PTE.LTD . SDN. BHD. Limited Ltd. Co., Ltd. Ltd.

70% 1% 51% 99% YFY Shenzhen Yuen Foong Fusi YFY Investment Systax Paper Pai Packaging Packaging (Yangzhou) Co., 82.5% Co., Ltd. Co., Ltd. Lt d. (BVI) Corp. Jupiter Jupiter Innovativ YFY Jupiter YFY Jupiter Prestige Rimagine Prestige Opal BPM Jupiter Prestige Packaging Group Australia Mexico,S.de (Shenzhen) Group North Limited Group Limited Worldwide , PTY Ltd. R.L . Ltd. America Inc. Europe Ltd . LLC 57.8%

YFY Family Yuen Foong Yu YFY YFY Family YFY YFY Care Paper Comsumer International Product Packaging Mauritius 42.2% YFY Jupiter (Beijing ) Co., Labuan Co., Rimagine Jupiter Opal BPM Supply Chain (Kunshan) (Yangzhou) Co., Capital Corp . Corp. Rimagine Kunshan YFY Ltd . Lt d. Ltd . Design Prestige India Management Co., Ltd. Group Jupiter Green Group Asia Private Services Limited (Shanghai) Packaging Ltd. (Shenzhen) Co., Ltd. Ltd. Limited Limited

90% 93.8% 81.2%

YFY Paper YFY Paper YFY Paper YFY Paper YFY Paper YFY Paper YFY Paper YFY Paper YFY Paper YFY Paper YFY Paper YFY Paper YFY Paper YFY Packaging Enterprise Enterprise Enterprise Enterprise Enterprise Enterprise Enterprise Enterprise Enterprise Enterprise Enterprise Enterprise Mfg. (Yangzhou) (Fuzhou) Co., (Kunshan) (Suzhou) Co., (Tianjin) Co., (Dongguan) (Shanghai) (Qingdao ) (Nanjing ) (Guangzhou) (Xiamen) Co., (Zhongshan) (Jiaxing ) Co., (Yangzhou) Investment Co., Ltd. Co., Ltd. Ltd. Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Ltd. Co., Ltd. Ltd. Co., Ltd. Ltd

Shanghai YFY 50% Kunshan YFY 50% 18.8% Note：100% of Ownership, Unless Otherwise Stated . Advertising and Advertising and Printing Co., 51% Printing Co., Ltd. Ltd.

Appendix 062 063 Appendix TABLE 2

YFY INC. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Collateral Financing Limit Aggregate Actual Interest Business Allowance for Financial Statement Related Highest Balance Nature of Reasons for for Each Financing No. Lender Borrower Ending Balance Borrowing Rate Transaction Impairment Note Account Party for the Period Financing Short-term Financing Item Value Borrower Limits Amount (%) Amounts Loss (Note 1) (Note 1)

1 YFY International BVI Corp. YFY Paper Mfg. (Yangzhou) Other receivables from Yes $ 5,469,600 $ 4,502,100 $ 4,502,100 2.37 Short-term $ - Financing for working $ - - $ - $ 43,282,568 $ 43,282,568 Note 2 Co., Ltd. related parties financing capital requirements YFY Paper Mfg. (Yangzhou) Long-term receivables Yes 1,260,573 1,260,573 1,260,573 2.00-3.50 Short-term - Financing for working - - - 43,282,568 43,282,568 Note 2 Co., Ltd. from related parties financing capital requirements Systax Communication (H.K.) Other receivables from Yes 77,365 65,212 65,212 2.00 Short-term - Financing for working - - - 43,282,568 43,282,568 Note 2 Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 419,429 384,743 384,743 2.37 Short-term - Financing for working - - - 8,656,514 17,313,027 Note 2 (Nanjing) Co., Ltd. related parties financing capital requirements YFY Paper Mfg. (Jiangyin) Other receivables from Yes 228,305 225,750 225,750 2.37 Short-term - Financing for working - - - 8,656,514 17,313,027 Note 2 Co., Ltd. related parties financing capital requirements YFY BioTechnology Other receivables No 370,392 352,151 352,151 2.00-3.50 Short-term - Financing for working - - - 8,656,514 17,313,027 - (Kunshan) Co., Ltd. financing capital requirements YFY Paper Enterprise (Tianjin) Long-term receivables Yes 32,615 31,148 - 3.50 Short-term - Financing for working - - - 43,282,568 43,282,568 Note 2 Co., Ltd. from related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 65,230 64,500 64,500 2.37 Short-term - Financing for working - - - 43,282,568 43,282,568 Note 2 (Qingdao) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Long-term receivables Yes 76,645 73,221 73,221 3.50 Short-term - Financing for working - - - 43,282,568 43,282,568 Note 2 (Qingdao) Co., Ltd. from related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 818,648 209,204 209,204 2.00 Short-term - Financing for working - - - 43,282,568 43,282,568 Note 2 (Kunshan) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Long-term receivables Yes 248,075 232,449 232,449 3.50 Short-term - Financing for working - - - 43,282,568 43,282,568 Note 2 (Kunshan) Co., Ltd. from related parties financing capital requirements YFY Packaging (Yangzhou) Other receivables from Yes 489,225 483,750 483,750 2.37 Short-term - Financing for working - - - 43,282,568 43,282,568 Note 2 Investment Co., Ltd. related parties financing capital requirements YFY Biopulp Technology Other receivables from Yes 3,262 3,225 3,225 1.50 Short-term - Financing for working - - - 8,656,514 17,313,027 Note 2 Limited. related parties financing capital requirements YFY Cayman Co., Ltd. Long-term receivables Yes 251,304 246,396 246,396 3.00 Short-term - Financing for working - - - 43,282,568 43,282,568 Note 2 from related parties financing capital requirements

2 YFY Global Investment BVI YFY Paper Mfg. (Yangzhou) Other receivables from Yes 622,500 322,500 322,500 2.37 Short-term - Financing for working - - - 8,941,940 8,941,940 Note 2 Corp. Co., Ltd. related parties financing capital requirements YFY Paper Mfg. (Jiangyin) Other receivables from Yes 257,659 254,775 254,775 2.37 Short-term - Financing for working - - - 1,788,388 3,576,776 Note 2 Co., Ltd. related parties financing capital requirements YFY Cayman Co., Ltd. Long-term receivables Yes 1,374,263 1,360,651 1,342,914 1.50-3.00 Short-term - Financing for working - - - 8,941,940 8,941,940 Note 2 from related parties financing capital requirements

3 YFY Paper Mfg. (Yangzhou) YFY Paper Mfg. (Jiangyin) Other receivables from Yes 429,684 283,178 272,662 2.25 Short-term - Financing for working - - - 283,178 2,265,427 Note 2 Co., Ltd. Co., Ltd. related parties financing capital requirements Shenzhen Systax Paper Co., Other receivables from Yes 8,662,906 929,797 - - Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 Ltd. related parties financing capital requirements Yuen Foong Yu Blue Economy Other receivables from Yes 8,662,906 929,797 14 2.25 Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 Natural Resource related parties financing capital requirements (Yangzhou) Co., Ltd. Kunshan YFY Advertising and Other receivables from Yes 8,662,906 929,797 391,188 2.25 Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 Printing Co., Ltd. related parties financing capital requirements YFY Family Care (Kunshan) Other receivables from Yes 8,662,906 929,797 - - Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 8,662,906 929,797 15,410 2.25 Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 (Suzhou) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 8,662,906 929,797 443,402 2.25 Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 (Fuzhou) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 8,662,906 929,797 106,673 2.25 Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 (Shanghai) Co., Ltd. related parties financing capital requirements YFY BioTechnology Other receivables No 149,439 139,470 92,342 2.25 Short-term - Financing for working - - - 283,178 2,265,427 - (Kunshan) Co., Ltd. financing capital requirements YFY Paper Enterprise Other receivables from Yes 429,684 283,178 134,517 2.25 Short-term - Financing for working - - - 283,178 2,265,427 Note 2 (Nanjing) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 8,662,906 929,797 - - Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 (Dongguan) Co., Ltd. related parties financing capital requirements

(Continued)

Appendix 064 065 Appendix Collateral Financing Limit Aggregate Actual Interest Business Allowance for Financial Statement Related Highest Balance Nature of Reasons for for Each Financing No. Lender Borrower Ending Balance Borrowing Rate Transaction Impairment Note Account Party for the Period Financing Short-term Financing Item Value Borrower Limits Amount (%) Amounts Loss (Note 1) (Note 1)

YFY Paper Enterprise (Jiaxing) Other receivables from Yes $ 8,662,906 $ 929,797 $ 31,638 2.25 Short-term $ - Financing for working $ - - $ - $ 5,663,567 $ 5,663,567 Note 2 Co., Ltd. related parties financing capital requirements Rimagine Design (Shanghai) Other receivables from Yes 8,662,906 929,797 2,610 2.25 Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 429,684 283,178 - - Short-term - Financing for working - - - 283,178 2,265,427 Note 2 (Guangzhou) Co., Ltd. related parties financing capital requirements Guangdong Ding Feng Pulp & Other receivables from Yes 996,260 929,797 - - Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 Paper Co., Ltd. related parties financing capital requirements YFY Family Paper (Beijing) Other receivables from Yes 8,662,906 929,797 31,634 2.25 Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 8,662,906 929,797 - - Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 (Zhongshan) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 8,662,906 929,797 594 2.25 Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 (Xiamen) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 8,662,906 929,797 - - Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 (Kunshan) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise (Tianjin) Other receivables from Yes 8,662,906 929,797 - - Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 8,662,906 929,797 - - Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 (Qingdao) Co., Ltd. related parties financing capital requirements Arizon RFID Technology Other receivables from Yes 8,662,906 - - - Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 (Yangzhou) Co., Ltd. related parties financing capital requirements YFY Jupiter (Shenzhen) Ltd. Other receivables from Yes 8,662,906 929,797 - - Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 related parties financing capital requirements Kunshan YFY Jupiter Green Other receivables from Yes 8,662,906 929,797 - - Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 Packaging Ltd. related parties financing capital requirements Yuen Foong Yu Consumer Other receivables from Yes 8,662,906 929,797 60,186 2.25 Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 Product (Yangzhou) Co., related parties financing capital requirements Ltd. YFY Investment Co., Ltd. Other receivables from Yes 8,662,906 929,797 - - Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 related parties financing capital requirements Shanghai YFY International Other receivables from Yes 4,981 4,649 1,827 2.25 Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 Trade Co., Ltd. related parties financing capital requirements YFY Packaging (Yangzhou) Other receivables from Yes 8,662,906 929,797 310,205 2.10-2.25 Short-term - Financing for working - - - 5,663,567 5,663,567 Note 2 Investment Co., Ltd. related parties financing capital requirements

4 YFY Paper Enterprise YFY Paper Mfg. (Yangzhou) Other receivables from Yes 627,606 615,349 593,911 2.10 Short-term - Financing for working - - - 894,287 894,287 Note 2 (Kunshan) Co., Ltd. Co., Ltd. related parties financing capital requirements YFY Packaging (Yangzhou) Other receivables from Yes 627,606 615,349 8,555 2.10 Short-term - Financing for working - - - 894,287 894,287 Note 2 Investment Co., Ltd. related parties financing capital requirements YFY (Shanghai) Financial Other receivables from Yes 406,928 278,938 113,900 3.85 Short-term - Financing for working - - - 894,287 894,287 Note 2 Services Co., Ltd. related parties financing capital requirements

5 YFY Paper Enterprise YFY Paper Mfg. (Yangzhou) Other receivables from Yes 1,271,662 1,226,579 597,971 2.10 Short-term - Financing for working - - - 1,459,028 1,459,028 Note 2 (Qingdao) Co., Ltd. Co., Ltd. related parties financing capital requirements YFY (Shanghai) Financial Other receivables from Yes 297,446 232,449 111,576 3.85 Short-term - Financing for working - - - 1,459,028 1,459,028 Note 2 Services Co., Ltd. related parties financing capital requirements

6 YFY Paper Enterprise YFY Paper Mfg. (Yangzhou) Other receivables from Yes 44,351 41,393 37,711 2.10 Short-term - Financing for working - - - 41,393 331,141 Note 2 (Guangzhou) Co., Ltd. Co., Ltd. related parties financing capital requirements YFY Paper Mfg. (Jiangyin) Other receivables from Yes 148,723 139,470 139,470 2.25 Short-term - Financing for working - - - 165,571 331,141 Note 2 Co., Ltd. related parties financing capital requirements

7 YFY Paper Enterprise YFY Paper Mfg. (Yangzhou) Other receivables from Yes 1,332,731 1,243,820 322,716 2.10 Short-term - Financing for working - - - 1,383,290 1,383,290 Note 2 (Zhongshan) Co., Ltd. Co., Ltd. related parties financing capital requirements YFY Paper Mfg. (Jiangyin) Other receivables from Yes 149,439 139,470 139,470 2.25 Short-term - Financing for working - - - 1,383,290 1,383,290 Note 2 Co., Ltd. related parties financing capital requirements

8 YFY Paper Enterprise YFY Paper Mfg. (Yangzhou) Other receivables from Yes 677,224 630,779 262,950 2.10 Short-term - Financing for working - - - 630,779 630,779 Note 2 (Dongguan) Co., Ltd. Co., Ltd. related parties financing capital requirements

9 YFY Paper Enterprise (Tianjin) YFY Paper Mfg. (Yangzhou) Other receivables from Yes 1,212,566 1,174,611 616,351 2.10 Short-term - Financing for working - - - 1,174,611 1,174,611 Note 2 Co., Ltd. Co., Ltd. related parties financing capital requirements YFY (Shanghai) Financial Other receivables from Yes 297,446 - - - Short-term - Financing for working - - - 1,174,611 1,174,611 Note 2 Services Co., Ltd. related parties financing capital requirements

(Continued)

Appendix 066 067 Appendix Collateral Financing Limit Aggregate Actual Interest Business Allowance for Financial Statement Related Highest Balance Nature of Reasons for for Each Financing No. Lender Borrower Ending Balance Borrowing Rate Transaction Impairment Note Account Party for the Period Financing Short-term Financing Item Value Borrower Limits Amount (%) Amounts Loss (Note 1) (Note 1)

10 YFY Cayman Co., Ltd. YFY Paper Enterprise (Jiaxing) Other receivables from Yes $ 130,460 $ 129,000 $ 129,000 2.37 Short-term $ - Financing for working $ - - $ - $ 28,639,241 $ 28,639,241 Note 2 Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 32,615 - - - Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 (Zhongshan) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Long-term receivables Yes 82,841 82,543 82,543 3.50 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 (Zhongshan) Co., Ltd. from related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 65,230 64,500 64,500 2.00 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 (Qingdao) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Long-term receivables Yes 148,398 141,724 141724 3.50 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 (Qingdao) Co., Ltd. from related parties financing capital requirements YFY Paper Enterprise (Tianjin) Long-term receivables Yes 251,714 88,331 88,331 3.50 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 Co., Ltd. from related parties financing capital requirements YFY Paper Enterprise (Tianjin) Other receivables from Yes 260,920 258,000 258,000 2.00 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Long-term receivables Yes 171,935 171,315 93,445 3.50 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 (Suzhou) Co., Ltd. from related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 150,220 64,500 64,500 2.37 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 (Suzhou) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Long-term receivables Yes 193,818 193,119 193,119 3.50 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 (Dongguan) Co., Ltd. from related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 179,383 171,315 - - Short-term - Financing for working - - - 5,727,848 11,455,696 Note 2 (Guangzhou) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 48,923 48,375 48,375 2.37 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 (Fuzhou) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 228,305 225,750 225,750 2.37 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 (Kunshan) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 326,150 322,500 258,000 2.37 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 (Shanghai) Co., Ltd. related parties financing capital requirements YFY Paper Mfg. (Yangzhou) Other receivables from Yes 559,347 553,088 553,088 2.37 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 Co., Ltd. related parties financing capital requirements YFY Paper Mfg. (Yangzhou) Long-term receivables Yes 4,096,432 3,963,677 3,963,677 2.37-3.50 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 Co., Ltd. from related parties financing capital requirements YFY Packaging (Yangzhou) Long-term receivables Yes 489,225 467,223 467,223 3.50 Short-term - Financing for working - - - 28,639,241 28,639,241 Note 2 Investment Co., Ltd. from related parties financing capital requirements

11 YFY Jupiter Ltd. YFY Jupiter (BVI) Inc. Other receivables from Yes 16,231 - - - Short-term - Financing for working - - - 77,416 154,832 Note 2 related parties financing capital requirements Jupiter Prestige Group Asia Other receivables from Yes 32,250 17,738 17,738 5.00 Short-term - Financing for working - - - 77,416 154,832 Note 2 Ltd. related parties financing capital requirements

12 YFY Paper Enterprise (Nanjing) YFY Packaging (Yangzhou) Other receivables from Yes 28,382 23,120 - - Short-term - Financing for working - - - 23,120 184,962 Note 2 Co., Ltd. Investment Co., Ltd. related parties financing capital requirements YFY Paper Mfg. (Yangzhou) Other receivables from Yes 28,382 23,120 - - Short-term - Financing for working - - - 23,120 184,962 Note 2 Co., Ltd. related parties financing capital requirements

13 Arizon RFID Technology YFY Paper Mfg. (Yangzhou) Other receivables from Yes 2,676,304 - - - Short-term - Financing for working - - - 2,954,642 2,954,642 Note 2 (Yangzhou) Co., Ltd. Co., Ltd. related parties financing capital requirements

14 YFY Jupiter (Shenzhen) Ltd. YFY Paper Mfg. (Yangzhou) Other receivables from Yes 321,953 300,263 37,283 2.10-3.50 Short-term - Financing for working - - - 302,587 302,587 Note 2 Co., Ltd. related parties financing capital requirements Chengdu Jie Lian Da Other receivables from Yes 2,479 - - - Short-term - Financing for working - - - 60,517 121,035 Note 2 Warehousing Co., Ltd. related parties financing capital requirements

15 Guangdong Ding Feng Pulp & YFY Paper Mfg. (Yangzhou) Other receivables from Yes 531,920 495,102 52,158 2.10 Short-term - Financing for working - - - 495,102 3,960,820 Note 2 Paper Co., Ltd. Co., Ltd. related parties financing capital requirements

16 YFY Family Paper (Beijing) YFY Paper Mfg. (Yangzhou) Other receivables from Yes 1,047,267 475,923 - - Short-term - Financing for working - - - 951,846 951,846 Note 2 Co., Ltd. Co., Ltd. related parties financing capital requirements

17 YFY Investment Co., Ltd. YFY Paper Mfg. (Yangzhou) Other receivables from Yes 3,284,190 1,237,365 211,002 2.10 Short-term - Financing for working - - - 2,474,730 2,474,730 Note 2 Co., Ltd. related parties financing capital requirements

18 Shenzhen Systax Paper Co., YFY Paper Mfg. (Yangzhou) Other receivables from Yes 144,798 135,139 20,412 2.10 Short-term - Financing for working - - - 135,139 135,139 Note 2 Ltd. Co., Ltd. related parties financing capital requirements

(Continued)

Appendix 068 069 Appendix Collateral Financing Limit Aggregate Actual Interest Business Allowance for Financial Statement Related Highest Balance Nature of Reasons for for Each Financing No. Lender Borrower Ending Balance Borrowing Rate Transaction Impairment Note Account Party for the Period Financing Short-term Financing Item Value Borrower Limits Amount (%) Amounts Loss (Note 1) (Note 1)

19 Effion Enertech Co., Ltd. Lotus Ecoscings & Engineering Other receivables from Yes $ 100,000 $ 100,000 $ 100,000 1.25 Short-term $ - Financing for working $ - - $ - $ 299,126 $ 598,252 Note 2 Co., Ltd. related parties financing capital requirements YFY Venture Capital Other receivables from Yes 198,000 198,000 198,000 1.25 Short-term - Financing for working - - - 299,126 598,252 Note 2 Investment Co., Ltd. related parties financing capital requirements

20 YFY Family Care (Kunshan) YFY Paper Mfg. (Yangzhou) Other receivables from Yes 952,294 893,041 199,797 2.10 Short-term - Financing for working - - - 893,041 893,041 Note 2 Co., Ltd. Co., Ltd. related parties financing capital requirements

21 CHP International (BVI) YFY International BVI Corp. Other receivables from Yes 602,100 290,250 290,250 1.50 Short-term - Financing for working - - - 2,226,664 4,453,328 Note 2 Corporation related parties financing capital requirements Guangdong Ding Feng Pulp & Other receivables from Yes 1,103,850 1,064,250 1,064,250 1.77 Short-term - Financing for working - - - 2,226,664 4,453,328 Note 2 Paper Co., Ltd. related parties financing capital requirements Zhaoqing Ding Feng Forestry Other receivables from Yes 401,400 387,000 387,000 1.77 Short-term - Financing for working - - - 2,226,664 4,453,328 Note 2 Ltd. related parties financing capital requirements

22 Eihoyo Shoji Co., Ltd. YFY International BVI Corp. Other receivables from Yes 71,125 55,120 55,120 1.50 Short-term - Financing for working - - - 165,029 165,029 Note 2 related parties financing capital requirements

23 YFY Packaging (Yangzhou) YFY Paper Mfg. (Yangzhou) Other receivables from Yes 1,235,779 778,237 - - Short-term - Financing for working - - - 778,237 778,237 Note 2 Investment Co., Ltd. Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 1,235,779 778,237 110,072 2.25 Short-term - Financing for working - - - 778,237 778,237 Note 2 (Shanghai) Co., Ltd related parties financing capital requirements YFY Paper Enterprise (Jiaxing) Other receivables from Yes 1,235,779 778,237 116,020 2.25 Short-term - Financing for working - - - 778,237 778,237 Note 2 Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 1,235,779 778,237 - - Short-term - Financing for working - - - 778,237 778,237 Note 2 (Kunshan) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 1,235,779 778,237 39,035 2.25 Short-term - Financing for working - - - 778,237 778,237 Note 2 (Suzhou) Co., Ltd. related parties financing capital requirements YFY Paper Enterprise Other receivables from Yes 63,760 38,912 16,660 2.25 Short-term - Financing for working - - - 38,912 311,295 Note 2 (Nanjing) Ltd. related parties financing capital requirements

24 YFY Paper Enterprise (Suzhou) YFY Paper Mfg. (Yangzhou) Other receivables from Yes 441,504 323,108 - - Short-term - Financing for working - - - 323,108 323,108 Note 2 Co., Ltd. Co., Ltd. related parties financing capital requirements YFY Packaging (Yangzhou) Other receivables from Yes 441,504 323,108 - - Short-term - Financing for working - - - 323,108 323,108 Note 2 Investment Co., Ltd. related parties financing capital requirements

25 YFY Consumer Products Co., YFY Family Care (Kunshan) Other receivables from Yes 993,809 781,029 781,029 2.00 Short-term - Financing for working - - - 985,366 1,970,732 Note 2 Ltd. Co., Ltd. related parties financing capital requirements

26 YFY Paper Enterprise YFY Paper Mfg. (Yangzhou) Other receivables from Yes 304,713 249,392 - - Short-term - Financing for working - - - 249,392 249,392 Note 2 (Shanghai) Co., Ltd. Co., Ltd. related parties financing capital requirements YFY Packaging (Yangzhou) Other receivables from Yes 304,713 249,392 - - Short-term - Financing for working - - - 249,392 249,392 Note 2 Investment Co., Ltd. related parties financing capital requirements

27 YFY Paper Enterprise (Jiaxing) YFY Paper Mfg. (Yangzhou) Other receivables from Yes 308,809 232,312 - - Short-term - Financing for working - - - 232,312 232,312 Note 2 Co., Ltd. Co., Ltd. related parties financing capital requirements YFY Packaging (Yangzhou) Other receivables from Yes 308,809 232,312 - - Short-term - Financing for working - - - 232,312 232,312 Note 2 Investment Co., Ltd. related parties financing capital requirements

28 YFY Paradigm Investment Co., Livebricks Inc. Other receivables from Yes 75,000 - - - Short-term - Financing for working - - - 551,475 1,012,950 Note 2 Ltd. related parties financing capital requirements Cupid InfoTech Co., Ltd. Other receivables from Yes 50,000 - - - Short-term - Financing for working - - - 551,475 1,012,950 Note 2 related parties financing capital requirements

29 YFY Packaging BVI Corp. YFY International BVI Corp. Long-term receivables Yes 652,300 322,500 322,500 1.00 Short-term - Financing for working - - - 8,562,346 8,562,346 Note 2 from related parties financing capital requirements YFY Cayman Co., Ltd. Long-term receivables Yes 842,788 833,663 833,663 1.00-1.50 Short-term - Financing for working - - - 8,562,346 8,562,346 Note 2 from related parties financing capital requirements

30 YFY Packaging Capital Corp. YFY International BVI Corp. Long-term receivables Yes 1,198,761 1,094,832 1,094,832 2.00 Short-term - Financing for working - - - 11,902,860 11,902,860 Note 2 from related parties financing capital requirements YFY Paper Mfg. (Yangzhou) Long-term receivables Yes 474,300 432,704 418,409 2.00 Short-term - Financing for working - - - 11,902,860 11,902,860 Note 2 Co., Ltd. from related parties financing capital requirements YFY Cayman Co., Ltd. Long-term receivables Yes 4,790,586 4,441,220 4,441,220 0.50 Short-term - Financing for working - - - 11,902,860 11,902,860 Note 2 from related parties financing capital requirements

(Continued)

Appendix 070 071 Appendix Collateral Financing Limit Aggregate Actual Interest Business Allowance for Financial Statement Related Highest Balance Nature of Reasons for for Each Financing No. Lender Borrower Ending Balance Borrowing Rate Transaction Impairment Note Account Party for the Period Financing Short-term Financing Item Value Borrower Limits Amount (%) Amounts Loss (Note 1) (Note 1)

31 YFY Consumer Products YFY Investment Co., Ltd. Other receivables from Yes $ 1,596,000 $ 967,500 $ 967,500 2.00 Short-term $ - Financing for working $ - - $ - $ 5,918,932 $ 5,918,932 Note 2 Investment Limited related parties financing capital requirements Yuen Foong Yu Consumer Other receivables from Yes 1,117,200 645,000 645,000 2.00 Short-term - Financing for working - - - 5,918,932 5,918,932 Note 2 Product (Yangzhou) Co., related parties financing capital requirements Ltd.

32 Yuen Foong Yu Consumer YFY Paper Mfg. (Yangzhou) Other receivables from Yes 2,057,850 954,851 - - Short-term - Financing for working - - - 1,909,702 1,909,702 Note 2 Product (Yangzhou) Co., Ltd. Co., Ltd. related parties financing capital requirements

33 YFY Capital Co., Ltd. Yeon Technologies Co., Ltd. Other receivables from Yes 35,000 35,000 15,000 1.50 Short-term - Financing for working - - - 127,847 255,694 Note 2 related parties financing capital requirements Cupid Info Tech Co., Ltd. Other receivables from Yes 50,000 50,000 50,000 1.50 Short-term - Financing for working - - - 127,847 255,694 Note 2 related parties financing capital requirements

34 YFY RFID Technologies Co., YFY Cayman Co., Ltd. Long-term receivables Yes 7,175 7,095 7,095 1.50 Short-term - Financing for working - - - 7,469 7,469 Note 2 Ltd. from related parties financing capital requirements

35 YFY International Labuan Co, YFY Cayman Co., Ltd. Long-term receivables Yes 105,184 103,200 103,200 1.50 Short-term - Financing for working - - - 14,414,620 14,414,620 Note 2 Ltd. from related parties financing capital requirements

36 YFY Packing Inc. YFY Cayman Co., Ltd. Other receivables from Yes 1,467,675 - - - Short-term - Financing for working - - - 2,772,591 5,545,182 Note 2 related parties financing capital requirements

37 Chung Hwa Pulp Corporation YFY Cayman Co., Ltd. Other receivables from Yes 1,793,825 - - - Short-term - Financing for working - - - 6,603,783 13,207,566 Note 2 related parties financing capital requirements

38 Yuen Foong Yu Blue Economy YFY Paper Mfg. (Yangzhou) Other receivables from Yes 439,287 409,981 - - Short-term - Financing for working - - - 409,981 409,981 Note 2 Natural Resource (Yangzhou) Co., Ltd. related parties financing capital requirements Co., Ltd.

39 Rimagine Design (Shanghai) YFY Paper Mfg. (Yangzhou) Other receivables from Yes 3,119 - - - Short-term - Financing for working - - - - - Note 2 Co., Ltd. Co., Ltd. related parties financing capital requirements

40 Kunshan YFY Jupiter Green YFY Paper Mfg. (Yangzhou) Other receivables from Yes 78,164 72,870 41,894 2.10-3.50 Short-term - Financing for working - - - 72,870 72,870 Note 2 Packaging Ltd. Co., Ltd. related parties financing capital requirements

41 Zhaoqing Ding Feng Forestry Guangdong Ding Feng Pulp & Other receivables from Yes 204,224 185,959 185,959 2.25 Short-term - Financing for working - - - 1,199,450 2,398,900 Note 2 Ltd. Paper Co., Ltd. related parties financing capital requirements

42 Shanghai YFY International YFY Paper Mfg. (Yangzhou) Other receivables from Yes 852 795 - - Short-term - Financing for working - - - 795 795 Note 2 Trade Co., Ltd. Co., Ltd. related parties financing capital requirements

43 YFY RFID Co., Ltd. YFY Cayman Co., Ltd. Long-term receivables Yes 6,289 6,289 6,289 1.50 Short-term - Financing for working - - - 3,169,306 3,169,306 Note 2 from related parties financing capital requirements

44 Hwa Fong Paper (H.K.) Ltd. YFY Cayman Co., Ltd. Long-term receivables Yes 3,870 3,870 3,870 1.50 Short-term - Financing for working - - - 152,762 152,762 Note 2 from related parties financing capital requirements

Note 1: a. In the provision of business dealing, total loans should not exceed 40% of the lender’s net equity of the prior year. Individual loans should not exceed total purchases and sales between the lender and the borrower of the prior year. In the provision of short-term financing, individual and total loans should not exceed 40% of the lender’s net equity of the prior year. To sum up, in the provision of business dealing and short-term financing, both aggregate loans and individual loans should not exceed 80% of the lender’s net equity of the prior year.

b. For YFY Inc.’s wholly owned foreign subsidiaries are not subject to the foregoing 40% and 80% limits when they provide financing to each other. For those subsidiaries of YFY Inc., if the lending is for the borrower’s business purposes or short-term financing, the amount of financing should not exceed twice of the lender’s net equity as of the end of the prior year.

c. For YFY Inc.’s other foreign subsidiaries that are not wholly owned and are based in China, their individual contributions to a cash pool to be used for lending purposes should not exceed 10% of their respective net equities as of the end of the prior year.

d. For Guangdong Ding Feng Pulp & Paper Co., Ltd. and CHP International (BVI) Corporation, individual loans and total loans should not exceed 40% and 80% of the lender’s net equity, respectively.

Note 2: In preparing the consolidated financial statements, the transaction has been eliminated.

(Concluded)

Appendix 072 073 Appendix TABLE 3

YFY INC. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Endorsee/Guarantee Ratio of Limits on Maximum Accumulated Endorsement/ Endorsement/ Endorsement/ Endorsement/ Amount Outstanding Amount Aggregate Actual Endorsement/ Guarantee Guarantee Guarantee Guarantee Given Endorsed/ Endorsement/ Endorsed/ Endorsement/ No. Endorser/Guarantor Borrowing Guarantee to Given by Parent Given by Given on Behalf Name Relationship on Behalf of Guaranteed Guarantee at the Guaranteed by Guarantee Limit Amount Net Equity In on Behalf of Subsidiaries on of Companies in Each Party During the End of the Period Collaterals (Note 2) Latest Financial Subsidiaries Behalf of Parent Mainland China (Note 1) Period Statements (%)

Endorsement

1 YFY Inc. YFY Paper Mf. (Yangzhou) Co., Ltd. Note 3 a. $ 53,319,330 $ 601,439 $ 601,439 $ 311,203 $ - 1.87 $ 71,092,440 Yes No Yes

2 YFY Packing Inc. YFY Cayman Co., Ltd. Note 3 b. 10,397,216 4,892,250 4,837,500 4,289,250 - 86.19 13,862,954 No Yes No

Credit lines (Note 4)

1 YFY Inc. YFY Capital Co., Ltd. Note 3 a. 53,319,330 3,200,000 3,200,000 1,490,000 - 9.94 71,092,440 No No No YFY Venture Capital Investment Co., Ltd. Note 3 a. 53,319,330 2,270,000 2,170,000 1,001,000 - 6.74 71,092,440 No No No San Ying Enterprise Co., Ltd. Note 3 a. 53,319,330 200,000 200,000 - - 0.62 71,092,440 No No No YFY Paradigm Investment Co., Ltd. Note 3 a. 53,319,330 2,020,000 1,920,000 982,000 - 5.97 71,092,440 No No No Lotus Ecoscings & Engineering Co., Ltd. Note 3 a. 53,319,330 230,000 230,000 83,000 - 0.71 71,092,440 No No No Yeon Technologies Co., Ltd. Note 3 a. 53,319,330 60,000 60,000 10,000 - 0.19 71,092,440 No No No YFY International BVI Corp. Note 3 a. 53,319,330 4,023,268 3,662,625 903,189 - 11.38 71,092,440 No No No YFY Global Investment BVI Corp. Note 3 a. 53,319,330 1,132,500 1,132,500 629,520 - 3.52 71,092,440 No No No YFY Jupiter Ltd. Note 3 a. 53,319,330 351,998 349,625 129,000 - 1.09 71,092,440 No No No Arizon RFID Technology (Yangzhou) Co., Ltd. Note 3 a. 53,319,330 81,750 80,625 - - 0.25 71,092,440 No No No YFY (Shanghai) Financial Services Co., Ltd. Note 3 a. 53,319,330 143,976 139,470 69,735 - 0.43 71,092,440 No No No Eihoyo Shoji Co., Ltd. Note 3 a. 53,319,330 84,000 84,000 - - 0.26 71,092,440 No No No

2 YFY Packaging Inc. YFY Cayman Co., Ltd. Note 3 b. 10,397,216 9,248,925 3,160,500 69,427 - 56.31 13,862,954 No No No YFY Paper Enterprise (Jiaxing) Co., Ltd. Note 3 b. 10,397,216 97,845 96,750 - - 1.72 13,862,954 No No No YFY Paper Enterprise (Suzhou) Co., Ltd. Note 3 b. 10,397,216 200,700 96,750 96,750 - 1.72 13,862,954 No No No YFY Paper Mfg. (Yangzhou) Co., Ltd. Note 3 b. 10,397,216 328,250 - - - - 13,862,954 No No No YFY Paper Enterprise (Dongguan) Co., Ltd. Note 3 b. 10,397,216 97,845 - - - - 13,862,954 No No No YFY Paper Enterprise (Guangzhou) Co., Ltd. Note 3 b. 10,397,216 210,693 208,335 96,750 - 3.71 13,862,954 No No No

3 YFY Consumer Products Co., Ltd. Yuen Foong Yu Consumer Products (Yangzhou) Note 3 a. 3,695,123 951,750 806,250 - - 33.39 4,926,830 No No No Co., Ltd. YFY Investment Co., Ltd. Note 3 a. 3,695,123 652,300 483,750 161,250 - 20.03 4,926,830 No No No YFY Family Care (Kunshan) Co., Ltd. Note 3 a. 3,695,123 815,375 483,750 - - 20.03 4,926,830 No No No

4 Chung Hwa Pulp Co., Ltd. CHP International (BVI) Corp. Note 3 a. 24,764,185 661,125 661,125 - - 4.21 33,018,914 No No No

Note 1: Represents 150% of the prior year’s net equity of YFY Inc., Chung Hwa Pulp Co., Ltd., YFY Packaging Inc., and YFY Consumer Products Co., Ltd.

Note 2: Represents 200% of the prior year’s net equity of YFY Inc., Chung Hwa Pulp Co., Ltd., YFY Packaging Inc. and YFY Consumer Products Co., Ltd.

Note 3: The relationships between endorsee and guarantee are as follow:

a. Subsidiary. b. Same parent company.

Note 4: In accordance with regulations, the credit lines jointly issued by the Company were disclosed.

Appendix 074 075 Appendix TABLE 4

YFY INC. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

December 31, 2016 Relationship Percentage with the Holding Company Name Type and Name of Marketable Securities Financial Statement Account Number of Carrying of Note Holding Fair Value Shares Amount Ownership Company (%)

YFY Inc. Common stock SinoPac Holdings Co., Ltd. Note 1 Available-for-sale financial assets - non-current 443,767,312 $ 4,029,407 4.2 $ 4,029,407 Boardtek Electronics Corporation - Available-for-sale financial assets - non-current 37,323,087 1,153,283 16.7 1,153,283 TaiGen Biopharmaceuticals Holdings Ltd. Note 1 Available-for-sale financial assets - non-current 84,509,502 2,298,659 11.8 2,298,659 Canada Investment and Development Co., Ltd. Note 1 Financial assets carried at cost - non-current 20,826,000 133,500 12.9 - Synmax Biochemical Co., Ltd. Note 1 Financial assets carried at cost - non-current 5,999,371 61,611 13.9 - Universal Investment Co., Ltd. Note 1 Financial assets carried at cost - non-current 5,562,000 50,000 2.9 - Fu Hwa Development Enterprise Co., Ltd. Note 1 Financial assets carried at cost - non-current 4,200,000 42,000 14.0 - Taiwan Cultural-Creative Development Co., Ltd. Note 1 Financial assets carried at cost - non-current 1,600,000 19,200 8.0 - Shin Taiwan Agricultural Machinery Co., Ltd. Note 1 Financial assets carried at cost - non-current 5,612 5,612 5.5 - Lang Kuan Co., Ltd. - Financial assets carried at cost - non-current 665,000 4,251 9.5 - China Trade and Development Corp. - Financial assets carried at cost - non-current 377,634 3,776 0.6 - Taiwan Stock Exchange Corporation - Financial assets carried at cost - non-current 20,309,292 3,458 3.0 - Sino Cell Technologies Ltd. - Financial assets carried at cost - non-current 995,313 9,962 10.0 - Yuen Foong Paper Co., Ltd. - Financial assets carried at cost - non-current 544,067 810 0.7 - KHL IB Venture Capital Co., Ltd. - Financial assets carried at cost - non-current 25,000,000 250,000 14.9 -

Subordinated bank debentures Bank SinoPac 3rd unsecured perpetual Note 2 Debt investment with no active market - non-current - 160,000 - - non-cumulative subordinated financial debentures issue in 2015

Beneficiary certificates SinoPac TWD Money Market - Financial assets at fair value through profit or loss - current 210,876 2,909 - 2,909

YFY Paper Enterprise (Xiamen) Co., Ltd. Stock certificate Xiamen Taiwanese Investment Association - Financial assets carried at cost - non-current - RMB 70 - - Management Company thousand

YFY Global Investment BVI Corp. Exchangeable bonds Giant Crystal Universal Development Inc. - Financial assets at fair value through profit or loss - current - US$ 8,988 - US$ 8,988 thousand thousand

Common stock SinoPac Holdings Co., Ltd. - Available-for-sale financial assets - current 73,358,183 US$ 20,654 0.7 US$ 20,654 thousand thousand

(Continued)

Appendix 076 077 Appendix December 31, 2016 Relationship Percentage with the Holding Company Name Type and Name of Marketable Securities Financial Statement Account Number of Carrying of Note Holding Fair Value Shares Amount Ownership Company (%)

Integral Investment-I Co., Ltd. - Financial assets carried at cost - non-current 337,949 US$ 177 13.8 $ - thousand

Preferred stock Neutron Innovation (BVI) Ltd. - Financial assets carried at cost - non-current 1,692,250 US$ 1,354 6.5 - thousand Micareo Inc. - Financial assets carried at cost - non-current 4,999,999 US$ 2,000 15.7 - thousand Loyalty Alliance Enterprise Co., Ltd. - Financial assets carried at cost - non-current 3,034,073 US$ 1,592 2.6 - thousand Omni-ID Corporation Inc. - Financial assets carried at cost - non-current 2,953,630 US$ 3,000 4.6 - thousand

Beneficiary certificates WI Harper INC Fund VII LP - Financial assets carried at cost - non-current - US$ 182 0.2 - thousand

Shin Foong Specialty and Applied Beneficiary certificates Materials Co SinoPac TWD Money Market - Financial assets at fair value through profit or loss - current 3,246,368 44,791 - 44,791 Note 3

Common stock SinoPac Holdings Co., Ltd. - Available-for-sale financial assets - non-current 20,736,141 188,284 0.2 188,284 Foongtone Technology Co., Ltd. - Financial assets carried at cost - non-current 2,622,196 11,784 11.8 - Huashan Cultural-Creative Co., Ltd. - Financial assets carried at cost - non-current 3,200,000 32,000 6.2 -

China Color Printing Co., Ltd. Beneficiary certificates Jih Sun Money Market - Financial assets at fair value through profit or loss - current 443,096 6,500 - 6,500 Mega Diamond Money Market - Financial assets at fair value through profit or loss - current 402,706 5,001 - 5,001 Prudential Financial Money Market - Financial assets at fair value through profit or loss - current 702,543 11,003 - 11,003 Hua Nan Kirin Money Market - Financial assets at fair value through profit or loss - current 1,432,820 17,001 - 17,001

Common stock China Development Financial Holding - Available-for-sale financial assets - current 9,959,081 80,270 0.1 80,270 Corporation China Parcel Co., Ltd. - Financial assets carried at cost - non-current 463,917 5,804 10.8 -

YFY Capital Co., Ltd. Common stock SinoPac Holdings Co., Ltd. - Available-for-sale financial assets - current 27,518,531 249,868 0.3 249,868 Taishin Holdings Co., Ltd. - Available-for-sale financial assets - current 13,637,010 160,917 0.1 160,917 Advance Materials Corporation Co., Ltd. - Financial assets carried at cost - non-current 1,713,620 9,631 1.3 - Leadwell Machines Mfg. Corp. - Financial assets carried at cost - non-current 2,090,000 23,957 3.4 -

YFY Biotech Management Company Common stock iStat Biomedical Co., Ltd. - Financial assets carried at cost - non-current 100,000 1,000 0.5 -

(Continued)

Appendix 078 079 Appendix December 31, 2016 Relationship Percentage with the Holding Company Name Type and Name of Marketable Securities Financial Statement Account Carrying of Note Holding Shares Fair Value Amount Ownership Company (%)

YFY Venture Capital Investment Co., Ltd. Common stock SinoPac Holdings Co., Ltd. - Financial assets at fair value through profit or loss - current 10,443,481 $ 94,827 0.1 $ 94,827 SinoPac Holdings Co., Ltd. - Available-for-sale financial assets - current 73,994,058 671,866 0.7 671,866 Medeon Biodesign, Inc. - Available-for-sale financial assets - current 185,000 26,825 0.4 26,825 Taigen Pharmaceuticals Holdings Limited - Available-for-sale financial assets - non-current 1,265,000 34,408 0.2 34,408 Quan Yuan Investment Co., Ltd. Note 1 Financial assets carried at cost - non-current 7,000,000 70,000 5.5 - Taiwan Global BioFund Co., Ltd. Note 1 Financial assets carried at cost - non-current 5,600,000 69,384 4.7 - Ever Terminal Co., Ltd. - Financial assets carried at cost - non-current 3,002,401 33,567 2.5 - Echem Solutions Corp. - Financial assets carried at cost - non-current 1,419,369 20,625 2.9 - Overseas Investment & Development Co., Ltd. - Financial assets carried at cost - non-current 1,000,000 9,960 1.1 - Advance Materials Corporation Co., Ltd. - Financial assets carried at cost - non-current 1,113 11 - - Hanmore Investment Corp. - Financial assets carried at cost - non-current 1,635,245 - 8.3 -

YFY Paradigm Investment Co., Ltd. Common stock SinoPac Holdings Co., Ltd. - Available-for-sale financial assets - current 91,532,053 831,111 0.9 831,111 Darfon Electronics Corp. - Available-for-sale financial assets - current 801,076 17,103 0.3 17,103 Well Shin Technology Co., Ltd. - Available-for-sale financial assets - current 233,954 11,908 0.2 11,908 Shen’s Art Printing Co., Ltd. Note 1 Available-for-sale financial assets - current 43,109 649 0.1 649 Medeon Biodesign, Inc. - Available-for-sale financial assets - current 108,000 15,660 0.2 15,660 Taigen Pharmaceuticals Holdings Limited - Available-for-sale financial assets - non-current 24,154,353 656,998 3.4 656,998 Canada Investment and Development Co., Ltd. Note 1 Financial assets carried at cost - non-current 2,574,000 16,500 1.6 - Locus Publishing Company Note 1 Financial assets carried at cost - non-current 1,402,386 16,442 13.4 - Huashan Cultural-Creative Co., Ltd. - Financial assets carried at cost - non-current 6,893,333 68,933 13.3 - Sino Cell Technologies Ltd. Note 1 Financial assets carried at cost - non-current 994,687 9,971 9.9 - Foongtone Technology Co., Ltd. - Financial assets carried at cost - non-current 801,077 500 3.6 - Taiwan Stock Exchange Corp. - Financial assets carried at cost - non-current 1,405 50 - -

Beneficiary certificates SinoPac TWD Money Market - Financial assets at fair value through profit or loss - current 1,413,516 19,503 - 19,503

YFY Packaging Inc. Beneficiary certificates SinoPac TWD Money Market - Financial assets at fair value through profit or loss - current 7,247,806 100,000 - 100,000 Yuanta Wan Tai Money Market Fund Financial assets at fair value through profit or loss - current 3,997,175 60,000 - 60,000

Cupid InfoTech Co., Ltd. Common stock SinoPac Holdings Co., Ltd. - Available-for-sale financial assets - current 7,062,081 64,124 0.1 64,124

Lotus Ecoscings & Engineering Co., Ltd. Common stock SinoPac Holdings Co., Ltd. - Available-for-sale financial assets - current 28,625,633 259,921 0.3 259,921 Boardtek Electronics Cor. Note 1 Available-for-sale financial assets - current 2,335,530 72,168 1.0 72,168 Fu Hwa Development Enterprise Co., Ltd. - Financial assets carried at cost - non-current 1,050,000 26,750 3.5 - Foongtone Technology Co., Ltd. Note 1 Financial assets carried at cost - non-current 445,042 2,000 2.0 -

(Continued)

Appendix 080 081 Appendix December 31, 2016 Relationship Percentage with the Holding Company Name Type and Name of Marketable Securities Financial Statement Account Carrying of Note Holding Shares Fair Value Amount Ownership Company (%)

Chung Hwa Pulp Co., Ltd. Common stock SinoPac Holdings Co., Ltd. - Available-for-sale financial assets - current 71,783,268 $ 651,792 0.7 $ 651,792 Taigen Pharmaceuticals Holdings Limited - Available-for-sale financial assets - non-current 15,315,356 416,578 2.1 416,578 NTU Innovation & Incubation Co., Ltd. Note 1 Financial assets carried at cost - non-current 800,000 8,000 6.3 - Groundhog Technologies Inc. - Financial assets carried at cost - non-current 275,000 3,902 2.8 - KHL IB Venture Capital Co., Ltd. - Financial assets carried at cost - non-current 25,000,000 250,000 14.9 -

Subordinated bank debentures Bank SinoPac 3rd unsecured perpetual - Debt investment with no active market - non-current - 170,000 - - non-cumulative subordinated financial debentures issue in 2015

Beneficiary certificates SinoPac TWD Money Market - Financial assets at fair value through profit or loss - current 942,220 13,000 - 13,000

YFY Operating Management Beneficiary certificates Consulting Co., Ltd. SinoPac TWD Money Market - Financial assets at fair value through profit or loss - current 16,426,163 226,635 - 226,635

Yeon Technologies Co., Ltd. Beneficiary certificates SinoPac TWD Money Market - Financial assets at fair value through profit or loss - current 72,515 1,000 - 1,000 Yuanta Wan Tai Money Market Fund - Financial assets at fair value through profit or loss - current 133,301 2,001 - 2,001

Union Paper Co., Ltd. Beneficiary certificates SinoPac TWD Money Market - Financial assets at fair value through profit or loss - current 4,823,923 66,557 - 66,557

Subordinated bank debentures Bank SinoPac 3rd unsecured perpetual - Debt investment with no active market - non-current - 20,000 - - non-cumulative subordinated financial debentures issue in 2015

Eihoyo Shoji Co., Ltd. Common stock Beautone Japan Co., Ltd. - Financial assets carried at cost - non-current 440 JPY 37,400 36.7 - thousand

Effion Enertech Co., Ltd. Beneficiary certificates SinoPac TWD Money Market - Financial assets at fair value through profit or loss - current 217,925 3,007 - 3,007

Subordinated bank debentures Bank SinoPac 3rd unsecured perpetual - Debt investment with no active market - non-current - 50,000 - - non-cumulative subordinated financial debentures issue in 2015

Kuang Hwa Fertilizer Limited Company Beneficiary certificates SinoPac TWD Money Market - Financial assets at fair value through profit or loss - current 167,024 2,306 - 2,306

(Continued)

Appendix 082 083 Appendix December 31, 2016 Relationship Percentage with the Holding Company Name Type and Name of Marketable Securities Financial Statement Account Carrying of Note Holding Shares Fair Value Amount Ownership Company (%)

Sam Ying Enterprise Co., Ltd. Beneficiary certificates SinoPac TWD Money Market - Financial assets at fair value through profit or loss - current 2,827,081 $ 39,006 - $ 39,006

YFY Cayman Co., Ltd. Beneficiary certificates JPMorgan Liquidity Funds - Financial assets at fair value through profit or loss - current 91 US$ 1,269 - US$ 1,269 thousand thousand

Note 1: The investor is the member of the Board of Directors or supervisors.

Note 2: The investor is the member of investee’s parent company of the Board of Directors.

Note 3: Formerly Shin Foong Chemical Industry Co., Ltd.

(Concluded)

Appendix 084 085 Appendix TABLE 5

YFY INC. AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICES OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars)

Financial Beginning Balance Acquisition Disposal Other Ending Balance Type and Name of Marketable Company Name Statement Counterparty Relationship Number of Number of Number of Carrying Gain (Loss) on Adjustments Number of Note Security Amount Amount Amount Amount Account Shares Shares Shares Amount Disposal (Note 4) Shares

YFY Inc. Beneficial certificate SinoPac TWD Money Market (Note 1) - - - $ - 57,892,875 $ 798,000 57,681,999 $ 795,160 $ 795,091 $ 69 $ - 210,876 $ 2,909 -

YFY Packaging Inc. Beneficiary certificate SinoPac TWD Money Market (Note 1) - - 3,816,107 52,500 186,866,278 2,575,000 183,434,579 2,527,672 2,527,503 169 3 7,247,806 100,000 - Yuanta Wan Tai Money Market (Note 1) - - 133,634 2,000 73,214,134 1,097,000 69,350,593 1,039,073 1,039,000 73 - 3,997,175 60,000 -

Chung Hwa Pulp Co., Ltd. Beneficiary certificate SinoPac TWD Money Market (Note 1) - - - - 134,724,375 1,855,000 133,782,155 1,842,082 1,842,000 82 - 942,220 13,000 -

YFY Cayman Co., Ltd. Beneficiary certificates JPMorgan Liquidity Funds (Note 1) - - - - 853 US$ 11,800 762 US$ 10,550 US$ 10,536 US$ 14 US$ 5 91 US$ 1,269 - thousand thousand thousand thousand thousand thousand

Shin Foong Specialty and Beneficiary certificate Applied Materials Co SinoPac TWD Money Market (Note 1) - - 21,138,623 290,817 7,219,544 99,500 25,111,799 346,000 345,387 613 (139) 3,246,368 44,791 Note 5

YFY Capital Co., Ltd. Beneficiary certificate SinoPac TWD Money Market (Note 1) - - - - 106,772,805 1,442,500 106,772,805 1,442,593 1,442,500 93 - - - - Capital Money Market (Note 1) - - - - 18,786,046 300,000 18,786,046 300,004 300,000 4 - - - -

YFY Packaging (Yangzhou) Stock certificate Investment Co., Ltd. YFY Paper Mfg. (Yangzhou) Co., (Note 2) - - - RMB 88,039 - RMB 68,865 - - - - RMB (91,998 - RMB 64,906 Note 6 Ltd. thousand thousand thousand) thousand

YFY Mauritius Corp. Stock certificate YFY Packaging (Yangzhou) (Note 2) - - - US$ 12,890 - US$ 10,000 - - - - US$ (16,569 - US$ 6,321 Note 6 Investment Co., Ltd. thousand thousand thousand) thousand

YFY Packaging (BVI) Corp, Common stock YFY Mauritius Corp. (Note 2) - - 105,000,000 US$ 87,097 10,000,000 US$ 10,000 - - - - US$ (28,626 115,000,000 US$ 68,471 Note 6 thousand thousand thousand) thousand

Note 1: Accounted as financial assets at fair value through profit or loss - current.

Note 2: Accounted as investments accounted for using equity method.

Note 3: Accounted as available-for-sale financial assets - current.

Note 4: Include the exchange differences on translating foreign operations, share of other comprehensive income (loss) of associates and unrealized gains (loss) on available-for-sale financial assets.

Note 5: Formerly Shin Foong Chemical Industry Co., Ltd.

Note 6: In preparing the consolidated financial statements, the transaction has been eliminated.

Appendix 086 087 Appendix TABLE 6

YFY INC. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars)

Notes/Accounts Transaction Details Abnormal Transaction Receivable (Payable) Unrealized Buyer Related Party Relationship Note Purchase/ % of Payment Ending % of Gain (Loss) Amount Payment Terms Unit Price Sale Total Terms Balance Total

YFY Packaging (Yangzhou) YFY Paper Mfg. (Yangzhou) Co., Ltd. Note 1 b. Sales $ 2,900,349 40 In agreed terms $ - - $ 897,812 35 $ - Note 2 Investment Co., Ltd. YFY Paper Enterprise (Dongguan) Co., Ltd. Note 1 b. Sales 1,687,529 23 In agreed terms - - 118,342 5 - Note 2 YFY Paper Enterprise (Xiamen) Co., Ltd. Note 1 b. Sales 304,017 4 In agreed terms - - 114,058 4 - Note 2 YFY Paper Enterprise (Guangzhou) Co., Ltd. Note 1 b. Sales 417,780 6 In agreed terms - - 71,457 3 - Note 2 YFY Paper Enterprise (Fuzhou) Co., Ltd. Note 1 b. Sales 225,561 3 In agreed terms - - 22,944 1 - Note 2 YFY Paper Enterprise (Qingdao) Co., Ltd. Note 1 b. Sales 225,176 3 In agreed terms - - 40,707 2 - Note 2 YFY Paper Enterprise (Tianjin) Co., Ltd. Note 1 b. Sales 390,130 5 In agreed terms - - 51,627 2 - Note 2 YFY Paper Enterprise (Zhongshan) Co., Ltd. Note 1 b. Sales 374,651 5 In agreed terms - - 101,289 4 - Note 2 YFY Paper Enterprise (Nanjing) Co., Ltd. Note 1 b. Sales 187,359 3 In agreed terms - - 17,650 1 - Note 2 YFY Paper Enterprise (Suzhou) Co., Ltd. Note 1 b. Sales 236,732 3 In agreed terms - - 59,176 2 - Note 2 YFY Paper Enterprise (Shanghai) Co., Ltd. Note 1 b. Sales 161,819 2 In agreed terms - - 24,832 1 - Note 2 YFY Paper Enterprise (Jiaxing) Co., Ltd. Note 1 b. Sales 198,089 3 In agreed terms - - 77,036 3 - Note 2

Shin Foong Specialty and Chung Hwa Pulp Co., Ltd. Note 1 b. Sales 347,751 11 4 months after transaction month - - 161,803 51 - Note 2 Applied Materials Co (Note 3)

YFY Packaging Inc. Pek Crown Paper Co., Ltd. Note 1 a. Sales 597,388 6 3 months after transaction month - - 108,950 6 (1,121) Note 2 Chung Hwa Pulp Co., Ltd. Note 1 b. Sales 1,505,896 16 2 months after transaction month - - 276,766 16 - Note 2 YFY Consumer Products Co., Ltd. Note 1 b. Sales 126,244 1 1 month after transaction month - - 12,545 1 - Note 2

Chung Hwa Pulp Co., Ltd. YFY Capital Co., Ltd. Note 1 b. Sales 964,487 5 2 months after transaction month - - 59,783 2 - Note 2 YFY Consumer Products Co., Ltd. Note 1 b. Sales 702,601 4 In agreed terms - - 320,592 12 - Note 2 Shenzhen Systax Paper Co., Ltd. Note 1 b. Sales 875,636 5 2 months after transaction month - - 438,420 16 - Note 2 Union Paper Co., Ltd. Note 1 b. Sales 935,356 5 1 month after transaction month - - 81,749 3 - Note 2 YFY Packaging Inc. Note 1 b. Sales 296,673 2 2 months after transaction month - - 82,186 4 - Note 2 China Color Printing Co., Ltd. Note 1 b. Sales 168,901 1 In agreed terms - - 34,833 2 - Note 2

YFY Investment Co., Ltd. YFY Family Care (Kunshan) Co., Ltd. Note 1 a. Sales 492,441 6 In agreed terms - - 48,575 4 - Note 2 YFY Consumer Products (Yangzhou) Co., Note 1 a. Sales 1,536,184 18 In agreed terms - - 75,659 6 - Note 2 Ltd. YFY Family Paper (Beijing) Co., Ltd. Note 1 a. Sales 128,533 2 In agreed terms - - 58,490 5 - Note 2

YFY Family Care (Kunshan) YFY Investment Co., Ltd. Note 1 b. Sales 2,194,340 98 In agreed terms - - 428,978 67 - Note 2 Co., Ltd.

YFY Family Paper (Beijing) YFY Investment Co., Ltd. Note 1 b. Sales 957,418 98 In agreed terms - - 41,439 92 - Note 2 Co., Ltd.

(Continued)

Appendix 088 089 Appendix Notes/Accounts Transaction Details Abnormal Transaction Receivable (Payable) Unrealized Buyer Related Party Relationship Note Purchase/ % of Payment Ending % of Gain (Loss) Amount Payment Terms Unit Price Sale Total Terms Balance Total

YFY Paper Enterprise YFY Paper Enterprise (Kunshan) Co., Ltd. Note 1 b. Sales $ 164,507 17 In agreed terms $ - - $ 30,363 14 $ - Note 2 (Suzhou) Co., Ltd.

Union Paper Co., Ltd. Chung Hwa Pulp Co., Ltd. Note 1 b. Sales 202,947 10 2 months after transaction month - - 20,802 8 - Note 2

YFY Consumer Products YFY Investment Co., Ltd. Note 1 b. Sales 1,548,755 61 In agreed terms - - 175,132 48 - Note 2 (Yangzhou) Co., Ltd. YFY Family Care (Kunshan) Co., Ltd. Note 1 b. Sales 743,012 29 In agreed terms - - 71,937 20 - Note 2 YFY Family Care (Beijing) Co., Ltd. Note 1 b. Sales 258,765 10 In agreed terms - - 113,804 31 - Note 2

YFY Consumer Products Co., Yuen Foong Shop Company Limited Note 1 a. Sales 654,960 21 In agreed terms - - 104,327 6 - Note 2 Ltd.

YFY Paper Mfg. (Yangzhou) YFY Paper Enterprise (Jiaxing) Co., Ltd. Note 1 b. Sales 147,417 2 In agreed terms - - 57,732 1 2,404 Note 2 Co., Ltd. YFY Paper Enterprise (Shanghai) Co., Ltd. Note 1 b. Sales 254,483 3 In agreed terms - - 54,186 1 2,499 Note 2 YFY Paper Enterprise (Suzhou) Co., Ltd. Note 1 b. Sales 206,065 3 In agreed terms - - 76,219 2 2,319 Note 2 YFY Paper Enterprise (Nanjing) Co., Ltd. Note 1 b. Sales 294,120 4 In agreed terms - - 63,539 2 1,940 Note 2 YFY Paper Enterprise (Guangzhou) Co., Ltd. Note 1 b. Sales 199,591 3 In agreed terms - - 45,807 1 1,709 Note 2 YFY Consumer Product (Zongshan) Co., Note 1 b. Sales 144,457 2 In agreed terms - - 59,250 1 1,813 Note 2 Ltd.

Eihoyo Shoji Co., Ltd. Chung Hwa Pulp Co., Ltd. Note 1 b. Sales 324,937 73 In agreed terms - - - - - Note 2

Ever Growing Agriculture YFY Consumer Products Co., Ltd. Note 1 b. Sales 227,355 100 In agreed terms - - 93,228 100 - Note 2 Biotech Co., Ltd.

Guangdong Ding Feng Pulp YFY Investment Co., Ltd. Note 1 b. Sales 895,381 42 In agreed terms - - 128,296 17 - Note 2 & Paper Co., Ltd.

Zhaoqing Ding Feng Forestry Guangdong Ding Feng Pulp & Paper Co., Note 1 b. Sales 481,628 86 In agreed terms - - 301,622 100 - Note 2 Ltd. Ltd.

Note 1: The relationships are as follow:

a. Subsidiary. b. Parent company or the same ultimate parent company.

Note 2: In preparing the consolidated financial statements, the transaction has been eliminated.

Note 3: Formerly Shin Foong Chemical Industry Co., Ltd.

(Concluded)

Appendix 090 091 Appendix TABLE 7

YFY INC. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars)

Overdue Amounts Allowance for Turnover Received in Company Name Related Party Relationship Ending Balance Impairment Rate Amount Actions Taken Subsequent Loss Period

YFY Family Care (Kunshan) Co., Ltd. YFY Investment Co., Ltd. Parent company $ 428,978 3.26 $ - - $ 63,372 $ -

YFY Packaging Inc. Chung Hwa Pulp Co., Ltd. Same ultimate parent company 276,766 5.62 - - 264,113 - Pek Crown Paper Co., Ltd. Subsidiary 108,950 5.44 - - 90,619 -

Shin Foong Specialty and Applied Materials Co (Note 1) Chung Hwa Pulp Co., Ltd. Same parent company 161,803 2.03 - - 61,167 -

YFY (Shanghai) Financial Services Co., Ltd. YFY Firstpak Packaging (YangZhou) Co., Ltd. Same ultimate parent company 124,996 - - - - -

Chung Hwa Pulp Co., Ltd. Shenzhen Systax Paper Co., Ltd. Same ultimate parent company 438,420 2.07 - - 80,156 - YFY Consumer Products Co., Ltd. Same parent company 320,592 2.36 - - 104,676 -

Zhaoqing Ding Feng Forestry Ltd. Guangdong Ding Feng Pulp & Paper Co., Ltd. Subsidiary 301,622 3.19 - - 55,796 -

Guangdong Ding Feng Pulp & Paper Co., Ltd. YFY Investment Co., Ltd. Same ultimate parent company 128,296 8.83 - - 128,296 -

Yuen Foong Yu Consumer Products (Yangzhou) Co., Ltd. YFY Family Paper (Beijing) Co., Ltd. Same parent company 113,804 1.80 - - 40,674 - YFY Investment Co., Ltd. Subsidiary 175,132 11.42 - - 113,950 -

YFY Packaging (Yangzhou) Investment Co., Ltd. YFY Paper Mfg. (Yangzhou) Co., Ltd. Same parent company 897,812 3.73 - - 102,278 - YFY Paper Enterprise (Dongguan) Co., Ltd. Same parent company 118,342 16.91 - - 30,285 - YFY Paper Enterprise (Xiaman) Co., Ltd. Same parent company 114,058 3.27 - - - - YFY Consumer Product (Zongshan) Co., Ltd. Same parent company 101,289 4.31 - - - -

YFY International BVI Corp. YFY Investment Co., Ltd. Same ultimate parent company 551,795 - - - 49,323 -

YFY Consumer Products Co., Ltd. Yuen Foong Shop Company Limited Subsidiary 104,327 5.85 - - 75,857 -

Note 1: Formerly Shin Foong Chemical Industry Co., Ltd.

Note 2: In preparing the consolidated financial statements, the transaction has been eliminated.

Appendix 092 093 Appendix TABLE 8

YFY INC. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investment Amount As of December 31, 2016 Net Income (Loss) Share of Investor Company Investee Company Location Main Businesses and Products Note December 31, 2016 December 31, 2015 Number of Shares % Carrying Amount of the Investee Profits (Loss)

YFY Inc. Chung Hwa Pulp Co., Ltd. Hualien, Taiwan Manufacture and sale of pulp. $ 5,715,988 $ 5,715,988 627,827,088 56.90 $ 8,999,028 $ 391,114 $ 221,760 Notes 1 and 4 E Ink Holdings Inc. , Taiwan To research, develop, produce and sale Thin-film transistor 1,361,555 1,361,555 133,472,904 11.90 3,234,309 1,907,939 226,143 - liquid crystal. YFY International BVI Corp. British Virgin Islands Investment and holding. 17,218,994 17,218,994 550,098,758 100.00 19,495,301 (1,259,582) (1,256,213) Notes 1 and 4 YFY Global Investment BVI Corp. British Virgin Islands Investment and holding. 2,153,335 2,153,335 79,000,000 100.00 4,757,408 280,007 369,442 Notes 1 and 4 YFY Consumer Products Co., Ltd. Taipei, Taiwan Sale and produce of paper, household cleansers, and related 1,600,000 1,600,000 214,562,200 100.00 2,414,569 85,103 27,295 Notes 1 and 4 paper merchandise. Shin Foong Specialty and Applied Materials Co Kaohsiung, Taiwan Sale and production of SBR Latex. 73,398 75,203 52,182,248 55.30 1,322,520 594,056 333,135 Notes 1, 3 and 4 Taiwan Global BioFund Co., Ltd. Taipei, Taiwan Biotechnology and biopharmaceutical business investment. 516,875 516,875 51,687,500 23.00 1,048,361 176,230 40,484 - China Color Printing Co., Ltd. Taipei, Taiwan To print magazines, posters and books. 190,068 190,068 32,896,330 49.70 455,298 46,798 23,238 Notes 1 and 4 YFY Venture Capital Investment Co., Ltd. Taipei, Taiwan Investment and holding. 200,000 200,000 44,993,600 100.00 763,409 84,717 84,717 Notes 1 and 4 Effion Enertech Co., Ltd. Taipei, Taiwan To operate cogeneration and provide power technology. 343,000 343,000 34,300,000 49.00 326,004 5,990 4,947 Notes 1 and 4 YFY Capital Co., Ltd. Taipei, Taiwan Paper and paper products, such as the trading business. 189,759 189,759 26,840,000 100.00 356,715 34,553 34,553 Notes 1 and 4 YFY Operation Management Consulting Co., Ltd. Taipei, Taiwan Consulting management. 250,000 250,000 25,000,000 100.00 249,977 6,983 6,983 Notes 1 and 4 Union Paper Co., Ltd. Yunlin, Taiwan Sale and manufacture of Kraft paper. 200,700 200,700 19,584,000 18.90 225,855 27,668 5,233 Notes 1 and 4 YFY Paradigm Investment Co., Ltd. Taipei, Taiwan Investment and holding. 231,357 231,357 60,050,000 100.00 1,167,626 225,243 198,740 Notes 1 and 4 San Ying Enterprise Co., Ltd. Taipei, Taiwan Design and construct water processing construction and 100,003 100,003 12,600,000 100.00 123,902 (11,389) (11,389) Notes 1 and 4 environmental facilities. Lotus Ecoscings & Engineering Co., Ltd. Taipei, Taiwan Construction of sewage treatment plants and incinerators. 152,944 152,944 23,704,000 100.00 260,821 22,013 22,013 Notes 1 and 4 Eihoyo Shoji Co., Ltd. Japan Trade of paper, chemical material and machinery. 2,099 2,099 200 100.00 82,614 106 106 Notes 1 and 4 Yuen Yan Paper Container Co., Ltd. Miaoli, Taiwan Sale of corrugated paper and manufacture of material. 62,462 62,462 6,178,500 50.90 70,725 6,691 3,409 Notes 1 and 4 Quan Hwa Venture Capital Co., Ltd. Taipei, Taiwan Venture capital. 27,331 27,331 2,733,167 19.50 9,704 - - - Cupid InfoTech Co., Ltd. Taipei, Taiwan 1. To provide service in information software and 10,000 10,000 1,847,000 100.00 31,324 6,857 6,857 Notes 1 and 4 information processing. 2. Wholesale of information software and electric appliance. Taiwan Genome Sciences Co., Ltd. Taipei, Taiwan 1. Develop skills in genome medicine. 12,260 12,260 1,225,956 19.40 20,880 90,397 17,496 - 2. Manufacture, wholesale of chemical material. 3. Medicine test.

YFY International BVI Corp. YFY Cayman Co., Ltd. Cayman Islands Investment and holding. US$ 361,850 US$ 361,850 309,918,142 100.00 US$ 376,906 US$ (43,371 US$ (43,371 Notes 1 and 4 thousand thousand thousand thousand) thousand) Hwa Fong Paper (H.K.) Ltd. Hong Kong, China Sale and print of paper merchandise. US$ 13,520 US$ 13,520 116,000,000 100.00 US$ 2,253 US$ 27 US$ 27 Notes 1 and 4 thousand thousand thousand thousand thousand Systax Communication (H.K.) Ltd. Hong Kong, China Sale and print of paper merchandise. US$ 4,646 US$ 4,646 20,500,000 100.00 - US$ 195 US$ 195 Notes 1, 2 and 4 thousand thousand thousand thousand YFY Biopulp Technology Limited British Virgin Islands Investment and holding. US$ 90 US$ 90 90,000 60.00 - US$ (46 US$ (28 Notes 1, 2 and 4 thousand thousand thousand) thousand)

YFY Cayman Co., Ltd. YFY International Labuan Co., Ltd. Malaysia Investment and holding. US$ 135,901 US$ 135,901 135,901,099 100.00 US$ 186,860 US$ (30,077 US$ (30,077 Notes 1 and 4 thousand thousand thousand thousand) thousand) YFY Mauritius Corp. Mauritius Investment and holding. US$ 157,502 US$ 157,502 157,501,731 57.80 US$ 93,776 US$ (54,213 US$ (32,351 Notes 1 and 4 thousand thousand thousand thousand) thousand) Willpower Industries Ltd. British Virgin Islands Investment and holding. US$ 10,898 US$ 10,898 6,950,000 44.80 US$ 21,644 US$ 6,206 US$ 2,807 - thousand thousand thousand thousand thousand YFY Packaging Capital Corp. British Virgin Islands Investment and holding. US$ 200,000 US$ 200,000 200,000,000 100.00 US$ 186,202 US$ 1,736 US$ 1,736 Notes 1 and 4 thousand thousand thousand thousand thousand

YFY International Labuan Co., Ltd. YFY Jupiter (BVI) Inc. British Virgin Islands Investment and holding. US$ 4,444 US$ 4,444 4,571,427 38.45 US$ 9,558 US$ 1,808 US$ 695 Notes 1 and 4 thousand thousand thousand thousand thousand YFY Packaging Inc. Taipei, Taiwan Production and sale of Kraft paper and corrugated paper. US$ 135,901 US$ 135,901 320,150,000 100.00 US$ 174,044 US$ (30,809 US$ (30,809 Notes 1 and 4 thousand thousand thousand thousand) thousand)

YFY Jupiter (BVI) Inc. Mobius 105 Ltd. Hong Kong, China Investment and holding. HK$ 10 HK$ 10 10,000 100.00 US$ 7,055 US$ 1,851 US$ 1,851 Notes 1 and 4 thousand thousand thousand thousand thousand YFY Jupiter Ltd. Hong Kong, China Design of packaging and sale of paper. - - 3 100.00 US$ 5,775 US$ 1,136 US$ 1,136 Notes 1 and 4 thousand thousand thousand Jupiter Prestige Group Holding Limited United Kingdom Investment and holding. GBP 100 GBP 100 100,000 57.00 US$ 1,836 US$ (1,517 US$ (864 Notes 1 and 4 thousand thousand thousand thousand) thousand)

(Continued)

Appendix 094 095 Appendix Investment Amount As of December 31, 2016 Net Income (Loss) Share of Investor Company Investee Company Location Main Businesses and Products Note December 31, 2016 December 31, 2015 Number of Shares % Carrying Amount of the Investee Profits (Loss)

Mobius 105 (HK) Ltd. Hong Kong, China Design of packaging and sale of paper. HK$ 10 HK$ 10 10,000 100.00 US$ 1 US$ (3 US$ (3 Notes 1 and 4 thousand thousand thousand thousand) thousand) YFY Jupiter US Inc. USA Design of packaging and sale of paper. US$ 1 US$ 1 100,000 100.00 - US$ (9 US$ (9 Notes 1, 2 and 4 thousand thousand thousand) thousand) YFY Jupiter Malaysia Sdn. Bhd. Selangor Design of packaging and sale of paper. - - 99 99.00 - US$ (3 US$ (3 Notes 1, 2 and 4 thousand) thousand) YFY Jupiter Singapore Pte Ltd. Singapore Design of packaging and sale of paper. - - 100 100.00 - - - Notes 1, 2 and 4

YFY Jupiter US, Inc. Innovativ Packaging Worldwide, LLC USA Design of packaging and sale of paper. - - 51,000 51.00 - US$ (817 US$ (417 Notes 1, 2 and 4 thousand) thousand) YFY Jupiter Mexico, S. de R.L. Mexico Design of packaging and sale of paper. - - 1 1.00 - - - Note 4

Mobius 105 Ltd. GST Packaging Ltd. Hong Kong, China Trading business. HK$ 4 HK$ 4 3,500 35.00 US$ 183 US$ (32 US$ (11 - thousand thousand thousand thousand) thousand) YJY Packaging Ltd. Hong Kong, China Trading business. HK$ 4 HK$ 4 3,500 35.00 US$ 156 US$ 8 US$ 3 - thousand thousand thousand thousand thousand JLD Logistics Ltd. Hong Kong, China Trading business. HK$ 4 HK$ 4 3,500 35.00 US$ 21 US$ (177 US$ (62 - thousand thousand thousand thousand) thousand) YFY Jupiter Malaysia Sdn. Bhd. Selangor Design of packaging and sale of paper. - - 1 1.00 - US$ (3 - Notes 1, 2 and 4 thousand) YFY Jupiter Mexico, S. de R.L. Mexico Design of packaging and sale of paper. PHP 3 - 99 99.00 - - - Notes 1, 2 and 4 thousand

Jupiter Prestige Group Holding Limited Rimagine Limited Hong Kong, China Investment and holding. - - 100 100.00 - US$ 9 US$ 9 Notes 1, 2 and 4 thousand thousand Jupiter Prestige Group Europe Ltd. England Graphic design. GBP 30 GBP 30 30,000 100.00 US$ 3,851 US$ (561 US$ (561 Notes 1 and 4 thousand thousand thousand thousand) thousand) Jupiter Prestige Group North America Inc. USA Design of packaging and sale of paper. US$ 1 US$ 1 100,000 100.00 US$ 265 US$ (811 US$ (811 Notes 1 and 4 thousand thousand thousand thousand) thousand) Jupiter Prestige Group Australia PTY Ltd. Australia Graphic design. - - 100 100.00 - US$ 171 US$ 171 Notes 1, 2 and 4 thousand thousand Opal BPM Limited United Kingdom Design of process system and assistance of graphic design. GBP 1 GBP 1 1,000 82.50 US$ 235 US$ 21 US$ 17 Notes 1 and 4 thousand thousand thousand thousand thousand Foster and Balyis (Prestige) Ltd. United Kingdom Graphic design. - - 300 33.30 US$ 470 US$ 80 US$ 27 - thousand thousand thousand

Rimagine Limited Rimagine Group Limited British Virgin Islands Trading business. - - 100 100.00 US$ 372 US$ 185 US$ 185 Notes 1 and 4 thousand thousand thousand

Jupiter Prestige Group Europe Ltd. Jupiter Prestige Group Asia Ltd. Hong Kong, China Graphic design. - - 100 100.00 US$ 2,244 US$ 234 US$ 234 Notes 1 and 4 thousand thousand thousand

Opal BPM Limited Opal BPM India Private Limited India Workflow system coding. INR 100 INR 100 1,000 100.00 US$ 15 US$ 15 US$ 15 Notes 1 and 4 thousand thousand thousand thousand thousand

YFY Packaging Inc. YFY Packaging (BVI) Corp. British Virgin Islands Investment and holding. 4,819,148 4,819,148 150,050,000 100.00 3,372,520 (690,800) (690,800) Notes 1 and 4 Pek Crown Paper Co., Ltd. Taichung, Taiwan Sale and manufacture of paper container. 234,666 234,666 20,027,557 66.80 285,758 39,043 27,791 Notes 1 and 4

YFY Packaging (BVI) Corp. YFY Mauritius Corp. Mauritius Investment and holding. US$ 115,000 US$ 105,000 115,000,000 42.20 US$ 68,471 US$ (54,213 US$ (21,862 Notes 1 and 4 thousand thousand thousand thousand) thousand)

YFY Global Investment BVI Corp. YFY RFID Co., Ltd. Hong Kong, China Investment and holding. US$ 25,600 US$ 25,600 25,600,000 100.00 US$ 58,243 US$ 12,781 US$ 12,781 Notes 1 and 4 thousand thousand thousand thousand thousand YFY Jupiter (BVI) Inc. British Virgin Islands Investment and holding. US$ 4,056 US$ 4,056 4,571,428 38.45 US$ 9,850 US$ 1,808 US$ 695 Notes 1 and 4 thousand thousand thousand thousand thousand YFY RFID Technologies Co., Ltd. British Virgin Islands Investment and holding. US$ 5,330 US$ 5,330 5,330,000 100.00 - US$ (188 US$ (188 Notes 1, 2 and 4 thousand thousand thousand) thousand)

YFY RFID Technologies Co., Ltd. Yeon Technologies Co., Ltd. Taipei, Taiwan Sale and design RFID products. US$ 2,035 US$ 2,035 6,000,001 100.00 - US$ (188 US$ (188 Notes 1, 2 and 4 thousand thousand thousand) thousand)

YFY Consumer Products Co., Ltd. Yuen Foong Yu Consumer Products Investment Samoa Investment and holding. 3,543,004 3,543,004 150,013,000 100.00 2,729,647 (145,904) (145,904) Notes 1 and 4 Limited Ever Growing Agriculture Biotech Co., Ltd. Taipei, Taiwan Agricultural services, wholesale and manufacturing of 107,595 107,595 14,612,209 85.00 191,177 25,574 21,548 Notes 1 and 4 fertilizers and other cleaning supplies wholesale. Livebricks Inc. Taipei, Taiwan Information processing services. - - - - - (6,235) (2,429) Notes 1 and 4 Yuen Foong Shop Company Limited Taipei, Taiwan Sale of paper. 25,000 25,000 2,500,000 50.00 - (4,861) (4,833) Notes 1, 2 and 4

(Continued)

Appendix 096 097 Appendix Investment Amount As of December 31, 2016 Net Income (Loss) Share of Investor Company Investee Company Location Main Businesses and Products Note December 31, 2016 December 31, 2015 Shares % Carrying Amount of the Investee Profits (Loss)

YFY Capital Co., Ltd. Chung Hwa Pulp Co., Ltd. Hualien, Taiwan Manufacture and sale of pulp. $ 16,809 $ 16,809 1,181,633 0.10 $ 16,829 $ 391,114 $ 419 Note 4 E Ink Holdings Inc. Hsinchu, Taiwan Sale and manufacture of TFT-LCD. 15,672 15,672 267,000 - 16,670 1,907,939 452 -

YFY Venture Capital Investment Co., Ltd. E Ink Holdings Inc. Hsinchu, Taiwan Sale and manufacture of TFT-LCD. 412,244 412,244 23,059,296 2.10 603,177 1,907,939 39,069 - Taiwan Global BioFund Co., Ltd. Taipei, Taiwan To provide service in consultation and business 88,550 88,550 8,855,000 3.90 179,605 176,230 6,936 - management. Effion Enertech Co., Ltd. Taipei, Taiwan To operate cogeneration and provide power technology. 7,000 7,000 700,000 1.00 7,019 5,990 60 Note 4 Taiwan Genome Sciences Co., Ltd. Taipei, Taiwan 1. Develop skills in genome medicine. 1,660 1,660 165,972 2.60 2,827 90,397 2,369 - 2. Manufacture, wholesale of chemical material. 3. Medicine test. Chung Hwa Pulp Co., Ltd. Hualien, Taiwan Manufacture and sale of pulp. 92,034 68,976 9,506,504 0.86 135,454 391,114 3,172 Note 4

YFY Paradigm Investment Co., Ltd. Union Paper Co., Ltd. Yunlin, Taiwan Investment and holding. 46,447 44,476 4,283,232 4.10 49,398 27,668 1,131 Notes 1 and 4 YFY Biotech Management Company Taipei, Taiwan To provide service in consultation and business 10,000 10,000 3,570,000 100.00 44,966 1,902 1,902 Notes 1 and 4 management. E Ink Holdings Inc. Hsinchu, Taiwan Sale and manufacture of TFT-LCD. 296,300 296,300 6,094,000 0.50 302,643 1,907,939 10,325 - Chung Hwa Pulp Co., Ltd. Hualien, Taiwan Manufacture and sale of pulp. 77,666 77,666 7,635,485 0.70 108,803 391,114 2,708 Note 4 Yuen Foong Shop Taipei, Taiwan Sale of paper. 25,000 25,000 2,500,000 50.00 2,497 (4,861) (2,430) Notes 1 and 4 Liverbricles Inc. Taipei, Taiwan Information processing services. 77,000 - 7,700,002 100.00 - (6,235) (3,403) Notes 1, 2 and 4

Lotus Ecoscings & Engineering Co., Ltd. Taiwan Genome Sciences Co., Ltd. Taipei, Taiwan 1. Develop skills in genome medicine. 450 450 43,408 0.70 739 90,397 619 - 2. Manufacture, wholesale of chemical material. 3. Medicine test. E Ink Holdings Inc. Hsinchu, Taiwan Sale and manufacture of TFT-LCD. 73,961 73,961 1,778,000 0.20 78,005 1,907,939 3,013 - Yuen Yan Paper Container Co., Ltd. Miaoli, Taiwan Sale of corrugated paper and manufacture of material. 107 107 9,000 0.10 103 6,691 5 Note 4 Shin Foong Specialty and Applied Materials Co Kaohsiung, Taiwan Trade of paper, chemical material and machinery. - 183 - - - 594,056 39 Notes 3 and 4 Pek Crown Paper Co., Ltd. Taichung, Taiwan Sale and manufacture of paper container. 141 141 10,000 - 142 39,043 13 Note 4 Chung Hwa Pulp Co., Ltd. Hualien, Taiwan Manufacture and sale of pulp. 1,226 1,226 117,247 - 1,666 391,114 42 Note 4

Chung Hwa Pulp Co., Ltd. CHP International (BVI) Corporation British Virgin Islands Investment and holding. 1,747,085 1,747,085 61,039,956 100.00 5,282,681 (42,373) (42,373) Notes 1 and 4 Effion Enertech Co., Ltd. Taipei, Taiwan To operate cogeneration and provide power technology. 343,000 343,000 34,300,000 49.00 343,947 5,990 2,935 Note 4 Taiwan Global BioFund Co., Ltd. Taipei, Taiwan To provide service in consultation and business 100,000 100,000 10,000,000 4.40 212,274 176,230 7,832 - management. Hwa Fong Investment Co., Ltd. Taipei, Taiwan Investment and holding. 36,000 36,000 3,600,000 100.00 46,189 3,103 3,103 Notes 1 and 4 Quan Hwa Venture Capital Co., Ltd. Taipei, Taiwan Biotechnology and biopharmaceutical business investment. 7,008 7,008 700,812 5.00 2,488 - - -

E Ink Holdings Inc. Hsinchu, Taiwan To research, develop, produce and sale thin-film transistor 329,000 329,000 20,000,000 1.80 389,452 1,907,939 33,887 - liquid crystal display.

Hwa Fong Investment Co., Ltd. Effion Enertech Co., Ltd. Taipei, Taiwan To operate cogeneration and provide power technology. 7,000 7,000 700,000 1.00 7,019 2,969 60 Note 4 Kuang Hwa Fertilizer Limited Company Hualien, Taiwan To produce fertilizer. 5,000 5,000 - 100.00 9,402 2,969 2,969 Notes 1 and 4

Effion Enertech Co., Ltd. YFY Capital Holdings Corp. British Virgin Islands Investment and holding. 243,625 243,625 8,060 100.00 301,495 16,927 16,927 Notes 1 and 4 YFY Biotech Co., Ltd. Taipei, Taiwan Wholesale of seeds, oil and agricultural products. 36,000 - 3,600,000 36.00 20,602 (67,680) (15,770) -

Note 1: Subsidiary.

Note 2: The amount was recognized as a subtraction from investment accounted for using the equity method and accounted as other liabilities.

Note 3: Formerly Shin Foong Chemical Industry Co., Ltd.

Note 4: In preparing the consolidated financial statements, the transaction has been eliminated.

(Concluded)

Appendix 098 099 Appendix TABLE 9

YFY INC. AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Remittance of Funds Accumulated Accumulated Accumulated Outward Outward Carrying Repatriation of Method of Remittance for Remittance for % Ownership of Investment Amount as of Paid-in Capital Net Income (Loss) Investment Investee Company Main Businesses and Products Investment Investment from Investment from Direct or Indirect Gain (Loss) December 31, (Note 1) Outward Inward of the Investee Income as of (Note 4) Taiwan as of Taiwan as of Investment (Note 1) 2016 December 31, January 1, 2016 December 31, (Note 1) 2016 (Note 1) 2016 (Note 1)

YFY Paper Enterprise (Fuzhou) Co., Ltd. Manufacture, sale and print of $ 161,250 a.(a) $ 48,375 $ - $ - $ 48,375 $ (55,473) 100.0 $ (55,473) $ - $ - cardboard and cardboard cases. (US$ 5,000) (US$ 1,500 (US$ 1,500 (Note 2) thousand) thousand)

YFY Paper Enterprise (Kunshan) Co., Ltd. Manufacture, sale and print of 354,750 a.(a) 225,750 - - 225,750 13,066 100.0 13,066 459,646 - cardboard and cardboard cases. (US$ 11,000 (US$ 7,000 (US$ 7,000 (Note 2) thousand) thousand) thousand)

YFY Paper Enterprise (Suzhou) Co., Ltd. Manufacture, sale and print of 225,750 a.(a) 225,750 - - 225,750 (46,025) 100.0 (46,025) 117,516 - cardboard and cardboard cases. (US$ 7,000 (US$ 7,000 (US$ 7,000 (Note 2) thousand) thousand) thousand)

YFY Paper Enterprise (Tianjin) Co., Ltd. Manufacture, sale and print of 258,000 a.(a) 258,000 - - 258,000 22,218 100.0 22,218 608,564 - cardboard and cardboard cases. (US$ 8,000 (US$ 8,000 (US$ 8,000 (Note 2) thousand) thousand) thousand)

YFY Paper Enterprise (Dongguan) Co., Ltd. Manufacture, sale and print of 193,500 a.(a) 64,500 - - 64,500 (10,675) 100.0 (10,675) 305,175 - cardboard and cardboard cases. (US$ 6,000 (US$ 2,000 (US$ 2,000 (Note 2) thousand) thousand) thousand)

YFY Paper Enterprise (Shanghai) Co., Ltd. Manufacture, sale and print of 258,000 a.(a) 261,644 - - 261,644 3,443 100.0 3,443 127,991 - cardboard and cardboard cases. (US$ 8,000 (US$ 8,113 (US$ 8,113 (Note 2) thousand) thousand) thousand)

YFY Paper Enterprise (Qingdao) Co., Ltd. Manufacture, sale and print of 258,000 a.(a) 258,000 - - 258,000 49,048 100.0 49,048 776,445 - cardboard and cardboard cases. (US$ 8,000 (US$ 8,000 (US$ 8,000 (Note 2) thousand) thousand) thousand)

YFY Paper Enterprise (Nanjing) Co., Ltd. Manufacture, sale and print of 321,178 a.(a) 290,250 - - 290,250 (33,594) 90.0 (30,235) 179,153 - cardboard and cardboard cases. (US$ 9,959 (US$ 9,000 (US$ 9,000 (Note 2) thousand) thousand) thousand)

YFY Paper Enterprise (Guangzhou) Co., Ltd. Manufacture, sale and print of 306,375 a.(a) 241,875 - - 241,875 19,801 93.8 18,564 405,818 - cardboard and cardboard cases. (US$ 9,500 (US$ 7,500 (US$ 7,500 (Note 2) thousand) thousand) thousand)

YFY Paper Enterprise (Xiamen) Co., Ltd. Manufacture, sale and print of 209,625 a.(a) 209,625 - - 209,625 (16,162) 100.0 (16,162) - - cardboard and cardboard cases. (US$ 6,500 (US$ 6,500 (US$ 6,500 (Note 2) thousand) thousand) thousand)

YFY Paper Enterprise (Zhongshan) Co., Ltd. Manufacture, sale and print of 193,500 a.(a) 154,800 - - 154,800 34,463 100.0 34,463 724,620 - cardboard and cardboard cases. (US$ 6,000 (US$ 4,800 (US$ 4,800 (Note 2) thousand) thousand) thousand)

(Continued)

Appendix 0100 0101 Appendix Remittance of Funds Accumulated Accumulated Accumulated Outward Outward Carrying Repatriation of Method of Remittance for Remittance for % Ownership of Investment Amount as of Paid-in Capital Net Income (Loss) Investment Investee Company Main Businesses and Products Investment Investment from Investment from Direct or Indirect Gain (Loss) December 31, (Note 1) Outward Inward of the Investee Income as of (Note 4) Taiwan as of Taiwan as of Investment (Note 1) 2016 December 31, January 1, 2016 December 31, (Note 1) 2016 (Note 1) 2016 (Note 1)

YFY Paper Enterprise (Jiaxing) Co., Ltd. Manufacture, sale and print of $ 161,250 a.(a) $ 161,250 $ - $ - $ 161,250 $ (13,049) 100.0 $ (13,049) $ 103,671 $ - cardboard and cardboard cases. (US$ 5,000 (US$ 5,000 (US$ 5,000 (Note 2) thousand) thousand) thousand)

YFY Packaging (Yangzhou) Investment Co., Investment and holding and paper 1,183,801 a.(a) 870,750 322,500 - 1,193,250 (329,682) 100.0 (329,682) 203,838 - Ltd. trading. (US$ 36,707 (US$ 27,000 (US$ 10,000 (US$ 37,000 (Note 2) thousand) thousand) thousand) thousand)

YFY Paper Mfg. (Yangzhou) Co., Ltd. Production and sale of paper and 6,278,914 a.(b) 5,966,250 322,500 - 6,288,750 (1,620,913) 100.0 (1,620,913) 1,601,000 - cardboard. (US$ 194,695 (US$ 185,000 (US$ 10,000 (US$ 195,000 (Note 2) thousand) thousand) thousand) thousand)

YFY Paper Mfg. (Jiangyin) Co., Ltd. Manufacture, sale and print of 480,525 a.(c) 451,694 - - 451,694 (88,949) 94.0 (83,612) - - cardboard and cardboard cases. (US$ 14,900 (US$ 14,006 (US$ 14,006 (Note 2) thousand) thousand) thousand)

Yuen Foong Yu Blue Economy Natural Development the technology of 258,000 a.(c) 258,000 - - 258,000 (64,342) 100.0 (64,342) 143,427 - Resource (Yangzhou) Co., Ltd. agricultural resource recycling. (US$ 8,000 (US$ 8,000 (US$ 8,000 (Note 2) thousand) thousand) thousand)

YFY Firstpak Packaging (YangZhou) Co., General trade. 130,172 a.(d) - - - - (97,032) 70.0 (67,916) 5,113 - Ltd. (RMB 28,000 (Note 2) thousand)

YFY Bio Technology (Yangzhou) Co., Ltd. Manufacture, sale and print of 13,947 a.(d) - - - - (2,748) 49.5 (1,360) 4,833 - cardboard. (RMB 3,000 (Note 2) thousand)

Shenzhen Systax Paper Co., Ltd. Sale of paper merchandise and 14,877 a.(e) - - - - 993 100.0 993 68,519 - import/export business. (RMB 3,200 (Note 2) thousand)

Kunshan YFY Advertising and Printing Co., To design, produce and act as agent 96,750 a.(f) - - - - (10,550) 100.0 (10,550) - - Ltd. releasing various domestic (US$ 3,000 (Note 2) advertising and printing plate thousand) cum.

Shanghai YFY Advertising Printing Co., Ltd. Prepress publications, publications 9,298 a.(g) - - - - (1,558) 51.0 (794) 599 - printing, packaging printing, other (RMB 2,000 (Note 2) printing, business card printing, thousand) and sale of paper and printing equipment.

Arizon RFID Technology (Yangzhou) Co., Sale and design RFID products. 806,250 a.(h) 818,892 - - 818,892 412,352 100.0 412,352 1,871,871 - Ltd. (US$ 25,000 (US$ 25,392 (US$ 25,392 (Note 2) thousand) thousand) thousand)

Yeon Technologies (Yangzhou) Co., Ltd 37,192 a.(i) - - - - 13,645 100.0 13,645 52,648 - (RMB 8,000 (Note 2) thousand)

YFY Jupiter (Shenzhen) Ltd. Design and sale of paper. 4,515 a.(j) - - - - 53,101 76.9 40,832 155,102 - (US$ (140 (Note 2) thousand)

(Continued)

Appendix 0102 0103 Appendix Remittance of Funds Accumulated Accumulated Accumulated Outward Outward Carrying Repatriation of Method of Remittance for Remittance for % Ownership of Investment Amount as of Paid-in Capital Net Income (Loss) Investment Investee Company Main Businesses and Products Investment Investment from Investment from Direct or Indirect Gain (Loss) December 31, (Note 1) Outward Inward of the Investee Income as of (Note 4) Taiwan as of Taiwan as of Investment (Note 1) 2016 December 31, January 1, 2016 December 31, (Note 1) 2016 (Note 1) 2016 (Note 1)

Kunshan YFY Jupiter Green Packaging Ltd. Design of packaging and sale of $ 9,298 a.(k) $ - $ - $ - $ - $ 26,563 76.9 $ 20,426 $ 47,130 $ - paper. (RMB 2,000 (Note 2) thousand)

YFY Jupiter Supply Chain Management Design of packaging and sale of - a.(k) - - - - 24,865 76.9 19,120 30,304 - Service (Shenzhen) Limited paper. (Note 2)

Chengdu JieLianDa Warehousing Co., Ltd. Trading business. 6,973 a.(k) - - - - (871) 26.9 (235) 1,740 - (RMB 1,500 (Note 6) thousand)

ChengDu JingShiTong Packing Co., Ltd. Trading business. 9,298 a.(k) - - - - (3,495) 26.9 (941) 2,572 - (RMB 2,000 (Note 6) thousand)

ChengDu YongJunYu Environmental Trading business. 9,298 a.(k) - - - - (2,991) 26.9 (805) 1,583 - Protection packing Co., Ltd. (RMB 2,000 (Note 6) thousand)

Rimagine Design (Shanghai) Co., Ltd. Photography. 10,848 a.(l) - - - - 396 43.8 174 293 - (EUR 320 (Note 6) thousand)

YFY Investment Co., Ltd. Investment and holding and sale of 3,063,750 a.(m) 3,063,750 - - 3,063,750 (176,779) 100.0 (176,779) 2,028,675 - paper. (US$ 95,000 (US$ 95,000 (US$ 95,000 (Note 2) thousand) thousand) thousand)

YFY Family Care (Kunshan) Co., Ltd. Manufacture and sale of tissue paper 967,500 a.(n) 967,500 - - 967,500 29,396 100.0 29,396 474,648 - and napkin. (US$ 30,000 (US$ 30,000 (US$ 30,000 (Note 2) thousand) thousand) thousand)

YFY Family Paper (Beijing) Co., Ltd. Manufacture and sale of tissue paper 1,128,750 a.(n) 1,128,750 - - 1,128,750 22,142 100.0 22,142 497,109 - and napkin. (US$ 35,000 (US$ 35,000 (US$ 35,000 (Note 2) thousand) thousand) thousand)

Yuen Foong Yu Consumer Products Manufacture and sale of tissue paper 967,500 a.(n) 967,500 - - 967,500 14,511 100.0 14,511 968,736 - (Yangzhou) Co., Ltd. and napkin. (US$ 30,000 (US$ 30,000 (US$ 30,000 (Note 2) thousand) thousand) thousand)

Shanghai YFY International Trade Co., Ltd. Trading business. 4,649 b.(a) 4,649 - - 4,649 (2,064) 100.0 (2,064) - - (RMB 1,000 (RMB 1,000 (RMB 1,000 (Note 2) thousand) thousand) thousand)

Guangdong Ding Feng Pulp & Paper Co., Pulp and paper production, trading 2,761,568 a.(o) 709,500 - - 709,500 (110,976) 75.2 (83,410) 3,641,401 - Ltd. and forestry business. (US$ 85,630 (US$ 22,000 (US$ 22,000 (Note 2) thousand) thousand) thousand)

Zhaoqing Ding Feng Forestry Ltd. Seedling cultivation and sales, 705,630 a.(p) 238,005 - - 238,005 22,193 75.2 16,680 2,269,739 - reforestation, sales-cum-forest (US$ 21,880 (US$ 7,380 (US$ 7,380 (Note 2) logging and other forestry, thousand) thousand) thousand) processing and transportation.

YFY (Shanghai) Financial Services Co., Ltd. Export factoring, domestic factoring, 232,449 a.(q) 232,449 - - 232,449 16,927 79.3 13,423 238,870 - business factoring and related (RMB 50,000 (RMB 50,000 (RMB 50,000 (Note 2) consulting services, develop credit thousand) thousand) thousand) risk management platform.

(Continued)

Appendix 0104 0105 Appendix Remittance of Funds Accumulated Accumulated Outward Accumulated Outward Carrying Remittance for Repatriation of Method of Remittance for % Ownership of Investment Amount as of Paid-in Capital Investment from Net Income (Loss) Investment Investee Company Main Businesses and Products Investment Investment from Direct or Indirect Gain (Loss) December 31, (Note 1) Outward Inward Taiwan as of of the Investee Income as of (Note 4) Taiwan as of Investment (Note 1) 2016 December 31, December 31, January 1, 2016 (Note 1) 2016 2016 (Note 1) (Note 1)

Kunshan Actview Carbon Technology Co., Research and development, $ 40,635 b.(b) $ 26,961 $ - $ - $ 26,961 $ (883) 66.4 $ (586) $ 27,684 $ - Ltd. manufacture, and sale of activated (US$ 1,260 (US$ 836 (US$ 836 (Note 2) carbon and related products. thousand) thousand) thousand)

Yangzhou Yuen Foong Yu Southern Reclamation of waste paper. - a.(r) - - - - (505) - (248) - - Renewable Resources Co., Ltd. (Note 7) (Note 6)

Accumulated Outward Remittance for Investment Investment Amounts Authorized by Upper Limit on the Amount of Investment in Mainland China as of December 31, 2016 Investment Commission, MOEA Stipulated by Investment Commission, MOEA

$16,427,534 $21,021,094 $34,052,482 (Notes 1 and 5) (Note 1)

Note 1: Except for investment gain or loss which use exchange rates of US$1=NT$32.262667 or RMB1=NT$4.858744 or EUR1=NT$35.699167, the exchange rates are US$1=NT$32.25 or RMB1=NT$4.648984 or EUR1=NT$33.9 as of December 31, 2016.

Note 2: Recognized from financial statements audited by the auditors for the same years.

Note 3: Difference between the amount of the paid-in capital multiplied by percentage of ownership and the cumulative amount of investment export from Taiwan in the end of year: Guangdong Ding Feng Pulp & Paper Co., Ltd. and YFY Paper Enterprise (Guangzhou) Co., Ltd. are capitalization of retained earnings; YFY Paper Enterprise (Zhongshan) Co., Ltd., YFY Paper Enterprise (Kunshan) Co., Ltd., YFY Paper Enterprise (Dongguan) Co., Ltd. and YFY Paper Enterprise (Fuzhou) Co., Ltd. are subsidiaries reinvested earnings from China. YFY Jupiter (Shenzhen) Ltd. is indirect acquired due to the acquirement of YFY Jupiter (BVI) Inc.

Note 4: Methods of investment and the related investors are as follow:

a. Investment in Mainland China through companies set up in another company. The related investees are as follow:

(a) YFY Mauritius Corp. (b) YFY Maruitius Corp. and YFY Packaging (Yangzhou) Investment Co., Ltd. (c) YFY International BVI Corp. (d) Yuen Foong Yu Blue Economy Natural Resource (YangZhou) Co., Ltd. (e) Hwa Fong Paper (H.K.) Ltd. (f) YFY Paper Enterprise (Xiamen) Co., Ltd. and YFY Paper Enterprise (Guangzhou) Co., Ltd. (g) Kunshan YFY Advertising and Printing Co., Ltd. (h) YFY RFID Co., Ltd. (i) Arizon RFID Technology (Yangzhou) Co., Ltd. (j) Mobius 105 Ltd. (k) YFY Jupiter (Shenzhen) Ltd. (l) Rimagine Limited (m) Yuen Foong Yu Consumer Products Co., Ltd. (n) YFY investment Co., Ltd. (o) YFY International BVI Corp. and CHP International (BVI) Corporation (p) YFY International BVI Corp., CHP International (BVI) Corporation and Guangdong Ding Feng Pulp & Paper Co., Ltd. (q) YFY Capital Holdings Corp. (r) YFY Paper Mfg. (Yangzhou) Co., Ltd.

b. Direct investment in Mainland China and the investor is San Ying Enterprise Co., Ltd.

(a) Yuen Foong Shop Company Limited (b) San Ying Enterprise Co., Ltd.

Note 5: In calculating the accumulated outward remittance for investment, the reinvestment amount of $2,321,935 thousand made by investor of Mainland China has been deducted.

Note 6: Recognized from financial statements that have not been audited.

Note 7: The liquidation of the current year.

(Concluded)

Appendix 0106 0107 Appendix TABLE 10

YFY INC. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars)

Transaction Details (Note) % of No. Investee Company Counterparty Relationship Financial Amount Payment Terms Total Sales Statement Account or Assets

1 YFY Packaging Inc. Pek Crown Paper Co., Ltd. Subsidiary Sales $ 597,388 By market price 0.9 Accounts receivable 108,950 3 months after transaction month 0.1 Chung Hwa Pulp Co., Ltd. Same ultimate parent company Sales 1,505,896 By market price 2.4 Accounts receivable 276,766 2 months after transaction month 0.3 YFY Consumer Products Co., Ltd. Same ultimate parent company Sales 126,244 By market price 0.2

2 Chung Hwa Pulp Co., Ltd. YFY Capital Co., Ltd. Same ultimate parent company Sales 964,487 By market price 1.5 Shenzhen Systax Paper Co., Ltd. Same ultimate parent company Sales 875,636 By market price 1.4 Accounts receivable 438,420 5 months after transaction month 0.4 YFY Consumer Products Co., Ltd. Same ultimate parent company Sales 702,601 By market price 1.1 Accounts receivable 320,592 In agreed terms 0.3 YFY Packaging Inc. Same ultimate parent company Sales 296,673 By market price 0.5 Union Paper Co., Ltd. Same ultimate parent company Sales 935,356 By market price 1.5 China Color Printing Co., Ltd. Same ultimate parent company Sales 168,901 By market price 0.3

3 Shin Foong Specialty and Applied Materials Co Chung Hwa Pulp Co., Ltd. Same parent company Sales 347,751 By market price 0.5 Accounts receivable 161,803 4 months after transaction month 0.1

4 YFY Family Care (Kunshan) Co., Ltd. YFY Investment Co., Ltd. Parent company Sales 2,194,340 By market price 3.5 Accounts receivable 428,978 In agreed terms 0.4

5 YFY Investment Co., Ltd. YFY Consumer Products (Yangzhou) Co., Ltd. Subsidiary Sales 1,536,184 By market price 2.4 YFY Family Care (Kunshan) Co., Ltd. Subsidiary Sales 492,441 By market price 0.8 YFY Family Paper (Beijing) Co., Ltd. Same parent company Sales 128,533 By market price 0.2

6 Yuen Foong Yu Consumer Products (Yangzhou) YFY Investment Co., Ltd. Parent company Sales 1,548,755 By market price 0.2 Co., Ltd. Account receivable 175,132 By market price 2.4 YFY Family Care (Kunshan) Co., Ltd. Same parent company Sales 743,012 By market price 1.2 YFY Family Paper (Beijing) Co., Ltd. Same parent company Sales 258,765 By market price 0.4 Accounts receivable 113,804 In agreed terms 0.1

7 YFY Family Paper (Beijing) Co., Ltd. YFY Investment Co., Ltd. Parent company Sales 957,418 By market price 1.5

8 YFY (Shanghai) Financial Services Co., Ltd. YFY Firstpak Packaging (Yangzhou) Investment Co., Ltd. Same ultimate parent company Accounts receivable 124,996 In agreed terms 0.1

(Continued)

Appendix 0108 0109 Appendix Transaction Details (Note) % of No. Investee Company Counterparty Relationship Financial Amount Payment Terms Total Sales Statement Account or Assets

9 YFY Paper Mfg. (Yangzhou) Co., Ltd. YFY Paper Enterprise (Jiaxing) Co., Ltd. Same parent company Sales $ 147,417 By market price 0.2 YFY Paper Enterprise (Shanghai) Co., Ltd. Same parent company Sales 254,483 By market price 0.4 YFY Paper Enterprise (Suzhou) Co., Ltd. Same parent company Sales 206,065 By market price 0.3 YFY Paper Enterprise (Nanjing) Co., Ltd. Same parent company Sales 294,120 By market price 0.5 YFY Paper Enterprise (Guangzhou) Co., Ltd. Same parent company Sales 199,591 By market price 0.3 YFY Paper Enterprise (Zhongshan) Co., Ltd. Same parent company Sales 144,457 By market price 0.2

10 YFY Packaging (Yangzhou) Investment Co., Ltd. YFY Paper Mfg. (Yangzhou) Co., Ltd. Same parent company Sales 2,900,349 By market price 4.6 Accounts receivable 897,812 In agreed terms 0.8 YFY Paper Enterprise (Dongguan) Co., Ltd. Same parent company Sales 1,687,529 By market price 2.7 Account receivable 118,342 In agreed terms 0.1 YFY Paper Enterprise (Xiamen) Co., Ltd. Same parent company Sales 304,017 By market price 0.5 Account receivable 114,058 In agreed terms 0.1 YFY Paper Enterprise (Guangzhou) Co., Ltd. Same parent company Sales 417,780 By market price 0.7 YFY Paper Enterprise (Fuzhou) Co., Ltd. Same parent company Sales 225,561 By market price 0.4 YFY Paper Enterprise (Qingdao) Co., Ltd. Same parent company Sales 225,176 By market price 0.4 YFY Paper Enterprise (Tianjin) Co., Ltd. Same parent company Sales 390,130 By market price 0.6 YFY Paper Enterprise (Zhongshan) Co., Ltd. Same parent company Sales 374,651 By market price 0.6 Account receivable 101,289 In agreed terms 0.1 YFY Paper Enterprise (Nanjing) Co., Ltd. Same parent company Sales 187,359 By market price 0.3 YFY Paper Enterprise (Suzhou) Co., Ltd. Same parent company Sales 236,732 By market price 0.4 YFY Paper Enterprise (Shanghai) Co., Ltd. Same parent company Sales 161,819 By market price 0.3 YFY Paper Enterprise (Jiaxing) Co., Ltd. Same parent company Sales 198,089 By market price 0.3

11 YFY Consumer Products Co., Ltd. Yuen Foong Shop Company Limited Subsidiary Sales 654,960 By market price 1.0 Accounts receivable 104,327 In agreed terms 0.1

12 Eihoyo Shoji Co., Ltd. Chung Hwa Pulp Co., Ltd. Same ultimate parent company Sales 324,937 By market price 0.5

13 Ever Growing Agriculture Biotech Co., Ltd. YFY Consumer Products Co., Ltd. Parent company Sales 227,355 By market price 0.4

14 Guangdong Ding Feng Pulp & Paper Co., Ltd. YFY Investment Co., Ltd. Same ultimate parent company Sales 895,381 By market price 1.4 Account receivable 128,296 By market price 0.1

15 Zhaoqing Ding Feng Forestry Ltd. Guangdong Ding Feng Pulp & Paper Co., Ltd. Parent company Sales 481,628 By market price 0.8 Account receivable 301,622 By market price 0.3

16 YFY Paper Enterprise (Suzhou) Co., Ltd. YFY Paper Enterprise (Kunshan) Co., Ltd. Same parent company Sales 164,507 By market price 0.3

17 Union Paper Co., Ltd. Chung Hwa Pulp Co., Ltd. Same ultimate parent company Sales 202,947 By market price 0.3

18 YFY International BVI Corp. YFY Investment Co., Ltd. Same ultimate parent company Accounts receivable 551,795 In agreed terms 0.5

Note: In preparing the consolidated financial statements, the transaction has been eliminated.

(Concluded)

Appendix 0110 0111 Appendix