Gourmet — Audit Report / Information 2017

Nov 13, 2017

Gourmet Master Co. Ltd. and Subsidiaries

Consolidated Financial Statements for the Years Ended December 31, 2017 and 2016 and Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Gourmet Master Co. Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Gourmet Master Co. Ltd. and its subsidiaries (the Group), which comprise the consolidated balance sheets as of December 31, 2017 and 2016, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2017 and 2016, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the 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

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, 2017. 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.

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The key audit matter for the Group’s consolidated financial statements for the year ended December 31, 2017 are stated as follows:

Promotion Revenue Recognition

Competition in the catering market is fierce and all kinds of promotion have been implemented. The Group has also implemented promotions such as the redemption of bonus points for goods, combo meal promotions, and the promotion of redeemable award credits. These promotion programs increase the complexity and inherent risk in accounting for the relevant revenue. Thus, promotion revenue recognition is considered to be a key audit matter. Refer to Notes 4 and 20 to the accompanying consolidated financial statements for the details of the information about operating revenue and customer loyalty programs.

Our main audit procedures performed in respect of the abovementioned area included the following:

1. We assessed the accounting treatment of the Group’s various promotions according to our understanding of its business and industry;

2. We performed an analysis of changes in key inputs (including the discount rate and the seasonal changes in operating revenue and revenue discounts) to determine the relevance and reasonableness of such inputs to the respective promotions;

3. We obtained information about the redeemable award credits and the Group’s estimation of the expected redemption rate and the fair value of the redeemable award credits; tested the correctness of the redeemable award credits information and assessed the rationality of the expected redemption rate and the fair value of the redeemable award credits; and finally compared the data with historical data to test the reasonableness of the redemption occurrence of customer loyalty programs and the accuracy of promotion revenue recognition.

Management of Gift Vouchers and Stored-Value Cards

The Group’s receipts in advance are mainly from issuance of gift vouchers and stored-value cards. The management of gift vouchers and stored-value cards follows the sales and management directions of prepaid cards. The number of gift vouchers and stored-value cards issued and redeemed is numerous and involves many manual operations, which may result in the incorrect amount of receipts in advance. Due to the significant amount of receipts in advance, management of gift vouchers and stored-value cards has been identified as a key audit matter.

Our main audit procedures performed in respect of the abovementioned area included the following:

1. We obtained samples of the application forms for gift vouchers and stored-value cards this year. We checked that the application forms were approved appropriately. We checked that cash payments for the issued gift vouchers and stored-value cards have been received.

2. We confirmed that outstanding gift vouchers and stored-value cards as listed on the vouchers and cards system have been approved for use.

3. We confirmed the reasonableness of the balance of receipts in advance and the amount of outstanding gift vouchers and stored-value cards generated from the vouchers and cards system.

4. We confirmed and calculated the reasonableness of the discount rate of gift vouchers and stored-value cards.

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Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the 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, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the 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 liquidate the Group or to cease operations, or has no realistic alternative but to do so.

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an 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 generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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

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

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

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

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6. 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.

7. Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2017 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Ruei-Cyuan Chih and Li-Huang Lee.

Deloitte & Touche Taipei, Taiwan Republic of China

March 8, 2018

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial 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.

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GOURMET MASTER CO. LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss - current (Note 7) Debt investments with no active market - current (Notes 9 and 32) Notes receivable Trade receivables (Notes 10 and 31) Other receivables (Note 31) Current tax assets Inventories (Note 11) Prepayments (Note 17) Other current assets (Note 17) Total current assets NON-CURRENT ASSETS Held-to-maturity financial assets - non-current (Note 8) Debt investments with no active market - non-current (Notes 9 and 32) Investments accounted for using equity method (Note 13) Property, plant and equipment (Notes 14 and 32) Investment properties (Notes 15 and 32) Intangible assets (Note 16) Deferred tax assets (Notes 5 and 24) Prepaid equipment (Note 17) Refundable deposits (Note 17) Other non-current assets (Note 17) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 18 and 32) Financial liabilities at fair value through profit or loss - current (Note 7) Notes payable Trade payables (Note 19) Other payables (Notes 20 and 31) Current tax liabilities Receipts in advance (Note 20) Deferred revenue-current (Notes 20 and 26) Current portion of long-term borrowings (Notes 18 and 32) Other current liabilities (Note 20) Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 18, 31 and 32) Decommission, restoration and rehabilitation provisions (Note 20) Deferred revenue - non-current (Notes 20 and 26) Guarantee deposits received (Note 20) Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Note 22) Share capital Capital surplus Additional paid-in capital Retained earnings Reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity attributable to owners of the Company NON-CONTROLLING INTERESTS Total equity TOTAL		2017 Amount % $ 2,794,862 18 165,148 1 3,702,772 23 1,908 - 356,296 2 136,188 1 45,527 - 768,453 5 464,907 3 17,771 - 8,453,832 53 29,847 - 369,301 2 87,930 1 5,592,612 36 210,422 1 46,103 - 96,418 1 212,640 1 464,575 3 244,065 2 7,353,913 47 $ 15,807,745 100 $ 784,964 5 3,134 - 1,358 - 1,272,022 8 1,559,830 10 176,495 1 1,230,587 8 129,022 1 238,622 1 45,051 - 5,441,085 34 155,109 1 119,808 1 13,351 - 151,534 1 439,802 3 5,880,887 37 1,629,936 10 2,532,950 16 764,883 5 95,072 - 5,059,852 32 5,919,807 37 (227,788) (1) 9,854,905 62 71,953 1 9,926,858 63 $ 15,807,745 100		2016
				Amount % $ 3,151,391 24 136,070 1 2,311,628 17 1,617 - 295,745 2 98,632 1 21,113 - 706,987 5 274,758 2 17,326 - 7,015,267 52 32,370 - 133,893 1 79,270 1 5,057,520 38 172,243 1 63,649 - 112,860 1 222,631 2 481,341 4 65,004 - 6,420,781 48 $ 13,436,048 100 $ 187,239 2 - - 823 - 1,228,936 9 1,261,912 9 182,174 1 966,177 7 81,332 1 - - 26,787 - 3,935,380 29 614,940 4 85,093 1 - - 132,901 1 832,934 6 4,768,314 35 1,481,760 11 2,681,126 20 590,779 5 38,098 - 3,893,735 29 4,522,612 34 (95,072) (1) 8,590,426 64 77,308 1 8,667,734 65 $ 13,436,048 100

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

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GOURMET MASTER CO. LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Note 36) OPERATING COSTS (Notes 23 and 31) GROSS PROFIT OPERATING EXPENSES Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES (Notes 14, 23, 26 and 31) Other income Other gains and losses Finance costs Share of profit or loss of associates Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Note 24) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Exchange differences arising on translation to the presentation currency Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Other comprehensive income (loss) for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR		2017 Amount % $ 23,018,413 100 (9,361,739) (41) 13,656,674 59 (9,801,235) (43) (982,770) (4) (37,983) - (10,821,988) (47) 2,834,686 12 291,304 1 (152,613) - (25,767) - 22,637 - 135,561 1 2,970,247 13 (815,297) (4) 2,154,950 9 (90,315) - (43,929) - (134,244) - $ 2,020,706 9		2016
				Amount % $ 22,046,504 100 (9,218,839) (42) 12,827,665 58 (9,430,557) (43) (1,001,691) (4) (31,799) - (10,464,047) (47) 2,363,618 11 246,950 1 (218,193) (1) (15,986) - 19,420 - 32,191 - 2,395,809 11 (613,254) (3) 1,782,555 8 (632,250) (3) 198,019 1 (434,231) (2) $ 1,348,324 6

(Continued)

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GOURMET MASTER CO. LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

NET PROFIT ATTRIBUTABLE TO: Owners of the Company Non-controlling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Company Non-controlling interests EARNINGS PER SHARE (Note 25) Basic		2017 Amount % $ 2,138,075 9 16,875 - $ 2,154,950 9 $ 2,005,359 9 15,347 - $ 2,020,706 9 $ 13.12		2016
				Amount % $ 1,741,051 8 41,504 - $ 1,782,555 8 $ 1,309,085 6 39,239 - $ 1,348,324 6 $ 10.68
		$		$
		$		$
		$		$

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

(Concluded)

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GOURMET MASTER CO. LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

BALANCE AT JANUARY 1, 2016 Appropriation of 2015 earnings Reserve Cash dividends distributed by the Company Share dividends distributed by the Company Cash dividends distributed by subsidiaries Net profit for the year ended December 31, 2016 Other comprehensive income (loss) for the year ended December 31, 2016, net of income tax Total comprehensive income for the year ended December 31, 2016 BALANCE AT DECEMBER 31, 2016 Appropriation of 2016 earnings Reserve Special Reserve Cash dividends distributed by the Company Other changes in capital surplus Issuance of share dividends from capital surplus Cash dividends distributed by subsidiaries Net profit for the year ended December 31, 2017 Other comprehensive income (loss) for the year ended December 31, 2017, net of income tax Total comprehensive income for the year ended December 31, 2017 BALANCE AT DECEMBER 31, 2017	Equity Attributable to the Owners of the Company	Equity Attributable to the Owners of the Company	Equity Attributable to the Owners of the Company		Non-controlling Total Interests $ 7,634,141 $ 58,470 - - (352,800) - - - - (20,401) 1,741,051 41,504 (431,966) (2,265) 1,309,085 39,239 8,590,426 77,308 - - - - (740,880) - - - - (20,702) 2,138,075 16,875 (132,716) (1,528) 2,005,359 15,347 $ 9,854,905 $ 71,953	Total Equity $ 7,692,611 - (352,800) - (20,401) 1,782,555 (434,231) 1,348,324 8,667,734 - - (740,880) - (20,702) 2,154,950 (134,244) 2,020,706 $ 9,926,858
	Shares (In Thousands) Share Capital Capital Surplus 141,120 $ 1,411,200 $ 2,681,126 - - - - - - 7,056 70,560 - - - - - - - - - - - - - 148,176 1,481,760 2,681,126 - - - - - - - - - 14,818 148,176 (148,176) - - - - - - - - - - - - 162,994 $ 1,629,936 $ 2,532,950		Retained Earnings Unappropriated Reserve Special Reserve Earnings $ 476,860 $ 38,098 $ 2,689,963 113,919 - (113,919) - - (352,800) - - (70,560) - - - - - 1,741,051 - - - - - 1,741,051 590,779 38,098 3,893,735 174,104 - (174,104) - 56,974 (56,974) - - (740,880) - - - - - - - - 2,138,075 - - - - - 2,138,075 $ 764,883 $ 95,072 $ 5,059,852	Other Equity Exchange Differences on Translating Foreign Operations $ 336,894 - - - - - (431,966) (431,966) (95,072) - - - - - - (132,716) (132,716) $ (227,788)

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

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GOURMET MASTER CO. LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Impairment loss recognized on trade receivables Net gain on fair value change of financial assets at fair value through profit or loss Interest expense Interest income Dividend income Share of (profit) loss of associates Loss on disposal of property, plant and equipment Loss on disposal of intangible assets Impairment loss of non-financial assets Amortization of prepayments for leases Government grants Changes in operating assets and liabilities Financial assets held for trading Notes receivable Trade receivables Other receivables Inventories Prepayments Other current assets Other operating assets Notes payable Trade payables Other payables Provisions Receipts in advance Deferred revenue Other current liabilities Cash generated from operations Interest paid Income taxes paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of debt investments with no active market Acquisition of associates Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits	2017 $ 2,970,247 1,078,060 31,724 3,934 (18,396) 25,767 (142,700) (6,000) (22,637) 63,553 12 70,710 1,992 (4,567) - (291) (64,323) (5,949) (68,806) (190,149) (445) 1,160 535 43,086 188,508 34,715 264,410 65,608 18,264 4,338,022 (26,968) (831,934) 3,479,120 (1,626,552) (106) (1,304,206) 41,350 (128,230)	2016 $ 2,395,809 1,132,998 36,128 - (17,198) 15,986 (83,135) (6,600) (19,420) 24,352 334 55,927 1,293 - (10,000) 4,905 (32,859) 15,913 (75,859) 139,675 4,198 6,785 823 25,787 15,986 12,250 168,928 56,177 3,688 3,872,871 (16,784) (570,641) 3,285,446 (1,270,768) (561) (1,019,969) 58,153 (94,029) (Continued)

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GOURMET MASTER CO. LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars)

Decrease in refundable deposits Payments for intangible assets Proceeds from disposal of intangible assets Increase in other non-current assets Increase in prepayments for equipment Increase in prepayments for leases Interest received Dividends received from associates Other dividends received Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Repayments of short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Proceeds from guarantee deposits received Refund of guarantee deposits received Dividends paid to owners of the Company Dividends paid to non-controlling interests Net cash used in financing activities EFFECT OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2017 $ 136,136 (15,004) 3 (59,400) (527,143) (122,504) 111,093 14,083 6,000 (3,474,480) 1,258,795 (652,453) - (187,806) 46,607 (27,381) (740,880) (20,702) (323,820) (37,349) (356,529) 3,151,391 $ 2,794,862	2016 $ 87,936 (16,386) 1 - (369,546) - 54,093 11,783 6,600 (2,552,693) 156,166 - 166,546 (540,810) 88,069 (4,564) (352,800) (20,401) (507,794) (128,550) 96,409 3,054,982 $ 3,151,391

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

(Concluded)

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GOURMET MASTER CO. LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

Gourmet Master Co. Ltd. (the “Company”) was incorporated in the Cayman Islands in September 2008.

The Company and its subsidiaries (collectively, the “Group”) mainly engage in the production and wholesale of bakery products, retail of beverages, wholesale of bakery machinery, and the operation of multiple shops and alliance shops.

The Company’s shares have been listed on the Taiwan Stock Exchange (“TWSE”) since November 22, 2010.

The functional currency of the Company is Renminbi. For greater comparability and consistency of financial reporting, the consolidated financial statements are presented in New Taiwan dollars since the Company’s shares are listed on the Taiwan Stock Exchange.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors on March 8, 2018.

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

• a. Initial application of the 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) (collectively, the “IFRSs”) endorsed and issued into effect by the FSC

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Group’s accounting policies:

1) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”

The amendment clarifies that the recoverable amount of an asset or a cash-generating unit is disclosed only when an impairment loss on the asset has been recognized or reversed during the period. Furthermore, if the recoverable amount of an item of property, plant and equipment for which impairment loss has been recognized or reversed is fair value less costs of disposal, the Group is required to disclose the fair value hierarchy. If the fair value measurements are categorized within Level 2/Level 3, the valuation technique and key assumptions used to measure the fair value are disclosed. The discount rate used is disclosed if such fair value less costs of disposal is measured by using present value technique. The amendment should be applied retrospectively from January 1, 2017.

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• 2) Annual Improvements to IFRSs: 2010-2012 Cycle

Several standards, including IFRS 2 “Share-based Payment”, IFRS 3 “Business Combinations” and IFRS 8 “Operating Segments”, were amended in this annual improvement.

• 3) Annual Improvements to IFRSs: 2011-2013 Cycle

Several standards, including IFRS 3, IFRS 13 and IAS 40 “Investment Property”, were amended in this annual improvement.

The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32.

• 4) Annual Improvements to IFRSs: 2012-2014 Cycle

Several standards including IFRS 5 “Non-current assets held for sale and discontinued operations”, IFRS 7, IAS 19 and IAS 34 were amended in this annual improvement.

• 5) Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers

The amendments include additions of several accounting items and requirements for disclosures of impairment of non-financial assets as a consequence of the IFRSs endorsed and issued into effect by the FSC. In addition, as a result of the post implementation review of IFRSs in Taiwan, the amendments also include emphasis on certain recognition and measurement considerations and add requirements for disclosures of related party transactions and goodwill.

The amendments stipulate that other companies or institutions of which the chairman of the board of 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 deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists. Furthermore, the amendments require the disclosure of 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.

The amendments also require additional disclosure if there is a significant difference between the actual operation after business combination and the expected benefit on acquisition date.

The retrospective application of the amendments on January 1, 2017 enhanced the disclosures of related party transactions. Refer to Note 31 for related disclosures.

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• b. 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) (collectively, the “IFRSs”) endorsed by the FSC for application starting from 2018

Effective Date New IFRSs Announced by IASB (Note 1) Annual Improvements to IFRSs 2014-2016 Cycle Note 2 Amendment to IFRS 2 “Classification and Measurement of January 1, 2018 Share-based Payment Transactions” Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments with January 1, 2018 IFRS 4 Insurance Contracts” IFRS 9 “Financial Instruments” January 1, 2018 Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of January 1, 2018 IFRS 9 and Transition Disclosures” IFRS 15 “Revenue from Contracts with Customers” January 1, 2018 Amendments to IFRS 15 “Clarifications to IFRS 15 Revenue from January 1, 2018 Contracts with Customers” Amendment to IAS 7 “Disclosure Initiative” January 1, 2017 Amendments to IAS 12 “Recognition of Deferred Tax Assets for January 1, 2017 Unrealized Losses” Amendments to IAS 40 “Transfers of Investment Property” January 1, 2018 IFRIC 22 “Foreign Currency Transactions and Advance January 1, 2018 Consideration”

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

• Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.

• 1) Annual Improvements to IFRSs 2014-2016 Cycle

Several standards, including IFRS 12 “Disclosure of Interests in Other Entities” and IAS 28 “Investments in Associates and Joint Ventures,” were amended in this annual improvement.

• 2) IFRS 9 “Financial Instruments” and related amendment

Recognition, measurement and impairment of financial assets

With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below.

For the Group’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

• a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method;

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• b) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are 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 instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for the above, all other financial assets are measured at fair value through profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with 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 comprehensive income cannot be reclassified from equity to profit or loss.

The Group analyzed the facts and circumstances of its financial assets that exist at December 31, 2017 and performed a preliminary assessment of the impact of IFRS 9 on the classification and measurement of financial assets. Under IFRS 9:

Debt investments classified as held-to-maturity financial assets/debt investments with no active market and measured at amortized cost will be classified as measured at amortized cost under IFRS 9 because on initial recognition, the contractual cash flows that are solely payments of principal and interest on the principal outstanding and these investments are held within a business model whose objective is to collect the contractual cash flows/will be classified as at fair value through other comprehensive income under IFRS 9, because on initial recognition, the contractual cash flows that are solely payments of principal and interest on the principal outstanding and these investments are held within a business model whose objective is achieved both by collecting the contractual cash flows and selling the financial assets/will be classified as at fair value through profit or loss, because on initial recognition, the contractual cash flows that are solely payments of principal and interest on the principal outstanding, but the objective of the Group’s business model is not to collect the contractual cash flows neither is achieved both by collecting the contractual cash flows and selling the financial assets/will be classified as at fair value through profit or loss, because on initial recognition, the contractual cash flows that are not solely payments of principal and interest on the principal outstanding.

IFRS 9 requires impairment loss on financial assets to be recognized by using the “Expected Credit Losses Model”. The loss allowance is required for financial assets measured at amortized cost, investments in debt instruments measured at FVTOCI, lease receivables, contract assets 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 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 risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.

For purchased or originated credit-impaired financial assets, the Group takes into account the 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 corresponding gain or loss recognized in profit or loss.

• 14 -

The Group has performed a preliminary assessment that the Group will apply the simplified approach to recognize lifetime expected credit losses for trade receivables, contract assets and lease receivables. In relation to the debt instrument investments and the financial guarantee contracts, the Group will assess whether there has been a significant increase in the credit risk to determine whether to recognize 12-month or lifetime expected credit losses. In general, the Group anticipates that the application of the expected credit loss model of IFRS 9 will result in earlier recognition of credit losses for financial assets.

The Group will elect not to restate prior periods when applying the requirements for the recognition, measurement and impairment of financial assets under IFRS 9, and will recognize the cumulative effect of the initial application recognized at the date of initial application and will provide the disclosures related to the classification and the adjustment information upon initial application of IFRS 9.

The anticipated impact on assets, liabilities and equity of retrospective application of the requirements for the classification, measurement and impairment of financial assets as of January 1, 2018 is set out below:

		Carrying	Adjustments	Adjustments	Adjusted
	Amount as of		Arising from		Carrying
	December 31,			Initial	Amount as of
		2017	Application		January 1, 2018
Impact on assets, liabilities and equity
Financial assets measured at amortized
cost - current	$	-	$	3,702,772	$ 3,702,772
Debt investments with no active market-
current		3,702,772		(3,702,772)	-
Held-to-maturity financial assets- non-
current		29,847		(29,847)	-
Debt investments with no active market -
non - current		369,301		(369,301)	-
Financial assets measured at amortized
cost -non -current		-		399,148	399,148
Total effect on assets	$	4,101,920	$	-	$ 4,101,920

• 3) IFRS 15 “Revenue from Contracts with Customers” and related amendment

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersede IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations.

When applying IFRS 15, the Group recognizes revenue by applying the following steps:

• Identify the contract with the customer;

• Identify the performance obligations in the contract;

• Determine the transaction price;

• Allocate the transaction price to the performance obligations in the contract; and

• Recognize revenue when the Group satisfies a performance obligation.

Under IFRS 15, the net effect of revenue recognized and consideration received and receivable is recognized as a contract asset or a contract liability. Currently, the receivable is recognized or the deferred revenue is reduced when revenue is recognized for the contract under IAS 18.

• 15 -

The Group will elect to retrospectively apply IFRS 15 to contracts that are not complete on January 1, 2018 and will recognize the cumulative effect of the change in the retained earnings on January 1, 2018.

In addition, the Group will disclose the difference between the amount that results from applying IFRS 15 and the amount that results from applying current standards for 2018.

The anticipated effect of retrospectively applying IFRS 15 is not significant.

• 4) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”

The amendment clarifies that the difference between the carrying amount of the debt instrument measured at fair value and its tax base gives rise to a temporary difference, even though there are unrealized losses on that asset, irrespective of whether the Group expects to recover the carrying amount of the debt instrument by sale or by holding it and collecting contractual cash flows.

In addition, in determining whether to recognize a deferred tax asset, the Group should assess a deductible temporary difference in combination with all of its other deductible temporary differences, unless the tax law restricts the utilization of losses as deduction against income of a specific type, in which case, a deductible temporary difference is assessed in combination only with other deductible temporary differences of the appropriate type. The amendment also stipulates that, when determining whether to recognize a deferred tax asset, the estimate of probable future taxable profit may include some of the Group’s assets for more than their carrying amount if there is sufficient evidence that it is probable that the Group will achieve the higher amount, and that the estimate for future taxable profit should exclude tax deductions resulting from the reversal of deductible temporary differences.

In assessing deferred tax asset, the Group currently assumes it will recover the asset at its carrying amount when estimating probable future taxable profit; the amendment will be applied retrospectively in 2018.

• 5) IFRIC 22“Foreign Currency Transactions and Advance Consideration”

IAS 21 stipulated that a foreign currency transaction shall be recorded on initial recognition in the functional currency by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. IFRIC 22 further explains that the date of the transaction is the date on which an entity recognizes a non-monetary asset or non-monetary liability from payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine the date of the transaction for each payment or receipt of advance consideration.

The Group will apply IFRIC 22 prospectively to all assets, expenses and income recognized on or after January 1, 2018 within the scope of the Interpretation.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

• 16 -

c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

New IFRSs Annual Improvements to IFRSs 2015-2017 Cycle Amendments to IFRS 9 “Prepayment Features with Negative Compensation” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” IFRS 16 “Leases” IFRS 17 “Insurance Contracts” Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures” IFRIC 23 “Uncertainty Over Income Tax Treatments”

Effective Date Announced by IASB (Note 1)

January 1, 2019 January 1, 2019 (Note 2) To be determined by IASB January 1, 2019 (Note 3) January 1, 2021 January 1, 2019 (Note 4) January 1, 2019 January 1, 2019

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

• Note 2: The FSC permits the election for early adoption of the amendments starting from 2018.

• Note 3: On December 19, 2017, the FSC announced that IFRS 16 will take effect starting from January 1, 2019.

• Note 4: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

• 1) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

The amendments stipulated that, when an entity sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate or joint venture, the gain or loss resulting from the transaction is recognized in full. Also, when an entity loses control of a subsidiary that contains a business but retains significant influence or joint control, the gain or loss resulting from the transaction is recognized in full.

Conversely, when an entity sells or contributes assets that do not constitute a business to an associate or joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors’ interest in the associate or joint venture, i.e. the entity’s share of the gain or loss is eliminated. Also, when an entity loses control of a subsidiary that does not contain a business but retains significant influence or joint control in an associate or a joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors’ interest in the associate or joint venture, i.e. the entity’s share of the gain or loss is eliminated.

• 2) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

• 17 -

Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Group may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Group should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities.

The application of IFRS 16 is not expected to have a material impact on the accounting of the Group as lessor.

When IFRS 16 becomes effective, the Group may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application.

• 3) IFRIC 23 “Uncertainty Over Income Tax Treatments”

IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Group should assume that the taxation authority will have full knowledge of all related information when making related examinations. If the Group concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the Group should determine the taxable profit, tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatments used or planned to be used in its income tax filings. If it is not probable that the taxation authority will accept an uncertain tax treatment, the Group should make estimates using either the most likely amount or the expected value of the tax treatment, depending on which method the entity expects to better predict the resolution of the uncertainty. The Group has to reassess its judgments and estimates if facts and circumstances change.

On initial application, the Group shall apply IFRIC 23 either retrospectively to each prior reporting period presented, if this is possible without the use of hindsight, or retrospectively with the cumulative effect of the initial application of IFRIC 23 recognized at the date of initial application.

• 4) Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures”

The amendments clarified that IFRS 9 shall be applied to account for other financial instruments in an associate or joint venture to which the equity method is not applied. These included long-term interests that, in substance, form part of the entity’s net investment in an associate or joint venture.

When the amendments become effective, the Group shall apply the amendments retrospectively. However, the Group may elect to recognize the cumulative effect of the initial application of the amendments in the opening carrying amount at the date of initial application, or to restate prior periods if, and only if, it is possible without the use of hindsight.

• 5) Amendments to IFRS 9 “Prepayment Features with Negative Compensation”

IFRS 9 stipulated that if a contractual term of a financial asset permits the issuer (i.e. the debtor) to prepay a debt instrument or permits the holder (i.e. the creditor) to put a debt instrument back to the issuer before maturity and the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination, the financial asset has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. The amendments further explained that the reasonable compensation may be paid or received by either of the parties, i.e. a party may receive reasonable compensation when it chooses to terminate the contract early.

• 18 -

When the amendments become effective, the Group shall apply the amendments retrospectively. However, the Group may elect to recognize the cumulative effect of the initial application of the amendments in the opening carrying amount at the date of initial application, or to restate prior periods if, and only if, it is possible without the use of hindsight.

• 6) Annual Improvements to IFRSs 2015-2017 Cycle

Several standards, including IFRS 3, IFRS 11, IAS 12 and IAS 23 “Borrowing Costs”, were amended in this annual improvement. IAS 23 was amended to clarify that, if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings. The amendment shall be applied prospectively.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by the FSC.

• b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments and investment properties which are measured at fair value.

The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and base on the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

• 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• 3) Level 3 inputs are unobservable inputs for the asset or liability.

• c. Classification of current and non-current assets and liabilities

Current assets include:

• 1) Assets held primarily for the purpose of trading;

• 2) Assets expected to be realized within 12 months after the reporting period; and

• 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

• 19 -

Current liabilities include:

1) Liabilities held primarily for the purpose of trading;

• 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 and before the consolidated financial statements are authorized for issue; and

• 3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Assets and liabilities that are not classified as current are classified as non-current.

• d. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries).

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 dates of acquisitions up to the effective dates of disposals, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the interests of the Group and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.

See Note 12 and Tables 7 and 8 for the detailed information of subsidiaries (including the percentage of ownership and main business).

• e. Foreign currencies

In preparing the Company’s financial statements, transactions in currencies other than the entity’s functional currency (i.e. foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise.

• 20 -

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising from the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which cases, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

For the purpose of presenting consolidated financial statements, the functional currencies of the Company and the group entities (including subsidiaries, associates, joint ventures and branches in other countries that use currencies which are different from the currency of the Company) are translated into the presentation currency, the New Taiwan dollar, as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; and income and expense items are translated at the average exchange rates 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. The exchange differences accumulated in equity, which resulted from the translation of the assets and liabilities of the group entities into the presentation currency, are not subsequently reclassified to profit or loss.

f. Inventories

Inventories consist of raw materials, supplies, finished goods and work in progress and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. The 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 recorded at the weighted-average cost on the balance sheet date.

g. Investments in associates and joint ventures

An associate is an entity over which the Group has significant influence and which is neither a subsidiary nor an interest in a joint venture.

The Group uses the equity method to account for its investments in associates and joint ventures.

Under the equity method, investments in an associate is initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. The Group also recognizes the changes in the Group’s share of equity of associates.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets and liabilities of an associate at the date of acquisition is recognized as goodwill, which is 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 of acquisition, after reassessment, is recognized immediately in profit or loss.

• 21 -

When the Company subscribes for additional new shares of an associate at a percentage different from 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 an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in capital surplus from investments in associates accounted for using the equity method. If the Group’s ownership interest is reduced due to its additional subscription of the new shares of the associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for using the equity method is insufficient, the shortage is debited to retained earnings.

The entire carrying amount of an investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is deducted from the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Group’ consolidated financial statements only to the extent that interests in the associate are not related to the Group.

h. Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss.

Property, 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. Such assets are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for their intended use.

Depreciation of property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in the estimates accounted for on a prospective basis.

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

• i. Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties also include land held for a currently undetermined future use.

Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss, depreciation is recognized using the straight-line method.

On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss.

• 22 -

• j. Intangible assets

• 1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, and amortization methods are reviewed at the end of each reporting period, with the effect of any changes in the estimates accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

• 2) Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

• k. Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered any 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 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 cash-generating units on a reasonable and consistent basis of allocation.

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 assets may be impaired.

The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset or cash-generating 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 cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

• l. Financial instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to an acquisition or issuance 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 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 value through profit or loss are recognized immediately in profit or loss.

1) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

• 23 -

a) Measurement categories

Financial assets are classified into the following categories: Financial assets at fair value through profit or loss, held-to-maturity investments and loans and receivables.

• i. Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when such financial assets are held for trading.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on the financial asset. Fair value is determined in the manner described in Note 30.

ii. Held-to-maturity investments

Bonds which are above specific credit ratings and which the Group has positive intent and ability to hold to maturity, are classified as held-to-maturity investments. Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

iii. Loans and receivables

Loans and receivables (including trade receivables, cash and cash equivalents, debt investments with no active market) are measured using the effective interest method at amortized cost less any impairment, except for short-term receivables when the effect of discounting is immaterial.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

• b) Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence, as a result of one or more events that occurred after the initial recognition of the financial assets, that the estimated future cash flows of the investment have been affected.

For financial assets carried at amortized cost, such as trade receivable such assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period 30 to 60 days, as well as observable changes in national or local economic conditions that correlate with defaults on receivables.

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 cash flows, discounted at the financial asset’s original effective interest rate.

• 24 -

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 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 is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract, such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for that financial asset because of financial difficulties.

The carrying amount of a financial asset is reduced by the impairment loss directly for all financial assets, with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When trade receivables and other receivables are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables that are written off against the allowance account.

• c) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows 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.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying 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.

• 2) Financial liabilities

• a) Subsequent measurement

All financial liabilities are carried at amortized cost using the effective interest method.

• b) Derecognition of financial liabilities

The difference between the carrying amount of a financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

• m. Provisions

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

• n. Revenue recognition

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. Allowances for sales returns and liabilities 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.

• 25 -

1) Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

• a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• c) The amount of revenue can be measured reliably;

• d) It is probable that the economic benefits associated with the transaction will flow to the Group; and

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

The sale of goods that results in awarded credits for customers under the Group’s award scheme is accounted for as a multiple element revenue transaction, and the fair value of the consideration received or receivable is allocated between the goods supplied and the awarded credits granted. The consideration allocated to the awarded credits is measured by reference to their fair value, i.e. the amount for which the awarded credits could be sold separately. Such consideration is not recognized as revenue at the time of the initial sale transaction but is deferred and recognized as revenue when the awarded credits are redeemed and the Group’s obligations have been fulfilled.

• 2) Interest income

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis by reference to the principal outstanding and at the applicable effective interest rate.

• 3) Royalties

Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement and provided that it is probable that the economic benefits will flow to the Group and that the amount of revenue can be measured reliably. Royalties determined on a time basis are recognized on a straight-line basis over the period of the agreement. Royalty arrangements that are based on production, sales and other measures are recognized by reference to the underlying arrangement.

• o. Leasing

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Operating lease payments are recognized as expenses on a straight-line basis over the lease term. Contingent rentals are recognized as expenses in the period in which they are incurred.

• p. Borrowing costs

Borrowing costs directly attributable to an acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

• 26 -

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

Other than that which is stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

q. Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attached to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable.

r. Employee benefits

Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered services entitling them to the contributions.

• s. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

2) Deferred tax

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. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates and interests in joint arrangements, 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 foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

• 27 -

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 allow all or part of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liabilities are settled or the assets are realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

• 3) Current and deferred taxes for the year

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred taxes are also recognized in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, management is required to make judgments, estimates 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 that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting 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.

Income Taxes

As of December 31, 2017 and 2016, the carrying amount of the deferred tax assets in relation to unused tax losses was $37,908 thousand and $44,180 thousand, respectively. As of December 31, 2017 and 2016, no deferred tax asset has been recognized on the tax loss of $698,798 thousand and $890,492 thousand, respectively, due to the unpredictability of future profit streams. The realizability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such a reversal takes place.

Impairment of investment property

The impairment of investment property was based on the recoverable amounts of those assets, which are the higher of their fair value less costs of disposal and their value in use. Any changes in the market prices or future cash flows will affect the recoverable amounts of those assets and may lead to the recognition of additional impairment losses or reversal of impairment losses.

• 28 -

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalent Time deposits with original maturities less than three months		December 31	December 31
		2017 $ 81,321 2,126,235 587,306 $ 2,794,862	2016 $ 93,405 2,115,598 942,388 $ 3,151,391

The market rate intervals of cash in bank at the end of the reporting period were as follows:

Bank deposits Time deposits	December 31
	2017 2016 0.001%-0.350% 0.001%-0.300% 0.590%-4.70% 0.81%-7.50%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets-current Financial assets held for trading Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts Non-derivative financial assets Domestic quoted shares Mutual funds Financial liabilities-current Financial liabilities held for trading Derivative financial liabilities (not under hedge accounting) Foreign exchange forward contracts		December 31	December 31
		2017 $ - 155,100 10,048 $ 165,148 $ 3,134	2016 $ 5,158 120,900 10,012 $ 136,070 $ -

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge accounting were as follows:

					Notional Amount
			Currency	Maturity Date	(In Thousands)
December	31,	2017
Buy			RMB/USD	2017.11.01-2018.10.31	RMB33,666/USD5,000
December	31,	2016
Buy			RMB/USD	2016.10.31-2017.11.02	RMB34,286/USD5,000
Buy			RMB/USD	2016.11.03-2017.10.31	RMB20,541/USD3,000
Buy			RMB/USD	2016.12.27-2017.12.29	RMB21,101/USD3,000

• 29 -

The Group entered into foreign exchange forward contracts to manage exposures to exchange rate fluctuations of foreign currency denominated liabilities.

8. HELD-TO-MATURITY FINANCIAL ASSETS

Non-current Bank debentures - China Development Bank		December	31
		2017 $ 29,847	2016 $ 32,370

In May 2015, the Group bought 10-year bank debentures issued by China Development Bank with a coupon rate of 4.25%, an effective interest rate of 4.17%, and a maturity date of December 2, 2024 for US$1,006 thousand (par value of US$1,000 thousand).

9. DEBT INVESTMENTS WITH NO ACTIVE MARKET

Current Time deposits with original maturity more than 3 months Restricted bank deposit Non-current Time deposits with original maturity more than 3 months Restricted bank deposit		December 31	December 31
		2017 $ 3,640,301 62,471 $ 3,702,772 $ 228,250 141,051 $ 369,301	2016 $ 2,300,578 11,050 $ 2,311,628 $ - 133,893 $ 133,893

• a. The market interest rates of the time deposits with original maturity more than 3 months were 0.65%-5% and 0.65%-4.6% per annum respectively as of December 31, 2017 and 2016.

• b. Refer to Note 32 for information relating to debt investments with no active market pledged as security.

10. TRADE RECEIVABLES

Trade receivables Less: Allowance for impairment loss		December 31	December 31
		2017 $ 361,902 (5,606) $ 356,296	2016 $ 299,145 (3,400) $ 295,745

• 30 -

The average credit period on sales of goods was between 30 days and 60 days. In determining the recoverability of a trade receivable, the Group considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period. The Group recognized an allowance for impairment loss of 100% against all receivables over 60 days because historical experience had been that receivables that are past due beyond 60 days were not recoverable.

Past due but not impaired receivables are trade receivables balances that were past due at the end of the reporting period, but the Group did not recognize an allowance for impairment loss, because there was no significant change in credit quality and the amounts were still considered recoverable. The Group did not hold any collateral or other credit enhancements for these balances.

The aging of receivables was as follows:

1 day to 60 days 61 days to 90 days 91 days to 180 days 181 days to 360 days Over 360 days		**December 31 **	**December 31 **
		2017 $ 342,532 5,899 3,332 5,347 4,792 $ 361,902	2016 $ 289,877 2,407 291 246 6,324 $ 299,145

The above aging schedule was based on the invoice date.

The aging of receivables that were past due but not impaired was as follows:

Less than 90 days 91 days to 180 days 181 days to 360 days Over 360 days		December	31
		2017 $ 14,384 3,332 466 4,067 $ 22,249	2016 $ 6,596 291 246 2,924 $ 10,057

The above aging schedule was based on the invoice date.

The movements of the allowance for doubtful trade receivables were as follows:

Individually Assessed for Impairment Collectively Assessed for Impairment Balance at January 1, 2016 $ 3,678 $ - Add: Impairment losses recognized on receivables - - Foreign exchange translation gains and losses (278) - Balance at December 31, 2016 $ 3,400 $ -	Total $ 3,678 - (278) $ 3,400 (Continued)

• 31 -

Individually Assessed for Impairment Collectively Assessed for Impairment Balance at January 1, 2017 $ 3,400 $ - Add: Impairment losses recognized on receivables 3,934 - Less: Amounts written off during the period as uncollectible (1,566) - Foreign exchange translation gains and losses (162) - Balance at December 31, 2017 $ 5,606 $ -	Total $ 3,400 3,934 (1,566) (162) $ 5,606 (Concluded)

11. INVENTORIES

Finished goods Work in process Raw materials and supplies Merchandise		**December 31 **	**December 31 **
		2017 $ 51,243 3,681 535,323 178,206 $ 768,453	2016 $ 43,726 5,337 488,455 169,469 $ 706,987

As of December 31, 2017 and 2016, the allowance for inventory devaluation was $23,251 thousand and $15,911 thousand, respectively.

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2017 and 2016 was $9,361,739 thousand and $9,218,839 thousand, respectively.

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2017 and 2016 included inventory write-downs of $7,443 thousand and $6,184 thousand, respectively.

The obsolescence of inventories recognized as cost of goods sold for the years ended December 31, 2017 and 2016 was $534,502 thousand and $469,782 thousand, respectively.

12. SUBSIDIARIES

Subsidiaries Included in Consolidated Financial Statements

Investor Investee Main Businesses Gourmet Master Co. Ltd. 85 Degree Co., Ltd. Investment Prime Scope Trading Limited Investment Perfect 85 Degrees C, Inc. Manufacturing and sale of baking food 85 Degrees Café International Pty. Ltd. Grocery and drink retail WinWin 85C Holding Co., Ltd. Investment Lucky Bakery Limited Investment	% ofOwnership December 2017 2016 Note 100.0 100.0 100.0 100.0 100.0 100.0 51.0 51.0 100.0 100.0 100.0 100.0 (Continued)

• 32 -

Investee Main Businesses WinPin 85 Investments, LLC Grocery and drink retail Golden 85 Investments, LLC Grocery and drink retail Comestibles Master Co., Ltd. Grocery and drink retail Mei Wei Master Co., Ltd. Grocery and drink retail Fang Song Comestibles Ltd. Grocery and drink retail Mei Wei Fu Xing Ltd. Grocery and drink retail WinWin 85C LLC Investment WinUS 85C LLC Investment Shanghai Gourmet Master Food & Beverage Ltd. Grocery and drink retail He-Shia Food & Beverage Ltd. Grocery and drink retail Sheng-Pin (Hangzhou) Food Ltd. Manufacturing and sale of baking food He-Shia (Nanjing) Food & Beverage Ltd. Grocery and drink retail Beijing 85 Food & Beverage Ltd. Grocery and drink retail Zhejiang 85 Food & Beverage Ltd. Grocery and drink retail Sheng-Pin (Beijing) Food Ltd. Manufacturing and sale of baking food Fuzhou 85 Food & Beverage Ltd. Grocery and drink retail Sheng-Pin (Jiangsu) Food Ltd. Manufacturing and sale of baking food Sheng-Pin (Xiamen) Food Ltd. Manufacturing and sale of baking food Sheng-Pin (Qingdao) Food Ltd. Manufacturing and sale of baking food Xiamen 85 Food & Beverage Ltd. Grocery and drink retail Shenyang 85 Food & Beverage Ltd. Grocery and drink retail Sheng-Pin (Shenyang) Food Ltd. Manufacturing and sale of baking food 85 Degree (Qingdao) Food & Beverage Management Ltd. Grocery and drink retail 85 Degree (Jiangsu) Food Ltd. Manufacturing and sale of baking food Wincase Limited Grocery and drink retail Worldinn Limited Manufacturing and sale of baking food Sheng-Pin (Shanghai) Food Ltd. Manufacturing and sale of baking food Mai-Jia (Shanghai) Food Ltd. Manufacturing and sale of baking food Shanghai Howco Jing Way Food & Beverage Ltd. Grocery and drink retail Shenzheng 85 Food & Beverage Ltd. Grocery and drink retail Chengdu 85 Food & Beverage Ltd. Grocery and drink retail Sheng-Pin (Wuhan) Food Ltd. Manufacturing and sale of baking food Wuhan Jing Way Food & Beverage Ltd. Grocery and drink retail Jianxi Jing Way Food & Beverage Ltd. Grocery and drink retail Jin Wei Industrial (Shanghai) Ltd. Grocery sale Guangzhou 85 Degree Food & Beverage Management Ltd. Grocery and drink retail 85 Degree (Jiangsu) Food Ltd. Manufacturing and sale of baking food Mai-Jia (Chengdu) Food Ltd. Manufacturing and sale of baking food Jia Ding Jing Way Food & Beverage Ltd. Grocery and drink retail Kunshan 85 Food & Beverage Ltd. Grocery and drink retail Sheng-Pin (Dongguan) Food Ltd. Manufacturing and sale of baking food Wuhan Jing Way Food & Beverage Ltd. Grocery and drink retail Beijing 85 Food & Beverage Ltd. Grocery and drink retail Sheng-Pin (Beijing) Food Ltd. Manufacturing and sale of baking food Sheng-Pin (Shenzheng) Food Ltd. Manufacturing and sale of baking food Qingdao Jie Wei Food & Beverage Management Ltd. Grocery and drink retail

% ofOwnership December 2017 2016 Note 100.0 100.0 65.0 65.0 100.0 100.0 100.0 100.0 100.0 100.0 60.0 60.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 25.0 25.0 100.0 100.0 61.5 61.5 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 25.0 25.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 85.0 85.0 100.0 100.0 100.0 100.0 57.0 57.0 100.0 100.0 100.0 100.0 100.0 100.0 75.0 75.0 100.0 100.0 100.0 100.0 100.0 100.0 40.0 100.0 * 43.0 43.0 75.0 75.0 38.5 38.5 100.0 100.0 100.0 100.0 (Concluded)

Investor

Perfect 85 Degrees C, Inc.

85 Degree Co., Ltd. Comestibles Master Co., Ltd.

Mei Wei Master Co., Ltd. Mei Wei Fu Xing Ltd. WinWin 85C Holding Co., Ltd. WinWin 85C LLC WinUS 85C LLC Prime Scope Trading Limited

Shanghai Gourmet Master Food & Beverage Ltd.

He-Shia Food & Beverage Ltd. Wuhan Jing Way Food & Beverage Ltd.

Shenzheng 85 Food & Beverage Ltd.

85 Degree (Qingdao) Food & Qingdao Jie Wei Food & Beverage Beverage Management Ltd. Management Ltd.

• 33 -

• Sheng-Pin (Dongguan) Food Ltd. was invested by other investors in November 2017 and the Group held 40% interest in Sheng-Pin (Dongguan) Food Ltd. and also owned call options on the other 60%. Based on the contractual arrangements between the Group and other investors, the Group has the practical ability to direct the relevant activities of Sheng-Pin (Dongguan) Food Ltd., and the call options are expected to be exercised in 2018. After considering these factors, the Group determined that it controls Sheng-Pin (Dongguan) Food Ltd. and deemed it as a subsidiary.

13. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investment in Associates

Material associate The Hot Pot Food and Beverage Management Co., Ltd.		December	31
		2017 $ 87,930	2016 $ 79,270

At the end of the reporting period, the proportion of ownership and voting rights in associates held by the Group were as follows:

Name of Associate The Hot Pot Food and Beverage Management Co., Ltd.	December 31
	2017 2016 23.01% 22.97%

Refer to Table 7 “Information on Investees” for the nature of activities, principal place of business and country of incorporation of the associate.

Management believes there is no material impact on the equity method accounting or the calculation of the share of profit or loss and other comprehensive income from the financial statements of The Hot Pot Food and Beverage Management Co., Ltd. which have not been audited.

The summarized financial information in respect of the Group’s associate is set out below:

The Hot Pot Food and Beverage Management Co., Ltd.

Current assets Non-current assets Current liabilities Non-current liabilities Equity Proportion of the Group’s ownership Equity attributable to the Group Carrying amount		December 31	December 31
		2017 $ 271,909 303,769 (187,301) (6,240) $ 382,137 23.01% $ 87,930 $ 87,930	2016 $ 194,846 288,935 (138,679) - $ 345,102 22.97% $ 79,270 $ 79,270

• 34 -

Revenue Profit for the year	**For the Year Ended **	**For the Year Ended **	**December 31 **
		2017 $ 910,081 $ 98,236	2016 $ 686,578 $ 84,361

14. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2016 Additions Disposal Reclassified Effect of foreign currency exchange differences Balance at December 31, 2016 Accumulated depreciation and impairment Balance at January 1, 2016 Depreciation expense Impairment loss Disposal Reclassified Effect of foreign currency exchange differences Balance at December 31, 2016 Carrying amounts at December 31, 2016 Cost Balance at January 1, 2017 Additions Disposal Reclassified Transfer to investment property Effect of foreign currency exchange differences Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Depreciation expense Impairment loss Disposal Reclassified Transfer to investment property Effect of foreign currency exchange differences Balance at December 31, 2017 Carrying amounts at December 31, 2017	Land $ 430,520 105,972 - - (4,656) $ 531,836 $ - - - - - - $ - $ 531,836 $ 531,836 49,892 - - - (17,231) $ 564,497 $ - - - - - - - $ - $ 564,497	Buildings Machinery and Equipment Leasehold Improvements Transportation Equipment $ 1,745,555 $ 2,625,249 $ 2,852,408 $ 54,978 90,967 270,251 585,264 10,045 - (195,696 ) (257,771 ) (3,678 ) 23,169 18,371 (49,261 ) - (125,711) (155,729) (171,303) (3,000) $ 1,733,980 $ 2,562,446 $ 2,959,337 $ 58,345 $ 145,296 $ 1,246,190 $ 1,333,440 $ 33,882 86,492 389,009 476,763 9,409 - 18,996 26,372 - - (170,811 ) (206,804 ) (3,309 ) 1,014 407 (18,413 ) - (11,036) (79,200) (93,925) (1,933) $ 221,766 $ 1,404,591 $ 1,517,433 $ 38,049 $ 1,512,214 $ 1,157,855 $ 1,441,904 $ 20,296 $ 1,733,980 $ 2,562,446 $ 2,959,337 $ 58,345 310,217 400,016 835,138 15,328 (1,486 ) (355,290 ) (331,728 ) (14,018 ) 90,215 - (33,298 ) - (93,870 ) - - - (24,772) (43,995) (81,864) (690) $ 2,014,284 $ 2,563,177 $ 3,347,585 $ 58,965 $ 221,766 $ 1,404,591 $ 1,517,433 $ 38,049 88,578 361,869 455,142 8,320 - 15,302 11,053 - (1,486 ) (331,855 ) (267,869 ) (10,549 ) 73,533 - (73,533 ) - (19,736 ) - - - (702) (21,860) (32,748) (467) $ 361,953 $ 1,428,047 $ 1,609,478 $ 35,353 $ 1,652,331 $ 1,135,130 $ 1,738,107 $ 23,612	Office Equipment $ 597,865 73,987 (46,456 ) (369 ) (43,145) $ 581,882 $ 365,103 130,382 - (41,649 ) (315 ) (29,788) $ 423,733 $ 158,149 $ 581,882 76,930 (97,864 ) - - (8,961) $ 551,987 $ 423,733 100,124 1,360 (88,622 ) - - (5,501) $ 431,094 $ 120,893	Other Equipment $ 231,191 85,633 (8,936 ) 37,217 (5,400) $ 339,705 $ 121,044 39,439 - (7,681 ) 17,307 (2,275) $ 167,834 $ 171,871 $ 339,705 77,904 (33,977 ) - - (10,858) $ 372,774 $ 167,834 60,175 2,694 (29,079 ) - - (5,082) $ 196,542 $ 176,232	Construction in Progress $ 25,831 67,948 (222 ) (29,127 ) (1,035) $ 63,395 $ - - - - - - $ - $ 63,395 $ 63,395 182,031 - (56,917 ) - (6,699) $ 181,810 $ - - - - - - - $ - $ 181,810	Total $ 8,563,597 1,290,067 (512,759 ) - (509,979) $ 8,830,926 $ 3,244,955 1,131,494 45,368 (430,254 ) - (218,157) $ 3,773,406 $ 5,057,520 $ 8,830,926 1,947,456 (834,363 ) - (93,870 ) (195,070) $ 9,655,079 $ 3,773,406 1,074,208 30,409 (729,460 ) - (19,736 ) (66,360) $ 4,062,467 $ 5,592,612

Additional impairment losses recognized in respect of property, plant and equipment for the year ended December 31, 2017 amounted to $30,409 thousand. This loss was attributable to idle plants for which the book value of the relevant leasing improvements had been assessed at higher than their recoverable amount. The impairment loss is recognized in other gains and losses in the consolidated statements of comprehensive income.

• 35 -

The above items of property, plant and equipment are depreciated on a straight-line basis over the estimated useful life of the asset:

Buildings Main buildings 20-49 years Power system engineering 11 years Furnishing 10-20 years Machinery and equipment 1-11 years Leasehold improvements 1-41 years Transportation equipment 1-6 years Office equipment 1-10 years Other equipment 1-15 years

Property, plant and equipment pledged as collateral for bank borrowings were set out in Note 32.

15. INVESTMENT PROPERTIES

	Completed	Completed
	Investment
	Properties
Cost
Balance at January 1, 2016	$	175,991
Balance at December 31, 2016	$	175,991
Accumulated depreciation and impairment
Balance at January 1, 2016	$	(2,244)
Depreciation expense		(1,504)
Balance at December 31, 2016	$	(3,748)
Carrying amounts at December 31, 2016	$	172,243
Cost
Balance at January 1, 2017	$	175,991
Transfers from property, plant and equipment		93,870
Effect of foreign currency exchange differences		1,147
Balance at December 31, 2017	$	271,008
Accumulated depreciation and impairment
Balance at January 1, 2017	$	(3,748)
Transfers from property, plant and equipment		(19,736)
Impairment losses recognized		(32,858)
Depreciation expense		(3,852)
Effect of foreign currency exchange differences		(392)
Balance at December 31, 2017	$	(60,586)
Carrying amounts at December 31, 2017	$	210,422

• 36 -

The investment properties are depreciated using the straight-line method over their estimated useful lives as follows:

Main buildings

• 20-49 years

• a. The carrying amount of the investment properties located in Taichung, Taiwan was $170,739 thousand. The management of the Company had used the situation of the investment properties and market price that market participants would use in determining the fair value. The valuation was arrived at by reference to market evidence of transaction prices of similar properties.

Fair value		**December 31 **	**December 31 **
		2017 $ 185,259	2016 $ 185,907

• b. The carrying amount of the investment properties located in Shenyang city, Liaoning province, China was $39,683 thousand. The determination of fair value was performed by independent qualified professional valuers, and the fair value was measured by using Level 3 inputs. The valuation was arrived at by reference to market evidence of transaction prices of similar properties.

	December 31,
	2017
Fair value	$ 39,683

All of the Group’s investment properties are held under freehold interests. The investment properties pledged as collateral for bank borrowing are set out in Note 32.

16. OTHER INTANGIBLE ASSETS

Cost Balance at January 1, 2016 Additions Disposal Effect of foreign currency exchange differences Balance at December 31, 2016	Goodwill Trademark $ 745 $ 3,930 - 1,338 - - - 2 $ 745 $ 5,270	Computer Software $ 161,948 15,048 (1,456) (10,614) $ 164,926	Others $ 5,496 - (5,162) (334) $ -	Total $ 172,119 16,386 (6,618) (10,946) $ 170,941 (Continued)

• 37 -

Accumulated amortization and impairment Balance at January 1, 2016 Amortization expense Disposal Impairment loss Effect of foreign currency exchange differences Balance at December 31, 2016 Carrying amounts at December 31, 2016 Cost Balance at January 1, 2017 Additions Disposal Effect of foreign currency exchange differences Balance at December 31, 2017 Accumulated amortization and impairment Balance at January 1, 2017 Amortization expense Disposal Effect of foreign currency exchange differences Balance at December 31, 2017 Carrying amounts at December 31, 2017	Goodwill Trademark $ - $ 840 - 517 - - - - - - $ - $ 1,357 $ 745 $ 3,913 $ 745 $ 5,270 - 2,627 - - - (7) $ 745 $ 7,890 $ - $ 1,357 - 773 - - - - $ - $ 2,130 $ 745 $ 5,760	Computer Software $ 77,401 35,611 (1,121) 440 (6,396) $ 105,935 $ 58,991 $ 164,926 12,377 (2,504) (2,295) $ 172,504 $ 105,935 30,951 (2,489) (1,491) $ 132,906 $ 39,598	Others $ 1,603 - (5,162) 3,935 (376) $ - $ - $ - - - - $ - $ - - - - $ - $ -	Total $ 79,844 36,128 (6,283) 4,375 (6,772) $ 107,292 $ 63,649 $ 170,941 15,004 (2,504) (2,302) $ 181,139 $ 107,292 31,724 (2,489) (1,491) $ 135,036 $ 46,103 (Concluded)

The intangible asset, trademark, has a legal life of 10 years but is renewable every 10 years at minimal cost. Management believes the Group will renew the trademark continuously and has the ability to do so. Various studies on areas including product life cycles, market, competitive and environmental trends, and brand extension opportunities have been performed by the management of the Group, which supported its opinion that there is no foreseeable limit to the period over which the trademarked products are expected to generate net cash flows. Therefore, the trademark is considered to have an indefinite useful life. The trademark will not be amortized until its useful life is determined to be finite. Instead it will be tested for impairment annually and whenever there is an indication that it may be impaired.

• 38 -

Other intangible assets are amortized on a straight-line basis over the estimated useful lives as follows:

Trademark Computer software

1-10 years 1-10 years

17. OTHER ASSETS

Current Prepaid rent Prepayments Offset against business tax payable Other prepayments Others Noncurrent Prepaid equipment Refundable deposits Long-term prepayments for lease Prepayments for property, plant and equipment Others		**December 31 **	**December 31 **
		2017 $ 218,632 98,989 81,488 65,798 464,907 17,771 $ 482,678 $ 212,640 464,575 180,950 59,400 3,715 $ 921,280	2016 $ 141,960 36,708 44,226 51,864 274,758 17,326 $ 292,084 $ 222,631 481,341 60,598 - 4,406 $ 768,976

• a. Prepaid rental is due to store lease arrangement.

• b. Prepaid equipment is due to the purchase of equipment for the factories.

• c. Refundable deposits are for rentals of stores and factories.

• d. Long-term prepayments for leases are for land use right in China.

• e. Prepayments for property, plant and equipment are due to the acquisition of the factory in Taichung.

18. BORROWINGS

a.	Short-term borrowings Secured borrowings (Note 32) Bank loan Unsecured borrowings Line of credit borrowings		**December 31 **	**December 31 **
			2017 $ 754,964 30,000 $ 784,964	2016 $ 171,225 16,014 $ 187,239

• 39 -

The weighted average effective interest rate of bank loans was 0.99%-2.2% and 1.13%-3.75% per annum as of December 31, 2017 and 2016, respectively.

• b. Long-term borrowings

Secured borrowings (Note 32) Bank loans (1) Long-term debt payable - related parties (2) (Note 31) Less: Current portion Long-term borrowings Borrowing Content Borrowings at floating rate: US secured bank loan Maturity date: January 14, 2018 Repayment term: Due for repayment US secured bank loan(3) Maturity date: January 12, 2018 Repayment term: Due for repayment US unsecured long-term debt - related parties Maturity date: November 7, 2019 Repayment term: Due for repayment Less: Current portion		**December 31 **	**December 31 **
		2017 2016 $ 238,622 $ 448,394 155,109 166,546 (238,622) - $ 155,109 $ 614,940 December 31
		2017 $ - 238,622 155,109 (238,622) $ 155,109	2016 $ 96,084 352,310 166,546 - $ 614,940

• 1) The range of weighted average effective interest rates of bank loans was 2.471% and 1.978%-1.982% per annum as of December 31, 2017 and 2016, respectively.

• 2) Long-term debt payable to related parties of the Group is repayable to directors. An interest rate of 3.75% per annum was charged on the outstanding balance during the year ended December 31, 2017.

• 3) The Group requested the creditor to extend the term of the US secured bank loan in December 2017; the related additional agreement will be signed in January 2018. According to the agreement, the credit period of the loan was extended to January 12, 2019.

19. TRADE PAYABLES

The average credit period of purchases of certain goods was 45 days. The Group has financial risk management policies to ensure in place that all payables are paid within the pre-agreed credit terms.

• 40 -

20. OTHER LIABILITIES

Current Other payables Accrued payroll and bonuses Utilities Insurance Rent Payable for purchases of equipment Others (shipping expense, repair expense, etc.) Deferred revenue Deferred revenue arising from customer loyalty program Arising from government grants (Note 26) Other liabilities Receipts in advance Others Non-current Decommission restoration and rehabilitation provision Guarantee deposits received Arising from government grants (Note 26)		December 31	December 31
		2017 $ 571,725 69,674 78,185 110,492 287,220 442,534 $ 1,559,830 $ 127,019 2,003 $ 129,022 $ 1,230,587 45,051 $ 1,275,638 $ 119,808 151,534 13,351 $ 284,693	2016 $ 462,239 69,159 63,493 69,502 176,609 420,910 $ 1,261,912 $ 81,332 - $ 81,332 $ 966,177 26,787 $ 992,964 $ 85,093 132,901 - $ 217,994

• a. Receipts in advance are mainly gift vouchers which have been issued but not redeemed yet.

• b. Deferred revenue was recognized from the Group’s customer loyalty program recognized in accordance with IFRIC 13 “Customer Loyalty Programs”.

• c. Guarantee deposits mainly consist of the deposits for the franchise, decoration work and the tender performance bond of logistics companies and other manufacturers.

21. RETIREMENT BENEFIT PLANS

Defined Contribution Plans

Comestibles Master Co., Ltd., Mei Wei Master Co., Ltd., Mei Wei Fu Xing Ltd. and Fang Song Comestibles Ltd. of the Group adopted a pension plan under the Labor Pension Act (the “LPA”) of the R.O.C., which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

• 41 -

The employees of the Group’s subsidiaries in China are members of a state-managed retirement benefit plan operated by the government of China. The subsidiaries are required to contribute a specified percentage of the payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.

22. SHAREHOLDERS’ EQUITY

Share Capital

Ordinary shares

Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		December 31	December 31
		2017 850,000 $ 8,500,000 162,994 $ 1,629,936	2016 850,000 $ 8,500,000 148,176 $ 1,481,760

Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to dividends.

The Company’s shareholders resolved to issue share dividends from capital surplus of $148,176 thousand in the shareholders’ meeting on June 15, 2017. The subscription base date was determined on July 8, 2017.

Capital Surplus

The capital surplus arising from shares issued in excess of par (including share premium from issuance of ordinary shares may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to capital (limited to a certain percentage of the Company’s capital surplus and once a year).

Retained Earnings and Dividend Policy

According to Company's articles of Incorporation, the company may declare dividends in the form of an ordinary resolution, but its amount must not exceed the amount recommended by the board of directors., the Company made a profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as a legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders. The reserve for the company is used as the company's operation or investment in a manner deemed appropriate by the board of directors, and the investment does not need to be part of the reserve separately from other investments. In addition, a special reserve should be appropriated as needed. The remainder of the income should be appropriated in the following order:

• a. Bonus for employees (including subsidiaries’ employees) at 3% or less;

• b. Remuneration of directors and supervisors at 1% or less; and

• c. The earnings appropriated should not be less than 30% of the after-tax earnings. And cash dividends should not be less than 10% of the sum of cash dividends and share dividends.

• 42 -

In accordance with the amendments to the Company Act of the ROC in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. Because the Company is incorporated in the Cayman Islands, the Company Act of the ROC is not applicable to the Company. The Company does not need to propose amendments to its Articles of Incorporation.

For the years ended December 31, 2017 and 2016, there were no accruals of bonuses for employees and remuneration of directors and supervisors. Material differences between estimated amounts and the amounts proposed by the board of directors on or before the consolidated financial statements are authorized for issue are adjusted in the year the bonuses and remuneration were recognized. If there is a change in the proposed amounts after the consolidated financial statements are authorized for issue, the differences are recorded as a change in the accounting estimate. If share bonuses are resolved to be distributed to employees, the number of shares is determined by dividing the amount of the share bonuses by the fair value of the shares. The fair value of the shares is stated at the closing price (after considering the effect of cash and share dividends) of the shares on the day immediately preceding the shareholders’ meeting.

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 Following Adoption of IFRSs”, shall be appropriated to or reversed from a special reserve by the Company. Any special reserve appropriated may be reversed to the extent that the net debit balance reverses and may thereafter be distributed.

The appropriations of earnings for 2016 and 2015 approved in the shareholders’ meetings on June 15, 2017 and June 3, 2016, respectively, were as follows:

Reserve Special reserve Cash dividends Share dividends	Appropriation of Earnings For the Year Ended December 31 2016 2015 $ 174,104 $ 113,919 56,974 - 740,880 352,800 - 70,560	Dividends Per Share (NT$)
		2016 2015 $ - $ - - - 5.0 2.5 - 0.5

The Company’s shareholders also resolved to transfer capital surplus to 148,176 ordinary shares on June 15, 2017.

There were no bonuses for employees and the remuneration of directors and supervisors for 2016 and 2015 were approved in the shareholders’ meetings held on June 15, 2017 and June 3, 2016, respectively.

The appropriation of earnings for 2017 was proposed by the Company’s board of directors on March 8, 2018. The appropriations and dividends per share were as follows:

	Appropriation	Dividends Per
	of Earnings	Share (NT$)
Reserve	$ 213,808	$ -
Special reserve	132,716	-
Cash dividends	977,962	6.00
Share dividends	7,070	0.04

The appropriation of earnings for 2017 are subject to the resolution of the shareholders’ meeting to be held on June 5, 2018.

• 43 -

The Company’s board of directors proposed to issue share dividends from capital surplus of $162,994 thousand on March 8, 2018.

There was no difference between the amounts of bonuses for employees and the remuneration of directors and supervisors approved in the shareholders’ meetings held on June 15, 2017 and June 3, 2016 the amounts recognized in the financial statements for the years ended December 31, 2016 and 2015, respectively.

Information on the bonuses for employees and the remuneration of directors and supervisors proposed by the Company’s board of directors is available on the Market Observation Post System website of the Taiwan Stock Exchange.

23. OTHER COMPREHENSIVE INCOME (LOSS) FROM CONTINUING OPERATIONS

a. Other income

Interest income Dividend income Income from government grants Rental income Others	For the Year Ended	For the Year Ended	December 31
		2017 $ 142,700 6,000 53,415 13,333 75,856 $ 291,304	2016 $ 83,135 6,600 77,086 12,200 67,929 $ 246,950

• b. Other gains and losses

Net foreign exchange gains (losses) Loss on disposal of property, plant and equipment Gain on trading investments Impairment loss Others	**For the Year Ended **	**For the Year Ended **	**December 31 **
		2017 $ (11,422) (63,517) 18,396 (63,267) (32,803) $ (152,613)	2016 $ (59,161) (24,352) 17,198 (49,743) (102,135) $ (218,193)

c. Finance costs

Interest on bank loans Interest on long-term debts payable - related parties	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2017 $ 18,887 6,880 $ 25,767	2016 $ 15,986 - $ 15,986

• 44 -

d. Depreciation and amortization

Property, plant and equipment Investment property Intangible assets An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Selling and marketing expenses General and administrative expenses e. Employee benefits expense Post-employment benefits Defined contribution plans Other employee benefits An analysis of employee benefits expense by function Operating costs Operating expenses f. Impairment loss on non-financial assets Other intangible assets (included in other gains and losses) Property, plant and equipment (included in other gains and losses) Investment properties (included in other gains and losses) Inventories (included in operating costs)	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2017 2016 $ 1,074,208 $ 1,131,494 3,852 1,504 31,724 36,128 $ 1,109,784 $ 1,169,126 $ 183,965 $ 209,108 894,095 923,890 $ 1,078,060 $ 1,132,998 $ 2,397 $ 2,219 29,327 33,909 $ 31,724 $ 36,128 **For the Year Ended December 31 **
	2017 2016 $ 50,347 $ 40,682 6,027,981 5,588,765 $ 6,078,328 $ 5,629,447 $ 929,922 $ 735,582 5,148,406 4,893,865 $ 6,078,328 $ 5,629,447 For the Year Ended December 31
		2017 $ - 30,409 32,858 7,443 $ 70,710	2016 $ 4,375 45,368 - 6,184 $ 55,927

• 45 -

24. INCOME TAX

a. Income tax recognized in profit or loss

The major components of tax expense were as follows:

Current tax In respect of the current year Adjustments for prior periods Deferred tax In respect of the current year Income tax expense recognized in profit or loss	**For the Year Ended **	**For the Year Ended **	**December 31 **
		2017 $ 808,212 (6,748) 801,464 13,833 $ 815,297	2016 $ 593,184 12,008 605,192 8,062 $ 613,254

A reconciliation of accounting income and income tax expenses used is as follow:

Profit before income tax Income tax expense calculated at the statutory rate Nondeductible expense in determining taxable income Tax-exempt income Repatriation tax withholdings Unrecognized deductible temporary differences Unrecognized loss carryforwards Adjustment for prior year’s tax Income tax expense recognized in profit or loss	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2017 $ 2,970,247 $ 723,806 7,132 (21,052) 123,103 11,255 (22,199) (6,748) $ 815,297	2016 $ 2,395,809 $ 586,022 1,639 (31,437) 38,849 (4,165) 10,338 12,008 $ 613,254

The applicable tax rate used by the subsidiaries in the ROC is 17%, in China is 25%, and in Hong Kong is 16.5%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

In February 2018, it was announced by the President that the Income Tax Act in the ROC was amended and starting from 2018, the corporate income tax rate will be adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings will be reduced from 10% to 5%. Deferred tax assets recognized as at December 31, 2017 are expected to be adjusted and would increase by $609 thousand in 2018.

The USA also amended the Income Tax Law, and starting from 2018, the maximum corporate income tax rate will be reduced from 35% to 21%.

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

• 46 -

b. Deferred tax assets

The movements of deferred tax assets were as follows:

For the year ended December 31, 2017

Deferred Tax Assets Temporary differences Unrealized foreign exchange losses Salaries and wages payable Inventory write-downs Operating lease Property, plant and equipment Deferred revenue Others Tax losses For the year ended December 31, 2016 Deferred Tax Assets Temporary differences Unrealized foreign exchange losses Salaries and wages payable Inventory write-downs Property, plant and equipment Deferred revenue Tax losses Deferred Tax Liabilities Temporary differences Unrealized foreign exchange gains	Opening Balance Recognized in Profit or Loss Exchange Differences $ 256 $ 1,756 $ 11 47,301 (49,471) 2,170 2,232 1,857 (93) 3,922 12,021 (1,136) 8,226 8,459 (571) 6,743 15,773 (1,123) - 187 (10) 68,680 (9,418) (752) 44,180 (4,415) (1,857) $ 112,860 $ (13,833) $ (2,609) Opening Balance Recognized in Profit or Loss Exchange Differences $ - $ 255 $ 1 43,768 7,160 (3,627) 1,279 1,022 (69) 4,429 (180) (327) 8,424 459 (657) - 7,053 (310) 57,900 15,769 (4,989) 70,449 (23,238) (3,031) $ 128,349 $ (7,469) $ (8,020) Opening Balance Recognized in Profit or Loss Exchange Differences $ 597 $ (593) $ (4)	Closing Balance $ 2,023 - 3,996 14,807 16,114 21,393 177
		58,510 37,908
		$ 96,418
		Closing Balance $ 256 47,301 2,232 3,922 8,226 6,743
		68,680 44,180
		$ 112,860
		Closing Balance $ -

• 47 -

c. Items for which no deferred tax assets have been recognized

Loss carryforwards Expires 2017 Expires 2018 Expires 2019 Expires 2020 Expires 2021 Expires 2022 Expires 2023 Expires 2024 Expires 2025 Expires 2026 Expires 2027 No expiration date				December 31	December 31	December 31
			2017	Applicable Tax Rate 16.5% $ - - - - - - - - - - - 69,367 $ 69,367			2016
		Applicable Tax Rate 25% $ - 120,585 109,563 50,441 88,128 18,028 - - - - - - $ 386,745	Applicable Tax Rate 17% $ - 21,674 9,369 2,012 - 1,352 113 76,911 93,061 12,921 25,273 - $ 242,686			Applicable Tax Rate 25% $ 37,051 201,028 208,270 71,370 90,422 - - - - - - - $ 608,141	Applicable Tax Rate 17% $ 117 21,674 9,369 2,012 - 1,352 113 76,911 93,061 13,846 - - $ 218,455	Applicable Tax Rate 16.5% $ - - - - - - - - - - - 63,896 $ 63,896

• d. Information about unused loss carryforwards and tax exemption

Loss carryforwards as of December 31, 2017 were comprised of:

Unused Amount	Total Expiry Year $ 142,259 2018 173,528 2019 69,390 2020 88,128 2021 19,380 2022 113 2023 76,911 2024 93,061 2025 12,921 2026 25,273 2027 190,729 No expiration date $ 891,693
Applicable Tax Rate 25% Applicable Tax Rate 17% Applicable Tax Rate 16.5% $ 120,585 $ 21,674 $ - 164,159 9,369 - 67,378 2,012 - 88,128 - - 18,028 1,352 - - 113 - - 76,911 - - 93,061 - - 12,921 - - 25,273 - - - 190,729 $ 458,278 $ 242,686 $ 190,729

• e. The Company is not subject to income tax. The income tax returns through 2014 of Comestibles Master Co., Ltd. and the income tax returns through 2015 of Mei Wei Master Co., Ltd. and Mei Wei Fu Xing have been assessed by the tax authorities in the ROC. The companies in other jurisdictions have been examined according to their local laws.

• 48 -

25. EARNINGS PER SHARE

Basic earnings per share From continuing operations	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2017 $ 13.12	2016 $ 10.68

The weighted average number of shares outstanding used for the earnings per share computation was adjusted retroactively for the issuance of bonus shares in July 2017. The basic and diluted earnings per share adjusted retrospectively for the year ended December 31, 2016 were as follows:

		Unit:	NT$ Per Share
		Before	After
		Retrospective	Retrospective
		Adjustment	Adjustment
Basic earnings	per share	$ 11.75	$ 10.68

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows:

Net Profit for the Year

Earnings used in computation of basic earnings per share	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2017 $ 2,138,075	2016 $ 1,741,051

Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares)

Weighted average number of ordinary shares used in the computation of basic and diluted earnings per share	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2017 162,994	2016 162,994

26. GOVERNMENT GRANTS

The amounts of project subsidies and incentives received for the years ended December 31, 2017 and 2016 were $48,848 thousand and $77,086 thousand, respectively. The government grants were recognized in non-operating income and expenses - other income in the consolidated statements of comprehensive income.

In January 2017, the Group received a government grant of $19,574 thousand towards its construction of a manufacturing plant. The amount was recognized as deferred revenue and subsequently transferred to profit or loss over the useful life of the related asset. This policy resulted in a credit to income of $4,567 thousand during 2017.

• 49 -

27. NON-CASH TRANSACTIONS

For the years ended December 31, 2017 and 2016, the Group entered into the following non-cash investing activities which were not reflected in the consolidated statements of cash flows:

• a. The Group acquired property, plant and equipment with an aggregate fair value of $1,947,456 thousand, an offset of prepayments for equipment of $532,639 thousand reduced from prepaid equipment, and $110,611 thousand recognized as other payables. Net cash used in acquiring property, plant and equipment was $1,304,206 thousand (refer to Note 14).

• b. The Group acquired property, plant and equipment with an aggregate fair value of $1,290,967 thousand, an offset of prepayments for equipment of $263,441 thousand reduced from prepaid equipment, and $6,657 thousand recognized as other payables. Net cash used in acquiring property, plant and equipment was $1,019,969 thousand (refer to Note 14).

28. OPERATING LEASE ARRANGEMENTS

Operating leases relate to leases of stores and plants with lease terms between 1 and 10 years. All operating lease contracts over 5 years contain clauses for 1 to 5 years market rental reviews. The Group does not have a bargain purchase option to acquire the leased stores and plants at the expiration of the lease periods.

The future minimum lease payments of non-cancellable operating lease commitments were as follows:

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years		December 31	December 31
		2017 $ 2,046,207 4,464,084 602,537 $ 7,112,828	2016 $ 1,944,273 4,438,340 866,465 $ 7,249,078

29. CAPITAL MANAGEMENT

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 shareholders through the optimization of the debt and equity balance.

The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and equity attributable to owners of the Company (comprising issued capital, reserves, retained earnings and other equity).

The Group is not subject to any externally imposed capital requirements.

Key management personnel of the Group review the capital structure on a quarterly basis. As part of this review, the key management personnel consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Group may adjust the amount of dividends paid to shareholders, the number of new shares issued and the amount of existing debt redeemed.

• 50 -

30. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments

Fair value of financial instruments not carried at fair value

The management considers the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements to be approximate amounts of their fair values.

• b. Categories of financial instruments

Financial assets Fair value through profit or loss (FVTPL) Held for trading Loans and receivables (Note 1) Held-to-maturity investments (Note 2) Financial liabilities Fair value through profit or loss (FVTPL) Held for trading Amortized cost (Note 3)	**December 31 **
	2017 2016 $ 165,148 $ 136,070 7,361,327 5,992,906 29,847 32,370 3,134 - 3,440,180 2,831,611

• Note 1: The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents, debt investments with no active market, notes receivable, trade receivables and other receivables.

• Note 2: The balances include bank debenture investments.

• Note 3: The balances include financial liabilities measured at amortized cost, which comprise short-term borrowings, trade and other payables, current portion of long-term loans payable and long-term borrowings.

• c. Financial risk management objectives and policies

The Group’s major financial instruments included equity and debt investments, trade receivables, trade payables and borrowings. The Group’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk.

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rate (see (b) below).

a) Foreign currency risk

The Group’s primary financial risk is foreign exchange risk. There is no change in the financial instrument’s market risk and exposure of management and measurement since prior period.

• 51 -

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) at the end of the reporting period are set out in Note 34.

Sensitivity analysis

The Group was mainly exposed to the U.S. dollar.

The following table details the Group’s sensitivity to a 1% increase and decrease in Renminbi (the functional currency) against the relevant foreign currencies. The sensitivity analysis included only outstanding foreign currency denominated monetary items and foreign currency forward contracts designated as cash flow hedges and adjusts their translation at the end of the reporting period for a 1% change in foreign currency rates. A positive number below indicates a decrease in pre-tax profit associated with the Renminbi weakening 1% against the relevant currency. For a 1% strengthening of the Renminbi against the relevant currency, there would be an equal and opposite impact on pre-tax profit and the balances below would be negative.

Profit or loss	U.S. Dollar Impact
	For the Year Ended December 31
	2017 2016 $ 2,869 $ 1,496

• This was mainly attributable to the exposure outstanding on U.S. dollar receivables, cash in the bank and borrowings, which were not hedged at the end of the reporting period.

b) Interest rate risk

The Group was exposed to interest rate risk because entities in the Group borrowed funds at floating interest rates.

The carrying amounts of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows.

Fair value interest rate risk Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities	**December 31 **
	2017 2016 $ 155,109 $ 166,546 4,072,073 2,445,521 1,023,586 635,633

Sensitivity analysis

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for both derivative and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 1% increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

• 52 -

If interest rates had been 1% higher and all other variables were held constant, the Group’s pre-tax profit for the years ended December 31, 2017 and 2016 would increase by $30,485 thousand and $18,099 thousand, respectively, which would be mainly attributable to the Group’s exposure to interest rates on its variable-rate bank borrowings.

The Group’s sensitivity to interest rates increased during the current year mainly due to the increase in variable rate debt investments.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group.

At the end of the reporting period, the Group’s maximum exposure to credit risk which would cause a financial loss to the Group due to failure to discharge an obligation by counterparties arose from the carrying amount of the respective recognized financial assets as stated in the consolidated balance sheets.

Most of the Group’s counterparties are franchisees with whom the Group has traded with for over the long-term, and the Group monitors trade receivables from such franchisees continuously. So impairment loss recognized on trade receivables was not significant. Trade receivables consisted of a large number of customers and spread across diverse industries between geographical areas. Therefore, the Group assessed that the concentration of credit risk was limited.

The concentration of credit risk with such counterparties was never more than 10% of the Group’s non-monetary assets.

Other than the abovementioned franchisees, because counterparties were banks monitored by regulators in the People’s Republic of China and Republic of China, such credit risk was limited.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Group relies on bank borrowings as a significant source of liquidity. As of December 31, 2017 and 2016, the Group had available unutilized short-term bank loan facilities set out below.

Unsecured bank loan facility: Amount used Amount unused Secured bank loan facility: Amount used Amount unused		**December 31 **	**December 31 **
		2017 $ 30,000 - $ 30,000 $ 993,586 588,873 $ 1,582,459	2016 $ 16,014 624,549 $ 640,563 $ 619,619 541,084 $ 1,160,703

• 53 -

31. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Besides as disclosed elsewhere in other notes, details of transactions between the Group and other related parties are disclosed below:

• a. Name and relationship of related parties

Name of Related-Party The Hot Pot Food and Beverage Management Co., Ltd. Xiang Tian (Shanghai) Food and Beverage Management Co., Ltd. The Hot Pot (Shanghai) Food and Beverage Management Co., Ltd. Guo Hong Ltd. Cai Hua Ltd. Long Yao Ltd. Infinity Emerging Markets Limited	Related-Party Category
	Associates Related parties Related parties Related parties Related parties Related parties Directors

• b. Purchases of goods

Related-Party Category Related parties	For the Year Ended	For the Year Ended	December 31
		2017 $ 31,643	2016 $ 57,409

The purchase prices are 65% of the sale prices and are paid within 30 days of the date of the purchases.

• c. Other transactions

Line Item Related-Party Category Rental income Associates Related parties Interest expense Directors	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2017 $ 698 803 $ 1,501 $ 6,880	2016 $ 349 506 $ 855 $ -

• d. Receivables from related parties (excluding loans to related parties)

Line Item Related-Party Category Trade receivables Associates Other receivables Associates Related parties		**December **	**31 **
		2017 $ 32 $ 1,463 860 $ 2,323	2016 $ 60 $ 835 182 $ 1,017

The outstanding trade receivables from related parties are unsecured. For the years ended December 31, 2017 and 2016, no impairment loss was recognized for trade receivables from related parties.

• 54 -

• e. Payables to related parties (excluding loans from related parties)

Line Item Related-Party Category Other payables Directors Loans from related parties Related-Party Category Directors		December	31
	2017 $ 339 For the Year Ended		2016 $ 7 December 31
		2017 $ 155,109	2016 $ 166,546

• f. Loans from related parties

The Group obtained loans at rates comparable to market interest rates for the loans from related parties.

The loans from the ultimate parent were unsecured.

• g. Other transactions with related parties

The Group performed technical services for associates and related parties. For the years ended December 31, 2017 and 2016, other income amounted to $5,613 thousand and $3,495 thousand, respectively.

• h. Compensation of key management personnel

Short-term benefits	For the Year Ended	For the Year Ended	December 31
		2017 $ 27,014	2016 $ 27,402

The remuneration of directors and supervisors and key executives was determined by the remuneration committee based on the performance of individuals and market trends.

32. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for bank borrowings and other contracts:

Property, plant and equipment Land Buildings Bond investments with no active market - current Restiricted bank deposits Bond investments with no active market - non-current Restiricted bank deposits Investment properties		**December 31 **	**December 31 **
		2017 $ 293,761 18,095 62,471 141,051 61,260 $ 576,638	2016 $ 293,761 19,736 11,050 133,893 61,794 $ 520,234

• 55 -

33. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of December 31, 2017 and 2016 were as follows:

Significant Commitments

Unrecognized commitments are as follows:

Acquisition of property, plant and equipment		December 31	December 31
		2017 $ 232,164	2016 $ 157,066

34. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The significant assets and liabilities denominated in foreign currencies were as follows:

December 31, 2017

		Foreign		Carrying	Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	519	6.5342 (USD:RMB)	$	15,475
USD		775	29.8286 (USD:NTD)		23,130
HKD		1,057	0.8340 (HKD:RMB)		4,023
HKD		5,511	3.8070 (HKD:NTD)		20,979
RMB		6,164	4.5650 (RMB:NTD)		28,139
Financial liabilities
Monetary items
USD		10,912	6.5342 (USD:RMB)		325,478
NTD		218,768	0.2191 (NTD:RMB)		218,768
December 31, 2016
		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	311	6.937 (USD:RMB)	$	9,951
USD		15,880	32.0281 (USD:NTD)		508,591
HKD		2,965	0.9006 (HKD:RMB)		12,327
HKD		9,574	4.158 (HKD:NTD)		39,808
Financial liabilities
Monetary items
USD		20,862	6.937 (USD:RMB)		668,158
HKD		1,000	0.9006 (HKD:RMB)		4,158

• 56 -

For the years ended December 31, 2017 and 2016, realized and unrealized net foreign exchange losses were $11,422 thousand and $59,161 thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the group entities.

35. SEPARATELY DISCLOSED ITEMS

• a. Information about significant transactions and investees

• 1) Financings provided to others. (Table 1)

• 2) Endorsements/guarantees provided. (Table 2)

• 3) Marketable securities held (excluding investment in subsidiaries, associates and joint controlled entities). (Table 3)

• 4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital. (None)

• 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital. (None)

• 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital. (None)

• 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital. (Table 4)

• 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital. (Table 5)

• 9) Trading in derivative instruments. (Note 7)

• 10) Intercompany relationships and significant intercompany transactions. (Table 6)

• 11) Information on investees. (Table 7)

• b. Information on investments in mainland China

• 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, ownership percentage, net income of the investee, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and the limit on the amount of investment in the mainland China area. (Table 8)

• 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses: (None)

  • a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.

  • b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.

• 57 -

• c) The amount of property transactions and the amount of the resultant gains or losses.

• d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.

• e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.

• f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receipt of services.

36. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. The Group’s principal geographical areas are China, Taiwan and the United Stated (USA).

• a. Revenue from major products and services

The following is an analysis of the Group’s revenue from continuing operations categorized by major products and services:

Beverages Cake Bread Others	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2017 $ 7,010,998 7,533,946 8,177,443 296,026 $ 23,018,413	2016 $ 6,613,225 7,549,601 7,543,579 340,099 $ 22,046,504

b. Geographical information

The Group’s revenue from continuing operations from external customers by location of operations and information about its non-current assets by location of assets is detailed below:

China Taiwan USA Others	Revenue from External Customers	Revenue from External Customers	Revenue from External Customers
	**For the Year Ended December 31 **
		2017 $ 14,822,564 3,978,195 3,766,992 450,662 $ 23,018,413	2016 $ 14,839,489 4,049,084 2,771,584 386,347 $ 22,046,504

c. Significant customer information

The Group has no client who contributes over 10% to the Group’s total revenue for the years ended December 31, 2017 and 2016.

• 58 -

TABLE 1

GOURMET MASTER CO. LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Lender	Borrower	Financial Statement Account	Related Parties	Highest Balance for the Period	Ending Balance	Actual Borrowing Amount	Interest Rate	Nature of Financing	Business Transaction Amounts	Reasons for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each **Borrower **	Aggregate Financing Limits	Note
													Item	Value
1	Shanghai Gourmet Master Food & Beverage Ltd.	85 Degree (Jiangsu) Food Ltd. 85 Degree (Jiangsu) Food Ltd. Sheng-Pin (Dongguan) Food Ltd. Prime Scope Trading Limited Prime Scope Trading Limited Prime Scope Trading Limited Prime Scope Trading Limited	Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties	Yes Yes Yes Yes Yes Yes Yes	$ 91,300 (RMB 20,000 ) 91,300 (RMB 20,000 ) 91,300 (RMB 20,000 ) 45,650 (RMB 10,000 ) 114,125 (RMB 25,000 ) 91,300 (RMB 20,000 ) 68,475 (RMB 15,000 )	$ - (RMB - ) 91,300 (RMB 20,000 ) 91,300 (RMB 20,000 ) - (RMB - ) - (RMB - ) 91,300 (RMB 20,000 ) 68,475 (RMB 15,000 )	$ - (RMB - ) 91,300 (RMB 20,000 ) 91,300 (RMB 20,000 ) - (RMB - ) - (RMB - ) 91,300 (RMB 20,000 ) 45,650 (RMB 10,000 )	3.75 2.00 2.00 3.50 3.75 3.50 3.50	For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing	$ - - - - - - -	Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan	$ - - - - - - -	- - - - - - -	$ - - - - - - -	$ 879,880 879,880 879,880 879,880 879,880 879,880 879,880	$ 1,319,821 1,319,821 1,319,821 1,319,821 1,319,821 1,319,821 1,319,821	Note 1,a. Note 1,a. Note 1,a. Note 1,a. Note 1,a. Note 1,a. Note 1,a.
2	He-Shia Food & Beverage Ltd.	Gourmet Master Co. Ltd. Gourmet Master Co. Ltd. Shenyang 85 Food & Beverage Ltd. Shenyang 85 Food & Beverage Ltd. Shenyang 85 Food & Beverage Ltd. Prime Scope Trading Limited	Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties	Yes Yes Yes Yes Yes Yes	136,950 (RMB 30,000 ) 136,950 (RMB 30,000 ) 114,125 (RMB 25,000 ) 59,345 (RMB 13,000 ) 68,475 (RMB 15,000 ) 136,950 (RMB 30,000 )	- (RMB - ) 136,950 (RMB 30,000 ) 114,125 (RMB 25,000 ) - (RMB - ) - (RMB - ) 136,950 (RMB 30,000 )	- (RMB - ) 48,309 (RMB 9,601 ) 93,583 (RMB 21,000 ) - (RMB - ) - (RMB - ) 136,950 (RMB 30,000 )	4.35 4.35 2.00 3.75 3.75 3.50	For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing	- - - - - -	Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan	- - - - - -	- - - - - -	- - - - - -	737,792 737,792 737,792 737,792 737,792 737,792	1,106,687 1,106,687 1,106,687 1,106,687 1,106,687 1,106,687	Note 1,b. Note 1,b. Note 1,b. Note 1,b. Note 1,b. Note 1,b.
3	He-Shia (Nanjing) Food & Beverage Ltd.	Sheng-Pin (Xiamen) Food Ltd. Sheng-Pin (Xiamen) Food Ltd. Shenzheng 85 Food & Beverage Ltd. 85 Degree (Jiangsu) Food Ltd. 85 Degree (Jiangsu) Food Ltd.	Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties	Yes Yes Yes Yes Yes	91,300 (RMB 20,000 ) 91,300 (RMB 20,000 ) 68,475 (RMB 15,000 ) 91,300 (RMB 20,000 ) 91,300 (RMB 20,000 )	- (RMB - ) 91,300 (RMB 20,000 ) - (RMB - ) 91,300 (RMB 20,000 ) 91,300 (RMB 20,000 )	- (RMB - ) 91,300 (RMB 20,000 ) - (RMB - ) 91,300 (RMB 20,000 ) 91,300 (RMB 20,000 )	2.00 2.00 3.75 2.00 2.00	For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing	- - - - -	Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan	- - - - -	- - - - -	- - - - -	385,308 385,308 385,308 385,308 385,308	577,963 577,963 577,963 577,963 577,963	Note 1,c. Note 1,c. Note 1,c. Note 1,c. Note 1,c.
4	Comestibles Master Co., Ltd.	Prime Scope Trading Limited Prime Scope Trading Limited Prime Scope Trading Limited Mei Wei Master Co., Ltd. Mei Wei Master Co., Ltd. Mei Wei Master Co., Ltd. Mei Wei Master Co., Ltd. Wincase Limited Gourmet Master Co. Ltd.	Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties	Yes Yes Yes Yes Yes Yes Yes Yes Yes	11,421 (HK$ 3,000 ) 11,421 (HK$ 3,000 ) 220,000 50,000 50,000 50,000 50,000 11,421 (HK$ 3,000 ) 100,000	- (HK$ - ) - (HK$ - ) 220,000 - - 50,000 50,000 - (HK$ - ) -	- (HK$ - ) - (HK$ - ) 218,768 - - 50,000 50,000 - (HK$ - ) -	2.30 2.30 1.00 1.30 1.15 1.15 1.00 2.30 1.30	For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing	- - - - - - - - -	Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan	- - - - - - - - -	- - - - - - - - -	- - - - - - - - -	564,878 564,878 564,878 564,878 564,878 564,878 564,878 564,878 564,878	564,878 564,878 564,878 564,878 564,878 564,878 564,878 564,878 564,878	Note 1,d. Note 1,d. Note 1,d. Note 1,d. Note 1,d. Note 1,d. Note 1,d. Note 1,d. Note 1,d.

(Continued)

• 59 -

No.	Lender	Borrower	Financial Statement Account	Related Parties	Highest Balance for the Period	Ending Balance	Actual Borrowing Amount	Interest Rate	Nature of Financing	Business Transaction Amounts	Reasons for Short-term Financing	Allowance for Impairment Loss	**Collateral **	**Collateral **	Financing Limit for Each Borrower	Aggregate Financing Limits	Note
													Item	Value
		Gourmet Master Co. Ltd. Gourmet Master Co. Ltd. Gourmet Master Co. Ltd. Perfect 85 Degrees C, Inc. 85 Degree Co., Ltd. 85 Degree Co., Ltd. Worldinn Limited Worldinn Limited	Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties Other receivables - related parties	Yes Yes Yes Yes Yes Yes Yes Yes	$ 44,743 (US$ 1,500 ) 100,000 44,743 (US$ 1,500 ) 164,057 (US$ 5,500 ) 50,000 10,000 10,469 (HK$ 2,750 ) 10,469 (HK$ 2,750 )	$ - (US$ - ) 100,000 44,743 (US$ 1,500 ) - (US$ - ) - 10,000 - (HK$ - ) 10,469 (HK$ 2,750 )	$ - (US$ - ) - - (US$ - ) - (US$ - ) - 10,000 - (HK$ - ) 10,469 (HK$ 2,750 )	1.30 1.15 1.30 3.75 1.15 1.00 2.30 2.50	For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing For short-term financing	$ - - - - - - - -	Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan Working capital loan	$ - - - - - - - -	- - - - - - - -	$ - - - - - - - -	$ 564,878 564,878 564,878 564,878 564,878 564,878 564,878 564,878	$ 564,878 564,878 564,878 564,878 564,878 564,878 564,878 564,878	Note 1,d. Note 1,d. Note 1,d. Note 1,d. Note 1,d. Note 1,d. Note 1,d. Note 1,d.
5	Perfect 85 Degrees C, Inc.	WinUS 85C LLC	Other receivables - related parties	Yes	92,469 (US$ 3,100 )	92,469 (US$ 3,100 )	85,073 (US$ 2,852 )	3.75	For short-term financing	-	Working capital loan	-	-	-	442,548	442,548	Note 1,e.

• Note 1: The limit amount is calculated as follow:

• a. The total amount for lending to a company for funding for a short-term period shall not exceed $2,199,701 (in thousands) x 60% = $1,319,821 (in thousands) of the net worth of Shanghai Gourmet Master Food & Beverage Ltd. The total amount for lending to a company for funding for a short-term period shall not exceed $2,199,701 (in thousands) x 40% = $879,880 (in thousands) of the net worth of Shanghai Gourmet Master Food & Beverage Ltd.

• b. The total amount for lending to a company for funding for a short-term period shall not exceed $1,844,479 (in thousands) x 60% = $1,106,687 (in thousands) of the net worth of He-Shia Food & Beverage Ltd. The total amount for lending to a company for funding for a short-term period shall not exceed $1,844,479 (in thousands) x 40% = $737,792 (in thousands) of the net worth of He-Shia Food & Beverage Ltd.

• c. The total amount for lending to a company for funding for a short-term period shall not exceed $963,271 (in thousands) x 60% = $577,963 (in thousands) of the net worth of He-Shia (Nanjing) Food & Beverage Ltd. The total amount for lending to a company for funding for a short-term period shall not exceed $963,271 (in thousands) x 40% = $385,308 (in thousands) of the net worth of He-Shia (Nanjing) Food & Beverage Ltd.

• d. The total amount for lending to a company for funding for a short-term period shall not exceed $1,412,195 (in thousands) x 40% = $564,878 (in thousands) of the net worth of Comestibles Master Co., Ltd. The total amount for lending to a company for funding for a short-term period shall not exceed $1,412,195 (in thousands) x 40% = $564,878 (in thousands) of the net worth of Comestibles Master Co., Ltd.

• e. The total amount for lending to a company for funding for a short-term period shall not exceed $1,106,371 (in thousands) x 40% = $442,548 (in thousands) of the net worth of Perfect 85 Degrees C, Inc. The total amount for lending to a company for funding for a short-term period shall not exceed $1,106,371 (in thousands) x 40% = $442,548 (in thousands) of the net worth of Perfect 85 Degrees C, Inc.

• Note 2: Transactions have been written off in these consolidated financial statements.

(Concluded)

• 60 -

TABLE 2

GOURMET MASTER CO. LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No. (Note 1)	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limits on Endorsement/ Guarantee Given on Behalf of Each Party (Note 3)	Maximum Amount Endorsed/Guara nteed During the Period	Outstanding Endorsement/ Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collaterals	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit (Note 3)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China	Note
		Name	Relationship (Note 2)
0	Gourmet Master Co. Ltd.	85 Degree (Jiangsu) Food Ltd. 85 Degree (Jiangsu) Food Ltd. Perfect 85 Degrees C, Inc. Comestibles Master Co., Ltd. WinPin 85 Investment, LLC 85 Degree (Jiangsu) Food Ltd.	c c c c c c	$ 1,970,981 1,970,981 1,970,981 1,970,981 1,970,981 1,970,981	$ 1,133,487 (US$ 38,000) 37,286 (US$ 1,250) 298,286 (US$ 10,000) 149,143 (US$ 5,000) 149,143 (US$ 5,000) 149,143 (US$ 5,000)	$ 477,258 (US$ 16,000) 37,286 (US$ 1,250) 298,286 (US$ 10,000) 149,143 (US$ 5,000) 149,143 (US$ 5,000) 149,143 (US$ 5,000)	$ 238,629 (US$ 8,000) 37,286 (US$ 1,250) 268,457 (US$ 9,000) 119,000 (US$ 3,989) - (US$ -) - (US$ -)	$ - - - - - -	11.50 0.38 3.03 1.51 1.51 1.51	$ 4,927,452 4,927,452 4,927,452 4,927,452 4,927,452 4,927,452	Y Y Y Y Y Y	N N N N N N	Y Y N N N Y
1	Comestibles Master Co., Ltd.	Gourmet Master Co. Ltd. Gourmet Master Co. Ltd. WinPin 85 Investments, LLC Perfect 85 Degrees C, Inc. Perfect 85 Degrees C, Inc. WinWin 85C LLC	d d c c c c	282,439 282,439 282,439 282,439 282,439 282,439	74,572 (US$ 2,500) 119,314 (US$ 4,000) 104,400 (US$ 3,500) 74,572 (US$ 2,500) 178,972 (US$ 6,000) 178,972 (US$ 6,000)	74,572 (US$ 2,500) 119,314 (US$ 4,000) 104,400 (US$ 3,500) - (US$ -) 178,972 (US$ 6,000) - (US$ -)	- (US$ -) 27,192 (US$ 912) 59,657 (US$ 2,000) - (US$ -) - (US$ -) - (US$ -)	- 161,258 - - - -	5.28 8.45 7.39 5.28 12.67 12.67	706,098 706,098 706,098 706,098 706,098 706,098	N N N N N N	Y Y N N N N	N N N N N N

Note 1: Number should be noted in number column.

• a. Number 0 represents the issuer.

• b. Number 1 (onward) represents the order of the investee.

• Note 2: Relationship information of endorser and endorsee should be noted.

• a. Trading partner.

• b. Majority owned subsidiary.

• c. The Company and subsidiary owns over fifty percent (50%) ownership of the investee company.

• d. A subsidiary jointly owned over fifty percent (50%) by the Company and the Company’s directly-owned subsidiary.

• e. Guaranteed by the Company according to the construction contract.

• f. An investee company of which the guarantees were provided based on the Company’s proportionate share in the investee company.

Note 3: The limit amount is calculated as follows:

• a. The total amount of guarantee shall not exceed 50% of the net worth Gourmet Master Co. Ltd. $9,854,905× 50% = $4,927,452 (in thousands).

• b. The total amount of guarantee provided by Gourmet Master Co. Ltd. to any individual entity shall not exceed 20% of the net worth of Gourmet Master Co. Ltd. $9,854,905× 20% = $1,970,981 (in thousands).

• c. The total amount of guarantee shall not exceed 50% of the net worth Comestibles Master Co., Ltd. $1,412,195× 50% = $706,098 (in thousands).

• d. The total amount of guarantee provided to any individual entity shall not exceed 20% of the net worth of Comestibles Master Co., Ltd. $1,412,195× 20% = $282,439 (in thousands).

• 61 -

TABLE 3

GOURMET MASTER CO. LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		December 31, 2017	December 31, 2017		Note
				Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
Comestibles Master Co., Ltd.	Bank debentures China Development Bank Shares Tehmag Foods Corporation Fund Taishin 1699 Money Market	NA NA NA	Held-to-maturity financial assets - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current	- 660 -	$ 29,847 155,100 10,048	- 1.96 -	$ 29,847 155,100 10,048

• 62 -

TABLE 4

GOURMET MASTER CO. LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Buyer	Related Party	Relationship		Transaction Detail	Transaction Detail		**Abnormal Transaction **	Notes/Accounts Payable or Receivable	Notes/Accounts Payable or Receivable	Notes/Accounts Payable or Receivable	Notes/Accounts Payable or Receivable	Note
			Purchases/ Sales	Amount	% of Total	Payment Term	Unit Price	Payment Term	Account	Ending Balance	% of Total
Comestibles Master Co., Ltd. Jin Wei Industrial (Shanghai) Ltd. Sheng-Pin (Hangzhou) Food Ltd. Sheng-Pin (Xiamen) Food Ltd. 85 Degree (Jiangsu) Food Ltd. Sheng-Pin (Beijing) Food Ltd. Sheng-Pin (Shenzheng) Food Ltd. Mai-Jia (Chengdu) Food Ltd. Perfect 85 Degree C, Inc.	Mei Wei Master Co., Ltd. Perfect 85 Degree C, Inc. Shanghai Gourmet Master Food & Beverage Ltd. He-Shia Food & Beverage Ltd. Beijing 85 Food & Beverage Ltd. He-Shia (Nanjing) Food & Beverage Ltd. Zhejiang 85 Food & Beverage Ltd. Fuzhou 85 Food & Beverage Ltd. Xiamen 85 Food & Beverage Ltd. Shenzheng 85 Food & Beverage Ltd. Chendu 85 Food & Beverage Ltd. Wuhan Jing Way Food & Beverage Ltd. Jin Wei Industrial (Shanghai) Ltd. Jin Wei Industrial (Shanghai) Ltd. Jin Wei Industrial (Shanghai) Ltd. Jin Wei Industrial (Shanghai) Ltd. Jin Wei Industrial (Shanghai) Ltd. Shanghai Gourmet Master Food & Beverage Ltd. WinPin 85 Investments, LLC Golden 85 Investments, LLC	Parent company Affiliated company Parent company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Parent company Parent company	Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales	$ 426,722 199,484 1,041,802 641,751 366,078 1,257,430 366,937 515,599 501,012 476,492 298,012 190,960 447,414 246,130 1,961,961 118,764 101,752 102,780 1,429,555 149,980	11 5 15 10 5 19 5 8 7 7 4 3 97 99 96 100 95 99 90 9	25 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 30 days 30 days	Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy Based on the Group’s transfer pricing policy	- - - - - - - - - - - - - - - - - - - -	Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables Trade receivables	$ 50,822 63,852 165,094 98,506 43,584 188,998 55,851 77,514 81,223 73,250 34,830 20,346 54,788 27,760 250,680 13,022 14 10,231 125,857 44,837	13 22 18 11 5 21 6 9 9 8 4 2 100 98 96 100 100 100 95 54	Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note Note

Note: Transactions have been written off in these consolidated financial statements.

• 63 -

TABLE 5

GOURMET MASTER CO. LTD. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
Comestibles Master Co., Ltd. Jin Wei Industrial (Shanghai) Ltd. Shanghai Gourmet Master Food & Beverage Ltd. He-Shia Food & Beverage Ltd. He-Shia (Nanjing) Food & Beverage Ltd. He-Shia Food & Beverage Ltd. 85 Degree (Jiangsu) Food Ltd. Fuzhou 85 Food & Beverage Ltd. Xiamen 85 Food & Beverage Ltd. Perfect 85 Degree C, Inc. Prime Scope Trading Limited	Mei Wei Master Co., Ltd. Prime Scope Trading Limited He-Shia (Nanjing) Food & Beverage Ltd. Shanghai Gourmet Master Food & Beverage Ltd. Prime Scope Trading Limited Shanghai Gourmet Master Food & Beverage Ltd. Shanghai Gourmet Master Food & Beverage Ltd. 85 Degree (Jiangsu) Food Ltd Prime Scope Trading Limited Jin Wei Industrial (Shanghai) Ltd. Shanghai Gourmet Master Food & Beverage Ltd. Shanghai Gourmet Master Food & Beverage Ltd. WinPin 85 Investments, LLC Jin Wei Industrial (Shanghai) Ltd.	Parent company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Affiliated company Parent company Affiliated company	$ 100,000 218,768 188,998 165,094 136,950 114,003 208,564 182,600 136,950 250,680 100,176 110,543 120,018 120,845	(Note) (Note) 7.83 8.09 (Note) (Note) (Note) (Note) (Note) 8.75 (Note) (Note) 14.23 (Note)	$ - - - - - - - - - - - - - -	- - - - - - - - - - - - - -	$ - - - - - - - - - - - - - -	$ - - - - - - - - - - - - - -

Note: The ending balance is primarily comprised of other receivables, which are not applicable in the calculation of the turnover ratio.

• 64 -

TABLE 6

GOURMET MASTER CO. LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars)

No. (Note 1)	Investee Company	Counterparty	Relationship (Note 2)			Intercompany Transactions
				Financial Statement Account	Amount	Payment Terms	% of Total Sales or Assets (Note 3)
1	Comestibles Master Co., Ltd.	Mei Wei Master Co., Ltd. Mei Wei Master Co., Ltd. 85 Degree Co., Ltd. Prime Scope Trading Limited Prime Scope Trading Limited Worldinn Limited	c c c c c c	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	$ 50,000 50,000 10,000 218,768 37,210 10,469	Financing provided, annual interest rate 1.15% Financing provided, annual interest rate 1% Financing provided, annual interest rate 1% Financing provided, annual interest rate 1% - Financing provided, annual interest rate 2.5%	- - - 1 - -
2	Mei Wei Master Co., Ltd.	Comestibles Master Co., Ltd. Comestibles Master Co., Ltd.	c c	Purchases Trade payables	426,722 50,822	25 days 25 days	2 -
3	Shanghai Gourmet Master Food & Beverage Ltd.	Jin Wei Industrial (Shanghai) Ltd. Jin Wei Industrial (Shanghai) Ltd. Prime Scope Trading Limited Prime Scope Trading Limited Sheng-Pin (Dongguan) Food Ltd. 85 Degree (Jiangsu) Food Ltd.	c c c c c c	Purchases Trade payables Other receivables Other receivables Other receivables Other receivables	1,041,802 165,094 45,650 91,300 91,300 91,300	60 days 60 days Financing provided, annual interest rate 3.5% Financing provided, annual interest rate 3.5% Financing provided, annual interest rate 2% Financing provided, annual interest rate 2%	5 - - 1 1 1
4	He-Shia Food & Beverage Ltd.	Shanghai Gourmet Master Food & Beverage Ltd. Shenyang 85 Food & Beverage Ltd. Prime Scope Trading Limited Gourmet Master Co. Ltd Jin Wei Industrial (Shanghai) Ltd. Jin Wei Industrial (Shanghai) Ltd.	c c c b c c	Other receivables Other receivables Other receivables Other receivables Purchases Trade payables	114,003 93,583 136,950 48,309 641,751 98,506	- Financing provided, annual interest rate 2% Financing provided, annual interest rate 3.5% Financing provided, annual interest rate 4.35% 60 days 60 days	1 1 1 - 3 1
5	Beijing 85 Food & Beverage Ltd.	Jin Wei Industrial (Shanghai) Ltd. Jin Wei Industrial (Shanghai) Ltd. Shanghai Gourmet Master Food & Beverage Ltd.	c c c	Purchases Trade payables Other receivables	366,078 43,584 59,490	60 days 60 days -	2 - -
6	He-Shia (Nanjing) Food & Beverage Ltd.	Jin Wei Industrial (Shanghai) Ltd. Jin Wei Industrial (Shanghai) Ltd. Shanghai Gourmet Master Food & Beverage Ltd. 85 Degree (Jiangsu) Food Ltd. 85 Degree (Jiangsu) Food Ltd. Sheng-Pin (Xiamen) Food Ltd.	c c c c c c	Purchases Trade payables Other receivables Other receivables Other receivables Other receivables	1,257,430 188,998 208,564 91,300 91,300 91,300	60 days 60 days - Financing provided, annual interest rate 2% Financing provided, annual interest rate 2% Financing provided, annual interest rate 2%	5 1 1 1 1 1
7	Zhejiang 85 Food & Beverage Ltd.	Jin Wei Industrial (Shanghai) Ltd. Shanghai Gourmet Master Food & Beverage Ltd. Jin Wei Industrial (Shanghai) Ltd.	c c c	Purchases Other receivables Trade payables	366,937 73,124 55,851	60 days - 60 days	2 - -
							(Continued)

• 65 -

No. (Note 1)	Investee Company	Counterparty	Relationship (Note 2)			Intercompany Transactions
				Financial Statement Account	Amount	Payment Terms	% of Total Sales or Assets (Note 3)
8	Fuzhou 85 Food & Beverage Ltd.	Jin Wei Industrial (Shanghai) Ltd. Jin Wei Industrial (Shanghai) Ltd. Shanghai Gourmet Master Food & Beverage Ltd.	c c c	Purchases Trade payables Other receivables	$ 515,599 77,514 100,176	60 days 60 days -	2 - 1
9	Xiamen 85 Food & Beverage Ltd.	Jin Wei Industrial (Shanghai) Ltd. Jin Wei Industrial (Shanghai) Ltd. Shanghai Gourmet Master Food & Beverage Ltd.	c c c	Purchases Trade payables Other receivables	501,012 81,223 110,543	60 days 60 days -	2 1 1
10	Shenzheng 85 Food & Beverage Ltd.	Jin Wei Industrial (Shanghai) Ltd. Jin Wei Industrial (Shanghai) Ltd. Shanghai Gourmet Master Food & Beverage Ltd.	c c c	Purchases Trade payables Other receivables	476,492 73,250 96,738	60 days 60 days -	2 - 1
11	85 Degree (Qingdao) Food & Beverage Management Ltd.	Jin Wei Industrial (Shanghai) Ltd.	c	Purchases	54,873	60 days	-
12	Guangzhou 85 Degree Food & Beverage Management Ltd.	Jin Wei Industrial (Shanghai) Ltd.	c	Purchases	95,893	60 days	-
13	Chengdu 85 Food & Beverage Ltd.	Jin Wei Industrial (Shanghai) Ltd. Jin Wei Industrial (Shanghai) Ltd. Shanghai Gourmet Master Food & Beverage Ltd.	c c c	Purchases Trade payables Other receivables	298,012 34,830 31,565	60 days 60 days -	1 - -
14	Wuhan Jing Way Food & Beverage Ltd.	Jin Wei Industrial (Shanghai) Ltd. Shanghai Gourmet Master Food & Beverage Ltd.	c c	Purchases Other receivables	190,960 32,198	60 days -	1 -
15	Jin Wei Industrial (Shanghai) Ltd.	Sheng-Pin (Hangzhou) Food Ltd. Sheng-Pin (Xiamen) Food Ltd. 85 Degree (Jiangsu) Food Ltd. Sheng-Pin (Beijing) Food Ltd. Sheng-Pin (Shenzheng) Food Ltd. Sheng-Pin (Wuhan) Food Ltd. Sheng-Pin (Qingdao) Food Ltd. Mai-Jia (Chengdu) Food Ltd. Sheng-Pin (Hangzhou) Food Ltd. 85 Degree (Jiangsu) Food Ltd. Sheng-Pin (Xiamen) Food Ltd. Sheng-Pin (Jiangsu) Food Ltd.	c c c c c c c c c c c c	Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Trade payables Trade payables Trade payables Purchases	447,414 246,130 1,961,961 118,764 101,752 74,732 66,322 102,780 54,788 250,680 27,760 48,170	60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days	2 1 9 1 - - - - - 2 - -
16	WinPin 85 Investments, LLC	Perfect 85 Degrees C, Inc. Perfect 85 Degrees C, Inc. Perfect 85 Degrees C, Inc.	c c c	Purchases Trade payables Selling and marketing expenses - others	1,429,555 120,018 169,427	30 days 30 days -	6 1 1
17	Golden 85 Investments, LLC	Perfect 85 Degrees C, Inc.	c	Purchases	149,980	30 days	1
18	Worldinn Limited	Wincase Limited	c	Other receivables	23,330	-	-
							(Continued)

• 66 -

No. (Note 1)	Investee Company	Counterparty	Relationship (Note 2)			Intercompany Transactions
				Financial Statement Account	Amount	Payment Terms	% of Total Sales or Assets (Note 3)
19	Perfect 85 Degrees C, Inc.	WinUS 85C LLC Comestibles Master Co., Ltd. Comestibles Master Co., Ltd.	c c c	Other receivables Purchases Trade payables	$ 85,073 199,484 63,852	Financing provided, annual interest rate 3.75% 60 days 60 days	1 1 -
20	Lucky Bakery Limited	Comestibles Master Co., Ltd.	c	Purchases	66,383	60 days	-
21	85 Degrees Café International Pty. Ltd.	Comestibles Master Co., Ltd.	c	Trade payables	35,056	60 days	-
22	Prime Scope Trading Limited	Jin Wei Industrial (Shanghai) Ltd.	c	Other receivables	120,845	-	-

Note 1: Intercompany relationships and significant intercompany transactions information are noted within the number column as follows:

• a. Number 0 represents the parent company.

• b. Number 1 to 22 represents subsidiaries.

Note 2: Parties involved in the transaction have a directional relationship noted by the following:

• a. “a” represents transactions from parent company to subsidiary.

• b. “b” represents transactions from subsidiary to parent company.

• c. “c” represents transactions between subsidiaries.

• Note 3: The amounts of asset accounts and liability accounts are calculated as a percentage of the consolidated total assets. The amounts of income accounts are calculated as a percentage of the consolidated total sales.

(Concluded)

• 67 -

TABLE 7

GOURMET MASTER CO. LTD. AND SUBSIDIARIES

INFORMATION OF INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	As of	December 31, 2017	December 31, 2017	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2017	December 31, 2016	Shares	%	Carrying Amount
Gourmet Master Co. Ltd. WinWin 85C Holding Co., Ltd. Prime Scope Trading Limited Perfect 85 Degrees C, Inc. 85 Degree Co., Ltd. Comestibles Master Co., Ltd. Mei Wei Master Co., Ltd.	85 Degree Co., Ltd. Prime Scope Trading Limited Perfect 85 Degrees C, Inc. 85 Degrees Café International Pty. Ltd. Lucky Bakery Limited WinWin 85C Holding Co., Ltd. WinWin 85C LCC WinUS 85C LLC Wincase Limited Worldinn Limited Golden 85 Investments, LLC WinPin 85 Investments, LLC Comestibles Master Co., Ltd. Mei Wei Master Co., Ltd. The Hot Pot Food and Beverage Management Co., Ltd. Fang Song Comestibles Ltd. Mei Wei Fu Xing Ltd.	Malaysia Hong Kong USA Australia Samoa Cayman USA USA Hong Kong Hong Kong USA USA Taichung City, Taiwan (R.O.C.) Taichung City, Taiwan (R.O.C.) Taichung City, Taiwan (R.O.C.) Taichung City, Taiwan (R.O.C.) Taichung City, Taiwan (R.O.C.)	Investment Investment Manufacturing and sale of baking food Grocery and drink retail Investment Investment Investment Investment Grocery and drink retail Manufacturing and sale of baking food Grocery and drink retail Grocery and drink retail Grocery and drink retail Grocery and drink retail Grocery and drink retail Food and beverage; grocery and drink retail Grocery and drink retail	$ 553,447 1,394,278 (US$ 46,743) 225,283 (US$ 7,553) 41,385 (AUD 1,785) 111,518 (US$ 3,739) 62,938 (US$ 2,110) 38,777 (US$ 1,300) 22,670 (US$ 760) 129,988 (HK$ 34,144) 135,705 (HK$ 35,646) 58,805 (US$ 1,971) 262,492 (US$ 8,800) 493,447 129,349 58,679 10,000 1,800	$ 553,447 1,394,278 (US$ 46,743) 225,283 (US$ 7,553) 41,385 (AUD 1,785) 165,101 (US$ 5,535) 40,269 (US$ 1,350) 38,777 (US$ 1,300) - (US$ -) 129,988 (HK$ 34,144) 135,705 (HK$ 35,646) 58,805 (US$ 1,971) 262,492 (US$ 8,800) 553,447 129,349 58,573 10,000 1,800	12,899,078 46,742,963 5,301,000 1,785,000 811,000 2,110,000 - - - - - - 35,908,727 8,206,370 5,864,660 - -	100 100 100 51 100 100 100 100 100 100 65 100 100 100 23 100 60	$ 1,426,581 6,998,163 1,106,371 4,941 33,260 44,213 26,120 17,025 15,477 14,495 45,172 638,080 1,412,195 (8,748) 87,930 10,468 1,634	$ 542,265 1,432,931 193,232 (41,092) 7,218 (18,134) (12,378) (5,755) (7,840) (3,478) 61,867 116,933 666,446 (25,683) 98,236 514 (522)	$ 542,265 1,433,400 193,232 (20,957) 7,218 (18,134) (12,378) (5,755) (7,840) (3,478) 40,213 116,933 666,446 (25,683) 22,637 514 (313)	Note 1 Note 1 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Note 1 Note 2 Note 2 Note 2

Note 1: The exchange rate was US$1=NT$29,829; RMB1=NT$4.565; AUD1=NT$23.19; HK$1=NT$3.807 as of December 31, 2017.

Note 2: The carrying amount was based on the net assets of the investee whose financial statements were not audited as of December 31, 2017.

Note 3: For information of investments in mainland China, refer to Table 8.

• 68 -

TABLE 8

GOURMET MASTER CO. LTD. AND SUBSIDIARIES

INFORMATION ON INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Investee Company	Main Businesses and Products	Total Amount of Paid-in Capital (RMB in Thousands)	Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2017	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2017	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss)	Carrying Amount as of December 31, 2017	Accumulated Repatriation of Investment Income as of December 31, 2017	Note
					Outward	Inward
Prime Scope Trading Limited Shanghai Gourmet Master Food & Beverage Ltd. He-Shia Food & Beverage Ltd. Sheng-Pin (Hangzhou) Food Ltd. He-Shia (Nanjing) Food & Beverage Ltd. Beijing 85 Food & Beverage Ltd. Zhejiang 85 Food & Beverage Ltd. Sheng-Pin (Beijing) Food Ltd. Fuzhou 85 Food & Beverage Ltd. Sheng-Pin (Jiangsu) Food Ltd. Sheng-Pin (Xiamen) Food Ltd. Sheng-Pin (Qingdao) Food Ltd. Xiamen 85 Food & Beverage Ltd. Shenyang 85 Food & Beverage Ltd. Sheng-Pin (Shenyang) Food Ltd. 85 Degree (Qingdao) Food & Beverage Management Ltd. 85 Degree (Jiangsu) Food Ltd. Shanghai Gourmet Master Food & Beverage Ltd. Sheng-Pin (Shanghai) Food Ltd. Mai-Jia (Shanghai) Food Ltd. Shanghai Howco Jing Way Food & Beverage Ltd. Shenzheng 85 Food & Beverage Ltd.	Grocery and drink retail Grocery and drink retail Manufacturing and sale of baking food Grocery and drink retail Grocery and drink retail Grocery and drink retail Manufacturing and sale of baking food Grocery and drink retail Manufacturing and sale of baking food Manufacturing and sale of baking food Manufacturing and sale of baking food Grocery and drink retail Grocery and drink retail Manufacturing and sale of baking food Grocery and drink retail Manufacturing and sale of baking food Manufacturing and sale of baking food Manufacturing and sale of baking food Grocery and drink retail Grocery and drink retail	$ 297,123 (US$ 9,961) 73,211 (US$ 2,454) 59,657 (US$ 2,000) 59,657 (US$ 2,000) 238,629 (US$ 8,000) 59,657 (US$ 2,000) 193,886 (US$ 6,500) 14,914 (US$ 500) 134,229 (US$ 4,500) 59,657 (US$ 2,000) 74,572 (US$ 2,500) 29,829 (US$ 1,000) 29,829 (US$ 1,000) 119,314 (US$ 4,000) 59,657 (US$ 2,000) 686,061 (US$ 23,000) 82,170 (RMB 18,000) - (RMB -) 68,475 (RMB 15,000) 50,709 (RMB 13,363)	Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment	$ - - - - - - - - - - - - - - - - - - - -	$ - - - - - - - - - - - - - - - - - - - -	$ - - - - - - - - - - - - - - - - - - - -	$ - - - - - - - - - - - - - - - - - - - -	$ 521,370 200,157 38,679 170,054 73,312 70,253 10,687 112,093 5,801 9,169 7,473 239,015 (6,081) (20,532) 4,383 114,001 (1,066) (87) 11,718 104,514	100.0 100.0 100.0 100.0 25.0 100.0 61.5 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 25.0 100.0 100.0 100.0 85.0	$ 521,370 200,157 38,633 170,054 18,328 70,253 6,781 112,093 5,801 8,322 7,299 239,015 (6,081) (20,532) 4,383 28,158 (916) (87) 11,718 88,837	$ 2,199,701 1,844,479 239,835 963,271 39,056 148,261 93,455 492,837 96,080 59,014 41,751 681,254 (88,821) 47,742 93,025 174,492 20,498 - 96,101 236,827	$ - - - - - - - - - - - - - - - - - - - -	Note 1 Note 1 Notes 1 and 2 Note 1 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Note 1 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Note 1 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Note 1 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2

(Continued)

• 69 -

Investee Company	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital (RMB in Thousands)	Method of Investment		Accumulated Outflow of Investment from Taiwan as of January 1, 2017	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2017	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss)	Carrying Amount as of December 31, 2017	Accumulated Repatriation of Investment Income as of December 31, 2017	Note
							Outward	Inward
Chengdu 85 Food & Beverage Ltd. Sheng-Pin (Wuhan) Food Ltd. Wuhan Jing Way Food & Beverage Ltd. Jianxi Jing Way Food & Beverage Ltd. Jin Wei Industrial (Shanghai) Ltd. Guangzhou 85 Degree Food & Beverage Management Ltd. Mai-Jia (Chengdu) Food Ltd. 85 Degree (Jiangsu) Food Ltd. Jia Ding Jing Way Food & Beverage Ltd. Kunshan 85 Food & Beverage Ltd. Sheng-Pin (Dongguan) Food Ltd. Shenzheng 85 Food & Beverage Ltd. Sheng-Pin (Shenzheng) Food Ltd. 85 Degree (Qingdao) Food & Beverage Management Ltd. Qingdao Jie Wei Food & Beverage Management Ltd. He-Shia Food & Beverage Ltd. Wuhan Jing Way Food & Beverage Ltd. Beijing 85 Food & Beverage Ltd. Sheng-Pin (Beijing) Food Ltd.	Grocery and drink retail Manufacturing and sale of baking food Grocery and drink retail Grocery and drink retail Grocery sale Grocery and drink retail Manufacturing and sale of baking food Manufacturing and sale of baking food Grocery and drink retail Grocery and drink retail Manufacturing and sale of baking food Manufacturing and sale of baking food Grocery and drink retail Grocery and drink retail Grocery and drink retail Manufacturing and sale of baking food		$ 121,383 (RMB 26,590) 73,040 (RMB 16,000) 209,990 (RMB 46,000) 27,390 (RMB 6,000) 9,130 (RMB 2,000) 73,040 (RMB 16,000) 112,984 (RMB 24,750) 686,061 (US$ 23,000) 4,565 (RMB 1,000) 13,695 (RMB 3,000) 319,550 (RMB 70,000) 29,673 (RMB 6,500) 6,848 (RMB 1,500) 209,990 (RMB 46,000) 238,629 (US$ 8,000) 193,886 (US$ 6,500)	Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment Direct investment		$ - - - - - - - - - - - - - - - -	$ - - - - - - - - - - - - - - - -	$ - - - - - - - - - - - - - - - -	$ - - - - - - - - - - - - - - - -	$ 17,798 14,570 19,128 (6,918) 114,222 20,395 2,051 114,001 3,675 1,549 (1,544) 383 1,695 19,128 73,312 10,687	100.0 100.0 57.0 100.0 100.0 100.0 100.0 75.0 100.0 100.0 40.0 85.0 100.0 43.0 75.0 38.5	$ 17,798 14,562 10,811 (6,918) 111,157 20,395 1,840 83,616 3,675 1,549 (1,544) (508) 1,695 8,317 54,984 4,245	$ 110,983 25,637 75,348 (2,090) 228,408 59,653 104,702 608,082 12,496 16,776 318,074 10,150 11,113 57,960 117,169 58,504	$ - - - - - - - - - - - - - - - -	Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Note 1 Notes 1 and 2 Notes 1 and 2 Note 1 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2 Notes 1 and 2
Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2017		Investment Amounts Authorized by Investment Commission, MOEA				Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA
NA		NA				NA

Note 1: The exchange rate was US$1=NT$29.829, RMB1=NT$4.565 as of December 31, 2017.

Note 2: The carrying amount was based on the net assets of the investee whose financial statements were not audited as of December 31, 2017.

(Concluded)

• 70 -