Stock Code: 2015

Feng Hsin Steel Co., Ltd. and its Subsidiaries

Consolidated Financial Statements and Independent Auditor’s Report

January 1 to March 31, 2021 and January 1 to March 31, 2020

Company Address: No. 998, Sec. 1, Jiahou Rd., Houli Dist., Taichung City 42145 Company Tel. No.: (04)2556-5101

The reader is advised that these consolidated financial statements have been prepared originally in Chinese. In the event of a conflict between these financial statements and the original Chinese version or difference in interpretation between the two versions, the Chinese language financial statements shall prevail.

Independent Auditor’s Report

To: Feng Hsin Steel Co., Ltd.

Foreword

We, as the CPAs, have completed the audit on the balance sheets dated March 31, 2021 and 2020 and the consolidated statements of comprehensive income, consolidated statements of changes in shareholders’ equity, consolidated statements of cash flow, and notes to consolidated financial statements from January 1 to March 31, 2021 and 2020 (including summaries of major accounting policies) of Feng Hsin Steel Co., Ltd.. Based on the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and the International Accounting Standards No. 34 “Interim Financial Reporting” recognized and released by the Financial Supervisory Commission, the management shall be responsible for preparation of financial statements fairly presented. The responsibility of the CPAs is to conclude the financial statements based on the result of the audit.

Scope

The CPAs have performed the review based on Statements on Auditing Standards No. 65 “Audit on financial statement.” The procedures performed during the review of financial statements include inquiries (mainly the inquiries to the personnel in charge of finance and accounting affairs), analytical procedures and other review procedures. The scope of review is apparently smaller than the scope of an audit; therefore, the CPAs may not be able to detect all the material matters that may be identifiable under audit, and thus no audit opinion may be provided.

Conclusion

Based on the results of review by us and other CPAs (please refer to the “Other Matters” paragraph), we do not find any incompliance in the preparation of the above-mentioned consolidated financial statements, in all major respects, with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Accounting Standards No. 34 “Interim Financial Reporting” recognized and released by the Financial Supervisory Commission, that may result in inability to fairly presented the consolidated financial position of Feng Hsin Steel Co.,

Ltd. and its subsidiaries as of March 31, 2021 and 2020, and the consolidated financial performance and cash flows from January 1 to March 31, 2021 and 2020.

Other Matters - About other CPAs’ review

The financial statements of some investees referred to in the consolidated financial statements as of March 31, 2021 and 2020 were not reviewed by us but by other CPAs. Therefore, the amount identified by us with respect to said investees in the review conclusion about said consolidated financial statements was based on the other CPA’s review report. Said investees’ investments under equity method were NT$707,818 thousand and NT$696,024 thousand as of March 31, 2021 and 2020, both accounting for 3% of the total consolidated assets. The shares of profit or loss of associates & joint ventures accounted for using equity method were NT$14,107 thousand NT$(934) thousand as of January 1 to March 31, 2021 and 2020, accounting for 2% and (0)% of the consolidated net profit before tax, respectively.

/s/Chen, Ming Hung

/s/Yen, Wen Pi

Ernst & Young, Taiwan

29 April 2021

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations 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 accepted and applied in the Republic of China.

Feng Hsin Steel Co., Ltd. and its Subsidiaries Consolidated Balance Sheets March 31, 2021, December 31, 2020 and March 31, 2020

(Those dated March 31, 2021 and 2020 were only reviewed but not audited in accordance with the Generally Accepted Auditing Standards.)

							Unit: NT$ thousand	Unit: NT$ thousand
Assets			March31,2021		December31,	2020	March31,2020
Code	Accounting Titles	Notes	Amount	%	Amount	%	Amount	%
1100 1110 1120 1140 1150 1170 1200 130x 1410 1470 11xx 1517 1550 1600 1755 1760 1840 1900 15xx 1xxx	Current assets Cash and cash equivalents Financial assets at fair value through profit or loss - current Financial assets at fair value through other comprehensive income - current Contract asset - current Notes receivable - net Accounts receivable - net Other receivables Inventories Prepayment Other current assets Total current assets Non-current assets Financial assets at fair value through other comprehensive income - non-current Investment under equity method Property, plant and equipment Right-of-use assets Investment property - net Deferred income tax assets Other non-current assets Total non-current assets Total assets	IV and VI. IV and VI.16 IV and VI.5 VI.6 IV and VI.4.15 IV and VI.2 IV and VI.9 IV and VI.8 IV and VI.3 IV and VI.17 IV and VI.7 VI.10 IV IV and VI.1 IV and VI.3	$1,298,187 10,920 2,535,064 345,821 5,122 1,553,072 99,027 5,147,495 630,218 7,352 11,632,278 1,174,374 1,394,603 9,459,255 177,408 697,394 107,771 205,281 13,216,086 $24,848,364	5 - 10 2 - 6 - 21 3 - 47 5 5 38 1 3 - 1 53 100	$2,175,269 - 1,700,311 397,242 11,006 1,478,967 8,579 3,301,468 668,739 7,352 9,748,933 1,072,262 1,426,954 9,436,032 178,936 698,381 109,222 343,142 13,264,929 $23,013,862	9 - 7 2 - 7 - 14 3 - 42 5 6 41 1 3 - 2 58 100	$1,654,500 - 363,219 255,286 8,740 1,318,682 12,520 4,618,546 622,106 2,500 8,856,099 981,134 1,369,136 9,704,425 210,114 380,176 107,992 164,696 12,917,673 $21,773,772	8 - 2 1 - 6 - 21 3 - 41 4 6 45 1 2 - 1 59 100

(Please refer to the Notes for Consolidated Financial Statements.)

Feng Hsin Steel Co., Ltd. and its Subsidiaries Consolidated Balance Sheets (Cont’d) March 31, 2021, December 31, 2020 and March 31, 2020

(Those dated March 31, 2021 and 2020 were only reviewed but not audited in accordance with the Generally Accepted Auditing Standards.)

							Unit: NT$ thousand	Unit: NT$ thousand
Liabilityand Equity			March31,2021		December31,	2020	March31,2020
Code	Accounting Titles	Notes	Amount	%	Amount	%	Amount	%
2100 2130 2150 2170 2200 2230 2280 2300 21xx 2570 2580 2640 2645 25xx 2xxx 31xx 3100 3110 3200 3300 3310 3320 3350 33xx 3400 3420 3400 3xxx	Current liabilities Short-term loan Contract liability - current Notes payable Accounts payable Other payables Current income tax liabilities Lease liability - current Other current liabilities Subtotal of current liabilities Non-current liabilities Deferred income tax liabilities Lease liabilities - non-current Net defined benefit liabilities - non-current Deposits received Subtotal of non-current liabilities Total liabilities Equity attributed to the owner of parent company Capital stock Capital stock - common shares Capital surplus Retained earnings Legal reserve Special reserve Unallocated earnings Subtotal of retained earnings Other equity Unrealized gain or loss on financial assets at fair value through other comprehensive income Subtotal of other equity Total equity Total liabilities and equity	IV VI.12 IV and VI.15 IV and VI.11 VI.14 IV and VI.17 VI.14 IV VI.14 IV and VI.17 IV IV and VI.13 VII	$826,910 203,203 115 1,604,182 936,535 576,515 5,127 808 4,153,395 333 174,793 156,533 32 331,691 4,485,086 5,815,994 531,784 4,354,532 278,241 9,218,260 13,851,033 164,467 164,467 20,363,278 $24,848,364	3 1 - 6 4 2 - - 16 - 1 1 - 2 18 23 2 18 1 37 56 1 1 82 100	$329,941 134,198 - 1,302,794 1,026,124 414,836 5,109 2,159 3,215,161 - 174,803 155,688 - 330,491 3,545,652 5,815,994 560,097 4,354,532 278,241 8,543,337 13,176,110 (83,991) (83,991) 19,468,210 $23,013,862	1 - - 6 4 2 - - 13 - 1 1 - 2 15 25 3 19 1 37 57 - - 85 100	$425,720 148,180 53 1,030,073 834,310 244,377 6,260 842 2,689,815 249 203,951 157,186 - 361,386 3,051,201 5,815,994 587,481 4,158,088 316,503 8,197,814 12,672,405 (353,309) (353,309) 18,722,571 $21,773,772	2 - - 5 4 1 - - 12 - 1 1 - 2 14 27 3 19 1 38 58 (2) (2) 86 100

(Please refer to the Notes for Consolidated Financial Statements.)

Feng Hsin Steel Co., Ltd. and its Subsidiaries

Consolidated Statements of Comprehensive Income

January 1 to March 31, 2021 and 2020

(Reviewed only but not audited in accordance with the Generally Accepted Auditing Standards.)

Unit: NT$ thousand

					Unit: NT$ thousand	Unit: NT$ thousand
Code	Accounting Titles	Notes	2021 Q1		2020 Q1
			Amount	%	Amount	%
4100 5000 5900 6000 6100 6200 6300 6900 7000 7100 7010 7020 7050 7060 7900 7950 8200 8300 8310 8316 8300 8500 8600 8610 8620 8700 8710 8720 9750 9850	Operating revenue Operating cost Gross profit Operating expenses Selling expenses Administrative expenses R&D expenses Total operating expenses Operating income Non-operating revenue and expenditure Interest revenue Other revenue Other gains and losses Financial cost Shares of associates and joint ventures accounted for using equity method Total non-operating revenue and expenditure Net income Income tax expenses Current net profit Other comprehensive income Items not re-classified into income Equity instrument at fair value through other comprehensive income Unrealized valuation gain or loss on investments Other comprehensive income for current period (net after tax) Total current comprehensive income Net income attributed to: Owner of parent company Non-controlling equity Total comprehensive income attributed to: Owner of parent company Non-controlling equity EPS (NT$) Basic EPS Diluted EPS	IV and VI.15 VI. 18 and VII VI.18 IV and VI.19 VI.19 VI.19 VI.7 IV and VI.21 VI.20 IV and VI.22	7,895,674 (6,861,456)	100 (87) 13 (2) (1) - (3) 10 - - - - - - 10 (2) 8 3 3 11	$6,515,187 (5,690,827) 824,360 (109,087) (73,039) (12,200) (194,326) 630,034 763 4,688 5,037 (2,365) 967 9,090 639,124 (127,625) 511,499 (75,300) (75,300) $436,199 $511,499 - $511,499 $436,199 - $436,199 $0.88 $0.88	100 (87) 13 (2) (1) - (3) 10 - - - - - - 10 (2) 8 (1) (1) 7
			1,034,218
			(128,891) (78,680) (11,509)
			(219,080)
			815,138
			351 6,584 (600) (1,190) 18,141
			23,286
			838,424 (163,501)
			674,923
			248,458
			248,458
			$923,381
			$674,923 -
			$674,923
			$923,381 -
			$923,381
			$1.16
			$1.16

(Please refer to the Notes for Consolidated Financial Statements.)

Feng Hsin Steel Co., Ltd. and its Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity January 1 to March 31, 2021 and 2020

(Reviewed only but not audited in accordance with the Generally Accepted Auditing Standards.)

								Unit: NT$thousand
	Item			Equityattributed to the	owner ofparent company			Total equity
		Capital stock	Capital surplus		Retained earnings		Other equity
				Legal reserve	Special reserve	Unallocated earnings	Unrealized valuation gain or loss on financial assets at fair value through other comprehensive income
Code		3100	3200	3310	3320	3350	3420	3XXX
A1 C7 C17 D1 D3 D5 Q1 Z1 A1 C7 C17 D1 D3 D5 Z1	Balance on January 1, 2020 Changes in other capital surplus Changes in associates and joint ventures under the equity method Changes in other capital surplus Net income 2020 Q1 Other comprehensive income 2020 Q1 Total current comprehensive income Disposal of equity instrument at fair value through other comprehensive income Balance on March 31, 2020 Balance on January 1, 2021 Changes in other capital surplus Changes in associates and joint ventures under the equity method Changes in other capital surplus Net income 2021 Q1 Other comprehensive income 2021 Q1 Total current comprehensive income Balance on March 31, 2021	$5,815,994 - $5,815,994 $5,815,994 - $5,815,994	$588,123 (1,339) 697 - $587,481 $560,097 (29,153) 840 - $531,784	$4,158,088 - $4,158,088 $4,354,532 - $4,354,532	$316,503 - $316,503 $278,241 - $278,241	$7,686,547 511,499 - 511,499 (232) $8,197,814 $8,543,337 674,923 - 674,923 $9,218,260	$(278,241) (75,300) (75,300) 232 $(353,309) $(83,991) 248,458 248,458 $164,467	$18,287,014 (1,339) 697 511,499 (75,300) 436,199 - $18,722,571 $19,468,210 (29,153) 840 674,923 248,458 923,381 $20,363,278

(Please refer to the Notes for Consolidated Financial Statements.)

Feng Hsin Steel Co., Ltd. and its Subsidiaries Consolidated Statements of Cash Flow

January 1 to March 31, 2021 and 2020

(Reviewed only but not audited in accordance with the Generally Accepted Auditing Standards.)

Unit: NT$ thousand

Code	Item	2021 Q1	2020 Q1
AAAA A10000 A20000 A20010 A20100 A20200 A20400 A20900 A21200 A21300 A22300 A22500 A30000 A31125 A31130 A31150 A31180 A31200 A31230 A31240 A32125 A32130 A32150 A32180 A32230 A32240 A33000 A33100 A33200 A33300 A33500 AAAA BBBB B00010 B00020 B00100 B00200 B01800 B02700 B02800 B05400 B06700 B06800 BBBB CCCC C00100 C03000 C04020 CCCC EEEE E00100 E00200	Cash flow from operating activities: Current income before tax Adjustment: Adjustments to reconcile profit (loss): Depreciation expenses Amortization Net gain on financial assets at fair value through profit or loss Interest expenses Interest revenue Dividend revenue Share of profit (loss) of associates and joint ventures accounted for using equity method Gain on disposal of property, plant and equipment Changes in current assets/liabilities related to operating activities: Decrease (increase) in contract assets - current Decrease in notes receivable Decrease (increase) in accounts receivable Decrease (increase) in other receivable Increase in inventories Decrease in prepayment Decrease in other current assets Increase in contract liability - current Increase (decrease) in notes payable Increase (decrease) in accounts payable Decrease in other payables Decrease in other current liabilities Decrease in net defined benefit liabilities Cash inflow (outflow) from operations Interest collected Dividends collected Interest paid Income tax paid Net cash inflow (outflow) from operating activities Cash flow from investing activities: Acquisition of financial assets at fair value through other comprehensive income Disposal of financial assets at fair value through other comprehensive income Acquisition of financial assets at fair value through profit or loss Disposal of financial assets at fair value through profit or loss Acquisition of investment under equity method Acquisition of property, plant and equipment Disposal of property, plant and equipment Acquisition of investment property Increase in other non-current assets Decrease in other non-current assets Net cash outflow from investing activities Cash flow from financing activities: Increase in short-term loan Increase in deposits received Payment of lease liabilities Net cash inflow from financing activities Increase (decrease) in current cash and cash equivalents Balance of cash and cash equivalents, beginning Balance of cash and cash equivalents, ending	$838,424 310,108 750 (2,733) 1,190 (351) (783) (18,141) (2,992) 51,421 6,724 (74,105) (19,032) (1,842,660) 17,786 - 69,005 115 301,388 (305,391) (1,351) (8,013) (678,641) 386 563 (514) (38) (678,244) (466,951) - (37,680) 29,493 (46,717) (310,589) 133 - 137,111 - (695,200) 496,969 32 (639) 496,362 (877,082) 2,175,269 $1,298,187	$639,124 294,764 750 - 2,365 (763) - (967) - (16,145) 17,244 213,589 4,280 (311,365) 40,565 120 16,808 (188) (146,330) (188,136) (534) (23,188) 541,993 679 3,800 (1,562) (66) 544,844 (292,749) 36 - - (2,196) (142,140) - (63) - (63,805) (500,917) 44,569 - (948) 43,621 87,548 1,566,952 $1,654,500

(Please refer to the Notes for Consolidated Financial Statements.)

Feng Hsin Steel Co., Ltd. and its Subsidiaries Notes to Consolidated Financial Statements January 1 to March 31, 2021 and January 1 to March 31, 2020

(Reviewed only but not audited in accordance with the Generally Accepted Auditing Standards.) (NT$ Thousand, unless otherwise provided.)

I. History

Feng Hsin Steel Co., Ltd. (hereinafter referred to as the “Company”) was founded in 1969, initially engaged in manufacturing, processing and trading of various triangle iron, angle iron, round iron, flat iron and iron plate products, and management and investment of businesses incidental thereto. The No. 2 Steel Rolling Mill was completed and started operating in June 1989. Then, the Company launched into the area of special steel and engaged in producing carbon steel and special steel. The Company’s No. 2 Steelmaking Shop completed the hot commissioning in 1997 and started to produce the special steel billets needed by No. 2 Steelmaking Shop and No. 1 Steelmaking Shop, hoping to control quality and cut costs. The Company’s stocks were listed upon approval of the competent authority in 1991, and officially traded on TWSE on May 25, 1992. The Company’s registered place and principal business place are both situated at No.998, Sec.1, Jiahou Rd., Houli Dist., Taichung City.

II. Date and Procedure for Authorization of Financial Statements

The consolidated financial statements of the Company and its subsidiaries (hereinafter referred to as the “Group”) from January 1 to March 31, 2021 and 2020 were approved and released by the Board of Directors on April 29, 2021.

III. Applicability of newly promulgated and amended standard rules and interpretations

Changes in accounting policies caused by the first-time application of International Financial Reporting Standards (IFRSs)

The Group has adopted the International Financial Reporting Standards (IFRSs),” International Accounting Standards (IAS), Standing Interpretation Committee (SIC) interpretation and International Financial Reporting Standards Interpretations Committee (IFRSIC) announcement, which has been recognized and applied by the Financial Supervisory Commission (“FSC”) as of the fiscal year since January 1, 2021.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

The first-time application of new and amended standards rendered no material impact to the Group.

By the date for authorization of the financial reports, the Group has not adopted the following new, revised and amended standards and interpretation, which have been released by International Accounting Standards Board but not yet recognized by FSC:

Item No.	New/Amended/Revised Standards and Interpretations	Effective date promulgated by the International Accounting Standards Board
1	Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” - “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”	To be decided by the International Accounting Standards Board
2	IFRS 17 “Insurance Contracts”	January1,2023
3	Classification of liabilities as current or non-current (Amendments to IAS 1)	January 1, 2023
4	Limited amendments to IFRSs, including the amendments to IFRS 3,IAS 16 and IAS 37,and annual improvements.	January 1, 2022
5	Disclosure Initiative - Accounting policy (amendments to IAS 1)	January1,2023
6	Definition of AccountingEstimate(amendments to IAS 8)	January1,2023
7	“Leases Regarding COVID-19-related Rent Concessions” after June 30,2021(amendments to IAS 16)	April 1, 2021

(1) Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” - “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

The amendments address the inconsistency between the requirements in IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture. IAS 28 requires that gains and losses arising from contributions of non-monetary assets to an associate or a joint venture shall be derecognized through downstream transactions. IFRS 10 requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28 was amended so that the gain or loss resulting from the sale or contribution of assets that constitute a

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

business as defined in IFRS 3 between an investor and its associate or joint venture is recognized in full.

IFRS 10 was also amended so that the gains or loss resulting from the sale or contribution of a subsidiary that does not constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized only to the extent of the unrelated investors’ interests in the associate or joint venture.

(2) IFRS 17 “Insurance Contracts”

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects (including recognition, measurement, presentation and disclosure requirements). The core of IFRS 17 is the General Model. Under this model, on initial recognition, an entity shall measure a company of insurance contracts at the total of the fulfillment cash flows and the contractual service margin. The carrying amount of a company of insurance contracts at the end of each reporting period shall be the sum of the liability for remaining coverage and incurred claims.

Other than the General Model, the standard also provides a specific adaptation for contracts with direct participation features (the Variable Fee Approach) and a simplified approach (Premium Allocation Approach) mainly for short-term contracts.

Upon promulgation of the Standard as of May 2017, the Standard was amended in June 2020, so that the effective date should be deferred for another two years (i.e. to be postponed from January 1, 2021 to January 1, 2023) and additional exemptions should be made available; meanwhile, the costs for the adoption of the Standard may be cut through the simplification and certain circumstances may be explained in an easier way by virtue of the amendments. The Standard will replace the provisional one (namely IFRS 4 “Insurance Contracts) after it becomes effective.

(3) Classification of liabilities as current or non-current (Amendments to IAS 1)

These are the amendments to paragraphs 69-76 of IAS 1 Presentation of Financial statements and the amended paragraphs related to the classification of liabilities as current or non-current.

(4) Limited amendments to IFRSs, including the amendments to IFRS 3, IAS 16 and IAS 37, and annual improvements.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

A. Updating a Reference to the Conceptual Framework (Amendments to IFRS 3)

The amendments are made in order to replace the old index version for the financial reporting conceptual concept and update IFRS 3 with the latest index version released in March 2018. Meanwhile, an exception is added into the recognition principle to prevent the gain or loss on “2nd day” potentially arising from liabilities or contingent liabilities, and to clarify the existing guidelines which remain unaffected by the replacement of the framework index.

B. Property, Plant and Equipment: Income before the intent to use (amendments to IAS 16)

The amendments are made to prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in profit or loss.

C. Onerous contract - cost of fulfilling a contract (amendments to IAS 37)

The amendments are made to clarify the costs that a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous.

D. Improvements to IFRSs from 2018 to 2020.

Amendments to IFRS 1

The amendment to IFRS 1 simplifies the application of IFRS 1 by a subsidiary that becomes a first-time adopter after its parent in relation to the measurement of cumulative translation differences.

Amendments to IFRS 9 “Financial Instruments”

The amendments are made in order to clarify the expenses to be included when an entity evaluates whether there is any significant difference between the new or amended contractual terms and conditions for financial liabilities and the old ones for the same financial liabilities.

Amendments to the illustrative example accompanying IFRS 16 “Leases”

The amendments to Illustrative Example 13 accompanying IFRS 16 are made in order to amend the lease incentives related to the lessee’s leasehold improvement.

Amendments to IAS 41

The amendments to IAS 41 removed a requirement to exclude cash flows from

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

taxation when measuring fair value, thereby aligning the fair value measurement requirements in IAS 41 with those in other IFRS Standards.

(5) Disclosure Initiative - Accounting policy (amendments to IAS 1)

The amendments are designed to improve the disclosure of accounting policies in order to provide investors and other primary users of the financial statements with more useful information.

(6) Definition of Accounting Estimate (amendments to IAS 8)

The amendments are made to define the accounting estimates directly, and also amend IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”, in order to help entities to distinguish between accounting policies and accounting estimates.

(7) “Leases Regarding COVID-19-related Rent Concessions” after June 30, 2021 (amendments to IAS 16)

The amendments are made in order to extend the availability of the practical expedient referred to in paragraph 46A in IFRS 16 “Leases” by one year.

The effective dates of said standards and interpretations which were already issued by IASB but have not yet been recognized by FSC, shall be decided by FSC. The new or amended standards or interpretations rendered no material effect on the Group.

IV. Summary of significant accounting policies

1. Statement of Compliance

The Group’s consolidated financial statements for the years from January 1 to December 31, 2021 and 2020 have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and IAS 34 “Interim Financial Reporting” recognized and put to effect by FSC.

2. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value. The consolidated financial statements are expressed in thousands of New Taiwan Dollars (“NT$”) unless

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

otherwise stated.

Overview of consolidation

Principles for preparation of consolidated financial statements

The Company controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Particularly, the Company controls an investee if and only if it satisfies all of the following three elements:

(1) Power over the investee (i.e. the Company has existing rights that give it the ability to direct the relevant activities).
(2) Exposure, or rights, to variable returns from its involvement with the investee, and
(3) Ability to use its power over the investee to affect the amount of the investor's returns.

When the Company holds, directly or indirectly, the voting rights or other similar rights less than the majority investee’s, the Company evaluates whether it still holds power over the investee by taking into account all critical facts and circumstances, including:

(1) Contractual arrangements with the investee and others with voting rights.
(2) Rights derived from other contractual arrangements.
(3) Voting rights and potential voting rights

When the facts and circumstances show changes of any or more of the three controlling elements, the Company re-evaluates whether it still holds power over the investee.

The subsidiaries have been included in the consolidated financial statements since the date of acquisition (namely, the date when the Group acquires the controlling power) in whole, until the date when the Company loses the controlling power over the subsidiaries. The fiscal period and accounting policies adopted by the subsidiaries’ financial statements are consistent with those adopted by the parent company. The balance, transactions, and unrealized internal gains and losses and dividends generated from the Group’s internal transactions in the Group’s internal account shall be derecognized accordingly.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

If the Company doesn’t lose the controlling power over the subsidiaries as a result of changes in shareholdings in the subsidiaries, the changes in equity should be treated as the equity transaction.

A subsidiary’s total comprehensive income is attributed to the parent company’s owner and non-controlling interests, irrelevant with balance or loss generated from non-controlling interests.

Where the Group loses the controlling power over a subsidiary,

(1) it shall derecognize the subsidiary’s assets (including goodwill) and liabilities;
(2) it shall derecognize any book value of the non-controlling interests;
(3) it shall recognize the fair value of consideration for the acquisition;
(4) it shall recognize the fair value of any retained investments;
(5) it shall recognize any gain or loss as the current income;
(6) it shall re-classify the amount recognized by the parent company to other comprehensive income previously as the current income.

Entities in the preparation of consolidated financial statements:

Name of investor The Company	Name of subsidiary GREAT FORTUNE HOLDING LIMITED	Principal business lines	Percentage of equity	Percentage of equity	Percentage of equity
			March 31, 2021 100%	December 31,2020	March 31, 2020 100%
		General investment		100%

4. Foreign currency transaction

The Group’s consolidated financial statements are expressed in New Taiwan Dollars, the functional currency adopted by the Company. Each entity in the Group decides its own functional currency independently, and measures its financial statement based on the functional currency.

Transactions in foreign currencies conducted by each entity in the Group are retranslated at its functional currency at the foreign exchange rate prevailing at the date of transaction. At the end of each reporting period, monetary items denominated in

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

foreign currencies are retranslated at the closing foreign exchange rate on the same day; non-monetary items are retranslated at the foreign exchange rate on the same day when the fair value is determined; non-monetary items that are measured at historical cost are retranslated at the foreign exchange rate on the date of initial transactions.

All exchange differences arising on the settlement of monetary items or on translating monetary items are taken to profit or loss in the period in which they arise except for the following:

(1) Exchange differences arising from foreign currency borrowings for an acquisition of a qualifying asset to the extent that they are regarded as an adjustment to interest costs are included in the borrowing costs that are eligible for capitalization.
(2) Foreign currency items within the scope of IFRS 9 “Financial Instruments” are accounted for based on the accounting policy for financial instruments.
(3) Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation are recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized into other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized into profit or loss.

Criteria for classifying assets and liabilities as current or non-current items

Assets that meet one of the following criteria are classified as current assets; otherwise, they are classified as non-current assets:

(1) Assets arising from operating activities that are expected to be realized or consumed, or are intended to be sold within the normal operating cycle;
(2) Assets held mainly for trading purposes;
(3) Assets that are expected to be realized within twelve months from the reporting period;
(4) Cash and cash equivalents, excluding restricted cash and cash equivalents and those

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

to be exchanged or used to pay off liabilities more than twelve months after the reporting period.

Liabilities that meet one of the following criteria are classified as current liabilities; otherwise, they are classified as non-current liabilities:

(1) Liabilities arising from operating activities that are expected to be paid off within the normal operating cycle;
(2) Liabilities arising mainly from trading activities;
(3) Liabilities that are expected to be paid off within twelve months from the reporting period;
(4) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the reporting period. Terms of a liability that could, at the option of the trading counterpart, result in its settlement by the issue of equity instruments do not affect its classification.

6. Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and short-term and highly liquid time deposits or investments (time deposits to be matured within 3 months) that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value.

7. Financial instruments

Financial assets and liabilities shall be recognized when the Group becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities within the scope of IFRS 9 “Financial Instruments” are recognized initially at fair value, plus or minus transaction costs directly attributable to acquisition or issuance of financial assets and financial liabilities (except those classified into financial assets and financial liabilities at fair value through profit or loss).

(1) Recognition and measurement of financial assets

The Group accounts for regular way purchase or sales of financial assets on the trade date.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

The Group classified financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss considering both factors below:

A. The Group’s business model for managing the financial assets
B. The contractual cash flow characteristics of the financial asset.

Financial assets measured at amortized cost

A financial asset is measured at amortized cost if both of the following conditions are met and presented as note receivables, accounts receivables, financial assets measured at amortized cost and other receivables etc., on the balance sheet:

A. Business model managing financial assets: To hold financial assets in order to collect contractual cash flows.
B. The contractual cash flow characteristics of the financial asset: Cash flows are solely payments of principal and interest on the principal amount outstanding.

Such financial assets (excluding those involving hedging relationship) are subsequently measured at amortized cost (the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount and the maturity amount and adjusted for any loss allowance). A gain or loss is recognized in profit or loss when the financial asset is derecognized through the amortization process or in order to recognize the impairment gains or losses.

Interest calculated by using the effective interest method (calculated by applying the effective interest rate to the gross carrying amount of a financial asset) or under the following circumstances shall be recognized into profit or loss:

A. In the case of purchased or originated credit impaired financial assets, the Group applies the credit adjusted effective interest rate to the amortized cost of the financial asset.
B. In the case of financial assets that are not purchased or originated credit impaired financial assets but subsequently have become credit impaired financial assets, the Group applies the effective interest rate to the amortized cost of the financial

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

assets.

Financial assets at fair value through other comprehensive income

A financial asset is measured at fair value through other comprehensive income if both of the following conditions are met and presented as the financial asset at fair value through other comprehensive income on the balance sheet:

A. Business model managing financial assets: To collect contractual cash flows and sell financial assets.
B. The contractual cash flow characteristics of the financial asset: Cash flows are solely payments of principal and interest on the principal amount outstanding.

Recognition of gain or loss on such financial asset is described as below:

A. Except for the impairment gain or loss and foreign currency exchange gain or loss, which is recognized into the income, the gain or loss thereof should be recognized into other comprehensive income before derecognition or re-classification.
B.At the time of derecognition, the accumulated gains or losses initially recognized into other comprehensive income should be re-classified from equity into income as the reclassification adjustment.
C.Interest calculated by using the effective interest method (calculated by applying the effective interest rate to the gross carrying amount of a financial asset) or under the following circumstances shall be recognized into profit or loss:
(a) In the case of purchased or originated credit impaired financial assets, the Group applies the credit adjusted effective interest rate to the amortized cost of the financial asset.
(b) In the case of financial assets that are not purchased or originated credit impaired financial assets but subsequently have become credit impaired financial assets, the Group applies the effective interest rate to the amortized cost of the financial assets.

Besides, for certain equity investments within the scope of IFRS 9 that is neither held for trading nor contingent consideration recognized by an acquirer in a business combination to which IFRS 3 applies, the Group made an irrevocable

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

election to present the changes of the fair value in other comprehensive income at initial recognition. Amounts presented in other comprehensive income shall not be subsequently transferred to profit or loss (when disposal of such equity instrument, its cumulated amount included in other components of equity is transferred directly to the retained earnings) and these investments should be presented as financial assets measured at fair value through other comprehensive income on the balance sheet. Dividends on such investment are recognized as profit or loss, unless the dividends clearly represent a recovery of part of the cost of investment.

Financial assets at fair value through profit or loss

Financial assets were classified as measured at amortized cost or measured at fair value through other comprehensive income based on aforementioned criteria. All other financial assets were measured at fair value through profit or loss and presented on the balance sheet as financial assets measured at fair value through profit or loss.

Such financial assets are measured at fair value. The gains or losses resulting from remeasurement are recognized in profit or loss, which includes any dividend or interest received on such financial assets.

(2) Impairment of financial assets

The Group recognizes and measures the loss allowance for financial assets at amortized costs based on expected credit losses.

The Group measures expected credit losses in a way that reflects:

A. an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes;

B. the time value of money;
C. reasonable and supportable information (that is available without undue cost or effort at the reporting date) about past events, current conditions and forecasts of future economic conditions.

The loss allowance is measured as follow:

A. At an amount equal to 12 month expected credit losses: the credit risk on a financial asset has not increased significantly since initial recognition or the

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

financial asset is determined to have low credit risk at the balance sheet date. Additionally, the Group measures the loss allowance at an amount equal to lifetime expected credit losses in the previous reporting period, but determines at the current balance sheet date that the credit risk on a financial asset has increased significantly since initial recognition is no longer met.

B.At an amount equal to the lifetime expected credit losses: the credit risk on a financial asset has increased significantly since initial recognition or financial asset that is purchased or originated credit impaired financial asset.
C.For accounts receivables or contract assets arising from transactions within the scope of IFRS 15, the Group measures the loss allowance at an amount equal to lifetime expected credit losses.

At each balance sheet date, the Group needs to assess whether the credit risk on a financial asset has been increased significantly since initial recognition by comparing the risk of a default occurring at the balance sheet date and the risk of default occurring at initial recognition. Please refer to Note 12 for further details on credit risk.

(3) Derecognition of financial assets

Any financial asset held by the Group is derecognized when any of the following circumstances are met:

A.The contractual rights to receive cash flows from the asset have expired.
B.The Group has transferred the asset and substantially all the risks and rewards of the asset have been transferred.
C.The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the consideration received or receivable, including any cumulative gain or loss that had been recognized in other comprehensive income, is recognized into profit or loss.

(4) Financial liabilities and equity instruments

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

Classification between liabilities or equity

The Group classifies the instrument issued as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability and an equity instrument.

Equity instrument

An equity instrument is any contract that evidences a residual interest in an entity's assets after deducting all of its liabilities. The equity instrument issued by the Group is recognized based on the acquisition price less the direct issue cost.

Financial liabilities

Financial liabilities within the scope of IFRS 9 are classified as financial liabilities measured at amortized cost upon initial recognition.

Financial liabilities measured at amortized cost

Financial liabilities measured at amortized cost include interest bearing loans and borrowings that are subsequently measured using the effective interest rate method after initial recognition. Gains and losses are recognized into profit or loss when the liabilities are derecognized as well as through the effective interest rate method amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or transaction costs.

Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired.

When debt instruments subject to contractual terms different from each other significantly are exchanged or the terms of an existing liability are substantially modified (whether or not attributable to the financial difficulty of the debtor) between the Group and creditors, such an exchange or modification is treated as a

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized into profit or loss.

(5) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

8. Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

(1) In the principal market for the asset or liability, or
(2) In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants acted in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

9. Inventories

Inventories are valued at lower cost and net realizable value item by item.

Costs incurred in bringing each inventory to its present location and condition are accounted for as follows:

Raw materials - Actual purchase cost on a weighted average method.

Finished goods and work in progress - Cost of direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity. Finished goods and work in progress adopt the weighted average method.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Rendering of services is accounted in accordance with IFRS 15 and not within the scope of inventories.

10. Investment under equity method

The Group’s investment in its associates is accounted for using the equity method other than those that meet the criteria to be classified as held for sale. An associate is an entity over which the Group has significant influence. A joint venture means that the Group has rights over net assets under the joint arrangement (with joint control).

Under the equity method, the investment in the associate or an investment in a joint venture is carried in the balance sheet at cost and adjusted thereafter for the post acquisition change in the Group’s share of net assets of the associate or joint venture. After the interest in the associate or joint venture is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. Unrealized gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the Group’s related interest in the associate or joint venture.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

When changes in the net assets of an associate or a joint venture occur and not those that are recognized in profit or loss or other comprehensive income and do not affect the Group’s percentage of ownership interests in the associate or joint venture, the Group recognizes such changes in equity based on its percentage of owner ship interests. The resulting capital surplus recognized will be reclassified to profit or loss at the time of disposing of the associate or joint venture on a pro rata basis.

When the associate or joint venture issues new stock, and the Group’s interest in an associate or a joint venture is reduced or increased as the Group fails to acquire shares newly issued in the associate or joint venture proportionately to its original ownership interest, the increase or decrease in the interest in the associate or joint venture is recognized into “Capital Surplus” and “Investment accounted for using the equity method”. When the interest in the associate or joint venture is reduced, the related items previously recognized into other comprehensive income are reclassified into profit or loss or other appropriate items. The aforementioned capital surplus recognized is reclassified into profit or loss on a pro rata basis when the Group disposes of the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

The Group determines at the end of each reporting period whether there is any objective evidence that the investment in the associate or an investment in a joint venture is impaired in accordance with IAS 28 “Investments in Associates and Joint Ventures”. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognizes the amount into the profit or loss of the associate or joint venture in accordance with IAS 36 “Impairment of Assets”. Where said recoverable amount adopts the value in use of the investment. The Group may determine the related value in use of the investment in the following manners:

(1) The Group’s share of the present value of the estimated future cash flows expected to be generated by the associate or joint venture, including the cash flows from the operations of the associate or joint venture, and the proceeds on the ultimate disposal of the investment; or

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

(2) The present value of the estimated future cash flows expected by the Group to arise from dividends to be received from the investment and its ultimate disposal.

Because goodwill that forms part of the carrying amount of an investment in an associate or an investment in a joint venture is not separately recognized, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in IAS 36 “Impairment of Assets”.

Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognizes any retaining investment at its fair value. Upon loss of significant influence over the associate or joint control over the joint venture, any difference between the carrying amount of the associate or joint venture and the fair value of the retaining investment plus proceeds from disposal is recognized into profit or loss. Meanwhile, when the investment in the associate becomes that in the joint venture, or the investment in the joint venture becomes that in the associate, the Group continues to apply the equity method without re-measuring the retained equity.

11. Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of dismantling and removing the item and restoring the site on which it is located and necessary interest expenses for construction in progress. Each part of property, plant and equipment that is significant is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognizes such parts as individual assets with specific useful life and depreciation. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 “Property, plant and equipment”. When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as the replacement cost if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

Depreciation is calculated on a straight line basis over the estimated economic life of the following assets:

Asset items House and building	Useful life
	6~56 years

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(Cont’d)	(Cont’d)
(NT$ Thousand, unless otherwise provided.)
Machine and equipment	3~41 years
Transportation equipment	4~16 years
Office equipment	3~17 years
Leasehold improvement	2~25 years

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on the derecognition of the asset is recognized as profit or loss.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at the end of each reporting period, and the changes resulting from the difference in the expected value and previous estimate are treated as changes in accounting estimates.

12. Investment property

The Group owned investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day to day servicing of an investment property. Subsequent to initial recognition, other than those that meet the criteria to be classified as held for sale (or are included in a disposal group that is classified as held for sale) in accordance with IFRS 5 “Non current Assets Held for Sale and Discontinued Operations”, investment properties are measured using the cost model in accordance with the requirements of IAS 16 Property, plant and equipment for that model. If investment properties are held by a lessee as the right of use assets and are not held for sale in accordance with IFRS 5, investment properties are measured in accordance with the requirements of IFRS 16.

Depreciation is calculated on a straight line basis over the estimated economic life of the following assets:

Asset items Building	Useful life
	30~50 years

Investment properties are derecognized and relevant profit or loss is recognized when

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal.

The Group decides to transfer to or from investment properties based on the actual usage of the assets.

Properties are transferred to or from investment properties when the properties meet, or cease to meet, the definition of investment property and there is evidence of the change in use.

13. Lease

The Group assesses whether the contract is, or contains, a lease on the date when the contract is established. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset for a period of time, the Group assesses whether, throughout the period of use, has both of the following:

(1) the right to obtain substantially all of the economic benefits from the use of the identified asset; and
(2) the right to direct the use of the identified asset.

For a contract that is, or contains, a lease, the Group accounts for each lease component within the contract as a lease separately from non-lease components of the contract. For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components. The relative stand-alone price of lease and non-lease components shall be determined on the basis of the price the lessor, or a similar supplier, would charge the Group for that component, or a similar component, separately. If an observable stand-alone price is not readily available, the Group estimates the stand-alone price, maximizing the use of observable information.

Group as a lessee

Except for leases that meet and elect short term leases or leases of low value assets, the

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

Group recognizes the right to use asset and lease liability for all leases. The Group is the lessee of those lease contracts.

At the commencement date, the Group measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease if that rate can be readily determined. If that rate cannot be readily determined, the Group uses its incremental borrowing rate. At the commencement date, the lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the lease term that is not paid at the commencement date:

(1) Fixed payments (including in substance fixed payments), less any lease incentives receivable;
(2) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
(3) amounts expected to be payable by the lessee under residual value guarantees;
(4) the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
(5) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

After the commencement date, the Group measures the lease liability on an amortized cost basis, which increases the carrying amount to reflect interest on the lease liability by using an effective interest method, and reduces the carrying amount to reflect the lease payments made.

At the commencement date, the Group measures the right-of-use asset at cost. The cost of the right-of-use asset comprises:

(1) the amount of the initial measurement of the lease liability;
(2) any lease payments made at or before the commencement date, less any lease incentives received;
(3) any initial direct costs incurred by the lessee; and
(4) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

For subsequent measurement of the right-of-use asset, the Group measures the right-of-use asset at cost less any accumulated depreciation and any accumulated

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

impairment losses. That is, the Group measures the right-of-use asset by applying a cost model.

If the lease transfers ownership of the underlying asset to the Group by the end of the lease term or if the cost of the right-of-use asset reflects that the Group will exercise a purchase option, the Group depreciates the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Group depreciates the right-of-use asset from the commencement date to the earlier end of the useful life of the right-of-use asset or the end of the lease term.

The Group applies IAS 36 “Impairment of Assets” to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.

Except for those leases that the Group accounted for as short term leases or leases of low value assets. The Group presents right-of-use assets and lease liabilities in the balance sheet and separately presents lease-related depreciation expense and interest expense in the statements of comprehensive income.

For short term leases or leases of low value assets, the Group elects to recognize the lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another systematic basis during the lease period.

The Group elects not to assess whether the related rent concessions resulting from the pandemic of COVID-19 directly is leasehold improvement, but treats such rent concessions as changes in the lease payment. The Group also has the practical expediency applied to all qualified rent concessions.

Group as a lessor

At the inception of a contract, the Group classifies its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it substantially transfers all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as an operating lease if it does not so. At the commencement date, the Group recognizes assets held under a finance lease in its balance sheet and presents them as a receivable amount equal to the net investment in the lease.

For a contract that contains lease components and non-lease components, the Group

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

allocates the consideration in the contract applying IFRS 15.

The Group recognizes lease payments from operating leases as rental revenue on either a straight-line basis or another systematic basis. Variable lease payments for operating leases that do not depend on an index or a rate are recognized as rental revenue when incurred.

14. Impairment of non financial assets

The Group assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 “Impairment of Assets” may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group tests the individual assets or cash-generating units of the assets. If the impairment test result shows that the carrying amount of the asset or cash-generating unit of the asset is more than the recoverable amount thereof, the impairment loss should be recognized. An asset’s recoverable amount is higher than the net fair value or value in use.

For assets excluding goodwill, an assessment is made at the end of each reporting period regarding whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been an increase in the estimated service potential of an asset, increasing the recoverable amount. However, the reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized for the asset in prior years.

A cash generating unit, or group of cash-generating units, to which goodwill has been allocated is tested for impairment annually at the same time, irrespective of whether there is any indication of impairment. If an impairment loss is to be recognized according to the impairment loss test, it is first allocated to reduce the carrying amount of any goodwill and then allocated to any assets other than goodwill pro rata on the basis of the carrying amount of each asset. Impairment losses relating to goodwill cannot be reversed in future periods for any reason when they are recognized.

An impairment loss of continuing operations or a reversal of such impairment loss is recognized as profit or loss.

Revenue recognition

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

The Group’s revenue arising from contracts with customers are primarily related to sale of goods and rendering of services. The accounting policies are explained as follow:

Sale of goods

The Group manufactures and sells goods. Sales revenue is recognized when control of the goods is transferred to the customer. The goods are delivered to the customers (i.e. the customer directs the use of such goods and obtains the ability of almost residual effects of such goods). The main products of the Group are steel and iron products and revenue is recognized based on the consideration stated in the contract. Transactions of the other goods are generally conditioned at a discount for quantity (based on the total sales accumulated within a specific time limit). Therefore, the revenue is recognized based on the consideration stated in the contract, less the amount of discount for the estimated quantity. The Group estimates the variable considerations generated from the discount for quantity based on the actual shipping quantity, to the extent that the accumulated revenue as recognized is highly unlikely to be reversed significantly after the uncertainty related to variable considerations is eliminated subsequently. The expected discount for quantity is also recognized as the refund liability relatively during the specific time limit as agreed.

The credit period of the Group’s sale of goods is from 10 to 75 days. For most of the contracts, when the Group transfers the goods to customers and has a right to an amount of consideration that is unconditional, these contracts are recognized as accounts receivables. Such accounts receivable are generally short-term and free from any important financial components. Few contracts are recognized as contract assets, when the Group transfers the goods to customers but has not yet had a right to an unconditional amount of consideration. In the case of contract assets, the loss allowance should be measured at an amount equal to lifetime expected credit losses under IFRS 9.

Rendering of services

The Group provides labor services primarily with respect to the transportation and insurance services for the various steel and iron products sold by the Group. Such services are separately priced or negotiated, provided based on the contract period. Since the Group provides transportation and insurance services during the contract

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

period, customers may obtain the effects of transportation and insurance for such goods during the contract period. Accordingly, the Group recognizes revenues when the Group satisfied a performance obligation at a point in time.

Most of the contractual considerations of the Group are collected evenly throughout the contract periods after rendering the transportation and insurance services. When the Group has performed the services for customers but does not has a right to an amount of consideration that is unconditional, these contracts should be presented as contract assets. However, for some rendering of services contracts, part of the consideration was received from customers upon signing the contract. The Group has an obligation to provide the services subsequently; accordingly, these amounts are recognized as contract liabilities.

The period between the transfers of the Group’s said contract liabilities to revenue is usually within one year. Thus, no significant financing component arises.

16. Borrowing costs

The borrowing costs of qualifying assets directly attributable to the acquisition, construction or production shall be eligible for capitalization as a part of the costs of such assets. The other borrowing costs are recognized as the expenses when incurred. The borrowing costs include the interests and other costs incurred related to the borrowing of loans.

17. Post employment benefits

The Company’s regulations governing employees’ retirement apply to all employees hired by the Company officially. The employees’ pension fund is managed by the Pension Supervisory Committee and deposited into the pension fund account as a whole. Said pension fund is deposited under the Committee’s name in the specific bank account and hence, not associated with the Company. Therefore, such a fund is not included in said consolidated financial statements.

For the defined contribution plan, the Company will make a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Company recognizes expenses for the defined contribution plan in the period in which the contribution becomes due.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

The post-employment benefit plan classified as a defined benefit plan uses the Projected Unit Credit Method to measure its obligations and costs based on actuarial assumptions. Remeasurements, comprising of the effect of the actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets, excluding net interest, are recognized as other comprehensive income with a corresponding debit or credit to retained earnings in the period in which they occur. The past service costs are the changes in the present value of defined benefit obligation generated from amendments to or curtailment of the plan and recognized into profit or loss on the earlier of:

(1) the date of the plan amendment or curtailment, and

(2) the date that the Group recognizes restructuring-related costs or termination benefits.

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset, both as determined at the start of the annual reporting period, taking account of any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payment.

Interim retirement costs are calculated from the beginning until the end of the interim period using the actuarial pension cost rate determined at the end of the previous year, and adjusted for major market changes, plan modifications, settlements and other one-time events that took place after the end of the interim period.

18. Income tax

Income tax expense (income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized into other comprehensive income or directly into equity is recognized into other comprehensive

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

income or equity and not into profit or loss.

The income tax for undistributed earnings is recognized as income tax expense on the date when the Shareholders’ meeting approves the distribution proposal.

Deferred income tax

Deferred income tax is provided on temporary differences at the end of reporting period between the tax bases of assets and liabilities and their carrying amounts in the balance sheet.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

(1) Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
(2) In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not be reversed in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, except:

(1) Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
(2) In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will be reversed in the foreseeable future and taxable profit will be available against

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

which the temporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the end of the reporting period. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets are reassessed at the end of each reporting period and are recognized accordingly.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current income tax assets against current income tax liabilities. The deferred taxes relate to the same taxable entity and the same taxation authority.

Income taxes for the interim period are assessed and disclosed by determining the tax rate applicable to expected total annual earnings, i.e. applying the estimated annual average effective tax rate to interim pre-tax profit. The estimate of annual average effective rate only comprises of current income tax expenses. The deferred income tax shall be recognized and measured in line with the annual financial reporting and under IAS 12 “Income Tax”. If the tax rate is changed during the interim period, the effect of the tax rate change to deferred income tax is recognized through profit and loss, other comprehensive income or directly into equity in one entry in the period occurred.

V. Major sources of major accounting judgments, estimates, and hypotheses

The preparation of the Group’s consolidated financial statements requires the management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Judgment

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the consolidated financial statements:

(1) Investment property

Some of the Group’s property is held to earn rent or capital appreciation in one part and for own use in the other part. If each part thereof may be sold independently, it shall be treated as investment property and property, plant and equipment, respectively. If it is impossible to sell each part independently, the property may be classified into investment property, to the extent that the parts held for own use are considered insignificant.

(2) Operating lease commitment - Group as the lessor

The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases.

2. Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(1)Post employment benefits

The cost of post-employment benefit and the present value of the pension obligation under defined benefit pension plans are determined using actuarial valuations. An actuarial valuation involves making various assumptions. These include the determination of the discount rate and increase/decrease in expected salaries.

(2)Revenue recognition - Sales return and allowance

The Group estimates the sales return and allowance based on historical experience and other known reasons. It presents it as a deduction to operating revenue at the

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

time of sale of the goods. Said estimate about sales return and allowance would be done to the extent that the accumulated revenue recognized due to important reversal is very unlikely to be incurred. Please refer to Note 6 for details.

(3)Income tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. Such provisions are based on various factors, such as the experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group’s entity’s domicile.

Deferred tax assets are recognized for all carryforward of unused tax losses and unused tax credits and deductible temporary differences to the extent that it is probable that taxable profit will be available or there are taxable temporary differences. The amount of deferred tax assets determined to be recognized is based upon the likely timing and the level of future taxable profits and taxable temporary differences together with future tax planning strategies.

(4)Accounts receivables–estimation of impairment loss

The Group estimates the impairment loss of accounts receivables at an amount equal to lifetime expected credit losses. The credit loss is the present value of the difference between the contractual cash flows due under the contract (carrying amount) and the cash flows that expect to receive (evaluate forward looking information). However, as the impact from the discounting of short-term receivables is not material, the credit loss is measured by the undiscounted difference. Where the actual future cash flows are lower than expected, a material impairment loss may arise. Please refer to Note 6 for more details.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

(5)Inventories

Estimates of the net realizable value of inventories take into consideration that inventories may be damaged, become wholly or partially obsolete, or their selling prices have declined. The estimates are based on the most reliable evidence available at the time the estimates are made. Please refer to Note 6 for more details.

VI. Notes to major accounting titles

1. Cash and cash equivalents

ash and cash equivalents
Cash on hand Demand deposits Cash equivalents Total	March 31, 2021 $961 997,182 300,044 $1,298,187	December 31, 2020 $948 1,074,729 1,099,592 $2,175,269	March 31, 2020
			$987 1,253,969 399,544
			$1,654,500

Financial assets at fair value through profit or loss - current

Mandatorily measured at fair value through profit or loss: Stocks	March 31, 2021	December 31, 2020	March 31, 2020
	$10,920	$ -	$ -

The Group’s financial assets at fair value through profit or loss noncurrent were not pledged.

Financial assets at fair value through other comprehensive income

Equity instrument at fair value through other comprehensive income - current: TWSE/TPEx-listed stocks	March 31, 2021	December 31, 2020	March 31, 2020
	$2,535,064	$1,700,311	$363,219

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d) (NT$ Thousand, unless otherwise provided.) March 31, 2021 December 31, 2020 Investment in equity instrument at fair value through other comprehensive income - non-current: TWSE/TPEx-listed stocks $255,138 $245,294 Unlisted stocks 919,236 826,968 Total $1,174,374 $1,072,262	(Cont’d) (NT$ Thousand, unless otherwise provided.) March 31, 2021 December 31, 2020 Investment in equity instrument at fair value through other comprehensive income - non-current: TWSE/TPEx-listed stocks $255,138 $245,294 Unlisted stocks 919,236 826,968 Total $1,174,374 $1,072,262	(Cont’d) (NT$ Thousand, unless otherwise provided.) March 31, 2021 December 31, 2020 Investment in equity instrument at fair value through other comprehensive income - non-current: TWSE/TPEx-listed stocks $255,138 $245,294 Unlisted stocks 919,236 826,968 Total $1,174,374 $1,072,262	March 31, 2020
	$255,138 919,236	$245,294 826,968	$227,921 753,213
	$1,174,374	$1,072,262	$981,134

The Group’s financial assets at fair value through other comprehensive income were not pledged.

The Group disposed of the investment in equity instrument at fair value through other comprehensive income at the fair value, NT$36 thousand, from January 1 to March 31, 2020, and re-stated the unrealized valuation loss accumulated at the time of disposal, NT$232 thousand, from other equity into retained earnings.

4. Accounts receivable

Accounts receivable
Accounts receivable Less: loss allowance Total	March 31, 2021 $1,555,190 (2,118) $1,553,072	December 31, 2020 $1,481,085 (2,118) $1,478,967	March 31, 2020
			$1,320,800 (2,118)
			$1,318,682

The Group’s accounts receivable were not pledged.

The loan extended by the Group to customers is generally on a 10-75-day term. As of March 31, 2021, December 31, 2020 and March 31, 2020, the total carrying amounts were NT$1,555,190 thousand, NT$1,481,085 thousand and NT$1,320,800 thousand, respectively. Please refer to Note 6(16) for more details on loss allowance for the years ended Q1 of 2021 and 2020. Please refer to Note 12 for more details on credit risk management.

5. Inventories

March 31, December 31, March 31,

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

Raw materials Supplies Work in progress Finished goods Total	2021 $2,869,315 273,465 901,254 1,103,461 $5,147,495	2020 $1,405,703 267,145 796,631 831,989 $3,301,468	2020
			$1,377,031 684,333 1,410,823 1,146,359
			$4,618,546

The costs of inventories recognized into the cost of sales amount to NT$6,861,456 thousand and NT$5,690,827 thousand for the years ended March 31, 2021 and 2020.

Said inventories are not pledged.

6. Prepayment

Prepayment
Supplies inventory Payment in advance Other prepayments Total	March 31, 2021 $559,296 67,362 3,560 $630,218	December 31, 2020 $578,186 86,989 3,564 $668,739	March 31, 2020
			$619,751 - 2,355
			$622,106

Said payment in advance was not pledged.

Investment under equity method

The Group’s investments under equity method are detailed as follows:

March 31, 2021 Amount Shareholding $707,818 21.52 507,971 29.71 178,814 18.00 $1,394,603	December 31, 2020 Amount Shareholding $744,203 20.92 510,929 29.71 171,822 18.00 $1,426,954	March 31, 2020	March 31, 2020
Amount $707,818 507,971 178,814 $1,394,603	Amount $744,203 510,929 171,822	Amount $696,024 514,449 158,663 $1,369,136	Shareholding
			20.27 29.71 18.00
	$1,426,954

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

The Group increased capital in Taiwan Steel Union Co., Ltd. by NT$49,892 thousand in Q1 of 2021 and thereby caused its shareholdings to increase from 20.92% to 21.52%. Meanwhile, the Group decreased other capital surpluses by NT$29,153 thousand.

The Group increased capital in Taiwan Steel Union Co., Ltd. by NT$2,196 thousand in Q1 of 2020 and thereby caused its shareholdings to increase from 20.24% to 20.27%. Meanwhile, the Group decreased other capital surpluses by NT$1,339 thousand.

The Group held the shareholding less than 20% in Wen-Shan Enterprise Co., Ltd. Notwithstanding, it still held significant influence over the investee and, therefore, the investee was evaluated under the equity method.

Fair value with quoted market price available: Taiwan Steel Union Co., Ltd. has been listed on TWSE. The fair values of the Group’s investment in it under the equity method were NT$1,767,037 thousand, NT$1,766,921 thousand and NT$1,161,510 thousand, respectively, on March 31, 2021, December 31, 2020 and March 31, 2020.

The investment by the Group in Taiwan Steel Union Co., Ltd., Fong Yu Resource Co., Ltd. and Wen-Shan Enterprise Co., Ltd. is not considered material. The summarized financial information about the Group’s investment in the associate is stated as follows, by the total shares vested in the Group:

Current net income from continuing operations Other comprehensive income for the current period (net after tax) Total current comprehensive income	Q1 of 2021 $18,141 - $18,141	Q1 of 2020
		$967 -
		$967

Said investment in associate was free from any contingent liability or capital commitment and was not pledged, on March 31, 2021, December 31, 2020 and March 31, 2020.

The investments in Taiwan Steel Union Co., Ltd. under the equity method were NT$707,818 thousand and NT$696,024 thousand, respectively, on March 31, 2021 and 2020. The share of profit (loss) of associates and joint ventures accounted for using the equity method was NT$14,107 thousand and NT$(934) thousand in Q1 of 2021 and

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

Said figures are provided based on the financial statements audited by other CPAs.

8. Property, plant and equipment

Cost: January 1, 2021 Addition Disposal Other changes March 31, 2021 January 1, 2020 Addition Disposal Other changes March 31, 2020 Depreciation: January 1, 2021 Depreciation Disposal Other changes March 31, 2021 January 1, 2020 Depreciation Disposal Other changes March 31, 2020 Net carrying amount: March 31, 2021 December 31, 2020 March 31, 2020	Land	House and building	Machine and equipment	Office equipment	Transportation equipment	Leasehold improvement	Unfinished construction and equipment pending acceptance	Total
	$1,285,809 2,544 - - $1,288,353 $1,193,967 - - - $1,193,967 $ - - - - $ - $ - - - - $ - $1,288,353 $1,285,809 $1,193,967	$3,475,129 - (1,442) - $3,473,687 $3,439,406 - - 23,529 $3,462,935 $1,383,229 26,236 (1,442) - $1,408,023 $1,279,505 25,861 - - $1,305,366 $2,065,664 $2,091,900 $2,157,569	$16,867,846 61,683 (491,877) 377,317 $16,814,969 $16,667,078 83,568 (245,909) 90,402 $16,595,139 $11,461,215 271,401 (491,369) - $11,241,247 $10,716,926 256,385 (245,909) - $10,727,402 $5,573,722 $5,406,631 $5,867,737	$48,956 - - - $48,956 $46,438 2,518 - - $48,956 $17,800 654 - - $18,454 $15,159 661 - - $15,820 $30,502 $31,156 $33,136	$409,785 8,626 (1,192) - $417,219 $394,566 4,320 - - $398,886 $307,332 5,963 (1,192) - $ 312,103 $286,391 6,143 - - $292,534 $105,116 $102,453 $106,352	$330,148 - - - $330,148 $330,148 - - - $330,148 $66,333 3,339 - - $69,672 $52,975 3,340 - - $56,315 $260,476 $263,815 $273,833	$254,268 237,736 - (356,582) $135,422 $125,475 51,734 - (105,378) $71,831 $ - - - - $ - $ - - - - $ - $135,422 $254,268 $71,831	$22,671,941 310,589 (494,511) 20,735 $22,508,754 $22,197,078 142,140 (245,909) 8,553 $22,101,862 $13,235,909 307,593 (494,003) - $13,049,499 $12,350,956 292,390 (245,909) - $12,397,437 $9,459,255 $9,436,032 $9,704,425

No interest that is eligible for capitalization arises from the Group’s purchase of fixed assets.

The amounts of land stated by the Group as agricultural land registered under another person’s name preliminarily were NT$149,811 thousand, NT$147,267 thousand and

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

NT$55,425 thousand, respectively, on March 31, 2021, December 31, 2020 and March 31, 2020. The Group has received the commitment for future unconditional transfer of the land.

The Group’s property, plant and equipment were not pledged.

9. Investment property

The investment property included the Group’s own investment property. The Group has executed commercial property lease contracts for the own investment property, effective for 1~10 years. The contracts included the terms and conditions requiring adjustment on the rental subject to the market environment on a yearly basis.

Cost: January 1, 2021 Addition from acquisition March 31, 2021 Depreciation: January 1, 2021 Current depreciation March 31, 2021 Cost: January 1, 2020 Addition from acquisition March 31, 2020 Depreciation: January 1, 2020 Current depreciation March 31, 2020	Land $506,477 - $506,477 $ - - $ - $376,867 63 $376,930 $ - - $ -	Building $192,233 - $192,233 $329 987 $1,316 $6,086 - $6,086 $2,536 304 $2,840	Total
			$698,710 -
			$698,710
			$329 987
			$1,316
			$382,953 63
			$383,016
			$2,536 304
			$2,840

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(Cont’d)
(NT$ Thousand, unless otherwise provided.) Land Building Net carrying amount: March 31, 2021 $506,477 $190,917 December 31, 2020 $506,477 $191,904 March 31, 2020 $376,930 $3,246 Q1 of 2021 Rental revenue from investment property $583 Less: Direct operating expenses from investment property generating rental revenue in the current period (2) Direct operating expenses from investment property not generating rental revenue in the current period (219) Total $362	Total
	$697,394
	$698,381
	$380,176
	Q1 of 2020
	$703 - -
	$703

The Group’s property, plant and equipment were not pledged.

Investment properties held by the Group are not measured at fair value but for which the fair value is disclosed. The fair value measurements of the investment properties are categorized within Level 3. The fair value of the Group’s investment property appraised by the external independent appraiser retained by the Group was NT$627,522 thousand in February 2017, which was evaluated under the comparative method and land development analysis approach. The discount rate as applied primarily was hypothesized as 5.58%.

The fair value of said investment property evaluated by the Group by referring to the information on the Department of Land Administration website, Ministry of the Interior and actual transactions in the neighborhood area on March 31, 2021, December 31, 2020 and March 31, 2020 appears to be equivalent to that appraised by the external independent appraiser retained by the Group in February 2017.

The fair value of the Group’s 2020 added investment property appraised by the

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

external independent appraiser retained by the Group was NT$441,347 thousand in August 2020, which was evaluated under the comparative method and income method. The income capitalization rate, as applied primarily, was hypothesized as 2.31%. The Group evaluated that no material fluctuation would be caused to the fair value of the investment property on March 31, 2021.

10. Other non-current assets

Prepayments for equipment Refundable deposits Others Total Short-term loan Unsecured bank loans	March 31, 2021 December 31, 2020 March 31, 2020 $179,764 $316,530 $138,148 7,081 7,081 5,112 18,436 19,531 21,436 $205,281 $343,142 $164,696 Interest range March 31, 2021 December 31,2020 March 31, 2020 0.48%~1.08 % $826,910 $329,941 $425,720	March 31, 2021 December 31, 2020 March 31, 2020 $179,764 $316,530 $138,148 7,081 7,081 5,112 18,436 19,531 21,436 $205,281 $343,142 $164,696 Interest range March 31, 2021 December 31,2020 March 31, 2020 0.48%~1.08 % $826,910 $329,941 $425,720
		$425,720

11. Short-term loan

The Group’s short-term credit limits remaining unused have been NT$4,616,715 thousand, NT$6,084,526 thousand and NT$7,976,470 thousand, respectively, until March 31, 2021, December 31, 2020 and March 31, 2020

12. Other payables

Other payables
Electricity bills payable Pollution control fees payable Salary and year-end bonus payable Discount payable Others Total	March 31, 2021 $205,559 151,675 136,170 129,366 313,765 $936,535	December 31, 2020 $194,542 176,499 344,290 162,391 148,402 $1,026,124	March 31, 2020
			$199,970 264,479 116,947 116,410 136,504
			$834,310

13. Post employment benefits

Defined contribution plan

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

Expenses under the defined contribution plan recognized by the Group for Q1 of 2021 and 2020 were NT$5,315 thousand and NT$5,001 thousand, respectively.

Defined benefit plan

Expenses under the defined benefit plan recognized by the Group for Q1 of 2021 and 2020 were NT$2,118 thousand and NT$2,558 thousand, respectively.

14. Equity

(1) Common Stock

The Company’s authorized capitals were both NT$7,000,000 thousand as at March 31, 2021, December 31, 2020 and March 31, 2020, each at a par value of NT$10 for 581,599,424 outstanding shares, with the paid-in capital, NT$5,815,994 thousand. Each share has one voting right and a right to receive dividends.

(2) Capital surplus

Capital surplus
Additional paid-in capital Treasury stock transactions Changes in net worth of equity of associates and joint ventures accounted for using the equity method Gain on sale of fixed assets Donated assets received Others Total	March 31, 2021 $271,134 175,263 79,239 665 218 5,265 $531,784	December 31,2020 $271,134 175,263 108,392 665 218 4,425 $560,097	March 31, 2020
			$271,134 175,263 135,920 665 218 4,281
			$587,481

According to the laws and regulations, the capital surplus shall not be used except for making good the Company's deficit. When the Company incurs no loss, it may distribute the capital surplus related to the income derived from the issuance of new shares at a premium or income from endowments received by the Company. The distribution could be made in cash or the form of dividend shares to its

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

shareholders in proportion to the number of shares being held by each of them.

(3) Legal reserve

According to the Company Act, after the Company has paid its tax and has made up for past loss. When distributing surplus, the first 10% shall be for the legal reserve. The legal reserve can be used to make good the deficit of the Company. When the Company incurs no loss, it may distribute the portion of legal reserve that exceeds 25% of the paid-in capital by issuing new shares or by cash in proportion to the number of shares held by each shareholder.

(4) Special reserve

When distributing earnings, the Company needs to provide the other net deductions from shareholders’ equity, net as the special reserve. Afterwards, earnings may be distributed for the reversed portion if there is any reversal for the deduction under other equity to shareholders.

(5) Distribution of earnings and dividend policies

According to the Company’s Articles of Incorporation, current year’s earnings, if any, shall be distributed in the following order:

A. Payment of all taxes and dues pursuant to laws;
B. Offset prior years’ operation losses;

C. Set aside 10% of the remaining amount as legal reserve;

D. Set aside or reverse special reserve in accordance with law and regulations, or the competent authority’s order;

E. If any, the distribution of the remaining portion will be recommended by the Board of Directors and resolved in the shareholders’ meeting.

The industry developed by the Company has become matured and sought stable profit under the robust financial structure. Therefore, the motion for allocation of shareholder bonus proposed by the Board of Directors supports allocation of cash dividend primarily. Notwithstanding, if the Company has to spend any major capital expenditure, no more than 70% of the dividends to be allocated in the year may be distributed in the form of stocks.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

According to the Company Act, the Company needs to set aside an amount to legal reserve unless such legal reserve amounts to the total authorized capital. The legal reserve can be used to make good the deficit of the Company. When the Company incurs no loss, it may distribute the portion of legal reserve which exceeds 25% of the paid in capital by issuing new shares or by cash in proportion to the number of shares being held by each of the shareholders.

Details of the 2020 and 2019 appropriation of earnings distribution and dividends per share as approved by the Board meeting and general shareholders’ meeting on February 25, 2021 and June 10, 2020, respectively, are as follows:

Legal reserve Provision (reversal) special reserve Common share cash dividend Total	Appropriation of earnings 2020 2019 $275,977 $196,444 (194,250) (38,262) 2,035,598 1,744,798 $2,117,325 $1,902,980	Earningsper	share(NT$)
	2020 $275,977 (194,250) 2,035,598 $2,117,325	2020 $3.5	2019
			$3

Please refer to Note 6(18) for details on basis of estimation and recognized amount of employees’ compensation and remuneration to directors and supervisors.

Operating revenue

Operating revenue
Revenue from Contracts with Customers Revenue from sale of goods Revenue from rendering of services Total	Q1 of 2021	Q1 of 2020
	$7,858,278 37,396	$6,485,504 29,683
	$7,895,674	$6,515,187

Details about revenue from contracts with customers in Q1 of 2021 and 2020 are stated as follows:

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

(1) Revenue breakdown

A.The Group refers to a single operating department. For the information about revenue disclosed by the department to be reported, please refer to the descriptions in the preceding paragraph.
B.The revenue from contracts with customers and revenue from contracts with customers is the revenue recognized at a point in time.
(2) Contract balances
A. Contract assets-current

Sale of goods	March 31, 2021	December 31, 2020	March 31, 2020	January 1, 2020
	$345,821	$397,242	$255,286	$239,141

The significant changes in the Group’s balances of contract assets for the years ended Q1 of 2021 and 2020 are as follows:

The opening balance transferred to current accounts receivable Increase in current accounts receivable (excluding the amount incurred and transferred to accounts receivable during the period)	Q1 of 2021	Q1 of 2020
	$(397,242) 345,821	$(239,141) 255,286

B. Contract liability-current

Sale of goods	March 31, 2021	December 31, 2020	March 31, 2020	January 1, 2020
	$203,203	$134,198	$148,180	$131,372

The changes in the Group’s balances of contract assets in Q1 of 2021 and 2020 result from the order quantity of steel products, customers’ requirement about shipping schedule and construction progress.

(3)Transaction price allocated to the performance obligation which still has not yet been

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

performed.

As the Group’s contracts with customers for the sale of goods were all no longer than one year until March 31, 2021, December 31, 2020 and March 31, 2020, it is not required for the Group to provide information about the performance obligation which has not yet been performed.

(4)Assets recognized the cost of acquisition or performance of contracts with customers.

None.

Expected credit impairment losses

The Group does not expect that any credit impairment losses will incur in Q1 of 2021 and 2020.

Please refer to Note 12 for information about credit risks.

The Group measures the loss allowance of its contract assets and accounts receivables (including note receivables and accounts receivables) at an amount equal to lifetime expected credit losses. The assessment of the Group’s loss allowance as at March 31, 2021, December 31, 2020 and March 31, 2020 is stated as follows:

(1)The historical credit loss experience about contract assets shows that there are no significant different types of loss varying depending on the different customer groups. Therefore, the loss allowance is measured by different groups and based on the expected credit loss rate. The details are provided as follows:

Total carrying amount Expected credit loss rate Loss allowance Total	March 31, 2021	December 31, 2020	March 31, 2020
	$345,821 0% -	$397,242 0% -	$255,286 0% -
	$345,821	$397,242	$255,286

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

(2)The accounts receivables were grouped by taking into consideration the trading counterpart’s credit rating, region and industry, and the loss allowance thereof is measured by using a provision matrix. Details are as follow:

March 31, 2021

March 31, 2021	1
Net yet due (Note) Total carrying amount $1,522,819 Loss rate 0-1% Lifetime expected credit losses 3,305 Carrying amount $1,519,514 December 31, 2020 Net yet due (Note) Total carrying amount $1,488,248 Loss rate 0-1% Lifetime expected credit losses 3,305 Carrying amount $1,484,943 March 31, 2020 Net yet due (Note) Total carrying amount $1,312,147 Loss rate 0-1% Lifetime expected credit losses 3,305 Carrying amount $1,308,842	Net yet due (Note)			Overdue			Total
		within 30 days	31~60 days	61~90 days	91~120 days	More than 121 days
	$1,522,819 0-1%	$38,680 -%	$ - -%	$ - -%	$ - -%	$ - -%	$1,561,499 3,305
	3,305	-	-	-	-	-
	$1,519,514	$38,680	$ -	$ -	$ -	$ -	$1,558,194
	Net yet due (Note)			Overdue			Total
		within 30 days	31~60 days	61~90 days	91~120 days	More than 121 days
	$1,488,248 0-1%	$5,030 -%	$ - -%	$ - -%	$ - -%	$ - -%	$1,493,278 3,305
	3,305	-	-	-	-	-
	$1,484,943	$5,030	$ -	$ -	$ -	$ -	$1,489,973
				Overdue			Total
		within 30 days	31~60 days	61~90 days	91~120 days	More than 121 days
	$1,312,147 0-1%	$18,580 -%	$ - -%	$ - -%	$ - -%	$ - -%	$1,330,727 3,305
	3,305	-	-	-	-	-
	$1,308,842	$18,580	$ -	$ -	$ -	$ -	$1,327,422

Note: The Group’s notes receivable are all not yet due, and the lifetime expected credit loss on accounts receivable are the credit losses provided in the past years.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

The information about changes in loss allowance for contract assets, notes receivable and accounts receivable in Q1 of 2021 and 2020 is stated as follows:

Contract assets	Notes receivable	Accounts receivable
$ - - -	$1,187 - -	$2,118 - -
$-	$1,187	$2,118
$ - - -	$1,187 - -	$2,118 - -
$-	$1,187	$2,118

17. Lease

(1) Group as a lessee

The Group leases multiple assets, including property and machine & equipment. The valid terms of various lease contracts range from 1 to 50 years.

The effect posed by lease to the Group’s financial position, financial performance and cash flow is described as follows:

A. Amount recognized in balance sheet

(a) Right-of-use assets

Carrying amount of right-of-use asset

Land Machine and equipment Total	March 31, 2021	December 31, 2020	March 31, 2020
	$175,221 2,187	$176,281 2,655	$206,052 4,062
	$177,408	$178,936	$210,114

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

The Group has never added any right-of-use assets in March 31, 2021, December 31, 2020 and March 31, 2020.

(b) Lease liabilities

Lease liabilities
Lease liabilities Current Non-current Total	March 31, 2021	December 31, 2020	March 31, 2020
	$5,127 174,793	$5,109 174,803	$6,260 203,951
	$179,920	$179,912	$210,211

For the Group’s interest expenses on lease liabilities in Q1 of 2021 and 2020, please refer to Note 6, (19).3 Financial Cost. For the analysis about the maturity of lease liabilities dated March 31, 2021, December 31, 2020 and March 31, 2020, please refer to Note 12(5) Liquidity Risk Management.

B. Amount recognized in the statement of comprehensive income

Depreciation of right-of-use assets

Depreciation of right-of-use assets
Q1 of 2021 Land $1,060 Machine and equipment 468 Total $1,528 Lessee’s income and expenses related to lease activities Q1 of 2021 Short-term lease expenses $1,310	Q1 of 2021	Q1 of 2020
	$1,060 468	$1,602 468
	$1,528	$2,070
		Q1 of 2020
	$1,310	$992

C. Lessee’s income and expenses related to lease activities
D. Lessee’s cash outflow related to lease activities

The Group’s total cash outflows from lease in Q1 of 2021 and 2020 were NT$2,217 thousand and NT$2,003 thousand, respectively.

E. Other information related to lease activities

(a) Variable lease payments

Some of the Group’s property lease contracts include the clauses about variable lease payments of the present value of land, which amount is structured with the present value of the leased land. Such variable lease

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.) payments lease is very common in the industry in which the Group is engaged. As the variable lease payments do not satisfy the definition of lease payment, they are excluded from the measurement of assets and liabilities.

(b) Options for extension of lease and options for termination of lease

Some of the Group’s property lease contracts include the option for extension of lease and the option for termination of lease. The non-cancellable period for which the lessee has the right to use an underlying asset, including optional periods when the Group is reasonably certain to exercise an option to extend (or not to terminate) a lease shall be included when deciding the lease period. The exercise of such options may maximize resilience in contract management. Most of the options to extend and terminate a lease can only be exercised by the Group. The Group must reassess the lease period if there is either a significant event or change after the commencement of the lease (as to whether it is still controllable by the Group or whether the Group is still reasonably certain to exercise an option excluded when deciding the lease period previously, or not to exercise an option included when deciding the lease period previously).

N/A.

(2) Group as a lessor

For the disclosure related to the Group’s own investment property, please refer to Note 6(9). The investment property is classified as an operating lease if it doesn’t transfer substantially all the risks and rewards incidental to ownership of an underlying asset.

underlying asset.
Lease income recognized from operating lease Fixed asset payment and income related to variable lease payments that depend on an index or a rate	Q1 of 2021	Q1 of 2020
	$583	$703

For the Group’s disclosure of property, plant and equipment for operating leases applicable under IAS 16, please refer to Note 6(9). The undiscounted lease payments and the total amount of the residual years to be collected by the Group on March 31, 2021, December 31, 2020 and March 31, 2020, for the operating lease contracts executed by the Group, are stated as follows:

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless More than one year More than one year but no more than five years More than two years but no more than three years More than three years but no more than four years More than four years but no more than five years More than five years Total	otherwise provided.) March 31, 2021 December 31, 2020 $2,149 $1,849 1,460 1,552 1,323 1,323 785 785 785 785 10,205 8,635 $16,707 $14,929	otherwise provided.) March 31, 2021 December 31, 2020 $2,149 $1,849 1,460 1,552 1,323 1,323 785 785 785 785 10,205 8,635 $16,707 $14,929	March 31, 2020
	$2,149 1,460 1,323 785 785 10,205	$1,849 1,552 1,323 785 785 8,635	$1,849 1,849 1,460 1,323 785 10,205
	$16,707	$14,929	$17,471

Summary statement of employee benefits, depreciation and amortization expenses by function:

By function bynature	Q1 of 2021	Q1 of 2021	Q1 of 2021	Q1 of 2020	Q1 of 2020	Q1 of 2020
	Operating costs	Operating expenses	Total	Operating costs	Operating expenses	Total
Employee benefit expenses
Salaries	$191,726	$62,512	$254,238	$175,459	$54,258	$229,717
Labor and national health insurance expenses	14,047	9,070	23,117	12,716	7,099	19,815
Pension	6,198	1,235	7,433	6,249	1,310	7,559
Other employee benefit expenses	9,449	2,200	11,649	7,873	1,953	9,826
Depreciation expenses	297,390	12,718	310,108	282,281	12,483	294,764
Amortization expenses	750	-	750	750	-	750

The Group had 901 employees and 873 employees on March 31, 2021 and 2020.

According to the Company’s Articles of Incorporation, where there are annual profits at the end of a financial year, no less than 2% of the profits for such year shall be distributed to employees as the employees’ compensation, and no more than 2% thereof to directors/supervisors as the remuneration. Notwithstanding, the accumulated losses, if any, shall have been covered first. By a resolution adopted by a

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, the Group may have the profit distributable as employees’ compensation in cash and report the same to a shareholders’ meeting. Information on the Board of Directors’ resolution regarding the employees’ compensation and remuneration to directors and supervisors can be obtained from the “Market Observation Post System” on the website of the TWSE.

Based on the profit of the year ended at Q1 of 2021, the Group estimated the amounts of the employees’ compensation and remuneration to directors and supervisors to be 8.11% and 1.47% of profit of the current year, recognized as the employees’ compensation and remuneration to directors and supervisors as NT$75,234 thousand and NT$13,588 thousand. The estimated amounts were based on the profit of the current period and were recognized as salaries. Based on the profit of the year ended at Q1 of 2020, the Group estimated the amounts of the employees’ compensation and remuneration to directors and supervisors to be 8.62% and 1.46% of profit of the current year, recognized as the employees’ compensation and remuneration to directors and supervisors NT$61,243 thousand and NT$10,341 thousand. The estimated amounts were recognized as salaries.

A resolution was passed at a Board of Directors meeting to distribute NT$305,699 thousand and NT$45,000 thousand in cash as employees’ compensation and remuneration to directors and supervisors of 2020, respectively. No material differences exist between the estimated amounts and the amounts stated as expenses in the 2020 financial report.

No material differences exist between the actual distribution of the employee compensation and remuneration to directors and supervisors for the year ended at December 31, 2019 and the amounts stated as expenses in the 2019 financial report.

19. Non-operating revenue and expenditure

(1)Other revenue

Other revenue
Rental revenue Dividend revenue Other revenue - others Total	Q1 of 2021 $583 783 5,218 $6,584	Q1 of 2020
		$703 - 3,985
		$4,688

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

(2)Other gains and losses

Foreign exchange (losses) gains, net Gain on disposal of property, plant and equipment Gain on financial assets at fair value through profit or loss Miscellaneous expenditure Total	Q1 of 2021 $(5,959) 2,992 2,733 (366) $(600)	Q1 of 2020
		$5,045 - - (8)
		$5,037

(3)Financial cost

Interest on borrowings from bank Lease liabilities interest Total	Q1 of 2021 $543 647 $1,190	Q1 of 2020
		$1,609 756
		$2,365

20. Components of other comprehensive income

(1) Components of other comprehensive income in Q1 of 2021 are stated as follows:

Items not re-classified into income: Unrealized gains (losses) from Investment in equity instrument at fair value through other comprehensive income	Arising during theperiod	during the period Re-classificati on adjustments	Others Other comprehensive income	Income tax gains (expenses)	net of tax
	$248,458	$ -	$248,458	$ -	$248,458

(2)Components of other comprehensive income in Q1 of 2020 are stated as follows:

Items not re-classified into income: Unrealized gains (losses) from Investment in equity instrument at fair value through other comprehensive income	Arising during theperiod	during the period Re-classificati on adjustments	Others Other comprehensive income	Income tax gains (expenses)	net of tax
	$(75,300)	$ -	$(75,300)	$ -	$(75,300)

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

21. Income tax

Components of the income tax expense in Q1 of 2021 and 2020 are stated as follows:

Income tax recognized into profit or loss Current income tax expenses: Current income tax payable Deferred income tax expenses: Deferred tax expenses relating to origination and reversal of temporary differences Income tax expenses	Q1 of 2021	Q1 of 2020
	$161,716 1,785	$123,857 3,768
	$163,501	$127,625

Income tax recognized into other comprehensive income

None.

The assessment of income tax returns

As of 31 March 2021, the Company’s income tax returns through 2019 have been assessed and approved by the tax authority.

22. Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to common stockholders of the parent company by the weighted average number of common shares outstanding during the year.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

Diluted earnings per share amounts are calculated by dividing net profit for the year attributable to the common stockholders of the parent company by the weighted average number of common shares outstanding during the year, plus the weighted average number of common shares to be issued when dilutive potential common shares are converted into common shares.

(1) Basic EPS

(1) Basic EPS
Basic EPS Profit attributable to common stockholders of the parent company (in NT$ thousand) Weighted average number of common shares outstanding for basic earnings per share (in thousands) Basic EPS (in NT$) (2) Diluted EPS Diluted EPS Profit attributable to common stockholders of the parent company (in NT$ thousand) Weighted average number of common shares outstanding for basic earnings per share (in thousands) Effect of dilutive potential ordinary shares: Employees’ compensation(in thousands) Weighted average number of ordinary shares used in the computation of diluted earnings (loss) per share Diluted EPS (in NT$)	Q1 of 2021	Q1 of 2020
	$674,923	$511,499
	581,599	581,599
	$1.16	$0.88
	Q1 of 2021	Q1 of 2020
	$674,923	$511,499
	581,599 1,057	581,599 1,327
	582,656	582,926
	$1.16	$0.88

The Company’s calculation of diluted earnings per share and basic earnings per share generated the same results.

There have been no other transactions involving common shares or potential common shares between the reporting period and the date of approval and publication of the financial statements.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

VII. Related party transaction

Information of the related parties that had transactions with the Group during the financial reporting period is as follows:

Name and relationship of the related parties

Name of relatedparty	Relationshipwith the Group The Group’s associate The Group’s associate Subsidiary of the Group’s associate
Taiwan Steel Union Co., Ltd. Fong Yu Resources Co., Ltd. Taiwan Steel Resources Co., Ltd.

Significant transactions with related parties

(1) Accounts payable

The Group’s associate Subsidiary of the Group’s associate Total	March 31, 2021 $6,651 4,524 $11,175	December 31,2020 $6,894 12,513 $19,407	March 31, 2020
			$4,237 7,965
			$12,202

(2) Other transactions

The Group contracted Taiwan Steel Union Co., Ltd. to dispose of the fly ash, and recognized the manufacturing expenses, NT$12,921 thousand and NT$10,284 thousand, in Q1 of 2021 and 2020. Until March 31, 2021 and 2020, NT$6,651 thousand and NT$4,237 thousand have been outstanding and stated as accounts payable.

The Group contracted Taiwan Steel Resources Co., Ltd. to dispose of the reducing slag, and recognized the manufacturing expenses, NT$24,686 thousand and NT$14,038 thousand, in Q1 of 2021 and 2020. Until March 31, 2021 and 2020, NT$4,524 thousand and NT$7,965 thousand have been outstanding and stated as accounts payable.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

(3) Key management personnel compensation

Short-term employee benefits Post-employment benefits Total	Q1 of 2021 $24,938 85 $25,023	Q1 of 2020
		$19,408 86
		$19,494

VIII. Pledged assets

The Group’s pledged assets as follows :

Item		Carryamount		Collateral for
	March 31, 2021	December 31, 2020	March 31, 2020
Non-current assets	$13,686	$13,686	$13,686	Performance guarantees

IX. Major contingent liabilities and commitments made under unrecognized contracts

The guarantee notes issued for loans that have not yet recalled and cancelled were NT$9,942,450 thousand and NT$12,755,250 thousand on March 31, 2021 and 2020.
The letters of guarantee issued by banks upon the Group’s request when importing goods under the “Implementation Regulations Governing Post Release Duty Payment” were NT$30,000 thousand and NT$50,000 thousand on March 31, 2021 and 2020.
Amount of letters of credit already issued but unused (in $ thousand in foreign currency)

Currency	March 31,	December 31,	March 31,
type	2021	2020	2020
USD	$59,456	$58,487	$34,012
JPY	121,697	213,413	587,979
EUR	400	440	305
No security bond has been furnished for said letters of credit			already issued but unused.

The important purchase contracts already executed by the Group are stated as follows:

Contract parties Company A Company B	Terms and conditions Crane renewal project New oxygen plant production project	Total contract price 75,700 JPY 550,000	Paid amount 68,130 JPY 495,000	Outstanding payment until March 31,2021
				7,570 JPY 55,000

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

X. Loss of material disaster

None.

XI. Subsequent events

None.

XII. Others

1. Categories of financial instruments

March 31, 2021	December 31,2020	March 31, 2020
$10,920 3,709,438 1,297,226 345,821 1,558,194 99,027 13,686	$ - 2,772,573 2,174,321 397,242 1,489,973 8,579 13,686	$ - 1,344,353 1,653,513 255,286 1,327,422 12,520 13,686
3,313,954	4,083,801	3,262,427
$7,034,312	$6,856,374	$4,606,780
$826,910 1,604,297 936,535 179,920	$329,941 1,302,794 1,026,124 179,912	$425,720 1,030,126 834,310 210,211
$3,547,662	$2,838,771	$2,500,367

Financial risk management objectives and policies

The Group’s principal financial risk management objective is to manage the market risk, credit risk and liquidity risk related to its operating activities. The Group

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

identifies measures and manages the aforementioned risks based on the Group’s policy and risk appetite.

The Group has established appropriate policies, procedures and internal controls for financial risk management. Before entering into significant transactions, due approval process by the Board of Directors and Audit Committee must be carried out based on related protocols and internal control procedures. The Group shall comply with its financial risk management policies during its financial management activities.

3. Market risk

Market risk is the risk that a financial instrument's fair value or future cash flows will fluctuate because of the changes in market prices. The Group’s market risk primarily includes foreign exchange rate risk, interest rate risk and other price risks.

In practice, it is rarely the case that a single risk variable will change independently from other risk variables, there is usually interdependencies between risk variables. However, the sensitivity analysis disclosed below does not take into account the interdependencies between risk variables.

Foreign exchange rate risk

The Group ’s exposure to the foreign exchange rate risk relates primarily to the Group’s operating activities (when revenue or expense are denominated in a different currency from the Group’s functional currency).

The Group’s foreign currency receivables and foreign currency payables are denominated in the same foreign currency in part. Accordingly, the equivalent positions would generate the natural hedging effect.

The Group’s foreign exchange rate risk sensitivity analysis is performed on the effect posed to the Group’s income by revaluation/devaluation of foreign currency related to the significant monetary items denominated in foreign currencies as at the end of the reporting period. The Group’s foreign exchange rate risk is mainly related to the volatility in the exchange rates for USD, JPY and EUR.

Interest rate risk

The interest rate risk arises when the fluctuation of the market interest rate results in fluctuation in financial instruments' fair value or future cash flow. The Group's interest rate risk arises primarily from the loans with fixed interest rates and floating interest rates.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

The sensitivity analysis on the Group’s interest rate risk was primarily intended to be conducted against the interest rate exposure items at the end of the financial reporting period, including the loan with a floating interest rate, under the hypothesis of holding for one fiscal year when interest rate increases/decrease by 10 basis points.

The sensitivity analysis on the changes in related risks before tax in Q1 of 2021 and 2020 is stated as follows:

Q1 of 2021

Primaryrisk Foreign exchange rate risk Interest rate risk Q1 of 2020 Primaryrisk Foreign exchange rate risk Interest rate risk	Range of change NTD/USD foreign exchange rate+/− 1% NTD/JPY foreign exchange rate+/− 1% Market interest rate +/−10 basis points Range of change NTD/USD foreign exchange rate+/− 1% NTD/JPY foreign exchange rate+/− 1% NTD/EUR foreign exchange rate+/− 1% Market interest rate +/−10 basis points	Income sensitivity +/- $(6,147) +/- $(103) -/+ $827 Income sensitivity +/- $(2,903) +/- $(87) +/- $(102) -/+ $426	Equitysensitivity
			- - - Equitysensitivity
			- - - -

Equity price risk

The fair value of the Group’s TWSE/TPEx-listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group’s TWSE/TPEx-listed and unlisted equity securities are

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

classified as at fair value through profit or loss and at fair value through other comprehensive income. The Group manages the equity price risk through diversification of investment and placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Group’s senior management on a regular basis. The Group’s Board of Directors reviews and approves all equity investment decisions.

A change of 1% in the price of the equity securities measured at fair value through profit or loss could have the impact of NT$109 thousand and NT$0 thousand on the Group’s equity in Q1 of 2021 and 2020.

A change of 1% in the price of the TWSE/TPEx-listed stocks in the investment in equity instruments measured at fair value through other comprehensive income could impact NT$27,902 thousand and NT$5,911 thousand on the Group’s equity in Q1 of 2021 and 2020.

4. Credit risk management

Credit risk is the risk that a trading counterpart will not meet its obligations under a contract, leading to a financial loss. The Group is exposed to credit risk from operating activities (primarily for contract assets, accounts receivables and notes receivables) and from its financing activities (primarily for bank deposits and other financial instruments).

Credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to credit risk management. Credit limits are established for all trading counterparts based on their financial position, rating from credit rating agencies, historical experience in transactions, prevailing economic conditions and the Group’s internal rating criteria, etc. The Group also uses certain credit enhancing procedures (such as unearned sales revenue and insurance, etc.) to mitigate certain trading counterparts’ credit risk.

As of March 31, 2021, December 31, 2020 and March 31, 2020, amounts receivables from the top ten customers and accounts receivable represent 21.95%, 24.53% and 26.60% of the balance of the Group’s contract assets and total accounts receivables, respectively. The credit concentration risk of other contract assets and accounts receivables is insignificant.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

The Group’s treasury manages credit risk from balances with bank deposits and other financial instruments in accordance with the Group’s policy. The Group only transacts with trading counterparts approved by the internal control procedures, which are banks and financial institutions, companies and government entities with good credit ratings. Consequently, there is no significant credit risk for these trading counterparts.

5. Liquidity risk management

The Group’s objective is to maintain financial resilience through instruments including cash and cash equivalents and bank loan contracts. The table below summarizes the maturity profile of the Group’s financial liabilities based on the earliest date when the repayment is required and the undiscounted cash flows thereof. The undiscounted interest amounts of the cash flow of interest at floating rate are extrapolated based on the estimated interest rate yield curve as of the end of the reporting period.

Non-derivative financial liabilities

March 31, 2021 Short-term loan Notes and accounts payable Other payables Lease liability (Note) December 31, 2020 Short-term loan Notes and accounts payable Other payables Lease liability (Note)	Less than oneyear $832,126 1,604,297 936,535 7,679 $332,860 1,302,794 1,026,124 7,679	2~3years $ - - - 11,204 $ - - - 11,842	4~5years $ - - - 10,883 $ - - - 10,883	More than 5 years $ - - - 212,226 $ - - - 212,226	Total
					$832,126 1,604,297 936,535 241,992 $332,860 1,302,794 1,026,124 242,630

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

March 31, 2020 Short-term loan Notes and accounts payable Other payables Lease liability	Less than oneyear $438,163 1,030,126 834,310 9,240	2~3years $ - - - 14,915	4~5years $ - - - 12,358	More than 5 years $ - - - 247,155	Total
					$438,163 1,030,126 834,310 283,668

(Note)

Note: The following table provides further details about analysis on maturity of lease liabilities:

Less than oneyear March 31, 2021 $7,679 December 31, 2020 7,679 March 31, 2020 9,240			Maturityof lease liabilities	Maturityof lease liabilities
	Less than oneyear	2~5years	6~10years	11~15years	More than 15years	Total
		$22,087 22,725 27,273	$27,208 27,208 30,894	$27,209 27,209 30,894	$157,809 157,809 185,367	$241,992 242,630 283,668

Derivative financial liabilities

None.

Reconciliation of liabilities from financing activities

Information about reconciliation of liabilities in Q1 of 2021:

January 1, 2021 Cash Flow Not changes in cash March 31, 2021	Short-term loan	Lease liabilities	Total
	$329,941 496,969 -	$179,912 (639) 647	$509,853 496,330 647
	$826,910	$179,920	$1,006,830

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

Information about the reconciliation of liabilities in Q1 of 2020:

January 1, 2020 Cash Flow Not changes in cash March 31, 2020	Short-term loan	Lease liabilities	Total
	$381,151 44,569 -	$210,403 (948) 756	$591,554 43,621 756
	$425,720	$210,211	$635,931

7. Fair value of financial instruments

(1) The methods and assumptions applied in determining the fair value of financial instruments:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group used the following methods and assumptions to measure or disclose the fair values of financial assets and financial liabilities:

A. The carrying amount of cash and cash equivalents, accounts receivables, accounts payable and other current liabilities

approximate their fair value due to their short maturities.

B. For financial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quotation price (including TWSE/TPEx-listed stocks and bonds).
C. For equity instruments not traded in an active market (including a public company’s stocks not traded in an active market and stocks issued by an unlisted company), the fair value is assessed under the market approach. That is, the fair value is estimated based on the price generated from the market where an identical or a comparable company’s equity instruments are traded, and other critical information (e.g. the inputs including discount for lack of marketability, similar company’s P/E ratio, similar company’s P/B ratio, etc.).
D. For investment in debt instruments without active market quotation, bank loans and other non-current liabilities, the fair value is decided based on the trading

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

counterpart’s quotation or valuation technique. The valuation technique is decided based on an analysis of cash flow discounts. The interest rate and discount rate hypotheses are based on the information related to similar instruments (e.g. TWSE reference interest rate yield curve, average quotation of promissory note interest rate and credit risk, etc.).

(2) Fair value of financial instruments measured at amortized cost

The carrying amounts of the Group’s financial assets and financial liabilities measured at amortized cost approximate their fair values.

(3) Fair value measurement hierarchy for financial instruments

Please refer to Note 12(9) for the fair value measurement hierarchy for financial instruments of the Group.

8. Derivatives

The Group has never held the derivative financial instruments for trading by March 31, 2021, December 31, 2020 and March 31, 2020.

9. Fair value hierarchy

(1) Fair value measurement hierarchy

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. Each level of inputs is described as follows:

Level 1: quoted (unadjusted) market prices in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2: Other than quoted prices included within Level 1 are observable for the asset or liability, either directly or indirectly.
Level 3: unobservable inputs for the asset or liability.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

For assets and liabilities measured at fair value on a recurring basis, the Group reevaluates their classification at the end of each reporting period to determine the amount of any transfer between different fair value hierarchy levels.

(2) Fair value measurement hierarchy

The Group does not have assets that are measured at fair value on a non recurring basis. The fair value measurement hierarchy of the Group’s assets and liabilities measured at fair value on a recurring basis is as follows:

	March 31,2021	March 31,2021
Level 1 $10,920 2,790,202	Level 2		Total
			$10,920 3,709,438
Level 1 $1,945,605	Level 2 Level 3 $ - $826,968 March 31,2020	Level 3	Total
			$2,772,573
Level 1 $591,140	Level 2 $ -	Level 3 $753,213	Total
			$1,344,353

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

Transfers between Level 1 and Level 2 during the period

During Q1 of 2021 and 2020, there were no transfers between Level 1 and Level 2 fair value measurements for the Group’s assets and liabilities measured at fair value on a recurring basis.

Details about changes in Level 3 fair value measurements

The balances of the Group’s assets and liabilities measured at fair value on a recurring basis categorized into Level 3 of the fair value hierarchy are reconciliated as follows from beginning to ending:

January 1, 2021 Total gains (losses) recognized in Q1 of 2021: Recognized into other comprehensive income (stated into the “unrealized gains (losses) from Investment in equity instrument at fair value through other comprehensive income”) Acquisition March 31, 2021 January 1, 2020 Total gains (losses) recognized in Q1 of 2020: Recognized into other comprehensive income (stated into the “unrealized gains (losses) from Investment in equity instrument at fair value through other comprehensive income”) March 31, 2020		Assets
		At fair value through other comprehensive income
		Stocks
		$826,968 (7,732) 100,000
		$919,236
		$779,572 (26,359)
		$753,213

Information on significant unobservable inputs to the fair value of Level 3 of the fair value hierarchy

Description of significant unobservable inputs to the Group’s assets measured at fair value on a recurring basis categorized within Level 3 of the fair value

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.) hierarchy is as follows:

March 31, 2021:

Valuation technique Financial assets: Financial assets at fair value through other comprehensive income Stocks and others Market approach December Valuation technique Financial assets: Financial assets at fair value through other comprehensive income Stocks and others Market approach	Valuation technique	Significant unobservable inputs	Quantitative information	Relationship between inputs and fair value	Sensitivity analysis of the input to fair value
		Discount for lack of marketability and discount for minority interest 31, 2020: Significant unobservable inputs	10%-30% Quantitative information	The higher the discount for lack of marketability, the lower the estimated fair value. Relationship between inputs and fair value	10% increase (decrease) in the discount for lack of marketability and discount for minority interest would result in (decrease) increase in the Group’s equity by NT$91,924 thousand. Sensitivity analysis of the input to fair value
	Market approach	Discount for lack of marketability and discount for minority interest	10%-30%	The higher the discount for lack of marketability, the lower the estimated fair value.	10% increase (decrease) in the discount for lack of marketability and discount for minority interest would result in (decrease) increase in the Group’s equity by NT$82,697 thousand.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

March 31, 2020:

Financial assets: Financial assets at fair value through other comprehensive income Stocks and others	Valuation technique	Significant unobservable inputs	Quantitative information	Relationship between inputs and fair value	Sensitivity analysis of the input to fair value
	Market approach	Discount for lack of marketability and discount for minority interest	10%-30%	The higher the discount for lack of marketability, the lower the estimated fair value.	10% increase (decrease) in the discount for lack of marketability and discount for minority interest would result in (decrease) increase in the Group’s equity by NT$75,321 thousand.

Valuation process used for fair value measurements categorized within Level 3 of the fair value hierarchy

The Group ’s Financial Department is responsible for validating the fair value measurements and ensuring that the results of valuation are in line with market conditions, based on independent and reliable inputs which are consistent with other information, and represent exercisable prices. The Department analyzes the movements in the values of assets and liabilities required to be remeasured or reassessed as per the Group ’s accounting policies at each reporting date to ensure that the results of valuation are reasonable.

(3)Fair value measurement hierarchy of the Group’s assets and liabilities not measured at fair value but for which the fair value is disclosed

Financial assets for which only the fair value is disclosed: Investment property (See Note 6(9) for details) Investment under equity method (See Note 6(7) for details)		March 31,2021	March 31,2021
	Level 1 $ - 1,767,037	Level 2 $ - -	Level 3 $1,068,869 -	Total
				$1,068,869 1,767,037

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

	December 31,2020	December 31,2020
Level 1 $ - 1,766,921	Level 2 Level 3 $ - $1,068,869 - - March 31,2020		Total
			$1,068,869 1,766,921
Level 1 $ - 1,161,510	Level 2 $ - -	Level 3 $627,522 -	Total
			$627,522 1,161,510

Significant assets and liabilities denominated in foreign currencies

Information regarding the Group’s significant assets and liabilities denominated in foreign currencies is listed below:

Unit: NT$ thousand

							Unit: NT$ thousand	Unit: NT$ thousand	Unit: NT$ thousand
Financial assets	March 31, 2021			December 31, 2020			March 31, 2020
	Foreign currency	Foreign exchange rate	NTD	Foreign currency	Foreign exchange rate	NTD	Foreign currency	Foreign exchange rate	NTD
	$10,281 - 2 $31,749 - 39,540	28.4850 33.3010 0.2559 28.5850 33.6610 0.2597	$292,843 - - $907,516 - 10,269	$7,886 - 2 $12,744 7 97,060	28.0500 34.3650 0.2706 28.1500 34.7250 0.2744	$221,203 - - $358,720 252 26,633	$6,701 - 2 $16,261 307 30,800	30.1950 33.0750 0.2773 30.2950 33.4350 0.2811	$202,343 - - $492,626 10,248 8,658
Monetaryitems:
USD EUR JPY Financial liabilities
Monetaryitems:
USD EUR JPY

In consideration of the multiple functional currencies adopted by the Group’s entities, it is impossible for the Group to disclose the information about exchange gains/losses on various significant assets and liabilities denominated in foreign currencies. For Q1 of 2021 and 2020, the Group’s foreign currency exchange gains (losses) were NT$(5,959) thousand and NT$5,045 thousand, respectively.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

The above information is disclosed based on the carrying amount of foreign currency (after conversion to functional currency).

11. Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business operations and maximize its shareholders’ equity. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.

XIII. Additional disclosures

1.Information about significant transactions
(1) Financing provided to others: None.
(2) Endorsements/guarantees provided: None.

(3) Marketable securities held, ending:

Holding company’ s name	Type of securiti es	Name of securities	Relatio nship with the securiti es issuer	Financial statement account	Ending	Ending	Ending	Ending	Ending
					Quantity of shares	Carrying amount	Shareho lding	Fair value	Rema rks
Feng Hsin Steel Co., Ltd. Feng Hsin Steel Co., Ltd.	Stocks Stocks	Evergreen Marine Corporation Yuanta/P-shares Taiwan Dividend Plus ETF Taiwan Cement Corporation Charoen Pokphand Enterprise (Taiwan) Co., Ltd. Formosa Plastics Corporation Formosa Taffeta Co., Ltd. China Steel Corporation Tung Ho Steel Enterprise Corp. Hon Hai Precision Industry Co., Ltd.	- - - - - - - - -	Financial assets at fair value through profit or loss - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current	240,000 3,376,000 2,426,000 717,000 1,247,000 3,162,000 10,395,000 5,507,000 160,000	$10,920 116,911 113,537 54,922 125,947 97,390 269,231 245,337 19,840	- 0.17% 0.04% 0.27% 0.02% 0.19% 0.07% 0.54% -	$10,920 116,911 113,537 54,922 125,947 97,390 269,231 245,337 19,840

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

	(Cont’d)	(Cont’d)	(Cont’d)
	(NT$Thousand,unless otherwise			provided.)
		Relatio				Ending
Name of securities		nship with the securiti es	Financial statement account	Quantity of shares	Carrying amount		Shareho lding	Fair value	Rema rks
		issuer
Taiwan Semiconductor		-	Financial assets at fair value through	313,000	183,731		-	183,731
Manufacturing Company, Ltd.			other comprehensive income -
			current
Synnex Technology International		-	Financial assets at fair value through	2,426,000	132,217		0.15%	132,217
Corporation			other comprehensive income -
			current
Asustek Computer Incorporation		-	Financial assets at fair value through	401,000	149,372		0.05%	149,372
			other comprehensive income -
			current
DA-CIN Construction Co., Ltd.		-	Financial assets at fair value through	1,847,000	59,750		0.56%	59,750
			other comprehensive income -
			current
Huaku Development Co., Ltd.		-	Financial assets at fair value through	575,000	53,590		0.21%	53,590
			other comprehensive income -
			current
Mega Financial Holding Co., Ltd.		-	Financial assets at fair value through	3,589,000	114,489		0.03%	114,489
			other comprehensive income -
			current

		(Cont’d)	(Cont’d)	(Cont’d)	(Cont’d)	(Cont’d)	(Cont’d)	(Cont’d)	(Cont’d)
		(NT$Thousand,unless otherwiseprovided.)
Holding company’ s name	Type of securiti es	Name of securities	Relatio nship with the securiti es issuer	Financial statement account		Ending
					Quantity of shares	Carrying amount	Shareho lding	Fair value	Rema rks
Feng Hsin Steel Co., Ltd.	Stocks	Taiwan Semiconductor Manufacturing Company, Ltd. Synnex Technology International Corporation Asustek Computer Incorporation DA-CIN Construction Co., Ltd. Huaku Development Co., Ltd. Mega Financial Holding Co., Ltd.	- - - - - -	Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current	313,000 2,426,000 401,000 1,847,000 575,000 3,589,000	183,731 132,217 149,372 59,750 53,590 114,489	- 0.15% 0.05% 0.56% 0.21% 0.03%	183,731 132,217 149,372 59,750 53,590 114,489
Feng Hsin Steel Co., Ltd.	Stocks	SinoPac Financial Holdings Company Limited WPG Holdings Limited YungShin Global Holding Corporation Far Eastone Telecommunications Co., Ltd. Pegatron Corporation Zhen Ding Technology Holding Limited Taiwan Printed Circuit Board Techvest Co., Ltd. Taiwan Hon Chuan Enterprise Co., Ltd. Chien Shing Harbour Service Co., Ltd. Fengshuo Investment Co., Ltd. Gwo Uei Metals Industry Co., Ltd. Gwo Huei Iron & Steel Co., Ltd. Ascentek Venture Capital Corporation Taichung International Entertainment Corporation	- - - - - - - - - - - - - -	Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Total Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income -	9,263,000 2,562,000 2,491,000 1,634,000 1,583,000 830,000 1,214,000 861,000 8,203,800 3,640,000 3,800,000 3,800,000 70,560 1	119,030 125,026 110,102 104,739 117,300 100,015 63,007 59,581	0.08% 0.14% 0.93% 0.05% 0.06% 0.09% 0.45% 0.30% 10.11% 18.20% 19.00% 19.00% 5.35% 0.03%	119,030 125,026 110,102 104,739 117,300 100,015 63,007 59,581 $255,138 221,945 50,872 34,217 4,656 970
						$2,535,064
						$255,138 221,945 50,872 34,217 4,656 970

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

		(Cont’d)	(Cont’d)	(Cont’d)
		(NT$Thousand,unless otherwise			provided.)
Holding company’ s name	Type of securiti es	Name of securities	Relatio nship with the securiti es issuer	Financial statement account		Ending
					Quantity of shares	Carrying amount	Shareho lding	Fair value	Rema rks
Feng Hsin Steel Co., Ltd. GREAT FORTUN E HOLDING LIMITED	Stocks Stocks	China Trade and Development Corporation Pro-Ascentek Investment Corporation Shihlien China Holding Co.,Ltd.	- - -	non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Total	1,925 10,000,000 23,033,543	25 91,140 515,411	- 8.33% 5.63%	25 91,140 515,411
						$1,174,374

(4) Marketable securities acquired and disposed of at costs or prices for 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 costs for at least NT$300 million or 20% of the paid-in capital: None.
(7) Total sales to or purchases from related parties amounting to at least NT$100 million or 20% of the paid-in capital: None.
(8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: None.
(9) Trading in derivative instruments: None.
(10) Others: Significant intercompany transactions and amounts between parent company and subsidiaries, and among various subsidiaries (amounting to at least NT$100 million or 20% of the paid-in capital): None.

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

2.Information related to investees

The information about investees in which the Group may exert material influence or control directly or indirectly (exclusive of investees in Mainland China) is stated as follows:

Name of investor	Name of investee	Location	Scope of Main Business	Initial Investment	Initial Investment	Endingbalance	Endingbalance	Endingbalance	Profit (loss) of investee (Note)	Investment profit (loss) recognized in the current period	Remar ks
				Ending balance	End of last year	Quantity of shares	Ratio	Carrying amount
Feng Hsin Steel Co., Ltd.	GREAT FORTUNE HOLDING LIMITED	Offshore Chamber, P.O. Box217, Apia, Samoa	General investment business	$971,367	$971,367	31,406,834	100.00%	$516,473	$16	$16	Subsi diary compa ny of the Comp any
Feng Hsin Steel Co., Ltd.	Taiwan Steel Union Co., Ltd.	No. 36, Xiangong N. 1st Rd., Shengang Township, Changhua County 509, Taiwan (R.O.C.)	General business and hazardous industrial waste treatment, the manufacture and sale of zinc oxide and non-metallic mineral products.	$249,775	$199,883	23,943,587	21.52%	$707,818	$65,553	$14,107	Assoc iated compa ny of the Comp any
Feng Hsin Steel Co., Ltd.	Fong Yu Resources Co., Ltd.	No.998, Jiahou Rd., Sec. 1, Houli Dist., Taichung City 421, Taiwan (R.O.C.)	General business and hazardous industrial waste treatment	$516,250	$516,250	51,625,000	29.71%	$507,971	$(9,953)	$(2,958)	Assoc iated compa ny of the Comp any
Feng Hsin Steel Co., Ltd.	Wen-Shan Enterprise Co., Ltd.	No.16, Wuncyuan Ln., Sec. 1, Dongguan Rd., Heping Dist., Taichung City 42444, Taiwan (R.O.C.)	General business and the operation of hotel industry	$209,777	$209,777	18,000,000	18.00%	$178,814	$38,841	$6,992	Assoc iated compa ny of the Comp any

Note: The recognized investment income on each company has been included in the subsidiary’s investment income, and derecognized from the consolidated financial statements.

3.Information on investments in mainland China:

(1) The information about investees in Mainland China invested by the Group via GREAT FORTUNE HOLDING LIMITED indirectly is stated as follows:

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

Name of Investee in Mainland China	Name of Investee in Mainland China	Scope of Main Business	Paid-in capital	Mode of investment	Accumulated outward remittance for investment from Taiwan, beginning	Amount remitted or recovered in the current period	Amount remitted or recovered in the current period	Accumulated outward remittance for investment from Taiwan, ending	Investee’s current income	Direct and indirect shareholding of the Company	Investment profit (loss) recognized in the current period	Carrying amount of investme nt, ending (Note 1)	Accumul ated investme nt income received until the end of the period
						Outwar d remittan ce	Recover ed
Shihlien Chemical Industrial Jiangsu Co.		Sodium carbonate, which is the ingredient of glass production	USD 800,000,000	Investment in Mainland China companies through a company invested and established in a third region	$779,145 (USD27,352,800 )	-	-	$779,145 (USD27,352,800 )	Note 1	3.15%	$-	$488,816	$ -
Shihlien Brine Huaian Co.		Brine, which is the ingredient of sodium carbonate	USD 32,000,000	Investment in Mainland China companies through a company invested and established in a third region	$42,351 (USD1,486,800)	-	-	$42,351 (USD1,486,800)	Note 1	3.94%	$-	$26,595	$ -

	Accumulated investment in Mainland China remitted outward from Taiwan, ending (Note 3)				Investment amounts authorized by Investment Commission, MOEA (Note 3)				Upper limit on investment in Mainland China required by Investment Commission,MOEA
									Net value x 60%
	$821,496 (USD 28,839,600)				$821,496 (USD 28,839,600)				$12,217,967 (Note 2)

Note 1: The existing investees invested by the Group’s subsidiaries in a third region are stated as financial assets at fair value through other comprehensive income-non-current.

Note 2: According to the requirements by Investment Commission, Ministry of Economic Affairs, the investment amount authorized to the Group for investment in Mainland China is no more than 60% of the net value.

Note 3: The related figures herein shall be expressed in NTD. If a foreign currency is involved, it shall be translated to NTD at the foreign exchange rate referred to in the balance sheet.

(2) Significant intercompany transactions between the Group and investees in Mainland China, directly or indirectly, via a third region: None.
4.Information about major shareholders

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

The Company had no shareholders with a stake of more than 5% on March 31, 2021, December 31, 2020 and March 31, 2020.

XIV. Information about segment

The Group’s revenue is primarily generated from manufacturing, processing and trading of various angle steel, round bar and flat-rolled steel products. The management judges that the Group should be a single operating segment.

AI assistant

FH — Interim / Quarterly Report 2021

51946_rns_2021-10-26_42b2a730-fe03-4039-a1ee-5cd7c50d545d.pdf

Stock Code: 2015

Feng Hsin Steel Co., Ltd. and its Subsidiaries

Consolidated Financial Statements and Independent Auditor’s Report

January 1 to March 31, 2021 and January 1 to March 31, 2020

Independent Auditor’s Report

To: Feng Hsin Steel Co., Ltd.

Foreword

Scope

Conclusion

Other Matters - About other CPAs’ review

Notice to Readers

Feng Hsin Steel Co., Ltd. and its Subsidiaries Consolidated Balance Sheets March 31, 2021, December 31, 2020 and March 31, 2020

Feng Hsin Steel Co., Ltd. and its Subsidiaries Consolidated Balance Sheets (Cont’d) March 31, 2021, December 31, 2020 and March 31, 2020

Feng Hsin Steel Co., Ltd. and its Subsidiaries

January 1 to March 31, 2021 and 2020

Feng Hsin Steel Co., Ltd. and its Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity January 1 to March 31, 2021 and 2020

Feng Hsin Steel Co., Ltd. and its Subsidiaries Consolidated Statements of Cash Flow

January 1 to March 31, 2021 and 2020

I. History

II. Date and Procedure for Authorization of Financial Statements

(NT$ Thousand, unless otherwise provided.)

(NT$ Thousand, unless otherwise provided.)

(2) IFRS 17 “Insurance Contracts”

(Cont’d)

(NT$ Thousand, unless otherwise provided.)

Amendments to IFRS 9 “Financial Instruments”

Amendments to the illustrative example accompanying IFRS 16 “Leases”

Amendments to IAS 41

(NT$ Thousand, unless otherwise provided.)

IV. Summary of significant accounting policies

1. Statement of Compliance

2. Basis of preparation

(NT$ Thousand, unless otherwise provided.)

Principles for preparation of consolidated financial statements

Entities in the preparation of consolidated financial statements:

4. Foreign currency transaction

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

(NT$ Thousand, unless otherwise provided.)

6. Cash and cash equivalents

7. Financial instruments

(1) Recognition and measurement of financial assets

Financial assets measured at amortized cost

Financial assets at fair value through other comprehensive income

(NT$ Thousand, unless otherwise provided.)

Financial assets at fair value through profit or loss

(2) Impairment of financial assets

(NT$ Thousand, unless otherwise provided.)

Classification between liabilities or equity

Equity instrument

Financial liabilities

Financial liabilities measured at amortized cost

Derecognition of financial liabilities

(NT$ Thousand, unless otherwise provided.)

8. Fair value measurement

(NT$ Thousand, unless otherwise provided.)

9. Inventories

10. Investment under equity method

Notes to Consolidated Financial Statements of Feng Hsin Steel Co., Ltd. and its Subsidiaries (Cont’d)

(NT$ Thousand, unless otherwise provided.)

11. Property, plant and equipment

12. Investment property

(NT$ Thousand, unless otherwise provided.)

13. Lease

Group as a lessee

(NT$ Thousand, unless otherwise provided.)

Group as a lessor

(NT$ Thousand, unless otherwise provided.)

14. Impairment of non financial assets

(NT$ Thousand, unless otherwise provided.)

Sale of goods

Rendering of services

(NT$ Thousand, unless otherwise provided.)

16. Borrowing costs

17. Post employment benefits

(NT$ Thousand, unless otherwise provided.)

FH Interim / Quarterly Report 2021