Stock code: 2008

Kao Hsing Chang Iron & Steel Corp. Financial Statements and Independent Auditor's Report

2021 and 2020

Company Address: No. 318, Zhonghua 1st Road, Gushan District, Kaohsiung City TEL: (07)555-6111

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Item . Cover Page II. Table of Contents III. Accountants Audit Report IV. Balance Sheet V. Statements of Comprehensive Income VI. Statement of Changes in Equity VII. Statement of Cash Flow VIII. Notes to Financial Statements (I) Company history (II) Financial statement approval date and procedures (III) Application of new and amended standards and interpretations (IV) Summary of significant accounting policies (V) Sources of uncertainty to significant accounting judgments, estimates, and assumptions (VI) Notes to major accounts (VII) Related party transactions (VIII) Pledged assets (IX) Major contingent liabilities and unrecognized contractual commitments (X) Losses from major disasters (XI) Major post-balance sheet events (XII) Others (XIII) Other disclosures 1. Information relating to significant transactions 2. Information on business investments 3. Information relating to investments in the Mainland 4. Information on principal shareholders (XIV) Segment information IX. Details of major accounts	Page No.
	1 2 3 4 5 6 7 8 8 8-9 9-24 24-25 25-57 57-59 59 59 59 59 59-61 61-63 63-64 64 64 64-67 67-82

Item
.
Cover Page
II.
Table of Contents
III.
Accountants Audit Report
IV.
Balance Sheet
V.
Statements of Comprehensive Income
VI.
Statement of Changes in Equity
VII.
Statement of Cash Flow
VIII. Notes to Financial Statements
(I) Company history
(II) Financial statement approval date and procedures
(III) Application of new and amended standards and interpretations
(IV) Summary of significant accounting policies
(V) Sources of uncertainty to significant accounting judgments,
estimates, and assumptions
(VI) Notes to major accounts
(VII) Related party transactions
(VIII) Pledged assets
(IX) Major contingent liabilities and unrecognized contractual
commitments
(X) Losses from major disasters
(XI) Major post-balance sheet events
(XII) Others
(XIII) Other disclosures
1. Information relating to significant transactions
2. Information on business investments
3. Information relating to investments in the Mainland
4. Information on principal shareholders
(XIV) Segment information
IX. Details of major accounts

Page No.

1
2
3
4
5
6
7
8
8
8-9
9-24
24-25
25-57
57-59
59
59
59
59
59-61
61-63
63-64
64
64
64-67
67-82

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Accountants Audit Report

To the board of directors of Kao Hsing Chang Iron & Steel Corp.:

Audit opinion

Regarding the balance sheet of Kao Hsing Chang Iron & Steel Corp. on December 31, 2021 and 2020, the comprehensive income statement, statement of changes in equity, and cash flow statement, as well as notes to the individual financial statements from January 1 to December 31, 2021 and 2020 (including a summary of major accounting policies), these have been audited by the accountants.

According to the opinion of the accountants, the above-mentioned consolidated financial statements are prepared in all material respects in accordance with the financial reporting standards of securities issuers, the International Financial Reporting Standards, International Accounting Standards, Interpretation and Interpretation Announcements approved and issued by the Financial Supervisory Commission. They are sufficient to express the financial situation of Kao Hsing Chang Iron & Steel Corp. on December 31, 2021 and 2020 and the financial performance and cash flows from January 1 to December 31 in 2021 and 2020.

Basis of Audit Opinion

The accountant performs the audit work in accordance with the accountant ’s rules for auditing financial statements and generally accepted auditing standards. The accountants’ responsibilities under these standards will be further explained in the accountability sections of the accountants' audits of individual financial statements. The personnel subject to the independence norms of the firm affiliated with these accountants have maintained detachment and independence from Kao Hsing Chang Iron & Steel Corp. in accordance with accountant professional ethics norms, and have performed other responsibilities of the norms. The accountant believes that sufficient and appropriate audit evidence has been obtained to serve as the basis for expressing an audit opinion.

Key audit items

Key audit items refer to the most important items for the audit of the 2021 financial statements of Kao Hsing Chang Iron & Steel Corp. according to the professional judgment of the accountant. These matters have been dealt with in the process of checking the individual and overall financial statements and the formation of the audit opinion. The accountant does not express an opinion on these matters separately. The accountants judge that the key audit items that should be communicated in the audit report are as follows:

Inventory valuation

For accounting policies on inventory valuation, please refer to Note IV(VII) of the financial report; for accounting estimates, assumptions, and uncertainties, please refer to Note V of the financial report; for detailed disclosure on inventory valuation, please refer to Note VI(V) of the financial report.

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Explanation of key audit issues:

Kao Hsing Chang Iron & Steel Corp. carries inventory mainly in the form of steel pipes and cold-rolled steel sheets, which are measured at the lower of cost and net realizable value. Given how susceptible the global steel market is to changes in raw material price, there may be significant volatility in product sales, demand, and pricing following a change of competitive landscape or industry environment. Due to the fact that estimation for net realizable value of inventory involves subjective judgments from the management of Kao Hsing Chang Iron & Steel Corp., it is possible that inventory cost may be stated above its net realizable value, which we considered an issue of high concern when auditing financial statements.

Audit procedures:

In terms of inventory valuation, we conducted a physical stock take at the end of the year to examine the state of inventory carried on hand, reviewed the inventory aging report, and analyzed inventory turnover rates and aging changes to determine the rationality of valuation allowances that Kao Hsing Chang Iron & Steel Corp. had provided on inventory. Given that the management of Kao Hsing Chang Iron & Steel Corp. had adopted the net realizable value approach, we also checked selling prices and analyzed the percentage of selling expenses shown on sales orders to establish rationality in the pricing and expense of sales. For slowmoving inventory items, we examined the levels of devaluation loss provided in previous periods to determine whether the management of Kao Hsing Chang Iron & Steel Corp. had made adequate valuation allowance on inventory. We also assessed the fairness of related disclosures made by Kao Hsing Chang Iron & Steel Corp.

Responsibilities of the management and governance body to the financial statements

Responsibilities of the management were to prepare and ensure fair presentation of financial statements in accordance with "Regulations Governing the Preparation of Financial Reports by Securities Issuers" and the version of International Financial Reporting Standards, International Accounting Standards and interpretations thereof approved and published by the Financial Supervisory Commission, and to exercise proper internal control practices that are relevant to the preparation of financial statements so that the financial statements are free of material misstatements, whether caused by fraud or error.

The management's responsibilities when preparing financial statements also involved: assessing the ability of Kao Hsing Chang Iron & Steel Corp. to operate, disclose information, and account for transactions as a going concern unless the management intends to liquidate or cease business operations, or is compelled to do so with no alternative solution.

The governance body of Kao Hsing Chang Iron & Steel Corp. (including the Audit Committee) is responsible for supervising the financial reporting process.

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Auditors' responsibilities in the audit of financial statements

The purposes of our audit were to obtain reasonable assurance of whether the financial statements were prone to material misstatements caused by fraud or error, and issue a report of our audit opinions. We considered assurance to be reasonable only if it is highly credible. However, audit tasks conducted in accordance with generally accepted auditing principles do not necessarily guarantee detection of all material misstatements within the financial statements. Misstatements can arise from fraud or error. Misstatements are considered material if the individual amount or aggregate total is reasonably expected to affect economic decisions of the financial statement user.

When conducting audits in accordance with generally accepted auditing principles, we exercised judgments and raised doubts as deemed professionally appropriate. We also performed the following tasks as an auditor:

Identified and assessed risks of material misstatement due to fraud or error; designed and executed appropriate response measures for the identified risks; and obtained adequate and appropriate audit evidence to support audit opinions. Fraud may involve conspiracy, forgery, intentional omission, untruthful declaration, or breach of internal control, and our audit did not find any material misstatement where the risk of fraud is greater than the risk of error.
Developed relevant understanding of internal control for the audit in order to design audit procedures that are appropriate for the given circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of Kao Hsing Chang Iron & Steel Corp.
Assessed the appropriateness of accounting policies adopted by the management, and the rationality of accounting estimates and related disclosures made.
Formed conclusions regarding the appropriateness of managements decision to account for the business as a going concern, and whether there are doubts or uncertainties about the ability of Kao Hsing Chang Iron & Steel Corp. to operate as a going concern, based on the audit evidence obtained. We are bound to remind financial statement users and make related disclosures if material uncertainties exist in regards to the above mentioned events or circumstances, and amend audit opinions when the disclosures are no longer appropriate. Our conclusions are based on the audit evidence obtained up to the date of audit report. However, future events or change of circumstances may still render Kao Hsing Chang Iron & Steel Corp. no longer capable of operating as a going concern.

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Assessed the overall presentation, structure and contents of the financial statements (including related footnotes), and whether transactions and events are presented appropriately in the financial statements.
Obtained sufficient and appropriate audit evidence on the financial information of equity-accounted investments, and expressed opinions on financial statements. Our responsibilities as auditor are to instruct, supervise, and execute audits and form audit opinions on Kao Hsing Chang Iron & Steel Corp.

We have communicated with the governance body about the scope, timing, and significant findings (including significant defects identified in the internal control) of our audit. We have also provided the governance body with a declaration of independence stating that all relevant personnel of the accounting firm have complied with auditors' professional ethics, and communicated with the governance body on all matters that may affect the auditor's independence (including protection measures).

Based on the matters communicated with the governance unit, the accountant decides the key audit items for the audit of Kao Hsing Chang Iron & Steel Corp.'s 2021 individual financial reports. The accountant stated these matters in the audit report, unless the law does not allow the public disclosure of specific matters or in very rare circumstances, the accountant decides not to communicate specific matters in the audit report because it can be reasonably expected that the negative impact of such communication will be greater than the public interest promoted.

KPMG Taiwan

Auditor: Kuo-Tsung, Chen Chen-Lung, Hsu Approval reference of the (89)Tai-Tsai-Cheng (VI) No. 62474 securities authority : Jin-Guan-Zheng NO. 6-0960069825 March 10, 2022

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Kao Hsing Chang Iron & Steel Corp. Balance Sheet

December 31, 2021 and 2020

Unit: NTD Thousand

Assets Current assets: 1100 Cash and cash equivalents (Note 6(1)) 1120 Financial assets measured at fair value through other comprehensive income -- current (Note 6(2)) 1152 Other notes receivable (Note 6 (4)) 1170 Net accounts receivable (Note 6 (3)) 1200 Other receivables (Notes 6 (4) and 7) 1220 Current income tax assets 130X Inventory (Note 6 (5)) 1470 Other current assets (Notes 6 (10) and 7) Total current assets Non-current assets: 1517 Financial assets at fair value through other comprehensive income - non-current (Note 6(2)) 1550 Investments using the equity method (Notes 6 (6) and 7) 1600 Property, plant, and equipment (Notes 6 (7) and 8) 1755 Right-of-use assets (Notes 6 (8) and 7) 1760 Net investment property (Notes 6 (9), 7, and 8) 1920 Refundable deposits (Notes 6 (4), 7 and 9) Total non-current assets Total assets	2021.12.31 Amount ％ $ 559,241 8 804,074 11 200 - 96,357 1 28,623 - - - 719,811 10 20,204 -	2020.12.31 Amount ％ 275,370 4 716,128 11 200 - 105,317 2 17,827 - 2 - 468,253 7 14,563 -
	2,228,510 30	1,597,660 24
	973,059 13 448,777 6 1,519,830 21 9,871 - 2,141,002 30 5,831 -	986,641 15 370,586 6 1,539,887 23 13,161 - 2,144,792 32 9,467 -
	5,098,370 70	5,064,533 76
	$ 7,326,880 100	6,662,194 100

(Please refer to the attached notes to financial statements) Manager: Rong-Feng Shenglu Accounting Supervisor: Hui-Mei Chao

Chairman: Tai-Rong Lu

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Kao Hsing Chang Iron & Steel Corp.

Balance Sheet (continued) December 31, 2021 and 2020

Unit: NTD Thousand

Liabilities and equity Current liabilities: 2100 Short-term loans (Notes 6 (11) and 8) 2151 Bills payable 2152 Other notes payable 2170 Accounts payable 2200 Other accounts payable 2230 Current tax liabilities 2300 Other current liabilities (Note 6 (12)) Total current liabilities Non-current liabilities: 2540 Long-term loans (Notes 6 (13) and 8) 2570 Deferred income tax liabilities (Note 6 (16) 2640 Net defined benefit liabilities-non-current (Note 6 (15)) 2645 Guarantee deposits received Total non-current liabilities Total liabilities Equity (Note 6 (17)): 3100 Share capital 3200 Capital reserve 3300 Retained earnings: 3310 Statutory reserve 3320 Special reserve 3350 Undistributed surplus earnings 3400 Other equity interest Total equity Total liabilities and equity	2021.12.31 Amount ％ $ 3,232,341 44 28,384 - 12,878 - 39,758 1 56,739 1 22,161 - 7,298 -	2020.12.31 Amount ％ 2,822,723 42 20,280 - 7,561 - 21,733 - 54,980 1 1,709 - 2,984 -
	3,399,559 46	2,931,970 43
	700,000 10 210,632 3 42,008 1 5,040 -	700,000 11 210,632 3 42,394 1 5,040 -
	957,680 14	958,066 15
	4,357,239 60	3,890,036 58
	2,008,523 27	2,008,523 30
	75,159 1	75,159 1
	147,137 2 - - 527,837 7	146,880 2 81,209 1 216,673 4
	674,977 9	444,762 7
	210,985 3	243,714 4
	2,969,641 40	2,772,158 42
	$ 7,326,880 100	6,662,194 100

(Please refer to the attached notes to financial statements) Chairman: Tai-Rong Lu Manager: Rong-Feng Shenglu Accounting Supervisor: Hui-Mei Chao

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Kao Hsing Chang Iron & Steel Corp. Statements of Comprehensive Income January 1 to December 31, 2021 and 2020

Unit: NTD Thousand

2021	％ 100 88	2020	％ 100 98 2 3 7 10 (8) - 9 - (4) - 5 (3) - (3) - 25 12 - 37 37 34 (0.16)
Amount $ 1,550,624 1,356,051		Amount 962,510 940,489
194,573	12	22,021
33,868 63,743	2 4	25,679 64,964
97,611	6	90,643
96,962	6	(68,622)
105 40,281 (26,849) (56,353) 8,423	- 3 (2) (4) 1	134 84,890 (5,559) (41,190) (738)
(34,393)	(2)	37,537
62,569 20,452	4 1	(31,085) 1,709
42,117	3	(32,794)
(6,840) 161,638 568 -	- 10 - -	1,715 240,892 117,676 -
155,366	10	360,283
155,366	10	360,283
$ 197,483	13	327,489
$	0.21
$	0.21		(0.16)

(Please refer to the attached notes to financial statements)

Chairman: Tai-Rong Lu

Manager: Rong-Feng Shenglu

Accounting Supervisor: Hui-Mei Chao

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Kao Hsing Chang Iron & Steel Corp. Statement of Changes in Equity

January 1 to December 31, 2021 and 2020

Unit: NTD Thousand

Share capital	Capital reserve		Retained earnings		Other equity items
					Unrealized gains on financial assets measured at fair value through other comprehensive income Profit and loss at fair value (81,209)
		Statutory reserve	Special reserve	Undistributed surplus earnings
$ 2,008,523	75,159	146,880	274,177
				21,139
- -	- -	- -	- -	(32,794) 1,715	- 358,568
-	-	-	-	(31,079)	358,568
- -	- -	- -	(192,968) -	192,968 33,645	- (33,645)
2,008,523	75,159	146,880	81,209	216,673	243,714
2,008,523	75,159	146,880	81,209	216,673	243,714
- -	- -	- -	- -	42,117 (6,841)	- 162,206
-	-	-	-	35,277	162,206
- - -	- - -	257 - -	- (81,209) -	(257) 81,209 194,935	- - (194,935)
$ 2,008,523	75,159	147,137	-	527,837	210,985

(Please refer to the attached notes to financial statements) Manager: Rong-Feng Shenglu

Chairman: Tai-Rong Lu

Accounting Supervisor: Hui-Mei Chao

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Kao Hsing Chang Iron & Steel Corp.

Statement of Cash Flow

January 1 to December 31, 2021 and 2020

Cash flow from operating activities: Current pre-tax profit (loss) Adjustment items: Income, expenses, and losses Depreciation Interest expenses Interest income Dividend income Share of losses (profits) on equity-accounted associated companies and joint ventures Loss on disposal and scrapping of property, plant and equipment Unrealized gains on foreign currency exchange Total income, expenses, and losses Changes in assets/liabilities related to business activities: Net changes in assets related to business activities: Decrease (increase) in notes receivable Decrease (increase) in accounts receivable Increase in other receivables Decrease (increase) in inventories Decrease (increase) in other current assets Total net changes in assets related to business activities Net changes in liabilities related to operating activities: Increase in bills payable Increase in accounts receivable Increase in other payables Increase in other current liabilities Increase (decrease) in net defined benefit liabilities Total net changes in liabilities related to operating activities Total net changes in assets and liabilities related to business activities Total adjustment items Cash inflow (outflow) from operations Interest received Dividends received Interests paid Income tax refunded 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 Investments accounted for using equity method Acquisition of property, plant, and equipment Disposal of property, plant, and equipment Decrease (increase) in refundable deposits Acquisition of investment real estate Net cash flows (used in) from investing activities Cash flows from (used in) financing activities: Increase in short-term loan Decrease in short-term loan Increase in long-term debt Increase in deposit margin Decrease in bills payable for the return of capital reduction Net cash inflow from financing activities Increase (decrease) in current cash and cash equivalents Beginning cash and cash equivalent balance Cash and cash equivalents at the end of the period	Unit: NTD 2021 $ 62,569	Thousand 2020 (31,085) 55,546 41,190 (134) (56,669) 738 - (15) 40,656 356 (26,681) (370) 11,969 36,315 21,589 8,653 12,162 2,955 1,033 994 25,797 47,386 88,042 56,957 134 56,669 (40,255) 9 73,514 (1,822,801) 1,625,334 (2,677) (9,959) 50,000 (1,398) (1,100,892) (1,262,393) 8,210,722 (7,786,116) 700,000 5,000 (25) 1,129,581 (59,298) 334,668 275,370
	54,485 56,353 (105) (31,210) (8,422) 30 (70)
	71,061
	- 8,960 (531) (251,559) (5,640)
	(248,770)
	8,104 18,025 8,315 4,314 (7,227)
	31,531
	(217,239)
	(146,178)
	(83,609) 105 30,935 (55,990) 2
	(108,557)
	(2,259,525) 2,304,661 (45,200) (20,801) 63 3,636 -
	(17,166)
	4,616,045 (4,206,357) - - (94)
	409,594
	283,871 275,370
	$ 559,241

(Please refer to the attached notes to financial statements) Chairman: Tai-Rong Lu Manager: Rong-Feng Shenglu Accounting Supervisor: Hui-Mei Chao

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Kao Hsing Chang Iron & Steel Corp. Notes to Financial Statements

2021 and 2020

(Unless otherwise specified, all amounts are presented in NTD)

I. Company history

Kao Hsing Chang Iron & Steel Corp. (the "Company") was approved for incorporation in January 1966 with office address registered at No. 318, Zhonghua 1st Road, Gushan District, Kaohsiung City. Primary business activities of the Company include: manufacturing, processing, and trading of steel pipes and cold-rolled steel sheets, manufacturing of metal architectural components, leasing, carpark management and wholesale of other products (activated carbon).

II. Financial statement approval date and procedures

This financial report has been approved during the board of directors meeting held on March 10, 2022, and announced to the public.

III. Application of new and amended standards and interpretations

(I) Effect of adopting the latest and amended standards and interpretations approved by Financial Supervisory Commission ("FSC")

The Company has applied the following newly revised International Financial

Reporting Standards from January 1, 2021, and they have not had a material effect on its financial reporting.

‧ Amendment to IFRS 4 regarding "Deferral of effective date of IFRS 9"
‧ Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16, “Interest Rate Benchmark Reform-Phase 2”
‧ Amendment to IFRS 16, "Covid-19-Related Rent Concessions of June 30, 2021"
(II) Impact of not adopting FSC-approved IFRS

Based on the Company's assessments, the application of the following newly revised International Financial Reporting Standards effective from January 1, 2022 will not have a material effect on its financial reporting.

‧ Amendments to IAS 16, “Property, Plant and Equipment: Proceeds before Intended Use”
‧ Amendments to IAS 37 “Onerous Contracts — Cost of Fulfilling a Contract”
‧ Annual improvements to IFRS standards for 2018-2020
‧ Amendments to IFRS 3 “Reference to the Conceptual Framework”
(III) Newly revised standards and interpretations that are not yet approved by the FSC The Company expects that the following newly issued and revised standards
that have not yet been approved will not have a material impact on financial reporting.

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Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

‧ Amendments to IFRS 10 and IAS 28 regarding "Sale or contribution of assets between an investor and its associate or joint venture"
‧ IFRS 17 “Insurance contracts” and amendments to IFRS 17
“ ”
‧ Amendments to IAS 1, Classifying Liabilities as Current or Non-current
‧ Amendments to IAS 1, “Disclosure of Accounting Policies”
‧ Amendments to IAS 8, “Definition of Accounting Estimates”
‧ Amendments to IAS 12, "Deferred Tax related to Assets and Liabilities arising from a Single Transaction"
‧ Amendments to IFRS 17, "Initial Application of IFRS 17 and IFRS 9— Comparative Information"

IV. Summary of significant accounting policies

(I) Statement of compliance

This financial statement has been prepared in accordance with Regulations Governing the Preparation of Financial Reports by Securities Issuers (the "Preparation Guidelines") and FSC-approved international financial reporting standards, international accounting standards, and interpretations thereof (collectively referred to as "FSC-approved IFRS").

(II) Basis of preparation
Basis for measurement

This financial statement is prepared on the basis of historical cost, except for the key balance sheet items listed below:

(1) Financial assets at fair value through profit and loss;
(2) Financial assets at fair value through other comprehensive income; and

(3) Net defined benefit liabilities (or assets), which is measured by deducting the present value of defined benefit plan obligations from the fair value of pension fund assets.

Functional currency and presentation currency

The Company designates the currency used in the main economic environment of its location as the functional currency. This financial statement is presented using the Company's functional currency (NTD). All financial figures denominated in NTD are presented in dollars.

(III) Foreign currency

Foreign currency transactions are converted into the functional currency using exchange rates as of the date of transaction. Foreign currency monetary items outstanding at the end of each reporting period (referred to as reporting date below) are subsequently converted into the functional currency using exchange rate applicable on that day. Foreign currency-denominated non-monetary items

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Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

carried at fair value are converted into the functional currency using exchange rate as of the valuation date. Foreign currency-denominated non-monetary items carried at historical cost are converted using exchange rate as of the initial transaction date.

Differences from foreign currency conversion are generally recognized through profit and loss, or recognized through other comprehensive income under the following circumstances:

Equity instruments designated to be carried at fair value through other comprehensive income;
Financial liabilities designated to hedge net investment in foreign operations, within the effective scope of hedge; or
3 Qualifying cash flow hedge, within the effective scope of hedge.
(IV) Classification of current and non-current assets and liabilities

Assets that match any of the following criteria are classified as current assets; assets that do not fall into the current category are classified as non-current assets:

Assets that are expected to be realized, or intended to be sold or consumed, over the Company's normal operating cycle;
Assets that are held mainly for the purpose of trading;
Assets that are expected to be realized within twelve (12) months after the end of the reporting period; or
Cash or cash equivalents, except those that will be swapped or used to repay liabilities at least twelve (12) months from the reporting period, and those with restricted uses.

Liabilities that match any of the following criteria are classified as current liabilities; liabilities that do not fall into the current category are classified as noncurrent liabilities:

Liabilities that are expected to be repaid within the Company's normal business cycle;
Liabilities that are held mainly for the purpose of trading;
Liabilities that are expected to be repaid within twelve (12) months after the end of the reporting period; or
Liabilities with repayment terms that cannot be extended unconditionally beyond twelve (12) months after the reporting period. Liabilities with terms that give counterparties the option to be repaid in the form of equity instruments do not affect their classification.
(V) Cash and cash equivalents

Cash includes cash on hand and demand deposits. Cash equivalent refers to short-term and highly liquid investments that are readily convertible to known

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Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

amounts of cash and are subject to insignificant risk of changes in value. Time deposits that meet the above mentioned definitions and are held for the purpose of meeting short-term cash commitments instead of investment or other purposes are presented as cash equivalents.

(VI) Financial instruments

Accounts receivable and debt securities issued are recognized at the time occurred. All other financial assets and financial liabilities are recognized at initiation when the Company becomes a party to a financial instrument contract. Financial assets or liabilities that are not carried at fair value through profit and loss (excluding accounts receivable without major financial component) are initially measured at fair value plus transaction costs that are directly attributable to the acquisition or issuance. Accounts receivable without major financial component are initially measured at transaction price.

1. Financial assets

Purchase and sale of financial asset that conforms to customary practices is accounted using trade day or settlement day accounting, and the same approach is applied consistently to financial assets of the same classification.

The Company's financial assets are classified into: financial assets carried at cost after amortization, equity instruments at fair value through other comprehensive income, or financial assets at fair value through profit and loss at initiation. Only when the Company changes the ways financial assets are managed will it reclassify the affected financial assets according to policy, starting from the next reporting period.

(1) Financial assets measured at amortized cost

Financial assets that meet all of the following conditions and are not designated to be carried at fair value through profit and loss shall be carried at cost after amortization:

‧ Financial assets that are held for the purpose of collecting contractual cash flow.
‧ Contractual terms of the financial asset give rise to cash flows on specific dates, and the cash flows are intended solely to pay principals and interests accruing on outstanding principals.

These assets are subsequently carried at initial cost plus/less

accumulated amortization calculated using the effective interest rate method and after adjusting for loss provisions. Interest income, gain/loss on foreign currency exchange, and impairment loss are recognized through profit and loss. When decommissioned, gains or losses are recognized through profit and loss.

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Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

(2) Financial assets at fair value through other comprehensive income

Debt instruments that satisfy all of the following conditions and are not designated to be carried at fair value through profit and loss shall be carried at fair value through other comprehensive income:

‧ Financial assets that are held for the purpose of collecting contractual cash flow and sale.
‧ Contractual terms of the financial asset give rise to cash flows on specific dates, and the cash flows are intended solely to pay principals and interests accruing on outstanding principals.

At initiation, the Company can make an irrevocable choice to account for subsequent fair value changes in equity instruments not held for trading through other comprehensive income. The above choice is determined on an instrument-by-instrument basis.

Investments in debt instruments are subsequently measured at fair value. Interest income, gain/loss on currency exchange, and impairment loss calculated using the effective interest method are recognized through profit and loss; other net gains or losses are recognized through other comprehensive income. When removed from balance sheet, amounts accumulated under other comprehensive income are reclassified into profit and loss.

Investments in equity instruments are subsequently measured at fair value. Dividend income is recognized through profit and loss (unless the dividends clearly represent a partial recovery of the investment cost). Other net gains or losses are recognized through other comprehensive income and are not reclassified into profit and loss.

Dividend income from equity investments are recognized on the day the Company becomes entitled to collect them (which is usually the ex-dividend day).

(3) Financial assets at fair value through profit and loss

Financial assets that are neither carried at cost after amortization nor at fair value through other comprehensive income are carried at fair value through profit and loss; this includes derivative financial assets. At initial recognition, the Company can make an irrevocable decision to designate financial assets that satisfy the criteria of being carried at cost after amortization or at fair value through other comprehensive income to be carried at fair value through profit and loss, for the purpose of eliminating or reducing accounting mismatch.

These assets are subsequently measured at fair value with net gains or

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Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

losses (including any dividend and interest income) recognized through profit and loss.

(4) Impairment on financial assets

The Company recognizes loss provisions on financial assets carried at cost after amortization (including cash and cash equivalents, notes and accounts receivable, other notes receivable, other receivables, guarantee deposits paid, and other financial assets) based on expected credit loss.

Loss provisions for the following financial assets are made based on 12month expected credit loss; for all other financial assets, loss provisions are made based on expected credit loss for the remaining lifetime:

‧ Debt securities that are deemed to be of low risk as of the reporting date; and
‧ Other debt instruments and bank deposits that exhibit no significant increase in credit risk (i.e. risk of default over the financial instrument's expected duration) since initial recognition.

Loss provisions for notes and accounts receivable and contract assets are measured based on expected credit loss over the remaining lifetime.

Expected credit loss for the remaining lifetime refers to the amount of credit losses that the financial instrument is likely to incur due to any possible default event in the remaining lifetime.

12-month expected credit loss refers to the amount of credit loss that a financial instrument may incur due to default event in the next 12 months (or shorter, if the financial instrument's expected remaining lifetime is less than 12 months).

The longest duration by which expected credit loss is measured shall be the maximum contract duration in which the Company is exposed to credit risk. When assessing whether a financial instrument has significantly increased in credit risk since initial recognition, the Company uses reasonable and verifiable information (that can be obtained without excessive cost or investment) including qualitative and quantitative data in conjunction with its own past experience, credit rating, and forecasts.

A financial instrument is deemed to be of low credit risk if: the instrument exhibits low risk of default, the debtor has ample capacity to fulfill contractual cash flow obligations in the short term, and the debtor is prone to adverse economic or operational development that may (but does not necessarily) undermine its capacity to fulfill contractual cash flow obligations over the long term.

The Company considers credit risk to have increased significantly if

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Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

contractual payment is overdue for more than 30 days.

The Company considers financial asset to have defaulted if contractual payment is overdue for more than 90 days, or if the borrower is unlikely to fulfill credit obligation and make pay full payment to the Company.

Expected credit loss is estimated by weighing credit losses for the remaining lifetime of a financial instrument against probability of occurrence. Credit losses are measured as the shortfall of cash collected, which is the difference between the amount of contractual cash flow collectible and the amount of cash flow the Company expects to collect. Expected credit losses are discounted at effective interest rate applicable to the financial asset.

The Company assesses financial assets carried at cost after amortization for credit impairment on every reporting date. A financial asset is deemed to have credit-impaired if estimated future cash flow exhibits one or several adverse events. Evidence of credit impairment includes any observable data that can be used to establish the following with respect to a financial asset:

‧ The borrower or issuer encounters significant financial distress;
‧ Event of default, such as delinquency or more than 90-day overdue;
‧ The Company grants compromise to the borrower for reasons relating to financial distress or contractual obligation that the Company would not have done so otherwise;
‧ The borrower is very likely to file for bankruptcy or undergo financial restructuring; or
‧ Occurrence of financial distress that may cause the financial asset to be removed from active market.

Loss provisions on financial assets carried at cost after amortization are deducted from book value. However, loss provisions on debt investments held at fair value through other comprehensive income are adjusted through profit and loss and recognized through other comprehensive income (without reducing asset book value).

When the Company has reason to believe that it may not recover part or all of a financial asset, the total book value of financial asset is reduced directly to reflect the expectation. If the counterparty is a corporate entity, the Company would analyze the timing and amount of charge-off based on rational expectations about recoverability. The Company expects no major reversal of amounts that it has charged off. However, the Company may still make claims on charged-off financial assets according to its recovery procedures.

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Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

(5) Removal of financial assets

Financial assets can be removed from balance sheet only if all contractual cash flow entitlements have ended, or if the asset has been transferred with virtually all risks and returns of ownership assumed by another party, or in situations where the Company neither transfers nor retains virtually all risks and returns of ownership or control over such financial asset.

The Company will continue recognizing financial assets it has signed transfer agreement for on the balance sheet if it retains virtually all risks and returns associated with the ownership of the transferred asset.

Financial liabilities and equity instruments
(1) Classification of liabilities or equity

Debt and equity instruments issued by the Company are classified into financial liabilities or equity depending on the terms of the underlying contract and the definitions of financial liability and equity used.

(2) Equity transactions

Equity instrument refers to any contract that represents the Company's entitlement to assets net of liabilities. Equity instruments issued by the Company are recognized at the amount of proceeds received net of direct issuing costs.

(3) Treasury stock

Buyback of equity instruments previously issued by the Company is accounted as a contra-equity transaction at the amount of consideration paid (including directly attributable costs). Shares repurchased by the Company are classified as treasury stock. Proceeds received from subsequent sale or reissuance of treasury stock are recognized as additional equity; surplus or deficit arising from such transactions is recognized as capital reserve or retained earnings (if there is insufficient capital reserve to offset).

(4) Financial liabilities

Financial liabilities are classified into those that are carried at cost after amortization and those that are carried at fair value through profit and loss. Financial liabilities are carried at fair value through profit and loss if they are held for trading, characterized as derivative instrument, or designated to be so at initial recognition. Financial liabilities at fair value through profit and loss are carried at fair value with net gains and losses, including any interest expense, recognized through profit and loss.

Financial liabilities are subsequently carried at cost after amortization using the effective interest method. Interest expenses and gains/losses on currency exchange are recognized through profit and loss. When removing

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Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

from balance sheet, any gains or losses incurred are also recognized through profit and loss.

(5) Removal of financial liabilities

Financial liabilities are removed from balance sheet upon fulfillment, cancellation, or expiry of contractual obligation.

When removing financial liabilities from balance sheet, any differences between the book value and the amount paid or payable (including any noncash assets transferred and any liabilities assumed as part of the arrangement) are recognized through profit and loss.

(6) Offset of financial assets and liabilities

Financial assets and financial liabilities may be offset against each other and reported on the balance sheet in net amount only when the Company is legally entitled to do so, and has the intention to settle assets and liabilities in net amount or realize them both at the same time.

(VII) Inventory

Inventory is stated at the lower of cost or net realizable value. Cost includes all costs incurred to acquire, produce, process, and bring inventory to its usable state and location, and is calculated using the weighted average method. Cost of finished products and work-in-progress includes manufacturing overheads, which are allocated proportionally based on normal production capacity.

Net realizable value refers to the estimated selling price less all additional costs required for completion and all associated marketing expenses under normal circumstances.

(VIII) Investment in associated companies

Associated company is an entity in which the Company has significant influence over financial and operating decisions, but no single or joint control.

The Company accounts for associated companies using the equity method. Under the equity method, investments are accounted at cost at initiation and the investment cost includes transaction cost. The book value of associated company includes goodwill recognized at initiation less any cumulative impairment losses.

The financial statements include profit and loss and other comprehensive income from associated companies, recognized based on percentage of equity ownership and adjusted for consistency of accounting policy, from the day the Company gains significant influence until the day it no longer exercises significant influence. If an associated company undergoes a change of equity that is not attributed to profit, loss, or other comprehensive income and has no impact on the Company's shareholding percentage, the Company will account for changes in ownership interest and its share of equity change in the associated company

~16~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

based on shareholding percentage, and recognize the change as "capital reserve." Unrealized gains and losses arising from transactions between the Company and associated companies are recognized in corporate financial statements only for the percentage of ownership that is controlled by non-related investors The Company will stop recognizing losses on associated companies when its share of the loss equals or exceeds the value of equity held. The Company will recognize extra losses and liabilities only for legal obligations and deemed obligations that arise in relation to ownership of investees, or payments made on behalf of investees.

(IX) Investment properties

Investment properties refer to real estate properties that are held for rental income or capital gain, or both, as opposed to normal business activities such as sale, production, supply of products, rendering of services, or administration. Investment properties are initially accounted at cost, and subsequently carried at cost less accumulated depreciation and cumulative impairment. These assets are subject to the same depreciation method and parameters such as useful year and residual value as does property, plant, and equipment.

Gain or loss on disposal of investment property (calculated as the difference between net disposal proceeds and book value of the asset) is recognized through profit and loss.

Rental income from investment properties are recognized as other income using the straight-line method over the lease tenor. Any lease incentives offered are recognized as part of rental income over the lease tenor.

(X) Property, plant, and equipment
Recognition and measurement

Property, plant, and equipment are carried at cost (including capitalized borrowing costs) less accumulated depreciation and any cumulative impairment. Major components of property, plant, and equipment that have different useful lives are accounted as separate categories (of major components).

Gain or loss on disposal of property, plant, and equipment is recognized through profit and loss.

Subsequent costs

Subsequent expenditures are capitalized only when the Company is very likely to realize future economic benefits.

Depreciation

Depreciation is calculated using the straight-line approach, in which the cost of asset net of residual value is divided by the useful life of each component, and recognized through profit and loss.

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Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

No depreciation is provided on land.

The following useful life estimates are used for the current and comparative

periods:

periods:
(1) Housing and construction	5-60 years
(2) Machinery	2-25 years
(3) Other equipment	5-25 years

The Company reviews its depreciation method, useful life, and residual value estimates on each reporting date. Changes are made as deemed necessary and appropriate.

(XI) Leases

The Company evaluates whether a contract meets the criteria of (or contains arrangements characterized as) lease on the day of establishment. A contract is considered as lease or deemed to contain lease elements if it involves a transfer of control over identified assets for a period of time in exchange for consideration.

1. As a lessee

The Company recognizes right-of-use assets and lease liabilities on the lease start date. Right-of-use assets are measured at cost at initiation; this cost includes the initial amount of lease liability, adjusted for any lease payments paid on or before the lease start date, plus any initial direct costs incurred and any estimated costs to dismantle/remove the asset and restore the location or the asset to its original state, less any lease incentives received.

Right-of-use assets are depreciated on a straight-line basis from the lease start date until the end of useful life of right-of-use asset or until expiry of the lease tenor, whichever the earlier. Furthermore, the Company regularly assesses right-of-use assets for impairment and accounts for impairment losses as they occur. Right-of-use assets are also adjusted in circumstances where lease liabilities are subject to remeasurement.

Lease liabilities are initially measured as the present value of unpaid lease payments as at the lease start date. Interest rate implicit in a lease is used as the discount rate if it can be easily determined; if the rate cannot be easily determined, the Company's incremental borrowing rate will be used as the discount rate instead. In general, the Company uses incremental borrowing rate as the discount rate.

The types of lease payments included in the calculation of lease liabilities include:

(1) Fixed payments, including in-substance fixed payments;
(2) Variable lease payments that are determined by certain index or rate, which are initially measured using index or rate as at the lease start date;

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Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

(3) Amount of residual value guarantee expected to be paid; and
(4) Amount of strike price or penalty payable, if there is reasonable assurance to exercise the purchasing or termination option.

Lease liabilities subsequently accrue interest using the effective interest approach, and are remeasured in the following circumstances:

(1) When there is a change in the index or rate used for determining lease payments, which leads to changes in future lease payments;
(2) When there is a change in the amount of residual value guarantee;
(3) When there is a change in the assessment of asset purchasing option;
(4) When there is a change in the likelihood of exercising lease

extension/termination option, which may alter the Company's expectation about the lease tenor;

(5) When there is a change in leased asset, scope of lease, or other terms.

When lease liability is remeasured due to: a change in the index or rate used to determine lease payment, a change in guaranteed residual value, or a purchase, extension, or termination of embedded options, a corresponding adjustment shall also be made to the book value of right-of-use asset at the same time. When book value of the right-of-use asset has been reduced to zero, further remeasurements shall be recognized through profit and loss instead.

If there is any contract amendment that reduces the scope of lease, the book value of right-of-use asset is reduced accordingly to reflect partial or total termination of lease arrangement. Any difference between right-of-use asset and remeasured lease liability is recognized through profit and loss.

Right-of-use assets that do not meet the definition of investment property and lease liabilities are presented on the balance sheet as single-line items. 2. As a lessor

Lease arrangements that the Company is a lessor of are investigated to determine whether virtually all risks and returns associated with ownership of the asset are transferred on the day of lease establishment. If so, the contract would be classified as a financial lease; if not, the asset would be classified as an operating lease. When assessing leases, the Company takes into consideration whether the lease tenor covers a major portion of the asset's useful life, among other indicators.

For lease arrangements where the Company is the intermediate lessor of a sublease, the Company would account for the main lease and the sublease separately, and classify the sublease based on the right-of-use asset given rise by the main lease. If the master lease is short-term in nature and exempted from lease recognition, the sub-lease shall be classified as operating lease.

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Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

If the agreement contains lease and non-lease components, the Company uses IFRS 15 to allocate the consideration in the contract.

(XII) Intangible assets

Recognition and measurement

Other intangible assets of limited useful life acquired by the Company are carried at cost less accumulated amortization and cumulative impairment.

Subsequent expenses

Subsequent expenses are capitalized only if they are able to increase future economic benefits of certain assets. All other expenses are recognized through profit and loss when incurred.

3. Amortization

Amortization is calculated using the straight-line approach, in which the cost of asset net of residual value is divided by estimated useful life and recognized through profit and loss from the time the intangible asset reaches its usable state.

The Company's intangible assets represent cost of computer software, which is estimated to have a useful life of 5 years for both the current and comparative periods.

The Company reviews its amortization method, useful life, and residual value estimates for intangible assets on each reporting date. Changes are made as deemed necessary and appropriate.

(XIII) Impairment of non-financial assets

The Company evaluates non-financial assets (excluding inventory and deferred income tax assets) for signs of impairment in the book value on each reporting date. Assets that exhibit any of the signs will have recoverable amount estimated.

For the purpose of impairment testing, assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets are determined as a smallest identified asset group.

Recoverable amount is determined as fair value less disposal cost or the utilization value, whichever the higher. Utilization value is assessed by discounting projected cash flows to the present value using the pre-tax discount rate. This discount rate reflects the time value that the market has currently priced for the given currency, and risks that are specific to the given asset or cash-generating unit.

If the recoverable amount of an individual asset or cash-generating unit falls below its book value, the difference is recognized as impairment loss.

Impairment losses are immediately recognized through current profit and loss

~20~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

against a reduction to the book value of goodwill that has been allocated to the cash-generating unit; any remaining amount of impairment will then be taken to reduce book values of other assets within the unit on a pro-rated basis (i.e. proportionally based on book value weight of each asset).

(XIV) Revenue recognition
Revenue from contracts with customers

Income is measured as the amount of consideration the Company expects to receive for the delivery of merchandise or service. The Company recognizes income when control of merchandise or service has been transferred to customers and the contractual obligations fulfilled. Detailed explanation is as follows:

(1) Sale of merchandise

The Company manufactures and sells various types of steel pipe and cold-rolled steel sheet and recognizes revenues upon transfer of product control. Product control is deemed to have transferred upon delivery, at a time when customer is able to exercise full discretion over the use of sales channel and selling price and no unfulfilled obligations exist that may otherwise affect customer's acceptance of the product. Delivery is deemed to have taken place when products are shipped to the designated location where all risks of obsolescence and loss are assumed by the customer, and that the customer accepts the products according to sales contract, thereby voiding the acceptance clause, or under any other circumstances where the Company has objective evidence to prove having satisfied all inspection criteria.

The Company recognizes accounts receivable at the time merchandise is delivered, as the Company has unconditional rights to collect consideration at this point.

(2) Financial component

The Company expects no more than one year between the time merchandise is transferred to customers and the time payment is received for such merchandise for all its customers. As a result, no time value adjustment is made to the transaction price.

2. Cost of contracts with customers

(1) Additional costs of contract establishment

Additional costs incurred to establish contract with customers are recognized as assets if the Company expects to recover them on a later date. Additional costs of contract establishment refer to costs that the Company incurs specifically to establish contract with a customer, which would not have incurred otherwise if contract is not established. Contract acquisition costs that incur regardless of whether contract is awarded are expensed at the time

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Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

incurred, except in cases where the Company is able to recover such cost from customer regardless of whether contract is awarded.

The Company adopts the compromised approach outlined in the standards, and expenses additional cost of contract acquisition at the time incurred if such cost is to be recognized as asset and amortized over a period of less than one year.

(2) Cost of fulfilling contractual obligations

Costs incurred for fulfilling contracts with customers that do not fall within the scope of alternative standards (i.e. IAS - "Inventories," IAS 16 - "Property, Plant and Equipment" or IAS 38 - "Intangible Assets") are recognized as assets only if the cost is directly related to the contract (or identifiable anticipated contract) in question, has the ability to generate or enhance resources that can be used to satisfy (or continually satisfy) contractual obligations in the future, and is expected to be recoverable.

General and administrative costs, any raw materials used for contract fulfillment but are not reflected in contract price, cost of labor or other resources, costs associated with fulfillment (or partial fulfillment) of contractual obligation, and costs that cannot be distinguished between unfulfilled and fulfilled (or partially fulfilled) contractual obligation are expensed at the time incurred.

(XV) Employee benefits

1. Defined contribution plan

Contributions to the defined contribution plan are expensed over the duration of employees' service.

2. Defined benefit plan

The Company calculates net obligation of defined benefit plan by discounting future benefit payouts that employees have earned in current or previous periods of employment to the present value, and deducting the fair value of any pension fund asset.

Defined benefit obligations are estimated by certified actuaries on a yearly basis using the Projected Unit Credit Method. If the calculated result is favorable to the Company, the amount of assets recognized shall not exceed the present value of future economic benefits, whether they are realized through refund of plan contributions or decrease of future contributions. Present value of economic benefits is calculated after taking into consideration all minimum contribution requirements.

Remeasurement of net defined benefit liabilities, including actuarial gains/losses, return on plan assets (excluding interest), and changes in the effect of the asset ceiling (excluding interest), are immediately recognized through other comprehensive income and accumulated in retained earnings. The Company determines net interest expenses (income) on net defined benefit

~22~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

liabilities (assets) using the balance of net defined benefit liabilities (assets) and discount rate as at the beginning of the reporting period. Net interest expense and other expenses associated with defined benefit plan are recognized through profit and loss.

When the plan is amended or curtailed, any change in benefit that arises in relation to service cost in previous periods or curtailment gains/losses is immediately recognized through profit and loss. The Company will recognize gain or loss on settlement of defined benefit plan, if any.

3. Short-term employee benefits

Short-term employee benefit obligations are expensed at the time service is rendered. These amounts are recognized as liability when the Company becomes legally obligated or is deemed obligated to pay employees for past services rendered, and that such obligations can be estimated reliably.

(XVI) Income tax

Income tax expense comprises current income tax and deferred income tax. Current income tax and deferred income tax are recognized through profit and loss, except for amounts that arise in relation to business combination and items that are recognized directly under equity or other comprehensive income.

Current income tax includes all income taxes refundable/payable for the current year, which is calculated based on current year's taxable income (or loss), plus any adjustment to income tax payable/refundable in previous years. This amount represents the best estimate of taxes that the Company expects to pay or collect given the statutory tax rate or substantively enacted tax rate prevailing on the reporting date, and reflects uncertainties (if any) concerning income tax.

Deferred income tax represents the tax impact of temporary differences between asset/liability figures presented for financial reporting purpose and asset/liability figures used for taxation basis. No deferred income tax is recognized on temporary differences that arise under the following circumstances:

Initial recognition of assets or liabilities for transactions unrelated to business combination, provided that accounting profit and taxable income (loss) are unaffected at the time of transaction;
Temporary differences arising from investment in subsidiaries, associated companies, and joint ventures, where the Company has control over the timing at which temporary difference is reversed and that the temporary difference is unlikely to be reversed in the foreseeable future; and
Taxable temporary differences arising from initial recognition of goodwill. Deferred income tax is calculated using tax rate that the Company expects to

be effective at the time the temporary difference is reversed. In this financial report, the statutory tax rate or effective tax rate as at the reporting date was used for calculation.

Deferred income tax assets and deferred income tax liabilities are offset

~23~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

against each other only when the following conditions are met:

When the Company is entitled to offset current income tax assets against current income tax liabilities; and
The deferred income tax assets and deferred income tax liabilities arise in relation to income taxes imposed by the same tax authority, and the tax-paying entities meet any of the following conditions:
(1) The tax-paying entities are one and the same; or
(2) The tax-paying entities are different, but all of them have the intention to settle current income tax assets against current income tax liabilities on a netted basis on every future date when material amounts of deferred income tax asset/liability are due to be recovered/paid, or to realize assets and repay liabilities at the same time.

Unused tax losses and tax credits can be added to deductible temporary differences and recognized as deferred tax assets, to the extent that the Company is likely to earn taxable income to offset against. Deferred tax assets are evaluated on each reporting date. Tax benefits that are not likely to be realized will be reduced down to the realizable amount, and the Company may reverse the amount it had reduced when it becomes likely to generate sufficient taxable income.

(XVII) Earnings per share

Earnings attributable to the Company's common shareholders are presented in basic and diluted earnings per share. Basic earnings per share is calculated by dividing the amount of profits attributable to the Company's common shareholders with the weighted average number of outstanding common shares for the given period. Diluted earnings per share is calculated after adjusting the amount of profits attributable to the Company's common shareholders and weighted average number of common shares for the dilutive effect of potential common shares. Potential common shares with dilutive effect are intended as share-based payment for employee remuneration.

(XVIII) Segment information

An operating segment is a section of the Company that generates income and incurs expenses as part of its activities (including income and expenses from transacting with other sections of the Company). Operating results of all segments are reviewed regularly by the Company's main decision maker for resource allocation and performance evaluation. All operating segments are individually capable of producing financial information.

V. Sources of uncertainty to significant accounting judgments, estimates, and assumptions

When preparing financial statements in compliance with the Preparation Regulations, the management is required to make judgments, estimates, and assumptions in accordance with FSC-approved IFRS. These judgments, estimates, and

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Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

assumptions may affect adoption of accounting policies and amounts of asset, liability, income, and expense reported. The actual results may differ from estimates.

The management constantly reviews its estimates and assumptions. Impacts from changes in accounting estimate are recognized in the year the changes take place and in future years when impacts materialize.

Uncertainty of the following assumptions and estimates have material risk of causing a significant adjustment to the carrying amount of assets and liabilities in the following fiscal year, and reflect the impact of the COVID-19 pandemic. The relevant information is as follows:

Inventory valuation

Due to the fact that inventory is measured at the lower of cost and net realizable value, the Company would assess inventory on the reporting date for any decrease in sales value due to normal wear, obsolescence, or absence of market demand, and reduce inventory cost to net realizable value accordingly. This inventory valuation is made by estimating product demand within a specific period of time in the future, which may give rise to significant changes due to rapid development of the industry. For details on inventory valuation, please refer to Note 6 (5).

VI. Notes to major accounts

(I) Cash and cash equivalents

Reserve cash Demand deposit Check deposit Cash and cash equivalents presented in the cash flow statement	$	2021.12.31 265,497 540,294,852 18,681,143		2020.12.31 252,607 262,452,932 12,664,776 275,370,315
	$	559,241,492

For disclosure of exchange rate risk, exchange rate sensitivity analysis, and credit risk associated with the Company's financial assets, please see Note 6 (22). (II) Financial assets at fair value through other comprehensive income

Equity instruments at fair value through other comprehensive income: TWSE/TPEx listed shares: China Steel Chemical $ Formosa Sumco Technology ASE Technology Holding Hon Hai Precision Industry ChainQui Construction Development Asia Pacific Telecom	2021.12.31 120,500,000 - 53,250,000 52,000,000 1,715,850 49,320,000	2020.12.31 281,015,000 8,640,000 16,260,000 18,400,000 1,719,372 53,530,000

~25~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Asia Optical Zhen Ding Technology Holding-KY Keystone Microtech Yageo Kaimei Electronic Foxconn Technology Ta Chen Stainless Pipe China Steel Episil Gudeng Precision Genius Electronic Evergreen International Giga solar CHPT Sunspring Metal Wonderful Hi Tech Win Semiconductors HTC Taiwan Semiconductor Manufacturing Cleanaway Largan Precision Eternal Materials Delta Electronics Subtotal Non-listed domestic and foreign companies: Universal Venture Capital Investment KHH Arena Corporation ENRESTEC CSGT Metals How Weih Holding Subtotal Total Current Non-current	14,085,000 30,150,000 - 76,720,000 80,800,000 25,960,000 13,875,000 14,140,000 14,300,000 32,400,000 21,160,000 - - 25,596,000 8,220,000 - 29,960,000 - 49,200,000 23,350,000 - 26,122,500 41,250,000 804,074,350 10,778,424 68,557,500 268,373,422 54,802,550 570,547,183 973,059,079 $ 1,777,133,429 $ 804,074,350 973,059,079 $1,777,133,429	88,680,000 5,700,000 9,360,000 51,800,000 - - - - - - - 7,634,250 6,120,000 7,640,000 5,040,000 4,620,099 3,460,000 12,300,000 53,000,000 - 63,900,000 21,930,000 - 720,748,721 9,478,000 81,551,250 289,332,707 40,779,800 560,878,673 982,020,430 1,702,769,151 716,128,622 986,640,529 1,702,769,151

This category of equity instruments are held as strategic long-term investments and not for trading, and therefore are designated to be measured at

~26~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

fair value through other comprehensive income.

The Company recognized dividend income totaling NTD 31,209,496 in 2021 and NTD 56,669,166 in 2020 from equity instruments at fair value through other comprehensive income mentioned above.

The Company sold equity instruments measured at fair value through other comprehensive income out of concern for changes in investment strategy in 2021 and 2020; fair values of the disposed investments were assessed at NTD 2,314,650,854 and NTD 1,637,157,689 at the time of disposal and cumulative gains amounting to NTD 170,935,739 and NTD 75,697,941 have been reclassified from other equity items into retained earnings for the respective years.

For market risk information, please refer to Note 6 (22).

None of the above financial assets was pledged as collateral.

(III) Accounts receivable

2021.12.31 2020.12.31 Accounts receivable - at cost after amortization $ 96,356,522 105,316,666 - - Less: loss provisions $ 96,356,522 105,316,666

The Company adopted the simplified approach to estimate expected credit loss on all accounts receivable, which involved measuring expected credit loss for the duration of its receivables. To facilitate this approach, accounts receivable were divided into several groups using common credit risk characteristics that assess customers' ability to pay contractual sum at maturity. This approach incorporates the use of forward-looking information. Expected credit loss analysis for accounts receivable is explained below:

Not overdue Overdue	Accounts receivable carrying value $ 96,356,522 - $ 96,356,522	2021.12.31		Provision for expected credit loss over the remaining duration - -
		Weighted average expected credit loss rate - -
				-

~27~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Not overdue Overdue	Accounts receivable carrying value $ 105,316,666 - $ 105,316,666	2020.12.31	Provision for expected credit loss over the remaining duration - -
		Weighted average expected credit loss rate - -
			-

Changes in loss provision on accounts receivable is shown below: 2021 2020 Opening balance $ - - Closing balance $ - - The Company held no collateral over the above-mentioned balances. (IV) Other receivables and notes 1. Other accounts receivable 2021.12.31 2020.12.31 Other receivables - proceeds from disposal of shares $ 26,322,345 16,332,066 Other receivables - purchase discounts 356,601 430,521 Other receivables - taxes refundable - 29,315 Other receivables - others 2,414,048 1,505,071 Guarantee deposits paid 5,830,867 9,466,537 Less: loss provisions 470,460 470,460 $ 34,453,401 27,293,050 2021.12.31 2020.12.31 Presented as net other receivables $ 28,622,534 17,826,513 Presented as guarantee deposits paid 5,830,867 9,466,537 $ 34,453,401 27,293,050 Others mainly comprise proceeds from the sale of scraps. 2. Other notes receivable 2021.12.31 2020.12.31 Other notes receivable - rent proceeds $ 200,000 200,000 Less: loss provisions - - $ 200,000 200,000 For more information on credit risk, please refer to Note 6 (22).	Changes in loss provision on accounts receivable is shown below: 2021 2020 Opening balance $ - - Closing balance $ - - The Company held no collateral over the above-mentioned balances. (IV) Other receivables and notes 1. Other accounts receivable 2021.12.31 2020.12.31 Other receivables - proceeds from disposal of shares $ 26,322,345 16,332,066 Other receivables - purchase discounts 356,601 430,521 Other receivables - taxes refundable - 29,315 Other receivables - others 2,414,048 1,505,071 Guarantee deposits paid 5,830,867 9,466,537 Less: loss provisions 470,460 470,460 $ 34,453,401 27,293,050 2021.12.31 2020.12.31 Presented as net other receivables $ 28,622,534 17,826,513 Presented as guarantee deposits paid 5,830,867 9,466,537 $ 34,453,401 27,293,050 Others mainly comprise proceeds from the sale of scraps. 2. Other notes receivable 2021.12.31 2020.12.31 Other notes receivable - rent proceeds $ 200,000 200,000 Less: loss provisions - - $ 200,000 200,000 For more information on credit risk, please refer to Note 6 (22).	Changes in loss provision on accounts receivable is shown below: 2021 2020 Opening balance $ - - Closing balance $ - - The Company held no collateral over the above-mentioned balances. (IV) Other receivables and notes 1. Other accounts receivable 2021.12.31 2020.12.31 Other receivables - proceeds from disposal of shares $ 26,322,345 16,332,066 Other receivables - purchase discounts 356,601 430,521 Other receivables - taxes refundable - 29,315 Other receivables - others 2,414,048 1,505,071 Guarantee deposits paid 5,830,867 9,466,537 Less: loss provisions 470,460 470,460 $ 34,453,401 27,293,050 2021.12.31 2020.12.31 Presented as net other receivables $ 28,622,534 17,826,513 Presented as guarantee deposits paid 5,830,867 9,466,537 $ 34,453,401 27,293,050 Others mainly comprise proceeds from the sale of scraps. 2. Other notes receivable 2021.12.31 2020.12.31 Other notes receivable - rent proceeds $ 200,000 200,000 Less: loss provisions - - $ 200,000 200,000 For more information on credit risk, please refer to Note 6 (22).
$	34,453,401	27,293,050
$	2021.12.31 28,622,534 5,830,867	2020.12.31 17,826,513 9,466,537
$		27,293,050
		2020.12.31 200,000 -
$	200,000	200,000

~28~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

(V) Inventory

nventory
Raw materials and merchandise Work-in-progress Finished goods Inventory in transit Scraps	$	2021.12.31 335,657,133 139,636,706 232,918,709 11,293,208 305,692		2020.12.31 157,527,523 63,456,809 245,803,449 1,458,881 6,004 468,252,666
	$	719,811,448

	$ 719,811,448	468,252,666
Detailed breakdown of sales cost: Reclassified into sales costs and expenses Inventory devaluation loss (gain from price recovery) Unallocated manufacturing overheads Others Leasing costs	2021 $1,325,269,830 1,641,231 38,837,082 (19,865,300) 10,168,173	2020 925,865,403 (38,350,723) 58,105,125 (11,678,205) 6,546,940 940,488,540
	$ 1,356,051,016

None of the Company's inventory was pledged as collateral.

(VI) Investments accounted for using equity method

The Company holds 38.32% of the voting shares of KHC Steel International Corp. Although the remaining 61.68% of KHC Steel International Corp.’s shares are not concentrated in specific shareholders, the Company is still unable to obtain more than half of the board seats of KHC Steel International Corp. and also failed to obtain more than half of the voting rights of the shareholders attending the shareholders meeting. Therefore, it is determined that the Company has only a significant influence on KHC Steel International Corp.

The Company holds 45.79% of the voting shares of Hsieh Chang Hsing Trading Co., Ltd. Although the remaining 54.21% of Hsieh Chang Hsing Trading Co., Ltd.’s shares are not concentrated in specific shareholders, the Company is still unable to obtain more than half of the board seats of Hsieh Chang Hsing Trading Co., Ltd. and also failed to obtain more than half of the voting rights of the shareholders attending the shareholders meeting. Therefore, it is determined that the Company has only a significant influence on Hsieh Chang Hsing Trading Co., Ltd.

Due to the Company’s purchase of equity rights in Sunward Refractories Co., Ltd. in 2020 for a total of NTD 2,762,812, raising its shareholding ratio to 20% from 16.10% previously, therefore, the Company has a significant influence on Sunward Refractories Co., Ltd. but does not have control. The Company's accounting

~29~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

treatment is based on the equity method of financial assets measured at fair value through other comprehensive gains and losses. Therefore, the Company recognized and disposed of financial asset losses of NTD 48,986,001 measured at fair value through other comprehensive gains and losses, transferring to retained earnings from other equity.

Associated companies accounted using the equity method as at the reporting date:

KHC Steel International Corp. Hsieh Chang Hsing Trading Co., Ltd. Sunward Refractories Co., Ltd.	$	2021.12.31 141,629,586 238,042,155 69,105,142		2020.12.31 130,888,282 225,593,900 14,104,103 370,586,285
	$	448,776,883

1. Associated companies

The Company's share of gains (losses) from associated companies is summarized below:

KHC Steel International Corp. Hsieh Chang Hsing Trading Co., Ltd. Sunward Refractories Co., Ltd.	2021 $ (1,322,159) (56,221) 9,801,039	2020 (1,065,990) (56,326) 384,103 (738,213)
	$ 8,422,659

The Company's share of other comprehensive income from associated companies is summarized below:

KHC Steel International Corp. Hsieh Chang Hsing Trading Co., Ltd. Sunward Refractories Co., Ltd.	2021 $ (11,935,992) 12,504,476 -	2020 39,671,628 78,004,109 - 117,675,737
	$ 568,484

Financial information of associated companies is summarized below; the following information has not been adjusted for the Company's ownership percentage:

(1) Summary financial information of KHC Steel International Corp.

Current assets Non-current assets	$	2021.12.31 34,898,141 342,169,388		2020.12.31 34,052,052 312,969,288

~30~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

$ 377,067,529 Current liabilities $ 7,289,164 Non-current liabilities 181,323 $ 7,470,487 2021 Operating revenue $ - Current net loss (3,450,310) Other comprehensive income (31,148,203) Total comprehensive income $ (34,598,513) (2) Summary financial information of Hsieh Chang Hsing Trading Co., 2021.12.31 Current assets $ 1,034,298 Non-current assets 518,857,904 $ 519,892,202 Current liabilities $ 36,000 Non-current liabilities - $ 36,000 2021 Operating revenue $ - Current net loss (122,780) Other comprehensive income 27,308,310 Total comprehensive income $ 27,185,530 (3) Summary financial information of Sunward Refractories Co., Ltd. 2021.12.31 Current assets $ 326,739,094 Non-current assets 190,287,229 $ 517,026,323 Current liabilities $ 94,248,980 Non-current liabilities 268,809,573 $ 363,058,553 2021 Operating revenue $ 335,676,746 Current net income $ 49,005,193	$ 377,067,529	$ 377,067,529		347,021,340 5,273,520 181,323 5,454,843 2020 - (2,781,810) 103,527,212 100,745,402 Ltd. 2020.12.31 1,157,078 491,549,594 492,706,672 36,000 - 36,000 2020 - (123,009) 170,351,844 170,228,835 2020.12.31 181,990,841 206,844,785 388,835,626 506,391,466 3,481,583 509,873,049 2020 208,411,033 375,053,138
	$ 7,289,164 181,323
	$ 7,470,487
	2021 $ -
	(3,450,310) (31,148,203)
	$ (34,598,513)
	$	519,892,202
	$	36,000 -
	$	36,000
	$	2021 -
		(122,780) 27,308,310
	$	27,185,530

	$	517,026,323
	$	94,248,980 268,809,573
	$	363,058,553
	$	2021 335,676,746
	$	49,005,193

~31~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Other comprehensive income Total comprehensive income Share of net assets attributable to the Company as of the beginning of the period Add: Goodwill Comprehensive income (loss) attributable to the Company Capital increase in affiliated companies in the current period Share of net assets attributable to the Company as of the end of the period	-	- 375,053,138 2020 (24,207,485) 38,311,588 - - 14,104,103
	$ 49,005,193
	2021 $ 14,104,103 - 9,801,039 45,200,000
	$ 69,105,142

2. Collateral

None of the Company's equity-accounted investments was pledged as collateral.

(VII) Property, plant, and equipment

Changes in cost, accumulated depreciation, and impairment of the Company's property, plant, and equipment are explained below:

Land	Buildings	Machinery	Others	Total
$1,106,417,035 - - -	1,446,436,138 400,000 - 432,764	2,218,221,257 16,588,200 (7,390,420) 4,518,000	248,689,692 10,452,264 (257,000) (4,950,764)	5,019,764,122 27,440,464 (7,647,420) - 5,039,557,166 5,008,291,231 12,283,291 (810,400) - 5,019,764,122 3,479,876,753 47,404,935 (7,554,465) 3,519,727,223 3,429,748,344 50,938,809 (810,400) 3,479,876,753 1,519,829,943
$1,106,417,035	1,447,268,902	2,231,937,037	253,934,192
$1,106,417,035 - - -	1,446,436,138 - - -	2,208,627,918 8,208,739 (810,400) 2,195,000	246,810,140 4,074,552 - (2,195,000)
$1,106,417,035	1,446,436,138	2,218,221,257	248,689,692
$ - - -	1,123,674,319 17,741,083 -	2,121,110,450 26,516,019 (7,297,465)	235,091,984 3,147,833 (257,000)
$ -	1,141,415,402	2,140,329,004	237,982,817
$ - - -	1,105,461,184 18,213,135 -	2,093,437,499 28,483,351 (810,400)	230,849,661 4,242,323 -
$ -	1,123,674,319	2,121,110,450	235,091,984
$1,106,417,035	305,853,500	91,608,033	15,951,375

~32~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

January 1, 2020 $1,106,417,035 340,974,954 115,190,419 15,960,479 1,578,542,887 December 31, 2020 $1,106,417,035 322,761,819 97,110,807 13,597,708 1,539,887,369

Please refer to Note 8 for details of property, plant, and equipment pledged as collateral.

(VIII) Right-of-use asset

For the Company's right-of-use assets recognized by leased houses and buildings and their costs, depreciation and deduction or reversal of impairment losses, details of any changes thereof are listed as follows:

Cost of right-of-use asset:
Balance as of January 1, 2021 (i.e., balance
as of December 31)
Balance as of January 1, 2020 (i.e., balance
as of December 31)
Accumulated depreciation and impairment
losses:
Balance as of January 1, 2021
Provision for depreciation
Balance as of December 31, 2021
Balance as of January 1, 2020
Provision for depreciation
Balance as of December 31, 2020
Book value:
December 31, 2021
January 1, 2020
December 31, 2020

Buildings
$
19,741,680
$
19,741,680
$ 6,580,560
3,290,280
$
9,870,840
$ 3,290,280
3,290,280
$
6,580,560
$
9,870,840
$
16,451,400
$
13,161,120

(IX) Investment properties

Changes in the Company's investment properties are detailed below:

Cost or deemed cost: Balance as of January 1, 2021 Balance as of December 31, 2021 Balance as of January 1, 2020 Additions Balance as of December 31, 2020 Accumulated depreciation and impairment losses: Balance as of January 1, 2021 Depreciation Balance as of December 31, 2021 Balance as of January 1, 2020	Land and improvement $2,122,918,103	Buildings 25,004,535	Total 2,147,922,638 2,147,922,638 1,047,031,154 1,100,891,484 2,147,922,638 3,131,020 3,789,759 6,920,779 1,813,266
	$2,122,918,103	25,004,535
	$1,038,553,654 1,084,364,449	8,477,500 16,527,035
	$2,122,918,103	25,004,535
	$ - -	3,131,020 3,789,759
	$ -	6,920,779
	$ -	1,813,266

~33~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Depreciation Balance as of December 31, 2020 Book value: December 31, 2021 January 1, 2020 December 31, 2020 Fair value: December 31, 2021 January 1, 2020 December 31, 2020	-	1,317,754	1,317,754 3,131,020 2,141,001,859 1,045,217,888 2,144,791,618 $6,621,698,470 $2,861,892,550 $4,457,572,250
	$ -	3,131,020
	$2,122,918,103	18,083,756
	$1,038,553,654	6,664,234
	$2,122,918,103	21,873,515

Investment property includes land that has been leased out as carpark without contingent rent. Please refer to Note 6 (14) for details (including rental income and direct operating expenses incurred).

For the Company's purchase of land and buildings from related parties in 2020, please refer to Note 7 for details.

Investment properties outstanding as at December 31, 2021 and 2020, are measured at fair value on a recurring basis. The Company assesses fair value in its sole capacity using comparable real estate transaction information in similar locations. These fair value assessment techniques make use of level 3 inputs.

Please refer to Note 8 for details of investment property pledged as collateral.

(X) Other current assets

Details of the Company's other current assets are explained below:

Prepaid insurance premiums Supplies inventory count Prepaid purchases Tax credit Others	$	2021.12.31 107,956 15,314,572 5,829 4,524,673 250,864 20,203,894		2020.12.31 116,107 13,671,824 5,101 552,761 217,703 14,563,496
	$

(XI) Short-term loans

Details regarding the Company's short-term loan are as follows:

Loans under L/C Secured bank loan Total Unused limit Interest rate range	2021.12.31 $ 722,340,870 2,510,000,000 $ 3,232,340,870 $ 217,659,130 1.45%~1.92%	2020.12.31 322,722,585 2,500,000,000 2,822,722,585 627,277,415 0.83%~1.50%

~34~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

For details on bank loans secured by the Company's assets, please see Note

8. (XII) Other current liabilities

Details of the Company's other current liabilities are explained below:

Unearned revenues Sales proceeds in advance - contractual liabilities Others	$	2021.12.31 190,475 6,982,486 125,491		2020.12.31 190,475 2,679,466 114,269
	$	7,298,452		2,984,210

(XIII) Long-term loans

Details, conditions, and terms of long-term loans of the Company are as follows:

Secured bank loan Less: Portion due within one year Total Unused limit Secured bank loan Less: Portion due within one year Total Unused limit		2021.12.31	Amount $ 700,000,000 - $ 700,000,000 $ - Amount $ 700,000,000 - $ 700,000,000 $ -
	Currency	Interest rate range Maturity date
	NTD
		1.8% 2030.10.23 2020.12.31
	Currency	Interest rate range Duration year
	NTD
		1.8% 119.10.23

For details on bank loans secured by the Company's assets, please see Note 8.
The Company and the financial institution agree that the first three years of the loan period (September 2020 to September 2023) is a grace period. During the grace period, only interest needs to be paid, and no principal is required to be repaid.

(XIV) Operating leases

~35~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

1. As a lessee

The Company rents office space from related parties in the form of operating lease; please refer to Note 7 for details.

2. As a lessor

The Company leases out its investment properties and some machinery. Since almost all risks and rewards belonging to the ownership of the underlying asset have not been transferred and paid, these lease contracts are classified as operating leases. For details please refer to Note 6 (9), Investment Properties.

Rental income from investment properties amounted to NTD 32,776,266 in 2021 and NTD 8,386,776 in 2020, both of which were presented in operating revenues. Maintenance and servicing expenses incurred on investment properties amounted to NTD 10,168,173 in 2021 and NTD 6,546,940 in 2020, both of which were presented in operating costs.

(XV) Employee benefits

1. Defined benefit plan

Reconciliation between present value of defined benefit obligations and fair value of plan assets:

Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities	$	2021.12.31 125,585,966 (83,577,790)		2020.12.31 126,725,675 (84,331,416) 42,394,259
	$	42,008,176

Contributions for defined benefit plan are made to a dedicated pension fund account opened with Bank of Taiwan. For retirees who opted for the pension scheme mentioned in the Labor Standards Act, the amount of pension benefit is calculated based on average salary for the six months preceding their retirement and the number of basis points accumulated over the duration of their service.

(1) Composition of plan assets

Pension fund contributions that the Company has made in accordance with the Labor Standards Act are collectively managed by the Bureau of Labor Funds (BLF), Ministry of Labor. Pursuant to "Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund," plan assets can only be allocated to investments that offer annual yields higher than the 2-year time deposit rate quoted by local banks.

As of the reporting date, balance of the Company's labor pension reserve account at Bank of Taiwan totaled NTD 85,998,385. Please visit the BLF website for more details such as fund yield and allocation of fund assets.

(2) Changes in present value of defined benefit obligations

Changes in present value of defined benefit obligations for 2021 and 2020

~36~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

are explained below:
		2021	2020
Defined benefit obligations as at January 1	$	126,725,675	139,148,896
Service cost and interest in the current period		1,587,224	2,490,716
Remeasurement of net defined benefit liabilities
(assets)
- Actuarial gains/losses due to adjustment by		5,218,094	(2,587,863)
experience
- Actuarial gains/losses due to change of		2,801,848	3,881,810
financial assumption
Amount of direct payment		(10,746,875)	(16,207,884)
Defined benefit obligations as at December 31	$	125,585,966	126,725,675
(3) Changes in the fair value of pension plan assets
Changes in the fair value of defined benefit plan assets in 2021			and 2020
are explained below:
		2021	2020
Fair value of plan assets as at January 1	$	84,331,416	96,033,720
Remeasurement of net defined benefit liabilities
(assets)
- Return on plan assets (excluding current		1,178,969	3,008,749
period interest)
Amount contributed to the plan		8,307,051	562,875
Expected return on plan assets		507,229	933,956
Benefits paid from plan		(10,746,875)	(16,207,884)
Fair value of plan assets as at December 31	$	83,577,790	84,331,416
(4) Expenses recognized in profit and loss
Details of expenses recognized for 2021 and	2020 are presented below:
		2021	2020
Current period service costs	$	816,715	1,128,436
Net interest on net defined benefit liabilities		263,280	428,324
	$	1,079,995	1,556,760
Operating costs	$	915,763	1,171,034
Management expenses		164,232	385,726
	$	1,079,995	1,556,760

(5) Remeasurement of net defined benefit obligations recognized in other comprehensive income

~37~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Cumulative remeasurement of net defined benefit obligations recognized in other comprehensive income:

n other comprehensive income:
Cumulative balance as of January 1 Amount recognized in the current period Cumulative Balance as of December 31	2021 $ (31,399,749) (6,840,973)	2020 (33,114,551) 1,714,802 (31,399,749)
	$ (38,240,722)

(6) Actuarial assumptions

Key actuarial assumptions that the Company had made to determine the present value of defined benefit obligations as at the reporting date are as follows

Discount rate Future salary increase	2021.12.31 0.625% 1.000%	2020.12.31 0.625% 1.000%

The Company expects to contribute NTD 454,932 to the defined benefit plan within one year from the 2021 reporting date.

The defined benefit plan has a weighted average duration of 10.47 years.

(7) Sensitivity analysis

The following shows impact of changes in actuarial assumption on the

present value of defined benefit obligations as at December 31, 2021 and 2020:

2020:
	Effect of (gains)		losses to
	defined benefit obligations
		Increase	Decrease
December 31, 2021
Discount rate (change by 0.25%)	$	(2,523,203)	2,605,098
Future salary increase (change by 0.25%)		2,497,137	(2,431,489)
December 31, 2020
Discount rate (change by 0.25%)		(2,609,078)	2,696,809
Future salary increase (change by 0.25%)		2,587,127	(2,516,130)

The above sensitivity analysis assumes changes to one variable at a time while keeping all other variables constant. In reality, however, multiple assumptions may change at the same time and are related to each other. The sensitivity analysis was conducted using the same method as how net pension liabilities are presented in the balance sheet.

Methodology and assumption for current period's sensitivity analysis are consistent with those of the previous period.

2. Defined contribution plan

The Company's defined contribution plan has been created in accordance with the Labor Pension Act, where the Company contributes an amount equal to

~38~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

6% of employees' salaries each month to employees' pension accounts held with the Bureau of Labor Insurance. Under this plan, the Company would be freed of pension obligations (whether statutory or inferred) once it has contributed this amount to the Bureau of Labor Insurance.

Pension expenses recognized for the Company's defined contribution plan

in 2021 and 2020 amounted to NTD 4,593,734 and NTD 4,426,167, respectively and have been contributed to the Bureau of Labor Insurance.

3. Short-term employee benefits

Below are details of employee benefit liabilities:

Paid leave of absence (presented as other payables)	2021.12.31 $ 6,513,878	2020.12.31 6,309,792

(XVI) Income tax

1. Income tax expense

Below are details of the Company's income tax expenses:

Income tax expense for the current period -- Incurred in the current period Deferred income tax expense Income tax expense	2021 $ 20,452,288 -	2020 1,709,159 - 1,709,159
	$ 20,452,288

The Company had no income tax expense recognized through equity or other comprehensive income in 2021 and 2020.

Reconciliation of income tax expense and pre-tax profit (loss) for 2021 and 2020 is explained below:

Profit (loss) before tax Income tax calculated by applying local tax rate of the country where the Company is located Non-deductible expenses Exempt income Effect of investment losses (gains) recognized using the equity method Current tax losses not recognized as deferred income tax asset Changes in temporary difference not recognized as deferred income tax asset Dividend income not eligible for loss deduction Undistributed surplus earnings plus tax Basic income tax amount Income tax expense	2021 $ 62,568,800	2020 (31,084,756) (6,216,951) 197,797 (4,212,891) 147,642 23,881,736 (18,010,224) 4,212,891 1,709,159 - 1,709,159
	$ 12,513,760 1,485,234 (3,959,670) (1,684,531) (10,818,988) (1,495,475) 3,959,670 - 20,452,288
	$ 20,452,288

~39~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Deferred income tax assets and liabilities
(1) Items not recognized as deferred income tax asset

The following items were not recognized as deferred income tax asset:

Deductible temporary differences Tax losses	$	2021.12.31 84,854,403 856,326,093		2020.12.31 86,349,878 923,477,909 1,009,827,787
	$	941,180,496

Tax losses, as defined in the Income Tax Act, are losses certified by the tax authority in the last 10 years that can be taken to reduce current year's taxable income. The Company had assessed the amount of deductible losses and deductible temporary differences as at December 31, 2021 by estimating its ability to generate taxable income in future years. Since the Company is not very likely to offset deductible losses against taxable income, the Company has decided not to recognize deferred income tax asset but will do so if revenues, profits and taxable income increase in the future.

Tax losses not recognized as deferred income tax asset and expiry as of December 31, 2021 are as follows:

Year of loss 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total	Losses not yet deducted $ 799,881,006 630,414,477 408,627,351 412,763,244 454,038,427 300,896,195 866,931,041 214,049,807 194,028,917 $ 4,281,630,465	Final year available for deduction
		2022 2023 2024 2025 2026 2027 2028 2029 2030

(2) Recognized deferred income tax liabilities

Changes in deferred income tax liabilities in 2021 and 2020 are explained below:

Deferred income tax liabilities: Balance as of January 1, 2021 Debit (credit) to profit and loss Balance as of December 31, 2021 Balance as of January 1, 2020 Debit (credit) to profit and loss Balance as of December 31, 2020	Land value increment tax $ 210,632,330 -
	$ 210,632,330
	$ 210,632,330 -
	$ 210,632,330

~40~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

3. Verified income tax expense

The Company’s profit-seeking enterprise income tax returns for the years through 2019 were examined and approved by the tax authority.

(XVII) Capital and other equity items

1. Common share capital

The Company had authorized capital of NTD 5,800,000,000 as at December 31, 2021 and 2020, available in 580,000,000 shares at a par value of NTD 10. A total of 200,852,293 common shares had been issued and 200,852,293 shares remained outstanding net of treasury stock on both two dates. All issued shares were fully paid up.

2. Capital reserve

The following is a breakdown of the Company's capital reserve:

Treasury stock

2021.12.31 2020.12.31 $ 75,159,101 75,159,101

According to The Company Act, balances of realized capital reserve can be distributed in shares or cash back to shareholders at the current shareholding percentage after reimbursing cumulative losses. The term "realized capital reserve" mentioned above includes shares issued at premium and gains from gifts. Pursuant to Regulations Governing the Offering and Issuance of Securities by Securities Issuers, the amount of capital reserves converted into share capital is capped at 10% of paid-up capital per year.

3. Retained earnings

According to the Company's Articles of Incorporation, earnings concluded in a year are first subject to taxation and reimbursement of previous losses, followed by a 10% provision for legal reserves. However, no further provision of legal reserve is required if the Company has accumulated legal reserves to an amount equal to paid-up capital. The residual balance can then be paid out in cash dividends, and any earnings remaining may be added to undistributed earnings carried from previous years and distributed as stock dividends, subject to board of directors' proposal and shareholders' resolution in a shareholder meeting. Shareholders' dividends are paid in appropriate percentage of cash and shares, with cash portion representing no less than 50%.

(1) Legal reserve

The Company Act stipulates that, subject to resolution of a shareholder meeting, companies with no cumulative losses may distribute legal reserve in cash or in shares; however, only the amount of legal reserve that exceeds paid-up capital by more than 25% can be distributed.

~41~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

(2) Special reserve

Pursuant to Financial Supervisory Commission regulations, the Company is required to make provisions for special reserve out of current net income and undistributed earnings for the difference between net other contra equity items incurred in the current year and balance of special reserves carried from previous years. Other contra equity items attributable to previous years are subject to additional provisioning of special reserve out of undistributed earnings, which cannot be distributed. If contra equity items are reversed on a later date, the Company may also reverse a matching amount from its special reserves and distribute it to shareholders.

(3) Earnings appropriation

Appropriation of 2020 and 2019 earnings was passed during the shareholder meetings held on August 26, 2021 and June 19, 2020, respectively and no dividends were resolved in either year.

4. Other equity items (net, after tax)

Balance as of January 1, 2021
Unrealized gains (losses) on financial assets at fair value
through other comprehensive income:
The Company
Associated companies
Disposal of equity instruments at fair value through other
comprehensive income:
The Company
Associated companies
Balance as of December 31, 2021
Balance as of January 1, 2020
Unrealized gains (losses) on financial assets at fair value
through other comprehensive income:
The Company
Associated companies
Disposal of equity instruments at fair value through other
comprehensive income:
The Company
Associated companies
Balance as of December 31, 2020

Investments at
fair value
through other
comprehensive
income
$ 243,713,136
161,638,217
568,484
(170,935,739)
(23,999,455)
$
210,984,643
$ (81,209,398)
240,892,281
117,675,737
(26,711,940)
(6,933,544)
$
243,713,136

(XVIII) Earnings per share

Calculation of basic and diluted earnings per share for 2021 and 2020 is

~42~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

explained below:
			2021	2020
1. Basic earnings per share
Net profit (loss) attributable	to common
shareholders of the Company		$	42,116,512	(32,793,915)
The weighted average number of ordinary
shares outstanding (unit:	shares)		200,852,293	200,852,293
		$	0.21	(0.16)
2. Diluted earnings per share
Net profit (loss) attributable	to common	$	42,116,512	(32,793,915)
shareholders of the Company
The weighted average number of ordinary
shares outstanding (unit:	shares)		200,852,293	200,852,293
Employee stock bonus			16,441	-
The weighted average number of ordinary
shares outstanding (unit:	shares) (After
adjusting for impact of dilutive potential
ordinary shares)			200,868,734	200,852,293
		$	0.21	(0.16)
Potential common shares were not included		in	the calculation of	weighted
average outstanding shares in 2020; this exclusion			carried an anti-dilutive effect.
(XIX) Revenue from contracts with customers
			2021	2020
Sale of merchandise		$	1,517,847,995	954,123,645
Rent income from investment property			32,776,266	8,386,776
		$	1,550,624,261	962,510,421
1. Details of revenue
			2021
	Steel Pipe Department		Others	Total
Main regions and markets:
Taiwan	$ 1,263,394,801		225,058,405	1,488,453,206
North America	61,086,427		-	61,086,427
Northeast Asia	1,084,628		-	1,084,628
	$ 1,325,565,856		225,058,405	1,550,624,261
Key products/services:
Steel pipes	$ 1,325,565,856		-	1,325,565,856
Steel coils	-		192,282,139	192,282,139

~43~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Rental income - $ 1,325,565,856 Steel Pipe Department Main regions and markets: Taiwan $ 878,542,298 North America 6,256,068 Northeast Asia 7,382,909 Total $ 892,181,275 Key products/services: Steel pipes $ 892,181,275 Steel coils - Rental income - Total $ 892,181,275 2. Contract balances Accounts receivable Less: loss provisions Total Contractual liabilities - sales proceeds in advance	-		32,776,266			32,776,266 1,550,624,261 Total 948,871,444 6,256,068 7,382,909 962,510,421 892,181,275 61,942,370 8,386,776 962,510,421 2020.12.31 105,316,666 - 105,316,666 2,679,466
	$ 1,325,565,856		225,058,405
	Steel Pipe Department $ 878,542,298 6,256,068 7,382,909		2020
			Others 70,329,146 - -

	$ 892,181,275		70,329,146
	$ 892,181,275 - -		- 61,942,370 8,386,776
	$ 892,181,275		70,329,146

			$ 96,356,522
			$ 6,982,486

For detailed disclosure on accounts receivable and impairment thereof, please see Note VI(III).

NTD 2,651,810 and NTD 1,351,029 of opening contractual liabilities as at January 1, 2021 and 2020, were later recognized as income for 2021 and 2020, respectively.

Changes in contract liability were mainly attributed to differences between the timing at which the Company is deemed to have fulfilled its obligations by delivering merchandise or service to customers and the timing at which payment is collected from customers.

(XX) Remuneration of employees and directors

Pursuant to the Articles of Incorporation, profits concluded from a financial year are subject to employee remuneration of no less than 0.5% and director remuneration of no more than 5%. However, profits must first be taken to offset against cumulative losses if any.

The Company's estimated employee compensation for 2021 was NTD

~44~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

328,000 thousand and estimated directors’ remuneration was NTD 0. These estimated amounts are calculated based on the net profit before tax excluding the remuneration to employees and directors as stipulated in the Company’s Articles of Incorporation, multiplied by the percentage of remuneration to employees. These remunerations are based on estimates and have been presented as operating expenses for the period.

The Company reported pre-tax losses in 2020, hence no remuneration was provided for employees or directors. Details of employee/director remuneration for 2021 and 2020 can be found on the Market Observation Post System.

(XXI) Non-operating income and expense
Interest income

Details of interest income recognized in 2021 and 2020:

Interest from bank deposits Other interest income	2021 $ 74,251 31,200	2020 91,975 41,600 133,575
	$ 105,451

2. Other income

Details of other income recognized in 2021 and Rental income Dividend income Income from disposal of waste tires Other income - others Income from government subsidies	2020: 2021 $ 228,868 31,209,496 2,668,073 6,174,900 -	2020 228,967 56,669,166 1,969,000 5,116,245 20,906,507 84,889,885
	$ 40,281,337

3. Other gains and losses

Details of other gains and losses incurred in 2021 and 2020 are as follows:

Net gain (loss) on currency exchange Losses from disposal of property, plant and equipment Soil pollution remediation expense Tax and others	2021 $ 823,503 (29,955) (25,771,854) (1,871,003)	2020 (546,786) - - (5,012,527) (5,559,313)
	$ (26,849,309)

4. Finance costs

Details of financial costs recognized in 2021 and 2020:

Interest expense - interest on bank borrowings (XXII) Financial instruments	2021 $ (56,353,471)	2020 (41,189,719)

~45~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

1. Credit risk

(1) Credit risk exposure

For financial assets, the book value represents the maximum credit risk

exposure.

(2) Concentration of credit risk

There was no significant concentration of sales to any single customer and the Company sells its products to diversified locations. As a result, there was no significant concentration of credit risk in accounts and notes receivable. The Company also monitors customers' financial position on a regular basis as a means to reduce credit risk.

(3) Credit risk of receivables

For credit risk information on accounts receivable, please refer to Note 6 (3). Other financial assets carried at cost after amortization include other notes receivable, other receivables, and guarantee deposits paid.

The following chart has been prepared based on 12-month expected credit loss or expected credit loss over remaining duration, and shows loss provisions and the state of credit impairment in the above-mentioned financial assets carried at cost after amortization:

12-month expected credit loss $ - 5,830,867 -	2021.12.31	2021.12.31
	At cost after	amortization
	Expected losses over duration - not impaired 28,822,534 - -	Expected losses over duration - impaired 470,460 - (470,460)
$ 5,830,867	28,822,534	-
$ 5,830,867	28,822,534	-

12-month expected credit loss Other notes and accounts receivable $ - Guarantee deposits 9,466,537	2020.12.31	2020.12.31	Total 18,496,973 9,466,537
	At cost after amortization
	Expected losses over duration - not impaired 18,026,513 -	Expected losses over duration - impaired 470,460 -

~46~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

paid Loss provisions Cost after amortization Book value	-	-	(470,460)	(470,460) 27,493,050 27,493,050
	$ 9,466,537	18,026,513	-
	$ 9,466,537	18,026,513	-

~47~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Changes in loss provision on financial assets carried at cost after amortization are explained below:

Opening balance Closing balance	12-month expected credit loss $ -	2021	2021	Total 470,460
		Credit loss over duration - not credit- impaired -	Credit loss over duration - credit- impaired 470,460
	$ -	-	470,460	470,460

Opening balance Closing balance	12-month expected credit loss $ -	2020	2020	Total 470,460
		Credit loss over duration - not credit- impaired -	Credit loss over duration - credit- impaired 470,460
	$ -	-	470,460	470,460

2. Liquidity risk

The following shows the expiry dates of financial liabilities, including

estimated interest but excluding the effect of net agreements.

Book value $ 3,232,340,870 28,383,843 12,878,056 39,757,973 56,738,395 5,040,000 700,000,000	Contractual cash flow (3,260,779,069) (28,383,843) (12,878,056) (39,757,973) (56,738,395) (5,040,000) (766,668,009)	Below 6 months (1,236,654,959) (28,383,843) (12,878,056) (39,757,973) (56,738,395) - (6,300,000)	6-12 months (2,024,124,110) - - - - (40,000) (6,300,000)	1-2years - - - - - - (45,084,884)	2-5 years - - - - - (5,000,000) (321,373,260)	More than 5 years - - - - - - (387,609,865)
$ 4,075,139,137	(4,170,245,345)	(1,380,713,226)	(2,030,464,110)	(45,084,884)	(326,373,260)	(387,609,865)
$ 2,822,722,585 20,279,699 7,560,858 21,732,568 54,980,378 5,040,000 700,000,000	(2,851,609,879) (20,279,699) (7,560,858) (21,732,568) (54,980,378) (5,040,000) (779,268,009)	(775,318,783) (20,279,699) (7,560,858) (21,732,568) (54,980,378) - (6,300,000)	(2,076,291,096) - - - - (40,000) (6,300,000)	- - - - - - (12,600,000)	- - - - - (5,000,000) (261,091,863)	- - - - - - (492,976,146)
$ 3,632,316,088	(3,740,471,391)	(886,172,286)	(2,082,631,096)	(12,600,000)	(266,091,863)	(492,976,146)

The Company does not expect cash flows in the maturity analysis to occur at any earlier time, or in amounts that differ significantly.

~48~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

3. Exchange rate risk

(1) Exposure to exchange rate risk

The Company had the following financial assets and liabilities that were

exposed to significant foreign currency/exchange rate risk:

Financial assets Monetary item USD Financial liabilities Monetary item USD JPY		2021.12.31	NTD 24,277,504 9,512,446 -		2020.12.31	NTD 6,326,353 - 634,772
	Foreign currency (NTD) $ 887,077.45 343,657.74 -	Exchange rate 27.68 27.68 -		Foreign currency (NTD) 222,133.17 - 2,297,400	Exchange rate 28.48 - 0.2763

(2) Sensitivity analysis

The Company's exchange rate risk arises primarily from the conversion of cash, cash equivalents, accounts receivable, and loans denominated in foreign currencies. Conversion of foreign currency-denominated amounts gives rise to gains/losses on exchange. As of December 31, 2021 and 2020, if the New Taiwan dollar would depreciate or appreciate 4% relative to the U.S. dollar or Japanese yen and all other factors remained unchanged, the net profit after tax in 2021 would decrease or increase by NTD 472,482 and the net loss after tax in 2020 would increase or decrease by NTD 182,130. Analyses for the two periods were conducted on the same basis.

Since the Company's functional currency is New Taiwan dollars, the foreign currency exchange gains and losses (including realized and unrealized) for 2021 and 2020 were a gain of NTD 823,503 and a loss of NTD 546,786, respectively.

4. Interest rate analysis

Interest rate risk exposure concerning the Company's financial liabilities has been explained as part of liquidity risk in this footnote.

The following sensitivity analysis has been prepared based on interest rate risk exposures of non-derivatives as at the reporting date. For liabilities that bear floating interests, the analysis is conducted by assuming that the amount of liabilities outstanding as at the reporting date remained outstanding throughout the entire year. Interest rates are reported to the management by applying a variance of 50 basis points above and below. This variance conforms with the management's reasonable expectation about the possible interest rate range.

If interest rate increased/decreased by 50 basis points while other variables remained unchanged, the Company's net profit after tax in 2021 would

~49~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

decrease/increase by NTD 15,729,363 and the net loss after tax in 2020 would increase/decrease by NTD 14,090,890. These potential changes would be primarily the result of the Company's floating-interest rate loans.

Other market price risk

Price of security on reporting date Increasing 10% Decreasing 10%	2021 Other comprehen sive income after tax After-tax profit/loss $ 80,407,435 - $(80,704,435) -	2020 Other comprehen sive income after tax After-tax profit/loss 72,074,872 - (72,074,872) -	2020 Other comprehen sive income after tax After-tax profit/loss 72,074,872 - (72,074,872) -
	$(80,704,435)	(72,074,872)	-

Fair value of financial instruments
(1) Fair value hierarchy

Financial liabilities at fair value through profit and loss and financial assets at fair value through other comprehensive income are measured at fair value on a recurring basis. Book value and fair value of financial assets and liabilities are shown below (categorized by level of fair value input; however, the Company is not required to disclose fair value for financial instruments that are not subject to fair value assessment and where the book value resembles the fair value):

Financial assets at fair value through other comprehensive income TWSE/TPEx listed shares Non-listed domestic and foreign shares Financial assets carried at cost after amortization Cash and cash equivalents Notes and accounts receivable Other notes and accounts receivable Guarantee deposits paid Financial liabilities carried at cost after amortization Bank loan Notes and accounts payable Other notes and accounts payable Guarantee deposits received	Book value Amount $ 804,074,350 973,059,079 $1,777,133,429 $ 559,241,492 96,356,522 28,822,534 5,830,867 $ 690,251,415 $3,932,340,870 68,141,816 69,616,451 5,040,000 $4,075,139,137		2021.12.31 Fair value Level 2 Level 3 Total - - 804,074,350 - 973,059,079 973,059,079 - - - - - - - - - - - - - - - - - - - - - - - -

		Level 1 804,074,350 - - - - - - - - -	Level 2 - - - - - - - - - -

Financial assets at fair value through other comprehensive income TWSE/TPEx listed shares Non-listed domestic and foreign shares	Book value Amount $ 720,748,721 982,020,430		2020.12.31	2020.12.31	Total 720,748,721 982,020,430
			Fair value
		Level 1 720,748,721 -	Level 2 - -	Level 3 - 982,020,430

~50~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Financial assets carried at cost after amortization Cash and cash equivalents Accounts receivable Other notes and accounts receivable Guarantee deposits paid Financial liabilities carried at cost after amortization Bank loan Notes and accounts payable Other notes and accounts payable Guarantee deposits received	$1,702,769,151 $ 275,370,315 - - - - 105,316,666 - - - - 18,026,513 - - - - 9,466,537 - - - - $ 408,180,031 $3,522,722,585 - - - - 42,012,267 - - - - 62,541,236 - - - - 5,040,000 - - - - $3,632,316,088

(2) When measuring assets and liabilities, the Company uses observable inputs available on the market wherever possible. Levels of fair value assessment are classified based on the types of input used:

Level 1: Open market quotation (unadjusted) for the same asset or liability.

Level 2: Inputs/parameters that are directly observable (i.e. price) or indirectly observable (i.e. inferred from price), other than level 1 inputs (open market quotation).

Level 3: Market inputs/parameters that are not observable (non-observable parameters).

(3) Valuation techniques for financial instruments not measured at fair value

The Company is of the opinion that financial instruments not measured at fair value either are close to maturity or have future payments/receipts that closely resemble the book value. For this reason, their fair values are estimated using book value as at the balance sheet date.

(4) Valuation techniques for financial instruments measured at fair value
(4.1) Non-derivative financial instruments

Financial instruments that are openly quoted in an active market shall have fair value determined at the openly quoted price. Market prices published on major exchange are used to determine the fair value of public-listed/OTCtraded equity instruments, while market prices of actively traded government bonds published by TPEx are used to determine the fair value of debt instruments that are openly quoted on an active market.

A financial instrument is deemed to be openly quoted on an active market if reliable quotations (that resemble transactions actually and frequently taking place in a fair market) can be obtained from stock exchange, brokers, underwriters, industry associations, pricing institutions, or the authority on a timely and frequent basis. A market is deemed inactive if it fails to satisfy the above conditions. In general, increasing or excessive bid-ask spread and lack of transaction volume are considered signs of inactive market.

~51~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Public listed and OTC-traded shares are deemed to have satisfied the standard conditions and hence treated as financial assets with active market. Their fair values are determined based on market quotations.

Fair value of equity instruments without public quotation held on hand is estimated using the market comparable company approach, which takes into account an investee's net equity and price-to-book multiple of comparable TWSE/TPEx listed company inferred from market quotation. This estimate has already been adjusted and discounted for equity security's lack of marketability.

(4.2) Derivative financial instruments

Fair values are determined using pricing models that are widely accepted among market participants, such as the discounted cash flow model and the options pricing model. Forward exchange contracts and currency swap contracts are generally valued based on counterparties' market quotations.

(5) Transfers between Level 1 and Level 2

There had been no change in levels of fair value input when assessing financial instruments in 2021 and 2020.

(6) Reconciliation of Level 3 fair values

Balance as of January 1, 2021 Recognized in other comprehensive income Balance as of December 31, 2021 Opening Balance as of January 1, 2020 Recognized in other comprehensive income Reclassification Purchase Balance as of December 31, 2020	At fair value through other comprehensive income Equity instruments without open quotation $ 982,020,430 (8,961,351) $ 973,059,079 $ 873,963,758 97,737,658 (13,720,000) 24,039,014 $ 982,020,430

(7) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

Assets that involve the use of level 3 fair value input are financial assets

at fair value through other comprehensive income - equity securities.

Assets that have been classified as level 3 fair value input only use one significant and unobservable input.

~52~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Quantitative information of significant and unobservable inputs:

Relationship between fair value Valuation Significant and and significant and Item technique unobservable input unobservable input Financial assets at Market ‧ Discount for lack of ‧ The higher fair value through approach liquidity (17.5% for discount for lack other comprehensive 2021.12.31 and of liquidity, the income - equity 2020.12.31) lower the fair instruments without value active market

(8) Sensitivity of level 3 fair value input to reasonable, possible alternative assumptions

The Company considers its fair value assessment approach of financial instruments to be reasonable, but uses of different valuation model or parameter may lead to different results. For financial instruments classified as level 3 input, impacts to other comprehensive income in the event of a change in valuation parameter are explained below:

Through other comprehensive income Rate increasing or decreasing Financial assets at fair value Input Change December 31, 2021 Equity instruments without active market Discount for lack of liquidity: 17.5% 1% December 31, 2020 Equity instruments without active market Discount for lack of liquidity: 17.5% 1%	Fair value changes reflected in other comprehensive income Favorable variation Adverse variation $ 11,794,118 (11,794,118) $ 11,738,083 (11,738,083)	Fair value changes reflected in other comprehensive income Favorable variation Adverse variation $ 11,794,118 (11,794,118) $ 11,738,083 (11,738,083)
		(11,738,083)

Favorable and adverse variations are determined by how they affect fair value. Fair value is calculated using appropriate valuation technique while incorporating different levels of unobservable input and parameter.

(XXIII) Financial risk management

1. Overview

Use of financial instrument exposes the Company to the following risks:

(1) Credit risk

(2) Liquidity risk

(3) Market risk

This footnote discloses exposure, assessment, and management goals, policies, and procedures for the above mentioned risks. For further quantitative disclosures, please see notes to the financial statement.

~53~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

2. Risk management framework

The Company's Treasury Department and Administrative Department are responsible for establishing risk management policies for various business activities. Both the scope and severity of risk exposures are analyzed to facilitate supervision and management of financial risks associated with the Company's operations. Internal auditors, too, play a supervisory role.

The Company's risk management policy has been established to facilitate identification and analysis of the risks encountered. The policy introduces appropriate risk limits and controls, along with risk supervision practices and compliance requirements. The risk management policy is regularly revised to reflect changes in market condition and the Company's operations.

3. Credit risk

Credit risk refers to the risk of financial loss the Company may incur due to its customers or financial instrument counterparties being unable to fulfill contractual obligations. Credit risk mainly arises from customers' accounts receivable and bank deposits.

(1) Accounts receivable and other accounts receivable

Credit risk exposure of the aforementioned accounts varies from customer to customer. The management also takes into consideration common factors including default risk of customers' industries and countries, as these risks are also likely to affect credit risk. There was no significant concentration of sales to few customers, and the Company was not susceptible to any significant concentration of credit risk.

The Company has established its own credit policy, which requires every new customer to have credit rating analyzed before being awarded standard payment and delivery terms and payment. Sales limits are assigned on a customer-by-customer basis. The limit represents the maximum amount of uncollected sales proceeds one customer may accumulate without additional approval from the Company, and is regularly reviewed. To mitigate credit risk, the Company requires most of its overseas customers to issue letters of credit.

The Company maintains a doubtful debt account that reflects its estimate of possible losses on notes, accounts, and other receivables. The doubtful debt account is used primarily to account for losses arising from the possibility of debts becoming unrecoverable due to financial distress or business-related dispute of certain customers.

(2) Bank deposits

Credit risks associated with bank deposit are assessed and monitored by the Company's Treasury Department. The Company transacts and deals only with banks of strong credit standing, hence there is no material concern in terms of contract fulfillment or credit risk exposure.

~54~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

4. Liquidity risk

Liquidity risk is the risk of not being able to deliver cash or other financial assets to settle financial liabilities and failing to perform related obligations. Through management personnel, the Company supervises the use of bank financing limits to ensure sufficient funds and compliance with the terms of loan contracts. At the same time, we also conduct financing consultations with financial institutions to maintain certain credit lines and to reduce liquidity risk. Unused short-term bank limits as at December 31, 2021 and 2020 totaled NTD 217,659,130 and NTD 627,277,415, respectively.

5. Market risk

Market risk refers to the effect a change of market price may have on the income or value of financial instruments held on hand, whether it is an exchange rate instrument, interest rate instrument, equity instrument or otherwise. The goal of market risk management is to control market risk exposure within a tolerable range while optimizing investment returns.

(1) Exchange rate risk

The Company is exposed to exchange rate risks arising from sales, purchases, and loans that are denominated in non-functional currencies. NTD represents the Company's main functional currency. The above mentioned transactions are primarily denominated in currencies such as NTD, USD, and JPY.

Furthermore, the Company adopts natural hedge as a general guideline, and hedges foreign currency capital requirements and net positions (being the difference between foreign currency assets and liabilities) depending on the state of the foreign currency market. Currency swaps are among the most common hedging instruments used, and all of which have maturity shorter than one year.

Loan interests accrue in the same currency as the principals borrowed. In general, the Company draws loans in the same currency that matches cash flows from operations, which mainly involve NTD and occasionally USD and JPY. This practice provides effective hedge without use of derivative instruments, hence no hedge accounting is required.

(2) Interest rate risk

Capital borrowed by the Company may give rise to fair value or cash flow volatility due to exchange rate changes. The Company adopts a policy that monitors changes in the borrowing rate against trends of the market interest rate. It manages interest rate risk by borrowing capital through an appropriate combination of floating rate and fixed rate sources.

~55~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

(3) Equity instrument price risk

Equity instrument price risk refers to future price uncertainty associated with the equity instruments held on hand. The Company manages equity instrument price risk through diversification of investment portfolio and regular update of issuers' financial position.

(XXIV) Capital management

Objectives of the Company's capital management practices are to ensure the ability to sustain operations, deliver shareholder returns, and perform in line with the interests of other stakeholders while maintaining optimal capital structure for minimal funding cost. The Company may maintain or adjust its capital structure by changing the amounts of dividend paid, reducing and refunding share capital back to shareholders, issuing new shares, or liquidating assets against liabilities.

The Company manages capital using debt-to-capital ratio as the primary form of measurement. This ratio is calculated by dividing net liabilities with gross capital. Net liabilities are calculated by deducting cash and cash equivalents from total liabilities, as shown in the balance sheet. Gross capital refers to the sum of all equity components (meaning share capital, capital reserve, retained earnings, other equity items, and treasury stock) plus net liabilities.

Debt-to-capital ratio as at December 31, 2021 and 2020 is as follows:

Total liabilities Less: Cash and cash equivalents Net liabilities Total equity interest Gross capital Debt-to-capital ratio	$	2021.12.31 4,357,239,542 559,241,492 3,797,998,050 2,969,640,169 6,767,638,219 56.12%		2020.12.31 3,890,036,046 275,370,315 3,614,665,731 2,772,157,929 6,386,823,660 56.60%
	$
	$
	$

There had been no change to the Company's capital management approach as at December 31, 2021.

(XXV) Non-cash investing and financing activities

Reconciliation of liabilities associated with financing activities is explained

below:

below:
Short-term loan Long term borrowings	2021.1.1 $ 2,822,722,585 700,000,000	Cash flow 409,688,391 -	Changes without cash effect	2021.12.31 ) 3,232,340,870 700,000,000
			Exchange rate changes
			(70,106 -

~56~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

$ 3,522,722,585	409,688,391	(70,106)
2020.1.1 $ 2,398,131,396 -	Cash flow 424,414,391 700,000,000	Exchange rate changes 176,798 -

$ 2,398,131,396	1,124,414,391	176,798

VII. Related party transactions

(I) Names and relationship with related parties

Transactions with related parties during the reporting period of the financial statements are as follows:

Related parties Kao Hsing Chang Iron & Steel Corp. Employee Welfare Committee Kao Hsing Smelting & Chemical Fiber Co., Ltd. ENRESTEC Inc. Sunward Refractories Co., Ltd.	Relationship with the Company
	Employee welfare committee of the Company A company managed by key management personnel A company managed by key management personnel Associated companies of the Company

(II) Significant transactions with related parties
Income from sale of scrap

Kao Hsing Smelting & Chemical Fiber Co., Ltd.	2021 $ 11,099,741	2020 6,480,489

Proceeds on scraps sold to related parties are collected 10 days after month-end via promissory note; proceeds on sale of scraps to non-related parties are collected either within 10 days after month-end or in advance before shipment.

2. Leases

(1) The Company leases the office used by the headquarters from the Employee Welfare Committee of the Company, and the lease period is from January 1,

~57~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

2015 to December 31, 2024. The payment method is a one-time payment of the rent during the lease period at the time of signing the contract.

Security deposits placed for the above lease were NTD 4,000,000 as at December 31, 2021 and 2020. As of December 31, 2021 and 2020, the balances of right-of-use assets were NTD 9,870,840 and NTD 13,161,120, respectively.

(2) The Company leased the plant in Zhuyuan Section, Renwu District, Kaohsiung City to Sunward Refractories Co., Ltd. in November 2020. The lease period is from November 2020 to November 2025. As of December 31, 2021 and 2020, the rental deposit collected for the aforementioned lease is NTD 5,000,000. The rental income recognized in 2021 and 2020 was NTD 28,608,567 and NTD 4,051,746 respectively. Operating income is reported in the consolidated income statement. As of December 31, 2021 and 2020, all receivables arising from the aforementioned transactions have been received.
Related party receivables

Related party receivables	Related party receivables
Details of related party receivables are shown below: Account category Type of related party 2021.12.31 Receivables A company managed by key management personnel $ 499,036		2020.12.31 475,141

4. Others

(1) The Company subscribed to the cash issue of Sunward Refractories Co., Ltd. in 2021 for a sum of NTD 45,200,000; all procedures relevant to the change of ownership have been completed.
(2) The Company subscribed to the cash issue of ENRESTEC Inc. in September 2020 for a sum of NTD 21,362,202; all procedures relevant to the change of ownership have been completed.
(3) For bank loans and their available limits as of December 31, 2021 and 2020, the primary management personnel of the Company served as the joint guarantors.
(III) Transactions involving key management personnel

Compensation to key management personnel includes the following:

Short-term employee benefits Retirement benefits Termination benefits Other long-term benefits Share-based payment	2021 $ 10,078,080 60,630 - - -	2020 9,912,780 57,744 - - - 9,970,524
	$ 10,138,710

~58~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

The Company provides vehicles for use by managerial personnel. As at December 31, 2021 and 2020, these vehicles had unimpaired balance of NTD 1,314,826 (NTD 11,270,000 cost less NTD 9,955,174 accumulated depreciation) and NTD 1,690,498 (NTD 11,270,000 cost less NTD 9,579,502 accumulated depreciation). NTD 375,672 and NTD 1,126,998 of depreciation expenses were recognized in 2021 and 2020, respectively. The Chairman has been assigned a driver, whose salary is determined according to the Company's Employee Salary Policy.

VIII. Pledged assets

Book value of assets pledged by the Company is explained below: Name of asset Collateral 2021.12.31 Property, plant, and equipment Short-term loans and long-term loans $ 959,595,740 Investment property Short-term loans and long-term loans 1,765,680,183 $2,725,275,923	2020.12.31 1,259,847,975 667,744,054
	1,927,592,029

IX. Major contingent liabilities and unrecognized contractual commitments

(I) As at December 31, 2021 and 2020, the Company had respectively issued NTD 12,820,000 and NTD 10,550,000 of guarantee notes payable for the purchase of supplies.
(II) As at December 31, 2021 and 2020, the Company had NTD 40,655,135 and NTD 73,331,779 of letters of credit that were issued but unused, respectively.
(III) As at December 31, 2021 and 2020, the Company had signed sales commitments for NTD 25,226,040 and NTD 88,569,205 and placed performance bonds totaling NTD 1,624,367 and NTD 5,260,037, respectively, that were presented as performance bonds. Failure to deliver goods as agreed will be subject to penalties calculate at 0.1%-0.3% on the amount of goods undelivered for every day delayed.

X. Losses from major disasters: None.

XI. Major post-balance sheet events: None.

XII. Others

(I) Summary of employee benefit, depreciation, and amortization expenses by function:

By function Nature	2021	2021	2021	2020	2020	2020
	Presented as operating cost	Presented as operating expense	Total	Presented as operating cost	Presented as operating expense	Total
Employee benefit expenses Salary expenses Labor/health insurance premium	80,212,162 9,492,919	31,793,220 3,547,712	112,005,382 13,040,631	78,248,662 8,780,116	34,317,186 3,521,435	112,565,848 12,301,551

~59~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Pension expense Directors' compensation Other employee benefit expenses Depreciation Amortization	4,147,376 - 5,630,512 48,096,048 -	1,526,353 4,638,000 2,029,614 6,388,926 -	5,673,729 4,638,000 7,660,126 54,484,974 -	4,234,349 - 3,368,253 48,309,022 -	1,748,578 4,443,000 1,342,793 7,237,821 -	5,982,927 4,443,000 4,711,046 55,546,843 -

Additional information on employee size and employee benefit expenses for 2021 and 2020 is presented below:

020 is presented below:
Employee count No. of directors without concurrent position as employee Average employee benefit expenses Average employee salary expenses Adjustments to average employee salary expenses Supervisor remuneration	2021 215	2020 222
	6	6
	$ 662,105	627,599
	$ 535,911	521,138
	2.83% $ -	-

Information on the Company’s salary and remuneration policies (including for

directors, managers and employees) is as follows:

Information on the Company’s salary and remuneration policies (including for directors, managers and employees) is as follows:
I. Employee salary compensation mainly includes basic salary (including principal salary, special environmental allowances, etc.), year-end bonuses, performance bonuses and so on.
Salary refers to salary market conditions, Company operating conditions and organizational structure in setting salary payment standards. Furthermore, it will be adjusted in due course according to market salary dynamics, changes in the overall economy and industrial climate and governmental laws and regulations.
Employee salary and remuneration are based on academic experience, professional knowledge and technological skills, professional experience, and personal performance; they are not differentiated due to age, gender, race, religion, political stance, marital status or union membership.
Bonuses are issued based on the Company’s operating performance and employees’ personal performances.
Starting salary standards for those with no work experience and for foreign workers shall comply with government regulations.
Pursuant to the Articles of Incorporation, profits concluded from a financial The Company year are subject to employee remuneration of no less than 0.5%. However, profits must first be taken to offset against cumulative losses if any.

~60~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

II. Manager’s salary remuneration is based on the Company’s business strategy, profitability, performance and job contribution, etc. and refers to the salary market level including salaries, job bonus, severance payment, various bonuses, incentives, various allowances, etc. In addition and accordance with to the Company's Articles of Incorporation, if the Company makes a profit during the year, no less than 0.5% shall be allocated as employee compensation. However, profits must first be taken to offset against cumulative losses if any.
III. In addition to receiving a fixed amount every month, directors’ salary and remuneration includes transportation fees for implementing business affairs. The remuneration of the chairman also includes salary, various bonuses, and incentives, etc. In addition, and in accordance with the Company’s Articles of Incorporation, if the Company makes a profit during the year, no more than 5% shall be allocated as directors' remuneration. However, profits must first be taken to offset against cumulative losses if any.

XIII. Other disclosures

(I) Information relating to significant transactions
Significant transactions in 2021 that require further disclosures under the
Preparation Regulations are as follows:
Loans to third parties: None.
Endorsement/guarantee to third parties: None.
End-of-period holding position of marketable securities (excluding investment in

subsidiaries, associated companies, and joint ventures):

Holder	Category and name of security	Relationship with company	Account category		Closing amount	Closing amount	Closing amount
				Shares	Book value	Shareholding percentage	Fair value
The Company	Share/China Steel Chemical	-	Financial assets at fair value through other comprehensive income - current	1,000,000	120,500,000	0.42%	120,500,000
The Company	Share/Win Semiconductors	-	Financial assets at fair value through other comprehensive income - current	80,000	29,960,000	0.02%	29,960,000
The Company	Share/ChainQui Construction Development	-	Financial assets at fair value through other comprehensive income - current	93,000	1,715,850	0.04%	1,715,850
The Company	Stocks / Ta Chen Stainless Pipe	-	Financial assets at fair value through other comprehensive income - current	300,000	13,875,000	0.01%	13,875,000
The Company	Share/Asia Pacific Telecom	-	Financial assets at fair value through other comprehensive income - current	6,000,000	49,320,000	0.14%	49,320,000
The Company	Stocks/Asia Optical	-	Financial assets at fair value through other	150,000	14,085,000	0.05%	14,085,000

~61~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

			comprehensive income - current
The Company	Stocks / Episil		Financial assets at fair value through other comprehensive income - current	100,000	14,300,000	0.03%	14,300,000
The Company	Stocks / Gudeng Precision		Financial assets at fair value through other comprehensive income - current	100,000	32,400,000	0.12%	32,400,000
The Company	Stocks / Delta Electronics		Financial assets at fair value through other comprehensive income - current	150,000	41,250,000	0.01%	41,250,000
The Company	Stocks / Genius Electronic		Financial assets at fair value through other comprehensive income - current	40,000	21,160,000	0.04%	21,160,000
The Company	Stocks/Eternal Materials	-	Financial assets at fair value through other comprehensive income - current	645,000	26,122,500	0.05%	26,122,500
The Company	Stocks/CHPT	-	Financial assets at fair value through other comprehensive income - current	36,000	25,596,000	0.11%	25,596,000
The Company	Share/Sunspring Metal	-	Financial assets at fair value through other comprehensive income - current	300,000	8,220,000	0.02%	8,220,000
The Company	Stocks/Taiwan Semiconductor Manufacturing	-	Financial assets at fair value through other comprehensive income - current	80,000	49,200,000	- %	49,200,000
The Company	Stock/Hon Hai Precision Industry	-	Financial assets at fair value through other comprehensive income - current	500,000	52,000,000	- %	52,000,000
The Company	Stocks / Cleanaway	-	Financial assets at fair value through other comprehensive income - current	100,000	23,350,000	0.09%	23,350,000
The Company	Share/Yageo	-	Financial assets at fair value through other comprehensive income - current	160,000	76,720,000	0.03%	76,720,000
The Company	Stocks / Zhen Ding Technology Holding - KY	-	Financial assets at fair value through other comprehensive income - current	300,000	30,150,000	0.03%	30,150,000
The Company	Stocks/ ASE Technology Holding	-	Financial assets at fair value through other comprehensive income - current	500,000	53,250,000	0.01%	53,250,000
The Company	Stocks / Kaimei Electronic	-	Financial assets at fair value through other comprehensive income - current	800,000	80,800,000	0.59%	80,800,000
The Company	Stocks / Foxconn Technology	-	Financial assets at fair value through other comprehensive	400,000	5,960,000	0.03%	25,960,000

~62~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

			income - current
The Company	Stocks / China Steel	-	Financial assets at fair value through other comprehensive income - current	400,000	14,140,000	- %	14,140,000
The Company	Share/Chunghwa Picture Tubes	-	Financial assets at fair value through other comprehensive income - non- current	71,210	-	-	-
The Company	Share/Universal Venture Capital Investment Crop.	-	Financial assets at fair value through other comprehensive income - non- current	1,400,000	10,778,424	1.16%	10,778,424
The Company	Share/KHH Arena Corporation	-	Financial assets at fair value through other comprehensive income - non- current	5,000,000	68,557,500	2.00%	68,557,500
The Company	Stocks/ENRESTE C Inc.	The Company is a director of the securities issuer	Financial assets at fair value through other comprehensive income - non- current	19,101,651	268,373,422	18.71%	268,373,422
The Company	Share/CSGT Metals Vietnam Joint Stock Company	-	Financial assets at fair value through other comprehensive income - non- current	1,328,940	54,802,550	6.00%	54,802,550
The Company	Share/How Weih Holding (Cayman) Co. Ltd.	-	Financial assets at fair value through other comprehensive income - non- current	12,700,000	570,547,183	18.68%	570,547,183

Cumulative purchase or sale of any single marketable security that amounts to NTD 300 million or more than 20% of paid-up capital: None.
Acquisition of real estate amounting to NTD 300 million or more than 20% of paid-up capital: None.
Disposal of real estate amounting to NTD 300 million or more than 20% of paidup capital: None.
Sales and purchases with related parties amounting to NTD 100 million or more than 20% of paid-up capital: None.
Related party accounts receivable amounting to NTD 100 million or more than 20% of paid-up capital: None.
Derivative transactions: None.

(II) Information on business investments:

Information about the Company's business investments in 2021 (excluding

Mainland investees):

Name of investor Designation	Net income (losses) of the investee Designation	Location Region	Main businesses andproducts.	Sum of initia	l investment	Period-end holding position	Period-end holding position	Period-end holding position	Net income (losses) of the investee.	Share of profits/losse of investee	s Remarks
				End of current period	End of previousyear	Shares	Percentage	Book value
The Company	Hsieh Chang Hsing Trading Co.,	Gushan District, Kaohsiung	Holding of various production and banking	171,728,510	171,728,510	17,172,851	45.79%	238,042,155	(122,780)	(56,221)

~63~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

	Ltd.	City	businesses
The Company	KHC Steel International Corp.	Gushan District, Kaohsiung City	Trading of steel pipes and steel sheets	105,800,000	105,800,000	7,280,000	38.32%	141,629,586	(3,450,310)	(1,322,159)
The Company	Sunward Refractories Co., Ltd.	Renwu District, Kaohsiung City	Ceramic products and refractory material manufacturing	107,906,001	62,706,001	4,588,600	20.00%	69,105,142	49,005,193	9,801,039

(III) Information relating to investments in the Mainland: None.

(IV) Information on principal shareholders:

Unit: Shares

Information on principal shareholders: Unit: Shares
Shares Name	Number of shares held	Percentage of shareholding
Huida Investment Co.,Ltd	40,999,312	20.41%
Lu Tai Run	27,551,329	13.71%
Hsieh ChangHsingTradingCo.,Ltd.	26,007,915	12.94%
Lu Ho-Lin	16,426,010	8.17%
KHC Steel International Corp.	14,747,000	7.34%

The Company has applied to Taiwan Depository and Clearing Corporation to obtain the information listed in this table to explain the following matters:

(1) Information of major shareholders in this table has been established by the Taiwan Depository and Clearing Corporation on the last business day of each quarter, calculating information of shareholders holding more than 5% of the Company's common stock that has been delivered with non-physical registration (including treasury stocks). As for the share capital recorded in the Company's financial statements and the Company's actual completed nonphysical registration of the number of shares delivered, there may be differences or discrepancies due to different calculation bases.
(2) In the case of the above information, if a shareholder delivers shares to a trust, it is disclosed in the individual sub-accounts for trustees who open special trust accounts. As for shareholders’ declarations of insider equity holdings exceeding 10% in accordance with the Securities and Exchange Act, such shareholdings include personal shareholdings plus the shares delivered to a trust and have the right to use the trust property, and so on. For information on insider equity declarations, please refer to the Market Observation Post System.

XIV. Segment information

(I) Basis of disclosure and reconciliation of profit, asset, and liability information for reporting segments

~64~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

The management allocates resources and evaluates segment performance based on pre-tax segment profits (excluding extraordinary gains/losses and exchange gains/losses), as shown on internal management reports verified by the main operational decision maker. Due to the fact that income tax, extraordinary gains/losses, and exchange gains/losses are managed at the group level, the Company does not allocate income tax expenses (benefits), extraordinary gains/losses, and exchange gains/losses to reporting segments. The reported amounts are consistent with the amounts used by the management for decisionmaking.

Accounting policies adopted by various operating segments are consistent with those described in Note 4 - "Summary of significant accounting policies." Disclosure and reconciliation of segment information:

Steel Pipe Department $ 1,325,565,856 -	Others 192,282,139 -	Reconciliation and elimination 32,776,266 -
$ 1,325,565,856	192,282,139	32,776,266
$ -	-	(56,353,471)
$ 43,988,415	746,034	9,750,525
$- $ 89,336,269	-	8,422,659 (13,219,425)
	(13,548,044)
$ -	-	448,776,883
$ 24,617,700	2,672,764	150,000
$ 1,681,258,978	18,949,773	5,626,670,960

~65~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Steel Pipe Department $ 892,181,275 -	Others 61,942,370 -	Reconciliatio n and elimination 8,386,776 -
$ 892,181,275	61,942,370	8,386,776
$ -	-	(41,189,779)
$ 47,023,029	288,207	8,235,607
$-	-	(738,213) 38,862,162
$ (48,044,412)	(21,902,506)
$ -	-	370,586,285
$ 28,810,326	-	-
$ 1,434,059,483	16,865,255	5,211,269,237

Significant reconciliation of information between the reporting segments mentioned above:

Unallocated profit/loss of reported segment:

Losses from disposal of property, plant and equipment Financial costs Others Total Assets not attributable to reported segment: Cash and bank deposits	2021 $ (29,955) (56,353,471) 43,164,001 $ (13,219,425) 2021 $ 559,151,492	2020 - (41,189,719) 80,051,881 38,862,162 2020 275,280,315

2. Assets not attributable to reported segment:

~66~

Notes to Financial Statements of Kao Hsing Chang Iron & Steel Corp. (continued)

Equity-accounted investments Property, plant, and equipment Right-of-use asset Investment property Financial assets at fair value through other comprehensive income Others Total	448,776,883 619,205,853 9,870,840 2,141,001,859 1,777,133,429 71,530,604 $ 5,626,670,960	370,586,285 622,154,499 13,161,120 2,144,791,618 1,702,769,151 82,526,249 5,211,269,237

(II) Regional disclosure

Disclosure of regional information is as follows. Income location is determined based on customers' geographic presence, whereas location of non-current assets is determined based on the asset's physical presence.

Location Revenues from external customers: Taiwan America Northeast Asia Location Non-current assets: Taiwan	2021 $1,488,453,206 61,086,427 1,084,628 $1,550,624,261 110.12.31 $3,670,702,642	2020 948,871,444 6,256,068 7,382,909 962,510,421 109.12.31 3,697,840,107

Non-current assets include property, plant, and equipment, investment property, and right-of-use asset, but exclude non-current financial instruments.

(III) Information on major customers

Customer Nakosin Enterprise Co., Ltd. Long An Hardware Co., Ltd. Gir Gai Trading Co., Ltd.	2021 $ 395,054,118 227,015,649 185,756,351	2020 325,105,617 143,842,264 77,994,674 546,942,555
	$ 807,826,118

~67~

Kao Hsing Chang Iron & Steel Corp. Schedule of cash and cash equivalents As of December 31, 2021

Unit: NTD

Item Cash dividends Cash in banks Total	Summary Reserve cash Check deposit Demand deposit Foreign currency deposits (USD 877,077.45, exchange rate 27.68)	Amount $ 265,497 18,681,143 516,017,348 24,277,504
		$ 559,241,492

Schedule of financial assets at fair value through other comprehensive income - current

Financial instruments Designation China Steel Chemical ChainQui Construction Development Asia Pacific Telecom Asia Optical CHPT Sunspring Metal Yageo Win Semiconducto rs Taiwan Semiconducto r Manufacturing Zhen Ding Technology Holding-KY Eternal Materials ASE Technology Holding Hon Hai Precision Industry	Summary Listed shares Listed shares Listed shares Listed shares TPEx listed shares Listed shares Listed shares TPEx listed shares Listed shares Listed shares Listed shares Listed shares Listed shares	Shares / Number of units 1,000,000 93,000 6,000,000 150,000 36,000 300,000 160,000 80,000 80,000 300,000 645,000 500,000 500,000	Face value $ 10 10 10 10 10 10 10 10 10 10 10 10 10	Total amount 10,000,000 930,000 60,000,000 1,500,000 360,000 3,000,000 1,600,000 800,000 800,000 3,000,000 6,450,000 5,000,000 5,000,000	Acquisition Cost 110,033,653 3,352,906 73,339,914 13,041,704 24,179,351 14,272,864 94,317,965 28,536,523 48,117,952 33,465,880 24,231,366 56,694,317 56,996,083	Fair value Unit price Total 120.50 120,500,000 18.45 1,715,850 8.22 49,320,000 93.90 14,085,000 711.00 25,596,000 27.40 8,220,000 479.50 76,720,000 374.50 29,960,000 615.00 49,200,000 100.50 30,150,000 40.50 26,122,500 106.50 53,250,000 104.00 52,000,000	Provision of collateral or collateral
						Unit price 120.50 18.45 8.22 93.90 711.00 27.40 479.50 374.50 615.00 100.50 40.50 106.50 104.00
							None None None None None None None None None None None None None

~67~

Kaimei	Listed	800,000	10	8,000,000		84,320,229	101.00	80,800,000	None
Electronic	shares
Foxconn	Listed	400,000	10	4,000,000		28,887,194	64.90	25,960,000	None
Technology	shares
China Steel	Listed	400,000	10	4,000,000		14,454,483	35.35	14,140,000	None
	shares
Episil	TPEx	100,000	10	1,000,000		12,854,025	143.00	14,300,000	None
	listed
	shares
Gudeng	TPEx	100,000	10	1,000,000		32,606,389	324.00	32,400,000	None
Precision	listed
	shares
Delta	Listed	150,000	10	1,500,000		41,764,433	275.00	41,250,000	None
Electronics	shares
Genius	TPEx	40,000	10	400,000		21,437,571	529.00	21,160,000	None
Electronic	listed
	shares
Ta Chen	Listed	300,000	10	3,000,000		14,618,059	46.25	13,875,000	None
Stainless Pipe	shares
Cleanaway	Listed	100,000	10	1,000,000		22,568,620	233.50	23,350,000	None
	shares
Total					$	854,091,481		804,074,350

~68~

Kao Hsing Chang Iron & Steel Corp. Schedule of other notes receivable As of December 31, 2021

Unit: NTD

counter party Mr. Pei-Kai Hsu	Summary Rental income	Amount $ 200,000

Schedule of net accounts receivable

Customer name Gir Gai Trading Co., Ltd. Nakosin Enterprise Co., Ltd. Long An Hardware Co., Ltd. Kiin's Corporation Ta Shen Shing Steel & Iron Co., Ltd. Sheng Lun Steel Co., Ltd. Others (If the balance of each account does not reach 5% of the accounts receivable, it is reported together) Total	Summary Business Business Business Business Business Business Business	Amount $ 31,601,748 18,643,736 11,800,670 10,996,330 8,455,390 5,134,812 9,723,836 $ 96,356,522

~69~

Kao Hsing Chang Iron & Steel Corp. Schedule of other net receivables

As of December 31, 2021

Unit: NTD

Item Related party: Income receivable from sale of scrap Non-related party: Income receivable from sale of scrap Receivables from sale of shares Dividend income receivable Receivable purchase discounts Receivables from scaffolding Others Total Less: Allowance for bad debts Net	Summary	Amount $ 499,036 1,126,809 26,322,345 275,000 356,601 470,460 42,743 29,092,994 470,460 $ 28,622,534

~70~

Kao Hsing Chang Iron & Steel Corp. Schedule of inventories

As of December 31, 2021

Unit: NTD

Item Finished goods Less: loss provisions Subtotal Work-in-progress Less: loss provisions Subtotal Raw materials Less: loss provisions Subtotal Materials Less: loss provisions Subtotal Inventory in transit Scraps Total	Amount Cost Net realizable value $ 241,400,289 275,130,565 8,481,580 232,918,709 141,228,540 156,868,675 1,591,834 139,636,706 287,195,589 295,382,565 944,386 286,251,203 49,406,294 52,525,956 364 49,405,930 11,293,208 11,293,208 305,692 305,692 $ 719,811,448
	Cost $ 241,400,289 8,481,580
	232,918,709
	141,228,540 1,591,834
	139,636,706
	287,195,589 944,386
	286,251,203
	49,406,294 364
	49,405,930
	11,293,208 305,692
	$ 719,811,448

Schedule of other current assets

For information concerning other current assets please refer to Note VI (X)

~71~

Kao Hsing Chang Iron & Steel Corp.

Financial assets measured at fair value through other comprehensive gains and losses - schedule of non-current changes

As of December 31, 2021

Unit: NTD

Beginning of period Shares Fair value 1,400,000$ 9,478,000 5,000,000 81,551,250 1,328,940 40,779,800 19,101,651 289,332,707 12,700,000 560,878,673 71,210 - 261,762 4,620,099 $ 986,640,529	Increase inthe period Shares Amount - 1,300,424(Note 1) - - - 14,022,750 (Note 1) - - - 9,668,510 (Note 1) - - 14,945 3,316,242 (Note 1) 28,307,926	Decrease inthe period Shares Amount - - - 12,993,750 (Note 1) - - - 20,959,285(Note 1) - - - - 276,707 7,936,341 (Note 3) 41,889,376	Closing	Provision of collateral Guarantee or pledge
	Shares	Shares	Shares 1,400,000 5,000,000 1,328,940 19,101,651 12,700,000 71,210 -
	- - - - - - 14,945	276,707		None None None None None None
$ 986,640,529

Note 1: This is the number of changes in the evaluation of the current period.

Note 2: This is the purchase of NTD 311,766 of equity in the current period and the amount of changes in the evaluation of the current period of NTD 3,004,476.

Note 3: Constitutes shares sold in this period.

~72~

Kao Hsing Chang Iron & Steel Corp.

Schedule of changes in investments accounted for using equity method

January 1 to December 31, 2021

Unit: NTD

Opening balance Shares Amount 17,172,851 $ 225,593,900 7,280,000 130,888,282 68,600 14,104,103 $ 370,586,285	Opening balance Shares Amount 17,172,851 $ 225,593,900 7,280,000 130,888,282 68,600 14,104,103 $ 370,586,285	Increase inthe period Shares Amount - 12,504,476(Note 1) - 23,999,455(Note 2) 4,520,000 55,001,039 (Note 3) 91,504,970	Decrease inthe period Closing balance Shares Amount Shares Percentage of shareholding Amount - 56,221(Note 1) 17,172,851 45.79% 238,042,155 - 13,258,151(Note 2) 7,280,000 38.32% 141,629,586 - - 4,588,600 20.00% 69,105,142 13,314,372 448,776,883	Decrease inthe period Closing balance Shares Amount Shares Percentage of shareholding Amount - 56,221(Note 1) 17,172,851 45.79% 238,042,155 - 13,258,151(Note 2) 7,280,000 38.32% 141,629,586 - - 4,588,600 20.00% 69,105,142 13,314,372 448,776,883	Decrease inthe period Closing balance Shares Amount Shares Percentage of shareholding Amount - 56,221(Note 1) 17,172,851 45.79% 238,042,155 - 13,258,151(Note 2) 7,280,000 38.32% 141,629,586 - - 4,588,600 20.00% 69,105,142 13,314,372 448,776,883	Market price or net equity value	Market price or net equity value
Shares		Shares	Shares - - -	Percentage of shareholding		Unit price	Total price
17,172,851 7,280,000 68,600		- - 4,520,000		45.79% 38.32% 20.00%		13.86 19.45 15.06	238,042,155 None 141,629,586 None 69,105,142 None 448,776,883
	$ 370,586,285				448,776,883

Note 1: This is the investment loss recognized in the current period of NTD (56,221), and the proportional unrealized profit of the invested company's financial assets recognized is NTD 12,504,476. Note 2: This is the investment loss recognized in the current period of NTD (1,322,159), and the proportional unrealized loss of the invested company's financial assets recognized is NTD (11,935,992) and disposal of stock interest is NTD 23,999,455.

Note 3: This is the investment gain recognized in the current period of NTD 9,801,039 and the cash capital increase of NTD 45,200,000 in proportion with the shareholding ratio.

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Kao Hsing Chang Iron & Steel Corp. Schedule of changes in property, plant, and equipment

January 1 to December 31, 2021

Unit: NTD

For information about changes in property, plant and equipment, please refer to Note VI (VII).

Schedule of changes in accumulated depreciation of property, plant and equipment

Item Buildings Machinery Others Total	Opening balance $ 959,453,164 1,304,584,101 137,951,501	Increase in the period 17,741,083 26,516,019 3,147,833	Decrease in the period - 6,239,076 257,000	Closing balance 977,194,247 1,324,861,044 140,842,334 2,442,897,625
	$ 2,401,988,766	47,404,935	6,496,076

Schedule of accumulated impairment changes of property, plant and equipment

Item	Opening balance $ 164,221,155 816,526,349 97,140,483	Increase in the period - - -	Decrease in the period - 1,058,389 -	Closing balance 164,221,155 815,467,960 97,140,483 1,076,829,598
Buildings Machinery Others Total
	$ 1,077,887,987	-	1,058,389

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Kao Hsing Chang Iron & Steel Corp. Schedule of changes in invested real estate

January 1 to December 31, 2021

Unit: NTD

For information about changes in invested real estate, please refer to Note VI (IX).

Schedule of changes in accumulated depreciation of invested real estate

For information about changes in invested real estate, please refer to Note VI (IX).

Schedule of guarantee deposits paid As of December 31, 2021

Item Guarantee deposits paid Total	Summary Bid deposit Lease deposit and security deposit Others	Amount $ 1,624,367 4,000,000 206,500 $ 5,830,867

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Kao Hsing Chang Iron & Steel Corp. Schedule of short-term loans

As of December 31, 2021

Unit: NTD

Loan type Loans under L/C Loans under L/C Loans under L/C Loans under L/C Secured loans Secured loans Secured loans Secured loans Total	Explana tion Changhua Bank Huatai Bank Bank of Taiwan JihSun Bank Huatai Bank Changhua Bank JihSun Bank Bank of Taiwan	Closing balance $ 419,159,078 163,244,632 80,531,358 59,405,802 1,100,000,000 900,000,000 460,000,000 50,000,000	Contract period Within one year Within one year Within one year Within one year Within one year Within one year Within one year Within one year	Interest rate range 1.47% 1.45 % 1.48% 1.50% 1.45% 1.50% 1.50% 1.48%	Financing amount Total amount 1,400,000,000 Total amount 1,380,000,000 Total amount 150,000,000 Total amount 520,000,000 Total amount 1,380,000,000 Total amount 1,400,000,000 Total amount 520,000,000 Total amount 150,000,000	Mortgage or collateral
						Land Land Land Land Land Land Land Land
		$ 3,232,340,870

Schedule of bills payable

Supplier I Hong Hot-Galvanization Industrial Co., Ltd. Shun Tai Trucking Co., Ltd. Others (If the balance of each account does not reach 5% of bills payable, it is reported together) Total	Summary Business Business Business	Amount $ 14,884,752 1,540,594 11,958,497 $ 28,383,843

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Kao Hsing Chang Iron & Steel Corp. Schedule of other bills payable As of December 31, 2021

Unit: NTD

Payment counterparty Each shareholder Guor Lung Machine Co., Ltd. Perfect Engineering Co., Ltd. Li Fang Enterprise Co., Ltd. Others (If the balance of each account does not reach 5% of other bills payable, it is reported together) Total	Summary Capital reduction and refund of shares Funds for equipment Funds for equipment Funds for equipment	Amount $ 5,761,181 3,048,150 1,706,250 693,000 1,669,475 $ 12,878,056

Schedule of accounts payable

Supplier China Steel Corporation I Hong Hot-Galvanization Industrial Co., Ltd. Kounan Steel Co., Ltd. Others (If the balance of each account does not reach 5% of the accounts payable, it is reported together) Total	Summary Business Business Business Business	Amount $ 10,869,412 18,314,772 5,873,528 4,700,261 $ 39,757,973

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Kao Hsing Chang Iron & Steel Corp. Schedule of other payables

As of December 31, 2021

Unit: NTD

Item Salary and bonus Paid leave Utility bills Tax Stock delivery payment Freight and customs declaration fee Cargo allowance Funds for equipment Pension Repair costs Labor health insurance Interest Other Total	Summary	Amount $ 10,285,288 6,513,878 2,193,810 2,926,998 6,479,719 2,209,369 1,731,895 3,381,210 772,620 1,614,596 1,063,099 2,855,557 14,710,356 $ 56,738,395

Schedule of other current liabilities

Item Contract liabilities Unearned revenues Collection Total	Summary Sales proceeds in advance Rent in advance Self-paid pensions	Amount $ 6,982,486 190,475 125,491 $ 7,298,452

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Kao Hsing Chang Iron & Steel Corp. Schedule of long-term loans As of December 31, 2021

Unit: NTD

Amount Due after Due within one year Interest Mortgage or Creditor Summary one year or more Total Contract period rate guarantee Changhua Bank Secured $ - 700,000,000 700,000,000 2020.10.23 ~ 1.8% Land loans 2020.10.23 Please refer to Note VI (XIII) for related information on the long-term loan schedule.

Schedule of deferred income tax liabilities

Item Summary Amount － Land revaluation valueProperty, plant and equipment Land $ 138,600,366 added tax provision Investment property 72,031,964 Total $ 210,632,330 Schedule of guarantee deposits received Item Summary Amount Guarantee deposits Land lease deposit $ 5,040,000 received

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Kao Hsing Chang Iron & Steel Corp. Schedule of net operating income January 1 to December 31, 2021

Unit: NTD

Item Steel pipes Hot rolled steel coil Zinc products Others Rental income Total	Quantity (kg) 35,418,136 7,710,195 379,566 210,620	Amount
		$1,299,148,571 187,184,443 26,417,285 5,097,696 32,776,266 $1,550,624,261

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Kao Hsing Chang Iron & Steel Corp. Schedule of operating costs January 1 to December 31, 2021

Unit: NTD

Item Direct raw materials Beginning stock Plus: Feedstock this period Less: Ending inventory Direct raw materials consumed in this period Direct labor Manufacturing expenses Unallocated manufacturing overheads Manufacturing costs Work in progress at the beginning of the period Plus: Outsourcing Inventory profit Work in progress at the end of the period Cost of finished goods for the current period Finished goods at beginning of period Plus: Outsourcing Less: Inventory losses Self-use Finished goods at end of period Cost of goods sold before adjustment Cost of goods sold plus (minus) adjustment Income from sale of scrap Net loss Losses from inventory inactivity and devaluation Unallocated manufacturing overheads Others Adjusted cost of goods sold Leasing costs Operating costs	Amount $ 109,696,880 1,138,736,230 (287,195,589)
	961,237,521 63,179,428 295,454,608 (38,837,082)
	1,281,034,475 64,863,595 31,840,535 60,756 (141,228,540)
	1,236,570,821 252,843,339 73,956,824 (185,375) (210,833) (241,400,289)
	1,321,574,487 (19,989,924) 124,619 1,641,231 38,837,082 3,695,348
	1,345,882,843 10,168,173
	$ 1,356,051,016

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Kao Hsing Chang Iron & Steel Corp. Schedule of selling expenses January 1 to December 31, 2021

Unit: NTD

Item Salary Shipping expense Others Total	Summary Employee salary and bonus Sales freight expense Rent, utilities, pension, labor and health insurance, warehouse rental and loading and unloading fees, entertainment expenses, etc.	Amount $ 8,114,467 18,875,187 6,878,127 $ 33,867,781

Schedule of management expenses

Item Salary Entertainment expenses Labor expenses Utility bills Tax Pension Others Total	Summary Employee salary, overtime pay and bonus Entertainment expenses Public expenses for services such as lawyers and accountants Utility bills for office premises Housing tax and land value tax, etc. Employee pensions Stationery printing, training expenses, post and telecommunications expenses, travel expenses and repair expenses, etc.	Amount $ 27,328,753 10,889,000 2,035,000 1,235,179 4,421,815 1,065,427 16,768,157 $ 63,743,331

Schedule of non-operating income and expenses

For information on non-operating income and expenses, please refer to Note VI (XXI).

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AI assistant

KHC — Annual Report 2021

51940_rns_2021-11-11_a317f700-47c9-45d4-8798-3cb197019a74.pdf

Kao Hsing Chang Iron & Steel Corp. Financial Statements and Independent Auditor's Report

Table of Contents

Accountants Audit Report

Audit opinion

Basis of Audit Opinion

Key audit items

Explanation of key audit issues:

Audit procedures:

Responsibilities of the management and governance body to the financial statements

Auditors' responsibilities in the audit of financial statements

KPMG Taiwan

Kao Hsing Chang Iron & Steel Corp. Balance Sheet

December 31, 2021 and 2020

Unit: NTD Thousand

Kao Hsing Chang Iron & Steel Corp.

Balance Sheet (continued) December 31, 2021 and 2020

Unit: NTD Thousand

Kao Hsing Chang Iron & Steel Corp. Statements of Comprehensive Income January 1 to December 31, 2021 and 2020

Unit: NTD Thousand

(Please refer to the attached notes to financial statements)

Kao Hsing Chang Iron & Steel Corp. Statement of Changes in Equity

January 1 to December 31, 2021 and 2020

Unit: NTD Thousand

Kao Hsing Chang Iron & Steel Corp.

Statement of Cash Flow

January 1 to December 31, 2021 and 2020

Kao Hsing Chang Iron & Steel Corp. Notes to Financial Statements

2021 and 2020

(Unless otherwise specified, all amounts are presented in NTD)

I. Company history

II. Financial statement approval date and procedures

III. Application of new and amended standards and interpretations

IV. Summary of significant accounting policies

1. Financial assets

(4) Impairment on financial assets

(5) Removal of financial assets

(4) Financial liabilities

(5) Removal of financial liabilities

(6) Offset of financial assets and liabilities

(VII) Inventory

(VIII) Investment in associated companies

(XI) Leases

1. As a lessee

(XII) Intangible assets

3. Amortization

(XIII) Impairment of non-financial assets

(2) Financial component

2. Cost of contracts with customers

(2) Cost of fulfilling contractual obligations

(XV) Employee benefits

1. Defined contribution plan

2. Defined benefit plan

3. Short-term employee benefits

V. Sources of uncertainty to significant accounting judgments, estimates, and assumptions

VI. Notes to major accounts

(III) Accounts receivable

(V) Inventory

(VI) Investments accounted for using equity method

1. Associated companies

2. Collateral

(VII) Property, plant, and equipment

(IX) Investment properties

8.

(XII) Other current liabilities

(XIII) Long-term loans

(XIV) Operating leases

1. As a lessee

2. As a lessor

(XV) Employee benefits

1. Defined benefit plan

(1) Composition of plan assets

(6) Actuarial assumptions

(7) Sensitivity analysis

2. Defined contribution plan

3. Short-term employee benefits

(XVI) Income tax

1. Income tax expense

KHC Annual Report 2021