Stock Code: 2008

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

2025 and 2024

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

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Table of Contents

	Item	Page
I.	Cover Page	1
II.	Table of Contents	2
III.	Independent Auditor's Report	3
IV.	Balance Sheet	4
V.	Statements of Comprehensive Income	5
VI.	Statement of Changes in Equity	6
VII.	Statement of Cash Flow	7
VIII.	Notes to Financial Statements
	(I) Company History	8
	(II) Date and Procedure for Passing the Financial Report	8
	(III) Application of New and Revised Standards and Interpretations	8~10
	(IV) Summary and Explanation of Significant Accounting Policies	10~26
	(V) Main Sources of Uncertainties in Major Accounting Judgments, Estimates and Assumptions	26
	(VI) Explanation of Important Accounting Items	27~66
	(VII) Related Party Transactions	66~68
	(VIII) Assets Collateralized and Pledged	69
	(IX) Significant Contingent Liabilities and Unrecognized Contractual Commitments	69
	(X) Significant Disaster Losses	69
	(XI) Significant Subsequent Events	69
	(XII) Others	69~71
	(XIII) Disclosure Notes
	1. Information Related to Significant Transactions	71~74
	2. Information Related to Reinvestments	74
	3. Mainland Investment Information	74
	(XIV) Department Information	75~77
IX.	Details of major accounts	78~93

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Independent Auditor's Report

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

Audit opinion

We have duly audited the balance sheet of Kao Hsing Chang Iron & Steel Corp. as of December 31, 2025 and 2024, and the comprehensive income statement, statement of changes in equity and cash flow statement from January 1 to December 31, 2025 and 2024 as well as notes to the individual financial statements (including the summary of significant accounting policies).

In our opinion, the parent company only financial statements referred to above have been prepared, in all material respects, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs), Standing Interpretation Committee (SICs) and International Financial Reporting Standards Interpretations Committee (IFRSICs) recognized and issued into effect by the Financial Supervisory Commission, Executive Yuan, and are fairly stated in terms of the financial position of Kao Hsing Chang Iron & Steel Corp. as of December 31, 2025 and 2024, and the financial performance and cash flows from January 1 to December 31, 2025 and 2024.

Basis of Audit Opinion

We conducted the audit in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountant and the Generally Accepted Auditing Standards. Our responsibility under these standards will be further explained in the section of our responsibility in reviewing the 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 are those that, based on our professional judgment, are material to the examination of the individual financial statements of Kao Hsing Chang Iron & Steel Corp. for 2025. These items have been considered in the process of examining the individual financial statements taken as a whole and forming an opinion thereon, and we do not express an opinion on these items individually. The accountants judge that the key audit items that should be communicated in the audit report are as follows: Inventory valuation

For accounting policies related to inventory evaluation, please refer to Note 4 (7) to the individual financial report on inventory; please refer to Note 5 of the individual financial report for accounting estimates and uncertainties in inventory evaluation and assumptions; please refer to Note 6 (5) to the individual financial report for the disclosure of inventory evaluation.

Explanation of key audit items:

The main inventory of Kao Hsing Chang Iron & Steel Corp. is various steel pipes and hot-rolled steel coils, measured at the lower of cost and net realizable value. Due to the impact of changes in raw material prices on the global steel market, the sales demand and prices of related products may fluctuate dramatically in a competitive and changing environment. The estimated net realizable value of inventory depends on the subjective judgment of the management of Kao Hsing Chang Iron & Steel Corp. Therefore, there is a risk that the net realizable value of inventory may be lower than the cost, which is a matter of high concern for us in conducting the financial statement audit.

Corresponding 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 slow-moving 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 evaluated the appropriateness of the items disclosed by Kao Hsing Chang Iron & Steel Corp.

Responsibility of the Management and the Governance Unit to the Individual Financial Report

The responsibility of the management is to properly prepare the individual financial report in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, Interpretations and Interpretation Announcements recognized and released by the Financial Supervisory Commission, and maintain essential internal controls related to the preparation of the individual financial report to ensure that there are no significant discrepancies in the individual financial report due to frauds or errors.

When preparing individual financial statements, the management's responsibilities also include evaluating Kao Hsing Chang Iron & Steel Corp.'s ability to continue operations and disclose related matters, and the adoption of the accounting foundation for continuing operations, unless management intends to liquidate Kao Hsing Chang Iron & Steel Corp. or cease operations, or there are no other practical solutions except for liquidation or suspension of business.

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

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Our Responsibility in Auditing the Individual Financial Report

The purpose of our audit of the individual financial report is to obtain reasonable assurance as to whether the overall individual financial report is free from material misrepresentations due to frauds or errors, and to issue an audit report accordingly. Reasonable assurance means a high degree of assurance. However, an audit performed in accordance with the Generally Accepted Auditing Standards does not provide assurance that material misrepresentations in the individual financial report can be detected. Misrepresentations may be the results of frauds or errors. If the individual amounts or aggregated figures that are misrepresented are reasonably expected to affect the economic decisions made by individual financial report users, they are considered to be material.

When conducting our audit in accordance with Generally Accepted Auditing Standards, we exercised our professional judgment and maintained our professional skepticism. We also performed the following tasks:

Identifying and assessing the risks of material misrepresentations of the individual financial report arising from frauds or errors, designing and implementing appropriate responses to the risks assessed, and obtaining sufficient and appropriate evidence to serve as the basis of the audit opinion. Because fraud may involve collusion, forgery, deliberate omission, false statement or violation of internal control, the risk of not detecting a major false expression caused by fraud is higher than that caused by error.
Obtaining an understanding of the internal control relevant to our audit, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of Kao Hsing Chang Iron & Steel Corp.
Evaluating the appropriateness of the accounting policies used by the management, and the reasonableness of the accounting estimates and related disclosures made by the management.
Based on the evidence obtained, making a conclusion on the appropriateness of the management's adoption of going-concern-basis accounting, and whether there is any material uncertainty about the events or circumstances that may cast significant doubt on the ability of Kao Hsing Chang Iron & Steel Corp. to continue as a going concern. If the accountant believes that there are significant uncertainties in these events or circumstances, he must remind the users of individual financial reports in the audit report to pay attention to the relevant disclosures in the individual financial reports, or amend the audit opinions when such disclosures are inappropriate. The accountant's conclusion is based on the audit evidence obtained as of the date of the audit report. However, future events or circumstances may cause Kao Hsing Chang Iron & Steel Corp. to no longer have the ability to continue operations.
Evaluating the overall presentation, structure and content of the individual financial report

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(including the related notes), and whether the individual financial report presents fairly the related transactions and events.

Obtaining sufficient and appropriate audit evidence on the financial information of the investee companies, in order to express an opinion on the individual financial report. The accountant is responsible for the guidance, supervision and execution of audit cases, and is responsible for forming audit opinions for Kao Hsing Chang Iron & Steel Corp.

The matters communicated between the accountant and the governance unit include the planned audit scope and time, and major audit findings (including significant deficiencies in internal control identified during the audit process).

The accountant also provides the governance unit with a statement that the personnel of the accounting firm's affiliated firm subject to independence regulations have complied with the independence of the accountant's professional ethics and communicates with the governance unit all relationships that may be considered to affect the independence of the accountant and other matters (including related protective measures).

From the matters communicated with the governance unit, we decided on the key audit items for the audit of the 2025 parent company only financial statement of Kao Hsing Chang Iron & Steel Corp. We identified such matters in our audit report, except for those that are not permitted by law to be disclosed publicly or, in the rarest of circumstances where we decided not to communicate those matters in our audit report, because the negative effect of such communication could be reasonably expected to outweigh the public interest that would be served.

KPMG Taiwan

Auditor:

Approval reference of the securities authority : Jin-Guan-Cheng VI No. 0960069825
Jin-Guan-Cheng-Shen No. 1110338100

March 6, 2026

Kao Hsing Chang Iron & Steel Corp.

Balance Sheet
December 31, 2025 and 2024

Unit: NTD Thousand

Assets	December 31, 2025		December 31, 2024
		Amount	%	Amount	%
Current assets:
1100	Cash and cash equivalents (Note 6(1))	$ 262,448	3	315,406	4
1120	Financial assets measured at fair value through other comprehensive income -- current (Note 6(2))	1,267,124	16	1,147,178	15
1151	Notes receivable (Note 6(3)(20))	851	-	312	-
1170	Accounts receivable, net (Notes 6 (3)(20) and 7)	116,593	1	103,155	1
1200	Other receivables (Notes 6 (4) and 7)	25,044	-	2,074	-
1220	Current tax assets	171	-	257	-
130X	Inventory (Note 6 (5))	601,358	8	602,758	8
1479	Other current assets – others (Note 6(6))	27,742	-	22,913	-
	Total current assets	2,301,331	28	2,194,053	28
Non-current assets:
1517	Financial assets at fair value through other comprehensive income – non-current (Notes 6(2) and 7)	1,311,811	16	1,309,883	17
1550	Investment accounted for using equity method (Notes 6(6) and 7)	1,110,747	13	826,156	10
1600	Property, plant, and equipment (Notes 6(8) and 8)	1,462,664	18	1,493,270	19
1755	Right-of-use asset (Notes VI (IX) and VII)	12,306	-	-	-
1760	Investment property, net (Notes 6(10), 7 and 8)	2,024,411	25	2,021,901	26
1920	Refundable deposits (Notes 6 (4) and 7)	4,576	-	4,717	-
1975	Net defined benefit assets – non-current (Note 6 (16))	6,536	-	14,492	-
	Total non-current assets	5,933,051	72	5,670,419	72
	Total assets	$ 8,234,382	100	7,864,472	100

(Please refer to the attached notes to financial statements)

Chairman: Tai-Rong Lu

Manager: Rong-Feng Shenglu

Accounting supervisor: Hui-Mei Chao

Kao Hsing Chang Iron & Steel Corp.

Balance Sheet (continued)
December 31, 2025 and 2024

Unit: NTD Thousand

Liabilities and equity

Current liabilities:

Line	Description	December 31, 2025		December 31, 2024
		Amount	%	Amount	%
2100	Short-term loans (Notes 6 (11) and 8)	$ 1,648,008	20	1,777,904	23
2151	Notes payable	18,710	-	18,366	-
2152	Other notes payable	9,701	-	10,996	-
2170	Accounts payable	48,161	1	30,506	1
2200	Other accounts payable	88,395	1	84,930	1
2230	Current tax liabilities	7,748	-	20,749	-
2280	Lease liabilities – current (Notes 6(14) and 7)	2,993	-	-	-
2300	Other current liabilities (Note 6 (12))	421	-	842	-
2320	Long-term liabilities, current portion (Notes 6(13) and 8)	80,143	1	65,885	1
Total current liabilities		1,904,280	23	2,010,178	26

Non-current liabilities:

Line	Description	December 31, 2025		December 31, 2024
		Amount	%	Amount	%
2540	Long-term loans (Notes 6 (13) and 8)	2,379,357	29	2,110,725	27
2570	Deferred income tax liabilities (Note 6 (17))	196,160	3	196,160	2
2580	Lease liability – non-current (Notes 6(14) and 7)	9,475	-	-	-
2645	Refundable deposit (Note 7)	5,000	-	5,000	-
Total non-current liabilities		2,589,992	32	2,311,885	29
Total liabilities		4,494,272	55	4,322,063	55

Equity (Note 6 (18)):

Line	Description	December 31, 2025		December 31, 2024
		Amount	%	Amount	%
3100	Share capital	1,908,523	23	1,908,523	24
3300	Retained earnings:
3310	Statutory reserve	252,354	3	233,730	3
3350	Unappropriated retained earnings	1,084,942	13	971,925	12
		1,337,296	16	1,205,655	15
3400	Other equity interest	494,291	6	428,231	6
Total equity		3,740,110	45	3,542,409	45
Total liabilities and equity		$ 8,234,382	100	7,864,472	100

(Please refer to the attached notes to financial statements)

Chairman: Tai-Rong Lu

Manager: Rong-Feng Shenglu

Accounting supervisor: Hui-Mei Chao

Kao Hsing Chang Iron & Steel Corp.

Statements of Comprehensive Income

January 1 to December 31, 2025 and 2024

Unit: NTD Thousand

	2025		2024
		Amount	%	Amount	%
4000	Operating revenue (Notes 6 (20) and 7)	$ 1,818,497	100	1,458,367	100
5000	Operating costs (Notes 6 (5)(16) and 12)	1,513,022	83	1,237,533	85
5900	Operating margin	305,475	17	220,834	15
6000	Operating expenses (Notes 6(16)(2), 7 and 12):
6100	Selling expenses	61,866	3	37,969	3
6200	Management expenses	82,032	5	82,291	6
	Total operating expenses	143,898	8	120,260	9
6900	Operating profit	161,577	9	100,574	6
	Non-operating income and expenses:
7100	Interest income (Note 6(22))	1,875	-	1,738	-
7010	Other income (Note 6(2)(22))	72,247	4	42,412	3
7020	Other gains and losses (Note 6(22))	(3,166)	-	(1,919)	-
7050	Finance costs (Notes 6(14)(22) and 7)	(102,156)	(6)	(92,889)	(6)
7060	Share of profit (loss) of associates accounted for using equity method (Note 6(7))	6,472	-	19,680	1
	Total non-operating income and expenses	(24,728)	(2)	(30,978)	(2)
7900	Net profit before tax	136,849	7	69,596	4
7950	less: income tax expense (Note 6 (17))	6,827	-	20,866	1
	Current net income	130,022	7	48,730	3
8300	Other comprehensive income:
8310	Items not reclassified into profit and loss
8311	Remeasurements of defined benefit plans (Note 6(16))	(7,993)	-	14,472	1
8316	Unrealized gain/loss on valuation of equity instruments at fair value through other comprehensive income	199,906	11	115,902	8
8320	Share of other comprehensive income of associates accounted for using equity method – components of other comprehensive income that will not be reclassified to profit or loss (Note 6(7))	(28,808)	(2)	106,557	7
8349	Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss (Note 6(17))	-	-	-	-
	Components of other comprehensive income that will not be reclassified to profit or loss	163,105	9	236,931	16
8300	Other comprehensive income for the period (net after tax)	163,105	9	236,931	16
	Total comprehensive income for the period	$ 293,127	16	285,661	19
	Earnings per share (Note 6(19))
9750	Basic earnings per share	$	0.68		0.26
9850	Diluted earnings per share	$	0.68		0.26

(Please refer to the attached notes to financial statements)

Chairman: Tai-Rong Lu

Manager: Rong-Feng Shenglu

Accounting supervisor: Hui-Mei Chao

Kao Hsing Chang Iron & Steel Corp.

Statement of Changes in Equity

January 1 to December 31, 2025 and 2024

Unit: NTD Thousand

	Retained earnings				Other equity items
	Share capital	Statutory reserve	Special reserve	Unappropriated retained earnings	Gain (loss) from unrealized valuation of financial assets measured at fair value through other comprehensive income	Total equity interest
Balance on January 1, 2024	$ 1,908,523	183,582	77,268	949,419	328,808	3,447,600
Current net income	-	-	-	48,730	-	48,730
Other comprehensive income for the period	-	-	-	14,472	222,459	236,931
Total comprehensive income for the period	-	-	-	63,202	222,459	285,661
Earnings appropriation and distribution:
Statutory surplus reserve	-	50,148	-	(50,148)	-	-
Reversal of special reserve	-	-	(77,268)	77,268	-	-
Cash dividends of ordinary share	-	-	-	(190,852)	-	(190,852)
Disposal of investments in equity instruments designated at fair value through other comprehensive income	-	-	-	123,036	(123,036)	-
Balance on December 31, 2024	1,908,523	233,730	-	971,925	428,231	3,542,409
Current net income	-	-	-	130,022	-	130,022
Other comprehensive income for the period	-	-	-	(7,993)	171,098	163,105
Total comprehensive income for the period	-	-	-	122,029	171,098	293,127
Earnings appropriation and distribution:
Statutory surplus reserve	-	18,624	-	(18,624)	-	-
Cash dividends of ordinary share	-	-	-	(95,426)	-	(95,426)
Disposal of investments in equity instruments designated at fair value through other comprehensive income	-	-	-	105,038	(105,038)	-
Balance on December 31, 2025	$ 1,908,523	252,354	-	1,084,942	494,291	3,740,110

(Please refer to the attached notes to financial statements)

Chairman: Tai-Rong Lu

Manager: Rong-Feng Shenglu

Accounting supervisor: Hui-Mei Chao

Kao Hsing Chang Iron & Steel Corp.

Statement of Cash Flow

January 1 to December 31, 2025 and 2024

Unit: NTD Thousand

	2025	2024
Cash flow from operating activities:
Profit before tax	$ 136,849	69,596
Adjustments:
Income, expenses, and losses
Depreciation	60,630	59,269
Interest expenses	102,156	92,889
Interest income	(1,875)	(1,738)
Dividend income	(68,150)	(38,315)
Share of profit of associates accounted for using equity method	(6,472)	(19,680)
Unrealized gains on foreign currency exchange	(4)	-
Total income, expenses, and losses	86,285	92,425
Changes in operating assets and liabilities:
Net changes in assets related to business activities:
Increase in bills receivable	(539)	(312)
Decrease in other notes receivables	-	200
(Increase) decrease in accounts receivable	(13,435)	9,518
Increase in other receivables	(719)	-
Increase in other receivables – related party	-	(98)
Decrease in inventories	1,400	119,868
Increase in other current assets	(4,829)	(3,683)
Total net changes in operating assets	(18,122)	125,493
Net changes in liabilities related to operating activities:
Increase (decrease) in bills payable	344	(11,967)
Increase (decrease) in accounts receivable	17,657	(3,889)
Decrease in other payables	(1,364)	(4,203)
Decrease in other current liabilities	(420)	(68)
Decrease in net defined benefit liability/increase in assets	(37)	(2,792)
Total changes in operating liabilities	16,180	(22,919)
Total net changes in assets and liabilities related to business activities	(1,942)	102,574
Total adjustment items	84,343	194,999
Cash inflow generated from operations	221,192	264,595
Interest received	1,875	1,741
Dividends received	68,477	38,018
Interest paid	(102,252)	(92,441)
Tax paid	(19,742)	(281)
Net cash flows from operating activities	169,550	211,632
Cash flow from investing activities:
Acquisition of financial assets at fair value through other comprehensive income	(1,297,966)	(1,838,382)
Disposal of financial assets at fair value through other comprehensive income	1,348,126	1,564,288
Investments accounted for using equity method	(297,500)	(66,500)
Acquisition of property, plant, and equipment	(28,282)	(43,869)
Decrease in refundable deposits	141	221
Acquisition of investment property	(6,910)	(1,550)
Dividends received	4,843	7,280
Net cash flows (used in) investing activities	(277,548)	(378,512)
Cash flows from (used in) financing activities:
Increase in short-term loan	3,580,670	3,610,261
Decrease in short-term loan	(3,710,566)	(3,495,674)
Increase in short-term notes and bills payable	340,000	380,000
Decrease in short-term notes and bills payable	(340,000)	(380,000)
Increase in long-term debt	326,890	133,610
Repayments of long-term debt	(44,000)	(32,000)
Lease principal repayment	(2,915)	-
Cash dividends paid	(94,930)	(189,632)
Decrease in notes payable from proceeds from capital reduction	(109)	(124)
Net cash flows from financing activities	55,040	26,441
Net decrease in current cash and cash equivalents	(52,958)	(140,439)
Beginning cash and cash equivalent balance	315,406	455,845
Cash and cash equivalents at the end of the period	$ 262,448	315,406

(Please refer to the attached notes to financial statements)

Chairman: Tai-Rong Lu

Manager: Rong-Feng Shenglu

Accounting supervisor: Hui-Mei Chao

Kao Hsing Chang Iron & Steel Corp.
Notes to Financial Statements
2025 and 2024

I. Company history

Kao Hsing Chang Iron & Steel Corp. (hereinafter referred to as "the Company") was approved to be established in January 1966, with its registered address at No. 318 Zhonghua First Road, Gushan District, Kaohsiung. The Company's main businesses include manufacturing, processing and trading of various steel pipes and hot-rolled steel coils, manufacturing of metal building structures and components, leasing and parking lots.

II. Financial statement approval date and procedures

The financial statement was approved and released by the Board of Directors on March 6, 2026.

III. Application of new and amended standards and interpretations

(I) Impact of adopting new and revised standards and interpretations recognized by the Financial Supervisory Commission (FSC)

The Company has applied the newly revised International Financial Reporting Standards from January 1, 2025, and there has been no significant impact on financial reporting.

Amendment to International Accounting Standard 21: "Lack of Convertibility"

(II) Impact of not adopting internationally recognized financial reporting standards recognized by the Financial Supervisory Commission

The Company evaluates that the application of the following newly revised International Financial Reporting Standards, effective from January 1, 2026, will not have a significant impact on financial reporting.

Amendment to International Financial Reporting Standard 17: "Insurance Contracts" and International Financial Reporting Standard 17.
Amendment to International Financial Reporting Standards 9 and 7: "Amendments to the Classification and Measurement of Financial Instruments"
Annual improvements to IFRS standards
International Financial Reporting Standards 9 and 7: "Contracts Involving Nature-Dependent Power"

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

(III) New and revised standards and interpretations not yet recognized by the Financial Supervisory Commission

Standards and interpretations amended and announced by the International Accounting Standards Board (IASB) yet to be approved by the FSC that may be of interest to the Company:

New or modified standards	Major amendments	Effective date of IASB announcement
Amendments to IFRS 18 regarding "Presentation and Disclosure in Financial Statements"	The new standards introduce three types of income and expenses, two small sums of gains and losses, and one single note about the performance measurement of management. These three amendments and enhancements provide a guide for how to perform disaggregation in financial statements, and provide users with better and more consistent information to lay the foundation. This will affect all companies.

• A more structured income statement: According to the existing standards, the Company uses different formats to express its operating results, so that investors can easily compare the financial performance of different companies. The new standard uses a more structured income statement, and introduces the new definition of “operating profits” as subtotal. All income and expenses are classified into three new categories based on the Company’s main business activities.

• Management performance measures (MPMs): The new standard introduces the definition of the MPM and requires companies to provide an explanation in a single note attached to the financial statement on why they are able to provide information for each of the measures, its calculation, and the | December 1, 2027

Note: On September 25,2025, the FSC announced in a press release that Taiwan will adopt IFRS No.18 starting from 2028. If the Company needs to apply the same earlier, it may do so upon receipt of approval from the FSC. |

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

New or modified standards	Major amendments	Effective date of IASB announcement
	method for reconciliation using the measures’ indicators and the amount recognized based on the IFRS standards.
	• More detailed disaggregation: The new standards include how companies can strengthen the guidance on information classification in financial statements. This includes whether the information should be included in the main financial statements or further divided in the notes.

The Company is currently evaluating the impact of the above-mentioned standards and interpretations on the Company’s financial position and business results. The relevant impact will be disclosed when the evaluation is completed.

The Company expects that the following other newly issued and revised standards that have not yet been approved will not have a material impact on financial reporting.

Amendment to International Financial Reporting Standards 10 and International Accounting Standards 28: "Asset Sales or Investments between Investors and Their Affiliates or Joint Ventures".
IFRS 19 “Subsidiaries without Public Accountability: Disclosures” and amendments to IFRS 19
Amendment to International Accounting Standard 21: “Translation to a Hyperinflationary Presentation Currency”

IV. Summary of significant accounting policies

Below is a summary of significant accounting policies adopted for the preparation of financial statements. The following accounting policies have been applied consistently across all periods presented in this financial statement.

(I) Declaration of Compliance

This financial report is prepared in compliance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “Preparation Regulations”) and International Financial Reporting Standards, International

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

Accounting Standards, Interpretations and Interpretation Announcements recognized and released by the Financial Supervisory Commission (hereinafter referred to as “FSC recognized International Financial Reporting Standards and International Accounting Standards”).

(II) Basis of preparation

Basis of 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 other comprehensive income
(2) Net defined benefit liability (or asset) is the fair value of pension fund assets minus the present value of defined benefit obligations and the ceiling effect described in Note 4 (14).

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 currencies

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 the exchange rate applicable on that day. Foreign currency-denominated non-monetary items 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.

Foreign currency exchange differences arising from conversions are usually recognized in profit or loss, but are recognized in other comprehensive income in the following situations:

Investments in equity instruments designated at fair value through other comprehensive income.
Financial liabilities designated as net investment hedging for foreign operating institutions within the effective hedging range.
Qualified cash flow hedging within the effective range of hedging.

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

(IV) Classification criteria for distinguishing between current and non current assets and liabilities

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

It is expected to realize the asset during its normal business cycle, or intended to sell or consume it.
The asset is held primarily for trading purposes.
It is to realize the asset within twelve months after the reporting period.
The asset is cash or cash equivalent (as defined in IASB No. 7), unless it is subject to restrictions on exchanging or using it to settle liabilities at least twelve months after the reporting period.

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

It is expected to settle the liability within the normal operating cycle.
The liability is held primarily for trading purposes.
The liability is settled within twelve months after the reporting period.
The liability is not settled at the end of the reporting period and has no right to defer the settlement for at least 12 months after the reporting period.

(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 amounts of cash and are subject to insignificant risk of changes in value. Time deposits and callable bonds that meet the definition above and are held for short-term cash commitments rather than investment or other purposes are recognized 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.

~12~

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

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, and equity instruments at fair value through other comprehensive income. 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 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.

(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

~13~

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

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) Impairment loss of financial assets

The Company recognizes a loss allowance for expected credit losses on financial assets measured at amortized cost, including cash and cash equivalents, notes receivable, accounts receivable, other receivables, refundable deposits, and contract assets.

Loss provisions for the following financial assets are made based on 12-month 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.

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

~14~

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

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 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 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.

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;

~15~

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

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.

(4) Derecognition 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 and 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.

~16~

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

(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) 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. Any gains or losses that are derecognized are also recognized in profit or loss.

(4) Derecognition 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 non-cash assets transferred and any liabilities assumed as part of the arrangement) are recognized through profit and loss.

(5) Offset between 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) Inventories

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

~17~

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

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 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

~18~

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

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 their future economic benefits are likely to flow into the Company.

Depreciation

Depreciation is calculated based on the cost of assets minus residual value, and recognized in profit or loss using the straight-line method over the estimated useful life of each component.

No depreciation is provided on land.

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

(1) Buildings and structures 2~60 years
(2) Machinery and equipment 2~25 years
(3) Other equipment 2~25 years

The Company reviews its depreciation method, useful life, and residual value estimates on each reporting date of the fiscal year. 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.

The Company as lessee

The Company recognizes right-of-use assets and lease liabilities on the lease

~19~

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

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 substantive fixed payments.
(2) For lease payments that depend on changes in a certain index or rate, the index or rate from the lease start date is used as the initial measurement.
(3) Expected residual value guarantee amount to be paid.
(4) The exercise price or penalty to be paid when reasonably determining the exercise of the purchase option or lease termination option.

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

(1) Changes in the index or rate used to determine lease payments that result in changes in future lease payments.
(2) Changes in the expected residual value guarantee amount to be paid.
(3) Changes in the evaluation of the option to purchase the underlying asset.
(4) Changes in the evaluation of the lease term due to changes in the estimation of whether to exercise the option of extension or termination.
(5) Modifications to the subject matter, scope or other terms of the lease.

When lease liability is remeasured due to: a change in the index or rate used to

~20~

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

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.

For short-term leases and low-value underlying asset leases, the Company chooses not to recognize right-of-use assets and lease liabilities, but to recognize related lease payments as expenses on a straight-line basis over the lease period.

The Company as 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.

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

For operating leases, the Company states the received lease payments as rent income over the lease term on a straight-line basis.

(XII) Impairment loss 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.

~21~

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

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 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).

Non-financial assets other than goodwill may be reversed only to the extent that the book value (less depreciation or amortization) of the asset has not been recognized as an impairment loss in prior years.

(XIII) Revenue recognition

Revenue from customer contracts

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. The Company’s main revenue items are as follows:

(1) Sales of goods

The Company's manufacturing and sales of various steel pipes and hot-rolled steel coils are recognized as revenue when the control over the products is transferred. 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

~22~

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

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.

(XIV) Employee benefits

Defined contribution plans

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

Defined benefit plans

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 liabilities (assets) using the balance of net defined benefit liabilities (assets) and discount rate as at the beginning of the reporting period. The net interest expense and other expenses of defined benefit plans are recognized in profit or loss.

When the plan is amended or curtailed, any change in benefit that arises in

~23~

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

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.

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.

(XV) 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. The amount is the best estimate of the expected payment or receipt based on the statutory tax rate or substantive legislative tax rate on the reporting date.

Deferred income tax is measured and recognized based on the temporary difference between the book amount of assets and liabilities on the reporting date and their tax basis. No deferred income tax is recognized on temporary differences that arise under the following circumstances:

Assets or liabilities initially recognized in transactions not for business merger, and at the time of the transaction (i) do not affect accounting profits and taxable income (losses), and (ii) do not generate any corresponding taxable and deductible temporary differences.
Temporary differences arising from investments in subsidiaries, associates and joint venture equity that the Company can control at the time of reversal and are likely not to be reversed in the foreseeable future.
Temporary taxable differences arising from the initial recognition of goodwill.

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

~24~

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

amount, and the Company may reverse the amount it had reduced when it becomes likely to generate sufficient taxable income.

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 against each other only when the following conditions are met:

There is the legal enforcement power to offset current income tax assets and current income tax liabilities against each other.
Deferred income tax assets and liabilities are related to one of the following taxpayers who are subject to income tax under the same tax authority.

(1) The same tax paying entity.
(2) Different tax paying entities, but each entity intends to settle current income tax liabilities and assets on a net basis or simultaneously realize assets and settle liabilities in each future period when significant amounts of deferred income tax assets are expected to be recovered and deferred income tax liabilities are expected to be settled.

(XVI) 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 a dilutive effect are intended as share-based payment for employee remuneration, including those that have not yet been resolved by the shareholders' meeting.

(XVII) 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.

~25~

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

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

When the management of the Company prepares the financial statements, it is necessary to make judgments and estimates about the future (including climate-related risks and opportunities), which will affect the adoption of accounting policies and the amount of assets, liabilities, revenues and expenses reported. The actual results may differ from estimates.

The management continues to review the estimates and basic assumptions, which are consistent with the Company’s risk management and climate-related commitments. Changes in the estimated value are deferred and recognized in the future period of the affected period.

Uncertainty of the following assumptions and estimates has material risk of causing a significant adjustment to the carrying amount of assets and liabilities in the following fiscal year. 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 evaluation is mainly based on the estimated demand for products in a specific future period, so significant changes may occur due to sales demand and prices. For details on inventory valuation, please refer to Note VI (V).

~26~

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

VI. Notes to major accounts

(I) Cash and cash equivalents

	December 31, 2025	December 31, 2024
Reserve cash	$ 308,460	259,195
Demand deposit	203,750,899	305,327,938
Check deposit	8,388,748	9,818,775
Cash equivalents - callable bonds	50,000,000	-
Cash and cash equivalents presented in the cash flow statement	$ 262,448,107	315,405,908

Please refer to Note 6 (23) for detailed analysis of the exchange rate risk and sensitivity of our financial assets, as well as disclosure of credit risk.

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

	December 31, 2025	December 31, 2024
Equity instruments at fair value through other comprehensive income:
TWSE/TPEx listed shares	$ 1,267,124,500	1,147,178,450
Non-listed/non-OTC shares at home and abroad	1,311,811,063	1,309,882,733
Total	$ 2,578,935,563	2,457,061,183
	114.12.31	113.12.31
Current	$ 1,267,124,500	1,147,178,450
Non-current	1,311,811,063	1,309,882,733
	$ 2,578,935,563	2,457,061,183

This category of equity instruments is held not for trading, and therefore is designated to be measured at fair value through other comprehensive income.

Due to the designation above as equity instrument investments measured at fair value through other comprehensive income, the Company recognized a dividend income of NT$68,150,492 and NT$38,315,347 in 2025 and 2024, respectively, and accounted for under the "Other income" account of the statement of comprehensive income.

The Company sold equity instrument investments designated to be measured at fair value through other comprehensive income in 2025 and 2024, respectively due to investment strategy considerations. The fair values at the time of disposal were NT$1,367,203,380 and NT$1,545,387,393, and the cumulative disposal benefits were

~27~

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

NT$90,767,389 and NT$111,373,975. Therefore, the aforementioned cumulative disposal benefits have been transferred from other equity to retained earnings.

For the information on the credit risk and market risk, please refer to Note 6(23).

None of the above financial assets was pledged as collateral.

(III) Notes and accounts receivable

	December 31, 2025	December 31, 2024
Notes receivable due to business operations	$ 851,091	311,597
Accounts receivable measured at amortized cost	116,592,575	103,155,158
Less: loss provisions	-	-
	$ 117,443,666	103,466,755

The Company adopts a simplified approach to estimate expected credit losses for all notes receivable and accounts receivable, i.e., measurement using expected credit losses during the term of existence. For this measurement purpose, these notes receivable and accounts receivable are grouped according to the common credit risk characteristics representing the customer's ability to pay all due amounts according to contract terms, and have been included in forward-looking information, including overall economic and related industry information. Expected credit loss analysis for notes and accounts receivable is explained below:

	December 31, 2025
	Book value of notes and accounts receivable	Weighted average expected credit loss rate	Provision for expected credit loss over the remaining duration
Not overdue	$ 117,443,666	-	-
Overdue	-	-	-
	$ 117,443,666		-

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

	December 31, 2024
	Book value of notes and accounts receivable	Weighted average expected credit loss rate	Provision for expected credit loss over the remaining duration
Not overdue	$ 103,466,755	-	-
Overdue	-	-	-
	$ 103,466,755		-

Changes in loss provision on notes receivable and accounts receivable is shown below:

	2025	2024
Closing balance (namely, Opening balance)	$ -	-

The Company does not hold any collateral for such balance.

(IV) Other receivables

Other accounts receivable (includes refundable deposits)

	December 31, 2025	December 31, 2024
Other receivable - proceeds from disposal of stocks	$ 22,577,392	-
Other receivables - purchase allowances	48,718	73,301
Other receivables - other	2,888,060	2,144,692
Other receivables - dividend income	-	326,996
Guarantee deposits paid	4,575,687	4,717,394
Less: loss provisions	(470,460)	(470,460)
	$ 29,619,397	6,791,923
	114.12.31	113.12.31
Presented as net other receivables	$ 25,043,710	2,074,529
Presented as guarantee deposits paid	4,575,687	4,717,394
	$ 29,619,397	6,791,923

Others mainly comprise proceeds from the sale of scraps.

For more information on credit risk, please refer to Note VI (XXIII).

~29~

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

(V) Inventory

	December 31, 2025	December 31, 2024
Raw materials	$ 242,879,493	277,876,600
Work-in-progress	120,938,973	126,344,850
Finished goods	236,986,294	196,985,804
Inventory in transit	423,400	1,465,424
Scraps	129,669	85,617
	$ 601,357,829	602,758,295
Detailed breakdown of sales cost:
	2025	2024
Reclassification of inventory for sale	$ 1,493,414,776	1,223,693,673
Inventory devaluation loss (gain from price recovery)	3,342,066	(12,840,519)
Unallocated manufacturing overheads	25,638,934	32,650,227
Leftover sales revenue	(20,871,194)	(17,198,269)
Others	(245,222)	(81,822)
Processing costs	730,569	75,500
Lease cost	10,811,464	11,234,144
	$ 1,512,821,393	1,237,532,934

The increase in the market value of inventories in 2024 caused the net realizable value of inventories to increase and to reverse the previously recognized loss on valuation.

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

(VI) Other current assets

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

	December 31, 2025	December 31, 2024
Prepaid insurance premiums	$ 108,151	114,396
Supplies inventory count	16,348,521	16,985,455
Prepaid purchases	10,635,679	3,831,697
Others	649,396	1,981,130
	$ 27,741,747	22,912,678

(VII) Investment accounted for using equity method

The Company holds 38.32% of the voting shares of KHC Steel International Corp. The remaining 61.68% of the shares are concentrated among specific shareholders, and

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

the Company is still unable to obtain a majority of the board seats of KHC Steel International Corp. or a majority of the voting rights at the shareholders’ meeting. Therefore, it is determined that the Company only has significant influence over KHC Steel International Corp.

The Company holds 45.79% of the voting shares of Hsieh Chang Hsing Trading Co., Ltd. The remaining 54.21% of the shares are concentrated among specific shareholders, and the Company is still unable to obtain a majority of the board seats of Hsieh Chang Hsing Trading Co., Ltd. or a majority of the voting rights at the shareholders’ meeting. Therefore, it is determined that the Company only has significant influence over Hsieh Chang Hsing Trading Co., Ltd.

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

	December 31, 2025	December 31, 2024
KHC Steel International Corp.	$ 194,539,191	200,802,257
Hsieh Chang Hsing Trading Co., Ltd.	370,415,729	375,585,800
Sunward Refractories Co., Ltd.	84,818,595	85,534,192
Smartway Ark Alliance Co., Ltd.	322,027,272	97,649,288
Da Dong Metroway Alliance CO., LTD.	34,979,382	35,057,341
Da Gang Metroway Alliance CO., LTD.	83,943,390	31,526,759
Wanxiang Construction & Development Co., Ltd.	20,023,505	-
	$ 1,110,747,064	826,155,637

Affiliates

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

	2025	2024
KHC Steel International Corp.	$ 1,196,266	3,882,627
Hsieh Chang Hsing Trading Co., Ltd.	5,548,051	11,688,466
Sunward Refractories Co., Ltd.	487,347	4,607,845
Smartway Ark Alliance Co., Ltd.	(622,016)	(583,254)
Da Dong Metroway Alliance CO., LTD.	(77,959)	57,341
Da Gang Metroway Alliance CO., LTD.	(83,369)	26,759
Wanxiang Construction & Development Co., Ltd.	23,505	-
	$ 6,471,825	19,679,784

The Company's share of other comprehensive income from associated

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

companies is summarized below:

	2025	2024
KHC Steel International Corp.	$ (18,090,333)	26,766,572
Hsieh Chang Hsing Trading Co., Ltd.	(10,718,122)	79,790,462
	$ (28,808,455)	106,557,034

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.

	December 31, 2025	December 31, 2024
Current assets	$ 28,307,508	17,114,472
Non-current assets	528,765,588	566,278,588
	$ 557,073,096	583,393,060
Current liabilities	$ 49,221,649	59,197,496
Non-current liabilities	181,323	181,323
	$ 49,402,972	59,378,819
	2025	2024
Revenue	$ -	-
Current net income	3,122,824	10,134,207
Other comprehensive income	(9,966,941)	100,283,749
Total comprehensive income	$ (6,844,117)	110,417,956
	2025	2024
Share of net assets attributable to the Company as of the beginning of the period	$ 200,802,257	165,770,897
Comprehensive income attributable to the Company in the period	(16,894,067)	30,649,199
Dividends received from affiliated companies in the current period	(3,640,000)	(7,280,000)
Share of equity instruments disposed of by affiliates recognized in the period	14,271,001	11,662,161
Share of net assets attributable to the Company as of the end of the period	$ 194,539,191	200,802,257

(2) Summary financial information of Hsieh Chang Hsing Trading Co., Ltd.

~32~

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

	December 31, 2025	December 31, 2024
Current assets	$ 53,367,662	40,640,096
Non-current assets	756,830,327	780,257,500
	$ 810,197,989	820,897,596
Current liabilities	$ 1,253,397	662,174
Non-current liabilities	-	-
	$ 1,253,397	662,174
	2025	2024
Revenue	$ -	-
Current net income	12,116,293	25,526,239
Other comprehensive income	(23,407,123)	174,253,030
Total comprehensive income	$ (11,290,830)	199,779,269
	2025	2024
Share of net assets attributable to the Company as of the beginning of the period	$ 375,585,800	284,106,872
Comprehensive income attributable to the Company in the period	(5,170,071)	91,478,928
Share of net assets attributable to the Company as of the end of the period	$ 370,415,729	375,585,800

(3) Summary financial information of Sunward Refractories Co., Ltd.

	December 31, 2025	December 31, 2024
Current assets	$ 360,526,385	370,514,834
Non-current assets	140,407,064	161,620,283
	$ 500,933,449	532,135,117
Current liabilities	$ 149,340,726	149,916,522
Non-current liabilities	110,057,688	146,105,573
	$ 259,398,414	296,022,095
	2025	2024
Revenue	$ 576,036,511	569,881,399
Current net income	2,436,733	23,039,227
Other comprehensive income	-	-
Total comprehensive income	$ 2,436,733	23,039,227
	2025	2024

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

Share of net assets attributable to the Company as of the beginning of the period	$ 47,222,604	42,614,759
Comprehensive income attributable to the Company in the period	487,347	4,607,845
Dividends received from affiliated companies in the current period	(1,202,944)	-
Share of net assets attributable to the Company as of the end of the period	46,507,007	47,222,604
Add: Goodwill	38,311,588	38,311,588
Book value of net assets attributable to the Company as of the end of the period	$ 84,818,595	85,534,192

(4) Summary financial information of Smartway Ark Alliance Co., Ltd.

	December 31, 2025	December 31, 2024
Current assets	$ 678,480,288	177,938,834
Non-current assets	41,614,962	40,769,898
	$ 720,095,250	218,708,732
Current liabilities	$ 4,479,091	1,710,315
Non-current liabilities	-	-
	$ 4,479,091	1,710,315
	2025	2024
Revenue	$ -	-
Current net loss	(1,382,258)	(1,296,121)
Other comprehensive income	-	-
Total comprehensive income	$ (1,382,258)	(1,296,121)
	2025	2024
Share of net assets attributable to the Company as of the beginning of the period	$ 97,649,288	98,232,542
Comprehensive income attributable to the Company in the period	(622,016)	(583,254)
Increase in capital for affiliates in the period	225,000,000	-
Share of net assets attributable to the Company as of the end of the period	$ 322,027,272	97,649,288

(5) Summary financial information of Da Dong Metroway Alliance CO., LTD.

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

	December 31, 2025	December 31, 2024
Current assets	$ 50,683,416	50,686,046
Non-current assets	49,600,677	49,557,785
	$ 100,284,093	100,243,831
Current liabilities	$ 343,000	80,000
Non-current liabilities	-	-
	$ 343,000	80,000
	2025	2024
Revenue	$ -	-
Net profit (loss) for the period	(222,738)	163,831
Other comprehensive income	-	-
Total comprehensive income	$ (222,738)	163,831
	2025	2024
Share of net assets attributable to the Company as of the beginning of the period	$ 35,057,341	-
Increase in capital for affiliates in the period	-	35,000,000
Comprehensive income attributable to the Company in the period	(77,959)	57,341
Share of net assets attributable to the Company as of the end of the period	$ 34,979,382	35,057,341

~35~

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

(6) Summary financial information of Da Dong Metroway Alliance CO., LTD.

	December 31, 2025	December 31, 2024
Current assets	$ 199,121,329	49,357,926
Non-current assets	40,816,928	40,798,957
	$ 239,938,257	90,156,883
Current liabilities	$ 100,000	80,428
Non-current liabilities	-	-
	$ 100,000	80,428
	2025	2024
Revenue	$ -	-
Net profit (loss) for the period	(238,198)	76,455
Other comprehensive income	-	-
Total comprehensive income	$ (238,198)	76,455
	2025	2024
Share of net assets attributable to the Company as of the beginning of the period	$ 31,526,759	-
Increase in capital for affiliates in the period	52,500,000	31,500,000
Comprehensive income attributable to the Company in the period	(83,369)	26,759
Share of net assets attributable to the Company as of the end of the period	$ 83,943,390	31,526,759

(7) Summary financial information of Da Wanxiang Construction & Development Co., Ltd.

	December 31, 2025
Current assets	$ 80,197,526
Non-current assets	20,000,000
	$ 100,197,526
Current liabilities	$ 80,000
Non-current liabilities	-
	$ 80,000

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

	2025
Revenue	$ -
Current net income	117,526
Other comprehensive income	-
Total comprehensive income	$ 117,526
	2025
Share of net assets attributable to the Company as of the beginning of the period	$ -
Increase in capital for affiliates in the period	20,000,000
Comprehensive income attributable to the Company in the period	23,505
Share of net assets attributable to the Company as of the end of the period	$ 20,023,505

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

~37~

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

(VIII) Property, plant and equipment

The details about changes in property, plant and equipment are as follows:

	Land	Buildings	Machinery	Others	Total
Cost or deemed cost:
Balance on January 1, 2025	$ 1,106,417,035	1,454,138,949	2,311,041,286	288,610,914	5,160,208,184
Addition	-	-	8,386,900	14,160,604	22,547,504
Disposals	-	-	-	(265,500)	(265,500)
Reclassification	-	9,000,000	9,425,910	(18,425,910)	-
Balance on December 31, 2025	$ 1,106,417,035	1,463,138,949	2,328,854,096	284,080,108	5,182,490,188
Balance on January 1, 2024	$ 1,106,417,035	1,449,938,949	2,293,476,286	263,650,514	5,113,482,784
Addition	-	-	17,565,000	29,160,400	46,725,400
Reclassification	-	4,200,000	-	(4,200,000)	-
Balance on December 31, 2024	$ 1,106,417,035	1,454,138,949	2,311,041,286	288,610,914	5,160,208,184
Accumulated depreciation and impairment:
Balance on January 1, 2025	$ -	1,195,348,051	2,218,354,879	253,235,348	3,666,938,278
Depreciation	-	20,007,205	25,930,105	7,216,562	53,153,872
Disposals	-	-	-	(265,500)	(265,500)
Balance on December 31, 2025	$ -	1,215,355,256	2,244,284,984	260,186,410	3,719,826,650
Balance on January 1, 2024	$ -	1,177,164,453	2,191,984,368	246,350,489	3,615,499,310
Depreciation	-	18,183,598	26,370,511	6,884,859	51,438,968
Balance on December 31, 2024	$ -	1,195,348,051	2,218,354,879	253,235,348	3,666,938,278
Book value:
December 31, 2025	$ 1,106,417,035	247,783,693	84,569,112	23,893,698	1,462,663,538
January 1, 2024	$ 1,106,417,035	272,774,496	101,491,918	17,300,025	1,497,983,474
December 31, 2024	$ 1,106,417,035	258,790,898	92,686,407	35,375,566	1,493,269,906

Please refer to Note 8 for the details of the Company's property, plant and equipment

~39~

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

which are provided as collateral.

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

(IX) Right-of-use asset

The details about changes in cost and depreciation of the right-of-use asset recognized due to the house and buildings rented by the Company are as follows:

	Buildings
Cost of right-of-use asset:
Balance on January 1, 2025	$ 19,741,680
Addition	15,382,647
Balance on December 31, 2025	$ 35,124,327
Balance on January 1, 2024 (i.e. the balance on December 31, 2024)	$ 19,741,680
Accumulated depreciation of right-of-use asset:
Balance on January 1, 2025	$ 19,741,680
Provision for depreciation	3,076,524
Balance on December 31, 2025	$ 22,818,204
Balance on January 1, 2024	$ 16,451,400
Provision for depreciation	3,290,280
Balance on December 31, 2024	$ 19,741,680
Book value:
December 31, 2025	$ 12,306,123
January 1, 2024	$ 3,290,280
December 31, 2024	$ -

(X) Investment property

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

	Land and improvement	Buildings	Total
Cost or deemed cost:
Balance on January 1, 2025	$ 2,009,584,634	31,856,468	2,041,441,102
Addition	-	6,910,476	6,910,476
Balance on December 31, 2025	$ 2,009,584,634	38,766,944	2,048,351,578
Balance on January 1, 2024	$ 2,009,584,634	30,306,468	2,039,891,102
Addition	-	1,550,000	1,550,000
Balance on December 31, 2024	$ 2,009,584,634	31,856,468	2,041,441,102
Accumulated depreciation and impairment losses:
Balance on January 1, 2025	$ -	19,539,728	19,539,728
Depreciation	-	4,399,851	4,399,851
Balance on December 31, 2025	$ -	23,939,579	23,939,579
Balance on January 1, 2024	$ -	15,000,247	15,000,247
Depreciation	-	4,539,481	4,539,481
Balance on December 31, 2024	$ -	19,539,728	19,539,728
Book value:
December 31, 2025	$ 2,009,584,634	14,827,365	2,024,411,999
January 1, 2024	$ 2,009,584,634	15,306,221	2,024,890,855
December 31, 2024	$ 2,009,584,634	12,316,740	2,021,901,374

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

	Land and improvement	Buildings	Total
Fair value:
December 31, 2025			$ 9,254,006,720
January 1, 2024			$ 6,447,948,791
December 31, 2024			$ 9,032,971,738

Investment property includes the provision of land for rental as a parking lot without receiving any contingent rent. Please refer to Note 6(15) for relevant information (including rental income and direct operating expenses incurred).

The investment property of the Company as of December 31, 2025 and 2024 is measured at fair value based on repeatability, and its fair value is evaluated by the Company using the information of comparable property transactions in similar locations. The input value used in the fair value evaluation technology belongs to Level III.

Please refer to Note 8 for the details of the Company's investment property provided as collateral.

(XI) Short-term borrowings

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

	December 31, 2025	December 31, 2024
Loans under L/C	$ 48,007,533	242,904,052
Secured bank loan	1,600,000,000	1,535,000,000
Total	$ 1,648,007,533	1,777,904,052
Unused limit	$ 1,216,992,467	987,095,948
Interest rate range	2.304%~2.375%	2.10%~2.385%

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

(XII) Other current liabilities

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

	December 31, 2025	December 31, 2024
Advance sales receipts - contract liabilities	$ 277,952	707,967
Others (collection, etc.)	143,522	133,815
	$ 421,474	841,782

(XIII)

~41~

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

(XIV) Long-term borrowings

Details about the Company’s long-term loan are as follows:

	December 31, 2025	December 31, 2024
Secured bank loan	$ 2,459,500,000	2,176,610,000
Less: Portion due within one year	(80,142,858)	(65,885,246)
Total	$ 2,379,357,142	2,110,724,754
Unused limit	$ 1,522,000,000	1,836,390,000
Interest rate range	2.65%~2.85%	2.65%~2.75%
Maturity date	Oct. 16, 2026-Nov.	Oct. 16, 2025-Oct
	10, 2033	23, 2030

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

(XV) Operating lease

The carrying amounts of the Company’s lease liabilities are as follows:

	December 31, 2025	December 31, 2024
Current	$ 2,993,276	-
Non-current	$ 9,475,019	-

Please refer to Note 6(23) financial instrument for details on the maturity analysis.

The amounts of lease expenses recognized in profit or loss are as follows:

	2025	2024
Interest expenses for lease liabilities	$ 375,928	-

The amounts of leases recognized in the statement of cash flows are as follows:

	2025	2024
Total cash outflows from the lease	$ 3,290,280	-

The Company has leased the buildings as the office premises since January 1, 2025, and the lease term for the premises is typically effective for five years.

(XVI) Operating lease

The Company as lessee

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

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

The Company as lessor

For the Company’s lease of its investment property and some machinery and equipment, as almost all risks and rewards associated with the ownership of the underlying assets have not been transferred, these lease contracts are classified as operating leases. Please refer to Note 6(9) for details on investment property.

The rental income generated from investment property in 2025 and 2024 was NT$41,228,774 and NT$39,851,144, respectively, reported under operating income. The maintenance and upkeep expenses incurred from investment property were NT$10,811,464 and NT$11,234,144, respectively, reported under operating costs.

(XVII) Employee benefits

Defined benefit plans

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

	December 31, 2025	December 31, 2024
Present value of defined benefit obligations	$ 104,287,757	101,459,440
Fair value of plan assets	(110,823,520)	(115,951,119)
Net defined benefit (assets) liabilities	$ (6,535,763)	(14,491,679)

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) Plan asset composition

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, the balance of the Company's labor pension reserve account at Bank of Taiwan is NT$110,823,520. Please visit the BLF website for more details such as fund yield and allocation of fund assets.

~43~

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

(2) Changes in the present value of defined benefit obligations

The changes in the present value of the Company’s defined benefit obligations for 2025 and 2024 are as follows:

	2025	2024
Defined benefit obligations on January 1	$ 101,459,440	111,168,532
Service cost and interest in the current period	2,299,346	2,220,608
Remeasurement of net defined benefit liabilities (assets)
- Actuarial gains/losses due to adjustment by experience	15,209,491	(2,480,063)
- Actuarial gains/losses due to change of financial assumption	804,913	(2,498,594)
Amount of direct payment	(15,485,433)	(6,951,043)
Defined benefit obligations on December 31	$ 104,287,757	101,459,440

(3) Changes in the fair value of plan assets

The changes in the fair value of the Company’s defined benefit plan assets for 2025 and 2024 are as follows:

	2025	2024
Fair value of plan assets on January 1	$ 115,951,119	108,396,585
Remeasurement of net defined benefit liabilities (assets)
- Return on plan assets (excluding current period interest)	8,021,161	9,493,597
Amount contributed to the plan	391,295	3,582,358
Expected return on plan assets	1,945,378	1,429,622
Benefits paid from plan	(15,485,433)	(6,951,043)
Fair value of plan assets on December 31	$ 110,823,520	115,951,119

~44~

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

(4) Expenses recognized as profit or loss

The details of the expenses recognized in 2025 and 2024 are as follows:

	2025	2024
Current period service costs	$ 610,940	755,547
Net interest on net defined benefit liabilities	(256,972)	35,439
	$ 353,968	790,986
Operating costs	$ 315,897	685,649
Management expenses	38,071	105,337
	$ 353,968	790,986

(5) Remeasurement of net defined benefit liabilities recognized as other comprehensive income

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

	2025	2024
Cumulative balance on January 1	$ (15,354,304)	(29,826,558)
Amount recognized in the current period	(7,993,243)	14,472,254
Cumulative balance on December 31	$ (23,347,547)	(15,354,304)

(6) Actuarial assumptions

The significant actuarial assumptions used by the Company to determine the present value of defined benefit obligations on the reporting date are as follows:

	December 31, 2025	December 31, 2024
Discount rate	1.625%	1.750%
Future salary increase	1.000%	1.000%

The contribution amount the Company expects to pay to the defined benefit plan within one year after the reporting date in 2025 is NT$336,528.

The weighted average duration of the defined benefit plan is 8.36 years.

(7) Sensitivity analysis

The impact of changes in the major actuarial assumptions adopted as of December 31, 2025 and 2024 on determining the present value of benefit obligations is as follows:

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

	Effect of (gains) losses to defined benefit obligations
	Increase	Decrease
December 31, 2025
Discount rate (change of 0.25%)	$ (1,599,573)	1,641,228
Future salary increment (change of 0.25%)	1,574,738	(1,542,247)
December 31, 2024
Discount rate (change of 0.25%)	(1,610,422)	1,654,402
Future salary increment (change of 0.25%)	1,593,622	(1,558,760)

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.

Defined contribution plans

The Company's defined contribution benefit plan is based on the provisions of the Labor Pension Act, with a contribution rate of 6% of the monthly wages of workers, and the fund is transferred to the individual account of labor pension at the Bureau of Labor Insurance. Under this plan, the Company is free from statutory or inferred pension obligations once it has contributed this amount to the Bureau of Labor Insurance.

The pension expenses of the Company for 2025 and 2024 under the defined contribution pension measures are NT$5,035,269 and NT$4,801,681 respectively, which have been contributed to the Bureau of Labor Insurance.

Short-term employee benefits

Below are details of employee benefit liabilities:

	December 31, 2025	December 31, 2024
Paid leave of absence (presented as other payables)	$ 7,751,003	7,185,177

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

(XVIII) Income tax

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

	2025	2024
Current income tax expense – occurred at current period	$ 10,184,213	20,874,102
Current income tax income – current income tax after adjustment for the previous period	(3,357,353)	(7,901)
Deferred income tax expense	-	-
	$ 6,826,860	20,866,201

The Company did not recognize any income tax expense under equity and other comprehensive income in 2025 and 2024.

The relationship between the Company's income tax expense and pre-tax net profit for 2025 and 2024 is adjusted as follows:

	2025	2024
Net profit before tax	$ 136,849,135	69,596,019
Income tax calculated by applying local tax rate of the country where the Company is located	$ 27,369,827	13,919,203
Non-deductible expenses	5,995,544	4,686,108
Exempt income	(7,831,683)	(5,588,178)
Effect of gains on investment accounted for using equity method	(1,294,365)	(3,935,956)
Recognition of tax losses not recognized in the previous period	(20,000,995)	(4,486,033)
Changes in temporary difference not recognized as deferred income tax asset	(1,802,553)	(4,470,306)
Previous overestimation	(3,357,353)	(7,901)
Levy on undistributed retained earnings	2,322,919	15,449,264
Basic income tax amount	5,425,519	5,300,000
Income tax expense	$ 6,826,860	20,866,201

Deferred income tax assets and liabilities

(1) Unrecognized deferred income tax assets

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

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

	December 31, 2025	December 31, 2024
Deductible temporary differences	$ 319,948,346	328,961,112
Tax losses	1,633,344,129	2,047,065,160
	$ 1,953,292,475	2,376,026,272

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. On December 31, 2025, the Company estimated taxable income generated from the future years' profits and evaluated that loss deductions and deductible temporary differences are not likely to be used as taxable income deductions, and therefore did not recognize deferred tax assets. If there is an increase in taxable income resulting from revenue gains in the future, it will be recognized as a deferred tax asset.

On December 31, 2025, the deduction periods of tax losses from the deferred tax assets not recognized by the Company are as follows:

Year of loss	Losses not yet deducted	Final year available for deduction
2016	$ 417,474,366	2026
2017	318,954,784	2027
2018	529,810,099	2028
2019	214,044,806	2029
2020	153,060,074	2030
Total	$ 1,633,344,129

(2) Recognized deferred income tax liabilities

The changes in deferred income tax liabilities for 2025 and 2024 are as follows:

	Land value increment tax
Deferred income tax liabilities:
Balance on January 1, 2025	$ 196,159,973
Balance on December 31, 2025	$ 196,159,973
Balance on January 1, 2024	$ 196,159,973
Balance on December 31, 2024	$ 196,159,973

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

Income tax approval status

The settlement and declaration of the Company’s profit-seeking enterprise income tax was approved by the tax collection authority up to 2023.

(XIX) Capital and other equity

As of December 31, 2025 and 2024, the total authorized share capital of the Company was NT$5,800,000,000, with a face value of NT$10 per share, divided into 58,000,000 shares. There are 190,852,293 issued shares, and payment for all issued shares has been received.

The details of the Company’s adjustment table for the number of outstanding shares in 2025 and 2024 are as follows:

	Common shares
(expressed in share)	2025	2024
Opening balance	190,852,293	190,852,293
Closing balance	190,852,293	190,852,293

Retained earnings

According to the Company’s articles of incorporation, if the Company makes a profit for a year, the profit shall be first used to pay taxes and offset the cumulative deficit, and then allocate 10% of the remaining balance as the legal reserve unless it has reached the same amount as the Company’s paid-in capital. In addition to the payment of dividends, if there are still surplus earnings then they shall be combined with undistributed earnings of prior years for the Board of Directors will draw up a profit distribution plan and submit to the Shareholders' Meeting a resolution to distribute shareholder dividends. Dividends shall be distributed at an appropriate ratio between cash dividends and stock dividends. Cash dividends shall not be lower than 50%.

(1) Distribution of earnings

On June 19, 2025 and June 20, 2024, the Company passed the earnings distribution plans for 2024 and 2023 through a resolution of the annual general meeting. The amounts of dividends distributed to owners are as follows:

~49~

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

	2024		2023
	Distribution rate (NTD)	Amount	Distribution rate (NTD)	Amount
Dividends distributed to owners of ordinary shares: Cash dividends	$ 0.50	95,426,147	1.00	190,852,293

On March 6, 2026, the Company's board of directors drafted the earnings distribution plan for 2025, and the amounts of dividends to be distributed to owners are as follows:

	2025
	Distribution rate (NTD)	Amount
Dividends distributed to owners of ordinary shares: Cash dividends	$ 1.00	190,852,293

Other equity (net after tax)

	Investments at fair value through other comprehensive income
Balance on January 1, 2025	$ 428,230,886
Unrealized losses on valuation of financial assets at fair value through other comprehensive income
The Company	199,906,039
Associated companies	(28,808,455)
Disposal of equity instruments at fair value through other comprehensive income:
The Company	(90,767,389)
Associated companies	(14,271,001)
Balance on December 31, 2025	$ 494,290,080
Balance on January 1, 2024	$ 328,808,336
Unrealized valuation gains on financial assets at fair value through other comprehensive income
The Company	115,901,652
Associated companies	106,557,034
Disposal of equity instruments at fair value through other comprehensive income:
The Company	(111,373,975)
Associated companies	(11,662,161)
Balance on December 31, 2024	$ 428,230,886

~50~

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

(XX) Earnings per share

The calculation of the Company’s basic earnings per share and diluted earnings per share for 2025 and 2024 is as follows:

	2025	2024
1. Basic earnings per share
Net profit attributable to holders of the Company’s ordinary shares	$ 130,022,275	48,729,818
Weighted average number of outstanding ordinary shares (unit: share)	190,852,293	190,852,293
Basic earnings per share (NT$)	$ 0.68	0.26
2. Diluted earnings per share
Net profit attributable to holders of the Company’s ordinary shares	$ 130,022,275	48,729,818
Weighted average number of outstanding ordinary shares (unit: share)	190,852,293	190,852,293
Effect of employee stock remuneration	33,517	31,732
Weighted average number of outstanding common shares (after adjustment to the Dilutive potential ordinary shares) (Unit: share)	190,885,810	190,884,025
Diluted earnings per share (NT$)	$ 0.68	0.26
(XXI) Revenue from contracts with customers
	2025	2024
Sale of merchandise	$ 1,776,465,992	1,418,432,235
Rent income from investment property	41,228,774	39,851,144
Processing income	802,132	83,678
	$ 1,818,496,898	1,458,367,057

~51~

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

Revenue details

	2025
	Steel Pipe Department	Others	Total
Main regions and markets:
Taiwan	$ 1,440,064,971	134,674,099	1,574,739,070
North America	239,322,922	-	239,322,922
Northeast Asia	4,434,906	-	4,434,906
Total	$ 1,683,822,799	134,674,099	1,818,496,898
Key products/services:
Steel pipe	$ 1,661,000,834	-	1,661,000,834
Zinc products	22,821,965	-	22,821,965
Steel coils	-	92,641,653	92,641,653
Others	-	803,672	803,672
Rental income	-	41,228,774	41,228,774
Total	$ 1,683,822,799	134,674,099	1,818,496,898
	2024
	Steel Pipe Department	Others	Total
Main regions and markets:
Taiwan	$ 1,279,703,510	96,384,628	1,376,088,138
North America	81,481,577	-	81,481,577
Northeast Asia	797,342	-	797,342
Total	$ 1,361,982,429	96,384,628	1,458,367,057
Key products/services:
Steel pipe	$ 1,333,580,298	-	1,333,580,298
Zinc products	28,402,131	-	28,402,131
Steel coils	-	56,448,401	56,448,401
Others	-	85,083	85,083
Rental income	-	39,851,144	39,851,144
Total	$ 1,361,982,429	96,384,628	1,458,367,057

~52~

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

Contract balance

	December 31, 2025	December 31, 2024	2024.1.1
Notes and accounts receivable	$ 117,443,666	103,466,755	112,673,131
Less: loss provisions	-	-	-
Total	$ 117,443,666	103,466,755	112,673,131
Contract liabilities - advance sales receipts	$ 277,952	707,967	581,645

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

The beginning balance of contractual liabilities on January 1, 2025 and 2024 was recognized as income in 2025 and 2024, amounting to NT$684,106 and NT$581,444, 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.

(XXII) Remuneration to employees and directors

The Company amended the Articles of Incorporation per the resolution rendered by the shareholders' meeting on June 19, 2025. According to the amended Articles of Incorporation of the Company, if there is a profit in the year, no less than 0.5% shall be allocated as employees' remuneration and no more than 5% shall be allocated as directors' remuneration, with no less than 0.1% thereof as the remuneration to the entry-level employees. However, profits must first be taken to offset against cumulative losses if any. According to the Articles of Incorporation before the amendments, if there is a profit in the year, no less than 0.5% shall be allocated as employees' remuneration and no more than 5% shall be allocated as directors' remuneration. However, profits must first be taken to offset against cumulative losses if any.

The estimated amounts of employees' remuneration for 2025 and 2024 are NT$900,550 (NT$141,050 out of it allocated as the remuneration to the entry-level employees) and NT$414,200, respectively. The estimated amounts of directors' remuneration are both NT$0. The estimates are based on the pre-tax net profit of the Company for that period minus the amount before deducting employees' & entry-level employees' and directors' remuneration, multiplying by the percentage of distribution of employees' & entry-level employees' and directors' remuneration as stipulated in the

~53~

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

Company's Articles of Incorporation, and recognized as operating expenses for various periods, all paid in cash. Please visit the Market Observation Post System for related information. The aforementioned amounts of employees' and directors' remuneration by board resolution do not differ from the estimated amounts in the financial reports of the Company for 2025 and 2024.

(XXIII) Non-operating income and expense

Interest income

The details of the Company's interest income in 2025 and 2024 are as follows:

	2025	2024
Interest from bank deposits	$ 1,710,623	1,505,238
Guarantee deposit interest calculation	69,000	232,754
Others	95,622	-
	$ 1,875,245	1,737,992

Other income

The details of the Company's other income in 2025 and 2024 are as follows:

	2025	2024
Rental income	$ -	190,475
Dividend income	68,150,492	38,315,347
Scrapped tire disposal income	61,133	100,913
Others	4,035,037	3,805,139
	$ 72,246,662	42,411,874

Other gains and losses

The details of the Company's other gains and losses in 2025 and 2024 are as follows:

	2025	2024
Foreign exchange gains	$ 1,099,405	798,369
Miscellaneous expenses	(2,333,944)	-
Tax and others	(1,931,083)	(2,716,921)
	$ (3,165,622)	(1,918,552)

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

Finance costs

The details of the Company’s financial costs in 2025 and 2024 are as follows:

	2025	2024
Interest expense - interest on bank borrowings	$ (101,694,207)	(92,889,500)
Interest expenses – lease liabilities	(375,928)	-
Interest expenses – imputed interest on deposits	(86,250)	-
	$ (102,156,385)	(92,889,500)

(XXIV) Financial instruments

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. In order to reduce credit risk, the Company also regularly evaluates customers' financial status.

(3) Credit risk of accounts receivable

For credit risk information on notes receivable and accounts receivable, please refer to Note VI (III). Other financial assets carried at amortized cost include other receivable and refundable deposits.

The following table presents the loss allowance of financial assets measured at amortized cost, based on the expected credit loss over a period of twelve months or the expected credit loss over the duration, and whether there is any credit impairment situation:

	December 31, 2025
	At cost after amortization
	12 month expected loss	Expected losses over duration - not impaired	Expected losses over duration - impaired	Total
Other receivables	$ -	25,043,710	470,460	25,514,170
Guarantee deposits paid	4,575,687	-	-	4,575,687
Loss provisions	-	-	(470,460)	(470,460)

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

	December 31, 2025
	At cost after amortization
	12 month expected loss	Expected losses over duration - not impaired	Expected losses over duration - impaired	Total
Cost after amortization	$ 4,575,687	25,043,710	-	29,619,397
Book amount	$ 4,575,687	25,043,710	-	29,619,397
	December 31, 2024
	At cost after amortization
	12 month expected loss	Expected losses over duration - not impaired	Expected losses over duration - impaired	Total
Other receivables	$ -	2,074,529	470,460	2,544,989
Guarantee deposits paid	4,717,394	-	-	4,717,394
Loss provisions	-	-	(470,460)	(470,460)
Cost after amortization	$ 4,717,394	2,074,529	-	6,791,923
Book amount	$ 4,717,394	2,074,529	-	6,791,923

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

	2025
	12 month expected credit loss	Credit loss over duration - not credit-impaired	Credit loss over duration - credit-impaired	Total
Opening balance	$ -	-	470,460	470,460
Closing balance	$ -	-	470,460	470,460
	2024
	12 month expected credit loss	Credit loss over duration - not credit-impaired	Credit loss over duration - credit-impaired	Total
Opening balance	$ -	-	470,460	470,460
Closing balance	$ -	-	470,460	470,460

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

2. Liquidity risk

The following shows the expiry dates of financial liabilities, including estimated interest but excluding the effect of net agreements.

	Book amount	Contractual cash flow	Within 6 months	6 - 12 months	1 - 2 years	2 - 5 years	More than 5 years
December 31, 2025
Non-derivative instruments
Short-term loans (floating rate)	$ 1,648,007,533	(1,667,517,017)	(753,930,716)	(913,586,301)	-	-	-
Notes payable (non-interest bearing)	18,710,132	(18,710,132)	(18,710,132)	-	-	-	-
Other notes payable (non-interest bearing)	9,700,547	(9,700,547)	(9,700,547)	-	-	-	-
Accounts payable (non-interest bearing)	48,161,116	(48,161,116)	(48,161,116)	-	-	-	-
Other payables (non-interest bearing)	88,394,614	(88,394,614)	(88,394,614)	-	-	-	-
Lease liabilities	12,468,295	(13,161,120)	(1,645,140)	(1,645,140)	(3,290,280)	(6,580,560)	-
Guarantee deposits paid (non-interest bearing)	5,000,000	(5,000,000)	-	-	-	(5,000,000)	-
Long-term loan (floating rate)	2,459,500,000	(2,591,484,158)	(45,332,073)	(60,059,455)	(1,755,448,447)	(476,665,516)	(253,978,667)
	$ 4,289,942,237	(4,442,128,704)	(965,874,338)	(975,290,896)	(1,758,738,727)	(488,246,076)	(253,978,667)
December 31, 2024
Non-derivative instruments
Short-term loans (floating rate)	$ 1,777,904,052	(1,799,270,690)	(885,625,827)	(913,644,863)	-	-	-
Notes payable (non-interest bearing)	18,366,409	(18,366,409)	(18,366,409)	-	-	-	-
Other notes payable (non-interest bearing)	10,995,717	(10,995,717)	(10,995,717)	-	-	-	-
Accounts payable (non-interest bearing)	30,506,227	(30,506,227)	(30,506,227)	-	-	-	-
Other payables (non-interest bearing)	84,929,668	(84,929,668)	(76,783,952)	(8,145,716)	-	-	-
Guarantee deposits paid (non-interest bearing)	5,000,000	(5,000,000)	-	(5,000,000)	-	-	-
Long-term loan (floating rate)	2,176,610,000	(2,265,940,756)	(34,681,719)	(49,762,710)	(1,683,127,339)	(394,169,091)	(104,199,897)
	$ 4,104,312,073	(4,215,009,467)	(1,056,959,851)	(976,553,289)	(1,683,127,339)	(394,169,091)	(104,199,897)

The Company does not anticipate that the cash flow timing in the maturity analysis will be significantly earlier, or that the actual amounts will differ significantly

3. Exchange rate risk

(1) Exchange rate risk exposure

The Company had the following financial assets and liabilities that were exposed to significant foreign currency/exchange rate risk:

	December 31, 2025			December 31, 2024
	Foreign currency (NTD)	Exchange rate	NTD	Foreign currency (NTD)	Exchange rate	NTD
Financial assets
Monetary item
USD	$ 112,975.82	31.43	3,550,831	966,377.91	32.785	31,682,699
Financial liabilities
Monetary item
USD	582,183.70	31.43	18,298,034	-	-	-

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

(2) Sensitivity analysis

The exchange rate risk of the Company's monetary items mainly comes from cash and cash equivalents, accounts receivable, borrowings, and accounts payable denominated in foreign currencies, which generate foreign currency exchange gains and losses during translation. On December 31, 2025 and 2024, when the New Taiwan dollar depreciates or appreciates by 4% relative to the US dollar, while all other factors remain unchanged, the net profit after tax for 2025 will decrease or increase by NT$471,910, and the net profit after tax for 2024 will increase or decrease by NT$1,013,846. The same base is used for the analysis of both periods.

Because the functional currency of the Company is New Taiwan dollar, the foreign currency exchange gains and losses (including realized and unrealized) for 2025 and 2024 were NT$1,099,405 and NT$798,369, respectively.

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. The rate of change used by the Company to report interest rates to the key management is a 50 basis point increase or decrease in interest rates, which also represents the management's evaluation of the reasonable range of possible changes in interest rates.

If the interest rate increases or decreases by 50 basis points while all other variables remain unchanged, the net profit after tax for 2025 will decrease or increase by NT$16,430,030, and the net profit after tax for 2024 will decrease or increase by NT$15,818,056, mainly due to the Company's variable interest rate borrowings.

Other price risks

The effect of changes in stock prices of domestic listed (OTC) companies (analyzed using the same basis while assuming that other factors of change remain unchanged) on comprehensive income and loss items is as follows:

~58~

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

	2025		2024
Price of security on reporting date	Other comprehensive income after tax	After-tax profit/loss	Other comprehensive income after tax	After-tax profit/loss
10%	$ 126,712,450	-	114,717,845	-
increase
10%	$ (126,712,450)	-	(114,717,845)	-
decrease

6. Fair value information

(1) Types and fair value of financial instruments

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):

	December 31, 2025
	Book amount	Fair value
		Level 1	Level 2	Level 3	Total
Financial assets at fair value through other comprehensive income
Domestic listed (OTC) stocks	$ 1,267,124,500	1,267,124,500	-	-	1,267,124,500
Domestic non-listed (non-OTC) stocks	1,311,811,063	-	-	1,311,811,063	1,311,811,063
	$ 2,578,935,563
Financial assets carried at cost after amortization
Cash and cash equivalents	$ 262,448,107	-	-	-	-
Notes and accounts receivable	117,443,666	-	-	-	-
Other receivables	25,043,710	-	-	-	-
Guarantee deposits paid	4,575,687	-	-	-	-
	$ 409,511,170
Financial liabilities carried at cost after amortization
---	---	---	---	---	---
Bank loan	$ 4,107,507,533	-	-	-	-
Notes and accounts payable	66,871,248	-	-	-	-
Other notes and accounts payable	98,095,161	-	-	-	-
Guarantee deposits received	5,000,000	-	-	-	-
Lease liabilities	12,468,295	-	-	-	-
	$ 4,289,942,237

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

	December 31, 2024
	Book amount	Fair value
		Level 1	Level 2	Level 3	Total
Financial assets at fair value through other comprehensive income
Domestic listed (OTC) stocks	$ 1,147,178,450	1,147,178,450	-	-	1,147,178,450
Domestic non-listed (non-OTC) stocks	1,309,882,733	-	-	1,309,882,733	1,309,882,733
	$ 2,457,061,183
Financial assets carried at cost after amortization
Cash and cash equivalents	$ 315,405,908	-	-	-	-
Notes and accounts receivable	103,466,755	-	-	-	-
Other receivables	2,074,529	-	-	-	-
Guarantee deposits paid	4,717,394	-	-	-	-
	$ 425,664,586
Financial liabilities carried at cost after amortization
Bank loan	$ 3,954,514,052	-	-	-	-
Notes and accounts payable	48,872,636	-	-	-	-
Other notes and accounts payable	95,925,385	-	-	-	-
Guarantee deposits received	5,000,000	-	-	-	-
	$ 4,104,312,073

(2) When measuring its assets and liabilities, the Company uses market observable input values as much as 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: In addition to the public quotation included in Level 1, the input parameters of assets or liabilities are directly (i.e. prices) or indirectly (i.e. derived from prices) observable.

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

(3) Fair value evaluation 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) Fair value evaluation 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/OTC-traded equity instruments, while market

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

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.

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) Transfer between Level 1 and Level 2

There was no transfer in the fair value level of financial instruments evaluated by the Company in 2025 and 2024.

~61~

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

(6) List of changes in Level 3

	At fair value through other comprehensive income
	Equity instruments without open quotation
Balance on January 1, 2025	$	1,309,882,733
Disposals		(3,500,000)
Recognized in other comprehensive income		5,428,330
Balance on December 31, 2025	$	1,311,811,063
Balance on January 1, 2024	$	1,238,617,075
Recognized in other comprehensive income		71,265,658
Balance on December 31, 2024	$	1,309,882,733

(7) Quantitative information on fair value measurement of significant unobservable input values (Level 3)

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.

Quantitative information of significant and unobservable inputs:

Item	Valuation technique	Significant and unobservable input	Relationship between fair value and significant and unobservable input
Financial assets at fair value through other comprehensive income - equity instruments without active market	Market approach	Lack of market liquidity discount (both 17.5% on December 31, 2025 and December 31, 2024)	The higher discount for lack of liquidity, the lower the fair value

(8) Sensitivity analysis of fair value to reasonable alternative assumptions for fair value measurement at Level 3

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:

~62~

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

~63~

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

| Other comprehensive income's
Financial assets at fair value through
profit or loss | Input | Upward/d
ownward
variation | Fair value changes
reflected in other
comprehensive income | |
| --- | --- | --- | --- | --- |
| | | | Favorable
variation | Adverse
variation |
| December 31, 2025 | | | | |
| Equity instruments without
active market | Market liquidity
discounted 17.5% | 1% | $ 15,900,036 | (15,900,036) |
| December 31, 2024 | | | | |
| Equity instruments without
active market | Market liquidity
discounted 17.5% | 1% | $ 15,876,291 | (15,876,291) |

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.

(XXV) Financial risk management

Summary

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 abovementioned risks. For further quantitative disclosures, please see notes to the financial statement.

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.

~64~

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

Credit risk

Credit risk refers to the risk of financial losses incurred by the Company due to the inability of customers or counterparties of financial instruments to fulfill contractual obligations, mainly arising from the accounts receivable and bank deposits of the Company’s customers.

(1) Accounts receivable and other receivables

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 deposit

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.

Liquidity risk

Liquidity risk refers to the risk of inability to deliver cash or other financial assets to settle financial liabilities and failure to fulfill related obligations. The Company monitors the use of bank financing limits through management

~65~

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

personnel to ensure sufficient funds available and compliance with loan contract terms. At the same time, it also conducts financing negotiations with financial institutions to maintain a certain credit limit and reduce liquidity risk. As of December 31, 2025 and 2024, the unused bank financing amounts of the Company were NT$2,738,992,467 and NT$2,823,485,948, respectively.

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) Currency 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 main denomination currencies of these transactions are the New Taiwan dollar and the US dollar.

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. Generally speaking, the currency of the loan is the same as the currency of the cash flow generated by the Company's operations, mainly in NT dollars, but also in US dollars. 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.

(3) Equity instrument price risk

~66~

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

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.

(XXVI) 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. Total capital refers to all components of equity (i.e. share capital, capital surplus, retained earnings and other equity) plus net liabilities.

The debt to capital ratios on December 31, 2025 and 2024 are as follows:

	December 31, 2025	December 31, 2024
Total liabilities	$ 4,494,272,122	4,322,063,092
Less: Cash and cash equivalents	262,448,107	315,405,908
Net liabilities	$ 4,231,824,015	4,006,657,184
Total equity interest	$ 3,740,109,782	3,542,409,313
Gross capital	$ 7,971,933,797	7,549,066,497
Debt-to-capital ratio	53.08%	53.07%

The capital management method of the Company remained unchanged as of December 31, 2025

~67~

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

(XXVII) Non-cash investing and financing activities

The reconciliation of the Company’s non-cash investing and financing activities in 2025 are as follows:

	January 1, 2025	Cash flow	Changes without cash effect
			Others (Note)	December 31, 2025
Lease liabilities	$ -	(2,914,352)	15,382,647	12,468,295
Total liabilities from financing activities	$ -	(2,914,352)	15,382,647	12,468,295

Note: The right-of-use assets were acquired in the form of the lease. For details, please refer to Note 6(9).

The Company did not have non-cash investing and financing activities in 2024.

VII. Related party transactions

(I) Name and relationship of related parties

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

Name of related party	Relationship with the Company
Employee Welfare Committee of Kao Hsing Chang Iron & Steel Corp.	Employee welfare committee of the Company
Kao Hsing Smelting & Chemical Fiber Co., Ltd.	A company managed by key management personnel
Sunward Refractories Co., Ltd.	Associated companies of the Company
Smartway Ark Alliance Co., Ltd.	Associated companies of the Company
Da Gang Metroway Alliance CO., LTD.	Associated companies of the Company

(II) Significant transactions with related parties

Revenue from sales and leftover

Kao Hsing Smelting & Chemical Fiber Co., Ltd.

2025	2024
$ 8,055,082	15,315,829

Proceeds 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.

~68~

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

Leases

(1) The Company initially leased an office from the Employee Welfare Committee of Kao Hsing Chang Iron & Steel Corp. for the use of the headquarters. The lease period is effective from January 1, 2015 to December 31, 2024, and the payment method is a one-off payment of the rent for the lease period at the time of contract signing. Meanwhile, the Company renewed the lease agreement upon expiration of the aforementioned term, with the renewed lease term running from January 1, 2025 to December 31, 2028. The interest expense recognized in 2025 NT$375,928, and the balance of lease liabilities as of December 31, 2025 was NT$12,468,295.

The lease deposits of the aforementioned lease paid on December 31, 2025 and 2024 were both NT$4,000,000. As of December 31, 2025 and 2024, the balances of the right-of-use assets were NT$12,306,123 and NT$0, 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 effective from November 2020 to November 2025. Meanwhile, the lease has been renewed until September 2030 based on the original lease conditions prior to the expiration of the lease. The lease deposits of the aforementioned lease paid on December 31, 2025 and 2024 were both NT$5,000,000, stated in the guarantee deposits received in the balance sheet. The recognized rental income for 2025 and 2024 were NT$31,718,033 and NT$31,198,838, respectively, recognized in the comprehensive income statement as operating income. As of December 31, 2025 and 2024, all receivables arising from the aforementioned transactions have been received.

Accounts receivable from related parties

Details of related party receivables are shown below:

Account category	Type of related party	December 31, 2025	December 31, 2024
Accounts receivable	A company managed by key management personnel	$ -	2,894,752
Other receivables	A company managed by key management personnel	564,541	355,276
		$ 564,541	3,250,028

Others

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

(1) As of December 31, 2023 and 2022, the bank loans and credit available were jointly guaranteed by the key management personnel of the Company.

(2) The Company provided labor services to Smartway Ark Alliance Co., Ltd. in 2024. The labor service revenues generated in 2025 and 2024 were NT$740,179 and NT$1,548,040, respectively, debited to the operating expenses in the statement of comprehensive income. As of December 31, 2025 and 2024, the receivables estimated for said transactions were NT$190,105 and NT$154,034, respectively, stated as other receivables in the balance sheet.

(3) The Company made a cash capital increase by NT$52,500,000 in Da Gang Metroway Alliance CO., LTD. in August 2025, and a cash capital increase by NT$225,000,000 in Smartway Ark Alliance Co., Ltd. in November 2025. The relevant procedures for these changes have been completed.

(4) The Company sold its equity in Apex Logistic CO., LTD. (stated as financial assets at fair value through other comprehensive income – non-current) to the Company's key management personnel in September 2025. The proceeds from the sale was NT$3,500,000, and the gains from the disposal, NT$504,000, were stated into the retained earnings. As of December 31, 2025, the receivables from the aforementioned transactions had been collected.

(III) Transactions of key management personnel

Compensation to key management personnel includes the following:

	2025	2024
Short-term employee benefits	$ 11,052,502	10,803,058
Retirement benefits	48,636	60,636
	$ 11,101,138	10,863,694

Meanwhile, the Company also provides cars to the management personnel. As of December 31, 2025 and 2024, the undiscounted balances of such car equipment were NT$8,376,222 (the cost, NT$24,294,900, minus accumulated depreciation, NT$15,918,678) and NT$5,590,142 (the cost, NT$17,254,000, minus accumulated depreciation, NT$11,663,958). The depreciation expenses for 2025 and 2024 were NT$2,358,651 and NT$957,448, respectively. The Chairman has been assigned a driver, whose salary is determined according to the Company's Employee Salary Policy.

VIII. Assets collateralized and pledged

Book value of assets pledged by the Company is explained below:

~70~

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

Name of asset	Targets of collateralization and pledge	December 31, 2025	December 31, 2024
Property, plant and equipment	Bank loan	$ 934,916,512	943,486,055
Investment property	Bank loan	2,009,113,013	2,007,081,635
		$ 2,944,029,525	2,950,567,690

IX. Major contingent liabilities and unrecognized contractual commitments

(I) As of December 31, 2025 and 2024, the payable guarantee notes issued by the Company for purchase of goods were NT$41,950,000 and NT$40,950,000, respectively.

(II) As of December 31, 2025 and 2024, the unused balance of letters of credit issued by the Company were NT$33,473,274 and NT$80,163,064, respectively.

X. Losses from major disasters: None.

XI. Major post-balance sheet events: None.

XII. Others

(I) A summary of employee benefits, depreciation and amortization expenses is listed below by function:

| Function
Nature | 2025 | | | 2024 | | |
| --- | --- | --- | --- | --- | --- | --- |
| | Presented as operating cost | Presented as operating expense | Total | Presented as operating cost | Presented as operating expense | Total |
| Employee benefit expenses | | | | | | |
| Salary expenses | 93,638,875 | 38,012,840 | 131,651,715 | 84,861,405 | 35,773,133 | 120,634,538 |
| Labor/health insurance premium | 10,966,020 | 4,142,229 | 15,108,249 | 9,984,368 | 4,067,191 | 14,051,559 |
| Pension expense | 3,695,576 | 1,693,661 | 5,389,237 | 3,876,236 | 1,716,431 | 5,592,667 |
| Directors' compensation | - | 4,518,000 | 4,518,000 | - | 4,550,998 | 4,550,998 |
| Other employee benefit expenses | 6,043,572 | 2,155,356 | 8,198,928 | 5,055,581 | 1,855,636 | 6,911,217 |
| Depreciation | 52,246,087 | 8,384,160 | 60,630,247 | 51,143,993 | 8,124,736 | 59,268,729 |
| Amortization | - | - | - | - | - | - |

~71~

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

The additional information on the number of employees and employee benefit expenses for 2025 and 2024 is as follows:

	2025	2024
Number of employees	222	220
No. of directors without concurrent position as employee	5	6
Average employee benefit expenses	$ 738,931	687,804
Average employee salary expenses	$ 606,690	563,713
Adjustments to average employee salary expenses	8.13%	- %
Supervisor remuneration	$ -	-

Information on the Company's salary and remuneration policies (including for directors, managers and employees) is as follows:

I. Employees' salary and remuneration mainly includes basic compensation (including base salary, special environmental allowances, etc.), year-end bonuses and performance bonuses.

Salary payment standards are determined based on the salary market situation, company operation status and organizational structure. 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.
Employees 'salary and remuneration are determined based on the academic experience, professional knowledge and skills, professional seniority and experience and personal performance, and do not differ based on age, gender, race, religion, political stance, marital status, or affiliation with the labor union.
Bonuses are paid based on the Company's operational performance and individual employee's performance.
The starting salary standards for inexperienced and foreign workers comply with government regulations.
According to the Articles of Incorporation of the Company, if there is a profit in the year, no less than 0.5% shall be allocated as employees' remuneration and no less than 0.1% as the remuneration to the entry-level employees. However, profits must first be taken to offset against cumulative losses if any.

II. Managers' salary and remuneration are based on factors such as the Company's business strategy, profitability, performance and job contribution, with reference to the salary market level, including salary, job allowance, severance pay, various bonuses, rewards and allowances. In addition, according to the Articles of

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

Incorporation of the Company, if there is any profit in the year, no less than 0.5% shall be allocated as employees' remuneration and no less than 0.1% as the remuneration to the entry-level employees separately. However, profits must first be taken to offset against cumulative losses if any.

III. Other than a fixed monthly fee for business execution, the remuneration of the Chairman also includes salary, various bonuses and rewards. In addition, according to the articles of incorporation of the Company, if there is any profit in the year, no less 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 Related to Significant Transactions

The information related to major transactions that the Company is required to disclose in accordance with the Regulations Governing the Preparation of Financial Reports for 2025 is as follows:

Loans to others: None.
Endorsement and guarantee for others: None.
Important marketable securities held (excluding investment in subsidiaries, associates, and joint venture equity):

Holder	Name and type of securities	Relationship with the securities issuer	Account category	Closing amount
				Number of shares	Book amount	Shareholding percentage	Fair value
The Company	Stock/TECO	-	Current financial assets at fair value through other comprehensive income	250,000	21,000,000	0.01%	21,000,000
The Company	Stock/Hota	-	Current financial assets at fair value through other comprehensive income	150,000	8,370,000	0.05%	8,370,000
The Company	Stock/Walsin Technology	-	Current financial assets at fair value through other comprehensive income	1,400,000	44,520,000	0.03%	44,520,000
The Company	Share/China Steel Chemical	-	Current financial assets at fair value through other comprehensive income	1,900,000	129,390,000	0.80%	129,390,000
The Company	Share/Sunspring Metal	-	Current financial assets at fair value through other comprehensive income	300,000	6,165,000	0.15%	6,165,000

~73~

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

Holder	Name and type of securities	Relationship with the securities issuer	Account category	Closing amount
				Number of shares	Book amount	Shareholding percentage	Fair value
The Company	Stock/Hon Hai Precision Industry	-	Current financial assets at fair value through other comprehensive income	50,000	11,525,000	- %	11,525,000
The Company	Share/Yageo	-	Current financial assets at fair value through other comprehensive income	480,000	110,880,000	0.09%	110,880,000
The Company	Stocks/Stock/TSMC	-	Current financial assets at fair value through other comprehensive income	10,000	15,500,000	- %	15,500,000
The Company	Stock/Inventec	-	Current financial assets at fair value through other comprehensive income	900,000	38,610,000	0.03%	38,610,000
The Company	Stock/Kaimei	-	Current financial assets at fair value through other comprehensive income	750,000	68,250,000	0.69%	68,250,000
The Company	Stock/Giga-Byte Technology	-	Current financial assets at fair value through other comprehensive income	300,000	74,850,000	0.04%	74,850,000
The Company	Stock/Quanta Computer	-	Current financial assets at fair value through other comprehensive income	300,000	81,600,000	0.01%	81,600,000
The Company	Share/ChainQui Construction Development	-	Current financial assets at fair value through other comprehensive income	93,000	1,534,500	0.04%	1,534,500
The Company	Stock/Episil-Precision	-	Current financial assets at fair value through other comprehensive income	100,000	5,110,000	0.03%	5,110,000
The Company	Stock/AOpen Onc.	-	Current financial assets at fair value through other comprehensive income	300,000	15,570,000	0.38%	15,570,000
The Company	Share/Win Semiconductors	-	Current financial assets at fair value through other comprehensive income	250,000	45,750,000	0.06%	45,750,000
The Company	Stock/Wistron	-	Current financial assets at fair value through other comprehensive income	100,000	15,050,000	- %	15,050,000

~74~

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

Holder	Name and type of securities	Relationship with the securities issuer	Account category	Closing amount
				Number of shares	Book amount	Shareholding percentage	Fair value
The Company	Stock/ELASER	-	Current financial assets at fair value through other comprehensive income	20,000	5,400,000	0.01%	5,400,000
The Company	Stock/Episil Technologies	-	Current financial assets at fair value through other comprehensive income	1,000,000	51,800,000	0.26%	51,800,000
The Company	Stock/ASE	-	Current financial assets at fair value through other comprehensive income	100,000	25,050,000	- %	25,050,000
The Company	Stock/Fur EasTone Telecommunications	-	Current financial assets at fair value through other comprehensive income	600,000	52,980,000	0.02%	52,980,000
The Company	Stock/Sino-American Silicon Products Inc.	-	Current financial assets at fair value through other comprehensive income	330,000	35,145,000	0.05%	35,145,000
The Company	Stock/PEC	-	Current financial assets at fair value through other comprehensive income	150,000	70,500,000	0.04%	70,500,000
The Company	Stock/Airoha Technology	-	Current financial assets at fair value through other comprehensive income	150,000	66,375,000	0.09%	66,375,000
The Company	Stock/VisEra Technologies	-	Current financial assets at fair value through other comprehensive income	250,000	71,250,000	0.08%	71,250,000
The Company	Stock/ Acer E-Enabling Service Business	-	Current financial assets at fair value through other comprehensive income	60,000	12,690,000	0.14%	12,690,000
The Company	Stock/Caliway Biotech	-	Current financial assets at fair value through other comprehensive income	200,000	31,000,000	0.26%	31,000,000
The Company	stock/AMAX-KY	-	Current financial assets at fair value through other comprehensive income	250,000	37,500,000	0.59%	37,500,000
The Company	Stock/Cleanaway	-	Current financial assets at fair value through other comprehensive	3,600,000	113,760,000	3.17%	113,760,000

~75~

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

Holder	Name and type of securities	Relationship with the securities issuer	Account category	Closing amount
				Number of shares	Book amount	Shareholding percentage	Fair value
			income
The Company	Share/Chunghwa Picture Tubes	-	Non-current financial assets at fair value through other comprehensive income	71,210	-	- %	-
The Company	Share/CSGT Metals Vietnam Joint Stock Company	-	Non-current financial assets at fair value through other comprehensive income	1,328,940	43,146,994	6.00%	43,146,994
The Company	Share/Universal Venture Capital Investment Crop.	-	Non-current financial assets at fair value through other comprehensive income	1,400,000	13,132,000	1.16%	13,132,000
The Company	Share/KHH Arena Corporation	-	Non-current financial assets at fair value through other comprehensive income	5,000,000	76,415,000	2.00%	76,415,000
The Company	Share/ENRESTEC Inc.	The Company is a director of the securities issuer	Non-current financial assets at fair value through other comprehensive income	19,101,651	466,271,301	18.71%	466,271,301
The Company	Stock/Guangdong Haswei Electronics Co., Ltd.	The Company is a director of the securities issuer	Non-current financial assets at fair value through other comprehensive income	28,014,706	625,261,458	18.68%	625,261,458
The Company	Stock/Upcycle Inc.	The Company is a director of the securities issuer	Non-current financial assets at fair value through other comprehensive income	8,846,900	87,584,310	8.48%	87,584,310

The amount of related parties' purchase or sale of goods reaches NTD100 million or 20% of the paid-in capital: None.
The amount of accounts receivable from related parties reaches NTD100 million or 20% of the paid-in capital:

(II) Information Related to reinvestments

The information on the Company's reinvestments in 2025 is as follows (excluding mainland investments):

Name of investor	Name of investee	Location	Main business activities	Sum of initial investment		Period-end holding position			Current period profit/loss of the investee	Investment gains/losses recognized in the current period	Remarks
				End of current period	End of previous year	Number of shares	Percentage	Book amount
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%	194,539,191	3,122,824	1,196,266	-
The Company	Hsieh Chang Hsing Trading Co., Ltd.	Gushan District,	Holding of various production and banking	171,728,510	171,728,510	17,172,851	45.79%	370,415,729	12,116,293	5,548,051	-

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

		Kaohsiung City	businesses
The Company	Sunward Refractories Co., Ltd.	Renwu District, Kaohsiung City	Ceramic products and refractory material manufacturing	107,906,001	107,906,001	4,588,600	20.00%	84,818,595	2,436,733	487,347	-
The Company	Smartway Ark Alliance Co., Ltd.	Gushan District, Kaohsiung City	Real estate construction	324,000,000	99,000,000	32,400,000	45.00%	322,027,272	(1,382,258)	(622,016)	-
The Company	Da Dong Metroway Alliance CO., LTD.	Qianzhen District, Kaohsiung City	Real estate construction	35,000,000	35,000,000	3,500,000	35.00%	34,979,382	(222,738)	(77,959)	-
The Company	Da Gang Metroway Alliance CO., LTD.	Qianzhen District, Kaohsiung City	Real estate construction	84,000,000	31,500,000	8,400,000	35.00%	83,943,390	(238,198)	(83,369)	-
The Company	Wanxiang Construction & Development Co., Ltd.	Qianzhen District, Kaohsiung City	Real estate construction	20,000,000	-	2,000,000	20.00%	20,023,505	117,526	23,505	-

(III) Mainland investment information: None.

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

XIV. Segment information

(I) Information on the profit or loss, assets, liabilities and their measurement basis and adjustments of departments to be reported

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 decision-making.

Accounting policies adopted by various operating segments are consistent with those described in Note IV - "Summary of significant accounting policies."

Disclosure and reconciliation of segment information:

	Steel Pipe Department	Others	Reconciliation and elimination	Total
2025
Revenues:
Revenues from external customers	$ 1,683,822,799	134,674,099	-	1,818,496,898
Inter-segment revenues	-	-	-	-
Total revenues	$ 1,683,822,799	134,674,099	-	1,818,496,898
Interest expenses	$ -	-	(102,156,385)	(102,156,385)
Depreciation and amortization	$ 39,975,273	7,870,963	12,784,011	60,630,247
Share of equity-accounted associated companies	$ -	-	6,471,825	6,471,825
Profit/loss of reported segment	$ 142,320,819	(9,206,277)	3,734,593	136,849,135
Assets:
Equity-accounted investments	$ -	-	1,110,747,064	1,110,747,064
Capital spending for non-current assets	$ 30,554,504	-	7,467,476	38,021,980
Assets of reported segment	$ 1,522,146,954	19,070,570	6,693,164,380	8,234,381,904

~78~

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

	Steel Pipe Department	Others	Reconciliation and elimination	Total
2024
Revenues:
Revenues from external customers	$ 1,361,982,429	96,384,628	-	1,458,367,057
Inter-segment revenues	-	-	-	-
Total revenues	$ 1,361,982,429	96,384,628	-	1,458,367,057
Interest expenses	$ -	-	(92,889,500)	(92,889,500)
Depreciation and amortization	$ 40,969,674	6,062,998	12,236,057	59,268,729
Share of equity-accounted associated companies	$ -	-	19,679,784	19,679,784
Profit/loss of reported segment	$ 83,767,572	(9,519,584)	(4,651,969)	69,596,019
Assets:
Equity-accounted investments	$ -	-	826,155,637	826,155,637
Capital spending for non-current assets	$ 35,583,000	1,201,000	11,491,400	48,275,400
Assets of reported segment	$ 1,529,627,203	20,492,957	6,314,352,245	7,864,472,405

Significant reconciliation of information between the reporting segments mentioned above:

Undistributed gains and losses of departments to be reported:

	2025	2024
Financial costs - interest expenses	$ (102,156,385)	(92,889,500)
Others	105,890,978	88,237,531
Total	$ 3,734,593	(4,651,969)

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

Assets of departments not to be reported:

	2025	2024
Cash and bank deposits	$ 262,358,107	315,315,908
Equity-accounted investments	1,110,747,064	826,155,637
Property, plant and equipment	616,762,429	622,033,065
Right-of-use asset	12,306,123	-
Investment property	2,024,411,999	2,021,901,374
Financial assets at fair value through other comprehensive income	2,578,935,563	2,457,061,183
Others	87,643,095	71,885,078
Total	$ 6,693,164,380	6,314,352,245

(II) Information by region

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	2025	2024
Revenues from external customers:
Taiwan	$ 1,574,739,070	1,376,088,138
United States	239,322,922	81,481,577
Japan	4,434,906	797,342
	$ 1,818,496,898	1,458,367,057
Location	December 31, 2025	December 31, 2024
Non-current assets:
Taiwan	$ 3,499,381,660	3,515,171,280

Non-current assets include property, plant, and equipment, investment property, and right-of-use assets, but exclude non-current assets of financial instruments, investments accounted for using the equity method, and retirement benefits.

(III) Major customer information

Customer	2025	2024
#22198499	$ 683,336,032	503,351,197
#86454661	268,655,604	262,073,403
	$ 951,991,636	765,424,600

Kao Hsing Chang Iron & Steel Corp.
Schedule of cash and cash equivalents
December 31, 2025
Unit: NTD

Item	Summary	Amount
Cash dividends	Reserve cash	$ 308,460
Cash in banks	Check deposit	8,388,748
	Demand deposit	200,200,068
	Foreign currency deposit (USD 112,975.82, exchange rate 31.43)	3,550,831
Cash and cash equivalents	Callable bonds	50,000,000
Total		$ 262,448,107

~78~

Kao Hsing Chang Iron & Steel Corp.

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

December 31, 2025 Unit: NTD

Financial instrument designations	Summary	Number of shares/number of units	Face value	Total	Acquisition cost	Fair value		Provision of guarantee or collateral
						Unit price	Total
TECO	Listed shares	250,000	$ 10	2,500,000	22,422,267	84.00	21,000,000	None
Hota	Listed shares	150,000	10	1,500,000	12,030,010	55.80	8,370,000	None
Walsin Technology	Listed shares	1,400,000	10	14,000,000	51,494,759	31.80	44,520,000	None
China Steel Chemical	Listed shares	1,900,000	10	19,000,000	170,018,055	68.10	129,390,000	None
Sunspring Metal	Listed shares	300,000	10	3,000,000	14,272,864	20.55	6,165,000	None
Hon Hai Precision Industry	Listed shares	50,000	10	500,000	9,264,256	230.50	11,525,000	None
Yageo	Listed shares	480,000	10	4,800,000	73,472,065	231.00	110,880,000	None
Taiwan Semiconductor Manufacturing	Listed shares	10,000	10	100,000	14,370,497	1,550.00	15,500,000	None
Inventec	Listed shares	900,000	10	9,000,000	45,580,622	42.90	38,610,000	None
Kaimei	Listed shares	750,000	10	7,500,000	68,299,884	91.00	68,250,000	None
Giga-Byte Technology	Listed shares	300,000	10	3,000,000	82,724,924	249.50	74,850,000	None
Quanta Computer	Listed shares	300,000	10	3,000,000	82,665,509	272.00	81,600,000	None
ChainQui Construction Development	Listed shares	93,000	10	930,000	3,352,906	16.50	1,534,500	None
Episil-Precision	Listed shares	100,000	10	1,000,000	6,117,579	51.10	5,110,000	None
AOpen Onc.	Listed shares	300,000	10	3,000,000	24,983,426	51.90	15,570,000	None
Win Semiconductors	TPEx listed shares	250,000	10	2,500,000	60,527,565	183.00	45,750,000	None
Wistron	Listed shares	100,000	10	1,000,000	14,320,376	150.50	15,050,000	None
ELASER	Listed shares	20,000	10	200,000	4,974,555	270.00	5,400,000	None
Episil Technologies	TPEx listed shares	1,000,000	10	10,000,000	63,878,331	51.80	51,800,000	None
ASE	Listed shares	100,000	10	1,000,000	18,055,693	250.50	25,050,000	None
Far EasTone Telecommunications	Listed shares	600,000	10	6,000,000	76,474,839	88.30	52,980,000	None
Sino-American Silicon Products	TPEx listed shares	330,000	10	3,300,000	35,306,312	106.50	35,145,000	None
PEC	Listed shares	150,000	10	1,500,000	77,628,324	470.00	70,500,000	None
Airoha Technology	Listed shares	150,000	10	1,500,000	98,042,409	442.50	66,375,000	None

~79~

Financial instrument designations	Summary	Number of shares/number of units	Face value	Total	Acquisition cost	Fair value		Provision of guarantee or collateral
						Unit price	Total
VisEra Technologies	Listed shares	250,000	10	2,500,000	66,509,817	285.00	71,250,000	None
Acer E-Enabling Service Business	TPEx listed shares	60,000	10	600,000	17,128,401	211.50	12,690,000	None
Caliway Biotech	Listed shares	200,000	10	2,000,000	34,160,754	155.00	31,000,000	None
AMAX-KY	Listed shares	250,000	10	2,500,000	75,927,061	150.00	37,500,000	None
Cleanaway	Listed shares	3,600,000	10	36,000,000	71,850,316	31.60	113,760,000	None
Total					$ 1,395,854,376		1,267,124,500

~80~

Kao Hsing Chang Iron & Steel Corp.
Notes receivable schedule
December 31, 2025
Unit: NTD

Customer name	Summary	Amount
#29129785	Business	$ 851,091

Schedule of net accounts receivable

Customer name	Summary	Amount
Non-related party:
#22198499	Business	$ 49,145,979
#86454661	Business	27,242,329
#86220355	Business	14,210,487
#84289961	Business	9,465,016
Others (if the balance of each account is less than 5% of accounts receivable, it shall be reported together)	Business	16,528,764
Total		$ 116,592,575

Schedule of other net receivables

For information concerning other receivables, net, please refer to Note 6(4)

~81~

Kao Hsing Chang Iron & Steel Corp.
Schedule of inventories
December 31, 2025
Unit: NTD

Item	Amount
	Cost	Net realizable value
Finished goods	$ 256,307,816	288,523,837
Less: loss provisions	(19,321,522)
Subtotal	236,986,294
Work-in-progress	122,818,789	147,972,783
Less: loss provisions	(1,879,816)
Subtotal	120,938,973
Raw materials	185,218,251	298,498,198
Less: loss provisions	(105,542)
Subtotal	185,112,709
Materials	57,768,236	62,626,880
Less: loss provisions	(1,452)
Subtotal	57,766,784
Inventory in transit	423,400	423,400
Scraps	129,669	129,669
Total	$ 601,357,829

Schedule of other current assets

For information concerning other current assets, please refer to Note 6(6).

~82~

Kao Hsing Chang Iron & Steel Corp.

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

January 1 to December 31, 2025

Unit: NTD

Designation	Beginning of period		Increase in the period		Decrease in the period		Closing amount		Provision of guarantee or pledge
	Number of shares	Fair value	Number of shares	Amount	Number of shares	Amount	Number of shares	Fair value
Universal Venture Capital	1,400,000$	12,628,000	-	504,000 1)	-	-	1,400,000	13,132,000	None
Investment Corporation
Hanwei Arena Development	5,000,000	75,528,750	-	886,250 1)	-	-	5,000,000	76,415,000	None
Co., Ltd.
CSGT Metals Vietnam Joint	1,328,940	41,936,593	-	1,210,401 1)	-	-	1,328,940	43,146,994	None
Stock Company
ENRESTEC Inc.	19,101,651	295,951,430	-	170,319,871 1)	-	-	19,101,651	466,271,301	None
Guangdong Haowei	28,014,706	759,590,704	-	-	-	134,329,246 1)	28,014,706	625,261,458	None
Electronics Co., Ltd.
Apex Logistic CO., LTD.	350,000	2,870,000	-	630,000 1)	350,000	3,500,000 2)	-	-	None
Upcycle Inc.	8,846,900	121,377,256	-	-	-	33,792,946 1)	8,846,900	87,584,310	None
Chunghwa Picture Tubes	71,210	-	-	-	-	-	71,210	-	None

Total

$ 1,309,882,733

173,550,522

171,622,192

1,311,811,063

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

Note 2: This is the number of changes in the sales of the current period.

~84~

Kao Hsing Chang Iron & Steel Corp.
Schedule of changes in investments accounted for using equity method
January 1 to December 31, 2025
Unit: NTD

Designation	Opening balance		Increase in the period		Decrease in the period		Closing balance			Market price or net equity value		Provision of guarantee or pledge
	Number of shares	Amount	Number of shares	Amount	Number of shares	Amount	Number of shares	Percentage of shareholding	Amount	Unit price	Total price
KHC Steel International Corp.	7,280,000	$ 200,802,257	-	15,467,267 (Note 1)	-	21,730,333 (Note 2)	7,280,000	38.32%	194,539,191	26.72	194,539,191	None
Hsieh Chang Hsing Trading Co., Ltd.	17,172,851	375,585,800	-	5,548,051 (Note 3)	-	10,718,122 (Note 4)	17,172,851	45.79%	370,415,729	21.57	370,415,729	None
Sunward Refractories Co., Ltd.	4,588,600	85,534,192	-	487,347 (Note 3)	-	1,202,944 (Note 5)	4,588,600	20.00%	84,818,595	18.48	84,818,595	None
Smartway Ark Alliance Co., Ltd.	9,900,000	97,649,288	22,500,000	225,000,000 (Note 6)	-	622,016 (Note 7)	32,400,000	45.00%	322,027,272	9.94	322,027,272	None
Da Dong Metroway Alliance CO., LTD.	3,500,000	35,057,341	-	-	-	77,959 (Note 7)	3,500,000	35.00%	34,979,382	9.99	34,979,382	None
Da Gang Metroway Alliance CO., LTD.	3,150,000	31,526,759	5,250,000	52,500,000 (Note 6)	-	83,369 (Note 7)	8,400,000	35.00%	83,943,390	9.99	83,943,390	None
Wanxiang Construction & Development Co., Ltd.	-	-	2,000,000	20,023,505 (Note 8)	-	-	2,000,000	20.00%	20,023,505	10.01	20,023,505	None
Total	$ 826,155,637		319,026,170		34,434,743		1,110,747,064		1,110,747,064

Note 1: This is the investment profit recognized in the current period, NT$1,196,266, and the gains from disposal of stock by the investee recognized proportionally, NT$14,271,001.
Note 2: This is the cash dividends distributed by the investee in the current period, NT$3,640,000, and unrealized loss on financial assets of the investee recognized proportionally, NT$18,090,333.
Note 3: This is the investment benefit recognized in the current period.
Note 4: This is the unrealized loss on financial assets of the investee recognized proportionally.
Note 5: This is the cash dividend received from the invested company.
Note 6: This is the equity received from the investee.
Note 7: Investment losses recognized in the current period.
Note 8: This is the equity of the investee acquired, in the amount of NT$20,000,000, and the investment gains recognized in the current period, at NT$23,505.

Kao Hsing Chang Iron & Steel Corp.
Schedule of changes in property, plant, and equipment
January 1 to December 31, 2025
Unit: NTD

Please refer to Note 6(8) for the information on changes in property, plant and equipment.

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

Item	Opening balance	Increase in the period	Decrease in the period	Closing balance
Buildings	$ 1,031,126,896	20,007,205	-	1,051,134,101
Machinery	1,403,429,066	25,930,105	-	1,429,359,171
Others	156,094,865	7,216,562	265,500	163,045,927
Total	$ 2,590,650,827	53,153,872	265,500	2,643,539,199

Schedule of accumulated impairment changes of property, plant and equipment

Item	Opening balance	Increase in the period	Decrease in the period	Closing balance
Buildings	$ 164,221,155	-	-	164,221,155
Machinery	814,925,813	-	-	814,925,813
Others	97,140,483	-	-	97,140,483
Total	$ 1,076,287,451	-	-	1,076,287,451

Kao Hsing Chang Iron & Steel Corp.
Schedule of Changes in Right-of-Use Assets
January 1 to December 31, 2025
Unit: NTD

Please refer to Note 6(9) for the information on changes in right-of-use assets.

Schedule of Changes in Accumulated
Depreciation of Right-of-Use Assets

Please refer to Note 6(9) for the relevant information on changes in accumulated depreciation of right-of-use assets.

~87~

Kao Hsing Chang Iron & Steel Corp.
Schedule of changes in invested real estate
January 1 to December 31, 2025
Unit: NTD

Please refer to Note 6(10) for the relevant information on changes in investment property.

Schedule of changes in accumulated depreciation of invested real estate

Please refer to Note 6(10) for the relevant information on changes in accumulated depreciation of investment property.

Schedule of guarantee deposits paid

December 31, 2025

Item	Summary	Amount
Guarantee deposits paid	performance bonds and bid deposit	$ 569,187
	rental deposit	4,000,000
	Others	6,500
Total		$ 4,575,687

~88~

Kao Hsing Chang Iron & Steel Corp.
Schedule of short-term loans
December 31, 2025
Unit: NTD

Loan type	Explanation	Closing balance	Contract period	Interest rate range	Financing amount		Mortgage or collateral
Loans under L/C	Changhua Bank	$ 48,007,533	Within one year	2.345%	Total amount	1,900,000,000	Land
Secured loans	Changhua Bank	900,000,000	Within one year	2.375%	Total amount	1,900,000,000	Land
Secured loans	Fubon Bank	600,000,000	Within one year	2.304%	Total amount	600,000,000	Land
Secured loans	Bank of Taiwan	100,000,000	Within one year	2.345%	Total amount	150,000,000	Land
Total		$ 1,648,007,533

Schedule of bills payable

Supplier	Summary	Amount
#23201198	Business	$ 8,166,482
#81082380	Business	1,709,505
#76378264	Business	1,490,895
Others (if the balance of each account is less than 5% of notes payable, it shall be reported together)	Business	7,343,250
Total		$ 18,710,132

~89~

Kao Hsing Chang Iron & Steel Corp.
Schedule of other bills payable
December 31, 2025
Unit: NTD

Payment counterparty	Summary	Amount
Each shareholder	Capital reduction and refund of shares	$ 5,450,185
Each shareholder	Dividends	2,298,962
#28610947	Funds for equipment	1,749,300
#81082380	Funds for equipment	-
Others (if the balance of each account is less than 5% of other notes payable, it shall be reported together)		202,100
Total		$ 9,700,547

Schedule of accounts payable

Supplier	Summary	Amount
#23201198	Business	$ 22,536,347
#IP188	Business	10,553,525
#IP180	Business	7,744,509
#84723705	Business	3,738,815
Others (if the balance of each account is less than 5% of accounts payable, it shall be reported together)	Business	3,587,920
Total		$ 48,161,116

~90~

Kao Hsing Chang Iron & Steel Corp.
Schedule of other payables
December 31, 2025
Unit: NTD

Item	Summary	Amount
Salary and bonus		$ 14,880,741
Paid leave		7,751,003
Utility bills		2,901,612
Tax		2,823,882
Stock delivery payment		24,194,423
Freight and customs declaration fee		2,439,067
Funds for equipment		719,250
Pension		853,584
Repair costs		1,558,236
Labor health insurance		1,250,985
Guarantee deposits – current		2,145,716
Interest		5,377,103
Other		21,499,012
Total		$ 88,394,614

Schedule of other current liabilities

Please refer to Note 6 (12) for information about other current liabilities schedule.

~91~

Kao Hsing Chang Iron & Steel Corp.
Schedule of long-term loans
December 31, 2025
Unit: NTD

Creditor	Summary	Borrowing amount			Contract period
		Due within one year	Due after one year or more	Total
Changhua Bank	Secured loans	$ 80,142,858	816,357,142	896,500,000	October 23, 2020–
November 10, 2033	2.675%~2.85%	Land
Huatai Bank	Secured loans	-	1,563,000,000	1,563,000,000	October 16, 2025–
October 8, 2026	2.65%~2.75%	Land
Total		$ 80,142,858	2,379,357,142	2,459,500,000

Schedule of deferred income tax liabilities

Item	Summary	Amount
Land revaluation value-added tax provision	Property, plant and equipment — Land	$ 138,600,366
	Investment property	57,559,607
Total		$ 196,159,973

Schedule of guarantee deposits received

Item	Summary	Amount
Guarantee deposits received	Land lease deposit	$ 5,000,000

~92~

Kao Hsing Chang Iron & Steel Corp.
Schedule of net operating income
January 1 to December 31, 2025
Unit: NTD

Item	Quantity (KG)	Amount
Steel pipe	42,095,146	$ 1,661,000,834
Hot rolled steel coil	5,788,345	92,641,653
Zinc products	301,092	22,821,965
Others	67,527	803,672
Rental income		41,228,774
Total		$ 1,818,496,898

~93~

Kao Hsing Chang Iron & Steel Corp.
Schedule of operating costs
January 1 to December 31, 2025
Unit: NTD

Item	Amount
Direct raw materials
Beginning stock	$ 196,430,008
Plus: Feedstock this period	884,031,769
Transfer-in of finished goods
Inventory at the end of period	(185,218,251)
Direct raw materials consumed in this period	895,243,526
Direct labor	74,822,696
Manufacturing expenses	341,951,088
Transfer to processing costs	(221,846)
Unallocated manufacturing overheads	(25,638,934)
Manufacturing costs	1,286,156,530
Work in progress at the beginning of the period	127,012,469
Plus: Outsourcing	42,548,906
Less: Inventory losses	(82,891)
Work in progress at the end of the period	(122,818,789)
Cost of finished goods for the current period	1,332,816,225
Finished goods at beginning of period	214,242,669
Plus: Outsourcing	200,035,054
inventory profit	328,113
Less: Self-use	(38,824)
Finished goods at end of period	(256,307,816)
Cost of goods sold before adjustment	1,491,075,421
Cost of goods sold plus (minus) adjustment
Income from sale of scrap	(20,871,194)
Net inventory profit	(245,222)
Allowance for inventory valuation losses	3,342,066
Unallocated manufacturing overheads	25,638,934
Others	2,539,355
Adjusted cost of goods sold	1,501,479,360
Processing costs	730,569
Leasing costs	10,811,464
Operating costs	$ 1,513,021,393

~94~

Kao Hsing Chang Iron & Steel Corp.
Schedule of selling expenses
January 1 to December 31, 2025
Unit: NTD

Item	Summary	Amount
Salary	Employee salary, overtime pay and bonus	$ 9,626,932
Shipping expense	Sales freight expense	41,438,034
Warehouse rent and assembling and dissembling expense	Warehouse rent at customs, etc.	3,474,470
Others	Commission, utility bill, pension, labor and health insurance premium and entertainment allowance, etc.	7,326,240
Total		$ 61,865,676

Schedule of management expenses

Item	Summary	Amount
Salary	Employee salary, overtime pay and bonus	$ 31,373,358
Entertainment expenses	Entertainment expenses	20,898,317
Depreciation	Depreciation of assets in the business place	8,096,014
Tax	Housing tax and land value tax, etc.	4,607,482
Others	Pension, utility bill, labor and health insurance premium, employee benefits, and labor service costs.	17,057,248
Total		$ 82,032,419

Schedule of non-operating income and expenses

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

~95~

AI assistant

KHC — Audit Report / Information 2026

51940_rns_2026-05-13_1f6affe6-9685-4461-8a48-1d0240cdc7bb.pdf

Audit opinion

Basis of Audit Opinion

Key audit items

Responsibility of the Management and the Governance Unit to the Individual Financial Report

Kao Hsing Chang Iron & Steel Corp.

Kao Hsing Chang Iron & Steel Corp.

Liabilities and equity

Current liabilities:

Non-current liabilities:

Equity (Note 6 (18)):

Kao Hsing Chang Iron & Steel Corp.

Statements of Comprehensive Income

January 1 to December 31, 2025 and 2024

Kao Hsing Chang Iron & Steel Corp.

Statement of Changes in Equity

Kao Hsing Chang Iron & Steel Corp.

Statement of Cash Flow

January 1 to December 31, 2025 and 2024

IV. Summary of significant accounting policies

(I) Declaration of Compliance

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

(VIII) Property, plant and equipment

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

2. Liquidity risk

3. Exchange rate risk

(1) Exchange rate risk exposure

6. Fair value information

(1) Types and fair value of financial instruments

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

XIV. Segment information

Kao Hsing Chang Iron & Steel Corp.

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

Schedule of changes in accumulated depreciation of invested real estate

Schedule of guarantee deposits paid

December 31, 2025

Schedule of accounts payable

Schedule of deferred income tax liabilities

Schedule of guarantee deposits received

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KHC Audit Report / Information 2026