EX-99.2

EX-99.2 3 d79249dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

Chunghwa Telecom Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the

Nine Months Ended September 30, 2020 and 2019 and

Independent Auditors’ Review Report

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and Stockholders

Chunghwa Telecom Co., Ltd.

Introduction

We have reviewed the accompanying consolidated balance sheets of Chunghwa Telecom Co., Ltd. and its subsidiaries (the “Company”) as of September 30, 2020 and 2019, the related consolidated statements of comprehensive income for the three months ended September 30, 2020 and 2019, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the nine months ended September 30, 2020 and 2019, and related notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

We conducted our reviews in accordance with Statement of Auditing Standards No. 65 “Review of Financial Information Performed by the Independent Auditor of the Entity”. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Company as of September 30, 2020 and 2019, and of its consolidated financial performance for the three months ended September 30, 2020 and 2019, as well as of its consolidated financial performance and its consolidated cash flows for the nine months ended September 30, 2020 and 2019 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

- 1 -

The engagement partners on the reviews resulting in this independent auditors’ review report are Dien Sheng Chang and Cheng Hung Kuo.


/s/ Dien Sheng Chang				/s/ Cheng Hung Kuo

Deloitte & Touche
Taipei, Taiwan
Republic of China

November 6, 2020

Notice to Readers

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

For the convenience of readers, the independent auditors’ review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ review report and consolidated financial statements shall prevail.

- 2 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)


	September 30, 2020 (Reviewed)			December 31, 2019 (Audited)			September 30, 2019 (Reviewed)
ASSETS		Amount	%		Amount	%		Amount	%
CURRENT ASSETS
Cash and cash equivalents (Note 6)	$	17,703,012	4	$	34,049,643	7	$	24,072,337	5
Financial assets at fair value through profit or loss (Note 7)		7,240	—		516	—		24,595	—
Hedging financial assets (Note 20)		7,841	—		327	—		—	—
Contract assets (Note 30)		5,169,966	1		4,441,196	1		4,516,992	1
Trade notes and accounts receivable, net (Notes 9, 13 and 30)		22,595,966	5		26,407,783	6		29,760,143	6
Receivables from related parties (Note 38)		690,145	—		16,834	—		19,077	—
Inventories (Notes 10 and 39)		15,167,360	3		17,344,276	4		17,888,077	4
Prepayments (Note 11)		4,868,631	1		1,883,259	—		4,564,748	1
Other current monetary assets (Note 12)		5,576,298	1		7,498,564	2		7,997,055	2
Other current assets (Notes 19 and 39)		3,366,624	—		2,429,664	—		2,496,710	1

Total current assets		75,153,083	15		94,072,062	20		91,339,734	20

NONCURRENT ASSETS
Financial assets at fair value through profit or loss (Note 7)		699,689	—		778,105	—		512,736	—
Financial assets at fair value through other comprehensive income (Note 8)		7,632,641	2		7,268,917	2		6,457,296	1
Investments accounted for using equity method (Note 14)		7,017,970	2		7,354,226	2		3,232,056	1
Contract assets (Note 30)		2,356,776	—		2,600,913	—		2,537,975	1
Property, plant and equipment (Notes 13, 15, 38 and 39)		279,241,678	56		283,694,215	59		282,108,127	60
Right-of-use assets (Note 16)		11,159,348	3		11,364,249	2		11,350,779	2
Investment properties (Note 17)		8,171,495	2		8,169,393	2		8,267,187	2
Intangible assets (Notes 13 and 18)		91,885,832	19		47,046,525	10		47,920,083	10
Deferred income tax assets (Note 3)		3,348,788	—		3,258,607	1		3,522,971	1
Incremental costs of obtaining contracts (Note 30)		975,788	—		942,652	—		961,348	—
Net defined benefit assets (Note 3)		2,285,109	—		2,127,335	—		842,890	—
Prepayments (Note 11)		2,340,922	—		2,679,335	1		2,761,579	1
Other noncurrent assets (Notes 19, 39 and 40)		5,191,151	1		6,101,704	1		5,888,995	1

Total noncurrent assets		422,307,187	85		383,386,176	80		376,364,022	80

TOTAL	$	497,460,270	100	$	477,458,238	100	$	467,703,756	100

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 21)	$	75,000	—	$	90,000	—	$	90,000	—
Short-term bills payable (Note 22)		11,990,829	3		—	—		—	—
Financial liabilities at fair value through profit or loss (Note 7)		19	—		239	—		1,854	—
Contract liabilities (Notes 30 and 38)		16,184,042	4		16,839,830	4		16,417,493	4
Trade notes and accounts payable (Note 25)		13,256,209	3		15,312,274	3		16,932,170	4
Payables to related parties (Note 38)		494,388	—		653,983	—		379,020	—
Current tax liabilities (Note 3)		2,580,457	—		4,020,670	1		6,238,714	1
Lease liabilities (Notes 16, 35 and 38)		3,272,130	—		3,291,330	1		3,247,553	1
Other payables (Note 26)		22,189,496	5		22,952,488	5		20,092,380	4
Provisions (Notes 13 and 27)		240,296	—		206,942	—		248,858	—
Current portion of long-term loans (Notes 23 and 39)		1,600,000	—		—	—		—	—
Other current liabilities		956,329	—		983,789	—		999,685	—

Total current liabilities		72,839,195	15		64,351,545	14		64,647,727	14

NONCURRENT LIABILITIES
Long-term loans (Notes 23 and 29)		—	—		1,600,000	—		1,600,000	—
Bonds payable (Note 24)		19,979,473	4		—	—		—	—
Contract liabilities (Note 30)		6,508,142	2		6,841,485	2		6,802,600	2
Deferred income tax liabilities (Note 3)		1,953,561	—		1,912,305	—		1,941,106	—
Provisions (Note 27)		105,323	—		97,382	—		85,090	—
Lease liabilities (Notes 16, 35 and 38)		6,300,425	1		6,466,808	1		6,339,175	1
Customers’ deposits (Note 38)		4,702,387	1		4,747,644	1		4,645,677	1
Net defined benefit liabilities (Note 3)		3,612,832	1		3,504,617	1		3,662,751	1
Other noncurrent liabilities		1,801,816	—		1,542,687	—		1,496,663	—

Total noncurrent liabilities		44,963,959	9		26,712,928	5		26,573,062	5

Total liabilities		117,803,154	24		91,064,473	19		91,220,789	19

EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT (Notes 13 and 29)
Common stocks		77,574,465	16		77,574,465	16		77,574,465	17

Additional paid-in capital		171,272,215	34		171,255,985	36		171,257,188	36

Retained earnings
Legal reserve		77,574,465	16		77,574,465	16		77,574,465	17
Special reserve		2,675,419	—		2,675,419	1		2,675,419	1
Unappropriated earnings		38,753,327	8		46,341,361	10		37,359,912	8

Total retained earnings		119,003,211	24		126,591,245	27		117,609,796	26

Others		868,533	—		688,548	—		22,151	—

Total equity attributable to stockholders of the parent		368,718,424	74		376,110,243	79		366,463,600	79
NONCONTROLLING INTERESTS (Notes 13 and 29)		10,938,692	2		10,283,522	2		10,019,367	2

Total equity		379,657,116	76		386,393,765	81		376,482,967	81

TOTAL	$	497,460,270	100	$	477,458,238	100	$	467,703,756	100

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

- 3 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

(Reviewed, Not Audited)


	Three Months Ended September 30										Nine Months Ended September 30
	2020					2019					2020					2019
	Amount			%		Amount			%		Amount			%		Amount			%
REVENUES (Notes 30, 38 and 44)	$	52,171,326			100	$	50,848,160			100	$	148,129,189			100	$	152,287,496			100
OPERATING COSTS (Notes 10, 28, 30, 31, 38 and 44)		34,505,914			66		33,019,129			65		94,697,928			64		98,767,215			65

GROSS PROFIT		17,665,412			34		17,829,031			35		53,431,261			36		53,520,281			35

OPERATING EXPENSES (Notes 9, 28, 31, 38 and 44)
Marketing		5,142,574			10		5,578,613			11		15,392,969			10		16,469,522			11
General and administrative		1,151,224			2		1,123,654			2		3,512,404			2		3,435,379			2
Research and development		980,526			2		1,088,190			2		2,877,722			2		2,963,501			2
Expected credit loss (reversal of credit loss)		(45,390	)		—		9,968			—		58,588			—		(91,793	)		—

Total operating expenses		7,228,934			14		7,800,425			15		21,841,683			14		22,776,609			15

OTHER INCOME AND EXPENSES (Note 31)		285,688			1		(19,273	)		—		273,854			—		(28,485	)		—

INCOME FROM OPERATIONS		10,722,166			21		10,009,333			20		31,863,432			22		30,715,187			20

NON-OPERATING INCOME AND EXPENSES
Interest income		21,187			—		67,223			—		93,362			—		196,757			—
Other income (Notes 31 and 38)		86,892			—		143,583			—		416,510			—		479,259			—
Other gains and losses (Notes 31, 37 and 38)		(53,371	)		—		47,230			—		(76,322	)		—		23,554			—
Interest expenses (Notes 16, 31 and 38)		(57,610	)		—		(26,292	)		—		(148,005	)		—		(77,730	)		—
Share of profits of associates accounted for using equity method (Note 14)		106,012			—		195,449			—		270,932			—		412,500			—

Total non-operating income and expenses		103,110			—		427,193			—		556,477			—		1,034,340			—

INCOME BEFORE INCOME TAX		10,825,276			21		10,436,526			20		32,419,909			22		31,749,527			20
INCOME TAX EXPENSE (Notes 3 and 32)		2,109,499			4		1,990,531			4		6,303,782			4		6,020,321			4

NET INCOME		8,715,777			17		8,445,995			16		26,116,127			18		25,729,206			16

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified to profit or loss:
Unrealized gain or loss on investments in equity instruments at fair value through other comprehensive income (Notes 29 and 37)		726,376			1		(191,166	)		—		280,667			—		(474,557	)		—
Gain or loss on hedging instruments subject to basis adjustment (Note 20)		5,483			—		(1,803	)		—		7,514			—		(1,069	)		—
Share of remeasurements of defined benefit pension plans of associates (Note 14)		—			—		—			—		725			—		—			—

		731,859			1		(192,969	)		—		288,906			—		(475,626	)		—

(Continued)

- 4 -


	Three Months Ended September 30										Nine Months Ended September 30
	2020					2019					2020					2019
	Amount			%		Amount			%		Amount			%		Amount			%
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising from the translation of the foreign operations	$	(52,733	)		—	$	(17,242	)		—	$	(132,042	)		—	$	45,756			—
Share of exchange differences arising from the translation of the foreign operations of associates (Note 14)		(1,565	)		—		(17	)		—		(2,800	)		—		299			—
Income tax relating to items that may be reclassified subsequently to profit or loss (Note 32)		56			—		—			—		56			—		—			—

	(54,242)			—		(17,259)			—		(134,786)			—		46,055			—

Total other comprehensive income (loss), net of income tax		677,617			1		(210,228	)		—		154,120			—		(429,571	)		—

TOTAL COMPREHENSIVE INCOME	$	9,393,394			18	$	8,235,767			16	$	26,270,247			18	$	25,299,635			16

NET INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	8,336,836			16	$	8,090,541			16	$	25,194,210			17	$	25,014,993			16
Noncontrolling interests		378,941			1		355,454			—		921,917			1		714,213			—

	$	8,715,777			17	$	8,445,995			16	$	26,116,127			18	$	25,729,206			16

COMPREHENSIVE INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	9,017,894			17	$	7,886,427			16	$	25,374,920			17	$	24,577,230			16
Noncontrolling interests		375,500			1		349,340			—		895,327			1		722,405			—

	$	9,393,394			18	$	8,235,767			16	$	26,270,247			18	$	25,299,635			16

EARNINGS PER SHARE (Note 33)
Basic	$	1.07				$	1.04				$	3.25				$	3.22

Diluted	$	1.07				$	1.04				$	3.24				$	3.22

(Concluded)

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

- 5 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	Equity Attributable to Stockholders of the Parent (Notes 13, 20 and 29)
													Others
			Additional			Retained Earnings							Exchange Differences Arising from the Translation of			Unrealized Gain or Loss on Financial Assets at Fair Value Through Other			Gain or Loss						Noncontrolling
	Common Stocks		Paid-in Capital			Legal Reserve		Special Reserve		Unappropriated Earnings			the Foreign Operations			Comprehensive Income			on Hedging Instruments			Total			Interests (Notes 13 and 29)			Total Equity
BALANCE, JANUARY 1, 2019	$	77,574,465	$	171,136,764		$	77,574,465	$	2,675,419	$	47,090,522		$	(79,427	)	$	538,272		$	1,069		$	376,511,549		$	9,990,345		$	386,501,894
Appropriation of 2018 earnings
Cash dividends distributed by Chunghwa		—		—			—		—		(34,745,603	)		—			—			—			(34,745,603	)		—			(34,745,603	)
Cash dividends distributed by subsidiaries		—		—			—		—		—			—			—			—			—			(709,817	)		(709,817	)
Unclaimed dividend		—		1,314			—		—		—			—			—			—			1,314			—			1,314
Change in additional paid-in capital from investments in associates accounted for using equity method		—		119,922			—		—		—			—			—			—			119,922			769			120,691
Net income for the nine months ended September 30, 2019		—		—			—		—		25,014,993			—			—			—			25,014,993			714,213			25,729,206
Other comprehensive income (loss) for the nine months ended September 30, 2019		—		—			—		—		—			27,706			(464,400	)		(1,069	)		(437,763	)		8,192			(429,571	)

Total comprehensive income (loss) for the nine months ended September 30, 2019		—		—			—		—		25,014,993			27,706			(464,400	)		(1,069	)		24,577,230			722,405			25,299,635

Share-based payment transactions of subsidiaries		—		(812	)		—		—		—			—			—			—			(812	)		16,428			15,616
Net decrease in noncontrolling interests		—		—			—		—		—			—			—			—			—			(763	)		(763	)

BALANCE, SEPTEMBER 30, 2019	$	77,574,465	$	171,257,188		$	77,574,465	$	2,675,419	$	37,359,912		$	(51,721	)	$	73,872		$	—		$	366,463,600		$	10,019,367		$	376,482,967

BALANCE, JANUARY 1, 2020	$	77,574,465	$	171,255,985		$	77,574,465	$	2,675,419	$	46,341,361		$	(148,377	)	$	836,598		$	327		$	376,110,243		$	10,283,522		$	386,393,765
Appropriation of 2019 earnings
Cash dividends distributed by Chunghwa		—		—			—		—		(32,782,969	)		—			—			—			(32,782,969	)		—			(32,782,969	)
Cash dividends distributed by subsidiaries		—		—			—		—		—			—			—			—			—			(775,420	)		(775,420	)
Unclaimed dividend		—		1,647			—		—		—			—			—			—			1,647			—			1,647
Change in additional paid-in capital from investments in associates accounted for using equity method		—		(9,399	)		—		—		—			—			—			—			(9,399	)		47			(9,352	)
Change in additional paid-in capital for not proportionately participating in the capital increase of subsidiaries		—		(103	)		—		—		—			—			—			—			(103	)		103			—
Net income for the nine months ended September 30, 2020		—		—			—		—		25,194,210			—			—			—			25,194,210			921,917			26,116,127
Other comprehensive income (loss) for the nine months ended September 30, 2020		—		—			—		—		725			(123,485	)		295,956			7,514			180,710			(26,590	)		154,120

Total comprehensive income (loss) for the nine months ended September 30, 2020		—		—			—		—		25,194,935			(123,485	)		295,956			7,514			25,374,920			895,327			26,270,247

Share-based payment transactions of subsidiaries		—		24,085			—		—		—			—			—			—			24,085			59,234			83,319
Net increase in noncontrolling interests		—		—			—		—		—			—			—			—			—			475,879			475,879

BALANCE, SEPTEMBER 30, 2020	$	77,574,465	$	171,272,215		$	77,574,465	$	2,675,419	$	38,753,327		$	(271,862	)	$	1,132,554		$	7,841		$	368,718,424		$	10,938,692		$	379,657,116

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

- 6 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	Nine Months Ended September 30
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	$	32,419,909		$	31,749,527
Adjustments for:
Depreciation		23,184,863			23,169,471
Amortization		3,774,247			3,191,249
Amortization of incremental costs of obtaining contracts		582,950			953,109
Expected credit loss (reversal of credit loss)		58,588			(91,793	)
Interest expenses		148,005			77,730
Interest income		(93,362	)		(196,757	)
Dividend income		(246,084	)		(296,360	)
Compensation cost of share-based payment transactions		4,937			1,288
Share of profits of associates accounted for using equity method		(270,932	)		(412,500	)
Loss (gain) on disposal of property, plant and equipment		(124,341	)		28,339
Gain on disposal of investment properties		(151,357	)		—
Loss on disposal of intangible assets		1,844			146
Loss on disposal of financial instruments		1,788			—
Gain on disposal of investments accounted for using equity method		(1,412	)		(30,152	)
Provision for impairment loss of inventory		608,024			155,761
Valuation loss on financial assets and liabilities at fair value through profit or loss, net		78,887			3,197
Others		(40,116	)		(26,531	)
Changes in operating assets and liabilities:
Decrease (increase) in:
Contract assets		98,393			159,557
Trade notes and accounts receivable		4,019,978			593,945
Receivables from related parties		(340,311	)		5,193
Inventories		1,710,128			(2,923,123	)
Prepayments		(2,516,543	)		(2,648,742	)
Other current monetary assets		276,557			(915,166	)
Other current assets		(862,203	)		79,373
Incremental cost of obtaining contracts		(616,086	)		(579,427	)
Increase (decrease) in:
Contract liabilities		(1,322,664	)		6,240,091
Trade notes and accounts payable		(2,313,384	)		(3,531,938	)
Payables to related parties		(159,595	)		(538,931	)
Other payables		(2,955,045	)		(1,556,888	)
Provisions		26,037			127,121
Other current liabilities		(41,634	)		(147,149	)
Net defined benefit plans		(82,172	)		450,013

Cash generated from operations		54,857,894			53,089,653

(Continued)

- 7 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	Nine Months Ended September 30
	2020			2019
Interest paid	$	(138,943	)	$	(77,730	)
Income tax paid		(7,808,819	)		(4,166,080	)

Net cash provided by operating activities		46,910,132			48,845,843

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of financial assets at fair value through other comprehensive income		(83,254	)		—
Purchase of financial assets at fair value through profit or loss		(38,944	)		(86,536	)
Proceeds from disposal of financial assets at fair value through profit or loss		29,741			64,111
Acquisition of time deposits and negotiable certificates of deposit with maturities of more than three months		(3,718,148	)		(13,483,451	)
Proceeds from disposal of time deposits and negotiable certificates of deposit with maturities of more than three months		5,381,866			15,880,554
Proceeds from disposal of agreements collateralized by bonds with maturities of more than three months		15,335			—
Proceeds from disposal of investments accounted for using equity method		—			32,470
Acquisition of property, plant and equipment		(13,972,367	)		(16,356,682	)
Proceeds from disposal of property, plant and equipment		110,115			37,476
Acquisition of intangible assets		(47,547,040	)		(167,593	)
Acquisition of investment properties		(54,435	)		—
Increase in other noncurrent assets		(130,825	)		(882,141	)
Interest received		102,113			207,360
Dividends received		515,364			534,395
Net cash inflow on acquisition of subsidiaries		354,056			—

Net cash used in investing activities		(59,036,423	)		(14,220,037	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans		115,000			315,000
Repayment of short-term loans		(134,000	)		(325,000	)
Proceeds from short-term bills payable		41,000,000			—
Repayment of short-term bills payable		(29,000,000	)		—
Proceeds from issuance of bonds		20,000,000			—
Payments for transaction costs attributable to the issuance of bonds		(21,038	)		—
Decrease in customers’ deposits		(61,246	)		(91,492	)
Payments for the principal of lease liabilities		(2,863,451	)		(2,896,092	)
Increase in other noncurrent liabilities		254,286			186,333
Cash dividends		(32,782,969	)		(34,745,603	)
Dividends distributed to noncontrolling interests		(775,420	)		(709,817	)

(Continued)

- 8 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	Nine Months Ended September 30
	2020			2019
Change in other noncontrolling interests	$	78,382		$	13,565
Unclaimed dividend		1,647			1,314

Net cash used in financing activities		(4,188,809	)		(38,251,792	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(31,531	)		53,543

NET DECREASE IN CASH AND CASH EQUIVALENTS		(16,346,631	)		(3,572,443	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		34,049,643			27,644,780

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	17,703,012		$	24,072,337


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

- 9 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

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

(Reviewed, Not Audited)

1.	GENERAL

Chunghwa Telecom Co., Ltd. (“Chunghwa”) was incorporated on July 1, 1996 in the Republic of China (“ROC”) pursuant to the Article 30 of the Telecommunications Act. Chunghwa is a company limited by shares and, prior to August 2000, was wholly owned by the Ministry of Transportation and Communications (“MOTC”). Prior to July 1, 1996, the current operations of Chunghwa were carried out under the Directorate General of Telecommunications (“DGT”). The DGT was established by the MOTC in June 1943 to take primary responsibility in the development of telecommunications infrastructure and to formulate policies related to telecommunications. On July 1, 1996, the telecom operations of the DGT were spun-off as Chunghwa which continues to carry out the business and the DGT continues to be the industry regulator.

Effective August 12, 2005, the MOTC completed the process of privatizing Chunghwa by reducing the government ownership to below 50% in various stages. In July 2000, Chunghwa received approval from the Securities and Futures Commission (the “SFC”) for a domestic initial public offering and its common stocks were listed and traded on the Taiwan Stock Exchange (the “TWSE”) on October 27, 2000. Certain of Chunghwa’s common stocks were sold, in connection with the foregoing privatization plan, in domestic public offerings at various dates from August 2000 to July 2003. Certain of Chunghwa’s common stocks were also sold in an international offering of securities in the form of American Depository Shares (“ADS”) on July 17, 2003 and were listed and traded on the New York Stock Exchange (the “NYSE”). The MOTC sold common stocks of Chunghwa by auction in the ROC on August 9, 2005 and completed the second international offering on August 10, 2005. Upon completion of the share transfers associated with these offerings on August 12, 2005, the MOTC owned less than 50% of the outstanding shares of Chunghwa and completed the privatization plan.

Chunghwa together with its subsidiaries are hereinafter referred to collectively as the “Company”.

The consolidated financial statements are presented in Chunghwa’s functional currency, New Taiwan dollars.

2.	APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Board of Directors on November 6, 2020.

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the following items, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2019. Please refer to the consolidated financial statements for the year ended December 31, 2019 for the details.

- 10 -

Statement of Compliance

The accompanying consolidated financial statements have been prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission (the “FSC”). The consolidated financial statements do not present all the disclosures required for a complete set of annual consolidated financial statements as required by International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), International Financing Reporting Interpretations Committee (IFRIC) and SIC Interpretation (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the FSC.

Basis of Consolidation

The detail information of the subsidiaries at the end of reporting period was as follows:


			Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	September 30, 2020		December 31, 2019		September 30, 2019		Note
Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd. (“SENAO”)	Handset and peripherals retailer, sales of CHT mobile phone plans as an agent		28		28		28		a.
	Light Era Development Co., Ltd. (“LED”)	Planning and development of real estate and intelligent buildings, and property management		100		100		100
	Donghwa Telecom Co., Ltd. (“DHT”)	International private leased circuit, IP VPN service, and IP transit services		100		100		100
	Chunghwa Telecom Singapore Pte., Ltd. (“CHTS”)	International private leased circuit, IP VPN service, and IP transit services		100		100		100
	Chunghwa System Integration Co., Ltd. (“CHSI”)	Providing system integration services and telecommunications equipment		100		100		100
	Chunghwa Investment Co., Ltd. (“CHI”)	Investment		89		89		89
	CHIEF Telecom Inc. (“CHIEF”)	Network integration, internet data center (“IDC”), communications integration and cloud application services		56		57		57		b.
	CHYP Multimedia Marketing & Communications Co., Ltd. (“CHYP”)	Digital information supply services and advertisement services		100		100		100
	Prime Asia Investments Group Ltd. (B.V.I.) (“Prime Asia”)	Investment		100		100		100
	Spring House Entertainment Tech. Inc. (“SHE”)	Software design services, internet contents production and play, and motion picture production and distribution		56		56		56		c.
	Chunghwa Telecom Global, Inc. (“CHTG”)	International private leased circuit, internet services, and transit services		100		100		100
	Chunghwa Telecom Vietnam Co., Ltd. (“CHTV”)	Intelligent energy saving solutions, international circuit, and information and communication technology (“ICT”) services.		100		100		100
	Smartfun Digital Co., Ltd. (“SFD”)	Providing diversified family education digital services		65		65		65
	Chunghwa Telecom Japan Co., Ltd. (“CHTJ”)	International private leased circuit, IP VPN service, and IP transit services		100		100		100
	Chunghwa Sochamp Technology Inc. (“CHST”)	Design, development and production of Automatic License Plate Recognition software and hardware		51		51		51

(Continued)

- 11 -


			Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	September 30, 2020		December 31, 2019		September 30, 2019		Note
	Honghwa International Co., Ltd. (“HHI”)	Telecommunications engineering, sales agent of mobile phone plan application and other business services, etc.		100		100		100
	Chunghwa Leading Photonics Tech Co., Ltd. (“CLPT”)	Production and sale of electronic components and finished products		75		75		75
	Chunghwa Telecom (Thailand) Co., Ltd. (“CHTT”)	International private leased circuit, IP VPN service, ICT and cloud VAS services		100		100		100		d.
	CHT Security Co., Ltd. (“CHTSC”)	Computing equipment installation, wholesale of computing and business machinery equipment and software, management consulting services, data processing services, digital information supply services and internet identify services		80		80		80
	International Integrated Systems, Inc. (“IISI”)	IT solution provider, IT application consultation, system integration and package solution		51		—		—		e.
Senao International Co., Ltd.	Senao International (Samoa) Holding Ltd. (“SIS”)	International investment		100		100		100
	Youth Co., Ltd. (“Youth”)	Sale of information and communication technologies products		96		93		93		f.
	Aval Technologies Co., Ltd. (“Aval”)	Sale of information and communication technologies products		100		100		100
	Senyoung Insurance Agent Co., Ltd. (“SENYOUNG”)	Property and liability insurance agency		100		100		100
Youth Co., Ltd.	ISPOT Co., Ltd. (“ISPOT”)	Sale of information and communication technologies products		100		100		100
	Youyi Co., Ltd. (“Youyi”)	Maintenance of information and communication technologies products		100		100		100
Aval Technologies Co., Ltd.	Wiin Technology Co., Ltd. (“Wiin”)	Sale of information and communication technologies products		100		100		100		g.
Senyoung Insurance Agent Co., Ltd.	Senaolife Insurance Agent Co., Ltd. (“Senaolife”)	Life insurance services		100		100		—		h.
Light Era Development Co., Ltd.	Taoyuan Asia Silicon Valley Innovation Co., Ltd. (“TASVI”)	Development of real estate		—		—		—		i.
CHIEF Telecom Inc.	Unigate Telecom Inc. (“Unigate”)	Telecommunications and internet service		100		100		100
	Chief International Corp. (“CIC”)	Telecommunications and internet service		100		100		100
	Shanghai Chief Telecom Co., Ltd. (“SCT”)	Telecommunications and internet service		49		49		49		j.
Chunghwa Investment Co., Ltd.	Chunghwa Precision Test Tech. Co., Ltd. (“CHPT”)	Production and sale of semiconductor testing components and printed circuit board		34		34		34		k.

(Continued)

- 12 -


			Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	September 30, 2020		December 31, 2019		September 30, 2019		Note
Chunghwa Precision Test Tech. Co., Ltd.	Chunghwa Precision Test Tech. USA Corporation (“CHPT (US)”)	Design and after-sale services of semiconductor testing components and printed circuit board		100		100		100
	CHPT Japan Co., Ltd. (“CHPT (JP)”)	Related services of electronic parts, machinery processed products and printed circuit board		100		100		100
	Chunghwa Precision Test Tech. International, Ltd. (“CHPT (International)”)	Wholesale and retail of electronic materials, and investment		100		100		100
Senao International (Samoa) Holding Ltd.	Senao International HK Limited (“SIHK”)	International investment		100		100		100
Senao International HK Limited	Senao Trading (Fujian) Co., Ltd. (“STF”)	Sale of information and communication technologies products		—		—		—		l.
	Senao International Trading (Shanghai) Co., Ltd. (“SITS”)	Sale of information and communication technologies products		100		100		100
	Senao International Trading (Jiangsu) Co., Ltd. (“SITJ”)	Sale of information and communication technologies products		—		—		—		m.
Prime Asia Investments Group Ltd. (B.V.I.)	Chunghwa Hsingta Co., Ltd. (“CHC”)	Investment		100		100		100
Chunghwa Hsingta Co., Ltd.	Chunghwa Telecom (China) Co., Ltd. (“CTC”)	Integrated information and communication solution services for enterprise clients, and intelligent energy network service		100		100		100		n.
Chunghwa Precision Test Tech. International, Ltd.	Shanghai Taihua Electronic Technology Limited (“STET”)	Design of printed circuit board and related consultation service		100		100		100
	Su Zhou Precision Test Tech. Ltd. (“SZPT”)	Assembly processed of circuit board, design of printed circuit board and related consultation service		100		100		—		o.
International Integrated Systems, Inc.	Infoexplorer International Co., Ltd.(“IESA”)	Investment		100		—		—		p.
	IISI Investment Co., Ltd. (“IICL”)	Investment		100		—		—		p.
	Unitronics Technology Corp. (“UTC”)	Development and maintenance of information system		99.96		—		—		p.
Infoexplorer International Co., Ltd.	International Integrated Systems (Hong Kong) Limited (“IEHK”)	Investment and technical consulting service		100		—		—		p.
IISI Investment Co., Ltd.	Leading Tech Co., Ltd. (“LTCL”)	Investment		100		—		—		p.
Leading Tech Co., Ltd.	Leading Systems Co., Ltd. (“LSCL”)	Investment		100		—		—		p.
Leading Systems Co., Ltd.	International Integrated Systems Inc. (Shanghai) (“IISS”)	Development and maintenance of information system		100		—		—		p.
International Integrated Systems Inc. (Shanghai)	Huiyu Shanghai Management Consultancy Co., Ltd. (“HSMC”)	Development and maintenance of information system		100		—		—		p.

(Concluded)

- 13 -

Chunghwa continues to control six out of eleven seats of the Board of Directors of SENAO through the support of large beneficial stockholders. As a result, the accounts of SENAO are included in the consolidated financial statements.

CHIEF issued new shares in March, November 2019 and March 2020, as its employees exercised options. Therefore, the Company’s ownership interest in CHIEF decreased to 59.75% and 59.10% as of December 31, 2019 and September 30, 2020, respectively.

SHE reduced 19.72% of its capital to offset accumulated deficits in December 2019 and the Company’s ownership interest in SHE remained the same.

The Company increased its investment in CHTT proportionally in October 2019 and the Company’s ownership interest in CHTT remained the same.

Chunghwa obtained 20.38% ownership interest in IISI in July 2020 and Chunghwa’s ownership interest in IISI increased to 51.54% by considering the previously held ownership interest in IISI. Chunghwa obtained over half of the seats of the Board of Directors of IISI; therefore, Chunghwa gained control over IISI and treated it as a subsidiary. IISI issued new shares in September 2020 as its employees exercised options; therefore, the Company’s ownership interest in IISI decreased to 51.20% as of September 30, 2020.

SENAO subscribed for all the shares in the capital increase of Youth in April 2020. Therefore, the Company’s ownership interest in Youth increased from 92.89% to 95.79%.

Aval invested 100% equity shares of Wiin Technology Co., Ltd. (“Wiin”) in September 2019.

SENYOUNG invested 100% equity shares of Senaolife Insurance Agent Co., Ltd. (“Senaolife”) in November 2019.

TASVI completed its liquidation in September 2019.

CHIEF obtained two out of three seats of the Board of Directors of SCT according to the mutual agreements among stockholders and gained control over SCT; hence, SCT is deemed as a subsidiary of the Company.

Though the Company’s ownership interest in CHPT is less than 50%, the management considered the absolute and relative size of ownership interest, and the dispersion of shares owned by the other stockholders and concluded that the Company has a sufficiently dominant voting interest to direct the relevant activities; hence, CHPT is deemed as a subsidiary of the Company.

STF completed its liquidation in May 2019.

SITJ completed its liquidation in March 2019.

CTC was approved to end and dissolve its business in August 2020. The liquidation of CTC is still in process.

CHPT (International) invested 100% equity shares of Su Zhou Precision Test Tech. Ltd. (“SZPT”) in October 2019.

It is a subsidiary of IISI.

- 14 -

The following diagram presented information regarding the relationship and ownership percentages between Chunghwa and its subsidiaries as of September 30, 2020.

LOGO

Other Significant Accounting Policies

Defined benefit retirement benefits

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for other significant one-off events.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. Income taxes for interim period are assessed on an annual basis and calculated by applying to an interim period’s pre-tax income the tax rate that would be applicable to expected total annual earnings.

The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects to recover or settle the carrying amount of its assets and liabilities at balance sheet date.

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are generally recognized in profit or loss as they are incurred.

Goodwill is measured as the excess of the sum of the consideration transferred and the fair value of the acquirer’s previously held equity interests in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation are measured at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets.

- 15 -

When a business combination is achieved in stages, the Company’s previously held equity interest in an acquiree is remeasured to fair value at the acquisition date and the resulting gain or loss is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are recognized on the same basis as would be required had those interests been directly disposed of by the Company.

4.	CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION, UNCERTAINTY AND ASSUMPTION

In the application of the Company’s accounting policies, the management is required to make judgments, estimates and assumptions which are based on historical experience and other factors that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed by the management on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

For the critical accounting judgments and key sources of estimation, uncertainty and assumption applied in these consolidated financial statements, please refer to the consolidated financial statements for the year ended December 31, 2019.

5. APPLICATION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC

The initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs issued by the International Accounting Standards Board and endorsed and issued into effect by the FSC (collectively, the “Taiwan-IFRSs”) does not have material impacts on the Company’s consolidated financial statements.

IFRSs issued by the IASB but not yet endorsed and issued into effect by the FSC


New, Revised or Amended Standards and Interpretations		Effective Date Announced by IASB (Note 1)
Amendments to IFRSs	Annual Improvements to IFRS Standards 2018-2020	January 1, 2022 (Note 2)
Amendments to IFRS 3	Reference to the Conceptual Framework	January 1, 2022 (Note 3)
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16	Interest rate benchmark reform - phase 2	January 1, 2021
Amendments to IFRS 10 and IAS 28	Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture	To be determined by IASB
Amendments to IAS 1	Classification of liabilities as current or noncurrent	January 1, 2023

(Continued)

- 16 -


New, Revised or Amended Standards and Interpretations		Effective Date Announced by IASB (Note 1)
Amendments to IAS 16	Property, Plant and Equipment - Proceeds before Intended Use	January 1, 2022 (Note 4)
Amendments to IAS 37	Onerous Contracts - Cost of Fulfilling a Contract	January 1, 2022 (Note 5)

(Concluded)

Note 1:

Unless stated otherwise, the above new IFRSs are effective for annual periods beginning on or after their respective effective dates.

Note 2:

The amendments to IFRS 9 are applied prospectively to financial liabilities that are exchanged or modified on or after the annual reporting periods beginning on or after January 1, 2022.

Note 3:

The amendments are applicable to business combinations for which the acquisition date is on or after the annual reporting period beginning on or after January 1, 2022.

Note 4:

The amendments are applicable to property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021.

Note 5:

The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022.

As of the date the consolidated financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of above standards and interpretations will have on the Company’s financial position and operating result and will disclose the relevant impact when the assessment is completed.

6.	CASH AND CASH EQUIVALENTS


	September 30, 2020		December 31, 2019		September 30, 2019
Cash
Cash on hand	$	343,096	$	353,499	$	347,622
Bank deposits		10,099,127		9,432,814		13,284,563

		10,442,223		9,786,313		13,632,185

Cash equivalents (investments with maturities of less than three months)
Commercial paper		4,938,075		20,109,823		7,903,428
Negotiable certificates of deposit		—		1,700,000		—
Time deposits		2,302,877		2,450,509		2,536,724
Repurchase agreements collateralized by bonds		17,703		2,998		—
Triple stimulus vouchers		2,134		—		—

		7,260,789		24,263,330		10,440,152

	$	17,703,012	$	34,049,643	$	24,072,337

- 17 -

The annual yield rates of bank deposits, commercial paper, negotiable certificates of deposit, time deposits and repurchase agreements collateralized by bonds as of balance sheet dates were as follows:


	September 30, 2020	December 31, 2019	September 30, 2019
Bank deposits	0.00%-0.35%	0.00%-0.74%	0.00%-0.77%
Commercial paper	0.22%-0.33%	0.47%-0.54%	0.45%-0.58%
Negotiable certificates of deposit	—	0.58%-0.60%	—
Time deposits	0.10%-3.60%	0.09%-4.40%	0.09%-4.40%
Repurchase agreements collateralized by bonds	0.50%	1.90%	—

7.	FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS


	September 30, 2020		December 31, 2019		September 30, 2019
Financial assets-current
Mandatorily measured at FVTPL
Derivatives (not designated for hedge)
Forward exchange contracts	$	38	$	53	$	83
Non-derivatives
Listed stocks—domestic		7,202		463		24,512

	$	7,240	$	516	$	24,595

Financial assets-noncurrent
Mandatorily measured at FVTPL
Non-derivatives
Non-listed stocks—domestic	$	455,275	$	510,801	$	280,363
Non-listed stocks—foreign		244,414		267,304		232,373

	$	699,689	$	778,105	$	512,736

Financial liabilities-current
Held for trading
Derivatives (not designated for hedge)
Forward exchange contracts	$	19	$	239	$	1,854

Outstanding forward exchange contracts not designated for hedge as of balance sheet dates were as follows:


	Currency	Maturity Period		Contract Amount (Thousands)
September 30, 2020
Forward exchange contracts—buy	EUR/NT$		2020.12	EUR1,800/NT$61,426
Forward exchange contracts—sell	US$/NT$		2020.11	US$500/NT$14,589

(Continued)

- 18 -


	Currency	Maturity Period		Contract Amount (Thousands)
December 31, 2019
Forward exchange contracts—buy	EUR/NT$		2020.03	EUR1,500/NT$50,910
Forward exchange contracts—buy	US$/NT$		2020.01	US$850/NT$25,524
September 30, 2019
Forward exchange contracts—buy	EUR/NT$		2019.12	EUR1,568/NT$55,134
Forward exchange contracts—buy	US$/NT$		2019.10	US$1,610/NT$49,917

(Concluded)

The Company entered into the above forward exchange contracts to manage its exposure to foreign currency risk due to fluctuations in exchange rates. However, the aforementioned derivatives did not meet the criteria for hedge accounting.

8.	FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - NONCURRENT


	September 30, 2020		December 31, 2019		September 30, 2019
Domestic investments
Listed stocks	$	2,317,591	$	2,453,616	$	2,393,689
Non-listed stocks		5,192,117		4,680,931		3,920,796
Foreign investments
Non-listed stocks		122,933		134,370		142,811

	$	7,632,641	$	7,268,917	$	6,457,296

The Company holds the above foreign and domestic stocks for medium to long-term strategic purposes and expects to profit from long-term investment. Accordingly, the management elected to designate these investments in equity instruments at FVOCI as they believe that recognizing short-term fair value fluctuations of these investments in profit or loss is not consistent with the Company’s strategy of holding these investments for long-term purposes.

The Company holds Powtec ElectroChemical Corporation (“Powtec”) as financial assets at FVOCI. The Board of Directors of Powtec resolved in February 2020 to file a petition with court for the declaration of its bankruptcy which was adjudged by the court in April 2020. The Company evaluated and determined the fair value of such investment was nil after its declaration of bankruptcy.

The Company recognized dividend income of $1,952 thousand and $238,248 thousand for the three months and nine months ended September 30, 2020, respectively. The Company recognized dividend income of $55,257 thousand and $278,168 thousand for the three months and nine months ended September 30, 2019, respectively. The above dividend income was derived from the investments held on the balance sheet date.

- 19 -

9.	TRADE NOTES AND ACCOUNTS RECEIVABLE, NET


	September 30, 2020			December 31, 2019			September 30, 2019
Trade notes and accounts receivable	$	24,921,407		$	28,767,539		$	32,234,790
Less: Loss allowance		(2,325,441	)		(2,359,756	)		(2,474,647	)

	$	22,595,966		$	26,407,783		$	29,760,143

The main credit terms range from 30 to 90 days.

The Company serves a large consumer base for telecommunications business; therefore, the concentration of credit risk is limited. When having transactions with customers, the Company considers the record of arrears in the past. In addition, the Company may also collect some telecommunication charges in advance to reduce the payment arrears in subsequent periods.

The Company adopted a policy of dealing with counterparties with certain credit ratings for project business and to obtain collateral where necessary to mitigate the risk of loss arising from defaults. Credit rating information is provided by independent rating agencies where available and, if such credit rating information is not available, the Company uses other publicly available financial information and its own historical transaction experience to rate its major customers. The Company continues to monitor the credit exposure and credit ratings of its counterparties and spread the credit risk amongst qualified counterparties.

In order to mitigate credit risk, the management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure the recoverability of receivables. In addition, the Company reviews the recoverable amount of receivables at balance sheet dates to ensure that adequate allowance is provided for possible irrecoverable amounts. In this regard, the management believes the Company’s credit risk could be reasonably reduced.

The Company applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for receivables. The expected credit losses on receivables are estimated using a provision matrix by reference to past default experience of the customers and an analysis of the customers’ current financial positions, as well as the forward-looking indicators such as macroeconomic business indicator.

When there is evidence indicating that the counterparty is in evasion, bankruptcy, deregistration of its company or the accounts receivable are over two years past due and the recoverable amount cannot be reasonable estimated, the Company writes off the trade notes and accounts receivable. For accounts receivable that have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

- 20 -

Except for receivables arising from telecommunications business and project business, the Company’s remaining accounts receivable are limited. Therefore, only Chunghwa’s provision matrix arising from telecommunications business and project business is disclosed below:

September 30, 2020


	Not Past Due			Past Due Less than 30 Days			Pass Due 31 to 60 Days			Pass Due 61 to 90 Days			Pass Due 91 to 120 Days			Pass Due 121 to 180 Days			Pass Due over 180 Days			Total
Telecommunications business
Expected credit loss rate (Note a)		0%-2	%		0%-24	%		0%-68	%		0%-83	%		26%-90	%		65%-96	%		100	%
Gross carrying amount	$	16,934,972		$	232,478		$	79,837		$	55,807		$	29,873		$	23,989		$	694,535		$	18,051,491
Loss allowance (lifetime ECL)		(53,906	)		(20,802	)		(24,891	)		(29,859	)		(25,180	)		(23,645	)		(694,535	)		(872,818	)

Amortized cost	$	16,881,066		$	211,676		$	54,946		$	25,948		$	4,693		$	344		$	—		$	17,178,673

Project business
Expected credit loss rate (Note b)		0%-5	%		5	%		10	%		30	%		50	%		80	%		100	%
Gross carrying amount	$	2,337,222		$	35,934		$	15,592		$	27,248		$	4,203		$	10,645		$	1,372,549		$	3,803,393
Loss allowance (lifetime ECL)		(3,201	)		(2,871	)		(1,559	)		(8,174	)		(2,102	)		(8,516	)		(1,372,549	)		(1,398,972	)

Amortized cost	$	2,334,021		$	33,063		$	14,033		$	19,074		$	2,101		$	2,129		$	—		$	2,404,421

December 31, 2019


	Not Past Due			Past Due Less than 30 Days			Pass Due 31 to 60 Days			Pass Due 61 to 90 Days			Pass Due 91 to 120 Days			Pass Due 121 to 180 Days			Pass Due over 180 Days			Total
Telecommunications business
Expected credit loss rate (Note a)		0%-2	%		0%-25	%		0%-68	%		0%-83	%		11%-90	%		17%-96	%		100	%
Gross carrying amount	$	19,020,326		$	267,902		$	74,775		$	46,782		$	40,771		$	28,021		$	600,985		$	20,079,562
Loss allowance (lifetime ECL)		(55,903	)		(25,517	)		(27,630	)		(34,624	)		(26,281	)		(27,366	)		(600,985	)		(798,306	)

Amortized cost	$	18,964,423		$	242,385		$	47,145		$	12,158		$	14,490		$	655		$	—		$	19,281,256

Project business
Expected credit loss rate (Note b)		0%-5	%		5	%		10	%		30	%		50	%		80	%		100	%
Gross carrying amount	$	4,053,681		$	78,147		$	52,227		$	29,527		$	12,688		$	1,040		$	1,471,840		$	5,699,150
Loss allowance (lifetime ECL)		(2,637	)		(4,892	)		(5,223	)		(10,577	)		(6,344	)		(832	)		(1,471,840	)		(1,502,345	)

Amortized cost	$	4,051,044		$	73,255		$	47,004		$	18,950		$	6,344		$	208		$	—		$	4,196,805

September 30, 2019


	Not Past Due			Past Due Less than 30 Days			Pass Due 31 to 60 Days			Pass Due 61 to 90 Days			Pass Due 91 to 120 Days			Pass Due 121 to 180 Days			Pass Due Over 181 Days			Total
Telecommunications business
Expected credit loss rate (Note a)		0%-3	%		0%-26	%		5%-69	%		10%-83	%		15%-90	%		53%- 96	%		100	%
Gross carrying amount	$	23,672,880		$	310,069		$	87,290		$	62,759		$	29,706		$	31,755		$	557,785		$	24,752,244
Loss allowance (Lifetime ECL)		(56,232	)		(24,883	)		(29,907	)		(27,399	)		(29,293	)		(22,092	)		(557,785	)		(747,591	)

Amortized cost	$	23,616,648		$	285,186		$	57,383		$	35,360		$	413		$	9,663		$	—		$	24,004,653

Project business
Expected credit loss rate (Note b)		0%-5	%		5	%		10	%		30	%		50	%		80	%		100	%
Gross carrying amount	$	2,041,041		$	578,854		$	177,408		$	35,526		$	16,018		$	15,530		$	1,582,987		$	4,447,364
Loss allowance (Lifetime ECL)		(1,684	)		(29,740	)		(17,741	)		(13,199	)		(8,940	)		(12,424	)		(1,582,987	)		(1,666,715	)

Amortized cost	$	2,039,357		$	549,114		$	159,667		$	22,327		$	7,078		$	3,106		$	—		$	2,780,649

- 21 -

Note a:

Please refer to Notes 30 and 44 for the information of disaggregation of telecommunications service revenue. The expected credit loss rate applicable to different business revenue varies so as to reflect the risk level indicating by factors like historical experience.

Note b:

The project business has different loss types according to the customer types. The expected credit loss rate listed above is for general customers. When the customer is a government-affiliated entity, it is anticipated that there will not be an instance of credit loss. Customers with past history of bounced checks or accounts receivable exceeding six months overdue are classified as high-risk customers, with an expected credit loss rate of 50%, increasing by period as the days overdue increase.

Movements of loss allowance for trade notes and accounts receivable were as follows:


	Nine Months Ended September 30
	2020			2019
Beginning balance	$	2,359,756		$	2,602,055
Add: Provision for (reversal of) credit loss		61,890			(23,064	)
Add: Acquired by business combinations (Note 13)		1,639			—
Less: Amounts written off		(97,844	)		(104,344	)

Ending balance	$	2,325,441		$	2,474,647

10.

INVENTORIES


	September 30, 2020		December 31, 2019		September 30, 2019
Merchandise	$	3,682,561	$	3,858,034	$	4,569,690
Project in process		9,108,343		11,113,286		10,939,283
Work in process		147,958		141,417		136,752
Raw materials		152,448		155,495		163,226

		13,091,310		15,268,232		15,808,951
Land held under development		1,998,733		1,998,733		1,998,733
Construction in progress		77,317		77,311		80,393

	$	15,167,360	$	17,344,276	$	17,888,077

The operating costs related to inventories were $13,171,599 thousand (including the valuation loss on inventories of $412,334 thousand) and $32,758,756 thousand (including the valuation loss on inventories of $608,024 thousand) for the three months and nine months ended September 30, 2020, respectively. The operating costs related to inventories were $11,081,398 thousand (including the valuation loss on inventories of $10,415 thousand) and $33,787,522 thousand (including the valuation loss on inventories of $155,761 thousand) for the three months and nine months ended September 30, 2019, respectively.

As of September 30, 2020, December 31, 2019 and September 30, 2019, inventories of $2,076,050 thousand, $2,076,044 thousand and $2,079,126 thousand, respectively, were expected to be recovered after more than twelve months. The aforementioned amount of inventories is related to property development owned by LED.

Land held under development and construction in progress was developed by LED for Qingshan Sec., Dayuan Dist., Taoyuan City project.

- 22 -

11.

PREPAYMENTS


	September 30, 2020		December 31, 2019		September 30, 2019
Prepaid rents	$	3,007,495	$	3,382,560	$	3,471,857
Prepaid salary and bonus		2,543,550		5,117		2,558,243
Others		1,658,508		1,174,917		1,296,227

	$	7,209,553	$	4,562,594	$	7,326,327

Current
Prepaid salary and bonus	$	2,543,550	$	5,117	$	2,558,243
Prepaid rents		666,767		704,607		710,452
Others		1,658,314		1,173,535		1,296,053

	$	4,868,631	$	1,883,259	$	4,564,748

Noncurrent
Prepaid rents	$	2,340,728	$	2,677,953	$	2,761,405
Others		194		1,382		174

	$	2,340,922	$	2,679,335	$	2,761,579

Prepaid rents comprised the prepayments from the lease agreements applying the recognition exemption and the prepayments for leases that do not meet the definition of leases under IFRS 16.

12.

OTHER CURRENT MONETARY ASSETS


	September 30, 2020		December 31, 2019		September 30, 2019
Time deposits and negotiable certificates of deposit with maturities of more than three months	$	4,371,489	$	5,959,074	$	5,746,069
Repurchase agreements collateralized by bonds with maturities of more than three months		—		14,990		—
Others		1,204,809		1,524,500		2,250,986

	$	5,576,298	$	7,498,564	$	7,997,055

The annual yield rates of time deposits, negotiable certificates of deposit and repurchase agreements collateralized by bonds with maturities of more than three months at the balance sheet dates were as follows:


	September 30, 2020	December 31, 2019	September 30, 2019
Time deposits and negotiable certificates of deposit with maturities of more than three months	0.07%-2.55%	0.03%-2.73%	0.03%-2.90%
Repurchase agreements collateralized by bonds with maturities of more than three months	—	2.50%	—

- 23 -

13.

SUBSIDIARIES

Information on subsidiaries with significant noncontrolling interests


	Principal		Proportion of Ownership Interests and Voting Rights Held by Noncontrolling Interests
Subsidiaries	Place of Business		September 30, 2020			December 31, 2019			September 30, 2019
SENAO		Taiwan		72	%		72	%		72	%
CHPT		Taiwan		66	%		66	%		66	%


	Profit Allocated to Noncontrolling Interests
	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
SENAO	$	94,443	$	122,831	$	201,343	$	217,051

CHPT	$	188,532	$	162,788	$	459,571	$	302,018


	Accumulated Noncontrolling Interests
	September 30, 2020		December 31, 2019		September 30, 2019
SENAO	$	4,190,814	$	4,267,547	$	4,188,236
CHPT		4,480,000		4,236,872		4,129,773
Individually immaterial subsidiaries with noncontrolling interests		2,267,878		1,779,103		1,701,358

	$	10,938,692	$	10,283,522	$	10,019,367

Summarized financial information in respect of SENAO and its subsidiaries that has material noncontrolling interests is set out below. The summarized financial information below represented amounts before intercompany eliminations.


	September 30, 2020			December 31, 2019			September 30, 2019
Current assets	$	6,877,640		$	6,751,385		$	7,439,800
Noncurrent assets		3,361,673			3,321,252			3,395,005
Current liabilities		(4,018,979	)		(3,617,165	)		(4,414,657	)
Noncurrent liabilities		(460,623	)		(589,882	)		(665,109	)

Equity	$	5,759,711		$	5,865,590		$	5,755,039

Equity attributable to the parent	$	1,568,897		$	1,598,043		$	1,566,803
Equity attributable to noncontrolling interests		4,190,814			4,267,547			4,188,236

	$	5,759,711		$	5,865,590		$	5,755,039

- 24 -


	Three Months Ended September 30						Nine Months Ended September 30
	2020			2019			2020			2019
Revenues and income	$	6,813,751		$	7,219,126		$	19,563,348		$	21,848,391
Costs and expenses		6,682,148			7,047,989			19,282,146			21,545,916

Profit for the period	$	131,603		$	171,137		$	281,202		$	302,475

Profit attributable to the parent	$	37,160		$	48,306		$	79,859		$	85,424
Profit attributable to noncontrolling interests		94,443			122,831			201,343			217,051

Profit for the period	$	131,603		$	171,137		$	281,202		$	302,475

Other comprehensive income (loss) attributable to the parent	$	(1,560	)	$	(820	)	$	(3,430	)	$	7,508
Other comprehensive income (loss) attributable to noncontrolling interests		(4,796	)		(1,740	)		(9,449	)		18,651

Other comprehensive income (loss) for the period	$	(6,356	)	$	(2,560	)	$	(12,879	)	$	26,159

Total comprehensive income attributable to the parent	$	35,600		$	47,486		$	76,429		$	92,932
Total comprehensive income attributable to noncontrolling interests		89,647			121,091			191,894			235,702

Total comprehensive income for the period	$	125,247		$	168,577		$	268,323		$	328,634


	Nine Months Ended September 30
	2020			2019
Net cash flow from operating activities	$	35,759		$	(225,183	)
Net cash flow from investing activities		46,856			239,726
Net cash flow from financing activities		(609,129	)		(631,723	)
Effect of exchange rate changes on cash and cash equivalents		488			208

Net cash outflow	$	(526,026	)	$	(616,972	)

Dividends paid to noncontrolling interests	$	268,944		$	268,944

- 25 -

Summarized financial information in respect of CHPT and its subsidiaries that has material noncontrolling interests is set out below. The summarized financial information below represented amounts before intercompany eliminations.


	September 30, 2020			December 31, 2019			September 30, 2019
Current assets	$	3,949,170		$	3,709,630		$	3,819,176
Noncurrent assets		4,021,513			4,043,881			3,716,879
Current liabilities		(1,142,130	)		(1,287,597	)		(1,245,552	)
Noncurrent liabilities		(14,864	)		(22,003	)		(9,480	)

Equity	$	6,813,689		$	6,443,911		$	6,281,023

Equity attributable to CHI	$	2,333,689		$	2,207,039		$	2,151,250
Equity attributable to noncontrolling interests		4,480,000			4,236,872			4,129,773

	$	6,813,689		$	6,443,911		$	6,281,023


	Three Months Ended September 30					Nine Months Ended September 30
	2020		2019			2020			2019
Revenues and income	$	1,204,323	$	1,106,759		$	3,168,534		$	2,398,213
Costs and expenses		917,582		859,174			2,469,572			1,938,773

Profit for the period	$	286,741	$	247,585		$	698,962		$	459,440

Profit attributable to CHI	$	98,209	$	84,797		$	239,391		$	157,422
Profit attributable to noncontrolling interests		188,532		162,788			459,571			302,018

Profit for the period	$	286,741	$	247,585		$	698,962		$	459,440

Other comprehensive income (loss) attributable to CHI	$	443	$	(349	)	$	(443	)	$	(135	)
Other comprehensive income (loss) attributable to noncontrolling interests		851		(670	)		(851	)		(259	)

Other comprehensive income (loss) for the period	$	1,294	$	(1,019	)	$	(1,294	)	$	(394	)

Total comprehensive income attributable to CHI	$	98,652	$	84,448		$	238,948		$	157,287
Total comprehensive income attributable to noncontrolling interests		189,383		162,118			458,720			301,759

Total comprehensive income for the period	$	288,035	$	246,566		$	697,668		$	459,046

- 26 -


	Nine Months Ended September 30
	2020			2019
Net cash flow from operating activities	$	1,050,319		$	111,119
Net cash flow from investing activities		(296,387	)		(1,069,396	)
Net cash flow from financing activities		(344,264	)		(342,952	)
Effect of exchange rate changes on cash and cash equivalents		487			(776	)

Net cash inflow (outflow)	$	410,155		$	(1,302,005	)

Dividends paid to noncontrolling interests	$	215,591		$	215,591

Equity transactions with noncontrolling interests

CHIEF issued new shares in March 2020, March and November 2019 as its employees exercised options. Therefore, the Company’s equity ownership interest in CHIEF decreased. See Note 34(b) for details.

SENAO subscribed for all the shares in the capital increase of Youth in April 2020; therefore, the Company’s ownership interest in Youth increased.

IISI issued new shares in September 2020 as its employees exercised options; therefore, the Company’s ownership interest in IISI decreased. See Note 34(d) for details.

The above transactions were accounted for as equity transactions since the Company did not cease to have control over these subsidiaries.

Information of the Company’s equity transactions with noncontrolling interests for the nine months ended September 30, 2020 and 2019 were as follows:


	Nine Months Ended September 30, 2020
	CHIEF Share-Based Payment			SENAO Not Proportionately Participating in the Capital Increase of Youth			IISI Share-Based Payment
Cash consideration received from noncontrolling interests	$	71,627		$	—		$	6,755
The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests		(47,638	)		(103	)		(6,659	)

Differences arising from equity transactions	$	23,989		$	(103	)	$	96

Line items for equity transaction adjustments
Additional paid-in capital - arising from changes in equities of subsidiaries	$	23,989		$	(103	)	$	96

- 27 -


	Nine Months Ended September 30, 2019
	CHIEF Share-Based Payment
Cash consideration received from noncontrolling interests	$	14,328
The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests		(15,140	)

Differences arising from equity transactions	$	(812	)

Line items for equity transaction adjustments
Additional paid-in capital - arising from changes in equities of subsidiaries	$	(812	)

BUSINESS COMBINATIONS

Subsidiary acquired

In order to develop and cultivate the enterprise customer market, Chunghwa obtained 20.38% ownership interest in IISI by cash on July 1, 2020, the acquisition date. (Note) Chunghwa’s ownership interest in IISI increased to 51.54% by considering the previously held ownership interest in IISI. Chunghwa obtained over half of the seats of the Board of Directors of IISI; therefore, Chunghwa gained control over IISI and included IISI and its subsidiaries in the consolidated financial statements starting from the acquisition date. IISI mainly engages in information system development and maintenance service business, etc.

Note:

IISI issued new shares in April 2020 as its employees exercised options; therefore, the percentage of ownership interest in IISI obtained on the acquisition date is lower than that approved by Chunghwa’s Board of Directors in January 2020.

Assets acquired and liabilities assumed at acquisition date


	IISI and Its Subsidiaries
Current assets
Cash and cash equivalents	$	587,979
Contract assets		582,745
Trade notes and accounts receivable		165,452
Inventories		141,236
Prepayments		113,858
Other current monetary assets		113,724
Other current assets		74,757
Noncurrent assets
Property, plant and equipment		47,962
Right-of-use assets		70,007
Intangible assets		11,861

(Continued)

- 28 -


	IISI and Its Subsidiaries
Deferred income tax assets	$	5,665
Other noncurrent assets		102,519
Current liabilities
Short-term loans		(4,000	)
Contract liabilities		(333,533	)
Trade notes and accounts payable		(256,902	)
Current tax liabilities		(19,355	)
Lease liabilities		(25,941	)
Other payables		(265,901	)
Provisions		(15,258	)
Other current liabilities		(30,163	)
Noncurrent liabilities
Deferred income tax liabilities		(2,209	)
Lease liabilities		(44,964	)
Net defined benefit liabilities		(32,613	)
Other noncurrent liabilities		(4,843	)

	$	982,083

(Concluded)

The trade notes and accounts receivable acquired in business combination transactions have a fair value of $165,452 thousand and a gross contractual amount of $167,091 thousand. The best estimates of the contractual cash flows not expected to be collected as of the acquisition date are $1,639 thousand.

Goodwill arising from acquisition


	IISI and Its Subsidiaries
Consideration transferred	$	233,923
Add:Fair value of equity interest held before the acquisition date		327,287
Add:Noncontrolling interest (48.46% of the identifiable net assets of IISI and its subsidiaries)		475,879
Less:Fair value of identifiable net assets acquired		(982,083	)

Goodwill arising from acquisition	$	55,006

The goodwill arising from the acquisition of IISI mainly represents the control premium. In addition, the consideration paid for the combination included amounts attributed to the benefits of expected synergies and the assembled workforces of IISI. These benefits are not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

Goodwill arising from business combinations is not deductible for tax purposes.

- 29 -

Net cash inflow on acquisition of subsidiaries


	IISI and Its Subsidiaries
Cash and cash equivalents acquired	$	587,979
Less: Consideration paid in cash		(233,923	)

	$	354,056

Impact of acquisition on the financial results of the Company

The financial results of the acquiree since the acquisition date to September 30, 2020, which are included in the consolidated statements of comprehensive income, are as follows:


	IISI and Its Subsidiaries
Revenue	$	544,229

Profit	$	23,004

Had the business combination been in effect at the beginning of the annual reporting period, the Company’s revenue and profit would have been $149,124,887 thousand and $26,157,875 thousand for the nine months ended September 30, 2020, respectively. This pro-forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Company that actually would have been achieved had the acquisition been completed on January 1, 2020, nor is it intended to be a projection of future results.

In determining the pro-forma revenue and profit of the Company had IISI been acquired at the beginning of the financial year, the management calculated amortization of intangible assets acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognized in the pre-acquisition financial statements.

14.

INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments in associates were as follows:


	Carrying Amount
	September 30, 2020		December 31, 2019		September 30, 2019
Material associate
Next Commercial Bank Co., Ltd. (“NCB”) (Note)	$	3,932,953	$	4,074,168	$	—

Associates that are not individually material
Listed
Senao Networks, Inc. (“SNI”)		951,699		953,685		920,063
KingwayTek Technology Co., Ltd. (“KWT”)		241,665		253,021		251,556

(Continued)

- 30 -


	Carrying Amount
	September 30, 2020		December 31, 2019		September 30, 2019
Non-listed
ST-2 Satellite Ventures Pte., Ltd. (“STS”)	$	554,839	$	500,930	$	575,355
Viettel-CHT Co., Ltd. (“Viettel-CHT”)		341,047		316,535		301,623
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		318,167		272,166		249,298
So-net Entertainment Taiwan Limited (“So-net”)		220,102		189,396		169,008
Chunghwa PChome Fund I Co., Ltd. (“CPFI”)		194,378		194,081		195,316
KKBOX Taiwan Co., Ltd. (“KKBOXTW”)		162,206		150,789		147,440
Taiwan International Ports Logistics Corporation (“TIPL”)		55,190		50,979		50,870
Click Force Co., Ltd. (“CF”)		32,418		37,120		36,173
Cornerstone Ventures Co., Ltd. (“CVC”)		5,919		5,507		5,131
Alliance Digital Tech Co., Ltd. (“ADT”)		5,080		5,080		5,080
UUPON Inc. (“UUPON”)		2,307		10,529		10,473
International Integrated Systems, Inc. (“IISI”)		—		340,240		314,670
MeWorks Limited (HK) (“MeWorks”)		—		—		—

	3,085,017		3,280,058		3,232,056

	$7,017,970		$7,354,226		$3,232,056

(Concluded)

The percentages of ownership and voting rights in associates held by the Company as of balance sheet dates were as follows:


	% of Ownership Interests and Voting Rights
	September 30, 2020		December 31, 2019		September 30, 2019
Material associate
Next Commercial Bank Co., Ltd. (“NCB”) (Note)		42		42		—
Associates that are not individually material
Senao Networks, Inc. (“SNI”)		34		34		34
KingwayTek Technology Co., Ltd. (“KWT”)		23		23		22
ST-2 Satellite Ventures Pte., Ltd. (“STS”)		38		38		38
Viettel-CHT Co., Ltd. (“Viettel-CHT”)		30		30		30
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		40		40		40
So-net Entertainment Taiwan Limited (“So-net”)		30		30		30
Chunghwa PChome Fund I Co., Ltd. (“CPFI”)		50		50		50
KKBOX Taiwan Co., Ltd. (“KKBOXTW”)		30		30		30
Taiwan International Ports Logistics Corporation (“TIPL”)		27		27		27

(Continued)

- 31 -


	% of Ownership Interests and Voting Rights
	September 30, 2020		December 31, 2019		September 30, 2019
Click Force Co., Ltd. (“CF”)		49		49		49
Cornerstone Ventures Co., Ltd. (“CVC”)		49		49		49
Alliance Digital Tech Co., Ltd. (“ADT”)		14		14		14
UUPON Inc. (“UUPON”)		22		22		22
International Integrated Systems, Inc. (“IISI”)		—		31		31
MeWorks Limited (HK) (“MeWorks”)		—		20		20

(Concluded)

Note: NCB was a preparatory office on December 31, 2019.

Summarized financial information of NCB was set out below:


	September 30, 2020			December 31, 2019
Assets	$	9,971,758		$	10,451,925
Liabilities		(585,235	)		(728,374	)

Equity	$	9,386,523		$	9,723,551
The percentage of ownership interest held by the Company		41.90	%		41.90	%
Equity attributable to the Company and carrying amount of investment	$	3,932,953		$	4,074,168


	Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020
Revenues	$	—		$	—
Net loss for the period	$	(139,881	)	$	(337,028	)
Other comprehensive income		—			—

Total comprehensive loss for the period	$	(139,881	)	$	(337,028	)

Except for NCB, no associate is considered individually material to the Company. Summarized financial information of associates that are not individually material to the Company was as follows:


	Three Months Ended September 30						Nine Months Ended September 30
	2020			2019			2020			2019
The Company’s share of profits	$	164,622		$	195,449		$	412,147		$	412,500
The Company’s share of other comprehensive income (loss)		(1,565	)		(17	)		(2,075	)		299

The Company’s share of total comprehensive income	$	163,057		$	195,432		$	410,072		$	412,799

- 32 -

The Level 1 fair values of associates based on the closing market prices as of the balance sheet dates were as follows:


	September 30, 2020		December 31, 2019		September 30, 2019
SNI	$	1,472,218	$	2,014,353	$	1,873,431

KWT	$	687,206	$	872,729	$	979,353

The participation of establishing NCB was approved by Chunghwa’s Board of Directors in January 2019. The establishment of NCB was approved by the FSC in July 2019 and the incorporation of NCB was approved by the Ministry of Economic Affairs Department of Commerce in January 2020. Chunghwa prepaid investment funds to NCB in February and November 2019 amounting to $4,190,000 thousand (included in other assets), for ownership interest of 41.90%. Although Chunghwa is the single largest stockholder of NCB, it only obtained six out of fifteen seats of the Board of Directors of NCB. In addition, the management considered the size of ownership interest and the dispersion of shares owned by the other stockholders, other holdings are not extremely dispersed. Chunghwa is not able to dominate its relevant activities. Therefore, Chunghwa does not have control over NCB and merely has significant influence over NCB and treats it as an associate. NCB mainly engages in online banking business in Taiwan.

The Company disposed some shares of KWT in April 2019 before KWT traded its shares on the General Stock Market of the Taipei Exchange according to the local requirements and recognized disposal gain of $30,152 thousand. In addition, the Company did not participate in the capital increase of KWT in May 2019 and KWT repurchased its stock from December 2019 to February 2020. Therefore, the Company’s ownership interest in KWT changed to 22.52% and 22.72% as of December 31, 2019 and September 30, 2020, respectively.

IISI issued new shares in March, September 2019 and April 2020, as its employees exercised options; therefore, the Company’s ownership interest in IISI decreased to 31.47% and 31.16% as of December 31, 2019 and June 30, 2020, respectively. The additional investment of 20.58% ownership interest in IISI was approved by Chunghwa’s Board of Directors in January 2020 and the equity transaction was completed in July 2020. As the business combination was achieved in stages, the Company remeasured the previously held equity interest of IISI and recognized disposal gain of $1,412 thousand under “other gains and losses” on the consolidated statements of comprehensive income. The Company treated IISI as a subsidiary starting from the acquisition date and included IISI and its subsidiaries in consolidated financial statements. Please refer to note 13(c).

UUPON reduced its capital to offset accumulated deficits in September 2020. The capital reduction ratio was 95.44%. The Company’s ownership interest in UUPON remained unchanged.

The Company disposed all shares of MeWorks in September 2020.

The Company invested and obtained 50% equity shares of CPFI. However, as the Company has only two out of five seats of the Board of Directors of CPFI and has no control but significant influence over CPFI, the Company recognized CPFI as an investment in associate.

The Company invested and obtained 49% equity shares of CVC. However, as the Company has only two out of five seats of the Board of Directors of CVC and has no control but significant influence over CVC. Therefore, the Company recognized CVC as an investment in associate.

The Company owns 14% equity shares of ADT. As the Company remains its seat in the Board of Directors of ADT and considers the relative size of ownership interest and the dispersion of shares owned by the other stockholders, the Company has significant influence over ADT. In June 2018, the stockholders of ADT approved to dissolve. The liquidation of ADT is still in process.

- 33 -

The Company’s share of profits and other comprehensive income (loss) of associates was recognized based on the reviewed financial statements.

15.

PROPERTY, PLANT AND EQUIPMENT


	September 30, 2020		December 31, 2019		September 30, 2019
Assets used by the Company	$	271,452,524	$	276,370,003	$	274,337,903
Assets subject to operating leases		7,789,154		7,324,212		7,770,224

	$	279,241,678	$	283,694,215	$	282,108,127

Assets used by the Company


	Land			Land Improvements			Buildings			Computer Equipment			Telecommuni- cations Equipment			Transportation Equipment			Miscellaneous Equipment			Construction in Progress and Equipment to be Accepted			Total
Cost
Balance on January 1, 2019	$	100,354,425		$	1,599,634		$	69,328,236		$	14,258,485		$	711,863,697		$	3,882,534		$	9,873,589		$	18,644,766		$	929,805,366
Additions		—			—			12,857			36,536			74,375			1,118			46,043			14,577,257			14,748,186
Disposal		(28,641	)		—			(3,101	)		(778,818	)		(25,854,514	)		(24,330	)		(278,941	)		—			(26,968,345	)
Effect of foreign exchange differences		—			—			—			55			18,736			64			(216	)		(26	)		18,613
Others		(1,229,480	)		11,272			(1,015,551	)		174,946			15,714,115			60,571			252,180			(16,212,384	)		(2,244,331	)

Balance on September 30, 2019	$	99,096,304		$	1,610,906		$	68,322,441		$	13,691,204		$	701,816,409		$	3,919,957		$	9,892,655		$	17,009,613		$	915,359,489

Accumulated depreciation and impairment
Balance on January 1, 2019	$	—		$	(1,337,192	)	$	(26,861,627	)	$	(12,143,307	)	$	(596,850,343	)	$	(3,651,139	)	$	(7,291,742	)	$	—		$	(648,135,350	)
Depreciation expenses		—			(32,297	)		(955,977	)		(626,361	)		(17,917,740	)		(72,206	)		(514,733	)		—			(20,119,314	)
Disposal		—			—			3,101			772,552			25,825,485			24,327			277,065			—			26,902,530
Effect of foreign exchange differences		—			—			—			(34	)		(6,191	)		(24	)		483			—			(5,766	)
Others		—			(543	)		365,072			(6,877	)		(2,332	)		(2,421	)		(16,585	)		—			336,314

Balance on September 30, 2019	$	—		$	(1,370,032	)	$	(27,449,431	)	$	(12,004,027	)	$	(588,951,121	)	$	(3,701,463	)	$	(7,545,512	)	$	—		$	(641,021,586	)

Balance on January 1, 2019, net	$	100,354,425		$	262,442		$	42,466,609		$	2,115,178		$	115,013,354		$	231,395		$	2,581,847		$	18,644,766		$	281,670,016

Balance on September 30, 2019, net	$	99,096,304		$	240,874		$	40,873,010		$	1,687,177		$	112,865,288		$	218,494		$	2,347,143		$	17,009,613		$	274,337,903

Cost
Balance on January 1, 2020	$	99,102,251		$	1,618,481		$	71,000,783		$	13,004,827		$	706,032,448		$	3,912,298		$	10,090,170		$	13,752,197		$	918,513,455
Additions		—			—			15,906			29,595			26,676			579			107,061			15,678,819			15,858,636
Disposal		(106,039	)		(567	)		(3,761	)		(1,080,083	)		(11,570,597	)		(30,354	)		(376,226	)		(29,358	)		(13,196,985	)
Effect of foreign exchange differences		—			—			—			(74	)		(48,352	)		(134	)		(973	)		(3,948	)		(53,481	)
Acquired by business combinations (Note 13)		—			—			—			69,814			—						72,400						142,214
Others		3,110,637			16,036			(442,732	)		227,150			17,601,765			14,809			240,939			(21,373,415	)		(604,811	)

Balance on September 30, 2020	$	102,106,849		$	1,633,950		$	70,570,196		$	12,251,229		$	712,041,940		$	3,897,198		$	10,133,371		$	8,024,295		$	920,659,028

Accumulated depreciation and impairment
Balance on January 1, 2020	$	—		$	(1,374,602	)	$	(27,976,732	)	$	(11,068,245	)	$	(590,337,891	)	$	(3,694,325	)	$	(7,662,299	)	$	(29,358	)	$	(642,143,452	)
Depreciation expenses		—			(32,881	)		(1,019,795	)		(584,065	)		(17,968,611	)		(52,482	)		(497,502	)		—			(20,155,336	)
Disposal		—			567			3,761			1,078,883			11,556,712			30,039			367,191			29,358			13,066,511
Effect of foreign exchange differences		—			—			—			72			21,827			33			686			—			22,618
Acquired by business combinations (Note 13)		—			—			—			(40,282	)		—			—			(53,970	)		—			(94,252	)
Others		—			13			123,206			(3,653	)		21,232			(894	)		(42,497	)		—			97,407

Balance on September 30, 2020	$	—		$	(1,406,903	)	$	(28,869,560	)	$	(10,617,290	)	$	(596,706,731	)	$	(3,717,629	)	$	(7,888,391	)	$	—		$	(649,206,504	)

Balance on January 1, 2020, net	$	99,102,251		$	243,879		$	43,024,051		$	1,936,582		$	115,694,557		$	217,973		$	2,427,871		$	13,722,839		$	276,370,003

Balance on September 30, 2020, net	$	102,106,849		$	227,047		$	41,700,636		$	1,633,939		$	115,335,209		$	179,569		$	2,244,980		$	8,024,295		$	271,452,524

There was no indication that property, plant and equipment was impaired, so the Company did not recognize any impairment loss for the nine months ended September 30, 2020 and 2019.

- 34 -

Chunghwa signed a joint development agreement with the MOTC previously which stated that the MOTC would provide the national land and Chunghwa would be in charge of the planning and construction for the MOTC’s office building, Chunghwa’s Renai office building, etc. According to the agreement, the MOTC and Chunghwa would each own a certain percentage of the buildings, and Chunghwa is to pay or get the reimbursement for the difference between the assessed value of the land and the construction cost paid by Chunghwa on behalf of the MOTC. The difference amounting to $1,056,680 thousand due to the MOTC was reported to Chunghwa’s Board of Directors in May 2020 and Chunghwa will complete the property registration of the respective asset once the payment is made. Please refer to Table 3 for the details.

Depreciation expense for assets used by the Company is computed using the straight-line method over the following estimated service lives:


Land improvements			10-30 years
Buildings
Main buildings			20-60 years
Other building facilities			3-15 years
Computer equipment			2-8 years
Telecommunications equipment
Telecommunication circuits			2-30 years
Telecommunication machinery and antennas equipment			2-30 years
Transportation equipment			3-10 years
Miscellaneous equipment
Leasehold improvements			1-9 years
Mechanical and air conditioner equipment			1-16 years
Others			1-15 years

Assets subject to operating leases


	Land		Land Improvements			Buildings			Total
Cost
Balance on January 1, 2019	$	3,617,627	$	689		$	3,582,774		$	7,201,090
Additions		—		—			4,284			4,284
Others		1,229,480		(689	)		1,008,444			2,237,235

Balance on September 30, 2019	$	4,847,107	$	—		$	4,595,502		$	9,442,609

Accumulated depreciation and impairment
Balance on January 1, 2019	$	—	$	(512	)	$	(1,265,356	)	$	(1,265,868	)
Depreciation expenses		—		(31	)		(64,750	)		(64,781	)
Others		—		543			(342,279	)		(341,736	)

Balance on September 30, 2019	$	—	$	—		$	(1,672,385	)	$	(1,672,385	)

Balance on January 1, 2019, net	$	3,617,627	$	177		$	2,317,418		$	5,935,222

Balance on September 30, 2019, net	$	4,847,107	$	—		$	2,923,117		$	7,770,224

(Continued)

- 35 -


	Land		Land Improvements		Buildings			Total
Cost
Balance on January 1, 2020	$	4,979,650	$	—	$	3,841,560		$	8,821,210
Others		99,219		—		544,834			644,053

Balance on September 30, 2020	$	5,078,869	$	—	$	4,386,394		$	9,465,263

Accumulated depreciation and impairment
Balance on January 1, 2020	$	—	$	—	$	(1,496,998	)	$	(1,496,998	)
Depreciation expenses		—		—		(66,378	)		(66,378	)
Others		—		—		(112,733	)		(112,733	)

Balance on September 30, 2020	$	—	$	—	$	(1,676,109	)	$	(1,676,109	)

Balance on January 1, 2020, net	$	4,979,650	$	—	$	2,344,562		$	7,324,212

Balance on September 30, 2020, net	$	5,078,869	$	—	$	2,710,285		$	7,789,154

(Concluded)

The Company leases out land and buildings with lease terms between 1 to 20 years. The lessees do not have bargain purchase options to acquire the assets at the expiry of the lease periods.

The future aggregate lease collection under operating lease for the freehold plant, property and equipment was as follows:


	September 30, 2020		December 31, 2019		September 30, 2019
Year 1	$	339,491	$	301,674	$	305,593
Year 2		295,583		272,899		257,654
Year 3		234,338		233,434		232,656
Year 4		177,560		191,128		193,882
Year 5		124,478		130,066		145,573
Onwards		1,207,181		1,224,416		1,245,923

	$	2,378,631	$	2,353,617	$	2,381,281

The above items of property, plant and equipment subject to operating leases are depreciated on a straight-line basis over their estimated useful lives as follows:


Land improvements			10 years
Buildings
Main buildings			35-60 years
Other building facilities			3-15 years

- 36 -

16.

LEASE ARRANGEMENTS

Right-of-use assets


	September 30, 2020		December 31, 2019		September 30, 2019
Land and buildings
Handsets base stations	$	7,065,729	$	6,844,687	$	6,895,757
Others		1,788,733		1,916,835		1,754,009
Equipment		2,304,886		2,602,727		2,701,013

	$	11,159,348	$	11,364,249	$	11,350,779


	Three Months Ended September 30, 2020				Nine Months Ended September 30, 2020
	2020		2019		2020		2019
Additions to right-of-use assets					$	2,892,908	$	2,671,187

Depreciation charge for right-of-use assets
Land and buildings
Handsets base stations	$	683,732	$	689,311	$	2,041,451	$	2,037,060
Others		201,142		205,489		594,220		614,508
Equipment		104,082		104,644		312,088		313,783

	$	988,956	$	999,444	$	2,947,759	$	2,965,351

The Company did not have significant sublease or impairment of right-of-use assets for the nine months ended September 30, 2020 and 2019.

Lease liabilities


	September 30, 2020		December 31, 2019		September 30, 2019
Lease liabilities
Current	$	3,272,130	$	3,291,330	$	3,247,553
Noncurrent		6,300,425		6,466,808		6,339,175

	$	9,572,555	$	9,758,138	$	9,586,728

Ranges of discount rates for lease liabilities are as follows:


	September 30, 2020			December 31, 2019			September 30, 2019
Land and buildings
Handsets base stations		0.50	%-1.18%		0.58	%-1.18%		0.58	%-1.18%
Others		0.50	%-9.00%		0.58	%-9.00%		0.58	%-9.00%
Equipment		0.52	%-2.99%		0.58	%-4.50%		0.59	%-4.50%

- 37 -

Important lease-in activities and terms

The Company mainly enters into lease-in agreements of land and buildings for handsets base stations located throughout Taiwan with lease terms ranging from 1 to 20 years. The lease agreements do not contain bargain purchase options to acquire the assets at the expiration of the respective leases. For majority of the lease-in agreements on handsets base station, the Company has the right to terminate the agreement prior to the expiration date if the Company is unable to build the required telecommunication equipment, either due to legal restrictions, controversial events, or other events.

The Company also leases land and buildings for the use of offices, server rooms, and stores with lease terms from 1 to 30 years. Most of the lease agreements for national land adjust the lease payment according to the changes of the announced land values by the authority. At the expiry of the lease term, the Company does not have bargain purchase options to acquire the assets.

The lease agreements for equipment include a contract between Chunghwa and ST-2 Satellite Ventures Pte., Ltd. on March 12, 2010 to lease capacity on the ST-2 satellite. For the information of lease agreements with related parties, please refer to Note 38 to the consolidated financial statements for details.

Other lease information


	Three Months Ended September 30, 2020				Nine Months Ended September 30, 2020
	2020		2019		2020		2019
Expenses relating to low-value asset leases	$	2,378	$	1,797	$	5,926	$	4,782

Expenses relating to variable lease payments not included in the measurement of lease liabilities	$	1,391	$	2,107	$	3,841	$	4,510

Total cash outflow for leases					$	2,933,976	$	2,968,915

The Company leases certain equipment which qualify as low-value asset leases. The Company has elected to apply the recognition exemption and, thus, not to recognize right-of-use assets and lease liabilities for these leases.

Lease-out arrangements under operating leases for freehold property, plant, and equipment and investment properties were set out in Notes 15 and 17 to the consolidated financial statements.

17.

INVESTMENT PROPERTIES


Cost
Balance on January 1, 2019	$	9,392,452
Disposal		(5,831	)

Balance on September 30, 2019	$	9,386,621


		(Continued	)

- 38 -


Accumulated depreciation and impairment
Balance on January 1, 2019	$	(1,105,240	)
Depreciation expense		(20,025	)
Disposal		5,831

Balance on September 30, 2019	$	(1,119,434	)

Balance on January 1, 2019, net	$	8,287,212

Balance on September 30, 2019, net	$	8,267,187

Cost
Balance on January 1, 2020	$	9,213,979
Additions		54,435
Disposal		(36,943	)
Reclassification		1,277

Balance on September 30, 2020	$	9,232,748

Accumulated depreciation and impairment
Balance on January 1, 2020	$	(1,044,586	)
Depreciation expense		(15,390	)
Reclassification		(1,277	)

Balance on September 30, 2020	$	(1,061,253	)

Balance on January 1, 2020, net	$	8,169,393

Balance on September 30, 2020, net	$	8,171,495

		(Concluded	)

Depreciation expense is computed using the straight-line method over the following estimated service lives:


Land improvements			10-30 years
Buildings
Main buildings			35-60 years
Other building facilities			4-10 years

The fair values of the Company’s investment properties as of December 31, 2019 and 2018 were determined by Level 3 fair value measurements inputs based on the appraisal reports conducted by independent appraisers. The Company used the aforementioned appraisal reports as the basis to determine the fair values as of September 30, 2020 and 2019 because there was no material change in the economic environment or the market transaction price. Those appraisal reports are based on the comparison approach, income approach or cost approach. Key assumptions and the fair values were as follows:

- 39 -


	September 30, 2020		December 31, 2019		September 30, 2019
Fair value	$	18,701,398	$	18,701,398	$	18,514,801

Overall capital interest rate		1.03%-4.04%		1.03%-4.04%		1.02%-4.04%
Profit margin ratio		12%-20%		12%-20%		12%-20%
Discount rate		—		—		—
Capitalization rate		0.79%-1.74%		0.79%-1.74%		0.79%-1.75%

All of the Company’s investment properties are held under freehold interest.

The future aggregate lease collection under operating lease for investment properties is as follows:


	September 30, 2020		December 31, 2019		September 30, 2019
Year 1	$	108,915	$	112,626	$	115,191
Year 2		89,548		90,701		95,189
Year 3		71,720		70,795		76,280
Year 4		51,324		61,115		63,022
Year 5		32,902		39,386		45,885
Onwards		59,387		96,010		103,160

	$	413,796	$	470,633	$	498,727

18.

INTANGIBLE ASSETS


	Mobile Broadband Concession			Computer Software			Goodwill			Others			Total
Cost
Balance on January 1, 2019	$	70,144,000		$	3,425,969		$	236,200		$	373,203		$	74,179,372
Additions-acquired separately		—			164,375			—			3,218			167,593
Disposal		(10,179,000	)		(329,027	)		—			(157	)		(10,508,184	)
Effect of foreign exchange differences		—			90			—			(69	)		21
Others		—			247			—			—			247

Balance on September 30, 2019	$	59,965,000		$	3,261,654		$	236,200		$	376,195		$	63,839,049

Accumulated amortization and impairment
Balance on January 1, 2019	$	(20,632,474	)	$	(2,467,170	)	$	(26,677	)	$	(109,369	)	$	(23,235,690	)
Amortization expenses		(2,879,679	)		(293,218	)		—			(18,352	)		(3,191,249	)
Disposal		10,179,000			329,027			—			11			10,508,038
Effect of foreign exchange differences		—			(91	)		—			26			(65	)

Balance on September 30, 2019	$	(13,333,153	)	$	(2,431,452	)	$	(26,677	)	$	(127,684	)	$	(15,918,966	)

Balance on January 1, 2019, net	$	49,511,526		$	958,799		$	209,523		$	263,834		$	50,943,682

Balance on September 30, 2019, net	$	46,631,847		$	830,202		$	209,523		$	248,511		$	47,920,083

(Continued)

- 40 -


	Mobile Broadband Concession			Computer Software			Goodwill			Others			Total
Cost
Balance on January 1, 2020	$	59,965,000		$	3,428,609		$	236,200		$	378,063		$	64,007,872
Additions-acquired separately		48,373,000			170,054			—			3,986			48,547,040
Disposal		—			(318,939	)		—			(3,040	)		(321,979	)
Effect of foreign exchange differences		—			(84	)		—			(60	)		(144	)
Acquired by business combinations (Note 13)		—			1,259			55,006			11,043			67,308
Others		—			1,586			—			(43	)		1,543

Balance on September 30, 2020	$	108,338,000		$	3,282,485		$	291,206		$	389,949		$	112,301,640

Accumulated amortization and impairment
Balance on January 1, 2020	$	(14,293,046	)	$	(2,498,825	)	$	(35,623	)	$	(133,853	)	$	(16,961,347	)
Amortization expenses		(3,476,068	)		(278,543	)		—			(19,636	)		(3,774,247	)
Disposal		—			318,939			—			1,196			320,135
Effect of foreign exchange differences		—			75			—			17			92
Acquired by business combinations (Note 13)		—			(441	)		—			—			(441	)

Balance on September 30, 2020	$	(17,769,114	)	$	(2,458,795	)	$	(35,623	)	$	(152,276	)	$	(20,415,808	)

Balance on January 1, 2020, net	$	45,671,954		$	929,784		$	200,577		$	244,210		$	47,046,525

Balance on September 30, 2020, net	$	90,568,886		$	823,690		$	255,583		$	237,673		$	91,885,832

(Concluded)

For long-term business development, Chunghwa participated in the 5G mobile broadband license bidding hosted by the NCC and paid the deposit for 5G spectrum bidding amounting to $1,000,000 thousand (included in other assets) in October 2019. Chunghwa paid $48,373,000 thousand in February 2020 for the aforementioned license to obtain 90MHz in the 3.5GHz spectrum and 600MHz in the 28GHz spectrum.

The concessions are granted and issued by the NCC. The concession fees are amortized using the straight-line method over the period from the date operations commence through the date the license expires or the useful life, whichever is shorter. The 4G concession fees will be fully amortized by December 2030 and December 2033 and 5G concession fees will be fully amortized by December 2040.

The computer software is amortized using the straight-line method over the estimated useful lives of 1 to 10 years. Other intangible assets are amortized using the straight-line method over the estimated useful lives of 1 to 20 years. Goodwill is not amortized.

19.

OTHER ASSETS


	September 30, 2020		December 31, 2019		September 30, 2019
Spare parts	$	3,200,426	$	2,336,082	$	2,328,662
Refundable deposits		1,824,654		1,879,109		1,788,380
Other financial assets		1,000,000		1,000,000		1,000,000
Prepayment for investments (Note 14)		—		—		838,000

(Continued)

- 41 -


	September 30, 2020		December 31, 2019		September 30, 2019
Deposit for mobile broadband license bidding (Note 18)	$	—	$	1,000,000	$	—
Others		2,532,695		2,316,177		2,430,663

	$	8,557,775	$	8,531,368	$	8,385,705

Current
Spare parts	$	3,200,426	$	2,336,082	$	2,328,662
Others		166,198		93,582		168,048

	$	3,366,624	$	2,429,664	$	2,496,710

Noncurrent
Refundable deposits	$	1,824,654	$	1,879,109	$	1,788,380
Other financial assets		1,000,000		1,000,000		1,000,000
Prepayment for investments		—		—		838,000
Deposit for mobile broadband license bidding		—		1,000,000		—
Others		2,366,497		2,222,595		2,262,615

	$	5,191,151	$	6,101,704	$	5,888,995

(Concluded)

Other financial assets—noncurrent was Piping Fund. As part of the government’s effort to upgrade the existing telecommunications infrastructure, Chunghwa and other public utility companies were required by the ROC government to contribute to a Piping Fund administered by the Taipei City Government. This fund was used to finance various telecommunications infrastructure projects. Net assets of this fund will be returned proportionately after the project is completed.

20.

HEDGING FINANCIAL INSTRUMENTS

Chunghwa’s hedge strategy is to enter into forward exchange contracts—buy to avoid its foreign currency exposure to certain foreign currency denominated equipment payments in the following six months. In addition, Chunghwa’s management considers the market condition to determine the hedge ratio and enters into forward exchange contracts with the banks to avoid the foreign currency risk.

Chunghwa signed equipment purchase contracts with suppliers and entered into forward exchange contracts to avoid foreign currency risk exposure to Euro-denominated purchase commitments. Those forward exchange contracts were designated as cash flow hedges. When forecast purchases actually take place, basis adjustments are made to the initial carrying amounts of hedged items.

For the hedges of highly probable forecast sales and purchases, as the critical terms (i.e. the notional amount, life and underlying) of the forward foreign exchange contracts and their corresponding hedged items are the same, the Company performs a qualitative assessment of effectiveness and it is expected that the value of the forward contracts and the value of the corresponding hedged items will systematically change in opposite direction in response to movements in the underlying exchange rates.

- 42 -

The main source of hedge ineffectiveness in these hedging relationships is the effect of credit risks of the Company and the counterparty on the fair value of the forward exchange contracts. Such credit risks do not impact the fair value of the hedged item attributable to changes in foreign exchange rates. No other sources of ineffectiveness emerged from these hedging relationships.

The following tables summarized the information relating to the hedges for foreign currency risk.

September 30, 2020

Notional
Amount

Forward

Line Item in

Carrying
Amount

Change in
Fair Values of
Hedging
Instruments
Used for
Calculating
Hedge

Hedging Instruments

Currency

(In Thousands)

Maturity

Rate

Balance Sheet

Asset

Liability

Ineffectiveness

Cash flow hedge

Forecast purchases—forward exchange contracts

EUR/NT$

EUR 13,000/
NT$ 435,843

2020.12

33.53

Hedging financial
assets (liabilities)

7,841

—

7,514


	Change in Value of Hedged Item Used for Calculating Hedge Ineffectiveness			Accumulated Gain or Loss on Hedging Instruments in Other Equity
Hedged Items				Continuing Hedges		Hedge Accounting no Longer Applied
Cash flow hedge
Forecast equipment purchases	$	(7,514	)	$	7,841	$	—

December 31, 2019

Notional Amount

Forward

Line Item in

Carrying Amount

Change in Fair
Values of
Hedging
Instruments Used
for Calculating
Hedge

Hedging Instruments

Currency

(In Thousands)

Maturity

Rate

Balance Sheet

Asset

Liability

Ineffectiveness

Cash flow hedge

Forecast purchases—forward exchange contracts

EUR/NT$

EUR 2,498/
NT$ 84,066

2020.03

33.66

Hedging
financial
assets
(liabilities)

327

—

(742

)


	Change in Value of Hedged Item Used for Calculating Hedge Ineffectiveness		Accumulated Gain or Loss on Hedging Instruments in Other Equity
Hedged Items			Continuing Hedges		Hedge Accounting No Longer Applied
Cash flow hedge
Forecast equipment purchases	$	742	$	327	$	—

There is no outstanding forward exchange contract designated for hedge on September 30, 2019.

- 43 -

Nine months ended September 30, 2020

Comprehensive Income

Reclassification from Equity
to Profit or Loss and the Adjusted
Line Item

Hedge Transaction

Hedging
Gain or
Losses
Recognized
in OCI

Amount of
Hedge
Ineffectiveness
Recognized in
Profit or Loss

Line Item in
Which Hedge
Ineffectiveness
is

Included

Amount
Reclassified to
P/L and the
Adjusted Line
Item

Due to Hedged
Future Cash
Flows No
Longer

Expected to
Occur

Cash flow hedge

Forecast equipment purchases

7,514

—

10,050

Construction in
progress and
equipment to be
accepted

—

Other gains
and losses

Nine months ended September 30, 2019


	Comprehensive Income
								Reclassification from Equity to Profit or Loss and the Adjusted Line Item
Hedge Transaction	Hedging Gain or Loss Recognized in OCI			Amount of Hedge Ineffectiveness Recognized in Profit or Loss		Line Item in Which Hedge Ineffectiveness is Included		Amount Reclassified to P/L and the Adjusted Line Item			Due to Hedged Future Cash Flows No Longer Expected to Occur
Cash flow hedge
Forecast equipment purchases	$	(1,069	)	$	—		—	$	(1,766 Construction in progress and equipment to be accepted	)	$	— Other gains and losses

21.

SHORT-TERM LOANS


	September 30, 2020		December 31, 2019		September 30, 2019
Unsecured bank loans	$	75,000	$	90,000	$	90,000

The annual interest rates of bank loans were as follows:


	September 30, 2020	December 31, 2019	September 30, 2019
Unsecured bank loans	1.12%-2.33%	1.20%-2.50%	1.20%-2.50%

- 44 -

22. SHORT-TERM BILLS PAYABLE


	September 30, 2020			December 31, 2019		September 30, 2019
Commercial paper payable		$12,000,000			$—		$—
Less: Discounts on commercial paper payable		(9,171	)		—		—

	$	11,990,829		$	—	$	—

The annual interest rates of commercial paper payable were as follows:


	September 30, 2020	December 31, 2019	September 30, 2019
Commercial paper payable	0.37%-0.40%	—	—

23.

LONG-TERM LOANS


	September 30, 2020			December 31, 2019		September 30, 2019
Secured bank loans (Note 39)		$1,600,000			$1,600,000		$1,600,000
Less: Current portion		(1,600,000	)		—		—

	$	—		$	1,600,000	$	1,600,000

The annual interest rates of loans were as follows:


	September 30, 2020	December 31, 2019	September 30, 2019
Secured bank loans	0.72%	0.92%	0.92%

LED obtained a secured loan from Chang Hwa Bank in September 2010. Interest is paid monthly. $300,000 thousand and $1,350,000 thousand were originally due in December 2014 and September 2015, respectively. In October 2014, the bank borrowing mentioned above was extended to September 2018 for one-time repayment. LED made an early repayment of $50,000 thousand in April 2015. LED entered into a contract with Chang Hwa Bank to renew the contract upon the maturity of the aforementioned contract in December 2017 and the due date of the renew contract is September 2021.

24.

Bonds Payable


	September 30, 2020			December 31, 2019		September 30, 2019
Unsecured domestic bonds	$	20,000,000		$	—	$	—
Less: Discounts on bonds payable		(20,527	)		—		—

	$	19,979,473		$	—	$	—

- 45 -

The major terms of unsecured domestic bonds issued by Chunghwa were as follows:


Issuance	Tranche		Issuance Period		Total Amount		Coupon Rate			Repayment and Interest Payment
2020—1		A		July 2020 to July 2025	$	8,800,000		0.50	%	One-time repayment upon maturity; interest payable annually
		B		July 2020 to July 2027		7,500,000		0.54	%	The same as above
		C		July 2020 to July 2030		3,700,000		0.59	%	The same as above

25.

TRADE NOTES AND ACCOUNTS PAYABLE


	September 30, 2020		December 31, 2019		September 30, 2019
Trade notes and accounts payable	$	13,256,209	$	15,312,274	$	16,932,170

Trade notes and accounts payable were attributable to operating activities and the trading conditions were agreed separately.

26.

OTHER PAYABLES


	September 30, 2020		December 31, 2019		September 30, 2019
Accrued salary and compensation	$	7,440,890	$	9,482,606	$	7,385,472
Payables to contractors		2,290,469		1,892,188		1,176,504
Accrued compensation to employees and remuneration to directors and supervisors		1,314,633		1,440,573		1,152,002
Amounts collected for others		1,264,053		1,278,796		1,414,354
Payable on land (Note 15)		1,056,680		—		—
Accrued maintenance costs		884,601		954,761		1,163,052
Accrued franchise fees		785,169		1,091,148		824,985
Payables to equipment suppliers		725,746		295,816		404,978
Others		6,427,255		6,516,600		6,571,033

	$	22,189,496	$	22,952,488	$	20,092,380

27.

PROVISIONS


	September 30, 2020		December 31, 2019		September 30, 2019
Warranties	$	176,268	$	173,275	$	157,237
Onerous contracts		101,372		66,907		117,433
Employee benefits		63,882		59,745		54,881
Others		4,097		4,397		4,397

	$	345,619	$	304,324	$	333,948

(Continued)

- 46 -


	September 30, 2020		December 31, 2019		September 30, 2019
Current	$	240,296	$	206,942	$	248,858
Noncurrent		105,323		97,382		85,090

	$	345,619	$	304,324	$	333,948

(Concluded)


	Warranties			Onerous contracts		Employee Benefits			Others			Total
Balance on January 1, 2019	$	131,664		$	19,323	$	51,393		$	4,447		$	206,827
Additional		89,022			98,110		4,330			—			191,462
Used / forfeited during the period		(63,449	)		—		(842	)		(50	)		(64,341	)

Balance on September 30, 2019	$	157,237		$	117,433	$	54,881		$	4,397		$	333,948

Balance on January 1, 2020	$	173,275		$	66,907	$	59,745		$	4,397		$	304,324
Additional / (reversal of) provisions recognized		104,321			19,207		4,831			(200	)		128,159
Used / forfeited during the period		(101,328	)		—		(694	)		(100	)		(102,122	)
Acquired by business combinations (Note 13)		—			15,258		—			—			15,258

Balance on September 30, 2020	$	176,268		$	101,372	$	63,882		$	4,097		$	345,619

The provision for warranty claims represents the present value of the management’s best estimate of the future outflow of economic benefits that will be required under the Company’s obligation for warranties in sales agreements. The estimate has been made based on historical warranty experience.

The provision for employee benefits represents vested long-term service compensation accrued.

The provision for onerous contracts represents the present obligation resulting from the measurement for the unavoidable costs of meeting the Company’s contractual obligations exceed the economic benefits expected to be received from the contracts.

28.

RETIREMENT BENEFIT PLANS

According to the Article 56 of the Labor Standards Law, entities are required to contribute the difference in one appropriation to their pension funds before the end of next March when the balance of the Funds is insufficient to pay the eligible employees who meet the retirement criteria in the following year. There is no additional amount that Chunghwa was required to contribute into the Fund in 2020 and 2019.

Relevant pension costs for defined benefit plans which were determined by the pension cost rates of actuarial valuation as of December 31, 2019 and 2018 were as follows:


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Operating costs	$	301,420	$	429,939	$	904,216	$	1,295,094
Marketing expenses		151,073		217,992		452,231		649,579

(Continued)

- 47 -


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
General and administrative expenses	$	30,395	$	41,124	$	90,368	$	122,109
Research and development expenses		18,175		25,635		54,183		77,920

	$	501,063	$	714,690	$	1,500,998	$	2,144,702

(Concluded)

29.

EQUITY

Share capital

Common stocks


	September 30, 2020		December 31, 2019		September 30, 2019
Number of authorized shares (thousand)		12,000,000		12,000,000		12,000,000

Authorized shares	$	120,000,000	$	120,000,000	$	120,000,000

Number of issued and paid shares (thousand)		7,757,447		7,757,447		7,757,447

Issued shares	$	77,574,465	$	77,574,465	$	77,574,465

Each issued common stock with par value of $10 per share is entitled the right to vote and receive dividends.

Global depositary receipts

The MOTC and some stockholders sold some common stocks of Chunghwa in an international offering of securities in the form of American Depositary Shares (“ADS”) (one ADS represents 10 common stocks) in July 2003, August 2005, and September 2006. The ADSs were traded on the New York Stock Exchange since July 17, 2003. As of September 30, 2020, the outstanding ADSs were 226,662 thousand common stocks, which equaled 22,666 thousand units and represented 2.92% of Chunghwa’s total outstanding common stocks.

The ADS holders generally have the same rights and obligations as other common stockholders, subject to the provision of relevant laws. The exercise of such rights and obligations shall comply with the related regulations and deposit agreement, which stipulate, among other things, that ADS holders are entitled to, through deposit agents:

a) Exercise their voting rights,

b) Sell their ADSs, and

c) Receive dividends declared and subscribe to the issuance of new shares.

- 48 -

Additional paid-in capital

The adjustments of additional paid-in capital for the nine months ended September 30, 2020 and 2019 were as follows:


	Share Premium		Movements of Additional Paid-in Capital for Associates Accounted for Using Equity Method			Movements of Additional Paid-in Capital Arising from Changes in Equities of Subsidiaries			Difference between Consideration Received and Carrying Amount of the Subsidiaries’ Net Assets upon Disposal		Donated Capital		Stockholders’ Contribution due to Privatization		Total
Balance on January 1, 2019	$	147,329,386	$	89,893		$	2,063,148		$	987,611	$	18,648	$	20,648,078	$	171,136,764
Unclaimed dividend		—		—			—			—		1,314		—		1,314
Change in additional paid-in capital from investments in associates accounted for using equity method		—		119,922			—			—		—		—		119,922
Share-based payment transactions of subsidiaries		—		—			(812	)		—		—		—		(812	)

Balance on September 30, 2019	$	147,329,386	$	209,815		$	2,062,336		$	987,611	$	19,962	$	20,648,078	$	171,257,188

Balance on January 1, 2020	$	147,329,386	$	208,746		$	2,062,250		$	987,611	$	19,914	$	20,648,078	$	171,255,985
Unclaimed dividend		—		—			—			—		1,647		—		1,647
Change in additional paid-in capital from investments in associates accounted for using equity method		—		(9,399	)		—			—		—		—		(9,399	)
Change in additional paid-in capital for not proportionately participating in the capital increase of subsidiaries		—		—			(103	)		—		—		—		(103	)
Share-based payment transactions of subsidiaries		—		—			24,085			—		—		—		24,085

Balance on September 30, 2020	$	147,329,386	$	199,347		$	2,086,232		$	987,611	$	21,561	$	20,648,078	$	171,272,215

Additional paid-in capital from share premium, donated capital and the difference between consideration received and the carrying amount of the subsidiaries’ net assets upon disposal may be utilized to offset deficits. Furthermore, when Chunghwa has no deficit, it may be distributed in cash or capitalized, which however is limited to a certain percentage of Chunghwa’s paid-in capital except the additional paid-in capital arising from unclaimed dividend can only be utilized to offset deficits.

The additional paid-in capital from movements of paid-in capital arising from changes in equities of subsidiaries may only be utilized to offset deficits.

Among additional paid-in capital from movements of investments in associates accounted for using equity method, the portion arising from the difference between consideration received and the carrying amount of the subsidiaries net assets upon disposal may be utilized to offset deficits; furthermore, when the Company has no deficit, it may be distributed in cash or capitalized. However, other additional paid-in capital recognized in proportion of share ownership may only be utilized to offset deficits.

Retained earnings and dividends policy

In accordance with the Chunghwa’s Articles of Incorporation, Chunghwa must pay all outstanding taxes, offset deficits in prior years and set aside a legal reserve equal to 10% of its net income before distributing a dividend or making any other distribution to stockholders, except when the accumulated amount of such legal reserve equals to Chunghwa’s total issued capital, and depending on its business needs or requirements, may also set aside or reverse special reserves. No less than 50% of the remaining earnings comprising remaining balance of net income, if any, plus cumulative undistributed earnings shall be distributed as stockholders’ dividends, of which cash dividends to be distributed shall not be less than 50% of the total amount of dividends to be distributed. If cash dividend to be distributed is less than $0.10 per share, such cash dividend shall be distributed in the form of common stocks.

- 49 -

Chunghwa should appropriate or reverse a special reserve in accordance with Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive entitled “Questions and Answers on Special Reserves Appropriated Following the Adoption of Taiwan-IFRSs”. Distributions can be made out of any subsequent reversal of the debit to other equity items.

The appropriation for legal reserve shall be made until the accumulated reserve equals the aggregate par value of the outstanding capital stock of Chunghwa. This reserve can only be used to offset a deficit, or, when the legal reserve has exceeded 25% of Chunghwa’s paid-in capital, the excess may be transferred to capital or distributed in cash.

The appropriations of the 2019 and 2018 earnings of Chunghwa approved by the stockholders in their meetings on May 29, 2020 and June 21, 2019 were as follows:


	Appropriation of Earnings				Dividends Per Share (NT$)
	For Fiscal Year 2019		For Fiscal Year 2018		For Fiscal Year 2019		For Fiscal Year 2018
Cash dividends	$	32,782,969	$	34,745,603	$	4.226	$	4.479

Information of the appropriation of Chunghwa’s earnings proposed by the Board of Directors and approved by the stockholders is available on the Market Observation Post System website.

Others

Exchange differences arising from the translation of the foreign operations

The exchange differences arising from the translation of the foreign operations from their functional currency to New Taiwan dollars were recognized as exchange differences arising from the translation of the foreign operations in other comprehensive income.

Unrealized gain or loss on financial assets at FVOCI


	Nine Months Ended September 30
	2020		2019
Beginning balance	$	836,598	$	538,272
Unrealized gain or loss for the period
Equity instruments		295,956		(464,400	)

Ending balance	$	1,132,554	$	73,872

Noncontrolling interests


	Nine Months Ended September 30
	2020			2019
Beginning balance	$	10,283,522		$	9,990,345
Shares attributed to noncontrolling interests
Net income for the period		921,917			714,213
Exchange differences arising from the translation of the foreign operations		(10,370	)		18,068
Unrealized gain or loss on financial assets at FVOCI		(15,289	)		(10,157	)

(Continued)

- 50 -


	Nine Months Ended September 30
	2020			2019
Income tax relating to exchange differences arising from the translation of the foreign operations	$	27		$	—
Share of other comprehensive income (loss) of associates accounted for using equity method		(958	)		281
Cash dividends distributed by subsidiaries		(775,420	)		(709,817	)
Changes in additional paid-in capital from investments in associates accounted for using equity method		47			769
Change in additional paid-in capital for not participating in the capital increase of subsidiaries		103			—
Share-based payment transactions of subsidiaries		59,234			16,428
Non-controlling interests increased by business combination of IISI (Note 13)		475,879			—
Decrease in noncontrolling interests		—			(763	)

Ending balance	$	10,938,692		$	10,019,367

(Concluded)

30.

REVENUES


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Revenue from contracts with customers	$	51,860,647	$	50,595,069	$	147,225,735	$	151,449,766

Other revenues
Rental income		220,581		216,558		616,557		607,370
Other		90,098		36,533		286,897		230,360

		310,679		253,091		903,454		837,730

	$	52,171,326	$	50,848,160	$	148,129,189	$	152,287,496

For the information of performance obligations related to customer contracts, please refer to Note 3 Summary of Significant Accounting Policies to the consolidated financial statements for the year ended December 31, 2019 for details.

Disaggregation of revenue

Nine months ended September 30, 2020


	Domestic Fixed Communi- cations Business		Mobile Communi- cations Business		Internet Business		International Fixed Communi- cations Business		Others		Total
Main Products and Service Revenues
Mobile services revenue	$	—	$	42,516,219	$	—	$	—	$	—	$	42,516,219
Sales of products		1,508,598		21,812,355		85,314		235,971		3,333,899		26,976,137
Local telephone and domestic long distance telephone services revenue		19,944,136		—		—		—		—		19,944,136
Broadband access and domestic leased line services revenue		16,729,965		—		—		—		—		16,729,965

(Continued)

- 51 -


	Domestic Fixed Communi- cations Business		Mobile Communi- cations Business		Internet Business		International Fixed Communi- cations Business		Others		Total
Data Communications internet services revenue	$	—	$	—	$	16,030,764	$	—	$	—	$	16,030,764
International network and leased line services revenue		—		—		—		3,041,287		—		3,041,287
Others		10,556,132		874,639		6,053,156		3,270,788		1,232,512		21,987,227

	$	48,738,831	$	65,203,213	$	22,169,234	$	6,548,046	$	4,566,411	$	147,225,735

(Concluded)

Nine months ended September 30, 2019


	Domestic Fixed Communi- cations Business		Mobile Communi- cations Business		Internet Business		International Fixed Communi- cations Business		Others		Total
Main Products and Service Revenues
Mobile services revenue	$	—	$	44,114,766	$	—	$	—	$	—	$	44,114,766
Sales of products		1,411,248		26,040,008		32,646		191,201		2,489,023		30,164,126
Local telephone and domestic long distance telephone services revenue		21,076,977		—		—		—		—		21,076,977
Broadband access and domestic leased line services revenue		16,550,818		—		—		—		—		16,550,818
Data communications internet services revenue		—		—		15,722,032		—		—		15,722,032
International network and leased telephone services revenue		—		—		—		5,662,625		—		5,662,625
Others		7,815,573		790,131		6,017,643		2,960,312		574,763		18,158,422

	$	46,854,616	$	70,944,905	$	21,772,321	$	8,814,138	$	3,063,786	$	151,449,766

Contract balances


	September 30, 2020			December 31, 2019			September 30, 2019			January 1, 2019
Trade notes and account receivables (Note 9)	$	22,595,966		$	26,407,783		$	29,760,143		$	30,075,503

Contract assets
Products and service bundling	$	6,872,648		$	6,942,974		$	6,958,114		$	7,122,875
Other		670,671			115,993			113,785			108,581
Less: Loss allowance		(16,577	)		(16,858	)		(16,932	)		(18,770	)

	$	7,526,742		$	7,042,109		$	7,054,967		$	7,212,686

Current	$	5,169,966		$	4,441,196		$	4,516,992		$	4,868,728
Noncurrent		2,356,776			2,600,913			2,537,975			2,343,958

	$	7,526,742		$	7,042,109		$	7,054,967		$	7,212,686

(Continued)

- 52 -


	September 30, 2020		December 31, 2019		September 30, 2019		January 1, 2019
Contract liabilities
Telecommunications business	$	12,693,256	$	12,771,621	$	12,530,094	$	8,193,215
Project business		9,462,062		10,360,428		9,820,467		4,508,200
Products and service bundling		20,211		38,570		44,068		105,559
Other		516,655		510,696		825,464		475,947

	$	22,692,184	$	23,681,315	$	23,220,093	$	13,282,921

Current	$	16,184,042	$	16,839,830	$	16,417,493	$	10,687,772
Noncurrent		6,508,142		6,841,485		6,802,600		2,595,149

	$	22,692,184	$	23,681,315	$	23,220,093	$	13,282,921

(Concluded)

The changes in the contract asset and the contract liability balances primarily result from the timing difference between the satisfaction of performance obligations and the payments collected from customers.

The Company applies the simplified approach to recognize expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for receivables. Contract assets will be reclassified to trade receivables when the corresponding invoice is billed to the client. Contract assets have substantially the same risk characteristics as the trade receivables of the same types of contracts. Therefore, the Company concluded that the expected loss rates for trade receivables can be applied to the contract assets.

Incremental costs of obtaining contracts


	September 30, 2020		December 31, 2019		September 30, 2019
Noncurrent
Incremental costs of obtaining contracts	$	975,788	$	942,652	$	961,348

The Company considered the past experience and the default clauses in the telecommunications service contracts and believes the commissions and equipment subsidies paid for obtaining such contracts are expected to be recoverable, therefore, such costs were capitalized. Amortization recognized for the three months and nine months ended September 30, 2020 were $192,669 thousand and $582,950 thousand, respectively. Amortization recognized in the three months and nine months ended September 30, 2019 were $262,170 thousand and $953,109 thousand, respectively.

- 53 -

31.

NET INCOME

Other income and expenses


	Three Months Ended September 30						Nine Months Ended September 30
	2020			2019			2020			2019
Gain on disposal of investment properties	$	151,357		$	—		$	151,357		$	—
Gain (loss) on disposal of property, plant and equipment		136,175			(19,273	)		124,341			(28,339	)
Loss on disposal of intangible assets		(1,844	)		—			(1,844	)		(146	)

	$	285,688		$	(19,273	)	$	273,854		$	(28,485	)

Other income


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Dividend income	$	9,788	$	55,511	$	246,084	$	296,360
Rental income		18,378		23,062		53,522		64,704
Others		58,726		65,010		116,904		118,195

	$	86,892	$	143,583	$	416,510	$	479,259

Other gains and losses


	Three Months Ended September 30						Nine Months Ended September 30
	2020			2019			2020			2019
Net foreign currency exchange gains (losses)	$	(46,526	)	$	51,943		$	14,268		$	37,280
Gains on disposal of investments accounted for using equity method		1,412			—			1,412			30,152
Losses on disposal of financial instruments		—			—			(1,788	)		—
Valuation gains (losses) on financial assets and liabilities at fair value through profit or loss, net		(10,717	)		2,800			(78,887	)		(3,197	)
Others		2,460			(7,513	)		(11,327	)		(40,681	)

	$	(53,371	)	$	47,230		$	(76,322	)	$	23,554

- 54 -

Interest expenses


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Interest on bank loans	$	19,195	$	4,776	$	67,289	$	13,136
Interest on lease liabilities		18,738		20,970		60,758		63,531
Interest on bonds payable		18,233		—		18,233		—
Others		1,444		546		1,725		1,063

	$	57,610	$	26,292	$	148,005	$	77,730

Impairment loss (reversal of impairment loss)


	Three Months Ended September 30						Nine Months Ended September 30
	2020			2019			2020			2019
Contract assets	$	(76	)	$	(1,105	)	$	(281	)	$	(1,838	)

Trade notes and accounts receivable	$	(43,237	)	$	1,389		$	61,890		$	(23,064	)

Other receivables	$	(2,077	)	$	9,684		$	(3,021	)	$	(66,891	)

Inventories	$	412,334		$	10,415		$	608,024		$	155,761

Depreciation and amortization expenses


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Property, plant and equipment	$	6,741,765	$	6,732,778	$	20,221,714	$	20,184,095
Right-of-use assets		988,956		999,444		2,947,759		2,965,351
Investment properties		5,130		5,149		15,390		20,025
Intangible assets		1,650,539		1,062,234		3,774,247		3,191,249
Incremental costs of obtaining contracts		192,669		262,170		582,950		953,109

Total depreciation and amortization expenses	$	9,579,059	$	9,061,775	$	27,542,060	$	27,313,829

Depreciation expenses summarized by functions
Operating costs	$	7,264,661	$	7,256,485	$	21,754,763	$	21,686,614
Operating expenses		471,190		480,886		1,430,100		1,482,857

	$	7,735,851	$	7,737,371	$	23,184,863	$	23,169,471

(Continued)

- 55 -


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Amortization expenses summarized by functions
Operating costs	$	1,787,420	$	1,267,217	$	4,190,432	$	3,971,884
Marketing expenses		24,865		23,552		71,245		73,728
General and administrative expenses		20,242		23,268		63,041		70,553
Research and development expenses		10,681		10,367		32,479		28,193

	$	1,843,208	$	1,324,404	$	4,357,197	$	4,144,358

(Concluded)

Employee benefit expenses


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Post-employment benefit
Defined contribution plans	$	183,609	$	163,662	$	520,826	$	490,303
Defined benefit plans		501,063		714,690		1,500,998		2,144,702

		684,672		878,352		2,021,824		2,635,005

Share-based payment
Equity-settled share—based payment		1,646		429		4,937		1,288

Other employee benefit
Salaries		6,538,139		6,278,607		19,742,735		19,056,884
Insurance		684,912		682,712		2,032,869		2,072,893
Others		3,234,105		3,908,055		9,764,217		10,784,939

		10,457,156		10,869,374		31,539,821		31,914,716

Total employee benefit expenses	$	11,143,474	$	11,748,155	$	33,566,582	$	34,551,009

Summary by functions
Operating costs	$	5,711,453	$	5,984,774	$	17,197,330	$	17,731,271
Operating expenses		5,432,021		5,763,381		16,369,252		16,819,738

	$	11,143,474	$	11,748,155	$	33,566,582	$	34,551,009

Chunghwa distributes employees’ compensation at the rates from 1.7% to 4.3% and remuneration to directors not higher than 0.17%, respectively, of pre-tax income.

If there is a change in the proposed amounts after the annual financial statements are authorized for issue, the difference is recorded as a change in accounting estimate.

- 56 -

The compensation to the employees and remuneration to the directors of 2019 and 2018 approved by the Board of Directors on February 26, 2020 and March 19, 2019, respectively, were as follows:


	Cash
	2019		2018
Compensation distributed to the employees	$	1,126,194	$	1,404,264
Remuneration paid to the directors		35,210		38,216

There was no difference between the initial accrued amounts recognized in 2019 and 2018 and the amounts approved by the Board of Directors in 2020 and 2019 of the aforementioned compensation to employees and the remuneration to directors.

Information of the appropriation of Chunghwa’s employees compensation and remuneration to directors and those approved by the Board of Directors is available on the Market Observation Post System website.

32.

INCOME TAX

Income tax recognized in profit or loss

The major components of income tax expense were as follows:


	Three Months Ended September 30						Nine Months Ended September 30
	2020			2019			2020			2019
Current tax
Current tax expenses recognized for the period	$	2,174,029		$	1,972,343		$	6,332,269		$	6,015,903
Income tax on unappropriated earnings		—			15,839			11,527			19,523
Income tax adjustments on prior years		1,096			(11,264	)		(16,510	)		(35,452	)
Others		15,671			5,247			17,778			10,443

		2,190,796			1,982,165			6,345,064			6,010,417

Deferred tax
Deferred tax expenses recognized for the period		(81,374	)		8,982			(69,098	)		10,354
Income tax adjustments on prior years		77			(616	)		27,816			(450	)

		(81,297	)		8,366			(41,282	)		9,904

Income tax recognized in profit or loss	$	2,109,499		$	1,990,531		$	6,303,782		$	6,020,321

The applicable tax rate used by the entities subject to the Income Tax Act of the Republic of China is 20%, while the applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other entities of the Company operating in other jurisdictions are based on the tax laws in those jurisdictions.

- 57 -

In July 2019, the President of the ROC announced the amendments to the Statute of Industrial Innovation, which stipulate that the unappropriated earnings in 2018 and thereafter that are used to build or acquire certain assets or technologies are allowed as deduction when computing the income tax on unappropriated earnings. The Company has deducted the reinvested capital expenditure from the unappropriated earnings while calculating income tax on unappropriated earnings.

Income tax recognized in other comprehensive income


	Three Months Ended September 30					Nine Months Ended September 30
	2020			2019		2020			2019
Deferred tax
Exchange differences arising from the translation of the foreign operations	$	(56	)	$	—	$	(56	)	$	—

Income tax examinations

Income tax returns of Chunghwa, Youth, Aval and CHIEF have been examined by the tax authorities through 2017. Income tax returns of SENAO, ISPOT, Youyi, SENYOUNG, CHYP, CHSI, LED, SHE, Unigate, CHI, CHPT, CHST, SFD, CLPT, CHTSC, HHI, IISI and UTC have been examined by the tax authorities through 2018.

33.

EARNINGS PER SHARE (“EPS”)

Net income and weighted average number of common stocks used in the calculation of earnings per share were as follows:

Net Income


	Three Months Ended September 30						Nine Months Ended September 30
	2020			2019			2020			2019
Net income used to compute the basic earnings per share
Net income attributable to the parent	$	8,336,836		$	8,090,541		$	25,194,210		$	25,014,993
Assumed conversion of all dilutive potential common stocks
Employee stock options and employee compensation of subsidiaries		(922	)		(1,070	)		(3,528	)		(3,936	)

Net income used to compute the diluted earnings per share	$	8,335,914		$	8,089,471		$	25,190,682		$	25,011,057

- 58 -

Weighted Average Number of Common Stocks

(Thousand Shares)


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Weighted average number of common stocks used to compute the basic earnings per share		7,757,447		7,757,447		7,757,447		7,757,447
Assumed conversion of all dilutive potential common stocks
Employee compensation		1,435		990		7,425		7,774

Weighted average number of common stocks used to compute the diluted earnings per share		7,758,882		7,758,437		7,764,872		7,765,221

As Chunghwa may settle the employee compensation in shares or cash, Chunghwa shall presume that it will be settled in shares and take those shares into consideration when calculating the weighted average number of outstanding shares used in the calculation of diluted EPS if the shares have a dilutive effect. The dilutive effect of the shares needs to be considered until the approval of the number of shares to be distributed to employees as compensation in the following year.

34.

SHARE-BASED PAYMENT ARRANGEMENT

SENAO share-based compensation plan (“SENAO Plan”) described as follows:

Effective Date for Plan
Registration

Resolution Date by
SENAO’s Board
of Directors

Stock Options Units
(Thousand)

Exercise Price

(NT$)

2012.05.28

2013.04.29

10,000

(Original price$

66.20

93.00

)

Each option is eligible to subscribe for one common share when exercisable. Under the terms of the SENAO Plan, the options are granted at an exercise price equal to the closing price of SENAO’s common stocks listed on the TWSE on the higher of closing price or par value. The SENAO Plan has an exercise price adjustment formula upon the changes in common stocks equity (including cash capital increase, new share issue through capitalization of earnings and additional paid-in capital, merger, spin off and new share issue for Global Depositary Shares, and so on) or distribution of cash dividends. The options of the SENAO Plan are valid for six years and the graded vesting schedule for which 50% of options granted will vest two years after the grant date and another two tranches of 25%, each will vest three and four years after the grant date respectively.

No compensation cost of stock options granted on May 7, 2013 was recognized for the three months and nine months ended September 30, 2019 and 2020, respectively.

- 59 -

Information about SENAO’s outstanding stock options for the nine months ended September 30, 2019 was as follows:


	Nine Months Ended September 30, 2019
	Granted on May 7, 2013
	Number of Options (Thousand)			Weighted Average Exercise Price (NT$)
Employee stock options
Options outstanding at beginning of the period		5,318		$	66.20
Options forfeited		(5,318	)		—

Options outstanding at end of the period		—			—

Option exercisable at end of the period		—			—

As of September 30, 2020, December 31, and September 30, 2019, there were no outstanding stock options.

SENAO used the fair value method to evaluate the options using the Black-Scholes model and the related assumptions and the fair value of the options were as follows:


	Stock Options Granted on May 7, 2013
Grant-date share price (NT$)	$	93.00
Exercise price (NT$)	$	93.00
Dividend yield		—
Risk-free interest rate		0.91	%
Expected life		4.375 years
Expected volatility		36.22	%
Weighted average fair value of grants (NT$)	$	28.72

Expected volatility was based on the historical share price volatility of SENAO over the period equal to the expected life of the SENAO Plan.

CHIEF share-based compensation plan (“CHIEF Plan”) described as follows:


Effective Date for Plan Registration	Resolution Date by CHIEF’s Board of Directors		Stock Options Units		Exercise Price (NT$)
2017.12.18		2017.12.19		950.00	$ (Original price $	132.70 147.00	)
		2018.10.31		50.00	$ (Original price $	138.70 147.00	)
2015.11.17		2015.10.22		2,000.00	$ (Original price $	34.40 43.00	)

- 60 -

Each option is eligible to subscribe for one thousand common stocks when exercisable. The options are granted to specific employees that meet the vesting conditions. The CHIEF Plan has an exercise price adjustment formula upon the changes in common stocks or distribution of cash dividends. The options of the CHIEF Plan are valid for five years and the graded vesting schedule will vest two years after the grant date.

The compensation costs for stock options granted on October 31, 2018 were both $138 thousand for the three months ended September 30, 2020 and 2019. The compensation costs for stock options granted on October 31, 2018 were both $414 thousand for the nine months ended September 30, 2020 and 2019, respectively.

The compensation costs for stock options granted on December 19, 2017 were $72 thousand and $216 thousand for the three months and nine months ended September 30, 2020, respectively. The compensation costs were $167 thousand and $502 thousand for the three months and nine months ended September 30, 2019, respectively.

There were no compensation costs for stock options granted on October 22, 2015 for the three months and nine months ended September 30, 2020. The compensation costs were $124 thousand and $372 thousand for the three months and nine months ended September 30, 2019, respectively.

CHIEF modified the plan terms of stock options granted on October 31, 2018 in June 2019 and July 2020, the exercise price changed from $147.00 to $141.70 and $138.70 per share. The modification did not cause any incremental fair value granted.

CHIEF modified the plan terms of stock options granted on December 19, 2017 in June 2019 and July 2020, the exercise price changed from $140.60 to $135.60 and $132.70 per share. The modification did not cause any incremental fair value granted.

Information about CHIEF’s outstanding stock options for the nine months ended September 30, 2020 and 2019 was as follows:


	Nine Months Ended September 30, 2020
	Granted on October 31, 2018					Granted on December 19, 2017					Granted on October 22, 2015
	Number of Options			Weighted Average Exercise Price (NT$)		Number of Options			Weighted Average Exercise Price (NT$)		Number of Options			Weighted Average Exercise Price (NT$)
Employee stock options
Options outstanding at beginning of the period		46.00		$	141.70		897.00		$	135.60		314.25		$	34.40
Options exercised		—			—		(448.50	)		135.60		(314.25	)		34.40
Options forfeited		(4.00	)		—		(17.00	)		—		—			—

Options outstanding at end of the period		42.00			138.70		431.50			132.70		—			—

Options exercisable at end of the period		—			—		—			—		—			—

- 61 -


	Nine Months Ended September 30, 2019
	Granted on October 31, 2018					Granted on December 19, 2017					Granted on October 22, 2015
	Number of Options			Weighted Average Exercise Price (NT$)		Number of Options			Weighted Average Exercise Price (NT$)		Number of Options			Weighted Average Exercise Price (NT$)
Employee stock options
Options outstanding at beginning of the period		50.00		$	147.00		925.00		$	140.60		882.75		$	34.40
Options exercised		—			—		—			—		(416.50	)		34.40
Options forfeited		(4.00	)		—		(32.00	)		—		(21.25	)		—

Options outstanding at end of the period		46.00			141.70		893.00			135.60		445.00			34.40

Options exercisable at end of the period		—			—		—			—		—			—

As of September 30, 2020, information about employee stock options outstanding was as follows:


Granted on October 31, 2018
Options Outstanding								Options Exercisable
Range of Exercise Price (NT$)		Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$	138.70		42.00		3.08	$	138.70		—	$	—


Granted on December 19, 2017
Options Outstanding								Options Exercisable
Range of Exercise Price (NT$)		Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$	132.70		431.50		2.22	$	132.70		—	$	—

As of September 30, 2020, all the stock options granted on October 22, 2015 were exercised or forfeited.

As of December 31, 2019, information about employee stock options outstanding was as follows:


Granted on October 31, 2018
Options Outstanding								Options Exercisable
Range of Exercise Price (NT$)		Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$	141.70		46.00		3.83	$	141.70		—	$	—

- 62 -


Granted on December 19, 2017
Options Outstanding								Options Exercisable
Range of Exercise Price (NT$)		Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$	135.60		897.00		2.96	$	135.60		448.50	$	135.60


Granted on October 22, 2015
Options Outstanding								Options Exercisable
Range of Exercise Price (NT$)		Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$	34.40		314.25		0.81	$	34.40		314.25	$	34.40

As of September 30, 2019, information about employee stock options outstanding was as follows:


Granted on October 31, 2018
Options Outstanding								Options Exercisable
Range of Exercise Price (NT$)		Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$	141.70		46.00		4.08	$	141.70		—	$	—


Granted on December 19, 2017
Options Outstanding								Options Exercisable
Range of Exercise Price (NT$)		Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$	135.60		893.00		3.22	$	135.60		—	$	—


Granted on October 22, 2015
Options Outstanding								Options Exercisable
Range of Exercise Price (NT$)		Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$	34.40		445.00		1.06	$	34.40		—	$	—

- 63 -

CHIEF used the fair value method to evaluate the options using the Black-Scholes model and binomial option pricing model and the related assumptions and the fair value of the options were as follows:


	Stock Options Granted on October 31, 2018			Stock Options Granted on December 19, 2017			Stock Options Granted on October 22, 2015
Grant-date share price (NT$)	$	166.00		$	95.92		$	39.55
Exercise price (NT$)	$	147.00		$	147.00		$	43.00
Dividend yield		—			—			—
Risk-free interest rate		0.72	%		0.62	%		0.86	%
Expected life		5 years			5 years			5 years
Expected volatility		16.60	%		17.35	%		21.02	%
Weighted average fair value of grants (NT$)	$	33,540		$	2,318		$	4,863

Expected volatility was based on the average annualized historical share price volatility of CHIEF’s comparable companies before the grant date.

CHTSC share-based compensation plan (“CHTSC Plan”) described as follows:

The Board of Directors of CHTSC resolved to issue 4,500 options that are granted to specific employees that meet the vesting conditions on December 20, 2019. Each option is eligible to subscribe for one thousand common stocks when exercisable, and the exercise price is $19.085. The CHTSC Plan has an exercise price adjustment formula upon the changes in common stocks. The options of CHTSC Plan are valid for five years and the graded vesting schedule will vest one year after the grant date.

The compensation costs were $1,436 thousand and $4,307 thousand for the three months and nine months ended September 30, 2020, respectively.

Information about CHTSC’s outstanding stock options for the nine months ended September 30, 2020 was as follows:


	Nine Months Ended September 30, 2020
	Granted on December 20, 2019
	Number of Options		Weighted Average Exercise Price (NT$)
Employee stock options
Options outstanding at beginning and end of the period		4,500	$	19.085

Options exercisable at end of the period		—		—

- 64 -

As of September 30, 2020, information about employee stock options outstanding was as follows:


Options Outstanding								Options Exercisable
Range of Exercise Price (NT$)		Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$	19.085		4,500		4.22	$	19.085		—	$	—

As of December 31, 2019, information about employee stock options outstanding was as follows:


Options Outstanding								Options Exercisable
Range of Exercise Price (NT$)		Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$	19.085		4,500		4.97	$	19.085		—	$	—

CHTSC used the fair value method to evaluate the options using the Black-Scholes model and the related assumptions and the fair value of the options were as follows:


	Stock Options Granted on December 20,2019
Grant-date share price (NT$)	$	20.17
Exercise price (NT$)	$	19.085
Dividend yield		12.49	%
Risk-free interest rate		0.54	%
Expected life		5 years
Expected volatility		42.41	%
Weighted average fair value of grants (NT$)	$	2,470

Expected volatility was based on the average annualized historical share price volatility of CHTSC’s comparable companies before the grant date.

IISI share-based compensation plan (“IISI Plan”) described as follows:

IISI issued 1,665 and 1,335 options in January 2014 and August, 2013, respectively. Each option is eligible to subscribe for one thousand common stocks when exercisable. The options are granted to specific employees of IISI and its subsidiaires that meet the vesting conditions. The options of the IISI Plan are valid for seven years and the graded vesting schedule will vest two years after the grant date. The exercise price of the original options is $14 per share. After the options are issued, if the common stocks of IISI change, the exercise price of the options should be adjusted according to the prescibed formula.

No compensation cost of stock options granted was recognized for the three months ended September 30, 2020.

- 65 -

Information about IISI’s outstanding stock options for the nine months ended September 30, 2020 was as follows:


	Nine Months Ended September 30, 2020
	Granted in January 2014					Granted in August 2013
	Number of Options			Weighted Average Exercise Price (NT$)		Number of Options			Weighted Average Exercise Price (NT$)
Employee stock options
Options outstanding at beginning of the period		—		$	—		—		$	—
Options outstanding upon the date of business combination		580.00			14.00		1,022.96			14.00
Options exercised		(50.00	)		14.00		(432.50	)		14.00
Options forfeited		—			—		(590.46	)		—

Options outstanding at end of the period		530.00			14.00		—			—

Options exercisable at end of the period		530.00			14.00		—			—

As of September 30, 2020, information about employee stock options outstanding was as follows:


Granted in January 2014
Options Outstanding								Options Exercisable
Range of Exercise Price (NT$)		Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$	14.00		530.00		0.29	$	14.00		530.00	$	14.00

As of September 30, 2020, the options granted to employees in 2013 have been fully exercised or forfeited.

IISI used the fair value method to evaluate the options using the Black-Scholes model and the related assumptions and the fair value of the options were as follows:


	Stock Options Granted in January 2014	Stock Options Granted in August 2013
Grant-date share price (NT$)	$14.51	$12.51
Exercise price (NT$)	$14.00	$14.00
Dividend yield	6%	6%
Risk-free interest rate	1.16%-1.32%	1.20%-1.39%
Expected life	4.5-5.5 years	4.5-5.5 years
Expected volatility	35.28%-35.97%	36.01%-36.62%
Weighted average fair value of grants (NT$)	$14.51	$12.51

- 66 -

Expected volatility was based on the average annualized historical share price volatility of IISI’s comparable companies before the grant date.

35.

CASH FLOW INFORMATION

For the nine months ended September 30, 2020 and 2019, the Company entered into the following non-cash investing activities:


	Nine Months Ended September 30
	2020			2019
Increase in property, plant and equipment	$	15,858,636		$	14,752,470
Changes in other payables		(1,886,269	)		1,604,212

	$	13,972,367		$	16,356,682

Increase in intangible assets	$	48,547,040		$	167,593
Changes in other assets		(1,000,000	)		—

	$	47,547,040		$	167,593

Disposal of property, plant and equipment	$	130,474		$	65,815
Gain (loss) on disposal of property, plant and equipment		124,341			(28,339	)
Changes in receivables from related parties		(144,700	)		—

	$	110,115		$	37,476

Disposal of investment properties	$	36,943		$	—
Gain on disposal of investment properties		151,357			—
Changes in receivables from related parties		(188,300	)		—

	$	—		$	—

For the nine months ended September 30, 2020 and 2019, changes in liabilities arising from financing activities, including non-cash transactions, were as follows:


	Balance on January 1, 2020		Cash Flows from Financing Activities			Changes in Non-Cash Transactions							Cash Flows from Operation Activities—Interest Paid			Balance on September 30, 2020
	Balance on January 1, 2020		Cash Flows from Financing Activities			New Leases		Acquired by business combination (Note 13)		Others						Balance on September 30, 2020
Lease liabilities	$	9,758,138	$	(2,863,451	)	$	2,892,908	$	70,905	$	(225,187	)	$	(60,758	)	$	9,572,555


	Balance on January 1,		Cash Flows from Financing			Changes in Non-Cash Transactions					Cash Flows from Operation Activities—Interest			Balance on September 30,
	2019		Activities			New Leases		Others			Paid			2019
Lease liabilities	$	10,340,057	$	(2,896,092	)	$	2,671,187	$	(464,893	)	$	(63,531	)	$	9,586,728

- 67 -

36.

CAPITAL MANAGEMENT

The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.

The capital structure of the Company consists of debt of the Company and the equity attributable to the parent.

Some consolidated entities are required to maintain minimum paid-in capital amount as prescribed by the applicable laws.

The management reviews the capital structure of the Company as needed. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. According to the management’s suggestions, the Company maintains a balanced capital structure through paying cash dividends, increasing its share capital, purchasing outstanding shares, and issuing new debt or repaying debt.

37.

FINANCIAL INSTRUMENTS

Fair Value Information

The fair value measurement guidance establishes a framework for measuring fair value and expands disclosure about fair value measurements. The standard describes a fair value hierarchy based on three levels of inputs that may be used to measure fair value. These levels are:

Level 1 fair value measurements: These measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 fair value measurements: These measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 fair value measurements: These measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Financial instruments that are not measured at fair value but for which fair value is disclosed

Except those listed in the table below, the Company considers that the carrying amounts of financial assets and liabilities not measured at fair value approximate their fair values or the fair values cannot be reliable estimated.


	September 30, 2020				December 31, 2019				September 30, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Financial liabilities
Financial liabilities carried at amortized cost
Bonds payable	$	19,979,473	$	19,999,956	$	—	$	—	$	—	$	—

The fair value of bonds payable is measured using Level 2 inputs. The valuation of fair value is based on the weighted-average per-hundred price of Taipei Exchange at the end of reporting period.

- 68 -

Financial instruments that are measured at fair values on a recurring basis

September 30, 2020


	Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Derivatives	$	—	$	38	$	—	$	38
Listed stocks		7,202		—		—		7,202
Non-listed stocks		—		—		699,689		699,689

	$	7,202	$	38	$	699,689	$	706,929

Hedging financial assets	$	—	$	7,841	$	—	$	7,841

Financial assets at FVOCI
Listed stocks	$	2,317,591	$	—	$	—	$	2,317,591
Non-listed stocks		—		—		5,315,050		5,315,050

	$	2,317,591	$	—	$	5,315,050	$	7,632,641

Financial liabilities at FVTPL
Derivatives	$	—	$	19	$	—	$	19

December 31, 2019


	Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Derivatives	$	—	$	53	$	—	$	53
Listed stocks		463		—		—		463
Non-listed stocks		—		—		778,105		778,105

	$	463	$	53	$	778,105	$	778,621

Hedging financial assets	$	—	$	327	$	—	$	327

Financial assets at FVOCI
Listed stocks	$	2,453,616	$	—	$	—	$	2,453,616
Non-listed stocks		—		—		4,815,301		4,815,301

	$	2,453,616	$	—	$	4,815,301	$	7,268,917

Financial liabilities at FVTPL
Derivatives	$	—	$	239	$	—	$	239

- 69 -

September 30, 2019


	Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Derivatives	$	—	$	83	$	—	$	83
Listed stocks		24,512		—		—		24,512
Non-listed stocks		—		—		512,736		512,736

	$	24,512	$	83	$	512,736	$	537,331

Financial assets at FVOCI
Listed stocks	$	2,393,689	$	—	$	—	$	2,393,689
Non-listed stocks		—		—		4,063,607		4,063,607

	$	2,393,689	$	—	$	4,063,607	$	6,457,296

Financial liabilities at FVTPL
Derivatives	$	—	$	1,854	$	—	$	1,854

There were no transfers between Levels 1 and 2 for the nine months ended September 30, 2020 and 2019.

The reconciliations for financial assets measured at Level 3 are listed below:

Nine months ended September 30, 2020


Financial Assets	Measured at Fair Value through Profit or Loss			Measured at Fair Value through Other Comprehensive Income		Total
Balance on January 1, 2020	$	778,105		$	4,815,301	$	5,593,406
Recognized in profit or loss under “Other gains and losses”		(78,416	)		—		(78,416	)
Recognized in other comprehensive income under “Unrealized gain or loss on investments in equity instruments at fair value through other comprehensive income”		—			499,749		499,749

Balance on September 30, 2020	$	699,689		$	5,315,050	$	6,014,739

Unrealized loss for the nine months ended September 30, 2020	$	(78,416	)

- 70 -

Nine months ended September 30, 2019


Financial Assets	Measured at Fair Value through Profit or Loss			Measured at Fair Value through Other Comprehensive Income		Total
Balance on January 1, 2019	$	517,362		$	4,032,660	$	4,550,022
Recognized in profit or loss under “Other gains and losses”		(4,626	)		—		(4,626	)
Recognized in other comprehensive income under “Unrealized gain or loss on investments in equity instruments at fair value through other comprehensive income”		—			30,947		30,947

Balance on September 30, 2019	$	512,736		$	4,063,607	$	4,576,343

Unrealized loss for the nine months ended September 30, 2019	$	(4,626	)

The fair values of financial assets and financial liabilities of Level 2 are determined as follows:

The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active markets are determined with reference to quoted market prices.

For derivatives, fair values are estimated using discounted cash flow model. Future cash flows are estimated based on observable inputs including forward exchange rates at the end of the reporting periods and the forward and spot exchange rates stated in the contracts, discounted at a rate that reflects the credit risk of various counterparties.

The fair values of non-listed domestic and foreign equity investments were Level 3 financial assets and determined using the market approach by reference the Price-to-Book ratios (P/B ratios) of peer companies that traded in active market or using assets approach. The significant unobservable inputs used were listed in the table below. A decrease in discount for the lack of marketability or noncontrolling interests discount would result in increases in the fair values.


	September 30, 2020	December 31, 2019	September 30, 2019
Discount for lack of marketability	13.73%—20.00%	13.73%—20.00%	12.73%-20.00%
Noncontrolling interests discount	21.45%—25.00%	21.45%—25.00%	24.41%-25.00%

If the inputs to the valuation model were changed to reflect reasonably possible alternative assumptions while all the other variables were held constant, the fair values of equity investments would increase as below table. When related discounts increase, the fair value of equity investments would be the negative amount of the same amount.


	September 30, 2020		September 30, 2019
Discount for lack of marketability 5% decrease	$	375,917	$	268,494

Noncontrolling interests discount 5% decrease	$	48,373	$	17,480

- 71 -

Categories of Financial Instruments


	September 30, 2020		December 31, 2019		September 30, 2019
Financial assets
Measured at FVTPL
Mandatorily measured at FVTPL	$	706,929	$	778,621	$	537,331
Hedging financial assets		7,841		327		—
Financial assets at amortized cost (Note a)		49,390,075		71,851,933		64,636,992
Financial assets at FVOCI		7,632,641		7,268,917		6,457,296
Financial liabilities
Measured at FVTPL
Held for trading		19		239		1,854
Measured at amortized cost (Note b)		65,532,259		34,433,210		35,201,773


		Note a:		The balances included cash and cash equivalents, trade notes and accounts receivable, receivables from related parties, other current monetary assets and refundable deposits (classified as other noncurrent assets), which were financial assets measured at amortized cost.

		Note b:		The balances included short-term loans, short-term bills payable, trade notes and accounts payable, payables to related parties, partial other payables, customers’ deposits, bonds payable and long-term loans which were financial liabilities carried at amortized cost.

Financial Risk Management Objectives

The main financial instruments of the Company include equity investments, trade notes and accounts receivable, trade notes and accounts payable, lease liabilities, loans, short-term bills payable and bonds payable. The Company’s Finance Department provides services to its business units, co-ordinates access to domestic and international capital markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including foreign currency risk, interest rate risk and other price risk), credit risk, and liquidity risk.

The Company seeks to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the Board of Directors. Those derivatives are used to hedge the risks of exchange rate fluctuation arising from operating or investment activities. Compliance with policies and risk exposure limits is reviewed by the Company’s Finance Department on a continuous basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Chunghwa reports the significant risk exposures and related action plans timely and actively to the audit committee and if needed to the Board of Directors.

Market risk

The Company is exposed to market risks of changes in foreign currency exchange rates and interest rates. The Company uses forward exchange contracts to hedge the exchange rate risk arising from assets and liabilities denominated in foreign currencies.

There were no changes to the Company’s exposure to market risks or the manner in which these risks are managed and measured.

- 72 -

Foreign currency risk

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the balance sheet dates were as follows:


	September 30, 2020		December 31, 2019		September 30, 2019
Assets
USD	$	3,752,586	$	5,781,593	$	6,165,652
EUR		10,164		11,792		32,842
SGD		261,394		224,501		67,691
JPY		22,647		17,092		17,451
RMB		28,137		8,854		9,314
Liabilities
USD		2,370,285		4,120,881		6,519,851
EUR		567,044		206,447		338,103
SGD		1,077,468		1,262,926		1,270,743
JPY		7,961		14,206		16,178
RMB		288		310		701

The carrying amounts of the Company’s derivatives with exchange rate risk exposures at the balance sheet dates were as follows:


	September 30, 2020		December 31, 2019		September 30, 2019
Assets
USD	$	38	$	53	$	83
EUR		7,841		327		—
Liabilities
USD		—		11		47
EUR		19		228		1,807

Foreign currency sensitivity analysis

The Company is mainly exposed to the fluctuations of the currencies USD, EUR, SGD, JPY and RMB as listed above.

The following table details the Company’s sensitivity to a 5% increase and decrease in the functional currency against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible changes in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and forward exchange contracts. A positive number below indicates an increase in pre-tax profit or equity where the functional currency weakens 5% against the relevant currency.


	Nine Months Ended September 30
	2020			2019
Profit or loss
Monetary assets and liabilities (a)
USD	$	69,115		$	(17,710	)
EUR		(27,844	)		(15,263	)
SGD		(40,804	)		(60,153	)

(Continued)

- 73 -


	Nine Months Ended September 30
	2020			2019
JPY	$	734		$	64
RMB		1,392			431
Derivatives (b)
USD		(728	)		2,498
EUR		3,074			2,662
Equity
Derivatives (c)
EUR		22,198			—

(Concluded)

This is mainly attributable to the exposure to foreign currency denominated receivables and payables of the Company outstanding at the balance sheet dates.

This is mainly attributable to forward exchange contracts.

This is mainly attributable to the changes in the fair value of derivatives that are designated as cash flow hedges.

For a 5% strengthening of the functional currency against the relevant currencies, there would be an equal and opposite effect on the pre-tax profit or equity for the amounts shown above.

Interest rate risk

The carrying amounts of the Company’s exposures to interest rates on financial assets and financial liabilities at the balance sheet dates were as follows:


	September 30, 2020		December 31, 2019		September 30, 2019
Fair value interest rate risk
Financial assets	$	12,256,062	$	30,946,503	$	17,015,191
Financial liabilities		41,542,857		9,758,138		9,586,728
Cash flow interest rate risk
Financial assets		8,893,268		7,681,032		12,605,731
Financial liabilities		1,675,000		1,690,000		1,690,000

Interest rate sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments at the end of the reporting period. A 25 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Company’s pre-tax income would increase/decrease by $18,046 thousand and $27,289 thousand for the nine months ended September 30, 2020 and 2019, respectively. This is mainly attributable to the Company’s exposure to floating interest rates on its financial assets and short-term and long-term loans.

- 74 -

Other price risk

The Company is exposed to equity price risks arising from holding other company’s equity. Equity investments are held for strategic rather than trading purposes. The management managed the risk through holding various risk portfolios. Further, the Company assigned finance and investment departments to monitor the price risk.

Equity price sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 5% higher/lower, pre-tax profit and pre-tax other comprehensive income would have increased/decreased by $35,345 thousand and $381,632 thousand as a result of the changes in fair value of financial assets at FVTPL and financial assets at FVOCI for the nine months ended September 30, 2020. If equity prices had been 5% higher/lower, pre-tax profit and pre-tax other comprehensive income would have increased/decreased by $26,862 thousand and $322,865 thousand as a result of the changes in fair value of financial assets at FVTPL and financial assets at FVOCI for the nine months ended September 30, 2019.

Credit risk

Credit risk refers to the risk that a counterparty would default on its contractual obligations resulting in financial loss to the Company. The maximum credit exposure of the aforementioned financial instruments is equal to their carrying amounts recognized in consolidated balance sheet as of the balance sheet date.

The Company has large trade receivables outstanding with its customers. A substantial majority of the Company’s outstanding trade receivables are not covered by collateral or credit insurance. The Company has implemented ongoing measures including enhancing credit assessments and strengthening overall risk management to reduce its credit risk. While the Company has procedures to monitor and limit exposure to credit risk on trade receivables, there can be no assurance such procedures will effectively limit its credit risk and avoid losses. This risk is heightened during periods when economic conditions worsen.

As the Company serves a large number of unrelated consumers, the concentration of credit risk was limited.

Liquidity risk

The Company manages and maintains sufficient cash and cash equivalent position to support the operations and reduce the impact on fluctuation of cash flow.

Liquidity and interest risk tables

The following tables detailed the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company is required to pay.

- 75 -

September 30, 2020


	Weighted Average Effective Interest Rate (%)		Less than 1 Month		1-3 Months		3 Months to 1 Year		1-5 Years		Add More than 5 Years		Total
Non-derivative financial liabilities
Non-interest bearing		—	$	32,783,611	$	—	$	3,156,482	$	4,702,387	$	—	$	40,642,480
Floating interest rate instruments		0.78		—		—		1,675,000		—		—		1,675,000
Fixed interest rate instruments		0.48		—		5,000,000		7,000,000		8,800,000		11,200,000		32,000,000

			$	32,783,611	$	5,000,000	$	11,831,482	$	13,502,387	$	11,200,000	$	74,317,480

Information about the maturity analysis for lease liabilities was as follows:


	Less than 1 Year		1-3 Years		3-5 Years		Add More than 5 Years		Total
Lease liabilities	$	3,293,176	$	4,272,026	$	1,663,042	$	509,197	$	9,737,441

December 31, 2019


	Weighted Average Effective Interest Rate (%)		Less than 1 Month		1-3 Months		3 Months to 1 Year		1-5 Years		Add More than 5 Years		Total
Non-derivative financial liabilities
Non-interest bearing		—	$	36,387,024	$	—	$	2,531,721	$	4,747,644	$	—	$	43,666,389
Floating interest rate instruments		0.98		50,000		10,000		30,000		1,600,000		—		1,690,000

			$	36,437,024	$	10,000	$	2,561,721	$	6,347,644	$	—	$	45,356,389

Information about the maturity analysis for lease liabilities was as follows:


	Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years		Total
Lease liabilities	$	3,309,578	$	4,394,009	$	1,581,034	$	645,520	$	9,930,141

September 30, 2019


	Weighted Average Effective Interest Rate (%)		Less than 1 Month		1-3 Months		3 Months to 1 Year		1-5 Years		More than 5 Years		Total
Non-derivative financial liabilities
Non-interest bearing		—	$	35,426,583	$	—	$	1,976,987	$	4,645,677	$	—	$	42,049,247
Floating interest rate instruments		0.98		10,000		—		80,000		1,600,000		—		1,690,000

			$	35,436,583	$	—	$	2,056,987	$	6,245,677	$	—	$	43,739,247

Information about the maturity analysis for lease liabilities was as follows:


	Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years		Total
Lease liabilities	$	3,266,203	$	4,341,335	$	1,553,871	$	602,270	$	9,763,679

- 76 -

The following table detailed the Company’s liquidity analysis for its derivative financial instruments. The table had been drawn up based on the undiscounted gross inflows and outflows on those derivatives that require gross settlement.


	Less than 1 Month		1-3 Months			3 Months to 1 Year		1-5 Years		Total
September 30, 2020
Gross settled
Forward exchange contracts
Inflow	$	—	$	519,680		$	—	$	—	$	519,680
Outflow		—		511,820			—		—		511,820

	$	—	$	7,860		$	—	$	—	$	7,860

December 31, 2019
Gross settled
Forward exchange contracts
Inflow	$	25,566	$	135,075		$	—	$	—	$	160,641
Outflow		25,524		134,976			—		—		160,500

	$	42	$	99		$	—	$	—	$	141

September 30, 2019
Gross settled
Forward exchange contracts
Inflow	$	49,953	$	53,327		$	—	$	—	$	103,280
Outflow		49,917		55,134			—		—		105,051

	$	36	$	(1,807	)	$	—	$	—	$	(1,771	)

Financing facilities


	September 30, 2020		December 31, 2019		September 30, 2019
Facilities from unsecured bank loan and commercial paper payable
Amount used	$	12,086,405	$	120,681	$	123,305
Amount unused		54,462,777		46,109,219		46,111,895

	$	66,549,182	$	46,229,900	$	46,235,200

Secured bank loan facility
Amount used	$	1,600,000	$	1,600,000	$	1,600,000
Amount unused		20,000		1,340,000		1,340,000

	$	1,620,000	$	2,940,000	$	2,940,000

- 77 -

38.

RELATED PARTIES TRANSACTIONS

The ROC Government, one of Chunghwa’s customers, has significant equity interest in Chunghwa. Chunghwa provides fixed-line services, wireless services, internet and data and other services to the various departments and institutions of the ROC Government in the normal course of business and at arm’s-length prices. Except for those disclosed in other notes or this note, the transactions with the ROC government bodies have not been disclosed because the transactions are not individually or collectively significant. However, the related revenues and operating costs have been appropriately recorded.

The Company engages in business transactions with the following related parties:


Company		Relationship
Taiwan International Standard Electronics Co., Ltd.		Associate
So-net Entertainment Taiwan Limited		Associate
KKBOX Taiwan Co., Ltd.		Associate
KingwayTek Technology Co., Ltd.		Associate
UUPON Inc.		Associate
Taiwan International Ports Logistics Corporation		Associate
International Integrated Systems, Inc.		Subsidiary (Note)
Senao Networks, Inc.		Associate
EnRack Tech. Co., Ltd.		Subsidiary of the Company’s associate, Senao Networks, Inc.
Emplus Technologies, Inc.		Subsidiary of the Company’s associate, Senao Networks, Inc.
ST-2 Satellite Ventures Pte., Ltd.		Associate
Viettel-CHT Co., Ltd.		Associate
Click Force Co., Ltd.		Associate
Alliance Digital Tech Co., Ltd.		Associate
Chunghwa PChome Fund I Co., Ltd.		Associate
Cornerstone Ventures Co., Ltd.		Associate
Next Commercial Bank Co., Ltd.		Associate
Other related parties
Chunghwa Telecom Foundation		A nonprofit organization of which the funds donated by Chunghwa exceeds one third of its total funds
Senao Technical and Cultural Foundation		A nonprofit organization of which the funds donated by SENAO exceeds one third of its total funds
Sochamp Technology Co., Ltd.		Investor of significant influence over CHST
E-Life Mall Co., Ltd.		One of the directors of E-Life Mall and a director of SENAO are members of an immediate family
Engenius Technologies Co., Ltd.		Chairman of Engenius Technologies Co., Ltd. is a member of SENAO’s management
Cheng Keng Investment Co., Ltd.		Chairman of Cheng Keng Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
Cheng Feng Investment Co., Ltd.		Chairman of Cheng Feng Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
All Oriented Investment Co., Ltd.		Chairman of All Oriented Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family

(Continued)

- 78 -


Company		Relationship
Hwa Shun Investment Co., Ltd.		Chairman of Hwa Shun Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
Yu Yu Investment Co., Ltd.		Chairman of Yu Yu Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
United Daily News Co., Ltd.		Investor of significant influence over SFD
Shenzhen Century Communication Co., Ltd.		Investor of significant influence over SCT
Chunghwa Post Co., Ltd.		Government-related entity as Chunghwa Telecom

(Concluded)

Note: IISI was an associate and has become a consolidated entity starting from July 1, 2020. Please refer to Note 13. All transactions between the Company were eliminated upon consolidation since the acquisition date.

Balances and transactions between Chunghwa and its subsidiaries, which are related parties of Chunghwa, have been eliminated on consolidation and are not disclosed in this note. Terms of the foregoing transactions with related parties were not significantly different from transactions with non-related parties. When no similar transactions with non-related parties can be referenced, terms were determined in accordance with mutual agreements. Details of transactions between the Company and other related parties are disclosed below:

Operating transactions


	Revenues
	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Associates	$	70,211	$	70,117	$	214,433	$	195,172
Others		17,944		16,473		52,772		57,333

	$	88,155	$	86,590	$	267,205	$	252,505


	Operating Costs and Expenses
	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Associates	$	186,154	$	221,095	$	513,819	$	575,777
Others		4,056		5,933		63,346		72,021

	$	190,210	$	227,028	$	577,165	$	647,798

- 79 -

Non-operating transactions


	Non-operating Income and Expenses
	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Associates	$	5,648	$	38,135	$	75,213	$	22,193
Others		570		221		1,036		238

	$	6,218	$	38,356	$	76,249	$	22,431

Receivables


	September 30, 2020		December 31, 2019		September 30, 2019
Associates	$	353,980	$	10,356	$	12,960
Others		336,165		6,478		6,117

	$	690,145	$	16,834	$	19,077

Contract liabilities-current


	September 30, 2020		December 31, 2019		September 30, 2019
Associates	$	609,524	$	—	$	—

Payables


	September 30, 2020		December 31, 2019		September 30, 2019
Associates	$	491,142	$	650,617	$	375,633
Others		3,246		3,366		3,387

	$	494,388	$	653,983	$	379,020

Customers’ deposits


	September 30, 2020		December 31, 2019		September 30, 2019
Associates	$	4,376	$	7,595	$	6,809

Acquisition of property, plant and equipment


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Associates	$	108,923	$	62,988	$	134,526	$	94,823
Others		—		182		—		182

	$	108,923	$	63,170	$	134,526	$	95,005

- 80 -

Disposal of property, plant and equipment and investment properties to Chunghwa Post Co., Ltd.


	Proceeds				Gain on Disposal
	Three Months Ended September 30				Three Months Ended September 30
	2020		2019		2020		2019
Others	$	333,000	$	—	$	264,257	$	—


	Proceeds				Gain on Disposal
	Nine Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Others	$	333,000	$	—	$	264,257	$	—

Lease-in agreements

Chunghwa entered into a contract with ST-2 Satellite Ventures Pte., Ltd. on March 12, 2010 to lease capacity on the ST-2 satellite. This lease term is for 15 years which should start from the official operation of ST-2 satellite and the total contract value is approximately $6,000,000 thousand (SG$260,723 thousand), including a prepayment of $3,067,711 thousand at the inception of the lease, and the rest of amount should be paid annually when ST-2 satellite starts its official operation. ST-2 satellite was launched in May 2011 and began its official operation in August 2011.

The lease liabilities of ST-2 Satellite Ventures Pte., Ltd. as of balance sheet dates were as follows:


	September 30, 2020		December 31, 2019		September 30, 2019
Lease liabilities—current	$	179,651	$	188,271	$	189,876
Lease liabilities—noncurrent		848,319		1,023,889		1,077,779

	$	1,027,970	$	1,212,160	$	1,267,655

The interest expense recognized for the aforementioned lease liabilities for the three months and nine months ended September 30, 2020 were $2,176 thousand and $6,821 thousand, respectively. The interest expense recognized for the aforementioned lease liabilities for the three months and nine months ended September 30, 2019 are $2,675 thousand and $8,347 thousand, respectively.

Compensation of key management personnel

The compensation of directors and key management personnel was as follows:


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Short-term employee benefits	$	80,934	$	74,139	$	218,013	$	209,553
Post-employment benefits		2,223		2,070		6,219		6,349
Share-based payment		20		70		61		202

	$	83,177	$	76,279	$	224,293	$	216,104

- 81 -

The compensation of directors and key management personnel was mainly determined by the compensation committee having regard to the performance of individual and market trends.

39.

PLEDGED ASSETS

The following assets are pledged as bank loans, custom duties of the imported materials and guarantee of contract performance.


	September 30, 2020		December 31, 2019		September 30, 2019
Property, plant and equipment	$	2,469,188	$	2,491,324	$	2,498,703
Land held under development (included in inventories)		1,998,733		1,998,733		1,998,733
Restricted assets (included in other assets - others)		112,659		2,500		2,500

	$	4,580,580	$	4,492,557	$	4,499,936

40.

SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

Except for those disclosed in other notes, the Company’s significant commitments and contingent liabilities as of September 30, 2020 were as follows:

Acquisitions of land and buildings of $60,220 thousand.

Acquisitions of telecommunications-related inventory and equipment of $34,384,149 thousand.

Unused letters of credit amounting to $10,000 thousand.

A commitment to contribute $2,000,000 thousand to a Piping Fund administered by the Taipei City Government, of which $1,000,000 thousand was contributed by Chunghwa on August 15, 1996 (classified as other monetary assets—noncurrent). If the fund is not sufficient, Chunghwa will contribute the remaining $1,000,000 thousand upon notification from the Taipei City Government.

Chunghwa committed that when its ownership interest in NCB is greater than 25% and NCB encounters financial difficulty or the capital adequacy ratio of NCB cannot meet the related regulation requirements, Chunghwa will provide financial support to assist NCB in maintaining a healthy financial condition.

CHPT signed the contract for its headquarters construction amounting to $1,613,800 thousand in July 2017. The payment of $1,533,110 thousand has been made as of September 30, 2020.

41.

OTHER MATTERS

The Company has assessed the economic impact of COVID-19 and determined that there were no significant impacts on the Company’s financial statements as of the date the consolidated financial statements were authorized for issue. The Company will continue to monitor developments of the pandemic and assess the related impacts.

- 82 -

42. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information summarizes the disclosure of foreign currencies other than the functional currency of Chunghwa and its subsidiaries. The following exchange rates are the exchange rates used to translate to the presentation currency of the consolidated financial statements, which is the NTD:


	September 30, 2020
	Foreign Currencies (Thousands)		Exchange Rate		New Taiwan Dollars (Thousands)
Assets denominated in foreign currencies
Monetary items
USD	$	128,955		29.10	$	3,752,586
EUR		298		34.15		10,164
SGD		12,295		21.26		261,394
JPY		82,056		0.276		22,647
RMB		6,591		4.269		28,137
Non-monetary items
Investments accounted for using equity method
SGD		26,098		21.26		554,839
VND		302,812,035		0.0011		341,047
Liabilities denominated in foreign currencies
Monetary items
USD		81,453		29.10		2,370,285
EUR		16,605		34.15		567,044
SGD		50,681		21.26		1,077,468
JPY		28,844		0.276		7,961
RMB		68		4.269		288


	December 31, 2019
	Foreign Currencies (Thousands)		Exchange Rate		New Taiwan Dollars (Thousands)
Assets denominated in foreign currencies
Monetary items
USD	$	192,849		29.98	$	5,781,593
EUR		351		33.59		11,792
SGD		10,076		22.28		224,501
JPY		61,929		0.276		17,092
RMB		2,057		4.305		8,854
Non-monetary items
Investments accounted for using equity method
SGD		22,483		22.28		500,930
VND		270,542,735		0.0012		316,535

(Continued)

- 83 -


	September 30, 2020
	Foreign Currencies (Thousands)		Exchange Rate		New Taiwan Dollars (Thousands)
Liabilities denominated in foreign currencies
Monetary items
USD	$	137,454		29.98	$	4,120,881
EUR		6,146		33.59		206,447
SGD		56,685		22.28		1,262,926
JPY		51,472		0.276		14,206
RMB		72		4.305		310

(Concluded)


	September 30, 2019
	Foreign Currencies (Thousands)		Exchange Rate		New Taiwan Dollars (Thousands)
Assets denominated in foreign currencies
Monetary items
USD	$	198,635		31.04	$	6,165,652
EUR		967		33.95		32,842
SGD		3,013		22.47		67,691
JPY		60,635		0.288		17,451
RMB		2,141		4.35		9,314
Non-monetary items
Investments accounted for using equity method
SGD		25,605		22.47		575,355
VND		247,231,882		0.00122		301,623
Liabilities denominated in foreign currencies
Monetary items
USD		210,047		31.04		6,519,851
EUR		9,959		33.95		338,103
SGD		56,553		22.47		1,270,743
JPY		56,213		0.288		16,178
RMB		161		4.35		701

The unrealized foreign currency exchange gains and losses were loss of $16,358 thousand and gain of $26,460 thousand for the three months ended September 30, 2020 and 2019, respectively. The unrealized foreign currency exchange gains were $30,119 thousand and $15,397 thousand for the nine months ended September 30, 2020 and 2019, respectively. Due to the various foreign currency transactions and the functional currency of each individual entity of the Company, foreign exchange gains and losses cannot be disclosed by the respective significant foreign currency.

- 84 -

43.

ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the FSC for the Company:

Financing provided: None.

Endorsement/guarantee provided: Please see Table 1.

Marketable securities held (excluding investments in subsidiaries and associates): Please see Table 2.

Marketable securities acquired or disposed of at costs or prices at least $300 million or 20% of the paid-in capital: None.

Acquisition of individual real estate at costs of at least $300 million or 20% of the paid-in capital: Please see Table 3.

Disposal of individual real estate at prices of at least $300 million or 20% of the paid-in capital: Table 4.

Total purchases from or sales to related parties amounting to at least $100 million or 20% of the paid-in capital: Please see Table 5.

Receivables from related parties amounting to $100 million or 20% of the paid-in capital: Please see Table 6.

Names, locations, and other information of investees on which the Company exercises significant influence (excluding investment in Mainland China): Please see Table 7.

Derivative instruments transactions: Please see Notes 7, 20 and 37.

Investment in Mainland China: Please see Table 8.

Intercompany relationships and significant intercompany transactions: Please see Table 9.

Information of main stakeholders: Please see Table 10.

44.

SEGMENT INFORMATION

The Company has the following reportable segments that provide different products or services. The reportable segments are managed separately because each segment represents a strategic business unit that serves different markets. Segment information is provided to the CEO who allocates resources and assesses segment performance. The Company’s measure of segment performance is mainly based on revenues and income before income tax. The Company’s reportable segments are as follows:

Domestic fixed communications business—the provision of local telephone services, domestic long distance telephone services, broadband access, and related services;

Mobile communications business—the provision of mobile services, sales of mobile handsets and data cards, and related services;

Internet business—the provision of HiNet services and related services;

- 85 -

International fixed communications business—the provision of international long distance telephone services and related services;

Others—the provision of non-telecom services and the corporate related items not allocated to reportable segments.

Some operating segments have been aggregated into a single operating segment taking into account the following factors: (a) similar economic characteristics such as long-term gross profit margins; (b) the nature of the telecommunications products and services are similar; (c) the nature of production processes of the telecommunications products and services are similar; (d) the type or class of customer for the telecommunications products and services are similar; and (e) the methods used to provide the services to the customers are similar.

The accounting policies of the operating segments are the same as those described in Note 3.

Segment Revenues and Operating Results

Analysis by reportable segment of revenues and operating results of continuing operations are as follows:


	Domestic Fixed Communi- cations Business		Mobile Communi- cations Business		Internet Business		International Fixed Communi- cations Business		Others			Total
For the three months ended September 30, 2020
Revenues
From external customers	$	18,850,991	$	21,628,859	$	7,457,571	$	2,143,029	$	2,090,876		$	52,171,326
Intersegment revenues		4,037,029		356,286		932,476		419,848		1,317,229			7,062,868

Segment revenues	$	22,888,020	$	21,985,145	$	8,390,047	$	2,562,877	$	3,408,105			59,234,194

Intersegment elimination													(7,062,868)

Consolidated revenues												$	52,171,326

Segments operating costs and expenses	$	16,451,237	$	16,422,668	$	3,186,981	$	2,066,251	$	3,607,711		$	41,734,848

Segment income (loss) before income tax		$5,465,576		$2,082,700		$3,358,242		$214,845		$(296,087)			$10,825,276

For the nine months ended September 30, 2020
Revenues
From external customers	$	49,234,337	$	65,270,735	$	22,398,988	$	6,558,132	$	4,666,997		$	148,129,189
Intersegment revenues		11,954,409		1,123,376		2,796,946		1,424,411		3,861,018			21,160,160

Segment revenues	$	61,188,746	$	66,394,111	$	25,195,934	$	7,982,543	$	8,528,015			169,289,349

Intersegment elimination													(21,160,160	)

Consolidated revenues												$	148,129,189

Segments operating costs and expenses	$	41,918,494	$	48,672,443	$	9,855,216	$	6,381,720	$	9,711,738		$	116,539,611

Segment income (loss) before income tax		$15,892,354		$7,522,363		$9,591,980		$738,597		$(1,325,385)			$32,419,909

For the three months ended September 30, 2019
Revenues
From external customers	$	15,626,976	$	23,629,079	$	7,269,202	$	2,941,355	$	1,381,548		$	50,848,160
Intersegment revenues		4,025,434		389,498		980,963		576,929		1,261,373			7,234,197

Segment revenues	$	19,652,410	$	24,018,577	$	8,250,165	$	3,518,284	$	2,642,921			58,082,357

Intersegment elimination													(7,234,197	)

Consolidated revenues												$	50,848,160

Segments operating costs and expenses	$	13,492,888	$	17,965,998	$	3,344,164	$	2,929,556	$	3,086,948		$	40,819,554

Segment income (loss) before income tax	$	4,625,431	$	2,838,741	$	2,962,026	$	267,236	$	(256,908	)	$	10,436,526

(Continued)

- 86 -


	Domestic Fixed Communi- cations Business		Mobile Communi- cations Business		Internet Business		International Fixed Communi- cations Business		Others			Total
For the nine months ended September 30, 2019
Revenues
From external customers	$	47,336,075	$	71,006,351	$	21,945,887	$	8,821,448	$	3,177,735		$	152,287,496
Intersegment revenues		12,061,671		1,133,367		2,911,479		1,715,751		3,438,839			21,261,107

Segment revenues	$	59,397,746	$	72,139,718	$	24,857,366	$	10,537,199	$	6,616,574			173,548,603

Intersegment elimination													(21,261,107)

Consolidated revenues												$	152,287,496

Segments operating costs and expenses	$	40,594,438	$	53,719,290	$	9,982,674	$	8,797,681	$	8,449,741		$	121,543,824

Segment income (loss) before income tax	$	14,565,179	$	8,779,149	$	8,994,894	$	734,580	$	(1,324,275	)	$	31,749,527

(Concluded)

Main Products and Service Revenues


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Mobile services revenue	$	14,220,347	$	14,729,163	$	42,516,219	$	44,114,766
Sales of products		8,927,134		10,318,026		26,976,137		30,164,126
Local telephone and domestic long distance telephone services revenue		6,666,969		7,004,246		19,944,136		21,076,977
Broadband access and domestic leased line services revenue		5,583,920		5,491,616		16,729,965		16,550,818
Data communications internet services revenue		5,370,351		5,219,220		16,030,764		15,722,032
International network and leased telephone services revenue		942,659		1,790,271		3,041,287		5,662,625
Others		10,459,946		6,295,618		22,890,681		18,996,152

	$	52,171,326	$	50,848,160	$	148,129,189	$	152,287,496

- 87 -

TABLE 1

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED

NINE MONTHS ENDED SEPTEMBER 30, 2020

(Amounts in Thousands of New Taiwan Dollars)

No.

(Note
1)

Endorsement/
Guarantee
Provider

Guaranteed Party

Limits on
Endorsement/
Guarantee
Amount
Provided to
Each
Guaranteed
Party

Maximum
Balance
for the
Period

Ending
Balance

Actual
Borrowing
Amount

Amount of
Endorsement/
Guarantee
Collateralized
by Properties

Ratio of
Accumulated
Endorsement/
Guarantee to
Net Equity
Per Latest
Financial
Statements

Maximum
Endorsement/
Guarantee
Amount
Allowable

Endorsement/
Guarantee
Given by
Parent on
Behalf of
Subsidiaries

Endorsement/
Guarantee
Given by
Subsidiaries
on Behalf of
Parent

Endorsement/
Guarantee
Given on
Behalf of
Companies
in Mainland
China

Note

Name

Nature of
Relationship
(Note 2)

Senao
International
Co.,
Ltd.

Aval
Technologies
Co., Ltd.

574,501

300,000

—

5.22

2,872,505

Yes

Notes 3 and 4

Wiin
Technology
Co., Ltd.

574,501

100,000

—

1.74

2,872,505

Yes

Notes 3 and 4

Note 1:

Significant transactions between the Company and its subsidiaries or among subsidiaries are numbered as follows:

“0” for the Company.

Subsidiaries are numbered from “1”.

Note 2: Relationships between the endorsement/guarantee provider and the guaranteed party:

A company with which it does business.

A company in which the Company directly and indirectly holds more than 50 percent of the voting shares.

A company that directly and indirectly holds more than 50 percent of the voting shares in the Company.

Companies in which the Company holds, directly or indirectly, 90% or more of the voting shares.

The Company fulfills its contractual obligations by providing mutual endorsements/guarantees for another company in the same industry or for joint builders for purposes of undertaking a construction project.

All capital contributing shareholders make endorsements/guarantees for their jointly invested company in proportion to their shareholding percentages.

Companies in the same industry provide among themselves joint and several security for a performance guarantee of a sales contract for pre-construction homes pursuant to the Consumer Protection Act for each other.

Note 3:

The limits on endorsement or guarantee amount provided to each guaranteed party is up to 10% of the net assets value of the latest financial statements of Senao International Co., Ltd.

Note 4:

The total amount of endorsement or guarantee that the Company is allowed to provide is up to 50% of the net assets value of the latest financial statements of Senao International Co., Ltd.

- 88 -

TABLE 2

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD

September 30, 2020

(Amounts in Thousands of New Taiwan Dollars)


Held Company Name	Marketable Securities Type and Name	Relationship with the Company		Financial Statement Account	September 30, 2020								Note
Held Company Name	Marketable Securities Type and Name	Relationship with the Company		Financial Statement Account	Shares (Thousands/ Thousand Units)		Carrying Value (Note 1)		Percentage of Ownership		Fair Value		Note
Chunghwa Telecom Co., Ltd.	Stocks
	Taipei Financial Center Corp.		—	Financial assets at FVOCI		172,927	$	5,023,510		12	$	5,023,510		—
	Innovation Works Development Fund, L.P.		—	Financial assets at FVTPL—noncurrent		—		244,414		4		244,414		—
	Industrial Bank of Taiwan II Venture Capital Co., Ltd. (IBT II)		—	Financial assets at FVOCI		5,252		17,084		17		17,084		—
	Global Mobile Corp.		—	Financial assets at FVOCI		7,617		—		3		—		—
	Innovation Works Limited		—	Financial assets at FVOCI		1,000		3,518		2		3,518		—
	RPTI Intergroup International Ltd.		—	Financial assets at FVOCI		4,765		—		10		—		—
	Taiwan mobile payment Co., Ltd.		—	Financial assets at FVOCI		1,200		4,395		2		4,395		—
	Taiwania Capital Buffalo Fund Co., Ltd.		—	Financial assets at FVTPL—noncurrent		600,000		455,275		13		455,275		—
	China Airlines Ltd.		—	Financial assets at FVOCI		263,622		2,182,791		5		2,182,791		Note 2
	4 Gamers Entertainment Inc.		—	Financial assets at FVOCI		136		115,056		19.9		115,056		—
Senao International Co., Ltd.	Stocks
	N.T.U. Innovation Incubation Corporation		—	Financial assets at FVOCI		1,200		9,492		9		9,492		—
CHIEF Telecom Inc.	Stocks
	3 Link Information Service Co., Ltd.		—	Financial assets at FVOCI		374		950		10		950		—
	WPG Holdings Limited		—	Financial assets at FVTPL—current		9		448		—		448		Note 2
	WPG Holdings Limited		—	Financial assets at FVOCI		1,696		84,800		—		84,800		Note 2
	Taichung Commercial Bank Co., Ltd.		—	Financial assets at FVTPL—current		631		6,754		—		6,754		Note 2
Chunghwa Investment Co., Ltd.	Stocks
	Tatung Technology Inc.		—	Financial assets at FVOCI		4,571		136,686		11		136,686		—
	iSing99 Inc.		—	Financial assets at FVOCI		10,000		—		7		—		—
	Powtec ElectroChemical Corporation		—	Financial assets at FVOCI		20,000		—		2		—		—
	Bossdom Digiinnovation Co., Ltd.		—	Financial assets at FVOCI		2,000		50,000		7		50,000		Note 2
Chunghwa Hsingta Co., Ltd.	Stocks
	Cotech Engineering Fuzhou Corp.		—	Financial assets at FVOCI		—		4,359		5		4,359		—

Note 1:

Showed at carrying amounts with fair value adjustments.

Note 2:

Fair value was based on the closing price on September 30, 2020.

- 89 -

TABLE 3

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL

NINE MONTHS ENDED SEPTEMBER 30, 2020

(Amounts in Thousands of New Taiwan Dollars)

Buyer

Property

Event Date

Transaction
Amount

Payment Status

Counterparty

Relationship

Information on Previous Title Transfer If Counterparty is a Related Party

Pricing Reference

Purpose of Acquisition

Other Terms

Property Owner

Relationship

Transaction Date

Amount

Chunghwa Telecom Co., Ltd.

Land that specific office building is located on

2020.05.06

$3,243,689

$1,056,680 to be paid

MOTC

Major Shareholder

None

Assessed value from National Property Administration

Operating purpose

None

Chunghwa Precision Test Tech. Co., Ltd.

Headquarters

2017.07.29-
2019.12.25

1,460,105

Monthly settlement based on the construction progress and acceptance

Fu Tsu Construction Co., Ltd.

—

Not applicable

Bidding, price comparison and price negotiation

Manufacturing purpose

None

- 90 -

TABLE 4

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

DISPOSAL OF INDIVIDUAL REAL ESTATE AT PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL

NINE MONTHS ENDED SEPTEMBER 30, 2020

(Amounts in Thousands of New Taiwan Dollars)

Seller

Property

Event
Date

Original
Acquisition
Date

Carrying
Amount

Transaction
Amount

Collection

Gain on
Disposal

Counterparty

Relationship

Purpose
of
Disposal

Price
Reference

Other
Terms

Chunghwa Telecom Co., Ltd.

Land

2020.08.05

2017.12.20, 2004.07.07 and 2004.12.16

$75,555

$385,760

Not received yet

$310,205

Chunghwa Post Co., Ltd.

Others

Asset activation

Real estate appraisal report

—

Note:

As of September 30, 2020, transaction for one piece of land had not been completed, with carrying amount and transaction amount of $6,812 thousand and $52,760 thousand, respectively. Upon completion of the transaction, there will be a gain on disposal of $45,948 thousand.

- 91 -

TABLE 5

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

NINE MONTHS ENDED SEPTEMBER 30, 2020

(Amounts in Thousands of New Taiwan Dollars)


Company Name	Related Party	Nature of Relationship	Transaction Details					Abnormal Transaction				Notes / Accounts Payable or Receivable
Company Name	Related Party	Nature of Relationship	Purchases/Sales (Note 1)	Amount (Notes 2 and 5)		% to Total	Payment Terms	Units Price		Payment Terms		Ending Balance (Notes 3 and 5)			% to Total
Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Subsidiary	Sales	$	1,511,816	1	30 days	$	—		—	$	44,408		—
			Purchase		491,983	1	30-90 days		—		—		(891,359	)	(9)
	Aval Technologies Co., Ltd.	Subsidiary	Purchase		132,866	—	30 days		—		—		(11,307	)	—
	CHIEF Telecom Inc.	Subsidiary	Sales		293,800	—	30 days		—		—		61,497		—
	Chunghwa System Integration Co., Ltd.	Subsidiary	Purchase		977,945	1	30 days		—		—		(314,035	)	(3)
	Honghwa International Co., Ltd.	Subsidiary	Sales		234,179	—	30-60 days		—		—		71,733		—
		Subsidiary	Purchase		4,134,619	5	30-60 days		—		—		(530,477	)	(5)
	Donghwa Telecom Co., Ltd.	Subsidiary	Sales		140,673	—	30 days		—		—		35,635		—
		Subsidiary	Purchase		344,277	—	90 days		—		—		(157,594	)	(2)
	Chunghwa Telecom Global, Inc.	Subsidiary	Purchase		240,165	—	90 days		—		—		(37,111	)	—
	Chunghwa Telecom Singapore Pte., Ltd.	Subsidiary	Purchase		132,484	—	30 days		—		—		(85,785	)	(1)
	CHT Security Co., Ltd.	Subsidiary	Purchase		162,388	—	30 days		—		—		(43,534	)	—
	International Integrated Systems, Inc.	Subsidiary	Purchase		287,009	—	30 days		—		—		(24,923	)	—
	Taiwan International Standard Electronics Co., Ltd.	Associate	Purchase		403,960	1	30-90 days		—		—		(312,218	)	(3)
Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		4,481,544	23	30-90 days		—		—		891,368		47
			Purchase		1,392,855	8	30 days		—		—		(40,467	)	(2)
	Aval Technologies Co., Ltd.	Subsidiary	Sales		146,702	1	60 days		—		—		41,947		2
			Purchase		219,992	1	30 days		—		—		(1,822	)	—
CHIEF Telecom Inc.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		191,890	10	60 days		—		—		34,688		15
			Purchase		293,439	29	30 days		—		—		(61,497	)	(53)
Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		1,197,635	84	30 days		—		—		311,485		70
Honghwa International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		4,174,548	98	30-60 days		—		—		529,198		97
Donghwa Telecom Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		344,277	41	90 days		—		—		157,594		99
			Purchase		140,673	17	30 days		—		—		(35,635	)	(30)
Chunghwa Telecom Global, Inc.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		240,165	54	90 days		—		—		37,111		57
Chunghwa Telecom Singapore Pte., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		132,484	14	30 days		—		—		85,785		14
CHT Security Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		171,778	30	30 days		—		—		43,543		29
International Integrated System, Inc.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		287,009	48	30 days		—		—		24,923		14
Aval Technologies Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		132,866	1	30 days		—		—		11,307		1

Note	1: Purchases include costs to acquire services.

Note	2: The differences were because Chunghwa Telecom Co., Ltd. and subsidiaries classified the amount as incremental costs of obtaining contracts, property, plant and equipment, intangible assets, and operating expenses.

Note	3: Notes and accounts receivable did not include the amounts collected for others and other receivables.

Note	4: Transaction terms with related parties were determined in accordance with mutual agreements when there were no similar transactions with third parties. Other transactions with related parties were not significantly different from those with third parties.

Note	5: All intercompany transactions, balances, income and expenses are eliminated upon consolidation.

- 92 -

TABLE 6

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

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

September 30, 2020

(Amounts in Thousands of New Taiwan Dollars)


Company Name	Related Party	Nature of Relationship	Ending Balance			Turnover Rate (Note 1)		Overdue				Amounts Received in Subsequent Period		Allowance for Bad Debts
Company Name	Related Party	Nature of Relationship	Ending Balance			Turnover Rate (Note 1)		Amounts		Action Taken		Amounts Received in Subsequent Period		Allowance for Bad Debts
Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Subsidiary	$	126,487 (Note 2	)		11.13	$	—		—	$	46,897	$	—
	Next Commercial Bank Co., Ltd.	Associate		320,000			0.08		—		—		—		—
	Chunghwa Post Co., Ltd.	Others		333,000			—		—		—		—		—
Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		1,118,995 (Note 2	)		7.08		—		—		185,356		—
Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		311,485 (Note 2	)		3.29		—		—		119,312		—
Honghwa International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		529,198 (Note 2	)		8.45		—		—		85,328		—
Donghwa Telecom Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		157,594 (Note 2	)		3.18		—		—		116,692		—

Note 1:

Payments and receipts collected in trust for others are excluded from the accounts receivable in calculating the turnover rate.

Note 2:

The amount was eliminated upon consolidation.

- 93 -

TABLE 7

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES IN WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE (EXCLUDING INVESTEES IN MAINLAND CHINA)

NINE MONTHS ENDED SEPTEMBER 30, 2020

(Amounts in Thousands of New Taiwan Dollars)


Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount				Balance as of September 30, 2020							Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
Investor Company	Investee Company	Location	Main Businesses and Products	September 30, 2020		December 31, 2019		Shares (Thousands)		Percentage of Ownership (%)		Carrying Value (Note 3)			Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Taiwan	Handset and peripherals retailer; sales of CHT mobile phone plans as an agent	$	1,065,813	$	1,065,813		71,773		28	$	1,585,489		$	282,010		$	76,334		Subsidiary (Note 5)
	Light Era Development Co., Ltd.	Taiwan	Planning and development of real estate and intelligent buildings, and property management		3,000,000		3,000,000		300,000		100		3,850,034			9,886			6,473		Subsidiary (Note 5)
	Donghwa Telecom Co., Ltd.	Hong Kong	International private leased circuit, IP VPN service, and IP transit services		1,567,453		1,567,453		402,590		100		1,517,426			5,805			5,805		Subsidiary (Note 5)
	Chunghwa Telecom Singapore Pte., Ltd.	Singapore	International private leased circuit, IP VPN service, and IP transit services		574,112		574,112		26,383		100		985,831			90,451			90,452		Subsidiary (Note 5)
	Chunghwa System Integration Co., Ltd.	Taiwan	Providing system integration services and telecommunications equipment		838,506		838,506		60,000		100		702,827			(15,680	)		(8,712	)	Subsidiary (Note 5)
	CHIEF Telecom Inc.	Taiwan	Network integration, internet data center (“IDC”), communications integration and cloud application services		459,652		459,652		39,426		56		1,691,859			445,262			255,680		Subsidiary (Note 5)
	Chunghwa Investment Co., Ltd.	Taiwan	Investment		639,559		639,559		68,085		89		2,949,852			239,593			213,331		Subsidiary (Note 5)
	Prime Asia Investments Group Ltd. (B.V.I.)	British Virgin Islands	Investment		385,274		385,274		1		100		168,498			(7,338	)		(7,338	)	Subsidiary (Note 5)
	Honghwa International Co., Ltd.	Taiwan	Telecommunication engineering, sales agent of mobile phone plan application and other business services, etc.		180,000		180,000		18,000		100		461,386			193,466			182,746		Subsidiary (Note 5)
	CHYP Multimedia Marketing & Communications Co., Ltd.	Taiwan	Digital information supply services and advertisement services		150,000		150,000		15,000		100		188,060			11,148			10,725		Subsidiary (Note 5)
	Chunghwa Telecom Vietnam Co., Ltd.	Vietnam	Intelligent energy saving solutions, international circuit, and information and communication technology (“ICT”) services.		148,275		148,275		—		100		94,868			5			5		Subsidiary (Note 5)
	Chunghwa Telecom Global, Inc.	United States	International private leased circuit, internet services, and transit services		70,429		70,429		6,000		100		390,764			53,064			54,744		Subsidiary (Note 5)
	CHT Security Co., Ltd.	Taiwan	Computing equipment installation, wholesale of computing and business machinery equipment and software, management consulting services, data processing services, digital information supply services and internet identify services		240,000		240,000		24,000		80		302,323			84,832			66,363		Subsidiary (Note 5)
	Chunghwa Telecom (Thailand) Co., Ltd.	Thailand	International private leased circuit, IP VPN service, ICT and cloud VAS services		119,624		119,624		1,300		100		108,882			4,461			4,461		Subsidiary (Note 5)
	Spring House Entertainment Tech. Inc.	Taiwan	Software design services, internet contents production and play, and motion picture production and distribution		41,941		41,941		8,251		56		122,549			37,216			20,856		Subsidiary (Note 5)
	Chunghwa leading Photonics Tech Co., Ltd.	Taiwan	Production and sale of electronic components and finished products		70,500		70,500		7,050		75		123,603			11,308			11,923		Subsidiary (Note 5)
	Smartfun Digital Co., Ltd.	Taiwan	Providing diversified family education digital services		65,000		65,000		6,500		65		68,911			1,885			1,225		Subsidiary (Note 5)
	Chunghwa Telecom Japan Co., Ltd.	Japan	International private leased circuit, IP VPN service, and IP transit services		17,291		17,291		1		100		86,012			9,618			9,618		Subsidiary (Note 5)
	Chunghwa Sochamp Technology Inc.	Taiwan	Design, development and production of Automatic License Plate Recognition software and hardware		20,400		20,400		2,040		51		(6,856	)		(4,364	)		3,230		Subsidiary (Note 5)
	International Integrated Systems, Inc.	Taiwan	IT solution provider, IT application consultation, system integration and package solution		517,423		283,500		37,211		51		573,044			107,798			26,663		Subsidiary (Note 6)

(Continued)

- 94 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES IN WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE (EXCLUDING INVESTMENT IN MAINLAND CHINA)

NINE MONTHS ENDED SEPTEMBER 30, 2020

(Amounts in Thousands of New Taiwan Dollars)


Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount				Balance as of September 30, 2020						Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
Investor Company	Investee Company	Location	Main Businesses and Products	September 30, 2020		December 31, 2019		Shares (Thousands)		Percentage of Ownership (%)		Carrying Value (Note 3)		Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
	Viettel-CHT Co., Ltd.	Vietnam	IDC services	$	288,327	$	288,327		—		30	$	341,047	$	210,792		$	63,255		Associate
	Taiwan International Standard Electronics Co., Ltd.	Taiwan	Manufacturing, selling, designing, and maintaining of telecommunications systems and equipment		164,000		164,000		1,760		40		318,167		260,695			134,492		Associate
	KKBOX Taiwan Co., Ltd.	Taiwan	Providing of music on-line, software, electronic information, and advertisement services		67,025		67,025		4,438		30		162,206		40,040			11,953		Associate
	So-net Entertainment Taiwan Limited	Taiwan	Online service and sale of computer hardware		120,008		120,008		9,429		30		220,102		102,347			30,704		Associate
	KingwayTek Technology Co., Ltd.	Taiwan	Publishing books, data processing and software services		66,684		66,684		8,688		23		241,665		(25,975	)		(5,222	)	Associate
	Taiwan International Ports Logistics Corporation	Taiwan	Import and export storage, logistic warehouse, and ocean shipping service		80,000		80,000		8,000		27		55,190		15,759			4,211		Associate
	UUPON Inc.	Taiwan	Information technology service and general advertisement service		97,598		97,598		246		15		1,507		(37,846	)		(5,692	)	Associate
	Alliance Digital Tech Co., Ltd.	Taiwan	Development of mobile payments and information processing service		60,000		60,000		6,000		14		5,080		—			—		Associate
	Chunghwa PChome Fund I Co., Ltd.	Taiwan	Investment, venture capital, investment advisor, management consultant and other consultancy service		200,000		200,000		20,000		50		194,378		593			297		Associate
	Cornerstone Ventures Co., Ltd.	Taiwan	Investment, venture capital, investment advisor, management consultant and other consultancy service		4,900		4,900		490		49		5,919		840			411		Associate
	Next Commercial Bank Co., Ltd.	Taiwan	Online banking business		4,190,000		4,190,000		419,000		42		3,932,953		(337,028	)		(141,215	)	Associate
Senao International Co., Ltd.	Senao Networks, Inc.	Taiwan	Telecommunication facilities manufactures and sales		202,758		202,758		16,579		34		951,699		253,190			85,560		Associate
	Senao International (Samoa) Holding Ltd.	Samoa Islands	International investment		2,333,620		2,333,620		77,775		100		315,317		(26,548	)		(26,548	)	Subsidiary (Note 5)
	UUPON Inc.	Taiwan	Information technology service and general advertisement service		24,000		24,000		109		7		800		(37,846	)		(2,532	)	Associate
	Youth Co., Ltd.	Taiwan	Sale of information and communication technologies products		427,850		364,950		14,752		96		241,408		(677	)		(6,985	)	Subsidiary (Note 5)
	Aval Technologies Co., Ltd.	Taiwan	Sale of information and communication technologies products		89,550		89,550		10,060		100		106,777		4,925			4,927		Subsidiary (Note 5)
	Senyoung Insurance Agent Co., Ltd.	Taiwan	Property and liability insurance agency		59,000		59,000		5,900		100		81,993		21,266			21,251		Subsidiary (Note 5)
CHIEF Telecom Inc.	Unigate Telecom Inc.	Taiwan	Telecommunications and internet service		2,000		2,000		200		100		957		71			71		Subsidiary (Note 5)
	Chief International Corp.	Samoa Islands	Telecommunications and internet service		6,068		6,068		200		100		78,419		7,380			7,380		Subsidiary (Note 5)
Chunghwa Telecom Singapore Pte., Ltd.	ST-2 Satellite Ventures Pte., Ltd.	Singapore	Operation of ST-2 telecommunications satellite		409,061		409,061		18,102		38		554,839		212,572			80,777		Associate
Chunghwa Investment Co., Ltd.	Chunghwa Precision Test Tech. Co., Ltd.	Taiwan	Production and sale of semiconductor testing components and printed circuit board		178,608		178,608		11,230		34		2,333,688		698,962			239,391		Subsidiary (Note 5)
	CHIEF Telecom Inc.	Taiwan	Network integration, internet data center (“IDC”), communications integration and cloud application services		19,064		19,064		2,078		3		83,192		445,262			13,176		Associate (Note 5)
	Senao International Co., Ltd.	Taiwan	Selling and maintaining mobile phones and its peripheral products		49,731		49,731		1,001		—		43,012		282,010			1,113		Associate (Note 5)

(Continued)

- 95 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES IN WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE (EXCLUDING INVESTMENT IN MAINLAND CHINA)

NINE MONTHS ENDED SEPTEMBER 30, 2020

(Amounts in Thousands of New Taiwan Dollars)


Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount				Balance as of September 30, 2020						Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
Investor Company	Investee Company	Location	Main Businesses and Products	September 30, 2020		December 31, 2019		Shares (Thousands)		Percentage of Ownership (%)		Carrying Value (Note 3)		Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
Chunghwa Precision Test Tech. Co., Ltd.	Chunghwa Precision Test Tech USA Corporation	United States	Design and after-sale services of semiconductor testing components and printed circuit board	$	12,636	$	12,636		400		100	$	23,817	$	200		$	200		Subsidiary (Note 5)
	CHPT Japan Co., Ltd.	Japan	Related services of electronic parts, machinery processed products and printed circuit board		2,008		2,008		1		100		2,451		74			74		Subsidiary (Note 5)
	Chunghwa Precision Test Tech. International, Ltd.	Samoa Islands	Wholesale and retail of electronic materials, and investment		116,790		116,790		3,700		100		85,003		4,833			5,189		Subsidiary (Note 5)
Prime Asia Investments Group, Ltd. (B.V.I.)	Chunghwa Hsingta Co., Ltd.	Hong Kong	Investment		375,274		375,274		1		100		168,497		(7,338	)		(7,338	)	Subsidiary (Note 5)
	MeWorks Limited (HK)	Hong Kong	Investment		—		10,000		—		—		—		—			—		Associate
Senao International (Samoa) Holding Ltd.	Senao International HK Limited	Hong Kong	International investment		2,328,754		2,328,754		80,440		100		295,731		(26,670	)		(26,670	)	Subsidiary (Note 5)
Youth Co., Ltd.	ISPOT Co., Ltd.	Taiwan	Sale of information and communication technologies products		53,021		53,021		—		100		9,411		456			313		Subsidiary (Note 5)
	Youyi Co., Ltd.	Taiwan	Maintenance of information and communication technologies products		21,354		21,354		—		100		17,918		946			766		Subsidiary (Note 5)
Aval Technologies Co., Ltd.	Wiin Technology Co., Ltd.	Taiwan	Sale of information and communication technologies products		29,550		29,550		2,955		100		31,653		1,872			1,872		Subsidiary (Note 5)
Senyoung Insurance Agent Co., Ltd.	Senaolife Insurance Agent Co., Ltd.	Taiwan	Life insurance services		29,500		29,500		2,950		100		26,707		(2,513	)		(2,513	)	Subsidiary (Note 5)
CHYP Multimedia Marketing & Communications Co., Ltd	Click Force Marketing Company	Taiwan	Advertisement services		44,607		44,607		1,078		49		32,418		1,847			(876	)	Associate
International Integrated Systems, Inc.	Infoexplorer International Co., Ltd.	Samoa	Investment		24,806		24,806		795		100		27,052		290			290		Subsidiary (Note 6)
	IISI Investment Co., Ltd.	Mauritius	Investment		81,302		81,302		244		100		31,065		(8,588	)		(8,588	)	Subsidiary (Note 6)
	Unitronics Technology Corp.	Taiwan	Development and maintenance of information system		55,569		55,569		5,065		99.96		68,623		6,290			6,287		Subsidiary (Note 6)
Infoexplorer International Co., Ltd.	International Integrated Systems (Hong Kong) Limited	Hong Kong	Investment and engaging in technical consulting service		24,336		24,336		780		100		27,030		294			294		Subsidiary (Note 6)
IISI Investment Co., Ltd.	Leading Tech Co., Ltd.	Mauritius	Investment		65,374		65,374		316		100		20,027		(8,593	)		(8,593	)	Subsidiary (Note 6)
Leading Tech Co., Ltd.	Leading Systems Co., Ltd.	Mauritius	Investment		100,693		100,693		300		100		15,071		(8,594	)		(8,594	)	Subsidiary (Note 6)

Note	1: The amounts were based on reviewed financial statements.

Note	2: Recognized gain (loss) of investees includes amortization of differences between the investment cost and net value and elimination of unrealized transactions.

Note	3: Recognized gain (loss) and carrying value of the investees did not include the adjustment of the difference between the accounting treatment on standalone basis and consolidated basis as a result of the application of IFRS 15.

Note	4: Investments in mainland China are included in Table 8.

Note	5: The amount was eliminated upon consolidation.

Note	6: The Company only eliminated the amounts after accounts of IISI and its subsidiaries are included in the consolidated financial statements.

(Concluded)

- 96 -

TABLE 8

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA

NINE MONTHS ENDED SEPTEMBER 30, 2020

(Amounts in Thousands of New Taiwan Dollars)


Investee	Businesses and Products	Total Amount of Paid-in Capital		Investment Type (Note 1)		Accumulated Outflow of Investment from Taiwan as of January 1, 2020		Investment Flows				Accumulated Outflow of Investment from Taiwan as of September 30, 2020		Net Income (Loss) of the Investee			% Ownership of Direct or Indirect Investment		Investment Gain (Loss) (Note 2)			Carrying Value as of September 30, 2020		Accumulated Inward Remittance of Earnings as of September 30, 2020		Note
Investee	Businesses and Products	Total Amount of Paid-in Capital		Investment Type (Note 1)				Outflow		Inflow				Net Income (Loss) of the Investee			% Ownership of Direct or Indirect Investment		Investment Gain (Loss) (Note 2)			Carrying Value as of September 30, 2020				Note
Senao Trading (Fujian) Co., Ltd.	Sale of information and communication technologies products	$	1,073,170		2	$	1,073,170	$	—	$	—	$	1,073,170	$	—			100	$	—		$	—	$	—	Notes 8 and 13
Senao International Trading (Shanghai) Co., Ltd.	Sale of information and communication technologies products		955,838		2		955,838		—		—		955,838		(26,562	)		100		(26,562	)		23,370		—	Note 13
Senao International Trading (Shanghai) Co., Ltd.	Maintenance of information and communication technologies products		26,053		2		26,053		—		—		26,053		—			100		—			—		—	Notes 9 and 13
Senao International Trading (Jiangsu) Co., Ltd.	Sale of information and communication technologies products		263,736		2		263,736		—		—		263,736		—			100		—			—		—	Notes 10 and 13
Chunghwa Telecom (China) Co., Ltd.	Integrated information and communication solution services for enterprise clients, and intelligent energy network service		177,176		2		177,176		—		—		177,176		(5,814	)		100		(5,814	)		38,276		—	Notes 12 and 13
Jiangsu Zhenghua Information Technology Company, LLC	Providing intelligent energy saving solution and intelligent buildings services		189,410		2		142,057		—		—		142,057		—			75		—			—		—	Notes 11 and 13
Shanghai Taihua Electronic Technology Limited	Design of printed circuit board and related consultation service		51,233		2		51,233		—		—		51,233		(6,645	)		100		(6,645	)		19,137		—	Note 13
Su Zhou Precision Test Tech. Ltd.	Assembly processed of circuit board, design of printed circuit board and related consultation service		62,340		2		62,340		—		—		62,340		11,467			100		11,467			70,072		—	Note 13
Shanghai Chief Telecom Co., Ltd.	Telecommunications and internet service		10,150		1		4,973		—		—		4,973		4,848			49		2,375			13,142		—	Note 13
International Integrated Systems Inc. (Shanghai)	Development and maintenance of information system		48,753		2		39,923		—		—		39,923		(8,594	)		100		(8,594	)		20,112		—	Note 14

(Continued)

- 97 -


Investee	Main Businesses and Products	Total Amount of Paid-in Capital		Investment Type (Note 1)		Accumulated Outflow of Investment from Taiwan as of January 1, 2020		Investment Flows				Accumulated Outflow of Investment from Taiwan as of September 30, 2020		Net Income (Loss) of the Investee			% Ownership of Direct or Indirect Investment		Investment Gain (Loss) (Note 2)			Carrying Value as of September 30, 2020		Accumulated Inward Remittance of Earnings as of September 30, 2020		Note
Investee	Main Businesses and Products	Total Amount of Paid-in Capital		Investment Type (Note 1)				Outflow		Inflow				Net Income (Loss) of the Investee			% Ownership of Direct or Indirect Investment		Investment Gain (Loss) (Note 2)			Carrying Value as of September 30, 2020				Note
Huiyu Shanghai Management Consultancy Co., Ltd.	Development and maintenance of information system	$	13,670		3	$	—	$	—	$	—	$	—	$	(2,943	)		100	$	(2,943	)	$	1,491	$	—	Note 14


Investee	Accumulated Investment in Mainland China as of September 30, 2020		Investment Amounts Authorized by Investment Commission, MOEA		Upper Limit on Investment Stipulated by Investment Commission, MOEA
SENAO and its subsidiaries (Note 3)	$	2,318,797	$	2,318,797	$	3,455,346
Chunghwa Telecom (China) Co., Ltd. (Note 4)		177,176		177,176		227,794,269
Jiangsu Zhenghua Information Technology Company, LLC (Note 4)		142,057		142,057		227,794,269
Chunghwa Precision Test Tech Co., Ltd and its subsidiaries (Note 5)		113,573		159,725		4,088,213
Shanghai Chief Telecom Co., Ltd. (Note 6)		4,973		4,973		1,694,524
IISI and its subsidiaries (Note 7)		39,923		39,923		606,903

Note 1:

Investments are divided into three categories as follows:

Direct investment.

Investments through a holding company registered in a third region.

Others.

Note 2:

The amounts were calculated based on the investee’s reviewed financial statements.

Note 3:

Senao International Co., Ltd. and its subsidiaries were calculated based on the consolidated net assets value of Senao International Co., Ltd.

Note 4:

Chunghwa Telecom (China) Co., Ltd. and Jiangsu Zhenghua Information Technology Company, LLC were calculated based on the consolidated net assets value of Chunghwa Telecom Co., Ltd.

Note 5:

Chunghwa Precision Test Tech. Co., Ltd. and its subsidiaries were calculated based on the consolidated net assets value of Chunghwa Precision Test Tech. Co., Ltd

Note 6:

Shanghai Chief Telecom Co., Ltd. was calculated based on the consolidated net assets value of CHIEF Telecom Inc.

Note 7:

International Integrated Systems, Inc. and its subsidiaries were calculated based on the consolidated net assets value of International Integrated Systems, Inc.

Note 8:

The liquidation of Senao Trading (Fujian) Co., Ltd. was completed in May 2019.

Note 9:

The liquidation of Senao International Trading (Shanghai) Co., Ltd. was completed in March 2018.

Note 10:

The liquidation of Senao International Trading (Jiangsu) Co., Ltd. was completed in March 2019.

Note 11:

The liquidation of Jiangsu Zhenhua Information Technology Company, LLC. was completed in December 2018.

Note 12:

Chunghwa Telecom (China) Co., Ltd. was approved to end and dissolve its business in August 2020. The liquidation of Chunghwa Telecom (China) Co., Ltd. is still in process.

Note 13:

The amount was eliminated upon consolidation.

Note 14:

The Company only eliminated the amounts after accounts of IISI and its subsidiaries are included in the consolidated financial statements.

Note 15:

The English name is the same as the above entity; however, the Chinese name included in the respective Articles of Incorporation is different from the above entity.

(Concluded)

- 98 -

TABLE 9

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS

NINE MONTHS ENDED SEPTEMBER 30, 2020

(Amounts in Thousands of New Taiwan Dollars)


Year	No. (Note 1)		Company Name	Related Party	Nature of Relationship (Note 2)	Transaction Details
Year	No. (Note 1)		Company Name	Related Party	Nature of Relationship (Note 2)	Financial Statement Account	Amount (Note 5)		Payment Terms (Note 3)		% to Total Sales or Assets (Note 4)
2020		0	Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	a	Accounts receivable	$	44,408		—		—
						Accrued custodial receipts		82,079		—		—
						Accounts payable		891,359		—		—
						Amounts collected for others		227,627		—		—
						Revenues		1,511,816		—		1
						Operating costs and expenses		433,869		—		—
						Inventories		58,114		—		—
				CHIEF Telecom Inc.	a	Accounts receivable		61,497		—		—
						Accounts payable		23,730		—		—
						Revenues		293,800		—		—
						Operating costs and expenses		92,610		—		—
				CHYP Multimedia Marketing &	a	Accounts payable		11,440		—		—
				Communications Co., Ltd.		Amounts collected for others		55,019		—		—
						Revenues		24,722		—		—
						Operating costs and expenses		62,917		—		—
				Chunghwa System Integration Co., Ltd.	a	Accounts receivable		42,005		—		—
						Accounts payable		314,035		—		—
						Revenues		13,867		—		—
						Operating costs and expenses		873,098		—		1
						Inventories		104,847		—		—
						Prepayments		102,152		—		—
						Property, plant and equipment		129,367		—		—
						Intangible assets		46,056		—		—
						Other noncurrent assets		16,116		—		—
				Chunghwa Telecom Global Inc.	a	Accounts receivable		17,035		—		—
						Accounts payable		37,111		—		—
						Revenues		74,891		—		—
						Operating costs and expenses		240,165		—		—
				Donghwa Telecom Co., Ltd.	a	Accounts receivable		35,635		—		—
						Accounts payable		157,594		—		—
						Revenues		140,673		—		—
						Operating costs and expenses		344,277		—		—
				Spring House Entertainment Tech. Inc.	a	Amounts collected for others		20,859		—		—
						Revenues		22,695		—		—
				Chunghwa Telecom Japan Co., Ltd.	a	Revenues		26,196		—		—
						Operating costs and expenses		68,764		—		—
				Light Era Development Co., Ltd.	a	Inventories		14,629		—		—
						Property, plant and equipment		84,777		—		—

(Continued)

- 99 -


Year	No. (Note 1)		Company Name	Related Party	Nature of Relationship (Note 2)	Transaction Details
Year	No. (Note 1)		Company Name	Related Party	Nature of Relationship (Note 2)	Financial Statement Account	Amount (Note 5)		Payment Terms (Note 3)		% to Total Sales or Assets (Note 4)
				Chunghwa Telecom Singapore Pte., Ltd.	a	Accounts receivable	$	29,299		—		—
						Accounts payable		85,785		—		—
						Revenues		41,872		—		—
						Operating costs and expenses		132,484		—		—
				Honghwa International Co., Ltd.	a	Accounts receivable		71,733		—		—
						Accounts payable		530,477		—		—
						Revenues		234,179		—		—
						Operating costs and expenses		4,020,098		—		3
						Inventories		114,521		—		—
				Smartfun Digital Co., Ltd.	a	Operating costs and expenses		18,324		—		—
				Chunghwa Telecom (Thailand) Co., Ltd.	a	Operating costs and expenses		16,667		—		—
				CHT Security Co., Ltd.	a	Accounts payable		43,534		—		—
						Revenues		16,900		—		—
						Operating costs and expenses		128,276		—		—
						Inventories		34,112		—		—
						Other noncurrent assets		28,567		—		—
				Aval Technologies Co., Ltd.	a	Accounts payable		11,307		—		—
						Operating costs and expenses		119,032		—		—
						Customers’ deposits		22,727		—		—
						Inventories		13,834		—		—
				Senyoung Insurance Agent Co., Ltd.	a	Accounts receivable		71,568		—		—
						Revenues		80,011		—		—
				International Integrated Systems, Inc.	a	Accounts payable		24,923		—		—
						Operating costs and expenses		17,639		—		—
						Inventories		20,269				—
		1	Light Era Development Co., Ltd.	CHIEF Telecom Inc.	c	Revenues		72,476		—		—
		2	Donghwa Telecom Co., Ltd.	Chunghwa Telecom Singapore Pte., Ltd.	c	Unearned receipts		13,903		—		—
		3	CHIEF Telecom Inc.	Chunghwa Telecom Singapore Pte., Ltd.	c	Revenues		25,009		—		—
						Operating costs and expenses		45,934		—		—

Note 1:

Significant transactions between the Company and its subsidiaries or among subsidiaries are numbered as follows:

“0” for the Company.

Subsidiaries are numbered from “1”.

Note 2:

Related party transactions are divided into three categories as follows:

The Company to subsidiaries.

Subsidiaries to the Company.

Subsidiaries to subsidiaries.

Note 3:

Transaction terms with the related parties were determined in accordance with mutual agreements when there were no similar transactions with third parties. Other transactions with related parties were not significantly different from those with third parties.

Note 4:

For assets and liabilities, amount is shown as a percentage to consolidated total assets as of September 30, 2020, while revenues, costs and expenses are shown as a percentage to consolidated revenues for the nine months ended September 30, 2020.

Note 5:

The amount was eliminated upon consolidation.

(Concluded)

- 100 -

TABLE 10

CHUNGHWA TELECOM CO., LTD.

INFORMATION OF MAJOR STOCKHOLDERS

September 30, 2020


Name of Major Stockholders	Shares
Name of Major Stockholders	Number of Shares		Percentage of Ownership (%)
Ministry of Transportation and Communication		2,737,718,976		35.29
Shin Kong Life Insurance Co., Ltd.		610,368,184		7.86

Note:

This table presents information provided by the Taiwan Depository & Clearing Corporation on stockholders holding greater than 5% of Chunghwa’s dematerialized securities that have completed the process of registration and delivery by book-entry transfer as of the last business day for the current quarter.

- 101 -