EX-99.2

EX-99.2 3 d240092dex992.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, 2021 and 2020 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, 2021 and 2020, the related consolidated statements of comprehensive income for the three months ended September 30, 2021 and 2020 and for the nine months ended September 30, 2021 and 2020, the consolidated statements of changes in equity and cash flows for the nine months then ended, 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, 2021 and 2020, its consolidated financial performance for the three months ended September 30, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for the nine months ended September 30, 2021 and 2020 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.

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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 5, 2021

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.

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)


	September 30, 2021 (Reviewed)				December 31, 2020 (Audited)			September 30, 2020 (Reviewed)
ASSETS		Amount		%		Amount	%		Amount	%
CURRENT ASSETS

Cash and cash equivalents (Note 6)	$	23,577,346		4	$	30,419,655	6	$	17,703,012	4
Financial assets at fair value through profit or loss (Note 7)		2,401		—		9,897	—		7,240	—
Hedging financial assets (Note 20)		—		—		1,752	—		7,841	—
Contract assets (Note 30)		5,340,164		1		5,331,246	1		5,169,966	1
Trade notes and accounts receivable, net (Notes 9, 13 and 30)		21,381,611		4		22,621,902	5		22,595,966	5
Receivables from related parties (Note 38)		66,361		—		230,696	—		690,145	—
Inventories (Notes 10 and 39)		13,080,419		3		12,408,903	3		15,167,360	3
Prepayments (Note 11)		5,077,953		1		2,306,246	—		4,868,631	1
Other current monetary assets (Notes 12 and 35)		5,241,261		1		6,123,665	1		5,576,298	1
Other current assets (Notes 19 and 39)		3,093,606		1		2,349,097	—		3,366,624	—

Total current assets		76,861,122		15		81,803,059	16		75,153,083	15

NONCURRENT ASSETS
Financial assets at fair value through profit or loss (Note 7)		1,231,096		—		677,202	—		699,689	—
Financial assets at fair value through other comprehensive income (Notes 8 and 35)		3,334,970		1		7,193,174	2		7,632,641	2
Investments accounted for using equity method (Notes 14 and 35)		7,236,929		2		6,893,001	1		7,017,970	2
Contract assets (Note 30)		2,375,636		—		2,495,302	—		2,356,776	—
Property, plant and equipment (Notes 13, 15, 35, 38 and 39)		284,620,855		58		281,415,943	56		279,241,678	56
Right-of-use assets (Note 16)		10,491,845		2		11,009,206	2		11,159,348	3
Investment properties (Notes 17 and 35)		9,589,763		2		9,621,322	2		8,171,495	2
Intangible assets (Notes 13, 18 and 35)		85,490,442		17		90,284,560	18		91,885,832	19
Deferred income tax assets (Note 3)		3,015,458		1		3,132,713	1		3,348,788	—
Incremental costs of obtaining contracts (Note 30)		971,665		—		999,593	—		975,788	—
Net defined benefit assets (Note 3)		3,929,023		1		3,372,555	1		2,285,109	—
Prepayments (Note 11)		1,891,625		—		2,213,521	—		2,340,922	—
Other noncurrent assets (Notes 19, 35, 39 and 40)		4,841,387		1		5,266,841	1		5,191,151	1

Total noncurrent assets		419,020,694		85		424,574,933	84		422,307,187	85

TOTAL	$	495,881,816		100	$	506,377,992	100	$	497,460,270	100

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 21)	$	66,000		—	$	67,000	—	$	75,000	—
Short-term bills payable (Note 22)		—		—		6,999,198	1		11,990,829	3
Financial liabilities at fair value through profit or loss (Note 7)		—		—		143	—		19	—
Hedging financial liabilities (Note 20)		9,330		—		—	—		—	—
Contract liabilities (Notes 30 and 38)		13,905,112		3		13,436,706	3		16,184,042	4
Trade notes and accounts payable (Note 25)		13,695,667		3		15,590,814	3		13,256,209	3
Payables to related parties (Note 38)		485,332		—		645,944	—		494,388	—
Current tax liabilities (Note 3)		2,794,089		1		4,369,241	1		2,580,457	—
Lease liabilities (Notes 16, 35 and 38)		3,243,039		1		3,381,571	1		3,272,130	—
Other payables (Notes 26 and 35)		23,670,300		4		23,987,962	5		22,189,496	5
Provisions (Notes 13 and 27)		257,945		—		313,555	—		240,296	—
Current portion of long-term loans (Notes 23 and 39)		—		—		1,600,000	—		1,600,000	—
Other current liabilities		920,909		—		1,042,977	—		956,329	—

Total current liabilities		59,047,723		12		71,435,111	14		72,839,195	15

NONCURRENT LIABILITIES
Long-term loans (Notes 23 and 39)		1,600,000		—		—	—		—	—
Bonds payable (Note 24)		26,975,582		5		19,980,272	4		19,979,473	4
Contract liabilities (Note 30)		6,819,317		2		7,289,087	2		6,508,142	2
Deferred income tax liabilities (Note 3)		2,188,487		—		1,966,538	—		1,953,561	—
Provisions (Note 27)		132,775		—		100,616	—		105,323	—
Lease liabilities (Notes 16, 35 and 38)		5,948,847		1		6,215,096	1		6,300,425	1
Customers’ deposits (Note 38)		4,826,659		1		4,826,679	1		4,702,387	1
Net defined benefit liabilities (Note 3)		3,434,689		1		3,415,331	1		3,612,832	1
Other noncurrent liabilities		3,081,834		1		1,890,805	—		1,801,816	—

Total noncurrent liabilities		55,008,190		11		45,684,424	9		44,963,959	9

Total liabilities		114,055,913		23		117,119,535	23		117,803,154	24

EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT (Notes 13 and 29)
Common stocks		77,574,465		16		77,574,465	15		77,574,465	16

Additional paid-in capital		171,279,116		34		171,261,379	34		171,272,215	34

Retained earnings
Legal reserve		77,574,465		16		77,574,465	15		77,574,465	16
Special reserve		2,675,419		1		2,675,419	1		2,675,419	—
Unappropriated earnings		41,723,981		8		47,918,166	10		38,753,327	8

Total retained earnings		121,973,865		25		128,168,050	26		119,003,211	24

Others		(483,416	)	—		927,122	—		868,533	—

Total equity attributable to stockholders of the parent		370,344,030		75		377,931,016	75		368,718,424	74
NONCONTROLLING INTERESTS (Notes 13 and 29)		11,481,873		2		11,327,441	2		10,938,692	2

Total equity		381,825,903		77		389,258,457	77		379,657,116	76

TOTAL	$	495,881,816		100	$	506,377,992	100	$	497,460,270	100

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

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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
	2021					2020					2021						2020
	Amount			%		Amount			%		Amount			%			Amount			%
REVENUES (Notes 30, 38 and 44)	$	50,885,502			100	$	52,171,326			100	$	150,587,632			100		$	148,129,189			100
OPERATING COSTS (Notes 10, 28, 30, 31, 38 and 44)		32,045,819			63		34,505,914			66		94,996,966			63			94,697,928			64

GROSS PROFIT		18,839,683			37		17,665,412			34		55,590,666			37			53,431,261			36

OPERATING EXPENSES (Notes 9, 28, 31, 38 and 44)
Marketing		5,133,627			10		5,142,574			10		15,063,012			10			15,392,969			10
General and administrative		1,223,057			2		1,151,224			2		3,805,637			2			3,512,404			2
Research and development		935,528			2		980,526			2		2,703,773			2			2,877,722			2
Expected credit loss (reversal of credit loss)		100,706			—		(45,390	)		—		187,601			—			58,588			—

Total operating expenses		7,392,918			14		7,228,934			14		21,760,023			14			21,841,683			14

OTHER INCOME AND EXPENSES (Note 31)		(4,904	)		—		285,688			1		(2,114	)		—			273,854			—

INCOME FROM OPERATIONS		11,441,861			23		10,722,166			21		33,828,529			23			31,863,432			22

NON-OPERATING INCOME AND EXPENSES
Interest income		27,717			—		21,187			—		74,071			—			93,362			—
Other income (Notes 31 and 38)		210,946			—		86,892			—		301,795			—			416,510			—
Other gains and losses (Notes 31, 37 and 38)		411,087			1		(53,371	)		—		669,930			—			(76,322	)		—
Interest expenses (Notes 16, 31 and 38)		(56,089	)		—		(57,610	)		—		(161,831	)		—			(148,005	)		—
Share of profits of associates and joint ventures accounted for using equity method (Note 14)		65,996			—		106,012			—		174,314			—			270,932			—

Total non-operating income and expenses		659,657			1		103,110			—		1,058,279			—			556,477			—

INCOME BEFORE INCOME TAX		12,101,518			24		10,825,276			21		34,886,808			23			32,419,909			22
INCOME TAX EXPENSE (Notes 3 and 32)		2,368,741			5		2,109,499			4		6,762,940			4			6,303,782			4

NET INCOME		9,732,777			19		8,715,777			17		28,123,868			19			26,116,127			18

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)		(240,364	)		—		726,376			1		(1,250,774	)		(1	)		280,667			—

(Continued)

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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
	2021					2020					2021						2020
	Amount			%		Amount			%		Amount			%			Amount			%
Gain or loss on hedging instruments subject to basis adjustment (Note 20)	$	4,683			—	$	5,483			—	$	(11,082	)		—		$	7,514			—
Share of remeasurements of defined benefit pension plans of associates and joint ventures (Note 14)		—			—		—			—		758			—			725			—

		(235,681	)		—		731,859			1		(1,261,098	)		(1	)		288,906			—

Items that may be reclassified subsequently to profit or loss:
Exchange differences arising from the translation of the foreign operations		(15,890	)		—		(52,733	)		—		(63,445	)		—			(132,042	)		—
Share of exchange differences arising from the translation of the foreign operations of associates and joint ventures (Note 14)		(2	)		—		(1,565	)		—		(1,145	)		—			(2,800	)		—
Income tax relating to items that may be reclassified subsequently to profit or loss (Note 32)		—			—		56			—		—			—			56			—

		(15,892	)		—		(54,242	)		—		(64,590	)		—			(134,786	)		—

Total other comprehensive income (loss), net of income tax		(251,573	)		—		677,617			1		(1,325,688	)		(1	)		154,120			—

TOTAL COMPREHENSIVE INCOME	$	9,481,204			19	$	9,393,394			18	$	26,798,180			18		$	26,270,247			18

NET INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	9,366,784			18	$	8,336,836			16	$	27,119,256			18		$	25,194,210			17
Noncontrolling interests		365,993			1		378,941			1		1,004,612			1			921,917			1

	$	9,732,777			19	$	8,715,777			17	$	28,123,868			19		$	26,116,127			18

COMPREHENSIVE INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	9,119,447			18	$	9,017,894			17	$	25,798,842			17		$	25,374,920			17
Noncontrolling interests		361,757			1		375,500			1		999,338			1			895,327			1

	$	9,481,204			19	$	9,393,394			18	$	26,798,180			18		$	26,270,247			18

EARNINGS PER SHARE (Note 33)
Basic	$	1.21				$	1.07				$	3.50					$	3.25

Diluted	$	1.21				$	1.07				$	3.49					$	3.24

(Concluded)

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

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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 Paid-in Capital			Retained Earnings							Exchange Differences Arising from the Translation of the Foreign Operations			Unrealized Gain or Loss on Financial Assets at Fair Value Through Other Comprehensive Income			Gain or Loss on Hedging Instruments						Noncontrolling Interests (Notes 13 and 29)
	Common Stocks		Additional Paid-in Capital			Legal Reserve		Special Reserve		Unappropriated Earnings									Gain or Loss on Hedging Instruments			Total			Noncontrolling Interests (Notes 13 and 29)			Total Equity
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 and joint ventures 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

BALANCE, JANUARY 1, 2021	$	77,574,465	$	171,261,379		$	77,574,465	$	2,675,419	$	47,918,166		$	(314,531	)	$	1,239,901		$	1,752		$	377,931,016		$	11,327,441		$	389,258,457
Appropriation of 2020 earnings
Cash dividends distributed by Chunghwa		—		—			—		—		(33,403,565	)		—			—			—			(33,403,565	)		—			(33,403,565	)
Cash dividends distributed by subsidiaries		—		—			—		—		—			—			—			—			—			(896,335	)		(896,335	)
Unclaimed dividend		—		1,969			—		—		—			—			—			—			1,969			—			1,969
Change in additional paid-in capital from investments in associates and joint ventures accounted for using equity method		—		200			—		—		—			—			—			—			200			—			200
Net income for the nine months ended September 30, 2021		—		—			—		—		27,119,256			—			—			—			27,119,256			1,004,612			28,123,868
Other comprehensive income (loss) for the nine months ended September 30, 2021		—		—			—		—		758			(65,786	)		(1,244,304	)		(11,082	)		(1,320,414	)		(5,274	)		(1,325,688	)

Total comprehensive income (loss) for the nine months ended September 30, 2021		—		—			—		—		27,120,014			(65,786	)		(1,244,304	)		(11,082	)		25,798,842			999,338			26,798,180

Disposal of investments in equity instruments at fair value through other comprehensive income		—		—			—		—		89,366			—			(89,366	)		—			—			—			—
Share-based payment transactions of subsidiaries		—		15,568			—		—		—			—			—			—			15,568			51,429			66,997

BALANCE, SEPTEMBER 30, 2021	$	77,574,465	$	171,279,116		$	77,574,465	$	2,675,419	$	41,723,981		$	(380,317	)	$	(93,769	)	($	9,330	)	$	370,344,030		$	11,481,873		$	381,825,903

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

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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
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	$	34,886,808		$	32,419,909
Adjustments for:
Depreciation		23,748,237			23,184,863
Amortization		4,924,105			3,774,247
Amortization of incremental costs of obtaining contracts		602,028			582,950
Expected credit loss		187,601			58,588
Interest expenses		161,831			148,005
Interest income		(74,071	)		(93,362	)
Dividend income		(138,990	)		(246,084	)
Compensation cost of share-based payment transactions		14,329			4,937
Share of profits of associates and joint ventures accounted for using equity method		(174,314	)		(270,932	)
Loss (gain) on disposal of property, plant and equipment		2,114			(124,341	)
Gain on disposal of investment properties		—			(151,357	)
Loss on disposal of intangible assets		—			1,844
Loss (gain) on disposal of financial instruments		(320	)		1,788
Gain on disposal of investments accounted for using equity method		(3,239	)		(1,412	)
Provision for impairment loss and obsolescence of inventory		82,500			608,024
Valuation loss (gain) on financial assets and liabilities at fair value through profit or loss, net		(527,382	)		78,887
Others		(127,339	)		(40,116	)
Changes in operating assets and liabilities:
Decrease (increase) in:
Contract assets		111,339			98,393
Trade notes and accounts receivable		1,127,146			4,019,978
Receivables from related parties		164,335			(340,311	)
Inventories		(754,016	)		1,710,128
Prepayments		(2,449,811	)		(2,516,543	)
Other current monetary assets		(408,375	)		276,557
Other current assets		(744,509	)		(862,203	)
Incremental cost of obtaining contracts		(574,100	)		(616,086	)
Increase (decrease) in:
Contract liabilities		(1,364	)		(1,322,664	)
Trade notes and accounts payable		(1,896,214	)		(2,313,384	)
Payables to related parties		(160,612	)		(159,595	)
Other payables		(1,177,291	)		(2,955,045	)
Provisions		(23,451	)		26,037
Other current liabilities		(90,980	)		(41,634	)
Net defined benefit plans		(537,110	)		(82,172	)

Cash generated from operations		56,148,885			54,857,894

(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
	2021			2020
Interest paid	$	(171,360	)	$	(138,943	)
Income tax paid		(7,998,888	)		(7,808,819	)

Net cash provided by operating activities		47,978,637			46,910,132

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at fair value through other comprehensive income		(103,492	)		(83,254	)
Proceeds from disposal of financial assets at fair value through other comprehensive income		2,905,889			—
Acquisition of financial assets at fair value through profit or loss		(43,651	)		(38,944	)
Proceeds from disposal of financial assets at fair value through profit or loss		24,812			29,741
Acquisition of time deposits and negotiable certificates of deposit with maturities of more than three months		(16,220,655	)		(3,718,148	)
Proceeds from disposal of time deposits and negotiable certificates of deposit with maturities of more than three months		17,252,379			5,381,866
Proceeds from disposal of repurchase agreements collateralized by bonds with maturities of more than three months		—			15,335
Acquisition of investments accounted for using equity method		(329,520	)		—
Proceeds from disposal of investments accounted for using equity method		8,519			—
Acquisition of property, plant and equipment		(23,031,397	)		(13,972,367	)
Proceeds from disposal of property, plant and equipment		19,846			110,115
Acquisition of intangible assets		(128,143	)		(47,547,040	)
Acquisition of investment properties		(146	)		(54,435	)
Decrease (increase) in other noncurrent assets		345,768			(130,825	)
Interest received		74,980			102,113
Dividends received		335,390			515,364
Net cash inflow on acquisition of subsidiaries		—			354,056

Net cash used in investing activities		(18,889,421	)		(59,036,423	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans		179,000			115,000
Repayments of short-term loans		(180,000	)		(134,000	)
Proceeds from short-term bills payable		5,000,000			41,000,000
Repayments of short-term bills payable		(12,000,000	)		(29,000,000	)
Proceeds from issuance of bonds		7,000,000			20,000,000
Payments for transaction costs attributable to the issuance of bonds		(7,675	)		(21,038	)
Decrease in customers’ deposits		(31,108	)		(61,246	)
Payments for the principal of lease liabilities		(2,834,017	)		(2,863,451	)

(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
	2021			2020
Increase in other noncurrent liabilities	$	1,191,029		$	254,286
Cash dividends paid		(33,403,565	)		(32,782,969	)
Cash dividends distributed to noncontrolling interests		(893,247	)		(775,420	)
Change in other noncontrolling interests		52,668			78,382
Unclaimed dividend		1,969			1,647

Net cash used in financing activities		(35,924,946	)		(4,188,809	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(6,579	)		(31,531	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(6,842,309	)		(16,346,631	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		30,419,655			34,049,643

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	23,577,346		$	17,703,012


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, 2021 AND 2020

(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”). 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 5, 2021.

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, 2020. Please refer to the consolidated financial statements for the year ended December 31, 2020 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 Financial Reporting Interpretations Committee (IFRIC) and SIC Interpretations (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 Interests
Name of Investor	Name of Investee	Main Businesses and Products	September 30, 2021		December 31, 2020		September 30, 2020		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		b.
	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		56		56		c.
	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
	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 Interests
Name of Investor	Name of Investee	Main Businesses and Products	September 30, 2021		December 31, 2020		September 30, 2020		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
	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		77		80		80		d.
	International Integrated Systems, Inc. (“IISI”)	IT solution provider, IT application consultation, system integration and package solution		51		51		51		e.
Senao International Co., Ltd.	Senao International (Samoa) Holding Ltd. (“SIS”)	International investment		100		100		100		f.
	Youth Co., Ltd. (“Youth”)	Sale of information and communication technologies products		96		96		96		g.
	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
Senyoung Insurance Agent Co., Ltd.	Senaolife Insurance Agent Co., Ltd. (“Senaolife”)	Life insurance services		100		100		100
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		h.
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		i.
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		j
	CHPT Japan Co., Ltd. (“CHPT (JP)”)	Related services of electronic parts, machinery processed products and printed circuit board		100		100		100

(Continued)

- 12 -


			Percentage of Ownership Interests
Name of Investor	Name of Investee	Main Businesses and Products	September 30, 2021		December 31, 2020		September 30, 2020		Note
	Chunghwa Precision Test Tech. International, Ltd. (“CHPT (International)”)	Wholesale and retail of electronic materials, and investment		100		100		100		k.
Senao International (Samoa) Holding Ltd.	Senao International HK Limited (“SIHK”)	International investment		100		100		100		l.
Senao International HK Limited	Senao International Trading (Shanghai) Co., Ltd. (“SITS”)	Sale of information and communication technologies products		—		100		100		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		100		o.
International Integrated Systems, Inc.	Infoexplorer International Co., Ltd.(“IESA”)	Investment		100		100		100		p.
	IISI Investment Co., Ltd. (“IICL”)	Investment		100		100		100		p.
	Unitronics Technology Corp. (“UTC”)	Development and maintenance of information system		99.96		99.96		99.96		p.
Infoexplorer International Co., Ltd.	International Integrated Systems (Hong Kong) Limited (“IEHK”)	Investment and technical consulting service		100		100		100		p.
IISI Investment Co., Ltd.	Leading Tech Co., Ltd. (“LTCL”)	Investment		100		100		100		p.
Leading Tech Co., Ltd.	Leading Systems Co., Ltd. (“LSCL”)	Investment		100		100		100		p.
Leading Systems Co., Ltd.	International Integrated Systems Inc. (Shanghai) (“IISS”)	Development and maintenance of information system		—		100		100		p. q.
International Integrated Systems Inc. (Shanghai)	Huiyu Shanghai Management Consultancy Co., Ltd. (“HSMC”)	Development and maintenance of information system		—		—		100		p. r.

(Concluded)

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 Company treated SENAO as a subsidiary.

DHT reduced and returned its capital to its stakeholders in March 2021. The Company’s ownership interest in DHT remained the same.

CHIEF issued new shares in March, December 2020, and March 2021 as its employees exercised options. Therefore, the Company’s ownership interest in CHIEF decreased to 59.08% and 58.90% as of December 31, 2020 and September 30, 2021, respectively.

- 13 -

CHTSC issued new shares in February 2021 as its employees exercised options. Therefore, the Company’s ownership interest in CHTSC decreased to 77.46% as of September 30, 2021.

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 and January 2021 as its employees exercised options; therefore, the Company’s ownership interest in IISI decreased to 51.20% and 51.02% as of December 31, 2020 and September 30, 2021, respectively.

SIS reduced and returned its capital to its stakeholders in November 2020 and July 2021. SIS reduced 8.14% of its capital to offset accumulated deficits in February 2021. The Company’s ownership interest in SIS remained the same. Furthermore, SIS was approved for another capital reduction in October 2021 to reduce 48.15% of its capital to offset accumulated deficits.

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%.

CHIEF has 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.

CHPT increased its investment in CHPT (US) proportionally in August 2021 and the Company’s ownership interest in CHPT (US) remained the same.

CHPT increased its investment in CHPT (International) proportionally in April 2021 and the Company’s ownership interest in CHPT (International) remained the same.

SIHK reduced and returned its capital to its stakeholders in November 2020 and May 2021. SIHK reduced 8.15% and 47.79% of its capital to offset accumulated deficits in January and August 2021, respectively. The Company’s ownership interest in SIHK remained the same.

SITS completed its liquidation in April 2021.

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

CHPT (International) increased its investment in SZPT proportionally in July 2021. The Company’s ownership interest in SZPT remained the same.

It is a subsidiary of IISI.

IISS completed its liquidation in August 2021.

HSMC completed its liquidation in December 2020.

- 14 -

The following diagram presented information regarding the relationship and percentages of ownership interests between Chunghwa and its subsidiaries as of September 30, 2021.

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.

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.

- 15 -

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, 2020.

5. APPLICATION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

Initial application of the amendments to the IFRSs endorsed and issued into effect by the FSC

The initial application of the amendments to the IFRSs issued by the International Accounting Standards Board and endorsed and issued into effect by the FSC does not have material impacts on the Company’s consolidated financial statements.

Amendments to IFRSs endorsed by the FSC for application starting from January 1, 2022


New, Revised or Amended Standards and Interpretations		Effective Date Announced by IASB
Amendments to IFRSs	Annual Improvements to IFRS Standards 2018-2020	January 1, 2022 (Note 1)
Amendments to IFRS 3	Reference to the Conceptual Framework	January 1, 2022 (Note 2)
Amendments to IAS 16	Property, Plant and Equipment - Proceeds before Intended Use	January 1, 2022 (Note 3)
Amendments to IAS 37	Onerous Contracts - Cost of Fulfilling a Contract	January 1, 2022 (Note 4)

Note 1:

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 2:

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 3:

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 4:

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.

- 16 -

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 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
Amendments to IAS 1	Disclosure of Accounting Policies	January 1, 2023 (Note 2)
Amendments to IAS 8	Definition of Accounting Estimates	January 1, 2023 (Note 3)
Amendments to IAS 12	Deferred Tax related to Assets and Liabilities arising from a Single Transaction	January 1, 2023 (Note 4)

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 will be applied prospectively for annual reporting periods beginning on or after January 1, 2023.

Note 3:

The amendments are applicable to changes in accounting estimates and changes in accounting policies that occur on or after the beginning of the annual reporting period beginning on or after January 1, 2023.

Note 4:

Except that deferred taxes will be recognized for temporary differences associated with leases and decommissioning obligations on January 1, 2022, the amendments will be applied prospectively to transactions that occur on or after January 1, 2022.

6.	CASH AND CASH EQUIVALENTS


	September 30, 2021		December 31, 2020		September 30, 2020
Cash
Cash on hand	$	329,294	$	486,989	$	343,096
Bank deposits		14,502,551		10,961,220		10,099,127

		14,831,845		11,448,209		10,442,223

Cash equivalents (investments with maturities of less than three months)
Commercial paper		5,875,826		14,060,568		4,938,075
Negotiable certificates of deposit		500,000		2,600,000		—
Time deposits		2,369,675		2,307,892		2,302,877

(Continued)

- 17 -


	September 30, 2021		December 31, 2020		September 30, 2020
Repurchase agreements collateralized by bonds	$	—	$	—	$	17,703
Stimulus vouchers		—		2,986		2,134

		8,745,501		18,971,446		7,260,789

	$	23,577,346	$	30,419,655	$	17,703,012

(Concluded)

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, 2021	December 31, 2020	September 30, 2020
Bank deposits	0.00%~0.45%	0.00%~0.40%	0.00%~0.35%
Commercial paper	0.20%~0.23%	0.14%~0.26%	0.22%~0.33%
Negotiable certificates of deposit	0.26%	0.24%~0.30%	—
Time deposits	0.01~3.60%	0.10%~3.60%	0.10%~3.60%
Repurchase agreements collateralized by bonds	—	—	0.50%

7.	FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS


	September 30, 2021		December 31, 2020		September 30, 2020
Financial assets-current
Mandatorily measured at FVTPL
Derivatives (not designated for hedge)
Forward exchange contracts	$	—	$	2,271	$	38
Non-derivatives
Listed stocks—domestic		2,401		7,626		7,202

	$	2,401	$	9,897	$	7,240

Financial assets-noncurrent
Mandatorily measured at FVTPL
Non-derivatives
Non-listed stocks—domestic	$	731,032	$	441,095	$	455,275
Non-listed stocks—foreign		475,064		236,107		244,414
Limited partnership—domestic		25,000		—		—

	$	1,231,096	$	677,202	$	699,689

Financial liabilities-current
Held for trading
Derivatives (not designated for hedge)
Forward exchange contracts	$	—	$	143	$	19

- 18 -

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

There were no outstanding forward exchange contracts not designated for hedge as of September 30, 2021.


	Currency	Maturity Period		Contract Amount (In Thousands)
December 31, 2020
Forward exchange contracts—buy	NT$/EUR		2021.03		NT$50,435/EUR1,500
Forward exchange contracts—sell	US$/NT$		2021.02-03		US$13,500/NT$379,472
September 30, 2020
Forward exchange contracts—buy	NT$/EUR		2020.12		NT$61,426/EUR1,800
Forward exchange contracts—sell	US$/NT$		2020.11		US$500/NT$14,589

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, 2021		December 31, 2020		September 30, 2020
Domestic investments
Listed stocks	$	160,467	$	2,754,175	$	2,317,591
Non-listed stocks		3,069,345		4,324,592		5,192,117
Foreign investments
Non-listed stocks		105,158		114,407		122,933

	$	3,334,970	$	7,193,174	$	7,632,641

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 Electro Chemical 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 disposed of its investment in China Airlines, Ltd. starting from December 2020 and sold all its shares by February 2021. The total fair value of the disposed investment was $2,635,568 thousand in 2021. The investments in Imedtac Co., Ltd. (“IME”) and AgriTalk Technology Inc. (“ATT”) held by CHI were reclassified from financial asset at FVOCI to associates in August 2021 and July 2021 at fair value. (Please refer to Note 14(a)). The related unrealized gain on financial assets at FVOCI of $89,366 thousand was transferred from other equity to retained earnings upon the aforementioned disposals.

- 19 -

9.	TRADE NOTES AND ACCOUNTS RECEIVABLE, NET


	September 30, 2021			December 31, 2020			September 30, 2020
Trade notes and accounts receivable	$	23,336,496		$	24,776,266		$	24,921,407
Less: Loss allowance		(1,954,885	)		(2,154,364	)		(2,325,441	)

	$	21,381,611		$	22,621,902		$	22,595,966

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, 2021


	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%~1	%		1%~24	%		2%~72	%		10%~86	%		24%~93	%		55%~98	%		100	%
Gross carrying amount	$	15,741,157		$	306,115		$	108,547		$	60,527		$	59,320		$	37,844		$	639,480		$	16,952,990
Loss allowance (lifetime ECL)		(48,801	)		(28,140	)		(49,774	)		(51,824	)		(41,636	)		(26,969	)		(639,480	)		(886,624	)

Amortized cost	$	15,692,356		$	277,975		$	58,773		$	8,703		$	17,684		$	10,875		$	—		$	16,066,366

Project business
Expected credit loss rate (Note b)		0%~5	%		5	%		10	%		30	%		50	%		80	%		100	%
Gross carrying amount	$	2,199,835		$	1,107		$	17,790		$	2,512		$	6,271		$	—		$	1,025,585		$	3,253,100
Loss allowance (lifetime ECL)		(5,712	)		(553	)		(1,779	)		(754	)		(3,440	)		—			(1,025,585	)		(1,037,823	)

Amortized cost	$	2,194,123		$	554		$	16,011		$	1,758		$	2,831		$	—		$	—		$	2,215,277

December 31, 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	%		2%~24	%		3%~68	%		11%~83	%		28%~90	%		52%~96	%		100	%
Gross carrying amount	$	15,839,132		$	203,949		$	50,897		$	31,263		$	29,872		$	25,351		$	625,591		$	16,806,055
Loss allowance (lifetime ECL)		(56,249	)		(20,880	)		(23,483	)		(24,859	)		(24,319	)		(21,665	)		(625,591	)		(797,046	)

Amortized cost	$	15,782,883		$	183,069		$	27,414		$	6,404		$	5,553		$	3,686		$	—		$	16,009,009

Project business
Expected credit loss rate (Note b)		0%~5	%		5	%		10	%		30	%		50	%		80	%		100	%
Gross carrying amount	$	3,472,738		$	64,372		$	26,810		$	8,963		$	2,163		$	2,691		$	1,287,567		$	4,865,304
Loss allowance (lifetime ECL)		(20,060	)		(3,219	)		(2,772	)		(2,760	)		(1,132	)		(2,160	)		(1,287,567	)		(1,319,670	)

Amortized cost	$	3,452,678		$	61,153		$	24,038		$	6,203		$	1,031		$	531		$	—		$	3,545,634

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

- 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
	2021			2020
Beginning balance	$	2,154,364		$	2,359,756
Add: Provision for credit loss		183,756			61,890
Add: Acquired by business combinations (Note 13)		—			1,639
Less: Amounts written off		(383,235	)		(97,844	)

Ending balance	$	1,954,885		$	2,325,441

10.

INVENTORIES


	September 30, 2021		December 31, 2020		September 30, 2020
Merchandise	$	3,788,100	$	3,902,854	$	3,682,561
Project in process		6,804,257		6,166,583		9,108,343
Work in process		162,208		126,163		147,958
Raw materials		242,228		137,495		152,448

		10,996,793		10,333,095		13,091,310
Land held under development		1,998,733		1,998,733		1,998,733
Construction in progress		84,893		77,075		77,317

	$	13,080,419	$	12,408,903	$	15,167,360

The operating costs related to inventories were $10,896,043 thousand (including the valuation loss on inventories of $50,017 thousand) and $32,810,873 thousand (including the valuation loss on inventories of $82,500 thousand) for the three months and nine months ended September 30, 2021, respectively. 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.

As of September 30, 2021, December 31, 2020 and September 30, 2020, inventories of $2,083,626 thousand, $2,075,808 thousand and $2,076,050 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. The Board of Directors of LED resolved to sign a joint construction and separate sale contract with Farglory Land Development Co., Ltd. in June 2021.

- 22 -

11.

PREPAYMENTS


	September 30, 2021		December 31, 2020		September 30, 2020
Prepaid rents	$	2,465,228	$	2,863,510	$	3,007,495
Prepaid salary and bonus		2,423,139		4,655		2,543,550
Others		2,081,211		1,651,602		1,658,508

	$	6,969,578	$	4,519,767	$	7,209,553

Current
Prepaid salary and bonus	$	2,423,139	$	4,655	$	2,543,550
Prepaid rents		587,426		651,510		666,767
Others		2,067,388		1,650,081		1,658,314

	$	5,077,953	$	2,306,246	$	4,868,631

Noncurrent
Prepaid rents	$	1,877,802	$	2,212,000	$	2,340,728
Others		13,823		1,521		194

	$	1,891,625	$	2,213,521	$	2,340,922

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, 2021		December 31, 2020		September 30, 2020
Time deposits and negotiable certificates of deposit with maturities of more than three months	$	3,547,964	$	4,595,951	$	4,371,489
Others		1,693,297		1,527,714		1,204,809

	$	5,241,261	$	6,123,665	$	5,576,298

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


	September 30, 2021	December 31, 2020	September 30, 2020
Time deposits and negotiable certificates of deposit with maturities of more than three months	0.03%~2.25%	0.07%~2.25%	0.07%~2.55%

- 23 -

13.

SUBSIDIARIES

Information on subsidiaries with material noncontrolling interests


	Principal		Proportion of Ownership Interests and Voting Rights Held by Noncontrolling Interests
Subsidiaries	Place of Business		September 30, 2021			December 31, 2020			September 30, 2020
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
	2021		2020		2021		2020
SENAO	$	113,115	$	94,443	$	301,086	$	201,343

CHPT	$	149,567	$	188,532	$	402,132	$	459,571


	Accumulated Noncontrolling Interests
	September 30, 2021		December 31, 2020		September 30, 2020
SENAO	$	4,341,785	$	4,311,048	$	4,190,814
CHPT		4,775,952		4,635,240		4,480,000
Individually immaterial subsidiaries with noncontrolling interests		2,364,136		2,381,153		2,267,878

	$	11,481,873	$	11,327,441	$	10,938,692

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, 2021			December 31, 2020			September 30, 2020
Current assets	$	7,992,966		$	6,834,221		$	6,877,640
Noncurrent assets		3,130,441			3,340,983			3,361,673
Current liabilities		(4,722,336	)		(3,832,372	)		(4,018,979	)
Noncurrent liabilities		(430,553	)		(415,712	)		(460,623	)

Equity	$	5,970,518		$	5,927,120		$	5,759,711

Equity attributable to the parent	$	1,628,733		$	1,616,072		$	1,568,897
Equity attributable to noncontrolling interests		4,341,785			4,311,048			4,190,814

	$	5,970,518		$	5,927,120		$	5,759,711

- 24 -


	Three Months Ended September 30					Nine Months Ended September 30
	2021		2020			2021		2020
Revenues and income	$	7,436,225	$	6,813,751		$	21,716,287	$	19,563,348
Costs and expenses		7,278,649		6,682,148			21,296,824		19,282,146

Profit for the period	$	157,576	$	131,603		$	419,463	$	281,202

Profit attributable to the parent	$	44,461	$	37,160		$	118,377	$	79,859
Profit attributable to noncontrolling interests		113,115		94,443			301,086		201,343

Profit for the period	$	157,576	$	131,603		$	419,463	$	281,202

Other comprehensive income (loss) attributable to the parent	$	141	$	(1,560	)	$	3,444	$	(3,430	)
Other comprehensive income (loss) attributable to noncontrolling interests		1,082		(4,796	)		7,870		(9,449	)

Other comprehensive income (loss) for the period	$	1,223	$	(6,356	)	$	11,314	$	(12,879	)

Total comprehensive income attributable to the parent	$	44,602	$	35,600		$	121,821	$	76,429
Total comprehensive income attributable to noncontrolling interests		114,197		89,647			308,956		191,894

Total comprehensive income for the period	$	158,799	$	125,247		$	430,777	$	268,323


	Nine Months Ended September 30
	2021			2020
Net cash flow from operating activities	$	683,518		$	35,759
Net cash flow from investing activities		242,127			46,856
Net cash flow from financing activities		(614,130	)		(609,129	)
Effect of exchange rate changes on cash and cash equivalents		(118	)		488

Net cash inflow (outflow)	$	311,397		$	(526,026	)

Dividends paid to noncontrolling interests	$	278,218		$	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, 2021			December 31, 2020			September 30, 2020
Current assets	$	4,091,697		$	4,122,134		$	3,949,170
Noncurrent assets		4,070,226			4,012,654			4,021,513
Current liabilities		(887,893	)		(1,072,538	)		(1,142,130	)
Noncurrent liabilities		(10,224	)		(12,456	)		(14,864	)

Equity	$	7,263,806		$	7,049,794		$	6,813,689

Equity attributable to CHI	$	2,487,854		$	2,414,554		$	2,333,689
Equity attributable to noncontrolling interests		4,775,952			4,635,240			4,480,000

	$	7,263,806		$	7,049,794		$	6,813,689


	Three Months Ended September 30					Nine Months Ended September 30
	2021			2020		2021			2020
Revenues and income	$	1,111,067		$	1,204,323	$	2,976,795		$	3,168,534
Costs and expenses		883,596			917,582		2,365,195			2,469,572

Profit for the period	$	227,471		$	286,741	$	611,600		$	698,962

Profit attributable to CHI	$	77,904		$	98,209	$	209,468		$	239,391
Profit attributable to noncontrolling interests		149,567			188,532		402,132			459,571

Profit for the period	$	227,471		$	286,741	$	611,600		$	698,962

Other comprehensive income (loss) attributable to CHI	$	(335	)	$	443	$	(1,411	)	$	(443	)
Other comprehensive income (loss) attributable to noncontrolling interests		(642	)		851		(2,709	)		(851	)

Other comprehensive income (loss) for the period	$	(977	)	$	1,294	$	(4,120	)	$	(1,294	)

Total comprehensive income attributable to CHI	$	77,569		$	98,652	$	208,057		$	238,948
Total comprehensive income attributable to noncontrolling interests		148,925			189,383		399,423			458,720

Total comprehensive income for the period	$	226,494		$	288,035	$	607,480		$	697,668

- 26 -


	Nine Months Ended September 30
	2021			2020
Net cash flow from operating activities	$	541,953		$	1,050,319
Net cash flow from investing activities		(448,439	)		(296,387	)
Net cash flow from financing activities		(408,831	)		(344,264	)
Effect of exchange rate changes on cash and cash equivalents		(2,559	)		487

Net cash inflow (outflow)	$	(317,876	)	$	410,155

Dividends paid to noncontrolling interests	$	258,710		$	215,591

Equity transactions with noncontrolling interests

CHIEF issued new shares in March, December 2020 and March 2021, as its employees exercised options. Therefore, the Company’s ownership interest in CHIEF decreased. See Note 34(a) for details.

CHTSC issued new shares in February 2021 as its employees exercised options. Therefore, the Company’s ownership interest in CHTSC decreased. See Note 34(b) for details.

IISI issued new shares in September 2020 and January 2021 as its employees exercised options. Therefore, the Company’s ownership interest in IISI decreased. See Note 34(c) 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.

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, 2021 and 2020 were as follows:


	Nine Months Ended September 30, 2021
	CHIEF Share-Based Payment			CHTSC Share-Based Payment			IISI Share-Based Payment
Cash consideration received from noncontrolling interests	$	28,364		$	20,650		$	3,654
The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests		(17,242	)		(19,066	)		(792	)

Differences arising from equity transactions	$	11,122		$	1,584		$	2,862

Line items for equity transaction adjustments
Additional paid-in capital - arising from changes in equities of subsidiaries	$	11,122		$	1,584		$	2,862

- 27 -


	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

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

(Continued)

- 28 -


	IISI and Its Subsidiaries
Noncurrent assets
Property, plant and equipment	$	47,962
Right-of-use assets		70,007
Intangible assets		11,861
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


	September 30, 2021		December 31, 2020		September 30, 2020
Investments in associates	$	7,226,883	$	6,882,801	$	7,017,970
Investment in joint venture		10,046		10,200		—

	$	7,236,929	$	6,893,001	$	7,017,970

- 30 -

Investments in associates

Investments in associates were as follows:


	Carrying Amount
	September 30, 2021		December 31, 2020		September 30, 2020
Material associate
Next Commercial Bank Co., Ltd. (“NCB”)	$	3,538,205	$	3,776,876	$	3,932,953

Associates that are not individually material
Listed
Senao Networks, Inc. (“SNI”)		1,023,428		991,610		951,699
KingwayTek Technology Co., Ltd. (“KWT”)		258,304		249,044		241,665
Non-listed
ST-2 Satellite Ventures Pte., Ltd. (“STS”)		592,728		488,257		554,839
Viettel-CHT Co., Ltd. (“Viettel-CHT”)		421,393		363,522		341,047
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		299,649		330,031		318,167
WiAdvance Technology Corporation (“WATC”)		261,577		—		—
So-net Entertainment Taiwan Limited (“So-net”)		218,251		226,647		220,102
Chunghwa PChome Fund I Co., Ltd. (“CPFI”)		217,413		192,856		194,378
KKBOX Taiwan Co., Ltd. (“KKBOXTW”)		158,212		163,809		162,206
Taiwan International Ports Logistics Corporation (“TIPL”)		65,215		55,925		55,190
CHT Infinity Singapore Pte. Ltd. (“CISG”)		55,552		—		—
Imedtac Co., Ltd. (“IME”)		41,001		—		—
Click Force Co., Ltd. (“CF”)		35,743		33,086		32,418
AgriTalk Technology Inc. (“ATT”)		33,612		—		—
Cornerstone Ventures Co., Ltd. (“CVC”)		6,600		6,058		5,919
Alliance Digital Tech Co., Ltd. (“ADT”)		—		5,080		5,080
UUPON Inc. (“UUPON”)		—		—		2,307
International Integrated Systems, Inc. (“IISI”)		—		—		—
MeWorks LIMITED (HK) (“MeWorks”)		—		—		—

		3,688,678		3,105,925		3,085,017

	$	7,226,883	$	6,882,801	$	7,017,970

- 31 -

The percentages of ownership interests 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, 2021		December 31, 2020		September 30, 2020
Material associate
Next Commercial Bank Co., Ltd. (“NCB”)		42		42		42
Associates that are not individually material
Senao Networks, Inc. (“SNI”)		34		34		34
KingwayTek Technology Co., Ltd. (“KWT”)		23		23		23
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
WiAdvance Technology Corporation (“WATC”)		20		—		—
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
CHT Infinity Singapore Pte. Ltd. (“CISG”)		40		—		—
Imedtac Co., Ltd. (“IME”)		8		—		—
Click Force Co., Ltd. (“CF”)		49		49		49
AgriTalk Technology Inc. (“ATT”)		17		—		—
Cornerstone Ventures Co., Ltd. (“CVC”)		49		49		49
Alliance Digital Tech Co., Ltd. (“ADT”)		—		14		14
UUPON Inc. (“UUPON”)		—		—		22
International Integrated Systems, Inc. (“IISI”)		—		—		—
MeWorks LIMITED (HK) (“MeWorks”)		—		—		—

Summarized financial information of NCB was set out below:


	September 30, 2021			December 31, 2020			September 30, 2020
Assets	$	9,066,931		$	9,906,945		$	9,971,758
Liabilities		(519,296	)		(788,813	)		(585,235	)

Equity	$	8,547,635		$	9,118,132		$	9,386,523

(Continued)

- 32 -


	September 30, 2021			December 31, 2020			September 30, 2020
The percentage of ownership interests held by the Company		41.90	%		41.90	%		41.90	%
Equity attributable to the Company	$	3,581,459		$	3,820,497		$	3,932,953
Unrealized loss from downstream transactions		(43,254	)		(43,621	)		—

The carrying amount of investment	$	3,538,205		$	3,776,876		$	3,932,953

(Concluded)


	Three Months Ended September 30						Nine Months Ended September 30
	2021			2020			2021			2020
Revenues	$	—		$	—		$	—		$	—

Net loss for the period	$	(181,663	)	$	(139,881	)	$	(570,497	)	$	(337,028	)
Other comprehensive income		—			—			—			—

Total comprehensive loss for the period	$	(181,663	)	$	(139,881	)	$	(570,497	)	$	(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
	2021			2020			2021			2020
The Company’s share of profits	$	144,600		$	164,622		$	413,139		$	412,147
The Company’s share of other comprehensive loss		(2	)		(1,565	)		(387	)		(2,075	)

The Company’s share of total comprehensive income	$	144,598		$	163,057		$	412,752		$	410,072

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


	September 30, 2021		December 31, 2020		September 30, 2020
SNI	$	1,497,087	$	1,707,640	$	1,472,218

KWT	$	1,027,333	$	675,911	$	687,206

The Company invested $55,720 thousand in June 2021. The ownership interest in CISG is 40.00%. CISG mainly engages in investment business.

- 33 -

The Company invested $273,800 thousand and obtained 20.33% ownership interest by participating in the capital increase of WATC in March 2021. WATC mainly engages in software solution integration.

KWT repurchased its stock from January to February 2020. Therefore, the Company’s ownership interest in KWT increased to 22.72%.

Chunghwa’s Board of Directors approved the investment of 20.58% ownership interest in IISI in January 2020 and the equity transaction was completed on July 1, 2020 (“acquisition date”). 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 the consolidated financial statements. Please refer to Note 13(c).

UUPON reduced 95.44% of its capital to offset accumulated deficits in September 2020 and the Company did not participate in the capital increase of UUPON in October 2020. Therefore, the Company’s ownership interest in UUPON decreased to 5.36% and lost its significant influence over UUPON. Hence the Company discontinued to treat UUPON as an associate. Instead, the Company treated it as a financial asset at fair value through other comprehensive income.

The Company disposed of all shares of MeWorks in September 2020.

The Company’s ownership interest in NCB is 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 direct its relevant activities. Therefore, Chunghwa does not have control over NCB and merely has significant influence over NCB and treated it as an associate.

The Company invested and obtained 50% ownership interest in 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. Therefore, the Company recognized CPFI as an investment in associate.

The Company invested and obtained 49% ownership interest in 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 invested and obtained 8% ownership interest in IME. The Company originally treated it as a financial asset at FVOCI. However, as the Company obtained one out of five seats of the Board of Directors of IME in August 2021 and has significant influence over IME, the Company reclassified it as an associate.

The Company invested and obtained 17% ownership interest in ATT. The Company originally treated it as a financial asset at FVOCI. However, as the Company obtained one out of three seats of the Board of Directors of ATT in July 2021 and has significant influence over ATT, the Company reclassified it as an associate.

The Company owns 14% ownership interest in ADT. Considering the seats that the Company controls in the Board of Directors of ADT and the relative size of ownership interest and the dispersion of shares owned by the other stockholders, the Company has significant influence over ADT. ADT completed its liquidation in August 2021. The Company received the liquidation distribution of $8,519 thousand and recognized disposal gain of $3,239 thousand under “other gains and losses” on the consolidated statements of comprehensive income.

- 34 -

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

Investment in joint venture

Investment in joint venture was as follows:


	Carrying Amount						% of Ownership Interests and Voting Rights
Name of Joint Venture	September 30, 2021		December 31, 2020		September 30, 2020		September 30, 2021			December 31, 2020			September 30, 2020
Non-listed
Chunghwa SEA Holdings (“CHT SEA”)	$	10,046	$	10,200	$	—		51	%		51	%		—

The Company invested $10,200 thousand to establish a joint venture, CHT SEA, with Delta Electronics, Inc. and Kwang Hsing Industrial Co., Ltd. in December 2020 and obtained 51% ownership interest of CHT SEA. However, according to the mutual agreements among stockholders, the Company does not individually direct CHT SEA’s relevant activities and has joint control with the other party; therefore, the Company treated CHT SEA as a joint venture.

The joint venture is not considered individually material to the Company. Summarized financial information of CHT SEA was set out below:


	Three Months Ended September 30					Nine Months Ended September 30
	2021			2020		2021			2020
The Company’s share of loss	$	(40	)	$	—	$	(154	)	$	—
The Company’s share of other comprehensive income		—			—		—			—

The Company’s share of total comprehensive loss	$	(40	)	$	—	$	(154	)	$	—

The Company’s share of loss and other comprehensive income of the joint venture was recognized based on the reviewed financial statements.

15.

PROPERTY, PLANT AND EQUIPMENT


	September 30, 2021		December 31, 2020		September 30, 2020
Assets used by the Company	$	277,328,730	$	273,822,588	$	271,452,524
Assets subject to operating leases		7,292,125		7,593,355		7,789,154

	$	284,620,855	$	281,415,943	$	279,241,678

- 35 -

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, 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

Cost
Balance on January 1, 2021	$	101,990,645		$	1,630,362		$	70,889,578		$	12,405,580		$	710,775,709		$	3,894,243		$	10,299,819		$	8,529,416		$	920,415,352
Additions		—			—			25,936			42,332			67,565			—			132,494			23,710,070			23,978,397
Disposal		—			(1,025	)		(29,418	)		(966,571	)		(14,959,264	)		(42,934	)		(291,415	)		—			(16,290,627	)
Effect of foreign exchange differences		—			—			—			145			(50,274	)		(360	)		(2,384	)		(4,196	)		(57,069	)
Others		76,225			9,922			308,126			155,535			20,869,837			21,283			293,715			(21,472,274	)		262,369
Balance on September 30, 2021	$	102,066,870		$	1,639,259		$	71,194,222		$	11,637,021		$	716,703,573		$	3,872,232		$	10,432,229		$	10,763,016		$	928,308,422
Accumulated depreciation and impairment
Balance on January 1, 2021	$	—		$	(1,399,204	)	$	(29,247,331	)	$	(10,638,967	)	$	(593,662,932	)	$	(3,718,392	)	$	(7,925,938	)	$	—		$	(646,592,764	)
Depreciation expenses		—			(32,849	)		(1,046,847	)		(540,885	)		(18,484,518	)		(47,305	)		(518,237	)		—			(20,670,641	)
Disposal		—			1,025			29,418			957,690			14,950,296			42,299			287,939			—			16,268,667
Effect of foreign exchange differences		—			—			—			(146	)		23,707			143			1,280			—			24,984
Others		—			—			3,562			(1,207	)		1,479			(197	)		(13,575	)		—			(9,938	)

	$	—		$	(1,431,028	)	$	(30,261,198	)	$	(10,223,515	)	$	(597,171,968	)	$	(3,723,452	)	$	(8,168,531	)	$	—		$	(650,979,692	)

Balance on September 30, 2021
Balance on January 1, 2021, net	$	101,990,645		$	231,158		$	41,642,247		$	1,766,613		$	117,112,777		$	175,851		$	2,373,881		$	8,529,416		$	273,822,588
Balance on September 30, 2021, net	$	102,066,870		$	208,231		$	40,933,024		$	1,413,506		$	119,531,605		$	148,780		$	2,263,698		$	10,763,016		$	277,328,730

There was no indication that property, plant and equipment was impaired, therefore, the Company did not recognize any impairment loss for the nine months ended September 30, 2021 and 2020.

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. Chunghwa paid the aforementioned amount in May 2021 and the property registration of the respective asset was completed in July 2021.

- 36 -

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			2~16 years
Others			1~15 years

Assets subject to operating leases


	Land			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

Cost
Balance on January 1, 2021	$	4,972,920		$	4,236,156		$	9,209,076
Others		(167,469	)		(83,961	)		(251,430	)

Balance on September 30, 2021	$	4,805,451		$	4,152,195		$	8,957,646

Accumulated depreciation and impairment
Balance on January 1, 2021	$	—		$	(1,615,721	)	$	(1,615,721	)
Depreciation expenses		—			(57,653	)		(57,653	)
Others		—			7,853			7,853

Balance on September 30, 2021	$	—		$	(1,665,521	)	$	(1,665,521	)

Balance on January 1, 2021, net	$	4,972,920		$	2,620,435		$	7,593,355

Balance on September 30, 2021, net	$	4,805,451		$	2,486,674		$	7,292,125

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.

- 37 -

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


	September 30, 2021		December 31, 2020		September 30, 2020
Year 1	$	375,633	$	347,229	$	339,491
Year 2		299,522		288,184		295,583
Year 3		223,063		230,984		234,338
Year 4		157,806		164,141		177,560
Year 5		134,233		124,845		124,478
Onwards		1,180,791		1,179,493		1,207,181

	$	2,371,048	$	2,334,876	$	2,378,631

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:


Buildings
Main buildings			35~60 years
Other building facilities			3~15 years

16.

LEASE ARRANGEMENTS

Right-of-use assets


	September 30, 2021		December 31, 2020		September 30, 2020
Land and buildings
Handsets base stations	$	6,948,036	$	7,095,883	$	7,065,729
Others		1,627,794		1,708,593		1,788,733
Equipment		1,916,015		2,204,730		2,304,886

	$	10,491,845	$	11,009,206	$	11,159,348


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Additions to right-of-use assets					$	2,636,051	$	2,892,908

Depreciation charge for right-of-use assets
Land and buildings
Handsets base stations	$	700,725	$	683,732	$	2,083,975	$	2,041,451
Others		194,638		201,142		592,125		594,220
Equipment		103,498		104,082		312,138		312,088

	$	998,861	$	988,956	$	2,988,238	$	2,947,759

The Company did not have significant sublease or impairment of right-of-use assets for the nine months ended September 30, 2021 and 2020.

- 38 -

Lease liabilities


	September 30, 2021		December 31, 2020		September 30, 2020
Lease liabilities
Current	$	3,243,039	$	3,381,571	$	3,272,130
Noncurrent		5,948,847		6,215,096		6,300,425

	$	9,191,886	$	9,596,667	$	9,572,555

Ranges of discount rates for lease liabilities were as follows:

September 30,
2021

December 31,
2020

September 30,
2020

Land and buildings

Handsets base stations

0.37

%~1.18%

0.46

%~1.18%

0.50

%~1.18%

Others

0.37

%~9.00%

0.46

%~9.00%

0.50

%~9.00%

Equipment

0.37

%~2.99%

0.46

%~2.99%

0.52

%~2.99%

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				Nine Months Ended September 30
	2021		2020		2021		2020
Expenses relating to low-value asset leases	$	2,113	$	2,378	$	6,121	$	5,926

Expenses relating to variable lease payments not included in the measurement of lease liabilities	$	1,811	$	1,391	$	5,072	$	3,841

Total cash outflow for leases					$	2,897,490	$	2,933,976

- 39 -

The Company leases certain equipment which qualifies 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, 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

Cost
Balance on January 1, 2021	$	10,662,450
Additions		146

Balance on September 30, 2021	$	10,662,596

Accumulated depreciation and impairment
Balance on January 1, 2021	$	(1,041,128	)
Depreciation expense		(31,705	)

Balance on September 30, 2021	$	(1,072,833	)

Balance on January 1, 2021, net	$	9,621,322

Balance on September 30, 2021, net	$	9,589,763

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

- 40 -

The fair values of the Company’s investment properties as of December 31, 2020 and 2019 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, 2021 and 2020 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:

September 30,

2021

December 31,

2020

September 30,

2020

Fair value

22,644,318

18,701,398

Overall capital interest rate

0.93%~3.03%

1.03%~4.04%

Profit margin ratio

12%~20%

Discount rate

—

Capitalization rate

0.73%~2.20%

0.79%~1.74%

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, 2021		December 31, 2020		September 30, 2020
Year 1	$	95,534	$	115,305	$	108,915
Year 2		74,018		95,223		89,548
Year 3		51,870		75,285		71,720
Year 4		44,542		52,544		51,324
Year 5		29,514		37,588		32,902
Onwards		40,182		57,773		59,387

	$	335,660	$	433,718	$	413,796

18.

INTANGIBLE ASSETS


	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

(Continued)

- 41 -


	Mobile Broadband Concession			Computer Software			Goodwill			Others			Total
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

Cost
Balance on January 1, 2021	$	108,338,000		$	3,319,223		$	291,206		$	392,326		$	112,340,755
Additions-acquired separately		—			123,839			—			4,304			128,143
Disposal		—			(294,185	)		—			—			(294,185	)
Effect of foreign exchange differences		—			(286	)		—			(24	)		(310	)
Others		—			1,898			—			—			1,898

Balance on September 30, 2021	$	108,338,000		$	3,150,489		$	291,206		$	396,606		$	112,176,301

Accumulated amortization and impairment
Balance on January 1, 2021	$	(19,318,842	)	$	(2,532,910	)	$	(44,926	)	$	(159,517	)	$	(22,056,195	)
Amortization expenses		(4,649,183	)		(253,099	)		—			(21,823	)		(4,924,105	)
Disposal		—			294,185			—			—			294,185
Effect of foreign exchange differences		—			274			—			8			282
Others		—			(26	)		—			—			(26	)

Balance on September 30, 2021	$	(23,968,025	)	$	(2,491,576	)	$	(44,926	)	$	(181,332	)	$	(26,685,859	)

Balance on January 1, 2021, net	$	89,019,158		$	786,313		$	246,280		$	232,809		$	90,284,560

Balance on September 30, 2021, net	$	84,369,975		$	658,913		$	246,280		$	215,274		$	85,490,442

(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 in October 2019. Chunghwa paid $48,373,000 thousand, including the aforementioned deposit, 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.

- 42 -

19.

OTHER ASSETS


	September 30, 2021		December 31, 2020		September 30, 2020
Spare parts	$	2,938,284	$	2,156,136	$	3,200,426
Refundable deposits		1,891,250		2,009,796		1,824,654
Other financial assets		1,000,000		1,000,000		1,000,000
Others		2,105,459		2,450,006		2,532,695

	$	7,934,993	$	7,615,938	$	8,557,775

Current
Spare parts	$	2,938,284	$	2,156,136	$	3,200,426
Others		155,322		192,961		166,198

	$	3,093,606	$	2,349,097	$	3,366,624

Noncurrent
Refundable deposits	$	1,891,250	$	2,009,796	$	1,824,654
Other financial assets		1,000,000		1,000,000		1,000,000
Others		1,950,137		2,257,045		2,366,497

	$	4,841,387	$	5,266,841	$	5,191,151

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.

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.

- 43 -

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

September 30, 2021

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

NT$

/EUR

NT$ 524,459/
EUR 15,900

2021.12

32.98

Hedging financial
assets (liabilities)

—

9,330

(11,082

)


	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	$	11,082	$	(9,330	)	$	—

December 31, 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

NT$

/EUR

NT$ 200,867/

EUR 5,831

2021.03

34.45

Hedging
financial
assets
(liabilities)

1,752

—

1,425


	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	$	(1,425	)	$	1,752	$	—

- 44 -

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

NT$

/EUR

NT$ 435,843/
EUR 13,000

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	$	—

Nine months ended September 30, 2021


	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	$	(11,082	)	$	—		—	$	(22,100 Construction in progress and equipment to be accepted	)	$	— Other gains and losses

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 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

7,514

—

10,050

Construction in progress and
equipment to be accepted

—

Other gains
and losses

- 45 -

21.

SHORT-TERM LOANS


	September 30, 2021		December 31, 2020		September 30, 2020
Unsecured bank loans	$	66,000	$	67,000	$	75,000

The annual interest rates of bank loans were as follows:


	September 30, 2021	December 31, 2020	September 30, 2020
Unsecured bank loans	1.10%~2.43%	1.12%~2.33%	1.12%~2.33%

22.

SHORT-TERM BILLS PAYABLE


	September 30, 2021		December 31, 2020			September 30, 2020
Commercial paper payable	$	—	$	7,000,000		$	12,000,000
Less: Discounts on commercial paper payable		—		(802	)		(9,171	)

	$	—	$	6,999,198		$	11,990,829

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


	September 30, 2021	December 31, 2020	September 30, 2020
Commercial paper payable	—	0.34%~0.36%	0.37%~0.40%

23.

LONG-TERM LOANS


	September 30, 2021		December 31, 2020			September 30, 2020
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, 2021	December 31, 2020	September 30, 2020
Secured bank loans	0.89%	0.72%	0.72%

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 renewed contract is September 2021. Furthermore, LED entered into another contract with Chang Hwa Bank to renew the contract upon the maturity of the aforementioned contract in August 2021 and the due date of the renewed contract is September 2024.

- 46 -

24.

BONDS PAYABLE


	September 30, 2021			December 31, 2020			September 30, 2020
Unsecured domestic bonds	$	27,000,000		$	20,000,000		$	20,000,000
Less: Discounts on bonds payable		(24,418	)		(19,728	)		(20,527	)

	$	26,975,582		$	19,980,272		$	19,979,473

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
2021—1		A		April 2021 to April 2026		1,900,000		0.42	%	The same as above
		B		April 2021 to April 2028		4,100,000		0.46	%	The same as above
		C		April 2021 to April 2031		1,000,000		0.50	%	The same as above

25.

TRADE NOTES AND ACCOUNTS PAYABLE


	September 30, 2021		December 31, 2020		September 30, 2020
Trade notes and accounts payable	$	13,695,667	$	15,590,814	$	13,256,209

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

26.

OTHER PAYABLES


	September 30, 2021		December 31, 2020		September 30, 2020
Accrued salary and compensation	$	7,640,090	$	9,449,659	$	7,440,890
Payables to contractors		3,741,121		1,778,735		2,290,469
Accrued compensation to employees and remuneration to directors and supervisors		1,636,867		1,690,796		1,314,633
Amounts collected for others		1,497,377		1,307,728		1,264,053
Payables to equipment suppliers		1,090,917		1,049,008		725,746
Accrued maintenance costs		1,014,711		1,039,689		884,601
Accrued franchise fees		4,853		785,352		785,169

(Continued)

- 47 -


	September 30, 2021		December 31, 2020		September 30, 2020
Payable on land (Note 15)	$	—	$	1,056,680	$	1,056,680
Others		7,044,364		5,830,315		6,427,255

	$	23,670,300	$	23,987,962	$	22,189,496

(Concluded)

27.

PROVISIONS


	September 30, 2021		December 31, 2020		September 30, 2020
Warranties	$	194,476	$	182,431	$	176,268
Onerous contracts		131,260		170,433		101,372
Employee benefits		60,887		57,210		63,882
Others		4,097		4,097		4,097

	$	390,720	$	414,171	$	345,619

Current	$	257,945	$	313,555	$	240,296
Noncurrent		132,775		100,616		105,323

	$	390,720	$	414,171	$	345,619


	Warranties			Onerous Contracts			Employee Benefits			Others			Total
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

Balance on January 1, 2021	$	182,431		$	170,433		$	57,210		$	4,097		$	414,171
Additional / (reversal of) provisions recognized		74,921			(39,173	)		4,379			—			40,127
Used / forfeited during the period		(62,860	)		—			(702	)		—			(63,562	)
Effect of foreign exchange differences		(16	)		—			—			—			(16	)

Balance on September 30, 2021	$	194,476		$	131,260		$	60,887		$	4,097		$	390,720

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.

- 48 -

28.

RETIREMENT BENEFIT PLANS

Relevant pension costs for defined benefit plans which were determined by the pension cost rates of actuarial valuation as of December 31, 2020 and 2019 were as follows:


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Operating costs	$	180,785	$	301,420	$	544,652	$	904,216
Marketing expenses		91,887		151,073		275,007		452,231
General and administrative expenses		20,260		30,395		59,648		90,368
Research and development expenses		11,293		18,175		33,148		54,183

	$	304,225	$	501,063	$	912,455	$	1,500,998

29.

EQUITY

Share capital

Common stocks


	September 30, 2021		December 31, 2020		September 30, 2020
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 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, 2021, the outstanding ADSs were 202,067 thousand common stocks, which equaled 20,207 thousand units and represented 2.60 % 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

- 49 -

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

Additional paid-in capital

The adjustments of additional paid-in capital for the nine months ended September 30, 2021 and 2020 were as follows:


	Share Premium		Movements of Additional Paid-in Capital for Associates and Joint Ventures 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, 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 and joint ventures 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

Balance on January 1, 2021	$	147,329,386	$	186,828		$	2,087,957		$	987,611	$	21,519	$	20,648,078	$	171,261,379
Unclaimed dividend		—		—			—			—		1,969		—		1,969
Change in additional paid-in capital from investments in associates and joint ventures accounted for using equity method		—		200			—			—		—		—		200
Share-based payment transactions of subsidiaries		—		—			15,568			—		—		—		15,568

Balance on September 30, 2021	$	147,329,386	$	187,028		$	2,103,525		$	987,611	$	23,488	$	20,648,078	$	171,279,116

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 and joint ventures 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.

- 50 -

Chunghwa should appropriate or reverse a special reserve in accordance with Rule No. 1010012865 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 2020 and 2019 earnings of Chunghwa approved by the stockholders in their meetings on August 20, 2021 and May 29, 2020 were as follows:


	Appropriation of Earnings				Dividends Per Share (NT$)
	For Fiscal Year 2020		For Fiscal Year 2019		For Fiscal Year 2020		For Fiscal Year 2019
Cash dividends	$	33,403,565	$	32,782,969	$	4.306	$	4.226

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
	2021			2020
Beginning balance	$	1,239,901		$	836,598
Unrealized gain or loss for the period
Equity instruments		(1,244,304	)		295,956
Transferred accumulated gain or loss to unappropriated earnings resulting from the disposal of equity instruments (Note 8)		(89,366	)		—

Ending balance	$	(93,769	)	$	1,132,554

- 51 -

Noncontrolling interests


	Nine Months Ended September 30
	2021			2020
Beginning balance	$	11,327,441		$	10,283,522
Shares attributed to noncontrolling interests
Net income for the period		1,004,612			921,917
Exchange differences arising from the translation of the foreign operations		1,929			(10,370	)
Unrealized gain or loss on financial assets at FVOCI		(6,470	)		(15,289	)
Income tax relating to exchange differences arising from the translation of the foreign operations		—			27
Share of other comprehensive loss of associates and joint ventures accounted for using equity method		(733	)		(958	)
Cash dividends distributed by subsidiaries		(896,335	)		(775,420	)
Changes in additional paid-in capital from investments in associates and joint ventures accounted for using equity method		—			47
Change in additional paid-in capital for not proportionately participating in the capital increase of subsidiaries		—			103
Share-based payment transactions of subsidiaries		51,429			59,234
Non-controlling interests increased by business combination of IISI (Note 13)		—			475,879

Ending balance	$	11,481,873		$	10,938,692

30.

REVENUES


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Revenue from contracts with customers	$	50,660,195	$	51,860,647	$	149,763,852	$	147,225,735

Other revenues
Rental income		163,556		220,581		628,124		616,557
Others		61,751		90,098		195,656		286,897

		225,307		310,679		823,780		903,454

	$	50,885,502	$	52,171,326	$	150,587,632	$	148,129,189

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, 2020 for details.

- 52 -

Disaggregation of revenue

Nine months ended September 30, 2021


	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	$	—	$	43,227,622	$	—	$	—	$	—	$	43,227,622
Sales of products		1,559,027		23,893,627		85,564		8,268		3,704,333		29,250,819
Local telephone and domestic long distance telephone services revenue		19,358,326		—		—		—		—		19,358,326
Broadband access and domestic leased line services revenue		17,168,724		—		—		—		—		17,168,724
Data communications internet services revenue		—		—		16,631,064		—		—		16,631,064
International network and leased line services revenue		—		—		—		3,286,328		—		3,286,328
Others		8,098,169		870,644		6,808,051		3,149,380		1,914,725		20,840,969

	$	46,184,246	$	67,991,893	$	23,524,679	$	6,443,976	$	5,619,058	$	149,763,852

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
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

Contract balances


	September 30, 2021			December 31, 2020			September 30, 2020			January 1, 2020
Trade notes and accounts receivable (Note 9)	$	21,381,611		$	22,621,902		$	22,595,966		$	26,407,783
Contract assets
Products and service bundling	$	6,893,783		$	7,232,134		$	6,872,648		$	6,942,974
Others		839,218			612,206			670,671			115,993
Less: Loss allowance		(17,201	)		(17,792	)		(16,577	)		(16,858	)

	$	7,715,800		$	7,826,548		$	7,526,742		$	7,042,109

(Continued)

- 53 -


	September 30, 2021		December 31, 2020		September 30, 2020		January 1, 2020
Current	$	5,340,164	$	5,331,246	$	5,169,966	$	4,441,196
Noncurrent		2,375,636		2,495,302		2,356,776		2,600,913

	$	7,715,800	$	7,826,548	$	7,526,742	$	7,042,109

Contract liabilities
Telecommunications business	$	13,040,533	$	13,601,662	$	12,693,256	$	12,771,621
Project business		7,234,479		6,686,561		9,462,062		10,360,428
Products and service bundling		6,755		16,404		20,211		38,570
Others		442,662		421,166		516,655		510,696

	$	20,724,429	$	20,725,793	$	22,692,184	$	23,681,315

Current	$	13,905,112	$	13,436,706	$	16,184,042	$	16,839,830
Noncurrent		6,819,317		7,289,087		6,508,142		6,841,485

	$	20,724,429	$	20,725,793	$	22,692,184	$	23,681,315

(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, 2021		December 31, 2020		September 30, 2020
Noncurrent
Incremental costs of obtaining contracts	$	971,665	$	999,593	$	975,788

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 expenses for the three months and nine months ended September 30, 2021 were $206,618 thousand and $602,028 thousand, respectively. Amortization expenses for the three months and nine months ended September 30, 2020 were $192,669 thousand and $582,950 thousand, respectively.

- 54 -

31.

NET INCOME

Other income and expenses


	Three Months Ended September 30						Nine Months Ended September 30
	2021			2020			2021			2020
Gain (loss) on disposal of property, plant and equipment, net	$	(4,904	)	$	136,175		$	(2,114	)	$	124,341
Gain on disposal of investment properties		—			151,357			—			151,357
Loss on disposal of intangible assets		—			(1,844	)		—			(1,844	)

	$	(4,904	)	$	285,688		$	(2,114	)	$	273,854

Other income


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Dividend income	$	138,990	$	9,788	$	138,990	$	246,084
Rental income		18,106		18,378		50,495		53,522
Others		53,850		58,726		112,310		116,904

	$	210,946	$	86,892	$	301,795	$	416,510

Other gains and losses


	Three Months Ended September 30					Nine Months Ended September 30
	2021		2020			2021			2020
Valuation gain (loss) on financial assets and liabilities at fair value through profit or loss, net	$	303,513	$	(10,717	)	$	527,382		$	(78,887	)
Foreign currency exchange gain or loss, net		101,721		(46,526	)		160,493			14,268
Gain on disposal of investments accounted for using equity method, net		3,239		1,412			3,239			1,412
Gain (loss) on disposal of financial instruments, net		20		—			320			(1,788	)
Others		2,594		2,460			(21,504	)		(11,327	)

	$	411,087	$	(53,371	)	$	669,930		$	(76,322	)

- 55 -

Interest expenses


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Interest on bonds payable	$	35,636	$	18,233	$	95,999	$	18,233
Interest on lease liabilities		16,952		18,738		52,280		60,758
Interest paid to financial institutions		3,498		19,195		12,580		67,289
Others		3		1,444		972		1,725

	$	56,089	$	57,610	$	161,831	$	148,005

Impairment loss (reversal of impairment loss)


	Three Months Ended September 30						Nine Months Ended September 30
	2021			2020			2021			2020
Contract assets	$	(331	)	$	(76	)	$	(591	)	$	(281	)

Trade notes and accounts receivable	$	104,024		$	(43,237	)	$	183,756		$	61,890

Other receivables	$	(2,987	)	$	(2,077	)	$	4,436		$	(3,021	)

Inventories	$	50,017		$	412,334		$	82,500		$	608,024

Depreciation and amortization expenses


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Property, plant and equipment	$	6,978,310	$	6,741,765	$	20,728,294	$	20,221,714
Right-of-use assets		998,861		988,956		2,988,238		2,947,759
Investment properties		10,569		5,130		31,705		15,390
Intangible assets		1,641,267		1,650,539		4,924,105		3,774,247
Incremental costs of obtaining contracts		206,618		192,669		602,028		582,950

Total depreciation and amortization expenses	$	9,835,625	$	9,579,059	$	29,274,370	$	27,542,060

Depreciation expenses summarized by functions
Operating costs	$	7,542,568	$	7,264,661	$	22,389,241	$	21,754,763
Operating expenses		445,172		471,190		1,358,996		1,430,100

	$	7,987,740	$	7,735,851	$	23,748,237	$	23,184,863

(Continued)

- 56 -


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Amortization expenses summarized by functions
Operating costs	$	1,795,304	$	1,787,420	$	5,370,281	$	4,190,432
Marketing expenses		23,355		24,865		70,430		71,245
General and administrative expenses		18,179		20,242		53,370		63,041
Research and development expenses		11,047		10,681		32,052		32,479

	$	1,847,885	$	1,843,208	$	5,526,133	$	4,357,197

(Concluded)

Employee benefit expenses


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Post-employment benefit
Defined contribution plans	$	196,482	$	183,609	$	583,452	$	520,826
Defined benefit plans		304,225		501,063		912,455		1,500,998

		500,707		684,672		1,495,907		2,021,824

Share-based payment
Equity-settled share—based payment		5,086		1,646		14,329		4,937

Other employee benefit		10,355,791		10,457,156		31,616,975		31,539,821

Total employee benefit expenses	$	10,861,584	$	11,143,474	$	33,127,211	$	33,566,582

Summary by functions
Operating costs	$	5,470,128	$	5,711,453	$	16,975,075	$	17,197,330
Operating expenses		5,391,456		5,432,021		16,152,136		16,369,252

	$	10,861,584	$	11,143,474	$	33,127,211	$	33,566,582

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 consolidated financial statements are authorized for issue, the difference is recorded as a change in accounting estimate.

The compensation to the employees and remuneration to the directors of 2020 and 2019 approved by the Board of Directors on February 23, 2021 and February 26, 2020, respectively, were as follows:


	Cash
	2020		2019
Compensation distributed to the employees	$	1,202,448	$	1,126,194
Remuneration paid to the directors		35,803		35,210

- 57 -

There was no difference between the initial accrued amounts recognized in 2020 and 2019 and the amounts approved by the Board of Directors in 2021 and 2020 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
	2021			2020			2021			2020
Current tax
Current tax expenses recognized for the period	$	2,204,728		$	2,174,029		$	6,487,320		$	6,332,269
Income tax on unappropriated earnings		1,849			—			33,094			11,527
Income tax adjustments on prior years		(255	)		1,096			(97,218	)		(16,510	)
Others		369			15,671			742			17,778

		2,206,691			2,190,796			6,423,938			6,345,064

Deferred tax
Deferred tax expenses recognized for the period		161,785			(81,374	)		335,643			(69,098	)
Income tax adjustments on prior years		265			77			3,359			27,816

		162,050			(81,297	)		339,002			(41,282	)

Income tax recognized in profit or loss	$	2,368,741		$	2,109,499		$	6,762,940		$	6,303,782

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.

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 while calculating income tax on unappropriated earnings.

- 58 -

Income tax recognized in other comprehensive income


	Three Months Ended September 30					Nine Months Ended September 30
	2021		2020			2021		2020
Deferred tax
Exchange differences arising from the translation of the foreign operations	$	—	$	(56	)	$	—	$	(56	)

Income tax examinations

Income tax returns of SENAO has been examined by the tax authorities through 2018. Income tax returns of Chunghwa, ISPOT, Youth, Youyi, Aval, Wiin, SENYOUNG, Senaolife, CHYP, CHSI, LED, CHI, CHPT, SFD, CLPT, CHTSC, CHIEF, Unigate, SHE, CHST, HHI, IISI and UTC have been examined by the tax authorities through 2019.

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
	2021			2020			2021			2020
Net income used to compute the basic earnings per share
Net income attributable to the parent	$	9,366,784		$	8,336,836		$	27,119,256		$	25,194,210
Assumed conversion of all dilutive potential common stocks
Employee stock options and employee compensation of subsidiaries		(983	)		(922	)		(3,198	)		(3,528	)

Net income used to compute the diluted earnings per share	$	9,365,801		$	8,335,914		$	27,116,058		$	25,190,682

- 59 -

Weighted Average Number of Common Stocks

(Thousand Shares)


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
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		1,609		1,435		7,041		7,425

Weighted average number of common stocks used to compute the diluted earnings per share		7,759,056		7,758,882		7,764,488		7,764,872

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

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$)
2020.09.16		2020.10.26		200.00	$ (Original price$	199.70 206.00	)
2017.12.18		2018.10.31		50.00	$ (Original price$	134.50 147.00	)
		2017.12.19		950.00	$ (Original price$	128.70 147.00	)
2015.11.17		2015.10.22		2,000.00	$ (Original price$	34.40 43.00	)

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 Board of Directors of CHIEF resolved to issue stock options on October 26, 2020 and authorized the chairman to decide the grant date. Afterwards, the grant date was decided as November 13, 2020.

- 60 -

The compensation costs for stock options for the three months and nine months ended September 30, 2021 and 2020 were as follows:


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Granted on November 13, 2020	$	2,433	$	—	$	7,298	$	—
Granted on October 31, 2018		42		138		126		414
Granted on December 19, 2017		35		72		121		216
Granted on October 22, 2015		—		—		—		—

	$	2,510	$	210	$	7,545	$	630

CHIEF modified the plan terms of stock options granted on November 13, 2020 in September 2021; therefore, the exercise price changed from $206.00 to $199.70 per share. The modification did not cause any incremental fair value granted.

CHIEF modified the plan terms of stock options granted on October 31, 2018 in July 2020 and September 2021; therefore, the exercise price changed from $141.70 to $138.70 and $134.50 per share, respectively. The modification did not cause any incremental fair value granted.

CHIEF modified the plan terms of stock options granted on December 19, 2017 in July 2020 and September 2021; therefore, the exercise price changed from $135.60 to $132.70 and $128.70 per share, respectively. The modification did not cause any incremental fair value granted.

Information about CHIEF’s outstanding stock options for the nine months ended September 30, 2021 and 2020 was as follows:


	Nine Months Ended September 30, 2021
	Granted on November 13, 2020					Granted on October 31, 2018				Granted on December 19, 2017
	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		200.00		$	206.00		21.00	$	138.70		427.50		$	132.70
Options exercised		—			—		—		—		(213.75	)		132.70
Options forfeited		(6.00	)		—		—		—		(0.50	)		—

Options outstanding at end of the period		194.00			199.70		21.00		134.50		213.25			128.70

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

- 61 -


	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		—			—		—			—		—			—

As of September 30, 2021, information about employee stock options outstanding was as follows:


Granted on November 13, 2020
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$)
$	199.70		194.00		4.12	$	199.70		—	$	—


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$)
$	134.50		21.00		2.08	$	134.50		—	$	—


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$)
$	128.70		213.25		1.22	$	128.70		—	$	—

As of September 30, 2021, all the stock options granted on October 22, 2015 were exercised or forefeited.

- 62 -

As of December 31, 2020, information about employee stock options outstanding was as follows:


Granted on November 13, 2020
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$)
$	206.00		200.00		4.87	$	206.00		—	$	—


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		21.00		2.83	$	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		427.50		1.96	$	132.70		213.75	$	132.70

As of December 31, 2020, all the stock options granted on October 22, 2015 were exercised or forfeited.

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		—	$	—

- 63 -

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

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 November 13, 2020			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$)	$	356.00		$	166.00		$	95.92		$	39.55
Exercise price (NT$)	$	206.00		$	147.00		$	147.00		$	43.00
Dividend yield		—			—			—			—
Risk-free interest rate		0.18	%		0.72	%		0.62	%		0.86	%
Expected life		5 years			5 years			5 years			5 years
Expected volatility		34.61	%		16.60	%		17.35	%		21.02	%
Weighted average fair value of grants (NT$)	$	173,893		$	33,540		$	2,318		$	4,863

The expected volatility for the options granted in 2020 was based on CHIEF’s average annualized historical share price volatility from June 5, 2018, CHIEF’s listing date on Taipei Exchange, to the grant date. The expected volatilities for the options granted from 2015 to 2018 were 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 and 3,500 stock options on December 20, 2019 and February 20, 2021, respectively. Each option is eligible to subscribe for one thousand common stocks when exercisable and the exercise price are both $19.085 per share. The options are granted to specific employees that meet the vesting conditions. The CHTSC Plan has an exercise price adjustment formula upon the changes in common stocks. The options of the CHTSC Plan are valid for five years and the graded vesting schedule will vest one year after the grant date.

The compensation costs for stock options for the three months and nine months ended September 30, 2021 and 2020 were as follows:


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Granted on February 20, 2021	$	1,609	$	—	$	3,902	$	—
Granted on December 20, 2019		730		1,436		2,192		4,307

	$	2,339	$	1,436	$	6,094	$	4,307

- 64 -

Information about CHTSC’s outstanding stock options for the nine months ended September 30, 2021 and 2020 were as follows:


	Nine Months Ended September 30, 2021
	Granted on February 20, 2021					Granted on December 20, 2019
	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		—		$	—		4,328		$	19.085
Options granted		3,500			19.085		—			—
Options exercised		—			—		(1,082	)		19.085
Options forfeited		(176	)		—		(72	)		—

Options outstanding at end of the period		3,324			19.085		3,174			19.085

Options exercisable at end of the period		—			—		—			—


	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		—		—

As of September 30, 2021, information about employee stock options outstanding was as follows:


Granted on February 20, 2021
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		3,324		4.39	$	19.085		—	$	—

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Granted on December 20, 2019
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		3,174		3.22	$	19.085		—	$	—

As of December 31, 2020, information about employee stock options outstanding was as follows:


Granted on December 20, 2019
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		4,328		3.97	$	19.085		1,082	$	19.085

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


Granted on December 20, 2019
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		—	$	—

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 Ferbuary 20, 2021	Stock Options Granted on December 20, 2019
Grant-date share price (NT$)	$23.76	$20.17
Exercise price (NT$)	$19.085	$19.085
Dividend yield	15.18%	12.49%
Risk-free interest rate	0.25%	0.54%
Expected life	5 years	5 years
Expected volatility	47.35%	42.41%
Weighted average fair value of grants (NT$)	$3,350	$2,470

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

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

IISI issued 1,665 and 1,335 stock 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 subsidiaries that meet the vesting conditions. The options of the IISI Plan are valid for seven years and the graded vesting schedule will vest at certain percentages starting from 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 prescribed formula.

No compensation cost of stock options granted was recognized for the three months and nine months ended September 30, 2021.

Information about IISI’s outstanding stock options for the nine months ended September 30, 2021 and 2020 were as follows:


	Nine Months Ended September 30, 2021
	Granted in January 2014
	Number of Options			Weighted Average Exercise Price (NT$)
Employee stock options
Options outstanding at beginning of the period		530.00		$	14.00
Options exercised		(261.00	)		14.00
Options forfeited		(269.00	)		—

Options outstanding at end of the period		—			—

Options exercisable at end of the period		—			—


	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		—			—

- 67 -

As of September 30, 2021, all the stock options granted in 2014 and 2013 were exercised or forfeited.

As of December 31, 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		0.04	$	14.00		530.00	$	14.00

As of December 31, 2020, all the stock options granted in 2013 were exercised or forfeited.

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

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

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

The Board of Directors of CLPT resolved to issue 690 stock options on February 26, 2021. Each option is eligible to subscribe for one thousand common stocks when exercisable and the exercise price is $15.90 per share (original price is $16.87 per share). The options are granted to specific employees that meet the vesting conditions. The CLPT Plan has an exercise price adjustment formula upon the changes in common stocks or distribution of cash dividends. The options of the CLPT Plan are valid for four years and the graded vesting schedule will vest two years after the grant date.

The compensation costs were $237 thousand and $690 thousand for the three months and nine months ended September 30, 2021, respectively.

CLPT modified the plan terms of stock options granted on February 26, 2021 in September 2021; therefore, the exercise price changed from $ $16.87 to $15.90 per share. The modification did not cause any incremental fair value granted.

Information about CLPT’s outstanding stock options for the nine months ended September 30, 2021 was as follows:


	Nine Months Ended September 30, 2021
	Granted on February 26, 2021
	Number of Options			Weighted Average Exercise Price (NT$)
Employee stock options
Options outstanding at beginning of the period		—		$	—
Options granted		690			16.87
Options forfeited		(90	)		—

Options outstanding at end of the period		600			15.90

Options exercisable at end of the period		—			—

As of September 30, 2021, 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$)
$	15.90		600		3.41	$	15.90		—	$	—

- 69 -

CLPT 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 February 26, 2021
Grant-date share price (NT$)	$	17.63
Exercise price (NT$)	$	16.87
Dividend yield		—
Risk-free interest rate		0.31	%
Expected life		4 years
Expected volatility		35.22	%
Weighted average fair value of grants (NT$)	$	4,750

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

35.

CASH FLOW INFORMATION

Except for those disclosed in other notes, the Company entered into the following non-cash investing and financing activities:


Investing activities	Nine Months Ended September 30
	2021			2020
Increase in property, plant and equipment	$	23,978,397		$	15,858,636
Changes in other payables		(947,000	)		(1,886,269	)

Acquisition of property, plant and equipment	$	23,031,397		$	13,972,367

Increase in intangible assets	$	128,143		$	48,547,040
Changes in other assets		—			(1,000,000	)

Acquisition of intangible assets	$	128,143		$	47,547,040

Disposal of financial assets at fair value through other comprehensive income	$	2,710,921		$	—
Changes in other current monetary assets		270,321			—
Reclassified to investment accounted for using equity method		(75,353	)		—

Proceeds from disposal of financial assets at fair value through other comprehensive income	$	2,905,889		$	—

Disposal of property, plant and equipment	$	21,960		$	130,474
Gain (loss) on disposal of property, plant and equipment		(2,114	)		124,341
Changes in receivables from related parties		—			(144,700	)

Proceeds from disposal of property, plant and equipment	$	19,846		$	110,115

(Continued)

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Investing activities	Nine Months Ended September 30
	2021		2020
Disposal of investment properties	$	—	$	36,943
Gain on disposal of investment properties		—		151,357
Changes in receivables from related parties		—		(188,300	)

Proceeds from disposal of investment properties	$	—	$	—

(Concluded)

Financing Activities


	Balance on January 1,		Cash Flows From Financing			Changes in Non-Cash Transactions					Cash Flows From Operation Activities—Interest			Balance on September 30,
	2021		Activities			New Leases		Others			Paid			2021
Lease liabilities	$	9,596,667	$	(2,834,017	)	$	2,636,051	$	(154,535	)	$	(52,280	)	$	9,191,886


	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

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.

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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, 2021				December 31, 2020				September 30, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Financial liabilities
Financial liabilities measured at amortized cost
Bonds payable	$	26,975,582	$	27,086,638	$	19,980,272	$	20,078,098	$	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 quoted market prices provided by third party pricing services.

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

September 30, 2021


	Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Listed stocks	$	2,401	$	—	$	—	$	2,401
Non-listed stocks		—		—		1,206,096		1,206,096
Limited partnership		—		—		25,000		25,000

	$	2,401	$	—	$	1,231,096	$	1,233,497

Financial assets at FVOCI
Listed stocks	$	160,467	$	—	$	—	$	160,467
Non-listed stocks		—		—		3,174,503		3,174,503

	$	160,467	$	—	$	3,174,503	$	3,334,970

Hedging financial liabilities	$	—	$	9,330	$	—	$	9,330

December 31, 2020


	Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Derivatives	$	—	$	2,271	$	—	$	2,271
Listed stocks		7,626		—		—		7,626
Non-listed stocks		—		—		677,202		677,202

	$	7,626	$	2,271	$	677,202	$	687,099

Hedging financial assets	$	—	$	1,752	$	—	$	1,752

(Continued)

- 72 -


	Level 1		Level 2		Level 3		Total
Financial assets at FVOCI
Listed stocks	$	2,754,175	$	—	$	—	$	2,754,175
Non-listed stocks		—		—		4,438,999		4,438,999

	$	2,754,175	$	—	$	4,438,999	$	7,193,174

Financial liabilities at FVTPL
Derivatives	$	—	$	143	$	—	$	143

(Concluded)

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

There were no transfers between Levels 1 and 2 for the nine months ended September 30, 2021 and 2020.

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

Nine months ended September 30, 2021


Financial Assets	Measured at Fair Value through Profit or Loss		Measured at Fair Value through Other Comprehensive Income		Total
Balance on January 1, 2021	$	677,202	$	4,438,999	$	5,116,201
Acquisition		25,000		81,000		106,000

(Continued)

- 73 -


Financial Assets	Measured at Fair Value through Profit or Loss		Measured at Fair Value through Other Comprehensive Income			Total
Reclassified to investments accounted for using equity method	$	—	$	(75,353	)	$	(75,353	)
Recognized in profit or loss under “Other gains and losses”		528,894		—			528,894
Recognized in other comprehensive income under “Unrealized gain or loss on financial assets at fair value through other comprehensive income”		—		(1,270,143	)		(1,270,143	)

Balance on September 30, 2021	$	1,231,096	$	3,174,503		$	4,405,599

Unrealized gain for the nine months ended September 30, 2021	$	528,894

(Concluded)

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 financial assets 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	)

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, using the income approach, in which the discounted cash flow is used to capture the present value of the expected future economic benefits to be derived from the ownership of these investees, or using assets approach. The Company originally used the market approach to measure the fair value of its investment in Taipei Financial Center Corp.; however, as the stock market was impacted by COVID-19 pandemic, the multiples of the referenced companies were changed significantly. With continuing impact of COVID-19 pandemic, the Company evaluated that the income approach, instead of the former market approach, would better reflect the future cash flows of Taipei Financial Center Corp. Therefore, the Company changed its valuation technique to the income approach starting from the second quarter 2021. The significant unobservable inputs used were listed in the table below. An increase in growth rate of long-term revenue, a decrease in discount for the lack of marketability or noncontrolling interests discount, or a decrease in the weighted average cost of capital (“WACC”) would result in increases in the fair values.

- 74 -


	September 30, 2021	December 31, 2020	September 30, 2020
Discount for lack of marketability	14.73%—20.00%	14.73%—20.00%	13.73%-20.00%
Noncontrolling interests discount	17.29%—25.00%	17.29%—25.00%	21.45%-25.00%
Growth rate of long-term revenue	0.19%	—	—
WACC	8.30%	—	—

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 (decrease) as below table.


	September 30, 2021			September 30, 2020
Discount for lack of marketability
5% increase	$	(45,292	)	$	(375,917	)

5% decrease	$	45,292		$	375,917

Noncontrolling interests discount
5% increase	$	(33,404	)	$	(48,373	)

5% decrease	$	33,404		$	48,373

Long-term revenue growth rates
0.1% increase	$	25,772		$	—

0.1% decrease	$	(25,298	)	$	—

WACC
1% increase	$	(299,223	)	$	—

1% decrease	$	365,351		$	—

Categories of Financial Instruments


	September 30, 2021		December 31, 2020		September 30, 2020
Financial assets
Measured at FVTPL
Mandatorily measured at FVTPL	$	1,233,497	$	687,099	$	706,929
Hedging financial assets		—		1,752		7,841
Financial assets at amortized cost (Note a)		53,157,829		62,405,714		49,390,075
Financial assets at FVOCI		3,334,970		7,193,174		7,632,641

(Continued)

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	September 30, 2021		December 31, 2020		September 30, 2020
Financial liabilities
Measured at FVTPL
Held for trading	$	—	$	143	$	19
Hedging financial liabilities		9,330		—		—
Measured at amortized cost (Note b)		62,042,583		62,557,414		65,532,259

(Concluded)


		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 (included current portion) 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.

- 76 -

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, 2021		December 31, 2020		September 30, 2020
Assets
USD	$	1,826,622	$	2,710,705	$	3,752,586
EUR		33,120		14,957		10,164
SGD		157,830		169,747		261,394
JPY		18,240		22,289		22,647
RMB		49,936		29,742		28,137
HKD		68,406		69,321		70,450
Liabilities
USD		846,514		767,553		2,370,285
EUR		741,079		957,257		567,044
SGD		874,816		1,049,225		1,077,468
JPY		6,838		9,683		7,961
RMB		53,837		201		288
HKD		16,080		7,665		8,523

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


	September 30, 2021		December 31, 2020		September 30, 2020
Assets
USD	$	—	$	121	$	38
EUR		—		3,902		7,841
Liabilities
USD		—		143		—
EUR		9,330		—		19

Foreign currency sensitivity analysis

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

- 77 -


	Nine Months Ended September 30
	2021			2020
Profit or loss
Monetary assets and liabilities (a)
USD	$	49,005		$	69,115
EUR		(35,398	)		(27,844	)
SGD		(35,849	)		(40,804	)
JPY		570			734
RMB		(195	)		1,392
HKD		2,616			3,096
Derivatives (b)
USD		—			(728	)
EUR		—			3,074
Equity
Derivatives (c)
EUR		25,694			22,198

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, 2021		December 31, 2020		September 30, 2020
Fair value interest rate risk
Financial assets	$	12,842,693	$	24,217,959	$	12,256,062
Financial liabilities		36,167,468		36,576,137		41,542,857
Cash flow interest rate risk
Financial assets		13,615,718		9,306,397		8,893,268
Financial liabilities		1,666,000		1,667,000		1,675,000

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 $29,874 thousand and $18,046 thousand for the nine months ended September 30, 2021 and 2020, 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.

- 78 -

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 $61,675 thousand and $166,749 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, 2021. 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.

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 the 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.

- 79 -

September 30, 2021


	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		—	$	36,214,432	$	—	$	1,636,867	$	4,826,659	$	—	$	42,677,958
Floating interest rate instruments		0.94		—		60,000		6,000		1,600,000		—		1,666,000
Fixed interest rate instruments		0.51		—		—		—		10,700,000		16,300,000		27,000,000

			$	36,214,432	$	60,000	$	1,642,867	$	17,126,659	$	16,300,000	$	71,343,958

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	$	3,253,105	$	4,127,277	$	1,670,259	$	269,652	$	9,320,293

December 31, 2020


	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		—	$	37,748,572	$	—	$	2,476,148	$	4,826,679	$	—	$	45,051,399
Floating interest rate instruments		0.78		—		7,000		1,660,000		—		—		1,667,000
Fixed interest rate instruments		0.50		7,000,000		—		—		8,800,000		11,200,000		27,000,000

			$	44,748,572	$	7,000	$	4,136,148	$	13,626,679	$	11,200,000	$	73,718,399

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	$	3,396,908	$	4,239,587	$	1,691,426	$	409,067	$	9,736,988

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

- 80 -

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, 2021
Gross settled
Forward exchange contracts
Inflow	$	—	$	515,129		$	—	$	—	$	515,129
Outflow		—		524,459			—		—		524,459

	$	—	$	(9,330	)	$	—	$	—	$	(9,330	)

December 31, 2020
Gross settled
Forward exchange contracts
Inflow	$	—	$	634,676		$	—	$	—	$	634,676
Outflow		—		630,796			—		—		630,796

	$	—	$	3,880		$	—	$	—	$	3,880

September 30, 2020
Gross settled
Forward exchange contracts
Inflow	$	—	$	519,680		$	—	$	—	$	519,680
Outflow		—		511,820			—		—		511,820

	$	—	$	7,860		$	—	$	—	$	7,860

Financing facilities


	September 30, 2021		December 31, 2020		September 30, 2020
Facilities of unsecured bank loan and commercial paper payable
Amount used	$	66,800	$	7,067,800	$	12,086,405
Amount unused		57,176,845		59,277,690		54,462,777

	$	57,243,645	$	66,345,490	$	66,549,182

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

	$	1,600,000	$	1,620,000	$	1,620,000

- 81 -

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 (Note 1)
Taiwan International Ports Logistics Corporation		Associate
International Integrated Systems, Inc.		Subsidiary (Note 2)
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
CHT Infinity Singapore Pte. Ltd.		Associate
PT. CHT Infinity Indonesia		Subsidiary of the Company’s associate, CHT Infinity Singapore Pte. Ltd.
Viettel-CHT Co., Ltd.		Associate
Click Force Co., Ltd.		Associate
Alliance Digital Tech Co., Ltd.		Associate (Note 3)
Chunghwa PChome Fund I Co., Ltd.		Associate
Cornerstone Ventures Co., Ltd.		Associate
Next Commercial Bank Co., Ltd.		Associate
WiAdvance Technology Corporation		Associate
AgriTalk Technology Inc.		Associate (Note 4)
Imedtac Co., Ltd.		Associate (Note 4)
Chunghwa SEA Holdings		Joint venture
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

(Continued)

- 82 -


Company		Relationship
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
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
Divine Fine Foods & Wine Inc.		Chairman of Divine Fine Foods & Wine Inc. 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
Advantech Co., Ltd.		Investor of significant influence over IISI
Chunghwa Post Co., Ltd.		Government-related entity as Chunghwa Telecom

(Concluded)

Note 1: UUPON was previously an associate. As the Company did not participate in the capital increase of UUPON in October 2020; therefore, the Company lost its significant influence over UUPON. Since then, UUPON was no longer a related party of the Company. Please refer to Note 14.

Note 2: IISI was an associate and has become a subsidiary starting from July 1, 2020 (“acquisition date”). Please refer to Note 13. All transactions between the Company were eliminated upon consolidation since the acquisition date.

Note 3: ADT completed its liquidation in August 2021. Please refer to Note 14.

Note 4: ATT and IME were previously treated as financial assets at FVOCI. As the Company acquired seats in the Board of Directors of each company and has significant influence over ATT and IME in July and August 2021, respectively, these investments are reclassified as associates. Please refer to Note 14.

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:

- 83 -

Operating transactions


	Revenues
	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Associates	$	284,584	$	70,211	$	425,942	$	214,433
Others		12,859		17,944		38,425		52,772

	$	297,443	$	88,155	$	464,367	$	267,205


	Operating Costs and Expenses
	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Associates	$	204,133	$	186,154	$	451,646	$	513,819
Others		5,137		4,056		64,941		63,346

	$	209,270	$	190,210	$	516,587	$	577,165

Non-operating transactions


	Non-operating Income and Expenses
	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Associates	$	9,641	$	5,648	$	28,582	$	75,213
Others		454		570		1,006		1,036

	$	10,095	$	6,218	$	29,588	$	76,249

Receivables


	September 30, 2021		December 31, 2020		September 30, 2020
Associates	$	61,608	$	228,879	$	353,980
Others		4,753		1,817		336,165

	$	66,361	$	230,696	$	690,145

Contract liabilities-current


	September 30, 2021		December 31, 2020		September 30, 2020
Associates	$	—	$	182,857	$	609,524

- 84 -

Payables


	September 30, 2021		December 31, 2020		September 30, 2020
Associates	$	481,865	$	642,489	$	491,142
Others		3,467		3,455		3,246

	$	485,332	$	645,944	$	494,388

Customers’ deposits


	September 30, 2021		December 31, 2020		September 30, 2020
Associates	$	13,823	$	4,626	$	4,376

Acquisition of property, plant and equipment


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Associates	$	84,732	$	108,923	$	186,577	$	134,526

Disposal of property, plant and equipment and investment properties


	Proceeds				Gain on Disposal
	Three Months Ended September 30				Three Months Ended September 30
	2021		2020		2021		2020
Associates	$	—	$	—	$	—	$	—
Others (Chunghwa Post Co., Ltd.)		—		333,000		—		264,257

	$	—	$	333,000	$	—	$	264,257


	Proceeds				Gain on Disposal
	Nine Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Associates	$	9,800	$	—	$	1,628	$	—
Others (Chunghwa Post Co., Ltd.)		—		333,000		—		264,257

	$	9,800	$	333,000	$	1,628	$	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 (SGD 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.

- 85 -

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


	September 30, 2021		December 31, 2020		September 30, 2020
Lease liabilities—current	$	172,976	$	182,187	$	179,651
Lease liabilities—noncurrent		650,411		816,610		848,319

	$	823,387	$	998,797	$	1,027,970

The interest expense recognized for the aforementioned lease liabilities for the three months and nine months ended September 30, 2021 were $1,759 thousand and $5,630 thousand, respectively. 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.

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
	2021		2020		2021		2020
Short-term employee benefits	$	73,418	$	80,934	$	237,505	$	218,013
Post-employment benefits		1,961		2,223		5,766		6,219
Share-based payment		411		20		1,238		61

	$	75,790	$	83,177	$	244,509	$	224,293

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

39.

PLEDGED ASSETS

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


	September 30, 2021		December 31, 2020		September 30, 2020
Property, plant and equipment	$	2,439,674	$	2,461,810	$	2,469,188
Land held under development (included in inventories)		—		1,998,733		1,998,733
Restricted assets (included in other assets - others)		200,357		209,638		112,659

	$	2,640,031	$	4,670,181	$	4,580,580

- 86 -

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, 2021 were as follows:

Acquisitions of land and buildings of $502,597 thousand.

Acquisitions of telecommunication-related inventory and equipment of $34,488,310 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 financial 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.

41.

OTHER MATTERS

The Company has assessed the economic impact of COVID-19 pandemic and determined that there were no significant impacts on the Company’s consolidated 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.

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, 2021
	Foreign Currencies (Thousands)		Exchange Rate		New Taiwan Dollars (Thousands)
Assets denominated in foreign currencies
Monetary items
USD	$	65,588		27.85	$	1,826,622
EUR		1,025		32.32		33,120
SGD		7,710		20.47		157,830
JPY		73,253		0.249		18,240
RMB		11,599		4.305		49,936
HKD		19,129		3.576		68,406
Non-monetary items
Investments accounted for using equity method
SGD		28,956		20.47		592,728
VND		349,703,734		0.0012		421,393

(Continued)

- 87 -


	September 30, 2021
	Foreign Currencies (Thousands)		Exchange Rate		New Taiwan Dollars (Thousands)
Liabilities denominated in foreign currencies
Monetary items
USD	$	30,395		27.85	$	846,514
EUR		22,929		32.32		741,079
SGD		42,736		20.47		874,816
JPY		27,463		0.249		6,838
RMB		12,506		4.305		53,837
HKD		4,497		3.576		16,080

(Concluded)


	December 31, 2020
	Foreign Currencies (Thousands)		Exchange Rate		New Taiwan Dollars (Thousands)
Assets denominated in foreign currencies
Monetary items
USD	$	95,179		28.48	$	2,710,705
EUR		427		35.02		14,957
SGD		7,873		21.56		169,747
JPY		80,671		0.276		22,289
RMB		6,795		4.377		29,742
HKD		18,873		3.673		69,321
Non-monetary items
Investments accounted for using equity method
SGD		22,646		21.56		488,257
VND		327,497,036		0.0011		363,522
Liabilities denominated in foreign currencies
Monetary items
USD		26,951		28.48		767,553
EUR		27,335		35.02		957,257
SGD		48,665		21.56		1,049,225
JPY		35,044		0.276		9,683
RMB		46		4.377		201
HKD		2,087		3.673		7,665

- 88 -


	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
HKD		18,767		3.754		70,450
Non-monetary items
Investments accounted for using equity method
SGD		26,098		21.26		554,839
VND		301,812,035		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
HKD		2,270		3.754		8,523

The unrealized foreign currency exchange gains and losses were gain of $29,953 thousand and loss of $16,358 thousand for the three months ended September 30, 2021 and 2020, respectively. The unrealized foreign currency exchange gains were $109,221 thousand and $30,119 thousand for the nine months ended September 30, 2021 and 2020, 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.

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, associates and joint ventures): 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: Please see Table 3.

Acquisition of individual real estate at costs of at least $300 million or 20% of the paid-in capital: Please see Table 4.

- 89 -

Disposal of individual real estate at prices of at least $300 million or 20% of the paid-in capital: None.

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.

Investments 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;

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.

- 90 -

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, 2021
Revenues
From external customers	$	15,657,465	$	22,840,975	$	8,276,538	$	2,110,332	$	2,000,192		$	50,885,502
Intersegment revenues		4,254,579		377,437		998,325		481,987		1,427,277			7,539,605

Segment revenues	$	19,912,044	$	23,218,412	$	9,274,863	$	2,592,319	$	3,427,469			58,425,107

Intersegment elimination													(7,539,605	)

Consolidated revenues												$	50,885,502

Segment operating costs and expenses	$	12,304,914	$	17,778,792	$	3,471,081	$	2,030,946	$	3,853,004		$	39,438,737

Segment income (loss) before income tax	$	6,444,784	$	1,625,392	$	3,826,474	$	246,115	$	(41,247	)	$	12,101,518

For the nine months ended September 30, 2021
Revenues
From external customers	$	46,657,971	$	68,049,063	$	23,696,685	$	6,452,242	$	5,731,671		$	150,587,632
Intersegment revenues		12,865,825		1,155,889		2,872,797		1,511,493		4,386,524			22,792,528

Segment revenues	$	59,523,796	$	69,204,952	$	26,569,482	$	7,963,735	$	10,118,195			173,380,160

Intersegment elimination													(22,792,528	)

Consolidated revenues												$	150,587,632

Segment operating costs and expenses	$	36,179,153	$	52,952,140	$	9,798,934	$	6,307,719	$	11,519,043		$	116,756,989

Segment income (loss) before income tax	$	19,557,245	$	4,853,760	$	10,751,850	$	787,404	$	(1,063,451	)	$	34,886,808

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

Segment 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

Segment 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

- 91 -

Main Products and Service Revenues


	Three Months Ended September 30				Nine Months Ended September 30
	2021		2020		2021		2020
Mobile services revenue	$	14,744,930	$	14,220,347	$	43,227,622	$	42,516,219
Sales of products		9,509,969		8,927,134		29,250,819		26,976,137
Local telephone and domestic long distance telephone services revenue		6,560,055		6,666,969		19,358,326		19,944,136
Broadband access and domestic leased line services revenue		5,815,664		5,583,920		17,168,724		16,729,965
Data communications internet services revenue		5,639,842		5,370,351		16,631,064		16,030,764
International network and leased line services revenue		1,071,161		942,659		3,286,328		3,041,287
Others		7,543,881		10,459,946		21,664,749		22,890,681

	$	50,885,502	$	52,171,326	$	150,587,632	$	148,129,189

- 92 -

TABLE 1

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED

NINE MONTHS ENDED SEPTEMBER 30, 2021

(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.

595,749

300,000

—

5.04

2,978,748

Yes

Notes 3 and 4

Wiin
Technology
Co., Ltd.

595,749

200,000

—

3.36

2,978,748

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 jointly and severally guarantee 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.

- 93 -

TABLE 2

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD

SEPTEMBER 30, 2021

(Amounts in Thousands of New Taiwan Dollars)


Held Company Name	Marketable Securities Type and Name	Relationship with the Company		Financial Statement Account	September 30, 2021								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	$	2,949,819		12	$	2,949,819		—
	Innovation Works Development Fund, L.P.		—	Financial assets at FVTPL—noncurrent		—		475,064		4		475,064		—
	Industrial Bank of Taiwan II Venture Capital Co., Ltd. (IBT II)		—	Financial assets at FVOCI		5,252		15,475		17		15,475		—
	Global Mobile Corp.		—	Financial assets at FVOCI		7,617		—		3		—		—
	Innovation Works Limited		—	Financial assets at FVOCI		1,000		3,910		2		3,910		—
	RPTI Intergroup International Ltd.		—	Financial assets at FVOCI		4,765		—		10		—		—
	Taiwan mobile payment Co., Ltd.		—	Financial assets at FVOCI		1,200		4,233		2		4,233		—
	Taiwania Capital Buffalo Fund Co., Ltd.		—	Financial assets at FVTPL—noncurrent		600,000		731,032		13		731,032		—
	4 Gamers Entertainment Inc.		—	Financial assets at FVOCI		136		97,087		19.9		97,087		—
	UUPON Inc.		—	Financial assets at FVOCI		246		877		4		877		—
Senao International Co., Ltd.	Stocks
	N.T.U. Innovation Incubation Corporation		—	Financial assets at FVOCI		1,200		9,365		9		9,365		—
	UUPON Inc.		—	Financial assets at FVOCI		109		390		2		390		—
CHIEF Telecom Inc.	Stocks
	3 Link Information Service Co., Ltd.		—	Financial assets at FVOCI		374		1,220		10		1,220		—
	WPG Holdings Limited		—	Financial assets at FVTPL—current		9		443		—		443		Note 2
	WPG Holdings Limited		—	Financial assets at FVOCI		2,072		102,461		—		102,461		Note 2
	Taichung Commercial Bank Co., Ltd.		—	Financial assets at FVTPL—current		169		1,958		—		1,958		Note 2
	WT Microelectronics Co., Ltd.		—	Financial assets at FVOCI		125		6,006		—		6,006		Note 2
Chunghwa Investment Co., Ltd.	Stocks
	Tatung Technology Inc.		—	Financial assets at FVOCI		4,571		87,966		11		87,966		—
	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		52,000		7		52,000		Note 2
	Limited partnership
	Taiwania Capital Buffalo Fund V, L.P.		—	Financial assets at FVTPL—noncurrent		—		25,000		3		25,000		—
Chunghwa Hsingta Co., Ltd.	Stocks
	Cotech Engineering Fuzhou Corp.		—	Financial assets at FVOCI		—		4,161		5		4,161		—

Note 1:

Showed at carrying amounts with fair value adjustments.

Note 2:

Fair value was based on the closing price on September 30, 2021.

- 94 -

TABLE 3

CHUNGHWA TELECOM CO., LTD.

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL

NINE MONTHS ENDED SEPTEMBER 30, 2021

(Amounts in Thousands of New Taiwan Dollars)

Company Name

Marketable Securities

Type and Name

Financial Statement
Account

Counterparty

Nature of
Relationship

Beginning Balance

Acquisition

Disposal

Ending Balance

Shares
(Thousands/
Thousand
Units)

Amount

Shares
(Thousands/
Thousand
Units)

Amount

Shares
(Thousands/
Thousand
Units)

Amount

Carrying
Value

Gain on
Disposal

Shares
(Thousands/
Thousand
Units)

Amount

Chunghwa Telecom Co., Ltd.

Stocks
China Airlines, Ltd.

Financial assets at FVOCI

—

216,639

2,541,176

(Note)

—

216,639

2,635,568

2,541,176

(Note)

94,392

—

Note:

Showing at their original investment amounts without adjustments for fair values.

- 95 -

TABLE 4

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, 2021

(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

2021.08.05

$564,988

Fully paid

Taipei City Government

—

Not applicable

According to appraisal report

Operating purpose

—

Chunghwa Precision Test Tech. Co., Ltd.

Land

2021.01.18

534,030

The first installment $80,104 thousand was paid.

Taiwan Powder Technologies Co., Ltd.

—

Not applicable

According to appraisal report

Space requirements for future business expansion and operational considerations

—

- 96 -

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, 2021

(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		Unit Price		Payment Terms		Ending Balance (Notes 3 and 5)			% to Total
Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Subsidiary		Sales	$	2,577,343		2		30 days	$	—		—	$	313,009			2
				Purchase		473,978		1		30~90 days		—		—		(992,114	)		(8	)
	Aval Technologies Co., Ltd.	Subsidiary		Purchase		323,064		—		30 days		—		—		(30,468	)		—
	CHIEF Telecom Inc.	Subsidiary		Sales		381,491		—		30 days		—		—		62,270			—
	Chunghwa System Integration Co., Ltd.	Subsidiary		Purchase		1,025,903		1		30 days		—		—		(353,437	)		(3	)
	Honghwa International Co., Ltd.	Subsidiary		Sales		126,179		—		30~60 days		—		—		59,218			—
				Purchase		4,506,761		6		30~60 days		—		—		(787,593	)		(6	)
	Donghwa Telecom Co., Ltd.	Subsidiary		Sales		135,547		—		30 days		—		—		46,602			—
				Purchase		350,009		—		90 days		—		—		(167,687	)		(1	)
	Chunghwa Telecom Global, Inc.	Subsidiary		Purchase		231,677		—		90 days		—		—		(32,301	)		—
	CHT Security Co., Ltd.	Subsidiary		Purchase		194,221		—		30 days		—		—		(37,471	)		—
	Chunghwa Telecom Singapore Pte., Ltd.	Subsidiary		Purchase		113,316		—		30 days		—		—		(40,811	)		—
	International Integrated Systems, Inc.	Subsidiary		Purchase		267,312		—		30 days		—		—		(51,216	)		—
	Taiwan International Standard Electronics Co., Ltd.	Associate		Purchase		340,983		—		30~90 days		—		—		(303,925	)		(2	)
	Next Commercial Bank Co., Ltd.	Associate		Sales		238,906		—		30~60 days		—		—		416			—
Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		Sales		4,338,897		20		30~90 days		—		—		992,122			47
				Purchase		2,463,930		13		30 days		—		—		(300,589	)		(9	)
	Aval Technologies Co., Ltd.	Subsidiary		Sales		246,541		1		60 days		—		—		50,858			2
				Purchase		212,682		1		30 days		—		—		(5,139	)		—
CHIEF Telecom Inc.	Chunghwa Telecom Co., Ltd.	Parent company		Sales		194,415		10		60 days		—		—		7,976			4
				Purchase		365,260		32		30 days		—		—		(62,270	)		(52	)
Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		Sales		1,306,966		82		30 days		—		—		352,401			79
Honghwa International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		Sales		4,592,496		99		30~60 days		—		—		786,149			97
Donghwa Telecom Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		Sales		350,009		42		90 days		—		—		167,687			45
				Purchase		135,547		16		30 days		—		—		(46,602	)		(39	)
Chunghwa Telecom Global, Inc.	Chunghwa Telecom Co., Ltd.	Parent company		Sales		231,677		56		90 days		—		—		32,290			58
Chunghwa Telecom Singapore Pte., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		Sales		113,316		9		30 days		—		—		40,811			11
CHT Security Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		Sales		203,326		28		30 days		—		—		37,466			18
International Integrated Systems, Inc.	Chunghwa Telecom Co., Ltd.	Parent company		Sales		267,312		11		30 days		—		—		51,216			30
Aval Technologies Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		Sales		323,064		2		30 days		—		—		30,468			1
Chunghwa Precision Test Tech. Co., Ltd.	Su Zhou Precision Test Tech. Ltd.	Subsidiary		Sales		74,666		3		90 days		—		—		43,851			5

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.

- 97 -

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, 2021

(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	$	421,364 (Note 2	)		11.27	$	—		—	$	45,336	$	—
Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		1,164,844 (Note 2	)		6.63		—		—		183,183		—
Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		352,401 (Note 2	)		5.01		—		—		111,457		—
Honghwa International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		786,149 (Note 2	)		8.35		—		—		112,178		—
Donghwa Telecom Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		167,687 (Note 2	)		2.95		—		—		61,942		—

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.

- 98 -

TABLE 7

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, 2021

(Amounts in Thousands of New Taiwan Dollars)


Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount				Balance as of September 30, 2021							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, 2021		December 31, 2020		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	$	1,638,607		$	420,180		$	112,892		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		3,855,110			20,663			15,520		Subsidiary (Note 5)
	Donghwa Telecom Co., Ltd.	Hong Kong	International private leased circuit, IP VPN service, and IP transit services		691,163		1,567,453		178,590		100		604,964			(41,436	)		(41,436	)	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		1,001,853			131,009			130,868		Subsidiary (Note 5)
	Chunghwa System Integration Co., Ltd.	Taiwan	Providing system integration services and telecommunications equipment		838,506		838,506		60,000		100		723,876			20,362			10,598		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		1,737,478			500,024			289,550		Subsidiary (Note 5)
	Chunghwa Investment Co., Ltd.	Taiwan	Investment		639,559		639,559		68,085		89		3,049,902			201,624			179,557		Subsidiary (Note 5)
	Prime Asia Investments Group Ltd. (B.V.I.)	British Virgin Islands	Investment		385,274		385,274		1		100		153,641			(3,951	)		(3,951	)	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		634,148			358,074			348,680		Subsidiary (Note 5)
	CHYP Multimedia Marketing & Communications Co., Ltd.	Taiwan	Digital information supply services and advertisement services		150,000		150,000		15,000		100		193,570			14,508			14,792		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		97,885			(1,121	)		(1,121	)	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		447,574			53,829			54,120		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		77		349,037			131,023			104,071		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		98,623			3,382			3,382		Subsidiary (Note 5)
	Spring House Entertainment Tech. Inc.	Taiwan	Software design services, internet contents production and play, and motion picture production and distribution		62,209		62,209		8,251		56		139,208			39,549			22,163		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		116,936			(3,545	)		19		Subsidiary (Note 5)
	Smartfun Digital Co., Ltd.	Taiwan	Providing diversified family education digital services		65,000		65,000		6,500		65		75,026			10,307			6,706		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		95,861			15,247			15,247		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		(5,563	)		(4,599	)		(524	)	Subsidiary (Note 5)
	International Integrated Systems, Inc.	Taiwan	IT solution provider, IT application consultation, system integration and package solution		517,423		517,423		37,211		51		569,068			95,162			30,879		Subsidiary (Note 5)

(Continued)

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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, 2021

(Amounts in Thousands of New Taiwan Dollars)


Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount				Balance as of September 30, 2021					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, 2021		December 31, 2020		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	$	421,393	$	183,437		$	55,057		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		299,649		236,655			103,688		Associate
	KKBOX Taiwan Co., Ltd.	Taiwan	Providing of music on-line, software, electronic information, and advertisement services		67,025		67,025		4,438	30		158,212		(16,402	)		(4,921	)	Associate
	So-net Entertainment Taiwan Limited	Taiwan	Online service and sale of computer hardware		120,008		120,008		9,429	30		218,251		(29,598	)		(8,880	)	Associate
	KingwayTek Technology Co., Ltd.	Taiwan	Design and sale of digital map, technical support for computer peripherals device, design and development of system programming projects		66,684		66,684		9,557	23		258,304		44,040			10,390		Associate
	Taiwan International Ports Logistics Corporation	Taiwan	Import and export storage, logistic warehouse, and ocean shipping service		80,000		80,000		8,000	27		65,215		34,832			9,290		Associate
	Alliance Digital Tech Co., Ltd.	Taiwan	Development of mobile payments and information processing service		—		60,000		6,000	14		—		—			—		Associate (Note 6)
	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		217,413		49,114			24,557		Associate
	Cornerstone Ventures Co., Ltd.	Taiwan	Investment, venture capital, investment advisor, management consultant and other consultancy service		4,900		4,900		490	49		6,600		1,104			541		Associate
	Next Commercial Bank Co., Ltd.	Taiwan	Online banking business		4,190,000		4,190,000		419,000	42		3,538,205		(570,497	)		(238,671	)	Associate
	Chunghwa SEA Holdings	Taiwan	Investment business		10,200		10,200		1,020	51		10,046		(301	)		(154	)	Joint venture
	WiAdvance Technology Corporation	Taiwan	Software solution integration		273,800		—		3,700	20		261,577		(42,462	)		(12,223	)	Associate
Senao International Co., Ltd.	Senao Networks, Inc.	Taiwan	Telecommunication facilities manufactures and sales		202,758		202,758		16,579	34		1,023,428		293,416			99,154		Associate
	Senao International (Samoa) Holding Ltd.	Samoa Islands	International investment		2,046,143		2,253,828		61,475	100		33,823		(3,187	)		(3,187	)	Subsidiary (Note 5)
	Youth Co., Ltd.	Taiwan	Sale of information and communication technologies products		427,850		427,850		14,752	96		226,333		755			(5,643	)	Subsidiary (Note 5)
	Aval Technologies Co., Ltd.	Taiwan	Sale of information and communication technologies products		89,550		89,550		10,840	100		116,895		6,390			6,387		Subsidiary (Note 5)
	Senyoung Insurance Agent Co., Ltd.	Taiwan	Property and liability insurance agency		59,000		59,000		5,900	100		91,259		27,539			27,527		Subsidiary (Note 5)
CHIEF Telecom Inc.	Unigate Telecom Inc.	Taiwan	Telecommunications and internet service		2,000		2,000		200	100		1,053		73			73		Subsidiary (Note 5)
	Chief International Corp.	Samoa Islands	Telecommunications and internet service		6,068		6,068		200	100		82,366		5,450			5,450		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		592,728		354,521			134,718		Associate
	CHT Infinity Singapore Pte. Ltd.	Singapore	Investment business		55,720		—		2,000	40		55,552		(372	)		(149	)	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		2,487,854		611,600			209,469		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		85,242		500,024			14,701		Associate (Note 5)
	Senao International Co., Ltd.	Taiwan	Selling and maintaining mobile phones and its peripheral products		49,731		49,731		1,001	—		43,835		420,180			1,629		Associate (Note 5)
	AgriTalk Technology Inc.	Taiwan	Providing smart agricultural solutions, scientific agricultural product, biological inhibitor, and biochips		33,000		—		1,650	17		33,612		(2,629	)		(434	)	Associate (Note 7)
	Imedtac Co., Ltd.	Taiwan	Providing medical AIoT solution, biomedical engineering services, and sales of medical device as an agent		48,000		—		960	8		41,001		(4,063	)		(306	)	Associate (Note 8)

(Continued)

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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, 2021

(Amounts in Thousands of New Taiwan Dollars)


Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount				Balance as of September 30, 2021						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, 2021		December 31, 2020		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	$	74,192	$	12,636		2,600		100	$	83,581	$	(816	)	$	(1,015	)	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		2,343		120			120		Subsidiary (Note 5)
	Chunghwa Precision Test Tech. International, Ltd.	Samoa Islands	Wholesale and retail of electronic materials, and investment		173,649		116,790		5,700		100		150,362		3,690			4,228		Subsidiary (Note 5)
Prime Asia Investments Group, Ltd. (B.V.I.)	Chunghwa Hsingta Co., Ltd.	Hong Kong	Investment		375,274		375,274		1		100		153,641		(3,951	)		(3,951	)	Subsidiary (Note 5)
Senao International (Samoa) Holding Ltd.	Senao International HK Limited	Hong Kong	International investment		2,060,467		2,248,963		80,440		100		31,696		(3,183	)		(3,183	)	Subsidiary (Note 5)
Youth Co., Ltd.	ISPOT Co., Ltd.	Taiwan	Sale of information and communication technologies products		53,021		53,021		—		100		11,236		818			674		Subsidiary (Note 5)
	Youyi Co., Ltd.	Taiwan	Maintenance of information and communication technologies products		21,354		21,354		—		100		17,745		(194	)		(400	)	Subsidiary (Note 5)
Aval Technologies Co., Ltd.	Wiin Technology Co., Ltd.	Taiwan	Sale of information and communication technologies products		29,550		29,550		3,305		100		37,114		3,638			3,638		Subsidiary (Note 5)
Senyoung Insurance Agent Co., Ltd.	Senaolife Insurance Agent Co., Ltd.	Taiwan	Life insurance services		29,500		29,500		2,950		100		24,298		(1,888	)		(1,888	)	Subsidiary (Note 5)
CHYP Multimedia Marketing & Communications Co., Ltd	Click Force Marketing Company	Taiwan	Advertisement services		44,607		44,607		1,154		49		35,743		6,190			2,657		Associate
International Integrated Systems, Inc.	Infoexplorer International Co., Ltd.	Samoa	Investment		24,806		24,806		795		100		26,274		(148	)		(148	)	Subsidiary (Note 5)
	IISI Investment Co., Ltd.	Mauritius	Investment		81,302		81,302		244		100		25,085		(765	)		(765	)	Subsidiary (Note 5)
	Unitronics Technology Corp.	Taiwan	Development and maintenance of information system		55,569		55,569		5,065		99.96		77,750		7,887			7,884		Subsidiary (Note 5)
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		26,267		(147	)		(147	)	Subsidiary (Note 5)
IISI Investment Co., Ltd.	Leading Tech Co., Ltd.	Mauritius	Investment		65,374		65,374		316		100		15,443		(111	)		(111	)	Subsidiary (Note 5)
Leading Tech Co., Ltd.	Leading Systems Co., Ltd.	Mauritius	Investment		100,693		100,693		300		100		10,699		(111	)		(111	)	Subsidiary (Note 5)

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:

Alliance Digital Tech Co., Ltd. completed its liquidation in August 2021.

Note 7:

AgriTalk Technology Inc. was reclassified from financial asset at FVOCI to associate in July 2021.

Note 8:

Imedtac Co., Ltd. was reclassified from financial asset at FVOCI to associate in August 2021.

(Concluded)

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TABLE 8

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA

NINE MONTHS ENDED SEPTEMBER 30, 2021

(Amounts in Thousands of New Taiwan Dollars)


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, 2021		Investment Flows				Accumulated Outflow of Investment from Taiwan as of September 30, 2021		Net Income (Loss) of the Investee			% Ownership of Direct or Indirect Investment		Investment Gain (Loss) (Note 2)			Carrying Value as of September 30, 2021		Accumulated Inward Remittance of Earnings as of September 30, 2021		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, 2021				Note
Senao Trading (Fujian) Co., Ltd.	Sale of information and communication technologies products	$	1,073,170		2	$	1,073,170	$	—	$	191,147	$	882,023	$	—			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		1,283			100		1,283			—		—	Notes 9 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		(3,429	)		100		(3,429	)		28,290		—	Notes 11 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 10 and 13
Shanghai Taihua Electronic Technology Limited	Design of printed circuit board and related consultation service		51,233		2		51,233		—		—		51,233		(3,943	)		100		(3,943	)		12,321		—	Note 13
Su Zhou Precision Test Tech. Ltd.	Assembly processed of circuit board, design of printed circuit board and related consultation service		119,199		2		62,340		56,859		—		119,199		7,675			100		7,675			140,080		—	Note 13
Shanghai Chief Telecom Co., Ltd.	Telecommunications and internet service		10,150		1		4,973		—		—		4,973		731			49		358			13,693		—	Note 13
International Integrated Systems Inc. (Shanghai)	Development and maintenance of information system		48,753		2		39,923		—		—		39,923		(2,753	)		100		(2,753	)		—		—	Notes 12 and 13

(Continued)

- 102 -


Investee	Accumulated Investment in Mainland China as of September 30, 2021		Investment Amounts Authorized by Investment Commission, MOEA		Upper Limit on Investment Stipulated by Investment Commission, MOEA
SENAO and its subsidiaries (Note 3)	$	1,837,861	$	2,047,858	$	3,582,310
Chunghwa Telecom (China) Co., Ltd. (Note 4)		177,176		177,176		229,095,541
Jiangsu Zhenghua Information Technology Company, LLC (Note 4)		142,057		142,057		229,095,541
Chunghwa Precision Test Tech Co., Ltd and its subsidiaries (Note 5)		170,432		216,185		4,358,283
Shanghai Chief Telecom Co., Ltd. (Note 6)		4,973		4,973		1,742,297
IISI and its subsidiaries (Note 7)		39,923		39,923		632,126

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:

IISI and its subsidiaries were calculated based on the consolidated net assets value of IISI.

Note 8:

Senao Trading (Fujian) Co., Ltd. completed its liquidation in May 2019.

Note 9:

Senao International Trading (Shanghai) Co., Ltd. completed its liquidation in April 2021.

Note 10:

Jiangsu Zhenhua Information Technology Company, LLC. completed its liquidation in December 2018.

Note 11:

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 12:

International Integrated Systems Inc. (Shanghai) completed its liquidation in August 2021.

Note 13:

The amount was eliminated upon consolidation.

(Concluded)

- 103 -

TABLE 9

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS

NINE MONTHS ENDED SEPTEMBER 30, 2021

(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)
2021		0	Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	a	Accounts receivable	$	313,009		—		—
						Accrued custodial receipts		108,355		—		—
						Accounts payable		992,114		—		—
						Amounts collected for others		172,721		—		—
						Revenues		2,577,343		—		2
						Operating costs and expenses		407,617		—		—
						Inventories		66,361		—		—
				CHIEF Telecom Inc.	a	Accounts receivable		62,270		—		—
						Revenues		381,491		—		—
				Chunghwa System Integration Co., Ltd.	a	Accounts payable		353,437		—		—
						Operating costs and expenses		852,898		—		1
						Inventories		173,005		—		—
						Property, plant and equipment		134,616		—		—
				Chunghwa Telecom Global Inc.	a	Accounts payable		32,301		—		—
						Operating costs and expenses		231,677		—		—
				Donghwa Telecom Co., Ltd.	a	Accounts receivable		46,602		—		—
						Accounts payable		167,687		—		—
						Revenues		135,547		—		—
						Operating costs and expenses		350,009		—		—
				Honghwa International Co., Ltd.	a	Accounts receivable		59,218		—		—
						Accounts payable		787,593		—		—
						Revenues		126,179		—		—
						Operating costs and expenses		4,414,511		—		3
						Inventories		92,250		—		—
						Property, plant and equipment		103,067		—		—
				CHT Security Co., Ltd.	a	Accounts payable		37,471		—		—
						Operating costs and expenses		154,416		—		—
						Inventories		39,805		—		—
				International Integrated Systems, Inc.	a	Accounts payable		51,216		—		—
						Operating costs and expenses		243,429		—		—
						Inventories		23,883		—		—
				Aval Technologies Co., Ltd.	a	Accounts payable		30,468		—		—
						Operating costs and expenses		295,626		—		—
						Inventories		27,438		—		—

(Continued)

- 104 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS

NINE MONTHS ENDED SEPTEMBER 30, 2021

(Amounts in Thousands of New Taiwan Dollars)

Year

No.

(Note 1)

Company Name

Related Party

Nature of

Relationship

(Note 2)

Transaction Details

Financial Statement

Account

Amount

(Note 5)

Payment Terms

(Note 3)

% to Total

Sales or Assets

(Note 4)

Chunghwa Telecom Singapore Pte., Ltd.

Accounts payable

40,811

—

Operating costs and expenses

113,316

—

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, 2021, while revenues, costs and expenses are shown as a percentage to consolidated revenues for the nine months ended September 30, 2021.

Note 5:

The amount was eliminated upon consolidation.

(Concluded)

- 105 -

TABLE 10

CHUNGHWA TELECOM CO., LTD.

INFORMATION OF MAJOR STOCKHOLDERS

SEPTEMBER 30, 2021


Name of Major Stockholders	Shares
Name of Major Stockholders	Number of Shares		Percentage of Ownership (%)
Ministry of Transportation and Communications		2,737,718,976		35.29
Shin Kong Life Insurance Co., Ltd.		467,321,184		6.02

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.

- 106 -