6-K

1934 Act Registration No. 1-31731

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

Dated August 6, 2020

Chunghwa Telecom Co., Ltd.

(Translation of Registrant’s Name into English)

21-3 Hsinyi Road Sec. 1,

Taipei, Taiwan, 100 R.O.C.

(Address of Principal Executive Office)

(Indicate by check mark whether the registrant files or will file annual reports under cover of form 20-F or Form 40-F.)

Form 20-F  ☒             Form 40-F  ☐

(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes  ☐            No  ☒

(If “Yes” is marked, indicated below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable)

Exhibit	Description
99.1	To announce the differences between the second quarter of 2020 financial statements under Taiwan-IFRSs and IFRSs
99.2	Consolidated Financial Statements for the Six Months Ended June 30, 2020 and 2019 and Independent Auditors’ Review Report pursuant to International Financial Reporting Standards adopted by ROC (“Taiwan-IFRSs”)
99.3	Consolidated Financial Statements for the Six Months Ended June 30, 2020 and 2019 pursuant to International Financial Reporting Standards issued by the International Accounting Standards Board (“IFRSs”)

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant Chunghwa Telecom Co., Ltd. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 6, 2020

Chunghwa Telecom Co., Ltd.
By:	/s/ Shui-Yi Kuo
Name:	Shui-Yi Kuo
Title:	Chief Financial Officer

3

EX-99.1

Exhibit 99.1

To announce the differences between the second quarter of 2020 financial statements under Taiwan-IFRSs and IFRSs

Date of events: 2020/8/6

Contents:

1. Date of occurrence of the event: 2020/8/6

2. Of which year/ quarter financial report required to be adjusted: The second quarter of 2020

3. Accounting principles applied (domestic listing securities):

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 (“Taiwan-IFRSs”)

4. Inconsistent items/ amounts (domestic listing securities):

Under Taiwan-IFRSs, Chunghwa Telecom Co., Ltd. and its subsidiaries (or the “Company”) reported consolidated net income of NT$8,852,986 thousand and NT$17,400,350 thousand, consolidated net income attributable to stockholders of the parent of NT$8,574,040 thousand and NT$16,857,374 thousand, and basic earnings per share of NT$1.11 and NT$2.17 for the three months and six months ended June 30, 2020, respectively. The Company also reported total assets of NT$506,003,267 thousand, total liabilities of NT$136,221,753 thousand, and total equity of NT$369,781,514 thousand as of June 30, 2020.

5. Accounting principles applied (securities issued overseas):

IAS 34 “Interim Financial Reporting” as issued by the International Accounting Standard Board (“IFRSs”)

6. Inconsistent items/ amounts (securities issued overseas):

Under IFRSs, the Company reported consolidated net income of NT$10,196 million and NT$18,296 million, consolidated net income attributable to stockholders of the parent of NT$9,881 million and NT$17,731 million, and basic earnings per share of NT$1.28 and NT$2.29 for the three months and six months ended June 30, 2020, respectively. The Company also reported total assets of NT$505,797 million, total liabilities of NT$137,121 million, and total equity of NT$368,676 million as of June 30, 2020.

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7. Cause of the inconsistency:

The differences between consolidated net income under Taiwan-IFRSs and that under IFRSs followed by the Company mainly come from the timing of the recognition of income tax on unappropriated earnings. In addition, prior to incorporation, the Company was subject to the laws and regulations applicable to state-owned enterprises in Taiwan which differed from the generally accepted accounting principles as applicable to commercial companies. As such, revenue from providing fixed line connection service and selling prepaid phone cards was recognized at the time the service was performed or the card was sold by the Company. Upon incorporation, net assets greater than the capital stock was credited as additional paid-in-capital and part of the additional paid-in-capital was from the unearned revenues generated from connection fees and prepaid cards as of the date of incorporation. Under IFRSs, revenue from connection fees and prepaid phone cards was deferred at the time of the service performed or sale and recognized as revenue over time as the service is continuously performed or as consumed. This reclassification from additional paid-in capital to retained earnings did not affect total equity.

8. Any other matters that need to be specified:

Chunghwa Telecom’s earnings distribution and stockholders’ equity matters are in accordance with Taiwan-IFRSs.

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EX-99.2

Exhibit 99.2

Chunghwa Telecom Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the

Six Months Ended June 30, 2020 and 2019 and

Independent Auditors’ Review Report

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and Stockholders

Chunghwa Telecom Co., Ltd.

Introduction

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

Scope of Review

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

Conclusion

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

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The engagement partners on the reviews resulting in this independent auditors’ review report are Dien Sheng Chang and Ching Pin Shih.

/s/ Dien Sheng Chang /s/ Ching Pin Shih

Deloitte & Touche

Taipei, Taiwan

Republic of China

August 5, 2020

Notice to Readers

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

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

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

	June 30, 2020 (Reviewed)				December 31, 2019 (Audited)				June 30, 2019 (Reviewed)
	Amount		%		Amount		%		Amount		%
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)	$	19,150,169		4	$	34,049,643		7	$	36,551,150		7
Financial assets at fair value through profit or loss (Note 7)		8,490		—		516		—		3,071		—
Hedging financial assets (Note 20)		2,358		—		327		—		1,803		—
Contract assets (Note 29)		4,518,827		1		4,441,196		1		4,667,108		1
Trade notes and accounts receivable, net (Notes 9 and 29)		26,710,646		5		26,407,783		6		27,704,025		6
Receivables from related parties (Note 37)		24,575		—		16,834		—		22,258		—
Inventories (Notes 10 and 38)		18,139,775		4		17,344,276		4		15,256,997		3
Prepayments (Note 11)		4,876,590		1		1,883,259		—		4,937,925		1
Other current monetary assets (Note 12)		6,665,163		1		7,498,564		2		18,684,258		4
Other current assets (Notes 19 and 38)		2,088,318		—		2,429,664		—		2,633,792		1
Total current assets		82,184,911		16		94,072,062		20		110,462,387		23
NONCURRENT ASSETS
Financial assets at fair value through profit or loss (Note 7)		709,137		—		778,105		—		508,262		—
Financial assets at fair value through other comprehensive income (Note 8)		6,899,935		1		7,268,917		2		6,649,385		1
Investments accounted for using equity method (Note 14)		7,248,984		1		7,354,226		2		3,033,826		1
Contract assets (Note 29)		2,456,073		—		2,600,913		—		2,406,011		—
Property, plant and equipment (Notes 15, 37 and 38)		279,607,696		55		283,694,215		59		283,593,894		58
Right-of-use assets (Note 16)		11,331,980		3		11,364,249		2		11,529,946		2
Investment properties (Note 17)		8,213,568		2		8,169,393		2		8,272,336		2
Intangible assets (Note 18)		93,390,023		19		47,046,525		10		48,933,945		10
Deferred income tax assets (Note 3)		3,260,000		1		3,258,607		1		3,545,648		1
Incremental costs of obtaining contracts (Note 29)		955,755		—		942,652		—		1,010,011		—
Net defined benefit assets (Note 3)		2,253,023		—		2,127,335		—		966,175		—
Prepayments (Note 11)		2,495,825		1		2,679,335		1		2,843,759		1
Other noncurrent assets (Notes 19, 38 and 39)		4,996,357		1		6,101,704		1		5,708,768		1
Total noncurrent assets		423,818,356		84		383,386,176		80		379,001,966		77
TOTAL	$	506,003,267		100	$	477,458,238		100	$	489,464,353		100
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 21)	$	60,000		—	$	90,000		—	$	95,000		—
Short-term bills payable (Note 22)		15,989,896		3		—		—		—		—
Financial liabilities at fair value through profit or loss (Note 7)		—		—		239		—		1,081		—
Contract liabilities (Notes 29 and 37)		18,190,895		4		16,839,830		4		14,724,134		3
Trade notes and accounts payable (Note 24)		12,478,030		3		15,312,274		3		15,320,902		3
Payables to related parties (Note 37)		377,082		—		653,983		—		398,515		—
Current tax liabilities (Note 3)		4,481,301		1		4,020,670		1		4,350,756		1
Lease liabilities (Notes 16, 34 and 37)		3,234,958		1		3,291,330		1		3,392,703		1
Dividends payable (Note 28)		32,782,969		7		—		—		34,745,603		7
Other payables (Note 25)		20,643,141		4		22,952,488		5		20,990,148		5
Provisions (Note 26)		199,592		—		206,942		—		145,412		—
Other current liabilities		955,771		—		983,789		—		997,872		—
Total current liabilities		109,393,635		23		64,351,545		14		95,162,126		20
NONCURRENT LIABILITIES
Contract liabilities (Note 29)		6,766,426		1		6,841,485		2		6,369,959		1
Long-term loans (Notes 23 and 38)		1,600,000		—		1,600,000		—		1,600,000		—
Deferred income tax liabilities (Note 3)		1,946,820		—		1,912,305		—		1,954,700		—
Provisions (Note 26)		101,240		—		97,382		—		82,890		—
Lease liabilities (Notes 16, 34 and 37)		6,381,335		1		6,466,808		1		6,341,162		1
Customers’ deposits (Note 37)		4,633,829		1		4,747,644		1		4,646,748		1
Net defined benefit liabilities (Note 3)		3,565,979		1		3,504,617		1		3,613,320		1
Other noncurrent liabilities		1,832,489		—		1,542,687		—		1,447,349		—
Total noncurrent liabilities		26,828,118		4		26,712,928		5		26,056,128		4
Total liabilities		136,221,753		27		91,064,473		19		121,218,254		24
EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT (Notes 13 and 28)
Common stocks		77,574,465		15		77,574,465		16		77,574,465		16
Additional paid-in capital		171,274,191		34		171,255,985		36		171,255,580		35
Retained earnings
Legal reserve		77,574,465		15		77,574,465		16		77,574,465		16
Special reserve		2,675,419		1		2,675,419		1		2,675,419		1
Unappropriated earnings		30,416,491		6		46,341,361		10		29,269,371		6
Total retained earnings		110,666,375		22		126,591,245		27		109,519,255		23
Others		187,475		—		688,548		—		226,265		—
Total equity attributable to stockholders of the parent		359,702,506		71		376,110,243		79		358,575,565		74
NONCONTROLLING INTERESTS (Notes 13 and 28)		10,079,008		2		10,283,522		2		9,670,534		2
Total equity		369,781,514		73		386,393,765		81		368,246,099		76
TOTAL	$	506,003,267		100	$	477,458,238		100	$	489,464,353		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 June 30										Six Months Ended June 30
	2020					2019					2020					2019
	Amount			%		Amount			%		Amount			%		Amount			%
REVENUES (Notes 29, 37 and 43)	$	47,807,864			100	$	50,108,175			100	$	95,957,863			100	$	101,439,336			100
OPERATING COSTS (Notes 10, 27, 29, 30, 37 and 43)		29,801,214			62		32,267,298			65		60,192,014			63		65,748,086			65
GROSS PROFIT		18,006,650			38		17,840,877			35		35,765,849			37		35,691,250			35
OPERATING EXPENSES (Notes 9, 27, 30, 37 and 43)
Marketing		5,177,839			12		5,483,018			11		10,250,395			11		10,890,909			11
General and administrative		1,147,680			2		1,140,567			2		2,361,180			2		2,311,725			2
Research and development		961,020			2		954,352			2		1,897,196			2		1,875,311			1
Expected credit loss (reversal of credit loss)		97,841			—		(45,808	)		—		103,978			—		(101,761	)		—
Total operating expenses		7,384,380			16		7,532,129			15		14,612,749			15		14,976,184			14
OTHER INCOME AND EXPENSES (Note 30)		(11,154	)		—		(4,707	)		—		(11,834	)		—		(9,212	)		—
INCOME FROM OPERATIONS		10,611,116			22		10,304,041			20		21,141,266			22		20,705,854			21
NON-OPERATING INCOME AND EXPENSES
Interest income		32,789			—		76,931			—		72,175			—		129,534			—
Other income (Notes 30 and 37)		286,426			1		279,330			1		329,618			—		335,676			—
Other gains and losses (Notes 30, 36 and 37)		(66,940	)		—		(4,308	)		—		(22,951	)		—		(23,676	)		—
Interest expenses (Notes 16, 30 and 37)		(48,008	)		—		(25,594	)		—		(90,395	)		—		(51,438	)		—
Share of profits of associates accounted for using equity method (Note 14)		127,846			—		137,878			—		164,920			—		217,051			—
Total non-operating income and expenses		332,113			1		464,237			1		453,367			—		607,147			—
INCOME BEFORE INCOME TAX		10,943,229			23		10,768,278			21		21,594,633			22		21,313,001			21
INCOME TAX EXPENSE (Notes 3 and 31)		2,090,243			4		2,011,780			4		4,194,283			4		4,029,790			4
NET INCOME		8,852,986			19		8,756,498			17		17,400,350			18		17,283,211			17
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 28 and 36)		955,207			2		(124,403	)		—		(445,709	)		—		(283,391	)		—
Gain or loss on hedging instruments subject to basis adjustment (Note 20)		2,358			—		4,522			—		2,031			—		734			—
Share of remeasurements of defined benefit pension plans of associates (Note 14)		—			—		—			—		725			—		—			—
		957,565			2		(119,881	)		—		(442,953	)		—		(282,657	)		—

(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 June 30										Six Months Ended June 30
	2020					2019					2020					2019
	Amount			%		Amount			%		Amount			%		Amount			%
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising from the translation of the foreign operations	$	(67,533	)		—	$	39,468			—	$	(79,309	)		—	$	62,998			—
Share of exchange differences arising from the translation of the foreign operations of associates (Note 14)		(1,047	)		—		146			—		(1,235	)		—		316			—
		(68,580	)		—		39,614			—		(80,544	)		—		63,314			—
Total other comprehensive income (loss), net of income tax		888,985			2		(80,267	)		—		(523,497	)		—		(219,343	)		—
TOTAL COMPREHENSIVE INCOME	$	9,741,971			21	$	8,676,231			17	$	16,876,853			18	$	17,063,868			17
NET INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	8,574,040			18	$	8,568,370			17	$	16,857,374			18	$	16,924,452			17
Noncontrolling interests		278,946			1		188,128			—		542,976			—		358,759			—
	$	8,852,986			19	$	8,756,498			17	$	17,400,350			18	$	17,283,211			17
COMPREHENSIVE INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	9,470,213			20	$	8,485,493			17	$	16,357,026			17	$	16,690,803			17
Noncontrolling interests		271,758			1		190,738			—		519,827			1		373,065			—
	$	9,741,971			21	$	8,676,231			17	$	16,876,853			18	$	17,063,868			17
EARNINGS PER SHARE (Note 32)
Basic	$	1.11				$	1.10				$	2.17				$	2.18
Diluted	$	1.11				$	1.10				$	2.17				$	2.18

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

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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 28)
													Others
																Unrealized Gain
													Exchange			or Loss on
													Differences			Financial Assets
													Arising from the			at Fair Value
						Retained Earnings							Translation of			Through Other			Gain or Loss					Noncontrolling
			Additional							Unappropriated			the Foreign			Comprehensive			on Hedging					Interests
	Common Stocks		Paid-in Capital			Legal Reserve		Special Reserve		Earnings			Operations			Income			Instruments		Total			(Notes 13 and 28)			Total Equity
BALANCE, JANUARY 1, 2019	$	77,574,465	$	171,136,764		$	77,574,465	$	2,675,419	$	47,090,522		$	(79,427	)	$	538,272		$	1,069	$	376,511,549		$	9,990,345		$	386,501,894
Appropriation of 2018 earnings
Cash dividends distributed by Chunghwa		—		—			—		—		(34,745,603	)		—			—			—		(34,745,603	)		—			(34,745,603	)
Cash dividends distributed by subsidiaries		—		—			—		—		—			—			—			—		—			(709,817	)		(709,817	)
Change in additional paid-in capital from investments in associates accounted for using equity method		—		119,628			—		—		—			—			—			—		119,628			942			120,570
Net income for the six months ended June 30, 2019		—		—			—		—		16,924,452			—			—			—		16,924,452			358,759			17,283,211
Other comprehensive income (loss) for the six months ended June 30, 2019		—		—			—		—		—			41,848			(276,231	)		734		(233,649	)		14,306			(219,343	)
Total comprehensive income (loss) for the six months ended June 30, 2019		—		—			—		—		16,924,452			41,848			(276,231	)		734		16,690,803			373,065			17,063,868
Share-based payment transactions of subsidiaries		—		(812	)		—		—		—			—			—			—		(812	)		15,999			15,187
BALANCE, JUNE 30, 2019	$	77,574,465	$	171,255,580		$	77,574,465	$	2,675,419	$	29,269,371		$	(37,579	)	$	262,041		$	1,803	$	358,575,565		$	9,670,534		$	368,246,099
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 declared by Chunghwa		—		—			—		—		(32,782,969	)		—			—			—		(32,782,969	)		—			(32,782,969	)
Cash dividends distributed by subsidiaries		—		—			—		—		—			—			—			—		—			(775,420	)		(775,420	)
Change in additional paid-in capital from investments in associates accounted for using equity method		—		(5,680	)		—		—		—			—			—			—		(5,680	)		47			(5,633	)
Change in additional paid-in capital for not proportionately participating in the capital increase of subsidiaries		—		(103	)		—		—		—			—			—			—		(103	)		103			—
Net income for the six months ended June 30, 2020		—		—			—		—		16,857,374			—			—			—		16,857,374			542,976			17,400,350
Other comprehensive income (loss) for the six months ended June 30, 2020		—		—			—		—		725			(72,813	)		(430,291	)		2,031		(500,348	)		(23,149	)		(523,497	)
Total comprehensive income (loss) for the six months ended June 30, 2020		—		—			—		—		16,858,099			(72,813	)		(430,291	)		2,031		16,357,026			519,827			16,876,853
Share-based payment transactions of subsidiaries		—		23,989			—		—		—			—			—			—		23,989			50,929			74,918
BALANCE, JUNE 30, 2020	$	77,574,465	$	171,274,191		$	77,574,465	$	2,675,419	$	30,416,491		$	(221,190	)	$	406,307		$	2,358	$	359,702,506		$	10,079,008		$	369,781,514

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

- 6 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

	Six Months Ended June 30
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	$	21,594,633		$	21,313,001
Adjustments to reconcile income before income tax to net cash provided by operating activities:
Depreciation		15,449,012			15,432,100
Amortization		2,123,708			2,129,015
Amortization of incremental costs of obtaining contracts		390,281			690,939
Expected credit loss (reversal of credit loss)		103,978			(101,761	)
Interest expenses		90,395			51,438
Interest income		(72,175	)		(129,534	)
Dividend income		(236,296	)		(240,849	)
Compensation cost of share-based payment transactions		3,291			859
Share of profits of associates accounted for using equity method		(164,920	)		(217,051	)
Loss on disposal of property, plant and equipment		11,834			9,066
Loss on disposal of intangible assets		—			146
Loss on disposal of financial instruments		1,788			—
Gain on disposal of investments accounted for using equity method		—			(30,152	)
Provision for inventory and obsolescence		195,690			240,511
Valuation loss on financial assets and liabilities at fair value through profit or loss, net		68,170			5,997
Others		(52,142	)		7,844
Changes in operating assets and liabilities
Decrease (increase) in:
Contract assets		67,414			140,300
Trade notes and accounts receivable		(343,907	)		2,463,779
Receivables from related parties		(7,741	)		2,012
Inventories		(991,189	)		(376,793	)
Prepayments		(2,793,263	)		(3,104,099	)
Other current monetary assets		116,838			(1,033,337	)
Other current assets		341,346			(57,708	)
Incremental cost of obtaining contracts		(403,384	)		(365,920	)
Increase (decrease) in:
Contract liabilities		1,276,006			4,114,091
Trade notes and accounts payable		(2,832,771	)		(5,143,953	)
Payables to related parties		(276,901	)		(519,436	)
Other payables		(3,302,263	)		(2,127,402	)
Provisions		(3,492	)		21,475
Other current liabilities		(17,632	)		(154,345	)
Net defined benefit plans		(64,326	)		277,297
Cash generated from operations		30,271,982			33,297,530
Interest paid		(100,499	)		(51,438	)
Income tax paid		(3,700,530	)		(4,072,590	)
Net cash provided by operating activities		26,470,953			29,173,502

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

	Six Months Ended June 30
	2020			2019
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of financial assets at fair value through other comprehensive income	$	(77,360	)	$	—
Purchase of financial assets at fair value through profit or loss		(38,944	)		—
Proceeds from disposal of financial assets at fair value through profit or loss		29,741			—
Acquisition of time deposits and negotiable certificates of deposit with maturities of more than three months		(2,693,369	)		(12,308,334	)
Proceeds from disposal of time deposits and negotiable certificates of deposit with maturities of more than three months		3,800,695			4,654,443
Proceeds from disposal of agreements collateralized by bonds with maturities of more than three months		15,335			—
Proceeds from disposal of investments accounted for using equity method		—			32,470
Acquisition of property, plant and equipment		(9,243,623	)		(10,315,387	)
Proceeds from disposal of property, plant and equipment		24,749			23,887
Acquisition of intangible assets		(47,467,328	)		(119,123	)
Acquisition of investment properties		(54,435	)		—
Decrease (increase) in other noncurrent assets		42,453			(503,514	)
Interest received		78,215			125,234
Dividends received		38,395			17,939
Net cash used in investing activities		(55,545,476	)		(18,392,385	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans		70,000			305,000
Repayment of short-term loans		(100,000	)		(310,000	)
Proceeds from short-term bills payable		29,000,000			—
Repayment of short-term bills payable		(13,000,000	)		—
Decrease in customers’ deposits		(124,201	)		(85,038	)
Payments for the principal of lease liabilities		(2,006,065	)		(1,962,191	)
Increase in other noncurrent liabilities		289,802			137,019
Dividends distributed to noncontrolling interests		(6,796	)		—
Change in other noncontrolling interests		71,627			14,328
Net cash provided by (used in) financing activities		14,194,367			(1,900,882	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(19,318	)		26,135

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

	Six Months Ended June 30
	2020			2019
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	$	(14,899,474	)	$	8,906,370
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		34,049,643			27,644,780
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	19,150,169		$	36,551,150

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

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2020 AND 2019

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

(Reviewed, Not Audited)

1. GENERAL

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

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

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

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

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Board of Directors on August 5, 2020.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

- 10 -

Statement of Compliance

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

Basis of Consolidation

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

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

(Continued)

- 11 -

			Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	June 30, 2020		December 31, 2019		June 30, 2019		Note
	Honghwa International Co., Ltd. (“HHI”)	Telecommunications engineering, sales agent of mobile phone plan application and other business services, etc		100		100		100
	Chunghwa Leading Photonics Tech Co., Ltd. (“CLPT”)	Production and sale of electronic components and finished products		75		75		75
	Chunghwa Telecom (Thailand) Co., Ltd. (“CHTT”)	International private leased circuit, IP VPN service, ICT and cloud VAS services		100		100		100	d.
	CHT Security Co., Ltd. (“CHTSC”)	Computing equipment installation, wholesale of computing and business machinery equipment and software, management consulting services, data processing services, digital information supply services and internet identify services		80		80		80
Senao International Co., Ltd.	Senao International (Samoa) Holding Ltd. (“SIS”)	International investment		100		100		100
	Youth Co., Ltd. (“Youth”)	Sale of information and communication technologies products		96		93		93	e.
	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		—	f.
Senyoung Insurance Agent Co., Ltd.	Senaolife Insurance Agent Co., Ltd. (“Senaolife”)	Life insurance services		100		100		—	g.
Light Era Development Co., Ltd.	Taoyuan Asia Silicon Valley Innovation Co., Ltd. (“TASVI”)	Development of real estate		—		—		60	h.
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	i.
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	j.
Chunghwa Precision Test Tech. Co., Ltd.	Chunghwa Precision Test Tech. USA Corporation (“CHPT (US)”)	Design and after-sale services of semiconductor testing components and printed circuit board		100		100		100
	CHPT Japan Co., Ltd. (“CHPT (JP)”)	Related services of electronic parts, machinery processed products and printed circuit board		100		100		100

(Continued)

- 12 -

			Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	June 30, 2020		December 31, 2019		June 30, 2019		Note
	Chunghwa Precision Test Tech. International, Ltd. (“CHPT (International)”)	Wholesale and retail of electronic materials, and investment		100		100		100
Senao International (Samoa) Holding Ltd.	Senao International HK Limited (“SIHK”)	International investment		100		100		100
Senao International HK Limited	Senao Trading (Fujian) Co., Ltd. (“STF”)	Sale of information and communication technologies products		—		—		—	k.
	Senao International Trading (Shanghai) Co., Ltd. (“SITS”)	Sale of information and communication technologies products		100		100		100
	Senao International Trading (Jiangsu) Co., Ltd. (“SITJ”)	Sale of information and communication technologies products		—		—		—	l.
Prime Asia Investments Group Ltd. (B.V.I.)	Chunghwa Hsingta Co., Ltd. (“CHC”)	Investment		100		100		100
Chunghwa Hsingta Co., Ltd. (“CHC”)	Chunghwa Telecom (China) Co., Ltd. (“CTC”)	Integrated information and communication solution services for enterprise clients, and intelligent energy network service		100		100		100
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		—	m.

(Concluded)

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

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

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

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

e. 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%.

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

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

h. TASVI completed its liquidation in September 2019.

- 13 -

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

j. 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.

k. STF completed its liquidation in May 2019.

l. SITJ completed its liquidation in March 2019.

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

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

Other Significant Accounting Policies

a. 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.

b. 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.

- 14 -

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.

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

5. APPLICATION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

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

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

b. 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 (Note1)
Amendments to IFRSs	Annual Improvements to IFRS Standards 2018–2020	January 1, 2022 (Note 2)
Amendments to IFRS 3	Reference to the Conceptual Framework	January 1, 2022 (Note 3)
Amendments to IFRS 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 16	Property, Plant and Equipment - Proceeds before Intended Use	January 1, 2022 (Note 4)
Amendments to IAS 37	Onerous Contracts–Cost of Fulfilling a Contract	January 1, 2022 (Note 5)

Note 1 : Unless stated otherwise, the above new IFRSs are effective for annual periods beginning on or after their respective effective dates.

- 15 -

Note 2 :	The amendments to IFRS 9 are applied prospectively to financial liabilities that are exchanged or modified on or after the annual reporting periods beginning on or after January 1, 2022.
Note 3 :	The amendments are applicable to business combinations for which the acquisition date is on or after the annual reporting period beginning on or after January 1, 2022.
Note 4 :	The amendments are applicable to property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021.
Note 5 :	The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022.

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

6. CASH AND CASH EQUIVALENTS

	June 30, 2020		December 31, 2019		June 30, 2019
Cash
Cash on hand	$	338,300	$	353,499	$	425,687
Bank deposits		10,471,106		9,432,814		8,866,882
		10,809,406		9,786,313		9,292,569
Cash equivalents (investments with maturities of less than three months)
Commercial paper		5,555,831		20,109,823		12,685,341
Negotiable certificates of deposit		400,000		1,700,000		11,900,000
Time deposits		2,366,939		2,450,509		2,673,240
Repurchase agreements collateralized by bonds		17,993		2,998		—
		8,340,763		24,263,330		27,258,581
	$	19,150,169	$	34,049,643	$	36,551,150

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:

	June 30, 2020	December 31, 2019	June 30, 2019
Bank deposits	0.00%-0.35%	0.00%-0.74%	0.00%-0.85%
Commercial paper	0.28%-0.36%	0.47%-0.54%	0.43%-0.60%
Negotiable certificates of deposit	0.36%	0.58%-0.60%	0.53%-0.60%
Time deposits	0.20%-3.60%	0.09%-4.40%	0.09%-4.40%
Repurchase agreements collateralized by bonds	0.80%	1.90%	—

- 16 -

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

	June 30, 2020		December 31, 2019		June 30, 2019
Financial assets-current
Mandatorily measured at FVTPL
Derivatives (not designated for hedge)
Forward exchange contracts	$	1,051	$	53	$	3,071
Non-derivatives
Listed stocks - domestic		7,439		463		—
	$	8,490	$	516	$	3,071
Financial assets-noncurrent
Mandatorily measured at FVTPL
Non-derivatives
Non-listed stocks - domestic	$	458,065	$	510,801	$	283,353
Non-listed stocks - foreign		251,072		267,304		224,909
	$	709,137	$	778,105	$	508,262
Financial liabilities-current
Held for trading
Derivatives (not designated for hedge)
Forward exchange contracts	$	—	$	239	$	1,081

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

					Contract Amount
	Currency		Maturity Period		(Thousands)
June 30, 2020
Forward exchange contracts - buy		EUR/NT$		2020.09		EUR1,800/NT$59,242
Forward exchange contracts - sell		US$/NT$		2020.07-08		US$4,843/NT$144,143
December 31, 2019
Forward exchange contracts - buy		EUR/NT$		2020.03		EUR1,500/NT$50,910
Forward exchange contracts - buy		US$/NT$		2020.01		US$850/NT$25,524
June 30, 2019
Forward exchange contracts - buy		EUR/NT$		2019.09		EUR7,057/NT$247,073
Forward exchange contracts - buy		US$/NT$		2019.07		US$3,056/NT$95,989

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.

- 17 -

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

	June 30, 2020		December 31, 2019		June 30, 2019
Domestic investments
Listed stocks	$	2,294,860	$	2,453,616	$	2,594,041
Non-listed stocks		4,478,820		4,680,931		3,879,760
Foreign investments
Non-listed stocks		126,255		134,370		175,584
	$	6,899,935	$	7,268,917	$	6,649,385

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

The Company holds Powtec ElectroChemical Corporation (“Powtec”) as financial assets at FVOCI. The Board of Directors of Powtec resolved in February 2020 to file a petition with court for the declaration of its bankruptcy which was adjudged by the court in April 2020. The Company evaluated and determined the fair value of such investment was nil on June 30, 2020.

9. TRADE NOTES AND ACCOUNTS RECEIVABLE, NET

	June 30, 2020			December 31, 2019			June 30, 2019
Trade notes and accounts receivable	$	29,115,685		$	28,767,539		$	30,219,401
Less: Loss allowance		(2,405,039	)		(2,359,756	)		(2,515,376	)
	$	26,710,646		$	26,407,783		$	27,704,025

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.

- 18 -

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.

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:

June 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	%		31%-90	%		31%-96	%		100	%
Gross carrying amount	$	21,436,247		$	292,224		$	79,754		$	50,155		$	32,297		$	29,229		$	684,330		$	22,604,236
Loss allowance (lifetime ECL)		(56,628	)		(22,392	)		(26,448	)		(29,337	)		(29,026	)		(25,463	)		(684,330	)		(873,624	)
Amortized cost	$	21,379,619		$	269,832		$	53,306		$	20,818		$	3,271		$	3,766		$	—		$	21,730,612
Project business
Expected credit loss rate (Note b)		0%-5	%		5	%		10	%		30	%		50	%		80	%		100	%
Gross carrying amount	$	2,368,013		$	33,150		$	10,264		$	54,623		$	1,401		$	9,018		$	1,444,902		$	3,921,371
Loss allowance (lifetime ECL)		(387	)		(1,658	)		(1,026	)		(18,143	)		(769	)		(7,214	)		(1,444,902	)		(1,474,099	)
Amortized cost	$	2,367,626		$	31,492		$	9,238		$	36,480		$	632		$	1,804		$	—		$	2,447,272

December 31, 2019

	Not Past Due			Past Due Less than 30 Days			Pass Due 31 to 60 Days			Pass Due 61 to 90 Days			Pass Due 91 to 120 Days			Pass Due 121 to 180 Days			Pass Due over 180 Days			Total
Telecommunications business
Expected credit loss rate (Note a)		0%-2	%		0%-25	%		0%-68	%		0%-83	%		11%-90	%		17%-96	%		100	%
Gross carrying amount	$	19,020,326		$	267,902		$	74,775		$	46,782		$	40,771		$	28,021		$	600,985		$	20,079,562
Loss allowance (lifetime ECL)		(55,903	)		(25,517	)		(27,630	)		(34,624	)		(26,281	)		(27,366	)		(600,985	)		(798,306	)
Amortized cost	$	18,964,423		$	242,385		$	47,145		$	12,158		$	14,490		$	655		$	—		$	19,281,256
Project business
Expected credit loss rate (Note b)		0%-5	%		5	%		10	%		30	%		50	%		80	%		100	%
Gross carrying amount	$	4,053,681		$	78,147		$	52,227		$	29,527		$	12,688		$	1,040		$	1,471,840		$	5,699,150
Loss allowance (lifetime ECL)		(2,637	)		(4,892	)		(5,223	)		(10,577	)		(6,344	)		(832	)		(1,471,840	)		(1,502,345	)
Amortized cost	$	4,051,044		$	73,255		$	47,004		$	18,950		$	6,344		$	208		$	—		$	4,196,805

- 19 -

June 30, 2019

	Not Past Due			Past Due Less than 30 Days			Pass Due 31 to 60 Days			Pass Due 61 to 90 Days			Pass Due 91 to 120 Days			Pass Due 121 to 180 Days			Pass Due Over 181 Days			Total
Telecommunications business
Expected credit loss rate (Note a)		0%-3	%		3%-27	%		8%-69	%		19%-83	%		30%-90	%		58%-96	%		100	%
Gross carrying amount	$	22,155,698		$	315,403		$	118,468		$	72,437		$	36,733		$	30,301		$	514,108		$	23,243,148
Loss allowance (Lifetime ECL)		(57,033	)		(24,731	)		(28,257	)		(27,325	)		(27,405	)		(21,501	)		(514,108	)		(700,360	)
Amortized cost	$	22,098,665		$	290,672		$	90,211		$	45,112		$	9,328		$	8,800		$	—		$	22,542,788
Project business
Expected credit loss rate (Note b)		0%-5%			5%			10%			30%			50%			80%			100%
Gross carrying amount	$	2,579,415		$	116,036		$	54,815		$	82,046		$	6,657		$	22,276		$	1,691,495		$	4,552,740
Loss allowance (Lifetime ECL)		(2,289	)		(5,888	)		(7,466	)		(24,614	)		(3,402	)		(17,846	)		(1,691,495	)		(1,753,000	)
Amortized cost	$	2,577,126		$	110,148		$	47,349		$	57,432		$	3,255		$	4,430		$	—		$	2,799,740

Note a:

Please refer to Notes 29 and 43 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:

	Six Months Ended June 30
	2020			2019
Beginning balance	$	2,359,756		$	2,602,055
Add: Provision for (reversal of) credit loss		105,127			(24,453	)
Less: Amounts written off		(59,844	)		(62,226	)
Ending balance	$	2,405,039		$	2,515,376

10. INVENTORIES

	June 30, 2020		December 31, 2019		June 30, 2019
Merchandise	$	3,137,328	$	3,858,034	$	3,583,169
Project in process		12,620,912		11,113,286		9,343,288
Work in process		115,983		141,417		102,126
Raw materials		189,472		155,495		149,793
		16,063,695		15,268,232		13,178,376
Land held under development		1,998,733		1,998,733		1,998,733
Construction in progress		77,347		77,311		79,888
	$	18,139,775	$	17,344,276	$	15,256,997

- 20 -

The operating costs related to inventories were $9,432,913 thousand (including the valuation loss on inventories of $172,089 thousand) and $19,587,157 thousand (including the valuation loss on inventories of $195,690 thousand) for the three months and six months ended June 30, 2020, respectively. The operating costs related to inventories were $10,542,716 thousand (including the valuation loss on inventories of $144,829 thousand) and $22,706,124 thousand (including the valuation loss on inventories of $240,511 thousand) for the three months and six months ended June 30, 2019, respectively.

As of June 30, 2020, December 31, 2019 and June 30, 2019, inventories of $2,076,080 thousand, $2,076,044 thousand and $2,078,621 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.

11. PREPAYMENTS

	June 30, 2020		December 31, 2019		June 30, 2019
Prepaid rents	$	3,165,676	$	3,382,560	$	3,539,616
Prepaid salary and bonus		2,989,372		5,117		3,089,648
Others		1,217,367		1,174,917		1,152,420
	$	7,372,415	$	4,562,594	$	7,781,684
Current
Prepaid salary and bonus	$	2,989,372	$	5,117	$	3,089,648
Prepaid rents		669,861		704,607		696,352
Others		1,217,357		1,173,535		1,151,925
	$	4,876,590	$	1,883,259	$	4,937,925
Noncurrent
Prepaid rents	$	2,495,815	$	2,677,953	$	2,843,264
Others		10		1,382		495
	$	2,495,825	$	2,679,335	$	2,843,759

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

	June 30, 2020		December 31, 2019		June 30, 2019
Time deposits and negotiable certificates of deposit with maturities of more than three months	$	4,836,352	$	5,959,074	$	15,836,335

(Continued)

- 21 -

	June 30, 2020		December 31, 2019		June 30, 2019
Repurchase agreements collateralized by bonds with maturities of more than three months	$	—	$	14,990	$	—
Others		1,828,811		1,524,500		2,847,923
	$	6,665,163	$	7,498,564	$	18,684,258

(Concluded)

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

	June 30, 2020	December 31, 2019	June 30, 2019
Time deposits and negotiable certificates of deposit with maturities of more than three months	0.03%-2.55%	0.03%-2.73%	0.03%-2.95%
Repurchase agreements collateralized by bonds with maturities of more than three months	—	2.50%	—

13. SUBSIDIARIES

a. Information on significant noncontrolling interest subsidiary

	Principal Place of Business		Proportion of Ownership Interests and Voting Rights Held by Noncontrolling Interests
Subsidiaries			June 30, 2020			December 31, 2019			June 30, 2019
SENAO		Taiwan		72	%		72	%		72	%
CHPT		Taiwan		66	%		66	%		66	%
	Profit Allocated to Noncontrolling Interests
	Three Months Ended June 30					Six Months Ended June 30
	2020		2019			2020			2019
SENAO	$	43,688	$	49,001		$	106,900		$	94,220
CHPT	$	153,355	$	77,293		$	271,039		$	139,230

	Accumulated Noncontrolling Interests
	June 30, 2020		December 31, 2019		June 30, 2019
SENAO	$	4,101,167	$	4,267,547	$	4,067,117
CHPT		4,290,617		4,236,872		3,967,656
Individually immaterial subsidiaries with noncontrolling interests		1,687,224		1,779,103		1,635,761
	$	10,079,008	$	10,283,522	$	9,670,534

- 22 -

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.

	June 30, 2020			December 31, 2019			June 30, 2019
Current assets	$	6,397,669		$	6,751,385		$	6,724,455
Noncurrent assets		3,231,968			3,321,252			3,426,650
Current liabilities		(3,466,337	)		(3,617,165	)		(3,867,434	)
Noncurrent liabilities		(528,836	)		(589,882	)		(697,346	)
Equity	$	5,634,464		$	5,865,590		$	5,586,325
Equity attributable to the parent	$	1,533,297		$	1,598,043		$	1,519,208
Equity attributable to noncontrolling interests		4,101,167			4,267,547			4,067,117
	$	5,634,464		$	5,865,590		$	5,586,325

	Three Months Ended June 30					Six Months Ended June 30
	2020			2019		2020			2019
Revenues and income	$	5,972,790		$	6,802,080	$	12,749,597		$	14,629,265
Costs and expenses		5,911,355			6,733,948		12,599,998			14,497,927
Profit for the period	$	61,435		$	68,132	$	149,599		$	131,338
Profit attributable to the parent	$	17,747		$	19,131	$	42,699		$	37,118
Profit attributable to noncontrolling interests		43,688			49,001		106,900			94,220
Profit for the period	$	61,435		$	68,132	$	149,599		$	131,338
Other comprehensive income (loss) attributable to the parent	$	(2,131	)	$	5,169	$	(1,870	)	$	8,328
Other comprehensive income (loss) attributable to noncontrolling interests		(5,318	)		13,192		(4,653	)		20,391
Other comprehensive income (loss) for the period	$	(7,449	)	$	18,361	$	(6,523	)	$	28,719
Total comprehensive income attributable to the parent	$	15,616		$	24,300	$	40,829		$	45,446
Total comprehensive income attributable to noncontrolling interests		38,370			62,193		102,247			114,611
Total comprehensive income for the period	$	53,986		$	86,493	$	143,076		$	160,057

- 23 -

	Six Months Ended June 30
	2020			2019
Net cash flow from operating activities	$	(62,405	)	$	(491,041	)
Net cash flow from investing activities		(25,433	)		133,129
Net cash flow from financing activities		(160,555	)		(173,439	)
Effect of exchange rate changes on cash and cash equivalents		(276	)		221
Net cash outflow	$	(248,669	)	$	(531,130	)
Dividends paid to noncontrolling interests	$	—		$	—

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.

	June 30, 2020			December 31, 2019			June 30, 2019
Current assets	$	4,055,518		$	3,709,630		$	4,173,928
Noncurrent assets		3,995,886			4,043,881			3,492,196
Current liabilities		(1,509,245	)		(1,287,597	)		(1,620,862	)
Noncurrent liabilities		(16,505	)		(22,003	)		(10,805	)
Equity	$	6,525,654		$	6,443,911		$	6,034,457
Equity attributable to CHI	$	2,235,037		$	2,207,039		$	2,066,801
Equity attributable to noncontrolling interests		4,290,617			4,236,872			3,967,656
	$	6,525,654		$	6,443,911		$	6,034,457

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Revenues and income	$	1,054,916	$	679,705	$	1,964,211	$	1,291,454
Costs and expenses		821,681		562,051		1,551,990		1,079,599
Profit for the period	$	233,235	$	117,654	$	412,221	$	211,855
Profit attributable to CHI	$	79,880	$	40,361	$	141,182	$	72,625
Profit attributable to noncontrolling interests		153,355		77,293		271,039		139,230
Profit for the period	$	233,235	$	117,654	$	412,221	$	211,855

(Continued)

- 24 -

	Three Months Ended June 30						Six Months Ended June 30
	2020			2019			2020			2019
Other comprehensive income (loss) attributable to CHI	$	(776	)	$	(124	)	$	(886	)	$	214
Other comprehensive income (loss) attributable to noncontrolling interests		(1,489	)		(238	)		(1,702	)		411
Other comprehensive income (loss) for the period	$	(2,265	)	$	(362	)	$	(2,588	)	$	625
Total comprehensive income attributable to CHI	$	79,104		$	40,237		$	140,296		$	72,839
Total comprehensive income attributable to noncontrolling interests		151,866			77,055			269,337			139,641
Total comprehensive income for the period	$	230,970		$	117,292		$	409,633		$	212,480

(Concluded)

	Six Months Ended June 30
	2020			2019
Net cash flow from operating activities	$	622,077		$	101,139
Net cash flow from investing activities		(194,962	)		(607,297	)
Net cash flow from financing activities		(10,629	)		(10,995	)
Effect of exchange rate changes on cash and cash equivalents		481			1,475
Net cash inflow (outflow)	$	416,967		$	(515,678	)
Dividends paid to noncontrolling interests	$	—		$	—

b. Equity transactions with noncontrolling interests

CHIEF issued new shares in March 2020, March and November 2019 as its employees exercised their options. Therefore, the Company’s equity ownership interest in CHIEF decreased. See Note 33(b) for details.

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

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

- 25 -

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

	Six Months Ended June 30, 2020
	CHIEF Share-Based Payment			SENAO Not Proportionately Participating in the Capital Increase of Youth
Cash consideration received from noncontrolling interests	$	71,627		$	—
The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests		(47,638	)		(103	)
Differences arising from equity transactions	$	23,989		$	(103	)
Line items for equity transaction adjustments
Additional paid-in capital - arising from changes in equities of subsidiaries	$	23,989		$	(103	)

	Six Months Ended June 30, 2019
	CHIEF Share-Based Payment
Cash consideration received from noncontrolling interests	$	14,328
The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests		(15,140	)
Differences arising from equity transactions	$	(812	)
Line items for equity transaction adjustments
Additional paid-in capital - arising from changes in equities of subsidiaries	$	(812	)

14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments in associates were as follows:

	Carrying Amount
	June 30, 2020		December 31, 2019		June 30, 2019
Material associate
Next Commercial Bank Co., Ltd. (“NCB”) (Note)	$	3,991,563	$	4,074,168	$	—

(Continued)

- 26 -

	Carrying Amount
	June 30, 2020		December 31, 2019		June 30, 2019
Associates that are not individually material
Listed
Senao Networks, Inc. (“SNI”)	$	918,370	$	953,685	$	872,543
KingwayTek Technology Co., Ltd. (“KWT”)		242,402		253,021		253,606
Non-listed
ST-2 Satellite Ventures Pte., Ltd. (“STS”)		522,161		500,930		540,889
International Integrated Systems, Inc. (“IISI”)		328,821		340,240		302,912
Viettel-CHT Co., Ltd. (“Viettel-CHT”)		327,051		316,535		284,569
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		236,322		272,166		177,789
So-net Entertainment Taiwan Limited (“So-net”)		213,834		189,396		150,003
Chunghwa PChome Fund I Co., Ltd. (“CPFI”)		197,956		194,081		196,524
KKBOX Taiwan Co., Ltd. (“KKBOXTW”)		166,123		150,789		144,928
Taiwan International Ports Logistics Corporation (“TIPL”)		53,712		50,979		50,382
Click Force Co., Ltd. (“CF”)		36,029		37,120		37,302
Cornerstone Ventures Co., Ltd. (“CVC”)		5,766		5,507		5,176
Alliance Digital Tech Co., Ltd. (“ADT”)		5,080		5,080		5,080
UUPON Inc. (“UUPON”)		3,794		10,529		12,123
MeWorks Limited (HK) (“MeWorks”)		—		—		—
		3,257,421		3,280,058		3,033,826
	$	7,248,984	$	7,354,226	$	3,033,826

(Concluded)

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

	% of Ownership Interests and Voting Rights
	June 30, 2020		December 31, 2019		June 30, 2019
Material associate
Next Commercial Bank Co., Ltd. (“NCB”) (Note)		42		42		—
Associates that are not individually material
Senao Networks, Inc. (“SNI”)		34		34		34
KingwayTek Technology Co., Ltd. (“KWT”)		23		23		22
ST-2 Satellite Ventures Pte., Ltd. (“STS”)		38		38		38
International Integrated Systems, Inc. (“IISI”)		31		31		32
Viettel-CHT Co., Ltd. (“Viettel-CHT”)		30		30		30

(Continued)

- 27 -

	% of Ownership Interests and Voting Rights
	June 30, 2020		December 31, 2019		June 30, 2019
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		40		40		40
So-net Entertainment Taiwan Limited (“So-net”)		30		30		30
Chunghwa PChome Fund I Co., Ltd. (“CPFI”)		50		50		50
KKBOX Taiwan Co., Ltd. (“KKBOXTW”)		30		30		30
Taiwan International Ports Logistics Corporation (“TIPL”)		27		27		27
Click Force Co., Ltd. (“CF”)		49		49		49
Cornerstone Ventures Co., Ltd. (“CVC”)		49		49		49
Alliance Digital Tech Co., Ltd. (“ADT”)		14		14		14
UUPON Inc. (“UUPON”)		22		22		22
MeWorks Limited (HK) (“MeWorks”)		20		20		20

(Concluded)

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

Summarized financial information of NCB was set out below:

	June 30, 2020			December 31, 2019
Assets	$	10,123,125		$	10,451,925
Liabilities		(596,721	)		(728,374	)
Equity	$	9,526,404		$	9,723,551
The percentage of ownership interest held by the Company		41.90	%		41.90	%
Equity attributable to the Company and carrying amount of investment	$	3,991,563		$	4,074,168
	Three Months Ended June 30, 2020			Six Months Ended June 30, 2020
Revenues	$	—		$	—
Net loss for the period	$	(117,259	)	$	(197,147	)
Other comprehensive income		—			—
Total comprehensive loss for the period	$	(117,259	)	$	(197,147	)

- 28 -

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 June 30					Six Months Ended June 30
	2020			2019		2020			2019
The Company’s share of profits	$	176,978		$	137,878	$	247,525		$	217,051
The Company’s share of other comprehensive income (loss)		(1,047	)		146		(510	)		316
The Company’s share of total comprehensive income	$	175,931		$	138,024	$	247,015		$	217,367

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

	June 30, 2020		December 31, 2019		June 30, 2019
SNI	$	1,790,536	$	2,014,353	$	1,621,429
KWT	$	825,342	$	872,729	$	983,123

The participation of establishing NCB was approved by Chunghwa’s Board of Directors in January 2019. The establishment of NCB was approved by the FSC in July 2019 and the incorporation of NCB was approved by the Ministry of Economic Affairs Department of Commerce in January 2020. Chunghwa prepaid investment funds to NCB in February and November 2019 amounting to $4,190,000 thousand (included in other assets), for ownership interest of 41.90%. Chunghwa obtained six out of fifteen seats of the Board of Directors of NCB; therefore, Chunghwa does not have control over NCB and merely has significant influence over NCB and treats it as an associate. NCB mainly engages in online banking business in Taiwan.

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

IISI issued new shares in March, September 2019 and April 2020, as its employees exercised options; therefore, the Company’s ownership interest in IISI decreased to 31.47% and 31.16% as of December 31, 2019 and June 30, 2020, respectively. The additional investment of 20.58% ownership interest in IISI was approved by Chunghwa’s Board of Directors in January 2020 and the equity transaction was completed in July 2020. However, IISI issued new shares in April 2020 as its employees exercised options. Chunghwa’s ownership interest in IISI obtained on the acquisition date decreased to 20.38%, which is lower than 20.58% ownership interest approved by Chunghwa’s Board of Directors. Considering the previously held ownership interest in IISI and the aforementioned transaction, Chunghwa’s ownership interest in IISI reached 51.54%. Chunghwa also obtained over half of the seats of the Board of Directors in IISI; therefore, Chunghwa gained control over IISI and will treat it as a subsidiary starting from the acquisition date.

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

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

- 29 -

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

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

15. PROPERTY, PLANT AND EQUIPMENT

	June 30, 2020		December 31, 2019		June 30, 2019
Assets used by the Company	$	271,906,920	$	276,370,003	$	275,800,063
Assets subject to operating leases		7,700,776		7,324,212		7,793,831
	$	279,607,696	$	283,694,215	$	283,593,894

a. Assets used by the Company

	Land			Land Improvements			Buildings			Computer Equipment			Telecommuni- cations Equipment			Transportation Equipment			Miscellaneous Equipment			Construction in Progress and Equipment to be Accepted			Total
Cost
Balance on January 1, 2019	$	100,354,425		$	1,599,634		$	69,328,236		$	14,258,485		$	711,863,697		$	3,882,534		$	9,873,589		$	18,644,766		$	929,805,366
Additions		—			—			5,622			15,321			30,460			—			30,825			9,375,793			9,458,021
Disposal		(19,331	)		—			(3,101	)		(588,249	)		(19,986,176	)		(13,784	)		(195,287	)		—			(20,805,928	)
Effect of foreign exchange differences		—			—			—			116			28,097			41			1,117			374			29,745
Others		(1,343,477	)		5,136			(847,623	)		94,387			11,500,308			47,320			152,985			(11,799,342	)		(2,190,306	)
Balance on June 30, 2019	$	98,991,617		$	1,604,770		$	68,483,134		$	13,780,060		$	703,436,386		$	3,916,111		$	9,863,229		$	16,221,591		$	916,296,898
Accumulated depreciation and impairment
Balance on January 1, 2019	$	—		$	(1,337,192	)	$	(26,861,627	)	$	(12,143,307	)	$	(596,850,343	)	$	(3,651,139	)	$	(7,291,742	)	$	—		$	(648,135,350	)
Depreciation expenses		—			(21,485	)		(639,340	)		(421,931	)		(11,929,921	)		(51,252	)		(345,623	)		—			(13,409,552	)
Disposal		—			—			3,101			585,629			19,976,104			13,781			194,360			—			20,772,975
Effect of foreign exchange differences		—			—			—			(47	)		(9,844	)		(26	)		(442	)		—			(10,359	)
Others		—			—			301,025			(6,538	)		(949	)		(1,820	)		(6,267	)		—			285,451
Balance on June 30, 2019	$	—		$	(1,358,677	)	$	(27,196,841	)	$	(11,986,194	)	$	(588,814,953	)	$	(3,690,456	)	$	(7,449,714	)	$	—		$	(640,496,835	)
Balance on January 1, 2019, net	$	100,354,425		$	262,442		$	42,466,609		$	2,115,178		$	115,013,354		$	231,395		$	2,581,847		$	18,644,766		$	281,670,016
Balance on June 30, 2019, net	$	98,991,617		$	246,093		$	41,286,293		$	1,793,866		$	114,621,433		$	225,655		$	2,413,515		$	16,221,591		$	275,800,063
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		—			—			17,890			17,997			20,326			581			67,533			9,337,279			9,461,606
Disposal		(18,620	)		(567	)		(114	)		(641,164	)		(6,595,745	)		(16,966	)		(192,319	)		—			(7,465,495	)
Effect of foreign exchange differences		—			—			—			(61	)		(13,432	)		(55	)		(1,785	)		(1,543	)		(16,876	)
Others		3,196,601			9,330			(434,207	)		129,498			9,280,908			3,069			126,506			(12,865,373	)		(553,668	)
Balance on June 30, 2020	$	102,280,232		$	1,627,244		$	70,584,352		$	12,511,097		$	708,724,505		$	3,898,927		$	10,090,105		$	10,222,560		$	919,939,022
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		—			(22,004	)		(681,178	)		(388,910	)		(11,978,140	)		(35,533	)		(329,934	)		—			(13,435,699	)
Disposal		—			567			114			640,497			6,586,955			16,960			183,819			—			7,428,912
Effect of foreign exchange differences		—			—			—			57			6,200			11			791			—			7,059
Others		—			—			106,962			(4,190	)		17,330			(662	)		(8,362	)		—			111,078
Balance on June 30, 2020	$	—		$	(1,396,039	)	$	(28,550,834	)	$	(10,820,791	)	$	(595,705,546	)	$	(3,713,549	)	$	(7,815,985	)	$	(29,358	)	$	(648,032,102	)
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 June 30, 2020, net	$	102,280,232		$	231,205		$	42,033,518		$	1,690,306		$	113,018,959		$	185,378		$	2,274,120		$	10,193,202		$	271,906,920

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

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

- 30 -

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	3-16 years
Others	1-15 years

b. Assets subject to operating leases

	Land		Land Improvements			Buildings			Total
Cost
Balance on January 1, 2019	$	3,617,627	$	689		$	3,582,774		$	7,201,090
Additions		—		—			3,523			3,523
Others		1,343,477		—			842,052			2,185,529
Balance on June 30, 2019	$	4,961,104	$	689		$	4,428,349		$	9,390,142
Accumulated depreciation and impairment
Balance on January 1, 2019	$	—	$	(512	)	$	(1,265,356	)	$	(1,265,868	)
Depreciation expenses		—		(31	)		(41,734	)		(41,765	)
Others		—		—			(288,678	)		(288,678	)
Balance on June 30, 2019	$	—	$	(543	)	$	(1,595,768	)	$	(1,596,311	)
Balance on January 1, 2019, net	$	3,617,627	$	177		$	2,317,418		$	5,935,222
Balance on June 30, 2019, net	$	4,961,104	$	146		$	2,832,581		$	7,793,831
Cost
Balance on January 1, 2020	$	4,979,650	$	—		$	3,841,560		$	8,821,210
Others		13,255		—			509,519			522,774
Balance on June 30, 2020	$	4,992,905	$	—		$	4,351,079		$	9,343,984

(Continued)

- 31 -

	Land		Land Improvements		Buildings			Total
Accumulated depreciation and impairment
Balance on January 1, 2020	$	—	$	—	$	(1,496,998	)	$	(1,496,998	)
Depreciation expenses		—		—		(44,250	)		(44,250	)
Others		—		—		(101,960	)		(101,960	)
Balance on June 30, 2020	$	—	$	—	$	(1,643,208	)	$	(1,643,208	)
Balance on January 1, 2020, net	$	4,979,650	$	—	$	2,344,562		$	7,324,212
Balance on June 30, 2020, net	$	4,992,905	$	—	$	2,707,871		$	7,700,776

(Concluded)

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

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

	June 30, 2020		December 31, 2019		June 30, 2019
Year 1	$	329,682	$	301,674	$	302,030
Year 2		287,063		272,899		231,677
Year 3		224,991		233,434		231,114
Year 4		177,718		191,128		190,406
Year 5		111,056		130,066		158,212
Onwards		1,174,712		1,224,416		1,282,715
	$	2,305,222	$	2,353,617	$	2,396,154

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

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

- 32 -

16. LEASE ARRANGEMENTS

a. Right-of-use assets

	June 30, 2020		December 31, 2019		June 30, 2019
Land and buildings
Handsets base stations	$	7,063,746	$	6,844,687	$	6,869,511
Others		1,863,982		1,916,835		1,856,956
Equipment		2,404,252		2,602,727		2,803,479
	$	11,331,980	$	11,364,249	$	11,529,946

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Additions to right-of-use assets					$	2,085,205	$	1,721,063
Depreciation charge for right-of-use assets
Land and buildings
Handsets base stations	$	680,343	$	681,273	$	1,357,719	$	1,347,749
Others		197,455		205,224		393,078		409,019
Equipment		101,070		104,463		208,006		209,139
	$	978,868	$	990,960	$	1,958,803	$	1,965,907

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

b. Lease liabilities

	June 30, 2020		December 31, 2019		June 30, 2019
Lease liabilities
Current	$	3,234,958	$	3,291,330	$	3,392,703
Noncurrent		6,381,335		6,466,808		6,341,162
	$	9,616,293	$	9,758,138	$	9,733,865

Ranges of discount rates for lease liabilities are as follows:

	June 30, 2020		December 31, 2019		June 30, 2019
Land and buildings
Handsets base stations		0.53%-1.18%		0.58%-1.18%		0.58%-1.18%
Others		0.54%-9.00%		0.58%-9.00%		0.58%-9.00%
Equipment		0.53%-2.99%		0.58%-4.50%		0.59%-4.50%

- 33 -

c. 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 37 to the consolidated financial statements for details.

d. Other lease information

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Expenses relating to low-value asset leases	$	1,707	$	1,504	$	3,548	$	2,985
Expenses relating to variable lease payments not included in the measurement of lease liabilities	$	1,303	$	1,272	$	2,450	$	2,403
Total cash outflow for leases					$	2,054,083	$	2,010,140

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

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

17. INVESTMENT PROPERTIES

Cost
Balance on January 1, 2019	$	9,392,452
Disposal		(5,832	)
Balance on June 30, 2019	$	9,386,620

(Continued)

- 34 -

Accumulated depreciation and impairment
Balance on January 1, 2019	$	(1,105,240	)
Depreciation expense		(14,876	)
Disposal		5,832
Balance on June 30, 2019	$	(1,114,284	)
Balance on January 1, 2019, net	$	8,287,212
Balance on June 30, 2019, net	$	8,272,336
Cost
Balance on January 1, 2020	$	9,213,979
Additions		54,435
Balance on June 30, 2020	$	9,268,414
Accumulated depreciation and impairment
Balance on January 1, 2020	$	(1,044,586	)
Depreciation expense		(10,260	)
Balance on June 30, 2020	$	(1,054,846	)
Balance on January 1, 2020, net	$	8,169,393
Balance on June 30, 2020, net	$	8,213,568

(Concluded)

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

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

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

	June 30, 2020		December 31, 2019		June 30, 2019
Fair value	$	18,701,398	$	18,701,398	$	18,514,801
Overall capital interest rate		1.03%-4.04%		1.03%-4.04%		1.02%-4.04%
Profit margin ratio		12%-20%		12%-20%		12%-20%
Discount rate		—		—		—
Capitalization rate		0.79%-1.74%		0.79%-1.74%		0.79%-1.75%

- 35 -

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:

	June 30, 2020		December 31, 2019		June 30, 2019
Year 1	$	109,916	$	112,626	$	113,290
Year 2		89,525		90,701		97,207
Year 3		70,855		70,795		77,343
Year 4		53,793		61,115		61,169
Year 5		32,860		39,386		48,991
Onwards		82,602		96,010		94,500
	$	439,551	$	470,633	$	492,500

18. INTANGIBLE ASSETS

	Mobile Broadband Concession			Computer Software			Goodwill			Others			Total
Cost
Balance on January 1, 2019	$	70,144,000		$	3,425,969		$	236,200		$	373,203		$	74,179,372
Additions-acquired separately		—			117,376			—			1,747			119,123
Disposal		(10,179,000	)		(206,509	)		—			(157	)		(10,385,666	)
Effect of foreign exchange difference		—			136			—			50			186
Others		—			247			—			—			247
Balance on June 30, 2019	$	59,965,000		$	3,337,219		$	236,200		$	374,843		$	63,913,262
Accumulated amortization and impairment
Balance on January 1, 2019	$	(20,632,474	)	$	(2,467,170	)	$	(26,677	)	$	(109,369	)	$	(23,235,690	)
Amortization expenses		(1,919,786	)		(197,045	)		—			(12,184	)		(2,129,015	)
Disposal		10,179,000			206,509			—			11			10,385,520
Effect of foreign exchange difference		—			(123	)		—			(9	)		(132	)
Balance on June 30, 2019	$	(12,373,260	)	$	(2,457,829	)	$	(26,677	)	$	(121,551	)	$	(14,979,317	)
Balance on January 1, 2019, net	$	49,511,526		$	958,799		$	209,523		$	263,834		$	50,943,682
Balance on June 30, 2019, net	$	47,591,740		$	879,390		$	209,523		$	253,292		$	48,933,945
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			91,642			—			2,686			48,467,328
Disposal		—			(310,370	)		—			(9	)		(310,379	)
Effect of foreign exchange difference		—			(65	)		—			(96	)		(161	)
Others		—			—			—			(45	)		(45	)
Balance on June 30, 2020	$	108,338,000		$	3,209,816		$	236,200		$	380,599		$	112,164,615

(Continued)

- 36 -

	Mobile Broadband Concession			Computer Software			Goodwill			Others			Total
Accumulated amortization and impairment
Balance on January 1, 2020	$	(14,293,046	)	$	(2,498,825	)	$	(35,623	)	$	(133,853	)	$	(16,961,347	)
Amortization expenses		(1,926,340	)		(184,818	)		—			(12,550	)		(2,123,708	)
Disposal		—			310,370			—			9			310,379
Effect of foreign exchange difference		—			51			—			33			84
Balance on June 30, 2020	$	(16,219,386	)	$	(2,373,222	)	$	(35,623	)	$	(146,361	)	$	(18,774,592	)
Balance on January 1, 2020, net	$	45,671,954		$	929,784		$	200,577		$	244,210		$	47,046,525
Balance on June 30, 2020, net	$	92,118,614		$	836,594		$	200,577		$	234,238		$	93,390,023

(Concluded)

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

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

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

19. OTHER ASSETS

	June 30, 2020		December 31, 2019		June 30, 2019
Spare parts	$	1,966,767	$	2,336,082	$	2,523,696
Refundable deposits		1,803,984		1,879,109		1,658,143
Other financial assets		1,000,000		1,000,000		1,000,000
Prepayment for investments (Note 14)		—		—		838,000
Deposit for mobile broadband license bidding (Note 18)		—		1,000,000		—
Others		2,313,924		2,316,177		2,322,721
	$	7,084,675	$	8,531,368	$	8,342,560
Current
Spare parts	$	1,966,767	$	2,336,082	$	2,523,696
Others		121,551		93,582		110,096
	$	2,088,318	$	2,429,664	$	2,633,792

(Continued)

- 37 -

	June 30, 2020		December 31, 2019		June 30, 2019
Noncurrent
Refundable deposits	$	1,803,984	$	1,879,109	$	1,658,143
Other financial assets		1,000,000		1,000,000		1,000,000
Prepayment for investments		—		—		838,000
Deposit for mobile broadband license bidding		—		1,000,000		—
Others		2,192,373		2,222,595		2,212,625
	$	4,996,357	$	6,101,704	$	5,708,768

(Concluded)

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

20. HEDGING FINANCIAL INSTRUMENTS

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

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

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

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.

- 38 -

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

June 30, 2020

Change in Fair

Values of

Hedging

Notional Amount (In Thousands)

Instruments Used

for Calculating

Forward

Line Item in

Carrying Amount

Hedge

Hedging Instruments

Currency

Maturity

Rate

Balance Sheet

Asset

Liability

Ineffectiveness

Cash flow hedge

Forecast purchases - forward exchange contracts

EUR/NT$

EUR5,500/ NT$ 180,934

2020.09

$

32.90

Hedging financial assets (liabilities)

$

2,358

$

—

$

2,031

	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	$	(2,031	)	$	2,358	$	—

December 31, 2019

Change in Fair

Values of

Hedging

Notional Amount (In Thousands)

Instruments Used

for Calculating

Forward

Line Item in

Carrying Amount

Hedge

Hedging Instruments

Currency

Maturity

Rate

Balance Sheet

Asset

Liability

Ineffectiveness

Cash flow hedge

Forecast purchases - forward exchange contracts

EUR/NT$

EUR 2,498/ NT$ 84,066

2020.03

$

33.66

Hedging financial assets (liabilities)

$

327

$

—

$

(742

)

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

June 30, 2019

Change in Fair

Values of

Hedging

Notional Amount (In Thousands)

Instruments Used

for Calculating

Forward

Line Item in

Carrying Amount

Hedge

Hedging Instruments

Currency

Maturity

Rate

Balance Sheet

Asset

Liability

Ineffectiveness

Cash flow hedge

Forecast purchases - forward exchange contracts

EUR/NT$

EUR 3,623/ NT$ 126,579

2019.09

$

34.94

Hedging financial assets (liabilities)

$

1,803

$

—

$

734

- 39 -

	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	$	(734	)	$	1,803	$	—

Six Months Ended June 30, 2020

	Comprehensive Income
							Reclassification from Equity to Profit or Loss and the Adjusted Line Item
Hedge Transaction	Hedging Gain or Losses Recognized in OCI		Amount of Hedge Ineffectiveness Recognized in Profit or Loss		Line Item in Which Hedge Ineffectiveness is Included		Amount Reclassified to P/L and the Adjusted Line Item		Due to Hedged Future Cash Flows No Longer Expected to Occur
Cash flow hedge
Forecast equipment purchases	$	2,031	$	—		—	$	385	$	—
								Construction in progress and equipment to be accepted		Other gains and losses

Six months ended June 30, 2019

	Comprehensive Income
							Reclassification from Equity to Profit or Loss and the Adjusted Line Item
Hedge Transaction	Hedging Gain or Loss Recognized in OCI		Amount of Hedge Ineffectiveness Recognized in Profit or Loss		Line Item in Which Hedge Ineffectiveness is Included		Amount Reclassified to P/L and the Adjusted Line Item			Due to Hedged Future Cash Flows No Longer Expected to Occur
Cash flow hedge
Forecast equipment purchases	$	734	$	—		—	$	(1,647	)	$	—
								Construction in progress and equipment to be accepted			Other gains and losses

21. SHORT-TERM LOANS

	June 30, 2020		December 31, 2019		June 30, 2019
Unsecured bank loans	$	60,000	$	90,000	$	95,000

- 40 -

The annual interest rates of bank loans were as follows:

	June 30, 2020	December 31, 2019	June 30, 2019
Unsecured bank loans	1.97%-2.23%	1.20%-2.50%	1.20%-2.50%

22. SHORT-TERM BILLS PAYABLE

	June 30, 2020			December 31, 2019		June 30, 2019
Commercial paper payable	$	16,000,000		$	—	$	—
Less: Discounts on commercial paper payable		(10,104	)		—		—
	$	15,989,896		$	—	$	—

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

	June 30, 2020	December 31, 2019		June 30, 2019
Commercial paper payable	0.59%-0.69%		—		—

23. LONG-TERM LOANS

	June 30, 2020		December 31, 2019		June 30, 2019
Secured bank loans (Note 38)	$	1,600,000	$	1,600,000	$	1,600,000

The annual interest rates of loans were as follows:

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

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

24. TRADE NOTES AND ACCOUNTS PAYABLE

	June 30, 2020		December 31, 2019		June 30, 2019
Trade notes and accounts payable	$	12,478,030	$	15,312,274	$	15,320,902

- 41 -

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

25. OTHER PAYABLES

	June 30, 2020		December 31, 2019		June 30, 2019
Accrued salary and compensation	$	5,744,531	$	9,482,606	$	5,260,622
Accrued compensation to employees and remuneration to directors and supervisors		2,170,193		1,440,573		2,444,083
Amounts collected for others		1,305,996		1,278,796		1,286,072
Payable on land (Note 15)		1,056,680		—		—
Payables to contractors		1,026,080		1,892,188		1,410,441
Accrued maintenance costs		880,356		954,761		1,104,515
Accrued franchise fees		524,056		1,091,148		551,619
Payables to equipment suppliers		326,231		295,816		933,060
Others		7,609,018		6,516,600		7,999,736
	$	20,643,141	$	22,952,488	$	20,990,148

26. PROVISIONS

	June 30, 2020		December 31, 2019		June 30, 2019
Warranties	$	167,099	$	173,275	$	147,684
Onerous contracts		66,371		66,907		21,892
Employee benefits		62,965		59,745		54,279
Others		4,397		4,397		4,447
	$	300,832	$	304,324	$	228,302
Current	$	199,592	$	206,942	$	145,412
Noncurrent		101,240		97,382		82,890
	$	300,832	$	304,324	$	228,302

	Warranties			Onerous contracts			Employee Benefits		Others		Total
Balance on January 1, 2019	$	131,664		$	19,323		$	51,393	$	4,447	$	206,827
Additional provisions recognized		46,145			2,569			2,886		—		51,600
Used / forfeited during the period		(30,125	)		—			—		—		(30,125	)
Balance on June 30, 2019	$	147,684		$	21,892		$	54,279	$	4,447	$	228,302
Balance on January 1, 2020	$	173,275		$	66,907		$	59,745	$	4,397	$	304,324
Additional / (reversal of) provisions recognized		51,624			(536	)		3,220		—		54,308
Used / forfeited during the period		(57,800	)		—			—		—		(57,800	)
Balance on June 30, 2020	$	167,099		$	66,371		$	62,965	$	4,397	$	300,832

- 42 -

a. 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.

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

c. 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.

27. RETIREMENT BENEFIT PLANS

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

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

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Operating costs	$	302,123	$	432,581	$	602,796	$	865,155
Marketing expenses		150,248		215,935		301,158		431,587
General and administrative expenses		29,996		40,685		59,973		80,985
Research and development expenses		17,972		25,924		36,008		52,285
	$	500,339	$	715,125	$	999,935	$	1,430,012

28. EQUITY

a. Share capital

1) Common stocks

	June 30, 2020		December 31, 2019		June 30, 2019
Number of authorized shares (thousand)		12,000,000		12,000,000		12,000,000
Authorized shares	$	120,000,000	$	120,000,000	$	120,000,000
Number of issued and paid shares (thousand)		7,757,447		7,757,447		7,757,447
Issued shares	$	77,574,465	$	77,574,465	$	77,574,465

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

- 43 -

2) 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 June 30, 2020, the outstanding ADSs were 236,447 thousand common stocks, which equaled 23,645 thousand units and represented 3.05% of Chunghwa’s total outstanding common stocks.

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

a) Exercise their voting rights,

b) Sell their ADSs, and

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

b. Additional paid-in capital

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

	Share Premium		Movements of Additional Paid-in Capital for Associates Accounted for Using Equity Method			Movements of Additional Paid-in Capital Arising from Changes in Equities of Subsidiaries			Difference between Consideration Received and Carrying Amount of the Subsidiaries’ Net Assets upon Disposal		Donated Capital		Stockholders’ Contribution due to Privatization		Total
Balance on January 1, 2019	$	147,329,386	$	89,893		$	2,063,148		$	987,611	$	18,648	$	20,648,078	$	171,136,764
Change in additional paid-in capital from investments in associates accounted for using equity method		—		119,628			—			—		—		—		119,628
Share-based payment transactions of subsidiaries		—		—			(812	)		—		—		—		(812	)
Balance on June 30, 2019	$	147,329,386	$	209,521		$	2,062,336		$	987,611	$	18,648	$	20,648,078	$	171,255,580
Balance on January 1, 2020	$	147,329,386	$	208,746		$	2,062,250		$	987,611	$	19,914	$	20,648,078	$	171,255,985
Change in additional paid-in capital from investments in associates accounted for using equity method		—		(5,680	)		—			—		—		—		(5,680	)
Change in additional paid-in capital for not proportionately participating in the capital increase of subsidiaries		—		—			(103	)		—		—		—		(103	)
Share-based payment transactions of subsidiaries		—		—			23,989			—		—		—		23,989
Balance on June 30, 2020	$	147,329,386	$	203,066		$	2,086,136		$	987,611	$	19,914	$	20,648,078	$	171,274,191

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.

- 44 -

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

c. 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.

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

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

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

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

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

d. Others

1) 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.

- 45 -

2) Unrealized gain or loss on financial assets at FVOCI

	Six Months Ended June 30
	2020			2019
Beginning balance	$	836,598		$	538,272
Unrealized gain or loss for the period Equity instruments		(430,291	)		(276,231	)
Ending balance	$	406,307		$	262,041

e. Noncontrolling interests

	Six Months Ended June 30
	2020			2019
Beginning balance	$	10,283,522		$	9,990,345
Shares attributed to noncontrolling interests
Net income for the period		542,976			358,759
Exchange differences arising from the translation of the foreign operations		(7,313	)		21,172
Unrealized gain or loss on financial assets at FVOCI		(15,418	)		(7,160	)
Share of other comprehensive income (loss) of associates accounted for using equity method		(418	)		294
Cash dividends distributed by subsidiaries		(775,420	)		(709,817	)
Changes in additional paid-in capital from investments in associates accounted for using equity method		47			942
Change in additional paid-in capital for not proportionately participating in the capital increase of subsidiaries		103			—
Share-based payment transactions of subsidiaries		50,929			15,999
Ending balance	$	10,079,008		$	9,670,534

29. REVENUES

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Revenue from contracts with customers	$	47,493,326	$	49,806,073	$	95,365,088	$	100,854,697
Other revenues
Rental income		192,050		199,101		395,976		390,812
Other		122,488		103,001		196,799		193,827
		314,538		302,102		592,775		584,639
	$	47,807,864	$	50,108,175	$	95,957,863	$	101,439,336

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

- 46 -

a. Disaggregation of revenue

Six months ended June 30, 2020

	Domestic Fixed Communications Business		Mobile Communications Business		Internet Business		International Fixed Communications Business		Others		Total
Main Products and Service Revenues
Mobile services revenue	$	—	$	28,295,872	$	—	$	—	$	—	$	28,295,872
Sales of products		981,015		14,838,635		51,196		161,933		2,016,224		18,049,003
Local telephone and domestic long distance telephone services revenue		13,277,167		—		—		—		—		13,277,167
Broadband access and domestic leased line services revenue		11,146,045		—		—		—		—		11,146,045
Data Communications internet services revenue		—		—		10,660,413		—		—		10,660,413
International network and leased line services revenue		—		—		—		2,098,628		—		2,098,628
Others		4,647,209		469,959		4,075,569		2,147,205		498,018		11,837,960
	$	30,051,436	$	43,604,466	$	14,787,178	$	4,407,766	$	2,514,242	$	95,365,088

Six months ended June 30, 2019

	Domestic Fixed Communications Business		Mobile Communications Business		Internet Business		International Fixed Communications Business		Others		Total
Main Products and Service Revenues
Mobile services revenue	$	—	$	29,385,603	$	—	$	—	$	—	$	29,385,603
Sales of products		886,175		17,453,189		22,977		128,217		1,355,542		19,846,100
Local telephone and domestic long distance telephone services revenue		14,072,731		—		—		—		—		14,072,731
Broadband access and domestic leased line services revenue		11,059,202		—		—		—		—		11,059,202
Data communications internet services revenue		—		—		10,502,812		—		—		10,502,812
International network and leased line services revenue		—		—		—		3,872,354		—		3,872,354
Others		5,375,767		501,930		3,997,665		1,874,999		365,534		12,115,895
	$	31,393,875	$	47,340,722	$	14,523,454	$	5,875,570	$	1,721,076	$	100,854,697

b. Contract balances

	June 30, 2020			December 31, 2019			June 30, 2019			January 1, 2019
Trade notes and account receivables (Note 9)	$	26,710,646		$	26,407,783		$	27,704,025		$	30,075,503
Contract assets
Products and service bundling	$	6,864,176		$	6,942,974		$	6,962,904		$	7,122,875
Other		127,377			115,993			128,252			108,581
Less: Loss allowance		(16,653	)		(16,858	)		(18,037	)		(18,770	)
	$	6,974,900		$	7,042,109		$	7,073,119		$	7,212,686

(Continued)

- 47 -

	June 30, 2020		December 31, 2019		June 30, 2019		January 1, 2019
Current	$	4,518,827	$	4,441,196	$	4,667,108	$	4,868,728
Noncurrent		2,456,073		2,600,913		2,406,011		2,343,958
	$	6,974,900	$	7,042,109	$	7,073,119	$	7,212,686
Contract liabilities
Telecommunications business	$	12,601,083	$	12,771,621	$	11,830,869	$	8,193,215
Project business		11,913,132		10,360,428		8,539,754		4,508,200
Products and service bundling		26,114		38,570		54,255		105,559
Other		416,992		510,696		669,215		475,947
	$	24,957,321	$	23,681,315	$	21,094,093	$	13,282,921
Current	$	18,190,895	$	16,839,830	$	14,724,134	$	10,687,772
Noncurrent		6,766,426		6,841,485		6,369,959		2,595,149
	$	24,957,321	$	23,681,315	$	21,094,093	$	13,282,921

(Concluded)

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

The Company applies the simplified approach to providing for 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.

c. Incremental costs of obtaining contracts

	June 30, 2020		December 31, 2019		June 30, 2019
Noncurrent
Incremental costs of obtaining contracts	$	955,755	$	942,652	$	1,010,011

The Company considered the past experience and the default clauses in the telecommunications service contracts and believes the commissions and equipment subsidies paid for obtaining such contracts are expected to be recoverable, therefore, such costs were capitalized. Amortization recognized for the three months and six months ended June 30, 2020 were $193,622 thousand and $390,281 thousand, respectively. Amortization recognized for the three months and six months ended June 30, 2019 were $314,037 thousand and $690,939 thousand, respectively.

- 48 -

30. NET INCOME

a. Other income and expenses

	Three Months Ended June 30						Six Months Ended June 30
	2020			2019			2020			2019
Loss on disposal of property, plant and equipment	$	(11,154	)	$	(4,561	)	$	(11,834	)	$	(9,066	)
Loss on disposal of intangible assets		—			(146	)		—			(146	)
	$	(11,154	)	$	(4,707	)	$	(11,834	)	$	(9,212	)

b. Other income

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Dividend income	$	236,296	$	240,849	$	236,296	$	240,849
Rental income		17,171		22,076		35,144		41,642
Others		32,959		16,405		58,178		53,185
	$	286,426	$	279,330	$	329,618	$	335,676

c. Other gains and losses

	Three Months Ended June 30						Six Months Ended June 30
	2020			2019			2020			2019
Net foreign currency exchange gains (losses)	$	(10,276	)	$	(9,900	)	$	60,794		$	(14,663	)
Loss on disposal of financial instruments		—			—			(1,788	)		—
Gains (losses) on financial assets and liabilities at fair value through profit or loss		(55,796	)		1,196			(68,170	)		(5,997	)
Gain on disposal of investments accounted for using equity method		—			30,152			—			30,152
Others		(868	)		(25,756	)		(13,787	)		(33,168	)
	$	(66,940	)	$	(4,308	)	$	(22,951	)	$	(23,676	)

d. Interest expenses

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Interest on bank loan	$	27,460	$	4,212	$	48,094	$	8,360
Interest on lease liabilities		20,548		21,173		42,020		42,561
Others		—		209		281		517
	$	48,008	$	25,594	$	90,395	$	51,438

- 49 -

e. Impairment loss (reversal of impairment loss)

	Three Months Ended June 30						Six Months Ended June 30
	2020			2019			2020			2019
Contract assets	$	(146	)	$	(180	)	$	(205	)	$	(733	)
Trade notes and accounts receivable	$	99,197		$	(22,226	)	$	105,127		$	(24,453	)
Other receivables	$	(1,210	)	$	(23,402	)	$	(944	)	$	(76,575	)
Inventories	$	172,089		$	144,829		$	195,690		$	240,511

f. Depreciation and amortization expenses

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Property, plant and equipment	$	6,705,732	$	6,742,623	$	13,479,949	$	13,451,317
Right-of-use assets		978,868		990,960		1,958,803		1,965,907
Investment properties		5,130		5,148		10,260		14,876
Intangible assets		1,064,685		1,064,821		2,123,708		2,129,015
Incremental costs of obtaining contracts		193,622		314,037		390,281		690,939
Total depreciation and amortization expenses	$	8,948,037	$	9,117,589	$	17,963,001	$	18,252,054
Depreciation expenses summarized by functions
Operating costs	$	7,212,208	$	7,233,780	$	14,490,102	$	14,430,129
Operating expenses		477,522		504,951		958,910		1,001,971
	$	7,689,730	$	7,738,731	$	15,449,012	$	15,432,100
Amortization expenses summarized by functions
Operating costs	$	1,203,739	$	1,320,209	$	2,403,012	$	2,704,667
Marketing expenses		23,346		25,568		46,380		50,176
General and administrative expenses		20,247		23,998		42,799		47,285
Research and development expenses		10,975		9,083		21,798		17,826
	$	1,258,307	$	1,378,858	$	2,513,989	$	2,819,954

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g. Employee benefit expenses

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Post-employment benefit
Defined contribution plans	$	169,925	$	164,088	$	337,217	$	326,641
Defined benefit plans		500,339		715,125		999,935		1,430,012
		670,264		879,213		1,337,152		1,756,653
Share-based payment
Equity-settled share - based payment		1,645		429		3,291		859
Other employee benefit
Salaries		6,905,178		6,429,964		13,204,596		12,778,277
Insurance		656,338		675,323		1,347,957		1,390,181
Others		2,977,081		3,423,548		6,530,112		6,876,884
		10,538,597		10,528,835		21,082,665		21,045,342
Total employee benefit expenses	$	11,210,506	$	11,408,477	$	22,423,108	$	22,802,854
Summary by functions
Operating costs	$	5,758,505	$	5,858,450	$	11,485,877	$	11,746,497
Operating expenses		5,452,001		5,550,027		10,937,231		11,056,357
	$	11,210,506	$	11,408,477	$	22,423,108	$	22,802,854

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

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

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

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

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

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

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31. INCOME TAX

a. Income tax recognized in profit or loss

The major components of income tax expense were as follows:

	Three Months Ended June 30						Six Months Ended June 30
	2020			2019			2020			2019
Current tax
Current tax expenses recognized for the period	$	2,070,289		$	2,036,541		$	4,158,240		$	4,043,560
Income tax on unappropriated earnings		11,527			3,684			11,527			3,684
Income tax adjustments on prior years		(17,606	)		(12,779	)		(17,606	)		(24,188	)
Others		1,964			699			2,107			5,196
		2,066,174			2,028,145			4,154,268			4,028,252
Deferred tax
Deferred tax expenses recognized for the period		(3,670	)		(16,531	)		12,276			1,372
Income tax adjustments on prior years		27,739			166			27,739			166
		24,069			(16,365	)		40,015			1,538
Income tax recognized in profit or loss	$	2,090,243		$	2,011,780		$	4,194,283		$	4,029,790

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 from the unappropriated earnings while calculating income tax on unappropriated earnings.

b. Income tax examinations

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

- 52 -

32. 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 June 30						Six Months Ended June 30
	2020			2019			2020			2019
Net income used to compute the basic earnings per share
Net income attributable to the parent	$	8,574,040		$	8,568,370		$	16,857,374		$	16,924,452
Assumed conversion of all dilutive potential common stocks
Employee stock options and employee compensation of subsidiaries		(553	)		(869	)		(2,093	)		(2,478	)
Net income used to compute the diluted earnings per share	$	8,573,487		$	8,567,501		$	16,855,281		$	16,921,974

Weighted Average Number of Common Stocks

(Thousand Shares)

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Weighted average number of common stocks used to compute the basic earnings per share		7,757,447		7,757,447		7,757,447		7,757,447
Assumed conversion of all dilutive potential common stocks
Employee compensation		1,323		1,460		5,751		8,593
Weighted average number of common stocks used to compute the diluted earnings per share		7,758,770		7,758,907		7,763,198		7,766,040

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.

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33. SHARE-BASED PAYMENT ARRANGEMENT

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

Effective Date for Plan Registration	Resolution Date by SENAO’s Board of Directors		Stock Options Units (Thousand)		Exercise Price (NT$)
2012.05.28		2013.04.29		10,000	$ (Original price $	66.20 93.00	)

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

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

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

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

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

- 54 -

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

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

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

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

Effective Date for Plan Registration	Resolution Date by CHIEF’s Board of Directors	Stock Options Units		Exercise Price (NT$)
2017.12.18	2017.12.19		950.00		$135.60
					(Original price $147.00	)
	2018.10.31		50.00		$141.70
					(Original price $147.00	)
2015.11.17	2015.10.22		2,000.00		$34.40
					(Original price $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 compensation costs for stock options granted on October 31, 2018 were both $138 thousand for the three months ended June 30, 2020 and 2019. The compensation costs for stock options granted on October 31, 2018 were both $276 thousand for the six months ended June 30, 2020 and 2019, respectively.

The compensation costs for stock options granted on December 19, 2017 were $72 thousand and $144 thousand for the three months and six months ended June 30, 2020, respectively. The compensation costs were $167 thousand and $335 thousand for the three months and six months ended June 30, 2019, respectively.

There were no compensation costs for stock options granted on October 22, 2015 for the three months and six months ended June 30, 2020. The compensation costs were $124 thousand and $248 thousand for the three months and six months ended June 30, 2019, respectively.

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

- 55 -

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

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

	Six Months Ended June 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			141.70		431.50			135.60		—			—
Options exercisable at end of the period		—			—		—			—

	Six Months Ended June 30, 2019
	Granted on October 31, 2018					Granted on December 19, 2017					Granted on October 22, 2015
	Number of Options			Weighted Average Exercise Price (NT$)		Number of Options			Weighted Average Exercise Price (NT$)		Number of Options			Weighted Average Exercise Price (NT$)
Employee stock options
Options outstanding at beginning of the period		50.00		$	147.00		925.00		$	140.60		882.75		$	34.40
Options exercised		—			—		—			—		(416.50	)		34.40
Options forfeited		(4.00	)		—		(16.00	)		—		(15.00	)		—
Options outstanding at end of the period		46.00			141.70		909.00			135.60		451.25			34.40
Options exercisable at end of the period		—			—		—			—		—			—

As of June 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$)
$    141.70		42.00		3.33	$	141.70		—	$	—

- 56 -

Granted on December 19, 2017
Options Outstanding							Options Exercisable
Range of Exercise Price (NT$)	Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$    135.60		431.50		2.46	$	135.60		—	$	—

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

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

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

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

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

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

Granted on October 31, 2018
Options Outstanding							Options Exercisable
Range of Exercise Price (NT$)	Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$    141.70		46.00		4.33	$	141.70		—	$	—

- 57 -

Granted on December 19, 2017
Options Outstanding							Options Exercisable
Range of Exercise Price (NT$)	Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$    135.60		909.00		3.46	$	135.60		—	$	—

Granted on October 22, 2015
Options Outstanding							Options Exercisable
Range of Exercise Price (NT$)	Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$    34.40		451.25		1.31	$	34.40		—	$	—

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

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

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

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

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

The compensation costs were $1,435 thousand and $2,871 thousand for the three months and six months ended June 30, 2020, respectively.

- 58 -

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

	Six Months Ended June 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 June 30, 2020, information about employee stock options outstanding was as follows:

Options Outstanding							Options Exercisable
Range of Exercise Price (NT$)	Number of Options		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price (NT$)		Number of Options		Weighted Average Exercise Price (NT$)
$    19.085		4,500		4.47	$	19.085		—	$	—

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

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

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

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

- 59 -

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

34. CASH FLOW INFORMATION

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

	Six Months Ended June 30
	2020			2019
Increase in property, plant and equipment	$	9,461,606		$	9,461,544
Changes in other payables		(217,983	)		853,843
	$	9,243,623		$	10,315,387
Increase in intangible assets	$	48,467,328		$	119,123
Changes in other assets		(1,000,000	)		—
	$	47,467,328		$	119,123

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

	Balance on January 1,		Cash Flows from Financing			Changes in Non-Cash Transactions					Cash Flows from Operation Activities - Interest			Balance on June 30,
	2020		Activities			New Leases		Others			Paid			2020
Lease liabilities	$	9,758,138	$	(2,006,065	)	$	2,085,205	$	(178,965	)	$	(42,020	)	$	9,616,293

	Balance on January 1,		Cash Flows from Financing			Changes in Non-Cash Transactions					Cash Flows from Operation Activities - Interest			Balance on June 30,
	2019		Activities			New Leases		Others			Paid			2019
Lease liabilities	$	10,340,057	$	(1,962,191	)	$	1,721,063	$	(322,503	)	$	(42,561	)	$	9,733,865

35. 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.

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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.

36. FINANCIAL INSTRUMENTS

Fair Value Information

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

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

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

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

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

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, no financial instruments need to be disclosed on balance sheet date.

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

June 30, 2020

	Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Derivatives	$	—	$	1,051	$	—	$	1,051
Listed stocks		7,439		—		—		7,439
Non-listed stocks		—		—		709,137		709,137
	$	7,439	$	1,051	$	709,137	$	717,627
Hedging financial assets	$	—	$	2,358	$	—	$	2,358
Financial assets at FVOCI
Listed stocks	$	2,294,860	$	—	$	—	$	2,294,860
Non-listed stocks		—		—		4,605,075		4,605,075
	$	2,294,860	$	—	$	4,605,075	$	6,899,935

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December 31, 2019

	Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Derivatives	$	—	$	53	$	—	$	53
Listed stocks		463		—		—		463
Non-listed stocks		—		—		778,105		778,105
	$	463	$	53	$	778,105	$	778,621
Hedging financial assets	$	—	$	327	$	—	$	327
Financial assets at FVOCI
Listed stocks	$	2,453,616	$	—	$	—	$	2,453,616
Non-listed stocks		—		—		4,815,301		4,815,301
	$	2,453,616	$	—	$	4,815,301	$	7,268,917
Financial liabilities at FVTPL
Derivatives	$	—	$	239	$	—	$	239

June 30, 2019

	Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Derivatives	$	—	$	3,071	$	—	$	3,071
Non-listed stocks		—		—		508,262		508,262
	$	—	$	3,071	$	508,262	$	511,333
Hedging financial assets	$	—	$	1,803	$	—	$	1,803
Financial assets at FVOCI
Listed stocks	$	2,594,041	$	—	$	—	$	2,594,041
Non-listed stocks		—		—		4,055,344		4,055,344
	$	2,594,041	$	—	$	4,055,344	$	6,649,385
Financial liabilities at FVTPL
Derivatives	$	—	$	1,081	$	—	$	1,081

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

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

Six months ended June 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”		(68,968	)		—			(68,968	)
Recognized in other comprehensive income under “Unrealized gain or loss on investments in equity instruments at fair value through other comprehensive income”		—			(210,226	)		(210,226	)
Balance on June 30, 2020	$	709,137		$	4,605,075		$	5,314,212
Unrealized loss for the six months ended June 30, 2020	$	(68,968	)

Six months ended June 30, 2019

Financial Assets	Measured at Fair Value through Profit or Loss			Measured at Fair Value through Other Comprehensive Income		Total
Balance on January 1, 2019	$	517,362		$	4,032,660	$	4,550,022
Recognized in profit or loss under “Other gains and losses”		(9,100	)		—		(9,100	)
Recognized in other comprehensive income under “Unrealized gain or loss on investments in equity instruments at fair value through other comprehensive income”		—			22,684		22,684
Balance on June 30, 2019	$	508,262		$	4,055,344	$	4,563,606
Unrealized loss for the six months ended June 30, 2019	$	(9,100	)

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

1) 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.

2) 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.

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

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

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

	June 30, 2020		June 30, 2019
Discount for lack of marketability 5% decrease	$	332,134	$	267,094
Noncontrolling interests discount 5% decrease	$	49,071	$	16,991

Categories of Financial Instruments

	June 30, 2020		December 31, 2019		June 30, 2019
Financial assets
Measured at FVTPL
Mandatorily measured at FVTPL	$	717,627	$	778,621	$	511,333
Hedging financial assets		2,358		327		1,803
Financial assets at amortized cost (Note a)		55,354,537		71,851,933		85,619,834
Financial assets at FVOCI		6,899,935		7,268,917		6,649,385
Financial liabilities
Measured at FVTPL
Held for trading		—		239		1,081
Measured at amortized cost (Note b)		80,650,223		34,433,210		70,092,211

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, dividends payable, partial other payables, customers’ deposits and long-term loans which were financial liabilities carried at amortized cost.

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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 and short-term bills 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.

a. 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.

1) 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:

	June 30, 2020		December 31, 2019		June 30, 2019
Assets
USD	$	6,099,642	$	5,781,593	$	7,988,274
EUR		17,666		11,792		28,083
SGD		220,321		224,501		80,183
JPY		22,051		17,092		23,986
RMB		20,249		8,854		2,787
Liabilities
USD		3,944,543		4,120,881		6,704,730
EUR		179,650		206,447		854,158
SGD		1,072,201		1,262,926		1,393,329
JPY		9,335		14,206		10,033
RMB		—		310		641

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

	June 30, 2020		December 31, 2019		June 30, 2019
Assets
USD	$	583	$	53	$	—
EUR		2,826		327		4,874
Liabilities
USD		—		11		1,081
EUR		—		228		—

Foreign currency sensitivity analysis

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

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

	Six Months Ended June 30
	2020			2019
Profit or loss
Monetary assets and liabilities (a)
USD	$	107,755		$	64,177
EUR		(8,099	)		(41,304	)
SGD		(42,594	)		(65,657	)
JPY		636			698
RMB		1,012			107
Derivatives (b)
USD		(7,174	)		4,745
EUR		2,994			12,483
Equity
Derivatives (c)
EUR		9,149			6,408

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

b) This is mainly attributable to forward exchange contracts.

c) 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.

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2) 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:

	June 30, 2020		December 31, 2019		June 30, 2019
Fair value interest rate risk
Financial assets	$	13,744,471	$	30,946,503	$	43,997,803
Financial liabilities		25,606,189		9,758,138		9,733,865
Cash flow interest rate risk
Financial assets		9,305,447		7,681,032		8,267,121
Financial liabilities		1,660,000		1,690,000		1,695,000

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 $19,114 thousand and $16,430 thousand for the six months ended June 30, 2020 and 2019, respectively. This is mainly attributable to the Company’s exposure to floating interest rates on its financial assets and short-term and long-term loans.

3) Other price risk

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

Equity price sensitivity analysis

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

If equity prices had been 5% higher/lower, pre-tax profit and pre-tax other comprehensive income would have increased/decreased by $35,829 thousand and $344,997 thousand as a result of the changes in fair value of financial assets at FVTPL and financial assets at FVOCI for the six months ended June 30, 2020. If equity prices had been 5% higher/lower, pre-tax profit and pre-tax other comprehensive income would have increased/decreased by $25,413 thousand and $332,469 thousand as a result of the changes in fair value of financial assets at FVTPL and financial assets at FVOCI for the six months ended June 30, 2019.

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b. Credit risk

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

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

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

c. 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.

1) 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.

June 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		—	$	30,140,105	$	33,551,592	$	2,589,525	$	4,633,829	$	—	$	70,915,051
Floating interest rate instruments		0.77		10,000		—		50,000		1,600,000		—		1,660,000
Fixed interest rate instruments		0.63		—		—		16,000,000		—		—		16,000,000
			$	30,150,105	$	33,551,592	$	18,639,525	$	6,233,829	$	—	$	88,575,051

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	$	3,252,439	$	4,305,632	$	1,664,807	$	564,111	$	9,786,989

December 31, 2019

	Weighted Average Effective Interest Rate (%)		Less than 1 Month		1-3 Months		3 Months to 1 Year		1-5 Years		Add More than 5 Years		Total
Non-derivative financial liabilities
Non-interest bearing		—	$	36,387,024	$	—	$	2,531,721	$	4,747,644	$	—	$	43,666,389
Floating interest rate instruments		0.98		50,000		10,000		30,000		1,600,000		—		1,690,000
			$	36,437,024	$	10,000	$	2,561,721	$	6,347,644	$	—	$	45,356,389

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

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

June 30, 2019

	Weighted Average Effective Interest Rate (%)		Less than 1 Month		1-3 Months		3 Months to 1 Year		1-5 Years		More than 5 Years		Total
Non-derivative financial liabilities
Non-interest bearing		—	$	35,156,343	$	35,297,222	$	1,001,603	$	4,646,748	$	—	$	76,101,916
Floating interest rate instruments		0.98		—		—		95,000		1,600,000		—		1,695,000
			$	35,156,343	$	35,297,222	$	1,096,603	$	6,246,748	$	—	$	77,796,916

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	$	3,478,727	$	4,340,808	$	1,574,578	$	660,675	$	10,054,788

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
June 30, 2020
Gross settled
Forward exchange contracts
Inflow	$	135,609		$	252,119	$	—	$	—	$	387,728
Outflow		135,141			249,178		—		—		384,319
	$	468		$	2,941	$	—	$	—	$	3,409
December 31, 2019
Gross settled
Forward exchange contracts
Inflow	$	25,566		$	135,075	$	—	$	—	$	160,641
Outflow		25,524			134,976		—		—		160,500
	$	42		$	99	$	—	$	—	$	141
June 30, 2019
Gross settled
Forward exchange contracts
Inflow	$	94,908		$	378,526	$	—	$	—	$	473,434
Outflow		95,989			373,652		—		—		469,641
	$	(1,081	)	$	4,874	$	—	$	—	$	3,793

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2) Financing facilities

	June 30, 2020		December 31, 2019		June 30, 2019
Facilities from unsecured bank loan and commercial paper payable
Amount used	$	16,098,845	$	120,681	$	136,553
Amount unused		45,119,305		46,109,219		46,098,747
	$	61,218,150	$	46,229,900	$	46,235,300
Secured bank loan facility
Amount used	$	1,600,000	$	1,600,000	$	1,600,000
Amount unused		1,340,000		1,340,000		1,340,000
	$	2,940,000	$	2,940,000	$	2,940,000

37. 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, 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.

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

Company	Relationship
Taiwan International Standard Electronics Co., Ltd.	Associate
So-net Entertainment Taiwan Limited	Associate
KKBOX Taiwan Co., Ltd.	Associate
KingwayTek Technology Co., Ltd.	Associate
UUPON Inc.	Associate
Taiwan International Ports Logistics Corporation	Associate
International Integrated Systems, Inc.	Associate
Senao Networks, Inc.	Associate
EnRack Tech. Co., Ltd.	Subsidiary of the Company’s associate, Senao Networks, Inc.
Emplus Technologies, Inc.	Subsidiary of the Company’s associate, Senao Networks, Inc.
ST-2 Satellite Ventures Pte., Ltd.	Associate
Viettel-CHT Co., Ltd.	Associate
Click Force Co., Ltd.	Associate
Alliance Digital Tech Co., Ltd.	Associate
MeWorks Limited (HK)	Associate
Chunghwa PChome Fund I Co., Ltd.	Associate
Cornerstone Ventures Co., Ltd.	Associate
Next Commercial Bank Co., Ltd.	Associate

(Continued)

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Company	Relationship
Other related parties
Chunghwa Telecom Foundation	A nonprofit organization of which the funds donated by Chunghwa exceeds one third of its total funds
Senao Technical and Cultural Foundation	A nonprofit organization of which the funds donated by SENAO exceeds one third of its total funds
Sochamp Technology Co., Ltd.	Investor of significant influence over CHST
E-Life Mall Co., Ltd.	One of the directors of E-Life Mall and a director of SENAO are members of an immediate family
Engenius Technologies Co., Ltd.	Chairman of Engenius Technologies Co., Ltd. is a member of SENAO’s management
Cheng Keng Investment Co., Ltd.	Chairman of Cheng Keng Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
Cheng Feng Investment Co., Ltd.	Chairman of Cheng Feng Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
All Oriented Investment Co., Ltd.	Chairman of All Oriented Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
Hwa Shun Investment Co., Ltd.	Chairman of Hwa Shun Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
Yu Yu Investment Co., Ltd.	Chairman of Yu Yu Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
United Daily News Co., Ltd.	Investor of significant influence over SFD
Shenzhen Century Communication Co., Ltd.	Investor of significant influence over SCT

(Concluded)

b. 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:

1) Operating transactions

	Revenues
	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Associates	$	82,523	$	57,874	$	144,222	$	125,055
Others		17,836		14,878		34,828		40,860
	$	100,359	$	72,752	$	179,050	$	165,915

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	Operating Costs and Expenses
	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Associates	$	153,715	$	140,724	$	327,665	$	354,682
Others		3,597		3,906		59,290		66,088
	$	157,312	$	144,630	$	386,955	$	420,770

2) Non-operating transactions

	Non-operating Income and Expenses
	Three Months Ended June 30					Six Months Ended June 30
	2020		2019			2020		2019
Associates	$	6,005	$	(3,987	)	$	69,565	$	(15,942	)
Others		455		8			466		17
	$	6,460	$	(3,979	)	$	70,031	$	(15,925	)

3) Receivables

	June 30, 2020		December 31,     2019		June 30, 2019
Associates	$	21,635	$	10,356	$	16,192
Others		2,940		6,478		6,066
	$	24,575	$	16,834	$	22,258

4) Contract liabilities-current

	June 30, 2020		December 31,     2019		June 30, 2019
Associates	$	304,762	$	—	$	—

5) Payables

	June 30, 2020		December 31,     2019		June 30, 2019
Associates	$	374,271	$	650,617	$	395,259
Others		2,811		3,366		3,256
	$	377,082	$	653,983	$	398,515

6) Customers’ deposits

	June 30, 2020		December 31,     2019		June 30, 2019
Associates	$	5,163	$	7,595	$	6,864

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7) Acquisition of property, plant and equipment

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Associates	$	12,608	$	31,835	$	25,603	$	31,835

8) Lease-in agreements

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

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

	June 30, 2020		December 31, 2019		June 30, 2019
Lease liabilities - current	$	179,482	$	188,271	$	194,101
Lease liabilities - noncurrent		890,465		1,023,889		1,147,832
	$	1,069,947	$	1,212,160	$	1,341,933

The interest expense recognized for the aforementioned lease liabilities for the three months and six months ended June 30, 2020 were $2,233 thousand and $4,645 thousand, respectively. The interest expense recognized for the aforementioned lease liabilities for the three months and six months ended June 30, 2019 were $2,835 thousand and $5,672 thousand, respectively.

c. Compensation of key management personnel

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

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Short-term employee benefits	$	64,713	$	59,379	$	137,079	$	135,414
Post-employment benefits		1,986		2,121		3,996		4,279
Share-based payment		21		64		41		132
	$	66,720	$	61,564	$	141,116	$	139,825

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

- 73 -

38. PLEDGED ASSETS

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

	June 30, 2020		December 31, 2019		June 30, 2019
Property, plant and equipment	$	2,476,567	$	2,491,324	$	2,506,081
Land held under development (included in inventories)		1,998,733		1,998,733		1,998,733
Restricted assets (included in other assets - others)		2,850		2,500		2,500
	$	4,478,150	$	4,492,557	$	4,507,314

39. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

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

a. Acquisitions of land and buildings of $57,026 thousand.

b. Acquisitions of telecommunications equipment of $20,350,917 thousand.

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

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

e. 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.

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

40. OTHER MATTERS

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

- 74 -

41. 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:

	June 30, 2020
	Foreign Currencies (Thousands)		Exchange Rate		New Taiwan Dollars (Thousands)
Assets denominated in foreign currencies
Monetary items
USD	$	205,860		29.63	$	6,099,642
EUR		531		33.27		17,666
SGD		10,373		21.24		220,321
JPY		80,185		0.275		22,051
RMB		4,831		4.191		20,249
Non-monetary items
Investments accounted for using equity method
SGD		24,584		21.24		522,161
VND		284,392,174		0.0012		327,051
Liabilities denominated in foreign currencies
Monetary items
USD		133,127		29.63		3,944,543
EUR		5,400		33.27		179,650
SGD		50,480		21.24		1,072,201
JPY		33,946		0.275		9,335

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

(Continued)

- 75 -

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

(Concluded)

	June 30, 2019
	Foreign Currencies (Thousands)		Exchange Rate		New Taiwan Dollars (Thousands)
Assets denominated in foreign currencies
Monetary items
USD	$	257,188		31.06	$	7,988,274
EUR		794		35.38		28,083
SGD		3,491		22.97		80,183
JPY		82,997		0.289		23,986
RMB		616		4.521		2,787
Non-monetary items
Investments accounted for using equity method
SGD		23,548		22.97		540,889
VND		235,181,077		0.00121		284,569
Liabilities denominated in foreign currencies
Monetary items
USD		215,864		31.06		6,704,730
EUR		24,142		35.38		854,158
SGD		60,658		22.97		1,393,329
JPY		34,715		0.289		10,033
RMB		142		4.521		641

The unrealized foreign currency exchange losses were $13,282 thousand and $50,457 thousand for the three months ended June 30, 2020 and 2019, respectively. The unrealized foreign currency exchange gains and losses were gain of $46,477 thousand and loss of $11,063 thousand for the six months ended June 30, 2019 and 2018, 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.

- 76 -

42. ADDITIONAL DISCLOSURES

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

a. Financing provided: None.

b. Endorsement/guarantee provided: Please see Table 1.

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

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

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

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

g. Total purchases from or sales to related parties amounting to at least $100 million or 20% of the paid-in capital: Please see Table 4.

h. Receivables from related parties amounting to $100 million or 20% of the paid-in capital: Please see Table 5.

i. Names, locations, and other information of investees on which the Company exercises significant influence (excluding investment in Mainland China): Please see Table 6.

j. Derivative instruments transactions: Please see Notes 7, 20 and 36.

k. Investment in Mainland China: Please see Table 7.

l. Intercompany relationships and significant intercompany transactions: Please see Table 8.

m. Information of main stakeholders: Please see Table 9.

43. 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:

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

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

c. Internet business - the provision of HiNet services and related services;

d. International fixed communications business - the provision of international long distance telephone services and related services;

- 77 -

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

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

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

Segment Revenues and Operating Results

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

	Domestic Fixed Communications Business		Mobile Communications Business		Internet Business		International Fixed Communications Business		Others			Total
For the three months ended June 30, 2020
Revenues
From external customers	$	15,691,493	$	21,101,099	$	7,429,377	$	2,178,993	$	1,406,902		$	47,807,864
Intersegment revenues		3,965,171		386,895		941,066		516,746		1,281,236			7,091,114
Segment revenues	$	19,656,664	$	21,487,994	$	8,370,443	$	2,695,739	$	2,688,138			54,898,978
Intersegment elimination													(7,091,114	)
Consolidated revenues												$	47,807,864
Segments operating costs and expenses	$	13,234,068	$	15,553,674	$	3,188,101	$	2,095,860	$	3,113,891		$	37,185,594
Segment income before income tax	$	5,257,494	$	2,565,956	$	3,199,255	$	281,687	$	(361,163	)	$	10,943,229
For the six months ended June 30, 2020
Revenues
From external customers	$	30,383,346	$	43,641,876	$	14,941,417	$	4,415,103	$	2,576,121		$	95,957,863
Intersegment revenues		7,917,380		767,090		1,864,470		1,004,563		2,543,789			14,097,292
Segment revenues	$	38,300,726	$	44,408,966	$	16,805,887	$	5,419,666	$	5,119,910			110,055,155
Intersegment elimination													(14,097,292	)
Consolidated revenues												$	95,957,863
Segments operating costs and expenses	$	25,467,257	$	32,249,775	$	6,668,235	$	4,315,469	$	6,104,027		$	74,804,763
Segment income before income tax	$	10,426,778	$	5,439,663	$	6,233,738	$	523,752	$	(1,029,298	)	$	21,594,633
For the three months ended June 30, 2019
Revenues
From external customers	$	15,920,907	$	22,896,177	$	7,258,322	$	3,109,205	$	923,564		$	50,108,175
Intersegment revenues		3,957,999		351,741		969,877		560,937		1,108,678			6,949,232
Segment revenues	$	19,878,906	$	23,247,918	$	8,228,199	$	3,670,142	$	2,032,242			57,057,407
Intersegment elimination													(6,949,232	)
Consolidated revenues												$	50,108,175
Segments operating costs and expenses	$	13,243,483	$	17,395,359	$	3,270,705	$	3,070,665	$	2,819,215		$	39,799,427
Segment income before income tax	$	5,270,940	$	2,698,589	$	3,022,133	$	265,362	$	(488,746	)	$	10,768,278
For the six months ended June 30, 2019
Revenues
From external customers	$	31,709,099	$	47,377,272	$	14,676,685	$	5,880,093	$	1,796,187		$	101,439,336
Intersegment revenues		8,036,237		743,869		1,930,516		1,138,822		2,177,466			14,026,910
Segment revenues	$	39,745,336	$	48,121,141	$	16,607,201	$	7,018,915	$	3,973,653			115,466,246
Intersegment elimination													(14,026,910	)
Consolidated revenues												$	101,439,336
Segments operating costs and expenses	$	27,101,550	$	35,753,292	$	6,638,510	$	5,868,125	$	5,362,793		$	80,724,270
Segment income before income tax	$	9,939,748	$	5,940,408	$	6,032,868	$	467,344	$	(1,067,367	)	$	21,313,001

- 78 -

Main Products and Service Revenues

	Three Months Ended June 30				Six Months Ended June 30
	2020		2019		2020		2019
Mobile services revenue	$	14,011,222	$	14,664,261	$	28,295,872	$	29,385,603
Sales of products		8,535,480		9,256,858		18,049,003		19,846,100
Local telephone and domestic long distance telephone services revenue		6,665,427		7,068,729		13,277,167		14,072,731
Broadband access and domestic leased line services revenue		5,604,889		5,546,228		11,146,045		11,059,202
Data communications internet services revenue		5,355,155		5,262,498		10,660,413		10,502,812
International network and leased line services revenue		1,019,305		2,061,473		2,098,628		3,872,354
Others		6,616,386		6,248,128		12,430,735		12,700,534
	$	47,807,864	$	50,108,175	$	95,957,863	$	101,439,336

- 79 -

TABLE 1

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED

SIX MONTHS ENDED JUNE 30, 2020

(Amounts in Thousands of New Taiwan Dollars)

No. (Note 1)	Endorsement/ Guarantee Provider	Guaranteed Party		Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party		Maximum Balance for the Period		Ending Balance		Actual Borrowing Amount		Amount of Endorsement/ Guarantee Collateralized by Properties		Ratio of Accumulated Endorsement/ Guarantee to Net Equity Per Latest Financial Statements		Maximum Endorsement/ Guarantee Amount Allowable		Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China	Note
		Name	Nature of Relationship (Note 2)
1	Senao International Co., Ltd.	Aval Technologies Co., Ltd.	b	$	561,906	$	300,000	$	300,000	$	300,000	$	—		5.34	$	2,809,532	Yes	No	No		Notes 3 and 4
		Wiin Technology Co., Ltd.	b		561,906		100,000		100,000		100,000		—		1.78		2,809,532	Yes	No	No		Notes 3 and 4

Note 1: Significant transactions between the Company and its subsidiaries or among subsidiaries are numbered as follows:

a. “0” for the Company.

b. Subsidiaries are numbered from “1”.

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

a. A company with which it does business.

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

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

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

e. 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.

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

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

Note 3: The limits on endorsement or guarantee amount provided to each guaranteed party is up to 10% of the net assets value of the latest financial statements of Senao International Co., Ltd.

Note 4: The total amount of endorsement or guarantee that the Company is allowed to provide is up to 50% of the net assets value of the latest financial statements of Senao International Co., Ltd.

- 80 -

TABLE 2

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD

JUNE 30, 2020

(Amounts in Thousands of New Taiwan Dollars)

Held Company Name	Marketable Securities Type and Name	Relationship with the Company		Financial Statement Account	June 30, 2020								Note
					Shares (Thousands/ Thousand Units)		Carrying Value (Note 1)		Percentage of Ownership		Fair Value
Chunghwa Telecom Co., Ltd.	Stocks
	Taipei Financial Center Corp.		—	Financial assets at FVOCI		172,927	$	4,320,655		12	$	4,320,655	—
	Innovation Works Development Fund, L.P.		—	Financial assets at FVTPL - noncurrent		—		251,072		4		251,072	—
	Industrial Bank of Taiwan II Venture Capital Co., Ltd. (IBT II)		—	Financial assets at FVOCI		5,252		17,084		17		17,084	—
	Global Mobile Corp.		—	Financial assets at FVOCI		7,617		—		3		—	—
	Innovation Works Limited		—	Financial assets at FVOCI		1,000		4,530		2		4,530	—
	RPTI Intergroup International Ltd.		—	Financial assets at FVOCI		4,765		—		10		—	—
	Taiwan mobile payment Co., Ltd.		—	Financial assets at FVOCI		1,200		4,411		2		4,411	—
	Taiwania Capital Buffalo Fund Co., Ltd.		—	Financial assets at FVTPL - noncurrent		600,000		458,065		13		458,065	—
	China Airlines Ltd.		—	Financial assets at FVOCI		263,622		2,161,702		5		2,161,702	Note 2
	4 Gamers Entertainment Inc.		—	Financial assets at FVOCI		136		116,675		19.9		116,675	—
Senao International Co., Ltd.	Stocks
	N.T.U. Innovation Incubation Corporation		—	Financial assets at FVOCI		1,200		10,325		9		10,325	—
CHIEF Telecom Inc.	Stocks
	3 Link Information Service Co., Ltd.		—	Financial assets at FVOCI		374		950		10		950	—
	WPG Holdings Limited		—	Financial assets at FVTPL - current		9		449		—		449	Note 2
	WPG Holdings Limited		—	Financial assets at FVOCI		1,578		79,058		—		79,058	Note 2
	Taichung Commercial Bank Co., Ltd.		—	Financial assets at FVTPL - current		600		6,990		—		6,990	Note 2
Chunghwa Investment Co., Ltd.	Stocks
	Tatung Technology Inc.		—	Financial assets at FVOCI		4,571		125,395		11		125,395	—
	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		54,100		7		54,100	Note 2
Chunghwa Hsingta Co., Ltd.	Stocks
	Cotech Engineering Fuzhou Corp.		—	Financial assets at FVOCI		—		5,050		5		5,050	—

Note 1: Showed at carrying amounts with fair value adjustments.

Note 2: Fair value was based on the closing price on June 30, 2020.

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TABLE 3

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

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

SIX MONTHS ENDED JUNE 30, 2020

(Amounts in Thousands of New Taiwan Dollars)

Buyer

Property

Event Date

Transaction Amount

Payment Status

Counterparty

Relationship

Information on Previous Title Transfer If Counterparty is a Related Party

Pricing Reference

Purpose of Acquisition

Other Terms

Property Owner

Relationship

Transaction Date

Amount

Chunghwa Telecom Co., Ltd.

Land that specific office building is located on

2020.05.06

$

3,243,689

$1,056,680 to be paid

MOTC

Major Shareholder

None

None

None

None

Assessed value from National Property Administration

Operating purpose

None

Chunghwa Precision Test Tech. Co., Ltd.

Headquarters

2017.07.29 2019.12.25

-

1,460,105

Monthly settlement based on the construction progress and acceptance

Fu Tsu Construction Co., Ltd.

—

Not applicable

Not applicable

Not applicable

Not applicable

Bidding, price comparison and price negotiation

Manufacturing purpose

None

- 82 -

TABLE 4

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

SIX MONTHS ENDED JUNE 30, 2020

(Amounts in Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship	Transaction Details						Abnormal Transaction				Notes / Accounts Payable or Receivable
			Purchases/Sales (Note 1)	Amount (Notes 2 and 5)		% to Total		Payment Terms	Units Price		Payment Terms		Ending Balance (Notes 3 and 5)			% to Total
Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Subsidiary	Sales	$	1,364,237		2	30 days	$	—		—	$	139,510			1
			Purchase		315,198		1	30-90 days		—		—		(826,972	)		(8	)
	CHIEF Telecom Inc.	Subsidiary	Sales		180,851		—	30 days		—		—		56,272			2
	Chunghwa System Integration Co., Ltd.	Subsidiary	Purchase		679,429		1	30 days		—		—		(363,513	)		(4	)
	Honghwa International Co., Ltd.	Subsidiary	Purchase		2,801,929		5	30-60 days		—		—		(520,494	)		(5	)
	Donghwa Telecom Co., Ltd.	Subsidiary	Purchase		230,374		—	90 days		—		—		(151,587	)		(1	)
	Chunghwa Telecom Global, Inc.	Subsidiary	Purchase		161,609		—	90 days		—		—		(38,181	)		—
	CHT Security Co., Ltd.	Subsidiary	Purchase		109,913		—	30 days		—		—		(38,251	)		—
	Taiwan International Standard Electronics Co., Ltd.	Associate	Purchase		246,356		—	30-90 days		—		—		(173,192	)		(2	)
	International Integrated System, Inc.	Associate	Purchase		249,101		—	30 days		—		—		(38,091	)		—
Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		2,849,257		23	30-90 days		—		—		823,070			54
			Purchase		1,277,277		12	30 days		—		—		(130,414	)		(8	)
	Aval Technologies Co., Ltd.	Subsidiary	Purchase		135,936		1	30 days		—		—		(4,661	)		—
CHIEF Telecom Inc.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		127,869		11	60 days		—		—		34,425			15
			Purchase		180,596		27	30 days		—		—		(56,272	)		(49	)
Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		739,960		83	30 days		—		—		360,928			78
Honghwa International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		2,807,818		98	30-60 days		—		—		519,228			99
Donghwa Telecom Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		230,374		41	90 days		—		—		151,587			85
Chunghwa Telecom Global, Inc.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		161,609		54	90 days		—		—		38,181			63
CHT Security Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		103,952		27	30 days		—		—		57,272			41

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.

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TABLE 5

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

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

JUNE 30, 2020

(Amounts in Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship	Ending Balance			Turnover Rate (Note 1)		Overdue				Amounts Received in Subsequent Period		Allowance for Bad Debts
								Amounts		Action Taken
Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Subsidiary	$	248,474 (Note 2	)		10.94	$	—		—	$	55,965	$	—
Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		1,028,910 (Note 2	)		7.03		—		—		119,820		—
Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		360,928 (Note 2	)		2.91		—		—		159,815		—
Honghwa International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		519,228 (Note 2	)		8.11		—		—		56,012		—
Donghwa Telecom Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		151,587 (Note 2	)		3.34		—		—		110,061		—

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.

- 84 -

TABLE 6

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

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

SIX MONTHS ENDED JUNE 30, 2020

(Amounts in Thousands of New Taiwan Dollars)

				Original Investment Amount				Balance as of June 30, 2020							Net Income			Recognized
Investor Company	Investee Company	Location	Main Businesses and Products	June 30, 2020		December 31, 2019		Shares (Thousands)		Percentage of Ownership (%)		Carrying Value (Note 3)			(Loss) of the Investee			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	$	1,551,226		$	150,166		$	40,304		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		3,846,722			5,155			3,161		Subsidiary (Note 5)
	Donghwa Telecom Co., Ltd.	Hong Kong	International private leased circuit, IP VPN service, and IP transit services		1,567,453		1,567,453		402,590		100		1,620,057			3,598			3,598		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		947,001			50,088			50,090		Subsidiary (Note 5)
	Chunghwa System Integration Co., Ltd.	Taiwan	Providing system integration services and telecommunications equipment		838,506		838,506		60,000		100		695,420			(24,765	)		(16,118	)	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		1,606,075			294,288			169,155		Subsidiary (Note 5)
	Chunghwa Investment Co., Ltd.	Taiwan	Investment		639,559		639,559		68,085		89		2,855,766			141,481			125,983		Subsidiary (Note 5)
	Prime Asia Investments Group Ltd. (B.V.I.)	British Virgin Islands	Investment		385,274		385,274		1		100		172,482			(944	)		(944	)	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		390,374			123,395			111,735		Subsidiary (Note 5)
	CHYP Multimedia Marketing & Communications Co., Ltd.	Taiwan	Digital information supply services and advertisement services		150,000		150,000		15,000		100		183,673			6,834			6,337		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		97,549			1,016			1,016		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		378,258			34,186			35,306		Subsidiary (Note 5)
	CHT Security Co., Ltd.	Taiwan	Computing equipment installation, wholesale of computing and business machinery equipment and software, management consulting services, data processing services, digital information supply services and internet identify services		240,000		240,000		24,000		80		283,814			59,675			47,854		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		111,138			2,011			2,011		Subsidiary (Note 5)
	Spring House Entertainment Tech. Inc.	Taiwan	Software design services, internet contents production and play, and motion picture production and distribution		41,941		41,941		8,251		56		115,627			24,864			13,934		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		120,338			8,485			8,659		Subsidiary (Note 5)
	Smartfun Digital Co., Ltd.	Taiwan	Providing diversified family education digital services		65,000		65,000		6,500		65		66,316			(2,110	)		(1,370	)	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		83,225			6,961			6,961		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		(7,045	)		(4,433	)		3,040		Subsidiary (Note 5)
	International Integrated Systems, Inc.	Taiwan	IT solution provider, IT application consultation, system integration and package solution		283,500		283,500		22,498		31		328,821			79,591			14,643		Associate

(Continued)

- 85 -

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)

SIX MONTHS ENDED JUNE 30, 2020

(Amounts in Thousands of New Taiwan Dollars)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount				Balance as of June 30, 2020						Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
				June 30, 2020		December 31, 2019		Shares (Thousands)		Percentage of Ownership (%)		Carrying Value (Note 3)
	Viettel-CHT Co., Ltd.	Vietnam	IDC services	$	288,327	$	288,327		—		30	$	327,051	$	133,699		$	40,129		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		236,322		73,797			52,647		Associate
	KKBOX Taiwan Co., Ltd.	Taiwan	Providing of music on-line, software, electronic information, and advertisement services		67,025		67,025		4,438		30		166,123		50,580			15,106		Associate
	So-net Entertainment Taiwan Limited	Taiwan	Online service and sale of computer hardware		120,008		120,008		9,429		30		213,834		81,451			24,435		Associate
	KingwayTek Technology Co., Ltd.	Taiwan	Publishing books, data processing and software services		66,684		66,684		7,898		23		242,402		(21,675	)		(4,485	)	Associate
	Taiwan International Ports Logistics Corporation	Taiwan	Import and export storage, logistic warehouse, and ocean shipping service		80,000		80,000		8,000		27		53,712		10,223			2,734		Associate
	UUPON Inc.	Taiwan	Information technology service and general advertisement service		97,598		97,598		5,400		15		2,536		(31,000	)		(4,662	)	Associate
	Alliance Digital Tech Co., Ltd.	Taiwan	Development of mobile payments and information processing service		60,000		60,000		6,000		14		5,080		—			—		Associate
	Chunghwa PChome Fund I Co., Ltd.	Taiwan	Investment, venture capital, investment advisor, management consultant and other consultancy service		200,000		200,000		20,000		50		197,956		7,749			3,874		Associate
	Cornerstone Ventures Co., Ltd.	Taiwan	Investment, venture capital, investment advisor, management consultant and other consultancy service		4,900		4,900		490		49		5,766		528			259		Associate
	Next Commercial Bank Co., Ltd.	Taiwan	Online banking business		4,190,000		4,190,000		419,000		42		3,991,563		(197,147	)		(82,605	)	Associate
Senao International Co., Ltd.	Senao Networks, Inc.	Taiwan	Telecommunication facilities manufactures and sales		202,758		202,758		16,579		34		918,370		152,334			51,478		Associate
	Senao International (Samoa) Holding Ltd.	Samoa Islands	International investment		2,333,620		2,333,620		77,775		100		328,364		(18,272	)		(18,272	)	Subsidiary (Note 5)
	UUPON Inc.	Taiwan	Information technology service and general advertisement service		24,000		24,000		2,400		7		1,258		(31,000	)		(2,074	)	Associate
	Youth Co., Ltd.	Taiwan	Sale of information and communication technologies products		427,850		364,950		14,752		96		243,323		(894	)		(5,071	)	Subsidiary (Note 5)
	Aval Technologies Co., Ltd.	Taiwan	Sale of information and communication technologies products		89,550		89,550		10,060		100		105,639		3,787			3,789		Subsidiary (Note 5)
	Senyoung Insurance Agent Co., Ltd.	Taiwan	Property and liability insurance agency		59,000		59,000		5,900		100		88,350		12,630			12,622		Subsidiary (Note 5)
CHIEF Telecom Inc.	Unigate Telecom Inc.	Taiwan	Telecommunications and internet service		2,000		2,000		200		100		933		47			47		Subsidiary (Note 5)
	Chief International Corp.	Samoa Islands	Telecommunications and internet service		6,068		6,068		200		100		77,679		5,230			5,230		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		522,161		143,507			54,532		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		2,235,036		412,221			141,182		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		78,752		294,288			8,703		Associate (Note 5)
	Senao International Co., Ltd.	Taiwan	Selling and maintaining mobile phones and its peripheral products		49,731		49,731		1,001		—		42,528		150,166			595		Associate (Note 5)

(Continued)

- 86 -

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)

SIX MONTHS ENDED JUNE 30, 2020

(Amounts in Thousands of New Taiwan Dollars)

				Original Investment Amount				Balance as of June 30, 2020
Investor Company	Investee Company	Location	Main Businesses and Products	June 30, 2020		December 31, 2019		Shares (Thousands)		Percentage of Ownership (%)		Carrying Value (Note 3)		Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
Chunghwa Precision Test Tech. Co., Ltd.	Chunghwa Precision Test Tech USA Corporation	United States	Design and after-sale services of semiconductor testing components and printed circuit board	$	12,636	$	12,636		400		100	$	23,329	$	(732	)	$	(732	)	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		2,421		48			48		Subsidiary (Note 5)
	Chunghwa Precision Test Tech. International, Ltd.	Samoa Islands	Wholesale and retail of electronic materials, and investment		116,790		116,790		3,700		100		85,183		2,626			2,804		Subsidiary (Note 5)
Prime Asia Investments Group, Ltd. (B.V.I.)	Chunghwa Hsingta Co., Ltd.	Hong Kong	Investment		375,274		375,274		1		100		172,481		(942	)		(942	)	Subsidiary (Note 5)
	MeWorks Limited (HK)	Hong Kong	Investment		10,000		10,000		—		20		—		—			—		Associate
Senao International (Samoa) Holding Ltd.	Senao International HK Limited	Hong Kong	International investment		2,328,754		2,328,754		80,440		100		308,417		(18,397	)		(18,397	)	Subsidiary (Note 5)
Youth Co., Ltd.	ISPOT Co., Ltd.	Taiwan	Sale of information and communication technologies products		53,021		53,021		—		100		9,215		213			117		Subsidiary (Note 5)
	Youyi Co., Ltd.	Taiwan	Maintenance of information and communication technologies products		21,354		21,354		—		100		17,693		661			541		Subsidiary (Note 5)
Aval Technologies Co., Ltd.	Wiin Technology Co., Ltd.	Taiwan	Sale of information and communication technologies products		29,550		29,550		2,955		100		31,217		1,436			1,436		Subsidiary (Note 5)
Senyoung Insurance Agent Co., Ltd.	Senaolife Insurance Agent Co., Ltd.	Taiwan	Life insurance services		29,500		29,500		2,950		100		27,389		(1,831	)		(1,831	)	Subsidiary (Note 5)
CHYP Multimedia Marketing & Communications Co., Ltd	Click Force Marketing Company	Taiwan	Advertisement services		44,607		44,607		1,078		49		36,029		324			(1,091	)	Associate

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 7.

Note 5: The amount was eliminated upon consolidation.

(Concluded)

- 87 -

TABLE 7

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA

SIX MONTHS ENDED JUNE 30, 2020

(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, 2020		Investment Flows				Accumulated Outflow of Investment from Taiwan as of June 30, 2020		Net Income (Loss) of the Investee			% Ownership of Direct or Indirect Investment		Investment Gain (Loss) (Note 2)			Carrying Value as of June 30, 2020		Accumulated Inward Remittance of Earnings as of June 30, 2020		Note
								Outflow		Inflow
Senao Trading (Fujian) Co., Ltd.	Sale of information and communication technologies products	$	1,073,170		2	$	1,073,170	$	—	$	—	$	1,073,170	$	—			100	$	—		$	—	$	—	Notes 7 and 11
Senao International Trading (Shanghai) Co., Ltd.	Sale of information and communication technologies products		955,838		2		955,838		—		—		955,838		(18,786	)		100		(18,786	)		30,570		—	Note 11
Senao International Trading (Shanghai) Co., Ltd. (Note 12)	Maintenance of information and communication technologies products		26,053		2		26,053		—		—		26,053		—			100		—			—		—	Notes 8 and 11
Senao International Trading (Jiangsu) Co., Ltd.	Sale of information and communication technologies products		263,736		2		263,736		—		—		263,736		—			100		—			—		—	Notes 9 and 11
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		(4,069	)		100		(4,069	)		39,291		—	Note 11
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 11
Shanghai Taihua Electronic Technology Limited	Design of printed circuit board and related consultation service		51,233		2		51,233		—		—		51,233		(5,372	)		100		(5,372	)		19,998		—	Note 11
Su Zhou Precision Test Tech. Ltd.	Assembly processed of circuit board, design of printed circuit board and related consultation service		62,340		2		62,340		—		—		62,340		7,995			100		7,995			65,218		—	Note 11
Shanghai Chief Telecom Co., Ltd.	Telecommunications and internet service		10,150		1		4,973		—		—		4,973		4,850			49		2,376			12,902		—	Note 11

(Continued)

- 88 -

Investee	Accumulated Investment in Mainland China as of June 30, 2020		Investment Amounts Authorized by Investment Commission, MOEA		Upper Limit on Investment Stipulated by Investment Commission, MOEA
SENAO and its subsidiaries (Note 3)	$	2,318,797	$	2,318,797	$	3,379,923
Chunghwa Telecom (China) Co., Ltd. (Note 4)		177,176		177,176		221,868,908
Jiangsu Zhenghua Information Technology Company, LLC (Note 4)		142,057		142,057		221,868,908
Chunghwa Precision Test Tech Co., Ltd and its subsidiaries (Note 5)		113,573		159,725		3,915,392
Shanghai Chief Telecom Co., Ltd. (Note 6)		4,973		4,973		1,604,371

Note 1:	Investments are divided into three categories as follows:
	a.   Direct investment.
	b.  Investments through a holding company registered in a third region.
	c.   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:	The liquidation of Senao Trading (Fujian) Co., Ltd. was completed in May 2019.
Note 8:	The liquidation of Senao International Trading (Shanghai) Co., Ltd. was completed in March 2018.
Note 9:	The liquidation of Senao International Trading (Jiangsu) Co., Ltd. was completed in March 2019.
Note 10:	The liquidation of Jiangsu Zhenhua Information Technology Company, LLC. was completed in December 2018.
Note 11:	The amount was eliminated upon consolidation.
Note 12:	The English name is the same as the above entity; however the Chinese name included in the respective Articles of Incorporations is different from the above entity.

(Concluded)

- 89 -

TABLE 8

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS

SIX MONTHS ENDED JUNE 30, 2020

(Amounts in Thousands of New Taiwan Dollars)

							Transaction Details
Year	No. (Note 1)		Company Name	Related Party	Nature of Relationship (Note 2)		Financial Statement Account	Amount (Note 5)		Payment Terms (Note 3)		% to Total Sales or Assets (Note 4)
2020		0	Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.		a	Accounts receivable	$	139,510		—		—
							Accrued custodial receipts		108,964		—		—
							Accounts payable		826,972		—		—
							Amounts collected for others		205,839		—		—
							Revenues		1,364,237		—		1
							Operating costs and expenses		290,108		—		—
							Inventories		25,090		—		—
				CHIEF Telecom Inc.		a	Accounts receivable		56,272		—		—
							Accounts payable		23,466		—		—
							Revenues		180,851		—		—
							Operating costs and expenses		61,685		—		—
				CHYP Multimedia Marketing & Communications Co., Ltd.		a	Amounts collected for others		21,120		—		—
							Revenues		15,907		—		—
							Operating costs and expenses		41,742		—		—
				Chunghwa System Integration Co., Ltd.		a	Accounts receivable		38,392		—		—
							Accounts payable		363,513		—		—
							Operating costs and expenses		567,494		—		1
							Inventories		111,935		—		—
							Property, plant and equipment		103,937		—		—
							Intangible assets		28,802		—		—
							Customers deposits		28,678		—		—
				Chunghwa Telecom Global Inc.		a	Accounts receivable		17,385		—		—
							Accounts payable		38,181		—		—
							Revenues		50,606		—		—
							Operating costs and expenses		161,609		—		—
				Donghwa Telecom Co., Ltd.		a	Accounts receivable		28,339		—		—
							Accounts payable		151,587		—		—
							Revenues		99,023		—		—
							Operating costs and expenses		230,374		—		—
				Spring House Entertainment Tech. Inc.		a	Amounts collected for others		20,781		—		—
							Revenues		14,130		—		—
				Chunghwa Telecom Japan Co., Ltd.		a	Revenues		17,497		—		—
							Operating costs and expenses		45,898		—		—
				Light Era Development Co., Ltd.		a	Property, plant and equipment		45,100		—		—
				Chunghwa Telecom Singapore Pte., Ltd.		a	Accounts receivable		39,409		—		—
							Accounts payable		54,689		—		—
							Revenues		34,826		—		—
							Operating costs and expenses		67,580		—		—

(Continued)

- 90 -

							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)
				Honghwa International Co., Ltd.		a	Accounts receivable	$	63,103		—		—
							Accounts payable		520,494		—		—
							Revenues		52,713		—		—
							Operating costs and expenses		2,681,318		—		3
							Inventories		120,611		—		—
				Smartfun Digital Co., Ltd.		a	Operating costs and expenses		10,381		—		—
				Chunghwa Telecom (Thailand) Co., Ltd.		a	Operating costs and expenses		14,170		—		—
				CHT Security Co., Ltd.		a	Accounts payable		38,251		—		—
							Revenues		11,688		—		—
							Operating costs and expenses		78,543		—		—
							Inventories		31,370		—		—
							Other noncurrent assets		11,551		—		—
				Aval Technologies Co., Ltd.		a	Accounts payable		12,036		—		—
							Operating costs and expenses		77,266		—		—
							Customers deposits		13,827		—		—
				Senyoung Insurance Agent Co., Ltd.		a	Accounts receivable		53,377		—		—
							Revenues		47,760		—		—
		1	Light Era Development Co., Ltd.	CHIEF Telecom Inc.		c	Revenues		48,333		—		—
		2	Donghwa Telecom Co., Ltd.	Chunghwa Telecom Singapore Pte., Ltd.		c	Unearned receipts		14,552		—		—
		3	CHIEF Telecom Inc.	Chunghwa Telecom Singapore Pte., Ltd.		c	Revenues		20,405		—		—
							Operating costs and expenses		37,409		—		—

Note 1:	Significant transactions between the Company and its subsidiaries or among subsidiaries are numbered as follows:
	a.   “0” for the Company.
	b.  Subsidiaries are numbered from “1”.
Note 2:	Related party transactions are divided into three categories as follows:
	a.   The Company to subsidiaries.
	b.  Subsidiaries to the Company.
	c.   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 June 30, 2020, while revenues, costs and expenses are shown as a percentage to consolidated revenues for the six months ended June 30, 2020.
Note 5:	The amount was eliminated upon consolidation.

(Concluded)

- 91 -

TABLE 9

CHUNGHWA TELECOM CO., LTD.

INFORMATION OF MAJOR STOCKHOLDERS

JUNE 30, 2020

	Shares
Name of Major Stockholders	Number of Shares		Percentage of Ownership (%)
Ministry of Transportation and Communication		2,737,718,976		35.29
Shin Kong Life Insurance Co., Ltd.		629,502,184		8.11

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.

- 92 -

EX-99.3

Exhibit 99.3

Chunghwa Telecom Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the

Six Months Ended June 30, 2020 and 2019

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Millions of New Taiwan Dollars)

	June 30, 2020 (Unaudited)				December 31, 2019 (Audited)				June 30, 2019 (Unaudited)
	Amount		%		Amount		%		Amount		%
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	19,150		4	$	34,050		7	$	36,551		7
Financial assets at fair value through profit or loss		8		—		1		—		3		—
Hedging financial assets		2		—		—		—		2		—
Contract assets		4,519		1		4,441		1		4,667		1
Trade notes and accounts receivable, net		26,711		5		26,408		6		27,704		6
Receivables from related parties		25		—		17		—		22		—
Inventories		18,140		4		17,344		4		15,257		3
Prepayments		4,877		1		1,883		—		4,938		1
Other current monetary assets		6,665		1		7,498		2		18,684		4
Other current assets		2,088		—		2,430		—		2,634		1
Total current assets		82,185		16		94,072		20		110,462		23
NONCURRENT ASSETS
Financial assets at fair value through profit or loss		709		—		778		—		508		—
Financial assets at fair value through other comprehensive income		6,900		2		7,154		1		6,649		1
Investments accounted for using equity method		7,042		1		7,139		1		2,829		1
Contract assets		2,456		—		2,601		1		2,406		—
Property, plant and equipment		279,608		55		283,694		60		283,594		58
Right-of-use assets		11,332		3		11,364		2		11,530		2
Investment properties		8,214		2		8,169		2		8,272		2
Intangible assets		93,390		19		47,047		10		48,934		10
Deferred income tax assets		3,260		1		3,259		1		3,546		1
Incremental costs of obtaining contracts		956		—		943		—		1,010		—
Net defined benefit assets		2,253		—		2,128		—		966		—
Prepayments		2,496		—		2,679		1		2,844		1
Other noncurrent assets		4,996		1		6,101		1		5,709		1
Total noncurrent assets		423,612		84		383,056		80		378,797		77
TOTAL	$	505,797		100	$	477,128		100	$	489,259		100

	June 30, 2020 (Unaudited)				December 31, 2019 (Audited)				June 30, 2019 (Unaudited)
	Amount		%		Amount		%		Amount		%
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans	$	60		—	$	90		—	$	95		—
Short-term bills payable		15,990		3		—		—		—		—
Financial liabilities at fair value through profit or loss		—		—		—		—		1		—
Contract liabilities		18,191		4		16,840		3		14,724		3
Trade notes and accounts payable		12,478		3		15,312		3		15,321		3
Payables to related parties		377		—		654		—		399		—
Current tax liabilities		5,380		1		5,812		1		5,232		1
Lease liabilities		3,235		1		3,291		1		3,393		1
Dividends payable		32,783		6		—		—		34,746		7
Other payables		20,643		4		22,953		5		20,990		5
Provisions		200		—		207		—		145		—
Other current liabilities		956		—		984		—		998		—
Total current liabilities		110,293		22		66,143		13		96,044		20
NONCURRENT LIABILITIES
Contract liabilities		6,766		2		6,841		2		6,370		2
Long-term loans		1,600		—		1,600		—		1,600		—
Deferred income taxes liabilities		1,947		—		1,912		—		1,955		—
Provisions		101		—		97		—		83		—
Lease liabilities		6,381		1		6,467		2		6,341		1
Customers’ deposits		4,634		1		4,748		1		4,647		1
Net defined benefit liabilities		3,566		1		3,505		1		3,613		1
Other noncurrent liabilities		1,833		—		1,543		—		1,447		—
Total noncurrent liabilities		26,828		5		26,713		6		26,056		5
Total liabilities		137,121		27		92,856		19		122,100		25
EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT
Common stocks		77,574		15		77,574		16		77,574		16
Additional paid-in capital		149,786		30		149,762		31		149,761		30
Retained earnings
Legal reserve		77,574		15		77,574		16		77,574		16
Special reserve		2,676		1		2,676		1		2,676		1
Unappropriated earnings		50,932		10		65,984		14		49,802		10
Total retained earnings		131,182		26		146,234		31		130,052		27
Others		188		—		587		—		226		—
Total equity attributable to stockholders of the parent		358,730		71		374,157		78		357,613		73
NONCONTROLLING INTERESTS		9,946		2		10,115		3		9,546		2
Total equity		368,676		73		384,272		81		367,159		75
TOTAL	$	505,797		100	$	477,128		100	$	489,259		100

- 1 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Unaudited)

	Three Months Ended June 30										Six Months Ended June 30
	2020					2019					2020					2019
	Amount			%		Amount			%		Amount			%		Amount			%
REVENUES	$	47,808			100	$	50,108			100	$	95,958			100	$	101,439			100
OPERATING COSTS		29,801			63		32,267			64		60,192			63		65,748			65
GROSS PROFIT		18,007			37		17,841			36		35,766			37		35,691			35
OPERATING EXPENSES
Marketing		5,177			11		5,483			11		10,250			11		10,891			11
General and administrative		1,149			2		1,141			2		2,362			2		2,312			2
Research and development		961			2		954			2		1,897			2		1,875			1
Expected credit loss (reversal of credit loss)		98			—		(46	)		—		104			—		(102	)		—
Total operating expenses		7,385			15		7,532			15		14,613			15		14,976			14
OTHER INCOME AND EXPENSES		(11	)		—		(5	)		—		(12	)		—		(9	)		—
INCOME FROM OPERATIONS		10,611			22		10,304			21		21,141			22		20,706			21
NON-OPERATING INCOME AND EXPENSES
Interest income		33			—		77			—		72			—		130			—
Other income		287			1		279			1		330			—		335			—
Other gains and losses		(68	)		—		116			—		(29	)		—		97			—
Interest expenses		(48	)		—		(26	)		—		(90	)		—		(52	)		—
Share of profits of associates accounted for using equity method		139			—		148			—		174			—		225			—
Total non-operating income and expenses		343			1		594			1		457			—		735			—
INCOME BEFORE INCOME TAX		10,954			23		10,898			22		21,598			22		21,441			21
INCOME TAX EXPENSE		758			2		628			2		3,302			3		3,080			3
NET INCOME		10,196			21		10,270			20		18,296			19		18,361			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		956			2		(124	)		—		(330	)		—		(283	)		—
Gain or loss on hedging instruments subject to basis adjustment		2			—		5			—		2			—		1			—
Share of remeasurements of defined benefit pension plans of associates		—			—		—			—		—			—		—			—
		958			2		(119	)		—		(328	)		—		(282	)		—
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising from the translation of the foreign operations		(68	)		—		39			—		(80	)		—		63			—
Share of exchange differences arising from the translation of the foreign operations of associates		(1	)		—		—			—		(1	)		—		—			—
		(69	)		—		39			—		(81	)		—		63			—
Total other comprehensive income (loss), net of income tax		889			2		(80	)		—		(409	)		—		(219	)		—
TOTAL COMPREHENSIVE INCOME	$	11,085			23	$	10,190			20	$	17,887			19	$	18,142			18

(Continued)

- 2 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Unaudited)

	Three Months Ended June 30								Six Months Ended June 30
	2020				2019				2020				2019
	Amount		%		Amount		%		Amount		%		Amount		%
NET INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	9,881		20	$	10,044		20	$	17,731		18	$	17,973		18
Noncontrolling interests		315		1		226		—		565		1		388		—
	$	10,196		21	$	10,270		20	$	18,296		19	$	18,361		18
COMPREHENSIVE INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	10,778		22	$	9,961		20	$	17,332		18	$	17,739		18
Noncontrolling interests		307		1		229		—		555		1		403		—
	$	11,085		23	$	10,190		20	$	17,887		19	$	18,142		18
EARNINGS PER SHARE
Basic	$	1.28			$	1.29			$	2.29			$	2.32
Diluted	$	1.27			$	1.29			$	2.28			$	2.31

(Concluded)

- 3 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Millions of New Taiwan Dollars)

(Unaudited)

	Equity Attributable to Stockholders of the Parent
																Others
																Exchange
																Differences
																Arising			Unrealized
																from the			Gain or Loss								Total Equity
						Retained Earnings										Translation of			on Financial			Gain on					Attributable to
			Additional					Special		Unappropriated			Total Retained			the Foreign			Assets at			Hedging					Stockholders			Noncontrolling
	Common Stocks		Paid-in Capital			Legal Reserve		Reserve		Earnings			Earnings			Operations			FVOCI			Instruments		Total Others			of the Parent			Interests			Total Equity
BALANCE, JANUARY 1, 2019	$	77,574	$	149,762		$	77,574	$	2,676	$	66,575		$	146,825		$	(79	)	$	538		$	1	$	460		$	374,621		$	9,837		$	384,458
Appropriation of 2018 earnings
Cash dividends distributed by Chunghwa		—		—			—		—		(34,746	)		(34,746	)		—			—			—		—			(34,746	)		—			(34,746	)
Cash dividends distributed by subsidiaries		—		—			—		—		—			—			—			—			—		—			—			(710	)		(710	)
Net income for the six months ended June 30, 2019		—		—			—		—		17,973			17,973			—			—			—		—			17,973			388			18,361
Other comprehensive income (loss) for the six months ended June 30, 2019		—		—			—		—		—			—			41			(276	)		1		(234	)		(234	)		15			(219	)
Total comprehensive income (loss) for the six months ended June 30, 2019		—		—			—		—		17,973			17,973			41			(276	)		1		(234	)		17,739			403			18,142
Share-based payment transactions of subsidiaries		—		(1	)		—		—		—			—			—			—			—		—			(1	)		16			15
BALANCE, JUNE 30, 2019	$	77,574	$	149,761		$	77,574	$	2,676	$	49,802		$	130,052		$	(38	)	$	262		$	2	$	226		$	357,613		$	9,546		$	367,159
BALANCE, JANUARY 1, 2020	$	77,574	$	149,762		$	77,574	$	2,676	$	65,984		$	146,234		$	(148	)	$	735		$	—	$	587		$	374,157		$	10,115		$	384,272
Appropriation of 2019 earnings
Cash dividends distributed by Chunghwa		—		—			—		—		(32,783	)		(32,783	)		—			—			—		—			(32,783	)		—			(32,783	)
Cash dividends distributed by subsidiaries		—		—			—		—		—			—			—			—			—		—			—			(775	)		(775	)
Change in additional paid-in capital for not proportionately participating in the capital increase of subsidiaries		—		—			—		—		—			—			—			—			—		—			—			—			—
Net income for the six months ended June 30, 2020		—		—			—		—		17,731			17,731			—			—			—		—			17,731			565			18,296
Other comprehensive income (loss) for the six months ended June 30, 2020		—		—			—		—		—			—			(73	)		(328	)		2		(399	)		(399	)		(10	)		(409	)
Total comprehensive income (loss) for the six months ended June 30, 2020		—		—			—		—		17,731			17,731			(73	)		(328	)		2		(399	)		17,332			555			17,887
Share-based payment transactions of subsidiaries		—		24			—		—		—			—			—			—			—		—			24			51			75
BALANCE, JUNE 30, 2020	$	77,574	$	149,786		$	77,574	$	2,676	$	50,932		$	131,182		$	(221	)	$	407		$	2	$	188		$	358,730		$	9,946		$	368,676

- 4 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions of New Taiwan Dollars)

(Unaudited)

	Six Months Ended June 30
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	$	21,598		$	21,441
Adjustments to reconcile income before income tax to net cash provided by operating activities:
Depreciation		15,449			15,432
Amortization		2,124			2,129
Amortization of incremental costs of obtaining contracts		390			691
Expected credit loss (reversal of credit loss)		104			(102	)
Interest expenses		90			52
Interest income		(72	)		(130	)
Dividend income		(236	)		(241	)
Compensation cost of share-based payment transactions		3			1
Share of profits of associates accounted for using equity method		(174	)		(225	)
Loss on disposal of property, plant and equipment		12			9
Loss on disposal of intangible assets		—			—
Loss on disposal of financial instruments		2			—
Loss (gain) on disposal of investments accounted for using equity method		6			(151	)
Provision for inventory and obsolescence		196			241
Valuation loss on financial assets and liabilities at fair value through profit or loss, net		68			6
Others		(54	)		8
Changes in operating assets and liabilities:
Decrease (increase) in:
Contract assets		67			140
Trade notes and accounts receivable		(344	)		2,464
Receivables from related parties		(8	)		2
Inventories		(991	)		(377	)
Prepayments		(2,793	)		(3,104	)
Other current monetary assets		117			(1,033	)
Other current assets		342			(58	)
Incremental cost of obtaining contracts		(403	)		(366	)
Increase (decrease) in:
Contract liabilities		1,276			4,114
Trade notes and accounts payable		(2,833	)		(5,144	)
Payables to related parties		(277	)		(519	)
Other payables		(3,302	)		(2,127	)
Provisions		(3	)		22
Other current liabilities		(18	)		(154	)
Net defined benefit plans		(64	)		277
Cash generated from operations		30,272			33,298

(Continued)

- 5 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions of New Taiwan Dollars)

(Unaudited)

	Six Months Ended June 30
	2020			2019
Interest paid	$	(100	)	$	(51	)
Income tax paid		(3,701	)		(4,073	)
Net cash provided by operating activities		26,471			29,174
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of financial assets at fair value through other comprehensive income		(77	)		—
Purchase of financial assets at fair value through profit or loss		(39	)		—
Proceeds from disposal of financial assets at fair value through profit or loss		30			—
Acquisition of time deposits and negotiable certificates of deposit with maturities of more than three months		(2,693	)		(12,308	)
Proceeds from disposal of time deposits and negotiable certificates of deposit with maturities of more than three months		3,801			4,654
Proceeds from disposal of agreements collateralized by bonds with maturities of more than three months		15			—
Proceeds from disposal of investments accounted for using equity method		—			32
Acquisition of property, plant and equipment		(9,244	)		(10,315	)
Proceeds from disposal of property, plant and equipment		25			24
Acquisition of intangible assets		(47,467	)		(119	)
Acquisition of investment properties		(54	)		—
Decrease (increase) in other noncurrent assets		42			(504	)
Interest received		78			125
Dividends received		38			18
Net cash used in investing activities		(55,545	)		(18,393	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans		70			305
Repayment of short-term loans		(100	)		(310	)
Proceeds from short-term bills payable		29,000			—
Repayment of short-term bills payable		(13,000	)		—
Decrease in customers’ deposits		(124	)		(85	)
Payments for the principal of lease liabilities		(2,006	)		(1,962	)
Increase in other noncurrent liabilities		289			137
Dividends distributed to noncontrolling interests		(7	)		—
Change in other noncontrolling interests		72			14
Net cash provided by (used in) financing activities		14,194			(1,901	)

(Continued)

- 6 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions of New Taiwan Dollars)

(Unaudited)

	Six Months Ended June 30
	2020			2019
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	$	(20	)	$	26
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(14,900	)		8,906
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		34,050			27,645
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	19,150		$	36,551

(Concluded)

- 7 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

NOTE TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2020 and 2019

(Unaudited)

STATEMENT OF COMPLIANCE

The Company has prepared its consolidated balance sheets as of June 30, 2020 and 2019, the related consolidated statements of comprehensive income for the three months ended June 30, 2020 and 2019, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the six months ended June 30, 2020 and 2019 in accordance with IAS 34 “Interim Financial Reporting” as issued by the International Accounting Standard Board (IASB). The consolidated financial statements are incomplete as they omit the related footnote disclosures as required under International Financial Reporting Standards as issued by IASB.

- 8 -