Chunghwa Telecom 6K Independent Auditors’ Report | CHT 24 Feb 22

Chunghwa Telecom (CHT) 6-KIndependent Auditors’ Report

Exhibit 99.2

REPRESENTATION LETTER

The entities that are required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2021 are all the same as those included in the consolidated financial statements of Chunghwa Telecom Co., Ltd. and its subsidiaries prepared in conformity with the International Financial Reporting Standard 10 “Consolidated Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates is included in the consolidated financial statements of Chunghwa Telecom Co., Ltd. and its subsidiaries. Hence, we do not prepare a separate set of consolidated financial statements of affiliates.

Very truly yours,

CHUNGHWA TELECOM CO., LTD.


By		/s/ Chi-Mau Sheih
		Chi-Mau Sheih
		Chairman

February 23, 2022

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders

Chunghwa Telecom Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Chunghwa Telecom Co., Ltd. and its subsidiaries (The “Company”), which comprise the consolidated balance sheets as of December 31, 2021 and 2020, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2021. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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The key audit matter of the consolidated financial statements for the year ended December 31, 2021 is as follows:

Revenue Recognition on Mobile Service

Refer to Notes 3 and 30 to the consolidated financial statements.

The Company’s mobile service revenue consists of subscriber-based charges made up of a significant volume of low-dollar transactions. Because of the complexity and a variety of subscriber-based charges as well as a large number of transactions, the Company uses highly automated systems to process and record its revenue transactions.

Given the Company’s systems to process and record revenue are highly automated, auditing revenue was complex and challenging due to the extent of audit effort required and involvement of professionals with expertise in information technology (IT) necessary for us to identify, test, and evaluate the Company’s IT systems.

Our audit procedures related to the Company’s systems to process revenue transactions included the following, among others:

•

With the assistance of our IT specialists, we:

•

Identified the significant systems used to process revenue transactions and tested the general IT controls over each of these systems, including testing of user access controls and change management controls.

•

Performed testing of system interface controls and automated controls within the relevant revenue streams, as well as the controls designed to ensure the accuracy and completeness of revenue.

•

We tested internal controls within the relevant revenue business processes, including those in place to reconcile the various systems to the Company’s accounting system.

•

We selected samples from mobile service revenue and agreed to customer contracts and records of cash receipts.

Other Matter

We have also audited the parent company only financial statements of Chunghwa Telecom Co., Ltd. as of and for the years ended December 31, 2021 and 2020 on which we have issued an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for 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 IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the audit committee, are responsible for overseeing the Company’s financial reporting process.

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Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2.	Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

3.	Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

5.	Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2021, and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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

February 23, 2022

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 audit such consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ 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’ report and consolidated financial statements shall prevail.

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2021 AND 2020

(In Thousands of New Taiwan Dollars)


	2021					2020
	Amount			%		Amount		%
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 3 and 6)	$	39,778,624			8	$	30,419,655		6
Financial assets at fair value through profit or loss (Notes 3, 4 and 7)		2,566			—		9,897		—
Hedging financial assets (Notes 3 and 20)		—			—		1,752		—
Contract assets (Notes 3 and 30)		5,554,070			1		5,331,246		1
Trade notes and accounts receivable, net (Notes 3, 4, 9, 13 and 30)		23,947,107			5		22,621,902		5
Receivables from related parties (Note 38)		41,528			—		230,696		—
Inventories (Notes 3, 4, 10 and 39)		11,327,409			2		12,408,903		3
Prepayments (Note 11)		2,330,097			—		2,306,246		—
Other current monetary assets (Notes 12, 28 and 35)		5,060,878			1		6,123,665		1
Other current assets (Notes 19, 32 and 39)		2,978,780			1		2,349,097		—

Total current assets		91,021,059			18		81,803,059		16

NONCURRENT ASSETS
Financial assets at fair value through profit or loss (Notes 3, 4 and 7)		908,775			—		677,202		—
Financial assets at fair value through other comprehensive income (Notes 3, 4, 8 and 35)		3,615,888			1		7,193,174		2
Investments accounted for using equity method (Notes 3, 14 and 35)		7,332,774			2		6,893,001		1
Contract assets (Notes 3 and 30)		2,607,744			—		2,495,302		—
Property, plant and equipment (Notes 3, 4, 13, 15, 35, 38 and 39)		289,100,461			56		281,415,943		56
Right-of-use assets (Notes 3, 4, 16 and 38)		11,050,936			2		11,009,206		2
Investment properties (Notes 3, 4, 17, 35 and 38)		9,662,638			2		9,621,322		2
Intangible assets (Notes 3, 4, 13, 18 and 35)		83,945,083			16		90,284,560		18
Deferred income tax assets (Notes 3, 13 and 32)		2,785,006			1		3,132,713		1
Incremental costs of obtaining contracts (Notes 3 and 30)		987,656			—		999,593		—
Net defined benefit assets (Notes 3, 4, 13 and 28)		3,391,077			1		3,372,555		1
Prepayments (Note 11)		1,798,463			—		2,213,521		—
Other noncurrent assets (Notes 19, 35, 39 and 40)		4,862,800			1		5,266,841		1

Total noncurrent assets		422,049,301			82		424,574,933		84

TOTAL	$	513,070,360			100	$	506,377,992		100

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 21)	$	65,000			—	$	67,000		—
Short-term bills payable (Note 22)		—			—		6,999,198		1
Financial liabilities at fair value through profit or loss (Notes 3, 4 and 7)		6,180			—		143		—
Hedging financial liabilities (Notes 3 and 20)		8,286			—		—		—
Contract liabilities (Notes 3, 30 and 38)		12,234,276			2		13,436,706		3
Trade notes and accounts payable (Note 25)		18,063,288			4		15,590,814		3
Payables to related parties (Note 38)		391,358			—		645,944		—
Current tax liabilities (Notes 3 and 32)		4,593,458			1		4,369,241		1
Lease liabilities (Notes 3, 4, 16, 35 and 38)		3,210,564			1		3,381,571		1
Other payables (Notes 26 and 35)		24,436,708			5		23,987,962		5
Provisions (Notes 3, 13 and 27)		284,813			—		313,555		—
Current portion of long-term loans (Notes 23 and 39)		—			—		1,600,000		—
Other current liabilities		998,367			—		1,042,977		—

Total current liabilities		64,292,298			13		71,435,111		14

NONCURRENT LIABILITIES
Long-term loans (Notes 23 and 39)		1,600,000			—		—		—
Bonds payable (Note 24)		26,976,675			6		19,980,272		4
Contract liabilities (Notes 3 and 30)		6,840,056			1		7,289,087		2
Deferred income tax liabilities (Notes 3, 13 and 32)		2,189,411			—		1,966,538		—
Provisions (Notes 3, 13 and 27)		141,865			—		100,616		—
Lease liabilities (Notes 3, 4, 16, 35 and 38)		7,061,689			2		6,215,096		1
Customers’ deposits (Note 38)		5,336,343			1		4,826,679		1
Net defined benefit liabilities (Notes 3, 4, 13 and 28)		2,287,663			—		3,415,331		1
Other noncurrent liabilities		5,081,910			1		1,890,805		—

Total noncurrent liabilities		57,515,612			11		45,684,424		9

Total liabilities		121,807,910			24		117,119,535		23

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

Additional paid-in capital		171,279,625			33		171,261,379		34

Retained earnings
Legal reserve		77,574,465			15		77,574,465		15
Special reserve		2,675,419			1		2,675,419		1
Unappropriated earnings		50,639,022			10		47,918,166		10

Total retained earnings		130,888,906			26		128,168,050		26

Others		(408,150	)		—		927,122		—

Total equity attributable to stockholders of the parent		379,334,846			74		377,931,016		75
NONCONTROLLING INTERESTS (Notes 13 and 29)		11,927,604			2		11,327,441		2

Total equity		391,262,450			76		389,258,457		77

TOTAL	$	513,070,360			100	$	506,377,992		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

YEARS ENDED DECEMBER 31, 2021 AND 2020

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


	2021					2020
	Amount			%		Amount			%

REVENUES (Notes 3, 30, 38 and 45)	$	210,477,948			100	$	207,608,998			100

OPERATING COSTS (Notes 3, 10, 28, 30, 31, 38 and 45)		135,110,751			64		137,028,852			66


GROSS PROFIT		75,367,197			36		70,580,146			34


OPERATING EXPENSES (Notes 3, 9, 28, 31, 38 and 45)
Marketing		20,944,091			10		20,912,848			10
General and administrative		5,293,136			2		5,005,934			2
Research and development		3,687,747			2		3,849,999			2
Expected credit loss		142,991			—		44,885			—


Total operating expenses		30,067,965			14		29,813,666			14


OTHER INCOME AND EXPENSES (Notes 15, 16, 17, 18, 31 and 45)		(369,411	)		—		1,595,246			1


INCOME FROM OPERATIONS		44,929,821			22		42,361,726			21


NON-OPERATING INCOME AND EXPENSES
Interest income (Note 45)		94,684			—		115,922			—
Other income (Notes 8, 31 and 38)		377,820			—		469,608			—
Other gains and losses (Notes 14, 31, 37 and 38)		460,830			—		(152,967	)		—
Interest expense (Notes 16, 31, 38 and 45)		(218,171	)		—		(206,063	)		—
Share of profits of associates and joint ventures accounted for using equity method (Notes 14 and 45)		421,640			—		242,745			—


Total non-operating income and expenses		1,136,803			—		469,245			—


INCOME BEFORE INCOME TAX		46,066,624			22		42,830,971			21

INCOME TAX EXPENSE (Notes 3 and 32)		8,871,745			4		8,125,428			4


NET INCOME		37,194,879			18		34,705,543			17

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2021 AND 2020

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


	2021					2020
	Amount			%		Amount			%

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit pension plans (Note 28)	$	390,441			—	$	1,193,149			1
Unrealized gain or loss on investments in equity instruments at fair value through other comprehensive income (Notes 3, 29 and 37)		(1,185,849	)		—		404,955			—
Gain or loss on hedging instruments subject to basis adjustment (Notes 3 and 20)		(10,038	)		—		1,425			—
Share of remeasurements of defined benefit pension plans of associates and joint ventures (Note 14)		(4,154	)		—		(4,282	)		—
Income tax relating to items that will not be reclassified to profit or loss (Note 32)		(78,088	)		—		(238,630	)		—

		(887,688	)		—		1,356,617			1


Items that may be reclassified subsequently to profit or loss:
Exchange differences arising from the translation of the foreign operations		(76,620	)		—		(177,149	)		—
Share of exchange differences arising from the translation of the foreign operations of associates and joint ventures (Note 14)		(1,523	)		—		(4,289	)		—
Income tax relating to items that may be reclassified subsequently to profit or loss (Note 32)		—			—		(263	)		—

		(78,143	)		—		(181,701	)		—


Total other comprehensive income (loss), net of income tax		(965,831	)		—		1,174,916			1


TOTAL COMPREHENSIVE INCOME	$	36,229,048			18	$	35,880,459			18


NET INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	35,753,579			17	$	33,406,130			16
Noncontrolling interests		1,441,300			1		1,299,413			1

	$	37,194,879			18	$	34,705,543			17

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2021 AND 2020

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


	2021				2020
	Amount		%		Amount			%

COMPREHENSIVE INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	34,789,149		17	$	34,598,348			17
Noncontrolling interests		1,439,899		1		1,282,111			1
							��

	$	36,229,048		18	$	35,880,459			18


EARNINGS PER SHARE (Note 33)
Basic	$	4.61			$	4.31

Diluted	$	4.60			$	4.30


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

YEARS ENDED DECEMBER 31, 2021 AND 2020

(In Thousands of New Taiwan Dollars)


	Equity Attributable to Stockholders of the Parent (Notes 13, 20 and 29)
													Others
													Exchange Differences Arising from the Translation of the Foreign Operations			Unrealized Gain or Loss on Financial Assets at Fair Value Through Other Comprehensive Income			Gain or Loss on Hedging Instruments						Noncontrolling Interest (Notes 13 and 29)
			Additional Paid-in Capital			Retained Earnings
	Common Stocks		Additional Paid-in Capital			Legal Reserve		Special Reserve		Unappropriated Earnings												Total						Total Equity
BALANCE, JANUARY 1, 2020	$	77,574,465	$	171,255,985		$	77,574,465	$	2,675,419	$	46,341,361		$	(148,377	)	$	836,598		$	327		$	376,110,243		$	10,283,522		$	386,393,765
Appropriation of 2019 earnings
Cash dividends distributed by Chunghwa		—		—			—		—		(32,782,969	)		—			—			—			(32,782,969	)		—			(32,782,969	)
Cash dividends distributed by subsidiaries		—		—			—		—		—			—			—			—			—			(775,420	)		(775,420	)
Unclaimed dividend		—		1,605			—		—		—			—			—			—			1,605			—			1,605
Change in additional paid-in capital from investments in associates and joint ventures accounted for using equity method		—		(21,918	)		—		—		—			—			—			—			(21,918	)		(1,817	)		(23,735	)
Change in additional paid-in capital for not proportionately participating in the capital increase of subsidiaries		—		(103	)		—		—		—			—			—			—			(103	)		103			—
Net income for the year ended December 31, 2020		—		—			—		—		33,406,130			—			—			—			33,406,130			1,299,413			34,705,543
Other comprehensive income (loss) for the year ended December 31, 2020		—		—			—		—		936,958			(166,154	)		419,989			1,425			1,192,218			(17,302	)		1,174,916

Total comprehensive income (loss) for the year ended December 31, 2020		—		—			—		—		34,343,088			(166,154	)		419,989			1,425			34,598,348			1,282,111			35,880,459

Disposal of investments in equity instruments at fair value through other comprehensive income		—		—			—		—		16,686			—			(16,686	)		—			—			—			—
Share-based payment transactions of subsidiaries		—		25,810			—		—		—			—			—			—			25,810			63,063			88,873
Net increase in noncontrolling interests		—		—			—		—		—			—			—			—			—			475,879			475,879

BALANCE, DECEMBER 31, 2020		77,574,465		171,261,379			77,574,465		2,675,419		47,918,166			(314,531	)		1,239,901			1,752			377,931,016			11,327,441			389,258,457
Appropriation of 2020 earnings
Cash dividends distributed by Chunghwa		—		—			—		—		(33,403,565	)		—			—			—			(33,403,565	)		—			(33,403,565	)
Cash dividends distributed by subsidiaries		—		—			—		—		—			—			—			—			—			(896,335	)		(896,335	)
Unclaimed dividend		—		1,968			—		—		—			—			—			—			1,968			—			1,968
Change in additional paid-in capital from investments in associates and joint ventures accounted for using equity method		—		(437	)		—		—		—			—			—			—			(437	)		(136	)		(573	)
Net income for the year ended December 31, 2021		—		—			—		—		35,753,579			—			—			—			35,753,579			1,441,300			37,194,879
Other comprehensive income (loss) for the year ended December 31, 2021		—		—			—		—		311,189			(77,745	)		(1,187,836	)		(10,038	)		(964,430	)		(1,401	)		(965,831	)

Total comprehensive income (loss) for the year ended December 31, 2021		—		—			—		—		36,064,768			(77,745	)		(1,187,836	)		(10,038	)		34,789,149			1,439,899			36,229,048

Disposal of investments in equity instruments at fair value through other comprehensive income		—		—			—		—		59,653			—			(59,653	)		—			—			—			—
Share-based payment transactions of subsidiaries		—		16,715			—		—		—			—			—			—			16,715			56,735			73,450

BALANCE, DECEMBER 31, 2021	$	77,574,465	$	171,279,625		$	77,574,465	$	2,675,419	$	50,639,022		$	(392,276	)	$	(7,588	)	$	(8,286	)	$	379,334,846		$	11,927,604		$	391,262,450

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

- 10 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2021 AND 2020

(In Thousands of New Taiwan Dollars)


	2021			2020

CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	$	46,066,624		$	42,830,971
Adjustments for:
Depreciation		31,832,326			30,942,330
Amortization		6,568,547			5,424,367
Amortization of incremental costs of obtaining contracts		815,241			771,875
Expected credit loss		142,991			44,885
Interest expense		218,171			206,063
Interest income		(94,684	)		(115,922	)
Dividend income		(154,008	)		(246,084	)
Compensation cost of share-based payment transactions		19,371			7,578
Share of profits of associates and joint ventures accounted for using equity method		(421,640	)		(242,745	)
Loss (gain) on disposal of property, plant and equipment		3,349			(1,427,984	)
Gain on disposal of investment properties		—			(151,357	)
Loss on disposal of intangible assets		—			1,858
Loss (gain) on disposal of financial instruments		(353	)		1,788
Gain on disposal of investments accounted for using equity method		(3,239	)		(15,946	)
Provision for impairment loss and obsolescence of inventory		206,824			1,161,281
Impairment loss on right-of-use assets		420,590			—
Reversal of impairment loss on investment properties		(83,429	)		(27,066	)
Impairment loss on intangible assets		28,901			9,303
Valuation loss (gain) on financial assets and liabilities at fair value through profit or loss, net		(243,381	)		99,150
Others		(132,924	)		3,139
Changes in operating assets and liabilities:
Decrease (increase) in:
Contract assets		(335,554	)		(202,628	)
Trade notes and accounts receivable		(1,339,250	)		4,071,260
Receivables from related parties		189,168			(213,862	)
Inventories		874,670			3,915,328
Prepayments		391,207			173,243
Other current monetary assets		(385,757	)		354,739
Other current assets		(629,683	)		155,324
Incremental cost of obtaining contracts		(803,304	)		(828,816	)
Increase (decrease) in:
Contract liabilities		(1,651,461	)		(3,289,055	)
Trade notes and accounts payable		2,468,093			21,015
Payables to related parties		(254,586	)		(8,039	)
Other payables		248,112			(924,186	)

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2021 AND 2020

(In Thousands of New Taiwan Dollars)


	2021			2020

Provisions	$	12,507		$	94,589
Other current liabilities		(12,390	)		46,303
Net defined benefit plans		(755,749	)		(173,970	)

Cash generated from operations		83,205,300			82,468,729
Interests paid		(192,064	)		(161,251	)
Income taxes paid		(8,155,036	)		(7,851,522	)


Net cash provided by operating activities		74,858,200			74,455,956


CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at fair value through other comprehensive income		(313,171	)		(85,246	)
Proceeds from disposal of financial assets at fair value through other comprehensive income		2,911,570			297,476
Acquisition of financial assets at fair value through profit or loss		(44,072	)		(39,253	)
Proceeds from disposal of financial assets at fair value through profit or loss		25,201			29,741
Acquisition of time deposits and negotiable certificates of deposit with maturities of more than three months		(17,369,138	)		(5,215,859	)
Proceeds from disposal of time deposits and negotiable certificates of deposit with maturities of more than three months		18,446,270			6,630,359
Proceeds from disposal of repurchase agreements collateralized by bonds with maturities of more than three months		—			15,335
Acquisition of investments accounted for using equity method		(329,520	)		(10,200	)
Proceeds from disposal of investments accounted for using equity method		8,519			—
Acquisition of property, plant and equipment		(35,333,028	)		(23,510,820	)
Proceeds from disposal of property, plant and equipment		27,038			319,089
Acquisition of intangible assets		(255,852	)		(47,605,187	)
Acquisition of investment properties		(146	)		(54,435	)
Proceeds from disposal of investment properties		—			188,300
Decrease (increase) in other noncurrent assets		336,878			(207,616	)
Interests received		95,118			124,653
Dividends received		621,972			515,918
Net cash inflow on acquisition of subsidiaries		—			354,056


Net cash used in investing activities		(31,172,361	)		(68,253,689	)

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2021 AND 2020

(In Thousands of New Taiwan Dollars)


	2021			2020

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans	$	154,000		$	115,000
Repayments of short-term loans		(156,000	)		(142,000	)
Proceeds from short-term bills payable		5,000,000			41,000,000
Repayments of short-term bills payable		(12,000,000	)		(34,000,000	)
Proceeds from issuance of bonds		7,000,000			20,000,000
Payments for transaction costs attributable to the issuance of bonds		(7,675	)		(21,038	)
Increase in customers’ deposits		477,444			61,757
Payments for the principal of lease liabilities		(3,728,949	)		(3,683,204	)
Increase in other noncurrent liabilities		3,191,105			343,275
Cash dividends paid		(33,403,565	)		(32,782,969	)
Cash dividends distributed to noncontrolling interests		(896,335	)		(775,420	)
Change in other noncontrolling interests		54,079			81,295
Unclaimed dividend		1,968			1,605


Net cash used in financing activities		(34,313,928	)		(9,801,699	)


EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(12,942	)		(30,556	)


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		9,358,969			(3,629,988	)

CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR		30,419,655			34,049,643


CASH AND CASH EQUIVALENTS, END OF THE YEAR	$	39,778,624		$	30,419,655


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

YEARS ENDED DECEMBER 31, 2021 AND 2020

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

1.	GENERAL

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

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

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

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

2.	APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Board of Directors on February 23, 2022.

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), International Financial Reporting Interpretations Committee (IFRIC) and SIC Interpretations (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (the “FSC”) (collectively, the “Taiwan-IFRS”).

- 14 -

Basis of Preparation

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values and net defined benefit liabilities (assets) which are measured at the present value of the defined benefit obligations less the fair value of plan assets.

Current and Noncurrent Assets and Liabilities

Current assets include:

Assets held primarily for the purpose of trading;

Assets expected to be realized within twelve months after the reporting period; and

Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

Liabilities held primarily for the purpose of trading;

Liabilities due to be settled within twelve months after the reporting period; and

Liabilities for which the Company does not have an unconditional right to defer settlement for at least twelve months after the reporting period.

Assets and liabilities that are not classified as current are classified as noncurrent.

Light Era Development Co., Ltd. (“LED”) engages mainly in development of property for rent and sale. The assets and liabilities of LED related to property development within its operating cycle, which is over one year, are classified as current items.

Basis of Consolidation

Principles for preparing consolidated financial statements

The consolidated financial statements incorporate the financial statements of Chunghwa and entities controlled by Chunghwa (its subsidiaries).

Income and expenses of subsidiaries acquired are included in the consolidated statement of comprehensive income from the acquisition date.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by the Company.

All inter-company transactions, balances, income and expenses are eliminated in full upon consolidation.

Attribution of total comprehensive income to noncontrolling interests

Total comprehensive income of subsidiaries is attributed to the stockholders of the parent and to the noncontrolling interests even if it results in the noncontrolling interests having a deficit balance.

- 15 -

Changes in the Company’s ownership interests in subsidiaries

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Company’s interests and the noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to stockholders of the parent.

The subsidiaries in the consolidated financial statements

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


			Percentage of Ownership Interests
			December 31
Name of Investor	Name of Investee	Main Businesses and Products	2021	2020	Note

Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd. (“SENAO”)	Handset and peripherals retailer, sales of CHT mobile phone plans as an agent	28	28		a	)
	Light Era Development Co., Ltd. (“LED”)	Planning and development of real estate and intelligent buildings, and property management	100	100
	Donghwa Telecom Co., Ltd. (“DHT”)	International private leased circuit, IP VPN service, and IP transit services	100	100		b	)
	Chunghwa Telecom Singapore Pte., Ltd. (“CHTS”)	International private leased circuit, IP VPN service, and IP transit services	100	100
	Chunghwa System Integration Co., Ltd. (“CHSI”)	Providing system integration services and telecommunications equipment	100	100
	Chunghwa Investment Co., Ltd. (“CHI”)	Investment	89	89
	CHIEF Telecom Inc. (“CHIEF”)	Network integration, internet data center (“IDC”), communications integration and cloud application services	56	56		c	)
	CHYP Multimedia Marketing & Communications Co., Ltd. (“CHYP”)	Digital information supply services and advertisement services	100	100
	Prime Asia Investments Group Ltd. (B.V.I.) (“Prime Asia”)	Investment	100	100
	Spring House Entertainment Tech. Inc. (“SHE”)	Software design services, internet contents production and play, and motion picture production and distribution	56	56
	Chunghwa Telecom Global, Inc. (“CHTG”)	International private leased circuit, internet services, and transit services	100	100
	Chunghwa Telecom Vietnam Co., Ltd. (“CHTV”)	Intelligent energy saving solutions, international circuit, and information and communication technology (“ICT”) services.	100	100
	Smartfun Digital Co., Ltd. (“SFD”)	Providing diversified family education digital services	65	65
	Chunghwa Telecom Japan Co., Ltd. (“CHTJ”)	International private leased circuit, IP VPN service, and IP transit services	100	100
	Chunghwa Sochamp Technology Inc. (“CHST”)	Design, development and production of Automatic License Plate Recognition software and hardware	51	51
	Honghwa International Co., Ltd. (“HHI”)	Telecommunications engineering, sales agent of mobile phone plan application and other business services, etc.	100	100
	Chunghwa Leading Photonics Tech Co., Ltd. (“CLPT”)	Production and sale of electronic components and finished products	75	75
	Chunghwa Telecom (Thailand) Co., Ltd. (“CHTT”)	International private leased circuit, IP VPN service, ICT and cloud VAS services	100	100

(Continued)

- 16 -


			Percentage of Ownership Interests
			December 31
Name of Investor	Name of Investee	Main Businesses and Products	2021	2020	Note

	CHT Security Co., Ltd. (“CHTSC”)	Computing equipment installation, wholesale of computing and business machinery equipment and software, management consulting services, data processing services, digital information supply services and internet identify services	77	80		d	)
	International Integrated Systems, Inc. (“IISI”)	IT solution provider, IT application consultation, system integration and package solution	51	51		e	)
Senao International Co., Ltd.	Senao International (Samoa) Holding Ltd. (“SIS”)	International investment	100	100		f	)
	Youth Co., Ltd. (“Youth”)	Sale of information and communication technologies products	96	96		g	)
	Aval Technologies Co., Ltd. (“Aval”)	Sale of information and communication technologies products	100	100
	Senyoung Insurance Agent Co., Ltd. (“SENYOUNG”)	Property and liability insurance agency	100	100
Youth Co., Ltd.	ISPOT Co., Ltd. (“ISPOT”)	Sale of information and communication technologies products	100	100
	Youyi Co., Ltd. (“Youyi”)	Maintenance of information and communication technologies products	100	100
Aval Technologies Co., Ltd.	Wiin Technology Co., Ltd. (“Wiin”)	Sale of information and communication technologies products	100	100
Senyoung Insurance Agent Co., Ltd.	Senaolife Insurance Agent Co., Ltd. (“Senaolife”)	Life insurance services	100	100
CHIEF Telecom Inc.	Unigate Telecom Inc. (“Unigate”)	Telecommunications and internet service	100	100
	Chief International Corp. (“CIC”)	Telecommunications and internet service	100	100
	Shanghai Chief Telecom Co., Ltd. (“SCT”)	Telecommunications and internet service	49	49		h	)
Chunghwa Investment Co., Ltd.	Chunghwa Precision Test Tech. Co., Ltd. (“CHPT”)	Production and sale of semiconductor testing components and printed circuit board	34	34		i	)
Chunghwa Precision Test Tech. Co., Ltd.	Chunghwa Precision Test Tech. USA Corporation (“CHPT (US)”)	Design and after-sale services of semiconductor testing components and printed circuit board	100	100		j	)
	CHPT Japan Co., Ltd. (“CHPT (JP)”)	Related services of electronic parts, machinery processed products and printed circuit board	100	100
	Chunghwa Precision Test Tech. International, Ltd. (“CHPT (International)”)	Wholesale and retail of electronic materials, and investment	100	100		k	)
Senao International (Samoa) Holding Ltd.	Senao International HK Limited (“SIHK”)	International investment	100	100		l	)
Senao International HK Limited	Senao International Trading (Shanghai) Co., Ltd. (“SITS”)	Sale of information and communication technologies products	—	100		m	)
Prime Asia Investments Group Ltd. (B.V.I.)	Chunghwa Hsingta Co., Ltd. (“CHC”)	Investment	100	100

(Continued)

- 17 -


			Percentage of Ownership Interests
			December 31
Name of Investor	Name of Investee	Main Businesses and Products	2021	2020	Note

Chunghwa Hsingta Co., Ltd.	Chunghwa Telecom (China) Co., Ltd. (“CTC”)	Integrated information and communication solution services for enterprise clients, and intelligent energy network service	100	100		n	)
Chunghwa Precision Test Tech. International, Ltd.	Shanghai Taihua Electronic Technology Limited (“STET”)	Design of printed circuit board and related consultation service	100	100
	Su Zhou Precision Test Tech. Ltd. (“SZPT”)	Assembly processed of circuit board, design of printed circuit board and related consultation service	100	100		o	)
International Integrated Systems, Inc.	Infoexplorer International Co., Ltd.(“IESA”)	Investment	100	100		p	)
	IISI Investment Co., Ltd. (“IICL”)	Investment	100	100		p	)
	Unitronics Technology Corp. (“UTC”)	Development and maintenance of information system	99.96	99.96		p	)
Infoexplorer International Co., Ltd.	International Integrated Systems (Hong Kong) Limited (“IEHK”)	Investment and technical consulting service	100	100		p	)
IISI Investment Co., Ltd.	Leading Tech Co., Ltd. (“LTCL”)	Investment	100	100		p	)
Leading Tech Co., Ltd.	Leading Systems Co., Ltd. (“LSCL”)	Investment	100	100		p	)
Leading Systems Co., Ltd.	International Integrated Systems Inc. (Shanghai) (“IISS”)	Development and maintenance of information system	—	100		p q	) )
International Integrated Systems Inc. (Shanghai)	Huiyu Shanghai Management Consultancy Co., Ltd. (“HSMC”)	Development and maintenance of information system	—	—		p r	) )

(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 Company treated SENAO as a subsidiary.

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

c)	CHIEF issued new shares in March 2020, December 2020, March 2021 and December 2021 as its employees exercised options. Therefore, the Company’s ownership interest in CHIEF decreased to 59.08% and 58.89% as of December 31, 2020 and 2021, respectively.

d)	CHTSC issued new shares in February 2021 as its employees exercised options. Therefore, the Company’s ownership interest in CHTSC decreased to 77.46% as of December 31, 2021.

Chunghwa obtained 20.38% ownership interest in IISI in July 2020 and Chunghwa’s ownership interest in IISI increased to 51.54% by considering the previously held ownership interest in IISI. Chunghwa obtained over half of the seats of the Board of Directors of IISI; therefore, Chunghwa gained control over IISI and treated it as a subsidiary. IISI issued new shares in September 2020 and January 2021 as its employees exercised options; therefore, the Company’s ownership interest in IISI decreased to 51.20% and 51.02% as of December 31, 2020 and 2021, respectively.

- 18 -

f)	SIS reduced and returned its capital to its stakeholders in November 2020 and July 2021. SIS reduced 8.14% and 48.15% of its capital to offset accumulated deficits in February and October 2021, respectively. The Company’s ownership interest in SIS remained the same.

g)	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%.

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

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

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

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

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

m)	SITS completed its liquidation in April 2021.

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

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

p)	It is a subsidiary of IISI.

q)	IISS completed its liquidation in August 2021.

r)	HSMC completed its liquidation in December 2020.

- 19 -

The following diagram presented information regarding the relationship and percentages of ownership interests between Chunghwa and its subsidiaries as of December 31, 2021.

LOGO

Business Combinations

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

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

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

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

Foreign Currencies

In preparing the financial statements of each individual entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise.

- 20 -

Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined and related exchange differences are recognized in profit or loss. Conversely, when the fair value changes were recognized in other comprehensive income, related exchange difference shall be recognized in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Company’s foreign operations (including those subsidiaries, associates and joint ventures in other countries or currencies used different with Chunghwa) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognized in other comprehensive income and attributed to stockholders of the parent and noncontrolling interests as appropriate.

Cash Equivalents

Cash equivalents include those maturities within three months from the date of acquisition, highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value such as commercial papers, negotiable certificates of deposit, time deposits, repurchase agreements collateralized by bonds and stimulus vouchers. These cash equivalents are held for the purpose of meeting short-term cash commitments.

Inventories

Inventories are stated at the lower of cost or net realizable value item by item, except for those that may be appropriate to group items of similar or related inventories. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. The calculation of the cost of inventory is derived using the weighted-average method.

Buildings and Land Consigned to Construction Contractors

Inventories of LED are stated at the lower of cost or net realizable value item by item, except for those that may be appropriate to group as similar items or related inventories. Land acquired before construction is classified as land held for development and then reclassified as land held under development after LED begins its construction project.

Upon the completion of the construction project, LED recognizes revenues in the amount of proceeds from customers for land and buildings and related costs when ownership is transferred to the customers. The unsold portion of the completed construction project is transferred to land and building held for sale.

Investments in Associates and Joint Ventures

An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. A joint venture is a joint arrangement whereby the Company and other parties that have joint control of the arrangement have rights to the net assets of the arrangement.

Investments accounted for using the equity method include investments in associates and interests in joint ventures. Under the equity method, an investment in an associate and a joint venture is initially recognized at cost and adjusted thereafter to recognize the Company’s share of profit or loss and other comprehensive income of the associate and joint venture as well as the distribution received. The Company also recognizes its share in changes in the associates and joint ventures.

- 21 -

When the Company subscribes for new shares of an associate and a joint venture at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the associate and joint venture. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to additional paid-in capital. When the adjustment should be debited to additional paid-in capital but the additional paid-in capital recognized from investments accounted for using equity method is insufficient, the shortage is debited to retained earnings.

Any excess of the cost of acquisition over the Company’s share of the fair value of the identifiable net assets and liabilities of an associate and a joint venture at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and shall not be amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognized immediately in profit or loss.

The entire carrying amount of an investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Company discontinues the use of the equity method from the date on which its investment ceases to be an associate and a joint venture. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment’s fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate and joint venture attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate and joint venture. The Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate and joint venture on the same basis as would be required had that associate and joint venture directly disposed of the related assets or liabilities.

When the Company transacts with its associate and joint venture, profits and losses resulting from the transactions with the associate and joint venture are recognized in the Company’s consolidated financial statements only to the extent of interests in the associate and joint venture that are not related to the Company.

Property, Plant and Equipment

Property, plant and equipment are initially measured at cost and subsequently measured at cost less accumulated depreciation and accumulated impairment loss.

Property, plant and equipment in the course of construction are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for their intended use.

Depreciation on property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. Freehold land is not depreciated. The estimated useful lives, residual values and depreciation method are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period in which the property is derecognized.

- 22 -

Investment Properties

Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties also include land held for a currently undetermined future use.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method.

For a transfer from the investment properties to property, plant and equipment, the deemed cost of the property, plant and equipment for subsequent accounting is its carrying amount at the commencement of owner-occupation.

For a transfer from the property, plant and equipment to investment properties, the deemed cost of the investment properties for subsequent accounting is its carrying amount at the end of owner-occupation.

For a contract where a land owner provides land for the construction of buildings by a property developer in exchange for a certain percentage of the buildings, any exchange gain or loss is recognized when the exchange transaction occurs if the exchange transaction has commercial substance.

On derecognition of the investment properties, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period in which the property is derecognized.

Goodwill

Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purpose of impairment testing, goodwill is allocated to each of the Company’s cash-generating units or groups of cash-generating units (referred to as “cash-generating unit”) that are expected to benefit from the synergies of the business combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributable goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

Intangible Assets Other Than Goodwill

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. The residual value of an intangible asset with a finite useful life shall be assumed to be zero unless the Company expects to dispose of the intangible asset before the end of its economic life.

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Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss in the period in which the asset is derecognized.

Impairment of Property, Plant and Equipment, Right-of-use Assets, Investment Properties, Intangible Assets Other Than Goodwill and Incremental Costs of Obtaining Contracts

At the end of each reporting period, the Company reviews the carrying amounts of its property, plant and equipment, right-of-use assets, investment properties and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

Impairment loss from the assets related to incremental cost of obtaining contracts is recognized to the extent that the carrying amount of the assets exceeds the remaining amount of consideration that the Company expects to receive in exchange for related goods or services less the costs which relate directly to providing those goods or services.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

Financial Instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

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Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

Measurement category

Financial assets at fair value through profit or loss (FVTPL)

Financial asset is classified as at FVTPL when the financial asset is mandatorily classified as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at fair value through other comprehensive income (FVOCI).

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividend earned on the financial asset. Fair value is determined in the manner described in Note 37.

Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

ii.

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost are measured at amortized cost, which equals to gross carrying amount determined by the effective interest method less any impairment loss, except for short-term receivables as the effect of discounting is immaterial. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such financial assets.

Investments in equity instruments at FVOCI

On initial recognition, the Company may make an irrevocable election to designate investments in equity instruments as at FVOCI. Designation at FVOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments. Instead, it will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

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Impairment of financial assets and contract assets

The Company recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including accounts receivable) and contract assets.

The Company recognizes lifetime Expected Credit Loss (ECL) for accounts receivable and contract assets. For all other financial instruments, the Company recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.

Expected credit losses reflect the weighted average of credit losses with the respective risks of a default occurring as the weights. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Company recognizes an impairment loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

On derecognition of a financial asset measured at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.

On derecognition of investments in equity instruments at FVOCI in its entirety, the cumulative gain or loss is directly transferred to retained earnings, and it is not reclassified to profit or loss.

Financial liabilities

Subsequent measurement

Except for financial liabilities at FVTPL, all the financial liabilities are subsequently measured at amortized cost using the effective interest method.

Derecognition of financial liabilities

The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

Derivative financial instruments

The Company enters into derivative financial instruments to manage its exposure to foreign exchange rate risks, including forward exchange contracts.

Derivatives are initially measured at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability.

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Hedge Accounting

The Company designates some derivatives instruments as cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss.

The associated gains or losses that were recognized in other comprehensive income are reclassified from equity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in the same period when the hedged item affects profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the associated gains and losses that were recognized in other comprehensive income are removed from equity and are included in the initial cost of the non-financial asset or non-financial liability.

The Company discontinues hedge accounting only when the hedging relationship ceases to meet the qualifying criteria; for instance, when the hedging instrument expires or is sold, terminated or exercised. The cumulative gain or loss on the hedging instrument that has been previously recognized in other comprehensive income from the period when the hedge was effective remains separately in equity until the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss.

Provisions

Provisions are measured at the best estimate of the expenditure required to settle the Company’s obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. The provisions for warranties claims are made by management according to the sales agreements which represent the management’s best estimate of the future outflow of economic benefits. The provisions of warranties claims are recognized as operating cost in the period in which the goods are sold. 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.

Revenue Recognition

The Company identifies the performance obligations in the contract with the customers, allocates transaction price to each performance obligation and recognizes revenue when performance obligations are satisfied.

Sales of products are recognized as revenue when the Company delivers products and the customer accepts and controls the product. Except for the consumer electronic products such as mobile devices sold in channel stores which are usually in cash sale, the Company recognizes revenues for sale of other electronic devices and corresponding trade notes and accounts receivable.

Usage revenues from fixed-line services (including local, domestic long distance and international long distance telephone services), mobile services, internet and data services, and interconnection and call transfer fees from other telecommunications companies and carriers are billed in arrears and are recognized based upon seconds or minutes of traffic processed when the services are provided in accordance with contract terms. The usage revenues and corresponding trade notes and accounts receivable are recognized monthly.

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Other revenues are recognized as follows: (a) one-time subscriber connection fees (on fixed-line services) are first recognized as contract liabilities and revenues are recognized subsequently over the average expected customer service periods, (b) monthly fees (on fixed-line services, mobile, internet and data services) and related receivables are accrued monthly, and (c) prepaid services (fixed-line, mobile, internet and data services) are recognized as contract liabilities upon collection considerations from customers and are recognized as revenues subsequently based upon actual usage by customers.

Where the Company enters into transactions which involve both the provision of telecommunications service bundled with products such as handsets, total consideration received from products and telecommunications service in these arrangements are allocated based on their relative stand-alone selling price. The amount of sales revenue recognized for products is not limited to the amount paid by the customer for the products. When the amount of sales revenue recognized for products exceeded the amount paid by the customer for the products, the difference is recognized as contract assets. Contract assets are reclassified to accounts receivable when the amounts become collectible from customers subsequently. When the amount of sales revenue recognized for products was less than the amount paid by the customer for the products, the difference is recognized as contract liabilities and revenues are recognized subsequently when the telecommunications service are provided.

For project business contracts, if a substantial part of the Company’s promise to customers is to manage and coordinate the various tasks and assume the risks of those tasks to ensure the individual goods or services are incorporated into the combined output, they are treated as a single performance obligation since the Company provides a significant integration service. The Company recognizes revenues and corresponding accounts receivable when the project business contract is completed and accepted by customers. For some project contracts, the Company does not create an asset with an alternative use to the Company and has an enforceable right to payment for performance completed to date; therefore, performance obligations are satisfied and revenues are recognized over time.

For service contracts such as maintenance and warranties, customers simultaneously receive and consume the benefits provided by the Company; thus, revenues and corresponding accounts receivable of service contracts are recognized over the related service period.

When another party is involved in providing goods or services to a customer, the Company is acting as a principal if it controls the specified good or service before that good or service is transferred to a customer; otherwise, the Company is acting as an agent. When the Company is acting as a principal, gross inflow of economic benefits arising from transactions is recognized as revenue. When the Company is acting as an agent, revenue is recognized as its share of transaction.

Incremental Costs of Obtaining Contracts

Commissions and equipment subsidy related to telecommunications service as a result of obtaining contracts are recognized as an asset under the incremental costs of obtaining contracts to the extent the costs are expected to be recovered and are amortized over the contract period. However, the Company elects not to capitalize the incremental costs of obtaining contracts if the amortization period of the assets that the Company otherwise would have recognized is expected to be one year or less.

Leasing

At inception of a contract, the Company assesses whether the contract is, or contains, a lease.

The Company as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

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The Company as lessee

The Company recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for lease payments for low-value assets are recognized as expenses on a straight-line basis over the lease terms accounted for applying recognition exemption.

Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities and for lease payments made at or before the commencement date. Right-of-use assets are subsequently measured at cost less accumulated depreciation and accumulated impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented separately on the consolidated balance sheets.

Right-of-use assets are depreciated using the straight-line basis from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms.

Lease liabilities were initially measured at the present value of the lease payments, which comprise fixed payments, in-substance fixed payments, variable lease payments which depend on an index or a rate. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If such rate cannot be readily determined, the lessee’s incremental borrowing rate is used.

Lease liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, the Company remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. The Company accounts for the remeasurement of the lease liability as a result of the decrease of lease scope by decreasing the carrying amount of the right-of-use assets and recognizes in profit or loss any gain or loss on the partial or full termination of the lease. Lease liabilities are presented separately on the consolidated balance sheets.

Variable lease payments not depending on an index or a rate are recognized as expenses in the periods in which they are incurred.

Borrowing Costs

All borrowing costs are recognized in profit or loss in the period in which they are incurred.

Government Grants

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attached to government grants and that the grants will be received.

Government grants related to income are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes expenses of the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company should construct noncurrent assets are recognized as deferred revenue and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that become receivable as compensation for expenses or losses already incurred are recognized in profit or loss in the period in which they become receivable.

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Employee Benefits

Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost and gains or losses on settlements) and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising (a) actuarial gains and losses; and (b) the return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability (asset) represents the actual deficit (surplus) in the Company’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

Other long-term employee benefits

Other long-term employee benefits are accounted for in the same way as the accounting required for defined benefit plan except that remeasurement is recognized in profit or loss.

Share-based Payment Arrangements - Employee Stock Options

The fair value determined at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of employee stock options that are expected to ultimately vest, with a corresponding increase in additional paid-in capital - employee stock options. If the equity instruments granted vest immediately at the grant date, expenses are recognized in full in profit or loss.

At the end of each reporting period, the Company revises its estimate of the number of employee share options expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to additional paid-in capital - employee stock options.

Income Tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

Income tax payable or recoverable is based on taxable profit or loss for the period determined according to the applicable tax laws of each tax jurisdiction.

According to the Income Tax Act in the ROC, an additional tax of unappropriated earnings is provided for in the year the stockholders approve to retain the earnings.

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Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. A deferred tax liability is not recognized on taxable temporary difference arising from initial recognition of goodwill.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carry forward and unused tax credits from purchases of machinery, equipment and technology and research, and development expenditures, etc. to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, associates, and joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income, in which case, the current and deferred tax are also recognized in other comprehensive income.

Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

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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.

Critical accounting judgments

Revenue recognition

The Company’s project agreements are mainly to provide one or more customized equipment or services to customers. In order to fulfill the agreements, another party may be involved in some agreements. The Company considers the following factors to determine whether the Company is a principal of the transaction: whether the Company is the primary obligation provider of the agreements, its exposures to inventory risks and the discretion in establishing prices, etc. The determination of whether the Company is a principal or an agent will affect the amount of revenue recognized by the Company. Only when the Company is acting as a principal, gross inflows of economic benefits arising from transactions is recognized as revenue.

Control over subsidiaries

As discussed in Note 3, “Summary of Significant Accounting Policies - Basis of Consolidation”, some entities are subsidiaries of the Company although the Company only owns less than 50% ownership interests in these entities. After considering the Company’s absolute size of holding in the entity and the relative size of and the dispersion of shares owned by the other stockholders, and the contractual arrangements between the Company and other investors, potential voting interests and the written agreement between stockholders, the management concluded that the Company has a sufficiently dominant voting interest to direct the relevant activities of the entity and therefore the Company has control over these entities.

Key sources of estimation uncertainty and assumption

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period. Actual results may differ from these estimates.

Impairment of trade notes and accounts receivable

The provision for impairment of trade notes and accounts receivable is based on assumptions on probability of default and expected credit loss rates. The Company uses judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on the Company’s past experience, current market conditions as well as forward looking information at the end of each reporting period. For details of the key assumptions and inputs used, see Note 9. Where the actual future cash flows are less than expected, a material impairment loss may arise.

Fair value measurements and valuation processes

For the assets and liabilities measured at fair value without quoted prices in active markets, the Company’s management determines the appropriate valuation techniques for the fair value measurements and whether to engage third party qualified appraisers based on the related regulations and professional judgments.

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Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities was disclosed in Note 37. If the actual changes of inputs in the future differ from expectation, the fair value may vary accordingly. The Company updates inputs periodically to monitor the appropriateness of the fair value measurement.

Provision for inventory valuation and obsolescence

Inventories are stated at the lower of cost or net realizable value. Net realizable value is calculated as the estimated selling price less the estimated costs necessary to make a sale. Comparison of net realizable value and cost is determined on an item by item basis, except for those similar items which could be categorized into the same groups. The Company uses the inventory holding period and turnover as the evaluation basis for inventory obsolescence losses.

Impairment of property, plant and equipment, right-of-use assets, investment properties and intangible assets

When an indication of impairment is assessed with objective evidence, the Company considers whether the recoverable amount of an asset is less than its carrying amount and recognizes the impairment loss based on difference between the recoverable amount and its carrying amount. The estimate of recoverable amount would impact on the timing and the amount of impairment loss recognition.

Useful lives of property, plant and equipment

As discussed in Note 3, “Summary of Significant Accounting Policies - Property, Plant and Equipment”, the Company reviews estimated useful lives of property, plant and equipment at the end of each year.

Recognition and measurement of defined benefit plans

Net defined benefit liabilities (assets) and the resulting pension expense under defined benefit pension plans are calculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discount rate, employee turnover rate, average future salary increase and etc. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability.

Lessees’ incremental borrowing rates

In determining a lessee’s incremental borrowing rate used in discounting lease payments, a risk-free rate for relevant duration and the same currency is selected as a reference rate. The lessee’s credit spread adjustments and lease specific adjustments are also taken into account.

5. APPLICATION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

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

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

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


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

Note 1:

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

Note 2:

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

Note 3:

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

Note 4:

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

The application of the above new, revised or amended standards and interpretations will not have a material impact on the Company’s consolidated financial statements.

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


New, Revised or Amended Standards and Interpretations		Effective Date Announced by IASB (Note 1)
Amendments to IFRS 10 and IAS 28	Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture	To be determined by IASB
Amendments to IAS 1	Classification of liabilities as current or noncurrent	January 1, 2023
Amendments to IAS 1	Disclosure of Accounting Policies	January 1, 2023 (Note 2)
Amendments to IAS 8	Definition of Accounting Estimates	January 1, 2023 (Note 3)
Amendments to IAS 12	Deferred Tax related to Assets and Liabilities arising from a Single Transaction	January 1, 2023 (Note 4)

Note 1:

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

Note 2:

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

Note 3:

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

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Note 4:

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

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


	December 31
	2021		2020
Cash
Cash on hand	$	439,989	$	486,989
Bank deposits		15,646,840		10,961,220

	16,086,829		11,448,209

Cash equivalents (with maturities of less than three months)
Commercial papers		13,530,111		14,060,568
Negotiable certificates of deposit		7,500,000		2,600,000
Time deposits		2,656,545		2,307,892
Stimulus vouchers		5,139		2,986

		23,691,795		18,971,446

	$	39,778,624	$	30,419,655

The annual yield rates of bank deposits, commercial papers, negotiable certificates of deposit and time deposits as of balance sheet dates were as follows:


	December 31
	2021	2020
Bank deposits	0.00%-0.45%	0.00%-0.40%
Commercial papers	0.17%-0.30%	0.14%-0.26%
Negotiable certificates of deposit	0.27%-0.30%	0.24%-0.30%
Time deposits	0.01%-3.60%	0.10%-3.60%

7.	FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS


	December 31
	2021		2020
Financial assets-current
Mandatorily measured at FVTPL
Derivatives (not designated for hedge)
Forward exchange contracts	$	—	$	2,271
Non-derivatives
Listed stocks - domestic		2,566		7,626

	$	2,566	$	9,897

(Continued)

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	December 31
	2021		2020
Financial assets-noncurrent
Mandatorily measured at FVTPL
Non-derivatives
Non-listed stocks - domestic	$	647,998	$	441,095
Non-listed stocks - foreign		236,672		236,107
Limited partnership - domestic		24,105		—

	$	908,775	$	677,202

Financial liabilities-current
Held for trading
Derivatives (not designated for hedge)
Forward exchange contracts	$	6,180	$	143

(Concluded)

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

Currency

Maturity Period

Contract Amount

(In Thousands)

December 31, 2021

Forward exchange contracts - buy

NT$/EUR

2022.03

NT$257,081/EUR8,000

December 31, 2020

Forward exchange contracts - buy

NT$/EUR

2021.03

NT$50,435/EUR1,500

Forward exchange contracts - sell

US$/NT$

2021.02-03

US$13,500/NT$379,472

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

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


	December 31
	2021		2020
Domestic investments
Listed stocks	$	458,582	$	2,754,175
Non-listed stocks		3,029,957		4,324,592
Foreign investments
Non-listed stocks		127,349		114,407

	$	3,615,888	$	7,193,174

- 36 -

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

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

The Company disposed of its investment in China Airlines, Ltd. starting from December 2020 and sold all its shares by February 2021. The total fair value of the disposed investment were $2,635,568 thousand and $567,797 thousand in 2021 and 2020, respectively. The Company disposed of its investments in UUPON Inc. (UUPON) and Cotech Engineering Fuzhou Corp. in October and December 2021 and the fair value of the disposed investment were $1,478 thousand and $4,203 thousand, respectively.

CHI obtained significant influence over Imedtac Co., Ltd. (“IME”) and AgriTalk Technology Inc. (“ATT”) in August 2021 and July 2021, respectively. Therefore, the aforementioned investments were reclassified from financial asset at FVOCI to associates at fair value of $44,850 thousand and $18,509 thousand, respectively. (Please refer to Note 14 (a)).

The related unrealized gain on financial assets at FVOCI of $59,653 thousand and $16,686 thousand were transferred from other equity to retained earnings upon the aforementioned disposals in 2021 and 2020, respectively.

CHI participated in the private placement of PChome Online Inc. in the amount of $200,000 thousand in October 2021.

The Company recognized dividend income of $154,008 thousand and $246,084 thousand for the years ended December 31, 2021 and 2020, respectively, from the investments still held on December 31, 2021 and 2020, of which $153,984 thousand and $246,084 thousand were from the outstanding investments on December 31, 2021 and 2020, respectively.

9.	TRADE NOTES AND ACCOUNTS RECEIVABLE, NET


	December 31
	2021			2020
Trade notes and accounts receivable	$	25,551,942		$	24,776,266
Less: Loss allowance		(1,604,835	)		(2,154,364	)

	$	23,947,107		$	22,621,902

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.

- 37 -

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

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

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

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:

December 31, 2021


	Not Past Due			Past Due Less than 30 Days			Pass Due 31 to 60 Days			Pass Due 61 to 90 Days			Pass Due 91 to 120 Days			Pass Due 121 to 180 Days			Pass Due over 180 Days			Total
Telecommunications business
Expected credit loss rate (Note a)		0%-1%			1%-22%			3%-62%			11%-80%			25%-90%			49%-97%			100%
Gross carrying amount	$	16,410,725		$	282,040		$	82,062		$	44,539		$	31,065		$	31,000		$	602,833		$	17,484,264
Loss allowance (lifetime ECL)		(50,733	)		(23,465	)		(28,596	)		(29,800	)		(25,402	)		(28,423	)		(602,833	)		(789,252	)

Amortized cost	$	16,359,992		$	258,575		$	53,466		$	14,739		$	5,663		$	2,577		$	—		$	16,695,012

Project business
Expected credit loss rate (Note b)		0%-5%			5%			10%			30%			50%			80%			100%
Gross carrying amount	$	3,988,010		$	136		$	6,960		$	14,271		$	411		$	799		$	769,762		$	4,780,349
Loss allowance (lifetime ECL)		(7,835	)		(68	)		(890	)		(4,293	)		(210	)		(639	)		(769,762	)		(783,697	)

Amortized cost	$	3,980,175		$	68		$	6,070		$	9,978		$	201		$	160		$	—		$	3,996,652

December 31, 2020


	Not Past Due			Past Due Less than 30 Days			Pass Due 31 to 60 Days			Pass Due 61 to 90 Days			Pass Due 91 to 120 Days			Pass Due 121 to 180 Days			Pass Due over 180 Days			Total
Telecommunications business
Expected credit loss rate (Note a)		0%-2%			2%-24%			3%-68%			11%-83%			28%-90%			52%-96%			100%
Gross carrying amount	$	15,839,132		$	203,949		$	50,897		$	31,263		$	29,872		$	25,351		$	625,591		$	16,806,055
Loss allowance (lifetime ECL)		(56,249	)		(20,880	)		(23,483	)		(24,859	)		(24,319	)		(21,665	)		(625,591	)		(797,046	)

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

(Continued)

- 38 -


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

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

(Concluded)

Note a:

Please refer to Notes 30 and 45 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:


	Year Ended December 31
	2021			2020
Beginning balance	$	2,154,364		$	2,359,756
Add: Provision for credit loss		122,911			48,708
Add: Acquired by business combinations (Note 13)		—			1,639
Less: Amounts written off		(672,440	)		(255,739	)

Ending balance	$	1,604,835		$	2,154,364

10.

INVENTORIES


	December 31
	2021		2020
Merchandise	$	4,070,189	$	3,902,854
Project in process		4,805,196		6,166,583
Work in process		144,847		126,163
Raw materials		224,338		137,495

		9,244,570		10,333,095
Land held under development		1,998,733		1,998,733
Construction in progress		84,106		77,075

	$	11,327,409	$	12,408,903

The operating costs related to inventories were $51,180,060 thousand (including the valuation loss on inventories of $206,824 thousand) and $53,847,123 thousand (including the valuation loss on inventories of $1,161,281 thousand) for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021 and 2020, inventories of $2,082,839 thousand and $2,075,808 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.

- 39 -

Land held under development and construction in progress was mainly developed by LED for Qingshan Sec., Dayuan Dist., Taoyuan City project. The Board of Directors of LED resolved to sign a joint construction and separate sale contract with Farglory Land Development Co., Ltd. in June 2021.

11.

PREPAYMENTS


	December 31
	2021		2020
Prepaid rents	$	2,349,236	$	2,863,510
Others		1,779,324		1,656,257

	$	4,128,560	$	4,519,767

Current
Prepaid rents	$	565,950	$	651,510
Others		1,764,147		1,654,736

	$	2,330,097	$	2,306,246

Noncurrent
Prepaid rents	$	1,783,286	$	2,212,000
Others		15,177		1,521

	$	1,798,463	$	2,213,521

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


	December 31
	2021		2020
Time deposits and negotiable certificates of deposit with maturities of more than three months	$	3,498,534	$	4,595,951
Others		1,562,344		1,527,714

	$	5,060,878	$	6,123,665

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


	December 31
	2021		2020
Time deposits and negotiable certificates of deposit with maturities of more than three months		0.03%-2.70%		0.07%-2.25%

- 40 -

13.

SUBSIDIARIES

Information on subsidiaries with material noncontrolling interests


			Proportion of Ownership Interests and Voting Rights Held by Noncontrolling Interests
	Principal Place		December 31
Subsidiaries	of Business		2021			2020

SENAO		Taiwan		72	%		72	%
CHPT		Taiwan		66	%		66	%


	Profit Allocated to Noncontrolling Interests				Accumulated Noncontrolling Interests
	Year Ended December 31				December 31
	2021		2020		2021		2020

SENAO	$	427,817	$	312,130	$	4,465,587	$	4,311,048

CHPT	$	586,332	$	613,907		4,960,977		4,635,240

Individually immaterial subsidiaries with noncontrolling interests						2,501,040		2,381,153


					$	11,927,604	$	11,327,441

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.


	December 31
	2021			2020

Current assets	$	7,962,726		$	6,834,221
Noncurrent assets		3,129,886			3,340,983
Current liabilities		(4,531,148	)		(3,832,372	)��
Noncurrent liabilities		(418,431	)		(415,712	)


Equity	$	6,143,033		$	5,927,120


Equity attributable to the parent	$	1,677,446		$	1,616,072
Equity attributable to noncontrolling interests		4,465,587			4,311,048


	$	6,143,033		$	5,927,120

- 41 -


	Year Ended December 31
	2021			2020

Revenues and income	$	31,303,161		$	27,231,145
Costs and expenses		30,707,150			26,795,397


Profit for the year	$	596,011		$	435,748


Profit attributable to the parent	$	168,194		$	123,618
Profit attributable to noncontrolling interests		427,817			312,130


Profit for the year	$	596,011		$	435,748


Other comprehensive income attributable to the parent	$	2,340		$	715
Other comprehensive income attributable to noncontrolling interests		4,941			1,863


	$	7,281		$	2,578


Total comprehensive income attributable to the parent	$	170,534		$	124,333
Total comprehensive income attributable to noncontrolling interests		432,758			313,993


	$	603,292		$	438,326


Net cash flow from operating activities	$	654,179		$	862,323
Net cash flow from investing activities		215,473			54,387
Net cash flow from financing activities		(690,084	)		(687,555	)
Effect of exchange rate changes on cash and cash equivalents		(209	)		(426	)


Net cash inflow	$	179,359		$	228,729


Dividends paid to noncontrolling interests	$	278,218		$	268,944

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.


	December 31
	2021			2020

Current assets	$	4,656,928		$	4,122,134
Noncurrent assets		4,063,611			4,012,654
Current liabilities		(1,143,341	)		(1,072,538	)
Noncurrent liabilities		(31,986	)		(12,456	)


Equity	$	7,545,212		$	7,049,794


Equity attributable to CHI	$	2,584,235		$	2,414,554
Equity attributable to noncontrolling interests		4,960,977			4,635,240


	$	7,545,212		$	7,049,794

- 42 -


	Year Ended December 31
	2021			2020

Revenues and income	$	4,254,027		$	4,220,724
Costs and expenses		3,362,267			3,287,031


Profit for the year	$	891,760		$	933,693


Profit attributable to CHI	$	305,428		$	319,786
Profit attributable to noncontrolling interests		586,332			613,907


Profit for the year	$	891,760		$	933,693


Other comprehensive income (loss) attributable to CHI	$	(988	)	$	27
Other comprehensive income (loss) attributable to noncontrolling interests		(1,886	)		53


	$	(2,874	)	$	80


Total comprehensive income attributable to CHI	$	304,440		$	319,813
Total comprehensive income attributable to noncontrolling interests		584,446			613,960


	$	888,886		$	933,773


Net cash flow from operating activities	$	1,089,645		$	1,482,834
Net cash flow from investing activities		(518,789	)		(532,820	)
Net cash flow from financing activities		(413,663	)		(349,136	)
Effect of exchange rate changes on cash and cash equivalents		(1,671	)		1,306


Net cash inflow	$	155,522		$	602,184


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

Equity transactions with noncontrolling interests

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

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

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

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

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

- 43 -

Information of the Company’s equity transactions with noncontrolling interests for the years ended December 31, 2021 and 2020 were as follows:


	Year Ended December 31, 2021
	CHIEF Share-Based Payment			CHTSC Share-Based Payment			IISI Share-Based Payment

Cash consideration received from noncontrolling interests	$	29,775		$	20,650		$	3,654
The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests		(17,506	)		(19,066	)		(792	)


Differences arising from equity transactions	$	12,269		$	1,584		$	2,862


Line items for equity transaction adjustments

Additional paid-in capital - arising from changes in equities of subsidiaries	$	12,269		$	1,584		$	2,862


	Year Ended December 31, 2020
	CHIEF Share-Based Payment			SENAO Not Proportionately Participating in the Capital Increase of Youth			IISI Share-Based Payment

Cash consideration received from noncontrolling interests	$	74,540		$	—		$	6,755
The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests		(48,826	)		(103	)		(6,659	)


Differences arising from equity transactions	$	25,714		$	(103	)	$	96


Line items for equity transaction adjustments

Additional paid-in capital - arising from changes in equities of subsidiaries	$	25,714		$	(103	)	$	96

- 44 -

BUSINESS COMBINATIONS

Subsidiary acquired

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

Note:

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

Assets acquired and liabilities assumed at acquisition date


	IISI and Its Subsidiaries

Current assets
Cash and cash equivalents	$	587,979
Contract assets		582,745
Trade notes and accounts receivable		165,452
Inventories		141,236
Prepayments		113,858
Other current monetary assets		113,724
Other current assets		74,757
Noncurrent assets
Property, plant and equipment		47,962
Right-of-use assets		70,007
Intangible assets		11,861
Deferred income tax assets		5,665
Other noncurrent assets		102,519
Current liabilities
Short-term loans		(4,000	)
Contract liabilities		(333,533	)
Trade notes and accounts payable		(256,902	)
Current tax liabilities		(19,355	)
Lease liabilities		(25,941	)
Other payables		(265,901	)
Provisions		(15,258	)
Other current liabilities		(30,163	)
Noncurrent liabilities
Deferred income tax liabilities		(2,209	)
Lease liabilities		(44,964	)
Net defined benefit liabilities		(32,613	)
Other noncurrent liabilities		(4,843	)


	$	982,083

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

- 45 -

Goodwill arising from acquisition


		IISI and Its Subsidiaries

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


Goodwill arising from acquisition		$	55,006

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

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

Net cash inflow on acquisition of subsidiaries


		IISI and Its Subsidiaries

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


		$	354,056

Impact of acquisition on the financial results of the Company

The financial results of the acquiree since the acquisition date to December 31, 2020 included in the consolidated statements of comprehensive income are as follows:


	IISI and Its Subsidiaries

Revenue	$	1,348,167

Profit	$	68,021

Had the business combination been in effect at the beginning of the annual reporting period, the Company’s revenue and profit would have been $208,604,696 thousand and $34,747,291 thousand for the year ended December 31, 2020, respectively. This pro-forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Company that actually would have been achieved had the acquisition been completed on January 1, 2020, nor is it intended to be a projection of future results.

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

- 46 -

14.

INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD


	December 31
	2021		2020

Investments in associates	$	7,322,842	$	6,882,801
Investment in joint venture		9,932		10,200


	$	7,332,774	$	6,893,001

Investments in associates

Investments in associates were as follows:


	Carrying Amount
	December 31
	2021		2020

Material associate

Next Commercial Bank Co., Ltd. (“NCB”)	$	3,592,054	$	3,776,876


Associates that are not individually material

Listed

Senao Networks, Inc. (“SNI”)		1,077,604		991,610
KingwayTek Technology Co., Ltd. (“KWT”)		258,943		249,044

Non-listed

ST-2 Satellite Ventures Pte., Ltd. (“STS”)		518,165		488,257
Viettel-CHT Co., Ltd. (“Viettel-CHT”)		447,097		363,522
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		347,269		330,031
WiAdvance Technology Corporation (“WATC”)		253,873		—
Chunghwa PChome Fund I Co., Ltd. (“CPFI”)		222,491		192,856
So-net Entertainment Taiwan Limited (“So-net”)		217,021		226,647
KKBOX Taiwan Co., Ltd. (“KKBOXTW”)		157,524		163,809
Taiwan International Ports Logistics Corporation (“TIPL”)		70,121		55,925
CHT Infinity Singapore Pte. Ltd. (“CISG”)		54,952		—
Imedtac Co., Ltd. (“IME”)		44,565		—
Click Force Co., Ltd. (“CF”)		36,938		33,086
AgriTalk Technology Inc. (“ATT”)		17,637		—
Cornerstone Ventures Co., Ltd. (“CVC”)		6,588		6,058
Alliance Digital Tech Co., Ltd. (“ADT”)		—		5,080
UUPON Inc. (“UUPON”)		—		—
International Integrated Systems, Inc. (“IISI”)		—		—
MeWorks LIMITED (HK) (“MeWorks”)		—		—

		3,730,788		3,105,925


	$	7,322,842	$	6,882,801

- 47 -

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


	% of Ownership Interests and Voting Rights
	December 31
	2021		2020

Material associate

Next Commercial Bank Co., Ltd. (“NCB”)		42		42

Associates that are not individually material

Senao Networks, Inc. (“SNI”)		34		34
KingwayTek Technology Co., Ltd. (“KWT”)		23		23
ST-2 Satellite Ventures Pte., Ltd. (“STS”)		38		38
Viettel-CHT Co., Ltd. (“Viettel-CHT”)		30		30
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		40		40
WiAdvance Technology Corporation (“WATC”)		20		—
Chunghwa PChome Fund I Co., Ltd. (“CPFI”)		50		50
So-net Entertainment Taiwan Limited (“So-net”)		30		30
KKBOX Taiwan Co., Ltd. (“KKBOXTW”)		30		30
Taiwan International Ports Logistics Corporation (“TIPL”)		27		27
CHT Infinity Singapore Pte. Ltd. (“CISG”)		40		—
Imedtac Co., Ltd. (“IME”)		7		—
Click Force Co., Ltd. (“CF”)		49		49
AgriTalk Technology Inc. (“ATT”)		17		—
Cornerstone Ventures Co., Ltd. (“CVC”)		49		49
Alliance Digital Tech Co., Ltd. (“ADT”)		—		14
UUPON Inc. (“UUPON”)		—		—
International Integrated Systems, Inc. (“IISI”)		—		—
MeWorks LIMITED (HK) (“MeWorks”)		—		—

Summarized financial information of NCB was set out below:


	December 31
	2021			2020

Assets	$	9,197,280		$	9,906,945
Liabilities		(524,813	)		(788,813	)


Equity	$	8,672,467		$	9,118,132


The percentage of ownership interest held by the Company		41.90	%		41.90	%

Equity attributable to the Company	$	3,633,764		$	3,820,497
Unrealized gain or loss from downstream transactions		(41,710	)		(43,621	)


The carrying amount of investment	$	3,592,054		$	3,776,876

- 48 -


	Year Ended December 31, 2021			Year Ended December 31, 2020

Revenues	$	—		$	—


Net loss for the year	$	(445,665	)	$	(605,419	)
Other comprehensive income		—			—


Total comprehensive loss for the year	$	(445,665	)	$	(605,419	)

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:


	Year Ended December 31
	2021			2020

The Company’s share of profits	$	606,730		$	540,037
The Company’s share of other comprehensive loss		(5,677	)		(8,571	)


The Company’s share of total comprehensive income	$	601,053		$	531,466

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


	December 31
	2021		2020

SNI	$	1,699,351	$	1,707,640

KWT	$	909,787	$	675,911

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

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

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

Chunghwa’s Board of Directors approved the investment of 20.58% ownership interest in IISI in January 2020 and the equity transaction was completed on July 1, 2020 (“acquisition date”). As the business combination was achieved in stages, the Company remeasured the previously held equity interest of IISI and recognized gain on disposal of $1,412 thousand under “other gains and losses” on the consolidated statements of comprehensive income. The Company treated IISI as a subsidiary starting from the acquisition date and included IISI and its subsidiaries in the consolidated financial statements. Please refer to Note 13(c).

UUPON reduced 95.44% of its capital to offset accumulated deficits in September 2020 and the Company did not participate in the capital increase of UUPON in October 2020. Therefore, the Company’s ownership interest in UUPON decreased to 5.36% and lost its significant influence over UUPON. Hence the Company discontinued to treat UUPON as an associate. Instead, the Company treated it as a financial asset at fair value through other comprehensive income and recognized gain on disposal of $14,534 thousand under “other gains and losses” on the consolidated statements of comprehensive income.

- 49 -

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

The Company’s ownership interest in NCB is 41.90%. Although Chunghwa is the single largest stockholder of NCB, it only obtained six out of fifteen seats of the Board of Directors of NCB. In addition, the management considered the size of ownership interest and the dispersion of shares owned by the other stockholders, other holdings are not extremely dispersed. Chunghwa is not able to direct its relevant activities. Therefore, Chunghwa does not have control over NCB and merely has significant influence over NCB and treated it as an associate.

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

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

The Company invested and obtained 7.54% ownership interest in IME. The Company originally treated it as a financial asset at FVOCI. However, as the Company obtained one out of five seats of the Board of Directors of IME in August 2021 and has significant influence over IME, the Company reclassified it as an associate. IME issued new shares in December 2021 as its employees exercised options; therefore, the Company’s ownership interest in IME decreased to 6.74% as of December 31, 2021.

The Company invested and obtained 17.19% ownership interest in ATT. The Company originally treated it as a financial asset at FVOCI. However, as the Company obtained one out of three seats of the Board of Directors of ATT in July 2021 and has significant influence over ATT, the Company reclassified it as an associate.

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

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

Investment in joint venture

Investment in joint venture was as follows:

Carrying Amount

% of Ownership Interests and
Voting Rights

December 31

Name of Joint Venture

2021

2020

2021

2020

Non-listed

Chunghwa SEA Holdings (“CHT SEA”)

9,932

10,200

- 50 -

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

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


	Year Ended December 31
	2021			2020

The Company’s share of loss	$	(268	)	$	—
The Company’s share of other comprehensive income		—			—


The Company’s share of total comprehensive loss	$	(268	)	$	—

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

15.

PROPERTY, PLANT AND EQUIPMENT


	December 31
	2021		2020

Assets used by the Company	$	281,849,188	$	273,822,588
Assets subject to operating leases		7,251,273		7,593,355


	$	289,100,461	$	281,415,943

Assets used by the Company


	Land			Land Improvements			Buildings			Computer Equipment			Telecommuni- cations Equipment			Transportation Equipment			Miscellaneous Equipment			Construction in Progress and Equipment to be Accepted			Total

Cost

Balance on January 1, 2020	$	99,102,251		$	1,618,481		$	71,000,783		$	13,004,827		$	706,032,448		$	3,912,298		$	10,090,170		$	13,752,197		$	918,513,455
Additions		66,712			—			18,113			54,402			117,441			1,309			150,385			24,786,365			25,194,727
Disposal		(270,268	)		(19,306	)		(48,748	)		(1,243,844	)		(20,618,652	)		(45,287	)		(520,411	)		(29,358	)		(22,795,874	)
Effect of foreign exchange differences		—			—			—			(93	)		(90,619	)		(88	)		267			(7,330	)		(97,863	)
Acquired by business combinations (Note 13)		—			—			—			69,814			—			—			72,400			—			142,214
Others		3,091,950			31,187			(80,570	)		520,474			25,335,091			26,011			507,008			(29,972,458	)		(541,307	)


Balance on December 31, 2020	$	101,990,645		$	1,630,362		$	70,889,578		$	12,405,580		$	710,775,709		$	3,894,243		$	10,299,819		$	8,529,416		$	920,415,352


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		—			(43,828	)		(1,366,374	)		(769,321	)		(23,992,691	)		(68,138	)		(665,674	)		—			(26,906,026	)
Disposal		—			19,213			48,748			1,242,510			20,599,703			44,972			504,180			29,358			22,488,684
Effect of foreign exchange differences		—			—			—			92			40,361			37			222			—			40,712
Acquired by business combinations (Note 13)		—			—			—			(40,282	)		—			—			(53,970	)		—			(94,252	)
Others		—			13			47,027			(3,721	)		27,586			(938	)		(48,397	)		—			21,570


Balance on December 31, 2020	$	—		$	(1,399,204	)	$	(29,247,331	)	$	(10,638,967	)	$	(593,662,932	)	$	(3,718,392	)	$	(7,925,938	)	$	—		$	(646,592,764	)


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 December 31, 2020, net	$	101,990,645		$	231,158		$	41,642,247		$	1,766,613		$	117,112,777		$	175,851		$	2,373,881		$	8,529,416		$	273,822,588


Cost

Balance on January 1, 2021	$	101,990,645		$	1,630,362		$	70,889,578		$	12,405,580		$	710,775,709		$	3,894,243		$	10,299,819		$	8,529,416		$	920,415,352
Additions		—			—			37,437			71,587			83,812			—			198,069			35,222,533			35,613,438
Disposal		—			(1,025	)		(29,418	)		(1,733,431	)		(27,916,170	)		(84,271	)		(470,175	)		—			(30,234,490	)
Effect of foreign exchange differences		—			—			—			135			(64,331	)		(389	)		(1,643	)		(5,366	)		(71,594	)
Others		654,069			32,291			460,439			473,177			30,655,202			117,754			782,803			(32,960,434	)		215,301


Balance on December 31, 2021	$	102,644,714		$	1,661,628		$	71,358,036		$	11,217,048		$	713,534,222		$	3,927,337		$	10,808,873		$	10,786,149		$	925,938,007

(Continued)

- 51 -


	Land		Land Improvements			Buildings			Computer Equipment			Telecommuni- cations Equipment			Transportation Equipment			Miscellaneous Equipment			Construction in Progress and Equipment to be Accepted		Total

Accumulated depreciation and impairment

Balance on January 1, 2021	$	—	$	(1,399,204	)	$	(29,247,331	)	$	(10,638,967	)	$	(593,662,932	)	$	(3,718,392	)	$	(7,925,938	)	$	—	$	(646,592,764	)
Depreciation expenses		—		(43,433	)		(1,401,187	)		(715,817	)		(24,801,815	)		(65,024	)		(700,648	)		—		(27,727,924	)
Disposal		—		1,025			29,418			1,724,140			27,900,053			83,646			465,821			—		30,204,103
Effect of foreign exchange differences		—		—			—			(134	)		30,948			164			934			—		31,912
Others		—		—			41,530			(1,268	)		457			628			(45,493	)		—		(4,146	)


Balance on December 31, 2021	$	—	$	(1,441,612	)	$	(30,577,570	)	$	(9,632,046	)	$	(590,533,289	)	$	(3,698,978	)	$	(8,205,324	)	$	—	$	(644,088,819	)


Balance on January 1, 2021, net	$	101,990,645	$	231,158		$	41,642,247		$	1,766,613		$	117,112,777		$	175,851		$	2,373,881		$	8,529,416	$	273,822,588


Balance on December 31, 2021, net	$	102,644,714	$	220,016		$	40,780,466		$	1,585,002		$	123,000,933		$	228,359		$	2,603,549		$	10,786,149	$	281,849,188

(Concluded)

There was no indication that property, plant and equipment was impaired; therefore, the Company did not recognize any impairment loss for the years ended December 31, 2021 and 2020.

Chunghwa signed a joint development agreement with the MOTC previously which stated that the MOTC would provide the national land and Chunghwa would be in charge of the planning and construction for the MOTC’s office building, Chunghwa’s Renai office building, etc. According to the agreement, the MOTC and Chunghwa would each own a certain percentage of the buildings, and Chunghwa is to pay or get the reimbursement for the difference between the assessed value of the land and the construction cost paid by Chunghwa on behalf of the MOTC. The difference amounting to $1,056,680 thousand due to the MOTC was reported to Chunghwa’s Board of Directors in May 2020. Chunghwa paid the aforementioned amount in May 2021 and the property registration of the respective asset was completed in July 2021.

The Company participated in the government-led urban renewal project in Xingzheng Section, Xindian District, New Taipei City. The Company provided land as a building lot while Kindom Development Corp., chosen through public selection by the New Taipei City Government, acted as the urban renewal developer. The property registration was completed in 2020. With respect to the Company’s trade-in share of land and buildings, only the trade-in buildings had commercial substance. Therefore, the gain on the asset exchange transaction of $1,267,980 thousand (included in “gains and losses on disposal of property, plant and equipment”) was recognized at the difference between the carrying amount of the trade-out land of $37,087 thousand and the fair value of trade-in buildings of $1,305,067 thousand (included in “investment properties”). The aforementioned gain on disposal was included under “other income and expenses” in the consolidated statements of comprehensive income.

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			1-8 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

- 52 -

Assets subject to operating leases


	Land			Buildings			Total

Cost

Balance on January 1, 2020	$	4,979,650		$	3,841,560		$	8,821,210
Others		(6,730	)		394,596			387,866


Balance on December 31, 2020	$	4,972,920		$	4,236,156		$	9,209,076


Accumulated depreciation and impairment

Balance on January 1, 2020	$	—		$	(1,496,998	)	$	(1,496,998	)
Depreciation expenses		—			(82,474	)		(82,474	)
Others		—			(36,249	)		(36,249	)


Balance on December 31, 2020	$	—		$	(1,615,721	)	$	(1,615,721	)


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

Balance on December 31, 2020, net	$	4,972,920		$	2,620,435		$	7,593,355


Cost

Balance on January 1, 2021	$	4,972,920		$	4,236,156		$	9,209,076
Others		(163,994	)		(102,167	)		(266,161	)


Balance on December 31, 2021	$	4,808,926		$	4,133,989		$	8,942,915


Accumulated depreciation and impairment

Balance on January 1, 2021	$	—		$	(1,615,721	)	$	(1,615,721	)
Depreciation expenses		—			(76,959	)		(76,959	)
Others		—			1,038			1,038


Balance on December 31, 2021	$	—		$	(1,691,642	)	$	(1,691,642	)


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

Balance on December 31, 2021, net	$	4,808,926		$	2,442,347		$	7,251,273

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:


	December 31
	2021		2020

Year 1	$	371,380	$	347,229
Year 2		300,591		288,184
Year 3		210,073		230,984
Year 4		158,541		164,141
Year 5		135,208		124,845
Onwards		1,177,460		1,179,493


	$	2,353,253	$	2,334,876

- 53 -

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


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

16.

LEASE ARRANGEMENTS

Right-of-use assets


	December 31
	2021		2020

Land and buildings
Handsets base stations	$	6,987,731	$	7,095,883
Others		1,537,852		1,708,593
Equipment		2,525,353		2,204,730


	$	11,050,936	$	11,009,206


	Year Ended December 31
	2021		2020

Additions to right-of-use assets	$	4,669,219	$	3,796,370


Depreciation charge for right-of-use assets
Land and buildings
Handsets base stations	$	2,788,774	$	2,729,441
Others		786,645		786,114
Equipment		409,765		415,943


	$	3,985,184	$	3,931,498

Chunghwa entered into a contract with ST-2 Satellite Ventures Pte., Ltd. to lease capacity on the ST-2 satellite. However, certain frequency that ST-2 satellite originally used was transferred for the use of 5G spectrum to the government, Chunghwa evaluated and determined that the recoverable amount of the related right-of-use assets was nil. Therefore, Chunghwa recognized an impairment loss of $420,590 thousand for the year ended December 31, 2021. The impairment loss was included under “other income and expenses” in the consolidated statement of comprehensive income.

The Company did not have significant sublease of right-of-use assets for the year ended December 31, 2021. The Company did not have significant sublease or impairment of right-of-use assets for the year ended December 31, 2020.

- 54 -

Lease liabilities


	December 31
	2021		2020

Lease liabilities
Current	$	3,210,564	$	3,381,571
Noncurrent		7,061,689		6,215,096


	$	10,272,253	$	9,596,667

Ranges of discount rates for lease liabilities were as follows:


	December 31
	2021			2020

Land and buildings
Handsets base stations		0.37%-1.18	%		0.46%-1.18	%
Others		0.37%-9.00	%		0.46%-9.00	%
Equipment		0.37%-2.99	%		0.46%-2.99	%

Important lease-in activities and terms

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

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

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

Other lease information


	Year Ended December 31
	2021		2020

Expenses relating to low-value asset leases	$	8,297	$	8,314

Expenses relating to variable lease payments not included in the measurement of lease liabilities	$	7,462	$	5,119

Total cash outflow for leases	$	3,813,681	$	3,776,291

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

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

- 55 -

17.

INVESTMENT PROPERTIES


Cost

Balance on January 1, 2020	$	9,213,979
Additions (Note 15)		1,359,502
Disposal		(36,943	)
Reclassification		125,912


Balance on December 31, 2020	$	10,662,450


Accumulated depreciation and impairment

Balance on January 1, 2020	$	(1,044,586	)
Depreciation expense		(22,332	)
Reclassification		(1,276	)
Reversal of impairment loss		27,066


Balance on December 31, 2020	$	(1,041,128	)


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

Balance on December 31, 2020, net	$	9,621,322


Cost

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


Balance on December 31, 2021	$	10,662,596


Accumulated depreciation and impairment

	$	(1,041,128	)
Balance on January 1, 2021		(42,259	)
Depreciation expense		83,429

Reversal of impairment loss
	$	(999,958	)


Balance on December 31, 2021

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

Balance on December 31, 2021, net	$	9,662,638

After the evaluation of land and buildings, the Company concluded the recoverable amount which represented the fair value less costs to sell of some land and buildings was higher than the carrying amount. Therefore, the Company recognized reversal of impairment losses of $83,429 thousand and $27,066 thousand for the years ended December 31, 2021 and 2020, respectively, and the amounts were recognized only to the extent of impairment losses that had been recognized in prior years. The reversal of impairment loss was included in other income and expenses in the consolidated statements of comprehensive income.

- 56 -

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, 2021 and 2020 were determined by Level 3 fair value measurements inputs based on the appraisal reports conducted by independent appraisers. Those appraisal reports are based on the comparison approach, income approach or cost approach. Key assumptions and the fair values were as follows:


	December 31
	2021		2020

Fair value	$	25,547,766	$	22,644,318

Overall capital interest rate		0.91%-3.05%		0.93%-3.03%
Profit margin ratio		8%-20%		12%-20%
Discount rate		—		—
Capitalization rate		0.53%-2.11%		0.73%-2.20%

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:


	December 31
	2021		2020

Year 1	$	107,183	$	115,305
Year 2		82,505		95,223
Year 3		61,629		75,285
Year 4		55,510		52,544
Year 5		38,605		37,588
Onwards		77,626		57,773


	$	423,058	$	433,718

18.

INTANGIBLE ASSETS


	Mobile Broadband Concession		Computer Software			Goodwill		Others			Total

Cost

Balance on January 1, 2020	$	59,965,000	$	3,428,609		$	236,200	$	378,063		$	64,007,872
Additions-acquired separately		48,373,000		225,829			—		6,358			48,605,187
Disposal		—		(337,954	)		—		(3,053	)		(341,007	)
Effect of foreign exchange differences		—		(106	)		—		(40	)		(146	)
Acquired by business combinations (Note 13)		—		1,259			55,006		11,043			67,308
Others		—		1,586			—		(45	)		1,541


Balance on December 31, 2020	$	108,338,000	$	3,319,223		$	291,206	$	392,326		$	112,340,755

(Continued)

- 57 -


	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		(5,025,796	)		(371,694	)		—			(26,877	)		(5,424,367	)
Disposal		—			337,948			—			1,201			339,149
Impairment losses		—			—			(9,303	)		—			(9,303	)
Effect of foreign exchange differences		—			102			—			12			114
Acquired by business combinations (Note 13)		—			(441	)		—			—			(441	)


Balance on December 31, 2020	$	(19,318,842	)	$	(2,532,910	)	$	(44,926	)	$	(159,517	)	$	(22,056,195	)


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

Balance on December 31, 2020, net	$	89,019,158		$	786,313		$	246,280		$	232,809		$	90,284,560


Cost

Balance on January 1, 2021	$	108,338,000		$	3,319,223		$	291,206		$	392,326		$	112,340,755
Additions-acquired separately		—			224,797			—			31,055			255,852
Disposal		—			(342,938	)		—			(10,867	)		(353,805	)
Effect of foreign exchange differences		—			(364	)		—			(37	)		(401	)
Others		—			2,183			—			—			2,183


Balance on December 31, 2021	$	108,338,000		$	3,202,901		$	291,206		$	412,477		$	112,244,584


Accumulated amortization and impairment

Balance on January 1, 2021	$	(19,318,842	)	$	(2,532,910	)	$	(44,926	)	$	(159,517	)	$	(22,056,195	)
Amortization expenses		(6,198,911	)		(340,298	)		—			(29,338	)		(6,568,547	)
Disposal		—			342,938			—			10,867			353,805
Impairment losses		—			—			(28,698	)		(203	)		(28,901	)
Effect of foreign exchange differences		—			355			—			8			363
Others		—			(26	)		—			—			(26	)


Balance on December 31, 2021	$	(25,517,753	)	$	(2,529,941	)	$	(73,624	)	$	(178,183	)	$	(28,299,501	)


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

Balance on December 31, 2021, net	$	82,820,247		$	672,960		$	217,582		$	234,294		$	83,945,083

(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, including the aforementioned deposit, in February 2020 for the aforementioned license to obtain 90MHz in the 3.5GHz spectrum and 600MHz in the 28GHz spectrum.

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

- 58 -

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.

SENAO evaluated the goodwill, license agreement and the right of trademark that arose in the acquisition of Youth and its subsidiaries at the end of each year. SENAO determined the smallest identifiable group of assets that generates cash inflows as single cash generating units by business type and evaluated the recoverable amount of those cash generating units by their value in use. The management of SENAO estimated the cash flow projections based on the financial budgets for the following five years. Discount rates were 12.10% as of December 31, 2021 and 2020 and were used to calculate the recoverable amount of related cash generating units by discounting aforementioned cash flows.

SENAO concluded the recoverable amount of the goodwill was lower than the carrying value and recognized impairment loss of $28,698 thousand and $9,303 thousand for the years ended December 31, 2021 and 2020, respectively. In addition, SENAO concluded the recoverable amount of the license agreement and the right of trademark were lower than the carrying value and recognized impairment loss of $203 thousand for the year ended December 31, 2021. The aforementioned impairment losses were included in other income and expenses of consolidated statements of comprehensive income.

19.

OTHER ASSETS


	December 31
	2021		2020

Spare parts	$	2,836,191	$	2,156,136
Refundable deposits		1,971,058		2,009,796
Other financial assets		1,000,000		1,000,000
Others		2,034,331		2,450,006


	$	7,841,580	$	7,615,938


Current
Spare parts	$	2,836,191	$	2,156,136
Others		142,589		192,961


	$	2,978,780	$	2,349,097


Noncurrent
Refundable deposits	$	1,971,058	$	2,009,796
Other financial assets		1,000,000		1,000,000
Others		1,891,742		2,257,045


	$	4,862,800	$	5,266,841

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.

- 59 -

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.

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

December 31, 2021

Notional

Amount

Forward

Line Item in

Carrying Amount

Change in Fair

Values of

Hedging

Instruments Used

for Calculating

Hedge

Hedging Instruments

Currency

(In Thousands)

Maturity

Rate

Balance Sheet

Asset

Liability

Ineffectiveness

Cash flow hedge

Forecast purchases - forward exchange contracts

NT$

/EUR

NT$ 227,780/

EUR 7,000

2022.03

32.54

Hedging financial
assets (liabilities)

—

8,286

(10,038

)


	Change in Value of Hedged Item Used for		Accumulated Gain or Loss on Hedging Instruments in Other Equity
Hedged Items	Calculating Hedge Ineffectiveness		Continuing Hedges			Hedge Accounting no Longer Applied
Cash flow hedge
Forecast equipment purchases	$	10,038	$	(8,286	)	$	—

December 31, 2020

Notional

Amount

Forward

Line Item in

Carrying Amount

Change in Fair

Values of

Hedging

Instruments Used

for Calculating

Hedge

Hedging Instruments

Currency

(In Thousands)

Maturity

Rate

Balance Sheet

Asset

Liability

Ineffectiveness

Cash flow hedge

Forecast purchases - forward exchange contracts

NT$

/EUR

NT$ 200,867/

EUR 5,831

2021.03

34.45

Hedging financial
assets (liabilities)

1,752

—

1,425

- 60 -


Hedged Items	Change in Value of Hedged Item Used for Calculating Hedge Ineffectiveness			Accumulated Gain or Loss on Hedging Instruments in Other Equity
Hedged Items				Continuing Hedges		Hedge Accounting no Longer Applied

Cash flow hedge
Forecast equipment purchases	$	(1,425	)	$	1,752	$	—

Year ended December 31, 2021


	Comprehensive Income
								Reclassification from Equity to Profit or Loss and the Adjusted Line Item
Hedge Transaction	Hedging Gain or Loss Recognized in OCI			Amount of Hedge Ineffectiveness Recognized in Profit or Loss		Line Item in Which Hedge Ineffectiveness is Included		Amount Reclassified to P/L and the Adjusted Line Item			Due to Hedged Future Cash Flows No Longer Expected to Occur

Cash flow hedge
Forecast equipment purchases	$	(10,038	)	$	—		—	$	(42,574 Construction in progress and equipment to be accepted	)	$	— Other gains and losses

Year ended December 31, 2020

Comprehensive Income

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

Hedge Transaction

Hedging

Gain or Loss

Recognized

in OCI

Amount of

Hedge

Ineffectiveness

Recognized in

Profit or Loss

Line Item in

Which Hedge

Ineffectiveness

is Included

Amount

Reclassified to

P/L and the

Adjusted Line

Item

Due to Hedged

Future Cash

Flows No

Longer

Expected to

Occur

Cash flow hedge

Forecast equipment purchases

1,425

—

20,564

Construction in
progress and
equipment to
be accepted

—

Other gains and
losses

- 61 -

21.

SHORT-TERM LOANS


	December 31
	2021		2020

Unsecured bank loans	$	65,000	$	67,000

The annual interest rates of bank loans were as follows:


	December 31
	2021			2020

Unsecured bank loans		1.97%-2.43	%		1.12%-2.33	%

22.

SHORT-TERM BILLS PAYABLE


	December 31
	2021		2020

Commercial paper payable	$	—	$	7,000,000
Less: Discounts on commercial paper payable		—		(802	)


	$	—	$	6,999,198

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


	December 31
	2021		2020

Commercial paper payable		—		0.34%-0.36	%

23.

LONG-TERM LOANS


	December 31
	2021		2020

Secured bank loans (Note 39)	$	1,600,000	$	1,600,000
Less: Current portion		—		(1,600,000	)


	$	1,600,000	$	—

The annual interest rates of bank loans were as follows:


	December 31
	2021			2020

Secured bank loans		0.89	%		0.72	%

LED obtained a secured loan from Chang Hwa Bank in September 2010. Interest is paid monthly. $300,000 thousand and $1,350,000 thousand were originally due in December 2014 and September 2015, respectively. In October 2014, the bank borrowing mentioned above was extended to September 2018 for one time repayment. LED made an early repayment of $50,000 thousand in April 2015. LED entered into a contract with Chang Hwa Bank to renew the contract upon the maturity of the aforementioned contract in December 2017 and the due date of the renewed contract is September 2021. Furthermore, LED entered into another contract with Chang Hwa Bank to renew the contract upon the maturity of the aforementioned contract in August 2021 and the due date of the renewed contract is September 2024.

- 62 -

24.

BONDS PAYABLE


	December 31
	2021			2020

Unsecured domestic bonds	$	27,000,000		$	20,000,000
Less: Discounts on bonds payable		(23,325	)		(19,728	)


	$	26,976,675		$	19,980,272

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


Issuance	Tranche	Issuance Period	Total Amount		Coupon Rate			Repayment and Interest Payment

2020-1	A	July 2020 to July 2025	$	8,800,000		0.50	%	One-time repayment upon maturity; interest payable annually
	B	July 2020 to July 2027		7,500,000		0.54	%	The same as above
	C	July 2020 to July 2030		3,700,000		0.59	%	The same as above
2021-1	A	April 2021 to April 2026		1,900,000		0.42	%	The same as above
	B	April 2021 to April 2028		4,100,000		0.46	%	The same as above
	C	April 2021 to April 2031		1,000,000		0.50	%	The same as above

25.

TRADE NOTES AND ACCOUNTS PAYABLE


	December 31
	2021		2020

Trade notes and accounts payable	$	18,063,288	$	15,590,814

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

26.

OTHER PAYABLES


	December 31
	2021		2020

Accrued salary and compensation	$	10,125,732	$	9,449,659
Payables to contractors		3,014,677		1,778,735
Accrued compensation to employees and remuneration to directors and supervisors		1,997,277		1,690,796
Amounts collected for others		1,426,443		1,307,728
Payables to equipment suppliers		1,153,550		1,049,008
Accrued maintenance costs		1,010,892		1,039,689
Payable on land (Note 15)		—		1,056,680
Others		5,708,137		6,615,667


	$	24,436,708	$	23,987,962

- 63 -

27.

PROVISIONS


	December 31
	2021		2020

Warranties	$	213,537	$	182,431
Onerous contracts		146,541		170,433
Employee benefits		62,833		57,210
Others		3,767		4,097


	$	426,678	$	414,171


Current	$	284,813	$	313,555
Noncurrent		141,865		100,616


	$	426,678	$	414,171


	Warranties			Onerous Contracts			Employee Benefits			Others			Total

Balance on January 1, 2020	$	173,275		$	66,907		$	59,745		$	4,397		$	304,324
Additional / (reversal of) provisions recognized		130,984			91,990			(1,841	)		(200	)		220,933
Used / forfeited during the year		(121,828	)		(3,722	)		(694	)		(100	)		(126,344	)
Acquired by business combinations (Note 13)		—			15,258			—			—			15,258


Balance on December 31, 2020	$	182,431		$	170,433		$	57,210		$	4,097		$	414,171


Balance on January 1, 2021	$	182,431		$	170,433		$	57,210		$	4,097		$	414,171
Additional / (reversal of) provisions recognized		102,475			(23,892	)		6,963			(330	)		85,216
Used / forfeited during the year		(71,367	)		—			(1,340	)		—			(72,707	)
Effect of foreign exchange differences		(2	)		—			—			—			(2	)


Balance on December 31, 2021	$	213,537		$	146,541		$	62,833		$	3,767		$	426,678

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

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

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

28.

RETIREMENT BENEFIT PLANS

Defined contribution plans

The pension plan under the Labor Pension Act of ROC (the “LPA”) is considered as a defined contribution plan. Based on the LPA, Chunghwa and its domestic subsidiaries make monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. Its foreign subsidiaries would make monthly contributions based on the local pension requirements.

- 64 -

Defined benefit plans

Chunghwa completed its privatization plans on August 12, 2005. Chunghwa is required to pay all accrued pension obligations including service clearance payment, lump sum payment under civil service plan, additional separation payments, etc. upon the completion of the privatization in accordance with the Statute Governing Privatization of Stated-owned Enterprises. After paying all pension obligations for privatization, the plan assets of Chunghwa should be transferred to the Fund for Privatization of Government-owned Enterprises (the “Privatization Fund”) under the Executive Yuan. On August 7, 2006, Chunghwa transferred the remaining balance of fund to the Privatization Fund. However, according to the instructions of MOTC, Chunghwa was requested to administer the distributions to employees for pension obligations including service clearance payment, lump sum payment under civil service plan, additional separation payments, etc. upon the completion of the privatization and recognized in other current monetary assets.

Chunghwa and its subsidiaries SENAO, CHIEF, CHSI, SHE, IISI and UTC with the pension mechanism under the Labor Standards Law in the ROC are considered as defined benefit plans. These pension plans provide benefits based on an employee’s length of service and average six-month salary prior to retirement. Chunghwa and its subsidiaries contribute an amount no more than 15% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the names of the Committees in the Bank of Taiwan. The plan assets are held in a commingled fund which is operated and managed by the government’s designated authorities; as such, the Company does not have any right to intervene in the investments of the funds. 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.

The amounts included in the consolidated balance sheets arising from the Company’s obligation in respect of its defined benefit plans were as follows:


	December 31
	2021			2020

Present value of funded defined benefit obligations	$	35,501,968		$	39,536,563
Fair value of plan assets		(36,605,382	)		(39,493,787	)


Funded status - deficit (surplus)	$	(1,103,414	)	$	42,776


Net defined benefit liabilities	$	2,287,663		$	3,415,331
Net defined benefit assets		(3,391,077	)		(3,372,555	)


	$	(1,103,414	)	$	42,776

Movements in the defined benefit obligations and the fair value of plan assets were as follows:


	Present Value of Funded Defined Benefit Obligations		Fair Value of Plan Assets		Net Defined Benefit Liabilities (Assets)

Balance on January 1, 2020	$	41,197,226	$	39,819,944	$	1,377,282
Current service cost		2,052,402		—		2,052,402
Interest expense / interest income		298,162		297,324		838

Amounts recognized in profit or loss		2,350,564		297,324		2,053,240

(Continued)

- 65 -


	Present Value of Funded Defined Benefit Obligations			Fair Value of Plan Assets			Net Defined Benefit Liabilities (Assets)

Remeasurement on the net defined benefit liability
Return on plan assets (excluding amounts included in net interest)	$	—		$	1,307,772		$	(1,307,772	)
Actuarial losses recognized from changes in financial assumptions		589,818			—			589,818
Actuarial gains recognized from experience adjustments		(475,195	)		—			(475,195	)

Amounts recognized in other comprehensive income		114,623			1,307,772			(1,193,149	)

Contributions from employer		—			1,964,480			(1,964,480	)
Benefits paid		(3,919,555	)		(3,919,555	)		—
Benefits paid directly by the Company		(262,730	)		—			(262,730	)
Acquired by business combinations (Note 13)		56,435			23,822			32,613

Balance on December 31, 2020		39,536,563			39,493,787			42,776
Current service cost		1,253,241			—			1,253,241
Interest expense / interest income		189,488			195,225			(5,737	)

Amounts recognized in profit or loss		1,442,729			195,225			1,247,504

Remeasurement on the net defined benefit liability
Return on plan assets (excluding amounts included in net interest)		—			500,851			(500,851	)
Actuarial gain recognized from changes in demographic assumptions		(433,952	)		—			(433,952	)
Actuarial loss recognized from experience adjustments		544,362			—			544,362

Amounts recognized in other comprehensive income		110,410			500,851			(390,441	)

Contributions from employer		—			1,727,329			(1,727,329	)
Benefits paid		(5,311,810	)		(5,311,810	)		—
Benefits paid directly by the Company		(275,924	)		—			(275,924	)


Balance on December 31, 2021	$	35,501,968		$	36,605,382		$	(1,103,414	)

(Concluded)

Relevant pension costs recognized in profit and loss for defined benefit plans were as follows:


	Year Ended December 31
	2021		2020

Operating costs	$	724,943	$	1,205,545
Marketing expenses		366,925		602,754
General and administrative expenses		80,248		121,050
Research and development expenses		44,362		72,125


	$	1,216,478	$	2,001,474

- 66 -

The Company is exposed to following risks for the defined benefits plans under the Labor Standards Law:

Investment risk

Under the Labor Standards Law, the rate of return on assets shall not be lower than the average interest rate on a two-year time deposit published by the local banks and the government is responsible for any shortfall in the event that the rate of return is less than the required rate of return. The plan assets are held in a commingled fund mainly invested in foreign and domestic equity and debt securities and bank deposits which is operated and managed by the government’s designated authorities; as such, the Company does not have any right to intervene in the investments of the funds.

Interest rate risk

The decline in government bond interest rate will increase the present value of the obligation on the defined benefit plan, while the return on plan assets will increase. The net effect on the present value of the obligation on defined benefit plan is partially offset by the return on plan assets.

Salary risk

The calculation of the present value of defined benefit obligations is referred to the plan participants’ future salary. Hence, the increase in plan participants’ salary will increase the present value of the defined benefit obligations.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligations were carried out by the independent actuary.

The principal assumptions used for the purpose of the actuarial valuations were as follows:


	Measurement Date
	December 31
	2021	2020

Discount rates	0.50%	0.50%
Expected rates of salary increase	1.00%-2.25%	1.00%-2.25%

If reasonably possible changes of the respective significant actuarial assumptions occur at the end of reporting periods, while holding all other assumptions constant, the present values of the defined benefit obligations would increase (decrease) as follows:


	December 31
	2021			2020

Discount rates
0.5% increase	$	(1,073,185	)	$	(1,208,082	)

0.5% decrease	$	1,139,142		$	1,284,034

Expected rates of salary increase
0.5% increase	$	1,217,115		$	1,372,403

0.5% decrease	$	(1,157,095	)	$	(1,302,983	)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligations as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. There is no change in the methods and assumptions used in preparing the sensitivity analysis from the previous period.

- 67 -


	December 31
	2021		2020

The expected contributions to the plan for the next year	$	1,681,091	$	1,931,842

The average duration of the defined benefit obligations		6.3-12 years		6.4-13 years

As of December 31, 2021, the Company’s maturity analysis of the undiscounted benefit payments was as follows:


Year	Amount

2022	$	2,692,536
2023		6,329,989
2024		9,721,271
2025		10,864,102
2026 and thereafter		36,890,213


	$	66,498,111

29.

EQUITY

Share capital

Common stocks


	December 31
	2021		2020

Number of authorized shares (thousand)		12,000,000		12,000,000

Authorized shares	$	120,000,000	$	120,000,000
Number of issued and paid shares (thousand)		7,757,447		7,757,447

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

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

Global depositary receipts

The MOTC and some stockholders sold some common stocks of Chunghwa in an international offering of securities in the form of American Depositary Shares (“ADS”) (one ADS represents 10 common stocks) in July 2003, August 2005, and September 2006. The ADSs were traded on the New York Stock Exchange since July 17, 2003. As of December 31, 2021, the outstanding ADSs were 201,601 thousand common stocks, which equaled 20,160 thousand units and represented 2.60% of Chunghwa’s total outstanding common stocks.

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

Exercise their voting rights,

Sell their ADSs, and

- 68 -

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

Additional paid-in capital

The adjustments of additional paid-in capital for the years ended December 31, 2021 and 2020 were as follows:


	Share Premium		Movements of Additional Paid-in Capital for Associates and Joint Ventures Accounted for Using Equity Method			Movements of Additional Paid-in Capital Arising from Changes in Equities of Subsidiaries			Difference between Consideration Received and Carrying Amount of the Subsidiaries’ Net Assets upon Disposal		Donated Capital		Stockholders’ Contribution due to Privatization		Total

Balance on January 1, 2020	$	147,329,386	$	208,746		$	2,062,250		$	987,611	$	19,914	$	20,648,078	$	171,255,985
Unclaimed dividend		—		—			—			—		1,605		—		1,605
Change in additional paid-in capital from investments in associates and joint ventures accounted for using equity method		—		(21,918	)		—			—		—		—		(21,918	)
Change in additional paid-in capital for not proportionately participating in the capital increase of subsidiaries		—		—			(103	)		—		—		—		(103	)
Share-based payment transactions of subsidiaries		—		—			25,810			—		—		—		25,810

Balance on December 31, 2020		147,329,386		186,828			2,087,957			987,611		21,519		20,648,078		171,261,379
Unclaimed dividend		—		—			—			—		1,968		—		1,968
Change in additional paid-in capital from investments in associates and joint ventures accounted for using equity method		—		(437	)		—			—		—		—		(437	)
Share-based payment transactions of subsidiaries		—		—			16,715			—		—		—		16,715


Balance on December 31, 2021	$	147,329,386	$	186,391		$	2,104,672		$	987,611	$	23,487	$	20,648,078	$	171,279,625

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

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

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

Retained earnings and dividends policy

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

- 69 -

The Company should appropriate a special reserve when the net amount of other equity items is negative at the end of reporting period upon the earnings distribution. Distributions can be made out of any subsequent reversal of the debit to other equity items.

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

The appropriations of the 2020 and 2019 earnings of Chunghwa approved by the stockholders in their meetings on August 20, 2021 and May 29, 2020, respectively, were as follows:


	Appropriation of Earnings				Dividends Per Share (NT$)
	For Fiscal Year 2020		For Fiscal Year 2019		For Fiscal Year 2020		For Fiscal Year 2019

Cash dividends	$	33,403,565	$	32,782,969	$	4.306	$	4.226

The appropriations of earnings for 2021 had been proposed by Chunghwa’s Board of Directors on February 23, 2022. The appropriations and dividends per share were as follows:


	Appropriation of Earnings		Dividends Per Share (NT$)

Special reserve	$	408,150
Cash dividends		35,746,314	$	4.608

The appropriations of earnings for 2021 are subject to the resolution of the stockholders’ meeting planned to be held on May 27, 2022. Information of the appropriation of Chunghwa’s earnings proposed by the Board of Directors and approved by the stockholders is available on the Market Observation Post System website.

Others

Exchange differences arising from the translation of the foreign operations

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

Unrealized gain or loss on financial assets at FVOCI


	Year Ended December 31
	2021			2020

Beginning balance	$	1,239,901		$	836,598
Unrealized gain or loss for the year
Equity instruments		(1,187,836	)		419,989
Transferred accumulated gain or loss to unappropriated earnings resulting from the disposal of equity instruments (Note 8)		(59,653	)		(16,686	)


Ending balance	$	(7,588	)	$	1,239,901

- 70 -

Noncontrolling interests


	Year Ended December 31
	2021			2020

Beginning balance	$	11,327,441		$	10,283,522
Shares attributed to noncontrolling interests
Net income for the year		1,441,300			1,299,413
Exchange differences arising from the translation of the foreign operations		602			(13,866	)
Unrealized gain or loss on financial assets at FVOCI		1,987			(15,034	)
Remeasurements of defined benefit pension plans		(5,426	)		17,395
Income tax relating to exchange differences arising from the translation of the foreign operations		—			(128	)
Income tax relating to remeasurements of defined benefit pension plans		1,085			(3,479	)
Share of other comprehensive loss of associates and joint ventures accounted for using equity method		351			(2,190	)
Cash dividends distributed by subsidiaries		(896,335	)		(775,420	)
Changes in additional paid-in capital from investments in associates and joint ventures accounted for using equity method		(136	)		(1,817	)
Noncontrolling interests increased by business combination of IISI (Note 13)		—			475,879
Share-based payment transactions of subsidiaries		56,735			63,063
Change in additional paid-in capital for not proportionately participating in the capital increase of subsidiaries		—			103


Ending balance	$	11,927,604		$	11,327,441

30.

REVENUES


	Year Ended December 31
	2021		2020

Revenue from contracts with customers	$	208,412,156	$	206,395,581

Other revenues
Government grants income		1,037,057		218,934
Rental income		863,719		842,941
Others		165,016		151,542

		2,065,792		1,213,417


	$	210,477,948	$	207,608,998

For the information of performance obligations related to customer contracts, please refer to Note 3 Summary of Significant Accounting Policies for details.

- 71 -

Disaggregation of revenue

2021


	Domestic Fixed Communications Business		Mobile Communications Business		Internet Business		International Fixed Communications Business		Others		Total

Main Products and Service Revenues

Mobile services revenue	$	—	$	58,047,852	$	—	$	—	$	—	$	58,047,852
Sales of products		2,172,907		35,414,256		128,156		12,018		5,179,779		42,907,116
Local telephone and domestic long distance telephone services revenue		25,703,655		—		—		—		—		25,703,655
Broadband access and domestic leased line services revenue		23,012,443		—		—		—		—		23,012,443
Data communications internet services revenue		—		—		22,281,459		—		—		22,281,459
International network and leased line services revenue		—		—		—		4,366,820		—		4,366,820
Others		13,255,179		1,222,384		10,427,035		4,245,690		2,942,523		32,092,811


	$	64,144,184	$	94,684,492	$	32,836,650	$	8,624,528	$	8,122,302	$	208,412,156

2020


	Domestic Fixed Communications Business		Mobile Communications Business		Internet Business		International Fixed Communications Business		Others		Total

Main Products and Service Revenues

Mobile services revenue	$	—	$	56,724,433	$	—	$	—	$	—	$	56,724,433
Sales of products		2,214,161		32,111,502		106,672		313,214		4,645,167		39,390,716
Local telephone and domestic long distance telephone services revenue		26,474,747		—		—		—		—		26,474,747
Broadband access and domestic leased line services revenue		22,420,164		—		—		—		—		22,420,164
Data communications internet services revenue		—		—		21,446,960		—		—		21,446,960
International network and leased line services revenue		—		—		—		3,884,182		—		3,884,182
Others		17,694,619		1,307,382		10,254,599		4,484,648		2,313,131		36,054,379


	$	68,803,691	$	90,143,317	$	31,808,231	$	8,682,044	$	6,958,298	$	206,395,581

Contract balances


	December 31, 2021			December 31, 2020			January 1, 2020

Trade notes and accounts receivable (Note 9)	$	23,947,107		$	22,621,902		$	26,407,783


Contract assets
Products and service bundling	$	7,197,206		$	7,232,134		$	6,942,974
Others		982,688			612,206			115,993
Less: Loss allowance		(18,080	)		(17,792	)		(16,858	)


	$	8,161,814		$	7,826,548		$	7,042,109


Current	$	5,554,070		$	5,331,246		$	4,441,196
Noncurrent		2,607,744			2,495,302			2,600,913


	$	8,161,814		$	7,826,548		$	7,042,109

(Continued)

- 72 -


	December 31, 2021		December 31, 2020		January 1, 2020

Contract liabilities
Telecommunications business	$	13,143,598	$	13,601,662	$	12,771,621
Project business		5,435,268		6,686,561		10,360,428
Products and service bundling		4,168		16,404		38,570
Others		491,298		421,166		510,696


	$	19,074,332	$	20,725,793	$	23,681,315


Current	$	12,234,276	$	13,436,706	$	16,839,830
Noncurrent		6,840,056		7,289,087		6,841,485


	$	19,074,332	$	20,725,793	$	23,681,315

(Concluded)

The changes in the contract asset and the contract liability balances primarily result from the timing difference between the satisfaction of performance obligations and the payments collected from customers. Significant changes of contract assets and liabilities recognized resulting from product and service bundling were as follows:


	Year Ended December 31
	2021			2020

Contract assets
Net increase of customer contracts	$	6,034,998		$	5,972,451
Reclassified to trade receivables		(6,039,413	)		(5,681,532	)


	$	(4,415	)	$	290,919


Contract liabilities
Net increase of customer contracts	$	162		$	7,370
Recognized as revenues		(12,398	)		(29,536	)


	$	(12,236	)	$	(22,166	)

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

Revenue recognized for the period that was included in the contract liability at the beginning of the year was as follows:


	Year Ended December 31
	2021		2020

Telecommunications business	$	5,952,356	$	5,492,271
Project business		4,630,103		6,091,951
Others		430,982		511,619


	$	11,013,441	$	12,095,841

- 73 -

Incremental costs of obtaining contracts


	December 31
	2021		2020

Noncurrent
Incremental costs of obtaining contracts	$	987,656	$	999,593

The Company considered the past experience and the default clauses in the telecommunications service contracts and believes the commissions and equipment subsidies paid for obtaining such contracts are expected to be recoverable; therefore, such costs were capitalized. Amortization expenses for the years ended December 31, 2021 and 2020 were $815,241 thousand and $771,875 thousand, respectively.

Remaining Performance Obligations

As of December 31, 2021, the aggregate amount of transaction price allocated to performance obligations for non-cancellable telecommunications service contracts that are unsatisfied is $29,379,640 thousand. The Company recognizes revenue when service is provided over contract terms. The Company expects to recognize such revenue of $18,349,662 thousand, $8,603,486 thousand and $2,426,492 thousand in 2022, 2023 and 2024, respectively. The variable consideration collected from customers on nonrecurring basis resulting from exceeded usage from monthly fee and revenue recognized for contracts that the Company has a right to consideration from customers in the amount corresponding directly with the value to the customers of the Company’s performance completed to date have been excluded from the disclosure of remaining performance obligations.

As of December 31, 2021, the aggregate amount of transaction price allocated to performance obligations for non-cancellable project business contracts that are unsatisfied is $19,030,013 thousand. The Company recognizes revenues when the project business contract is completed and accepted by customers. The Company expects to recognize such revenue of $9,032,786 thousand, $4,781,524 thousand and $5,215,703 thousand in 2022, 2023 and 2024, respectively. Project business contracts whose expected duration are less than a year have been excluded from the aforementioned disclosure.

31.

NET INCOME

Other income and expenses


	Year Ended December 31
	2021			2020

Gain (loss) on disposal of property, plant and equipment, net	$	(3,349	)	$	1,427,984
Impairment loss on right-of-use assets		(420,590	)		—
Gain on disposal of investment properties, net		—			151,357
Reversal of impairment loss on investment properties		83,429			27,066
Loss on disposal of intangible assets		—			(1,858	)
Impairment loss on intangible assets		(28,901	)		(9,303	)


	$	(369,411	)	$	1,595,246

- 74 -

Other income


	Year Ended December 31
	2021		2020

Dividend income	$	154,008	$	246,084
Rental income		69,669		70,123
Others		154,143		153,401


	$	377,820	$	469,608

Other gains and losses


	Year Ended December 31
	2021			2020

Valuation gain (loss) on financial assets and liabilities at fair value through profit or loss, net	$	243,381		$	(99,150	)
Foreign currency exchange gain or loss, net		229,502			(46,535	)
Gain on disposal of investments accounted for using equity method, net		3,239			15,946
Gain (loss) on disposal of financial instruments, net		353			(1,788	)
Others		(15,645	)		(21,440	)


	$	460,830		$	(152,967	)

Interest expenses


	Year Ended December 31
	2021		2020

Interest on bonds payable	$	131,635	$	45,614
Interest on lease liabilities		68,973		79,654
Interest paid to financial institutions		16,587		79,067
Others		976		1,728


	$	218,171	$	206,063

Impairment loss (reversal of impairment loss)


	Year Ended December 31
	2021			2020

Contract assets	$	288		$	934

Trade notes and accounts receivable	$	122,911		$	48,708

Other receivables	$	19,792		$	(4,757	)

Inventories	$	206,824		$	1,161,281

Right-of-use assets	$	420,590		$	—

Investment properties	$	(83,429	)	$	(27,066	)

Intangible assets	$	28,901		$	9,303

- 75 -

Depreciation and amortization expenses


	Year Ended December 31
	2021		2020

Property, plant and equipment	$	27,804,883	$	26,988,500
Right-of-use assets		3,985,184		3,931,498
Investment properties		42,259		22,332
Intangible assets		6,568,547		5,424,367
Incremental costs of obtaining contracts		815,241		771,875


Total depreciation and amortization expenses	$	39,216,114	$	37,138,572


Depreciation expenses summarized by functions
Operating costs	$	30,020,758	$	29,056,306
Operating expenses		1,811,568		1,886,024


	$	31,832,326	$	30,942,330


Amortization expenses summarized by functions
Operating costs	$	7,171,851	$	5,971,033
Marketing expenses		92,823		99,881
General and administrative expenses		75,331		82,436
Research and development expenses		43,783		42,892


	$	7,383,788	$	6,196,242

Employee benefit expenses


	Year Ended December 31
	2021		2020

Post-employment benefit
Defined contribution plans	$	783,762	$	708,230
Defined benefit plans		1,216,478		2,001,474

		2,000,240		2,709,704
Share-based payment
Equity-settled share-based payment		19,371		7,578
Other employee benefit		42,653,703		42,245,925


Total employee benefit expenses	$	44,673,314	$	44,963,207


Summary by functions
Operating costs	$	22,734,259	$	23,005,380
Operating expenses		21,939,055		21,957,827


	$	44,673,314	$	44,963,207

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. As of December 31, 2021, the payables of the employees’ compensation and the remuneration to directors were $1,429,000 thousand and $38,552 thousand, respectively. Such amounts have been approved by the Chunghwa’s Board of Directors on February 23, 2022 and will be reported to the stockholders in their meeting planned to be held on May 27, 2022.

- 76 -

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

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


	Cash
	2020		2019

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

There was no difference between the initial accrued amounts recognized in 2020 and 2019 and the amounts approved by the Board of Directors in 2021 and 2020 of the aforementioned compensation to employees and the remuneration to directors.

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

32.

INCOME TAX

Income tax recognized in profit or loss

The major components of income tax expense were as follows:


	Year Ended December 31
	2021			2020

Current tax
Current tax expenses recognized for the year	$	8,490,402		$	8,172,184
Income tax on unappropriated earnings		32,728			11,329
Income tax adjustments on prior years		(150,719	)		(22,436	)
Others		6,842			19,661

		8,379,253			8,180,738

Deferred tax
Deferred tax expenses (benefits) recognized for the year		489,181			(81,618	)
Income tax adjustments on prior years		3,311			26,308

		492,492			(55,310	)


Income tax recognized in profit or loss	$	8,871,745		$	8,125,428

Reconciliation of accounting profit and income tax expense was as follows:


	Year Ended December 31
	2021		2020

Income before income tax	$	46,066,624	$	42,830,971


Income tax expense calculated at the statutory rate	$	9,213,325	$	8,566,194
Nondeductible income and expenses in determining taxable income		7,809		14,975

(Continued)

- 77 -


	Year Ended December 31
	2021			2020

Unrecognized loss carryforwards	$	(549	)	$	3,515

Tax-exempt income		(30,181	)		(367,817	)
Income tax on unappropriated earnings		32,728			11,329
Investment credits		(217,318	)		(130,888	)
Effect of different tax rates of group entities operating in other jurisdictions		(10,374	)		10,324
Income tax adjustments on prior years		(147,408	)		3,872
Others		23,713			13,924


Income tax expense recognized in profit or loss	$	8,871,745		$	8,125,428

(Concluded)

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

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

Income tax recognized in other comprehensive income


	Year Ended December 31
	2021		2020

Deferred tax
Remeasurement on defined benefit pension plans	$	78,088	$	238,630
Exchange differences arising from the translation of the foreign operations		—		263


Total income tax expense recognized in other comprehensive income	$	78,088	$	238,893

Current tax assets and liabilities


	December 31
	2021		2020

Current tax assets
Tax refund receivable (included in other current assets - other)	$	4,532	$	774

Current tax liabilities
Income tax payable	$	4,593,458	$	4,369,241

- 78 -

Deferred income tax assets and liabilities

The movements of deferred income tax assets and liabilities were as follows:

For the year ended December 31, 2021


	Beginning Balance		Recognized in Profit or Loss			Recognized in Other Comprehensive Income			Ending Balance

Deferred income tax assets

Temporary differences
Defined benefit pension plans	$	1,816,158	$	5,928		$	(78,056	)	$	1,744,030
Share of profit or loss of associates and joint ventures accounted for using equity method		400,776		175			—			400,951
Allowance for doubtful receivables over quota		364,607		(99,810	)		—			264,797
Valuation loss on inventory		299,199		(102,128	)		—			197,071
Deferred revenue		73,067		(24,389	)		—			48,678
Estimated warranty liabilities		36,165		6,576			—			42,741
Valuation loss on financial instruments		32,609		(32,609	)		—			—
Others		89,261		(14,329	)		—			74,932

		3,111,842		(260,586	)		(78,056	)		2,773,200
Loss carryforwards		20,871		(9,065	)		—			11,806


	$	3,132,713	$	(269,651	)	$	(78,056	)	$	2,785,006

Deferred income tax liabilities

Temporary differences
Defined benefit pension plans	$	1,812,193	$	156,648		$	32		$	1,968,873
Land value incremental tax		94,986		—			—			94,986
Deferred revenue for award credits		30,207		25,501			—			55,708
Unrealized foreign exchange gain, net		313		26,293			—			26,606
Intangible assets		26,999		(2,555	)		—			24,444
Valuation gain on financial instruments		—		16,074			—			16,074
Others		1,840		880			—			2,720


	$	1,966,538	$	222,841		$	32		$	2,189,411

- 79 -

For the year ended December 31, 2020


	Beginning Balance		Acquired by business combinations (Note 13)		Recognized in Profit or Loss			Recognized in Other Comprehensive Income			Ending Balance

Deferred income tax assets

Temporary differences
Defined benefit pension plans	$	2,034,357	$	1,366	$	18,960		$	(238,525	)	$	1,816,158
Share of profit or loss of associates and joint ventures accounted for using equity method		402,059		—		(1,283	)		—			400,776
Allowance for doubtful receivables over quota		403,712		—		(39,105	)		—			364,607
Valuation loss on inventory		140,838		2,710		155,651			—			299,199
Deferred revenue		97,457		—		(24,390	)		—			73,067
Estimated warranty liabilities		34,461		—		1,704			—			36,165
Valuation loss on financial instruments		12,929		—		19,680			—			32,609
Others		104,422		1,589		(16,487	)		(263	)		89,261

		3,230,235		5,665		114,730			(238,788	)		3,111,842
Loss carryforwards		28,372		—		(7,501	)		—			20,871


	$	3,258,607	$	5,665	$	107,229		$	(238,788	)	$	3,132,713


Deferred income tax liabilities

Temporary differences
Defined benefit pension plans	$	1,758,131	$	—	$	53,957		$	105		$	1,812,193
Land value incremental tax		94,986		—		—			—			94,986
Deferred revenue for award credits		28,543		—		1,664			—			30,207
Unrealized foreign exchange gain, net		1,079		—		(766	)		—			313
Intangible assets		29,513		—		(2,514	)		—			26,999
Others		53		2,209		(422	)		—			1,840


	$	1,912,305	$	2,209	$	51,919		$	105		$	1,966,538

Unused loss carryforwards for which no deferred tax assets have been recognized in the consolidated balance sheets


	December 31
	2021		2020

Loss carryforwards
Expire in 2022	$	21	$	9,997
Expire in 2023		25		8,251
Expire in 2024		1,255		8,364
Expire in 2025		15,223		19,106
Expire in 2026		8,423		8,423
Expire in 2027		2,585		2,585
Expire in 2028		930		930
Expire in 2029		697		697
Expire in 2030		198		198
Expire in 2031		—		—


	$	29,357	$	58,551

- 80 -

Information about unused loss carryforwards

As of December 31, 2021, information about loss carryforwards was as follows:


Remaining Creditable Amount	Expiry Year

$873		2022
697		2023
1,438		2024
18,018		2025
10,172		2026
3,503		2027
930		2028
2,034		2029
1,615		2030
1,883		2031


$41,163

Income tax examinations

Income tax returns of Chunghwa, SENAO, ISPOT, Youth, Youyi, Aval, Wiin, SENYOUNG, Senaolife, CHYP, CHSI, CHI, CHPT, SFD, CLPT, CHTSC, CHIEF, Unigate, SHE, CHST, HHI, IISI and UTC have been examined by the tax authorities through 2019. Income tax returns of LED has been examined by the tax authorities through 2020.

33.

EARNINGS PER SHARE (“EPS”)

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

Net Income


	Year Ended December 31
	2021			2020

Net income used to compute the basic earnings per share
Net income attributable to the parent	$	35,753,579		$	33,406,130
Assumed conversion of all dilutive potential common stocks
Employee stock options and employee compensation of subsidiaries		(6,258	)		(7,241	)


Net income used to compute the diluted earnings per share	$	35,747,321		$	33,398,889

- 81 -

Weighted Average Number of Common Stocks

(Thousand Shares)


	Year Ended December 31
	2021		2020

Weighted average number of common stocks used to compute the basic earnings per share		7,757,447		7,757,447
Assumed conversion of all dilutive potential common stocks Employee compensation		7,773		7,108


Weighted average number of common stocks used to compute the diluted earnings per share		7,765,220		7,764,555

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

34.

SHARE-BASED PAYMENT ARRANGEMENT

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


Effective Date for Plan Registration	Resolution Date by CHIEF’s Board of Directors		Stock Options Units		Exercise Price (NT$)

2020.09.16		2020.10.26		200.00		$199.70 (Original price$206.00	)
2017.12.18		2018.10.31		50.00		$134.50 (Original price$147.00	)
		2017.12.19		950.00		$128.70 (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 Board of Directors of CHIEF resolved to issue stock options on October 26, 2020 and authorized the chairman to decide the grant date. Afterwards, the grant date was decided as November 13, 2020.

- 82 -

The compensation costs for stock options for the year ended December 31, 2021 and 2020 were as follows:


	Year Ended December 31
	2021		2020

Granted on November 13, 2020	$	9,729	$	1,297
Granted on October 31, 2018		153		312
Granted on December 19, 2017		152		226

Granted on October 22, 2015		—		—


	$	10,034	$	1,835

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

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

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

Information about CHIEF’s outstanding stock options for the years ended December 31, 2021 and 2020 was as follows:


	Year Ended December 31, 2021
	Granted on November 13, 2020					Granted on October 31, 2018					Granted on December 19, 2017
	Number of Options			Weighted Average Exercise Price (NT$)		Number of Options			Weighted Average Exercise Price (NT$)		Number of Options			Weighted Average Exercise Price (NT$)

Employee stock options

Options outstanding at beginning of the year		200.00		$	206.00		21.00		$	138.70		427.50		$	132.70
Options exercised		—			—		(10.50	)		134.50		(213.75	)		132.70
Options forfeited		(6.00	)		—		—			—		(0.50	)		—


Options outstanding at end of the year		194.00			199.70		10.50			134.50		213.25			128.70


Options exercisable at end of the year		—			—		—			—		213.25			128.70

- 83 -


	Year Ended December 31, 2020
	Granted on November 13, 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$)		Number of Options			Weighted Average Exercise Price (NT$)

Employee stock options

Options outstanding at beginning of the year		—	$	—		46.00		$	141.70		897.00		$	135.60		314.25		$	34.40
Options granted		200.00		206.00		—			—		—			—		—			—
Options exercised		—		—		(21.00	)		138.70		(448.50	)		135.60		(314.25	)		34.40
Options forfeited		—		—		(4.00	)		—		(21.00	)		—		—			—


Options outstanding at end of the year		200.00		206.00		21.00			138.70		427.50			132.70		—			—


Options exercisable at end of the year		—		—		—			—		213.75			132.70		—			—

As of December 31, 2021, information about employee stock options outstanding was as follows:


Granted on November 13, 2020
Options Outstanding				Options Exercisable
Range of Exercise Price (NT$)	Number of Options	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price (NT$)	Number of Options	Weighted Average Exercise Price (NT$)

$199.70	194.00	3.87	$199.70	—	$—


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

$134.50	10.50	1.83	$134.50	—	$—


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

$128.70	213.25	0.96	$128.70	213.25	$128.70

As of December 31, 2021, all the stock options granted in 2015 were exercised or forfeited.

- 84 -

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


Granted on November 13, 2020
Options Outstanding				Options Exercisable
Range of Exercise Price (NT$)	Number of Options	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price (NT$)	Number of Options	Weighted Average Exercise Price (NT$)

$206.00	200.00	4.87	$206.00	—	$—


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

$138.70	21.00	2.83	$138.70	—	$—


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

$132.70	427.50	1.96	$132.70	213.75	$132.70

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

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


	Stock Options Granted on November 13, 2020			Stock Options Granted on October 31, 2018			Stock Options Granted on December 19, 2017			Stock Options Granted on October 22, 2015

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

- 85 -

The expected volatility for the options granted in 2020 was based on CHIEF’s average annualized historical share price volatility from June 5, 2018, CHIEF’s listing date on Taipei Exchange, to the grant date. The expected volatilities for the options granted from 2015 to 2018 were based on the average annualized historical share price volatility of CHIEF’s comparable companies before the grant date.

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

The Board of Directors of CHTSC resolved to issue 4,500 and 3,500 stock options on December 20, 2019 and February 20, 2021, respectively. Each option is eligible to subscribe for one thousand common stocks when exercisable and the exercise price are both $19.085 per share. The options are granted to specific employees that meet the vesting conditions. The CHTSC Plan has an exercise price adjustment formula upon the changes in common stocks. The options of the CHTSC Plan are valid for five years and the graded vesting schedule will vest one year after the grant date.

The compensation costs for stock options for the years ended December 31, 2021 and 2020 were as follows:


	Year Ended December 31
	2021		2020

Granted on February 20, 2021	$	5,511	$	—
Granted on December 20, 2019		2,923		5,743


	$	8,434	$	5,743

Information about CHTSC’s outstanding stock options for the years ended December 31, 2021 and 2020 was as follows:


	Year Ended December 31, 2021
	Granted on February 20, 2021					Granted on December 20, 2019
	Number of Options			Weighted Average Exercise Price (NT$)		Number of Options			Weighted Average Exercise Price (NT$)

Employee stock options

Options outstanding at beginning of the year		—		$	—		4,328		$	19.085
Options granted		3,500			19.085		—			—
Options exercised		—			—		(1,082	)		19.085
Options forfeited		(176	)		—		(72	)		—


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


Options exercisable at end of the year		—			—		1,058			19.085

- 86 -


	Year Ended December 31, 2020
	Granted on December 20, 2019
	Number of Options			Weighted Average Exercise Price (NT$)

Employee stock options

Options outstanding at beginning of the year		4,500		$	19.085
Options granted		—			—
Options forfeited		(172	)		—


Options outstanding at end of the year		4,328			19.085


Options exercisable at end of the year		1,082			19.085

As of December 31, 2021, information about employee stock options outstanding was as follows:


Granted on February 20, 2021
Options Outstanding				Options Exercisable
Range of Exercise Price (NT$)	Number of Options	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price (NT$)	Number of Options	Weighted Average Exercise Price (NT$)

$19.085	3,324	4.14	$19.085	—	$—


Granted on December 20, 2019
Options Outstanding				Options Exercisable
Range of Exercise Price (NT$)	Number of Options	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price (NT$)	Number of Options	Weighted Average Exercise Price (NT$)

$19.085	3,174	2.97	$19.085	1,058	$19.085

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


Granted on December 20, 2019
Options Outstanding				Options Exercisable
Range of Exercise Price (NT$)	Number of Options	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price (NT$)	Number of Options	Weighted Average Exercise Price (NT$)

$19.085	4,328	3.97	$19.085	1,082	$19.085

- 87 -

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


	Stock Options Granted on Ferbuary 20, 2021			Stock Options Granted on December 20, 2019

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

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

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

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

No compensation cost of stock options granted was recognized for the year ended December 31, 2021 and the six months ended December 31, 2020.

Information about IISI’s outstanding stock options for the years ended December 31, 2021 and 2020 was as follows:


	Year Ended December 31, 2021
	Granted in January 2014
	Number of Options			Weighted Average Exercise Price (NT$)

Employee stock options

Options outstanding at beginning of the year		530.00		$	14.00
Options exercised		(261.00	)		14.00
Options forfeited		(269.00	)		—


Options outstanding at end of the year		—			—


Options exercisable at end of the year		—			—

- 88 -


	Year Ended December 31, 2020
	Granted in January 2014					Granted in August 2013
	Number of Options			Weighted Average Exercise Price (NT$)		Number of Options			Weighted Average Exercise Price (NT$)

Employee stock options

Options outstanding at beginning of the year		—		$	—		—		$	—
Options outstanding upon the date of business combination		580.00			14.00		1,022.96			14.00
Options exercised		(50.00	)		14.00		(432.50	)		14.00
Options forfeited		—			—		(590.46	)		—


Options outstanding at end of the year		530.00			14.00		—			—


Options exercisable at end of the year		530.00			14.00		—			—

As of December 31, 2021, all the stock options granted in 2014 and 2013 were exercised or forfeited.

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


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

$14.00	530.00	0.04	$14.00	530.00	$14.00

As of December 31, 2020, the options granted to employees in 2013 have been fully exercised or forfeited.

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


	Stock Options Granted in January 2014		Stock Options Granted in August 2013

Grant-date share price (NT$)		$14.51		$12.51
Exercise price (NT$)		$14.00		$14.00
Dividend yield		6%		6%
Risk-free interest rate		1.16%-1.32%		1.20%-1.39%
Expected life		4.5-5.5 years		4.5-5.5 years
Expected volatility		35.28%-35.97%		36.01%-36.62%
Weighted average fair value of grants (NT$)		$2,345		$1,670

- 89 -

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

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

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

The compensation cost was $903 thousand for the year ended December 31, 2021.

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

Information about CLPT’s outstanding stock options for the year ended December 31, 2021 was as follows:


	Year Ended December 31, 2021
	Granted on February 26, 2021
	Number of Options			Weighted Average Exercise Price (NT$)

Employee stock options

Options outstanding at beginning of the year		—		$	—
Options granted		690			16.87
Options forfeited		(140	)		—


Options outstanding at end of the year		550			15.90


Options exercisable at end of the year		—			—

As of December 31, 2021, information about employee stock options outstanding was as follows:


Options Outstanding				Options Exercisable
Range of Exercise Price (NT$)	Number of Options	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price (NT$)	Number of Options	Weighted Average Exercise Price (NT$)

$15.90	550	3.16	$15.90	—	$—

- 90 -

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


	Stock Options Granted on February 26, 2021

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

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

35.

CASH FLOW INFORMATION

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


	Year Ended December 31
Investing activities	2021			2020

Increase in property, plant and equipment	$	35,613,438		$	25,194,727
Changes in other payables		(280,410	)		(1,683,907	)


Acquisition of property, plant and equipment	$	35,333,028		$	23,510,820


Increase in investment properties	$	146		$	1,359,502
Trade-in investment properties from asset exchange transaction (Note 15)		—			(1,305,067	)


Acquisition of investment properties	$	146		$	54,435


Increase in intangible assets	$	255,852		$	48,605,187
Changes in other assets		—			(1,000,000	)


Acquisition of intangible assets	$	255,852		$	47,605,187


Disposal of property, plant and equipment	$	30,387		$	307,190
Gain (loss) on disposal of property, plant and equipment		(3,349	)		1,427,984
Trade-in investment properties from asset exchange transaction (Note 15)		—			(1,305,067	)
Changes in other payables		—			(79,986	)
Changes in other current monetary assets		—			(31,032	)


Proceeds from disposal of property, plant and equipment	$	27,038		$	319,089

(Continued)

- 91 -


	Year Ended December 31
Investing activities	2021			2020

Disposal of financial assets at fair value through other comprehensive income	$	2,704,608		$	567,797
Changes in other current monetary assets		270,321			(270,321	)
Reclassified to investment accounted for using equity method		(63,359	)		—


Proceeds from disposal of financial assets at fair value through other comprehensive income	$	2,911,570		$	297,476

(Concluded)

Financing Activities


	Balance on January 1, 2021		Cash Flows from Financing Activities			Changes in Non-Cash Transactions					Cash Flows from Operation Activities - Interest Paid			Balance on December 31, 2021
	Balance on January 1, 2021		Cash Flows from Financing Activities			New Leases		Others						Balance on December 31, 2021

Lease liabilities	$	9,596,667	$	(3,728,949	)	$	4,669,219	$	(195,711	)	$	(68,973	)	$	10,272,253


	Balance on January 1, 2020		Cash Flows from Financing Activities			Changes in Non-Cash Transactions							Cash Flows from Operation Activities - Interest Paid			Balance on December 31, 2020
	Balance on January 1, 2020		Cash Flows from Financing Activities			New Leases		Acquired by Business Combination (Note 13)		Others						Balance on December 31, 2020

Lease liabilities	$	9,758,138	$	(3,683,204	)	$	3,796,370	$	70,905	$	(265,888	)	$	(79,654	)	$	9,596,667

36.

CAPITAL MANAGEMENT

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

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

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

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

- 92 -

37.

FINANCIAL INSTRUMENTS

Fair Value Information

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

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

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

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

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

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


	December 31
	2021				2020
	Carrying Value		Fair Value		Carrying Value		Fair Value

Financial liabilities

Financial liabilities measured at amortized cost
Bonds payable	$	26,976,675	$	27,082,090	$	19,980,272	$	20,078,098

The fair value of bonds payable is measured using Level 2 inputs. The valuation of fair value is based on the quoted market prices provided by third party pricing services.

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

December 31, 2021


	Level 1		Level 2		Level 3		Total

Financial assets at FVTPL
Listed stocks	$	2,566	$	—	$	—	$	2,566
Non-listed stocks		—		—		884,670		884,670
Limited partnership		—		—		24,105		24,105


	$	2,566	$	—	$	908,775	$	911,341

(Continued)

- 93 -


	Level 1		Level 2		Level 3		Total

Financial assets at FVOCI
Listed stocks	$	458,582	$	—	$	—	$	458,582
Non-listed stocks		—		—		3,157,306		3,157,306


	$	458,582	$	—	$	3,157,306	$	3,615,888


Financial liabilities at FVTPL
Derivatives	$	—	$	6,180	$	—	$	6,180


Hedging financial liabilities	$	—	$	8,286	$	—	$	8,286

(Concluded)

December 31, 2020


	Level 1		Level 2		Level 3		Total

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


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


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


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


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


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

There were no transfers between Levels 1 and 2 for the years ended December 31, 2021 and 2020.

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

2021


Financial Assets	Measured at Fair Value through Profit or Loss		Measured at Fair Value through Other Comprehensive Income			Total

Balance on January 1, 2021	$	677,202	$	4,438,999		$	5,116,201
Acquisition		25,000		81,000			106,000
Disposal		—		(5,681	)		(5,681	)

(Continued)

- 94 -


Financial Assets	Measured at Fair Value through Profit or Loss			Measured at Fair Value through Other Comprehensive Income			Total

Reclassified to investments accounted for using equity method	$	—		$	(63,359	)	$	(63,359	)
Recognized in profit or loss under “Other gains and losses”		250,973			—			250,973
Recognized in other comprehensive income under “Unrealized gain or loss on financial assets at fair value through other comprehensive income”		—			(1,293,653	)		(1,293,653	)
Proceeds from return of capital due to capital reduction from investees		(44,400	)		—			(44,400	)


Balance on December 31, 2021	$	908,775		$	3,157,306		$	4,066,081

Unrealized gain in 2021	$	232,377

(Concluded)

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
Reclassified from investments accounted for using equity method		—			1,853			1,853
Recognized in profit or loss under “Other gains and losses”		(100,903	)		—			(100,903	)
Recognized in other comprehensive income under “Unrealized gain or loss on financial assets at fair value through other comprehensive income”		—			(378,155	)		(378,155	)


Balance on December 31, 2020	$	677,202		$	4,438,999		$	5,116,201

Unrealized loss in 2020	$	(100,903	)

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

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

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

- 95 -

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


	December 31
	2021	2020

Discount for lack of marketability	16.05%-20.00%	14.73%-20.00%
Noncontrolling interests discount	17.29%-25.00%	17.29%-25.00%
Growth rate of long-term revenue	0.19%	—
WACC	8.50%	—

If the inputs to the valuation model were changed to reflect reasonably possible alternative assumptions while all the other variables were held constant, the fair values of equity investments would increase (decrease) as below table.


	December 31
	2021			2020

Discount for lack of marketability
5% increase	$	(31,655	)	$	(319,758	)

5% decrease	$	31,655		$	319,758

Noncontrolling interests discount
5% increase	$	(18,998	)	$	(47,018	)

5% decrease	$	18,998		$	47,018

Long-term revenue growth rates
0.1% increase	$	25,190		$	—

0.1% decrease	$	(24,733	)	$	—

WACC
1% increase	$	(287,845	)	$	—

1% decrease	$	350,328		$	—

Categories of Financial Instruments


	December 31
	2021		2020

Financial assets

Measured at FVTPL
Mandatorily measured at FVTPL	$	911,341	$	687,099
Hedging financial assets		—		1,752
Financial assets at amortized cost (Note a)		71,799,195		62,405,714
Financial assets at FVOCI		3,615,888		7,193,174

(Continued)

- 96 -


	December 31
	2021		2020

Financial liabilities

Measured at FVTPL
Held for trading	$	6,180	$	143
Hedging financial liabilities		8,286		—
Measured at amortized cost (Note b)		64,746,363		62,557,414

(Concluded)

Note a:

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

Note b:

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

Financial Risk Management Objectives

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

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

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

Market risk

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

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

- 97 -

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:


	December 31
	2021		2020

Assets
USD	$	2,009,607	$	2,710,705
EUR		48,962		14,957
SGD		259,571		169,747
JPY		37,123		22,289
RMB		88,654		29,742
HKD		69,776		69,321
Liabilities
USD		889,578		767,553
EUR		861,481		957,257
SGD		1,964,490		1,049,225
JPY		12,662		9,683
RMB		38,521		201
HKD		15,792		7,665

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


	December 31
	2021		2020

Assets
USD	$	—	$	121
EUR		—		3,902
Liabilities
USD		—		143
EUR		14,466		—

Foreign currency sensitivity analysis

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

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

- 98 -


	Year Ended December 31
	2021			2020

Profit or loss
Monetary assets and liabilities (a)
USD	$	56,001		$	97,158
EUR		(40,626	)		(47,115	)
SGD		(85,246	)		(43,974	)
JPY		1,223			630
RMB		2,507			1,477
HKD		2,699			3,083
Derivatives (b)
USD		—			(19,224	)
EUR		12,528			2,627
Equity
Derivatives (c)
EUR		10,962			10,210

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

This is mainly attributable to forward exchange contracts.

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

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

Interest rate risk

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


	December 31
	2021		2020

Fair value interest rate risk
Financial assets	$	27,670,982	$	24,217,959
Financial liabilities		37,248,928		36,576,137
Cash flow interest rate risk
Financial assets		14,171,472		9,306,397
Financial liabilities		1,665,000		1,667,000

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 $31,266 thousand and $19,098 thousand for the years ended December 31, 2021 and 2020, respectively. This is mainly attributable to the Company’s exposure to floating interest rates on its financial assets, short-term and long-term loans.

- 99 -

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 $45,567 thousand and $180,794 thousand, respectively, as a result of the changes in fair value of financial assets at FVTPL and financial assets at FVOCI for the year ended December 31, 2021. If equity prices had been 5% higher/lower, pre-tax profit and pre-tax other comprehensive income would have increased/decreased by $34,241 thousand and $359,659 thousand, respectively, as a result of the changes in fair value of financial assets at FVTPL and financial assets at FVOCI for the year ended December 31, 2020.

Credit risk

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

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

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

Liquidity risk

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

Liquidity and interest risk tables

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

- 100 -

December 31, 2021


	Weighted Average Effective Interest Rate (%)		Less than 1 Month		1-3 Months		3 Months to 1 Year		1-5 Years		More than 5 Years		Total

Non-derivative financial liabilities
Non-interest bearing		—	$	40,894,077	$	—	$	1,997,277	$	5,336,343	$	—	$	48,227,697
Floating interest rate instruments		0.95		—		15,000		50,000		1,600,000		—		1,665,000
Fixed interest rate instruments		0.51		—		—		—		10,700,000		16,300,000		27,000,000

			$	40,894,077	$	15,000	$	2,047,277	$	17,636,343	$	16,300,000	$	76,892,697

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	$	3,227,909	$	4,125,893	$	1,808,056	$	1,243,987	$	10,405,845

December 31, 2020


	Weighted Average Effective Interest Rate (%)		Less than 1 Month		1-3 Months		3 Months to 1 Year		1-5 Years		More than 5 Years		Total

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

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

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


	Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years		Total

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

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

December 31, 2021

Gross settled

Forward exchange contracts
Inflow	$	—	$	470,395		$	—	$	—	$	470,395
Outflow		—		484,861			—		—		484,861


	$	—	$	(14,466	)	$	—	$	—	$	(14,466	)


December 31, 2020

Gross settled

Forward exchange contracts
Inflow	$	—	$	634,676		$	—	$	—	$	634,676
Outflow		—		630,796			—		—		630,796


	$	—	$	3,880		$	—	$	—	$	3,880

- 101 -

Financing facilities


	December 31
	2021		2020

Facilities of unsecured bank loan and commercial paper payable
Amount used	$	65,000	$	7,067,800
Amount unused		61,620,489		59,277,690


	$	61,685,489	$	66,345,490


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


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

38.

RELATED PARTIES TRANSACTIONS

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

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


Company		Relationship

Taiwan International Standard Electronics Co., Ltd.		Associate
So-net Entertainment Taiwan Limited		Associate
KKBOX Taiwan Co., Ltd.		Associate
KingwayTek Technology Co., Ltd.		Associate
UUPON Inc.		Associate (Note 1)
Taiwan International Ports Logistics Corporation		Associate
International Integrated Systems, Inc.		Subsidiary (Note 2)
Senao Networks, Inc.		Associate
EnRack Tech. Co., Ltd.		Subsidiary of the Company’s associate, Senao Networks, Inc.
Emplus Technologies, Inc.		Subsidiary of the Company’s associate, Senao Networks, Inc.
ST-2 Satellite Ventures Pte., Ltd.		Associate
CHT Infinity Singapore Pte. Ltd.		Associate
Viettel-CHT Co., Ltd.		Associate
Click Force Co., Ltd.		Associate
Alliance Digital Tech Co., Ltd.		Associate (Note 3)
Chunghwa PChome Fund I Co., Ltd.		Associate
Cornerstone Ventures Co., Ltd.		Associate

(Continued)

- 102 -


Company		Relationship

Next Commercial Bank Co., Ltd.		Associate
WiAdvance Technology Corporation		Associate
AgriTalk Technology Inc.		Associate (Note 4)
Imedtac Co., Ltd.		Associate (Note 4)
Chunghwa SEA Holdings		Joint venture
Other related parties
Chunghwa Telecom Foundation		A nonprofit organization of which the funds donated by Chunghwa exceeds one third of its total funds
Senao Technical and Cultural Foundation		A nonprofit organization of which the funds donated by SENAO exceeds one third of its total funds
Sochamp Technology Co., Ltd.		Investor of significant influence over CHST
E-Life Mall Co., Ltd.		One of the directors of E-Life Mall and a director of SENAO are members of an immediate family
Engenius Technologies Co., Ltd.		Chairman of Engenius Technologies Co., Ltd. is a member of SENAO’s management
Cheng Keng Investment Co., Ltd.		Chairman of Cheng Keng Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
Cheng Feng Investment Co., Ltd.		Chairman of Cheng Feng Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
All Oriented Investment Co., Ltd.		Chairman of All Oriented Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
Hwa Shun Investment Co., Ltd.		Chairman of Hwa Shun Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
Yu Yu Investment Co., Ltd.		Chairman of Yu Yu Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family
Divine Fine Foods & Wine Inc.		Chairman of Divine Fine Foods & Wine Inc. and SENAO’s chief executive officer are members of an immediate family (Note 5)
United Daily News Co., Ltd.		Investor of significant influence over SFD
Shenzhen Century Communication Co., Ltd.		Investor of significant influence over SCT
Advantech Co., Ltd.		Investor of significant influence over IISI
Chunghwa Post Co., Ltd.		Government-related entity as Chunghwa Telecom

(Concluded)

Note 1:

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

Note 2:

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

- 103 -

Note 3:

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

Note 4:

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

Note 5:

Divine Fine Foods & Wine Inc. replaced its responsible persons in October 2021. Since then, Divine Fine Foods & Wine Inc. is no longer a related party of the Company.

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

Operating transactions


	Revenues
	Year Ended December 31
	2021		2020

Associates	$	499,321	$	1,507,867
Others		54,453		66,612


	$	553,774	$	1,574,479


	Operating Costs and Expenses
	Year Ended December 31
	2021		2020

Associates	$	852,909	$	715,405
Others		73,825		67,612


	$	926,734	$	783,017

Non-operating transactions


	Non-operating Income and Expenses
	Year Ended December 31
	2021		2020

Associates	$	38,192	$	36,716
Others		2,936		3,590


	$	41,128	$	40,306

- 104 -

Receivables


	December 31
	2021		2020

Associates	$	34,864	$	228,879
Others		6,664		1,817


	$	41,528	$	230,696

Contract liabilities-current


	December 31
	2021		2020

Associates	$	—	$	182,857

Payables


	December 31
	2021		2020

Associates	$	385,327	$	642,489
Others		6,031		3,455


	$	391,358	$	645,944

Customers’ deposits


	December 31
	2021		2020

Associates	$	16,120	$	4,626

Acquisition of property, plant and equipment


	Year Ended December 31
	2021		2020

Associates	$	397,884	$	375,469

Disposal of property, plant and equipment and investment properties


	Proceeds				Gain on Disposal
	Year Ended December 31				Year Ended December 31
	2021		2020		2021		2020

Associates	$	9,800	$	—	$	1,628	$	—
Others (Chunghwa Post Co., Ltd.)		—		385,760		—		310,205


	$	9,800	$	385,760	$	1,628	$	310,205

- 105 -

Lease-in agreements

Chunghwa entered into a contract with ST-2 Satellite Ventures Pte., Ltd. on March 12, 2010 to lease capacity on the ST-2 satellite. This lease term is for 15 years which should start from the official operation of ST-2 satellite and the total contract value is approximately $6,000,000 thousand (SGD 260,723 thousand), including a prepayment of $3,067,711 thousand at the inception of the lease, and the rest of amount should be paid annually when ST-2 satellite starts its official operation. ST-2 satellite was launched in May 2011 and began its official operation in August 2011. As ST-2 satellite is in good operating condition, the useful life is extended for another 3 years and 3 months after evaluation. The Board of Directors of Chunghwa approved to extend the lease period accordingly with the original contract terms in December 2021; therefore, Chunghwa acquired right-of-use asset of $1,124,780 thousand from the aforementioned lease extension.

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


	December 31
	2021		2020

Lease liabilities - current	$	173,306	$	182,187
Lease liabilities - noncurrent		1,740,557		816,610


	$	1,913,863	$	998,797

The interest expense recognized for the aforementioned lease liabilities for the years ended December 31, 2021 and 2020 were $7,420 thousand and $8,895 thousand, respectively.

Compensation of key management personnel

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


	Year Ended December 31
	2021		2020

Short-term employee benefits	$	320,619	$	290,106
Post-employment benefits		7,568		10,392
Share-based payment		1,648		333


	$	329,835	$	300,831

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

- 106 -

39.

PLEDGED ASSETS

The following assets are pledged as collaterals for bank loans, custom duties of the imported materials, and warranties of contract performance as well as the bank deposits for the restricted purpose in accordance with The Management, Utilization, and Taxation of Repatriated Offshore Funds Act.


	December 31
	2021		2020

Property, plant and equipment	$	2,432,296	$	2,461,810
Land held under development (included in inventories)		—		1,998,733
Restricted assets (included in other assets - others)		163,012		209,638


	$	2,595,308	$	4,670,181

40.

SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

Except for those disclosed in other notes, the Company’s significant commitments and contingent liabilities as of December 31, 2021 were as follows:

Acquisitions of land and buildings of $571,610 thousand.

Acquisitions of telecommunications-related inventory and equipment of $21,629,594 thousand.

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

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

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

Chunghwa’s Board of Directors approved the acquisition of the 900MHz frequency band and equipment from Asia Pacific Telecom Co., Ltd. in November 2021. The transaction amount is expected to be in the range from $1,626,000 thousand to $2,081,000 thousand; however, the actual amount will be determined according to the approval date of the related authority and mutual negotiations.

41.

SIGNIFICANT SUBSEQUENT EVENTS

Chunghwa’s Board of Directors approved the issuance of unsecured domestic bonds in January 2022. The total amount of the bonds will not exceed $10,000,000 thousand and the issuance period will not exceed 10 years. The bonds could be issued at a one-time basis or separately.

Chunghwa’s Board of Directors approved an investment in Taiwania Capital Buffalo Fund VI, L.P. at the amount of $600,000 thousand in January 2022.

Chunghwa launched its organizational transformation based on customer-centric structure effective from January 2022.

- 107 -

42.

OTHER MATTERS

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

43.

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:


	December 31, 2021
	Foreign Currencies (Thousands)		Exchange Rate		New Taiwan Dollars (Thousands)

Assets denominated in foreign currencies

Monetary items
USD	$	72,601		27.68	$	2,009,607
EUR		1,563		31.32		48,962
SGD		12,687		20.46		259,571
JPY		154,358		0.241		37,123
RMB		20,408		4.344		88,654
HKD		19,661		3.549		69,776
Non-monetary items
Investments accounted for using equity method
SGD		25,326		20.46		518,165
VND		374,139,749		0.0012		447,097

Liabilities denominated in foreign currencies

Monetary items
USD		32,138		27.68		889,578
EUR		27,506		31.32		861,481
SGD		96,016		20.46		1,964,490
JPY		52,648		0.241		12,662
RMB	��	8,868		4.344		38,521
HKD		4,450		3.549		15,792


	December 31, 2020
	Foreign Currencies (Thousands)		Exchange Rate		New Taiwan Dollars (Thousands)

Assets denominated in foreign currencies

Monetary items
USD	$	95,179		28.48	$	2,710,705
EUR		427		35.02		14,957
SGD		7,873		21.56		169,747

(Continued)

- 108 -


	December 31, 2020
	Foreign Currencies (Thousands)		Exchange Rate		New Taiwan Dollars (Thousands)

JPY	$	80,671		0.276	$	22,289
RMB		6,795		4.377		29,742
HKD		18,873		3.673		69,321
Non-monetary items
Investments accounted for using equity method
SGD		22,646		21.56		488,257
VND		327,497,036		0.0011		363,522

Liabilities denominated in foreign currencies

Monetary items
USD		26,951		28.48		767,553
EUR		27,335		35.02		957,257
SGD		48,665		21.56		1,049,225
JPY		35,044		0.276		9,683
RMB		46		4.377		201
HKD		2,087		3.673		7,665

(Concluded)

The unrealized foreign currency exchange gains and losses were gain of $113,174 thousand and loss of $17,036 thousand for the years ended December 31, 2021 and 2020, respectively. Due to the various foreign currency transactions and the functional currency of each individual entity of the Company, foreign exchange gains and losses cannot be disclosed by the respective significant foreign currency.

44.

ADDITIONAL DISCLOSURES

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

Financing provided: None.

Endorsement/guarantee provided: Please see Table 1.

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

Marketable securities acquired or disposed of at costs or prices at least $300 million or 20% of the paid-in capital: Please see Table 3.

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

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

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

- 109 -

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

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

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

Investments in Mainland China: Please see Table 8.

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

Information of main stakeholders: Please see Table 10.

45.

SEGMENT INFORMATION

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

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

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

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

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

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

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

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

- 110 -

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

Year ended December 31, 2021

Revenues
From external customers	$	64,780,559	$	95,248,723	$	33,081,758	$	9,096,109	$	8,270,799		$	210,477,948
Intersegment revenues		17,429,630		1,588,401		3,868,755		2,009,110		6,260,448			31,156,344

Segment revenues	$	82,210,189	$	96,837,124	$	36,950,513	$	11,105,219	$	14,531,247			241,634,292

Intersegment elimination													(31,156,344	)


Consolidated revenues												$	210,477,948


Segment operating costs and expenses	$	51,013,128	$	74,973,470	$	14,150,213	$	8,408,772	$	16,633,133		$	165,178,716


Segment income (loss) before income tax	$	26,141,879	$	6,361,824	$	14,512,065	$	1,164,807	$	(2,113,951	)	$	46,066,624


Year ended December 31, 2020

Revenues
From external customers	$	69,469,212	$	90,229,818	$	32,115,110	$	8,695,238	$	7,099,620		$	207,608,998
Intersegment revenues		15,929,871		1,536,283		3,966,461		1,875,372		5,369,325			28,677,312

Segment revenues	$	85,399,083	$	91,766,101	$	36,081,571	$	10,570,610	$	12,468,945			236,286,310

Intersegment elimination													(28,677,312	)


Consolidated revenues												$	207,608,998


Segment operating costs and expenses	$	59,371,277	$	69,211,073	$	15,240,814	$	8,572,822	$	14,446,532		$	166,842,518


Segment income (loss) before income tax	$	22,504,443	$	8,777,385	$	13,119,611	$	829,271	$	(2,399,739	)	$	42,830,971

Other Segment Information

Other information reviewed by the chief operating decision maker or regularly provided to the chief operating decision maker was as follows:


	Domestic Fixed Communications Business		Mobile Communications Business			Internet Business		International Fixed Communications Business			Others			Total

Year ended December 31, 2021

Share of profits of associates and joint ventures accounted for using equity method	$	—	$	—		$	—	$	—		$	421,640		$	421,640

Interest income	$	6,792	$	3,648		$	13,135	$	5,251		$	65,858		$	94,684

Interest expenses	$	3,547	$	47,506		$	995	$	7,998		$	158,125		$	218,171

Depreciation and amortization	$	13,977,714	$	20,313,116		$	2,471,495	$	1,417,242		$	1,036,547		$	39,216,114

Capital expenditure	$	13,299,389	$	16,808,936		$	2,942,730	$	444,754		$	1,837,219		$	35,333,028

Impairment loss on right-of-use assets	$	—	$	—		$	—	$	420,590		$	—		$	420,590

Reversal of impairment loss on investment properties	$	83,429	$	—		$	—	$	—		$	—		$	83,429

Impairment loss on intangible assets	$	—	$	28,901		$	—	$	—		$	—		$	28,901


Year ended December 31, 2020
Share of profits of associates and joint ventures accounted for using equity method	$	—	$	—		$	—	$	—		$	242,745		$	242,745

Interest income	$	13,151	$	5,328		$	16,930	$	21,785		$	58,728		$	115,922

Interest expenses	$	6,060	$	55,761		$	856	$	9,535		$	133,851		$	206,063

Depreciation and amortization	$	14,249,950	$	17,799,875		$	2,668,740	$	1,450,423		$	969,584		$	37,138,572

Capital expenditure	$	11,482,779	$	8,827,322		$	1,397,399	$	779,160		$	1,024,160		$	23,510,820

Gain (loss) on disposal of property, plant and equipment	$	1,442,401	$	(3,527	)	$	140	$	(30	)	$	(11,000	)	$	1,427,984

Gain on disposal of investment properties	$	151,357	$	—		$	—	$	—		$	—		$	151,357

Reversal of impairment loss on investment properties	$	27,066	$	—		$	—	$	—		$	—		$	27,066

Impairment loss on intangible assets	$	—	$	9,303		$	—	$	—		$	—		$	9,303

- 111 -

Main Products and Service Revenues


	Year Ended December 31
	2021		2020

Mobile services revenue	$	58,047,852	$	56,724,433
Sales of products		42,907,116		39,390,716
Local telephone and domestic long distance telephone services revenue		25,703,655		26,474,747
Broadband access and domestic leased line services revenue		23,012,443		22,420,164
Data communications internet services revenue		22,281,459		21,446,960
International network and leased line services revenue		4,366,820		3,884,182
Others		34,158,603		37,267,796


	$	210,477,948	$	207,608,998

Geographic Information

The users of the Company’s services are mainly from Taiwan, ROC. The revenues it derived outside Taiwan are mainly revenues from international long distance telephone and leased line services. The geographic information for revenues was as follows:


	Year Ended December 31
	2021		2020

Taiwan, ROC	$	204,472,965	$	200,881,289
Overseas		6,004,983		6,727,709


	$	210,477,948	$	207,608,998

The Company has long-lived assets in U.S., Singapore, Hong Kong, China, Vietnam, Japan and Thailand for $3,234,183 thousand and $3,745,552 thousand at December 31, 2021 and 2020, respectively, in the aforementioned areas, the other long-lived assets are located in Taiwan, ROC.

Major Customers

As of December 31, 2021, and 2020, the Company did not have any single customer whose revenue exceeded 10% of the total revenues.

- 112 -

TABLE 1

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED

YEAR ENDED DECEMBER 31, 2021

(Amounts in Thousands of New Taiwan Dollars)

No.

(Note 1)

Endorsement/

Guarantee

Provider

Guaranteed Party

Limits on
Endorsement/
Guarantee
Amount
Provided to
Each
Guaranteed
Party

Maximum
Balance
for the
Period

Ending
Balance

Actual
Borrowing
Amount

Amount of
Endorsement/
Guarantee
Collateralized
by Properties

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

Maximum
Endorsement/
Guarantee
Amount
Allowable

Endorsement/

Guarantee

Given by

Parent on

Behalf of

Subsidiaries

Endorsement/

Guarantee

Given by

Subsidiaries

on Behalf

of Parent

Endorsement/

Guarantee

Given on

Behalf of

Companies

in
Mainland

China

Note

Name

Nature of

Relationship

(Note 2)

Senao International Co., Ltd.

Aval Technologies Co., Ltd.

613,023

300,000

—

4.89

3,065,115

Yes

Notes 3 and 4

Wiin Technology Co., Ltd.

613,023

200,000

—

3.26

3,065,115

Yes

Notes 3 and 4

Note 1:

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

“0” for the Company.

Subsidiaries are numbered from “1”.

Note 2:

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

A company with which it does business.

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

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

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

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

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

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

Note 3:

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

Note 4:

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

- 113 -

TABLE 2

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD

DECEMBER 31, 2021

(Amounts in Thousands of New Taiwan Dollars)


Held Company Name	Marketable Securities Type and Name	Relationship with the Company		Financial Statement Account	December 31, 2021								Note
Held Company Name	Marketable Securities Type and Name	Relationship with the Company		Financial Statement Account	Shares (Thousands/ Thousand Units)		Carrying Value (Note 1)		Percentage of Ownership		Fair Value		Note

Chunghwa Telecom Co., Ltd.	Stocks
	Taipei Financial Center Corp.		—	Financial assets at FVOCI		172,927	$	2,911,585		12	$	2,911,585	—
	Innovation Works Development Fund, L.P.		—	Financial assets at FVTPL - noncurrent		—		236,672		4		236,672	—
	Industrial Bank of Taiwan II Venture Capital Co., Ltd. (IBT II)		—	Financial assets at FVOCI		5,252		15,475		17		15,475	—
	Global Mobile Corp.		—	Financial assets at FVOCI		7,617		—		3		—	—
	Innovation Works Limited		—	Financial assets at FVOCI		1,000		3,917		2		3,917	—
	RPTI Intergroup International Ltd.		—	Financial assets at FVOCI		4,765		—		10		—	—
	Taiwan mobile payment Co., Ltd.		—	Financial assets at FVOCI		1,200		4,197		2		4,197	—
	Taiwania Capital Buffalo Fund Co., Ltd.		—	Financial assets at FVTPL - noncurrent		555,600		647,998		13		647,998	—
	4 Gamers Entertainment Inc.		—	Financial assets at FVOCI		136		123,432		19.9		123,432	—

Senao International Co., Ltd.	Stocks
	N.T.U. Innovation Incubation Corporation		—	Financial assets at FVOCI		1,200		9,456		9		9,456	—
	UUPON Inc.		—	Financial assets at FVOCI		109		349		2		349	—

CHIEF Telecom Inc.	Stocks
	3 Link Information Service Co., Ltd.		—	Financial assets at FVOCI		374		284		10		284	—
	WPG Holdings Limited		—	Financial assets at FVTPL - current		9		444		—		444	Note 2
	WPG Holdings Limited		—	Financial assets at FVOCI		2,102		104,154		—		104,154	Note 2
	Taichung Commercial Bank Co., Ltd.		—	Financial assets at FVTPL - current		175		2,122		—		2,122	Note 2
	WT Microelectronics Co., Ltd.		—	Financial assets at FVOCI		294		14,391		—		14,391	Note 2

Chunghwa Investment Co., Ltd.	Stocks
	Tatung Technology Inc.		—	Financial assets at FVOCI		4,571		88,611		11		88,611	—
	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		100,000		7		100,000	Note 2

	Limited partnership
	Taiwania Capital Buffalo Fund V, L.P.		—	Financial assets at FVTPL - noncurrent		—		24,105		3		24,105	—

	Stocks
	PChome Online Inc.		—	Financial assets at FVOCI		1,875		240,037		1		240,037	Note 2

Note 1:

Showed at carrying amounts with fair value adjustments.

Note 2:

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

- 114 -

TABLE 3

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

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

YEAR ENDED DECEMBER 31, 2021

(Amounts in Thousands of New Taiwan Dollars)


Company Name	Marketable Securities Type and Name	Financial Statement Account	Counterparty		Nature of Relationship		Beginning Balance					Acquisition				Disposal									Ending Balance
Company Name	Marketable Securities Type and Name	Financial Statement Account	Counterparty		Nature of Relationship		Shares (Thousands/ Thousand Units)		Amount			Shares (Thousands/ Thousand Units)		Amount		Shares (Thousands/ Thousand Units)		Amount		Carrying Value			Gain on Disposal		Shares (Thousands/ Thousand Units)		Amount

Chunghwa Telecom Co., Ltd.	Stocks
	China Airlines, Ltd.	Financial assets at FVOCI		—		—		216,639	$	2,541,176 (Note	)		—	$	—		216,639	$	2,635,568	$	2,541,176 (Note	)	$	94,392		—	$	—

Chunghwa Investment Co., Ltd.	Stocks

	PChome Online Inc.	Financial assets at FVOCI		—		—		—		—			1,875		200,000		—		—		—			—		1,875		200,000 (Note	)

Note:

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

- 115 -

TABLE 4

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

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

YEAR ENDED DECEMBER 31, 2021

(Amounts in Thousands of New Taiwan Dollars)

Buyer

Property

Event Date

Transaction
Amount

Payment Status

Counterparty

Relationship

Information on Previous Title Transfer If
Counterparty is a Related Party

Pricing Reference

Purpose of

Acquisition

Other
Terms

Property
Owner

Relationship

Transaction
Date

Amount

Chunghwa Telecom Co., Ltd.

Land

2021.08.05

564,988

Fully paid

Taipei City Government

—

Not
applicable

According to appraisal report

Operating purpose

—

Chunghwa Precision Test Tech. Co., Ltd.

Land

2021.01.18

534,030

The first installment $80,104 thousand was paid.

Taiwan Powder Technologies Co., Ltd.

—

Not
applicable

According to appraisal report

Space requirements for future business expansion and operational considerations

—

- 116 -

TABLE 5

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

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

YEAR ENDED DECEMBER 31, 2021

(Amounts in Thousands of New Taiwan Dollars)


Company Name	Related Party	Nature of Relationship	Transaction Details						Abnormal Transaction				Notes / Accounts Payable or Receivable
Company Name	Related Party	Nature of Relationship	Purchases/Sales (Note 1)	Amount (Notes 2 and 5)		% to Total		Payment Terms	Unit Price		Payment Terms		Ending Balance (Notes 3 and 5)			% to Total

Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Subsidiary	Sales	$	5,671,851		3	30 days	$	—		—	$	1,145,964			5
			Purchase		728,889		1	30~90 days		—		—		(831,921	)		(5	)
	Aval Technologies Co., Ltd.	Subsidiary	Purchase		437,450		—	30 days		—		—		(70,101	)		—
	CHIEF Telecom Inc.	Subsidiary	Sales		496,173		—	30 days		—		—		53,590			—
			Purchase		101,698		—	60 days		—		—		(11,678	)		—
	Chunghwa System Integration Co., Ltd.	Subsidiary	Purchase		1,420,111		1	30 days		—		—		(406,770	)		(2	)
	CHYP Multimedia Marketing & Communications Co., Ltd.	Subsidiary	Purchase		105,356		—	30 days		—		—		(37,752	)		—
	Honghwa International Co., Ltd.	Subsidiary	Sales		175,966		—	30~60 days		—		—		58,384			—
			Purchase		6,123,929		5	30~60 days		—		—		(901,629	)		(5	)
	Donghwa Telecom Co., Ltd.	Subsidiary	Sales		180,361		—	30 days		—		—		51,551			—
			Purchase		465,949		—	90 days		—		—		(194,142	)		(1	)
	Chunghwa Telecom Global, Inc.	Subsidiary	Purchase		303,822		—	90 days		—		—		(33,605	)		—
	CHT Security Co., Ltd.	Subsidiary	Purchase		364,049		—	30 days		—		—		(114,134	)		(1	)
	Chunghwa Telecom Singapore Pte., Ltd.	Subsidiary	Purchase		155,444		—	30 days		—		—		(39,984	)		—
	International Integrated Systems, Inc.	Subsidiary	Purchase		385,266		—	30 days		—		—		(111,594	)		(1	)
	Senyoung Insurance Agent Co., Ltd.	Subsidiary	Sales		126,146		—	90 days		—		—		57,783			—
	Taiwan International Standard Electronics Co., Ltd.	Associate	Purchase		571,076		1	30~90 days		—		—		(232,041	)		(1	)
	Next Commercial Bank Co., Ltd.	Associate	Sales		259,822		—	30~60 days		—		—		2,845			—
Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		5,969,353		19	30~90 days		—		—		831,709			44
			Purchase		5,515,088		20	30 days		—		—		(1,109,885	)		(38	)
	Aval Technologies Co., Ltd.	Subsidiary	Sales		351,228		1	60 days		—		—		64,646			3
			Purchase		275,666		1	30 days		—		—		(2,212	)		—
CHIEF Telecom Inc.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		259,125		9	60 days		—		—		7,647			4
			Purchase		480,123		32	30 days		—		—		(53,590	)		(46	)
Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		1,808,904		80	30 days		—		—		403,712			69
	WiAdvance Technology Corporation	Associate of parent company	Purchase		125,825		9	60 days		—		—		(125	)		—
CHYP Multimedia Marketing & Communications Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		105,356		25	30 days		—		—		33,790			54
Honghwa International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		6,250,502		99	30~60 days		—		—		901,146			98
Donghwa Telecom Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		465,949		42	90 days		—		—		194,142			51
			Purchase		180,361		16	30 days		—		—		(51,551	)		(41	)
Chunghwa Telecom Global, Inc.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		303,822		52	90 days		—		—		33,605			47
Chunghwa Telecom Singapore Pte., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		155,444		10	30 days		—		—		39,984			11
CHT Security Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		393,546		35	30 days		—		—		114,142			43
International Integrated Systems, Inc.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		385,266		12	30 days		—		—		80,593			19
Aval Technologies Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		437,450		1	30 days		—		—		70,101			4
	Youth Co., Ltd.	Fellow subsidiary	Sales		144,579		—	30 days		—		—		9,996			1
	ISPOT Co., Ltd.	Fellow subsidiary	Sales		104,713		—	30 days		—		—		12,813			1
Light Era Development Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		172,166		62	30~90 days		—		—		59,023			100
Chunghwa Precision Test Tech. Co., Ltd.	Su Zhou Precision Test Tech. Ltd.	Subsidiary	Sales		143,029		3	90 days		—		—		68,603			7

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.

- 117 -

TABLE 6

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

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

DECEMBER 31, 2021

(Amounts in Thousands of New Taiwan Dollars)


Company Name	Related Party	Nature of Relationship	Ending Balance			Turnover Rate (Note 1)		Overdue				Amounts Received in Subsequent Period		Allowance for Bad Debts
Company Name	Related Party	Nature of Relationship	Ending Balance			Turnover Rate (Note 1)		Amounts		Action Taken		Amounts Received in Subsequent Period		Allowance for Bad Debts

Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Subsidiary	$	1,305,396 (Note 2	)		11.25	$	—		—	$	1,291,542	$	—
Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		983,033 (Note 2	)		7.53		—		—		10,438		—
Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		403,712 (Note 2	)		4.85		—		—		278,110		—
Honghwa International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		901,146 (Note 2	)		7.89		—		—		220,914		—
Donghwa Telecom Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		194,142 (Note 2	)		2.80		—		—		123,839		—
CHT Security Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		114,142 (Note 2	)		3.51		—		—		87,716		—
Chunghwa Precision Test Tech. Co., Ltd.	Su Zhou Precision Test Tech. Ltd.	Subsidiary		68,603 (Note 2	)		2.92		—		—		7,970		—

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.

- 118 -

TABLE 7

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

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

YEAR ENDED DECEMBER 31, 2021

(Amounts in Thousands of New Taiwan Dollars)


				Original Investment Amount				Balance as of December 31, 2021
Investor Company	Investee Company	Location	Main Businesses and Products	December 31, 2021		December 31, 2020		Shares (Thousands)		Percentage of Ownership (%)		Carrying Value (Note 3)			Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Taiwan	Handset and peripherals retailer; sales of CHT mobile phone plans as an agent	$	1,065,813	$	1,065,813		71,773		28	$	1,683,237		$	596,948		$	158,643		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		3,856,921			33,891			17,331		Subsidiary (Note 5)
	Donghwa Telecom Co., Ltd.	Hong Kong	International private leased circuit, IP VPN service, and IP transit services		691,163		1,567,453		178,590		100		613,536			(27,982	)		(27,982	)	Subsidiary (Note 5)
	Chunghwa Telecom Singapore Pte., Ltd.	Singapore	International private leased circuit, IP VPN service, and IP transit services		574,112		574,112		26,383		100		1,057,720			188,941			188,800		Subsidiary (Note 5)
	Chunghwa System Integration Co., Ltd.	Taiwan	Providing system integration services and telecommunications equipment		838,506		838,506		60,000		100		716,992			28,638			3,585		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		1,845,072			686,567			397,403		Subsidiary (Note 5)
	Chunghwa Investment Co., Ltd.	Taiwan	Investment		639,559		639,559		68,085		89		3,202,188			296,371			263,916		Subsidiary (Note 5)
	Prime Asia Investments Group Ltd. (B.V.I.)	British Virgin Islands	Investment		385,274		385,274		1		100		153,582			(5,412	)		(5,412	)	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		624,218			358,766			338,750		Subsidiary (Note 5)
	CHYP Multimedia Marketing & Communications Co., Ltd.	Taiwan	Digital information supply services and advertisement services		150,000		150,000		15,000		100		201,424			22,313			22,647		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		97,014			(1,201	)		(1,201	)	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		464,281			73,251			73,638		Subsidiary (Note 5)
	CHT Security Co., Ltd.	Taiwan	Computing equipment installation, wholesale of computing and business machinery equipment and software, management consulting services, data processing services, digital information supply services and internet identify services		240,000		240,000		24,000		77		375,827			167,194			130,861		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		99,853			3,835			3,835		Subsidiary (Note 5)
	Spring House Entertainment Tech. Inc.	Taiwan	Software design services, internet contents production and play, and motion picture production and distribution		62,209		62,209		8,251		56		143,613			47,311			26,513		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		121,879			3,046			4,962		Subsidiary (Note 5)
	Smartfun Digital Co., Ltd.	Taiwan	Providing diversified family education digital services		65,000		65,000		6,500		65		79,876			17,949			11,557		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		98,852			21,693			21,693		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		(4,908	)		(3,615	)		131		Subsidiary (Note 5)
	International Integrated Systems, Inc.	Taiwan	IT solution provider, IT application consultation, system integration and package solution		517,423		517,423		37,211		51		586,133			152,890			48,312		Subsidiary (Note 5)

(Continued)

- 119 -

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)

YEAR ENDED DECEMBER 31, 2021

(Amounts in Thousands of New Taiwan Dollars)


				Original Investment Amount				Balance as of December 31, 2021						Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
Investor Company	Investee Company	Location	Main Businesses and Products	December 31, 2021		December 31, 2020		Shares (Thousands)		Percentage of Ownership (%)		Carrying Value (Note 3)		Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
	Viettel-CHT Co., Ltd.	Vietnam	IDC services	$	288,327	$	288,327	$	—		30	$	447,097	$	271,072		$	80,881		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		347,269		368,779			158,100		Associate
	KKBOX Taiwan Co., Ltd.	Taiwan	Providing of music on-line, software, electronic information, and advertisement services		67,025		67,025		4,438		30		157,524		(17,884	)		(5,365	)	Associate
	So-net Entertainment Taiwan Limited	Taiwan	Online service and sale of computer hardware		120,008		120,008		9,429		30		217,021		(34,418	)		(10,325	)	Associate
	KingwayTek Technology Co., Ltd.	Taiwan	Design and sale of digital map, technical support for computer peripherals device, design and development of system programming projects		66,684		66,684		9,557		23		258,943		45,965			11,028		Associate
	Taiwan International Ports Logistics Corporation	Taiwan	Import and export storage, logistic warehouse, and ocean shipping service		80,000		80,000		8,000		27		70,121		53,228			14,196		Associate
	Alliance Digital Tech Co., Ltd.	Taiwan	Development of mobile payments and information processing service		—		60,000		—		—		—		—			—		Associate (Note 6)
	Chunghwa PChome Fund I Co., Ltd.	Taiwan	Investment, venture capital, investment advisor, management consultant and other consultancy service		200,000		200,000		20,000		50		222,491		59,270			29,635		Associate
	Cornerstone Ventures Co., Ltd.	Taiwan	Investment, venture capital, investment advisor, management consultant and other consultancy service		4,900		4,900		490		49		6,588		1,081			530		Associate
	Next Commercial Bank Co., Ltd.	Taiwan	Online banking business		4,190,000		4,190,000		419,000		42		3,592,054		(445,665	)		(184,822	)	Associate
	Chunghwa SEA Holdings	Taiwan	Investment business		10,200		10,200		1,020		51		9,932		(525	)		(268	)	Joint venture
	WiAdvance Technology Corporation	Taiwan	Software solution integration		273,800		—		3,700		20		253,873		(75,184	)		(20,414	)	Associate
Senao International Co., Ltd.	Senao Networks, Inc.	Taiwan	Telecommunication facilities manufactures and sales		202,758		202,758		16,579		34		1,077,604		449,270			151,821		Associate
	Senao International (Samoa) Holding Ltd.	Samoa Islands	International investment		2,046,143		2,253,828		31,875		100		32,968		(3,829	)		(3,829	)	Subsidiary (Note 5)
	Youth Co., Ltd.	Taiwan	Sale of information and communication technologies products		427,850		427,850		14,752		96		196,426		1,860			(35,550	)	Subsidiary (Note 5)
	Aval Technologies Co., Ltd.	Taiwan	Sale of information and communication technologies products		89,550		89,550		10,840		100		119,614		9,112			9,106		Subsidiary (Note 5)
	Senyoung Insurance Agent Co., Ltd.	Taiwan	Property and liability insurance agency		59,000		59,000		5,900		100		99,817		36,097			36,085		Subsidiary (Note 5)
CHIEF Telecom Inc.	Unigate Telecom Inc.	Taiwan	Telecommunications and internet service		2,000		2,000		200		100		1,079		99			99		Subsidiary (Note 5)
	Chief International Corp.	Samoa Islands	Telecommunications and internet service		6,068		6,068		200		100		83,782		7,380			7,380		Subsidiary (Note 5)
Chunghwa Telecom Singapore Pte., Ltd.	ST-2 Satellite Ventures Pte., Ltd.	Singapore	Operation of ST-2 telecommunications satellite		409,061		409,061		18,102		38		518,165		503,532			191,342		Associate
	CHT Infinity Singapore Pte. Ltd.	Singapore	Investment business		55,720		—		2,000		40		54,952		(1,034	)		(413	)	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		2,584,235		891,760			305,428		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		91,047		686,567			20,254		Associate (Note 5)
	Senao International Co., Ltd.	Taiwan	Selling and maintaining mobile phones and its peripheral products		49,731		49,731		1,001		—		44,505		596,948			2,314		Associate (Note 5)
	AgriTalk Technology Inc.	Taiwan	Providing smart agricultural solutions, scientific agricultural product, biological inhibitor, and biochips		33,000		—		1,650		17		17,637		(5,791	)		(872	)	Associate (Note 7)
	Imedtac Co., Ltd.	Taiwan	Providing medical AIoT solution, biomedical engineering services, and sales of medical device as an agent		48,000		—		960		7		44,565		(3,110	)		955		Associate (Note 8)

(Continued)

- 120 -

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)

YEAR ENDED DECEMBER 31, 2021

(Amounts in Thousands of New Taiwan Dollars)


				Original Investment Amount				Balance as of December 31, 2021						Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
Investor Company	Investee Company	Location	Main Businesses and Products	December 31, 2021		December 31, 2020		Shares (Thousands)		Percentage of Ownership (%)		Carrying Value (Note 3)		Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
Chunghwa Precision Test Tech. Co., Ltd.	Chunghwa Precision Test Tech USA Corporation	United States	Design and after-sale services of semiconductor testing components and printed circuit board	$	74,192	$	12,636		2,600		100	$	85,223	$	1,164		$	1,164		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		2,263		118			118		Subsidiary (Note 5)
	Chunghwa Precision Test Tech. International, Ltd.	Samoa Islands	Wholesale and retail of electronic materials, and investment		173,649		116,790		5,700		100		155,985		8,165			8,882		Subsidiary (Note 5)
Prime Asia Investments Group, Ltd. (B.V.I.)	Chunghwa Hsingta Co., Ltd.	Hong Kong	Investment		375,274		375,274		1		100		153,582		(5,412	)		(5,412	)	Subsidiary (Note 5)
Senao International (Samoa) Holding Ltd.	Senao International HK Limited	Hong Kong	International investment		2,060,467		2,248,963		80,440		100		30,845		(3,834	)		(3,834	)	Subsidiary (Note 5)
Youth Co., Ltd.	ISPOT Co., Ltd.	Taiwan	Sale of information and communication technologies products		53,021		53,021		—		100		11,903		1,533			1,341		Subsidiary (Note 5)
	Youyi Co., Ltd.	Taiwan	Maintenance of information and communication technologies products		21,354		21,354		—		100		17,624		(331	)		(521	)	Subsidiary (Note 5)
Aval Technologies Co., Ltd.	Wiin Technology Co., Ltd.	Taiwan	Sale of information and communication technologies products		29,550		29,550		3,305		100		39,440		5,964			5,964		Subsidiary (Note 5)
Senyoung Insurance Agent Co., Ltd.	Senaolife Insurance Agent Co., Ltd.	Taiwan	Life insurance services		29,500		29,500		2,950		100		23,489		(2,697	)		(2,697	)	Subsidiary (Note 5)
CHYP Multimedia Marketing & Communications Co., Ltd	Click Force Marketing Company	Taiwan	Advertisement services		44,607		44,607		1,154		49		36,938		12,527			5,631		Associate
International Integrated Systems, Inc.	Infoexplorer International Co., Ltd.	Samoa	Investment		24,806		24,806		795		100		26,084		(177	)		(177	)	Subsidiary (Note 5)
	IISI Investment Co., Ltd.	Mauritius	Investment		81,302		81,302		244		100		24,724		(975	)		(975	)	Subsidiary (Note 5)
	Unitronics Technology Corp.	Taiwan	Development and maintenance of information system		55,569		55,569		5,065		99.96		76,791		9,991			9,988		Subsidiary (Note 5)
Infoexplorer International Co., Ltd.	International Integrated Systems (Hong Kong) Limited	Hong Kong	Investment and engaging in technical consulting service		24,336		24,336		780		100		26,078		(176	)		(176	)	Subsidiary (Note 5)
IISI Investment Co., Ltd.	Leading Tech Co., Ltd.	Mauritius	Investment		65,374		65,374		316		100		15,548		90			90		Subsidiary (Note 5)
Leading Tech Co., Ltd.	Leading Systems Co., Ltd.	Mauritius	Investment		100,693		100,693		300		100		10,833		90			90		Subsidiary (Note 5)

Note 1:

The amounts were based on audited financial statements.

Note 2:

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

Note 3:

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

Note 4:

Investments in mainland China are included in Table 8.

Note 5:

The amount was eliminated upon consolidation.

Note 6:

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

Note 7:

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

Note 8:

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

(Concluded)

- 121 -

TABLE 8

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INVESTMENTS IN MAINLAND CHINA

YEAR ENDED DECEMBER 31, 2021

(Amounts in Thousands of New Taiwan Dollars)


						Accumulated		Investment Flows				Accumulated												Accumulated
Investee	Main Businesses and Products	Total Amount of Paid-in Capital		Investment Type (Note 1)		Outflow of Investment from Taiwan as of January 1, 2021		Outflow		Inflow		Outflow of Investment from Taiwan as of December 31, 2021		Net Income (Loss) of the Investee			% Ownership of Direct or Indirect Investment		Investment Gain (Loss) (Note 2)			Carrying Value as of December 31, 2021		Inward Remittance of Earnings as of December 31, 2021		Note

Senao Trading (Fujian) Co., Ltd.	Sale of information and communication technologies products	$	1,073,170		2	$	1,073,170	$	—	$	191,147	$	882,023	$	—			100	$	—		$	—	$	—		Notes 8 and 13
Senao International Trading (Shanghai) Co., Ltd.	Sale of information and communication technologies products		955,838		2		955,838		—		—		955,838		1,283			100		1,283			—		—		Notes 9 and 13
Chunghwa Telecom (China) Co., Ltd.	Integrated information and communication solution services for enterprise clients, and intelligent energy network service		177,176		2		177,176		—		—		177,176		(2,667	)		100		(2,667	)		29,312		—		Notes 11 and 13
Jiangsu Zhenghua Information Technology Company, LLC	Providing intelligent energy saving solution and intelligent buildings services		189,410		2		142,057		—		—		142,057		—			75		—			—		—		Notes 10 and 13
Shanghai Taihua Electronic Technology Limited	Design of printed circuit board and related consultation service		51,233		2		51,233		—		—		51,233		(7,486	)		100		(7,486	)		8,928		—		Note 13
Su Zhou Precision Test Tech. Ltd.	Assembly processed of circuit board, design of printed circuit board and related consultation service		119,199		2		62,340		56,859		—		119,199		15,716			100		15,716			149,851		—		Note 13
Shanghai Chief Telecom Co., Ltd.	Telecommunications and internet service		10,150		1		4,973		—		—		4,973		755			49		370			13,829		—		Note 13
International Integrated Systems Inc. (Shanghai)	Development and maintenance of information system		48,753		2		39,923		—		—		39,923		(2,747	)		100		(2,747	)		—		—		Notes 12 and 13

(Continued)

- 122 -


Investee	Accumulated Investment in Mainland China as of December 31, 2021		Investment Amounts Authorized by Investment Commission, MOEA		Upper Limit on Investment Stipulated by Investment Commission, MOEA

SENAO and its subsidiaries (Note 3)	$	1,837,861	$	2,047,858	$	3,685,819
Chunghwa Telecom (China) Co., Ltd. (Note 4)		177,176		177,176		234,757,470
Jiangsu Zhenghua Information Technology Company, LLC (Note 4)		142,057		142,057		234,757,470
Chunghwa Precision Test Tech Co., Ltd and its subsidiaries (Note 5)		170,432		216,185		4,527,127
Shanghai Chief Telecom Co., Ltd. (Note 6)		4,973		4,973		1,855,630
IISI and its subsidiaries (Note 7)		39,923		39,923		666,330

Note 1:

Investments are divided into three categories as follows:

Direct investment.

Investments through a holding company registered in a third region.

Others.

Note 2:

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

Note 3:

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

Note 4:

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

Note 5:

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

Note 6:

Shanghai Chief Telecom Co., Ltd. was calculated based on the consolidated net assets value of CHIEF Telecom Inc.

Note 7:

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

Note 8:

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

Note 9:

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

Note 10:

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

Note 11:

Chunghwa Telecom (China) Co., Ltd. was approved to end and dissolve its business in August 2020. The liquidation of Chunghwa Telecom (China) Co., Ltd. is still in process.

Note 12:

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

Note 13:

The amount was eliminated upon consolidation.

(Concluded)

- 123 -

TABLE 9

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS

YEAR ENDED DECEMBER 31, 2021

(Amounts in Thousands of New Taiwan Dollars)


Year	No. (Note 1)		Company Name	Related Party	Nature of Relationship (Note 2)		Transaction Details
Year	No. (Note 1)		Company Name	Related Party	Nature of Relationship (Note 2)		Financial Statement Account	Amount (Note 5)		Payment Terms (Note 3)		% to Total Sales or Assets (Note 4)

2021		0	Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.		a	Accounts receivable	$	1,145,964		—		—
							Accrued custodial receipts		159,432		—		—
							Accounts payable		831,921		—		—
							Amounts collected for others		151,324		—		—
							Revenues		5,671,851		—		3
							Operating costs and expenses		592,883		—		—
							Inventories		136,006		—		—
				CHIEF Telecom Inc.		a	Accounts receivable		53,590		—		—
							Accounts payable		11,678		—		—
							Revenues		496,173		—		—
							Operating costs and expenses		101,698		—		—
				Chunghwa System Integration Co., Ltd.		a	Accounts payable		406,770		—		—
							Operating costs and expenses		1,273,162		—		1
							Inventories		146,949		—		—
							Property, plant and equipment		270,412		—		—
				Chunghwa Telecom Global Inc.		a	Accounts payable		33,605		—		—
							Operating costs and expenses		303,822		—		—
				Donghwa Telecom Co., Ltd.		a	Accounts receivable		51,551		—		—
							Accounts payable		194,142		—		—
							Revenues		180,361		—		—
							Operating costs and expenses		465,949		—		—
				Light Era Development Co., Ltd.		a	Property, plant and equipment		124,978		—		—
				Honghwa International Co., Ltd.		a	Accounts receivable		58,384		—		—
							Accounts payable		901,629		—		—
							Revenues		175,966		—		—
							Operating costs and expenses		6,036,734		—		3
							Inventories		87,195		—		—
							Property, plant and equipment		138,223		—		—
				CHT Security Co., Ltd.		a	Accounts payable		114,134		—		—
							Operating costs and expenses		325,487		—		—
							Inventories		38,562		—		—
				International Integrated Systems, Inc.		a	Accounts payable		111,594		—		—
							Operating costs and expenses		360,537		—		—
							Inventories		24,729		—		—

(Continued)

- 124 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS

YEAR ENDED DECEMBER 31, 2021

(Amounts in Thousands of New Taiwan Dollars)


Year	No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)		Transaction Details
Year	No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)		Financial Statement Account	Amount (Note 5)		Payment Terms (Note 3)		% to Total Sales or Assets (Note 4)
			Aval Technologies Co., Ltd.		a	Accounts payable	$	70,101		—		—
						Operating costs and expenses		388,141		—		—
						Inventories		49,309		—		—
			Chunghwa Telecom Singapore Pte., Ltd.		a	Accounts payable		39,984		—		—
						Operating costs and expenses		155,444		—		—
			CHYP Multimedia Marketing & Communications Co., Ltd.		a	Accounts payable		37,752		—		—
						Operating costs and expenses		105,356		—		—
			Senyoung Insurance Agent Co., Ltd.		a	Accounts receivable		57,783		—		—
						Revenues		126,146		—		—

Note 1:

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

“0” for the Company.

Subsidiaries are numbered from “1”.

Note 2:

Related party transactions are divided into three categories as follows:

The Company to subsidiaries.

Subsidiaries to the Company.

Subsidiaries to subsidiaries.

Note 3:

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

Note 4:

For assets and liabilities, amount is shown as a percentage to consolidated total assets as of December 31, 2021, while revenues, costs and expenses are shown as a percentage to consolidated revenues for year ended December 31, 2021.

Note 5:

The amount was eliminated upon consolidation.

(Concluded)

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TABLE 10

CHUNGHWA TELECOM CO., LTD.

INFORMATION OF MAJOR STOCKHOLDERS

DECEMBER 31, 2021


Name of Major Stockholders	Shares
Name of Major Stockholders	Number of Shares		Percentage of Ownership (%)
Ministry of Transportation and Communications		2,737,718,976		35.29
Shin Kong Life Insurance Co., Ltd.		438,973,184		5.65

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.

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/s/ Dien Sheng Chang

/s/ Cheng Hung Kuo

Deloitte & Touche

Taipei, Taiwan

Republic of China