EX-99.2

EX-99.2 3 d461941dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

Chunghwa Telecom Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the

Years Ended December 31, 2022 and 2021 and

Independent Auditors’ Report

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, 2022 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 24, 2023

- 1 -

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, 2022 and 2021, 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, 2022 and 2021, 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 the Standards on Auditing of 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, 2022. 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.

- 2 -

The key audit matter of the consolidated financial statements for the year ended December 31, 2022 is as follows:

Revenue Recognition on Mobile Service

Refer to Notes 3 and 43 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 manual 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, 2022 and 2021, 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 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.

- 3 -

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 Standards on Auditing of 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 Standards on Auditing of 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 and appropriate audit evidence regarding the financial information of 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.

- 4 -

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, 2022, 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 audits resulting in this independent auditors’ report are Yih-Shin Kao and Mei Yen Chiang.


/s/ Yih-Shin Kao				/s/ Mei Yen Chiang

Deloitte & Touche

Taipei, Taiwan

Republic of China

February 24, 2023

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, 2022 AND 2021

(In Thousands of New Taiwan Dollars)


	2022					2021
	Amount			%		Amount			%
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 3 and 6)	$	50,192,604			10	$	39,778,624			8
Financial assets at fair value through profit or loss (Notes 3, 4 and 7)		3,953			—		2,566			—
Hedging financial assets (Notes 3 and 20)		12,891			—		—			—
Contract assets (Notes 3 and 29)		6,055,343			1		5,554,070			1
Trade notes and accounts receivable, net (Notes 3, 4, 9 and 29)		24,672,473			5		23,947,107			5
Receivables from related parties (Note 37)		75,061			—		41,528			—
Inventories (Notes 3, 4 and 10)		11,316,406			2		11,327,409			2
Prepayments (Note 11)		2,398,608			—		2,330,097			—
Other current monetary assets (Notes 12, 27 and 34)		3,618,902			1		5,060,878			1
Other current assets (Notes 18, 19, 31 and 38)		3,555,423			1		2,978,780			1

Total current assets		101,901,664			20		91,021,059			18

NONCURRENT ASSETS
Financial assets at fair value through profit or loss (Notes 3, 4 and 7)		1,020,203			—		908,775			—
Financial assets at fair value through other comprehensive income (Notes 3, 4, 8 and 34)		3,491,381			1		3,615,888			1
Investments accounted for using equity method (Notes 3, 14 and 34)		7,155,851			1		7,332,774			2
Contract assets (Notes 3 and 29)		3,136,801			1		2,607,744			—
Property, plant and equipment (Notes 3, 4, 15, 34, 37 and 38)		291,527,910			56		289,100,461			56
Right-of-use assets (Notes 3, 4, 16 and 37)		11,102,549			2		11,050,936			2
Investment properties (Notes 3, 4 and 17)		9,803,861			2		9,662,638			2
Intangible assets (Notes 3, 4, 18 and 37)		79,187,087			15		83,945,083			16
Deferred income tax assets (Notes 3 and 31)		2,196,645			—		2,785,006			1
Incremental costs of obtaining contracts (Notes 3 and 29)		979,914			—		987,656			—
Net defined benefit assets (Notes 3, 4 and 27)		5,265,721			1		3,391,077			1
Prepayments (Note 11)		1,728,277			—		1,798,463			—
Other noncurrent assets (Notes 19, 38 and 39)		4,705,624			1		4,862,800			1

Total noncurrent assets		421,301,824			80		422,049,301			82

TOTAL	$	523,203,488			100	$	513,070,360			100

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 21)	$	722,000			—	$	65,000			—
Financial liabilities at fair value through profit or loss (Notes 3, 4 and 7)		—			—		6,180			—
Hedging financial liabilities (Notes 3 and 20)		—			—		8,286			—
Contract liabilities (Notes 3 and 29)		13,390,439			3		12,234,276			2
Trade notes and accounts payable (Note 24)		16,428,856			3		18,063,288			4
Payables to related parties (Note 37)		539,194			—		391,358			—
Current tax liabilities (Notes 3 and 31)		4,956,465			1		4,593,458			1
Lease liabilities (Notes 3, 4, 16, 34 and 37)		3,338,813			1		3,210,564			1
Other payables (Notes 25 and 34)		25,079,960			5		24,436,708			5
Provisions (Notes 3 and 26)		226,019			—		284,813			—
Other current liabilities		1,016,179			—		998,367			—

Total current liabilities		65,697,925			13		64,292,298			13

NONCURRENT LIABILITIES
Long-term loans (Notes 22 and 38)		1,600,000			—		1,600,000			—
Bonds payable (Note 23)		30,477,357			6		26,976,675			6
Contract liabilities (Notes 3 and 29)		7,674,095			2		6,840,056			1
Deferred income tax liabilities (Notes 3 and 31)		2,300,845			—		2,189,411			—
Provisions (Notes 3 and 26)		173,033			—		141,865			—
Lease liabilities (Notes 3, 4, 16, 34 and 37)		7,333,694			2		7,061,689			2
Customers’ deposits (Note 37)		5,156,700			1		5,336,343			1
Net defined benefit liabilities (Notes 3, 4 and 27)		2,285,224			—		2,287,663			—
Other noncurrent liabilities		6,726,187			1		5,081,910			1

Total noncurrent liabilities		63,727,135			12		57,515,612			11

Total liabilities		129,425,060			25		121,807,910			24

EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT (Notes 13 and 28)
Common stocks		77,574,465			15		77,574,465			15

Additional paid-in capital		171,300,898			32		171,279,625			33

Retained earnings
Legal reserve		77,574,465			15		77,574,465			15
Special reserve		3,083,569			1		2,675,419			1
Unappropriated earnings		51,868,574			10		50,639,022			10

Total retained earnings		132,526,608			26		130,888,906			26

Others		(223,084	)		—		(408,150	)		—

Total equity attributable to stockholders of the parent		381,178,887			73		379,334,846			74
NONCONTROLLING INTERESTS (Notes 13 and 28)		12,599,541			2		11,927,604			2

Total equity		393,778,428			75		391,262,450			76

TOTAL	$	523,203,488			100	$	513,070,360			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, 2022 AND 2021

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


	2022					2021
	Amount			%		Amount			%
REVENUES (Notes 3, 29, 37 and 43)	$	216,739,234			100	$	210,477,948			100
OPERATING COSTS (Notes 3, 10, 27, 30 and 37)		136,717,375			63		135,110,751			64

GROSS PROFIT		80,021,859			37		75,367,197			36

OPERATING EXPENSES (Notes 3, 9, 27, 30 and 37)
Marketing		22,819,067			10		20,944,091			10
General and administrative		6,579,537			3		5,293,136			2
Research and development		3,774,309			2		3,687,747			2
Expected credit loss		117,070			—		142,991			—

Total operating expenses		33,289,983			15		30,067,965			14

OTHER INCOME AND EXPENSES (Notes 16, 17, 18, 30 and 43)		93,013			—		(369,411	)		—

INCOME FROM OPERATIONS		46,824,889			22		44,929,821			22

NON-OPERATING INCOME AND EXPENSES
Interest income (Note 43)		249,129			—		94,684			—
Other income (Notes 8, 30 and 37)		368,523			—		377,820			—
Other gains and losses (Notes 14, 30, 36 and 37)		(403,784	)		—		460,830			—
Interest expense (Notes 16, 30, 37 and 43)		(262,738	)		—		(218,171	)		—
Share of profits of associates and joint ventures accounted for using equity method (Notes 14 and 43)		452,931			—		421,640			—

Total non-operating income and expenses		404,061			—		1,136,803			—

INCOME BEFORE INCOME TAX		47,228,950			22		46,066,624			22
INCOME TAX EXPENSE (Notes 3 and 31)		9,228,911			4		8,871,745			4

NET INCOME		38,000,039			18		37,194,879			18

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2022 AND 2021

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


	2022					2021
	Amount			%		Amount			%
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit pension plans (Note 27)	$	1,153,576			—	$	390,441			—
Unrealized gain or loss on investments in equity instruments at fair value through other comprehensive income (Notes 3, 28 and 36)		(136,563	)		—		(1,185,849	)		—
Gain or loss on hedging instruments subject to basis adjustment (Notes 3 and 20)		21,177			—		(10,038	)		—
Share of other comprehensive income (loss) of associates and joint ventures (Note 14)		2,802			—		(4,154	)		—
Income tax relating to items that will not be reclassified to profit or loss (Note 31)		(230,715	)		—		(78,088	)		—

		810,277			—		(887,688	)		—

Items that may be reclassified subsequently to profit or loss:
Exchange differences arising from the translation of the foreign operations		296,484			—		(76,620	)		—
Share of other comprehensive income (loss) of associates and joint ventures (Note 14)		5,961			—		(1,523	)		—

		302,445			—		(78,143	)		—

Total other comprehensive income (loss), net of income tax		1,112,722			—		(965,831	)		—

TOTAL COMPREHENSIVE INCOME	$	39,112,761			18	$	36,229,048			18

NET INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	36,477,157			17	$	35,753,579			17
Noncontrolling interests		1,522,882			1		1,441,300			1

	$	38,000,039			18	$	37,194,879			18

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2022 AND 2021

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


	2022				2021
	Amount		%		Amount		%
COMPREHENSIVE INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	37,569,082		17	$	34,789,149		17
Noncontrolling interests		1,543,679		1		1,439,899		1

	$	39,112,761		18	$	36,229,048		18

EARNINGS PER SHARE (Note 32)
Basic	$	4.70			$	4.61
Diluted	$	4.70			$	4.60


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, 2022 AND 2021

(In Thousands of New Taiwan Dollars)


	Equity Attributable to Stockholders of the Parent (Notes 13, 20 and 28)
													Others
																Unrealized Gain or Loss on Financial Assets at Fair Value Through Other Comp- rehensive Income
													Exchange Differences Arising from the Translation of the Foreign Operations


						Retained Earnings													Gain or Loss on Hedging Instruments						Non- controlling Interests (Notes 13 and 28)
	Common Stocks		Additional Paid-in Capital			Legal Reserve		Special Reserve		Unappro- priated Earnings									Gain or Loss on Hedging Instruments			Total			Non- controlling Interests (Notes 13 and 28)			Total Equity
BALANCE, JANUARY 1, 2021	$	77,574,465	$	171,261,379		$	77,574,465	$	2,675,419	$	47,918,166		$	(314,531	)	$	1,239,901		$	1,752		$	377,931,016		$	11,327,441		$	389,258,457
Appropriation of 2020 earnings
Cash dividends distributed by Chunghwa		—		—			—		—		(33,403,565	)		—			—			—			(33,403,565	)		—			(33,403,565	)
Cash dividends distributed by subsidiaries		—		—			—		—		—			—			—			—			—			(896,335	)		(896,335	)
Unclaimed dividend		—		1,968			—		—		—			—			—			—			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
Appropriation of 2021 earnings
Special reserve		—		—			—		408,150		(408,150	)		—			—			—			—			—			—
Cash dividends distributed by Chunghwa		—		—			—		—		(35,746,314	)		—			—			—			(35,746,314	)		—			(35,746,314	)
Cash dividends distributed by subsidiaries		—		—			—		—		—			—			—			—			—			(1,053,240	)		(1,053,240	)
Unclaimed dividend		—		1,632			—		—		—			—			—			—			1,632			—			1,632
Change in investments in associates and joint ventures accounted for using equity method		—		(12,719	)		—		—		—			—			—			—			(12,719	)		(1,491	)		(14,210	)
Change in additional paid-in capital for not proportionately participating in the capital increase of subsidiaries		—		5,153			—		—		—			—			—			—			5,153			9,847			15,000
Net income for the year ended December 31, 2022		—		—			—		—		36,477,157			—			—			—			36,477,157			1,522,882			38,000,039
Other comprehensive income (loss) for the year ended December 31, 2022		—		—			—		—		906,975			281,063			(117,290	)		21,177			1,091,925			20,797			1,112,722

Total comprehensive income (loss) for the year ended December 31, 2022		—		—			—		—		37,384,132			281,063			(117,290)			21,177			37,569,082			1,543,679			39,112,761

Disposal of investments in equity instruments at fair value through other comprehensive income		—		—			—		—		(116)			—			116			—			—			—			—
Share-based payment transactions of subsidiaries		—		27,207			—		—		—			—			—			—			27,207			62,385			89,592
Net increase in noncontrolling interests		—		—			—		—		—			—			—			—			—			110,757			110,757

BALANCE, DECEMBER 31, 2022	$	77,574,465	$	171,300,898		$	77,574,465	$	3,083,569	$	51,868,574		$	(111,213	)	$	(124,762	)	$	12,891		$	381,178,887		$	12,599,541		$	393,778,428

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

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2022 AND 2021

(In Thousands of New Taiwan Dollars)


	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	$	47,228,950		$	46,066,624
Adjustments for:
Depreciation		32,785,526			31,832,326
Amortization		6,642,657			6,568,547
Amortization of incremental costs of obtaining contracts		840,553			815,241
Expected credit loss		117,070			142,991
Interest expense		262,738			218,171
Interest income		(249,129	)		(94,684	)
Dividend income		(157,465	)		(154,008	)
Compensation cost of share-based payment transactions		15,513			19,371
Share of profits of associates and joint ventures accounted for using equity method		(452,931	)		(421,640	)
Loss on disposal of property, plant and equipment		4,907			3,349
Gain on disposal of financial instruments		(726	)		(353	)
Gain on disposal of investments accounted for using equity method		—			(3,239	)
Provision for impairment loss and obsolescence of inventory		34,167			206,824
Impairment loss on right-of-use assets		—			420,590
Reversal of impairment loss on investment properties		(107,467	)		(83,429	)
Impairment loss on intangible assets		9,547			28,901
Valuation loss (gain) on financial assets and liabilities at fair value through profit or loss, net		205,805			(243,381	)
Others		254,276			(132,924	)
Changes in operating assets and liabilities:
Decrease (increase) in:
Contract assets		(1,031,379	)		(335,554	)
Trade notes and accounts receivable		(785,476	)		(1,339,250	)
Receivables from related parties		(33,533	)		189,168
Inventories		(23,164	)		874,670
Prepayments		1,675			391,207
Other current monetary assets		(164,346	)		(385,757	)
Other current assets		(576,643	)		(629,683	)
Incremental cost of obtaining contracts		(832,811	)		(803,304	)
Increase (decrease) in:
Contract liabilities		1,990,202			(1,651,461	)
Trade notes and accounts payable		(1,630,693	)		2,468,093
Payables to related parties		147,836			(254,586	)
Other payables		782,340			248,112

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2022 AND 2021

(In Thousands of New Taiwan Dollars)


	2022			2021
Provisions	$	(27,626	)	$	12,507
Other current liabilities		60,163			(12,390	)
Net defined benefit plans		(723,507	)		(755,749	)

Cash generated from operations		84,587,029			83,205,300
Interests paid		(239,357	)		(192,064	)
Income taxes paid		(8,396,824	)		(8,155,036	)

Net cash provided by operating activities		75,950,848			74,858,200

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at fair value through other comprehensive income		(19,394	)		(313,171	)
Proceeds from disposal of financial assets at fair value through other comprehensive income		154			2,911,570
Proceeds from capital reduction of financial assets at fair value through other comprehensive income		7,184			—
Acquisition of financial assets at fair value through profit or loss		(360,214	)		(44,072	)
Proceeds from disposal of financial assets at fair value through profit or loss		14,573			25,201
Proceeds from capital reduction of financial assets at fair value through profit or loss		65,967			—
Acquisition of time deposits and negotiable certificates of deposit with maturities of more than three months		(5,669,860	)		(17,369,138	)
Proceeds from disposal of time deposits and negotiable certificates of deposit with maturities of more than three months		7,310,021			18,446,270
Acquisition of investments accounted for using equity method		(52,175	)		(329,520	)
Proceeds from disposal of investments accounted for using equity method		—			8,519
Proceeds from capital reduction of investments accounted for using equity method		340,182			—
Acquisition of property, plant and equipment		(31,534,946	)		(35,333,028	)
Proceeds from disposal of property, plant and equipment		15,743			27,038
Acquisition of intangible assets		(1,892,675	)		(255,852	)
Acquisition of investment properties		(18,333	)		(146	)
Decrease in other noncurrent assets		235,178			336,878
Interests received		219,092			95,118
Dividends received		550,310			621,972

Net cash used in investing activities		(30,789,193	)		(31,172,361	)

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2022 AND 2021

(In Thousands of New Taiwan Dollars)


	2022			2021
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans	$	1,292,000		$	154,000
Repayments of short-term loans		(635,000	)		(156,000	)
Proceeds from short-term bills payable		—			5,000,000
Repayments of short-term bills payable		—			(12,000,000	)
Proceeds from issuance of bonds		3,500,000			7,000,000
Payments for transaction costs attributable to the issuance of bonds		(4,463	)		(7,675	)
Increase (decrease) in customers’ deposits		(221,994	)		477,444
Payments for the principal of lease liabilities		(3,776,965	)		(3,728,949	)
Increase in other noncurrent liabilities		1,644,277			3,191,105
Cash dividends paid		(35,746,314	)		(33,403,565	)
Cash dividends distributed to noncontrolling interests		(1,053,240	)		(896,335	)
Change in other noncontrolling interests		199,836			54,079
Unclaimed dividend		1,632			1,968

Net cash used in financing activities		(34,800,231	)		(34,313,928	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		52,556			(12,942	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		10,413,980			9,358,969
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR		39,778,624			30,419,655

CASH AND CASH EQUIVALENTS, END OF THE YEAR	$	50,192,604		$	39,778,624


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

- 13 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2022 AND 2021

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

1.	GENERAL

Chunghwa Telecom Co., Ltd. (“Chunghwa”; Chunghwa together with its subsidiaries are hereinafter referred to collectively as the “Company”.) 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 launched its organizational transformation based on customer-centric structure effective from January 2022. Please refer to Note 43 Segment Information for details.

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 24, 2023.

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).

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	2022	2021	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. (“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	37	51	d)
	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	2022	2021	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 identity services	73	77	e)
	International Integrated Systems, Inc. (“IISI”)	IT solution provider, IT application consultation, system integration and package solution	51	51	f)
Senao International Co., Ltd.	Senao International (Samoa) Holding Ltd. (“SIS”)	International investment	100	100	g)
	Youth Co., Ltd. (“Youth”)	Sale of information and communication technologies products	96	96
	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	h)
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	i)
Chunghwa Investment Co., Ltd.	Chunghwa Precision Test Tech. Co., Ltd. (“CHPT”)	Production and sale of semiconductor testing components and printed circuit board	34	34	j)
Chunghwa Precision Test Tech. Co., Ltd.	Chunghwa Precision Test Tech. USA Corporation (“CHPT (US)”)	Design and after-sale services of semiconductor testing components and printed circuit board	100	100	k)
	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	l)
	TestPro Investment Co., Ltd. (“TestPro”)	Investment	100	—	m)
TestPro Investment Co., Ltd.	NavCore Tech. Co., Ltd (“NavCore”)	Sale and manufacturing of smart equipment, smart factory software and hardware integration and technical consulting service	54	—	n)
Senao International (Samoa) Holding Ltd.	Senao International HK Limited (“SIHK”)	International investment	100	100	o)
Senao International HK Limited	Senao International Trading (Shanghai) Co., Ltd. (“SITS”)	Sale of information and communication technologies products	—	—	p)

(Continued)

- 17 -


			Percentage of Ownership Interests
			December 31
Name of Investor	Name of Investee	Main Businesses and Products	2022	2021	Note
Prime Asia Investments Group Ltd.	Chunghwa Hsingta Co., Ltd. (“CHC”)	Investment	100	100
Chunghwa Hsingta Co., Ltd.	Chunghwa Telecom (China) Co., Ltd. (“CTC”)	Integrated information and communication solution services for enterprise clients, and intelligent energy network service	—	100	q)
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	r)
International Integrated Systems, Inc.	Infoexplorer International Co., Ltd.(“IESA”)	Investment	100	100	s)
	IISI Investment Co., Ltd. (“IICL”)	Investment	—	100	t)
	Unitronics Technology Corp. (“UTC”)	Development and maintenance of information system	99.96	99.96
Infoexplorer International Co., Ltd.	International Integrated Systems (Hong Kong) Limited (“IEHK”)	Investment and technical consulting service	100	100	s)
IISI Investment Co., Ltd.	Leading Tech Co., Ltd. (“LTCL”)	Investment	—	100	t)
Leading Tech Co., Ltd.	Leading Systems Co., Ltd. (“LSCL”)	Investment	—	100	t)
Leading Systems Co., Ltd.	International Integrated Systems Inc. (Shanghai) (“IISS”)	Development and maintenance of information system	—	—	u)

(Concluded)

a)	Chunghwa continues to control seven out of thirteen 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 2021, December 2021, March 2022 and December 2022 as its employees exercised options. Therefore, the Company’s ownership interest in CHIEF decreased to 58.89% and 58.67% as of December 31, 2021 and 2022, respectively.

Chunghwa did not participate in the capital increase of CHST in November 2022. Therefore, the Company’s ownership interest in CHST decreased to 37.09% as of December 31, 2022. However, Chunghwa continues to control three out of five seats of the Board of Directors of CHST. As a result, the Company treated CHST as a subsidiary.

e)	CHTSC issued new shares in February 2021, February 2022 and May 2022 as its employees exercised options. Therefore, the Company’s ownership interest in CHTSC decreased to 77.46% and 73.09% as of December 31, 2021 and 2022, respectively.

f)	IISI issued new shares in January 2021 as its employees exercised options. Therefore, the Company’s ownership interest in IISI decreased to 51.02%.

- 18 -

g)	SIS reduced and returned its capital to its stakeholders in November 2020 and July 2021. SIS reduced 8.14%, 48.15% and 96.26% of its capital to offset accumulated deficits in February 2021, October 2021 and November 2022, respectively. The Company’s ownership interest in SIS remained the same.

In order to coordinate with financial planning and adjustment of organizational resources, the Board of Directors of SENYOUNG approved the merger with Senaolife. Senaolife will be the dissolved company. In January 2023, the Board of Directors of SENYOUNG approved the merger completion date as March 1, 2023.

i)	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.

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

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

m)	CHPT invested and established TestPro in March 2022. CHPT obtained 100% ownership interest of TestPro.

n)	TestPro invested and established NavCore in May 2022. TestPro obtained 54.25% ownership interest of NavCore.

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. SIHK was approved to end and dissolve its business in August 2022. The liquidation of SIHK is still in process.

p)	SITS completed its liquidation in April 2021.

q)	CTC completed its liquidation in October 2022.

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

s)	The Board of Directors of IISI approved to end and dissolve the business of IESA and IEHK. The liquidation of IESA and IEHK is still in process.

t)	IICL, LTCL and LSCL completed the cancellation of registration in September 2022.

u)	IISS completed its liquidation in August 2021.

- 19 -

The following diagram presented information regarding the relationship and percentages of ownership interests between Chunghwa and its subsidiaries as of December 31, 2022.

LOGO

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.

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 and stimulus vouchers. These cash equivalents are held for the purpose of meeting short-term cash commitments.

- 20 -

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.

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.

- 21 -

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.

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.

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.

- 22 -

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.

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.

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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.

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 36.

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.

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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.

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.

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b.	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.

c.	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.

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. In assessing whether a contract is onerous, the cost of fulfilling a contract includes both the incremental costs of fulfilling that contract and an allocation of other costs that are related directly to fulfilling contracts.

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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.

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.

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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.

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.

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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.

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.

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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.

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.

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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.

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

Principal versus agent

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.

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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.

Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities was disclosed in Note 36. 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.

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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.

Amendments to IFRSs endorsed by the FSC for application starting from January 1, 2023


New, Revised or Amended Standards and Interpretations		Effective Date Announced by IASB
Amendments to IAS 1	Disclosure of Accounting Policies	January 1, 2023 (Note 1)
Amendments to IAS 8	Definition of Accounting Estimates	January 1, 2023 (Note 2)
Amendments to IAS 12	Deferred Tax related to Assets and Liabilities arising from a Single Transaction	January 1, 2023 (Note 3)

Note 1:

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

Note 2:

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

Note 3:

Except for deferred taxes that were recognized on January 1, 2022 for temporary differences associated with leases and decommissioning obligations, the amendments were applied prospectively to transactions that occur on or after 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 IFRS 16	Leases Liability in a Sale and Leaseback	January 1, 2024 (Note 2)
Amendments to IAS 1	Classification of Liabilities as Current or Non-current	January 1, 2024
Amendments to IAS 1	Non-current Liabilities with Covenants	January 1, 2024

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Note 1:

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

Note 2:

A seller-lessee shall apply the Amendments to IFRS 16 retrospectively to sale and leaseback transactions entered into after the date of initial application of IFRS 16.

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
	2022		2021
Cash
Cash on hand	$	471,751	$	439,989
Bank deposits		10,423,195		15,646,840

		10,894,946		16,086,829

Cash equivalents (with maturities of less than three months)
Commercial papers		19,592,233		13,530,111
Negotiable certificates of deposit		15,500,000		7,500,000
Time deposits		4,205,425		2,656,545
Stimulus vouchers		—		5,139

		39,297,658		23,691,795

	$	50,192,604	$	39,778,624

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
	2022	2021
Bank deposits	0.00%~2.62%	0.00%~0.45%
Commercial papers	0.56%~1.30%	0.17%~0.30%
Negotiable certificates of deposit	1.20%~1.45%	0.27%~0.30%
Time deposits	0.01%~4.65%	0.01%~3.60%

7.	FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS


	December 31
	2022		2021
Financial assets-current
Mandatorily measured at FVTPL
Derivatives (not designated for hedge)
Forward exchange contracts	$	3,514	$	—
Non-derivatives
Listed stocks - domestic		439		2,566

	$	3,953	$	2,566

(Continued)

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	December 31
	2022		2021
Financial assets-noncurrent
Mandatorily measured at FVTPL
Non-derivatives
Non-listed stocks - domestic	$	758,312	$	647,998
Non-listed stocks - foreign		102,648		236,672
Limited partnership - domestic		135,121		24,105
Film and drama investing agreements		24,122		—

	$	1,020,203	$	908,775

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

(Concluded)

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. As of December 31, 2022, Chunghwa invested $100,000 thousand.

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, 2022

Forward exchange contracts - buy

NT$/EUR

2023.03

NT$61,746/EUR2,000

December 31, 2021

Forward exchange contracts - buy

NT$/EUR

2022.03

NT$257,081/EUR8,000

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
	2022		2021
Domestic investments
Listed stocks	$	272,802	$	458,582
Non-listed stocks		3,084,670		3,029,957

(Continued)

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	December 31
	2022		2021
Foreign investments
Non-listed stocks	$	133,909	$	127,349

	$	3,491,381	$	3,615,888

(Concluded)

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 disposed of all its investments in UUPON Inc. (UUPON) in December 2022 and the fair value of the disposed investment was $154 thousand. The Company disposed of its investment in China Airlines, Ltd. starting from December 2020 and sold all its shares by February 2021. The total fair value of the disposed investment was $2,635,568 thousand in 2021. The Company disposed of its investments in 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 investments in associates at fair value of $44,850 thousand and $18,509 thousand, respectively. (Please refer to Note 14 (a)).

The related unrealized gains and losses on financial assets at FVOCI of loss of $116 thousand and gain of $59,653 thousand were transferred from other equity to retained earnings upon the aforementioned disposals in 2022 and 2021, 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 $157,465 thousand and $154,008 thousand for the years ended December 31, 2022 and 2021, respectively, of which $157,465 thousand and $153,984 thousand were from the outstanding investments on December 31, 2022 and 2021, respectively.

9.	TRADE NOTES AND ACCOUNTS RECEIVABLE, NET


	December 31
	2022			2021
Trade notes and accounts receivable	$	26,037,695		$	25,551,942
Less: Loss allowance		(1,365,222	)		(1,604,835	)

	$	24,672,473		$	23,947,107

The main credit terms range from 30 to 90 days.

- 36 -

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

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

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

The Company applies the simplified approach to recognize 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 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, 2022


	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%~20%			3%~64%			11%~80%			25%~90%			45%~96%			100%
Gross carrying amount	$	17,162,634		$	310,392		$	86,500		$	32,826		$	27,774		$	34,127		$	599,316		$	18,253,569
Loss allowance (lifetime ECL)		(49,644	)		(22,309	)		(19,806	)		(20,927	)		(20,085	)		(29,244	)		(599,316	)		(761,331	)

Amortized cost	$	17,112,990		$	288,083		$	66,694		$	11,899		$	7,689		$	4,883		$	—		$	17,492,238

Project business
Expected credit loss rate (Note b)		0%~5%			5%			10%			30%			50%			80%			100%
Gross carrying amount	$	3,797,905		$	119,329		$	11,424		$	53,189		$	1,360		$	785		$	547,269		$	4,531,261
Loss allowance (lifetime ECL)		(2,604	)		(6,138	)		(1,142	)		(15,986	)		(680	)		(628	)		(547,269	)		(574,447	)

Amortized cost	$	3,795,301		$	113,191		$	10,282		$	37,203		$	680		$	157		$	—		$	3,956,814

- 37 -

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

Note a:

Please refer to Note 43 for the information of disaggregation of telecommunications service revenue. The expected credit loss rate applicable to different business revenue varies so as to reflect the risk level indicating by factors like historical experience.

Note b:

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

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


	Year Ended December 31
	2022			2021
Beginning balance	$	1,604,835		$	2,154,364
Add: Provision for credit loss		108,746			122,911
Less: Amounts written off		(348,359	)		(672,440	)

Ending balance	$	1,365,222		$	1,604,835

10.	INVENTORIES


	December 31
	2022		2021
Merchandise	$	3,977,853	$	4,070,189
Project in process		4,859,226		4,805,196
Work in process		98,712		144,847
Raw materials		279,022		224,338

		9,214,813		9,244,570
Land held under development		1,998,733		1,998,733
Construction in progress		102,860		84,106

	$	11,316,406	$	11,327,409

- 38 -

The operating costs related to inventories were $49,544,267 thousand (including the valuation loss on inventories of $34,167 thousand) and $51,180,060 thousand (including the valuation loss on inventories of $206,824 thousand) for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022 and 2021, inventories of $2,101,593 thousand and $2,082,839 thousand, respectively, were expected to be recovered after more than twelve months. The aforementioned amount of inventories is related to property development owned by LED.

Land held under development and construction in progress was 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. LED entrusts Land Bank of Taiwan to execute fund control and property right management for the land held under development.

11.

PREPAYMENTS


	December 31
	2022		2021
Prepaid rents	$	2,316,088	$	2,349,236
Others		1,810,797		1,779,324

	$	4,126,885	$	4,128,560

Current
Prepaid rents	$	589,506	$	565,950
Others		1,809,102		1,764,147

	$	2,398,608	$	2,330,097

Noncurrent
Prepaid rents	$	1,726,582	$	1,783,286
Others		1,695		15,177

	$	1,728,277	$	1,798,463

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
	2022		2021
Time deposits and negotiable certificates of deposit with maturities of more than three months	$	1,915,755	$	3,498,534
Accrued custodial receipts		815,547		765,339
Others		887,600		797,005

	$	3,618,902	$	5,060,878

- 39 -

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
	2022	2021
Time deposits and negotiable certificates of deposit with maturities of more than three months	0.03%~3.00%	0.03%~2.70%

13.

SUBSIDIARIES

Information on subsidiaries with material noncontrolling interests


			Proportion of Ownership Interests and Voting Rights Held by Noncontrolling Interests
Subsidiaries	Principal Place of Business		December 31
			2022	2021
SENAO		Taiwan	72%	72%
CHPT		Taiwan	66%	66%


	Profit Allocated to Noncontrolling Interests				Accumulated Noncontrolling Interests
	Year Ended December 31				December 31
	2022		2021		2022		2021
SENAO	$	471,454	$	427,817	$	4,592,326	$	4,465,587

CHPT	$	492,637	$	586,332		5,259,231		4,960,977

Individually immaterial subsidiaries with noncontrolling interests						2,747,984		2,501,040

					$	12,599,541	$	11,927,604

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
	2022			2021
Current assets	$	7,249,222		$	7,962,726
Noncurrent assets		3,211,081			3,129,886
Current liabilities		(3,680,470	)		(4,531,148	)
Noncurrent liabilities		(459,666	)		(418,431	)

Equity	$	6,320,167		$	6,143,033

Equity attributable to the parent	$	1,727,841		$	1,677,446
Equity attributable to noncontrolling interests		4,592,326			4,465,587

	$	6,320,167		$	6,143,033

- 40 -


	Year Ended December 31
	2022			2021
Revenues and income	$	31,611,424		$	31,303,161
Costs and expenses		30,954,539			30,707,150

Profit for the year	$	656,885		$	596,011

Profit attributable to the parent	$	185,431		$	168,194
Profit attributable to noncontrolling interests		471,454			427,817

Profit for the year	$	656,885		$	596,011

Other comprehensive income attributable to the parent	$	10,512		$	2,340
Other comprehensive income attributable to noncontrolling interests		26,242			4,941

	$	36,754		$	7,281

Total comprehensive income attributable to the parent	$	195,943		$	170,534
Total comprehensive income attributable to noncontrolling interests		497,696			432,758

	$	693,639		$	603,292

Net cash flow from operating activities	$	(329,154	)	$	654,179
Net cash flow from investing activities		36,666			215,473
Net cash flow from financing activities		(826,206	)		(690,084	)
Effect of exchange rate changes on cash and cash equivalents		732			(209	)

Net cash inflow (outflow)	$	(1,117,962	)	$	179,359

Dividends paid to noncontrolling interests	$	370,957		$	278,218

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
	2022			2021
Current assets	$	4,406,032		$	4,656,928
Noncurrent assets		4,630,788			4,063,611
Current liabilities		(1,051,544	)		(1,143,341	)
Noncurrent liabilities		(25,975	)		(31,986	)

Equity	$	7,959,301		$	7,545,212

Equity attributable to CHI	$	2,700,070		$	2,584,235
Equity attributable to noncontrolling interests		5,259,231			4,960,977

	$	7,959,301		$	7,545,212

- 41 -


	Year Ended December 31
	2022			2021
Revenues and income	$	4,434,662		$	4,254,027
Costs and expenses		3,678,096			3,362,267

Profit for the year	$	756,566		$	891,760

Profit attributable to CHI	$	263,929		$	305,428
Profit attributable to noncontrolling interests		492,637			586,332

Profit for the year	$	756,566		$	891,760

Other comprehensive income (loss) attributable to CHI	$	4,631		$	(988	)
Other comprehensive income (loss) attributable to noncontrolling interests		7,321			(1,886	)

	$	11,952		$	(2,874	)

Total comprehensive income attributable to CHI	$	268,560		$	304,440
Total comprehensive income attributable to noncontrolling interests		499,958			584,446

	$	768,518		$	888,886

Net cash flow from operating activities	$	1,400,873		$	1,089,645
Net cash flow from investing activities		(1,010,681	)		(518,789	)
Net cash flow from financing activities		(387,845	)		(413,663	)
Effect of exchange rate changes on cash and cash equivalents		7,496			(1,671	)

Net cash inflow	$	9,843		$	155,522

Dividends paid to noncontrolling interests	$	293,204		$	258,710

Equity transactions with noncontrolling interests

Chunghwa did not participate in the capital increase of CHST in November 2022. Therefore, the Company’s ownership interest in CHST decreased.

CHIEF issued new shares in March 2021, December 2021, March 2022 and December 2022 as its employees exercised options. Therefore, the Company’s ownership interest in CHIEF decreased. See Note 33(a) for details.

CHTSC issued new shares in February 2021, February 2022 and May 2022 as its employees exercised options. Therefore, the Company’s ownership interest in CHTSC decreased. See Note 33(b) for details.

IISI issued new shares in January 2021 as its employees exercised options. Therefore, the Company’s ownership interest in IISI decreased. See Note 33(c) for details.

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

- 42 -

Information of the Company’s equity transactions with noncontrolling interests for the years ended December 31, 2022 and 2021 were as follows:


	Year Ended December 31, 2022
	CHIEF Share-Based Payment			CHTSC Share-Based Payment			Chunghwa Not Proportionately Participating in the Capital Increase of CHST
Cash consideration received from noncontrolling interests	$	38,677		$	35,402		$	15,000
The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests		(16,835	)		(30,037	)		(9,847	)

Differences arising from equity transactions	$	21,842		$	5,365		$	5,153

Line items for equity transaction adjustments
Additional paid-in capital - arising from changes in equities of subsidiaries	$	21,842		$	5,365		$	5,153


	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

- 43 -

14.

INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD


	December 31
	2022		2021
Investments in associates	$	7,146,174	$	7,322,842
Investment in joint venture		9,677		9,932

	$	7,155,851	$	7,332,774

Investments in associates

Investments in associates were as follows:


	Carrying Amount
	December 31
	2022		2021
Material associate
Non-listed
Next Commercial Bank Co., Ltd. (“NCB”)	$	3,173,309	$	3,592,054

Associates that are not individually material
Listed
Senao Networks, Inc. (“SNI”)		1,395,858		1,077,604
KingwayTek Technology Co., Ltd. (“KWT”)		267,125		258,943
Non-listed
Viettel-CHT Co., Ltd. (“Viettel-CHT”)		558,532		447,097
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		296,501		347,269
Chunghwa PChome Fund I Co., Ltd. (“CPFI”)		277,776		222,491
ST-2 Satellite Ventures Pte., Ltd. (“STS”)		246,815		518,165
So-net Entertainment Taiwan Limited (“So-net”)		228,184		217,021
WiAdvance Technology Corporation (“WATC”)		227,868		253,873
KKBOX Taiwan Co., Ltd. (“KKBOXTW”)		173,634		157,524
Taiwan International Ports Logistics Corporation (“TIPL”)		101,078		70,121
CHT Infinity Singapore Pte. Ltd. (“CISG”)		62,948		54,952
Click Force Co., Ltd. (“CF”)		40,932		36,938
Imedtac Co., Ltd. (“IME”)		40,866		44,565
AgriTalk Technology Inc. (“ATT”)		34,738		17,637
Baohwa Trust Co., Ltd. (“BHT”)		13,267		—
Cornerstone Ventures Co., Ltd. (“CVC”)		6,743		6,588
Alliance Digital Tech Co., Ltd. (“ADT”)		—		—

		3,972,865		3,730,788

	$	7,146,174	$	7,322,842

- 44 -

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
	2022		2021
Material associate
Non-listed
Next Commercial Bank Co., Ltd. (“NCB”)		42		42
Associates that are not individually material
Listed
Senao Networks, Inc. (“SNI”)		34		34
KingwayTek Technology Co., Ltd. (“KWT”)		23		23
Non-listed
Viettel-CHT Co., Ltd. (“Viettel-CHT”)		30		30
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		40		40
Chunghwa PChome Fund I Co., Ltd. (“CPFI”)		50		50
ST-2 Satellite Ventures Pte., Ltd. (“STS”)		38		38
So-net Entertainment Taiwan Limited (“So-net”)		30		30
WiAdvance Technology Corporation (“WATC”)		20		20
KKBOX Taiwan Co., Ltd. (“KKBOXTW”)		30		30
Taiwan International Ports Logistics Corporation (“TIPL”)		27		27
CHT Infinity Singapore Pte. Ltd. (“CISG”)		40		40
Click Force Co., Ltd. (“CF”)		49		49
Imedtac Co., Ltd. (“IME”)		7		7
AgriTalk Technology Inc. (“ATT”)		29		17
Baohwa Trust Co., Ltd. (“BHT”)		40		—
Cornerstone Ventures Co., Ltd. (“CVC”)		49		49
Alliance Digital Tech Co., Ltd. (“ADT”)		—		—

Summarized financial information of NCB was set out below:


	December 31
	2022			2021
Assets	$	33,540,595		$	9,197,280
Liabilities		(25,882,268	)		(524,813	)

Equity	$	7,658,327		$	8,672,467

The percentage of ownership interest held by the Company		41.90%			41.90%
Equity attributable to the Company	$	3,208,839		$	3,633,764
Unrealized gain or loss from downstream transactions		(35,530	)		(41,710	)

The carrying amount of investment	$	3,173,309		$	3,592,054

- 45 -


	Year Ended December 31, 2022			Year Ended December 31, 2021
Net revenues (losses)	$	(47,349	)	$	14,907

Net loss for the year	$	(1,004,331	)	$	(445,665	)
Other comprehensive income		(9,809	)		—

Total comprehensive loss for the year	$	(1,014,140	)	$	(445,665	)

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
	2022		2021
The Company’s share of profits	$	867,821	$	606,730
The Company’s share of other comprehensive loss		12,873		(5,677	)

The Company’s share of total comprehensive income	$	880,694	$	601,053

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


	December 31
	2022		2021
SNI	$	3,299,228	$	1,699,351

KWT	$	804,187	$	909,787

The Company originally invested and obtained 17.19% ownership interest in ATT and 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 subscribed for all the shares in the capital increase of ATT at the price of $32,175 thousand in November 2022. Therefore, the Company’s ownership interest in ATT increased to 29.33% as of December 31, 2022.

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. WATC issued new shares in March 2022 and October 2022 as its employees exercised option. Therefore, the Company’s ownership interest in WATC decreased to 20.05% as of December 31, 2022.

STS reduced its capital in April 2022 and the Company received $340,182 thousand from capital reduction. The Company’s ownership interest in STS remained the same.

The Company invested $20,000 thousand and obtained 40.00% ownership interest in BHT in March 2022. BHT mainly engages in VR integration and AIoT security services

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

- 46 -

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 treats 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 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

2022

2021

2022

2021

Non-listed

Chunghwa SEA Holdings (“CHT SEA”)

9,677

9,932

The Company invested and established a joint venture, CHT SEA, with Delta Electronics, Inc. and Kwang Hsing Industrial Co., Ltd. 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.

- 47 -

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
	2022			2021
The Company’s share of loss	$	(255	)	$	(268	)
The Company’s share of other comprehensive income		—			—

The Company’s share of total comprehensive loss	$	(255	)	$	(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
	2022		2021
Assets used by the Company	$	285,328,919	$	281,849,188
Assets subject to operating leases		6,198,991		7,251,273

	$	291,527,910	$	289,100,461

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, 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

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

Cost
Balance on January 1, 2022	$	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
Additions		460,000			—			133,496			101,549			149,182			1,217			253,312			30,166,736			31,265,492
Disposal		(3,558	)		(6,042	)		(6,988	)		(807,795	)		(18,395,302	)		(104,132	)		(391,932	)		—			(19,715,749	)
Effect of foreign exchange differences		—			—			—			143			209,156			183			3,500			19,187			232,169
Others		562,372			19,669			1,045,230			577,932			24,571,065			146,434			793,774			(26,544,575	)		1,171,901

Balance on December 31, 2022	$	103,663,528		$	1,675,255		$	72,529,774		$	11,088,877		$	720,068,323		$	3,971,039		$	11,467,527		$	14,427,497		$	938,891,820

Accumulated depreciation and impairment
Balance on January 1, 2022	$	—		$	(1,441,612	)	$	(30,577,570	)	$	(9,632,046	)	$	(590,533,289	)	$	(3,698,978	)	$	(8,205,324	)	$	—		$	(644,088,819	)
Depreciation expenses		—			(38,515	)		(1,452,152	)		(725,191	)		(25,653,845	)		(77,357	)		(753,520	)		—			(28,700,580	)
Disposal		—			6,042			6,988			807,453			18,382,027			104,132			388,457			—			19,695,099
Effect of foreign exchange differences		—			—			—			(140	)		(110,073	)		(108	)		(2,139	)		—			(112,460	)
Others		—			—			(240,466	)		(3,656	)		(42,105	)		(417	)		(69,497	)		—			(356,141	)

Balance on December 31, 2022	$	—		$	(1,474,085	)	$	(32,263,200	)	$	(9,553,580	)	$	(597,957,285	)	$	(3,672,728	)	$	(8,642,023	)	$	—		$	(653,562,901	)

Balance on January 1, 2022, 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

Balance on December 31, 2022, net	$	103,663,528		$	201,170		$	40,266,574		$	1,535,297		$	122,111,038		$	298,311		$	2,825,504		$	14,427,497		$	285,328,919

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, 2022 and 2021.

- 48 -

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


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

Assets subject to operating leases


	Land			Buildings			Total
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

Cost
Balance on January 1, 2022	$	4,808,926		$	4,133,989		$	8,942,915
Additions		—			196			196
Others		(432,730	)		(949,088	)		(1,381,818	)

Balance on December 31, 2022	$	4,376,196		$	3,185,097		$	7,561,293

Accumulated depreciation and impairment
Balance on January 1, 2022	$	—		$	(1,691,642	)	$	(1,691,642	)
Depreciation expenses		—			(59,475	)		(59,475	)
Others		—			388,815			388,815

Balance on December 31, 2022	$	—		$	(1,362,302	)	$	(1,362,302	)

Balance on January 1, 2022, net	$	4,808,926		$	2,442,347		$	7,251,273

Balance on December 31, 2022, net	$	4,376,196		$	1,822,795		$	6,198,991

- 49 -

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
	2022		2021
Year 1	$	389,376	$	371,380
Year 2		280,705		300,591
Year 3		211,059		210,073
Year 4		176,548		158,541
Year 5		149,434		135,208
Onwards		1,122,237		1,177,460

	$	2,329,359	$	2,353,253

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
	2022		2021
Land and buildings
Handsets base stations	$	7,175,277	$	6,987,731
Others		1,726,510		1,537,852
Equipment		2,200,762		2,525,353

	$	11,102,549	$	11,050,936

- 50 -


	Year Ended December 31
	2022		2021
Additions to right-of-use assets	$	4,369,219	$	4,669,219

Depreciation charge for right-of-use assets
Land and buildings
Handsets base stations	$	2,862,478	$	2,788,774
Others		770,276		786,645
Equipment		348,963		409,765

	$	3,981,717	$	3,985,184

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 or impairment of right-of-use assets for the year ended December 31, 2022. The Company did not have significant sublease of right-of-use assets for the year ended December 31, 2021.

Lease liabilities


	December 31
	2022		2021
Lease liabilities
Current	$	3,338,813	$	3,210,564
Noncurrent		7,333,694		7,061,689

	$	10,672,507	$	10,272,253

Ranges of discount rates for lease liabilities were as follows:


	December 31
	2022	2021
Land and buildings
Handsets base stations	0.37%~1.71%	0.37%~1.18%
Others	0.37%~9.00%	0.37%~9.00%
Equipment	0.37%~2.99%	0.37%~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.

- 51 -

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 37 to the consolidated financial statements for details.

Other lease information


	Year Ended December 31
	2022		2021
Expenses relating to low-value asset leases	$	8,952	$	8,297

Expenses relating to variable lease payments not included in the measurement of lease liabilities	$	8,078	$	7,462

Total cash outflow for leases	$	3,869,421	$	3,813,681

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

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

17.

INVESTMENT PROPERTIES


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

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

Accumulated depreciation and impairment
Balance on January 1, 2021	$	(1,041,128	)
Depreciation expense		(42,259	)
Reversal of impairment loss		83,429

Balance on December 31, 2021	$	(999,958	)

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

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

Cost
Balance on January 1, 2022	$	10,662,596
Additions		18,333
Reclassification		99,100

Balance on December 31, 2022	$	10,780,029

(Continued)

- 52 -


Accumulated depreciation and impairment
Balance on January 1, 2022	$	(999,958	)
Depreciation expense		(43,754	)
Reversal of impairment loss		107,467
Reclassification		(39,923	)

Balance on December 31, 2022	$	(976,168	)

Balance on January 1, 2022, net	$	9,662,638

Balance on December 31, 2022, net	$	9,803,861

(Concluded)

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 $107,467 thousand and $83,429 thousand for the years ended December 31, 2022 and 2021, 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.

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, 2022 and 2021 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
	2022		2021
Fair value	$	26,861,591	$	25,547,766

Overall capital interest rate		1.31%~4.91%		0.91%~3.05%
Profit margin ratio		8%~20%		8%~20%
Discount rate		—		—
Capitalization rate		0.23%~2.16%		0.53%~2.11%

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
	2022		2021
Year 1	$	118,370	$	107,183
Year 2		99,077		82,505
Year 3		89,821		61,629
Year 4		69,934		55,510

(Continued)

- 53 -


	December 31
	2022		2021
Year 5	$	43,608	$	38,605
Onwards		149,168		77,626

	$	569,978	$	423,058

(Concluded)

18.

INTANGIBLE ASSETS


	Mobile Broadband Concession			Computer Software			Goodwill			Others			Total
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

Cost
Balance on January 1, 2022	$	108,338,000		$	3,202,901		$	291,206		$	412,477		$	112,244,584
Additions-acquired separately		1,625,431			256,932			—			10,312			1,892,675
Disposal		—			(663,617	)		—			(1,008	)		(664,625	)
Effect of foreign exchange differences		—			167			—			32			199
Others		—			1,452			—			—			1,452

Balance on December 31, 2022	$	109,963,431		$	2,797,835		$	291,206		$	421,813		$	113,474,285

Accumulated amortization and impairment
Balance on January 1, 2022	$	(25,517,753	)	$	(2,529,941	)	$	(73,624	)	$	(178,183	)	$	(28,299,501	)
Amortization expenses		(6,294,525	)		(309,800	)		—			(38,332	)		(6,642,657	)
Disposal		—			663,617			—			1,008			664,625
Impairment losses		—			—			—			(9,547	)		(9,547	)
Effect of foreign exchange differences		—			(110	)		—			(8	)		(118	)

Balance on December 31, 2022	$	(31,812,278	)	$	(2,176,234	)	$	(73,624	)	$	(225,062	)	$	(34,287,198	)

Balance on January 1, 2022, net	$	82,820,247		$	672,960		$	217,582		$	234,294		$	83,945,083

Balance on December 31, 2022, net	$	78,151,153		$	621,601		$	217,582		$	196,751		$	79,187,087

- 54 -

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 aforementioned tax-excluded transaction amount was $1,800,113 thousand included in intangible assets- mobile broadband concession and other assets- spare parts. The transaction was approved by the related authority in May 2022 and completed in July 2022.

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

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

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. Due to the competition in the industrial environment, the gross profit margin decreased. SENAO concluded the recoverable amount of the goodwill was lower than the carrying value and recognized impairment loss of $28,698 thousand for the years ended December 31, 2021. 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 $9,547 thousand and $203 thousand for the years ended December 31, 2022 and 2021, respectively. The aforementioned impairment losses were included in other income and expenses of consolidated statements of comprehensive income. The recoverable amount of license agreement and right of trademark was measured at the fair value less costs to sell. The fair value was calculated based on asset approach by reference to the net assets value of Youth.

19.

OTHER ASSETS


	December 31
	2022		2021
Spare parts	$	3,379,837	$	2,836,191
Refundable deposits		1,964,648		1,971,058
Other financial assets		1,000,000		1,000,000
Others		1,916,562		2,034,331

	$	8,261,047	$	7,841,580

Current
Spare parts	$	3,379,837	$	2,836,191
Others		175,586		142,589

	$	3,555,423	$	2,978,780

Noncurrent
Refundable deposits	$	1,964,648	$	1,971,058
Other financial assets		1,000,000		1,000,000
Others		1,740,976		1,891,742

	$	4,705,624	$	4,862,800

- 55 -

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

20.	HEDGING FINANCIAL INSTRUMENTS

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

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

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

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

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

December 31, 2022

Hedging Instruments

Currency

Notional
Amount

(In Thousands)

Maturity

Forward

Rate

Line Item in

Balance Sheet

Carrying Amount

Change in Fair
Values of
Hedging
Instruments Used
for Calculating
Hedge

Ineffectiveness

Asset

Liability

Cash flow hedge

Forecast purchases - forward exchange contracts

NT$/EUR

NT$ 423,024
/EUR 13,350

2023.03

31.69

Hedging financial
assets (liabilities)

12,891

—

21,177


	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	$	(21,177	)	$	12,891	$	—

- 56 -

December 31, 2021

Carrying Amount

Change in Fair
Values of
Hedging
Instruments Used
for Calculating
Hedge

Ineffectiveness

Hedging Instruments

Currency

Notional
Amount

(In Thousands)

Maturity

Forward

Rate

Line Item in

Balance Sheet

Asset

Liability

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 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	$	10,038	$	(8,286	)	$	—

Year ended December 31, 2022


	Comprehensive Income						Reclassification from Equity to Assets 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 Assets and the Adjusted Line Item		Due to Hedged Future Cash Flows No Longer Expected to Occur
Cash flow hedge
Forecast equipment purchases	$	21,177	$	—		—	$	6,273	$	—
								Construction in progress and equipment to be accepted		Other gains and losses

Year ended December 31, 2021


	Comprehensive Income							Reclassification from Equity to Assets 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 Assets 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

- 57 -

21.

SHORT-TERM LOANS


	December 31
	2022		2021
Unsecured bank loans	$	722,000	$	65,000

The annual interest rates of bank loans were as follows:


	December 31
	2022	2021
Unsecured bank loans	1.30%~3.19%	1.97%~2.43%

22.

LONG-TERM LOANS


	December 31
	2022		2021
Secured bank loans (Note 38)	$	1,600,000	$	1,600,000

The annual interest rates of bank loans were as follows:


	December 31
	2022			2021
Secured bank loans		1.80	%		0.89	%

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.

23.

BONDS PAYABLE


	December 31
	2022			2021
Unsecured domestic bonds	$	30,500,000		$	27,000,000
Less: Discounts on bonds payable		(22,643	)		(23,325	)

	$	30,477,357		$	26,976,675

- 58 -

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
2022-1 (Sustainable Bond)	—	March 2022 to March 2027		3,500,000		0.69	%	The same as above

24.

TRADE NOTES AND ACCOUNTS PAYABLE


	December 31
	2022		2021
Trade notes and accounts payable	$	16,428,856	$	18,063,288

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

25.

OTHER PAYABLES


	December 31
	2022		2021
Accrued salary and compensation	$	10,409,299	$	10,125,732
Payables to contractors		2,571,376		3,014,677
Accrued compensation to employees and remuneration to directors and supervisors		2,143,523		1,997,277
Amounts collected for others		1,596,341		1,426,443
Payables to equipment suppliers		1,278,738		1,153,550
Accrued maintenance costs		1,060,534		1,010,892
Others		6,020,149		5,708,137

	$	25,079,960	$	24,436,708

26.

PROVISIONS


	December 31
	2022		2021
Warranties	$	235,308	$	213,537
Onerous contracts		95,201		146,541
Employee benefits		64,776		62,833
Others		3,767		3,767

	$	399,052	$	426,678

(Continued)

- 59 -


	December 31
	2022		2021
Current	$	226,019	$	284,813
Noncurrent		173,033		141,865

	$	399,052	$	426,678

(Concluded)


	Warranties			Onerous Contracts			Employee Benefits			Others			Total
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

Balance on January 1, 2022	$	213,537		$	146,541		$	62,833		$	3,767		$	426,678
Additional / (reversal of) provisions recognized		107,714			(51,340	)		2,217			—			58,591
Used / forfeited during the year		(85,953	)		—			(274	)		—			(86,227	)
Effect of foreign exchange differences		10			—			—			—			10

Balance on December 31, 2022	$	235,308		$	95,201		$	64,776		$	3,767		$	399,052

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.

27. 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.

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.

- 60 -

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 in the ROC, 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
	2022			2021
Present value of funded defined benefit obligations	$	33,599,272		$	35,501,968
Fair value of plan assets		(36,579,769	)		(36,605,382	)

Funded status - surplus	$	(2,980,497	)	$	(1,103,414	)

Net defined benefit liabilities	$	2,285,224		$	2,287,663
Net defined benefit assets		(5,265,721	)		(3,391,077	)

	$	(2,980,497	)	$	(1,103,414	)

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, 2021	$	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	)

(Continued)

- 61 -


	Present Value of Funded Defined Benefit Obligations			Fair Value of Plan Assets			Net Defined Benefit Liabilities (Assets)
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	)
Current service cost		1,085,437			—			1,085,437
Interest expense / interest income		170,797			181,249			(10,452	)

Amounts recognized in profit or loss		1,256,234			181,249			1,074,985

Remeasurement on the net defined benefit liability
Return on plan assets (excluding amounts included in net interest)		—			2,968,012			(2,968,012	)
Actuarial loss recognized from changes in financial assumptions		208,369			—			208,369
Actuarial loss recognized from experience adjustments		1,606,067			—			1,606,067

Amounts recognized in other comprehensive income		1,814,436			2,968,012			(1,153,576	)

Contributions from employer		—			1,554,804			(1,554,804	)
Benefits paid		(4,729,678	)		(4,729,678	)		—
Benefits paid directly by the Company		(243,688	)		—			(243,688	)

Balance on December 31, 2022	$	33,599,272		$	36,579,769		$	(2,980,497	)

(Concluded)

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


	Year Ended December 31
	2022		2021
Operating costs	$	564,616	$	724,943
Marketing expenses		360,415		366,925
General and administrative expenses		86,182		80,248
Research and development expenses		36,595		44,362

	$	1,047,808	$	1,216,478

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

Investment risk

Under the Labor Standards Law in the ROC, 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.

- 62 -

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
	2022	2021
Discount rates	1.25%	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
	2022			2021
Discount rates
0.5% increase	$	(995,704	)	$	(1,073,185	)

0.5% decrease	$	1,055,779		$	1,139,142

Expected rates of salary increase
0.5% increase	$	1,129,812		$	1,217,115

0.5% decrease	$	(1,075,216	)	$	(1,157,095	)

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.


	December 31
	2022		2021
The expected contributions to the plan for the next year	$	1,542,033	$	1,681,091

The average duration of the defined benefit obligations		6.2~11 years		6.3~12 years

- 63 -

As of December 31, 2022, the Company’s maturity analysis of the undiscounted benefit payments was as follows:


Year	Amount
2023	$	2,673,046
2024		6,184,201
2025		9,312,821
2026		10,556,293
2027 and thereafter		36,622,841

	$	65,349,202

28.

EQUITY

Share capital

Common stocks


	December 31
	2022		2021
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, 2022, the outstanding ADSs were 195,211 thousand common stocks, which equaled 19,521 thousand units and represented 2.52% 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

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

- 64 -

Additional paid-in capital

The adjustments of additional paid-in capital for the years ended December 31, 2022 and 2021 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, 2021	$	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
Unclaimed dividend		—		—			—		—		1,632		—		1,632
Change in additional paid-in capital from investments in associates and joint ventures accounted for using equity method		—		(12,719	)		—		—		—		—		(12,719	)
Change in additional paid-in capital for not proportionately participating in the capital increase of subsidiaries		—		—			5,153		—		—		—		5,153
Share-based payment transactions of subsidiaries		—		—			27,207		—		—		—		27,207

Balance on December 31, 2022	$	147,329,386	$	173,672		$	2,137,032	$	987,611	$	25,119	$	20,648,078	$	171,300,898

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.

- 65 -

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 2021 and 2020 earnings of Chunghwa approved by the stockholders in their meetings on May 27, 2022 and August 20, 2021, respectively, were as follows:


	Appropriation of Earnings				Dividends Per Share (NT$)
	For Fiscal Year 2021		For Fiscal Year 2020		For Fiscal Year 2021		For Fiscal Year 2020
Special reserve	$	408,150	$	—
Cash dividends		35,746,314		33,403,565	$	4.608	$	4.306

The appropriations of earnings for 2022 had been proposed by Chunghwa’s Board of Directors on February 24, 2023. The appropriations and dividends per share were as follows:


	Appropriation of Earnings		Dividends Per Share (NT$)
Reversal of special reserve	$	185,066
Cash dividends		36,475,514	$	4.702

The appropriations of earnings for 2022 are subject to the resolution of the stockholders’ meeting planned to be held on May 26, 2023. 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
	2022			2021
Beginning balance	$	(7,588	)	$	1,239,901
Unrealized gain or loss for the year
Equity instruments		(111,551	)		(1,187,836	)
Share of loss of associates and joint ventures accounted for using equity method		(5,739	)		—
Transferred accumulated gain or loss to unappropriated earnings resulting from the disposal of equity instruments (Note 8)		116			(59,653	)

Ending balance	$	(124,762	)	$	(7,588	)

- 66 -

Noncontrolling interests


	Year Ended December 31
	2022			2021
Beginning balance	$	11,927,604		$	11,327,441
Shares attributed to noncontrolling interests
Net income for the year		1,522,882			1,441,300
Exchange differences arising from the translation of the foreign operations		20,710			602
Unrealized gain or loss on financial assets at FVOCI		(25,012	)		1,987
Remeasurements of defined benefit pension plans		24,040			(5,426	)
Income tax relating to remeasurements of defined benefit pension plans		(4,808	)		1,085
Share of other comprehensive income of associates and joint ventures accounted for using equity method		5,867			351
Cash dividends distributed by subsidiaries		(1,053,240	)		(896,335	)
Changes in additional paid-in capital from investments in associates and joint ventures accounted for using equity method		(1,491	)		(136	)
Share-based payment transactions of subsidiaries		62,385			56,735
Change in additional paid-in capital for not proportionately participating in the capital increase of subsidiaries		9,847			—
Net increase in noncontrolling interests		110,757			—

Ending balance	$	12,599,541		$	11,927,604

29.

REVENUES


	Year Ended December 31
	2022		2021
Revenue from contracts with customers	$	214,497,968	$	208,412,156

Other revenues
Government grants income		1,030,506		1,037,057
Rental income		1,021,709		863,719
Others		189,051		165,016

		2,241,266		2,065,792

	$	216,739,234	$	210,477,948

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

Disaggregation of revenue

Please refer to Note 43 Segment Information for details.

- 67 -

Contract balances


	December 31, 2022			December 31, 2021			January 1, 2021
Trade notes and accounts receivable (Note 9)	$	24,672,473		$	23,947,107		$	22,621,902

Contract assets
Products and service bundling	$	7,955,689		$	7,197,206		$	7,232,134
Others		1,255,584			982,688			612,206
Less: Loss allowance		(19,129	)		(18,080	)		(17,792	)

	$	9,192,144		$	8,161,814		$	7,826,548

Current	$	6,055,343		$	5,554,070		$	5,331,246
Noncurrent		3,136,801			2,607,744			2,495,302

	$	9,192,144		$	8,161,814		$	7,826,548

Contract liabilities
Telecommunications business	$	14,081,316		$	13,143,598		$	13,601,662
Project business		6,586,384			5,435,268			6,686,561
Products and service bundling		8,559			4,168			16,404
Others		388,275			491,298			421,166

	$	21,064,534		$	19,074,332		$	20,725,793

Current	$	13,390,439		$	12,234,276		$	13,436,706
Noncurrent		7,674,095			6,840,056			7,289,087

	$	21,064,534		$	19,074,332		$	20,725,793

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
	2022			2021
Contract assets
Net increase of customer contracts	$	6,933,294		$	6,034,998
Reclassified to trade receivables		(6,148,501	)		(6,039,413	)

	$	784,793		$	(4,415	)

Contract liabilities
Net increase of customer contracts	$	9,161		$	162
Recognized as revenues		(4,770	)		(12,398	)

	$	4,391		$	(12,236	)

- 68 -

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 year that was included in the contract liability at the beginning of the year was as follows:


	Year Ended December 31
	2022		2021
Telecommunications business	$	6,625,564	$	5,952,356
Project business		4,066,613		4,630,103
Others		440,093		430,982

	$	11,132,270	$	11,013,441

Incremental costs of obtaining contracts


	December 31
	2022		2021
Noncurrent
Incremental costs of obtaining contracts	$	979,914	$	987,656

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, 2022 and 2021 were $840,553 thousand and $815,241 thousand, respectively.

Remaining Performance Obligations

As of December 31, 2022, the aggregate amount of transaction price allocated to performance obligations for non-cancellable telecommunications service contracts that are unsatisfied is $31,247,091 thousand. The Company recognizes revenue when service is provided over contract terms. The Company expects to recognize such revenue of $18,976,104 thousand, $9,516,800 thousand and $2,754,187 thousand in 2023, 2024 and 2025, 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, 2022, the aggregate amount of transaction price allocated to performance obligations for non-cancellable project business contracts that are unsatisfied is $25,007,150 thousand. The Company recognizes revenues when the project business contract is completed and accepted by customers. The Company expects to recognize such revenue of $9,373,665 thousand, $6,447,143 thousand and $9,186,342 thousand in 2023, 2024 and 2025, respectively. Project business contracts whose expected duration are less than a year have been excluded from the aforementioned disclosure.

- 69 -

30.

NET INCOME

Other income and expenses


	Year Ended December 31
	2022			2021
Loss on disposal of property, plant and equipment, net	$	(4,907	)	$	(3,349	)
Impairment loss on right-of-use assets		—			(420,590	)
Reversal of impairment loss on investment properties		107,467			83,429
Impairment loss on intangible assets		(9,547	)		(28,901	)

	$	93,013		$	(369,411	)

Other income


	Year Ended December 31
	2022		2021
Dividend income	$	157,465	$	154,008
Rental income		78,089		69,669
Others		132,969		154,143

	$	368,523	$	377,820

Other gains and losses


	Year Ended December 31
	2022			2021
Valuation gain (loss) on financial assets and liabilities at fair value through profit or loss, net	$	(205,805	)	$	243,381
Foreign currency exchange gain or loss, net		(185,243	)		229,502
Gain on disposal of investments accounted for using equity method, net		—			3,239
Gain on disposal of financial instruments, net		726			353
Others		(13,462	)		(15,645	)

	$	(403,784	)	$	460,830

Interest expenses


	Year Ended December 31
	2022		2021
Interest on bonds payable	$	161,427	$	131,635
Interest on lease liabilities		75,426		68,973
Interest paid to financial institutions		25,830		16,587
Others		55		976

	$	262,738	$	218,171

- 70 -

Impairment loss (reversal of impairment loss)


	Year Ended December 31
	2022			2021
Contract assets	$	1,049		$	288

Trade notes and accounts receivable	$	108,746		$	122,911

Other receivables	$	7,275		$	19,792

Inventories	$	34,167		$	206,824

Right-of-use assets	$	—		$	420,590

Investment properties	$	(107,467	)	$	(83,429	)

Intangible assets	$	9,547		$	28,901

Depreciation and amortization expenses


	Year Ended December 31
	2022		2021
Property, plant and equipment	$	28,760,055	$	27,804,883
Right-of-use assets		3,981,717		3,985,184
Investment properties		43,754		42,259
Intangible assets		6,642,657		6,568,547
Incremental costs of obtaining contracts		840,553		815,241

Total depreciation and amortization expenses	$	40,268,736	$	39,216,114

Depreciation expenses summarized by functions
Operating costs	$	30,734,623	$	30,020,758
Operating expenses		2,050,903		1,811,568

	$	32,785,526	$	31,832,326

Amortization expenses summarized by functions
Operating costs	$	7,285,987	$	7,171,851
Marketing expenses		76,209		92,823
General and administrative expenses		71,127		75,331
Research and development expenses		49,887		43,783

	$	7,483,210	$	7,383,788

Employee benefit expenses


	Year Ended December 31
	2022		2021
Post-employment benefit
Defined contribution plans	$	862,200	$	783,762
Defined benefit plans		1,047,808		1,216,478

		1,910,008		2,000,240
Share-based payment
Equity-settled share-based payment		15,513		19,371
Other employee benefit (Note)		43,746,874		42,653,703

Total employee benefit expenses	$	45,672,395	$	44,673,314

(Continued)

- 71 -


	Year Ended December 31
	2022		2021
Summary by functions
Operating costs	$	21,857,680	$	22,734,259
Operating expenses		23,814,715		21,939,055

	$	45,672,395	$	44,673,314

(Concluded)

Note: Other employee benefit mainly includes salaries, compensation and labor and health insurance expenses, etc.

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, 2022, the payables of the employees’ compensation and the remuneration to directors were $1,498,374 thousand and $39,480 thousand, respectively. Such amounts have been approved by the Chunghwa’s Board of Directors on February 24, 2023 and will be reported to the stockholders in their meeting planned to be held on May 26, 2023.

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 2021 and 2020 approved by the Board of Directors on February 23, 2022 and 2021, respectively, were as follows:


	Cash
	2021		2020
Compensation distributed to the employees	$	1,429,000	$	1,202,448
Remuneration paid to the directors		38,552		35,803

There was no difference between the initial accrued amounts recognized in 2021 and 2020 and the amounts approved by the Board of Directors in 2022 and 2021 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.

31.

INCOME TAX

Income tax recognized in profit or loss

The major components of income tax expense were as follows:


	Year Ended December 31
	2022		2021
Current tax
Current tax expenses recognized for the year	$	8,863,349	$	8,490,402
Income tax on unappropriated earnings		31,209		32,728

(Continued)

- 72 -


	Year Ended December 31
	2022			2021
Income tax adjustments on prior years	$	(141,850	)	$	(150,719	)
Others		7,123			6,842

		8,759,831			8,379,253

Deferred tax
Deferred tax expenses recognized for the year		318,191			489,181
Income tax adjustments on prior years		150,889			3,311

		469,080			492,492

Income tax recognized in profit or loss	$	9,228,911		$	8,871,745

(Concluded)

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


	Year Ended December 31
	2022			2021
Income before income tax	$	47,228,950		$	46,066,624

Income tax expense calculated at the statutory rate	$	9,445,790		$	9,213,325
Nondeductible income and expenses in determining taxable income		(19,903	)		7,809
Tax-exempt income		(8,050	)		(30,181	)
Income tax on unappropriated earnings		31,209			32,728
Investment credits		(206,815	)		(217,318	)
Effect of different tax rates of group entities operating in other jurisdictions		(30,878	)		(10,374	)
Income tax adjustments on prior years		9,039			(147,408	)
Others		8,519			23,164

Income tax expense recognized in profit or loss	$	9,228,911		$	8,871,745

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.

Income tax recognized in other comprehensive income


	Year Ended December 31
	2022		2021
Deferred tax
Remeasurement on defined benefit pension plans	$	230,715	$	78,088

- 73 -

Current tax assets and liabilities


	December 31
	2022		2021
Current tax assets
Tax refund receivable (included in other current assets - others)	$	1,553	$	4,532

Current tax liabilities
Income tax payable	$	4,956,465	$	4,593,458

Deferred income tax assets and liabilities

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

For the year ended December 31, 2022


	Beginning Balance		Recognized in Profit or Loss			Recognized in Other Comprehensive Income			Ending Balance
Deferred income tax assets
Temporary differences
Defined benefit pension plans	$	1,744,030	$	900		$	(230,282	)	$	1,514,648
Allowance for doubtful receivables over quota		264,797		(80,823	)		—			183,974
Valuation loss on inventory		197,071		(92,204	)		—			104,867
Unrealized foreign exchange loss, net		1,638		56,225			—			57,863
Estimated warranty liabilities		42,741		4,358			—			47,099
Deferred revenue		48,678		(19,323	)		—			29,355
Valuation loss on financial instruments		—		23,668			—			23,668
Valuation loss on onerous contracts		26,519		(8,166	)		—			18,353
Accrued award credits liabilities		8,935		2,577			—			11,512
Share of profit or loss of associates and joint ventures accounted for using equity method		400,951		(398,892	)		—			2,059
Others		37,840		(4,953	)		—			32,887

		2,773,200		(516,633	)		(230,282	)		2,026,285
Loss carryforwards		11,806		158,554			—			170,360

	$	2,785,006	$	(358,079	)	$	(230,282	)	$	2,196,645

Deferred income tax liabilities
Temporary differences
Defined benefit pension plans	$	1,968,873	$	145,151		$	433		$	2,114,457
Land value incremental tax		94,986		—			—			94,986
Deferred revenue for award credits		55,708		14,394			—			70,102

(Continued)

- 74 -


	Beginning Balance		Recognized in Profit or Loss			Recognized in Other Comprehensive Income		Ending Balance
Intangible assets	$	24,444	$	(4,420	)	$	—	$	20,024
Others		45,400		(44,124	)		—		1,276

	$	2,189,411	$	111,001		$	433	$	2,300,845

(Concluded)

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
Allowance for doubtful receivables over quota		364,607		(99,810	)		—			264,797
Valuation loss on inventory		299,199		(102,128	)		—			197,071
Unrealized foreign exchange loss, net		4,698		(3,060	)		—			1,638
Estimated warranty liabilities		36,165		6,576			—			42,741
Deferred revenue		73,067		(24,389	)		—			48,678
Valuation loss on financial instruments		32,609		(32,609	)		—			—
Valuation loss on onerous contracts		33,997		(7,478	)		—			26,519
Accrued award credits liabilities		18,409		(9,474	)		—			8,935
Share of profit or loss of associates and joint ventures accounted for using equity method		400,776		175			—			400,951
Others		32,157		5,683			—			37,840

		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
Intangible assets		26,999		(2,555	)		—			24,444
Others		2,153		43,247			—			45,400

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

- 75 -

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


	December 31
	2022		2021
Loss carryforwards
Expire in 2022	$	—	$	21
Expire in 2023		24		25
Expire in 2024		770		1,255
Expire in 2025		15,223		15,223
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		—		—
Expire in 2032		286		—

	$	29,136	$	29,357

Deductible temporary differences	$	12,743	$	—

Information about unused loss carryforwards

As of December 31, 2022, information about loss carryforwards was as follows:


Remaining Creditable Amount		Expiry Year
$	697	2023
	953	2024
	18,018	2025
	10,172	2026
	3,503	2027
	930	2028
	2,034	2029
	1,615	2030
	62,618	2031
	98,956	2032

$	199,496

Income tax examinations

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

- 76 -

32.

EARNINGS PER SHARE (“EPS”)

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

Net Income


	Year Ended December 31
	2022			2021
Net income used to compute the basic earnings per share
Net income attributable to the parent	$	36,477,157		$	35,753,579
Assumed conversion of all dilutive potential common stocks
Employee stock options and employee compensation of subsidiaries		(7,370	)		(6,258	)

Net income used to compute the diluted earnings per share	$	36,469,787		$	35,747,321

Weighted Average Number of Common Stocks

(Thousand Shares)


	Year Ended December 31
	2022		2021
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		8,342		7,773

Weighted average number of common stocks used to compute the diluted earnings per share		7,765,789		7,765,220

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.

33.

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	$193.50
					(Original price$206.00)
2017.12.18		2018.10.31		50.00	$130.30
					(Original price$147.00)
		2017.12.19		950.00	$124.70
					(Original price$147.00)

- 77 -

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.

The compensation costs for stock options for the year ended December 31, 2022 and 2021 were as follows:


	Year Ended December 31
	2022		2021
Granted on November 13, 2020	$	8,780	$	9,729
Granted on October 31, 2018		58		153
Granted on December 19, 2017		—		152

	$	8,838	$	10,034

CHIEF modified the plan terms of stock options granted on November 13, 2020 in September 2021 and July 2022; therefore, the exercise price changed from $206.00 to $199.70 and $193.50 per share, repectively. The modification did not cause any incremental fair value granted.

CHIEF modified the plan terms of stock options granted on October 31, 2018 in September 2021 and July 2022; therefore, the exercise price changed from $138.70 to $134.50 and $130.30 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 September 2021 and July 2022; therefore, the exercise price changed from $132.70 to $128.70 and $124.70 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, 2022 and 2021 was as follows:


	Year Ended December 31, 2022
	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		194.00		$	199.70		10.50		$	134.50		213.25		$	128.70
Options exercised		(51.00	)		193.50		(10.50	)		130.30		(213.25	)		124.70
Options forfeited		(0.75	)		—		—			—		—			—

Options outstanding at end of the year		142.25			193.50		—			—		—			—

Options exercisable at end of the year		0.50			193.50		—			—		—			—

Weighted average remaining contractual life (years)		2.87					0.83					—

- 78 -


	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

Weighted average remaining contractual life (years)		3.87					1.83					0.96

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

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 2017 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.

- 79 -

The compensation costs for stock options for the years ended December 31, 2022 and 2021 were as follows:


	Year Ended December 31
	2022		2021
Granted on February 20, 2021	$	3,555	$	5,511
Granted on December 20, 2019		1,577		2,923

	$	5,132	$	8,434

Information about CHTSC’s outstanding stock options for the years ended December 31, 2022 and 2021 was as follows:


	Year Ended December 31, 2022
	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		3,324		$	19.085		3,174		$	19.085
Options exercised		(815	)		19.085		(2,049	)		19.085
Options forfeited		(166	)		—		(42	)		—

Options outstanding at end of the year		2,343			19.085		1,083			19.085

Options exercisable at end of the year		7			19.085		31			19.085

Weighted average remaining contractual life (years)		3.14					1.97


	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

(Continued)

- 80 -


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

Weighted average remaining contractual life (years)		4.14					2.97

(Concluded)

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 stock options in January 2014. 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.

- 81 -

Information about IISI’s outstanding stock options for the years ended December 31, 2021 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		—			—

Weighted average remaining contractual life (years)		—

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

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

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

- 82 -

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

The Board of Directors of CLPT resolved to issue 690 and 600 stock options on February 26, 2021 and May 31, 2022, respectively. Each option is eligible to subscribe for one thousand common stocks when exercisable and the exercise price are both $16.87 per share. The options are granted to specific employees that meet the vesting conditions. The CLPT Plan has an exercise price adjustment formula upon the changes in common stocks or distribution of cash dividends. The options of the CLPT Plan are valid for four years and the graded vesting schedule will vest two years after the grant date.

The compensation costs for stock options for the year ended December 31, 2022 and 2021 were as follows:


	Year Ended December 31
	2022		2021
Granted on May 31, 2022	$	604	$	—
Granted on February 26, 2021		939		903

	$	1,543	$	903

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, 2022 and 2021 was as follows:


	Year Ended December 31, 2022
	Granted on May 31, 2022					Granted on February 26, 2021
	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		—		$	—		550		$	15.90
Options granted		600			16.87		—			—
Options forfeited		(160	)		—		(40	)		—

Options outstanding at end of the year		440			16.87		510			15.90

Options exercisable at end of the year		—			—		—			—

Weighted average remaining contractual life (years)		3.41					2.16

- 83 -


	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		—			—

Weighted average remaining contractual life (years)		3.16

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 May 31, 2022		Stock Options Granted on February 26, 2021
Grant-date share price (NT$)	$	18.66	$	17.63
Exercise price (NT$)	$	16.87	$	16.87
Dividend yield		—		—
Risk-free interest rate		0.98%		0.31%
Expected life		4 years		4 years
Expected volatility		35.76%		35.22%
Weighted average fair value of grants (NT$)	$	5,665	$	4,750

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

34.

CASH FLOW INFORMATION

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


Investing activities	Year Ended December 31
	2022		2021
Additions of property, plant and equipment	$	31,265,688	$	35,613,438
Changes in other payables		269,258		(280,410	)

Payments for acquisition of property, plant and equipment	$	31,534,946	$	35,333,028

The carrying amounts of disposal of financial assets at fair value through other comprehensive income	$	154	$	2,704,608
Changes in other current monetary assets		—		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	$	154	$	2,911,570

(Concluded)

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Financing Activities


	Balance on January 1,		Cash Flows from Financing			Changes in Non-Cash Transactions					Cash Flows from Operation Activities -			Balance on December 31,
	2022		Activities			New Leases		Others			Interest Paid			2022
Lease liabilities	$	10,272,253	$	(3,776,965	)	$	4,369,219	$	(116,574	)	$	(75,426	)	$	10,672,507


	Balance on January 1,		Cash Flows from Financing			Changes in Non-Cash Transactions					Cash Flows from Operation Activities -			Balance on December 31,
	2021		Activities			New Leases		Others			Interest Paid			2021
Lease liabilities	$	9,596,667	$	(3,728,949	)	$	4,669,219	$	(195,711	)	$	(68,973	)	$	10,272,253

35.

CAPITAL MANAGEMENT

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

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

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

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

36.

FINANCIAL INSTRUMENTS

Fair Value Information

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

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

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

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

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

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


	December 31
	2022				2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial liabilities
Financial liabilities measured at amortized cost
Bonds payable	$	30,477,357	$	30,452,475	$	26,976,675	$	27,082,090

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, 2022


	Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Derivatives	$	—	$	3,514	$	—	$	3,514
Listed stocks		439		—		—		439
Non-listed stocks		—		—		860,960		860,960
Limited partnership		—		—		135,121		135,121
Film and drama investing agreements		—		—		24,122		24,122

	$	439	$	3,514	$	1,020,203	$	1,024,156

Hedging financial assets	$	—	$	12,891	$	—	$	12,891

Financial assets at FVOCI
Listed stocks	$	272,802	$	—	$	—	$	272,802
Non-listed stocks		—		—		3,218,579		3,218,579

	$	272,802	$	—	$	3,218,579	$	3,491,381

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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

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

There were no transfers between Levels 1 and 2 for the years ended December 31, 2022 and 2021.

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

2022


Financial Assets	Measured at Fair Value through Profit or Loss			Measured at Fair Value through Other Comprehensive Income			Total
Balance on January 1, 2022	$	908,775		$	3,157,306		$	4,066,081
Acquisition		348,321			16,092			364,413
Disposal		—			(154	)		(154	)
Recognized in profit or loss under “Other gains and losses”		(215,326	)		—			(215,326	)
Recognized in other comprehensive income under “Unrealized gain or loss on financial assets at fair value through other comprehensive income”		—			52,519			52,519
Proceeds from capital reduction of the investees		(21,567	)		(7,184	)		(28,751	)

Balance on December 31, 2022	$	1,020,203		$	3,218,579		$	4,238,782

Unrealized gain or loss in 2022	$	(208,809	)

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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	)
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 capital reduction of the investees		(44,400	)		—			(44,400	)

Balance on December 31, 2021	$	908,775		$	3,157,306		$	4,066,081

Unrealized gain or loss in 2021	$	232,377

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

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

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

The fair values of non-listed domestic and foreign equity investments and film and drama investing agreements 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 investments, 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 discount rate would result in increases in the fair values.

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	December 31
	2022	2021
Discount for lack of marketability	14.09%~20.00%	16.05%~20.00%
Noncontrolling interests discount	17.29%~20.00%	17.29%~25.00%
Growth rate of long-term revenue	0.19%	0.19%
Discount rate	7.20%~8.80%	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 Level 3 financial assets would increase (decrease) as below table.


	December 31
	2022			2021
Discount for lack of marketability
5% increase	$	(33,111	)	$	(31,655	)

5% decrease	$	33,111		$	31,655

Noncontrolling interests discount
5% increase	$	(23,794	)	$	(18,998	)

5% decrease	$	23,794		$	18,998

Long-term revenue growth rates
0.1% increase	$	29,506		$	25,190

0.1% decrease	$	(28,938	)	$	(24,733	)

Discount rate
1% increase	$	(329,863	)	$	(287,845	)

1% decrease	$	406,648		$	350,328

Categories of Financial Instruments


	December 31
	2022		2021
Financial assets
Measured at FVTPL
Mandatorily measured at FVTPL	$	1,024,156	$	911,341
Hedging financial assets		12,891		—
Financial assets at amortized cost (Note a)		81,523,688		71,799,195
Financial assets at FVOCI		3,491,381		3,615,888
Financial liabilities
Measured at FVTPL
Held for trading		—		6,180
Hedging financial liabilities		—		8,286
Measured at amortized cost (Note b)		67,451,245		64,746,363


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, trade notes and accounts payable, payables to related parties, partial other payables, customers’ deposits, bonds payable and long-term loans which were financial liabilities carried at amortized cost.

- 89 -

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.

a.	Market risk

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

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

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
	2022		2021
Assets
USD	$	2,354,691	$	2,009,607
EUR		89,645		48,962
SGD		626,538		259,571
JPY		27,855		37,123
RMB		36,591		88,654
HKD		9,669		69,776
Liabilities
USD		852,302		889,578
EUR		875,256		861,481
SGD		2,010,250		1,964,490
JPY		15,748		12,662
RMB		37,386		38,521
HKD		17,193		15,792

- 90 -

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


	December 31
	2022		2021
Assets
EUR	$	16,405	$	—
Liabilities
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.


	Year Ended December 31
	2022			2021
Profit or loss
Monetary assets and liabilities (a)
USD	$	75,119		$	56,001
EUR		(39,281	)		(40,626	)
SGD		(69,186	)		(85,246	)
JPY		605			1,223
RMB		(40	)		2,507
HKD		(376	)		2,699
Derivatives (b)
EUR		3,272			12,528
Equity
Derivatives (c)
EUR		21,841			10,962

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.

- 91 -

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
	2022		2021
Fair value interest rate risk
Financial assets	$	41,593,475	$	27,670,982
Financial liabilities		41,149,864		37,248,928
Cash flow interest rate risk
Financial assets		9,631,079		14,171,472
Financial liabilities		2,322,000		1,665,000

Interest rate sensitivity analysis

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

If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Company’s pre-tax income would increase/decrease by $18,273 thousand and $31,266 thousand for the years ended December 31, 2022 and 2021, respectively. This is mainly attributable to the Company’s exposure to floating interest rates on its financial assets, short-term and long-term loans.

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 $49,826 thousand and $174,569 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, 2022. 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.

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.

- 92 -

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.

December 31, 2022


	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		—	$	39,904,488	$	—	$	2,143,523	$	5,156,700	$	—	$	47,204,711
Floating interest rate instruments		1.79		—		300,000		422,000		1,600,000		—		2,322,000
Fixed interest rate instruments		0.53		—		—		—		21,700,000		8,800,000		30,500,000

			$	39,904,488	$	300,000	$	2,565,523	$	28,456,700	$	8,800,000	$	80,026,711

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	$	3,390,348	$	4,445,772	$	2,142,864	$	869,994	$	10,848,978

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

- 93 -

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, 2022
Gross settled
Forward exchange contracts
Inflow	$	—	$	501,175		$	—	$	—	$	501,175
Outflow		—		484,770			—		—		484,770

	$	—	$	16,405		$	—	$	—	$	16,405

December 31, 2021
Gross settled
Forward exchange contracts
Inflow	$	—	$	470,395		$	—	$	—	$	470,395
Outflow		—		484,861			—		—		484,861

	$	—	$	(14,466	)	$	—	$	—	$	(14,466	)

Financing facilities


	December 31
	2022		2021
Unsecured bank loan facilities
Amount used	$	722,000	$	65,000
Amount unused		56,861,505		61,620,489

	$	57,583,505	$	61,685,489

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

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

37.

RELATED PARTIES TRANSACTIONS

The ROC Government, one of Chunghwa’s customers, has significant equity interest in Chunghwa. Chunghwa provides fixed-line services, wireless services, internet and data and other services to the various departments and institutions of the ROC Government in the normal course of business and at arm’s-length prices. Except for those disclosed in other notes 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.

- 94 -

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
Taiwan International Ports Logistics Corporation		Associate
Senao Networks, Inc.		Associate
EnRack Tech. Co., Ltd.		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 1)
Chunghwa PChome Fund I Co., Ltd.		Associate
Cornerstone Ventures Co., Ltd.		Associate
Next Commercial Bank Co., Ltd.		Associate
WiAdvance Technology Corporation		Associate
AgriTalk Technology Inc.		Associate (Note 2)
Imedtac Co., Ltd.		Associate (Note 2)
Baohwa Trust Co., Ltd.		Associate
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.		Substantial related party of SENAO
Engenius Technologies Co., Ltd.		Substantial related party of SENAO
Cheng Keng Investment Co., Ltd.		Substantial related party of SENAO
Cheng Feng Investment Co., Ltd.		Substantial related party of SENAO
All Oriented Investment Co., Ltd.		Substantial related party of SENAO
Hwa Shun Investment Co., Ltd.		Substantial related party of SENAO
Yu Yu Investment Co., Ltd.		Substantial related party of SENAO
Divine Fine Foods & Wine Inc.		Substantial related party of SENAO (Note 3)
Kangsin Co., Ltd.		Substantial related party of SENAO
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

Note 1:

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

Note 2:

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 3:

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.

- 95 -

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
	2022		2021
Associates	$	416,922	$	499,321
Others		60,767		54,453

	$	477,689	$	553,774


	Operating Costs and Expenses
	Year Ended December 31
	2022		2021
Associates	$	1,246,744	$	852,909
Others		79,759		73,825

	$	1,326,503	$	926,734

Non-operating transactions


	Non-operating Income and Expenses
	Year Ended December 31
	2022		2021
Associates	$	37,014	$	38,192
Others		1,928		2,936

	$	38,942	$	41,128

Receivables


	December 31
	2022		2021
Associates	$	70,091	$	34,864
Others		4,970		6,664

	$	75,061	$	41,528

- 96 -

Payables


	December 31
	2022		2021
Associates	$	534,515	$	385,327
Others		4,679		6,031

	$	539,194	$	391,358

Customers’ deposits


	December 31
	2022		2021
Associates	$	68,942	$	16,120
Others		284		—

	$	69,226	$	16,120

Acquisition of property, plant and equipment


	Year Ended December 31
	2022		2021
Associates	$	32,477	$	397,884

Acquisition of intangible assets


	Year Ended December 31
	2022		2021
Associates	$	677	$	—

Disposal of property, plant and equipment


	Proceeds				Gain on Disposal
	Year Ended December 31				Year Ended December 31
	2022		2021		2022		2021
Associates	$	—	$	9,800	$	—	$	1,628

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 in 2021. 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.

- 97 -

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


	December 31
	2022		2021
Lease liabilities - current	$	193,805	$	173,306
Lease liabilities - noncurrent		1,760,815		1,740,557

	$	1,954,620	$	1,913,863

The interest expense recognized for the aforementioned lease liabilities for the years ended December 31, 2022 and 2021 were $8,165 thousand and $7,420 thousand, respectively.

Compensation of key management personnel

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


	Year Ended December 31
	2022		2021
Short-term employee benefits	$	359,936	$	320,619
Post-employment benefits		7,974		7,568
Share-based payment		1,481		1,648
Termination benefits		237		—

	$	369,628	$	329,835

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

38.

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
	2022		2021
Property, plant and equipment	$	2,402,781	$	2,432,296
Restricted assets (included in other assets - others)		131,136		163,012

	$	2,533,917	$	2,595,308

39.

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, 2022 were as follows:

Acquisitions of land and buildings of $73,769 thousand.

Acquisitions of telecommunications-related inventory and equipment of $34,999,322 thousand.

- 98 -

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.

40.

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.

41.

SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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


	December 31, 2022
	Foreign Currencies (Thousands)		Exchange Rate		New Taiwan Dollars (Thousands)
Assets denominated in foreign currencies
Monetary items
USD	$	76,675		30.71	$	2,354,691
EUR		2,740		32.72		89,645
SGD		27,384		22.88		626,538
JPY		119,858		0.232		27,855
RMB		8,301		4.408		36,591
HKD		2,455		3.938		9,669
Non-monetary items
Investments accounted for using equity method
SGD		10,787		22.88		246,815
VND		434,655,397		0.0013		558,532
Liabilities denominated in foreign currencies
Monetary items
USD		27,753		30.71		852,302
EUR		26,750		32.72		875,256
SGD		87,861		22.88		2,010,250
JPY		67,762		0.232		15,748
RMB		8,481		4.408		37,386
HKD		4,366		3.938		17,193

- 99 -


	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

The unrealized foreign currency exchange gains and losses were loss of $265,035 thousand and gain of $113,174 thousand for the years ended December 31, 2022 and 2021, 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.

42.

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.

- 100 -

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.

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 36.

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.

43.

SEGMENT INFORMATION

In response to changes in the operating environment and new business challenges, the Company launched its organizational transformation and redesigned the operational decision-making processes and the performance assessment under the new structure. The aforementioned organizational transformation was effective from January 1, 2022. The Company redefined the reportable segments as “Consumer Business”, “Enterprise Business”, “International Business” and “Others” and restated the corresponding items of segment information for the comparative period. The reportable segments are managed separately because each segment represents a strategic business unit that serves different customers. 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.

Some operating segments have been aggregated into a single operating segment taking into account the following factors: (a) the type or class of customer for the telecommunications products and services are similar; (b) the nature of the telecommunications products and services are similar; and (c) 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.

- 101 -

Segment Revenues and Operating Results

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


	Consumer Business		Enterprise Business		International Business		Others		Total
Year ended December 31, 2022
Revenues
From external customers	$	132,062,750	$	72,152,293	$	7,188,697	$	5,335,494	$	216,739,234
Intersegment revenues		2,166,085		951,518		864,792		348,017		4,330,412

Segment revenues	$	134,228,835	$	73,103,811	$	8,053,489	$	5,683,511		221,069,646

Intersegment elimination										(4,330,412	)

Consolidated revenues									$	216,739,234

Segment income before income tax	$	28,515,614	$	15,608,640	$	1,693,789	$	1,410,907	$	47,228,950

Year ended December 31, 2021
Revenues
From external customers	$	129,912,418	$	69,258,462	$	6,121,699	$	5,185,369	$	210,477,948
Intersegment revenues		2,857,212		1,693,026		960,825		340,298		5,851,361

Segment revenues	$	132,769,630	$	70,951,488	$	7,082,524	$	5,525,667		216,329,309

Intersegment elimination										(5,851,361	)

Consolidated revenues									$	210,477,948

Segment income before income tax	$	27,526,976	$	15,094,067	$	1,246,398	$	2,199,183	$	46,066,624

Other Segment Information

Other information reviewed by the chief operating decision maker or regularly provided to the chief operating decision maker was as follows:


	Consumer Business			Enterprise Business		International Business		Others		Total
Year ended December 31, 2022
Share of profits of associates and joint ventures accounted for using equity method	$	(32,511	)	$	24,275	$	315,133	$	146,034	$	452,931

Interest income	$	11,020		$	28,273	$	7,599	$	202,237	$	249,129

Interest expenses	$	150,875		$	83,296	$	6,587	$	21,980	$	262,738

Depreciation and amortization	$	28,702,921		$	9,713,909	$	1,113,039	$	738,867	$	40,268,736

Reversal of impairment loss on investment properties	$	—		$	—	$	—	$	107,467	$	107,467

Impairment loss on intangible assets	$	9,547		$	—	$	—	$	—	$	9,547

Year ended December 31, 2021
Share of profits of associates and joint ventures accounted for using equity method	$	(48,691	)	$	10,441	$	271,542	$	188,348	$	421,640

Interest income	$	6,671		$	16,431	$	5,153	$	66,429	$	94,684

Interest expenses	$	130,889		$	65,726	$	7,009	$	14,547	$	218,171

Depreciation and amortization	$	27,953,387		$	9,700,088	$	865,020	$	697,619	$	39,216,114

Impairment loss on right-of-use assets	$	5,346		$	382,321	$	32,923	$	—	$	420,590

Reversal of impairment loss on investment properties	$	—		$	—	$	—	$	83,429	$	83,429

Impairment loss on intangible assets	$	28,901		$	—	$	—	$	—	$	28,901

- 102 -

Main Products and Service Revenues


	Year Ended December 31
	2022		2021
Consumer Business
Mobile services	$	51,821,044	$	49,042,476
Fixed-line services		42,766,155		42,277,164
Sales		35,171,564		36,145,331
Others		2,303,987		2,447,447

		132,062,750		129,912,418

Enterprise Business
Fixed-line services		34,536,513		34,711,557
Project business		24,247,914		22,298,743
Mobile services		8,942,259		8,446,406
Others		4,425,607		3,801,756

		72,152,293		69,258,462

International Business
Fixed-line services		5,063,377		5,007,780
Project business		1,506,495		679,315
Others		618,825		434,604

		7,188,697		6,121,699

Others
Sales		4,553,403		4,334,998
Others		782,091		850,371

		5,335,494		5,185,369

	$	216,739,234	$	210,477,948

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
	2022		2021
Taiwan, ROC	$	209,727,262	$	204,472,965
Overseas		7,011,972		6,004,983

	$	216,739,234	$	210,477,948

The Company has long-lived assets in U.S., Singapore, Hong Kong, China, Vietnam, Japan and Thailand for $3,212,396 thousand and $3,234,183 thousand at December 31, 2022 and 2021, respectively, in the aforementioned areas, the other long-lived assets are located in Taiwan, ROC.

Major Customers

As of December 31, 2022, and 2021, the Company did not have any single customer whose revenue exceeded 10% of the total revenues.

- 103 -

TABLE 1

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED

YEAR ENDED DECEMBER 31, 2022

(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.

630,851

300,000

—

4.76

3,154,258

Yes

Notes
3 and
4

Wiin
Technology
Co., Ltd.

630,851

200,000

—

3.17

3,154,258

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.

- 104 -

TABLE 2

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD

DECEMBER 31, 2022

(Amounts in Thousands of New Taiwan Dollars)


Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	December 31, 2022								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	$	3,008,391		12	$	3,008,391	—
	Innovation Works Development Fund, L.P.	—	Financial assets at FVTPL - noncurrent		—		102,648		4		102,648	—
	Industrial Bank of Taiwan II Venture Capital Co., Ltd. (IBT II)	—	Financial assets at FVOCI		5,252		13,412		17		13,412	—
	Global Mobile Corp.	—	Financial assets at FVOCI		7,617		—		3		—	—
	Innovation Works Limited	—	Financial assets at FVOCI		1,000		2,401		2		2,401	—
	RPTI Intergroup International Ltd.	—	Financial assets at FVOCI		4,765		—		10		—	—
	Taiwan mobile payment Co., Ltd.	—	Financial assets at FVOCI		1,200		4,246		2		4,246	—
	Taiwania Capital Buffalo Fund Co., Ltd.	—	Financial assets at FVTPL - noncurrent		555,600		567,203		13		567,203	—
	4 Gamers Entertainment Inc.	—	Financial assets at FVOCI		136		115,416		19.9		115,416	—
	TOP TAIWAN XIV VENTURE CAPITAL CO., LTD.	—	Financial assets at FVTPL - noncurrent		20,000		191,109		9		191,109	—
	Limited partnership
	Taiwania Capital Buffalo Fund VI, L.P.	—	Financial assets at FVTPL - noncurrent		—		93,114		10		93,114	—
Senao International Co., Ltd.	Stocks
	N.T.U. Innovation Incubation Corporation	—	Financial assets at FVOCI		1,200		10,428		9		10,428	—
CHIEF Telecom Inc.	Stocks
	3 Link Information Service Co., Ltd.	—	Financial assets at FVOCI		374		1,204		10		1,204	—
	WPG Holdings Limited	—	Financial assets at FVTPL - current		9		439		—		439	Note 2
	WPG Holdings Limited	—	Financial assets at FVOCI		2,102		102,998		—		102,998	Note 2
	WT Microelectronics Co., Ltd.	—	Financial assets at FVOCI		361		17,238		—		17,238	Note 2
Chunghwa Investment Co., Ltd.	Stocks
	Tatung Technology Inc.	—	Financial assets at FVOCI		4,571		46,989		11		46,989	—
	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		2,200		52,800		7		52,800	Note 2
	PChome Online Inc.	—	Financial assets at FVOCI		1,875		99,766		1		99,766	Note 2
	Limited partnership
	Taiwania Capital Buffalo Fund V, L.P.	—	Financial assets at FVTPL - noncurrent		—		42,007		3		42,007	—
CHT Security Co., Ltd.	Stocks
	TXOne Networks Inc.	—	Financial assets at FVOCI		91		16,092		—		16,092	—

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

Note 2: Fair value was based on the closing price on December 30, 2022.

- 105 -

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, 2022

(Amounts in Thousands of New Taiwan Dollars)

Company
Name

Marketable
Securities
Type and
Name

Financial
Statement
Account

Counter-
party

Nature of
Relationship

Beginning Balance

Acquisition

Disposal

Ending Balance

Shares
(Thousands/
Thousand
Units)

Amount

Shares
(Thousands/
Thousand
Units)

Amount

Shares
(Thousands/
Thousand
Units)

Amount

Carrying
Value

Gain on
Disposal

Shares
(Thousands/
Thousand
Units)

Amount

Chunghwa Precision Test Tech. Co., Ltd.

Stocks

TestPro
Investment
Co., Ltd.

Investments
accounted
for using
equity
method

Invested
and
established

Subsidiary

—

13,500

135,000

—

13,500

135,000

(Note)

TestPro Investment Co., Ltd.

Stocks

NavCore
Tech. Co.,
Ltd

Investments
accounted
for using
equity
method

Invested
and
established

Subsidiary

—

10,850

108,500

—

10,850

108,500

(Note)

Note: Showing at their original investment amounts. The amount was eliminated upon consolidation.

- 106 -

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, 2022

(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 Precision Test Tech. Co., Ltd.

Land

2021.01~2022.05

534,030

Fully
paid

Taiwan
Powder
Technologies
Co., Ltd.

—

Not applicable

According to
appraisal
report

Space
requirements
for future
business
expansion and
operational
considerations

—

- 107 -

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, 2022

(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 (Note 4)		% to Total		Payment Terms	Unit Price		Payment Terms		Ending Balance (Notes 2 and 4)			% to Total
Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Subsidiary	Sales	$	3,961,183		2	30 days	$	—		—	$	411,867			2
			Purchase		1,010,242		1	30~90 days		—		—		(951,467	)		(6	)
	Aval Technologies Co., Ltd.	Subsidiary	Purchase		345,739		—	30 days		—		—		(20,066	)		—
	CHIEF Telecom Inc.	Subsidiary	Sales		482,253		—	30 days		—		—		60,896			—
			Purchase		100,884		—	60 days		—		—		(29,434	)		—
	Chunghwa System Integration Co., Ltd.	Subsidiary	Purchase		1,383,311		1	30 days		—		—		(548,279	)		(3	)
	CHYP Multimedia Marketing & Communications Co., Ltd.	Subsidiary	Purchase		144,904		—	30 days		—		—		(70,901	)		—
	Honghwa International Co., Ltd.	Subsidiary	Purchase		6,398,667		6	30~60 days		—		—		(889,437	)		(6	)
	Donghwa Telecom Co., Ltd.	Subsidiary	Sales		181,714		—	30 days		—		—		43,519			—
			Purchase		526,207		—	90 days		—		—		(136,772	)		(1	)
	Chunghwa Telecom Global, Inc.	Subsidiary	Sales		130,426		—	90 days		—		—		20,368			—
			Purchase		314,688		—	90 days		—		—		(45,523	)		—
	CHT Security Co., Ltd.	Subsidiary	Purchase		365,383		—	30 days		—		—		(132,146	)		(1	)
	International Integrated Systems, Inc.	Subsidiary	Purchase		644,072		1	30 days		—		—		(105,962	)		(1	)
	Senyoung Insurance Agent Co., Ltd.	Subsidiary	Sales		137,915		—	90 days		—		—		41,775			—
	Next Commercial Bank Co., Ltd.	Associate	Sales		153,022		—	30~60 days		—		—		15,663			—
	Taiwan International Standard Electronics Co., Ltd.	Associate	Purchase		811,060		1	30~90 days		—		—		(274,242	)		(2	)
	KingwayTek Technology Co., Ltd.	Associate	Purchase		102,505		—	30 days		—		—		(12,310	)		—
Senao International Co., Ltd.	Aval Technologies Co., Ltd.	Subsidiary	Sales		354,836		1	60 days		—		—		54,984			3
			Purchase		239,559		1	30 days		—		—		(12,561	)		(1	)
CHIEF Telecom Inc.	So-net Entertainment Taiwan Limited	Associate	Sales		141,493		5	30 days		—		—		24,244			11
Aval Technologies Co., Ltd.	Youth Co., Ltd.	Fellow subsidiary	Sales		129,705		—	30 days		—		—		16,404			1
	ISPOT Co., Ltd.	Fellow subsidiary	Sales		105,031		—	30 days		—		—		13,907			1
Chunghwa Precision Test Tech. Co., Ltd.	Su Zhou Precision Test Tech. Ltd.	Subsidiary	Sales		185,105		4	90 days		—		—		39,884			5

Note 1: Purchases include costs to acquire services.

Note 2: Notes and accounts receivable did not include the amounts collected for others and other receivables.

Note 3: 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 4: All intercompany transactions, balances, income and expenses are eliminated upon consolidation.

- 108 -

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, 2022

(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	$	553,907 (Note 2	)		11.07	$	—		—	$	542,039	$	—
Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		1,096,214 (Note 2	)		8.10		—		—		80,373		—
Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		547,598 (Note 2	)		3.97		—		—		304,798		—
Honghwa International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		888,955 (Note 2	)		7.30		—		—		159,406		—
CHT Security Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		132,146 (Note 2	)		4.13		—		—		100,210		—
CHYP Multimedia Marketing & Communications Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		106,751 (Note 2	)		2.89		—		—		65,982		—
Donghwa Telecom Co.,Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		136,772 (Note 2	)		3.10		—		—		43,210		—

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.

- 109 -

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, 2022

(Amounts in Thousands of New Taiwan Dollars)


Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount				Balance as of December 31, 2022							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, 2022		December 31, 2021		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	$	1,727,055		$	658,038		$	177,150		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		3,839,742			20,995			13,323		Subsidiary (Note 5)
	Donghwa Telecom Co., Ltd.	Hong Kong	International private leased circuit, IP VPN service, and IP transit services		691,163		691,163		178,590		100		707,721			26,033			26,033		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		1,120,634			250,922			250,982		Subsidiary (Note 5)
	Chunghwa System Integration Co., Ltd.	Taiwan	Providing system integration services and telecommunications equipment		838,506		838,506		60,000		100		718,130			32,836			25,296		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		1,983,440			836,809			480,237		Subsidiary (Note 5)
	Chunghwa Investment Co., Ltd.	Taiwan	Investment		639,559		639,559		68,085		89		3,176,735			246,304			219,339		Subsidiary (Note 5)
	Prime Asia Investments Group Ltd.	British Virgin Islands	Investment		385,274		385,274		1		100		162,922			7,100			7,100		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		739,508			464,271			438,179		Subsidiary (Note 5)
	CHYP Multimedia Marketing & Communications Co., Ltd.	Taiwan	Digital information supply services and advertisement services		150,000		150,000		15,000		100		204,188			22,296			22,846		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		103,508			(764	)		(764	)	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		597,080			79,803			80,191		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		73		405,032			201,332			133,820		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		114,611			7,322			7,322		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		158,406			44,541			24,961		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		150,071			37,590			28,192		Subsidiary (Note 5)
	Smartfun Digital Co., Ltd.	Taiwan	Providing diversified family education digital services		65,000		65,000		6,500		65		81,764			19,479			12,388		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		124,400			28,268			28,268		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		37		(2,217	)		(3,575	)		(2,462	)	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		642,709			191,147			112,461		Subsidiary (Note 5)
	Viettel-CHT Co., Ltd.	Vietnam	IDC services		288,327		288,327		—		30		558,532			389,161			116,780		Associate

(Continued)

- 110 -

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, 2022

(Amounts in Thousands of New Taiwan Dollars)


Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount				Balance as of December 31, 2022						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, 2022		December 31, 2021		Shares (Thousands)		Percentage of Ownership (%)		Carrying Value (Note 3)		Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
	Taiwan International Standard Electronics Co., Ltd.	Taiwan	Manufacturing, selling, designing, and maintaining of telecommunications systems and equipment	$	164,000	$	164,000		1,760		40	$	296,501	$	162,479		$	84,401		Associate
	KKBOX Taiwan Co., Ltd.	Taiwan	Providing of music on-line, software, electronic information, and advertisement services		67,025		67,025		4,438		30		173,634		38,348			11,504		Associate
	So-net Entertainment Taiwan Limited	Taiwan	Online service and sale of computer hardware		120,008		120,008		9,429		30		228,184		35,925			10,777		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		10,512		23		267,125		78,927			18,316		Associate
	Taiwan International Ports Logistics Corporation	Taiwan	Import and export storage, logistic warehouse, and ocean shipping service		80,000		80,000		8,000		27		101,078		116,075			30,957		Associate
	Chunghwa PChome Fund I Co., Ltd.	Taiwan	Investment, venture capital, investment advisor, management consultant and other consultancy service		200,000		200,000		20,000		50		277,776		133,610			66,805		Associate
	Cornerstone Ventures Co., Ltd.	Taiwan	Investment, venture capital, investment advisor, management consultant and other consultancy service		4,900		4,900		490		49		6,743		315			155		Associate
	Next Commercial Bank Co., Ltd.	Taiwan	Online banking business		4,190,000		4,190,000		419,000		42		3,173,309		(1,004,331	)		(414,635	)	Associate
	Chunghwa SEA Holdings	Taiwan	Investment business		10,200		10,200		1,020		51		9,677		(501	)		(255	)	Joint venture
	WiAdvance Technology Corporation	Taiwan	Software solution integration		273,800		273,800		3,700		20		227,868		(94,522	)		(25,344	)	Associate
Senao International Co., Ltd.	Senao Networks, Inc.	Taiwan	Telecommunication facilities manufactures and sales		202,758		202,758		16,579		34		1,395,858		1,064,850			359,842		Associate
	Senao International (Samoa) Holding Ltd.	Samoa Islands	International investment		2,046,143		2,046,143		1,191		100		36,848		278			278		Subsidiary (Note 5)
	Youth Co., Ltd.	Taiwan	Sale of information and communication technologies products		427,850		427,850		14,752		96		180,344		(10,463	)		(16,082	)	Subsidiary (Note 5)
	Aval Technologies Co., Ltd.	Taiwan	Sale of information and communication technologies products		89,550		89,550		11,660		100		129,560		9,945			9,946		Subsidiary (Note 5)
	Senyoung Insurance Agent Co., Ltd.	Taiwan	Property and liability insurance agency		59,000		59,000		5,900		100		100,817		33,444			33,450		Subsidiary (Note 5)
CHIEF Telecom Inc.	Unigate Telecom Inc.	Taiwan	Telecommunications and internet service		2,000		2,000		200		100		1,213		134			134		Subsidiary (Note 5)
	Chief International Corp.	Samoa Islands	Telecommunications and internet service		6,068		6,068		200		100		101,660		8,450			8,450		Subsidiary (Note 5)
Chunghwa Telecom Singapore Pte., Ltd.	ST-2 Satellite Ventures Pte., Ltd.	Singapore	Operation of ST-2 telecommunications satellite		21,309		409,061		943		38		246,815		517,590			196,684		Associate
	CHT Infinity Singapore Pte. Ltd.	Singapore	Investment business		55,720		55,720		2,000		40		62,948		4,808			1,923		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		2,700,070		770,620			263,929		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		97,306		836,809			24,616		Associate (Note 5)
	Senao International Co., Ltd.	Taiwan	Selling and maintaining mobile phones and its peripheral products		49,731		49,731		1,001		—		45,196		658,038			2,551		Associate (Note 5)
	AgriTalk Technology Inc.	Taiwan	Providing smart agricultural solutions, scientific agricultural product, biological inhibitor, and biochips		65,175		33,000		3,300		29		34,738		(8,500	)		(757	)	Associate
	Imedtac Co., Ltd.	Taiwan	Providing medical AIoT solution, biomedical engineering services, and sales of medical device as an agent		48,000		48,000		960		7		40,866		(36,145	)		(4,568	)	Associate
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		74,192		2,600		100		99,700		4,996			4,996		Subsidiary (Note 5)

(Continued)

- 111 -

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, 2022

(Amounts in Thousands of New Taiwan Dollars)


Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount				Balance as of December 31, 2022						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, 2022		December 31, 2021		Shares (Thousands)		Percentage of Ownership (%)		Carrying Value (Note 3)		Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1, 2 and 3)			Note
	CHPT Japan Co., Ltd.	Japan	Related services of electronic parts, machinery processed products and printed circuit board	$	2,008	$	2,008		1		100	$	2,255	$	67		$	67		Subsidiary (Note 5)
	Chunghwa Precision Test Tech. International, Ltd.	Samoa Islands	Wholesale and retail of electronic materials, and investment		173,649		173,649		5,700		100		168,997		11,138			11,856		Subsidiary (Note 5)
	TestPro Investment Co., Ltd.	Taiwan	Investment		135,000		—		13,500		100		98,422		(13,775	)		(34,429	)	Subsidiary (Note 5)
TestPro Investment Co., Ltd.	NavCore Tech. Co., Ltd	Taiwan	Sale and manufacturing of smart equipment, smart factory software and hardware integration and technical consulting service		108,500		—		10,850		54		92,692		(25,177	)		(13,659	)	Subsidiary (Note 5)
Prime Asia Investments Group, Ltd.	Chunghwa Hsingta Co., Ltd.	Hong Kong	Investment		375,274		375,274		1		100		162,922		7,100			7,100		Subsidiary (Note 5)
Senao International (Samoa) Holding Ltd.	Senao International HK Limited	Hong Kong	International investment		2,060,467		2,060,467		80,440		100		34,207		—			—		Subsidiary (Note 5)
Youth Co., Ltd.	ISPOT Co., Ltd.	Taiwan	Sale of information and communication technologies products		53,021		53,021		—		100		14,131		2,420			2,228		Subsidiary (Note 5)
	Youyi Co., Ltd.	Taiwan	Maintenance of information and communication technologies products		21,354		21,354		—		100		5,150		(2,013	)		(12,474	)	Subsidiary (Note 5)
Aval Technologies Co., Ltd.	Wiin Technology Co., Ltd.	Taiwan	Sale of information and communication technologies products		29,550		29,550		3,845		100		45,810		6,370			6,370		Subsidiary (Note 5)
Senyoung Insurance Agent Co., Ltd.	Senaolife Insurance Agent Co., Ltd.	Taiwan	Life insurance services		29,500		29,500		2,950		100		21,804		(1,685	)		(1,685	)	Subsidiary (Note 5)
CHYP Multimedia Marketing & Communications Co., Ltd	Click Force Marketing Company	Taiwan	Advertisement services		44,607		44,607		1,401		49		40,932		14,887			7,079		Associate
International Integrated Systems, Inc.	Infoexplorer International Co., Ltd.	Samoa	Investment		24,806		24,806		795		100		28,893		(44	)		(44	)	Subsidiary (Note 5)
	IISI Investment Co., Ltd.	Mauritius	Investment		—		81,302		—		—		—		4,013			4,013		Subsidiary (Notes 5 and 6)
	Unitronics Technology Corp.	Taiwan	Development and maintenance of information system		55,569		55,569		5,065		99.96		83,036		8,085			8,082		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		28,887		(44	)		(44	)	Subsidiary (Note 5)
IISI Investment Co., Ltd.	Leading Tech Co., Ltd.	Mauritius	Investment		—		65,374		—		—		—		3,774			3,774		Subsidiary (Notes 5 and 6)
Leading Tech Co., Ltd.	Leading Systems Co., Ltd.	Mauritius	Investment		—		100,693		—		—		—		24			24		Subsidiary (Notes 5 and 6)
CHT Security Co., Ltd.	Baohwa Trust Co., Ltd.	Taiwan	VR integration and AIoT security services		20,000		—		2,000		40		13,267		(16,833	)		(6,733	)	Associate

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:

IICL , LTCL and LSCL completed the cancellation of registration in September 2022.

(Concluded)

- 112 -

TABLE 8

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INVESTMENTS IN MAINLAND CHINA

YEAR ENDED DECEMBER 31, 2022

(Amounts in Thousands of New Taiwan Dollars)


Investee	Main Businesses and Products	Total Amount of Paid-in Capital		Investment Type (Note 1)		Accumulated Outflow of Investment from Taiwan as of January 1, 2022		Investment Flows				Accumulated Outflow of Investment from Taiwan as of December 31, 2022		Net Income (Loss) of the Investee			% Ownership of Direct or Indirect Investment		Investment Gain (Loss) (Note 2)			Carrying Value as of December 31, 2022		Accumulated Inward Remittance of Earnings as of December 31, 2022		Note
Investee	Main Businesses and Products	Total Amount of Paid-in Capital		Investment Type (Note 1)				Outflow		Inflow				Net Income (Loss) of the Investee			% Ownership of Direct or Indirect Investment		Investment Gain (Loss) (Note 2)			Carrying Value as of December 31, 2022				Note
Senao International Trading (Shanghai) Co., Ltd.	Sale of information and communication technologies products	$	955,838		2	$	955,838	$	—	$	—	$	955,838	$	—			100	$	—		$	—	$	—		Notes 8 and 12
Chunghwa Telecom (China) Co., Ltd.	Integrated information and communication solution services for enterprise clients, and intelligent energy network service		177,176		2		177,176		—		—		177,176		(4,725	)		100		(4,725	)		—		—		Notes 10 and 12
Jiangsu Zhenghua Information Technology Company, LLC	Providing intelligent energy saving solution and intelligent buildings services		189,410		2		142,057		—		—		142,057		—			75		—			—		—		Notes 9 and 12
Shanghai Taihua Electronic Technology Limited	Design of printed circuit board and related consultation service		51,233		2		51,233		—		—		51,233		176			100		176			9,231		—		Note 12
Su Zhou Precision Test Tech. Ltd.	Assembly processed of circuit board, design of printed circuit board and related consultation service		119,199		2		119,199		—		—		119,199		10,983			100		10,983			162,919		—		Note 12
Shanghai Chief Telecom Co., Ltd.	Telecommunications and internet service		10,150		1		4,973		—		—		4,973		871			49		428			14,459		—		Note 12
International Integrated Systems Inc. (Shanghai)	Development and maintenance of information system		48,753		2		39,923		—		15,701		24,222		—			100		—			—		—		Notes 11 and 12

(Continued)

- 113 -


Investee	Accumulated Investment in Mainland China as of December 31, 2022		Investment Amounts Authorized by Investment Commission, MOEA		Upper Limit on Investment Stipulated by Investment Commission, MOEA
SENAO and its subsidiaries (Note 3)	$	955,838	$	2,047,858	$	3,792,099
Chunghwa Telecom (China) Co., Ltd. (Note 4)		177,176		177,176		236,267,056
Jiangsu Zhenghua Information Technology Company, LLC (Note 4)		142,057		142,057		236,267,056
Chunghwa Precision Test Tech Co., Ltd and its subsidiaries (Note 5)		170,432		216,185		4,775,580
Shanghai Chief Telecom Co., Ltd. (Note 6)		4,973		4,973		1,996,687
IISI and its subsidiaries (Note 7)		24,222		39,923		715,297

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

Note 9:

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

Note 10:

Chunghwa Telecom (China) Co., Ltd. completed its liquidation in October 2022.

Note 11:

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

Note 12:

The amount was eliminated upon consolidation.

(Concluded)

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TABLE 9

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS

YEAR ENDED DECEMBER 31, 2022

(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)
2022	0	Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	a	Accounts receivable	$	411,867		—		—
					Accrued custodial receipts		142,040		—		—
					Accounts payable		951,467		—		—
					Amounts collected for others		144,967		—		—
					Revenues		3,961,183		—		2
					Operating costs and expenses		865,491		—		—
					Inventories		144,751		—		—
			CHIEF Telecom Inc.	a	Accounts receivable		60,896		—		—
					Revenues		482,253		—		—
					Accounts payable		29,434		—		—
					Operating costs and expenses		100,884		—		—
			CHYP Multimedia Marketing & Communications Co., Ltd.	a	Accounts payable		70,901		—		—
					Operating costs and expenses		144,904		—		—
			Chunghwa System Integration Co., Ltd.	a	Accounts payable		548,279		—		—
					Operating costs and expenses		1,369,194		—		1
					Inventories		14,117		—		—
			Chunghwa Telecom Global Inc.	a	Accounts receivable		20,368		—		—
					Accounts payable		45,523		—		—
					Revenues		130,426		—		—
					Operating costs and expenses		314,688		—		—
			Donghwa Telecom Co., Ltd.	a	Accounts receivable		43,519		—		—
					Accounts payable		136,772		—		—
					Revenues		181,714		—		—
					Operating costs and expenses		526,207		—		—
			Honghwa International Co., Ltd.	a	Accounts payable		889,437		—		—
					Operating costs and expenses		6,311,140		—		3
					Inventories		87,527		—		—
			CHT Security Co., Ltd.	a	Accounts payable		132,146		—		—
					Operating costs and expenses		320,770		—		—
					Inventories		44,613		—		—
			International Integrated Systems, Inc.	a	Accounts payable		105,962		—		—
					Operating costs and expenses		628,518		—		—
					Inventories		15,554		—		—
			Aval Technologies Co., Ltd.	a	Accounts payable		20,066		—		—
					Operating costs and expenses		345,739		—		—
			Senyoung Insurance Agent Co., Ltd.	a	Accounts receivable		41,775		—		—
					Revenues		137,915		—		—

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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, 2022, while revenues, costs and expenses are shown as a percentage to consolidated revenues for the year ended December 31, 2022.

Note 5:

The amount was eliminated upon consolidation.

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TABLE 10

CHUNGHWA TELECOM CO., LTD.

INFORMATION OF MAJOR STOCKHOLDERS

DECEMBER 31, 2022


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.		416,466,184		5.36

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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