Chunghwa Telecom Co., Ltd. — Interim / Quarterly Report 2019

Nov 14, 2019

Chunghwa Telecom Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Three Months Ended March 31, 2019 and 2018 and Independent Auditors’ Review Report

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INDEPENDENT AUDITORS’ REVIEW REPORT

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The Board of Directors and Stockholders Chunghwa Telecom Co., Ltd.

Introduction

We have reviewed the accompanying consolidated balance sheets of Chunghwa Telecom Co., Ltd. and its subsidiaries (the “Company”) as of March 31, 2019 and 2018, the related consolidated statements of comprehensive income, the consolidated statements of changes in equity and cash flows for the three months then ended, and the related notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

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

Conclusion

Based on our reviews, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the three months then ended March 31, 2019 and 2018 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Emphasis of Matter

As disclosed in Note 5 to the consolidated financial statements, the Company initial applied IFRS 16 “Lease’’ in 2019. Our review result is not modified in respect of this matter.

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

Deloitte & Touche Taipei, Taiwan Republic of China May 8, 2019

Notice to Readers

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

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

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss (Note 7) Hedging financial assets (Note 20) Contract assets (Note 28) Trade notes and accounts receivable, net (Note 9) Receivables from related parties (Note 36) Inventories (Notes 10 and 37) Prepayments (Notes 5, 11 and 36) Other current monetary assets (Note 12) Other current assets (Notes 19 and 37) Total current assets NONCURRENT ASSETS Financial assets at fair value through profit or loss (Note 7) Financial assets at fair value through other comprehensive income (Note 8) Investments accounted for using equity method (Note 14) Contract assets (Note 28) Property, plant and equipment (Notes 5, 15 and 37) Right-of-use assets (Notes 3, 4, 5 and 16) Investment properties (Note 17) Intangible assets (Note 18) Deferred income tax assets (Notes 3 and 5) Incremental costs of obtaining contracts (Note 28) Net defined benefit assets (Note 3) Prepayments (Notes 5, 11 and 36) Other noncurrent assets (Notes 19, 37 and 38) Total noncurrent assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term loans (Note 21) Financial liabilities at fair value through profit or loss (Note 7) Hedging derivative financial liabilities (Note 20) Contract liabilities (Notes 5 and 28) Trade notes and accounts payable (Note 23) Payables to related parties (Note 36) Current tax liabilities (Note 3) Lease liabilities (Notes 3, 4, 5, 16 and 36) Other payables (Notes 5 and 24) Provisions (Note 25) Other current liabilities (Note 5) Total current liabilities NONCURRENT LIABILITIES Contract liabilities (Notes 5 and 28) Long-term loans (Notes 22 and 37) Deferred income tax liabilities (Notes 3 and 5) Provisions (Note 25) Lease liabilities (Notes 3, 4, 5, 16 and 36) Customers’ deposits (Note 36) Net defined benefit liabilities (Note 3) Other noncurrent liabilities (Note 5) Total noncurrent liabilities Total liabilities EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT (Notes 5, 13 and 27) Common stocks Additional paid-in capital Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other adjustments Total equity attributable to stockholders of the parent NONCONTROLLING INTERESTS (Notes 5, 13 and 27) Total equity TOTAL		March 31, 2019 (Reviewed)		December 31, 2018 (Audited)		March 31, 2018 (Reviewed)
		Amount % $ 37,228,202 8 - - - - 4,606,104 1 27,524,272 6 18,251 - 13,904,329 3 4,855,305 1 7,169,247 1 2,925,849 1 98,231,559 21 511,274 - 6,774,106 1 3,024,908 1 2,394,383 - 284,681,139 59 11,710,079 2 8,277,484 2 49,934,152 11 3,557,699 1 1,117,334 - 1,088,263 - 2,931,109 1 5,798,112 1 381,800,042 79 $ 480,031,601 100 $ 175,000 - 2,219 - 2,719 - 12,417,476 3 14,948,306 4 361,333 - 6,276,099 1 3,500,021 1 20,293,306 4 131,367 - 1,051,655 - 59,159,501 13 6,324,795 1 1,600,000 - 1,984,867 - 79,142 - 6,353,362 2 4,646,233 1 3,579,648 1 1,400,139 - 25,968,186 5 85,127,687 18 77,574,465 16 171,135,080 36 77,574,465 16 2,675,419 1 55,446,604 11 135,696,488 28 309,142 - 384,715,175 80 10,188,739 2 394,903,914 82 $ 480,031,601 100		Amount % $ 27,644,780 6 - - 1,069 - 4,868,728 1 30,075,503 7 24,270 - 15,120,715 3 1,872,984 - 9,504,203 2 2,576,084 1 91,688,336 20 517,362 - 6,932,503 2 2,944,890 1 2,343,958 - 288,914,228 61 - - 8,287,212 2 50,943,682 11 3,553,856 1 1,335,030 - 1,164,088 - 3,463,337 1 5,180,222 1 375,580,368 80 $ 467,268,704 100 $ 100,000 - 1,114 - - - 10,687,772 2 20,464,792 5 917,951 - 4,390,203 1 - - 23,315,383 5 128,200 - 1,381,606 - 61,387,021 13 2,595,149 1 1,600,000 - 1,991,843 - 78,627 - - - 4,716,571 1 3,533,936 1 4,793,237 1 19,309,363 4 80,696,384 17 77,574,465 17 171,136,764 36 77,574,465 17 2,675,419 1 47,141,345 10 127,391,229 28 459,914 - 376,562,372 81 10,009,948 2 386,572,320 83 $ 467,268,704 100		Amount % $ 31,529,327 7 34 - 47 - 6,258,807 2 29,999,086 6 28,531 - 11,079,728 2 5,535,061 1 5,394,128 1 2,245,629 - 92,070,378 19 - - 7,305,255 2 2,603,503 1 3,588,239 1 284,977,119 61 - - 8,048,154 2 53,832,505 11 3,250,266 1 2,283,014 - 1,288,997 - 3,411,968 1 5,434,158 1 376,023,178 81 $ 468,093,556 100 $ 170,000 - 1,031 - - - 8,654,115 2 14,695,321 3 414,752 - 8,702,753 2 - - 21,575,325 5 100,012 - 1,299,977 - 55,613,286 12 2,384,343 1 1,600,000 - 2,064,694 - 79,272 - - - 4,559,868 1 2,001,699 - 4,537,157 1 17,227,033 3 72,840,319 15 77,574,465 17 169,478,964 36 77,574,465 17 2,680,823 1 58,529,134 12 138,784,422 30 417,073 - 386,254,924 83 8,998,313 2 395,253,237 85 $ 468,093,556 100

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

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

REVENUES (Notes 28, 36 and 41) OPERATING COSTS (Notes 10, 26, 28, 29, 36 and 41) GROSS PROFIT OPERATING EXPENSES (Notes 26, 29, 36 and 41) Marketing General and administrative Research and development Expected credit loss (reversal of credit loss) Total operating expenses OTHER INCOME AND EXPENSES (Note 29) INCOME FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Interest income Other income (Notes 29 and 36) Other gains and losses (Notes 29 and 36) Interest expenses (Notes 16 and 36) Share of the profit of associates accounted for using equity method (Note 14) Total non-operating income and expenses INCOME BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 3 and 30) NET INCOME		**Three Months Ended March 31 **	**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2019 Amount % $ 51,331,161 100 33,480,788 65 17,850,373 35 5,407,891 11 1,171,158 2 920,959 2 (55,953) - 7,444,055 15 (4,505) - 10,401,813 20 52,603 - 56,346 - (19,368) - (25,844) - 79,173 - 142,910 - 10,544,723 20 2,018,010 4 8,526,713 16		2018
				Amount % $ 53,632,358 100 34,450,367 64 19,181,991 36 5,652,814 11 1,190,974 2 925,504 2 397,920 1 8,167,212 16 (71,322) - 10,943,457 20 38,919 - 56,160 - (33,288) - (4,386) - 82,648 - 140,053 - 11,083,510 20 2,086,006 4 8,997,504 16 (Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

TOTAL OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified to profit or loss: Unrealized gain or loss on investments in equity instruments at fair value through other comprehensive income (Note 35) Gain or loss on hedging instruments subject to basis adjustment (Note 20) Income tax benefit relating to items that will not be reclassified to profit or loss (Note 30) Items that may be reclassified subsequently to profit or loss: Exchange differences arising from the translation of the foreign operations Share of exchange differences arising from the translation of the foreign operations of associates (Note 14) Total other comprehensive loss, net of income tax TOTAL COMPREHENSIVE INCOME NET INCOME ATTRIBUTABLE TO Stockholders of the parent Noncontrolling interest COMPREHENSIVE INCOME ATTRIBUTABLE TO Stockholders of the parent Noncontrolling interest EARNINGS PER SHARE (Note 31) Basic Diluted		**Three Months Ended March 31 **	**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2019 Amount % $ (158,988) - (3,788) - - - (162,776) - 23,530 - 170 - 23,700 - (139,076) - $ 8,387,637 16 $ 8,356,082 16 170,631 - $ 8,526,713 16 $ 8,205,310 16 182,327 - $ 8,387,637 16 $1.08 $1.08		2018
				Amount % $ (234,132) - 897 - 207,269 - (25,966) - (51,924) - 835 - (51,089) - (77,055) - $ 8,920,449 16 $ 8,727,524 16 269,980 - $ 8,997,504 16 $ 8,642,380 16 278,069 - $ 8,920,449 16 $1.13 $1.12

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

(Concluded)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

BALANCE, JANUARY 1, 2018 Change in additional paid-in capital from investments in associates accounted for using equity method Net income for the three months ended March 31, 2018 Other comprehensive income (loss) for the three months ended March 31, 2018 Total comprehensive income for the three months ended March 31, 2018 Share-based payment transactions of subsidiaries Net increase in noncontrolling interests BALANCE, MARCH 31, 2018 BALANCE, JANUARY 1, 2019 Effect of retrospective application (Note 5) BALANCE, JANUARY 1, 2019 AS ADJUSTED Change in additional paid-in capital from investments in associates accounted for using equity method Net income for the three months ended March 31, 2019 Other comprehensive income (loss) for the three months ended March 31, 2019 Total comprehensive income for the three months ended March 31, 2019 Share-based payment transactions of subsidiaries BALANCE, MARCH 31, 2019					Equity Attributable to Stockholders of the Pa	rent (Notes 13, 20 and 27)		Noncontrolling Interests Total (Notes 13 and 27) $ 377,600,463 $ 8,693,650 (38) 4 8,727,524 269,980 (85,144) 8,089 8,642,380 278,069 12,119 21,590 - 5,000 $ 386,254,924 $ 8,998,313 $ 376,562,372 $ 10,009,948 (50,823) (19,603) 376,511,549 9,990,345 (872) 497 8,356,082 170,631 (150,772) 11,696 8,205,310 182,327 (812) 15,570 $ 384,715,175 $ 10,188,739	Total Equity $ 386,294,113 (34) 8,997,504 (77,055) 8,920,449 33,709 5,000 $ 395,253,237 $ 386,572,320 (70,426) 386,501,894 (375) 8,526,713 (139,076) 8,387,637 14,758 $ 394,903,914
		Common Stocks $ 77,574,465 - - - - - - $ 77,574,465 $ 77,574,465 - 77,574,465 - - - - - $ 77,574,465	Additional Paid-in Capital $ 169,466,883 (38) - - - 12,119 - $ 169,478,964 $ 171,136,764 - 171,136,764 (872) - - - (812) $ 171,135,080		Retained Earnings	Other Adjustments	Gain or Loss on Hedging Instruments $ (850) - - 897 897 - - $ 47 $ 1,069 - 1,069 - - (3,788) (3,788) - $ (2,719)
						Unrealized Gain Exchange or Loss on Differences Financial Assets Arising from the at Fair Value Translation of Through Other the Foreign Comprehensive Operations Income $ (174,593) $ 883,420 - - - - (53,403) (238,398) (53,403) (238,398) - - - - $ (227,996) $ 645,022 $ (79,427) $ 538,272 - - (79,427) 538,272 - - - - 15,223 (162,207) 15,223 (162,207) - - $ (64,204) $ 376,065
					Unappropriated Legal Reserve Special Reserve Earnings $ 77,574,465 $ 2,680,823 $ 49,595,850 - - - - - 8,727,524 - - 205,760 - - 8,933,284 - - - - - - $ 77,574,465 $ 2,680,823 $ 58,529,134 $ 77,574,465 $ 2,675,419 $ 47,141,345 - - (50,823) 77,574,465 2,675,419 47,090,522 - - - - - 8,356,082 - - - - - 8,356,082 - - - $ 77,574,465 $ 2,675,419 $ 55,446,604

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

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments to reconcile income before income tax to net cash provided by operating activities: Depreciation Amortization Amortization of incremental costs of obtaining contracts Expected credit losses (reversal of credit loss) Interest expenses Interest income Compensation cost of share-based payment transactions Share of profit of associates accounted for using equity method Loss on disposal of property, plant and equipment Gain on disposal of financial instruments Provision for inventory and obsolescence Impairment loss on intangible assets Valuation loss on financial assets and liabilities at fair value through profit or loss, net Others Changes in operating assets and liabilities: Decrease (increase) in: Financial assets mandatorily measured at fair value through profit or loss Contract assets Trade notes and accounts receivable Accounts receivable from related parties Inventories Prepayments Other current monetary assets Other current assets Incremental cost of obtaining contracts Increase (decrease) in: Contract liabilities Trade notes and accounts payable Payables to related parties Other payables Provisions Other current liabilities Net defined benefit plans Cash generated from operations Interest paid Income tax paid Net cash provided by operating activities		**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2019 $ 10,544,723 7,693,369 1,064,194 376,902 (55,953) 25,844 (52,603) 430 (79,173) 4,505 - 95,682 - 7,193 (23,594) - 212,752 2,615,369 6,019 1,120,704 (3,108,829) (42,281) (349,765) (159,206) 1,762,269 (5,516,944) (556,618) (2,240,856) 3,682 (107,442) 121,537 13,361,910 (25,844) (117,351) 13,218,715	2018 $ 11,083,510 6,895,427 1,069,983 452,276 397,920 4,386 (38,919) 410 (82,648) 20,572 (5,754) 32,476 50,750 419 (22,054) 59,642 135,004 1,593,019 20,836 (2,404,675) (3,193,139) 78,794 69,215 (261,147) 408,284 (4,701,135) (269,433) (2,256,525) (401) 181,426 (1,977,888) 7,340,631 (4,386) (12,269) 7,323,976

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of time deposits and negotiable certificates of deposit with maturities of more than three months Proceeds from disposal of time deposits and negotiable certificates of deposit with maturities of more than three months Proceeds from capital reduction of investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Acquisition of investment properties Increase in other noncurrent assets Interest received Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term loans Repayment of short-term loans Decrease in customers' deposits Payments for the principal of lease liabilities Decrease in other noncurrent liabilities Change in other noncontrolling interests Net cash used in financing activities EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS, END OF PERIOD		**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2019 $ (1,563,562) 3,931,264 - (4,492,381) 9,618 (54,332) - (618,400) 58,028 (2,729,765) 300,000 (225,000) (78,673) (1,019,347) 89,809 14,328 (918,883) 13,355 9,583,422 27,644,780 $ 37,228,202	2018 $ (2,316,703) 2,118,012 19,184 (4,390,273) 9,932 (69,923) (5,557) (43,084) 41,437 (4,636,975) 200,000 (100,000) (101,178) - (37,637) 38,299 (516) 17,907 2,704,392 28,824,935 $ 31,529,327

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

(Concluded)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited)

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

1. GENERAL

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

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

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

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

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Board of Directors on May 8, 2019.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the following items, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2018. Please refer to the consolidated financial statements for the year ended December 31, 2018 for the details.

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Statement of Compliance

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

Basis of Consolidation

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

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

Percentage ofOwnership March 31, 2019 December 31, 2018 March 31, 2018 Note 28 28 29 a. 100 100 100 100 100 100 100 100 100 100 100 100 89 89 89 57 57 66 b. 100 100 100 100 100 100 56 56 56 100 100 100 100 100 100 65 65 65 100 100 100 51 51 51

(Continued)

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Name of Investor Name of Investee Main Businesses and Products Honghwa International Co., Ltd. (“HHI”) Telecommunications engineering, sales agent of mobile phone plan application and other business services Chunghwa Leading Photonics Tech Co., Ltd. (“CLPT”) Production and sale of electronic components and finished products Chunghwa Telecom (Thailand) Co., Ltd. (“CHTT”) International private leased circuit, IP VPN service, ICT and cloud VAS services CHT Security Co., Ltd. (“CHTSC”) Computing equipment installation, wholesale of computing and business machinery equipment and software, management consulting services, data processing services, digital information supply services and internet identify services Senao International Co., Ltd. Senao International (Samoa) Holding Ltd. (“SIS”) International investment Youth Co., Ltd. (“Youth”) Sale of information and communication technologies products Aval Technologies Co., Ltd. (“Aval”) Sale of information and communication technologies products SENYOUNG Insurance Agent Co., Ltd. (“SENYOUNG”) Property and liability insurance agency Youth Co., Ltd. ISPOT Co., Ltd. (“ISPOT”) Sale of information and communication technologies products Youyi Co., Ltd. (“Youyi”) Maintenance of information and communication technologies products Light Era Development Co., Ltd. Taoyuan Asia Silicon Valley Innovation Co., Ltd. (“TASVI”) Development of real estate CHIEF Telecom Inc. Unigate Telecom Inc. (“Unigate”) Telecommunications and internet service Chief International Corp. (“CIC”) Telecommunications and internet service Shanghai Chief Telecom Co., Ltd. (“SCT”) Telecommunications and internet service Chunghwa System Integration Co., Ltd. Concord Technology Co., Ltd. (“Concord”) Investment Chunghwa Investment Co., Ltd. Chunghwa Precision Test Tech. Co., Ltd. (“CHPT”) Production and sale of semiconductor testing components and printed circuit board 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 CHPT Japan Co., Ltd. (“CHPT (JP)”) Related services of electronic parts, machinery processed products and printed circuit board Chunghwa Precision Test Tech. International, Ltd. (“CHPT (International)”) Wholesale and retail of electronic materials, and investment

Percentage ofOwnership March 31, 2019 December 31, 2018 March 31, 2018 Note 100 100 100 75 75 75 100 100 100 80 80 80 100 100 100 93 93 89 c. 100 100 100 100 100 100 100 100 100 100 100 100 60 60 60 d. 100 100 100 100 100 100 49 49 49 - - - e. 34 34 38 f. 100 100 100 100 100 100 100 100 100 (Continued)

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Name of Investor Name of Investee Main Businesses and Products Senao International (Samoa) Holding Ltd. Senao International HK Limited (“SIHK”) International investment Senao International HK Limited Senao Trading (Fujian) Co., Ltd. (“STF”) Sale of information and communication technologies products Senao International Trading (Shanghai) Co., Ltd. (“SITS”) Sale of information and communication technologies products Senao International Trading (Shanghai) Co., Ltd. (“SEITS”) Maintenance of information and communication technologies products Senao International Trading (Jiangsu) Co., Ltd. (“SITJ”) Sale of information and communication technologies products Prime Asia Investments Group Ltd. (B.V.I.) Chunghwa Hsingta Co., Ltd. (“CHC”) Investment Chunghwa Hsingta Co., Ltd. (“CHC”) Chunghwa Telecom (China) Co., Ltd. (“CTC”) Integrated information and communication solution services for enterprise clients, and intelligent energy network service Jiangsu Zhenhua Information Technology Company, LLC. (“JZIT”) Providing intelligent energy saving solution and intelligent buildings services Chunghwa Precision Test Tech. International, Ltd. Shanghai Taihua Electronic Technology Limited (“STET”) Design of printed circuit board and related consultation service

Percentage ofOwnership March 31, 2019 December 31, 2018 March 31, 2018 Note 100 100 100 100 100 100 g. 100 100 100 - - - h. - 100 100 i. 100 100 100 100 100 100 - - 75 j. 100 100 100 (Concluded)

• a. SENAO transferred its treasury stock to employees in June 2018 and the Company’s ownership interest in SENAO decreased to 28.18% as of December 31, 2018 and March 31, 2019. As Chunghwa controls five out of nine seats of the Board of Directors of SENAO through the support of large beneficial stockholders, the accounts of SENAO are included in the consolidated financial statements.

• b. CHIEF issued new shares in March 2019, March and November 2018 as its employees exercised their options. In addition, Chunghwa and CHI disposed some shares of CHIEF in May 2018 before CHIEF traded its shares on the General Stock Market of the Taipei Exchange according to the local requirements. Furthermore, Chunghwa and CHI did not participate in the capital increase of CHIEF in June 2018. Therefore, the Company’s equity ownership interest in CHIEF decreased to 60.23% as of December 31, 2018 and 59.86% as of March 31, 2019, respectively.

• c. SENAO subscribed for all the shares in the capital increase of Youth in December 2018. Therefore, the Company’s equity ownership interest in Youth increased from 89% to 93%.

• d. LED invested 60% equity shares of Taoyuan Asia Silicon Valley Innovation Co., Ltd. (“TASVI”) in March 2018. TASVI was approved to end and dissolve its business in April 2019. The liquidation of TASVI is still in process.

• e. Concord was approved to end and dissolve its business in August 2017. The liquidation of Concord was completed in January 2018.

• 12 -

• f. CHI disposed some shares of CHPT from April to August 2018. Therefore, its ownership interest in CHPT decreased to 34.25% as of December 31, 2018 and March 31, 2019. However, considering the absolute and relative size of ownership interest, and the dispersion of shares owned by the other stockholders, the management 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.

• g. STF was approved to end and dissolve its business in September 2018. The liquidation of STF is still in process.

• h. SEITS completed its liquidation in March 2018.

• i. SITJ completed its liquidation in March 2019.

• j. JZIT completed its liquidation in December 2018.

The following diagram presents information regarding the relationship and ownership percentages between Chunghwa and its subsidiaries as of March 31, 2019:

==> picture [557 x 267] intentionally omitted <==

----- Start of picture text -----

Chunghwa Telecom Co., Ltd.
(Chunghwa)
100% 27.79% 100% 100% 100% 100% 100% 56.04% 100% 56.86% 100% 89% 100% 51% 65% 100% 75% 100% 80.27%
Chunghwa Senao CHYP Chunghwa Chunghwa Chunghwa Light Era Spring House Donghwa CHIEF Chunghwa Chunghwa Prime Asia Chunghwa Smartfun Honghwa Chunghwa Chunghwa CHT
Telecom International Multimedia Telecom System Telecom Development Entertainment Telecom Telecom Telecom Investment Investments Sochamp Digital International Leading Telecom Security
Vietnam Co., Ltd. Marketing & Singapore Integration Global, Inc. Co., Ltd. Tech. Inc. Co., Ltd. Inc. Japan Co., Co., Ltd. Group Ltd. Technology Co., Ltd. Co., Ltd. Photonics (Thailand) Co., Ltd.
Co., Ltd. (“SENAO”) Communications Pte., Ltd. Co., Ltd. (“CHTG”) (“LED”) (“SHE”) (“DHT”) (“CHIEF”) Ltd. (“CHI”) (“Prime Inc. (“SFD”) (“HHI”) Tech Co., Ltd. (“CHTSC”)
(“CHTV”) Co., Ltd. (“CHTS”) (“CHSI”) (“CHTJ”) Asia”) (“CHST”) Co., Ltd. (“CHTT”)
(“CHYP”) (“CLPT”)
3.00%
60%
Insurance Agent SENYOUNG Co., Ltd. 100% Technologies Co., Ltd. Aval 100% (“Youth”) Co., Ltd. Youth 92.89% International (Samoa) Senao 100% Silicon Valley Taoyuan Asia Innovation Co., Ltd. Telecom Inc. Unigate 100% International Chief 100% Shanghai Chief 49% Chunghwa Test Tech. Precision 34.25% Chunghwa Co., Ltd. Hsingta 100%
(“SENYOUNG”) (“Aval”) Holding Ltd. (“SIS”) (“TASVI”) (“Unigate”) Corp. (“CIC”) Co., Ltd. Telecom (“CHPT”) Co., Ltd. (“CHC”)
(“SCT”)
100% 100% 100% 100% 100% 100% 100%
ISPOT Co., (“ISPOT”)Ltd. Youyi Co., Ltd. (“Youyi”) International HK Limited (“SIHK”) Senao 0.39% (“CHPT (US)”) Precision Test Corporation Chunghwa Tech USA (“CHPT (JP)”) CHPT Japan Co., Ltd. International, Ltd. (InternationalChunghwa Test Tech. Precision (“CHPT )”) Chunghwa Co., Ltd. (“CTC”) Telecom (China)
100%
100% 100% Shanghai Taihua
Electronic
Senao Senao Technology
Trading International Limited
(Fujian) Trading (“STET”)
Co., Ltd. (Shanghai)
(“STF”) Co., Ltd.
(“SITS”)
----- End of picture text -----

Other Significant Accounting Policies

The Company initial applied IFRS 16 “Lease’’ on January 1, 2019, and elected not to restate the figures in comparative periods. Different accounting policies for each accounting periods as a result of the application of new accounting standards are listed by year separately.

a. Defined benefit retirement benefits

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

• 13 -

b. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. Income taxes for interim period are assessed on an annual basis and calculated by applying to an interim period’s pre-tax income the tax rate that would be applicable to expected total annual earnings. The effect of a change in tax rate resulting from a change in tax law is recognized in consistent with the accounting for the transaction itself for which the tax consequence arises from, and is recognized in profit or loss or other comprehensive income in full in the period in which the change in tax rate occurs.

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.

• c. Leasing

2019

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

• 1) The Company as lessor

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

• 2) 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. Lease liabilities are presented separately on the consolidated balance sheets.

• 14 -

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

2018

• 1) The Company as lessor

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

• 2) The Company as lessee

Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

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.

Except for the following items, for the critical accounting judgments and key sources of estimation, uncertainty and assumption applied in these consolidated financial statements, please refer to the consolidated financial statements for the year ended December 31, 2018.

Lessees’ incremental borrowing rates - 2019

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

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

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

IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for identifying leases and accounting treatments for lessors and lessees. It supersedes IAS 17 “Lease”, IFRIC 4 - Determining Whether an Arrangement Contains a Lease and a number of related interpretations. Refer to Note 3 for information relating to the relevant accounting policies.

• 15 -

The Company reassesses whether a contract is, or contains, a lease in accordance with the definition of a lease under IFRS 16. Some contracts previously identified as containing a lease under IAS 17 and IFRIC 4 do not meet the definition of a lease under IFRS 16 and are accounted for in accordance with other accounting standards because the Company does not have the right to direct the use of the identified assets. Contracts that are reassessed as leases or containing a lease are accounted for in accordance with the transitional provisions under IFRS 16.

If the Company is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for those whose payments for low-value assets are recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Company presents the depreciation expense charged on the right-of-use asset separately from the interest expense accrued on lease liability using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities. Before the application of IFRS 16, payments under operating lease contracts were recognized as expenses on a straight-line basis. Prepaid lease payments for use rights of leased assets were recognized as prepaid rents. Cash flows for operating leases were classified within operating activities on the statements of cash flows.

The Company does not make any adjustments for leases in which the Company is a lessor and accounts for those leases with the application of IFRS 16 starting from January 1, 2019.

The Company applied IFRS 16 retrospectively with the cumulative effect of the initial application of IFRS 16 recognized in retained earnings on January 1, 2019. Comparative financial information is not restated.

Lease liabilities are recognized on January 1, 2019 for leases previously classified as operating leases under IAS 17 and measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets are measured at the present value discounted using the aforementioned incremental borrowing rate as if IFRS 16 had been applied since the commencement date of leases. The Company applies IAS 36 for assessing impairment of right-of-use assets.

The lessee’s weighted average incremental borrowing rate applied to lease liabilities recognized on January 1, 2019 is 0.85%. The difference between the (1) lease liabilities recognized and (2) future aggregate minimum lease payments of non-cancellable operating lease disclosed under IAS 17 on December 31, 2018 is explained as follows:

The future aggregate minimum lease payments of non-cancellable operating lease on December 31, 2018 Less: Recognition exemption for leases of low-value assets Undiscounted amount on January 1, 2019 Discounted amount using the incremental borrowing rate on January 1, 2019 Add: Adjustments as a result of a different treatment of extension options Lease liabilities recognized on January 1, 2019	$ 10,557,854 (3,263) $ 10,554,591 $ 10,339,868 189 $ 10,340,057

• 16 -

The impact on assets, liabilities and equity as of January 1, 2019 from the initial application of IFRS 16 is set out as follows:

			Adjustments	Adjustments
			Arising from			Adjusted
		Carrying		Initial		Carrying
	Amount as of		Application of		Amount as of
	January 1, 2019			IFRS 16	January 1, 2019
Prepayments - current	$	1,872,984	$	(245,215)	$	1,627,769
Property, plant and equipment	$	288,914,228		(1,308,990)	$	287,605,238
Right-of-use assets	$	-		12,163,063	$	12,163,063
Deferred income tax assets	$	3,553,856		25,588	$	3,579,444
Prepayments - noncurrent	$	3,463,337		(413,521)	$	3,049,816
Total effect on assets			$	10,220,925
Contract liabilities - current	$	10,687,772	$	214,174	$	10,901,946
Lease liabilities - current	$	-		3,394,119	$	3,394,119
Other payables	$	23,315,383		(48,712)	$	23,266,671
Other current liabilities	$	1,381,606		(214,174)	$	1,167,432
Contract liabilities - noncurrent	$	2,595,149		3,482,907	$	6,078,056
Deferred income tax liabilities	$	1,991,843		6	$	1,991,849
Lease liabilities - noncurrent	$	-		6,945,938	$	6,945,938
Other noncurrent liabilities	$	4,793,237		(3,482,907)	$	1,310,330
Total effect on liabilities			$	10,291,351
Unappropriated earnings	$	47,141,345	$	(50,823)	$	47,090,522
Noncontrolling interests	$	10,009,948		(19,603)	$	9,990,345
Total effect on equity			$	(70,426)

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

		Effective Date
		Announced by IASB
New, Revised or Amended	Standards and Interpretations	(Note 1)
Amendments to IFRS 3	Definition of a Business	January 1, 2020 (Note 2)
Amendments to IFRS 10 and IAS	Sale or Contribution of Assets	To be determined by
28	between An Investor and Its	IASB
	Associate or Joint Venture
Amendments to IAS 1 and IAS 8	Definition of Materiality	January 1, 2020 (Note 3)

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

• Note 2: The Company shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

• Note 3: The Company shall apply these amendments prospectively in annual periods beginning on or after January 1, 2020.

• 17 -

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

March 31, 2019 Cash Cash on hand $ 413,478 Bank deposits 9,199,415 9,612,893 Cash equivalents (investments with maturities of less than three months) Commercial paper 12,303,571 Negotiable certificates of deposit 12,400,000 Time deposits 2,911,738 27,615,309 $ 37,228,202	December 31, 2018 March 31, 2018 $ 462,719 $ 205,096 10,574,697 8,895,661 11,037,416 9,100,757 6,143,672 12,866,655 7,600,000 7,200,000 2,863,692 2,361,915 16,607,364 22,428,570 $ 27,644,780 $ 31,529,327

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

		December 31,
	March 31, 2019	2018	March 31, 2018
Bank deposits	0.00%-0.85%	0.00%-0.50%	0.00%-0.38%
Commercial paper	0.46%-0.52%	0.47%-0.57%	0.35%-0.40%
Negotiable certificates of deposit	0.54%-0.63%	0.55%-0.60%	0.40%-0.52%
Time deposits	0.09%-4.40%	0.09%-4.40%	0.03%-4.50%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

March 31, 2019 Financial assets-current Mandatorily measured at FVTPL Derivatives (not designated for hedge) Forward exchange contracts $ - Financial assets-noncurrent Mandatorily measured at FVTPL Non-derivatives Non-listed stocks - domestic $ 287,259 Non-listed stocks - foreign 224,015 $ 511,274	December 31, 2018 March 31, 2018 $ - $ 34 $ 292,910 $ - 224,452 - $ 517,362 $ -

(Continued)

• 18 -

			December 31,	December 31,
	March	31, 2019		2018	March 31, 2018
Financial liabilities-current
Held for trading
Derivatives (not designated for hedge)
Forward exchange contracts	$	2,219	$	1,114	$	1,031
						(Concluded)

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

			Contract Amount
	Currency	Maturity Period	(Thousands)
March 31, 2019
Forward exchange contracts - buy	EUR/NT$	2019.06	EUR6,050/NT$212,082
Forward exchange contracts - buy	US$/NT$	2019.04	US$300/NT$9,245
December 31, 2018
Forward exchange contracts - buy	EUR/NT$	2019.03-06	EUR5,452/NT$192,734
Forward exchange contracts - buy	US$/NT$	2019.01	US$2,020/NT$62,252
March 31, 2018
Forward exchange contracts - buy	EUR/NT$	2018.06-09	EUR4,390/NT$158,199
Forward exchange contracts - buy	US$/NT$	2018.04	US$5,863/NT$170,903

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

March 31, 2019 Domestic investments Listed stocks $ 2,599,314 Non-listed stocks 3,997,088 Foreign investments Non-listed stocks 177,704 $ 6,774,106	December 31, 2018 March 31, 2018 $ 2,899,843 $ 2,847,119 3,901,053 4,168,039 131,607 290,097 $ 6,932,503 $ 7,305,255

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.

• 19 -

9. TRADE NOTES AND ACCOUNTS RECEIVABLE, NET

March 31, 2019 Trade notes and accounts receivable $ 30,074,822 Less: Loss allowance (2,550,550) $ 27,524,272	December 31, 2018 March 31, 2018 $ 32,677,558 $ 32,386,539 (2,602,055) (2,387,453) $ 30,075,503 $ 29,999,086

The average credit terms range from 30 to 90 days.

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

The Company adopts 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 default. Credit rating information is provided by independent rating agencies where available and, if such credit rating information is not available, the Company uses other publicly available financial information and its own historical transaction experience to rate its major customers. The Company continues to monitor the credit exposure and credit ratings of its counterparties and spread the credit risk amongst qualified counterparties.

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

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

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

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

March 31, 2019

			Past Due Less	Past Due Less	Pass Due	Pass Due		Pass Due		Pass Due		Pass Due		Pass Due
	Not Past Due		than 30 Days		31	to 60 Days	61 to 90 Days		91	to 120 Days	121 to 180 Days		over 181 Days		Total
Telecommunications
business
Expected credit loss rate
(Note a)		0%-3%		3%-29%		8%-70%		19%-83%		30%-90%		58%-96%		100%
Gross carrying amount	$	22,471,713	$	484,292	$	121,606	$	57,219	$	130,153	$	29,607	$	439,878	$ 23,734,468
															(Continued)

• 20 -

Not Past Due Loss allowance (Lifetime ECL) $ (74,225) Amortized cost $ 22,397,488 Project business Expected credit loss rate (Note b) 0%-5% Gross carrying amount $ 2,069,173 Loss allowance (Lifetime ECL) (10,785) Amortized cost $ 2,058,388 December 31, 2018 Not Past Due Telecommunications business Expected credit loss rate (Note a) 0%-3% Gross carrying amount $ 23,307,276 Loss allowance (lifetime ECL) (79,857) Amortized cost $ 23,227,419 Project business Expected credit loss rate (Note b) 0%-5% Gross carrying amount $ 4,066,271 Loss allowance (lifetime ECL) (152,624) Amortized cost $ 3,913,647 March 31, 2018 Not Past Due Telecommunications business Expected credit loss rate (Note a) 0%-2% Gross carrying amount $ 23,331,863 Loss allowance (Lifetime ECL) (65,172) Amortized cost $ 23,266,691 Project business Expected credit loss rate (Note b) 0%-5% Gross carrying amount $ 3,775,399 Loss allowance (Lifetime ECL) (100,272) Amortized cost $ 3,675,127	Past Due Less than 30 Days $ (30,867) $ 453,425 5% $ 130,563 (9,189) $ 121,374 Past Due Less than 30 Days 3%-30% $ 454,465 (26,872) $ 427,593 5% $ 88,384 (8,609) $ 79,775 Past Due Less than 30 Days 3%-33% $ 351,328 (36,358) $ 314,970 5% $ 290,847 (45,175) $ 245,672	Pass Due 31 to 60 Days $ (28,169) $ 93,437 10% $ 75,300 (7,678) $ 67,622 Pass Due 31 to 60 Days 7%-69% $ 94,715 (24,023) $ 70,692 10% $ 92,343 (10,142) $ 82,201 Pass Due 31 to 60 Days 9%-69% $ 124,106 (29,213) $ 94,893 10% $ 730,900 (107,207) $ 623,693	Pass Due 61 to 90 Days $ (25,686) $ 31,533 30% $ 207,572 (70,693) $ 136,879 Pass Due 61 to 90 Days 19%-82% $ 48,924 (28,432) $ 20,492 30% $ 8,248 (2,910) $ 5,338 Pass Due 61 to 90 Days 15%-82% $ 60,798 (27,336) $ 33,462 30% $ 127,247 (19,891) $ 107,356	Pass Due 91 to 120 Days $ (26,075) $ 104,078 50% $ 47,669 (31,909) $ 15,760 Pass Due 91 to 120 Days 32%-90% $ 37,640 (28,196) $ 9,444 50% $ 12,132 (8,492) $ 3,640 Pass Due 91 to 120 Days 28%-89% $ 33,847 (29,103) $ 4,744 50% $ 61,190 (9,749) $ 51,441	Pass Due 121 to 180 Days $ (26,339) $ 3,268 80% $ 17,095 (13,808) $ 3,287 Pass Due 121 to 180 Days 61%-95% $ 36,090 (25,618) $ 10,472 80% $ 6,809 (5,643) $ 1,166 Pass Due 121 to 180 Days 64%-98% $ 29,170 (28,685) $ 485 80% $ 58,425 (8,645) $ 49,780	Pass Due over 181 Days Total $ (439,878) $ (651,239) $ - $ 23,083,229 100% $ 1,692,221 $ 4,239,593 (1,692,221) (1,836,283) $ - $ 2,403,310 (Concluded) Pass Due over 181 Days Total 100% $ 418,101 $ 24,397,211 (418,101) (631,099) $ - $ 23,766,112 100% $ 1,725,168 $ 5,999,355 (1,725,168) (1,913,588) $ - $ 4,085,767 Pass Due over 181 Days Total 100% $ 460,011 $ 24,391,123 (460,011) (675,878) $ - $ 23,715,245 100% $ 1,372,868 $ 6,416,876 (1,372,868) (1,663,807) $ - $ 4,753,069
Telecommunications business Expected credit loss rate (Note a) Gross carrying amount Loss allowance (lifetime ECL) Amortized cost Project business Expected credit loss rate (Note b) Gross carrying amount Loss allowance (lifetime ECL) Amortized cost March 31, 2018 Telecommunications business Expected credit loss rate (Note a) Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost Project business Expected credit loss rate (Note b) Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost

• Note a: Please refer to Notes 28 and 41 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 customer is the government or its affiliates, it is expected that no credit loss will occur. For those who had bounced or exchanged checks as well as those accounts receivable were overdue more than six months that are classified as high risk customers, the expected credit loss of high risk customers is at least 50%, and the rate is increased when the overdue days increases.

• 21 -

Movements of the allowance for doubtful accounts were as follows:

Balance on January 1, 2019 Add: Provision for (reversal of) credit loss Less: Amounts written off Balance on March 31, 2019		Three Months Ended March 31	Three Months Ended March 31
		2019 $ 2,602,055 (2,227) (49,278) $ 2,550,550	2018 $ 2,117,349 320,388 (50,284) $ 2,387,453

10. INVENTORIES

		December 31,
	March 31, 2019	2018	March 31, 2018
Merchandise	$ 3,607,408	$ 6,067,750	$ 4,616,215
Project in process	7,991,698	6,756,486	4,155,581
Work in process	108,766	109,191	138,637
Raw materials	120,584	111,566	93,950
	11,828,456	13,044,993	9,004,383
Land held under development	1,998,733	1,998,733	1,998,733
Construction in progress	77,140	76,989	76,612
	$ 13,904,329	$ 15,120,715	$ 11,079,728

The operating costs related to inventories were $12,163,408 thousand (including the valuation loss on inventories of $95,682 thousand) and $12,291,096 thousand (including the valuation loss on inventories of $32,476 thousand) for the three months ended March 31, 2019 and 2018, respectively.

As of March 31, 2019, December 31, 2018 and March 31, 2018, inventories of $2,075,873 thousand, $2,075,722 thousand and $2,075,345 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 on March 31, 2019, December 31, 2018 and March 31, 2018 was for Qingshan Sec., Dayuan Dist., Taoyuan City project.

11. PREPAYMENTS

		December 31,
	March 31, 2019	2018	March 31, 2018
Prepaid rents	$ 3,629,909	$ 2,415,083	$ 2,802,370
Prepaid salary and bonus	3,105,568	5,407	3,147,147
Others	1,050,937	2,915,831	2,997,512
	$ 7,786,414	$ 5,336,321	$ 8,947,029
			(Continued)

• 22 -

		December 31,	December 31,
	March 31, 2019		2018	March 31, 2018
Current
Prepaid salary and bonus	$ 3,105,568	$	5,407	$ 3,147,147
Prepaid rents	699,428		599,817	1,003,157
Others	1,050,309		1,267,760	1,384,757
	$ 4,855,305	$	1,872,984	$ 5,535,061
Noncurrent
Prepaid rents	$ 2,930,481	$	1,815,266	$ 1,799,213
Others	628		1,648,071	1,612,755
	$ 2,931,109	$	3,463,337	$ 3,411,968

(Concluded)

Prepaid rents in 2019 comprises the lease agreements applied 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,
	March 31, 2019	2018	March 31, 2018
Time deposits and negotiable certificatess of
deposit with maturities of more than three
months	$ 5,789,466	$ 8,156,647	$ 4,223,295
Others	1,379,781	1,347,556	1,170,833
	$ 7,169,247	$ 9,504,203	$ 5,394,128

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

		December 31,
	March 31, 2019	2018	March 31, 2018
Time deposits and negotiable certificates of
deposit with maturities of more than three
months	0.03%-2.95%	0.03%-3.05%	0.06%-4.30%

13. SUBSIDIARIES

a. Information on significant noncontrolling interest subsidiary

Principal Subsidiaries Place of Business SENAO Taiwan CHPT Taiwan	Proportion of Ownership Interests and Voting Rights Held by Noncontrolling Interests
	March 31, 2019 December 31, 2018 March 31, 2018 72% 72% 71% 66% 66% 62%

• 23 -

Profit Allocated to Noncontrolling Interests Accumulated Noncontrolling Interests Three Months Ended March 31 March 31, December 31, March 31, 2019 2018 2019 2018 2018 SENAO $ 45,219 $ 122,274 $ 4,273,647 $ 4,228,240 $ 4,381,223 CHPT $ 61,937 $ 102,781 4,106,192 4,044,322 3,658,493 Individually immaterial subsidiaries with noncontrolling interests 1,808,900 1,737,386 958,597 $ 10,188,739 $ 10,009,948 $ 8,998,313 Summarized financial information in respect of SENAO and its subsidiaries that has material noncontrolling interests is set out below. The summarized financial information below represents amounts before intercompany eliminations. March 31, 2019 December 31, 2018 March 31, 2018 Current assets $ 7,016,462 $ 7,041,416 $ 8,017,896 Noncurrent assets 3,527,483 2,675,748 2,695,786 Current liabilities (3,950,067) (3,740,162) (4,474,560) Noncurrent liabilities (719,587) (164,056) (155,673) Equity $ 5,874,291 $ 5,812,946 $ 6,083,449 Equity attributable to the parent $ 1,600,644 $ 1,584,706 $ 1,702,226 Equity attributable to noncontrolling interests 4,273,647 4,228,240 4,381,223 $ 5,874,291 $ 5,812,946 $ 6,083,449 Three Months Ended March 31 2019 2018 Revenues and income $ 7,827,185 $ 8,898,056 Costs and expenses 7,763,979 8,723,388 Profit for the period $ 63,206 $ 174,668 Profit attributable to the parent $ 17,987 $ 52,394 Profit attributable to the noncontrolling interests 45,219 122,274 Profit for the period $ 63,206 $ 174,668 Other comprehensive income attributable to the parent $ 3,159 $ 2,735 Other comprehensive income attributable to noncontrolling interests 7,199 1,653 Other comprehensive income for the period $ 10,358 $ 4,388 (Continued)		Accumulated Noncontrolling Interests	Accumulated Noncontrolling Interests	Accumulated Noncontrolling Interests	Accumulated Noncontrolling Interests
				2019 $ 7,827,185 7,763,979 $ 63,206 $ 17,987 45,219 $ 63,206 $ 3,159 7,199 $ 10,358	2018 $ 8,898,056 8,723,388 $ 174,668 $ 52,394 122,274 $ 174,668 $ 2,735 1,653 $ 4,388 (Continued)

• 24 -

Total comprehensive income attributable to the parent Total comprehensive income attributable to noncontrolling interests Total comprehensive income for the period Net cash flow from operating activities Net cash flow from investing activities Net cash flow from financing activities Effect of exchange rate changes on cash and cash equivalents Net cash inflows		**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2019 $ 21,146 52,418 $ 73,564 $ 34,785 186,604 (86,449) 63 $ 135,003	2018 $ 55,129 123,927 $ 179,056 $ 301,134 (67,870) 89 (241) $ 233,112 (Concluded)

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

March 31, 2019 Current assets $ 4,277,957 Noncurrent assets 3,114,279 Current liabilities (1,135,278) Noncurrent liabilities (11,903) Equity $ 6,245,055 Equity attributable to CHI $ 2,138,863 Equity attributable to noncontrolling interests 4,106,192 $ 6,245,055 Revenues and income Costs and expenses Profit for the period Profit attributable to CHI Profit attributable to noncontrolling interests Profit for the period		December 31, 2018 March 31, 2018 $ 4,416,910 $ 4,465,717 2,779,020 2,307,227 (1,044,054) (842,287) (816) (1,173) $ 6,151,060 $ 5,929,484 $ 2,106,738 $ 2,270,991 4,044,322 3,658,493 $ 6,151,060 $ 5,929,484 **Three Months Ended March 31 **	December 31, 2018 March 31, 2018 $ 4,416,910 $ 4,465,717 2,779,020 2,307,227 (1,044,054) (842,287) (816) (1,173) $ 6,151,060 $ 5,929,484 $ 2,106,738 $ 2,270,991 4,044,322 3,658,493 $ 6,151,060 $ 5,929,484 **Three Months Ended March 31 **
		2019 $ 611,749 517,548 $ 94,201 $ 32,264 61,937 $ 94,201	2018 $ 744,990 578,409 $ 166,581 $ 63,800 102,781 $ 166,581 (Continued)

• 25 -

Other comprehensive income attributable to CHI Other comprehensive income attributable to noncontrolling interests Total comprehensive income attributable to the CHI Total comprehensive income attributable to noncontrolling interests Net cash flow from operating activities Net cash flow from investing activities Net cash flow from financing activities Effect of exchange rate changes on cash and cash equivalents Net cash outflows		**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2019 $ 338 649 $ 987 $ 32,602 62,586 $ 95,188 $ 205,270 (235,104) (5,364) 714 $ (34,484)	2018 $ 92 148 $ 240 $ 63,892 102,929 $ 166,821 $ 193,765 (238,677) - 524 $ (44,388) (Concluded)

• b. Equity transactions with noncontrolling interests

CHIEF issued new shares in March 31, 2019 and 2018 as its employees exercised their options. Therefore, the Company’s equity ownership interest in CHIEF decreased. See Note 32(b) for details.

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

Information of the Company’s equity transactions with noncontrolling interests for the three months ended March 31, 2019 and 2018 were as follows:

Cash consideration received from noncontrolling interests The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests Differences arising from equity transactions Line items for equity transaction adjustments Additional paid-in capital - arising from changes in equities of subsidiaries	CHIEF Share-Based Payment	CHIEF Share-Based Payment	CHIEF Share-Based Payment
	**Three Months Ended March 31 **
		2019 $ 14,328 (15,140) $ (812) $ (812)	2018 $ 33,299 (21,180) $ 12,119 $ 12,119

• 26 -

14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments in associates a. Investments in associates Investments in associates were as follows: Listed Senao Networks, Inc. (“SNI”) Non-listed ST-2 Satellite Ventures Pte., Ltd. (“STS”) International Integrated System, Inc. (“IISI”) Viettel-CHT Co., Ltd. (“Viettel-CHT”) Taiwan International Standard Electronics Co., Ltd. (“TISE”) Chunghwa PChome Fund I Co., Ltd. (“CPFI”) KKBOX Taiwan Co., Ltd. (“KKBOXTW”, previously known as Skysoft Co., Ltd.) KingwayTek Technology Co., Ltd. (“KWT”) So-net Entertainment Taiwan Limited (“So-net”) Taiwan International Ports Logistics Corporation (“TIPL”) Click Force Co., Ltd. (“CF”) UUPON Inc. (“UUPON”, previously known as Dian Zuan Integrating Marketing Co., Ltd.) Alliance Digital Tech Co., Ltd. (“ADT”) Cornerstone Ventures Co., Ltd. (“CVC”) HopeTech Technologies Limited (“HopeTech”) MeWorks LIMITED (HK) (“MeWorks”)

March 31, 2019 December 31, 2018 March 31, 2018 $ 3,024,908 $ 2,944,890 $ 2,603,503 Carrying Amount

March 31, 2019 December 31, 2018 March 31, 2018 $ 944,463 $ 919,841 $ 902,901 522,084 496,033 500,546 307,978 310,842 303,712 302,794 286,510 256,476 234,238 216,439 149,019 197,740 198,974 - 139,951 147,360 138,534 135,690 134,925 125,949 127,980 119,956 102,602 49,887 49,650 48,209 37,835 37,876 38,075 14,238 16,647 22,428 5,080 5,080 11,787 4,950 4,757 - - - 3,265 - - - $ 3,024,908 $ 2,944,890 $ 2,603,503

• 27 -

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

Senao Networks, Inc. (“SNI”) ST-2 Satellite Ventures Pte., Ltd. (“STS”) International Integrated System, Inc. (“IISI”) Viettel-CHT Co., Ltd. (“Viettel-CHT”) Taiwan International Standard Electronics Co., Ltd. (“TISE”) Chunghwa PChome Fund I Co., Ltd. (“CPFI”) KKBOX Taiwan Co., Ltd. (“KKBOXTW”) KingwayTek Technology Co., Ltd. (“KWT”) So-net Entertainment Taiwan Limited (“So-net”) Taiwan International Ports Logistics Corporation (“TIPL”) Click Force Co., Ltd. (“CF”) UUpon Inc. (“UUPON”) Alliance Digital Tech Co., Ltd. (“ADT”) Cornerstone Ventures Co., Ltd. (“CVC”) HopeTech Technologies Limited (“HopeTech”) MeWorks LIMITED (HK) (“MeWorks”)

% of Ownership and Voting Rights

March 31, 2019 December 31, 2018 March 31, 2018 34 34 34 38 38 38 32 32 32 30 30 30 40 40 40 50 50 - 30 30 30 26 26 26 30 30 30 27 27 27 49 49 49 22 22 22 14 14 14 49 49 - - - 45 20 20 20

None of the above associates is considered individually material to the Company. Summarized financial information of associates that are not individually material was as follows:

The Company’s share of profits The Company’s share of other comprehensive income The Company’s share of total comprehensive income	**Three Months Ended March 31 **	**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2019 $ 79,173 170 $ 79,343	2018 $ 82,648 835 $ 83,483

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

		December 31,
	March 31, 2019	2018	March 31, 2018
SNI	$ 1,765,667	$ 1,447,350	$ 2,263,038

The Company invested 50% equity shares of Chunghwa PChome Fund I Co., Ltd. (“CPFI”) in October 2018. 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 investment in associate. CPFI engages mainly in investment business.

• 28 -

The Company invested 49% equity shares of Cornerstone Ventures Co., Ltd. (“CVC”) in October 2018. 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 investment in associate. CVC engages mainly in investment business.

HopeTech returned the proceeds of $19,184 thousand as a result of capital reduction in January 2018. The Company disposed all shares of HopeTech in June 2018.

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

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

15. PROPERTY, PLANT AND EQUIPMENT

March 31, 2019 Assets used by the Company $ 278,763,541 Assets subject to operating leases 5,917,598 $ 284,681,139

a. Assets used by the Company - 2019

Cost Balance on January 1, 2019 Effect of retrospective application of IFRS 16 Balance on January 1, 2019 as adjusted Additions Disposal Effect of foreign exchange differences Others Balance on March 31, 2019 Accumulated depreciation and impairment Balance on January 1, 2019 Effect of retrospective application of IFRS 16 Balance on January 1, 2019 as adjusted Depreciation expenses Disposal Effect of foreign exchange differences Others Balance on March 31, 2019 Balance on January 1, 2019, net Balance on January 1, 2019 as adjusted Balance on March 31, 2019, net	Land $ 103,972,052 (3,617,627) 100,354,425 - (9,310 ) - 88 $ 100,345,203 $ - - - - - - - $ - $ 103,972,052 $ 100,354,425 $ 100,345,203	Land Improvements $ 1,600,323 (689) 1,599,634 - - - - $ 1,599,634 $ (1,337,704 ) 512 (1,337,192 ) (10,762 ) - - - $ (1,347,954) $ 262,619 $ 262,442 $ 251,680	Buildings $ 72,911,010 (3,582,774) 69,328,236 2,297 (2,285 ) - (1,676) $ 69,326,572 $ (28,126,983 ) 1,265,356 (26,861,627 ) (324,803 ) 2,285 - 6,133 $ (27,178,012) $ 44,784,027 $ 42,466,609 $ 42,148,560	Computer Equipment $ 14,258,485 - 14,258,485 11,941 (292,201 ) 154 16,133 $ 13,994,512 $ (12,143,307 ) - (12,143,307 ) (212,324 ) 291,500 (94 ) (6,716) $ (12,070,941) $ 2,115,178 $ 2,115,178 $ 1,923,571	Telecommuni- cations Equipment $ 715,748,118 (3,884,421) 711,863,697 14,678 (13,396,265 ) 2,647 5,861,350 $ 704,346,107 $(599,425,774 ) 2,575,431 (596,850,343 ) (5,946,959 ) 13,392,872 (884 ) 1,374 $(589,403,940) $ 116,322,344 $ 115,013,354 $ 114,942,167	Transportation Equipment $ 3,882,534 - 3,882,534 - (7,522 ) 3 4,444 $ 3,879,459 $ (3,651,139 ) - (3,651,139 ) (26,372 ) 7,522 (3 ) (938) $ (3,670,930) $ 231,395 $ 231,395 $ 208,529	Miscellaneous Equipment $ 9,873,589 - 9,873,589 12,126 (75,245 ) 1,226 36,813 $ 9,848,509 $ (7,291,742 ) - (7,291,742 ) (171,444 ) 74,526 (580 ) (1,819) $ (7,391,059) $ 2,581,847 $ 2,581,847 $ 2,457,450	Construction in Progress and Equipment to be Accepted $ 18,644,766 - 18,644,766 3,754,329 - 16 (5,912,730) $ 16,486,381 $ - - - - - - - $ - $ 18,644,766 $ 18,644,766 $ 16,486,381	Total $ 940,890,877 (11,085,511) 929,805,366 3,795,371 (13,782,828 ) 4,046 4,422 $ 919,826,377 $(651,976,649 ) 3,841,299 (648,135,350 ) (6,692,664 ) 13,768,705 (1,561 ) (1,966) $(641,062,836) $ 288,914,228 $ 281,670,016 $ 278,763,541

There was no indication that property, plant and equipment was impaired so the Company did not recognize any impairment loss for the three months ended March 31, 2019.

• 29 -

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

Land improvements 8-30 years Buildings Main buildings 35-60 years Other building facilities 3-20 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 1-10 years

b. Assets subject to operating leases - 2019

Cost Balance on January 1, 2019 Effect of retrospective application of IFRS 16 Balance on January 1, 2019 as adjusted Additions Transferred to assets used by the company Balance on March 31, 2019 Accumulated depreciation and impairment Balance on January 1, 2019 Effect of retrospective application of IFRS 16 Balance on January 1, 2019 as adjusted Depreciation expenses Transferred to assets used by the company Balance on March 31, 2019 Balance on January 1, 2019 as adjusted, net Balance on March 31, 2019, net	Land Land Improvements $ - $ - 3,617,627 689 3,617,627 689 - - (88) - $ 3,617,539 $ 689 $ - $ - - (512) - (512) - (16) - - $ - $ (528) $ 3,617,627 $ 177 $ 3,617,539 $ 161	Buildings $ - 3,582,774 3,582,774 310 (2,341) $ 3,580,743 $ - (1,265,356) (1,265,356) (16,014) 525 $ (1,280,845) $ 2,317,418 $ 2,299,898	Total $ - 7,201,090 7,201,090 310 (2,429) $ 7,198,971 $ - (1,265,868) (1,265,868) (16,030) 525 $ (1,281,373) $ 5,935,222 $ 5,917,598

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.

• 30 -

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

	March 31, 2019
Year 1	$ 245,048
Year 2	142,144
Year 3	91,914
Year 4	59,084
Year 5	37,657
Onwards	94,223
	$ 670,070

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

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

c. Property, plant and equipment - 2018

Cost Balance on January 1, 2018 Additions Disposal Effect of foreign exchange differences Others Balance on March 31, 2018 Accumulated depreciation and impairment Balance on January 1, 2018 Depreciation expenses Disposal Effect of foreign exchange differences Others Balance on March 31, 2018 Balance on January 1, 2018, net Balance on March 31, 2018, net	Land $ 104,079,190 - (9,759 ) - 10,348 $ 104,079,779 $ - - - - - $ - $ 104,079,190 $ 104,079,779	Land Improvements $ 1,594,899 - - - - $ 1,594,899 $ (1,292,527 ) (11,841 ) - - (10) $ (1,304,378) $ 302,372 $ 290,521	Buildings $ 72,694,050 2,248 (23 ) - (5,344) $ 72,690,931 $ (26,798,694 ) (338,264 ) 23 - 2,568 $ (27,134,367) $ 45,895,356 $ 45,556,564	Computer Equipment $ 14,161,797 7,752 (123,117 ) 6 13,197 $ 14,059,635 $ (11,787,847 ) (265,910 ) 118,523 27 (2,278) $ (11,937,485) $ 2,373,950 $ 2,122,150	Telecommuni- cations Equipment $ 722,054,435 7,236 (10,400,269 ) (50,032 ) 7,724,079 $ 719,335,449 $(607,154,914 ) (6,060,756 ) 10,385,474 15,177 1,321 $(602,813,698) $ 114,899,521 $ 116,521,751	Transportation Equipment $ 3,834,372 - (10,922 ) 10 2,048 $ 3,825,508 $ (3,513,529 ) (50,403 ) 10,898 13 (1,544) $ (3,554,565) $ 320,843 $ 270,943	Miscellaneous Equipment $ 9,514,875 30,023 (164,204 ) 635 49,084 $ 9,430,413 $ (7,205,011 ) (163,057 ) 162,872 (196 ) (5,791) $ (7,211,183) $ 2,309,864 $ 2,219,230	Construction in Progress and Equipment to be Accepted $ 18,526,814 3,171,774 - 112 (7,782,519) $ 13,916,181 $ - - - - - $ - $ 18,526,814 $ 13,916,181	Total $ 946,460,432 3,219,033 (10,708,294 ) (49,269 ) 10,893 $ 938,932,795 $(657,752,522 ) (6,890,231 ) 10,677,790 15,021 (5,734) $(653,955,676) $ 288,707,910 $ 284,977,119

There was no indication that property, plant and equipment was impaired so the Company did not recognize any impairment loss for the three months ended March 31, 2018.

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

Land improvements	8-30 years
Buildings
Main buildings	35-60 years
Other building facilities	3-20 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
	(Continued)

• 31 -

Miscellaneous equipment Leasehold improvements 1-6 years Mechanical and air conditioner equipment 3-16 years Others 1-10 years (Concluded)

16. LEASE ARRANGEMENTS

a. Right-of-use Assets - 2019

March 31, 2019 Land and buildings Handsets base stations $ 6,846,186 Others 1,959,142 Equipment 2,904,751 $ 11,710,079 Three Months Ended March 31, 2019 Additions to right-of-use assets $ 799,527 Depreciation charge for right-of-use assets Land and buildings Handsets base stations $ 666,476 Others 203,795 Equipment 104,676 $ 974,947

b. Lease liabilities - 2019

March 31, 2019 Lease liabilities Current $ 3,500,021 Non-current 6,353,362 $ 9,853,383

Range of discount rate for lease liabilities is as follows:

March 31, 2019 Land and buildings Handsets base stations 0.59%-1.18% Others 0.59%-9.00% Equipment 0.59%-4.50%

• 32 -

c. Important lease-in activities and terms

The Company mainly enters into lease-in agreements of land and buildings for handsets base stations located all over Taiwan with lease terms from 1 to 20 years. There’s no clause for bargain purchase options to acquire the assets at the expiry of the lease periods in the agreement. In most lease-in agreements of handsets base station agreements, the Company is able to terminate the agreement prior to the maturity date provided that the premise the Company fails to meet the propose to build telecommunication equipment due to legal restriction, controversial events, or other events.

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

The lease agreements for equipment include a contract between Chunghwa and ST-2 Satellite Ventures Pte., Ltd. on March 12, 2010 to lease capacity on the ST-2 satellite. The information of lease agreements with related parties, please refer to Note 36 to the consolidated financial statements for details.

d. Other lease information

2019
	Three Months
	Ended March
		31, 2019
Expenses relating to low-value asset leases	$	1,481
Expenses relating to variable lease payments not included in
the measurement of lease liabilities	$	1,131
Total cash outflow for leases	$	1,041,865

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

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

2018

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Within one year Longer than one year but within five years Longer than five years	December 31, 2018 March 31, 2018 $ 3,439,259 $ 3,396,608 6,375,101 6,648,203 743,494 738,293 $ 10,557,854 $ 10,783,104

• 33 -

17. INVESTMENT PROPERTIES

Cost Balance on January 1, 2018 Additions Balance on March 31, 2018 Accumulated depreciation and impairment Balance on January 1, 2018 Depreciation expense Balance on March 31, 2018 Balance on January 1, 2018, net Balance on March 31, 2018, net Cost Balance on January 1, 2019 Disposal Balance on March 31, 2019 Accumulated depreciation and impairment Balance on January 1, 2019 Depreciation expense Disposal Balance on March 31, 2019 Balance on January 1, 2019, net Balance on March 31, 2019, net

$ 9,134,817 5,557 $ 9,140,374 $ (1,087,024) (5,196) $ (1,092,220) $ 8,047,793 $ 8,048,154 $ 9,392,452 (5,831) $ 9,386,621 $ (1,105,240) (9,728) 5,831 $ (1,109,137) $ 8,287,212 $ 8,277,484

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

Land improvements 8-30 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, 2018 and 2017 were determined by Level 3 fair value measurements inputs based on the appraisal reports conducted by independent appraisers. The Company used the aforementioned appraisal reports as the basis to determine the fair values as of March 31, 2019 and 2018 because there was no material change in the economic environment and the market transaction price. Those appraisal reports are based on the comparison approach, income approach or cost approach. Key assumptions and the fair values were as follows:

• 34 -

March 31, 2019 Fair value $ 18,514,801 Overall capital interest rate 1.02%-4.04% Profit margin ratio 12%-20% Discount rate - Capitalization rate 0.79%-1.75%	December 31, 2018 March 31, 2018 $ 18,514,801 $ 17,728,012 1.02%-4.04% 1.46%-2.20% 12%-20% 12%-20% - 1.04% 0.79%-1.75% 0.47%-1.69%

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

2019

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

	March 31, 2019	March 31, 2019
Year 1	$	114,977
Year 2		99,711
Year 3		80,987
Year 4		61,713
Year 5		52,534
Onwards		105,165
	$	515,087

2018

The future aggregate minimum lease collection under non-cancellable operating leases is as follows:

		December 31,	December 31,
			2018	March 31, 2018
Within	one year	$	343,981	$	403,712
Longer	than one year but within five years		580,451		645,334
Longer	than five years		205,747		228,893
		$	1,130,179	$	1,277,939

18. INTANGIBLE ASSETS

Cost Balance on January 1, 2018 Additions-acquired separately Disposal Effect of foreign exchange difference Balance on March 31, 2018	3G and 4G Concession $ 70,144,000 - - - $ 70,144,000	Computer Software $ 3,311,610 69,096 (63,664) 44 $ 3,317,086	Goodwill $ 236,200 - - - $ 236,200	Others $ 418,150 827 (58,009) 41 $ 361,009	Total $ 74,109,960 69,923 (121,673) 85 $ 74,058,295 (Continued)

• 35 -

Accumulated amortization and impairment Balance on January 1, 2018 Amortization expenses Disposal Impairment losses Effect of foreign exchange difference Balance on March 31, 2018 Balance on January 1, 2018, net Balance on March 31, 2018, net Cost Balance on January 1, 2019 Additions-acquired separately Disposal Effect of foreign exchange difference Others Balance on March 31, 2019 Accumulated amortization and impairment Balance on January 1, 2019 Amortization expenses Disposal Effect of foreign exchange difference Balance on March 31, 2019 Balance on January 1, 2019, net Balance on March 31, 2019, net	3G and 4G Concession $ (16,674,565) (957,963) - - - $ (17,632,528) $ 53,469,435 $ 52,511,472 $ 70,144,000 - (10,179,000) - - $ 59,965,000 $ (20,632,474) (959,893) 10,179,000 - $ (11,413,367) $ 49,511,526 $ 48,551,633	Computer Software $ (2,431,797) (105,930) 63,664 - (32) $ (2,474,095) $ 879,813 $ 842,991 $ 3,425,969 53,377 (37,324) 48 247 $ 3,442,317 $ (2,467,170) (98,218) 37,324 (32) $ (2,528,096) $ 958,799 $ 914,221	Goodwill $ (26,677) - - - - $ (26,677) $ 209,523 $ 209,523 $ 236,200 - - - - $ 236,200 $ (26,677) - - - $ (26,677) $ 209,523 $ 209,523	Others $ (93,653) (6,090) 58,009 (50,750) (6) $ (92,490) $ 324,497 $ 268,519 $ 373,203 955 - 90 - $ 374,248 $ (109,369) (6,083) - (21) $ (115,473) $ 263,834 $ 258,775	Total $ (19,226,692) (1,069,983) 121,673 (50,750) (38) $ (20,225,790) $ 54,883,268 $ 53,832,505 $ 74,179,372 54,332 (10,216,324) 138 247 $ 64,017,765 $ (23,235,690) (1,064,194) 10,216,324 (53) $ (14,083,613) $ 50,943,682 $ 49,934,152 (Concluded)

The concessions are granted and issued by the NCC. The concession fees are amortized using the straight-line method from the date operations commence through the date the license expires. The carrying amount of 3G concession fee was fully amortized by December 2018, and 4G concession fees will be fully amortized by December 2030 and December 2033.

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 3 to 20 years. Goodwill is not amortized.

SENAO evaluated and determined that the recoverable amount of certain licensed contract was nil and recognized the impairment loss of $50,750 thousand for the three months ended March 31, 2018. The recoverable amount was based on the value in use. The aforementioned impairment loss was included in other income and expenses of statement of comprehensive income.

• 36 -

19. OTHER ASSETS

		December 31,
	March 31, 2019	2018	March 31, 2018
Spare parts	$ 2,656,342	$ 2,422,060	$ 2,045,003
Refundable deposits	1,854,102	1,992,206	1,743,262
Other financial assets	1,000,000	1,000,000	1,000,000
Prepayment for investments	838,000	-	-
Others	2,375,517	2,342,040	2,891,522
	$ 8,723,961	$ 7,756,306	$ 7,679,787
Current
Spare parts	$ 2,656,342	$ 2,422,060	$ 2,045,003
Others	269,507	154,024	200,626
	$ 2,925,849	$ 2,576,084	$ 2,245,629
Noncurrent
Refundable deposits	$ 1,854,102	$ 1,992,206	$ 1,743,262
Other financial assets	1,000,000	1,000,000	1,000,000
Prepayment for investments	838,000	-	-
Others	2,106,010	2,188,016	2,690,896
	$ 5,798,112	$ 5,180,222	$ 5,434,158

The participation of establishing Next Commercial Bank Co., Ltd. (“NCB”) was approved by Chunghwa’s Board of Directors in January 2019. The Company expects to invest $4,500,000 thousand at most in NCB’s common stock and the Company’s equity ownership interest in NCB will be no more than 45%. The establishment of NCB is subject to the approval of FSC. Chunghwa prepaid $838,000 thousand for the first phase of investment as of March 31, 2019.

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 DERIVATIVE FINANCIAL INSTRUMENTS

Chunghwa’s hedge strategy is to enter 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.

• 37 -

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.

March 31, 2019

											Change in Fair
											Values of
											Hedging
											Instruments Used
		Notional									for Calculating
		Amount		Forward		Line Item in		Carrying Amount			Hedge
Hedging Instruments	Currency	(In Thousands)	Maturity		Rate	Balance Sheet		Asset	Liability		Ineffectiveness
Cash flow hedge
Forecast purchases -	EUR/NT$	EUR 7,206/	2019.06	$	35.07	Hedging financial	$	-	$	2,719	$ (3,788 )
forward exchange		NT$ 252,668				assets (liabilities)
contracts
					Change in
					Value of		Accumulated			Gain	or Loss
					Hedged Item		on Hedging			Instruments
					Used for			in Other Equity
					Calculating						Hedge
					Hedge		Continuing			Accounting no
	Hedged	Items		Ineffectiveness			Hedges			Longer Applied
Cash flow hedge
Forecast equipment purchases					$	3,788	$	(2,719)		$	-
December 31,	2018

										Change in Fair
										Values of
										Hedging
										Instruments Used
		Notional								for Calculating
		Amount		Forward Line Item in			Carrying Amount			Hedge
Hedging Instruments	Currency	(In Thousands)	Maturity		Rate Balance Sheet		Asset	Liability		Ineffectiveness
Cash flow hedge
Forecast purchases -	EUR/NT$	EUR 4,911/	2019.03	$	34.98 Hedging financial	$	1,069	$	-	$ 1,919
forward exchange		NT$ 171,797			assets (liabilities)
contracts
					Change in
					Value of	Accumulated Gain				or Loss
					Hedged Item	on Hedging Instruments
					Used for		in Other Equity
					Calculating					Hedge
					Hedge	Continuing			Accounting no
	Hedged	Items		Ineffectiveness		Hedges			Longer Applied
Cash flow hedge
Forecast equipment purchases					$ (1,919)	$	1,069		$	-

• 38 -

March 31, 2018

											Change in Fair	Change in Fair
												Values of
												Hedging
											Instruments Used
		Notional									for Calculating
		Amount		Forward		Line Item in		Carrying Amount				Hedge
Hedging Instruments	Currency	(In Thousands)	Maturity		Rate	Balance Sheet		Asset	Liability		Ineffectiveness
Cash flow hedge
Forecast purchases -	EUR/NT$	EUR1,248/	2018.06-09	$	35.84	Hedging financial	$	47	$	-	$	897
forward exchange		NT$44,723				assets (liabilities)
contracts
					Change in
					Value of		Accumulated Gain or					Loss
					Hedged Item		on Hedging Instruments
					Used for			in Other Equity
					Calculating						Hedge
					Hedge		Continuing			Accounting no
	Hedged	Items		Ineffectiveness			Hedges			Longer		Applied
Cash flow hedge
Forecast equipment purchases					$	(897)	$	47			$	-
Three months ended March 31,2019

Comprehensive Income

Hedge Transaction Cash flow hedge Forecast equipment purchases	Hedging Losses Recognized in OCI Amount of Hedge Ineffectiveness Recognized in Profit or Loss Line Item in Which Hedge Ineffectiveness is Included $ (3,788) $ - -	Reclassification from Equity to Profit or Loss and the Adjusted Line Item
		Amount Reclassified to P/L and the Adjusted Line Item Due to Hedged Future Cash Flows No Longer Expected to Occur $ - Construction in progress and equipment to be accepted $ - Other gains and losses

Three months ended March 31,2018

Comprehensive Income

Hedge Transaction Cash flow hedge Forecast equipment purchases	Hedging Gains Recognized in OCI Amount of Hedge Ineffectiveness Recognized in Profit or Loss Line Item in Which Hedge Ineffectiveness is Included $ 897 $ - -	Reclassification from Equity to Profit or Loss and the Adjusted Line Item
		Amount Reclassified to P/L and the Adjusted Line Item Due to Hedged Future Cash Flows No Longer Expected to Occur $ (806) Construction in progress and equipment to be accepted $ (59) Other gains and losses

• 39 -

21. SHORT-TERM LOANS

		December 31,
	March 31, 2019	2018	March 31, 2018
Unsecured loans	$ 175,000	$ 100,000	$ 170,000
The annual interest rates of loans were as follows:
		December 31,
	March 31, 2019	2018	March 31, 2018
Unsecured loans	1.15%-2.50%	1.35%-2.35%	1.20%-2.19%

22. LONG-TERM LOANS (INCLUDING LONG-TERM LOANS - CURRENT PORTION)

			December 31,
		March 31, 2019	2018	March 31, 2018
Secured loans (Note	37)	$ 1,600,000	$ 1,600,000	$ 1,600,000

The annual interest rates of loans were as follows:

		December 31,
	March 31, 2019	2018	March 31, 2018
Secured loans	0.92%	0.92%	0.91%

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

23. TRADE NOTES AND ACCOUNTS PAYABLE

March 31, 2019 Trade notes and accounts payable $ 14,948,306	December 31, 2018 March 31, 2018 $ 20,464,792 $ 14,695,321

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

• 40 -

24. OTHER PAYABLES

March 31, 2019 Accrued salary and compensation $ 5,531,189 Accrued compensation to employees and remuneration to directors and supervisors 2,136,648 Accrued franchise fees 1,425,770 Payables to contractors 1,293,063 Amounts collected for others 1,262,882 Payables to equipment suppliers 1,190,671 Accrued maintenance costs 1,140,817 Others 6,312,266 $ 20,293,306 PROVISIONS March 31, 2019 Warranties $ 137,307 Employee benefits 52,836 Others 20,366 $ 210,509 Current $ 131,367 Noncurrent 79,142 $ 210,509 Warranties Employee Benefits Balance on January 1, 2018 $ 131,789 $ 43,429 Additional provisions recognized 21,061 1,278 Used / forfeited during the period (22,690) - Balance on March 31, 2018 $ 130,160 $ 44,707 Balance on January 1, 2019 $ 131,664 $ 51,393 Additional provisions recognized 22,516 1,443 Used / forfeited during the period (16,873) - Balance on March 31, 2019 $ 137,307 $ 52,836

December 31, 2018 March 31, 2018 $ 9,040,692 $ 6,371,806 1,738,716 2,428,290 1,151,084 1,535,484 1,709,778 1,242,473 1,226,031 1,220,575 1,459,246 1,337,331 1,049,849 961,444 5,939,987 6,477,922 $ 23,315,383 $ 21,575,325 December 31, 2018 March 31, 2018 $ 131,664 $ 130,160 51,393 44,707 23,770 4,417 $ 206,827 $ 179,284 $ 128,200 $ 100,012 78,627 79,272 $ 206,827 $ 179,284 Others Total $ 4,467 $ 179,685 - 22,339 (50) (22,740) $ 4,417 $ 179,284 $ 23,770 $ 206,827 - 23,959 (3,404) (20,277) $ 20,366 $ 210,509

25. PROVISIONS

• 41 -

• a. The provision for warranties 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 the historical warranty experience.

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

26. RETIREMENT BENEFIT PLANS

According to the Article 56 of the Labor Standards Law revised in February 2015, 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. Chunghwa contributed $2,118,583 thousand to its pension fund as of March 31, 2018. There is no difference that requires to contribute into the Fund in 2019.

Relevant pension costs for defined benefit plans which were determined by the pension cost rates of actuarial valuation as of December 31, 2018 and 2017 were as follows:

Operating costs Marketing expenses General and administrative expenses Research and development expenses	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2019 $ 432,574 215,652 40,300 26,361 $ 714,887	2018 $ 449,306 222,212 40,397 26,553 $ 738,468

27. EQUITY

• a. Share capital

• 1) Common stocks

March 31, 2019 Number of authorized shares (thousand) 12,000,000 Authorized shares $ 120,000,000 Number of issued and paid shares (thousand) 7,757,447 Issued shares $ 77,574,465	December 31, 2018 March 31, 2018 12,000,000 12,000,000 $ 120,000,000 $ 120,000,000 7,757,447 7,757,447 $ 77,574,465 $ 77,574,465

The issued common stocks of a par value at $10 per share entitled the right to vote and receive dividends.

• 42 -

2) Global depositary receipts

The MOTC and some stockholders sold some common stocks of Chunghwa in an international offering of securities in the form of American Depositary Shares (“ADS”) (one ADS represents 10 common stocks) in July 2003, August 2005, and September 2006. The ADSs were traded on the New York Stock Exchange since July 17, 2003. As of March 31, 2019, the outstanding ADSs were 235,037 thousand common stocks, which equaled 23,504 thousand units and represented 3.03% of Chunghwa’s total outstanding common stocks.

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

• a) Exercise their voting rights,

• b) Sell their ADSs, and

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

b. Additional paid-in capital

The adjustments of additional paid-in capital for the three months ended March 31, 2019 and 2018 were as follows:

Balance on January 1, 2018 Change in additional paid-in capital from investments in associates accounted for using equity method Share-based payment transactions of subsidiaries Balance on March 31, 2018 Balance on January 1, 2019 Change in additional paid-in capital from investments in associates accounted for using equity method Share-based payment transactions of subsidiaries Balance on March 31, 2019	Share Premium $ 147,329,386 - - $ 147,329,386 $ 147,329,386 - - $ 147,329,386	Movements of Additional Paid-in Capital for Associates Accounted for Using Equity Method $ 90,937 (38 ) - $ 90,899 $ 89,893 (872 ) - $ 89,021	Movements of Additional Paid-in Capital Arising from Changes in Equities of Subsidiaries $ 1,221,046 - 12,119 $ 1,233,165 $ 2,063,148 - (812) $ 2,062,336	Difference between Consideration Received and Carrying Amount of the Subsidiaries’ Net Assets upon Disposal $ 161,243 - - $ 161,243 $ 987,611 - - $ 987,611	Donated Capital $ 16,193 - - $ 16,193 $ 18,648 - - $ 18,648	Stockholders’ Contribution due to Privatization $ 20,648,078 - - $ 20,648,078 $ 20,648,078 - - $ 20,648,078	Total $ 169,466,883 (38 ) 12,119 $ 169,478,964 $ 171,136,764 (872 ) (812) $ 171,135,080

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 claimed 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.

• 43 -

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

c. Retained earnings and dividends policy

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

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

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

The appropriations of the 2018 earnings of Chunghwa proposed by the Chunghwa’s Board of Directors on March 19, 2019 and the appropriations of the 2017 earnings of Chunghwa approved by the stockholders in their meetings on June 15, 2018 were as follows:

Reversal of special reserve Cash dividends	Appropriation of Earnings For Fiscal Year 2018 For Fiscal Year 2017 $ - $ 5,404 34,745,603 37,204,714	Dividends Per Share (NT$)
		For Fiscal Year 2018 For Fiscal Year 2017 $ 4.479 $ 4.796

The appropriation of earnings for 2018 are subject to the resoultion by the stockholders in their meeting to be held on June 21, 2019. Information of the appropriation of Chunghwa’s earnings proposed by the Board of Directors and approved by the stockholders is available on the Market Observation Post System website.

d. Other adjustments

• 1) Exchange differences arising from the translation of the foreign operations

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

• 44 -

• 2) Unrealized gain or loss on financial assets at FVOCI

Balance on January 1, 2019 Unrealized gain or loss for the year Equity instruments Balance on March 31, 2019	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2019 $ 538,272 (162,207) $ 376,065	2018 $ 883,420 (238,398) $ 645,022

• e. Noncontrolling interests

Balance on January 1, 2019 Effect of retrospective application Beginning balance as adjusted Shares attributed to noncontrolling interests Net income for the period Exchange differences arising from the translation of the foreign operations Unrealized gain or loss on financial assets at FVOCI Income tax relating to remeasurments of defined benefit pension plans Share of other comprehensive income of associates accounted for using equity method Changes in additional paid-in capital from investments in associates accounted for using equity method Share-based payment transactions of subsidiaries Net increase in noncontrolling interests Balance on March 31, 2019	**Three Months Ended March 31 **	**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2019 $ 10,009,948 (19,603) 9,990,345 170,631 8,387 3,219 - 90 497 15,570 - $ 10,188,739	2018 $ 8,693,650 - 8,693,650 269,980 2,862 4,266 1,509 (548) 4 21,590 5,000 $ 8,998,313

28. REVENUES

Revenue from contracts with customers Other revenues Rental income Other	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2019 $ 51,048,624 191,711 90,826 282,537 $ 51,331,161	2018 $ 53,435,935 156,333 40,090 196,423 $ 53,632,358

The information of performance obligations in customer contracts, please refer to Note 3 Summary of Significant Accounting Policies to the consolidated financial statements for the year ended December 31, 2018 for details.

• 45 -

a. Disaggregation of revenue

Three months ended March 31, 2019

D Main Products and Service Revenues Mobile services revenue Sales of products Local telephone and domestic long distance telephone services revenue Broadband access and domestic leased line services revenue Data Communications internet services revenue International network and leased telephone services revenue Others	omestic Fixed Communi- cations Business $ - 416,884 7,004,002 5,512,974 - - 2,710,535 $ 15,644,395	Mobile Communi- cations Business $ 14,721,342 9,482,418 - - - - 254,758 $ 24,458,518	Internet Business $ - - - - 5,240,314 - 2,102,746 $ 7,343,060	International Fixed Communi- cations Business $ - 68,026 - - - 1,810,881 889,646 $ 2,768,553	Others $ - 621,915 - - - - 212,183 $ 834,098	Total $ 14,721,342 10,589,243 7,004,002 5,512,974 5,240,314 1,810,881 6,169,868
						$ 51,048,624

Three months ended March 31, 2018

Domestic Fixed Communi- cations Business Mobile Communi- cations Business Internet Business Main Products and Service Revenues Mobile services revenue $ - $ 16,037,024 $ - Sales of products 412,437 10,447,500 380 Local telephone and domestic long distance telephone services revenue 7,550,294 - - Broadband access and domestic leased line services revenue 5,627,812 - - Data Communications internet services revenue - - 5,266,520 International network and leased telephone services revenue - - - Others 2,061,487 286,934 1,716,265 $ 15,652,030 $ 26,771,458 $ 6,983,165 Contract balances March 31, 2019 Trade notes and account receivables (Note 9) $ 27,524,272 Contract assets Products and service bundling $ 6,888,091 Other 130,613 Less: Loss allowance (18,217) $ 7,000,487 Current $ 4,606,104 Non-current 2,394,383 $ 7,000,487

International Fixed Communi- cations Business Others Total $ - $ - $ 16,037,024 50,198 874,124 11,784,639 - - 7,550,294 - - 5,627,812 - - 5,266,520 1,909,918 - 1,909,918 1,003,532 191,510 5,259,728 $ 2,963,648 $ 1,065,634 $ 53,435,935 December 31, 2018 March 31, 2018 $ 30,075,503 $ 29,999,086 $ 7,122,875 $ 9,718,903 108,581 128,143 (18,770) - $ 7,212,686 $ 9,847,046 $ 4,868,728 $ 6,258,807 2,343,958 3,588,239 $ 7,212,686 $ 9,847,046 (Continued)

b. Contract balances

• 46 -

		December 31,
	March 31, 2019	2018	March 31, 2018
Contract liabilities
Telecommunications business	$ 11,841,556	$ 8,193,215	$ 8,526,054
Project business	6,176,701	4,508,200	2,141,701
Products and service bundling	73,002	105,559	241,428
Other	651,012	475,947	129,275
	$ 18,742,271	$ 13,282,921	$ 11,038,458
Current	$ 12,417,476	$ 10,687,772	$ 8,654,115
Non-current	6,324,795	2,595,149	2,384,343
	$ 18,742,271	$ 13,282,921	$ 11,038,458
			(Concluded)

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

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

c. Incremental costs of obtaining contracts

		December 31,
	March 31, 2019	2018	March 31, 2018
Noncurrent
Incremental costs of obtaining contracts	$ 1,117,334	$ 1,335,030	$ 2,283,014

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 are capitalized. Amortization recognized in the three months ended March 31, 2019 and 2018 are $376,902 thousand and $452,276 thousand, respectively.

29. NET INCOME

a. Other income and expenses

Loss on disposal of property, plant and equipment Impairment loss on intangible assets	**Three Months Ended March 31 **	**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2019 $ (4,505) - $ (4,505)	2018 $ (20,572) (50,750) $ (71,322)

• 47 -

b. Other income

Rental income Income from Piping Fund Others	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2019 $ 19,566 618 36,162 $ 56,346	2018 $ 17,459 13,971 24,730 $ 56,160

• c. Other gains and losses

Valuation loss on financial assets and liabilities at fair value through profit or loss, net Net foreign currency exchange losses Gain on disposal of financial instruments Others	**Three Months Ended March 31 **	**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2019 $ (7,193) (4,763) - (7,412) $ (19,368)	2018 $ (419) (33,500) 5,754 (5,123) $ (33,288)

• d. Impairment loss (reversal of impairment loss)

Contract assets Trade notes and accounts receivable Other receivables Inventories Intaganble assets	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2019 $ (553) $ (2,227) $ (53,173) $ 95,682 $ -	2018 $ - $ 320,388 $ 77,532 $ 32,476 $ 50,750

e. Depreciation and amortization expenses

Property, plant and equipment Right-of-use assets Investment properties Intangible assets Incremental costs of obtaining contracts Total depreciation and amortization expenses Depreciation expenses summarized by functions Operating costs Operating expenses	**Three Months Ended March 31 **	**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2019 $ 6,708,694 974,947 9,728 1,064,194 376,902 $ 9,134,465 $ 7,196,349 497,020 $ 7,693,369	2018 $ 6,890,231 - 5,196 1,069,983 452,276 $ 8,417,686 $ 6,504,990 390,437 $ 6,895,427 (Continued)

• 48 -

Amortization expenses summarized by functions Operating costs Marketing expenses General and administrative expenses Research and development expenses f. Employee benefit expenses	**Three Months Ended March 31 **	**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2019 $ 1,384,458 24,608 23,287 8,743 $ 1,441,096	2018 $ 1,455,765 34,239 23,967 8,288 $ 1,522,259 (Concluded)

Post-employment benefit Defined contribution plans Defined benefit plans Share-based payment Equity-settled share-based payment Other employee benefit Salaries Insurance Others Total employee benefit expenses Summary by functions Operating costs Operating expenses		**Three Months Ended March 31 **	**Three Months Ended March 31 **
		2019 $ 162,553 714,887 877,440 430 6,348,313 714,858 3,453,336 10,516,507 $ 11,394,377 $ 5,888,047 5,506,330 $ 11,394,377	2019 $ 154,629 738,468 893,097 410 6,530,999 708,161 3,590,518 10,829,678 $ 11,723,185 $ 6,131,925 5,591,260 $ 11,723,185

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

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

The compensation to the employees and remuneration to the directors of 2018 and 2017 approved by the Board of Directors on March 19, 2019 and March 13, 2018, respectively, were as follows. The compensation to the employees and remuneration to the directors of 2018 will be reported to the stockholders in their meeting planned to be held on June 21, 2019.

Compensation distributed to the employees Remuneration paid to the directors	**Cash **
	2018 2017 $ 1,404,264 $ 1,596,012 38,216 40,750

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There was no difference between the initial accrual amounts and the amounts approved in the Board of Directors in 2019 and 2018 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.

30. INCOME TAX

• a. Income tax recognized in profit or loss

The major components of income tax expense were as follows:

Current tax Current tax expenses recognized for the period Income tax adjustments on prior years Others Deferred tax Deferred tax expenses recognized for the period Income tax adjustments on prior years Change in tax rate Income tax recognized in profit or loss	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2019 $ 2,007,019 (11,409) 4,497 2,000,107 17,903 - - 17,903 $ 2,018,010	2018 $ 1,777,874 180 500 1,778,554 345,325 (221) (37,652) 307,452 $ 2,086,006

Income Tax Act in the ROC was amended in 2018 and the corporate income tax rate is adjusted from 17% to 20%. All deferred tax resulting from the change of tax rate has been recognized in profit or loss in the period in which the change in tax rate occurs. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings is reduced from 10% to 5%. The applicable tax rate used by subsidiaries in China is 25%, and tax rates used by other entities in the Company operating in other jurisdictions are based on the tax laws in those jurisdictions.

• b. Income tax benefit recognized in other comprehensive income

Deferred tax benefit Change in tax rate	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2019 $ -	2018 $ (207,269)

c. Income tax examinations

Income tax returns of Chunghwa have been examined by the tax authorities through 2015. Income tax returns of Aval, CHSI, CHPT, HHI and CHST have been examined by the tax authorities through 2016. Income tax returns of SENAO, CHIEF, CHI, LED, Unigate, CLPT, SFD, CHYP, CHTSC, SHE, ISPOT, Youth, Youyi and SENYOUNG have been examined by the tax authorities through 2017.

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31. 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

Net income used to compute the basic earnings per share Net income attributable to the parent Assumed conversion of all dilutive potential common stocks Employee stock options and employee compensation of subsidiaries Net income used to compute the diluted earnings per share Weighted Average Number of Common Stocks Weighted average number of common stocks used to compute the basic earnings per share Assumed conversion of all dilutive potential common stocks Employee compensation Weighted average number of common stocks used to compute the diluted earnings per share	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
	2019 2018 $ 8,356,082 $ 8,727,524 (1,376) (100) $ 8,354,706 $ 8,727,424 (Thousand Shares) Three Months Ended March 31
		2019 7,757,447 12,777 7,770,224	2018 7,757,447 4,707 7,762,154

Because Chunghwa may settle the employee compensation in shares or cash, Chunghwa shall presume that it will be settled in shares and takes 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.

32. SHARE-BASED PAYMENT ARRANGEMENT

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

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

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

No compensation cost of stock options granted on May 7, 2013 was recognized for the three months ended March 31, 2018 and 2019, respectively.

SENAO modified the plan terms of the outstanding stock options in July 2018 and the exercise price changed from $70.70 to $66.20 per share. The modification did not cause any incremental fair value granted.

Information about SENAO’s outstanding stock options for the three months ended March 31, 2019 and 2018 was as follows:

Employee stock options Options outstanding at beginning of the period Options forfeited Options outstanding at end of the period Option exercisable at end of the period	Three Months Ended March 31	Three Months Ended March 31
	2019 Granted on May 7, 2013 Number of Options (Thousand) Weighted Average Exercise Price (NT$) 5,318 $ 66.20 (602) - 4,716 66.20 4,716 66.20	2018
		Granted on May 7, 2013
		Number of Options (Thousand) Weighted Average Exercise Price (NT$) 5,926 $ 70.70 (50) - 5,876 70.70 5,876 70.70

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

Options Outstanding Range of Exercise Price (NT$) Number of Options (Thousand) Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price (NT$) $ 66.20 4,716 0.10 $ 66.20	Options Exercisable
	Number of Options (Thousand) Weighted Average Exercise Price (NT$) 4,716 $ 66.20

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As of December 31, 2018, information about employee stock options outstanding was as follows:

Options Outstanding Range of Exercise Price (NT$) Number of Options (Thousand) Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price (NT$) $ 66.20 5,318 0.35 $ 66.20	Options Exercisable
	Number of Options (Thousand) Weighted Average Exercise Price (NT$) 5,318 $ 66.20

As of March 31, 2018, information about employee stock options outstanding was as follows:

Options Outstanding Range of Exercise Price (NT$) Number of Options (Thousand) Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price (NT$) $ 70.70 5,876 1.10 $ 70.70	Options Exercisable
	Number of Options (Thousand) Weighted Average Exercise Price (NT$) 5,876 $ 70.70

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

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

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

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

	Resolution Date by
Effective Date for	CHIEF’s Board of		Exercise Price
Plan Registration	Directors	Stock Options Units	(NT$)
2017.12.18	2017.12.19	950.00	$ 140.60
			(Original price $ 147.00)
	2018.10.31	50.00	$ 147.00
2015.11.17	2015.10.22	2,000.00	$ 34.40
			(Original price $ 43.00)

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

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The compensation cost for stock options granted on October 31, 2018 was $138 thousand for the three months ended March 31, 2019.

The compensation costs for stock options granted on December 19, 2017 were $168 thousand and $94 thousand for the three months ended March 31, 2019 and 2018, respectively.

The compensation costs for stock options granted on October 22, 2015 were $124 thousand and $316 thousand for the three months ended March 31, 2019 and 2018, respectively.

CHIEF modified the plan terms of stock options granted on December 19, 2017 in June and August 2018 and the exercise price changed from $147.00 to $144.10 and $144.10 to $140.60 per share, respectively. The modification did not cause any incremental fair value granted.

Information about CHIEF’s outstanding stock options for the three months ended March 31, 2019 and 2018 was as follows:

Three Months Ended March 31, 2019 Granted on October 31, 2018 Granted on December 19, 2017 Granted on October 22, 2015 Number of Options Weighted Average Exercise Price (NT$) Number of Options Weighted Average Exercise Price (NT$) Number of Options Weighted Average Exercise Price (NT$) Employee stock options Options outstanding at beginning of the period 50.00 $ 147.00 925.00 $ 140.60 882.75 $ 34.40 Options exercised - - - - (416.50) 34.40 Options outstanding at end of the period 50.00 147.00925.00 140.60466.25 34.40 Options exercisable at end of the period - - - - - - Three Months Ended March 31, 2018 Granted on December 19, 2017 Granted on October 22, 2015 Number of Options (Thousand) Weighted Average Exercise Price (NT$) Number of Options (Thousand) Weighted Average Exercise Price (NT$) Employee stock options Options outstanding at beginning of the period 950 $ 147.00 1,936 $ 34.40 Options exercised - - (968) 34.40 Options forfeited (12) - (4) - Options outstanding at end of the period 938 147.00 964 34.40 Option exercisable at end of the period - - - -	Three Months Ended March 31,	Three Months Ended March 31,	Three Months Ended March 31,	Three Months Ended March 31,	2019
					Granted on October 22, 2015
			Granted on December 19, 2017 Number of Options (Thousand) Weighted Average Exercise Price (NT$) 950 $ 147.00 - - (12) - 938 147.00 - -	Granted on October 22, 2015
				Number of Options (Thousand) Weighted Average Exercise Price (NT$) 1,936 $ 34.40 (968) 34.40 (4) - 964 34.40 - -

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

Granted on October 31, 2018
Options Outstanding Range of Exercise Price (NT$) Number of Options Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price (NT$) $147.00 50.00 4.58 $147.00 Granted on December 19, 2017	Options Exercisable
	Number of Options Weighted Average Exercise Price (NT$) - $ -
Options Outstanding Range of Exercise Price (NT$) Number of Options Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price (NT$) $140.60 925.00 3.72 $140.60 Granted on October 22, 2015	Options Exercisable
	Number of Options Weighted Average Exercise Price (NT$) - $ -
Options Outstanding Range of Exercise Price (NT$) Number of Options Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price (NT$) $ 34.40 466.25 1.56 $ 34.40	Options Exercisable
	Number of Options Weighted Average Exercise Price (NT$) - $ -

As of December 31, 2018, information about employee stock options outstanding was as follows:

Granted on October 31, 2018
Options Outstanding Range of Exercise Price (NT$) Number of Options Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price (NT$) $147.00 50.00 4.83 $147.00 Granted on December 19, 2017	Options Exercisable
	Number of Options Weighted Average Exercise Price (NT$) - $ -
Options Outstanding Range of Exercise Price (NT$) Number of Options Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price (NT$) $140.60 925.00 3.96 $140.60	Options Exercisable
	Number of Options Weighted Average Exercise Price (NT$) - $ -

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Granted on October 22, 2015
Options Outstanding Range of Exercise Price (NT$) Number of Options Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price (NT$) $ 34.40 882.75 1.81 $ 34.40	Options Exercisable
	Number of Options Weighted Average Exercise Price (NT$) 416.50 $ 34.40

As of March 31, 2018, information about employee stock options outstanding was as follows:

Granted on December 19, 2017

Granted on December 19, 2017
Options Outstanding Range of Exercise Price (NT$) Number of Options Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price (NT$) $147.00 938 4.72 $147.00 Granted on October 22, 2015	Options Exercisable
	Number of Options Weighted Average Exercise Price (NT$) - $ -
Options Outstanding Range of Exercise Price (NT$) Number of Options Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price (NT$) $ 34.40 964 2.56 $ 34.40	Options Exercisable
	Number of Options Weighted Average Exercise Price (NT$) - $ -

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

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

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• c. New shares reserved for subscription by employees under cash injection of CHIEF

In March 2018, the Board of Directors of CHIEF approved the cash injection to issue 7,842 thousand shares and simultaneously reserved 1,176 thousand shares for subscription by employees according to the Company Act of the ROC. Furthermore, when the employees subscribed some shares or discarded their rights to subscribe shares, the Board of Directors of CHIEF authorized the chairman of the Board of Directors to contact specific people or group to subscribe.

The aforementioned options granted to employees are accounted for and measured at fair value of the grant date. No compensation cost was recognized for the year ended December 31, 2018.

CHIEF used the fair value method to evaluate the options granted to employees on May 22, 2018 using the Black-Scholes model and the related assumptions and the fair value of the options were as follows:

	Stock Options
	Granted on
	May 22, 2018
Grant-date share price (NT$)	$156.41
Exercise price (NT$)	$170.00
Dividends yield	-
Risk-free interest rate	0.34%
Expected life	7 days
Expected volatility	14.33%
Weighted average fair value of grants (NT$)	$ -

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

33. CASH FLOW INFORMATION

For the three months ended March 31, 2019 and 2018, the Company entered into the following non-cash investing activities:

Increase in property, plant and equipment Changes in other payables	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2019 $ 3,795,681 696,700 $ 4,492,381	2018 $ 3,219,033 1,171,240 $ 4,390,273

For the three months ended March 31, 2019, changes in liabilities arising from financing activities, including non-cash transactions, were as follows:

Lease liabilities	Balance on January 1, 2019 $ 10,340,057	Cash Flows From Financing Activities $ (1,019,347)	Changes In Non-Cash Transactions New Leases Others $ 799,527 $ (245,466)	Cash Flows From Operation Activities - Interest Paid $ (21,388)	Balance on March 31, 2019 $ 9,853,383
			New Leases $ 799,527

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34. 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 suggestion, the Company maintains a balanced capital structure through paying cash dividends, increasing its share capital, purchasing outstanding shares, and proceeds from new debt or repayment of debt.

35. FINANCIAL INSTRUMENTS

Fair Value Information

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

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

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

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

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

The Company considers that the carrying amounts of financial assets and liabilities not measured at fair value approximate their fair values or the fair values cannot be reliable estimated, no financial instruments need to be disclosed on balance sheet date.

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

March 31, 2019

Financial assets at FVTPL Non-listed stocks	Level 1 $ -	Level 2 $ -	Level 3 $ 511,274	Total $ 511,274 (Continued)

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Financial assets at FVOCI Equity investment Financial liabilities at FVTPL Derivatives Hedging financial liabilities December 31, 2018 Financial assets at FVTPL Non-listed stocks Hedging financial assets Financial assets at FVOCI Equity investment Financial liabilities at FVTPL Derivatives March 31, 2018 Financial assets at FVTPL Derivatives Hedging financial assets Financial assets at FVOCI Equity investment Financial liabilities at FVTPL Derivatives	Level 1 $ 2,599,314 $ - $ - Level 1 $ - $ - $ 2,899,843 $ - Level 1 $ - $ - $ 2,847,119 $ -	Level 2 $ - $ 2,219 $ 2,719 Level 2 $ - $ 1,069 $ - $ 1,114 Level 2 $ 34 $ 47 $ - $ 1,031	Level 3 $ 4,174,792 $ - $ - Level 3 $ 517,362 $ - $ 4,032,660 $ - Level 3 $ - $ - $ 4,458,136 $ -	Total $ 6,774,106 $ 2,219 $ 2,719 (Concluded) Total $ 517,362 $ 1,069 $ 6,932,503 $ 1,114 Total $ 34 $ 47 $ 7,305,255 $ 1,031

There were no transfers between Levels 1 and 2 for the three months ended March 31, 2019 and 2018.

For financial assets measured at Level 3, there is no other reconciliation item except for the change in fair value that is recognized in other comprehensive income or loss for the three months ended March 31, 2019.

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

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

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

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

		December 31,
	March 31, 2019	2018	March 31, 2018
Discount for lack of marketability	12.73%-20.00%	12.73%-20.00%	14.25%-20.00%
Noncontrolling interests discount	24.41%-25.00%	24.41%-25.00%	23.00%-24.40%

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

			March 31, 2019	March 31, 2019	March 31, 2018	March 31, 2018
Discount for lack of marketability
5% decrease			$	271,635	$	253,671
Noncontrolling interests discount
5% decrease			$	16,940	$	20,222
Categories of Financial Instruments
			December 31,
	March 31, 2019			2018	March 31, 2018
Financial assets
Measured at FVTPL
Mandatorily measured at FVTPL	$	511,274	$	517,362	$	34
Hedging financial assets		-		1,069		47
Financial assets at amortized cost (Note a)		74,794,074		70,240,962		69,694,334
Financial assets at FVOCI		6,774,106		6,932,503		7,305,255
Financial liabilities
Measured at FVTPL
Held for trading		2,219		1,114		1,031
Hedging financial liabilities		2,719		-		-
Measured at amortized cost (Note b)		34,356,341		40,335,289		34,215,170

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 and long-term loans which were financial liabilities carried at amortized cost.

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Financial Risk Management Objectives

The main financial instruments of the Company include equity investments, accounts receivable, accounts payable, lease liabilities and loans. 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 to the Board of Directors if needed.

a. Market risk

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

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

1) Foreign currency risk

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

		December 31,
	March 31, 2019	2018	March 31, 2018
Assets
USD	$ 6,305,055	$ 5,903,025	$ 6,524,510
EUR	29,834	34,059	34,050
SGD	128,110	123,916	60,941
JPY	30,103	16,689	17,159
RMB	2,307	2,082	2,271
Liabilities
USD	5,643,875	6,998,564	6,787,144
EUR	1,061,209	1,216,812	1,123,494
SGD	1,425,877	50,921	47,632
JPY	19,198	13,968	10,413

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

			December 31,
	March	31, 2019	2018	March	31, 2018
Assets
USD	$	-	$ -	$	-
EUR		-	1,069		47
Liabilities
USD		6	217		268
EUR		4,932	897		729

Foreign currency sensitivity analysis

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

Profit or loss Monetary assets and liabilities (a) USD EUR SGD RMB JPY Derivatives (b) USD EUR Equity Derivatives (c) EUR	**Three Months Ended March 31 **
	2019 2018 $ 33,059 $ (13,132) (51,569) (54,472) (64,888) 665 115 114 545 337 462 8,532 10,470 7,873 12,469 2,238

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

• b) This is mainly attributable to the forward exchange contracts.

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

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

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2) Interest rate risk

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

		December 31,	December 31,
	March 31, 2019		2018	March 31, 2018
Fair value interest rate risk
Financial assets	$ 34,376,501	$	25,821,638	$ 27,968,531
Financial liabilities	9,908,383		-	100,000
Cash flow interest rate risk
Financial assets	8,558,623		9,160,863	7,891,396
Financial liabilities	1,720,000		1,700,000	1,670,000

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 $17,097 thousand and $15,553 thousand for the three months ended March 31, 2019 and 2018, respectively. This is mainly attributable to the Company’s exposure to floating interest rates on its financial assets and short-term and long-term loan.

3) Other price risk

The Company is exposed to equity price risks arising from equity securities investments. Such 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 $25,564 thousand and $338,705 thousand as a result of the changes in fair value of financial assets at FVTPL and financial assets at FVOCI for the three months ended March 31, 2019. If equity prices had been 5% higher/lower, other comprehensive income would have increased/decreased by $365,263 thousand as a result of the changes in fair value of financial assets at FVTPL for the three months ended March 31, 2018.

b. Credit risk

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

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

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

c. Liquidity risk

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

1) Liquidity and interest risk tables

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

Weighted Average Effective Interest Rate (%) March 31, 2019 Non-derivative financial liabilities Non-interest bearing - Floating interest rate instruments 0.99 Fixed interest rate instruments 1.15	Less than 1 Month $ 32,040,527 - 55,000 $ 32,095,527	1-3 Months $ 1,425,770 - - $ 1,425,770	3 Months to 1 Year $ 2,136,648 120,000 - $ 2,256,648	1-5 Years A $ 4,646,233 1,600,000 - $ 6,246,233	dd More than 5 Years $ - - - $ -	Total $ 40,249,178 1,720,000 55,000 $ 42,024,178

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

Lease liabilities Weighted Average Effective Interest Rate (%) December 31, 2018 Non-derivative financial liabilities Non-interest bearing - Floating interest rate instruments 0.98 March 31, 2018 Non-derivative financial liabilities Non-interest bearing - Floating interest rate instruments 0.96 Fixed interest rate instruments 1.20	Less than 1 Year $ 3,555,491 Less than 1 Month $ 41,808,326 - $ 41,808,326 $ 32,721,624 - 100,000 $ 32,821,624	1-3 Years $ 4,339,888 1-3 Months $ - - $ - $ 1,535,484 - - $ 1,535,484	3 Mo 1 $ 2,	3-5 Years Add More than 5 Years $ 1,600,769 $ 707,739 nths to Year 1-5 Years Add More than 5 Years 889,800 $ 4,716,571 $ - 100,000 1,600,000 - 989,800 $ 6,316,571 $ - 428,290 $ 4,559,868 $ - 20,000 1,650,000 - - - - 448,290 $ 6,209,868 $ -	3-5 Years Add More than 5 Years $ 1,600,769 $ 707,739 nths to Year 1-5 Years Add More than 5 Years 889,800 $ 4,716,571 $ - 100,000 1,600,000 - 989,800 $ 6,316,571 $ - 428,290 $ 4,559,868 $ - 20,000 1,650,000 - - - - 448,290 $ 6,209,868 $ -	3-5 Years Add More than 5 Years $ 1,600,769 $ 707,739 nths to Year 1-5 Years Add More than 5 Years 889,800 $ 4,716,571 $ - 100,000 1,600,000 - 989,800 $ 6,316,571 $ - 428,290 $ 4,559,868 $ - 20,000 1,650,000 - - - - 448,290 $ 6,209,868 $ -	Total $10,203,887	Total $10,203,887
				nths to Year 889,800 100,000 989,800 428,290 20,000 - 448,290		rs A 571 000 571 868 000 - 868		Total $ 49,414,697 1,700,000 $ 51,114,697 $ 41,245,266 1,670,000 100,000 $ 43,015,266
			$ 2,		$ 6,316,
			$ 2,		$ 4,559, 1,650,
			$ 2,		$ 6,209,

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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.

2)	March 31, 2019 Gross settled Forward exchange contracts Inflow Outflow December 31, 2018 Gross settled Forward exchange contracts Inflow Outflow March 31, 2018 Gross settled Forward exchange contracts Inflow Outflow Financing facilities Unsecured bank loan facility Amount used Amount unused Secured bank loan facility Amount used Amount unused	Less than 1 Month 1-3 Months $ 9,239 $ 459,818 9,245 464,750 $ (6) $ (4,932) $ 62,035 $ 238,302 62,252 238,459 $ (217) $ (157) $ 170,635 $ 178,352 170,903 179,068 $ (268) $ (716) March 31, 2019 $ 207,445 46,046,655 $ 46,254,100 $ 1,600,000 1,340,000 $ 2,940,000	3 Months to 1 Year 1-5 Years Total $ - $ - $ 469,057 - - 473,995 $ - $ - $ (4,938) $ 126,401 $ - $ 426,738 126,072 - 426,783 $ 329 $ - $ (45) $ 23,888 $ - $ 372,875 23,854 - 373,825 $ 34 $ - $ (950) December 31, 2018 March 31, 2018 $ 132,445 $ 170,000 46,328,280 45,512,417 $ 46,460,725 $ 45,682,417 $ 1,600,000 $ 1,600,000 1,340,000 1,910,000 $ 2,940,000 $ 3,510,000

• 65 -

36. 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. The transactions with the ROC government bodies have not been disclosed because the transactions are not individually or collectively significant. However, the related revenues and operating costs have been appropriately recorded.

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

Company Taiwan International Standard Electronics Co., Ltd. So-net Entertainment Taiwan Limited KKBOX Taiwan Co., Ltd. KingwayTek Technology Co., Ltd. UUPON Inc. Taiwan International Ports Logistics Corporation International Integrated System, Inc. Senao Networks, Inc. EnGenius Tech. Co., Ltd. Emplus Technologies, Inc. HopeTech Technologies Limited ST-2 Satellite Ventures Pte., Ltd. Viettel-CHT Co., Ltd. Click Force Co., Ltd. Alliance Digital Tech Co., Ltd. MeWorks LIMITED（HK） Chunghwa PChome Fund I Co., Ltd. (“CPFI”) Cornerstone Ventures Co., Ltd. (“CVC”) Other related parties Chunghwa Telecom Foundation Senao Technical and Cultural Foundation Sochamp Technology Co., Ltd. E-Life Mall Co., Ltd. Engenius Technologies Co., Ltd. Cheng Keng Investment Co., Ltd. Cheng Feng Investment Co., Ltd.

Relationship

Associate Associate Associate Associate Associate Associate Associate Associate Subsidiary of the Company’s associate, Senao Networks, Inc. Subsidiary of the Company’s associate, Senao Networks, Inc. Associate Associate Associate Associate Associate Associate Associate Associate A nonprofit organization of which the funds donated by Chunghwa exceeds one third of its total funds A nonprofit organization of which the funds donated by SENAO exceeds one third of its total funds Investor of significant influence over CHST One of the directors of E-Life Mall and a director of SENAO are members of an immediate family Chairman of Engenius Technologies Co., Ltd. is a member of SENAO’s management Chairman of Cheng Keng Investment and SENAO’s chief executive officer are members of an immediate family Chairman of Cheng Feng Investment and SENAO’s chief executive officer are members of an immediate family (Continued)

• 66 -

Company Hwa Shun Investment Co., Ltd. United Daily News Co., Ltd. Shenzhen Century Communication Co., Ltd. Taoyuan Aerotropolis Co., Ltd.	Relationship
	Chairman of Hwa Shun Investment and SENAO’s chief executive officer are members of an immediate family Investor of significant influence over SFD Investor of significant influence over SCT Investor of significant influence over TASUI (Concluded)

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

• 1) Operating transactions

Associates Others Associates Others	Revenues	Revenues	Revenues
	Three Months Ended March 31
	2019 2018 $ 67,181 $ 81,218 25,982 18,792 $ 93,163 $ 100,010 Operating Costs and Expenses
	Three Months Ended March 31
		2019 $ 213,958 62,182 $ 276,140	2018 $ 253,428 62,578 $ 316,006

2) Non-operating transactions

Associates Others	Non-operating Income and Expenses	Non-operating Income and Expenses	Non-operating Income and Expenses
	Three Months Ended March 31
		2019 $ (11,955) 9 $ (11,946)	2018 $ 7,812 9 $ 7,821

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3) Receivables

			December 31,	December 31,
		March 31, 2019		2018	March 31, 2018
	Associates	$ 10,106	$	10,785	$ 22,909
	Others	8,145		13,485	5,622
		$ 18,251	$	24,270	$ 28,531
4)	Payables
			December 31,
		March 31, 2019		2018	March 31, 2018
	Associates	$ 357,595	$	914,177	$ 410,616
	Others	3,738		3,774	4,136
		$ 361,333	$	917,951	$ 414,752
5)	Customers’ deposits
			December 31,
		March 31, 2019		2018	March 31, 2018
	Associates	$ 5,870	$	5,925	$ 5,188

• 6) Lease-in agreements

Chunghwa entered into a contract with ST-2 Satellite Ventures Pte., Ltd. on March 12, 2010 to lease capacity on the ST-2 satellite. This lease term is for 15 years which should start from the official operation of ST-2 satellite and the total contract value is approximately $6,000,000 thousand (SG$260,723 thousand), including a prepayment of $3,067,711 thousand, 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.

2019

The lease liabilities of ST-2 Satellite Ventures Pte., Ltd. as of March 31, 2019 was as follows:

	March 31, 2019	March 31, 2019
Lease liabilities - current	$	192,260
Lease liabilities - noncurrent		1,230,614
	$	1,422,874

The interest expense recognized for the aforementioned lease liabilities was $2,837 thousand for the three months ended March 31, 2019.

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2018

The total rental expense for the three months ended March 31, 2018 was $98,248 thousand, which consisted of an offsetting credit of the prepayment of $51,100 thousand and an additional accrual of $47,148 thousand. The prepaid rents (classified as prepayments) as of December 31, 2018 and March 31, 2018, were as follows:

	December 31,	December 31,
		2018	March 31, 2018
Prepaid rents - current	$	204,398	$	204,398
Prepaid rents - noncurrent		1,345,623		1,498,921
	$	1,550,021	$	1,703,319

c. Compensation of key management personnel

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

Short-term employee benefits Post-employment benefits Share-based payment	Three Months Ended March 31	Three Months Ended March 31	Three Months Ended March 31
		2019 $ 76,035 2,158 68 $ 78,261	2019 $ 84,171 2,408 86 $ 86,665

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

37. PLEDGED ASSETS

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

		December 31,
	March 31, 2019	2018	March 31, 2018
Property, plant and equipment	$ 2,513,460	$ 2,520,838	$ 2,542,974
Land held under development (included in
inventories)	1,998,733	1,998,733	1,998,733
Restricted assets (included in other assets -
others)	2,500	2,500	2,500
	$ 4,514,693	$ 4,522,071	$ 4,544,207

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38. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

As of March 31, 2019, the Company’s significant commitments and contingent liabilities, excluding those disclosed in other notes, were as follows:

• a. Acquisitions of land and buildings of $153,759 thousand.

• b. Acquisitions of telecommunications equipment of $21,170,687 thousand.

• c. Unused letters of credit amounting to $50,000 thousand.

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

• e. CHPT signed the contract for its headquarters construction amounted to $1,613,800 thousand in July, 2017. The payment of $566,555 thousand has been made as of March 31, 2019.

39. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

Assets denominated in foreign currencies Monetary items Cash USD EUR SGD JPY RMB Accounts receivable USD EUR SGD JPY Non-monetary items Investments accounted for using equity method SGD VND	March 31, 2019
	Foreign Currencies (Thousands) Exchange Rate New Taiwan Dollars (Thousands) $ 22,658 30.82 $ 698,326 831 34.61 28,772 5,535 22.75 125,921 85,985 0.278 23,904 504 4.58 2,307 181,919 30.82 5,606,729 31 34.61 1,062 96 22.75 2,189 22,297 0.278 6,199 22,949 22.75 522,084 250,242,975 0.00121 302,794 (Continued)

• 70 -

Liabilities denominated in foreign currencies Monetary items Accounts payable USD EUR SGD JPY Lease liabilities USD SGD Assets denominated in foreign currencies Monetary items Cash USD EUR SGD JPY RMB Accounts receivable USD EUR SGD JPY Non-monetary items Investments accounted for using equity method SGD VND Liabilities denominated in foreign currencies Monetary items Accounts payable USD EUR SGD JPY	March 31, 2019
	Foreign Currencies (Thousands) Exchange Rate New Taiwan Dollars (Thousands) $ 183,117 30.82 $ 5,643,678 30,662 34.61 1,061,209 29 22.75 650 69,059 0.278 19,198 6 30.82 197 62,647 22.75 1,425,227 (Concluded) December 31, 2018
	Foreign Currencies (Thousands) Exchange Rate New Taiwan Dollars (Thousands) $ 27,035 30.72 $ 830,385 957 35.20 33,676 5,461 22.48 122,762 58,563 0.278 16,280 466 4.472 2,082 165,152 30.72 5,072,640 11 35.20 383 51 22.48 1,154 1,471 0.278 409 22,066 22.48 496,033 238,757,968 0.0012 286,510 227,855 30.72 6,998,564 34,569 35.20 1,216,812 2,265 22.48 50,921 50,243 0.278 13,968

• 71 -

Assets denominated in foreign currencies Monetary items Cash USD EUR SGD RMB JPY Accounts receivable USD EUR SGD JPY Non-monetary items Investments accounted for using equity method USD SGD VND Liabilities denominated in foreign currencies Monetary items Accounts payable USD EUR SGD JPY	March 31, 2018
	Foreign Currencies (Thousands) Exchange Rate New Taiwan Dollars (Thousands) $ 23,095 29.11 $ 672,188 878 35.87 31,489 2,676 22.21 59,442 489 4.647 2,271 54,105 0.274 14,819 201,076 29.11 5,852,322 71 35.87 2,561 67 22.21 1,499 8,545 0.274 2,340 112 29.11 3,265 22,537 22.21 500,546 213,730,000 0.0012 256,476 233,195 29.11 6,787,144 31,321 35.87 1,123,494 2,145 22.21 47,632 38,019 0.274 10,413

The unrealized foreign exchange gains were $39,394 thousand and $31,523 thousand for the three months ended March 31, 2019 and 2018, respectively. Due to the various foreign currency transactions and the functional currency of each individual entity of the Company, foreign exchange gains and losses cannot be disclosed by the respective significant foreign currency.

40. ADDITIONAL DISCLOSURES

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

• a. Financing provided: None.

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

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

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

• 72 -

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

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

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

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

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

• j. Derivative instruments transactions: Please see Notes 7, 20 and 35.

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

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

41. SEGMENT INFORMATION

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

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

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

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

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

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

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

There was no material differences between the accounting policies of the operating segments and the accounting policies described in Note 3.

• 73 -

Segment Revenues and Operating Results

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

Three months ended March 31, 2019 Revenues From external customers Intersegment revenues Segment revenues Intersegment elimination Consolidated revenues Segment operating costs and expenses Segment income (loss) before income tax Three months ended March 31, 2018 Revenues From external customers Intersegment revenues Segment revenues Intersegment elimination Consolidated revenues Segment operating costs and expenses Segment income (loss) before income tax	Domestic Fixed Communi- cations Business $ 15,788,192 4,078,238 $ 19,866,430 $ 13,858,067 $ 4,668,808 $ 15,803,086 4,528,383 $ 20,331,469 $ 14,164,831 $ 4,893,071	Mobile Communi- cations Business $ 24,481,095 392,128 $ 24,873,223 $ 18,357,933 $ 3,241,819 $ 26,778,575 483,397 $ 27,261,972 $ 19,670,369 $ 4,030,597	Internet Business $ 7,418,363 960,639 $ 8,379,002 $ 3,367,805 $ 3,010,735 $ 6,985,730 874,774 $ 7,860,504 $ 3,000,286 $ 2,583,013	International Fixed Communi- cations Business $ 2,770,888 577,885 $ 3,348,773 $ 2,797,460 $ 201,982 $ 2,966,689 577,934 $ 3,544,623 $ 2,969,587 $ 205,632	Others $ 872,623 1,068,788 $ 1,941,411 $ 2,543,578 $ (578,621 ) $ 1,098,278 1,069,457 $ 2,167,735 $ 2,812,506 $ (628,803)	Total $ 51,331,161 7,077,678 58,408,839 (7,077,678) $ 51,331,161 $ 40,924,843 $ 10,544,723 $ 53,632,358 7,533,945 61,166,303 (7,533,945) $ 53,632,358 $ 42,617,579 $ 11,083,510

Main Products and Service Revenues

Mobile services revenue Sales of products Local telephone and domestic long distance telephone services revenue Broadband access and domestic leased line services revenue Data Communications internet services revenue International network and leased telephone services revenue Others		Three Months Ended March 31	Three Months Ended March 31
		2019 $ 14,721,342 10,589,242 7,004,002 5,512,974 5,240,314 1,810,881 6,452,406 $ 51,331,161	2018 $ 16,037,024 11,784,639 7,550,294 5,627,812 5,266,520 1,909,918 5,456,151 $ 53,632,358

• 74 -

TABLE 1

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED THREE MONTHS ENDED MARCH 31, 2019 (Amounts in Thousands of New Taiwan Dollars)

No. (Note 1)	Endorsement/ Guarantee Provider	Guaranteed Party	Guaranteed Party	Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party	Maximum Balance for the Period	Ending Balance	Actual Borrowing Amount	Amount of Endorsement/ Guarantee Collateralized by Properties	Ratio of Accumulated Endorsement/ Guarantee to Net Equity Per Latest Financial Statements	Maximum Endorsement/ Guarantee Amount Allowable	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China	Note
		Name	Nature of Relationship (Note 2)
1	Senao International Co., Ltd.	Aval Technologies Co., Ltd.	b	$ 585,783	$ 300,000	$ 300,000	$ 300,000	$ -	5.12	$ 2,928,919	Yes	No	No	Notes 3 and 4

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

• a. “0” for the Company.

• b. Subsidiaries are numbered from “1”.

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

• a. A company with which it does business.

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

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

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

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

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

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

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

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

• 75 -

TABLE 2

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD MARCH 31, 2019

(Amounts in Thousands of New Taiwan Dollars)

Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		March 31, 2019	March 31, 2019		Note
				Shares (Thousands/ Thousand Units)	Carrying Value (Note 1)	Percentage of Ownership	Fair Value
Chunghwa Telecom Co., Ltd. Senao International Co., Ltd. CHIEF Telecom Inc. Chunghwa Investment Co., Ltd. Chunghwa Hsingta Co., Ltd.	Stocks Taipei Financial Center Corp. Innovation Works Development Fund, L.P. Industrial Bank of Taiwan II Venture Capital Co., Ltd. (IBT II) Global Mobile Corp. Innovation Works Limited RPTI Intergroup International Ltd. Taiwan mobile payment Co., Ltd. Taiwania Capital Buffalo Fund Co., Ltd. China Airlines Ltd. 4 Gamers Entertainment Inc. Stocks N.T.U. Innovation Incubation Corporation Stocks 3 Link Information Service Co., Ltd. Stocks Tatung Technology Inc. iSing99 Inc. Powertec Energy Corp. Stocks Cotech Engineering Fuzhou Corp.	- - - - - - - - - - - - - - - -	Financial assets at FVOCI Financial assets at FVTPL Financial assets at FVOCI Financial assets at FVOCI Financial assets at FVOCI Financial assets at FVOCI Financial assets at FVOCI Financial assets at FVTPL Financial assets at FVOCI Financial assets at FVOCI Financial assets at FVOCI Financial assets at FVOCI Financial assets at FVOCI Financial assets at FVOCI Financial assets at FVOCI Financial assets at FVOCI	172,927 - 5,252 7,617 1,000 4,765 1,200 300,000 263,622 136 1,200 374 4,571 10,000 20,000 -	$ 3,550,930 224,015 21,555 - 2,845 - 4,757 287,259 2,599,314 163,011 9,433 930 144,035 52,574 212,874 11,848	12 4 17 3 2 10 2 13 5 19.9 9 10 11 7 2 5	$ 3,550,930 224,015 21,555 - 2,845 - 4,757 287,259 2,599,314 163,011 9,433 930 144,035 52,574 212,874 11,848	- - - - - - - - Note 2 - - - - - - -

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

Note 2: Fair value was based on the closing price on March 29, 2019.

• 76 -

TABLE 3

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL THREE MONTHS ENDED MARCH 31, 2019

(Amounts in Thousands of New Taiwan Dollars)

Buyer	Property	Event Date	Transaction Amount	Payment Status	Counterparty	Relationship	Information on Pr	evious Title Transf	er If Counterparty is a Related Party	er 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.	Headquarters	2017.07.29- 2019.03.29	$ 849,884	Monthly settlement based on the construction progress and acceptance	Fu Tsu Construction Co., Ltd.	-	Not applicable	Not applicable	Not applicable	Not applicable	Bidding, price comparison and price negotiation	Manufacturing purpose	None

• 77 -

TABLE 4

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL THREE MONTHS ENDED MARCH 31, 2019

(Amounts in Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship		Transaction	Details		Abnormal	Transaction	Notes / Accounts or Receiva	Payable ble
			Purchase/Sales (Note 1)	Amount (Notes 2and 5)	% to Total	Payment Terms	Units Price	Payment Terms	Ending Balance (Notes 3 and 5)	% to Total
Chunghwa Telecom Co., Ltd. Senao International Co., Ltd. Chunghwa System Integration Co., Ltd. Honghwa International Co., Ltd. Donghwa Telecom Co., Ltd. Chunghwa Telecom Singapore Pte., Ltd.	Senao International Co., Ltd. Chunghwa System Integration Co., Ltd. Honghwa International Co., Ltd. Donghwa Telecom Co., Ltd. Chunghwa Telecom Singapore Pte., Ltd. Taiwan International Standard Electronics Co., Ltd. Chunghwa Telecom Co., Ltd. Aval Technologies Co., Ltd. Chunghwa Telecom Co., Ltd. Chunghwa Telecom Co., Ltd. Chunghwa Telecom Co., Ltd. Chunghwa Telecom Co., Ltd.	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Associate Parent company Subsidiary Parent company Parent company Parent company Parent company	Sales Purchase Purchase Purchase Purchase Purchase Purchase Sales Purchase Purchase Sales Sales Sales Sales	$ 630,813 231,807 203,118 1,228,054 161,148 110,080 159,650 1,546,533 578,289 106,615 310,214 1,228,054 161,148 110,080	1 1 1 4 1 - 1 20 9 2 92 98 48 41	30 days 30-90 days 30 days 30-60 days 90 days 90 days 30-90 days 30-90 days 30 days 30 days 30 days 30-60 days 90 days 90 days	$ - - - - - - - - - - - - - -	- - - - - - - - - - - - - -	$ 106,297 (903,089) (283,593) (834,939) (174,205) (78,855) (174,816) 908,867 (62,153) (242) 282,318 834,917 174,205 78,855	- (8) (2) (7) (1) (1) (1) 52 (2) - 88 98 88 27

Note 1: Purchase included acquisition of services costs.

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

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

Note 4: Transaction terms with 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 5: All inter-company transactions, balances, income and expenses are eliminated upon consolidation.

• 78 -

TABLE 5

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL MARCH 31, 2019

(Amounts in Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship	Ending Balance	Turnover Rate (Note 1)	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Bad Debts
					Amounts	Action Taken
Chunghwa Telecom Co., Ltd. Senao International Co., Ltd. Chunghwa System Integration Co., Ltd. Honghwa International Co., Ltd. Donghwa Telecom Co., Ltd.	Senao International Co., Ltd. Donghwa Telecom Co., Ltd. Chunghwa Telecom Global, Inc. Chunghwa Telecom Singapore Pte., Ltd. Chunghwa Telecom Co., Ltd. Chunghwa Telecom Co., Ltd. Chunghwa Telecom Co., Ltd. Chunghwa Telecom Co., Ltd.	Subsidiary Subsidiary Subsidiary Subsidiary Parent company Parent company Parent company Parent company	$ 276,452 (Note 2) 302,258 (Note 2) 287,170 (Note 2) 191,096 (Note 2) 1,221,495 (Note 2) 282,318 (Note 2) 834,917 (Note 2) 174,205 (Note 2)	10.85 1.40 0.82 1.46 6.75 2.73 5.19 4.84	$ - - - - - - - -	- - - - - - - -	$ 255,007 296,937 280,552 167,786 151,917 88,705 79,627 161,551	$ - - - - - - - -

Note 1: Payments and receipts collected in trust for others are excluded from the accounts receivable for calculating the turnover rate.

Note 2: The amount was eliminated upon consolidation.

• 79 -

TABLE 6

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) THREE MONTHS ENDED MARCH 31, 2019

(Amounts in Thousands of New Taiwan Dollars)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Inves	tment Amount	Balan	ce as of March 31, 2019	ce as of March 31, 2019	Net Income (Loss) of the Investee	Recognized Gain (Loss) (Notes 1, 2 and 3)	Note
				March 31, 2019	December 31, 2018	Shares (Thousands)	Percentage of Ownership (%)	Carrying Value (Note 3)
Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd. Light Era Development Co., Ltd. Donghwa Telecom Co., Ltd. Chunghwa Telecom Singapore Pte., Ltd. Chunghwa System Integration Co., Ltd. CHIEF Telecom Inc. Chunghwa Investment Co., Ltd. Prime Asia Investments Group Ltd. (B.V.I.) Honghwa International Co., Ltd. CHYP Multimedia Marketing & Communications Co., Ltd. Chunghwa Telecom Vietnam Co., Ltd. Chunghwa Telecom Global, Inc. CHT Security Co., Ltd. Chunghwa Telecom (Thailand) Co., Ltd. Spring House Entertainment Tech. Inc. Chunghwa leading Photonics Tech Co., Ltd. Smartfun Digital Co., Ltd. Chunghwa Telecom Japan Co., Ltd. Chunghwa Sochamp Technology Inc. International Integrated System, Inc.	Taiwan Taiwan Hong Kong Singapore Taiwan Taiwan Taiwan British Virgin Islands Taiwan Taiwan Vietnam United States Taiwan Thailand Taiwan Taiwan Taiwan Japan Taiwan Taiwan	Handset and peripherals retailer; sales of CHT mobile phone plans as an agent Planning and development of real estate and intelligent buildings, and property management International private leased circuit, IP VPN service, and IP transit services International private leased circuit, IP VPN service, and IP transit services Providing system integration services and telecommunications equipment Network integration, internet data center (“IDC”), communications integration and cloud application services Investment Investment Telecommunication engineering, sales agent of mobile phone plan application and other business services Digital information supply services and advertisement services Intelligent energy saving solutions, international circuit, and information and communication technology (“ICT”) services. International private leased circuit, internet services, and transit services 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 International private leased circuit, IP VPN service, ICT and cloud VAS services Software design services, internet contents production and play, and motion picture production and distribution Production and sale of electronic components and finished products Providing diversified family education digital services International private leased circuit, IP VPN service, and IP transit services Design, development and production of Automatic License Plate Recognition software and hardware IT solution provider, IT application consultation, system integration and package solution	$ 1,065,813 3,000,000 1,567,453 574,112 838,506 459,652 639,559 385,274 180,000 150,000 148,275 70,429 240,000 100,000 62,209 70,500 65,000 17,291 20,400 283,500	$ 1,065,813 3,000,000 1,567,453 574,112 838,506 459,652 639,559 385,274 180,000 150,000 148,275 70,429 240,000 100,000 62,209 70,500 65,000 17,291 20,400 283,500	71,773 300,000 402,590 26,383 60,000 39,426 68,085 1 18,000 15,000 - 6,000 24,000 1,000 10,277 7,050 6,500 1 2,040 22,498	28 100 100 100 100 57 89 100 100 100 100 100 80 100 56 75 65 100 51 32	$ 1,623,530 3,852,302 1,631,543 945,938 730,062 1,792,266 3,206,351 192,315 451,173 201,375 106,536 309,041 257,213 94,664 100,989 101,473 73,112 65,753 (7,393) 307,978	$ 63,497 (1,617) 10,580 32,110 (11,981) 136,701 31,360 (6,021) (4,987) 3,392 (409) 20,049 26,099 (2,353) 4,886 1,912 1,284 3,353 (1,446) (9,778)	$ 16,478 (1,539) 10,580 32,113 (8,050) 79,337 28,016 (6,021) (5,169) 3,349 (409) 20,614 19,276 (2,353) 2,738 2,844 1,081 3,353 (1,166) (3,096)	Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Associate

(Continued)

• 80 -

Investor Company	Investee Company	Location	Main Businesses and Products	Original Inves	tment Amount	Balan	ce as of March 31, 2019	ce as of March 31, 2019	Net Income (Loss) of the Investee	Recognized Gain (Loss) (Notes 1, 2 and 3)	Note
				March 31, 2019	December 31, 2018	Shares (Thousands)	Percentage of Ownership (%)	Carrying Value (Note 3)
Senao International Co., Ltd. Light Era Development Co., Ltd. CHIEF Telecom Inc. Chunghwa Telecom Singapore Pte., Ltd. Chunghwa Investment Co., Ltd. Chunghwa Precision Test Tech. Co., Ltd.	Viettel-CHT Co., Ltd. Taiwan International Standard Electronics Co., Ltd. KKBOX Taiwan Co., Ltd. So-net Entertainment Taiwan Limited KingwayTek Technology Co., Ltd. Taiwan International Ports Logistics Corporation UUPON Inc. Alliance Digital Tech Co., Ltd. Chunghwa PChome Fund I Co., Ltd. Cornerstone Ventures Co., Ltd. Senao Networks, Inc. Senao International (Samoa) Holding Ltd. UUPON Inc. Youth Co., Ltd. Aval Technologies Co., Ltd. SENYOUNG Insurance Agent Co., Ltd. Taoyuan Asia Silicon Valley Innovation Co., Ltd. Unigate Telecom Inc. Chief International Corp. ST-2 Satellite Ventures Pte., Ltd. Chunghwa Precision Test Tech. Co., Ltd. CHIEF Telecom Inc. Senao International Co., Ltd. Chunghwa Precision Test Tech USA Corporation CHPT Japan Co., Ltd. Chunghwa Precision Test Tech. International,Ltd.	Vietnam Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Samoa Islands Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Samoa Islands Singapore Taiwan Taiwan Taiwan United States Japan Samoa Islands	IDC services Manufacturing, selling, designing, and maintaining of telecommunications systems and equipment Providing of music on-line, software, electronic information, and advertisement services Online service and sale of computer hardware Publishing books, data processing and software services Import and export storage, logistic warehouse, and ocean shipping service Information technology service and general advertisement service Development of mobile payments and information processing service Investment, venture capital, investment advisor, management consultant and other consultancy service Investment, venture capital, investment advisor, management consultant and other consultancy service Telecommunication facilities manufactures and sales International investment Information technology service and general advertisement service Sale of information and communication technologies products Sale of information and communication technologies products Property and liability insurance agency Development of real estate Telecommunications and internet service Telecommunications and internet service Operation of ST-2 telecommunications satellite Production and sale of semiconductor testing components and printed circuit board Network integration, internet data center (“IDC”), communications integration and cloud application services Selling and maintaining mobile phones and its peripheral products Design and after-sale services of semiconductor testing components and printed circuit board Related services of electronic parts, machinery processed products and printed circuit board Wholesale and retail of electronic materials, and investment	$ 288,327 164,000 67,025 120,008 69,013 80,000 97,598 60,000 200,000 4,900 202,758 2,416,645 24,000 364,950 60,000 59,000 7,500 2,000 6,068 409,061 178,608 19,064 49,731 12,636 2,008 54,450	$ 288,327 164,000 67,025 120,008 69,013 80,000 97,598 60,000 200,000 4,900 202,758 2,416,645 24,000 364,950 60,000 59,000 7,500 2,000 6,068 409,061 178,608 19,064 49,731 12,636 2,008 54,450	- 1,760 4,438 9,429 6,993 8,000 5,400 6,000 20,000 490 16,579 81,175 2,400 8,462 6,510 5,900 750 200 200 18,102 11,230 2,078 1,001 400 1 1,700	30 40 30 30 26 27 15 14 50 49 34 100 7 93 100 100 60 100 100 38 34 3 - 100 100 100	$ 302,794 234,238 139,951 127,980 135,690 49,887 9,765 5,080 197,740 4,950 944,463 474,391 4,473 203,524 70,225 54,388 2,064 869 67,553 522,084 2,138,864 89,296 43,513 24,893 2,342 42,202	$ 46,300 14,188 (24,758) 26,656 3,226 871 (11,087) - (2,468) 393 72,489 (5,973) (11,087) (598) 293 3,699 (3,933) (18) 2,990 73,929 94,201 136,701 63,497 418 21 (1,115)	$ 13,801 17,800 (7,427) 7,997 765 236 (1,668) - (1,234) 193 24,496 (5,973) (742) (2,679) 292 3,704 (2,360) (18) 2,990 28,093 32,264 4,128 246 418 21 (1,115)	Associate Associate Associate Associate Associate Associate Associate Associate Associate Associate Associate Subsidiary (Note 6) Associate Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Notes 4 and 6) Subsidiary (Note 6) Subsidiary (Note 6) Associate Subsidiary (Note 6) Associate (Note 6) Associate (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6)

(Continued)

• 81 -

Investor Company	Investee Company	Location	Main Businesses and Products	Original Inves	tment Amount	Balan	ce as of March 31, 2019	ce as of March 31, 2019	Net Income (Loss) of the Investee	Recognized Gain (Loss) (Notes 1, 2 and 3)	Note
				March 31, 2019	December 31, 2018	Shares (Thousands)	Percentage of Ownership (%)	Carrying Value (Note 3)
Prime Asia Investments Group, Ltd. (B.V.I.) Senao International (Samoa) Holding Ltd. Youth Co., Ltd. CHYP Multimedia Marketing & Communications Co., Ltd	Chunghwa Hsingta Co., Ltd. MeWorks Limited (HK) Senao International HK Limited ISPOT Co., Ltd. Youyi Co., Ltd. Click Force Marketing Company	Hong Kong Hong Kong Hong Kong Taiwan Taiwan Taiwan	Investment Investment International investment Sale of information and communication technologies products Maintenance of information and communication technologies products Advertisement services	$ 375,274 10,000 2,328,754 53,021 21,354 44,607	$ 375,274 10,000 2,393,646 53,021 21,354 44,607	1 - 80,440 - - 1,078	100 20 100 100 100 49	$ 192,315 - 370,710 9,315 16,910 37,835	$ (6,021) - (6,127) (21) (100) 1,000	$ (6,021) - (6,127) (69) (155) (41)	Subsidiary (Note 6) Associate Subsidiary (Note 6) Subsidiary (Note 6) Subsidiary (Note 6) Associate

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

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

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

Note 4: Taoyuan Asia Silicon Valley Innovation Co., Ltd. was approved to end its business and dissolve in April 2019. The liquidation of Taoyuan Asia Silicon Valley Innovation Co., Ltd. is still in process.

Note 5: Investment in mainland China is included in Table 7.

Note 6: The amount was eliminated upon consolidation.

(Concluded)

• 82 -

TABLE 7

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA THREE MONTHS ENDED MARCH 31, 2019 (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, 2019	Investme	nt Flows	Accumulated Outflow of Investment from Taiwan as of March 31, 2019	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note 2)	Carrying Value as of March 31, 2019	Accumulated Inward Remittance of Earnings as of March 31, 2019	Note
					Outflow	Inflow
Senao Trading (Fujian) Co., Ltd. Senao International Trading (Shanghai) Co., Ltd. Senao International Trading (Shanghai) Co., Ltd. (Note 12) Senao International Trading (Jiangsu) Co., Ltd. Chunghwa Telecom (China) Co., Ltd. Jiangsu Zhenghua Information Technology Company, LLC Shanghai Taihua Electronic Technology Limited Shanghai Chief Telecom Co., Ltd.	Sale of information and communication technologies products Sale of information and communication technologies products Maintenance of information and communication technologies products Sale of information and communication technologies products Integrated information and communication solution services for enterprise clients, and intelligent energy network service Providing intelligent energy saving solution and intelligent buildings services Design of printed circuit board and related consultation service Telecommunications and internet service	$ 1,073,170 955,838 87,540 263,736 177,176 189,410 51,233 10,150	2 2 2 2 2 2 2 1	$ 1,073,170 955,838 87,540 263,736 177,176 142,057 51,233 4,973	$ - - - - - - - -	$ - - - - - - - -	$ 1,073,170 955,838 87,540 263,736 177,176 142,057 51,233 4,973	$ 810 (7,054) - 310 (3,657) - (1,137) 765	100 100 100 100 100 75 100 49	$ 810 (7,054) - 310 (3,657) - (1,137) 375	$ 200,180 74,435 - - 49,862 - 39,033 8,497	$ - - - - - - - -	Notes 7 and 11 Note 11 Notes 8 and 11 Notes 9 and 11 Note 11 Notes 10 and 11 Note 11 Note 11

(Continued)

• 83 -

Investee	Accumulated Investment in Mainland China as of March 31, 2019	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment Stipulated by Investment Commission, MOEA
SENAO and its subsidiaries (Note 3) Chunghwa Telecom (China) Co., Ltd. (Note 4) Jiangsu Zhenghua Information Technology Company, LLC (Note 4) Shanghai Taihua Electronic Technology Limited (Note 5) Shanghai Chief Telecom Co., Ltd. (Note 6)	$ 2,380,284 177,176 142,057 51,233 4,973	$ 2,380,284 177,176 142,057 97,965 4,973	$ 3,523,866 236,942,348 236,942,348 3,747,033 1,785,914

Note 1: Investments are divided into three categories as follows:

a. Direct investment.

• b. Investments through a holding company registered in a third region.

c. Others.

Note 2: The amounts were calculated based on the investee’s reviewed financial statements.

Note 3: Senao International Co., Ltd. and its subsidiaries were calculated based on the consolidated net assets value of Senao International Co., Ltd.

Note 4: Chunghwa Telecom (China) Co., Ltd. and Jiangsu Zhenghua Information Technology Company, LLC were calculated based on the consolidated net assets value of Chunghwa Telecom Co., Ltd.

Note 5: Shanghai Taihua Electronic Technology Limited was 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: Senao Trading (Fujian) Co., Ltd. was approved to end its business and dissolve in September 2018. The liquidation of Senao Trading (Fujian) Co., Ltd. is still in process.

Note 8: The liquidation of Senao International Trading (Shanghai) Co., Ltd. was completed in March 2018.

Note 9: The liquidation of Senao International Trading (Jiangsu) Co., Ltd. was completed in March 2019.

Note 10: The liquidation of Jiangsu Zhenhua Information Technology Company, LLC. was completed in December 2018.

Note 11: The amount was eliminated upon consolidation.

Note 12: The English name is the same as the above entity; however the Chinese name included in the respective Articles of Incorporations is different from the above entity.

(Concluded)

• 84 -

TABLE 8

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS THREE MONTHS ENDED MARCH 31, 2019 (Amounts in Thousands of New Taiwan Dollars)

Year	No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)	Transaction Details	Transaction Details
					Financial Statement Account	Amount (Note 5)	Payment Terms (Note 3)	% to Total Sales or Assets (Note 4)
2019	0	Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd. CHIEF Telecom Inc. CHYP Multimedia Marketing & Communications Co., Ltd. Chunghwa System Integration Co., Ltd. Chunghwa Telecom Global Inc. Donghwa Telecom Co., Ltd. Chunghwa Telecom Japan Co., Ltd. Chunghwa Telecom Singapore Pte., Ltd. Chunghwa Sochamp Technology Inc. Honghwa International Co., Ltd.	a a a a a a a a a a	Accounts receivable Accrued custodial receipts Accounts payable Amounts collected for others Revenues Operating costs and expenses Accounts receivable Accounts payable Revenues Operating costs and expenses Amounts collected for others Operating costs and expenses Accounts receivable Accounts payable Operating costs and expenses Inventories Property, plant and equipment Accounts receivable Accounts payable Revenues Operating costs and expenses Accounts receivable Accounts payable Revenues Operating costs and expenses Accounts receivable Accounts payable Operating costs and expenses Accounts receivable Accounts payable Revenues Operating costs and expenses Accounts payable Accounts payable Revenues Operating costs and expenses Property, plant and equipment	$ 106,297 170,155 903,089 318,406 630,813 231,807 41,423 307,450 90,807 26,715 25,281 15,661 24,916 283,593 182,210 20,908 103,332 287,170 44,219 22,468 96,014 302,258 174,205 52,437 161,148 47,321 23,992 23,984 191,096 78,855 79,054 110,080 24,479 834,939 22,567 1,228,054 33,550	- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	- - - - 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2 -

(Continued)

• 85 -

Year	No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)	Transaction Details	Transaction Details
					Financial Statement Account	Amount (Note 5)	Payment Terms (Note 3)	% to Total Sales or Assets (Note 4)
	1 2	Light Era Development Co., Ltd. Chunghwa Telecom Singapore Pte., Ltd.	CHT Security Co., Ltd. Aval Technologies Co., Ltd. CHIEF Telecom Inc. Donghwa Telecom Co., Ltd.	a a c c	Accounts payable Operating costs and expenses Inventories Other noncurrent assets Operating costs and expenses Customers’ deposits Revenues Prepayments	$ 18,999 31,157 26,827 10,281 10,362 11,597 23,790 17,191	- - - - - - - -	- - - - - - - -

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

• a. “0” for the Company.

• b. Subsidiaries are numbered from “1”.

Note 2: Related party transactions are divided into three categories as follows:

• a. The Company to subsidiaries.

• b. Subsidiaries to the Company.

• c. Subsidiaries to subsidiaries.

• Note 3: Transaction terms with the related parties were determined in accordance with mutual agreements when there were no similar transactions with third parties. Other transactions with related parties were not significantly different from those with third parties.

• Note 4: For assets and liabilities, amount is shown as a percentage to consolidated total assets as of March 31, 2019, while revenues, costs and expenses are shown as a percentage to consolidated revenues for the three months ended March 31, 2019.

Note 5: The amount was eliminated upon consolidation.

(Concluded)

• 86 -