TWM — Annual Report 2019

Nov 8, 2019

Taiwan Mobile Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Years Ended December 31, 2019 and 2018 and Independent Auditors’ Report

REPRESENTATION LETTER

The entities that are required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2019 are all the same as those included in the consolidated financial statements of Taiwan Mobile Co., Ltd. and its subsidiaries prepared in conformity with the International Financial Reporting Standard 10 “Consolidated Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates is included in the consolidated financial statements of Taiwan Mobile Co., Ltd. and its subsidiaries. Hence, we do not prepare a separate set of consolidated financial statements of affiliates.

Very truly yours,

TAIWAN MOBILE CO., LTD.

By

DANIEL TSAI Chairman February 21, 2020

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders Taiwan Mobile Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Taiwan Mobile Co., Ltd. and its subsidiaries (collectively, the “Group”), which comprise the consolidated balance sheets as of December 31, 2019 and 2018, and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and the related notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (“IFRS”), International Accounting Standards (“IAS”), IFRIC Interpretations (“IFRIC”), and SIC Interpretations (“SIC”) endorsed and issued into effect by the Financial Supervisory Commission (“FSC”) of the Republic of China (“ROC”).

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2019. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The descriptions of the key audit matters of the 2019 consolidated financial statements are as follows:

The Impairment Loss of Property, Plant and Equipment and Intangible Assets (Including Goodwill)

The description of key audit matter:

The consolidated balances of property, plant and equipment and intangible assets (including goodwill) amounted to $36,182,005 thousand and $59,078,475 thousand, respectively, as of December 31, 2019. On each balance sheet date, the Group reviews its tangible and intangible assets for indications of impairment,

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and then the Group estimates the recoverable amount of the assets. If it is not possible to determine the recoverable amount (fair value less costs to sell or value in use) for the individual asset, then the Group will determine the recoverable amount for the asset’s cash-generating unit. Because the aforementioned tangible and intangible assets amounted to $95,260,480 thousand (62% of total consolidated assets) and the calculation for the recoverable amount involved several assumptions and estimations, which directly impact the amount to be recognized as impairment losses, we believe that the review for the impairment of assets is a key audit matter.

Corresponding audit procedures:

By conducting compliance tests, we obtained an understanding of the estimation for asset impairment and of the design and execution for relevant controls. We also performed major audit procedures which are as follows:

1. Obtain the valuation form of asset impairment produced by the Group for each cash-generating unit.

2. Evaluate the appropriateness of the assumptions and sensitivity analyses, including the classification of cash-generating units, forecasts of cash flows, and discount rates, used by the Group management to assess if there is any asset impairment.

Telecommunications and Value-added Services Revenue

The description of key audit matter:

The source of the major operating revenue of the Group is the telecommunications and value-added services revenue, totaling $48,135,239 thousand for the year ended December 31, 2019. The Group offers more different monthly-fee plans and diversifies the business by innovating value-added services since the telecommunication industry becomes more competitive nowadays. The competitive telecommunication industry and complicated calculations for revenue recognition, which highly relies on automatic and systematic connection and implementation, lead the telecommunications and value-added service revenue to be considered as one of the key audit matters.

Corresponding audit procedures:

By conducting compliance tests, we obtained an understanding of the revenue recognition process and of the design and execution for relevant controls. We also performed major audit procedures which are as follows:

1. Review the contracts of mobile subscribers to ensure the accuracy of information in the accounting system.

2. Perform dialing tests to verify the completeness of the information in the telephone exchange system.

3. Perform system integration tests from telephone-exchange to telephone traffic.

4. Test for the accuracy of call record charge rates and billing calculations.

5. Verify the accuracy of the billing amounts generated from monthly rentals as well as airtime accounting systems and the transfer to the accounting information system.

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Other Matter

We have also audited the parent company only financial statements of Taiwan Mobile Co., Ltd. as of and for the years ended December 31, 2019 and 2018 on which we have issued an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the FSC of the ROC, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance (including the audit committee) are responsible for overseeing the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

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

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

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

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

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the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

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

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

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2019 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Li-Wen Kuo and Kwan-Chung Lai.

Deloitte & Touche Taipei, Taiwan Republic of China February 21, 2020

Notice to Readers

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

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

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 6 and 30) Financial assets at fair value through profit or loss (Note 30) Financial assets at fair value through other comprehensive income (Note 7) Contract assets (Note 23) Notes and accounts receivable, net (Note 8) Accounts receivable due from related parties (Note 30) Other receivables (Note 30) Inventories (Note 9) Prepayments (Note 30) Other financial assets (Notes 30 and 31) Other current assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through other comprehensive income (Note 7) Contract assets (Note 23) Investments accounted for using equity method (Notes 10 and 30) Property, plant and equipment (Note 13) Right-of-use assets (Notes 14 and 30) Investment properties (Note 15) Concessions (Notes 16 and 31) Goodwill (Note 16) Other intangible assets (Note 16) Deferred tax assets (Note 25) Incremental costs of obtaining a contract (Note 23) Other financial assets (Notes 30, 31 and 32) Other non-current assets (Notes 17 and 30) Total non-current assets		December 31, 2019 Amount % $ 8,663,370 6 149 - 246,493 - 4,832,043 3 7,671,838 5 146,186 - 1,418,485 1 5,670,476 4 463,334 - 592,868 - 200,458 - 29,905,700 19 5,245,888 4 3,463,456 2 1,478,025 1 36,182,005 24 9,657,938 6 2,984,057 2 37,709,501 24 15,832,440 10 5,536,534 4 839,240 1 2,119,052 1 271,653 - 2,694,470 2 124,014,259 81		December 31, 2018 Amount % $ 7,498,710 5 81,474 - 255,732 - 5,472,357 4 7,531,858 5 137,958 - 2,066,105 1 3,945,663 3 584,799 1 576,542 - 917,689 1 29,068,887 20 4,763,899 3 3,208,519 2 1,435,607 1 38,855,960 26 - - 2,999,403 2 40,528,874 27 15,872,595 11 5,774,176 4 806,521 1 2,946,282 2 131,110 - 1,275,195 1 118,598,141 80

TOTAL $ 153,919,959 100 $ 147,667,028 100

LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 18) Short-term notes and bills payable (Note 18) Contract liabilities (Note 23) Notes and accounts payable Accounts payable due to related parties (Note 30) Other payables (Note 30) Current tax liabilities Provisions (Note 20) Lease liabilities (Notes 14, 27 and 30) Advance receipts Long-term liabilities, current portion (Notes 18 and 19) Other current liabilities (Note 30) Total current liabilities NON-CURRENT LIABILITIES Financial liabilities at fair value through profit or loss Contract liabilities (Note 23) Bonds payable (Note 19) Long-term borrowings (Note 18) Provisions (Note 20) Deferred tax liabilities (Note 25) Lease liabilities (Notes 14, 27 and 30) Net defined benefit liabilities (Note 21) Guarantee deposits Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT (Note 22) Common stock Capital collected in advance Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Other equity interests Treasury stock Total equity attributable to owners of the parent NON-CONTROLLING INTERESTS (Note 22) Total equity TOTAL		December 31, 2019 Amount % $ 16,270,000 11 1,898,111 1 1,807,407 1 7,660,285 5 135,162 - 8,823,705 6 1,539,638 1 88,961 - 3,532,951 2 87,410 - 303,297 - 2,376,029 2 44,522,956 29 - - 45,293 - 15,903,436 10 8,586,076 6 1,459,270 1 977,560 1 6,117,438 4 517,175 - 1,092,364 1 522,116 - 35,220,728 23 79,743,684 52 34,959,441 23 134,104 - 20,274,694 13 28,922,281 19 95,381 - 12,909,829 8 438,905 - (29,717,344) (19) 68,017,291 44 6,158,984 4 74,176,275 48 $ 153,919,959 100		December 31, 2018
				Amount % $ 10,270,000 7 1,498,992 1 2,030,793 1 6,756,980 5 179,588 - 9,581,496 6 2,377,000 2 120,334 - - - 111,250 - 6,802,916 5 2,154,154 1 41,883,503 28 1,861 - 56,144 - 24,419,137 17 8,889,438 6 1,400,954 1 917,261 1 - - 510,880 - 1,013,905 1 580,249 - 37,789,829 26 79,673,332 54 34,208,519 23 29,819 - 12,580,692 9 27,558,064 19 362,703 - 16,954,448 11 (95,381) - (29,717,344) (20) 61,881,520 42 6,112,176 4 67,993,696 46 $ 147,667,028 100

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

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUES (Notes 23, 30 and 36) OPERATING COSTS (Notes 9, 30, 34 and 36) GROSS PROFIT FROM OPERATIONS OPERATING EXPENSES (Notes 30, 34 and 36) Marketing Administrative Expected credit loss Total operating expenses OTHER INCOME AND EXPENSES, NET (Notes 30 and 36) OPERATING INCOME (Note 36) NON-OPERATING INCOME AND EXPENSES Other income (Notes 24 and 30) Other gains and losses, net (Notes 24 and 30) Finance costs (Notes 24 and 30) Share of profit of associates accounted for using equity method (Note 10) Total non-operating income and expenses PROFIT BEFORE TAX INCOME TAX EXPENSE (Note 25) NET PROFIT OTHER COMPREHENSIVE INCOME (LOSS) (Notes 10, 21, 22 and 25) Items that will not be reclassified subsequently to profit or loss Remeasurements of defined benefit plans Unrealized gain on investments in equity instruments at fair value through other comprehensive income Share of other comprehensive income (loss) of associates accounted for using equity method Items that may be reclassified subsequently to profit or loss Exchange differences on translation Share of other comprehensive income (loss) of associates accounted for using equity method Other comprehensive income (after tax) TOTAL COMPREHENSIVE INCOME NET PROFIT ATTRIBUTABLE TO: Owners of the parent Non-controlling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the parent Non-controlling interests EARNINGS PER SHARE (Note 26) Basic earnings per share Diluted earnings per share		2019 Amount % $ 124,420,913 100 91,612,178 74 32,808,735 26 10,506,264 8 5,367,860 4 241,043 - 16,115,167 12 499,767 - 17,193,335 14 311,898 - (359,131) - (574,780) - 10,488 - (611,525) - 16,581,810 14 3,289,943 3 13,291,867 11 (44,101) - 536,083 - 15,432 - (24,446) - 4,205 - 487,173 - $ 13,779,040 11 $ 12,481,167 10 810,700 1 $ 13,291,867 11 $ 12,971,397 10 807,643 1 $ 13,779,040 11 $ 4.51 $ 4.44		2018
				Amount % $ 118,732,328 100 84,315,734 71 34,416,594 29 11,340,018 10 5,134,269 4 411,210 - 16,885,497 14 630,945 - 18,162,042 15 227,605 - (125,717) - (601,841) - 27,128 - (472,825) - 17,689,217 15 3,203,449 3 14,485,768 12 (78,532) - 210,717 - (18,477) - (14,114) - (1,040) - 98,554 - $ 14,584,322 12 $ 13,642,172 11 843,596 1 $ 14,485,768 12 $ 13,768,068 12 816,254 - $ 14,584,322 12 $ 5.01 $ 4.86

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

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

BALANCE, JANUARY 1, 2018 Effect of retrospective application ADJUSTED BALANCE, JANUARY 1, 2018 Distribution of 2017 earnings Legal reserve Reversal of special reserve Cash dividends Total distribution of earnings Cash dividends from capital surplus Profit for the year ended December 31, 2018 Other comprehensive income (loss) for the year ended December 31, 2018 Total comprehensive income (loss) for the year ended December 31, 2018 Disposal of investments in equity instruments designated as at fair value through other comprehensive income Conversion of convertible bonds to common stock Changes in percentage of ownership interests in subsidiaries Changes in equity of associates accounted for using equity method Other changes in capital surplus Cash dividends paid to non-controlling interests of subsidiaries Increase in non-controlling interests BALANCE, DECEMBER 31, 2018 Effect of retrospective application ADJUSTED BALANCE, JANUARY 1, 2019 Distribution of 2018 earnings Legal reserve Reversal of special reserve Cash dividends Total distribution of earnings Profit for the year ended December 31, 2019 Other comprehensive income (loss) for the year ended December 31, 2019 Total comprehensive income (loss) for the year ended December 31, 2019 Conversion of convertible bonds to common stock Changes in equity of associates accounted for using equity method Other changes in capital surplus Cash dividends paid to non-controlling interests of subsidiaries BALANCE, DECEMBER 31, 2019					Equity Attributable to Owners of the Parent	Equity Attributable to Owners of the Parent		Non-controlling Total Interests $ 59,631,863 $ 5,879,738 3,418,600 (39) 63,050,463 5,879,699 - - - - (13,610,406) - (13,610,406) - (1,633,249) - 13,642,172 843,596 125,896 (27,342) 13,768,068 816,254 - - 305,624 - (10,347) 12,663 10,351 9,717 1,016 - - (616,452) - 10,295 61,881,520 6,112,176 32,605 16,275 61,914,125 6,128,451 - - - - (15,366,223) - (15,366,223) - 12,481,167 810,700 490,230 (3,057) 12,971,397 807,643 8,565,573 - (68,563) (83,749) 982 - - (693,361) $ 68,017,291 $ 6,158,984	Total Equity $ 65,511,601 3,418,561 68,930,162 - - (13,610,406) (13,610,406) (1,633,249) 14,485,768 98,554 14,584,322 - 305,624 2,316 20,068 1,016 (616,452) 10,295 67,993,696 48,880 68,042,576 - - (15,366,223) (15,366,223) 13,291,867 487,173 13,779,040 8,565,573 (152,312) 982 (693,361) $ 74,176,275
	Common Stock $ 34,208,328 - 34,208,328 - - - - - - - - - 191 - - - - - 34,208,519 - 34,208,519 - - - - - - - 750,922 - - - $ 34,959,441	Capital Collected in Advance $ - - - - - - - - - - - - 29,819 - - - - - 29,819 - 29,819 - - - - - - - 104,285 - - - $ 134,104	Capital Surplus $ 13,939,278 - 13,939,278 - - - - (1,633,249) - - - - 275,614 (10,347) 8,380 1,016 - - 12,580,692 - 12,580,692 - - - - - - - 7,710,366 (17,346) 982 - $ 20,274,694		Retained Earnings Special Unappropriated Legal Reserve Reserve Earnings $ 26,138,846 $ 690,034 $ 14,735,424 - - 3,354,181 26,138,846 690,034 18,089,605 1,419,218 - (1,419,218) - (327,331) 327,331 - - (13,610,406) 1,419,218 (327,331) (14,702,293) - - - - - 13,642,172 - - (78,832) - - 13,563,340 - - 1,825 - - - - - - - - 1,971 - - - - - - - - - 27,558,064 362,703 16,954,448 - - 32,605 27,558,064 362,703 16,987,053 1,364,217 - (1,364,217) - (267,322) 267,322 - - (15,366,223) 1,364,217 (267,322) (16,463,118) - - 12,481,167 - - (44,056) - - 12,437,111 - - - - - (51,217) - - - - - - $ 28,922,281 $ 95,381 $ 12,909,829	Other Equity Interests Unrealized Gain (Loss) on Financial Assets at Fair Unrealized Value Through Gain (Loss) on Exchange Other Available-for- Differences on Comprehensive sale Financial Translation Income Assets $ (16,499) $ - $ (346,204) - (281,785) 346,204 (16,499) (281,785) - - - - - - - - - - - - - - - - - - - (7,899) 212,627 - (7,899) 212,627 - - (1,825) - - - - - - - - - - - - - - - - - - - (24,398) (70,983) - - - - (24,398) (70,983) - - - - - - - - - - - - - - - - (10,107) 544,393 - (10,107) 544,393 - - - - - - - - - - - - - $ (34,505) $ 473,410 $ -	Treasury Stock $ (29,717,344) - (29,717,344) - - - - - - - - - - - - - - - (29,717,344) - (29,717,344) - - - - - - - - - - - $ (29,717,344)
					Legal Reserve $ 26,138,846 - 26,138,846 1,419,218 - - 1,419,218 - - - - - - - - - - - 27,558,064 - 27,558,064 1,364,217 - - 1,364,217 - - - - - - - $ 28,922,281

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

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments for: Depreciation expense Amortization expense Amortization of incremental costs of obtaining a contract Loss on disposal of property, plant and equipment, net Loss on disposal of intangible assets, net Expected credit loss Finance costs Interest income Dividend income Share of profit of associates accounted for using equity method Valuation (gain) loss on financial assets and liabilities at fair value through profit or loss Reversal of impairment loss on property, plant and equipment Impairment loss on intangible assets Others Changes in operating assets and liabilities Financial assets mandatorily at fair value through profit or loss Contract assets Notes and accounts receivable Accounts receivable due from related parties Other receivables Inventories Prepayments Other current assets Other financial assets Incremental costs of obtaining a contract Contract liabilities Notes and accounts payable Accounts payable due to related parties Other payables Provisions Advance receipts Other current liabilities Net defined benefit liabilities Other non-current liabilities Cash inflows generated from operating activities Interest received Interest paid Income taxes paid Net cash generated from operating activities	2019 $ 16,581,810 12,755,740 3,439,851 2,483,997 277,123 - 241,043 574,780 (115,313) (117,211) (10,488) (2,858) - 40,155 (2,950) 84,864 388,595 (552,401) (276) 607,142 (1,724,813) (3,017) 716,507 (11,484) (1,656,767) 1,921 903,305 (44,426) (533,329) (11,582) (19,658) (14,010) (48,831) - 34,227,419 42,534 (1,291) (4,052,247) 30,216,415	2018 $ 17,689,217 9,904,079 3,657,017 3,394,116 80,282 128,002 411,210 601,841 (61,633) (83,164) (27,128) 19,745 (103,586) - 891 736,265 1,920,836 (9,311) (34,468) (272,544) 387,701 (84,649) (794,848) (9,299) (2,173,201) (696,235) (1,231,342) 49,956 (831,657) (70,429) 22,303 (4,055) (53,206) (19,744) 32,442,962 1,199 (1,245) (2,667,261) 29,775,655

(Continued)

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment Acquisition of right-of-use assets Acquisition of intangible assets Increase in prepayments for equipment Increase in prepayments for investment Proceeds from disposal of property, plant and equipment Decrease in advanced receipts from assets disposals Acquisition of financial assets at fair value through profit or loss Acquisition of investments accounted for using equity method Redemption of convertible notes Proceeds from capital return of investments accounted for using equity method Net cash outflow on acquisition of subsidiaries Proceeds from disposal of financial assets at fair value through other comprehensive income Proceeds from capital return of financial assets at fair value through other comprehensive income Increase in refundable deposits Decrease in refundable deposits Increase in other financial assets Decrease in other financial assets Interest received Dividend received Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Increase (decrease) in short-term notes and bills payable Proceeds from issue of bonds Repayments of bonds payable Repayment of long-term borrowings Repayment of the principal portion of lease liabilities Increase in guarantee deposits received Decrease in guarantee deposits received Cash dividends paid (including amount paid to non-controlling interests) Interest paid Changes in non-controlling interests Net cash used in financing activities EFFECT OF EXCHANGE RATE CHANGES ON CASH AND EQUIVALENTS	2019 $ (6,605,925) (14,858) (291,260) (240,031) (100,000) 49,700 (123) (2,500) (262,000) - - - - - (1,257,689) 249,028 (222,215) 73,985 58,545 192,062 (8,373,281) 6,000,000 399,285 - (4,500,000) (2,304,000) (3,776,678) 217,256 (138,587) (16,059,547) (512,224) - (20,674,495) (3,979)	2018 $ (7,813,657) - (363,471) (316,330) - 44,838 (72) - (20,771) 491,192 31,090 (2,925) 1,669 3,149 (307,564) 281,551 (254,531) 2,478,579 60,977 159,947 (5,526,329) 599,472 (4,096,683) 14,984,564 (7,400,000) (11,206,042) - 162,473 (126,783) (15,860,099) (439,637) 2,316 (23,380,419) (1,741) (Continued)

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TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR	2019 $ 1,164,660 7,498,710 $ 8,663,370	2018 $ 867,166 6,631,544 $ 7,498,710

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

(Concluded)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

1. ORGANIZATION AND OPERATIONS

Taiwan Mobile Co., Ltd. (“TWM”) was incorporated in Taiwan, the Republic of China (“ROC”) on February 25, 1997. TWM’s stock was listed on the ROC Over-the-Counter (“OTC”) Securities Exchange (currently known as The Taipei Exchange, TPEx) on September 19, 2000. On August 26, 2002, TWM’s stock was shifted to be listed on the Taiwan Stock Exchange. TWM is mainly engaged in rendering wireless communication service and the sale of mobile phones and accessories, e-books and value-added services.

TWM received a second-generation (“2G”) mobile telecommunications concession operation license issued by the Directorate General of Telecommunications (“DGT”) of the ROC. The license allows TWM to provide services for 15 years from 1997 onwards. The 2G concession license had been renewed by the National Communications Commission (“NCC”) and terminated on June 30, 2017. TWM received a third-generation (“3G”) concession license issued by the DGT in March 2005, and the 3G concession license terminated on December 31, 2018. TWM participated in the fourth-generation (“4G”) mobile spectrum auctions held by NCC for the need of long-term business development and from April 2014 to June 2018 acquired the concession licenses for the mobile broadband spectrum in the 700MHz, 1800MHz and 2100MHz frequency bands separately, and the aforementioned licenses are valid until December 2030 and December 2033, respectively. In February 2020, TWM acquired the fifth-generation (“5G”) concession licenses for the mobile broadband spectrum in the 3500MHz and 28000MHz, and the aforementioned licenses are valid until December 2040.

The accompanying consolidated financial statements comprise of TWM and its subsidiaries (collectively, the “Group”).

2. APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors approved the consolidated financial statements on February 21, 2020.

3. APPLICATION OF NEW AND AMENDED STANDARDS AND INTERPRETATIONS

• a. Application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (“IFRS”), International Accounting Standards (“IAS”), Interpretations of IFRS (“IFRIC”), and Interpretations of IAS (“SIC”) (collectively, the “IFRSs”) endorsed and issued into effect by the ROC Financial Supervisory Commission (“FSC”).

Except for the following, the 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 did not have any material impact on the Group’s accounting policies:

IFRS 16 “Leases”

IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessee and lessor. It supersedes IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, and a number of related interpretations. Please refer to Note 4 for information relating to the relevant accounting policies.

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Definition of a lease

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

The Group as lessee

The Group recognizes right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for those whose payments fall under low-value and short-term leases are recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group presents the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities and the interest portion are classified within financing activities. Prior to the application of IFRS 16, payments under operating lease contracts were recognized as expenses on a straight-line basis. The difference between the actual payments and the expenses, as adjusted for lease incentives, was recognized as accrued or prepaid expenses. Cash flows for operating leases were classified within operating activities on the consolidated statements of cash flows.

The Group elected to apply IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized in retained earnings on January 1, 2019. Comparative information was not restated.

Lease liabilities were recognized on January 1, 2019 for leases previously classified as operating leases under IAS 17. Lease liabilities were 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 an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments. The Group applies IAS 36 to all right-of-use assets.

The Group also applies the following practical expedients: the Group applies a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.

The lessee’s weighted average incremental borrowing rate applied to lease liabilities recognized on January 1, 2019 was 1%. The difference between the lease liabilities recognized and operating lease commitments disclosed under IAS 17 on December 31, 2018 is explained as follows:

The future minimum lease payments of non-cancellable operating lease commitments on December 31, 2018 Less: Recognition exemption for short-term leases Less: Recognition exemption for leases of low-value assets Less: Adjustment of application scope under IFRS 16 Undiscounted amounts on January 1, 2019 Discounted amounts using the incremental borrowing rate on January 1, 2019 Add: Adjustments as a result of a different treatment of extension Add: Adjustment of application scope under IFRS 16 Lease liabilities recognized on January 1, 2019

$ 9,358,238 (32,099) (70,201) (356,676) $ 8,899,262 $ 8,773,930 135,301 1,071,615 $ 9,980,846

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The Group as lessor

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

The Group subleased its leasehold to a third party. Such sublease was classified as an operating lease under IAS 17. The Group determines the sublease is classified as a finance lease on the basis of the remaining contractual terms and conditions of the head lease and sublease on January 1, 2019, and the Group accounts for the sublease as a new finance lease entered into at that date.

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

Carrying Amount as of December 31, 2018 Current assets Notes and accounts receivable, net (including related parties) $ 7,669,816 Other receivables 2,066,105 Prepayments 584,799 Non-current assets Right-of-use assets - Deferred tax assets 806,521 Other non-current assets 1,275,195 Total effect on assets Current liabilities Other payables 9,581,496 Lease liabilities - Advanced receipts 111,250 Non-current liabilities Deferred tax liabilities 917,261 Lease liabilities - Total effect on liabilities Equity Unappropriated earnings 16,954,448 Non-controlling interests 6,112,176 Total effect on equity

Adjustments Arising from Initial Application Adjusted Carrying Amount as of January 1, 2019 $ 14,720 $ 7,684,536 (116) 2,065,989 (129,483) 455,316 10,087,654 10,087,654 (11,596) 794,925 10,454 1,285,649 $ 9,971,633 $ (57,235) 9,524,261 3,368,348 3,368,348 (1,557) 109,693 699 917,960 6,612,498 6,612,498 $ 9,922,753 $ 32,605 16,987,053 16,275 6,128,451 $ 48,880

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• b. The IFRSs issued by International Accounting Standards Board (“IASB”) and endorsed by FSC for application starting from 2020.

Effective Date New IFRSs Announced by IASB

Amendments to IFRS 3 “Definition of a Business” January 1, 2020 (Note 1) Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark January 1, 2020 (Note 2) Reform” Amendments to IAS 1 and IAS 8 “Definition of Material” January 1, 2020 (Note 3)

• Note 1: The Group 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 2: The Group shall apply these amendments retrospectively for annual reporting periods beginning on or after January 1, 2020.

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

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

• c. New IFRSs issued by IASB but not yet endorsed and issued into effect by the FSC.

New IFRSs Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”	Effective Date Announced by IASB (Note)
	To be determined by IASB January 1, 2021 January 1, 2022

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

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by the FSC.

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Basis of Preparation

a. Basis of measurement

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

• b. Functional and presentation currency

The functional currency of each individual consolidated entity is determined based on the primary economic environment in which the entity operates. The Group’s consolidated financial statements are presented in New Taiwan dollars (NTD), which is TWM’s functional currency.

Basis of Consolidation

• a. Principles for preparation of the consolidated financial statements

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

Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statements of comprehensive income from the effective dates of acquisitions or to the effective dates of disposals, as appropriate. The comprehensive income from subsidiaries is allocated to TWM and its non-controlling interests, even if the non-controlling interests have a deficit balance.

Changes in the ownership of a subsidiary that do not result in loss of control are accounted for as equity transactions. The carrying amounts of the interests of the Group and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of TWM.

Financial statements of subsidiaries are adequately adjusted to align their accounting policies with those of the Group.

Transactions and balances, and any income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.

• b. The subsidiaries included in the consolidated financial statements were as follows:

Investor Subsidiary Main Business and Products TWM Taiwan Cellular Co., Ltd. (TCC) Investment Wealth Media Technology Co., Ltd. (WMT) Investment TWM Venture Co., Ltd. (TVC) Investment Taipei New Horizon Co., Ltd. (TNH) Building and operating Songshan Cultural and Creative Park BOT project TCC Taiwan Fixed Network Co., Ltd. (TFN) Fixed-line service provider Taiwan Teleservices & Technologies Co., Ltd. (TT&T) Call center service and telephone marketing

Percentage of Ownership December 31 2019 2018 Note 100.00% 100.00% - 100.00% 100.00% - 100.00% - Note 1 49.90% 49.90% - 100.00% 100.00% - 100.00% 100.00% - (Continued)

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Investor Subsidiary Main Business and Products TCC TWM Holding Co., Ltd. (TWM Holding) Investment TCC Investment Co., Ltd. (TCCI) Investment Taiwan Digital Communications Co., Ltd. (TDC) Mobile phone wholesaling and TV program production Taiwan Digital Service Co., Ltd. (TDS) Commissioned maintenance service Taihsin Property Insurance Agent Co., Ltd.(TPIA) Property insurance agent Tai-Fu Cloud Technology Co., Ltd. (TFC) Type II Telecommunications Business WMT TFN Media Co., Ltd. (TFNM) Type II Telecommunications Business Global Forest Media Technology Co., Ltd. (GFMT) Investment Global Wealth Media Technology Co., Ltd. (GWMT) Investment Win TV Broadcasting Co., Ltd. (WTVB) TV program provider momo.com Inc. (momo) Wholesale and retail sales TFN TFN Union Investment Co., Ltd. (TUI) Investment TFN HK Ltd. Telecommunication service provider TWM Holding TWM Communications (Beijing) Co., Ltd. (TWMC) Mobile application development and design TCCI TCCI Investment and Development Co., Ltd. (TID) Investment TFNM Taiwan Kuro Times Co., Ltd. (TKT) Online music service Yeong Jia Leh Cable TV Co., Ltd. (YJCTV) Cable TV service provider Mangrove Cable TV Co., Ltd. (MCTV) Cable TV service provider Phoenix Cable TV Co., Ltd. (PCTV) Cable TV service provider Union Cable TV Co., Ltd. (UCTV) Cable TV service provider Globalview Cable TV Co., Ltd. (GCTV) Cable TV service provider GFMT UCTV Cable TV service provider GWMT GCTV Cable TV service provider momo Asian Crown International Co., Ltd. (Asian Crown (BVI)) Investment Honest Development Co., Ltd. (Honest Development) Investment Fuli Life Insurance Agent Co., Ltd. (FLI) Life insurance agent Fuli Property Insurance Agent Co., Ltd. (FPI) Property insurance agent Fu Sheng Travel Service Co., Ltd. (FST) Travel agent Bebe Poshe International Co., Ltd. (Bebe Poshe) Wholesale of cosmetics

Percentage of Ownership December 31 2019 2018 Note 100.00% 100.00% - 100.00% 100.00% Note 2 - 100.00% Note 3 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 45.01% 45.01% - 100.00% 100.00% Note 2 - 100.00% Note 3 100.00% 100.00% - 100.00% 100.00% Note 2 100.00% 100.00% - 100.00% 100.00% - 29.53% 29.53% Note 4 100.00% 100.00% - 99.22% 99.22% - 92.38% 92.38% - 0.76% 0.76% - 6.83% 6.83% - 81.99% 81.99% - 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 85.00% 85.00% - (Continued)

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Investor Subsidiary Main Business and Products Asian Crown (BVI) Fortune Kingdom Corporation (Fortune Kingdom) Investment Honest Development Hongkong Yue Numerous Investment Co., Ltd. (HK Yue Numerous) Investment Fortune Kingdom Hong Kong Fubon Multimedia Technology Co., Ltd. (HK Fubon Multimedia) Investment HK Yue Numerous Haobo Information Consulting (Shenzhen) Co., Ltd. (Haobo) Investment HK Fubon Multimedia Fubon Gehua (Beijing) Enterprise Ltd. (FGE) Wholesaling

Percentage of Ownership December 31 2019 2018 Note 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 93.55% 93.55% - (Concluded)

• Note 1: Set up in September 2019.

• Note 2: TCCI, TUI and TID collectively owned 698,752 thousand shares of TWM, representing 19.91% of total outstanding shares as of December 31, 2019.

• Note 3: Liquidation procedures were completed in August 2019.

• Note 4: The other 70.47% of shares were held under trustee accounts.

• c. Subsidiaries excluded from the consolidated financial statements: None.

Foreign Currency

Foreign currency transactions are recorded at the spot exchange rate on the date of the transaction. At the end of the reporting period, foreign currency monetary items are reported using the closing rate. Exchange differences in the period on monetary items arising from settlement or translation are recognized in profit or loss in the period which they arise.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when fair value was determined. Exchange differences arising from the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income; in which cases, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

When preparing consolidated financial statements, the assets and liabilities of foreign operations are translated to NTD using the exchange rates at the end of the reporting period. The income and expenses of foreign operations are translated at the average exchange rate for the period. Exchange differences are recognized in other comprehensive income and accumulated in equity attributed to the owners of TWM and non-controlling interests as appropriate.

Classification of Current and Non-current Assets and Liabilities

The Group classifies an asset as current when any one of the following requirements is met. Assets that are not classified as current are non-current assets.

• a. It holds the asset primarily for the purpose of trading;

• b. It expects to realize the asset within twelve months after the reporting period; or

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• c. The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

The Group classifies a liability as current when any one of the following requirements is met. Liabilities that are not classified as current are non-current liabilities.

• a. It holds the liability primarily for the purpose of trading;

• b. The liability is due to be settled within twelve months after the reporting period; or

• c. It does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Financial Instruments

Financial assets and financial liabilities are recognized in consolidated balance sheets when the Group becomes a party to the contractual provisions of the instruments.

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

• a. Financial assets

The Group adopts trade-date accounting to recognize and derecognize financial assets.

• 1) Measurement category

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost, and investments in equity instruments at FVTOCI.

• a) Financial assets at FVTPL

Financial asset is classified as at FVTPL when the financial asset is mandatorily classified or it is designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets at FVTPL are subsequently measured at fair value, and any dividends or interest earned on such financial assets are recognized in other income; any remeasurement gains or losses on such financial assets are recognized in other gains or losses. Fair value is determined in the manner described in Note 29.

• b) Financial assets at amortized cost

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

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

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

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, notes and accounts receivable, other receivables, other financial assets and refundable deposits are measured at amortized cost, which equal to gross carrying amount determined by the effective interest method less any impairment loss, except for short-term receivables when the recognition of interest is immaterial. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments. If they do not meet the above definition, time deposits should be recognized as other current or non-current financial assets.

• c) Investments in equity instruments at FVTOCI

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

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

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

• 2) Impairment of financial assets and contract assets

The Group recognizes a loss allowance for expected credit losses (“ECL”) on financial assets at amortized cost (including receivables) and contract assets.

The loss allowances for receivables and contract assets are measured at an amount equal to lifetime ECL. For other financial assets, when the credit risk on the financial instrument has not increased significantly since initial recognition, a loss allowance is recognized at an amount equal to 12-month ECL. If, on the other hand, there has been a significant increase in credit risk since initial recognition, a loss allowance is recognized at an amount equal to lifetime ECL.

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

For internal credit risk management purposes, the Group determines that the following situations indicate that a financial asset is in default (without taking into account any collateral held by the Group):

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• 1) Internal or external information shows that the debtor is unlikely to pay its creditors.

• 2) Failure to meet the obligation associated with liabilities within the credit terms.

The Group recognizes an impairment loss in profit or loss for aforementioned financial instruments and contract assets with a corresponding adjustment to their carrying amount through a loss allowance account.

3) Derecognition of financial assets

The Group derecognizes financial assets when the contractual rights of the cash inflow from the asset are terminated, or when the Group transfers substantially all the risks and rewards of ownership of the financial assets.

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

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

• b. Equity instruments

Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.

The repurchase of the company’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the company’s own equity instruments.

c. Financial liabilities

1) Recognition

Except for the financial liabilities measured at FVTPL, all financial liabilities, including loans and borrowings, short-term notes and bills payable, bonds payable, notes and accounts payable, other payables, guarantee deposits received, etc., are measured at amortized cost calculated using the effective interest method.

• 2) Convertible bonds

The component parts of compound financial instruments (convertible bonds) issued by the company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

On initial recognition, the fair value of the liability component is estimated at the prevailing market interest rate for similar non-convertible instruments. The amount is recognized as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or the instrument’s maturity date. Any embedded derivative liability is measured at fair value.

The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized and included in equity, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised, in which case, the balance recognized in equity will be reclassified as capital surplus - additional paid-in capital. If the conversion option remains unexercised at maturity, the balance recognized in equity will be

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reclassified as capital surplus - others.

Transaction costs that relate to the issuance of the convertible bonds are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component.

• 3) Derecognition of financial liabilities

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

• d. Derivative financial instruments

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately.

Derivatives embedded in hybrid contracts that contain financial asset hosts within the scope of IFRS 9 are not separated; instead, the classification is determined in accordance with the entire hybrid contract. Derivatives embedded in non-derivative host contracts that are not financial assets within the scope of IFRS 9 (e.g. financial liabilities) are treated as separate derivatives when they meet the definition of a derivative; their risks and characteristics are not closely related to those of the host contracts; and the host contracts are not measured at FVTPL.

Inventories

Inventories are measured at the lower of cost or net realizable value. Inventories are assessed item by item, except those with similar characteristics which are assessed collectively. Net realizable value is the estimated selling price in the ordinary course of business less the estimated selling expenses. The weighted-average method is used in the calculation of cost.

Non-current Assets Held for Sale

The book value of non-current assets classified as held for sale is expected to be recovered primarily through sale. Being classified as held for sale, the assets should be available for immediate sale. Being available for immediate sale means the management is committed to a planned sale and the sale is highly probable within 12 months.

Assets classified as non-current assets held for sale are measured at the lower of the carrying amount and fair value less costs to sell, and should not be depreciated.

Investment in Associates

An associate is an entity in which the Group has significant influence, but is neither a subsidiary nor an interest in a joint venture. The Group applies the equity method to account for its investments in associates.

Investments in associates are accounted for using equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition less any accumulated impairment losses. Goodwill is not amortized. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, is recognized immediately in profit or loss after reassessment. The entire carrying amount of an investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is not allocated to any asset, including goodwill, which forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently

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increases.

The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income (loss) of equity-accounted investees, after adjustments to align their accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

When the Group’s share of losses of an associate equals or exceeds its interest in that associate, the Group discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

When the Group doesn’t subscribe for additional new shares of an associate as its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in capital surplus from investments in associates accounted for using the equity method. If the Group’s ownership interest is reduced due to its disproportionate subscription of the new shares of the associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required had the investee directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for using the equity method is insufficient, the shortage is debited to retained earnings.

When the Group loses significant influence over an associate, it recognizes the investment retained in the former associate at its fair value at the date when significant influence is lost. The difference between the fair value of the retained investment plus any consideration received and the carrying amount of the previous investment at the date when significant influence is lost is recognized as a gain or loss in profit or loss. Besides this, the Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if the Group had directly disposed of the related assets or liabilities. If the Group decreased the percentage of the ownership of associate due to disposal but still accounts for its investments in associate, it should reclassify the amount previously recognized in other comprehensive income to profit or loss proportionally.

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

Property, Plant and Equipment

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and any borrowing cost that is eligible for capitalization.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated with a separate depreciation rate or depreciation method.

The depreciable amount of an asset is determined after deducting its residual amount, and the net amount shall be allocated by the straight-line method over its useful life. Each significant item of property, plant and equipment shall be evaluated and depreciated separately if it possesses a different useful life. The depreciation charge for each period shall be recognized in profit or loss.

Land has an unlimited useful life and therefore is not depreciated. For the estimated useful lives, for the current and comparative years, of significant items of property, plant and equipment, see Note 13 to the consolidated financial statements for details.

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Depreciation methods, useful lives, and residual values are reviewed at the end of each reporting period. If expectations differ from the previous estimates, the change is accounted for as a change in accounting estimate.

Property, plant and equipment are derecognized when disposed of or expected to have no future economic benefits generated through usage or disposal. The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized in profit and loss.

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Group and the amount can be reliably measured. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

Leases

2019

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

• a. The Group as lessor

Leases in which the lessee assumes substantially all of the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.

When the Group subleases a right-of-use asset, the sublease is classified by reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.

Under finance leases, the lease payments comprise fixed payments and in-substance fixed payments. The net investment in a lease is measured at the present value of the sum of the lease payments receivable by a lessor and is presented as a finance lease receivable. Finance lease income is allocated to the relevant accounting periods so as to reflect a constant, periodic rate of return on the Group’s net investment outstanding in respect of leases.

Lease payments from operating leases are recognized on a straight-line basis over the terms of the relevant leases.

When a lease includes both land and building elements, the Group assesses the classification of each element separately as a finance or an operating lease based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the lessee. The entire lease is classified as an operating lease when it is clear that both elements are operating leases.

b. The Group as lessee

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

Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease payments made at or before the commencement date and an estimate of costs needed to restore the underlying assets. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented on a separate line in the consolidated balance sheets.

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

Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments, in-substance fixed payments and variable lease payments which depend on an index. The lease payments are discounted using the lessee’s incremental borrowing rate.

Subsequently, lease liabilities are 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 used to determine those payments, the Group 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 on a separate line in the consolidated balance sheets.

Variable lease payments that do not depend on an index are recognized as expenses in the periods in which they are incurred.

2018

Leases in which the lessee assumes substantially all of the risks and rewards of ownership are classified as finance leases. Other leases are operating leases. Receivables collected are periodically recognized as rental income during the lease contract.

Under an operating lease, rental income or lease payments are recognized as income or expense, respectively, on a straight-line basis over the lease term.

Under a finance lease, the proceeds from the lessee should be recognized on a net basis as lease receivable when the Group is the lessor. The finance income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the receivable.

Investment Property

Investment property is a property held either to earn rental income or for capital appreciation or for both. Investment property is measured at cost on initial recognition. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation methods, useful lives, and residual values are the same as plant, property and equipment.

Intangible Assets

• a. Goodwill

Goodwill acquired in a business combination is recognized at the acquisition date, and is measured at cost less accumulated impairment losses.

• b. Service concession agreement

The operator recognizes the right to charge users for a service as an intangible asset. The operator measures the intangible asset at fair value.

• c. Other intangible assets

Other intangible assets that are acquired through business combinations or are internally developed are measured at cost less accumulated amortization and any accumulated impairment losses. Intangible assets that are acquired through business combinations are measured at acquisition-date fair value, and recognized along with goodwill.

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• d. Amortization and derecognition of intangible assets

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and intangible assets with an indefinite useful life, from the date that they are available for use. For the estimated useful lives for the current and comparative periods, see Note 16 to the consolidated financial statements for details.

The amortization method, the amortization period, and the residual value for an intangible asset with a finite useful life shall be reviewed at each fiscal year-end. Any changes shall be accounted for as changes in accounting estimates.

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

Incremental Costs of Obtaining a Contract

Only when a contract is obtained, sales commissions and subsidies of telecommunication, cable television and broadband services are recognized as incremental costs of obtaining a contract to the extent the amounts are expected to be recovered, and are amortized on a straight-line basis over the life of the contract. However, the Group elects not to capitalize the incremental costs of obtaining a contract if the amortization period of the assets that the Group otherwise would have recognized is expected to be one year or less.

Impairment of Non-financial Assets

• a. Goodwill

Impairment of goodwill is required to be tested annually or more frequently whenever there is an indication that the unit may be impaired. Goodwill shall be allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination. If the recoverable amount of the cash-generating unit is less than its carrying amount, the difference is allocated first to reduce the carrying amount of any goodwill allocated to such cash generating unit and then to the other assets of the cash generating unit pro rata based on the carrying amount of each asset in the cash generating unit. Any impairment loss for goodwill is recognized directly in profit or loss. Any impairment loss recognized for goodwill is not reversed in subsequent periods.

• b. Other tangible, intangible assets, and incremental costs of obtaining a contract

At the end of each reporting period, the Group reviews the carrying amounts of those assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss. When an impairment loss subsequently reverses, the carrying amount of the asset or a cash-generating unit is increased to the revised estimate of its recoverable amount, but the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

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Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

a. Restoration

The restoration costs for property, plant and equipment that were originally acquired or used by the Group for a period of time and had obligations for dismantling, relocating, and restoring to the previous state should be recognized as an addition to the assets and accrued as a potential liability accordingly.

b. Decommissioning

For a service concession agreement, the concession receiver has an obligation for maintenance or decommissioning before returning the construction to the grantor as stated in the concession agreement. For a BOT contract, the costs paid for the obligation for maintenance or decommissioning should be recognized as expense and liabilities.

• c. Warranties

A provision for warranties is recognized when the underlying products or services are sold. The provision is based on sales contracts, historical warranty data, and a weighing of all possible outcomes against their associated probabilities.

Treasury Stock

Repurchased stocks are recognized under treasury stock (a contra-equity account) based on their repurchase price (including all directly accountable costs), net of tax. TWM’s stocks held by its subsidiaries are regarded as treasury stock.

Gains on disposal of treasury stock should be recognized under “capital reserve - treasury stock transactions”; losses on disposal of treasury stock should be offset against existing capital reserves arising from similar types of treasury stock. If there is insufficient capital reserve to offset the losses, then such losses should be accounted for under retained earnings. The carrying amount of treasury stock should be calculated using the weighted-average method for the purpose of repurchased stock.

Government Grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets; or recognized as a book value deduction of the non-current assets and classified as profit or loss within their useful lives through deducting depreciation expenses of the related non-current assets.

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

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Employee Benefits

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

Obligations for contributions to defined contribution pension plans are recognized as an expense in profit or loss in the periods during which services are rendered by employees.

The defined benefit costs (including service cost, net interest, and remeasurement) of defined benefit plan use the projected unit credit method for the actuarial valuation. Service cost (including current service cost and past service cost) and net interest on the net defined benefit liability (asset) are recognized under employee benefit expense as they occur. Remeasurement (including actuarial gains and losses, changes in the effect of the asset ceiling, and the return on plan assets, excluding amounts included in net interest) is recognized in other comprehensive income (loss) in retained earnings as it occurs, and is not reclassified to profit or loss subsequently.

Net defined benefit liability (asset) is the deficit (surplus) of defined benefit plans. IAS 19 requires the Group to limit the carrying amount of a net defined benefit asset so that it does not exceed the economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

A liability for a termination benefit is recognized at the earlier of when the Group can no longer withdraw the offer of the termination benefit and when the Group recognizes any related restructuring costs.

Income Tax

Income tax expense represents the sum of the tax currently payable and deferred tax. Except for expenses related to business combinations, expenses directly recognized in equity or other comprehensive income (loss), and other related expenses, all current and deferred taxes shall be recognized in profit or loss.

a. Current taxes

Current taxes include tax payables and tax deduction receivables on taxable gains (losses), as well as tax adjustments related to prior years.

An additional surtax on undistributed earnings, computed according to the ROC Income Tax Act, is recognized in current taxes in the year of approval by a stockholders’ meeting resolution.

• b. Deferred taxes

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax basis. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carryforwards and unused tax credits for purchases of machinery, equipment and technology, and research and development expenditures to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

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

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or

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substantively enacted at the end of the reporting period. The measurement reflects the Group’s expectations at the end of the reporting period as to the manner in which the carrying amount of its assets and liabilities will be recovered or settled.

A deferred tax asset should be recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible temporary differences shall also be re-evaluated at the end of each reporting period, and adjusted based on the probability that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized.

Revenue

Where the Group enters into transactions which involve both the provision of telecommunications service bundled with products such as handsets, total consideration received from products and telecommunications service in these arrangements is allocated based on their relative stand-alone selling price. The amount of sales revenue recognized for products is not limited to the amount paid by the customer for the products at the time of purchase. When the amount of sales revenue recognized for products exceeds the amount paid by the customer for the products, the difference is recognized as a contract asset. A contract asset is derecognized and an account receivable is recognized when the amount becomes collectible from the customer subsequently. When the amount of sales revenue recognized for products is less than the amount paid by the customer for the products, the difference is recognized as contract liabilities and the revenue is recognized subsequently when the telecommunications service is provided.

Under customer loyalty program, the Group offers reward points or vouchers for customers to deduct the price when they are redeemed. Transaction price is allocated on a stand-alone selling price basis to reward points and vouchers. Reward points and vouchers will be recognized as revenue when they are redeemed or expired.

Telecommunications and value-added services revenue

Service revenues from telecommunications services, fixed network services and internet services, are billed at predetermined rates and calculated by the actual volume of voice call and data transfer. Revenues from postpaid users are accrued monthly. Revenues from prepaid users are recognized based on the actual usage. The advanced receipts obtained before services are rendered are recognized as contract liabilities and reclassified as revenues when services are rendered. Interconnection and call transfer fees from other telecommunications companies and carriers are billed and recognized based upon seconds or minutes of traffic processed when the services are provided in accordance with contract terms. The usage revenues and corresponding trade notes and accounts receivable are recognized monthly.

Revenue from sale of goods

Revenues from sale of goods are mainly generated from physical stores, e-commerce platform, television channels and catalog. Revenues are recognized when the goods are transferred or delivered to the customers. Advance receipts obtained before goods are transferred or delivered are recognized as contract liabilities, and reclassified as revenue when the goods are transferred or delivered. When rights of return exist, refund liability and right to recover a product are accrued based on past experience and other relevant factors.

Cable television and broadband services revenue

The Group recognizes advance receipts as contract liabilities initially, with prepayment period of annually, semi-annually, quarterly or monthly, which is reclassified as cable television and broadband service revenue as service becomes rendered, and do not include significant financing component. The Group provides contractual services such as the right of access to cable channels and internet over the duration of

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the contract, and recognizes revenue over the duration of the contract through the straight-line method.

Other operating income

The Group recognizes advance receipts obtained before contracts are initiated as contract liabilities, and contract liabilities are transferred into revenue after the completion of usage or over the term of the relevant lease. Short-term lease revenues are recognized after the completion of usage. Long-term lease revenues are recognized over the term of the relevant lease through the straight-line method, and do not include significant financing component.

Service revenues generated from contractual agreements are recognized as revenue as services are rendered based on the completion of the contracts and the Group does not have any further obligations. In addition, when the Group is acting as an agent in the transaction, proportional revenue is recognized based on the net amount in accordance with the contractual agreements proportionally.

Advertising revenues are recognized as services are rendered over the contract terms.

Business Combinations

Business combinations are accounted for by the acquisition method. Acquisition-related costs are recognized in profit or loss as they are incurred.

Goodwill is measured as an aggregation of the consideration transferred at the acquisition date, and the amount of any non-controlling interest in the acquiree, net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed at fair value. If the residual balance is negative, the Group shall re-assess whether it has correctly identified all of the assets acquired and liabilities assumed, and recognize a gain on the bargain purchase thereafter.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of the consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The management will continually review the estimates and basic assumptions. The impact of changes in accounting estimates will be recognized in the period of change and the future period impacted.

Critical Accounting Judgements

a. Lease terms - 2019

In determining a lease term, the Group considers all facts and circumstances that create an economic incentive to exercise or not to exercise an option, including any expected changes in facts and circumstances from the commencement date until the exercise date of the option. Main factors considered include contractual terms and conditions for the optional periods, significant leasehold improvements undertaken over the contract term, the importance of the underlying asset to the lessee’s operations, etc. The lease term is reassessed if a significant change in circumstances that are within control of the Group occurs.

Key Sources of Estimation Uncertainty

• a. Impairment assessment of tangible and intangible assets (goodwill is excluded)

In the process of impairment assessments, the Group relies on subjective judgment to determine the individual cash flows of a specific group of assets and estimates future gains and losses according to the

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usage of the assets and relevant business characteristics. Alterations of estimates from any changes in economic conditions or business strategy may lead to significant impairment losses in the future.

• b. Impairment assessment of goodwill

The usage value of the cash-generating units to which goodwill is allocated should be predetermined when assessing whether the goodwill is impaired. Management estimates the future cash flows from cash-generating units and assigns an appropriate discount rate in calculating the present value. Significant impairment loss may occur if actual cash flows are less than that originally forecasted.

6. CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS
Cash on hand and revolving funds Cash in banks Time deposits Government bonds with repurchase rights	December 31
	2019 2018 $ 60,483 $ 156,900 3,545,544 3,603,620 2,423,103 1,588,020 2,634,240 2,150,170 $ 8,663,370 $ 7,498,710

7. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Investments in equity instruments-current Domestic investments Listed stocks Foreign investments Unlisted stocks Investments in equity instruments-non-current Domestic investments Listed stocks Unlisted stocks Foreign investments Limited partnerships Unlisted stocks		December 31	December 31
		2019 $ 239,086 7,407 $ 246,493 $ 4,580,516 173,515 462,068 29,789 $ 5,245,888	2018 $ 245,607 10,125 $ 255,732 $ 3,778,949 181,178 775,385 28,387 $ 4,763,899

These investments in equity instruments are held for medium to long-term strategic purposes. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believed that recognizing short-term fluctuations from these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes.

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8. NOTES AND ACCOUNTS RECEIVABLE, NET

Notes receivable Accounts receivable Less: Allowance for impairment loss		December 31	December 31
		2019 $ 224,042 7,793,254 (345,458) $ 7,671,838	2018 $ 175,658 7,820,249 (464,049) $ 7,531,858

The main credit terms range from 30 to 90 days.

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

The Group adopted a policy of dealing with counterparties with considerable scale of operations, certain credit ratings and financial conditions for project business. In addition to examining publicly available financial information and its own historical transaction experience, the Group obtains collateral where necessary to mitigate the risk of loss arising from default. The Group continues to monitor the credit exposure and financial and credit conditions of its counterparties, and spreads the total amount of the transactions among qualified counterparties.

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

The Group measures the loss allowance for trade receivables at an amount equal to lifetime expected credit losses (ECLs). The ECLs on trade receivables are estimated using a provision matrix with reference to past default experiences of the customers and an analysis of the customers’ current financial positions, as well as forward-looking indicators such as the industrial economic conditions. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision matrix does not distinguish customer segments. As a result, the expected credit loss rate is based on the number of past due days of trade receivables.

The Group writes off a trade receivable when there are evidences indicating that the counterparty is in severe financial difficulty and the trade receivable is considered uncollectible. For trade receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

Movements of allowance for doubtful notes and accounts receivables by individual and collective assessment were as follows:

December 31, 2019

Not Past Due Gross carrying amount $ 7,381,152 Loss allowance (Lifetime ECL) (52,054) Amortized cost $ 7,329,098	Overdue 1 to 120 Days 121 to 365 Days Over 365 Days $ 444,507 $ 190,353 $ 1,284 (113,011) (179,114) (1,279) $ 331,496 $ 11,239 $ 5	Total $ 8,017,296 (345,458) $ 7,671,838

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December 31, 2018

Not Past Due Gross carrying amount $ 7,269,513 Loss allowance (Lifetime ECL) (56,022) Amortized cost $ 7,213,491	Overdue 1 to 120 Days 121 to 365 Days Over 365 Days $ 458,984 $ 261,723 $ 5,687 (154,752) (247,788) (5,487) $ 304,232 $ 13,935 $ 200	Total $ 7,995,907 (464,049) $ 7,531,858

Expected credit loss rates of the Group for the aforementioned periods were as follows:

	Not Past Due
	and Past Due	Past Due Over
	within 120 Days	120 Days
Telecommunications service	0.02%-85%	65.5%-100%
Retail business and others	below 10%	35%-100%

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

Beginning balance Add: Provision Recovery Less: Write-off Ending balance	**For the Year Ended **	**For the Year Ended **	December 31
		2019 $ 464,049 239,681 42,280 (400,552) $ 345,458	2018 $ 468,474 424,395 11,945 (440,765) $ 464,049

The Group entered into accounts receivable factoring contracts with private institutions and sold those overdue accounts receivable that had been written off. Under the contracts, the Group would no longer assume the risk on the receivables. The related factored accounts receivable information was as follows:

Amount of accounts receivable sold Proceeds of the sale of accounts receivable 9. INVENTORIES	For the Year Ended	For the Year Ended	December 31
		2019 $ 583,132 $ 35,389	2018 $ 620,643 $ 37,590

Merchandise Materials for maintenance		December 31	December 31
		2019 $ 5,662,872 7,604 $ 5,670,476	2018 $ 3,936,724 8,939 $ 3,945,663

For the years ended December 31, 2019 and 2018, the cost of goods sold related to inventories amounted to $62,137,365 thousand and $52,564,502 thousand, respectively, which included the inventory write-down totaling $17,141 thousand and $29,381 thousand, respectively.

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10. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Associates, which were not individually material and were accounted for using equity method, were as follows:

Investee Company Global Home Shopping Co., Ltd. (GHS) Taiwan Pelican Express Co., Ltd. (TPE) kbro Media Co., Ltd. (kbro Media) TVD Shopping Co., Ltd. (TVD Shopping) Alliance Digital Tech Co., Ltd. (ADT) Mistake Entertainment Co., Ltd. (M.E.) AppWorks Ventures Co., Ltd (AppWorks)		December 31	December 31	December 31
		2019 Amount % of Ownership $ 560,029 20.00 404,413 17.70 136,812 32.50 119,531 35.00 6,072 14.40 25,045 15.00 226,123 51.00 $ 1,478,025		2018
				Amount % of Ownership $ 766,529 20.00 385,706 17.70 154,847 32.50 119,889 35.00 8,636 14.40 - - - - $ 1,435,607

Aggregate information of associates that were not individually material:

The Group’s share of: Profit Other comprehensive income (loss) Comprehensive income		**December **	**31 **
		2019 $ 10,488 19,637 $ 30,125	2018 $ 27,128 (19,517) $ 7,611

a. GHS

In June 2015, one of momo’s subsidiaries acquired 20% equity interest of GHS.

Due to non-participation in GHS’s capital increase in October 2015, momo’s subsidiary’s percentage of ownership interests in GHS decreased to 18%. In January 2016, momo’s subsidiary’s percentage of ownership interests in GHS increased to 20% due to the acquisition of additional 2% equity interest of GHS.

b. TPE

In August 2012, momo acquired 20% equity interest of TPE.

As of December 2013, momo held 17.7% equity interest of TPE due to its not subscribing for new stock issued by TPE and selling part of its stock when TPE went public. momo still has significant influence on TPE due to its having two seats on TPE’s board of directors.

c. TVD Shopping

In April 2014, momo acquired 35% equity interest of TVD Shopping for THB155,750 thousand.

On November 23, 2017, an extraordinary stockholders’ meeting of TVD Shopping resolved to reduce its capital stock. momo received $31,090 thousand (THB35,000 thousand) as a proportional capital reduction in January 2018.

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d. ADT

In November 2013, TWM acquired 19.23% equity interest of ADT.

In 2014, TWM’s percentage of ownership interests in ADT decreased to 13.33% as TWM did not subscribe for any newly issued ADT stock. In December 2016, TWM increased its percentage of ownership interests in ADT to 14.4% by subscribing for new stock issued by ADT. TWM still has significant influence on ADT due to having a seat on ADT’s board of directors.

ADT had resolved December 31, 2018 as the dissolution date. As of December 31, 2019, ADT was still under liquidation procedures.

e. M.E.

In May 2019, TKT acquired 15% equity interest of M.E. TKT has significant influence on M.E. due to its having a seat on M.E.’s board of directors.

f. AppWorks

In September 2019, TWM acquired 51% equity interest of AppWorks. TWM has no control over AppWorks due to its holding less than half number of seats on AppWorks’ board of directors. Therefore, TWM only has significant influence on AppWorks and accounts for its investments in AppWorks as an associate of TWM, under the equity-method of accounting.

11. SUBSIDIARIES WITH MATERIAL NON-CONTROLLING INTERESTS

Subsidiary momo	Proportion of Non-controlling Interests’ Ownership and Voting Rights
	**December 31 **
	2019 2018 54.99% 54.99%

For information on the principal place of business and the company’s country of registration, see Table 7.

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The summarized financial information of momo and its subsidiaries had taken into account the adjustments to acquisition-date fair value, and reflected the amounts before eliminations of intercompany transactions as follows:

Current assets Non-current assets Current liabilities Non-current liabilities Equity Equity attributable to: Owners of the parent Non-controlling interests of momo Non-controlling interests of momo’s subsidiaries Operating revenues Profit Other comprehensive loss Comprehensive income Profit (loss) attributable to: Owners of the parent Non-controlling interests of momo Non-controlling interests of momo’s subsidiaries Comprehensive income (loss) attributable to: Owners of the parent Non-controlling interests of momo Non-controlling interests of momo’s subsidiaries Net cash generated from operating activities Net cash used in investing activities Net cash used in financing activities Effect of exchange rate changes Net increase in cash Dividends paid to non-controlling interests		**December 31 **	**December 31 **
	2019 2018 $ 7,547,400 $ 6,168,249 14,525,235 13,531,769 (7,372,246) (5,772,994) (1,050,690) (281,454) $ 13,649,699 $ 13,645,570 $ 9,321,432 $ 9,318,968 4,308,010 4,305,001 20,257 21,601 $ 13,649,699 $ 13,645,570 For the Year Ended December 31
		2019 $ 51,830,417 $ 1,392,701 (5,260) $ 1,387,441 $ 627,409 766,372 (1,080) $ 1,392,701 $ 625,200 763,673 (1,432) $ 1,387,441 $ 2,836,386 (398,567) (1,549,264) (1,162) $ 887,393 $ (693,102)	2018 $ 42,017,012 $ 1,444,675 (49,899) $ 1,394,776 $ 652,554 797,086 (4,965) $ 1,444,675 $ 630,001 769,537 (4,762) $ 1,394,776 $ 2,085,628 (683,882) (1,178,056) (311) $ 223,379 $ (616,090)

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12. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS

In August 2018, momo and its subsidiaries increased the capital of Asian Crown (BVI) to invest in FGE. Due to non-proportional investment in capital increase (Tong-An Investment Co., Ltd. participated in the capital increase), momo’s ownership percentage in Asian Crown (BVI) increased from 76.26% to 81.99%, and HK Fubon Multimedia’s ownership percentage in FGE increased from 91.30% to 93.55%. The above transactions did not result in losing control of FGE, and were therefore considered as equity transactions.

Proceeds from capital injection $ 2,316 Increase in non-controlling interests due to equity transaction involving subsidiaries (12,663) Capital surplus - changes in percentage of equity in subsidiaries $ (10,347)

Capital surplus - changes in percentage of equity in subsidiaries

13. PROPERTY, PLANT AND EQUIPMENT

Cost Balance, January 1, 2019 Additions Reclassification Disposals and retirements Effect of exchange rate changes Balance, December 31, 2019 Accumulated depreciation and impairment Balance, January 1, 2019 Depreciation Reclassification Disposals and retirements Effect of exchange rate changes Balance, December 31, 2019 Carrying amount, December 31, 2019 Cost Balance, January 1, 2018 Additions Reclassification Disposals and retirements Effect of exchange rate changes Balance, December 31, 2018 Accumulated depreciation and impairment Balance, January 1, 2018 Depreciation Reversal of impairment loss Reclassification Disposals and retirements Effect of exchange rate changes Balance, December 31, 2018 Carrying amount, December 31, 2018	Land $ 8,289,085 - (2,766 ) (25,278 ) - $ 8,261,041 $ 1,662 - - (1,662 ) - $ - $ 8,261,041 $ 8,250,857 4,609 38,391 (4,772 ) - $ 8,289,085 $ 83,426 - (81,764 ) - - - $ 1,662 $ 8,287,423	Buildings Telecommuni- cations Equipment and Machinery $ 5,672,957 $ 87,623,044 1,116 700,488 (3,370 ) 5,177,156 (29,095 ) (3,131,281 ) - (2,926 ) $ 5,641,608 $ 90,366,481 $ 1,499,982 $ 64,521,396 161,412 7,709,909 (1,180 ) - (11,007 ) (2,849,017 ) - (2,688) $ 1,649,207 $ 69,379,600 $ 3,992,401 $ 20,986,881 $ 5,552,706 $ 84,505,063 16,415 285,948 106,721 6,277,548 (2,885 ) (3,443,813 ) - (1,702) $ 5,672,957 $ 87,623,044 $ 1,369,660 $ 59,427,788 158,304 8,434,614 (21,822 ) - (5,065 ) (1,061 ) (1,095 ) (3,338,463 ) - (1,482) $ 1,499,982 $ 64,521,396 $ 4,172,975 $ 23,101,648	Others Construction in Progress and Equipment to Be Inspected $ 9,346,834 $ 1,349,217 290,480 5,518,629 161,788 (5,360,738 ) (249,751 ) (193 ) (191 ) - $ 9,549,160 $ 1,506,915 $ 7,402,137 $ - 959,504 - - - (247,089 ) - (159) - $ 8,114,393 $ - $ 1,434,767 $ 1,506,915 $ 8,924,688 $ 1,766,195 458,845 6,331,513 377,595 (6,747,100 ) (414,183 ) (1,391 ) (111) - $ 9,346,834 $ 1,349,217 $ 6,515,214 $ - 1,291,105 - - - - - (404,103 ) - (79) - $ 7,402,137 $ - $ 1,944,697 $ 1,349,217	Total $ 112,281,137 6,510,713 (27,930 ) (3,435,598 ) (3,117) $ 115,325,205 $ 73,425,177 8,830,825 (1,180 ) (3,108,775 ) (2,847) $ 79,143,200 $ 36,182,005 $ 108,999,509 7,097,330 53,155 (3,867,044 ) (1,813) $ 112,281,137 $ 67,396,088 9,884,023 (103,586 ) (6,126 ) (3,743,661 ) (1,561) $ 73,425,177 $ 38,855,960

• 37 -

• a. The estimated useful lives, for the current and comparative years, of significant items of property, plant and equipment are as follows:

Buildings Primary buildings 20-55 years Mechanical and electrical equipment 5-15 years Telecommunications equipment and machinery 1-20 years Others 1-20 years

• b. The fair values of parts of TWM’s properties (land and buildings) were measured using Level 3 inputs, arising from income approach and comparative approach adopted by HomeBan Appraisers Joint Firm. As the recoverable amount, fair value less cost to sell, is higher than the carrying amount, an impairment loss is reversed to the extent of the impairment losses that have been recognized in previous years. For the year ended December 31, 2018, the reversal of impairment loss of $103,586 thousand was included in other gains and losses in the statement of comprehensive income.

14. LEASE ARRANGEMENTS

• a. Right-of-use assets - 2019

	December 31,	December 31,
		2019
Carrying amounts
Land	$	565,364
Buildings		8,025,737
Telecommunications equipment and machinery		874,638
Others		192,199
	$	9,657,938
	For the Year
		Ended
	December 31,
		2019
Additions to right-of-use assets	$	3,730,923
Depreciation charge for right-of-use assets
Land	$	233,752
Buildings		3,404,023
Telecommunications equipment and machinery		202,542
Others		64,297
	$	3,904,614
Lease liabilities - 2019
	December 31,
		2019
Carrying amounts
Current	$	3,532,951
Non-current	$	6,117,438

• b. Lease liabilities - 2019

• 38 -

Range of discount rate for lease liabilities was as follows:

	December 31,
	2019
Land	0.78%-1%
Buildings	0.78%-5.44%
Telecommunications equipment and machinery	0.86%-4.38%
Others	0.78%-5.44%

c. Material lease-in activities and terms

The Group leases base transceiver stations, machine rooms, stores, offices, warehouses, maintenance centers, telecommunications equipment, etc., with most of the lease terms ranging from 1 to 6 years. The Group does not have bargain purchase options to acquire the leasehold assets at the end of the lease terms. In addition, the Group is prohibited from subleasing all or any portion of the underlying assets without the lessors’ consents. The Group can early terminate the arrangements if there are any controversial or other incidental matters that will cause the leasehold assets not being able to meet the purposes of use.

d. Other lease information

Leases, with respect to the Group’s investment properties, under operating lease arrangements are set out in Note 15.

2019
	For the Year
		Ended
	December 31,
		2019
Expenses related to short-term leases	$	57,107
Expenses related to low-value asset leases	$	69,676
Expenses related to variable lease payments and not included in
the measurement of lease liabilities	$	43,116
Total cash outflow for leases	$	(4,059,079)

The Group leases certain buildings, which qualify as short-term leases, and certain office equipment and other assets, which qualify as low-value asset leases. The Group has elected to apply the recognition exemption and, thus, no recognition of right-of-use assets and lease liabilities was made for such leases.

As of December 31, 2019, the amount of lease commitments for short-term leases, for which the recognition exemption is applied, is $19,411 thousand.

• 39 -

2018

Non-cancellable rental payables with respect to operating leases were as follows:

	December 31,
	2018
Less than one year	$ 3,440,873
Between one and five years	5,876,088
More than five years	41,277
	$ 9,358,238

The Group leases offices, base transceiver stations, machine rooms, stores, maintenance centers, etc., under operating leases. The leases typically run for a period ranging from 1 to 5 years.

The payments of leases and subleases were as follows:

	For the Year
	Ended
	December 31,
	2018
Minimum lease payments	$ 3,789,325
Receipts from subleases	(10,947)
	$ 3,778,378

15. INVESTMENT PROPERTIES

The Group leases its properties to others and thus reclassifies them from property, plant and equipment to investment property.

The fair values of investment properties were measured using Level 3 inputs, arising from income approach, comparative approach, and cost approach adopted by a third party real estate appraiser, HomeBan Appraisers Joint Firm. As of December 31, 2019 and 2018, the fair values of investment properties were $6,989,343 thousand and $6,979,581 thousand, respectively, and the capitalization rates for the years were ranging from 1.32%-4.95% and 1.32%-5.23%, respectively.

The amount of depreciation recognized for the years ended December 31, 2019 and 2018 were $20,301 thousand and $20,056 thousand, respectively.

The maturity analysis of lease payments receivable under operating leases of investment properties as of December 31, 2019 was as follows:

			December 31,	December 31,
				2019
Year	1		$ 153,723
Year	2			143,089
Year	3			133,686
Year	4			81,103
Year	5			29,888
Year	6	and thereafter		51,310
			$ 592,799

• 40 -

The Group leases out investment properties under operating leases. The future minimum lease-payment receivables under non-cancellable leases as of December 31, 2018 are as follows:

	December 31,
	2018
Less than one year	$ 152,807
Between one and five years	502,272
More than five years	79,298
	$ 734,377

16. INTANGIBLE ASSETS

	Concessions	Concessions	Concessions					Other Intangible Assets	Other Intangible Assets	Other Intangible Assets	Other Intangible Assets
	Concession		Service			Computer		Customer	Operating
	Licenses	Concessions			Goodwill		Software	Relationships		Rights	Trademarks		Copyrights		Total
Cost
Balance, January 1, 2019	$ 41,043,375	$	8,180,078	$	15,872,595	$	3,907,630	$ 2,654,089	$	1,382,000	$	2,517,866	$	15,222	$ 75,572,855
Addition	-		-		-		222,247	-		-		18		9,975	232,240
Disposals and retirements	-		-		-		(183,523 )	-		-		-		-	(183,523 )
Reclassification	-		-		-		150,700	-		-		-		-	150,700
Effect of exchange rate changes	-		-		-		(484)	-		-		-		-	(484)
Balance, December 31, 2019	$ 41,043,375	$	8,180,078	$	15,872,595	$	4,096,570	$ 2,654,089	$	1,382,000	$	2,517,884	$	25,197	$ 75,771,788
Accumulated amortization
and impairment
Balance, January 1, 2019	$ 7,663,274	$	1,031,305	$	-	$	3,176,937	$ 1,510,663	$	-	$	1,493	$	13,538	$ 13,397,210
Amortization	2,640,653		178,720		-		472,270	136,400		-		149		11,659	3,439,851
Disposals and retirements	-		-		-		(183,523 )	-		-		-		-	(183,523 )
Impairment loss	-		-		40,155		-	-		-		-		-	40,155
Effect of exchange rate changes	-		-		-		(380)	-		-		-		-	(380)
Balance, December 31, 2019	$ 10,303,927	$	1,210,025	$	40,155	$	3,465,304	$ 1,647,063	$	-	$	1,642	$	25,197	$ 16,693,313
Carrying amount, December 31, 2019	$ 30,739,448	$	6,970,053	$	15,832,440	$	631,266	$ 1,007,026	$	1,382,000	$	2,516,242	$	-	$ 59,078,475
Cost
Balance, January 1, 2018	$ 51,324,375	$	8,180,078	$	15,845,930	$	3,529,068	$ 2,654,089	$	1,382,000	$	2,517,866	$	-	$ 85,433,406
Addition	-		-		26,665		301,367	-		-		-		9,822	337,854
Disposals and retirements	(10,281,000 )		-		-		(167,204 )	-		-		-		-	(10,448,204 )
Reclassification	-		-		-		244,680	-		-		-		5,400	250,080
Effect of exchange rate changes	-		-		-		(281)	-		-		-		-	(281)
Balance, December 31, 2018	$ 41,043,375	$	8,180,078	$	15,872,595	$	3,907,630	$ 2,654,089	$	1,382,000	$	2,517,866	$	15,222	$ 75,572,855
Accumulated amortization
and impairment
Balance, January 1, 2018	$ 14,981,287	$	852,586	$	-	$	2,851,117	$ 1,374,263	$	-	$	1,333	$	-	$ 20,060,586
Amortization	2,838,369		178,719		-		489,831	136,400		-		160		13,538	3,657,017
Disposals and retirements	(10,156,382 )		-		-		(163,820 )	-		-		-		-	(10,320,202 )
Effect of exchange rate changes	-		-		-		(191)	-		-		-		-	(191)
Balance, December 31, 2018	$ 7,663,274	$	1,031,305	$	-	$	3,176,937	$ 1,510,663	$	-	$	1,493	$	13,538	$ 13,397,210
Carrying amount, December 31, 2018	$ 33,380,101	$	7,148,773	$	15,872,595	$	730,693	$ 1,143,426	$	1,382,000	$	2,516,373	$	1,684	$ 62,175,645
The estimated useful	lives for the		current	and comparative periods are					as	follows:
Concession licenses														14-17 years
Service concessions														44-50 years
Computer software															2-10 years
Customer relationships															20 years
Trademarks															10 years
Copyrights													Amortized over the
														broadcast period

a. Concession licenses

The 3G concession license terminated on December 31, 2018.

• 41 -

b. Service concessions

On January 15, 2009, TNH signed a BOT contract with the Department of Cultural Affairs of Taipei City Government. Under the BOT contract, TNH obtained the right to build and operate a development project located at the old Songshan Tobacco Plant. The development concession premium of superficies is amortized on a straight-line basis during the contract period, and the construction costs are amortized on a straight-line basis from the completion date of the construction to the BOT contract expiry date.

c. Customer relationships, operating rights and trademarks

The Group measures the fair value of acquired assets when acquisitions occur, and identifies the fair value and amortization periods of the intangible assets which conform to materiality and related standards. Although some of the intangible assets such as operating rights and trademarks have legal useful lives, which can be extended, the Group regards these assets as intangible assets with indefinite useful lives.

• 1) On April 17, 2007, TFN, one of TWM’s wholly-owned subsidiaries, acquired more than 50% of the former Taiwan Fixed Network Co., Ltd. (formerly “TFN”) through a public tender offer. TWM split the former TFN and its subsidiaries into two cash-generating units, i.e., fixed network service and cable television business. Accordingly, customer relationships and operating rights are identified as major intangible assets.

• 2) On September 1, 2010, TFNM, one of TWM’s wholly-owned subsidiaries, acquired 55% of TKT. On August 12, 2011, TFNM acquired 45% of TKT. TWM measured the fair value of the acquired net assets and viewed TKT’s wireless services as one cash-generating unit. Accordingly, trademarks and customer relationships are identified as major intangible assets.

• 3) On July 13, 2011, WMT, one of TWM’s wholly-owned subsidiaries, acquired control over momo. TWM measured the fair value of the acquired assets and viewed momo’s retail business as one cash-generating unit. Accordingly, trademarks are identified as major intangible assets.

• d. Goodwill

The carrying amounts of goodwill allocated to the cash-generating units were as follows:

Telecommunications service Fixed network service Cable television business Retail business		**December 31 **	**December 31 **
		2019 $ 7,211,936 357,970 3,269,636 4,992,898 $ 15,832,440	2018 $ 7,238,758 357,970 3,269,636 5,006,231 $ 15,872,595

• e. Impairment of assets

In conformity with IAS 36 “Impairment of Assets”, the Group identified its mobile communication service, fixed network service, cable television business, and retail business as the smallest identifiable units which can generate cash inflows independently.

The recoverable amounts of the operating assets were evaluated by business type, and the critical assumptions used for this evaluation were as follows:

• 42 -

1) Telecommunications service

a) Assumptions on cash flows

The five-year cash flow projections were estimated on the basis of previous experience, actual operating results, and the financial budget.

• b) Assumptions on operating revenues

After taking changes in the telecom industry and the competitive landscape into consideration, operating revenues were estimated on the basis of the projected changes in subscriber numbers, minutes of incoming and outgoing calls, and rate plan composition.

• c) Assumptions on operating costs and expenses

The estimates of activation commissions and customer retention costs were based on the new customers obtained and existing customers maintained. The estimates of remaining costs and expenses were based on the cost drivers of each item.

• d) Assumptions on discount rates

For the years ended December 31, 2019 and 2018, the discount rates used to calculate the recoverable amount for the asset’s cash-generating unit were 6.27% and 5.92%, respectively.

• 2) Fixed network service

• a) Assumptions on cash flows

The five-year cash flow projections were estimated on the basis of previous experience, actual operating results, and the financial budget.

• b) Assumptions on operating revenues

After taking changes and growth of business in the telecom industry into consideration, operating revenues were estimated on the basis of the types of data transmission and the demand for broadband capacity.

• c) Assumptions on operating costs and expenses

The estimates of operating costs and expenses were based on the cost drivers of each cost and expense.

• d) Assumptions on discount rates

For the years ended December 31, 2019 and 2018, the discount rates used to calculate the recoverable amount for the asset’s cash-generating unit were 6.77% and 6.6%, respectively.

• 3) Cable television business

• a) Assumptions on cash flows

The five-year cash flow projections were estimated on the basis of previous experience, actual operating results, and the financial budget.

• 43 -

• b) Assumptions on operating revenues

After taking changes in the cable television industry and the competitive landscape into consideration, operating revenues were estimated on the basis of the projected changes in subscriber numbers and average revenue per subscriber.

• c) Assumptions on operating costs and expenses

The estimates of commission costs, customer service costs, and bill processing costs were based on the projected changes in subscriber numbers. The estimates of remaining costs and expenses were based on the actual costs and expenses as a proportion of operating revenues.

• d) Assumptions on discount rates

For the years ended December 31, 2019 and 2018, the discount rates used to calculate the recoverable amount for the asset’s cash-generating unit for each system operator ranged from 5.01% to 5.64% and from 5.28% to 6.02%, respectively.

• 4) Retail business

• a) Assumptions on cash flows

The five-year cash flow projections were estimated on the basis of previous experience, actual operating results, and the financial budget.

• b) Assumptions on operating revenues

After taking changes in the retail business industry and the competitive landscape into consideration, operating revenues were estimated on the basis of the classification and average price of commodities, and the degree of the contribution of the customers.

• c) Assumptions on operating costs and expenses

The estimates of costs and expenses were based on the actual costs and expenses as a proportion of operating revenues.

• d) Assumptions on discount rates

For the years ended December 31, 2019 and 2018, the discount rates used to calculate the recoverable amount for the asset’s cash-generating unit were 8.92% and 7.21%, respectively.

Based on the key assumptions of each cash-generating unit, the Group’s management believes that the carrying amounts of these operating assets and intangible assets will not exceed their recoverable amounts even if there are any reasonable changes in the critical assumptions used to estimate recoverable amounts. For the year ended December 31, 2018, there was no impairment on such assets; for the year ended December 31, 2019, an impairment loss on goodwill, totaling $40,155 thousand, was recognized as other gains and losses in the statement of comprehensive income since the operating conditions of subsidiaries were expected to decline in the future.

• 44 -

17. OTHER NON-CURRENT ASSETS

Long-term accounts receivable Refundable deposits (Note) Prepayments for investment Prepayments for equipment Others		December 31	December 31
		2019 $ 325,482 1,633,054 100,000 131,228 504,706 $ 2,694,470	2018 $ 101,740 634,512 - 29,256 509,687 $ 1,275,195

Note: TWM applied for the participation in the 5G mobile spectrum auction held by NCC, and paid $1,000,000 thousand as bid bond in October 2019.

18. BORROWINGS

• a. Short-term borrowings

Unsecured loans Annual interest rates		December 31	December 31
		2019 $ 16,270,000 0.65%-0.95%	2018 $ 10,270,000 0.7%-0.96%

For the information on endorsements and guarantees, see Note 32(b).

• b. Short-term notes and bills payable

Short-term notes and bills payable Less: Discounts on short-term notes and bills payable Annual interest rates		**December 31 **
		2019 2018 $ 1,900,000 $ 1,500,000 (1,889) (1,008) $ 1,898,111 $ 1,498,992 0.688% 0.788%-0.798%

• c. Long-term borrowings

Unsecured loans Secured loans Less: Current portion Annual interest rates: Unsecured loans Secured loans		**December 31 **	**December 31 **
		2019 $ 6,000,000 2,889,373 (303,297) $ 8,586,076 0.72%-0.79% 2.0337%	2018 $ 8,000,000 3,192,674 (2,303,236) $ 8,889,438 0.75%-1.07% 2.0337%

• 45 -

1) Unsecured loans

The Group entered into credit facility agreements with a group of banks for mid-term requirements of operating capital, and the interest is paid periodically. Under certain credit agreements, the loans are treated as revolving credit facilities, and the maturity dates of the loans are based on terms under the agreements. In addition, the expiry date of the repayments is in July 2021, and some credit facilities are subject to financial covenants regarding debt ratios and interest protection multiples during the credit facility period.

2) Secured loans

TNH entered into a syndicated loan agreement, with respect to the investment under the aforementioned BOT contract. The credit agreement originally signed in 2010 has been early terminated. TNH signed another credit agreement with Bank of Taiwan for a $3,400,000 thousand credit amount and a $65,000 thousand guarantee amount in 2017. The agreement started from the date of the first drawdown of the loan and would last for 7 years with interest payments made on a monthly basis. In accordance with the loan agreement, the regular financial covenants, e.g. current ratio, equity ratio, and interest protection multiples, must be complied with during the credit facility period. For property under the BOT contract and its superficies that have been pledged as collateral, see Note 31 for details.

19. BONDS PAYABLE

3rd domestic unsecured straight corporate bonds 5th domestic unsecured straight corporate bonds 3rd domestic unsecured convertible bonds Less: Current portion		December 31	December 31
		2019 $ - 14,988,914 914,522 - $ 15,903,436	2018 $ 4,499,680 14,986,357 9,432,780 (4,499,680) $ 24,419,137

• a. 3rd domestic unsecured straight corporate bonds

On December 20, 2012, TWM issued $9,000,000 thousand of seven-year 3rd domestic unsecured straight corporate bonds; each bond had a face value of $10,000 thousand and a coupon rate of 1.34% per annum, with simple interest due annually. Repayment will be made in the sixth and seventh years in equal installments, i.e., $4,500,000 thousand. The trustee of bond holders is Hua Nan Commercial Bank.

The above-mentioned corporate bonds were fully liquidated in December 2019.

• b. 4th domestic unsecured straight corporate bonds

On April 25, 2013, TWM issued $5,800,000 thousand of five-year 4th domestic unsecured straight corporate bonds, each having a face value of $10,000 thousand and a coupon rate of 1.29% per annum, with simple interest due annually. Repayment will be made in the fourth and fifth years with equal installments, i.e., $2,900,000 thousand. The trustee of bond holders is Hua Nan Commercial Bank.

The above-mentioned corporate bonds were fully liquidated in April 2018.

• 46 -

c. 5th domestic unsecured straight corporate bonds

On April 20, 2018, TWM issued the 5th domestic unsecured straight corporate bonds. The bonds included five-year and seven-year bonds, with the principal amounts of $6,000,000 thousand and $9,000,000 thousand, each having a face value of $10,000 thousand, and coupon rates of 0.848% and 1% per annum, respectively, with simple interest due annually. Repayment will be made in full at maturity. As of December 31, 2019, the amount of unamortized bond issue cost was $11,086 thousand. The trustee of bond holders is Bank of Taiwan.

Future repayments of the above-mentioned corporate bonds are as follows:

Year 2023 2025	Amount $ 6,000,000 9,000,000 $ 15,000,000

d. 3rd domestic unsecured convertible bonds

On November 22, 2016, TWM issued its 3rd domestic five-year unsecured zero-coupon convertible bonds with an aggregate principal amount of $10,000,000 thousand and a par value of $100 thousand per bond certificate. The conversion price was set initially at $116.1 per share. The conversion price should be adjusted according to the prescribed formula and has been adjusted to $99.9 per share since July 15, 2019. Except for the book closure period, bondholders are entitled to convert bonds into TWM’s common stock from December 23, 2016 to November 22, 2021. The trustee of bond holders is Bank of Taiwan.

If the closing price of TWM’s common stock continues being at least 130% of the conversion price then in effect for 30 consecutive trading days or the aggregate outstanding balance of bonds payable is less than 10% of the original issuance amount, TWM has the right to redeem the outstanding bonds payable at par value in cash during the period from one month after the issuance date to the date 40 days prior to the maturity date.

At the end of the third year from the bond issuance date, bondholders have the right to request TWM to redeem the convertible bonds at par value in cash.

The convertible bonds contain both liability and equity components. The equity component was presented in equity under the heading of capital surplus - option. The effective interest rate of the liability component was 0.9149% per annum on initial recognition. As of December 31, 2019, the amount of unamortized bond discount was $15,978 thousand.

Proceeds of the issuance (minus transaction costs $10,870 thousand) Equity component Financial liabilities Liability component at the date of issuance Interest charged at an effective interest rate Convertible bonds converted into common stock Liability component on December 31, 2018 Interest charged at an effective interest rate Convertible bonds converted into common stock Liability component on December 31, 2019

$ 9,989,130 (400,564) (35,961) 9,552,605 185,759 (305,584) 9,432,780 47,272 (8,565,530) $ 914,522

As of December 31, 2019 and 2018, the bondholders had requested to convert the bonds at face values of $9,069,500 thousand and $314,200 thousand, respectively.

• 47 -

20. PROVISIONS

Restoration Decommissioning Warranties Current Non-current Balance, January 1, 2019 Provision Payment/Reversal Unwinding of discount Balance, December 31, 2019 Balance, January 1, 2018 Provision Payment/Reversal Unwinding of discount Balance, December 31, 2018	Restoration $ 1,184,823 50,172 (55,731) 4,163 $ 1,183,427 $ 1,208,093 59,291 (88,115) 5,554 $ 1,184,823	Decom- missioning $ 268,536 50,233 (1,714) 7,638 $ 324,693 $ 213,372 48,961 - 6,203 $ 268,536			December 31	December 31
				$	2019 1,183,427 324,693 40,111 1,548,231 88,961 1,459,270 1,548,231 Warranties $ 67,929 68,301 (96,119) - $ 40,111 $ 128,412 92,463 (152,946) - $ 67,929	2018 $ 1,184,823 268,536 67,929 $ 1,521,288 $ 120,334 1,400,954 $ 1,521,288 Total $ 1,521,288 168,706 (153,564) 11,801 $ 1,548,231 $ 1,549,877 200,715 (241,061) 11,757 $ 1,521,288
				$
				$
				$

21. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

Domestic firms of the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed and defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. The employees of the Group’s subsidiaries in other countries are participants of state-managed retirement benefit plans operated by local governments. In accordance with the above provision, the Group’s contribution to the pension plan amounted to $311,921 thousand and $307,042 thousand for the years ended December 31, 2019 and 2018, respectively.

b. Defined benefit plans

The Group contributed 2% of each employee’s monthly wages to the pension fund, with Bank of Taiwan acting as the custodian bank, in accordance with the defined benefit plans (the “Plans”). The Plan provides defined pension benefits for the Group’s certain qualified employees, specified under the Labor Standards Law, and such benefits are determined based on an employee’s years of service and average monthly salary for six-month period prior to the date of retirement. Before the end of each year, the Group assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Group will fund the difference in one appropriation before the end of March of the following

• 48 -

year. The fund is operated and managed by the government’s designated authorities; as such, the Group does not have any right to participate in the operation of the fund.

The defined benefit plans were as follows:

Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities		**December 31 **	**December 31 **
		2019 $ 1,500,604 (983,429) $ 517,175	2018 $ 1,415,592 (904,712) $ 510,880

The movements in present value of defined benefit obligations for the years ended December 31, 2019 and 2018 were as follows:

Balance, January 1 Current service costs Past service costs Interest costs Actuarial loss - changes in demographic assumptions Actuarial loss - changes in financial assumptions Actuarial (gain) loss - experience adjustments Benefits paid from plan assets Paid from defined benefit obligations Balance, December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 1,415,592 2,103 (854) 17,093 26,252 69,940 (11,438) (15,296) (2,788) $ 1,500,604	2018 $ 1,284,048 2,109 165 18,651 90,641 48,477 2,934 (31,433) - $ 1,415,592

The movements in the fair value of the plan assets for the years ended December 31, 2019 and 2018 were as follows:

Balance, January 1 Net interest income Return on plan assets (excluding amounts included in net interest) Contributions from the employer Benefits paid from plan assets Balance, December 31	For the Year Ended	For the Year Ended	December 31
		2019 $ 904,712 11,323 29,628 53,062 (15,296) $ 983,429	2018 $ 841,004 12,886 21,010 61,245 (31,433) $ 904,712

The expenses recognized in profit or loss for the years ended December 31, 2019 and 2018 were as follows:

Current service costs Past service costs Interest costs Net interest income	**For the Year Ended **	**For the Year Ended **	**December 31 **
		2019 $ 2,103 (854) 17,093 (11,323) $ 7,019	2018 $ 2,109 165 18,651 (12,886) $ 8,039

• 49 -

The pre-tax remeasurements recognized in other comprehensive income (loss) for the years ended December 31, 2019 and 2018 were as follows:

Return on plan assets (excluding amounts included in net interest) Actuarial loss - changes in demographic assumptions Actuarial loss - changes in financial assumptions Actuarial (gain) loss - experience adjustments	For the Year Ended	For the Year Ended	December 31
		2019 $ (29,628) 26,252 69,940 (11,438) $ 55,126	2018 $ (21,010) 90,641 48,477 2,934 $ 121,042

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

• 1) Investment risk: The plan assets are invested in equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

• 2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.

• 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial present values of the defined benefit obligation were carried out by the chartered actuary.

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

Discount rate Long-term average adjustment rate of salary	December 31
	2019 2018 0.75%-1% 1%-1.375% 2.5%-3% 2.5%-3%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rate 0.25% increase 0.25% decrease Long-term average adjustment rate of salary 0.25% increase 0.25% decrease		**December **	**31 **
		2019 $ (50,626) $ 52,850 $ 51,172 $ (49,300)	2018 $ (50,155) $ 52,445 $ 50,979 $ (49,028)

• 50 -

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

The expected contributions to the Plan for the following year The average duration of the defined benefit obligation		**December **	**31 **
	2019 2018 $ 32,349 $ 32,752 11-17.4 years 12-18.3 years

22. EQUITY

a. Common stock

As of December 31, 2019 and 2018, TWM’s authorized capital was $60,000,000 thousand and capital issued and outstanding were $34,959,441 thousand and $34,208,519 thousand, respectively, divided into 3,495,944 thousand shares and 3,420,852 thousand shares, respectively, which were all common stocks, at a par value of $10 each.

As of December 31, 2019 and 2018, the bondholders of the 3rd domestic unsecured convertible bonds had requested to convert the bonds into 88,522 thousand and 3,001 thousand common stocks, respectively. TWM recognized 13,410 thousand and 2,982 thousand of common stocks, respectively, as capital collected in advance, totaling $134,104 thousand and $29,819 thousand, respectively. TWM would complete the related corporate registrations after the issuance of new stocks on the record date in accordance with the regulations.

b. Capital surplus

Additional paid-in capital from convertible corporate bonds Treasury stock transactions Difference between consideration and carrying amount arising from the disposal of subsidiaries’ stock Changes in equity of subsidiaries Convertible bonds payable options Changes in equity of associates accounted for using equity method Others		**December 31 **	**December 31 **
		2019 $ 14,424,786 5,159,704 85,965 501,215 37,273 30,801 34,950 $ 20,274,694	2018 $ 6,363,714 5,159,704 85,965 501,215 387,979 48,147 33,968 $ 12,580,692

Under the ROC Company Act, capital surplus generated from the excess of the issue price over the par value of capital stock, including the stock issued for new capital, the conversion premium from convertible corporate bonds, the difference between consideration and carrying amount of subsidiaries’ stock acquired or disposed of, and treasury stock transactions, may be applied to make-up accumulated deficit, if any, or be transferred to capital as stock dividends, or be distributed as cash dividends when there is no accumulated deficit, and this transfer is restricted to a certain percentage of the paid-in capital. The capital surplus arising from changes in equity of subsidiaries, changes in equity of associates accounted for using equity method and the overdue unclaimed dividends could also be applied to make-up accumulated deficit, if any. And the other capital surplus cannot be used by any means.

• 51 -

• c. Appropriation of earnings and dividend policy

In accordance with the policy, TWM’s profits earned in a fiscal year shall first be set aside to pay the applicable taxes, offset losses, and set aside for legal reserve pursuant to laws and regulations, unless the legal reserve has reached TWM’s total paid-up capital. The remaining profits shall be set aside for special reserve in accordance with laws, regulations, or business requirements. Any further remaining profits plus unappropriated earnings shall be distributed in accordance with the proposal submitted by the Board of Directors for approval at a stockholders’ meeting.

TWM adopts a dividend distribution policy whereby only surplus profits of TWM shall be distributed to stockholders. That is, after setting aside amounts for retained earnings based on TWM’s capital budget plan, the residual profits shall be distributed as cash dividends. Stock dividends in a particular year shall be capped at no more than 80% of total dividends to be distributed for that year. The amount of the distributable dividends, the forms in which dividends shall be distributed, and the ratio thereof shall depend on the actual profit and cash positions of TWM and shall be approved by resolutions of the Board of Directors, who shall, upon such approval, recommend the same to the stockholders for approval by resolution at the stockholders’ meetings.

The above appropriation of earnings should be resolved in the annual general stockholders’ meeting (“AGM”) held in the following year.

According to the ROC Company Act, a company shall first set aside its earning for legal reserve until it equals the paid-in capital. The legal reserve may offset losses. After offsetting any deficit, the legal reserve may be transferred to capital and distributed as stock dividends or cash dividends for the amount in excess of 25% of the paid-in capital pursuant to a resolution adopted in the stockholders’ meeting.

TWM distributes and reverses special reserve in accordance with Decree No. 1010012865, Decree No. 1010047490, and “The Q&A for special reserve recognition after adopting IFRS” issued by the FSC.

The appropriations of earnings for 2018 and 2017 which have been resolved in the AGM on June 12, 2019 and June 12, 2018, respectively, were as follows:

Appropriation of legal reserve Reversal from special reserve Cash dividends to stockholders	Appropriation of Earnings For Fiscal Year 2018 For Fiscal Year 2017 $ 1,364,217 $ 1,419,218 (267,322) (327,331) 15,366,223 13,610,406	Dividends Per Share (NT$)
		For Fiscal Year 2018 For Fiscal Year 2017 $ 5.54897 $ 5

The cash dividends of $5 per share mentioned above have been distributed from unappropriated earnings for 2017. In addition, the AGM resolved another cash appropriation from the capital surplus generated from the excess of the issuance price over the par value of capital stock amounting to $1,633,249 thousand, that is, $0.6 per share. Total appropriations distributed were $5.6 per share for 2017.

TWM’s 2019 earnings appropriations will be proposed by the Board of Directors and approved in the AGM. Information on earnings appropriations is available on the Market Observation Post System website of the Taiwan Stock Exchange.

• 52 -

d. Other equity interests

Exchange Differences on Translation Unrealized Gain (Loss) on Financial Assets at FVTOCI Unrealized Gain (Loss) on Available-for- sale Financial Assets Balance, January 1, 2019 $ (24,398) $ (70,983) $ - Exchange differences on translation (12,227) - - Changes in fair value of financial assets at FVTOCI - 470,394 - Changes in other comprehensive income (loss) of associates accounted for using equity method 2,120 10,667 - Income tax effect - 63,332 - Balance, December 31, 2019 $ (34,505) $ 473,410 $ - Balance, January 1, 2018 $ (16,499) $ - $ (346,204) Effect of retrospective application - (281,785) 346,204 Adjusted balance, January 1, 2018 (16,499) (281,785) - Exchange differences on translation (7,235) - - Changes in fair value of financial assets at FVTOCI - 226,082 - Changes in other comprehensive income (loss) of associates accounted for using equity method (664) (14,247) - Reclassification of loss on disposal of equity instruments to retained earnings - (1,825) - Income tax effect - 792 - Balance, December 31, 2018 $ (24,398) $ (70,983) $ -

Total $ (95,381) (12,227) 470,394 12,787 63,332 $ 438,905 $ (362,703) 64,419 (298,284) (7,235) 226,082 (14,911) (1,825) 792 $ (95,381)

• e. Treasury stock

As of December 31, 2019 and 2018, TWM’s stocks held for the investment purposes by TCCI, TUI and TID, which are all wholly-owned by TWM, were 698,752 thousand shares, and the market values were $78,260,179 thousand and $74,417,046 thousand, respectively. Since TWM’s stocks held by its subsidiaries are regarded as treasury stock, TWM recognized $29,717,344 thousand as treasury stock. For those treasury stock holders, they have the same rights as the other stockholders, except that they are not allowed to subscribe new shares issued by TWM for cash and exercise the voting rights over such treasury stock.

• 53 -

f. Non-controlling interests

Beginning balance Effect of retrospective application Adjusted beginning balance Portion attributable to non-controlling interests Profit Exchange differences on translation Unrealized gain (loss) on financial asset at FVTOCI Share of other comprehensive income (loss) of associates accounted for using equity method Changes in equity of associates accounted for using equity method Remeasurements of defined benefit plans Changes in ownership interests in subsidiaries Cash dividends paid to non-controlling interests of subsidiaries Increase in non-controlling interests Ending balance	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 6,112,176 16,275 6,128,451 810,700 (12,219) 2,357 6,859 (83,749) (54) - (693,361) - $ 6,158,984	2018 $ 5,879,738 (39) 5,879,699 843,596 (6,879) (16,157) (4,344) 9,717 38 12,663 (616,452) 10,295 $ 6,112,176

23. OPERATING REVENUES

Revenue from contracts with customers Telecommunications and value-added services Sales revenue Cable TV and broadband services Other operating revenues	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 48,135,239 68,983,292 5,949,073 1,353,309 $ 124,420,913	2018 $ 53,320,270 58,023,078 6,193,842 1,195,138 $ 118,732,328

a. Contract information

Please refer to Note 4 and Note 36.

b. Contract balances

Contract assets Bundle sales Less: Allowance for impairment loss Current Non-current		December 31	December 31
		2019 $ 8,366,531 (71,032) $ 8,295,499 $ 4,832,043 3,463,456 $ 8,295,499	2018 $ 8,755,126 (74,250) $ 8,680,876 $ 5,472,357 3,208,519 $ 8,680,876

• 54 -

For notes and accounts receivable, please refer to Note 8.

Contract liabilities Telecommunications and value-added services Sales of goods Cable TV and broadband services Others Current Non-current		**December 31 **	**December 31 **
		2019 $ 1,125,265 42,417 672,667 12,351 $ 1,852,700 $ 1,807,407 45,293 $ 1,852,700	2018 $ 1,235,446 141,343 694,228 15,920 $ 2,086,937 $ 2,030,793 56,144 $ 2,086,937

The changes in balances of contract assets and contract liabilities primarily result from the timing difference between the satisfaction of performance obligation and the payments collected from customers. Other significant changes are as follows:

Contract assets Transfers of beginning balance to receivables	**December 31 **
	2019 2018 $ (5,436,072) $ (6,242,827)

The Group measures the loss allowance for contract assets at an amount equal to lifetime ECLs. The contract assets will be transferred to accounts receivable when the corresponding invoice is billed to the client, and the contract assets have substantially the same risk as the trade receivables. Therefore, the Group concluded that the expected loss rates for trade receivables can be applied to the contract assets. As of December 31, 2019 and 2018, the expected credit loss rates were both 0.02%-0.85%.

The movements of the allowance of contract assets are as follows:

Beginning balance Less: Recovery Ending balance	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2019 $ 74,250 (3,218) $ 71,032	2018 $ 90,593 (16,343) $ 74,250

Revenue of the reporting period recognized from the beginning contract liabilities is as follows:

Contract liabilities Telecommunications and value-added services Sales of goods Cable TV and broadband services Others	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2019 $ 1,116,074 120,781 683,439 12,688 $ 1,932,982	2018 $ 1,722,803 49,667 777,337 13,082 $ 2,562,889

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c. Partially completed contracts

The transaction prices allocated to the performance obligations that are not fully satisfied and the expected timing for recognition of revenue are as follows:

Telecommuni- cations and Value-added Services Cable TV and Broadband Services December 31, 2019 - in 2020 $ 13,710,580 $ 665,536 - in 2021 6,416,669 10,561 - after 2021 724,224 - $ 20,851,473 $ 676,097 December 31, 2018 - in 2019 $ 17,281,431 $ 704,066 - in 2020 7,759,927 19,832 - after 2020 1,024,079 237 $ 26,065,437 $ 724,135	Others $ 1,353 - - $ 1,353 $ 1,510 - - $ 1,510	Total $ 14,377,469 6,427,230 724,224 $ 21,528,923 $ 17,987,007 7,779,759 1,024,316 $ 26,791,082

The above information does not include contracts with expected durations which are equal to or less than one year.

• d. Assets related to contract costs

Incremental costs of obtaining a contract - non-current		**December 31 **	**December 31 **
		2019 $ 2,119,052	2018 $ 2,946,282

The Group considered the past experience and the default clauses in the sale contracts and believed the commission and the subsidy paid for obtaining a contract are wholly recoverable, therefore, such costs are capitalized. Amortization recognized for the years ended December 31, 2019 and 2018 were $2,483,997 thousand and $3,394,116 thousand, respectively.

24. NON-OPERATING INCOME AND EXPENSES

• a. Other income

Interest income Dividend income Other income	For the Year Ended	For the Year Ended	December 31
		2019 $ 115,313 117,211 79,374 $ 311,898	2018 $ 61,633 83,164 82,808 $ 227,605

• 56 -

b. Other gains and losses, net

Loss on disposal of property, plant and equipment, net Loss on disposal of intangible assets, net Valuation gain (loss) on financial assets at FVTPL Valuation gain on financial liabilities at FVTPL Reversal of impairment loss on property, plant and equipment Impairment loss on intangible assets Gain (loss) on foreign exchange Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ (277,123) - 1,039 1,819 - (40,155) (40,890) (3,821) $ (359,131)	2018 $ (80,282) (128,002) (27,806) 8,061 103,586 - 4,007 (5,281) $ (125,717)

c. Finance costs

Interest expense Bank loans Corporate bonds Lease liabilities Others Less: Capitalized interest Capitalization rates	**For the Year Ended **	**For the Year Ended **	**December 31 **
		2019 $ 193,088 249,243 96,987 40,408 579,726 (4,946) $ 574,780 1.34%	2018 $ 236,880 319,895 - 51,087 607,862 (6,021) $ 601,841 1.34%

25. INCOME TAX

a. Income tax recognized in profit or loss

Current income tax expense Current period Prior years’ adjustment Others Deferred income tax expense Temporary differences Changes in tax rates Income tax expense	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 3,169,982 46,802 (16,483) 3,200,301 89,642 - 89,642 $ 3,289,943	2018 $ 3,085,799 (81,796) (42,094) 2,961,909 239,578 1,962 241,540 $ 3,203,449

• 57 -

The reconciliation of profit before tax to income tax expense was as follows:

Profit before tax Income tax expense at domestic statutory tax rate Effect of different tax rates on the group entities Adjustment items in determining taxable profit Temporary differences Investment tax credits Prior years’ other adjustments Loss carryforwards Changes in tax rates Land value increment tax Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 16,581,810 $ 3,316,362 382 (93,992) 89,642 (43,053) 46,802 (10,002) - 285 (16,483) $ 3,289,943	2018 $ 17,689,217 $ 3,537,843 (2,231) (316,909) 239,578 (101,772) (81,796) (31,195) 1,962 63 (42,094) $ 3,203,449

The corporate income tax rate was adjusted from 17% to 20% after the amendment of the Income Tax Law in the ROC on January 1, 2018. The effect of such tax rate change on deferred income tax was recognized in profit or loss. In addition, the tax rate applicable to the undistributed portion of earnings made in 2018 and thereafter has been reduced from 10% to 5%. Tax rates used by the group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

In July 2019, the President of the ROC announced the amendments to the Statute for Industrial Innovation, which stipulate that the amounts of unappropriated earnings in 2018 and thereafter that are reinvested in the construction or purchase of certain assets or technologies are allowed as deduction when computing the income tax on unappropriated earnings. The Group has already deducted the amount of capital expenditure from the unappropriated earnings in 2018 that was reinvested when calculating the tax on unappropriated earnings for the year 2019.

b. Income tax recognized in other comprehensive income (loss)

Deferred income tax income Unrealized gain on financial assets at FVTOCI Remeasurements from defined benefit plans Changes in tax rates - Remeasurements of defined benefit plans	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2019 $ 63,332 11,025 - $ 74,357	2018 $ 792 24,208 18,302 $ 43,302

• 58 -

c. Deferred tax assets and liabilities

1) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for the years ended December 31, 2019 and 2018, were as follows:

Deferred tax assets Property, plant and equipment Defined benefit plans Investment credits Others Deferred tax liabilities Intangible assets Others Deferred tax assets Property, plant and equipment Defined benefit plans Investment credits Others Deferred tax liabilities Intangible assets Others		For the Year Ended December 31, 2019	For the Year Ended December 31, 2019
		Recognized in Opening Balance Effect of Application Profit or Loss Other Comprehensive Income (Loss) $ 354,881 $ - $ (14,997) $ - 107,209 - (9,766) 11,025 18,558 - (18,558) - 325,873 (11,596) 14,228 62,383 $ 806,521 $ (11,596) $ (29,093) $ 73,408 $ 903,335 $ - $ 65,688 $ - 13,926 699 (5,139) (949) $ 917,261 $ 699 $ 60,549 $ (949) For the Year Ended December 31, 2018		Closing Balance $ 339,884 108,468 - 390,888 $ 839,240 $ 969,023 8,537 $ 977,560
		Opening Balance Effect of Application $ 442,595 $ - 79,596 - - - 298,053 (2,960) $ 820,244 $ (2,960) $ 712,001 $ - 17,785 - $ 729,786 $ -	Recognized in Profit or Loss Other Comprehensive Income (Loss) $ (87,714) $ - (14,897) 42,510 18,558 - 27,951 2,829 $ (56,102) $ 45,339 $ 191,334 $ - (5,896) 2,037 $ 185,438 $ 2,037	Closing Balance $ 354,881 107,209 18,558 325,873 $ 806,521 $ 903,335 13,926 $ 917,261

• 59 -

• 2) Unrecognized deferred tax assets items

Loss carryforwards		December 31	December 31
		2019 $ 298,829	2018 $ 507,257

As of December 31, 2019, the Group had not recognized the prior years’ loss carryforwards, totaling $298,829 thousand, as deferred tax assets. The expiry years are from 2020 to 2029.

d. Income tax examinations

The latest years for which income tax returns have been examined and cleared by the tax authorities were as follows:

Company TWM TCC WMT TNH TFN TT&T TCCI TDC TDS TPIA TFC TUI TID TKT TFNM GFMT GWMT WTVB YJCTV MCTV PCTV UCTV GCTV momo FLI FPI FST Bebe Poshe	**Year **
	2017 2017 2017 2017 2017 2017 2018 2019 (except 2018 not yet examined and assessed) 2018 2017 2018 2017 2018 2017 2017 2018 2017 2017 2017 2017 2017 2017 2017 2017 2017 2018 2018 2018

• 60 -

26. EARNINGS PER SHARE

Basic EPS Profit attributable to owners of the parent Effect of potential dilutive common stock: Employees’ compensation Convertible bonds Diluted EPS Profit attributable to owners of the parent (adjusted for potential effect of common stock) Basic EPS Profit attributable to owners of the parent Effect of potential dilutive common stock: Employees’ compensation Convertible bonds Diluted EPS Profit attributable to owners of the parent (adjusted for potential effect of common stock)	For the Year Ended December 31, 2019	For the Year Ended December 31, 2019
	Amount After Income Tax Weighted- average Number of Common Stock EPS $ 12,481,167 2,767,709$ 4.51 - 3,863 45,453 52,208 $ 12,526,620 2,823,780 $ 4.44 For the Year Ended December 31, 2018
	Amount After Income Tax Weighted- average Number of Common Stock $ 13,642,172 2,722,519 - 4,405 80,227 95,073 $ 13,722,399 2,821,997	EPS $ 5.01 $ 4.86

Since TWM has the discretion to settle the employees’ compensation by cash or stock, TWM should presume that the entire amount of the compensation will be settled in stock, and the potential stock dilution should be included in the weighted-average number of stock outstanding used in the calculation of diluted EPS, provided there is a dilutive effect. Such dilutive effect of the potential stock needs to be included in the calculation of diluted EPS until employees’ compensation is approved in the following year.

27. CASH FLOW INFORMATION

Changes in liabilities arising from financing activities:

For the Year Ended December 31, 2019

Lease liabilities (including current and non-current portions)	Opening Balance $ 9,980,846	Cash Flows $ (3,873,221)		Non-cash Changes New Leases Others $ 3,711,597 $ (168,833)	Closing Balance $ 9,650,389
				New Leases $ 3,711,597

• 61 -

28. CAPITAL MANAGEMENT

The Group maintains and manages its capital to meet the minimum paid-in capital required by the competent authority, and to optimize the balance of liabilities and equity in order to maximize stockholders’ return. By periodically reviewing and measuring relative cost, risk, and rate of return to ensure profit and to maintain adequate financial ratios, the Group may adopt various financing approaches to balance its capital structure in order to meet the demands for capital expenditures, working capital, settlements of liabilities, and dividend payments in its normal course of business for the future.

29. FINANCIAL INSTRUMENTS

• a. Categories of financial instruments

Financial assets Financial assets at FVTPL Financial assets at FVTOCI (including current and non-current portions) Financial assets measured at amortized cost (including current and non-current portions) (Note 1) Total Financial liabilities Financial liabilities measured at amortized cost (including current and non-current portions) (Note 2) Financial liabilities at FVTPL Total		December 31	December 31
		2019 $ 149 5,492,381 20,722,936 $ 26,215,466 $ 61,453,923 - $ 61,453,923	2018 $ 81,474 5,019,631 18,678,535 $ 23,779,640 $ 69,992,701 1,861 $ 69,994,562

Note 1: The balances comprise cash and cash equivalents, notes and accounts receivable, other receivables, other financial assets and refundable deposits.

Note 2: The balances comprise short-term borrowings, short-term notes and bills payable, payables, other financial liabilities (classified as other current liabilities), bonds payable, long-term borrowings and guarantee deposits.

• 62 -

• b. Fair value of financial instruments

• 1) Financial instruments not at fair value

Except for the table below, the Group considers that the book value of financial assets and liabilities that are not at fair value is close to the fair value, or the fair value cannot be reliably measured.

Financial liabilities Bonds payable (including current portion)	December 31	December 31
	2019 Carrying Amount Fair Value $ 15,903,436 $ 16,077,220	2018
		Carrying Amount Fair Value $ 28,918,817 $ 29,495,234

The fair value of bonds payable is measured by Level 2 inputs, using a volume-weighted-average price on the OTC at the end of the reporting period.

• 2) Fair value of financial instruments that are measured at fair value on a recurring basis

The table below provides the related analysis of financial instruments at fair value after initial recognition. Based on the extent that fair value can be observed, the fair value measurements are grouped into Levels 1 to 3:

• Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: Inputs other than quoted prices included within Level 1 are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

• Level 3: Inputs for the assets or liabilities are not based on observable market data (unobservable inputs).

December 31, 2019

Financial assets at FVTPL Equity instruments Limited partnerships Financial assets at FVTOCI Equity instruments Domestic listed stocks Domestic unlisted stocks Limited partnerships Foreign unlisted stocks	Level 1 $ - $ 4,819,602 - - - $ 4,819,602	Level 2 $ - $ - - - 7,407 $ 7,407	Level 3 $ 149 $ - 173,515 462,068 29,789 $ 665,372	Total $ 149 $ 4,819,602 173,515 462,068 37,196 $ 5,492,381

• 63 -

December 31, 2018

Financial assets at FVTPL Beneficiary certificates Financial assets at FVTOCI Equity instruments Domestic listed stocks Domestic unlisted stocks Limited partnerships Foreign unlisted stocks Financial liabilities at FVTPL	Level 1 $ 81,474 $ 4,024,556 - - - $ 4,024,556 $ -	Level 2 $ - $ - - - 10,125 $ 10,125 $ 1,861	Level 3 $ - $ - 181,178 775,385 28,387 $ 984,950 $ -	Total $ 81,474 $ 4,024,556 181,178 775,385 38,512 $ 5,019,631 $ 1,861

There was no transfer between the fair value measurements of Levels 1 and 2 for the years ended December 31, 2019 and 2018.

Valuation techniques and assumptions used in fair value determination

• a) The fair value of financial instruments traded in active markets is based on quoted market prices (including stocks and funds of publicly traded companies).

• b) Valuation techniques and inputs applied for Level 2 fair value measurement:

For foreign unlisted stocks, the Group takes price fluctuations and risk-free rates into consideration by using the market comparison approach. Call and put options of convertible bonds that adopted binomial tree valuation model were evaluated by the observable closing price of the stocks, volatility, risk-free interest rate, risk discount rate, and liquidity risk at the balance sheet date.

• c) Valuation techniques and inputs applied for Level 3 fair value measurement:

• i. Equity instruments

The evaluation of fair value of unlisted stocks is mainly referenced to the same type of companies through the market approach. The unobservable input parameter was liquidity discount rates, which were both ranging from 20% to 30% as of December 31, 2019 and 2018.

The fair value of limited partnerships investments was evaluated through the market approach and income approach. The evaluation and assumptions are mainly referenced to related information of comparable market targets and estimated future cash flows. The unobservable input parameter was liquidity discount rates, which were estimated at 29.6% and 28% as of December 31, 2019 and 2018, respectively.

• 64 -

ii. Hybrid instruments

Convertible notes were redeemed at maturity in May 2018.

The embedded derivatives instruments of convertible notes are evaluated by using binary tree evaluation models to evaluate fair value, considering significant unobservable inputs are historical volatility of stock prices and liquidity discount rate. Assuming all other variables are constant, an increase (or decrease) in the historical volatility of stock prices used in isolation would result in an increase (or decrease) in the liquidity discount rate. There is a positive correlation between historical volatility of stock prices and fair value and a negative correlation between liquidity discount rate and fair value. As a result, the fair value is affected by historical volatility of stock prices and liquidity discount rate.

• 3) Reconciliation of Level 3 fair value measurements of financial instruments

For the Year Ended December 31, 2019

	Financial Assets	Financial Assets	Financial Assets
	at	FVTPL -	at FVTOCI -
		Equity	Equity
	Instruments		Instruments
Balance at January 1, 2019	$	-	$ 984,950
Additions		2,500	-
Recognized in profit or loss (loss on financial assets at
FVTPL)		(2,351)	-
Recognized in other comprehensive income (unrealized loss
on financial assets at FVTOCI)		-	(319,578)
Balance at December 31, 2019	$	149	$ 665,372
For the Year Ended December 31, 2018
	Financial Assets		Financial Assets
	at	FVTPL -	at FVTOCI -
	Convertible		Equity
		Notes	Instruments
Balance at January 1, 2018	$	490,931	$ 956,286
Recognized in profit or loss (gain on financial assets at
FVTPL)		261	-
Recognized in other comprehensive income (unrealized gain
on financial assets at FVTOCI)		-	33,482
Redemption		(491,192)	-
Disposal		-	(1,669)
Capital return		-	(3,149)
Balance at December 31, 2018	$	-	$ 984,950

• 65 -

• c. Financial risk management

• 1) The Group’s major financial instruments include equity investments, trade receivables, trade payables, short-term notes and bills payable, bonds payable, borrowings, lease liabilities, etc., and the Group is exposed to the following risks due to usage of financial instruments:

  • a) Credit risk

  • b) Liquidity risk

  • c) Market risk

This note presents information concerning the Group’s risk exposure and the Group’s targets, policies and procedures to measure and manage the risks.

• 2) Risk management framework

• a) Decision-making mechanism

The Board of Directors is the highest supervisory and decision-making body responsible for assessing material risks, designating actions to control these risks, and keeping track of their execution. In addition, the Operations and Management Committee conducts periodic reviews of each business group’s operating target and performance to meet the Group’s guidance and budget.

• b) Risk management policies

• i. Promote a risk-management-based business model.

• ii. Establish a risk management mechanism that can effectively recognize, evaluate, supervise and control risk.

iii. Create a company-wide risk management structure that can limit risk to an acceptable level.

iv. Introduce best risk management practices and continue to seek improvements.

• c) Monitoring mechanism

The Internal Audit Office assesses the potential risks that the Group may face and uses this information as a reference for determining its annual audit plan. The Internal Audit Office reports the results and findings of performing such procedures, and follows up the discrepancies, if any, for actions.

3) Credit risk

Credit risk refers to the risk that a counterparty would default on its contractual obligations resulting in financial loss. The maximum credit exposure of the aforementioned financial instruments is equal to their carrying amounts recognized in consolidated balance sheet as of the balance sheet date. The Group has large trade receivables outstanding with its customers. A substantial majority of the Group’s outstanding trade receivables are not covered by collateral or credit insurance. The Group has implemented ongoing measures including enhancing credit assessments and strengthening overall risk management to reduce its credit risk. While the Group 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 Group serves a large number of unrelated consumers, the concentration of credit risk was limited.

• 66 -

4) Liquidity risk

Liquidity risk is the risk that the Group fails to meet the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to manage liquidity is to ensure, as far as possible, that it always has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable loss or damage to the Group’s reputation.

The Group manages and maintains sufficient level of capital to ensure the requirements of paying estimated operating expenditures, including financial obligations on each contract. The Group also monitors its bank credit facilities to ensure that the provisions of loan contracts are all complied with. As of December 31, 2019 and 2018, the Group had unused bank facilities of $56,641,022 thousand and $58,376,758 thousand, respectively.

The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments, but not including the financial liabilities whose carrying amounts approximate contractual cash flows.

December 31, 2019 Unsecured loans Secured loans Short-term notes and bills payable Bonds payable Lease liabilities December 31, 2018 Unsecured loans Secured loans Short-term notes and bills payable Bonds payable	Contractual Cash Flows Within 1 Year $ 22,351,278 $ 16,337,490 3,127,824 360,411 1,900,000 1,900,000 16,674,020 140,880 9,814,113 3,605,364 $ 53,867,235 $ 22,344,145 $ 18,370,540 $ 12,336,530 3,503,401 366,594 1,500,000 1,500,000 30,130,500 4,701,180 $ 53,504,441 $ 18,904,304	1-5 Years $ 6,013,788 2,767,413 - 7,443,140 6,173,611 $ 22,397,952 $ 6,034,010 1,020,143 - 16,249,320 $ 23,303,473	More Than 5 Years $ - - - 9,090,000 35,138 $ 9,125,138 $ - 2,116,664 - 9,180,000 $ 11,296,664

5) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within an acceptable range and to optimize the return.

The Group carefully evaluates each financial instrument transaction involving any risk such as exchange rate risk, interest rate risk, and market price risk in order to decrease potential influences caused by market uncertainty.

• 67 -

a) Exchange rate risk

The Group mainly operates in Taiwan, except for international roaming services. Most of the operating revenues and expenses are measured in NTD. A small portion of the expenses is paid in USD, EUR, etc.; thus, the Group purchases currency at the spot rate based on the conservative principle in order to hedge exchange rate risk.

The Group’s foreign currency assets and liabilities exposed to significant exchange rate risk were as follows:

Foreign currency assets Monetary items RMB USD EUR Non-monetary items RMB USD HKD THB Foreign currency liabilities Monetary items USD EUR HKD JPY Foreign currency assets Monetary items RMB USD EUR Non-monetary items RMB USD HKD THB Foreign currency liabilities Monetary items USD EUR	December 31, 2019
	Foreign Currencies Exchange Rate New Taiwan Dollars $ 29,446 4.299 $ 126,589 50,271 30.02 1,509,081 1,162 33.62 39,057 130,270 4.299 560,029 16,384 30.02 491,857 1,921 3.855 7,407 118,371 1.01 119,531 15,795 30.02 474,108 97 33.62 3,251 9,326 3.855 35,950 38,710 0.275 10,645 December 31, 2018
	Foreign Currencies Exchange Rate New Taiwan Dollars $ 17,207 4.464 $ 76,812 37,052 30.79 1,140,858 609 35.05 21,323 171,713 4.464 766,529 26,105 30.79 803,772 2,576 3.93 10,125 125,776 0.953 119,889 11,702 30.79 360,320 19 35.05 677

• 68 -

Please refer to Note 24(b) for the information related to the Group’s realized and unrealized foreign exchange gains (losses) for the years ended December 31, 2019 and 2018, respectively. Due to the variety of foreign currency transactions and functional currencies, the Group could not disclose the foreign exchange gains (losses) for each foreign currency with significant influence.

Sensitivity analysis

The Group’s exchange rate risk comes mainly from conversion gains and losses of accounts denominated in monetary items of foreign currencies. If there had been an unfavorable 5% movement in the levels of foreign exchanges against NTD at the end of the reporting period (with other factors remaining constant at the end of the reporting period and with analyses of the two periods on the same basis), profit would have decreased by $57,539 thousand and $43,900 thousand for the years ended December 31, 2019 and 2018, respectively.

b) Interest rate risk

The Group issued unsecured straight corporate bonds and signed facility agreements with banks for locking in medium- and long-term fixed interest rates. In respect of interest payables, the fluctuation of interest rates does not affect the Group significantly.

The carrying amounts of the Group’s financial assets and financial liabilities exposed to interest rate risk were as follows:

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities Sensitivity analysis	December 31
	2019 2018 $ 5,763,639 $ 4,290,492 41,837,415 33,285,029 3,697,273 3,750,159 9,859,372 9,162,674

The following sensitivity analysis is based on the exposure to interest rate risk of derivative and non-derivative instruments at the end of the reporting period. For floating-rate assets and liabilities, the analysis assumes that the balances of outstanding assets and liabilities at the end of the reporting period have been outstanding for the whole period and that the changes in interest rates are reasonable. If the interest rate had increased by 50 basis points (with other factors remaining constant at the end of the reporting period and with analyses of the two periods on the same basis), profit would have decreased by $30,810 thousand and $27,063 thousand for the years ended December 31, 2019 and 2018, respectively.

c) Other market price risk

The exposure to equity price risk is mainly due to holding of stocks and beneficiary certificates. The Group manages the risk by maintaining portfolios of investments with different risks and by continuously monitoring the future developments and market trends of investment targets.

Sensitivity analysis

If the prices of equity instruments had decreased by 5% (with other factors remaining constant and with the analyses of the two periods on the same basis), profit would have decreased by $7 thousand and $4,074 thousand since the fair value of financial assets at FVTPL decreased for

• 69 -

the years ended December 31, 2019 and 2018, respectively, and other comprehensive income would have decreased by $274,619 thousand and $250,982 thousand since the fair value of financial assets at FVTOCI decreased for the years ended December 31, 2019 and 2018, respectively.

30. RELATED-PARTY TRANSACTIONS

• a. Parent company and ultimate controlling party

TWM is the ultimate controlling party of the Group.

• b. Related party name and nature of relationship

Related Party GHS TPE kbro Media TVD Shopping ADT M.E. AppWorks Beijing Global JiuSha Media Technology Co., Ltd. GHS Trading Ltd. Beijing Global Zhiqun Trading Co., Ltd. Beijing YueShih JiuSha Media Technology Co., Ltd. Good Image Co., Ltd. Fubon Life Insurance Co., Ltd. (Fubon Life) Fubon Insurance Co., Ltd. (Fubon Ins.) Fubon Securities Investment Trust Co., Ltd. (FSIT) Fubon Sports & Entertainment Co., Ltd. Taipei Fubon Commercial Bank Co., Ltd. (TFCB) Fubon Financial Holding Co., Ltd. Fubon Life Insurance (HK) Ltd. Fubon Securities Co., Ltd. Fubon Futures Co., Ltd. Fubon Investment Services Co., Ltd. Fubon Marketing Co., Ltd. Fu-Sheng Life Insurance Agency Co., Ltd. Fu-Sheng General Insurance Agency Co., Ltd. Fubon Financial Venture Capital Co., Ltd. Fubon Gymnasium Co., Ltd. Fubon Asset Management Co., Ltd. One Production Film Co., Ltd. Fubon Bank (China) Co., Ltd. Fubon Land Development Co., Ltd. Fubon Property Management Co., Ltd. Fubon Real Estate Management Co., Ltd. Fubon Hospitality Management Co., Ltd. Chung Hsing Constructions Co., Ltd. Ming Dong Co., Ltd. Fu Yi Health Management Co., Ltd. Dao Ying Co., Ltd. Fubon Xinji Investment Co., Ltd.

Nature of Relationship

Associate Associate Associate Associate Associate Associate Associate Associate (subsidiary of GHS) Associate (subsidiary of GHS) Associate (subsidiary of GHS) Associate (subsidiary of GHS) Associate (subsidiary of kbro Media) Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party Other related party

(Continued)

• 70 -

Natureree of Relationshipf Relationshipelationshiplationshipationshipionshiponshipnshipshiphipp

Related Party Natureree of Relationshipf Relationshipelationshiplationshipationshipionshiponshipnshipshiphipp Mitchiller Media Co., Ltd. Other related party (not a related party since August 2019) Far Eastern Memorial Hospital Other related party Dai-Ka Ltd. Other related party Chen Feng Investment Ltd. Other related party Chen Yun Co., Ltd. Other related party Xi Guo Co., Ltd. Other related party Taiwan Mobile Foundation (TMF) Other related party Taipei New Horizon Foundation (TNHF) Other related party Fubon Cultural & Educational Foundation Other related party Fubon Charity Foundation Other related party Fubon Art Foundation Other related party Taipei Fubon Bank Charity Foundation Other related party Taipei New Horizon Management Agency Other related party Key management Chairman, director, general manager, manager, etc.

(Concluded)

c. Significant transactions with related parties

• 1) Operating revenue

Associates Other related parties	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 77,795 904,350 $ 982,145	2018 $ 76,963 859,838 $ 936,801

The Group renders telecommunications, sales, maintenance, lease services, etc., to the related parties. The transaction terms with related parties were not significantly different from those with third parties.

2) Purchases

Associates Other related parties	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 588,655 369,102 $ 957,757	2018 $ 409,648 860,007 $ 1,269,655

The entities mentioned above provide logistics, copyright, member service costs and other services. The transaction terms with related parties were not significantly different from those with third parties.

• 71 -

3) Receivables due from related parties

Account Related Party Categories Accounts receivable Associates Accounts receivable Other related parties Other receivables Associates Other receivables Other related parties		**December 31 **	**December 31 **
		2019 $ 4,729 141,457 $ 146,186 $ 63,988 65,285 $ 129,273	2018 $ 11,249 126,709 $ 137,958 $ 113,187 59,108 $ 172,295

Receivables from related parties above were not secured with collateral, and no provisions for impairment loss were accrued.

4) Payables due to related parties

Account Related Party Categories Accounts payable Associates Accounts payable Other related parties Other payables Other related parties 5) Prepayments Other related parties			December 31	December 31
			2019 2018 $ 101,077 $ 91,266 34,085 88,322 $ 135,162 $ 179,588 $ 18,027 $ 60,216 December 31
		2019 $ 15,803		2018 $ 15,467

6) Bank deposits, time deposits and other financial assets (including current and non-current portions)

Other related parties TFCB Others 7) Cash equivalents Related Party Target Acquired TFCB Government bonds with repurchase rights		December 31	December 31
	2019 2018 $ 2,102,334 $ 1,284,174 18,736 23,001 $ 2,121,070 $ 1,307,175 For the Year Ended December 31
		2019 $ 240,000	2018 $ 1,670,129

• 72 -

For the Year Ended December 31, 2019

Related Party Target Disposed Original Purchase Price Proceeds TFCB Government bonds with repurchase rights $ 386,013 $ 386,049 For the Year Ended December 31, 2018 Related Party Target Disposed Original Purchase Price Proceeds TFCB Government bonds with repurchase rights $ 1,524,116 $ 1,524,181 Financial assets at FVTPL - current For the Year Ended December 31, 2019 Related Party Target Disposed Purchase Price FSIT Fund $ 100,000	Interest Income $ 36 Interest Income $ 65 Proceeds $ 84,864	Interest Income $ 36
		Interest Income $ 65

• 8) Financial assets at FVTPL - current

The cumulative losses were $15,136 thousand, and the Group recognized $3,390 thousand as gain for the year ended December 31, 2019.

For the Year Ended December 31, 2018

Related Party Target Disposed Purchase Price FSIT Fund $ 100,000	Proceeds $ 88,184

The cumulative loss was $11,816 thousand, and the Group recognized $2,249 thousand as loss for the year ended December 31, 2018.

• 9) Equity purchase transaction

			Shares (In
Related Party	Transaction Date	Target	Thousands)	Purchase Price
Jamie Lin, President
of TWM	September 2019	AppWorks	387	$ 62,000

• 73 -

10) Others

11)	Guarantee deposits Other related parties Other current liabilities - receipts under custody Other related parties Operating expenses Other related parties TMF TNHF Fubon Life TFCB Others Other income Other related parties Lease arrangements Acquisition of right-of-use assets Other related parties Lease liabilities (including current and non-current portions) Other related parties Sublease arrangements under finance leases		December 31
		2019 2018 $ 54,256 $ 51,548 $ 123,993 $ 69,057 For the Year Ended December 31
			2019 2018 $ 13,100 $ 14,420 5,000 5,000 13,110 155,416 247,114 250,111 161,402 175,022 $ 439,726 $ 599,969 $ 15,734 $ 2,520 For the Year Ended December 31, 2019 $ 92,694 December 31, 2019 $ 611,736

For the year ended December 31, 2019, the Group subleased right-of-use assets to other related parties under finance leases. As of December 31, 2019, the balance of finance lease receivables was $380 thousand, and the Group recognized $58 thousand as income from the subleasing of right-of-use assets.

• 74 -

Interest expenses

	For the Year	For the Year
		Ended
	December 31,
		2019
Associates	$	61
Other related parties		6,251
	$	6,312

The leases are conducted by referring to general market prices, and all the terms and conditions conform to normal business practices.

d. Key management compensation

The amounts of remuneration of directors and key executives were as follows:

Short-term employee benefits Termination and post-employment benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 292,411 18,528 $ 310,939	2018 $ 300,741 9,583 $ 310,324

31. ASSETS PLEDGED

The assets pledged as collateral for bank loans, purchases, performance bonds and lawsuits were as follows:

Other current financial assets Services concessions Other non-current financial assets		December 31	December 31
		2019 $ 165,201 6,970,053 271,653 $ 7,406,907	2018 $ 160,033 7,148,773 131,110 $ 7,439,916

32. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

a. Unrecognized commitments

Purchases of property, plant and equipment Purchases of cellular phones		December 31	December 31
		2019 $ 3,670,907 $ 2,268,710	2018 $ 806,935 $ 1,872,470

As of December 31, 2019, the amount of lease commitments commencing after the balance sheet date was $629,272 thousand.

• 75 -

• b. As of December 31, 2019 and 2018, the amounts of endorsements and guarantees provided to group entities were both $21,550,000 thousand.

• c. In accordance with the NCC’s policy and regulations, TWM entered into a contract with First Commercial Bank Co., Ltd., which provided a performance guarantee for advance receipts from prepaid cards and electronic gift certificates, totaling $490,027 thousand and $15,405 thousand, respectively, as of December 31, 2019.

In accordance with the NCC’s policy and regulations, cable television companies should provide performance bonds based on a certain proportion of the advance receipts from their subscribers. As of December 31, 2019, the cable television companies had provided $78,405 thousand as performance bonds, classified as other non-current financial assets.

In accordance with the Ministry of Economic Affairs’ policy and regulations, momo entered into a contract with First Commercial Bank Co., Ltd., which provided a performance guarantee for advance receipts from prepaid bonuses and electronic tickets totaling $113,250 thousand and $61,401 thousand, respectively, as of December 31, 2019.

• d. On January 15, 2009, TNH signed the BOT contract with the Department of Cultural Affairs of Taipei City Government. The primary terms of the contract are summarized as follows:

• 1) Construction and operating period:

The construction and operating period is 50 years from the day following the signing of the contract.

• 2) Development concession:

The total initial amount of concession was $1,238,095 thousand (tax excluded). According to the supplemental agreement signed in November 2014, the concession will be paid with additional business tax from the signing date of the supplemental agreement; thus, the concession will be increased by $48,750 thousand. The rest of the concession will be paid over 14 years from fiscal year 2015. As of December 31, 2019, $660,156 thousand (tax included) of the concession had been paid.

• 3) Performance guarantee:

As of December 31, 2019, TNH had provided a $32,500 thousand performance guarantee regarding the BOT contract.

• 4) Rental of land:

During the construction period, TNH should pay land value tax (1% of the announced land value) and other expenses.

During the operating period, TNH should pay 60% of 5% of the announced land value, that is, 3% of the announced land value. According to the supplemental agreement signed in November 2014, the concession will be paid with additional business tax from the date of agreement signing.

• e. In August 2015, Far EasTone Telecommunications (“FET”) filed a civil statement of complaint with the Court, in which FET claimed that (i) TWM shall apply for the return the C4 spectrum block (1748.7-1754.9/1843.7-1849.9 MHz) back to the NCC; (ii) TWM shall not use the C4 spectrum block; (iii) TWM shall not use the C1 spectrum block until TWM’s application for the return of the C4 spectrum block is approved by the NCC; and (iv) TWM shall provide $1,005,800 thousand to FET as compensation. In May 2016, the Court decided against TWM regarding claims (i), (ii), and (iii) of the lawsuit; and the Court decided against FET regarding claim (iv) of the lawsuit. FET offered a security

• 76 -

deposit of $320,630 thousand for the provisional execution of claims (i) to (iv). TWM offered a counter-security deposit of $961,913 thousand in order to be exempted from the provisional execution of claims (i) to (iv). In addition, TWM offered a counter-security deposit for the exemption from provisional execution of the sentence, and the counter-security deposit was reclaimed in March 2018. TWM and FET appealed the aforementioned sentences respectively. The judgment dismissed by the High Court were as follows: 1. (1) TWM “shall apply for the return of the C4 spectrum block to the NCC immediately”, “shall not use the C4 spectrum block in any way”, and “TWM shall not use the C1 spectrum block before the C4 spectrum block has been returned to and approved by the NCC”, and (2) the claim stated in section 2(2) below, in which the corresponding portion of FET’s claimed provisional execution and litigation expenses were rejected. 2. (1) For the dismissed portion stated in the above section (1), FET’s claim and motion of provisional execution in the first instance were rejected; and (2) for the dismissed portion stated in the above section 1(2), TWM shall pay FET $765,779 thousand, as well as a 5% annual interest payment, for the period starting from September 5, 2015 to the payment date, on $152,584 thousand of the above amount. 3. The rest of FET’s appeals were rejected. 4. TWM shall bear half of the litigation expenses in the first and second instances, and FET shall bear the rest. 5. Regarding the portion of the judgment regarding TWM’s payment, FET may file a provisional execution with a collateral of $255,260 thousand or a negotiable certificate deposit (NCD) issued by Far Eastern International Bank for the equal amount; and TWM may provide a counter-security of $765,779 thousand to be exempted from the above FET provisional execution. 6. The rest of FET’s motions on provisional execution were rejected. TWM and FET appealed the sentence respectively. On May 29, 2019, the judgment dismissed by the Supreme Court was as follows: regarding the portion of the High Court’s original judgment on (1) dismissed FET’s other appeal, (2) ruled the TWM’s payment obligation, and (3) ruled the litigation expenses with respect to above-mentioned two items shall be dismissed, and the Supreme Court remanded the case to the High Court. The case is now under the trial of the High Court.

33. SIGNIFICANT EVENTS AFTER REPORTING PERIOD

• a. TWM acquired the 60MHz in the 3500MHz frequency band of 5G in the quantity-based bidding in January 2020, and the winning bid amounted to $30,450,000 thousand. TWM also submitted the winning bid for spectrum position in February 2020, with the winning bid amounting to $0. The total winning bids were $30,450,000 thousand. TWM acquired the 200MHz in the 28000MHz frequency band in January 2020 with the winning bid amounting to $206,000 thousand, and negotiated and agreed with other bidders for the spectrum position in February 2020.

• b. In January 2020, the Board of Directors resolved that TWM would issue unsecured straight corporate bonds with a total amount no more than $20,000,000 thousand.

• c. TWM acquired 5% equity interest of Line Bank, and the preparatory office of Line Bank has been granted a permit to establish an internet-only banking business by FSC on July 30, 2019. TWM has prepaid $100,000 thousand and $400,000 thousand for the proposed investments in January 2019 and February 2020, respectively. Line Bank is currently in the progress for setup registration and a banking business license application.

• d. In January 2020, the Board of Directors of TFN, one of TWM’s subsidiaries, resolved that TFN would dispose of 90,212 thousand shares of common stock of Taiwan High Speed Rail Corporation at selling prices no less than $36 per share in batches.

• e. In January 2020, the Board of Directors of momo, one of TWM’s subsidiaries, resolved that momo would set up a 100%-owned subsidiary, which will mainly engage in trucking business, with an investment amount capped at $250,000 thousand.

• 77 -

34. OTHERS

Employee benefits, depreciation, and amortization are summarized as follows:

Employee benefits Salary Insurance expenses Pension Others Depreciation Amortization	**For the Year Ended December 31 **	**For the Year Ended December 31 **
	2019 Classified as Operating Costs Classified as Operating Expenses Total $ 2,265,080 $ 4,672,180 $ 6,937,260 189,966 411,739 601,705 102,099 209,627 311,726 107,486 256,185 363,671 11,750,782 1,004,958 12,755,740 3,036,555 2,887,293 5,923,848	2018
		Classified as Operating Costs Classified as Operating Expenses Total $ 2,174,076 $ 4,469,891 $ 6,643,967 176,526 390,191 566,717 97,721 207,550 305,271 106,350 266,152 372,502 9,564,028 340,051 9,904,079 3,223,551 3,827,582 7,051,133

Information of employees’ compensation and remuneration of directors

According to TWM’s Articles, the estimated employees’ compensation and remuneration of directors are set at the rates of 1% to 3% and no higher than 0.3%, respectively, of profit before income tax, employees’ compensation, and remuneration of directors. Estimations for employees’ compensation were made by applying the rates to the aforementioned profit before income tax, for the years ended December 31, 2019 and 2018, respectively.

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

The employees’ compensation and remuneration of directors of 2019 and 2018 shown below were approved by the Board of Directors on February 21, 2020 and January 31, 2019, respectively. The differences with the amounts recognized in the consolidated financial statements have been adjusted in 2020 and 2019, respectively.

Amounts approved by the Board of Directors Amounts recognized in the consolidated financial statements	For the Year Ended December 31	For the Year Ended December 31
	2019 Employees’ Compensation Paid in Cash Remuneration of Directors $ 437,880 $ 43,788 $ 394,092 $ 39,409	2018
		Employees’ Compensation Paid in Cash Remuneration of Directors $ 459,368 $ 45,937 $ 432,341 $ 43,234

Information on the employees’ compensation and remuneration of directors approved by the Board of Directors is available on the Market Observation Post System website of the Taiwan Stock Exchange.

• 78 -

35. ADDITIONAL DISCLOSURES

• a. Information on significant transactions and b. Information on investees:

• 1) Financing extended to other parties: Table 1 (attached)

• 2) Endorsements/guarantees provided to other parties: Table 2 (attached)

• 3) Marketable securities held: Table 3 (attached) (excluding investments in subsidiaries and associates)

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

• 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in

  • capital: Table 4 (attached)

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

• 7) Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: Table 5 (attached)

• 8) Receivables from related parties of at least NT$100 million or 20% of the paid-in capital: Table 6 (attached)

• 9) Names, locations and related information of investees on which TWM exercised significant influence: Table 7 (attached) (excluding information on investment in Mainland China)

• 10) Trading in derivative instruments: None

• 11) Business relationships between the parent and the subsidiaries and significant intercompany transactions: Table 8 (attached)

• c. Information on investment in Mainland China:

• 1) The names of investees in Mainland China, the main businesses and products, issued capital, method of investment, information on inflow or outflow of capital, ownership, net income or loss and recognized investment gain or loss, ending balance, amount received as earnings distributions from the investment, and limitation on investment: Table 9 (attached)

• 2) Significant direct or indirect transactions with the investee companies, the prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in Mainland China on financial reports: Table 8 (attached)

• 79 -

36. SEGMENT INFORMATION

The Group divides its business into four reportable segments with different market attributes and operation modes. The four segments are described as follows.

Telecommunications: providing mobile communication services, data mobile services, and fixed-line services.

Retail: providing online shopping, TV shopping and catalog shopping.

Cable Television: providing pay TV and cable broadband services.

Others: business other than telecommunication, retail, and cable television.

						Adjustments	Adjustments
For the Year Ended	Telecommuni-			Cable			and
December 31, 2019		cations	Retail	Television	Others	Eliminations		Total
Operating revenues	$	67,384,770	$ 51,830,417 $	6,089,688 $	598,050	$	(1,482,012 )	$ 124,420,913
Operating costs		42,561,416	46,745,781	3,237,440	345,741		(1,278,200 )	91,612,178
Operating expenses		12,067,423	3,458,294	770,045	58,989		(239,584 )	16,115,167
Net other income and
expenses		501,358	29,287	10,188	2,709		(43,775 )	499,767
Profit		13,257,289	1,655,629	2,092,391	196,029		(8,003 )	17,193,335
EBITDA (Note)		27,618,141	2,328,619	3,079,032	408,399		(45,265 )	33,388,926
						Adjustments
For the Year Ended	Telecommuni-			Cable			and
December 31, 2018		cations	Retail	Television	Others	Eliminations		Total
Operating revenues	$	70,030,527	$ 42,017,012 $	6,344,906 $	587,091	$	(247,208 )	$ 118,732,328
Operating costs		42,760,166	37,756,772	3,585,937	344,015		(131,156 )	84,315,734
Operating expenses		13,340,946	2,852,538	830,384	58,967		(197,338 )	16,885,497
Net other income and
expenses		657,267	14,716	775	-		(41,813 )	630,945
Profit		14,586,682	1,422,418	1,929,360	184,109		39,473	18,162,042
EBITDA (Note)		26,191,754	1,743,000	3,187,542	396,504		204,338	31,723,138

Note: The Group uses EBITDA (Operating income + Depreciation + Amortization expenses of intangible assets) as the measurement for segment profit and the basis of performance assessment.

• a. Geographical information

The Group’s revenues are generated mostly from domestic business. Overseas revenues are primarily generated from international calls and data services.

Consolidated geographic information for revenues was as follows:

Taiwan, ROC Overseas	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 121,142,887 3,278,026 $ 124,420,913	2018 $ 115,690,423 3,041,905 $ 118,732,328

b. Information on major customers

The Group does not have revenues from a single customer that exceeds 10% of the consolidated operating revenues.

• 80 -

TABLE 1

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

FINANCING EXTENDED TO OTHER PARTIES FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars)

No.	Lending Company	Borrowing Company	Financial Statement Account	Related Parties	Maximum Balance for the Period (Note 1)	Ending Balance (Note 1)	Drawdown Amounts	Interest Rate	Nature of Financing	Transaction Amounts	Reasons for Short-term Financing	Allowance for Impairment Loss	**Collateral **	**Collateral **	Lending Limit for Each Borrowing Company	Lending Company’s Lending Amount Limits	Note
													Item	Value
1	TCC	TWM TFC	Other receivables Other receivables	Yes Yes	$ 400,000 700,000	$ 400,000 700,000	$ 59,000 252,000	1.09422%-1.09511% 1.39378%	Short-term financing Short-term financing	$ - -	Operation requirements Operation requirements	$ - -	- -	$ - -	$ 36,513,649 36,513,649	$ 36,513,649 36,513,649	Note 2 Note 2
2	WMT	TWM TKT TFNM WTVB	Other receivables Other receivables Other receivables Other receivables	Yes Yes Yes Yes	3,500,000 100,000 3,000,000 600,000	3,500,000 100,000 2,770,000 600,000	2,876,000 - 1,070,000 330,000	1.09367%-1.09511% - 1.09378%-1.09489% 1.09367%-1.09522%	Short-term financing Short-term financing Short-term financing Short-term financing	- - - -	Operation requirements Operation requirements Operation requirements Operation requirements	- - - -	- - - -	- - - -	8,295,952 8,295,952 8,295,952 8,295,952	8,295,952 8,295,952 8,295,952 8,295,952	Note 2 Note 2 Note 2 Note 2
3	TFN	TWM TCC	Other receivables Other receivables	Yes Yes	9,000,000 700,000	9,000,000 700,000	7,600,000 -	1.09378%-1.09511% -	Short-term financing Short-term financing	- -	Operation requirements Operation requirements	- -	- -	- -	23,762,059 23,762,059	23,762,059 23,762,059	Note 2 Note 2
4	YJCTV	TFNM	Other receivables	Yes	140,000	100,000	100,000	1.09378%-1.09456%	Transactions	462,023	-	-	-	-	462,023	462,023	Notes 3 and 4
5	PCTV	TFNM	Other receivables	Yes	520,000	520,000	520,000	1.09378%-1.09456%	Transactions	538,216	-	-	-	-	538,216	538,216	Notes 3 and 4
6	GCTV	TFNM	Other receivables	Yes	250,000	250,000	250,000	1.09378%-1.09456%	Short-term financing	-	Repayment of financing	-	-	-	286,680	286,680	Note 3

Note 1: The maximum balance for the period and the ending balance represent quotas, not actual drawdown.

Note 2: Where funds are loaned for reasons of business dealings and short-term financing needs, the amount of loaned funds shall be limited to 40% of the lending company’s net worth. For short-term financing needs, the aggregate amount of loaned funds shall not exceed 40% of the lending company’s net worth. The individual loan funds shall be limited to the lowest amount of the following items: 1) 40% of the lending company’s net worth; 2) The amount that the lending company invests in the borrowing entities; or 3) An amount equal to (the share portion of the borrowing entities that the lending company invests in) * (the total loaning amounts of the borrowing company). In the event that a lending company directly and indirectly owns 100% of the borrowing company, or the borrowing company directly and indirectly owns 100% of the lending company, the individual lending amount and the aggregate amount of loaned funds shall not exceed 40% of the lending company’s net worth. Note 3: Where funds are loaned for reasons of business dealings and short-term financing needs, the amount of loaned funds shall be limited to the total amount of business dealings and 40% of the lending company’s net worth. 1) For reasons of business dealings: The individual lending amount and the aggregate amount of loaned funds shall not exceed the amount of business dealings and the total amount of business dealings, respectively. 2) For short-term financing needs: The individual lending amount and the aggregate amount of loaned funds shall not exceed 40% of the lending company’s net worth.

Note 4: Where funds are loaned for reasons of business dealings, the aggregate amount of loans and the maximum amount permitted to a single borrower shall be prescribed within the aggregate amount of business transactions.

• 81 -

TABLE 2

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

ENDORSEMENT/GUARANTEE PROVIDED TO OTHER PARTIES FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars)

No.	Company Providing Endorsements/ Guarantees	Receiving Party	Receiving Party	Limits on Endorsements/ Guarantees Amount Provided to Each Entity	Maximum Balance for the Period (Note 1)	Ending Balance (Note 1)	Drawdown Amounts (Note 1)	Amount of Endorsements/ Guarantees Collateralized by Property	Ratio of Accumulated Endorsements/ Guarantees to Net Worth of the Guarantor (Note 1)	Maximum Endorsements/ Guarantees Amount Allowable	Guarantee Provided by Parent Company	Guarantee Provided by a Subsidiary	Guarantee Provided to Subsidiaries in Mainland China	Note
		Name	Nature of Relationship
0	TWM	TFN TKT	Note 2 Note 2	$ 42,000,000 313,800	$ 21,500,000 50,000	$ 21,500,000 50,000	$ 8,451,300 50,000	$ - -	31.61 0.07	$ 68,017,291 68,017,291	Y Y	N N	N N	Notes 3 and 4 Note 3

Note 1: The maximum endorsement/guarantee balance for the period, the ending balance, and the drawdown amounts represent quotas, not actual drawdown.

Note 2: Direct/indirect subsidiary.

Note 3: For 100% directly/indirectly owned subsidiaries, the aggregate endorsement/guarantee amount provided shall not exceed the net worth of TWM, and the upper limit for each subsidiary shall be double the investment amount.

Note 4: Including US$65,000 thousand.

• 82 -

TABLE 3

(In Thousands of New Taiwan Dollars)

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD (EXCLUDING INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES) DECEMBER 31, 2019

Investing Company	Marketable Securities Type and Name	Relationship with the Securities Issuer	Financial Statement Account		December 31, 2019	December 31, 2019		Note
				Units/Shares (In Thousands)	Carrying Value	Percentage of Ownership %	Fair Value
TWM TCC WMT TFN TCCI TUI TID TFNM	Stock Chunghwa Telecom Co., Ltd. Asia Pacific Telecom Co., Ltd. Bridge Mobile Pte Ltd. Limited Partnerships Grand Academy Investment, L.P. Starview Heights Investment, L.P. Stock Arcoa Communication Co., Ltd. Limited Partnerships The Last Thieves, L.P. Stock Taiwan High Speed Rail Corporation Stock TWM Great Taipei Broadband Co., Ltd. Stock TWM Stock TWM Beneficiary Certificates Dragon Tiger Capital Partners Limited - Class B Dragon Tiger Capital Partners Limited - Class C	- - - - - - - - TWM - TWM TWM - -	Current financial assets at FVTOCI Non-current financial assets at FVTOCI Non-current financial assets at FVTOCI Non-current financial assets at FVTOCI Non-current financial assets at FVTOCI Non-current financial assets at FVTOCI Current financial assets at FVTPL Non-current financial assets at FVTOCI Non-current financial assets at FVTOCI Non-current financial assets at FVTOCI Non-current financial assets at FVTOCI Non-current financial assets at FVTOCI Non-current financial assets at FVTOCI Non-current financial assets at FVTOCI	2,174 148,255 800 - - 6,998 - 90,212 200,497 10,000 410,665 87,590 0.2 0.0335	$ 239,086 1,116,360 29,789 367,115 94,953 85,867 149 3,464,156 22,455,637 38,064 45,994,512 9,810,030 - -	0.028 2.55 10 21.67 21.67 5.21 7.14 1.6 5.71 6.67 11.7 2.5 0.33 0.056	$ 239,086 1,116,360 29,789 367,115 94,953 85,867 149 3,464,156 22,455,637 38,064 45,994,512 9,810,030 - -	Note 1 Note 2 Note 2 Note 2

(Continued)

• 83 -

Investing Company	Marketable Securities Type and Name	Relationship with the Securities Issuer	Financial Statement Account		December 31, 2019	December 31, 2019		Note
				Units/Shares (In Thousands)	Carrying Value	Percentage of Ownership %	Fair Value
momo	Stock Media Asia Group Holdings Limited We Can Medicines Co., Ltd.	- -	Current financial assets at FVTOCI Non-current financial assets at FVTOCI	43,668 2,400	$ 7,407 49,584	2.04 7.73	$ 7,407 49,584

Note 1: Asia Pacific Telecom Co., Ltd. had completed the corporate amendment registration on December 9, 2019, and the record date of capital reduction and replacement issue of stock was set at January 17, 2020.

Note 2: Percentage of ownership is the percentage of capital contribution.

Note 3: For the information on investments in subsidiaries and associates, see Table 7 and Table 9 for details.

(Concluded)

• 84 -

TABLE 4

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2019

											(In	Thousands of New Taiwan Dollars)	Thousands of New Taiwan Dollars)
Buyer	Property	Event Date	Transaction Amount	Payment Status	Counterparty	Relationship	Information on Previous Title Transfer If Counterparty			Is A Related Party	Pricing Reference	Purpose of Acquisition	Other Terms
							**Property Owner **	Relationship	Transaction Date	Amount
momo	Land	July 31, 2019	$ 628,143	momo has paid $62,814 thousand. The remaining amounts will be settled in accordance with the contract.	Yi Jinn Industrial Co., Ltd.	-	-	-	-	$ -	Determined by the professional appraisal report and market conditions	Set up a southern logistics center for operational needs	None

• 85 -

TABLE 5

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship		Transaction Details	Transaction Details		Transactions with Terms Different from Others	Transactions with Terms Different from Others	Notes/Accounts Payable or Receivable	Notes/Accounts Payable or Receivable	Note
			Purchase/Sale	Amount (Note 1)	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
TWM TNH TFN TT&T TPIA TKT TDS TFNM YJCTV PCTV UCTV GCTV MCTV momo	TFN TT&T TPIA TKT momo Fubon Ins. TWM TWM TT&T TFNM Fubon Life TWM TFN TWM Fubon Ins. TWM Fubon Ins. TFN YJCTV PCTV UCTV GCTV TFNM TFNM TFNM TFNM Dai-Ka Ltd. TWM TPE	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Other related party Parent Ultimate parent Fellow subsidiary Fellow subsidiary Other related party Ultimate parent Fellow subsidiary Ultimate parent Other related party Ultimate parent Other related party Fellow subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Parent Parent Parent Parent Other related party Ultimate parent Associate	Sale Purchase Purchase Sale Purchase Sale Purchase Sale Purchase Sale Sale Purchase Purchase Sale Sale Sale Sale Purchase Sale Sale Sale Purchase Channel leasing fee Channel leasing fee Channel leasing fee Channel leasing fee Royalty for copyright Royalty for copyright Royalty for copyright Royalty for copyright Royalty for copyright Sale Purchase Purchase	$ 339,163 4,443,314 1,030,475 119,944 270,393 1,155,242 157,676 148,523 101,859 127,410 4,479,607 322,688 106,735 149,860 137,415 1,030,475 106,735 125,905 189,613 270,393 142,603 149,403 424,445 496,761 220,801 189,274 424,445 496,761 220,801 189,274 157,827 158,773 1,135,778 597,651	1 (Note 2) (Note 2) - (Note 2) 2 - - - 21 48 (Note 2) (Note 2) 2 1 91 9 100 90 91 57 (Note 2) 13 15 7 6 54 56 39 56 52 - (Note 2) 1	Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms Based on contract terms	- - - - - - - - - - - - - - - - - - - - - - Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 - - -	- - - - - - - - - - - - - - - - - - - - - - Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 - - -	$ 7,631 (398,965) (83,523) 55,784 (59,888) 185,737 (27,818) 22,140 (9,788) 5,384 398,965 (7,631) (8,353) 24,299 12,676 83,523 8,353 (58,009) 70,117 59,888 - (24,299) - - - - - - - - (39,457) 31,807 (186,683) (101,077)	- (Note 4) (Note 4) 1 (Note 4) 3 2 - 1 39 38 (Note 4) (Note 4) 2 1 91 9 100 88 99 - (Note 4) - - - - - - - - 85 25 (Note 4) 2	Note 5 Note 5 Note 5 Note 5

Note 1: The main difference between the amount sold and purchased by TWM and subsidiaries was because TWM and its subsidiaries classified the amount as right-of-use assets and other items. Note 2: Including operating costs and operating expenses.

Note 3: The companies authorized a related party to deal with the copyright fees for cable television. As the said account item is the only one, there is no comparable transaction. Note 4: Including accounts payable and other payables.

Note 5: Accounts receivable (payable) was the net amount after being offset.

• 86 -

TABLE 6

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

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

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship	Ending Balance	Ending Balance	Turnover Rate	Overdue	Overdue	Amount Received in Subsequent Period	Allowance for Impairment Loss
						Amount	Action Taken
TWM TCC WMT TFN YJCTV PCTV GCTV	momo TFC TWM TFNM WTVB TWM TFNM TFNM TFNM	Subsidiary Subsidiary Parent Subsidiary Subsidiary Ultimate parent Parent Parent Parent	Accounts receivable Other receivables Other receivables Other receivables Other receivables Accounts receivable Other receivables Accounts receivable Other receivables Accounts receivable Other receivables Accounts receivable Other receivables	$ 185,737 253,078 2,881,827 1,071,759 330,715 398,965 7,698,384 6,602 100,176 7,270 520,036 3,217 250,002	11.97 10.34 5.86 5.75 5.75	$ - - - - - - - - - - - - -	- - - - - - - - - - - - -	$ 181,790 253,078 836 - 71 329,261 338,780 - - - - - -	$ - - - - - - - - - - - - -

• 87 -

TABLE 7

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

NAMES, LOCATIONS AND RELATED INFORMATION OF INVESTEES ON WHICH TWM EXERCISED SIGNIFICANT INFLUENCE (EXCLUDING INFORMATION ON INVESTMENT IN MAINLAND CHINA) FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars)

Investor	Investee	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance as of December	Balance as of December	31, 2019	Net Income (Loss) of the Investee	Investment Income (Loss)	Note
				December 31, 2019	December 31, 2018	Shares (In Thousands)	Percentage of Ownership %	Carrying Value
TWM TCC WMT TFN TCCI TFNM TKT	TCC WMT TVC TNH AppWorks ADT TFN TT&T TWM Holding TCCI TDC TDS TPIA TFC TFNM GFMT GWMT WTVB momo TUI TFN HK Ltd. TID TKT YJCTV MCTV PCTV UCTV GCTV kbro Media M.E.	Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan British Virgin Islands Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Hong Kong Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan	Investment Investment Investment Building and operating Songshan Cultural and Creative Park BOT project Venture capital, investment consulting, and management consulting Technology development of mobile payment and information processing services Fixed line service provider Call center service and telephone marketing Investment Investment Mobile phone wholesaling and TV program production Commissioned maintenance service Property insurance agent Type II telecommunications business Type II telecommunications business Investment Investment TV program provider Wholesale and retail sales Investment Telecommunications service provider Investment Digital music service Cable TV service provider Cable TV service provider Cable TV service provider Cable TV service provider Cable TV service provider Film distribution, arts and literature service, and entertainment Livestreaming artists management service, digital media production, and media planning	$ 40,397,288 16,802,000 5,000 1,918,655 235,000 60,000 21,000,000 56,210 347,951 17,285,441 - 25,000 5,000 200,000 5,210,443 16,984 92,189 222,417 8,129,394 22,314,536 - 3,602,782 156,900 2,061,522 510,724 3,261,073 1,986,250 1,221,002 292,500 27,000	$ 40,397,288 16,802,000 - 1,918,655 - 60,000 21,000,000 56,210 347,951 17,285,441 112,000 25,000 5,000 5,000 5,210,443 16,984 92,189 222,417 8,129,394 22,314,536 2,925 3,602,782 129,900 2,061,522 510,724 3,261,073 1,986,250 1,221,002 292,500 -	502,970 42,065 500 191,866 1,275 6,000 2,100,000 2,484 - 154,721 - 2,500 500 20,000 230,921 1,500 8,945 18,177 63,047 400 - 104,712 14,700 33,940 6,248 68,090 169,141 51,733 29,250 460	100 100 100 49.9 51 14.4 100 100 100 100 - 100 100 100 100 100 100 100 45.01 100 - 100 100 100 29.53 100 99.22 92.38 32.5 15	$ 20,765,900 20,739,363 4,907 1,820,444 226,123 6,072 59,406,109 101,853 227,662 30,675,496 - 105,275 65,448 197,410 6,695,029 16,903 98,433 313,672 9,321,432 40,421,727 - 8,626,763 245,322 1,770,106 647,082 3,411,505 1,993,914 1,284,613 136,812 25,045	$ 3,531,541 2,180,997 (93) 89,627 (46,806) 3,541 3,318,792 51,681 (25,416) 6,023 (596) 10,742 58,157 (1,999) 1,594,502 20 4,171 55,984 1,393,781 (59) 70 (130) (7,529) (146,317) 62,321 121,282 22,275 63,657 (76,139) (22,512)	$ 3,532,343 2,181,298 (93) 47,990 (9,328) (2,564) - - - - - - - - - - - - - - - - - - - - - - - -	Note 1 Note 1 Note 1 Note 2 Note 2 Notes 2 and 3 Note 2 Notes 2 and 4 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Notes 2 and 5 Note 2 Notes 2 and 4 Note 2 Note 2 Note 2 Notes 2 and 6 Note 2 Note 2 Note 2 Note 2 Note 2

(Continued)

• 88 -

Investor	Investee	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance as of December	Balance as of December	31, 2019	Net Income (Loss) of the Investee	Investment Income (Loss)	Note
				December 31, 2019	December 31, 2018	Shares (In Thousands)	Percentage of Ownership %	Carrying Value
GFMT GWMT momo Asian Crown (BVI) Fortune Kingdom Honest Development	UCTV GCTV Asian Crown (BVI) Honest Development FLI FPI FST TPE TVD Shopping Bebe Poshe Fortune Kingdom HK Fubon Multimedia HK Yue Numerous	Taiwan Taiwan British Virgin Islands Samoa Taiwan Taiwan Taiwan Taiwan Thailand Taiwan Samoa Hong Kong Hong Kong	Cable TV service provider Cable TV service provider Investment Investment Life insurance agent Property insurance agent Travel agent Logistics industry Wholesale and retail sales Wholesale of cosmetics Investment Investment Investment	$ 16,218 91,910 885,285 670,448 3,000 3,000 6,000 337,860 121,933 85,000 1,132,789 1,132,789 670,448	$ 16,218 91,910 885,285 670,448 3,000 3,000 6,000 337,860 121,933 85,000 1,132,789 1,132,789 670,448	1,300 3,825 9,735 21,778 500 500 3,000 16,893 24,150 8,500 11,594 11,594 16,600	0.76 6.83 81.99 100 100 100 100 17.7 35 85 100 100 100	$ 15,329 96,965 40,741 630,252 8,791 10,403 47,826 404,413 119,531 62,992 45,274 45,274 630,252	$ 22,275 63,657 142 9,592 (304) 1,275 8,509 158,565 36,316 (7,532) 229 229 9,592	$ - - - - - - - - - - - - -	Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2 Note 2

Note 1: Downstream transactions, upstream transactions, and consolidated unrealized gain or loss with intercompany effect are included.

Note 2: The income/loss of the investee was already included in the income/loss of the investor, and is not presented in this table.

Note 3: Held 1 share on December 31, 2019.

Note 4: Liquidation procedures were completed in August 2019.

Note 5: Non-controlling interests.

Note 6: 70.47% of stocks are held under trustee accounts.

Note 7: For information on investment in Mainland China, see Table 9 for details.

(Concluded)

• 89 -

TABLE 8

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars)

Number	Company Name	Counter-party	Nature of Relationship (Note 1)		Transaction Details	Transaction Details	Percentage of Consolidated Total Operating Revenues or Total Assets
				Account	Amount	Transaction Terms
0	TWM	TPIA momo TFN TNH TFN WMT TCC TFN TKT momo TFN TT&T TDS TFN TNH TFN momo TFN	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1	Notes and accounts receivable, net Notes and accounts receivable, net Other receivables Other non-current assets Short-term borrowings Short-term borrowings Short-term borrowings Notes and accounts payable Notes and accounts payable Notes and accounts payable Other payables Other payables Other payables Lease liabilities - current Lease liabilities - current Other current liabilities Other current liabilities Lease liabilities - non-current	$ 55,784 185,916 31,619 18,071 7,600,000 2,876,000 59,000 70,865 59,614 27,818 394,247 83,523 17,550 35,879 113,144 32,080 18,291 34,417	The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices	- - - - 5% 2% - - - - - - - - - - - -
							(Continued)

• 90 -

Number	Company Name	Counter-party	Nature of Relationship (Note 1)		Transaction Details	Transaction Details	Percentage of Consolidated Total Operating Revenues or Total Assets
				Account	Amount	Transaction Terms
0	TWM	TNH YJCTV GCTV TKT TFN TFNM TPIA momo TFN TKT TFNM TDS momo TT&T TFN TFN TFN WMT	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1	Lease liabilities - non-current Lease liabilities - non-current Lease liabilities - non-current Disposal of plant, property and equipment Operating revenues Operating revenues Operating revenues Operating revenues Operating costs Operating costs Operating costs Operating costs Operating costs Operating expenses Operating expenses Other revenues and expenses, net Finance costs Finance costs	$ 367,981 34,107 17,330 14,770 339,163 13,378 119,944 1,155,242 4,412,388 269,652 19,329 70,123 157,699 1,030,475 26,786 36,670 81,813 28,923	The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices	- - - - - - - 1% 4% - - - - 1% - - - -
1	TCC	TFC	1	Other receivables	253,078	The terms of transaction are determined in accordance with mutual agreements or general business practices	-

(Continued)

• 91 -

Number	Company Name	Counter-party	Nature of Relationship (Note 1)		Transaction Details	Transaction Details	Percentage of Consolidated Total Operating Revenues or Total Assets
				Account	Amount	Transaction Terms
2	WMT	TFNM WTVB TFNM	1 1 1	Other receivables Other receivables Other income	$ 1,071,759 330,715 13,944	The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices	1% - -
3	TFN	TFNM UCTV TFC TFNM momo TT&T	3 3 3 3 3 3	Notes and accounts receivable, net Acquisition of property, plant and equipment Operating revenues Operating revenues Operating revenues Operating expenses	24,299 11,490 70,940 149,860 19,520 106,735	The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices	- - - - - -
4	momo	FST FGE Bebe Poshe TFNM	1 1 1 3	Other receivables Operating revenues Operating costs Operating costs	12,057 37,351 19,737 53,981	The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices	- - - -
5	TFNM	PCTV YJCTV UCTV GCTV MCTV PCTV YJCTV	1 1 1 1 1 1 1	Other receivables Other receivables Other receivables Other receivables Other receivables Short-term borrowings Short-term borrowings	38,448 36,594 25,452 28,462 15,459 520,000 100,000	The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices	- - - - - - -
							(Continued)

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Number	Company Name	Counter-party	Nature of Relationship (Note 1)		Transaction Details	Transaction Details	Percentage of Consolidated Total Operating Revenues or Total Assets
				Account	Amount	Transaction Terms
5	TFNM	GCTV WTVB PCTV YJCTV UCTV GCTV MCTV WTVB PCTV YJCTV UCTV GCTV WTVB	1 3 1 1 1 1 1 3 1 1 1 1 3	Short-term borrowings Notes and accounts payable Operating revenues Operating revenues Operating revenues Operating revenues Operating revenues Operating revenues Operating costs Operating costs Operating costs Operating costs Operating costs	$ 250,000 17,491 538,601 462,023 220,801 206,040 18,816 11,939 34,942 31,406 22,733 14,650 66,633	The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices The terms of transaction are determined in accordance with mutual agreements or general business practices	- - - - - - - - - - - - -

Note 1: 1. Parent to subsidiary.

1. Subsidiary to parent.

2. Between subsidiaries.

Note 2: All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.

(Concluded)

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TABLE 9

TAIWAN MOBILE CO., LTD. AND SUBSIDIARIES

INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars and Foreign Currencies)

Investee Company Name	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital	Total Amount of Paid-in Capital	Investment Type (Note 1)	Accumulated Outflow of Investment from Taiwan as of January 1, 2019	Accumulated Outflow of Investment from Taiwan as of January 1, 2019	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2019	Net Income (Loss) of Investee	% Ownership through Direct or Indirect Investment	Investment Income (Loss) (Note 2)	Carrying Value as of December 31, 2019	Accumulated Inward Remittance of Earnings as of December 31, 2019	Note
								Outflow	Inflow
TWMC FGE Haobo GHS	Mobile application development and design Wholesaling Investment Wholesaling		$ 90,060 (USD 3,000) 333,173 (RMB 77,500) 47,289 (RMB 11,000) 214,951 (RMB 50,000)		b b b b	$ 146,254 (USD 4,872) 804,040 (USD 14,000) (RMB 89,267) - -		$ - - - -	$ - - - -	$ 146,254 (USD 4,872) 804,040 (USD 14,000) (RMB 89,267) - -	$ 1,433 376 14,261 166,832	100 76.7 100 20	$ 1,433 289 14,261 15,700	$ 77,308 30,240 603,097 560,029	- - - -
Company		Accumulated Investment in Mainland China as of December 31, 2019		Investment Amounts Authorized by Investment Commission, MOEA			Upper Limit on Investment Authorized by Investment Commission, MOEA (Note 3)
TWM and subsidiaries		$1,600,012 (USD18,872, RMB89,267 and HKD168,539)		$1,600,012 (USD18,872, RMB89,267 and HKD168,539)			$44,505,765

Note 1: The investment types are as follows:

a. Direct investment in Mainland China.

b. Indirect investment in Mainland China through a subsidiary in a third place, e.g. TCC and momo.

c. Others.

Note 2: The amounts are based on the audited financial statements.

Note 3: The upper limit on investment in Mainland China is calculated by 60% of the consolidated net worth.

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