Edgar Filing: CHUNGHWA TELECOM CO LTD

Fu-fu Shen

+886 2 2344 5488

chtir@cht.com.tw

Form 6-K

1934 Act Registration No. 1-31731

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

Dated April 30, 2010

Chunghwa Telecom Co., Ltd.

(Translation of Registrant’s Name into English)

21-3 Hsinyi Road Sec. 1,

Taipei, Taiwan, 100 R.O.C.

(Address of Principal Executive Office)

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

Form 20-F x Form 40-F ¨

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

Yes ¨ No x

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

SIGNATURE

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

Date: 2010/04/30


Chunghwa Telecom Co., Ltd.

By:		/S/ SHU YEH
Name:		Shu Yeh
Title:		Senior Vice President CFO

Exhibit


Exhibit		Description

1		Press Release to Report Operating Results for the first quarter of 2010

2		Financial Statements for the Three Months Ended March 31, 2010 and 2009 and Independent Accountants’ Review Report (Stand Alone)

3		Consolidated Financial Statements for the Three Months Ended March 31, 2010 and 2009 and Independent Accountants’ Review Report

4		GAAP Reconciliations of Consolidated Financial Statements for the Three Months Ended March 31, 2009 and 2010

Exhibit 99.1

LOGO

Chunghwa Telecom Reports Operating Results for the First Quarter of 2010

Taipei, Taiwan, R.O.C. April 30, 2010 - Chunghwa Telecom Co., Ltd. (TAIEX: 2412, NYSE: CHT) (“Chunghwa” or “the Company”), today reported its operating results for the first quarter of 2010. All figures were presented on a consolidated basis and prepared in accordance with generally accepted accounting principles in the Republic of China (“ROC GAAP”).

(Comparisons, unless otherwise stated, are to the prior year period)

Financial Highlights for the First Quarter of 2010:

•

Total consolidated revenue increased by 1.0% to NT$49.6 billion

•

Mobile communications business revenue increased by 2.1% to NT$22.2 billion

•

Internet business revenue increased by 2.0% to NT$5.9 billion

•

Domestic fixed communications business revenue decreased by 2.8% to NT$17.2 billion; Broadband access revenue increased by 1.1% to NT$5.1 billion

•

International fixed communications business revenue increased by 9.3% to NT$4.0 billion

•

Total operating costs and expenses decreased by 0.7% to NT$34.7 billion

•

Net income totaled NT$12.1 billion, representing an increase of 11.8%

•

Basic earnings per share (EPS) increased by 11.8% to NT$1.24

Revenue

Chunghwa’s total consolidated revenue for the first quarter of 2010 increased by 1.0% year-over-year to NT$49.6 billion, of which 44.8% was from the mobile business, 11.8% was from the internet business, 34.7% was from the domestic fixed business, 8.0% was from the international fixed business and the remainder was from the other business segment. The primary reasons for the year-over-year increase were the economic recovery and the company’s marketing efforts.

For the mobile business, total revenue for the first quarter of 2010 amounted to NT$22.2 billion, representing an increase of 2.1% year-over-year. The increase was mainly due to the growth of mobile data revenue and increased handset and data card sales, which were the result of the Company’s successful promotion of smartphones and increased user demand for mobile internet services. In addition, the overall economic recovery also supported handset sales and the mobile data revenue.

Chunghwa’s internet business revenue increased by 2.0% year-over-year to NT$5.9 billion in the first quarter of 2010, mainly attributable to HiNet and internet value-added service revenue. The HiNet revenue growth was driven by the increase in broadband subscribers and the migration of ADSL subscribers to fiber solutions. Internet value-added service revenue increased by 9.3% year over year, mostly attributable to the growth of land administrative sales and on-line music and advertisement service revenues.

For the first quarter of 2010, domestic fixed revenue totaled NT$17.2 billion, representing a decrease of 2.8% year-over-year. Of this, local revenue decreased by 2.5% to NT$7.9 billion and domestic long-distance (DLD) revenue decreased by 10.6% to NT$1.7 billion on a year-over-year basis. The decrease of local and DLD revenue was mainly due to mobile and VOIP substitution. Broadband access revenues, including ADSL and FTTx, increased by 1.1% to NT$5.1 billion year-over-year. ADSL access revenue decreased as more ADSL subscribers migrated to fiber solutions, and this decrease was fully offset by the FTTx revenue growth. Chunghwa believes that this migration will continue as customers continue to demand increased bandwidth, and that broadband revenue will increase over time accordingly.

International fixed line revenue for the first quarter of 2010 increased by 9.3% to NT$4.0 billion, which was mainly due to the growth of ILD and leased-line revenue. ILD revenue growth was driven by economic recovery while leased-line revenue growth was due to the expansion of overseas data wholesale and increased sales to multinational corporations.

Finally, other revenue increased by 35.5% to NT$0.4 billion in the first quarter of 2010 compared to the same period of 2009.

Costs and expenses

Total operating costs and expenses for the first quarter of 2010 were NT$34.7 billion, a decrease of 0.7% year-over-year, mainly due to decreased depreciation expenses.

Income Tax

Income tax expense for the first quarter of 2010 were NT$3.0 billion, representing a decrease of 10.9% compared to NT$3.3 billion for the same period of 2009. This decrease was mainly due to the reduced income tax expense resulting from the income tax rate adjustment.

EBITDA and Net Income

EBITDA and operating profit for the first quarter of 2010 increased by 0.9% to NT$23.6 billion and by 5.3% to NT$14.9 billion, respectively, primarily due to the revenue growth in the first quarter of 2010. The Company’s EBITDA margin and operating profit margin for the first quarter of 2010 were 47.5% and 30.0%, respectively, compared to 47.6% and 28.8%, respectively, for the same period of 2009.

Net income for the first quarter of 2010 increased by 11.8% year-over-year to NT$12.1 billion, primarily because of the revenue growth and the decreased income tax rate.

Capital Expenditures (“Capex”)

Total capex for the first quarter of 2010 amounted to NT$4.2 billion, representing a decrease of 11.4% year-over-year, primarily because the slight delay of capex budget execution. Of the NT$4.2 billion in capex, 66.8% was used for the domestic fixed communications business, 17.8% was for the mobile communications business, 4.6% was for the internet business, 9.2% was for the international fixed communications business and the remainder was for other uses.

Cash Flow

Cash flow from operating activities for the first quarter of 2010 decreased by 2.2% to NT$15.7 billion compared to the same period of 2009. This was primarily due to the increase in other monetary assets.

As of March 31, 2010, the Company’s cash and cash equivalents totaled NT$79.2 billion, an increase of 14.5% year-over-year, primarily due to the smaller capital reduction distribution amount in February of 2010 compared to that in March of 2009.

Businesses Performance Highlights:

Broadband/ HiNet Business

•

Total broadband subscribers were 4.3 million as of March 31, 2010. Chunghwa continued its effort to migrate ADSL subscribers to FTTx solutions. By the end of the first quarter of 2010, there were 1.74 million FTTx subscribers, accounting for 40.4% of Chunghwa’s total broadband subscriber base. By the end of the first quarter 2010, the number of ADSL and FTTx subscribers with a service speed greater than 8 Mbps reached 2.1 million, representing 48.8% of total broadband subscribers, compared to 39.0% at the end of the first quarter of 2009.

•

HiNet subscribers totaled 4.07 million at the end of the first quarter of 2010, growth of 6,545 compared to the end of 2009.

Mobile Business

•

As of March 31, 2010, Chunghwa had 9.4 million mobile subscribers, an increase of 4.2% compared to 8.98 million at the end of the first quarter of 2009.

•

Chunghwa had 4.9 million 3G subscribers at the end of March 2010, accounting for 52.7% of its total subscriber base.

•

Mobile VAS revenue for the first quarter of 2010 was up 23.9% year-over-year to NT$2.5 billion; SMS revenue was up 5.3% year-over-year and mobile internet revenue was up 73.9% year-over-year.

Domestic/International Fixed-line Businesses

•

As of the end of the first quarter of 2010, the Company maintained its leading fixed-line market position, with fixed-line subscribers totaling 12.4 million.

Financial Statements

Financial statements and additional operational data can be found on the Company’s website at www.cht.com.tw/ir/filedownload.

Note Concerning Forward-looking Statements

Except for statements in respect of historical matters, the statements made in this press release contain “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual performance, financial condition or results of operations of Chunghwa to be materially different from what may be implied by such forward-looking statements. Investors are cautioned that actual events and results could differ materially from those statements as a result of a number of factors including, among other things: extensive regulation of telecom industry; the intensely competitive telecom industry; our relationship with our labor union; general economic and political conditions, including those related to the telecom industry; possible disruptions in commercial activities caused by natural and human induced events and disasters, including terrorist activity, armed conflict and highly contagious diseases, such as SARS; and those risks identified in the section entitled “Risk Factors” in Chunghwa’s annual reports on Form F-20 filed with the SEC.

The forward-looking statements in this press release reflect the current belief of Chunghwa as of the date of this press release and we undertake no obligation to update these forward-looking statements for events or circumstances that occur subsequent to such date.

About Chunghwa Telecom

Chunghwa Telecom (TAIEX 2412, NYSE: CHT) is the leading telecom service provider in Taiwan. Chunghwa Telecom provides fixed-line, mobile and Internet and data services to residential and business customers in Taiwan.

Exhibit 99.2

Chunghwa Telecom Co., Ltd.

Financial Statements for the

Three Months Ended March 31, 2010 and 2009 and

Independent Accountants’ Review Report

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and Stockholders

Chunghwa Telecom Co., Ltd.

We have reviewed the accompanying balance sheets of Chunghwa Telecom Co., Ltd. as of March 31, 2010 and 2009, and the related statements of income and cash flows for the three months then ended, all expressed in New Taiwan dollars. These financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these financial statements based on our review.

Except for the matters described in the next paragraph, we conducted our reviews in accordance with the Statement of Auditing Standards No. 36, “Review of Financial Statements”, issued by the Auditing Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an audit opinion.

As discussed in Note 12 to the financial statements, we did not review all financial statements of equity-accounted investments, the investments in which are reflected in the accompanying financial statements using the equity method of accounting. The aggregate carrying values of the equity method investees were NT$9,022,021 thousand and NT$7,439,250 thousand as of March 31, 2010 and 2009, respectively, and the equity in earnings (losses) of these equity method investees were NT$136,174 thousand and NT$(2,877) thousand for the three months ended March 31, 2010 and 2009, respectively.

Based on our reviews, except for the effects of such adjustments, if any, as might have been determined to be necessary had we reviewed financial statements of certain subsidiaries and equity method investees referred to in the preceding paragraph, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with the Securities and Exchange Act, the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines Governing Business Accounting relevant to financial accounting standards, and accounting principles generally accepted in the Republic of China.

- 1 -

As discussed in Note 3 to the financial statements, the Company early adopted the new Statements of Financial Accounting Standards No. 41, “Operating Segments” (“SFAS No. 41”) beginning from September 1, 2009.

We have also reviewed the consolidated financial statements of the Company and its subsidiaries as of and for the three months ended March 31, 2010 and 2009, and have issued a reserve review report.

/s/ DELOITTE & TOUCHE

Deloitte & Touche

Taipei, Taiwan

The Republic of China

April 22, 2010

Notice to Readers

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

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

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CHUNGHWA TELECOM CO., LTD.

BALANCE SHEETS

MARCH 31, 2010 AND 2009

(Amounts in Thousands of New Taiwan Dollars, Except Par Value Data)

(Reviewed, Not Audited)


	2010				2009
	Amount			%	Amount			%
ASSETS

CURRENT ASSETS
Cash and cash equivalents (Notes 2 and 4)	$	75,244,129		17	$	64,381,376		15
Financial assets at fair value through profit or loss (Notes 2 and 5)		6,841		—		8,865		—
Available-for-sale financial assets (Notes 2 and 6)		7,902,927		2		17,939,244		4
Held-to-maturity financial assets (Notes 2 and 7)		1,600,885		1		515,487		—
Trade notes and accounts receivable, net of allowance for doubtful accounts of $2,726,916 thousand in 2010 and $2,938,468 thousand in 2009 (Notes 2 and 8)		9,983,020		2		10,178,679		2
Receivables from related parties (Note 23)		416,889		—		305,236		—
Other monetary assets (Note 9)		2,751,736		1		2,102,708		1
Inventories, net (Notes 2, 3 and 10)		710,718		—		816,103		—
Deferred income tax assets (Notes 2 and 20)		54,638		—		52,718		—
Other current assets (Note 11)		5,552,563		1		5,852,575		1


Total current assets		104,224,346		24		102,152,991		23


LONG-TERM INVESTMENTS
Investments accounted for using equity method (Notes 2 and 12)		10,352,973		2		8,769,953		2
Financial assets carried at cost (Notes 2 and 13)		2,226,048		1		2,521,907		—
Held-to-maturity financial assets (Notes 2 and 7)		6,123,566		1		3,926,522		1
Other monetary assets (Notes 14 and 24)		1,000,000		—		1,000,000		—


Total long-term investments		19,702,587		4		16,218,382		3


PROPERTY, PLANT AND EQUIPMENT (Notes 2, 15 and 23)
Cost
Land		101,269,357		23		101,259,941		23
Land improvements		1,535,066		—		1,496,379		—
Buildings		62,646,557		14		62,647,458		14
Computer equipment		15,467,600		4		15,750,110		4
Telecommunications equipment		656,619,453		149		650,599,936		146
Transportation equipment		1,969,062		—		2,292,026		—
Miscellaneous equipment		6,989,078		2		7,217,760		2

Total cost		846,496,173		192		841,263,610		189
Revaluation increment on land		5,800,909		1		5,810,650		1

		852,297,082		193		847,074,260		190
Less: Accumulated depreciation		560,985,343		127		546,625,885		123

		291,311,739		66		300,448,375		67
Construction in progress and advances related to acquisitions of equipment		13,913,785		3		15,642,868		4


Property, plant and equipment, net		305,225,524		69		316,091,243		71


INTANGIBLE ASSETS (Note 2)
3G concession		6,550,327		2		7,298,936		2
Other		371,953		—		389,601		—


Total intangible assets		6,922,280		2		7,688,537		2


OTHER ASSETS
Idle assets (Note 2)		925,982		—		926,858		—
Refundable deposits		1,567,448		—		1,179,096		—
Deferred income tax assets (Notes 2 and 20)		400,150		—		1,490,762		1
Other (Notes 23 and 24)		2,565,570		1		860,079		—


Total other assets		5,459,150		1		4,456,795		1


TOTAL	$	441,533,887		100	$	446,607,948		100


	2010				2009
	Amount			%	Amount			%
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Financial liabilities at fair value through profit or loss (Notes 2 and 5)	$	—		—	$	104,743		—
Trade notes and accounts payable		5,120,399		1		6,578,112		2
Payables to related parties (Note 23)		1,985,304		1		1,322,641		—
Income tax payable (Notes 2 and 20)		7,044,152		2		8,622,121		2
Accrued expenses (Note 16)		13,693,200		3		12,651,958		3
Other current liabilities (Notes 2, 17 and 25)		15,176,827		3		14,570,711		3


Total current liabilities		43,019,882		10		43,850,286		10


DEFERRED INCOME (Note 2)		2,508,776		—		2,103,085		—


RESERVE FOR LAND VALUE INCREMENTAL TAX (Note 15)		94,986		—		94,986		—


OTHER LIABILITIES
Accrued pension liabilities (Notes 2 and 22)		1,222,842		—		5,173,685		1
Customers’ deposits		5,841,887		1		6,028,691		2
Deferred credit - profit on intercompany transactions (Note 23)		1,485,916		1		1,485,916		—
Other		219,912		—		366,998		—


Total other liabilities		8,770,557		2		13,055,290		3


Total liabilities		54,394,201		12		59,103,647		13


STOCKHOLDERS’ EQUITY (Notes 2, 6, 15 and 18)
Common stock - $10 par value;
Authorized: 12,000,000 thousand shares
Issued: 9,696,808 thousand shares		96,968,082		22		96,968,082		22

Preferred stock -$10 par value		—		—		—		—

Additional paid-in capital
Capital surplus		169,496,289		39		179,193,581		40
Donated capital		13,170		—		13,170		—
Equity in additional paid-in capital reported by equity-method investees		3,252		—		3		—

Total additional paid-in capital		169,512,711		39		179,206,754		40

Retained earnings:
Legal reserve		56,987,241		13		52,859,566		12
Special reserve		2,675,894		—		2,675,894		—
Unappropriated earnings		55,810,363		13		52,061,466		12

Total retained earnings		115,473,498		26		107,596,926		24

Other adjustments
Cumulative translation adjustments		(8,946	)	—		22,571		—
Unrecognized net loss of pension		(44,105	)	—		(4	)	—
Unrealized loss on financial instruments		(565,000	)	—		(2,103,215	)	—
Unrealized revaluation increment		5,803,446		1		5,813,187		1

Total other adjustments		5,185,395		1		3,732,539		1


Total stockholders’ equity		387,139,686		88		387,504,301		87



TOTAL	$	441,533,887		100	$	446,607,948		100

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

(With Deloitte & Touche review report dated April 22, 2010)

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CHUNGHWA TELECOM CO., LTD.

STATEMENTS OF INCOME

THREE MONTHS ENDED MARCH 31, 2010 AND 2009

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

(Reviewed, Not Audited)


	2010			2009
	Amount		%	Amount		%

NET REVENUES (Note 23)	$	45,517,837	100	$	45,208,245	100

OPERATING COSTS (Note 23)		23,631,415	52		23,761,295	53


GROSS PROFIT		21,886,422	48		21,446,950	47


OPERATING EXPENSES (Note 23)
Marketing		5,791,371	13		6,088,237	13
General and administrative		817,002	2		831,483	2
Research and development		745,458	1		755,363	2


Total operating expenses		7,353,831	16		7,675,083	17


INCOME FROM OPERATIONS		14,532,591	32		13,771,867	30


NON-OPERATING INCOME AND GAINS
Equity in earnings of equity investees, net		215,163	1		75,456	—
Interest income		80,495	—		209,571	1
Foreign exchange gain, net		56,192	—		210,804	1
Gain on disposal of financial instruments, net		55,632	—		—	—
Valuation gain on financial instruments, net		164	—		24,321	—
Other		41,290	—		186,740	—


Total non-operating income and gains		448,936	1		706,892	2


NON-OPERATING EXPENSES AND LOSSES
Loss on disposal of property, plant and equipment		11,174	—		2,856	—
Interest expenses		6,692	—		2,770	—
Loss on disposal of financial instruments, net		—	—		274,539	1
Impairment loss on assets		—	—		85,349	—
Other		7,768	—		89,788	—


Total non-operating expenses and losses		25,634	—		455,302	1


INCOME BEFORE INCOME TAX		14,955,893	33		14,023,457	31

INCOME TAX EXPENSES (Notes 2 and 20)		2,895,492	7		3,236,068	7


NET INCOME	$	12,060,401	26	$	10,787,389	24

(Continued)

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CHUNGHWA TELECOM CO., LTD.

STATEMENTS OF INCOME

THREE MONTHS ENDED MARCH 31, 2010 AND 2009

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

(Reviewed, Not Audited)


	2010				2009
	Before Income Tax		After Income Tax		Before Income Tax		After Income Tax

EARNINGS PER SHARE (Note 21)
Basic earnings per share	$	1.54	$	1.24	$	1.45	$	1.11

Diluted earnings per share	$	1.54	$	1.24	$	1.44	$	1.11

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


(With Deloitte & Touche review report dated April 22, 2010)		(Concluded)

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CHUNGHWA TELECOM CO., LTD.

STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Amounts in Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	2010			2009

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	12,060,401		$	10,787,389
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts		113,459			131,026
Depreciation and amortization		8,589,578			9,159,791
Amortization of premium of financial assets		8,114			4,142
Valuation gain on financial instruments, net		(164	)		(24,321	)
Loss (gain) on disposal of financial instruments, net		(55,632	)		274,539
Impairment loss on assets		—			85,349
Valuation loss on inventories		43,939			13,296
Loss on disposal of property, plant and equipment, net		11,174			2,856
Equity in earnings of equity method investees, net		(215,163	)		(75,456	)
Deferred income taxes		4,335			8,416
Changes in operating assets and liabilities:
Financial assets held for trading		9,850			242,768
Trade notes and accounts receivable		973,579			(115,880	)
Receivables from related parties		(33,671	)		37,780
Other current monetary assets		(984,520	)		53,805
Inventories		431,865			247,666
Other current assets		(2,506,685	)		(1,669,918	)
Trade notes and accounts payable		(2,355,561	)		(2,855,833	)
Payables to related parties		150,360			(869,469	)
Income tax payable		2,886,166			3,188,491
Accrued expenses		(2,806,860	)		(3,028,644	)
Other current liabilities		273,388			(112,033	)
Deferred income		25,012			30,790
Accrued pension liabilities		14,885			9,297


Net cash provided by operating activities		16,637,849			15,525,847


CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of available-for-sale financial assets		(1,600,000	)		(5,000,000	)
Proceeds from disposal of available-for-sale financial assets		10,328,079			1,093,285
Acquisition of held-to-maturity financial assets		(2,703,308	)		(883,860	)
Proceeds from disposal of held-to maturity financial assets		—			251,246
Acquisition of investments accounted for using equity method		—			(11,151	)
Acquisition of property, plant and equipment		(4,124,333	)		(4,454,875	)
Proceeds from disposal of property, plant and equipment		11,290			—
Increase in intangible assets		(12,242	)		(36,651	)
Increase in other assets		(1,898,633	)		(12,431	)


Net cash provided by (used in) investing activities		853			(9,054,437	)

(Continued)

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CHUNGHWA TELECOM CO., LTD.

STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Amounts in Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	2010			2009

CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in customers’ deposits	$	(85,942	)	$	(52,993	)
Decrease in other liabilities		(5,202	)		(59,390	)
Capital reduction		(9,696,808	)		(19,115,554	)


Net cash used in financing activities		(9,787,952	)		(19,227,937	)


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		6,850,750			(12,756,527	)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		68,393,379			77,137,903


CASH AND CASH EQUIVALENTS, END OF PERIOD	$	75,244,129		$	64,381,376


SUPPLEMENTAL INFORMATION
Interest paid	$	14		$	17

Income tax paid	$	4,991		$	39,161


CASH AND NON-CASH INVESTING ACTIVITIES
Increase in property, plant and equipment	$	3,041,400		$	3,622,330
Payables to suppliers		1,082,933			832,545

	$	4,124,333		$	4,454,875

The acquisition of InfoExplorer Co., Ltd. (“IFE”) was made on January 20, 2009. The following table presents the allocation of acquisition costs of IFE to assets acquired and liabilities assumed based on their fair values on the basis of the final data on May 7, 2009:


Cash and cash equivalents	$	457,990
Receivables		13,479
Other current assets		14,792
Property, plant, and equipment		40,221
Identifiable intangible assets		53,001
Refundable deposits		2,468
Other assets		2,338
Payables		(83,319	)
Income tax payable		(246	)
Other current liabilities		(153	)

Total		500,571
Percentage of ownership		49.07	%

		245,630
Goodwill		37,870

Acquisition costs of acquired subsidiary (cash prepaid for long-term investments in December 2008)	$	283,500

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


(With Deloitte & Touche review report dated April 22, 2010)		(Concluded)

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CHUNGHWA TELECOM CO., LTD.

NOTES TO FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Amounts in Thousands of New Taiwan Dollars, Unless Stated Otherwise)

(Reviewed, Not Audited)

1.	GENERAL

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

As the dominate telecommunications service provider of fixed-line and Global System for Mobile Communications (“GSM”) in the ROC, Chunghwa is subject to additional regulations imposed by ROC.

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

As of March 31, 2010 and 2009, the Company had 24,619 and 24,530 employees, respectively.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements were prepared in conformity with the Securities and Exchange Act, the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law, Guidelines Governing Business Accounting relevant to financial accounting standards, and accounting principles generally accepted in the ROC (“ROC GAAP”). The preparation of financial statements requires management to make certain estimates and assumptions on allowances for doubtful accounts, valuation allowances on inventories, depreciation of property, plant and equipment, impairment of assets, bonuses paid to employees, remuneration to board of directors and supervisors, pension plans and income tax which are inherently uncertain. Actual results may differ from these estimates. The significant accounting policies are summarized as follows:

Classification of Current and Noncurrent Assets and Liabilities

Current assets are assets expected to be converted to cash, sold or consumed within one year from balance sheet date. Current liabilities are obligations expected to be settled within one year from balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively.

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Cash Equivalents

Cash equivalents are commercial paper purchased with maturities of three months or less from the date of acquisition. The carrying amount approximates fair value.

Financial Assets and Liabilities at Fair Value Through Profit or Loss

Financial instruments classified as financial assets or financial liabilities at fair value through profit or loss (“FVTPL”) include financial assets or financial liabilities held for trading and are designated as FVTPL on initial recognition. The Company recognizes a financial asset or a financial liability when the Company becomes a party to the contractual provisions of the financial instrument. A financial asset is derecognized when the Company losses control of its contractual rights over the financial asset. A financial liability is derecognized when the obligation specified in the relevant contract is discharged, cancelled or expired.

Financial instruments at FVTPL are initially measured at fair value. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized as expenses as incurred. Financial assets or financial liabilities at FVTPL are remeasured at fair value, subsequently with changes in fair value recognized in earnings. Cash dividends received subsequently (including those received in the period of investment) are recognized as income. On derecognition of a financial asset or a financial liability, the difference between its carrying amount and the sum of the consideration received and receivable or consideration paid and payable is recognized in earnings. A regular way purchases or sale of financial assets is accounted for using trade date accounting.

Derivatives that do not meet the criteria for hedge accounting is classified as financial assets or financial liabilities held for trading. When the fair value is positive, the derivative is recognized as a financial asset; when the fair value is negative, the derivative is recognized as a financial liability.

Available-for-sale Financial Assets

Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Changes in fair value from subsequent remeasurement are reported as a separate component of stockholders’ equity. The corresponding accumulated gains or losses are recognized in earnings when the financial asset is derecognized from the balance sheet. A regular way purchase or sale of financial assets is accounted for using trade date accounting.

The recognition and derecognition of available-for-sale financial assets are similar to those of financial assets at FVTPL.

Fair values are determined as follows: Listed stocks - at closing prices at the balance sheet date; open-end mutual funds - at net asset values at the balance sheet date; bonds - quoted at prices provided by the Taiwan GreTai Securities Market; and financial assets and financial liabilities without quoted prices in an active market - at values determined using valuation techniques.

Cash dividends are recognized in earnings on the ex-dividend date, except for the dividends declared before acquisition are treated as a reduction of investment cost. Stock dividends are recorded as an increase in the number of shares and do not affect investment income. The total number of shares subsequent to the increase of stock dividends is used for recalculate cost per share.

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An impairment loss is recognized when there is objective evidence that the financial asset is impaired. If, in a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously recognized impairment loss is reversed to the extent to the decrease and recorded as an adjustment to stockholders’ equity; for debt securities, the amount of the decrease is recognized in earnings, provided that the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.

Held-to-maturity Financial Assets

Held-to-maturity financial assets are carried at amortized cost using the effective interest method. Those financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Gains and losses are recognized at the time of derecognition, impairment or amortization. A regular way purchase or sale of financial assets is accounted for using trade date accounting.

If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount that exceeds the amortized cost that would have been determined as if no impairment loss had been recognized.

Revenue Recognition, Account Receivables and Allowance for Doubtful Receivables

Revenues are recognized when they are realized or realizable and earned. Revenues are realized or realizable and earned when the Company has persuasive evidence of an arrangement, the goods have been delivered or the services have been rendered to the customer, the sales price is fixed or determinable and collectibility is reasonably assured.

Revenue is measured at the fair value of the consideration received or receivable and represents amounts agreed between the Company and the customers for goods sold in the normal course of business, net of sales discounts and volume rebates. For trade receivables due within one year from the balance sheet date, as the nominal value of the consideration to be received approximates its fair value and transactions are frequent, fair value of the consideration is not determined by discounting all future receipts using an imputed rate of interest.

Usage revenues from fixed-line services (including local, domestic long distance and international long distance), cellular services, Internet and data services, and interconnection and call transfer fees from other telecommunications companies and carriers are billed in arrears and are recognized based upon minutes of traffic processed when the services are provided in accordance with contract terms.

The costs of providing services are recognized as incurred. Incentives to third party dealers for inducing business which are payable when the end user enters into an airtime contract are recognized in marketing expenses as incurred.

Other revenues are recognized as follows: (a) one-time subscriber connection fees (on fixed-line services) are deferred and recognized over the average expected customer service periods, (b) monthly fees (on fixed-line services, wireless and Internet and data services) are accrued every month, and (c) prepaid services (fixed line, cellular and Internet) are recognized as income based upon actual usage by customers or when the right to use those services expires.

Where the Company enters into transactions which involve both the provision of air time bundled with products such as 3G data card and handset, total consideration received from handsets in these arrangements is allocated and measured using units of accounting within the arrangement based on relative fair values limited to the amount that is not contingent upon the delivery of other items or services.

Where the Company sells products to third party cellular phone stores the Company records the direct sale of the products, typically handsets, as gross revenue when the Company is the primary obligor in the arrangement and when title is passed and the products are accepted by the stores.

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An allowance for doubtful receivables is provided based on a review of the collectibility of accounts receivable. The Company determines the amount of allowance for doubtful receivables by examining the aging analysis of outstanding accounts receivable.

Inventories

Inventories including merchandise and work-in-process are stated at the lower of cost (weighted-average cost) or net realizable value item by item, except for those that may be appropriate to group items of similar or related inventories. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale.

Investments Accounted for Using Equity Method

Investments in companies in which the Company exercises significant influence over the operating and financial policy decisions are accounted for by the equity method. Under the equity method, the investment is initially stated at cost and subsequently adjusted for its proportionate share in the net earnings of the investee companies. Any cash dividends received are recognized as a reduction in the carrying value of the investments.

Gains or losses on sales from the Company to equity method investees wherein Chunghwa exercises significant influence over these equity investees are deferred in proportion to the Company’s ownership percentage in the investees until such gains or losses are realized through transactions with third parties. Gains or losses on sales from equity method investees to Chunghwa are deferred in proportion to Chunghwa’s ownership percentages in the investees until they are realized through transactions with third parties.

When the Company subscribes for additional investees shares at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment in the investee differs from the amount of the Company share of the investee’s equity. The Company records such a difference as an adjustment to long-term investments with the corresponding amount charged or credited to additional paid-in capital to the extent available, with the balance charged to retained earnings.

Financial Assets Carried at Cost

Investments in equity instruments that do not have a quoted price in an active market and whose fair values cannot be reliably measured such as non-publicly traded stocks are measured at their original cost. If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment loss is not allowed.

Property, Plant and Equipment

Property, plant and equipment are stated at cost plus a revaluation increment, if any, less accumulated depreciation and accumulated impairment loss. The interest costs that are directly attributable to the acquisition, construction of a qualifying asset are capitalized as property, plant and equipment. Major renewals and betterments are capitalized, while maintenance and repairs are expensed as incurred.

When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the amount previously recognized as impairment would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of depreciation, as if no impairment loss had been recognized.

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An impairment loss on a revalued asset is charged to “unrealized revaluation increment” under equity to the extent available, with the balance is recognized as a loss in earnings. If the recoverable amount increases in a subsequent period, the amount previously recognized as impairment loss could be reversed and recognized as a gain, with the remaining credited to “unrealized revaluation increment”.

Depreciation expense is computed using the straight-line method over the following estimated service lives: land improvements - 10 to 30 years; buildings - 10 to 60 years; computer equipment - 6 to 10 years; telecommunications equipment - 6 to 15 years; transportation equipment - 5 to 10 years; and miscellaneous equipment - 3 to 12 years.

Upon sale or disposal of property, plant and equipment, the related cost, accumulated depreciation, accumulated impairment losses and any unrealized revaluation increment are deducted from the corresponding accounts, and any gain or loss recorded as non-operating gains or losses in the period of sale or disposal.

Intangible Assets

Intangible assets mainly include 3G Concession, computer software and patents.

The 3G Concession is valid through December 31, 2018. The 3G Concession is amortized on a straight-line basis from the date operations commence through the date the license expires. Computer software costs and patents are amortized using the straight-line method over the estimated useful lives of 3-20 years.

The Company adopted Statements of Financial Accounting Standards No. 37, “Intangible Assets.” Expenditure on research shall be expensed as incurred. Development Costs are capitalized when those costs meet relative criteria and are amortized using the straight-line method over estimated useful lives. Development costs do not meet relative criteria shall be expensed as incurred.

Idle Assets

Idle assets are carried at the lower of recoverable amount or carrying amount.

Pension Costs

For defined benefit pension plans, net periodic pension benefit cost is recorded in the statement of income and includes service cost, interest cost, expected return on plan assets, amortization of prior service costs, amortization of pension gains (losses) and curtailment or settlement gains (losses).

The Company recognizes into income, any unrecognized actuarial net gains or losses that exceed 10% of the larger of projected benefit obligations or plan assets, defined as the “corridor”. Amounts inside this 10% corridor are amortized over the average remaining service life of active plan participants. Actuarial net gains and losses occur when actual experience differs from any of the many assumptions used to value the plans. Differences between the expected and actual returns on plan assets and changes in interest rate, which affect the discount rate used to value projected plan obligations, can have a significant impact on the calculation of pension net gains and losses from year to year.

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The curtailments and settlement gains (losses) resulted from the Chunghwa’s early retirement programs. Curtailment/settlement gains or losses are equal to the changes of underfunded status plus the a pro rata portion of the unrecognized prior service cost, unrecognized net gains (losses), and unrecognized transition obligations/assets, before the settlement/curtailment event multiplied by the percentage reduction in projected benefit obligation.

The projected benefit obligation represents the actuarial present value of benefits expected to be paid upon retirement based on estimated future compensation levels.

The carrying amount of accrued pension liability should be the sum of the following amounts: (a) projected benefit obligation as of balance sheet date, (b) minus (plus) unamortized actuarial loss (gain), (c) minus unamortized prior service cost, and (d) minus the fair value of plan assets. If the amount determined by above calculation is negative, it is viewed as prepaid pension cost. The prepaid pension cost is measured at the lower of: (a) the amount determined above, and (b) the sum of the following amounts: (i) unamortized actuarial loss, (ii) unamortized prior service cost, and (iii) the present value of refunds from the plan or reductions in future contributions to the plan.

The measurement of benefit obligations and net periodic cost (income) is based on estimates and assumptions approved by the company’s management such as compensation, age and seniority, as well as certain assumptions, including estimates of discount rates, expected return on plan assets and rate of compensation increases.

For employees under defined contribution pension plans, pension costs are recorded based on the actual contributions made to employees’ individual pension accounts during their service periods.

Expense Recognition

The costs of providing services are recognized as incurred. The cost includes incentives to third party dealers for inducing business which are payable when the end user enters into an airtime contract.

Income Tax

The Company applies inter-period allocations for its income tax, whereby deferred income tax assets and liabilities are recognized for the tax effects of temporary differences and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred tax asset or liability does not relate to an asset or liability in the financial statements, then it is classified as either current or noncurrent based on the expected length of time before it is realized or settled.

Any tax credits arising from purchases of machinery, equipment and technology, research and development expenditures, personnel training, and investments in important technology-based enterprises are recognized using the flow-through method.

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

Income taxes (10%) on undistributed earnings is recorded in the year of stockholders approval which is the year subsequent to the year the earnings are generated.

Foreign-currency Transactions

Foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange gains or losses derived from foreign-currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in earnings. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are revalued at prevailing exchange rates with the resulting gains or losses recognized in earnings.

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The financial statements of foreign equity investees are translated into New Taiwan dollars at the following exchange rates. Assets and liabilities - spot rates at period-end; stockholders’ equity - historical rates, income and expenses - average rates during the period. The resulting translation adjustments are recorded as a separate component of stockholders’ equity.

Hedge Accounting

A hedging relationship qualifies for hedge accounting only if, all of the following conditions are met: (a) at the inception of the hedge, there is formal documentation of the hedging relationship and the entity’s risk management objective and strategy for undertaking the hedge; (b) the hedge is expected to be highly effective in achieving offsetting changes in fair value attributable to the hedged risk, consistently with the risk management strategy documented for that particular hedging relationship; (c) the effectiveness of the hedge can be reliably measured; (d) the hedge is assessed on an ongoing basis and determined actually to have been highly effective throughout the financial reporting periods for which the hedge was designated.

The gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in earnings.

The hedging items that do not meet the criteria for hedge accounting were classified as financial assets or financial liabilities at fair value through profit or loss.

3.	EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES

The Company early adopted the Statement of Financial Accounting Standards No. 41 “Operating Segments” (“SFAS No. 41”) starting from September 1, 2009. This Statement supersedes the Statement of Financial accounting Standards No. 20 “Segment Reporting”. For comparative purpose, the segment information for the three months ended March 31, 2009 was presented in accordance with SFAS No. 41.

The Company adopted the newly-revised Statements of Financial Accounting Standards No. 10, “Accounting for Inventories,” (“SFAS No. 10”) beginning from January 1, 2009, which requires inventories to be stated at the lower of cost (weighted-average cost) or net realizable value item by item, except for those that may be appropriate to group items of similar or related inventories. The inventory-related incomes and expenses shall be classified in operating cost.

4.	CASH AND CASH EQUIVALENTS


	March 31
	2010		2009
Cash
Cash on hand	$	84,653	$	92,652
Bank deposits		3,992,315		8,962,810
Negotiable certificate of deposit, annual yield rate - ranging from 0.32%-0.38% and 0.19%-2.45% for 2010 and 2009, respectively		60,400,000		41,650,000

		64,476,968		50,705,462
Cash equivalents
Commercial paper, annual yield rate - ranging from 0.19%-0.25% and 0.16%-0.27% for 2010 and 2009, respectively		10,767,161		13,675,914


	$	75,244,129	$	64,381,376

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As of March 31, 2010 and 2009, foreign deposits in bank were as following:


	March 31
	2010		2009

United States of America - New York (US$ 1,103 thousand and US$712 thousand for 2010 and 2009, respectively)	$	35,097	$	24,155
Hong Kong (US$15,763 thousand, EUR1 thousand, and GBP2 thousand)		—		534,751


	$	35,097	$	558,906

5.	FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS


	March 31
	2010		2009
Derivatives - financial assets
Currency swap contracts	$	6,841	$	—
Forward exchange contracts		—		8,865


	$	6,841	$	8,865


Derivatives - financial liabilities
Forward exchange contracts	$	—	$	104,743

Chunghwa entered into investment management agreements with well-known financial institutions (fund managers) to manage its investment portfolios in 2006. The investment portfolios managed by these fund managers aggregated to an original amount of US$100,000 thousand. Chunghwa terminated the investment management agreements on March 2, 2009 and asked fund managers to dispose all the investment portfolios. The fund managers had disposed all investment portfolios before June 23, 2009 and returned the proceeds to Chunghwa.

Chunghwa entered into currency swap contracts, forward exchange contracts and index future contracts to reduce its exposure to foreign currency risk and variability in operating results due to fluctuations in exchange rates and stock prices. However, the aforementioned derivatives did not meet the criteria for hedge accounting and were classified as financial assets or financial liabilities held for trading.

Outstanding currency swap contracts and forward exchange contracts on March 31, 2010 and 2009 were as follows:


	Currency	Maturity Period	Contract Amount (In Thousands)
March 31, 2010

Currency swap contracts	USD/NTD	2010.04		USD45,000/NTD1,437,553

March 31, 2009

Forward exchange contracts - sell	EUR/USD	2009.04	EUR	3,540
	GBP/USD	2009.04	GBP	3,680
	JPY/USD	2009.04	JPY	304,000
	USD/NTD	2009.04	USD	96,000
	USD/EUR	2009.04	USD	4,514
	USD/GBP	2009.04	USD	5,278
	USD/JPY	2009.04	USD	3,137

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Net gain (losses) arising from financial assets and liabilities at fair value through profit or loss for the three months ended March 31, 2010 and 2009 were $10,014 thousand (including realized settlement gain of $9,850 thousand and valuation gain of $164 thousand) and $(19,435) thousand (including realized settlement loss of $15,145 thousand and valuation loss of $4,290 thousand), respectively.

6.	AVAILABLE-FOR-SALE FINANCIAL ASSETS


	March 31
	2010		2009

Open-end mutual funds	$	7,720,445	$	17,748,321
Domestic listed stocks		142,717		—
Real estate investment trust fund		39,765		190,923


	$	7,902,927	$	17,939,244

Movements of unrealized gain (loss) on available-for-sale financial assets were as follows:


	Three Months Ended March 31
	2010			2009

Balance, beginning of period	$	(466,803	)	$	(2,255,905	)
Recognized in stockholders’ equity		(144,937	)		(60,078	)
Transferred to profit or loss		45,782			227,894


Balance, end of period	$	(565,958	)	$	(2,088,089	)

As a result of the global economic and financial crisis, the Company determined that the impairment losses of available-for-sale financial assets was other-than-temporary in nature, and recorded impairment losses of $85,349 thousand for the three months ended March 31, 2009.

7.	HELD-TO-MATURITY FINANCIAL ASSETS


	March 31
	2010		2009
Corporate bonds, nominal interest rate ranging from 0.77%-4.75% and 0.89%-4.75% for 2010 and 2009, respectively; effective interest rate ranging from 0.45%-2.95% and 0.89-2.95% for 2010 and 2009, respectively	$	7,226,450	$	3,516,546
Bank debentures, nominal interest rate ranging from 1.87%-2.11% and 1.96%-2.80% for 2010 and 2009, respectively; effective interest rate ranging from 1.14%-2.90% and 2.33%-2.90% for 2010 and 2009, respectively		498,001		895,350
Collateralized loan obligation, nominal and effective interest rate was 2.175% for 2009		—		30,113

		7,724,451		4,442,009
Less: Current portion		1,600,885		515,487


	$	6,123,566	$	3,926,522

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8.	ALLOWANCE FOR DOUBTFUL ACCOUNTS


	Three Months Ended March 31
	2010			2009

Balance, beginning of period	$	2,774,868		$	2,992,143
Provision for doubtful accounts		108,726			127,351
Accounts receivable written off		(156,678	)		(181,026	)


Balance, end of period	$	2,726,916		$	2,938,468

9.	OTHER MONETARY ASSETS - CURRENT


	March 31
	2010		2009

Accrued custodial receipts from other carriers	$	387,260	$	449,917
Other receivables		2,364,476		1,652,791


	$	2,751,736	$	2,102,708

10.

INVENTORIES, NET


	March 31
	2010		2009

Merchandise	$	366,222	$	396,373
Work in process		344,496		419,730


	$	710,718	$	816,103

The operating costs related to inventories were $2,166,499 thousand (including the valuation loss on inventories of $43,939 thousand) and $1,500,349 thousand (including the valuation loss on inventories of $13,296 thousand) for the three months ended March 31, 2010 and 2009, respectively.

11.

OTHER CURRENT ASSETS


	March 31
	2010		2009

Prepaid expenses	$	2,436,125	$	2,482,558
Spare parts		1,965,942		2,301,188
Prepaid rents		879,874		875,458
Miscellaneous		270,622		193,371


	$	5,552,563	$	5,852,575

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12.

INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD


	March 31
	2010			2009
	Carrying Amount		% of Owner- ship	Carrying Amount		% of Owner- ship
Listed
Senao International Co., Ltd. (“SENAO”)	$	1,418,947	29	$	1,412,162	29

Non-listed
Light Era Development Co., Ltd. (“LED”)		2,915,201	100		2,966,151	100
Chunghwa Investment Co., Ltd. (“CHI”)		1,672,381	89		832,624	49
Chunghwa Telecom Singapore Pte., Ltd. (“CHTS”)		1,412,966	100		768,879	100
Chunghwa System Integration Co., Ltd. (“CHSI”)		712,951	100		747,188	100
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		484,630	40		574,203	40
CHIEF Telecom Inc. (“CHIEF”)		465,800	69		432,049	69
InfoExplorer Co., Ltd. (“IFE”)		265,337	49		280,152	49
Viettel-CHT Co., Ltd. (“Viettel-CHT”)		261,677	30		96,647	33
Donghwa Telecom Co., Ltd. (“DHT”)		234,932	100		230,393	100
Chunghwa International Yellow Pages Co., Ltd. (“CIYP”)		183,688	100		139,935	100
Skysoft Co., Ltd. (“SKYSOFT”)		89,938	30		86,594	30
Chunghwa Telecom Global, Inc. (“CHTG”)		69,562	100		70,037	100
KingWay Technology Co., Ltd. (“KWT”)		66,220	33		74,335	33
Spring House Entertainment Inc. (“SHE”)		60,592	56		46,702	56
So-net Entertainment Taiwan (“So-net”)		27,572	30		—	—
Chunghwa Telecom Japan Co., Ltd. (“CHTJ”)		10,579	100		11,902	100
New Prospect Investments Holdings Ltd. (B.V.I.) (“New Prospect”)		—	100		—	100
Prime Asia Investments Group Ltd. (B.V.I.) (“Prime Asia”)		—	100		—	100

		8,934,026			7,357,791


	$	10,352,973		$	8,769,953

On March 27, 2009, the board of directors of Chunghwa resolved to purchase 48,000 thousand common shares of Senao International Co., Ltd. (“SENAO”) through SENAO’s private placement. However, Chunghwa and SENAO did not complete the required procedures within the legal payment period; therefore, Chunghwa and SENAO decided to discontinue the private placement. SENAO engages mainly in selling and maintaining mobile phone and its peripheral products.

Chunghwa invested in Chunghwa Investment Co., Ltd. (“CHI”) in September 2009 for $758,709 thousand. Chunghwa increased its ownership interest in CHI from 49% to 89%. CHI engages mainly in professional investing in telecommunication business and the telecommunication valued-added services.

Chunghwa increased its investment in Chunghwa Telecom Singapore Pte., Ltd. (“CHTS”) for $610,659 thousand in July 2009. CHTS engages mainly in telecommunication wholesale, internet transfer services, international data, long distance call wholesales to carriers and the world satellite business. ST-1 telecommunications satellite is expected be retired in 2011; therefore, CHTS and SingTelSat Pte., Ltd. established a joint venture, ST-2 Satellite Ventures Pte., Ltd. (“STS”) in Singapore in October 2008 in order to maintain the current service. STS will engage in the installation and the operation of ST-2 telecommunications satellite.

- 18 -

Chunghwa prepaid $283,500 thousand to invest in InfoExplorer Co., Ltd. (“IFE”) and the record date of capital increase of IFE was January 5, 2009. Chunghwa acquired 49% of ownership. Chunghwa has control over IFE by obtaining above half of seats of the board of directors of IFE on January 20, 2009, which was IFE’s stockholder’s meeting. IFE mainly engages in information system planning and maintenance, software development, and information technology consultation services.

Chunghwa participated in the capital increase of Viettel-CHT in September 2009, by investing $197,088 thousand cash and its ownership interest of Viettel-CHT was decreased from 33% to 30%. Viettel-CHT engages mainly in IDC services.

Chunghwa participated in So-net Entertainment Co., Ltd.’s capital increase on April 3, 2009, by investing $60,008 thousand cash, and acquired 30% of its shares. So-net Entertainment Co., Ltd. engages mainly in online service and sale of computer hardware.

Chunghwa increased its investment on CHTJ by investing $11,151 thousand cash in January 2009. CHTJ engages mainly in telecommunication business, information processing and information providing service, development and sale of software and consulting services in telecommunication.

Chunghwa has established New Prospect Investments Holdings Ltd. (B.V.I.) (“New Prospect”) and Prime Asia Investments Group Ltd. (B.V.I.) (“Prime Asia”) in March 2006, but not on operation stage yet. Both holding companies are operating as investment companies and Chunghwa has 100% ownership interest in an amount of US$1 in each holding company.

The equity in earnings (losses) of equity investees for the three months ended March 31, 2010 and 2009, are based on unreviewed financial statements except the equity in earnings of SENAO.

The aggregate carrying values of the equity method investments whose financial statements have not been reviewed were $9,022,021 thousand and $7,439,250 thousand as of March 31, 2010 and 2009, respectively. The net equity in earnings (losses) were $136,174 thousand and $(2,877) thousand for the three months ended March 31, 2010 and 2009, respectively.

13.

FINANCIAL ASSETS CARRIED AT COST


	March 31
	2010			2009
	Carrying Amount		% of Owner- ship	Carrying Amount		% of Owner- ship
Non-listed
Taipei Financial Center (“TFC”)	$	1,789,530	12	$	1,789,530	12
Industrial Bank of Taiwan II Venture Capital Co., Ltd. (“IBT II”)		200,000	17		200,000	17
Global Mobile Corp. (“GMC”)		127,018	11		127,018	11
iD Branding Ventures (“iDBV”)		75,000	8		75,000	8
RPTI International (“RPTI”)		34,500	10		34,500	12
Essence Technology Solution, Inc. (“ETS”)		—	9		10,000	9

		2,226,048			2,236,048

Prepayments for long-term investments in stocks - Taipei Financial Center (“TFC”)		—	—		285,859	—


	$	2,226,048		$	2,521,907

RPTI completed a capital reduction to offset its deficits and as a result the number of shares held by Chunghwa was reduced from 9,234 thousand shares to 4,765 thousand shares. Subsequent to this capital reduction, RPTI raised additional capital through cash contributions. Chunghwa did not participate in the RPTI’s capital increase plan; therefore, Chunghwa’s ownership of RPTI decreased to 10%.

- 19 -

After evaluating the financial assets carried at cost, Chunghwa determined the investment in ETS was impaired and recognized an impairment loss of NT$10,000 thousand in 2009.

Chunghwa participated in TFC’s capital increase in October 2008 and prepaid $285,859 thousand. However, TFC was not expected to be able to collect enough amount of capital increase within a specific period; therefore TFC’s board of directors held a meeting on April 10, 2009 and resolved to withdraw its capital increase plan from Securities and Futures Bureau of Financial Supervisory Commission, Executive Yuan (“FSC”). TFC returned the prepayment to Chunghwa on May 8, 2009.

The above investments that do not have a quoted market price in an active market and whose fair values cannot be reliably measured are carried at original cost.

14.

OTHER MONETARY ASSETS - NONCURRENT

As part of the government’s effort to upgrade the existing telecommunications infrastructure, Chunghwa and other public utility companies were required by the ROC government to contribute a total of $1,000,000 thousand to a Piping Fund administered by the Taipei City Government. This funds was used to finance various telecommunications infrastructure projects.

15.

PROPERTY, PLANT AND EQUIPMENT


	March 31
	2010		2009
Cost
Land	$	101,269,357	$	101,259,941
Land improvements		1,535,066		1,496,379
Buildings		62,646,557		62,647,458
Computer equipment		15,467,600		15,750,110
Telecommunications equipment		656,619,453		650,599,936
Transportation equipment		1,969,062		2,292,026
Miscellaneous equipment		6,989,078		7,217,760

Total cost		846,496,173		841,263,610
Revaluation increment on land		5,800,909		5,810,650

		852,297,082		847,074,260

Accumulated depreciation
Land improvements		965,010		912,283
Buildings		17,586,104		16,513,194
Computer equipment		11,833,646		11,886,242
Telecommunications equipment		522,908,897		509,079,240
Transportation equipment		1,742,807		2,094,789
Miscellaneous equipment		5,948,879		6,140,137

		560,985,343		546,625,885

Construction in progress and advances related to acquisition of equipment		13,913,785		15,642,868


Property, plant and equipment, net	$	305,225,524	$	316,091,243

- 20 -

Pursuant to the related regulation, Chunghwa revalued its land owned as of April 30, 2000 based on the publicly announced value on July 1, 1999. These revaluations which have been approved by the Ministry of Auditing resulted in increases in the carrying values of property, plant and equipment of $5,986,074 thousand, liabilities for land value incremental tax of $211,182 thousand, and stockholders’ equity - other adjustments of $5,774,892 thousand.

The amendment to the Land Tax Act, relating to the article to permanently lower land value incremental tax, went into effect on February 1, 2005. In accordance with the lowered tax rates, Chunghwa recomputed its land value incremental tax, and reclassified the reserve for land value incremental tax of $116,196 thousand to stockholders’ equity - other adjustments. As of March 31, 2010, the unrealized revaluation increment was decreased to $5,803,446 thousand due to disposal of revaluation assets.

Depreciation expense on property, plant and equipment for the three months ended March 31, 2010 and 2009 amounted to $8,305,538 thousand and $8,893,937 thousand, respectively. No interest was capitalized for the three months ended March 31, 2010 and 2009.

16.

ACCRUED EXPENSES


	March 31
	2010		2009

Accrued salary and compensation	$	5,178,746	$	5,099,672
Accrued franchise fees		2,745,815		2,910,613
Accrued employees’ bonus and remuneration to directors and supervisors		2,302,868		2,194,620
Other accrued expenses		3,465,771		2,447,053


	$	13,693,200	$	12,651,958

17.

OTHER CURRENT LIABILITIES


	March 31
	2010		2009

Advances from subscribers	$	6,928,420	$	5,605,407
Amounts collected in trust for others		1,916,964		2,201,597
Payables to equipment suppliers		1,434,555		1,925,844
Payables to contractors		1,312,771		1,114,070
Refundable customers’ deposits		1,056,287		997,543
Miscellaneous		2,527,830		2,726,250


	$	15,176,827	$	14,570,711

18.

STOCKHOLDERS’ EQUITY

Under Chunghwa’s Articles of Incorporation, Chunghwa’s authorized capital is $120,000,000,000 which is divided into 12,000,000,000 common shares (at $10 par value per share), among which 9,696,808,181 shares are issued and outstanding as of March 31, 2010.

- 21 -

On March 28, 2006, the board of directors approved the issuance of the 2 preferred shares, and the MOTC purchased the 2 preferred shares at par value on April 4, 2006. In accordance with the Articles of Incorporation of Chunghwa, the preferred shares would be redeemed by Chunghwa three years from the date of issuance at their par value. These preferred shares expired on April 4, 2009 and were redeemed on April 6, 2009.

For the purpose of privatizing Chunghwa, the MOTC sold 1,109,750 thousand common shares of Chunghwa in an international offering of securities in the form of American Depositary Shares (“ADS”) amounting to 110,975 thousand units (one ADS represents ten common shares) on the New York Stock Exchange on July 17, 2003. Afterwards, the MOTC sold 1,350,682 thousand common shares in the form of ADS amounting to 135,068 thousand units on August 10, 2005. Subsequently, the MOTC and Taiwan Mobile Co., Ltd. sold 505,389 thousand and 58,959 thousand common shares of Chunghwa, respectively, in the form of ADS totally amounting to 56,435 thousand units on September 29, 2006. The MOTC and Taiwan Mobile Co., Ltd. have sold 3,024,780 thousand common shares in the form of ADS amounting to 302,478 thousand units. As of March 31, 2010, the outstanding ADSs were 1,021,842 thousand common shares, which equaled approximately 102,184 thousand units and represented 10.54 % of Chunghwa’s total outstanding common shares.

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

Exercise their voting rights,

Sell their ADSs, and

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

Under the ROC Company Law, additional paid-in capital may only be utilized to offset deficits. For those companies having no deficits, additional paid-in capital arising from capital surplus can be used to increase capital stock and distribute to stockholders in proportion to their ownership at the ex-dividend date. Also, such amounts can only be declared as a stock dividend by Chunghwa at an amount calculated in accordance with the provisions of existing regulations. The combined amount of any portions capitalized each year may not exceed 10 percent of common stock issued. However, where a company undergoes an organizational change (such as a merger, acquisition, or reorganization) that results in the capitalization of undistributed earnings after the organizational change, the above restriction does not apply.

In addition, before distributing a dividend or making any other distribution to stockholders, Chunghwa must pay all outstanding taxes, recover any past losses and set aside a legal reserve equal to 10% of its net income, and depending on its business needs or requirements, may also set aside a special reserve. In accordance with the Articles of Incorporation, no less than 50% of the remaining earnings comprising remaining balance of net income, if any, plus cumulative undistributed earnings shall be distributed in the following order: (a) from 2% to 5% of distributable earnings shall be distributed to employees as employee bonus; (b) no more than 0.2% of distributable earnings shall be distributed to board of directors and supervisors as remuneration; and (c) cash dividends to be distributed shall not be less than 50% of the total amount of dividends to be distributed. If cash dividends to be distributed is less than $0.10 per share, such cash dividend shall be distributed in the form of common shares.

Chunghwa operates in a capital-intensive and technology-intensive industry and requires capital expenditures to sustain its competitive position in high-growth market. Thus, Chunghwa’s dividend policy takes into account future capital expenditure outlays. In this regard, a portion of the earnings may be retained to finance these capital expenditures. The remaining earnings can then be distributed as dividends if approved by the stockholders in the following year and will be recorded in the financial statements of that year.

- 22 -

For the three months ended March 31, 2010 and 2009, the accrual amounts for bonuses to employees and remuneration to directors and supervisors is based on management estimates including past experience and probable amount to be paid in accordance with Chunghwa’s Articles of Incorporation and Implementation Guidance for the Employee’s Bonus Distribution of Chunghwa Telecom Co., Ltd.

If the initial accrual amounts of the aforementioned bonus are significantly different from the amounts proposed by the board of directors, the difference is charged to the earnings of the year making the initial estimate. Otherwise, the difference between initial accrual amounts and the amounts resoluted in the stockholders’ meeting is charged to the earnings of the following year as a result of change in accounting estimate.

Under the ROC Company Law, the appropriation for legal reserve shall be made until the accumulated reserve equals the aggregate par value of the outstanding capital stock of Chunghwa. This reserve can only be used to offset a deficit, or when reaching 50% of the aggregate par value of the outstanding capital stock of Chunghwa, up to 50% of the reserve may, at the option of Chunghwa, be declared as a stock dividend and transferred to capital.

The appropriations and distributions of the 2008 and 2007 earnings of Chunghwa have been approved and resolved by the stockholders on June 19, 2009 and June 19, 2008 as follows:


	Appropriation of Earnings				Dividend Per Share
	2008		2007		2008		2007

Legal reserve	$	4,127,675	$	4,823,356	$	—	$	—
Special reserve		475		—		—		—
Reversal of special reserve		—		3,304		—		—
Cash dividends		37,138,775		40,716,130		3.83		4.26
Stock dividends		—		955,778		—		0.10
Employee bonus - cash		—		1,303,605		—		—
Employee bonus - stock		—		434,535		—		—
Remuneration to board of directors and supervisors		—		43,454		—		—

The amounts for bonuses to employees and remuneration to directors and supervisors approved in the stockholders’ meeting on June 19, 2009, were $1,629,915 thousand and $38,807 thousand, respectively. The bonus to employees was all settled in cash. The aforementioned approved amounts of the bonus to employees and the remuneration to directors and supervisors were different from the accrual amounts of $1,723,921 thousand and $40,886 thousand, respectively, reflected in the statement of income for the year ended December 31, 2008. The differences of $94,006 thousand and $2,079 thousand, respectively, were treated as change in estimates and were adjusted against earnings for the year ended December 31, 2009.

The stockholders, at a meeting held on June 19, 2009, resolved to transfer capital surplus in the amount of $9,696,808 thousand to common capital stock. The abovementioned 2009 capital increase proposal was effectively approved by FSC. The board of directors authorized the chairman of directors to decide the ex-dividend date of the aforementioned proposal and the chairman decided the ex-dividend date as August 9, 2009.

The stockholders, at the stockholders’ meeting held on June 19, 2009, also resolved to reduce the amount of capital in Chunghwa by a cash distribution to its stockholders in order to improve the financial condition of Chunghwa and better utilize its excess funds. The abovementioned 2009 capital reduction proposal was effectively approved by FSC. The board of directors of Chunghwa further authorized the chairman of board of directors of Chunghwa to designate the record date of capital reduction as of October 26, 2009. Subsequently, common capital stock was reduced by NT$9,696,808 thousand and the stock transfer date of capital reduction was January 28, 2010. The amount due to stockholders for capital reduction was paid in February 2010.

- 23 -

The stockholders, at a special meeting held on August 14, 2008, resolved to transfer capital surplus in the amount of $19,115,554 thousand to common capital stock. The abovementioned 2008 capital increase proposal was effectively registered with FSC. The board of directors resolved the ex-dividend date of the aforementioned proposal as October 25, 2008.

The stockholders, at the stockholders’ meeting held on August 14, 2008, also resolved to reduce the amount of capital in Chunghwa by a cash distribution to its stockholders in order to improve the financial condition of Chunghwa and better utilize its excess funds. The capital reduction plan was effected by a transfer of capital surplus in the amount of $19,115,554 thousand to common capital stock and was effectively registered with FSC. Chunghwa designated December 30, 2008 as the record date and March 9, 2009 as the stock transfer date of capital reduction. Subsequently, common capital stock was reduced by $19,115,554 thousand and a liability for the same amount of cash to be distributed to stockholders was recorded. Such cash payment to stockholders was made in March 2009.

The appropriation of Chunghwa’s 2009 earnings has not been resolved by the board of directors as of the report date. Information on the appropriation of Chunghwa’s 2009 earnings, employee bonus and remuneration to directors and supervisors resolved by the board of directors and approved by the stockholders will be available at the Market Observation Post System website.

19.

COMPENSATION, DEPRECIATION AND AMORTIZATION EXPENSES


	Three Months Ended March 31, 2010
	Operating Costs		Operating Expenses		Total

Compensation expense
Salaries	$	3,018,985	$	2,113,514	$	5,132,499
Insurance		239,217		165,344		404,561
Pension		416,306		274,057		690,363
Other compensation		2,138,988		1,442,255		3,581,243


	$	5,813,496	$	3,995,170	$	9,808,666


Depreciation expense	$	7,890,911	$	414,627	$	8,305,538

Amortization expense	$	245,041	$	38,782	$	283,823


	Three Months Ended March 31, 2009
	Operating Costs		Operating Expenses		Total

Compensation expense
Salaries	$	3,044,505	$	2,078,882	$	5,123,387
Insurance		185,741		124,797		310,538
Pension		401,097		282,481		683,578
Other compensation		2,109,622		1,434,400		3,544,022


	$	5,740,965	$	3,920,560	$	9,661,525


Depreciation expense	$	8,425,837	$	468,100	$	8,893,937

Amortization expense	$	227,690	$	37,944	$	265,634

- 24 -

20.

INCOME TAX

A reconciliation between income tax expense computed by applying the statutory income tax rate to income before income tax and income tax payable is as follows:


	Three Months Ended March 31
	2010			2009

Income tax expense computed at statutory income tax rate	$	2,991,179		$	3,505,854
Add (deduct) tax effects of:
Permanent differences		(56,580	)		(43,998	)
Temporary differences		9,238			9,485
10% undistributed earning tax		1,286			—
Investment tax credits		(57,654	)		(281,431	)


Income tax payable	$	2,887,469		$	3,189,910

Income tax expense consisted of the following:


	Three Months Ended March 31
	2010		2009

Income tax payable	$	2,887,469	$	3,189,910
Income tax - separated		3,688		37,331
Income tax - deferred		4,335		8,416
Adjustments of prior years’ income tax		—		411


Income tax	$	2,895,492	$	3,236,068

In May 2009, the Legislative Yuan passed the amendment of Article 5 of the Income Tax Law, which reduces the income tax rate of profit-seeking enterprises from 25% to 20% since 2010. After the Legislative Yuan passed the amendment of Article 5 of the Income Tax Law, the Company recalculated its deferred income tax assets and liabilities in accordance with the amended Article and recorded the resulting difference as an income tax expense or benefit for the year ended December 31, 2009.

Net deferred income tax assets (liabilities) consisted of the following:


	March 31
	2010			2009

Current
Provision for doubtful accounts	$	363,090		$	494,770
Unrealized accrued expense		62,260			34,623
Valuation loss (gain) on financial instruments, net		(9,214	)		7,616
Unrealized foreign exchange gain		(22,058	)		(55,218	)
Other		23,650			65,697

		417,728			547,488
Valuation allowance		(363,090	)		(494,770	)


Net deferred income tax assets - current	$	54,638		$	52,718


Noncurrent
Accrued pension cost	$	339,200		$	1,410,537
Impairment loss		60,950			80,225


Net deferred income tax assets - noncurrent	$	400,150		$	1,490,762

- 25 -

The related information under the Integrated Income Tax System is as follows:

The estimated and the actual creditable ratios distribution of Chunghwa’s of 2009 and 2008 for earnings were 26.50% and 30.61%, respectively. The imputation credit allocated to stockholders is based on its balance as of the date of dividend distribution. The estimated creditable ratio may change when the actual distribution of imputation credit is made.

Undistributed earnings information

As of March 31, 2010 and 2009, there is no earnings generated prior to June 30, 1998 in Chunghwa’s undistributed earnings.

Income tax returns through the year ended December 31, 2005 have been examined by the ROC tax authorities.

21.

EARNINGS PER SHARE


	Amount (Numerator)						Weighted- average Number of	Earnings Per Share (Dollars)
	Income Before Income Tax			Net Income			Common Shares (Thousand) (Denominator)	Income Before Income Tax		Net Income
Three months ended March 31, 2010

Basic EPS
Income attributable to stockholders	$	14,955,893		$	12,060,401		9,696,808	$	1.54	$	1.24

Effect of dilutive potential common stock
SENAO’s stock options		(1,721	)		(1,721	)	—
Employee bonus		—			—		34,380


Diluted EPS
Income attributable to stockholders (including effect of dilutive potential common stock)	$	14,954,172		$	12,058,680		9,731,188	$	1.54	$	1.24


Three months ended March 31, 2009

Basic EPS:
Income attributable to stockholders	$	14,023,457		$	10,787,389		9,696,808	$	1.45	$	1.11

Effect of dilutive potential common stock
SENAO’s stock options		(1,550	)		(1,550	)	—
Employee bonus		—			—		18,216


Diluted EPS
Income attributable to stockholders (including effect of dilutive potential common stock)	$	14,021,907		$	10,785,839		9,715,024	$	1.44	$	1.11

- 26 -

In March 2007, the ARDF issued an Interpretation 96-052 that requires companies to recognize bonuses paid to employees, directors and supervisors as an expense rather than an appropriation of earnings beginning from January 1, 2008. According to the Interpretation 97-169 issued by ARDF in May 2008, Chunghwa presumed that the employee bonuses to be paid will be settled in shares and takes those shares into consideration when calculating the weighted average number of outstanding shares used in the calculation of diluted EPS if the shares have a dilutive effect for the three months ended March 31, 2010 and 2009. The number of shares is calculated by dividing the amount of bonuses by the closing price of the Chunghwa’s shares of the balance sheet date. The dilutive effect of the shares needs to be considered until the stockholders resolve the number of shares to be distributed to employees in their meeting in the following year.

The diluted earnings per share for the three months ended March 31, 2010 and 2009 was due to the effect of potential common stock of stock options by SENAO.

22.

PENSION PLAN

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

The pension plan under the Labor Pension Act of ROC (the “LPA”) is effective beginning July 1, 2005 and this pension mechanism is considered as a defined contribution plan. Based on the LPA, Chunghwa makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

Chunghwa’s pension plan is considered as a defined benefit plan under the Labor Standards Law that provide benefits based on an employee’s length of service and average six-month salary prior to retirement. Chunghwa contributes an amount at 15% or less of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the names of the Committees in the Bank of Taiwan.

The balance of Chunghwa’s plan assets subject to defined benefit plan were $11,489,612 thousand and $4,945,033 thousand as of March 31, 2010 and 2009, respectively.

Pension costs of Chunghwa were $709,107 thousand ($686,216 thousand subject to defined benefit plan and $22,891 thousand subject to defined contribution plan) and $702,024 thousand ($683,097 thousand subject to defined benefit plan and $18,927 thousand subject to defined contribution plan) for the three months ended March 31, 2010 and 2009, respectively.

- 27 -

23.

TRANSACTIONS WITH RELATED PARTIES

The ROC Government, one of Chunghwa’s customers, held significant equity interest in Chunghwa. Chunghwa provides fixed-line services, wireless services, Internet and data and other services to the various departments and institutions of the ROC Government and other state-owned enterprises in the normal course of business and at arm’s-length prices. The information on service revenues from government bodies and related organizations have not been provided because details of the type of transactions were not summarized by Chunghwa. Chunghwa believes that all costs of doing business are reflected in the financial statements.

Chunghwa engages in business transactions with the following related parties:


Company		Relationship

Senao International Co., Ltd. (“SENAO”)		Subsidiary
Light Era Development Co., Ltd. (“LED”)		Subsidiary
Chunghwa Telecom Singapore Pte., Ltd. (“CHTS”)		Subsidiary
CHIEF Telecom, Inc. (“CHIEF”)		Subsidiary
InfoExplorer Co., Ltd. (“IFE”)		Subsidiary
Chunghwa Telecom Japan Co., Ltd. (“CHTJ”)		Subsidiary
Chunghwa International Yellow Pages Co., Ltd. (“CIYP”)		Subsidiary
Chunghwa System Integration Co., Ltd. (“CHSI”)		Subsidiary
Spring House Entertainment Inc. (“SHE”)		Subsidiary
Chunghwa Telecom Global, Inc. (“CHTG”)		Subsidiary
Donghwa Telecom Co., Ltd. (“DHT”)		Subsidiary
New Prospect Investments Holdings Ltd. (B.V.I.) (“New Prospect”)		Subsidiary
Prime Asia Investments Group Ltd. (B.V.I.) (“Prime Asia”)		Subsidiary
Chunghwa Investment Co., Ltd. (“CHI”)		Equity-method investee before Chunghwa obtained control over CHI on September 9, 2009
Chunghwa Investment Holding Co., Ltd. (“CIHC”)		Subsidiary of CHI
Chunghwa Precision Test Tech. Co., Ltd. (“CHPT”)		Subsidiary of CHI
Unigate Telecom Inc. (“Unigate”)		Subsidiary of CHIEF
CHIEF Telecom (Hong Kong) Limited (“CHK”)		Subsidiary of CHIEF
Chief International Corp. (“CIC”)		Subsidiary of CHIEF
Concord Technology Co., Ltd. (“Concord”)		Subsidiary of CHSI
Glory Network System Service (Shanghai) Co., Ltd. (“Glory”)		Subsidiary of Concord
Senao International (Samoa) Holding Ltd. (SIS)		Subsidiary of SENAO
Senao International HK Limited (SIHK)		Subsidiary of SENAO
CHI One Investment Co., Ltd. (“COI”)		Subsidiary of CHI
Yao Yong Real Property Co., Ltd. (“YYRP”)		Subsidiary of LED
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		Equity-method investee
So-net Entertainment Taiwan (“So-net”)		Equity-method investee
Skysoft Co., Ltd. (“SKYSOFT”)		Equity-method investee
Senao Networks, Inc. (“SNI”)		Equity-method investee of SENAO

- 28 -

Significant transactions with the above related parties are summarized as follows:


	March 31
	2010			2009
	Amount		%	Amount		%
1) Receivables

Trade notes and accounts receivable
SENAO	$	307,263	74	$	166,222	55
So-net		25,321	6		—	—
CHIEF		23,265	6		24,926	8
CIYP		20,863	5		35,986	12
CHTG		12,199	3		14,857	5
DHT		8,896	2		48,859	16
CHSI		8,339	2		—	—
SHE		5,601	1		13,409	4
Others		5,142	1		977	—


	$	416,889	100	$	305,236	100


2) Payables

Trade notes payable, accounts payable and accrued expenses
SENAO	$	1,255,733	63	$	582,554	44
CHSI		206,314	11		121,005	9
TISE		85,553	5		221,061	17
CHTG		63,278	3		11,347	1
CHIEF		40,681	2		46,950	4
DHT		38,325	2		12,451	1
CIYP		19,495	1		42,586	3
Others		29,166	1		6,228	—

		1,738,545	88		1,044,182	79


Payables to contractors
CHSI		1,985	—		—	—
TISE		—	—		22,712	2

		1,985	—		22,712	2

Amounts collected in trust for others

SENAO		240,025	12		234,659	18
CIYP		3,951	—		12,943	1
Others		798	—		8,145	—

		244,774	12		255,747	19


	$	1,985,304	100	$	1,322,641	100

- 29 -


	Three Months Ended March 31
	2010			2009
	Amount		%	Amount		%
3) Revenues

SENAO	$	351,161	1	$	92,912	—
So-net		78,951	—		—	—
CHIEF		60,571	—		65,499	—
DHT		21,416	—		23,082	—
CHSI		12,509	—		3,112	—
CHTG		12,208	—		15,363	—
CIYP		3,954	—		4,181	—
Others		20,675	—		14,463	—


	$	561,445	1	$	218,612	—


4) Operating costs and expenses

SENAO	$	1,133,354	4	$	1,394,146	5
CHSI		155,325	1		85,278	—
TISE		88,717	—		92,367	—
CHIEF		72,638	—		77,954	—
DHT		35,679	—		33,729	—
CHTG		28,450	—		12,113	—
SHE		15,039	—		16,876	—
CIYP		7,201	—		65,011	—
Others		19,706	—		397	—


	$	1,556,109	5	$	1,777,871	5


5) Acquisitions of property, plant and equipment

CHSI	$	71,116	2	$	47,186	1
CHTG		16,470	1		—	—
TISE		10,986	—		9,779	—
Others		7,380	—		250	—


	$	105,952	3	$	57,215	1

The Company has leased property to LED since January 2010. The leased term is 15 years and the rent is charged monthly.

Chunghwa sold the land with a carrying value of $936,016 thousand to Light Era Development Co., Ltd. (“LED”) at the price of $2,421,932 thousand in 2008. However, since the gain on disposal of land amounting to $1,485,916 thousand is unrealized, the gain was recognized as deferred credit—profit on intercompany transactions, and will not be recognized as revenue till the gain is realized in the future.

Chunghwa sold the land with a carrying value of $378,927 thousand to LED at price of $207,030 thousand in 2008 and resulted in a disposal loss amounting to $171,897 thousand. The disposal loss on land is unrealized and the unrealized loss is included in other assets—other. The unrealized loss is not recognized in earnings until it is sold to the third party and realized in the future.

- 30 -

The foregoing transactions with related parties were conducted as arm’s length transactions, except for the transactions with SENAO, CHIEF, CIYP, LED and IFE were determined in accordance with mutual agreements.

24.

SIGNIFICANT COMMITMENTS AND CONTINGENCIES

As of March 31, 2010, Chunghwa’s remaining commitments under non-cancellable contracts with various parties were as follows:

Acquisitions of land and buildings of $177,007 thousand.

Acquisitions of telecommunications equipment of $17,572,128 thousand.

Contracts to print billing, envelopes and telephone directories of $63,016 thousand.

Chunghwa also has non-cancelable operating leases covering certain buildings, computers, computer peripheral equipment and operation system software under contracts that expire in various years. Future leases payments were as follows:


Year	Amount

2010 (from April 1, 2010 to December 31, 2010)	$	1,379,901
2011		1,405,858
2012		1,077,770
2013		691,424
2014 and thereafter		682,606

A commitment to contribute $2,000,000 thousand to a Piping Fund administered by the Taipei City Government, of which $1,000,000 thousand was contributed by Chunghwa on August 15, 1996 (classified as long-term investment—other monetary assets). If the fund is not sufficient, Chunghwa will contribute the remaining $1,000,000 thousand upon notification from the Taipei City Government. Based on Chunghwa’s understanding of the Piping Fund terms, if the project is considered to be no longer necessary by the ROC government, Chunghwa will receive back its proportionate share of the net equity of the Piping Fund upon its dissolution. Chunghwa does not know when its contribution to the Piping Fund will be returned; therefore, Chunghwa did not discount the face amount of its contribution on the Piping Fund.

A portion of the land used by Chunghwa during the period July 1, 1996 to December 31, 2004 was co-owned by Chunghwa and Taiwan Post Co., Ltd. (the former Chunghwa Post Co., Ltd. directorate General of Postal Service). In accordance with the claims process in Taiwan, on July 12, 2005, the Taiwan Taipei District Court sent a claim notice to Chunghwa to reimburse Chunghwa Post Co., Ltd. in the amount of $767,852 thousand for land usage compensation due to the portion of land usage area in excess of Chunghwa’s ownership and along with interest calculated at 5% interest rate from June 30, 2005 to the payment date. Chunghwa stated that both parties have the right to use co-management land without consideration. Chunghwa Post Co., Ltd. can’t request payment for land compensation. Furthermore, Chunghwa believes that the computation used to derive the land usage compensation amount is inaccurate because most of the compensation amount has expired as result of the expiration clause. Therefore, Chunghwa filed an appeal at the Taiwan Taipei District Court. On March 30, 2009, the Taiwan Taipei District Court rendered its judgment that Chunghwa only need to pay $16,870 thousand along with interest calculated at 5% per annum from July 23, 2005 and 4% of the court fees as the court judgment compensation. However, Chunghwa Post Co., Ltd. did not accept the judgment and filed an appeal at Taiwan High Court. Chunghwa also filed an appeal at the Taiwan High Court within the statutory period. On April 7, 2010, the Taiwan High Court rendered its judgment, ruling that we need to pay $23,284 thousand as compensation in addition to the $16,870 thousand from the Taiwan Taipei District Court judgment, along with interest calculated at 5% per annum from July 23,

- 31 -

2005 to the payment date and 12.5% of Chunghwa Post Co., Ltd.’s court fees from its original suit and subsequent appeal as compensation. Chunghwa is evaluating whether to file an appeal to the Supreme Court of the Republic of China.

Chunghwa has entered into a contract with ST-2 Satellite Ventures Pte., Ltd. on March 12, 2010 to lease capacity on the ST-2 satellite. This lease term is 15 years and the total contract value is approximately $6,000,000 thousand (SGD 260,723 thousand). The Company has prepaid $1,269,540 thousand which was classified as other assets-others. By March 31, 2010, the ST-2 satellite is still under construction.

25.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying amount and fair value of financial instruments were as follows:


	March 31
	2010				2009
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Assets
Cash and cash equivalents	$	75,244,129	$	75,244,129	$	64,381,376	$	64,381,376
Financial assets at fair value through profit or loss		6,841		6,841		8,865		8,865
Available-for-sale financial assets		7,902,927		7,902,927		17,939,244		17,939,244
Held-to-maturity financial assets—current		1,600,885		1,600,885		515,487		515,487
Trade notes and accounts receivable, net		9,983,020		9,983,020		10,178,679		10,178,679
Receivables from related parties		416,889		416,889		305,236		305,236
Other current monetary assets		2,751,736		2,751,736		2,102,708		2,102,708
Investments accounted for using equity method		10,352,973		12,471,938		8,769,953		10,106,426
Financial assets carried at cost		2,226,048		2,226,048		2,521,907		2,521,907
Held-to-maturity financial assets—noncurrent		6,123,566		6,123,566		3,926,522		3,926,522
Other noncurrent monetary assets		1,000,000		1,000,000		1,000,000		1,000,000
Refundable deposits		1,567,448		1,567,448		1,179,096		1,179,096
Liabilities
Financial liabilities at fair value through profit or loss		—		—		104,743		104,743
Trade notes and accounts payable		5,120,399		5,120,399		6,578,112		6,578,112
Payables to related parties		1,985,304		1,985,304		1,322,641		1,322,641
Accrued expenses		13,693,200		13,693,200		12,651,958		12,651,958
Amounts collected in trust for others (included in “other current liabilities”)		1,916,964		1,916,964		2,201,597		2,201,597
Payables to equipment suppliers (included in “other current liabilities”)		1,434,555		1,434,555		1,925,844		1,925,844
Payables to contractors (included in “other current liabilities”)		1,312,771		1,312,771		1,114,070		1,114,070
Refundable customers’ deposits (included in “other current liabilities”)		1,056,287		1,056,287		997,543		997,543
Hedging derivative financial liabilities (included in “other current liabilities”)		—		—		30,716		30,716
Customers’ deposits		5,841,887		5,841,887		6,028,691		6,028,691

Methods and assumptions used in the estimation of fair values of financial instruments:

The fair values of certain financial instruments recognized in the balance sheet generally correspond to the market prices of the financial assets. Because of the short maturities of these instruments, the carrying value represents a reasonable basis to estimate fair values. This method does not apply to the financial instruments discussed in Notes 2 and 3 below.

- 32 -

If the financial instruments have quoted market prices in an active market, the quoted market prices are viewed as fair values. If the market prices of the available-for-sale financial assets are not readily available, valuation techniques are used incorporating estimates and assumptions that are consistent with prevailing market conditions.

Long-term investments are based on the net asset values or carrying values of the investments in investees, if quoted market prices are not available.

Fair values of financial assets and liabilities using quoted market prices or valuation techniques were as follows:


	Amount Based on Quoted Market Price				Amount Determined Using Valuation Techniques
	March 31				March 31
	2010		2009		2010		2009
Assets
Financial assets at fair value through profit or loss	$	6,841	$	8,865	$	—	$	—
Available-for-sale financial assets		7,902,927		17,939,244		—		—
Liabilities
Financial liabilities at fair value through profit or loss		—		104,743		—		—
Hedging derivative financial liabilities (classified as other current liabilities)		—		30,716		—		—

Information about financial risks

Market risk

The foreign exchange rate fluctuations would result in Chunghwa’s foreign-currency-dominated assets and liabilities, outstanding currency swap contracts, and forward exchange contracts exposed to rate risk.

The financial instruments categorized as available-for-sale financial assets are mainly listed stocks and open-end mutual funds. Therefore, the market risk is the fluctuations of market price. In order to manage this risk, Chunghwa would assess the risk before investing, therefore, no material market risk are anticipated.

Credit risk

Credit risk represents the potential loss that would be incurred by Chunghwa if the counter-parties or third-parties breached contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. The counter-parties or third-parties of the aforementioned financial instruments are reputable financial institutions and corporations. Management does not expect Chunghwa’s exposure to default by those parties to be material.

Liquidation risk

Chunghwa has sufficient operating capital to meet cash needs upon settlement of derivative financial instruments. Therefore, the liquidation risk is low.

The financial instruments of the Company categorized as available-for-sale financial assets are publicly-traded, easily converted to cash. Therefore, no material liquidation risk are anticipated. The financial instruments categorized as financial assets carried at cost are investments that do not have a quoted market price in an active market. Therefore, material liquidation risk are anticipated.

- 33 -

Cash flow interest rate risk

Chunghwa engages in investments in fixed-interest-rate debt securities. Therefore, cash flows from such securities are not expected to fluctuate significantly due to changes in market interest rates.

In addition, Chunghwa engages in investments in floating-interest-rate debt securities. The changes in market interest rate would impact the floating-interest rate; therefore, cash flows from such securities are expected to fluctuate due to changes in market interest rates.

Fair value hedge

Chunghwa entered into forward exchange contracts to hedge the fluctuation in exchange rates of beneficiary certificate denominated in foreign currency, which is fair value hedge. No transaction met the criteria for hedge accounting for the three months ended March 31, 2010. The transaction was assessed as highly effective for the three months ended March 31, 2009.

Outstanding forward exchange contracts for hedge as of March 31, 2009:


	Currency	Maturity Period	Contract Amount (In Thousands)
Forward exchange contracts—Sell	USD/NTD	2009.04	USD	30,000

As of March 31, 2009, the forward exchange contract measured at fair value resulting in hedging derivative financial liability of $30,716 thousand (classified as other current liabilities).

According to the regulations of Securities and Futures Bureau, Chunghwa should disclose the derivative transactions of Chunghwa’s investees, SENAO and CHI, which was as follows:

Holding period and contract amounts

SENAO entered into a forward exchange contract for the three months ended March 31, 2010 and 2009 to reduce the exposure to foreign currency risk.

Outstanding forward exchange contracts as of March 31, 2010 and 2009:


	Currency	Maturity Period	Contract Amount (In Thousands)
March 31, 2010

Buy	NTD/USD	2010.4	NT$	252,927

March 31, 2009

Buy	NTD/USD	2009.04	NT$	137,091

- 34 -

Outstanding index future contracts of CHI on March 31, 2010 were as follows:


	Maturity Period	Units	Contract Amount (In Thousands)
TAIEX futures	2010.04	4	NT$	6,212
TAIEX futures	2010.05	5	NT$	7,884

Market risk

The foreign exchange rate fluctuations would result in SENAO’s foreign-currency-dominated assets and liabilities and open forward exchange contracts exposed to rate risk.

The fluctuations of market price would result in CHI’s index future contracts exposed to price risk.

Credit risk

Credit risk represents the potential loss that would be incurred by SENAO if the counter-parties or third-parties breached contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. The counter-parties or third-parties to the aforementioned financial instruments are reputable financial institutions. Management does not expect SENAO’s exposure to default by those parties to be material.

Liquidation risk

SENAO has sufficient operating capital to meet cash needs upon settlement of derivative financial instruments. Therefore, the liquidation risk is low.

26.

ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the SFC for Chunghwa and its investees:

Financing provided: Please see Table 1.

Endorsement/guarantee provided: Please see Table 2.

Marketable securities held: Please see Table 3.

Marketable securities acquired and disposed of at costs or prices at least $100 million or 20% of the paid-in capital: Please see Table 4.

Acquisition of individual real estate at costs of at least $100 million or 20% of the paid-in capital: None.

Disposal of individual real estate at prices of at least $100 million or 20% of the paid-in capital: None.

Total purchases from or sales to related parties amounting to at least $100 million or 20% of the paid-in capital: Please see Table 5.

Receivables from related parties amounting to $100 million or 20% of the paid-in capital: Please see Table 6.

Names, locations, and other information of investees on which Chunghwa exercises significant influence: Please see Table 7.

- 35 -

Financial transactions: Please see Notes 5 and 25.

Investment in Mainland China: Please see Table 8.

27.

SEGMENT FINANCIAL INFORMATION

Segment information: Please see Table 9.

- 36 -

TABLE 1

CHUNGHWA TELECOM CO., LTD.

FINANCINGS PROVIDED

THREE MONTHS ENDED MARCH 31, 2010

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

No.

Financing
Company

Counterparty

Financial
Statement
Account

Maximum
Balance for
the Year

Ending
Balance

Interest
Rate
(Note 5)

Type of
Financing
(Note 2)

Transaction
Amount

Reason
for Short-
term
Financing

Allowance
for Bad
Debt

Collateral

Financing
Limit for
Each
Borrowing
Company
(Note 3)

Financing
Company’s
Financing
Amount
Limit (Note 4)

Item

Value

Chunghwa Telecom Singapore Pte., Ltd.

ST-2 Satellite Ventures Pte., Ltd.

Other

receivables

(SG$

543,303

23,913

)

(SG$

543,303

23,913

)

6.38

(Note 6)

—

(SG$

1,400,120

61,625

)

(SG$

1,400,120

61,625

)

Note 1:

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

“0” for the Company.

Subsidiaries are numbered from “1”.

Note 2:

Reasons for financing are as follows:

Business relationship.

For short-term financing.

Note 3:

The upper limit of loans lending to any other party is no more than 100% of the net value of the latest financial statements of the lender.

Note 4:

The upper limit of loans lending to all other parties is no more than 100% of the net value of the latest financial statements of the lender.

Note 5:

It equals to the prime rate of Singapore plus 1%

Note 6:

Chunghwa Telecom Singapore Pte., Ltd. signed the joint venture contract with SingTelSat Pte., Ltd. to establish ST-2 Satellite Ventures Pte., Ltd. which mainly engages in the installation and the operation of ST-2 telecommunications satellite. The amount was collected on April 1, 2010.

- 37 -

TABLE 2

CHUNGHWA TELECOM CO., LTD.

ENDORSEMENTS/GUARANTEES PROVIDED

THREE MONTHS ENDED MARCH 31, 2010

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


No.	Endorsement/ Guarantee Provider	Guaranteed Party		Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party		Maximum Balance for the Year		Ending Balance		Amount of Endorsement/ Guarantee Collateralized by Properties		Ratio of Accumulated Endorsement/ Guarantee to Net Equity per Latest Financial Statements		Maximum Endorsement/ Guarantee Amount Allowable (Note 3)
No.	Endorsement/ Guarantee Provider	Name	Nature of Relationship (Note 2)			Maximum Balance for the Year		Ending Balance						Maximum Endorsement/ Guarantee Amount Allowable (Note 3)
25	Yao Yong Real Property Co., Ltd.	Light Era Development Co., Ltd.	d	$	3,792,749	$	3,360,000	$	3,360,000	$	3,360,000	0.9	%	$	3,792,749

Note 1:

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

“0” for the Company.

Subsidiaries are numbered from “1”.

Note 2:

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

Trading partner.

Majority owned subsidiary.

The Company and subsidiary owns over 50% ownership of the investee company.

A subsidiary jointly owned by the Company and the Company’s directly-owned subsidiary.

Guaranteed by the Company according to the construction contract.

An investee company. The guarantees were provided based on the Company’s proportionate share in the investee company.

Note 3:

The maximum amount of endorsement or guarantee amounts is up to 200% of the asset value of the latest financial statements of Yao Yong Real Property Co., Ltd.

- 38 -

TABLE 3

CHUNGHWA TELECOM CO., LTD.

MARKETABLE SECURITIES HELD

MARCH 31, 2010

(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)


No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	March 31, 2010								Note
No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares (Thousands/ Thousand Units)	Carrying Value (Note 5)			Percentage of Ownership	Market Value or Net Asset Value			Note
0	Chunghwa Telecom Co., Ltd.	Stocks
		Senao International Co., Ltd.	Subsidiary	Investments accounted for using equity method	71,773	$	1,418,947		29	$	3,542,005		Note 4
		Light Era Development Co., Ltd.	Subsidiary	Investments accounted for using equity method	300,000		2,915,201		100		2,915,596		Note 1
		Chunghwa Investment Co., Ltd.	Subsidiary	Investments accounted for using equity method	178,000		1,672,381		89		1,745,436		Note 1
		Chunghwa Telecom Singapore Pte. Ltd.	Subsidiary	Investments accounted for using equity method	61,869		1,412,966		100		1,412,965		Note 1
		Chunghwa System Integration Co., Ltd.	Subsidiary	Investments accounted for using equity method	60,000		712,951		100		635,246		Note 1
		Taiwan International Standard Electronics Co., Ltd.	Equity-method investee	Investments accounted for using equity method	1,760		484,630		40		682,673		Note 1
		CHIEF Telecom Inc.	Subsidiary	Investments accounted for using equity method	37,942		465,800		69		414,189		Note 1
		InfoExplorer Co., Ltd.	Subsidiary	Investments accounted for using equity method	22,498		265,337		49		216,082		Note 1
		Viettel-CHT Co., Ltd.	Equity-method investee	Investments accounted for using equity method	—		261,677		30		261,677		Note 1
		Donghwa Telecom Co., Ltd.	Subsidiary	Investments accounted for using equity method	51,590		234,932		100		234,932		Note 1
		Chunghwa International Yellow Pages Co., Ltd.	Subsidiary	Investments accounted for using equity method	15,000		183,688		100		183,688		Note 1
		Skysoft Co., Ltd.	Equity-method investee	Investments accounted for using equity method	4,438		89,938		30		50,571		Note 1
		Chunghwa Telecom Global, Inc.	Subsidiary	Investments accounted for using equity method	6,000		69,562		100		94,812		Note 1
		KingWay Technology Co., Ltd.	Equity-method investee	Investments accounted for using equity method	1,703		66,220		33		16,613		Note 1
		Spring House Entertainment Inc.	Subsidiary	Investments accounted for using equity method	5,996		60,592		56		45,156		Note 1
		So-net Entertainment Taiwan	Equity-method investee	Investments accounted for using equity method	3,429		27,572		30		9,718		Note 1
		Chunghwa Telecom Japan Co., Ltd.	Subsidiary	Investments accounted for using equity method	1		10,579		100		10,579		Note 1
		New Prospect Investments Holdings Ltd. (B.V.I.)	Subsidiary	Investments accounted for using equity method	—		—		100		—		Note 2
						(US$	1 dollar	)		(US$	1 dollar	)
		Prime Asia Investments Group Ltd. (B.V.I.)	Subsidiary	Investments accounted for using equity method	—		—		100		—		Note 2
						(US$	1 dollar	)		(US$	1 dollar	)
		Taipei Financial Center	—	Financial assets carried at cost	172,927		1,789,530		12		1,359,209		Note 1
		Industrial Bank of Taiwan II Venture Capital Co., Ltd. (IBT II)	—	Financial assets carried at cost	20,000		200,000		17		222,578		Note 1
		Global Mobile Corp.	—	Financial assets carried at cost	12,696		127,018		11		103,754		Note 1
		iD Branding Ventures	—	Financial assets carried at cost	7,500		75,000		8		78,927		Note 1
		RPTI International	—	Financial assets carried at cost	4,765		34,500		10		34,343		Note 1
		Essence Technology Solution, Inc.	—	Financial assets carried at cost	2,000		—		9		2,617		Note 1
		Beneficiary certificates (mutual fund)
		Yuan Ta Wan Tai Bond Fund	—	Available-for-sale financial assets	103,616		1,500,000		—		1,500,041		Note 3
		JPM (Taiwan) Global Balanced Fund	—	Available-for-sale financial assets	14,161		200,000		—		207,124		Note 3
		JPM (Taiwan) JF Balanced Fund	—	Available-for-sale financial assets	2,462		50,000		—		48,233		Note 3
		Fuh-Hwa Aegis Fund	—	Available-for-sale financial assets	14,000		184,452		—		171,552		Note 3
		AGI Global Quantitative Balanced Fund	—	Available-for-sale financial assets	10,000		116,365		—		112,000		Note 3
		Capital Value Balance Fund	—	Available-for-sale financial assets	8,000		141,776		—		138,446		Note 3

(Continued)

- 39 -


No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	March 31, 2010						Note
No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares (Thousands/ Thousand Units)	Carrying Value (Note 5)		Percentage of Ownership	Market Value or Net Asset Value		Note
		Fuh Hwa Life Goal Fund	—	Available-for-sale financial assets	6,000	$	90,037	—	$	97,084	Note 3
		Fuh Hwa Asia Pacific Balanced	—	Available-for-sale financial assets	7,764		100,000	—		87,112	Note 3
		Asia-Pacific Mega - Trend Fund	—	Available-for-sale financial assets	15,074		200,000	—		200,025	Note 3
		PCA Asia Pacc Infrastructure Fund	—	Available-for-sale financial assets	3,061		30,000	—		31,187	Note 3
		PineBridge Flagship Glb Bal Fund of Funds	—	Available-for-sale financial assets	25,679		350,000	—		353,089	Note 3
		Franklin Templeton Global Bond Fund of Funds	—	Available-for-sale financial assets	17,984		208,018	—		231,669	Note 3
		Cathay Global Aggressive Fund of Funds	—	Available-for-sale financial assets	15,570		210,000	—		195,556	Note 3
		Polaris Global Emerging Market Funds	—	Available-for-sale financial assets	13,603		200,000	—		193,293	Note 3
		HSBC Global Fund of Bond Funds	—	Available-for-sale financial assets	22,838		250,000	—		264,701	Note 3
		Fuh Hwa global Fixed Income FOFs Fund	—	Available-for-sale financial assets	15,594		190,000	—		192,274	Note 3
		PCA Asia Pacific REITs-A	—	Available-for-sale financial assets	7,849		50,000	—		51,962	Note 3
		Fidelity US High Yield Fund	—	Available-for-sale financial assets	535		206,588	—		193,973	Note 3
		HSBC GIF G16 Emg MK+ Bond	—	Available-for-sale financial assets	273		155,112	—		160,217	Note 3
		FTIF - Templeton G16 Bond	—	Available-for-sale financial assets	289		210,001	—		219,427	Note 3
		PIMCO Global Investment Grade Credit - Ins H Acc	—	Available-for-sale financial assets	398		161,575	—		165,436	Note 3
		MFS Meridian Gunds-European Equity Fund (A1 Class)	—	Available-for-sale financial assets	253		262,293	—		226,861	Note 3
		Fidelity Fds International	—	Available-for-sale financial assets	128		163,960	—		126,066	Note 3
		Fidelity Fds America	—	Available-for-sale financial assets	937		163,960	—		139,752	Note 3
		JPMorgan Funds - Global Dynamic Fund (B)	—	Available-for-sale financial assets	303		165,640	—		129,993	Note 3
		MFS Meridian Funds - Research International Fund (A1 share)	—	Available-for-sale financial assets	173		131,920	—		100,281	Note 3
		Fidelity Fds Emerging Markets	—	Available-for-sale financial assets	144		122,175	—		86,637	Note 3
		Credit Suisse Equity Fund (Lux) Global Resources	—	Available-for-sale financial assets	10		130,402	—		88,412	Note 3
		Schroder ISF - BRIC Fund - A1 Acc	—	Available-for-sale financial assets	31		197,071	—		190,670	Note 3
		Parvest Europe Convertible Bond Fond	—	Available-for-sale financial assets	71		398,787	—		374,346	Note 3
		JPMorgan Funds - Global Convertibles Fund (EUR)	—	Available-for-sale financial assets	868		491,450	—		455,458	Note 3
		Schroder ISF Euro Corp. Bond A	—	Available-for-sale financial assets	260		190,098	—		177,432	Note 3
		Fidelity Euro Balanced Fund	—	Available-for-sale financial assets	429		273,315	—		223,568	Note 3
		Fidelity Fds World	—	Available-for-sale financial assets	248		144,116	—		101,602	Note 3
		Fidelity Fds Euro Blue Chip	—	Available-for-sale financial assets	155		140,125	—		93,035	Note 3
		MFS Meridian Funds - European Equity Fund (A1 share)	—	Available-for-sale financial assets	171		178,920	—		132,761	Note 3
		Henderson Horizon Fund - Pan European Equity Fund	—	Available-for-sale financial assets	230		180,886	—		152,722	Note 3
		Polaris TW Top 50 Tracker	—	Available-for-sale financial assets	1,710		91,574	—		92,768	Note 4
		Polaris/P-Shares Taiwan DTV ETF	—	Available-for-sale financial assets	600		15,000	—		13,680	Note 4
		Stock
		China Steel Corporation	—	Available-for-sale financial assets	926		28,374	—		30,419	Note 4
		Siliconware Precision Industries Co., Ltd.	—	Available-for-sale financial assets	661		28,369	—		25,316	Note 4
		Taiwan Semiconductor Manufacturing Co., Ltd.	—	Available-for-sale financial assets	456		28,357	—		28,044	Note 4
		U-Ming Marine Transport Corp.	—	Available-for-sale financial assets	454		28,363	—		29,238	Note 4
		President Chain Store Corp.	—	Available-for-sale financial assets	375		28,367	—		29,700	Note 4

(Continued)

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No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	March 31, 2010						Note
No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares (Thousands/ Thousand Units)	Carrying Value (Note 5)		Percentage of Ownership	Market Value or Net Asset Value		Note
		Reits
		Fubon No. 1 Fund	—	Available-for-sale financial assets	2,274	$	22,740	—	$	24,969	Note 4
		Gallop No. 1 Reit	—	Available-for-sale financial assets	1,947		19,470	—		14,796	Note 4
		Bonds
		Yuanta Securities Finance Co. Ltd. 1st Unsecured Corporate Bonds-A Issue in 2007	—	Held-to-maturity financial assets	—		100,005	—		100,005	Note 6
		Mega Securities Corp. 1st Unsecured Corporate Bonds in 2007	—	Held-to-maturity financial assets	—		150,000	—		150,000	Note 6
		Taiwan Power Co. 2nd Unsecured Bond - CB Issue in 2003	—	Held-to-maturity financial assets	—		150,510	—		150,510	Note 6
		Fubon Financial Holding Company 2005 1st Unsecured Debenture	—	Held-to-maturity financial assets	—		99,859	—		99,859	Note 6
		TaipeiFubon Bank 1st Financial Debentures - BA Issue in 2005	—	Held-to-maturity financial assets	—		100,209	—		100,209	Note 6
		KGI Securities 1st Unsecured Corporate Bonds 2007 - B Issue	—	Held-to-maturity financial assets	—		100,000	—		100,000	Note 6
		China Development Financial Holding Corporation Unsecured Corporate Bonds-AB issue in 2005	—	Held-to-maturity financial assets	—		201,402	—		201,402	Note 6
		Chinatrust Commercial Bank 2nd Unsecured Subordinate Financial Debentures Issue in 2003	—	Held-to-maturity financial assets	—		198,899	—		198,899	Note 6
		Mega Financial Holding Co., Ltd. 1^st Unsecured Corpoate Bonds-B issued in 2007	—	Held-to-maturity financial assets	—		200,000	—		200,000	Note 6
		Mega Securities Corp. 1st Unsecured Corporate Bond 2008 - A Issue	—	Held-to-maturity financial assets	—		300,000	—		300,000	Note 6
		Taiwan Power Co. 1st Unsecured Bond-B Issue in 2001	—	Held-to-maturity financial assets	—		178,660	—		178,660	Note 6
		Taiwan Power Company 3rd Boards in 2008	—	Held-to-maturity financial assets	—		149,950	—		149,950	Note 6
		GreTai Company 1st Unsecured Corporate Bonds-A Issue in 2008	—	Held-to-maturity financial assets	—		100,000	—		100,000	Note 6
		Taiwan Power Co. 5th secured Bond - A Issue in 2008		Held-to-maturity financial assets	—		306,625	—		306,625	Note 6
		Formosa Petrochemical Corporation 4th Unsecured Corporate Bonds Issue in 2006	—	Held-to-maturity financial assets	—		300,575	—		300,575	Note 6
		Taiwan Power Company 5th Boards in 2008	—	Held-to-maturity financial assets	—		272,071	—		272,071	Note 6
		Formosa Petrochemical Corporation Bond Issue in 2006	—	Held-to-maturity financial assets	—		201,174	—		201,174	Note 6
		Taiwan Power Company 3rd Boards in 2006	—	Held-to-maturity financial assets	—		200,882	—		200,882	Note 6
		China Development Industrial Bank 2nd Financial Debentures Issue in 2006	—	Held-to-maturity financial assets	—		198,892	—		198,892	Note 6
		China Development Financial Holding Corporation 1st Unsecured Corporate Bonds Issue in 2006	—	Held-to-maturity financial assets	—		201,812	—		201,812	Note 6

(Continued)

- 41 -


No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	March 31, 2010						Note
No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares (Thousands/ Thousand Units)	Carrying Value (Note 5)		Percentage of Ownership	Market Value or Net Asset Value		Note
		China Development Financial Holding Corporation 1st Unsecured Corporate Bonds Issue in 2006	—	Held-to-maturity financial assets	—	$	201,812	—	$	201,812	Note 6
		Yuanta Securities Finance Co. Ltd. 1st Unsecured Corporate Bonds-B Issue in 2007	—	Held-to-maturity financial assets	—		405,419	—		405,419	Note 6
		Mega Securities Co., Ltd. 1^st Unsecured Corporate Bond Issue in 2009	—	Held-to-maturity financial assets	—		300,000	—		300,000	Note 6
		China Development Financial Holding Corporation 1st Unsecured Corporate Bonds - A Issue in 2008	—	Held-to-maturity financial assets	—		103,404	—		103,404	Note 6
		Formosa Petrochemical Corp.	—	Held-to-maturity financial assets	—		99,888	—		99,888	Note 6
		Taiwan Power Co. 4th secured Bond-B Issue in 2008	—	Held-to-maturity financial assets	—		51,795	—		51,795	Note 6
		Taiwan Power Co. 5th secured Bond-B Issue in 2008	—	Held-to-maturity financial assets	—		209,600	—		209,600	Note 6
		Formosa Petrochemical Corporation 2nd Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		102,738	—		102,738	Note 6
		Formosa Petrochemical Corporation 2nd Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		414,237	—		414,237	Note 6
		Formosa Petrochemical Corporation 3rd Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		49,938	—		49,938	Note 6
		NAN YA Company 2nd Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		407,023	—		407,023	Note 6
		China Steel Corporation 1St Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		103,461	—		103,461	Note 6
		Chinese Petroleum Corporation 1st Unsecured corporate Bonds - A Issue in 2008	—	Held-to-maturity financial assets	—		103,653	—		103,653	Note 6
		NAN YA Company 3rd Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		204,258	—		204,258	Note 6
		China Steel Corporation 2nd Unsecured Corporate Bonds - A Issue in 2008	—	Held-to-maturity financial assets	—		100,027	—		100,027	Note 6
		Formosa Petrochemical Corporation 1st Unsured Corporate Bonds Issued in 2009	—	Held-to-maturity financial assets	—		201,106	—		201,106	Note 6
		Formosa Petrochemical Corporation 1st Unsured Corporate Bonds Issued in 2009	—	Held-to-maturity financial assets	—		203,972	—		203,972	Note 6
		NAN YA Company 1st Unsecured Corporate Bonds Issue in 2009	—	Held-to-maturity financial assets	—		99,900	—		99,900	Note 6
		MLPC 1st Unsecured Corporate Bonds Issue in 2009	—	Held-to-maturity financial assets	—		199,727	—		199,727	Note 6
		NAN YA Company 2Nd Unsecured Corporate Bonds Issue in 2009	—	Held-to-maturity financial assets	—		200,902	—		200,902	Note 6
		NAN YA Company 2Nd Unsecured Corporate Bonds Issue in 2009	—	Held-to-maturity financial assets	—		50,512	—		50,512	Note 6
		NAN YA Company 3Rd Unsecured Corporate Bonds Issue in 2009	—	Held-to-maturity financial assets	—		199,554	—		199,554	Note 6

(Continued)

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No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	March 31, 2010						Note
No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares (Thousands/ Thousand Units)	Carrying Value (Note 5)		Percentage of Ownership	Market Value or Net Asset Value		Note
1	Senao International Co., Ltd.	Stocks
		Senao Networks, Inc.	Equity-method investee	Investments accounted for using equity method	15,295	$	306,391	41	$	306,391	Note 1
		Senao International (Samoa) Holding Ltd.	Subsidiary	Investments accounted for using equity method	—		—	100		—	Note 7
		N.T.U. Innovation Incubation Corporation	—	Financial assets carried at cost	1,200		12,000	9		12,800	Note 1
		Beneficiary certificates (mutual fund)
		Prudential Financial Bond Fund	—	Available-for-sale financial assets	3,304		50,000	—		50,028	Note 3
		IBT Bond Fund	—	Available-for-sale financial assets	3,691		50,000	—		50,046	Note 3
		Fuh Hwa Global Short-term Income Fund	—	Available-for-sale financial assets	4,850		50,000	—		51,005	Note 3
		Fuh Hwa Strategic High Income Fund	—	Available-for-sale financial assets	5,000		50,000	—		52,800	Note 3

2	CHIEF Telecom Inc.	Stocks
		Unigate Telecom Inc.	Subsidiary	Investments accounted for using equity method	200		1,995	100		1,995	Note 1
		CHIEF Telecom (Hong Kong) Limited	Subsidiary	Investments accounted for using equity method	400		983	100		983	Note 1
		Chief International Corp.	Subsidiary