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 August 27, 2009

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: 2009/08/27


Chunghwa Telecom Co., Ltd.

By:		/s/ Joseph C.P. Shieh
Name:		Joseph C.P. Shieh
Title:		Senior Vice President CFO

Exhibit


Exhibit		Description
1		Press Release to Report Operating Results for the First Half of 2009

2		Financial Statements for the Six Months Ended June 30, 2009 and 2008 and Independent Auditors’ Report

3		Consolidated Financial Statements for the Six Months Ended June 30, 2009 and 2008 and Independent Auditors’ Report

4		GAAP Reconciliations of Consolidated Financial Statements for the Six Months Ended June 30, 2008 and 2009

Exhibit 1

LOGO

Chunghwa Telecom Reports Operating Results

for the First Half of 2009

Taipei, Taiwan, R.O.C. August 27, 2009 - Chunghwa Telecom Co., Ltd (TAIEX: 2412, NYSE: CHT) (“Chunghwa” or “the Company”), today reported its operating results for the first six months of 2009. All figures were presented on a consolidated basis and prepared in accordance to generally accepted accounting principles in the Republic of China (“ROC GAAP”).

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

Financial Highlights for 1H09:

•

Total consolidated revenue decreased by 3.7% to NT$97.2 billion

•

Internet and data revenue decreased by 0.2% to NT$24.7 billion

•

Mobile revenue decreased by 2.9% to NT$35.2 billion; mobile VAS revenue increased by 18.5% to NT$4.1 billion

•

Net income totaled NT$22.3 billion, representing a decrease of 4.2%

•

Basic earnings per share (EPS) decreased by 4.1% to NT$2.09

Financial Highlights for 2Q09:

•

Total consolidated revenue decreased by 3.8% to NT$48.1 billion

•

Internet and data revenue remained flat at NT$12.3 billion; ADSL & FTTx revenue increased by 0.4% to NT$4.9 billion; Managed data services and other revenues increased by 11.1% to NT$1.2 billion

•

Mobile revenue decreased by 2.6% to NT$17.7 billion; mobile VAS revenue increased by 18.5% to NT$2.0 billion

•

Net income totaled NT$11.5 billion, representing a decrease of 8.3%

•

Basic earnings per share (EPS) decreased by 8.3% to NT$1.08

Revenues

Chunghwa’s total consolidated revenues for the first half of 2009 decreased by 3.7% year-over-year to NT$97.2 billion, of which 27.3% was from fixed-line services, 36.3% was from mobile services, 25.4% was from Internet and data services, and the remainder was mainly from handset sales from Chunghwa’s subsidiary SENAO on a consolidated basis. The primary reason for the total revenue decline was due to the deteriorating economic environment and market competition, which resulted in the reduced traffic for fixed line and mobile businesses.

For the mobile business, total revenue for the first half of 2009 amounted to NT$35.2 billion, representing a decline of 2.9% year-over-year. For the first half of 2009, Chunghwa achieved some progress via increased subscriber numbers of 3.0% and enhanced VAS service revenues of 18.5% compared to the first half of 2008. However, these successes were offset by the economic downturn and the market competition

Chunghwa’s internet and data revenue decreased slightly by 0.2% year-over-year to NT$24.7 billion in the first half of 2009, mainly due to the tariff reduction for HiNet and ADSL services. As of the end of first half of 2009, Chunghwa provides FTTx to about 1,342 thousand of subscribers, compared to 782 thousand as of the end of first half of 2008.

In the first half of 2009, fixed-line revenue totaled NT$26.5 billion, decreasing 7.7% year-over-year. The local and domestic long distance revenues decreased by 5.7% to NT$16.3 billion and by 10.5% to NT$3.8 billion year-over-year, respectively, for the first half of 2009. These decreases were mainly due to the economic downturn, as well as mobile and VOIP substitution. Similarly, international long distance revenue decreased by 10.7% year-over-year to NT$6.3 billion, as a result of the overall economic downturn, VOIP substitution and market competition.

Finally, other revenue decreased by 4.0% to NT$10.7 billion in the first half of 2009 compared to same period last year, mainly due to the decrease of handset sales.

For the second quarter of 2009, total revenue was NT$48.1 billion, a 3.8% decrease from the same period last year. Of this, 27.9% was from fixed-line services, 36.8% was from mobile services and 25.5% was from Internet and data services, with the remainder primarily attributed to the consolidation of NT$2.6 billion in revenue from SENAO.

Costs and expenses

Total operating costs and expenses for first half 2009 were NT$68.1 billion, a decrease of 0.7% compared to the first half 2008. For the second quarter of 2009, total operating costs and expenses were NT$33.1 billion, a decrease of 2.9% compared to the second quarter of 2008. Both decreases of costs and expenses in the first half and the second quarter of 2009 were mainly due to the decline of Senao’s operating costs primarily resulted from Senao’s revenue decline, as well as the decrease in the parent company’s depreciation expense. However, the operating expenses in first half 2009 were NT$13.9 billion, an increase of 3.3% compared the same period 2008. The increase was mainly due to additional ERP compensation and increased G&A expenses resulted from the establishment of subsidiaries in Singapore and Japan, etc. which commenced in the second half of 2008.

Income Tax

Income taxes for the first half of 2009 were NT$6.8 billion, representing a decrease of 2.1% compared to NT$7.0 billion for the first half of 2008. This was mainly due to the decrease of revenue resulting in an increase of effective tax rate.

EBITDA and Net Income

Both EBITDA and the operating profit for the first half of 2009 decreased by 8.0% to NT$47.4 billion and by 10.0% to NT$29.0 billion, respectively, primarily due to the revenue decrease. However, net income decreased only by 4.2% mainly because of a NT$2.7 billion valuation loss recognized in the first half of 2008 from the 10-year foreign currency derivative contract. EBITDA margin and the operating margin for the first half of 2009 were 48.8% and 29.9%, respectively, relatively stable compared to 51.0% for EBITDA margin and 32.0% for the operating margin in the first half of 2008.

Similarly, both EBITDA and the operating profit for second quarter of 2009 decreased by 5.2% to NT$24.1 billion and by 5.9% to NT$14.9 billion, respectively. The reasons for these declines are due to the overall revenue decrease. However, both EBITDA and operating profit margins for the second quarter of 2009 are relatively stable at 50.1% and 31.1%, respectively, compared to the second quarter of 2008. Net income decreased by 8.3% to NT$11.5 billion for the second quarter of 2009, at a relatively higher decline rate than the operating profit for the same period, mainly due to the reduced interest income generated from the lower interest rate.

Capital Expenditure (“Capex”)

The total capex for the first half of 2009 amounted to NT$10.3 billion, a 9.0% decrease compared to that of the same period in 2008. Of this capex figure, 73.2% was for wireline equipment (including fixed-line and Internet and data), 21.3% was for wireless equipment and the remainder was for other expenditures.

Cash Flow

Cash flow from operating activities for the first half of 2009 decreased by 21.0% to NT$34.3 billion compared to the first half of 2008, primarily due to the revenue decline, as well as due to the NT3.2 billion income tax refund received by the parent company in the first half of 2008.

As of June 30, 2009, the Company’s cash and cash equivalents totaled NT$83.4 billion, a decrease of 12.5% year-over-year compared to the same period last year, and the decrease was because of the cash payment from previously completed capital reduction program.

Businesses Performance Highlights:

Internet and Data Services

•

Total HiNet subscribers decreased to 4.07 million as of June 30, 2009. ADSL subscribers decreased by 156 thousand to 2.96 million quarter-over-quarter. This decline was offset by strong growth in FTTx subscriptions, with 148 thousand net additions to around 1.34 million over the course of the second quarter of 2009, compared to 782 thousand FTTx subscribers as of June 30, 2008. By the end of June 2009, the number of ADSL and FTTx subscriptions with a service speed of greater than 8 Mbps reached 1.78 million, representing 41.4% of total broadband subscribers, which was 32.1% as the end of June 2008

•

Overall, the Company had 4.3 million broadband subscribers (including ADSL and FTTx subscribers) at the end of June 2009, a 0.1% decrease in the number of total broadband subscriptions compared to the same period of last year.

•

Internet and data revenue decreased by 0.2% year-over-year to NT$24.7 billion in the first half of 2009, mainly due to tariff reduction for HiNet and ADSL services.

Mobile Services

•

As of June 30, 2009, Chunghwa had 9.04 million mobile subscribers, slightly up quarter-over-quarter by 0.7% compared to 8.98million as of March 31, 2009.

•

Chunghwa remained the leading mobile operator in Taiwan. According to statistics published by the NCC, at the end of June 2009, the Company’s total subscriber market share (including 2G, 3G and PHS) was 34.5%, while its revenue share was 33.1%.

•

Chunghwa had 251 thousand net additions to its 3G subscriber base during the second quarter of 2009, recording a 6.5% rise quarter-over-quarter in the total number of 3G subscribers to 4.1 million as of June 30, 2009.

•

Mobile VAS revenue for the first half of 2009 was NT$4.07 billion, a 18.5% year-over-year increase, with SMS revenue up 13.4% and mobile Internet revenue up 47.6% for the same period.

Fixed-line Services

•

At the end of June 2009, the Company maintained its leading fixed-line market position, with fixed-line subscribers totaling 12.58 million.

Early Retirement Program

•

We started to offer an early-retirement program in second half of 2009. There were 240 employees participated in the program. Despite the ERP compensation of NT$300 million to be recognized in June, we will benefit from the cost savings for the rest of the year in 2009.

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 2

Chunghwa Telecom Co., Ltd.

Financial Statements for the

Six Months Ended June 30, 2009 and 2008 and

Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders

Chunghwa Telecom Co., Ltd.

We have audited the accompanying balance sheets of Chunghwa Telecom Co., Ltd. as of June 30, 2009 and 2008, and the related statements of income, changes in stockholders’ equity and cash flows for the six months then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Taiwan International Standard Electronics Co., Ltd., of Viettel-CHT Co., Ltd. and of equity-accounted investee of SENAO of Senao Networks, Inc. The aggregate carrying values of these equity method investees were NT$661,122 thousand and NT$655,093 thousand, respectively, as of June 30, 2009 and 2008 and the equity in their losses and earnings were NT$21,400 thousand and NT$69,502 thousand, respectively, for the six months then ended. The financial statements of Taiwan International Standard Electronics Co., Ltd., of Viettel-CHT Co., Ltd. and of equity-accounted investee of SENAO of Senao Networks, Inc. as of and for the six months ended June 30, 2009 and the financial statements of Taiwan International Standard Electronics Co., Ltd. and of equity-accounted investee of SENAO of Senao Networks, Inc. as of and for the six months ended June 30 2008, were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for these equity method investees, is based solely on the reports of the other auditors.

We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards required that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the financial reports of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, the financial statements referred to first paragraph present fairly, in all material respects, the financial position of the Company as of June 30, 2009 and 2008, and the results of their operations and cash flows for the six months then ended 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, on January 1, 2008, the Company adopted Interpretation 96-052 issued by the Accounting and Research Development Foundation of the Republic of China that requires companies to record bonuses paid to employees, directors and supervisors as an expense rather than an appropriation of earnings.

We have also audited the consolidated financial statements of the Company and its subsidiaries as of and for the six months ended June 30, 2009 and 2008, and have expressed an modified unqualified opinion on those consolidated financial statements.

August 11, 2009

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

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

- 2 -

CHUNGHWA TELECOM CO., LTD.

BALANCE SHEETS

JUNE 30, 2009 AND 2008

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


	2009			2008
	Amount		%	Amount		%
ASSETS

CURRENT ASSETS
Cash and cash equivalents (Notes 2 and 4)	$	78,572,933	17	$	91,744,722	19
Financial assets at fair value through profit or loss (Notes 2 and 5)		22,423	—		135,238	—
Available-for-sale financial assets (Notes 2 and 6)		16,354,375	4		18,509,251	4
Held-to-maturity financial assets (Notes 2 and 7)		670,541	—		644,935	—
Trade notes and accounts receivable, net of allowance for doubtful accounts of $2,853,031 thousand in 2009 and $3,111,329 thousand in 2008 (Notes 2 and 8)		10,300,053	2		9,815,385	2
Receivables from related parties (Note 24)		217,058	—		468,729	—
Other current monetary assets (Notes 2, 9 and 26)		3,246,786	1		2,828,805	1
Inventories, net (Notes 2 and 10)		837,141	—		645,902	—
Deferred income tax assets (Notes 2 and 21)		74,196	—		1,073,256	—
Other current assets (Note 11)		5,335,560	1		6,844,682	2


Total current assets		115,631,066	25		132,710,905	28


LONG-TERM INVESTMENTS
Investments accounted for using equity method (Notes 2 and 12)		8,482,350	2		7,376,058	2
Financial assets carried at cost (Notes 2 and 13)		2,236,048	1		2,261,048	—
Held-to-maturity financial assets (Notes 2 and 7)		4,536,191	1		763,852	—
Other monetary assets (Notes 14 and 25)		1,000,000	—		1,000,000	—


Total long-term investments		16,254,589	4		11,400,958	2


PROPERTY, PLANT AND EQUIPMENT (Notes 2, 15 and 24)
Cost
Land		101,259,764	22		101,855,226	21
Land improvements		1,513,208	—		1,484,013	—
Buildings		62,686,423	14		62,433,677	13
Computer equipment		15,434,463	3		15,022,254	3
Telecommunications equipment		652,387,793	143		642,086,379	135
Transportation equipment		2,243,028	1		2,751,402	1
Miscellaneous equipment		7,159,198	2		7,418,057	2

Total cost		842,683,877	185		833,051,008	175
Revaluation increment on land		5,810,342	1		5,820,548	1

		848,494,219	186		838,871,556	176

Less: Accumulated depreciation		549,671,350	121		532,618,692	112

		298,822,869	65		306,252,864	64
Construction in progress and advances related to acquisition of equipment		14,212,625	3		14,370,085	3


Property, plant and equipment, net		313,035,494	68		320,622,949	67


INTANGIBLE ASSETS (Note 2)
3G concession		7,111,783	2		7,860,392	2
Others		356,524	—		299,993	—


Total intangible assets		7,468,307	2		8,160,385	2


OTHER ASSETS
Idle assets (Note 2)		926,640	—		927,512	—
Refundable deposits		1,288,994	1		1,243,701	—
Deferred income tax assets (Notes 2 and 21)		1,195,223	—		1,485,073	1
Others (Note 24)		860,916	—		652,963	—


Total other assets		4,271,773	1		4,309,249	1


TOTAL	$	456,661,229	100	$	477,204,446	100



	2009				2008
	Amount			%	Amount			%
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Financial liabilities at fair value through profit or loss (Notes 2 and 5)	$	—		—	$	3,313,291		1
Trade notes and accounts payable		5,608,657		1		6,919,396		1
Payables to related parties (Note 24)		1,464,771		—		1,678,379		—
Income tax payable (Notes 2 and 21)		6,523,855		2		7,807,133		2
Accrued expenses (Notes 3 and 16)		12,939,389		3		11,193,670		2
Dividends payable (Note 18)		37,138,775		8		40,716,130		9
Other current liabilities (Notes 17 and 24)		15,214,391		3		15,779,569		3


Total current liabilities		78,889,838		17		87,407,568		18


DEFERRED INCOME		2,145,289		1		1,831,946		—


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


OTHER LIABILITIES
Accrued pension liabilities (Notes 2 and 23)		5,183,644		1		5,105,108		1
Customers’ deposits		6,047,305		1		6,236,222		2
Deferred credit - profit on intercompany transactions (Note 24)		1,485,916		1		1,117,755		—
Others		260,875		—		425,213		—


Total other liabilities		12,977,740		3		12,884,298		3


Total liabilities		94,107,853		21		102,218,798		21


STOCKHOLDERS’ EQUITY (Notes 2, 15, 18 and 19)
Common stock - $10 par value;
Authorized: 12,000,000 thousand shares Issued: 9,696,808 thousand shares in 2009 and 9,557,777 thousand shares in 2008		96,968,082		21		95,577,769		20

Preferred stock - $10 par value		—		—		—		—

Capital stock to be issued		9,696,808		2		1,390,313		—

Additional paid-in capital
Capital surplus		169,496,289		37		198,308,651		42
Donated capital		13,170		—		13,170		—
Equity in additional paid-in capital reported by equity-method investees		3		—		1,367		—

Total additional paid-in capital		169,509,462		37		198,323,188		42

Retained earnings
Legal reserve		56,987,241		12		52,859,566		11
Special reserve		2,675,894		1		2,675,419		1
Unappropriated earnings		22,265,116		5		19,532,657		4

Total retained earnings		81,928,251		18		75,067,642		16

Other adjustments
Cumulative translation adjustments		17,765		—		(12,295	)	—
Unrecognized net loss of pension		(5	)	—		(87	)	—
Unrealized loss on financial instruments		(1,379,866	)	—		(1,183,967	)	—
Unrealized revaluation increment		5,812,879		1		5,823,085		1

Total other adjustments		4,450,773		1		4,626,736		1


Total stockholders’ equity		362,553,376		79		374,985,648		79


TOTAL	$	456,661,229		100	$	477,204,446		100

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

(With Deloitte & Touche audit report dated August 11, 2009)

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CHUNGHWA TELECOM CO., LTD.

STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

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


	2009			2008
	Amount		%	Amount		%

NET REVENUES (Note 24)	$	90,301,418	100	$	93,367,447	100

OPERATING COSTS (Note 24)		46,704,834	52		46,114,627	49


GROSS PROFIT		43,596,584	48		47,252,820	51


OPERATING EXPENSES (Note 24)
Marketing		11,987,497	13		12,625,911	13
General and administrative		1,694,373	2		1,599,300	2
Research and development		1,525,698	2		1,473,205	2


Total operating expenses		15,207,568	17		15,698,416	17


INCOME FROM OPERATIONS		28,389,016	31		31,554,404	34


NON-OPERATING INCOME AND GAINS
Interest income		324,528	1		845,778	1
Valuation gain on financial instruments, net		146,918	—		—	—
Equity in earnings of equity method investees, net		123,119	—		258,169	—
Foreign exchange gain, net		86,098	—		—	—
Dividends income		2,498	—		14,664	—
Gain on disposal of financial instruments, net		—	—		756,241	1
Others		285,545	—		152,504	—


Total non-operating income and gains		968,706	1		2,027,356	2


NON-OPERATING EXPENSES AND LOSSES
Loss on disposal of financial instruments, net		234,095	—		—	—
Impairment loss on assets		85,349	—		—	—
Loss on disposal of property, plant and equipment, net		9,138	—		40,518	—
Interest expense		2,775	—		132	—
Valuation loss on financial instruments, net		—	—		2,734,885	3
Foreign exchange loss, net		—	—		730,230	1
Others		99,631	—		51,874	—


Total non-operating expenses and losses		430,988	—		3,557,639	4


INCOME BEFORE INCOME TAX		28,926,734	32		30,024,121	32

INCOME TAX EXPENSES (Notes 2 and 21)		6,665,332	7		6,793,608	7


NET INCOME	$	22,261,402	25	$	23,230,513	25


		(Continued)

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CHUNGHWA TELECOM CO., LTD.

STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

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


	2009				2008
	Income Before Income Tax		Net Income		Income Before Income Tax		Net Income

EARNINGS PER SHARE (Note 22)
Basic earnings per share	$	2.71	$	2.09	$	2.81	$	2.18

Diluted earnings per share	$	2.70	$	2.08	$	2.81	$	2.18

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


(With Deloitte & Touche audit report dated August 11, 2009)		(Concluded)

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CHUNGHWA TELECOM CO., LTD.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

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


	Common Stock					Preferred Stock			Capi- tal Stock to Be Issued		Addi tional Paid-in Capital			Retained Earnings								Other Adjustments															Total Stock- holders’ Equity
	Common Stock					Preferred Stock								Retained Earnings								Cumu- lative Trans- lation Adjust- ments			Unrecog- nized Net Loss of Pen- sion			Un- realized Gain (Loss) on Finan- cial Instru- ments			Un- realized Reva- luation Incre- ment			Treasury Stock
	Shares (Thou- sands)		Amount			Shares (Thou- sands)	Amount							Legal Reserve		Special Reserve			Unappro- priated Earnings			Cumu- lative Trans- lation Adjust- ments			Unrecog- nized Net Loss of Pen- sion						Un- realized Reva- luation Incre- ment			Treasury Stock

BALANCE, JANUARY 1, 2009	9,696,808		$	96,968,082		—	$	—	$	—	$	179,206,270		$	52,859,566	$	2,675,894		$	41,276,274		$	29,474		$	(84	)	$	(2,272,242	)	$	5,813,187		$	—		$	376,556,421

Adjustment of additional paid-in capital from revaluation of land to income upon disposal	—			—		—		—		—		—			—		—			—			—			—			—			(308	)		—			(308	)

Appropriation of 2008 earnings
Legal reserve	—			—		—		—		—		—			4,127,675		—			(4,127,675	)		—			—			—			—			—			—
Cash dividend - NT$3.83 per share	—			—		—		—		—		—			—		—			(37,138,775	)		—			—			—			—			—			(37,138,775	)

Cancellation of preferred stock (Note 18)	—			—		—		—		—		—			—		—			—			—			—			—			—			—			—

Capital surplus transferred to common stock	—			—		—		—		9,696,808		(9,696,808	)		—		—			—			—			—			—			—			—			—

Net income for the six months ended June 30, 2009	—			—		—		—		—		—			—		—			22,261,402			—			—			—			—			—			22,261,402

Unrealized gain on financial instruments held by investees	—			—		—		—		—		—			—		—			—			—			—			7,773			—			—			7,773

Equity adjustments in investees	—			—		—		—		—		—			—		—			(6,110	)		—			—			—			—			—			(6,110	)

Cumulative translation adjustment for foreign-currency investments held by investees	—			—		—		—		—		—			—		—			—			(11,709	)		—			—			—			—			(11,709	)

Defined benefit pension plan adjustments of investees	—			—		—		—		—		—			—		—			—			—			79			—			—			—			79

Unrealized gain on financial instruments	—			—		—		—		—		—			—		—			—			—			—			884,603			—			—			884,603


BALANCE, JUNE 30, 2009	9,696,808		$	96,968,082		—	$	—	$	9,696,808	$	169,509,462		$	56,987,241	$	2,675,894		$	22,265,116		$	17,765		$	(5	)	$	(1,379,866	)	$	5,812,879		$	—		$	362,553,376


BALANCE, JANUARY 1, 2008	9,667,845		$	96,678,451		—	$	—	$	—	$	200,605,563		$	48,036,210	$	2,678,723		$	48,317,617		$	(1,980	)	$	(90	)	$	37,508		$	5,823,200		$	(7,107,494	)	$	395,067,708

Adjustment of additional paid-in capital from revaluation of land to income upon disposal	—			—		—		—		—		—			—		—			—			—			—			—			(115	)		—			(115	)

Appropriation of 2007 earnings
Legal reserve	—			—		—		—		—		—			4,823,356		—			(4,823,356	)		—			—			—			—			—			—
Reversal of special reserve	—			—		—		—		—		—			—		(3,304	)		3,304			—			—			—			—			—			—
Cash dividend - NT$4.26 per share	—			—		—		—		—		—			—		—			(40,716,130	)		—			—			—			—			—			(40,716,130	)
Stock dividend - NT$0.1 per share	—			—		—		—		955,778		—			—		—			(955,778	)		—			—			—			—			—			—
Employees’ bonus - cash	—			—		—		—		—		—			—		—			(1,303,605	)		—			—			—			—			—			(1,303,605	)
Employees’ bonus - stock	—			—		—		—		434,535		—			—		—			(434,535	)		—			—			—			—			—			—
Remuneration to board of directors and supervisors	—			—		—		—		—		—			—		—			(43,454	)		—			—			—			—			—			(43,454	)

Net income for the six months ended June 30, 2008	—			—		—		—		—		—			—		—			23,230,513			—			—			—			—			—			23,230,513

Unrealized loss on financial instruments held by investees	—			—		—		—		—		—			—		—			—			—			—			(13,766	)		—			—			(13,766	)

Equity adjustments in investees	—			—		—		—		—		1,364			—		—			(18,846	)		—			—			—			—			—			(17,482	)

Cumulative translation adjustment for foreign-currency investments held by investees	—			—		—		—		—		—			—		—			—			(10,315	)		—			—			—			—			(10,315	)

Defined benefit pension plan adjustments of investees	—			—		—		—		—		—			—		—			—			—			3			—			—			—			3

Cancellation of treasury stock - 110,068 thousand common shares (Notes 2 and 19)	(110,068	)		(1,100,682	)	—		—		—		(2,283,739	)		—		—			(3,723,073	)		—			—			—			—			7,107,494			—

Unrealized loss on financial instruments	—			—		—		—		—		—			—		—			—			—			—			(1,207,709	)		—			—			(1,207,709	)


BALANCE, JUNE 30, 2008	9,557,777		$	95,577,769		—	$	—	$	1,390,313	$	198,323,188		$	52,859,566	$	2,675,419		$	19,532,657		$	(12,295	)	$	(87	)	$	(1,183,967	)	$	5,823,085		$	—		$	374,985,648

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

(With Deloitte & Touche audit report dated August 11, 2009)

- 6 -

CHUNGHWA TELECOM CO., LTD.

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Amounts in Thousands of New Taiwan Dollars)


	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	22,261,402		$	23,230,513
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts		263,467			335,579
Depreciation and amortization		18,209,208			19,134,387
Valuation loss on inventory		30,370			24,487
Valuation loss (gain) on financial instruments, net		(146,918	)		2,734,885
Amortization of premium (discount) of financial assets		7,617			(1,192	)
Loss (gain) on disposal of financial instruments, net		234,095			(756,241	)
Loss on disposal of property, plant and equipment, net		9,138			40,518
Impairment loss on assets		85,349			—
Equity in earnings of equity method investees, net		(123,119	)		(258,169	)
Dividends received from equity investees		393,115			—
Deferred income taxes		282,477			(1,185,404	)
Changes in operating assets and liabilities:
Decrease (increase) in:
Financial assets held for trading		171,783			543,031
Trade notes and accounts receivable		(368,679	)		323,014
Receivables from related parties		125,958			(257,103	)
Other current monetary assets		(1,096,489	)		4,780,221
Inventories		(400,060	)		768,521
Other current assets		(1,152,902	)		(3,596,776	)
Increase (decrease) in:
Trade notes and accounts payable		(3,215,674	)		(3,637,407	)
Payables to related parties		(710,099	)		71,747
Income tax payable		1,090,225			846,629
Accrued expenses		(2,741,213	)		(3,763,411	)
Other current liabilities		347,131			1,105,918
Deferred income		72,992			326,796
Accrued pension liabilities		19,256			1,193,144


Net cash provided by operating activities		33,648,430			42,003,687


CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of available-for-sale financial assets		(6,010,000	)		(4,900,000	)
Proceeds from disposal of available-for-sale financial assets		4,490,787			2,701,761
Acquisition of held-to-maturity financial assets		(1,948,505	)		(300,000	)
Proceeds from disposal of held-to-maturity financial assets		547,693			41,854
Acquisition of financial assets carried at cost		—			(200,000	)
Proceeds from disposal of financial assets carried at cost		285,859			354,933
Acquisition of investments accounted for using equity method		(71,159	)		(3,202,809	)
Acquisition of property, plant and equipment		(10,004,743	)		(11,225,747	)
Proceeds from disposal of property, plant and equipment		1,095			1,823,900


		(Continued)

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CHUNGHWA TELECOM CO., LTD.

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Amounts in Thousands of New Taiwan Dollars)


	2009			2008
Increase in intangible assets	$	(55,375	)	$	(52,971	)
Increase in other assets		(148,974	)		(138,629	)


Net cash used in investing activities		(12,913,322	)		(15,097,708	)


CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in customers’ deposits		(19,012	)		(48,546	)
Decrease in other liabilities		(165,512	)		(307,498	)
Capital reduction		(19,115,554	)		(9,557,777	)


Net cash used in financing activities		(19,300,078	)		(9,913,821	)


NET INCREASE IN CASH AND CASH EQUIVALENTS		1,435,030			16,992,158

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		77,137,903			74,752,564


CASH AND CASH EQUIVALENTS, END OF PERIOD	$	78,572,933		$	91,744,722


SUPPLEMENTAL INFORMATION
Interest paid	$	36		$	132

Income tax paid	$	5,292,630		$	7,133,234


NON-CASH FINANCING ACTIVITIES
Dividends payable	$	37,138,775		$	40,716,130

Payables to employees’ bonuses and remuneration to directors and supervisors	$	—		$	1,347,059


CASH AND NON-CASH INVESTING ACTIVITIES
Increase in property, plant and equipment	$	9,358,701		$	10,559,851
Payables to suppliers		646,042			665,896

	$	10,004,743		$	11,225,747


		(Continued)

- 8 -

CHUNGHWA TELECOM CO., LTD.

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Amounts in Thousands of New Taiwan Dollars)

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 performed by a third-party valuation firm 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 audit report dated August 11, 2009)		(Concluded)

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CHUNGHWA TELECOM CO., LTD.

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

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

1. GENERAL

Chunghwa Telecom Co., Ltd. (“Chunghwa”) was incorporated on July 1, 1996 in the Republic of China (“ROC”) 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 10, 2005. Upon completion of the share transfers associated with these offerings on August 12, 2005, the MOTC owned less than 50% of the outstanding shares of Chunghwa and completed the privatization plan.

As of June 30, 2009 and 2008, the Company had 24,425 and 24,519 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 reasonable 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, 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.

- 10 -

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 at 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 sales 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.

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.

- 11 -

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.

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.

- 12 -

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 the Company 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 the Company to equity method investees are eliminated if the Company has substantial control over these equity investees. Gains or losses on sales from equity method investees to the Company are deferred in proportion to the Company’s ownership percentages in the investees until they are realized through transactions with third parties.

Effective January 1, 2006, pursuant to the revised Statement of Financial Accounting Standards No. 5, the cost of an investment shall be analyzed and the difference between the cost of investment and the fair value of identifiable net assets acquired, representing goodwill, shall not be amortized and instead shall be tested for impairment annually. If the fair value of identifiable net assets acquired exceeds the cost of investment, the excess shall be proportionately allocated as reductions to fair values of noncurrent assets except (a) financial assets other than investments accounted for using equity method, (b) assets to be disposed of by sale, (c) deferred tax assets, and (d) prepaid assets relating to pension or other postretirement benefit plans. If any excess remains after reducing the aforementioned items, the remaining excess shall be recognized as an extraordinary gain.

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.

The accounting treatment for cash dividends and stock dividends arising from financial assets carried at cost is the same as that for cash dividends and stock dividends arising from available-for-sale financial assets.

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.

- 13 -

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.

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 the 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).

- 14 -

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.

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.

Treasury Stock

Treasury stock is recorded at cost and shown as a reduction to stockholders’ equity. Upon cancellation of treasury stock, the treasury stock account is reduced and the common stocks as well as the capital surplus are reversed on a pro rata basis. If capital surplus is not sufficient for debiting purposes, the difference is charged to retained earnings.

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.

- 15 -

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.

The financial statements of foreign equity investees are translated into New Taiwan dollars at the following exchange rates. Assets and liabilities - spot rates at year-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.

3. EFFECT OF CHANGES IN ACCOUNTING PRINCIPLE

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 as operating cost. The adoption of the revised SFAS No. 10 does not have significant impact on the Company’s net income and basic earnings per share (after income tax) for the six months ended June 30, 2009. The Company reclassified non-operating losses of $24,487 thousand to operating costs for the six months ended June 30, 2008.

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. Beginning from 2009, such bonuses are classified as an operating activity for purposes of the statement of cash flows when paid.

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4. CASH AND CASH EQUIVALENTS


	June 30
	2009		2008
Cash
Cash on hand	$	89,142	$	87,664
Bank deposits		9,729,204		16,542,583
Negotiable certificate of deposit, annual yield rate - ranging from 0.15%-0.50% and 2.00%-4.31% for 2009 and 2008, respectively.		48,150,000		49,449,950

		57,968,346		66,080,197
Cash equivalents
Commercial paper, annual yield rate - ranging from 0.13%-0.15% and 1.99%-2.02% for 2009 and 2008, respectively.		20,604,587		25,664,525


	$	78,572,933	$	91,744,722

As of June 30, 2009 and 2008, foreign deposits in bank were as follows:


	June 30
	2009		2008
United States of America - New York (US$2,314 thousand and US$290,917 thousand for 2009 and 2008, respectively)	$	75,936	$	8,830,509
Hong Kong (US$35,377 thousand, EUR862 thousand, JPY10,016 thousand and GBP198 thousand for 2008)		—		1,130,090


	$	75,936	$	9,960,599

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


	June 30
	2009		2008
Derivatives - financial assets
Currency swap contracts	$	22,423	$	—
Index future contracts		—		135,238


	$	22,423	$	135,238


Derivatives - financial liabilities
Currency option contracts	$	—	$	3,274,607
Forward exchange contracts		—		38,684


	$	—	$	3,313,291

Chunghwa entered into investment management agreements with a 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 April 14, 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.

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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, derivatives that do not meet the criteria for hedge accounting is classified as financial assets or financial liabilities held for trading.

Outstanding currency swap contracts and forward exchange contracts on June 30, 2009 and 2008 were as follows:


	Currency	Maturity Period	Contract Amount (in Thousands)
June 30, 2009

Currency swap contracts	USD/NTD	2009.07	USD	85,000/NTD2,788,879

June 30, 2008

Forward exchange contracts - sell	USD/NTD	2008.07-2008.09	USD	320,000
	EUR/USD	2008.08	EUR	18,105
	GBP/USD	2008.08	GBP	2,250
	JPY/USD	2008.08	JPY	523,000

The Company did not have any outstanding index future contracts on June 30, 2009.

Outstanding index future contracts on June 30, 2008 were as follows:


	Maturity Period	Units	Contract Amount (in Thousands)

June 30, 2008

AMSTERDAM IDX FUT	2008.07	13	EUR	1,209
IBEX 35 INDX FUTR	2008.07	7	EUR	897
CAC40 10 EURO FUT	2008.07	3	EUR	141
DAX INDEX FUTURE	2008.09	1	EUR	172
MINI S&P/MIB FUT	2008.09	37	EUR	1,155
FTSE 100 IDX FUT	2008.09	18	GBP	1,065
TOPIX INDEX FUTURE	2008.09	36	JPY	504,432
S&P 500 FUTURE	2008.09	16	USD	5,373
S&P 500 EMINI FUTURE	2008.09	38	USD	2,549

As of June 30, 2008, the deposits paid for outstanding index future contracts were $101,374 thousand.

In September 2007, Chunghwa entered into a 10-year, foreign currency derivative contract with Goldman Sachs Group Inc. (“Goldman”) and valuations are made biweekly starting from September 20, 2007 which are 260 valuation periods totally. Under the terms of the contract, if the NT dollar/US dollar exchange rate is less than NT$31.50 per US dollar at any two consecutive bi-weekly valuation dates during the valuation period starting from October 4, 2007 to September 5, 2017, Chunghwa was required to make a cash payment to Goldman. The settlement amount was determined by the difference between the applicable exchange rates and the base amount of US$4,000 thousand. Conversely, if the NT dollar/US dollar exchange rate was above NT$31.50 per US dollar using the same valuation methodology, Goldman would have a settlement obligation to Chunghwa determined using a base amount of US$2,000 thousand. Further, if the exchange rate is at or above NT$32.70 per US dollar starting from December 12, 2007 at any time, the contract will be terminated at that time. In accordance with the terms of the contract, Chunghwa deposited US$3,000 thousand with Goldman with annual yield rate of 8%. On October 21, 2008, the exchange rate was above NT$32.70 per US dollar, so the contract was terminated at that time.

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Net gain and loss arising from financial assets and liabilities at fair value through profit or loss for the six months ended June 30, 2009 and 2008 were $43,027 thousand (including realized settlement loss of $70,985 thousand and valuation gain of $114,012 thousand) and $2,104,697 thousand (including realized settlement gain of $559,140 thousand and valuation loss of $2,663,837 thousand), respectively.

6. AVAILABLE-FOR-SALE FINANCIAL ASSETS


	June 30
	2009		2008

Open-end mutual funds	$	16,171,555	$	17,483,417
Real estate investment trust fund		182,820		236,455
Foreign listed stocks		—		789,379


	$	16,354,375	$	18,509,251

For the six months ended June 30, 2009 and 2008, movements of unrealized gain or loss on financial instruments mentioned above were as follows:


	Six Months Ended June 30
	2009			2008

Balance, beginning of period	$	(2,255,905	)	$	35,232
Recognized in stockholders’ equity		771,204			(1,396,494	)
Transferred to profit or loss		113,399			188,785


Balance, end of period	$	(1,371,302	)	$	(1,172,477	)

Global economic and financial circumstances have significantly changed. As a result, the Company determined that the impairment losses of available-for-sale financial assets is other-than-temporary in nature, and recorded impairment losses of $85,349 thousand and nil for the six months ended June 30, 2009 and 2008, respectively. Chunghwa recorded impairment losses of $1,139,105 thousand in 2008.

7. HELD-TO-MATURITY FINANCIAL ASSETS


	June 30
	2009		2008

Corporate bonds, nominal interest rate ranging from 0.799%-4.750% and 0.799%-2.680% for 2009 and 2008, respectively; effective interest rate ranging from 0.799%-2.950% and 0.799%-2.680% for 2009 and 2008, respectively	$	4,388,813	$	750,000
Financial institution bonds, nominal interest rate ranging from 1.950%-2.300% and 0.0%-4.0% for 2009 and 2008, respectively; effective interest rate ranging from 1.140%-2.900% and 2.45%-4.0% for 2009 and 2008, respectively		796,752		599,676
Collateralized loan obligation, nominal and effective interest rate were both 2.175% for 2009 and 2008		21,167		59,111

		5,206,732		1,408,787
Less: Current portion		670,541		644,935


	$	4,536,191	$	763,852

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8. ALLOWANCE FOR DOUBTFUL ACCOUNTS


	Six Months Ended June 30
	2009			2008

Balance, beginning of period	$	2,992,143		$	3,290,123
Provision for doubtful accounts		258,776			332,403
Accounts receivable written off		(397,888	)		(511,197	)


Balance, end of period	$	2,853,031		$	3,111,329

9. OTHER CURRENT MONETARY ASSETS


	June 30
	2009		2008

Accrued custodial receipts from other carriers	$	546,036	$	641,245
Other		2,700,750		2,187,560


	$	3,246,786	$	2,828,805

10. INVENTORIES, NET


	June 30
	2009		2008

Work in process	$	475,672	$	171,293
Merchandise		361,469		474,609


	$	837,141	$	645,902

The operating costs related to inventories for the six months ended June 30, 2009 was $2,437,805 thousand, including the valuation loss on inventories of $30,370 thousand. The operating costs related to inventories for the six months ended June 30, 2008 was $2,228,570 thousand, including the valuation loss on inventories of $24,487 thousand.

11. OTHER CURRENT ASSETS


	June 30
	2009		2008

Prepaid expenses	$	2,405,326	$	3,411,415
Spare parts		1,868,913		2,323,784
Prepaid rents		883,735		762,115
Miscellaneous		177,586		347,368


	$	5,335,560	$	6,844,682

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12. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD


	June 30
	2009			2008
	Carrying Value		% of Ownership	Carrying Value		% of Ownership

Listed
Senao International Co., Ltd. (“SENAO”)	$	1,192,470	29	$	1,207,996	31

Non-listed
Light Era Development Co., Ltd. (“LED”)		2,952,556	100		2,995,721	100
Chunghwa Investment Co., Ltd. (“CHI”)		841,475	49		876,867	49
Chunghwa Telecom Singapore Pte., Ltd. (“CHTS”)		782,281	100		—	—
Chunghwa System Integration Co., Ltd. (“CHSI”)		712,953	100		781,034	100
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		495,158	40		578,926	40
CHIEF Telecom Inc. (“CHIEF”)		433,045	69		415,145	69
InfoExplorer Co., Ltd. (“IFE”)		279,423	49		—	—
Donghwa Telecom Co., Ltd. (“DHT”)		224,105	100		15,393	100
Chunghwa International Yellow Pages Co., Ltd. (“CIYP”)		152,699	100		101,297	100
Viettel-CHT Co., Ltd. (“Viettel-CHT”)		88,198	33		88,207	33
Skysoft Co., Ltd. (“SKYSOFT”)		85,775	30		78,973	30
Chunghwa Telecom Global, Inc. (“CHTG”)		69,024	100		77,695	100
KingWaytek Technology Co., Ltd. (“KWT”)		69,003	33		75,671	33
Spring House Entertainment Inc. (“SHE”)		47,986	56		40,250	56
So-Net Entertainment Taiwan (“So-net”)		44,929	30		—	—
Chunghwa Telecom Japan Co., Ltd. (“CHTJ”)		11,270	100		—	—
ELTA Technology Co., Ltd. (“ELTA”)		—	—		42,883	32
New Prospect Investments Holdings Ltd. (B.V.I.) (“New Prospect”)		—	100		—	100
Prime Asia Investments Group Ltd. (B.V.I.) (“Prime Asia”)		—	100		—	100

		7,289,880			6,168,062


	$	8,482,350		$	7,376,058

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 established 100% shares of Light Era Development Co., Ltd. (“LED”) by prepaying $3,000,000 thousand in January 2008. LED completed its incorporation on February 12, 2008. LED engages mainly in development of property for rent and sale.

Chunghwa established Chunghwa Telecom Singapore Pte., Ltd. (“CHTS”) in July 2008, for a purchase price of $200,000 thousand, and increased its investment in CHTS for $610,659 thousand and $579,280 thousand in July 2009 and September 2008. 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. (“SSVP”) in Singapore in October 2008 in order to maintain the current service. SSVP will engage in the installation and the operation of ST-2 telecommunications satellite.

- 21 -

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 invested in Donghwa Telecom Co., Ltd. (“DHT”) in September 2008 and December 2007 for a purchase price of $189,833 thousand and $11,430 thousand. DHT engages mainly in international telecommunications, IP fictitious internet and internet transfer services.

Chunghwa established Viettel-CHT Co., Ltd. (“Viettel-CHT”) with Viettel Co., Ltd. in Vietnam in April 2008, by investing $91,239 thousand cash. Viettel-CHT engages mainly in IDC services.

Chunghwa invested in KingWaytek Technology Co., Ltd. (“KWT”) in January 2008, for a purchase price of $71,770 thousand. KWT engages mainly in publishing books, data processing and software services.

Chunghwa increased its ownership of Spring House Entertainment Inc. (“SHE”) from 30% to 56% in January 2008, for a purchase price of $39,800 thousand, and SHE becomes a subsidiary of Chunghwa. SHE engages mainly in network services, producing digital entertainment contents and broadband visual sound terrace development.

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

Chunghwa established Chunghwa Telecom Japan Co., Ltd. (“CHTJ”), a 100% owned subsidiary in October 2008 by investing $6,140 thousand cash, and 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.

ELTA engages mainly in professional on-line and mobile value-added content aggregative services. Chunghwa sold all shares of ELTA with carrying value $51,152 thousand on July 23, 2008 for a selling price of $44,047 thousand and recognized a disposal loss of $7,105 thousand.

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 right in an amount of US$1 in each holding company.

The equity in earnings for the six months ended June 30, 2009 and 2008 were based on the audited financial statements.

All accounts of Chunghwa’s subsidiaries were included in Chunghwa’s consolidated financial statements.

- 22 -

13. FINANCIAL ASSETS CARRIED AT COST


	June 30
	2009			2008
	Carrying Value		% of Ownership	Carrying Value		% of Ownership

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	12		49,500	12
Essence Technology Solution, Inc. (“ETS”)		10,000	9		20,000	9


	$	2,236,048		$	2,261,048

Chunghwa invested in IBT II in January 2008, for a purchase price of 200,000 thousand. IBT II engages mainly in investment and completed its incorporation on February 13, 2008.

Chunghwa invested in GMC in December 2007, for a purchase price of $168,038 thousand for 16,796 thousand shares. GMC engages mainly in wire communication services and computer software wholesale and circuit engineering. The National Communications Commission (“NCC”) informed Chunghwa with the Communication Letter (#0974102087) on April 1, 2008 that its investment in GMC was not authorized by NCC, and notified Chunghwa on May 5, 2008 that Chunghwa should dispose of its investment in GMC no later than June 30, 2008; otherwise, NCC would fine Chunghwa according to the Telecommunication Act. In April 2008, Chunghwa disposed of a portion of its investment in GMC (4,100 thousand shares) and filed an appeal to NCC to suspend the enforcement. In July 2008, NCC resolved that according to the Administrative Penalty Act, Chunghwa could not divest of its investment in the short time period provided and that Chunghwa would not be subject to fines as noted above. In October 2008, NCC revoked the original decree about Chunghwa’s investment in GMC, therefore, Chunghwa did not dispose of its remaining holding in GMC.

After evaluating the investments in RPTI and ETS, Chunghwa determined the investment in RPTI and ETS were impaired and recognized impairment losses of $15,000 thousand and $10,000 thousand, respectively, for the year ended December 31, 2008.

Chunghwa participated in TFC’s capital increase in October 2008 and prepaid $285,859 thousand. However, TFC is 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 (“SFB”). 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

- 23 -

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 fund were used to finance various telecommunications infrastructure projects.

15. PROPERTY, PLANT AND EQUIPMENT


	June 30
	2009		2008

Cost
Land	$	101,259,764	$	101,855,226
Land improvements		1,513,208		1,484,013
Buildings		62,686,423		62,433,677
Computer equipment		15,434,463		15,022,254
Telecommunications equipment		652,387,793		642,086,379
Transportation equipment		2,243,028		2,751,402
Miscellaneous equipment		7,159,198		7,418,057

Total cost		842,683,877		833,051,008
Revaluation increment on land		5,810,342		5,820,548

		848,494,219		838,871,556

Accumulated depreciation
Land improvements		923,853		871,734
Buildings		16,805,966		15,714,076
Computer equipment		11,742,232		11,512,642
Telecommunications equipment		512,046,657		495,542,339
Transportation equipment		2,056,290		2,603,643
Miscellaneous equipment		6,096,352		6,374,258

		549,671,350		532,618,692

Construction in progress and advances related to acquisition of equipment		14,212,625		14,370,085


Property, plant and equipment, net	$	313,035,494	$	320,622,949

Pursuant to the related regulations, Chunghwa revalued its land owned as of April 30, 2000 based on the publicly announced values 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 stockholder’s 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 effective from 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 stockholder’s equity - other adjustments. As of June 30, 2009, the unrealized revaluation increment was decreased to $5,812,879 thousand by disposal of revaluation assets.

Depreciation on property, plant and equipment for the six months ended June 30, 2009 and 2008 amounted to $17,678,816 thousand and $18,636,189 thousand, respectively. No interest expense was capitalized for the six months ended June 30, 2009 and 2008.

- 24 -

16. ACCRUED EXPENSES


	June 30
	2009		2008

Accrued salary and compensation	$	7,150,199	$	7,725,061
Accrued employees’ bonuses and remuneration to directors and supervisors		2,322,659		757,661
Accrued franchise fees		1,137,051		1,219,579
Other accrued expenses		2,329,480		1,491,369


	$	12,939,389	$	11,193,670

17. OTHER CURRENT LIABILITIES


	June 30
	2009		2008

Advances from subscribers	$	5,399,428	$	5,226,374
Amounts collected in trust for others		2,268,896		2,580,798
Payables to constructors		2,012,710		1,025,968
Payables to equipment suppliers		1,247,747		1,312,458
Refundable customers’ deposits		1,012,910		955,192
Payables to employees’ bonuses and remuneration to directors and supervisors		—		1,347,059
Miscellaneous		3,272,700		3,331,720


	$	15,214,391	$	15,779,569

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 June 30, 2009.

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 June 30, 2009, the outstanding ADSs were 1,154,330 thousand common shares, which equaled approximately 115,433 thousand units and represented 11.90% of Chunghwa’s total outstanding common shares.

- 25 -

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 NT$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.

For the six months ended June 30, 2009 and 2008, 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 shareholders’ meeting is charged to the earnings of the following year as a result of change of 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.

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


	Appropriation and Distribution				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 six months ended June 30, 2009.

Information on the appropriation of Chunghwa’s 2008 earnings, employee bonus and remuneration to directors and supervisors resolved by the board of directors and approved by the stockholders is available at the Market Observation Post System website.

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 registered with SFB. 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 capital reduction plan was effected by a transfer of capital surplus in the amount of $9,696,808 thousand to common capital stock. The stockholders further authorized the board of directors of Chunghwa to designate the record date of capital reduction after the capital reduction plan is effectively registered with SFB.

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 SFB. 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 SFB. 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.

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The stockholders, at a meeting held on June 15, 2007, resolved to transfer capital surplus in the amount of $9,667,845 thousand to common capital stock, and the 2007 capital increase proposal was effectively registered with SFB.

The stockholders, at the stockholders’ meeting held on June 15, 2007, 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 $9,667,845 thousand to common capital stock and was effectively registered with SFB. Chunghwa designated October 19, 2007 and December 29, 2007 as the record date and the stock transfer date of capital reduction, respectively. Subsequently, common capital stock was reduced by $9,667,845 thousand and a liability for the actual amount of cash to be distributed to stockholders of $9,557,777 thousand was recorded. The difference between the reduction in common capital stock and the distribution amount represented treasury stock of $110,068 thousand held by Chunghwa and concurrently cancelled. Such cash payment to stockholders was made in January 2008.

19. TREASURY STOCK


	Six Months Ended June 30
	2009	2008

Balance, beginning of period	—	110,068
Decrease	—	110,068


Balance, end of period	—	—

According to the Securities and Exchange Law of the ROC, total shares of treasury stock shall not exceed 10% of Chunghwa’s stock issued. The total amount of the repurchased shares shall not be more than the total amount of retained earnings, capital surplus and realized additional paid-in capital. The Company shall neither pledge treasury stock nor exercise stockholders’ rights on these shares, such as rights to receive dividends and to vote.

In order to maintain its credit and stockholders’ equity, Chunghwa repurchased 121,075 thousand treasury stock for $7,217,562 thousand from August 29, 2007 to October 25, 2007. On December 29, 2007, Chunghwa cancelled 11,007 thousand shares of treasury stock by reducing common stock of $110,068 thousand. The remaining treasury stock of 110,068 thousand shares amounted $7,107,494 thousand was cancelled on February 21, 2008.

20. COMPENSATION, DEPRECIATION AND AMORTIZATION EXPENSES


	Six Months Ended June 30, 2009
	Operating Costs		Operating Expenses		Total
Compensation expense
Salaries	$	6,075,780	$	4,137,113	$	10,212,893
Insurance		423,519		291,536		715,055
Pension		805,479		570,654		1,376,133
Other compensation		3,993,505		2,742,003		6,735,508


	$	11,298,283	$	7,741,306	$	19,039,589


Depreciation expense	$	16,733,371	$	945,445	$	17,678,816

Amortization expense	$	454,444	$	75,512	$	529,956

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	Six Months Ended June 30, 2008
	Operating Costs		Operating Expenses		Total
Compensation expense
Salaries	$	6,028,408	$	4,132,847	$	10,161,255
Insurance		284,013		192,257		476,270
Pension		800,023		567,919		1,367,942
Other compensation		3,844,789		2,647,897		6,492,686


	$	10,957,233	$	7,540,920	$	18,498,153


Depreciation expense	$	17,620,558	$	1,015,631	$	18,636,189

Amortization expense	$	429,819	$	67,943	$	497,762

21. INCOME TAX

A reconciliation between income tax expense computed by applying the statutory income tax rate of 25% to income before income tax and income tax payable is as follows:


	Six Months Ended June 30
	2009			2008
Income tax expense computed at statutory income tax rate of 25% to income before income tax	$	7,231,674		$	7,506,021
Add (deduct) tax effects of:
Permanent differences		(96,567	)		(278,522	)
Temporary differences		19,312			1,367,337
Additional tax at 10% on undistributed earnings		6,441			—
Investment tax credits		(632,810	)		(785,317	)


Income tax payable	$	6,528,050		$	7,809,519

Income tax expense consists of the following:


	Six Months Ended June 30
	2009			2008
Income tax payable	$	6,528,050		$	7,809,519
Income tax - separated		49,128			131,752
Income tax - deferred		282,477			(1,185,404	)
Adjustments of prior years’ income tax		(194,323	)		37,741


	$	6,665,332		$	6,793,608

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. 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.

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


	June 30
	2009			2008
Current
Provision for doubtful accounts	$	377,136		$	513,261
Unrealized accrued expense		48,783			—
Unrealized foreign exchange loss		29,426			207,337
Valuation loss (gain) on financial instruments, net		(23,034	)		835,079
Other		19,021			30,840

		451,332			1,586,517
Valuation allowance		(377,136	)		(513,261	)


Net deferred income tax assets - current	$	74,196		$	1,073,256


Noncurrent
Accrued pension cost	$	1,131,060		$	1,391,601
Impairment loss		64,163			80,502
Loss on disposal of property, plant and equipment		—			12,970


Net deferred income tax assets - noncurrent	$	1,195,223		$	1,485,073

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

The actual creditable ratios distribution of Chunghwa’s of 2008 and 2007 for earnings were 30.61% and 28.81%, respectively.

Undistributed earnings information

All Chunghwa’s earnings generated prior to June 30, 1998 have been appropriated.

Chunghwa’s income tax returns have been examined by tax authorities through 2005.

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22. EARNINGS PER SHARE


	Amount (Numerator)						Weighted- average Number of Common Shares Outstanding (Denominator)	Earnings Per Share (Dollars)
	Income Before Income Tax			Net Income				Income Before Income Tax		Net Income
Six months ended June 30, 2009

EPS was calculated as follows:

Basic EPS
Income available to stockholders	$	28,926,734		$	22,261,402		10,666,489	$	2.71	$	2.09

Effect of dilutive potential common stock
SENAO’s stock options		(1,038	)		(1,038	)	—
Employee bonus		—			—		33,294


Diluted EPS
Income available to stockholders (including effect of dilutive potential common stock)	$	28,925,696		$	22,260,364		10,699,783	$	2.70	$	2.08


Six months ended June 30, 2008

Basic EPS
Income available to stockholders	$	30,024,121		$	23,230,513		10,666,489	$	2.81	$	2.18

Effect of dilutive potential common stock
SENAO’s stock options		(5,009	)		(5,009	)	—
Employee bonus		—			—		9,616


Diluted EPS
Income available to stockholders (including effect of dilutive potential common stock)	$	30,019,112		$	23,225,504		10,676,105	$	2.81	$	2.18

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 employees 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 six months ended June 30, 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 six months ended June 30, 2009 and 2008 was due to the effect of potential common stock of stock options by SENAO.

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The weighted average number of outstanding shares for EPS calculation has been retroactively adjusted for employee stock bonuses issued in 2008 as a result of the distribution of 2007 earnings and the issuance of stock dividends. The retroactive adjustments caused both of the basic and diluted EPS before income tax for the six months ended June 30, 2008 to decrease from NT$3.14 to NT$2.81, and both of the basic and diluted EPS for the six months ended June 30, 2008, to decrease from NT$2.43 to NT$2.18.

23. 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 at 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 $5,440,162 thousand and $2,961,507 thousand as of June 30, 2009 and 2008, respectively.

Pension costs of Chunghwa were $1,412,661 thousand ($1,366,125 thousand subject to defined benefit plan and $46,536 thousand subject to defined contribution plan) and $1,410,232 thousand ($1,374,036 thousand subject to defined benefit plan and $36,196 thousand subject to defined contribution plan) for the six months ended June 30, 2009 and 2008, respectively.

24. 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.

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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
Chunghwa System Integration Co., Ltd. (“CHSI”)		Subsidiary
CHIEF Telecom, Inc. (“CHIEF”)		Subsidiary
InfoExplorer Co., Ltd. (“IFE”)		Subsidiary
Donghwa Telecom Co., Ltd. (“DHT”)		Subsidiary
Chunghwa International Yellow Pages Co., Ltd. (“CIYP”)		Subsidiary
Chunghwa Telecom Global, Inc. (“CHTG”)		Subsidiary
Spring House Entertainment Inc. (“SHE”)		Subsidiary
Chunghwa Telecom Japan Co., Ltd. (“CHTJ”)		Subsidiary
New Prospect Investments Holdings Ltd. (B.V.I.) (“New Prospect”)		Subsidiary
Prime Asia Investments Group Ltd. (B.V.I.) (“Prime Asia”)		Subsidiary
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
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		Equity-method investee
Skysoft Co., Ltd. (“SKYSOFT”)		Equity-method investee
So-net Entertainment Taiwan (“So-net”)		Equity-method investee
ELTA Technology Co., Ltd. (“ELTA”)		Equity-method investee before Chunghwa sold all shares in July 2008.
Senao Networks, Inc. (“SNI”)		Equity-method investee of SENAO
Chunghwa Precision Test Technical Co., Ltd. (“CHPT”)		Subsidiary of CHI

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


	June 30
	2009			2008
	Amount		%	Amount		%

1) Receivables

Trade notes and accounts receivable
SENAO	$	121,635	56	$	273,901	59
CIYP		30,306	14		12,724	3
CHIEF		21,388	10		19,524	4
CHSI		14,800	7		—	—
CHTG		13,987	6		67,594	15
LED		—	—		91,134	19
Others		14,942	7		3,852	—


	$	217,058	100	$	468,729	100

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	June 30
	2009			2008
	Amount		%	Amount		%

2) Payables

Trade notes payable, accounts payable, and accrued expenses
SENAO	$	520,969	36	$	727,653	43
TISE		349,389	24		183,439	11
CHSI		205,965	14		197,902	12
CHIEF		50,215	4		17,024	1
DHT		36,285	2		—	—
CHTG		25,173	2		18,128	1
SHE		12,212	1		—	—
CIYP		4,786	—		16,216	1
ELTA		—	—		19,225	1
Others		8,254	—		1,516	—

		1,213,248	83		1,181,103	70

Payables to constructors
TISE		15,412	1		41,628	3
CHSI		1,358	—		45,406	3

		16,770	1		87,034	6

Amounts collected in trust for others
SENAO		224,382	16		323,400	19
LED		—	—		74,962	4
Others		10,371	—		11,880	1

		234,753	16		410,242	24


	$	1,464,771	100	$	1,678,379	100


3) Revenue in advance - land (included in “other current liabilities”)

LED	$	—	—	$	80,677	—


	Six Months Ended June 30
	2009			2008
	Amount		%	Amount		%

4) Revenues

SENAO	$	347,971	—	$	1,093,469	1
CHIEF		111,274	—		99,869	—
CHTG		25,128	—		90,048	—
So-net		24,608	—		—	—
SKYSOFT		17,086	—		16,657	—
CIYP		8,167	—		13,400	—
CHSI		7,925	—		2,494	—
Others		14,239	—		17,094	—


	$	556,398	—	$	1,333,031	1

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	Six Months Ended June 30
	2009			2008
	Amount		%	Amount		%

5) Operating costs and expenses

SENAO	$	2,566,458	4	$	3,350,546	6
TISE		232,188	1		285,372	1
CHSI		169,862	—		165,465	—
CHIEF		150,251	—		79,872	—
SHE		32,456	—		15,336	—
CIYP		25,844	—		101,364	—
CHTG		24,183	—		28,609	—
DHT		6,276	—		38,063	—
ELTA		—	—		189,232	—
Others		5,610	—		2	—


	$	3,213,128	5	$	4,253,861	7


6) Acquisition of property, plant and equipment

TISE	$	214,625	2	$	205,065	2
CHSI		187,788	2		324,994	3
CHTG		21,770	—		37,022	—
Others		268	—		—	—


	$	424,451	4	$	567,081	5

Chunghwa sold the land with a carrying value of $703,125 thousand to Light Era Development Co., Ltd. (“LED”) at price of $1,820,880 thousand. However, since the gain on disposal of land amounting to $1,117,755 thousand is unrealized, the gain is recognized as deferred credit - profit on intercompany transactions, and will not be recognized as revenue till the gain is realized in the future.

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

25. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

As of June 30, 2009, Chunghwa’s remaining commitments under non-cancellable contracts with various parties were as follows:

Acquisition of land and buildings of $209,770 thousand.

Acquisition of telecommunications equipment of $16,446,119 thousand.

Contracts to print billing, envelops and selling gifts $111,207 thousand.

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


Year	Rental Amount
2009 (from July 1, 2009 to December 31, 2009)	$	893,421
2010		1,315,883
2011		1,021,957
2012		791,037
2013 and thereafter		690,997

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 Chunghwa 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. Chunghwa had filed an appeal at the Taiwan Taipei District Court within the statutory period.

Giga Media filed a civil action against Chunghwa with the Taiwan Taipei District Court (the “Court”) on June 12, 2008. The complaint alleged that Chunghwa infringed Giga Media’s ROC Patent No. I 258284 which is a Point-to-Point Protocol over Ethernet (“PPPoE”) technique used to launch fixed IP of ADSL. Giga Media is seeking damages of $500,000 thousand and interest calculated at 5% for the period from one day following the date Chunghwa received the official notification from the Court to the payment date. As of audit report date, the case is still in the procedure of the first instance.

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26. FAIR VALUES OF FINANCIAL INSTRUMENTS

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


	June 30
	2009				2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets
Cash and cash equivalents	$	78,572,933	$	78,572,933	$	91,744,722	$	91,744,722
Financial assets at fair value through profit or loss		22,423		22,423		135,238		135,238
Available-for-sale financial assets		16,354,375		16,354,375		18,509,251		18,509,251
Held-to-maturity financial assets - current		670,541		670,541		644,935		644,935
Trade notes and accounts receivable, net		10,300,053		10,300,053		9,815,385		9,815,385
Receivables from related parties		217,058		217,058		468,729		468,729
Other current monetary assets		3,246,786		3,246,786		2,828,805		2,828,805
Investments accounted for using equity method		8,482,350		10,084,028		7,376,058		9,100,776
Financial assets carried at cost		2,236,048		2,236,048		2,261,048		2,261,048
Held-to-maturity financial assets - noncurrent		4,536,191		4,536,191		763,852		763,852
Other noncurrent monetary assets		1,000,000		1,000,000		1,000,000		1,000,000
Refundable deposits		1,288,994		1,288,994		1,243,701		1,243,701
Liabilities
Financial liabilities at fair value through profit or loss		—		—		3,313,291		3,313,291
Trade notes and accounts payable		5,608,657		5,608,657		6,919,396		6,919,396
Payables to related parties		1,464,771		1,464,771		1,678,379		1,678,379
Accrued expenses		12,939,389		12,939,389		11,193,670		11,193,670
Dividends Payable		37,138,775		37,138,775		40,716,130		40,716,130
Amounts collected in trust for others (included in “other current liabilities”)		2,268,896		2,268,896		2,580,798		2,580,798
Payables to employees’ bonuses and remuneration to directors and supervisors (included in “other current liabilities”)		—		—		1,347,059		1,347,059
Payables to equipment suppliers (included in “other current liabilities”)		1,247,747		1,247,747		1,312,458		1,312,458
Payables to constructors (included in “other current liabilities”)		2,012,710		2,012,710		1,025,968		1,025,968
Refundable customers’ deposits (included in “other current liabilities”)		1,012,910		1,012,910		955,192		955,192
Hedging derivative financial liabilities (included in “other current liabilities”)		—		—		5,263		5,263
Customers’ deposits		6,047,305		6,047,305		6,236,222		6,236,222

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.

If the financial assets/liabilities at fair value through profit or loss and the available-for-sale financial assets 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.

- 37 -

Long-term investments are based on the net asset values of the investments in unconsolidated companies, 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
	June 30				June 30
	2009		2008		2009		2008
Assets
Financial assets at fair value through profit or loss	$	22,423	$	135,238	$	—	$	—
Available-for-sale financial assets		16,354,375		18,509,251		—		—
Hedging derivative financial assets (classified as other current monetary assets)		17,374		—		—		—
Liabilities
Financial liabilities at fair value through profit or loss		—		38,684		—		3,274,607
Hedging derivative financial liabilities (classified as other current liabilities)		—		5,263		—		—

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, forward exchange contracts and currency option contracts exposed to rate risk.

The fluctuations of market price would result in the index future contracts exposed to price 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.

- 38 -

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 currency swap contracts and forward exchange contracts to hedge the fluctuation in exchange rates of beneficiary certificate denominated in foreign currency, which is fair value hedge. The transaction was assessed as highly effective for the six months ended June 30, 2009 and 2008.

Outstanding currency swap contracts and forward exchange contracts for hedge as of June 30, 2009 and 2008:


	Currency	Holding Period	Contract Amount (in Thousands)
June 30, 2009

Currency swap contracts	USD/NTD	2009.07	USD30,000/NTD984,471

June 30, 2008

Forward exchange contracts - sell	USD/NTD	2008.09	USD65,000

As of June 30, 2009, the currency swap contracts measured at fair value result in hedging derivative financial assets of $17,374 thousand (classified as other current monetary assets). As of June 30, 2008, the forward exchange contracts measured at fair value result in hedging derivative financial liabilities of $5,263 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, which was as follows:

Holding period and contract amounts

SENAO entered into a forward exchange contract for the six months ended June 30, 2009 and 2008 to reduce the exposure to foreign currency risk.

Outstanding forward exchange contracts as of June 30, 2009 and 2008:


	Currency	Holding Period	Contract Amount (in Thousands)
June 30, 2009

Buy	NTD/USD	2009.07	NTD	183,773

June 30, 2008

Buy	NTD/USD	2008.07	NTD	149,934

- 39 -

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 financial instruments categorized as available-for-sale financial assets are mainly beneficiary certificates. Therefore, the market risk is the fluctuations of market price. In order to manage this risk, SENAO 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 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. The maximum credit exposures of SENAO’s financial instruments are the same as its carrying amounts.

Liquidation risk

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

SENAO’s investments in domestic open-end mutual funds are traded in active markets and can be disposed readily approximately to their fair values. 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 would be anticipated on financial assets carried at cost.

27. ADDITIONAL DISCLOSURES

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

Financing provided: None.

Endorsement/guarantee provided: None.

Marketable securities held: Please see Table 1.

Marketable securities acquired and disposed of at costs or prices at least $100 million or 20% of the paid-in capital: Please see Table 2.

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 purchase from or sale to related parties amounting to at least $100 million or 20% of the paid-in capital: Please see Table 3.

Receivables from related parties amounting to $100 million or 20% of the paid-in capital: Please see Table 4.

Names, locations, and other information of investees on which the Company exercises significant influence: Please see Table 5.

- 40 -

Financial transactions: Please see Notes 5 and 26.

Investment in Mainland China: Please see Table 6.

- 41 -

TABLE 1

CHUNGHWA TELECOM CO., LTD.

MARKETABLE SECURITIES HELD

JUNE 30, 2009

(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	June 30, 2009						Note
No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares (Thousands/ Thousand Units)	Carrying Value (Note 6)		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	$	1,192,470	29	$	2,845,806	Note 5
		Light Era Development Co., Ltd.	Subsidiary	Investments accounted for using equity method	300,000		2,952,556	100		2,953,075	Note 1
		Chunghwa Investment Co., Ltd.	Equity-method investee	Investments accounted for using equity method	98,000		841,475	49		917,666	Note 1
		Chunghwa Telecom Singapore Pte. Ltd.	Subsidiary	Investments accounted for using equity method	34,869		782,281	100		782,281	Note 1
		Chunghwa System Integration Co., Ltd.	Subsidiary	Investments accounted for using equity method	60,000		712,953	100		621,905	Note 1
		Taiwan International Standard Electronics Co., Ltd.	Equity-method investee	Investments accounted for using equity method	1,760		495,158	40		667,376	Note 1
		CHIEF Telecom Inc.	Subsidiary	Investments accounted for using equity method	37,942		433,045	69		383,390	Note 1
		InfoExplorer Co., Ltd.	Subsidiary	Investments accounted for using equity method	22,498		279,423	49		224,564	Note 1
		Donghwa Telecom Co., Ltd.	Subsidiary	Investments accounted for using equity method	51,590		224,105	100		224,105	Note 1
		Chunghwa International Yellow Pages Co., Ltd.	Subsidiary	Investments accounted for using equity method	15,000		152,699	100		152,699	Note 1
		Viettel-CHT Co., Ltd.	Equity-method investee	Investments accounted for using equity method	—		88,198	33		88,198	Note 1
		Skysoft Co., Ltd.	Equity-method investee	Investments accounted for using equity method	4,438		85,775	30		46,408	Note 1
		Chunghwa Telecom Global, Inc.	Subsidiary	Investments accounted for using equity method	6,000		69,024	100		89,988	Note 1
		KingWaytek Technology Co., Ltd.	Equity-method investee	Investments accounted for using equity method	1,703		69,003	33		15,230	Note 1
		Spring House Entertainment Inc.	Subsidiary	Investments accounted for using equity method	5,996		47,986	56		32,992	Note 1
		So-net Entertainment Taiwan	Equity-method investee	Investments accounted for using equity method	3,429		44,929	30		27,075	Note 1
		Chunghwa Telecom Japan Co., Ltd.	Subsidiary	Investments accounted for using equity method	1		11,270	100		11,270	Note 1
		New Prospect Investments Holdings Ltd. (B.V.I.)	Subsidiary	Investments accounted for using equity method	—	US$	1 dollar	100	US$	1 dollar	Note 3
		Prime Asia Investments Group Ltd. (B.V.I.)	Subsidiary	Investments accounted for using equity method	—	US$	1 dollar	100	US$	1 dollar	Note 3
		Taipei Financial Center	—	Financial assets carried at cost	172,927		1,789,530	12		1,371,753	Note 2
		Industrial Bank of Taiwan II Venture Capital Co., Ltd. (IBT II)	—	Financial assets carried at cost	20,000		200,000	17		206,833	Note 2
		Global Mobile Corp.	—	Financial assets carried at cost	12,696		127,018	11		116,569	Note 2
		iD Branding Ventures	—	Financial assets carried at cost	7,500		75,000	8		71,245	Note 2
		PRTI International	—	Financial assets carried at cost	9,234		34,500	12		34,925	Note 2
		Essence Technology Solution, Inc.	—	Financial assets carried at cost	2,000		10,000	9		3,979	Note 2

		REITS
		Fubon No. 1 Fund	—	Available-for-sale financial assets	9,141		91,410	—		97,626	Note 5
		Cathay No. 2 REIT	—	Available-for-sale financial assets	1,125		11,250	—		11,194	Note 5
		Gallop No. 1 REIT	—	Available-for-sale financial assets	10,000		100,000	—		74,000	Note 5

		Beneficiary certificates (mutual fund)
		Polaris /P-shares Taiwan Dividend + ETF	—	Available-for-sale financial assets	600		15,000	—		11,556	Note 4
		PCA Well Pool Fund	—	Available-for-sale financial assets	194,181		2,500,000	—		2,518,912	Note 4

(Continued)

- 42 -


No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	June 30, 2009						Note
No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares (Thousands/ Thousand Units)	Carrying Value (Note 6)		Percentage of Ownership	Market Value or Net Asset Value		Note

		Yuan Ta Wan Tai Bond Fund	—	Available-for-sale financial assets	104,520	$	1,500,000	—	$	1,511,002	Note 4
		Mega Diamond Bond Fund	—	Available-for-sale financial assets	126,106		1,500,000	—		1,502,581	Note 4
		Polaris De-Li Fund	—	Available-for-sale financial assets	225,901		3,500,000	—		3,520,331	Note 4
		Fuh-Hwa Bond Fund	—	Available-for-sale financial assets	108,849		1,500,000	—		1,502,024	Note 4
		Fidelity US High Yield Fund	—	Available-for-sale financial assets	535		206,588	—		169,632	Note 4
		MFS Meridian Funds-Strategic Income Fund	—	Available-for-sale financial assets	316		132,592	—		128,053	Note 4
		Fidelity Fds Intl Bond	—	Available-for-sale financial assets	8,713		336,405	—		321,117	Note 4
		Credit Suisse BF (Lux) Euro Bond Fund	—	Available-for-sale financial assets	4		55,632	—		67,298	Note 4
		Fidelity European High Yield Fund	—	Available-for-sale financial assets	324		126,425	—		109,991	Note 4
		Parvest Europe Convertible Bond Fond	—	Available-for-sale financial assets	78		443,097	—		373,985	Note 4
		JPMorgan Funds-Global Convertibles Fund (EUR)	—	Available-for-sale financial assets	868		491,450	—		421,179	Note 4
		Parvest Euro Bond	—	Available-for-sale financial assets	39		287,400	—		302,293	Note 4
		Fuh-Hwa Aegis Fund	—	Available-for-sale financial assets	17,813		234,684	—		202,631	Note 4
		AGI Global Quantitative Balanced Fund	—	Available-for-sale financial assets	20,000		232,731	—		210,000	Note 4
		Capital Value Balance Fund	—	Available-for-sale financial assets	11,285		200,000	—		164,621	Note 4
		Fuh Hwa Life Goal Fund	—	Available-for-sale financial assets	6,832		100,000	—		99,483	Note 4
		Fuh Hwa Asia Pacific Balanced	—	Available-for-sale financial assets	7,764		100,000	—		71,584	Note 4
		Asia-Pacific Mega - Trend Fund	—	Available-for-sale financial assets	13,059		175,000	—		137,903	Note 4
		AIG Flagship Global Balanced Fund of Funds	—	Available-for-sale financial assets	25,679		350,000	—		298,392	Note 4
		Franklin Templeton Global Bond Fund of Funds	—	Available-for-sale financial assets	18,967		210,000	—		217,664	Note 4
		Cathay Global Aggressive Fund of Funds	—	Available-for-sale financial assets	14,692		200,000	—		154,264	Note 4
		Polaris Global Emerging Market Funds	—	Available-for-sale financial assets	9,791		150,000	—		107,115	Note 4
		HSBC Global Fund of Bond Funds	—	Available-for-sale financial assets	22,838		250,000	—		244,481	Note 4
		JPM (Taiwan) JF Balanced Fund	—	Available-for-sale financial assets	2,462		50,000	—		44,417	Note 4
		MFS Meridian Funds-Global Equity Fund (A1 class)	—	Available-for-sale financial assets	253		262,293	—		182,642	Note 4
		Fidelity Fds International	—	Available-for-sale financial assets	128		163,960	—		103,800	Note 4
		Fidelity Fds America	—	Available-for-sale financial assets	937		163,960	—		110,971	Note 4
		JPMorgan Funds-Global Dynamic Fund (B)	—	Available-for-sale financial assets	303		165,640	—		106,345	Note 4
		MFS Meridian Funds-Research International Fund (A1 share)	—	Available-for-sale financial assets	173		131,920	—		84,264	Note 4
		Fidelity Fds Emerging Markets	—	Available-for-sale financial assets	144		122,175	—		65,718	Note 4
		Credit Suisse Equity Fund (Lux) Global Resources	—	Available-for-sale financial assets	13		162,990	—		88,487	Note 4
		Fidelity Euro Balanced Fund	—	Available-for-sale financial assets	879		560,819	—		416,878	Note 4
		Fidelity Fds World	—	Available-for-sale financial assets	295		171,568	—		102,090	Note 4
		Fidelity Fds Euro Blue Chip	—	Available-for-sale financial assets	259		233,543	—		134,270	Note 4
		MFS Meridian Funds - European Equity Fund (A1 share)	—	Available-for-sale financial assets	171		178,920	—		110,305	Note 4
		Henderson Horizon Fund - Pan European Equity Fund	—	Available-for-sale financial assets	230		180,886	—		131,026	Note 4
		JPM (Taiwan) Global Balanced Fund	—	Available-for-sale financial assets	9,071		125,000	—		122,250	Note 4

(Continued)

- 43 -


No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	June 30, 2009						Note
No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares (Thousands/ Thousand Units)	Carrying Value (Note 6)		Percentage of Ownership	Market Value or Net Asset Value		Note

		Bonds
		Mega Securities Corp. 1st Unsecured Corporate Bonds in 2007	—	Held-to-maturity financial assets	—	$	150,000	—	$	150,000	Note 7
		KGI Securities 1st Unsecured Corporate Bonds 2007-B Issue	—	Held-to-maturity financial assets	—		100,000	—		100,000	Note 7
		Mega Financial Holding 1st Unsecured Corporate Bond 2007-B Issue	—	Held-to-maturity financial assets	—		200,000	—		200,000	Note 7
		Mega Securities Corp. 1st Unsecured Corporate Bond 2008 - A issue	—	Held-to-maturity financial assets	—		300,000	—		300,000	Note 7
		Formosa Petrochemical Corp.	—	Held-to-maturity financial assets	—		99,868	—		99,868	Note 7
		Taiwan Power Company 3rd Boards in 2008	—	Held-to-maturity financial assets	—		149,938	—		149,938	Note 7
		GreTai Company 1st Unsecured Corporate Bonds-A issue in 2008	—	Held-to-maturity financial assets	—		100,000	—		100,000	Note 7
		Fubon Financial Holding Company 2005 1st Unsecured Debenture	—	Held-to-maturity financial assets	—		99,447	—		99,447	Note 7
		Formosa Petrochemical Corporation 3rd Unsecured Corporate Bonds Issue in 2008.	—	Held-to-maturity financial assets	—		49,925	—		49,925	Note 7
		Taiwan Power Company 5th Boards in 2008	—	Held-to-maturity financial assets	—		273,038	—		273,038	Note 7
		Yuanta Securities Finance Co. Ltd. 1nd Unsecured Corporate Bonds-A Issue in 2007	—	Held-to-maturity financial assets	—		100,043	—		100,043	Note 7
		Formosa Petrochemical Corporation 4th Unsecured Corporate Bonds Issue in 2006	—	Held-to-maturity financial assets	—		300,989	—		300,989	Note 7
		NAN YA Company 2nd Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		408,659	—		408,659	Note 7
		Taiwan Power Company 3rd Boards in 2006	—	Held-to-maturity financial assets	—		201,284	—		201,284	Note 7
		Taiwan Power Co. 1st Unsecured Bond-B Issue in 2001	—	Held-to-maturity financial assets	—		182,865	—		182,865	Note 7
		Formosa Petrochemical Corporation Bond Issue in 2006	—	Held-to-maturity financial assets	—		201,721	—		201,721	Note 7
		NAN YA Company 3rd Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		205,214	—		205,214	Note 7
		China Development Financial Holding Corporation 1st Unsecured Corporate Bonds Issue in 2006	—	Held-to-maturity financial assets	—		405,048	—		405,048	Note 7
		China Development Financial Holding Corporation 1st Unsecured Corporate Bonds-A Issue in 2008	—	Held-to-maturity financial assets	—		104,176	—		104,176	Note 7
		Taiwan Power Co. 4th secured Bond-B Issue in 2008	—	Held-to-maturity financial assets	—		52,264	—		52,264	Note 7
		Formosa Petrochemical Corporation 2nd Unsecured Corporate Bonds Issue in 2008.	—	Held-to-maturity financial assets	—		103,411	—		103,411	Note 7
		Formosa Petrochemical Corporation 4th Unsecured Corporate Bonds Issue in 2008.	—	Held-to-maturity financial assets	—		201,346	—		201,346	Note 7
		NAN YA Company 4th Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		99,877	—		99,877	Note 7
		MLPC 1st Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		199,667	—		199,667	Note 7

(Continued)

- 44 -


No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	June 30, 2009								Note
No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares (Thousands/ Thousand Units)	Carrying Value (Note 6)			Percentage of Ownership	Market Value or Net Asset Value			Note

		China Steel Corporation 2nd Unsecured Corporate Bonds-A Issue in 2008	—	Held-to-maturity financial assets	—	$	100,033		—	$	100,033		Note 7
		China Development Industrial B	—	Held-to-maturity financial assets	—		197,645		—		197,645		Note 7
		Cathay United Bank 9st Financial Debentures-03 Issue in 2004	—	Held-to-maturity financial assets	—		199,920		—		199,920		Note 7
		Hua Nan Commercial Bank 2nd of the two Subordinate Financial Debentures Issue in 2004	—	Held-to-maturity financial assets	—		99,964		—		99,964		Note 7
		China Development Industrial Bank 2nd Financial Debentures issue in 2006	—	Held-to-maturity financial assets	—		198,411		—		198,411		Note 7
		TaipeiFubon Bank 1st Financial Debentures-BA Issue in 2005	—	Held-to-maturity financial assets	—		100,812		—		100,812		Note 7
		Enterprise Debt Securitization Cathay United Bank CLO 96-1	—	Held-to-maturity financial assets	—		21,167		—		21,167		Note 7

1	Senao International Co., Ltd.	Senao Networks, Inc.	Equity-method investee	Investments accounted for using equity method	15,152		269,365		42		269,365		Note 1
		N.T.U. Innovation Incubation Corporation	—	Financial assets carried at cost	1,200		12,000		9		12,081		Note 2

2	CHIEF Telecom Inc.	Unigate Telecom Inc.	Subsidiary	Investments accounted for using equity method	200		1,856		100		1,856		Note 1
		CHIEF Telecom (Hong Kong) Limited	Subsidiary	Investments accounted for using equity method	400		1,128		100		1,128		Note 1
		Chief International Corp.	Subsidiary	Investments accounted for using equity method	200		7,145		100		7,145		Note 1
		eASPNet Inc.	—	Financial assets carried at cost	1,000		—		2		—		Note 2
		3 Link Information Service Co., Ltd.	—	Financial assets carried at cost	374		3,450		10		6,484		Note 2

3	Chunghwa System Integration Co., Ltd.	Concord Technology Corp.	Subsidiary	Investments accounted for using equity method	500	(US$	13,245 404	)	100	(US$	13,245 404	)	Note 1
		Cathy Global Aggressive Fund of Fund	—	Available-for-sale financial assets	1,233		15,000		—		12,951		Note 4
		Cathy Global Infrastructure Fund	—	Available-for-sale financial assets	1,418		15,000		—		10,653		Note 4

4	Concord Technology Corp.	Glory Network System Service (Shanghai) Co., Ltd.	Subsidiary	Investments accounted for using equity method	500	(US$	13,241 404	)	100	(US$	13,241 404	)	Note 1

5	Chunghwa Telecom Singapore Pte., Ltd.	ST-2 Satellite Ventures Pte., Ltd.	Equity-method investee	Investments accounted for using equity method	—	(SG$	409,790 18,068	)	38	(SG$	409,790 18,068	)	Note 1

Note 1:

The net asset values of investees were based on audited financial statements.

Note 2:

The net asset values of investees were based on unaudited financial statements.

Note 3:

New Prospect Investments Holdings Ltd. (B.V.I.) and Prime Asia Investments Group Ltd. (B.V.I.) were incorporated in March 2006, but not on operating stage, yet. Chunghwa has 100% ownership right in an amount of US$1 in each holding company.

Note 4:

The net asset values of beneficiary certification (mutual fund) were based on the net asset values on June 30, 2009.

Note 5:

Market value was based on the closing price of June 30, 2009.

Note 6:

Showing at their original carrying amounts without the adjustments of fair values, except for held-to-maturity financial assets.

Note 7:

The net asset values of investees were based on amortized cost.

(Concluded)

- 45 -

TABLE 2

CHUNGHWA TELECOM CO., LTD.

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2009

(Amounts in Thousands of New Taiwan Dollars)


No.	Company Name	Marketable Securities Type and Name	Financial Statement Account	Counter- party	Nature of Relationship	Beginning Balance			Acquisition				Disposal									Ending Balance
No.	Company Name	Marketable Securities Type and Name	Financial Statement Account	Counter- party	Nature of Relationship	Shares (Thousands/ Thousand Units)	Amount (Note 1)		Shares (Thousands/ Thousand Units)	Amount			Shares (Thousands/ Thousand Units)	Amount		Carrying Value (Note 1)			Gain (Loss) on Disposal			Shares (Thousands/ Thousand Units)	Amount (Note 1)

0	Chunghwa Telecom Co., Ltd.	Beneficiary certificates (mutual fund)
		Mega Diamond Bond Fund	Available-for-sale financial assets	—	—	—	$	—	126,106	$	1,500,000		—	$	—	$	—		$	—		126,106	$	1,500,000
		Polaris De-Li Fund	Available-for-sale financial assets	—	—	97,388		1,500,000	128,513		2,000,000		—		—		—			—		225,901		3,500,000
		Fuh-Hwa Bond Fund	Available-for-sale financial assets	—	—	—		—	108,849		1,500,000		—		—		—			—		108,849		1,500,000
		PCA Well Pool Fund	Available-for-sale financial assets	—	—	117,079		1,500,000	77,102		1,000,000		—		—		—			—		194,181		2,500,000
		MFS Meridian Emerging Markets Debt Fund	Available-for-sale financial assets	—	—	336		208,578	—		—		336		231,575		208,578			22,997		—		—
		Fidelity Fds Intl Bond	Available-for-sale financial assets	—	—	14,644		565,387	—		—		5,931		213,940		228,982			(15,042	)	8,713		336,405
		Sinopia Alternative Funds - Global Bond Market Neutral Fund 600	Available-for-sale financial assets	—	—	—		623,332	—		—		—		684,208		647,917			36,291		—		—
		Fubon Taiwan Selected Fund	Available-for-sale financial assets	—	—	100,000		618,404	—		—		100,000		671,052		618,104 (Note 4	)		52,948		—		—
		HSBC Taiwan Balanced Strategy Fund	Available-for-sale financial assets	—	—	100,000		797,811	—		—		100,000		794,099		769,374 (Note 4	)		24,725		—		—
		Cathay Chung Hwa No. 1 Fund	Available-for-sale financial assets	—	—	100,000		717,909	—		—		100,000		696,522		710,886 (Note 4	)		(14,364	)	—		—
		Fuh Hwa Power Fund III	Available-for-sale financial assets	—	—	100,000		726,771	—		—		100,000		717,136		677,182 (Note 4	)		39,954		—		—

		Bonds
		Taiwan Power Co. 1st Unsecured Bond-B Issue in 2001	Held-to-maturity financial assets	—	—	—		—	—		262,500 (Note 2	)	—		—		—			—		—		262,500 (Note 2	)
		Formosa Petrochemical Corporation 5th Unsecured Corporate Bonds Issue in 2006	Held-to-maturity financial assets	—	—	—		—	—		200,000 (Note 2	)	—		—		—			—		—		200,000 (Note 2	)
		Nan Ya Company 3rd Unsecured Corporate Bonds Issue in 2008	Held-to-maturity financial assets	—	—	—		—	—		200,000 (Note 2	)	—		—		—			—		—		200,000 (Note 2	)
		China Development Financial Holding Corporation 1st Unsecured Corporate Bonds Issue in 2007	Held-to-maturity financial assets	—	—	—		—	—		400,000 (Note 2	)	—		—		—			—		—		400,000 (Note 2	)
		MLPC 1st Unsecured Corporate Bonds Issue in 2008	Held-to-maturity financial assets	—	—	—		—	—		200,000 (Note 2	)	—		—		—			—		—		200,000 (Note 2	)
		Formosa Petrochemical Corporation 2nd Unsecured Corporate Bonds Issue in 2008.	Held-to-maturity financial assets	—	—	—		—	—		100,000 (Note 2	)	—		—		—			—		—		100,000 (Note 2	)
		TaipeiFubon Bank 1st Financial Debentures-BA Issue in 2005	Held-to-maturity financial assets	—	—	—		—	—		100,000 (Note 2	)	—		—		—			—		—		100,000 (Note 2	)
		China Development Financial Holding Corporation 1st Unsecured Corporate Bonds-A Issue in 2008	Held-to-maturity financial assets	—	—	—		—	—		100,000 (Note 2	)	—		—		—			—		—		100,000 (Note 2	)
		Formosa Petrochemical Corporation 4th Unsecured Corporate Bonds Issue in 2008.	Held-to-maturity financial assets	—	—	—		—	—		200,000 (Note 2	)	—		—		—			—		—		200,000 (Note 2	)

(Continued)

- 46 -

No.

Company
Name

Marketable
Securities
Type
and
Name

Financial
Statement
Account

Counter-
party

Nature of
Relationship

Beginning Balance

Acquisition

Disposal

Ending Balance

Shares
(Thousands/
Thousand
Units)

Amount
(Note 1)

Shares
(Thousands/
Thousand
Units)

Amount

Shares
(Thousands/
Thousand
Units)

Amount

Carrying
Value
(Note 1)

Gain
(Loss)
on
Disposal

Shares
(Thousands/
Thousand
Units)

Amount
(Note 1)

Chunghwa Telecom Singapore Pte., Ltd.

Stocks

ST-2 Satelite Ventures Pte., Ltd.

Investment accounted for using equipment

—

Equity-method investee

—

(SG$

108,212

4,736

)

—

( SG$

302,629

13,366

)

—

(SG$

409,790

18,068

(Note 3

)

Note 1:

Showing at their original carrying amounts without adjustments of fair values.

Note 2:

Stated at its nominal amounts.

Note 3:

The ending balance includes $746 thousand and $305 thousand which are investment loss recognized under equity method and cumulative translation adjustments, respectively.

Note 4:

The carrying amount of disposal was decreased by impairment losses.

(Concluded)

- 47 -

TABLE 3

CHUNGHWA TELECOM CO., LTD.

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2009

(Amounts in Thousands of New Taiwan Dollars)


No.	Company Name	Related Party	Nature of Relationship	Transaction Details						Abnormal Transaction				Notes/Accounts Payable or Receivable
No.	Company Name	Related Party	Nature of Relationship	Purchase/Sale	Amount			% to Total	Payment Terms	Units Price		Payment Terms		Ending Balance (Note 1)			% to Total
0	Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Subsidiary	Purchase	$	2,566,458 (Note 3	)	4	30-90 days	(Note 2	)	(Note 2	)	$	(520,969	)	(7	)
				Sales		347,971 (Note 4	)	—	30 days	(Note 2	)	(Note 2	)		121,635		1
		CHIEF Telecom Inc.	Subsidiary	Purchase		150,251		—	30 days	(Note 2	)	(Note 2	)		(50,215	)	(1	)
				Sales		111,274 (Note 5	)	—	30 days	(Note 2	)	(Note 2	)		21,119		—
		Chunghwa System Integration Co., Ltd.	Subsidiary	Purchase		169,862 (Note 7	)	—	30 days	—		—			(205,944 (Note 6	) )	(3	)
		Taiwan International Standard Electronics Co., Ltd.	Equity-method investee	Purchase		232,188		1	30-90 days	—		—			(364,801	)	(5	)

1	Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		2,566,835 (Note 3	)	29	30-90 days	(Note 2	)	(Note 2	)		520,969		42
				Purchase		326,547 (Note 4	)	5	30 days	(Note 2	)	(Note 2	)		(121,635	)	(10	)

2	CHIEF Telecom Inc.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		150,251		28	30-90 days	(Note 2	)	(Note 2	)		50,215		32
				Purchase		110,818 (Note 5	)	21	30 days	(Note 2	)	(Note 2	)		(21,119	)	(18	)

3	Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		377,500 (Note 7	)	57	30 days	—		—			207,302 (Note 6	)	49

Note 1:

Excluding payment and receipts on behalf of other.

Note 2:

Transaction terms were determined in accordance with mutual agreements.

Note 3:

The difference was because Chunghwa classified the amount as property, plant and equipment and other current assets.

Note 4:

The difference was because Senao International Co., Ltd. classified the amount as operating expenses.

Note 5:

The difference was because CHIEF Telecom Inc. classified the amount as operating expenses.

Note 6:

The difference was because Chunghwa classified the amount as payables to constructors.

Note 7:

The difference was because Chunghwa classified the amount as property, plant and equipment.

- 48 -

TABLE 4

CHUNGHWA TELECOM CO., LTD.

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

JUNE 30, 2009

(Amounts in Thousands of New Taiwan Dollars)


No.	Company Name	Related Party	Nature of Relationship	Ending Balance		Turnover Rate	Overdue			Amounts Received in Subsequent Period		Allowance for Bad Debts
No.	Company Name	Related Party	Nature of Relationship	Ending Balance		Turnover Rate	Amounts		Action Taken	Amounts Received in Subsequent Period		Allowance for Bad Debts
0	Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Subsidiary	$	121,635	14.88	$	—	—	$	121,635	$	—
1	Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		745,120	9.29		—	—		22		—
2	Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		207,302	1.70		—	—		207,302		—

Note:

Payments and receipts on behalf of other are excluded from the accounts receivable for calculating the turnover rate.

- 49 -

TABLE 5

CHUNGHWA TELECOM CO., LTD.

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES IN WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE

FOR THE SIX MONTHS ENDED JUNE 30, 2009

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


No.	Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount						Balance as of June 30, 2009					Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1 and 2)			Note
No.	Investor Company	Investee Company	Location	Main Businesses and Products	June 30, 2009			December 31, 2008			Shares (Thousands)	Percentage of Ownership (%)	Carrying Value			Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1 and 2)			Note

0	Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Sindian City, Taipei	Selling and maintaining mobile phones and its peripheral products	$	1,065,813		$	1,065,813		71,773	29	$	1,192,470		$	518,820		$	149,609		Subsidiary
		Light Era Development Co., Ltd.	Taipei	Housing, office building development, rent and sale services		3,000,000			3,000,000		300,000	100		2,952,556			(23,940	)		(23,878	)	Subsidiary
		Chunghwa Investment Co., Ltd.	Taipei	Investment		980,000			980,000		98,000	49		841,475			13,460			6,595		Equity-method investee
		Chunghwa Telecom Singapore Pte., Ltd.	Singapore	Telecommunication wholesale, internet transfer services international data and long distance call wholesales to carriers		779,280			779,280		34,869	100		782,281			(2,386	)		(2,386	)	Subsidiary
		Chunghwa System Integration Co., Ltd.	Taipei	Providing communication and information aggregative services		838,506			838,506		60,000	100		712,953			4,462			(3,748	)	Subsidiary
		Taiwan International Standard Electronics Co., Ltd.	Taipei	Manufacturing, selling, designing, and maintaining of telecommunications systems and equipment		164,000			164,000		1,760	40		495,158			(83,262	)		(24,353	)	Equity-method investee
		CHIEF Telecom Inc.	Taipei	Internet communication and internet data center (“IDC”) service		482,165			482,165		37,942	69		433,045			5,621			5,203		Subsidiary
		InfoExplorer Co., Ltd.	Banqiae City, Taipei	IT solution provider, IT application consultation, system integration and package solution		283,500			—		22,498	49		279,423			(1,635	)		(4,077	)	Subsidiary
		Donghwa Telecom Co., Ltd.	Hong Kong	International telecommunications IP fictitious internet and internet transfer services		201,263			201,263		51,590	100		224,105			2,570			2,570		Subsidiary
		Chunghwa Yellow Pages Co., Ltd.	Taipei	Yellow pages sales and advertisement services		150,000			150,000		15,000	100		152,699			41,427			42,154		Subsidiary
		Viettel-CHT Co., Ltd.	Vietnam	IDC services		91,239			91,239		—	33		88,198			(8,279	)		(2,759	)	Equity-method investee
		Skysoft Co., Ltd.	Taipei	Providing of music on-line, software, electronic information, and advertisement services		67,025			67,025		4,438	30		85,775			2,608			783		Equity-method investee
		Chunghwa Telecom Global, Inc.	United States	International data and internet services and long distance call wholesales to carriers		70,429			70,429		6,000	100		69,024			19,569			(1,640	)	Subsidiary
		KingWaytek Technology Co., Ltd.	Taipei	Publishing books, data processing and software services		71,770			71,770		1,703	33		69,003			(8,789	)		(5,714	)	Equity-method investee
		Spring House Entertainment Inc.	Taipei	Network services, producing digital entertainment contents and broadband visual sound terrace development		62,209			62,209		5,996	56		47,986			4,602			2,873		Subsidiary
		So-net Entertainment Taiwan	Taipei	Online service and sale of computer hardware		60,008			—		3,429	30		44,929			(50,260	)		(15,079	)	Equity-method investee
		Chunghwa Telecom Japan Ptd., Ltd.	Japan	Telecom business, information process and information provide service, development and sale of software and consulting services in telecommunication		17,291			6,140		1	100		11,270			(3,034	)		(3,034	)	Subsidiary
		New Prospect Investments Holdings Ltd. (B.V.I.)	British Virgin Islands	Investment		— (Note 3	)		— (Note 3	)	—	100		— (Note 3	)		—			— (Note 3	)	Subsidiary
		Prime Asia Investments Group Ltd. (B.V.I.)	British Virgin Islands	Investment		— (Note 3	)		— (Note 3	)	—	100		— (Note 3	)		—			— (Note 3	)	Subsidiary
1	Senao International Co., Ltd.	Senao Networks, Inc.	Linkou Hsiang, Taipei	Telecommunication facilities manufactures and sales		206,190			206,190		15,152	42		269,365			45,401			19,641		Equity-method investee

(Continued)

- 50 -


No.	Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount						Balance as of June 30, 2009					Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1 and 2)			Note
No.	Investor Company	Investee Company	Location	Main Businesses and Products	June 30, 2009			December 31, 2008			Shares (Thousands)	Percentage of Ownership (%)	Carrying Value			Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1 and 2)			Note
2	CHIEF Telecom Inc.	Unigate Telecom Inc.	Taipei	Telecommunication and internet service	$	2,000		$	2,000		200	100	$	1,856		$	(108	)	$	(108	)	Subsidiary
		CHIET Telecom (Hong Kong) Limited	Hong Kong	Network communication and engine room hiring	(HK$	1,678 400	)	(HK$	1,678 400	)	400	100		1,128			(82	)		(82	)	Subsidiary
		Chief International Corp.	Samoa Islands	Network communication and engine room hiring	(US$	6,068 200	)	(US$	6,068 (200	)	200	100		7,145			531			531		Subsidiary
3	Chunghwa System Integrated Co., Ltd.	Concord Technology Corp.	Brunei	Providing advanced business solutions to telecommunications	(US$	16,179 500	)	(US$	16,179 500	)	500	100	(US$	13,245 404	)	(US$	112 3	)	(US$	112 3	)	Subsidiary
4	Concord Technology Corp.	Glory Network System Service (Shanghai) Co., Ltd.	Shanghai	Providing advanced business solutions to telecommunications	(US$	16,179 500	)	(US$	16,179 500	)	500	100	(US$	13,241 404	)	(US$	112 3	)	(US$	112 3	)	Subsidiary
5	Chunghwa Telecom Singapore Pte., Ltd.	ST-2 Satellite Ventures Ptd., Ltd.	Singapore	Operation of ST-2 telecommunication satellite	(SG$	410,841 18,102	)	(SG$	108,212 4,735	)	—	38	(SG$	409,790 18,068	)	(SG$	(1,956 89	) ))	(SG$	(746 34	) ))	Equity-method investee

Note 1:

The equity in net income (loss) of investees was based on audited financial statements.

Note 2:

The equity in net income (loss) of investees includes amortization between the investment cost and net value and elimination of unrealized transactions.

Note 3:

New Prospect Investments Holdings Ltd. (B.V.I.) and Prime Asia Investments Group Ltd. (B.V.I.) were incorporated in March 2006, but not on operating stage. Chunghwa has 100% ownership right in an amount of US$1 in each holding company.

(Concluded)

- 51 -

TABLE 6

CHUNGHWA TELECOM CO., LTD.

INVESTMENT IN MAINLAND CHINA

FOR THE SIX MONTHS ENDED JUNE 30, 2009

(Amounts in Thousands of New Taiwan Dollars, in Thousands of U.S. Dollars)

Investee

Main Businesses

and Products

Total
Amount of
Paid-in
Capital

Investment
Type

Accumulated
Outflow of
Investment from
Taiwan as of
January 1, 2009

Investment Flows

Accumulated
Outflow of
Investment from
Taiwan as of
June 30, 2009

% Ownership of
Direct or
Indirect
Investment

Investment
Gain (Loss)
(Note 2)

Carrying Value
as of
June 30, 2009

Accumulated
Inward
Remittance of
Earnings as of
June 30, 2009

Outflow

Inflow

Glory Network System Service (Shanghai) Co., Ltd.

Providing advanced business solutions to telecommunications

(US$

16,179

500

)

Note 1

(US$

16,179

500

)

—

(US$

16,179

500

)

100

(US$

112

)

(US$

13,241

404

)

—


Accumulated Investment in Mainland China as of June 30, 2009		Investment Amounts Authorized by Investment Commission, MOEA			Upper Limit on Investment Stipulated by Investment Commission, MOEA
$ (US$	16,179 500)	$ (US$	16,179 500	)	$	373,143 (Note 3	)

Note 1:

Chunghwa System Integration Co., Ltd. indirectly owns these investees through an investment company registered in a third region.

Note 2:

Recognition of investment gains (losses) was calculated based on the investees’ audited financial statements.

Note 3:

The amount was calculated based on the net assets value of Chunghwa System Integration Co., Ltd.

- 52 -

Exhibit 3

Chunghwa Telecom Co., Ltd. and

Subsidiaries

Consolidated Financial Statements for the

Six Months Ended June 30, 2009 and 2008 and

Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders

Chunghwa Telecom Co., Ltd.

We have audited the accompanying consolidated balance sheets of Chunghwa Telecom Co., Ltd. and subsidiaries (“the Company”) as of June 30, 2009 and 2008, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the six months then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of Taiwan International Standard Electronics Co., Ltd., of Viettel - CHT Co., Ltd. and of Senao Networks, Inc. The aggregate carrying values of these equity method investees were NT$852,721 thousand and NT$830,220 thousand, respectively, as of June 30, 2009 and 2008 and the equity in their losses and earnings were NT$7,471 thousand and NT$80,097 thousand, respectively, for the six months then ended. The financial statements of Taiwan International Standard Electronics Co., Ltd., of Viettel - CHT Co., Ltd. and of Senao Networks, Inc. as of and for the six months ended June 30, 2009 and the financial statements of Taiwan International Standard Electronics Co., Ltd. and of Senao Networks Inc. as of and for the six months ended June 30, 2008, were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for these equity method investees, is based solely on the reports of the other auditors.

We conducted our audits in accordance with auditing standards generally accepted in the Republic of China. Those standards required that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the financial reports of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, such consolidated financial statements referred to first paragraph present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2009 and 2008, and the results of their operations and their cash flows for the six months ended June 30, 2009 and 2008, in conformity with accounting principles generally accepted in the Republic of China.

- 1 -

As discussed in Note 3 to the consolidated financial statements, beginning from January 1, 2008, the Company changed its method of accounting for bonuses paid to employees, directors and supervisors upon adoption of Interpretation 96-052 issued by the Accounting and Research Development Foundation in the Republic of China.

August 11, 2009

Notice to Readers

The accompanying consolidated 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 audit such consolidated financial statements are those generally accepted and applied in the Republic of China.

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

- 2 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2009 AND 2008

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


	2009			2008
	Amount		%	Amount		%
ASSETS

CURRENT ASSETS
Cash and cash equivalents (Notes 2 and 4)	$	83,422,659	18	$	95,346,400	20
Financial assets at fair value through profit or loss (Notes 2 and 5)		22,454	—		135,307	—
Available-for-sale financial assets (Notes 2 and 6)		16,377,979	4		18,979,469	4
Held-to-maturity financial assets (Notes 2 and 7)		670,541	—		644,935	—
Trade notes and accounts receivable, net of allowance for doubtful accounts of $2,901,489 thousand in 2009 and $3,191,412 thousand in 2008 (Notes 2 and 8)		10,969,179	2		10,597,817	2
Receivables from related parties (Note 28)		113,429	—		2,033	—
Other current monetary assets (Notes 2, 9 and 31)		2,974,798	1		2,628,413	1
Inventories (Notes 2, 10 and 20)		3,229,670	1		3,369,478	1
Deferred income tax assets (Notes 2 and 25)		101,554	—		1,122,788	—
Restricted assets (Notes 29 and 30)		101,843	—		2,865	—
Other current assets (Notes 11 and 20)		5,783,318	1		7,097,509	1


Total current assets		123,767,424	27		139,927,014	29


LONG-TERM INVESTMENTS
Investments accounted for using equity method (Notes 2 and 12)		2,303,693	1		1,992,999	—
Financial assets carried at cost (Notes 2 and 13)		2,251,498	—		2,276,498	1
Held-to-maturity financial assets (Notes 2 and 7)		4,536,191	1		763,852	—
Other monetary assets (Notes 14 and 30)		1,000,000	—		1,029,100	—


Total long-term investments		10,091,382	2		6,062,449	1


PROPERTY, PLANT AND EQUIPMENT (Notes 2, 15, 28 and 29)
Cost
Land		101,474,866	22		102,056,021	21
Land improvements		1,513,208	—		1,484,013	—
Buildings		63,157,815	14		62,850,705	13
Computer equipment		15,823,342	3		15,404,617	3
Telecommunications equipment		653,783,918	142		642,939,298	134
Transportation equipment		2,244,208	—		2,753,805	1
Miscellaneous equipment		7,283,620	2		7,479,111	2

Total cost		845,280,977	183		834,967,570	174
Revaluation increment on land		5,810,342	1		5,820,548	1

		851,091,319	184		840,788,118	175
Less: Accumulated depreciation		550,588,704	119		533,362,947	111

		300,502,615	65		307,425,171	64
Construction in progress and advances related to acquisition of equipment		14,181,979	3		14,425,108	3


Property, plant and equipment, net		314,684,594	68		321,850,279	67


INTANGIBLE ASSETS (Note 2)
3G concession		7,111,783	2		7,860,392	2
Goodwill		264,128	—		226,257	—
Others		524,652	—		464,533	—


Total intangible assets		7,900,563	2		8,551,182	2


OTHER ASSETS
Leased assets (Note 29)		642,655	—		442,787	—
Idle assets (Note 2)		985,728	—		963,460	—
Refundable deposits		1,336,669	1		1,407,108	—
Deferred income tax assets (Notes 2 and 25)		1,254,441	—		1,534,088	1
Restricted assets (Note 29)		29,104	—		8,532	—
Others		820,105	—		758,113	—


Total other assets		5,068,702	1		5,114,088	1


TOTAL	$	461,512,665	100	$	481,505,012	100


	2009				2008
	Amount			%	Amount			%
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Short-term loans (Note 16)	$	256,000		—	$	75,000		—
Financial liabilities at fair value through profit or loss (Notes 2 and 5)		501		—		3,313,372		1
Trade notes and accounts payable		7,106,260		2		8,931,645		2
Payables to related parties (Note 28)		371,468		—		249,203		—
Income tax payable (Notes 2 and 25)		6,683,388		1		7,976,754		2
Accrued expenses (Note 17)		13,570,531		3		11,597,582		2
Dividends payable (Note 21)		37,138,775		8		40,716,130		8
Current portion of long-term loans (Note 19)		104,668		—		4,200		—
Other current liabilities (Notes 2, 18, 20, 28 and 31)		16,605,341		4		17,121,405		4


Total current liabilities		81,836,932		18		89,985,291		19


NONCURRENT LIABILITIES
Long-term loans (Note 19)		270,043		—		33,640		—
Deferred income		2,145,289		1		1,831,946		—


Total noncurrent liabilities		2,415,332		1		1,865,586		—


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


OTHER LIABILITIES
Accrued pension liabilities (Notes 2 and 27)		5,192,642		1		5,108,399		1
Customers’ deposits		6,054,883		1		6,328,579		2
Others		269,607		—		439,709		—


Total other liabilities		11,517,132		2		11,876,687		3


Total liabilities		95,864,382		21		103,822,550		22


EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT (Notes 2, 15, 21 and 23)
Common stock - $10 par value;
Authorized: 12,000,000 thousand shares
Issued: 9,696,808 thousand shares in 2009 and 9,557,777 thousand shares in 2008		96,968,082		21		95,577,769		20

Preferred stock - $10 par value		—		—		—		—

Capital stock to be issued		9,696,808		2		1,390,313		—

Additional paid-in capital
Capital surplus		169,496,289		36		198,308,651		41
Donated capital		13,170		—		13,170		—
Equity in additional paid-in capital reported by equity-method investees		3		—		1,367		—

Total additional paid-in capital		169,509,462		36		198,323,188		41

Retained earnings
Legal reserve		56,987,241		12		52,859,566		11
Special reserve		2,675,894		1		2,675,419		1
Unappropriated earnings		22,265,116		5		19,532,657		4

Total retained earnings		81,928,251		18		75,067,642		16

Other adjustments
Cumulative translation adjustments		17,765		—		(12,295	)	—
Unrecognized net loss of pension		(5	)	—		(87	)	—
Unrealized loss on financial instruments		(1,379,866	)	—		(1,183,967	)	—
Unrealized revaluation increment		5,812,879		1		5,823,085		1

Total other adjustments		4,450,773		1		4,626,736		1


Total equity attributable to stockholders of the parent		362,553,376		78		374,985,648		78


MINORITY INTEREST		3,094,907		1		2,696,814		—


Total stockholders’ equity		365,648,283		79		377,682,462		78


TOTAL	$	461,512,665		100	$	481,505,012		100

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

(With Deloitte & Touche audit report dated August 11, 2009)

- 3 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

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


	2009			2008
	Amount		%	Amount		%

NET REVENUES (Note 28)	$	97,178,944	100	$	100,922,554	100

OPERATING COSTS (Note 28)		54,269,907	56		55,217,765	55


GROSS PROFIT		42,909,037	44		45,704,789	45


OPERATING EXPENSES (Note 28)
Marketing		10,403,837	11		10,187,310	10
General and administrative		1,933,644	2		1,662,492	2
Research and development		1,525,614	1		1,571,836	1


Total operating expenses		13,863,095	14		13,421,638	13


INCOME FROM OPERATIONS		29,045,942	30		32,283,151	32


NON-OPERATING INCOME AND GAINS (Note 28)
Interest income		335,261	1		872,623	1
Valuation gain on financial instruments, net		146,448	—		—	—
Foreign exchange gain, net		87,663	—		—	—
Dividends income		2,872	—		15,076	—
Equity in earnings of equity method investees, net		—	—		56,165	—
Gain on disposal of financial instruments, net		—	—		753,831	1
Others		333,851	—		209,155	—


Total non-operating income and gains		906,095	1		1,906,850	2


NON-OPERATING EXPENSES AND LOSSES
Loss on disposal of financial instruments, net		234,095	1		—	—
Impairment loss on assets		88,900	—		—	—
Equity in losses of equity method investees, net		21,632	—		—	—
Loss on disposal of property, plant and equipment, net		9,291	—		40,748	—
Interest expense		8,837	—		2,724	—
Foreign exchange loss, net		—	—		726,723	1
Valuation loss on financial instruments, net		—	—		2,734,897	3
Others		107,029	—		68,829	—


Total non-operating expenses and losses		469,784	1		3,573,921	4

(Continued)

- 4 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

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


	2009				2008
	Amount		%		Amount		%

INCOME BEFORE INCOME TAX	$	29,482,253		30	$	30,616,080		30

INCOME TAX EXPENSES (Notes 2 and 25)		6,849,491		7		6,993,820		7


CONSOLIDATED NET INCOME	$	22,632,762		23	$	23,622,260		23


ATTRIBUTED TO
Stockholders of the parent	$	22,261,402		23	$	23,230,513		23
Minority interest		371,360		—		391,747		—


	$	22,632,762		23	$	23,622,260		23


	2009				2008
	Income Before Income Tax		Net Income		Income Before Income Tax		Net Income
EARNINGS PER SHARE (Note 26)
Basic earnings per share	$	2.71	$	2.09	$	2.81	$	2.18

Diluted earnings per share	$	2.70	$	2.08	$	2.81	$	2.18

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


(With Deloitte & Touche audit report dated August 11, 2009)		(Concluded)

- 5 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

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


	Common Stock					Preferred Stock								Retained Earnings								Other Adjustments
	Shares (Thou- sands)		Amo- unt			Shares (Thou- sands)	Amo- unt		Cap- ital Stock to Be Issued		Addi- tional Paid -in Capital			Legal Reserve		Special Reserve			Unappro- priated Ear- nings			Cumu- lative Trans- lation Adjust- ments			Unrecog- nized Net Loss of Pension			Unrea- lized Gain (Loss) on Finan- cial Instru- ments			Unrea- lized Reva- luation Incre- ment			Trea- sury Stock			Mino- rity Interest in Subsi- diaries			Total Stock- holders’ Equity
BALANCE, JANUARY 1, 2009	9,696,808		$	96,968,082		—	$	—	$	—	$	179,206,270		$	52,859,566	$	2,675,894		$	41,276,274		$	29,474		$	(84	)	$	(2,272,242	)	$	5,813,187		$	—		$	3,137,450		$	379,693,871

Adjustment of additional paid-in capital from revaluation of land to income upon disposal	—			—		—		—		—		—			—		—			—			—			—			—			(308	)		—			—			(308	)

Appropriation of 2008 earnings
Legal reserve	—			—		—		—		—		—			4,127,675		—			(4,127,675	)		—			—			—			—			—			—			—
Cash dividend - NT$3.83 per share	—			—		—		—		—		—			—		—			(37,138,775	)		—			—			—			—			—			—			(37,138,775	)

Cancellation of preferred stock (Note 21)	—			—		—		—		—		—			—		—			—			—			—			—			—			—			—			—

Capital surplus transferred to common stock	—			—		—		—		9,696,808		(9,696,808	)		—		—			—			—			—			—			—			—			—			—

Decrease in minority interest	—			—		—		—		—		—			—		—			—			—			—			—			—			—			(413,903	)		(413,903	)

Consolidated net income for the six months ended June 30, 2009	—			—		—		—		—		—			—		—			22,261,402			—			—			—			—			—			371,360			22,632,762

Unrealized gain on financial instruments held by investees	—			—		—		—		—		—			—		—			—			—			—			5,163			—			—			—			5,163

Equity adjustments in investees	—			—		—		—		—		—			—		—			(6,110	)		—			—			—			—			—			—			(6,110	)

Cumulative translation adjustment for foreign-currency investments held by investees	—			—		—		—		—		—			—		—			—			(11,709	)		—			—			—			—			—			(11,709	)

Defined benefit pension plan adjustments of investees	—			—		—		—		—		—			—		—			—			—			79			—			—			—			—			79

Unrealized gain on financial instruments	—			—		—		—		—		—			—		—			—			—			—			887,213			—			—			—			887,213


BALANCE, JUNE 30, 2009	9,696,808		$	96,968,082		—	$	—	$	9,696,808	$	169,509,462		$	56,987,241	$	2,675,894		$	22,265,116		$	17,765		$	(5	)	$	(1,379,866	)	$	5,812,879		$	—		$	3,094,907		$	365,648,283


BALANCE, JANUARY 1, 2008	9,667,845		$	96,678,451		—	$	—	$	—	$	200,605,563		$	48,036,210	$	2,678,723		$	48,317,617		$	(1,980	)	$	(90	)	$	37,508		$	5,823,200		$	(7,107,494	)	$	2,774,561		$	397,842,269

Adjustment of additional paid-in capital from revaluation of land to income upon disposal	—			—		—		—		—		—			—		—			—			—			—			—			(115	)		—			—			(115	)

Appropriation of 2007 earnings
Legal reserve	—			—		—		—		—		—			4,823,356		—			(4,823,356	)		—			—			—			—			—			—			—
Reversal of special reserve	—			—		—		—		—		—			—		(3,304	)		3,304			—			—			—			—			—			—			—
Cash dividend - NT$4.26 per share	—			—		—		—		—		—			—		—			(40,716,130	)		—			—			—			—			—			—			(40,716,130	)
Stock dividend - NT$0.1 per share	—			—		—		—		955,778		—			—		—			(955,778	)		—			—			—			—			—			—			—
Employees’ bonus - cash	—			—		—		—		—		—			—		—			(1,303,605	)		—			—			—			—			—			—			(1,303,605	)
Employees’ bonus - stock	—			—		—		—		434,535		—			—		—			(434,535	)		—			—			—			—			—			—			—
Remuneration to board of directors and supervisors	—			—		—		—		—		—			—		—			(43,454	)		—			—			—			—			—			—			(43,454	)

Decrease in minority interest	—			—		—		—		—		—			—		—			—			—			—			—			—			—			(469,494	)		(469,494	)

Consolidated net income for the six months ended June 30, 2008	—			—		—		—		—		—			—		—			23,230,513			—			—			—			—			—			391,747			23,622,260

Unrealized loss on financial instruments held by investees	—			—		—		—		—		—			—		—			—			—			—			(576	)		—			—			—			(576	)

Equity adjustments in investees	—			—		—		—		—		1,364			—		—			(18,846	)		—			—			—			—			—			—			(17,482	)

Cumulative translation adjustment for foreign-currency investments held by investees	—			—		—		—		—		—			—		—			—			(10,315	)		—			—			—			—			—			(10,315	)

Defined benefit pension plan adjustments of investees	—			—		—		—		—		—			—		—			—			—			3			—			—			—			—			3

Cancellation of treasury stock - 110,068 thousand common shares (Notes 2 and 23)	(110,068	)		(1,100,682	)	—		—		—		(2,283,739	)		—		—			(3,723,073	)		—			—			—			—			7,107,494			—			—

Unrealized loss on financial instruments	—			—		—		—		—		—			—		—			—			—			—			(1,220,899	)		—			—			—			(1,220,899	)


BALANCE, JUNE 30, 2008	9,557,777		$	95,577,769		—	$	—	$	1,390,313	$	198,323,188		$	52,859,566	$	2,675,419		$	19,532,657		$	(12,295	)	$	(87	)	$	(1,183,967	)	$	5,823,085		$	—		$	2,696,814		$	377,682,462

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

(With Deloitte & Touche audit report dated August 11, 2009)

- 6 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Amounts in Thousands of New Taiwan Dollars)


	2009			2008

CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income	$	22,632,762		$	23,622,260
Provision for doubtful accounts		266,567			337,461
Depreciation and amortization		18,372,080			19,255,452
Amortization of premium (discount) of financial assets		7,617			(1,192	)
Valuation loss on inventory		—			24,357
Valuation loss (gain) on financial instruments, net		(146,448	)		2,734,897
Loss (gain) on disposal of financial instruments, net		234,095			(753,831	)
Loss on disposal of property, plant and equipment, net		9,291			40,748
Loss from obsolescence of deferred charges		—			279
Equity in losses (earnings) of equity method investees, net		21,632			(56,165	)
Dividends received from equity investees		76,435			—
Impairment loss on assets		88,900			—
Impairment loss on other noncurrent monetary assets		—			900
Deferred income taxes		305,855			(1,150,776	)
Changes in operating assets and liabilities:
Decrease (increase) in:
Financial assets held for trading		171,783			704,805
Trade notes and accounts receivable		(373,526	)		465,083
Receivables from related parties		(631,104	)		(156,268	)
Other current monetary assets		(1,086,316	)		4,779,775
Inventories		(45,940	)		198,885
Other current assets		(861,325	)		(3,711,484	)
Increase (decrease) in:
Trade notes and accounts payable		(3,733,239	)		(2,891,043	)
Payables to related parties		434,161			203,529
Income tax payable		992,799			718,805
Accrued expenses		(2,923,882	)		(3,893,685	)
Other current liabilities		347,256			1,338,524
Deferred income		72,992			326,796
Accrued pension liabilities		17,407			1,190,491


Net cash provided by operating activities		34,249,852			43,328,603


CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of available-for-sale financial assets		(6,010,000	)		(6,360,000	)
Proceeds from disposal of available-for-sale financial assets		4,490,787			3,854,826
Acquisition of held-to-maturity financial assets		(1,948,505	)		(300,000	)
Proceeds from disposal of held-to-maturity financial assets		547,693			41,854
Acquisition of financial assets carried at cost		—			(200,000	)
Proceeds from disposal of financial assets carried at cost		285,859			354,933
Increase in other monetary assets		—			(30,000	)
Acquisition of investments accounted for using equity method		(362,637	)		(163,009	)
Proceeds from disposal of long-term investments		—			209
Acquisition of property, plant and equipment		(10,296,388	)		(11,309,142	)


		(Continued)

- 7 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Amounts in Thousands of New Taiwan Dollars)


	2009			2008
Proceeds from disposal of property, plant and equipment	$	1,136		$	3,057
Increase in intangible assets		(56,204	)		(53,166	)
Increase in restricted assets		(40,202	)		(2,558	)
Increase in other assets		(247,562	)		(233,509	)


Net cash used in investing activities		(13,636,023	)		(14,396,505	)


CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term loans		(2,000	)		39,000
Repayment of long-term loans		(63,129	)		(37,280	)
Increase in long-term loans		400,000			—
Decrease in customers’ deposits		(34,125	)		(10,890	)
Decrease in other liabilities		(161,910	)		(302,576	)
Capital reduction		(19,115,554	)		(9,557,777	)
Proceeds from exercise of employee stock option		45,636			41,142


Net cash used in financing activities		(18,931,082	)		(9,828,381	)


EFFECT OF EXCHANGE RATE CHANGES		(6,243	)		(3,510	)


EFFECT OF CHANGE ON CONSOLIDATED SUBSIDIARIES		457,990			13,192


NET INCREASE IN CASH AND CASH EQUIVALENTS		2,134,494			19,113,399

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		81,288,165			76,233,001


CASH AND CASH EQUIVALENTS, END OF PERIOD	$	83,422,659		$	95,346,400


SUPPLEMENTAL INFORMATION
Interest paid (excluding capitalized interest expense)	$	5,688		$	3,126

Income tax paid	$	5,539,321		$	7,434,336


NON-CASH FINANCING ACTIVITIES
Dividends payable	$	37,138,775		$	40,716,130

Payables to employees’ bonuses and remuneration to directors and supervisors	$	—		$	1,394,077

Current portion of long-term loans	$	104,668		$	4,200


CASH AND NON-CASH INVESTING ACTIVITIES
Increase in property, plant and equipment	$	9,424,425		$	10,608,146
Payables to suppliers		900,824			649,936
Prepayments for equipment		(28,861	)		51,060

	$	10,296,388		$	11,309,142


		(Continued)

- 8 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Amounts in Thousands of New Taiwan Dollars)


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 consolidated financial statements.


(With Deloitte & Touche audit report dated August 11, 2009)		(Concluded)

- 9 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

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

1. GENERAL

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.

Senao International Co., Ltd. (“SENAO”) was incorporated in 1979. SENAO engages mainly in selling and maintaining mobile phone and its peripheral products. Chunghwa acquired 31.33% shares of SENAO on January 15, 2007 and has control in SENAO by obtaining four out of seven seats of the board of directors of SENAO on April 12, 2007. On March 27, 2009, the board of directors of Chunghwa resolved to purchase 48,000 thousand common shares of 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.

Chunghwa established Chunghwa International Yellow Pages Co., Ltd. (“CIYP”) in January 2007. CIYP engages mainly in yellow pages sales and advertisement services.

CHIEF Telecom Inc. (“CHIEF”) was incorporated in 1991. CHIEF engages mainly in internet communication and internet data center (“IDC”) service. Chunghwa acquired 70% shares of CHIEF on September 2006.

Unigate Telecom Inc. (“Unigate”) was established by CHIEF in 1999. Unigate engages mainly in telecommunication and information software service.

- 10 -

CHIEF Telecom (Hong Kong) Limited (“CHIEF (HK)”) was established by CHIEF in 2003. CHIEF (HK) engages mainly in internet communication and internet data center (“IDC”) service.

Chief International Corp. (“CIC”) was established by CHIEF in 2008. CIC engages mainly in internet communication and internet data center (“IDC”) service.

Chunghwa System Integration Co., Ltd. (“CHSI”) was incorporated in 2002. CHSI engages mainly in providing communication and information integration services. Chunghwa has acquired 100% shares of CHSI in December 2007.

Concord Technology Co., Ltd. (“Concord”), a subsidiary of CHSI, was incorporated in 2006. Concord engages mainly in investment.

Glory Network System Service (Shanghai) Co., Ltd. (“GNSS (Shanghai)”), a subsidiary of Concord, was incorporated in 2006. GNSS (Shanghai) engages mainly in planning and designing of systems and communications and information integration services. On March 20, 2009, the stockholders of CHSI resolved to dissolve GNSS (Shanghai). On July 23, 2009, the board of directors of CHSI revoked the original resolution of dissolution.

Chunghwa Telecom Global, Inc. (“CHTG”) was incorporated in 2004. CHTG engages mainly in international data and internet services and long distance call wholesales to carriers. Chunghwa acquired 100% shares of CHTG in December 2007.

Donghwa Telecom Co., Ltd. (“DHT”) was incorporated in 2004. DHT engages mainly in international telecommunications, IP fictitious internet and internet transfer services. Chunghwa acquired 100% shares of DHT in December 2007.

Spring House Entertainment Inc. (“SHE”) was incorporated in 2000. SHE engages mainly in network services, producing digital entertainment contents and broadband visual sound terrace development. SHE was an equity method investee before Chunghwa obtained control interest over it in January 2008.

Chunghwa established Light Era Development Co., Ltd. (“LED”) in February 2008. LED engages mainly in development of property for rent and sale.

Chunghwa established Chunghwa Telecom Singapore Pte. Ltd. (“CHTS”) in July 2008 and increased its investment in 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.

Chunghwa established Chunghwa Telecom Japan Co., Ltd. (“CHTJ”) in October 2008. CHTJ engages mainly in telecommunication business, information processing and information providing service, development and sale of software and consulting services in telecommunication.

InfoExplorer Co., Ltd. (“IFE”) was incorporated in 2008. IFE engages mainly in information system planning and maintenance, software development, and information technology consultation services. Chunghwa acquired 49% shares of IFE on January 5, 2009 and has control over IFE by obtaining four out of seven seats of the board of directors of IFE on January 20, 2009. IFE’s financial results have been consolidated with Chunghwa from January 20, 2009.

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

- 11 -

The following diagram presents information regarding the relationship and ownership percentages between Chunghwa and its subsidiaries as of June 30, 2009:

LOGO

Chunghwa together with its subsidiaries are hereinafter referred to collectively as the “Company”. Minority interests in the aforementioned subsidiaries are presented as a separate component of stockholders’ equity.

As of June 30, 2009 and 2008, the Company had 27,248 and 26,885 employees, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements were prepared in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the ROC (“ROC GAAP”). The preparation of consolidated financial statements requires management to make reasonable 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, 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:

Principle of Consolidation

The Company accounts for business combinations in accordance with the requirements of the Statement of Financial Accounting Standards No. 25, “Business Combinations” - the accounting treatment of purchase method when acquiring the information of its subsidiaries.

The accompanying consolidated financial statements include the accounts of all directly and indirectly majority owned subsidiaries of the Company, and the accounts of investees in which the Company’s ownership percentage is less than 50% but over which the Company has a controlling interest. All significant intercompany transactions and balances are eliminated upon consolidation.

- 12 -

The consolidated financial statements for the six months ended June 30, 2009 include the accounts of Chunghwa, SENAO, CIYP, CHIEF, Unigate, CHIEF (HK), CIC, CHSI, Concord, GNSS (Shanghai), CHTG, DHT, SHE, LED, CHTS, CHTJ, IFE, New Prospect and Prime Asia. The consolidated financial statements for the six months ended June 30, 2008 include the accounts of Chunghwa, SENAO, CIYP, CHIEF, Unigate, CHIEF (HK), CHSI, Concord, GNSS (Shanghai), CHTG, DHT, SHE, LED, New Prospect and Prime Asia.

For foreign subsidiaries using their local currency as their functional currency, assets and liabilities are translated into New Taiwan dollars at the exchange rates in effect on the balance sheet date; stockholders’ equity accounts are translated into New Taiwan dollars at historical exchange rates and income statement accounts are translated into New Taiwan dollars at average exchange rates during the period.

Classification of Current and Noncurrent Assets and Liabilities

As LED engages mainly in development of property for rent and sale, its operating cycle is over one year.

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

Available-for-sale Financial Assets

- 13 -

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

Held-to-maturity Financial Assets

Revenue Recognition, Account Receivables and Allowance for Doubtful Receivables

- 14 -

Inventories

Beginning from 2008, the Company classified certain land as land held for development within inventories. Prior to 2008, such land was classified as part of property, plant, and equipment. Such land is stated at the lower of cost or net realizable value. Prepayments for licensing and other miscellaneous costs have been capitalized as part of inventory. Profit shall be recognized in full when the land is sold, provided (a) the profit is determinable, that is, the collectibility of the sales price is reasonably assured or the amount that will not be collectible can be estimated, and (b) the earnings process is virtually complete.

Investments Accounted for Using Equity Method

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.

- 15 -

Effective January 1, 2006, pursuant to the revised Statement of Financial Accounting Standards No. 5, the cost of an investment shall be analyzed and the difference between the cost of investment and the fair value of identifiable net assets acquired, representing goodwill, shall not be amortized and instead shall be tested for impairment annually. If the fair value of identifiable net assets acquired exceeds the cost of investment, the excess shall be proportionately allocated as reductions to fair values of noncurrent assets except (a) financial assets other than investments accounted for using equity method, (b) assets to be disposed of by sale (c) deferred tax assets, and (d) prepaid assets relating to pension or other postretirement benefit plans. If any excess remains after reducing the aforementioned items, the remaining excess shall be recognized as an extraordinary gain.

Financial Assets Carried at Cost

Property, Plant and Equipment

An impairment loss on a revalued asset is charged to “unrealized revaluation increment” under equity to the extent available, with the balance 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 - 3 to 10 years; telecommunication equipment - 5 to 30 years; transportation equipment - 5 to 10 years; and miscellaneous equipment - 2 to 12 years.

- 16 -

Intangible Assets

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

The 3G Concession is valid through December 31, 2018. The 3G Concession fee 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 2-20 years.

Goodwill represents the excess of the consideration paid for acquisition over the fair value of identifiable net assets acquired. Goodwill is tested for impairment annually. If an event occurs or circumstances change which indicates that the fair value of goodwill is more likely than not below its carrying amount, an impairment loss is recognized. A subsequent reversal of such impairment loss is not allowed.

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

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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

Treasury Stock

Share-based Compensation

Employee stock options granted on or after January 1, 2008 are accounted for using fair value method in accordance with under SFAS No. 39, “Accounting for Share-based Payment.” The adoption of SFAS No. 39 did not have any impact on the Company.

Employee stock options granted between January 1, 2004 and December 31, 2007 were accounted for under the interpretations issued by the Accounting Research and Development Foundation (the “ARDF”). The Company adopted the intrinsic value method, under which compensation cost was amortized over the vesting period.

Income Tax

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

- 18 -

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

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

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.

3. EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES

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 as operating cost. The adoption of the revised SFAS No. 10 does not have significant impact on the Company’s consolidated net income and basic earnings per share (after income tax) for the six months ended June 30, 2009. The Company reclassified non-operating losses of $24,357 thousand to operating costs for the six months ended June 30, 2008.

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. Beginning from 2009, such bonuses are classified as an operating activity for purposes of the statement of cash flows when paid.

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4. CASH AND CASH EQUIVALENTS


	June 30
	2009		2008
Cash
Cash on hand	$	495,086	$	161,406
Bank deposits		11,915,400		18,795,209
Negotiable certificate of deposit, annual yield rate - ranging from 0.15%-2.84% and 2.00%-4.31% for 2009 and 2008, respectively.		49,570,484		49,449,950

		61,980,970		68,406,565
Cash equivalents
Commercial paper, annual yield rate - ranging from 0.13%-0.20% and 1.99%-2.04% for 2009 and 2008, respectively.		21,441,689		26,939,835


	$	83,422,659	$	95,346,400

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


	June 30
	2009		2008

Derivatives - financial assets
Currency swap contracts	$	22,423	$	—
Forward exchange contracts		31		69
Index future contracts		—		135,238


	$	22,454	$	135,307

Derivatives - financial liabilities
Forward exchange contracts	$	501	$	38,765
Currency option contracts		—		3,274,607


	$	501	$	3,313,372

The Company 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, derivatives that do not meet the criteria for hedge accounting is classified as financial assets or financial liabilities held for trading.

- 20 -

Outstanding currency swap contracts and forward exchange contracts on June 30, 2009 and 2008 were as follows:


	Currency	Maturity Period	Contract Amount (in Thousands)
June 30, 2009

Currency swap contracts	USD/NTD	2009.07	USD	85,000/NTD 2,788,879
Forward exchange contracts - buy	NTD/USD	2009.07	NTD	183,773

June 30, 2008

Forward exchange contracts - sell	USD/TWD	2008.07-09	USD	320,000
	EUR/USD	2008.08	EUR	18,105
	GBP/USD	2008.08	GBP	2,250
	JPY/USD	2008.08	JPY	523,000
Forward exchange contracts - buy	TWD/USD	2008.07	NTD	149,934

The Company did not have any outstanding index future contracts on June 30, 2009.

Outstanding index future contracts on June 30, 2008 were as follows:


			Contract
			Amount
	Maturity Period	Units	(in Thousands)
June 30, 2008

AMSTERDAM IDX FUT	2008.07	13	EUR	1,209
IBEX 35 INDX FUTR	2008.07	7	EUR	897
CAC40 10 EURO FUT	2008.07	3	EUR	141
DAX INDEX FUTURE	2008.09	1	EUR	172
MINI S&P/MIB FUT	2008.09	37	EUR	1,155
FTSE 100 IDX FUT	2008.09	18	GBP	1,065
TOPIX INDEX FUTURE	2008.09	36	JPY	504,432
S&P 500 FUTURE	2008.09	16	USD	5,373
S&P 500 EMINI FUTURE	2008.09	38	USD	2,549

As of June 30, 2008, the deposits paid for outstanding index future contracts were $101,374 thousand.

In September 2007, Chunghwa entered into a 10-year, foreign currency derivative contract with Goldman Sachs Group Inc. (“Goldman”) and valuations are made biweekly starting from September 20, 2007 which are 260 valuation periods totally. Under the terms of the contract, if the NT dollar/US dollar exchange rate is less than NT$31.50 per US dollar at any two consecutive bi-weekly valuation dates during the valuation period starting from October 4, 2007 to September 5, 2017, Chunghwa was required to make a cash payment to Goldman. The settlement amount is determined by the difference between the applicable exchange rates and the base amount of US$4,000 thousand. Conversely, if the NT dollar/US dollar exchange rate was above NT$31.50 per US dollar using the same valuation methodology, Goldman would have a settlement obligation to Chunghwa determined using a base amount of US$2,000 thousand. Further, if the exchange rate is at or above NT$32.70 per US dollar starting from December 12, 2007 at any time, the contract will be terminated at that time. In accordance with the terms of the contract, Chunghwa deposited US$3,000 thousand with Goldman with annual yield rate of 8%. On October 21, 2008, the exchange rate was above NT$32.70 per US dollar, so the contract was terminated at that time.

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Net gain and loss arising from financial assets and liabilities at fair value through profit or loss for the six months ended June 30, 2009 and 2008 were $44,016 thousand (including realized settlement loss of $69,996 thousand and net valuation gain of $114,012 thousand) and $2,121,566 thousand (including realized settlement gain of $542,283 thousand and net valuation loss of $2,663,849 thousand), respectively.

6. AVAILABLE-FOR-SALE FINANCIAL ASSETS


	June 30
	2009		2008
Open-end mutual funds	$	16,195,159	$	17,953,635
Real estate investment trust fund		182,820		236,455
Foreign listed stocks		—		789,379


	$	16,377,979	$	18,979,469

For the six months ended June 30, 2009 and 2008, movements of unrealized gain or loss on financial instruments mentioned above were as follows:


	Six Months Ended
	June 30
	2009			2008
Balance, beginning of period	$	(2,264,932	)	$	37,420
Recognized in stockholders’ equity		773,814			(1,409,684	)
Transferred to profit or loss		113,399			188,785


Balance, end of period	$	(1,377,719	)	$	(1,183,479	)

Global economic and financial circumstances have significantly changed. As a result, Chunghwa determined that the impairment losses of available-for-sale financial assets is other-than-temporary in nature, and recorded impairment losses of $85,349 thousand and nil for the six months ended June 30, 2009 and 2008, respectively. Chunghwa recorded impairment losses of $1,139,105 thousand in 2008.

7. HELD-TO-MATURITY FINANCIAL ASSETS


	June 30
	2009		2008
Corporate bonds, nominal interest rate ranging from 0.799%-4.750% and 0.799%-2.680% for 2009 and 2008, respectively; effective interest rate ranging from 0.799%-2.950% and 0.799%-2.680% for 2009 and 2008, respectively	$	4,388,813	$	750,000
Financial institution bonds, nominal interest rate ranging from 1.950%-2.300% and 0.0%-4.0% for 2009 and 2008, respectively; effective interest rate ranging from 1.140%-2.900% and 2.45%-4.0%, respectively		796,752		599,676
Collateralized loan obligation, nominal and effective interest rate were both 2.175% for 2009 and 2008		21,167		59,111

		5,206,732		1,408,787
Less: Current portion		670,541		644,935


	$	4,536,191	$	763,852

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8. ALLOWANCE FOR DOUBTFUL ACCOUNTS


	Six Months Ended June 30
	2009			2008
Balance, beginning of period	$	3,050,691		$	3,430,157
Charge to expense for doubtful accounts		261,964			333,012
Impact on acquisition of subsidiaries		—			983
Accounts receivable written off		(411,166	)		(572,740	)


Balance, end of period	$	2,901,489		$	3,191,412

9. OTHER CURRENT MONETARY ASSETS


	June 30
	2009		2008
Accrued custodial receipts from other carriers	$	546,036	$	641,245
Other		2,428,762		1,987,168


	$	2,974,798	$	2,628,413

10. INVENTORIES, NET


	June 30
	2009		2008
Merchandise	$	1,628,004	$	2,465,732
Work in process		514,046		199,334

		2,142,050		2,665,066
Land held under development		706,177		—
Land held for development		337,738		704,412
Prepayment for construction		43,705		—


	$	3,229,670	$	3,369,478

The operating costs related to inventories for the six months ended June 30, 2009 was $10,165,458 thousand, including the accruals for product warranty costs of $3,827 thousand. The operating costs related to inventories for the six months ended June 30, 2008 was $12,129,108 thousand, including valuation loss on inventories of $24,357 thousand and the reversal of accruals for product warranty costs of $19,484 thousand.

Land held under development on June 30, 2009 was for Wan-Xi project which is expected to be completed in 2012.

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11. OTHER CURRENT ASSETS


	June 30
	2009		2008
Prepaid expenses	$	2,486,753	$	3,512,790
Spare parts		1,868,913		2,323,784
Prepaid rents		884,389		762,602
Miscellaneous		543,263		498,333


	$	5,783,318	$	7,097,509

12. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD


	June 30
	2009			2008
	Carrying Value		% of Ownership	Carrying Value		% of Ownership
Chunghwa Investment Co., Ltd. (“CHI”)	$	841,475	49	$	876,867	49
Taiwan International Standard Electronics Co., Ltd. (“TISE”)		495,158	40		578,926	40
ST-2 Satellite Ventures Pte., Ltd. (“SSVP”)		409,790	38		—	—
Senao Networks, Inc. (“SNI”)		269,365	42		251,294	47
Viettel-CHT Co., Ltd. (“Viettel-CHT”)		88,198	33		88,207	33
Skysoft Co., Ltd. (“SKYSOFT”)		85,775	30		78,973	30
KingWaytek Technology Co., Ltd. (“KWT”)		69,003	33		75,671	33
So-net Entertainment Taiwan (“So-net”)		44,929	30		—	—
ELTA Technology Co., Ltd. (“ELTA”)		—	—		42,883	32
A-Kuei Publishing Co., Ltd. (“AKP”)		—	—		178	49


	$	2,303,693		$	1,992,999

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. (“SSVP”) in Singapore in October 2008 in order to maintain the current service. By June 30, 2009, Chunghwa has invested $409,061 thousand. SSVP will engage in the installation and the operation of ST-2 telecommunications satellite.

Chunghwa established Viettel-CHT Co., Ltd. (“Viettel-CHT”) with Viettel Co., Ltd. in Vietnam in April 2008, by investing $91,239 thousand cash. Viettel-CHT engages mainly in IDC services.

Chunghwa invested KingWaytek Technology Co., Ltd. (“KWT”) in January 2008, for a purchase price of $71,770 thousand. KWT engages mainly in publishing books, data processing and software services.

The equity in earnings for the six months ended June 30, 2009 and 2008 were based on the audited financial statements.

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13. FINANCIAL ASSETS CARRIED AT COST


	June 30
	2009			2008
	Carrying Value		% of Ownership	Carrying Value		% of Ownership
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	12		49,500	12
N.T.U Innovation Incubation (“NTUI”)		12,000	9		12,000	9
Essence Technology Solution, Inc. (“ETS”)		10,000	9		20,000	9
3 Link Information Service Co., Ltd. (“3 Link”)		3,450	10		3,450	10
eASPNet Taiwan Inc. (“eASPNet”)		—	2		—	2


	$	2,251,498		$	2,276,498

Chunghwa invested in IBT II in January 2008, for a purchase price of $200,000 thousand. IBT II engages mainly in investment. IBT II completed its incorporation on February 13, 2008.

After evaluating the investments in RPTI and ETS, Chunghwa determined the investments in RPTI and ETS were impaired and recognized impairment losses of $15,000 thousand and $10,000 thousand, respectively, for the year ended December 31, 2008.

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.

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14. OTHER MONETARY ASSETS - NONCURRENT


	June 30
	2009		2008
Piping Fund	$	1,000,000	$	1,000,000
Taiwan Goal Co., Ltd. (“TG”)		—		29,100


	$	1,000,000	$	1,029,100

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.

In January 2008, CHSI invested in Taiwan Goal Co., Ltd. (“TG”) for a purchase price of $30,000 thousand. TG engages mainly in import and export activities for machine wholesale, arms and ammunition products. On March 17, 2008, the stockholders of TG resolved to dissolve TG at a special meeting. Therefore, CHSI has reclassified its investment to other financial assets and recognized a loss of $900 thousand for the six month ended June 30, 2008. As of December 31, 2008, TG has completed its dissolution process. CHSI received $29,585 thousand for the liquidation and recognized a loss of $415 thousand in 2008.

15. PROPERTY, PLANT AND EQUIPMENT


	June 30
	2009		2008
Cost
Land	$	101,474,866	$	102,056,021
Land improvements		1,513,208		1,484,013
Buildings		63,157,815		62,850,705
Computer equipment		15,823,342		15,404,617
Telecommunications equipment		653,783,918		642,939,298
Transportation equipment		2,244,208		2,753,805
Miscellaneous equipment		7,283,620		7,479,111

Total cost		845,280,977		834,967,570
Revaluation increment on land		5,810,342		5,820,548

		851,091,319		840,788,118

Accumulated depreciation
Land improvements		923,853		871,734
Buildings		16,879,207		15,768,414
Computer equipment		12,017,316		11,759,381
Telecommunications equipment		512,567,243		495,949,466
Transportation equipment		2,057,372		2,604,918
Miscellaneous equipment		6,143,713		6,409,034

		550,588,704		533,362,947

Construction in progress and advances related to acquisition of equipment		14,181,979		14,425,108


Property, plant and equipment, net	$	314,684,594	$	321,850,279

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The amendment to the Land Tax Act, relating to the article to permanently lower land value incremental tax, went effective from 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 June 30, 2009, the unrealized revaluation increment was decreased to $5,812,879 thousand by disposal of revaluation assets.

Depreciation on property, plant and equipment for the six months ended June 30, 2009 and 2008 amounted to $17,782,402 thousand and $18,705,762 thousand, respectively. Capitalized interest expenses for the six months ended June 30, 2009 and 2008 amounted to $193 thousand and $143 thousand, and capitalized rates were 1.238%-1.604% and 2.85%-2.88%, respectively.

16. SHORT-TERM LOANS


	June 30
	2009		2008

Unsecured loans - annual rate - 1.20%-1.30% and 2.90% for 2009 and 2008, respectively	$	256,000	$	10,000
Secured loan - annual rate - 2.85%-2.98%		—		65,000


	$	256,000	$	75,000

17. ACCRUED EXPENSES


	June 30
	2009		2008

Accrued salary and compensation	$	7,440,198	$	7,934,366
Accrued employees’ bonuses and remuneration to directors and supervisors		2,509,910		822,345
Accrued franchise fees		1,137,051		1,219,579
Other accrued expenses		2,483,372		1,621,292


	$	13,570,531	$	11,597,582

18. OTHER CURRENT LIABILITIES


	June 30
	2009		2008

Advances from subscribers	$	5,773,165	$	5,827,544
Amounts collected in trust for others		2,343,607		2,599,044
Payables to constructors		2,012,710		1,025,968
Payables to equipment suppliers		1,269,180		1,366,748
Refundable customers’ deposits		1,012,910		955,192
Payables to employees’ bonuses and remuneration to directors and supervisors		—		1,394,077
Miscellaneous		4,193,769		3,952,832


	$	16,605,341	$	17,121,405

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


	June 30
	2009		2008

Unsecured loans - annual rate 2.01%-2.167%	$	360,011	$	—
Secured loans - annual rate - 1%		14,700		37,840

		374,711		37,840
Less: Current portion of long-term loans		104,668		4,200


	$	270,043	$	33,640

CHIEF obtained an unsecured loan from Bank of Taiwan. Interest and principal amount are payable monthly from January 6, 2009 with a due date of January 6, 2013.

SHE obtained a loan from the Industrial Development Bureau, Ministry of Economic Affairs for research and development purpose and obtained a secured loan from Taiwan Business Bank. Interest is payable monthly and the principal is payable every three month from January 15, 2009 with a due date of April 15, 2013.

20. MATURITY ANALYSIS OF ASSETS AND LIABILITIES

The Company classified LED’s assets and liabilities of the construction operations as current and noncurrent according to the length of the operating cycle of the construction operations. Maturity analysis of LED’s related assets and liabilities was as follows:


	June 30, 2009
	With in One Year		Over One Year		Total

Assets

Inventories	$	—	$	1,087,620	$	1,087,620
Deferred expenses (classified as other current assets)		—		91,580		91,580
Restricted assets (classified as other assets - others)		—		76,501		76,501


	$	—	$	1,255,701	$	1,255,701

Liabilities
Advance from of land and building (classified as other current liabilities)	$	—	$	247,480	$	247,480

- 28 -


	June 30, 2008
	With in One Year		Over One Year		Total

Assets

Inventories	$	—	$	704,412	$	704,412
Deferred expenses (classified as other current assets)		8,751		59,705		68,456


	$	8,751	$	764,117	$	772,868


Liabilities

Trade notes and accounts payable	$	18	$	—	$	18
Advance from of land and building (classified as other current liabilities)		708		146,775		147,483


	$	726	$	146,775	$	147,501

21. STOCKHOLDERS’ EQUITY

Exercise their voting rights,

Sell their ADSs, and

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

- 29 -

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.

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 of accounting estimate.

- 30 -

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


	Appropriation and Distribution				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		—		—

- 31 -

The stockholders, at a meeting held on June 15, 2007, resolved to transfer capital surplus in the amount of $9,667,845 thousand to common capital stock and the capital increase proposal was effectively registered with SFB.

The stockholders, at the stockholders’ meeting held on June 15, 2007, 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 $9,667,845 thousand to common capital stock and was effectively registered with SFB. Chunghwa designated October 19, 2007 and December 29, 2007 as the record date and the stock transfer date of capital reduction, respectively. Subsequently, common capital stock was reduced by $9,667,845 thousand and a liability for the actual amount of cash to be distributed to stockholders of $9,557,777 thousand was recorded. The difference between the reduction in common capital stock and the distribution amount represents treasury stock of $110,068 thousand held by Chunghwa and concurrently cancelled. Such cash payment to stockholders was made in January 2008.

22. SENAO’ STOCK-BASED COMPENSATION PLANS

SENAO has several share-based compensation plans (“SENAO Plans”) described as follows:


Effective Date	Grant Date	Stock Options Units (Thousand)	Exercise Price

2003.09.03	2003.10.17	3,981		$ 14.7 (Original price $20.2)
2003.09.03	2004.03.04	385		17.6 (Original price $23.9)
2004.12.01	2004.12.28	6,500		10.0 (Original price $11.6)
2004.12.01	2005.11.28	1,500		14.4 (Original price $18.3)
2005.09.30	2006.05.05	10,000		13.3 (Original price $16.9)
2007.10.16	2007.10.31	6,181		42.6 (Original price $44.2)


		28,547

Each option is eligible to subscribe for one common share when exercisable. Under the terms of the Plans, the options are granted at an exercise price equal to the closing price of the SENAO’s common shares listed on the TSE on the higher of closing price or par value. The SENAO Plans have exercise price adjustment formula upon the issuance of new common shares, capitalization of retained earnings and/or capital reserves, stock split as well as distribution of cash dividend (except for 2007 Plan), except (i) in the case of issuance of new shares in connection with mergers and in the case of cancellation of outstanding shares in connection with capital reduction (2007 Plan is out of this exception), and (ii) except if the exercise price after adjustment exceeds the exercise price before adjustment. The options of all the Plans are valid for six years and the graded vesting schedule for which 50% of option granted will vest two years after the grant date and another two tranches of 25% will vest three and four years after the grant date respectively.

- 32 -

Information about SENAO’s outstanding stock options for the six months ended June 30, 2009 and 2008 were as follows:


	Stock Options Outstanding
	2009				2008
	Number of Options (Thousand)		Weighted Average Exercise Price NT$		Number of Options (Thousand)		Weighted Average Exercise Price NT$

Options outstanding, beginning of period	13,818		$	26.34	18,592		$	24.70
Options issued	—			—	—			—
Options exercised	(3,452	)		12.57	(2,791	)		14.74
Options expired	(191	)		24.46	(167	)		25.43


Options outstanding, end of period	10,175			30.41	15,634			26.47


Options exercisable, end of period	1,938				3,792

As of June 30, 2009, information about SENAO’s outstanding and exercisable options was as follows:


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

$	10.0-$13.3	3,727	2.71	$	12.99	1,762	$	12.65
$	14.4-$17.6	487	2.16		14.44	176		14.50
$	42.6	5,961	4.42		42.60	—		—

As of June 30, 2008, information about SENAO’s outstanding and exercisable options was as follows:


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

$	10.5-$15.7	8,389	3.60	$	14.77	3,337	$	14.74
$	17.1-$20.8	1,121	2.77		17.19	455		17.33
$	44.2	6,124	5.42		44.20	—		—

No compensation cost of SENAO’s options was recognized under the intrinsic value method for the six months ended June 30, 2009 and 2008. Had SENAO used the fair value method to recognize the compensation cost, there were no significant impact on the consolidated net income and earnings per share.

- 33 -

Had SENAO used the fair value method to evaluate the options using the Black-Scholes model, the assumptions and pro forma results of SENAO for the six months ended June 30, 2009 would have been as follows:


	October 31, 2007			May 5, 2006			November 28, 2005			December 28, 2004			March 4, 2004

Expected dividend yield		1.49	%		—			—			—			—
Risk free interest rate		2.00	%		1.75	%		2.00	%		1.88	%		1.88	%
Expected life (years)		4.375			4.375			4.375			4.375			4.375
Expected volatility		39.82	%		39.63	%		43.40	%		49.88	%		52.65	%
Weighted-average fair value of grants	$	13.69		$	5.88		$	6.93		$	4.91		$	10.56

23. TREASURY STOCK


	Six Months Ended June 30
	2009	2008

Balance, beginning of period	—	110,068
Decrease	—	110,068


Balance, end of period	—	—

24. COMPENSATION, DEPRECIATION AND AMORTIZATION EXPENSES


	Six Months Ended June 30, 2009
	Operating Costs		Operating Expenses		Total

Compensation expense
Salaries	$	6,266,498	$	4,885,090	$	11,151,588
Insurance		439,203		343,322		782,525
Pension		816,646		603,729		1,420,375
Other compensation		4,023,648		2,788,481		6,812,129


	$	11,545,995	$	8,620,622	$	20,166,617


Depreciation expense	$	16,804,893	$	977,509	$	17,782,402

Amortization expense	$	470,744	$	111,261	$	582,005

- 34 -


	Six Months Ended June 30, 2008
	Operating Costs		Operating Expenses		Total

Compensation expense
Salaries	$	6,134,641	$	4,817,719	$	10,952,360
Insurance		290,987		231,972		522,959
Pension		804,852		595,606		1,400,458
Other compensation		3,849,886		2,686,875		6,536,761


	$	11,080,366	$	8,332,172	$	19,412,538


Depreciation expense	$	17,661,714	$	1,044,048	$	18,705,762

Amortization expense	$	434,422	$	90,669	$	525,091

25. INCOME TAX

Income tax expense consisted of the following:


	Six Months Ended June 30
	2009			2008

Income tax payable	$	6,688,966		$	7,963,738
Income tax - separated		49,486			132,892
Income tax - deferred		305,855			(1,150,776	)
Adjustments of prior years’ income tax		(194,816	)		47,966


	$	6,849,491		$	6,993,820

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


	June 30
	2009			2008

Current
Provision for doubtful accounts	$	384,661		$	528,427
Unrealized accrued expense		48,783			—
Unrealized foreign exchange loss		29,509			207,471
Valuation loss on inventory		21,598			11,232
Estimated warranty liabilities		12,875			12,154
Valuation loss (gain) on financial instruments, net		(22,940	)		835,079
Loss carryforward		—			73,605
Other		2,413			30,238

		476,899			1,698,206
Valuation allowance		(375,345	)		(575,418	)


Net deferred income tax assets - current	$	101,554		$	1,122,788

(Continued)

- 35 -


	June 30
	2009			2008

Noncurrent
Accrued pension cost	$	1,128,496		$	1,390,253
Loss carryforward		113,756			74,512
Impairment loss		68,399			84,292
Loss on disposal of property, plant and equipment		1,283			16,498
Other		5,590			3,802

		1,317,524			1,569,357
Valuation allowance		(63,083	)		(35,269	)


Net deferred income tax assets - noncurrent	$	1,254,441		$	1,534,088

(Concluded)

As of June 30, 2009, loss carryforward of CHIEF, Unigate, SHE and LED are as follows:


Company	Total Creditable Amounts		Remaining Creditable Amounts		Expiry Year

CHIEF	$	22,609	$	22,609	2013
		17,942		17,942	2014
		20,314		20,314	2015
		17,580		17,580	2016
		9,700		9,700	2017
		3,192		3,192	2018
		146		146	2019
Unigate		20		20	2017
		8		8	2018
SHE		5,223		3,517	2013
		1,578		1,578	2014
		5,009		5,009	2016
		922		922	2017
LED		6,383		6,383	2018
		4,836		4,836	2019


	$	115,462	$	113,756

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

The actual creditable ratios distribution of Chunghwa’s of 2008 and 2007 for earnings were 30.61% and 28.81%, respectively.

Undistributed earnings information

All Chunghwa’s earnings generated prior to June 30, 1998 have been appropriated.

- 36 -

Chunghwa’s income tax returns have been examined by tax authorities through 2005. SENAO’s income tax returns have been examined by tax authorities through 2006. The following entities’ income tax returns have been examined by tax authorities through 2007: CHIEF, Unigate, CHSI, SHE, and CIYP.

26. EARNINGS PER SHARE


	Amount (Numerator)						Weighted- average Number of Common Shares (Thousand) (Denominator)	Earnings Per Share (Dollars)
	Amount (Numerator)							Income Before Income Tax		Net Income
	Income Before Income Tax			Net Income				Income Before Income Tax		Net Income

Six months ended June 30, 2009

EPS was calculated as follows:

Basic EPS:
Income attributable to stockholders of the parent	$	28,926,734		$	22,261,402		10,666,489	$	2.71	$	2.09

Effect of dilutive potential common stock
SENAO’s stock options		(1,038	)		(1,038	)	—
Employee bonus		—			—		33,294


Diluted EPS
Income attributable to stockholders of the parent (including effect of dilutive potential common stock)	$	28,925,696		$	22,260,364		10,699,783	$	2.70	$	2.08


Six months ended June 30, 2008

Basic EPS
Income attributable to stockholders of the parent	$	30,024,121		$	23,230,513		10,666,489	$	2.81	$	2.18

Effect of dilutive potential common stock
SENAO’s stock options		(5,009	)		(5,009	)	—
Employee bonus		—			—		9,616


Diluted EPS
Income attributable to stockholders of the parent (including effect of dilutive potential common stock)	$	30,019,112		$	23,225,504		10,676,105	$	2.81	$	2.18

- 37 -

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 employees 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 six months ended June 30, 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 six months ended June 30, 2009 and 2008 was due to the effect of potential common stock of stock options by SENAO.

27. 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, SENAO, CIYP, CHIEF, Unigate, CHSI, SHE, LED makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The Company’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 at retirement. Chunghwa, SENAO, CHIEF and SHE contribute an amount no more than 15% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the names of the Committees in the Bank of Taiwan.

Pension costs of the Company were $1,456,883 thousand ($1,368,420 thousand subject to defined benefit plan and $88,463 thousand subject to defined contribution plan) and $1,442,748 thousand ($1,375,664 thousand subject to defined benefit plan and $67,084 thousand subject to defined contribution plan) for the six months ended June 30, 2009 and 2008, respectively.

- 38 -

28. TRANSACTIONS WITH RELATED PARTIES

Chunghwa engages in business transactions with the following related parties:


Company		Relationship

Taiwan International Standard Electronics Ltd. (“TISE”)		Equity-method investee
Skysoft Co., Ltd. (“SKYSOFT”)		Equity-method investee
ELTA Technology Co., Ltd. (“ELTA”)		Equity-method investee before Chunghwa sold all shares in July, 2008.
Chunghwa Precision Test Technical Co., Ltd. (“CHPT”)		Subsidiary of CHI
So-net Entertainment Taiwan (“So-net”)		Equity-method investee
Senao Networks, Inc. (“SNI”)		Equity-method investee of SENAO
SENAO Technology Education Foundation (“STEF”)		A nonprofit organization of which the funds donated by SENAO exceeds one third of its total funds
Institute for Information Industry (“III”)		Equity- method investor of InfoExplorer
e-To You International Inc. (“ETY”)		Chairman of ETY is the vice chairman of InfoExplorer

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


	June 30
	2009			2008
	Amount		%	Amount		%
1) Receivables

Trade notes and accounts receivable
III	$	109,432	96	$	—	—
Others		3,997	4		2,033	100


	$	113,429	100	$	2,033	100

2) Payables

Trade notes payable, accounts payable, and accrued expenses
TISE	$	349,389	94	$	183,439	74
ELTA		—	—		19,225	8
Others		6,667	2		4,911	1

		356,056	96		207,575	83

Payables to constructors
TISE		15,412	4		41,628	17


	$	371,468	100	$	249,203	100

- 39 -


		Six Months Ended June 30
		2009			2008
		Amount		%	Amount		%

3)	Revenues

	III	$	91,373	—	$	—	—
	So-net		24,608	—		—	—
	SKYSOFT		17,086	—		16,657	—
	Others		7,624	—		12,730	—


		$	140,691	—	$	29,387	—


4)	Operating costs and expenses

	TISE	$	232,188	—	$	285,372	1
	Others		17,433	—		194,867	—

		$	249,621	—	$	480,239	1


5)	Non-operating income and gains

	SNI	$	13,286	1	$	—	—
	Others		71	—		—	—

		$	13,357	1	$	—	—


6)	Acquisition of property, plant and equipment

	TISE	$	214,625	2	$	205,065	2
	III		18,972	—		—	—
	SNI		—	—		755	—


		$	233,597	2	$	205,820	2

SENAO rents out part of its plant to SNI. The rent is collected monthly. The foregoing transactions with related parties were conducted as arm’s length transactions, except for the transactions with SNI and STEF which were determined in accordance with mutual agreements.

29. PLEDGED ASSETS

The assets are pledged as collaterals for short-term and long-term bank loans and contract deposits by SENAO, CHIEF and SHE and IFE.


	June 30
	2009		2008

Property, plant and equipment, net	$	—	$	342,604
Leased assets, net		—		441,280
Restricted assets		54,446		11,397


	$	54,446	$	795,281

- 40 -

30. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

As of June 30, 2009, the Company’s remaining commitments under non-cancellable contracts with various parties were as follows:

Acquisition of land and buildings of $209,770 thousand.

Acquisition of telecommunications equipment of $15,929,572 thousand.

Contracts to print billing, envelops and selling gifts of $111,207 thousand.

LED has already contracted to advance sale of land for $1,697,816 thousand, and collected $247,480 thousand according to the contracts.

For the purpose of completion the construction, acquisition of the building construction license and registration ownerships of all buildings for Wan-Xi Project, LED signed the trust deeds with Hua Nan Bank and China Real Estate Management Co., Ltd. for the fund management, property rights and related development to the extent of authority they are given.

Trust assets are as follow:


	June 30, 2009

Restricted assets - bank deposits	$	76,501
Land held under development		706,177


	$	782,678

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


Year	Rental Amount

2009 (from July 1, 2009 to December 31, 2009)	$	985,877
2010		1,465,903
2011		1,117,466
2012		872,673
2013 and thereafter		1,049,011

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. The Company does not know when its contribution to the Piping Fund will be returned; therefore, the Company did not discount the face amount of its contribution to the Pining Fund.

- 41 -

Giga Media filed a civil action against Chunghwa with the Taiwan Taipei District Court (the “Court”) on June 12, 2008. The complaint alleged that Chunghwa infringed Giga Media’s ROC Patent No. I258284 which is a Point-to-Point Protocol over Ethernet (“PPPoE”) technique used to launch fixed IP of ADSL. Giga Media is seeking damages of $500,000 thousand and interest calculated at 5% for the period from one day following the date Chunghwa received the official notification from the Court to the payment date. As of audit report date, the case is still in the procedure of the first instance.

31. FAIR VALUE OF FINANCIAL INSTRUMENTS

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


	June 30
	2009				2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets
Cash and cash equivalents	$	83,422,659	$	83,422,659	$	95,346,400	$	95,346,400
Financial assets at fair value through profit or loss		22,454		22,454		135,307		135,307
Available-for-sale financial assets		16,377,979		16,377,979		18,979,469		18,979,469
Held-to-maturity financial assets - current		670,541		670,541		644,935		644,935
Trade notes and accounts receivable, net		10,969,179		10,969,179		10,597,817		10,597,817
Receivables from related parties		113,429		113,429		2,033		2,033
Other current monetary assets		2,974,798		2,974,798		2,628,413		2,628,413
Restricted assets - current		101,843		101,843		2,865		2,865
Investments accounted for using equity method		2,303,693		2,441,108		1,992,999		2,142,170
Financial assets carried at cost		2,251,498		2,251,498		2,276,498		2,276,498
Held-to-maturity financial assets - noncurrent		4,536,191		4,536,191		763,852		763,852
Other noncurrent monetary assets		1,000,000		1,000,000		1,029,100		1,029,100
Refundable deposits		1,336,669		1,336,669		1,407,108		1,407,108
Restricted assets - noncurrent		29,104		29,104		8,532		8,532
Liabilities
Short-term loans		256,000		256,000		75,000		75,000
Financial liabilities at fair value through profit or loss		501		501		3,313,372		3,313,372
Trade notes and accounts payable		7,106,260		7,106,260		8,931,645		8,931,645
Payables to related parties		371,468		371,468		249,203		249,203

(Continued)

- 42 -


	June 30
	2009				2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Accrued expenses	$	13,570,531	$	13,570,531	$	11,597,582	$	11,597,582
Dividends payable		37,138,775		37,138,775		40,176,130		40,176,130
Amounts collected in trust for others (included in “other current liabilities”)		2,343,607		2,343,607		2,599,044		2,599,044
Payables to employees’ bonuses and remuneration to directors and supervisors (included in “other current liabilities”)		—		—		1,394,077		1,394,077
Payables to constructors (included in “other current liabilities”)		2,012,710		2,012,710		1,025,968		1,025,968
Payables to equipment suppliers (included in “other current liabilities”)		1,269,180		1,269,180		1,366,748		1,366,748
Refundable customers’ deposits (included in “other current liabilities”)		1,012,910		1,012,910		955,192		955,192
Hedging derivative financial liabilities (included in “other current liabilities”)		—		—		5,263		5,263
Current portion of long-term loans		104,668		104,668		4,200		4,200
Long-term loans		270,043		270,043		33,640		33,640
Customers’ deposits		6,054,883		6,054,883		6,328,579		6,328,579

(Concluded)

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

If the financial assets/liabilities at fair value through profit or loss and the available-for-sale financial assets have quoted market prices in an active market, the quoted market prices are viewed as fair values. If the market price of the available-for-sale financial assets are not readily available, valuation techniques is used incorporating estimates and assumptions that are consistent with prevailing market conditions.

Long-term investments are based on the net asset values of the investments in unconsolidated companies if quoted market prices are not available.

The fair value of long-term loans (including current portion) is based on discounted projected cash flow. The projected cash flows were discounted using the interest rate of similar long-term loans.

- 43 -

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


	Amount Based on Quoted Market Price				Amount Determined Using Valuation Techniques
	June 30				June 30
	2009		2008		2009		2008
Assets

Financial assets at fair value through profit or loss	$	22,454	$	135,307	$	—	$	—
Available-for-sale financial assets		16,377,979		18,979,469		—		—
Hedging derivative financial assets (classified as other current monetary assets)		17,374		—		—		—

Liabilities

Financial liabilities at fair value through profit or loss		501		38,765		—		3,274,607
Hedging derivative financial liabilities (classified as other current liabilities)		—		5,263		—		—

Information about financial risks

Market risk

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

The fluctuations of market price would result in the index future contracts exposed to price 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, the Company 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 the Company 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 the Company’s exposure to default by those parties to be material.

Liquidation risk

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

- 44 -

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.

Fair value hedge

Outstanding currency swap contracts and forward exchange contracts for hedge as of June 30, 2009 and 2008:


	Currency	Maturity Period	Contract Amount (in Thousands)
June 30, 2009

Currency swap contracts	USD/NTD	2009.07	USD30,000/NTD984,471

June 30, 2008

Forward exchange contracts - sell	USD/NTD	2008.09	USD65,000

As of June 30, 2009, the currency swap contracts measured at fair value result in hedging derivative financial assets of $17,374 thousand (classified as other current monetary assets). As of June 30, 2008, the forward exchange contracts measured at fair value result in hedging derivative financial asset of $5,263 thousand (classified as other current liabilities).

32. ADDITIONAL DISCLOSURES

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

Financing provided: None.

Endorsement/guarantee provided: None.

Marketable securities held: Please see Table 1.

Marketable securities acquired and disposed of at costs or prices at least $100 million or 20% of the paid-in capital: Please see Table 2.

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 purchase from or sale to related parties amounting to at least $100 million or 20% of the paid-in capital: Please see Table 3.

- 45 -

Receivables from related parties amounting to $100 million or 20% of the paid-in capital: Please see Table 4.

Names, locations, and other information of investees on which the Company exercises significant influence: Please see Table 5.

Financial transactions: Please see Notes 5 and 31

Investment in Mainland China: Please see Table 6.

Intercompany relationships and significant intercompany transaction: Please see Table 7.

- 46 -

TABLE 1

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD

JUNE 30, 2009

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


					June 30, 2009							Note
No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares (Thousands/ Thousand Units)	Carrying Value (Note 6)			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	$	1,192,470 (Note 8	)	29	$	2,845,806	Note 5
		Light Era Development Co., Ltd.	Subsidiary	Investments accounted for using equity method	300,000		2,952,556 (Note 8	)	100		2,953,075	Note 1
		Chunghwa Investment Co., Ltd.	Equity-method investee	Investments accounted for using equity method	98,000		841,475		49		917,666	Note 1
		Chunghwa Telecom Singapore Pte. Ltd.	Subsidiary	Investments accounted for using equity method	34,869		782,281 (Note 8	)	100		782,281	Note 1
		Chunghwa System Integration Co., Ltd.	Subsidiary	Investments accounted for using equity method	60,000		712,953 (Note 8	)	100		621,905	Note 1
		Taiwan International Standard Electronics Co., Ltd.	Equity-method investee	Investments accounted for using equity method	1,760		495,158		40		667,376	Note 1
		CHIEF Telecom Inc.	Subsidiary	Investments accounted for using equity method	37,942		433,045 (Note 8	)	69		383,390	Note 1
		InfoExplorer Co., Ltd.	Subsidiary	Investments accounted for using equity method	22,498		279,423 (Note 8	)	49		224,564	Note 1
		Donghwa Telecom Co., Ltd.	Subsidiary	Investments accounted for using equity method	51,590		224,105 (Note 8	)	100		224,105	Note 1
		Chunghwa International Yellow Pages Co., Ltd.	Subsidiary	Investments accounted for using equity method	15,000		152,699 (Note 8	)	100		152,699	Note 1
		Viettel-CHT Co., Ltd.	Equity-method investee	Investments accounted for using equity method	—		88,198		33		88,198	Note 1
		Skysoft Co., Ltd.	Equity-method investee	Investments accounted for using equity method	4,438		85,775		30		46,408	Note 1
		Chunghwa Telecom Global, Inc.	Subsidiary	Investments accounted for using equity method	6,000		69,024 (Note 8	)	100		89,988	Note 1
		KingWaytek Technology Co., Ltd.	Equity-method investee	Investments accounted for using equity method	1,703		69,003		33		15,230	Note 1
		Spring House Entertainment Inc.	Subsidiary	Investments accounted for using equity method	5,996		47,986 (Note 8	)	56		32,992	Note 1
		So-net Entertainment Taiwan	Equity-method investee	Investments accounted for using equity method	3,429		44,929		30		27,075	Note 1
		Chunghwa Telecom Japan Co., Ltd.	Subsidiary	Investments accounted for using equity method	1		11,270 (Note 8	)	100		11,270	Note 1
		New Prospect Investments Holdings Ltd. (B.V.I.)	Subsidiary	Investments accounted for using equity method	—	US$	1 dollar (Note 8	)	100	US$	1 dollar	Note 3
		Prime Asia Investments Group Ltd. (B.V.I.)	Subsidiary	Investments accounted for using equity method	—	US$	1 dollar (Note 8	)	100	US$	1 dollar	Note 3
		Taipei Financial Center	—	Financial assets carried at cost	172,927		1,789,530		12		1,371,753	Note 2
		Industrial Bank of Taiwan II Venture Capital Co., Ltd. (IBT II)	—	Financial assets carried at cost	20,000		200,000		17		206,833	Note 2

(Continued)

- 47 -


No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	June 30, 2009						Note
No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares (Thousands/ Thousand Units)	Carrying Value (Note 6)		Percentage of Ownership	Market Value or Net Asset Value		Note

		Global Mobile Corp.	—	Financial assets carried at cost	12,696	$	127,018	11	$	116,569	Note 2
		iD Branding Ventures	—	Financial assets carried at cost	7,500		75,000	8		71,245	Note 2
		PRTI International	—	Financial assets carried at cost	9,234		34,500	12		34,925	Note 2
		Essence Technology Solution, Inc.	—	Financial assets carried at cost	2,000		10,000	9		3,979	Note 2

		REITS
		Fubon No. 1 Fund	—	Available-for-sale financial assets	9,141		91,410	—		97,626	Note 5
		Cathay No. 2 REIT	—	Available-for-sale financial assets	1,125		11,250	—		11,194	Note 5
		Gallop No. 1 REIT	—	Available-for-sale financial assets	10,000		100,000	—		74,000	Note 5

		Beneficiary certificates (mutual fund)
		Polaris /P-shares Taiwan Dividend + ETF	—	Available-for-sale financial assets	600		15,000	—		11,556	Note 4
		PCA Well Pool Fund	—	Available-for-sale financial assets	194,181		2,500,000	—		2,518,912	Note 4
		Yuan Ta Wan Tai Bond Fund	—	Available-for-sale financial assets	104,520		1,500,000	—		1,511,002	Note 4
		Mega Diamond Bond Fund	—	Available-for-sale financial assets	126,106		1,500,000	—		1,502,581	Note 4
		Polaris De-Li Fund	—	Available-for-sale financial assets	225,901		3,500,000	—		3,520,331	Note 4
		Fuh-Hwa Bond Fund	—	Available-for-sale financial assets	108,849		1,500,000	—		1,502,024	Note 4
		Fidelity US High Yield Fund	—	Available-for-sale financial assets	535		206,588	—		169,632	Note 4
		MFS Meridian Funds-Strategic Income Fund	—	Available-for-sale financial assets	316		132,592	—		128,053	Note 4
		Fidelity Fds Intl Bond	—	Available-for-sale financial assets	8,713		336,405	—		321,117	Note 4
		Credit Suisse BF (Lux) Euro Bond Fund	—	Available-for-sale financial assets	4		55,632	—		67,298	Note 4
		Fidelity European High Yield Fund	—	Available-for-sale financial assets	324		126,425	—		109,991	Note 4
		Parvest Europe Convertible Bond Fond	—	Available-for-sale financial assets	78		443,097	—		373,985	Note 4
		JPMorgan Funds-Global Convertibles Fund (EUR)	—	Available-for-sale financial assets	868		491,450	—		421,179	Note 4
		Parvest Euro Bond	—	Available-for-sale financial assets	39		287,400	—		302,293	Note 4
		Fuh-Hwa Aegis Fund	—	Available-for-sale financial assets	17,813		234,684	—		202,631	Note 4
		AGI Global Quantitative Balanced Fund	—	Available-for-sale financial assets	20,000		232,731	—		210,000	Note 4
		Capital Value Balance Fund	—	Available-for-sale financial assets	11,285		200,000	—		164,621	Note 4
		Fuh Hwa Life Goal Fund	—	Available-for-sale financial assets	6,832		100,000	—		99,483	Note 4
		Fuh Hwa Asia Pacific Balanced	—	Available-for-sale financial assets	7,764		100,000	—		71,584	Note 4
		Asia-Pacific Mega - Trend Fund	—	Available-for-sale financial assets	13,059		175,000	—		137,903	Note 4
		AIG Flagship Global Balanced Fund of Funds	—	Available-for-sale financial assets	25,679		350,000	—		298,392	Note 4
		Franklin Templeton Global Bond Fund of Funds	—	Available-for-sale financial assets	18,967		210,000	—		217,664	Note 4
		Cathay Global Aggressive Fund of Funds	—	Available-for-sale financial assets	14,692		200,000	—		154,264	Note 4
		Polaris Global Emerging Market Funds	—	Available-for-sale financial assets	9,791		150,000	—		107,115	Note 4
		HSBC Global Fund of Bond Funds	—	Available-for-sale financial assets	22,838		250,000	—		244,481	Note 4
		JPM (Taiwan) JF Balanced Fund	—	Available-for-sale financial assets	2,462		50,000	—		44,417	Note 4
		MFS Meridian Funds-Global Equity Fund (A1 class)	—	Available-for-sale financial assets	253		262,293	—		182,642	Note 4
		Fidelity Fds International	—	Available-for-sale financial assets	128		163,960	—		103,800	Note 4
		Fidelity Fds America	—	Available-for-sale financial assets	937		163,960	—		110,971	Note 4
		JPMorgan Funds-Global Dynamic Fund (B)	—	Available-for-sale financial assets	303		165,640	—		106,345	Note 4
		MFS Meridian Funds-Research International Fund (A1 share)	—	Available-for-sale financial assets	173		131,920	—		84,264	Note 4
		Fidelity Fds Emerging Markets	—	Available-for-sale financial assets	144		122,175	—		65,718	Note 4
		Credit Suisse Equity Fund (Lux) Global Resources	—	Available-for-sale financial assets	13		162,990	—		88,487	Note 4

(Continued)

- 48 -


No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	June 30, 2009						Note
No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares (Thousands/ Thousand Units)	Carrying Value (Note 6)		Percentage of Ownership	Market Value or Net Asset Value		Note

		Fidelity Euro Balanced Fund	—	Available-for-sale financial assets	879	$	560,819	—	$	416,878	Note 4
		Fidelity Fds World	—	Available-for-sale financial assets	295		171,568	—		102,090	Note 4
		Fidelity Fds Euro Blue Chip	—	Available-for-sale financial assets	259		233,543	—		134,270	Note 4
		MFS Meridian Funds - European Equity Fund (A1 share)	—	Available-for-sale financial assets	171		178,920	—		110,305	Note 4
		Henderson Horizon Fund - Pan European Equity Fund	—	Available-for-sale financial assets	230		180,886	—		131,026	Note 4
		JPM (Taiwan) Global Balanced Fund	—	Available-for-sale financial assets	9,071		125,000	—		122,250	Note 4

		Bonds
		Mega Securities Corp. 1st Unsecured Corporate Bonds in 2007	—	Held-to-maturity financial assets	—		150,000	—		150,000	Note 7
		KGI Securities 1st Unsecured Corporate Bonds 2007-B Issue	—	Held-to-maturity financial assets	—		100,000	—		100,000	Note 7
		Mega Financial Holding 1st Unsecured Corporate Bond 2007-B Issue	—	Held-to-maturity financial assets	—		200,000	—		200,000	Note 7
		Mega Securities Corp. 1st Unsecured Corporate Bond 2008 - A issue	—	Held-to-maturity financial assets	—		300,000	—		300,000	Note 7
		Formosa Petrochemical Corp.	—	Held-to-maturity financial assets	—		99,868	—		99,868	Note 7
		Taiwan Power Company 3rd Boards in 2008	—	Held-to-maturity financial assets	—		149,938	—		149,938	Note 7
		GreTai Company 1st Unsecured Corporate Bonds-A issue in 2008	—	Held-to-maturity financial assets	—		100,000	—		100,000	Note 7
		Fubon Financial Holding Company 2005 1st Unsecured Debenture	—	Held-to-maturity financial assets	—		99,447	—		99,447	Note 7
		Formosa Petrochemical Corporation 3rd Unsecured Corporate Bonds Issue in 2008.	—	Held-to-maturity financial assets	—		49,925	—		49,925	Note 7
		Taiwan Power Company 5th Boards in 2008	—	Held-to-maturity financial assets	—		273,038	—		273,038	Note 7
		Yuanta Securities Finance Co. Ltd. 1nd Unsecured Corporate Bonds-A Issue in 2007	—	Held-to-maturity financial assets	—		100,043	—		100,043	Note 7
		Formosa Petrochemical Corporation 4th Unsecured Corporate Bonds Issue in 2006	—	Held-to-maturity financial assets	—		300,989	—		300,989	Note 7
		NAN YA Company 2nd Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		408,659	—		408,659	Note 7
		Taiwan Power Company 3rd Boards in 2006	—	Held-to-maturity financial assets	—		201,284	—		201,284	Note 7
		Taiwan Power Co. 1st Unsecured Bond-B Issue in 2001	—	Held-to-maturity financial assets	—		182,865	—		182,865	Note 7
		Formosa Petrochemical Corporation Bond Issue in 2006	—	Held-to-maturity financial assets	—		201,721	—		201,721	Note 7
		NAN YA Company 3rd Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		205,214	—		205,214	Note 7
		China Development Financial Holding Corporation 1st Unsecured Corporate Bonds Issue in 2006	—	Held-to-maturity financial assets	—		405,048	—		405,048	Note 7
		China Development Financial Holding Corporation 1st Unsecured Corporate Bonds-A Issue in 2008	—	Held-to-maturity financial assets	—		104,176	—		104,176	Note 7
		Taiwan Power Co. 4th secured Bond-B Issue in 2008	—	Held-to-maturity financial assets	—		52,264	—		52,264	Note 7

(Continued)

- 49 -


No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	June 30, 2009								Note
No.	Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares (Thousands/ Thousand Units)	Carrying Value (Note 6)			Percentage of Ownership	Market Value or Net Asset Value			Note

		Formosa Petrochemical Corporation 2nd Unsecured Corporate Bonds Issue in 2008.	—	Held-to-maturity financial assets	—	$	103,411		—	$	103,411		Note 7
		Formosa Petrochemical Corporation 4th Unsecured Corporate Bonds Issue in 2008.	—	Held-to-maturity financial assets	—		201,346		—		201,346		Note 7
		NAN YA Company 4th Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		99,877		—		99,877		Note 7
		MLPC 1st Unsecured Corporate Bonds Issue in 2008	—	Held-to-maturity financial assets	—		199,667		—		199,667		Note 7
		China Steel Corporation 2nd Unsecured Corporate Bonds-A Issue in 2008	—	Held-to-maturity financial assets	—		100,033		—		100,033		Note 7
		China Development Industrial B	—	Held-to-maturity financial assets	—		197,645		—		197,645		Note 7
		Cathay United Bank 9st Financial Debentures-03 Issue in 2004	—	Held-to-maturity financial assets	—		199,920		—		199,920		Note 7
		Hua Nan Commercial Bank 2nd of the two Subordinate Financial Debentures Issue in 2004	—	Held-to-maturity financial assets	—		99,964		—		99,964		Note 7
		China Development Industrial Bank 2nd Financial Debentures issue in 2006	—	Held-to-maturity financial assets	—		198,411		—		198,411		Note 7
		TaipeiFubon Bank 1st Financial Debentures-BA Issue in 2005	—	Held-to-maturity financial assets	—		100,812		—		100,812		Note 7
		Enterprise Debt Securitization Cathay United Bank CLO 96-1	—	Held-to-maturity financial assets	—		21,167		—		21,167		Note 7

1	Senao International Co., Ltd.	Senao Networks, Inc.	Equity-method investee	Investments accounted for using equity method	15,152		269,365		42		269,365		Note 1
		N.T.U. Innovation Incubation Corporation	—	Financial assets carried at cost	1,200		12,000		9		12,081		Note 2

2	CHIEF Telecom Inc.	Unigate Telecom Inc.	Subsidiary	Investments accounted for using equity method	200		1,856 (Note 8	)	100		1,856		Note 1
		CHIEF Telecom (Hong Kong) Limited	Subsidiary	Investments accounted for using equity method	400		1,128 (Note 8	)	100		1,128		Note 1
		Chief International Corp.	Subsidiary	Investments accounted for using equity method	200		7,145 (Note 8	)	100		7,145		Note 1
		eASPNet Inc.	—	Financial assets carried at cost	1,000		—		2		—		Note 2
		3 Link Information Service Co., Ltd.	—	Financial assets carried at cost	374		3,450		10		6,484		Note 2

3	Chunghwa System Integration Co., Ltd.	Concord Technology Corp.	Subsidiary	Investments accounted for using equity method	500	(US$	13,245 404 (Note 8	) )	100	(US$	13,245 404	)	Note 1

		Cathy Global Aggressive Fund of Fund	—	Available-for-sale financial assets	1,233		15,000		—		12,951		Note 4
		Cathy Global Infrastructure Fund	—	Available-for-sale financial assets	1,418		15,000		—		10,653		Note 4

4	Concord Technology Corp.	Glory Network System Service (Shanghai) Co., Ltd.	Subsidiary	Investments accounted for using equity method	500	(US$	13,241 404 (Note 8	) )	100	(US$	13,241 404	)	Note 1

13	Chunghwa Telecom Singapore Pte., Ltd.	ST-2 Satellite Ventures Pte., Ltd.	Equity-method investee	Investments accounted for using equity method	—	(SG$	409,790 18,068	)	38	(SG$	409,790 18,068	)	Note 1

(Continued)

- 50 -

Note 1:

The net asset values of investees were based on audited financial statements.

Note 2:

The net asset values of investees were based on unaudited financial statements.

Note 3:

Note 4:

The net asset values of beneficiary certification (mutual fund) were based on the net asset values on June 30, 2009.

Note 5:

Market value was based on the closing price of June 30, 2009.

Note 6:

Showing at their original carrying amounts without the adjustments of fair values, except for held-to-maturity financial assets.

Note 7:

The net asset values of investees were based on amortized cost.

Note 8:

The amount was eliminated upon consolidation.

(Concluded)

- 51 -

TABLE 2

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2009

(Amounts in Thousands of New Taiwan Dollars)


No.	Company Name	Marketable Securities Type and Name	Financial Statement Account	Counter- party	Nature of Relationship	Beginning Balance			Acquisition				Disposal									Ending Balance
No.	Company Name	Marketable Securities Type and Name	Financial Statement Account	Counter- party	Nature of Relationship	Shares (Thousands/ Thousand Units)	Amount (Note 1)		Shares (Thousands/ Thousand Units)	Amount			Shares (Thousands/ Thousand Units)	Amount		Carrying Value (Note 1)			Gain (Loss) on Disposal			Shares (Thousands/ Thousand Units)	Amount (Note 1)

0	Chunghwa Telecom Co., Ltd.	Beneficiary certificates (mutual fund)
		Mega Diamond Bond Fund	Available-for-sale financial assets	—	—	—	$	—	126,106	$	1,500,000		—	$	—	$	—		$	—		126,106	$	1,500,000
		Polaris De-Li Fund	Available-for-sale financial assets	—	—	97,388		1,500,000	128,513		2,000,000		—		—		—			—		225,901		3,500,000
		Fuh-Hwa Bond Fund	Available-for-sale financial assets	—	—	—		—	108,849		1,500,000		—		—		—			—		108,849		1,500,000
		PCA Well Pool Fund	Available-for-sale financial assets	—	—	117,079		1,500,000	77,102		1,000,000		—		—		—			—		194,181		2,500,000
		MFS Meridian Emerging Markets Debt Fund	Available-for-sale financial assets	—	—	336		208,578	—		—		336		231,575		208,578			22,997		—		—
		Fidelity Fds Intl Bond	Available-for-sale financial assets	—	—	14,644		565,387	—		—		5,931		213,940		228,982			(15,042	)	8,713		336,405
		Sinopia Alternative Funds - Global Bond Market Neutral Fund 600	Available-for-sale financial assets	—	—	—		623,332	—		—		—		684,208		647,917			36,291		—		—
		Fubon Taiwan Selected Fund	Available-for-sale financial assets	—	—	100,000		618,404	—		—		100,000		671,052		618,104 (Note 4	)		52,948		—		—
		HSBC Taiwan Balanced Strategy Fund	Available-for-sale financial assets	—	—	100,000		797,811	—		—		100,000		794,099		769,374 (Note 4	)		24,725		—		—
		Cathay Chung Hwa No. 1 Fund	Available-for-sale financial assets	—	—	100,000		717,909	—		—		100,000		696,522		710,886 (Note 4	)		(14,364	)	—		—
		Fuh Hwa Power Fund III	Available-for-sale financial assets	—	—	100,000		726,771	—		—		100,000		717,136		677,182 (Note 4	)		39,954		—		—

		Bonds
		Taiwan Power Co. 1st Unsecured Bond-B Issue in 2001	Held-to-maturity financial assets	—	—	—		—	—		262,500 (Note 2	)	—		—		—			—		—		262,500 (Note 2	)
		Formosa Petrochemical Corporation 5th Unsecured Corporate Bonds Issue in 2006	Held-to-maturity financial assets	—	—	—		—	—		200,000 (Note 2	)	—		—		—			—		—		200,000 (Note 2	)
		Nan Ya Company 3rd Unsecured Corporate Bonds Issue in 2008	Held-to-maturity financial assets	—	—	—		—	—		200,000 (Note 2	)	—		—		—			—		—		200,000 (Note 2	)
		China Development Financial Holding Corporation 1st Unsecured Corporate Bonds Issue in 2007	Held-to-maturity financial assets	—	—	—		—	—		400,000 (Note 2	)	—		—		—			—		—		400,000 (Note 2	)
		MLPC 1St Unsecured Corporate Bonds Issue in 2008	Held-to-maturity financial assets	—	—	—		—	—		200,000 (Note 2	)	—		—		—			—		—		200,000 (Note 2	)
		Formosa Petrochemical Corporation 2Nd Unsecured Corporate Bonds Issue in 2008.	Held-to-maturity financial assets	—	—	—		—	—		100,000 (Note 2	)	—		—		—			—		—		100,000 (Note 2	)
		TaipeiFubon Bank 1St Financial Debentures-BA Issue in 2005	Held-to-maturity financial assets	—	—	—		—	—		100,000 (Note 2	)	—		—		—			—		—		100,000 (Note 2	)
		China Development Financial Holding Corporation 1st Unsecured Corporate Bonds-A Issue in 2008	Held-to-maturity financial assets	—	—	—		—	—		100,000 (Note 2	)	—		—		—			—		—		100,000 (Note 2	)
		Formosa Petrochemical Corporation 4Th Unsecured Corporate Bonds Issue in 2008.	Held-to-maturity financial assets	—	—	—		—	—		200,000 (Note 2	)	—		—		—			—		—		200,000 (Note 2	)

(Continued)

- 52 -

No.

Company
Name

Marketable
Securities
Type
and
Name

Financial
Statement
Account

Counter-
party

Nature
of
Relationship

Beginning Balance

Acquisition

Disposal

Ending Balance

Shares
(Thousands/
Thousand
Units)

Amount
(Note 1)

Shares
(Thousands/
Thousand
Units)

Amount

Shares
(Thousands/
Thousand
Units)

Amount

Carrying
Value
(Note 1)

Gain
(Loss)
on
Disposal

Shares
(Thousands/
Thousand
Units)

Amount
(Note 1)

Chunghwa Telecom Singapore Pte., Ltd.

Stocks

ST-2 Satellite Ventures Pte., Ltd.

Investment accounted for using equipment

—

Equity-method investee

—

(SG$

108,212

4,736

)

—

(SG$

302,629

13,366

)

—

(SG$

409,790

18,068

(Note 3

)

Note 1:

Showing at their original carrying amounts without adjustments of fair values.

Note 2:

Stated at its nominal amounts.

Note 3:

The ending balance includes $746 thousand and $305 thousand which are investment loss recognized under equity method and cumulative translation adjustments, respectively.

Note 4:

The carrying amount of disposal was decreased by impairment losses.

(Concluded)

- 53 -

TABLE 3

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2009

(Amounts in Thousands of New Taiwan Dollars)


No.	Company Name	Related Party	Nature of Relationship	Transaction Details						Abnormal Transaction				Notes/Accounts Payable or Receivable
No.	Company Name	Related Party	Nature of Relationship	Purchase/Sale	Amount			% to Total	Payment Terms	Units Price		Payment Terms		Ending Balance (Note 1)			% to Total

0	Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Subsidiary	Purchase	$	2,566,458 (Notes 3 and 8	)	4	30-90 days	(Note 2	)	(Note 2	)	$	(520,969	)	(7	)
				Sales		347,971 (Notes 4 and 8	)	—	30 days	(Note 2	)	(Note 2	)		121,635		1
		CHIEF Telecom Inc.	Subsidiary	Purchase		150,251 (Note 8	)	—	30 days	(Note 2	)	(Note 2	)		(50,215	)	(1	)
				Sales		111,274 (Notes 5 and 8	)	—	30 days	(Note 2	)	(Note 2	)		21,119		—
		Chunghwa System Integration Co., Ltd.	Subsidiary	Purchase		169,862 (Notes 7 and 8	)	—	30 days	—		—			(205,944 (Note 6	) )	(3	)
		Taiwan International Standard Electronics Co., Ltd.	Equity-method investee	Purchase		232,188		1	30-90 days	—		—			(364,801	)	(5	)

1	Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		2,566,835 (Notes 3 and 8	)	29	30-90 days	(Note 2	)	(Note 2	)		520,969		42
				Purchase		326,547 (Notes 4 and 8	)	5	30 days	(Note 2	)	(Note 2	)		(121,635	)	(10	)

2	CHIEF Telecom Inc.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		150,251 (Note 8	)	28	30-90 days	(Note 2	)	(Note 2	)		50,215		32
				Purchase		110,818 (Notes 5 and 8	)	21	30 days	(Note 2	)	(Note 2	)		(21,119	)	(18	)

3	Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company	Sales		377,500 (Notes 7 and 8	)	57	30 days	—		—			207,302 (Note 6	)	49

Note 1:

Excluding payment and receipts on behalf of other.

Note 2:

Transaction terms were determined in accordance with mutual agreements.

Note 3:

The difference was because Chunghwa classified the amount as property, plant and equipment and other current assets.

Note 4:

The difference was because Senao International Co., Ltd. classified the amount as operating expenses.

Note 5:

The difference was because CHIEF Telecom Inc. classified the amount as operating expenses.

Note 6:

The difference was because Chunghwa classified the amount as payables to constructors.

Note 7:

The difference was because Chunghwa classified the amount as property, plant and equipment.

Note 8:

The amount was eliminated upon consolidation.

- 54 -

TABLE 4

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

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

JUNE 30, 2009

(Amounts in Thousands of New Taiwan Dollars)


No.	Company Name	Related Party	Nature of Relationship	Ending Balance			Turnover Rate		Overdue			Amounts Received in Subsequent Period		Allowance for Bad Debts
No.	Company Name	Related Party	Nature of Relationship	Ending Balance			Turnover Rate		Amounts		Action Taken	Amounts Received in Subsequent Period		Allowance for Bad Debts

0	Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Subsidiary	$	121,635 (Note 2	)	14.88 (Note 1	)	$	—	—	$	121,635	$	—

1	Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		745,120 (Note 2	)	9.29 (Note 1	)		—	—		22		—

2	Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	Parent company		207,302 (Note 2	)	1.70 (Note 1	)		—	—		207,302		—

Note 1:

Payments and receipts on behalf of other are excluded from the accounts receivable for calculating the turnover rate.

Note 2:

The amount was eliminated upon consolidation.

- 55 -

TABLE 5

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES IN WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE

FOR THE SIX MONTHS ENDED JUNE 30, 2009

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


No.	Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount						Balance as of June 30, 2009					Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1 and 2)			Note
No.	Investor Company	Investee Company	Location	Main Businesses and Products	June 30, 2009			December 31, 2008			Shares (Thousands)	Percentage of Ownership (%)	Carrying Value			Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1 and 2)			Note

0	Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	Sindian City, Taipei	Selling and maintaining mobile phones and its peripheral products	$	1,065,813		$	1,065,813		71,773	29	$	1,192,407 (Note 4	)	$	518,820		$	149,609 (Note 4	)	Subsidiary
		Light Era Development Co., Ltd.	Taipei	Housing, office building development, rent and sale services		3,000,000			3,000,000		300,000	100		2,952,556 (Note 4	)		(23,940	)		(23,878 (Note 4	) )	Subsidiary
		Chunghwa Investment Co., Ltd.	Taipei	Investment		980,000			980,000		98,000	49		841,475			13,460			6,595		Equity-method investee
		Chunghwa Telecom Singapore Pte., Ltd.	Singapore	Telecommunication wholesale, internet transfer services international data and long distance call wholesales to carriers		779,280			779,280		34,869	100		782,281 (Note 4	)		(2,386	)		(2,386 (Note 4	) )	Subsidiary
		Chunghwa System Integration Co., Ltd.	Taipei	Providing communication and information aggregative services		838,506			838,506		60,000	100		712,953 (Note 4	)		4,462			(3,748 (Note 4	) )	Subsidiary
		Taiwan International Standard Electronics Co., Ltd.	Taipei	Manufacturing, selling, designing, and maintaining of telecommunications systems and equipment		164,000			164,000		1,760	40		495,158			(83,262	)		(24,353	)	Equity-method investee
		CHIEF Telecom Inc.	Taipei	Internet communication and internet data center (“IDC”) service		482,165			482,165		37,942	69		433,045 (Note 4	)		5,621			5,203 (Note 4	)	Subsidiary
		InfoExplorer Co., Ltd.	Banqiae City, Taipei	IT solution provider, IT application consultation, system integration and package solution		283,500			—		22,498	49		279,423 (Note 4	)		(1,635	)		(4,077 (Note 4	) )	Subsidiary
		Donghwa Telecom Co., Ltd.	Hong Kong	International telecommunications IP fictitious internet and internet transfer services		201,263			201,263		51,590	100		224,105 (Note 4	)		2,570			2,570 (Note 4	)	Subsidiary
		Chunghwa Yellow Pages Co., Ltd.	Taipei	Yellow pages sales and advertisement services		150,000			150,000		15,000	100		152,699 (Note 4	)		41,427			42,154 (Note 4	)	Subsidiary
		Viettel-CHT Co., Ltd.	Vietnam	IDC services		91,239			91,239		—	33		88,198			(8,279	)		(2,759	)	Equity-method investee
		Skysoft Co., Ltd.	Taipei	Providing of music on-line, software, electronic information, and advertisement services		67,025			67,025		4,438	30		85,775			2,608			783		Equity-method investee
		Chunghwa Telecom Global, Inc.	United States	International data and internet services and long distance call wholesales to carriers		70,429			70,429		6,000	100		69,024 (Note 4	)		19,569			(1,640 (Note 4	) )	Subsidiary
		KingWaytek Technology Co., Ltd.	Taipei	Publishing books, data processing and software services		71,770			71,770		1,703	33		69,003			(8,789	)		(5,714	)	Equity-method investee
		Spring House Entertainment Inc.	Taipei	Network services, producing digital entertainment contents and broadband visual sound terrace development		62,209			62,209		5,996	56		47,986 (Note 4	)		4,602			2,873 (Note 4	)	Subsidiary
		So-net Entertainment Taiwan	Taipei	Online service and sale of computer hardware		60,008			—		3,429	30		44,929			(50,260	)		(15,079	)	Equity-method investee
		Chunghwa Telecom Japan Ptd., Ltd.	Japan	Telecom business, information process and information provide service, development and sale of software and consulting services in telecommunication		17,291			6,140		1	100		11,270 (Note 4	)		(3,034	)		(3,034 (Note 4	) )	Subsidiary
		New Prospect Investments Holdings Ltd. (B.V.I.)	British Virgin Islands	Investment		— (Note 3	)		— (Note 3	)	—	100		— (Notes 3 and 4	)		—			— (Notes 3 and 4	)	Subsidiary
		Prime Asia Investments Group Ltd. (B.V.I.)	British Virgin Islands	Investment		— (Note 3	)		— (Note 3	)	—	100		— (Notes 3 and 4	)		—			— (Notes 3 and 4	)	Subsidiary

1	Senao International Co., Ltd.	Senao Networks, Inc.	Linkou Hsiang, Taipei	Telecommunication facilities manufactures and sales		206,190			206,190		15,152	42		269,365			45,401			19,641		Equity-method investee

(Continued)

- 56 -


No.	Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount						Balance as of June 30, 2009					Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1 and 2)			Note
No.	Investor Company	Investee Company	Location	Main Businesses and Products	June 30, 2009			December 31, 2009			Shares (Thousands)	Percentage of Ownership (%)	Carrying Value			Net Income (Loss) of the Investee			Recognized Gain (Loss) (Notes 1 and 2)			Note

2	CHIEF Telecom Inc.	Unigate Telecom Inc.	Taipei	Telecommunication and internet service	$	2,000		$	2,000		200	100	$	1,856 (Note 4	)	$	(108	)	$	(108 (Note 4	) )	Subsidiary
		CHIET Telecom (Hong Kong) Limited	Hong Kong	Network communication and engine room hiring	(HK$	1,678 400	)	(HK$	1,678 400	)	400	100		1,128 (Note 4	)		(82	)		(82 (Note 4	) )	Subsidiary
		Chief International Corp.	Samoa Islands	Network communication and engine room hiring	(US$	6,068 200	)	(US$	6,068 200	)	200	100		7,145 (Note 4	)		531			531 (Note 4	)	Subsidiary

3	Chunghwa System Integrated Co., Ltd.	Concord Technology Corp.	Brunei	Providing advanced business solutions to telecommunications	(US$	16,179 500	)	(US$	16,179 500	)	500	100	(US$	13,245 404 (Note 4	) )	(US$	112 3	)	(US$	112 3 (Note 4	) )	Subsidiary

4	Concord Technology Corp.	Glory Network System Service (Shanghai) Co., Ltd.	Shanghai	Providing advanced business solutions to telecommunications	(US$	16,179 500	)	(US$	16,179 500	)	500	100	(US$	13,241 404 (Note 4	) )	(US$	112 3	)	(US$	112 3 (Note 4	) )	Subsidiary

13	Chunghwa Telecom Singapore Pte., Ltd.	ST-2 Satellite Ventures Ptd., Ltd.	Singapore	Operation of ST-2 telecommunication satellite	(SG$	410,841 18,102	)	(SG$	108,212 4,735	)	—	38	(SG$	409,790 18,06	)	(SG$	(1,956 (89	) ))	(SG$	(746 (34	) ))	Equity-method investee

Note 1:

The equity in net income (loss) of investees was based on audited financial statements.

Note 2:

The equity in net income (loss) of investees includes amortization between the investment cost and net value and elimination of unrealized transactions.

Note 3:

Note 4:

The amount was eliminated upon consolidation.

(Concluded)

- 57 -

TABLE 6

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA

FOR THE SIX MONTHS ENDED JUNE 30, 2009

(Amounts in Thousands of New Taiwan Dollars, in Thousands of U.S. Dollars)

Investee

Main
Businesses and
Products

Total
Amount of
Paid-in
Capital

Investment
Type

Accumulated
Outflow of
Investment
from Taiwan
as of
January 1,
2009

Investment
Flows

Accumulated
Outflow of
Investment
from Taiwan
as of
June 30,
2009

%
Ownership
of Direct
or Indirect
Investment

Investment
Gain
(Loss)
(Notes 2
and 4)

Carrying
Value as of
June 30,
2009 (Note
4)

Accumulated
Inward
Remittance
of Earnings
as of
June 30,
2009

Outflow

Inflow

Glory Network System Service (Shanghai) Co., Ltd.

Providing advanced business solutions to telecommunications

(US$

16,179

500

)

Note 1

(US$

16,179

500

)

—

(US$

16,179

500

)

100

(US$

112

)

(US$

13,241

404

)

—


Accumulated Investment in Mainland China as of June 30, 2009	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment Stipulated by Investment Commission, MOEA

$16,179 (US$500)	$16,179 (US$500)	$373,143 (Note 3)

Note 1:

Chunghwa System Integration Co., Ltd. indirectly owns these investees through an investment company registered in a third region.

Note 2:

Recognition of investment gains (losses) was calculated based on the investees’ audited financial statements.

Note 3:

The amount was calculated based on the net assets value of Chunghwa System Integration Co., Ltd.

Note 4:

The amount was eliminated upon consolidation.

-58 -

TABLE 7

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(Amount in Thousands of New Taiwan Dollars)


	No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)	Transaction Details
	No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)	Financial Statement Account	Amount (Note 5)		Payment Terms (Note 3)	% to Total Sales or Assets (Note 4)

2009	0	Chunghwa Telecom Co., Ltd.	Senao International Co., Ltd.	a	Accounts receivable	$	121,635	—	—
					Accounts payable		520,969	—	—
					Payment of receipts under custody		224,382	—	—
					Revenues		347,971	—	—
					Other income		4	—	—
					Operating costs and expenses		2,566,458	—	3
					Property, plant and equipment		268	—	—
					Work in process		88	—	—
					Office supplies		109	—	—
			CHIEF Telecom Inc.	a	Accounts receivable		21,388	—	—
					Accounts payable		50,215	—	—
					Revenues		111,274	—	—
					Operating costs and expenses		150,251	—	—
			Chunghwa System Integration Co., Ltd.	a	Accounts receivable		14,800	—	—
					Accounts payable		205,965	—	—
					Payables to constructors		1,358	—	—
					Revenues		7,925	—	—
					Other income		2,103	—	—
					Operating costs and expenses		169,862	—	—
					Property, plant and equipment		187,788	—	—
					Intangible assets		10,951	—	—
					Work in process		2,441	—	—
					Spare parts		6,400	—	—
					Other deferred expenses		58	—	—
			Chunghwa Telecom Global, Inc.	a	Accounts receivable		13,987	—	—
					Accounts payable		25,173	—	—
					Payment of receipts under custody		3,618	—	—
					Revenues		25,128	—	—
					Operating costs and expenses		24,183	—	—
					Property, plant and equipment		21,770	—	—
			Spring House Entertainment Inc.	a	Accounts receivable		7,613	—	—
					Accounts payable		12,212	—	—
					Revenues		1,182	—	—
					Operating costs and expenses		32,456	—	—
			Unigate Telecom Inc.	a	Revenues		1,276	—	—
			Chunghwa International Yellow Pages Co., Ltd.	a	Accounts receivable		30,306	—	—
					Accounts payable		4,786	—	—
					Payment of receipts under custody		4,680	—	—

(Continued)

- 59 -


				Transaction Details
No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)	Financial Statement Account	Amount (Note 5)		Payment Terms (Note 3)	% to Total Sales or Assets (Note 4)

				Revenues	$	8,167	—	—
				Operating costs and expenses		25,844	—	—
		Donghwa Telecom Co., Ltd.	a	Accounts receivable		2,385	—	—
				Accounts payable		36,285	—	—
				Revenues		3,306	—	—
				Operating costs and expenses		6,276	—	—
		Light Era Development Co., Ltd.	a	Accounts payable		494	—	—
				Revenues		2,215	—	—
		InfoExplorer Co., Ltd.	a	Accounts payable		4,405	—	—
				Revenues		474	—	—
				Operating costs and expenses		100	—	—
		Chunghwa Telecom Japan Co., Ltd.	a	Accounts receivable		974	—	—
				Accounts payable		769
				Payment of receipts under custody		1,843	—	—
				Operating costs and expenses		771	—	—
		Chunghwa Telecom Singapore Pte., Ltd.	a	Accounts payable		1,068	—	—
				Payment of receipts under custody		230	—	—
				Operating costs and expenses		1,083	—	—

1	Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		745,115	—	—
				Accounts payable		72,766	—	—
				Receivable of receipts under custody		5	—	—
				Prepaid expense		231	—	—
				Payment of receipts under custody		48,869	—	—
				Revenues		2,566,835	—	3
				Other income		88	—	—
				Operating costs and expenses		347,971	—	—
				Other expenses		4	—	—
		Chunghwa International Yellow Pages Co., Ltd.	c	Operating costs and expenses		1,002	—	—

2	CHIEF Telecom Inc.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		50,215	—	—
				Accounts payable		21,119	—	—
				Advances from customers		269	—	—
				Revenues		150,251	—	—
				Operating costs and expenses		111,274	—	—
		Unigate Telecom Inc.	c	Accounts payable		1,479	—	—
				Revenues		17	—	—
		Chunghwa Telecom Global, Inc.	c	Operating costs and expenses		10	—	—
		Donghwa Telecom Co., Ltd.	c	Accounts receivable		25	—	—

3	Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		207,302	—	—
				Accounts payable		14,800	—	—
				Prepaid expense		21	—	—
				Revenues		377,500	—	—
				Operating costs and expenses		10,028	—	—
		Spring House Entertainment Inc.	c	Accounts receivable		100	—	—
				Revenues		501	—	—

(Continued)

- 60 -


No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)	Transaction Details
No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)	Financial Statement Account	Amount (Note 5)		Payment Terms (Note 3)	% to Total Sales or Assets (Note 4)

		Chunghwa International Yellow Pages Co., Ltd.	c	Accounts receivable	$	17	—	—
				Revenues		1,484	—	—
		Light Era Development Co., Ltd.	c	Revenues		5	—	—

5	Chunghwa Telecom Global, Inc.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		28,759	—	—
				Accounts payable		12,790	—	—
				Prepaid expense		32	—	—
				Advances from customers		1,197	—	—
				Revenues		45,953	—	—
				Operating costs and expenses		25,128	—	—
		CHIEF Telecom Inc.	c	Revenues		10	—	—

6	Spring House Entertainment Inc.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		12,212	—	—
				Payment of receipts under custody		7,613	—	—
				Revenues		32,456	—	—
				Operating costs and expenses		1,182	—	—
		Chunghwa System Integration Co., Ltd.	c	Accounts payable		100	—	—
				Property, plant and equipment		477	—	—
				Operating costs and expenses		24	—	—

7	Unigate Telecom Inc.	Chunghwa Telecom Co., Ltd.	b	Operating costs and expenses		1,276	—	—
		CHIEF Telecom Inc.	c	Accounts receivable		1,479	—	—
				Operating costs and expenses		17	—	—

8	Chunghwa International Yellow Pages Co., Ltd.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		4,211	—	—
				Receivable of receipts under custody		4,680	—	—
				Prepaid expenses		575	—	—
				Accounts payable		24,245	—	—
				Advances from customers		6,061	—	—
				Revenues		25,844	—	—
				Operating costs and expenses		8,167	—	—
		Senao International Co., Ltd.	c	Revenues		1,002	—	—
		Chunghwa System Integration Co., Ltd.	c	Accounts payable		17	—	—
				Operating costs and expenses		292	—	—
				Property, plant and equipment		1,192	—	—

9	Donghwa Telecom Co., Ltd.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		36,285	—	—
				Accounts payable		2,385	—	—
				Revenues		6,276	—	—
				Operating costs and expenses		3,306	—	—
		CHIEF Telecom Inc.	c	Accounts payable		25	—	—

10	Light Era Development Co., Ltd.	Chunghwa Telecom Co., Ltd.	b	Prepaid expense		494	—	—
				Operating costs and expenses		2,215	—	—
		Chunghwa System Integration Co., Ltd.	c	Operating costs and expenses		5	—	—

(Continued)

- 61 -


	No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)	Transaction Details
	No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)	Financial Statement Account	Amount (Note 5)		Payment Terms (Note 3)	% to Total Sales or Assets (Note 4)

	11	InfoExplorer Co., Ltd.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable	$	4,405	—	—
					Revenues		100	—	—
					Operating cost and expenses		474	—	—

	12	Chunghwa Telecom Japan Co., Ltd.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		2,612	—	—
					Accounts payable		974	—	—
					Revenue		771	—	—

	13	Chunghwa Telecom Singapore Pte., Ltd.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		1,068	—	—
					Receivable of receipts under custody		230	—	—
					Revenue		1,083	—	—

2008	0	Chunghwa Telecom Co., Ltd.	CHIEF Telecom Inc.	a	Accounts receivable		19,524	—	—
					Accounts payable		17,024	—	—
					Payment of receipts under custody		602	—	—
					Revenues		99,869	—	—
					Operating cost and expenses		79,872	—	—
			Unigate Telecom Inc.	a	Accounts receivable		58	—	—
					Revenues		327	—	—
			Chunghwa International Yellow Pages Co., Ltd.	a	Accounts receivable		12,724	—	—
					Accounts payable		16,216	—	—
					Payment of receipts under custody		2,595	—	—
					Revenues		13,400	—	—
					Operating cost and expenses		101,364	—	—
			Senao International Co., Ltd.	a	Accounts receivable		273,901	—	—
					Accounts payable		727,653	—	—
					Payment of receipts under custody		323,400	—	—
					Revenues		1,093,469	—	1
					Operating cost and expenses		3,350,546	—	3
					Office supplies		179	—	—
					Work in process		238	—	—
					Property, plant and equipment		257	—	—
			Chunghwa System Integration Co., Ltd.	a	Accounts payable		197,902	—	—
					Payables to constructors		45,406	—	—
					Revenues		2,494	—	—
					Other income		418	—	—
					Operating cost and expenses		165,465	—	—
					Inventory		46,796	—	—
					Property, plant and equipment		324,994	—	—
					Intangible assets		3,258	—	—
			Chunghwa Telecom Global, Inc.	a	Accounts receivable		67,594	—	—
					Accounts payable		18,128	—	—
					Payment of receipts under custody		8,683	—	—
					Revenues		90,048	—	—
					Other income		77	—	—
					Operating cost and expenses		28,609	—	—
					Property, plant and equipment		37,022	—	—


		(Continued)

- 62 -


No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)	Transaction Details
No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)	Financial Statement Account	Amount (Note 5)		Payment Terms (Note 3)	% to Total Sales or Assets (Note 4)

		Donghwa Telecom Co., Ltd.	a	Operating cost and expenses	$	38,063	—	—
		Spring House Entertainment Inc.	a	Accounts receivable		1,813	—	—
				Revenues		896	—	—
				Operating cost and expenses		15,336	—	—
		Light Era Development Co., Ltd.	a	Accounts receivable		91,134	—	—
				Unearned revenue		80,677	—	—
				Payment of receipts under custody		74,962	—	—
				Revenues		3,141	—	—

1	Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		1,051,053	—	—
				Accounts payable		273,901	—	—
				Revenues		3,351,191	—	3
				Other income		29	—	—
				Operating cost and expenses		1,093,469	—	1
		Chunghwa International Yellow Pages Co., Ltd.	c	Accounts payable		661	—	—
				Other income		1	—	—
				Operating cost and expenses		1,780	—	—

2	CHIEF Telecom Inc.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		17,626	—	—
				Accounts payable		19,524	—	—
				Revenues		79,872	—	—
				Operating cost and expenses		99,869	—	—
		Unigate Telecom Inc.	c	Estimated accounts payable		145	—	—
				Other income		17	—	—
				Operating cost		2,137	—	—

3	Chunghwa System Integration Co., Ltd.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		243,308	—	—
				Payment of receipts under custody		2,312	—	—
				Revenues		538,131	—	1
				Other income		70	—	—
				Operating cost and expenses		2,912	—	—

5	Chunghwa Telecom Global, Inc.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		26,811	—	—
				Accounts payable		67,594	—	—
				Revenues		65,631	—	—
				Operating cost and expenses		90,125	—	—

6	Spring House Entertainment Inc.	Chunghwa Telecom Co., Ltd.	b	Accounts payable		1,813	—	—
				Revenues		15,336	—	—
				Operating cost and expenses		896	—	—

7	Unigate Telecom Inc.	Chunghwa Telecom Co., Ltd.	b	Accounts payable		58	—	—
				Operating cost and expenses		327	—	—
		CHIEF Telecom Inc.	c	Estimated accounts receivable		145	—	—
				Revenues		2,137	—	—
				Operating expenses		17	—	—


		(Continued)

- 63 -


No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)	Transaction Details
No. (Note 1)	Company Name	Related Party	Nature of Relationship (Note 2)	Financial Statement Account	Amount (Note 5)		Payment Terms (Note 3)	% to Total Sales or Assets (Note 4)

8	Chunghwa International Yellow Pages Co., Ltd.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable	$	18,811	—	—
				Accounts payable		12,724	—	—
				Revenues		101,364	—	—
				Operating cost and expenses		13,400	—	—
		Senao International Co., Ltd.	c	Accounts receivable		661	—	—
				Revenues		1,780	—	—
				Other expenses		1	—	—

9	Donghwa Telecom Co., Ltd.	Chunghwa Telecom Co., Ltd.	b	Revenues		38,063	—	—

10	Light Era Development Co., Ltd.	Chunghwa Telecom Co., Ltd.	b	Accounts receivable		155,639	—	—
				Accounts payable		91,134	—	—
				Operating cost and expenses		3,141	—	—


Note 1:	Significant transactions between the Company and its subsidiaries or among subsidiaries are numbered as follows:
	a.	“0” for the Company.
	b.	Subsidiaries are numbered from “1”.
Note 2:	Related party transactions are divided into three categories as follows:
	a.	The Company to subsidiaries.
	b.	Subsidiaries to the Company.
	c.	Subsidiaries to subsidiaries.
Note 3:	Except transaction prices of SENAO, CHIEF and CIYP were determined in accordance with mutual agreements, the foregoing transactions with related parties were conducted under normal commercial terms.
Note 4:	For assets and liabilities, amount is shown as a percentage to consolidated total assets as of June 30, 2009, while revenues, costs and expenses are shown as a percentage to consolidated total operating revenues for the six months ended June 30, 2009.
Note 5:	The amount was eliminated upon consolidation.


		(Concluded)

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Exhibit 4


		Chunghwa Telecom Co., Ltd. and Subsidiaries

		GAAP Reconciliations of Consolidated Financial Statements for the Six Months Ended June 30, 2008 and 2009

1.	SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING POLICIES FOLLOWED BY THE COMPANY AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES OF AMERICA (UNAUDITED) (AMOUNTS IN MILLIONS OF NEW TAIWAN DOLLARS, UNLESS STATED OTHERWISE)

The following is a reconciliation of consolidated net income and stockholders’ equity under ROC GAAP as reported in the audited consolidated financial statements to unaudited consolidated net income and stockholders’ equity determined under US GAAP. For the descriptions of principal differences between ROC GAAP and US GAAP, please refer to Form 20-F filed with the Securities and Exchange Commission of the United States (the “SEC”) on April 22, 2009 (File No. 001-31731). Certain additional adjustments impacting the reconciliation but not included in the SEC Form 20-F referenced above have been included in the notes to the reconciliation below.

Net Income Reconciliation


	Six Months Ended June 30
	2008 As Adjusted (Note 2, Below)			2009
	NT$			NT$

Consolidated net income based on ROC GAAP	$	23,622		$	22,633
Adjustment:
a. Property, plant and equipment
1. Adjustments of gains and losses on disposal of property, plant and equipment		8			—
2. Adjustments for depreciation expenses		166			95
b. 10% tax on unappropriated earnings		2,248			2,098
c. Employee bonuses and remuneration to directors and supervisors		(3,993	)		—
d. Revenues recognized from deferred income of prepaid phone cards		377			381
e. Revenues recognized from deferred one-time connection fees		959			796
f. Share-based compensation (Note 1)		(12	)		(9	)
g. Defined benefit pension plan		—			—
i. Income tax effect of US GAAP adjustments		(479	)		(627	)
Noncontrolling interests of acquired subsidiary (Note 3)		—			(3	)
Other minor GAAP differences not listed above		(16	)		(19	)

Net adjustment		(742	)		2,712


Consolidated net income based on US GAAP	$	22,880		$	25,345


Attributable to
Stockholders of the parent	$	22,677		$	24,947
Noncontrolling interests		203			398

	$	22,880		$	25,345


Basic earnings per common share	$	2.13		$	2.34

Diluted earnings per common share	$	2.13		$	2.33

(Continued)

- 1 -


	Six Months Ended June 30
	2008 As Adjusted (Note 2, Below)		2009
	NT$		NT$

Weighted-average number of common shares outstanding (in 1,000 shares)	$	10,623,035	$	10,666,489


Net income per pro forma equivalent ADSs
Basic	$	21.3	$	23.4

Diluted	$	21.3	$	23.3


Weighted-average number of pro forma equivalent ADSs (in 1,000 shares)	$	1,062,304	$	1,066,649

(Concluded)

Stockholders’ Equity Reconciliation


		June 30
		2008 As Adjusted (Note 2, Below)			2009
		NT$			NT$

Total stockholders’ equity based on ROC GAAP		$	377,683		$	365,648
Adjustment:
a.	Property, plant and equipment
	1. Capital surplus reduction		(60,168	)		(60,168	)
	2. Adjustment on depreciation expenses, and disposal gains and losses		3,819			4,054
	3. Adjustments of revaluation of land		(5,818	)		(5,813	)
b.	10% tax on unappropriated earnings		(2,090	)		(2,049	)
c.	Employee bonuses and remuneration to directors and supervisors		—			—
d.	Deferred income of prepaid phone cards
	1. Capital surplus reduction		(2,798	)		(2,798	)
	2. Adjustment on deferred income recognition		1,504			2,306
e.	Revenues recognized from deferred one-time connection fees
	1. Capital surplus reduction		(18,487	)		(18,487	)
	2. Adjustment on deferred income recognition		12,197			13,952
f.	Share-based compensation
	1. Adjustment on capital surplus		15,673			15,692
	2. Adjustment on retained earnings		(15,673	)		(15,692	)
g.	1. Accrual for accumulative other comprehensive income under US SFAS No. 158		31			22
	2. Accrual for pension cost		(30	)		(29	)
h.	Adjustment for pension plan upon privatization
	1. Adjustment on capital surplus		1,782			1,782
	2. Adjustment on retained earnings		(9,665	)		(9,665	)

(Continued)

- 2 -


	June 30
	2008 As Adjusted (Note 2, Below)			2009
	NT$			NT$

i. Income tax effect of US GAAP adjustments	$	6,484		$	5,590
Noncontrolling interests of acquired subsidiary (Note 3)		—			59
Other GAAP differences not listed above		211			175

Net adjustment		(73,028	)		(71,069	)


Total stockholders’ equity based on US GAAP	$	304,655		$	294,579


Attributable to
Stockholders of the parent	$	302,013		$	291,489
Noncontrolling interests		2,642			3,090


	$	304,655		$	294,579

(Concluded)

Cash Flows Differences

The Company applies R.O.C. SFAS No. 17, “Statement of Cash Flows”. Its objectives and principles are similar to those set out in U.S. SFAS No. 95, “Statement of Cash Flows”. The principal differences between the two standards relate to classification. Cash flows from investing activities for changes in other assets, and cash flows from financing activities for changes in customer deposits, other liabilities and cash bonuses paid to employees, directors and supervisors are reclassified to operating activities under U.S. SFAS No. 95.

Note 1:

In August 2007, the ARDF issued ROC SFAS No. 39, “Accounting for Share-based Payment”, which require companies to record share-based payment transactions granted on or after January 1, 2008 using fair value method. There is no impact of the adoption this statement since the Company did not grant options on or after January 1, 2008.

Note 2:

Prior to the adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (SFAS No. 160), the noncontrolling interests in the income of subsidiaries is deducted in arriving at net income. Upon the adoption of SFAS No. 160 beginning from January 1, 2009, the noncontrolling interests forms part of net income. In addition, prior to the adoption of SFAS No. 160, the noncontrolling interests in subsidiaries is classified as mezzanine equity. Upon the adoption SFAS No. 160 beginning from January 1, 2009, the non-controlling interest in subsidiaries is classified as a separate component of shareholders’ equity and the presentation and disclosure requirements of SFAS No. 160 are applied retrospectively for all periods presented. Therefore, from January 1, 2009, there are no differences in presentation for non-controlling interest (or minority interest as referred to under ROC GAAP) between ROC GAAP and US GAAP.

- 3 -

Note 3:

The adjustment to Net Income for the six months ended June 30, 2009 and to Stockholders’ Equity as of June 30, 2009 represents a difference between ROC GAAP and US GAAP for the accounting for business combinations. Under ROC GAAP, the noncontrolling interest in the acquiree is measured at historical cost whereas under US GAAP, the noncontrolling interest in the acquiree is measured at fair value at acquisition date upon the adoption of SFAS No. 141R, “Business Combination” beginning from January 1, 2009. Such adjustment for the six-month period ended June 30, 2009 was caused by the Company’s acquisition of IFE in January 2009. The adjustment to ROC GAAP net income represents additional amortization expense recognized under US GAAP due to the difference between the measurement of noncontrolling interests at historical cost and fair value. The adjustment to stockholders’ equity represents the difference for the measurement of noncontrolling interests at historical cost and fair value after the aforementioned net income adjustment.

Note 4:

There are significant differences in the classification of items on the statements of income under ROC GAAP and US GAAP. These include:

(1) Incentives paid to third party dealers for inducing business:

• Under ROC GAAP: Such account is included in operating expenses.

• Under US GAAP: Such account is included in cost of revenues.

(2) Gains (losses) on disposal of property, plant and equipment and other assets:

• Under ROC GAAP: Such account is included in non-operating income (expenses).

• Under US GAAP: Such account is included in cost of revenues.

2. RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In December 2008, the FASB issued FSP SFAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets,” which provides additional guidance on employers’ disclosures about the plan assets of defined benefit pension or other postretirement plans. FAS 132(R)-1 clarifies the disclosures about fair value measurement of pension or other postretirement plant assets are not within the scope of the disclosures requirements of SFAS 157. The disclosures required by FSP FAS 132(R)-1 include a description of how investment allocation decisions are made, major categories of plan assets, valuation techniques used to measure the fair value of plan assets, the impact of measurements using significant unobservable inputs and concentrations of risk within plan assets. The disclosures about plan assets required by this FSP shall be provided for fiscal years ending after December 15, 2009. For the Company, FSP FAS 132(R)-1 will be effective for its 2009 fiscal year and will result in additional disclosures related to the assets of defined benefit pension plans in notes to its consolidated financial statements.

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets” (“SFAS No. 166”). SFAS No. 166 is a revision to SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and will require more information about transfers of financial assets, including securitization transactions, and any continuing exposure to the risks related to such transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures. SFAS No. 166 is effective for fiscal years beginning after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The Company believes the adoption of SFAS No. 166 will not have a material impact on its financial statements.

- 4 -

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS No. 167”). SFAS No. 167 is a revision to FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities (FIN 46R), and changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar) rights should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. SFAS No 167 revises the approach to determining the primary beneficiary of a variable interest entity (VIE) to be more qualitative in nature and requires companies to more frequently reassess whether they must consolidate a VIE. SFAS No. 167 is effective for fiscal years beginning after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The adoption of SFAS No. 167 is not expected to have a significant effect on the Company’s consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 168”) which replaces SFAS No. 162. SFAS No. 168 launches the FASB Accounting Standard Codification (the “Codification”) as the single source of authoritative U.S. generally accepted accounting principles. The Codification simplifies the classification of accounting standards into one online database under a common referencing system, organized into eight areas, ranging from industry specific to general financial statement matters. The standard is effective for interim and annual periods ending after September 15, 2009. The Company believes the adoption of SFAS No. 168 will not have a material impact on its financial statements.

- 5 -