04/19/2021 | Press release | Distributed by Public on 04/19/2021 04:11

Annual Report (SEC Filing - 20-F)

cht-20f_20201231.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

or

For the fiscal year ended December 31, 2020

or

or

Date of event requiring this shell company report
For the transition period from to
Commission file number 001-31731

Chunghwa Telecom Co., Ltd.

(Exact name of Registrant as specified in its charter)
Chunghwa Telecom Co., Ltd.
(Translation of Registrant's name into English)
Taiwan, Republic of China
(Jurisdiction of incorporation or organization)
21-3 Hsinyi Road, Section 1, Taipei, Taiwan, Republic of China
(Address of principal executive offices)
Fufu Shen
21-3 Hsinyi Road, Section 1, Taipei,
Taiwan, Republic of China
Tel: +886 2 2344-5488
E-mail: [email protected]
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

7,757,446,545 Common Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of 'large accelerated filer,' 'accelerated filer,' and 'emerging growth company' in Rule 12b-2 of the Exchange Act.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term 'new or revised financial accounting standard' refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.) 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If 'Other' has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No

CHUNGHWA TELECOM CO., LTD.

FORM 20-F ANNUAL REPORT

FISCAL YEAR ENDED DECEMBER 31, 2020

TABLE OF CONTENTS

i

SUPPLEMENTAL INFORMATION

All references to 'we,' 'us,' 'our,' 'Chunghwa Telecom' and 'our company' in this annual report are to Chunghwa Telecom Co., Ltd. and our consolidated subsidiaries, unless the context otherwise requires. All references to 'shares' and 'common shares' are to our common shares, par value NT$10 per share, and to 'ADSs' are to our American depositary shares, each of which represents ten of our common shares. The ADSs are issued under the deposit agreement, as amended, supplemented or modified from time to time, originally dated as of July 17, 2003, among Chunghwa Telecom Co., Ltd. and the Bank of New York, and amended and restated on November 14, 2007, among Chunghwa Telecom Co., Ltd. and JP Morgan Chase Bank, as depository, and the holders and beneficial owners of American Depositary Receipts issued thereunder. All references to 'Taiwan' are to the island of Taiwan and other areas under the effective control of the Republic of China. All references to 'the government' or 'the ROC government' are to the government of the Republic of China. All references to 'the Ministry of Transportation and Communications' or 'the MOTC' are to the Ministry of Transportation and Communications of the Republic of China. All references to 'the National Communications Commission' or 'the NCC' are to the National Communications Commission of the Republic of China. All references to the 'Securities and Futures Bureau' are to the Securities and Futures Bureau of the Republic of China or its predecessors, as applicable. 'ROC GAAP' means the generally accepted accounting principles of the Republic of China, 'U.S. GAAP' means the generally accepted accounting principles of the United States, 'IFRSs' means International Financial Reporting Standards as issued by the International Accounting Standards Board, and 'Taiwan IFRSs' means the International Financial Reporting Standards as issued by the International Accounting Standards Board and endorsed by the Financial Supervisory Commission, or the FSC, which are required to be adopted by applicable companies in the ROC pursuant to the 'Framework for Adoption of International Financial Reporting Standards by Companies in the ROC' promulgated by the FSC on May 14, 2009. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding. Unless otherwise indicated, or the context otherwise requires, references in this annual report to financial and operational data for a particular year refer to the fiscal year of our company ending December 31 of that year.

When we refer to our 'privatization' or our being 'privatized' in this annual report, we mean our status as a non-state-owned entity after the government reduced its ownership of our outstanding common shares, including our common shares owned by entities majority-owned by the government, to less than 50%. We were privatized on August 12, 2005.

We publish our consolidated financial statements in New Taiwan dollars, the lawful currency of the Republic of China. In this annual report, 'NT$' and 'NT dollars' mean New Taiwan dollars, '$,' 'US$' and 'U.S. dollars' mean United States dollars.

1

FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT MAY NOT BE REALIZED

This annual report contains forward-looking statements, including statements regarding:

These forward-looking statements are generally indicated by the use of forward-looking terminology such as 'believe,' 'expect,' 'anticipate,' 'estimate,' 'plan,' 'aim,' 'seek,' 'project,' 'may,' 'will' or other similar words that express an indication of actions or results of actions that may or are expected to occur in the future. These statements reflect our current views with respect to future events and are subject to risks, uncertainties and assumptions, many of which are beyond our control. The forward-looking statements are contained principally in the sections entitled 'Item 3. Key Information-D. Risk Factors,' 'Item 4. Information on the Company' and 'Item 5. Operating and Financial Review and Prospects.' These statements are made under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. You should not place undue reliance on these statements, which apply only as of the date of this annual report. These forward-looking statements are based on our own information and on information from other sources we believe to be reliable. Actual results may differ materially from those expressed or implied by these forward-looking statements. Factors that could cause differences include, but are not limited to, those discussed under 'Item 3. Key Information-D. Risk Factors.' In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this annual report might not occur and our actual results could differ materially from those anticipated in these forward-looking statements. The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report completely and with the understanding that our actual future results may be materially different from what we expect.

2

PART I

Not applicable.

Not applicable.

A. Selected Financial Data

The selected consolidated statements of comprehensive income data and consolidated cash flows data for the years ended December 31, 2018, 2019 and 2020, and the selected consolidated balance sheets data as of December 31, 2019 and 2020 set forth below are derived from our audited consolidated financial statements included elsewhere in this annual report and should be read in conjunction with, and are qualified in their entirety by reference to, our consolidated financial statements and the related notes. The selected consolidated statements of comprehensive income data and consolidated cash flows data for the years ended December 31, 2016 and 2017, and the selected consolidated balance sheet data as of December 31, 2016, 2017 and 2018 set forth below are derived from our audited consolidated financial statements, which are not included this annual report. The consolidated financial statements have been prepared and presented in accordance with IFRSs.

3

4

Currency Translations and Exchange Rates

For the convenience of readers, NT dollar amounts used in this annual report for, and as of, the year ended December 31, 2020 have been translated into U.S. dollar amounts using US$1.00=NT$28.08, set forth in the statistical release of the Federal Reserve Board on December 31, 2020. The U.S. dollar translation appears in parentheses next to the relevant NT dollar amount. We make no representation that any New Taiwan dollar amounts or U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or NT dollars, as the case may be, at any particular rate or at all. On April 7, 2021, the exchange rate was NT$28.42 to US$1.00.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Our business and operations are subject to various risks, many of which are beyond our control. If any of the risks described below actually occurs, our business, financial condition or results of operations could be seriously harmed.

Risks Relating to Our Company and the Taiwan Telecommunications Industry

Extensive regulation of our industry may limit our flexibility to respond to market conditions and competition, and our business and revenue may suffer.

As a telecommunications service provider in Taiwan, we are subject to extensive regulation. Any changes in the regulatory environment applicable to us may adversely affect our business, financial condition and results of operations. Recently, there have been some regulatory changes which may have an impact on us, including the promulgation of the ROC Telecommunications Management Act, or the TMA, and the issuance of the draft of the 'Regulations Governing Internet Audiovisual Services' and the 'List of the Prohibited Commercial Engagement Practices in Taiwan Area.' The TMA was passed by the Legislative Yuan on May 31, 2019 and promulgated by the President on June 26, 2019, with part of the provisions taking effect on July 1, 2020, and the remaining provisions regarding frequency allocation on November 1, 2020. According to the TMA, within three years of its effective date, the existing telecommunications enterprises shall register themselves with the NCC and become subject to the TMA. We have filed an application for the registration on July 31, 2020, and received the approval from the NCC on September 30, 2020. Since then, we have become subject to the TMA. See 'Item 4. Information on the Company-B. Business Overview-Regulation' for more information on the regulatory environment applicable to us. Furthermore, pursuant to the TMA, as we have been designated by the NCC as a dominant Type I service provider of fixed communications under the Telecommunications Act before the TMA becomes effective, we shall continue to be subject to the NCC's supervision under the Telecommunications Act and the relevant implementation measures until the NCC designates our significant position in the specific market and adopts special implementation measures based on the TMA.

5

In particular, future decreases in tariff rates could immediately and substantially decrease our revenues. As a dominant Type I service provider under the Telecommunications Act, we are constrained in our ability to raise prices. For example, the NCC adopted several rounds of tariff reduction plans, resulting in a number of price reductions in the tariff structures relating to our domestic fixed communications services. On March 8, 2017, the NCC announced a plan for tariff reductions effective from April 1, 2017 to March 31, 2020, andon March 5, 2020, the NCC announced a new round for tariff reductions effective from April 1, 2020 to March 31, 2024.Both of these tariff reduction schemes apply to us, being one of the dominant Type 1 service providers in local network business and long distance network business.See 'Item 4. Information on the Company-B. Business Overview-Regulation' and 'Item 5. Operating and Financial Review and Prospects-Overview-Tariff adjustments.'We cannot assure you that we will not be required to further reduce our tariffs again in the future. Any mandatory tariff reductions could have a material adverse effect on our revenues.

In addition, the NCC amended Articles 14 and 17 of the Regulations Governing Network Interconnection among Telecommunications Enterprises on November 11, 2017, and announced the 'Upper Limit on Access Charge for the Third Generation Mobile Telecommunications Operators and Mobile Broadband Operators.' Pursuant to the amendment and the announcement, starting from November 1, 2017, the tariff in the mobile interconnection fees will decrease over a period of four years, except the telecommunication fees (including interconnection fees) for incoming international long distance, or ILD, calls remain subject to mutual agreement between operators. On December 14, 2020, the NCC issued a notice for the promulgation of the 'Upper Limit on Access Charge for Mobile Broadband Operators,' which applies to all mobile broadband operators and is effective from January 1, 2021 to June 30, 2023. During the aforementioned effective term, the upper limit of mobile interconnection fees will decrease year by year from NT$ 0.525 per minute in 2021 to NT$ 0.482 per minute in 2022, and then to NT$ 0.443 per minute in 2023 until June 30, 2023. The decrease of the upper limit on mobile access charge during 2021 to 2023 will reduce the revenue as well as the expenses of the Company, and may cause impact on the service price within the mobile market.

Furthermore, the NCC approved our new fixed communications network interconnection fees on September 26, 2018. The interconnection fees for local telephone and domestic long distance telephone remain the same, while the interconnection fees from the mobile network to local telephone decrease. The tariff is effective from January 1, 2019 to December 31, 2022. See 'Item 5. Operating and Financial Review and Prospects-Overview-Tariff adjustments.' The regulatory framework within which we operate may limit our flexibility to respond to market conditions, competition or changes.

On July 22, 2020, the draft of the 'Regulations Governing Internet Audiovisual Services' was published by the NCC. The main provisions of the draft regulations include: the scope of the applicable objects and required registration, disclosure of material information, prohibition against improper content, self-disciplinary requirements, and the counseling and incentivized measures. To prevent the Internet audiovisual service providers of Mainland China from providing services in Taiwan without obtaining approval pursuant to the 'Act Governing Relations between the People of the Taiwan Area and the Mainland Area,' the draft provides that telecommunications enterprises or relevant Internet service providers may not provide any equipment or service to the aforementioned Internet audiovisual service providers or their agents, and that telecommunications enterprises or relevant Internet service providers shall take necessary actions in accordance with the notice of the competent authority. As a telecommunications enterprise, if the draft takes effect in its current form, we may need to take necessary actions in cooperation with the competent authority.

On September 3, 2020, the 'List of the Prohibited Commercial Engagement Practices in Taiwan Area' was published by the Ministry of Economic Affairs, which prohibits any natural or legal persons, organizations or other institutions in the Taiwan area from acting as agents or dealers with respect to Internet audiovisual services (OTT-TV) for any natural or legal persons, organizations or other institutions in the Mainland area or providing them with any intermediary input services or relevant commercial services. As a Taiwan company, we are also subject to these restrictions.

If we fail to comply with the regulations of the ROC Fair Trade Act, we may be investigated and fined.

As a provider of telecommunication products and services, our business operations are subject to the regulations of the ROC Fair Trade Act, or the FTA, which is administered and enforced by the ROC Fair Trade Commission, or the FTC. The FTA requires, among other things, that the marketing and promotional materials of a business to be true and not misleading. The FTA also prohibits a business from participating or engaging in a cartel or other anti-competitive conduct. The FTC has the authority under the FTA to investigate and, where appropriate,

6

impose fines and penalties on a business that violates any regulations promulgated by the FTA. The consequences of any such violations could have a material adverse effect on our business and results of operations. See 'Item 4. Information on the Company-B. Business Overview-Regulation' for a discussion of the FTA applicable to us. We have been investigated and penalized by the FTC in the past and may continue to be investigated or penalized by the FTC in the future if we fail to comply with the relevant regulations.As the FTA provides the FTC broad discretion to interpret anti-competition actions and enforce the relevant clauses under the FTA, we are unable to predict whether the FTC would initiate investigations on any of our daily business activities or find us liable for violating the FTA in the future. The investigations of and penalties imposed by the FTC could interrupt our provision of products or services and have a negative impact on our reputation, business operations and results of operations.

If we do not or are unable to obtain and maintain the licenses to operate our business, our business prospects and future results of operations would be adversely affected.

We operate our businesses with approvals and licenses granted by the government. If these approvals or licenses are revoked or suspended or are not renewed, or if we are unable to obtain any additional licenses that we may need to operate or expand our business in the manner we desire, then our financial condition and results of operations, as well as our prospects, will suffer. For example, in November 2017, we obtained 4G mobile broadband services spectrum in 1800MHz and 2100MHz frequency bands, which are valid until the end of 2030 and 2033, respectively. Furthermore, the NCC held the auction for the fifth generation license, or 5G, mobile networks in December 2019, and we obtained spectrum in 3.5GHz and 28GHz frequency bands in February 2020. If we are unable to successfully acquire and maintain the rights to use the licenses or frequency spectrums that we need for our future business operations, our business prospects and future results of operations may be materially and adversely affected.

Increasing market competition may adversely affect our growth and profitability by causing us to lose customers, charge lower tariffs or spend more on marketing.

As of the date of this annual report, there are five mobile network operators in Taiwan providing mobile broadband services.Each mobile network operator, including us, has been offering aggressive promotional programs to attract consumers, such as unlimited low-priced data plans, when many mobile network operators around the world have eliminated unlimited data plans. We cannot assure you that we will be able to raise our revenues from mobile broadband services after our 5G services launch on June 30, 2020 in light of the intense market competition, which could have a material adverse effect on our business prospects and our future results of operations.

Cable operators mainly promote high-speed internet access and TV converging solutions, and the bundled price is about 10% to 20% off ours. Furthermore, they offer low-price promotions about 40% to 60% off ours for competitors' users, and expand sales channels through cross-industry alliances, such as kbro Co., Ltd., or kbro, in alliance with momo.com Inc., and China Network System Co., Ltd., or CNS, in alliance with Far Eastern Group and Taiwan Star Telecom Co., Ltd. Competitors may also roll out aggressive marketing plans such as bundling broadband internet and 4G/5G mobile services to stir the market. As a result, we could face increased competition for our broadband access and Multimedia on Demand, or MOD, and mobile services. If we are unable to compete successfully with the cable operators for broadband access and MOD services, our results of operations could be impacted.

In addition, our over the top, or OTT, business may not be able to compete with video streaming providers, some of which invest extensively in contents and productions of original films and TV series. Although we have invited other OTT providers to provide contents onto our platform, we do not rule out that our OTT customers might be attracted by its massive and exclusive titles, and our OTT business growth might slow down and be limited.

As the mobile data access speeds have increased as technologies advanced, many of our customers have replaced fixed broadband services with high-speed mobile broadband services. Rates of customer growth have declined in our fixed broadband and mobile businesses and may decline further, which may bring about further decreases in tariff rates and necessitate increases in our selling and marketing expenses. Any of these developments could adversely affect our business, financial condition and results of operations.

7

Our ability to deliver services may be disrupted due to a systems failure, shutdown in our networks, earthquakes or other natural disasters.

Taiwan is susceptible to earthquakes and typhoons. However, we do not carry insurance to cover damage caused by earthquakes, typhoons or other natural disasters or any resulting business interruption. Our services are currently carried through our fixed and mobile communications networks, as well as through our transmission networks consisting of optical fiber cable, microwave, submarine cable and satellite transmission links, which could be vulnerable to damage or interruptions in operations due to natural disasters. The occurrence of natural disasters could impact our ability to deliver services and have a negative effect on our results of operations. In 2020, we recorded losses on property, plant and equipment arising from natural disasters such as earthquakes and typhoons in the amount of approximately NT$1.0 million (US$0.04 million).

Our ability to deliver services could also be disrupted by systems failure, shutdown in our networks or other unanticipated problems at our facilities. In 2020, our submarine cables were broken four times, causing the suspension of our fixed line services, MOD, broadband access and mobile services in Juguang township, the southernmost of the Matsu Islands. The cable breaks were due to the removal of sand and gravel by Chinese sand pumpers.

Furthermore, we might also be liable for losses claimed from our customers that were incurred from our failure to deliver our services. These potential liabilities could also have a material adverse effect on our results of operations.

Our long-term international bandwidth supply may be disrupted by unexpected delays for new international submarine cables.

The intensifying geopolitical conflicts have caused unexpected delays on operational and construction permit applications for several submarine cables in the South China Sea. In particular, the construction of our new submarine cable, SJC2, which connects various countries in the Asia Pacific region, has been delayed unexpectedly. The target service commencement date was pushed back to the fourth quarter of 2022, which is more than one year later than the original plan.

In the foreseeable future, submarine cables remain an indispensable international bandwidth solution, especially for Taiwan, and cannot be replaced by alternatives like satellite and microwave transmissions. Disruptions on new submarine cable projects will not only affect our services to individual customers but will also endanger our IDC, terrestrial links and international bandwidth sales, and eventually may have a material adverse effect on our business.

We are subject to litigation or other legal proceedings that could expose us to substantial liabilities.

We are from time to time involved in various litigation, arbitration or administrative proceedings in the ordinary course of our business. Any such claims, whether with or without merit, asserted or threatened, could be time-consuming and expensive to defend and could divert our management's attention and resources. See 'Item 4. Information on the Company-B. Business Overview-Legal Proceedings.' We cannot predict the outcome of these proceedings, and we cannot assure you that if a judgment is rendered against us in any or all of these proceedings, our financial condition and results of operations would not be materially and adversely affected.

Our success depends on our ability to attract and retain quality personnel.

In response to the rapidly evolving industry in which we operate, we need to continuously attract and retain skilled technical personnel, and we also depend on the continued service of our executive officers. Our business could suffer if we are unable to attract qualified personnel or lose the services of any of these personnel and cannot adequately replace them. In particular, we could not afford the loss of any of our talents since attracting a qualified talent is increasingly difficult. Moreover, any expansion by industry players may intensify the competition for qualified and experienced personnel in the Taiwan telecommunications industry. All the major three telecom operators in Taiwan, including us, are expanding the Information, Communication and Technology, or ICT, business and may increase the number of their employees as part of this expansion. In addition to telecom operators, some

8

computer design companies and manufacturers are also expanding their business into this area and have been recruiting information technology related employees as well. We cannot assure you that we will be able to successfully attract and retain new information technology related employees. We may also need to increase employee compensation levels to attract and retain personnel, which in turn could result in an increase inour operating costs.We cannot assure you that the loss of the services of any of these personnel would not disrupt our business and operations and materially and adversely affect the quality of our services and harm our reputation.

We may not realize the benefits we expect from our investments, which may materially and adversely affect our business, financial condition, results of operations and prospects.

We have made significant capital investments in our network infrastructure and information technology systems. To continue developing our business and offer new and more sophisticated services, we intend to continue to invest in different areas and in new technologies. The launch of new and commercially viable products and services is important to the success of our business. We expect to continue making substantial capital expenditures to further develop our range of services and products.

Commercial acceptance by consumers of the new and more sophisticated services we offer may not occur at the rate or level expected, and we may not be able to successfully adapt these services to effectively and economically meet our customers' demands, thus impairing the expected return from our investments.

We cannot assure you that services enabled by the new technologies we are implementing, such as 5G, IDC, PSTN migration, international submarine cables, Internet of Things, or IoT, Software-Defined Networking, or SDN, Network Functions Virtualization, or NFV, LTE WLAN Aggregation, or LWA, License Assisted Access, or LAA, Voice over LTE, or VoLTE, Wi-Fi Calling, Artificial Intelligence, or AI, Augmented Reality, or AR, Virtual Reality, or VR, Multi-access Edge Computing, or MEC, will be accepted by the public to the extent required to generate an acceptable rate of return. In addition, we could face the risk of unforeseen complications in the deployment of these new services and technologies, and we cannot assure you that we will not exceed our estimate of the necessary capital expenditure to offer such services. New services and technologies may not be developed and/or deployed according to expected schedules or may not achieve commercial acceptance or be cost-effective. We have also purchased equipment and technology infrastructure to establish our 5G network from suppliers across the globe, including Europe.

The failure of any of our services to achieve commercial acceptance could result in additional capital expenditures or a reduction in profitability to the extent that we are required under applicable accounting standards to recognize a charge for impairment of assets. Any such charge could materially and adversely affect our financial condition and results of operations. We recognized an impairment loss for investment properties, equipment and intangible assets in the past. In 2020, we concluded that the recoverable amount representing the fair value less costs to sell of investment properties was higher than the carrying amount. Therefore, we recognized a reversal of impairment loss of NT$27.0 million (US$1.0 million) and the amount was recognized only to the extent of impairment losses that had been recognized in prior years.

In 2020, our subsidiary, Senao International Co., Ltd., or SENAO, evaluated the goodwill that arose in the acquisition of Youth Co., Ltd. and its subsidiaries, or Youth, and concluded that the recoverable amount of the goodwill was lower than the carrying value and recognized an impairment loss on intangible assets of NT$9.0 million (US$0.3 million).

Furthermore, we cannot assure you that we will be able to continue to maintain control of and consolidate the results of operations of our minority-owned subsidiaries. For example, we consolidate the results of operations of our subsidiary SENAO, because we have remained in control over SENAO's relevant activities and have control over the governance of the entity. Please refer to Note 3 and Note 14 to our consolidated financial statements included elsewhere in this annual report for details of the relationship between SENAO and its parent company. We cannot assure you that we will be able to continue maintaining control over SENAO's relevant activities. If we lose control of our minority-owned subsidiary, we will no longer be able to consolidate the results of operations of such subsidiary, which could adversely affect our consolidated results of operations and ability to meet the operating results guidance that we have projected.

9

We may alsomake equity investments in companies from time to time, but we cannot assure you of their profitability, andwhether any losses related to our equity investments will not have a material adverse effect on our financial condition or results of operations. For example, we have invested NT$4.19 billion (US$0.1billion) in Next Commercial Bank Co., Ltd., or NCB, which was established in 2020. Though the bank serves as a pivotal strategic investment for our Company's FinTech strategy, in the long run, it is still at an early stage and has yet to generate profits.

Changes in technology may render our current technologies obsolete or require us to obtain licenses for introducing new services or make substantial capital investments, financing for which may not be available to us on favorable commercial terms or at all.

The telecommunications industry in Taiwan has been characterized by rapid increases in the diversity and sophistication of the technologies and services offered. As a result, we expect that we will need to constantly upgrade our telecommunications technologies and services in order to respond to competitive industry conditions and customer requirements. Developments of new technologies have rendered some less advanced technologies unpopular or obsolete. If we fail to develop, or obtain timely access to, new technologies and equipment, or if we fail to obtain the necessary licenses to provide services using these new technologies, we may lose our customers and market share and become less profitable.

In addition, the cost of implementing new technologies, upgrading our networks or expanding capacity could be significant. In particular, we have made and will continue to make substantial capital expenditures in the near future in order to effectively respond to technological changes, such as the continued expansion of our fiber optic networks and mobile broadband networks. To meet the increasingly robust high-bandwidth requirements of digital convergence services, we continue to expand construction of fiber optic networks, including passive optical networks, or PONs, and optical distribution networks, or ODNs. After we obtained 5G mobile broadband services spectrum in 3.5 GHz and 28 GHz frequency bands, we started to construct our 5G mobile broadband network. To the extent these expenditures exceed our cash resources, we have already sought additional debt or equity financing. On May 6, 2020, our board of directors authorized the issuance of domestic unsecured corporate bonds with an aggregate principal amount of NT$30.0 billion, which could be issued at once or separately. On July 30, 2020, we completed the issuance of unsecured corporate bonds with an aggregate principal amount of NT$20.0 billion. The net proceeds were used primarily for future corporate development. On April 9, 2021, we announced the launch of the offering of corporate bonds with a principal amount of NT$7.0 billion, which is expected to be completed in late April. These factors include our financial condition, results of operations, cash flows and the prevailing market conditions in the domestic and international telecommunications industry, the cost of financing and conditions in the financial markets, and the issuance of relevant government and other regulatory approvals. Any inability to obtain the funding for our capital expenditures on commercially acceptable terms could jeopardize our expansion plans and materially and adversely affect our business prospects and future results of operations.

10

If new technologies adopted by us do not perform as expected, or if we are unable to effectively deliver new services based on these technologies in a commercially viable manner, our revenue growth and profitability will decline.

We are constantly evaluating new growth opportunities in the broader telecommunications industry. Some of these opportunities involve new services for which there are no proven markets, and may not develop as expected. Our ability to deploy and deliver these services will depend, in many instances, on new but unproven technologies. These new technologies may not perform as expected or generate an acceptable rate of return. In addition, we may not be able to successfully develop new technologies to effectively and economically deliver these services, or be able to compete successfully in the delivery of telecommunications services based on new technologies. In the 5G era, there could be more services beyond that of standard operators by delivering services via a B2B2X model, which is substantially dependent on the availability of applications and devices that third-party developers are developing. If we are unable to deliver commercially viable services based on the new technologies that we adopt, our financial condition and results of operations may be materially and adversely affected. In addition, we may need to cooperate with certain third parties to deliver these new services. To the extent that these third parties fail to perform their obligations or that we fail to thoroughly verify their qualifications and credentials, our ability to deliver these services or our financial condition and results of operations may be materially and adversely affected.

As an internet service provider, we may not be able to protect our customers and their information from cyber attacks, nor protect our services from disruptions due to cybersecurity breaches.

Driven by emerging technologies (including 5G applications, IoT, AI and cloud services), cybersecurity threats have evolved into multi-faceted mixed attacks. Any cybersecurity incident or privacy leakage will damage customers' rights and cause the Company penalties and financial losses. In addition, malware attacks, which are often imbedded into supply chain software, have become more frequent and diverse, and would adversely impact business services or privacy leakage.

The Cyber Security Management Act came into force on January 1, 2019. According to the Act, a critical infrastructure provider shall satisfy the requirements of the cybersecurity responsibility level, to amend and implement the cybersecurity maintenance plan. The 'Administration Regulations of Cyber Security on Telecommunications Business', which was promulgated pursuant to the 'Telecommunications Management Act', was enforced on July 1, 2020. According to the Regulations, telecommunications enterprises shall establish the cyber security maintenance plan and implement it accordingly. If we fail to comply with such requirements, we may be subject to administrative penalties. We may suffer negative consequences, such as remedial costs, increased cybersecurity protection costs, lost revenues, litigation and reputational damage due to cyber attacks. See 'Item 4. Information on the Company-B. Business Overview-Cybersecurity and Personal Information Protection.'

Our largest stockholder may take actions that conflict with our public stockholders' best interests.

As of December 31, 2020, our largest shareholder, the government of the ROC, through the MOTC, owned approximately 35.29% of our outstanding common shares. Accordingly, the government, through its control over our board, as all non-independent board members were appointed by the MOTC, may continue to have the ability to control our business, including matters relating to:

We cannot assure you that our largest shareholder will not take actions that impair our ability to conduct our business competitively or conflict with the best interests of our public stockholders.

11

Actual or perceived health risks related to mobile handsets and base stations could lead to decreased mobile service usage and difficulties in increasing network coverage and could expose us to potential liability.

According to some published reports, the electromagnetic signals from mobile handsets and cellular base stations may pose health risks or interfere with the operation of electronic equipment. Although the findings of those reports are disputed, actual or perceived risks of using mobile communications devices or of cellular base stations could have a material adverse effect on mobile service providers, including us. For example, our customer base could be reduced, our customers may reduce their usage of our mobile services, we could encounter difficulties in obtaining sites for additional cellular base stations required to expand our network coverage or we may be requested to reduce the number of existing cellular base stations. As a result, our mobile services business may generate less revenue and our financial condition and results of operations may be materially and adversely affected. In addition, we could be exposed to potential liability for any health problems caused by mobile handsets and base stations.

Investor confidence in us may be adversely impacted if we or our independent registered public accountants are unable to attest to or express an unqualified opinion on the effectiveness of our internal control over financial reporting.

We are subject to the reporting requirements of the SEC. The SEC, as directed by Section 404 of the U.S. Sarbanes-Oxley Act of 2002, adopted rules requiring U.S. public companies to include a report of management on our internal control over financial reporting in their annual reports that contain an assessment by management of the effectiveness of our internal control over financial reporting. The effectiveness of our internal control over financial reporting has been audited by Deloitte & Touche, an independent registered public accounting firm, which has also audited our consolidated financial statements for the year ended December 31, 2020. Deloitte & Touche has issued an attestation report on the effectiveness of our internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). See 'Item 15. Controls and Procedures-Attestation Report of the Registered Public Accounting Firm.'

While the management report included in this annual report concluded that our internal control over financial reporting was effective, we cannot assure you that our management will be able to conclude that our internal control over financial reporting is effective in future years. If in future years we fail to maintain effective internal control over financial reporting in accordance with the Sarbanes-Oxley Act, we could suffer a loss of investor confidence in the reliability of our consolidated financial statements, which in turn could negatively impact the trading price of our ADSs, and could result in lawsuits being filed against us by our stockholders or otherwise harm our reputation.

If we fail to maintain a good relationship with our labor unions, work stoppages or labor unrest could occur and the quality of our services as well as our reputation could suffer.

In accordance with the articles of association of Chunghwa Telecom Workers' Union, except for the chief manager of each department, most of our employees are members of our principal labor union, the Chunghwa Telecom Workers' Union. Since our incorporation in 1996, we have experienced disputes with our labor unions on such issues as employee benefits and retirement benefits in connection with our privatization as well as the right to protest. Despite having taken measures to improve relations, increase cooperation and ensure mutual benefit with our labor unions, such as increasing channels of communications by holding periodic labor resource review meetings and guaranteeing our labor unions a seat on our board of directors, we cannot assure you that we will be able to maintain a good relationship with our labor unions. Any deterioration in our relationship with our labor unions could result in work stoppages, strikes or threats to take such an action, which could disrupt our business and operations, materially and adversely affect the quality of our services and harm our reputation.

Any economic downturn or decline in the growth of the population in Taiwan may materially and adversely affect our financial condition, results of operations and prospects.

We conduct most of our operations and generate most of our revenues in Taiwan. As a result, any decline in the Taiwan economy or a decline in the growth of the population in Taiwan may materially and adversely affect our financial condition, results of operations and prospects. In particular, Taiwan's economy is highly dependent on the technology industry, and any downturn in the global technology industry may have a material adverse effect on Taiwan's economy, which in turn, could adversely affect the demand for our products and services. There have also been concerns over the armed conflicts, civil unrest and geopolitical uncertainty in the Middle East, and Asia Pacific

12

(particularly Hong Kong, the South China Sea, and North Korea), which has resulted or could result in higher volatility on oil prices and capital markets, and the economic slowdown in Mainland China and the United States, which could have a material adverse effect on economies around the world. There have also been concerns over the forecast for the global economic slowdown, the dispute on trade war between the United States and Mainland China, the effect of Brexit and the COVID-19 pandemic, all of which could cause turbulence in the international and Taiwan's financial markets as well.

As our business is dependent on economic growth, any uncertainty or further deterioration in economic conditions could have a material adverse effect on our financial condition and results of operations. We cannot assure you that economic conditions in Taiwan will continue to improve in the future or that our business and operations will not be materially and adversely affected by deterioration in Taiwan's economy.

We face substantial political risks associated with doing business in Taiwan, particularly due to domestic political events and the tense relationship between the ROC and the People's Republic of China, which could adversely affect our financial condition and results of operations.

Our principal executive offices and substantially all of our assets are located in Taiwan, and substantially all of our revenues are derived from our operations in Taiwan. Accordingly, our business, financial condition and results of operations and the market price of our common shares and the ADSs may be affected by changes in ROC governmental policies, taxation, inflation or interest rates and by social instability and diplomatic and social developments in or affecting Taiwan, which are outside of our control. Taiwan has a unique international political status. Since 1949, Taiwan and Mainland China have been separately governed. The People's Republic of China, or PRC, claims that it is the sole government in China and that Taiwan is part of China.

In addition, the PRC government has refused to renounce the use of military force to gain control over Taiwan. Past developments in relations between the ROC and the PRC have on occasion depressed the market prices of the securities of companies in the ROC. Relations between the ROC and the PRC and other factors affecting military, political or economic conditions in Taiwan could materially and adversely affect our financial condition and results of operations, as well as the market price and the liquidity of our securities. In addition, the complexities of the relationship between the ROC and PRC require companies involved in cross-strait business operations to carefully monitor their actions and manage their relationships with both ROC and PRC governments. In the past, companies in the ROC, including us, have received minor sanctions such as travel restrictions or minor monetary fines by the ROC and/or PRC governments. We cannot assure you that we will be able to successfully manage our relationships with the ROC and PRC governments for our cross-strait business operations, which could have an adverse effect on our ability to expand our business and conduct cross-strait business operations.

Any outbreak of contagious diseases may materially and adversely affect our business and operations, as well as our financial condition and results of operations.

Any outbreak of contagious diseases, such as the COVID-19, influenza, Zika virus, dengue fever or Ebola virus, may disrupt our ability to adequately staff our business and may generally disrupt our operations. If any of our employees is suspected of having contracted any contagious disease, we may under certain circumstances be required to quarantine such employees and the affected areas of our premises. As a result, we may have to temporarily suspend part or all of our operations. Furthermore, any outbreak may restrict the level of economic activity in affected regions, including Taiwan, which may adversely affect our business and prospects. The COVID-19 pandemic affects global economy, resulting in economic contraction and travel restrictions which cause the decrease in our roaming revenue. In addition, the pandemic affects the global production capacity and the supply chain of handsets, which leads customers to extend the replacement cycle. Therefore, our revenues generated from handset sales and mobile services may not achieve our original expectations. As for emerging services, lockdowns due to the COVID-19 pandemic might lead to difficulty in mobility, lacking labors, project delays or order-taking cancellations. As a result, we cannot assure you that any outbreak of contagious diseases would not have a material adverse effect on our financial condition and results of operations.

13

Our operation may be interrupted, and our expansion may be limited, by power or utility shortage.

We may from time to time suffer power outages or surges in Taiwan caused by difficulties encountered by the public utility, or other power consumers on the same power grid. Some of these have resulted in interruptions to our operations. If we are unable to secure reliable and uninterrupted supply of electricity in Taiwan, our services may be interrupted. Furthermore, we may suffer from shortage in water in Taiwan, and we may need to incur additional costs and expenses to respond to such shortages in order to maintain our operations and services. Such incremental costs may affect our profitability and results of operations.

Stockholders may have more difficulty protecting their interests under the laws of the ROC than they would under the laws of the United States.

Our corporate affairs are governed by our Articles of Incorporation, the Telecommunications Act, and, starting from September 30, 2020, the TMA, and by the laws governing corporations incorporated in the ROC. See '-Extensive regulation of our industry may limit our flexibility to respond to market conditions and competition, and our business may suffer.' The rights of stockholders and the responsibilities of management and the members of the board of directors of Taiwan companies are different from those applicable to a corporation incorporated in the United States. For example, controlling or major stockholders of Taiwan companies do not owe fiduciary duties to minority stockholders. As a result, holders of our common shares and ADSs may have more difficulties in protecting their interests in connection with actions taken by our management or members of our board of directors than they would as public stockholders of a United States corporation.

Our actual financial results may differ materially from our published guidance.

Starting in 2013, we continued to voluntarily publish our operating results guidance on an annual basis in accordance with the Taiwan IFRSs. We may from time to time update our operating results guidance after evaluating the effects of any changes to the estimates and assumptions that we used to calculate our projections of our operating results. Our projections are based on a number of estimates and assumptions that are inherently subject to significant uncertainties and contingencies, including the risk factors described in this annual report. In particular, our projections are forward-looking statements that are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections were based will not materialize or will vary significantly from actual results, and such variances will likely increase overtime. Although our operating income, net income and EPS exceeded our expectations in 2020, our financial results will depend on future developments, which are highly uncertain and cannot be predicted.

Our results of operations and financial condition under Taiwan IFRSs may differ materially from our reported results of operations and financial condition under IFRSs.

While we have adopted Taiwan IFRSs for ROC reporting purposes, we adopt IFRSs for certain filings with the SEC, including our annual reports on Form 20-F. Taiwan IFRSs differs from IFRSs in certain significant respects, including to the extent that any new or amended standards or interpretations applicable under IFRSs may not be timely endorsed by the FSC. Furthermore, the dividends for 2020 that are expected to be declared at our 2021 annual general stockholders' meeting are calculated based on Taiwan IFRSs. It is difficult for us to determine the differences between Taiwan IFRSs and IFRSs on our financial statements as any new or amended standards or interpretations applicable under IFRSs may not be timely endorsed by the FSC.

Risks Relating to Ownership of Our ADSs and Common Shares

The value of your investment may be reduced by future sales of our ADSs or common shares by us, by the government of the ROC or by other stockholders.

The government may continue to sell our common shares. Sales of substantial amounts of ADSs or common shares by the government or any other stockholder in the public market, or the perception that future sales may occur, could depress the prevailing market price of our ADSs and common shares.

14

The market value of your investment may fluctuate due to the volatility of, and government intervention in, the Taiwan securities market.

Our common shares are traded on the TWSE, which has a smaller market capitalization and is more volatile than the securities markets in the United States and many European countries. The market value of our ADSs may fluctuate in response to the fluctuation of the trading price of our common shares on the TWSE. The TWSE has experienced substantial fluctuations in the prices and trading volumes of listed securities, and there are currently limits on the range of daily price movements. During 2020, the TWSE Index reached a low of 8,681.34 on March 19, 2020, and peaked at 14,732.53on December 31, 2020. On April 7, 2021, the TWSE Index closed at 16,815.36.The TWSE has experienced certain problems, including market manipulation, insider trading and payment defaults. The recurrence of these or similar problems could have a material adverse effect on the market price and liquidity of the securities of Taiwan companies, including our ADSs and common shares, in both the domestic and the international markets.

In response to declines and volatility in the securities markets in Taiwan, the government of the ROC formed the National Financial Stabilization Fund to support these markets through open market purchases of shares in Taiwan companies from time to time. The details of the transactions of the National Financial Stabilization Fund have not been made public. In addition, the government's Labor Insurance Fund and other funds associated with the government have in the past purchased, and may from time to time purchase, shares of Taiwan companies listed on the TWSE or other markets. As a result of these activities, the market price of common shares of Taiwan companies may have been and may currently be higher than the prices that would otherwise prevail in the open market. Market intervention by government entities, or the perception that such activity is taking place, may take place or has ceased, may cause sudden movements in the market prices of the securities of Taiwan companies, which may affect the market price and liquidity of our common shares and ADSs.

We may be sanctioned or the network establishment approval granted to us may be abolished for violations of limits on foreign ownership of our common shares, and these limits may materially and adversely affect our ability to obtain financing.

The Telecommunications Act limits foreign ownership of our common shares. Prior to March 1, 2006, the MOTC, as the competent authority under the Telecommunications Act, had the power to prescribe the limits on foreign ownership of our common shares. After the formation of the NCC on March 1, 2006, the NCC replaced the MOTC as the competent authority under the Telecommunications Act pursuant to the National Communications Commission Organization Act, or the Organization Act. The NCC and the MOTC reached an agreement on foreign ownership of Chunghwa Telecom, so an announcement issued by the MOTC on December 28, 2007 stipulated that direct holdings by foreign investors in Chunghwa Telecom cannot exceed 49% of our outstanding share capital and the total direct and indirect holdings by foreign investors cannot exceed 55% of our outstanding share capital. According to the TMA effective from July 1, 2020 (excluding certain articles regarding frequency allocation were set effective from November 1, 2020), the total amount of our shares directly held by foreigners shall not exceed 49%, and the total amount of our shares directly and indirectly held by foreigners shall not exceed 60%. As of April 7, 2021, foreign direct holdings of our outstanding share capital is at 15.38%. If we fail to comply with the applicable foreign ownership limitations, the network establishment approval granted to us may be abolished. We cannot predict the manner in which the NCC will exercise its authority over us in the case of a violation, or whether the NCC will lower the foreign ownership cap at any time.

If we are deemed to be in violation of our foreign ownership limitations, any consequences arising from such violation may materially and adversely affect us. Moreover, since we are unable to control ownership of our common shares or ADSs representing our common shares, and we have no ability to stop transfers among stockholders, or force particular stockholders to sell their shares, we may be subject to monetary fines, or the network establishment approval granted to us may be abolished, even if there is no fault of our own. In that event, our business could be disrupted, our reputation could be damaged and the market price of our ADSs and common shares could decline. These limitations may also materially and adversely affect our ability to obtain adequate financing to fund our future capital requirements or to obtain strategic partners, and alternate forms of financing may not be available on terms favorable to us or at all.

15

Restrictions on the ability to deposit our common shares into our ADS program may adversely affect the liquidity and price of the ADSs.

The ability to deposit shares into our ADS program is restricted by ROC law, under which no person or entity, including you and us, may deposit our common shares into our ADS program unless the Securities and Futures Bureau has not objected within a prescribed period following the filing with it of an application to do so, except for the deposit of the common shares into our ADS program and for the issuance of additional ADSs in connection with:

As a result of the limited ability to deposit common shares into our ADS program, the prevailing market price of our ADSs on the New York Stock Exchange, or NYSE, may differ from the prevailing market price of the equivalent number of our common shares on the TWSE.

You will be more restricted in your ability to exercise voting rights than the holders of our common shares, which may diminish your influence over our corporate affairs and may reduce the value of your ADSs.

Holders of American depositary receipts evidencing our ADSs may exercise voting rights with respect to the common shares represented by these ADSs only in accordance with the provisions of our deposit agreement. The deposit agreement provides that, upon receipt of notice of any meeting of holders of our common shares, the depositary bank will, as soon as practicable thereafter if requested by us in writing, mail to ADS holders the notice of the meeting sent by us, voting instruction forms and a statement as to the manner in which instructions may be given by the holders.

Generally, ADS holders will not be able to exercise voting rights attached to the underlying securities on an individual basis. Under the deposit agreement, the voting rights attached to the underlying securities must be exercised as to all matters subject to a vote of stockholders collectively in the same manner, except in the case of an election of directors. The election of our directors is by means of cumulative voting. In the event the depositary does not receive voting instructions from ADS holders in accordance with the deposit agreement, our chairman or his or her designee will be entitled to vote the common shares represented by the ADSs in the manner he or she deems appropriate at his or her discretion, which may not be in your interest.

16

Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.

We may from time to time distribute rights to our stockholders, including rights to acquire our securities. Under the deposit agreement, the depositary will not offer you those rights unless the distribution to ADS holders of both the rights and any related securities are either registered under the U.S. Securities Act of 1933, as amended, or the Securities Act, or exempt from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.

If the depositary is unable to sell rights that are not exercised or not distributed or if the sale is not lawful or reasonably practicable, it will allow the rights to lapse, in which case you will receive no value for these rights.

Changes in exchange controls that restrict your ability to convert proceeds received from your ownership of ADSs may have an adverse effect on the value of your investment.

Your ability to convert proceeds received from your ownership of ADSs depends on existing and future exchange control regulations of the ROC. Under the current laws of the ROC, an ADS holder or the depositary, without obtaining further approvals from the Central Bank of the ROC (Taiwan) or any other governmental authority or agency of the ROC, may convert NT dollars into other currencies, including U.S. dollars, in respect of:

In addition, the depositary may also convert into NT dollars incoming payments for purchases of common shares for deposit in the depositary receipt facility against the creation of additional ADSs. If you withdraw the common shares underlying your ADSs and become a holder of our common shares, you may convert into NT dollars subscription payments for rights offerings. The depositary may be required to obtain foreign exchange approval from the Central Bank of the ROC (Taiwan) on a payment-by-payment basis for conversion from NT dollars into foreign currencies of the proceeds from the sale of subscription rights of new common shares. Although it is expected that the Central Bank of the ROC (Taiwan) will grant approval as a routine matter, required approvals may not be obtained in a timely manner, or at all.

Under the ROC Foreign Exchange Control Law, the Executive Yuan of the ROC may, without prior notice but subject to subsequent legislative approval rendered within ten days from such imposition, impose foreign exchange controls or other restrictions in the event of, among other things, a material change in domestic or international economic conditions which might threaten the stability of the domestic economy in Taiwan.

You are required to register with the TWSE and appoint several local agents in Taiwan if you withdraw common shares from our ADS facility and become our stockholder, which may make your ownership burdensome.

If you are a non-ROC person and wish to withdraw common shares represented by your ADSs from our ADS facility and hold those common shares, you are required under the current laws and regulations of the ROC to appoint an agent, also referred to as a tax guarantor, in the ROC for filing tax returns and making tax payments. A tax guarantor must meet certain qualifications set by the Ministry of Finance of the ROC and, upon appointment, becomes a guarantor of your ROC tax obligations. If you wish to repatriate profits derived from the sale of withdrawn common shares or cash dividends or interest on funds derived from the withdrawn common shares, you will be required to submit evidence of your appointment of a tax guarantor and the approval of the appointment by the ROC tax authorities. You may not be able to appoint and obtain approval for a tax guarantor in a timely manner.

17

In addition, under the current laws of the ROC, you will be required to be registered as a foreign investor with the TWSE for making investments in the ROC securities market prior to your withdrawal and holding of common shares represented by the ADSs. You will be required to appoint a local agent in Taiwan to, among other things, open a securities trading account with a local securities brokerage firm and a bank account to remit funds, exercise stockholders' rights and perform other functions as holders of ADSs may designate. You must also appoint a local bank to act as custodian for handling confirmation and settlement of trades, safekeeping of securities and cash proceeds and reporting and declaration of information. Without the relevant registration and appointment of the local agent and custodian and the opening of a securities trading account and bank account, you will not be able to hold, subsequently sell or otherwise transfer our common shares withdrawn from the ADS facilities on the TWSE.

A. History and Development of the Company

Our legal and commercial name is Chunghwa Telecom Co., Ltd. We were officially established on July 1, 1996 as part of the privatization efforts by the government of the ROC and operate under the Statute of Chunghwa Telecom Co., Ltd. Prior to our formation, we were operating as a business unit of the Directorate General of Telecommunications, which was the predecessor of the NCC. The common shares of the Company have been listed on the TWSE under the trading code '2412' since October 2000 and its ADSs have been listed on the NYSE under the symbol 'CHT' since July 2003. We were privatized as a result of a secondary ADS offering and concurrent domestic auction of our common shares on August 12, 2005, as the ownership by the government of the ROC was reduced to less than 50%. The privatization has enabled us to develop our business and respond to changing market conditions more rapidly and efficiently. Today, we are the largest full telecommunication service provider in Taiwan. Our principal executive offices are located at 21-3 Hsinyi Road, Section 1, Taipei, Taiwan, ROC, and our telephone number is (886) 2-2344-5488. Our website address is https://www.cht.com.tw. The information on our website does not form a part of this annual report. Our agent for service of process in any suit or proceeding arising out of or relating to our shares, ADSs, American depository receipt, or ADR, and deposit agreement in the United States is CT Corporation System, 111 8th Avenue, 13th Floor, New York, NY 10011.

We are the largest telecommunications service provider in Taiwan and one of the largest in Asia in terms of revenue. As an integrated telecommunications service provider, our principal services include:

We enjoy leading positions across a number of areas in terms of both revenues and customers. We are Taiwan's largest fixed communications services provider as well as Taiwan's largest mobile communications service provider. We are also Taiwan's largest broadband accessand internet service provider. As for the IPTV service, our MOD service is the largest video platform in Taiwan in terms of the number of customers. In 2020, our revenues were NT$207.6billion (US$7.4billion), our consolidated net income was NT$34.7billion (US$1.2billion) and our basic earnings per share was NT$4.31(US$0.15).

18

In 2020, we made capital expenditures totaling NT$23.5billion (US$0.8billion). See 'Item 5. Operating and Financial Review and Prospects-B. Liquidity and Capital Resources-Capital Expenditures' for a detailed discussion of our capital expenditures.

Competitive Strengths

We believe that our primary competitive strengths are:

We are an integrated full-service telecommunications provider as well as ICT service provider and have premium brand and broad customer base in Taiwan.

We are the largest telecommunications service provider in Taiwan with a leading position in fixed communications services, mobile communications services, internet services, and multimedia services. We are also a major ICT service provider in areas such as cybersecurity, cloud, IoT, IDC and Big Data analysis.

Broad range of communications products and services. We are confident with our ability to provide an attractive and comprehensive range of both telecommunications services and ICT total solutions to our business and residential customers. In addition, we are able to offer innovative customized ICT services and competitive tariff packages to deliver customer-centric services.

Broad network coverage. In order to provide higher bandwidth services for our customers, we have been constructing our fiber to the x, or FTTx, network since 2003. We have successfully migrated many of our customers to higher speed FTTx service.As of December 31, 2020, network coverage of FTTx with speeds of 1 Gbps and higher was approximately 83.1%. In addition, our mobile communications network provides nationwide coverage. Our large mobile spectrum allocation, together with our extensive network coverage, positions us well for the continued expansion of our mobile services in Taiwan. We are also continuing to build our Wi-Fi network to offload mobile network capacity in residential areas and public areas where subscriber density and usage is high, such as urban areas, airports and convenience stores. We aim to provide seamless broadband connection to satisfy our customers.

Brand awareness, distribution channels and customer service. Our brand 'Chunghwa Telecom' has a reputation for quality and reliability. We serve our large customer base through our extensive customer service network in Taiwan. See '-B. Business Overview-Marketing, Sales and Distribution-Sales and Distribution.' Our extensive sales and distribution channels help us attract additional customers and develop new business opportunities. We eagerly enhance user experience at different channels. We integrate our online store and offline channels, with our Big Data capability, to accelerate the development of our Online-to-Offline business.To enhance customers' online experience, we provide customized online purchase processes by leveraging our capability to analyze Big Data, and accurately analyze customer preferences and behaviors, and target different customer groups for implementing accurate marketing initiatives to improve sales success rate and reduce marketing costs.Customers can apply for various services online through websites or apps, and make queries with us in real time. We have also built logistic systems to deliver mobile handsets and smart home appliances to our customers. In addition, customers can also order online and enjoy quality services at designated offline stores to save waiting time.

19

In 2020, we obtained several domestic and international awards which recognized our service quality, corporate governance and our fulfillment of corporate social responsibility. In the Reader's Digest Trusted Brands Awards, we have stood out and won the Platinum Award of Telecom Company in Taiwan for 16 consecutive years since 2005. We also have been awarded The Asset Corporate Platinum Award by The Asset Magazine for eight consecutive years since 2013. In addition, we were also awarded TaiwanMobileData Service Provider,Taiwan Data Centre Services Provider as well as Taiwan Cloud InfrastructureService Provider of the Year in 2020 Frost & Sullivan Best Practices Awards.

Operational expertise. Our management and employees have extensive operating experience and technical knowledge for the future growth of emerging businesses. We also believe we will continue to attract and retain high-quality information technology talents.

We have the capital resources and technology to retain our leading position.

Strong capital structure. We believe we have great financial resources in Taiwan. Our low debt-to-equity capital structure, together with our strong operating cash flows, provides us with the flexibility and resources to invest in capital-intensive and growing businesses. We started to construct our 5G base stations in the first half of 2020 and continue to enhance our existing 4G/5G mobile broadband networks, our expansion of FTTx broadband access services, IP-based MOD/OTT services, fixed-line/mobile VAS, ICT-related services and service platforms. In addition, we also deploy Narrowband-IoT and LTE Cat-M1 networks for IoT applications. We will also continue to make strategic investments in or acquire other companies to enhance our emerging businesses and to further expand our business to retain our leading position in the future.

Advanced network technology. By the end of 2020, more than 83.1% of households in Taiwan can enjoy ultra-fast connectivity with our FTTH network. We will still expand FTTH network coverage of households in 2021, based on the requirement of ultra-fast connectivity service in Taiwan. In 2020, we also continued to enhance our 4G/5G mobile broadband networks. Our investment in network infrastructure places us in a position to capture a significant share of the internet and high-speed data transmission market.

Research and development expertise. In 2020, our research and development expenses accounted for 1.9% of our revenues. See 'Item 5. Operating and Financial Review and Prospects-C. Research and Development, Patents and Licenses-Research and Development' for descriptions about areas of our research and development. We believe our focus on research and development will allow us to efficiently develop and deploy new technologies and services ahead of our competitors.

Business Strategies

Our key strategic objectives are to maintain our position as a leading integrated telecommunications services provider in Taiwan and to enhance our profit margins of ICT services by leveraging our strong sales forces and research capacity.

Consistent with our strategic objectives, we have developed the following business strategies:

20

Execute strategic transformation for a customer-centric and sustainable operations

In response to a structural change in the telecommunications market and intensified competition from the OTT players, especially in the ICT services such as cloud and IoT, we aim to strengthen our 5G service and implement strategic transformation to establish a solid foundation for further business development. Focusing on digital convergence and business opportunities in the digital economy and by teaming up with strategic partners, we will make the best effort to promote our business growth to enhance value to customers, shareholders, employees and the society.

Under the guiding principle of customer-centric value creation, we will continue to execute on our 'Together, We Rise in 2021' strategic transformation plan to make a fundamental change and achieve sustainable growth.

The transformation plan has four focal points, namely the core business, emerging businesses, cost optimization and core competencies improvement. It aims to expand our customer base in personal, family, corporate and international customers. Furthermore, we will continue to optimize costs and improve our fundamental capabilities to enhance our competitive edge. Combining with investments as well as mergers and acquisitions, we believe this strategic transformation will enhance our core competitiveness and advantages for long-term development.

Focus on our core strengths while expanding our scope of services to capture new growth opportunities

We endeavor to maintain our strong market position in telecommunication business and seek to expand the scope of our business beyond network services by offering service platforms and VAS to capture new opportunities and generate revenue growth, such as IoT platforms. We also continue to enhance our MOD/OTT service platform, which offers digital contents, live broadcasting and subscription video on demand, or SVoD, services.

Broadband services: We strive to maintain our broadband market share and average revenue per user, or ARPU, for our FTTx internet services. We expect to continue to offer various incentives for our FTTx customers to upgrade to 300Mbps~1Gbps or even higher speed FTTx services in 2021. We are continuing the build-out of our FTTx infrastructure, and we believe these efforts will help us maintain our competitive advantage for broadband services. A high-quality broadband network is also essential for our high-definition MOD services.By offering 4K services, we enable our customers to enjoy quality content via our MOD platform. We leverage our robust cloud infrastructure to offer IPTV/OTT services and stay abreast with international trends.

We also endeavor to improve our MOD business by facilitating the overall TV operational environment, and starting from August 2019, we launched optional service packages by customized subscription mechanism to encourage user-centric perspectives. We have been building relationships with content providers and service providers to offer attractive content and services. Our strategy on MOD/VOD/OTT services is to enrich content, by providing movies, drama and TV series for SVOD, to leverage our existing base of fixed broadband and mobile broadband subscribers to boost our MOD and OTT subscribers.Our Hami Video VOD platform started to strengthen its content offering in the first quarter of 2019, including the introduction of various Hollywood blockbuster movies and simultaneous airing of popular TV dramas from China and Korea. We also cooperate with production studios to produce TV dramas for simultaneous premieres on our various platforms.

Mobile Communications: We launched 5G services on June 30, 2020. Our strategy for mobile services includes the following initiatives:

21

Internet services: Our strategy for internet services is to continue to build on the success of our HiNet internet services and enhance our internet application VAS, such as Security Operation Center, or SOC, IDC and cloud services. In 2021, we will continue to promote our IDC, cloud (including Google Cloud Platform, Amazon Web Service, or AWS,and Microsoft Azure) and cybersecurity services to help our business customers decrease management costs; we will also launch new services related to AI, Big Data and Smart Health.

Emerging services: We continue to leverage our core telecommunication infrastructure and services to expand ICT services. Our goal is to become the Leading Provider of Smart Life and the Enabler of Digital Economy. In order to drive the development of various emerging ICT services, we provide high-quality platforms, cooperate with strategic partners to build an industrial ecosystem, and combine with strategic investment, mergers and acquisitions. With the strength and reliability of our technologies and services, we believe that we have the competitive advantages to continue expanding our ICT services in the future. Furthermore, we have invested in an internet-only bank, namely Next Commercial Bank Co., Ltd., or NCB, with banking, insurance and retail partners. NCB, established in January 2020, has been applying for the business license from the competent authority and is expected to launch services in the first half of 2021.

Emphasize quality of service and customer satisfaction

Quality of service is critical in attracting and retaining customers and enhancing our long-term profitability. In order to continually enhance and improve the quality of our services, we have, in addition to the quality assurance function of our regular operating units, established a number of dedicated task forces to monitor our network performance. Our senior management sets our quality evaluation criteria and regularly reviews the quality of our performance.

In order to ensure that our quality of service will translate into strong customer loyalty, we continue to focus on and invest in the provision of a full range of services that emphasize customer care from the point of sale onward. Our corporate customer services cover small, medium-sized and large enterprises. To improve the quality of our customer services, we implemented a customer relationship management system, which encompasses a customer complaint system, a business information database for the use of our call centers, and a Big Data system to enhance our sales and market analysis efforts. For example, we leverage our capability to analyze Big Data in identifying locations for constructing base stations and target groups for marketing our services.

In addition, we offer 24-hour customer service, including consolidated billing for all services and online bill payment service on our website.

Improve operational and cost efficiency

We have historically been focused, and will continue to focus, on cost control. We continue to improve our operational and cost efficiency by migrating to more advanced networks, such as electronic purchasing and sophisticated operational support systems.

Our short-term goal is to achieve customer-centric digital transformation. The important tasks that need to be completed in recent years are as follows:

22

Our long-term goal is to optimize our capital expenditures by focusing on investing in innovative products and services with attractive return profiles. We continue the construction of our fiber-based fixed-line and mobile network to increase the network bandwidth and enhance operational efficiencies. We continue to enhance our mobile network and construct high capacity Wi-Fi/Fiber-Wireless networks to offload mobile network traffic. We will continue to leverage our core telecommunication infrastructure and services to expand the ICT business, including 5G services, IDC services, PSTN migration, international submarine cable services, cloud services, IoT, enterprise total solutions and government projects.

Expand our business through alliances, acquisitions and investments

We continuously expand our business in growth areas, such as ICT services, through alliances, acquisitions and investments. We believe that our experience, operational scale and large customer base make us an attractive ally for other service providers.

Alliances. We have formed and will continue to pursue alliances with content providers, multimedia service platform providers, customer premises equipment providers, internet portal operators and ICT solutions partners to diversify our business operations and enhance our service offerings. Starting from April 2019, our clients may access Google Cloud's Partner Interconnect service globally through our CHT Global EXchange Center, or CHT GXC. In October 2019, we became a Dual Certification AWS Partner for both Advanced Consulting and Direct Connect to expand our global cloud service footprint. In April 2020, we achieved three AWS Competencies to underscore CHT's deep expertise for enterprise Digital Transformation. In October 2019, we signed a Letter of Intent for strategic cooperation with Microsoft, providing comprehensive cloud services, including Infrastructure as a Service, Platform as a Service, and Software as a Service; and in June 2020, we cooperated with Microsoft to create AIoT Smart Ecosystem.

Acquisition and Investments. We have focused our acquisition strategy on making strategic acquisitions of companies that we believe to be complementary to our long-term strategic goals. We have focused our investment strategy on the development of new businesses and the enhancement of our operational efficiency, especially the aspects of 5G and ICT services. Recently we have entered into the following notable transactions:

We increased our ownership interest in International Integrated Systems, Inc., or IISI, a company that provides system integration, IT solution and consultation, from 31.16% to 51.54% on July 1,2020. Upon completion of the transaction, we gained control over IISI to develop and deepen the FinTech business and the market of corporate clients.

One of our consolidated subsidiaries, Chunghwa Precision Test Tech Co., Ltd., or CHPT, a semiconductor testing company, was listed on the General Stock Market of the Taipei Exchange (formerly known as Gre Tai Securities Market) since March 24, 2016. Benefitting from its advanced technology and one-stop solution, CHPT's business continued to grow in the past few years. On March 23, 2018, we announced our plan to dispose of 1.5 million common shares of CHPT to fund our future investment. By the end of 2020, we have disposed 1.328 million common shares of CHPT and our ownership interest in CHPT decreased to 34.25%.

In support of the government's southbound development policy, we set up an office in Indonesia in January 2019 to expand our smart city and ICT businesses. In the mid- to long-term, we plan to seek cooperation with local partners in the ASEAN countries to capitalize on the strong market potential, facilitate Taiwanese companies to develop in those countries and explore opportunities for investment and mergers and acquisitions.

We have invested in NCB in January 2020 and obtained 41.9% of its equity interests and 6 out of 15 seats on the board of directors. NCB is expected to launch services in the first half of 2021.

Going forward, we will focus on digital economy and innovative businesses and may consider making other equity investments and acquisitions that we believe are complementary to our business and strategic goals. By cooperating with other companies and leveraging our advantages, we strive to gain market share in the 5G and AI IoT, or AIoT, business. Furthermore, we will continue to explore opportunities to strengthen our cooperation with companies in ASEAN countries and expand our geographic footprint, either in traditional telecommunication businessand smart city ICT businesses.

23

Maintain focus on maximizing stockholder value

We are committed to maximizing stockholder value and intend to maintain a sustainable dividend policy. Under the ROC Company Act, companies are allowed to distribute special cash dividends from capital surplus. In addition, the accumulated legal reserve that we had set aside in previous years has amounted to the aggregate par value of our outstanding share capital. Therefore, according to relevant regulations, we are not required to appropriate profits to our legal reserve starting from 2015. With the approval of our board of directors in January 2021, our payout ratio was 99.99% in 2020 after adjusting for unappropriated earnings. See 'Item 8. Financial Information-A. Consolidated Statements and Other Financial Information.'

B. Business Overview

Our Principal Lines of Business

Our core business segments are our domestic fixed communications business, mobile communications business, internet business and international fixed communications business.

Domestic Fixed Communications Business

The provision of domestic fixed communications services is one of our principal business activities. Our domestic fixed communications business includes local telephone services and domestic long distance telephone services, broadband access services, local and domestic long distance leased line services, Wi-Fi services, MOD services, and other domestic services, including ICT services. We also provide interconnection with our fixed-line network to other mobile and fixed-line operators. Our revenues from domestic fixed communications services were NT$66.8 billion and NT$65.7 billion and NT$69.5 billion (US$2.5 billion), respectively, in 2018, 2019 and 2020, representing 31.0%, 31.7% and 33.4% of our total revenue in such periods.

Local Telephone

The following table sets forth our revenues from local telephone services for the periods indicated.

We provide local telephone services to approximately 9.9 million customers in Taiwan. Our fixed-line network reaches virtually all homes and businesses in Taiwan. Revenues from local telephone services comprised 12.8%, 12.4% and 11.8% of our total revenues in 2018, 2019 and 2020, respectively. Approximately 73.4% of our local telephone customers as of December 31, 2020 were residential customers. We are the leader of the local telephone service market, with an average subscriber market share of approximately 93.0%, 92.5% and 92.1% in 2018, 2019 and 2020, respectively.

24

The following table sets forth information with respect to our local telephone customers and penetration rates as of the dates indicated.

With the continued development of internet technologies, demand for local customer lines has been declining. The number of fixed-line customers decreased by 2.5% in 2019 compared to 2018 and decreased by 2.6% in 2020 compared to 2019. We attribute the decrease in fixed-line customers to a general industry-wide trend of migrating from fixed-line services to internet telephony services and voice over internet protocol, or VoIP, applications.

Minutes from local calls decreased in 2018, 2019 and 2020 due to the impact of mobile substitution and increased use of VoIP applications.

We charge our local telephone service customers a monthly fee and a usage fee. We also charge separate fees for some VAS. The monthly fees for our primary tariff plans are NT$70for residential customers and NT$295for business customers. Our primary peak time rate is NT$1.6 for three minutes, and our off-peak time rate is NT$1.0for ten minutes. Our rates are the same for residential and business customers.

The following table sets forth information with respect to the average local telephone usage charge per minute for the periods indicated.

Average per minute usage charges remained relatively stable from 2019 to 2020.

Domestic Long Distance Telephone

We provide domestic long distance telephone services in Taiwan. Total revenues from domestic long distance telephone services were NT$2.4 billion, NT$2.2 billion and NT$2.0 billion (US$0.1 billion) in 2018, 2019 and 2020, respectively, representing 1.1%, 1.1% and 1.0% of our total revenues in such periods. This decrease was mainly due to the continuous decline in call minutes resulting from the migration to mobile services and increased use of VoIP applications. Our average market share by minutes in the domestic long distance market was approximately 82.9%, 82.0% and 81.6% in 2018, 2019 and 2020, respectively.

We provide so-called 'intelligent' network services over our domestic long distance network, including toll-free calling and virtual private networks, or VPN, services and others.

25

Broadband Access

We provide broadband internet access through connections based on our FTTx and ADSL technologies. Our revenues from our broadband access services in 2018, 2019 and 2020 were NT$18.3 billion, NT$18.0 billion and NT$18.1 billion (US$0.6 billion), respectively. We provide broadband access services to other internet service providers that do not have their own network infrastructure, and as a result, our broadband customers also include some customers that use only our broadband data access lines and choose another provider for internet service provider, or ISP, services.

From 2018 to 2020, we continued accelerating our high-speed FTTx household coverage. We offer various promotional packages to encourage more migration of our FTTx subscribers to higher speed FTTx service. In 2020, FTTx revenue reached 94.6% of our total broadband revenue. Subscriber migration to our broadband of 300 Mbps or higher continued to increase by 69.0% year-over-year, as we continue focusing on higher speed migration.

Our subscriber market share of Taiwan's broadband market was approximately 70.8%, 68.0% and 65.6% in 2018, 2019 and 2020, respectively.

The following table sets forth our broadband service customers as of each of the dates indicated.

We have experienced competition in broadband from cable operators and other fixed-line operators. In addition, as faster wireless technologies, such as 5G and 4G LTE, have been deployed, some customers have replaced fixed broadband services with high-speed mobile broadband services. Our strategy is to continue the deployment of higher speed FTTx network so as to maintain our competitiveness.

Charges for our FTTx and ADSL services include one-time installation charges and monthly subscription fees. These charges vary based on connection speed.

The following table sets forth our ARPU for each of the periods indicated.

Our overall broadband ARPU decreased in 2019 mainly due to the increased competition in the market and the mandatory tariff reduction, while it increased in 2020 due to the higher speed migration and the increasing demand of working from home resulting from the COVID-19 pandemic. For more details on the NCC's mandatory tariff reduction, please see 'Item 5. Operating and Financial Review and Prospects-Overview-Tariff adjustments.'

26

Leased Line Services-Local and Domestic Long Distance

We are the leading provider of domestic leased line services in Taiwan. Leased line services involve offering exclusive lines that allow point-to-point connection for voice and data traffic. Leased lines are used by business customers to assemble their own private networks and by telecommunications service providers to establish networks to offer telecommunications services.

We provide data transmission services to major corporate customers in Taiwan. We also provide leased lines to other mobile and fixed-line service operators for interconnection with our fixed-line network and for connection within their networks. Our local and domestic long distance leased line services revenues were NT$4.2 billion, NT$4.1 billion and NT$4.3 billion (US$0.2 billion) in 2018, 2019 and 2020, respectively. Revenues remain relatively stable year-over-year and we continue to migrate customers to higher speed services.

Wi-Fi Services

As of December 31, 2018, 2019 and 2020, we had a total of approximately 2.7 million, 2.8 million and 2.6 million residential and business customers that leased our access points, respectively. In addition, we had more than 48 thousand hot spots in public areas by the end of 2020, such as convenience stores, airports and international convention centers, where our smartphone subscribers can access our Wi-Fi network and help to offload mobile data network traffic.

MOD Services

Using video streaming technology through a set top box that connects to our FTTx and ADSL data connections, our MOD customers can access TV programs, video-on-demand, OTT, and other services. We had over 203, including 196 high definition, or HD, broadcasting channels and over 30,000 hours of on-demand programs. In addition to our regular packaged offerings, we also offer SVoD services for film and drama. Furthermore, starting from 2017, our MOD platform successively offers OTT services such as KKTVand Netflix. As of December 31, 2020, we had 2.07 million MOD customers, including 1.30 million SVoD subscriptions and 1.40 million channel subscriptions. We continued to see upsell in our tiered-pricing channel packages and digital convergence packages.

Our MOD revenues were NT$3.3 billion, NT$3.6 billion and NT$3.64 billion (US$121 million) in 2018, 2019 and 2020, respectively. The increase in revenue from 2018 to 2020 was mainly due to the upsell of our tiered-pricing channel and VOD packages. We are pleased to see that our IPTV customers continued to sign up for additional SVoD programs and OTT services. In addition, starting from August 2019, we have launched an optional service package by customized subscription mechanism to meet customers' needs. The slowdown in 2020 revenue growth is mainly due to the postponement of major sports events resulting from the COVID-19 pandemic to drive customer growth.

ICT and Other Services

Our ICT and other services in domestic fixed communications business include ICT services and corporate solutions. See 'Emerging Services.'

Mobile Communications Business

Mobile communications services are one of our principal business activities. Our mobile communications services include mobile services, sales of mobile handsets, tablets and wearable devices and ICT and other mobile services.

Mobile Services

We are Taiwan's largest provider of mobile services in terms of both revenues and customers. In 2018, we generated revenues of NT$63.9 billion, or 29.7% of our total revenues, from mobile services. In 2019, we generated revenues of NT$58.7billion, or 28.3% of our total revenues, from mobile services. In 2020, we generated revenues of NT$56.7 billion (US$2.0 billion), or 27.3% of our total revenues, from mobile services. The decrease in mobile

27

services revenue was mainly due toa decrease in roaming revenue and handset sales because of the COVID-19 pandemic.

Our ARPU per month decreased to NT$461 in 2019 mainly due to more fierce competition. Our ARPU per month further decreased to NT$427 in 2020 mainly due to the decrease in roaming revenue mentioned above and the increase of IoT subscribers, which resulted in the dilution of ARPU.

We remain the largest mobile operator in Taiwan in terms of revenues and number of customers, although the two smaller operators, Asia Pacific Telecom Co., Ltd., or APTG, and Taiwan Star Telecom Corporation Ltd., or T-Star, continue to offer low-priced data plans to gain customers. We had 11.3 million mobile customers, and a market share of approximately 36.0% in terms of total mobile customers and approximately 38.4% in terms of total mobile services revenues in Taiwan, as of December 31, 2020.

In October 2013, we obtained a 4G mobile broadband services spectrum of 10MHz paired spectrum in the 900MHz frequency band and 25MHz paired spectrum in the 1800MHz frequency band. We paid NT$39.1 billion to the government for the spectrum. The license is valid until December 31, 2030. We launched 4G mobile broadband services in May 2014.

In December 2015, we obtained an additional spectrum for 4G mobile broadband services of 30MHz paired spectrum in the 2500MHz and 2600MHz frequency bands, and we paid NT$10.0 billion to the government. The license is valid until December 31, 2033. We put these 2500MHz and 2600MHz frequency bands into use on March 24, 2016.

In November 2017, we further obtained spectrum for 4G mobile broadband services of 5MHz paired spectrum in the 1800MHz frequency band and 20MHz paired spectrum in the 2100MHz frequency band, and we paid NT$10.9 billion to the government. The licenses are valid until December 31 of 2030 and 2033, respectively.

In February 2020, we obtained spectrum for 5G mobile broadband services of 90MHz spectrum over 3.5GHz frequency bands and 600MHz spectrum over 28GHz frequency bands, and we paid NT$48.4 billion to the government. The license is valid until December 31 of 2040. We launched 5G services on June 30, 2020.

Our 3G service license expired in December 2018, and we have ceased our 3G service since then.

By the end of 2020, we commercially launched roaming services with 474 networks in 202 countries, including 249 LTE roaming partners in 118 countries. Meanwhile, we offer diverse and competitive roaming services in order to meet customers' demands. By strategically cooperating with the chief mobile operators, ultimately we gained a good reputation and the best brand value in roaming market.

The following table sets forth information regarding our mobile service operations and our mobile customer base for the periods indicated.

28

The total mobile customers in Taiwan had reached approximately 29.3 million as of December 31, 2020. Mobile penetration was approximately 124.3% on the same date. The overall mobile services market experienced a decrease of 5.2% in revenues in 2020 mainly due to the decrease in roaming revenue resulting from the COVID-19 pandemic and market competition.

We offer incentives, such as mobile handset subsidies for the immediate purchase, when new customers agree to sign a service contract with us or when existing customers renew their contracts with us ranging from 12 months to 48 months.

Our tariffs for post-paid mobile customers primarily consist of usage fees and monthly fees. We also offer discounts on usage fees for calls made between our mobile customers to encourage subscription to our mobile service.

As of December 31, 2020, we had approximately 1.3 million prepaid customers, representing approximately 11.6% of our total mobile customers. Prepaid customers do not pay monthly fees but pay a higher usage charge on a per second basis. Once the prepayment has been fully utilized, a prepaid customer can make additional prepayments to continue the service. Alternatively, the customer may convert to become a post-paid customer while retaining the same telephone number.

Sales of Mobile Handsets, Tablets and Wearable Devices

We engage in the distribution and sales of mobile handsets, tablets and wearable devices for use on our mobile network to customers through our directly-owned stores, our online store, our subsidiary SENAO, and also through third-party retailers. See 'Marketing Strategy-Distribution Channels' and 'Sales and Distribution' in '-Marketing, Sales and Distribution.'

ICT and Other Services

Our ICT and other services in our mobile communications business include ICT services and corporate solutions, which are leveraged by our Narrowband-IoT and LTE Cat-M1 networks. See 'Emerging Services.'

Internet Business

Our internet business includes data communication services, application VAS and services provided to the government. Our revenues from internet business represented 13.8%, 14.5% and 15.5% of our revenues in 2018, 2019 and 2020, respectively. In 2020, our revenues from internet business as a percentage of our revenues increased mainly due to the increase in revenues generated from services such as IDC, cloud services, IoT, cybersecurity services, HiNet and HiLink.

29

Data Communication Services

Our data communication service includes HiNet, our brand name as an ISP, and HiLink, a VPN service for enterprises. The following table sets forth HiNet's subscribers as of each of the dates indicated.

Our ISP service subscribers decreased from 2018 to 2020 mainly due to the competition from cable broadband operators and substitution by mobile broadband services. We are still the largest ISP in Taiwan, with a subscriber market share of 62.5% among 245 ISPs in ROC as of December 31, 2020. As of December 31, 2020, approximately 82.4% of our broadband customers were also HiNet subscribers, using HiNet as their ISP, and 92.7% of our FTTx service customers subscribe HiNet ISP service.

Application VAS and Services Provided to the Government

Application VAS and services provided to the government includes services regarding IDC, cloud computing, cybersecurity and IoT. See 'Emerging Services.' We have developed an open IoT application platform featured with functions of cloud computing, Big Data analysis, AI and AR, etc., to enlarge the cooperation with IoT industry as well as strengthen its domestic ecosystem. We will continue to explore new IoT applications such as smart metering, smart lighting, smart agriculture and smart transportation.

International Fixed Communications Business

Our international fixed communications business includes ILD telephone services, international leased line services, satellite services and ICT and other international services.

ILD Telephone Services

We provide ILD telephone services in Taiwan. Our ILD services consist primarily of international direct dial services and the wholesale of ILD traffic. Total revenues from ILD telephone services comprised 3.0%, 2.2% and 0.7% of our revenues in 2018, 2019 and 2020, respectively. Our ILD telephone revenues further decreased by 30.1% to NT$4.6 billion in 2019 due to our strategy to reduce low-margin revenues such as the wholesale of ILD traffic. Due to the same reasons, our ILD telephone revenues further decreased by 66.5% to NT$1.5 billion (US$0.1 billion) in 2020. Our average market share of the ILD market by minutes was approximately 70.3%, 69.6%, and 50.9% in 2018, 2019 and 2020, respectively.

Total incoming call volume decreased by 39.4% from 2018 to 2019 due to our new strategy to reduce low-margin revenues such as the wholesale of ILD traffic. Total incoming call volume decreased by 69.3% from 2019 to 2020 due to our new strategy to reduce low-margin revenues such as the wholesale of ILD traffic. Due to the same reasons, total outgoing call volume decreased by 38.2% from 2018 to 2019 and further decreased by 53.0% in 2020.

We pay for the use of networks of carriers in foreign destinations for outgoing international calls and receive payments from foreign carriers for the use of our network for incoming international calls. Traditionally, these payments have been made pursuant to settlement arrangements under the general auspices of the International Telecommunications Union. Settlement payments are generally denominated in U.S. dollars and are made on a net basis.

30

Leased Line Services-International

We are a leading provider of international leased line services in Taiwan. Leased line services involve offering exclusive lines that allow point-to-point connection for voice and data traffic. Leased lines are used by business customers to assemble their own private networks and by telecommunications service providers to establish networks to offer telecommunications services.

We provide data transmission services to major corporate customers in Taiwan. Since August 2001, licenses have been awarded to a total of five undersea cable operators, including us, to engage in leased line services. Rental fees for ILD leased line are generally based on transmission speed and distance. We continue to experience a decline in rental fees for international leased lines, partly as a result of competition from other international leased line service providers. In response, we continue to implement marketing and service campaigns to retain our high-value corporate customers. Our international leased line services revenues were NT$2.2 billion, NT$2.5 billion and NT$2.4 billion (US$83.7 million) in 2018, 2019 and 2020, respectively. Revenue increased in 2019 mainly due to our expansion to the oversea markets and growing demand from OTT providers, while decreased in 2020 mainly due to the fact that customers converted to indefeasible rights of use, or IRU, and the effect of the COVID-19 pandemic.

Satellite Services

We entered into a contract with ST-2 Satellite Ventures Pte., Ltd. on March 12, 2010 to lease capacity on the ST-2 satellite. The lease term is 15 years. Please refer to Note 40 to our consolidated financial statements included elsewhere in this annual report for further details.

In addition, we have two satellite communication centers that enable us to provide TV broadcasts, satellite VAS and backup systems for use in major emergencies. We also provide satellite services to Southeast Asia.

The ROC government adjusted the frequency configuration of the 3.5GHz band in order to release the 5G license. Some of the frequency of the ST-2 satellite C band was transferred to 5G in May 2020.

ICT and Other Services

Our ICT and other services in our international fixed communications business include corporate solution services. See 'Emerging Services.'

Others

Our other business segment includes our non-telecom services, including semiconductor testing components and printed circuit board sales made by our subsidiary, CHPT.

Emerging Services

The revenues from our ICT business are classified in 'ICT and Other Services' of each business segment besides internet business. By integrating various technologies, such as cloud computing, cybersecurity, Big Data, IoT and accelerating emerging services, we provide customized ICT total solutions to assist our business customers in improving efficiency and reducing management costs.

Through computer-driven data analysis, our iEN service can help companies and corporations implement energy-saving measures. In addition, our iEN can also support households as well as enterprises to build an automatic interior environment in areas, including security, solar energy generation, parking and communications.

We provide HiNet Advanced Networks Defense System, or ANDs, together with our subsidiary, CHT Security. ANDs can combine with HiNet Security Fleet solution to upgrade the security of users' information systems.

31

Our IDC is under centralized management, and we saw increasing occupancy in our highest-rated Banqiao IDC with strong potential demand, which has driven us to work on our next business expansion.

CHT cloud service is a Multi-Cloud Network Convergence service. With a high-quality global network as the basis for all kinds of cloud services, it integrates our Company's hicloud and other public cloud services, including in Amazon Web Services, Microsoft Azure, and Google Cloud Platform.

We also provide Content Delivery Network, or CDN, service. This service is effective in speeding the delivery of content of websites with high traffic. The closer the CDN server is to the user geographically, the faster the content will be delivered to the user. We provide CDN service to internet content providers to ensure stable quality when programs are broadcasted.We will expedite CDN construction to enhance digital convergence product competitiveness. In addition, starting from 2020, we launched value-added Web Application Firewall, or WAF, to cater to increasing cybersecurity demands. Besides, our CDN is effectively integrated with IDC. With the combined solution, customers can place the server in IDC as the origin site and CDN distribute the site traffic to the internet with high efficiency and stable quality.

Interconnection

We provide interconnection of our fixed line network and mobile network with other operators.

The following table sets forth our interconnection fee revenues and costs for the periods indicated. These revenues and costs are included, depending on the nature of the call made, in domestic fixed communications or mobile communications revenues and expenses, respectively.

The interconnection rate between fixed-line customers and other fixed-line customers is NT$0.32 per minute during peak times and NT$0.09 per minute during off-peak times. The interconnection rate for calls initiated by mobile customers to fixed-line customers has been NT$0.4383 per minute during peak times and NT$0.2148 per minute during off-peak times since January 2019. See 'Item 5. Operating and Financial Review and Prospects-Overview-Tariff adjustments.'

Our mobile interconnection revenues and costs decreased from 2018 to 2020 mainly due to (1) the NCC mandating a mobile interconnection rate reduction over a period of four years starting from November 2017 from NT$1.15 per minute to NT$0.571 per minute, and (2) decreasing traffic volume attributable to VoIP substitution.

Currently, for fixed-line-to-mobile calls, the fixed-line network operators have the right to set the rates of telecommunication fees and to be charged to customers, but fixed-line network operators have to pay interconnection fees to mobile network operators in accordance with the interconnection rate prescribed by the NCC. Fixed interconnection costs decreased from 2018 to 2020 mainly due to (1) reduction of mobile interconnection rate for fixed-line-to-mobile calls, and (2) decreasing traffic volume attributable to VoIP substitution.

In accordance with governmental regulations, the contracts governing our interconnection arrangements must specifically address a number of prescribed issues. For example, our interconnection charge should reflect our costs with respect to the network elements used. In addition, cost increases are subject to approval by the regulatory

32

authorities. We expect that our interconnection contracts will generally be reviewed annually, although we may also enter into long-term contracts. See 'Regulation-Telecommunications Act-Interconnection Arrangements.'

Marketing, Sales and Distribution

Marketing Strategy

In order to retain and expand our large customer base and to encourage our customers to increase their use of our services and products, we continue to focus our marketing strategy on the following areas.

Sales and Distribution

As of December 31, 2020, we had 17 operations offices for operations, 455 service centers and 15customer service call centers for sales and customer service. In addition, in 2020, we enhanced user interface and user experience, simplified transaction process on our online store to improve customers' experience, and we enhanced our service efficiency by increasing digital channel access and transactions.

We also had 245 SENAO exclusive service stores as of December 31, 2020. In January 2007, we acquired 31.33% equity ownership of SENAO, a major distributor of mobile handsets in Taiwan. SENAO has been listed on the TWSE under the number '2450' since May 2001. Our equity ownership in SENAO decreased from 31.33% as of January 15, 2007 to 28.18% as of February 28, 2021. Our investment in SENAO enhanced our mobile handset distribution and sales capabilities. Besides, customers can subscribe to our broadband service, MOD service and other services at SENAO retail stores. See 'Item 7. Major Stockholders and Related Party Transactions-B. Related Party Transactions' for a discussion of the agreement between the parent company and SENAO about our business cooperation.

Competition

We face competition in virtually all aspects of our business.

Domestic Fixed Communications

33

Mobile Communications

There are five mobile operators in Taiwan, including Chunghwa Telecom, Taiwan Mobile, Far EasTone, T-Star and APTG. All of these five operators have 4G and 5G mobile broadband licenses. Each mobile broadband network operator has been providing promotional programs to attract consumers, including unlimited data plans. In recent years, T-Star and APTG provided unlimited data plans with extremely low prices and acquired many subscribers. In 2018, the big three also offered unlimited low-priced data plans to maintain their market share. In 2019, we aimed at bundling attractive handsets in order to increase our service revenues. In 2020, with effective 4G subscriber retention and 5G migration, we were pleased to see net increases in our post-paid mobile subscriber for four consecutive quarters. We believe such factors will contribute to our growth in our mobile business.

In addition to the mobile network operators, the NCC has issued a total of 16 mobile virtual network operators, or MVNO, licenses, which allow operators without a spectrum allocation to provide mobile services by leasing the capacity and facilities of a mobile service network from a licensed mobile service provider.

We compete in the mobile services market primarily on the basis of premium brand, quality of service, network reliability and attractiveness of service packages. See 'Network Infrastructure-Mobile Services Network' for a discussion on our advantage of mobile broadband services spectrum.

Internet

Our primary competitors in internet services are other internet service providers, including SeedNet and TWM Broadband. We compete in the internet services market primarily on the basis of technology, speed of transmission, amount of bandwidth available for use, network coverage and VAS. See '-Emerging Services' for a discussion on our ICT services.

International Fixed Communications

Our major competitors are TWM Broadband, New Century Infocomm Tech. Co., Ltd. and APTG, which have provided fixed-line services since June 2001. These operators are primarily focused on ILD services and enterprise customer services, which typically generate a higher revenue than residential customers.

There are four submarine cable licenses granted by NCC since August 2001, including East Asia Network Inc., owned by Telstra, Reach Cable Networks Limited, owned by PCCW Global, FLAG Telecom Taiwan Services Limited, owned by GCX Corporation, and Taiwan International Gateway Corporation, offering international leased line services to the other fixed-line operators, internet service providers and international simple resale, or ISR, operators.

34

Our ILD services compete with ILD resale services and VoIP services such as those provided by mobile applications.

Emerging Services

Our major competitors in ICT services are system integration service providers, including HwaCom Systems Inc., MiTAC Information Technology Corp., NEC Taiwan Ltd., Acer Incorporated, Tatung Company, SYSTEX Corporation, SYSCOM Group, IBM Corporation, HP Company, Stark Technology Inc., Amazon.com Inc. and Advantech Co., Ltd.

Network Infrastructure

Our network infrastructure consists of transmission networks that convey voice and data traffic, switching networks that route traffic between networks, and mobile, internet, leased line and data switching networks.

We purchase most of our network equipment from well-known international suppliers. As part of the purchase contract, these suppliers deliver and install the equipment for us. We also purchase from local suppliers a variety of components such as transmission lines, switches, telephone sets, MOD set-top boxes and radio transmitters.

Approximately 12,067 of our employees were engaged in network infrastructure development, maintenance, operations and planning as of December 31, 2020.

Transmission Networks

As of December 31, 2020, our transmission networks consisted of approximately 2.7 million fiber kilometers of fiber optic cable for trunking and approximately 10.7 million fiber kilometers of fiber optic cable for local loop.

Due to the emergence of Packet Transport Network, or PTN, technology, a cost-effective method for transmitting data services, we began the deployment of PTN in 2013. Due to the high utilization of our existing Re-configurable Optical Add-Drop Multiplexer, or ROADM, network, we began to introduce Optical Transport Network, or OTN, to meet the demand of 100G wavelength services in 2014. After completing a trial of per-wavelength transmission rates of 200 Gbps, we began to introduce the technology of 200Gbps per wavelength in our OTN network in 2018. We had deployed 620 100Gbps-wavelength and 221 200Gbps-wavelength in the OTN network and 24,180 GbEs in the PTN network by the end of 2020.

As part of our strategic focuses on the internet and data markets, our local loop connections mainly adopt FTTx technology. This enables us to provide broadband services, such as MOD, high-speed internet access and VPN. As of December 31, 2020, we have constructed 10.3 million FTTx ports. Our FTTx service can offer high-speed broadband internet access rates up to 1 Gbps. For low bandwidth demand, we use ADSL technology to provide the internet connection services to our customers.

Switching Networks

Domestic telecommunications network. Our domestic public switched telephone network currently consists of 19 message areas connected by a long distance network. As of December 31, 2020, we had 38 long distance exchanges, which are interconnection points between our telecommunications network and approximately 14.7 million telephone lines, which reached virtually all homes and businesses in Taiwan.

We currently have intelligent networks installed over our public switched telephone networks for our domestic long distance and international networks, as well as a local intelligent network in the Taipei, Taichung and Kaohsiung metropolitan areas. Our intelligent network is designed to facilitate the use of VAS by providing more information about calls and allowing greater management of those calls.

35

As of December 31, 2020, our Next Generation Network, or NGN core network capacity consisted of 2,330,000 local telephone subscribers, comprising 1,570,000 Session Initiation Protocol-based, or SIP-based, and 760,000 Access Gateway-based, or AG-based, subscribers.

Our NGN Managed IP backbone network consists of an inner core network and an outer core network. We owned high-speed NGN Managed IP backbone network by the end of 2020 with 12 sets of 4Tbps switch routers for the inner core network and more than 34 sets of 4Tbps/1.6Tbps switch routers for the outer core network. The bandwidth of the network is approximately 2,060 Gbps as of the end of 2020. We believe this network will enable us to meet the increasing demand for NGN services, such as VoIP, and all managed services, including MOD and VPN.

International network. Our international transmission infrastructure consists of both submarine cable and satellite transmission systems, which link our national network directly to 97 telecommunications service providers in 47 international destinations.

International calls are routed between Taiwan and international destinations through one of our two international switching centers, one located in Taipei and the other in Kaohsiung. Each center had time-division multiplexing, or TDM, international gateway switches and NGN international gateway switch. We had a trunk capacity of 60,000 channels in total as of December 31, 2020.

In 2018, we started to build the Southeast Asia-Japan 2 Submarine Cable, or SJC2, with several Asian telecom companies. The cable will feature up to seven pairs of high capacity optical fiber with a total capacity of 126 Terabits per second. Its high capacity allows it to support high bandwidth intensive requirements such as the IoTs, robotics, analytics and AR or VR applications. As of December 31, 2020, we had invested in 27 submarine cables, 12 of which land in Taiwan. We had increased the capacity of each of our current submarine cables, increasing our total aggregate capacity from 17,256 Gbps in 2019 to 18,718 Gbps in 2020.

Mobile Services Network

Our mobile services network consists of:

36

In May 2014, we launched our 4G mobile broadband services with 10MHz paired spectrum in the 900MHz frequency band and 25MHz paired spectrum in the 1800MHz frequency band. In December 2015, we obtained an additional spectrum for 4G mobile broadband services of 30MHz paired spectrum in the 2500MHz and 2600MHz frequency bands. In June 2017, we implemented four frequency band CA technology into our 1800/2600MHz frequency band base stations that is expected to increase users' downlink speed over 500 Mbps. In November 2017, we further obtained spectrum for 4G mobile broadband services of 5MHz paired spectrum in the 1800MHz frequency band and 20MHz paired spectrum in the 2100MHz frequency band. After that, we own three consecutive 20MHz spectrum in 1800MHz, 2100MHz and 2600MHz frequency bands, which may provide higher data transmission rates.

In February 2020, we acquired 5G spectrums allocated 90MHz bandwidth in the 3.5GHz frequency band and 600MHz bandwidth in the 28GHz frequency band. To meet the demand from our customers for 5G mobile broadband services, we are now deploying our 5G network and using C-RAN architecture to enhance 5G RAN performance and reduce network maintenance costs.

We have also installed an intelligent network on our existing mobile services network infrastructure, which enables us to provide additional functions, such as prepaid and VPN services as well as a wide range of VAS.

Internet Network

HiNet, our internet service provider, has the largest internet access network in Taiwan, with 34 points of presence, approximately 5,476,000 broadband remote access server ports and a backbone bandwidth of approximately 12,232 Gbps as of December 31, 2020. We aim to increase HiNet's points of presence and backbone bandwidth to approximately 14,332 Gbps by the end of 2021.

HiNet's broadband backbone network consists of an inner core network and an outer core network. We had high-speed internet protocol backbone network by the end of 2020 with 20 sets of 46Tbps/30Tbps /28.8Tbps/10.24Tbps/4.48Tbps switch routers for the inner core network and more than 54 sets of 28.8Tbps/10.56Tbps/5.28Tbps/2.64Tbps switch routers for the outer core network. We also built CDN to meet the needs of Internet/OTT services. Our CDN consists of 17 domestic and five overseas point-of-presences and the total capacity is approximately 2,340 Gbps. We believe these networks will enable us to meet the increasing demand for our internet services.

HiNet's total international connection bandwidth is 2,212 Gbps as of December 31, 2020. As we expect that internet traffic flows to and from the United States will continue to increase, we have been continuously expanding our bandwidth to the United States. We also endeavor to increase our links to other countries, including Japan, Korea, Hong Kong, Singapore, Mainland China, Malaysia, Thailand, the United Kingdom, Germany and the Netherlands.

Leased Line and Data Switching Networks

We operate leased line networks on both a managed and unmanaged basis. In addition, we operate a number of switched digital networks used principally for the provision of packet-switched, frame relay, asynchronous transfer mode technology and a multi-protocol label switching internet protocol VPN. As of December 31, 2020, we had 272 frame relay ports, 854 asynchronous transfer mode ports and approximately 117,742 multi-protocol label switching internet protocol VPN virtual ports.

Our data networks support a variety of transmission technologies, including frame relay, asynchronous transfer mode and Ethernet technology. We have also built up our HiLink VPN that combines internet protocol and asynchronous transfer mode technologies. The advantage of HiLink VPN based on multi-protocol label switching technology is that it can carry different classes of services, such as video, voice and data together to provide services with various qualities of service, high-performance transmission and fast forward solution in an enhanced security

37

network. HiLink VPN can be accessed by xDSL/FTTx/NG-SDH and can include built-in mechanisms that can deal with overlapping internet protocol addresses. Therefore, the network potentially is less costly and requires less management for business applications.

Cybersecurity and Personal Information Protection

In order to ensure full security of our critical infrastructure and critical information infrastructure, we referenced Cybersecurity Framework, or CSF, of the National Institute of Standards and Technology in the U.S., as well as domestic and international standards and regulations, including the Administration Regulations of Cyber Security on Telecommunications Business, Cyber Security Management Act, Personal Information Protection Act, General Data Protection Regulation, or GDPR, BS10012, ISO27001, ISO27011, to establish our Cyber Security and Privacy Protection Risk Management Framework.

Our risk management committee tracks and manages risk control issues of cybersecurity and privacy protection on a monthly basis. When a risk is greater than our risk appetite, or where there is a major crisis, the convener of risk management committee will report to our audit committee, and if necessary, report to our board of directors accordingly. In 2020, there were no incidents of material risks arising from cybersecurity or personal information protection.

Our Senior Executive Vice President of Business serves as the Chief Information Security Officer, or CISO, and Data Protection Officer, or DPO, and formed an unit with Cyber Security Department, to (i) align regulations with technology advancement for new business development, (ii) coordinate the overall cybersecurity policy, (iii) enact and amend required security specifications, (iv) utilize equipment for centralized security monitor (v) defense and mitigate enterprise security risks, (vi) accelerate new business development, and (vii) provide customers with secure and reliable digital ecosystem.

To prevent increasing cyber risks and threats, we have established CHT SOC, which is responsible for security controls, and threats of smart detection and intelligence, quick incidents response since 2013. Key sequential measures are described below.

38

We evaluate security governance based on risk management orientation, and formulate annual key security measures and key performance indicators based on external trends, such as regulations, security threats, international standards, development trend, and internal risk assessment results, including internal and external audits, our SOC threats detected, crisis resolution and review, and incorporate them into our employees' performance assessments. We review and adjust the security strategy, policy and procedures regularly, and comply with internal and external audits. The Company is required to pass government administrative security and privacy protection check and obtain third parties certifications, such as ISO 27001, ISO 27011, BS10012, CSA STAR Certification.

For more information, please refer to our website https://www.cht.com.tw/en/home/cht/sustainability/economic/cybersecurity-and-privacy-protection. The information on our website does not form a part of this annual report.

Property, plant and equipment

Our property, plant and equipment consist mainly of telecommunications equipment, land and buildings located throughout Taiwan. Although we have a significant amount of land and buildings throughout Taiwan, most of our properties are for operational use and only a small part of them are for investment purposes, which were classified as 'investment properties' in our consolidated financial statements included in this annual report. Notes 16 and 18 to our consolidated financial statements, included elsewhere in this annual report, provide additional details as to our 'Property, plant and equipment' and 'Investment properties,' respectively. See 'Item 3. Key Information-D. Risk Factors-Our ability to deliver services may be disrupted due to a systems failure, shutdown in our networks, earthquakes or other natural disasters' for a discussion of environmental issues that may affect utilization of our assets.

We are now focusing on rental income and will continue seeking development opportunities to increase the value of our land and buildings. We have received approximately NT$735.9 million (US$26.2 million) in rental income from properties in 2020. We are also developing a commercial building in Nangang, Taipei City, and a staff dormitory in Taoyuan City to attract and maintain outstanding human resources.

Insurance

We do not carry comprehensive insurance for our properties or any insurance for business disruptions. We do, however, maintain in-transit insurance for key materials, such as cables, equipment and equipment components. We do not carry insurance for the ST-2 satellite since we only lease it for our operations instead of owning the satellite.

Employees

Please refer to 'Item 6. Directors, Senior Management and Employees-D. Employees' for a discussion of our employees.

Our Pension Plans

Currently, we offer two types of employee retirement plans-our defined contributions plan and defined benefits plan-which are administered in accordance with the Republic of China Labor Standards Act and the Republic of China Labor Pension Act.

Legal Proceedings

From time to time, we are involved in various legal and arbitration proceedings of a nature considered to be in the ordinary course of our business. It is our policy to provide for reserves related to these legal matters when it is probable that a liability has been incurred and the amount is reasonably estimable. From time to time, we have also been assessed fines by various government agencies such as the NCC and FTC, but none of these fines have had a significant effect on our financial condition or results of operations.

39

Except as disclosed in our annual report, we believe that we have not been involved in any legal or arbitration proceedings during 2018, 2019 and 2020 that would have a significant effect on our financial condition or results of operations; however, we cannot give you any assurance with respect to the ultimate outcome of any asserted claims against us or legal or arbitration proceedings involving us.

Capital Expenditures

See 'Item 5. Operating and Financial Review and Prospects-B. Liquidity and Capital Resources-Capital Expenditures' for a discussion of our capital expenditures.

Enforceability of Judgments in Taiwan

We are a company limited by shares and incorporated under the ROC Company Act. All of our directors, executive officers and some of the experts named in this annual report are residents of Taiwan and a substantial portion of our assets and the assets of those persons are located in Taiwan. As a result, it may not be possible for investors to effect service of process upon us or those persons outside of Taiwan, or to enforce against them judgments obtained in courts outside of Taiwan. We have been advised by our ROC counsel that in their opinion any final judgment obtained against us in any court other than the courts of the ROC in connection with any legal suit or proceeding arising out of or relating to the ADSs will be enforced by the courts of the ROC without further review of the merits only if the court of the ROC in which enforcement is sought is satisfied that:

A party seeking to enforce a foreign judgment in the ROC would be required to obtain foreign exchange approval from the Central Bank of the ROC (Taiwan) for the payment out of Taiwan of any amounts recovered in connection with the judgment denominated in a currency other than NT dollars if a conversion from NT dollars to a foreign currency is involved.

Regulation

Regulatory Authorities

Prior to March 1, 2006, we were under the supervision of the MOTC and the Directorate General of Telecommunications. On March 1, 2006, the NCC was formed in accordance with the National Communications Commission Organization Act, which was intended to transfer regulatory authority over the Taiwan telecommunications industry from the MOTC and the Directorate General of Telecommunications to the NCC.

Under the National Communications Commission Organization Act, the NCC was comprised of seven commissioners, which are full-time positions. The premier of the Executive Yuan shall nominate the commissioners and appoint one of them to serve as chairperson, and one as vice chairperson. The nomination shall be approved and appointed by the Legislative Yuan. The tenure of the commissioners is four years, and the commissioners may be re-appointed to serve a consecutive term. Before July 31, 2020, there were five commissioners, including Yaw-Shyang Chen, who acted as the acting chairperson from May 30, 2019 to July 31, 2020. Starting from August 1, 2020, there

40

are seven commissioners, including the chairperson Yaw-Shyang Chen and the vice chairperson Po-Tsung Wong, both of whom began on August 1, 2020.

Telecommunications Act

The Telecommunications Act and the regulations under the Telecommunications Act establish the framework and govern the various aspects of the Taiwan telecommunications industry, including licensing of telecommunications services, telecommunication numbers, restrictions on dominant telecommunications service providers, tariff control and price cap regulation, accounting separation system, interconnection arrangements, bottleneck facilities, spectrum allocation, provision of universal services, equal access, number portability, local loop unbundling, co-location, ownership limitations, and non-auction pricing system for assignment of radio frequencies.

Under the Telecommunications Act, telecommunications service providers are classified into two categories: Type I service providers and Type II service providers. Type I service providers are more closely regulated than Type II service providers. Until 1996, we had been the sole provider of Type I services in Taiwan. In 1996, the government opened the market for mobile, paging and trunked radio, mobile data and digital low power cordless telephone services. In 1998, the government opened the market for fixed-line and mobile satellite services. As of February 5, 2020, there had been 82 Type I services providers in total.

The regulations governing dominant telecommunications services providers under the Telecommunications Act apply only to Type I service providers. We were declared by the former competent authority MOTC as a dominant Type I service provider for fixed-line services, and no dominant Type I service provider for mobile broadband services was declared. Under the Telecommunications Act, a dominant Type I service provider must not engage in the following activities:

41

In addition, a dominant Type I service provider is subject to special regulations limiting its tariff changes. As a dominant Type I service provider under the Telecommunications Act, we were constrained in our ability to raise prices. Under the Administrative Regulation Governing Tariffs of Type I Telecommunications Enterprises, a dominant Type I service provider must submit its proposed adjustment in primary tariffs and promotional packages including primary tariffs to the NCC for approval at least 14 days prior to the date of the proposed tariff changes and announce such change on media, website and business locations on the day after the NCC grants the approval. The tariff change will come into effect seven days after the announcement. In comparison, all non-dominant Type I service providers are only required to fully disclose and notify the public of their proposed tariff adjustments and promotional packages, through the media, websites, and at all business premises, in an appropriate manner, and to report to the NCC prior to the date of the proposed tariff change, with respect to all tariffs. Type II service providers are free to establish their own tariff schemes but are required to notify the NCC and the public upon adoption and upon any subsequent adjustments.

Telecommunications Management Act

Due to the rapid development of the borderless internet application services and the rapid evolution of network technology, the regulatory framework of the Telecommunications Act and relevant regulations thereunder can no longer meet the need of the telecommunications industry, and may even restrain the digital convergence and innovation of the telecommunications industry. Therefore, the Telecommunications Management Act, or the TMA, and relevant regulations thereunder were enacted, which adopt an 'administration by activity' model, to dissolve the regulatory framework of the Telecommunications Act and relevant regulations thereunder, which adopts an 'administration by business' model and the concession approval system.

The TMA was passed by the Legislative Yuan on May 31, 2019 and promulgated by the President on June 26, 2019. The Executive Yuan issued an ordinance on June 29, 2020 to set the effective date of the TMA (excluding certain articles regarding frequency allocation) on July 1, 2020, and issued an ordinance on October 22, 2020 to set the effective date of the remaining articles of the TMA regarding frequency allocation on November 1, 2020. According to the TMA, within three years upon the enforcement thereof, the existing telecommunications enterprises shall register themselves with the NCC for the transition into being governed by the TMA. We filed an application for the aforementioned transition registration on July 31, 2020, and the application was approved by the NCC on September 30, 2020. With respect to Type I telecommunications enterprises that have been designed as dominant market players according to the Telecommunications Act before the enforcement of the TMA and related implementation measures, from the period between the TMA taking effect and the competent authority determining their significant position in the specific market and hence adopting special control measures therefor based on the TMA, the competent authority still supervises them in accordance with the Telecommunications Act and implementation measures thereof.

The impact caused by the enforcement of the TMA on us and the telecommunications industry include: (i) reducing the entry barrier to the telecommunications markets by changing the original concession/approval system to the registration system, which spurs the competition of the market; (ii) loosening unnecessary restrictions. General enterprises shall have only ordinary obligations to the minimum necessary extent, provided that certain enterprises with significance in the specific telecommunications service markets will be subject to more stringent control measures. Since we may be regarded as the enterprise with significance in the specific telecommunications service markets, we will be required to bear more stringent obligations; (iii) restricting the right of telecommunications enterprises to use private lands and buildings. Only where the telecommunications infrastructure of a public switched telecommunications network cannot be established without passing through private lands or buildings or can be established with an enormous amount of money, the establishment may be made by passing through private lands or buildings on the premise of selecting the least harmful location and manner; (iv) opening up domestic roaming, frequency transferring, frequency leasing, frequency lending or frequency sharing mechanisms, which allows the telecommunication enterprises to use spectrums and conduct network constructions more flexibly and changes the competition status of the telecommunications market. The main provisions of the Telecommunications Management Act are summarized as follows:

Reducing the entry barrier to the telecommunications market:

The Telecommunications Management Act reduces the entry barrier to the telecommunications market by changing the concession approval system to the registration system. According to the Telecommunications Management Act, telecommunications service providers with any of the following activities shall register as a telecommunications enterprise with the competent authority:

42

However, if any telecommunications service provider fails to make the aforementioned registration, the only consequence is that it will not be granted the rights provided under the Telecommunications Management Act.

Specifying the obligations of telecommunications enterprises:

The TMA categorizes the obligations of telecommunications enterprises into three levels: general obligations, special obligations and designated obligations:

The obligations borne by all the telecommunications enterprises that have filed the registration with the NCC include:

The obligations borne by the telecommunications enterprises that are granted specific resources or determined by the NCC include:

43

In order to fulfill the need of policy or the competent laws and regulations, relevant competent authorities may designate the telecommunications enterprises which meet certain conditions to take relevant necessary measures, including disaster prevention and assistance, communication security and surveillance, protection of the rights and interests of the people with disabilities and the telecommunications universal services.

To meet the need of the rapid-changing market and ensure effective competition in the telecommunications service market, the enterprises under control are changed from dominant market players to the enterprises with significance in the specific telecommunications service market, which are subject to different levels of corrective actions according to the Telecommunications Management Act.

The NCC is entitled to adopt control measures for those with market significance in the specific telecommunications service market if necessary, including:

We may be regarded as the enterprise with significance in the specific telecommunications service market. If so, the aforementioned control measures may be levied on us.

The opportunity of accessing to and using information may be different due to gender, race, class, geographic area of residence or other factors, which is called 'digital divide'.

The Telecommunications Management Act tries to resolve the problem caused by digital divide from the following aspects by opening the market, introducing competition and new technology and continuing the promotion of telecommunications universal service:

44

The Telecommunications Management Act removes the restriction on telecommunications network construction imposed by the Telecommunications Act and allows enterprises to establish the telecommunications networks that meet their business needs and develop new technology and equipment.

To ensure the security of network and information, in addition to the PSTN where telecommunications resources including frequency and telecommunications number is used, the telecommunications network where no telecommunications resource is used while telecommunications services are actually provided based on the network-to-network characteristic of the internet, such as iTaiwan, is also regarded as the PSTN, and are both subject to a unified cyber security standard. Besides, there are some protection obligations relating to the establishment of PSTN and the provision of telecommunications services specified in the Telecommunications Management Act, including using the telecommunications equipment that complies with national security concerns and cyber security standards, establishing the equipment for the performance of communication surveillance, adopting cyber security protection plan and ensuring the security of critical telecommunications infrastructure, to ensure and maintain national security, cyber security and public security.

The Telecommunications Management Act changes the method of frequency allocation specified in the Telecommunications Act, allowing the competent authority to allocate frequency by auction, open tender or other appropriate methods according to the characteristic and purpose of use of the frequency.

As a result, the efficiency of the use of frequency can be improved, the development of radio technology can be ensured, and the development of the new technology and services of communications can be encouraged.

Fair Trade Act

The requirements and restrictions under the Telecommunication Act regarding price control, IP peering, equal access and accounting separation regulates certain competitive activities among telecommunication industries and aims to reduce the occurrence of anti-competition activities.

Besides, according to the TMA, to ensure effective competition in the telecommunications service market, the competent authority is entitled to adopt control measures for those with market significance in the specific telecommunications service market if necessary, including ordering those enterprises to disclose necessary information, conditions, procedures and expenses in terms of interconnection, network access components or use of telecommunications infrastructure; prohibiting those enterprises from making discrimination, setting the service fee that may cause a cross-subsidy, price squeeze or any other abuse of power and hence impede fair competition (including doing so for the subsidiaries, affiliates or partners thereof ); requesting those enterprises to provide interconnection, network access components or relevant telecommunications infrastructure; ordering those enterprises to draw up and publish a template agreement related to the provision of interconnection or network access.

By comparison to the Telecommunications Act and the TMA, the Fair Trade Act, or the FTA, plays a more comprehensive role in regulating all matters relating to competition between enterprises. The Fair Trade Act seeks to deter and prevent anti-competitive conduct by granting the Fair Trade Commission's powers to investigate and to impose penalties.

The FTA is administered and enforced by the Fair Trade Commission, or the FTC, which has independent administration rights granted to it under the Fair Trade Act and is empowered to impose disciplinary actions for fair trade matters. The Fair Trade Commission may initiate an investigation either on its own account in accordance with its discretion granted by the Fair Trade Act or upon receipt of a complaint.

Regulation on Telecommunications Enterprise with Monopoly Status

The term 'monopoly' used in the FTA refers to the circumstance where an enterprise conducts its business operation in a relevant market without facing any competition or where an enterprise is able to dominate the relevant market and block competition in the market. If there are two or more enterprises within the same market that do not engage in any price competition with each other, the whole group of non-competing enterprises should be deemed as a single monopoly enterprise in the market.

45

The FTC has the ultimate discretion to consider an enterprise as a monopolistic enterprise upon any other events evidencing such enterprise's capability to affect the supply and demand in relevant market or eliminate competition.

Under the FTA, any enterprise with monopoly status is prohibited from engaging in any of the following activities:

According to the FTC's Explanation on Regulations Governing Telecommunication Industry, a telecommunications enterprise with monopoly status is likely to be involved with the following activities regulated by the FTA: conducting predatory pricing, price squeezing, cross-subsidies, price discrimination, blocking access to essential facilities, inappropriate preference or differential treatment and entering into long-term agreements to restrict the ability to change counterparties.

If the FTC finds an enterprise liable for violation of regulations governing monopoly, the FTC could impose a monetary fine of not more than NT$100,000,000 each time. If the FTC finds such violation serious, it may further impose a monetary fine exceeding the NT$100,000,000 but up to 10% of the total sales of the enterprise in the preceding fiscal year. The responsible person of such enterprise may be sentenced to imprisonment of not more than three years.

Regulations on Concerted Action (Cartel) in Telecommunication Industry

The term 'concerted action (cartel)' as used in the FTA means the competing enterprises at the same production and/or marketing stage, by means of contract, agreement or any other form of mutual understanding, jointly determine the price of goods or services, quantity, technology, products, facilities, trading counterparts, or trading territory with respect to such goods and services, or any other behavior that restrict each other's business activities, resulting in an impact on the market function with respect to production, trade in goods, or supply and demand of services. The FTC may assume a concerted action exists based on the market condition, the feature of goods or services, cost and profit, and the economic feasibility for enterprises to conduct concerted action.

Under the FTA, enterprises are prohibited from engaging in any concerted actions unless the FTC holds the concerted action may be beneficial to the overall economy and public interest.

According to the FTC's Explanation on Regulations Governing Telecommunication Industry, a telecommunications enterprise may be able to involve with the following concerted actions: entering into common pricing agreements, restriction of output and market segregation, concerted refusal to deal, or entering into agreements for exchange of information.

If the FTC finds an enterprise liable for violation of regulations governing concerted action (cartel), the FTC could impose a monetary fine of not more than NT$100,000,000 each time. If the FTC finds such violation is serious, it may further impose a monetary fine exceeding the NT$100,000,000 but up to 10% of the total sales of the enterprise in the preceding fiscal year.

Regulations on Restrict Competition in Telecommunication Industry

The FTA prohibits any enterprise from conducting any of the following activities that may restrict competition:

46

If any enterprise violates the regulations governing unfair competition, the FTC may order it to cease therefrom, rectify its conduct or take necessary corrective action within the time prescribed in the order; in addition, the FTC may assess upon such enterprise an administrative fine of not less than NT$100,000 nor more than NT$50,000,000. Should such enterprise fail to cease therefrom, rectify the conduct or take any necessary corrective action after the lapse of the prescribed period, the FTC may continue to order such enterprise to cease therefrom, rectify the conduct or take any necessary corrective action within the time prescribed in the order, and each time may successively assess thereupon an administrative fine of not less than NT$200,000 nor more than NT$100,000,000 until its ceasing therefrom, rectifying its conduct or taking the necessary corrective action.

Regulations on the Representations or Symbol Used by Telecommunications Enterprise on Goods or in Advertisement

The FTA prohibits any enterprise from making or using false or misleading representations or symbol as to price, quantity, quality, content, production process, production date, valid period, method of use, purpose of use, place of origin, manufacturer, place of manufacturing, processor, place of processing on goods, or any items which attract customers or in advertisements, or in any other way making known to the public.

If an enterprise violates the applicable provisions under the FTA that prohibit false or misleading representations, the FTC may order it to cease therefrom, rectify its conduct or take necessary corrective action within the time prescribed in the order; in addition, the FTC may assess upon such enterprise an administrative fine of not less than NT$50,000 nor more than NT$25,000,000. Should such enterprise fail to cease therefrom, rectify the conduct or take any necessary corrective action after the lapse of the prescribed period, the FTC may continue to order such enterprise to cease therefrom, rectify the conduct or take any necessary corrective action within the time prescribed in the order, and each time may successively assess thereupon an administrative fine of not less than NT$100,000 nor more than NT$50,000,000 until its ceasing therefrom, rectifying its conduct or taking the necessary corrective action.

Personal Information Protection Act

Under the Personal Information Protection Act, or PIPA, every individual or governmental or non-governmental agencies, including us, should be subject to certain requirements and restrictions for collecting, processing or using personal data. The definition of 'personal data' is extended to cover a broad scope, including the name, date of birth, ID number, special features, fingerprints, marital status, family, education, occupation, medical records, medical history, genetic information, sex life, health examination report, criminal records, contact information, financial status, social activities, and any other data which is sufficient to directly or indirectly identify a specific person. If we fail to comply with the PIPA, we may be subject to serious punishment for civil claims, criminal offenses and administrative liabilities: the ceiling of the aggregate compensation amount for damages payable in a single case will be up to NT$200 million or the actual value of loss arising from our violation provided the amount of actual value of such loss is higher than NT$200 million; the defendant may be subject to an imprisonment of up to five years; and the penalty for administrative liabilities will be up to NT$500,000 for each violation, and may be imposed consecutively if such violation continues.

47

C. Organizational Structure

Set forth below is a diagram indicating our organization structure as of March 31, 2021. Please refer to Exhibit 8.1 for the subsidiaries' jurisdiction of incorporation.

D. Property, Plant and Equipment

Please refer to '-B. Business Overview' for a discussion of our property, plant and equipment.

None.

You should read the following discussion of our financial condition and results of operations together with the consolidated financial statements and the notes to such statements included in this annual report.

For the convenience of readers, NT dollar amounts used in this section for, and as of, the year ended December 31, 2020 have been translated into U.S. dollar amounts using US$1.00=NT$28.08, set forth in the statistical release of the Federal Reserve Board on December 31, 2020. The U.S. dollar translation appears in parentheses next to the relevant NT dollar amount.

Overview

A number of recent and expected future developments have had, and in the future may have, a material impact on our financial condition and results of operations. These developments include:

48

Each of these developments is discussed below.

Changes in our revenue composition and sources of revenue growth

Our domestic fixed communications business revenues are derived primarily from the provision of local, domestic long distance, broadband access, leased line service, MOD, and other domestic services, including ICT, cloud services, corporate solution services, billing handling services and the leasing of real estate properties. In addition, we also derive fixed-line revenues from providing interconnection services to other carriers. Our revenues from mobile communications business are principally derived from the provision of mobile services, sales of mobile handsets, tablets and wearable devices and other mobile services. Our revenues from internet business are generated principally from HiNet internet service, data communication services, internet VAS, IDC and other internet services, including ICT and cloud services. Our revenues from international fixed communications business are derived primarily from ILD, international leased line, international data services, satellite services and other international services. Our other revenues are principally derived from non-telecom services.

The table below sets forth the revenues from our principal lines of business as a percentage of total revenues for the periods indicated.

Our domestic fixed communications business has been an important source of revenue over the last three years. We derive domestic fixed communications revenue from the provision of FTTx and ADSL access services that provides customers with data access lines. Revenue from domestic fixed communication increased as a percentage of our total revenue in 2019, mainly attributable to the increase in ICT revenues, which was partially offset by the decline of domestic long distance and local call service revenue, and the decrease in fixed broadband access revenues. Revenues from domestic fixed communication further increased as a percentage of our total revenue in 2020, mainly attributable to the increase in ICT and broadband access revenues, which was partially offset by the decline of local and domestic long-distance revenues. We believe that domestic fixed communications business will continue to generate a significant portion of our revenues.

Revenues from our mobile communications business were a major contributor to our revenues over the last three years. In 2019, the percentage of total revenues derived from mobile communications business decreased mainly attributable to the decline in service revenue, due to market competition and free VoIP applications. In 2020, the percentage of total revenues derived from mobile communications business further decreased mainly attributable to the decline in handset sales and roaming revenue resulting from travel restrictions in response to the COVID-19 pandemic. We believe that our mobile communications business will continue to generate a significant portion of our revenues.

Our internet business was another important source of revenues over the last three years. We derived internet business revenues from the provision of data communication services, application VAS and services provided to the government. In 2019, the percentage increased mainly due to the revenues from services such as HiLink, ITS, smart home and Big Data services, and attributable to the decrease in revenues generated from other segments. In 2020, the percentage of revenues from internet services within total revenues further increased mainly due to the revenues from IDC, cloud services, IoT, cybersecurity services, HiNetand HiLink.

We derived our international fixed communications revenues mainly from ILD telephone services and international ICT services. In 2019, the percentage decreased mainly due to our new strategy to reduce low-margin

49

revenues such as the wholesale of ILD traffic. In 2020, the percentage of total revenues derived from international fixed communications business further decreased mainly attributable to our aforementionedstrategy.

Our other revenues increased from 2018 to 2020, and the increase was mainly due to operating growth derived from one of our subsidiaries, CHPT, a semiconductor testing company.

Tariff adjustments

We adjust our tariffs and offer promotional packages from time to time primarily in response to market conditions. We also from time to time are required to adjust our pricing in line with domestic regulations.

On March 8, 2017, the NCC announced a plan for tariff reductions effective from April 1, 2017 to March 31, 2020. The reduction plan applies to the wholesale tariffs for IP peering and domestic leased line services, which was subject to a reduction by ∆CPI-5.1749%, and to the monthly fees for fixed-line broadband access services (excluding FTTH, FTTB, ADSL, and the services with downlink and uplink speeds both over 100 Mbps), which was subject to a reduction by ∆CPI-3.19%. The ∆CPI for 2018 that was used for the tariff reduction starting from April 1, 2019 was 1.35%. On March 5, 2020, the NCC announced a new round for tariff reductions effective from April 1, 2020 to March 31, 2024. The new round of reduction plan applies to the wholesale tariffs for IP peering and domestic leased line services, which was subject to a reduction by ∆CPI-7.48%, and to the monthly fees for xDSL and FTTx services (excluding ADSL, the services with downlink speed of 12 Mbps and below, and the services with downlink speeds of 300 Mbps and over), which was subject to a reduction by ∆CPI-2.15%. The ∆CPI for 2019 that was used for the tariff reduction starting from April 1, 2020 was 0.56%. The ∆CPI for 2020 that was used for the tariff reduction starting from April 1, 2021 was -0.23%. We do not expect such tariff reduction to have a material adverse impact on our results of operations.

In addition, on August 23, 2017, the NCC determined that, starting from November 2017, our tariff in the mobile interconnection fees should be reduced from NT$1.15 per minute to NT$0.571 per minute in four years.

On December 14,2020, the NCC determined that starting from January 1, 2021 to June 30, 2023, our tariff in the mobile interconnection fees will decrease year by year from NT$ 0.525 per minute in 2021 to NT$ 0.482 per minute in 2022, and then to NT$ 0.443 per minute in 2023 until June 30, 2023.

Furthermore, the NCC approved our new fixed communications network interconnection fees on September 26, 2018. The interconnection fees for local telephone and domestic long distance telephone remain the same, while the interconnection fees from mobile network to local telephone decrease, from NT$0.4851 to NT$0.4383 per minute during peak times and from NT$0.2531 to NT$0.2148 per minute during off-peak times. The tariff is effective from January 1, 2019 to December 31, 2022.

Besides the mandatory tariff reduction mentioned above, we, from time to time, voluntarily implemented tariff adjustments in our broadband and mobile businesses in the past few years to consolidate our market share.

50

Capital expenditures as a result of technological improvements and changes in our business

In recent years, we have focused on modernizing and upgrading our mobile services network and on developing our FTTx network, which enables transmission of digital information at a high bandwidth over fiber loops. Our priority is to construct fiber networks in new buildings and areas with demand for 500 Mbps and 1 Gbps per household for 300 Mbps and above per household, and 10 Gbps for enterprises in the near future. Our long-term goal is to optimize our capital expenditures by focusing on investing in innovative products and services with attractive return profiles. We evaluate our investment opportunities by benchmarking them against internal return requirements.

Personnel expenses

Personnel expenses constitute a significant portion of our operating costs and expenses. In 2018, 2019 and 2020, personnel expenses represented 27.3%, 27.7% and 27.0% of our total operating costs and expenses, respectively, and pension costs represented 2.1%, 2.1% and 1.6% of our total operating costs and expenses, respectively. The table below sets forth information regarding our personnel expenses and as a percentage of our total operating costs and expenses for the periods indicated.

At the time of our privatization, we settled all of our then existing defined benefit pension obligations in full. After completing our privatization on August 12, 2005, all of our continuing employees were deemed to have commenced employment as of August 12, 2005 for seniority purposes under our pension plans in effect after privatization. Under applicable ROC regulations, upon our privatization, the MOTC assumed the obligation to make annuity payments to all of our employees that retired before our privatization.

Taxation

The income tax rate for profit-seeking enterprises is 20% in the ROC. Prior to 2018, the income tax rate for profit-seeking enterprises was 17% in the ROC. We benefit from tax incentives, including tax credits of up to 15% of some of our research and development expenses in accordance with the Statute for Innovating Industries.

After-tax earnings generated from January 1, 1998 and not distributed to stockholders as dividends in the following year were assessed with a 10% unappropriated earnings tax. According to the amendment to the Income Tax Law, the rate of the ROC unappropriated earnings tax was adjusted from 10% to 5% against our unappropriated earnings generated from January 1, 2018 and the allowed tax credit (against our earnings generated since January 1, 2018) was canceled. Such amendment has been applied to our annual tax filings made starting January 1, 2019. See 'Item 10. Additional Information-E. Taxation-ROC Taxation-Dividends.' Under IFRSs, the 5% tax on unappropriated earnings is accrued during the year the earnings arise and adjusted to the extent that distributions are approved by the stockholders in the following year. As a result, our effective tax rates were 19.0% in 2019 and 2020, respectively.

51

Critical Accounting Policies

Summarized below are our accounting policies that we believe are both important to the portrayal of our financial results and involve the need for management to make estimates about the effect of matters that are uncertain in nature. Actual results may differ from these estimates, judgments and assumptions. Certain accounting policies are particularly critical because of their significance to our reported financial results and the possibility that future events may differ significantly from the conditions and assumptions underlying the estimates used and judgments made by our management in preparing our financial statements. The following discussion should be read in conjunction with the consolidated financial statements and related notes, which are included in this annual report.

Revenue Recognition

We identify the performance obligations in the contract with the customers, allocate transaction price to each performance obligation and recognize revenue when performance obligations are satisfied.

Sales of products are recognized as revenue when we deliver products and the customer accepts and controls the product. Except for consumer electronic products such as mobile devices sold in channel stores usually in the form of cash, we recognize revenues and corresponding trade notes and accounts receivable for sale of other electronic devices.

Usage revenues from fixed-line services (including local, domestic long distance and international long distance telephone services), mobile services, internet and data services, and interconnection and call transfer fees from other telecommunications companies and carriers are billed in arrears and are recognized based upon seconds or minutes of traffic processed when the services are provided in accordance with contract terms. The usage revenues and corresponding trade notes and accounts receivable are recognized monthly.

Other revenues are recognized as follows: (a) one-time subscriber connection fees (on fixed-line services) are first recognized as contract liabilities and revenues are recognized subsequently over the average expected customer service periods, (b) monthly fees (on fixed-line services, mobile, Internet and data services) and related receivables are accrued monthly, and (c) prepaid services (fixed-line, mobile, Internet and data services) are recognized as contract liabilities upon collection considerations from customers and are recognized as revenues subsequently based upon actual usage by customers.

Where we enter into transactions which involve both the provision of telecommunications service bundled with products such as handsets, total consideration received from products and telecommunications service in these arrangements are allocated based on their relative standalone selling price. The amount of sales revenue recognized for products is not limited to the amount paid by the customer for the products. When the amount of sales revenue recognized for products exceeded the amount paid by the customer for the products, the difference is recognized as contract assets. Contract assets are reclassified to accounts receivable when the amounts become collectible from customers subsequently. When the amount of sales revenue recognized for products was less than the amount paid by the customer for the products, the difference is recognized as contract liabilities and revenues are recognized subsequently when the telecommunications services are provided.

For project business contracts, if a substantial part of our promise to customers is to manage and coordinate the various tasks and assume the risks of those tasks to ensure the individual goods or services are incorporated into the combined output, they are treated as a single performance obligation since we provide a significant integration service. We recognize revenues and corresponding accounts receivable when the project business contract is completed and accepted by customers. For some project contracts, we do not create an asset with an alternative use to us and have an enforceable right to payment for performance completed to date; therefore, performance obligations are satisfied and revenues are recognized over time.

For service contracts such as maintenance and warranties, customers simultaneously receive and consume the benefits provided by us; thus, revenues and corresponding accounts receivable of service contracts are recognized over the related service period.

52

When another party is involved in providing goods or services to a customer, we are acting as a principal if we control the specified good or service before that good or service is transferred to a customer; otherwise, we are acting as an agent. When we are acting as a principal, gross inflow of economic benefits arising from transactions is recognized as revenue. When we are acting as an agent, revenue is recognized as its share of transaction.

Impairment of Trade notes and Accounts Receivable

The provision for impairment of trade notes and accounts receivable is based on assumptions about risk of default and expected loss rates. We use judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on our past experience, current market conditions as well as forward-looking information at the end of each reporting period. For details of the key assumptions and inputs used, please refer to Note 10 to our consolidated financial statements included elsewhere in this annual report. Where the actual future cash flows are less than expected, a material impairment loss may arise.

We recognize lifetime Expected Credit Loss (ECL) for trade notes and accounts receivable. Expected credit losses reflect the weighted average of credit losses with the respective risks of a default occurring as the weights. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument.

The expected credit losses on receivables are estimated using a provision matrix by reference to past default experience of the customers and an analysis of the customers' current financial positions, as well as the forward-looking indicators such as macroeconomic business indicators. When there are pieces of evidence indicating that the counterparty is in evasion, bankruptcy, deregistration of its company or the accounts receivable are over two years past due and the recoverable amount cannot be reasonably estimated, we write off the trade notes and accounts receivable. For accounts receivable that have been written off, we continue to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

Provision for inventory valuation and obsolescence

Inventories are stated at the lower of cost or net realizable value. Estimates of net realizable value are based on the most reliable evidence available at the time the estimates are made at the end of the reporting period. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the end of the period to the extent that such events confirm conditions existing at the end of the period. Inventory write-downs are determined on an item by item basis, except for those similar items which could be categorized into the same groups. We use the inventory holding period and turnover as the evaluation basis for inventory obsolescence losses.

Useful Lives of Long-Lived Assets

A significant portion of our total assets consists of long-lived assets, primarily property, plant and equipment and definite-lived intangibles. We estimate the useful lives of property, plant and equipment and other long-lived assets with finite lives in order to determine the period of time over which depreciation and amortization expenses should be recorded. The useful lives are estimated at the time assets are acquired and are based on historical experience with similar assets as well as the anticipated technological evolution or other environmental changes. Further, we review the estimated useful lives of long-lived assets at the balance sheet date. If technological changes were to occur more rapidly than anticipated or in a different form than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation and amortization in the relevant periods.

Business Combinations

Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are generally recognized in profit or loss as they are incurred.

Goodwill is measured as the excess of the sum of the consideration transferred and the fair value of the acquirer's previously held equity interests in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

53

Noncontrolling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation are measured at the non-controlling interests' proportionate share of the recognized amounts of the acquiree's identifiable net assets.

When a business combination is achieved in stages, our previously held equity interest in an acquiree is remeasured to fair value at the acquisition date and the resulting gain or loss is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are recognized on the same basis as would be required had those interests been directly disposed of by ourselves.

Control over Subsidiaries

Some entities are our subsidiaries, although we only own less than 50% ownership interest in these entities. After considering our absolute size of holding in the entity and the relative size of and the dispersion of shares owned by the other stockholders, and the contractual arrangements between us and other investors, potential voting interests and the written agreement between stockholders, the management concluded that we have a sufficiently dominant voting interest to direct the relevant activities of the entity and to have control over the governance of the entity and therefore we have control over these entities.

Investments in Unconsolidated Companies

An associate is an entity over which we have significant influence and that is neither a subsidiary nor an interest in a joint venture. A joint venture is a joint arrangement whereby we and other parties that have joint control of the arrangement and have rights to the net assets of the arrangement.

Investments accounted for using the equity method include investments in associates and interests in joint ventures. Under the equity method, an investment in an associate or joint venture is initially recognized at cost and adjusted thereafter to recognize our share of profit or loss and other comprehensive income of the associate and joint venture as well as the distribution received.

When we reduce our ownership interest in an associate or a joint venture but we continue to use the equity method, we reclassify to profit or loss the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.

Any excess of the cost of acquisition over our share of the fair value of the identifiable net assets and liabilities of an associate and joint venture at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and shall not be amortized. Any excess of our share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

We assess the impairment of investments accounted for using the equity method whenever triggering events or changes in circumstances indicate that an investment may be impaired and carrying value may not be recoverable. The entire carrying amount of the investment, including goodwill, is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. We measure the impairment based on the projected future cash flow of the investees, the underlying assumptions for which had been formulated by such investees' internal management team, taking into account sales growth and capacity utilization. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

Some of our equity investments are classified as financial assets at fair value through other comprehensive income, or FVOCI. On initial recognition, we may make an irrevocable election to designate investments in equity instruments as at FVOCI; however, designation at FVOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

54

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

Some of our other equity investments are mandatorily classified as financial asset at fair value through profit or loss, or FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVOCI.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividend earned on the financial asset.

For the assets and liabilities measured at fair value without quoted prices in active markets, our management determines the appropriate valuation techniques for the fair value measurements and whether to engage third party qualified appraisers based on the related regulations and professional judgments. Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities, please refer to Note 39 to our consolidated financial statements included elsewhere in this annual report. If the actual changes of inputs in the future differ from expectation, the fair value may vary accordingly. We update inputs periodically to monitor the appropriateness of the fair value measurement.

Impairment of long-lived assets, right-of-use assets, intangible assets and incremental costs of obtaining contracts

We assess the impairment of long-lived assets, right-of-use assets and intangible assets whenever triggering events or changes in circumstances indicate that the asset may be impaired and carrying value may not be recoverable. Indications we consider important which could trigger an impairment review include, but are not limited to, the following:

•during the period, an asset's market value has declined significantly more than what would be expected as a result of the passage of time or normal use.

•significant changes with an adverse effect on the entity have taken place during the period, or will take place in the near future, in the technological, market, economic or legal environment in which the entity operates or in the market to which an asset is dedicated.

•market interest rates or other market rates of return on investments have increased during the period, and those increases are likely to affect the discount rate used in calculating an asset's value in use and decrease the asset's recoverable amount materially.

•the carrying amount of the net assets of the entity is more than its market capitalization.

•evidence is available of obsolescence or physical damage of an asset.

•significant changes with an adverse effect on the entity have taken place during the period, or are expected to take place in the near future, in the extent to which, or manner in which, an asset is used or is expected to be used.

•evidence is available from internal reporting that indicates that the economic performance of an asset is, or will be, worse than expected.

55

When an indication of impairment is identified for long-lived assets, right-of-use assets and intangible assets other than goodwill, 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, as if no impairment loss had been recognized.

Impairment loss from the assets related to incremental cost of obtaining contracts is recognized to the extent that the carrying amount of the assets exceeds the remaining amount of consideration that we expect to receive in exchange for related goods or services less the costs which relate directly to providing those goods or services.

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

In 2018, 2019 and 2020, we determined that some of our investment properties' recoverable amount which represented the fair value less costs to sell of some land and buildings was higher than the carrying amount and recognized reversals of impairment loss of NT$19 million, NT$57 million and NT$27 million (US$1.0 million), respectively.

In 2019 and 2020, our subsidiary, SENAO, evaluated that the goodwill that arose in the acquisition of Youth and its subsidiaries and concluded the recoverable amount of the goodwill was lower than the carrying value and recognized an impairment loss of NT$9 million and NT$9 million (US$0.3 million), respectively. There was no impairment loss recognized in 2018.

In 2018, our subsidiary, SENAO, evaluated and determined that the recoverable amount of certain licensed contract was nil and recognized the impairment loss of NT$51 million.

In 2018 and 2020, there was no indication that property, plant and equipment was impaired, so we did not recognize any impairment loss. In 2019, our subsidiaries, CHPT and CHSI, evaluated that certain miscellaneous equipment, construction in progress and equipment to be accepted will not be used in the future and there was no active market for sale; therefore, we determined that the recoverable amount of such assets was nil and recognized impairment losses of NT$93 million.

In 2019, we evaluated that certain other assets will not be used in the future and there was no active market for sale; therefore, we determined that the recoverable amount of such assets was nil and recognized impairment losses of NT$44 million.

Pension Benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees rendered services entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Actuarial assumptions comprise the discount rate, rate of employee turnover, and long-term average future salary increase. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability.

Service cost (including current service cost and gains or losses on settlements) and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising (a) actuarial gains and losses; and (b) the return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

56

Net defined benefit liability (asset) represents the actual deficit (surplus) in our defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

Curtailment or settlement gains or losses on the defined benefit plan are recognized when the curtailment or settlement occurs.

Accounting for Income Taxes

Income tax expense represents the sum of the tax currently payable and deferred tax.

The current tax is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statements of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Income tax on unappropriated earnings is accrued during the period the earnings arise and adjusted to the extent that distributions are approved by the stockholders in the following year. Adjustments of prior years' tax liabilities are added to or deducted from the current year's tax provision.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. If the temporary difference arises from the initial recognition, other than in a business combination, of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit, the resulting deferred tax asset or liability is not recognized. In addition, a deferred tax liability is not recognized on a taxable temporary difference arising from initial recognition of goodwill.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carry forwards and unused tax credits from purchase of machinery, equipment and technology, and research and development expenditures to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

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

The carrying amount of deferred tax assets is reviewed at the balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which we expect, at the end of the reporting period, to recover or settle the carrying amount of the assets and liabilities.

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income, in which case, the current and deferred tax are also recognized in other comprehensive income.

57

Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Leasing

2018

As a lessor, we recognize rental income from operating leases on a straight-line basis over the term of the relevant lease.

As a lessee, we recognized operating lease payments as an expense on a straight-line basis over the lease term.

Starting from 2019

At the inception of a contract, we assess whether the contract is, or contains, a nature of lease.

As a lessor, we recognize rental income from operating leases on a straight-line basis over the term of the relevant lease.

As a lessee, we recognize right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for lease payments for low-value assets are recognized as expenses on a straight-line basis over the lease terms accounted for applying for recognition exemption.

Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities and for lease payments made at or before the commencement date. Right-of-use assets are subsequently measured at cost less accumulated depreciation and accumulated impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented separately on the consolidated balance sheets.

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

Lease liabilities were initially measured at the present value of the lease payments, which comprise fixed payments, in-substance fixed payments, variable lease payments which depend on an index or a rate. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If such rate cannot be readily determined, the lessee's incremental borrowing rate is used. In determining a lessee's incremental borrowing rate used in discounting lease payments, a risk-free rate for relevant duration and the same currency is selected as a reference rate. The lessee's credit spread adjustments and lease specific adjustments are also taken into account.

Lease liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, we remeasure the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. We account for the remeasurement of the lease liability as a result of the decrease of lease scope by decreasing the carrying amount of the right-of-use assets and recognizes in profit or loss any gain or loss on the partial or full termination of the lease. Lease liabilities are presented separately on the consolidated balance sheets.

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

58

A. Operating Results

The following table sets forth our revenues, operating costs and expenses, income from operations and other financial data for the periods indicated.

59

The following table sets forth our revenues, operating costs and expenses, income from operations and other financial data as a percentage of our total revenues for the periods indicated.

Each of our operating segments is managed separately because each represents a strategic business unit that serves a different market. We measure our segment performances mainly based on revenues and income before income tax.

The year ended December 31, 2020 compared with the year ended December 31, 2019

Revenues

Our revenues remain stable at NT$207.6 billion (US$7.4 billion) in 2020 as compared to NT$207.5 billion in 2019, primarily due to increases in revenues generated from domestic fixed communications and internet services, partially offset by decreases in mobile communications, and international fixed communications.

Domestic fixed communications

Domestic fixed communications revenues accounted for 31.7% and 33.4% of our revenues in 2019 and 2020, respectively. Our domestic fixed communications revenues increased by 5.7% from NT$65.7 billion in 2019 to NT$69.5 billion (US$2.5 billion)in 2020, primarily due to growth in ICT, broadband access revenues and MOD revenues, which were partially offset by the decrease in local and domestic long distance telephone services.

60

Local telephone services:Our local telephone revenues decreased from NT$25.7 billion in 2019 to NT$24.5 billion (US$0.9 billion) in 2020 with a 9.8% decline in traffic volume from 6.2 billion minutes in 2019 to 5.6 billion minutes in 2020. The decline in traffic volume was primarily due to the traffic migration from fixed-line services to internet telephone services and VoIP applications. We expect this trend to continue as broadband and mobile services become more popular in Taiwan.

Domestic long distance telephone services: Our domestic long distance telephone revenues decreased by 8.2% from NT$2.2 billion in 2019 to NT$2.0 billion (US$0.1 billion) in 2020. This decrease was mainly due to the increased use of VoIP applications.

Broadband access: Revenues generated from broadband access slightly increased from NT$18.0 billion in 2019 to NT$18.1 billion (US$0.6 billion) in 2020, mainly due to the increasing number of our customers adopting our higher-priced data plans.

Domestic leased line: We keep migrating domestic leased line customers to higher speed broadband services. Revenues generated from domestic leased line services increased from NT$4.1 billion in 2019 to NT$4.3 billion (US$0.2 billion) in 2020.

MOD: Revenues generated from our MOD services increased by 0.9% from NT$3.6 billion in 2019 to NT$3.64 billion (US$0.1 billion) in 2020. This increase was due to the upsell in our tiered-pricing channel packages and digital convergence packages.

Domestic ICT and other services: Other revenues increased by 40.4% from NT$12.1 billion in 2019 to NT$17.0 billion (US$0.6 billion) in 2020. This was mainly due to revenue recognition of large government ICT projects.

Mobile communications

Revenues from our mobile communications business accounted for 46.0% and 43.5% of our revenues in 2019 and 2020, respectively. Revenues from our mobile communications business decreased by 5.5% from NT$95.5 billion in 2019 to NT$90.2 billion (US$3.2 billion) in 2020. This decrease was due to the decline in mobile service revenues and sales of mobile handsets, tablets and wearable devices.

Mobile services. Revenues from our mobile services accounted for 28.3% and 27.3% of our revenues in 2019 and 2020, respectively. Revenues from our mobile services decreased by 3.4% from NT$58.7 billion in 2019 to NT$56.7 billion (US$2.0 billion) in 2020 due to market competition and decrease in roaming revenue resulting from travel restrictions in response to the COVID-19 pandemic.

Sales of mobile handsets, tablets and wearable devices. Revenues from our sales of mobile handsets, tablets and wearable devices accounted for 17.1% and 15.5% of our revenues in 2019 and 2020, respectively. Revenues from our sales of mobile handsets, tablets and wearable devices decreased by 9.7% from NT$35.5 billion in 2019 to NT$32.1 billion (US$1.1 billion) in 2020, mainly due to the COVID-19 pandemic, the delay in release of the new iPhone, and the extension of the mobile phone replacement cycle.

Internet

Revenues from internet business accounted for 14.5% and 15.5% of our revenues in 2019 and 2020, respectively. Revenues from our internet services increased by 6.7% from NT$30.1 billion in 2019 to NT$32.1 billion (US$1.1 billion) in 2020 mainly due to the increase in revenues generated from services such as IDC, Cloud, IoT, cybersecurity, HiNet and HiLink.

61

International fixed communications

International fixed communications revenues accounted for 5.5% and 4.2% of our revenues in 2019 and 2020, respectively. Our international fixed communications revenues decreased by 24.3% from NT$11.5 billion in 2019 to NT$8.7 billion (US$0.3 billion) in 2020. This decrease was mainly due to the decrease in revenues generated from ILD telephone service.

ILD telephone services. Our ILD telephone revenues decreased by 66.5% from NT$4.6 billion in 2019 to NT$1.5 billion (US$0.1 billion) in 2020 due to our new strategy to reduce low-margin revenues such as the wholesale of ILD traffic.

International leased line and international data services. Our international leased line and international data revenues decreased by 5.7% from NT$4.5 billion in 2019 to NT$4.2 billion (US$0.2 billion) in 2020. The decrease was mainly due to indefeasible rights of use, or IRU, and affected by the COVID-19 pandemic.

International ICT and other services. Our international ICT and other revenues increased by 27.1% from NT$1.8 billion in 2019 to NT$2.2 billion (US$0.1 billion) in 2020. The increase was mainly generated from our subsidiary Chunghwa Telecom Singapore Pte., Ltd.

Others

Other revenues accounted for 2.3% and 3.4% of our revenues in 2019 and 2020, respectively. Our other revenues increased from NT$4.7 billion in 2019 to NT$7.1 billion (US$0.3 billion) in 2020. The increase was mainly due to operating growth derived from one of our subsidiaries, CHPT, a semiconductor testing company and the increase of ownership interests in International Integrated Systems, Inc. ('IISI') in the second half of 2020.

Operating Costs

Our operating costs include depreciation and amortization expenses, personnel expenses, cost of goods sold, interconnection and service costs, marketing expenses, costs of materials and maintenance and spectrum usage and license fees.

Our operating costs increased by 0.8% from NT$135.9 billion in 2019 to NT$137.0 billion (US$4.9 billion) in 2020. This increase was primarily due to the completion of some major ICT projects in 2020, which was partially offset by a decrease of NT$4.3 billion (US$0.2 billion) in interconnection costs.

Operating Expenses

Our operating expenses decreased by 3.2% from NT$30.8 billion in 2019 to NT$29.8 billion (US$1.0 billion) in 2020.

Marketing

Our marketing expenses decreased by 5.9% from NT$22.2 billion in 2019 to NT$20.9 billion (US$0.7 billion) in 2020. This decrease was primarily due to a decrease in personnel expenses and promotion expenses.

General and administrative

Our general and administrative expenses increased by 5.2% from NT$4.8 billion in 2019 to NT$5.0 billion (US$0.2 billion) in 2020. This increase was primarily due to an increase in personnel expenses.

Research and development

Our research and development expenses remained stable at NT$3.9 billion (US$0.1 billion) in 2019 and 2020.

62

Expected credit loss

We reversed credit loss of NT$0.1 billion in 2019 and recognized expected credit loss of NT$45.0 million (US$2.0 million) in 2020, respectively.

Operating Costs and Expenses by Business Segment

Domestic fixed communications

Our domestic fixed communications costs and expenses increased by 3.6% from NT$62.3 billion in 2019 to NT$64.6 billion (US$2.3 billion) in 2020, primarily due to an increase of NT$5.0 billion (US$0.2 billion) in ICT project costs, a decrease of NT$1.8 billion (US$0.1 billion) in personnel expenses and a decrease of NT$0.6 billion (US$21.0 million) in depreciation, amortization and rental expenses.

Mobile communications

Our mobile communications operating costs and expenses decreased by 3.3% from NT$85.8 billion in 2019 to NT$82.9 billion (US$3.0 billion) in 2020. This decrease was primarily due to a decrease of NT$2.9 billion (US$0.1 billion) in costs of goods sold, a decrease of NT$0.5 billion (US$18.9 million) in interconnection costs and an increase of NT1.2 billion (US$42 million) in amortization expenses of 5G concession.

Internet

Our internet operating costs and expenses increased by 6.7% from NT$21.5 billion in 2019 to NT$23.0 billion (US$0.8 billion) in 2020. This increase was primarily due to an increase of NT$0.9 billion (US$33.5 million) in ICT project costs and an increase of NT$0.4 billion (US$15.7 million) in maintenance and rental expenses

International fixed communications

Our international fixed communications costs and expenses decreased by 23.6% from NT$12.8 billion in 2019 to NT$9.8 billion (US$0.3 billion) in 2020. The decrease was primarily due to a decrease of NT$3.0 billion (US$0.1 billion) in international settlement costs.

63

Others

The costs and expenses from our other business increased by 18.6% from NT$12.9 billion in 2019 to NT$15.2 billion (US$0.5 billion) in 2020. The increase was primarily due to an increase of NT$1.3 billion (US$46.3 million) from our new subsidiary International Integrated Systems, Inc. since July 1, 2020 and an increase of NT$0.9 billion (US$ 30.3 million) from our other subsidiaries.

Other Income and Expenses

We recorded net other expenses of NT$0.1 billion in 2019 and net other income of NT$1.6 billion (US$57.0 million) in 2020, respectively. The differences between 2019 and 2020 were primarily due to the gains resulting from asset revitalization in 2020.

Income from Operations and Operating Margin

As a result of the foregoing, our income from operations increased by 4.2% from NT$40.7 billion in 2019 to NT$42.4 billion (US$1.5 billion) in 2020. Our operating margin increased from 19.6% in 2019 to 20.4% in 2020.

The following table sets forth certain information regarding our revenues and income before income tax by business segment for the periods indicated.

As a result of the foregoing, segment income before tax for our domestic fixed communications business increased by 15.2% from NT$19.5 billion in 2019 to NT$22.5 billion (US$0.8 billion) in 2020; segment income before tax for our mobile communications business decreased by 22.0% from NT$11.3 billion in 2019 to NT$8.8 billion (US$0.3 billion) in 2020; segment income before tax for our internet business increased by 4.8% from NT$12.5 billion in 2019 to NT$13.1 billion (US$0.5 billion) in 2020; segment income before tax for our international fixed communications business remained stable at NT$0.8 billion (US$30.0 million) in 2019 and 2020; and segment loss for our other business segments increased by 7.6% from NT$2.2 billion in 2019 to NT$2.4 billion (US$0.1 billion) in 2020.

Non-operating Income and Expenses

Our non-operating income decreased from NT$1.2 billion in 2019 to NT$0.4 billion (US$17.0 million) in 2020. The decrease was primarily due to a decrease in the share of profits of associates accounted for using equity method, a decrease in interest income and an increase in interest expense.

64

Income Tax

Our income tax was NT$8.0 billion and NT$8.1 billion (US$0.3 billion) in 2019 and 2020, respectively. Our effective tax rate remained stable at 19.0% in 2019 and 2020.

Net Income

As a result of the foregoing, our net income attributable to stockholders of the parent was NT$32.9 billion and NT$33.4 billion (US$1.2 billion) in 2019 and 2020, respectively. Our net margin increased from 15.9% in 2019 to 16.1% in 2020.

The year ended December 31, 2019 compared with the year ended December 31, 2018

Revenues

Our revenues decreased by 3.7% from NT$215.5 billion in 2018 to NT$207.5 billion in 2019, primarily due to the decrease in revenues generated from mobile communications, international fixed communications and domestic fixed communications.

Domestic fixed communications

Domestic fixed communications revenues accounted for 31.0% and 31.7% of our revenues in 2018 and 2019, respectively. Our domestic fixed communications revenues decreased by 1.5% from NT$66.8 billion in 2018 to NT$65.7 billion in 2019 primarily due to a decrease in local and domestic long distance telephone and in broadband access revenues, which were partially offset by growth in ICT and MOD revenues.

Local telephone services:Our local telephone revenues decreased from NT$27.6 billion in 2018 to NT$25.7 billion in 2019 with a 14.5% decline in traffic volume from 7.2 billion minutes in 2018 to 6.2 billion minutes in 2019. The decline in traffic volume was primarily due to the traffic migration from fixed-line services to internet telephone services and VoIP applications. We expect this trend to continue as broadband and mobile services become more popular in Taiwan.

Domestic long distance telephone services:Our domestic long distance telephone revenues decreased by 9.5% from NT$2.4 billion in 2018 to NT$2.2 billion in 2019. This decrease was mainly due to the increased use of VoIP applications.

Broadband access:Revenues generated from broadband access slightly decreased from NT$18.3 billion in 2018 to NT$18.0 billion in 2019, mainly due to the increased market competition and the mandatory tariff reduction.

Domestic leased line: Our tariffs for overall leased line services continued to decrease due to the competition from other fixed-line operators, as well as the continued migration of domestic leased line customers to high-speed broadband services. Revenues generated from domestic leased line services slightly decreased from NT$4.2 billion in 2018 to NT$4.1 billion in 2019.

MOD: Revenues generated from our MOD services increased by 10.6% from NT$3.3 billion in 2018 to NT$3.6 billion in 2019. This increase was due to the increase in the number of IPTV and SVoD subscribers.

Domestic ICT and other services: Other revenues increased by 9.4% from NT$11.0 billion in 2018 to NT$12.1 billion in 2019. This was mainly due to the increased revenue from ICT projects.

65

Mobile communications

Revenues from our mobile communications business accounted for 46.9% and 46.0% of our revenues in 2018 and 2019, respectively. Revenues from our mobile communications business decreased by 5.4% from NT$100.9 billion in 2018 to NT$95.5 billion in 2019. This decrease was due to the decline in mobile service revenues and in sales of mobile handsets, tablets and wearable devices.

Mobile services: Revenues from our mobile services accounted for 29.7% and 28.3% of our revenues in 2018 and 2019, respectively. Revenues from our mobile services decreased by 8.1% from NT$63.9 billion in 2018 to NT$58.7 billion in 2019 due to market competition.

Sales of mobile handsets, tablets and wearable devices: Revenues from our sales of mobile handsets, tablets and wearable devices accounted for 16.6% and 17.1% of our revenues in 2018 and 2019, respectively. Revenues from our sales of mobile handsets, tablets and wearable devices decreased by 0.4% from NT$35.7 billion in 2018 to NT$35.5 billion in 2019 mainly due to the decrease in the number of handset sales derived from fewer handset-bundled subscriptions.

Internet

Revenues from internet business accounted for 13.8% and 14.5% of our revenues in 2018 and 2019, respectively. Revenues from our internet services increased by 0.9% from NT$29.8 billion in 2018 to NT$30.1 billion in 2019 mainly due to the increase in revenues generated from services such as HiLink, ITS, smart home and Big Data services.

International fixed communications

International fixed communications revenues accounted for 6.2% and 5.5% of our revenues in 2018 and 2019, respectively. Our international fixed communications revenues decreased by 14.5% from NT$13.4 billion in 2018 to NT$11.5 billion in 2019. This decrease was mainly due to the decrease in revenues generated from ILD telephone service.

ILD telephone services: Our ILD telephone revenues decreased by 30.1% from NT$6.6 billion in 2018 to NT$4.6 billion in 2019 due to our new strategy to reduce low-margin revenues such as the wholesale of ILD traffic.

International leased line and international data services: Our international leased line and international data revenues increased by 2.6% from NT$4.4 billion in 2018 to NT$4.5 billion in 2019. The increase was mainly due to growing demand from OTT providers.

International ICT and other services: Our international ICT and other revenues decreased by 6.2% from NT$1.9 billion in 2018 to NT$1.8 billion in 2019. The decrease was mainly generated from our subsidiary Chunghwa Telecom Singapore Pte., Ltd.

Others

Other revenues accounted for 2.1% and 2.3% of our revenues in 2018 and 2019, respectively. Our other revenues increased from NT$4.6 billion in 2018 to NT$4.7 billion in 2019. The increase was mainly due to operating growth derived from one of our subsidiaries, CHPT, a semiconductor testing company.

Operating Costs

Our operating costs include depreciation and amortization expenses, personnel expenses, cost of goods sold, interconnection and service costs, marketing expenses, costs of materials and maintenance and spectrum usage and license fees.

66

Our operating costs decreased by 2.6% from NT$139.6 billion in 2018 to NT$135.9 billion in 2019. This decrease was primarily due to a decrease of NT$2.1 billion in interconnection and service costs, a decrease of NT$0.8 billion in personnel expenses, and a decrease of NT$0.6 billion in marketing expenses.

Operating Expenses

Our operating expenses decreased by 5.0% from NT$32.4 billion in 2018 to NT$30.8 billion in 2019.

Marketing

Our marketing expenses decreased by 4.1% from NT$23.2 billion in 2018 to NT$22.2 billion in 2019. This decrease was primarily due to a decrease in personnel expenses, postage fees and depreciation expenses.

General and administrative

Our general and administrative expenses increased by 3.7% from NT$4.6 billion in 2018 to NT$4.8 billion in 2019. This increase was primarily due to an increase in personnel expenses.

Research and development

Our research and development expenses increased by 5.8% from NT$3.7 billion in 2018 to NT$3.9 billion in 2019. This increase was primarily due to an increase in personnel expenses and professional service expenses.

Expected credit loss

We recognized expected credit loss of NT$0.9 billion in 2018 and reversal of credit loss of NT$0.1 billion in 2019, respectively.

Operating Costs and Expenses by Business Segment

Domestic fixed communications

Our domestic fixed communications costs and expenses decreased by 5.1% from NT$65.7 billion in 2018 to NT$62.3 billion in 2019, primarily due to a decrease of NT$0.9 billion in personnel expenses, a decrease of NT$0.9 billion in expected credit losses, a decrease of NT$0.5 billion in maintenance and professional service expenses, a decrease of NT$0.4 billion in depreciation and rental expenses and a decrease of NT$0.4 billion in interconnection costs.

Mobile communications

Our mobile communications operating costs and expenses decreased by 2.0% from NT$87.6 billion in 2018 to NT$85.8 billion in 2019. This decrease was primarily due to a decrease of NT$0.6 billion in marketing expenses, a decrease of NT$0.6 billion in intersegment leased line expenses, and a decrease of NT$0.3 billion in cost of goods sold.

67

Internet

Our internet operating costs and expenses decreased by 1.9% from NT$21.9 billion in 2018 to NT$21.5 billion in 2019. This decrease was primarily due to a decrease of NT$0.5 billion in intersegment leased line expenses.

International fixed communications

Our international fixed communications costs and expenses decreased by 12.9% from NT$14.7 billion in 2018 to NT$12.8 billion in 2019. The decrease was primarily due to a decrease of NT$1.6 billion in international settlement costs.

Others

The costs and expenses from our other business increased by 5.8% from NT$12.2 billion in 2018 to NT$12.9 billion in 2019. The increase was primarily due to an increase of NT$0.3 billion in operating costs and expenses from our subsidiaries, and an increase of NT$0.2 billion in provision for impairment loss and obsolescence of inventory.

Other Income and Expenses

We recorded net other income of NT$0.1 billion in 2018 and net other expense of NT$0.1 billion in 2019, respectively. The differences between 2018 and 2019 were primarily due to the compensation payment of land from Taoyuan City Government in 2018 and impairment loss on property, plant and equipment in 2019.

Income from Operations and Operating Margin

As a result of the foregoing, our income from operations decreased by 6.9% from NT$43.6 billion in 2018 to NT$40.7 billion in 2019. Our operating margin decreased from 20.3% in 2018 to 19.6% in 2019.

The following table sets forth certain information regarding our revenues and income before income tax by business segment for the periods indicated.

As a result of the foregoing, segment income before tax for our domestic fixed communications business increased by 7.1% from NT$18.3 billion in 2018 to NT$19.5 billion in 2019; segment income before tax for our mobile communications business decreased by 26.6% from NT$15.3 billion in 2018 to NT$11.3 billion in 2019; segment income before tax for our internet business increased by 4.8% from NT$12.0 billion in 2018 to NT$12.5 billion in 2019; segment income before tax for our international fixed communications business decreased by 22.0%

68

from NT$1.0 billion in 2018 to NT$0.8 billion in 2019; and segment loss for our other business segments increased by 43.9% from NT$1.6 billion in 2018 to NT$2.2 billion in 2019.

Non-operating Income and Expenses

Our non-operating income decreased from NT$1.4 billion in 2018 to NT$1.2 billion in 2019. The decrease was primarily due to an increase in interest expense.

Income Tax

Our income tax was NT$6.4 billion and NT$8.0 billion in 2018 and 2019, respectively. In 2018, due to the reversal of the 10% unappropriated earnings tax accrued in 2017, which was much higher than that accrued of the 5% unappropriated earnings tax in 2018, net unappropriated earnings tax accrued in 2018 was lower than that accrued in 2019. As a result, our effective tax rate increased from 14.2% in 2018 to 19.0% in 2019. See 'Item 5. Operating and Financial Review and Prospects-Overview-Taxation' for a discussion of the change in tax rate.

Net Income

As a result of the foregoing, our net income attributable to stockholders of the parent was NT$37.6 billion and NT$32.9 billion in 2018 and 2019, respectively. Our net margin decreased from 17.4% in 2018 to 15.9% in 2019.

B. Liquidity and Capital Resources

Liquidity

The following table sets forth the summary of our cash flows for the periods indicated:

Our primary source of liquidity is cash flow from operations, which represents operating profit adjusted for non-cash items, primarily depreciation and amortization and changes in current assets and liabilities. Notes 22, 23, 24 and 25 to our consolidated financial statements, included elsewhere in this annual report, provide additional details as to our bank loans, commercial paper payable and bonds payable. We believe that our working capital is sufficient to meet our present cash flow requirements.

In 2020, we generated NT$74.5 billion (US$2.6 billion) in net cash from operating activities as compared to NT$72.4 billion in 2019. The increase was primarily due to an increase in cash inflows from the completion of project business and a decrease in trade notes and accounts payable.

In 2019, we generated NT$72.4 billion (US$2.4 billion) in net cash from operating activities as compared to NT$66.4 billion in 2018. The increase was primarily due to an increase in cash inflows from the completion of project business and a decrease in contribution to the pension funds.

In 2018, we generated NT$66.4 billion in net cash from operating activities as compared to NT$70.9 billion in 2017. The decrease was primarily due to an increase in cash outflows for inventories, income tax paid and contribution to the pension funds. The decrease was partially offset by an increase in cash inflows relating to contracts balances of customers.

69

Historically, net cash from operating activities has been sufficient to cover our capital expenditures, including ongoing expansion and modernization of our networks.

In 2020, net cash used in investing activities was NT$68.3 billion (US$2.4 billion), an increase from NT$27.1 billion in 2019. The change was primarily due to a payment of NT$47.4 billion (US$1.7 billion) in 2020 for acquiring the 5G mobile broadband spectrum, offsetby a decrease in acquisition of property, plant and equipment as well as an increase in proceeds from disposals of property, plant and equipment resulting from asset revitalization.

In 2019, net cash used in investing activities was NT$27.1 billion, a decrease from NT$32.6 billion in 2018. The change was primarily due to a decrease in acquisition of property, plant and equipment and a net increase in cash flows of negotiable certificates of deposit with maturities of more than three months. The decrease is partially offset by a one-time payment of NT$4.2 billion in 2019 in acquisition of investments accounted for using equity method.

In 2018, net cash used in investing activities was NT$32.6 billion, a decrease from NT$36.7 billion in 2017. The change was primarily due to a one-time payment of NT$10.9 billion in 2017 for acquiring the 4G mobile broadband spectrum, an increase in acquisition of property, plant and equipment, an increase in acquisition of time deposits and negotiable certificates of deposit with maturities of more than three months, and a decrease in proceeds from the disposal of held-to-maturity financial assets in 2017.

In 2020, our net cash used in financing activities totaled NT$9.8 billion (US$0.3 billion), which mainly reflected NT$32.8 billion (US$1.2 billion) in dividends paid, a net increase in short-term bills payable and issuance of bonds.

In 2019, our net cash used in financing activities totaled NT$38.9 billion, which mainly reflected NT$34.7 billion in dividends paid and NT$3.7 billion in payments for the principal of lease liabilities.

In 2018, our net cash used in financing activities totaled NT$35.0 billion, which mainly reflected NT$37.2 billion in dividends paid during that period.

Capital Resources

We have historically financed our capital expenditure requirements with our cash flows from operations and some bank loans. In future years, we have capital expenditure requirements for the ongoing expansion and upgrade of our networks, including 5G mobile broadband, IDC, FTTx, PSTN migration, international submarine cables, service platforms and IoT. We also expect to make dividend payments on an ongoing basis. See 'Item 8. Financial Information-A. Consolidated Statements and Other Financial Information. Furthermore, we may require working capital from time to time to finance purchases of materials for our maintenance and other overhead expenses. We expect to primarily rely on cash generated from operations and, to a lesser extent, loans from commercial banks to meet our planned capital expenditures, make our planned dividend payments, repay debts and fulfill other commitments over the next twelve months.

As of December 31, 2020, our primary source of liquidity was NT$30.4 billion (US$1.1 billion) in cash and cash equivalents. In addition, the unused line of credit for unsecured and secured bank loans amounted to NT$66.3 billion (US$2.4 billion) and NT$1.6 billion (US$57.7 million), respectively, as of December 31, 2020.

As of December 31, 2020, we had commercial paper payable in the amount of NT$7.0 billion (US$0.2 billion) at interest rates ranging from 0.34% to 0.36% and bonds payable in the amount of NT$20.0 billion (US$0.7 billion) at interest rates ranging from 0.50% to 0.59%.

As of December 31, 2020, our subsidiary, Chunghwa Sochamp Technology Inc., had short-term unsecured loans of NT$60 million (US$2.1 million) at interest rates ranging from 1.97% to 2.33%.

As of December 31, 2020, our subsidiary, Chunghwa Leading Photonics Tech Co., Ltd., had short-term unsecured loans of NT$7 million (US$0.2 million) at an interest rate of 1.12%.

70

As of December 31, 2020, our subsidiary Light Era had long-term secured loans in the amount of NT$1.6 billion (US$57.0 million) due in 2021at an interest rate of 0.72%.

As part of the government's effort to upgrade the existing telecommunications infrastructure, we and other public utility companies were required by the ROC government to contribute a certain amount of money to a Piping Fund, administered by the Taipei City Government. A total of NT$1.0 billion was contributed by us on August 15, 1996. This fund is used to finance various telecommunications infrastructure projects. We accounted for the contribution as other financial assets on our consolidated balance sheets.

Note 41 to our consolidated financial statements included elsewhere in this annual report provides a description of the assets that are pledged as collateral for long-term bank loans and contract deposits.

Capital Expenditures

Substantially all of our capital expenditures in 2018, 2019 and 2020 were made for operations in the ROC. We have financed our capital expenditures using cash flow from operations and bank loans. The following table sets forth a summary of our capital expenditures for the periods indicated.

The following table sets forth a summary of our planned capital expenditures for the year ending December 31, 2021.

We expect our total capital expenditures to be approximately NT$43.1 billion in 2021. Our capital expenditures for 2021 are planned to be allocated to our 4G/5G network deployment, FTTx network expansion, public switching telephone network transforming to internet protocol network, service platforms, cloud computing, IoT, IDC construction and asset activation. We expect to finance these capital expenditures with our cash flows from operations and bank loans.

Inflation

We do not believe that inflation in Taiwan has had a material impact on our results of operations in 2018, 2019 and 2020.

71

Recent Accounting Pronouncements

Major differences between IFRSs and Taiwan IFRSs

While we have adopted Taiwan IFRSs for ROC reporting purposes, we adopt IFRSs for certain filings with the SEC, including our annual reports on Form 20-F for the year ended December 31, 2013 and thereafter.

Taiwan IFRSs differs from IFRSs in certain significant respects, including to the extent that any new or amended standards or interpretations applicable under IFRSs may not be timely endorsed by the FSC. Therefore, these pronouncements will not be applicable to Taiwan IFRSs until endorsed by the FSC. Some of the major differences between IFRSs and Taiwan IFRSs that are relevant to us as of the date of this annual report are set forth below.

It is difficult for us to determine the differences between Taiwan IFRSs and IFRSs on our financial statements as any new or amended standards or interpretations applicable under IFRSs may not be timely endorsed by the FSC.

Other recent accounting pronouncements under IFRSs

For a summary of new standards, amendments and interpretations issued under IFRSs but not effective for 2020 and which have not been adopted early by us, see Note 5 to our consolidated financial statements included elsewhere in this annual report.

C. Research and Development, Patents and Licenses

Research and Development

Looking back at the year 2020, global telecommunications operators faced intense competition from OTT and social media providers. In addition to actively promoting 5G network construction and innovative services, global telecommunications operators mapped out their digital transformation strategies to meet such challenges. We have also undertaken the 3-year transformation plan aiming at four major areas, including core businesses, emerging businesses, cost optimization, and core competency improvement. Our Telecommunication Laboratories strives to align itself with the strategy by leveraging its capabilities in emerging technologies, while implementing next-generation networks, on which various converging services for the three major markets of individuals, families, and enterprises are provided.

Key research and development achievements of our Telecommunication Laboratories in 2020 are as follows:

72

In 2020, we applied for 161 patents, and 177 patents, including those applied for in previous years, were certified.In addition, we won 16 important awards.

D. Trend Information

See '-Overview' for a discussion of the most significant recent trends that have had, and in the future may have, a material impact on our results of operations, financial condition and capital expenditures. In addition, see discussions included in this Item for a discussion of known trends, uncertainties, demands, commitments or events that we believe are reasonably likely to have a material effect on our net operating revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

E. Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that are material to investors.

F. Tabular Disclosure of Contractual Obligations

Set forth below are our total contractual obligations as of December 31, 2020.

73

As of December 31, 2020, we had remaining commitments under non-cancelable contracts with various parties, including acquisition of lands and buildings of NT$0.1 billion (US$4.2 million) and acquisition of telecommunications related inventory and equipment of NT$26.8 billion (US$1.0 billion).

We committed that when our ownership interest in NCB is greater than 25% and NCB encounters financial difficulty or capital adequacy ratio of NCB cannot meet the related regulation requirements, we will provide financial support to assist NCB to maintain in healthy financial condition.

Foreign Exchange

Our revenues and costs and expenses are largely denominated in NT dollars. Our principal expenses denominated in foreign currencies are capital expenditures on telecommunications equipment and settlement payments for the use of networks of carriers in foreign countries for outgoing international calls. Settlement receipts have been a principal source of foreign currency for us. While future fluctuations of the NT dollar against foreign currencies could impact our financial condition and results of operations, we have not been materially affected in the past. See 'Item 11. Quantitative and Qualitative Disclosures about Market Risk-Foreign Currency Risk' for further details.

G. Safe Harbor

See 'Forward-Looking Statements in This Annual Report May Not Be Realized.'

A. Directors and Senior Management

Our Articles of Incorporation provides for a board of directors consisting of seven to fifteen directors bestowed with a three-year tenure. The following table sets forth the name, age and position of each of our directors and such person's position as of February 28, 2021. There is no family relationship among any of these persons. These directors have terms until June 20, 2022. Pursuant to the ROC Company Act, a person may serve as our director in his or her personal capacity or as the representative of another legal entity. A director who serves as the representative of a legal entity may be removed or replaced at any time at the discretion of that legal entity, and the replacement director may serve the remainder of the term of office of the replaced director. All of our non-independent directors are representatives of the MOTC.

Chi-Mau Sheih is the Chairman, Chief Executive Officer and director of our company. Mr. Sheih assumed the role of our Chairman and Chief Executive Officer on April 22, 2019. He has served as the President and director of our company since January 2017. Mr. Sheih served as a Senior Executive Vice President of our company from 2010 to 2017, the President of Southern Taiwan Business Group from 2007 to 2010, and the President of Central Taiwan Business Group from 2006 to 2007. Mr. Sheih holds an MBA degree from National Taiwan University.

74

Shui-Yi Kuo is the Presidentand director of our company. Mr. Kuo has been our President since May 8, 2019. Prior to that,he served as our Senior Executive Vice President and Chief Financial Officer from August 2017 to September 2020 andthe Senior Executive Vice President of Investment of the Company from March 2017 to August 2017. He also served as the Vice President of the Company's Investment Department from November 2014 to March 2017. From November 2013 to November 2014, Mr. Kuo served as the President of the Company's subsidiary, Light Era Development Co., Ltd. In addition, from March 2008 to November 2013, Mr. Kuo served as the Vice President of the Company's Accounting Department. Mr. Kuo holds a master's degree in Accounting from National Chengchi University.

Yu-Lin Huang is a director of our company. Dr. Huang is currently the President of the Taiwan Foundation for Democracy. He is also a professor of the Civil Engineering Department of the National Yang Ming Chiao Tung University. He had been the Political Deputy Minister of the MOTC and the Director General of the Construction Bureau of Taichung City. Dr. Huang holds a Ph.D. degree in Civil and Environmental Engineering from University of California at Berkeley. He specializes in infrastructure investment, project finance, and project management.

Lien-Chuan Lee is a director of our company. Mr. Lee is currently the Vice Minister of the Ministry of Culture, or the MOC. Mr. Lee has served as Secretary General, Executive Secretary of Legal Affairs, and Director General of General Planning of the MOC from 2012 to 2017. Mr. Lee also worked at the Ministry of Finance, Ministry of Economic Affairs, and Executive Yuan, and has served as Senior Executive Officer, Senior Specialist and Senior Executive Officer for 13 years. Mr. Lee holds a master's degree in Economics from National Chengchi University.

Shin-Yi Chang is a director of our company. Mr. Chang is currently the Director of the Accounting Department of the MOTC. He holds a master's degree in Accounting from National Taiwan University.

Sin-Horng Chen is a director of our company. Dr. Chen is currently a professor in the Department of Electrical and Computer Engineering of National Yang Ming Chiao Tung University. He holds a Ph.D. degree in Electrical Engineering from Texas Tech University.

Hung-Yi Hsiao is a director of our company. Dr. Hsiao is currently a professor in the Department of Law, School of Law of Soochow University and he also serves as an independent director of China Electric Manufacturing Corp. He holds a Ph.D. degree in Law from Soochow University in Taiwan.

Chin-Tsai Pan is a director of our company. Mr. Pan is currently the Executive Director of Chunghwa Telecom Workers' Union and an engineer of the company's Southern Taiwan Business Group. Mr. Pan graduated from Kaohsiung Industrial High School.

Lo-Yu Yen is an independent director of our company. Mr. Yen is currently the Chairman of the Entrepreneurs Co-Creation Platform. He also serves as an independent director of Sinyi Realty Inc. and Qisda Corp. Mr. Yen is also a legal representativeof Chinese Television System Inc. Mr. Yen worked at international accounting and consulting firms in Taiwan, the US and Mainland China for 30 years. He holds a master's degree in Accounting from National Chengchi University. He has CPA certificates both in the ROC andin the United States.

JenRan Chen is an independent director of our company. Mr. Chen is currently the Executive Board Director of Pixnet Digital Media Technology Co., Ltd., the largest social media in Taiwan. He also serves as an independent director of Ezfly International Travel Agent Co., Ltd. He is the co-founder and ex-CEO of Yam, the very first Chinese search engine, and former President of Chinese Television System. Mr. Chen holds a master's degree in Sociology from National Taiwan University.

Yu-Fen Linis an independent director of our company. Ms. Lin is the co-founder and managing partner of Lex & Honor Law offices. She is a transactional attorney with a board practice in business planning, corporate compliance and finance transactions. Ms. Lin also serves as an independent director of Bank SinoPac Co., Ltd. and ShareHope Medicine Co., Ltd. She holds bachelor's degrees of Laws and Political Science from National Taiwan University.

75

Chung-Chin Lu is an independent director of our company. Dr. Lu is a professor in the Department of Electrical Engineering, National Tsing Hua University, Taiwan. He holds a Ph.D. degree in Electrical Engineering from the University of Southern California, USA.

Yi-Chin Tu is an independent director of our company. Mr. Tu is currently the founder of Taiwan AI Labs and also a director of the Taiwan Creative Content Agency, or the TAICCA. Prior to that, Mr. Tu worked for Microsoft for 11 years and the National Human Genome Research Institute in the USA for three years. Mr. Tu is also the founder of the non-profit open-source organization of BBS club, PTT. Mr. Tu holds a master's degree in Computer Science and Information Engineering from National Taiwan University.

The following table sets forth the name, age and position of each of our executive officers and such person's position as of February 28, 2021. There is no family relationship among any of these persons.

Hong-Chan Ma has been the Senior Executive Vice President of Business since August 2018. Mr. Ma is also the CISO and DPO of our company, and a director of CHIEF Telecom Inc, or CHIEF, one of our consolidated subsidiaries. See 'Item 4. Information on the Company-B. Business Overview-Cybersecurity and Personal Information Protection.' He was the President of our Data Communications Business Group from August 2015 to August 2018. Prior to that, he served as the Vice President of our Marketing Department from September 2012 to August 2015, and the Assistant Vice President of our Marketing Department from January 2011 to September 2012. Mr. Ma holds a master's degree in Management Science from National Chiao Tung University in Taiwan.

Rong-Shy Lin has been the Senior Executive Vice President of Technology since June 2020. Dr. Lin was the President of our Data Communications Business Group from November 2018 to June 2020. Prior to that, he served as the President of our Telecommunication Laboratories from November 2017 to November 2018, and the Vice President of our Telecommunication Laboratories from February 2017 to November 2017. Dr. Lin holds a Ph.D. degree in Information Engineering from National Chiao Tung University in Taiwan.

Wei-Kuo Hong has been the Senior Executive Vice President of Administration since June 2020. Dr. Hong was the President of our Telecommunication Training Institute from November 2018 to June 2020. Prior to that, he served as the Vice President of our Telecommunication Training Institute from May 2017 to November 2018, and the Assistant Vice President of our Investment Department from May 2012 to May 2017. Dr. Hong holds a Ph.D. degree in Industrial Administration from National Tsing Hua University in Taiwan.

Yu-Shen Chen has been the Senior Executive Vice President of Finance and Chief Financial Officer since September 2020. He has been the Professor of Accounting at National Chengchi University since August 2015. Dr. Chen holds a Ph.D. degree in Accounting from State University of New York at Buffalo.

Yi-Fong Chang has been the President of our Southern Taiwan Business Group since August 2019. He is also a director of Senao International Co., Ltd. Mr. Chang was the Chairman of Honghwa International Co., Ltd. from January 2019 to August 2019. Prior to that, he was the Vice President of our Northern Taiwan Business Group from October 2011 to January 2019, and the Deputy Principal Engineer from March 2009 to October 2011. Mr. Chang holds a master's degree in Engineering Technology from National Taiwan University of Science and Technology.

76

Li-ShowWuhas beenthe President of our Enterprise Business Groupsince January 2019. Ms. Wuis also a director of SENAO. She was the Chairman of Honghwa International Co., Ltd.from November 2017 to January 2019. Prior to that, she served as the Senior Executive Vice President of Administration from November 2016 to November 2017, and the Vice President of our Marketing Department from August 2015 to November 2016. Ms. Wuholds a master's degree in Applied Mathematics from National Chiao Tung University in Taiwan.

Chih-Cheng Chien has been the President of our Mobile Business Group since January 2021. He is also a director of Senao International Co., Ltd. Dr. Chien was the President of our Telecommunication Training Institute from June 2020 to January 2021. Prior to that, he was the Advisor of our Overseas New Business Office from November 2018 to June 2020, and the president of our International Business Group from March 2017 to November 2018. Dr. Chien holds a Ph.D. degree in Engineering Technology from National Taiwan University of Science and Technology.

Hsueh-Lan Wu has been the President of our International Business Group since November 2018. Ms. Wu was the Vice President of our Enterprise Business Group from March 2018 to November 2018. Prior to that, she served as the Vice President of our Marketing Department from November 2016 to March 2018, and the Vice President of our Enterprise Business Group from November 2013 to November 2016. Ms. Wu holds a master's degree in Information Management from National Taiwan University.

Chau-Young Lin has been the President of our Data Communications Business Group since June 2020. He is also a director of Chunghwa Precision Test Tech. Co., Ltd. Dr. Lin was the Senior Executive Vice President of Administration from August 2019 to June 2020. Prior to that, he was the President of our Southern Taiwan Business Group from March 2018 to August 2019, and the Vice President of our Enterprise Business Group from July 2016 to March 2018. Dr. Lin holds a Ph.D. degree in Electronic Engineering from National Taiwan University of Science and Technology.

The following persons served as our executive officers during 2020 and retired in the same year.

Kuo-Feng Lin was the Senior Executive Vice President of Technology from November 2016 to June 2020. Mr. Lin is also a director of Chunghwa Precision Test Tech. Co., Ltd. He was the President of our Mobile Business Group from May 2012 to November 2016. Prior to that, he served as the Vice President of our Mobile Business Group from October 2009 to May 2012, and the President of Mobile Business Group, Taipei Branch from May 2007 to October 2009. Mr. Lin holds a bachelor's degree in Electronic Engineering from Provincial Taipei Institute of Technology.

Yuan-Kuang Tu was the President of our Northern Taiwan Business Group from November 2017 to January 2021. He was the President of our Mobile Business Group from November 2016 to November 2017. Prior to that, he served as the President of our Enterprise Business Group from March 2015 to November 2016, and the President of our Northern Taiwan Business Group from March 2012 to February 2015. Dr. Tu holds a Ph.D. degree in Electrical Engineering from National Taiwan University.

Ming-Shih Chen was the President of our Mobile Business Group from November 2017 to January 2021. He was the President of our Northern Taiwan Business Group from March 2017 to November 2017. Prior to that, he served as the President of our International Business Group from November 2016 to March 2017, the Vice President of our Data Communications Business Group from May 2012 to November 2016. Dr. Chen holds a Ph.D. degree in Electrical Engineering from National Tsing Hua University in Taiwan.

B. Compensation

The board of directors has set up a compensation committee to be responsible for drafting, approving and periodically reviewing the compensation proposals for the directors and managers. See 'C. Board Practices' for a discussion of our compensation committee.

77

Our Chairman and Chief Executive Officer, Mr. Chi-Mau Sheih, and our President, Mr. Shui-Yi Kuo, and our labor director Mr. Chin-Tsai Pan, to our board of directors, respectively, do not receive monthly compensation for acting as our directors because they receive salaries as employees.

The aggregate amount of compensation to our directors and executive officers in 2018, 2019 and 2020 was NT$131,525,410, NT$115,079,161 and NT$117,485,681 (US$4,183,963.0), respectively. The aggregate amount of compensation in 2020 includes a NT$70,087,423 (US$2,495,990.8 ) salary payment for directors and executive officers, a NT$7,624,830 (US$271,539.5) pension payment for executive officers, a NT$35,803,428 (US$1,275,050.9) bonus accrued for directors and a NT$3,970,000 (US$141,381.8 ) bonus accrued for executive officers. See 'Item 10. Additional Information-B. Memorandum and Articles of Incorporation-Dividends and Distributions' for a discussion of the distribution of bonuses and earnings.

All of our non-independent directors are legal representatives of the MOTC. The bonus in the amount of NT$35,210,397 (US$1,253,931.5) was paid directly to the MOTC in 2020 because such earnings distributions are not the individual income of these directors. Independent directors will not receive any earnings distributions.

Pursuant to ROC disclosure rules, we have disclosed the compensation range of our directors and senior management for the fiscal year ended December 31, 2020 as follows, excluding bonus accrued for legal entity the MOTC:

78

We accrued NT$4,613,000 (US$164,281) pension expense for executive officers mentioned above in 2020. See 'Item 5. Operating and Financial Review and Prospects-Overview-Personnel expenses' and Note 29 to our consolidated financial statements included elsewhere in this annual report for descriptions about our pension plans. We do not have any service contracts with any directors providing for any benefits upon termination of employment.

C. Board Practices

We currently have 13 directors, including five independent directors. All of our directors were elected on June 21, 2019, except for Mr. Lien-Chuan Lee as he was reassigned as a juristic-person director by the MOTC prior to February 28, 2021. The term is until June 20, 2022. Pursuant to the ROC Company Act, the directors may be removed from office at any time by a resolution adopted at a stockholders' meeting. The chairman of our board of directors is elected by our directors. Our chairman presides at all meetings of our board of directors and also has the authority to act as our representative. We have not entered into any contract with any of our directors by which our directors are expected to receive benefits upon termination of their employment.

Our Articles of Incorporation provides for a board of directors consisting of seven to fifteen directors, one-fifth of whom shall be expert representatives. Pursuant to the ROC Company Act, the ROC Securities and Exchange Act and Article 12-1 of our Articles of Incorporation provides for the election of, starting from the fifth commencement of the board of directors, at least three independent directors out of the 7-to-15-member board. The term 'independent director' may have a different meaning when used in Taiwan than in other jurisdictions. We have used a nominating process, with the stockholders choosing the directors, including independent directors from the list of nominees. With respect to certain material decisions to be made by our board of directors as specified in the ROC Securities and Exchange Act, the Business Mergers and Acquisitions Act and other relevant laws and regulations, including the adoption or amendment to our internal control system, material loans or guarantees, the issuance of equity-type securities, matters in which directors have personal interests, the appointment and discharge of auditors, approval of financial reports, the appointment and discharge of financial, accounting or internal auditing officers and other matters prescribed by the ROC FSC or other relevant competent authorities, the dissenting opinion or qualified opinion of an independent director is required to be noted in the minutes of the board of directors' meeting and disclosed on the website maintained by the TWSE.

Our audit committee was established in September 2004 in accordance with the rules set forth in the NYSE Listed Company Manual, and was comprised of three independent directors. See 'Item 16G. Corporate Governance-Audit Committee.' Starting from the date of the annual general meeting in June 2013, we have established a new audit committee that replaces our supervisors and our old audit committee in accordance with Paragraph 1, Article 14-4 of the ROC Securities and Exchange Act and our Articles of Incorporation, and as a result, we simultaneously comply with the relevant rules of the NYSE Listed Company Manual and the relevant rules and regulations in the ROC. Accordingly, our audit committee is currently composed of all independent directors, namely Lo-Yu Yen, JenRan Chen, Yu-Fen Lin, Chung-Chin Lu and Yi-Chin Tu to be the members of the audit committee.

79

Under the ROC Company Act, a person may serve as our director in his personal capacity or as the representative of another legal entity. A director who serves as the representative of a legal entity may be removed or replaced at any time at the discretion of that legal entity, and the replacement director may serve the remainder of the term of office of the replaced director. Except for our five independent directors, all of our directors are representatives of the MOTC.

The business address of our directors and executive officers is the same as our registered address.

Our audit committee approves and handles following items: (i) the adoption of or amendments to the internal control system pursuant to Article 14-1 of the Securities and Exchange Act; (ii) assessment of the effectiveness of the internal control system; (iii) the adoption or amendment, pursuant to Article 36-1 of the Securities and Exchange Act, of procedures for handling financial or business activities of a material nature, such as acquisition or disposal of assets, derivatives trading, loaning of funds to others, and endorsements or guarantees for others; (iv) a matter bearing on the personal interest of a director; (v) a material asset or derivatives transaction; (vi) a material monetary loan, endorsement, or provision of guarantee; (vii) the offering, issuance, or private placement of any equity-type securities; (viii) the hiring or dismissal of a CPA, or the compensation given thereto; (ix) the appointment or discharge of a financial, accounting, or internal auditing supervisor; (x) annual financial reports; (xi) the matters regulated by the Business Mergers and Acquisitions Act; (xii) the first to third quarter financial reports; (xiii) communication with the CPA; (xiv) negotiating conflicts over financial reports between the management team and the CPA; (xv) discussing and reporting other financial information and required disclosures under the Securities Exchange Act of the U.S. with the management team and the CPA; and (xvi) any other material matter so required by the company or the relevant competent authorities. Our board of directors has concluded that Lo-Yu Yen is our audit committee financial expert.

In addition to our audit committee, we also have a corporate strategy committee. Our corporate strategy committee may comprise of five to nine directors. Currently, there are eight directors on the Committee. It is responsible for:(i) reviewing and advising on the company's mid- to long-term goals and strategies; (ii) major investments and mergers and acquisitions; (iii) major reorganizations of the company; (iv) applications for or returns of business licenses; (v) annual operating plans and budget compilations and revisions; (vi)capital increases or decreases; and (vii) other major strategic decisions that may affect our development. Conclusions made by the corporate strategy committee are considered at a subsequent board of directors meeting.

Article 14-6 of the ROC Securities and Exchange Act requires all listed companies to establish a compensation committee for directors, supervisors and managers' compensation, which includes salary, stock options and other rewards, as well as authorizes the FSC to enact a regulation on the authorities of the compensation committee and the qualifications of its members. Accordingly, our compensation committee is composed of three independent directors (Lo-Yu Yen, JenRan Chen and Yu-Fen Lin) and is responsible for(i) stipulating and periodically reviewing the performance of the directors and managers, as well as the policy, system, standard, and structure of salary and compensation; and (ii) periodically reviewing and stipulating the salary and compensation of the directors and managers. The proposals of the compensation committee should be presented to the board of directors for discussion. See 'Item 10. Additional Information-B. Memorandum and Articles of Incorporation-Directors and Audit Committee.'

In addition, our board of directors engages with management on information security/cybersecurity issues. See 'Item 4. Information on the Company-B. Business Overview-Cybersecurity and Personal Information Protection.'

In November 2003, the SEC approved changes to the NYSE's listing standards related to the corporate governance practices of listed companies. Under these rules, listed foreign private issuers, like us, must disclose any significant ways in which their corporate governance practices differ from those followed by NYSE-listed non-foreign private issuers under the NYSE's listing standards. See 'Item 16G. Corporate Governance.' A copy of the significant differences between our corporate governance practices and NYSE corporate governance rules applicable to non-foreign private issuers is also available on our websitehttp://www.cht.com.tw. The information contained on our website is not a part of this annual report.

80

D. Employees

As of December 31, 2020, we had 32,218 employees on a consolidated basis. Approximately 99% of our employees were based in the ROC. The following table is a breakdown of our employees from 2018 to 2020 on a consolidated basis.

The following table is a breakdown of our employees of Chunghwa Telecom Co., Ltd. from 2018 to 2020.

As of December 31, 2020, 83.2% of our employees of Chunghwa Telecom Co., Ltd. had bachelor, master or doctoral degrees.

As of December 31, 2020, approximately 99% of our employees on a non-consolidated basis were members of our principal labor union. Our collective agreement sets forth work rules, grievance procedures and provides for union participation in performance evaluations and promotion decisions. Our union members also occupy a majority of the seats on our employee welfare and pension fund committees. We will continue to maintain a good relationship with our labor unions. We strive to have good communication with our employees and the labor unions by inviting representatives of our labor unions to attend various meetings related to the performance of our employees.

Pursuant to our Articles of Incorporation, our employees are entitled to 1.7% to 4.3%of the distributable earnings as employee compensation. Our practice in the past to determine the amount of the compensation has been based on the operating results. In the third quarter of 2020, we distributed compensation to our employees of NT$1.1 billion (US$40.1 million).

81

E. Share Ownership

As of February 28, 2021, our directors and executive officers personally held an aggregate of 376,288 shares of our common shares, representing around 0.005% of our outstanding common shares. The following table sets forth information with respect to the beneficial ownership of our common shares as of February 28, 2021 by each of our directors and executive officers.

Employee Stock Subscription Program

Under our Articles of Incorporation, we must reserve up to 10% to 15% of any new shares for subscription by our employees whenever we issue new shares for cash, unless otherwise approved by the central competent authority.

Our consolidated subsidiary, SENAO, is publicly traded on the TWSE and resolved to grant a stock options plan for its employees to purchase common stock of SENAO. As of December 31, 2018, participants in SENAO's stock incentive plan had outstanding stock options to purchase 5.3 million common shares of SENAO, respectively. As of December 31, 2019 and 2020, there were no outstanding stock options.

SENAO transferred treasury stock to specific employees in 2018.

In 2015, 2017, 2018 and 2020, our consolidated subsidiary, CHIEF, which has been a public company since November 17, 2015, granted stock options to its employees entitling them to purchase common stock of CHIEF. As of December 31, 2018, 2019 and 2020, participants in CHIEF's stock incentive plan had outstanding stock options to purchase 1.9 million, 1.3 million and 0.6 million common shares of CHIEF.

CHIEF granted its employees the right to subscribe to new shares reserved for employees under cash injection in 2018.

82

In 2019, CHTSC, another consolidated subsidiary of ours, granted a stock options plan for its employees to purchase common stock of CHTSC. As of December 31,2019 and 2020, participants in CHTSC's incentive plan had outstanding stock options to purchase 4.5 million and 4.3 million common shares of CHTSC.

In 2013 and 2014, our consolidated subsidiary, IISI, which has been a public company since October 20, 2016, granted stock options to its employees entitling them to purchase common stock of IISI. As of December 31, 2020, participants in IISI's stock incentive plan had outstanding stock options to purchase 0.5 million common shares of IISI.

See Note 35 to our consolidated financial statements, included elsewhere in this annual report, for additional details regarding share-based payment arrangements of SENAO, CHIEF, CHTSC and IISI.

A. Major Stockholders

The following table sets forth information known to us with respect to the beneficial ownership of our shares (i) as of February 28, 2021, the most recent practicable date and (ii) as of certain book closure dates in each of the preceding three years, for the stockholders known by us to own at least 5.0% of our outstanding common shares. Beneficial ownership is determined in accordance with the SEC's rules.

As of February 28, 2021, 27 record holders held 22,037,838 ADSs (each representing ten common shares), which represents approximately 3.0% of our total outstanding common shares. Because many of these ADSs were held by brokers or other nominees, we cannot ascertain the exact number of beneficial shareholders with addresses in the United States.

None of our shareholders has different voting rights from other shareholders. See 'Item 10. Additional Information-B. Memorandum and Articles of Incorporation-Voting Rights.' We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

B. Related Party Transactions

We have not extended any loans or credit to any of our directors or executive officers, and we have not provided guarantees for borrowings by any of these persons. We have not entered into any fee-paying contracts with any of these persons for them to provide services not within his or her capacity as a director or executive officer of our company, except that two of our directors who are also our employees receive salaries from our company in their capacity as our employees.

Please refer to 'Item 4. Information on the Company-A. History and Development of the Company' for a discussion of our alliances, acquisitions and investments. Please refer to Notes 3, 14, 15 and 40 to our consolidated financial statements included elsewhere in this annual report for descriptions of Chunghwa's subsidiaries, investments accounted for using equity method, and related party transactions.

On April 1, 2007, Chunghwa entered into an agreement with SENAO making SENAO the exclusive distributor of mobile handsets to Chunghwa's retail outlets. Under the terms of the agreement, SENAO also

83

provides mobile handset sales services in Chunghwa's retail outlets, exclusively sells Chunghwa's SIM cards in SENAO's own retail stores, and gets commission, subsidies of handset sold and warranties from Chunghwa. For the year ended December 31, 2020, SENAO received NT$5.8 billion (US$0.2 billion) from Chunghwa. Chunghwa also sells mobile handsets to SENAO. For the year ended December 31, 2020, Chunghwa sold mobile handsets to SENAO, which amounted to NT$3.0 billion (US$0.1 billion).

Honghwa contracted with Chunghwa to provide on-site sales services in Chunghwa's retail stores and on-site equipment installation services to Chunghwa's customers. Chunghwa paid Honghwa approximately NT$5.6 billion (US$0.2 billion) in 2020 for these services.

Chunghwa acquired network equipment and related supplies from Chunghwa System Integration for approximately NT$1.4 billion (US$51.5 million) in 2020.

Chunghwa paid Taiwan International Standard Electronics approximately NT$1.0 billion (US$35.8 million) in 2020 for the purchase of telecommunications exchange facilities and related supplies, and the maintenance expenses.

Terms and conditions of the foregoing transactions with related parties were not significantly different from transactions with non-related parties. When no similar transactions with non-related parties can be referenced, terms and conditions were determined in accordance with mutual agreements.

C. Interests of Experts and Counsel

Not applicable.

A. Consolidated Statements and Other Financial Information

See Item 18 for a list of all consolidated financial statements filed as part of this annual report on Form 20-F.

We are not currently involved in material litigation or other proceedings that may have or have had in the recent past, significant effects on our financial position or profitability.See 'Item 4. Information on the Company-B. Business Overview-Legal Proceedings.'

For our policy on dividend distributions, see 'Item 10. Additional Information-B. Memorandum and Articles of Incorporation-Dividends and Distributions.' The following table sets forth the dividends declared on each of our common shares and in the aggregate for each of the years from 2016 to 2020. All of these dividends were paid, in the fiscal year following the period with respect to which the dividends relate.

84

We are committed to maximizing stockholder value and intend to maintain a sustainable dividend policy, subject to a number of commercial factors, including the interests of our stockholders, cash requirements for future capital expenditures and investments, as well as relevant industry and market practice. The amount of our net income determined for purposes of calculating our annual dividend payout will be calculated based on Taiwan IFRSs, which may differ from the amount of our net income determined in accordance with IFRSs.

B. Significant Changes

Other than as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of the annual consolidated financial statements included in this annual report.

A. Offer and Listing Details

Market Price Information for Our Common Shares

Our common shares have been listed on the TWSE under the number '2412' since October 27, 2000. There is no public market outside Taiwan for our common shares. The closing price for our common shares on the TWSE on April 7, 2021 was NT$112 per share.

Market Price Information for Our American Depositary Shares

Our ADSs have been listed on the NYSE under the symbol 'CHT' since July 17, 2003. The outstanding ADSs are identified by the CUSIP number 17133Q502. The closing price for our ADSs on the NYSE on April 7, 2021 was US$39.61 per ADS. Each of our ADSs represents the right to receive ten shares.

As of April 7, 2021, a total of 22,151,463 ADSs and 7,757,446,545 common shares (including those represented by ADSs) were outstanding. With certain limited exceptions, holders of shares that are not ROC persons are required to hold these shares through a brokerage or custodial account in the ROC.

B. Plan of Distribution

Not applicable.

C. Markets

The principal trading market for our common shares is the TWSE and the principal trading market for our ADSs is the NYSE.

D. Selling Stockholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

85

A. Share Capital

Not applicable.

B. Memorandum and Articles of Incorporation

Set forth below is information relating to our capital structure, including brief summaries of material provisions of our Articles of Incorporation, the ROC Securities and Exchange Law, the ROC Company Act, the Telecommunications Act, and the Telecommunications Management Act, all as currently in effect. The following summaries are qualified in their entirety by reference to our Articles of Incorporation, the ROC Securities and Exchange Law, the ROC Company Act, the Telecommunications Act,and the Telecommunications Management Act.

Objects and Purpose

The scope of business of Chunghwa Telecom Co., Ltd. as set forth in Article 2 of our Articles of Incorporation, includes (i) telecommunications Enterprise Type 1 and Type 2 businesses pursuant to the Telecommunications Act of the ROC, (ii) installation of the computer equipment and radio-frequency equipment whose operation is controlled by the telecommunication business, (iii) telecommunications equipment wholesale, retail and engineering businesses, (iv) engineering and operation of information software and information process service businesses, (v) apparatus and electric appliance installation and construction business, (vi) television program production, distribution and commercial business, (vii) broadcasting program distribution and commercial business, (viii) the third party payment business, (ix) water pipe construction business, (x) machinery and equipment manufacturing business, (xi) traffic signal installation and construction, and traffic labels construction business, (xii) medical device wholesale and retail business, and (xiii) other businesses, except any business requiring a special permit or otherwise restricted by law or regulation.

General

Under our Articles of Incorporation, our authorized capital was NT$120,000,000,000 divided into 12,000,000,000 common shares, with a par value of NT$10 per share. We have set aside 200,000,000 common shares from the aforementioned common shares for the exercise of any future issuances of stock warrants, preferred shares with warrants, and bonds with warrants. Our paid-in capital is NT$77,574,465,450 divided into 7,757,446,545 common shares. We currently do not have any other equity in the form of preferred shares, bonds or otherwise outstanding as of the date of this annual report.

The MOTC, on behalf of the government of the ROC, owned approximately 35.29% of our outstanding common shares as of December 31, 2020. The remainder of our outstanding shares is held by public stockholders and other investors.

Directors and Audit Committee

Our Articles of Incorporation provide for a board of directors consisting of seven to fifteen directors, and one-fifth of these directors shall be professionals of domain knowledge. See 'Item 6. Directors, Senior Management and Employees-C. Board Practices.' Pursuant to the ROC Securities and Exchange Act, for a company that has established an audit committee, unless otherwise provided for by law, the provisions regarding supervisors in the ROC Securities and Exchange Act, the ROC Company Act, and other laws and regulations shall apply mutatis mutandis to the audit committee.

Under the ROC Company Act, our board of directors, in conducting our business, shall act in accordance with laws and regulations, our Articles of Incorporation and the resolutions adopted at the meetings of our stockholders. Where any resolution adopted by our board of directors contravenes laws, our Articles of Incorporation and the resolutions adopted at the meetings of our stockholders, thereby causing loss or damage to us, all directors taking part in the adoption of such resolution shall be liable to compensate us for such loss or damage; however, those directors whose disagreement appears on record or is expressed in writing shall be exempted from liability.

86

If our board of directors decides, by resolution, to commit any act in violation of any law or our Articles of Incorporation, any of our independent directors or any stockholder who has continuously held our shares for a period of one year or longer may request our board of directors to discontinue such act. One or more stockholders who have held 1% or more of the total number of our outstanding shares for six months or a longer time may send a written request to require an independent director to bring an action on our behalf against a director for losses suffered by us as a result of unlawful actions. In addition, if our stockholders' meeting resolves to institute an action against a director, we shall, within 30 days from the date of such resolution, institute the action. In case of a lawsuit between us and a director, an independent director shall act on our behalf, unless otherwise provided by law; and our stockholders meeting may also appoint some other person to act on our behalf in a lawsuit.

According to the ROC Company Act, our board of directors owes fiduciary duty to us. Our directors are liable for the damages to be sustained by us if they breach their fiduciary duty. In addition, if a director, his or her spouse, his or her blood relative within second degree of kinship, or any company which has a controlling or subordinate relation with him or her, have a personal interest in a matter to be discussed at the meeting of the board of directors, the director shall specify such conflict; if the conflict may cause damages to the Company, the director shall abstain from voting on the matter, and shall not serve as a proxy and vote on behalf of another director.

According to our Articles of Incorporation, the remuneration and compensation of the directors shall be determined by the board of directors based on the participation and the contribution of each director in the business operation of the Company and referencing the regular standards of other corporations in the similar industry. Our Articles of Incorporation do not impose a mandatory retirement age for our directors. Furthermore, our Articles of Incorporation do not impose a shareholding qualification for each director. According to our Code of Ethics, we may not extend any loans to our directors.

Dividends and Distributions

At each annual general stockholders' meeting, our board of directors submits to the stockholders for their approval any proposal for the distribution of dividends or the making of any other distribution to stockholders from our net income for the preceding fiscal year. All common shares outstanding and fully paid as of the relevant record date are entitled to share equally in any dividend or other distribution so approved. Dividends may be distributed in cash, in the form of common shares or a combination of the two, as determined by the stockholders at the meeting.

We are not permitted to distribute dividends or make other distributions to stockholders in any year in which we do not have any net income or unappropriated earnings (excluding reserves). The ROC Company Act also requires that 10% of our annual net income, less prior years' losses and outstanding tax, if any, be set aside as a legal reserve until the accumulated legal reserve equals our paid-in capital. We may also set aside special reserve by the resolution of our stockholders' meeting. In addition, our Articles of Incorporation provide that at least 50% of the remaining portion of the net income, less accumulated losses, outstanding taxes, the legal reserve and any special reserve, plus accumulated retained earnings from prior years will be distributed as dividends to stockholders. Under our Articles of Incorporation, not less than 50% of the total amount of the distributed dividends must be in cash, but if the cash dividends to be distributed are less than NT$0.10 per share, the dividends may be distributed in the form of shares. The actual percentage of distribution would take actual profitability of the year, capital budgeting, and status of finance into consideration, and would be executed following a resolution of shareholders' meeting.

Pursuant to our current Articles of Incorporation, in annual profit-making year, we should distribute 1.7% to 4.3% of profit as employees' compensation, and not more than 0.17% of profit should be distributed as directors' compensation; however, if we have any accumulated losses, an amount to offset losses should be reserved in advance.

Under the ROC Company Act, if we do not incur a loss, we are permitted to make distributions on a pro rata basis to our stockholders of additional common shares or cash by the legal reserve, the premium derived from the issuance of new shares and the income from endowments received by us. We are allowed to make the above distributions to our stockholders by legal reserve only if the legal reserve exceeds 25% of our paid-in capital. Furthermore, subject to the provision under our Articles of Incorporation, such distribution should firstly be made by the premium derived from the issuance of new shares.

87

Changes in Share Capital

Under the ROC Company Act, any change in our authorized share capital requires an amendment to our Articles of Incorporation, which in turn requires approval at our stockholders' meeting. Authorized but unissued common shares may be issued, subject to applicable ROC law, upon terms as our board of directors may determine.

Preemptive Rights

Under the ROC Company Act and our Articles of Incorporation, when we issue new shares for cash, unless otherwise approved by the central competent authority, our employees have rights to subscribe for between 10% and 15% of the new issue, and we have rights to restrain the shares subscribed by employees from being transferred within a specific period of time, which should not be longer than two years. Except for the shares reserved in accordance with the ROC Company Act, we are required to inform our existing shareholders of their rights to subscribe for additional shares pro rata to their respective shareholding and to note that the shareholders will lose their pre-emptive right if they fail to subscribe for the new shares within the prescribed period. In the event that there is any new share that has not been subscribed for by the existing shareholders or our employees pursuant to their respective pre-emptive rights, we may offer such shares to other investors through public offering or private negotiation with any person designated by us.

In addition, in accordance with the ROC Securities and Exchange Act, a public company such as us that intends to offer new shares for cash must offer to the public at least 10% of the shares to be sold except in certain limited circumstances. This percentage can be increased by a resolution passed at a stockholders' meeting, held in accordance with the Company Act and our Articles of Incorporation, which would diminish the number of new shares subject to the preemptive rights of existing stockholders.

Meetings of Stockholders

Pursuant to the ROC Securities and Exchange Act, as a listed company, we must hold a general shareholders' meeting within six months after the end of each fiscal year and may not seek any extension for such meeting. These meetings are generally held in New Taipei City, Taiwan. Special stockholders' meetings may be convened by resolution of the board of directors, or by the board of directors upon the written request of any stockholder or stockholders who have held 3% or more of the issued shares continuously for one year or longer, or, according to the new amendments of the ROC Company Act, taking effect on November 1, 2018, by the stockholders who have held over 50% of the issued shares continuously for three months or longer. Stockholders' meetings may also be convened by an independent director. Notice in writing of general meetings of stockholders, stating the place, time and agenda must be dispatched to each stockholder at least 30 days, in the case of general meetings, and 15 days, in the case of special meetings, before the date set for each meeting. Except in certain circumstances described below, a majority of the holders of all issued and outstanding common shares present at a stockholders' meeting constitutes a quorum for meetings of stockholders. Stockholders of 1% or more of the total number of our outstanding shares are entitled to submit, during the period of time prescribed by us no less than ten days, one proposal each year for consideration at our annual general stockholders' meeting in accordance with the ROC Company Act.

Voting Rights

As previously required by the ROC Company Act, our Articles of Incorporation provide that a holder of common shares has one vote for each common share. Cumulative voting applies to the election of our directors. The election of independent and non-independent directors should be held simultaneously while the ballots for the election of directors and independent directors are cast separately. According to Article 146-1 of the Insurance Act of the ROC, insurance companies that hold our shares may not be our directors or vote for the election of our directors.

88

In general, a resolution can be adopted by the holders of at least one-half of the common shares represented at a stockholders' meeting at which the holders of more than half of all issued and outstanding common shares are present. Under the ROC Company Act, the approval by at least one-half of the common shares represented at a stockholders' meeting in which a quorum of at least two-thirds of all issued and outstanding common shares are represented is required for major corporate actions, including:

Alternatively, the ROC Company Act provides that in the case of a public company, such as us, a resolution may be adopted by the holders of at least two-thirds of the common shares represented at a meeting of stockholders at which holders of at least one-half of issued and outstanding common shares are present.

A stockholder may be represented at a general or special meeting by proxy if a valid proxy form, which is printed by the company, is delivered to us five days before the commencement of the general or special stockholders' meeting. Except for trust enterprises or share registrar approved by the Securities and Futures Bureau of the FSC, where one person is appointed as proxy by two or more stockholders who together hold more than 3% of the total issued common shares, the votes of those stockholders in excess of 3% of the outstanding common shares shall not be counted. Alternatively, if the stockholder would like to exercise its voting right at a general or special meeting but cannot be present at the meeting in person, we have set up an electronic voting mechanism for such stockholder to exercise voting right. The stockholder is not allowed to exercise voting right through an electronic voting mechanism if such stockholder fails to revoke the granted proxy (if any) at least two days prior to the general or special meeting.

At the time of any vote, if a director of a public company has pledged more than half of the holding at the time the director was elected, such director will not be allowed to exercise the voting rights with respect to the number of shares pledged in excess of the half of the number of shares that such director held in such public company at the time the director was elected. The maximum number of shares ineligible for voting pursuant to the provision above cannot exceed half of the number of shares that such director held in such public company at the time the director was elected. In addition, any shares that were ineligible for voting pursuant to the above provision would not count as being present for such vote, but may be counted as present for calculation of attendance quorum.

Any stockholder who has a personal interest in the matter under discussion at a stockholders' meeting, the outcome of which may impair our interests, shall not vote or exercise voting rights on behalf of another stockholder; the shares held by such stockholder will not be counted as present for such vote but, may be counted as present for calculation of attendance quorum.

Holders of our ADSs generally will not be able to exercise voting rights on the common shares underlying ADSs on an individual basis.

Other Rights of Stockholders

Under the ROC Company Act and the Business Mergers and Acquisitions Act, dissenting stockholders are entitled to appraisal rights in certain major corporate actions, such as a planned transfer of the whole or part of the business or a proposed merger by us. A dissenting stockholder may request us to purchase back all of the shares owned by the stockholder at a fair price determined by mutual agreement or determined by the court if a mutual

89

agreement cannot be reached. For example, if we propose to split up or to consolidate or merge with another company,stockholders may exercise their appraisal rights by serving a written notice or raising his objection verbally with a record prior to or during the related stockholders' meeting. Moreover, a stockholder has the right to file a petition in the court for annulment of any resolution adopted at a stockholders' meeting where the procedures for convening the stockholders' meeting or the method of adopting the resolutions at the meeting is contrary to law or our Articles of Incorporation.

We have adopted a nomination procedure for election of directors as stipulated in the ROC Company Act, which provides that stockholders holding 1% or more of our total issued shares may submit to us a list of candidates for directors, including independent directors, along with relevant information and supporting documents.

Register of Stockholders and Record Dates

Our share registrar, Yuanta Securities Co., Ltd., maintains our register of stockholders at its offices in Taipei City, Taiwan. Under the ROC Company Act, we may, by giving advance public notice, set a record date and close the register of stockholders for a specified period in order for us to determine the stockholders or pledgees that are entitled to rights pertaining to the common shares. The specified period starting from such record date (to determine the entitled stockholders or pledgees) required is as follows:

Annual Consolidated Financial Statements

At least ten days before the annual general stockholders' meeting, our annual consolidated financial statements prepared in accordance with Taiwan IFRSs, the business report, and the earnings distribution or losses offsetting proposal, must be available at our principal office in Taipei City, Taiwan for inspection by the stockholders.

Transfer of Common Shares

In accordance with our Articles of Incorporation, all of our shares are currently issued and transferred in book-entry form instead of issuing physical share certificates. After the book closure date, the Taiwan Depository & Clearing Corporation, or the TDCC, will deliver the names and addresses of the shareholders as of the book closure date to our registrar, Yuanta Securities Co., Ltd. Only shareholders as of the book closure date can assert shareholder rights against us.

Acquisition of Our Own Common Shares

Under the ROC Company Act, with minor exceptions, we cannot acquire our own common shares. Any common shares acquired by us, under certain of such minor exceptions, must be sold at the market price within six months after their acquisition.

In addition, under the ROC Securities and Exchange Act, a company whose shares are listed on the TWSE or traded on the Taipei Exchange (formerly known as Gre Tai Securities Market) may, pursuant to a board resolution adopted by a majority consent at a meeting attended by more than two-thirds of the directors and pursuant to the procedures prescribed by the Securities and Futures Bureau of the FSC, purchase its shares for the following purposes on the TWSE, the Taipei Exchange or by a tender offer:

90

The total shares purchased by us shall not exceed 10% of its total issued and outstanding shares. In addition, the total amount for purchase of the shares shall not exceed the aggregate amount of the retained earnings, the premium from shares issues and the realized portion of the capital surplus.

The shares purchased by us pursuant to items (1) and (2) above shall be transferred to the intended transferees within five years after the purchase; otherwise the same shall be cancelled. For the shares to be cancelled pursuant to item (3) above, we shall complete amendment registration for such cancellation within six months after the purchase.

The shares purchased by us shall not be pledged or hypothecated. In addition, we may not exercise any stockholders' rights attaching to these shares. Under the ROC Company Act, we may transfer the treasury stock to our employees and impose transfer restrictions on the shares up to two years.

Liquidation Rights

In the event of our liquidation, the assets remaining after payment of all debts, liquidation expenses and taxes will be distributed pro rata to the stockholders in accordance with the relevant provisions of the ROC Company Act.

Substantial Stockholders and Transfer Restrictions

The ROC Securities and Exchange Act currently requires for public companies that (i) each director, supervisor, manager, as well as their respective spouses, minor children and nominees, and substantial stockholder (i.e., a stockholder who, together with his or her spouse, minor children or nominees, holds more than 10% of the shares of a public company) to report any change in that person's shareholding to the issuer of the shares on a monthly basis and (ii) each director, supervisor, manager or substantial stockholder holding such common shares for more than a six month period to report his or her intent to transfer any shares listed on the TWSE or traded on the Taipei Exchange (formerly known as Gre Tai Securities Market) to the Securities and Futures Bureau of the FSC at least three days before the intended transfer, unless the number of shares to be transferred each day is no more than 10,000 shares. ADS holders holding more than 10% of our common shares, including common shares represented by ADSs, may be subject to the above-mentioned obligations.

In addition, the number of shares that can be sold or transferred on the TWSE or the Taipei Exchange (formerly known as Gre Tai Securities Market) by any person subject to the restrictions described above on any given day may not exceed:

These restrictions do not apply to block trading, auction sale, purchase by auction, after-hours trading and sales or transfers of our ADSs. However, these restrictions will apply to sales of common shares upon withdrawal.

C. Material Contracts

We have not entered into any material contracts other than in the ordinary course of business and other than those described elsewhere in this annual report.

91

D. Exchange Controls

Foreign Investment and Exchange Controls in Taiwan

We have extracted from publicly available documents the information presented in this section. Please note that citizens of the PRC and entities organized in the PRC are subject to special ROC laws, rules and regulations, which are not discussed in this section.

General

Historically, foreign investments in the securities market of Taiwan were restricted. However, commencing in 1983, the Taiwan government has from time to time enacted legislation and adopted regulations to make foreign investment in the Taiwan securities market possible. Initially, only overseas investment trust funds of authorized securities investment trust enterprises established in Taiwan were permitted to invest in the Taiwan securities market. Since January 1, 1991, qualified foreign institutional investors are allowed to make investments in the Taiwan listed securities market. Since March 1, 1996, overseas Chinese, non-resident foreign institutional and individual investors (other than qualified foreign institutional investors), called 'general foreign investors,' are permitted to make direct investments in the Taiwan securities market.

Foreign Investment in Taiwan Securities Market

On December 28, 1990, the Executive Yuan, the cabinet of the ROC government, approved guidelines drafted by the Securities and Futures Commission (the predecessor of the Securities and Futures Bureau), which, since January 1, 1991, has allowed direct foreign investment in Taiwan's securities that are listed on the TWSE or other Taiwan securities approved by the Securities and Futures Bureau by certain eligible qualified foreign institutional investors.

In addition to qualified foreign institutional investors, certain individual and foreign institutional investors which meet certain qualifications set by the Securities and Futures Bureau may invest in the shares of TWSE-listed companies, the Taipei Exchange (formerly known as Gre Tai Securities Market) traded companies, emerging market companies or other Taiwan securities approved by the Securities and Futures Bureau up to a limit of US$50 million (in the case of institutional investors) and US$5 million (in the case of individual investors) after obtaining permission from the TWSE.

On September 30, 2003 and June 15, 2004, the Securities and Futures Bureau issued amendments to the 'Guideline Governing Investment in Securities by Overseas Chinese and Foreign Nationals' and relevant regulations, in which the Securities and Futures Bureau lifted certain restrictions and simplified the procedures required for foreign investments in Taiwan's securities market. The amendment focuses mainly on the following aspects:

Currently, subject to the specific restriction imposed by relevant regulations, the off-shore foreign institutional investors may invest in the Taiwan securities market without any amount of restriction. However, a ceiling will be separately determined by the Securities and Futures Bureau after consultation with the Central Bank of the ROC (Taiwan) for investment by offshore overseas Chinese and foreign individual investors.

92

Foreign Investment Approval

Other than:

In addition to the general restrictions against direct investment by non-Taiwan persons in Taiwan companies, non-Taiwan persons are currently prohibited from investing in prohibited industries in Taiwan under the Negative List promulgated by the Executive Yuan from time to time. The prohibition on direct foreign investment in the prohibited industries in the Negative List is absolute with the consequence of certain specific exemptions from the application of the Negative List. Under the Negative List, some other industries are restricted so that non-Taiwan persons may directly invest only up to a specified level and with the specific approval of the relevant authority which is responsible for enforcing the legislation which the negative list is intended to implement. The telecommunication industry is a restricted industry under the Negative List.

Depositary Receipts

In April 1992, the Securities and Futures Bureau began allowing Taiwan companies listed on the TWSE, with the prior approval of the Securities and Futures Bureau, to sponsor the issuance and sale of depositary receipts evidencing depositary shares. In December 1994, the ROC Ministry of Finance began allowing companies whose shares are traded on the Taipei Exchange (formerly known as Gre Tai Securities Market) also to sponsor the issuance and sale of depositary receipts evidencing depositary shares representing shares of its capital stock. Approvals for these issuances are still required.

After the issuance of a depositary share, a holder of the depositary receipt evidencing the depositary shares may request the depositary issuing the depositary share to cause the underlying shares to be sold in Taiwan and to distribute the proceeds of the sale to or to withdraw the shares and deliver the shares to the depositary receipt holder. A citizen of the PRC is not permitted to withdraw and hold our shares.

If you are an offshore foreign institutional investor holding the depositary receipts, you must register with the TWSE as a foreign investor before you will be permitted to withdraw the shares represented by the depositary receipts. In addition to obtaining registration with the TWSE, you must also (i) appoint a qualified local agent to, among other things, open a securities trading account with a local securities brokerage firm and a bank account to remit funds, exercise stockholders' rights and perform other functions as holders of ADSs may designate, (ii) appoint a custodian bank to hold the securities and cash proceeds, confirm transactions, settle trades and report and declare other relevant information; and (iii) appoint a tax guarantor as guarantor for the full compliance of the withdrawing depositary receipt holder's tax filing and payment obligations in the ROC. A depositary receipt holder not registered as a foreign investor with the TWSE, or not has made the necessary appointments as outlined above, will be unable to hold or subsequently transfer the shares withdrawn from the depositary receipt facility.

93

No deposits of shares may be made in a depositary receipt facility and no depositary shares may be issued against deposits without specific Securities and Futures Bureau approval, unless they are:

An ADS holder or the depositary, without obtaining further approvals from the Central Bank of the ROC (Taiwan) or any other governmental authority or agency of the ROC, may convert NT dollars into other currencies, including U.S. dollars, in respect of:

In addition, the depositary may also convert into NT dollars incoming payments for purchases of common shares for deposit in the depositary receipt facility against the creation of additional ADSs. If you withdraw the common shares underlying your ADSs and become a holder of our common shares, you may convert into NT dollars subscription payment for rights offerings. The depositary may be required to obtain foreign exchange payment approval from the Central Bank of the ROC (Taiwan) on a payment-by-payment basis for conversion from NT dollars into foreign currencies of the proceeds from the sale of subscription rights of new common shares. Although it is expected that the Central Bank of the ROC (Taiwan) will grant approval as a routine matter, required approvals may not be obtained in a timely manner, or at all.

Exchange Controls

Taiwan's Foreign Exchange Control Statute and regulations provide that all foreign exchange transactions must be executed by banks designated to handle foreign exchange transactions by the FSC and by the Central Bank of the ROC (Taiwan). Current regulations favor trade-related foreign exchange transactions. Consequently, foreign currency earned from exports of merchandise and services may now be retained and used freely by exporters. All foreign currency needed for the importation of merchandise and services may be purchased freely from the designated foreign exchange banks.

Aside from trade-related foreign exchange transactions, Taiwan companies and residents may remit to and from Taiwan foreign currencies of up to US$50 million (or its equivalent) and US$5 million, (or its equivalent), respectively, in each calendar year. These limits apply to remittances involving conversion between New Taiwan dollars and U.S. dollars or other foreign currencies. A requirement is also imposed on all private enterprises to register all medium and long-term foreign debt with the Central Bank of the ROC (Taiwan).

In addition, a foreign person without an alien resident card or an unrecognized foreign entity may remit to and from Taiwan foreign currencies of up to US$100,000 per remittance if required documentation is provided to Taiwan authorities. This limit applies only to remittances involving conversion between New Taiwan dollars and U.S. dollars or other foreign currencies.

94

E. Taxation

ROC Taxation

The discussion below describes the principal ROC tax consequences of the ownership and disposition of ADSs representing common shares and of common shares. It applies to you only if you are:

You should also consult your tax advisors concerning the tax consequences of owning ADSs and common shares in the ROC and any other relevant taxing jurisdiction to which they are subject.

Dividends

Dividends declared by us out of our retained earnings and distributed to you are subject to ROC withholding tax, currently at the rate of 21%, pursuant to the amendment to the Standards of Withholding Rates for Various Incomes promulgated by the Ministry of Finance of the ROC effective from January 1, 2018, on the amount of the distribution in the case of cash dividends or on the par value of the common shares in the case of stock dividends.

Share or cash dividends paid by us out of our capital surplus which are derived from the issuance of shares at a premium are not subject to ROC withholding tax. According to the rulings of Ref. Tai-Tsai-Hsuei-Tzi-09504509440 issued by the Ministry of Finance of the ROC, if a company reduces its share capital and redeems for cash its outstanding common shares issued to the company's stockholders by capitalization of capital surplus, those premiums under the capitalized capital surplus derived from re-evaluation of assets, sale of lands and/or merger with other enterprises shall be deemed as the gain in the stockholders' capital investment, and shall be deemed as stockholders' dividend income (or investment revenue) and be subject to ROC income tax.

As the legal reserve is set-aside from company's profit earnings (after tax) in accordance with Article 237 of the ROC Company Act, receipt of distribution of legal reserve shall be deemed as stockholders' dividend income (or investment revenue) and be subject to ROC income tax collected by way of withholding at the time of distribution, currently at the rate of 21%, unless a lower withholding rate is provided under a tax treaty between the ROC and the jurisdiction where the non-ROC stockholder is a resident.

Capital Gains

Gains from the sale of property in the ROC are generally subject to ROC income tax. Effective January 1, 2016, capital gain on the sale of common shares, including common shares withdrawn from the ADS facility, received by a non-resident individual or non-resident entity is no longer subject to the capital gain tax and is further exempted from alternative minimum tax, or the AMT.

Sales of ADSs by you are regarded as transactions relating to property located outside the ROC and thus any gains derived therefrom are currently not subject to ROC income tax.

Preemptive Rights

Distributions of statutory preemptive rights for common shares in compliance with ROC law are not subject to any ROC tax. Proceeds derived from sales of statutory preemptive rights evidenced by securities are subject to securities transaction tax at the rate of 0.3% of the gross amount received. Proceeds derived from sales of statutory preemptive rights which are not evidenced by securities are subject to capital gains tax at the rate of 20% of the gains realized if the seller is a non-ROC resident regardless of whether the non-ROC resident is an individual or entity.

Subject to compliance with ROC law, we, at our sole discretion, can determine whether statutory preemptive rights shall be evidenced by issuance of securities.

95

Securities Transaction Tax

A securities transaction tax, at the rate of 0.3% of the gross amount received, payable by the seller will be withheld upon a sale of common shares in Taiwan. Transfers of ADSs are not subject to ROC securities transaction tax. According to a letter issued by the Ministry of Finance of the ROC in 1996, withdrawal of common shares from the deposit facility will not be subject to ROC securities transaction tax.

Estate Taxation and Gift Tax

ROC estate tax is payable on any property within Taiwan of a deceased person who is a non-resident individual, and ROC gift tax is payable on any property within Taiwan donated by any such person. Under ROC estate and gift tax laws, common shares issued by Taiwan companies are deemed located in Taiwan regardless of the location of the owner. It is not clear whether the ADSs will be regarded as property located in Taiwan under ROC estate and gift tax laws. Starting from May 12, 2017, estate tax is payable at rates ranging from 10% of the first NT$50,000,000 to 20% of amounts over NT$100,000,000, and gift tax is payable at rates ranging from 10% of the first NT$25,000,000 to 20% of amounts over NT$50,000,000.

Tax Treaty

The ROC does not have an income tax treaty with the United States. On the other hand, the ROC has income tax treaties with Indonesia, Israel, Singapore, South Africa, Australia, Vietnam, New Zealand, Malaysia, North Macedonia, Switzerland, the Netherlands, United Kingdom, Gambia, Senegal, Sweden, Belgium, Denmark, Paraguay, Hungary, France, India, Slovakia, Germany, Thailand, Eswatini, Luxembourg, Kiribati, Austria, Italy, Japan, Canada, Poland and the Czech Republic, which may limit the rate of ROC withholding tax on dividends paid with respect to common shares in Taiwan companies. It is unclear whether if you hold ADSs, you will be considered to hold common shares for the purposes of these treaties. Accordingly, if you may otherwise be entitled to the benefits of the relevant income tax treaty, you should consult your tax advisors concerning your eligibility for the benefits with respect to the ADSs.

Unappropriated Earnings Tax

Under the ROC Income Tax Act, a 10% unappropriated earnings tax will be imposed on a company for its after-tax earnings generated after January 1, 1998 which are not distributed in the following year. The unappropriated earnings tax so paid will further reduce the retained earnings available for future distribution. According to the amendment to the Income Tax Law, the rate of the ROC unappropriated earnings tax was adjusted from 10% to 5% against our unappropriated earnings generated from January 1, 2018. Such amendment applied to our annual tax filings made starting from January 1, 2019.

U.S. Federal Income Tax Considerations for U.S. Holders

The following is a summary of certain U.S. federal income tax consequences of the ownership and disposition of our shares and ADSs as of the date hereof. The discussion set forth below is applicable to beneficial owners of our shares or ADSs that hold the shares or ADSs as capital assets and that are U.S. holders (defined below) and non-residents of the ROC. You are a U.S. holder if you are:

96

This summary is based on the provisions of the Internal Revenue Code of 1986, as amended (the 'Code'), and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be replaced, revoked or modified so as to result in U.S. federal income tax consequences different from those discussed below. It is for general purposes only and you should not consider it to be tax advice. In addition, it is also based in part on representations made by the depositary and assumes that the deposit agreement and any related agreement will be performed in accordance with their terms. This summary does not represent a detailed description of all the U.S. federal income tax consequences to you in light of your particular circumstances and does not address the effects of any state, local or non-U.S. tax laws (or other U.S. federal tax consequences, such as U.S. federal estate or gift tax consequences or the Medicare tax on net investment income). In addition, it does not represent a detailed description of the U.S. federal income tax consequences applicable to you if you are subject to special treatment under the U.S. federal income tax laws, including if you are:

We cannot assure you that a later change in law will not alter significantly the tax considerations that we describe in this summary. If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partnership or a partner of a partnership holding our shares or ADSs, you should consult your tax advisor.

You should consult your own tax advisor concerning the particular U.S. federal income tax consequences to you of the ownership and disposition of the shares or ADSs, as well as the consequences to you arising under the laws of any other taxing jurisdiction.

In general, for U.S. federal income tax purposes, a U.S. holder who is the beneficial owner of an ADS will be treated as the owner of the shares underlying such ADS. Deposits or withdrawals of shares, actually or constructively, by U.S. holders for ADSs will not be subject to U.S. federal income tax.

Taxation of Dividends

The gross amount of distributions (other than certain pro rata distributions of shares to all stockholders) you receive on your shares or ADSs, including amounts withheld in respect of ROC withholding taxes, will generally be treated as dividend income to you to the extent the distributions are made from our current or accumulated earnings and profits as calculated according to U.S. federal income tax principles. These amounts (including withheld taxes) will be includible in your gross income as ordinary income on the day you actually or constructively receive the distributions, which in the case of an ADS will be the date actually or constructively received by the depositary. You will not be entitled to claim a dividends-received deduction allowed to corporations under the Code with respect to distributions you receive from us.

97

With respect to non-corporate U.S. holders, certain dividends received from a qualified foreign corporation may be subject to reduced rates of taxation, provided that the foreign corporation was not, in the year prior to the year in which the dividends are paid, and is not, in the year in which the dividends are paid, a passive foreign investment company (see 'Passive Foreign Investment Company' below). A foreign corporation is treated as a qualified foreign corporation with respect to dividends paid by that corporation on shares (or ADSs backed by such shares) that are readily tradable on an established securities market in the United States. Under current U.S. Treasury Department guidance, our ADSs, which are listed on the NYSE, but not our shares, are treated as readily tradable on an established securities market in the United States. Thus, we do not believe that dividends that we pay on our shares that are not represented by ADSs currently meet the conditions required for these reduced tax rates. There also can be no assurance that our ADSs will continue to be readily tradable on an established securities market in the United States in later years, or that our shares will be readily tradable on an established securities market in any given year. Non-corporate U.S. holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss, or that elect to treat the dividend income as 'investment income' pursuant to Section 163(d)(4) of the Code, will not be eligible for the reduced rates of taxation regardless of the trading status of our shares or ADSs. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. You should consult your own tax advisor regarding the application of these rules given your particular circumstances.

The amount of any dividend paid in NT dollars will equal the U.S. dollar value of the NT dollars you receive, calculated by reference to the exchange rate in effect on the date you actually or constructively receive the dividend, which in the case of an ADS will be the date actually or constructively received by the depositary, regardless of whether the NT dollars are actually converted into U.S. dollars. If the NT dollars received as a dividend are converted into U.S. dollars on the date they are actually or constructively received, you generally will not be required to recognize foreign currency gain or loss in respect of the dividend income. If the NT dollars received as a dividend are not converted into U.S. dollars on the date of receipt, you will have a basis in the NT dollars equal to their U.S. dollar value on the date of receipt. Any gain or loss you realize if you subsequently sell or otherwise dispose of the NT dollars will be treated as ordinary income or loss from sources within the United States for foreign tax credit limitation purposes.

Subject to certain conditions and limitations under the Code, you may be entitled to a credit or deduction against your U.S. federal income taxes for any ROC taxes that are withheld from dividend distributions made to you. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For purposes of calculating the foreign tax credit, dividends we pay with respect to shares or ADSs will generally be considered passive category income from sources outside the United States. Further, a U.S. holder that has held shares or ADSs for less than a specified minimum period during which it is not protected from risk of loss, or is obligated to make payments related to the dividends, may not be allowed a foreign tax credit for foreign taxes imposed on dividends paid on shares or ADSs. The rules governing the foreign tax credit are complex. We therefore urge you to consult your tax advisor regarding the availability of the foreign tax credit under your particular circumstances.

To the extent that the amount of any distribution you receive exceeds our current and accumulated earnings and profits for a taxable year, as determined under U.S. federal income tax principles, the distribution will first be treated as a tax-free return of capital, causing a reduction in your adjusted basis in the shares or ADSs and thereby increasing the amount of gain, or decreasing the amount of loss, you will recognize on a subsequent disposition of the shares or ADSs. The balance in excess of adjusted basis, if any, will be taxable to you as capital gain recognized on a sale or exchange. However, we do not expect to keep earnings and profits in accordance with U.S. federal income tax principles. Therefore, you should expect that a distribution will generally be treated as a dividend.

It is possible that pro rata distributions of shares or ADSs to all stockholders may be made in a manner that is not subject to U.S. federal income tax. The basis of any new shares or ADSs so received will generally be determined by allocating your basis in the old shares or ADSs between the old shares or ADSs and the new shares or ADSs, based on their relative fair market values on the date of distribution.

For U.S. tax purposes, any such tax-free share distribution would not result in foreign source income to you. Consequently, you may not be able to use the foreign tax credit associated with any ROC withholding tax imposed

98

on such distributions unless you can use the credit (subject to applicable limitations) against U.S. federal income tax due on other foreign source income in the appropriate category for foreign tax credit purposes.

Taxation of Capital Gains

When you sell or otherwise dispose of your shares or ADSs, you will generally recognize capital gain or loss in an amount equal to the difference between the U.S. dollar value of the amount realized for the shares or ADSs and your basis in the shares or ADSs, determined in U.S. dollars. Such gain or loss will generally be long-term capital gain or loss if you have held the shares or ADSs for more than one year. If you are an individual or other non-corporate holder, long-term capital gains will be eligible for reduced rates of taxation. Your ability to deduct capital losses is subject to limitations. For foreign tax credit limitation purposes, such gain or loss will generally be treated as U.S. source gain or loss. Consequently, you may not be able to use the foreign tax credit arising from any ROC tax imposed on the disposition of shares or ADSs unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources.

Any ROC securities transaction taxes that you pay upon the disposition of shares generally will not be creditable foreign taxes for U.S. federal income tax purposes. You are urged to consult your tax advisors regarding the U.S. federal income tax consequences of these taxes.

Passive Foreign Investment Company

We believe that we were not a 'passive foreign investment company,' or PFIC, for U.S. federal income tax purposes for our taxable year ending on December 31, 2020, and we do not expect to become a PFIC for our current taxable year or in the future, although there can be no assurance in this regard. If we were treated as a PFIC for any taxable year during which you held our shares or ADSs, you could be subject to additional U.S. federal income taxes on gain recognized with respect to the shares or ADSs and on certain distributions, plus an interest charge on certain taxes treated as having been deferred under the PFIC rules.

Non-corporate U.S. holders will not be eligible for reduced rates of taxation on any dividends received from us, if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year.

Information Reporting and Backup Withholding

In general, information reporting will apply to dividends in respect of our shares or ADSs and the proceeds from the sale, exchange or other disposition of our shares or ADSs that are paid to you within the United States (and in certain cases, outside the United States), unless you are an exempt recipient such as a corporation. A backup withholding tax may apply to such payments if you fail to provide a taxpayer identification number or certification of exempt status or fail to report in full dividend and interest income.

Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is timely furnished to the U.S. Internal Revenue Service.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

99

H. Documents on Display

We have filed this annual report on Form 20-F, including exhibits, with the SEC. As allowed by the SEC, in Item 19 of this annual report, we incorporate by reference certain information we have already filed with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report.

You may read and copy this annual report, including the exhibits incorporated by reference in this annual report, at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and at the SEC's regional offices in New York, New York and Chicago, Illinois. You also can obtain copies of this annual report, including the exhibits incorporated by reference in this annual report, from the SEC's Public Reference Room and regional offices upon payment of a duplicating fee.

The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the SEC. Our annual report and some of the other information submitted by us to the SEC may be accessed through this website.

I. Subsidiary Information

Not applicable.

Market risk is the risk of loss related to adverse changes in market prices, including interest rates and foreign exchange rates, of financial instruments. In the normal course of business, we are routinely subject to a variety of risks, including market risk associated with interest rate movements, currency rate movements on non-NT dollar-denominated assets and liabilities and equity price movements on our portfolio of equity securities.

We regularly assess these financial instruments and their ability to address market risk and have established policies and business practices to protect against the adverse effects of these and other potential exposures.

Interest Rate Risk

We do not expect interest rate risk to have a material impact on our financial condition and results of operations. Please refer to 'Item 5. Operating and Financial Review and Prospects-B. Liquidity and Capital Resources' for a discussion of our loans.

For our non-fixed interest rate loans, the interest rates will change in accordance with the fixed rates of the banks we borrowed from. For the financial assets, the risk associated with fluctuating interest rates is principally confined to our cash deposits in banks, which is one of the many ways we manage our capital. Assuming an increase or decrease of 0.25% in the interest rates of our non-fixed interest rate financial assets and loans, our profit before tax for the year ended December 31, 2020 would have increased or decreased by NT$19 million (US$0.7 million). We have not used any derivative financial instruments to hedge interest rate risk. We have not been exposed, nor do we anticipate being exposed to material risks due to changes in interest rates. As of December 31, 2020, our cash and cash equivalents amounted to NT$30.4 billion (US$1.1 billion). Interest income from our cash deposits in banks accounts for only a very small percentage of our total revenue. Therefore, we believe our exposure to interest rate risk is immaterial.

Foreign Currency Risk

We are exposed to foreign currency risk as a result of (i) our foreign currency and derivative trading activities; (ii) our telecommunications equipment being sourced from overseas suppliers; (iii) our international settlement payments associated with our services for international calls and roaming traffic; and (iv) investment denominated in foreign currencies.

100

We entered into forward exchange contracts to reduce our exposure to foreign currency risk due to fluctuations in exchange rates. Outstanding forward exchange contracts on December 31, 2020 were as follows:

Note 38 to our consolidated financial statements included elsewhere in this annual report provides a sensitivity analysis for foreign currency risk.

Equity Price Risk

We are exposed to equity price risk as a result of holding other company's equity and we manage our investment portfolio in accordance with our internal policies and procedures.

The table below presents the carrying amount and accumulated unrealized gain or loss for our financial assets at fair value through profit or loss, or FVTPL, and financial assets at fair value through other comprehensive income, or FVOCI, as of December 31, 2020.

The value of our equity holdings fluctuates depending on the market conditions. Assuming an increase or decrease of 5% in the equity prices, our profit before tax and other comprehensive income before tax for the year ended December 31, 2020 would have increased or decreased by NT$34 million (US$1.2 million) and NT$360 million (US$12.8 million) as a result of the changes in fair value of financial assets at FVTPL and financial assets at FVOCI, respectively. However, we do not expect the gains and losses in the values of the equities that we hold to have a material impact on our financial condition and results of operations.

A. Debt Securities

Not applicable

B. Warrants and Rights

Not applicable

C. Other Securities

Not applicable

101

D. American Depositary Shares

Depositary Fees

Under the terms of the deposit agreement for our ADSs, an ADS holder may have to pay the following service fees to the depositary:

Depositary Charges

In addition, an ADS holder shall be responsible for the following charges:

Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary by the brokers (on behalf of their clients) receiving the newly-issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for cancellation. The brokers in turn charge these transaction fees to their clients.

Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary to the holders of record of ADSs as of the applicable ADS record date. The depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than cash (i.e., stock dividends, rights offerings), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or un-certificated in direct registration), the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts via the central clearing and settlement system, The Depository Trust Company, or DTC, the depositary generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients' ADSs in DTC accounts in turn charge their clients' accounts the amount of the fees paid to the depositary.

In the event of refusal to pay the depositary fees and charges, the depositary may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.

102

The fees and charges ADS holders may be required to pay may vary overtime and may be changed by us and by the depositary. ADS holders will receive prior notice of such changes.

Payments by Depositary

In 2020, we received US$0.5 million net payments (after deducting the 30% U.S. withholding tax) from JPMorgan Chase Bank, N.A., the Depositary Bank for our ADR program. The payments were intended to cover certain of our expenses incurred in relation to the ADR program for the year, including:

103

Part II

None.

None.

Disclosure Controls and Procedures

As of the end of the period covered by this annual report, an evaluation has been carried out under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rules 13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934, as amended. Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective in ensuring that material information required to be disclosed in this annual report is recorded, processed, summarized and reported to them for assessment, and required disclosure is made within the time period specified in the rules and forms of the SEC.

Management's Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended, for our company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB), or IFRSs, and includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company's assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with IFRSs, and that a company's receipts and expenditures are being made only in accordance with authorizations of a company's management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of a company's assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules as promulgated by the SEC, management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020 using criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2020 based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Deloitte & Touche, an independent registered public accounting firm who has also audited our consolidated financial statements as of and for the year ended December 31, 2020, has issued an attestation report on the effectiveness of our internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States).

104

Attestation Report of the Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Chunghwa Telecom Co., Ltd.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Chunghwa Telecom Co., Ltd. and subsidiaries (the 'Company') as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our report dated April 19, 2021, expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding the Company's change in its method of accounting for leases in 2019 due to the adoption of IFRS 16.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying 'Management's Annual Report on Internal Control over Financial Reporting.' Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the consolidated financial statements.

105

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Lo-Yu Yen is our audit committee financial expert and independent director. See 'Item 6. Directors, Senior Management and Employees -C. Board Practices.'

The SEC has indicated that the designation of Mr. Yen as the audit committee financial expert does not: (i) make Mr. Yen an 'expert' for any purpose, including without limitation for purposes of Section 11 of the Securities Act of 1933, as amended, as a result of this designation; (ii) impose any duties, obligations or liability on Mr. Yen that are greater than those imposed on him as a member of the audit committee and the board of directors in the absence of such designation; or (iii) affect the duties, obligations or liability of any other member of the audit committee or the board of directors.

We have adopted a Code of Ethics and Ethical Corporate Management Best Practice Principles that applies to our directors, managers, employees, and mandataries, including our chief executive officer and chief financial officer. We have posted a copy of our Code of Ethics and Ethical Corporate Management Best Practice Principles on our website at https://www.cht.com.tw/en/home/cht/about-cht/corporate-governance/other-bylaws.

The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by Deloitte & Touche, our principal accountant for the years indicated. We did not pay any other fees to Deloitte & Touche during the periods indicated below.

106

All audit and non-audit services provided by Deloitte & Touche were pre-approved by our audit committee according to the revised Rule 201(c) (7) of Regulation S-X, entitled 'Audit Committee Administration of the Engagement,' that served to strengthen requirements regarding auditor independence.

None.

Not applicable.

Not applicable.

As a ROC company listed on the NYSE, we are subject to the U.S. corporate governance rules to the extent that these rules are applicable to foreign private issuers. The following summary details the significant differences between our corporate governance practices and corporate governance standards for non-foreign private issuers (e.g., U.S. companies) under the NYSE Listed Company Manual.

Under Section 303A of the NYSE Listed Company Manual, NYSE-listed foreign private issuers may, in general, follow their home country corporate governance practices in lieu of most of the new NYSE corporate governance requirements. However, all NYSE-listed foreign private issuers must comply with Sections 303A.06, 303A.11, 303A.12(b) and 303A.12(c) of the NYSE Listed Company Manual.

The Legal Framework. In general, corporate governance principles for Taiwanese companies are set forth in the ROC Company Act, the ROC Securities Exchange Act, regulations promulgated by the Securities and Futures Bureau of the FSC and, to the extent they are listed on the TWSE, listing rules of the TWSE. Corporate governance principles under provisions of ROC law may differ in significant ways to corporate governance standards for non-foreign private issuers listed on the NYSE. Committed to high standards of corporate governance, we have generally brought our corporate governance in line with U.S. regulations. However, we have not adopted certain recommended NYSE corporate governance standards where such standards are not in conformity with ROC laws or regulations or generally prevailing business practices in Taiwan. We believe the following to be the significant differences between our corporate governance practices and NYSE corporate governance rules applicable to non-foreign private issuers listed on the NYSE.

Director Independence. The NYSE corporate governance rules applicable to non-foreign private issuers listed on the NYSE require companies to have a majority of independent directors on the board of directors. The ROC Securities Exchange Act requires the independent directors of a public company to comprise of no less than two persons and one-fifth of the total number of directors. We currently have five independent directors on our thirteen-member board of directors.We follow the standards regulated under the ROC Securities Exchange Act and by the FSC for determining director independence, which are comparable to the standards imposed by the NYSE.

107

In addition, under the ROC requirements, our board of directors is not required to make a formal determination of a director's independence. Nevertheless, we believe that our independent directors are free from any business or other relationships that would impair the exercise of their independent judgment. Furthermore, pursuant to the NYSE Listed Company Manual, non-executive directors must meet on a regular basis without the management directors present. All of our directors attend our board of directors' meetings; however, no separate meeting is held among non-executive directors.

Audit Committee. On April 1, 2003, the SEC adopted final rules relating to the audit committee requirements. Foreign private issuers listed on the NYSE were required to comply with the related NYSE corporate governance rules by July 31, 2005. Our audit committee was established in September 2004 in accordance with the rules set forth in the NYSE Listed Company Manual. According to the NYSE corporate governance rules applicable to non-foreign private issuers listed on the NYSE, the board must review the status of any audit member that serves on more than three audit committees. There is no such requirement under the ROC law, which allows a person to serve as an independent director on up to four public companies in the ROC.

Section 303A.07 of the NYSE Listed Company Manual requires issuers to have at least three directors on the audit committee that meets the definition of independence set forth under Rule 10A-3 of the Exchange Act and Section 303A of the NYSE Listed Company Manual. There is no such requirement under the ROC law, which requires all independent directors of a public company to be members of the audit committee if the company has established such a committee.

On February 20, 2013, the FSC of the ROC announced that any (i) financial holding company, bank, bill finance company or insurance company, (ii) listed company whose paid-in capital reaches NT$50 billion or (iii) integrated securities firm controlled by a financial holding company, should establish an audit committee to replace supervisors. On December 19, 2018, the FSC further announced that, effective from January 1, 2020, all companies listed on TWSE/ Taipei Exchange should establish an audit committee to replace supervisors. As a result, our new audit committee started from the date of the annual general meeting on June 25, 2013, and is maintained as of the date of this annual report. See 'Item 6. Directors, Senior Management and Employees-C. Board Practices.' We now simultaneously comply with the relevant rules of the NYSE Listed Company Manual and the relevant rules and regulations in the ROC.

Nominating/Corporate Governance Committee and Corporate Governance Principles. The NYSE corporate governance rules applicable to non-foreign private issuers listed on the NYSE require companies to have a nominating/corporate governance committee, composed entirely of independent directors. In addition to identifying individuals qualified to become board members, the nominating/corporate governance committee must develop and recommend to the board a set of corporate governance principles. The ROC Company Act does not require companies incorporated in the ROC to have a nominating/corporate governance committee. We do not currently have a nominating committee or a corporate governance committee; however, we do have formulated the Company'sCode of Corporate Governance to follow.

Currently, our board of directors performs the duties of a corporate governance committee and regularly reviews our corporate governance principles and practices. The ROC Company Act requires that directors shall be elected by stockholders. Our Articles of Incorporation requires us, beginning in the fifth commencement, to establish at least three independent directors in the number of directors. The elections for directors shall proceed with the candidate nomination mechanism; the stockholders shall elect the directors from among the nominees listed in the roster of director candidates. Stockholders holding 1% or more of our outstanding shares are entitled to nominate candidates of directors in writing to us. The numbers of candidates nominated by stockholders shall not exceed the numbers of directors to be elected; neither the numbers of candidates nominated by the Board. Elections for independent and non-independent directors shall proceed concurrently, and the number of elected independent and non-independent directors shall be calculated separately.

Non-foreign private issuers listed on the NYSE are also required to adopt and disclose corporate governance guidelines. We currently comply with the ROC Non-Binding Corporate Governance Best Practice Principles for TWSE/Taipei Exchange Listed Companies promulgated by the TWSE, or Best Practice Principles, and we explain differences between our practice and the principles, if any, in our ROC annual report.

108

Compensation Committee. The NYSE corporate governance rules applicable to non-foreign private issuers listed on the NYSE require companies to have a compensation committee, composed entirely of independent directors. Article 14-6 of the ROC Securities and Exchange Act requires all listed companies to establish a compensation committee for directors, supervisors and managers' compensation, which includes salary, stock options and other rewards, as well as authorizes the Competent Authority (i.e., FSC) to enact a regulation on the authorities of the compensation committee and the qualifications of its members. See 'Item 6. Directors, Senior Management and Employees-C. Board Practices' for description of our compliance.

Code of Business Conduct and Ethics. The NYSE corporate governance rules applicable to non-foreign private issuers listed on the NYSE require companies must adopt a code of business conduct and ethics for directors, officers and employees and promptly disclose any waivers of the code for directors or executive officers. We have adopted Code of Ethics which applies to our directors, managers and employees, and Ethical Corporate Management Best Practice Principles that applies to our directors, managers, employees and persons having substantial control over us. We have filed Code of Ethics and Ethical Corporate Management Best Practice Principles as an exhibit to our annual report filed with the U.S. SEC and a copy is available to any stockholder upon request.

Equity Compensation Plans. The NYSE corporate governance rules applicable to non-foreign private issuers listed on the NYSE require that equity compensation plans be approved by a company's stockholders. Under the ROC Company Act and the ROC Securities and Exchange Act, the distribution of compensation to employees should be decided by the board of directors and reported in stockholders' meeting. The approval of stockholders' meeting is required for any issuances of restricted stock to employees, and the board of director has authority to approve employee stock option plans and to grant options to employees pursuant to such plans, subject to the approval of the FSC, and to approve share buy-back programs and transfer of shares to employees under such programs. We intend to follow only the ROC requirements.

Means to Communicate with Non-Management Directors. The NYSE corporate governance rules applicable to non-foreign private issuers listed on the NYSE require companies to establish a means for stockholders, employees and other interested parties to communicate with non-management directors. The ROC law does not have comparable requirements. However, according to the Best Practice Principles, companies are required to establish channels of communication with employees and encourage employees to communicate directly with the management or directors so as to reflect employees' opinions about the management, financial conditions and material decisions of the company concerning employee welfare. We have complied with these provisions.

Internal Audit Function. The NYSE corporate governance rules applicable to non-foreign private issuers listed on the NYSE require companies to establish an internal audit function to provide management and the audit committee with assessments of the company's risk management processes and system of internal control. We have complied with the Best-Practice Principles by setting up an internal control/audit system in accordance with the ROC Regulations Governing Establishment of Internal Control Systems by Public Companies.

CEO Certification to the NYSE. The NYSE listing standards require the CEO of companies to certify compliance with NYSE corporate governance standards annually. ROC law does not contain such requirement. In this regard, we only follow the ROC corporate governance requirement which does not require CEO annual certification. However, our CEO and CFO are required to certify in the 20-F annual report that, to his or her knowledge the information contained therein fairly represents in all material respects the financial condition and results of operations of our company.

Not applicable.

109

PART III

The Registrant has elected to provide the consolidated financial statements and related information specified in Item 18 in lieu of Item 17.

The following is a list of the consolidated financial statements and report of independent registered public accounting firm included in this annual report beginning on page F-1.

110

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

111

112

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

113

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Chunghwa Telecom Co., Ltd.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Chunghwa Telecom Co., Ltd. and subsidiaries (the 'Company') as of December 31, 2019 and 2020, the related consolidated statements of comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the 'consolidated financial statements'). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Our audits also comprehended the translation of New Taiwan dollar amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 6 to the consolidated financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside the Republic of China.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 19, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of IFRS 16.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

F-1

Revenue Recognition on Mobile Service - Refer to Notes 3 and 31 to the consolidated financial statements

Critical Audit Matter Description

The Company's mobile service revenue consists of subscriber-based charges made up of a significant volume of low-dollar transactions. Because of the complexity and a variety of subscriber-based charges as well as a large number of transactions, the Company uses highly automated systems to process and record its revenue transactions.

Given the Company's systems to process and record revenue are highly automated, auditing revenue was complex and challenging due to the extent of audit effort required and involvement of professionals with expertise in information technology (IT) necessary for us to identify, test, and evaluate the Company's IT systems.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company's systems to process revenue transactions included the following, among others:

/s/ DELOITTE & TOUCHE

Deloitte & Touche

Taipei, Taiwan

Republic of China

April 19, 2021

We have served as the Company's auditor since 1998.

F-2

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2019 and 2020

(In Millions of New Taiwan or U.S. Dollars)

(Continued)

F-3

(Concluded)

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

F-4

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2018, 2019 and 2020

(In Millions of New Taiwan or U.S. Dollars, Except Earnings Per Share That Are in New Taiwan or U.S. Dollars)

(Continued)

F-5

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2018, 2019 and 2020

(In Millions of New Taiwan or U.S. Dollars, Except Earnings Per Share That Are in New Taiwan or U.S. Dollars)

F-6

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

YEARS ENDED DECEMBER 31, 2018, 2019 and 2020

(In Millions of New Taiwan or U.S. Dollars)

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

F-7

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2018, 2019 and 2020

(In Millions of New Taiwan or U.S. Dollars)

(Continued)

F-8

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2018, 2019 and 2020

(In Millions of New Taiwan or U.S. Dollars)

(Continued)

F-9

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2018, 2019 and 2020

(In Millions of New Taiwan or U.S. Dollars)

(Concluded)

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

F-10

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

The consolidated financial statements were authorized for issue by the management on March 31, 2021.

The Company initially applied IFRS 16 'Leases' on January 1, 2019 and elected not to reflect the figures on a retrospective basis in comparative periods. Different accounting policies for each accounting period as a result of the application of new accounting standards are listed by year separately.

Statement of Compliance

The accompanying consolidated financial statements have been prepared in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (collectively, 'IFRSs').

Basis of Preparation

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

F-11

Current and Noncurrent Assets and Liabilities

Current assets include:

Current liabilities include:

Assets and liabilities that are not classified as current are classified as noncurrent.

Light Era Development Co., Ltd. (LED) engages mainly in development of property for rent and sale. The assets and liabilities of LED related to property development within its operating cycle, which is over one year, are classified as current items.

Basis of Consolidation

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

Income and expenses of subsidiaries acquired are included in the consolidated statements of comprehensive income from the acquisition date.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by the Company.

All inter-company transactions, balances, income and expenses are eliminated in full upon consolidation.

Attribution of total comprehensive income to noncontrolling interests

Total comprehensive income of subsidiaries is attributed to the stockholders of the parent and to the noncontrolling interests even if it results in the noncontrolling interests having a deficit balance.

Changes in the Company's ownership interests in subsidiaries

Changes in the Company's ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Company's interests and the noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to stockholders of the parent.

F-12

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

(Continued)

F-13

(Continued)

F-14

(Concluded)

F-15

The following diagram presented information regarding the relationship and percentages of ownership interests between Chunghwa and its subsidiaries as of December 31, 2020.

F-16

Business Combinations

Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are generally recognized in profit or loss as they are incurred.

Goodwill is measured as the excess of the sum of the consideration transferred and the fair value of the acquirer's previously held equity interests in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

Noncontrolling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation are measured at the noncontrolling interests' proportionate share of the recognized amounts of the acquiree's identifiable net assets.

When a business combination is achieved in stages, the Company's previously held equity interest in an acquiree is remeasured to fair value at the acquisition date and the resulting gain or loss is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are recognized on the same basis as would be required had those interests been directly disposed of by the Company.

Foreign Currencies

In preparing the financial statements of each individual entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise.

Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined and related exchange differences are recognized in profit or loss. Conversely, when the fair value changes were recognized in other comprehensive income, related exchange difference shall be recognized in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

Chunghwa uses New Taiwan dollars (NT$) as the functional currency. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Company's foreign operations (including of the subsidiaries, associates and joint ventures in other countries or currencies used different with Chunghwa) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognized in other comprehensive income and attributed to stockholders of the parent and noncontrolling interests as appropriate.

Cash Equivalents

Cash equivalents include commercial paper, negotiable certificates of deposit, time deposits, repurchase agreements collateralized by bonds with original maturities within three months from the date of acquisition and government stimulus vouchers, highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

Inventories

Inventories are stated at the lower of cost or net realizable value item by item, except for those that may be appropriate to group items of similar or related inventories. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. The calculation of the cost of inventory is derived using the weighted-average method.

F-17

Buildings and Land Consigned to Construction Contractors

Inventories of LED are stated at the lower of cost or net realizable value item by item, except for those that may be appropriate to group as similar items or related inventories. Land acquired before construction is classified as land held for development, and then reclassified as land held under development after LED begins its construction project.

Upon the completion of the construction project, LED recognizes revenues in the amount of proceeds from customers for land and buildings and related costs when ownership is transferred to the customers. The unsold portion of the completed construction project is transferred to land and building held for sale.

Investments in Associates and Joint Ventures

An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. A joint venture is a joint arrangement whereby the Company and other parties that have joint control of the arrangement have rights to the net assets of the arrangement.

Investments accounted for using the equity method include investments in associates and interests in joint ventures. Under the equity method, an investment in an associate or a joint venture is initially recognized at cost and adjusted thereafter to recognize the Company's share of profit or loss and other comprehensive income of the associate and joint venture as well as the distribution received. The Company also recognizes its share in changes in the associates and joint ventures.

When the Company subscribes for new shares of an associate and a joint venture at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company's proportionate interest in the associate and joint venture. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to additional paid-in capital. When the adjustment should be debited to additional paid-in capital but the additional paid-in capital recognized from investments accounted for using equity method is insufficient, the shortage is debited to retained earnings.

Any excess of the cost of acquisition over the Company's share of the fair value of the identifiable net assets and liabilities of an associate and a joint venture at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and shall not be amortized. Any excess of the Company's share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognized immediately in profit or loss.

The entire carrying amount of an investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Company discontinues the use of the equity method from the date on which its investment ceases to be an associate and a joint venture. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment's fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate and joint venture attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate and joint venture. The Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate and joint venture on the same basis as would be required had that associate and joint venture directly disposed of the related assets or liabilities.

When the Company transacts with its associate and joint venture, profits and losses resulting from the transactions with the associate and joint venture are recognized in the Company's consolidated financial statements only to the extent of interests in the associate and joint venture that are not related to the Company.

F-18

Property, Plant and Equipment

Property, plant and equipment are initially measured at cost and subsequently measured at cost less accumulated depreciation and accumulated impairment loss.

Property, plant and equipment in the course of construction are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for their intended use.

Depreciation on property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. Freehold land is not depreciated. The estimated useful lives, residual values and depreciation method are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period in which the property is derecognized.

Investment Properties

Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties also include land held for a currently undetermined future use.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method.

For a transfer from the investment properties to property, plant and equipment, the deemed cost of the property, plant and equipment for subsequent accounting is its carrying amount at the commencement of owner-occupation.

For a transfer from the property, plant and equipment to investment properties, the deemed cost of the investment properties for subsequent accounting is its carrying amount at the end of owner-occupation.

For a contract where a land owner provides land for the construction of buildings by a property developer in exchange for a certain percentage of the buildings, any exchange gain or loss is recognized when the exchange transaction occurs if the exchange transaction has commercial substance.

On derecognition of the investment properties, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period in which the property is derecognized.

Goodwill

Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purpose of impairment testing, goodwill is allocated to each of the Company's cash-generating units or groups of cash-generating units (referred to as 'cash-generating unit') that are expected to benefit from the synergies of the business combination.

F-19

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributable goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

Intangible Assets Other Than Goodwill

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. The residual value of an intangible asset with a finite useful life shall be assumed to be zero unless the Company expects to dispose of the intangible asset before the end of its economic life.

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss in the period in which the asset is derecognized.

Impairment of Property, Plant and Equipment, Right-of-use Assets, Intangible Assets Other Than Goodwill and Incremental Costs of Obtaining Contracts

At the end of each reporting period, the Company reviews the carrying amounts of its property, plant and equipment, right-of-use assets and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

Impairment loss from the assets related to incremental cost of obtaining contracts is recognized to the extent that the carrying amount of the assets exceeds the remaining amount of consideration that the Company expects to receive in exchange for related goods or services less the costs which relate directly to providing those goods or services.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

F-20

Financial Instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.

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

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. The regular way of transaction means the purchase or sale of financial assets delivered within the time frame established by regulation or convention in the marketplace.

Financial asset is classified as at FVTPL when the financial asset is mandatorily classified as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at fair value through other comprehensive income (FVOCI).

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividend earned on the financial asset. Fair value is determined in the manner described in Note 38.

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

Subsequent to initial recognition, financial assets at amortized cost are measured at amortized cost, which equals to gross carrying amount determined by the effective interest method less any impairment loss, except for short-term receivables as the effect of discounting is immaterial. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such financial assets.

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

Investments in equity instruments at FVOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be

F-21

reclassified to profit or loss on disposal of the equity investments. Instead, it will be transferred to retained earnings.

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

The Company recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including accounts receivable) and contract assets.

The Company recognizes lifetime Expected Credit Loss (ECL) for accounts receivable and contract assets. For all other financial instruments, the Company recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.

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

The Company recognizes an impairment loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

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

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

Except for financial liabilities at FVTPL, all the financial liabilities are subsequently measured at amortized cost using the effective interest method.

The Company derecognizes financial liabilities when, and only when, the Company's obligations are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

F-22

The Company enters into derivative financial instruments to manage its exposure to foreign exchange rate risks, including forward exchange contracts.

Derivatives are initially measured at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability.

Hedge Accounting

The Company designates some derivatives instruments as cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss.

The associated gains or losses that were recognized in other comprehensive income are reclassified from equity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in the same period when the hedged item affects profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the associated gains and losses that were recognized in other comprehensive income are removed from equity and are included in the initial cost of the non-financial asset or non-financial liability.

The Company discontinues hedge accounting only when the hedging relationship ceases to meet the qualifying criteria; for instance, when the hedging instrument expires or is sold, terminated or exercised. The cumulative gain or loss on the hedging instrument that has been previously recognized in other comprehensive income from the period when the hedge was effective remains separately in equity until the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss.

Provisions

Provisions are measured at the best estimate of the expenditure required to settle the Company's obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. The provisions for warranties claims are made by management according to the sales agreements which represent the management's best estimate of the future outflow of economic benefits. The provisions of warranties claims are recognized as operating cost in the period in which the goods are sold. The provision for onerous contracts represents the present obligation resulting from the measurement for the unavoidable costs of meeting the Company's contractual obligations exceed the economic benefits expected to be received from the contracts.

Revenue Recognition

The Company identifies the performance obligations in the contract with the customers, allocates transaction price to each performance obligation and recognizes revenue when performance obligations are satisfied.

Sales of products are recognized as revenue when the Company delivers products and the customer accepts and controls the product. Except for consumer electronic products such as mobile devices sold in channel stores usually in the form of cash, the Company recognizes revenues for sale of other electronic devices and corresponding trade notes and accounts receivable.

F-23

Usage revenues from fixed-line services (including local, domestic long distance and international long distance telephone services), mobile services, internet and data services, and interconnection and call transfer fees from other telecommunications companies and carriers are billed in arrears and are recognized based upon seconds or minutes of traffic processed when the services are provided in accordance with contract terms. The usage revenues and corresponding trade notes and accounts receivable are recognized monthly.

Other revenues are recognized as follows: (a) one-time subscriber connection fees (on fixed-line services) are first recognized as contract liabilities and revenues are recognized subsequently over the average expected customer service periods, (b) monthly fees (on fixed-line services, mobile, internet and data services) and related receivables are accrued monthly, and (c) prepaid services (fixed-line, mobile, internet and data services) are recognized as contract liabilities upon collection considerations from customers and are recognized as revenues subsequently based upon actual usage by customers.

Where the Company enters into transactions which involve both the provision of telecommunications service bundled with products such as handsets, total consideration received from products and telecommunications service in these arrangements are allocated based on their relative standalone selling price. The amount of sales revenue recognized for products is not limited to the amount paid by the customer for the products. When the amount of sales revenue recognized for products exceeded the amount paid by the customer for the products, the difference is recognized as contract assets. Contract assets are reclassified to accounts receivable when the amounts become collectible from customers subsequently. When the amount of sales revenue recognized for products was less than the amount paid by the customer for the products, the difference is recognized as contract liabilities and revenues are recognized subsequently when the telecommunications services are provided.

For project business contracts, if a substantial part of the Company's promise to customers is to manage and coordinate the various tasks and assume the risks of those tasks to ensure the individual goods or services are incorporated into the combined output, they are treated as a single performance obligation since the Company provides a significant integration service. The Company recognizes revenues and corresponding accounts receivable when the project business contract is completed and accepted by customers. For some project contracts, the Company does not create an asset with an alternative use to the Company and has an enforceable right to payment for performance completed to date; therefore, performance obligations are satisfied and revenues are recognized over time.

For service contracts such as maintenance and warranties, customers simultaneously receive and consume the benefits provided by the Company; thus, revenues and corresponding accounts receivable of service contracts are recognized over the related service period.

When another party is involved in providing goods or services to a customer, the Company is acting as a principal if it controls the specified good or service before that good or service is transferred to a customer; otherwise, the Company is acting as an agent. When the Company is acting as a principal, gross inflow of economic benefits arising from transactions is recognized as revenue. When the Company is acting as an agent, revenue is recognized as its share of transaction.

Incremental Costs of Obtaining Contracts

Commissions and equipment subsidy related to telecommunications service as a result of obtaining contracts are recognized as an asset under the incremental costs of obtaining contracts to the extent the costs are expected to be recovered and are amortized over the contract period. However, the Company elects not to capitalize the incremental costs of obtaining contracts if the amortization period of the assets that the Company otherwise would have recognized is expected to be one year or less.

F-24

Leasing

2018

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

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

Starting from 2019

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

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

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

Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities and for lease payments made at or before the commencement date. Right-of-use assets are subsequently measured at cost less accumulated depreciation and accumulated impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented separately on the consolidated balance sheets.

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

Lease liabilities were initially measured at the present value of the lease payments, which comprise fixed payments, in-substance fixed payments, variable lease payments which depend on an index or a rate. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If such rate cannot be readily determined, the lessee's incremental borrowing rate is used.

Lease liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, the Company remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. The Company accounts for the remeasurement of the lease liability as a result of the decrease of lease scope by decreasing the carrying amount of the right-of-use assets and recognizes in profit or loss any gain or loss on the partial or full termination of the lease. Lease liabilities are presented separately on the consolidated balance sheets.

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

F-25

Borrowing Costs

All borrowing costs are recognized in profit or loss in the period in which they are incurred.

Government Grants

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attached to government grants and that the grants will be received.

Government grants related to income are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes expenses of the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company should construct noncurrent assets are recognized as deferred revenue and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Employee Benefits

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

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost and gains or losses on settlements) and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising (a) actuarial gains and losses; and (b) the return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability (asset) represents the actual deficit (surplus) in the Company's defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

Other long-term employee benefits are accounted for in the same way as the accounting required for defined benefit plan except that remeasurement is recognized in profit or loss.

Share-based Payment Arrangements - Employee Stock Options

The fair value determined at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Company's estimate of employee stock options that are expected to ultimately vest, with a corresponding increase in additional paid-in capital - employee stock options. If the equity instruments granted vest immediately at the grant date, expenses are recognized in full in profit or loss.

At the end of each reporting period, the Company revises its estimate of the number of employee share options expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to additional paid-in capital - employee stock options.

F-26

Income Tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

The current tax is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statements of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Income tax on unappropriated earnings is accrued during the period the earnings arise and adjusted to the extent that distributions are approved by the stockholders in the following year.

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

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. A deferred tax liability is not recognized on taxable temporary difference arising from initial recognition of goodwill.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carry forward and unused tax credits from purchases of machinery, equipment and technology and research, and development expenditures, etc. to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

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

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income, in which case, the current and deferred tax are also recognized in other comprehensive income.

Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

F-27

In the application of the Company's accounting policies, the management is required to make judgments, estimates and assumptions which are based on historical experience and other factors that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed by the management on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The Company's project agreements are mainly to provide one or more customized equipment or services to customers. In order to fulfill the agreements, another party may be involved in some agreements. The Company considers the following factors to determine whether the Company is a principal of the transaction: whether the Company is the primary obligation provider of the agreements, its exposures to inventory risks and the discretion in establishing prices, etc. The determination of whether the Company is a principal or an agent will affect the amount of revenue recognized by the Company. Only when the Company is acting as a principal, gross inflows of economic benefits arising from transactions is recognized as revenue.

As discussed in Note 3, 'Summary of Significant Accounting Policies - Basis of Consolidation', some entities are subsidiaries of the Company although the Company only owns less than 50% ownership interests in these entities. After considering the Company's absolute size of holding in the entity and the relative size of and the dispersion of shares owned by the other stockholders, and the contractual arrangements between the Company and other investors, potential voting interests and the written agreement between stockholders, the management concluded that the Company has a sufficiently dominant voting interest to direct the relevant activities of the entity and to have control over the governance of the entity and therefore the Company has control over these entities.

The provision for impairment of trade notes and accounts receivable is based on assumptions about risk of default and expected loss rates. The Company uses judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on the Company's past experience, current market conditions as well as forward looking information at the end of each reporting period. For details of the key assumptions and inputs used, see Note 10. Where the actual future cash flows are less than expected, a material impairment loss may arise.

For the assets and liabilities measured at fair value without quoted prices in active markets, the Company's management determines the appropriate valuation techniques for the fair value measurements and whether to engage third party qualified appraisers based on the related regulations and professional judgments.

F-28

Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities was disclosed in Note 38. If the actual changes of inputs in the future differ from expectation, the fair value may vary accordingly. The Company updates inputs periodically to monitor the appropriateness of the fair value measurement.

Inventories are stated at the lower of cost or net realizable value. Estimates of net realizable value are based on the most reliable evidence available at the time the estimates are made at the end of reporting period. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the end of the period to the extent that such events confirm conditions existing at the end of the period. Inventory write-downs are determined on an item by item basis, except for those similar items which could be categorized into the same groups. The Company uses the inventory holding period and turnover as the evaluation basis for inventory obsolescence losses.

In the process of evaluating the potential impairment of tangible and intangible assets, the Company is required to consider internal and external indicators of impairment and make subjective judgments in determining the independent cash flows, useful lives, expected future revenue and expenses related to the specific asset groups within the context of the telecommunication industry. Any changes in these estimates based on changed economic conditions or business strategies could result in significant impairment charges in future periods.

As discussed in Note 3, 'Summary of Significant Accounting Policies - Property, Plant and Equipment', the Company reviews estimated useful lives of property, plant and equipment at the end of each year.

Net defined benefit liabilities (assets) and the resulting pension expense under defined benefit pension plans are calculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discount rate, employee turnover rate, average future salary increase and etc. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability.

Starting from 2019

In determining a lessee's incremental borrowing rate used in discounting lease payments, a risk-free rate for relevant duration and the same currency is selected as a reference rate. The lessee's credit spread adjustments and lease specific adjustments are also taken into account.

F-29

Amendments to IFRSs and the New Interpretation That Are Mandatorily Effective for the Current Year

The Company has applied Amendments to IFRS 3: Definition of a Business, Amendments to IAS 9 and IAS 39 and IFRS 7: Interest Rate Benchmark Reform, Amendments to IAS 1 and IAS 8: Definition of Material. The application of these new standards and amendments has had no impact on the disclosures or amounts recognized in the Company's consolidated financial statements.

New and Amended IFRSs in Issue But Not Yet Effective

The Company has not applied the following new and amended IFRSs that have been issued but are not yet effective.

F-30

The application of 'Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform-phase 2' will not have material impact on the Company's consolidated financial statements.

As of the date the consolidated financial statements were authorized for issue, the Company is continuously assessing whether the application of 'Amendments to IFRSs: Annual Improvements to IFRS Standards 2018-2020', 'Amendments to IFRS 3: Reference to the Conceptual Framework', 'Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture', 'Amendments to IAS 1: Classification of liabilities as current or noncurrent', 'Amendments to IAS 1: Definition of Accounting Estimates', 'Amendments to IAS 8: Disclosure Initiative - Accounting Policies', 'Amendments to IAS 16: Property, Plant and Equipment - Proceeds before Intended Use' and 'Amendments to IAS 37: Onerous Contracts - Cost of Fulfilling a Contract' will have the impact on the Company's financial position and operating result. The Company will disclose the relevant impact when the assessment is completed.

The Company maintains its accounts and expresses its consolidated financial statements in New Taiwan dollars. For readers' convenience only, U.S. dollar amounts presented in the accompanying consolidated financial statements have been translated from New Taiwan dollars as set forth in the statistical release of the Federal Reserve Board of the United States as of December 31, 2020, which was NT$28.08 to US$1.00. The convenience translations should not be construed as representations that the New Taiwan dollar amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.

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

F-31

The Company increased its investment in Taiwania Capital Buffalo Fund Co., Ltd. proportionally for $300 million in October 2019 and the Company's ownership interest in Taiwania Capital Buffalo Fund Co., Ltd. remained at 12.9%.

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

The Company entered into the above forward exchange contracts to manage its exposure to foreign currency risk due to fluctuations in exchange rates. However, the aforementioned derivatives did not meet the criteria for hedge accounting.

F-32

The Company holds the above foreign and domestic stocks for medium to long-term strategic purposes and expects to profit from long-term investment. Accordingly, the management elected to designate these investments in equity instruments at FVOCI as they believe that recognizing short-term fair value fluctuations of these investments in profit or loss is not consistent with the Company's strategy of holding these investments for long-term purposes.

The Company holds Powtec Electro Chemical Corporation ('Powtec') as financial assets at FVOCI. The Board of Directors of Powtec resolved in February 2020 to file a petition with court for the declaration of its bankruptcy which was adjudged by the court in April 2020. The Company evaluated and determined the fair value of such investment was nil after its declaration of bankruptcy and recognized related loss in the consolidated statements of comprehensive income for the year ended December 31, 2019.

The Company disposed a portion of its investment in China Airlines, Ltd. at fair value of $568 million in December 2020. As of December 31, 2020, the settlement of funds/securities amounting to $270 million had not been completed. The related unrealized gain on investments in equity instruments at fair value through other comprehensive income of $17 million was transferred from other equity to retained earnings upon the aforementioned disposal.

The Company recognized dividend income of $396 million, $296 million and $246 million for the years ended December 31, 2018, 2019 and 2020, respectively, from the investments still held on December 31, 2018, 2019 and 2020.

The main credit terms range from 30 to 90 days.

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

The Company adopted a policy of dealing with counterparties with certain credit ratings for project business

F-33

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

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

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

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

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

December 31, 2019

F-34

December 31, 2020

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

F-35

The operating costs related to inventories were $48,649 million, $49,258 million and $53,847 million for the years ended December 31, 2018, 2019 and 2020, respectively.

For the years ended December 31, 2018, 2019 and 2020, valuation loss on inventories recognized as operating costs included the amounts of $365 million, $475 million and $1,161 million, respectively.

As of December 31, 2019 and 2020, inventories of $2,076 million and $2,076 million, respectively, were expected to be recovered for a time period longer than twelve months. The aforementioned amount of inventories is related to property development owned by LED.

Land held under development and construction in progress was developed by LED for Qingshan Sec., Dayuan Dist., Taoyuan City project.

Prepaid rents comprised the prepayments from the lease agreements applying the recognition exemption and the prepayments for leases that do not meet the definition of leases under IFRS 16.

F-36

The annual yield rates of time deposits, negotiable certificates of deposit and repurchase agreements

collateralized by bonds with maturities of more than three months at the balance sheet dates were as

follows:

The table below shows details of less than wholly owned subsidiaries of the Company that have material noncontrolling interests:

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

F-37

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

F-38

CHI disposed some shares of CHPT from April to August 2018. Therefore, the Company's ownership interest in CHPT decreased to 34.25% as of December 31, 2019 and 2020.

F-39

Chunghwa and CHI disposed some shares of CHIEF in May 2018 before CHIEF traded its shares on the emerging stock market and the General Stock Market of the Taipei Exchange according to the local requirements. In addition, Chunghwa and CHI did not participate in the capital increase of CHIEF in June 2018. Furthermore, CHIEF issued new shares in March 2018, November 2018, March 2019, November 2019, March 2020 and December 2020, as its employees exercised options. Therefore, the Company's ownership interest in CHIEF decreased to 59.75% and 59.08% as of December 31, 2019 and 2020. See Note 35(c)(d) for details.

SENAO transferred its treasury stock to employees in June 2018; therefore, the Company's ownership interest in SENAO decreased to 28.18% as of December 31, 2019 and 2020. See Note 35(b) for details.

SENAO subscribed for all the shares in the capital increase of Youth in December 2018 and April 2020; therefore, the Company's ownership interest in Youth increased to 93% and 96% as of December 31, 2019 and 2020, respectively.

IISI issued new shares in September 2020 as its employees exercised options; therefore, the Company's ownership interest in IISI decreased. See Note 35(f) for details.

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

The detailed information of the equity transactions for the years ended December 31, 2018, 2019 and 2020 was as follows:

F-40

In order to develop and cultivate the enterprise customer market, Chunghwa obtained 20.38% ownership interest in IISI by cash on July 1, 2020, the acquisition date. (Note) Chunghwa's ownership interest in IISI increased to 51.54% by considering the previously held ownership interest in IISI. Chunghwa obtained over half of the seats of the Board of Directors of IISI; therefore, Chunghwa gained control over IISI and included IISI and its subsidiaries in the consolidated financial statements starting from the acquisition date. IISI mainly engages in information system development and maintenance service business, etc.

Note:IISI issued new shares in April 2020 as its employees exercised options; therefore, the percentage of ownership interest in IISI obtained on the acquisition date is lower than that approved by Chunghwa's Board of Directors in January 2020.

F-41

The trade notes and accounts receivable acquired in business combination transactions have a fair value of $165 million and a gross contractual amount of $167 million. The best estimates of the contractual cash flows not expected to be collected as of the acquisition date are $2 million.

The goodwill arising from the acquisition of IISI mainly represents the control premium. In addition, the consideration paid for the combination included amounts attributed to the benefits of expected synergies and the assembled workforces of IISI. These benefits are not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

Goodwill arising from business combinations is not deductible for tax purposes.

F-42

The financial results of the acquiree since the acquisition date to December 31, 2020 included in the consolidated statements of comprehensive income are as follows:

Had the business combination been in effect at the beginning of the annual reporting period, the Company's revenue and profit would have been $208,605 million and $34,747 million for the year ended December 31, 2020, respectively. This pro-forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Company that actually would have been achieved had the acquisition been completed on January 1, 2020, nor is it intended to be a projection of future results.

In determining the pro-forma revenue and profit of the Company had IISI been acquired at the beginning of the financial year, the management calculated amortization of intangible assets acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognized in the pre-acquisition financial statements.

F-43

F-44

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

Note: NCB was a preparatory office on December 31, 2019.

Summarized financial information of NCB was set out below:

F-45

Except for NCB, no associate is considered individually material to the Company.

Summarized financial information of associates that are not individually material to the Company was as follows:

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

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

HopeTech returned the proceeds of $19 million as a result of capital reduction in January 2018. The Company received $3 million by disposing all shares of HopeTech in June 2018 and recognized disposal loss of $0.1 million. HopeTech engages mainly in sale of information and communication technologies products.

The Company invested 50% equity shares of CPFI in October 2018. The Company has only two out of five seats of the Board of Directors of CPFI, and has no control but significant influence over CPFI. Therefore, the Company recognized CPFI as investment in associate. CPFI engages mainly in investment business.

The Company invested 49% equity shares of CVC in October 2018. The Company has only two out of five seats of the Board of Directors of CVC, and has no control but significant influence over CVC. Therefore, the Company recognized CVC as investment in associate. CVC engages mainly in investment business.

The participation of establishing NCB was approved by Chunghwa's Board of Directors in January 2019. The establishment of NCB was approved by the Financial Supervisory Commission in July 2019 and the incorporation of NCB was approved by the ROC's Ministry of Economic Affairs Department of Commerce in January 2020. Chunghwa prepaid investment funds to NCB in February and November

F-46

2019 amounting to $4,190 million, for ownership interest of 41.90%. Although Chunghwa is the single largest stockholder of NCB, it only obtained six out of fifteen seats of the Board of Directors of NCB. In addition, the management considered the size of ownership interest and the dispersion of shares owned by the other stockholders, other holdings are not extremely dispersed. Chunghwa is not able to direct its relevant activities. Therefore, Chunghwa does not have control over NCB and merely has significant influence over NCB and treats it as an associate. NCB mainly engages in online banking business in Taiwan.

IISI issued new shares in March, September 2019 and April 2020, as its employees exercised options; therefore, the Company's ownership interest in IISI decreased to 31.47% and 31.16% as of December 31, 2019 and June 30, 2020, respectively. The additional investment of 20.58% ownership interest in IISI was approved by Chunghwa's Board of Directors in January 2020 and the equity transaction was completed in July 2020. As the business combination was achieved in stages, the Company remeasured the previously held equity interest of IISI and recognized gain on disposal of $1 million on the acquisition date. The Company treated IISI as a subsidiary starting from the acquisition date and included IISI and its subsidiaries in the consolidated financial statements. Please refer to Note 14(c).

The Company disposed some shares of KWT in April 2019 before KWT traded its shares on the General Stock Market of the Taipei Exchange according to the local requirements and recognized gain on disposal of $151 million. In addition, the Company did not participate in the capital increase of KWT in May 2019 and KWT repurchased its stock from December 2019 to February 2020. Therefore, the Company's ownership interest in KWT changed to 22.52% and 22.72% as of December 31, 2019 and 2020, respectively.

UUPON reduced 95.44% of its capital to offset accumulated deficits in September 2020 and the Company did not participate in the capital increase of UUPON in October 2020. Therefore, the Company's ownership interest in UUPON decreased to 5.36% and lost its significant influence over UUPON. Hence the Company discontinued to treat UUPON as an associate. Instead, the Company treated it as a financial asset at fair value through other comprehensive income and recognized gain on disposal of $15 million.

The aforementioned gains on disposal were included under 'other gains and losses' in the consolidated statements of comprehensive income.

The Company disposed of all shares of MeWorks in September 2020.

The Company invested $10 million to establish a joint venture, CHT SEA, with Delta Electronics, Inc and Kwang Hsing Industrial Co., Ltd. in December 2020 and obtained 51% equity shares of CHT SEA. However, according to the mutual agreements among stockholders, the Company does not individually direct CHT SEA's relevant activities and has joint control with the other party; therefore, the Company treated CHT SEA as a joint venture.

F-47

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

F-48

Depreciation expense in 2018 is computed using the straight-line method over the following estimated service lives:

F-49

F-50

CHPT evaluated that certain miscellaneous equipment, construction in progress and equipment to be accepted used for manufacturing specific PCB will not be used in the future and there was no active market for sale; therefore, CHPT determined that the recoverable amount of such assets was nil and recognized impairment losses of $89 million for the year ended December 31, 2019. CHSI evaluated that certain miscellaneous equipment will not be used in the future and there was no active market for sale; therefore, CHSI determined that the recoverable amount of such assets was nil and recognized impairment losses of $4 million for the year ended December 31, 2019. The aforementioned impairment losses were included in other income and expenses of statements of comprehensive income.

There was no indication that property, plant and equipment was impaired; therefore, the Company did not recognize any impairment loss for the year ended December 31, 2020.

Chunghwa signed a joint development agreement with the MOTC previously which stated that the MOTC would provide the national land and Chunghwa would be in charge of the planning and construction for the MOTC's office building, Chunghwa's Renai office building, etc. According to the agreement, the MOTC and Chunghwa would each own a certain percentage of the buildings, and Chunghwa is to pay or get the reimbursement for the difference between the assessed value of the land and the construction cost paid by Chunghwa on behalf of the MOTC. The difference amounting to $1,057 million due to the MOTC was reported to Chunghwa's Board of Directors in May 2020 and Chunghwa will complete the property registration of the respective asset once the payment is made.

The Company participated in the government-led urban renewal project in Xingzheng Section, Xindian District, New Taipei City. The Company provided land as a building lot while Kindom Development Corp., chosen through public selection by the New Taipei City Government, acted as the urban renewal developer. The property registration was completed in 2020. With respect to the Company's trade-in share of land and buildings, only the trade-in buildings had commercial substance. Therefore, the gain on the asset exchange transaction of $1,268 million (included in' gains and losses on disposal of property, plant and equipment') was recognized at the difference between the carrying amount of the trade-out land of $37 million and the fair value of trade-in buildings of $1,305 million (included in 'investment properties'). The aforementioned gain on disposal was included under 'other income and expenses' in the statements of comprehensive income.

F-51

Depreciation expense for assets used by the Company in 2019 and 2020 is computed using the straight-line method over the following estimated service lives:

F-52

The Company leases out land and buildings with lease terms between 1 to 20 years. The lessees do not have bargain purchase options to acquire the assets at the expiry of the lease periods.

F-53

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

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

a.Right-of-use Assets

The Company did not have significant sublease or impairment of right-of-use assets for the years ended December 31, 2019 and 2020.

F-54

b.Lease liabilities

Ranges of discount rates for lease liabilities were as follows:

c.Important lease-in activities and terms

The Company mainly enters into lease-in agreements of land and buildings for handsets base stations located all over Taiwan with lease terms from 1 to 20 years. The lease agreements do not contain bargain purchase options to acquire the assets at the expiration of the respective leases. For majority of the lease-in agreements on handsets base station, the Company has the right to terminate the agreement prior to the expiration date if the Company is unable to build the required telecommunication equipment, either due to legal restrictions, controversial events, or other events.

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

The lease agreements for equipment include a contract between Chunghwa and ST-2 Satellite Ventures Pte., Ltd. on March 12, 2010 to lease capacity on the ST-2 satellite. For the information of lease agreements with related parties, please refer to Note 40 to the consolidated financial statements for details.

d.Other lease information

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

Lease-out arrangements under operating leases for freehold property, plant, and equipment and investment properties were set out in Notes 16 and 18 to the consolidated financial statements.

F-55

After the evaluation of land and buildings, the Company concluded the recoverable amount which represented the fair value less costs to sell of some land and buildings was higher than the carrying amount. Therefore, the Company recognized reversal of impairment losses of $19 million, $57 million and $27 million for the years

F-56

ended December 31, 2018, 2019 and 2020, respectively, and the amounts were recognized only to the extent of impairment losses that had been recognized in prior years. The reversal of impairment loss was included in other income and expenses in the statements of comprehensive income.

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

The fair values of the Company's investment properties as of December 31, 2019 and 2020 were determined by Level 3 fair value measurements inputs based on the appraisal reports conducted by independent appraisers. Those appraisal reports are based on the comparison approach, income approach or cost approach. Key assumptions and the fair values were as follows:

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

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

F-57

F-58

For long-term business development, Chunghwa participated in the 5G mobile broadband license bidding hosted by the NCC and paid the deposit for 5G spectrum bidding amounting to $1,000 million (included in other assets) in October 2019. Chunghwa paid $48,373 million, including the aforementioned deposit, in February 2020 for the aforementioned license to obtain 90MHz in the 3.5GHz spectrum and 600MHz in the 28GHz spectrum.

The concessions are granted and issued by the NCC. The concession fees are amortized using the straight-line method over the period from the date operations commence through the date the license expires or the useful life, whichever is shorter. The carrying amount of 3G concession fee was fully amortized in December 2018, 4G concession fees will be fully amortized by December 2030 and December 2033, and 5G concession fees will be fully amortized by December 2040.

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

SENAO evaluated the goodwill that arose in the acquisition of Youth and its subsidiaries at the end of each year. SENAO determined the smallest identifiable group of assets that generates cash inflows as single cash generating units by business type and evaluated the recoverable amount of those cash generating units by their value in use. The management of SENAO estimated the cash flow projections based on the financial budgets for the following five years. Discount rates were 13.7%, 12.3% and 12.1% as of December 31 2018, 2019 and 2020, respectively and were used to calculate the recoverable amount of related cash generating units by discounting aforementioned cash flows.

SENAO concluded the recoverable amount of the goodwill was lower than the carrying value and recognized impairment loss of $9 million and $9 million ffor the years ended December 31, 2019 and 2020, respectively. There was no impairment loss recognized for the year ended December 31, 2018.

SENAO evaluated and determined that the recoverable amount of certain licensed contract was nil and recognized the impairment loss of $51 million for the year ended December 31, 2018. The recoverable amount was based on the value in use.

The aforementioned impairment losses were included under 'other income and expenses' in the statements of comprehensive income.

F-59

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

Chunghwa evaluated that certain other assets will not be used in the future and there was no active market for sale; therefore, the Company determined that the recoverable amount of such assets was nil and recognized impairment losses of $44 million for the year ended December 31, 2019. The aforementioned impairment loss was included in other income and expenses in the statements of comprehensive income.

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

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

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

F-60

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

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

December 31, 2018

December 31, 2019

F-61

December 31, 2020

2018

2019

F-62

2020

The annual interest rates of bank loans were as follows:

The annual interest rates of commercial paper payable were as follows:

F-63

The annual interest rates of bank loans were as follows:

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

The major terms of unsecured domestic bonds issued by Chunghwa were as follows:

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

F-64

F-65

The pension plan under the Labor Pension Act of ROC (the 'LPA') is considered as a defined contribution plan. Based on the LPA, Chunghwa and its domestic subsidiaries make monthly contributions to employees' individual pension accounts at 6% of monthly salaries and wages. Its foreign subsidiaries would make monthly contributions based on the local pension requirements.

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

Chunghwa and its subsidiaries SENAO, CHIEF, CHSI, SHE, IISI and UTC with the pension mechanism under the Labor Standards Law in the ROC are considered as defined benefit plans. These pension plans provide benefits based on an employee's length of service and average six-month salary prior to retirement. Chunghwa and its subsidiaries contribute an amount no more than 15% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the names of the Committees in the Bank of Taiwan. The plan assets are held in a commingled fund which is operated and managed by the government's designated authorities; as such, the Company does not have any right to intervene in the investments of the funds. According to the Article 56 in the ROC of the Labor Standards Law, entities are required to contribute the difference in one appropriation to their pension funds before the end of next March when the balance of the Funds is insufficient to pay the eligible employees who meet the retirement criteria in the following year.

F-66

The amounts included in the consolidated balance sheets arising from the Company's obligation in respect of its defined benefit plans were as follows:

F-67

Movements in the defined benefit obligations and the fair value of plan assets were as follows:

F-68

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

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

Under the Labor Standards Law, the rate of return on assets shall not be lower than the average interest rate on a two-year time deposit published by the local banks and the government is responsible for any shortfall in the event that the rate of return is less than the required rate of return. The plan assets are held in a commingled fund mainly invested in foreign and domestic equity and debt securities and bank deposits which is operated and managed by the government's designated authorities; as such, the Company does not have any right to intervene in the investments of the funds.

The decline in government bond interest rate will increase the present value of the obligation on the defined benefit plan, while the return on plan assets will increase. The net effect on the present value of the obligation on defined benefit plan is partially offset by the return on plan assets.

The calculation of the present value of defined benefit obligations is referred to the plan participants' future salary. Hence, the increase in plan participants' salary will increase the present value of the defined benefit obligations.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligations were carried out by the independent actuary.

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

F-69

If reasonably possible changes of the respective significant actuarial assumptions occur at the end of reporting periods, while holding all other assumptions constant, the present values of the defined benefit obligations would increase (decrease) as follows:

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

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligations has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the consolidated balance sheets.

There is no change in the methods and assumptions used in preparing the sensitivity analysis from the previous period.

As of December 31, 2020, the Company's maturity analysis of the undiscounted benefit payments was as follows:

F-70

Each issued common stock with par value of $10 entitled the right to vote and receive dividends.

The MOTC and some stockholders sold some common stocks of Chunghwa in an international offering of securities in the form of American Depositary Shares ('ADS') (one ADS represents 10 common stocks) in July 2003, August 2005, and September 2006. The ADSs were traded on the New York Stock Exchange since July 17, 2003. As of December 31, 2020, the outstanding ADSs were 220 million common stocks, which equaled 22 million units and represented 2.84% of Chunghwa's total outstanding common stocks.

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

F-71

The adjustments of additional paid-in capital for the years ended December 31, 2018, 2019 and 2020 were as follows:

Additional paid-in capital from share premium, donated capital and the difference between consideration received and the carrying amount of the subsidiaries' net assets upon disposal may be utilized to offset deficits. Furthermore, when Chunghwa has no deficit, it may be distributed in cash or capitalized, which however is limited to a certain percentage of Chunghwa's paid-in capital except the additional paid-in capital arising from unclaimed dividend can only be utilized to offset deficits.

The additional paid-in capital from movements of paid-in capital arising from changes in equities of subsidiaries may only be utilized to offset deficits.

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

In accordance with the Chunghwa's Articles of Incorporation, Chunghwa must pay all outstanding taxes, offset deficits in prior years and set aside a legal reserve equal to 10% of its net income before distributing a dividend or making any other distribution to stockholders, except when the accumulated amount of such legal reserve equals to Chunghwa's total issued capital, and depending on its business needs or requirements, may also set aside or reverse special reserves. No less than 50% of the remaining earnings comprising remaining balance of net income, if any, plus cumulative undistributed earnings shall be distributed as stockholders' dividends, of which cash dividends to be distributed shall

F-72

not be less than 50% of the total amount of dividends to be distributed. If cash dividend to be distributed is less than $0.10per share, such cash dividend shall be distributed in the form of common stocks.

Special reserve was appropriated in accordance with the relevant laws and regulations or as requested by local authority. Pursuant to existing regulations, Chunghwa is required to set aside additional special reserve equivalent to debit balances under stockholder's equity. For subsequent decrease in the deduction amount to stockholder's equity, the decreased amount could be reversed from the special reserve to retained earnings.

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

The appropriations of the 2018 and 2019 earnings of Chunghwa approved by the stockholders in their meetings on June 21, 2019 and May 29, 2020 were as follows:

The appropriations of earnings for 2020 had been proposed by Chunghwa's Board of Directors on February 23, 2021. The appropriations and dividends per share were as follows:

The appropriations of earnings for 2020 are subject to the resolution of the stockholders' meeting planned to be held on May 28, 2021. Information of the appropriation of Chunghwa's earnings proposed by the Board of Directors and approved by the stockholders is available on the Market Observation Post System website.

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

F-73

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

F-74

2018

2019

F-75

2020

F-76

The changes in the contract asset and the contract liability balances primarily result from the timing difference between the satisfaction of performance obligations and the payments collected from customers. Significant changes of contract assets and liabilities recognized resulting from product and service bundling were as follows:

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

Revenue recognized for the period that was included in the contract liability at the beginning of the year was as follows:

The Company considered the past experience and the default clauses in the telecommunications service contracts and believes the commissions and equipment subsidies paid for obtaining such contracts are expected to be recoverable; therefore, such costs were capitalized. Amortization expenses for the years ended December 31 2018, 2019 and 2020 were $1,941 million, $1,173 million and $772 million, respectively.

F-77

As of December 31, 2020, the aggregate amount of transaction price allocated to performance obligations for non-cancellable telecommunications service contracts that are unsatisfied is $29,501 million. The Company recognizes revenue when service is provided over contract terms. The Company expects to recognize such revenue of $18,729 million, $9,082 million and $1,690 million in 2021, 2022 and 2023, respectively. The variable consideration collected from customers on nonrecurring basis resulting from exceeded usage from monthly fee and revenue recognized for contracts that the Company has a right to consideration from customers in the amount corresponding directly with the value to the customers of the Company's performance completed to date have been excluded from the disclosure of remaining performance obligations.

As of December 31, 2020, the aggregate amount of transaction price allocated to performance obligations for non-cancellable project business contracts that are unsatisfied is $18,555 million. The Company recognizes revenues when the project business contract is completed and accepted by customers. The Company expects to recognize such revenue of $7,977 million, $5,897 million and $4,681 million in 2021, 2022 and 2023, respectively. Project business contracts whose expected duration are less than a year have been excluded from the aforementioned disclosure.

F-78

F-79

Chunghwa distributes employees' compensation at the rates from 1.7% to 4.3% and remuneration to directors not higher than 0.17%, respectively, of pre-tax income. As of December 31, 2020, the payables of the employees' compensation and the remuneration to directors were $1,202 million and $36 million, respectively. Such amounts have been approved by the Chunghwa's Board of Directors on February 23, 2021 and will be reported to the stockholders in their meeting planned to be held on May 28, 2021.

F-80

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

The compensation to the employees and remuneration to the directors of 2018 and 2019 approved by the Board of Directors on March 19, 2019 and February 26, 2020, respectively, were as follows:

There was no difference between the initial accrual amounts and the amounts proposed in the Board of Directors in 2019 and 2020 of the aforementioned compensation to employees and the remuneration to directors.

The major components of income tax expense were as follows:

F-81

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

Income Tax Act in the ROC was amended in February 2018 and the corporate income tax rate is adjusted from 17% to 20%. Such amendment is effective from 2018. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings is reduced from 10% to 5%. The applicable tax rate used by subsidiaries in China is 25%, and tax rates used by other entities in the Company operating in other jurisdictions are based on the tax laws in those jurisdictions.

In July 2019, the President of the ROC announced the amendments to the Statute of Industrial Innovation, which stipulate that the unappropriated earnings in 2018 and thereafter that are used to build or acquire certain assets or technologies are allowed as deduction when computing the income tax on unappropriated earnings. The Company has deducted the reinvested capital expenditure while calculating income tax on unappropriated earnings.

F-82

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

For the year ended December 31, 2018

F-83

For the year ended December 31, 2019

F-84

For the year ended December 31, 2020

F-85

As of December 31, 2020, unused loss carryforwards were as follows:

Income tax returns of Chunghwa have been examined by the tax authorities through 2017. Income tax returns of SENAO, ISPOT, Youth, Youyi, SENYOUNG, Aval, CHIEF, CHSI, SHE, CHI, CHPT, SFD, CLPT, CHTSC, HHI, IISI and UTC have been examined by the tax authorities through 2018. Income tax returns of CHYP, LED, Unigate and CHST have been examined by the tax authorities through 2019.

F-86

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

Net Income

Weighted Average Number of Common Stocks

(Millions Shares)

As Chunghwa may settle the employee compensation in shares or cash, Chunghwa shall presume that it will be settled in shares and take those shares into consideration when calculating the weighted average number of outstanding shares used in the calculation of diluted EPS if the shares have a dilutive effect. The dilutive effect of the shares needs to be considered until the approval of the number of shares to be distributed to employees as compensation in the following year.

Each option is eligible to subscribe for one common share when exercisable. Under the terms of the SENAO Plan, the options are granted at an exercise price equal to the closing price of the SENAO's common stocks listed on the TWSE on the higher of closing price or par value. The SENAO Plan has an exercise price adjustment formula upon the changes in common stocks equity (including cash capital increase, new share issue through capitalization of earnings and additional paid-in capital, merger, spin off and new share issue for Global Depositary Shares, and so on) or distribution of cash dividends. The

F-87

options of the SENAO Plan are valid forsix yearsand the graded vesting schedule for which50% of options granted will vesttwo yearsafter the grant date and another two tranches of25%, each will vestthree and four yearsafter the grant date respectively.

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

No compensation cost was recognized for the years ended December 31, 2018, 2019 and 2020.

Information about SENAO's outstanding stock options for the years ended December 31, 2018 and 2019 was as follows:

As of December 31, 2019 and 2020,, there were no outstanding stock options.

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

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

F-88

The Board of Directors of SENAO resolved to transfer treasury stock 6,658 thousand shares to specific employees in April 2018. The aforementioned treasury stock transferred to employees were measured at the fair value on the grant date. The compensation cost of $15.6 million was recognized for the year ended December 31, 2018.

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

Expected volatility was based on the historical share price volatility of SENAO over three months before the grant date.

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

The compensation costs for stock options granted on October 22, 2015 were $1 million and $0.3 million for the years ended December 31, 2018 and 2019, respectively. No compensation cost was recognized for the year ended December 31, 2020.

The compensation costs for stock options granted on December 19, 2017 were $0.6 million, $0.6 million and $0.2 million for the years ended December 31, 2018, 2019 and 2020, respectively.

The compensation costs for stock options granted on October 31, 2018 were $0.1 million, $0.6 million and $0.3 million for the years ended December 31, 2018, 2019 and 2020, respectively.

The Board of Directors of CHIEF resolved to issue stock options in October 26, 2020 and authorized the chairman to decide the grant date. Afterwards, the grant date was decided as November 13, 2020. The compensation costs were $1 million for the year ended December 31, 2020.

F-89

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

CHIEF modified the plan terms of stock options granted on December 19, 2017 in June 2019 and July 2020; therefore, the exercise price changed from $140.60 to $135.60 and $132.70 per share. The modification did not cause any incremental fair value granted.

CHIEF modified the plan terms of stock options granted on October 31, 2018 in June 2019 and July 2020; therefore, the exercise price changed from $147.00 to $141.70 and $138.70 per share. The modification did not cause any incremental fair value granted.

Information about CHIEF's outstanding stock options for the years ended December 31, 2018, 2019 and 2020 was as follows:

F-90

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

As of December 31, 2020, information about employee stock options outstanding was as follows:

F-91

As of December 31, 2020, all the stock options granted on October 22, 2015 were exercised or forfeited.

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

The expected volatility for the options granted in 2020 was based on CHIEF's average annualized historical share price volatility from June 5, 2018, CHIEF's listing date on Taipei Exchange, to the grant date. The expected volatilities for the options granted from 2015 to 2018 were based on the average annualized historical share price volatility of CHIEF's comparable companies before the grant date.

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

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

F-92

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

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

The Board of Directors of CHTSC resolved to issue 4,500 stock options that are granted to specific employees that meet the vesting conditions on December 20, 2019. Each option is eligible to subscribe for one thousand common stocks when exercisable, and the exercise price is $19.085. The CHTSC Plan has an exercise price adjustment formula upon the changes in common stocks. The options of the CHTSC Plan are valid for five years and the graded vesting schedule will vest one year after the grant date.

The compensation costs of stock options granted were $0.2 million and $5.7 million for the years ended December 31, 2019 and 2020, respectively.

Information about CHTSC's outstanding stock options for the years ended December 31, 2019 and 2020 was as follows:

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

F-93

As of December 31, 2020, information about employee stock options outstanding was as follows:

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

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

IISI issued 1,335 and 1,665 options in August 2013 and January 2014, respectively. Each option is eligible to subscribe for one thousand common stocks when exercisable. The options are granted to specific employees of IISI and its subsidiaires that meet the vesting conditions. The options of the IISI Plan are valid for seven years and the graded vesting schedule will vest two years after the grant date. The exercise price of the original options is $14 per share. After the options are issued, if the common stocks of IISI change, the exercise price of the options should be adjusted according to the prescibed formula.

No compensation cost of stock options granted was recognized for the six months ended December 31, 2020.

F-94

Information about IISI's outstanding stock options for the year ended December 31, 2020 was as follows:

As of December 31, 2020, information about employee stock options outstanding was as follows:

As of December 31, 2020, the options granted to employees in 2013 have been fully exercised or forfeited.

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

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

F-95

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

Financing activities

F-96

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

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

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

The management reviews the capital structure of the Company as needed. As part of this review, the management considers the cost of capital and the risks associated with each class of capital.

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

Categories of Financial Instruments

F-97

Financial Risk Management Objectives

The main financial instruments of the Company include equity investments, trade notes and accounts receivable, trade notes and accounts payable, lease liabilities, loans, short-term bills payable and bonds payable. The Company's Finance Department provides services to its business units, co-ordinates access to domestic and international capital markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including foreign currency risk, interest rate risk and other price risk), credit risk, and liquidity risk.

The Company seeks to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Company's policies approved by the Board of Directors. Those derivatives are used to hedge the risks of exchange rate fluctuation arising from operating or investment activities. Compliance with policies and risk exposure limits is reviewed by the Company's Finance Department on a continuous basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Chunghwa reports the significant risk exposures and related action plans timely and actively to the audit committee and if needed to the Board of Directors.

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

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

F-98

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

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

Foreign currency sensitivity analysis

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

F-99

The following table details the Company's sensitivity to a 5% increase and decrease in the functional currency against the relevant foreign currencies.5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible changes in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and forward exchange contracts. A positive number below indicates an increase in pre-tax profit or equity where the functional currency weakens5% against the relevant currency.

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

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

F-100

Interest rate sensitivity analysis

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

If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Company's pre-tax income would increase/decrease by $19 million, $15 million and $19 million for the years ended December 31, 2018, 2019 and 2020, respectively. This is mainly attributable to the Company's exposure to floating interest rates on its financial assets and short-term and long-term loans.

The Company is exposed to equity price risks arising from holding other company's equity. Equity investments are held for strategic rather than trading purposes. The management managed the risk through holding various risk portfolios. Further, the Company assigned finance and investment departments to monitor the price risk.

Equity price sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 5% higher/lower, pre-tax profit and pre-tax other comprehensive income for the year ended December 31, 2018 would have increased/decreased by $26 million and $347 million as a result of the changes in fair value of financial assets at FVTPL and financial assets at FVOCI, respectively. If equity prices had been 5% higher/lower, pre-tax profit and pre-tax other comprehensive income for the year ended December 31, 2019 would have increased/decreased by $39 million and $358 million as a result of the changes in fair value of financial assets at FVTPL and financial assets at FVOCI, respectively. If equity prices had been 5% higher/lower, pre-tax profit and pre-tax other comprehensive income for the year ended December 31, 2020 would have increased/decreased by $34 million and $360 million as a result of the changes in fair value of financial assets at FVTPL and financial assets at FVOCI, respectively.

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

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

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

F-101

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

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

December 31, 2019

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

December 31, 2020

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

F-102

The following table detailed the Company's liquidity analysis for its derivative financial instruments. The table had been drawn up based on the undiscounted gross inflows and outflows on those derivatives that require gross settlement.

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

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

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

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

F-103

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

The fair value of bonds payable is measured using Level 2 inputs. The valuation of fair value is based on the quoted market prices provided by third party pricing services.

December 31, 2019

December 31, 2020

There were no transfers between Levels 1 and 2 for the years ended December 31, 2018, 2019 and 2020.

F-104

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

2018

2019

2020

F-105

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

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

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

F-106

The ROC Government, one of Chunghwa's customers, has significant equity interest in Chunghwa. Chunghwa provides fixed-line services, wireless services, internet and data and other services to the various departments and institutions of the ROC Government in the normal course of business and at arm's-length prices. Except for those disclosed in other notes or this note, the transactions with the ROC government bodies have not been disclosed because the transactions are not individually or collectively significant. However, the related revenues and operating costs have been appropriately recorded.

F-107

(Concluded)

Note 1: IISI was an associate and has become a subsidiary starting from July 1, 2020. Please refer to Note 14 (c). All transactions between the Company were eliminated upon consolidation since the acquisition date.

Note 2: UUPON was previously an associate. As the Company did not participate in the capital increase of UUPON in October 2020; therefore, the Company lost its significant influence over UUPON. Since then, UUPON was no longer a related party of the Company. Please refer to Note 15.

F-108

F-109

Chunghwa entered into a contract with ST-2 Satellite Ventures Pte., Ltd. on March 12, 2010 to lease capacity on the ST-2 satellite. This lease term is for 15 years which should start from the official operation of ST-2 satellite and the total contract value is approximately $6,000 million (SGD$261 million), including a prepayment of $3,068 million at the inception of the lease, and the rest of amount should be paid annually when ST-2 satellite starts its official operation. ST-2 satellite was launched in May 2011 and began its official operation in August 2011.

2018

The total rental expense for the year ended December 31, 2018 was $394 million, which consisted of an offsetting credit of the prepayment of $204 million and an additional accrual of $190 million. The prepaid rents (classified as prepayments) as of December 31, 2018, was as follows:

Starting from 2019

The lease liabilities of ST-2 Satellite Ventures Pte., Ltd. as of December 31, 2019 and 2020 were as follows:

The interest expense recognized for the aforementioned lease liabilities for the years ended December 31, 2019 and 2020 were $11 million and $9 million, respectively.

The compensation of directors and other key management personnel for the years ended December 31, 2018, 2019 and 2020 were as follows:

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

F-110

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

Except for those disclosed in other notes, the Company's significant commitments and contingent liabilities as of December 31, 2020 were as follows:

The Company disposed of its remaining investment in China Airlines, Ltd. in January and February 2021 at fair value amounting to $2,635 million. The related unrealized gain on investments in equity instruments at fair value through other comprehensive income of $94 million was transferred from other equity to retained earnings upon the disposal.

The Company has assessed the economic impact of COVID-19 and determined that there were no significant impacts on the Company's financial statements as of the date the consolidated financial statements were authorized for issue. The Company will continue to monitor developments of the pandemic and assess the related impacts.

F-111

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

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

The accounting policies of the operating segments are the same as those described in Note 3.

F-112

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

F-113

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

For the year ended December 31, 2018

For the year ended December 31, 2019

F-114

For the year ended December 31, 2020

The following is an analysis of the Company's revenue from its major products and services.

The users of the Company's services are mainly from Taiwan, ROC. The revenues it derived outside Taiwan are mainly revenues from international long distance telephone and leased line services. The geographic information for revenues was as follows:

F-115

The Company has long-lived assets in U.S., Singapore, Hong Kong, China, Vietnam, Japan, and Thailand and except for $4,063 million and $3,746 million as of December 31, 2019 and 2020, respectively, in the aforementioned areas, the other long-lived assets are located in Taiwan, ROC.

As of December 31, 2018, 2019 and 2020, the Company did not have any single customer whose revenue exceeded 10% of the total revenues.

F-116