1934 Act Registration No. 1-31731

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

Dated May 7, 2020

 

 

Chunghwa Telecom Co., Ltd.

(Translation of Registrant’s Name into English)

 

 

21-3 Hsinyi Road Sec. 1,

Taipei, Taiwan, 100 R.O.C.

(Address of Principal Executive Office)

 

 

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

Form 20-F  ☒              Form 40-F  ☐

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

Yes  ☐             No  ☒

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

 

 

 

Exhibit		Description
99.1		To announce the differences between the first quarter of 2020 financial statements under Taiwan-IFRSs and IFRSs
99.2		Consolidated Financial Statements for the Three Months Ended March  31, 2020 and 2019 and Independent Auditors’ Review Report pursuant to International Financial Reporting Standards adopted by ROC (“Taiwan-IFRSs”)
99.3		Consolidated Financial Statements for the Three Months Ended March  31, 2020 and 2019 pursuant to International Financial Reporting Standards issued by the International Accounting Standards Board (“IFRSs”)

 

2

SIGNATURE

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

Date: May 7, 2020    

 

 

3

Exhibit 99.1

To announce the differences between the first quarter of 2020 financial statements under Taiwan-IFRSs and IFRSs

Date of events: 2020/5/7

Contents:

 

1.	Date of occurrence of the event: 2020/5/7

 

2.	Of which year/ quarter financial report required to be adjusted: The first quarter of 2020

 

3.	Accounting principles applied (domestic listing securities):

Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China (“Taiwan-IFRSs”)

 

4.	Inconsistent items/ amounts (domestic listing securities):

Under Taiwan-IFRSs, Chunghwa Telecom Co., Ltd. and its subsidiaries (or the “Company”) reported consolidated net income of NT$8,547,364 thousand, consolidated net income attributable to stockholders of the parent of NT$8,283,334 thousand, and basic earnings per share of NT$1.07 for the three months ended March 31, 2020, respectively. The Company also reported total assets of NT$499,896,930 thousand, total liabilities of NT$106,300,543 thousand, and total equity of NT$393,596,387 thousand as of March 31, 2020.

 

5.	Accounting principles applied (securities issued overseas):

IAS 34 “Interim Financial Reporting” as issued by the International Accounting Standard Board (“IFRSs”)

 

6.	Inconsistent items/ amounts (securities issued overseas):

Under IFRSs, the Company reported consolidated net income of NT$8,100 million, consolidated net income attributable to stockholders of the parent of NT$7,850 million, and basic earnings per share of NT$1.01 for the three months ended March 31, 2020, respectively. The Company also reported total assets of NT$499,679 million, total liabilities of NT$108,532 million, and total equity of NT$391,147 million as of March 31, 2020.

 

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7.	Cause of the inconsistency:

The differences between consolidated net income under Taiwan-IFRSs and that under IFRSs followed by the Company mainly come from the timing of the recognition of income tax on unappropriated earnings. In addition, prior to incorporation, the Company was subject to the laws and regulations applicable to state-owned enterprises in Taiwan which differed from the generally accepted accounting principles as applicable to commercial companies. As such, revenue from providing fixed line connection service and selling prepaid phone cards was recognized at the time the service was performed or the card was sold by the Company. Upon incorporation, net assets greater than the capital stock was credited as additional paid-in-capital and part of the additional paid-in-capital was from the unearned revenues generated from connection fees and prepaid cards as of the date of incorporation. Under IFRSs, revenue from connection fees and prepaid phone cards was deferred at the time of the service performed or sale and recognized as revenue over time as the service is continuously performed or as consumed. This reclassification from additional paid-in capital to retained earnings did not affect total equity.

 

8.	Any other matters that need to be specified:

Chunghwa Telecom’s earnings distribution and stockholders’ equity matters are in accordance with Taiwan-IFRSs.

 

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Exhibit 99.2

Chunghwa Telecom Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the

Three Months Ended March 31, 2020 and 2019 and

Independent Auditors’ Review Report

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and Stockholders

Chunghwa Telecom Co., Ltd.

Introduction

We have reviewed the accompanying consolidated balance sheets of Chunghwa Telecom Co., Ltd. and its subsidiaries (the “Company”) as of March 31, 2020 and 2019, the related consolidated statements of comprehensive income, the consolidated statements of changes in equity and cash flows for the three months then ended, and the related notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

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

Conclusion

Based on our reviews, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2020 and 2019, and of its consolidated financial performance and its consolidated cash flows for the three months then ended March 31, 2020 and 2019 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

 

- 1 -

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

 

/s/ Dien Sheng Chang						/s/ Ching Pin Shih
Deloitte & Touche
Taipei, Taiwan
Republic of China

May 6, 2020

Notice to Readers

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

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

 

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

		March 31, 2020 (Reviewed)								December 31, 2019 (Audited)								March 31, 2019 (Reviewed)
		Amount				%				Amount				%				Amount				%
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)		$	16,569,950				3			$	34,049,643				7			$	37,228,202				8
Financial assets at fair value through profit or loss (Note 7)			6,631				—				516				—				—				—
Hedging financial assets (Note 20)			—				—				327				—				—				—
Contract assets (Note 29)			4,466,540				1				4,441,196				1				4,606,104				1
Trade notes and accounts receivable, net (Notes 9 and 29)			23,401,540				5				26,407,783				6				27,524,272				6
Receivables from related parties (Note 37)			9,712				—				16,834				—				18,251				—
Inventories (Notes 10 and 38)			17,774,693				4				17,344,276				4				13,904,329				3
Prepayments (Note 11)			5,103,222				1				1,883,259				—				4,855,305				1
Other current monetary assets (Note 12)			6,159,141				1				7,498,564				2				7,169,247				1
Other current assets (Notes 19 and 38)			1,876,171				—				2,429,664				—				2,925,849				1
Total current assets			75,367,600				15				94,072,062				20				98,231,559				21
NONCURRENT ASSETS
Financial assets at fair value through profit or loss (Note 7)			767,362				—				778,105				—				511,274				—
Financial assets at fair value through other comprehensive income (Note 8)			5,903,181				1				7,268,917				2				6,774,106				1
Investments accounted for using equity method (Note 14)			7,358,379				1				7,354,226				2				3,024,908				1
Contract assets (Note 29)			2,567,439				1				2,600,913				—				2,394,383				—
Property, plant and equipment (Notes 15, 37 and 38)			279,867,247				56				283,694,215				59				284,681,139				59
Right-of-use assets (Note 16)			11,494,300				2				11,364,249				2				11,710,079				2
Investment properties (Note 17)			8,164,263				1				8,169,393				2				8,277,484				2
Intangible assets (Note 18)			94,407,682				19				47,046,525				10				49,934,152				11
Deferred income tax assets (Note 3)			3,262,026				1				3,258,607				1				3,557,699				1
Incremental costs of obtaining contracts (Note 29)			929,827				—				942,652				—				1,117,334				—
Net defined benefit assets (Note 3)			2,204,182				1				2,127,335				—				1,088,263				—
Prepayments (Note 11)			2,611,936				1				2,679,335				1				2,931,109				1
Other noncurrent assets (Notes 19, 38 and 39)			4,991,506				1				6,101,704				1				5,798,112				1
Total noncurrent assets			424,529,330				85				383,386,176				80				381,800,042				79
TOTAL		$	499,896,930				100			$	477,458,238				100			$	480,031,601				100
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 21)		$	70,000				—			$	90,000				—			$	175,000				—
Short-term bills payable (Note 22)			19,965,629				4				—				—				—				—
Financial liabilities at fair value through profit or loss (Note 7)			570				—				239				—				2,219				—
Hedging financial liabilities (Note 20)			—				—				—				—				2,719				—
Contract liabilities (Note 29)			17,163,178				4				16,839,830				4				12,417,476				3
Trade notes and accounts payable (Note 24)			11,890,475				2				15,312,274				3				14,948,306				4
Payables to related parties (Note 37)			338,449				—				653,983				—				361,333				—
Current tax liabilities (Note 3)			6,103,903				1				4,020,670				1				6,276,099				1
Lease liabilities (Notes 16, 34 and 37)			3,395,000				1				3,291,330				1				3,500,021				1
Other payables (Note 25)			19,653,578				4				22,952,488				5				20,293,306				4
Provisions (Note 26)			199,804				—				206,942				—				131,367				—
Other current liabilities			972,553				—				983,789				—				1,051,655				—
Total current liabilities			79,753,139				16				64,351,545				14				59,159,501				13
NONCURRENT LIABILITIES
Contract liabilities (Note 29)			6,667,831				1				6,841,485				2				6,324,795				1
Long-term loans (Notes 23 and 38)			1,600,000				—				1,600,000				—				1,600,000				—
Deferred income tax liabilities (Note 3)			1,928,010				1				1,912,305				—				1,984,867				—
Provisions (Note 26)			99,681				—				97,382				—				79,142				—
Lease liabilities (Notes 16, 34 and 37)			6,424,707				1				6,466,808				1				6,353,362				2
Customers’ deposits (Note 37)			4,601,704				1				4,747,644				1				4,646,233				1
Net defined benefit liabilities (Note 3)			3,539,441				1				3,504,617				1				3,579,648				1
Other noncurrent liabilities			1,686,030				—				1,542,687				—				1,400,139				—
Total noncurrent liabilities			26,547,404				5				26,712,928				5				25,968,186				5
Total liabilities			106,300,543				21				91,064,473				19				85,127,687				18
EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT (Notes 13 and 28)
Common stocks			77,574,465				16				77,574,465				16				77,574,465				16
Additional paid-in capital			171,274,394				34				171,255,985				36				171,135,080				36
Retained earnings
Legal reserve			77,574,465				16				77,574,465				16				77,574,465				16
Special reserve			2,675,419				1				2,675,419				1				2,675,419				1
Unappropriated earnings			54,625,420				10				46,341,361				10				55,446,604				11
Total retained earnings			134,875,304				27				126,591,245				27				135,696,488				28
Others			(708,698	)			—				688,548				—				309,142				—
Total equity attributable to stockholders of the parent			383,015,465				77				376,110,243				79				384,715,175				80
NONCONTROLLING INTERESTS (Notes 13 and 28)			10,580,922				2				10,283,522				2				10,188,739				2
Total equity			393,596,387				79				386,393,765				81				394,903,914				82
TOTAL		$	499,896,930				100			$	477,458,238				100			$	480,031,601				100

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

 

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2020								2019
		Amount				%				Amount				%
REVENUES (Notes 29, 37 and 43)		$	48,149,999				100			$	51,331,161				100
OPERATING COSTS (Notes 10, 27, 29, 30, 37 and 43)			30,390,800				63				33,480,788				65
GROSS PROFIT			17,759,199				37				17,850,373				35
OPERATING EXPENSES (Notes 9, 27, 30, 37 and 43)
Marketing			5,072,556				11				5,407,891				11
General and administrative			1,213,500				3				1,171,158				2
Research and development			936,176				2				920,959				2
Expected credit loss (reversal of credit loss)			6,137				—				(55,953	)			—
Total operating expenses			7,228,369				16				7,444,055				15
OTHER INCOME AND EXPENSES (Note 30)			(680	)			—				(4,505	)			—
INCOME FROM OPERATIONS			10,530,150				21				10,401,813				20
NON-OPERATING INCOME AND EXPENSES
Interest income			39,386				—				52,603				—
Other income (Notes 30 and 37)			43,192				—				56,346				—
Other gains and losses (Notes 30, 36 and 37)			43,989				—				(19,368	)			—
Interest expenses (Notes 16, 30 and 37)			(42,387	)			—				(25,844	)			—
Share of profits of associates accounted for using equity method (Note 14)			37,074				—				79,173				—
Total non-operating income and expenses			121,254				—				142,910				—
INCOME BEFORE INCOME TAX			10,651,404				21				10,544,723				20
INCOME TAX EXPENSE (Notes 3 and 31)			2,104,040				4				2,018,010				4
NET INCOME			8,547,364				17				8,526,713				16

 

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2020								2019
		Amount				%				Amount				%
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified to profit or loss:
Unrealized gain or loss on investments in equity instruments at fair value through other comprehensive income (Note 36)		$	(1,400,916	)			(3	)		$	(158,988	)			—
Gain or loss on hedging instruments subject to basis adjustment (Note 20)			(327	)			—				(3,788	)			—
Share of remeasurements of defined benefit pension plans of associates (Note 14)			725				—				—				—
			(1,400,518	)			(3	)			(162,776	)			—
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising from the translation of the foreign operations			(11,776	)			—				23,530				—
Share of exchange differences arising from the translation of the foreign operations of associates (Note 14)			(188	)			—				170				—
			(11,964	)			—				23,700				—
Total other comprehensive loss, net of income tax			(1,412,482	)			(3	)			(139,076	)			—
TOTAL COMPREHENSIVE INCOME		$	7,134,882				14			$	8,387,637				16
NET INCOME ATTRIBUTABLE TO
Stockholders of the parent		$	8,283,334				17			$	8,356,082				16
Noncontrolling interests			264,030				—				170,631				—
		$	8,547,364				17			$	8,526,713				16
COMPREHENSIVE INCOME ATTRIBUTABLE TO
Stockholders of the parent		$	6,886,813				14			$	8,205,310				16
Noncontrolling interests			248,069				—				182,327				—
		$	7,134,882				14			$	8,387,637				16
EARNINGS PER SHARE (Note 32)
Basic		$	1.07							$	1.08
Diluted		$	1.07							$	1.08

(Concluded)

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

 

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Equity Attributable to Stockholders of the Parent (Notes 13, 20 and 28)
																						Others
																										Unrealized Gain
																						Exchange				or Loss on
																						Differences				Financial Assets
																						Arising from the				at Fair Value
						Additional Paid-in Capital				Retained Earnings												Translation of				Through Other				Gain or Loss								Noncontrolling
		Common Stocks								Legal Reserve				Special Reserve				Unappropriated				the Foreign				Comprehensive				on Hedging								Interests
																		Earnings				Operations				Income				Instruments				Total				(Notes 13 and 28)				Total Equity
BALANCE, JANUARY 1, 2019		$	77,574,465			$	171,136,764			$	77,574,465			$	2,675,419			$	47,090,522			$	(79,427	)		$	538,272			$	1,069			$	376,511,549			$	9,990,345			$	386,501,894
Change in additional paid-in capital from investments in associates accounted for using equity method			—				(872	)			—				—				—				—				—				—				(872	)			497				(375	)
Net income for the three months ended March 31, 2019			—				—				—				—				8,356,082				—				—				—				8,356,082				170,631				8,526,713
Other comprehensive income (loss) for the three months ended March 31, 2019			—				—				—				—				—				15,223				(162,207	)			(3,788	)			(150,772	)			11,696				(139,076	)
Total comprehensive income (loss) for the three months ended March 31, 2019			—				—				—				—				8,356,082				15,223				(162,207	)			(3,788	)			8,205,310				182,327				8,387,637
Share-based payment transactions of subsidiaries			—				(812	)			—				—				—				—				—				—				(812	)			15,570				14,758
BALANCE, MARCH 31, 2019		$	77,574,465			$	171,135,080			$	77,574,465			$	2,675,419			$	55,446,604			$	(64,204	)		$	376,065			$	(2,719	)		$	384,715,175			$	10,188,739			$	394,903,914
BALANCE, JANUARY 1, 2020		$	77,574,465			$	171,255,985			$	77,574,465			$	2,675,419			$	46,341,361			$	(148,377	)		$	836,598			$	327			$	376,110,243			$	10,283,522			$	386,393,765
Change in additional paid-in capital from investments in associates accounted for using equity method			—				(5,580	)			—				—				—				—				—				—				(5,580	)			47				(5,533	)
Net income for the three months ended March 31, 2020			—				—				—				—				8,283,334				—				—				—				8,283,334				264,030				8,547,364
Other comprehensive income (loss) for the three months ended March 31, 2020			—				—				—				—				725				(12,593	)			(1,384,326	)			(327	)			(1,396,521	)			(15,961	)			(1,412,482	)
Total comprehensive income (loss) for the three months ended March 31, 2020			—				—				—				—				8,284,059				(12,593	)			(1,384,326	)			(327	)			6,886,813				248,069				7,134,882
Share-based payment transactions of subsidiaries			—				23,989				—				—				—				—				—				—				23,989				49,284				73,273
BALANCE, MARCH 31, 2020		$	77,574,465			$	171,274,394			$	77,574,465			$	2,675,419			$	54,625,420			$	(160,970	)		$	(547,728	)		$	—			$	383,015,465			$	10,580,922			$	393,596,387

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

 

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2020				2019
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax		$	10,651,404			$	10,544,723
Adjustments to reconcile income before income tax to net cash provided by operating activities:
Depreciation			7,759,282				7,693,369
Amortization			1,059,023				1,064,194
Amortization of incremental costs of obtaining contracts			196,659				376,902
Expected credit loss (reversal of credit loss)			6,137				(55,953	)
Interest expenses			42,387				25,844
Interest income			(39,386	)			(52,603	)
Compensation cost of share-based payment transactions			1,646				430
Share of profits of associates accounted for using equity method			(37,074	)			(79,173	)
Loss on disposal of property, plant and equipment			680				4,505
Loss on disposal of financial instruments			1,788				—
Provision for inventory and obsolescence			23,601				95,682
Valuation loss on financial assets and liabilities at fair value through profit or loss, net			12,374				7,193
Others			(50,887	)			(23,594	)
Changes in operating assets and liabilities:
Decrease (increase) in:
Contract assets			8,189				212,752
Trade notes and accounts receivable			3,042,468				2,615,369
Receivable from related parties			7,122				6,019
Inventories			(454,018	)			1,120,704
Prepayments			(3,152,564	)			(3,108,829	)
Other current monetary assets			122,464				(42,281	)
Other current assets			553,493				(349,765	)
Incremental cost of obtaining contracts			(183,834	)			(159,206	)
Increase (decrease) in:
Contract liabilities			149,694				1,762,269
Trade notes and accounts payable			(3,422,773	)			(5,516,944	)
Payables to related parties			(315,534	)			(556,618	)
Other payables			(2,523,167	)			(2,240,856	)
Provisions			(4,839	)			3,682
Other current liabilities			(6,481	)			(107,442	)
Net defined benefit plans			(42,023	)			121,537
Cash generated from operations			13,405,831				13,361,910
Interest paid			(76,758	)			(25,844	)
Income tax paid			(8,521	)			(117,351	)
Net cash provided by operating activities			13,320,552				13,218,715

 

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2020				2019
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of financial assets at fair value through other comprehensive income		$	(35,433	)		$	—
Purchase of financial assets at fair value through profit or loss			(38,944	)			—
Proceeds from disposal of financial assets at fair value through profit or loss			29,741				—
Acquisition of time deposits and negotiable certificates of deposit with maturities of more than three months			(1,391,556	)			(1,563,562	)
Proceeds from disposal of time deposits and negotiable certificates of deposit with maturities of more than three months			2,616,599				3,931,264
Acquisition of property, plant and equipment			(3,729,411	)			(4,492,381	)
Proceeds from disposal of property, plant and equipment			14,465				9,618
Acquisition of intangible assets			(47,420,261	)			(54,332	)
Decrease (increase) in other noncurrent assets			70,533				(618,400	)
Interest received			45,620				58,028
Net cash used in investing activities			(49,838,647	)			(2,729,765	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans			70,000				300,000
Repayment of short-term loans			(90,000	)			(225,000	)
Proceeds from short-term bills payable			29,000,000				—
Repayment of short-term bills payable			(9,000,000	)			—
Decrease in customers’ deposits			(150,695	)			(78,673	)
Payment for the principal of lease liabilities			(992,494	)			(1,019,347	)
Increase in other noncurrent liabilities			143,343				89,809
Change in other noncontrolling interests			71,627				14,328
Net cash provided by (used in) financing activities			19,051,781				(918,883	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			(13,379	)			13,355
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(17,479,693	)			9,583,422
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			34,049,643				27,644,780
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	16,569,950			$	37,228,202

(Concluded)

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

 

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2020 AND 2019

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

(Reviewed, Not Audited)

 

 

1.

GENERAL

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

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

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

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

 

2.	APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Board of Directors on May 6, 2020.

 

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the following items, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2019. Please refer to the consolidated financial statements for the year ended December 31, 2019 for the details.

 

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Statement of Compliance

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

Basis of Consolidation

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

 

						Percentage of Ownership
Name of Investor		Name of Investee		Main Businesses and Products		March 31, 2020				December 31, 2019				March 31, 2019				Note
Chunghwa Telecom Co., Ltd.		Senao International Co., Ltd. (“SENAO”)		Handset and peripherals retailer, sales of CHT mobile phone plans as an agent			28				28				28			a.
		Light Era Development Co., Ltd. (“LED”)		Planning and development of real estate and intelligent buildings, and property management			100				100				100
		Donghwa Telecom Co., Ltd. (“DHT”)		International private leased circuit, IP VPN service, and IP transit services			100				100				100
		Chunghwa Telecom Singapore Pte., Ltd. (“CHTS”)		International private leased circuit, IP VPN service, and IP transit services			100				100				100
		Chunghwa System Integration Co., Ltd. (“CHSI”)		Providing system integration services and telecommunications equipment			100				100				100
		Chunghwa Investment Co., Ltd. (“CHI”)		Investment			89				89				89
		CHIEF Telecom Inc. (“CHIEF”)		Network integration, internet data center (“IDC”), communications integration and cloud application services			56				57				57			b.
		CHYP Multimedia Marketing & Communications Co., Ltd. (“CHYP”)		Digital information supply services and advertisement services			100				100				100
		Prime Asia Investments Group Ltd. (B.V.I.) (“Prime Asia”)		Investment			100				100				100
		Spring House Entertainment Tech. Inc. (“SHE”)		Software design services, internet contents production and play, and motion picture production and distribution			56				56				56			c.
		Chunghwa Telecom Global, Inc. (“CHTG”)		International private leased circuit, internet services, and transit services			100				100				100
		Chunghwa Telecom Vietnam Co., Ltd. (“CHTV”)		Intelligent energy saving solutions, international circuit, and information and communication technology (“ICT”) services.			100				100				100
		Smartfun Digital Co., Ltd. (“SFD”)		Providing diversified family education digital services			65				65				65
		Chunghwa Telecom Japan Co., Ltd. (“CHTJ”)		International private leased circuit, IP VPN service, and IP transit services			100				100				100
		Chunghwa Sochamp Technology Inc. (“CHST”)		Design, development and production of Automatic License Plate Recognition software and hardware			51				51				51

 

(Continued)

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						Percentage of Ownership
Name of Investor		Name of Investee		Main Businesses and Products		March 31, 2020				December 31, 2019				March 31, 2019				Note
		Honghwa International Co., Ltd. (“HHI”)		Telecommunications engineering, sales agent of mobile phone plan application and other business services, etc			100				100				100
		Chunghwa Leading Photonics Tech Co., Ltd. (“CLPT”)		Production and sale of electronic components and finished products			75				75				75
		Chunghwa Telecom (Thailand) Co., Ltd. (“CHTT”)		International private leased circuit, IP VPN service, ICT and cloud VAS services			100				100				100			d.
		CHT Security Co., Ltd. (“CHTSC”)		Computing equipment installation, wholesale of computing and business machinery equipment and software, management consulting services, data processing services, digital information supply services and internet identify services			80				80				80
Senao International Co., Ltd.		Senao International (Samoa) Holding Ltd. (“SIS”)		International investment			100				100				100
		Youth Co., Ltd. (“Youth”)		Sale of information and communication technologies products			93				93				93
		Aval Technologies Co., Ltd. (“Aval”)		Sale of information and communication technologies products			100				100				100
		Senyoung Insurance Agent Co., Ltd. (“SENYOUNG”)		Property and liability insurance agency			100				100				100
Youth Co., Ltd.		ISPOT Co., Ltd. (“ISPOT”)		Sale of information and communication technologies products			100				100				100
		Youyi Co., Ltd. (“Youyi”)		Maintenance of information and communication technologies products			100				100				100
Aval Technologies Co., Ltd.		Wiin Technology Co., Ltd. (“Wiin”)		Sale of information and communication technologies products			100				100				—			e.
Senyoung Insurance Agent Co., Ltd.		Senaolife Insurance Agent Co., Ltd. (“Senaolife”)		Life insurance services			100				100				—			f.
Light Era Development Co., Ltd.		Taoyuan Asia Silicon Valley Innovation Co., Ltd. (“TASVI”)		Development of real estate			—				—				60			g.
CHIEF Telecom Inc.		Unigate Telecom Inc. (“Unigate”)		Telecommunications and internet service			100				100				100
		Chief International Corp. (“CIC”)		Telecommunications and internet service			100				100				100
		Shanghai Chief Telecom Co., Ltd. (“SCT”)		Telecommunications and internet service			49				49				49			h.
Chunghwa Investment Co., Ltd.		Chunghwa Precision Test Tech. Co., Ltd. (“CHPT”)		Production and sale of semiconductor testing components and printed circuit board			34				34				34			i.
Chunghwa Precision Test Tech. Co., Ltd.		Chunghwa Precision Test Tech. USA Corporation (“CHPT (US)”)		Design and after-sale services of semiconductor testing components and printed circuit board			100				100				100
		CHPT Japan Co., Ltd. (“CHPT (JP)”)		Related services of electronic parts, machinery processed products and printed circuit board			100				100				100

 

(Continued)

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						Percentage of Ownership
Name of Investor		Name of Investee		Main Businesses and Products		March 31, 2020				December 31, 2019				March 31, 2019				Note
		Chunghwa Precision Test Tech. International, Ltd. (“CHPT (International)”)		Wholesale and retail of electronic materials, and investment			100				100				100
Senao International (Samoa) Holding Ltd.		Senao International HK Limited (“SIHK”)		International investment			100				100				100
Senao International HK Limited		Senao Trading (Fujian) Co., Ltd. (“STF”)		Sale of information and communication technologies products			—				—				100			j.
		Senao International Trading (Shanghai) Co., Ltd. (“SITS”)		Sale of information and communication technologies products			100				100				100
		Senao International Trading (Jiangsu) Co., Ltd. (“SITJ”)		Sale of information and communication technologies products			—				—				—			k.
Prime Asia Investments Group Ltd. (B.V.I.)		Chunghwa Hsingta Co., Ltd. (“CHC”)		Investment			100				100				100
Chunghwa Hsingta Co., Ltd. (“CHC”)		Chunghwa Telecom (China) Co., Ltd. (“CTC”)		Integrated information and communication solution services for enterprise clients, and intelligent energy network service			100				100				100
Chunghwa Precision Test Tech. International, Ltd.		Shanghai Taihua Electronic Technology Limited (“STET”)		Design of printed circuit board and related consultation service			100				100				100
		Su Zhou Precision Test Tech. Ltd. (“SZPT”)		Assembly processed of circuit board, design of printed circuit board and related consultation service			100				100				—			l.

(Concluded)

 

a.

Chunghwa continues to control over half of the seats of the Board of Directors of SENAO (six out of eleven seats as of March 31, 2020) through the support of large beneficial stockholders. As a result, the accounts of SENAO are included in the consolidated financial statements.

 

b.

CHIEF issued new shares in March 2020, March and November 2019 as its employees exercised their options. Therefore, the Company’s ownership interest in CHIEF decreased to 59.75% and 59.10% as of December 31, 2019 and March 31, 2020, respectively.

 

c.

SHE reduced 19.72% of its capital to offset accumulated deficits in December 2019 and the Company’s ownership interest in SHE remained the same.

 

d.

The Company increased its investment in CHTT proportionally in October 2019 and the Company’s ownership interest in CHTT remained the same.

 

e.

Aval invested 100% equity shares of Wiin Technology Co., Ltd. (“Wiin”) in September 2019.

 

f.

SENYOUNG invested 100% equity shares of Senaolife Insurance Agent Co., Ltd. (“Senaolife”) in November 2019.

 

g.

TASVI completed its liquidation in September 2019.

 

h.

CHIEF obtained two out of three seats of the Board of Directors of SCT according to the mutual agreements among stockholders and gained control over SCT; hence, SCT is deemed as a subsidiary of the Company.

 

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