Chunghwa Telecom : Q3 2020 Consolidated Financial Statements (Fully IFRSs)

Chunghwa Telecom Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the

Nine Months Ended September 30, 2020 and 2019

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (In Millions of New Taiwan Dollars)

		September 30, 2020			December 31, 2019			September 30, 2019			September 30, 2020			December 31, 2019			September 30, 2019
			(Unaudited)						(Audited)						(Unaudited)						(Unaudited)						(Audited)						(Unaudited)
ASSETS		Amount	%				Amount	%				Amount	%		LIABILITIES AND EQUITY		Amount	%				Amount	%				Amount	%
CURRENT ASSETS																					CURRENT LIABILITIES
Cash and cash equivalents	$	17,703	4		$	34,050	7		$	24,072	5		Short-term loans	$	75	-		$	90	-		$	90	-
Financial assets at fair value through profit or loss			7		-					1		-					25	-		Short-term bills payable			11,991	2					-		-					-		-
Hedging financial assets			8		-					-		-					-		-		Financial liabilities at fair value through profit or loss			-		-					-		-					2		-
Contract assets			5,170	1					4,441	1					4,517	1		Contract liabilities			16,184	3					16,840	3					16,417	4
Trade notes and accounts receivable, net			22,596	4					26,408	6					29,760	6		Trade notes and accounts payable			13,256	4					15,312	3					16,932	4
Receivables from related parties			690	-					17	-					19	-		Payables to related parties			494	-					654	-					379	-
Inventories			15,167	3					17,344	4					17,888	4		Current tax liabilities			3,934	1					5,812	1					7,553	2
Prepayments			4,869	1					1,883	-					4,565	1		Lease liabilities			3,272	1					3,291	1					3,248	1
Other current monetary assets			5,576	1					7,498	2					7,997	2		Other payables			22,190	4					22,953	5					20,092	4
Other current assets			3,367	1					2,430	-					2,497	1		Provisions			240	-					207	-					249	-
																					Current portion of long-term loans			1,600	-					-		-					-		-
Total current assets			75,153	15					94,072	20				91,340	20	Other current liabilities			956	-					984	-					1,000	-
NONCURRENT ASSETS																					Total current liabilities			74,192	15					66,143	13				65,962	15
Financial assets at fair value through profit or loss			700	-					778	-					513	-
Financial assets at fair value through other																					NONCURRENT LIABILITIES
comprehensive income			7,633	2					7,154	1					6,457	1		Long-term loans			-		-					1,600	-					1,600	-
Investments accounted for using equity method			6,806	1					7,139	1					3,020	1		Bonds payable			19,979	4					-		-					-		-
Contract assets			2,357	-					2,601	1					2,538	1		Contract liabilities			6,508	2					6,841	2					6,803	2
Property, plant and equipment			279,242		56					283,694	60				282,108	60	Deferred income taxes liabilities			1,954	-					1,912	-					1,941	-
Right-of-use assets			11,159	3					11,364	2					11,351	2		Provisions			105	-					97	-					85	-
Investment properties			8,171	2					8,169	2					8,267	2		Lease liabilities			6,300	1					6,467	2					6,339	1
Intangible assets			91,885	19					47,047	10				47,920	10	Customers' deposits			4,702	1					4,748	1					4,646	1
Deferred income tax assets			3,349	1					3,259	1					3,523	1		Net defined benefit liabilities			3,613	1					3,505	1					3,663	1
Incremental costs of obtaining contracts			976	-					943	-					961	-		Other noncurrent liabilities			1,803	-					1,543	-					1,496	-
Net defined benefit assets			2,285	-					2,128	-					843	-
Prepayments			2,341	-					2,679	1					2,762	1		Total noncurrent liabilities			44,964	9					26,713	6					26,573	5
Other noncurrent assets			5,191	1					6,101	1					5,889	1
																					Total liabilities			119,156		24					92,856	19				92,535	20
Total noncurrent assets			422,095		85					383,056	80				376,152	80
																					EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF
																					THE PARENT
																					Common stocks			77,574	16					77,574	16				77,574	17
																					Additional paid-in capital			149,784		30					149,762		31				149,763	32
																					Retained earnings
																					Legal reserve			77,574	16					77,574	16				77,574	17
																					Special reserve			2,676	1					2,676	1					2,676	-
																					Unappropriated earnings			58,829	11					65,984	14				57,471	12
																					Total retained earnings			139,079		28					146,234		31				137,721	29
																					Others			869	-					587	-					22	-
																					Total equity attributable to stockholders of the
																					parent			367,306		74					374,157	78				365,080	78
																					NONCONTROLLING INTERESTS			10,786	2					10,115	3					9,877	2
																					Total equity			378,092		76					384,272		81				374,957	80
TOTAL	$	497,248		100		$	477,128	100	$	467,492	100	TOTAL	$	497,248		100		$	477,128		100	$	467,492	100

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Millions of New Taiwan Dollars, Except Earnings Per Share) (Unaudited)

		Three Months Ended September 30					Nine Months Ended September 30
	2020			2019			2020			2019
		Amount	%				Amount	%				Amount	%				Amount	%
REVENUES	$ 52,171		100	$ 50,848	100	$ 148,129	100	$ 152,287	100
OPERATING COSTS		34,506		67	33,019	65	94,698	64	98,767	65
GROSS PROFIT		17,665		33	17,829	35	53,431	36	53,520	35
OPERATING EXPENSES
Marketing	5,143		9	5,579	11	15,393	10	16,470	11
General and administrative	1,150		2	1,123	2	3,512	2	3,435	2
Research and development	981		2	1,089	2	2,878	2	2,964	2
Expected credit loss (reversal of credit
loss)		(45)	-	10	-	59	-	(92)	-
Total operating expenses		7,229		13	7,801	15	21,842	14	22,777	15
OTHER INCOME AND EXPENSES		286		1	(19)	-	274	-	(28)	-
INCOME FROM OPERATIONS		10,722		21	10,009	20	31,863	22	30,715	20
NON-OPERATING INCOME AND
EXPENSES
Interest income	21		-	67	-	93	-	197	-
Other income	87		-	144	-	417	-	479	-
Other gains and losses	(53)	-	47	-	(82)	-	144	-
Interest expenses	(58)	-	(26)	-	(148)	-	(78)	-
Share of profits of associates accounted
for using equity method	101		-	189	-	275	-	414	-
Total non-operating income and
expenses		98		-	421	-	555	-	1,156	-
INCOME BEFORE INCOME TAX		10,820		21	10,430	20	32,418	22	31,871	20
INCOME TAX EXPENSE		2,563		5	2,423	4	5,865	4	5,503	3
NET INCOME		8,257		16	8,007	16	26,553	18	26,368	17
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	725		1	(192)	-	395	-	(475)	-
Gain or loss on hedging instruments
subject to basis adjustment	6		-	(2)	-	8	-	(1)	-
Share of remeasurements of defined
benefit pension plans of associates		-		-	-	-	-	-	-	-
		731		1	(194)	-	403	-	(476)	-
Items that may be reclassified
subsequently to profit or loss:
Exchange differences arising from
the translation of the foreign
operations	(52)	-	(17)	-	(132)	-	46	-

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Millions of New Taiwan Dollars, Except Earnings Per Share) (Unaudited)

			Three Months Ended September 30						Nine Months Ended September 30
			2020						2019						2020						2019
		Amount	%				Amount	%				Amount	%				Amount	%
Share of exchange differences
arising from the translation of the
foreign operations of associates	$	(2)	-	$	-	-	$	(3)	-	$	-	-
Income tax relating to items that may
be reclassified subsequently to
profit or loss			-		-				-	-				-	-				-	-
			(54)	-				(17)	-				(135)	-				46	-
Total other comprehensive income
(loss), net of income tax			677		1				(211)	-				268	-				(430)	-
TOTAL COMPREHENSIVE INCOME		$	8,934	17	$	7,796	16	$	26,821	18	$	25,938	17
NET INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	7,897	15	$	7,669	16	$	25,628	17	$	25,642	17
Noncontrolling interests			360		1				338	-				925	1				726	-
		$	8,257	16	$	8,007	16	$	26,553	18	$	26,368	17
COMPREHENSIVE INCOME
ATTRIBUTABLE TO
Stockholders of the parent	$	8,578	16	$	7,465	16	$	25,910	17	$	25,204	17
Noncontrolling interests			356		1				331	-				911	1				734	-
		$	8,934	17	$	7,796	16	$	26,821	18	$	25,938	17
EARNINGS PER SHARE
Basic			$1.02						$0.99						$3.31						$3.31
Diluted			$1.02						$0.99						$3.30						$3.30

(Concluded)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Millions of New Taiwan Dollars)

(Unaudited)

																		Equity Attributable to Stockholders of the Parent
																															Other Adjustments
																											Exchange
																										Differences
																											Arising		Unrealized
																											from the	Gain or Loss									Total Equity
														Retained Earnings						Translation of		on Financial	Gain or Loss on					Attributable to
						Additional						Special	Unappropriated	Total Retained		the Foreign			Assets at		Hedging				Total Other	Stockholders	Noncontrolling
	Common Stocks	Paid-in Capital	Legal Reserve		Reserve			Earnings			Earnings		Operations			FVOCI		Instruments	Adjustments	of the Parent			Interests	Total Equity
BALANCE, JANUARY 1, 2019	$	77,574		$	149,762	$	77,574	$	2,676	$	66,575	$	146,825		$	(79)	$	538	$	1	$	460	$	374,621	$	9,837	$	384,458
Appropriation of 2018 earnings
Cash dividends distributed by Chunghwa			-				-			-		-			(34,746)			(34,746)				-			-			-			-			(34,746)			-			(34,746)
Cash dividends distributed by subsidiaries			-				-			-		-			-			-				-			-			-			-			-			(710)			(710)
Unclaimed dividend			-				2			-		-			-			-				-			-			-			-			2			-			2
Net income for the nine months ended September 30, 2019			-				-			-		-			25,642			25,642				-			-			-			-			25,642			726			26,368
Other comprehensive income (loss) for the nine months ended
September 30, 2019			-				-			-		-			-			-				27			(464)			(1)			(438)			(438)			8			(430)
Total comprehensive income (loss) for the nine months ended
September 30, 2019			-				-			-		-			25,642			25,642				27			(464)			(1)			(438)			25,204			734			25,938
Share-based payment transactions of subsidiaries			-				(1)			-		-			-			-				-			-			-			-			(1)			17			16
Net decrease in noncontrolling interests			-				-			-		-			-			-				-			-			-			-			-			(1)			(1)
BALANCE, SEPTEMBER 30, 2019		$	77,574			$	149,763	$	77,574	$	2,676	$	57,471	$	137,721		$	(52)	$	74	$	-	$	22	$	365,080	$	9,877	$	374,957
BALANCE, JANUARY 1, 2020		$	77,574			$	149,762	$	77,574	$	2,676	$	65,984	$	146,234		$	(148)	$	735	$	-	$	587	$	374,157	$	10,115	$	384,272
Appropriation of 2019 earnings
Cash dividends distributed by Chunghwa			-				-			-		-			(32,783)			(32,783)				-			-			-			-			(32,783)			-			(32,783)
Cash dividends distributed by subsidiaries			-				-			-		-			-			-				-			-			-			-			-			(775)			(775)
Unclaimed dividend			-				2			-		-			-			-				-			-			-			-			2			-			2
Change in additional paid-in capital for not proportionately
participating in the capital increase of subsidiaries			-				(4)			-		-			-			-				-			-			-			-			(4)			-			(4)
Net income for the nine months ended September 30, 2020			-				-			-		-			25,628			25,628				-			-			-			-			25,628			925			26,553
Other comprehensive income (loss) for the nine months ended
September 30, 2020			-				-			-		-			-			-				(123)			397			8			282			282			(14)			268
Total comprehensive income (loss) for the nine months ended
September 30, 2020			-				-			-		-			25,628			25,628				(123)			397			8			282			25,910			911			26,821
Share-based payment transactions of subsidiaries			-				24			-		-			-			-				-			-			-			-			24			59			83
Net increase in noncontrolling interests			-				-			-		-			-			-				-			-			-			-			-			476			476
BALANCE, SEPTEMBER 30, 2020		$	77,574			$	149,784	$	77,574	$	2,676	$	58,829	$	139,079		$	(271)	$	1,132	$	8	$	869	$	367,306	$	10,786	$	378,092

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Millions of New Taiwan Dollars)

(Unaudited)

	Nine Months Ended September 30
	2020	2019
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	$ 32,418	$ 31,871
Adjustments to reconcile income before income tax to net cash
provided by operating activities:
Depreciation	23,185	23,170
Amortization	3,774	3,191
Amortization of incremental costs of obtaining contracts	583	953
Expected credit loss (reversal of credit loss)	59	(92)
Interest expenses	148	78
Interest income	(93)	(197)
Dividend income	(246)	(296)
Compensation cost of share-based payment transactions	5	1
Share of profits of associates accounted for using equity method	(275)	(414)
Loss (gain) on disposal of property, plant and equipment	(124)	28
Gain on disposal of investment properties	(152)	-
Loss on disposal of intangible assets	2	-
Loss on disposal of financial instruments	2	-
Loss (gain) on disposal of investments accounted for using equity
method	4	(151)
Provision for impairment loss of inventory	608	156
Valuation loss on financial assets and liabilities at fair value
through profit or loss, net	79	3
Others	(40)	(26)
Changes in operating assets and liabilities:
Decrease (increase) in:
Contract assets	98	160
Trade notes and accounts receivable	4,020	594
Receivables from related parties	(340)	5
Inventories	1,710	(2,923)
Prepayments	(2,517)	(2,648)
Other current monetary assets	277	(915)
Other current assets	(862)	79
Incremental cost of obtaining contracts	(616)	(579)
Increase (decrease) in:
Contract liabilities	(1,323)	6,240
Trade notes and accounts payable	(2,313)	(3,532)
Payables to related parties	(160)	(539)
Other payables	(2,955)	(1,557)
Provisions	26	127
		(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Millions of New Taiwan Dollars)

(Unaudited)

	Nine Months Ended September 30
			2020			2019
Other current liabilities	$	(42)	$	(147)
Net defined benefit plans			(82)		450
Cash generated from operations			54,858			53,090
Interest paid			(139)		(78)
Income tax paid			(7,809)		(4,166)
Net cash provided by operating activities			46,910			48,846
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of financial assets at fair value through other
comprehensive income			(83)		-
Purchase of financial assets at fair value through profit or loss			(39)		(87)
Proceeds from disposal of financial assets at fair value through
profit or loss			30			64
Acquisition of time deposits and negotiable certificates of deposit
with maturities of more than three months			(3,718)		(13,482)
Proceeds from disposal of time deposits and negotiable certificates
of deposit with maturities of more than three months			5,382			15,881
Proceeds from disposal of agreements collateralized by bonds with
maturities of more than three months			15			-
Proceeds from disposal of investments accounted for using equity
method			-			32
Acquisition of property, plant and equipment			(13,972)		(16,357)
Proceeds from disposal of property, plant and equipment			110			37
Acquisition of intangible assets			(47,547)		(168)
Acquisition of investment properties			(54)		-
Increase in other noncurrent assets			(131)		(882)
Interest received			102			208
Dividends received			515			534
Net cash inflow on acquisition of subsidiaries			354			-
Net cash used in investing activities			(59,036)		(14,220)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans			115			315
Repayment of short-term loans			(134)		(325)
Proceeds from short-term bills payable			41,000			-
Repayment of short-term bills payable			(29,000)		-
Proceeds from issuance of bonds			20,000			-
Payments for transaction costs attributable to the issuance of bonds			(21)		-
Decrease in customers' deposits			(61)		(92)
Payments for the principal of lease liabilities			(2,863)		(2,896)
Increase in other noncurrent liabilities			253			186
Cash dividends			(32,783)		(34,746)
						(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Millions of New Taiwan Dollars)

(Unaudited)

	Nine Months Ended September 30
			2020			2019
Dividends distributed to noncontrolling interests	$	(775)	$	(710)
Change in other noncontrolling interests			78			14
Unclaimed dividend			2			2
Net cash used in financing activities			(4,189)		(38,252)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS			(32)		53
NET DECREASE IN CASH AND CASH EQUIVALENTS			(16,347)		(3,573)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			34,050		27,645
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	17,703	$	24,072

(Concluded)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

NOTE TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2020 and 2019 (Unaudited)

STATEMENT OF COMPLIANCE

The Company has prepared its consolidated balance sheets as of September 30, 2020 and 2019, the related consolidated statements of comprehensive income for the three months ended September 30, 2020 and 2019, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the nine months ended September 30, 2020 and 2019 in accordance with International Accounting Standards No. 34 "Interim Financial Reporting" as issued by the International Accounting Standard Board (IASB). The consolidated financial statements are incomplete as they omit the related footnote disclosures as required under International Financial Reporting Standards as issued by IASB.

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