chap. financial report - taiwan mobile · note 2: 2005-2009 financial data have been duly audited...

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Chap. 8 Financial Report

Financial status

1. Balance sheet

The Company’s condensed balance sheets for the past

five years and explanation of significant changes are as fol-

lows:

1. Current assets

In 2007, the Company liquidated its bond funds to meet

funding requirements for acquiring Taiwan Fixed Network

Co., Ltd. (TFN) shares, resulting in a decrease in current

assets. In 2009, the Company upstreamed cash from Tai-

wan Cellular Co., Ltd’s (TCC) capital reduction, resulting in

an increase in current assets.

2. Funds and long-term investments

In 2007, the Company increased its investment in TCC

to acquire TFN shares. The long-term investments were,

however, lower than the previous year as the Company

shares held by its subsidiaries were reclassified as treasury

stock. Furthermore, TransAsia Telecommunications, Inc.

(TAT) and TCC had capital reductions in 2007 and 2009,

respectively, resulting in decreased long-term investments.

3. Fixed assets

The disposal of obsolete 2G equipment resulted in a de-

cline in fixed assets.

4. Intangible assets

In 2008, intangible assets increased as the Company

merged with TAT International (which was acquired at a

premium) and inherited the goodwill.

5. Other assets

In 2007, other assets increased due to reclassification from

fixed assets of one of the Company’s office buildings being

leased out and an increase in deferred tax assets related

to timing difference between financial accounting and tax

accounting in the recognition of asset write-off losses.

The 2009 amendment of Article 5 of the Income Tax Act

provides for the corporate statutory tax rate to be reduced

from 25% to 20% effective 2010; as such, deferred in-

come tax assets were revised downward accordingly.

6. Current liabilities

The Company’s raising of bank loans to meet its funding

needs in acquiring TFN shares, together with payables

arising from capital reduction, resulted in increased cur-

rent liabilities in 2007. Current liabilities decreased due to

bank loan repayment and settlement of capital reduction in

2008.

7. Long-term liabilities

Starting in 2004, repayment of long-term bank loans as

well as settlement and conversion of convertible bonds

contributed to a steady decline in long-term liabilities. In

2008, however, issuance of the second unsecured cor-

porate bonds and increase in syndicated loans resulted in

increased long-term liabilities. In 2009, long-term liabilities

decreased anew as the Company repaid its syndicated

loans.

8. Other liabilities

In 2007, the Company injected capital into TCC, which fur-

ther invested in Taihsing International Telecommunications

Co., Ltd. (TIT), using cash and TFN shares. The spread

between the original cost and the disposal price of the TFN

shares on these transactions had been deferred and classi-

fied under other liabilities in accordance to SFAS No. 5.

9. Stockholders’ equity

The conversion of convertible bonds increased capital and

capital surplus, while a 24% capital reduction approved


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during the shareholders’ meeting in 2007 decreased capital. The Company’s shares held by subsidiaries were classified as

treasury stock, decreasing shareholders’ equity. In 2008, the sale of 300,000 Company’s shares by its subsidiary decreased

treasury shares, while the disposal gain increased capital surplus and shareholders’ equity accordingly.

Balance sheet for the past five yearsUnit: NT$’000

2005 2006 2007 2008 2009

Current assets 25,779,977 26,112,730 11,831,063 11,055,600 13,530,729

Funds and long-term investments 21,091,320 21,620,736 15,276,374 15,660,750 9,808,833

Fixed assets 57,638,728 57,224,824 42,568,638 43,018,691 39,033,012

Intangible assets 9,720,218 9,036,696 8,249,458 14,317,314 13,567,671

Other assets 3,139,195 2,976,458 6,076,924 5,608,974 4,823,691

Total assets 117,369,438 116,971,444 84,002,457 89,661,329 80,763,936

Current liabilitiesBefore appropriation 15,477,853 16,564,043 42,763,948 23,717,197 18,833,732

After appropriation 28,766,184 29,919,728 50,565,070 37,686,061 (Note1)

Long-term liabilities 14,584,125 10,291,046 7,551,665 13,200,000 8,000,000

Other liabilities 318,704 248,561 1,833,915 1,841,534 1,856,978

Total liabilitiesBefore appropriation 30,380,682 27,103,650 52,149,528 38,758,731 28,690,710


Capital stock 49,492,065 49,993,251 38,009,254 38,009,254 38,009,254

Capital surplus 7,905,337 8,748,571 8,785,159 12,297,839 12,431,704

Retained earningsBefore appropriation 29,881,787 32,706,825 25,959,268 33,529,532 33,449,530


Unrealized valuation loss on long-term investments

- (147,423) (64,043) (5,897) 63,624

Translation adjustments 3,240 3,860 5,764 17,840 12,011

Net loss not recognized as pension cost - - 1,534 2,862 (3,797)

Total sharehold-ers’ equity

Before appropriation 86,988,756 89,867,794 31,852,929 50,902,598 52,073,226


Note 1: 2009 earnings appropriation proposals are pending approval in the shareholders’ meeting.Note 2: 2005-2009 financial data have been duly audited by independent auditors.

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2. Income statement

The Company’s condensed income statements for the

past five years and explanation of significant changes are

as follows:

1. Non-operating income

In 2006, non-operating income rose on gains of NT$2.1bn

from the disposal of CHT shares. In 2009, non-operating

income decreased due to less investment income from

subsidiaries.

2. Non-operating expense

Significant losses from asset write-off of obsolete telecom

equipment following its technology upgrade and network

integration were recognized in 2007.

Unit: NT$’000

2005 2006 2007 2008 2009

Revenue 47,408,572 47,891,289 51,284,856 54,311,605 57,015,452

Gross profit 28,056,234 27,464,393 28,908,257 30,204,806 29,849,527

Operating income 17,170,785 14,981,243 16,025,677 16,861,395 16,632,797

Non-operating income 3,839,134 6,355,984 4,538,500 4,791,141 3,730,713

Non-operating expense 2,698,462 3,858,726 12,508,313 1,875,439 2,231,019

Pre-tax income 18,311,457 17,478,501 8,055,864 19,777,097 18,132,491

Net income 16,236,698 16,170,741 6,612,997 15,371,386 13,888,862

EPS (NT$) 3.31 3.28 1.68 5.18 4.66

Note: 2005-2009 financial data have been duly audited by independent auditors.

99


3. Financial analysis for the past five years

2005 2006 2007 2008 2009

Financial structure

Debt to asset ratio (%) 25.88 23.17 62.08 43.23 35.52

Long-term capital to fixed asset ratio (%) 176.22 175.03 92.57 149.01 153.90

Solvency

Current ratio (%) 166.56 157.65 27.67 46.61 71.84

Quick ratio (%) 163.49 154.05 26.17 42.66 67.00

Interest coverage ratio (x) 31.82 42.94 21.58 29.91 33.17

Operations

Accounts receivable turnover (x) 7.77 7.37 7.75 8.02 8.56

Average collection days 46.98 49.53 47.10 45.51 42.64

Inventory turnover (x) - 2.53 2.02 5.44 7.85

Accounts payable turnover (x) 13.57 14.03 14.76 12.62 13.18

Average days sales - 144.27 180.69 67.10 46.50

Fixed asset turnover (x) 0.82 0.84 1.20 1.26 1.46

Total asset turnover (x) 0.40 0.41 0.61 0.61 0.71

Profitability

Return on assets (%) 13.98 14.07 6.87 18.29 16.80

Return on equity (%) 19.33 18.29 10.87 37.15 26.97

% of paid-in capitalOperating income 34.67 29.97 42.16 44.36 43.76

Pre-tax income 36.98 34.96 21.19 52.03 47.71

Net income margin (%) 34.25 33.77 12.89 28.30 24.36

EPS (NT$) 3.31 3.28 1.68 5.18 4.66

Cash flow

Cash flow ratio (%) 174.16 69.93 79.87 106.27 139.10

Cash flow adequacy ratio (%) 162.30 126.44 148.13 147.08 143.32

Cash reinvestment rate (%) 13.02 - 24.93 18.69 14.54

LeverageOperating leverage 1.43 1.64 1.70 1.69 1.77

Financial leverage 1.04 1.03 1.03 1.04 1.04

Others

EBITDA (NT$’000) 22,576,687 21,385,641 23,205,291 23,886,242 24,519,524

EBITDA margin (%) 47.62 44.65 45.25 43.98 43.01

ARPU (NT$) 842 827 821 785 721

MOU (in thousand minutes) 12,213,446 12,903,920 13,554,863 14,674,970 15,797,024

Explanation for items in 2009 with major changes > 20% from the previous year:(1) The decrease in current liabilities, long-term liabilities and total liabilities were due to repayment of the first unsecured corporate bonds

and syndicated loan. Accordingly, current ratio, quick ratio and cash flow ratio increased while debt to asset radio decreased.(2) The decrease in net income from the previous year was due to less investment gain from subsidiaries and higher asset write-off losses.

Return on assets, return on equity, pre-tax income as a % of paid-in capital, net income margin and EPS declined accordingly.(3) Increase in promotional handset sell-through resulted in higher cost of handset sold. As the inventory didn’t rise proportionally, the

inventory turnover was up with shorter average days sales.(4) The cash reinvestment rate dropped due to increased cash dividends paid out.

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2008 - 2009 Standalone Balance SheetUnit: NT$’000, %

2009 2008YoY change

Amount %

Current assets 13,530,729 11,055,600 2,475,129 22.39

Fixed assets 39,033,012 43,018,691 (3,985,679) (9.26)

Other assets 4,823,691 5,608,974 (785,283) (14.00)

Total assets 80,763,936 89,661,329 (8,897,393) (9.92)

Current liabilities 18,833,732 23,717,197 (4,883,465) (20.59)

Long-term liabilities 8,000,000 13,200,000 (5,200,000) (39.39)

Total liabilities 28,690,710 38,758,731 (10,068,021) (25.98)

Paid-in capital 38,009,254 38,009,254 - -

Capital surplus 12,431,704 12,297,839 133,865 1.09

Retained earnings 33,449,530 33,529,532 (80,002) (0.24)

Total shareholders’ equity 52,073,226 50,902,598 1,170,628 2.30

Note: 2005-2009 financial data have been duly audited by independent auditors.

Formulas for the above table:1. Financial structure

(1) Debt to asset ratio = Total l iabil it ies / Total assets(2) Long-term capital to f ixed asset ratio = (Shareholders’ equity +

Long-term l iabil it ies) / Net f ixed assets

2. Solvency(1) Current ratio = Current assets / Current l iabil it ies(2) Quick ratio = (Current assets – Inventory – Prepaid expenses) /

Current l iabil it ies(3) Interest cover = Income before interest and tax / Interest expense

3. Operations(1) Accounts receivable turnover = Net revenue / Average accounts

receivable(2) Average collection days = 365 / AR turnover ratio(3) Inventory turnover = COGS / Average inventory(4) Accounts payable turnover = COGS / Average accounts payable(5) Average days sales = 365 / Inventory turnover ratio(6) Fixed asset turnover = Net revenue / Net f ixed assets(7) Total asset turnover = Net revenue / Total assets

4. Profitabil ity(1) Return on assets = [Net income + Interest expense * (1 – Tax rate)]

/ Average assets(2) Return on equity = Net income / Average equity

(3) Net income margin = Net income / Net sales(4) EPS = (Net income – Preferred stock dividend) / Weighted average

outstanding shares

5. Cash flow(1) Cash f low ratio = Cash flow from operating activit ies / Current

l iabil it ies(2) Cash flow adequacy ratio = Net cash f low from operating activit ies

for the past 5 years / (Capital expenditures + Increases in inventory + Cash dividend) for the past 5 years

(3) Cash reinvestment rate = (Cash flow from operating activit ies – Cash dividends) / (Gross f ixed assets + Long-term investments + Other assets + Working capital) (Note: Use 0 if working capital value is negative)

6. Leverage(1) Operating leverage = (Net revenue – Variable operating costs and

expenses) / Operating income(2) Financial leverage = Operating income / (Operating income – Inter-

est expense)

7. Others(1) EBITDA = Operating income + Depreciation + Amortization(2) EBITDA margin = EBITDA/Net revenue(3) ARPU = Net telecom service revenue / Average number of subscrib-

ers(4) MOU = Outgoing & incoming minutes

Financial and operating results analysis

1. Financial results

1. Taiwan Mobile Co., Ltd. – standalone balance sheet

Explanation of significant changes – i.e., at least a 10%

change amounting to more than NT$10 million – in the

past two years’ assets, liabilities and shareholders’ equity:

1. Increase in current assets was due to receiving capi-

tal return of NT$3.5bn from the subsidiary, Taiwan

Cellular Co., Ltd.

2. Amendment of Article 5 of the Income Tax Act

provides for the corporate statutory tax rate to be

reduced from 25% to 20% effective 2010. Deferred

income tax assets have been revised downward ac-

cordingly.

3. Current liabilities and long-term liabilities decreased

due to repayment of the first unsecured corporate

bonds and syndicated loan.

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2. Taiwan Mobile Co., Ltd. – consolidated balance sheet

Explanation of significant changes – i.e., at least a 10%

change amounting to more than NT$10 million – in the

past two years’ assets, liabilities and shareholders’ equity:

1. Amendment of Article 5 of the Income Tax Act

2008 - 2009 Consolidated Balance SheetUnit: NT$’000, %

2009 2008YoY change

Amount %

Current assets 11,600,054 12,712,754 (1,112,700) (8.75%)

Fixed assets 46,543,617 49,720,231 (3,176,614) (6.39%)

Other assets 3,331,469 4,119,087 (787,618) (19.12%)

Total assets 85,899,832 91,939,109 (6,039,277) (6.57%)

Current liabilities 24,761,119 26,735,149 (1,974,030) (7.38%)

Long-term liabilities 8,000,000 13,200,000 (5,200,000) (39.39%)

Total liabilities 33,816,723 41,002,576 (7,185,853) (17.53%)

Paid-in capital 38,009,254 38,009,254 - -

Capital surplus 12,431,704 12,297,839 133,865 1.09%

Retained earnings 33,449,530 33,529,532 (80,002) (0.24%)

Total shareholders’ equity 52,083,109 50,936,533 1,146,576 2.25%

provides for the corporate statutory tax rate to be

reduced from 25% to 20% effective 2010. Deferred

income tax assets have been downward revised ac-

cordingly.

2. Current liabilities and long-term liabilities decreased

due to repayment of the first unsecured corporate

bonds and syndicated loan.

3. Impact of changes on financial results: No significant

impact

4. Preventive measures: Not applicable

2. Operating results

1. Taiwan Mobile Co., Ltd. – standalone income statement

1. Increase in operating costs: Telecom operating cost

increased upon consolidation with TransAsia Tele-

communications, Inc. (TAT), and cost of handset

sold increased due to higher promotional handset

sell-through.

2. Decrease in non-operating gain: Investment in-

come from subsidiaries decreased due to TAT was

merged with the Company in September 2008 and

its income was reclassified to operating revenue in

2009.

3. Increase in non-operating loss: Asset write-off

losses increased due to increased network system

integration in 2009.

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2. Taiwan Mobile Co., Ltd. – consolidated income statement

Decrease in non-operating gain: Non-operating income in 2009 was lower since there was a significant gain reported in 2008

from the disposal of Fubon Financial Holding Co., Ltd.

2008 – 2009 Standalone Income StatemenUnit: NT$’000, %

2009 2008YoY change

Amount %

Revenue 57,015,452 54,311,605 2,703,847 4.98

Operating costs (27,165,925) (24,106,799) 3,059,126 12.69

Gross profit 29,849,527 30,204,806 (355,279) (1.18)

Operating expense (13,216,730) (13,343,411) (126,681) (0.95)

Operating income 16,632,797 16,861,395 (228,598) (1.36)

Non-operating income 3,730,713 4,791,141 (1,060,428) (22.13)

Non-operating expense (2,231,019) (1,875,439) 355,580 18.96

Income before tax 18,132,491 19,777,097 (1,644,606) (8.32)

Net income 13,888,862 15,371,386 (1,482,524) (9.64)

2008 – 2009 Consolidated Income StatementUnit: NT$’000, %

2009 2008YoY change

Amount %

Revenue 68,470,232 69,296,096 (825,864) (1.19%)

Operating costs (33,195,238) (31,720,111) 1,475,127 4.65%

Gross profit 35,274,994 37,575,985 (2,300,991) (6.12%)

Operating expense (14,826,860) (15,814,145) (987,285) (6.24%)

Operating income 20,448,134 21,761,840 (1,313,706) (6.04%)

Non-operating income 596,131 1,032,166 (436,035) (42.24%)

Non-operating expense (2,397,934) (2,257,296) 140,638 6.23%

Income before tax 18,646,331 20,536,710 (1,890,379) (9.20%)

Net income 13,890,516 15,382,249 (1,491,733) (9.70%)

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3. Consolidated financial analysis (2009 versus 2008)

2009 2008

Financial structure (%)Debt to asset ratio 39.37 44.60

Long-term capital to fixed asset ratio 129.09 128.99

Solvency (%)

Current ratio 46.85 47.55

Quick ratio 42.13 43.13

Interest coverage ratio (x) 34.21 30.80

Operations

Accounts receivable turnover (x) 8.81 8.69

Average collection days 41.43 42.00

Inventory turnover (x) 7.48 5.13

Accounts payable turnover (x) 11.64 10.44

Average days sales 48.80 71.15

Fixed asset turnover (x) 1.47 1.39

Total asset turnover (x) 0.80 0.75

Profitability (%)

Return on assets 16.09 16.74

Return on equity 26.97 36.91

% of paid-in capita

Operating income 53.80 57.25

Pre-tax income 49.06 54.03

Net profit margin 20.29 22.20

EPS (NT$) 4.66 5.18

Cash flow (%)

Cash flow ratio 96.73 103.00

Cash flow adequacy ratio 157.94 173.61

Cash reinvestment rate 11.64 22.31

LeverageOperating leverage 1.83 1.75

Financial leverage 1.03 1.03

Explanation for items in 2009 with major changes > 20% from the previous year:(1) Total liabilities and debt to asset ratio were lower due to repayment of the first unsecured corporate bonds and syndicated loan.(2) Increase in promotional handset sell-through resulted in higher cost of handset sold. As the inventory didn’t rise proportionally, the

inventory turnover was up with shorter average days sales.(3) Selling of the Company’s shares by its subsidiaries in 2008 resulted in increased capital surplus due to the disposal gain while decreas-

ing treasury shares. Average shareholders’ equity increased accordingly, leading to a decrease in return on equity.(4) The cash reinvestment rate dropped due to increased cash dividends paid out.

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4. Revenue outlook, key assumptions, potential impact on the Company’s business and corresponding proposal

In 2010, the Company will continue to leverage mobile internet products to expand its wireless market share. Telecom opera-

tors are expected to become more aggressive in devising new acquisition strategies and investing more in the VAS market as

the demand for smart devices continues to grow. To realize the full potential of this growth, the Company will focus on de-

veloping attractive value-added products and services in order to increase average revenue per user (ARPU). The Company

will also pursue a bigger market share of the mid to high usage customers. In order to meet these targets, the Company will

utilize the full potential of its growing number of direct stores as well as use its edge in handset procurement to help boost

cost and marketing efficiency.

3. Cash flow analysis

1. Taiwan Mobile Co., Ltd. – standalone cash flow analysis

1. Cash flow from operating activities: Cash inflow increased in 2009 as more cash dividends were distributed from TCC,

this in spite of higher income tax related cash outflow during the same year.

2. Cash flow from investment activities: Cash outflow was lower in 2008 due to a capital return from TCC.

3. Cash flow from financing activities: Cash outflow was lower in 2009 even after payment of cash dividends and repay-

ment of bank loans since there was a significant capital reduction in 2008.

2. Taiwan Mobile Co., Ltd. – consolidated cash flow analysis

1. Cash flow from operating activities: Cash inflow decreased in 2009 due to increase in income tax related cash outflow.

2. Cash flow from investment activities: Cash outflow was lower in 2008 due to consideration received from the disposal

of Fubon Financial Holding Co., Ltd.

3. Cash flow from financing activities: Cash outflow was higher in 2008 on account of the payment of capital reduction.

2008 – 2009 Standalone Cash Flow StatementUnit: NT$’000, %

2009 2008YoY change

Amount %

Cash inflow (outflow) from operating activities

26,196,820 25,203,147 993,673 3.94

Cash inflow (outflow) from investment activities

(5,082,512) (3,403,331) (1,679,181) (49.34)

Cash inflow (outflow) from financing activities

(21,601,641) (22,718,880) 1,117,239 4.92

Net cash (487,333) (919,064) 431,731 46.98

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3. Plans to improve negative liquidity: Not applicable

4. Projected cash flow for 2010

1. Projected cash inflow from operating activities: Projected operating cash inflow in 2010 will decrease from 2009 on

account of lower cash dividends to be distributed by subsidiaries under the equity method of accounting. Other than

this, the projected cash inflow from operating activities in 2010 is expected to remain stable.

2. Projected cash outflow from investment activities: For capital expenditures

3. Projected cash outflow from financing activities: For distribution of cash dividends and repayment of long-term debts

5. Source of funding for negative cash flow in 2010: Not applicable

4. Major capital expenditures and sources of capital analysis

Due to stable operations and cash flows, the Company was able to fund all major capital expenditures using internal capital;

therefore, the Company’s financials are not affected.

2008 – 2009 Consolidated Cash Flow StatementUnit: NT$’000, %

2009 2008YoY change

Amount %

Cash inflow (outflow) from operating activities

23,950,872 27,537,370 (3,586,498) (13.02%)

Cash inflow (outflow) from investment activities

(6,747,699) (5,993,202) (754,497) (12.59%)

Cash inflow (outflow) from financing activities

(18,067,736) (24,816,247) 6,748,511 27.19%

Net cash (4,463) 8,440 (12,903) (152.88%)

2010 Cash Flow AnalysisUnit: NT$’000

Cash balance, be-ginning of the year

(1)

Forecast net cash inflow from opera-

tions (2)

Forecast cash outflow from invest-ment and financing

activities (3)

Cash balance, end of the year(1) +(2) -(3)

Source of funding for negative cash bal-ance

Cash inflow from investment activities

Cash inflow from financing activities

1,057,042 21,881,495 21,798,735 1,139,802 - -

106


5. Investments

Investment policies, profitability analyses, and improvement plans: See chart belowUnit: NT$’000

Explanation

Item

Carrying Value

Rationale Source for income/ lossImprove-

ment plans

Future invest-ment plans

Taiwan Cellular Co., Ltd.(TCC)

9,353,920Investing in fixed network and other telecommunication related business

Investment income from Taiwan Fixed Network Co., Ltd.

- -

Taipei New Horizons Co., Ltd. (TNH)

211,974

Investing in a property develop-ment project located at the old Songshan Tobacco Factory site for headquarter use

In preparatory stage as of 2009 year end

-

Dependent on future construc-tion plan and fund requirement

Wealth Media Technol-ogy Co., Ltd.(WMT)

192,615Investing in CATV related busi-ness

Investment loss from Tai Fu Me-dia Technology Co., Ltd.(TFM)

TFM has turned profitable since Nov. 2009 after reducing its debt

The Company’s BOD decided to provide addi-tional funding to WMT up to NT$6.5bn in July, 2009

Bridge Mobile Pte Ltd. 50,324Cooperation with other Asia operators so as to enhance the Company’s competitiveness

-(Note)

-(Note)

-

Note: Investment was booked as “Financial assets carried at cost”. The Company does not have signif icant influence on it

6. Financial difficulties for the Company and its affiliates: None

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Affiliates

1. Investment Holding StructureAs of December 31, 2009

100%

100% 100%

12%

100%

Taiwan Cellular Co., Ltd.(former Taihsing Den Syun Co., Ltd.)

Wealth Media Tech-nology Co., Ltd.

Globalview Cable TV Co., Ltd.

Mangrove Cable TV Co., Ltd.

Yeong Jialeh Cable TV Co., Ltd.

Taiwan Super Basketball Co., Ltd.

Xiamen TaifuTeleservices & Technologies Co., Ltd.

TT&T Holdings Co., Ltd.

Phoenix Cable TV Co., Ltd.

Union Cable TV Co., Ltd.

TWM's Investment ———

TCC's Investment————

TCCI's Investment————

TFN's Investment —————

Other Subsidiaries's Investment ———— Note: 70.47% shares are held under trustee accounts.

Taiwan Mobile Co., Ltd.

100%100%

100%100% 100%

100% 100%98.5%100% 100%100%

99.99%

100%

96.66%92.38%6.694%

3.34%

29.53%(Note)

100% 100%100%

100% 100% 100%

3.5%5.86%

TCC Investment Co., Ltd.

Taiwan Fixed Network Co., Ltd.(former Taihsing International Telecommunications Co., Ltd)

TWM Holding Co. Ltd. (former Simax Investment

Holdings Ltd.)

Taiwan Digital Com-munications Co., Ltd.

Tai Fu Media Tech-nology Co., Ltd.

Fu Sin Media Technology

Co., Ltd.

Global Wealth Media Tech-nology Co.,

Ltd.

Fu Jia Leh Media

Technology Co., Ltd.

Global For-est Media

Technology Co., Ltd.

TWM Communica-tions (Beijing) Ltd.

(former Hurray! Times Communications

(Beijing) Ltd. )

Taiwan Teleservices & Technologies Co., Ltd. (former VoPier Communications

(Taiwan) Co., Ltd.)

TFN Union In-vestment Co., Ltd.

TFN HK Ltd.

Win TV Broadcast-

ing Co., Ltd.

TFN Media Co., Ltd.

TCCI Investment

and De-velopment Co., Ltd.

108


2. Affiliates’ ProfileUnit: NT$’000 (unless otherwise stated)

Name Date ofincorporation Address Paid-in capital Main business

Wealth Media Technology Co., Ltd. 2007.08.07 13F-1, No. 172-1, Jilong Rd., Sec. 2, Taipei 272,000 Investment

Tai Fu Media Technology Co., Ltd. 2007.10.18 13F-1, No. 172-1, Jilong Rd., Sec. 2, Taipei 270,000 Investment

Global Wealth Media Technology Co., Ltd. 2007.10.26 1F, No. 206, Datong Rd., Sec. 2, Sijhih City,

Taipei County 84,000 Investment

Fu Jia Leh Media Technology Co., Ltd. 2007.11.23 13F-1, No. 172-1, Jilong Rd., Sec. 2, Taipei 1,000 Investment

Fu Sin Media Technology Co., Ltd. 2007.11.23 13F-1, No. 172-1, Jilong Rd., Sec. 2, Taipei 135,000 Investment

Global Forest Media Technology Co., Ltd. 2008.12.26 13F-1, No. 172-1, Jilong Rd., Sec. 2, Taipei 1,000 Investment

Taiwan Cellular Co., Ltd. 2005.09.20 13F-1, No. 172-1, Jilong Rd., Sec. 2, Taipei 300,000 Telecom engineer-ing and IT services

Taiwan Fixed Network Co., Ltd. 2007.01.30 13F-1, No. 172-1, Jilong Rd., Sec. 2, Taipei 21,000,000 Fixed line service provider

Taiwan Digital Communications Co., Ltd. 2007.06.06 13F-1, No. 172-1, Jilong Rd., Sec. 2, Taipei 12,000 Telecom engineer-

ing and IT service

TCC Investment Co., Ltd. 2009.08.10 13F-1, No. 172-1, Jilong Rd., Sec. 2, Taipei 21,000 Investment

TCCI Investment and Develop-ment Co., Ltd. 2009.09.22 13F-1, No. 172-1, Jilong Rd., Sec. 2, Taipei 4,000 Investment

Win TV Broadcasting Co., Ltd. 2005.10.17 9F, No. 206, Dunhua S. Rd., Sec. 2, Daan Dis-trict, Taipei 181,774 TV program provid-

er

TFN Media Co., Ltd. 2005.01.25 6F, No. 206, Dunhua S. Rd., Sec. 2, Daan Dis-trict, Taipei 2,305,263

Cable broadband and value-added service provider

Union Cable TV Co., Ltd. 2005.02.04 Nos. 28-23, Xiaoshe Lane, Donggang Rd., Yilan City, Yilan County 1,704,633 Cable TV service

provider

Yeong Jialeh Cable TV Co., Ltd. 1994.09.26 10F, No. 651-5, Jhongjheng Rd., Sinjhuang City, Taipei County 339,400 Cable TV service

provider

Mangrove Cable TV Co., Ltd. 1996.01.23 5F, No. 33, Lane 3, Jhongjheng E. Rd., Sec. 1, Danshuei Township, Taipei County 211,600 Cable TV service

provider

Phoenix Cable TV Co., Ltd. 1996.08.22 No. 312, Fongping 1st Rd., Daliao Township, Kaohsiung County 680,902 Cable TV service

provider

Globalview Cable TV Co., Ltd. 1995.11.25 No. 206, Datong Rd., Sec. 2, Sijhih City, Taipei County 560,000 Cable TV service

provider

TWM Holding Co., Ltd. 2006.06.09

c/o Arias, Fabrega & Fabrega Trust Co., BVI Ltd., 325 Waterfront Drive, Road Town, Tortola, Brit-ish Virgin Islands

US$1 (Note) Investment

TWM Communications (Beijing) Ltd. 2002.09.17 Room B05B, B Floor, Tong Heng Building, No.

4 Garden Road, Haidian District, Beijing, ChinaUS$3,000,000

(Note)

Mobile application development and design

Taiwan Teleservices & Technolo-gies Co., Ltd. 2001.06.08 13F-1, No. 172-1, Jilong Rd., Sec. 2, Taipei 10,000 Call center service

Taiwan Super Basketball Co., Ltd. 2007.09.21 15F-1, No. 172-1, Jilong Rd., Sec. 2, Taipei 20,000 Basketball team management

TT&T Holdings Co., Ltd. 2004.10.08 TrustNet Chambers, P.O. Box 1225, Apia, Samoa

US$1,300,000 (Note) Investment

Xiamen Taifu Teleservices & Tech-nologies Co., Ltd. 2005.04.05 3F-B, No.2, Xiamen Software Park, Xiamen

City, PRCUS$1,300,000

(Note) Call center service

TFN HK LIMITED 2003.05.14 Unit 507, 5/F, Tower 1, Silvercord, 30 Canton Road, Tsimshatsui, Kowloon, Hong Kong

HK$1,300,000(Note)

Telecommuni-cations service provider

TFN Union Investment Co., Ltd. 2009.09.22 13F-1, No. 172-1, Jilong Rd., Sec. 2, Taipei 4,000 Investment

Note : Exchange rate of US$1=NT$32.238 and HK$=NT$4.153 as of December 31, 2009.

109


3. Affiliates’ Operating Highlights Unit: NT$’000

Company NamePaid-in capital

Totalassets

Totalliabilities

Net worthOperating revenue

Operating income

Net income EPS (NT$)

Wealth Media Technol-ogy Co., Ltd.

272,000 237,801 45,186 192,615 - (286) (33,120) (1.22)

Tai Fu Media Technol-ogy Co., Ltd.

270,000 236,389 45,211 191,178 - (229) (32,871) (1.22)

Global Wealth Media Technology Co., Ltd.

84,000 91,105 4,123 86,982 - (245) 2,465 0.29

Fu Jia Leh Media Tech-nology Co., Ltd.

1,000 1,094 125 969 - (248) (231) (0.001)

Fu Sin Media Technol-ogy Co., Ltd.

135,000 140,977 119 140,858 - (213) 5,386 0.40

Global Forest Media Technology Co., Ltd.

1,000 840 60 780 - (176) (145) (1.45)

Taiwan Cellular Co., Ltd.

300,000 63,759,087 11,564,028 52,195,059 - (2,282) 2,648,823 7.08

Taiwan Fixed Network Co., Ltd.

21,000,000 44,776,387 9,564,607 35,211,780 9,941,579 1,770,217 2,195,548 0.62

Taiwan Digital Commu-nications Co., Ltd.

12,000 11,010 60 10,950 - (156) (131) (0.11)

TCC Investment Co., Ltd.

21,000 24,596,613

3,630,978 20,965,635 507,372 502,374 502,577 386.60

TCCI Investment and Development Co., Ltd.

4,000 8,289,757 166,116 8,123,641 - (56) (56) (0.14)

Win TV Broadcasting Co., Ltd.

181,774 710,316 455,581 254,735 877,852 74,002 72,961 4.01

TFN Media Co., Ltd. 2,305,263 12,860,238 9,256,853 3,603,385 2,451,888 1,176,109 1,012,976 4.39

Union Cable TV Co., Ltd.

1,704,633 2,143,698 289,903 1,853,795 613,516 154,517 131,110 0.77

Yeong Jialeh Cable TV Co., Ltd.

339,400 1,062,604 475,263 587,341 1,035,706 217,809 160,341 4.72

Mangrove Cable TV Co., Ltd.

211,600 468,194 184,854 283,340 379,541 64,210 47,872 2.26

Phoenix Cable TV Co., Ltd.

680,902 1,285,734 336,938 948,796 1,117,616 221,487 166,870 2.45

Globalview Cable TV Co., Ltd.

560,000 839,250 209,890 629,360 466,717 80,158 42,399 0.76

TWM Holding Co., Ltd. 0.032 271,492 200 271,292 - (403) (46,139) (46,139,054)

TWM Communications (Beijing) Ltd.

96,714 107,201 11,088 96,113 75,542 1,946 738 NA

Taiwan Teleservices & Technologies Co., Ltd.

10,000 433,064 340,001 93,063 1,015,569 77,837 57,320 57.32

Taiwan Super Basket-ball Co., Ltd.

20,000 27,118 7,095 20,023 35,532 80 14 0.01

TT&T Holdings Co., Ltd. 41,909 55,620 10,191 45,429 52,767 2,667 1,499 1.15

Xiamen Taifu Teleser-vices & Technologies Co., Ltd.

41,909 53,291 8,049 45,242 67,863 3,068 1,318 NA

TFN HK LIMITED 5,399 13,239 9,893 3,346 28,414 449 457 0.35

TFN Union Investment Co., Ltd.

4,000 28,472,793 570,424

27,902,369 - (56) (56) (0.14)

110


Audit Committee Report

Date: January 28, 2010

The Board of Directors of Taiwan Mobile Co., Ltd. (TWM) has submitted the Company’s 2009 business report and financial statements. The CPA firm, Deloitte & Touche, was retained to audit TWM’s financial statements and has issued an audit report relating to the financial statements. The business report and financial statements have been reviewed and determined to be correct and accurate by the Audit Committee of TWM. According to Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act, I hereby submit this report on behalf of all members of the committee.

Taiwan Mobile Co., Ltd.

Tsung-Ming Chung Chairman of the Audit Committee

111


- 1 -

IND

EPEN

DEN

T A

UD

ITO

RS’

REP

OR

T Th

e B

oard

of D

irect

ors a

nd S

hare

hold

ers

Taiw

an M

obile

Co.

, Ltd

. W

e ha

ve a

udite

d th

e ac

com

pany

ing

bala

nce

shee

ts o

f Tai

wan

Mob

ile C

o., L

td. (

the

“Cor

pora

tion”

) as

of D

ecem

ber 3

1, 2

009

and

2008

, and

the

rela

ted

stat

emen

ts o

f inc

ome,

cha

nges

in s

hare

hold

ers’

eq

uity

and

cas

h flo

ws

for t

he y

ears

then

end

ed.

The

se fi

nanc

ial s

tate

men

ts a

re th

e re

spon

sibi

lity

of th

e C

orpo

ratio

n’s

man

agem

ent.

Our

res

pons

ibili

ty is

to e

xpre

ss a

n op

inio

n on

thes

e fin

anci

al

stat

emen

ts b

ased

on

our a

udits

. W

e co

nduc

ted

our

audi

ts i

n ac

cord

ance

with

the

Rul

es G

over

ning

the

Aud

it of

Fin

anci

al

Stat

emen

ts b

y C

ertif

ied

Publ

ic A

ccou

ntan

ts a

nd a

uditi

ng s

tand

ards

gen

eral

ly a

ccep

ted

in t

he

Rep

ublic

of C

hina

. T

hose

rule

s and

stan

dard

s req

uire

that

we

plan

and

per

form

the

audi

t to

obta

in

reas

onab

le a

ssur

ance

abo

ut w

heth

er th

e fin

anci

al st

atem

ents

are

free

of m

ater

ial m

isst

atem

ent.

An

audi

t inc

lude

s ex

amin

ing,

on

a te

st b

asis

, evi

denc

e su

ppor

ting

the

amou

nts

and

disc

losu

res

in th

e fin

anci

al s

tate

men

ts.

An

audi

t al

so i

nclu

des

asse

ssin

g th

e ac

coun

ting

prin

cipl

es u

sed

and

sign

ifica

nt e

stim

ates

mad

e by

man

agem

ent,

as w

ell a

s ev

alua

ting

the

over

all

finan

cial

sta

tem

ent

pres

enta

tion.

W

e be

lieve

that

our

aud

its p

rovi

de a

reas

onab

le b

asis

for o

ur o

pini

on.

In o

ur o

pini

on, t

he fi

nanc

ial s

tate

men

ts re

ferr

ed to

abo

ve p

rese

nt fa

irly,

in a

ll m

ater

ial r

espe

cts,

the

finan

cial

pos

ition

of T

aiw

an M

obile

Co.

, Ltd

. as o

f Dec

embe

r 31,

200

9 an

d 20

08, a

nd th

e re

sults

of

its o

pera

tions

and

its

cas

h flo

ws

for

the

year

s th

en e

nded

, in

con

form

ity w

ith t

he G

uide

lines

G

over

ning

the

Prep

arat

ion

of F

inan

cial

Rep

orts

by

Secu

ritie

s Is

suer

s, re

quire

men

ts o

f the

Bus

ines

s A

ccou

ntin

g La

w a

nd G

uide

lines

Gov

erni

ng B

usin

ess

Acc

ount

ing

rele

vant

to f

inan

cial

acc

ount

ing

stan

dard

s, an

d ac

coun

ting

prin

cipl

es g

ener

ally

acc

epte

d in

the

Rep

ublic

of C

hina

. A

s st

ated

in

Not

e 3

to t

he f

inan

cial

sta

tem

ents

, in

Mar

ch 2

007,

the

Acc

ount

ing

Res

earc

h an

d D

evel

opm

ent F

ound

atio

n is

sued

an

inte

rpre

tatio

n th

at re

quire

s co

mpa

nies

to re

cogn

ize

empl

oyee

s’

bonu

ses

and

rem

uner

atio

n pa

id to

dire

ctor

s an

d su

perv

isor

s as

exp

ense

s st

artin

g fr

om J

anua

ry 1

, 20

08.

The

men

tione

d bo

nuse

s and

rem

uner

atio

n w

ere

prev

ious

ly re

cord

ed a

s ap

prop

riatio

ns fr

om

earn

ings

. W

e ha

ve

also

au

dite

d th

e ac

com

pany

ing

sche

dule

s of

si

gnifi

cant

ac

coun

ts,

prov

ided

fo

r su

pple

men

tary

ana

lysi

s, by

app

lyin

g th

e sa

me

proc

edur

es d

escr

ibed

abo

ve.

In

our

opin

ion,

suc

h sc

hedu

les a

re c

onsi

sten

t, in

all

mat

eria

l res

pect

s, w

ith th

e fin

anci

al st

atem

ents

refe

rred

to a

bove

.

Taiw

an M

obile

Co.

, Ltd

. Fi

nanc

ial S

tate

men

ts fo

r the

Ye

ars

Ende

d D

ecem

ber 3

1, 2

009

and

2008

and

In

depe

nden

t Aud

itors

’ Rep

ort

2009

Fin

anci

al S

tate

men

ts

112


- 2 -

We

have

als

o au

dite

d th

e co

nsol

idat

ed b

alan

ce s

heet

s of

the

Cor

pora

tion

and

its s

ubsi

diar

ies

as o

f D

ecem

ber

31,

2009

and

200

8 an

d th

e re

late

d co

nsol

idat

ed s

tate

men

ts o

f in

com

e, c

hang

es i

n sh

areh

olde

rs’

equi

ty, a

nd c

ash

flow

s fo

r th

e ye

ars

then

end

ed, o

n w

hich

we

have

issu

ed a

n au

dit

repo

rt da

ted

Janu

ary

20, 2

010,

with

an

unqu

alifi

ed o

pini

on a

nd e

mph

asis

of

a m

atte

r ex

plan

ator

y pa

ragr

aph,

resp

ectiv

ely.

Ja

nuar

y 20

, 201

0

Notic

e to

Rea

ders

Th

e ac

com

pany

ing

finan

cial

sta

tem

ents

are

inte

nded

onl

y to

pre

sent

the

finan

cial

pos

ition

, res

ults

of o

pera

tions

and

cas

h flo

ws i

n ac

cord

ance

with

acc

ount

ing

prin

cipl

es a

nd p

ract

ices

gen

eral

ly

acce

pted

in

the

Repu

blic

of

Chin

a an

d no

t th

ose

of a

ny o

ther

jur

isdi

ctio

ns.

The

sta

ndar

ds,

proc

edur

es a

nd p

ract

ices

to

audi

t su

ch f

inan

cial

sta

tem

ents

are

thos

e ge

nera

lly a

ccep

ted

and

appl

ied

in th

e Re

publ

ic o

f Chi

na.

For

the

conv

enie

nce

of r

eade

rs, t

he a

udito

rs’

repo

rt an

d th

e ac

com

pany

ing

finan

cial

sta

tem

ents

have

bee

n tr

ansl

ated

int

o En

glish

fro

m t

he o

rigin

al C

hine

se v

ersi

on p

repa

red

and

used

in

the

Repu

blic

of C

hina

. I

f the

re is

any

con

flict

bet

ween

the

Engl

ish

vers

ion

and

the

orig

inal

Chi

nese

ve

rsio

n or

any

diff

eren

ce in

the

inte

rpre

tatio

n of

the

two

vers

ions

, the

Chi

nese

-lang

uage

aud

itors

’ re

port

and

finan

cial

stat

emen

ts sh

all p

reva

il.

113


- 3 -

TAIW

AN

MO

BIL

E C

O.,

LTD

. B

AL

AN

CE

SH

EET

S D

EC

EM

BER

31,

200

9 A

ND

200

8 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs, E

xcep

t Par

Val

ue)

2009

2008

2009

2008

A

SSE

TS

A

mou

nt

%

Am

ount

%

L

IAB

ILIT

IES

AN

D S

HA

RE

HO

LD

ER

S’ E

QU

ITY

Am

ount

%

A

mou

nt

%

CU

RRE

NT

ASS

ETS

C

UR

REN

T LI

AB

ILIT

IES

Cas

h an

d ca

sh e

quiv

alen

ts (N

otes

2, 4

and

24)

$

1,

057,

042

1

$

1,54

4,37

5

2

Shor

t-ter

m b

orro

win

gs (N

ote

13)

$

5,00

0,00

0

6

$

1,

300,

000

1

Ava

ilabl

e-fo

r-sa

le fi

nanc

ial a

sset

s - c

urre

nt (N

otes

2 a

nd 5

)

177,

821

-

17

4,00

8

-

Shor

t-ter

m n

otes

and

bill

s pay

able

(Not

e 14

)

299,

872

-

-

-

Hed

ging

der

ivat

ive

finan

cial

ass

ets -

cur

rent

(Not

es 2

, 23

and

27)

-

-

82

,484

-

Acc

ount

s pay

able

(Not

e 24

)

1,90

3,22

3

2

2,21

8,19

3

3 N

otes

rece

ivab

le

16

,772

-

14,1

39

-

In

com

e ta

xes p

ayab

le (N

otes

2 a

nd 2

0)

1,

478,

353

2

2,

139,

263

2

Acc

ount

s rec

eiva

ble

- thi

rd p

artie

s (N

otes

2 a

nd 6

)

5,53

8,85

2

7

5,81

7,23

9

7

Acc

rued

exp

ense

s (N

ote

24)

4,

701,

741

6

4,

686,

201

5

Acc

ount

s rec

eiva

ble

- rel

ated

par

ties (

Not

es 2

and

24)

22,6

68

-

5,

469

-

O

ther

pay

able

s (N

otes

2 a

nd 2

4)

3,

739,

454

5

4,

071,

747

5

Oth

er re

ceiv

able

s - th

ird p

artie

s

157,

737

-

25

1,41

0

-

Adv

ance

rece

ipts

(Not

e 15

)

1,19

5,83

2

2

1,36

1,41

1

2 O

ther

rece

ivab

les -

rela

ted

parti

es (N

ote

24)

5,

608,

315

7

2,

067,

754

2

C

urre

nt p

ortio

n of

long

-term

liab

ilitie

s (N

otes

16

and

23)

-

-

7,

500,

000

8

Inve

ntor

ies (

Not

e 2)

429,

129

1

30

9,89

8

-

Gua

rant

ee d

epos

its -

curre

nt

60

,624

-

68,0

96

-

Prep

aym

ents

(Not

es 7

and

24)

482,

598

1

62

8,33

7

1

Oth

er c

urre

nt li

abili

ties (

Not

e 24

)

454,

633

1

37

2,28

6

- D

efer

red

inco

me

tax

asse

ts -

curre

nt (N

otes

2 a

nd 2

0)

27

,261

-

142,

605

-

Pled

ged

time

depo

sits (

Not

es 2

4 an

d 25

)

10,0

00

-

10

,000

-

Tota

l cur

rent

liab

ilitie

s

18,8

33,7

32

24

23,7

17,1

97

26

O

ther

cur

rent

ass

ets

2,

534

-

7,

882

-

LON

G-T

ERM

LIA

BIL

ITIE

S

To

tal c

urre

nt a

sset

s

13,5

30,7

29

17

11,0

55,6

00

12

Bon

ds p

ayab

le (N

otes

16

and

23)

8,

000,

000

10

8,00

0,00

0

9

Lo

ng-te

rm b

orro

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gs (N

ote

17)

-

-

5,

200,

000

6

INV

ESTM

ENTS

In

vest

men

ts a

ccou

nted

for u

sing

the

equi

ty m

etho

d (N

otes

2 a

nd 8

)

9,75

8,50

9

12

15

,351

,186

17

To

tal l

ong-

term

liab

ilitie

s

8,00

0,00

0

10

13

,200

,000

15

Prep

aym

ents

for l

ong-

term

inve

stm

ents

(Not

e 8)

-

-

249,

500

1

Fina

ncia

l ass

ets c

arrie

d at

cos

t - n

on-c

urre

nt (N

otes

2 a

nd 9

)

50,3

24

-

60

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OTH

ER L

IAB

ILIT

IES

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rant

ee d

epos

its

26

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5

-

246,

885

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l inv

estm

ents

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8,83

3

12

15

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18

D

efer

red

cred

its -

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s on

inte

rcom

pany

acc

ount

s (N

otes

2 a

nd 8

)

1,23

8,37

8

2

1,23

8,37

8

1

O

ther

(Not

e 2)

353,

395

-

35

6,27

1

1 PR

OPE

RTY

AN

D E

QU

IPM

ENT

(Not

es 2

, 10

and

24)

Cos

t

Tota

l oth

er li

abili

ties

1,

856,

978

2

1,

841,

534

2

Land

3,86

6,28

9

5

3,86

6,28

9

4

B

uild

ings

2,38

5,58

7

3

2,38

5,58

7

3

Tota

l lia

bilit

ies

28

,690

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com

mun

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67

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Is

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37,4

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From

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C

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From

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Fr

om lo

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Net

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U

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cost

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to o

ther

s (N

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Unr

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63

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Not

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52

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Def

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1

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Def

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d in

com

e ta

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sets

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es 2

and

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2

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ass

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5,

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TAL

$

80,7

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36

10

0

$

89

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100

TO

TAL

$

80,7

63,9

36

10

0

$

89

,661

,329

100

The

acco

mpa

nyin

g no

tes a

re a

n in

tegr

al p

art o

f the

fina

ncia

l sta

tem

ents.

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ith D

eloi

tte &

Tou

che

audi

t rep

ort d

ated

Jan

uary

20,

201

0)

114


- 5 -

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2008

B

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e In

com

e Ta

x

Aft

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Inco

me

Tax

Bef

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Inco

me

Tax

Aft

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Inco

me

Tax

EA

RN

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S PE

R S

HA

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(Not

e 21

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B

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$

6.09

$

4.66

$

6.67

$

5.18

D

ilute

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$

6.07

$

4.65

$

6.65

$

5.17

Pr

o fo

rma

info

rmat

ion

shou

ld t

he C

orpo

ratio

n’s

stoc

ks h

eld

by i

ts s

ubsi

diar

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be t

reat

ed a

s an

inv

estm

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inst

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of tr

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ock

(afte

r inc

ome

tax)

:

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NET

INC

OM

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$

13,4

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55

$

18

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PER

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Bas

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$

3.

54

$

4.

97

Dilu

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$

3.

53

$

4.

96

The

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tes a

re a

n in

tegr

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f the

fina

ncia

l sta

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ents

. (W

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$

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57

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16

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175,

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Loss

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1,

529,

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Fina

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22

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$

13

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24

$

15,3

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28

(Con

tinue

d)

115


- 6 -

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IWA

N M

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CO

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as

Fi

nanc

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$

25,

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App

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n of

the

2007

ear

ning

s

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l res

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66

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0

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sal o

f spe

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to e

mpl

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s - c

ash

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Bal

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afte

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ropr

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38

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5,76

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1,

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Buy

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-

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8

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posa

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-

3,

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C

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38,0

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948,

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A

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of th

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Rev

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122,

216

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306

Tran

sfer

of t

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em

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(3

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ts, n

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-

(5

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5)

(52,

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C

ompe

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cost

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Net

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88,8

62

13,8

88,8

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13,8

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$

12,

431,

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$

13,

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$

3,

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16,

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$

33,

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12

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$

63,6

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52,

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Not

e:

The

bonu

s to

empl

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s of $

41,4

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nd th

e re

mun

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to d

irect

ors a

nd su

perv

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of $

414,

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thou

sand

hav

e be

en e

xpen

sed

and

dedu

cted

from

200

8 ea

rnin

gs.

The

acco

mpa

nyin

g no

tes a

re a

n in

tegr

al p

art o

f the

fina

ncia

l sta

tem

ents

. (W

ith D

eloi

tte &

Tou

che

audi

t rep

ort d

ated

Jan

uary

20,

201

0)

116


- 8 -

TA

IWA

N M

OB

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CO

., L

TD

. ST

ATE

ME

NTS

OF

CA

SH F

LOW

S Y

EAR

S EN

DED

DEC

EMB

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1, 2

009

AN

D 2

008

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs)

2009

2008

Incr

ease

in lo

ng-te

rm in

vest

men

ts a

ccou

nted

for u

sing

the

equi

ty

met

hod

$

-

$

(434

,500

) C

ash

rece

ived

from

mer

ger w

ith su

bsid

iarie

s

-

124,

754

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et c

ash

used

in in

vest

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activ

ities

(5

,082

,512

)

(3

,403

,331

)

CA

SH F

LOW

S FR

OM

FIN

AN

CIN

G A

CTI

VIT

IES

Cas

h di

vide

nds p

aid

(13,

968,

840)

(7,6

01,8

04)

Dec

reas

e in

bon

ds p

ayab

le

(7,5

00,0

00)

(2,5

00,0

00)

Dec

reas

e in

long

-term

bor

row

ings

(5

,200

,000

)

(9

00,0

00)

Incr

ease

(dec

reas

e) in

shor

t-ter

m b

orro

win

gs

3,70

0,00

0

(1

0,95

4,39

1)

Tran

sfer

of t

reas

ury

stoc

k to

em

ploy

ees

1,05

6,47

8

-

Incr

ease

(dec

reas

e) in

shor

t-ter

m n

otes

and

bill

s pay

able

29

9,87

2

(1

,594

,753

) In

crea

se (d

ecre

ase)

in g

uara

ntee

dep

osits

10

,849

(1

1,14

2)

Cap

ital r

educ

tion

-

(1

1,99

7,78

7)

Buy

back

of t

reas

ury

stoc

k

-

(1,0

59,7

32)

Issu

ance

of b

onds

pay

able

-

8,00

0,00

0 In

crea

se in

long

-term

bor

row

ings

-

6,10

0,00

0 B

onus

to e

mpl

oyee

s

-

(181

,155

) R

emun

erat

ion

to d

irect

ors a

nd su

perv

isor

s

-

(18,

116)

Net

cas

h us

ed in

fina

ncin

g ac

tiviti

es

(21,

601,

641)

(22,

718,

880)

NET

DEC

REA

SE IN

CA

SH A

ND

CA

SH E

QU

IVA

LEN

TS

(487

,333

)

(9

19,0

64)

C

ASH

AN

D C

ASH

EQ

UIV

ALE

NTS

, BEG

INN

ING

OF

YEA

R

1,54

4,37

5

2,

463,

439

C

ASH

AN

D C

ASH

EQ

UIV

ALE

NTS

, EN

D O

F Y

EAR

$

1,05

7,04

2

$

1,54

4,37

5

SUPP

LEM

ENTA

L D

ISC

LOSU

RE

OF

CA

SH F

LOW

INFO

RM

ATI

ON

In

tere

st p

aid

$

48

2,40

9

$

652,

276

Less

inte

rest

cap

italiz

ed

16,6

85

11,2

96

Inte

rest

pai

d - e

xclu

ding

inte

rest

cap

italiz

ed

$

46

5,72

4

$

640,

980

Inco

me

tax

paid

$

3,99

4,13

9

$

2,35

3,72

8

NO

N-C

ASH

INV

ESTI

NG

AN

D F

INA

NC

ING

AC

TIV

ITIE

S

R

ecei

vabl

es fr

om su

bsid

iary

's ca

pita

l red

uctio

n

$

3,50

0,00

0

$

- C

urre

nt p

ortio

n of

long

-term

liab

ilitie

s

$

-

$

7,50

0,00

0 R

ecla

ssifi

catio

n of

the

Cor

pora

tion'

s sha

res h

eld

by it

s sub

sidi

arie

s to

treas

ury

stoc

k $

31

,889

,100

$

31,8

89,1

00

C

ASH

INV

ESTI

NG

AN

D F

INA

NC

ING

AC

TIV

ITIE

S

A

cqui

sitio

n of

pro

perty

and

equ

ipm

ent

$

4,

546,

368

$

5,

907,

774

Dec

reas

e (in

crea

se) i

n ot

her p

ayab

les

302,

383

(215

,049

) D

ecre

ase

(incr

ease

) in

othe

r lia

bilit

ies -

oth

er

2,87

6

(3

56,2

71)

C

ash

paid

for a

cqui

sitio

n of

pro

perty

and

equ

ipm

ent

$

4,

851,

627

$

5,

336,

454

(Con

tinue

d)

- 7 -

TA

IWA

N M

OB

ILE

CO

., L

TD

. ST

ATE

ME

NTS

OF

CA

SH F

LOW

S Y

EAR

S EN

DED

DEC

EMB

ER 3

1, 2

009

AN

D 2

008

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs)

2009

2008

CA

SH F

LOW

S FR

OM

OPE

RA

TIN

G A

CTI

VIT

IES

Net

inco

me

$

13

,888

,862

$

15,3

71,3

86

Adj

ustm

ents

to re

conc

ile n

et in

com

e to

net

cas

h pr

ovid

ed b

y op

erat

ing

activ

ities

:

D

epre

ciat

ion

7,02

0,51

7

6,

163,

877

Cas

h di

vide

nds r

ecei

ved

from

equ

ity-m

etho

d in

vest

ees

5,52

5,23

0

3,

245,

715

Inve

stm

ent i

ncom

e re

cogn

ized

und

er th

e eq

uity

met

hod,

net

(3

,044

,360

)

(4

,092

,481

) Lo

ss o

n di

spos

al a

nd re

tirem

ent o

f pro

perty

and

equ

ipm

ent,

net

1,52

9,90

2

1,

116,

290

Def

erre

d in

com

e ta

xes

977,

088

331,

247

Am

ortiz

atio

n

86

6,21

0

86

0,97

0 B

ad d

ebts

60

1,12

7

62

7,26

0 C

ompe

nsat

ion

cost

reco

gniz

ed fr

om e

mpl

oyee

stoc

k op

tions

10

8,15

3

21

,701

Pr

ovis

ion

for (

reco

very

of)

loss

on

inve

ntor

ies

(12,

213)

15,7

32

Impa

irmen

t los

s

9,

740

11,5

32

Pens

ion

cost

2,

531

(2,2

29)

Prop

erty

and

equ

ipm

ent t

rans

ferr

ed to

oth

er e

xpen

ses

-

1,

680

Net

cha

nges

in o

pera

ting

asse

ts a

nd li

abili

ties

Not

es re

ceiv

able

(2

,633

)

47

0 A

ccou

nts r

ecei

vabl

e - t

hird

par

ties

(358

,101

)

(4

51,1

71)

Acc

ount

s rec

eiva

ble

- rel

ated

par

ties

(17,

199)

71,9

01

Oth

er re

ceiv

able

s - th

ird p

artie

s

13

7,02

7

(4

59,8

77)

Oth

er re

ceiv

able

s - re

late

d pa

rties

(4

0,56

1)

46

9,19

3 In

vent

orie

s

(1

07,0

18)

(243

,408

) Pr

epay

men

ts

145,

739

(33,

617)

O

ther

cur

rent

ass

ets

5,34

8

10

,346

A

ccou

nts p

ayab

le

(314

,970

)

39

3,57

4 In

com

e ta

xes p

ayab

le

(660

,910

)

1,

238,

504

Acc

rued

exp

ense

s

15

,540

67

,594

O

ther

pay

able

s

4,

571

524,

341

Adv

ance

rece

ipts

(1

65,5

79)

248,

301

Oth

er c

urre

nt li

abili

ties

82,7

79

(305

,684

)

Net

cas

h pr

ovid

ed b

y op

erat

ing

activ

ities

26

,196

,820

25

,203

,147

CA

SH F

LOW

S FR

OM

INV

ESTI

NG

AC

TIV

ITIE

S

A

cqui

sitio

n of

pro

perty

and

equ

ipm

ent

(4,8

51,6

27)

(5,3

36,4

54)

Incr

ease

in d

efer

red

char

ges

(213

,995

)

(1

48,0

91)

Dec

reas

e (in

crea

se) i

n fin

anci

ng p

rovi

ded

to in

vest

ees,

net

(45,

000)

255,

000

Dec

reas

e (in

crea

se) i

n ot

her a

sset

s

10

,176

(9

,617

) Pr

ocee

ds fr

om d

ispo

sal o

f pro

perty

and

equ

ipm

ent

9,61

1

5,

447

Proc

eeds

from

inve

stee

s' ca

pita

l red

uctio

n

5,

356

2,15

2,68

8 D

ecre

ase

(incr

ease

) in

refu

ndab

le d

epos

its

4,65

3

(9

,842

) In

crea

se in

com

pute

r sof

twar

e co

sts

(1,6

86)

(2,7

16)

(Con

tinue

d)

117


- 10

-

TA

IWA

N M

OB

ILE

CO

., L

TD

. N

OTE

S TO

FIN

AN

CIA

L ST

ATE

ME

NTS

Y

EAR

S EN

DED

DEC

EMB

ER 3

1, 2

009

AN

D 2

008

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs, U

nles

s Sta

ted

Oth

erw

ise)

1.

OR

GA

NIZ

ATI

ON

AN

D O

PER

ATI

ON

S Ta

iwan

Mob

ile C

o., L

td. w

as in

corp

orat

ed in

the

Rep

ublic

of

Chi

na (

RO

C)

on F

ebru

ary

25, 1

997.

Th

e C

orpo

ratio

n’s

shar

es b

egan

trad

ing

on th

e R

OC

Ove

r-th

e-C

ount

er S

ecur

ities

Exc

hang

e (k

now

n as

Gre

Tai

Secu

ritie

s M

arke

t) on

Sep

tem

ber 1

9, 2

000.

O

n A

ugus

t 26,

200

2, th

e C

orpo

ratio

n’s

shar

es w

ere

liste

d on

th

e Ta

iwan

Sto

ck E

xcha

nge.

Th

e C

orpo

ratio

n m

ainl

y re

nder

s wire

less

com

mun

icat

ion

serv

ices

. Th

e C

orpo

ratio

n’s

serv

ices

ar

e un

der

the

type

I

licen

se

issu

ed

by

the

Dire

ctor

ate

Gen

eral

of

Te

leco

mm

unic

atio

ns (

DG

T) o

f th

e R

OC

. T

he li

cens

e al

low

s th

e C

orpo

ratio

n to

pro

vide

ser

vice

s fo

r 15

ye

ars

from

199

7 on

war

ds.

It a

lso

enta

ils th

e pa

ymen

t of

an a

nnua

l lic

ense

fee

con

sist

ing

of 2

% o

f to

tal

wire

less

com

mun

icat

ion

serv

ice

reve

nues

. O

n M

arch

24,

200

5, t

he C

orpo

ratio

n re

ceiv

ed t

he t

hird

ge

nera

tion

(3G

) con

cess

ion

oper

atio

n lic

ense

issu

ed b

y th

e D

GT.

Th

e 3G

lice

nse

allo

ws

the

Cor

pora

tion

to p

rovi

de se

rvic

es fr

om th

e is

suan

ce d

ate

of th

e lic

ense

to D

ecem

ber 3

1, 2

018.

A

s of D

ecem

ber 3

1, 2

009

and

2008

, the

Cor

pora

tion

had

2,49

6 an

d 2,

543

empl

oyee

s, re

spec

tivel

y.

2

. SU

MM

AR

Y O

F SI

GN

IFIC

AN

T A

CC

OU

NTI

NG

PO

LIC

IES

Bas

is o

f Pre

sent

atio

n Th

e ac

com

pany

ing

finan

cial

sta

tem

ents

hav

e be

en p

repa

red

in c

onfo

rmity

with

the

Gui

delin

es G

over

ning

th

e Pr

epar

atio

n of

Fin

anci

al R

epor

ts b

y Se

curit

ies

Issu

ers,

the

Bus

ines

s A

ccou

ntin

g La

w,

Gui

delin

es

Gov

erni

ng B

usin

ess

Acc

ount

ing,

and

acc

ount

ing

prin

cipl

es g

ener

ally

acc

epte

d in

the

RO

C.

In

conf

orm

ity

with

thes

e gu

idel

ines

, the

Law

, and

prin

cipl

es, t

he C

orpo

ratio

n is

req

uire

d to

mak

e ce

rtain

est

imat

es a

nd

assu

mpt

ions

tha

t co

uld

affe

ct t

he a

mou

nts

of a

llow

ance

for

dou

btfu

l ac

coun

ts,

prov

isio

n fo

r lo

sses

on

decl

ine

in v

alue

of

inve

ntor

ies,

depr

ecia

tion,

pen

sion

, allo

wan

ce f

or d

efer

red

inco

me

tax

asse

ts, b

onus

to

empl

oyee

s, re

mun

erat

ion

to d

irect

ors

and

supe

rvis

ors,

impa

irmen

t los

s on

ass

ets,

etc.

A

ctua

l res

ults

may

di

ffer

from

thes

e es

timat

es.

For

the

conv

enie

nce

of r

eade

rs, t

he a

ccom

pany

ing

finan

cial

sta

tem

ents

hav

e be

en tr

ansl

ated

into

Eng

lish

from

the

orig

inal

Chi

nese

ver

sion

pre

pare

d an

d us

ed i

n th

e R

OC

. I

f th

ere

is a

ny c

onfli

ct b

etw

een

the

Engl

ish

vers

ion

and

the

orig

inal

Chi

nese

ver

sion

or a

ny d

iffer

ence

in th

e in

terp

reta

tion

of th

e tw

o ve

rsio

ns,

the

Chi

nese

-lang

uage

fina

ncia

l sta

tem

ents

shal

l pre

vail.

Th

e C

orpo

ratio

n’s s

igni

fican

t acc

ount

ing

polic

ies a

re su

mm

ariz

ed a

s fol

low

s:

Cla

ssifi

catio

n of

Cur

rent

and

Non

-cur

rent

Ass

ets a

nd L

iabi

litie

s C

urre

nt a

sset

s inc

lude

cas

h an

d ca

sh e

quiv

alen

ts, a

sset

s he

ld fo

r tra

ding

and

thos

e ex

pect

ed to

be

conv

erte

d to

cas

h, s

old

or c

onsu

med

with

in t

wel

ve m

onth

s fr

om t

he b

alan

ce s

heet

dat

e.

Oth

er a

sset

s su

ch a

s pr

oper

ty a

nd e

quip

men

t an

d in

tang

ible

ass

ets

are

clas

sifie

d as

non

-cur

rent

. C

urre

nt l

iabi

litie

s ar

e ob

ligat

ions

hel

d fo

r tra

ding

and

thos

e ex

pect

ed to

be

due

with

in tw

elve

mon

ths f

rom

the

bala

nce

shee

t dat

e.

All

othe

r lia

bilit

ies a

re c

lass

ified

as n

on-c

urre

nt.

- 9 -

TA

IWA

N M

OB

ILE

CO

., L

TD

. ST

ATE

ME

NTS

OF

CA

SH F

LOW

S Y

EAR

S EN

DED

DEC

EMB

ER 3

1, 2

009

AN

D 2

008

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs)

The

Cor

pora

tion

mer

ged

with

Tra

nsA

sia

Tele

com

mun

icat

ions

Inc.

on

Sept

embe

r 2, 2

008.

Th

e bo

ok v

alue

s of

th

e as

sets

and

liab

ilitie

s upo

n th

e m

erge

r wer

e as

follo

ws:

C

ash

$

124,

754

Acc

ount

s rec

eiva

ble

75

8,87

4

Oth

er a

ccou

nts r

ecei

vabl

e

2,10

2,93

0 Pr

epay

men

ts

38

,355

O

ther

cur

rent

ass

ets

57

0 Pr

oper

ty a

nd e

quip

men

t

1,64

4,53

1 In

tang

ible

ass

ets

6,

843,

089

Oth

er a

sset

s

35,4

15

11,5

48,5

18

Acc

ount

s pay

able

300,

846

Inco

me

taxe

s pay

able

54,2

24

Acc

rued

exp

ense

s

142,

097

Oth

er p

ayab

les

16

1,39

1 A

dvan

ce re

ceip

ts

5,

107

Oth

er c

urre

nt li

abili

ties

77

,023

O

ther

liab

ilitie

s

322

741,

010

N

et

$

10,8

07,5

08

The

acco

mpa

nyin

g no

tes a

re a

n in

tegr

al p

art o

f the

fina

ncia

l sta

tem

ents

. (W

ith D

eloi

tte &

Tou

che

audi

t rep

ort d

ated

Janu

ary

20, 2

010)

(C

oncl

uded

)

118


- 12

-

Gai

ns o

r lo

sses

fro

m d

owns

tream

tra

nsac

tions

to

its s

ubsi

diar

ies

are

defe

rred

and

inc

lude

d in

def

erre

d in

com

e (lo

ss) a

nd re

cord

ed a

s ot

her l

iabi

litie

s (a

sset

s).

Gai

ns o

r los

ses

on th

e up

stre

am tr

ansa

ctio

ns to

the

Cor

pora

tion

by e

quity

-met

hod

inve

stee

s th

at a

re n

ot m

ajor

ity o

wne

d ar

e de

ferr

ed i

n pr

opor

tion

to t

he

Cor

pora

tion’

s ow

ners

hip

perc

enta

ges i

n th

e in

vest

ees u

ntil

thes

e sa

les a

re re

aliz

ed th

roug

h tra

nsac

tions

with

th

ird p

artie

s. Th

e co

st a

nd th

e re

sulti

ng g

ain

or lo

ss o

f an

inve

stm

ent s

old

is d

eter

min

ed b

y th

e w

eigh

ted-

aver

age

met

hod.

Fi

nanc

ial A

sset

s Car

ried

at C

ost

If th

ere

is n

o ac

tive

mar

ket f

or a

n eq

uity

inst

rum

ent a

nd a

relia

ble

fair

valu

e ca

nnot

be

estim

ated

, the

equ

ity

inst

rum

ent,

incl

udin

g no

n-pu

blic

ly tr

aded

and

em

ergi

ng s

tock

s, et

c, is

mea

sure

d at

cos

t. T

he a

ccou

ntin

g fo

r th

e di

vide

nds

from

fin

anci

al a

sset

car

ried

at c

ost i

s th

e sa

me

as th

at f

or a

n av

aila

ble-

for-s

ale

finan

cial

as

set.

Im

pairm

ent

loss

es a

re r

ecog

nize

d if

a de

crea

se i

n th

e fa

ir va

lue

of t

he i

nstru

men

ts c

an b

e ob

ject

ivel

y re

late

d to

an

even

t. R

ever

sal o

f im

pairm

ent l

osse

s is n

ot a

llow

ed.

Prop

erty

and

Equ

ipm

ent a

nd A

sset

s Lea

sed

to O

ther

s Pr

oper

ty a

nd e

quip

men

t an

d as

sets

lea

sed

to o

ther

s ar

e st

ated

at

cost

les

s ac

cum

ulat

ed d

epre

ciat

ion

and

accu

mul

ated

im

pairm

ent.

Sig

nific

ant

addi

tions

, re

new

als,

bette

rmen

ts,

and

inte

rest

exp

ense

s in

curr

ed

durin

g th

e co

nstru

ctio

n pe

riod

are

capi

taliz

ed,

whi

le m

aint

enan

ce a

nd r

epai

rs a

re e

xpen

sed.

Le

ased

pr

oper

ty a

nd e

quip

men

t fro

m o

ther

s co

vere

d by

agr

eem

ents

qua

lifyi

ng a

s ca

pita

l lea

ses

are

carr

ied

at th

e lo

wer

of

the

pres

ent v

alue

of

futu

re m

inim

um le

ase

paym

ents

or

the

mar

ket v

alue

of

the

prop

erty

on

the

star

ting

date

s of t

he le

ases

. Fo

r cos

t ass

ocia

ted

with

dis

man

tling

and

relo

catin

g fix

ed a

sset

s an

d re

stor

ing

the

leas

ed p

rem

ises

hou

sing

ou

r fix

ed a

sset

s to

the

prev

ious

stat

e sh

ould

be

reco

gniz

ed a

s an

addi

tion

to th

e fix

ed a

sset

s and

acc

rued

as a

po

tent

ial

liabi

lity

acco

rdin

gly,

acc

ordi

ng t

o th

e In

terp

reta

tion

No.

200

8-34

0 is

sued

by

the

Acc

ount

ing

Res

earc

h an

d D

evel

opm

ent F

ound

atio

n (A

RD

F) in

Nov

embe

r 200

8.

Dep

reci

atio

n is

cal

cula

ted

usin

g th

e st

raig

ht-li

ne m

etho

d ov

er th

e es

timat

ed s

ervi

ce li

ves,

whi

ch r

ange

as

follo

ws:

bu

ildin

gs -

50 to

55

year

s; te

leco

mm

unic

atio

n eq

uipm

ent -

2 to

15

year

s; o

ffic

e eq

uipm

ent -

3 to

5

year

s; le

ased

ass

ets -

20

year

s; a

nd m

isce

llane

ous e

quip

men

t - 3

to 5

yea

rs.

Upo

n sa

le o

r re

tirem

ent

of p

rope

rty a

nd e

quip

men

t, th

e re

late

d co

st a

nd a

ccum

ulat

ed d

epre

ciat

ion

are

rem

oved

from

the

acco

unts,

and

any

gai

n or

loss

is c

redi

ted

or c

harg

ed to

non

-ope

ratin

g ga

in o

r los

s in

the

perio

d of

dis

posa

l. A

ccou

ntin

g fo

r Le

ases

In

acc

orda

nce

with

SFA

S N

o. 2

, “A

ccou

ntin

g fo

r Lea

ses,”

a le

ase

is id

entif

ied

as e

ither

an

oper

atin

g le

ase

or a

cap

ital

leas

e ba

sed

on t

he l

ease

con

tract

ter

ms,

the

colle

ctab

ility

of

the

leas

ehol

d an

d th

e no

n-re

imbu

rsab

le c

osts

to b

e in

curr

ed b

y th

e le

ssor

. Th

e as

set h

eld

unde

r an

oper

atin

g le

ase

is s

tate

d at

cos

t, an

d de

prec

iate

d on

the

stra

ight

-line

bas

is o

ver t

he

estim

ated

use

ful l

ife.

Rec

eiva

bles

col

lect

ed a

re p

erio

dica

lly re

cogn

ized

as

rent

al in

com

e du

ring

the

leas

e co

ntra

ct.

A

t th

e in

cept

ion

date

of

a ca

pita

l le

ase,

tot

al l

ease

hold

rec

eiva

bles

sha

ll be

rec

ogni

zed

as a

ll re

ntal

re

ceiv

able

s pl

us th

e pr

e-de

term

ined

bar

gain

pur

chas

e pr

ice

offe

red

to th

e le

ssee

upo

n m

atur

ity o

r est

imat

ed

resi

dual

val

ue.

For

a f

inan

cing

-type

of

capi

tal

leas

e, l

ease

hold

rec

eiva

bles

sho

uld

be r

ecog

nize

d as

the

su

m o

f pr

esen

t val

ue d

eriv

ed f

rom

eac

h fu

ture

ren

tal r

ecei

vabl

e ba

sed

on a

n im

plic

it in

tere

st r

ate

of t

he

leas

e.

The

exce

ss o

f tot

al le

aseh

old

rece

ivab

les

over

the

pres

ent v

alue

of l

ease

hold

rece

ivab

les

shou

ld b

e de

ferr

ed a

s un

real

ized

inte

rest

inco

me,

and

am

ortiz

ed a

s in

tere

st in

com

e by

the

eff

ectiv

e in

tere

st m

etho

d up

on e

ach

colle

ctio

n.

- 11

-

Cas

h Eq

uiva

lent

s G

over

nmen

t bon

ds a

nd s

hort-

term

bill

s acq

uire

d w

ith re

purc

hase

righ

ts a

nd h

avin

g m

atur

ities

of u

p to

thre

e m

onth

s fro

m th

e da

te o

f pur

chas

e ar

e cl

assi

fied

as c

ash

equi

vale

nts,

who

se c

arry

ing

valu

e ap

prox

imat

es fa

ir va

lue.

A

vaila

ble-

for-

sale

Fin

anci

al A

sset

s O

n in

itial

reco

gniti

on, a

vaila

ble-

for-s

ale

finan

cial

ass

ets

are

reco

gniz

ed a

t fai

r val

ue p

lus

trans

actio

n co

sts.

W

hen

subs

eque

ntly

mea

sure

d at

fair

valu

e, th

e fa

ir va

lue

chan

ges

are

reco

gniz

ed d

irect

ly in

equ

ity.

The

cu

mul

ativ

e ga

in o

r lo

ss t

hat

was

rec

ogni

zed

in e

quity

is

reco

gniz

ed i

n pr

ofit

or l

oss

whe

n an

av

aila

ble-

for-s

ale

finan

cial

ass

et i

s de

reco

gniz

ed f

rom

the

bal

ance

she

et.

The

pur

chas

e or

sal

e of

the

fin

anci

al in

stru

men

ts is

reco

gniz

ed a

nd d

erec

ogni

zed

usin

g tra

de d

ate

acco

untin

g.

Cas

h di

vide

nds

are

reco

gniz

ed a

s di

vide

nd i

ncom

e on

the

ex-

divi

dend

dat

e, b

ut a

re a

ccou

nted

for

as

redu

ctio

ns to

the

orig

inal

cos

t of

inve

stm

ents

if s

uch

divi

dend

s ar

e de

clar

ed o

n th

e ea

rnin

gs o

f in

vest

ees

attri

buta

ble

to p

erio

ds p

rior t

o th

e pu

rcha

se o

f inv

estm

ents

. S

tock

div

iden

ds a

re n

ot re

cogn

ized

as

curr

ent

inco

me

but

are

acco

unte

d fo

r on

ly a

s an

inc

reas

e in

the

num

ber

of s

hare

s he

ld.

The

cos

t pe

r sh

are

is re

-cal

cula

ted

base

d on

the

new

num

ber o

f sha

res.

An

impa

irmen

t los

s is

rec

ogni

zed

if th

ere

is o

bjec

tive

evid

ence

that

a f

inan

cial

ass

et is

impa

ired.

If

the

amou

nt o

f im

pairm

ent l

oss d

ecre

ases

in th

e su

bseq

uent

per

iod,

such

dec

reas

e is

reco

gniz

ed in

equ

ity.

The

fair

valu

e of

list

ed st

ocks

is b

ased

on

the

clos

ing

pric

e on

the

bala

nce

shee

t dat

e.

Allo

wan

ce fo

r D

oubt

ful A

ccou

nts

Allo

wan

ce fo

r dou

btfu

l acc

ount

s is p

rovi

ded

on th

e ba

sis o

f pas

t exp

erie

nces

and

an

eval

uatio

n of

the

agin

g an

d co

llect

ibili

ty o

f all

rece

ivab

les o

n th

e ba

lanc

e sh

eet d

ate.

In

vent

orie

s In

vent

orie

s ar

e re

cord

ed a

t wei

ghte

d-av

erag

e co

st.

Bef

ore

Janu

ary

1, 2

009,

inve

ntor

ies

are

stat

ed a

t the

lo

wer

of

the

cost

or

mar

ket

valu

e.

Mar

ket

valu

e is

eva

luat

ed o

n th

e ba

sis

of r

epla

cem

ent

cost

or

net

real

izab

le v

alue

. E

ffec

tive

from

Jan

uary

1, 2

009,

how

ever

, inv

ento

ries

are

stat

ed a

t the

low

er o

f co

st o

r ne

t re

aliz

able

val

ue.

Whe

n co

mpa

ring

cost

and

net

rea

lizab

le v

alue

, in

vent

orie

s ar

e ev

alua

ted

by

indi

vidu

al it

ems.

Inve

stm

ents

Acc

ount

ed fo

r U

sing

the

Equi

ty M

etho

d Lo

ng-te

rm in

vest

men

ts in

whi

ch th

e C

orpo

ratio

n ow

ns 2

0% o

r m

ore

of a

n in

vest

ee’s

out

stan

ding

vot

ing

shar

es o

r exe

rcis

es si

gnifi

cant

influ

ence

on

an in

vest

ee a

re a

ccou

nted

for u

nder

the

equi

ty m

etho

d.

In a

ccor

danc

e w

ith t

he n

ewly

rev

ised

Sta

tem

ent

of F

inan

cial

Acc

ount

ing

Stan

dard

s (S

FAS)

, the

cos

t of

ac

quis

ition

is s

ubje

cted

to a

n in

itial

ana

lysi

s, an

d go

odw

ill re

pres

ents

the

exce

ss o

f the

cos

t of a

cqui

sitio

n ov

er th

e fa

ir va

lue

of th

e id

entif

iabl

e ne

t ass

ets

valu

e.

Goo

dwill

is n

o lo

nger

am

ortiz

ed.

If t

he fa

ir va

lue

of i

dent

ifiab

le n

et a

sset

s ac

quire

d ex

ceed

s th

e co

st o

f in

vest

men

ts,

the

exce

ss s

houl

d be

ass

igne

d to

no

n-cu

rren

t ass

ets (

exce

pt fo

r fin

anci

al a

sset

s not

und

er e

quity

met

hod,

ass

ets f

or d

ispo

sal,

defe

rred

inco

me

tax

asse

ts a

nd p

repa

id p

ensi

on c

osts

or

othe

r re

tirem

ent b

enef

it co

sts)

. I

f th

ese

asse

ts a

re a

ll re

duce

d to

ze

ro,

the

rem

aini

ng e

xces

s sh

ould

be

reco

gniz

ed a

s ex

traor

dina

ry g

ain.

St

artin

g Ja

nuar

y 1,

200

6, t

he

unam

ortiz

ed b

alan

ce o

f the

exc

ess

of th

e ac

quis

ition

cos

t of t

he lo

ng-te

rm in

vest

men

t by

the

equi

ty m

etho

d ov

er t

he e

quity

in

the

inve

stee

’s n

et a

sset

s va

lue

is a

lso

no l

onge

r am

ortiz

ed a

nd a

pplie

s th

e sa

me

acco

untin

g tre

atm

ent a

s goo

dwill

.

119


- 14

-

Inco

me

Tax

es

The

inte

r-per

iod

and

intra

-per

iod

allo

catio

n m

etho

d is

used

for i

ncom

e ta

xes.

Def

erre

d in

com

e ta

x as

sets

an

d lia

bilit

ies

are

reco

gniz

ed f

or t

he t

ax e

ffec

ts o

f te

mpo

rary

diff

eren

ces,

unus

ed t

ax c

redi

ts a

nd n

et

oper

atin

g lo

ss c

arry

forw

ards

. V

alua

tion

allo

wan

ce is

pro

vide

d fo

r def

erre

d in

com

e ta

x as

sets

to th

e ex

tent

th

at m

ore

likel

y th

an n

ot s

uch

asse

ts w

ill n

ot b

e re

aliz

ed.

Def

erre

d ta

x as

sets

or l

iabi

litie

s are

cla

ssifi

ed a

s cu

rren

t or

non-

curr

ent a

ccor

ding

to th

e cl

assi

ficat

ion

of r

elat

ed a

sset

s or

liab

ilitie

s fo

r fin

anci

al r

epor

ting.

H

owev

er, i

f def

erre

d ta

x as

sets

or l

iabi

litie

s do

not

rela

te to

ass

ets

or li

abili

ties

in th

e fin

anci

al s

tate

men

ts,

they

are

cla

ssifi

ed a

s cur

rent

or n

on-c

urre

nt o

n th

e ba

sis o

f the

exp

ecte

d le

ngth

of t

ime

befo

re re

aliz

ed.

Tax

cred

its fo

r cer

tain

pur

chas

es o

f equ

ipm

ent a

nd te

chno

logy

, res

earc

h an

d de

velo

pmen

t exp

endi

ture

s an

d pe

rson

nel t

rain

ing

are

reco

gniz

ed b

y th

e cu

rren

t met

hod.

A

djus

tmen

ts to

prio

r yea

rs’ t

ax li

abili

ties a

re a

dded

to o

r ded

ucte

d fr

om th

e cu

rren

t yea

r’s t

ax e

xpen

se.

Inco

me

tax

of 1

0% o

n un

appr

opria

ted

earn

ings

gen

erat

ed is

pro

vide

d fo

r as i

ncom

e ta

x in

the

year

whe

n th

e sh

areh

olde

rs re

solv

e th

e re

tent

ion

of th

e ea

rnin

gs.

Trea

sury

Sto

ck

The

purc

hase

of

issu

ed s

hare

s is

acc

ount

ed f

or b

y de

bitin

g tre

asur

y st

ock,

whi

ch i

s a

redu

ctio

n of

sh

areh

olde

rs’

equi

ty.

The

Cor

pora

tion’

s sh

ares

hel

d by

its

subs

idia

ries

are

treat

ed a

s tre

asur

y st

ock

and

recl

assi

fied

from

inve

stm

ents

acc

ount

ed fo

r usi

ng e

quity

met

hod

to tr

easu

ry st

ock.

If

the

proc

eeds

on

the

disp

osal

of t

reas

ury

stoc

k ex

ceed

the

carr

ying

val

ue o

f tre

asur

y st

ock,

the

exce

ss is

cr

edite

d to

cap

ital s

urpl

us fr

om tr

easu

ry s

tock

. I

f the

pro

ceed

s ar

e le

ss th

an th

e ca

rryi

ng v

alue

of t

reas

ury

stoc

k, t

he d

iffer

ence

is

debi

ted

to c

apita

l su

rplu

s fr

om t

reas

ury

stoc

k.

If th

e ba

lanc

e of

cap

ital

surp

lus

from

trea

sury

sto

ck is

not

suf

ficie

nt to

abs

orb

the

diff

eren

ce, t

he re

st is

reco

rded

as

a re

duct

ion

of re

tain

ed

earn

ings

. Fo

reig

n-cu

rren

cy T

rans

actio

ns

Ass

ets,

liabi

litie

s, re

venu

es o

r ex

pens

es d

enom

inat

ed in

for

eign

cur

renc

ies

as a

res

ult o

f fo

reig

n-cu

rren

cy

trans

actio

ns o

f no

n-de

rivat

ive

finan

cial

inst

rum

ents

are

rec

orde

d in

New

Tai

wan

dol

lars

at t

he e

xcha

nge

rate

s pre

vaili

ng o

n th

e da

tes o

f tra

nsac

tions

.

Mon

etar

y as

sets

or

liabi

litie

s de

nom

inat

ed i

n fo

reig

n cu

rren

cies

are

tra

nsla

ted

at t

he e

xcha

nge

rate

s pr

evai

ling

on th

e ba

lanc

e sh

eet d

ate,

and

the

resu

lting

exc

hang

e di

ffer

ence

s are

incl

uded

in p

rofit

or l

oss f

or

the

curr

ent y

ear.

Non

-mon

etar

y as

sets

or

liabi

litie

s ca

rrie

d at

fai

r va

lue

that

are

den

omin

ated

in

fore

ign

curr

enci

es a

re

retra

nsla

ted

at th

e ra

tes

prev

ailin

g on

the

bala

nce

shee

t dat

e w

hen

the

fair

valu

e w

as d

eter

min

ed, a

nd th

e re

sulti

ng e

xcha

nge

diff

eren

ces

are

incl

uded

in p

rofit

or l

oss

for t

he c

urre

nt y

ear e

xcep

t for

the

diff

eren

ces

aris

ing

on th

e re

trans

latio

n of

non

-mon

etar

y as

sets

and

liab

ilitie

s in

res

pect

of

whi

ch g

ains

and

loss

es a

re

reco

gniz

ed d

irect

ly in

equ

ity.

For

suc

h no

n-m

onet

ary

asse

ts a

nd li

abili

ties,

any

exch

ange

com

pone

nt o

f th

at g

ain

or lo

ss is

als

o re

cogn

ized

dire

ctly

in e

quity

. N

on-m

onet

ary

asse

ts o

r lia

bilit

ies c

arrie

d at

cos

t tha

t ar

e de

nom

inat

ed i

n fo

reig

n cu

rren

cies

are

tra

nsla

ted

at t

he h

isto

rical

rat

es p

reva

iling

on

the

date

s of

tra

nsac

tions

. Th

e ab

ove

prev

ailin

g ex

chan

ge ra

tes a

re b

ased

on

the

aver

age

of b

id a

nd a

sk ra

tes o

f maj

or b

anks

. R

even

ue R

ecog

nitio

n R

even

ues

are

reco

gniz

ed w

hen

the

serv

ice

rend

erin

g pr

oces

s is

com

plet

ed o

r vi

rtual

ly c

ompl

eted

, an

d ea

rnin

gs a

re re

aliz

able

and

mea

sura

ble.

R

elat

ed c

osts

of p

rovi

ding

serv

ices

are

con

curr

ently

reco

gniz

ed a

s in

curr

ed.

- 13

-

Inta

ngib

le A

sset

s a.

Fr

anch

ise

Fran

chis

e re

fers

to th

e pa

ymen

t for

the

3G m

obile

tele

com

mun

icat

ion

serv

ice

- Li

cens

e C

. T

he 3

G

conc

essi

on is

rec

orde

d at

acq

uisi

tion

cost

and

is a

mor

tized

by

the

stra

ight

-line

met

hod

over

13

year

s an

d 9

mon

ths s

tarti

ng fr

om th

e la

unch

of 3

G se

rvic

es.

b.

Com

pute

r sof

twar

e C

ompu

ter s

oftw

are

cost

is a

mor

tized

by

the

stra

ight

-line

met

hod

over

3 y

ears

.

c.

Goo

dwill

In

acc

orda

nce

with

the

new

ly r

evis

ed S

FAS,

goo

dwill

is

no l

onge

r am

ortiz

ed.

Ple

ase

refe

r to

the

ac

coun

ting

polic

y of

inve

stmen

ts a

ccou

nted

for b

y th

e eq

uity

met

hod.

Id

le A

sset

s Pr

oper

ties n

ot c

urre

ntly

use

d in

ope

ratio

ns a

re st

ated

at t

he lo

wer

of b

ook

valu

e or

net

real

izab

le v

alue

, with

th

e di

ffer

ence

cha

rged

to c

urre

nt lo

ss.

Dep

reci

atio

n ex

pens

e is

com

pute

d us

ing

the

stra

ight

-line

met

hod

over

the

estim

ated

use

ful l

ives

of t

he a

sset

s. D

efer

red

Cha

rges

D

efer

red

char

ges,

mai

nly

inte

rior

deco

ratio

n co

st a

re a

mor

tized

by

the

stra

ight

-line

met

hod

over

3 t

o 7

year

s. A

sset

Impa

irm

ent

If

the

carr

ying

val

ue o

f ass

ets (

incl

udin

g pr

oper

ty a

nd e

quip

men

t, in

tang

ible

ass

ets,

idle

ass

ets,

asse

ts le

ased

to

oth

ers,

inve

stm

ents

acc

ount

ed fo

r usi

ng e

quity

met

hod

and

defe

rred

cha

rge)

is m

ore

than

its

reco

vera

ble

amou

nt,

whi

ch i

ndic

ates

tha

t an

im

pairm

ent

exis

ts,

an i

mpa

irmen

t lo

ss s

houl

d be

rec

ogni

zed.

A

ny

subs

eque

nt re

vers

al o

f the

impa

irmen

t los

s fo

r the

incr

ease

in re

cove

rabl

e am

ount

is re

cogn

ized

as

inco

me.

Th

e re

vers

al o

f im

pairm

ent l

oss o

n go

odw

ill is

not

allo

wed

. Sh

are-

base

d C

ompe

nsat

ion

For t

he g

rant

dat

e of

the

empl

oyee

stoc

k op

tions

whi

ch fa

lls o

n or

afte

r Jan

uary

1, 2

008

shou

ld a

pply

SFA

S N

o. 3

9 -

“Acc

ount

ing

for

Shar

e-ba

sed

Paym

ent”

. T

he v

alue

of

stoc

k op

tion

gran

ted,

the

prod

uct o

f th

e nu

mbe

r of

ves

ted

stoc

k op

tions

mul

tiplie

s by

the

fair

valu

e of

the

optio

n on

gra

nt d

ate,

sha

ll be

exp

ense

d ov

er t

he v

estin

g pe

riod,

and

to

incr

ease

“ca

pita

l su

rplu

s -

empl

oyee

sto

ck o

ptio

ns”

by t

he s

ame

amou

nt

acco

rdin

gly.

Pe

nsio

n C

osts

Th

e pe

nsio

n co

sts

unde

r th

e de

fined

ben

efit

pens

ion

plan

are

rec

ogni

zed

on t

he b

asis

of

actu

aria

l ca

lcul

atio

ns.

The

con

tribu

tion

amou

nts

of th

e pe

nsio

n co

sts

unde

r th

e de

fined

con

tribu

tion

pens

ion

plan

ar

e re

cogn

ized

as c

urre

nt e

xpen

ses d

urin

g th

e em

ploy

ees’

serv

ice

year

s.

120


- 16

-

5.

AV

AIL

AB

LE-F

OR

-SA

LE F

INA

NC

IAL

ASS

ETS

- CU

RR

ENT

Dec

embe

r 31

20

09

20

08

D

omes

tic li

sted

stoc

ks

Chu

nghw

a Te

leco

m C

o., L

td.

$

177

,821

$ 1

74,0

08

6.

AC

CO

UN

TS R

ECEI

VA

BLE

- TH

IRD

PA

RTI

ES

D

ecem

ber

31

2009

2008

Acc

ount

s rec

eiva

ble

$

5,9

49,8

53

$

6,2

69,5

41

Less

allo

wan

ce fo

r dou

btfu

l acc

ount

s

(4

11,0

01)

(452

,302

)

$ 5

,538

,852

$ 5

,817

,239

Fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 20

08,

the

Cor

pora

tion

ente

red

into

an

acco

unts

rec

eiva

ble

fact

orin

g co

ntra

ct w

ith H

C S

econ

d A

sset

Man

agem

ent C

o., L

td.

The

Cor

pora

tion

sold

$2,

966,

244

thou

sand

of t

he

over

due

acco

unts

rece

ivab

le, w

hich

had

bee

n w

ritte

n of

f, to

HC

Sec

ond

Ass

et M

anag

emen

t Co.

, Ltd

. T

he

aggr

egat

e se

lling

pric

e w

as $

36,9

67 t

hous

and.

U

nder

thi

s co

ntra

ct,

the

Cor

pora

tion

wou

ld n

o lo

nger

as

sum

e th

e ris

k on

this

rece

ivab

le.

7

. PR

EPA

YM

EN

TS

D

ecem

ber

31

2009

2008

Prep

aid

com

mis

sion

s

$ 2

69,2

44

$

335

,388

Pr

epai

d re

nts

89,1

55

121,

152

Prep

aid

insu

ranc

e

3,

476

38,1

77

Oth

er

120,

723

133,

620

$

482

,598

$ 6

28,3

37

8.

INV

ESTM

EN

TS A

CC

OU

NTE

D F

OR

USI

NG

TH

E EQ

UIT

Y M

ETH

OD

Dec

embe

r 31

20

09

20

08

%

of

% o

f

C

arry

ing

Ow

ner-

C

arry

ing

Ow

ner-

V

alue

ship

Val

ue

sh

ip

Ta

iwan

Cel

lula

r Co.

, Ltd

. (TC

C)

$

9,35

3,92

0

100.

0

$ 15

,125

,451

10

0.0

Taip

ei N

ew H

oriz

ons C

o., L

td. (

TNH

)

21

1,97

4

49.9

-

-

Wea

lth M

edia

Tec

hnol

ogy

Co.

, Ltd

. (W

MT)

19

2,61

5

100.

0

22

5,73

5

100.

0

9,75

8,50

9

15

,351

,186

Prep

aym

ent f

or lo

ng-te

rm in

vest

men

ts

TNH

-

249,

500

$

9,75

8,50

9

$ 15

,600

,686

- 15

-

Serv

ice

reve

nues

from

wire

less

serv

ices

and

val

ue-a

dded

serv

ices

, net

of a

ny a

pplic

able

dis

coun

t, ar

e bi

lled

at p

rede

term

ined

rate

s. P

repa

id c

ard

serv

ices

are

reco

gniz

ed o

n th

e ba

sis o

f min

utes

of u

sage

. Pr

omot

ion

Expe

nses

C

omm

issi

ons a

nd c

ellu

lar p

hone

subs

idy

cost

s per

tain

ing

to th

e C

orpo

ratio

n’s p

rom

otio

ns a

re re

cogn

ized

as

mar

ketin

g ex

pens

es o

n an

acc

rual

bas

is in

the

curr

ent p

erio

d.

Hed

ging

Der

ivat

ive

Fina

ncia

l Ins

trum

ents

D

eriv

ativ

es t

hat

qual

ify a

s ef

fect

ive

hedg

ing

inst

rum

ents

are

mea

sure

d at

fai

r va

lue,

with

sub

sequ

ent

chan

ges

in fa

ir va

lue

reco

gniz

ed e

ither

in e

arni

ngs

or s

hare

hold

ers’

equ

ity, d

epen

ding

on

the

natu

re o

f the

he

dge.

H

edge

Acc

ount

ing

Whe

n he

dge

acco

untin

g is

app

lied,

gai

n or

loss

from

cha

nges

in th

e fa

ir va

lue

of th

e de

rivat

ives

(hed

ging

in

stru

men

ts) s

hall

be o

ffse

t by

that

of f

inan

cial

ass

ets/

liabi

litie

s (he

dged

pos

ition

). Th

e C

orpo

ratio

n en

tere

d in

to i

nter

est

rate

sw

aps

(IR

S) c

ontra

cts

to h

edge

aga

inst

cas

h flo

w r

isk

from

in

vers

e flo

atin

g in

tere

st ra

tes

of li

abili

ties,

thus

was

qua

lifie

d to

app

ly h

edge

acc

ount

ing.

Th

e ac

coun

ting

treat

men

t is a

s fo

llow

s:

Gai

n or

loss

from

cha

nges

in th

e fa

ir va

lue

of th

e de

rivat

ives

, whi

ch is

reco

gniz

ed

in s

hare

hold

er’s

equ

ity, s

hall

be re

clas

sifie

d in

ear

ning

s, if

gain

or l

oss

from

the

expe

cted

tran

sact

ion

of th

e he

dged

pos

ition

occ

urs.

Whe

n th

ere

is o

bjec

tive

evid

ence

tha

t th

e ne

t lo

ss r

ecog

nize

d in

sha

reho

lder

s’

equi

ty is

exp

ecte

d to

be

not r

ecov

erab

le, t

he m

entio

ned

net l

oss s

houl

d be

recl

assi

fied

in e

arni

ngs a

s wel

l. R

ecla

ssifi

catio

n C

erta

in a

ccou

nts

in t

he f

inan

cial

sta

tem

ents

as

of a

nd f

or th

e ye

ar e

nded

Dec

embe

r 31

, 200

8 ha

ve b

een

recl

assi

fied

to c

onfo

rm to

the

pres

enta

tion

of fi

nanc

ial s

tate

men

ts a

s of a

nd fo

r the

yea

r end

ed D

ecem

ber 3

1,

2009

.

3.

REA

SON

S A

ND

EFF

ECT

OF

CH

AN

GES

IN A

CC

OU

NTI

NG

PR

INC

IPLE

S In

Mar

ch 2

007,

the

AR

DF

issu

ed a

n in

terp

reta

tion

that

req

uire

s co

mpa

nies

and

the

ir su

bsid

iarie

s to

re

cogn

ize

thos

e bo

nuse

s to

em

ploy

ees

and

rem

uner

atio

ns t

o di

rect

ors

and

supe

rvis

ors

as c

ompe

nsat

ion

expe

nses

sta

rting

fro

m J

anua

ry 1

, 20

08.

The

men

tione

d bo

nuse

s an

d re

mun

erat

ions

wer

e pr

evio

usly

re

cord

ed a

s ap

prop

riatio

ns f

rom

ear

ning

s. T

he a

dopt

ion

of t

his

inte

rpre

tatio

n re

sulte

d in

a d

ecre

ase

of

$342

,125

thou

sand

in n

et in

com

e an

d a

decr

ease

in b

asic

ear

ning

s pe

r sh

are

of $

0.12

for

the

year

end

ed

Dec

embe

r 31,

200

8.

4

. C

ASH

AN

D C

ASH

EQ

UIV

ALE

NTS

Dec

embe

r 31

20

09

20

08

C

ash

in b

anks

$

517,

071

$

52

1,22

4 G

over

nmen

t bon

ds w

ith re

purc

hase

righ

ts

265,

000

485,

439

Shor

t-ter

m n

otes

and

bill

s with

repu

rcha

se ri

ghts

20

2,00

0

39

1,87

9 Ti

me

depo

sits

45

,139

11

5,10

7 C

ash

on h

and

21,9

99

25,9

23

Rev

olvi

ng fu

nds

5,83

3

4,

803

$

1,0

57,0

42

$

1,5

44,3

75

121


- 18

-

To e

xpan

d its

CA

TV b

usin

ess,

the

Cor

pora

tion’

s 10

0%-o

wne

d su

bsid

iary

, WM

T, p

lans

to b

uy a

100

%

stak

e in

Che

ng T

ing

Co.

, Ltd

. to

acqu

ire a

ll th

e ca

ble

TV a

nd c

onte

nt d

istri

butio

n bu

sine

ss o

f Kbr

o C

o.,

Ltd.

Th

e pu

rcha

se w

ill b

e se

ttled

usi

ng t

he C

orpo

ratio

n’s

treas

ury

shar

es (

up t

o 15

.5%

of

tota

l ou

tsta

ndin

g sh

ares

), an

d th

e re

mai

nder

in

cash

. T

he C

orpo

ratio

n ex

pect

s to

clo

se t

he d

eal

afte

r ob

tain

ing

the

auth

oriti

es’ a

ppro

val.

d.

Tr

ansA

sia

Tele

com

mun

icat

ions

Inc.

O

n Ju

ly 3

1, 2

008,

the

Boa

rd o

f D

irect

ors

of t

he C

orpo

ratio

n re

solv

ed t

o m

erge

TA

T, w

ith t

he

Cor

pora

tion

as th

e su

rviv

ing

com

pany

. T

he re

cord

dat

e of

the

mer

ger w

as S

epte

mbe

r 2,

200

8.

The

Cor

pora

tion

assu

med

all

the

right

s and

obl

igat

ions

of T

AT.

e.

Equi

ty in

inve

stee

s’ n

et g

ains

or l

osse

s Th

e ca

rryi

ng v

alue

of

the

inve

stm

ents

und

er th

e eq

uity

met

hod

and

the

rela

ted

inve

stm

ent i

ncom

e or

lo

sses

wer

e de

term

ined

on

the

basi

s of a

udite

d fin

anci

al st

atem

ents

.

The

Cor

pora

tion’

s inv

estm

ent i

ncom

e or

loss

es w

ere

as fo

llow

s:

Dec

embe

r 31

20

09

20

08

TC

C

$

3,1

15,0

06

$

3,0

03,2

28

TNH

(3

7,52

6)

- W

MT

(33,

120)

(4

1,98

0)

TAT

-

1,

131,

233

$

3,0

44,3

60

$

4,0

92,4

81

All

the

finan

cial

sta

tem

ents

of

subs

idia

ries

have

bee

n co

nsol

idat

ed i

nto

the

cons

olid

ated

fin

anci

al

stat

emen

ts o

f the

Cor

pora

tion.

9

. FI

NA

NC

IAL

ASS

ETS

CA

RR

IED

AT

CO

ST -

NO

N-C

UR

REN

T

D

ecem

ber

31

2009

2008

Fore

ign

unlis

ted

stoc

ks

Brid

ge M

obile

Pte

Ltd

.

$ 5

0,32

4

$ 6

0,06

4 B

ecau

se t

here

is

no a

ctiv

e m

arke

t qu

otat

ion

and

a re

liabl

e fa

ir va

lue

can

not

be e

stim

ated

, th

e ab

ove

inve

stm

ents

are

mea

sure

d at

cos

t. A

n im

pairm

ent

loss

of

$9,7

40 t

hous

and

and

$11,

532

thou

sand

wer

e re

cogn

ized

for t

he y

ears

of 2

009

and

2008

, res

pect

ivel

y.

- 17

-

a.

Taiw

an C

ellu

lar C

o., L

td.

On

Apr

il 18

, 200

8, T

CC

’s B

oard

of

Dire

ctor

s de

cide

d to

red

uce

its c

apita

l by

$1,

000,

000

thou

sand

, re

sulti

ng in

the

canc

ella

tion

of 1

00,0

00 th

ousa

nd sh

ares

and

the

cash

retu

rn to

inve

stor

s. O

n th

e re

cord

da

te (

May

1, 2

008)

, the

Cor

pora

tion

was

ent

itled

to r

ecei

ve $

1,00

0,00

0 th

ousa

nd b

ased

on

its 1

00%

eq

uity

in T

CC

. O

n Ju

ly 2

9, 2

008,

TC

C’s

Boa

rd o

f D

irect

ors

deci

ded

to r

educ

e its

cap

ital

by $

1,15

0,00

0 th

ousa

nd,

resu

lting

in th

e ca

ncel

latio

n of

115

,000

thou

sand

shar

es a

nd th

e ca

sh re

turn

to in

vest

ors.

On

the

reco

rd

date

(Aug

ust 1

, 200

8), t

he C

orpo

ratio

n w

as e

ntitl

ed to

rece

ive

$1,1

50,0

00 th

ousa

nd b

ased

on

its 1

00%

eq

uity

in T

CC

. O

n D

ecem

ber 2

4, 2

009,

TCC

’s B

oard

of D

irect

ors r

esol

ved

to:

1)

Tran

sfer

$2,

300,

417

thou

sand

from

cap

ital s

urpl

us in

to c

apita

l, w

hich

incr

ease

d its

issu

ed s

hare

s by

23

0,04

2 th

ousa

nd o

n th

e re

cord

dat

e of

Dec

embe

r 25,

200

9;

2)

Red

uce

$3,5

00,0

00 t

hous

and

of c

apita

l to

sha

reho

lder

s th

roug

h th

e ca

ncel

latio

n of

350

,000

th

ousa

nd s

hare

s. O

n th

e re

cord

dat

e of

cap

ital r

educ

tion

(Dec

embe

r 26

, 200

9), t

he C

orpo

ratio

n,

base

d on

its 1

00%

ow

ners

hip

in T

CC

, was

ent

itled

to re

ceiv

e $3

,500

,000

thou

sand

. Th

e C

orpo

ratio

n in

vest

ed in

Tai

wan

Fix

ed N

etw

ork

Co.

, Ltd

. (TF

N) i

ndire

ctly

thro

ugh

Taiw

an C

ellu

lar

Co.

Ltd

. (TC

C)

with

sha

res

of t

he f

orm

er T

FN a

s in

vest

men

t. B

ased

on

the

revi

sed

SFA

S N

o. 5

, “L

ong-

term

Inve

stm

ents

in E

quity

Sec

uriti

es,”

unr

ealiz

ed g

ains

and

loss

es o

n do

wns

tream

tran

sact

ions

sh

ould

be

defe

rred

. T

hus,

the

diff

eren

ce b

etw

een

the

orig

inal

car

ryin

g co

st a

nd th

e in

vest

men

t pric

e of

th

e fo

rmer

TFN

sha

res

of th

is tr

ansa

ctio

n sh

ould

be

treat

ed a

s de

ferr

ed g

ains

. A

s of

Dec

embe

r 31

, 20

09, t

he a

mou

nt o

f def

erre

d cr

edits

reco

gniz

ed b

y th

e C

orpo

ratio

n w

as $

1,23

8,37

8 th

ousa

nd.

As

of D

ecem

ber

31, 2

009,

TC

C In

vest

men

t C

o., L

td. (

TCC

I, 10

0%-o

wne

d by

Tai

wan

Cel

lula

r C

o.,

Ltd)

, TC

CI

Inve

stm

ent

& D

evel

opm

ent

Co.

, Lt

d. (

TID

, 10

0%-o

wne

d by

TC

CI)

and

TFN

Uni

on

Inve

stm

ent

Co.

, Ltd

. (TU

I, 10

0%-o

wne

d by

TFN

), co

llect

ivel

y he

ld 8

11,9

18 t

hous

and

shar

es o

f th

e C

orpo

ratio

n.

Base

d on

SFA

S N

o. 3

0, “

Acc

ount

ing

for T

reas

ury

Stoc

k”, t

he C

orpo

ratio

ns’ s

hare

s he

ld

by s

ubsi

diar

ies

are

treat

ed a

s tre

asur

y st

ock.

Th

is a

ccou

ntin

g tre

atm

ent

redu

ced

the

Cor

pora

tion’

s lo

ng-te

rm i

nves

tmen

t va

lue

by t

he s

ame

amou

nt a

s tre

asur

y st

ock

acco

unt

valu

e of

$31

,889

,100

th

ousa

nd.

Ple

ase

refe

r to

Not

e 19

for d

etai

ls.

b.

Taip

ei N

ew H

oriz

ons C

o., L

td.

TNH

is e

stab

lishe

d to

inve

st in

a p

rope

rty d

evel

opm

ent p

roje

ct lo

cate

d in

the

old

Song

shan

Tob

acco

Fa

ctor

y si

te.

On

Janu

ary

15, 2

009,

TN

H si

gned

a 5

0-ye

ar B

OT

cont

ract

with

Tai

pei C

ity G

over

nmen

t. Th

e C

orpo

ratio

n es

tabl

ishe

d TN

H o

n D

ecem

ber 3

1, 2

008

with

initi

al in

vest

men

t of $

249,

500

thou

sand

, re

pres

entin

g 49

.9%

ow

ners

hip.

c.

Wea

lth M

edia

Tec

hnol

ogy

Co.

, Ltd

. W

MT’

s B

oard

of D

irect

ors

reso

lved

the

issu

ance

of 1

8,50

0 th

ousa

nd s

hare

s at

$10

par

val

ue o

n M

arch

28

, 200

8.

On

the

reco

rd d

ates

(Apr

il 1,

200

8), t

he C

orpo

ratio

n su

bscr

ibed

for a

ll th

e sh

ares

and

WM

T is

still

a w

holly

-ow

ned

subs

idia

ry o

f the

Cor

pora

tion.

122


- 20

-

12.

ASS

ETS

LEA

SED

TO

OTH

ERS

AN

D ID

LE A

SSET

S

Dec

embe

r 31

20

09

20

08

Ass

ets l

ease

d to

oth

ers

Cos

t

$ 2

,338

,225

$ 2

,495

,563

Le

ss a

ccum

ulat

ed d

epre

ciat

ion

(129

,343

)

(1

36,7

21)

Less

acc

umul

ated

impa

irmen

t

(1

0,59

1)

(54,

493)

$ 2

,198

,291

$ 2

,304

,349

Id

le a

sset

s

C

ost

$

42

7,54

8

$

505,

217

Less

allo

wan

ce fo

r val

ue d

eclin

e

(3

5,92

9)

(187

,519

) Le

ss a

ccum

ulat

ed d

epre

ciat

ion

(43,

053)

(9

4,57

2)

Less

acc

umul

ated

impa

irmen

t

(1

26,4

29)

(84,

447)

$

222,

137

$

13

8,67

9 13

. SH

OR

T-TE

RM

BO

RR

OW

ING

S

Dec

embe

r 31

20

09

20

08

U

nsec

ured

loan

s - re

late

d pa

rties

$

-

$ 1

,300

,000

U

nsec

ured

loan

s fro

m fi

nanc

ial i

nstit

utio

ns

5,00

0,00

0

-

$

5,0

00,0

00

$

1,3

00,0

00

In

tere

st ra

te

0.

57%

-0.6

0%

2.1

24%

-2.4

17%

14

. SH

OR

T-TE

RM

NO

TES

AN

D B

ILLS

PA

YA

BLE

Dec

embe

r 31

20

09

20

08

C

omm

erci

al p

aper

pay

able

G

rand

Bill

s Fin

ance

Cor

pora

tion

$

30

0,00

0

$

- Le

ss d

isco

unt o

n sh

ort-t

erm

not

es a

nd b

ills p

ayab

le

(128

)

-

N

et c

arry

ing

valu

e

$

299,

872

$

-

In

tere

st ra

te

0.

27%

-

Perio

d

2009

.12.

10-

2010

.1.2

9

-

- 19

-

10.

PRO

PER

TY A

ND

EQ

UIP

ME

NT

- AC

CU

MU

LATE

D D

EPR

ECIA

TIO

N

D

ecem

ber

31

2009

2008

Bui

ldin

gs

$

39

2,95

3

$

343,

780

Tele

com

mun

icat

ion

equi

pmen

t

28

,637

,272

28

,153

,739

O

ffic

e eq

uipm

ent

21,2

98

69,8

25

Leas

ed a

sset

s

48

5,45

5

42

0,30

3 M

isce

llane

ous e

quip

men

t

89

7,90

6

92

0,16

6

$

30,4

34,8

84

$

29

,907

,813

C

apita

lized

inte

rest

for

the

year

s en

ded

Dec

embe

r 31

, 200

9 an

d 20

08 a

mou

nted

to $

16,6

85 th

ousa

nd a

nd

$11,

296

thou

sand

, res

pect

ivel

y, w

ith c

apita

lizat

ion

rate

s ran

ging

from

2.4

% to

2.7

6%.

The

Cor

pora

tion

boug

ht fa

rmla

nd lo

cate

d in

Yan

g-M

ei, T

aoyu

an fo

r the

am

ount

of $

12,0

00 th

ousa

nd fr

om

TFN

, bas

ed o

n th

e ne

ed fo

r dep

loyi

ng te

leco

m e

quip

men

t. B

ecau

se o

nly

an in

divi

dual

cou

ld b

e th

e ow

ner

of f

arm

land

acc

ordi

ng t

o re

late

d re

gula

tions

, its

ow

ners

hip

is u

nder

the

lan

dhol

der

thro

ugh

a fid

ucia

ry

cont

ract

.

11.

GO

OD

WIL

L O

n Se

ptem

ber

2, 2

008,

the

Cor

pora

tion

mer

ged

with

TA

T, r

esul

ting

in th

e re

cogn

ition

of

good

will

at t

he

book

val

ue o

f $6,

835,

370

thou

sand

. In

con

form

ity w

ith S

FAS

No.

35,

“A

ccou

ntin

g fo

r Ass

et Im

pairm

ent,”

the

Cor

pora

tion

enga

ged

in m

obile

se

rvic

e, w

hich

was

vie

wed

as

one

cash

-gen

erat

ing

unit

in 2

009

and

2008

. T

he c

ritic

al a

ssum

ptio

ns t

o ev

alua

te th

e re

cove

rabl

e am

ount

s of o

pera

ting

asse

ts a

nd g

oodw

ill w

ere

as fo

llow

s:

a.

A

ssum

ptio

ns o

n op

erat

ing

reve

nues

A

fter

taki

ng c

hang

es in

the

tele

com

indu

stry

and

com

petit

ive

land

scap

e in

to c

onsi

dera

tion,

ope

ratin

g re

venu

es w

ere

estim

ated

on

the

basi

s of

the

pro

ject

ed c

hang

es i

n su

bscr

iber

num

bers

, m

inut

es o

f in

com

ing

and

outg

oing

cal

ls a

nd a

vera

ge re

venu

e pe

r min

ute.

b.

Ass

umpt

ions

on

oper

atin

g co

sts a

nd e

xpen

ses

The

estim

ates

of

com

mis

sion

s, cu

stom

er r

eten

tion

cost

s, cu

stom

er s

ervi

ce c

osts

and

bill

pro

cess

ing

cost

s w

ere

base

d on

the

proj

ecte

d ch

ange

s in

sub

scrib

er n

umbe

rs.

The

est

imat

es o

f re

mai

ning

cos

ts an

d ex

pens

es w

ere

base

d on

the

prop

ortio

n of

the

actu

al c

osts

and

exp

ense

s to

ope

ratin

g re

venu

es in

the

2009

fina

ncia

l sta

tem

ents

.

c.

Ass

umpt

ions

on

disc

ount

rate

Fo

r the

yea

rs e

nded

Dec

embe

r 31,

200

9 an

d 20

08, t

he C

orpo

ratio

n us

ed th

e di

scou

nt ra

te o

f 8.5

0% a

nd

7.48

%, r

espe

ctiv

ely,

in c

alcu

latin

g th

e as

set r

ecov

erab

le a

mou

nts.

B

ased

on

the

key

assu

mpt

ions

of t

he c

ash-

gene

ratin

g un

it, th

e C

orpo

ratio

n’s

man

agem

ent b

elie

ves

that

the

carr

ying

am

ount

s of

thes

e as

sets

for o

pera

ting

and

good

will

will

not

exc

eed

thei

r rec

over

able

am

ount

s eve

n if

ther

e ar

e ch

ange

s in

the

crit

ical

ass

umpt

ions

use

d to

est

imat

e re

cove

rabl

e am

ount

s as

lon

g as

the

se

chan

ges a

re re

ason

able

for t

he y

ears

end

ed D

ecem

ber 3

1, 2

009

and

2008

.

123


- 22

-

17

. LO

NG

-TER

M B

OR

RO

WIN

GS

D

ecem

ber

31

2009

2008

Uns

ecur

ed lo

ans

$

-

$

5,2

00,0

00

In

tere

st ra

te

-

2.

5916

%

To p

rovi

de m

ediu

m-te

rm w

orki

ng c

apita

l, th

e C

orpo

ratio

n an

d its

sub

sidi

ary,

TFN

, en

tere

d in

to a

sy

ndic

ated

loan

with

a jo

int c

redi

t lin

e of

$13

,500

,000

thou

sand

with

9 b

anks

led

by C

hina

trust

Com

mer

cial

B

ank

on F

ebru

ary

21, 2

008.

Th

e te

nor

is th

ree

year

s st

artin

g fr

om M

ay 2

0, 2

008.

B

ased

on

cont

ract

te

rm, i

nter

ests

are

pay

able

mon

thly

and

the

prin

cipa

l is

due

upon

mat

urity

. U

pon

mat

urity

, the

loan

is

allo

wed

to

revo

lve

with

in i

ts c

redi

t lim

its.

The

con

tract

req

uire

s th

e C

orpo

ratio

n to

mai

ntai

n ce

rtain

fin

anci

al r

atio

incl

udin

g de

bt r

atio

s, in

tere

st c

over

age,

and

tan

gibl

e ne

t ass

et r

atio

bas

ed o

n se

mi-a

nnua

l fin

anci

als.

The

Cor

pora

tion

also

bea

rs th

e re

paym

ent l

iabi

lity

with

resp

ect t

o TF

N’s

bor

row

ing.

Pl

ease

re

fer t

o N

ote

24 fo

r fur

ther

info

rmat

ion.

18.

PEN

SIO

N P

LAN

Th

e La

bor

Pens

ion

Act

(LP

A)

prov

ides

for

a d

efin

ed c

ontri

butio

n pe

nsio

n pl

an.

Sta

rting

fro

m J

uly

1,

2005

, the

Cor

pora

tion

shou

ld c

ontri

bute

mon

thly

an

amou

nt e

qual

to 6

% o

f the

em

ploy

ees’

mon

thly

wag

es

to t

he e

mpl

oyee

s’ i

ndiv

idua

l pe

nsio

n ac

coun

ts.

The

con

tribu

ted

amou

nt w

as $

108,

662

thou

sand

and

$1

07,8

48 th

ousa

nd fo

r the

yea

rs e

nded

Dec

embe

r 31,

200

9 an

d 20

08, r

espe

ctiv

ely.

Th

e La

bor

Stan

dard

s A

ct (

LSA

) pr

ovid

es f

or a

def

ined

ben

efit

pens

ion

plan

. B

enef

its a

re b

ased

on

the

leng

th o

f ser

vice

and

ave

rage

bas

ic p

ay o

f the

six

mon

ths

befo

re re

tirem

ent.

The

Cor

pora

tion

cont

ribut

es

mon

thly

an

amou

nt e

qual

to 2

% o

f the

em

ploy

ees’

mon

thly

wag

es to

a p

ensi

on fu

nd.

The

pen

sion

fund

is

man

aged

by

an in

depe

nden

tly a

dmin

iste

red

pens

ion

fund

com

mitt

ee a

nd d

epos

ited

in th

e co

mm

ittee

’s n

ame

in th

e B

ank

of T

aiw

an (f

orm

erly

in th

e Ce

ntra

l Tru

st o

f Chi

na, w

hich

was

mer

ged

into

the

Ban

k of

Tai

wan

in

Jul

y 20

07.)

App

rove

d by

Dep

artm

ent o

f Lab

or o

f Tai

pei C

ity G

over

nmen

t, th

e C

orpo

ratio

n su

spen

ded

cont

ribut

ing

from

Feb

ruar

y 20

07 to

Janu

ary

2010

. In

form

atio

n on

the

defin

ed b

enef

it pe

nsio

n pl

an is

sum

mar

ized

as f

ollo

ws:

a.

Pe

nsio

n co

st

Y

ears

End

ed D

ecem

ber

31

2009

2008

Serv

ice

cost

$

3,12

7

$

2,89

1 In

tere

st c

ost

10,6

56

8,61

3 Pr

ojec

ted

retu

rn o

f pen

sion

ass

ets

(11,

789)

(1

1,38

7)

Am

ortiz

atio

n

53

7

(2,3

46)

Pe

nsio

n co

st

$

2,

531

$

(2

,229

)

- 21

-

15.

AD

VA

NC

E R

ECEI

PTS

The

Cor

pora

tion

ente

red

into

a c

ontra

ct w

ith M

ega

Inte

rnat

iona

l C

omm

erci

al B

ank

Co.

, Lt

d.,

whi

ch

prov

ided

per

form

ance

gua

rant

ee f

or a

dvan

ce r

ecei

pts

from

pre

paid

car

d cu

stom

ers

in a

ccor

danc

e w

ith

NC

C’s

new

pol

icy

effe

ctiv

e on

Apr

il 1,

200

7.

The

guar

ante

ed a

dvan

ce r

ecei

pts

from

pre

paid

car

d cu

stom

ers w

ere

$832

,908

thou

sand

as o

f Dec

embe

r 31,

200

9.

16

. BO

ND

S PA

YA

BLE

Dec

embe

r 31

20

09

20

08

Cur

rent

Non

-cur

rent

Cur

rent

Non

-cur

rent

Dom

estic

uns

ecur

ed b

onds

$

-

$ 8

,000

,000

$ 7

,500

,000

$ 8

,000

,000

a.

1st d

omes

tic u

nsec

ured

bon

ds

On

Dec

embe

r 13

, 200

2, t

he C

orpo

ratio

n is

sued

$15

,000

,000

tho

usan

d of

dom

estic

uns

ecur

ed b

onds

, w

ith e

ach

bond

hav

ing

a fa

ce v

alue

of $

5,00

0 th

ousa

nd.

The

bon

ds h

ave

four

diff

eren

t typ

es b

ased

on

term

s an

d da

tes.

Typ

es I

and

II bo

th c

onsi

st o

f A to

L tr

anch

es.

Typ

es II

I and

IV b

oth

cons

ist o

f A

to M

tran

ches

. T

ypes

I an

d II

are

five-

year

bon

ds a

nd T

ypes

III a

nd IV

are

sev

en-y

ear

bond

s. T

he

inte

rest

rate

s and

pay

men

t ter

ms a

re a

s fol

low

s:

Prin

cipa

l

Rat

e

Term

s

Ty

pe I

$

2,50

0,00

0 2

.60%

R

epay

men

t of $

1,25

0,00

0 th

ousa

nd e

ach

in th

e fo

urth

and

fifth

yea

rs, i

nter

est p

ayab

le a

nnua

lly

Type

II

2,50

0,00

0 5

.21%

-6M

LIB

OR

R

epay

men

t on

mat

urity

dat

e, in

tere

st p

ayab

le

se

mia

nnua

lly

Type

III

5,00

0,00

0 2

.80%

R

epay

men

t of $

2,50

0,00

0 th

ousa

nd e

ach

in th

e si

xth

and

seve

nth

year

s, in

tere

st p

ayab

le

annu

ally

Ty

pe IV

5,

000,

000

5

.75%

-6M

LIB

OR

R

epay

men

t on

mat

urity

dat

e, in

tere

st p

ayab

le

sem

iann

ually

$

15,0

00,0

00

Th

e la

st i

nsta

llmen

ts o

f th

e ab

ove-

men

tione

d co

rpor

ate

bond

s w

ere

repa

id b

y th

e C

orpo

ratio

n in

D

ecem

ber 2

009.

b.

2nd

dom

estic

uns

ecur

ed b

onds

O

n N

ovem

ber

14,

2008

, th

e C

orpo

ratio

n is

sued

$8,

000,

000

thou

sand

fiv

e-ye

ar d

omes

tic u

nsec

ured

bo

nds,

with

eac

h bo

nd h

avin

g a

face

val

ue o

f $10

,000

thou

sand

and

a c

oupo

n ra

te o

f 2.8

8% p

er a

nnum

, si

mpl

e in

tere

st d

ue a

nnua

lly.

Rep

aym

ents

will

be

mad

e in

the

fou

rth a

nd f

ifth

year

s w

ith e

qual

in

stal

lmen

ts, i

.e. $

4,00

0,00

0 th

ousa

nd, r

espe

ctiv

ely.

Fu

ture

repa

ymen

ts o

f the

abo

ve-m

entio

ned

corp

orat

e bo

nds a

re a

s fol

low

s:

Yea

r

Am

ount

2012

$

4,0

00,0

00

2013

4,00

0,00

0

$

8,0

00,0

00

124


- 24

-

The

Cor

pora

tion’

s di

vide

nd d

istri

butio

n is

bas

ed o

n th

e av

aila

bilit

y of

exc

ess

fund

s. T

hat

is,

the

Cor

pora

tion

first

pro

ject

s fu

ture

cap

ital n

eeds

thro

ugh

a ca

pita

l bud

getin

g pr

oces

s an

d th

en p

rovi

des

for

the

proj

ecte

d ca

pita

l ne

eds

by u

sing

ret

aine

d ea

rnin

gs.

Any

rem

aind

er i

s av

aila

ble

for

divi

dend

di

strib

utio

n.

How

ever

, th

e am

ount

of

stoc

k di

vide

nds

shou

ld n

ot b

e m

ore

than

80%

of

the

tota

l di

vide

nds t

o be

dis

tribu

ted

in a

sing

le y

ear.

The

fina

l am

ount

, typ

e an

d pe

rcen

tage

of t

he d

ivid

ends

are

su

bjec

t to

the

appr

oval

by

the

Boa

rd o

f Dire

ctor

s an

d sh

areh

olde

rs b

ased

on

actu

al e

arni

ngs

and

capi

tal

requ

irem

ents

of t

he C

orpo

ratio

n in

a p

artic

ular

yea

r. A

reg

ulat

ion

issu

ed b

y th

e Se

curit

ies

and

Futu

res

Bur

eau

requ

ires

a sp

ecia

l res

erve

be

mad

e fr

om th

e un

appr

opria

ted

earn

ings

, equ

ival

ent t

o th

e de

bit b

alan

ce o

f any

acc

ount

sho

wn

in s

hare

hold

ers’

equ

ity.

Th

e sp

ecia

l res

erve

app

ropr

iate

d w

ill b

e re

vers

ed to

the

exte

nt th

at th

e ne

t deb

it ba

lanc

e re

vers

es.

Th

e ap

prop

riatio

n of

ear

ning

s sh

ould

be

reso

lved

by

the

shar

ehol

ders

in th

e fo

llow

ing

year

and

giv

en

effe

ct to

in th

e fin

anci

al st

atem

ents

of t

hat y

ear.

Und

er th

e In

tegr

ated

Inc

ome

Tax

Syst

em, R

OC

res

iden

t sha

reho

lder

s ar

e al

low

ed a

tax

cred

it fo

r th

e in

com

e ta

x pa

id b

y th

e C

orpo

ratio

n.

An

impu

tatio

n cr

edit

acco

unt

(ICA

) is

mai

ntai

ned

by t

he

Cor

pora

tion

for s

uch

inco

me

tax

and

the

tax

cred

it al

loca

ted

to e

ach

shar

ehol

der.

For

the

year

s en

ded

Dec

embe

r 31

, 200

9, th

e bo

nuse

s to

em

ploy

ees

and

rem

uner

atio

n to

dire

ctor

s an

d su

perv

isor

s w

ere

accr

ued

base

d on

a r

espe

ctiv

e 3%

and

0.3

% o

f ne

t in

com

e (n

et o

f th

e bo

nus

to

empl

oyee

s an

d re

mun

erat

ion

to d

irect

ors

and

supe

rvis

ors)

afte

r se

tting

asi

de 1

0% n

et in

com

e as

lega

l re

serv

es.

The

sig

nific

ant d

iffer

ence

bet

wee

n an

nual

acc

rual

s an

d th

e am

ount

app

rove

d by

the

Boa

rd

shal

l be

adj

uste

d in

the

cur

rent

yea

r. I

f th

e B

oard

of

Dire

ctor

s’ a

ppro

val

diff

ers

from

the

am

ount

ra

tifie

d at

the

annu

al g

ener

al s

hare

hold

ers’

mee

ting

(AG

M),

the

diff

eren

ce w

ill b

e tre

ated

as

chan

ges

in

acco

untin

g es

timat

ion

and

will

be

adju

sted

in 2

010’

s P&

L.

If em

ploy

ee b

onus

es a

re p

aid

in th

e fo

rm

of c

ompa

ny s

hare

s, th

e nu

mbe

r of e

mpl

oyee

bon

us s

hare

s sh

all b

e de

rived

from

div

idin

g th

e ap

prov

ed

bonu

s am

ount

by

its c

losi

ng p

rice

one

day

prio

r to

the

AG

M, a

djus

ted

for c

ash

and/

or st

ock

divi

dend

s if

any.

Th

e 20

08 a

nd 2

007

earn

ings

app

ropr

iatio

ns re

solv

ed b

y th

e A

GM

s on

Jun

e 19

, 200

9 an

d Ju

ne 1

3, 2

008

wer

e as

follo

ws:

D

ivid

end

Per

Shar

e

A

ppro

pria

tion

of E

arni

ngs

(N

T$)

For

Fisc

al

Fo

r Fi

scal

For

Fisc

al

Fo

r Fi

scal

Y

ear

2008

Yea

r 20

07

Yea

r 20

08

Yea

r 20

07

A

ppro

pria

tion

of le

gal r

eser

ve

$

1,53

7,13

8

$ 66

1,30

0

R

ever

sal o

f spe

cial

rese

rve

(56,

744)

(86,

819)

Rem

uner

atio

n to

dire

ctor

s and

su

perv

isor

s

-

18,1

16

C

ash

bonu

s to

empl

oyee

s

-

18

1,15

5

C

ash

divi

dend

s

13

,968

,864

7,60

1,85

1

$4.6

8704

$2.5

4326

$ 15

,449

,258

$

8,

375,

603

The

shar

ehol

ders

on

June

19,

200

9 re

solv

ed t

o di

strib

ute

2008

bon

us o

f $4

14,6

97 t

hous

and

to

empl

oyee

s and

rem

uner

atio

n of

$41

,470

thou

sand

to d

irect

ors a

nd su

perv

isor

s. In

form

atio

n on

the

appr

opria

tion

of th

e 20

08 e

arni

ngs,

bonu

s an

d re

mun

erat

ion

to e

mpl

oyee

s, di

rect

ors

and

supe

rvis

ors

prop

osed

by

Boa

rd o

f Dire

ctor

s an

d ap

prov

ed a

t 200

9 A

GM

is a

vaila

ble

on th

e M

arke

t O

bser

vatio

n Po

st S

yste

m w

ebsi

te o

f the

Tai

wan

Sto

ck E

xcha

nge.

- 23

-

b.

Cha

nges

in th

e pr

epai

d pe

nsio

n co

st

D

ecem

ber

31

2009

2008

B

enef

it ob

ligat

ion

Ves

ted

$

-

$

-

Non

-ves

ted

(252

,211

)

(2

08,6

18)

Acc

umul

ated

(2

52,2

11)

(208

,618

) A

dditi

onal

ben

efits

bas

ed o

n fu

ture

sala

ries

(158

,534

)

(1

78,8

80)

Proj

ecte

d be

nefit

obl

igat

ion

(410

,745

)

(3

87,4

98)

Fair

valu

e of

pla

n as

sets

43

1,53

5

42

8,70

3 Fu

nded

stat

us

20,7

90

41,2

05

Unr

ecog

nize

d ne

t tra

nsiti

on o

blig

atio

n

6,

726

7,24

1 U

nrec

ogni

zed

prio

r ser

vice

cos

t

39

9

42

1 U

nrec

ogni

zed

net g

ain

or lo

ss

(18,

222)

(3

6,64

3)

Pr

epai

d pe

nsio

n co

st

$

9,

693

$

12,2

24

c.

V

este

d be

nefit

$

-

$

- d.

A

ctua

rial a

ssum

ptio

ns

Y

ears

End

ed D

ecem

ber

31

2009

2008

Dis

coun

t rat

e us

ed in

det

erm

inin

g pr

esen

t val

ues

2.

00%

2.75

%

Futu

re sa

lary

incr

ease

rate

2.50

%

3.

00%

Ex

pect

ed ra

te o

f ret

urn

on p

lan

asse

ts

2.

00%

2.75

%

19.

SHA

REH

OLD

ERS’

EQ

UIT

Y

a.

C

apita

l sur

plus

U

nder

the

Com

pany

Act

, cap

ital s

urpl

us m

ay o

nly

be u

sed

to o

ffse

t a d

efic

it.

How

ever

, cap

ital s

urpl

us

gene

rate

d fr

om t

he e

xces

s of

the

iss

ue p

rice

over

the

par

val

ue o

f ca

pita

l st

ock,

inc

ludi

ng t

he s

tock

is

sued

for

new

cap

ital

and

the

buyb

ack

of t

reas

ury

stoc

k, m

ay b

e tra

nsfe

rred

to

capi

tal

as s

tock

di

vide

nds,

and

this

tran

sfer

is re

stric

ted

to a

cer

tain

per

cent

age

of th

e ca

pita

l sur

plus

and

may

be

mad

e on

ly w

ithin

pre

scrib

ed li

mits

eac

h tim

e.

Als

o, th

e ca

pita

l sur

plus

from

long

-term

inve

stm

ents

may

not

be

use

d fo

r any

pur

pose

.

b.

App

ropr

iatio

n of

ear

ning

s and

div

iden

d po

licy

Th

e C

orpo

ratio

n’s

Arti

cles

of I

ncor

pora

tion

prov

ide

that

a 1

0% le

gal r

eser

ve s

houl

d be

set

asi

de f

rom

th

e an

nual

net

inco

me

afte

r the

redu

ctio

n of

acc

umul

ated

def

icit.

Th

e re

mai

nder

, les

s sp

ecia

l res

erve

ba

sed

on re

leva

nt la

ws o

r reg

ulat

ions

or b

usin

ess r

equi

rem

ents

, sho

uld

be d

istri

bute

d as

follo

ws:

1)

Div

iden

ds a

nd b

onus

to p

refe

rred

shar

ehol

ders

2)

R

emun

erat

ion

to d

irect

ors a

nd su

perv

isor

s - u

p to

0.3

%

3)

Bon

us to

em

ploy

ees -

1%

-3%

4)

R

emai

nder

, to

be a

ppro

pria

ted

as d

ivid

ends

as d

eter

min

ed in

the

shar

ehol

ders

’ mee

ting.

125


- 26

-

e.

U

nrea

lized

gai

ns o

r los

ses o

n fin

anci

al in

stru

men

ts

Unr

ealiz

ed g

ains

or

loss

es o

n fin

anci

al in

stru

men

ts f

or th

e ye

ars

ende

d D

ecem

ber

31, 2

009

and

2008

w

ere

sum

mar

ized

as f

ollo

ws:

Y

ears

End

ed D

ecem

ber

31

2009

2008

A

vaila

ble-

for-s

ale

finan

cial

ass

ets

Bal

ance

, beg

inni

ng o

f yea

r

$

54,4

55

$

57

,560

Fa

ir va

lue

chan

ges r

ecog

nize

d di

rect

ly in

equ

ity

9,16

9

(3

,105

)

63,6

24

54,4

55

Cha

nges

in u

nrea

lized

gai

ns (l

osse

s) o

f cas

h flo

w h

edge

B

alan

ce, b

egin

ning

of y

ear

61,8

64

(38,

749)

Fa

ir va

lue

chan

ges r

ecog

nize

d di

rect

ly in

equ

ity

(61,

864)

10

0,61

3

-

61,8

64

Cha

nges

in u

nrea

lized

gai

ns (l

osse

s) re

cogn

ized

by

the

equi

ty

met

hod

Bal

ance

, beg

inni

ng o

f yea

r

(1

22,2

16)

(82,

854)

Fa

ir va

lue

chan

ges r

ecog

nize

d di

rect

ly in

equ

ity

122,

216

(39,

362)

-

(1

22,2

16)

U

nrea

lized

gai

ns (l

osse

s) o

n fin

anci

al in

stru

men

ts

$

63

,624

$

(5,8

97)

20.

INC

OM

E T

AX

EX

PEN

SE

a.

Th

e re

conc

iliat

ion

of im

pute

d in

com

e ta

xes o

n pr

etax

inco

me

at st

atut

ory

tax

rate

to in

com

e ta

x ex

pens

e w

as a

s fol

low

s:

Yea

rs E

nded

Dec

embe

r 31

20

09

20

08

Ta

x on

pre

tax

inco

me

at st

atut

ory

tax

rate

(25%

)

$ 4

,533

,113

$ 4

,944

,264

A

dd (d

educ

t) ta

x ef

fect

s of

Perm

anen

t diff

eren

ces

Inve

stm

ent i

ncom

e fr

om d

omes

tic in

vest

ees a

ccou

nted

for

usin

g eq

uity

met

hod

(7

61,0

90)

(1,0

23,1

20)

Oth

er

(17,

718)

(9

,912

) Te

mpo

rary

diff

eren

ces

(483

,947

)

(3

76,2

62)

Def

erre

d in

com

e ta

xes

97

7,08

8

331,

247

In

vest

men

t tax

cre

dits

(1

0,00

2)

(112

,901

) Pr

ior y

ears

’ adj

ustm

ent

5,93

2

64

7,17

4 Ta

x on

shor

t-ter

m b

ills

253

5,22

1

Inco

me

tax

expe

nse

$

4,2

43,6

29

$

4,4

05,7

11

In

May

200

9, th

e A

rticl

e 5

of th

e In

com

e Ta

x La

w w

as a

men

ded

to re

duce

cor

pora

te s

tatu

tory

inco

me

tax

rate

fro

m 2

5% to

20%

, eff

ectiv

e fr

om 2

010.

Th

e C

orpo

ratio

n re

calc

ulat

ed it

s de

ferr

ed ta

x as

sets

and

liabi

litie

s in

acc

orda

nce

with

the

am

ende

d A

rticl

e an

d re

cord

ed t

he r

esul

ting

diff

eren

ce a

s an

in

com

e ta

x ex

pens

e.

- 25

-

c.

Cap

ital r

educ

tion

by c

ash

To in

crea

se R

OE

(Ret

urn

of E

quity

) an

d m

aint

ain

stab

le E

PS (

Earn

ings

per

Sha

re)

and

divi

dend

, the

C

orpo

ratio

n’s

AG

M r

esol

ved

on J

une

15,

2007

, a

capi

tal

redu

ctio

n of

$12

,000

,000

tho

usan

d,

repr

esen

ting

24%

of

outs

tand

ing

shar

es.

The

Cor

pora

tion’

s B

oard

of

Dire

ctor

s re

solv

ed t

he r

ecor

d da

te o

f D

ecem

ber

1, 2

007,

and

com

plet

ed t

he p

roce

dure

for

reg

istra

tion

chan

ges,

whi

ch i

s al

read

y ap

prov

ed b

y th

e au

thor

ity.

Tra

ding

sus

pens

ion

perio

d st

arte

d fr

om F

ebru

ary

1 to

19,

200

8, a

nd n

ew

shar

es re

sum

ed tr

adin

g fr

om F

ebru

ary

20, 2

008.

d.

Trea

sury

stoc

k

(S

hare

s in

Thou

sand

s)

Beg

inni

ng

En

ding

Pu

rpos

e of

Buy

back

Shar

es

In

crea

se

D

ecre

ase

Sh

ares

Yea

r end

ed D

ecem

ber 3

1, 2

009

To

be

trans

ferr

ed to

em

ploy

ees

24,1

93

-

24,1

93

-

Shar

es h

eld

by su

bsid

iarie

s

81

1,91

8

-

-

81

1,91

8

Yea

r end

ed D

ecem

ber 3

1, 2

008

To

be

trans

ferr

ed to

em

ploy

ees

-

24

,193

-

24

,193

Sh

ares

hel

d by

subs

idia

ries

1,36

8,25

0

(Not

e)

-

55

6,33

2

811,

918

N

ote:

Sh

ares

hel

d be

fore

cap

ital r

educ

tion.

1)

Tran

sfer

of s

tock

to e

mpl

oyee

s Fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

009,

the

Cor

pora

tion

trans

ferr

ed 2

4,19

3 th

ousa

nd s

hare

s bo

ught

ba

ck fr

om th

e m

arke

t to

empl

oyee

s at

$43

.8 p

er s

hare

, res

ultin

g in

a re

duct

ion

of $

3,25

4 th

ousa

nd

in c

apita

l sur

plus

. U

nder

the

Secu

ritie

s an

d Ex

chan

ge L

aw, t

he b

uyba

ck a

mou

nt o

f tre

asur

y st

ock

shou

ld n

ot e

xcee

d 10

% o

f tot

al is

sued

shar

es, a

nd th

e bu

ybac

k co

st sh

ould

not

exc

eed

the

sum

of t

he re

tain

ed e

arni

ngs,

addi

tiona

l pa

id-in

cap

ital

in e

xces

s of

par

val

ue a

nd r

ealiz

ed c

apita

l su

rplu

s. I

n ad

ditio

n, t

he

Cor

pora

tion

shou

ld n

ot p

rovi

de tr

easu

ry s

tock

as

colla

tera

l and

sho

uld

not e

xerc

ise

shar

ehol

ders

’ rig

hts o

n th

ose

shar

es b

efor

e tra

nsfe

r.

2)

Shar

es h

eld

by su

bsid

iarie

s

As

of D

ecem

ber 3

1, 2

009,

the

carr

ying

and

mar

ket v

alue

of t

he C

orpo

ratio

n’s

stoc

ks h

eld

by T

CC

I, TI

D a

nd T

UI (

all a

re th

e su

bsid

iarie

s 100

%-o

wne

d by

the

Cor

pora

tion)

wer

e $5

0,66

3,65

9 th

ousa

nd.

Th

e C

orpo

ratio

n re

clas

sifie

d $3

1,88

9,10

0 th

ousa

nd f

rom

inv

estm

ents

acc

ount

ed f

or u

sing

equ

ity

met

hod

to t

reas

ury

stoc

k ba

sed

on S

FAS

No.

30,

“A

ccou

ntin

g fo

r Tr

easu

ry S

tock

”.

Alth

ough

th

ese

shar

es a

re tr

eate

d as

trea

sury

sto

ck in

the

cons

olid

ated

fina

ncia

l sta

tem

ents

, the

sha

reho

lder

s ar

e en

title

d to

exc

ise

thei

r rig

hts o

n th

ese

shar

es, e

xcep

t for

par

ticip

atio

n in

cap

ital i

njec

tion

by c

ash.

In

add

ition

, bas

ed o

n th

e R

OC

Com

pany

Act

, the

sha

reho

lder

s of

trea

sury

sto

cks

can

not e

xerc

ise

the

votin

g rig

ht.

In th

e fir

st q

uarte

r of 2

008,

TFN

sol

d 30

0,00

0 th

ousa

nd s

hare

s of

the

Cor

pora

tion

for $

13,5

09,8

28

thou

sand

. D

ispo

sal

gain

fro

m t

he s

ales

res

ulte

d in

an

incr

ease

in

capi

tal

surp

lus

by $

3,48

5,73

2 th

ousa

nd.

In

addi

tion,

the

Cor

pora

tion’

s sh

ares

hel

d by

sub

sidi

arie

s w

ere

redu

ced

by 2

56,3

32

thou

sand

shar

es d

ue to

the

Cor

pora

tion’

s cap

ital r

educ

tion.

126


- 28

-

TAT’

s in

com

e ta

x re

turn

s as

of 2

007

had

been

exa

min

ed b

y th

e ta

x au

thor

ities

. T

AT

disa

gree

d w

ith

the

exam

inat

ion

resu

lts o

f th

e in

com

e ta

x re

turn

s an

d ha

d re

ques

ted

a re

exam

inat

ion

of th

e 20

06 a

nd

2007

inco

me

tax

retu

rns.

The

form

er T

AT’

s in

com

e ta

x re

turn

s as

of

2006

had

bee

n ex

amin

ed b

y th

e ta

x au

thor

ities

. T

he

form

er T

AT

disa

gree

d w

ith th

e ex

amin

atio

n re

sults

of

the

2002

and

200

3 in

com

e ta

x re

turn

s an

d ha

d fil

ed a

n ap

peal

, whi

ch is

rev

iew

ed b

y th

e Su

prem

e C

ourt

of th

e R

.O.C

. T

he f

orm

er T

AT

also

file

d ad

min

istra

tive

proc

eedi

ngs f

or 2

004

and

2005

’s in

com

e ta

x re

turn

s. M

obita

i’s in

com

e ta

x re

turn

s as

of

2006

had

bee

n ra

tifie

d by

the

tax

auth

oriti

es.

Mob

itai d

isag

reed

w

ith th

e re

sult

on th

e in

com

e ta

x re

turn

s an

d pl

ans

to a

pply

for a

reex

amin

atio

n of

the

2006

inco

me

tax

retu

rn.

21

. EA

RN

ING

S PE

R S

HA

RE

Am

ount

s (N

umer

ator

)

Shar

es

E

PS (N

T$)

B

efor

e In

com

e T

ax

A

fter

Inco

me

Tax

(Den

omin

ator

) T

hous

ands

)

Bef

ore

Inco

me

Tax

A

fter

Inco

me

Tax

Fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

009

B

asic

EPS

Inco

me

of c

omm

on sh

areh

olde

rs

$

18,

132,

491

$

13,

888,

862

2,97

9,31

1

$

6.09

$

4.66

A

dd e

ffect

of d

ilutiv

e po

tent

ially

Bon

us to

em

ploy

ees

-

-

9,84

6

D

ilute

d EP

S

Inco

me

of c

omm

on sh

areh

olde

rs w

ith

dilu

tive

effe

ct o

f pot

entia

l com

mon

sh

ares

$

18,

132,

491

$

13,

888,

862

2,98

9,15

7

$

6.07

$

4.65

Fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

008

B

asic

EPS

Inco

me

of c

omm

on sh

areh

olde

rs

$

19,

777,

097

$

15,

371,

386

2,96

6,36

8

$

6.67

$

5.18

A

dd e

ffect

of p

oten

tially

dilu

tive

com

mon

stoc

ks

B

onus

to e

mpl

oyee

s

-

-

8,

515

Dilu

ted

EPS

In

com

e of

com

mon

shar

ehol

ders

with

di

lutiv

e ef

fect

of p

oten

tial c

omm

on

shar

es

$

19,

777,

097

$

15,

371,

386

2,97

4,88

3

$

6.65

$

5.17

The

AR

DF

issu

ed I

nter

pret

atio

n N

o. 2

007-

052

that

req

uire

s co

mpa

nies

to

reco

gniz

e bo

nuse

s pa

id t

o em

ploy

ees

and

rem

uner

atio

ns to

dire

ctor

s an

d su

perv

isor

s as

com

pens

atio

n ex

pens

es b

egin

ning

Jan

uary

1,

2008

. T

hese

bon

uses

and

rem

uner

atio

ns w

ere

prev

ious

ly r

ecor

ded

as a

ppro

pria

tions

fro

m e

arni

ngs.

If

the

Cor

pora

tion

may

set

tle th

e bo

nus

to e

mpl

oyee

s by

cas

h or

sha

res,

the

Cor

pora

tion

shou

ld p

resu

me

that

th

e en

tire

amou

nt o

f the

bon

us w

ill b

e se

ttled

in s

hare

s an

d th

e po

tent

ial s

hare

dilu

tions

sho

uld

be in

clud

ed

in th

e w

eigh

ted

aver

age

num

ber o

f sha

res

outs

tand

ing

used

in th

e ca

lcul

atio

n of

dilu

ted

EPS,

if th

e sh

ares

ha

ve a

dilu

tive

effe

ct.

In

the

calc

ulat

ion

of d

ilute

d EP

S, th

e nu

mbe

r of o

utst

andi

ng s

hare

s is

der

ived

from

di

vidi

ng th

e en

tire

amou

nt o

f the

bon

us b

y th

e cl

osin

g pr

ice

of th

e sh

ares

on

the

bala

nce

shee

t dat

e.

Such

po

tent

ial

dilu

tive

effe

ct s

houl

d be

tak

en i

nto

cons

ider

atio

n in

the

cal

cula

tion

of d

ilute

d EP

S un

til t

he

shar

ehol

ders

res

olve

d th

e ac

tual

num

ber

of s

hare

s to

be

dist

ribut

ed t

o em

ploy

ees

at t

he A

GM

of

the

follo

win

g ye

ar.

- 27

-

b.

Def

erre

d in

com

e ta

x as

sets

(lia

bilit

ies)

wer

e as

follo

ws:

Dec

embe

r 31

20

09

20

08

U

nrea

lized

loss

on

retir

emen

t of p

rope

rty a

nd e

quip

men

t

$ 1

,412

,488

$ 2

,154

,822

Pr

ovis

ion

for d

oubt

ful a

ccou

nts

480,

098

683,

659

Am

ortiz

atio

n of

goo

dwill

(1

21,5

18)

(37,

974)

Pr

ovis

ion

for i

mpa

irmen

t los

ses o

n id

le a

sset

s

30,3

75

60,5

22

Acc

rued

pen

sion

cos

t

(1

,939

)

(3

,056

) In

vest

men

t tax

cre

dits

-

31,4

13

Unr

ealiz

ed g

ain

on fi

nanc

ial l

iabi

litie

s

-

(2

0,62

2)

Oth

er

89,7

83

28,5

10

1,

889,

287

2,89

7,27

4 Le

ss v

alua

tion

allo

wan

ce

(235

,580

)

(2

87,1

01)

$

1,6

53,7

07

$

2,6

10,1

73

D

efer

red

inco

me

tax

asse

ts

Cur

rent

$

27,2

61

$

14

2,60

5 N

on-c

urre

nt

1,62

6,44

6

2,

467,

568

$

1,6

53,7

07

$

2,6

10,1

73

c.

Inte

grat

ed in

com

e ta

x in

form

atio

n w

as a

s fol

low

s:

D

ecem

ber

31

2009

2008

Bal

ance

of i

mpu

tatio

n cr

edit

acco

unt (

ICA

)

$ 2

,990

,179

$ 2

,797

,888

A

s of

Dec

embe

r 31

, 200

9, t

here

wer

e no

una

ppro

pria

ted

earn

ings

gen

erat

ed b

efor

e Ja

nuar

y 1,

199

8.

The

estim

ated

cre

dita

ble

ratio

for t

he 2

009

earn

ings

app

ropr

iatio

n an

d th

e ac

tual

cre

dita

ble

ratio

for t

he

2008

ear

ning

app

ropr

iatio

n w

ere

32.1

7% a

nd 3

5.28

%, r

espe

ctiv

ely.

The

impu

tatio

n cr

edits

allo

cate

d to

the

sha

reho

lder

s ar

e ba

sed

on t

he I

CA

bal

ance

as

of t

he d

ate

of

divi

dend

dis

tribu

tion.

Th

e es

timat

ed c

redi

tabl

e ra

tio f

or t

he 2

009

earn

ings

app

ropr

iatio

n m

ay b

e ad

just

ed w

hen

the

impu

tatio

n cr

edits

are

dis

tribu

ted.

d.

The

late

st y

ears

thro

ugh

whi

ch in

com

e ta

x re

turn

s had

bee

n ex

amin

ed a

nd c

lear

ed b

y th

e ta

x au

thor

ities

w

ere

as fo

llow

s:

Y

ear

The

Cor

pora

tion

2005

TA

T

20

07

The

form

er T

AT

App

licab

le

Mob

itai

2006

Th

e C

orpo

ratio

n’s

inco

me

tax

retu

rns

as o

f 20

05 h

ad b

een

exam

ined

by

the

tax

auth

oriti

es.

The

C

orpo

ratio

n fil

ed f

or c

orre

ctio

ns o

f its

199

9 th

roug

h 20

01 in

com

e ta

x re

turn

s. T

he C

orpo

ratio

n al

so

disa

gree

d w

ith th

e re

sults

on

the

inco

me

tax

retu

rns

of 2

002

thro

ugh

2005

and

had

file

d re

ques

ts f

or

reex

amin

atio

n.

127


- 30

-

6)

The

abov

e fin

anci

al i

nstru

men

ts d

o no

t in

clud

e ca

sh a

nd c

ash

equi

vale

nts,

note

s an

d ac

coun

ts re

ceiv

able

s, pl

edge

d tim

e de

posi

ts,

refu

ndab

le d

epos

its,

shor

t-ter

m b

orro

win

gs,

shor

t-ter

m n

otes

an

d bi

lls p

ayab

le,

note

s an

d ac

coun

ts p

ayab

le a

nd g

uara

ntee

dep

osits

. B

ecau

se o

f th

e sh

ort

mat

uriti

es o

f th

ese

inst

rum

ents

, th

e ca

rryi

ng v

alue

s re

pres

ent

a re

ason

able

bas

is t

o es

timat

e fa

ir va

lues

. c.

Th

e fa

ir va

lues

of f

inan

cial

ass

ets a

nd li

abili

ties w

ere

not s

imul

tane

ousl

y de

term

ined

by

quot

ed p

rices

in

activ

e m

arke

ts a

nd b

y es

timat

ions

usi

ng v

alua

tion

tech

niqu

e.

d.

The

finan

cial

ass

ets

expo

sed

to f

air

valu

e in

tere

st ra

te r

isk

amou

nted

to

$522

,139

tho

usan

d an

d $1

,002

,425

tho

usan

d as

of

Dec

embe

r 31

, 20

09 a

nd 2

008,

res

pect

ivel

y, a

nd t

he f

inan

cial

lia

bilit

ies

expo

sed

to fa

ir va

lue

inte

rest

rate

risk

am

ount

ed to

$13

,299

,872

thou

sand

and

$17

,000

,000

thou

sand

as

of D

ecem

ber 3

1, 2

009

and

2008

, res

pect

ivel

y.

The

finan

cial

ass

ets

expo

sed

to c

ash

flow

inte

rest

rate

ris

k am

ount

ed t

o $5

09,2

32 t

hous

and

and

$595

,637

tho

usan

d as

of

Dec

embe

r 31

, 20

09 a

nd 2

008,

re

spec

tivel

y, a

nd th

e fin

anci

al li

abili

ties e

xpos

ed to

cas

h flo

w in

tere

st ra

te ri

sk a

mou

nted

to $

0 th

ousa

nd

and

$5,0

00,0

00 th

ousa

nd a

s of D

ecem

ber 3

1, 2

009

and

2008

, res

pect

ivel

y.

e.

Info

rmat

ion

on fi

nanc

ial r

isks

: 1)

M

arke

t ris

k Th

e C

orpo

ratio

n di

dn’t

ente

r in

to a

ny f

inan

cial

der

ivat

ives

tra

nsac

tions

, w

hich

will

hav

e bi

g ex

posu

re to

exc

hang

e ra

te a

nd in

tere

st ra

te ri

sks.

2)

C

redi

t ris

k

Cre

dit r

isk

repr

esen

ts th

e po

tent

ial i

mpa

cts

to fi

nanc

ial a

sset

s th

at th

e C

orpo

ratio

n m

ight

enc

ount

er

if co

unte

r-par

ties

or t

hird

par

ties

brea

ch t

he c

ontra

cts.

Fac

tors

tha

t af

fect

the

im

pact

s in

clud

e cr

edit

risk

conc

entra

tion,

co

mpo

nent

s of

fin

anci

al

inst

rum

ents

, co

ntra

ct

amou

nt

and

othe

r re

ceiv

able

s. T

he C

orpo

ratio

n’s

eval

uatio

n of

cre

dit r

isk

expo

sure

as

of D

ecem

ber

31, 2

009

and

2008

wer

e bo

th z

ero

beca

use

all

of c

ount

er-p

artie

s ar

e re

puta

ble

finan

cial

ins

titut

ions

with

goo

d cr

edit

ratin

gs.

The

Cor

pora

tion’

s m

axim

um c

redi

t ris

k ex

posu

re o

f ea

ch f

inan

cial

ins

trum

ent

is t

he s

ame

as i

ts ca

rryi

ng v

alue

.

The

cred

it ris

k am

ount

list

ed a

bove

is a

n ev

alua

tion

over

the

cont

ract

s with

pos

itive

fair

valu

e at

the

bala

nce

shee

t dat

e an

d th

e co

ntra

cts o

f off

-bal

ance

-she

et c

omm

itmen

ts a

nd g

uara

ntee

s. S

igni

fican

t co

ncen

tratio

n of

cre

dit

risk

exis

ts w

hen

coun

ter-

parti

es i

n fin

anci

al i

nstru

men

t tra

nsac

tions

si

gnifi

cant

ly c

once

ntra

te o

n on

e in

divi

dual

, or

whe

n th

ere

are

a nu

mbe

r of

cou

nter

-par

ties

in

finan

cial

inst

rum

ent t

rans

actio

ns, b

ut th

ese

coun

ter-p

artie

s ar

e en

gage

d in

sim

ilar b

usin

ess a

ctiv

ities

an

d ha

ve s

imila

r ec

onom

ic c

hara

cter

istic

s so

that

thei

r ab

ilitie

s to

per

form

con

tract

ual o

blig

atio

ns

wou

ld

be

conc

urre

ntly

af

fect

ed

in

sim

ilar

econ

omic

ch

ange

s or

ot

her

situ

atio

ns.

Th

e ch

arac

teris

tics

of c

redi

t ris

k co

ncen

tratio

n in

clud

e th

e na

ture

of

the

debt

ors’

ope

ratin

g ac

tiviti

es.

Th

e C

orpo

ratio

n do

es n

ot re

ly si

gnifi

cant

ly o

n si

ngle

tran

sact

ion

and

trans

act w

ith si

ngle

clie

nt o

r in

the

sam

e re

gion

.

3)

Liqu

idity

risk

The

Cor

pora

tion’

s op

erat

ing

fund

s ar

e de

emed

suf

ficie

nt to

mee

t the

cas

h flo

w d

eman

d, th

eref

ore,

liq

uidi

ty ri

sk is

not

con

side

red

to b

e si

gnifi

cant

.

- 29

-

22.

LAB

OR

CO

ST, D

EPR

ECIA

TIO

N A

ND

AM

OR

TIZA

TIO

N E

XPE

NSE

Yea

rs E

nded

Dec

embe

r 31

20

09

20

08

Cla

ssifi

ed a

s

Cla

ssifi

ed a

s

Cla

ssifi

ed a

s

Cla

ssifi

ed a

s

O

pera

ting

O

pera

ting

O

pera

ting

O

pera

ting

Cos

ts

E

xpen

ses

T

otal

Cos

ts

E

xpen

ses

T

otal

La

bor c

ost

Sala

ry

$

92

3,14

5

$ 1

,943

,443

$ 2

,866

,588

$

852,

052

$

1,7

58,6

48

$

2,6

10,7

00

Labo

r and

hea

lth

insu

ranc

e

50,9

42

92,0

99

143,

041

43,1

69

83,7

16

126,

885

Pens

ion

36

,711

62

,491

99

,202

31

,578

57

,451

89

,029

O

ther

43

,184

80

,745

12

3,92

9

42

,831

81

,531

12

4,36

2

$ 1

,053

,982

$ 2

,178

,778

$ 3

,232

,760

$

969,

630

$

1,9

81,3

46

$

2,9

50,9

76

D

epre

ciat

ion

$

6,4

48,6

39

$

55

3,14

2

$ 7

,001

,781

$ 5

,626

,974

$

519,

816

$

6,1

46,7

90

Am

ortiz

atio

n

76

1,75

8

10

3,11

7

86

4,87

5

76

1,31

5

98

,321

85

9,63

6 23

. FI

NA

NC

IAL

INST

RU

MEN

T TR

AN

SAC

TIO

NS

a.

Fa

ir va

lue

info

rmat

ion

D

ecem

ber

31

2009

2008

C

arry

ing

C

arry

ing

Val

ue

Fa

ir V

alue

Val

ue

Fa

ir V

alue

N

on-d

eriv

ativ

e fin

anci

al

in

stru

men

ts

Liab

ilitie

s

B

onds

pay

able

(in

clud

ing

curr

ent

porti

on)

$

8,00

0,00

0

$

8,37

3,37

6

$

15,5

00,0

00

$

15,6

21,8

15

b.

The

met

hods

and

sig

nific

ant

assu

mpt

ions

app

lied

in d

eter

min

ing

fair

valu

es o

f fin

anci

al i

nstru

men

ts

wer

e as

follo

ws:

1)

Ava

ilabl

e-fo

r-sal

e fin

anci

al a

sset

s - b

ased

on

quot

ed p

rices

in a

n ac

tive

mar

ket o

n th

e ba

lanc

e sh

eet

date

. 2)

B

ecau

se th

ere

is n

o ac

tive

mar

ket a

nd a

rel

iabl

e fa

ir va

lue

coul

d on

ly b

e ve

rifie

d at

a m

ore

than

re

ason

able

cos

t, th

e fa

ir va

lues

of i

nves

tmen

ts in

unl

iste

d st

ocks

car

ried

at c

ost,

acco

unte

d fo

r usi

ng

equi

ty m

etho

d or

pre

paym

ents

for l

ong-

term

inve

stm

ents

can

be

mea

sure

d by

net

wor

th o

f inv

este

e or

est

imat

e of

the

book

val

ue.

3)

Bon

ds p

ayab

le -

base

d on

the

over

-the-

coun

ter q

uota

tions

in D

ecem

ber.

4)

Fair

valu

e of

long

-term

loan

s -

base

d on

the

pres

ent v

alue

of

futu

re c

ash

flow

s di

scou

nted

by

the

inte

rest

rate

s the

Cor

pora

tion

may

obt

ain

for s

imila

r loa

ns (e

.g.,

sim

ilar m

atur

ities

). 5)

D

eriv

ativ

e fin

anci

al in

stru

men

ts -

base

d on

val

uatio

n re

sults

pro

vide

d by

ban

ks.

As

of D

ecem

ber

31, 2

008,

the

finan

cial

inst

rum

ent h

eld

by th

e C

orpo

ratio

n w

as e

valu

ated

by

the

bid

pric

e of

cou

nter

pa

rty.

128


- 32

-

R

elat

ed P

arty

Rel

atio

nshi

p w

ith th

e C

orpo

ratio

n

Fu

bon

Insu

ranc

e C

o., L

td. (

Fubo

n In

s.)

Rel

ated

par

ty in

subs

tanc

e

Fubo

n Pr

oper

ty M

anag

emen

t Co.

, Ltd

. (FP

M)

Rel

ated

par

ty in

subs

tanc

e

Taiw

an S

port

Lotte

ry C

orpo

ratio

n (T

SL)

Rel

ated

par

ty in

subs

tanc

e

Taiw

an U

nite

d C

omm

unic

atio

n C

o., L

td.

S

ubsi

diar

y (m

erge

d in

to T

FN o

n Ja

nuar

y 1,

200

8)

TT&

T C

asua

lty &

Pro

perty

Insu

ranc

e A

genc

y C

o., L

td.

Sub

sidi

ary

(liqu

idat

ed o

n M

arch

15,

200

8)

TT&

T Li

fe In

sura

nce

Age

ncy

Co.

, Ltd

.

Sub

sidi

ary

(liqu

idat

ed o

n M

ay 1

5, 2

008)

Ta

iwan

Tel

ecom

mun

icat

ion

Net

wor

k Se

rvic

es

Co.

, Ltd

. (TT

N)

Sub

sidi

ary

(mer

ged

into

TFN

on

Aug

ust 1

, 200

8)

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

, Ltd

. (th

e fo

rmer

TT&

T)

Sub

sidi

ary

(mer

ged

into

TT&

T on

Sep

tem

ber 1

, 20

08)

Tran

sAsi

a Te

leco

mm

unic

atio

ns In

c. (T

AT)

S

ubsi

diar

y (m

erge

d in

to th

e C

orpo

ratio

n on

Se

ptem

ber 2

, 200

8)

Nor

th C

oast

Cab

le T

V C

o., L

td.

S

ubsi

diar

y (li

quid

ated

on

Oct

ober

1, 2

008)

Ta

i Yi D

igita

l Bro

adca

stin

g C

o., L

td.

Equ

ity-m

etho

d in

vest

ee o

f TC

C (l

iqui

date

d on

Fe

brua

ry 2

8, 2

009)

R

each

& R

ange

Inc.

S

ubsi

diar

y (m

erge

d in

to T

FN o

n M

ay 1

, 200

9)

TFN

Inve

stm

ent C

o., L

td.

Sub

sidi

ary

(mer

ged

into

TC

CI o

n Se

ptem

ber 1

9,

2009

) Sh

in H

o C

able

TV

Co.

, Ltd

. R

elat

ed p

arty

in su

bsta

nce

(liqu

idat

ed o

n D

ecem

ber

1, 2

009)

(C

oncl

uded

) b.

Si

gnifi

cant

tran

sact

ions

with

rela

ted

parti

es w

ere

sum

mar

ized

bel

ow:

1

) Ope

ratin

g re

venu

es

Y

ears

End

ed D

ecem

ber

31

2009

2008

% o

f Tot

al

%

of T

otal

A

mou

nt

R

even

ues

A

mou

nt

R

even

ues

TF

N

$

2,2

76,3

19

4

$ 2

,087

,756

4

TFC

B

9,

796

-

13

,848

-

TAT

-

-

459,

338

1

$ 2

,286

,115

$

2,5

60,9

42

Th

e C

orpo

ratio

n m

ainl

y re

nder

ed t

elec

omm

unic

atio

n se

rvic

e to

the

abo

ve c

ompa

nies

. T

he

aver

age

colle

ctio

n pe

riod

for n

otes

and

acc

ount

s rec

eiva

ble

was

app

roxi

mat

ely

two

mon

ths.

2) O

pera

ting

cost

s

Yea

rs E

nded

Dec

embe

r 31

20

09

20

08

%

of T

otal

% o

f Tot

al

Am

ount

Cos

ts

A

mou

nt

C

osts

TFN

$ 1

,390

,303

5

$

96

5,96

2

4 Fu

bon

Ins.

51,4

12

-

58

,406

-

TAT

-

-

257,

796

1

$ 1

,441

,715

$

1,2

82,1

64

- 31

-

24.

REL

ATE

D-P

AR

TY T

RA

NSA

CTI

ON

S

a.

The

rela

ted

parti

es a

nd th

eir r

elat

ions

hips

with

the

Cor

pora

tion

wer

e as

follo

ws:

Rel

ated

Par

ty

R

elat

ions

hip

with

the

Cor

pora

tion

Taiw

an C

ellu

lar C

o., L

td. (

TCC

) S

ubsi

diar

y

Wea

lth M

edia

Tec

hnol

ogy

Co.

, Ltd

. (W

MT)

S

ubsi

diar

y

Tai F

u M

edia

Tec

hnol

ogy

Co.

, Ltd

. (TF

MT)

S

ubsi

diar

y G

loba

l Wea

lth M

edia

Tec

hnol

ogy

Co.

, Ltd

. S

ubsi

diar

y Fu

Sin

Med

ia T

echn

olog

y C

o., L

td.

Sub

sidi

ary

Fu Ji

a Le

h M

edia

Tec

hnol

ogy

Co.

, Ltd

. S

ubsi

diar

y G

loba

l For

est M

edia

Tec

hnol

ogy

Co.

, Ltd

. S

ubsi

diar

y TW

M H

oldi

ng C

o. L

td.

S

ubsi

diar

y Ta

iwan

Sup

er B

aske

tbal

l Co.

, Ltd

. (TS

BC

) S

ubsi

diar

y TT

&T

Hol

ding

s Co.

, Ltd

.

Sub

sidi

ary

Xia

men

Tai

fu T

eles

ervi

ces &

Tec

hnol

ogie

s Ltd

. S

ubsi

diar

y Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. (TF

N)

Sub

sidi

ary

Taiw

an D

igita

l Com

mun

icat

ions

Co.

, Ltd

. S

ubsi

diar

y

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

, Ltd

. (T

T&T)

S

ubsi

diar

y (th

e fo

rmer

VoP

ier C

omm

unic

atio

ns

(Tai

wan

) Co.

, Ltd

., m

erge

d th

e fo

rmer

TT&

T an

d re

nam

ed a

s TT&

T on

Sep

tem

ber 1

, 200

8.)

TCC

Inve

stm

ent C

o., L

td. (

TCC

I) S

ubsi

diar

y TF

N U

nion

Inve

stm

ent C

o., L

td. (

TUI)

Sub

sidi

ary

TCC

I Inv

estm

ent a

nd D

evel

opm

ent C

o., L

td.

(TID

) S

ubsi

diar

y

Win

TV

Bro

adca

stin

g C

o., L

td.

S

ubsi

diar

y TF

N M

edia

Co.

, Ltd

. (TF

NM

) S

ubsi

diar

y Y

eong

Jial

eh C

able

TV

Co.

, Ltd

.

Sub

sidi

ary

Man

grov

e C

able

TV

Cor

pora

tion

R

elat

ed p

arty

in su

bsta

nce

Phoe

nix

Cab

le T

V C

o., L

td.

S

ubsi

diar

y G

loba

lvie

w C

able

TV

Co.

, Ltd

.

Sub

sidi

ary

Uni

on C

able

TV

Co.

, Ltd

.

Sub

sidi

ary

TFN

HK

LIM

ITED

S

ubsi

diar

y TW

M C

omm

unic

atio

ns (B

eijin

g) L

td. (

form

erly

na

med

Hur

ray!

Tim

es C

omm

unic

atio

ns

(Bei

jing)

Ltd

.)

Sub

sidi

ary

(rel

atio

nshi

p ch

ange

d on

Apr

il 24

, 200

8)

Taiw

an M

obile

Fou

ndat

ion

(TW

M F

ound

atio

n)

Ove

r one

third

of t

he F

ound

atio

n’s i

ssue

d fu

nd c

ame

from

the

Cor

pora

tion

Taip

ei N

ew H

oriz

ons C

o., L

td.

Equ

ity-m

etho

d in

vest

ee

Fubo

n Li

fe A

ssur

ance

Co.

, Ltd

. S

ame

chai

rman

Fu

bon

Secu

ritie

s Inv

estm

ent T

rust

Co.

, Ltd

. R

elat

ed p

arty

in su

bsta

nce

Fubo

n M

arke

ting

Co.

, Ltd

. (fo

rmer

ly n

amed

Fu

bon

Dire

ct M

arke

ting

Con

sulti

ng C

o., L

td.)

Rel

ated

par

ty in

subs

tanc

e (r

enam

ed o

n A

pril

13,

2009

) Fu

bon

Fina

ncia

l Ven

ture

Cap

ital C

o., L

td.

Rel

ated

par

ty in

subs

tanc

e Fu

bon

Mul

timed

ia T

echn

olog

y C

o., L

td. (

FMT)

R

elat

ed p

arty

in su

bsta

nce

Fubo

n A

sset

Man

agem

ent C

o., L

td.

Rel

ated

par

ty in

subs

tanc

e C

hung

Hsi

ng C

onst

ruct

ions

Co.

, Ltd

. R

elat

ed p

arty

in su

bsta

nce

Fu

bon

Land

Dev

elop

men

t Co.

, Ltd

. R

elat

ed p

arty

in su

bsta

nce

Fu

bon

Fina

ncia

l Hol

ding

Com

pany

R

elat

ed p

arty

in su

bsta

nce

Taip

ei F

ubon

Com

mer

cial

Ban

k C

o., L

td.

(TFC

B)

Rel

ated

par

ty in

subs

tanc

e

Fubo

n Se

curit

ies C

o., L

td.

R

elat

ed p

arty

in su

bsta

nce

Fu

bon

Futu

re C

o., L

td.

Rel

ated

par

ty in

subs

tanc

e

Fubo

n In

vest

men

t Ser

vice

s Co.

, Ltd

. R

elat

ed p

arty

in su

bsta

nce

(C

ontin

ued)

129


- 34

-

Not

e:

Leas

ehol

d re

ceiv

able

s fro

m T

SL w

ere

as fo

llow

s:

Cur

rent

Po

rtio

n

M

atur

ities

of

Ove

r O

ne Y

ear

(Cla

ssifi

ed

Und

er O

ther

A

sset

s)

Tota

l D

ecem

ber 3

1, 2

008

Le

aseh

old

rece

ivab

les

$

2,

995

$

10,

732

$

13,

727

Less

unr

ealiz

ed in

tere

st in

com

e

(5

20)

(840

)

(1

,360

)

$

2,

475

$

9,

892

$

12,

367

Dec

embe

r 31

20

09

20

08

Am

ount

%

A

mou

nt

%

b)

O

ther

rece

ivab

les

TC

C (N

ote

1)

$

3,5

00,0

00

61

$

-

- TF

NM

(Not

e 2)

2,

003,

836

35

-

-

TFN

53

,418

1

46,7

33

2 W

MT

(Not

e 2)

45

,065

1

-

-

TFM

T (N

ote

2)

-

-

2,00

8,07

9

87

O

ther

5,

996

-

12

,942

1

$

5,6

08,3

15

$ 2

,067

,754

Not

e 1:

R

ecei

vabl

es fr

om c

apita

l red

uctio

n.

Not

e 2:

Fi

nanc

ing

to re

late

d pa

rties

was

as f

ollo

ws:

Y

ear

Ende

d D

ecem

ber

31, 2

009

Rel

ated

Par

ty

En

ding

B

alan

ce

M

axim

um

Bal

ance

Inte

rest

Rat

e (%

)

Inte

rest

In

com

e

TFN

M

$

2,0

00,0

00

$

2,0

00,0

00

0.

838

$

2,

893

WM

T

45

,000

60

,000

0.83

8

69

TF

MT

-

2,

045,

000

0.

838-

2.41

7

40

,132

TC

C

-

8,00

0,00

0

0.84

7

37

1

$

2,0

45,0

00

$

12,1

05,0

00

$

43

,465

Y

ear

Ende

d D

ecem

ber

31, 2

008

Rel

ated

Par

ty

En

ding

B

alan

ce

M

axim

um

Bal

ance

Inte

rest

Rat

e (%

)

Inte

rest

In

com

e

TFM

T

$ 2

,000

,000

$ 2

,005

,000

2.41

7-2.

568

$

50

,869

TF

NM

-

1,25

0,00

0

2.53

8-2.

548

10,7

93

$ 2

,000

,000

$ 3

,255

,000

$

61,6

62

- 33

-

Thes

e co

mpa

nies

mai

nly

rend

ered

tele

com

mun

icat

ion,

mai

nten

ance

and

insu

ranc

e se

rvic

es t

o th

e C

orpo

ratio

n.

The

aver

age

paym

ent t

erm

for

not

es a

nd a

ccou

nts

paya

ble

was

app

roxi

mat

ely

two

mon

ths.

3

) Pro

perty

tran

sact

ions

Acq

uisi

tion

of p

rope

rty a

nd e

quip

men

t

Y

ear

End

ed D

ecem

ber

31, 2

009

Des

crip

tion

A

mou

nt

TW

N C

omm

unic

atio

ns (B

ejin

g) L

td.

Tel

ecom

mun

icat

ion

equi

pmen

t

$ 1

1,58

2

4) R

enta

l inc

ome

Y

ears

End

ed D

ecem

ber

31

Leas

ed S

ites/

Equi

pmen

t

2009

2008

TF

N

Off

ices

and

BTS

, etc

.

$ 1

19,4

47

$

70

,390

FM

T O

ffic

e ap

plia

nce,

etc

.

33

,423

29

,972

TF

NM

O

ffic

es

10,7

84

10,6

40

$

163

,654

$ 1

11,0

02

The

abov

e le

ase

trans

actio

ns w

ere

base

d on

mar

ket p

rice

and

rent

was

col

lect

ed m

onth

ly.

5) C

ash

in b

anks

Dec

embe

r 31

20

09

20

08

Am

ount

%

A

mou

nt

%

a)

C

ash

in b

anks

TFC

B

$

99,3

76

9

$

275,

104

18

b)

Pl

edge

d tim

e de

posi

ts

TF

CB

$

10

,000

100

$

10,0

00

1

00

6) R

ecei

vabl

es a

nd p

ayab

les

D

ecem

ber

31

2009

2008

A

mou

nt

%

Am

ount

%

a)

Acc

ount

s rec

eiva

ble

TF

N

$

19

,347

-

$

-

$

214,

172

-

Oth

er (N

ote)

3,

321

-

5,

469

5,

469

-

$

22

,668

$

5,

469

$

219,

641

130


- 36

-

Y

ears

End

ed D

ecem

ber

31

2009

2008

13

) Rep

airs

and

Mai

nten

ance

FPM

$

23,4

85

$

22

,883

14) A

dver

tisem

ent e

xpen

ses

TSB

C

$

34,3

00

$

32

,000

15) F

inan

cing

from

rela

ted

parti

es w

as a

s fol

low

s:

Yea

r En

ded

Dec

embe

r 31

, 200

9

Rel

ated

Par

ty

En

ding

B

alan

ce

M

axim

um

Bal

ance

Inte

rest

Rat

e (%

)

Inte

rest

Ex

pens

e

TFN

$

-

$ 1

,600

,000

1.06

8-2.

417

$

16

,869

Y

ear

Ende

d D

ecem

ber

31, 2

008

Rel

ated

Par

ty

En

ding

B

alan

ce

M

axim

um

Bal

ance

Inte

rest

Rat

e (%

)

Inte

rest

Ex

pens

e

TAT

$

-

$

1,7

45,6

09

2.

572-

2.60

4

$

15,2

05

TFN

1,

300,

000

1,30

0,00

0

2.12

4-2.

417

3,81

3

$

1,3

00,0

00

$

3,0

45,6

09

$

19

,018

16) E

ndor

sem

ent/g

uara

ntee

pro

vide

d

a)

The

Cor

pora

tion

prov

ided

$21

,500

,000

tho

usan

d gu

aran

tee

for

TFN

’s b

ank

loan

. T

he

Cor

pora

tion

also

pro

vide

d $2

1,32

8,33

0 th

ousa

nd i

n pr

omis

sory

not

es o

utst

andi

ng f

or T

FN’s

bo

rrow

ing

with

ban

ks.

TFN

has

dra

wn

dow

n $1

,848

,322

tho

usan

d fr

om b

anks

with

in t

he

guar

ante

e am

ount

. b)

Th

e C

orpo

ratio

n an

d its

sub

sidi

ary,

TFN

, obt

aine

d $1

3,50

0,00

0 th

ousa

nd o

f sy

ndic

ated

loa

n fr

om 9

ban

ks le

d by

Chi

natru

st C

omm

erci

al B

ank.

Th

e C

orpo

ratio

n pr

ovid

ed a

gua

rant

ee fo

r TF

N’s

ban

k lo

an.

As

of D

ecem

ber

31,

2009

, th

e C

orpo

ratio

n an

d TF

N h

ad n

ot m

ade

any

draw

dow

n on

this

loan

. c)

A

s of D

ecem

ber 3

1, 2

009,

the

Cor

pora

tion

had

prov

ided

TFN

$50

,000

thou

sand

as p

erfo

rman

ce

guar

ante

e fo

r ID

D c

allin

g ca

rd s

ervi

ce is

sued

by

July

31,

200

8 in

acc

orda

nce

with

NC

C’s

new

po

licy

effe

ctiv

e on

Apr

il 1,

200

7.

17

) Com

pens

atio

n to

dire

ctor

s, su

perv

isor

s and

man

ager

s:

Y

ears

End

ed D

ecem

ber

31

2009

2008

Sala

ries,

ince

ntiv

es a

nd sp

ecia

l com

pens

atio

n

$ 2

04,7

02

$

192

,440

Ea

rnin

gs p

aid

as re

mun

erat

ions

to d

irect

ors

37,4

83

41,4

70

Earn

ings

pai

d as

bon

us to

em

ploy

ees

62,6

68

77,2

93

Prof

essi

onal

fee

2,33

0

3,

210

$

307

,183

$ 3

14,4

13

- 35

-

D

ecem

ber

31

2009

2008

A

mou

nt

%

Am

ount

%

c)

Prep

aym

ents

Fubo

n In

s.

$

8,71

2

2

$

43

,604

7

d)

A

ccou

nts p

ayab

le

TF

N

$

-

-

$

55,6

09

2 e)

A

ccru

ed e

xpen

ses

TF

N

$

26

5,00

4

6

$

19

7,41

6

4

TT&

T

65

,790

1

79,7

15

2 Fu

bon

Ins.

10,6

07

-

20

-

TSB

C

4,

300

-

20

,000

-

$

34

5,70

1

$

29

7,15

1

f)

O

ther

pay

able

s

TFN

$

176,

836

5

$

99,2

49

2

g)

Oth

er c

urre

nt li

abili

ties -

col

lect

ions

and

te

mpo

rary

cre

dits

for t

he fo

llow

ing

TF

N

$

83

,059

18

$

92,4

55

25

Y

ears

End

ed D

ecem

ber

31

2009

2008

7

) Tel

ecom

mun

icat

ion

serv

ice

expe

nses

TFN

$

78,1

01

$

79

,002

8) P

rofe

ssio

nal s

ervi

ce fe

es

TT

&T

(incl

ude

the

form

er T

T&T)

$ 8

59,1

59

$

911

,679

9) I

nsur

ance

exp

ense

s

Fubo

n In

s.

$

10,0

29

$

13

,594

10) O

ther

exp

ense

s

FPM

$

25,6

11

$

21

,537

11) D

onat

ion

TWM

Fou

ndat

ion

$

30,4

00

$

22

,000

12) R

enta

l exp

ense

s

TFN

$

13,3

04

$

9,

029

131


- 38

-

27.

AD

DIT

ION

AL

DIS

CLO

SUR

ES

Follo

win

g w

ere

the

addi

tiona

l dis

clos

ures

requ

ired

by th

e Se

curit

ies a

nd F

utur

es B

urea

u fo

r the

Cor

pora

tion

and

its in

vest

ees:

a.

Fi

nanc

ing

prov

ided

: T

able

1 (a

ttach

ed).

b.

Endo

rsem

ent/g

uara

ntee

pro

vide

d:

Tabl

e 2

(atta

ched

). c.

M

arke

tabl

e se

curit

ies h

eld:

Ta

ble

3 (a

ttach

ed).

d.

Mar

keta

ble

secu

ritie

s ac

quire

d an

d di

spos

ed o

f at c

osts

or p

rices

of a

t lea

st $

100

mill

ion

or 2

0% o

f the

pa

id-in

cap

ital:

Tab

le 4

(atta

ched

). e.

A

cqui

sitio

n of

ind

ivid

ual

real

est

ate

at c

osts

of

at l

east

$10

0 m

illio

n or

20%

of

the

paid

-in c

apita

l:

Non

e.

f. D

ispo

sal o

f ind

ivid

ual r

eal e

stat

e at

pric

es o

f at l

east

$10

0 m

illio

n or

20%

of t

he p

aid-

in c

apita

l: N

one.

g.

To

tal p

urch

ase

from

or s

ale

to re

late

d pa

rties

am

ount

ing

to a

t lea

st $

100

mill

ion

or 2

0% o

f the

pai

d-in

ca

pita

l: T

able

5 (a

ttach

ed).

h.

Rec

eiva

bles

fro

m r

elat

ed p

artie

s am

ount

ing

to a

t le

ast

$100

mill

ion

or 2

0% o

f th

e pa

id-in

cap

ital:

Ta

ble

6 (a

ttach

ed).

i. N

ames

, loc

atio

ns, a

nd r

elat

ed in

form

atio

n of

inve

stee

s on

whi

ch th

e C

orpo

ratio

n ex

erci

sed

sign

ifica

nt

influ

ence

: T

able

7 (a

ttach

ed).

j. D

eriv

ativ

e tra

nsac

tions

Th

e C

orpo

ratio

n en

tere

d in

to in

tere

st ra

te s

wap

(IR

S) c

ontra

cts

in D

ecem

ber

2002

to h

edge

fluc

tuat

ion

on in

vers

e flo

atin

g in

tere

st ra

tes

of b

onds

, whi

ch a

re se

ttled

sem

iann

ually

. P

leas

e re

fer t

o N

ote

23 fo

r th

e re

late

d in

form

atio

n.

C

ontr

act

Fina

ncia

l Ins

trum

ent

Te

rm

A

mou

nt

D

ue D

ate

In

tere

st ra

te sw

ap c

ontra

cts

Inv

erse

floa

ting

inte

rest

rate

in

exch

ange

for f

ixed

inte

rest

rate

of

2.4

5%

$

5,0

00,0

00

D

ecem

ber 2

009

The

Cor

pora

tion

ente

red

into

IRS

cont

ract

s to

hed

ge in

vers

e flo

atin

g in

tere

st ra

te fl

uctu

atio

n.

For t

he

year

s en

ded

Dec

embe

r 31,

200

9 an

d 20

08, t

he C

orpo

ratio

n re

cogn

ized

gai

ns o

f $84

,485

thou

sand

and

lo

sses

of

$30,

531

thou

sand

, re

spec

tivel

y, r

ecor

ded

as d

educ

tion

and

addi

tion

to i

nter

est

expe

nse,

re

spec

tivel

y.

k.

In

vest

men

t in

Mai

nlan

d C

hina

:

1)

The

nam

e of

the

inve

stee

com

pany

in M

ainl

and

Chi

na, t

he m

ain

busi

ness

es a

nd p

rodu

cts,

issu

ed

capi

tal,

met

hod

of in

vest

men

t, in

form

atio

n on

inflo

w o

r ou

tflow

of

capi

tal,

owne

rshi

p, in

vest

men

t ga

in o

r los

s, en

ding

bal

ance

, am

ount

rece

ived

as e

arni

ngs

dist

ribut

ions

from

the

inve

stm

ent,

and

the

limita

tion

on in

vest

men

t: T

able

8 (a

ttach

ed).

2)

Sign

ifica

nt d

irect

or

indi

rect

tra

nsac

tions

with

the

inv

este

e co

mpa

ny,

its p

rices

and

ter

ms

of

paym

ent,

unre

aliz

ed g

ain

or lo

ss, a

nd o

ther

rel

ated

info

rmat

ion

whi

ch is

hel

pful

to u

nder

stan

d th

e im

pact

of i

nves

tmen

t in

Mai

nlan

d C

hina

on

finan

cial

repo

rts:

Non

e.

- 37

-

The

com

pens

atio

n to

dire

ctor

s, su

perv

isor

s an

d m

anag

ers

for

the

year

end

ed D

ecem

ber

31, 2

008

incl

uded

the

bonu

s ap

prop

riatio

n fr

om 2

008

earn

ings

app

rove

d in

200

9 A

GM

. W

hile

that

for t

he

year

end

ed D

ecem

ber

31, 2

009

incl

uded

the

bon

us a

ppro

pria

tion

from

200

9 ea

rnin

gs s

ubje

ct t

o ap

prov

al in

201

0 A

GM

. M

ore

deta

iled

info

rmat

ion

may

be

refe

rred

in th

e C

orpo

ratio

n’s

annu

al

repo

rts.

18

) Oth

er

For t

he y

ears

end

ed D

ecem

ber 3

1, 2

009

and

2008

, the

Cor

pora

tion

prov

ided

ser

vice

s to

com

pani

es

belo

w a

nd fe

es re

ceiv

ed b

y th

e C

orpo

ratio

n, w

hich

wer

e re

cord

ed a

s de

duct

ions

from

rela

ted

costs

an

d ex

pens

es.

The

Cor

pora

tion’

s ser

vice

cha

rges

wer

e as

follo

ws:

Y

ears

End

ed D

ecem

ber

31

2009

2008

TFN

$ 4

58,5

19

$

377

,035

TA

T

-

488,

422

$

458

,519

$ 8

65,4

57

25.

ASS

ETS

PLED

GED

Th

e as

sets

ple

dged

as c

olla

tera

ls fo

r cre

dit l

ine

of d

epos

it ov

erdr

aft w

ere

as fo

llow

s:

D

ecem

ber

31

2009

2008

Tim

e de

posi

ts

$

10,

000

$

10,

000

26.

CO

MM

ITM

ENTS

AN

D C

ON

TIN

GEN

T EV

ENTS

a.

To e

nhan

ce 3

G m

obile

com

mun

icat

ions

, exp

and

netw

ork

cove

rage

and

incr

ease

the

serv

ice

func

tions

, th

e C

orpo

ratio

n en

tere

d in

to a

3G

exp

ansi

on c

ontra

ct w

ith N

okia

Sie

men

s N

etw

orks

Tai

wan

Co.

, Ltd

. fo

r $4,

800,

000

thou

sand

in S

epte

mbe

r 200

6 an

d $3

,242

,661

thou

sand

in M

ay 2

009,

resp

ectiv

ely.

A

s of

Dec

embe

r 31

, 20

09,

the

purc

hase

am

ount

was

$4,

693,

485

thou

sand

and

$97

5,55

6 th

ousa

nd,

resp

ectiv

ely.

b.

Fu

ture

min

imum

ren

tal p

aym

ents

as

of D

ecem

ber

31, 2

009

for

sign

ifica

nt o

pera

ting

leas

e ag

reem

ents

ar

e su

mm

ariz

ed a

s fol

low

s:

A

mou

nt

20

10

$ 4

2,35

2 20

11

26

,268

20

12

17

,893

20

13

8,

976

2014

8,97

6

132


- 39

-

28.

SEG

ME

NT

INFO

RM

ATI

ON

a.

Indu

stry

Th

e C

orpo

ratio

n is

prim

arily

a w

irele

ss c

omm

unic

atio

n se

rvic

es p

rovi

der.

b.

Fo

reig

n op

erat

ions

Th

e C

orpo

ratio

n ha

s no

reve

nue-

gene

ratin

g un

it th

at o

pera

tes o

utsi

de th

e R

OC

.

c.

Fore

ign

reve

nues

Th

e C

orpo

ratio

n ha

s no

fore

ign

reve

nues

.

d.

C

usto

mer

s with

reve

nues

exc

eedi

ng 1

0% o

f the

tota

l net

ope

ratin

g re

venu

es w

ere

as fo

llow

s:

Y

ears

End

ed D

ecem

ber

31

2009

2008

C

ompa

ny

Am

ount

Per

cent

age

of

Ope

ratin

g R

even

ue

Am

ount

Per

cent

age

of

Ope

ratin

g R

even

ue

C

hung

hwa

Tele

com

Co.

, Ltd

.

$ 8

,730

,057

15

$ 8

,956

,659

16

133


- 40

-

TA

BL

E 1

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S FI

NA

NC

ING

PR

OV

IDE

D

YE

AR

EN

DE

D D

EC

EM

BE

R 3

1, 2

009

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

)

No.

L

endi

ng C

ompa

ny

Bor

row

ing

Com

pany

Fi

nanc

ial

Stat

emen

t A

ccou

nt

Max

imum

B

alan

ce fo

r th

e Pe

riod

E

ndin

g B

alan

ce

Inte

rest

Rat

e Fi

nanc

ing

Purp

ose

Tra

nsac

tion

Am

ount

s R

easo

ns fo

r Sh

ort-

term

Fi

nanc

ing

Allo

wan

ce fo

r D

oubt

ful

Acc

ount

s

Col

late

ral

Len

ding

Lim

it fo

r E

ach

Bor

row

ing

Com

pany

Len

ding

C

ompa

ny’s

L

endi

ng A

mou

nt

Lim

its

Item

V

alue

0

Taiw

an M

obile

Co.

, Ltd

. (th

e “C

orpo

ratio

n”)

Tai F

u M

edia

Tec

hnol

ogy

Co.

, Ltd

. O

ther

rece

ivab

les

$

2,

045,

000

$

-

0.83

8%-2

.417

%

Shor

t-ter

m

finan

cing

$

- To

mee

t its

fina

ncin

g ne

eds

in a

cqui

ring

min

oriti

es

$

-

- -

$

20,

829,

291

(Not

e 1)

$ 2

0,82

9,29

1

(N

ote

1)

Wea

lth M

edia

Te

chno

logy

Co.

, Ltd

. O

ther

rece

ivab

les

60,0

00

45,0

00

0.83

8%

Shor

t-ter

m

finan

cing

-

Ope

ratio

n re

quire

men

ts

- -

-

20

,829

,291

(N

ote

1)

20,8

29,2

91

(Not

e 1)

TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les

2,00

0,00

0

2,

000,

000

0.83

8%

Shor

t-ter

m

finan

cing

-

Ope

ratio

n re

quire

men

ts

- -

-

20

,829

,291

(N

ote

1)

20,8

29,2

91

(Not

e 1)

Ta

iwan

Cel

lula

r Co.

, Ltd

. O

ther

rece

ivab

les

8,00

0,00

0

-

0.84

7%

Shor

t-ter

m

finan

cing

-

Ope

ratio

n re

quire

men

ts

- -

-

20

,829

,291

(N

ote

1)

20,8

29,2

91

(Not

e 1)

1 Ta

iwan

Cel

lula

r Co.

, Ltd

. TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les

5,04

0,00

0

4,

670,

000

0.83

8%-2

.417

%

Shor

t-ter

m

finan

cing

-

To m

eet i

ts fi

nanc

ing

need

s in

acq

uirin

g m

inor

ities

an

d op

erat

ion

requ

irem

ents

- -

-

20

,878

,023

(N

ote

1)

20,8

78,0

23

(Not

e 1)

TCC

Inve

stm

ent C

o., L

td.

Oth

er re

ceiv

able

s

2,

270,

000

2,27

0,00

0 0.

845%

Sh

ort-t

erm

fin

anci

ng

- O

pera

tion

requ

irem

ents

-

- -

20,8

78,0

23

(Not

e 1)

20

,878

,023

(N

ote

1)

2

TCC

Inve

stm

ent C

o., L

td.

(Not

e 3)

TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les

1,00

0,00

0

-

2.41

7%

Shor

t-ter

m

finan

cing

-

To m

eet i

ts fi

nanc

ing

need

s in

acq

uirin

g m

inor

ities

-

- -

8,38

6,25

4

(N

ote

1)

8,38

6,25

4

(N

ote

1)

TFN

Med

ia C

o., L

td.

Oth

er re

ceiv

able

s

2,

900,

000

- 0.

929%

-2.6

02%

Sh

ort-t

erm

fin

anci

ng

- O

pera

tion

requ

irem

ents

-

- -

8,38

6,25

4

(N

ote

1)

8,38

6,25

4

(N

ote

1)

3

Taiw

an F

ixed

Net

wor

k C

o.,

Ltd.

TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les

1,32

0,00

0

-

0.86

2%-2

.581

%

Shor

t-ter

m

finan

cing

-

Ope

ratio

n re

quire

men

ts

- -

-

14

,084

,712

(N

ote

1)

14,0

84,7

12

(Not

e 1)

Th

e C

orpo

ratio

n O

ther

rece

ivab

les

1,60

0,00

0

-

1.06

8%-2

.417

%

Shor

t-ter

m

finan

cing

-

Ope

ratio

n re

quire

men

ts

- -

-

14

,084

,712

(N

ote

1)

14,0

84,7

12

(Not

e 1)

Ta

iwan

Cel

lula

r Co.

, Ltd

. O

ther

rece

ivab

les

8,41

0,00

0

8,

040,

000

0.83

8%-0

.847

%

Shor

t-ter

m

finan

cing

-

Ope

ratio

n re

quire

men

ts

- -

-

14

,084

,712

(N

ote

1)

14,0

84,7

12

(Not

e 1)

4 U

nion

Cab

le T

V C

o., L

td.

TFN

Med

ia C

o., L

td.

Oth

er re

ceiv

able

s -

rela

ted

parti

es

700,

000

700,

000

0.83

8%-2

.604

%

Tran

sact

ions

27

0,21

3 B

usin

ess r

equi

rem

ents

-

- -

13,5

00,0

00

(Not

e 2)

13

,500

,000

(N

ote

2)

5

Man

grov

e C

able

TV

C

orpo

ratio

n TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les -

re

late

d pa

rties

18

8,00

0

-

0.84

4%-2

.594

%

Tran

sact

ions

32

,440

B

usin

ess r

equi

rem

ents

-

- -

12,0

00,0

00

(Not

e 2)

12

,000

,000

(N

ote

2)

6

Glo

balv

iew

Cab

le T

V C

o.,

Ltd.

TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les -

re

late

d pa

rties

45

0,00

0

20

0,00

0 0.

862%

-2.6

04%

Tr

ansa

ctio

ns

221,

977

Bus

ines

s req

uire

men

ts

- -

-

12

,000

,000

(N

ote

2)

12,0

00,0

00

(Not

e 2)

7 Ph

oeni

x C

able

TV

Co.

, Ltd

. TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les -

re

late

d pa

rties

68

0,00

0

68

0,00

0 0.

838%

-2.5

94%

Tr

ansa

ctio

ns

563,

225

Bus

ines

s req

uire

men

ts

- -

-

12

,000

,000

(N

ote

2)

12,0

00,0

00

(Not

e 2)

8 Sh

in H

o C

able

TV

Co.

, Ltd

. (N

ote

4)

TFN

Med

ia C

o., L

td.

Oth

er re

ceiv

able

s -

rela

ted

parti

es

207,

700

- 0.

839%

-2.6

04%

Tr

ansa

ctio

ns

1,35

0 B

usin

ess r

equi

rem

ents

-

- -

12,0

00,0

00

(Not

e 2)

12

,000

,000

(N

ote

2)

9

Yeo

ng Ji

aleh

Cab

le T

V C

o.,

Ltd.

TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les -

re

late

d pa

rties

36

0,00

0

36

0,00

0 0.

838%

-2.5

94%

Tr

ansa

ctio

ns

478,

941

Bus

ines

s req

uire

men

ts

- -

-

24

,000

,000

(N

ote

2)

24,0

00,0

00

(Not

e 2)

10

TFN

Med

ia C

o., L

td.

Win

TV B

road

cast

ing

Co.

, Lt

d.

Oth

er re

ceiv

able

s -

rela

ted

parti

es

470,

000

307,

000

0.83

9%-0

.862

%

Tran

sact

ions

57

,336

B

usin

ess r

equi

rem

ents

-

- -

15,0

00,0

00

(Not

e 2)

15

,000

,000

(N

ote

2)

(C

ontin

ued)

134


- 41

-

No.

L

endi

ng C

ompa

ny

Bor

row

ing

Com

pany

Fi

nanc

ial

Stat

emen

t A

ccou

nt

Max

imum

B

alan

ce fo

r th

e Pe

riod

E

ndin

g B

alan

ce

Inte

rest

Rat

e Fi

nanc

ing

Purp

ose

Tra

nsac

tion

Am

ount

s R

easo

ns fo

r Sh

ort-

term

Fi

nanc

ing

Allo

wan

ce fo

r D

oubt

ful

Acc

ount

s

Col

late

ral

Len

ding

Lim

it fo

r E

ach

Bor

row

ing

Com

pany

Len

ding

C

ompa

ny’s

L

endi

ng A

mou

nt

Lim

its

Item

V

alue

11

W

ealth

Med

ia T

echn

olog

y C

o., L

td.

Tai F

u M

edia

Tec

hnol

ogy

Co.

, Ltd

. O

ther

rece

ivab

les -

re

late

d pa

rties

$

60,0

00

$

45

,000

0.

838%

Sh

ort-t

erm

fin

anci

ng

$

-

Rep

aym

ent o

f fin

anci

ng

$

-

- -

$

77

,046

(N

ote

1)

$

77

,046

(N

ote

1)

12

Ta

i Fu

Med

ia T

echn

olog

y C

o., L

td.

Glo

bal W

ealth

Med

ia

Tech

nolo

gy C

o., L

td.

Oth

er re

ceiv

able

s -

rela

ted

parti

es

9,00

0

4,

000

0.86

7%

Shor

t-ter

m

finan

cing

-

To m

eet i

ts fi

nanc

ing

need

s in

acq

uirin

g m

inor

ities

-

- -

76,4

71

(Not

e 1)

76

,471

(N

ote

1)

N

ote

1:

For t

he e

ntiti

es w

hich

hav

e sh

ort-t

erm

fina

ncin

g ne

eds

(loan

ing

entit

ies)

, the

agg

rega

te a

mou

nt o

f loa

ning

fund

sha

ll no

t exc

eed

40 p

erce

nt o

f the

fina

ncin

g co

mpa

ny's

net w

orth

. T

he in

divi

dual

loan

ing

fund

sha

ll be

lim

ited

to th

e lo

wes

t am

ount

of t

he fo

llow

ing

item

s:

1) 4

0 pe

rcen

t of t

he

finan

cing

com

pany

's ne

t wor

th; 2

) the

am

ount

that

the

finan

cing

com

pany

inve

sts i

n th

e lo

anin

g en

titie

s; o

r 3) t

he a

mou

nt =

(the

shar

e po

rtion

of t

he lo

anin

g en

titie

s tha

t the

fina

ncin

g co

mpa

ny in

vest

s)*

(the

tota

l loa

ning

am

ount

s of t

he lo

anin

g en

titie

s).

In

the

even

t tha

t a fi

nanc

ing

com

pany

di

rect

ly o

r ind

irect

ly 1

00%

ow

ns a

cou

nter

-par

ty, t

he in

divi

dual

lend

ing

amou

nt a

nd th

e ag

greg

ate

amou

nt o

f loa

ning

fund

s sha

ll no

t exc

eed

40%

of t

he fi

nanc

ing

com

pany

’s n

et w

orth

. N

ote

2:

Whe

re fu

nds a

re lo

aned

for r

easo

ns o

f bus

ines

s dea

lings

, the

indi

vidu

al le

ndin

g am

ount

and

the

aggr

egat

e am

ount

of l

oani

ng fu

nds s

hall

be b

oth

limite

d to

the

high

er a

mou

nt o

f the

follo

win

g ite

ms:

1)

a m

ultip

le o

f the

fina

ncin

g co

mpa

ny’s

cap

ital,

or 2

) the

am

ount

of b

usin

ess d

ealin

g.

Not

e 3:

TC

C In

vest

men

t Co.

, Ltd

. ass

umed

all

TFN

Inve

stm

ent C

o., L

td.’s

fina

ncin

g pr

ovid

ed to

oth

ers d

ue to

mer

ger.

Not

e 4:

Sh

in H

o C

able

TV

Co.

, Ltd

. was

liqu

idat

ed o

n D

ecem

ber 1

, 200

9.

(C

oncl

uded

)

135


- 42

-

TAB

LE 2

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S EN

DO

RSE

ME

NT/

GU

AR

AN

TEE

PRO

VID

ED

YEA

R E

ND

ED D

ECEM

BER

31,

200

9 (I

n Th

ousa

nds o

f New

Tai

wan

Dol

lars

)

No.

En

dors

emen

t/Gua

rant

or

(A)

Rec

eivi

ng P

arty

M

axim

um G

uara

ntee

/ En

dors

emen

t Am

ount

C

an B

e Pr

ovid

ed to

Ea

ch R

ecei

ving

Par

ty

Max

imum

Bal

ance

for

the

Peri

od

(Not

e 1)

Endi

ng B

alan

ce

(Not

e 1)

V

alue

of C

olla

tera

ls

Rat

io o

f Acc

umul

ated

En

dors

emen

t/ G

uara

ntee

to N

et

Wor

th o

f the

G

uara

ntor

(Not

e 1)

Max

imum

Gua

rant

ee/

Endo

rsem

ent C

an B

e Pr

ovid

ed b

y th

e G

uara

ntor

/End

orse

r

Nam

e (B

)

Nat

ure

of

Rel

atio

nshi

p (B

is A

’s)

0 Ta

iwan

Mob

ile C

o., L

td. (

the

“Cor

pora

tion”

) Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. (N

ote

2)

$

42

,000

,000

(N

ote

3)

$

34

,878

,330

$

34,8

78,3

30

$

-

66.9

8%

$

52

,073

,226

1 Ta

iwan

Tel

eser

vice

s &

Tech

nolo

gies

Co.

, Ltd

. Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. (N

ote

4)

20,0

00

(Not

e 5)

14

6

14

6

-

0.16

%

93,0

63

(Not

e 5)

N

ote

1:

Max

imum

gua

rant

ee/e

ndor

sem

ent a

mou

nt fo

r the

per

iod

and

the

endi

ng b

alan

ce a

re th

e am

ount

allo

wed

, not

act

ual a

ppro

pria

tion.

N

ote

2:

Dire

ct/in

dire

ct su

bsid

iary

N

ote

3:

For 1

00%

dire

ct/in

dire

ct o

wne

d su

bsid

iarie

s, th

e ag

greg

ate

endo

rsem

ent/g

uara

ntee

am

ount

pro

vide

d sh

all n

ot e

xcee

d th

e ne

t wor

th o

f the

Cor

pora

tion,

and

the

uppe

r-lim

it to

eac

h su

bsid

iary

shal

l be

the

doub

le o

f the

inve

stm

ent a

mou

nt.

Not

e 4:

Pa

rent

com

pany

N

ote

5:

TT&

T is

dire

ctly

and

indi

rect

ly 1

00%

ow

ned

by T

FN.

The

end

orse

men

t/gua

rant

ee a

mou

nt p

rovi

ded

by T

T&T,

shal

l be

limite

d w

ithin

the

net w

orth

of T

T&T,

and

not

ove

r dou

ble

of th

e in

vest

men

t am

ount

in T

T&T.

136


- 43

-

TAB

LE 3

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S M

AR

KET

AB

LE S

ECU

RIT

IES

HE

LD

DEC

EMB

ER 3

1, 2

009

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs o

r U

.S. D

olla

rs)

Inve

stin

g C

ompa

ny

(A)

Mar

keta

ble

Secu

ritie

s Inv

este

d (B

)

Rel

atio

nshi

p w

ith

the

Inve

stin

g C

ompa

ny (B

is A

’s)

Fina

ncia

l Sta

tem

ent A

ccou

nt

Dec

embe

r 31

, 200

9 N

ote

Shar

es/U

nits

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d in

200

4 re

duce

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N

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9,14

9

5,55

2,13

7

(Not

e 3)

(Not

e 4)

(Not

e 4)

TF

N U

nion

St

ock

Inve

stm

ent C

o.,

Ltd.

Ta

iwan

Mob

ile C

o., L

td.

Ava

ilabl

e-fo

r-sa

le

finan

cial

ass

ets -

no

n-cu

rren

t

Taiw

an F

ixed

N

etw

ork

Co.

, Lt

d.

Pare

nt

-

-

45

6,29

5

22,7

69,1

09

-

-

-

-

45

6,29

5

28,4

72,7

93

TC

CI I

nves

tmen

t S

tock

&

Dev

elop

men

t C

o., L

td.

Taiw

an M

obile

Co.

, Ltd

. A

vaila

ble-

for-

sale

fin

anci

al a

sset

s -

non-

curr

ent

TFN

Inve

stm

ent

Co.

, Ltd

. Pa

rent

-

-

132,

849

6,

629,

149

-

-

-

-

13

2,84

9

8,28

9,75

7

TW

M H

oldi

ng

AD

S

C

o., L

td.

Hur

ray!

Hol

ding

Co.

, Ltd

. A

vaila

ble-

for-

sale

fin

anci

al a

sset

s -

curr

ent

- -

1,

080

US$

2,

052

-

-

1,

080

US$

4,

320

US$

5,

771

US$

(1

,451

)

-

-

N

ote

1:

The

amou

nt o

f beg

inni

ng a

nd e

ndin

g fu

nd b

alan

ce th

at b

elon

gs to

mar

keta

ble

secu

ritie

s inc

lude

d th

e un

real

ized

reva

luat

ion

gain

or l

oss o

n fin

anci

al a

sset

s. N

ote

2:

TFN

reso

lved

to in

ject

cap

ital i

nto

TUI w

ith it

s Tai

wan

Mob

ile sh

ares

. T

he d

iffer

ence

bet

wee

n th

e or

igin

al c

ost a

nd th

e di

spos

al p

rice

of sh

ares

, $4,

152,

548

thou

sand

, was

reco

gniz

ed a

s def

erre

d cr

edits

. T

here

was

no

gain

or l

oss o

n th

is tr

ansa

ctio

n.

Not

e 3:

TF

NI r

esol

ved

to in

ject

cap

ital i

nto

TID

with

its T

aiw

an M

obile

shar

es.

The

diff

eren

ce b

etw

een

the

orig

inal

cos

t and

the

disp

osal

pric

e of

shar

es, $

1,07

7,01

2 th

ousa

nd, w

as re

cogn

ized

as d

efer

red

cred

its.

The

re w

as n

o ga

in o

r los

s on

this

tran

sact

ion.

N

ote

4:

TCC

I ass

umed

the

222,

774

thou

sand

Tai

wan

Mob

ile sh

ares

and

$13

,901

,109

thou

sand

(inc

ludi

ng u

nrea

lized

gai

n of

fina

ncia

l ins

trum

ents

) fro

m T

FNI d

ue to

mer

ger.

140


- 47

-

TA

BL

E 5

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S T

OT

AL

PU

RC

HA

SE F

RO

M O

R S

AL

E T

O R

EL

AT

ED

PA

RT

IES

AM

OU

NT

ING

TO

AT

LE

AST

$10

0 M

ILLI

ON

OR

20%

OF

TH

E P

AID

-IN

CA

PIT

AL

Y

EA

R E

ND

ED

DE

CE

MB

ER

31,

200

9 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs)

Com

pany

Nam

e (A

) R

elat

ed P

arty

(B

) N

atur

e of

Rel

atio

nshi

p (B

is A

’s)

Tra

nsac

tion

Det

ails

T

rans

actio

ns w

ith T

erm

s Diff

eren

t fr

om O

ther

s N

otes

/Acc

ount

s Pay

able

or

Rec

eiva

ble

Not

e Pu

rcha

se/

Sale

A

mou

nt

% to

Tot

al

Paym

ent T

erm

s U

nit P

rice

Pa

ymen

t Ter

ms

End

ing

Bal

ance

%

to T

otal

Taiw

an M

obile

Co.

, Ltd

. (th

e “C

orpo

ratio

n”)

Taiw

an F

ixed

Net

wor

k C

o., L

td.

Subs

idia

ry

Sale

$ (2

,276

,319

)

(4

) B

ased

on

cont

ract

term

s -

-

$

368,

183

6 (N

ote

1)

Pu

rcha

se

1,39

0,30

3

(N

ote

2)

Bas

ed o

n co

ntra

ct te

rms

- -

(301

,974

)

(N

ote

3)

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s C

o., L

td.

Su

bsid

iary

Pu

rcha

se

859,

159

(Not

e 4)

B

ased

on

cont

ract

term

s -

-

(6

5,79

0)

(Not

e 5)

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s C

o., L

td.

Th

e C

orpo

ratio

n U

ltim

ate

pare

nt

Sale

(8

59,3

50)

(85)

B

ased

on

cont

ract

term

s -

-

65

,804

85

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. Pa

rent

Sa

le

(156

,205

)

(1

5)

Bas

ed o

n co

ntra

ct te

rms

- -

11,2

40

15

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. Th

e C

orpo

ratio

n U

ltim

ate

pare

nt

Sale

(1

,464

,178

)

(1

5)

Bas

ed o

n co

ntra

ct te

rms

- -

294,

399

15

Purc

hase

2,

273,

452

32

Bas

ed o

n co

ntra

ct te

rms

- -

(367

,857

)

(2

1)

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s C

o., L

td.

Su

bsid

iary

Pu

rcha

se

156,

205

(Not

e 4)

B

ased

on

cont

ract

term

s -

-

(1

1,24

0)

(Not

e 5)

TFN

Med

ia C

o., L

td.

Phoe

nix

Cab

le T

V C

o., L

td.

Subs

idia

ry

Cha

nnel

leas

ing

fee

(459

,667

)

(1

9)

Bas

ed o

n co

ntra

ct te

rms

(Not

e 6)

(N

ote

6)

115,

122

27

Uni

on C

able

TV

Co.

, Ltd

. Su

bsid

iary

C

hann

el le

asin

g fe

e

(2

12,0

96)

(9)

Bas

ed o

n co

ntra

ct te

rms

(Not

e 6)

(N

ote

6)

53,2

05

13

Yeo

ng Ji

aleh

Cab

le T

V C

o., L

td.

Subs

idia

ry

Cha

nnel

leas

ing

fee

(388

,009

)

(1

6)

Bas

ed o

n co

ntra

ct te

rms

(Not

e 6)

(N

ote

6)

97,9

17

23

Glo

balv

iew

Cab

le T

V C

o., L

td.

Subs

idia

ry

Cha

nnel

leas

ing

fee

(182

,643

)

(7

) B

ased

on

cont

ract

term

s (N

ote

6)

(Not

e 6)

45

,862

11

Man

grov

e C

able

TV

Cor

pora

tion

Dai

-Ka

Ltd.

R

elat

ed p

arty

in su

bsta

nce

Roy

alty

of c

opyr

ight

143,

665

59

Bas

ed o

n co

ntra

ct te

rms

(Not

e 6)

(N

ote

6)

(35,

916)

(8

2)

G

loba

lvie

w C

able

TV

Co.

, Ltd

. TF

N M

edia

Co.

, Ltd

. Pa

rent

R

oyal

ty o

f cop

yrig

ht

18

2,64

3

58

B

ased

on

cont

ract

term

s (N

ote

6)

(Not

e 6)

(4

5,86

2)

(82)

Uni

on C

able

TV

Co.

, Ltd

. TF

N M

edia

Co.

, Ltd

. Pa

rent

R

oyal

ty o

f cop

yrig

ht

21

2,09

6

60

B

ased

on

cont

ract

term

s (N

ote

6)

(Not

e 6)

(5

3,20

5)

(84)

Yeo

ng Ji

aleh

Cab

le T

V C

o., L

td.

TFN

Med

ia C

o., L

td.

Pare

nt

Roy

alty

of c

opyr

ight

388,

009

59

Bas

ed o

n co

ntra

ct te

rms

(Not

e 6)

(N

ote

6)

(97,

917)

(7

9)

Ph

oeni

x C

able

TV

Co.

, Ltd

. TF

N M

edia

Co.

, Ltd

. Pa

rent

R

oyal

ty o

f cop

yrig

ht

45

9,66

7

63

B

ased

on

cont

ract

term

s (N

ote

6)

(Not

e 6)

(1

15,1

22)

(89)

Not

e 1:

Th

e $3

68,1

83 th

ousa

nd a

ccou

nts r

ecei

vabl

e am

ount

was

exp

ress

ed o

n a

gros

s bas

is in

acc

ord

with

sale

s am

ount

. T

he n

et a

ccou

nts r

ecei

vabl

e sh

ould

be

$19,

347

thou

sand

afte

r ded

uctin

g ac

coun

ts p

ayab

le a

nd a

ccru

ed c

usto

dial

rece

ipts/

paym

ents

tota

led

$348

,836

thou

sand

. N

ote

2:

Incl

uded

ope

ratin

g co

sts a

nd o

pera

ting

expe

nses

. N

ote

3:

Incl

uded

acc

ount

s pay

able

and

acc

rued

exp

ense

s.

Not

e 4:

R

ecog

nize

d as

ope

ratin

g ex

pens

es.

Not

e 5:

R

ecog

nize

d as

acc

rued

exp

ense

s. N

ote

6:

No

com

para

bles

on

such

kin

d of

tran

sact

ions

.

141


- 48

-

TAB

LE 6

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S R

ECEI

VA

BLE

S FR

OM

REL

ATE

D P

AR

TIE

S A

MO

UN

TIN

G T

O A

T LE

AST

$10

0 M

ILLI

ON

OR

20%

OF

THE

PAID

-IN

CA

PIT

AL

D

ECEM

BER

31,

200

9 (I

n Th

ousa

nds o

f New

Tai

wan

Dol

lars

)

Com

pany

Nam

e (A

) R

elat

ed P

arty

(B

) N

atur

e of

Rel

atio

nshi

p (B

is A

’s)

Endi

ng B

alan

ce

Turn

over

R

ate

Ove

rdue

A

mou

nt R

ecei

ved

in

Subs

eque

nt P

erio

d A

llow

ance

for

Bad

D

ebts

A

mou

nt

Act

ion

Take

n

Taiw

an M

obile

Co.

, Ltd

. (th

e “C

orpo

ratio

n”)

Taiw

an F

ixed

Net

wor

k C

o., L

td.

Subs

idia

ry

Acc

ount

s rec

eiva

ble

$ 36

8,18

3 5.

92

$

-

-

$

167

$

-

O

ther

rece

ivab

les

53

,418

- -

41

-

TFN

Med

ia C

o., L

td.

Subs

idia

ry

Oth

er re

ceiv

able

s

2,00

3,83

6

- -

-

-

Ta

iwan

Cel

lula

r Co.

, Ltd

. Su

bsid

iary

O

ther

rece

ivab

les

3,

500,

000

-

-

-

-

Taiw

an C

ellu

lar C

o., L

td.

TFN

Med

ia C

o., L

td.

Subs

idia

ry

Oth

er re

ceiv

able

s

4,67

9,01

4

- -

240,

632

-

TCC

Inve

stm

ent C

o., L

td.

Subs

idia

ry

Oth

er re

ceiv

able

s

2,27

4,46

7

- -

-

-

Ta

iwan

Tel

eser

vice

s & T

echn

olog

ies C

o., L

td.

The

Cor

pora

tion

Ulti

mat

e pa

rent

A

ccou

nts r

ecei

vabl

e

65,8

04

11.8

1

-

-

14

-

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. Pa

rent

A

ccou

nts r

ecei

vabl

e

11,2

40

11.0

7

-

-

-

-

Taiw

an F

ixed

Net

wor

k C

o., L

td.

The

Cor

pora

tion

Ulti

mat

e pa

rent

A

ccou

nts r

ecei

vabl

e

294,

399

6.06

-

-

8,

989

-

Oth

er re

ceiv

able

s

268,

588

-

-

14

8,48

8

-

Ta

iwan

Cel

lula

r Co.

, Ltd

. Pa

rent

O

ther

rece

ivab

les

8,

055,

329

-

-

24

0,58

4

-

TF

N M

edia

Co.

, Ltd

. Ph

oeni

x C

able

TV

Co.

, Ltd

. Su

bsid

iary

A

ccou

nts r

ecei

vabl

e

134,

306

5.37

-

-

-

-

Yeo

ng Ji

aleh

Cab

le T

V C

o., L

td.

Subs

idia

ry

Acc

ount

s rec

eiva

ble

11

5,56

7 5.

57

- -

-

-

W

inTV

Bro

adca

stin

g C

o., L

td.

Rel

ated

par

ty in

su

bsta

nce

Acc

ount

s rec

eiva

ble

11

6 13

.33

- -

-

-

O

ther

rece

ivab

les

30

7,00

0

- -

-

-

Ph

oeni

x C

able

TV

Co.

, Ltd

. TF

N M

edia

Co.

, Ltd

. Pa

rent

A

ccou

nts r

ecei

vabl

e

2,85

9 13

.37

-

-

-

-

Oth

er re

ceiv

able

s

680,

139

-

-

-

- U

nion

Cab

le T

V C

o., L

td.

TFN

Med

ia C

o., L

td.

Pare

nt

Acc

ount

s rec

eiva

ble

5,

767

6.11

-

-

-

-

Oth

er re

ceiv

able

s

700,

055

-

-

-

- G

loba

lvie

w C

able

TV

Co.

, Ltd

. TF

N M

edia

Co.

, Ltd

. Pa

rent

A

ccou

nts r

ecei

vabl

e

1,93

3 11

.00

- -

-

-

O

ther

rece

ivab

les

20

0,03

6

- -

-

-

Yeo

ng Ji

aleh

Cab

le T

V C

o., L

td.

TFN

Med

ia C

o., L

td.

Pare

nt

Acc

ount

s rec

eiva

ble

3,

020

14.1

3

-

-

-

-

Oth

er re

ceiv

able

s

360,

127

-

-

-

-

142


- 49

-

TA

BL

E 7

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S N

AM

ES,

LO

CA

TIO

NS,

AN

D O

TH

ER

INFO

RM

AT

ION

OF

INV

EST

EE

S O

N W

HIC

H T

HE

CO

MPA

NY

EX

ER

CIS

ES

SIG

NIF

ICA

NT

INFL

UE

NC

E

YE

AR

EN

DE

D D

EC

EM

BE

R 3

1, 2

009

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

or

U.S

. Dol

lars

)

Inve

stor

In

vest

ee

Loc

atio

n M

ain

Bus

ines

ses a

nd P

rodu

cts

Inve

stm

ent A

mou

nt

Bal

ance

as o

f Dec

embe

r 31

, 200

9 N

et In

com

e (L

oss)

of t

he

Inve

stee

Inve

stm

ent

Inco

me

(Los

s)

Not

e D

ecem

ber

31,

2009

D

ecem

ber

31,

2008

Sh

ares

(T

hous

ands

) Pe

rcen

tage

of

Ow

ners

hip

Car

ryin

g V

alue

Ta

iwan

Mob

ile C

o., L

td. (

the

“Cor

pora

tion”

) Ta

iwan

Cel

lula

r Co.

, Ltd

. Ta

ipei

, Tai

wan

Te

leco

m e

ngin

eerin

g an

d IT

serv

ice

$ 3

7,55

8,33

0 $

41,

058,

330

30

,000

10

0.00

$

9,

353,

920

(N

ote

1)

$

2,64

8,82

3 $

3,

115,

006

Ta

ipei

New

Hor

izon

s Co.

, Ltd

. Ta

ipei

, Tai

wan

R

eal E

stat

e R

enta

l and

Sal

e

249,

500

24

9,50

0

24,9

50

49.9

0

211,

974

(7

5,20

3)

(3

7,52

6)

W

ealth

Med

ia T

echn

olog

y C

o., L

td.

Taip

ei, T

aiw

an

Inve

stm

ent

27

2,00

0

272,

000

27

,200

10

0.00

192,

615

(3

3,12

0)

(3

3,12

0)

Wea

lth M

edia

Tec

hnol

ogy

Co.

, Ltd

. Ta

i Fu

Med

ia T

echn

olog

y C

o., L

td.

Taip

ei, T

aiw

an

Inve

stm

ent

27

0,00

0

270,

000

27

,000

10

0.00

191,

178

(3

2,87

1)

N

A

Ta

i Fu

Med

ia T

echn

olog

y C

o., L

td.

Glo

bal W

ealth

Med

ia T

echn

olog

y C

o., L

td.

Taip

ei C

ount

y, T

aiw

an

Inve

stm

ent

84

,000

84,0

00

8,

400

100.

00

86

,982

2,46

5

NA

Fu

Jia

Leh

Med

ia T

echn

olog

y C

o., L

td.

Taip

ei, T

aiw

an

Inve

stm

ent

1,

700

2,

001,

700

10

0 10

0.00

968

(2

31)

N

A

Fu S

in M

edia

Tec

hnol

ogy

Co.

, Ltd

. Ta

ipei

, Tai

wan

In

vest

men

t

135,

000

13

5,00

0

13,5

00

100.

00

14

0,85

8

5,38

6

NA

G

loba

l For

est M

edia

Tec

hnol

ogy

Co.

, Ltd

. Ta

ipei

, Tai

wan

In

vest

men

t

1,00

0

1,00

0

100

100.

00

78

0

(145

)

NA

Glo

bal W

ealth

Med

ia T

echn

olog

y C

o., L

td.

Glo

balv

iew

Cab

le T

V C

o., L

td.

Taip

ei C

ount

y, T

aiw

an

Cab

le T

V se

rvic

e pr

ovid

er

90

,099

82,8

82

3,

749

6.69

4

89,1

99

42

,400

NA

Fu S

in M

edia

Tec

hnol

ogy

Co.

, Ltd

. Ph

oeni

x C

able

TV

Co.

, Ltd

. K

aohs

iung

Cou

nty,

Tai

wan

C

able

TV

serv

ice

prov

ider

133,

358

13

3,35

8

2,27

2 3.

34

13

1,93

7

166,

870

N

A

Ta

iwan

Cel

lula

r Co.

, Ltd

. TW

M H

oldi

ng C

o. L

td.

Brit

ish

Virg

in Is

land

s In

vest

men

t U

S$

10,8

00

US$

10

,800

1 sh

are

100.

00

US$

8,

415

US$

(1

,396

)

NA

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. Ta

ipei

, Tai

wan

Fi

xed

line

serv

ice

prov

ider

21,0

00,0

00

40

,000

,000

2,10

0,00

0 10

0.00

35,2

11,7

80

2,

195,

548

N

A

Taiw

an D

igita

l Com

mun

icat

ion

Co.,

Ltd.

Ta

ipei

, Tai

wan

Te

leco

m e

ngin

eerin

g an

d IT

serv

ice

12

,000

12,0

00

1,

200

100.

00

10

,950

(131

)

NA

TC

C In

vest

men

t Co.

, Ltd

. Ta

ipei

, Tai

wan

In

vest

men

t

20,4

51,0

00

-

2,

100

100.

00

21

,092

,818

502,

577

N

A

TW

M H

oldi

ng C

o. L

td.

TWM

Com

mun

icat

ions

(Bei

jing)

Ltd

. B

eijin

g, C

hina

M

obile

app

licat

ion

deve

lopm

ent a

nd

desi

gn

US$

4,

936

US$

5,

005

-

100.

00

US$

3,

872

US$

22

NA

TCC

Inve

stm

ent C

o., L

td.

Win

TV B

road

cast

ing

Co.

, Ltd

. Ta

ipei

, Tai

wan

TV

pro

gram

pro

vide

r

179,

047

25

2,14

1

17,9

05

98.5

0

253,

732

72

,961

NA

TF

N M

edia

Co.

, Ltd

. Ta

ipei

, Tai

wan

C

able

bro

adba

nd a

nd v

alue

add

ed

serv

ice

prov

ider

2,03

5,71

4

2,03

5,71

4

230,

526

100.

00

1,

763,

621

1,

012,

976

N

A

TC

CI I

nves

tmen

t & D

evel

opm

ent C

o., L

td.

Taip

ei, T

aiw

an

Inve

stm

ent

6,

629,

149

-

40

0 10

0.00

8,12

3,64

1

(56)

NA

TFN

Med

ia C

o., L

td.

Yeo

ng Ji

aleh

Cab

le T

V C

o., L

td.

Taip

ei C

ount

y, T

aiw

an

Cab

le T

V se

rvic

e pr

ovid

er

1,

616,

824

1,

616,

824

33

,940

10

0.00

2,11

1,82

1

160,

341

N

A

Man

grov

e C

able

TV

Cor

pora

tion

Taip

ei C

ount

y, T

aiw

an

Cab

le T

V se

rvic

e pr

ovid

er

39

7,70

3

397,

703

6,

248

(N

ote

2)

29.5

3

546,

514

47

,872

NA

Ph

oeni

x C

able

TV

Co.

, Ltd

. K

aohs

iung

Cou

nty,

Tai

wan

C

able

TV

serv

ice

prov

ider

2,29

4,96

7

2,29

4,96

7

65,8

18

96.6

6

3,14

1,64

4

166,

870

N

A

Uni

on C

able

TV

Co.

, Ltd

. Y

ilan

Cou

nty,

Tai

wan

C

able

TV

serv

ice

prov

ider

1,90

4,44

0

1,90

4,44

0

170,

441

99.9

9

2,05

8,30

4

131,

110

N

A

Glo

balv

iew

Cab

le T

V C

o., L

td.

Taip

ei C

ount

y, T

aiw

an

Cab

le T

V se

rvic

e pr

ovid

er

84

1,41

3

841,

413

51

,733

92

.38

1,

203,

928

42

,400

NA

Taiw

an F

ixed

Net

wor

k C

o., L

td.

TFN

Uni

on In

vest

men

t Co.

, Ltd

. Ta

ipei

, Tai

wan

In

vest

men

t

22,7

69,1

09

-

40

0 10

0.00

27,9

02,3

69

(5

6)

N

A

TFN

HK

LIM

ITED

H

ong

Kon

g Te

leco

mm

unic

atio

ns se

rvic

e pr

ovid

er

5,

816

5,

816

1,

300

100.

00

3,

346

45

7

NA

Ta

iwan

Tel

eser

vice

s & T

echn

olog

ies C

o., L

td.

Ta

ipei

, Tai

wan

C

all c

ente

r ser

vice

and

ISR

(in

tern

atio

nal s

impl

e re

sale

s)

10

,000

10,0

00

1,

000

100.

00

93

,063

57,3

20

N

A

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

,

TT&

T H

oldi

ngs C

o., L

td.

Sam

oa

Inve

stm

ent

US$

1,

300

US$

1,

300

1,

300

100.

00

US$

1,

409

US$

45

NA

Lt

d.

Taiw

an S

uper

Bas

ketb

all C

o., L

td.

Taip

ei, T

aiw

an

Bas

ketb

all t

eam

man

agem

ent

20

,000

20,0

00

2,

000

100.

00

20

,023

14

N

A

TT

&T

Hol

ding

s Co.

, Ltd

. X

iam

en T

aifu

Tel

eser

vice

s & T

echn

olog

ies L

td.

Xia

men

, Chi

na

Cal

l cen

ter s

ervi

ce

US$

1,

300

US$

1,

300

-

100.

00

US$

1,

403

US$

40

NA

Not

e 1:

Th

e C

orpo

ratio

n’s

shar

es h

eld

by T

CC

I, TI

D a

nd T

UI (

all a

re s

ubsi

diar

ies

100%

-ow

ned

by T

CC

) are

cla

ssifi

ed a

s tre

asur

y sh

ares

. T

here

fore

, the

Cor

pora

tion’

s ca

rryi

ng c

ost o

f $52

,195

,059

thou

sand

on

TCC

sha

ll be

redu

ced

by 1

) dow

nwar

d ad

just

ing

$31,

889,

100

thou

sand

, the

car

ryin

g va

lue

of to

tal t

reas

ury

shar

es o

n th

e C

orpo

ratio

n’s b

ook,

2) e

xclu

ding

$11

,420

,417

thou

sand

unr

ealiz

ed g

ain

from

fina

ncia

l ass

ets i

nves

tmen

t, 3)

add

ing

back

$47

5,90

7 th

ousa

nd in

com

e ta

x ex

pens

es re

sulte

d fro

m T

FN a

nd T

FNI’

s disp

osal

gai

n fro

m th

e Co

rpor

atio

n’s s

hare

s, an

d 4)

exc

ludi

ng

reco

gniti

on o

f ups

tream

tran

sact

ions

gai

n of

$7,

529

thou

sand

. N

ote

2:

70.4

7% sh

ares

are

hel

d un

der t

ruste

e ac

coun

ts.

143


- 50

-

TAB

LE 8

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S IN

VES

TME

NT

IN M

AIN

LAN

D C

HIN

A

YEA

R E

ND

ED D

ECEM

BER

31,

200

9 (I

n Th

ousa

nds o

f New

Tai

wan

Dol

lars

or

U.S

. Dol

lars

)

Inve

stee

C

ompa

ny N

ame

Mai

n B

usin

esse

s an

d Pr

oduc

ts

Tota

l Am

ount

of

Paid

-in C

apita

l In

vest

men

t Typ

e

Acc

umul

ated

O

utflo

w o

f In

vest

men

t fro

m

Taiw

an a

s of

Janu

ary

1, 2

009

Inve

stm

ent F

low

s A

ccum

ulat

ed

Out

flow

of

Inve

stm

ent f

rom

Ta

iwan

as o

f D

ecem

ber

31,

2009

% O

wne

rshi

p of

D

irec

t or

Indi

rect

In

vest

men

t

Inve

stm

ent G

ain

(Los

s)

(Not

e 3)

Car

ryin

g V

alue

as

of

Dec

embe

r 31

, 20

09

Acc

umul

ated

In

war

d R

emitt

ance

of

Earn

ings

as o

f D

ecem

ber

31,

2009

Out

flow

In

flow

Xia

men

Tai

fu

Tele

serv

ices

&

Tech

nolo

gies

Ltd

.

Cal

l cen

ter s

ervi

ce

US$

1,

300

(NT$

41

,909

) In

dire

ct in

vest

men

t in

Mai

nlan

d C

hina

thro

ugh

a th

ird p

lace

by

the

Cor

pora

tion’

s sub

sidi

ary,

Ta

iwan

Tel

eser

vice

s &

Tech

nolo

gies

Co.

, Ltd

.

US$

1,

300

(NT$

41

,909

) $

-

$

- U

S$

1,30

0 (N

T$

41,9

09)

100%

ow

ners

hip

of

indi

rect

in

vest

men

t by

the

Cor

pora

tion’

s su

bsid

iary

US$

40

(N

T$

1,29

0) U

S$

1,40

3 (N

T$

45,2

30)

$

-

TWM

C

omm

unic

atio

ns

(Bei

jing)

Ltd

.

Mob

ile a

pplic

atio

n de

velo

pmen

t and

de

sign

US$

3,

000

(NT$

96

,714

) In

dire

ct in

vest

men

t in

Mai

nlan

d C

hina

thro

ugh

a th

ird p

lace

by

the

Cor

pora

tion’

s sub

sidi

ary,

Ta

iwan

Cel

lula

r Co.

, Ltd

.

US$

4,

617

(NT$

14

8,84

3) U

S$

255

(NT$

8,

221)

-

US$

4,

872

(NT$

15

7,06

4) 10

0% o

wne

rshi

p of

in

dire

ct

inve

stm

ent b

y th

e C

orpo

ratio

n’s

subs

idia

ry

US$

22

(N

T$

709)

US$

3,

872

(NT$

12

4,82

6)

-

Acc

umul

ated

Inve

stm

ent i

n M

ainl

and

Chi

na a

s of

D

ecem

ber

31, 2

009

Inve

stm

ent A

mou

nts A

utho

rize

d by

Inve

stm

ent C

omm

issio

n,

MO

EA

(Not

e 2)

Upp

er L

imit

on In

vest

men

t A

utho

rize

d by

Inve

stm

ent

Com

mis

sion,

MO

EA

(Not

e 2)

US$

1,30

0 (N

T$41

,909

) U

S$1,

300

(NT$

41,9

09)

$

93,0

63

U

S$4,

872

(NT$

157,

064)

U

S$5,

300

(NT$

170,

861)

52,

195,

059

N

ote

1:

The

abov

e am

ount

s wer

e tra

nsla

ted

into

New

Tai

wan

dol

lars

at t

he e

xcha

nge

rate

of U

S$1=

NT$

32.2

38, R

MB

1=N

T$4.

7213

as o

f Dec

embe

r 31,

200

9.

Not

e 2:

Th

e in

dire

ct in

vest

men

ts m

ade

by T

aiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

, Ltd

. and

Tai

wan

Cel

lula

r Co.

, Ltd

., su

bsid

iarie

s of t

he C

orpo

ratio

n.

Not

e 3:

C

alcu

latio

n w

as b

ased

on

audi

ted

finan

cial

stat

emen

ts.

144


- 52

-

SCH

EDU

LE 2

T

AIW

AN

MO

BIL

E C

O.,

LT

D.

AC

CO

UN

TS R

ECEI

VA

BLE

D

ECEM

BER

31,

200

9 (I

n Th

ousa

nds o

f New

Tai

wan

Dol

lars

)

Clie

nt

A

mou

nt

R

elat

ed p

artie

s

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

.

$

19

,347

O

ther

(Not

e)

3,

321

22,6

68

Third

par

ties

Chu

nghw

a Te

leco

m C

o., L

td.

70

4,09

5 O

ther

(Not

e)

5,

245,

758

5,94

9,85

3 Le

ss a

llow

ance

for d

oubt

ful a

ccou

nts

(411

,001

)

5,

538,

852

$ 5

,561

,520

N

ote:

Ea

ch o

f the

acc

ount

was

less

than

5%

of t

he to

tal a

ccou

nt b

alan

ce.

- 51

-

SCH

EDU

LE 1

T

AIW

AN

MO

BIL

E C

O.,

LT

D.

CA

SH A

ND

CA

SH E

QU

IVA

LEN

TS

DEC

EMB

ER 3

1, 2

009

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs, U

nles

s Sta

ted

Oth

erw

ise)

It

em

D

ue D

ate

A

mou

nt

C

ash

in b

anks

Fo

reig

n-cu

rren

cy d

epos

its

EUR

1,57

0.25

(exc

hang

e ra

te a

t EU

R1=

NT$

46.2

94)

$

73

US$

1,21

1,52

7.94

(exc

hang

e ra

te a

t US$

1=N

T$32

.238

)

39,0

57

Che

ckin

g de

posi

ts

7,

838

Dem

and

depo

sits

470,

103

517,

071

G

over

nmen

t bon

ds w

ith re

purc

hase

righ

ts

Jan

uary

5, 2

010

265,

000

Sh

ort-t

erm

bill

s with

repu

rcha

se ri

ghts

J

anua

ry 4

, 201

0

20

2,00

0 Ti

me

depo

sits

Fore

ign-

curr

ency

dep

osit

US$

1,40

0,19

3.62

(exc

hang

e ra

te a

t US$

1=N

T$32

.238

)

45,1

39

C

ash

on h

and

21

,999

Rev

olvi

ng fu

nds

5,

833

$ 1

,057

,042

145


- 54

-

SCH

EDU

LE 4

T

AIW

AN

MO

BIL

E C

O.,

LT

D.

CH

AN

GES

IN IN

VES

TME

NTS

AC

CO

UN

TED

FO

R U

SIN

G E

QU

ITY

MET

HO

D

YEA

R E

ND

ED D

ECEM

BER

31,

200

9 (I

n Th

ousa

nds o

f New

Tai

wan

Dol

lars

, Unl

ess S

tate

d O

ther

wise

)

Adj

ustm

ents

M

arke

t Pri

ce

Beg

inni

ng B

alan

ce

In

crea

se

D

ecre

ase

on

Equ

ity

En

ding

Bal

ance

o

r N

et E

quity

Th

ousa

nd

Th

ousa

nd

A

mou

nt

Th

ousa

nd

A

mou

nt

M

etho

d

Thou

sand

% o

f

(Not

es 5

Pa

r V

alue

Shar

es

A

mou

nt

Sh

ares

(Not

e 1)

Shar

es

(N

ote

2)

(N

ote

3)

Sh

ares

Ow

ners

hip

A

mou

nt

an

d 5)

Ta

iwan

Cel

lula

r Co.

, Ltd

.

N

T$10

14

9,95

8

$ 15

,125

,451

230,

042

$

-

35

0,00

0

$ 9,

025,

230

$

3,25

3,69

9

30

,000

10

0.00

$ 9,

353,

920

$

52,1

95,0

59

Taip

ei N

ew H

oriz

ons C

o., L

td.

N

T$10

-

-

24

,950

249,

500

-

-

(37,

526)

24,9

50

49.9

0

21

1,97

4

21

1,97

4 W

ealth

Med

ia T

echn

olog

y C

o., L

td.

NT$

10

27,2

00

22

5,73

5

-

-

-

-

(3

3,12

0)

27

,200

10

0.00

19

2,61

5

19

2,61

5

Tota

l

$

15,3

51,1

86

$ 24

9,50

0

$

9,02

5,23

0

$ 3,

183,

053

$ 9,

758,

509

N

ote

1:

The

incr

ease

in e

quity

-met

hod

inve

stm

ents

incl

uded

the

follo

win

g:

Ta

ipei

New

Hor

izon

s Co.

, Ltd

. $

24

9,50

0 N

ote

2:

The

decr

ease

in e

quity

-met

hod

inve

stm

ents

incl

uded

the

follo

win

g:

a.

D

istri

butin

g ca

sh d

ivid

ends

by

Taiw

an C

ellu

lar C

o., L

td.

$

5,

525,

230

b.

C

apita

l red

uctio

n of

Tai

wan

Cel

lula

r Co.

, Ltd

.

3,50

0,00

0

$

9,02

5,23

0 N

ote

3:

Oth

er a

djus

tmen

t fro

m e

valu

atio

n in

clud

ed th

e fo

llow

ing:

a.

Rec

ogni

zed

inve

stm

ent i

ncom

e fr

om in

vest

ees.

$

3,04

4,36

0

b.

Rec

ogni

zed

chan

ges i

n cu

mul

ativ

e tra

nsla

tion

adju

stm

ent o

f inv

este

es.

(5

,829

)

c.

Rec

ogni

zed

chan

ges i

n re

valu

atio

n ga

in (l

oss)

on

finan

cial

ass

ets o

f inv

este

es.

12

2,21

6

d.

Rec

ogni

zed

chan

ges i

n ne

t los

s not

reco

gniz

ed a

s pen

sion

cost

of i

nves

tees

.

(6,6

59)

e.

R

ecog

nize

d ch

ange

s in

paid

in c

apita

l of i

nves

tees

.

28,9

65

$

3,

183,

053

Not

e 4:

C

alcu

latio

n w

as b

ased

on

audi

ted

finan

cial

stat

emen

ts a

s of D

ecem

ber 3

1, 2

009.

N

ote

5:

Non

e of

the

abov

e in

vest

men

ts w

ere

prov

ided

as c

olla

tera

l.

146


- 53

-

SCH

EDU

LE 3

T

AIW

AN

MO

BIL

E C

O.,

LT

D.

OTH

ER R

ECEI

VA

BLE

S D

ECEM

BER

31,

200

9 (I

n Th

ousa

nds o

f New

Tai

wan

Dol

lars

)

Item

Am

ount

Rec

eiva

ble

for c

apita

l red

uctio

n

$ 3

,500

,000

R

ecei

vabl

e fo

r fin

anci

ng p

rovi

ded

2,

048,

901

Oth

er (N

ote)

217,

151

$

5,7

66,0

52

Not

e:

Each

of t

he a

ccou

nt w

as le

ss th

an 5

% o

f the

tota

l acc

ount

bal

ance

.

- 56

-

SCH

EDU

LE 6

T

AIW

AN

MO

BIL

E C

O.,

LT

D.

NO

N-O

PER

ATI

NG

ASS

ETS

DEC

EMB

ER 3

1, 2

009

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs)

Acc

umul

ated

Net

Car

ryin

g

C

ost

D

epre

ciat

ion

V

alue

A

sset

s lea

sed

to o

ther

s

Land

$ 1

,572

,359

$

-

$ 1

,572

,359

B

uild

ings

76

5,05

2

12

9,34

3

63

5,70

9

$

2,3

37,4

11

$

12

9,34

3

2,

208,

068

Def

erre

d ch

arge

s, ne

t

81

4

2,20

8,88

2 Le

ss a

ccum

ulat

ed im

pairm

ent

(1

0,59

1)

$ 2

,198

,291

Id

le a

sset

s

Land

$

238,

960

$

-

$

23

8,96

0 B

uild

ings

13

7,01

0

27

,403

10

9,60

7 Te

leco

mm

unic

atio

n eq

uipm

ent

51,5

78

15,6

50

35,9

28

$

427,

548

$

43

,053

38

4,49

5 Le

ss a

llow

ance

for p

rice

decl

ine

(35,

929)

Le

ss a

ccum

ulat

ed im

pairm

ent

(1

26,4

29)

$

222,

137

147


- 55

-

SCH

ED

UL

E 5

T

AIW

AN

MO

BIL

E C

O.,

LT

D.

CH

AN

GE

S IN

PR

OPE

RT

Y A

ND

EQ

UIP

ME

NT

Y

EA

R E

ND

ED

DE

CE

MB

ER

31,

200

9 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs)

Beg

inni

ng

C

hang

es fo

r th

e Pe

riod

End

ing

Bal

ance

Incr

ease

Dec

reas

e R

ecla

ssifi

catio

n

Bal

ance

C

ost

La

nd

$

3,

866,

289

$

-

$

-

$

-

$

3,

866,

289

Bui

ldin

gs

2,38

5,58

7

-

-

-

2,38

5,58

7 Te

leco

mm

unic

atio

n eq

uipm

ent

60,7

83,8

82

9,49

0

7,

345,

415

4,68

6,40

0

58

,134

,357

O

ffice

equ

ipm

ent

100,

333

1,63

7

61

,997

(7

,373

)

32

,600

Le

ased

ass

ets

1,28

5,92

0

-

-

-

1,28

5,92

0 M

isce

llane

ous e

quip

men

t

2,

065,

396

665,

822

595,

995

7,37

3

2,

142,

596

70

,487

,407

$

676,

949

$

8,

003,

407

$

4,

686,

400

67,8

47,3

49

Acc

umul

ated

dep

reci

atio

n

Bui

ldin

gs

343,

780

$

49

,173

$

-

$

-

39

2,95

3 Te

leco

mm

unic

atio

n eq

uipm

ent

28,1

53,7

39

6,34

3,32

4

5,

859,

791

-

28

,637

,272

O

ffice

equ

ipm

ent

69,8

25

10,6

21

53,4

21

(5,7

27)

21,2

98

Leas

ed a

sset

s

42

0,30

3

65

,152

-

-

48

5,45

5 M

isce

llane

ous e

quip

men

t

92

0,16

6

53

3,51

1

56

1,49

8

5,

727

897,

906

29

,907

,813

$

7,00

1,78

1

$

6,47

4,71

0

$

-

30

,434

,884

C

onst

ruct

ion

in p

rogr

ess a

nd a

dvan

ce

paym

ents

2,43

9,09

7

$

3,86

9,41

9

$

1,56

9

$ (

4,68

6,40

0)

1,

620,

547

Net

pro

perty

and

equ

ipm

ent

$

43,

018,

691

$ 3

9,03

3,01

2 N

ote

1:

The

tota

l ins

uran

ce fo

r pro

perty

and

equ

ipm

ent a

nd a

sset

s lea

sed

to o

ther

s am

ount

ed to

$30

,527

,264

thou

sand

. N

ote

2:

The

incr

ease

of

the

cons

truct

ion

in p

rogr

ess

and

adva

nce

paym

ents

inc

lude

d ca

pita

lized

int

eres

ts a

mou

ntin

g to

$16

,685

th

ousa

nd.

- 58

-

SCH

EDU

LE 8

T

AIW

AN

MO

BIL

E C

O.,

LT

D.

AC

CO

UN

TS P

AY

AB

LE

DEC

EMB

ER 3

1, 2

009

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs)

Sup

plie

rs

A

mou

nt

N

atio

nal C

omm

unic

atio

n Co

mm

issi

on

$ 1

,581

,702

O

ther

(Not

e)

32

1,52

1

$

1,9

03,2

23

Not

e:

Each

of t

he a

ccou

nt w

as le

ss th

an 5

% o

f the

tota

l acc

ount

bal

ance

.

148


- 57

-

SCH

ED

UL

E 7

T

AIW

AN

MO

BIL

E C

O.,

LT

D.

SHO

RT

-TE

RM

BO

RR

OW

ING

S D

EC

EM

BE

R 3

1, 2

009

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

)

Bon

d T

ype

and

Cre

dito

r

Fina

ncin

g Pe

riod

Inte

rest

R

ate

A

mou

nt

C

redi

t L

ine

Mor

tgag

e or

G

uara

ntee

U

nsec

ured

loan

s

Taiw

an C

oope

ratio

n B

ank

Dec

embe

r 10,

200

9 - J

anua

ry 2

9, 2

010

0.

60

$

2,

200,

000

$

2,

200,

000

N

one

Ban

k of

Tai

wan

D

ecem

ber 3

0, 2

009

- Jan

uary

29,

201

0

0.59

2,

000,

000

10,0

00,0

00

N

one

Hua

Nan

Com

mer

cial

Ban

k D

ecem

ber 3

0, 2

009

- Jan

uary

29,

201

0

0.57

50

0,00

0

3,

000,

000

N

one

Firs

t Com

mer

cial

Ban

k D

ecem

ber 3

0, 2

009

- Jan

uary

29,

201

0

0.57

30

0,00

0

2,

000,

000

N

one

$

5,00

0,00

0

$ 1

7,20

0,00

0

- 60

-

SCH

EDU

LE 1

0 T

AIW

AN

MO

BIL

E C

O.,

LT

D.

OTH

ER P

AY

AB

LES

DEC

EMB

ER 3

1, 2

009

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs)

N

atur

e

Am

ount

Paya

bles

for e

quip

men

t and

con

stru

ctio

ns

$ 1

,355

,332

V

alue

-add

ed ta

x pa

yabl

es

15

6,34

9 O

ther

2,22

7,77

3

$

3,7

39,4

54

149


- 59

-

SCH

EDU

LE 9

T

AIW

AN

MO

BIL

E C

O.,

LT

D.

AC

CR

UED

EX

PEN

SES

DEC

EMB

ER 3

1, 2

009

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs)

N

atur

e

Am

ount

Sala

ries a

nd b

onus

es

$ 1

,167

,974

C

omm

issi

ons

84

2,49

1 B

onus

to e

mpl

oyee

s and

rem

uner

atio

ns to

dire

ctor

s

406,

548

Prof

essi

onal

serv

ice

fees

333,

678

BTS

exp

ense

s

328,

898

Rep

air a

nd m

aint

enan

ce e

xpen

ses

304,

752

Oth

er (N

ote)

1,31

7,40

0

$

4,7

01,7

41

Not

e:

Each

of t

he it

em w

as le

ss th

an 5

% o

f the

tota

l acc

ount

bal

ance

.

- 62

-

SCH

EDU

LE 1

2 T

AIW

AN

MO

BIL

E C

O.,

LT

D.

OPE

RA

TIN

G C

OST

S Y

EAR

EN

DED

DEC

EMB

ER 3

1, 2

009

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs)

It

em

Am

ount

Tele

com

serv

ice

cost

s

Inte

rcon

nect

ion

cost

(Not

e 1)

$

8,

941,

581

Dep

reci

atio

n

6,

448,

639

Cos

t of g

oods

sold

2,97

7,14

1 Le

ased

-line

cha

rges

1,78

5,71

6 R

ents

1,63

8,97

8 2G

con

cess

ion

fee

and

3G li

cens

e am

ortiz

atio

n

1,60

6,40

7 M

aint

enan

ce m

ater

ials

and

con

stru

ctio

ns

94

3,79

4 A

dmin

istra

tive

and

utili

ties e

xpen

se o

f rad

io b

ase

stat

ions

922,

666

Freq

uenc

y us

age

fee

467,

505

Oth

er (N

ote

2)

1,

433,

498

$

27,1

65,9

25

Not

e 1:

In

clud

ing

airti

me

and

inte

rcon

nect

ion

char

ges

paid

to

othe

r te

leco

mm

unic

atio

n se

rvic

e pr

ovid

ers.

Not

e 2:

In

clud

ing

expe

nses

for m

aint

aini

ng te

leco

mm

unic

atio

n ne

twor

k an

d eq

uipm

ent.

150


- 63

-

SCH

EDU

LE 1

3 T

AIW

AN

MO

BIL

E C

O.,

LT

D.

OPE

RA

TIN

G E

XPE

NSE

S Y

EAR

EN

DED

DEC

EMB

ER 3

1, 2

009

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs)

Item

Mar

ketin

g A

dmin

istr

ativ

e

Tota

l

C

omm

issi

ons

$

5,

952,

338

$

-

$

5,

952,

338

Sala

ries a

nd p

ensi

on

863,

590

1,14

2,34

4

2,

005,

934

Prof

essi

onal

serv

ice

fees

1,

059,

561

261,

172

1,32

0,73

3 B

ad d

ebts

-

599,

482

599,

482

Serv

ice

char

ges

40,8

59

529,

052

569,

911

Dep

reci

atio

n

22

,877

53

0,26

5

55

3,14

2 A

dver

tisin

g

32

4,58

7

50

,522

37

5,10

9 Te

leco

mm

unic

atio

n an

d po

stag

e ex

pens

es

10

7,43

3

22

2,35

9

32

9,79

2 O

ther

(Not

e)

829,

125

681,

164

1,51

0,28

9

$

9,

200,

370

$

4,

016,

360

$

13

,216

,730

N

ote:

Ea

ch it

em w

as le

ss th

an 5

% o

f the

tota

l acc

ount

bal

ance

.

- 62

-

SCH

EDU

LE 1

2 T

AIW

AN

MO

BIL

E C

O.,

LT

D.

OPE

RA

TIN

G C

OST

S Y

EAR

EN

DED

DEC

EMB

ER 3

1, 2

009

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs)

It

em

Am

ount

Tele

com

serv

ice

cost

s

Inte

rcon

nect

ion

cost

(Not

e 1)

$

8,

941,

581

Dep

reci

atio

n

6,

448,

639

Cos

t of g

oods

sold

2,97

7,14

1 Le

ased

-line

cha

rges

1,78

5,71

6 R

ents

1,63

8,97

8 2G

con

cess

ion

fee

and

3G li

cens

e am

ortiz

atio

n

1,60

6,40

7 M

aint

enan

ce m

ater

ials

and

con

stru

ctio

ns

94

3,79

4 A

dmin

istra

tive

and

utili

ties e

xpen

se o

f rad

io b

ase

stat

ions

922,

666

Freq

uenc

y us

age

fee

467,

505

Oth

er (N

ote

2)

1,

433,

498

$

27,1

65,9

25

Not

e 1:

In

clud

ing

airti

me

and

inte

rcon

nect

ion

char

ges

paid

to

othe

r te

leco

mm

unic

atio

n se

rvic

e pr

ovid

ers.

Not

e 2:

In

clud

ing

expe

nses

for m

aint

aini

ng te

leco

mm

unic

atio

n ne

twor

k an

d eq

uipm

ent.

151


- 1 -

IND

EPEN

DEN

T A

UD

ITO

RS’

REP

OR

T Th

e B

oard

of D

irect

ors a

nd S

hare

hold

ers

Taiw

an M

obile

Co.

, Ltd

. W

e ha

ve a

udite

d th

e ac

com

pany

ing

cons

olid

ated

bal

ance

shee

ts o

f Tai

wan

Mob

ile C

o., L

td. (

the

“Cor

pora

tion”

) an

d su

bsid

iarie

s as

of D

ecem

ber 3

1, 2

009

and

2008

, and

the

rela

ted

cons

olid

ated

stat

emen

ts o

f inc

ome,

cha

nges

in

sha

reho

lder

s’ e

quity

and

cas

h flo

ws

for

the

year

s th

en e

nded

. T

hese

con

solid

ated

fin

anci

al s

tate

men

ts a

re

the

resp

onsi

bilit

y of

the

Cor

pora

tion’

s m

anag

emen

t. O

ur r

espo

nsib

ility

is

to e

xpre

ss a

n op

inio

n on

the

se

finan

cial

stat

emen

ts b

ased

on

our a

udits

. W

e co

nduc

ted

our a

udits

in a

ccor

danc

e w

ith th

e R

ules

Gov

erni

ng th

e A

udit

of F

inan

cial

Sta

tem

ents

by

Cer

tifie

d Pu

blic

Acc

ount

ants

and

aud

iting

sta

ndar

ds g

ener

ally

acc

epte

d in

the

Rep

ublic

of

Chin

a.

Thos

e ru

les

and

stan

dard

s re

quire

tha

t w

e pl

an a

nd p

erfo

rm t

he a

udit

to o

btai

n re

ason

able

ass

uran

ce a

bout

whe

ther

the

co

nsol

idat

ed f

inan

cial

sta

tem

ents

are

fre

e of

mat

eria

l m

isst

atem

ent.

An

audi

t in

clud

es e

xam

inin

g, o

n a

test

basi

s, ev

iden

ce s

uppo

rting

the

amou

nts

and

disc

losu

res

in th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts.

An

audi

t als

o in

clud

es a

sses

sing

the

acc

ount

ing

prin

cipl

es u

sed

and

sign

ifica

nt e

stim

ates

mad

e by

man

agem

ent,

as w

ell

as

eval

uatin

g th

e ov

eral

l co

nsol

idat

ed f

inan

cial

sta

tem

ent

pres

enta

tion.

W

e be

lieve

tha

t ou

r au

dits

pro

vide

a

reas

onab

le b

asis

for o

ur o

pini

on.

In o

ur o

pini

on, t

he c

onso

lidat

ed fi

nanc

ial s

tate

men

ts re

ferr

ed to

abo

ve p

rese

nt fa

irly,

in a

ll m

ater

ial r

espe

cts,

the

cons

olid

ated

fina

ncia

l pos

ition

of T

aiw

an M

obile

Co.

, Ltd

. and

sub

sidi

arie

s as

of D

ecem

ber 3

1, 2

009

and

2008

, an

d th

e co

nsol

idat

ed r

esul

ts o

f its

ope

ratio

ns a

nd i

ts c

onso

lidat

ed c

ash

flow

s fo

r th

e ye

ars

then

end

ed,

in

conf

orm

ity w

ith t

he G

uide

lines

Gov

erni

ng t

he P

repa

ratio

n of

Fin

anci

al R

epor

ts b

y Se

curit

ies

Issu

ers

and

acco

untin

g pr

inci

ples

gen

eral

ly a

ccep

ted

in th

e R

epub

lic o

f Chi

na.

As

stat

ed i

n N

ote

3 to

the

con

solid

ated

fin

anci

al s

tate

men

ts,

in M

arch

200

7, t

he A

ccou

ntin

g R

esea

rch

and

Dev

elop

men

t Fou

ndat

ion

issu

ed a

n in

terp

reta

tion

that

requ

ires

com

pani

es to

reco

gniz

e em

ploy

ees’

bon

uses

and

re

mun

erat

ion

paid

to

dire

ctor

s an

d su

perv

isor

s as

exp

ense

s st

artin

g fr

om J

anua

ry 1

, 20

08.

The

men

tione

d bo

nuse

s and

rem

uner

atio

n w

ere

prev

ious

ly re

cord

ed a

s app

ropr

iatio

ns fr

om e

arni

ngs.

Ja

nuar

y 20

, 201

0 No

tice

to R

eade

rs

The

acco

mpa

nyin

g co

nsol

idat

ed fi

nanc

ial s

tate

men

ts ar

e in

tend

ed o

nly

to p

rese

nt th

e fin

anci

al p

ositi

on, r

esul

ts of

ope

ratio

ns a

nd c

ash

flows

in a

ccor

danc

e wi

th a

ccou

ntin

g pr

inci

ples

and

pra

ctic

es g

ener

ally

acc

epte

d in

the

Repu

blic

of C

hina

and

not

thos

e of

any

oth

er ju

risdi

ctio

ns.

The

sta

ndar

ds, p

roce

dure

s an

d pr

actic

es to

aud

it su

ch c

onso

lidat

ed fi

nanc

ial s

tate

men

ts a

re th

ose

gene

rally

acc

epte

d an

d ap

plie

d in

the

Repu

blic

of C

hina

. Fo

r th

e co

nven

ienc

e of

rea

ders

, the

aud

itors

’ re

port

and

the

acco

mpa

nyin

g co

nsol

idat

ed fi

nanc

ial s

tate

men

ts ha

ve b

een

trans

late

d in

to E

nglis

h fr

om th

e or

igin

al C

hine

se v

ersio

n pr

epar

ed a

nd u

sed

in th

e Re

publ

ic o

f Chi

na.

If

ther

e is

any

conf

lict b

etwe

en th

e En

glis

h ve

rsio

n an

d th

e or

igin

al C

hine

se v

ersio

n or

any

diff

eren

ce in

the

inte

rpre

tatio

n of

the

two

vers

ions

, the

Chi

nese

-lang

uage

aud

itors

’ rep

ort a

nd c

onso

lidat

ed fi

nanc

ial s

tate

men

ts sh

all p

reva

il.

Taiw

an M

obile

Co.

, Ltd

. and

Sub

sidi

arie

s

Con

solid

ated

Fin

anci

al S

tate

men

ts fo

r the

Ye

ars

Ende

d D

ecem

ber 3

1, 2

009

and

2008

and

In

depe

nden

t Aud

itors

’ Rep

ort

2009

Con

solid

ated

Fin

anci

al S

tate

men

ts

152


- 2 -

TAIW

AN

MO

BIL

E C

O.,

LTD

. AN

D S

UB

SID

IAR

IES

CO

NSO

LID

AT

ED

BA

LA

NC

E SH

EET

S D

EC

EM

BER

31,

200

9 A

ND

200

8 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs, E

xcep

t Par

Val

ue)

2009

2008

2009

2008

A

SSE

TS

A

mou

nt

%

Am

ount

%

L

IAB

ILIT

IES

AN

D S

HA

RE

HO

LD

ER

S’ E

QU

ITY

Am

ount

%

A

mou

nt

%

CU

RRE

NT

ASS

ETS

C

UR

REN

T LI

AB

ILIT

IES

Cas

h an

d ca

sh e

quiv

alen

ts (N

otes

2, 4

and

24)

$

2,

999,

036

3

$

3,86

8,06

2

4

Shor

t-ter

m b

orro

win

gs (N

ote

13)

$

6,80

0,00

0

8

$

-

-

Ava

ilabl

e-fo

r-sa

le fi

nanc

ial a

sset

s - c

urre

nt (N

otes

2 a

nd 5

)

177,

821

-

24

1,44

2

-

Shor

t-ter

m n

otes

and

bill

s pay

able

(Not

e 14

)

799,

638

1

-

-

Hed

ging

der

ivat

ive

finan

cial

ass

ets -

cur

rent

(Not

es 2

, 23

and

27)

-

-

82

,485

-

Not

es p

ayab

le

27

7,57

1

-

186,

506

-

Not

es re

ceiv

able

68,4

98

-

66

,589

-

Acc

ount

s pay

able

(Not

e 24

)

2,44

7,32

4

3

2,79

4,30

5

3 A

ccou

nts r

ecei

vabl

e - t

hird

par

ties (

Not

es 2

and

6)

6,

637,

930

8

6,

411,

711

7

In

com

e ta

xes p

ayab

le (N

otes

2 a

nd 2

0)

1,

665,

244

2

2,

798,

352

3

Acc

ount

s rec

eiva

ble

- rel

ated

par

ties (

Not

es 2

and

24)

163,

998

-

23

3,02

9

-

Acc

rued

exp

ense

s (N

ote

24)

5,

806,

865

7

5,

909,

947

6

Oth

er re

ceiv

able

s

319,

201

-

42

6,41

8

1

Oth

er p

ayab

les (

Not

e 2)

4,32

1,34

1

5

4,76

2,54

8

5 In

vent

orie

s (N

ote

2)

47

2,05

8

1

359,

119

1

A

dvan

ce re

ceip

ts (N

ote

15)

2,

057,

643

2

2,

284,

294

3

Prep

aym

ents

(Not

e 24

)

696,

279

1

82

3,69

7

1

Cur

rent

por

tion

of lo

ng-te

rm li

abili

ties (

Not

es 1

6 an

d 23

)

-

-

7,50

0,00

0

8 D

efer

red

inco

me

tax

asse

ts -

curre

nt (N

otes

2 a

nd 2

0)

29

,132

-

149,

534

-

G

uara

ntee

dep

osits

-cur

rent

60,6

24

-

68

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edge

d tim

e de

posi

ts (N

otes

24

and

25)

32

,157

-

38,0

15

-

O

ther

cur

rent

liab

ilitie

s

524,

869

1

43

1,10

1

1 O

ther

cur

rent

ass

ets

3,

944

-

12

,653

-

To

tal c

urre

nt li

abili

ties

24

,761

,119

29

26

,735

,149

29

Tota

l cur

rent

ass

ets

11

,600

,054

13

12

,712

,754

14

LON

G-T

ERM

LIA

BIL

ITIE

S

IN

VES

TMEN

TS

B

onds

pay

able

(Not

es 1

6 an

d 23

)

8,00

0,00

0

9

8,00

0,00

0

9 In

vest

men

ts a

ccou

nted

for u

sing

the

equi

ty m

etho

d (N

otes

2 a

nd 7

)

211,

974

-

-

-

Lo

ng-te

rm b

orro

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gs (N

ote

17)

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5,

200,

000

6

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or lo

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ote

7)

-

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24

9,50

0

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Fi

nanc

ial a

sset

s car

ried

at c

ost -

non

-cur

rent

(Not

es 2

and

8)

2,

498,

980

3

2,

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168

3

To

tal l

ong-

term

liab

ilitie

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0

9

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00

15

B

onds

mea

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am

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non

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es 2

and

9)

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0,00

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1

500,

000

1

OTH

ER L

IAB

ILIT

IES

Tota

l inv

estm

ents

3,21

0,95

4

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3,26

4,66

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4

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rant

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32

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316

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erre

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com

e ta

x lia

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on-c

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otes

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12

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90,3

88

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PRO

PER

TY A

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ther

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5,60

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1 B

uild

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Te

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mm

unic

atio

n eq

uipm

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63

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65

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71

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tal l

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s

33,8

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23

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41,0

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76

45

O

ffice

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ipm

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14

8,62

7

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173,

887

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sset

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0

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1,28

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1

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otes

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neou

s equ

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367,

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areh

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par v

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con

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pro

perty

and

equ

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49

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21

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33,9

35

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and

12)

438,

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1

54

3,92

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1

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2)

31

1,72

6

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228,

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tal s

hare

hold

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equ

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52

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61

50

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tax

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curre

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1,

631,

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139,

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$

85

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91,9

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85

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91,9

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0 Th

e ac

com

pany

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note

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an

inte

gral

par

t of t

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lidat

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nanc

ial s

tate

men

ts.

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Del

oitte

& T

ouch

e au

dit r

epor

t dat

ed Ja

nuar

y 20

, 201

0)

153


- 4 -

TA

IWA

N M

OB

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CO

., L

TD

. AN

D S

UB

SID

IAR

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NSO

LID

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TATE

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NTS

OF

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S EN

DED

DEC

EMB

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1, 2

009

AN

D 2

008

(In

Thou

sand

s of N

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aiw

an D

olla

rs, E

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ning

s Per

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2008

A

mou

nt

%

Am

ount

%

A

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TO

Sh

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f the

par

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13

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15,3

71,3

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22

Min

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inte

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s

1,

654

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$

13

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$

15,3

82,2

49

22

2009

2008

B

efor

e In

com

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Aft

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Inco

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Tax

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Tax

Aft

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RN

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S PE

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(Not

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$

6.09

$

4.66

$

6.67

$

5.18

D

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$

6.07

$

4.65

$

6.65

$

5.17

Th

e ac

com

pany

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note

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an

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par

t of t

he c

onso

lidat

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nanc

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(With

Del

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ouch

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dit r

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nuar

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clud

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- 3 -

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N M

OB

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., L

TD

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D S

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2008

A

mou

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ount

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PER

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REV

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$

68

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69,2

96,0

96

1

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O

PER

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CO

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es 2

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and

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33,1

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38

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46

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ketin

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10

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15

10

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16

A

dmin

istra

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4,76

9,95

6

7

4,85

7,47

6

7

To

tal o

pera

ting

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nses

14

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22

15

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23

OPE

RA

TIN

G IN

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20,4

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21,7

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Pe

nalty

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265,

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Ren

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71,4

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-

74

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Gai

n on

dis

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l of p

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quip

men

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27

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-

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tere

st in

com

e (N

ote

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16,5

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10

3,58

3

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10,4

05

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11

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Gai

n on

dis

posa

l of i

nves

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ts, n

et (N

ote

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-

-

262,

759

1 O

ther

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and

6)

204,

780

-

31

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To

tal n

on-o

pera

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and

gain

59

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1

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1,03

2,16

6

2

N

ON

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S A

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LO

SSES

Lo

ss o

n di

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al a

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f pro

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and

eq

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Not

es 2

and

24)

1,62

7,69

3

3

1,46

1,85

1

2

Inte

rest

exp

ense

s (N

otes

2 a

nd 1

0)

561,

364

1

68

9,04

3

1

Loss

on

disp

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of i

nves

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ts (N

ote

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49,0

44

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vest

men

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unde

r the

equ

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37,5

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ses

24,5

78

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18

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-

Impa

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t los

s (N

otes

2, 8

and

12)

16

,188

-

23,6

56

- O

ther

(Not

e 2)

81

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-

63,9

09

-

Tota

l non

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pens

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sses

2,

397,

934

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2,

257,

296

3

INC

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31

27

20,5

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10

30

IN

CO

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EX

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0)

4,75

5,81

5

7

5,15

4,46

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8

C

ON

SOLI

DA

TED

NET

INC

OM

E

$

13,8

90,5

16

20

$

15

,382

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22

(C

ontin

ued)

154


- 5 -

TAIW

AN

MO

BIL

E C

O.,

LTD

. AN

D S

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SID

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CO

NSO

LID

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ST

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f New

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as

on

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anci

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T

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Tre

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BA

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$

8,78

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$

11

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$

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$

25,9

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$

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$

55

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2

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32

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2007

ear

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s

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gal r

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ve

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66

1,30

0

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(661

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)

-

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-

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ever

sal o

f spe

cial

rese

rve

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(8

6,81

9 )

86

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- R

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ion

to d

irect

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nd su

perv

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s

-

-

-

-

(18,

116 )

(18,

116 )

-

-

-

-

-

(18,

116 )

B

onus

to e

mpl

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s - c

ash

-

-

-

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(1

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(1

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81,1

55 )

Cas

h di

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NT$

2.54

326

per s

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51 )

B

alan

ce a

fter a

ppro

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38

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8,78

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9

12,4

06,7

75

3,

406,

744

2,

344,

627

18

,158

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5,76

4

1,53

4

(40,

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007 )

(64,

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552,

232

24

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Con

solid

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net

inco

me

in 2

008

-

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15

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49

B

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(1,0

59,7

32 )

C

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cost

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mpl

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stoc

k op

tions

-

27,0

95

-

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-

-

-

-

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-

27

,095

Adj

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equ

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vest

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-

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12

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8

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362 )

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(26,

105 )

Dis

posa

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n's s

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s hel

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subs

idia

ries

-

3,

485,

732

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8,

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12

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Unr

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ed g

ain

on fi

nanc

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97

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C

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D

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406,

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17

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17

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2,86

2

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33

A

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of th

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ngs

Lega

l res

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Rev

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l of s

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56,7

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Cas

h di

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NT$

4.68

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per s

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Bal

ance

afte

r app

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38,0

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54

12

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2,

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19

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17,8

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Con

solid

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13

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1,

654

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Adj

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f equ

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equ

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vest

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-

2,

578

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Tr

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to e

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C

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om e

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13

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(592

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Dec

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min

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(25,

114 )

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114 )

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CE,

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$

38,0

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$

12,4

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13,9

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0

$

16

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$

33

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$

12

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(3

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$

63

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9,

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52,0

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The

acco

mpa

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g no

tes a

re a

n in

tegr

al p

art o

f the

con

solid

ated

fina

ncia

l sta

tem

ents

. (W

ith D

eloi

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che

audi

t rep

ort d

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Janu

ary

20, 2

010)

155


- 7 -

TA

IWA

N M

OB

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CO

., L

TD

. AN

D S

UB

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IAR

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CO

NSO

LID

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OF

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DED

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1, 2

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AN

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(In

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sand

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olla

rs)

2009

2008

Dec

reas

e in

ple

dged

tim

e de

posi

ts

$

5,

358

$

9,

691

Proc

eeds

from

inve

stee

s' ca

pita

l ret

urn

5,35

6

2,

688

Dec

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refu

ndab

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epos

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5,04

7

12

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crea

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2

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ccou

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in b

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in sh

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6,

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340,

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In

crea

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long

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bor

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2,

500,

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6,10

0,00

0 Tr

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asur

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ock

to e

mpl

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s

1,

056,

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in sh

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not

es a

nd b

ills p

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le

799,

638

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94,7

53)

Dec

reas

e in

gua

rant

ee d

epos

its

(29,

545)

(31,

418)

C

apita

l ret

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to m

inor

ity in

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(21,

401)

- D

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74)

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13,4

88)

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h di

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aid

to m

inor

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(1

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) Pr

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ds fr

om th

e di

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al o

f tre

asur

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-

13

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C

apita

l red

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-

(9,4

34,4

61)

Issu

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of b

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pay

able

-

8,00

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0 R

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men

t of l

ong-

term

not

es p

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le

-

(2

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) B

uyba

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f tre

asur

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-

(1

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to e

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s

-

(181

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) R

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nd su

perv

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s

-

(18,

116)

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cas

h us

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fina

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tiviti

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(18,

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736)

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816,

247)

EFFE

CT

OF

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CH

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8,

440

A

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103,

610

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YEA

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3,86

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7,

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$

2,99

9,03

6

$

3,86

8,06

2 (C

ontin

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- 6 -

TA

IWA

N M

OB

ILE

CO

., L

TD

. AN

D S

UB

SID

IAR

IES

CO

NSO

LID

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D S

TATE

ME

NTS

OF

CA

SH F

LOW

S Y

EAR

S EN

DED

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1, 2

009

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D 2

008

(In

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sand

s of N

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olla

rs)

2009

2008

CA

SH F

LOW

S FR

OM

OPE

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CTI

VIT

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Con

solid

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net

inco

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$

13

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,516

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15,3

82,2

49

Adj

ustm

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to re

conc

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et in

com

e to

net

cas

h pr

ovid

ed b

y op

erat

ing

activ

ities

:

D

epre

ciat

ion

7,75

4,52

2

7,

188,

030

Loss

on

disp

osal

and

retir

emen

t of p

rope

rty a

nd e

quip

men

t, ne

t

1,

600,

088

1,41

1,99

2 A

mor

tizat

ion

1,08

9,05

1

1,

095,

670

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erre

d in

com

e ta

xes

1,02

3,50

5

42

6,49

7 B

ad d

ebts

60

5,70

8

67

5,05

7 C

ompe

nsat

ion

cost

reco

gniz

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om e

mpl

oyee

stoc

k op

tions

13

4,54

1

27

,095

Lo

ss (g

ain)

on

disp

osal

of i

nves

tmen

ts

49,0

44

(262

,759

) In

vest

men

t los

s rec

ogni

zed

unde

r the

equ

ity m

etho

d, n

et

37,5

26

- Im

pairm

ent l

oss

16,1

88

23,6

56

Pens

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cost

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2,86

0)

(2

3,54

3)

Prov

isio

n fo

r (re

cove

ry o

f) lo

ss o

n in

vent

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s

(1

0,98

3)

19

,126

O

ther

9,

215

28,4

84

Am

ortiz

atio

n of

long

-term

not

es p

ayab

le

-

9,

660

Net

cha

nges

in o

pera

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asse

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nd li

abili

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l ass

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for t

radi

ng

-

13

1,97

3 N

otes

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(1,9

09)

18,5

14

Acc

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s rec

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ble

- thi

rd p

artie

s

(8

74,4

48)

(325

,236

) A

ccou

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vabl

e - r

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ed p

artie

s

69

,031

(1

12,3

95)

Oth

er re

ceiv

able

s

10

4,42

4

(1

84,0

26)

Long

-term

cap

ital l

ease

rece

ivab

les

(4,4

63)

(58,

497)

In

vent

orie

s

(9

7,41

4)

(2

18,2

54)

Prep

aym

ents

12

7,25

2

(5

4,56

5)

Oth

er c

urre

nt a

sset

s

8,

709

10,2

70

Not

es p

ayab

le

92,9

08

(36,

714)

A

ccou

nts p

ayab

le

(339

,822

)

37

9,36

8 In

com

e ta

xes p

ayab

le

(1,1

33,1

08)

1,08

1,84

1 A

ccru

ed e

xpen

ses

(103

,478

)

17

8,96

9 O

ther

pay

able

s

8,

928

502,

378

Adv

ance

rece

ipts

(1

87,6

52)

290,

635

Oth

er c

urre

nt li

abili

ties

95,8

53

(68,

105)

Net

cas

h pr

ovid

ed b

y op

erat

ing

activ

ities

23

,950

,872

27

,537

,370

CA

SH F

LOW

S FR

OM

INV

ESTI

NG

AC

TIV

ITIE

S

A

cqui

sitio

n of

pro

perty

and

equ

ipm

ent

(6,6

73,5

66)

(6,6

36,7

45)

Incr

ease

in d

efer

red

char

ges

(220

,214

)

(1

49,6

44)

Proc

eeds

from

dis

posa

l of a

vaila

ble-

for-s

ale

finan

cial

ass

ets

139,

259

2,08

9,51

1 In

crea

se in

com

pute

r sof

twar

e co

st a

nd o

ther

inta

ngib

le a

sset

s

(1

4,92

2)

(1

5,37

6)

Acq

uisi

tion

of su

bsid

iarie

s

(1

1,06

6)

(1

40,9

19)

Dec

reas

e (in

crea

se) i

n ot

her a

sset

s

10

,176

(9

,617

) Pr

ocee

ds fr

om d

ispo

sal o

f pro

perty

and

equ

ipm

ent

9,66

3

31

6,43

5 (C

ontin

ued)

156


- 9 -

TA

IWA

N M

OB

ILE

CO

., L

TD

. AN

D S

UB

SID

IAR

IES

NO

TES

TO C

ON

SOLI

DA

TED

FIN

AN

CIA

L ST

ATE

ME

NTS

Y

EAR

S EN

DED

DEC

EMB

ER 3

1, 2

009

AN

D 2

008

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs, U

nles

s Sta

ted

Oth

erw

ise)

1.

OR

GA

NIZ

ATI

ON

AN

D O

PER

ATI

ON

S Ta

iwan

Mob

ile C

o., L

td. w

as in

corp

orat

ed in

the

Rep

ublic

of

Chi

na (

RO

C)

on F

ebru

ary

25, 1

997.

Th

e C

orpo

ratio

n’s

shar

es b

egan

trad

ing

on th

e R

OC

Ove

r-th

e-C

ount

er S

ecur

ities

Exc

hang

e (k

now

n as

Gre

Tai

Secu

ritie

s M

arke

t) on

Sep

tem

ber 1

9, 2

000.

O

n A

ugus

t 26,

200

2, th

e C

orpo

ratio

n’s

shar

es w

ere

liste

d on

th

e Ta

iwan

Sto

ck E

xcha

nge.

Th

e C

orpo

ratio

n m

ainl

y re

nder

s wire

less

com

mun

icat

ion

serv

ices

. Th

e C

orpo

ratio

n’s

serv

ices

ar

e un

der

the

type

I

licen

se

issu

ed

by

the

Dire

ctor

ate

Gen

eral

of

Te

leco

mm

unic

atio

ns (

DG

T) o

f th

e R

OC

. T

he li

cens

e al

low

s th

e C

orpo

ratio

n to

pro

vide

ser

vice

s fo

r 15

ye

ars

from

199

7 on

war

ds.

It a

lso

enta

ils th

e pa

ymen

t of

an a

nnua

l lic

ense

fee

con

sist

ing

of 2

% o

f to

tal

wire

less

com

mun

icat

ion

serv

ice

reve

nues

. O

n M

arch

24,

200

5, t

he C

orpo

ratio

n re

ceiv

ed t

he t

hird

ge

nera

tion

(3G

) con

cess

ion

oper

atio

n lic

ense

issu

ed b

y th

e D

GT.

Th

e 3G

lice

nse

allo

ws

the

Cor

pora

tion

to p

rovi

de se

rvic

es fr

om th

e is

suan

ce d

ate

of th

e lic

ense

to D

ecem

ber 3

1, 2

018.

A

s of

Dec

embe

r 31

, 200

9 an

d 20

08, t

he C

orpo

ratio

n an

d su

bsid

iarie

s ha

d 4,

416

and

4,55

2 em

ploy

ees,

resp

ectiv

ely.

2.

SUM

MA

RY

OF

SIG

NIF

ICA

NT

AC

CO

UN

TIN

G P

OLI

CIE

S B

asis

of P

rese

ntat

ion

The

acco

mpa

nyin

g co

nsol

idat

ed fi

nanc

ial s

tate

men

ts h

ave

been

pre

pare

d in

con

form

ity w

ith th

e G

uide

lines

G

over

ning

the

Prep

arat

ion

of F

inan

cial

Rep

orts

by

Secu

ritie

s Is

suer

s an

d ac

coun

ting

prin

cipl

es g

ener

ally

ac

cept

ed in

the

RO

C.

In

conf

orm

ity w

ith th

ese

guid

elin

es a

nd p

rinci

ples

, the

Cor

pora

tion

and

subs

idia

ries

(her

eina

fter r

efer

red

to a

s th

e “G

roup

”) a

re re

quire

d to

mak

e ce

rtain

est

imat

es a

nd a

ssum

ptio

ns th

at c

ould

af

fect

the

am

ount

s of

allo

wan

ce f

or d

oubt

ful

acco

unts

, pr

ovis

ion

for

loss

es o

n de

clin

e in

val

ue o

f in

vent

orie

s, de

prec

iatio

n, p

ensi

on,

allo

wan

ce f

or d

efer

red

inco

me

tax

asse

ts,

bonu

s to

em

ploy

ees,

rem

uner

atio

n to

dire

ctor

s an

d su

perv

isor

s, im

pairm

ent l

oss

on a

sset

s, et

c.

Act

ual r

esul

ts m

ay d

iffer

from

th

ese

estim

ates

. Fo

r th

e co

nven

ienc

e of

rea

ders

, the

acc

ompa

nyin

g co

nsol

idat

ed f

inan

cial

sta

tem

ents

hav

e be

en tr

ansl

ated

in

to E

nglis

h fr

om t

he o

rigin

al C

hine

se v

ersi

on p

repa

red

and

used

in

the

RO

C.

If

ther

e is

any

con

flict

be

twee

n th

e En

glis

h ve

rsio

n an

d th

e or

igin

al C

hine

se v

ersi

on o

r any

diff

eren

ce in

the

inte

rpre

tatio

n of

the

two

vers

ions

, the

Chi

nese

-lang

uage

con

solid

ated

fina

ncia

l sta

tem

ents

shal

l pre

vail.

C

onso

lidat

ion

a.

Bas

is o

f con

solid

atio

n

The

cons

olid

ated

fina

ncia

l sta

tem

ents

hav

e be

en p

repa

red

in a

ccor

danc

e w

ith th

e St

atem

ent o

f Fin

anci

al

Acc

ount

ing

Stan

dard

s (S

FAS)

No.

7, “

Con

solid

ated

Fin

anci

al S

tate

men

ts,”

and

incl

uded

the

finan

cial

st

atem

ents

of

the

Cor

pora

tion,

its

dire

ct a

nd in

dire

ct s

ubsi

diar

ies

with

at l

east

50%

sha

reho

ldin

g an

d ot

her i

nves

tees

con

trolle

d by

the

Cor

pora

tion.

A

s obt

aini

ng th

e m

ajor

ity o

f the

shar

ehol

der’

s equ

ity o

f th

e su

bsid

iarie

s du

ring

the

year

, the

com

pany

sta

rts to

con

solid

ate

the

rela

ted

reve

nues

and

exp

ense

s of

th

e su

bsid

iarie

s sin

ce th

e da

te o

f hav

ing

the

cont

rolli

ng in

tere

st.

- 8 -

TA

IWA

N M

OB

ILE

CO

., L

TD

. AN

D S

UB

SID

IAR

IES

CO

NSO

LID

ATE

D S

TATE

ME

NTS

OF

CA

SH F

LOW

S Y

EAR

S EN

DED

DEC

EMB

ER 3

1, 2

009

AN

D 2

008

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs)

2009

2008

SUPP

LEM

ENTA

L D

ISC

LOSU

RE

OF

CA

SH F

LOW

INFO

RM

ATI

ON

In

tere

st p

aid

$

47

0,60

5

$

849,

930

Less

inte

rest

cap

italiz

ed

16,6

85

11,2

96

Inte

rest

pai

d - e

xclu

ding

inte

rest

cap

italiz

ed

$

45

3,92

0

$

838,

634

Inco

me

tax

paid

$

4,86

9,49

4

$

3,25

9,18

7

NO

N-C

ASH

INV

ESTI

NG

AN

D F

INA

NC

ING

AC

TIV

ITIE

S

C

urre

nt p

ortio

n of

long

-term

liab

ilitie

s

$

-

$

7,50

0,00

0

CA

SH IN

VES

TIN

G A

ND

FIN

AN

CIN

G A

CTI

VIT

IES

Acq

uisi

tion

of p

rope

rty a

nd e

quip

men

t

$

6,24

4,64

1

$

7,53

1,93

9 D

ecre

ase

in n

otes

pay

able

1,

842

6,81

2 In

crea

se in

acc

rued

exp

ense

s

(3

95)

- D

ecre

ase

(incr

ease

) in

othe

r pay

able

s

40

2,16

0

(2

91,0

27)

Dec

reas

e (in

crea

se) i

n ot

her l

iabi

litie

s-ot

her

25,3

18

(610

,979

) C

ash

paid

for a

cqui

sitio

n of

pro

perty

and

equ

ipm

ent

$

6,

673,

566

$

6,

636,

745

The

Cor

pora

tion

acqu

ired

100%

sha

res

of T

WM

Com

mun

icat

ions

(B

eijin

g) L

td.

(for

mer

ly n

amed

Hur

ray!

Ti

mes

Com

mun

icat

ions

(Be

ijing

) Lt

d.)

on A

pril

24, 2

008.

Th

e fa

ir va

lues

of

the

asse

ts a

nd li

abili

ties

upon

ac

quis

ition

wer

e as

follo

ws:

C

ash

$

103

,610

A

ccou

nts r

ecei

vabl

e

46

,443

Pr

epay

men

ts

1,59

0 O

ther

cur

rent

ass

ets

320

Prop

erty

and

equ

ipm

ent

2,72

7 In

tang

ible

ass

ets

50

Oth

er a

sset

s

14

6

154,

886

Acc

ount

s pay

able

7,

841

Acc

rued

exp

ense

s

84

4 O

ther

pay

able

s

6,

326

Adv

ance

rece

ipts

16

,595

O

ther

cur

rent

liab

ilitie

s

27

0

31,8

76

Net

12

3,01

0 Pe

rcen

tage

of e

quity

inte

rest

10

0%

12

3,01

0 A

dd g

oodw

ill

29,1

93

Less

inve

stm

ent p

ayab

le

(21,

955)

C

ash

paid

for a

cqui

sitio

n of

TW

M C

omm

unic

atio

ns (B

eijin

g) L

td.

(for

mer

ly n

amed

Hur

ray!

Tim

es C

omm

unic

atio

ns (B

eijin

g) L

td.)

$ 1

30,2

48

The

acco

mpa

nyin

g no

tes a

re a

n in

tegr

al p

art o

f the

con

solid

ated

fina

ncia

l sta

tem

ents

(W

ith D

eloi

tte &

Tou

che

audi

t rep

ort d

ated

Janu

ary

20, 2

010)

(C

oncl

uded

)

157


- 11

-

Mai

n B

usin

esse

s and

Perc

enta

ge o

f Dir

ect

Ow

ners

hip

as o

f D

ecem

ber

31

Inve

stor

Subs

idia

ry

Pr

oduc

ts

20

09

20

08

N

ote

TF

NM

Nor

th C

oast

Cab

le T

V C

o., L

td.

(NC

CTV

)

Cab

le T

V S

O (S

yste

m

Ope

rato

r)

-

-

Li

quid

ated

on

Oct

ober

1, 2

008

TCC

TWM

Hol

ding

Co.

Ltd

. (TW

M

Hol

ding

)

Inve

stm

ent

10

0.00

100.

00

-

TWM

Hol

ding

TWM

Com

mun

icat

ions

(B

eijin

g) L

td. (

form

erly

na

med

Hur

ray!

Tim

es

Com

mun

icat

ions

(Bei

jing)

Lt

d.)

M

obile

app

licat

ion

deve

lopm

ent a

nd

desi

gn

10

0.00

100.

00

10

0% a

cqui

red

by T

WM

H

oldi

ng a

nd c

onso

lidat

ed

into

fina

ncia

l sta

tem

ents

on

Apr

il 24

, 200

8

TCC

Taiw

an T

eles

ervi

ces &

Te

chno

logi

es C

o., L

td. (

the

form

er T

T&T)

C

all c

ente

r ser

vice

-

-

Mer

ged

into

TT&

T on

Se

ptem

ber 1

, 200

8

The

form

er T

T&T

TT

&T

Cas

ualty

& P

rope

rty

Insu

ranc

e A

genc

y C

o., L

td.

(TC

PIA

)

In

sura

nce

agen

cy

-

-

Li

quid

ated

on

Mar

ch 1

5, 2

008

The

form

er T

T&T

TT

&T

Life

Insu

ranc

e A

genc

y C

o., L

td. (

TLIA

)

Insu

ranc

e ag

ency

-

-

Liqu

idat

ed o

n M

ay 1

5, 2

008

TFN

Taiw

an U

nite

d C

omm

unic

atio

n C

o., L

td. (

TUC

)

Equi

pmen

t ins

talla

tion

and

IT se

rvic

e

-

-

Mer

ged

into

TFN

on

Janu

ary

1, 2

008

TFN

Taiw

an T

elec

omm

unic

atio

n N

etw

ork

Serv

ices

Co.

, Ltd

. (T

TN)

Te

leco

mm

unic

atio

ns

-

-

M

erge

d in

to T

FN o

n A

ugus

t 1,

200

8.

TFN

Taiw

an T

eles

ervi

ces &

Te

chno

logi

es C

o., L

td.

(TT&

T)

C

all c

ente

r ser

vice

and

in

tern

atio

nal s

impl

e re

sale

(ISR

)

10

0.00

100.

00

Fo

rmer

ly V

oPie

r C

omm

unic

atio

ns (T

aiw

an)

Co.

, Ltd

. (V

oPie

r) m

erge

d th

e fo

rmer

TT&

T on

Se

ptem

ber 1

, 200

8 w

ith

VoP

ier a

s the

surv

ivin

g co

mpa

ny a

nd re

nam

ed a

s Ta

iwan

Tel

eser

vice

s &

Tech

nolo

gies

Co.

, Ltd

.

(N

ote

3)

TT&

T

Taiw

an S

uper

Bas

ketb

all C

o.,

Ltd.

(TSB

)

Bas

ketb

all t

eam

m

anag

emen

t and

re

late

d bu

sines

s

10

0.00

100.

00

(N

ote

4)

TT&

T

TT&

T H

oldi

ngs C

o., L

td.

(TT&

T H

oldi

ngs)

Inve

stm

ent

10

0.00

100.

00

(N

ote

4)

TT&

T H

oldi

ngs

X

iam

en T

aifu

Tel

eser

vice

s &

Tech

nolo

gies

Ltd

.

Cal

l cen

ter s

ervi

ce

10

0.00

100.

00

-

TFN

TFN

HK

Ltd

.

Tele

com

mun

icat

ions

100.

00

10

0.00

- TF

N

TF

N U

nion

Inve

stm

ent C

o.,

Ltd.

(TU

I)

In

vest

men

t

100.

00

-

Es

tabl

ished

on

Sept

embe

r 22,

20

09

TFN

TFN

Inve

stm

ent C

o., L

td.

(TFN

I)

In

vest

men

t

-

100.

00

M

erge

d in

to T

CC

I on

Sept

embe

r 19,

200

9 TF

NI

R

each

& R

ange

Inc.

(R&

R)

Te

leco

m e

quip

men

t sal

es

and

mai

nten

ance

-

100.

00

M

erge

d in

to T

FN o

n M

ay 1

, 20

09

(Con

clud

ed)

N

ote

1:

To e

xpan

d its

CA

TV b

usin

ess,

the

Cor

pora

tion’

s 100

%-o

wne

d su

bsid

iary

, WM

T, p

lans

to b

uy

a 10

0% s

take

in

Che

ng T

ing

Co.

, Ltd

. to

acqu

ire a

ll th

e ca

ble

TV a

nd c

onte

nt d

istri

butio

n bu

sine

ss o

f K

bro

Co.

, Lt

d.

The

purc

hase

will

be

settl

ed u

sing

the

Cor

pora

tion’

s tre

asur

y sh

ares

(up

to 1

5.5%

of t

otal

out

stan

ding

sha

res)

, and

the

rem

aind

er in

cas

h.

The

Cor

pora

tion

expe

cts t

o cl

ose

the

deal

afte

r obt

aini

ng th

e au

thor

ities

’ app

rova

l. N

ote

2:

Bec

ame

a su

bsid

iary

of T

CCI,

whi

ch m

erge

d TF

NI o

n Se

ptem

ber 1

9, 2

009.

N

ote

3:

Bec

ame

a su

bsid

iary

of T

FN, w

hich

mer

ged

TTN

on

Aug

ust 1

, 200

8.

N

ote

4:

Bec

ame

a su

bsid

iary

of T

T&T,

whi

ch m

erge

d th

e fo

rmer

TT&

T on

Sep

tem

ber 1

, 200

8.

- 10

-

For f

orei

gn s

ubsi

diar

ies

usin

g th

eir l

ocal

cur

renc

y as

thei

r fun

ctio

nal c

urre

ncy,

ass

ets

and

liabi

litie

s ar

e tra

nsla

ted

at e

xcha

nge

rate

s in

eff

ect

on t

he b

alan

ce s

heet

dat

e; s

hare

hold

ers’

equ

ity a

ccou

nts

are

trans

late

d us

ing

hist

oric

al e

xcha

nge

rate

s an

d in

com

e st

atem

ent a

ccou

nts

are

trans

late

d us

ing

aver

age

exch

ange

rate

s dur

ing

the

perio

d.

All

sign

ifica

nt in

terc

ompa

ny b

alan

ces a

nd tr

ansa

ctio

ns h

ave

been

elim

inat

ed u

pon

cons

olid

atio

n.

b.

U

nder

the

abov

e ba

sis o

f con

solid

atio

n, th

e co

nsol

idat

ed e

ntiti

es w

ere

as fo

llow

s:

Mai

n B

usin

esse

s and

Perc

enta

ge o

f Dir

ect

Ow

ners

hip

as o

f D

ecem

ber

31

Inve

stor

Subs

idia

ry

Pr

oduc

ts

20

09

20

08

N

ote

C

orpo

ratio

n

Tran

sAsi

a Te

leco

mm

unic

atio

ns

Inc.

(TA

T)

W

irele

ss se

rvic

e pr

ovid

er

-

-

M

erge

d in

to th

e C

orpo

ratio

n on

Sep

tem

ber 2

, 200

8 C

orpo

ratio

n

Wea

lth M

edia

Tec

hnol

ogy

Co.

, Lt

d. (W

MT)

Inve

stm

ent

10

0.00

100.

00

-

WM

T

Tai F

u M

edia

Tec

hnol

ogy

Co.

, Lt

d. (T

FMT)

Inve

stm

ent

10

0.00

100.

00

(N

ote

1)

TFM

T

Glo

bal W

ealth

Med

ia

Tech

nolo

gy C

o., L

td.

(GW

MT)

In

vest

men

t

100.

00

10

0.00

-

TFM

T

Fu Ji

a Le

h M

edia

Tec

hnol

ogy

Co.

, Ltd

. (FJ

LMT)

Inve

stm

ent

10

0.00

100.

00

-

TFM

T

Fu S

in M

edia

Tec

hnol

ogy

Co.

, Lt

d. (F

SMT)

Inve

stm

ent

10

0.00

100.

00

-

TFM

T

Glo

bal F

ores

t Med

ia

Tech

nolo

gy C

o., L

td.

(GFM

T)

In

vest

men

t

100.

00

10

0.00

Esta

blish

ed o

n D

ecem

ber 2

6,

2008

GW

MT

G

loba

lvie

w C

able

TV

Co.

, Ltd

. (G

CTV

)

Cab

le T

V S

O (S

yste

m

Ope

rato

r)

6.

694

6.

179

-

FSM

T

Phoe

nix

Cabl

e TV

Co.

, Ltd

. (P

CTV

)

Cab

le T

V S

O (s

yste

m

Ope

rato

r)

3.

34

3.

34

-

Cor

pora

tion

Ta

iwan

Cel

lula

r Co.

, Ltd

. (T

CC

)

Equi

pmen

t ins

talla

tion

and

IT se

rvic

e

10

0.00

100.

00

-

TCC

Tai Y

i Dig

ital B

road

casti

ng C

o.,

Ltd.

(TY

DB

)

Bro

adca

sts b

usin

ess a

nd

cell

phon

e nu

mbe

r ag

ency

-

49

.90

Li

quid

ated

on

Febr

uary

28,

20

09

TCC

Taiw

an F

ixed

Net

wor

k C

o., L

td.

(TFN

)

Fixe

d ne

twor

k se

rvic

e

100.

00

10

0.00

-

TCC

Taiw

an D

igita

l Com

mun

icat

ions

C

o., L

td. (

TDC

)

Equi

pmen

t ins

talla

tion

and

IT se

rvic

e

10

0.00

100.

00

-

TCC

TCC

Inve

stm

ent C

o., L

td.

(TC

CI)

In

vest

men

t

100.

00

-

Es

tabl

ished

on

Aug

ust 1

0,

2009

A

s of D

ecem

ber 3

1, 2

009,

TC

CI,

TID

and

TU

I co

llect

ivel

y ow

ned

811,

918

thou

sand

shar

es o

f the

C

orpo

ratio

n re

pres

entin

g 21

.36%

of t

otal

out

stand

ing

shar

es.

TCC

I

TCC

I Inv

estm

ent &

D

evel

opm

ent C

o., L

td. (

TID

)

Inve

stm

ent

10

0.00

-

Esta

blish

ed o

n Se

ptem

ber 2

2,

2009

TC

CI

W

in T

V B

road

casti

ng C

o., L

td.

(WTV

B)

TV

pro

gram

pro

duci

ng

98.5

0

98.5

0

(Not

e 2)

TCC

I

TFN

Med

ia C

o., L

td. (

TFN

M)

C

able

bro

adba

nd se

rvic

e

100.

00

10

0.00

(Not

e 2)

TF

NM

Uni

on C

able

TV

Co.

, Ltd

. (U

CTV

)

Cab

le T

V S

O (S

yste

m

Ope

rato

r)

99

.99

99

.99

-

TFN

M

Y

eong

Jial

eh C

able

TV

Co.

, Lt

d. (Y

JCTV

)

Cab

le T

V S

O (S

yste

m

Ope

rato

r)

10

0.00

100.

00

-

TFN

M

M

angr

ove

Cab

le T

V

Cor

pora

tion

(MC

TV)

C

able

TV

SO

(Sys

tem

O

pera

tor)

29.5

3

29.5

3

Ano

ther

70.

47%

shar

es w

ere

held

und

er tr

uste

e ac

coun

ts

TFN

M

PC

TV

C

able

TV

SO

(Sys

tem

O

pera

tor)

96.6

6

96.6

6

-

TFN

M

G

CTV

Cab

le T

V S

O (S

yste

m

Ope

rato

r)

92

.38

92

.38

-

TFN

M

Sh

in H

o Ca

ble

TV C

o., L

td.

(SH

CTV

)

Cab

le T

V S

O (S

yste

m

Ope

rato

r)

-

30

.15

Li

quid

ated

on

Dec

embe

r 31,

20

09.

Ano

ther

69.

85%

sh

ares

wer

e he

ld u

nder

tru

stee

acc

ount

s. (C

ontin

ued)

158


- 13

-

Inve

ntor

ies

Inve

ntor

ies

are

reco

rded

at w

eigh

ted-

aver

age

cost

. B

efor

e Ja

nuar

y 1,

200

9, in

vent

orie

s ar

e st

ated

at t

he

low

er o

f th

e co

st o

r m

arke

t va

lue.

M

arke

t va

lue

is e

valu

ated

on

the

basi

s of

rep

lace

men

t co

st o

r ne

t re

aliz

able

val

ue.

Eff

ectiv

e fr

om J

anua

ry 1

, 200

9, h

owev

er, i

nven

torie

s ar

e st

ated

at t

he lo

wer

of

cost

or

net

real

izab

le v

alue

. W

hen

com

parin

g co

st a

nd n

et r

ealiz

able

val

ue,

inve

ntor

ies

are

eval

uate

d by

in

divi

dual

item

s. In

vest

men

ts A

ccou

nted

for

Usi

ng th

e Eq

uity

Met

hod

Long

-term

inve

stm

ents

in w

hich

the

Gro

up o

wns

20%

or m

ore

of a

n in

vest

ee’s

out

stan

ding

vot

ing

shar

es o

r ex

erci

se si

gnifi

cant

influ

ence

on

an in

vest

ee a

re a

ccou

nted

for u

nder

equ

ity m

etho

d.

In a

ccor

danc

e w

ith t

he n

ewly

rev

ised

Sta

tem

ent

of F

inan

cial

Acc

ount

ing

Stan

dard

s (S

FAS)

, the

cos

t of

ac

quis

ition

is s

ubje

cted

to a

n in

itial

ana

lysi

s, an

d go

odw

ill re

pres

ents

the

exce

ss o

f the

cos

t of a

cqui

sitio

n ov

er th

e fa

ir va

lue

of th

e id

entif

iabl

e ne

t ass

ets

valu

e.

Goo

dwill

is n

o lo

nger

am

ortiz

ed.

If t

he fa

ir va

lue

of i

dent

ifiab

le n

et a

sset

s ac

quire

d ex

ceed

s th

e co

st o

f in

vest

men

ts,

the

exce

ss s

houl

d be

ass

igne

d to

no

n-cu

rren

t as

sets

(ex

cept

for

fin

anci

al a

sset

s no

t un

der

the

equi

ty m

etho

d, a

sset

s fo

r di

spos

al, d

efer

red

inco

me

tax

asse

ts a

nd p

repa

id p

ensi

on c

osts

or

othe

r re

tirem

ent

bene

fit c

osts

). I

f th

ese

asse

ts a

re a

ll re

duce

d to

zer

o, t

he r

emai

ning

exc

ess

shou

ld b

e re

cogn

ized

as

extra

ordi

nary

gai

n.

Star

ting

Janu

ary

1,

2006

, the

una

mor

tized

bal

ance

of

the

exce

ss o

f th

e ac

quis

ition

cos

t of

the

lon

g-te

rm i

nves

tmen

t by

the

eq

uity

met

hod

over

the

equi

ty in

the

inve

stee

’s n

et a

sset

s va

lue

is a

lso

no lo

nger

am

ortiz

ed a

nd a

pplie

s th

e sa

me

acco

untin

g tre

atm

ent a

s goo

dwill

. Th

e co

st a

nd th

e re

sulti

ng g

ain

or lo

ss o

f an

inve

stm

ent s

old

is d

eter

min

ed b

y th

e w

eigh

ted-

aver

age

met

hod.

Fi

nanc

ial A

sset

s Car

ried

at C

ost

If th

ere

is n

o ac

tive

mar

ket f

or a

n eq

uity

inst

rum

ent a

nd a

relia

ble

fair

valu

e ca

nnot

be

estim

ated

, the

equ

ity

inst

rum

ent,

incl

udin

g no

n-pu

blic

ly tr

aded

and

em

ergi

ng s

tock

s, et

c, is

mea

sure

d at

cos

t. T

he a

ccou

ntin

g fo

r the

div

iden

ds fr

om fi

nanc

ial a

sset

s ca

rrie

d at

cos

t is

the

sam

e as

that

for

an a

vaila

ble-

for-s

ale

finan

cial

as

sets

. I

mpa

irmen

t los

ses

are

reco

gniz

ed if

a d

ecre

ase

in fa

ir va

lue

of th

e in

stru

men

ts c

an b

e ob

ject

ivel

y re

late

d to

an

even

t. R

ever

sal o

f im

pairm

ent l

osse

s is n

ot a

llow

ed.

Bon

ds M

easu

red

at A

mor

tized

Cos

t B

ond

portf

olio

s w

ith f

ixed

or

dete

rmin

able

pay

men

ts a

nd w

ith n

o qu

oted

pric

es i

n an

act

ive

mar

ket

are

carr

ied

at a

mor

tized

cos

t us

ing

the

effe

ctiv

e in

tere

st m

etho

d.

Thes

e bo

nd p

ortfo

lios

are

initi

ally

re

cogn

ized

at f

air v

alue

plu

s tra

nsac

tion

cost

s th

at a

re d

irect

ly a

ttrib

utab

le to

the

acqu

isiti

on o

r the

issu

ance

of

the

finan

cial

ass

ets.

Pro

fit o

r los

s is r

ecog

nize

d at

the

time

of d

erec

ogni

zed,

impa

irmen

t or a

mor

tizat

ion.

A

regu

lar p

urch

ase

or sa

le o

f fin

anci

al a

sset

s is r

ecog

nize

d an

d de

-reco

gniz

ed u

sing

trad

e da

te a

ccou

ntin

g.

If th

ere

is o

bjec

tive

evid

ence

of

impa

irmen

t los

s as

of

the

bala

nce

shee

t dat

e, im

pairm

ent l

oss

shou

ld b

e re

cogn

ized

. I

f th

e im

pairm

ent

loss

dec

reas

es a

nd t

he d

ecre

ase

can

be r

elat

ed o

bjec

tivel

y to

an

even

t oc

curr

ing

afte

r im

pairm

ent l

oss

reco

gniti

on, t

he im

pairm

ent l

oss

shou

ld b

e re

vers

ed.

Thi

s re

vers

al s

houl

d no

t res

ult i

n th

e ca

rryi

ng a

mou

nt o

f the

fina

ncia

l ass

et e

xcee

ding

the

amor

tized

cos

t tha

t wou

ld h

ave

been

de

term

ined

had

no

impa

irmen

t los

s bee

n re

cogn

ized

.

Prop

erty

and

Equ

ipm

ent a

nd A

sset

s Lea

sed

to O

ther

s Pr

oper

ty a

nd e

quip

men

t an

d as

sets

lea

sed

to o

ther

s ar

e st

ated

at

cost

les

s ac

cum

ulat

ed d

epre

ciat

ion

and

accu

mul

ated

im

pairm

ent.

Sig

nific

ant

addi

tions

, re

new

als,

bette

rmen

ts,

and

inte

rest

exp

ense

s in

curr

ed

durin

g th

e co

nstru

ctio

n pe

riod

are

capi

taliz

ed,

whi

le m

aint

enan

ce a

nd r

epai

rs a

re e

xpen

sed.

Le

ased

pr

oper

ty a

nd e

quip

men

t fro

m o

ther

s co

vere

d by

agr

eem

ents

qua

lifyi

ng a

s ca

pita

l lea

ses

are

carr

ied

at th

e lo

wer

of

the

pres

ent v

alue

of

futu

re m

inim

um le

ase

paym

ents

or

the

mar

ket v

alue

of

the

prop

erty

on

the

star

ting

date

s of t

he le

ases

.

- 12

-

The

Gro

up’s

sign

ifica

nt a

ccou

ntin

g po

licie

s are

sum

mar

ized

as f

ollo

ws:

C

lass

ifica

tion

of C

urre

nt a

nd N

on-c

urre

nt A

sset

s and

Lia

bilit

ies

Cur

rent

ass

ets i

nclu

de c

ash

and

cash

equ

ival

ents

, ass

ets

held

for t

radi

ng a

nd th

ose

expe

cted

to b

e co

nver

ted

to c

ash,

sol

d or

con

sum

ed w

ithin

tw

elve

mon

ths

from

the

bal

ance

she

et d

ate.

O

ther

ass

ets

such

as

prop

erty

and

equ

ipm

ent

and

inta

ngib

le a

sset

s ar

e cl

assi

fied

as n

on-c

urre

nt.

Cur

rent

lia

bilit

ies

are

oblig

atio

ns h

eld

for t

radi

ng a

nd th

ose

expe

cted

to b

e du

e w

ithin

twel

ve m

onth

s fro

m th

e ba

lanc

e sh

eet d

ate.

A

ll ot

her l

iabi

litie

s are

cla

ssifi

ed a

s non

-cur

rent

. C

ash

Equi

vale

nts

Gov

ernm

ent b

onds

and

shor

t-ter

m b

ills a

cqui

red

with

repu

rcha

se ri

ghts

and

hav

ing

mat

uriti

es o

f up

to th

ree

mon

ths f

rom

the

date

of p

urch

ase

are

clas

sifie

d as

cas

h eq

uiva

lent

s, w

hose

car

ryin

g va

lue

appr

oxim

ates

fair

valu

e.

Fina

ncia

l Ins

trum

ents

at F

air

Val

ue th

roug

h Pr

ofit

or L

oss

Fina

ncia

l in

stru

men

ts a

t fa

ir va

lue

thro

ugh

prof

it or

los

s in

clud

e fin

anci

al a

sset

s or

lia

bilit

ies

held

for

tra

ding

and

tho

se d

esig

nate

d on

ini

tial

reco

gniti

on t

o be

mea

sure

d at

fai

r va

lue

with

fai

r va

lue

chan

ges

reco

gniz

ed in

pro

fit o

r lo

ss.

On

initi

al r

ecog

nitio

n, th

e fin

anci

al in

stru

men

ts a

re r

ecog

nize

d at

fair

valu

e pl

us tr

ansa

ctio

n co

sts

and

are

subs

eque

ntly

mea

sure

d at

fai

r va

lue

with

fai

r va

lue

chan

ges

reco

gniz

ed in

pr

ofit

or l

oss.

The

pur

chas

e or

sal

e of

the

fin

anci

al i

nstru

men

ts i

s re

cogn

ized

and

der

ecog

nize

d us

ing

trade

dat

e ac

coun

ting.

Th

e fa

ir va

lue

of o

pen-

end

mut

ual f

unds

is b

ased

on

the

net a

sset

s val

ue o

n th

e ba

lanc

e sh

eet d

ate.

A

vaila

ble-

for-

sale

Fin

anci

al A

sset

s O

n in

itial

reco

gniti

on, a

vaila

ble-

for-s

ale

finan

cial

ass

ets

are

reco

gniz

ed a

t fai

r val

ue p

lus

trans

actio

n co

sts.

W

hen

subs

eque

ntly

mea

sure

d at

fair

valu

e, th

e fa

ir va

lue

chan

ges

are

reco

gniz

ed d

irect

ly in

equ

ity.

The

cu

mul

ativ

e ga

in o

r lo

ss t

hat

was

rec

ogni

zed

in e

quity

is

reco

gniz

ed i

n pr

ofit

or l

oss

whe

n an

av

aila

ble-

for-s

ale

finan

cial

ass

et i

s de

reco

gniz

ed f

rom

the

bal

ance

she

et.

The

pur

chas

e or

sal

e of

the

fin

anci

al in

stru

men

ts is

reco

gniz

ed a

nd d

erec

ogni

zed

usin

g tra

de d

ate

acco

untin

g.

Cas

h di

vide

nds

are

reco

gniz

ed a

s di

vide

nd i

ncom

e on

the

ex-

divi

dend

dat

e, b

ut a

re a

ccou

nted

for

as

redu

ctio

ns to

the

orig

inal

cos

t of

inve

stm

ents

if s

uch

divi

dend

s ar

e de

clar

ed o

n th

e ea

rnin

gs o

f in

vest

ees

attri

buta

ble

to p

erio

ds p

rior t

o th

e pu

rcha

se o

f inv

estm

ents

. S

tock

div

iden

ds a

re n

ot re

cogn

ized

as

curr

ent

inco

me

but

are

acco

unte

d fo

r on

ly a

s an

inc

reas

e in

the

num

ber

of s

hare

s he

ld.

The

cos

t pe

r sh

are

is re

-cal

cula

ted

base

d on

the

new

num

ber o

f sha

res.

An

impa

irmen

t los

s is

rec

ogni

zed

if th

ere

is o

bjec

tive

evid

ence

that

a f

inan

cial

ass

et is

impa

ired.

If

the

amou

nt o

f im

pairm

ent l

oss d

ecre

ases

in th

e su

bseq

uent

per

iod,

such

dec

reas

e is

reco

gniz

ed in

equ

ity.

The

fair

valu

e of

list

ed se

curit

ies i

s bas

ed o

n th

e cl

osin

g pr

ice

on th

e ba

lanc

e sh

eet d

ate.

A

llow

ance

for

Dou

btfu

l Acc

ount

s A

llow

ance

for d

oubt

ful a

ccou

nts i

s pro

vide

d on

the

basi

s of p

ast e

xper

ienc

es a

nd a

n ev

alua

tion

of th

e ag

ing

and

colle

ctib

ility

of a

ll re

ceiv

able

s on

the

bala

nce

shee

t dat

e.

159


- 15

-

d.

Cus

tom

er re

latio

nshi

p an

d op

erat

ing

right

s Th

e cu

stom

er r

elat

ions

hip

and

oper

atin

g rig

hts

shal

l be

ide

ntifi

ed w

hen

anal

yzin

g th

e ex

cess

of

acqu

isiti

on c

ost

over

the

ow

ners

hip

in n

et a

sset

s va

lue

of a

n in

vest

ee, a

nd b

e bo

oked

at

fair

valu

es

prov

ided

by

the

purc

hase

pric

e al

loca

tion

repo

rt.

Cus

tom

er re

latio

nshi

p an

d op

erat

ing

right

s ar

e m

easu

red

on th

e ba

sis

of th

e fu

ture

eco

nom

ic v

alue

and

us

eful

life

of

the

subs

idia

ries’

cab

le T

V a

nd d

ata

netw

ork

busi

ness

es.

Cus

tom

er r

elat

ions

hip

is

amor

tized

by

stra

ight

-line

met

hod

over

6 to

20

year

s. O

pera

ting

right

s is

bas

ed o

n a

licen

se is

sued

by

the

Min

istry

of T

rans

porta

tion

and

Com

mun

icat

ions

. A

lthou

gh th

e lic

ense

has

a s

tatu

tory

per

iod,

the

subs

idia

ry c

an fi

le fo

r lic

ense

rene

wal

. F

urth

erm

ore,

it d

oes

not h

ave

a de

finite

use

ful l

ife in

ligh

t of

futu

re c

ompe

titio

n fr

om I

PTV

. T

hus,

this

inta

ngib

le a

sset

sho

uld

be te

sted

ann

ually

for

impa

irmen

t in

stea

d of

bei

ng a

mor

tized

in a

ccor

danc

e w

ith S

FAS

No.

37.

A

n im

pairm

ent t

est i

s al

so r

equi

red

if th

ere

is e

vide

nce

of g

oodw

ill im

pairm

ent d

ue to

cer

tain

circ

umst

ance

s.

Idle

Ass

ets

Prop

ertie

s not

cur

rent

ly u

sed

in o

pera

tions

are

stat

ed a

t the

low

er o

f boo

k va

lue

or n

et re

aliz

able

val

ue, w

ith

the

diff

eren

ce c

harg

ed to

cur

rent

loss

. D

epre

ciat

ion

expe

nse

is c

ompu

ted

usin

g th

e st

raig

ht-li

ne m

etho

d ov

er th

e es

timat

ed u

sefu

l liv

es o

f the

ass

ets.

Def

erre

d C

harg

es

Def

erre

d ch

arge

s, m

ainl

y in

terio

r de

cora

tion

cost

s, ar

e am

ortiz

ed b

y th

e st

raig

ht-li

ne m

etho

d ov

er 3

to 7

ye

ars.

Ass

et Im

pair

men

t If

the

carr

ying

val

ue o

f ass

ets (

incl

udin

g pr

oper

ty a

nd e

quip

men

t, in

tang

ible

ass

ets,

idle

ass

ets,

asse

ts le

ased

to

oth

ers

and

inve

stm

ents

acc

ount

ed f

or u

sing

equ

ity m

etho

d an

d de

ferr

ed c

harg

es)

is m

ore

than

its

re

cove

rabl

e am

ount

, whi

ch in

dica

tes

that

an

impa

irmen

t exi

sts,

an im

pairm

ent l

oss

shou

ld b

e re

cogn

ized

.

Any

sub

sequ

ent

reve

rsal

of

the

impa

irmen

t lo

ss f

or th

e in

crea

se in

rec

over

able

am

ount

is

reco

gniz

ed a

s in

com

e.

The

reve

rsal

of i

mpa

irmen

t los

s on

good

will

is n

ot a

llow

ed.

Shar

e-ba

sed

Com

pens

atio

n Fo

r the

gra

nt d

ate

of th

e em

ploy

ee st

ock

optio

ns w

hich

falls

on

or a

fter J

anua

ry 1

, 200

8 sh

ould

app

ly S

FAS

No.

39

- “A

ccou

ntin

g fo

r Sh

are-

base

d Pa

ymen

t”.

The

val

ue o

f st

ock

optio

n gr

ante

d, th

e pr

oduc

t of

the

num

ber

of v

este

d st

ock

optio

ns m

ultip

lies

by th

e fa

ir va

lue

of th

e op

tion

on g

rant

dat

e, s

hall

be e

xpen

sed

over

the

ves

ting

perio

d, a

nd t

o in

crea

se “

capi

tal

surp

lus

- em

ploy

ee s

tock

opt

ions

” by

the

sam

e am

ount

ac

cord

ingl

y.

Pens

ion

Cos

ts

The

pens

ion

cost

s un

der

the

defin

ed b

enef

it pe

nsio

n pl

an a

re r

ecog

nize

d on

the

bas

is o

f ac

tuar

ial

calc

ulat

ions

. T

he c

ontri

butio

n am

ount

s of

the

pens

ion

cost

s un

der

the

defin

ed c

ontri

butio

n pe

nsio

n pl

an

are

reco

gniz

ed a

s cur

rent

exp

ense

s dur

ing

the

empl

oyee

s’ se

rvic

e ye

ars.

- 14

-

For c

ost a

ssoc

iate

d w

ith d

ism

antli

ng a

nd re

loca

ting

fixed

ass

ets

and

rest

orin

g th

e le

ased

pre

mis

es h

ousi

ng

our f

ixed

ass

ets t

o th

e pr

evio

us st

ate

shou

ld b

e re

cogn

ized

as a

n ad

ditio

n to

the

fixed

ass

ets a

nd a

ccru

ed a

s a

pote

ntia

l lia

bilit

y ac

cord

ingl

y, a

ccor

ding

to th

e A

ccou

ntin

g R

esea

rch

and

Dev

elop

men

t Fou

ndat

ion

(AR

DF)

is

sued

the

Inte

rpre

tatio

n N

o. 2

008-

340

in N

ovem

ber 2

008.

D

epre

ciat

ion

is c

alcu

late

d us

ing

the

stra

ight

-line

met

hod

over

the

estim

ated

ser

vice

live

s, w

hich

ran

ge a

s fo

llow

s:

build

ings

- 20

to 5

5 ye

ars;

tele

com

mun

icat

ion

equi

pmen

t - 2

to 1

5 ye

ars;

off

ice

equi

pmen

t - 3

to

8 ye

ars;

leas

ed a

sset

s - 2

0 ye

ars;

and

mis

cella

neou

s equ

ipm

ent -

2 to

9 y

ears

. U

pon

sale

or

retir

emen

t of

pro

perty

and

equ

ipm

ent,

the

rela

ted

cost

and

acc

umul

ated

dep

reci

atio

n ar

e re

mov

ed fr

om th

e ac

coun

ts, a

nd a

ny g

ain

or lo

ss is

cre

dite

d or

cha

rged

to n

on-o

pera

ting

gain

or l

oss

in th

e pe

riod

of d

ispo

sal.

Acc

ount

ing

for

Leas

es

In a

ccor

danc

e w

ith S

FAS

No.

2, “

Acc

ount

ing

for L

ease

s,” a

leas

e is

iden

tifie

d as

eith

er a

n op

erat

ing

leas

e or

a c

apita

l le

ase

base

d on

the

lea

se c

ontra

ct t

erm

s, th

e co

llect

abili

ty o

f th

e le

aseh

old

and

the

non-

reim

burs

able

cos

ts to

be

incu

rred

by

the

less

or.

The

asse

t hel

d un

der a

n op

erat

ing

leas

e is

sta

ted

at c

ost,

and

depr

ecia

ted

on th

e st

raig

ht-li

ne b

asis

ove

r the

es

timat

ed u

sefu

l life

. R

ecei

vabl

es c

olle

cted

are

per

iodi

cally

reco

gniz

ed a

s re

ntal

inco

me

durin

g th

e le

ase

cont

ract

.

At

the

ince

ptio

n da

te o

f a

capi

tal

leas

e, t

otal

lea

seho

ld r

ecei

vabl

es s

hall

be r

ecog

nize

d as

all

rent

al

rece

ivab

les

plus

the

pre-

dete

rmin

ed b

arga

in p

urch

ase

pric

e of

fere

d to

the

less

ee u

pon

mat

urity

or e

stim

ated

re

sidu

al v

alue

. F

or a

sal

es-ty

pe c

apita

l lea

se, s

ales

rev

enue

sho

uld

be r

ecog

nize

d as

the

sum

of

pres

ent

valu

e de

rived

from

eac

h fu

ture

rent

al re

ceiv

able

bas

ed o

n an

impl

icit

inte

rest

rate

of t

he le

ase.

Th

e ex

cess

of

tot

al l

ease

hold

rec

eiva

bles

ove

r sa

les

reve

nue

shou

ld b

e de

ferr

ed a

s un

real

ized

int

eres

t in

com

e, a

nd

amor

tized

as

inte

rest

inco

me

by th

e ef

fect

ive

inte

rest

met

hod

upon

eac

h co

llect

ion.

Fo

r a

finan

cing

-type

of

cap

ital l

ease

, lea

seho

ld re

ceiv

able

s sh

ould

be

reco

gniz

ed a

s th

e su

m o

f pre

sent

val

ue d

eriv

ed fr

om e

ach

futu

re r

enta

l re

ceiv

able

bas

ed o

n an

im

plic

it in

tere

st r

ate

of t

he l

ease

. T

he e

xces

s of

tot

al l

ease

hold

re

ceiv

able

s ove

r the

pre

sent

val

ue o

f lea

seho

ld re

ceiv

able

s sho

uld

be d

efer

red

as u

nrea

lized

inte

rest

inco

me,

an

d am

ortiz

ed a

s int

eres

t inc

ome

by th

e ef

fect

ive

inte

rest

met

hod

upon

eac

h co

llect

ion.

In

tang

ible

Ass

ets

a.

Fran

chis

e Fr

anch

ise

refe

rs to

the

paym

ent f

or th

e 3G

mob

ile te

leco

mm

unic

atio

n se

rvic

e -

Lice

nse

C.

The

3G

co

nces

sion

is r

ecor

ded

at a

cqui

sitio

n co

st a

nd is

am

ortiz

ed b

y th

e st

raig

ht-li

ne m

etho

d ov

er 1

3 ye

ars

and

9 m

onth

s sta

rting

from

the

laun

ch o

f 3G

serv

ices

.

b.

C

ompu

ter s

oftw

are

Com

pute

r sof

twar

e co

st is

am

ortiz

ed b

y th

e st

raig

ht-li

ne m

etho

d ov

er 2

to 5

yea

rs.

c.

G

oodw

ill

Goo

dwill

is th

e un

iden

tifia

ble

diff

eren

ce b

etw

een

the

cost

of a

cqui

sitio

n an

d th

e eq

uity

in th

e in

vest

ee’s

ne

t ass

et v

alue

. I

n ac

cord

ance

with

the

new

ly re

vise

d SF

AS,

goo

dwill

is n

o lo

nger

am

ortiz

ed.

Ple

ase

refe

r to

the

acco

untin

g po

licy

of in

vest

men

ts a

ccou

nted

for b

y th

e eq

uity

met

hod.

160


- 17

-

Serv

ice

reve

nues

fro

m w

irele

ss s

ervi

ces,

valu

e-ad

ded

serv

ices

, an

d fix

ed n

etw

ork

serv

ices

, ne

t of

any

ap

plic

able

dis

coun

t, ar

e bi

lled

at p

rede

term

ined

rate

s; th

e fix

ed-m

onth

ly fe

es o

n ba

sic

cabl

e TV

serv

ices

are

ac

crue

d; p

repa

id c

ard

serv

ice

are

reco

gniz

ed o

n th

e ba

sis o

f min

utes

of u

sage

. Pr

omot

ion

Expe

nses

C

omm

issi

ons a

nd c

ellu

lar p

hone

subs

idy

cost

s per

tain

ing

to th

e C

orpo

ratio

n’s p

rom

otio

ns a

re re

cogn

ized

as

mar

ketin

g ex

pens

es o

n an

acc

rual

bas

is in

the

curr

ent y

ear.

Hed

ging

Der

ivat

ive

Fina

ncia

l Ins

trum

ents

D

eriv

ativ

es t

hat

qual

ify a

s ef

fect

ive

hedg

ing

inst

rum

ents

are

mea

sure

d at

fai

r va

lue,

with

sub

sequ

ent

chan

ges

in f

air

valu

e re

cogn

ized

eith

er in

ear

ning

or

shar

ehol

ders

’ eq

uity

, dep

endi

ng o

n th

e na

ture

of

the

hedg

e.

Hed

ge A

ccou

ntin

g W

hen

hedg

e ac

coun

ting

is a

pplie

d, g

ain

or lo

ss fr

om c

hang

es in

the

fair

valu

e of

the

deriv

ativ

es (h

edgi

ng

inst

rum

ents

) sha

ll be

off

set b

y th

at o

f fin

anci

al a

sset

s/lia

bilit

ies (

hedg

ed p

ositi

on).

The

Cor

pora

tion

ente

red

into

int

eres

t ra

te s

wap

s (I

RS)

con

tract

s to

hed

ge a

gain

st c

ash

flow

ris

k fr

om

inve

rse

float

ing

inte

rest

rate

s of

liab

ilitie

s, th

us w

as q

ualif

ied

to a

pply

hed

ge a

ccou

ntin

g.

The

acco

untin

g tre

atm

ent i

s as f

ollo

ws:

G

ain

or lo

ss fr

om c

hang

es in

the

fair

valu

e of

the

deriv

ativ

es, w

hich

is re

cogn

ized

in

sha

reho

lder

’s e

quity

, sha

ll be

recl

assi

fied

in e

arni

ngs,

if ga

in o

r los

s fr

om th

e ex

pect

ed tr

ansa

ctio

n of

the

hedg

ed p

ositi

on o

ccur

s. W

hen

ther

e is

obj

ectiv

e ev

iden

ce t

hat

the

net

loss

rec

ogni

zed

in s

hare

hold

ers’

eq

uity

is e

xpec

ted

to b

e no

t rec

over

able

, the

men

tione

d ne

t los

s sho

uld

be re

clas

sifie

d in

ear

ning

s as w

ell.

Rec

lass

ifica

tion

Cer

tain

acc

ount

s in

the

cons

olid

ated

fina

ncia

l sta

tem

ents

as

of a

nd fo

r th

e ye

ar e

nded

Dec

embe

r 31,

200

8 ha

ve b

een

recl

assi

fied

to c

onfo

rm to

the

pres

enta

tion

of c

onso

lidat

ed fi

nanc

ial s

tate

men

ts a

s of

and

for t

he

year

end

ed D

ecem

ber 3

1, 2

009.

3.

REA

SON

S A

ND

EFF

ECT

OF

CH

AN

GES

IN A

CC

OU

NTI

NG

PR

INC

IPLE

S In

Mar

ch 2

007,

the

AR

DF

issu

ed a

n in

terp

reta

tion

that

req

uire

s co

mpa

nies

and

the

ir su

bsid

iarie

s to

re

cogn

ize

thos

e bo

nuse

s to

em

ploy

ees

and

rem

uner

atio

ns t

o di

rect

ors

and

supe

rvis

ors

as c

ompe

nsat

ion

expe

nses

sta

rting

fro

m J

anua

ry 1

, 20

08.

The

men

tione

d bo

nuse

s an

d re

mun

erat

ions

wer

e pr

evio

usly

re

cord

ed a

s ap

prop

riatio

ns f

rom

ear

ning

s. T

he a

dopt

ion

of t

his

inte

rpre

tatio

n re

sulte

d in

a d

ecre

ase

of

$343

,629

thou

sand

in c

onso

lidat

ed n

et in

com

e an

d a

decr

ease

in b

asic

ear

ning

s pe

r sh

are

of N

T$0.

12 f

or

the

year

end

ed D

ecem

ber 3

1, 2

008.

- 16

-

Inco

me

Tax

es

The

inte

r-per

iod

and

intra

-per

iod

allo

catio

n m

etho

ds a

re u

sed

for

inco

me

taxe

s. D

efer

red

inco

me

tax

asse

ts a

nd li

abili

ties

are

reco

gniz

ed fo

r the

tax

effe

cts

of te

mpo

rary

diff

eren

ces,

unus

ed ta

x cr

edits

and

net

op

erat

ing

loss

car

ryfo

rwar

ds.

Val

uatio

n al

low

ance

is p

rovi

ded

for d

efer

red

inco

me

tax

asse

ts to

the

exte

nt

that

mor

e lik

ely

than

not

suc

h as

sets

will

not

be

real

ized

. D

efer

red

tax

asse

ts o

r lia

bilit

ies a

re c

lass

ified

as

curr

ent o

r no

n-cu

rren

t acc

ordi

ng to

the

clas

sific

atio

n of

rel

ated

ass

ets

or li

abili

ties

for

finan

cial

rep

ortin

g.

How

ever

, if d

efer

red

tax

asse

ts o

r lia

bilit

ies

do n

ot re

late

to a

sset

s or

liab

ilitie

s in

the

finan

cial

sta

tem

ents

, th

ey a

re c

lass

ified

as c

urre

nt o

r non

-cur

rent

on

the

basis

of t

he e

xpec

ted

leng

th o

f tim

e be

fore

real

ized

. Ta

x cr

edits

for c

erta

in p

urch

ases

of e

quip

men

t and

tech

nolo

gy, r

esea

rch

and

deve

lopm

ent e

xpen

ditu

res

and

pers

onne

l tra

inin

g ar

e re

cogn

ized

by

the

curr

ent m

etho

d.

Adj

ustm

ents

to p

rior y

ears

’ tax

liab

ilitie

s are

add

ed to

or d

educ

ted

from

the

curr

ent y

ear’

s tax

exp

ense

. In

com

e ta

x of

10%

on

unap

prop

riate

d ea

rnin

gs g

ener

ated

is p

rovi

ded

for a

s inc

ome

tax

in th

e ye

ar w

hen

the

shar

ehol

ders

reso

lve

to re

tain

the

earn

ings

. Tr

easu

ry S

tock

Th

e pu

rcha

se o

f is

sued

sha

res

is a

ccou

nted

for

by

debi

ting

treas

ury

stoc

k, w

hich

is

a re

duct

ion

of

shar

ehol

ders

’ eq

uity

. T

he C

orpo

ratio

n’s

shar

es h

eld

by it

s su

bsid

iarie

s ar

e tre

ated

as

treas

ury

stoc

k an

d re

clas

sifie

d fr

om in

vest

men

ts a

ccou

nted

for u

sing

equ

ity m

etho

d to

trea

sury

stoc

k.

If th

e pr

ocee

ds o

n th

e di

spos

al o

f tre

asur

y st

ock

exce

ed th

e ca

rryi

ng v

alue

of t

reas

ury

stoc

k, th

e ex

cess

is

cred

ited

to c

apita

l sur

plus

from

trea

sury

sto

ck.

If t

he p

roce

eds

are

less

than

the

carr

ying

val

ue o

f tre

asur

y st

ock,

the

diff

eren

ce i

s de

bite

d to

cap

ital

surp

lus

from

tre

asur

y st

ock.

If

the

bala

nce

of c

apita

l su

rplu

s fr

om tr

easu

ry s

tock

is n

ot s

uffic

ient

to a

bsor

b th

e di

ffer

ence

, the

rest

is re

cord

ed a

s a

redu

ctio

n of

reta

ined

ea

rnin

gs.

Fore

ign-

curr

ency

Tra

nsac

tions

A

sset

s, lia

bilit

ies,

reve

nues

or

expe

nses

den

omin

ated

in f

orei

gn c

urre

ncie

s as

a r

esul

t of

fore

ign-

curr

ency

tra

nsac

tions

of

non-

deriv

ativ

e fin

anci

al in

stru

men

ts a

re r

ecor

ded

in N

ew T

aiw

an d

olla

rs a

t the

exc

hang

e ra

tes p

reva

iling

on

the

date

s of t

rans

actio

ns.

M

onet

ary

asse

ts o

r lia

bilit

ies

deno

min

ated

in

fore

ign

curr

enci

es a

re t

rans

late

d at

the

exc

hang

e ra

tes

prev

ailin

g on

the

bala

nce

shee

t dat

e, a

nd th

e re

sulti

ng e

xcha

nge

diff

eren

ces a

re in

clud

ed in

pro

fit o

r los

s for

th

e cu

rren

t yea

r. N

on-m

onet

ary

asse

ts o

r lia

bilit

ies

carr

ied

at f

air

valu

e th

at a

re d

enom

inat

ed i

n fo

reig

n cu

rren

cies

are

re

trans

late

d at

the

rate

s pr

evai

ling

on th

e ba

lanc

e sh

eet d

ate

whe

n th

e fa

ir va

lue

was

det

erm

ined

, and

the

resu

lting

exc

hang

e di

ffer

ence

s ar

e in

clud

ed in

pro

fit o

r los

s fo

r the

cur

rent

yea

r exc

ept f

or th

e di

ffer

ence

s ar

isin

g on

the

retra

nsla

tion

of n

on-m

onet

ary

asse

ts a

nd li

abili

ties

in r

espe

ct o

f w

hich

gai

ns a

nd lo

sses

are

re

cogn

ized

dire

ctly

in e

quity

. F

or s

uch

non-

mon

etar

y as

sets

and

liab

ilitie

s, an

y ex

chan

ge c

ompo

nent

of

that

gai

n or

loss

is a

lso

reco

gniz

ed d

irect

ly in

equ

ity.

Non

-mon

etar

y as

sets

or l

iabi

litie

s car

ried

at c

ost t

hat

are

deno

min

ated

in

fore

ign

curr

enci

es a

re t

rans

late

d at

the

his

toric

al r

ates

pre

vaili

ng o

n th

e da

tes

of

trans

actio

ns.

The

abov

e pr

evai

ling

exch

ange

rate

s are

bas

ed o

n th

e av

erag

e of

bid

and

ask

rate

s of p

rinci

pal b

anks

. R

even

ue R

ecog

nitio

n R

even

ues

are

reco

gniz

ed w

hen

the

serv

ice

rend

erin

g pr

oces

s is

com

plet

ed o

r vi

rtual

ly c

ompl

eted

, an

d ea

rnin

gs a

re re

aliz

able

and

mea

sura

ble.

R

elat

ed c

osts

of p

rovi

ding

serv

ices

are

con

curr

ently

reco

gniz

ed a

s in

curr

ed.

161


- 19

-

8.

FIN

AN

CIA

L A

SSET

S C

AR

RIE

D A

T C

OST

- N

ON

-CU

RR

ENT

Dec

embe

r 31

20

09

20

08

Dom

estic

em

ergi

ng st

ocks

Ta

iwan

Hig

h Sp

eed

Rai

l Cor

pora

tion

$

2,1

20,8

29

$

2,1

20,8

29

Dom

estic

unl

iste

d st

ocks

N

ew C

entu

ry In

form

atio

n Te

ch. C

o., L

td.

18

7,04

2

-

Arc

oa C

omm

unic

atio

n Co

., Lt

d.

67,7

31

67,7

31

Gre

at T

aipe

i Bro

adba

nd C

o., L

td.

46,0

74

50,5

27

Para

win

Ven

ture

Cap

ital C

orp.

20

,207

22

,202

W

EB P

oint

Co.

, Ltd

.

6,

773

6,77

3 Fo

reig

n un

liste

d st

ocks

B

ridge

Mob

ile P

te L

td.

50,3

24

60,0

64

Dom

estic

unl

iste

d pr

efer

red

stoc

k

N

ew C

entu

ry In

form

atio

n Te

ch. C

o., L

td.

-

187,

042

$

2,4

98,9

80

$

2,5

15,1

68

Bec

ause

the

re i

s no

act

ive

mar

ket

quot

atio

n an

d a

relia

ble

fair

valu

e ca

n no

t be

est

imat

ed,

the

abov

e in

vest

men

ts a

re m

easu

red

at c

ost.

For

the

yea

rs e

nded

Dec

embe

r 31

, 20

09 a

nd 2

008,

the

Gro

up

reco

gniz

ed a

n im

pairm

ent l

oss o

f $16

,188

thou

sand

and

$11

,532

thou

sand

, res

pect

ivel

y.

9.

BON

DS

MEA

SUR

ED A

T A

MO

RTI

ZED

CO

ST -

NO

N-C

UR

REN

T

Dec

embe

r 31

20

09

20

08

Ta

iwan

Hig

h Sp

eed

Rai

l Cor

pora

tion

- unl

iste

d co

nver

tible

pre

ferr

ed

stoc

k - s

erie

s A

$

500

,000

$ 5

00,0

00

10.

PRO

PER

TY A

ND

EQ

UIP

ME

NT

- AC

CU

MU

LATE

D D

EPR

ECIA

TIO

N

D

ecem

ber

31

2009

2008

Bui

ldin

gs

$

59

5,46

3

$

515,

681

Tele

com

mun

icat

ion

equi

pmen

t

30

,516

,262

30

,209

,157

O

ffic

e eq

uipm

ent

65,7

26

99,2

52

Leas

ed a

sset

s

48

5,45

5

42

0,30

3 M

isce

llane

ous e

quip

men

t

99

7,25

8

1,

017,

139

$

32

,660

,164

$

32,2

61,5

32

Cap

italiz

ed in

tere

st f

or th

e ye

ars

ende

d D

ecem

ber

31, 2

009

and

2008

am

ount

ed to

$16

,685

thou

sand

and

$1

1,29

6 th

ousa

nd, r

espe

ctiv

ely,

with

cap

italiz

atio

n ra

tes r

angi

ng fr

om 2

.40%

to 2

.76%

. Th

e C

orpo

ratio

n an

d its

subs

idia

ry b

ough

t far

mla

nd lo

cate

d in

Yan

g-M

ei, T

aoyu

an a

nd F

angs

han,

Pin

gtun

g,

reco

gniz

ed a

s la

nd o

f $12

,000

thou

sand

and

idle

ass

et o

f $35

,787

thou

sand

, res

pect

ivel

y, b

ased

on

the

need

fo

r dep

loyi

ng te

leco

m e

quip

men

t. B

ecau

se o

nly

an in

divi

dual

cou

ld b

e th

e ow

ner o

f far

mla

nd a

ccor

ding

to

rela

ted

regu

latio

ns, i

ts o

wne

rshi

p is

und

er th

e la

ndho

lder

thro

ugh

a fid

ucia

ry c

ontra

ct.

- 18

-

4.

CA

SH A

ND

CA

SH E

QU

IVA

LEN

TS

D

ecem

ber

31

2009

2008

Gov

ernm

ent b

onds

with

repu

rcha

se ri

ghts

$ 1

,580

,638

$ 2

,176

,133

C

ash

in b

anks

83

8,31

3

99

6,34

9 Ti

me

depo

sits

34

7,35

0

27

0,10

8 Sh

ort-t

erm

not

es a

nd b

ills w

ith re

purc

hase

righ

ts

202,

000

391,

879

Cas

h on

han

d

22

,239

26

,124

R

evol

ving

fund

s

8,

496

7,46

9

$ 2

,999

,036

$ 3

,868

,062

5

. A

VA

ILA

BLE

-FO

R-S

ALE

FIN

AN

CIA

L A

SSET

S - C

UR

REN

T

D

ecem

ber

31

2009

2008

D

omes

tic li

sted

stoc

ks

Chu

nghw

a Te

leco

m C

o., L

td.

$

177

,821

$ 1

74,0

08

Ove

rsea

s lis

ted

stoc

ks

Hur

ray!

Hol

ding

Co.

, Ltd

. (N

ASD

AQ

list

ed c

ompa

ny)

-

67

,434

$ 1

77,8

21

$

241

,442

6

. A

CC

OU

NTS

REC

EIV

AB

LE -

THIR

D P

AR

TIE

S

Dec

embe

r 31

20

09

20

08

A

ccou

nts r

ecei

vabl

e

$ 7

,057

,849

$ 6

,876

,210

Le

ss a

llow

ance

for d

oubt

ful a

ccou

nts

(419

,919

)

(4

64,4

99)

$

6,6

37,9

30

$

6,4

11,7

11

For

the

year

end

ed D

ecem

ber

31,

2008

, th

e C

orpo

ratio

n an

d its

sub

sidi

arie

s en

tere

d in

to a

n ac

coun

ts

rece

ivab

le f

acto

ring

cont

ract

with

HC

Sec

ond

Ass

et M

anag

emen

t C

o.,

Ltd.

Th

e C

orpo

ratio

n an

d its

su

bsid

iarie

s so

ld $

5,18

8,39

8 th

ousa

nd o

f th

e ov

erdu

e ac

coun

ts r

ecei

vabl

e, w

hich

had

bee

n w

ritte

n of

f, to

H

C S

econ

d A

sset

Man

agem

ent C

o., L

td.

The

agg

rega

te s

ellin

g pr

ice

was

$60

,525

thou

sand

. U

nder

this

co

ntra

ct, t

he C

orpo

ratio

n an

d its

subs

idia

ries w

ould

no

long

er a

ssum

e th

e ris

k on

this

rece

ivab

le.

7.

INV

ESTM

EN

TS A

CC

OU

NTE

D F

OR

USI

NG

TH

E EQ

UIT

Y M

ETH

OD

Ta

ipei

New

Hor

izon

s C

o., L

td. (

TNH

) is

esta

blis

hed

to in

vest

in a

pro

perty

dev

elop

men

t pro

ject

loca

ted

in

the

old

Song

shan

Tob

acco

Fac

tory

site

. O

n Ja

nuar

y 15

, 200

9, T

NH

sig

ned

a 50

-yea

r BO

T co

ntra

ct w

ith

Taip

ei C

ity G

over

nmen

t. Th

e C

orpo

ratio

n es

tabl

ishe

d TN

H o

n D

ecem

ber

31, 2

008

with

ini

tial

inve

stm

ent

of $

249,

500

thou

sand

, re

pres

entin

g 49

.9%

ow

ners

hip.

In

vest

men

t los

s w

as $

37,5

26 th

ousa

nd f

or th

e ye

ar e

nded

Dec

embe

r 31

, 20

09 b

ased

on

the

audi

ted

finan

cial

stat

emen

ts o

f TN

H.

162


- 21

-

The

Gro

up’s

mem

bers

, w

hich

wer

e en

gage

d in

mob

ile o

r w

irele

ss p

hone

ser

vice

s, fix

ed n

etw

ork

serv

ices

and

the

cabl

e te

levi

sion

bus

ines

s, w

ere

view

ed a

s se

para

te, i

ndep

ende

nt c

ash-

gene

ratin

g un

its.

Th

us, t

he r

ecov

erab

le a

mou

nts

of th

e op

erat

ing

asse

ts a

nd g

oodw

ill w

ere

eval

uate

d by

bus

ines

s ty

pe,

and

the

criti

cal a

ssum

ptio

ns u

sed

for t

his e

valu

atio

n w

ere

as fo

llow

s:

1)

W

irele

ss se

rvic

e

a)

Ass

umpt

ions

on

oper

atin

g re

venu

es

A

fter

taki

ng c

hang

es i

n th

e te

leco

m i

ndus

try a

nd c

ompe

titiv

e la

ndsc

ape

into

con

side

ratio

n,

oper

atin

g re

venu

es w

ere

estim

ated

on

the

basi

s of

the

proj

ecte

d ch

ange

s in

sub

scrib

er n

umbe

rs,

min

utes

of i

ncom

ing

and

outg

oing

cal

ls a

nd a

vera

ge re

venu

e pe

r min

ute.

b)

Ass

umpt

ions

on

oper

atin

g co

sts a

nd e

xpen

ses

The

estim

ates

of

com

mis

sion

s, cu

stom

er r

eten

tion

cost

s, cu

stom

er s

ervi

ce c

osts

and

bill

pr

oces

sing

cos

ts w

ere

base

d on

the

proj

ecte

d ch

ange

s in

subs

crib

er n

umbe

rs.

The

est

imat

es o

f re

mai

ning

cos

ts a

nd e

xpen

ses

wer

e ba

sed

on th

e pr

opor

tion

of th

e ac

tual

cos

ts a

nd e

xpen

ses

to

oper

atin

g re

venu

es in

the

2009

and

200

8 fin

anci

al st

atem

ents

.

c)

Ass

umpt

ions

on

disc

ount

rate

In

200

9 an

d 20

08,

the

disc

ount

rat

e us

ed t

o ca

lcul

ate

the

asse

t re

cove

rabl

e am

ount

s of

the

C

orpo

ratio

n w

as 8

.50%

and

7.4

8% re

spec

tivel

y.

2)

Fi

xed

netw

ork

serv

ice

a)

Ass

umpt

ions

on

oper

atin

g re

venu

es

Afte

r ta

king

cha

nges

in

the

tele

com

ind

ustry

and

com

petit

ive

land

scap

e in

to c

onsi

dera

tion,

op

erat

ing

reve

nues

wer

e es

timat

ed o

n th

e ba

sis

of th

e pr

ojec

ted

chan

ges

in s

ubsc

riber

num

bers

, th

e ty

pes

of d

ata

trans

mis

sion

, ban

dwid

th o

n de

man

d, m

inut

es o

f in

com

ing

and

outg

oing

cal

ls

and

aver

age

reve

nue

per m

inut

e.

b)

Ass

umpt

ions

on

oper

atin

g co

sts a

nd e

xpen

ses.

Th

e co

sts

and

expe

nses

wer

e ba

sed

on t

he p

ropo

rtion

of

the

actu

al c

osts

and

exp

ense

s to

op

erat

ing

reve

nues

in th

e 20

09 a

nd 2

008

finan

cial

stat

emen

ts.

c)

Ass

umpt

ions

on

disc

ount

rate

In

200

9 an

d 20

08, t

he d

isco

unt r

ate

was

8.3

1% a

nd 7

.60%

, res

pect

ivel

y, in

cal

cula

ting

the

asse

t re

cove

rabl

e am

ount

s of T

FN.

3)

C

able

tele

visi

on b

usin

ess

a)

Ass

umpt

ions

on

oper

atin

g re

venu

es

A

fter

taki

ng

chan

ges

in

the

cabl

e te

levi

sion

in

dust

ry

and

com

petit

ive

land

scap

e in

to

cons

ider

atio

n, o

pera

ting

reve

nues

wer

e es

timat

ed o

n th

e ba

sis

of t

he p

roje

cted

cha

nges

in

subs

crib

er n

umbe

rs a

nd a

vera

ge re

venu

e pe

r sub

scrib

er.

- 20

-

11.

INTA

NG

IBLE

ASS

ETS

Y

ear

End

ed D

ecem

ber

31, 2

009

Cus

tom

er

O

pera

ting

Goo

dwill

Rel

atio

nshi

p

Rig

hts

Cos

t

Beg

inni

ng b

alan

ce

$

10,4

85,0

48

$

2,68

6,54

1

$ 1,

382,

000

Add

:

Acq

uire

d fr

om m

erge

r

3,

742

-

-

Adj

ustm

ent i

n co

ntin

gent

con

side

ratio

n of

ac

quis

ition

tran

sact

ion

(2

,371

)

-

- Ef

fect

to e

xcha

nge

rate

cha

nges

(4

78)

-

- A

mor

tizat

ion

-

(1

74,7

81)

-

Endi

ng b

alan

ce

$

10,4

85,9

41

$

2,51

1,76

0

$ 1,

382,

000

Y

ear

End

ed D

ecem

ber

31, 2

008

Cus

tom

er

O

pera

ting

Goo

dwill

Rel

atio

nshi

p

Rig

hts

Cos

t

Beg

inni

ng b

alan

ce

$

9,23

1,47

8

$ 2,

861,

323

$

1,38

2,00

0 A

dd:

A

cqui

red

from

mer

ger

1,25

1,21

1

-

- Ef

fect

of e

xcha

nge

rate

cha

nges

2,

359

-

-

Am

ortiz

atio

n

-

(174

,782

)

- En

ding

bal

ance

$ 10

,485

,048

$

2,

686,

541

$

1,38

2,00

0 a.

C

usto

mer

rela

tions

hip

and

oper

atin

g rig

hts

Und

er S

FAS

No.

25

- “A

ccou

ntin

g fo

r B

usin

ess

Com

bina

tions

” an

d N

o. 3

7 -

“Acc

ount

ing

for

Inta

ngib

le A

sset

s”, t

he G

roup

sho

uld

mea

sure

the

fair

valu

e of

the

acqu

ired

asse

ts a

nd id

entif

y m

ajor

in

tang

ible

ass

ets a

s wel

l as t

he a

mor

tizat

ion

perio

ds.

1)

On

Apr

il 17

, 200

7, T

FN, t

he C

orpo

ratio

n’s 1

00%

-ow

ned

subs

idia

ry, a

cqui

red

mor

e th

an 5

0% o

f the

fo

rmer

TFN

thr

ough

a p

ublic

ten

der

offe

r at

the

pric

e of

NT$

8.3

pre

shar

e.

The

Cor

pora

tion

divi

ded

the

form

er T

FN a

nd it

s su

bsid

iarie

s in

to tw

o ca

sh-g

ener

atin

g un

its, f

ixed

net

wor

k se

rvic

e an

d ca

ble

TV.

Acc

ordi

ngly

, cu

stom

er r

elat

ions

hip

and

oper

atin

g rig

hts

are

iden

tifie

d as

maj

or

inta

ngib

le a

sset

s. 2)

O

n Se

ptem

ber

2007

, TU

C, t

he C

orpo

ratio

n’s

100%

-ow

ned

subs

idia

ry, a

cqui

red

mor

e th

an 5

0% o

f TT

N’s

sha

res

at N

T$13

.843

per

sha

re.

The

Cor

pora

tion

mea

sure

d th

e fa

ir va

lue

of th

e ac

quire

d as

sets

, an

d vi

ewed

TTN

’s I

SP s

ervi

ces

as o

ne c

ash-

gene

ratin

g un

it.

Acc

ordi

ngly

, cu

stom

er

rela

tions

hip

is id

entif

ied

as m

ajor

inta

ngib

le a

sset

.

b.

Goo

dwill

In

con

form

ity w

ith S

FAS

No.

35,

“A

ccou

ntin

g fo

r Ass

et Im

pairm

ent,”

the

Gro

up id

entif

ied

the

smal

lest

iden

tifia

ble

grou

p of

cas

h-ge

nera

ting

units

by

year

s and

ent

ities

as f

ollo

ws:

163


- 23

-

14.

SHO

RT-

TER

M N

OT

ES A

ND

BIL

LS P

AY

AB

LE

D

ecem

ber

31

2009

2008

C

omm

erci

al p

aper

pay

able

In

tern

atio

nal B

ills f

inan

cial

Cor

pora

tion

$

500

,000

$

- G

rand

Bill

s Fin

ance

Cor

pora

tion

300,

000

- Le

ss d

isco

unt o

n sh

ort-t

erm

not

es a

nd b

ills p

ayab

le

(362

)

-

N

et c

arry

ing

valu

e

$ 7

99,6

38

$

-

In

tere

st ra

te

0.

27%

-0.3

3%

-

Pe

riod

20

09.1

2.10

- 20

10.0

1.29

-

15.

AD

VA

NC

E R

ECEI

PTS

Th

e C

orpo

ratio

n en

tere

d in

to a

con

tract

with

Meg

a In

tern

atio

nal

Com

mer

cial

Ban

k C

o.,

Ltd.

, w

hich

pr

ovid

ed p

erfo

rman

ce g

uara

ntee

for

adv

ance

rec

eipt

s fr

om p

repa

id c

ard

cust

omer

s in

acc

orda

nce

with

N

CC

’s n

ew p

olic

y ef

fect

ive

on A

pril

1, 2

007.

Th

e gu

aran

teed

adv

ance

rec

eipt

s fr

om p

repa

id c

ard

cust

omer

s wer

e $8

32,9

08 th

ousa

nd a

s of D

ecem

ber 3

1, 2

009.

TF

N, t

he C

orpo

ratio

n’s

subs

idia

ry, e

nter

ed in

to a

con

tract

with

Meg

a In

tern

atio

nal C

omm

erci

al B

ank

Co.

, Lt

d.,

whi

ch p

rovi

ded

perf

orm

ance

gua

rant

ee f

or a

dvan

ce r

ecei

pts

from

ID

D c

allin

g ca

rd c

usto

mer

s in

ac

cord

ance

with

NC

C’s

new

pol

icy

effe

ctiv

e on

Apr

il 1,

200

7.

The

Cor

pora

tion

also

bea

rs th

e re

paym

ent

liabi

lity

with

res

pect

to T

FN’s

dra

wdo

wn

from

its

cred

it lin

e w

ith M

ega

Ban

k.

The

guar

ante

ed a

dvan

ce

rece

ipts

fro

m a

bove

-men

tione

d ID

D c

allin

g ca

rd c

usto

mer

s w

ere

$48,

322

thou

sand

as

of D

ecem

ber

31,

2009

.

16.

BON

DS

PAY

AB

LE

D

ecem

ber

31

2009

2008

C

urre

nt

N

on-c

urre

nt

C

urre

nt

N

on-c

urre

nt

D

omes

tic u

nsec

ured

bon

ds

$

-

$

8,0

00,0

00

$

7,5

00,0

00

$

8,0

00,0

00

a.

1st d

omes

tic u

nsec

ured

bon

ds

On

Dec

embe

r 13

, 200

2, t

he C

orpo

ratio

n is

sued

$15

,000

,000

tho

usan

d of

dom

estic

uns

ecur

ed b

onds

, w

ith e

ach

bond

hav

ing

a fa

ce v

alue

of $

5,00

0 th

ousa

nd.

The

bon

ds h

ave

four

diff

eren

t typ

es b

ased

on

term

s an

d da

tes.

Typ

es I

and

II bo

th c

onsi

st o

f A to

L tr

anch

es.

Typ

es II

I and

IV b

oth

cons

ist o

f A

to M

tran

ches

. T

ypes

I an

d II

are

five-

year

bon

ds a

nd T

ypes

III a

nd IV

are

sev

en-y

ear

bond

s. T

he

inte

rest

rate

s and

pay

men

t ter

ms a

re a

s fol

low

s:

Pr

inci

pal

R

ate

Te

rms

Ty

pe I

$

2,50

0,00

0

2.60

%

Rep

aym

ent o

f $1,

250,

000

thou

sand

eac

h in

the

four

th a

nd fi

fth y

ears

, int

eres

t pay

able

ann

ually

Ty

pe II

2,

500,

000

5.

21%

-6M

LI

BO

R

Rep

aym

ent o

n m

atur

ity d

ate,

inte

rest

pay

able

se

mia

nnua

lly

(Con

tinue

d)

- 22

-

b)

Ass

umpt

ions

on

oper

atin

g co

sts a

nd e

xpen

ses

Th

e es

timat

es o

f co

pyrig

ht c

osts

, net

wor

k m

aint

enan

ce c

osts

, cus

tom

er s

ervi

ce c

osts

and

bill

pr

oces

sing

cos

ts w

ere

base

d on

the

proj

ecte

d ch

ange

s in

subs

crib

er n

umbe

rs.

The

est

imat

es o

f re

mai

ning

cos

ts a

nd e

xpen

ses

wer

e ba

sed

on th

e pr

opor

tion

of th

e ac

tual

cos

ts a

nd e

xpen

ses

to

oper

atin

g re

venu

es in

the

2009

and

200

8 fin

anci

al st

atem

ents

. c)

A

ssum

ptio

ns o

n di

scou

nt ra

te

Th

e di

scou

nt r

ate

used

to c

alcu

late

the

ass

et r

ecov

erab

le a

mou

nts

for

each

Sys

tem

Ope

ratio

n w

as ra

ngin

g fr

om 2

.90%

to 6

.42%

and

from

3.2

1% to

5.9

2% in

200

9 an

d 20

08, r

espe

ctiv

ely.

Bas

ed o

n th

e ke

y as

sum

ptio

ns o

f eac

h ca

sh-g

ener

atin

g un

it, th

e G

roup

’s m

anag

emen

t bel

ieve

s th

at

the

carr

ying

am

ount

s of

thes

e as

sets

for

ope

ratin

g an

d go

odw

ill w

ill n

ot e

xcee

d th

eir

reco

vera

ble

amou

nts

even

if th

ere

are

chan

ges

in th

e cr

itica

l ass

umpt

ions

use

d to

est

imat

e re

cove

rabl

e am

ount

s as

long

as t

hese

cha

nges

are

reas

onab

le fo

r the

yea

rs e

nded

Dec

embe

r 31,

200

9 an

d 20

08.

12.

ASS

ETS

LEA

SED

TO

OTH

ERS

AN

D ID

LE A

SSET

S

Dec

embe

r 31

20

09

20

08

Ass

ets l

ease

d to

oth

ers

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t

$ 4

71,6

64

$

639

,696

Le

ss a

ccum

ulat

ed d

epre

ciat

ion

(22,

462)

(4

1,27

9)

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acc

umul

ated

impa

irmen

t

(1

0,59

1)

(54,

493)

$ 4

38,6

11

$

543

,924

Idle

ass

ets

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t

$ 5

17,1

37

$

612

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Le

ss a

llow

ance

for v

alue

dec

line

(35,

929)

(1

87,5

19)

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acc

umul

ated

dep

reci

atio

n

(4

3,05

3)

(100

,616

) Le

ss a

ccum

ulat

ed im

pairm

ent

(126

,429

)

(9

6,57

1)

$

311

,726

$ 2

28,2

69

The

impa

irmen

t los

ses

of id

le e

quip

men

t wer

e de

term

ined

bas

ed o

n th

eir n

et re

aliz

able

val

ue.

The

Gro

up

reco

gniz

ed im

pairm

ent l

osse

s of $

12,1

24 th

ousa

nd fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

008.

13.

SHO

RT-

TER

M B

OR

RO

WIN

GS

D

ecem

ber

31

2009

2008

Uns

ecur

ed lo

ans f

rom

fina

ncia

l ins

titut

ions

$ 6

,800

,000

$

-

Inte

rest

rate

0.57

%-0

.60%

-

164


- 25

-

The

Labo

r St

anda

rds

Act

(LS

A)

prov

ides

for

a d

efin

ed b

enef

it pe

nsio

n pl

an.

Ben

efits

are

bas

ed o

n th

e le

ngth

of

serv

ice

and

aver

age

basi

c pa

y of

the

six

mon

ths

befo

re r

etire

men

t. T

he G

roup

con

tribu

tes

mon

thly

an

amou

nt e

qual

to 2

% o

f the

em

ploy

ees’

mon

thly

wag

es to

a p

ensi

on fu

nd.

The

pen

sion

fund

is

man

aged

by

an in

depe

nden

tly a

dmin

iste

red

pens

ion

fund

com

mitt

ee a

nd d

epos

ited

in th

e co

mm

ittee

’s n

ame

in th

e B

ank

of T

aiw

an (f

orm

erly

the

Cen

tral T

rust

of C

hina

, whi

ch w

as m

erge

d in

to th

e B

ank

of T

aiw

an in

Ju

ly 2

007.

) A

ppro

ved

by D

epar

tmen

t of

Lab

or o

f Ta

ipei

City

Gov

ernm

ent,

the

Cor

pora

tion

susp

ende

d co

ntrib

utin

g fr

om F

ebru

ary

2007

to Ja

nuar

y 20

10.

Info

rmat

ion

on th

e de

fined

ben

efit

pens

ion

plan

is su

mm

ariz

ed a

s fol

low

s:

a.

Pens

ion

cost

Yea

rs E

nded

Dec

embe

r 31

20

09

20

08

Se

rvic

e co

st

$

4,

238

$

4,

386

Inte

rest

cos

t

16

,620

13

,920

Pr

ojec

ted

retu

rn o

f pen

sion

ass

ets

(16,

280)

(1

4,85

1)

Am

ortiz

atio

n

5,

172

213

Gai

n on

settl

emen

t

(1

1,65

7)

(1,0

87)

Pe

nsio

n co

st

$

(1

,907

)

$

2,58

1

b.

Cha

nges

in th

e pr

epai

d pe

nsio

n co

st

D

ecem

ber

31

2009

2008

B

enef

it ob

ligat

ion

Ves

ted

$

(6

,540

)

$

(3,8

78)

Non

-ves

ted

(427

,856

)

(3

58,0

40)

Acc

umul

ated

(4

34,3

96)

(361

,918

) A

dditi

onal

ben

efits

bas

ed o

n fu

ture

sala

ries

(282

,031

)

(2

95,3

60)

Proj

ecte

d be

nefit

obl

igat

ion

(716

,427

)

(6

57,2

78)

Fair

valu

e of

pla

n as

sets

66

5,36

7

657,

784

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ed st

atus

(5

1,06

0)

506

Unr

ecog

nize

d ne

t tra

nsiti

on o

blig

atio

n

17

,821

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nrec

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prio

r ser

vice

cos

t

26

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28

,056

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nam

ortiz

ed n

et g

ain

or lo

ss

90,9

81

50,9

84

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ecog

nize

d ne

t gai

n

(3

5,34

5)

(64,

247)

A

dditi

onal

liab

ility

(3

6,89

9)

(29,

694)

Prep

aid

pens

ion

cost

$

12,1

60

$

6,

505

c.

Ves

ted

bene

fit

$

(7

,364

)

$

(4,5

23)

d.

Act

uaria

l ass

umpt

ions

Yea

rs E

nded

Dec

embe

r 31

20

09

20

08

D

isco

unt r

ate

used

in d

eter

min

ing

pres

ent v

alue

s

2.00

-2.2

5%

2.

50%

-2.7

5%

Futu

re sa

lary

incr

ease

rate

2.50

-3.0

0%

3.

00%

Ex

pect

ed ra

te o

f ret

urn

on p

lan

asse

ts

2.

00%

2.50

%-2

.75%

- 24

-

Pr

inci

pal

R

ate

Te

rms

Ty

pe II

I

$ 5,

000,

000

2.

80%

R

epay

men

t of $

2,50

0,00

0 th

ousa

nd e

ach

in th

e si

xth

and

seve

nth

year

s, in

tere

st p

ayab

le a

nnua

lly

Type

IV

5,00

0,00

0

5.75

%-6

M

LIB

OR

R

epay

men

t on

mat

urity

dat

e, in

tere

st p

ayab

le

sem

iann

ually

$ 15

,000

,000

(Con

clud

ed)

Th

e la

st i

nsta

llmen

ts o

f th

e ab

ove-

men

tione

d co

rpor

ate

bond

s w

ere

repa

id b

y th

e C

orpo

ratio

n in

D

ecem

ber 2

009.

b.

2n

d do

mes

tic u

nsec

ured

bon

ds

On

Nov

embe

r 14

, 20

08,

the

Cor

pora

tion

issu

ed $

8,00

0,00

0 th

ousa

nd f

ive-

year

dom

estic

uns

ecur

ed

bond

s, w

ith e

ach

bond

hav

ing

a fa

ce v

alue

of $

10,0

00 th

ousa

nd a

nd a

cou

pon

rate

of 2

.88%

per

ann

um,

sim

ple

inte

rest

due

ann

ually

. R

epay

men

t w

ill b

e m

ade

in t

he f

ourth

and

fift

h ye

ar w

ith e

qual

in

stal

lmen

ts, i

.e. $

4,00

0,00

0 th

ousa

nd, r

espe

ctiv

ely.

Fu

ture

repa

ymen

ts o

f the

abo

ve-m

entio

ned

corp

orat

e bo

nds a

re a

s fol

low

s:

Yea

r

Am

ount

2012

$

4,0

00,0

00

2013

4,00

0,00

0

$

8,0

00,0

00

17.

LON

G-T

ERM

BO

RR

OW

ING

S

D

ecem

ber

31

2009

2008

Uns

ecur

ed lo

ans

$

-

$

5,2

00,0

00

In

tere

st ra

te

-

2.

5916

%

To p

rovi

de m

ediu

m-te

rm w

orki

ng c

apita

l, th

e C

orpo

ratio

n an

d its

sub

sidi

ary,

TFN

, en

tere

d in

to a

sy

ndic

ated

loan

with

a jo

int c

redi

t lin

e of

$13

,500

,000

thou

sand

with

9 b

anks

led

by C

hina

trust

Com

mer

cial

B

ank

on F

ebru

ary

21, 2

008.

Th

e te

nor

is th

ree

year

s st

artin

g fr

om M

ay 2

0, 2

008.

B

ased

on

cont

ract

te

rm, i

nter

ests

are

pay

able

mon

thly

and

the

prin

cipa

l is

due

upon

mat

urity

. U

pon

mat

urity

, the

loan

is

allo

wed

to

revo

lve

with

in i

ts c

redi

t lim

its.

The

con

tract

req

uire

s th

e C

orpo

ratio

n to

mai

ntai

n ce

rtain

fin

anci

al r

atio

incl

udin

g de

bt r

atio

s, in

tere

st c

over

age,

and

tang

ible

net

ass

et r

atio

bas

ed o

n se

mi-a

nnua

l fin

anci

als.

The

Cor

pora

tion

also

bea

rs th

e re

paym

ent l

iabi

lity

with

resp

ect t

o TF

N’s

bor

row

ing.

Pl

ease

re

fer t

o N

ote

26 fo

r fur

ther

info

rmat

ion.

18

. PE

NSI

ON

PLA

N

The

Labo

r Pe

nsio

n A

ct (

LPA

) pr

ovid

es f

or a

def

ined

con

tribu

tion

pens

ion

plan

. S

tarti

ng f

rom

Jul

y 1,

20

05, t

he G

roup

shou

ld c

ontri

bute

mon

thly

an

amou

nt e

qual

to 6

% o

f the

em

ploy

ees’

mon

thly

wag

es to

the

empl

oyee

s’ in

divi

dual

pen

sion

acc

ount

s. T

he c

ontri

bute

d am

ount

was

$17

2,91

0 th

ousa

nd a

nd $

174,

989

thou

sand

for t

he y

ears

end

ed D

ecem

ber 3

1, 2

009

and

2008

, res

pect

ivel

y.

165


- 27

-

The

2008

and

200

7 ea

rnin

gs a

ppro

pria

tions

reso

lved

by

the

AG

Ms

on J

une

19, 2

009

and

June

13,

200

8 w

ere

as fo

llow

s:

App

ropr

iatio

n of

Ear

ning

s

Div

iden

d Pe

r Sh

are

(NT$

)

Fo

r Fi

scal

For

Fisc

al

Fo

r Fi

scal

For

Fisc

al

Yea

r 20

08

Y

ear

2007

Yea

r 20

08

Y

ear

2007

App

ropr

iatio

n of

lega

l res

erve

$ 1,

537,

138

$

661,

300

Rev

ersa

l of s

peci

al re

serv

e

(5

6,74

4)

(8

6,81

9)

Rem

uner

atio

n to

dire

ctor

s and

su

perv

isor

s

-

18,1

16

Cas

h bo

nus t

o em

ploy

ees

-

181,

155

Cas

h di

vide

nds

13,9

68,8

64

7,

601,

851

$4

.687

04

$2

.543

26

$

15,4

49,2

58

$

8,37

5,60

3

Th

e sh

areh

olde

rs o

n Ju

ne 1

9, 2

009

reso

lved

to

dist

ribut

e 20

08 b

onus

of

$414

,697

tho

usan

d to

em

ploy

ees a

nd re

mun

erat

ion

of $

41,4

70 th

ousa

nd to

dire

ctor

s and

supe

rvis

ors.

Info

rmat

ion

on th

e ap

prop

riatio

n of

the

2008

ear

ning

s, bo

nus

and

rem

uner

atio

n to

em

ploy

ees,

dire

ctor

s an

d su

perv

isor

s pr

opos

ed b

y th

e B

oard

of

Dire

ctor

s an

d ap

prov

ed a

t 20

09 A

GM

is

avai

labl

e on

the

Mar

ket O

bser

vatio

n Po

st S

yste

m w

ebsi

te o

f the

Tai

wan

Sto

ck E

xcha

nge.

c.

Cap

ital r

educ

tion

by c

ash

To in

crea

se R

OE

(Ret

urn

of E

quity

) an

d m

aint

ain

stab

le E

PS (

Earn

ings

per

Sha

re)

and

divi

dend

, the

C

orpo

ratio

n’s

AG

M r

esol

ved

on J

une

15,

2007

, a

capi

tal

redu

ctio

n of

$12

,000

,000

tho

usan

d,

repr

esen

ting

24%

of

outs

tand

ing

shar

es.

The

Cor

pora

tion’

s B

oard

of

Dire

ctor

s re

solv

ed t

he r

ecor

d da

te o

f D

ecem

ber

1, 2

007,

and

com

plet

ed t

he p

roce

dure

for

reg

istra

tion

chan

ges,

whi

ch i

s al

read

y ap

prov

ed b

y th

e au

thor

ity.

Tra

ding

sus

pens

ion

perio

d st

arte

d fr

om F

ebru

ary

1 to

19,

200

8, a

nd n

ew

shar

es re

sum

ed tr

adin

g fr

om F

ebru

ary

20, 2

008.

d.

Tr

easu

ry st

ock

(Sha

res i

n Th

ousa

nds)

B

egin

ning

Endi

ng

Purp

ose

of B

uyba

ck

Sh

ares

Incr

ease

Dec

reas

e

Shar

es

Y

ear e

nded

Dec

embe

r 31,

200

9

N

ine

mon

ths e

nded

June

30,

200

8

To b

e tra

nsfe

rred

to e

mpl

oyee

s

24

,193

-

24,1

93

- Sh

ares

hel

d by

subs

idia

ries

811,

918

-

-

811,

918

Y

ear e

nded

Dec

embe

r 31,

200

8

To b

e tra

nsfe

rred

to e

mpl

oyee

s

-

24,1

93

-

24

,193

Sh

ares

hel

d by

subs

idia

ries

1

,368

,250

(Not

e)

-

55

6,33

2

81

1,91

8

Not

e:

Shar

es h

eld

befo

re c

apita

l red

uctio

n.

- 26

-

19.

SHA

REH

OLD

ERS’

EQ

UIT

Y

a.

C

apita

l sur

plus

U

nder

the

Com

pany

Act

, cap

ital s

urpl

us m

ay o

nly

be u

sed

to o

ffse

t a d

efic

it.

How

ever

, cap

ital s

urpl

us

gene

rate

d fr

om t

he e

xces

s of

the

iss

ue p

rice

over

the

par

val

ue o

f ca

pita

l st

ock,

inc

ludi

ng t

he s

tock

is

sued

for

new

cap

ital

and

the

buyb

ack

of t

reas

ury

stoc

k, m

ay b

e tra

nsfe

rred

to

capi

tal

as s

tock

di

vide

nds,

and

this

tran

sfer

is re

stric

ted

to a

cer

tain

per

cent

age

of th

e ca

pita

l sur

plus

and

may

be

mad

e on

ly w

ithin

pre

scrib

ed li

mits

eac

h tim

e.

Als

o, th

e ca

pita

l sur

plus

from

long

-term

inve

stm

ents

may

not

be

use

d fo

r any

pur

pose

.

b.

App

ropr

iatio

n of

ear

ning

s and

div

iden

d po

licy

Th

e C

orpo

ratio

n’s

Arti

cles

of I

ncor

pora

tion

prov

ide

that

a 1

0% le

gal r

eser

ve s

houl

d be

set

asi

de f

rom

th

e an

nual

net

inco

me

afte

r the

redu

ctio

n of

acc

umul

ated

def

icit.

Th

e re

mai

nder

, les

s sp

ecia

l res

erve

ba

sed

on re

leva

nt la

ws o

r reg

ulat

ions

or b

usin

ess r

equi

rem

ents

, sho

uld

be d

istri

bute

d as

follo

ws:

1)

Div

iden

ds a

nd b

onus

to p

refe

rred

shar

ehol

ders

. 2)

R

emun

erat

ion

to d

irect

ors a

nd su

perv

isor

s - u

p to

0.3

%.

3)

Bon

us to

em

ploy

ees -

1%

-3%

. 4)

R

emai

nder

, to

be a

ppro

pria

ted

as d

ivid

ends

as d

eter

min

ed in

the

shar

ehol

ders

’ mee

ting.

Th

e C

orpo

ratio

n’s

divi

dend

dis

tribu

tion

is b

ased

on

the

avai

labi

lity

of e

xces

s fu

nds.

Tha

t is

, th

e C

orpo

ratio

n fir

st p

roje

cts f

utur

e ca

pita

l nee

ds th

roug

h a

capi

tal b

udge

ting

proc

ess

and

then

pro

vide

s for

th

e pr

ojec

ted

capi

tal

need

s by

usi

ng r

etai

ned

earn

ings

. A

ny r

emai

nder

is

avai

labl

e fo

r di

vide

nd

dist

ribut

ion.

H

owev

er,

the

amou

nt o

f st

ock

divi

dend

s sh

ould

not

be

mor

e th

an 8

0% o

f th

e to

tal

divi

dend

s to

be

dist

ribut

ed in

a s

ingl

e ye

ar.

The

fin

al a

mou

nt, t

ype

and

perc

enta

ge o

f th

e di

vide

nds

are

subj

ect t

o th

e ap

prov

al b

y th

e B

oard

of

Dire

ctor

s an

d sh

areh

olde

rs b

ased

on

actu

al e

arni

ngs

and

capi

tal r

equi

rem

ents

of t

he C

orpo

ratio

n in

a p

artic

ular

yea

r. A

reg

ulat

ion

issu

ed b

y th

e Se

curit

ies

and

Futu

res

Bur

eau

requ

ires

a sp

ecia

l res

erve

be

mad

e fr

om th

e un

appr

opria

ted

earn

ings

, equ

ival

ent t

o th

e de

bit b

alan

ce o

f any

acc

ount

sho

wn

in s

hare

hold

ers’

equ

ity.

Th

e sp

ecia

l res

erve

app

ropr

iate

d w

ill b

e re

vers

ed to

the

exte

nt th

at th

e ne

t deb

it ba

lanc

e re

vers

es.

Th

e ap

prop

riatio

n of

ear

ning

s sh

ould

be

reso

lved

by

the

shar

ehol

ders

in th

e fo

llow

ing

year

and

giv

en

effe

ct to

in th

e fin

anci

al st

atem

ents

of t

hat y

ear.

Und

er th

e In

tegr

ated

Inc

ome

Tax

Syst

em, R

OC

res

iden

t sha

reho

lder

s ar

e al

low

ed a

tax

cred

it fo

r th

e in

com

e ta

x pa

id b

y th

e C

orpo

ratio

n.

An

impu

tatio

n cr

edit

acco

unt

(ICA

) is

mai

ntai

ned

by t

he

Cor

pora

tion

for s

uch

inco

me

tax

and

the

tax

cred

it al

loca

ted

to e

ach

shar

ehol

der.

For

the

year

end

ed D

ecem

ber

31, 2

009,

the

bonu

ses

to e

mpl

oyee

s an

d re

mun

erat

ion

to d

irect

ors

and

supe

rvis

ors

wer

e ac

crue

d ba

sed

on a

res

pect

ive

3% a

nd 0

.3%

of

net

inco

me

(net

of

the

bonu

s to

em

ploy

ees

and

rem

uner

atio

n to

dire

ctor

s an

d su

perv

isor

s) a

fter

setti

ng a

side

10%

net

inco

me

as le

gal

rese

rves

. T

he s

igni

fican

t diff

eren

ce b

etw

een

annu

al a

ccru

als

and

the

amou

nt a

ppro

ved

by th

e B

oard

sh

all

be a

djus

ted

in t

he c

urre

nt y

ear.

If

the

Boa

rd o

f D

irect

ors’

app

rova

l di

ffer

s fr

om t

he a

mou

nt

ratif

ied

at th

e an

nual

gen

eral

sha

reho

lder

s’ m

eetin

g (A

GM

), th

e di

ffer

ence

will

be

treat

ed a

s ch

ange

s in

ac

coun

ting

estim

atio

n an

d w

ill b

e ad

just

ed in

201

0 P&

L.

If em

ploy

ee b

onus

es a

re p

aid

in th

e fo

rm o

f co

mpa

ny s

hare

s, th

e nu

mbe

r of

em

ploy

ee b

onus

sha

res

shal

l be

der

ived

fro

m d

ivid

ing

the

appr

oved

bo

nus a

mou

nt b

y its

clo

sing

pric

e on

e da

y pr

ior t

o th

e A

GM

, adj

uste

d fo

r cas

h an

d/or

stoc

k di

vide

nds i

f an

y.

166


- 29

-

20.

INC

OM

E T

AX

EX

PEN

SE

a.

Th

e re

conc

iliat

ion

of im

pute

d in

com

e ta

xes o

n pr

etax

inco

me

at st

atut

ory

tax

rate

to in

com

e ta

x ex

pens

e w

as a

s fol

low

s:

Yea

rs E

nded

Dec

embe

r 31

20

09

20

08

Ta

x on

pre

tax

inco

me

at st

atut

ory

tax

rate

(25%

)

$ 6

,509

,331

$ 7

,351

,511

A

dd (d

educ

t) ta

x ef

fect

s of

Perm

anen

t diff

eren

ces

Inve

stm

ent i

ncom

e fr

om d

omes

tic in

vest

ees a

ccou

nted

for

usin

g eq

uity

met

hod

(2

,195

,626

)

(2

,705

,374

) O

ther

(2

3,22

6)

91,2

38

Tem

pora

ry d

iffer

ence

s

(5

44,3

01)

(507

,231

) Ta

x-ex

empt

inco

me

-

(2

6,00

1)

Def

erre

d in

com

e ta

xes

1,

023,

505

42

6,49

7

Prio

r yea

rs’ a

djus

tmen

t

22,1

35

509,

901

Prio

r yea

rs’ l

oss c

arry

forw

ard

(20,

412)

(3

9,90

1)

Inve

stm

ent t

ax c

redi

ts

(15,

857)

(3

16,8

78)

Tax

on sh

ort-t

erm

bill

s

26

6

11

,601

In

com

e ta

x (1

0%) o

n un

appr

opria

ted

earn

ings

-

195,

172

Inco

me

basi

c ta

x

-

163,

926

In

com

e ta

x ex

pens

e

$ 4

,755

,815

$ 5

,154

,461

In J

anua

ry 2

009,

the

Arti

cle

39 o

f th

e In

com

e Ta

x La

w w

as a

men

ded

to e

xten

d th

e op

erat

ing

loss

es

carr

yfor

war

d pe

riod

from

five

yea

rs to

ten

year

s. I

n M

ay 2

009,

the

Arti

cle

5 of

the

Inco

me

Tax

Law

w

as a

men

ded

to r

educ

e co

rpor

ate

stat

utor

y in

com

e ta

x ra

te f

rom

25%

to

20%

, eff

ectiv

e fr

om 2

010.

Th

e G

roup

rec

alcu

late

d its

def

erre

d ta

x as

sets

and

liab

ilitie

s in

acc

orda

nce

with

the

amen

ded

Arti

cles

an

d re

cord

ed th

e re

sulti

ng d

iffer

ence

as a

n in

com

e ta

x ex

pens

e.

b.

Def

erre

d in

com

e ta

x as

sets

(lia

bilit

ies)

wer

e as

follo

ws:

Dec

embe

r 31

20

09

20

08

U

nrea

lized

loss

on

retir

emen

t of p

rope

rty a

nd e

quip

men

t

$

1,4

12,4

88

$

2,1

55,0

31

Prov

isio

n fo

r dou

btfu

l acc

ount

s

482,

476

690,

256

Inve

stm

ent t

ax c

redi

ts

27,7

60

484,

494

Am

ortiz

atio

n of

goo

dwill

(2

56,5

98)

(136

,519

) Pr

ior y

ears

’ los

s car

ryfo

rwar

d

66

,022

10

1,90

1 Pr

ovis

ion

for i

mpa

irmen

t los

ses o

n id

le a

sset

s

30,3

75

66,4

16

Unr

ealiz

ed g

ain

on fi

nanc

ial l

iabi

litie

s

-

(20,

622)

A

ccru

ed p

ensi

on c

ost

(4,5

71)

(2,5

26)

Oth

er

106,

288

41,5

99

1,

864,

240

3,38

0,03

0 Le

ss v

alua

tion

allo

wan

ce

(329

,494

)

(8

42,4

00)

$

1,5

34,7

46

$

2,5

37,6

30

(Con

tinue

d)

- 28

-

1)

Tran

sfer

of s

tock

to e

mpl

oyee

s Fo

r the

yea

r end

ed D

ecem

ber 3

1, 2

009,

the

Cor

pora

tion

trans

ferr

ed 2

4,19

3 th

ousa

nd s

hare

s bo

ught

ba

ck f

rom

the

mar

ket

to e

mpl

oyee

s at

NT$

43.8

per

sha

re,

resu

lting

in

a re

duct

ion

of $

3,25

4 th

ousa

nd in

cap

ital s

urpl

us.

Und

er th

e Se

curit

ies

and

Exch

ange

Law

, the

buy

back

am

ount

of

treas

ury

stoc

k sh

ould

not

exc

eed

10%

of t

otal

issu

ed sh

ares

, and

the

buyb

ack

cost

shou

ld n

ot e

xcee

d th

e su

m o

f the

reta

ined

ear

ning

s, ad

ditio

nal

paid

-in c

apita

l in

exc

ess

of p

ar v

alue

and

rea

lized

cap

ital

surp

lus.

In

addi

tion,

the

C

orpo

ratio

n sh

ould

not

pro

vide

trea

sury

sto

ck a

s co

llate

ral a

nd s

houl

d no

t exe

rcis

e sh

areh

olde

rs’

right

s on

thos

e sh

ares

bef

ore

trans

fer.

2)

Sh

ares

hel

d by

subs

idia

ries

As

of D

ecem

ber 3

1, 2

009,

the

carr

ying

and

mar

ket v

alue

of t

he C

orpo

ratio

n’s

stoc

ks h

eld

by T

CC

I, TI

D a

nd T

UI

(all

are

subs

idia

ries

100%

-ow

ned

by t

he C

orpo

ratio

n) w

ere

$50,

663,

659

thou

sand

.

The

Cor

pora

tion

recl

assi

fied

$31,

889,

100

thou

sand

fro

m i

nves

tmen

ts a

ccou

nted

for

usi

ng e

quity

m

etho

d to

tre

asur

y st

ock

base

d on

SFA

S N

o. 3

0, “

Acc

ount

ing

for

Trea

sury

Sto

ck”.

A

lthou

gh

thes

e sh

ares

are

trea

ted

as tr

easu

ry s

tock

in th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts, t

he s

hare

hold

ers

are

entit

led

to e

xcis

e th

eir r

ight

s on

thes

e sh

ares

, exc

ept f

or p

artic

ipat

ion

in c

apita

l inj

ectio

n by

cas

h.

In a

dditi

on, b

ased

on

the

RO

C C

ompa

ny A

ct, t

he s

hare

hold

ers

of tr

easu

ry s

tock

s ca

n no

t exe

rcis

e th

e vo

ting

right

. In

the

first

qua

rter o

f 200

8, T

FN s

old

300,

000

thou

sand

sha

res

of th

e C

orpo

ratio

n fo

r $13

,509

,828

th

ousa

nd.

Dis

posa

l ga

in f

rom

the

sal

es r

esul

ted

in a

n in

crea

se i

n ca

pita

l su

rplu

s by

$3,

485,

732

thou

sand

. I

n ad

ditio

n, t

he C

orpo

ratio

n’s

shar

es h

eld

by s

ubsi

diar

ies

wer

e re

duce

d by

256

,332

th

ousa

nd sh

ares

due

to th

e C

orpo

ratio

n’s c

apita

l red

uctio

n.

e.

U

nrea

lized

gai

ns o

r los

ses o

n fin

anci

al in

stru

men

ts

U

nrea

lized

gai

ns o

r lo

sses

on

finan

cial

inst

rum

ents

for

the

year

s en

ded

Dec

embe

r 31

, 200

9 an

d 20

08

wer

e su

mm

ariz

ed a

s fol

low

s:

Y

ears

End

ed D

ecem

ber

31

2009

2008

A

vaila

ble-

for-s

ale

finan

cial

ass

ets

Bal

ance

, beg

inni

ng o

f yea

r

$

54,4

55

$

57

,560

Fa

ir va

lue

chan

ges r

ecog

nize

d di

rect

ly in

equ

ity

9,16

9

(3,1

05)

63

,624

54

,455

C

hang

es in

unr

ealiz

ed g

ains

(los

ses)

of c

ash

flow

hed

ge

Bal

ance

, beg

inni

ng o

f yea

r

61

,864

(3

8,74

9)

Fair

valu

e ch

ange

s rec

ogni

zed

dire

ctly

in e

quity

(61,

864)

10

0,61

3

-

61,8

64

Cha

nges

in u

nrea

lized

gai

ns (l

osse

s) re

cogn

ized

by

the

equi

ty

met

hod

Bal

ance

, beg

inni

ng o

f yea

r

(1

22,2

16)

(82,

854)

Fa

ir va

lue

chan

ges r

ecog

nize

d di

rect

ly in

equ

ity

122,

216

(3

9,36

2)

-

(122

,216

)

Unr

ealiz

ed g

ains

(los

ses)

on

finan

cial

inst

rum

ents

$

63,6

24

$

(5

,897

)

167


- 31

-

D

ecem

ber

31

2009

2008

TDC

$

-

$

-

TCC

I

-

- TI

D

-

-

TSB

-

10

TF

N

712,

967

1,61

5,93

5 TU

I

-

- TT

&T

562

29

TFN

I

Not

app

licab

le

123,

168

R&

R

N

ot a

pplic

able

-

WTV

B

-

- TF

NM

14

8,00

1

19

8,24

8 U

CTV

27

,364

44

,364

SH

CTV

Not

app

licab

le

9,64

1 Y

JCTV

56

,870

54

,683

M

CTV

14

,119

7,

914

PCTV

34

,556

31

,588

G

CTV

28

,694

33

,738

(C

oncl

uded

)

As

of D

ecem

ber

31, 2

009,

the

re w

ere

no u

napp

ropr

iate

d ea

rnin

gs g

ener

ated

bef

ore

Janu

ary

1, 1

998.

Th

e es

timat

ed o

r act

ual c

redi

tabl

e ra

tios f

or th

e 20

09 a

nd 2

008

earn

ings

app

ropr

iatio

n w

ere

as fo

llow

s:

2009

2008

The

Cor

pora

tion

32

.17%

35.2

8%

TCC

30.5

6%

29

.90%

W

MT

-

-

TFM

T

33.3

3%

33

.33%

FJ

LMT

-

-

GW

MT

33

.33%

33.3

3%

FSM

T

33.3

3%

33

.33%

G

FMT

-

-

TYD

B

N

ot a

pplic

able

- TD

C

-

- TC

CI

33

.33%

Not

app

licab

le

TID

-

Not

app

licab

le

TSB

-

25

.98%

TF

N

33

.33%

33.3

3%

TT&

T

27.6

1%

0.

05%

TU

I

-

Not

app

licab

le

TFN

I

Not

app

licab

le

30

.52%

R

&R

Not

app

licab

le

-

WTV

B

-

- TF

NM

33.3

5%

33

.35%

U

CTV

29.7

5%

33

.33%

SH

CTV

Not

app

licab

le

-

YJC

TV

33

.33%

33.3

3%

MC

TV

33

.39%

33.3

7%

PCTV

33.3

7%

32

.59%

G

CTV

33.3

4%

33

.34%

- 30

-

D

ecem

ber

31

2009

2008

D

efer

red

inco

me

tax

asse

ts

Cur

rent

$

29,1

32

$

14

9,53

4 N

on-c

urre

nt

1,63

1,57

0

2,

478,

484

$

1,6

60,7

02

$

2,6

28,0

18

D

efer

red

inco

me

tax

liabi

litie

s

N

on-c

urre

nt

$

(1

25,9

56)

$

(9

0,38

8)

(Con

clud

ed)

c.

As

of D

ecem

ber 3

1, 2

009,

the

Cor

pora

tion

and

its s

ubsi

diar

ies’

inve

stm

ent t

ax c

redi

ts c

onsi

sted

of t

he

follo

win

g:

Reg

ulat

ory

Bas

is o

f Ta

x C

redi

ts

It

em

Tota

l C

redi

tabl

e A

mou

nt

Rem

aini

ng

Cre

dita

ble

Am

ount

Ex

piry

Y

ear

Stat

ute

for U

pgra

ding

Pu

rcha

se o

f mac

hine

ry a

nd e

quip

men

t

$ 4

2,71

8

$ 2

6,86

1

2013

Indu

strie

s P

erso

nnel

trai

ning

89

9

89

9

2012

$ 4

3,61

7

$ 2

7,76

0

d.

Fo

llow

ing

wer

e th

e ne

t ope

ratin

g lo

ss c

arry

forw

ards

of t

he G

roup

of D

ecem

ber 3

1, 2

009:

Yea

r

Tota

l C

redi

tabl

e A

mou

nt

Rem

aini

ng

Cre

dita

ble

Am

ount

Ex

piry

Y

ear

2004

$

8,

733

$

-

20

14

2005

22,5

58

-

2015

20

06

18

4,62

7

13

9,14

8

2016

20

07

12

9,14

4

12

6,53

9

2017

20

08

65

,226

62

,951

2018

20

09

1,

471

1,47

1

20

19

$

411

,759

$ 3

30,1

09

e.

Inte

grat

ed in

com

e ta

x in

form

atio

n w

as a

s fol

low

s:

D

ecem

ber

31

2009

2008

B

alan

ce o

f im

puta

tion

cred

it ac

coun

t (IC

A)

The

Cor

pora

tion

$

2,9

90,1

79

$

2,7

97,8

88

TCC

-

2,

668

WM

T

-

- TF

MT

2,67

4

-

FJLM

T

-

- G

WM

T

1,

627

1,62

4 FS

MT

2,37

0

1,

950

GFM

T

-

- TY

DB

Not

app

licab

le

97

(Con

tinue

d)

168


- 33

-

Mob

itai’s

inc

ome

tax

retu

rns

as o

f 20

06 h

ad b

een

ratif

ied

by t

he t

ax a

utho

ritie

s.

Mob

itai

disa

gree

d w

ith th

e re

sult

on th

e in

com

e ta

x re

turn

s an

d pl

ans

to a

pply

for a

reex

amin

atio

n of

the

2006

inco

me

tax

retu

rn.

TFN

M’s

inco

me

tax

retu

rns

as o

f 20

06 h

ad b

een

exam

ined

by

the

tax

auth

oriti

es.

How

ever

, TFN

M

disa

gree

d w

ith th

e ex

amin

atio

n re

sult

on th

e 20

06 in

com

e ta

x re

turn

and

requ

este

d a

reex

amin

atio

n of

th

e 20

06 in

com

e ta

x re

turn

. 21

. EA

RN

ING

S PE

R S

HA

RE

EPS

(NT

$)

Am

ount

s (N

umer

ator

)

Shar

es

B

efor

e

Afte

r

B

efor

e

Afte

r

(Den

omin

ator

)

Inco

me

Inco

me

In

com

e T

ax

In

com

e T

ax

(T

hous

ands

)

Tax

Tax

Fo

r the

yea

r end

ed

D

ecem

ber 3

1, 2

009

B

asic

EPS

Inco

me

of c

omm

on sh

areh

olde

rs

$

18,

132,

491

$

13,

888,

862

2,97

9,31

1

$

6.09

$

4.66

A

dd e

ffect

of p

oten

tially

dilu

tive

com

mon

stoc

ks

B

onus

to e

mpl

oyee

s

-

-

9,

846

Dilu

ted

EPS

In

com

e of

com

mon

shar

ehol

ders

w

ith d

ilutiv

e ef

fect

of p

oten

tial

com

mon

shar

es

$

18,

132,

491

$

13,

888,

862

2,98

9,15

7

$

6.07

$

4.65

Fo

r the

yea

r end

ed

D

ecem

ber 3

1, 2

008

B

asic

EPS

Inco

me

of c

omm

on sh

areh

olde

rs

$

19,7

77,0

97

$

15,3

71,3

86

2,96

6,36

8

$ 6.

67

$

5.18

A

dd e

ffect

of p

oten

tially

dilu

tive

com

mon

stoc

ks

B

onus

to e

mpl

oyee

s

-

-

8,

515

Dilu

ted

EPS

In

com

e of

com

mon

shar

ehol

ders

w

ith d

ilutiv

e ef

fect

of p

oten

tial

com

mon

shar

es

$

19,7

77,0

97

$

15,3

71,3

86

2,97

4,88

3

$

6.65

$

5.17

Th

e A

RD

F is

sued

Int

erpr

etat

ion

No.

200

7-05

2 th

at r

equi

res

com

pani

es t

o re

cogn

ize

bonu

ses

paid

to

empl

oyee

s an

d re

mun

erat

ions

to d

irect

ors

and

supe

rvis

ors

as c

ompe

nsat

ion

expe

nses

beg

inni

ng J

anua

ry 1

, 20

08.

The

se b

onus

es a

nd r

emun

erat

ions

wer

e pr

evio

usly

rec

orde

d as

app

ropr

iatio

ns f

rom

ear

ning

s. I

f th

e C

orpo

ratio

n m

ay s

ettle

the

bonu

s to

em

ploy

ees

by c

ash

or s

hare

s, th

e C

orpo

ratio

n sh

ould

pre

sum

e th

at

the

entir

e am

ount

of t

he b

onus

will

be

settl

ed in

sha

res

and

the

pote

ntia

l sha

re d

ilutio

ns s

houl

d be

incl

uded

in

the

wei

ghte

d av

erag

e nu

mbe

r of s

hare

s ou

tsta

ndin

g us

ed in

the

calc

ulat

ion

of d

ilute

d EP

S, if

the

shar

es

have

a d

ilutiv

e ef

fect

. I

n th

e ca

lcul

atio

n of

dilu

ted

EPS,

the

num

ber o

f out

stan

ding

sha

res

is d

eriv

ed fr

om

divi

ding

the

entir

e am

ount

of t

he b

onus

by

the

clos

ing

pric

e of

the

shar

es o

n th

e ba

lanc

e sh

eet d

ate.

Su

ch

pote

ntia

l di

lutiv

e ef

fect

sho

uld

be t

aken

int

o co

nsid

erat

ion

in t

he c

alcu

latio

n of

dilu

ted

EPS

until

the

sh

areh

olde

rs r

esol

ved

the

actu

al n

umbe

r of

sha

res

to b

e di

strib

uted

to

empl

oyee

s at

the

AG

M o

f th

e fo

llow

ing

year

.

- 32

-

The

impu

tatio

n cr

edits

allo

cate

d to

the

sha

reho

lder

s ar

e ba

sed

on t

he I

CA

bal

ance

as

of t

he d

ate

of

divi

dend

dis

tribu

tion.

Th

e es

timat

ed c

redi

tabl

e ra

tio f

or t

he 2

009

earn

ings

app

ropr

iatio

n m

ay b

e ad

just

ed w

hen

the

impu

tatio

n cr

edits

are

dis

tribu

ted.

f. Th

e la

test

yea

rs th

roug

h w

hich

inco

me

tax

retu

rns h

ad b

een

exam

ined

and

cle

ared

by

the

tax

auth

oriti

es

wer

e as

follo

ws:

Yea

r

The

Cor

pora

tion

20

05

The

form

er T

AT

A

ll ap

plic

able

TA

T

2007

M

obita

i

2006

TC

C

2007

W

MT

20

07

TFM

T

2007

FJ

LMT

20

07

GW

MT

20

07

FSM

T

2007

G

FMT

N

ot a

pplic

able

TY

DB

All

appl

icab

le

TDC

20

08

The

form

er T

T&T

20

07

TCPI

A

A

ll ap

plic

able

TL

IA

A

ll ap

plic

able

TS

B

2007

TF

N

20

07

The

form

er T

FN

200

6, o

nly

2005

not

app

licab

le

TUC

A

ll ap

plic

able

TT

N

20

07

TT&

T

2007

TF

NI

20

07

R&

R

20

07

WTV

B

2007

TF

NM

2006

U

CTV

2005

SH

CTV

2007

Y

JCTV

2007

M

CTV

2007

N

CC

TV

A

ll ap

plic

able

PC

TV

20

07

GC

TV

20

07

The

Cor

pora

tion’

s in

com

e ta

x re

turn

s as

of

2005

had

bee

n ex

amin

ed b

y th

e ta

x au

thor

ities

. T

he

Cor

pora

tion

filed

for

cor

rect

ions

of

its 1

999

thro

ugh

2001

inco

me

tax

retu

rns.

Th

e C

orpo

ratio

n al

so

disa

gree

d w

ith th

e re

sults

on

the

inco

me

tax

retu

rns

of 2

002

thro

ugh

2005

and

had

file

d re

ques

ts f

or

reex

amin

atio

n.

TAT’

s in

com

e ta

x re

turn

s as

of

2007

had

bee

n ex

amin

ed b

y th

e ta

x au

thor

ities

. TA

T di

sagr

eed

with

th

e ex

amin

atio

n re

sults

of

the

inco

me

tax

retu

rns

and

had

requ

este

d a

reex

amin

atio

n of

the

2006

and

20

07 in

com

e ta

x re

turn

s. Th

e fo

rmer

TA

T’s

inco

me

tax

retu

rns

as o

f 20

06 h

ad b

een

exam

ined

by

the

tax

auth

oriti

es.

The

fo

rmer

TA

T di

sagr

eed

with

the

exam

inat

ion

resu

lts o

f th

e 20

02 a

nd 2

003

inco

me

tax

retu

rns

and

had

filed

an

appe

al, w

hich

is

revi

ewed

by

the

Supr

eme

Cou

rt of

the

R.O

.C.

The

for

mer

TA

T al

so f

iled

adm

inis

trativ

e pr

ocee

ding

s for

200

4 an

d 20

05’s

inco

me

tax

retu

rns.

169


- 35

-

6)

The

abov

e fin

anci

al i

nstru

men

ts d

o no

t in

clud

e ca

sh a

nd c

ash

equi

vale

nts,

note

s an

d ac

coun

ts re

ceiv

able

s, pl

edge

d tim

e de

posi

ts,

refu

ndab

le d

epos

its,

shor

t-ter

m b

orro

win

gs,

shor

t-ter

m n

otes

an

d bi

lls p

ayab

le,

note

s an

d ac

coun

ts p

ayab

le a

nd g

uara

ntee

dep

osits

. B

ecau

se o

f th

e sh

ort

mat

uriti

es o

f th

ese

inst

rum

ents

, th

e ca

rryi

ng v

alue

s re

pres

ent

a re

ason

able

bas

is t

o es

timat

e fa

ir va

lues

.

c.

The

fair

valu

es o

f fin

anci

al a

sset

s and

liab

ilitie

s wer

e no

t sim

ulta

neou

sly

dete

rmin

ed b

y qu

oted

pric

es in

ac

tive

mar

kets

and

by

estim

atio

ns u

sing

val

uatio

n te

chni

que.

d.

Th

e fin

anci

al a

sset

s ex

pose

d to

fai

r va

lue

inte

rest

rat

e ris

k am

ount

ed t

o $2

,006

,775

tho

usan

d an

d $2

,764

,594

tho

usan

d as

of

Dec

embe

r 31

, 20

09 a

nd 2

008,

res

pect

ivel

y, a

nd t

he f

inan

cial

lia

bilit

ies

expo

sed

to fa

ir va

lue

inte

rest

rate

risk

am

ount

ed to

$15

,599

,638

thou

sand

and

$15

,700

,000

thou

sand

as

of D

ecem

ber 3

1, 2

009

and

2008

, res

pect

ivel

y.

The

finan

cial

ass

ets

expo

sed

to c

ash

flow

inte

rest

rate

ris

k am

ount

ed t

o $9

75,9

05 t

hous

and

and

$1,1

73,2

29 t

hous

and

as o

f D

ecem

ber

31,

2009

and

200

8,

resp

ectiv

ely,

and

the

finan

cial

liab

ilitie

s exp

osed

to c

ash

flow

inte

rest

rate

risk

am

ount

ed to

$0

thou

sand

an

d $5

,000

,000

thou

sand

as o

f Dec

embe

r 31,

200

9 an

d 20

08, r

espe

ctiv

ely.

e.

In

form

atio

n on

fina

ncia

l ris

ks:

1)

M

arke

t ris

k Th

e G

roup

did

n’t e

nter

into

any

fina

ncia

l der

ivat

ives

tran

sact

ions

, whi

ch w

ill h

ave

big

expo

sure

to

exch

ange

rate

and

inte

rest

rate

risk

s. 2)

C

redi

t ris

k

Cre

dit

risk

repr

esen

ts t

he p

oten

tial

impa

cts

to f

inan

cial

ass

ets

that

the

Gro

up m

ight

enc

ount

er if

co

unte

r-par

ties

or th

ird p

artie

s br

each

the

cont

ract

s. F

acto

rs th

at a

ffec

t the

impa

cts

incl

ude

cred

it ris

k co

ncen

tratio

n, c

ompo

nent

s of

fin

anci

al i

nstru

men

ts,

cont

ract

am

ount

and

oth

er r

ecei

vabl

es.

Th

e G

roup

’s e

valu

atio

n of

cre

dit r

isk

expo

sure

as

of D

ecem

ber 3

1, 2

009

and

2008

wer

e bo

th z

ero

beca

use

all o

f cou

nter

-par

ties a

re re

puta

ble

finan

cial

inst

itutio

ns w

ith g

ood

cred

it ra

tings

. Th

e G

roup

’s m

axim

um c

redi

t ris

k ex

posu

re o

f eac

h fin

anci

al in

stru

men

t is

the

sam

e as

its

carr

ying

va

lue.

Th

e cr

edit

risk

amou

nt li

sted

abo

ve is

an

eval

uatio

n ov

er th

e co

ntra

cts w

ith p

ositi

ve fa

ir va

lue

at th

e ba

lanc

e sh

eet d

ate

and

the

cont

ract

s of o

ff-b

alan

ce-s

heet

com

mitm

ents

and

gua

rant

ees.

Sig

nific

ant

conc

entra

tion

of c

redi

t ris

k ex

ists

whe

n co

unte

r-pa

rties

in

finan

cial

ins

trum

ent

trans

actio

ns

sign

ifica

ntly

con

cent

rate

on

one

indi

vidu

al,

or w

hen

ther

e ar

e a

num

ber

of c

ount

er-p

artie

s in

fin

anci

al in

stru

men

t tra

nsac

tions

, but

thes

e co

unte

r-pa

rties

are

eng

aged

in si

mila

r bus

ines

s act

iviti

es

and

have

sim

ilar

econ

omic

cha

ract

eris

tics

so th

at th

eir

abili

ties

to p

erfo

rm c

ontra

ctua

l obl

igat

ions

w

ould

be

co

ncur

rent

ly

affe

cted

in

si

mila

r ec

onom

ic

chan

ges

or

othe

r si

tuat

ions

.

The

char

acte

ristic

s of

cre

dit

risk

conc

entra

tion

incl

ude

the

natu

re o

f th

e de

btor

s’ o

pera

ting

activ

ities

.

The

Gro

up d

oes

not r

ely

sign

ifica

ntly

on

sing

le tr

ansa

ctio

n an

d tra

nsac

t with

sin

gle

clie

nt o

r in

the

sam

e re

gion

. 3)

Li

quid

ity ri

sk

The

Gro

up’s

ope

ratin

g fu

nds

are

deem

ed s

uffic

ient

to

mee

t th

e ca

sh f

low

dem

and,

the

refo

re,

liqui

dity

risk

is n

ot c

onsi

dere

d to

be

sign

ifica

nt.

- 34

-

22. L

AB

OR

CO

ST, D

EPR

ECIA

TIO

N A

ND

AM

OR

TIZA

TIO

N E

XPE

NSE

Yea

rs E

nded

Dec

embe

r 31

20

09

20

08

Cla

ssifi

ed a

s

Cla

ssifi

ed a

s

Cla

ssifi

ed a

s

Cla

ssifi

ed a

s

O

pera

ting

O

pera

ting

O

pera

ting

O

pera

ting

Cos

t

Exp

ense

s

Tot

al

C

ost

E

xpen

ses

T

otal

La

bor c

ost

Sala

ry

$

1,3

48,6

39

$

3,2

89,2

62

$

4,6

37,9

01

$

1,3

63,6

49

$

3,3

62,0

99

$

4,7

25,7

48

Labo

r and

hea

lth

insu

ranc

e

87,9

07

180,

163

268,

070

78

,725

17

3,19

4

251,

919

Pens

ion

58

,567

11

0,56

4

16

9,13

1

54

,513

10

4,27

3

15

8,78

6 O

ther

59

,474

13

2,97

7

19

2,45

1

66

,258

14

8,61

7

21

4,87

5

$ 1

,554

,587

$ 3

,712

,966

$ 5

,267

,553

$ 1

,563

,145

$ 3

,788

,183

$ 5

,351

,328

Dep

reci

atio

n

$ 7

,136

,715

$

610,

460

$

7,7

47,1

75

$

6,5

97,8

80

$

58

1,72

1

$ 7

,179

,601

A

mor

tizat

ion

961,

926

127,

125

1,08

9,05

1

97

3,60

3

12

2,06

7

1,

095,

670

23.

FIN

AN

CIA

L IN

STR

UM

ENT

TRA

NSA

CTI

ON

S

a.

Fair

valu

e in

form

atio

n

Dec

embe

r 31

20

09

20

08

Car

ryin

g

Car

ryin

g

V

alue

Fair

Val

ue

V

alue

Fair

Val

ue

Non

-der

ivat

ive

finan

cial

inst

rum

ents

Li

abili

ties

Bon

ds p

ayab

le (i

nclu

ding

cu

rren

t por

tion)

$

8,

000,

000

$

8,37

3,37

6 $

15

,500

,000

$

15,6

21,8

15

b.

The

met

hods

and

sig

nific

ant

assu

mpt

ions

app

lied

in d

eter

min

ing

fair

valu

es o

f fin

anci

al i

nstru

men

ts

wer

e as

follo

ws:

1)

Ava

ilabl

e-fo

r-sal

e fin

anci

al a

sset

s - b

ased

on

quot

ed p

rices

in a

n ac

tive

mar

ket o

n th

e ba

lanc

e sh

eet

date

. 2)

B

ecau

se th

ere

is n

o ac

tive

mar

ket a

nd a

rel

iabl

e fa

ir va

lue

coul

d on

ly b

e ve

rifie

d at

a m

ore

than

re

ason

able

cos

t, th

e in

vest

men

ts a

ccou

nted

for

usi

ng e

quity

met

hod,

pre

paym

ent

for

long

-term

in

vest

men

ts,

finan

cial

ass

ets

carr

ied

at c

ost

or b

onds

inv

estm

ent

with

no

activ

e m

arke

t ca

n be

m

easu

red

by th

e ne

t wor

th o

f the

inve

stee

s’ o

r the

est

imat

ed b

ook

valu

e.

3)

Bon

ds p

ayab

le -

base

d on

the

over

-the-

coun

ter q

uota

tions

in D

ecem

ber.

4)

Fair

valu

e of

long

-term

loan

s -

base

d on

the

pres

ent v

alue

of

futu

re c

ash

flow

s di

scou

nted

by

the

inte

rest

rate

s the

Cor

pora

tion

may

obt

ain

for s

imila

r loa

ns (e

.g.,

sim

ilar m

atur

ities

). 5)

D

eriv

ativ

e fin

anci

al in

stru

men

ts -

base

d on

val

uatio

n re

sults

pro

vide

d by

ban

ks.

As

of D

ecem

ber

31, 2

008,

the

finan

cial

inst

rum

ent h

eld

by th

e C

orpo

ratio

n w

as e

valu

ated

by

the

bid

pric

e of

cou

nter

pa

rty.

170


- 37

-

2) O

pera

ting

cost

s

Yea

rs E

nded

Dec

embe

r 31

20

09

20

08

% o

f To

tal

%

of

Tota

l

A

mou

nt

C

osts

Am

ount

Cos

ts

D

KL

$

146

,948

-

$

155

,199

-

Fubo

n In

s.

66

,336

-

76,3

75

-

$ 2

13,2

84

$ 2

31,5

74

Th

e ab

ove

com

pani

es m

ainl

y re

nder

ed t

elec

omm

unic

atio

n, m

aint

enan

ce,

insu

ranc

e an

d TV

pr

ogra

ms

licen

sing

ser

vice

s to

the

Gro

up.

The

ave

rage

pay

men

t te

rm f

or n

otes

and

acc

ount

s pa

yabl

e w

as b

ased

on

regu

lar t

erm

s. 3

) Pro

perty

tran

sact

ions

Dis

posa

l of p

rope

rty a

nd e

quip

men

t

Yea

r E

nded

Dec

embe

r 31

, 200

8

D

escr

iptio

n

Am

ount

Loss

FM

T T

elec

omm

unic

atio

n eq

uipm

ent a

nd m

isce

llane

ous

equi

pmen

t

$ 62

,807

$

7,

038

Th

e tra

nsac

tion

amou

nt o

f WTV

B’s

sale

of

equi

pmen

t to

FMT

was

neg

otia

ted

base

d on

the

valu

e ap

prai

sed

by a

n in

depe

nden

t th

ird p

arty

. W

TVB

’s r

ecei

vabl

es f

rom

the

abo

ve t

rans

actio

n w

ere

fully

col

lect

ed a

s of D

ecem

ber 3

1, 2

008.

4

) Ren

tal i

ncom

e

Y

ear

End

ed D

ecem

ber

31, 2

009

Leas

ed S

ites/

Equi

pmen

t

2009

2008

FM

T O

ffic

es a

pplia

nce,

etc

.

$ 33

,423

$

29,

972

Th

e ab

ove

leas

e tra

nsac

tions

wer

e ba

sed

on m

arke

t pric

e an

d re

nt w

as c

olle

cted

mon

thly

.

5) C

ash

in b

anks

Dec

embe

r 31

20

09

20

08

Am

ount

%

A

mou

nt

%

a)

C

ash

in b

anks

TFC

B

$ 4

08,1

01

14

$

556

,278

14

b)

Pled

ged

time

depo

sits

TFC

B

$

10,0

00

31

$

36

,965

97

- 36

-

24.

REL

ATE

D-P

AR

TY T

RA

NSA

CTI

ON

S

a.

The

rela

ted

parti

es a

nd th

eir r

elat

ions

hips

with

the

Gro

up w

ere

as fo

llow

s:

R

elat

ed P

arty

Rel

atio

nshi

p w

ith th

e G

roup

Ta

iwan

Mob

ile F

ound

atio

n (T

WM

Fou

ndat

ion)

O

ver o

ne th

ird o

f the

Fou

ndat

ion’

s iss

ued

fund

cam

e fr

om th

e C

orpo

ratio

n Ta

ipei

New

Hor

izon

s Co.

, Ltd

. E

quity

-met

hod

inve

stee

Fu

bon

Life

Ass

uran

ce C

o., L

td. (

FLA

) S

ame

chai

rman

Fu

bon

Secu

ritie

s Inv

estm

ent T

rust

Co.

, Ltd

. R

elat

ed p

arty

in su

bsta

nce

Chu

ng H

sing

Con

stru

ctio

ns C

o., L

td.

Rel

ated

par

ty in

subs

tanc

e

Fubo

n La

nd D

evel

opm

ent C

o., L

td.

Rel

ated

par

ty in

subs

tanc

e Ta

ipei

Fub

on C

omm

erci

al B

ank

Co.

, Ltd

. (TF

CB

) R

elat

ed p

arty

in su

bsta

nce

Fu

bon

Secu

ritie

s Co.

, Ltd

. (FS

C)

Rel

ated

par

ty in

subs

tanc

e

Fubo

n In

sura

nce

Co.

, Ltd

. (Fu

bon

Ins.)

R

elat

ed p

arty

in su

bsta

nce

Fu

bon

Mul

timed

ia T

echn

olog

y C

o., L

td. (

FMT)

R

elat

ed p

arty

in su

bsta

nce

Fubo

n Pr

oper

ty M

anag

emen

t Co.

, Ltd

. (FP

M)

Rel

ated

par

ty in

subs

tanc

e Fu

bon

Mar

ketin

g C

o., L

td. (

form

erly

nam

ed

Fu

bon

Dire

ct M

arke

ting

Con

sulti

ng C

o., L

td.)

Rel

ated

par

ty in

subs

tanc

e (r

enam

ed o

n A

pril

13, 2

009)

Fu

bon

Fina

ncia

l Hol

ding

Com

pany

R

elat

ed p

arty

in su

bsta

nce

Fubo

n A

sset

Man

agem

ent C

o., L

td.

Rel

ated

par

ty in

subs

tanc

e Fu

bon

Fina

ncia

l Ven

ture

Cap

ital C

o., L

td.

Rel

ated

par

ty in

subs

tanc

e Fu

bon

Futu

re C

o., L

td.

Rel

ated

par

ty in

subs

tanc

e Fu

bon

Inve

stm

ent S

ervi

ces C

o., L

td.

Rel

ated

par

ty in

subs

tanc

e Fu

bon

Ven

ture

Cap

ital C

onsu

lting

Co.

, Ltd

. R

elat

ed p

arty

in su

bsta

nce

Dai

-Ka

Ltd.

(DK

L)

Rel

ated

par

ty in

subs

tanc

e Ta

iwan

Spo

rt Lo

ttery

Cor

pora

tion

(TSL

) R

elat

ed p

arty

in su

bsta

nce

b.

Sign

ifica

nt tr

ansa

ctio

ns w

ith re

late

d pa

rties

are

sum

mar

ized

bel

ow:

1

) Ope

ratin

g re

venu

es

Y

ears

End

ed D

ecem

ber

31

2009

2008

% o

f To

tal

%

of

Tota

l

A

mou

nt

Rev

enue

s

Am

ount

R

even

ues

TF

CB

$

133

,447

-

$

149

,783

-

FMT

108,

446

-

73

,494

-

FLA

25

,203

-

14,5

10

- TS

L

24

,822

-

102,

147

- Fu

bon

Fina

ncia

l Hol

ding

Com

pany

18

,359

-

5,63

4

-

FSC

16

,565

-

47,4

29

- Fu

bon

Ins.

16,5

21

-

15

,765

-

$

343

,363

$

408

,762

The

Gro

up m

ainl

y re

nder

ed t

elec

omm

unic

atio

n se

rvic

e to

the

abo

ve c

ompa

nies

. T

he a

vera

ge

colle

ctio

n pe

riod

for n

otes

and

acc

ount

s rec

eiva

ble

was

bas

ed o

n re

gula

r ter

ms.

171


- 39

-

Cur

rent

Po

rtio

n

Mat

uriti

es o

f O

ver

One

Y

ear

(Cla

ssifi

ed

Und

er O

ther

A

sset

s)

To

tal

Dec

embe

r 31,

200

8

Leas

ehol

d re

ceiv

able

$ 3

0,85

1

$ 7

0,84

1

$ 10

1,69

2 Le

ss u

nrea

lized

inte

rest

inco

me

(4,5

78)

(7,1

34)

(11,

712)

$

26,

273

$

63,

707

$

89,

980

(Con

clud

ed)

Not

e:

Leas

ehol

d re

ceiv

able

s fro

m F

LA w

ere

as fo

llow

s:

Cur

rent

Po

rtio

n

Mat

uriti

es o

f O

ver

One

Y

ear

(Cla

ssifi

ed

Und

er O

ther

A

sset

s)

To

tal

Dec

embe

r 31,

200

9

Leas

ehol

d re

ceiv

able

$

5,58

7

$

9,39

1

$ 1

4,97

8 Le

ss u

nrea

lized

inte

rest

inco

me

(209

)

(6

70)

(879

)

$

5,

378

$

8,

721

$

14,

099

(C

oncl

uded

)

Dec

embe

r 31

20

09

20

08

Am

ount

%

A

mou

nt

%

b)

Pr

epay

men

ts

Fu

bon

Ins.

$

20

,543

3

$

46

,502

6

c)

A

ccou

nts p

ayab

le

D

KL

$

35

,916

1

$

38

,800

1

d)

A

ccru

ed e

xpen

ses

Fu

bon

Ins.

$

13

,176

1

$

56

-

- 38

-

6) R

ecei

vabl

es a

nd p

ayab

les

D

ecem

ber

31

2009

2008

A

mou

nt

%

Am

ount

%

a)

Acc

ount

s rec

eiva

ble

TF

CB

$

79

,594

1

$

114

,822

2

FSC

(Not

e)

17,9

83

-

29

,715

-

TSL

(Not

e)

15,8

35

-

42

,716

1

Fubo

n In

s.

15

,199

-

14,4

36

- FL

A (N

ote)

14

,566

-

13,4

55

- O

ther

20

,821

-

17,8

85

-

$ 1

63,9

98

$ 2

33,0

29

N

ote:

Le

aseh

old

rece

ivab

les f

rom

FSC

wer

e as

follo

ws:

Cur

rent

Po

rtio

n

M

atur

ities

of

Ove

r O

ne

Yea

r (C

lass

ified

U

nder

Oth

er

Ass

ets)

Tota

l D

ecem

ber 3

1, 2

009

Le

aseh

old

rece

ivab

le

$

4,

295

$

9,

288

$

13,

583

Less

unr

ealiz

ed in

tere

st in

com

e

(6

79)

(766

)

(1

,445

)

$

3,

616

$

8,

522

$

12,

138

Dec

embe

r 31,

200

8

Leas

ehol

d re

ceiv

able

$

5,44

3

$ 1

2,70

0

$ 1

8,14

3 Le

ss u

nrea

lized

inte

rest

inco

me

(868

)

(1

,425

)

(2

,293

)

$

4,

575

$

11,

275

$

15,

850

Not

e:

Leas

ehol

d re

ceiv

able

s fro

m T

SL w

ere

as fo

llow

s:

Cur

rent

Po

rtio

n

Mat

uriti

es o

f O

ver

One

Y

ear

(Cla

ssifi

ed

Und

er O

ther

A

sset

s)

To

tal

Dec

embe

r 31,

200

9

Leas

ehol

d re

ceiv

able

$ 1

6,09

5

$ 3

3,34

0

$ 4

9,43

5 Le

ss u

nrea

lized

inte

rest

inco

me

(2,4

38)

(2,4

98)

(4,9

36)

$ 1

3,65

7

$ 3

0,84

2

$ 4

4,49

9 (C

ontin

ued)

172


- 41

-

26.

CO

MM

ITM

ENTS

AN

D C

ON

TIN

GEN

T EV

ENTS

a.

To e

nhan

ce 3

G m

obile

com

mun

icat

ions

, exp

and

netw

ork

cove

rage

and

incr

ease

the

serv

ice

func

tions

, th

e C

orpo

ratio

n en

tere

d in

to a

3G

exp

ansi

on c

ontra

ct w

ith N

okia

for $

4,80

0,00

0 th

ousa

nd in

Sep

tem

ber

2006

and

$3,

242,

661

thou

sand

in M

ay 2

009,

res

pect

ivel

y.

As

of D

ecem

ber

31, 2

009,

the

pur

chas

e am

ount

was

$4,

693,

485

thou

sand

and

$97

5,55

6 th

ousa

nd, r

espe

ctiv

ely.

b.

Th

e C

orpo

ratio

n pr

ovid

ed $

21,5

00,0

00 t

hous

and

guar

ante

e fo

r TF

N’s

ban

k lo

ans.

The

Cor

pora

tion

also

pro

vide

d $2

1,32

8,33

0 th

ousa

nd in

pro

mis

sory

not

es o

utst

andi

ng fo

r TFN

’s b

orro

win

gs w

ith b

anks

.

TFN

has

dra

wn

dow

n $1

,848

,322

thou

sand

from

ban

ks w

ithin

the

guar

ante

e am

ount

.

c.

The

Cor

pora

tion

and

its s

ubsi

diar

y, T

FN, o

btai

ned

$13,

500,

000

thou

sand

of

synd

icat

ed l

oan

from

9

bank

s le

d by

Chi

natru

st C

omm

erci

al B

ank.

Th

e C

orpo

ratio

n pr

ovid

ed a

gua

rant

ee f

or T

FN’s

ban

k lo

an.

As

of D

ecem

ber 3

1, 2

009,

bot

h th

e C

orpo

ratio

n an

d TF

N h

ad n

ot m

ade

any

draw

dow

n on

this

lo

an.

d.

A

s of

Dec

embe

r 31

, 20

09,

the

Cor

pora

tion

had

prov

ided

TFN

$50

,000

tho

usan

d as

per

form

ance

gu

aran

tee

for I

DD

cal

ling

card

issu

ed b

y Ju

ly 3

1, 2

008,

in a

ccor

danc

e w

ith N

CC

’s n

ew p

olic

y ef

fect

ive

on A

pril

1, 2

007.

e.

A

s of

Dec

embe

r 31

, 20

09,

TT&

T pr

ovid

ed a

n $1

46 t

hous

and

guar

ante

e fo

r TF

N’s

obl

igat

ion

of

cons

truct

ion

and

equi

pmen

t sal

es.

f. Fu

ture

min

imum

ren

tal p

aym

ents

as

of D

ecem

ber

31, 2

009

for

sign

ifica

nt o

pera

ting

leas

e ag

reem

ents

ar

e su

mm

ariz

ed a

s fol

low

s:

A

mou

nt

2010

$

159

,153

20

11

14

1,87

3 20

12

13

1,15

2 20

13

8,

976

2014

8,97

6

27. A

DD

ITIO

NA

L D

ISC

LOSU

RES

Fo

llow

ing

wer

e th

e ad

ditio

nal d

iscl

osur

es re

quire

d by

the

Secu

ritie

s and

Fut

ures

Bur

eau

for t

he C

orpo

ratio

n an

d its

inve

stee

s: a.

Fi

nanc

ing

prov

ided

: T

able

1 (a

ttach

ed).

b.

Endo

rsem

ent/g

uara

ntee

pro

vide

d:

Tabl

e 2

(atta

ched

). c.

M

arke

tabl

e se

curit

ies h

eld:

Ta

ble

3 (a

ttach

ed).

d.

Mar

keta

ble

secu

ritie

s ac

quire

d an

d di

spos

ed o

f at c

osts

or p

rices

of a

t lea

st $

100

mill

ion

or 2

0% o

f the

pa

id-in

cap

ital:

Tab

le 4

(atta

ched

). e.

A

cqui

sitio

n of

ind

ivid

ual

real

est

ate

at c

osts

of

at l

east

$10

0 m

illio

n or

20%

of

the

paid

-in c

apita

l:

Non

e.

f. D

ispo

sal o

f ind

ivid

ual r

eal e

stat

e at

pric

es o

f at l

east

$10

0 m

illio

n or

20%

of t

he p

aid-

in c

apita

l: N

one.

- 40

-

Y

ears

End

ed D

ecem

ber

31

2009

2008

7

) Ins

uran

ce e

xpen

ses

Fu

bon

Ins.

$

12

,065

$

15,8

87

8

) Don

atio

n

TWM

Fou

ndat

ion

$

30

,400

$

22,0

00

9

) Rep

airs

and

mai

nten

ance

FPM

$

24,7

09

$

23

,347

10) O

ther

exp

ense

s

FPM

$

27,3

92

$

28

,085

11) E

ndor

sem

ent/g

uara

ntee

pro

vide

d Th

e C

orpo

ratio

n an

d its

subs

idia

ries p

rovi

de g

uara

ntee

con

tract

s for

rela

ted

party

. P

leas

e se

e N

ote

26.

12) C

ompe

nsat

ion

to d

irect

ors,

supe

rvis

ors a

nd m

anag

ers:

Yea

rs E

nded

Dec

embe

r 31

20

09

20

08

Sa

larie

s, in

cent

ives

and

spec

ial c

ompe

nsat

ion

$

216

,507

$ 2

02,0

12

Earn

ings

pai

d as

rem

uner

atio

n to

dire

ctor

s

37

,483

41

,470

Ea

rnin

gs p

aid

as b

onus

to e

mpl

oyee

s

62

,668

77

,293

Pr

ofes

sion

al fe

e

3,

092

3,68

8

$ 3

19,7

50

$

324

,463

Th

e co

mpe

nsat

ion

to d

irect

ors,

supe

rvis

ors

and

man

ager

s fo

r th

e ye

ar e

nded

Dec

embe

r 31

, 200

8 in

clud

ed th

e bo

nus

appr

opria

tion

from

200

8 ea

rnin

gs a

ppro

ved

in 2

009

AG

M.

Whi

le th

at fo

r the

ye

ar e

nded

Dec

embe

r 31

, 200

9 in

clud

ed t

he b

onus

app

ropr

iatio

n fr

om 2

009

earn

ings

sub

ject

to

appr

oval

in 2

010

AG

M.

Mor

e de

taile

d in

form

atio

n m

ay b

e re

ferr

ed in

the

Cor

pora

tion’

s an

nual

re

ports

.

25.

ASS

ETS

PLED

GED

Th

e as

sets

ple

dged

as

colla

tera

ls fo

r ban

k lo

ans,

cred

it lin

e of

dep

osit

over

draf

t, gu

aran

tees

and

refu

ndab

le

depo

sits

for c

onst

ruct

ion

cont

ract

s wer

e as

follo

ws:

Dec

embe

r 31

20

09

20

08

C

urre

nt a

sset

s - ti

me

depo

sits

$

32,

157

$

38,

015

Oth

er a

sset

s - ti

me

depo

sits

50

0

-

$

32,

657

$

38,

015

173


- 43

-

28.

SEG

ME

NT

INFO

RM

ATI

ON

a.

Indu

stry

Yea

r E

nded

Dec

embe

r 31

, 200

9

Mob

ile

Fi

xed-

line

Cab

le T

V

O

ther

s

Adj

ustm

ents

an

d E

limin

atio

n

Con

solid

ated

Rev

enue

s fro

m o

utsi

de o

f the

Gro

up

$

54,7

62,0

97

$ 8,

399,

835

$ 5,

244,

538

$ 63

,762

$

-

$

68,4

70,2

32

Rev

enue

s fro

m o

ther

segm

ents

in

the

Gro

up (N

ote

2)

2,

299,

111

1,

541,

744

28

,527

35,0

70

(3

,904

,452

)

-

Tota

l rev

enue

s

$

57,0

61,2

08

$ 9,

941,

579

$ 5,

273,

065

$ 98

,832

$

(3,9

04,4

52 )

$ 68

,470

,232

Gro

ss p

rofit

(los

s) (N

ote

3)

$ 16

,696

,861

$

1,77

8,06

6

$

1,98

4,49

8

$

8,84

3

$

(20,

134 )

$

20,4

48,1

34

Inte

rest

inco

me

16

,501

O

ther

inco

me

57

9,63

0 In

tere

st e

xpen

ses

(5

61,3

64 )

Ope

ratin

g ex

pens

es

-

Oth

er e

xpen

ses

(1

,836

,570

)

Inco

me

befo

re in

com

e ta

x

$

18,6

46,3

31

Id

entif

iabl

e as

sets

(Not

e 4)

$

65,9

84,1

31

$ 6,

427,

772

$ 12

,642

,162

$

27,1

18

$ (2

,570

,126

)

$

82,5

11,0

57

Fina

ncia

l ass

ets

17

7,82

1 Lo

ng-te

rm in

vest

men

t

3,21

0,95

4 G

ener

al a

sset

s

-

Tota

l ass

ets

$ 85

,899

,832

Dep

reci

atio

n ex

pens

es

$ 7,

026,

751

$ 23

2,57

7

$

491,

537

$ 3,

657

Am

ortiz

atio

n ex

pens

es

$ 87

2,75

5

$

72,8

01

$ 14

2,46

8

$

1,02

7

C

apita

l exp

endi

ture

$

4,57

3,90

0

$

1,18

3,00

5

$

487,

341

$ 39

5

Y

ear

End

ed D

ecem

ber

31, 2

008

Mob

ile

Fi

xed-

line

Cab

le T

V

O

ther

s

Adj

ustm

ents

an

d E

limin

atio

n

Con

solid

ated

Rev

enue

s fro

m o

utsi

de o

f the

Gro

up

$

56,1

04,7

67

$ 8,

862,

675

$ 4,

186,

480

$ 14

2,17

4

$

-

$

69,2

96,0

96

Rev

enue

s fro

m o

ther

segm

ents

in

the

Gro

up (N

ote

2)

2,

151,

979

1,

127,

584

50

,900

33,5

00

(3

,363

,963

)

-

Tota

l rev

enue

s

$

58,2

56,7

46

$ 9,

990,

259

$ 4,

237,

380

$ 17

5,67

4

$

(3,3

63,9

63 )

$ 69

,296

,096

Gro

ss p

rofit

(los

s) (N

ote

3)

$ 18

,455

,210

$

1,72

6,18

7

$

1,68

6,00

3

$

(55,

338 )

$

(50,

222 )

$

21,7

61,8

40

Inte

rest

inco

me

10

3,58

3 O

ther

inco

me

92

8,58

3 In

tere

st e

xpen

ses

(6

89,0

43 )

Ope

ratin

g ex

pens

es

-

Oth

er e

xpen

ses

(1

,568

,253

)

Inco

me

befo

re in

com

e ta

x

$

20,5

36,7

10

Id

entif

iabl

e as

sets

(Not

e 4)

$

72,7

45,8

97

$ 5,

866,

249

$ 12

,511

,028

$

240,

474

$ (3

,013

,134

)

$

88,3

50,5

14

Fina

ncia

l ass

ets

32

3,92

7 Lo

ng-te

rm in

vest

men

t

3,26

4,66

8 G

ener

al a

sset

s

-

Tota

l ass

ets

$ 91

,939

,109

Dep

reci

atio

n ex

pens

es

$ 6,

598,

035

$ 87

,509

$

483,

282

$ 19

,204

A

mor

tizat

ion

expe

nses

$

888,

390

$ 62

,990

$

142,

913

$ 1,

377

Cap

ital e

xpen

ditu

re

$ 5,

911,

444

$ 1,

222,

258

$ 39

7,91

6

$

321

N

ote

1:

The

Gro

up is

div

ided

into

mob

ile, f

ixed

-line

and

cab

le T

V se

rvic

e bu

sine

ss.

Not

e 2:

R

epre

sent

s sal

es o

r ser

vice

reve

nue

betw

een

segm

ents

. N

ote

3:

Rep

rese

nts

reve

nue

min

us c

ost

and

expe

nses

on

segm

ent

basi

s, no

t in

clud

ed t

he G

roup

’s

gene

ral a

nd a

dmin

istra

tive

expe

nses

. N

ote

4:

Rep

rese

nts

tang

ible

and

inta

ngib

le a

sset

s w

hich

can

be

sepa

rate

ly a

lloca

ted

to e

ach

segm

ent.

H

owev

er, t

hese

ass

ets d

o no

t inc

lude

: 1)

A

sset

not

for u

se b

y an

y sp

ecifi

c se

gmen

t. 2)

A

dvan

ces o

r loa

ns to

ano

ther

segm

ent.

3)

Long

-term

inve

stm

ents

acc

ount

ed fo

r usi

ng e

quity

met

hod.

- 42

-

g.

Tota

l pur

chas

e fr

om o

r sal

e to

rela

ted

parti

es a

mou

ntin

g to

at l

east

$10

0 m

illio

n or

20%

of t

he p

aid-

in

capi

tal:

Tab

le 5

(atta

ched

). h.

R

ecei

vabl

es f

rom

rel

ated

par

ties

amou

ntin

g to

at

leas

t $1

00 m

illio

n or

20%

of

the

paid

-in c

apita

l:

Tabl

e 6

(atta

ched

). i.

Nam

es, l

ocat

ions

, and

rel

ated

info

rmat

ion

of in

vest

ees

on w

hich

the

Cor

pora

tion

exer

cise

d si

gnifi

cant

in

fluen

ce:

Tab

le 7

(atta

ched

). j.

Der

ivat

ive

trans

actio

ns

1)

Th

e C

orpo

ratio

n en

tere

d in

to i

nter

est

rate

sw

ap (

IRS)

con

tract

s in

Dec

embe

r 20

02 t

o he

dge

fluct

uatio

n of

inve

rse

float

ing

inte

rest

rate

s of

bon

ds, w

hich

are

set

tled

sem

iann

ually

. P

leas

e re

fer

to N

ote

23 fo

r the

rela

ted

info

rmat

ion.

C

ontr

act

Fina

ncia

l Ins

trum

ent

Te

rm

A

mou

nt

D

ue D

ate

In

tere

st ra

te sw

ap

cont

ract

s I

nver

se fl

oatin

g in

tere

st ra

te in

ex

chan

ge fo

r fix

ed in

tere

st ra

te o

f 2.

45%

$

5,0

00,0

00

Dec

embe

r 200

9

The

Cor

pora

tion

ente

red

into

IRS

cont

ract

s to

hed

ge in

vers

e flo

atin

g in

tere

st ra

te fl

uctu

atio

n.

For

the

year

s en

ded

Dec

embe

r 31

, 20

09 a

nd 2

008,

the

Cor

pora

tion

reco

gniz

ed g

ains

of

$84,

485

thou

sand

and

loss

es $

30,5

31 th

ousa

nd, r

espe

ctiv

ely,

reco

rded

as

dedu

ctio

n an

d ad

ditio

n to

inte

rest

expe

nse,

resp

ectiv

ely

k.

In

vest

men

t in

Mai

nlan

d C

hina

:

1)

The

nam

e of

the

inve

stee

com

pany

in M

ainl

and

Chi

na, t

he m

ain

busi

ness

es a

nd p

rodu

cts,

issu

ed

capi

tal,

met

hod

of in

vest

men

t, in

form

atio

n on

inflo

w o

r ou

tflow

of

capi

tal,

owne

rshi

p, in

vest

men

t ga

in o

r los

s, en

ding

bal

ance

, am

ount

rece

ived

as e

arni

ngs

dist

ribut

ions

from

the

inve

stm

ent,

and

the

limita

tion

on in

vest

men

t: T

able

8 (a

ttach

ed).

2)

Sign

ifica

nt d

irect

or

indi

rect

tra

nsac

tions

with

the

inv

este

e co

mpa

ny,

its p

rices

and

ter

ms

of

paym

ent,

unre

aliz

ed g

ain

or lo

ss, a

nd o

ther

rel

ated

info

rmat

ion

whi

ch is

hel

pful

to u

nder

stan

d th

e im

pact

of i

nves

tmen

t in

Mai

nlan

d C

hina

on

finan

cial

repo

rts:

Non

e.

l. B

usin

ess r

elat

ions

hips

and

sign

ifica

nt in

terc

ompa

ny tr

ansa

ctio

ns:

Tab

le 9

and

Tab

le 1

0 (a

ttach

ed).

174


- 44

-

b.

Fo

reig

n op

erat

ions

Th

e C

orpo

ratio

n ha

s no

reve

nue-

gene

ratin

g un

it th

at o

pera

tes o

utsi

de th

e R

OC

.

c.

Fore

ign

reve

nues

Th

e C

orpo

ratio

n ha

s no

fore

ign

reve

nues

.

d.

C

usto

mer

s with

reve

nues

exc

eedi

ng 1

0% o

f the

tota

l net

ope

ratin

g re

venu

es w

ere

as fo

llow

s:

Y

ears

End

ed D

ecem

ber

31

2009

2008

Com

pany

Am

ount

Pe

rcen

tage

of

Ope

ratin

g R

even

ues (

%)

A

mou

nt

Perc

enta

ge o

f O

pera

ting

Rev

enue

s (%

)

Chu

nghw

a Te

leco

m C

o., L

td.

$

8,8

33,1

37

13

$ 9

,850

,395

14

175


- 45

-

TA

BL

E 1

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S FI

NA

NC

ING

PR

OV

IDE

D

YE

AR

EN

DE

D D

EC

EM

BE

R 3

1, 2

009

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

)

No.

L

endi

ng C

ompa

ny

Bor

row

ing

Com

pany

Fi

nanc

ial

Stat

emen

t A

ccou

nt

Max

imum

B

alan

ce fo

r th

e Pe

riod

E

ndin

g B

alan

ce

Inte

rest

Rat

e Fi

nanc

ing

Purp

ose

Tra

nsac

tion

Am

ount

s R

easo

ns fo

r Sh

ort-

term

Fi

nanc

ing

Allo

wan

ce fo

r D

oubt

ful

Acc

ount

s

Col

late

ral

Len

ding

Lim

it fo

r E

ach

Bor

row

ing

Com

pany

Len

ding

C

ompa

ny’s

L

endi

ng A

mou

nt

Lim

its

Item

V

alue

0

Taiw

an M

obile

Co.

, Ltd

. (th

e “C

orpo

ratio

n”)

Tai F

u M

edia

Tec

hnol

ogy

Co.

, Ltd

. O

ther

rece

ivab

les

$

2,

045,

000

$

-

0.83

8%-2

.417

%

Shor

t-ter

m

finan

cing

$

- To

mee

t its

fina

ncin

g ne

eds

in a

cqui

ring

min

oriti

es

$

-

- -

$

20,

829,

291

(Not

e 1)

$ 2

0,82

9,29

1

(N

ote

1)

Wea

lth M

edia

Te

chno

logy

Co.

, Ltd

. O

ther

rece

ivab

les

60,0

00

45,0

00

0.83

8%

Shor

t-ter

m

finan

cing

-

Ope

ratio

n re

quire

men

ts

- -

-

20

,829

,291

(N

ote

1)

20,8

29,2

91

(Not

e 1)

TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les

2,00

0,00

0

2,

000,

000

0.83

8%

Shor

t-ter

m

finan

cing

-

Ope

ratio

n re

quire

men

ts

- -

-

20

,829

,291

(N

ote

1)

20,8

29,2

91

(Not

e 1)

Ta

iwan

Cel

lula

r Co.

, Ltd

. O

ther

rece

ivab

les

8,00

0,00

0

-

0.84

7%

Shor

t-ter

m

finan

cing

-

Ope

ratio

n re

quire

men

ts

- -

-

20

,829

,291

(N

ote

1)

20,8

29,2

91

(Not

e 1)

1 Ta

iwan

Cel

lula

r Co.

, Ltd

. TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les

5,04

0,00

0

4,

670,

000

0.83

8%-2

.417

%

Shor

t-ter

m

finan

cing

-

To m

eet i

ts fi

nanc

ing

need

s in

acq

uirin

g m

inor

ities

an

d op

erat

ion

requ

irem

ents

- -

-

20

,878

,023

(N

ote

1)

20,8

78,0

23

(Not

e 1)

TCC

Inve

stm

ent C

o., L

td.

Oth

er re

ceiv

able

s

2,

270,

000

2,27

0,00

0 0.

845%

Sh

ort-t

erm

fin

anci

ng

- O

pera

tion

requ

irem

ents

-

- -

20,8

78,0

23

(Not

e 1)

20

,878

,023

(N

ote

1)

2

TCC

Inve

stm

ent C

o., L

td.

(Not

e 3)

TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les

1,00

0,00

0

-

2.41

7%

Shor

t-ter

m

finan

cing

-

To m

eet i

ts fi

nanc

ing

need

s in

acq

uirin

g m

inor

ities

-

- -

8,38

6,25

4

(N

ote

1)

8,38

6,25

4

(N

ote

1)

TFN

Med

ia C

o., L

td.

Oth

er re

ceiv

able

s

2,

900,

000

- 0.

929%

-2.6

02%

Sh

ort-t

erm

fin

anci

ng

- O

pera

tion

requ

irem

ents

-

- -

8,38

6,25

4

(N

ote

1)

8,38

6,25

4

(N

ote

1)

3

Taiw

an F

ixed

Net

wor

k C

o.,

Ltd.

TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les

1,32

0,00

0

-

0.86

2%-2

.581

%

Shor

t-ter

m

finan

cing

-

Ope

ratio

n re

quire

men

ts

- -

-

14

,084

,712

(N

ote

1)

14,0

84,7

12

(Not

e 1)

Th

e C

orpo

ratio

n O

ther

rece

ivab

les

1,60

0,00

0

-

1.06

8%-2

.417

%

Shor

t-ter

m

finan

cing

-

Ope

ratio

n re

quire

men

ts

- -

-

14

,084

,712

(N

ote

1)

14,0

84,7

12

(Not

e 1)

Ta

iwan

Cel

lula

r Co.

, Ltd

. O

ther

rece

ivab

les

8,41

0,00

0

8,

040,

000

0.83

8%-0

.847

%

Shor

t-ter

m

finan

cing

-

Ope

ratio

n re

quire

men

ts

- -

-

14

,084

,712

(N

ote

1)

14,0

84,7

12

(Not

e 1)

4 U

nion

Cab

le T

V C

o., L

td.

TFN

Med

ia C

o., L

td.

Oth

er re

ceiv

able

s -

rela

ted

parti

es

700,

000

700,

000

0.83

8%-2

.604

%

Tran

sact

ions

27

0,21

3 B

usin

ess r

equi

rem

ents

-

- -

13,5

00,0

00

(Not

e 2)

13

,500

,000

(N

ote

2)

5

Man

grov

e C

able

TV

C

orpo

ratio

n TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les -

re

late

d pa

rties

18

8,00

0

-

0.84

4%-2

.594

%

Tran

sact

ions

32

,440

B

usin

ess r

equi

rem

ents

-

- -

12,0

00,0

00

(Not

e 2)

12

,000

,000

(N

ote

2)

6

Glo

balv

iew

Cab

le T

V C

o.,

Ltd.

TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les -

re

late

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rties

45

0,00

0

20

0,00

0 0.

862%

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04%

Tr

ansa

ctio

ns

221,

977

Bus

ines

s req

uire

men

ts

- -

-

12

,000

,000

(N

ote

2)

12,0

00,0

00

(Not

e 2)

7 Ph

oeni

x C

able

TV

Co.

, Ltd

. TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les -

re

late

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rties

68

0,00

0

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0,00

0 0.

838%

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94%

Tr

ansa

ctio

ns

563,

225

Bus

ines

s req

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ts

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-

12

,000

,000

(N

ote

2)

12,0

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(Not

e 2)

8 Sh

in H

o C

able

TV

Co.

, Ltd

. (N

ote

4)

TFN

Med

ia C

o., L

td.

Oth

er re

ceiv

able

s -

rela

ted

parti

es

207,

700

- 0.

839%

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04%

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ansa

ctio

ns

1,35

0 B

usin

ess r

equi

rem

ents

-

- -

12,0

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(Not

e 2)

12

,000

,000

(N

ote

2)

9

Yeo

ng Ji

aleh

Cab

le T

V C

o.,

Ltd.

TF

N M

edia

Co.

, Ltd

. O

ther

rece

ivab

les -

re

late

d pa

rties

36

0,00

0

36

0,00

0 0.

838%

-2.5

94%

Tr

ansa

ctio

ns

478,

941

Bus

ines

s req

uire

men

ts

- -

-

24

,000

,000

(N

ote

2)

24,0

00,0

00

(Not

e 2)

10

TFN

Med

ia C

o., L

td.

Win

TV B

road

cast

ing

Co.

, Lt

d.

Oth

er re

ceiv

able

s -

rela

ted

parti

es

470,

000

307,

000

0.83

9%-0

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%

Tran

sact

ions

57

,336

B

usin

ess r

equi

rem

ents

-

- -

15,0

00,0

00

(Not

e 2)

15

,000

,000

(N

ote

2)

(C

ontin

ued)

176


- 46

-

No.

L

endi

ng C

ompa

ny

Bor

row

ing

Com

pany

Fi

nanc

ial

Stat

emen

t A

ccou

nt

Max

imum

B

alan

ce fo

r th

e Pe

riod

E

ndin

g B

alan

ce

Inte

rest

Rat

e Fi

nanc

ing

Purp

ose

Tra

nsac

tion

Am

ount

s R

easo

ns fo

r Sh

ort-

term

Fi

nanc

ing

Allo

wan

ce fo

r D

oubt

ful

Acc

ount

s

Col

late

ral

Len

ding

Lim

it fo

r E

ach

Bor

row

ing

Com

pany

Len

ding

C

ompa

ny’s

L

endi

ng A

mou

nt

Lim

its

Item

V

alue

11

W

ealth

Med

ia T

echn

olog

y C

o., L

td.

Tai F

u M

edia

Tec

hnol

ogy

Co.

, Ltd

. O

ther

rece

ivab

les -

re

late

d pa

rties

$

60,0

00

$

45

,000

0.

838%

Sh

ort-t

erm

fin

anci

ng

$

-

Rep

aym

ent o

f fin

anci

ng

$

-

- -

$

77

,046

(N

ote

1)

$

77

,046

(N

ote

1)

12

Ta

i Fu

Med

ia T

echn

olog

y C

o., L

td.

Glo

bal W

ealth

Med

ia

Tech

nolo

gy C

o., L

td.

Oth

er re

ceiv

able

s -

rela

ted

parti

es

9,00

0

4,

000

0.86

7%

Shor

t-ter

m

finan

cing

-

To m

eet i

ts fi

nanc

ing

need

s in

acq

uirin

g m

inor

ities

-

- -

76,4

71

(Not

e 1)

76

,471

(N

ote

1)

N

ote

1:

For t

he e

ntiti

es w

hich

hav

e sh

ort-t

erm

fina

ncin

g ne

eds (

loan

ing

entit

ies)

, the

agg

rega

te a

mou

nt o

f loa

ning

fund

shal

l not

exc

eed

40 p

erce

nt o

f the

fina

ncin

g co

mpa

ny's

net w

orth

. T

he in

divi

dual

loan

ing

fund

shal

l be

limite

d to

the

low

est a

mou

nt o

f the

follo

win

g ite

ms:

1)

40

perc

ent o

f the

fin

anci

ng c

ompa

ny's

net w

orth

; 2) t

he a

mou

nt th

at th

e fin

anci

ng c

ompa

ny in

vest

s in

the

loan

ing

entit

ies;

or 3

) the

am

ount

= (t

he sh

are

porti

on o

f the

loan

ing

entit

ies t

hat t

he fi

nanc

ing

com

pany

inve

sts)

* (th

e to

tal l

oani

ng a

mou

nts o

f the

loan

ing

entit

ies)

. I

n th

e ev

ent t

hat a

fina

ncin

g co

mpa

ny

dire

ctly

or i

ndire

ctly

100

% o

wns

a c

ount

er-p

arty

, the

indi

vidu

al le

ndin

g am

ount

and

the

aggr

egat

e am

ount

of l

oani

ng fu

nds s

hall

not e

xcee

d 40

% o

f the

fina

ncin

g co

mpa

ny’s

net

wor

th.

Not

e 2:

W

here

fund

s are

loan

ed fo

r rea

sons

of b

usin

ess d

ealin

gs, t

he in

divi

dual

lend

ing

amou

nt a

nd th

e ag

greg

ate

amou

nt o

f loa

ning

fund

s sha

ll be

bot

h lim

ited

to th

e hi

gher

am

ount

of t

he fo

llow

ing

item

s:

1) a

mul

tiple

of t

he fi

nanc

ing

com

pany

’s c

apita

l, or

2) t

he a

mou

nt o

f bus

ines

s dea

ling.

N

ote

3:

TCC

Inve

stm

ent C

o., L

td. a

ssum

ed a

ll TF

N In

vest

men

t Co.

, Ltd

.’s fi

nanc

ing

prov

ided

to o

ther

s due

to m

erge

r. N

ote

4:

Shin

Ho

Cab

le T

V C

o., L

td. w

as li

quid

ated

on

Dec

embe

r 1, 2

009.

(Con

clud

ed)

177


- 47

-

TAB

LE 2

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S EN

DO

RSE

ME

NT/

GU

AR

AN

TEE

PRO

VID

ED

YEA

R E

ND

ED D

ECEM

BER

31,

200

9 (I

n Th

ousa

nds o

f New

Tai

wan

Dol

lars

)

No.

En

dors

emen

t/Gua

rant

or

(A)

Rec

eivi

ng P

arty

M

axim

um G

uara

ntee

/ En

dors

emen

t Am

ount

C

an B

e Pr

ovid

ed to

Ea

ch R

ecei

ving

Par

ty

Max

imum

Bal

ance

for

the

Peri

od

(Not

e 1)

Endi

ng B

alan

ce

(Not

e 1)

V

alue

of C

olla

tera

ls

Rat

io o

f Acc

umul

ated

En

dors

emen

t/ G

uara

ntee

to N

et

Wor

th o

f the

G

uara

ntor

(Not

e 1)

Max

imum

Gua

rant

ee/

Endo

rsem

ent C

an B

e Pr

ovid

ed b

y th

e G

uara

ntor

/End

orse

r

Nam

e (B

)

Nat

ure

of

Rel

atio

nshi

p (B

is A

’s)

0 Ta

iwan

Mob

ile C

o., L

td. (

the

“Cor

pora

tion”

) Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. (N

ote

2)

$

42

,000

,000

(N

ote

3)

$

34

,878

,330

$

34,8

78,3

30

$

-

66.9

8%

$

52

,073

,226

1 Ta

iwan

Tel

eser

vice

s &

Tech

nolo

gies

Co.

, Ltd

. Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. (N

ote

4)

20,0

00

(Not

e 5)

14

6

14

6

-

0.16

%

93,0

63

(Not

e 5)

N

ote

1:

Max

imum

gua

rant

ee/e

ndor

sem

ent a

mou

nt fo

r the

per

iod

and

the

endi

ng b

alan

ce a

re th

e am

ount

allo

wed

, not

act

ual a

ppro

pria

tion.

N

ote

2:

Dire

ct/in

dire

ct su

bsid

iary

N

ote

3:

For 1

00%

dire

ct/in

dire

ct o

wne

d su

bsid

iarie

s, th

e ag

greg

ate

endo

rsem

ent/g

uara

ntee

am

ount

pro

vide

d sh

all n

ot e

xcee

d th

e ne

t wor

th o

f the

Cor

pora

tion,

and

the

uppe

r-lim

it to

eac

h su

bsid

iary

shal

l be

the

doub

le o

f the

inve

stm

ent a

mou

nt.

Not

e 4:

Pa

rent

com

pany

N

ote

5:

TT&

T is

dire

ctly

and

indi

rect

ly 1

00%

ow

ned

by T

FN.

The

end

orse

men

t/gua

rant

ee a

mou

nt p

rovi

ded

by T

T&T,

shal

l be

limite

d w

ithin

the

net w

orth

of T

T&T,

and

not

ove

r dou

ble

of th

e in

vest

men

t am

ount

in T

T&T.

178


- 48

-

TAB

LE 3

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S M

AR

KET

AB

LE S

ECU

RIT

IES

HE

LD

DEC

EMB

ER 3

1, 2

009

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs o

r U

.S. D

olla

rs)

Inve

stin

g C

ompa

ny

(A)

Mar

keta

ble

Secu

ritie

s Inv

este

d (B

)

Rel

atio

nshi

p w

ith

the

Inve

stin

g C

ompa

ny (B

is A

’s)

Fina

ncia

l Sta

tem

ent A

ccou

nt

Dec

embe

r 31

, 200

9 N

ote

Shar

es/U

nits

(T

hous

ands

) C

arry

ing

Val

ue

Perc

enta

ge o

f O

wne

rshi

p M

arke

t Val

ue

(Not

e 1)

Taiw

an M

obile

Co.

, Ltd

.

Stoc

k

(th

e “C

orpo

ratio

n”)

Chu

nghw

a Te

leco

m C

o., L

td.

- A

vaila

ble-

for-s

ale

finan

cial

ass

ets -

cur

rent

2,

989

$

17

7,82

1 0.

028

$

17

7,82

1

(N

ote

5)

B

ridge

Mob

ile P

te L

td.

- Fi

nanc

ial a

sset

s car

ried

at c

ost -

non

-cur

rent

2,

200

50,3

24

10.0

0

-

(Not

e 3)

Y

es M

obile

Hol

ding

s Com

pany

-

Fina

ncia

l ass

ets c

arrie

d at

cos

t - n

on-c

urre

nt

74

-

(N

ote

2)

0.19

-

(Not

e 3)

W

ealth

Med

ia T

echn

olog

y C

o., L

td.

Subs

idia

ry

Long

-term

inve

stm

ents

- eq

uity

met

hod

27,2

00

192,

615

100.

00

192,

615

Taiw

an C

ellu

lar C

o., L

td.

Subs

idia

ry

Long

-term

inve

stm

ents

- eq

uity

met

hod

30,0

00

9,35

3,92

0

(N

ote

4)

100.

00

52,1

95,0

59

Ta

ipei

New

Hor

izon

s Co.

, Ltd

. Eq

uity

-met

hod

inve

stee

Lo

ng-te

rm in

vest

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ty m

etho

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1,97

4 49

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211,

974

W

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ia T

echn

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Stoc

k

C

o., L

td.

Tai F

u M

edia

Tec

hnol

ogy

Co.

, Ltd

. Su

bsid

iary

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ng-te

rm in

vest

men

ts -

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ty m

etho

d

27

,000

19

1,17

8 10

0.00

19

1,17

8

Ta

i Fu

Med

ia T

echn

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y

Stoc

k

C

o., L

td.

Glo

bal W

ealth

Med

ia T

echn

olog

y C

o., L

td.

Subs

idia

ry

Long

-term

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8,40

0

86

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0.00

86

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Fu

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echn

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o., L

td.

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idia

ry

Long

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ents

- eq

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met

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100

968

100.

00

968

Fu S

in M

edia

Tec

hnol

ogy

Co.

, Ltd

. Su

bsid

iary

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ng-te

rm in

vest

men

ts -

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ty m

etho

d

13

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14

0,85

8 10

0.00

14

0,85

8

G

loba

l For

est M

edia

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hnol

ogy

Co.

, Ltd

. Su

bsid

iary

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men

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ty m

etho

d

10

0

78

0 10

0.00

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0

G

loba

l Wea

lth M

edia

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ock

Tech

nolo

gy C

o., L

td.

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le T

V C

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-term

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3,74

9

89

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30

Fu S

in M

edia

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Stoc

k

C

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Cab

le T

V C

o., L

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Subs

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Long

-term

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2,27

2

13

1,93

7 3.

34

31,6

57

Taiw

an C

ellu

lar C

o., L

td.

Stoc

k

A

rcoa

Com

mun

icat

ion

Co.,

Ltd.

-

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ncia

l ass

ets c

arrie

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cos

t - n

on-c

urre

nt

6,99

8

67

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5.

21

-

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ote

3)

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raw

in V

entu

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p.

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sset

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3,

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3.00

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e 3)

Tr

ansp

orta

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Hig

h Te

ch In

c.

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nanc

ial a

sset

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ried

at c

ost -

non

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rent

1,

200

-

(N

ote

2)

12.0

0

-

(Not

e 3)

W

EB P

oint

Co.

, Ltd

. -

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ncia

l ass

ets c

arrie

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t - n

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urre

nt

803

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3 3.

17

-

(N

ote

3)

TW

M H

oldi

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o. L

td.

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Long

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1 sh

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U

S$

8,41

5 10

0.00

US$

8,

415

(C

ontin

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179


- 49

-

Inve

stin

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ompa

ny

(A)

Mar

keta

ble

Secu

ritie

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este

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)

Rel

atio

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p w

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ote

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hous

ands

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ue

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enta

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f O

wne

rshi

p M

arke

t Val

ue

(Not

e 1)

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

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bsid

iary

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rm in

vest

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ts -

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Taiw

an D

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mun

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Co.

, Ltd

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TCC

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TW

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TW

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00

U

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2

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C In

vest

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Taiw

an M

obile

Co.

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. (th

e “C

orpo

ratio

n”)

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Cor

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tion

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obile

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Cor

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Secu

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)

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Taiw

an T

eles

ervi

ces &

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ock

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nolo

gies

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- eq

uity

met

hod

1,30

0

US$

1,

409

100.

00

U

S$

1,40

9

Ta

iwan

Sup

er B

aske

tbal

l Co.

, Ltd

. Su

bsid

iary

Lo

ng-te

rm in

vest

men

ts -

equi

ty m

etho

d

2,

000

20,0

23

100.

00

20,0

23

TT&

T H

oldi

ngs C

o., L

td.

Stoc

k

X

iam

en T

aifu

Tel

eser

vice

s & T

echn

olog

ies

Ltd.

Su

bsid

iary

Lo

ng-te

rm in

vest

men

ts -

equi

ty m

etho

d

-

U

S$

1,40

3 10

0.00

US$

1,

403

N

ote

1:

Bas

ed o

n th

e in

vest

ee’s

net

wor

th a

s sho

wn

in it

s aud

ited

finan

cial

stat

emen

ts if

mar

ket v

alue

was

not

ava

ilabl

e.

Not

e 2:

Im

pairm

ent l

oss r

ecog

nize

d in

200

4 re

duce

d th

e va

lue

to z

ero.

N

ote

3:

As o

f Jan

uary

20,

201

0, th

e in

depe

nden

t aud

itors

’ rep

ort d

ate,

the

inve

stee

’s n

et w

orth

was

not

ava

ilabl

e.

Not

e 4:

Th

e C

orpo

ratio

n’s

shar

es h

eld

by T

CC

I, TI

D a

nd T

UI (

all a

re s

ubsi

diar

ies

100%

-ow

ned

by T

CC

) ar

e cl

assi

fied

as tr

easu

ry s

hare

s. T

here

fore

, the

Cor

pora

tion’

s ca

rryi

ng c

ost o

f $5

2,19

5,05

9 th

ousa

nd o

n TC

C s

hall

be r

educ

ed b

y 1)

do

wnw

ard

adju

stin

g $3

1,88

9,10

0 th

ousa

nd, t

he c

arry

ing

valu

e of

tota

l tre

asur

y sh

ares

on

the

Cor

pora

tion’

s bo

ok, 2

) exc

ludi

ng $

11,4

20,4

17 th

ousa

nd u

nrea

lized

gai

n fr

om fi

nanc

ial a

sset

s in

vest

men

t, 3)

add

ing

back

$47

5,90

7 th

ousa

nd

inco

me

tax

expe

nses

resu

lted

from

TFN

and

TFN

I’s d

ispo

sal g

ain

from

the

Cor

pora

tion’

s sha

res,

and

4) e

xclu

ding

reco

gniti

on o

f ups

tream

tran

sact

ions

gai

n of

$7,

529

thou

sand

. N

ote

5:

Bas

ed o

n th

e cl

osin

g pr

ice

on D

ecem

ber 3

1, 2

009

Not

e 6:

70

.47%

shar

es a

re h

eld

unde

r tru

stee

acc

ount

s.

(Con

clud

ed)

181


- 51

-

TA

BL

E 4

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S M

AR

KE

TA

BL

E S

EC

UR

ITIE

S A

CQ

UIR

ED

OR

DIS

POSE

D A

MO

UN

TIN

G T

O A

T L

EA

ST $

100

MIL

LIO

N O

R 2

0% O

F T

HE

PA

ID-I

N C

API

TA

L

YE

AR

EN

DE

D D

EC

EM

BE

R 3

1, 2

009

(In

Tho

usan

ds o

f New

Tai

wan

Dol

lars

) C

ompa

ny N

ame

Mar

keta

ble

Secu

ritie

s Typ

e an

d Is

suer

Fina

ncia

l St

atem

ent

Acc

ount

C

ount

er-p

arty

N

atur

e of

R

elat

ions

hip

Beg

inni

ng B

alan

ce

Acq

uisi

tion

Dis

posa

l E

ndin

g B

alan

ce

Shar

es/U

nits

(T

hous

ands

) A

mou

nt

Shar

es/U

nits

(T

hous

ands

) A

mou

nt

Shar

es/U

nits

(T

hous

ands

) A

mou

nt

Car

ryin

g V

alue

G

ain

(Los

s) o

n D

ispo

sal

Shar

es/U

nits

(T

hous

ands

) A

mou

nt

Ta

iwan

Fix

ed

Stoc

k

N

etw

ork

Co.

, Lt

d.

Taiw

an M

obile

Co.

, Ltd

. A

vaila

ble-

for-

sale

fin

anci

al a

sset

s -

non-

curr

ent

TFN

Uni

on

Inve

stm

ent C

o.,

Ltd.

Subs

idia

ry

45

6,29

5 $

22

,221

,555

- $

-

45

6,29

5 $

22

,769

,109

$

18

,616

,561

(Not

e 2)

- $

-

TF

N In

vest

men

t S

tock

C

o., L

td.

Taiw

an M

obile

Co.

, Ltd

. A

vaila

ble-

for-

sale

fin

anci

al a

sset

s -

non-

curr

ent

TCC

I Inv

estm

ent

& D

evel

opm

ent

Co.

, Ltd

.

Subs

idia

ry

35

5,62

3

17,3

18,8

33

-

-

13

2,84

9

6,62

9,14

9

5,55

2,13

7

(Not

e 3)

(Not

e 4)

(Not

e 4)

TF

N U

nion

St

ock

Inve

stm

ent

Co.

, Ltd

. Ta

iwan

Mob

ile C

o., L

td.

Ava

ilabl

e-fo

r-sa

le

finan

cial

ass

ets -

no

n-cu

rren

t

Taiw

an F

ixed

N

etw

ork

Co.

, Lt

d.

Pare

nt

-

-

45

6,29

5

22,7

69,1

09

-

-

-

-

45

6,29

5

28,4

72,7

93

TC

CI

Stoc

k

Inve

stm

ent &

D

evel

opm

ent

Co.

, Ltd

.

Taiw

an M

obile

Co.

, Ltd

. A

vaila

ble-

for-

sale

fin

anci

al a

sset

s -

non-

curr

ent

TFN

Inve

stm

ent

Co.

, Ltd

. Pa

rent

-

-

132,

849

6,

629,

149

-

-

-

-

13

2,84

9

8,28

9,75

7

TW

M H

oldi

ng

AD

S

C

o., L

td.

Hur

ray!

Hol

ding

Co.

, Ltd

. A

vaila

ble-

for-

sale

fin

anci

al a

sset

s -

curr

ent

- -

1,

080

US$

2,

052

-

-

1,

080

US$

4,

320

US$

5,

771

US$

(1

,451

)

-

-

N

ote

1:

The

amou

nt o

f beg

inni

ng a

nd e

ndin

g fu

nd b

alan

ce th

at b

elon

gs to

mar

keta

ble

secu

ritie

s inc

lude

d th

e un

real

ized

reva

luat

ion

gain

or l

oss o

n fin

anci

al a

sset

s. N

ote

2:

TFN

reso

lved

to in

ject

cap

ital i

nto

TUI w

ith it

s Tai

wan

Mob

ile sh

ares

. T

he d

iffer

ence

bet

wee

n th

e or

igin

al c

ost a

nd th

e di

spos

al p

rice

of sh

ares

, $4,

152,

548

thou

sand

, was

reco

gniz

ed a

s def

erre

d cr

edits

. T

here

was

no

gain

or l

oss o

n th

is tr

ansa

ctio

n.

Not

e 3:

TF

NI r

esol

ved

to in

ject

cap

ital i

nto

TID

with

its T

aiw

an M

obile

shar

es.

The

diff

eren

ce b

etw

een

the

orig

inal

cos

t and

the

disp

osal

pric

e of

shar

es, $

1,07

7,01

2 th

ousa

nd, w

as re

cogn

ized

as d

efer

red

cred

its.

The

re w

as n

o ga

in o

r los

s on

this

tran

sact

ion.

N

ote

4:

TCC

I ass

umed

the

222,

774

thou

sand

Tai

wan

Mob

ile sh

ares

and

$13

,901

,109

thou

sand

(inc

ludi

ng u

nrea

lized

gai

n of

fina

ncia

l ins

trum

ents

) fro

m T

FNI d

ue to

mer

ger.

182


- 52

-

TA

BL

E 5

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S T

OT

AL

PU

RC

HA

SE F

RO

M O

R S

AL

E T

O R

EL

AT

ED

PA

RT

IES

AM

OU

NT

ING

TO

AT

LE

AST

$10

0 M

ILLI

ON

OR

20%

OF

TH

E P

AID

-IN

CA

PIT

AL

Y

EA

R E

ND

ED

DE

CE

MB

ER

31,

200

9 (I

n T

hous

ands

of N

ew T

aiw

an D

olla

rs)

Com

pany

Nam

e (A

) R

elat

ed P

arty

(B

) N

atur

e of

Rel

atio

nshi

p (B

is A

’s)

Tra

nsac

tion

Det

ails

T

rans

actio

ns w

ith T

erm

s Diff

eren

t fro

m

Oth

ers

Not

es/A

ccou

nts P

ayab

le o

r R

ecei

vabl

e N

ote

Purc

hase

/Sal

e A

mou

nt

% to

Tot

al

Paym

ent T

erm

s U

nit P

rice

Pa

ymen

t Ter

ms

End

ing

Bal

ance

%

to T

otal

Ta

iwan

Mob

ile C

o., L

td. (

the

“Cor

pora

tion”

) Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. Su

bsid

iary

Sa

le

$

(2,2

76,3

19)

(4)

Bas

ed o

n co

ntra

ct

term

s -

-

$

368,

183

6 (N

ote

1)

Pu

rcha

se

1,39

0,30

3

(N

ote

2)

Bas

ed o

n co

ntra

ct

term

s -

-

(3

01,9

74)

(Not

e 3)

Ta

iwan

Tel

eser

vice

s & T

echn

olog

ies

Co.

, Ltd

.

Subs

idia

ry

Purc

hase

85

9,15

9

(N

ote

4)

Bas

ed o

n co

ntra

ct

term

s -

-

(6

5,79

0)

(Not

e 5)

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s C

o., L

td.

Th

e C

orpo

ratio

n U

ltim

ate

pare

nt

Sale

(8

59,3

50)

(85)

B

ased

on

cont

ract

te

rms

- -

65,8

04

85

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. Pa

rent

Sa

le

(156

,205

)

(1

5)

Bas

ed o

n co

ntra

ct

term

s -

-

11

,240

15

Taiw

an F

ixed

Net

wor

k C

o., L

td.

The

Cor

pora

tion

Ulti

mat

e pa

rent

Sa

le

(1,4

64,1

78)

(15)

B

ased

on

cont

ract

te

rms

- -

294,

399

15

Pu

rcha

se

2,27

3,45

2

32

B

ased

on

cont

ract

te

rms

- -

(367

,857

)

(2

1)

Ta

iwan

Tel

eser

vice

s & T

echn

olog

ies

Co.

, Ltd

.

Subs

idia

ry

Purc

hase

15

6,20

5

(N

ote

4)

Bas

ed o

n co

ntra

ct

term

s -

-

(1

1,24

0)

(Not

e 5)

TFN

Med

ia C

o., L

td.

Phoe

nix

Cab

le T

V C

o., L

td.

Subs

idia

ry

Cha

nnel

leas

ing

fee

(459

,667

)

(1

9)

Bas

ed o

n co

ntra

ct

term

s (N

ote

6)

(Not

e 6)

11

5,12

2

27

U

nion

Cab

le T

V C

o., L

td.

Subs

idia

ry

Cha

nnel

leas

ing

fee

(212

,096

)

(9

) B

ased

on

cont

ract

te

rms

(Not

e 6)

(N

ote

6)

53,2

05

13

Y

eong

Jial

eh C

able

TV

Co.

, Ltd

. Su

bsid

iary

C

hann

el le

asin

g fe

e

(3

88,0

09)

(16)

B

ased

on

cont

ract

te

rms

(Not

e 6)

(N

ote

6)

97,9

17

23

G

loba

lvie

w C

able

TV

Co.

, Ltd

. Su

bsid

iary

C

hann

el le

asin

g fe

e

(1

82,6

43)

(7)

Bas

ed o

n co

ntra

ct

term

s (N

ote

6)

(Not

e 6)

45

,862

11

Man

grov

e C

able

TV

Cor

pora

tion

Dai

-Ka

Ltd.

R

elat

ed p

arty

in

subs

tanc

e R

oyal

ty o

f co

pyrig

ht

143,

665

59

Bas

ed o

n co

ntra

ct

term

s (N

ote

6)

(Not

e 6)

(3

5,91

6)

(82)

Glo

balv

iew

Cab

le T

V C

o., L

td.

TFN

Med

ia C

o., L

td.

Pare

nt

Roy

alty

of

copy

right

18

2,64

3

58

B

ased

on

cont

ract

te

rms

(Not

e 6)

(N

ote

6)

(45,

862)

(8

2)

Uni

on C

able

TV

Co.

, Ltd

. TF

N M

edia

Co.

, Ltd

. Pa

rent

R

oyal

ty o

f co

pyrig

ht

212,

096

60

Bas

ed o

n co

ntra

ct

term

s (N

ote

6)

(Not

e 6)

(5

3,20

5)

(84)

Yeo

ng Ji

aleh

Cab

le T

V C

o., L

td.

TFN

Med

ia C

o., L

td.

Pare

nt

Roy

alty

of

copy

right

38

8,00

9

59

B

ased

on

cont

ract

te

rms

(Not

e 6)

(N

ote

6)

(97,

917)

(7

9)

Phoe

nix

Cab

le T

V C

o., L

td.

TFN

Med

ia C

o., L

td.

Pare

nt

Roy

alty

of

copy

right

45

9,66

7

63

B

ased

on

cont

ract

te

rms

(Not

e 6)

(N

ote

6)

(115

,122

)

(8

9)

Not

e 1:

Th

e $3

68,1

83 th

ousa

nd a

ccou

nts r

ecei

vabl

e am

ount

was

exp

ress

ed o

n a

gros

s bas

is in

acc

ord

with

sale

s am

ount

. T

he n

et a

ccou

nts r

ecei

vabl

e sh

ould

be

$19,

347

thou

sand

afte

r ded

uctin

g ac

coun

ts p

ayab

le a

nd a

ccru

ed c

usto

dial

rece

ipts/

paym

ents

tota

led

$348

,836

thou

sand

. N

ote

2:

Incl

uded

ope

ratin

g co

sts a

nd o

pera

ting

expe

nses

. N

ote

3:

Incl

uded

acc

ount

s pay

able

and

acc

rued

exp

ense

s.

Not

e 4:

R

ecog

nize

d as

ope

ratin

g ex

pens

es.

Not

e 5:

R

ecog

nize

d as

acc

rued

exp

ense

s. N

ote

6:

No

com

para

bles

on

such

kin

d of

tran

sact

ions

.

183


- 53

-

TAB

LE 6

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S R

ECEI

VA

BLE

S FR

OM

REL

ATE

D P

AR

TIE

S A

MO

UN

TIN

G T

O A

T LE

AST

$10

0 M

ILLI

ON

OR

20%

OF

THE

PAID

-IN

CA

PIT

AL

D

ECEM

BER

31,

200

9 (I

n Th

ousa

nds o

f New

Tai

wan

Dol

lars

)

Com

pany

Nam

e (A

) R

elat

ed P

arty

(B

) N

atur

e of

Rel

atio

nshi

p (B

is A

’s)

Endi

ng B

alan

ce

Turn

over

R

ate

Ove

rdue

A

mou

nt R

ecei

ved

in

Subs

eque

nt P

erio

d A

llow

ance

for

Bad

D

ebts

A

mou

nt

Act

ion

Take

n

Taiw

an M

obile

Co.

, Ltd

. (th

e “C

orpo

ratio

n”)

Taiw

an F

ixed

Net

wor

k C

o., L

td.

Subs

idia

ry

Acc

ount

s rec

eiva

ble

$ 36

8,18

3 5.

92

$

-

- 16

7

$

-

Oth

er re

ceiv

able

s

53,4

18

-

- 41

-

TF

N M

edia

Co.

, Ltd

. Su

bsid

iary

O

ther

rece

ivab

les

2,

003,

836

-

- -

-

Taiw

an C

ellu

lar C

o., L

td.

Subs

idia

ry

Oth

er re

ceiv

able

s

3,50

0,00

0

-

-

Ta

iwan

Cel

lula

r Co.

, Ltd

. TF

N M

edia

Co.

, Ltd

. Su

bsid

iary

O

ther

rece

ivab

les

4,

679,

014

-

- 24

0,63

2

-

TC

C In

vest

men

t Co.

, Ltd

. Su

bsid

iary

O

ther

rece

ivab

les

2,

274,

467

-

- -

-

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

, Ltd

. T

he C

orpo

ratio

n U

ltim

ate

pare

nt

Acc

ount

s rec

eiva

ble

65

,804

11

.81

- -

14

-

Taiw

an F

ixed

Net

wor

k C

o., L

td.

Pare

nt

Acc

ount

s rec

eiva

ble

11

,240

11

.07

- -

-

-

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. Th

e C

orpo

ratio

n U

ltim

ate

pare

nt

Acc

ount

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td. (

the

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lula

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, Ltd

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ipei

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hnol

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, Ltd

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x C

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, Ltd

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wan

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able

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serv

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prov

ider

133,

358

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2 3.

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13

1,93

7

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870

N

A

Ta

iwan

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, Ltd

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M H

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o. L

td.

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(1

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NA

Ta

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, Ltd

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, Tai

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line

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0 10

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N

A

Taiw

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mun

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Ltd.

Ta

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, Tai

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Te

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g an

d IT

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12

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00

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00

10

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(131

)

NA

TC

C In

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, Ltd

. Ta

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wan

In

vest

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00

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00

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502,

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N

A

TW

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ng C

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TWM

Com

mun

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ions

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Ltd

. B

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g, C

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M

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licat

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deve

lopm

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nd

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5,

005

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00

US$

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NA

TCC

Inve

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o., L

td.

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road

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Co.

, Ltd

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ipei

, Tai

wan

TV

pro

gram

pro

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r

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047

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1

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05

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TF

N M

edia

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, Ltd

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NA

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Man

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N

A

Uni

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Uni

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td.

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all c

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and

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57,3

20

N

A

Taiw

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hnol

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td.

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00

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45

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s Co.

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men

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na

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US$

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00

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Not

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shar

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eld

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CC

I, TI

D a

nd T

UI (

all a

re s

ubsi

diar

ies

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ned

by T

CC

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cla

ssifi

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s tre

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ares

. T

here

fore

, the

Cor

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s ca

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ost o

f $52

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thou

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on

TCC

sha

ll be

redu

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ing

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100

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sand

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car

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lue

of to

tal t

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es o

n th

e C

orpo

ratio

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ook,

2) e

xclu

ding

$11

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thou

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ain

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on o

f ups

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sact

ions

gai

n of

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529

thou

sand

. N

ote

2:

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7% sh

ares

are

hel

d un

der t

ruste

e ac

coun

ts.

185


- 55

-

TAB

LE 8

T

AIW

AN

MO

BIL

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O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S IN

VES

TME

NT

IN M

AIN

LAN

D C

HIN

A

YEA

R E

ND

ED D

ECEM

BER

31,

200

9 (I

n Th

ousa

nds o

f New

Tai

wan

Dol

lars

or

U.S

. Dol

lars

)

Inve

stee

C

ompa

ny N

ame

Mai

n B

usin

esse

s an

d Pr

oduc

ts

Tota

l Am

ount

of

Paid

-in C

apita

l In

vest

men

t Typ

e

Acc

umul

ated

O

utflo

w o

f In

vest

men

t fro

m

Taiw

an a

s of

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ary

1, 2

009

Inve

stm

ent F

low

s A

ccum

ulat

ed

Out

flow

of

Inve

stm

ent f

rom

Ta

iwan

as o

f D

ecem

ber

31,

2009

% O

wne

rshi

p of

D

irec

t or

Indi

rect

In

vest

men

t

Inve

stm

ent G

ain

(Los

s)

(Not

e 3)

Car

ryin

g V

alue

as

of

Dec

embe

r 31

, 20

09

Acc

umul

ated

In

war

d R

emitt

ance

of

Earn

ings

as o

f D

ecem

ber

31,

2009

Out

flow

In

flow

Xia

men

Tai

fu

Tele

serv

ices

&

Tech

nolo

gies

Ltd

.

Cal

l cen

ter s

ervi

ce

US$

1,

300

(NT$

41

,909

) In

dire

ct in

vest

men

t in

the

Com

pani

es in

Mai

nlan

d C

hina

thro

ugh

a th

ird

plac

e by

the

Cor

pora

tion’

s sub

sidi

ary,

Ta

iwan

Tel

eser

vice

s &

Tech

nolo

gies

Co.

, Ltd

.

US$

1,

300

(NT$

41

,909

) $

-

$

- U

S$

1,30

0 (N

T$

41,9

09)

100%

ow

ners

hip

of

indi

rect

in

vest

men

t by

the

Cor

pora

tion’

s su

bsid

iary

US$

40

(N

T$

1,29

0) U

S$

1,40

3 (N

T$

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30)

$

-

TWM

C

omm

unic

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ns

(Bei

jing)

Ltd

.

Mob

ile a

pplic

atio

n de

velo

pmen

t and

de

sign

US$

3,

000

(NT$

96

,714

) In

dire

ct in

vest

men

t in

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Com

pani

es in

Mai

nlan

d C

hina

thro

ugh

a th

ird

plac

e by

the

Cor

pora

tion’

s sub

sidi

ary,

Ta

iwan

Cel

lula

r Co.

, Ltd

.

US$

4,

617

(NT$

14

8,84

3) U

S$

255

(NT$

8,

221)

-

US$

4,

872

(NT$

15

7,06

4) 10

0% o

wne

rshi

p of

in

dire

ct

inve

stm

ent b

y th

e C

orpo

ratio

n’s

subs

idia

ry

US$

22

(N

T$

709)

US$

3,

872

(NT$

12

4,82

6)

-

Acc

umul

ated

Inve

stm

ent i

n M

ainl

and

Chi

na a

s of

D

ecem

ber

31, 2

009

Inve

stm

ent A

mou

nts A

utho

rize

d by

Inve

stm

ent C

omm

issio

n,

MO

EA

(Not

e 2)

Upp

er L

imit

on In

vest

men

t A

utho

rize

d by

Inve

stm

ent

Com

mis

sion,

MO

EA

(Not

e 2)

US$

1,30

0 (N

T$41

,909

) U

S$1,

300

(NT$

41,9

09)

$

93,0

63

U

S$4,

872

(NT$

157,

064)

U

S$5,

300

(NT$

170,

861)

52,

195,

059

N

ote

1:

The

abov

e am

ount

s wer

e tra

nsla

ted

into

New

Tai

wan

dol

lars

at t

he e

xcha

nge

rate

of U

S$1=

NT$

32.2

38, R

MB

1=N

T$4.

7213

as o

f Dec

embe

r 31,

200

9.

Not

e 2:

Th

e in

dire

ct in

vest

men

ts m

ade

by T

aiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

, Ltd

. and

Tai

wan

Cel

lula

r Co.

, Ltd

., su

bsid

iarie

s of t

he C

orpo

ratio

n.

Not

e 3:

C

alcu

latio

n w

as b

ased

on

audi

ted

finan

cial

stat

emen

ts.

186


- 56

-

TAB

LE 9

T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S B

USI

NES

S R

ELA

TIO

NSH

IP A

ND

SIG

NIF

ICA

NT

INTE

RC

OM

PAN

Y T

RA

NSA

CTI

ON

S Y

EAR

EN

DED

DEC

EMB

ER 3

1, 2

009

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs)

Num

ber

Com

pany

Nam

e C

ount

erpa

rty

Nat

ure

of

Rel

atio

nshi

p (N

ote)

Tran

sact

ion

Det

ails

Acc

ount

A

mou

nt

Tran

sact

ion

Term

s

Perc

enta

ge o

f C

onso

lidat

ed T

otal

O

pera

ting

Rev

enue

s or

Tot

al A

sset

s

0

Taiw

an M

obile

Co.

, Ltd

. Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. 1

Acc

ount

s rec

eiva

ble

$

19,3

47

Bas

ed o

n re

gula

r ter

ms

-

TF

N M

edia

Co.

, Ltd

. 1

Acc

ount

s rec

eiva

ble

46

Bas

ed o

n re

gula

r ter

ms

-

U

nion

Cab

le T

V C

o., L

td.

1 A

ccou

nts r

ecei

vabl

e

17

B

ased

on

regu

lar t

erm

s -

Yeo

ng Ji

aleh

Cab

le T

V C

o., L

td.

1 A

ccou

nts r

ecei

vabl

e

39

B

ased

on

regu

lar t

erm

s -

Man

grov

e C

able

TV

Cor

pora

tion

1 A

ccou

nts r

ecei

vabl

e

9

Bas

ed o

n re

gula

r ter

ms

-

Ph

oeni

x C

able

TV

Co.

, Ltd

. 1

Acc

ount

s rec

eiva

ble

51

Bas

ed o

n re

gula

r ter

ms

-

G

loba

lvie

w C

able

TV

Co.

, Ltd

. 1

Acc

ount

s rec

eiva

ble

11

Bas

ed o

n re

gula

r ter

ms

-

W

ealth

Med

ia T

echn

olog

y C

o., L

td.

1 O

ther

rece

ivab

les

45,0

65

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Cel

lula

r Co.

, Ltd

. 1

Oth

er re

ceiv

able

s

3,

500,

000

Bas

ed o

n re

gula

r ter

ms

4%

Taiw

an F

ixed

Net

wor

k C

o., L

td.

1 O

ther

rece

ivab

les

53,4

18

Bas

ed o

n re

gula

r ter

ms

-

W

inTV

Bro

adca

stin

g C

o., L

td.

1 O

ther

rece

ivab

les

28

Bas

ed o

n re

gula

r ter

ms

-

TF

N M

edia

Co.

, Ltd

. 1

Oth

er re

ceiv

able

s

2,

003,

836

Bas

ed o

n re

gula

r ter

ms

2%

TFN

Uni

on In

vest

men

t Co.

, Ltd

. 1

Oth

er re

ceiv

able

s

6

Bas

ed o

n re

gula

r ter

ms

-

TC

CI I

nves

tmen

t & D

evel

opm

ent C

o., L

td.

1 O

ther

rece

ivab

les

6 B

ased

on

regu

lar t

erm

s -

Taiw

an F

ixed

Net

wor

k C

o., L

td.

1 Pr

epay

men

ts

212

Bas

ed o

n re

gula

r ter

ms

-

M

angr

ove

Cab

le T

V C

orpo

ratio

n 1

Prep

aym

ents

21

B

ased

on

regu

lar t

erm

s -

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

, Ltd

. 1

Acc

ount

s pay

able

14

B

ased

on

regu

lar t

erm

s -

Taiw

an C

ellu

lar C

o., L

td.

1 A

ccru

ed e

xpen

ses

275

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Sup

er B

aske

tbal

l Co.

, Ltd

. 1

Acc

rued

exp

ense

s

4,

300

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. 1

Acc

rued

exp

ense

s

26

5,00

4 B

ased

on

regu

lar t

erm

s -

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

, Ltd

. 1

Acc

rued

exp

ense

s

65

,790

B

ased

on

regu

lar t

erm

s -

TWM

Com

mun

icat

ions

(Bei

jing)

Ltd

. 1

Oth

er p

ayab

les

5,50

8 B

ased

on

regu

lar t

erm

s -

Taiw

an F

ixed

Net

wor

k C

o., L

td.

1 O

ther

pay

able

s

17

6,83

6 B

ased

on

regu

lar t

erm

s -

Uni

on C

able

TV

Co.

, Ltd

. 1

Oth

er p

ayab

les

476

Bas

ed o

n re

gula

r ter

ms

-

Y

eong

Jial

eh C

able

TV

Co.

, Ltd

. 1

Oth

er p

ayab

les

1,25

3 B

ased

on

regu

lar t

erm

s -

Man

grov

e C

able

TV

Cor

pora

tion

1 O

ther

pay

able

s

36

1 B

ased

on

regu

lar t

erm

s -

Phoe

nix

Cab

le T

V C

o., L

td.

1 O

ther

pay

able

s

1,

720

Bas

ed o

n re

gula

r ter

ms

-

G

loba

lvie

w C

able

TV

Co.

, Ltd

. 1

Oth

er p

ayab

les

297

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. 1

Adv

ance

rece

ipts

17

5 B

ased

on

regu

lar t

erm

s -

TCC

Inve

stm

ent C

o., L

td.

1 A

dvan

ce re

ceip

ts

34

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. 1

Oth

er c

urre

nt li

abili

ties

83,0

59

Bas

ed o

n re

gula

r ter

ms

-

U

nion

Cab

le T

V C

o., L

td.

1 O

ther

cur

rent

liab

ilitie

s

89

3 B

ased

on

regu

lar t

erm

s -

Yeo

ng Ji

aleh

Cab

le T

V C

o., L

td.

1 O

ther

cur

rent

liab

ilitie

s

2,

638

Bas

ed o

n re

gula

r ter

ms

-

M

angr

ove

Cab

le T

V C

orpo

ratio

n 1

Oth

er c

urre

nt li

abili

ties

693

Bas

ed o

n re

gula

r ter

ms

-

Ph

oeni

x C

able

TV

Co.

, Ltd

. 1

Oth

er c

urre

nt li

abili

ties

1,85

1 B

ased

on

regu

lar t

erm

s -

Glo

balv

iew

Cab

le T

V C

o., L

td.

1 O

ther

cur

rent

liab

ilitie

s

77

9 B

ased

on

regu

lar t

erm

s - (C

ontin

ued)

187


- 57

-

Num

ber

Com

pany

Nam

e C

ount

erpa

rty

Nat

ure

of

Rel

atio

nshi

p (N

ote)

Tran

sact

ion

Det

ails

Acc

ount

A

mou

nt

Tran

sact

ion

Term

s

Perc

enta

ge o

f C

onso

lidat

ed T

otal

O

pera

ting

Rev

enue

s or

Tot

al A

sset

s

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. 1

Gua

rant

ee d

epos

its

$

830

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. 1

Ope

ratin

g re

venu

es

2,27

6,31

9 B

ased

on

regu

lar t

erm

s 3%

TF

N M

edia

Co.

, Ltd

. 1

Ope

ratin

g re

venu

es

642

Bas

ed o

n re

gula

r ter

ms

-

U

nion

Cab

le T

V C

o., L

td.

1 O

pera

ting

reve

nues

60

5 B

ased

on

regu

lar t

erm

s -

Shin

Ho

Cab

le T

V C

o., L

td.

1 O

pera

ting

reve

nues

10

1 B

ased

on

regu

lar t

erm

s -

Yeo

ng Ji

aleh

Cab

le T

V C

o., L

td.

1 O

pera

ting

reve

nues

80

3 B

ased

on

regu

lar t

erm

s -

Man

grov

e C

able

TV

Cor

pora

tion

1 O

pera

ting

reve

nues

43

8 B

ased

on

regu

lar t

erm

s -

Phoe

nix

Cab

le T

V C

o., L

td.

1 O

pera

ting

reve

nues

1,

105

Bas

ed o

n re

gula

r ter

ms

-

G

loba

lvie

w C

able

TV

Co.

, Ltd

. 1

Ope

ratin

g re

venu

es

449

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. 1

Ope

ratin

g co

sts

1,40

4,45

5 B

ased

on

regu

lar t

erm

s 2%

Ta

iwan

Tel

eser

vice

s & T

echn

olog

ies C

o., L

td.

1 O

pera

ting

cost

s

97

1 B

ased

on

regu

lar t

erm

s -

Phoe

nix

Cab

le T

V C

o., L

td.

1 O

pera

ting

cost

s

17

1 B

ased

on

regu

lar t

erm

s -

Taiw

an S

uper

Bas

ketb

all C

o., L

td.

1 O

pera

ting

expe

nses

34

,304

B

ased

on

regu

lar t

erm

s -

Taiw

an F

ixed

Net

wor

k C

o., L

td.

1 O

pera

ting

expe

nses

91

,612

B

ased

on

regu

lar t

erm

s -

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

, Ltd

. 1

Ope

ratin

g ex

pens

es

860,

420

Bas

ed o

n re

gula

r ter

ms

1%

TFN

Inve

stm

ent C

o., L

td.

1 O

pera

ting

expe

nses

3,

157

Bas

ed o

n re

gula

r ter

ms

-

W

inTV

Bro

adca

stin

g C

o., L

td.

1 O

pera

ting

expe

nses

(5

49)

Bas

ed o

n re

gula

r ter

ms

-

TF

N M

edia

Co.

, Ltd

. 1

Ope

ratin

g ex

pens

es

(497

) B

ased

on

regu

lar t

erm

s -

Uni

on C

able

TV

Co.

, Ltd

. 1

Ope

ratin

g ex

pens

es

(10)

B

ased

on

regu

lar t

erm

s -

Yeo

ng Ji

aleh

Cab

le T

V C

o., L

td.

1 O

pera

ting

expe

nses

(2

3)

Bas

ed o

n re

gula

r ter

ms

-

M

angr

ove

Cab

le T

V C

orpo

ratio

n 1

Ope

ratin

g ex

pens

es

(3)

Bas

ed o

n re

gula

r ter

ms

-

Ph

oeni

x C

able

TV

Co.

, Ltd

. 1

Ope

ratin

g ex

pens

es

(29)

B

ased

on

regu

lar t

erm

s -

Glo

balv

iew

Cab

le T

V C

o., L

td.

1 O

pera

ting

expe

nses

(1

1)

Bas

ed o

n re

gula

r ter

ms

-

W

ealth

Med

ia T

echn

olog

y C

o., L

td.

1 In

tere

st in

com

e

69

B

ased

on

regu

lar t

erm

s -

Tai F

u M

edia

Tec

hnol

ogy

Co.

, Ltd

. 1

Inte

rest

inco

me

40,1

32

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Cel

lula

r Co.

, Ltd

. 1

Inte

rest

inco

me

371

Bas

ed o

n re

gula

r ter

ms

-

TF

N M

edia

Co.

, Ltd

. 1

Inte

rest

inco

me

2,89

3 B

ased

on

regu

lar t

erm

s -

Wea

lth M

edia

Tec

hnol

ogy

Co.

, Ltd

. 1

Ren

tal i

ncom

e

34

B

ased

on

regu

lar t

erm

s -

Tai F

u M

edia

Tec

hnol

ogy

Co.

, Ltd

. 1

Ren

tal i

ncom

e

34

B

ased

on

regu

lar t

erm

s -

Fu Ji

a Le

h M

edia

Tec

hnol

ogy

Co.

, Ltd

. 1

Ren

tal i

ncom

e

34

B

ased

on

regu

lar t

erm

s -

Fu S

in M

edia

Tec

hnol

ogy

Co.

, Ltd

. 1

Ren

tal i

ncom

e

34

B

ased

on

regu

lar t

erm

s -

Glo

bal F

ores

t Med

ia T

echn

olog

y C

o., L

td.

1 R

enta

l inc

ome

37

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Cel

lula

r Co.

, Ltd

. 1

Ren

tal i

ncom

e

34

B

ased

on

regu

lar t

erm

s -

Taiw

an D

igita

l Com

mun

icat

ions

Co.

, Ltd

. 1

Ren

tal i

ncom

e

34

B

ased

on

regu

lar t

erm

s -

Taiw

an S

uper

Bas

ketb

all C

o., L

td.

1 R

enta

l inc

ome

34

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. 1

Ren

tal i

ncom

e

11

9,44

7 B

ased

on

regu

lar t

erm

s -

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

, Ltd

. 1

Ren

tal i

ncom

e

34

B

ased

on

regu

lar t

erm

s -

TFN

Inve

stm

ent C

o., L

td.

1 R

enta

l inc

ome

34

Bas

ed o

n re

gula

r ter

ms

-

R

each

& R

ange

Inc.

1

Ren

tal i

ncom

e

34

B

ased

on

regu

lar t

erm

s -

Win

TV B

road

cast

ing

Co.

, Ltd

. 1

Ren

tal i

ncom

e

17

3 B

ased

on

regu

lar t

erm

s -

TFN

Med

ia C

o., L

td.

1 R

enta

l inc

ome

10,7

84

Bas

ed o

n re

gula

r ter

ms

-

TF

N U

nion

Inve

stm

ent C

o., L

td.

1 R

enta

l inc

ome

6 B

ased

on

regu

lar t

erm

s -

TCC

I Inv

estm

ent &

Dev

elop

men

t Co.

, Ltd

. 1

Ren

tal i

ncom

e

6

Bas

ed o

n re

gula

r ter

ms

-

TC

C In

vest

men

t Co.

, Ltd

. 1

Ren

tal i

ncom

e

14

B

ased

on

regu

lar t

erm

s -

Taiw

an F

ixed

Net

wor

k C

o., L

td.

1 M

isce

llane

ous r

even

ue

3,22

1 B

ased

on

regu

lar t

erm

s -

Taiw

an F

ixed

Net

wor

k C

o., L

td.

1 In

tere

st e

xpen

ses

16,8

69

Bas

ed o

n re

gula

r ter

ms

-

(Con

tinue

d)

188


- 58

-

Num

ber

Com

pany

Nam

e C

ount

erpa

rty

Nat

ure

of

Rel

atio

nshi

p (N

ote)

Tran

sact

ion

Det

ails

Acc

ount

A

mou

nt

Tran

sact

ion

Term

s

Perc

enta

ge o

f C

onso

lidat

ed T

otal

O

pera

ting

Rev

enue

s or

Tot

al A

sset

s

1

Wea

lth M

edia

Tec

hnol

ogy

Co.

, Ltd

. Ta

i Fu

Med

ia T

echn

olog

y C

o., L

td.

1 O

ther

rece

ivab

les

$

45,0

65

Paym

ent t

erm

s var

ied

depe

nd

on th

e ag

reem

ents

-

Taiw

an M

obile

Co.

, Ltd

. 2

Acc

rued

exp

ense

s

65

Pa

ymen

t ter

ms v

arie

d de

pend

on

the

agre

emen

ts

-

Taiw

an M

obile

Co.

, Ltd

. 2

Oth

er p

ayab

les

45,0

00

Paym

ent t

erm

s var

ied

depe

nd

on th

e ag

reem

ents

-

Taiw

an M

obile

Co.

, Ltd

. 2

Ope

ratin

g ex

pens

es

34

Paym

ent t

erm

s var

ied

depe

nd

on th

e ag

reem

ents

-

Tai F

u M

edia

Tec

hnol

ogy

Co.

, Ltd

. 1

Inte

rest

inco

me

69

Paym

ent t

erm

s var

ied

depe

nd

on th

e ag

reem

ents

-

Taiw

an M

obile

Co.

, Ltd

. 2

Inte

rest

exp

ense

s

69

Pa

ymen

t ter

ms v

arie

d de

pend

on

the

agre

emen

ts

-

2 Ta

i Fu

Med

ia T

echn

olog

y C

o., L

td.

Glo

bal W

ealth

Med

ia T

echn

olog

y C

o., L

td.

1 O

ther

rece

ivab

les

4,00

0 Pa

ymen

t ter

ms v

arie

d de

pend

on

the

agre

emen

ts

-

Wea

lth M

edia

Tec

hnol

ogy

Co.

, Ltd

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8 Ta

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ased

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Adv

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190


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Num

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Y

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able

TV

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ased

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20

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ased

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regu

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s -

Taiw

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Inte

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me

16,8

69

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67

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ased

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Co.

, Ltd

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cella

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Taiw

an M

obile

Co.

, Ltd

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ratin

g ex

pens

es

34

Bas

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ms

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10

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C In

vest

men

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o., L

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ts

34

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ased

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, Ltd

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pens

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14

Bas

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ms

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TF

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edia

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11

TCC

I Inv

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Dev

elop

men

t Co.

, Ltd

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iwan

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ile C

o., L

td.

2 A

ccru

ed e

xpen

ses

6 B

ased

on

regu

lar t

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Taiw

an M

obile

Co.

, Ltd

. 2

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ratin

g ex

pens

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ased

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regu

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12

Win

TV B

road

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, Ltd

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edia

Co.

, Ltd

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es re

ceiv

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19

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2 M

isce

llane

ous r

even

ue

170

Bas

ed o

n re

gula

r ter

ms

-

N

ote:

1.

Pa

rent

to su

bsid

iary

.

2.

Subs

idia

ry to

par

ent.

3.

B

etw

een

subs

idia

ries.

(C

oncl

uded

)

201


- 71

-

TAB

LE 1

0 T

AIW

AN

MO

BIL

E C

O.,

LT

D. A

ND

SU

BSI

DIA

RIE

S B

USI

NES

S R

ELA

TIO

NSH

IP A

ND

SIG

NIF

ICA

NT

INTE

RC

OM

PAN

Y T

RA

NSA

CTI

ON

S Y

EAR

EN

DED

DEC

EMB

ER 3

1, 2

008

(In

Thou

sand

s of N

ew T

aiw

an D

olla

rs)

Num

ber

Com

pany

Nam

e C

ount

erpa

rty

Nat

ure

of

Rel

atio

nshi

p (N

ote)

Tran

sact

ion

Det

ails

Acc

ount

A

mou

nt

Tran

sact

ion

Term

s

Perc

enta

ge o

f C

onso

lidat

ed T

otal

O

pera

ting

Rev

enue

s or

Tot

al A

sset

s

0

Taiw

an M

obile

Co.

, Ltd

. Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. 1

Acc

ount

s rec

eiva

ble

$

214,

172

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Sup

er B

aske

tbal

l Co.

, Ltd

. 1

Acc

ount

s rec

eiva

ble

1 B

ased

on

regu

lar t

erm

s -

Tai F

u M

edia

Tec

hnol

ogy

Co.

, Ltd

. 1

Oth

er re

ceiv

able

s

2,

008,

079

Bas

ed o

n re

gula

r ter

ms

2%

Taiw

an F

ixed

Net

wor

k C

o., L

td.

1 O

ther

rece

ivab

les

46,7

33

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Tel

eser

vice

s & T

echn

olog

ies C

o., L

td.

1 O

ther

rece

ivab

les

685

Bas

ed o

n re

gula

r ter

ms

-

TF

N M

edia

Co.

, Ltd

. 1

Oth

er re

ceiv

able

s

2,

299

Bas

ed o

n re

gula

r ter

ms

-

U

nion

Cab

le T

V C

o., L

td.

1 O

ther

rece

ivab

les

22

Bas

ed o

n re

gula

r ter

ms

-

Sh

in H

o C

able

TV

Co.

, Ltd

. 1

Oth

er re

ceiv

able

s

2

Bas

ed o

n re

gula

r ter

ms

-

Y

eong

Jial

eh C

able

TV

Co.

, Ltd

. 1

Oth

er re

ceiv

able

s

59

B

ased

on

regu

lar t

erm

s -

Man

grov

e C

able

TV

Cor

pora

tion

1 O

ther

rece

ivab

les

8 B

ased

on

regu

lar t

erm

s -

Phoe

nix

Cab

le T

V C

o., L

td.

1 O

ther

rece

ivab

les

62

Bas

ed o

n re

gula

r ter

ms

-

G

loba

lvie

w C

able

TV

Co.

, Ltd

. 1

Oth

er re

ceiv

able

s

19

B

ased

on

regu

lar t

erm

s -

Taiw

an F

ixed

Net

wor

k C

o., L

td.

1 Pr

epay

men

ts

238

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. 1

Shor

t-ter

m b

orro

win

g

1,

300,

000

Bas

ed o

n re

gula

r ter

ms

1%

Taiw

an F

ixed

Net

wor

k C

o., L

td.

1 A

ccou

nts p

ayab

le

4,09

4 B

ased

on

regu

lar t

erm

s -

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

, Ltd

. 1

Acc

ount

s pay

able

19

B

ased

on

regu

lar t

erm

s -

Taiw

an C

ellu

lar C

o., L

td.

1 A

ccru

ed e

xpen

ses

460

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Sup

er B

aske

tbal

l Co.

, Ltd

. 1

Acc

rued

exp

ense

s

20

,000

B

ased

on

regu

lar t

erm

s -

Taiw

an F

ixed

Net

wor

k C

o., L

td.

1 A

ccru

ed e

xpen

ses

197,

416

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Tel

eser

vice

s & T

echn

olog

ies C

o., L

td.

1 A

ccru

ed e

xpen

ses

79,7

15

Bas

ed o

n re

gula

r ter

ms

-

TF

N M

edia

Co.

, Ltd

. 1

Acc

rued

exp

ense

s

35

B

ased

on

regu

lar t

erm

s -

Hur

ray!

Tim

es C

omm

unic

atio

ns (B

eijin

g) L

td.

1 O

ther

pay

able

s

9,

206

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. 1

Oth

er p

ayab

les

99,2

49

Bas

ed o

n re

gula

r ter

ms

-

W

inTV

Bro

adca

stin

g C

o., L

td.

1 O

ther

pay

able

s

15

2 B

ased

on

regu

lar t

erm

s -

Uni

on C

able

TV

Co.

, Ltd

. 1

Oth

er p

ayab

les

301

Bas

ed o

n re

gula

r ter

ms

-

Sh

in H

o C

able

TV

Co.

, Ltd

. 1

Oth

er p

ayab

les

17

Bas

ed o

n re

gula

r ter

ms

-

Y

eong

Jial

eh C

able

TV

Co.

, Ltd

. 1

Oth

er p

ayab

les

811

Bas

ed o

n re

gula

r ter

ms

-

M

angr

ove

Cab

le T

V C

orpo

ratio

n 1

Oth

er p

ayab

les

134

Bas

ed o

n re

gula

r ter

ms

-

Ph

oeni

x C

able

TV

Co.

, Ltd

. 1

Oth

er p

ayab

les

875

Bas

ed o

n re

gula

r ter

ms

-

G

loba

lvie

w C

able

TV

Co.

, Ltd

. 1

Oth

er p

ayab

les

289

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. 1

Adv

ance

rece

ipts

18

1 B

ased

on

regu

lar t

erm

s -

Taiw

an F

ixed

Net

wor

k C

o., L

td.

1 O

ther

cur

rent

liab

ilitie

s

35

8,14

2 B

ased

on

regu

lar t

erm

s -

Taiw

an T

elec

omm

unic

atio

n N

etw

ork

Serv

ices

Co.

, Ltd

. 1

Oth

er c

urre

nt li

abili

ties

5 B

ased

on

regu

lar t

erm

s -

Uni

on C

able

TV

Co.

, Ltd

. 1

Oth

er c

urre

nt li

abili

ties

91

Bas

ed o

n re

gula

r ter

ms

-

Sh

in H

o C

able

TV

Co.

, Ltd

. 1

Oth

er c

urre

nt li

abili

ties

6 B

ased

on

regu

lar t

erm

s -

Yeo

ng Ji

aleh

Cab

le T

V C

o., L

td.

1 O

ther

cur

rent

liab

ilitie

s

33

2 B

ased

on

regu

lar t

erm

s -

Man

grov

e C

able

TV

Cor

pora

tion

1 O

ther

cur

rent

liab

ilitie

s

51

B

ased

on

regu

lar t

erm

s - (C

ontin

ued)

202


- 72

-

Num

ber

Com

pany

Nam

e C

ount

erpa

rty

Nat

ure

of

Rel

atio

nshi

p (N

ote)

Tran

sact

ion

Det

ails

Acc

ount

A

mou

nt

Tran

sact

ion

Term

s

Perc

enta

ge o

f C

onso

lidat

ed T

otal

O

pera

ting

Rev

enue

s or

Tot

al A

sset

s

Ph

oeni

x C

able

TV

Co.

, Ltd

. 1

Oth

er c

urre

nt li

abili

ties

$

257

Bas

ed o

n re

gula

r ter

ms

-

G

loba

lvie

w C

able

TV

Co.

, Ltd

. 1

Oth

er c

urre

nt li

abili

ties

120

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

. 1

Gua

rant

ee d

epos

its

830

Bas

ed o

n re

gula

r ter

ms

-

Tr

ansA

sia

Tele

com

mun

icat

ions

Inc.

1

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ratin

g re

venu

es

459,

338

Bas

ed o

n re

gula

r ter

ms

1%

Taiw

an S

uper

Bas

ketb

all C

o., L

td.

1 O

pera

ting

reve

nues

1

Bas

ed o

n re

gula

r ter

ms

-

Ta

iwan

Fix

ed N

etw

ork

Co.

, Ltd

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Ope

ratin

g re

venu

es

2,08

7,75

6 B

ased

on

regu

lar t

erm

s 2%

Ta

iwan

Tel

ecom

mun

icat

ion

Net

wor

k Se

rvic

es C

o., L

td.

1 O

pera

ting

reve

nues

17

1 B

ased

on

regu

lar t

erm

s -

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

, Ltd

. 1

Ope

ratin

g re

venu

es

92

Bas

ed o

n re

gula

r ter

ms

-

TF

N M

edia

Co.

, Ltd

. 1

Ope

ratin

g re

venu

es

778

Bas

ed o

n re

gula

r ter

ms

-

U

nion

Cab

le T

V C

o., L

td.

1 O

pera

ting

reve

nues

51

7 B

ased

on

regu

lar t

erm

s -

Shin

Ho

Cab

le T

V C

o., L

td.

1 O

pera

ting

reve

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17

2 B

ased

on

regu

lar t

erm

s -

Yeo

ng Ji

aleh

Cab

le T

V C

o., L

td.

1 O

pera

ting

reve

nues

44

3 B

ased

on

regu

lar t

erm

s -

Man

grov

e C

able

TV

Cor

pora

tion

1 O

pera

ting

reve

nues

36

8 B

ased

on

regu

lar t

erm

s -

Nor

th C

oast

Cab

le T

V C

o., L

td.

1 O

pera

ting

reve

nues

34

B

ased

on

regu

lar t

erm

s -

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nix

Cab

le T

V C

o., L

td.

1 O

pera

ting

reve

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1,

115

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ed o

n re

gula

r ter

ms

-

G

loba

lvie

w C

able

TV

Co.

, Ltd

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Ope

ratin

g re

venu

es

447

Bas

ed o

n re

gula

r ter

ms

-

Tr

ansA

sia

Tele

com

mun

icat

ions

Inc.

1

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ratin

g co

sts

257,

989

Bas

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n re

gula

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ms

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Th

e fo

rmer

Tai

wan

Tel

eser

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s & T

echn

olog

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o., L

td.

1 O

pera

ting

cost

s

34

5 B

ased

on

regu

lar t

erm

s -

Taiw

an F

ixed

Net

wor

k C

o., L

td.

1 O

pera

ting

cost

s

98

2,64

4 B

ased

on

regu

lar t

erm

s 1%

Ta

iwan

Tel

eser

vice

s & T

echn

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td.

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cost

s

25

9 B

ased

on

regu

lar t

erm

s -

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le T

V C

o., L

td.

1 O

pera

ting

cost

s

20

0 B

ased

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regu

lar t

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The

form

er T

aiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

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Ope

ratin

g ex

pens

es

601,

107

Bas

ed o

n re

gula

r ter

ms

1%

Taiw

an T

eles

ervi

ces &

Tec

hnol

ogie

s Co.

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pens

es

310,

881

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ed o

n re

gula

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ms

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Ta

iwan

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aske

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pens

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32,0

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g ex

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82,0

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W

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nion

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in H

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pens

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ms

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Y

eong

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able

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ased

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grov

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pera

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Ph

oeni

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able

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ased

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i Fu

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td.

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ased

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road

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34

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ased

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form

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aiw

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ervi

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hnol

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34

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ased

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34

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ased

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regu

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lty &

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perty

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td.

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34

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tal i

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34

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ased

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203


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Com

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e C

ount

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rty

Nat

ure

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Det

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Term

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Perc

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ting

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iwan

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etw

ork

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, Ltd

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tal i

ncom

e

$ 70

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ased

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lar t

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an T

elec

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atio

n N

etw

ork

Serv

ices

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tal i

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ased

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eles

ervi

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tal i

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5

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ccru

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on

regu

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Taiw

an M

obile

Co.

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Adv

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rece

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N

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2.

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idia

ry to

par

ent.

3.

B

etw

een

subs

idia

ries.

(C

oncl

uded

)

Taiwan Mobile

Taiwan Mobile

2009 Annual Report

Taiwan M

obile2009 Annual Report

Publication Date : January 31, 2010 Company Website : www.taiwanmobile.com MOPS : newmops.twse.com.tw

Ticker : 3045

Name Rosie Yu

Title Vice President

Telephone (02) 6635-1880

Email [email protected]

Name Josephine Juan

Title Director

Telephone (02) 6636-6970



Name Fubon Securities Co., Ltd.

Address 2F, No. 17, Syuchang St., Jhongjheng Dist., Taipei

Telephone (02) 2361-1300

Website www.fbs.com.tw

Website www.taiwanmobile.com

Deloitte & Touche Peter Fan, CPA, and S. C. Huang, CPA

Address 12F, No. 156, Minsheng E. Rd., Sec. 3, Taipei

Telephone (02) 2545-9988

Website www.deloitte.com.tw

Listing of Foreign Securities

Independent Auditor

Stock Transfer Agent

IR Contact

Taiwan Mobile Official Website

Deputy Spokesperson

Spokesperson

None

The cover’s design idea is based on Chang Xu’s winning match of Go (Weichi) during the Go Master

title competition. The Taiwanese Go Chess player living in Japan was using the White stones. His

victorious play is a fitting representation of Taiwan Mobile’s management strategy of acting

cautiously and proactively while positioning a complete telecommunications and media domain to

break the competition stalemate and reach a final victory.

Breaking Trough

chap. financial report - taiwan mobile · note 2: 2005-2009 financial data have been duly audited...

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