PART I B. Liquidity and Capital Resources  Liquidity  The following table sets forth the summary of our cash flows for the periods indicated:  Our primary source of liquidity is cash flow from operations, which represents operating profit adjusted for  non cash items, primarily depreciation and amortization and changes in current assets and liabilities. We believe  that our working capital is sufficient to meet our present cash flow requirements.  In 2010, we generated NT$84.8 billion (US$2.9 billion) net cash from operating activities as compared to  NT$77.3 billion in 2009. The increase was primarily due to a NT$4.1 billion increase in consolidated net income  and the decrease in pension fund contribution described below.  In 2009, we generated NT$77.3 billion net cash from operating activities, as compared to NT$91.9 billion  in 2008. The decrease in net cash from operating activities was primarily the result of a NT$4.0 billion pension  fund contribution in December 2009.  Historically, net cash from operating activities has been sufficient to cover our capital expenditures,  including ongoing expansion and modernization of our networks.  In 2010, net cash used in investing activities was NT$17.4 billion (US$0.6 billion), a decrease from  NT$29.5 billion in 2009. The change was primarily due to the increase in cash inflow from disposal of available- for-sale financial instruments.  In 2009, net cash used in investing activities was NT$29.5 billion, a decrease from NT$34.5 billion in 2008.  The decrease was primarily the result of decreases in acquisition of property, plant and equipment and held-to- maturity financial assets.  In 2010, our net cash used in financing activities totaled NT$47.0 billion (US$1.6 billion), which mainly  reflected NT$39.4 billion (US$1.4 billion) of payment of dividends during that period and NT$9.7 billion  (US$0.3 billion) of cash distribution to our stockholders for a capital reduction plan.  In 2009, our net cash used in financing activities totaled NT$56.5 billion, which mainly reflected NT$37.1  billion of payment of dividends during that period and NT$19.1 billion of cash distribution to our stockholders  for a capital reduction plan.  We have historically financed our capital expenditure requirements with our cash flows from operations. In  future years, we expect to have capital expenditure requirements for the ongoing expansion and upgrade of our  networks, including 3G/HSPA/HSPA+,FTTx, Wi-Fi/femtocell and service platforms, and future construction  of LTE to migrate mobile and data service customers to higher contribution platforms. We also expect to make  dividend payments on an ongoing basis. See “Item 8. Financial Information—A. Consolidated Statements  and Other Financial Information.” Furthermore, we may require working capital from time to time to finance  purchases of materials for our maintenance and other overhead expenses. We expect to primarily rely on cash  generated from operations and, to a lesser extent, loans from commercial banks to meet our planned capital  expenditures, make our planned dividend payments, repay debts and fulfill other commitments over the next  twelve months.  Capital Resources  83 For the year ended December 31, 2008 2009 2010 NT$ NT$ NT$ US$ (in billions) Net cash provided by operating activities 91.9  77.3  84.8  2.9  Net cash used in investing activities (34.5) (29.5) (17.4) (0.6) Net cash used in financing activities (52.3) (56.5) (47.0) (1.6) Effect of exchange rate changes — — — — Effect of change on consolidated subsidiaries 0.7  (2.8) (0.1) Net increase (decrease) in cash and cash equivalents 5.1  (8.0) 17.6  0.6  Cash and cash equivalents at end of year 81.3  73.3  90.9  3.1 