CHUNGHWATELECOM CO., LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.  GENERAL Chunghwa Telecom Co., Ltd. (“Chunghwa”) was incorporated on July 1, 1996 in the Republic of China (“ROC”) pursuant  to the Article 30 of the Telecommunications Act. Chunghwa is a company limited by shares and, prior to August 2000, was  wholly owned by the Ministry of Transportation and Communications (“MOTC”). Prior to July 1, 1996, the current operations  of Chunghwa were carried out under the Directorate General of Telecommunications (“DGT”). The DGT was established  by the MOTC in June 1943 to take primary responsibility in the development of telecommunications infrastructure and to  formulate policies related to telecommunications. On July 1, 1996, the telecom operations of the DGT were spun-off to as  Chunghwa which continues to carry out the business and the DGT continues to be the industry regulator.  As the dominate telecommunications service provider of fixed-line and Global System for Mobile Communications (“GSM”)  in the ROC, Chunghwa is subject to additional regulations imposed by the ROC. Effective August 12, 2005, the MOTC had completed the process of privatizing Chunghwa by reducing the government  ownership to below 50% in various stages. In July 2000, Chunghwa received approval from the Securities and Futures  Commission (the “SFC”) for a domestic initial public offering and its common shares were listed and traded on the Taiwan  Stock Exchange (the “TSE”) on October 27, 2000. Certain of Chunghwa’s common shares had been sold, in connection with  the foregoing privatization plan, in domestic public offerings at various dates from August 2000 to July 2003. Certain of  Chunghwa’s common shares had also been sold in an international offering of securities in the form of American Depository  Shares (“ADS”) on July 17, 2003 and were listed and traded on the New York Stock Exchange (the “NYSE”). The MOTC  sold common shares of Chunghwa by auction in the ROC on August 9, 2005 and completed the second international offering  on August 10, 2005. Upon completion of the share transfers associated with these offerings on August 12, 2005, the MOTC  owned less than 50% of the outstanding shares of Chunghwa and completed the privatization plan. Senao International Co., Ltd. (“SENAO”) was incorporated in 1979. SENAO has been listed on the Taiwan Stock Exchange  under the number “2450” since May 2001. SENAO engages mainly in selling and maintaining mobile phones and its  peripheral products. Chunghwa acquired 31.33% shares of SENAO on January 15, 2007 and has substantial control in SENAO  by obtaining half of the seats of the board of directors of SENAO on April 12, 2007. At general annual stockholder meeting of  SENAO in June 2010, the Company continued to maintain control of a majority of the board of directors through the continued  support of the largest beneficial shareholder. The Company’s equity ownership of SENAO decreased from 31.33% as of  January 15, 2007 to 28.44% as of December 31, 2011 due to the exercise of options by employees that were previously granted  before 2007. Senao International (Samoa) Holding Ltd. (“SIS”) was established by SENAO in 2009. SIS engages mainly in international  investment activities. Senao International HK Limited (“SIHK”) was established by SIS in 2009. SIHK engages mainly in international investment  activities. Senao Trading (Fujian) Co., Ltd. (“STF”) was established by SIHK in 2011. STF engages mainly in the sale of information  and communication technology products. Senao International Trading (Shanghai) Co., Ltd. (“SITS”) was established by SIHK in 2011. SITS engages mainly in the sale  of information and communication technology products. PART III F-11