CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Millions of New Taiwan or U.S. Dollars, Except Earnings Per Share That Are in New Taiwan or U.S. Dollars) Year Ended December 31 2009 2010 2011 Notes NT$ NT$ NT$ US$ (Note 3) NET REVENUES 29 $  198,361 $  202,430 $  217,493 $  7,185 OPERATING COSTS 29 112,736 115,332 131,531 4,345 GROSS PROFIT 85,625 87,098 85,962 2,840 OPERATING EXPENSES 29 Marketing 22,293 22,469 23,172 766 General and administrative 3,765 4,012 4,180 138 Research and development 3,173 3,250 3,525 116 Total operating expenses 29,231 29,731 30,877 1,020 INCOME FROM OPERATIONS 56,394 57,367 55,085 1,820 NON-OPERATING INCOME AND GAINS 29 Interest income 479 475 682 22 Equity in earnings of equity method investees,  net - 151 364 12 Gain on disposal of financial instruments, net - 20 1 Gain on disposal of property, plant and  equipment, net - - 298 10 Foreign exchange gain, net 89 81 3 Dividend income 55 26 34 1 Valuation gain on financial instruments, net 99 - - - Others 700 380 402 13 Total non-operating income and gains 1,422 1,032 1,881 62 NON-OPERATING EXPENSES AND LOSSES Impairment loss on assets 110 125 148 5 Valuation loss on financial instruments, net - 11 37 1 Interest expense 15 107 31 Loss on disposal of property, plant and  equipment, net 7 216 - - Loss on disposal of financial instruments, net 142 157 Foreign exchange loss, net - 17 - - Loss arising from natural calamities 149 19 1 Equity in losses of equity method investees, net 23 - - - Others 132 60 50 2 Total non-operating expenses and losses 578 712 267 9 INCOME BEFORE INCOME TAX 57,238 57,687 56,699 1,873 INCOME TAX EXPENSE 2, 26 12,743 9,129 8,604 284 CONSOLIDATED NET INCOME $  44,495 $  48,558 $  48,095 $  1,589 (Continued) F-4 PART III