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 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 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. On March 27, 2009, the board of directors of Chunghwa resolved to purchase  48,000 thousand common shares of SENAO through SENAO’s private placement. However, Chunghwa and  SENAO did not complete the required procedures within the legal payment period; therefore, Chunghwa and  SENAO decided to discontinue the private placement.  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.  Chunghwa established Chunghwa International Yellow Pages Co., Ltd. (“CIYP”) in January 2007. CIYP  engages mainly in yellow pages sales and advertisement services.  CHIEF Telecom Inc. (“CHIEF”) was incorporated in 1991. CHIEF engages mainly in internet communication  and internet data center (“IDC”) service. Chunghwa acquired 70% of the shares of CHIEF on September  2006.  Unigate Telecom Inc. (“Unigate”) was established by CHIEF in 1999. Unigate engages mainly in  telecommunication and information software service.  F-16