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## B. Liquidity and Capital Resources 

## Liquidity 

The following table sets forth the summary of our cash flows for the periods indicated: 

<img src='content_image/181326.jpg'>

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. 

## Capital Resources 

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. 

