We are involved in various legal proceedings of a nature considered in the ordinary course of our business.  It is our policy to provide for reserves related to these legal matters when it is probable that a liability has been  incurred and the amount is reasonably estimable.  We believe that the various asserted claims and litigation in which we are involved will not materially affect  our financial condition or results of operations although no assurance can be given with respect to the ultimate  outcome of any such claim or litigation.  See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital  Expenditures” for a discussion of our capital expenditures.  We are a company limited by shares and incorporated under the Republic of China Company Law and  the Statute of Chunghwa Telecom Co., Ltd. All of our directors and executive officers, our supervisors and  some of the experts named in this annual report are residents of Taiwan and a substantial portion of our assets  and the assets of those persons are located in Taiwan. As a result, it may not be possible for investors to effect  service of process upon us or those persons outside of Taiwan, or to enforce against them judgments obtained in  courts outside of Taiwan. We have been advised by our Republic of China counsel that in their opinion any final  judgment obtained against us in any court other than the courts of the Republic of China in connection with any  legal suit or proceeding arising out of or relating to the ADSs will be enforced by the courts of the Republic of  China without further review of the merits only if the court of the Republic of China in which enforcement is  sought is satisfied that:  A party seeking to enforce a foreign judgment in the Republic of China would be required to obtain foreign  exchange approval from the Central Bank of the Republic of China (Taiwan) for the payment out of Taiwan of  any amounts recovered in connection with the judgment denominated in a currency other than NT dollars if a  conversion from NT dollars to a foreign currency is involved.  We were subject to the Statute of Chunghwa Telecom Co., Ltd. prior to our privatization. Although we have  been privatized, the Legislative Yuan has not yet abolished the Statute of Chunghwa Telecom Co., Ltd., and at  this time, the Statute of Chunghwa Telecom Co., Ltd. is still applicable to us.  Overview  Regulation  Enforceability of Judgments in Taiwan  Capital Expenditures  PART I 48 •  the court rendering the judgment has jurisdiction over the subject matter according to the laws of the  Republic of China;  •  the judgment and the court procedure resulting in the judgment are not contrary to the public order  or good morals of the Republic of China;  •  if the judgment was rendered by default by the court rendering the judgment, we were served within  a reasonable period of time in accordance with the laws and regulations of the jurisdiction of the  court or process was served on us with judicial assistance of the Republic of China; and  •  judgments at the courts of the Republic of China are recognized and enforceable in the court  rendering the judgment on a reciprocal basis. 