As an internet service provider, our system is susceptible to cyber security risks, including hijack attacks, phishing attacks,  hacker’s intrusions to steal customer’s information and distributed denial-of-service (DDoS) attacks. Our online services such as  e-bills and multiple payment options through the internet are also vulnerable to cyber attacks. These attacks may disrupt our services  and cause leakage of our customers’ personal information, which may result in significant damages and material adverse effect to our  customers and our operations. We cannot assure you that our data protection measures are sufficient to prevent any data leakage or  disruption of our service due to cyber attacks. We may suffer negative consequences, such as remedial costs, increased cybersecurity  protection costs, lost revenues, litigation and reputational damage due to cyber attacks.  Furthermore, the R.O.C. legislator may, from time to time, imposes obligations on us for protecting public interest from  harmful content on the internet. For example, according to the newly amended R.O.C. Children and Youth Welfare Act that became  effective on November 30, 2011, we are required to take precautionary measures to protect minor children from accessing to offensive  or obscene content on internet that is harmful for their physical and mental health. If we fail to comply with these requirements, we  may be subject to administrative fines ranging from NT$60,000 to NT$300,000. As a telecommunications service provider in Taiwan, we are subject to extensive regulation. See “Item 4. Information on the  Company—B. Business Overview—Regulation” for a discussion of the regulatory environment applicable to us. Any changes in the  regulatory environment applicable to us may adversely affect our business, financial condition and results of operations.  Currently, our regulator is the National Communications Commission, or the NCC, which was formed on March 1, 2006 in  accordance with the National Communications Commission Organization Law, or the NCC Organization Law, which was intended to  transfer regulatory authority over the Taiwan telecommunications industry from the Ministry of Transportation and Communications  and the Directorate General of Telecommunications to the National Communications Commission.  We have been designated by the government as a dominant provider of fixed communications and mobile services within the  meaning of applicable telecommunications regulations, and as a result, we are subject to special additional requirements imposed by  the National Communications Commission. For example, the regulation governing the setting and changing of tariffs allows non- dominant telecommunications service providers greater freedom to set and change tariffs within the range set by the government. If  we are unable to respond effectively to tariff changes by our competitors, then our competitiveness, market position and profitability  will be materially and adversely affected. According to the Fixed Network Regulations, we are still required to submit a report  to the National Communications Commission within 20 days after our shareholders approves the entering into, modification or  termination of any contracts regarding leasing of all business, outsourcing of operations or joint operations, the transfer of the whole  or substantial part of our business or assets; taking over of the whole of the business or assets of any other company which would  have significant impact on our operations. The National Communications Commission also amended the Wireless Regulations and  the Third Generation Mobile Telecommunications on April 3, 2009 to impose a similar requirement requiring us to submit a report  within 20 days after our shareholders approves one of the above matters or our capital reduction. 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.  Under the Statute of Chunghwa Telecom Co., Ltd., the Ministry of Transportation and Communications has the authority to regulate  aspects of our business. Any such regulation could be burdensome or conflict with regulations of the National Communications  Commission or may otherwise adversely affect our business, financial condition and results of operations. The regulatory framework  within which we operate may limit our flexibility to respond to market conditions, competition or changes in our cost structure. In  7 Extensive regulation of our industry may limit our flexibility to respond to market conditions and competition, and our business  may suffer.  As an internet service provider, we may not be able to protect our customers and their information from cyber attacks, nor protect  our services from disruptions due to cyber security breaches. Since we also provide value-added services via the internet, we may  also be subject to administrative penalties due to our failure to protect public interest from harmful content on the internet. P AR T I