P AR T I 49 We are a company limited by shares and incorporated under the Republic of China Company Act 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,  See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital Expenditures” for  a discussion of our capital expenditures.  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.  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.  On September 30, 2008, the Taiwan Kaohsiung Administrative High Court ruled that we are required to pay NT$428 million  in land usage fees to the Kaohsiung City Government. During the three month period ending December 31, 2009, we recognized the  maximum possible amount of NT$428 million in connection with this litigation as an expense under operating costs. On June 22,  2010, the Supreme Administrative Court judged that we should pay the land usage fees to the Kaohsiung City Government, and we  have made the payment accordingly. A portion of the land used by us during the period between July 1, 1996 and December 31, 2004 was jointly owned by us  and Chunghwa Post Co., Ltd., Directorate General of Postal Service. In accordance with the claims process in Taiwan, on July 12,  2005, the Taiwan Taipei District Court sent a claim notice to us requiring us to reimburse Chunghwa Post Co., Ltd. in the amount of  NT$768.0 million for land usage compensation due to the portion of land usage area in excess of our ownership, along with interest  calculated at 5% interest rate from June 30, 2005 to the payment date. However, we believe that both parties have the right to use  co-managed land without consideration and thus Chunghwa Post Co., Ltd. does not have the right to request land compensation  payments. Furthermore, we also believe that the computation used to derive the land usage compensation amount is inaccurate  because most of the compensation amount has expired as a result of the expiration clause. On March 30, 2009, the Taiwan Taipei  District Court rendered its judgment that we only need to pay approximately NT$17 million (US$0.5 million), along with interest  calculated at 5% per annum from July 23, 2005, and 4% of Chunghwa Post Co., Ltd.’s court fees as compensation. Chunghwa Post  Co., Ltd. appealed to the Taiwan High Court on April 22, 2009. We also filed an appeal to the Taiwan High Court within the statutory  period. On April 7, 2010, the Taiwan High Court rendered its judgment, ruling that we need to pay approximately NT$23 million  (US$0.7 million), in addition to the approximately NT$17 million from the Taiwan Taipei District Court judgment, along with  interest calculated at 5% per annum from July 23, 2005, and 12.5% of Chunghwa Post Co., Ltd.’s court fees from its original suit and  subsequent appeal as compensation. We filed an appeal with the Supreme Court on April 22, 2010 and the Supreme Court reversed  and remanded the judgment for a new trial at Taiwan High Court in June 2011. On January 6, 2012, the Taiwan High Court ruled  that we need to pay NT$4 million (US$0.1 million) to Chunghwa Post Co., Ltd., in addition to the amount as demanded by court in  the Taipei District Court judgment, along with interest calculated at 5% per annum from July 23, 2005. After further evaluation, we  decided not to appeal the judgment. Currently, we offer two types of employee retirement plans—our defined contributions plan and defined benefits plan—which  are administered in accordance with the Republic of China Labor Standards Act and the Republic of China Labor Pension Act.  Our Pension Plans  Legal Proceedings  Capital Expenditures  Enforceability of Judgments in Taiwan 