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exchange rates, in New Taiwan dollar per U.S. dollar. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this annual report or will use in the preparation of our periodic reports or any other information to be provided to you. 

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Source: Federal Reserve Statistical Release, Board of Governors of the Federal Reserve System. (1) Annual averages are calculated using the average of exchange rates on the last day of each month during the period. Monthly averages are calculated using the average of the daily rates during the relevant period. 

## B. Capitalization and Indebtedness 

Not applicable. 

## C. Reasons for the Offer and Use of Proceeds 

Not applicable. 

## D. Risk Factors 

Our business and operations are subject to various risks, many of which are beyond our control. If any of the risks described below actually occurs, our business, financial condition or results of operations could be seriously harmed. 

## Risks Relating to Our Company and the Taiwan Telecommunications Industry 

## Extensive regulation of our industry may limit our flexibility to respond to market conditions and competition, and our business may suffer. 

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, 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 

