23. STOCKHOLDERS’ EQUITY  Under Chunghwa’s Articles of Incorporation, Chunghwa’s authorized capital is NT$120,000 million, which  is divided into 12,000,000 thousand common shares (at $10 par value per share). The stockholders, at the  stockholders’ meeting held on June 18, 2010 resolved to reduce the amount of capital in Chunghwa by a  cash distribution to its stockholders. The board of directors of Chunghwa further authorized the chairman of  board of directors of Chunghwa to designate the record date of capital reduction as of October 26, 2010 and  the stock transfer date of capital reduction as of January 15, 2011. The common stock capital of Chunghwa is  NT$77,574 million as of December 31, 2010.  On March 28, 2006, the board of directors approved the issuance of the 2 preferred shares, and the  MOTC purchased the 2 preferred shares at par value on April 4, 2006. In accordance with the Articles of  Incorporation of Chunghwa, the preferred shares would be redeemed by Chunghwa three years from the date  of issuance at their par value. These preferred shares expired on April 4, 2009 and were redeemed on April 6,  2009.  For the purpose of privatizing Chunghwa, the MOTC sold 1,109,750 thousand common shares of Chunghwa  in an international offering of securities in the form of American Depositary Shares (“ADS”) amounting  to 110,975 thousand units (one ADS represents ten common shares) on the New York Stock Exchange  on July 17, 2003. Afterwards, the MOTC sold 1,350,682 thousand common shares in the form of ADS  amounting to 135,068 thousand units on August 10, 2005. Subsequently, the MOTC and Taiwan Mobile Co.,  Ltd. sold 505,389 thousand and 58,959 thousand common shares of Chunghwa, respectively, in the form of  ADS totally amounting to 56,435 thousand units on September 29, 2006. The MOTC and Taiwan Mobile  Co., Ltd. have sold 3,024,780 thousand common shares in the form of ADS amounting to 302,478 thousand  units. As of December 31, 2010, the outstanding ADSs representing 892,783 thousand common shares,  which equaled approximately 89,278 thousand units and represented 9.21% of Chunghwa’s total outstanding  common shares.  The ADS holders generally have the same rights and obligations as other common stockholders, subject  to the provision of relevant laws. The exercise of such rights and obligations shall comply with the related  regulations and deposit agreement, which stipulate, among other things, that ADS holders can, through  deposit agents:  Under the ROC Company Law, additional paid-in capital may only be utilized to offset deficits. For those  companies having no deficits, additional paid-in capital arising from capital surplus can be used to increase  capital stock and distribute to stockholders in proportion to their ownership at the ex-dividend date. Also,  such amounts can only be declared as a stock dividend by Chunghwa at an amount calculated in accordance  with the provisions of existing regulations. The combined amount of any portions capitalized each year may  not exceed 10 percent of common stock issued. However, where a company undergoes an organizational  change (such as a merger, acquisition, or reorganization) that results in the capitalization of undistributed  earnings after the organizational change, the above restriction does not apply.  In addition, before distributing a dividend or making any other distribution to stockholders, Chunghwa must  pay all outstanding taxes, recover any past losses and set aside a legal reserve equal to 10% of its net income,  and depending on its business needs or requirements, may also set aside a special reserve. In accordance with  the Articles of Incorporation, no less than 50% of the remaining earnings comprising remaining balance of  net income, if any, plus cumulative undistributed earnings shall be distributed in the following order: (a) from  2% to 5% of distributable earnings shall be distributed to employees as employee bonus; (b) no more than  0.2% of distributable earnings shall be distributed to board of directors and supervisors as remuneration;  and (c) cash dividends to be distributed shall not be less than 50% of the total amount of dividends to be  distributed. If cash dividends to be distributed is less than NT$0.10 per share, such cash dividend shall be  distributed in the form of common shares.  a. Exercise their voting rights,  b. Sell their ADSs, and  c. Receive dividends declared and subscribe to the issuance of new shares.  F-39