P AR T I Relations between the Republic of China and the PRC and other factors affecting military, political or economic conditions in Taiwan  could materially and adversely affect our financial condition and results of operations, as well as the market price and the liquidity  of our securities. In addition, the complexities of the relationship between the R.O.C. and PRC require companies involved in cross- strait business operations to carefully monitor its actions and manage its relationships with both R.O.C. and PRC governments. In  the past, companies in the R.O.C., including us, have received minor sanctions such as travel restrictions or minor monetary fines by  the R.O.C. and/or PRC governments. We cannot assure you that we will be able to successfully manage our relationships with the  R.O.C. and PRC governments for our cross-strait business operations, which could have an adverse effect on our ability to expand  our business and conduct cross-strait business operations. Any future outbreak of contagious diseases, such as severe acute respiratory syndrome or avian influenza, may disrupt our  ability to adequately staff our business and may generally disrupt our operations. If any of our employees is suspected of having  contracted any contagious disease, we may under certain circumstances be required to quarantine such employees and the affected  areas of our premises. As a result, we may have to temporarily suspend part or all of our operations. Furthermore, any future outbreak  may restrict the level of economic activity in affected regions, including Taiwan, which may adversely affect our business and  prospects. As a result, we cannot assure you that any future outbreak of contagious diseases would not have a material adverse effect  on our financial condition and results of operations.  Our corporate affairs are governed by our articles of incorporation, the Telecommunications Act, and by the laws governing  corporations incorporated in the Republic of China. In addition, our corporate affairs may remain governed by the Statute of  Chunghwa Telecom Co., Ltd. See “—Extensive regulation of our industry may limit our flexibility to respond to market conditions  and competition, and our business may suffer.” The rights of stockholders and the responsibilities of management and the members of  the board of directors of Taiwan companies are different from those applicable to a corporation incorporated in the United States. For  example, controlling or major stockholders of Taiwan companies do not owe fiduciary duties to minority stockholders. As a result,  holders of our common shares and ADSs may have more difficulty in protecting their interests in connection with actions taken by  our management or members of our board of directors than they would as public stockholders of a United States corporation.  The government may continue to sell our common shares. Sales of substantial amounts of ADSs or common shares by the  government or any other stockholder in the public market, or the perception that future sales may occur, could depress the prevailing  market price of our ADSs and common shares.  Our common shares are traded on the Taiwan Stock Exchange, which has a smaller market capitalization and is more volatile  than the securities markets in the United States and many European countries. The market value of our ADSs may fluctuate in  response to the fluctuation of the trading price of our common shares on the Taiwan Stock Exchange. The Taiwan Stock Exchange  has experienced substantial fluctuations in the prices and trading volumes of listed securities, and there are currently limits on the  range of daily price movements. In recent years, the Taiwan Stock Exchange Index reached a peak of 10,202.20 in February 2000  and subsequently fell to a low of 3,446.26 in October 2001. During 2011, the Taiwan Stock Exchange Index peaked at 9,145.35 on  Any future outbreak of contagious diseases may materially and adversely affect our business and operations, as well as our  financial condition and results of operations.  Stockholders may have more difficulty protecting their interests under the laws of the Republic of China than they would under  the laws of the United States.  Risks Relating to Ownership of Our ADSs and Common Shares  The value of your investment may be reduced by future sales of our ADSs or common shares by us, by the Republic of China  government or by other stockholders.  The market value of your investment may fluctuate due to the volatility of, and government intervention in, the Taiwan securities  market.  14