Stock Code: 2633 2020 ANNUAL REPORT Published on April 26, 2021. THSRC Milestones Date of Incorporation: May 1998 Construction Stage: March 2000 – December 2006 Operation Stage: Started in January 2007 Capitalization: NT$56.28 billion Key Operating Statistics for 2020 Number of Train Services: 53,076 Punctuality (defined as arrival within five minutes of scheduled time): 99.71% Annual Ridership: 57.24 million passengers Annual Revenues: NT$39.14 billion Loading Factor: 56.94% Passenger Kilometers: 9,912 million km Total Route Length: 350 km Number of Cities/Counties Passed Through: 11 Maximum Operating Speed: 300 km/hr Number of Seats Per Train: 989 (923 in standard and 66 in business class carriages) Stations in Service: 12 (Nangang, Taipei, Banqiao, Taoyuan, Hsinchu, Miaoli, Taichung, Changhua, Yunlin, Chiayi, Tainan, and Zuoying) Maintenance Depots in Service: 5 (Liujia/Hsinchu, Wuri/Taichung, Taibao/Chiayi, Zuoying/Kaohsiung, and Yanchao Main Workshop/Kaohsiung) Note: Passenger-kilometers Loading Factor = x100% Seat-kilometers Passenger-Kilometers = Sum of the mileage traveled by each passenger Seat-Kilometers = ∑ (Number of seats per trainset x sum of the mileage of trains operated in revenue service) 0011 Table of Contents One Letter to Shareholders 004 Replacement of CPA 143 Business Report for 2020 006 Information on Employment of Corporation Business Plan for 2021 010 Chairman, President, or Financial Manager at CPA Firms or Affiliated Businesses Within Two Company Profile 013 Past Year 143 Business Strategy and Vision 014 Information on Share Transfers and Pledge Changes 143 Historical Milestones 016 Information Disclosing the Spouse, Kinship Three Corporate Structure 020 within the Second Degree, and Relationship between any of the Top Ten Shareholders 144 Organizational Structure 022 Shareholding of Single Invested Companies Board of Directors 028 Held by Company Insiders 145 Management Team 040 Five Financing Information 146 Remuneration to Directors and Department Capital and Shares Information 148 Heads 044 Information on Corporate Debt 153 Human Resources 053 Information on Preferred Stock 154 Four Corporate Governance 058 Information on Global Depository Receipts 154 Corporate Governance Status 059 Information on Employee Stock Options 154 Implementation Status of Internal Control System 135 Information on New Restricted Employee Shares 154 Important Governance Information for 2020 and as of Publication Date of This Annual New Shares Issuance in Connection with Report 136 Mergers and Acquisitions 154 Information on CPA Professional Fees 142 Implementation of Capital Utilization Plans 154 002 Six Operational Overview 155 Financial Statements and Independent Operations Scope and Review of Current Auditors' Report in the Most Recent Year 209 Operations 156 Financial Difficulties of the Corporation and Industrial Overview & Development 165 its Affiliates, if Any, and Impacts on the Corporation Financial Status 277 Analysis of Macroeconomic Environments 171 Review of Financial Conditions, Financial Long and Short-Term Business Development Performance, and Risk Management 277 Plans 171 Analysis of Risk Management 279 Important Contracts 174 Other Important Disclosure Items 291 Status of Technological Research and Development 176 Nine Special Disclosures 296 Information on Affiliated Businesses 297 Seven Value Propositions 179 Information on Private Placement Securities 297 Establishing a Sustainable Environment 180 Information on Shares Held or Sold by Quality Services 184 Subsidiaries 298 Friendly Work Environment 187 Other Supplementary Information Required 298 Mutually Beneficial Society 193 Major Impacts to Shareholder Equity or Share Effectiveness of Corporate Governance System 200 Prices Due to Events Described in Article 36, Paragraph 3, Item 2 of the Securities and Eight Financial Overview 202 Exchange Act 298 Five-Year Financial Summary 203 Five-Year Financial Analysis 205 Audit Committee's Review Report for Most Recent Financial Statement 207 003 Letter to Sareolders Letter to Shareholders 0041 005 Letter to Sareolders Chairman Business Report and Future Prospects Taiwan High Speed Rail Corporation (THSRC) has been in commercial operation since 2007. Over the years, HSR has become the transportation backbone of Taiwan's western corridor. Passenger volumes have continued to increase year over year, but total ridership decreased in 2020 due to the impacts of the COVID-19 pandemic. Shortly after the outbreak of the global pandemic and tightening of domestic border controls, we implemented various preventive measures to ensure the safety and well-being of our customers and employees during this extraordinary period. We continue to deliver on our commitment to provide excellent service, comfortable travel, and customer satisfaction, adhering to the principle of "To be the platform for advancement and enjoyment" for every action we take. 1. Business Report for 2020 (1) Operational Performance 1) Rail Operations In 2020, THSRC celebrated its 14th year of operations. Due to the COVID-19 pandemic, a total of 53,076 train services were provided during the course of the year, a decrease of 651 train services compared to 53,727 trains in 2019. Daily maximum train services reached 166 north- and south-bound trains and this number was increased to 210 train services per day during consecutive holidays to successfully fulfill passengers' needs. Our loading factor was 56.94% (down by 11.09% compared to 68.03% in 2019) and passenger volume decreased to 57.24 million, down by 10.17 million (15.09%) compared to 67.41 million in 2019. Our total passenger-kilometers were 9,912 million km, down by 17.36% compared to 11,994 million km in 2019. Average daily ridership was 156 thousand passengers, a decrease of 29 thousand passengers compared to 185 thousand passengers in 2019. 006 President In terms of operational safety, no accidents or injuries occurred in 2020. Our average punctuality rate (arrival within five minutes of scheduled time) was 99.71%, higher than our target of 99.50%, and our average reliability rate (excluding delays due to force majeure) was 100%, exceeding our target of 99.60%. Operational Statistics Indicators 2019 2020 Change 1.Train Services 53,727 53,076 -1.21% 2.Ridership (in millions) 6,741 5,724 -15.09% 3.Seat-Kilometers (in millions) 17,630 17,407 -1.26% 4.Passenger-Kilometers (in millions) 11,994 9,912 -17.36% 5.Punctuality Rate (as % of trains arriving within five minutes of scheduled time) 99.88% 99.71% -0.17% 6.Loading Factor (Passenger-km/Seat-km) 68.03% 56.94% -11.09% 2) Marketing and Passenger Services Products, services, and activities launched in 2020: A. THSRC has implemented the following preventive measures since January in response to the COVID-19 pandemic: (a) Required passengers to wear masks and measure body temperatures at HSR stations. (b) Enhanced cleaning and disinfection measures on trains and at HSR stations. 007 Letter to Sareolders (c) Implemented "Social Distancing Seating" measures for ticket bookings and seat allocations. (d) Adjusted train schedules in response to the pandemic and required seat reservations for all holiday train runs to reduce risk of infection. (e) Adjusted regulations regarding eating and drinking on trains according to epidemic conditions and required passengers to wear face masks at all times, except when eating or drinking in train compartments. B. In response to the government's anti-epidemic campaigns, THSRC launched a series of promotions based on diverse needs to satisfy different customer segments, e.g. free coupon with T Holiday package, 40% discount on hotel packages, 35% discount on travel packages, 35% discount on period tickets, and discounts for college students, to increase ridership and achieve revenue targets. C. Introduced Artificial Intelligent Customer Service (AICS) to provide passengers with a faster and more direct communication channel. D. Added CCTV surveillance systems and luggage placement areas in train compartments to ensure travel safety and quality. E. Installed new Passenger Information Display System (PIDS) at Banqiao, Taoyuan, and Hsinchu HSR stations to provide passengers with better information. The remaining original eight HSR stations will gradually be upgraded with the new system. F. Installed new elevators at Taoyuan HSR station to improve service quality, and a new elevator at Banqiao HSR station is scheduled to commence operations in 2021. (2) Budget Implementation In 2020, our estimated operating revenue was NT$48.03 billion, but actual operating revenue was NT$39.14 billion due to the impact of the COVID-19 pandemic. Our budget achievement rate was 81.5% and our actual net income was NT$5.84 billion. (3) Revenue, Expenditure, and Profitability Analysis In 2020, our revenue was NT$39.14 billion and income before tax was NT$5.42 billion, down by 17.6% and 30.3% compared to 2019 due to the impact of COVID-19 pandemic. Net income reached NT$5.84 billion due to the recognition of income tax benefits. While the global pandemic in 2020 had its effects on daily life in Taiwan, normalcy resumed during the second half of the year after the domestic epidemic was properly controlled, and THSRC ridership and revenue has steadily increased since June 2020. Apart from maintaining punctuality and service quality, THSRC also continues to provide passengers with heartwarming and safe travel experiences while working to minimizing pandemic impacts on operations. Financial Data Unit: NT$ in billions Indicators 2019 2020 Operating