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Fact Sheet THSRC Milestones Commencement Date: May 1998 Construction Stage: March 2000–December 2006 Operation Stage: Started in January 2007 Capitalization: NT$105.3 billion Summary Results for 2011: Train Services: 48,553 train services Punctuality Rate (defined as departure within 5 minutes of scheduled time): 99.86% Annual Ridership: 41.63 million passengers Annual Revenue: NT$32.24 billion Loading Factor: 51.63% Passenger Kilometers: 8.15 billion km Total Route Length: 345 km Number of Cities/Counties Passed Through: 11 cities/counties Maximum Operating Speed: 300 km/hr Number of Seats Per Train: 989 seats (923 seats in standard and 66 in business class carriages) Stations in Service: 8 (Taipei, Banqiao, Taoyuan, Hsinchu, Taichung, Chiayi, Tainan and Zuoying) Maintenance Depots in Service: 5 (Hsinchu Lioujia, Taichung Wurih, Chiayi Taibao, Kaohsiung Zuoying and Kaohsiung Yanchao Main Workshop) Note: Loading Factor=Passenger Kilometers/Seat Kilometers x100% Passenger Kilometers = ∑ (sum of the mileage traveled by passengers based on the tickets purchased and used on trains) Seat Kilometers = ∑ (number of seats per trrainset * sum of the mileage of trains operated in revenue service) Table of Contents 02 Chairman’s Letter to Shareholders 05 Overview Company Profile 06 Company History 09 12 Our Business Five Years in Review 13 Results of Operations 14 Looking Ahead 18 19 Corporate Governance Corporate Governance Overview 20 Internal Control 27 Major Stockholders who are Related Parties in Compliance with the Statement of Financial Accounting Standard No. 6 28 30 Corporate Activities Public Relations 31 Corporate Social Responsibility (CSR) 33 36 Financial Report Financial Highlights 37 Financial Statements 40 CHAIRMAN’S LETTER to SHAREHOLDERS Dear Fellow Shareholders, 2011 marked a turning point for THSRC. We achieved We've brought to Taiwan a profitability for the first time in our company’s history with a net income of NT$ 5.78 billion. From the time New Way of we commenced construction of THSR in 2000, and since LIFE starting commercial operations in 2007, we have been able to overcome many challenges along the way, thanks to the efforts of our Board members, our management team, and our dedicated employees. Additionally, we appreciate the assistance from the Government, our most important build–operate– transfer (BOT) project partner, whose support has been integral to our growth. Finally, we are profoundly grateful to our shareholders, who have shown us incredible loyalty and support over the years. We remain dedicated to fulfilling our mission of enhancing people’s lives by offering a rail transport experience that is safe, reliable, and dependable, and with the continued support of our shareholders, we will succeed. 2011 Results Since starting operations on the rail line in January 2007, we have carried over 150 million passengers. Last year marked our fifth operational anniversary, and THSRC continued its efforts to increase patronage despite the challenges posed by the economic slowdown. During 2011, our passenger volume rose to 41.63 million, we provided a total of 48,553 train services, and our loading factor was 51.63%, an increase of 2.66 percentage points compared to 48.97% in 2010. Even with this increase in passenger volume, we managed to achieve a punctuality rate of 99.86% and a reliability rate of 100%. Chin-Der Ou Chairman 02 THSRC Annual Report 2011 CHAIRMAN’S LETTER TO SHAREHOLDERS Looking Forward We are proud of our zero accident record over the past year Based on our solid track record over the past five years, high – no accidents or injuries to passengers or members of the speed rail has become the most important transportation public on railway premises were caused by train service system along Taiwan’s western corridor, and THSR has operations or malfunctions of station equipment. boosted overall economic activity in Taiwan and improved the daily lives of its residents. We also made strong progress in marketing and sales with the launches of several promotional programs, including Looking toward the next 5 years, THSRC will not only Early Bird ticketing, discounts for college students, provide safe and reliable train services, but will also practice upgraded service to business class, and vacation packages corporate social responsibility to support the economic and and deals under our T Holiday program. Furthermore, social development of Taiwan. we provided multiple channels for ticket purchasing, In the course of our own future development, we will including at convenience stores, via mobile phone, and continue to prioritize safety measures, enhance sales and using EasyCard, a contactless smartcard. We maximized marketing, streamline customer service, and improve accessibility to our HSR stations by providing free shuttle ticketing, station, on-board, and transfer services. bus services to and from downtown areas. Additionally, we will continue to invest in new trainsets and Our financial performance also improved significantly from build new stations to capture market share growth. Finally, the prior year. We posted revenues of NT$32.24 billion, a we will work to implement sound management practices 16.65% increase from 2010. With the inclusion of NT$2.59 and enhance our overall financial health, help employees billion of income tax benefits, we earned a net profit for expand their skill sets, cooperate with other high-speed rail the first time of NT$5.78 billion, with earnings per share operators around the world to strengthen our technology of NT$0.59. EBITDA reached NT$22.73 billion, a 22.34% and management know-how, and engage in property and increase over 2010. business development in the areas surrounding our stations to better coordinate and integrate every facet of our high- Based on the figures above, we demonstrated broad-based speed rail operations. growth and improvement across our entire operation, from transport volume and passenger revenue to cost control In order to enable the long-term development of THSRC, and operational efficiency. We are currently studying the feasibility of calling on the Government to extend our 35-year concession to operate Research & Development Taiwan’s high-speed rail system. We hope to have the For the stability and safety of our railway operation and to opportunity to continue to provide maximum benefits help develop the railway industry in Taiwan, we work to for shareholders and for the general public for many build up our maintenance capability and reduce the cost years to come. and delivery risk of spare parts. To meet these objectives, we seek out local suppliers for spare parts, develop and operate a bridge structure diagnosis and management system, and strengthen the capability of electronic devices repair factory. Chin-Der Ou Chairman THSRC Annual Report 2011 03 O VERVIEW 04 THSRC Annual Report 2011 Speeding through Taiwan's western corridor, our rail network conveniently connects millions of travelers across 11 cities and counties, bringing profound changes to people's lives and their communities. THSRC Annual Report 2011 05 Company Profile Business Segments THSRC's business scope covers the operation of the high-speed railway and affiliated businesses, as well as station area development. A. High-Speed Rail Service C. Station Area Development THSRC provides high-speed rail services to each of the There are five station area developments, located in major cities along Taiwan’s western corridor via eight Taoyuan, Hsinchu, Taichung, Chiayi, and Tainan. The stations: Taipei, Banqiao, Taoyuan, Hsinchu, Taichung, total area of all station area developments is 30.14 Chiayi, Tainan and Zuoying. A total of 48,553 train hectares, with a floor area of 1,200,380 2m , which can services were delivered in 2011 with traffic volume be used for an array of commercial purposes, including amounting to as many as 175 services each day. hotels and restaurants, convention and exhibition Offering speed, convenience and dependability, THSRC space, recreation and amusement venues, office space, has become the transport of choice for residents and retail facilities, and space for financial services, general travelers alike. services, telecommunication services, transportation services, and tourism-related services. B. Affiliated Businesses THSRC will work to enhance station area development To serve the needs of the traveling public, at high-speed in support of the government’s policy of economic rail stations, we have deployed various commercial development, and we will align our development outlets that supply goods and services, including food, efforts with the needs of local communities and market beverages, newspapers and other reading materials, conditions in order to maximize profit. souvenirs, car rental and travel agency services, and car The main objectives of station area development are as parking facilities. follows: • Execute and coordinate the Station Area Development Advertising, both at station sites and on board trains, Agreement. makes a significant contribution to THSRC revenue, • Initiate the overall development planning and offering passengers within the rail system a unique strategy for station area development. brand of distinctive artwork and information. • Evaluate different business models for station area All these commercial outlets and facilities are designed development, such as investing and building for to add value to passengers' high-speed rail experience operation by THSRC, other developers, joint venture and demonstrate THSRC's