THSRC - Annual Report 2020 | FinancialReports.eu

Stock Code: 2633

2 0 2 0 ANNUAL R E P O R T

==> picture [415 x 184] intentionally omitted <==

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,

Note:

Loading Factor = Passenger-kilometers 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)

==> picture [470 x 36] intentionally omitted <==

00 1

One	Letter to Shareholders	004
	Business Report for 2020	006
	Business Plan for 2021	010
Two	Company Profle	013
	Business Strategy and Vision	014
	Historical Milestones	016
Three	Corporate Structure	020
	Organizational Structure	022
	Board of Directors	028
	Management Team	040
	Remuneration to Directors and Department
	Heads	044
	Human Resources	053
Four	Corporate Governance	058
	Corporate Governance Status	059
	Implementation Status of Internal Control
	System	135
	Important Governance Information for 2020
	and as of Publication Date of This Annual
	Report	136
	Information on CPA Professional Fees	142

	Replacement of CPA	143
	Information on Employment of Corporation
	Chairman, President, or Financial Manager
	at CPA Firms or Affliated Businesses Within
	Past Year	143
	Information on Share Transfers and Pledge
	Changes	143
	Information Disclosing the Spouse, Kinship
	within the Second Degree, and Relationship
	between any of the Top Ten Shareholders	144
	Shareholding of Single Invested Companies
	Held by Company Insiders	145
Five	Financing Information	146
	Capital and Shares Information	148
	Information on Corporate Debt	153
	Information on Preferred Stock	154
	Information on Global Depository Receipts	154
	Information on Employee Stock Options	154
	Information on New Restricted Employee
	Shares	154
	New Shares Issuance in Connection with
	Mergers and Acquisitions	154
	Implementation of Capital Utilization Plans	154

002

Six	Operational Overview	155
	Operations Scope and Review of Current
	Operations	156
	Industrial Overview & Development	165
	Analysis of Macroeconomic Environments	171
	Long and Short-Term Business Development
	Plans	171
	Important Contracts	174
	Status of Technological Research and
	Development	176
Seven	Value Propositions	179
	Establishing a Sustainable Environment	180
	Quality Services	184
	Friendly Work Environment	187
	Mutually Benefcial Society	193
	Effectiveness of Corporate Governance System	200
Eight	Financial Overview	202
	Five-Year Financial Summary	203
	Five-Year Financial Analysis	205
	Audit Committee's Review Report for Most
	Recent Financial Statement	207

	Financial Statements and Independent
	Auditors' Report in the Most Recent Year	209
	Financial Diffculties of the Corporation and
	its Affliates, if Any, and Impacts on the
	Corporation Financial Status	277
	Review of Financial Conditions, Financial
	Performance, and Risk Management	277
	Analysis of Risk Management	279
	Other Important Disclosure Items	291
Nine	Special Disclosures	296
	Information on Affliated Businesses	297
	Information on Private Placement Securities	297
	Information on Shares Held or Sold by
	Subsidiaries	298
	Other Supplementary Information Required	298
	Major Impacts to Shareholder Equity or Share
	Prices Due to Events Described in Article 36,
	Paragraph 3, Item 2 of the Securities and
	Exchange Act	298

003

Letter to Shareholders

1 Letter to Shareholders

004

==> picture [596 x 619] intentionally omitted <==

005

Letter to Shareholders

==> picture [483 x 322] intentionally omitted <==

Chairman

==> picture [146 x 61] intentionally omitted <==

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

==> picture [484 x 321] intentionally omitted <==

President

==> picture [123 x 59] intentionally omitted <==

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

==> picture [483 x 121] intentionally omitted <==

----- Start of picture text -----

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%
----- End of picture text -----

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 Shareholders

(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

==> picture [483 x 121] intentionally omitted <==

----- Start of picture text -----

Indicators 2019 2020
Operating Revenue 47.51 39.14
Gross Profit 21.74 13.04
Operating Income 20.51 11.81
Income Before Income Tax 7.78 5.42
Income Tax Benefit 0.23 0.42
Net Income 8.01 5.84
----- End of picture text -----

(4) Research and Development

Main research and development activities in 2020 were as follows:

1) Civil Facilities:

A. Establishment of artificial intelligence drone service platform for HSR viaduct inspections.
B. Relevant research on seismic displacement after damper was placed on viaducts in the Tainan section.

008

2) Signaling and Communications:
A. Development of Intelligent Passenger Information System (PIS).
B. Development of Railway Turnout Monitoring System (TMS).
3) Rolling Stock:
A. Addition of CCTV surveillance system and luggage placement area in train compartments.
B. Establishment of bogie running surveillance test system.
4) Information Technology:
A. Development of Crew Utilization Plan System (CUPS).
B. Implementation of Artificial Intelligent Customer Service (AICS).
C. Replacement of L2 Switch for the station payment flow network Electronic Data Capture (EDC) system.
D. Optimized software architecture of Ticket Window Equipment.
5) Localization of Maintenance Materials and Equipment:

In order to expand localization of materials and equipment and to enhance development of the local railway industry, we have established a "Railway Industries Localization Project Team," and the following is a brief summary of our localization efforts:

A. Signaling and Communication

Mistake-proofing aluminum sheet for relay.

B. Rolling Stock
(a) Cooling fins for converter of the train air conditioning system.
(b) Vending machines on trains.
(c) Lavatory water heater system.
(d) Internal/external Passenger Information Display.
C. Track and Power Systems
(a) Automatic vibration measurement system for rolling stock.
(b) Substation B&C battery.
(c) 8R-N base plates & supplementary materials (including SMC-N insulated baseplate pad).
6) Electronic Service Center:

We established an electronic maintenance center in mid-2008 to reduce dependence on original manufacturers and to increase our maintenance capabilities. The number of repairs for circuit boards and components from all systems has increased year over year.

7) Industry-Academia Collaboration Projects: We continue to collaborate with major research institutions to develop the following materials and equipment:
A. Intelligent rail scooter (phase 2).
B. Rail lubricator instrument.
C. Analysis of aging OCS composite insulator and polluted mainline area.
D. Alternative wayside direct line telephone PCB.

009

Letter to Shareholders

E. Test system for tachogenerator motor of rolling stock.
F. Diesel locomotive.
G. Test system for lightning arrester of rolling stock.

2. Business Plan for 2021

(1) Management Guidelines

With 2021 filled with uncertainties due to the ongoing COVID-19 pandemic, we plan to integrate innovative technology and applications that increase operational and management efficiency to ensure our service quality. In addition, we also plan to increase train services during off-peak hours, improve convenience of ticketing services, and strengthen digital customer services to enhance revenue management.

We will continue to offer a series of promotions in accordance with policies set in 2020 and in response to border controls, collaborating with other industries to supply domestic travel packages that ensure our operational performance.

(2) Expected Sales Volumes

Due to steady domestic economic growth following the pandemic, increasing convenience of digital ticket purchase services, and promotion of membership services and travel products, we estimate that the annual ridership volume for 2021 will exceed 65.78 million passengers.

(3) Major Production and Marketing Initiatives

Major Initiatives for 2021:

1) Implementation of preventive measures to ensure passengers safety in response to the ongoing COVID-19 pandemic.
2) Facilitation of timely train service adjustments and adaptability of seating supply and demand, as well as improvement of revenue management efficiency to increase the output value of seats and fulfillment of revenue targets.
3) Development of diversified products based on diverse needs to satisfy different customer segments and promotions based on epidemic conditions to achieve sales potential, build the HSR tourism brand, and ensure fulfillment of revenue targets.
4) Promotion of the "Journey with THSR, Discover Taiwan" with brand through T Holidays and combo tickets for hotels, transportation, and events that increase sales and attract passengers.
5) Continued promotion of the TGo membership program to build TGo membership economy, encourage cross-industry cooperation, and increase ticket and non-ticket revenues.
6) We continue to enhance our ticketing services through our online-offline integration strategy, and work with different industries to increase ticket utilization and enhance ticketing convenience. Additionally, we continue to introduce innovative payment technologies and applications into our ticketing channels and are assessing the feasibility of mobile credit card transactions, travel cards, and cloudbased ticketing systems. In order to strengthen accessibility service for ticket purchase, we plan to add voice-activated functions on T Express to increase convenience of ticketing services.

010

3. Future strategies

THSRC's vision is "To be the platform for advancement and enjoyment," and we continue to implement the strategies of our 4T program: Transportation, Technology, Taiwan, and Touch:

(1) Transportation: To build professional transportation systems that provide high quality services and products.
1) To implement comprehensive safety and emergency measures.
2) To enhance operational equipment at stations, build friendly travel environments, increase customer service equipment, and enhance service quality.
3) To improve operational processes and ensure maximum train capabilities.
4) To improve revenue management efficiency, provide a variety of products, and increase ridership during off-peak hours.
5) To strengthen maintenance equipment (and self-maintenance capabilities), so as to ensure system stability and accountability.
(2) Technology: To implement intelligent transportation that improves operational efficiency and quality, and enhances service, safety, and emergency responses.
1) To digitalize ticketing channels.
2) To utilize big data in the promotion of our membership economy.
3) To implement information technology that strengthens operational, maintenance, and service quality to improve efficiency.
4) To research and enhance core system capabilities.
(3) Taiwan: To combine unique local cultures and landscapes to create a multicultural and progressive platform.
1) To enhance local development capabilities and increase the percentage of local equipment and materials.
2) To promote localization for the railway industry.
3) To develop multiple products that combine local culture and activities and enhance common prosperity.
4) To develop affiliated business and optimize quality.
5) To integrate technical railway resources and evaluate possibilities for re-investment or technical exportation.
(4) Touch: To establish brand culture, enhance talent skills and corporate efficiency, and participate in social caring and environmental protection.
1) To build talent development plans.
2) To enhance management capabilities of managers.
3) To combine the Corporation's brand with arts and culture, broadening our cultural scope and depth.
4) To optimize long term financial structure.
5) To build a corporate governance culture that serves as an example to all other businesses, and carry out corporate social responsibilities.
6) To promote environmental protection, energy efficiency, and carbon reduction goals.

011

Letter to Shareholders

4. Impacts of External Environment, Legal Environment, and Overall Business Environment

Domestic economic forecasts released by the Directorate-General of Budget, Accounting and Statistics, Executive Yuan on November 27, 2020, predict that Taiwan’s export capabilities will rise in 2021 due to increasing demand for technology applications, restructuring of global supply chains, and expansion of Taiwan’s production lines, as well as continuing development of competitively advantageous advanced manufacturing processes for semiconductors. In terms of private consumption, with the domestic epidemic properly controlled, the number of domestic consumers have increased and economic stimulus measures have been introduced. Therefore, we believe that growth in domestic consumption will offset negative impacts and the expected economic growth rate for 2021 is estimated to be 3.83%. Despite these changes in our external economic environment, we will continue to formulate suitable operational strategies to achieve our business targets.

In terms of the legal environment, 24 laws and regulations relating to our operating activities were amended this year, including several landmark actions, such as the "Special Act for Prevention, Relief and Revitalization Measures for Severe Pneumonia with Novel Pathogens," which was established in response to the COVID-19 pandemic. The "Railway Act" was amended to add an article stating that in case of serious operational accidents or delays, railway institutions shall notify the Taiwan Transportation Safety Board; moreover, railway institutions shall effectively train and administrate employees so that they possess railway expertise and abilities of safety operation, response to maintaining safety, and assistance in sanitation and disease prevention. These amendments indicate that our government and legislature are responding in a proper and timely manner to the public's deepening reliance on rail transport, and are highly focused on the operational scale, capability, and safety of railway transport.

THSRC regularly identifies applicable laws, organizes law compilations, and complies with relevant regulations where necessary. We have an effective grasp on and appropriate response measures to changes in legal environments. The aforementioned amendments had no significant impacts to our business operations. In future, as rail transportation networks continue to expand, we anticipate that legal measures will become more comprehensive and relevant laws will continue to be formulated. We will continue to stay abreast of legislative updates, refine our operations, strengthen our corporate governance, integrate legal compliance into our corporate culture, and adhere to the highest safety standards so as to provide high-quality passenger services as we strive for long-term sustainability and generate value for our shareholders.

Looking at overall operational conditions in 2021, THSRC is facing challenges from the COVID-19 pandemic, decreasing birth rates, and aging populations, which are slowing passenger growth. In addition, challenges such as abnormal climate changes and aging operation equipment are causing maintenance costs to increase.

We will continue to focus on developing smart transportation, increasing safety and efficiencies of emergency responses, establishing local maintenance capabilities, developing localization materials, and formulating other strategic plans. Additionally, we will continue to enhance our strengths through industry cooperation and integrate local cultures to provide our passengers with better and safety transportation quality and establish a foundation for long-term sustainability. With 4T-Transportation, Technology, Taiwan, and Touch as our core strategy, we not only promise to provide a safe, comfortable, and convenient journey, but also strive to realize our vision "To be the platform for advancement and enjoyment."

012

==> picture [596 x 619] intentionally omitted <==

2 Company Profile

013

Company Profile

1. Business Strategy and Vision

In order to become the symbol of Taiwan progress, THSRC has set its vision, mission, and core values to carry out the commitment to the society, shareholders, customers, partners, and our employees, as the highest guiding principles for implementation.

Our Vision & Mission--

"To be the platform for advancement and enjoyment"

THSRC is committed to provide convenient, comfortable and considerate service during the high speed rail journey, and strive to provide a pleasant customer experience.

THSRC not only provides passengers with safe, fast, and punctual transportation services, but also cooperates and builds alliances with external industries to enhance our railway capabilities. THSRC also strive to provide passengers with comprehensive, high-quality life experiences through integration of advanced technology, local culture, and environmental protection.

==> picture [483 x 403] intentionally omitted <==

014

Our Values

Discipline is the cornerstone of our work habits. Discipline binds individuals and teams to Discipline rigorous safety standards, and demands adherence to standardized processes and regulations when completing tasks.

Integrity means compliance with ethical, moral, professional, and corporate principles, Int ~~e~~ gr ~~i~~ ty courage to bear responsibilities and do the right thing, and displaying behaviors consistent with corporate values even when faced with pressures or challenges.

Efficiency

Efficiency means appropriate time management and resource utilization, using quick and flexible methods to complete tasks, and ensuring performance.

Innovation

Innovation means thinking outside the box, using new methods to solve problems, and generating value for both internal and external clients.

Sensibility

Sensibility starts with a humane approach, paired with rational thinking and communication, to bring warmth during interactions with others.

Our Attributes

Real

Progressive

We encourage all employees to be realistic in their approach to life, identifying that which is substantive when addressing the facts in each encounter with problems or adverse circumstances.

By taking a measured and progressive approach to achieving improvement in all our activities, we aim to meet customers' needs and provide a railway with worldclass standards.

Passionate

Premium

We are driven by a passionate desire to succeed in our goals of making each passenger experience memorable and encouraging public use of the high-speed rail.

In pursuing the highest standards of quality in all our activities and provision of rail services, we are determined to demonstrate true "Value for Money" for each highspeed rail journey.

015

Company Profile

2. Historical Milestones

Incorporated on May 11, 1998

==> picture [235 x 587] intentionally omitted <==

----- Start of picture text -----

Development Stage
November 1996 The Taiwan High Speed Rail Consortium was
established.
September 1997 The Ministry of Transportation and
Communications (MOTC) awarded the Taiwan High
Speed Rail Consortium with a concession to build
and operate THSR.
May 1998 THSRC was incorporated.
July 1998 THSRC and the MOTC signed the Taiwan North-
South High Speed Rail Construction and Operation
Agreement, the Taiwan North-South High Speed
Rail Station Zone Development Agreement, the
Memorandum on Government Commitment
Matters, and the Memorandum on Contract
Execution.
February 2000 THSRC entered into a syndicated loan agreement
with 25 banks in order to obtain credit facilities of
NT$323.3 billion. A tripartite agreement was signed
by THSRC, the syndicate, and the MOTC.
Construction Stage
March 2000 THSRC commenced construction of the high-speed
rail project.
December 2000 THSRC entered into the Core System Supply Contract
and the Core System Integration and Installation
Contract with Taiwan Shinkansen Corporation
and Taiwan Shinkansen International Engineering
Corporation.
April 2001 The Securities and Futures Bureau approved
THSRC's re-registration as a public company.
September 2003 THSRC applied to the Gre Tai Securities Market for
permission to trade on the Emerging Stock Market.
January 2004 THSRC held a ceremony to unveil the THSR 700T
trainset at Kawasaki's manufacturing facilities in
Kobe, Japan.
October 2005 A train to be delivered to THSRC achieved a top
speed of 315 km/hr on a test run.
July 2006 THSRC entered into a second syndicated loan
agreement with seven banks to secure credit
facilities of NT$40.7 billion.
October 2006 THSRC launched a new corporate identity system.
----- End of picture text -----

==> picture [235 x 664] intentionally omitted <==

----- Start of picture text -----

Operation Stage
January 2007 THSRC began operating the rail line between
Banqiao and Zuoying.
March 2007 THSRC officially commenced operations over its
entire line (Taipei to Kaohsiung), and the number
of daily train services was increased to 50 north-
and south-bound trains.
May 2007 Lehman Brothers Asia and the parties to the second
syndicated loan agreement agreed to raise credit
facilities to NT$65.5 billion.
September 2007 THSRC launched a 24-hour online reservation
system.
November 2007 THSRC began offering non-reserved seats on its
trains.
January 2010 THSRC entered into another syndicated loan
agreement with eight banks to secure NT$382
billion in credit facilities for refinancing its existing
two syndicated loans. THSRC, the syndicate, and
the MOTC also renewed their tripartite agreement.
February 2010 THSRC began allowing passengers to book, pay for,
and collect train tickets at partnering convenience
stores.
May 2010 THSRC drew down the facilities designated as
tranches A, B, and C of its new loan of NT$382
billion to repay the outstanding balance of its first
syndicated loan of NT$323.3 billion and tranches A,
B, and C of its second loan.
August 2010 The Taiwan North-South High Speed Rail Project
received the Outstanding Civil Engineering
Project Award from the Asian Civil Engineering
Coordination Council.
THSRC carried its 100 millionth passenger.
February 2011 THSRC topped an online poll conducted by the
Public Construction Commission, Executive Yuan,
which allowed the public to select Taiwan's most
important 100 public works.
October 2011 THSRC launched T Express, a new ticketing system
that enabled customers to book and purchase
tickets using their smartphones.
November 2011 THSRC's entrepreneurship achievements received
recognition from the Gre Tai Securities Market at
the 1st Golden Laurel Awards.
April 2012 THSRC and the International Union of Railways (UIC)
held the 2nd UIC World High Speed Interaction
Workshop to offer a global platform for exchanges
between experts and institutions in the area of
high-speed rail system maintenance.
----- End of picture text -----

016

==> picture [484 x 684] intentionally omitted <==

----- Start of picture text -----

July 2012 THSRC became an overall winner across all December 2015 Three new HSR stations in Miaoli, Changhua, and
categories at the 2012 Golden Service Awards Yunlin opened for traffic. THSRC also announced
hosted by CommonWealth Magazine. schedule adjustments in the same month.
November 2012 THSRC participated in the 14th UIC Regional Train fares were rolled back to the level they were
Assembly for Asia and Oceania and the 11th Asian before a hike was implemented.
Management Committee (AMC) in Moscow, and was March 2016 Shareholders, at an extraordinary general meeting,
recognized as a member of the AMC effective from approved plans formulated by the THSRC Board for
2013. an initial public offering (IPO).
Lloyd's Register Quality Assurance issued an April 2016 Changhua HSR Station was named a Popular Choice
ISO 9001 compliance certificate for THSRC's rail Winner by the Architizer A+ Awards in the Bus &
operation, maintenance, and passenger service. Train Station category.
All audited items conformed with ISO 9001 Quality THSRC won a Gold Award in the Transportation
Management System standards. category from CommonWealth Magazine's 2016
National Geographic editors selected one of Golden Service Awards.
THSRC's T Holiday packages as the Best Winter Trip May 2016 THSRC and the International High-Speed Railway
for 2013. Association (IHRA) held their 5th annual meeting in
January 2013 THSRC held groundbreaking ceremonies for new Taipei.
stations in Yunlin, Miaoli, and Changhua. July 2016 A new HSR station was opened in Nangang District
October 2013 THSRC raised passenger fares using a formula of Taipei City.
approved by the MOTC. The new Yunlin HSR station was awarded the Gold
November 2013 THSRC received the R.O.C. Enterprise Environmental Level Green Building Certificate by the MOI and
Protection Award from the Environmental received a green building placard.
Protection Administration for the third consecutive August 2016 The new Miaoli HSR station was awarded the
year. Diamond Level Green Building Certificate by the
December 2013 THSRC and the JR Kyushu Railway Company hosted MOI and received a green building placard.
a work practices exchange for train attendants to The new Changhua HSR station was awarded the
observe and learn different service cultures. Gold Level Green Building Certificate by the MOI
April 2014 THSRC won first place in the Ground Transportation and received a green building placard.
category of CommonWealth Magazine's Golden October 2016 THSRC received an ITS World Congress Hall of
Service Awards. Fame Award at the 2016 ITS World Congress in
May 2014 THSRC and the UIC jointly organized a series of Melbourne, Australia.
conferences that included the 6th UIC Asia-Pacific THSRC became the first listed rail operator in
Technical Directors Meeting, the 17th Asia-Pacific Taiwan to debut on the stock market of the Taiwan
Regional Assembly, and the 1st UIC Conference on Stock Exchange.
Natural Disaster Management of Railway Systems November 2016 THSRC received a Silver Award from the 2016
at Le Meridien Taipei. Enterprise Project Management Benchmarking
January 2015 THSRC received a carbon footprint certificate for Awards for its three new stations.
high-speed rail service from the Environmental January 2017 The THSR Museum was inaugurated at the
Protection Administration, Executive Yuan. Operation Management Center in Taoyuan City.
July 2015 THSRC and the MOTC entered into two agreements: THSRC hosted a signing ceremony marking the
the Fourth Supplement to Taiwan North-South High issuance of a NT$20-billion two-year commercial
Speed Rail Construction and Operation Agreement, paper managed by Mega Bills Finance Co. and nine
and the Termination of Taiwan North-South High other financial institutions.
Speed Rail Station Zone Development Agreement. April 2017 An E-Ticket Reader was established for multiple
September 2015 THSRC established a Muslim prayer room at ticket types.
Taichung HSR Station in order to better cater to the July 2017 Lloyd's Register Quality Assurance issued a TOSHMS
needs of Muslim passengers. and OHSAS 18001 dual compliance certificate to
THSRC; the certificate verified THSR stations, depots,
facilities along the line, and office environments.
----- End of picture text -----

017

Company Profile

==> picture [483 x 676] intentionally omitted <==

----- Start of picture text -----

August 2017 The iTaiwan free Wi-Fi network was made available March 2019 THSRC launched ticket pick-up services for senior/
along HSR line. disabled concession tickets on the mobile ticketing
THSRC hosted the "Business Opportunity Seminar app and from automatic ticketing machines.
for Taiwan Track Industry Localization" at Yanchao THSRC launched smart online ticketing services on
Main Workshop. Facebook Messenger.
October 2017 THSRC won the first Transportation Award of April 2019 THSRC participated in the 5th (2018) Corporate
Service hosted by Next Magazine. Governance Evaluations and again ranked among
THSRC launched the "TGo" and THSRC App. top 5% of listed companies.
November 2017 THSRC won Global Views Magazine's 15th Five-Star THSRC won the exclusive "FTSE4Good TIP Taiwan
Service Award. ESG Index" badge certification for financial
December 2017 THSRC won the Ministry of Culture's 13th Art & indicators.
Business Award. October 2019 THSRC participated in National Day Parade Float
May 2018 THSRC participated in the Corporate Governance for the first time with the theme of "Journey with
Evaluation for the first time and received a "Top THSR, Discover Taiwan."
5% of the 4th Corporate Governance Evaluation THSRC launched automatic inspection mechanism
Award." services for senior/disabled concession tickets,
June 2018 THSRC participated in the Taiwan Corporate allowing passengers to purchase tickets without
Governance Association's corporate governance documentation at convenience stores.
evaluations and received a CG6011 (2017) Corporate November 2019 THSRC won the "Technology Management Award
Governance System Assessment Certificate with an 2019" from the Chinese Society for Management of
"Excellent" ranking. Technology.
July 2018 THSRC carried its 500 millionth passenger. THSRC won the "14th Arts and Business Awards
(Permanent Awards Category)" from the Ministry of
August 2018 THSRC was listed in the MSCI Taiwan index, the
Culture.
FTSE TWSE Taiwan 50 Index, the FTSE Emerging
THSRC participated in the "2019 TCSA Awards" and
Markets Index, the TWSE CG 100 Index, and the
won the Gold "Corporate Sustainability Report
FTSE4Good Emerging Index.
Award" and the "Top 50 Corporate Sustainability
THSRC was awarded the 2018 "Corporate
Award" from the Taiwan Institute for Sustainable
Social Responsibility Excellence Award" by
Energy.
CommonWealth Magazine.
September 2018 THSRC received the German "Red Dot Award: January 2020 THSRC carried its 600 millionth passenger.
Communication Design 2018" for its T Express April 2020 THSRC was ranked the most desirable traditional
mobile ticket purchasing app. corporation for new graduates in yes123 Job
November 2018 THSRC obtained twAA+ and AA+ excellent credit Bank's "Career Development Plan for Graduates
rating from Taiwan Ratings and Fitch Ratings for and New Recruits for Corporations" survey for two
the third consecutive year. consecutive years.
THSRC tickets were redesigned for the first time. Received top 5% ranking in the Corporate
THSRC won three major awards at the "Taiwan Governance Evaluations hosted by TWSE for three
Corporate Sustainability Awards," namely the consecutive years, and was ranked in top 10%
Corporate Sustainability Report Transportation of publicly listed "non-financial or electronic
Industry Top 50 Platinum Award, Creativity in companies with market values of 10 billion and
Communication Award, and Growth through above" for two consecutive years.
Innovation Award. May 2020 "Road ~ Taiwan Express,"the first TV drama with
THSRC's rolling stock locomotive path confirmation Taiwan High Speed Rail construction and operation
system obtained international IEC61508 period as its backstory, was broadcast in Taiwan
certification. and Japan.
December 2018 THSRC won the "Critical Infrastructure and Security
Protection Practice Award" given by the British
Standards Institution (BSI) InfoSec Standards.
----- End of picture text -----

018

June 2020	THSRC was informed of inclusion in the Taiwan Sustainability Index and was awarded the "Taiwan Sustainability Index Label" by Taiwan Index, highlighting the Corporation's efforts in maintaining E (Environmental), S (Social), and G (Governance) sustainability.		January 2021	The Ministry of Transportation and Communications (MOTC) "Transport Data eXchange (TDX)" platform awarded THSRC with "Merit Award in Parking Category" and "Excellence Award in Rail/ Air Transport Category."

July 2020	THSRC was notifed of inclusion in the TWSE RA Taiwan Employment Creation 99 Index by Taiwan Index. Received "Excellent" certifcation under the Corporate Governance Evaluations hosted by the Taiwan Corporate Governance Association.
August 2020	Received "2020 Excellence in Industrial-Academic Cooperation Award" from the Chinese Institution of Engineers. THSRC "Occupational Health and Safety Management System" was accredited by the British Standards Institution (BSI) with "ISO 45001" standards and was certifed by the Taiwan Occupational Safety and Health Management System (TOSHMS).
September 2020	Participated in 1111 Job Bank's 2020 Most Touching Work Contribution Awards and took frst place in the "Transportation and Logistics Category."
October 2020	Won "Outstanding Enterprise Category" at the National Brand Yushan Awards.
November 2020	THSRC participated in the "2020 Taiwan Corporate Sustainability Awards (TCSA)" and won the "Top 10 Domestic Companies Sustainability Model Awards (Service Industry)" and the "Corporate Sustainability Report Awards" from the Taiwan Institute for Sustainable Energy (TAISE). THSRC introduced the AI Customer Service (AICS) to provide passengers and customer service staff with a faster and more direct communication channel.
December 2020	Obtained "ISO 14001:2015 Environmental Management System (EMS)" certifcation from the British Standards Institution (BSI). Continued to be selected as a constituent of the "FTSE4Good TIP Taiwan ESG Index." Won the 2020 Epidemic Prevention Award from Taiwan Immunization Vision and Strategy (TIVS). Obtained "ISO 27001 Information Security Management System (ISMS)" certifcation from the British Standards Institution (BSI).

019

Company Profile

Corporate Structure

020

==> picture [596 x 619] intentionally omitted <==

021

Corporate Structure

1. Organizational Structure

(1) Corporation Organizational Structure

==> picture [497 x 317] intentionally omitted <==

----- Start of picture text -----

Board of Directors
Corporate Governance & Shareholder Meeting
Nominating Committee
Board of Directors
A udit Committee
Chairman
Remu neration Committee
Secretariat Division of Board of
Directors
S pecial Committee
Corporate Audit Of f ice
President
President
S afety Committee
Operation Safety Office
Occupational Safety &
Health Committee Occupational Safety & Health
Office
Quality Assurance O f fice
Corporate Planning Office
----- End of picture text -----

022

==> picture [525 x 687] intentionally omitted <==

----- Start of picture text -----

Facility Engineering Dept.
Core Technology Development Dept.
Employee Service Dept.
Legal Office Recruiting & Staffing Dept.
Compensation & Benefit Dept.
Human Resource Division
Employment & Development Dept.
Administration
Learning & Development Dept.
Senior Vice President
Accounting Dept.
Finance Division
Finance Dept.
Contract Performance Management Dept.
Procurement Division
Procurement Dept.
Media Relation Dept.
Public Affairs Division Customer Relation Dept.
Public Relation Dept.
Automatic Fare Collection System Dept.
Information Technology Division Application System Dept.
System Operation Dept.
Business
Senior Vice President
Brand & Communication Dept.
Business Division A ffiliated Business Development Dept.
Transportation Business Development Dept.
Nationonwide Travel Strategy Development and
Promotion Dept.
Travel and Business Development
Travel Planning and Products Development Dept.
Division
Travel Digitalization and Planning Dept.
Operation Planning Dept.
Signaling & Communication Dept.
Maintenance Technical Support Dept.
Track & Power Dept.
Operation Maintenance Management
Senior Vice President Division
Rolling Stock Maintenance Dept.
Depot & Station Facility Dept.
Infrastructure Maintenance Dept.
Station Operation Dept.
Operation Division Operation Control Center
Note: The Corporation established a "Travel Affairs Department" on May 3, 2021 to facilitate overall Train Operation Dept.
----- End of picture text -----

Note: The Corporation established a "Travel Affairs Department" on May 3, 2021 to facilitate overall promotion of travel products and services.

023

Corporate Structure

(2) Business Operations of Major Departments

Main duties of functional committees overseen by the Board of Directors

1) Corporate Governance & Nomination Committee
A. Review the diversified backgrounds of independent directors, non-independent directors, and managerial officers in terms of professional and technical knowledge, past experiences, and gender as well as standards of impartiality, and use these criteria to seek out, assess, and nominate candidates to serve as directors, independent directors, and managerial officers.
B. Plan composition of the Board and its functional committees and evaluate performance of the Board, committees, all directors, and managerial officers, and the independence of the independent directors. This Committee shall explore the willingness of potential candidates to serve on committees and consider candidate backgrounds and the duties of the respective committees before presenting its plans and suggestions regarding the composition of the committees to the Board.
C. Be responsible for nominations of independent directors and non-independent directors.
D. Identify and evaluate potential candidates for independent and non-independent directors.
E. Review the basic programs for director continuing education and succession plans of directors and managerial officers (succession planning).
F. Plan and review implementation performance of the Board and its committees.
G. Devise and review liability insurance plans for directors and managerial officers.
H. Review status of information disclosures.
I. Analyze, implement, and provide recommendations relating to the Corporation's corporate governance system, and review the Corporation's Guidelines for Corporate Governance and relevant bylaws.
J. Review implementation performance of the corporate governance system, including execution of corporate social responsibilities, ethical management, and stakeholder communication.
K. Other duties as required by the Corporation's Articles of Incorporation, Guidelines for Corporate Governance, or resolutions passed by the Board.
2) Audit Committee
A. Adopt or amend the internal control systems pursuant to Article 14-1 of the Securities and Exchange Act.
B. Evaluate the effectiveness of the Corporation's internal control system.
C. Adopt or amend the procedures for material financial or operational acts such as acquisition or disposal of assets, derivatives trading, monetary loans to others, or providing endorsements or guarantees for others, pursuant to Article 36-1 of the Securities and Exchange Act.
D. Review matters that may involve the personal interest of directors.
E. Review material asset and derivatives transactions.
F. Review material monetary loans or endorsement, or provision of guarantees.
G. Review the public offering, issuance, or private placement of equity-type securities.
H Evaluate the appointment, dismissal, or compensation of attesting CPAs.
I. Evaluate the appointment and dismissal of the Corporation's chief financial officer, chief accountant, or chief internal auditor.
J. Review the annual financial report and the first to third quarter financial reports, which are signed or sealed by the Corporation Chairperson, managerial officer and chief accountant.

024

K. Review the Corporation's accounting system and financial condition.
L. Evaluate the Corporation's risk management policies and risk measurement standards.
M. Review the procedures for material financial and operational acts.
N. Evaluate, examine, and monitor any existing or potential risks to the Corporation.
O. Examine the Corporation's compliance with laws, regulations and rules.
P. Review the Corporation's capital, financing, and credit plans.
Q. Assess the Corporation's tax planning and compliance with tax laws and regulations.
R. Other major matters as required by the Corporation or the competent authority.
S. Other duties as required by the Corporation's Articles of Incorporation, Guidelines for Corporate Governance, or resolutions passed by the Board.

3) Remuneration Committee

A. Formulate and regularly review the performance assessment criteria, performance goals, and the policies, systems, standards, and structure for the compensation of directors and managerial officers of the Corporation.
B. Regularly assess the degree to which performance goals for the directors and managerial officers of the Corporation have been achieved, set the types and amounts of their individual compensation based on the results of the reviews conducted in accordance with the performance assessment criteria.

4) Special Committee

A. Provide counsel and suggestions in accordance with Board resolutions on major legal or contractual disputes and important institutional changes of the Corporation, and assist the Board in supervising the implementation of said resolutions by managerial departments.
B. Review proposals relating to procurement matters that should be submitted to the Board by managerial departments according to Corporation bylaws.
C. Other duties as required by the Corporation's Articles of Incorporation, Guidelines for Corporate Governance, or resolutions passed by the Board.

Main operational scope and duties of each department/unit

1) Secretariat Division of the Board of Directors

Established under the Board of Directors, the Secretariat Division provides relevant resources or assistance for the Board of Directors and its committees to perform their duties in order to facilitate the smooth operation of the Corporation's corporate governance system.

2) Corporate Audit Office

Plans and implements annual audit plans and issues audit reports in accordance with the "Internal Audit Procedures" and related laws and regulations, and executes project audits according to the instructions of the Board of Directors or Board-authorized personnel.

3) Corporate Planning Office

Formulates THSRC business model and analyzes integration and comprehensive procedures for internal management matters under the three major aspects of business planning management, operation planning management, and project affairs coordination and control.

4) Legal Office

Provides legal advice and legal counseling for all types of Corporation business; records, classifies, stores, disseminates, and updates relevant legal documents; assists in the planning, promotion, and execution of corporate governance systems and corporate governance evaluations; handles application, maintenance, protection, and authorized use of intellectual property rights; reviews formulation and

025

Corporate Structure

revision of Corporation contracts and contract templates; establishes and promotes legal compliance system; plans and coordinates the handling of engineering, operation, and asset insurance, claims, or third-party claims cases; provides counseling on matters relating to Corporation insurance; and reviews insurance contract clauses and insurance policies.

5) Quality Assurance Office

Responsible for planning and management of the Corporation's quality management system in accordance with the requirements of international quality management system ISO 9001 and European railway application EN50126, as well as full implementation and continuous improvement to ensure the Corporation's quality policies and objectives. Main duties include: quality management, coordination with government audits, form management, system assurance, and internal control.

6) Operation Safety Committee

Ensures the safety of passengers and high-speed railway systems, information security, and protection of personal information. Responsible for keeping pace with internal and external issues and risks relating to operations, planning and promoting policies and strategies relating to safety procedures, obtaining and coordinating relevant operational resources, supervising safety performance and achievement of targets, reviewing responses to and investigations into abnormal events, and following up on corrective measures and improvements to "personnel, procedures, and equipment."

7) Occupational Safety and Health Committee

Provides recommendations for occupational safety and health policies and self-management plans; safety and health management plans, measures, and reports; and occupational hazard investigation reports. Convenes at least once every three months and compiles records in accordance with relevant laws and regulations.

8) Occupational Safety and Health Office

Formulates and promotes safety and health management procedures, and guides relevant departments in implementation of said procedures. Performs identification, statistical analysis, and management of occupational hazards. Plans and implements health checks, health management, health promotion, and occupational disease prevention activities. Establishes occupational safety audit procedures and implements occupational safety and health audits to ensure the effective operation and continuous improvement of various operating procedures.

9) Operation Safety Office

Responsible for formulating the Corporation's safety management system, management policies and management systems for personal information, safety policies, and safety objectives, and assessing the effectiveness of safety management procedures based on the "Railway Act," the "Disaster Prevention and Protection Act," the "All-out Defense Mobilization Readiness Act" and related laws and regulations. Main duties include three main aspects: investigation, operation maintenance, and disaster prevention.

10) Finance Division

Responsible for the Corporation's financial planning and execution, securing of long-term and short-term funds, capital utilization and management, financial risk management, land and share management, general accounting, management accounting, tax accounting and revenue checking, as well as formulation, revision, and implementation of financial procedures; preparation of reports relating to corporate budgets, accounting, taxation, revenues, and business performance; and research on accounting related matters.

11) Human Resource Division

Responsible for integrated management and planning of human resources, and establishment of related systems.

12) Information Technology Division

The Information Division is responsible for the planning, development, operation and maintenance of the Corporation's overall information system, including formulation of information development strategies, planning of information system architecture, evaluation and introduction of application systems, maintenance and management of automatic fare collection system, maintenance

026

and operation of computer room host equipment, education and training for information promotion, management of information security, and execution of various information management procedures.

13) Business Division

Mainly responsible for market research and analysis, planning of transportation business products and services, development and promotion of tourism products, planning and management of affiliated businesses, corporate brand management, communication management, and promotion of other businesses to maximize Corporation revenues.

14) Travel and Business Development Division

Mainly responsible for planning and development of travel products, digital transformation, system integration, digitalization of travel coupons, and other business promotions to enhance diversification of the Corporation's travel packages and products.

15) Public Affairs Division

Builds internal and external stakeholders communication channels to communicate accurate corporate messages; plans and implements corporate image projects, major milestones, ceremonies, and charity events.

16) Operation Division

Responsible for the planning and execution of train maintenance, train operations, traffic monitoring, station management, passenger services, ticketing operations, and trolley sales.

17) Maintenance Management Division

Responsible for maintenance of core electromechanical systems for rolling stock, track, power, signaling, and communication systems, and maintenance of infrastructure, depot facilities, and station facilities.

18) Procurement Division

Establishes fair and open procurement procedures to improve procurement efficiency and functionality and ensure procurement quality; establishes procurement policies and strategies; establishes/maintains/manages procurement procedures that are most efficient for Corporation operations and management; develops business sources, suppliers, and management for materials contracts; reduces costs and ensures stable supply of materials; strengthens inventory management for materials; provides contract management and claims management assistance and advice to contract management units; and ensures Corporation interests.

19) Employee Service Department

Responsible for operation planning, resource integration, and management system formulation for general logistics affairs; coordination and supervision of execution of general logistics affairs at each station; planning and control of Corporation by-laws; and management of seals, archives, and documents.

20) Core Technology Development Department

Responsible for the planning and design of core electromechanical systems for new high-speed railway projects, and discussions for system renewal and improvement.

21) Facility Engineering Department

Responsible for planning and design of subsequent station sites and civil construction works; technical support for environmental assessments; and budget management.

22) Operation Planning Department

Responsible for the strategic evaluation of transportation, maintenance, engineering, and technology related departments; formulation of operational plans; cost and asset management; maintenance management; and planning and management for professional training.

027

Corporate Structure

2. Board of Directors

(1) Directors

==> picture [484 x 61] intentionally omitted <==

	Shares ％ Shares ％ Shares ％
Chairman	R.O.C. China Aviation Development Foundation － 2020/05/21 2023/05/20 2006/01/20 260,040 4.62 260,040 4.62 0 0
	R.O.C. Representative: Yao-Chung Chiang Male 2020/05/21 2023/05/20 2016/10/18 0 0 0 0 0 0
Director	R.O.C. Representative: Lee-Ching Ko Female 2020/05/21 2023/05/20 2001/07/13 0 0 0 0 0 0

028

==> picture [483 x 74] intentionally omitted <==

----- Start of picture text -----

Thousands of shares; % (as of 2021/03/29)
Executives, Directors
Shareholding
or Supervisors Who are
by Nominee
Experience (Education) Other Position Spouses or within Two Remarks
Arrangement
Degrees of Kinship
Shares ％ Title Name Relation
----- End of picture text -----

0	0	－	－	None	None	None
0	0	Ph. D. in Engineering Mechanics, University of Wisconsin,	․Director, China Aviation Development	None	None	None
		Madison	Foundation
		M.S. in Mechanical Engineering, National Cheng Kung	․Independent Director, Radiant Opto-Electronics
		University	Corporation
		․Independent Director, Chin Fong Machine Industrial Co.,	․Independent Director, TYNTEK Corporation
		Ltd.
		․Independent Director, TYNSOLAR Corporation.
		․Chairman, China Steel Chemical Corporation
		․Chairman, Kaohsiung Rapid Transit Corporation
		․Chairman, China Steel Corporation.
		․Chairman, China Airlines
		․Deputy Minister, Public Construction Committee, Executive
		Yuan.
		․Director-General, Department of Rapid Transit System,
		Taipei City Government.
		․Technical Supervisor, Researcher, National Chung-Shan
		Institute of Science and Technology
0	0	Second Vice Group Chairman of Evergreen Group	․Chairman, Evergreen International Corporation	None	None	None
			․Chairman, Evergreen (Shanghai) Hotel Limited
			․Director, Evergreen Marine Corp. (Taiwan) Ltd.
			․Director, EVA Airways Corporation
			․Director, Evergreen International Storage &
			Transport Corporation
			․Director, Evergreen Steel Corporation.
			․Director, Evergreen Security Corporation
			․Director, Shun An Enterprise Corporation0
			․Director, Charng Yang Development Co., Ltd.
			․Director, Evergreen Marine (Singapore) Pte. Ltd.
			․Director, Greencompass Marine S.A.
			․Director, Gaining Enterprise S.A.
			․Director and Manager, Evergreen International
			S.A.
			․Supervisor, Ever Reward Logistics Corporation
			․Supervisor, Evergreen Air Cargo Services
			Corporation
			․Supervisor, Evergreen Airline Services Corporation
			․Supervisor, Hsin Yung Enterprise Corporation
			․Supervisor,Ever Ecove Corporation

029

Corporate Structure

==> picture [484 x 647] intentionally omitted <==

030

==> picture [483 x 647] intentionally omitted <==

----- Start of picture text -----

Executives, Directors
Shareholding
or Supervisors Who are
by Nominee
Experience (Education) Other Position Spouses or within Two Remarks
Arrangement
Degrees of Kinship
Shares ％ Title Name Relation
0 0 －－ None None None
0 0 M.S. in Institute of Traffic and Transportation, National Chiao ․Administrative Deputy Minister,Ministry of None None None
Tung University. Transportation and Communications
․
B.M. in Department of Traffic and Transportation Chairman, Vehicle Safety Certification Center.
Engineering, National Chiao Tung University. ․Director, Taiwan-Hong Kong Economic and
․Director General, Institute of Transportation, MOTC Cultural Co-operation Council.
․Director General, Maritime and Port Bureau, MOTC
․Director, Department of Navigation and Aviation, MOTC
․Director, Department of Railways and Highways, MOTC
․Director, Transportation Bureau,Taichung City Government
․Director General, Transportation Bureau,Taichung City
Government
․Deputy Chief Engineer, Taiwan Area National Freeway
Bureau, MOTC
․Director, Taiwan Area National Freeway Bureau, MOTC
․Chief Engineer, Taipei City Traffic Engineering Office
0 0 Ph.D. in Institute of Traffic and Transportation, National ․Minister, Ministry of Transportation and None None None
Chiao Tung University Communications
․Political Deputy Minister, Ministry of Transportation and
Communications
․Acting Minister, Ministry of Transportation and
Communications
․Chairman, China Aviation Development Foundation
․Chairman, The Grand Hotel
․Acting Chairman, Taiwan International Ports Corporation,
Ltd.
․Acting Chairman, Chunghwa Post Co., Ltd.
․Chairman, iPASS Corporation
․President, Intelligent Transportation Society of Taiwan
․Advisor and Director of Taipei Contact Division, Kaohsiung
City Government
․Director-General, Transportation Bureau, Kaohsiung City
Government
․President, Chairman, THI Consultants Inc.
0 0 M.S. in Technology Management, Chung Hua University ․Deputy Director, Department of Accounting, None None None
B.S. in Accounting, Fu Jen Catholic University Ministry of Transportation and Communications,
․Director, Accounting Office, Control Yuan, R.O.C. R.O.C.
․
Director, Accounting and Statistics Office, Public
Construction Commission, Executive Yuan
․Senior Specialist, Directorate General of Budget, Accounting
and Statistics, Executive Yuan
․Director, Department of Budget, Accounting and Statistics,
Hsinchu City Government
0 0 M.B.A, Emporia State University, USA ․Director, Department of Accounting, Ministry of None None None
․Deputy Director, Department of Accounting, Ministry of Culture, R.O.C.
Transportation and Communications, R.O.C.
․Deputy Director, Ministry of Health and Welfare
․
Director, Comptroller Office of Ministry of National
Defense, R.O.C.
․Director of Accounting, Public Construction Commission,
Executive Yuan
․Senior Specialist, Directorate General of Budget, Accounting
and Statistics, Executive Yuan
․Accounting Director, Freeway Bureau of MOTC
․Section Chief, Department of Accounting, Ministry of
Transportation and Communications, R.O.C.
----- End of picture text -----

031

Corporate Structure

==> picture [484 x 636] intentionally omitted <==

----- Start of picture text -----

Nationality/ Shareholding Current Spouse & Minor
Date Date First
Title Place of Name Gender Term when Elected Shareholding Shareholding
Elected Elected
Incorporation
Shares ％ Shares ％ Shares ％
Director R.O.C. China Steel Corporation － 2020/05/21 2023/05/20 2009/11/10 242,148 4.30 242,148 4.30 0 0
R.O.C. Representative: Male 2020/05/21 2023/05/20 2018/03/31 0 0 0 0 0 0
Chao-Tung Wong
Director R.O.C. Taiwan Sugar Corporation － 2020/05/21 2023/05/20 2000/06/27 200,000 3.55 200,000 3.55 0 0
R.O.C. Representative: Male 2020/05/21 2023/05/20 2013/05/30 0 0 0 0 0 0
Chao-Yih Chen
Director R.O.C. TECO Electric & Machinery － 2020/05/21 2023/05/20 1998/04/13 190,060 3.38 190,060 3.38 0 0
Co., Ltd.
R.O.C. Representative: Male 2020/05/21 2023/05/20 2011/03/14 0 0 0 0 0 0
Mao-Hsiung Huang
Director R.O.C. Management Committee － 2020/05/21 2023/05/20 2009/11/10 120,000 2.13 120,000 2.13 0 0
of National Development
Fund, Executive Yuan
R.O.C. Representative: Female 2020/05/21 2023/05/20 2016/10/14 0 0 0 0 0 0
Shien-Quey Kao
Director R.O.C. Taipei Fubon Commercial － 2020/05/21 2023/05/20 1998/04/13 20,277 0.36 20,277 0.36 0 0
Bank Co., Ltd.
R.O.C. Representative: Male 2020/05/21 2023/05/20 2010/05/24 45 0 45 0 0 0
Kuo-Chih Liu
----- End of picture text -----

032

==> picture [483 x 667] intentionally omitted <==

----- Start of picture text -----

Executives, Directors
Shareholding
or Supervisors Who are
by Nominee
Experience (Education) Other Position Spouses or within Two Remarks
Arrangement
Degrees of Kinship
Shares ％ Title Name Relation
0 0 －－ None None None
0 0 Ph.D. in Resources Engineering, National Cheng Kung ․Chairman, China Steel Corporation None None None
University ․Executive Director, Industrial Technology
․President, Vice President, China Steel Corporation Research Institute
․Chairman, China Prosperity Development
Corporation
․Director, China Ecotek Corporation
․Director, China Steel Chemical Corporation
․Director, Chung Hung Steel Corporation
․Director, Dragon Steel Corporation
0 0 －－ None None None
0 0 Ph. D., Institute of Agricultural Chemistry, National Taiwan ․Chairman, Taiwan Sugar Corporation None None None
University. ․Director, Industrial Technology Research Institute
․Chairman, Automotive Research & Testing Center ․Director, Central Bank of the Republic of China
․Professor Emeritus, China University of Science and (Taiwan)
Technology.
․Chairman, Taiwan Sugar Corporation
․
Chief Executive Officer of the Sinotech Engineering
Consultants, Inc.
․Director, Technical Department, MOEA
․Executive Secretary, Energy Commission, MOEA
․Director General of the Department of Investment Services
(DOIS), MOEA.
․Director General of the Industrial Development Bureau
(IBD), MOEA.
․Vice Chairperson of the State-owned Enterprise
Commission, MOEA.
․Director, Department Development Department, Council
for Economic Planning And Development, Executive Yuan
0 0 －－ None None None
0 0 MBA, The Wharton School, University of Pennsylvania ․Chairman, Century Development Corporation None None None
Bachelor of Economics, Keio University ․Director, TECO Electric & Machinery Co., Ltd.
․Director, An-Shin Food Services Co., Ltd
․Honorary Chairman, Chinese National
Association of Industry & Commerce, Taiwan
0 0 －－ None None None
0 0 M.S. in Economics, National Taiwan University ․Deputy Minister, National Development Council, None None None
Bachelor's Degree in Economics, National Taiwan University. Executive Yuan
․Secretary General, National Development Council,
Executive Yuan.
․Secretary General, Council for Economic Planning and
Development, Executive Yuan.
․Director, Department of Economics Research, CEPD.
․Deputy Director, Department of Overall Planning, CEPD.
0 0 －－ None None None
0 0 Ph.D. in Physics, Massachusetts Institute of Technology ․Director, Wealth Media Co., Ltd. None None None
․Chairman, Fubon Land
․Chairman, Fubon Real Estate Management
․President, Taiwan High Speed Rail Corporation
․President, Taiwan Aerospace Corp.
----- End of picture text -----

033

Corporate Structure

==> picture [484 x 664] intentionally omitted <==

Note 1: Representative of institutional director Ministry of Transportation and Communication, R.O.C. Mr. Kwo-Tsai Wang, was elected on 2020/05/21； the representative was changed to Mr. Wen-Jong, Chi on 2021/04/26, and Mr. Kwo-Tsai Wang was relieved of office on the same day.

Note 2: Representative of institutional director Ministry of Transportation and Communication, R.O.C. Ms. Ming-Ching Liu, was elected on 2020/05/21； the representative was changed to Ms. Yueh-Hsiang Chen on 2020/07/23, and Ms. Ming-Ching Liu was relieved of office on the same day.

034

==> picture [483 x 664] intentionally omitted <==

----- Start of picture text -----

Executives, Directors
Shareholding
or Supervisors Who are
by Nominee
Experience (Education) Other Position Spouses or within Two Remarks
Arrangement
Degrees of Kinship
Shares ％ Title Name Relation
0 0 LL.M, University of Cambridge ․Independent Director, ShunSin Technology None None None
LL.B, National Taiwan University Holdings Limited
․Managing Partner, Kew & Lord ․Director, Ju-Kao Engineering Co., Ltd.
․Partner, Taiwan Commercial Law Offices ․Independent Director, Chunghwa Precision Test
․Attorney, Baker & McKenzie Tech. Co., Ltd.
․Attorney, Huang & Associates ․Independent Director, Lungteh Shipbuilding Co.,
Ltd.
0 0 Ph.D. from the Graduate Institute of Electrical Engineering, ․Adjunct Professor Rank Specialist, Department None None None
National Taiwan University of Electrical Engineering, National Taipei
․Political Deputy Minister, Public Construction Commission, University of Technology
Executive Yuan ․Independent Director, Compal Electronics, Inc.
․Political Deputy Minister, Administrative Deputy Minister, ․Independent Director, TTY Biopharm Company
Technical Supervisor, Ministry of Transportation and Limited
Communications
․Director General, Civil Aeronautics Administration, Ministry
of Transportation and Communications
․Adjunct Professor, Department of Electronics Engineering,
National Taiwan University of Technology
․Deputy Director General, Directorate General of
Telecommunications, MOTC
0 0 Ph.D. in Economics, University of Texas at Austin ․Professor, Department of Finance, National None None None
․Independent Director, Edison Opto Corp. Taiwan University
․Associate Professor, Department of Finance, National ․Director, Digital Finance and Industry
Taiwan University Development Research Center, College of
․Assistant Professor, Associate Professor, Department of Management, National Taiwan University
Economics, National Dong Hwa University ․Independent Director, Nan Shan Life Insurance
Co., Ltd.
․Director, Financial Engineering Association of
Taiwan Advisory Committee
․Advisory Committee Member, Taiwan, Insurance
Guaranty Fund
․Director, Taiwan Risk and Insurance Association
․Committee Member, Labor Funds Supervisory
Committee, Ministry of Labor
0 0 Ph.D., Railroad Engineering Program, University of Illinois at ․Professor, Railway Technology Research Center, None None None
Urbana-Champaign National Taiwan University
․Associate Professor, Assistant Professor, Division ․Professor, Division of Transportation Engineering,
of Transportation Engineering, Department of Civil Department of Civil Engineering, National
Engineering, National Taiwan University Taiwan University
․Chairman, Railroad Operating Technologies Committee, ․Director, Railway Technology Research and
Transportation Research Board (TRB), USA Certification Center
․Committee Member, Academic Committee, Railway ․Co-Chair, SIG A3 Rail Transport, World Conference
Engineering Society of Taiwan (RESOT), Taiwan on Transport Research Society (WCTRS)
․Committee Member, Review Committee for Technical ․Handling Editor, Transportation Research Record
Standards of High-Speed Rail Rolling Stock (TRR)
․Committee Member, Executive Yuan Investigative Team for ․Associate Editor, Journal of Rail Transport
1021 Puyuma Incident Planning & Management (JRTPM)
․Board Member, Railway Operational Safety Board, Taiwan ․Board Member, International Association of
Railways Administration (TRA), Taiwan Railway Operations Research (IAROR)
․Visiting Professor, Faculty of Societal Safety Science, Kansai ․Director, Railway Engineering Society of Taiwan
University, Japan (RESOT), Taiwan
․Visiting Professor, Research Institute for Sustainable Urban ․Supervisor, Chinese Institute of Transportation,
Development(RISUD), Hong Kong Polytechnic University Taiwan
(PolyU), Hong Kong ․Committee Member, Review Committee for
․Visiting Scholar, TOMII Lab, Chiba Institute of Technology, Mass Rapid Transit System Construction and
Japan Peripheral Land Development Plans, Ministry
of Transportation and Communication (MOTC),
Taiwan
․Committee Member, Railway Accident
Investigation Team, MOTC, Taiwan
․Committee Member, Safety Management
Committee, Taiwan Railways Administration
(TRA), Taiwan
----- End of picture text -----

035

Corporate Structure

(2) Major Shareholders of Institutional Shareholders

List of major shareholders of institutional shareholders

==> picture [484 x 339] intentionally omitted <==

----- Start of picture text -----

Name of institutional shareholders
Major shareholders (Note 2)
(Note 1)
A non-corporate organization. In February 1988, all 27 shareholders of the Company (Note 5) donated
shares held and 100% of shareholder equity to set up this Foundation, which was reported to the Ministry
China Aviation Development Foundation
of Transportation and Communications on March 2 of the same year. Its establishment was approved on
July 6 of the same year.
Ministry of Transportation and
Governmental institute
Communications, R.O.C.
Ministry of Economic Affairs (20.00%), Employee's Stock Trust of China Steel Corporation under the
custody of Mega International Commercial Bank Co., Ltd. (4.22%), Transglory Investment Corporation
(1.63%), JPMorgan Chase Bank N.A. Taipei Branch in Custody for Vanguard Total International Stock Index
China Steel Corporation Fund, a series of Vanguard Star Funds (1.33%),Vanguard Emerging Markets Stock Index Fund under the
custody of JP Morgan Chase Bank N.A. Taipei Branch (1.06%), Norges Bank (1.04%), Winning Investment
Corporation (1.02%), New Labor Pension Fund (0.96%), Public Service Pension Fund Management Board
(0.91%), Labor Insurance Fund (0.81%)
Ministry of Economic Affairs (86.15%), Northern Region Branch, National Property Administration, MOF
(9.92%), First Commercial Bank (0.75%), Chang Hwa Commercial Bank (0.41%), Bank of Taiwan (0.36%),
Taiwan Sugar Corporation Taiwan Business Bank Co., Ltd. (0.30%), Hua Nan Commercial Bank (0.14%), Central Investment Co. (0.14%),
Mega International Commercial Bank Co., Ltd. (0.13%), Land Bank of Taiwan (0.08%), Taiwan Cooperative
Commercial Bank (0.08%)
PJ Asset Management Co., Ltd. (17.45%),Walsin Lihwa Corporation(9.70%), Jia Yuan Investment Co., Ltd.
(6.34%), Creative Sensor Inc. (3.62%),Silchester International Investors International Value Equity Trust
(2.28%), WGI Emerging Markets Smaller Companies Fund, LLC (1.76%),Tong Kuang Investment Co., Ltd.
TECO Electric & Machinery Co., Ltd.
(1.50%), Silchester International Investors International Value Equity Group Trust (1.27%), Norges Bank
Investment Management under the custody of Citibank (Taiwan) Limited (1.26%), Kuang Yuan Industrial
Co., Ltd. (1.25%)
Management Committee of National
Governmental institute
Development Fund, Executive Yuan
----- End of picture text -----

Taipei Fubon Commercial Bank Co., Ltd. Fubon Financial Holding Co., Ltd. (100%)

Note 1: Names of institutional shareholders with representatives serving on the Board of Directors should be listed here. Note 2: The major (top ten) shareholders of said institutional shareholders should be listed here. Note 3: The aforementioned disclosures of shareholder names and shareholding should be replaced by investor or donor names and ratio of investments or donations for institutional directors which are not enterprises.
Note 4: Data is mostly sourced from information provided by institutional shareholders in March 2021, while some is sourced from the Commerce Industrial Services Portal or shareholder websites.
Note 5: Endowers listed in the Charter of Endowment of Chang Yung-Fa Foundation.

Major shareholders of the Corporation's major institutional shareholders

Name of institutional shareholders (Note 1)	Name of institutional shareholders (Note 1)	Major shareholders (Note 2)
China Steel Corporation	Ministry of Economic Affairs Governmental institute
	Transglory Investment Corporation China Steel Express Corporation (49.89%), Chung Hung Steel Corporation (40.91%), China Steel Chemical Corporation (9.20%)
	Winning Investment Corporation Gains Investment Corporation (49.00%), Maruichi Steel Tube Ltd. (42.00%), Transglory Investment Corporation (9.00%)

036

==> picture [483 x 607] intentionally omitted <==

----- Start of picture text -----

Name of institutional shareholders
Major shareholders (Note 2)
(Note 1)
Ministry of Economic Affairs Governmental institute
Northern Region Branch,
National Property Governmental institute
Administration, MOF
First Commercial Bank First Financial Holding Co. Ltd. (100%)
Taishin Financial Holding Co., Ltd (22.55%), Ministry of Finance (12.19%), Chunghwa Post Co., Ltd.
(6.00%), First Commercial Bank (3.86%), Excel Chemical Corporation (2.85%), National Development
Chang Hwa Commercial
Fund, Executive Yuan (2.75%), Taiwan Tobacco & Liquor Co., Ltd (2.32%), Mega International
Bank
Commercial Bank Co., Ltd.,Head Office, Treasury Department (2.17%), Taiwan Cooperative Bank, Ltd.
(1.45%), Hua Nan Commercial Bank, Ltd. (1.45%)
Bank of Taiwan Taiwan Financial Holdings Co., Ltd (100%)
Bank of Taiwan (16.21%), Management Committee of National Development Fund, Executive
Taiwan Sugar
Yuan(5.87%), Land Bank of Taiwan (2.29%), Ministry of Finance (2.08%), JPMorgan Chase Bank N.A.
Corporation
Taipei Branch in custody for Vanguard Total International Stock Index Fund a series of Vanguard
Taiwan Business Bank Co.,
Star Funds (1.22 %), Norges Bank - internal - NBIM PF EQ INTERNAL CFD (0.91%), Vanguard Emerging
Ltd.
Markets Stock Index Fund A Series of Vanguard International Equity Index Funds (0.90%), BES
Engineering Corporation (0.87%), iShares MSCI Taiwan ETF (0.63%), California Public Employees'
Retirement System - Emerging Markets Small Cap Index Fund (0.59%)
Hua Nan Commercial Bank Hua Nan Financial Holding Co Ltd. (100%)
Central Investment Co. Kuomintang (100%)
Mega International
Mega Financial Holding Co Ltd. (100%)
Commercial Bank Co., Ltd.
Land Bank of Taiwan Ministry of Finance (100%)
Taiwan Cooperative
Taiwan Cooperative Financial Holding Co., Ltd. (100%)
Commercial Bank
PJ Asset Management Co.,
Ho Yang Management Consulting Co. (94.95%), Other (5.05%)
Ltd.
LGT Bank (Singapore) Investment Fund under the custody of Standard Chartered (7.20%), Winbond
Electronics Corporation (6.47%), Chin-Xin Investment Co., Ltd (6.41%), TECO Electric & Machinery Co.,
Walsin Lihwa Corporation Ltd. (5.98%), Huali Investment Corp. (2.91%), Rong Jiang Co., Ltd. (2.86%), Patricia Chiao (2.72%), Yu-
Heng Chiao (1.78%), Pictet Bank Investment Account under the trust of HSBC (1.63%), Norges Bank
Investment Fund under the custody of Citibank Taiwan Limited (1.63%)
Jia Yuan Investment Co., Ltd. He Yuan International Investment Co., Ltd. (100%)
TECO Electric &
TECO Image Systems Co. Ltd. (17.26%), TECO Capital Investment Co., Ltd. (6.23%), Hermes Invested
Machinery Co.,
Master Fund North America (Cayman Islands) Managed by Bank of Taiwan in Trust (5.01%), TECO
Ltd.
International Investment Co., Ltd. (3.41%), Koryo Co., Ltd. Trust Property Account Managed by Yuanta
Creative Sensor Inc. Bank in Trust (2.98%), Fidelity Funds Investment Account Managed by Standard Chartered Bank in
Trust (2.45%), TECO Electric & Machinery Co., Ltd. (1.68%), Fidelity Funds - Asia Focus Fund Investment
Account Managed by JPMorgan Chase Bank in Trust (1.51%), A-Chung Hou (1.29%), DFA Emerging
Market Core Securities Investment Account Managed by Citibank in Trust (0.90%)
Tong Kuang Investment Kuang Yuan Industrial Co., Ltd. (39.28%), Huo-Huei Lin Huang (35.01%), Bright Lane Investments, Ltd.
Co., Ltd. (12.73%), Tong Ho Global Investment Co., Ltd (6.00%), Other (6.98%)
Kuang Yuan Industrial Co., Tong Kuang Investment Co., Ltd. (33.86%), Huo-Huei Lin Huang (51.58%), Bright Lane Investments, Ltd.
Ltd. (10.00%), Tong Ho Global Investment Co., Ltd (0.74%), Other (3.82%)
Taipei City Government (13.11%), Ming Dong Co., Ltd. (8.45%), Dao Ying Co., Ltd. (7.73%), Richard M.
Taipei Fubon Tsai (3.20%), Daniel M. Tsai (3.01%), Hung Fu Investment Co., Ltd. (2.57%), New Labor Pension Fund
Fubon Financial Holding Co.,
Commercial (1.48%), Citibank (Taiwan) in its capacity as Master Custodian for Investment Account of GIC Pte Ltd.
Ltd.
Bank Co., Ltd. (Singapore) (1.46%), Chung Shing Development Co., Ltd. (1.42%), Shin Kong Life Insurance Co., Ltd.
(1.39%)
----- End of picture text -----

Note 1: Names of institutional shareholders with representatives serving on the Board of Directors should be listed here.

Note 2: The major (top ten) shareholders of said institutional shareholders should be listed here.

Note 3: The aforementioned disclosures of shareholder names and shareholding should be replaced by investor or donor names and ratio of investments or donations for institutional directors which are not enterprises.

Note 4: Data is mostly sourced from information provided by institutional shareholders in March 2021, while some is sourced from the Commerce Industrial Services Portal or shareholder websites.

037

Corporate Structure

(3) Independence Analysis of Directors

Director qualifications

==> picture [484 x 309] intentionally omitted <==

----- Start of picture text -----

Criteria Meet One of the Following Professional Qualification Requirements,
Together with at Least Five Years Work Experience
An Instructor or Higher Position A Judge, Public Prosecutor,
in a Department of Commerce, Attorney, Certified Public
Have Work Experience in the
Law, Finance, Accounting, or Accountant, or Other Professional
Areas of Commerce, Law,
Other Academic Department or Technical Specialist Who has
Finance, or Accounting, or
Related to the Business Needs Passed a National Examination
Otherwise Necessary for the
of the Company in a Public or and been Awarded a Certificate
Business of the Company
Private Junior College, College or in a Profession Necessary for the
Name University Business of the Company
Yao-Chung Chiang V
Wen-Jong Chi V
Yueh-Hsiang Chen V
Lee-Ching Ko V
Chao-Tung Wong V
Chao-Yih Chen V V V
Mao-Hsiung Huang V
Shien-Quey Kao V
Kuo-Chih Liu V
Kenneth Huang-Chuan Chiu V V
Duei Tsai V V
Pai-Ta Shih V V
Yung-Cheng (Rex) Lai V V
----- End of picture text -----

Note: A check mark is placed in the box for directors who fulfill the following conditions during and two years prior to their time in office.

(1) Is not hired by the Corporation or any of its affiliates.
(2) Is not a director or supervisor of the Corporation or any of its affiliates. (The same does not apply, however, in cases where the person is a concurrent independent director of the Corporation and its parent company, subsidiaries, or subsidiaries of the same parent company, as appointed in accordance with the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies or local laws and regulations.)
(3) Is not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under others' names, in an aggregate amount of 1% or more of the total number of issued shares of the Corporation or ranking in the top ten in shareholdings.
(4) Is not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of managers not conforming to subparagraph (1) above, or of any persons not conforming to subparagraphs (2) and (3) above.
(5) Is not a director, supervisor, or employee of an institutional shareholder that directly holds 5% or more of total number of issued shares or ranks among the top five in shareholdings, or a director, supervisor, or employee of an institutional shareholder who has been appointed as a director or supervisor representative at the Corporation under paragraphs 1 and 2, Article 27 of the Company Act. (The same does not apply, however, in cases where the person is a concurrent independent director of the Corporation and its parent company, subsidiaries, or subsidiaries of the same parent company, as appointed in accordance with the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies or local laws and regulations.)
(6) Is not a director, supervisor, or employee of other companies controlled by Corporation directors or persons with more than half of voting rights at the Corporation. (The same does not apply, however, in cases where the person is a concurrent independent director of the Corporation and its parent company, subsidiaries, or subsidiaries of the same parent company, as appointed in accordance with the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies or local laws and regulations.)
(7) Is not a director, supervisor, or employee of other companies or institutions of the Corporation's chairperson, president, or persons with equivalent duties, or spouses thereof. (The same does not apply, however, in cases where the person is a concurrent independent director of the Corporation and its parent company, subsidiaries, or subsidiaries of the same parent company, as appointed in accordance with the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies or local laws and regulations.)
(8) Is not a director, supervisor, manager, or shareholder holding 5% or more of the shares, of a specified company or institution that has a financial or business relationship with the Corporation. (The same does not apply, however, in cases where the person is a concurrent independent director of the Corporation and its parent company, subsidiaries, or subsidiaries of the same parent company, as appointed in accordance with the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies or local laws and regulations.)
(9) Is not a professional individual, or an owner, partner, director, supervisor, or manager, or spouses thereof, of a sole proprietorship, partnership, company, or institution which provides audit services to the Corporation or its affiliates; or has in the past two years provided commercial, legal, financial, accounting, or related services not exceeding total compensation of NT$ 500,000 to the Corporation or its affiliates. The same does not apply, however, for members of remuneration committees, public tender offer review committees, or special committees for mergers/consolidations and acquisitions exercising their duties in accordance with the laws and regulations of the Securities and Exchange Act and the Business Mergers and Acquisitions Act.
(10) Has no spousal relationship and are not relatives within the second degree of kinship of other Corporation directors.
(11) Has not violated any regulations in Article 30 of the Company Act.
(12) Has not been elected as a government, juristic person, or their representatives in accordance with Article 27 of the Company Act.

038

==> picture [483 x 308] intentionally omitted <==

----- Start of picture text -----

Independent Criteria (Note)
Number of Other Public Companies in Which
the Individual is Concurrently Serving as an
1 2 3 4 5 6 7 8 9 10 11 12 Independent Director
V V V V V V V V V V 2
V V V V V V V V V V -
V V V V V V V V V V -
V V V V V V V V V -
V V V V V V V V V -
V V V V V V V V V -
V V V V V V V V V -
V V V V V V V V V V V -
V V V V V V V V V V V -
V V V V V V V V V V V V 3
V V V V V V V V V V V V 2
V V V V V V V V V V V V 1
V V V V V V V V V V V V -
----- End of picture text -----

039

Corporate Structure

3. Management Team

Information on President, Vice Presidents, Assistant Vice Presidents, and all Departments heads

==> picture [484 x 640] intentionally omitted <==

----- Start of picture text -----

Shareholding
Spouse & Minor
Title Nationality Name Gender EffectiveDate Shareholding Shareholding Arrangement by Nominee
Shares % Shares % Shares %
President R.O.C. James Jeng Male 2014/03/14 21 0 0 0 0 0
Administration Senior Vice President R.O.C. Barret Wang Male 2006/12/01 12 0 3 0 0 0
Business Senior Vice President R.O.C. Johnson Sun Male 2017/02/15 0 0 0 0 0 0
and Head of Business Division/
Spokesperson
Operation Senior Vice President R.O.C. James Shi Male 2007/01/02 21 0 0 0 0 0
Vice President, R.O.C. Allen Wang Male 2020/01/15 0 0 0 0 0 0
Finance Division
Vice President, R.O.C. Rae Chung Female 2005/06/06 0 0 0 0 0 0
Corporate Planning Office
Vice President, R.O.C. Andy Lu Male 2006/12/01 0 0 0 0 0 0
Operation Division
Vice President, R.O.C. Tim Fu Male 2014/01/01 25 0 0 0 0 0
Procurement Division
Human Resources Division
Vice President, R.O.C. Calvin Yen Male 2016/04/01 7 0 0 0 0 0
Information Technology Division
Assistant Vice President, R.O.C. Shirley Lai Female 2003/09/16 0 0 0 0 0 0
Employee Service Department
Assistant Vice President, R.O.C. Max Liu Male 2008/06/16 12 0 0 0 0 0
Quality Assurance Office
Assistant Vice President, R.O.C. Griffin Huang Male 2017/10/19 0 0 0 0 0 0
Accounting Department of Finance
Division
----- End of picture text -----

040

Unit: Thousands of shares; % (as of 2021/03/29)

==> picture [485 x 640] intentionally omitted <==

----- Start of picture text -----

Managers who are Spouses
Other or Within Two Degrees of
Experience （ Education ） Kinship Remarks
Position
Title Name Relation
Ph.D. in Transportation Management, National Chiao Tung University. None None None None
M.S. in Ocean Systems Management, Massachusetts Institute of Technology, USA.
Master of Engineering in Transportation, National Chiao Tung University, Taiwan
․Chairman/Vice Chairman/President, EVA Airways Corporation
․Chairman/President/Vice President, UNI Airways Corporation
․Vice Chairman, Italia Marittima S.p.A, a wholly-owned subsidiary of Evergreen Group.
․Executive Vice President, Evergreen Marine Corporation.
Bachelor of Law, National Taiwan University. None None None None
Attorney-at-Law, Chun He Law Firm.
B.A. in Navigation, China College of Marine Technology and Commerce. None None None None
․General Manager, Taiwan Airport Service Co., Ltd.
․General Manager, Osaka Branch, China Airlines Co., Ltd.
M.S. in Electrical Engineering, Northeastern University, Boston Massachusetts, USA. None None None None
․Director of Affiliated Business Development Department, Taipei Rapid Transit Corp.
․Deputy Director of Maintenance Department, Taipei Rapid Transit Corp.
․Assistant Vice President, Head of Maintenance Sub-Division, Taiwan High Speed Rail
Corporation.
․Assistant Vice President, Head of Operation Division, Taiwan High Speed Rail Corporation.
․Vice President, Head of Maintenance Management Division, Taiwan High Speed Rail
Corporation
EMBA, National Taiwan University. None None None None
EMBA, National Chengchi University.
․MSc., International Banking and Financial Studies, University of Southampton, UK.
․CFO, IME Group Beijing.
․Vice President, IBF Securities Co., Ltd.
․Associate Director, Standard Chartered Bank Beijing Branch.
B.A. in Economics, Tamkang University. None None None None
․Marketing Manager, New Zealand Milk Products (Far East) Ltd., Taiwan Branch.
Executive MBA, College of Management, National Sun-Yat-Sen University. None None None None
Executive MBA (Asia-Pacific), the Chinese University of Hong Kong.
․Assistant Manager, EVA Airways Corporation.
․Assistant Vice President, Operation Sub-Division, Taiwan High Speed Rail Corporation.
․Assistant Vice President, Head of Maintenance Management Division, Taiwan High Speed Rail
Corporation.
B.S. in Computer Science, Tamkang University. None None None None
․Manager, Pfizer Inc.
․Assistant Vice President, Corporate Audit Office, Taiwan High Speed Rail Corporation.
․Assistant Vice President, Procurement Division, Taiwan High Speed Rail Corporation.
B.S. in Computer Science, Tamkang University. None None None None
․Project Engineer, EVA Air.
․Manager of Information Office, Ever Rich Group Corp.
․Manager of Warehouse Management Department, Ever Rich Group Corp.
․Project Manager, NCR Corp.
․Assistant Vice President, Information Technology Division, Taiwan High Speed Rail
Corporation.
Master of Management, University of Southern Queensland, Australia. None None None None
․Supervisor, Independent Director, Excelsior Medical Co., Ltd.
․Certified Public Accountant, Deloitte Taiwan.
B.E. in Mechanical Engineering, National Chiao Tung University. None None None None
EMBA, National Chengchi University.
․Special Assistant to the Chairman, DJ Auto Components Corporation (an investee company of
Germany-based Hella KGaA Hueck & Co.)
․Director, International High-Speed Rail Association (IHRA).
Master of Business Administration, National Taipei University. None None None None
․Senior Manager, Deloitte Taiwan.
----- End of picture text -----

041

Corporate Structure

==> picture [484 x 676] intentionally omitted <==

----- Start of picture text -----

Shareholding
Spouse & Minor
Title Nationality Name Gender EffectiveDate Shareholding Shareholding Arrangement by Nominee
Shares % Shares % Shares %
Assistant Vice President, R.O.C. Elaine Tsou Female 2016/07/15 14 0 0 0 0 0
Public Affairs Office
Assistant Vice President, R.O.C. Felix Hsu Male 2019/12/02 0 0 0 0 0 0
Human Resources Division
Assistant Vice President, R.O.C. Simon Chen Male 2008/09/01 15 0 0 0 0 0
Affiliated Business Development
Department of Business Division
Assistant Vice President, R.O.C. Wilson Ting Male 2008/02/25 0 0 0 0 0 0
Transportation Business
Development Department of
Business Division
Assistant Vice President, R.O.C. Paul Hwang Male 2006/11/06 0 0 0 0 0 0
Train Operation Department of
Operation Division
Assistant Vice President, R.O.C. Alpha Lin Male 2006/11/06 0 0 0 0 0 0
Operation Control Center of
Operation Division
Assistant Vice President, R.O.C. Paul Yang Male 2016/04/01 14 0 0 0 0 0
Station Operation Department of
Operation Division
Assistant Vice President, R.O.C. Bob Chen Male 2014/01/01 0 0 0 0 0 0
Maintenance Management Division
Assistant Vice President, R.O.C. Eric Cheng Male 2006/11/06 11 0 0 0 0 0
Signaling & Communication
Department of Maintenance
Management Division
Assistant Vice President, R.O.C. Vincent Male 2016/04/01 42 0 0 0 0 0
Rolling Stock Maintenance Huang
Department of Maintenance
Management Division
Assistant Vice President, R.O.C. Sheng-Hsin Male 2015/01/01 6 0 0 0 0 0
Core Technology Development Yu
Department
Assistant Vice President, R.O.C. Gavin Tsou Male 2006/05/15 0 0 0 0 0 0
Core Technology Development
Department
Assistant Vice President, R.O.C. Tom Tsai Male 2016/04/01 61 0 40 0 0 0
Facility Engineering Department
Assistant Vice President, R.O.C. Beatrice Tsai Female 2020/06/01 0 0 0 0 0 0
Affiliated Business Development
Department of Business Division
Assistant Vice President, R.O.C. Paul Hsu Male 2020/11/16 0 0 0 0 0 0
Operation Safety Office
Assistant Vice President, R.O.C. Mandy Ko Female 2021/04/01 1 0 0 0 0 0
Legal Office
----- End of picture text -----

042

==> picture [485 x 676] intentionally omitted <==

----- Start of picture text -----

Managers who are Spouses
Other or Within Two Degrees of
Experience （ Education ） Kinship Remarks
Position
Title Name Relation
B.A. in Mass Communication, Fu Jen Catholic University. None None None None
․Assistant Vice President, Public Affairs Department, Wei Chuan Foods Corporation.
․Manager, Public Affairs Department, KFC of Yum Brands Inc.
EMBA Master of Biotechnology, School of Management, Taipei Medical University. None None None None
․Executive Assistant Vice President, Kingmaker (Vietnam) Footwear Co., Ltd.
․Assistant Vice President, Wei Chuan Foods Corporation
․Senior Manager, HongDa International Electronics Co., Ltd.
Ph.D., Division of Transportation Engineering, Institute of Civil Engineering, National Taiwan None None None None
University.
Master of Science in Finance, Golden Gate University. None None None None
․Sales / Channel Management Director, Far EasTone Telecommunications Co., Ltd.
M.S. Transportation and Communication Management Science, National Cheng Kung University. None None None None
․Vice President of Figaro Philippine Holdings Inc.
․Director of Training Center, Deputy Director of OCC, Taipei Rapid Transit Corp.
․Engineer/Junior Engineer, Department of Rapid Transit Systems, Taipei City Government, R.O.C.
Master of Systems Analysis Group, Institute of Management Science, Tamkang University. None None None None
․Director of OCC and Director of Train Operation Center, Taipei Rapid Transit Corp.
Electronic Computer Science, Tamkang University. None None None None
․Programmer of Panasonic Taiwan.
․Deputy Engineer of Chang-Lung Information.
․Engineer of EVA Air.
․Senior Manager, Station Operation Department, Taiwan High Speed Rail Corporation.
Executive MBA, National Sun-Yat-Sen University. None None None None
Section Chief, EVA Air.
Master's Degree in Department of Electrical Engineering, National Taiwan University of Science None None None None
and Technology.
․Electrical Engineering Plant Director & Power Supply Plant Director, Taipei Rapid Transit Corp.
MBA, National Sun Yat-Sen University. None None None None
Mechanical Department, St. John's and St. Mary's Institute of Technology.
․Deputy Section Chief, Evergreen Steel Corp.
․Section Chief, Evergreen Steel Corp. (Malaysia).
․Section Chief, Evergreen Steel Corp.
․Assistant Manager, Manager, Senior Manager, Taiwan High Speed Rail Corp.
Master of Electrical Engineering, University of Memphis, USA. None None None None
․Electronics Engineering Plant Director, Taipei Rapid Transit Corp.
B.A. in Department of Electronic and Computer Engineering, National Taiwan University of None None None None
Science and Technology
․Electronics Engineering Plant Director, Taipei Rapid Transit Corp
Master of Culture Planning Institute, Chinese Culture University. None None None None
Department of Architecture, Tamkang University.
․Manager, Kangshe Construction Corp.
Master of Science, Applied Chemistry National Chiao Tung University None None None None
CTO, AFE-Solutions Corporation, HK
․Director, SYSTEX Corporation
MD, Department of Civil Engineering, National Chung Hsing University. None None None None
․Assistant Researcher, National Disaster Prevention and Technology Center.
․Disaster Response Team Head of the Taipei City Government.
․MRT Planner, Taipei Rapid Transit Corporation.
Master of Law Institute of Chinese Culture University None None None None
․Manager of EASYCARD Co., Ltd.
----- End of picture text -----

043

Corporate Structure

==> picture [484 x 185] intentionally omitted <==

----- Start of picture text -----

Shareholding
Spouse & Minor
Title Nationality Name Gender EffectiveDate Shareholding Shareholding Arrangement by Nominee
Shares % Shares % Shares %
Senior Manager, R.O.C. Roger Chu Male 2017/02/15 1 0 0 0 0 0
Corporate Audit Office
Senior Manager, R.O.C. Chris Lee Male 2016/02/15 1 0 0 0 0 0
Occupational Safety & Health Office
----- End of picture text -----

4. Remuneration to Directors and Department Heads

(1) Remuneration to Directors (Including Independent Directors), President, Vice Presidents, and Others in the Most Recent Year
1) Remuneration to directors and independent directors (names and method of payment disclosed)

==> picture [484 x 368] intentionally omitted <==

----- Start of picture text -----

Remuneration
Directors Compensation Allowances (D)
Base Compensation (A) Severance Pay (B)
(C) (Note 1)
Title Name All All All All
companies companies companies companies
The The The The
included included included included
Corporation Corporation Corporation Corporation
in financial in financial in financial in financial
statements statements statements statements
China Aviation Development Foundation 0 0 0 0 6,176 6,176 0 0
Chairman
Representative: 8,368 8,368 0 0 0 0 602 602
Yao-Chung Chiang
Director
0 0 0 0 0 0 56 56
Representative: Lee-Ching Ko
Director
0 0 0 0 0 0 80 80
Former Representative: Huang-Liang Tsai
Ministry of Transportation and
0 0 0 0 4,986 4,986 106 106
Communications, R.O.C.
Director
0 0 0 0 0 0 42 42
Representative: Yueh-Hsiang Chen
Director
0 0 0 0 0 0 41 41
Former Representative: Kwo-Tsai Wang
Director
0 0 0 0 0 0 60 60
Former Representative: Min-Ching Liu
China Steel Corporation 0 0 0 0 3,088 3,088 88 88
Director
0 0 0 0 0 0 0 0
Representative: Chao-Tung Wong
Director
0 0 0 0 0 0 0 0
Former Representative: Shyi-Chin Wang
----- End of picture text -----

044

==> picture [485 x 185] intentionally omitted <==

----- Start of picture text -----

Managers who are Spouses
Other or Within Two Degrees of
Experience （ Education ） Kinship Remarks
Position
Title Name Relation
B.A. in Accounting, National Chengchi University. None None None None
․Audit Manager, Deloitte Taiwan.
․Assistant Vice President, Accounting Department, New Century InfoComm Tech Co., Ltd.
․Assistant Vice President, Worldwide Semiconductor Manufacturing Co., Ltd. (WSMC).
Ph.D., Program of Technology Management, Chung Hua University None None None None
M.Sc. in Construction Management at USC, USA.
M.Sc. in Environmental Engineering at National Taiwan University R.O.C.
․Engineer Director, Senior Engineer, and Director Engineer, Taiwan High Speed Rail
Corporation.
․Commissioner, Fubon Land Inc.
․Engineer, Kajima Eng. & Construction Inc. in USA.
․Deputy Engineer, Taiwan Building and Urban Developing Bureau.
----- End of picture text -----

Unit: NT$ thousands (as of 2020/12/31)

==> picture [484 x 368] intentionally omitted <==

----- Start of picture text -----

Ratio of Total Ratio of Total
Relevant Remuneration Received by Directors Who are Also Employees
Remuneration Compensation
Compensation
(A+B+C+D) to Net Salary, Bonuses, and Severance Pay (A+B+C+D+E+F+G) to
Employee Compensation (G) Paid to Directors
Income (%) Allowances (E) (F) Net Income (%)
from an Invested
All All All All companies All Company Other
companies companies companies The included companies than a Corporation
The included The included The included Corporation in financial The included Subsidiary or from
Corporation Corporation Corporation statements Corporation
in financial in financial in financial in financial Parent Company
statements statements statements Cash Stock Cash Stock statements
0.11 0.11 0 0 0 0 0 0 0 0 0.11 0.11 None
0.15 0.15 0 0 0 0 0 0 0 0 0.15 0.15 None
0.00 0.00 0 0 0 0 0 0 0 0 0.00 0.00 None
0.00 0.00 0 0 0 0 0 0 0 0 0.00 0.00 None
0.09 0.09 0 0 0 0 0 0 0 0 0.09 0.09 None
0.00 0.00 0 0 0 0 0 0 0 0 0.00 0.00 None
0.00 0.00 0 0 0 0 0 0 0 0 0.00 0.00 None
0.00 0.00 0 0 0 0 0 0 0 0 0.00 0.00 None
0.05 0.05 0 0 0 0 0 0 0 0 0.05 0.05 None
0.00 0.00 0 0 0 0 0 0 0 0 0.00 0.00 None
0.00 0.00 0 0 0 0 0 0 0 0 0.00 0.00 None
----- End of picture text -----

045

Corporate Structure

==> picture [484 x 507] intentionally omitted <==

----- Start of picture text -----

Remuneration
Directors Compensation Allowances (D)
Base Compensation (A) Severance Pay (B)
(C) (Note 1)
Title Name All All All All
companies companies companies companies
The The The The
included included included included
Corporation Corporation Corporation Corporation
in financial in financial in financial in financial
statements statements statements statements
Taiwan Sugar Corporation 0 0 0 0 3,088 3,088 144 144
Director
0 0 0 0 0 0 0 0
Representative: Chao-Yih Chen
Director
0 0 0 0 0 0 0 0
Former Representative: Tao-I Kwan
TECO Electric & Machinery Co., Ltd. 0 0 0 0 3,088 3,088 0 0
Director
0 0 0 0 0 0 208 208
Representative: Mao-Hsiung Huang
Management Committee of National
0 0 0 0 3,088 3,088 67 67
Development Fund, Executive Yuan
Director
0 0 0 0 0 0 101 101
Representative: Shien-Quey Kao
Taipei Fubon Commercial Bank Co., Ltd. 0 0 0 0 3,088 3,088 0 0
Director
0 0 0 0 0 0 208 208
Representative: Kuo-Chih Liu
Former Director
0 0 0 0 1,189 1,189 0 0
Evergreen Steel Corporation
Former Director
Representative: 0 0 0 0 0 0 24 24
Lee-Ching Ko
Independent Director
720 720 0 0 0 0 400 400
Kenneth Huang-Chuan Chiu
Independent Director
175 175 0 0 0 0 248 248
Duei Tsai
Independent Director
441 441 0 0 0 0 248 248
Pai-Ta Shih
Independent Director
441 441 0 0 0 0 240 240
Yung-Cheng (Rex) Lai
Former Independent Director
281 281 0 0 0 0 152 152
Kung-Wha Ding
Former Independent Director
281 281 0 0 0 0 192 192
David Da-Wei Poo
----- End of picture text -----

Please describe policies, systems, standards, and structures for independent director remuneration, and connection between remuneration amounts and borne duties, risks, time invested, and other factors:
According to Article 2-07 of the Corporation's "Guidelines for Corporate Governance," the remuneration paid to Directors for their services as Directors, including Board meeting attendance fees, salary and pay, and profit-sharing compensation paid to Directors as set out in the Articles of Incorporation, shall be discussed and determined by the Board separately for each Director, in accordance with laws and regulations, the Articles of Incorporation, and these Guidelines, with consideration to the level of involvement and value of the contribution of each Director, and taking into reference the usual pay level in the industry domestically and abroad. Remuneration for independent directors is determined according to the reasonable compensation is provided in consideration of the Corporation's overall business performance, future industrial risks, and development trends and in reference to the Corporation's "Regulation of Self-Evaluation of Birector of Directors ," Relevant performance evaluations and rationality of compensation are reviewed by the Remuneration Committee and the Board of Directors; our compensation system is adjusted according to business operations and related laws and regulations when appropriate, and also considers current corporate governance trends so as to balance sustainable operations and risk management. The Corporation's independent directors are not entitled to profit shares.
Remuneration paid to Corporation directors by all companies included in financial statements for services (such as non-employee consultants and others) other than disclosed in the table above: None.

Note 1: Includes expenses for company cars, but not driver remuneration of NT$ 782 thousand.

Note 2: The remuneration disclosed in this table uses a different concept to that of the Income Tax Act, and therefore the purpose of this table is merely to disclose the information. This information should not be used for tax purposes.

Note 3: The Corporation has no subsidiaries and therefore does not disclose any consolidated financial reports.

046

==> picture [484 x 507] intentionally omitted <==

----- Start of picture text -----

Ratio of Total Ratio of Total
Relevant Remuneration Received by Directors Who are Also Employees
Remuneration Compensation
Compensation
(A+B+C+D) to Net Salary, Bonuses, and Severance Pay (A+B+C+D+E+F+G) to
Employee Compensation (G) Paid to Directors
Income (%) Allowances (E) (F) Net Income (%)
from an Invested
All All All All companies All Company Other
companies companies companies The included companies than a Corporation
The included The included The included Corporation in financial The included Subsidiary or from
Corporation Corporation Corporation statements Corporation
in financial in financial in financial in financial Parent Company
statements statements statements Cash Stock Cash Stock statements
0.06 0.06 0 0 0 0 0 0 0 0 0.06 0.06 None
0.00 0.00 0 0 0 0 0 0 0 0 0.00 0.00 None
0.00 0.00 0 0 0 0 0 0 0 0 0.00 0.00 None
0.05 0.05 0 0 0 0 0 0 0 0 0.05 0.05 None
0.00 0.00 0 0 0 0 0 0 0 0 0.00 0.00 None
0.05 0.05 0 0 0 0 0 0 0 0 0.05 0.05 None
0.00 0.00 0 0 0 0 0 0 0 0 0.00 0.00 None
0.05 0.05 0 0 0 0 0 0 0 0 0.05 0.05 None
0.00 0.00 0 0 0 0 0 0 0 0 0.00 0.00 None
0.02 0.02 0 0 0 0 0 0 0 0 0.02 0.02 None
0.00 0.00 0 0 0 0 0 0 0 0 0.00 0.00 None
0.02 0.02 0 0 0 0 0 0 0 0 0.02 0.02 None
0.01 0.01 0 0 0 0 0 0 0 0 0.01 0.01 None
0.01 0.01 0 0 0 0 0 0 0 0 0.01 0.01 None
0.01 0.01 0 0 0 0 0 0 0 0 0.01 0.01 None
0.01 0.01 0 0 0 0 0 0 0 0 0.01 0.01 None
0.01 0.01 0 0 0 0 0 0 0 0 0.01 0.01 None
----- End of picture text -----

047

Corporate Structure

2) Remuneration of President and vice presidents

==> picture [485 x 409] intentionally omitted <==

----- Start of picture text -----

Base Compensation (A) Severance Pay (B) Bonuses and Allowances (C)
(Note 2) (Note 3) (Note 4)
All All All
Title Name
companies companies companies
The The The
included included included
Corporation Corporation Corporation
in financial in financial in financial
statements statements statements
President James Jeng
Senior Vice President Barret Wang
Senior Vice President Johnson Sun
Senior Vice President James Shi
Vice President Allen Wang
Total amount Total amount Total amount Total amount Total amount Total amount
Vice President Rae Chung
28,965 28,965 942 942 16,053 16,053
Vice President Andy Lu
Vice President Tim Fu
Vice President Calvin Yen
Former Executive Vice
John Chen
President
Former
Eleanore New
Vice President
----- End of picture text -----

Note 1: The number of people with decision-making management authority and people who were appointed to ranks of vice president and above following Board approval was 11; of these, 5 were changed during the year (Vice President Eleanore New retired on 2020/01/15, and Vice President Allen Wang took office on 2020/01/15; Executive Vice President John Chen retired on 2020/07/15 and Vice President James Shi was promoted to Senior Vice President on 2020/09/17; and Assistant Vice President Calvin Yen was promoted to Vice President and took office on 2020/11/16).
Note 2: Remuneration (A) includes basic salaries and food allowances. The amount of employee compensation and bonuses for 2020 are disclosed as estimated figures.
Note 3: Actual amounts of retirement pay for 2020 came to a total of NT$0 and retirement pensions expenses came to NT$942,000, making a total of NT$942,000.
Note 4: The remuneration, retirement pay, bonuses and special disbursements in this table are disclosed in accordance with regulations regarding information to be disclosed in annual reports. Special leave liability and non-business travel of NT$ 2,609 thousand is not included. Includes expenses for company cars, but not the relevant remuneration paid to drivers of NT$1,274 thousand.
Note 5: Article 35-1 of the Articles of Incorporation states that "If the final annual accounts of the Corporation show a net profit for a given year, it shall allocate not less than 1 percent of the net profit as profit-sharing compensation to employees and not more than 1 percent as profit-sharing compensation to Directors; provided, however, that if the Corporation still has any accumulated loss, it shall first set aside the amount to offset the loss before such allocation." Employee compensation for 2020 was calculated based on profits for the year (pre-tax profits minus profits prior to distribution of employee and director compensation), and were estimated to be 2% of NT$5,558,268,000 (no accumulated losses to be offset). This proposal will be carried out in accordance with regulations following approval from the 2021 shareholders' meeting.

048

Unit: NT$ thousands (as of 2020/12/31)

==> picture [485 x 103] intentionally omitted <==

----- Start of picture text -----

Employee Compensation (D) Ratio of total compensation
(Note 5) (A+B+C+D) to net income (%)
Compensation Paid to Directors from an Invested
All companies included in All
The Corporation Company Other than a Corporation Subsidiary or
financial statements companies
The from Parent Company
included
Corporation
Cash Stock Cash Stock in financial
statements
----- End of picture text -----

==> picture [400 x 20] intentionally omitted <==

----- Start of picture text -----

Total amount Total amount
0 0 0.82 0.82 None
1,888 1,888
----- End of picture text -----

049

Corporate Structure

3) Remuneration range table

Unit: NT$

==> picture [484 x 195] intentionally omitted <==

----- Start of picture text -----

Names of President and Vice Presidents
Range of Remuneration
The Corporation All companies included in financial statements
Lower than 1,000,000 Eleanore New Eleanore New
1,000,000 (Included) ～ 2,000,000 (Not included) - -
2,000,000 (Included) ～ 3,500,000 (Not included) John Chen John Chen
Rae Chung,Andy Lu, James Shi, Tim Fu, Rae Chung,Andy Lu, James Shi, Tim Fu,
3,500,000 (Included) ～ 5,000,000 (Not included)
Allen Wang , Calvin Yen Allen Wang , Calvin Yen
James Jeng, James Jeng,
5,000,000 (Included) ～ 10,000,000 (Not included)
Barret Wang,Johnson Sun Barret Wang,Johnson Sun
10,000,000 (Included) ～ 15,000,000 (Not included) - -
15,000,000 (Included) ～ 30,000,000 (Not included) - -
30,000,000 (Included) ～ 50,000,000 (Not included) - -
50,000,000 (Included) ～ 100,000,000 (Not included) - -
- -
Above 100,000,000
Total 11 11
----- End of picture text -----

Note : The remuneration disclosed in this table uses a different concept to that of the Income Tax Act, and therefore the purpose of this table is merely to disclose the information. This information should not be used for tax purposes.

4) Names of managers who received employee compensation and status of distribution

Unit: NT$ thousands

==> picture [483 x 418] intentionally omitted <==

----- Start of picture text -----

Employee Compensation - Employee Compensation Ratio of Total Amount
Title Name Total
in Stock - in Cash to Net Income (%)
President James Jeng
Senior Vice President Barret Wang
Senior Vice President Johnson Sun
Senior Vice President James Shi
Vice President Allen Wang
Vice President Rae Chung
Vice President Andy Lu
Vice President Tim Fu
Vice President Calvin Yen
Former Executive Vice President John Chen
Former Vice President Eleanore New
Assistant Vice President Shirley Lai
Assistant Vice President Max Liu
Assistant Vice President Griffin Huang
Total amount Total amount
Managers Assistant Vice President Elaine Tsou 0 0.07
4,215 4,215
Assistant Vice President Felix Hsu
Assistant Vice President Simon Chen
Assistant Vice President Wilson Ting
Assistant Vice President Paul Hwang
Assistant Vice President Alpha Lin
Assistant Vice President Paul Yang
Assistant Vice President Bob Chen
Assistant Vice President Eric Cheng
Assistant Vice President Vincent Huang
Assistant Vice President Sheng-Hsin Yu
Assistant Vice President Gavin Tsou
Assistant Vice President Tom Tsai
Assistant Vice President Beatrice Tsai
Assistant Vice President Paul Hsu
----- End of picture text -----

Note: The aforementioned employee compensation for 2020 are estimated figures.

050

(2) The Ratio of Total-Remuneration-to-Net-Income for Remuneration Paid to Corporation Directors, President, and Vice Presidents for the Most Recent Two Fiscal Years, Remuneration Policy, Standards, Combinations, Manner of Determining Remuneration, and Relationship between Operational Performance and Future Risks
1) The ratio of total-remuneration-to-net-income for remuneration paid to directors and managers ranked above vice presidents:

==> picture [483 x 81] intentionally omitted <==

----- Start of picture text -----

Unit: NT$ thousands
Item 2019 2020
Total remuneration paid to directors 54,321 41,805
Ratio of total remuneration paid to directors (Note 1) 0.68% 0.72%
Total remuneration paid to managers ranked above vice president (Note 2) 48,126 47,848
Ratio of total remuneration paid to managers ranked above vice president (Note 1) 0.60% 0.82%
----- End of picture text -----

Note 1: Information for 2019 was calculated based on after-tax profits of NT$ 8,007,033 thousand, and information for 2020 was calculated based on aftertax profits of NT$ 5,843,037 thousand. Note 2: Remuneration for managers ranked above vice presidents represents the total remuneration for the president, executive vice presidents, senior vice presidents, and vice presidents.

2) Remuneration policies, standards, and packages

According to Article 27-1 of the Articles of Incorporation, remuneration for individual board directors should be determined by the Board based on the level of participation, value contributed, and remuneration levels of similar companies. Additionally, if the Corporation is profitable in a given year, it shall allocate not more than 1% of the net profit as profit-sharing compensation to Directors according to Article 35-1 of the Articles of Incorporation. Independent directors receive fixed monthly compensation as determined by the Board and are not entitled to profit shares.

The Corporation's employee remuneration levels are set according to individual work experience, positions and job duties, work skills and work performance, and the Corporation's financial and operational status, and have a positive correlation with operational performance. Additionally, if the Corporation is profitable in a given year, it shall allocate not less than 1% of the net profit as profitsharing compensation to employees according to Article 35-1 of the Articles of Incorporation. Remuneration levels for Corporation managers are determined by the Board based on individual performance, contribution to Corporation operations, relevant regulations, and market standards. The Corporation's "Salary Payment Regulation" stipulates salary allowances and bonuses to reward employees for their hard work. Bonus levels are based on the Corporation's annual business performance, financial status, operating conditions, and individual work performance.

Remuneration as defined by the Charter of Remuneration Committee includes cash remuneration, stock options, dividends, retirement or redundancy benefits, allowances, and other substantial incentives; the scope of remuneration is consistent with that set out for director and manager remuneration in our publicly issued annual report.

3) Procedures for determining remuneration

For regularly evaluate the remuneration of directors and managerial officers, the performance evaluations of Corporation directors and managers refer to our "Regulation of Self-Evaluation of Board of Directors" and our "Performance Appraisal Reguation" (applicable to managers and employees). Evaluation items for director performance include: understanding of corporate goals and tasks, recognition of director responsibilities, participation in corporate operations, internal relations engagement and communication, director knowledge and continued training, and internal control. Evaluation items for annual performance of managers and employees adhere to performance indicators for their main work duties and include evaluations of management capabilities and core capabilities. Manager assessment items include: the knowledge, techniques and behavioral items required for managers, planning and organizational capabilities, mentoring abilities, customer-oriented improvement capabilities, continuous improvement capabilities, performance improvement capabilities, and safety awareness. Employee assessment items include: the knowledge, techniques and behavioral items required by employees, problem analysis and resolution capabilities, work management capabilities, proactive capabilities, adaptive capabilities, and capability to pursue excellence. Additionally, the remuneration of the Corporation's Chairman and President is determined in reference to the "Reference Table of Remuneration Standards for Heads of Public Institutes under the

051

Corporate Structure

Ministry of Transportation and Communications" and is submitted to the Board for approval. In order to fully reflect achievement of operational performance indicators, performance assessments for the Chairman are based on annal Corporation performance relating to operations, governance, and finances, and include four assessment items: net income before tax, credit ratings or Taiwan ratings, customer satisfaction, and corporate governance evaluations. Performance assessment items for the President include: management of operational safety, supervision of financial plan execution, revenue management, promotion of autonomous maintenance capabilities, strengthening of internal controls, and implementation and management of quality assurance. Relevant performance evaluations and rationality of compensation are reviewed by the Remuneration Committee and the Board of Directors, and takes into account the Corporation's overall business performance, future industrial risks, and development trends, as well as individual performance achievement rates and level of contribution to the Corporation. Our compensation system is adjusted according to business operations and related laws and regulations when appropriate, and also considers current corporate governance trends so as to balance sustainable operations and risk management.

Results of performance self-assessments for the Corporation's Board of Directors, Board members, and functional committees in 2020 all significantly exceeded standards. Operations in 2020 were affected by the COVID-19 pandemic, but we were active in implementing advanced measures and in executing cost-saving measures, and therefore our profits in the third quarter were better than expected. Additionally, results of performance assessments for managers in 2020 showed that all managers either met or exceeded set targets, indicating that our evaluation results for annual business performance indicators have reached the highest standards. Compensation for the Corporation's directors and managers fully consider the professional capabilities of these individuals and Corporation operations and finances, and are linked to overall Corporation operational performance, individual performance targets, and evaluation results.

4) Linkage to operating performance and future risk exposure

Assessments of remuneration standards and systems consider the Corporation's overall operational status, individual performance achievement rates, and contribution levels to enhance overall organizational efficiency of the Board and managerial departments. Additionally, we reference industrial remuneration standards to ensure that the remuneration of managers is competitive within the industry and can help to retain talent.

Establishing linkages between remuneration levels and the Corporation's operational results and managerial performance have had positive effects on the Corporation's overall performance and are helping to maximize shareholder interests.

Manager performance targets are all integrated with "risk management" to ensure that possible risks within the scope of job duties can be managed and prevented, and results of actual performance evaluations are linked to relevant human resources and remuneration policies. Corporation management undertake major decisions after careful consideration of all risk factors, and results of relevant decisions are reflected in Corporation profitability, which are in turn linked to remuneration and risk management performance of managers.

052

5. Human Resources

(1) Human Resources Structure: An Overview of Employee Numbers, Seniority, Age, and Education Qualifications for the Past Two Years and up to the Publication Date of the Annual Report

==> picture [483 x 183] intentionally omitted <==

----- Start of picture text -----

2019 2020 2021
Year
(Until 2019/12/31) (Until 2020/12/31) As of 2021/03/31
General Staff 4,515 4,630 4,687
Compulsory Employment 78 62 33
Employee Numbers
Expats 3 3 3
Total 4,596 4,695 4,723
Average Age 37.7 38.3 38.9
Average Seniority 9.0 9.6 9.7
Doctorate 0.3 0.3 0.3
Master 12.8 13.0 13.0
Education Distribution Ratios (%) Undergraduate 80.7 82.3 82.5
High School 5.8 4.0 3.9
Below High School 0.4 0.4 0.3
----- End of picture text -----

(2) Employee Benefits and Rights

1) Employee benefits

A. Friendly environment and establishing a win-win solution

Apart from employee labor and health insurance, vacation days, retirement, injury compensation, health checks, and other benefits stipulated by law, we believe that only happy employees can provide quality passenger services, and therefore we are committed to establishing a friendly work environment and competitive salaries and benefits. Due to the ongoing COVID-19 pandemic, increased the coverage limit of our group insurance plan for specific periods of time in order to take care of our employees. Employees who have childcare needs, major disaster needs, and personal turmoil can also apply for leave without pay to take care of their personal and family care needs.

We are attentive to the work-life balance of employees and encourage our employees to participate in activities that enhance their mental and physical health in their free time. Our "HSR tournament" contains a series of softball, basketball, badminton competitions, and is an important annual event for THSRC. In order to curb the spread of the coronavirus, the "HSR Tournament" was suspended in 2020, but we launched online activities such as the "Summer Marathon" and "iEpidemic Prevention" events to encourage our employees to exercise, strengthen their immune systems, and avoid getting sick.

In 2020, a total of 113 clubs were registered with the employee welfare committee, including the archery club, the fishing club, and the diving club. Exercise-type clubs made up 57% of all clubs, and in 2020 the Corporation once again received the Corporate Exercise certificate given out by the Sports Department of the Ministry of Education.

Additionally, we provide dorms, shuttle buses, exercise equipment at specific locations, and also provide registered childcare facilities, special promotions, uniform cleaning services, and catering including providing dinner and breakfast for night workers.

053

Corporate Structure

THSRC Employee Benefits and Work Support Items

Club activity subsidies, travel activity subsidies, annual promotional tickets, sports events, movie Work-Life Balance appreciation events Childcare Support Childcare leave without pay, registered contract childcare facilities, lactation room facilities

Group insurance, funeral subsides and bereavement support, wedding couplets and funeral scrolls, Daily Support weeding subsides, annual holiday bonuses, birthday bonuses, major disaster assistance, illness subsidies and care, hospitalization subsidies

Work Assistance Counseling, healthcare assistance, relocation subsidies, travel insurance, catering

Spring party activities; commendation of senior staff; parent days; gym and entertainment facilities; Others library services; quality merchant discount deals with entertainment, dining, travel, lodging, and bulk purchasing of consumer products businesses

Note: The benefits mentioned above include benefits and facilities provided by both the Corporation and the employee welfare committee.

2) Education, training, and retirement systems:
A. Education and training:
(a) To develop, cultivate, and evaluate talent, we have optimized management and core competencies and professional training for technical and service employees of all levels and all departments.
(b) Safety, service, and quality are the core competencies of all employees. Through routine promotion and implementation of safe driving procedures and physical and mental health, the Corporation has built up a corporate culture which believes that "a focus on personal safety is the best safeguard of passenger safety and peace of mind."
(c) We planned training programs for management and maintenance of regulated professional certifications and licenses to achieve various functional and strategic operational goals and cultivate and explore potential talent.
(d) We established mobile learning services to enhance employee learning motivations and effectiveness, allowing employees to complete training through personal mobile devices, shortening training schedules and strengthening timeliness and convenience of personnel training.
B. Implementation of retirement plan system:

To provide stable lifestyles for employees after retirement, the Corporation has set retirement procedures in accordance with law, and has established a Pension Reserves Supervisory Committee which convenes every quarter to discuss distribution of pensions and other matters.

054

The Corporation has established a retirement benefits plan according to the Labor Standards Act and the Labor Pension Act:

(a) Defined benefit plan: Includes pension plans under the Labor Standards Act and the Labor Pension Act, as well as prior pension plans where tenure of services rendered was retained. The Corporation places 2% of employee monthly salaries into pension funds, and these are turned over to the Pension Reserves Supervisory Committee and deposited in a special savings account at the Bank of Taiwan in the Committee's name. Qualified actuaries review pension reserves every year and the Pension Reserves Supervisory Committee convenes periodically in accordance with relevant laws to protect the pensions and rights of our employees.
(b) Defined contribution plan: Includes pension plans under the Labor Pension Act. The Corporation places 6% of employee monthly salaries in individual labor insurance accounts to serve as pension reserves.
(c) Pension distribution table

==> picture [483 x 82] intentionally omitted <==

----- Start of picture text -----

Pension Plan Defined benefit plan Defined contribution plan
Applicable Law Labor Standards Act Labor Pension Act
We contribute 2% of employee salaries into pension funds We contribute 6% of employee salaries into pension funds
each month each month
Pension Contributions
We contributed a total of NT$ 15,874 thousand to pension We contributed a total of NT$ 190,370 thousand to pension
funds in 2020 funds in 2020
----- End of picture text -----

Retirement conditions:

(a) Voluntary retirement: An employee may apply for voluntary retirement under any of the following conditions:
I. Has reached the age of fifty-five and has worked for fifteen years.
II. Has worked for more than twenty-five years.

III. Has reached the age of sixty and has worked for ten years.

(b) Forced retirement:
I. Has reached the age of sixty-five.
II. Is unable to perform his/her duties due to disability.
(c) Pension payments and standards:
I. Defined benefit plan: Employers shall pay employee pensions within 30 days from the day of retirement. According to Article 55 of the Labor Standards Act, pensions are calculated according to bases of tenure of services rendered and the six-month average salary amount following approval of retirement application. Two bases are given for each full year of service rendered. But for the rest of the years over 15 years, one base is given for each full year of service rendered. The total number of bases shall be no more than 45. An additional 20% on top of the amount calculated according to the preceding subparagraph shall be given to workers forced to retire due to disability incurred from the execution of their duties.
II. Defined contribution plan: According to the Labor Pension Act and relevant regulations, employees under the new pension system can collect pensions from their pension reserve accounts directly from the Bureau of Labor Insurance.

055

Corporate Structure

(3) Labor-Management Negotiations

1) Labor-management negotiations:
A. In order to enhance labor relations, the Corporation management holds monthly discussions with labor unions and works with various departments to handle and respond to issues.
B. The Corporation and the THSRC Labor Union have held 18 collective agreement and negotiations meetings since June 3, 2019. The two parties negotiated the general terms of the collective agreement as well as the organization, operation, and facilities of the union. The Corporation will continue to seek consensus and balance the interests of both parties under principles of fairness and reasonableness, and in consideration of the interests of all stakeholders.
2) Legal compliance:
A. Convening of labor-management conferences:

Our first labor-management conference was held on December 24, 2003, and our first labor-management conference at headquarters was held on July 1, 2016, after which labor-management conferences were held quarterly and changes in labor representative were reported to relevant authorities according to law.

B. Establishment of the grievance appeals system:

We established and implemented our "Grievance Handling Procedures" on December 13, 2005 and revised these procedures on November 19, 2018 in order to effectively implement policies and maintain employee relations.

C. Sexual harassment prevention and appeals system:

We established and implemented our "Sexual Harassment Prevention and Handling Regulations" on May 14, 2015 in accordance with the Act of Gender Equality in Employment and Regulations for Establishing Measures of Prevention, Correction, Complaint and Punishment of Sexual Harassment at Workplace to ensure physical and mental safety of all employees in the workplace, strengthen prevention of sexual harassment incidents, and disseminate related information. Revisions were made to our "Sexual Harassment Prevention and Handling Regulations" on December 16, 2019. We promote relevant information through the training program for new employees and the E-learning platform and also display our appeals hotline and fax number on our corporate website, stations, and workplaces to effectively prevent external and internal incidences of sexual harassment.

D. Promotion of work equality:

Starting from June 2005, the Corporation established lactation rooms for passengers and staffs to encourage and support breastfeeding policies.

E. Healthcare management:

Infirmaries have been established at corporate headquarters, the OMC building, and all maintenance bases in accordance with the Labor Health Protection Regulations, and health stations of higher quality than stipulated by law have been established at all HSR stations and are equipped with nursing staffs that provide emergency medical assistance to passengers and employees to enhance and manage employee health.

F. The Corporation has formulated the "Health Management Regulation," "Prevention Program of Human Factors Hazard," "Abnormal Workload Trigger Disease Prevention Plan," "Prevent Plan for Wrongful Physical or Mental Harm During the Execution of Job Duties," and "Maternal Health Protection Plan" in accordance with government labor laws to ensure the physical and mental health of employees and workplace safety through measures that protect the psychological health of employees.

056

3) Losses sustained as a result of labor disputes (including results of labor inspections found to be in violation of provisions in the Labor Standards Act, specifying the disposition date, disposition reference number, provisions of the regulations breached, description of the violation, and the disposition) in the most recent fiscal year and up to publication date of this annual report, disclosure of estimated losses incurred to date or likely to be incurred in the future, and indication of mitigation measures being or to be taken. If the loss cannot be reasonably estimated, make a statement to that effect:
A. The Labor Bureau of the Taipei City Government conducted a labor inspection of HSR Taipei Station on August 10, August 19 in 2020, and March 4, March 17 in 2021, and discovered that the station master's delay in approving colleague applications for overtime pay exceeded agreed issuance dates of overtime pay under law, resulting in failures to pay overtime for vacations and national holidays. The Labor Bureau of the Taipei City Government determined that the company's violation of the previous matters was not intentional, but constituted negligence which caused violations of Paragraph 2, Article 24 and Article 39 of the Labor Standards Law. In accordance with Arbitration Letter No.10960673901 dated October 22, 2020, and Arbitration Letter No.11060038061 dated March 31, 2021, THSRC incurred a penalty of NT$220,000.
THSRC has requested unit supervisors to be attentive of schedules for overtime application approval to avoid recurrence of similar situations and penalties.
B. The Corporation reached an agreement with the THSRC Labor Union on January 21, 2016 on overtime payments and confirmed calculation of payments in July 2016. Appropriate measures were implemented based on the content of this agreement and the decision of the administrative court. As of December 31, 2018, the Corporation has placed NT$ 283,279 thousand in debt reserves. The aforementioned decision of the administrative court refers to the appeal filed in November 2015 by the Corporation against the Taipei City Government's claim of failure to provide overtime payments and vacation days according to law. The Taipei High Administrative Court dismissed the Corporation's case on June 7, 2018, and the Corporation filed an additional appeal on July 6, 2018. The Supreme Administrative Court issued a judgment on October 17, 2019, abolished the original judgment, and sent it back to the Taipei High Administrative Court for trial. On December 23, 2020, the Taipei High Administrative Court revoked "the appeal decision and the original sanctions concerning the plaintiff's violation of Article 24 of the Labor Standards Law of NT$150,000." On January 15, 2021, THSRC filed an appeal against the original decision pronounced by the Taipei City Government, which stated that THSRC had violated Article 37 of the Labor Standards Law.

057

Corporate Structure

4 Corporate Governance

058

1. Corporate Governance Status

(1) Status of Board Operations

The Board of Directors convened 14 times in 2020. Board operations are as detailed below:

1) Director attendance records for meetings of the 8th Board in 2020

==> picture [483 x 476] intentionally omitted <==

----- Start of picture text -----

Actual
Actual Required
Title Name By Proxy Attendance Remarks
Attendances Attendances
Rate (%)
China Aviation Development Foundation
Chairman 5 0 5 100
Representative: Yao-Chung Chiang
Ministry of Transportation and
Director Communications 5 0 5 100
Representative: Min-Ching Liu
TECO Electric & Machinery Co., Ltd.
Director 5 0 5 100
Representative: Mao-Hsiung Huang
Taipei Fubon Commercial Bank Co., Ltd.
Director 5 0 5 100
Representative: Kuo-Chih Liu
China Aviation Development Foundation
Director 5 0 5 100
Representative: Huang-Liang Tsai
China Steel Corporation
Director 3 2 5 60
Representative: Shyi-Chin Wang
Taiwan Sugar Corporation Took office on
Director 3 1 4 75
Representative: Tao-I Kwan 2020/2/14
Left office on
Taiwan Sugar Corporation 2020/2/14;
Former Director 1 0 1 100
Representative: Chao-Yih Chen resumed office
on 2020/5/21
Management Committee of National
Director Development Fund, Executive Yuan 5 0 5 100
Representative: Shien-Quey Kao
Evergreen Steel Corporation
Director 3 2 5 60
Representative: Lee-Ching Ko
Independent Director Kung-Wha Ding 5 0 5 100
Independent Director Kenneth Huang-Chuan Chiu 5 0 5 100
Independent Director Da-Wei (David) Poo 5 0 5 100
Average actual director attendance rates of the 8th Board in 2020 (%)
55 5 60 92
(Total actual attendances/Total required attendances)
----- End of picture text -----

059

Corporate Governance

Attendances of Independent Directors at Board Meetings of the 8th Board of Directors in 2020: (◎: Attended in person; ☆: Proxy attendance; △: Did not attend)

==> picture [484 x 66] intentionally omitted <==

----- Start of picture text -----

Name/Date 2020/1/15 2020/2/19 2020/3/18 2020/4/8 2020/5/6
Session (Term-Sitting) (8-34) (8-35) (8-36) (8-37) (8-38)
Kung-Wha Ding ◎ ◎ ◎ ◎ ◎
Kenneth Huang-Chuan Chiu ◎ ◎ ◎ ◎ ◎
Da-Wei (David) Poo ◎ ◎ ◎ ◎ ◎
----- End of picture text -----

2) Director attendance records for meetings of the 9th Board in 2020

==> picture [484 x 458] intentionally omitted <==

----- Start of picture text -----

Actual
Actual Required
Title Name By Proxy Attendance Remarks
Attendances Attendances
Rate (%)
China Aviation Development Foundation
Chairman 9 0 9 100
Representative: Yao-Chung Chiang
Ministry of Transportation and
Took office on
Director Communications 5 0 5 100
2020/7/23
Representative: Yueh-Hsiang Chen
Ministry of Transportation and
Left office on
Former Director Communications 7 2 9 78
2021/4/16
Representative: Kwo-Tsai Wang
Ministry of Transportation and
Left office on
Former Director Communications 4 0 4 100
2020/7/23
Representative: Min-Ching Liu
China Aviation Development Foundation
Director 7 2 9 78
Representative: Lee-Ching Ko
China Steel Corporation
Director 6 3 9 67
Representative: Chao-Tung Wong
Taiwan Sugar Corporation
Director 9 0 9 100
Representative: Chao-Yih Chen
TECO Electric & Machinery Co., Ltd.
Director 9 0 9 100
Representative: Mao-Hsiung Huang
Management Committee of National
Director Development Fund, Executive Yuan 7 2 9 78
Representative: Shien-Quey Kao
Taipei Fubon Commercial Bank Co., Ltd.
Director 9 0 9 100
Representative: Kuo-Chih Liu
Independent Director Kenneth Huang-Chuan Chiu 9 0 9 100
Independent Director Duei Tsai 9 0 9 100
Independent Director Pai-Ta Shih 9 0 9 100
Independent Director Yung-Cheng (Rex) Lai 9 0 9 100
Average actual director attendance rates of the 9th Board in 2020 (%)
108 9 117 92
(Total actual attendances/Total required attendances)
----- End of picture text -----

060

Attendances of Independent Directors at Board Meetings of the 9th Board of Directors in 2020: (◎: Attended in person; ☆: Proxy attendance; △: Did not attend)

==> picture [483 x 83] intentionally omitted <==

----- Start of picture text -----

Name/Date 2020/5/21 2020/6/3 2020/6/17 2020/7/15 2020/8/5 2020/9/16 2020/10/14 2020/11/4 2020/12/16
Session (Term-Sitting) (9-1) (9-2) (9-3) (9-4) (9-5) (9-6) (9-7) (9-8) (9-9)
Kenneth Huang-Chuan Chiu ◎ ◎ ◎ ◎ ◎ ◎ ◎ ◎ ◎
Duei Tsai ◎ ◎ ◎ ◎ ◎ ◎ ◎ ◎ ◎
Pai-Ta Shih ◎ ◎ ◎ ◎ ◎ ◎ ◎ ◎ ◎
Yung-Cheng (Rex) Lai ◎ ◎ ◎ ◎ ◎ ◎ ◎ ◎ ◎
----- End of picture text -----

3) Combined average actual director attendance rates of the 8th and 9th Board were 92% in 2020.

Other matters required to be recorded:

If any of the following circumstances occur during board meetings, the date of said meeting, session number, proposal content, all independent director opinions, and the Corporation's responses to said independent director opinions:
(1) Items listed according to Article 14-3 of the Securities and Exchange Act:

==> picture [483 x 470] intentionally omitted <==

----- Start of picture text -----

The Corporation's
Session Independent
Responses to
Date (Term- Agenda Content Director Resolutions
Independent Director
Sitting) Comments
Opinions
2020/1/15 8-34 Procurement strategy suggestions for Approved. Approved by the Board. Apart from directors who recused
civil engineering design and construction themselves from participating in
supervisory consultant services for discussions and voting according to legal
second rolling stock inspection and requirements, the remaining directors in
maintenance shop at Zuoying depot attendance approved the proposal.
2020/2/19 8-35 Proposal for approval to sign "Fifth Approved. Approved by the Board. Apart from directors who recused
Amendment of the NT$382 billion themselves from participating in
Syndicated Loan Agreement with respect discussions and voting according to legal
to Taiwan North-South High Speed Rail requirements, the remaining directors in
Construction and Operation Project" attendance approved the proposal.
2020/3/18 8-36 Procurement strategy and bid selection Approved. Approved by the Board. Apart from the Chairman and directors
suggestions for HSR meal boxes (Contract who recused themselves from
number: PCDD-19-1413) participating in discussions and voting
according to legal requirements, the
remaining directors in attendance
approved the proposal.
2020/3/18 8-36 Proposal for approval to sign "First Approved. Approved by the Board. Apart from directors who recused
Amended Agreement to Land Use themselves from participating in
Contract for Taiwan North-South High- discussions and voting according to legal
Speed Rail Traffic Facilities" requirements, the remaining directors in
attendance approved the proposal.
2020/3/18 8-36 Formulation of proposal regarding Approved. Approved by the Board. Approved by all directors in attendance.
"Revisions to the Corporation's
'Operational Procedures for Loaning
Funds to Others'" for submission and
discussion at shareholders' general
meeting on May 21, 2020
2020/3/18 8-36 Formulation of proposal regarding Approved. Approved by the Board. Approved by all directors in attendance.
"Revisions to the Corporation's
'Operational Procedures for
Endorsements and Guarantees'"
for submission and discussion at
shareholders' general meeting on May
21, 2020
----- End of picture text -----

061

Corporate Governance

==> picture [484 x 645] intentionally omitted <==

----- Start of picture text -----

The Corporation's
Session Independent
Responses to
Date (Term- Agenda Content Director Resolutions
Independent Director
Sitting) Comments
Opinions
2020/5/6 8-38 Formulation of plans for issuance of Approved. Approved by the Board. Approved by all directors in attendance.
unsecured ordinary corporate bonds
2020/5/6 8-38 Procurement and bid selection Approved. Approved by the Board. Apart from directors who recused
suggestions for civil engineering design themselves from participating in
and construction supervisory consultant discussions and voting according to legal
services for second rolling stock requirements, the remaining directors in
inspection and maintenance shop at attendance approved the proposal.
Zuoying depot (Contract number: C2-19-
003)
2020/6/17 9-3 Extension or transfer of letters of credit Approved. Approved by the Board. Apart from directors who recused
that expired during the second half of themselves from participating in
2020 discussions and voting according to legal
requirements, the remaining directors in
attendance approved the proposal.
2020/7/15 9-4 Procurement and re-bidding strategy Approved. Approved by the Board. Apart from directors who recused
suggestions for construction of Yanchao themselves from participating in
Main Workshop automated painting discussions and voting according to legal
shop equipment requirements, the remaining directors in
attendance approved the proposal.
2020/7/15 9-4 Procurement strategy suggestions for Approved. Approved by the Board. Apart from directors who recused
THSRC headquarters office and parking themselves from participating in
lease agreement discussions and voting according to legal
requirements, the remaining directors in
attendance approved the proposal.
2020/8/5 9-5 Suggestions for official appointment Approved. Approved by the Board. Approved by all directors in attendance.
granted to acting head of Finance
Division
2020/8/5 9-5 Revisions to the Corporation's "Internal Approved. Approved by the Board. Approved by all directors in attendance.
Control System"
2020/10/14 9-7 Procurement and bid selection Approved. Approved by the Board. Apart from directors who recused
suggestions for "Phase 3 Nangang themselves from participating in
Software Park Office Building Lease discussions and voting according to legal
from 2021 to 2023" contract (Contract requirements, the remaining directors in
number: PCDD-20-0945) and " Phase 3 attendance approved the proposal.
Nangang Software Park Parking Space
Lease from 2021 to 2023" contract
(Contract number: PCDD-20-0946)
2020/11/4 9-8 Collaboration plans for THSRC and China Approved. Approved by the Board. Apart from the Chairman and directors
Airlines joint tickets who recused themselves from
participating in discussions and voting
according to legal requirements, the
remaining directors in attendance
approved the proposal.
2020/11/4 9-8 Procurement strategy suggestions for Approved. Approved by the Board. Apart from directors who recused
ATP6 electrical substation core system themselves from participating in
power equipment control and relay discussions and voting according to legal
panel (CRP) research and development requirements, the remaining directors in
project attendance approved the proposal.
----- End of picture text -----

062

==> picture [483 x 175] intentionally omitted <==

----- Start of picture text -----

The Corporation's
Session Independent
Responses to
Date (Term- Agenda Content Director Resolutions
Independent Director
Sitting) Comments
Opinions
2020/12/16 9-9 Extension of quota for derivative assets Approved. Approved by the Board. Apart from directors who recused
that expired during the first half of 2021 themselves from participating in
discussions and voting according to legal
requirements, the remaining directors in
attendance approved the proposal.
2020/12/16 9-9 Extension or transfer of letters of credit Approved. Approved by the Board. Apart from directors who recused
that expired during the first half of 2021 themselves from participating in
discussions and voting according to legal
requirements, the remaining directors in
attendance approved the proposal.
----- End of picture text -----

(2) Other instances where an independent director expressed objections or reservations on record or through written opinions regarding board meeting proposals, apart from the aforementioned matters: None.
Implementation of director recusals on proposals due to conflicts of interest, including director names, proposal content, reasons for recusal, and participation in voting procedures:

==> picture [484 x 427] intentionally omitted <==

----- Start of picture text -----

Names of
Session
Directors with Reasons for Recusal and Participation in Voting
Date (Term- Agenda Content Resolutions
Potential Conflicts Procedures
Sitting)
of Interest
2020/1/15 8-34 Procurement strategy Director Min-Ching CECI Engineering Consultants, Inc. Taiwan, one of the Apart from
suggestions for civil Liu potential bidders for this project, is a 100% reinvested directors who
engineering design and company of China Engineering Consultants, Inc., a recused themselves
construction supervisory company established by the Executive Yuan Ministry from participating
consultant services of Transportation and Communications. The Ministry in discussions
for second rolling stock of Transportation and Communications has a and voting
inspection and maintenance director representative serving on the THSRC Board, according to legal
shop at Zuoying depot necessitating recusal of voting rights to avoid conflicts requirements,
of interest. Director Min-Ching Liu absented from the the remaining
proceedings and was recused during the reading and directors in
review of this proposal. attendance
approved the
proposal.
2020/2/19 8-35 Proposal for approval to sign Independent Hua Nan Commercial Bank, one of the banks Apart from
"Fifth Amendment of the Director Kung-Wha involved in this project, is a subsidiary of Mega directors who
NT$382 billion Syndicated Ding and Director Financial Holding Co Ltd., and the spouse of THSRC recused themselves
Loan Agreement with respect Shien-Quey Kao Independent Director Kung-Wha Ding is the general from participating
to Taiwan North-South High manager of Hua Nan Financial Holdings; additionally, in discussions
Speed Rail Construction and the Executive Yuan Management Committee and voting
Operation Project" of National Development Fund has director according to legal
representatives at Mega Financial Holding Co Ltd. (the requirements,
parent company of Mega International Commercial the remaining
Bank) and Chang Hwa Bank, and Director Shien- directors in
Quey Kao serves as the director representative of the attendance
Executive Yuan Management Committee of National approved the
Development Fund on the THSRC Board, necessitating proposal.
recusal of voting rights to avoid conflicts of interest.
Independent Director Kung-Wha Ding and Director
Shien-Quey Kao absented from the proceedings and
were recused during the reading and review of this
proposal.
----- End of picture text -----

063

Corporate Governance

==> picture [485 x 595] intentionally omitted <==

----- Start of picture text -----

Names of
Session
Directors with Reasons for Recusal and Participation in Voting
Date (Term- Agenda Content Resolutions
Potential Conflicts Procedures
Sitting)
of Interest
2020/3/18 8-36 Procurement strategy and Chairman Yao- More than 50% of company shares at Kaohsiung Apart from the
bid selection suggestions for Chung Chiang and Airport Catering Services Ltd., the company that was Chairman and
HSR meal boxes (Contract directors Huang- awarded this contract, are held by China Airlines. directors who
number: PCDD-19-1413) Liang Tsai, Shien- Many directors at China Airlines are representatives recused themselves
Quey Kao, Min- of the China Aviation Development Foundation, and from participating
Ching Liu, and Lee- THSRC Chairman Yao-Chung Chiang and Director in discussions
Ching Ko Huang-Liang Tsai also serve as representatives of and voting
the China Aviation Development Foundation. THSRC according to legal
Director Shien-Quey Kao is a representative of the requirements,
Management Committee of National Development the remaining
Fund (Executive Yuan), which holds 9.5% of China directors in
Airlines shares and THSRC Director Min-Ching attendance
Liu serves as a representative of the Ministry of approved the
Transportation and Communications, the government proposal.
entity which funded the establishment of and
has substantial influence over the China Aviation
Development Foundation. Some directors and
supervisors at Kaohsiung Airport Catering Services are
representatives of Uni Air and Evergreen International
Corporation, two companies which together hold
more than 40% of shares in Kaohsiung Airport
Catering Services Ltd. Additionally, the two companies
belong to the same corporate group as THSRC
Director Lee-Ching Ko, who serves as a representative
of Evergreen Steel, necessitating recusal of voting
rights to avoid conflicts of interest. Chairman Yao-
Chung Chiang and directors Huang-Liang Tsai, Shien-
Quey Kao, Min-Ching Liu, and Lee-Ching Ko absented
from the proceedings and were recused during the
reading and review of this proposal. Chairman Chiang
appointed Independent Director Kung-Wha Ding to
serve as deputy chair for the meeting.
2020/3/18 8-36 Proposal for approval to sign Director Min-Ching The Ministry of Transportation and Communications, Apart from
"First Amended Agreement to Liu the counterparty to this transaction, has a director directors who
Land Use Contract for Taiwan representative serving at THSRC, necessitating recusal recused themselves
North-South High-Speed Rail of voting rights to avoid conflicts of interest. Director from participating
Traffic Facilities" Min-Ching Liu absented from the proceedings and in discussions
was recused during the reading and review of this and voting
proposal. according to legal
requirements,
the remaining
directors in
attendance
approved the
proposal.
----- End of picture text -----

064

Date	Session (Term- Sitting)	Agenda Content	Names of Directors with Potential Conficts of Interest	Reasons for Recusal and Participation in Voting Procedures	Resolutions
2020/4/8 8-37 Submission of "Removal of non-competition restrictions for the Corporation's 9th Board" proposal for discussion at the shareholders' general meeting on May 21, 2020 Chairman Yao- Chung Chiang; directors Min- Ching Liu, Lee- Ching Ko, Mao- Hsiung Huang, Kuo-Chih Liu; and Independent Director Kenneth Huang-Chuan Chiu Chairman Yao-Chung Chiang; directors Min-Ching Liu, Lee-Ching Ko, Mao-Hsiung Huang, Kuo-Chih Liu; and Independent Director Kenneth Huang-Chuan Chiu did not participate in discussions and voting procedures on behalf of themselves or the government and legal entities they represent regarding removal of non- competition restrictions. Additionally, directors Shyi- Chin Wang and Tao-I Kwan did not attend this board meeting and did not appoint proxies to participate in discussions and voting procedures on behalf of the legal entities they represent regarding removal of non-competition restrictions. Apart from the Chairman and directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal.
2020/5/6 8-38 Procurement and bid selection suggestions for civil engineering design and construction supervisory consultant services for second rolling stock inspection and maintenance shop at Zuoying depot (Contract number: C2- 19-003) Director Min-Ching Liu CECI Engineering Consultants, Inc. Taiwan, the company that was awarded this contract, is a 100% reinvested company of China Engineering Consultants, Inc., a company established by the Executive Yuan Ministry of Transportation and Communications. The Ministry of Transportation and Communications has a director representative serving on the THSRC Board, necessitating recusal of voting rights to avoid conficts of interest. Director Min-Ching Liu absented from the proceedings and was recused during the reading and review of this proposal. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal.
2020/5/21 9-1 Proposal for approval to sign THSRC "Industry-academia collaboration agreement" and "Academic rebate agreement" Independent directors Pai-Ta Shih and Yung- Cheng (Rex) Lai According to the stipulations of the "Regulations Governing Concurrent Positions for Full-Time Faculty of Public Schools" issued by the Ministry of Education, following election of independent directors at shareholders' meetings, companies are required to sign industry-academia collaboration and academic rebate agreements with the schools where said independent directors are employed. As independent directors Pai-Ta Shih and Yung-Cheng (Rex) Lai are currently full-time professors at National Taiwan University, this proposal was handled in accordance with National Taiwan University's Regulations for Collecting and Distributing Academic Rebates from For-Proft Institutes or Organizations where Full- Time Faculty hold Full-Time or Concurrent Positions," necessitating recusal of voting rights to avoid conficts of interest. Independent directors Pai-Ta Shih and Yung-Cheng (Rex) Lai absented rom the proceedings and were recused during the reading and review of this proposal. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal.

065

Corporate Governance

==> picture [485 x 549] intentionally omitted <==

----- Start of picture text -----

Names of
Session
Directors with Reasons for Recusal and Participation in Voting
Date (Term- Agenda Content Resolutions
Potential Conflicts Procedures
Sitting)
of Interest
2020/6/17 9-3 Extension or transfer of Director Shien- The Executive Yuan Management Committee of Apart from
letters of credit that expired Quey Kao National Development Fund, which is represented directors who
during the second half of by THSRC Director Shien-Quey Kao, is a director of recused themselves
2020 Chang Hwa Bank, the bank involved in this proposal, from participating
necessitating recusal of voting rights to avoid conflicts in discussions
of interest. Director Shien-Quey Kao absented from and voting
the proceedings and was recused during the reading according to legal
and review of this proposal. requirements,
the remaining
directors in
attendance
approved the
proposal.
2020/6/17 9-3 Suggestions regarding Independent The four independent directors recused themselves Apart from
remuneration adjustments directors Kenneth and did not participate in discussions and voting independent
for directors on the 9th Board Huang-Chuan Chiu, procedures when reviewing fixed remuneration for directors who
of Directors Duei Tsai, Pai-Ta independent directors. recused themselves
Shih, and Yung- from participating
Cheng (Rex) Lai in discussions
and voting
according to legal
requirements,
the remaining
directors in
attendance
approved the
proposal.
2020/7/15 9-4 Suggestions regarding Independent This remuneration adjustment proposal involved Apart from
individual remuneration Director Duei Tsai the personal interests of a director. Independent independent
adjustments for independent Director Duei Tsai absented from the proceedings and directors who
directors on the 9th Board of was recused during the reading and review of this recused themselves
Directors proposal. from participating
in discussions
and voting
according to legal
requirements,
the remaining
directors in
attendance
approved the
proposal.
----- End of picture text -----

066

Date	Session (Term- Sitting)	Agenda Content	Names of Directors with Potential Conficts of Interest	Reasons for Recusal and Participation in Voting Procedures	Resolutions
2020/7/15 9-4 Procurement and re-bidding strategy suggestions for construction of Yanchao Main Workshop automated painting shop equipment Directors Chao- Tung Wong and Chao-Yih Chen THSRC directors Chao-Tung Wong and Chao-Yih Chen are the managing director and director of the Industrial Technology Research Institute, necessitating recusal of voting rights to avoid conficts of interest. Directors Chao-Tung Wong and Chao-Yih Chen absented from the proceedings and were recused during the reading and review of this proposal. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal.
2020/7/15 9-4 Procurement strategy suggestions for THSRC headquarters offce and parking lease agreement Director Mao- Hsiung Huang THSRC Director Mao-Hsiung Huang is the chairman of Century Development Corporation, the counterparty to this transaction, necessitating recusal of voting rights to avoid conficts of interest. Director Mao- Hsiung Huang absented from the proceedings and was recused during the reading and review of this proposal. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal.
2020/8/5 9-5 Suggestions for strengthening links between non- fxed remuneration and operational performance for THSRC chairman and president Chairman Yao- Chung Chiang This proposal involved the personal interests of a director. Chairman Yao-Chung Chiang absented from the proceedings and was recused during the reading and review of this proposal. Chairman Chiang appointed Independent Director Duei Tsai to serve as deputy chair for the meeting. The managerial department was instructed to reference opinions proposed by attending directors, discuss and revise the standards for payment of performance bonuses, and then submit said standards to the Remuneration Committee and the Board for review.

067

Corporate Governance

==> picture [485 x 645] intentionally omitted <==

----- Start of picture text -----

Names of
Session
Directors with Reasons for Recusal and Participation in Voting
Date (Term- Agenda Content Resolutions
Potential Conflicts Procedures
Sitting)
of Interest
2020/9/16 9-6 Suggestions for strengthening Chairman Yao- This proposal involved the personal interests of Apart from the
links between non- Chung Chiang a director. Chairman Yao-Chung Chiang absented Chairman who
fixed remuneration and from the proceedings and was recused during the recused himself
operational performance reading and review of this proposal. Chairman Chiang from participating
for THSRC chairman and appointed Independent Director Duei Tsai to serve as in discussions
president deputy chair for the meeting. and voting
according to legal
requirements,
the remaining
directors in
attendance
approved the
proposal.
2020/10/14 9-7 Procurement and bid Director Mao- THSRC Director Mao-Hsiung Huang is the chairman of Apart from
selection suggestions for Hsiung Huang Century Development Corporation, the counterparty directors who
"Phase 3 Nangang Software to this transaction, necessitating recusal of voting recused themselves
Park Office Building Lease rights to avoid conflicts of interest. Director Mao- from participating
from 2021 to 2023" contract Hsiung Huang absented from the proceedings and in discussions
(Contract number: PCDD-20- was recused during the reading and review of this and voting
0945) and "Phase 3 Nangang proposal. according to legal
Software Park Parking Space requirements,
Lease from 2021 to 2023" the remaining
contract (Contract number: directors in
PCDD-20-0946) attendance
approved the
proposal.
2020/11/4 9-8 Collaboration plans for THSRC Chairman Yao- More than half of the directors at China Airlines, Apart from the
and China Airlines joint Chung Chiang and the counterparty to the transactions under this Chairman and
tickets directors Lee-Ching proposal, represent the China Aviation Development directors who
Ko, Kwo-Tsai Wang, Foundation, a government-related entity overseen by recused themselves
Yueh-Hsiang Chen, the Executive Yuan (Ministry of Transportation and from participating
and Shien-Quey Communications). THSRC Chairman Yao-Chung Chiang in discussions
Kao and Director Lee-Ching Ko are representatives of the and voting
China Aviation Development Foundation, Director according to legal
Kwo-Tsai Wang is the chairman of the China Aviation requirements,
Development Foundation, Director Yueh-Hsiang Chen the remaining
is a representative of the Ministry of Transportation directors in
and Communications (a government entity), and attendance
Director Shien-Quey Kao is a representative of the approved the
Executive Yuan Management Committee of National proposal.
Development Fund, which has appointed a director
representative at China Airlines, necessitating recusal
of voting rights to avoid conflicts of interest. Chairman
Yao-Chung Chiang and directors Lee-Ching Ko, Kwo-
Tsai Wang, Yueh-Hsiang Chen, and Shien-Quey Kao
absented from the proceedings and were recused
during the reading and review of this proposal.
Chairman Chiang appointed Independent Director
Duei Tsai to serve as deputy chair for the meeting.
----- End of picture text -----

068

Date	Session (Term- Sitting)	Agenda Content	Names of Directors with Potential Conficts of Interest	Reasons for Recusal and Participation in Voting Procedures	Resolutions
2020/11/4 9-8 Procurement strategy suggestions for ATP6 electrical substation core system power equipment control and relay panel (CRP) research and development project Director Chao-Tung Wong InfoChamp Systems Corporation, one of the potential bidders for this project, is a 100% reinvested company of China Steel Corporation, which is represented by THSRC Director Chao-Tung Wong, necessitating recusal of voting rights to avoid conficts of interest. Director Chao-Tung Wong absented from the proceedings and was recused during the reading and review of this proposal. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal.
2020/12/16 9-9 Extension of quota for derivative assets that expired during the frst half of 2021 Director Shien- Quey Kao The Executive Yuan Management Committee of National Development Fund, which is represented by THSRC Director Shien-Quey Kao, has appointed director representatives at Mega Financial Holding Co Ltd., the parent company of Mega International Commercial Bank (the bank involved in this proposal), necessitating recusal of voting rights to avoid conficts of interest. Director Shien-Quey Kao absented from the proceedings and was recused during the reading and review of this proposal. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal.
2020/12/16 9-9 Extension or transfer of letters of credit that expired during the frst half of 2021 Director Shien- Quey Kao The Executive Yuan Management Committee of National Development Fund, which is represented by THSRC Director Shien-Quey Kao, has appointed director representatives at Mega Financial Holding Co Ltd., the parent company of Mega International Commercial Bank (the bank involved in this proposal), necessitating recusal of voting rights to avoid conficts of interest. Director Shien-Quey Kao absented from the proceedings and was recused during the reading and review of this proposal. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal.

Disclosures of exchange-listed or OTC-listed company self-evaluations (or peer evaluations) of the Board, including information on evaluation cycle and duration, scope of evaluation, method of evaluation, and content of evaluation, as well as implementation status of Board evaluations:

Implementation Status of Board Evaluations:

Implemented in accordance with the "Regulation of Self-Evaluation of the Board of Directors" approved by the 27th meeting of the 7th Board held on March 21, 2017. For more information regarding results of external evaluations on board performance, please refer to (6) Corporate Governance Implementation Status and Deviations from "the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies" in this same chapter. The information has also been disclosed on our corporate website.

069

Corporate Governance

==> picture [483 x 470] intentionally omitted <==

----- Start of picture text -----

Evaluation
Evaluation Cycle Scope of Evaluation Method of Evaluation Content of Evaluation
Duration
1. Internal Board January Included Internal self-evaluations were Assessment items for Board performance
performance 1, 2020 to performance conducted on the Board, Board evaluations included 25 indicators across
evaluations: December evaluations of the directors, and members of five main aspects: participation in corporate
implemented every 31, 2020 Board, individual functional committees. operations, enhancement of Board decision-
year. directors, and making quality, Board composition and structure,
functional director elections and continued training, and
committees. internal control.
Assessment items for Board director performance
evaluations included 25 indicators across six
main aspects: understanding of corporate goals
and tasks, recognition of director responsibilities,
participation in corporate operations, internal
relations and communication, director knowledge
and continued training, and internal control.
Assessment items for functional committee
member performance evaluations included 25
indicators across five main aspects: participation
in corporate operations, recognition of functional
committee responsibilities, enhancement of
functional committee decision-making quality,
composition of functional committees and
election of committee members, and internal
control.
2. External Board March 1, Included The evaluations for 2019 were External Board performance evaluations included
performance 2018 to performance conducted by the Taiwan eight main aspects: Board composition, Board
evaluations: one February 28, evaluations of the Corporate Governance Association, guidance, Board authority, Board supervision,
evaluation is 2019. Board, individual which conducted reviews of the Board communication, internal control and risk
conducted every directors, and relevant documents submitted by management, self-discipline of the Board, and
three years by functional THSRC for evaluations, and also others (Board meetings, support systems, and so
external professional committees. commissioned experts to conduct on). Experts conducting the evaluations referenced
independent on-site evaluations and interviews information provided by THSRC and publicly
institutes or external with the Corporation's Chairman, available information regarding implementation
teams composed President, independent directors, for each indicator and carried out on-site
of experts and corporate governance officers, interviews before submitting evaluation reports.
scholars. head of corporate planning office ,
and accountants.
----- End of picture text -----

Strengthening of functional goals (for example establishment of audit committee and enhancement of information transparency) for the Board for this year and in the most recent year, and assessment of implementation:
(1) In consideration of appropriate Board scale, representation of shareholder interests, business nature of BOT projects, and corporate development, as well as implementation of Board diversification policies, shareholder structure, and meeting efficiency, the number of directors serving on the 9th Board were elected at the shareholders' general meeting held on May 21, 2020. There are 13 directors on the Board; the number of independent directors were increased to 4 from the original 3, and the remaining 9 directors were non-independent directors. Functional committees such as the Corporate Governance & Nomination Committee, Audit Committee, Remuneration Committee, and Special Committee were established under the 9th Board. The Audit Committee and the Remuneration Committee are convened by independent directors, while more than half of the members in the Corporate Governance & Nomination Committee are independent directors. The composition of these committees, their duties, and implementation status are disclosed in this annual report and on the Corporation website. All functional committees have a duty of pre-assessment and help to enhance meeting efficiency and quality. Independent directors exercise their independence and professionalism by sharing their professional opinions during meetings.

070

(2) The Corporation has taken out a total of NT$ 0.9 billion in D&O liability insurance for directors and important managerial officers to help reduce risk of legal liability and to enhance corporate governance capabilities.
(3) In 2020, in order to strengthen our corporate governance system, the functional committees of the Corporation pre-assessed proposals to establish or revise basic and management bylaws relating to corporate governance, and submitted these to the Board for approval; the corporate bylaws concerned included the "Rules of Procedure for Shareholders' Meetings," "Rules of Procedure for Board of Directors Meetings," "Charter of the Corporate Governance & Nominating Committee," "Charter of the Audit Committee," "Charter of the Remuneration Committee," "Charter of the Special Committee," "Standardized Operating Procedure for Handling Directors' Requests," "Ethical Corporate Management Best Practice Principles," "Regulation of WhistleBlowing System for Unlawful, Unethical Conduct and Dishonesty Behavior," "THSRC Organizational Regulation," "Internal Control System," "Regulations of Responsibility & Authority," and "General Delegation of Responsibility and Authority."
(4) Our corporate governance information is disclosed on the Market Observation Post System in accordance with relevant regulations, and we have also established corporate social responsibility, investor relations, and corporate governance sections on our corporate website to provide detailed and timely disclosures of information that are of concern to our stakeholders. Additionally, we regularly review our "Regulations of Disclosure Information," "Guidelines for Disclosure of Material Information and Major News Submitted to Directors," "Regulation for Posting Information on 'Market Observation Post System,'" and "Media Management Procedure" and other regulations relating to information disclosures, and make timely adjustments based on the latest laws and regulations and our actual operations.
(5) Since going public, THSRC has been ranked among the top 5% of publicly listed companies by the TWSE Corporate Governance Evaluations for three consecutive years (from 2017 to 2019). Additionally, we were awarded a "Platinum" certification by the Taiwan Corporate Governance Association under the CG6012 (2019) Corporate Governance System Assessment on July 28, 2020, the certification period being from July 9, 2020 to July 8, 2022.

(2) Operational Status of Audit Committee

1) The Corporation's Audit Committee was established on March 18, 2016 to replace our supervisor system, and the committee is composed of the independent directors on our Board of Directors. The number of committee members cannot be fewer than three, and at least one of them has to have professional expertise in accounting or finance. Following election of Board members by the shareholders' general meeting on May 24, 2017, the 8th committee members served until May 23, 2020; there were three members on the committee and Independent Director Kung-Wha Ding was elected as convener. Additionally, following election of Board members by the shareholders' general meeting on May 21, 2020, the 9th committee members will serve until May 20, 2023; there are four members on the committee and Independent Director Duei Tsai was elected as convener by all committee members. The committee operates according to the "Charter of the Audit Committee" and convenes at least once every quarter.
2) The main duties of the committee and focuses for 2020 included review and supervision of financial reports, risk management items, and financial proposals, as well as the auditing of: financial reports; accounting and internal control systems; transactions of major assets or derivatives; offering and issuance of securities; appointment, dismissal, or compensation of Certified Public Accountants (CPAs); matters involving director conflicts of interest; and appointment and dismissal of chief financial officer, chief accountant, or chief internal auditor. (Please refer to Chapter Three of this report for details regarding the main duties of the Audit Committee).
A. Review financial reports: The Corporation's business reports, annual financial reports, and surplus distribution proposals all have to be reviewed by the Audit Committee before submission to the Board for approval and the shareholders' general meeting for recognition. The Corporation's 2020 financial report was submitted to the 9th Board at the 9th Audit Committee Meeting held on February 23, 2021, was approved by the 9th Board at the 11th Board Meeting on February 24, 2021, and will be submitted to the 2021 shareholders' general meeting for recognition. Additionally, all quarterly financial reports also have to be discussed and approved by the Audit Committee before submission to the Board.

071

Corporate Governance

B. Assess efficiency of internal control system: The self-assessment results for the Corporation's internal control system are completed by all units through cyclical procedures and submitted to the Audit Committee for confirmation of internal control systems, which includes understanding of operational performance, efficiency, and goal attainment rates; reliability, timeliness, transparency, and legal compliance of reporting measures; and efficient implementation to ensure that relevant goals are met. Results of selfassessments for our internal control system in 2020 were submitted to the 9th Board at the 9th Audit Committee Meeting held on February 23, 2021, and were approved by the 9th Board at the 11th Board Meeting on February 24, 2021.
C. Appoint and evaluate CPAs: The Audit Committee periodically assesses the professionalism, independence, and audit fees of CPAs at the end of each year. CPA assessment results for 2020 were approved by the 9th Board at the 9th Audit Committee Meeting held on February 23, 2021 and the 9th Board at the 11th Board Meeting on February 24, 2021, confirming that accountants Mei-Yen Chiang and Kwan-Chung Lai of Deloitte & Touche both fulfilled assessment standards for independence and competency.
3) The Audit Committee convened 12 times in 2020, and the operational status of the committee was as follows:
A. Operational Status of 8th Audit Committee in 2020:

==> picture [483 x 120] intentionally omitted <==

----- Start of picture text -----

Actual Required Attendance
Title Name By Proxy Remarks
Attendances Attendances Rate (%)
Independent Director
Kung-Wha Ding 5 0 5 100
(Convener)
Independent Director Kenneth Huang-Chuan Chiu 5 0 5 100
Independent Director Da-Wei (David) Poo 5 0 5 100
Average actual attendances of 8th Audit Committee
members in 2020 (%) 15 0 15 100
(Total actual attendances/Total required attendances)
----- End of picture text -----

B. Operational Status of 9th Audit Committee in 2020:

Title	Name	Actual Attendances	By Proxy	Required Attendances	Attendance Rate (%)	Remarks
Independent Director (Convener) Duei Tsai 7 0 7 100
Independent Director Kenneth Huang-Chuan Chiu 7 0 7 100
Independent Director Pai-Ta Shih 7 0 7 100
Independent Director Yung-Cheng (Rex) Lai 7 0 7 100
Average actual attendances of 9th Audit Committee members in 2020 (%) (Total actual attendances/Total required attendances) 28 0 28 100

C. Combined average 8th and 9th Audit Committee member attendance rates were 100% in 2020.
Other matters required to be recorded:
If any of the following circumstances occur during Audit Committee meetings, the date of said meeting, session number, proposal content, Audit Committee resolutions, and the Corporation's responses to Audit Committee opinions should be recorded:
(1) Items listed according to Article 14-5 of the Securities and Exchange Act: As detailed in the following table.
(2) Other instances apart from the aforementioned matters where the Audit Committee did not approve a proposal, but more than two-thirds of directors approved said proposal: None.

072

==> picture [483 x 587] intentionally omitted <==

----- Start of picture text -----

Items not
approved
Audit Items listed by the
Board
Committee according Audit
Meeting The Corporation's
Meeting to Article Committee,
Date Audit Committee Responses to
Agenda Content Date Board Resolutions 14-5 of the but
Session Resolutions Audit Committee
Session Securities approved
(Term- Opinions
(Term- and by more
Sitting)
Sitting) Exchange Act than two-
thirds of
directors
2020/1/15 Procurement strategy 2020/1/14 Approved by all Approved by the Apart from directors Ｖ
(8-34) suggestions for civil (8-32) committee members in Board. who recused
engineering design attendance. themselves from
and construction participating
supervisory in discussions
consultant services and voting
for second rolling according to legal
stock inspection and requirements, the
maintenance shop at remaining directors
Zuoying depot in attendance
approved the
proposal.
2020/2/19 Formulation of 2019 2020/2/17 Approved by all Approved by the Approved by Ｖ
(8-35) financial report (8-33) committee members in Board. all directors in
attendance. attendance.
2020/2/19 Proposal for 2020/2/17 Approved by all Approved by the Apart from directors Ｖ
(8-35) approval to sign (8-33) committee members in Board. who recused
"Fifth Amendment attendance. themselves from
of the NT$382 participating
billion Syndicated in discussions
Loan Agreement and voting
with respect to according to legal
Taiwan North-South requirements, the
High Speed Rail remaining directors
Construction and in attendance
Operation Project" approved the
proposal.
2020/2/19 Self-assessment 2020/2/17 Approved by all Handled in Approved by Ｖ
(8-35) results of internal (8-33) committee members accordance with all directors in
control system for in attendance; the Audit Committee attendance.
2019 managerial department resolutions and
was instructed to further submitted to the
analyze reasons behind Board for approval.
and improvement plans
for previous assessment
items with higher
amounts of feedback.
----- End of picture text -----

073

Corporate Governance

Board Meeting Date Session (Term- Sitting)	Agenda Content	Audit Committee Meeting Date Session (Term- Sitting)	Audit Committee Resolutions	The Corporation's Responses to Audit Committee Opinions	Board Resolutions	Items listed according to Article 14-5 of the Securities and Exchange Act	Items not approved by the Audit Committee, but approved by more than two- thirds of directors
2020/3/18 (8-36) Procurement strategy and bid selection suggestions for HSR meal boxes (Contract number: PCDD-19- 1413) 2020/3/13 (8-34) Approved by all committee members in attendance. Approved by the Board. Apart from the Chairman and directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal. Ｖ
2020/3/18 (8-36) Proposal for approval to sign "First Amended Agreement to Land Use Contract for Taiwan North- South High-Speed Rail Traffc Facilities" 2020/3/13 (8-34) Apart from committee members who recused themselves from participating in discussions and voting according to legal requirements, the remaining committee members in attendance approved the proposal. Approved by the Board. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal. Ｖ
2020/3/18 (8-36) Formulation of proposal regarding "Revisions to the Corporation's 'Operational Procedures for Loaning Funds to Others'" for submission and discussion at shareholders' general meeting on May 21, 2020 2020/3/13 (8-34) Approved by all committee members in attendance. Approved by the Board. Approved by all directors in attendance. Ｖ

074

Board Meeting Date Session (Term- Sitting)	Agenda Content	Audit Committee Meeting Date Session (Term- Sitting)	Audit Committee Resolutions	The Corporation's Responses to Audit Committee Opinions	Board Resolutions	Items listed according to Article 14-5 of the Securities and Exchange Act	Items not approved by the Audit Committee, but approved by more than two- thirds of directors
2020/3/18 (8-36) Formulation of proposal regarding "Revisions to the Corporation's 'Operational Procedures for Endorsements and Guarantees'" for submission and discussion at shareholders' general meeting on May 21, 2020 2020/3/13 (8-34) Approved by all committee members in attendance. Approved by the Board. Approved by all directors in attendance. Ｖ
2020/5/6 (8-38) Formulation of plans for issuance of unsecured ordinary corporate bonds 2020/5/4 (8-36) Approved by all committee members in attendance. Approved by the Board. Approved by all directors in attendance. Ｖ
2020/5/6 (8-38) Procurement and bid selection suggestions for civil engineering design and construction supervisory consultant services for second rolling stock inspection and maintenance shop at Zuoying depot (Contract number: C2-19-003) 2020/5/4 (8-36) Approved by all committee members in attendance. Approved by the Board. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal. Ｖ
2020/6/17 (9-3) Extension or transfer of letters of credit that expired during the second half of 2020 2020/6/16 (9-1) Approved by all committee members in attendance. Approved by the Board. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal. Ｖ

075

Corporate Governance

==> picture [484 x 633] intentionally omitted <==

----- Start of picture text -----

Items not
approved
Audit Items listed by the
Board
Committee according Audit
Meeting The Corporation's
Meeting to Article Committee,
Date Audit Committee Responses to
Agenda Content Date Board Resolutions 14-5 of the but
Session Resolutions Audit Committee
Session Securities approved
(Term- Opinions
(Term- and by more
Sitting)
Sitting) Exchange Act than two-
thirds of
directors
2020/7/15 Procurement and 2020/7/14 Approved by all Handled in Apart from directors Ｖ
(9-4) re-bidding strategy (9-2) committee members accordance with who recused
suggestions for in attendance; the Audit Committee themselves from
construction of managerial department resolutions and participating
Yanchao Main was instructed to provide submitted to the in discussions
Workshop automated risk assessments and Board for approval. and voting
painting shop response measures for according to legal
equipment this proposal before requirements, the
submission to the Board remaining directors
for review. in attendance
approved the
proposal.
2020/7/15 Procurement strategy 2020/7/14 Approved by all Approved by the Apart from directors Ｖ
(9-4) suggestions for (9-2) committee members in Board. who recused
THSRC headquarters attendance. themselves from
office and parking participating
lease agreement in discussions
and voting
according to legal
requirements, the
remaining directors
in attendance
approved the
proposal.
2020/8/5 2020 Q2 Financial 2020/8/3 Approved by all Handled in Approved by Ｖ
(9-5) Report (9-3) committee members accordance with all directors in
in attendance; the Audit Committee attendance.
managerial department resolutions and
was instructed to submitted to the
provide supplementary Board for approval.
explanations regarding
financial report current
financial asset accounts,
approval procedures,
and compliance with the
Regulations Governing
the Acquisition and
Disposal of Assets by
Public Companies before
submission to the Board
for review.
----- End of picture text -----

076

==> picture [483 x 599] intentionally omitted <==

----- Start of picture text -----

Items not
approved
Audit Items listed by the
Board
Committee according Audit
Meeting The Corporation's
Meeting to Article Committee,
Date Audit Committee Responses to
Agenda Content Date Board Resolutions 14-5 of the but
Session Resolutions Audit Committee
Session Securities approved
(Term- Opinions
(Term- and by more
Sitting)
Sitting) Exchange Act than two-
thirds of
directors
2020/8/5 Suggestions for 2020/8/3 Approved by all Approved by the Approved by Ｖ
(9-5) official appointment (9-3) committee members in Board. all directors in
granted to acting attendance. attendance.
head of Finance
Division
2020/8/5 Revisions to the 2020/8/3 Approved by all Approved by the Approved by Ｖ
(9-5) Corporation's (9-3) committee members in Board. all directors in
"Internal Control attendance. attendance.
System"
2020/10/14 Procurement and bid 2020/10/13 Approved by committee Approved by the Apart from directors Ｖ
(9-7) selection suggestions (9-5) members in attendance. Board. who recused
for "Phase 3 themselves from
Nangang Software participating
Park Office Building in discussions
Lease from 2021 and voting
to 2023" contract according to legal
(Contract number: requirements, the
PCDD-20-0945) and remaining directors
"Phase 3 Nangang in attendance
Software Park approved the
Parking Space Lease proposal.
from 2021 to 2023"
contract (Contract
number: PCDD-20-
0946)
2020/11/4 Collaboration plans 2020/11/2 Approved by all Approved by the Apart from the Ｖ
(9-8) for THSRC and China (9-6) committee members in Board. Chairman and
Airlines joint tickets attendance. directors who
recused themselves
from participating
in discussions
and voting
according to legal
requirements, the
remaining directors
in attendance
approved the
proposal.
----- End of picture text -----

077

Corporate Governance

Board Meeting Date Session (Term- Sitting)	Agenda Content	Audit Committee Meeting Date Session (Term- Sitting)	Audit Committee Resolutions	The Corporation's Responses to Audit Committee Opinions	Board Resolutions	Items listed according to Article 14-5 of the Securities and Exchange Act	Items not approved by the Audit Committee, but approved by more than two- thirds of directors
2020/11/4 (9-8) Procurement strategy suggestions for ATP6 electrical substation core system power equipment control and relay panel (CRP) research and development project 2020/11/2 (9-6) Approved by all committee members in attendance; the managerial department was instructed to reference opinions proposed by attending committee members and compile clear and comprehensive information that could be summarized and reported to the Board. Handled in accordance with Audit Committee resolutions and submitted to the Board for approval. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal. Ｖ
2020/12/16 (9-9) Extension of quota for derivative assets that expired during the frst half of 2021 2020/12/15 (9-7) Approved by all committee members in attendance. Approved by the Board. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal. Ｖ
2020/12/16 (9-9) Extension or transfer of letters of credit that expired during the frst half of 2021 2020/12/15 (9-7) Approved by all committee members in attendance. Approved by the Board. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal. Ｖ

078

Implementation of independent director recusals on proposals due to conflicts of interest, including independent director names, proposal content, reasons for recusal, and participation in voting procedures:

==> picture [483 x 77] intentionally omitted <==

----- Start of picture text -----

Board Audit
Meeting Committee
Reasons for Recusal and
Date Meeting Independent Director Audit Committee Meeting and
Agenda Content Participation in Voting
Session Date Session Name Board Resolutions
Procedures
(Term- (Term-
Sitting) Sitting)
----- End of picture text -----

2020/2/19	Proposal for	2020/2/17	Independent Director	Hua Nan Commercial Bank, one	1. Audit Committee: Apart from
(8-35)	approval to sign	(8-33)	Kung-Wha Ding	of the banks involved in this	committee members who
	"Fifth Amendment			proposal, is a subsidiary of Hua	recused themselves from
	of the NT$382			Nan Financial Holdings. The	participating in discussions
	billion Syndicated			spouse of THSRC Independent	and voting according to legal
	Loan Agreement			Director Kung-Wha Ding is the	requirements, the remaining
	with respect to			general manager of Hua Nan	committee members in
	Taiwan North-South			Financial Holdings, necessitating	attendance approved the
	High Speed Rail			recusal of voting rights to avoid	proposal.
	Construction and			conficts of interest. Independent	2. Board: Apart from directors
	Operation Project"			Director Kung-Wha Ding absented	who recused themselves from
				from the proceedings and was	participating in discussions
				recused during the reading and	and voting according to legal
				review of this proposal.	requirements, the remaining
					directors in attendance
					approved the proposal.

Communication status between independent directors, chief internal auditor, and certified public accountants(CPAs) (should include communication of major items, methods, and results relating to corporate finance and business affairs):
(1) THSRC's chief internal auditor periodically present internal audit reports to the Audit Committee and fully communicate status of audit implementation, follow-up of improvements to errors, and implementation results. Chief internal auditor not only periodically provide independent directors with written audit reports, but also present business reports based on suggestions from independent directors.
(2) CPAs periodically present annual and quarterly audits of financial reports and audit reports to the Audit Committee, and also communicate other matters according to relevant laws.
(3) Individual meetings between independent directors, chief internal auditor, and CPAs are convened at least once a year. Chief internal auditor and CPAs respectively make independent reports to the independent directors regarding audit items, annual plans, financial reports, and details of annual audit plans.
(4) The aforementioned chief internal auditor and CPAs directly communicate with independent directors via email, phone, or face-toface meetings as necessary; periodically review the Corporation's financial and business conditions according to regulations; and directly communicate with management and governance units.
1) The independent directors communicated well with chief internal auditor; a list of reported items for 2020 is summarized below:

Date	Communication Method (Audit Committee Term- Sitting)	Report Highlight	Communication Results	The Corporation's Responses to Independent Director Opinions
2020/2/17 Audit Committee Meeting (8-33) 2019 Q4 audit offce project implementation report Acknowledged by all Audit Committee members in attendance. No objections from independent directors.
2020/5/4 Audit Committee Meeting (8-36) 2020 Q1 audit offce project implementation report Acknowledged by all Audit Committee members in attendance. No objections from independent directors.
2020/8/3 Audit Committee Meeting (9-3) 2020 Q2 audit offce project implementation report Acknowledged by all Audit Committee members in attendance. No objections from independent directors.

079

Corporate Governance

==> picture [483 x 594] intentionally omitted <==

----- Start of picture text -----

Communication Method
The Corporation's Responses to
Date (Audit Committee Term- Report Highlight Communication Results
Independent Director Opinions
Sitting)
2020/10/13 Audit report Audit plans for 2021 Acknowledged by independent No objections from independent
(Independent report made directors. directors.
by chief internal auditor
to independent directors)
2020/10/13 Audit Committee Meeting Formulation of 2021 audit Approved after discussion by all Audit No objections from independent
(9-5) report for auditing office Committee members in attendance. directors.
2020/11/2 Audit Committee Meeting 2020 Q3 audit office project Acknowledged by all Audit Committee No objections from independent
(9-6) implementation report members in attendance. directors.
2) The independent directors communicated well with CPAs; a list of reported items for 2020 is summarized below:
Communication Method The Corporation's Responses
Date (Audit Committee Term- Report Highlight Communication Results to Independent Director
Sitting) Opinions
2020/2/17 Audit Committee Meeting 1.2019 financial report Approved after discussion by all Audit No objections from independent
(8-33) 2.Important communications Committee members in attendance. directors.
with governance units
3.Key audit items
4.Queries regarding amounts set
aside as legal reserve as per
Article 237 of the Company Act
5.Self-compiled issues in financial
report
2020/5/4 Audit Committee Meeting 1.2020 Q1 financial report Approved after discussion by all Audit No objections from independent
(8-36) highlights Committee members in attendance. directors.
2.Explanation of new disclosures
in 2020 Q1 financial report
3.Evaluation of impacts on 2020
Q1 financial report from the
COVID-19 pandemic
2020/8/3 Audit Committee Meeting 1.2020 Q2 financial report Approved after discussion by all Audit No objections from independent
(9-3) highlights Committee members in attendance. directors.
2.Explanation of new disclosures
in 2020 Q2 financial report
3.Explanation of revisions made
to IAS 1
2020/11/2 Audit Committee Meeting 1.2020 Q3 financial report Approved after discussion by all Audit No objections from independent
(9-6) highlights Committee members in attendance. directors.
2.Audit plans and key audit items
for 2020 financial reports
3.Communication on Audit
Committee member queries
2020/11/2 CPA audit report Report of audits on financial Acknowledged by independent No objections from independent
(Independent report statements and audit plans directors. directors.
made by CPAs to
independent directors)
----- End of picture text -----

080

(3) Composition, Duties, and Operational Status of Remuneration Committee

1) Remuneration Committee Members

==> picture [483 x 351] intentionally omitted <==

----- Start of picture text -----

Meets One of the Following Professional Qualification
Requirements, Together with at Least Five Years' Work Independent Criteria (Note 2)
Experience
An instructor or Has work
higher position A judge, public experience Number of
in a department prosecutor, attorney, in the Other Public
of commerce, Certified Public areas of Companies
Criteria Accountant, or in Which the
law, finance, commerce,
Title accounting, or other professional or technical law, Individual is Remarks
other academic finance, or Concurrently
Name department specialist who has accounting, 1 2 3 4 5 6 7 8 9 10 Serving as an
related to the passed a national or Remuneration
examination and
business needs otherwise Committee
been awarded a
of the Company certificate in a necessary Member
in a public or for the
profession necessary
private junior business
for the business of
college, college or of the
the Company
university Company
8th Independent Kenneth
Term Director Huang-Chuan v v v v v v v v v v v v 3
(Convener) Chiu
Independent Kung-Wha
v v v v v v v v v v v v 0
Director Ding
Independent Da-Wei (David)
v v v v v v v v v v v 0
Director Poo
9th Independent Kenneth
Term Director Huang-Chuan v v v v v v v v v v v v 3
(Convener) Chiu
Independent
Duei Tsai v v v v v v v v v v v v 2
Director
Independent
Pai-Ta Shih v v v v v v v v v v v v 0
Director
----- End of picture text -----

Note: A check mark is placed in the box for those directors who fulfill the following conditions during and up to two years prior to their time in office.

(1) Is not hired by the Corporation or its affiliates.
(2) Is not a director or supervisor of the Corporation or any of its affiliates. (The same does not apply, however, in cases where the person is a concurrent independent director of the Corporation and its parent company, subsidiaries, or subsidiaries of the same parent company, as appointed in accordance with the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies or local laws and regulations.)
(3) Is not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under others' names, in an aggregate amount of 1% or more of the total number of issued shares of the Corporation or ranking in the top ten in shareholdings.
(4) Is not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of managers not conforming to subparagraph (1) above, or of any persons not conforming to subparagraphs (2) and (3) above.
(5) Is not a director, supervisor, or employee of an institutional shareholder that directly holds 5% or more of total number of issued shares or ranks among the top five in shareholdings, or a director, supervisor, or employee of an institutional shareholder who has been appointed as a director or supervisor representative at the Corporation under paragraphs 1 and 2, Article 27 of the Company Act. (The same does not apply, however, in cases where the person is a concurrent independent director of the Corporation and its parent company, subsidiaries, or subsidiaries of the same parent company, as appointed in accordance with the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies or local laws and regulations.)
(6) Is not a director, supervisor, or employee of other companies controlled by Corporation directors or persons with more than half of voting rights at the Corporation. (The same does not apply, however, in cases where the person is a concurrent independent director of the Corporation and its parent company, subsidiaries, or subsidiaries of the same parent company, as appointed in accordance with the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies or local laws and regulations.)
(7) Is not a director, supervisor, or employee of other companies or institutions of the Corporation's chairperson, president, or persons with equivalent duties, or spouses thereof. (The same does not apply, however, in cases where the person is a concurrent independent director of the Corporation and its parent company, subsidiaries, or subsidiaries of the same parent company, as appointed in accordance with the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies or local laws and regulations.)
(8) Is not a director, supervisor, manager, or shareholder holding 5% or more of the shares, of a specified company or institution that has a financial or business relationship with the Corporation. (The same does not apply, however, for specific companies or institutions that hold more than 20% and less than 50% of issued Corporation shares, or in cases where the person is a concurrent independent director of the Corporation and its parent company, subsidiaries, or subsidiaries of the same parent company, as appointed in accordance with the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies or local laws and regulations.)
(9) Is not a professional individual, or an owner, partner, director, supervisor, or manager, or spouses thereof, of a sole proprietorship, partnership, company, or institution which provides audit services to the Corporation or its affiliates; or has in the past two years provided commercial, legal, financial, accounting, or related services not exceeding total compensation of NT$ 500,000 to the Corporation or its affiliates. The same does not apply, however, for members of remuneration committees, public tender offer review committees, or special committees for mergers/consolidations and acquisitions exercising their duties in accordance with the laws and regulations of the Securities and Exchange Act and the Business Mergers and Acquisitions Act.
(10) Has not violated any regulations in Article 30 of the Company Act.

081

Corporate Governance

2) Operational Status of Remuneration Committee
A. The Corporation's Remuneration Committee is composed of three to five people, and committee members are appointed in accordance with the "Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter." Following election of Board members by the shareholders' general meeting on May 24, 2017, the 8th committee members served until May 23, 2020. The three members of the committee were all independent directors, and Independent Director Kenneth Huang-Chuan Chiu was elected as convener by all committee members. Additionally, following election of Board members by the shareholders' general meeting on May 21, 2020, the 9th committee members will serve until May 20, 2023; there are three members on the committee and Independent Director Kenneth Huang-Chuan Chiu was elected as convener by all committee members. The committee operates according to the "Charter of the Remuneration Committee" and convenes at least twice every year.
B The main duties of the committee and focuses for 2020 included formulating and regularly reviewing policies, systems, standards, and structure of evaluations on director and manager performance, salaries, and compensation, as well as regular assessment and formulation of director and manager salaries and compensation. (Please refer to Chapter Three of this report for details regarding the main duties of the Remuneration Committee).
C. The Remuneration Committee convened 12 times in 2020, and the operational status of the committee was as follows:
(a) Operational Status of 8th Remuneration Committee in 2020:

==> picture [484 x 119] intentionally omitted <==

----- Start of picture text -----

Actual Required Attendance Remarks
Title Name By Proxy
Attendances Attendances Rate (%)
Independent Director Kenneth Huang-Chuan
4 0 4 100
(Convener) Chiu
Independent Director Kung-Wha Ding 4 0 4 100
Independent Director Da-Wei (David) Poo 4 0 4 100
Average actual attendances of 8th Remuneration
Committee members in 2020 (%) 12 0 12 100
(Total actual attendances/Total required attendances)
----- End of picture text -----

(b) Operational Status of 9th Remuneration Committee in 2020:

==> picture [483 x 120] intentionally omitted <==

----- Start of picture text -----

Actual Required Attendance
Title Name By Proxy Remarks
Attendances Attendances Rate (%)
Independent Director Kenneth Huang-Chuan
8 0 8 100
(Convener) Chiu
Independent Director Duei Tsai 8 0 8 100
Independent Director Pai-Ta Shih 8 0 8 100
Average actual attendances of 9th Remuneration Committee
members in 2020 (%) 24 0 24 100
(Total actual attendances/Total required attendances)
----- End of picture text -----

082

Other matters required to be recorded:

Matters discussed and resolved during Remuneration Committee meetings in 2020, and the Corporation's responses to Remuneration Committee opinions:

==> picture [483 x 501] intentionally omitted <==

----- Start of picture text -----

Remuneration
The Corporation's
Board Meeting Committee
Remuneration Committee Responses to Board
Date Session Agenda Content Meeting Date
Resolutions Remuneration Resolutions
(Term-Sitting) Session
Committee Opinions
(Term-Sitting)
2020/1/15 Report on self-evaluations of 2020/1/14 Approved by committee members in Approved by the Board. Approved by
(8-34) Board performance for 2019 (8-29) attendance. all directors in
(Note 1) attendance.
2020/1/15 Distribution suggestions for 2020/1/14 Approved by committee members in Approved by the Board. Approved by
(8-34) 2019 employee compensation (8-29) attendance. all directors in
and bonuses (Note 1) attendance.
2020/1/15 Distribution suggestions for 2020/1/14 Approved by committee members in Approved by the Board. Approved by
(8-34) 2019 director remuneration (8-29) attendance. all directors in
(Note 1) attendance.
2020/1/15 Implementation status of 2020/1/14 Approved by committee members in Approved by the Board. Approved by
(8-34) Remuneration Committee in (8-29) attendance. all directors in
2019 attendance.
2020/2/19 Actual distributions of 2020/2/17 Approved by committee members in Approved by the Board. Approved by
(8-35) director remuneration and (8-30) attendance. all directors in
employee compensation in attendance.
2019 (Note 1)
2020/2/19 Results of manager 2020/2/17 Approved by committee members in Approved by the Board. Approved by
(8-35) performance audits for 2019 (8-30) attendance. all directors in
(Note 1) attendance.
2020/2/19 Suggestions regarding 2020/2/17 Approved by committee members in Approved by the Board. Approved by
(8-35) performance goals for new (8-30) attendance. all directors in
managers in 2020 (Note 1) attendance.
2020/5/6 Suggestions regarding annual 2020/5/4 Approved by all committee members in Approved by the Board. Approved by
(8-38) performance bonuses for (8-32) attendance. all directors in
2019 (Note 1) attendance.
- Nomination of Remuneration 2020/6/16 All attending committee members - -
Committee convener for the (9-1) nominated Independent Director
9th Board Kenneth Huang-Chuan Chiu as the
Remuneration Committee convener for
the 9th Board.
2020/6/17 Review report of 2020/6/16 Approved by committee members in Approved by the Board. Approved by
(9-3) compensation (9-1) attendance. all directors in
competitiveness (including attendance.
manager compensation) for
2020 (Note 1)
----- End of picture text -----

083

Corporate Governance

Board Meeting Date Session (Term-Sitting)	Agenda Content	Remuneration Committee Meeting Date Session (Term-Sitting)	Remuneration Committee Resolutions	The Corporation's Responses to Remuneration Committee Opinions	Board Resolutions
2020/6/17 (9-3) Proposal of suggestions regarding remuneration adjustments for directors on the 9th Board of Directors 2020/6/16 (9-1) The item of fxed remuneration of independent directors contained within this proposal involved conficts of interest for the independent directors who are committee members. The item was submitted without discussion to the Board for review. The remainder of the proposal was approved and submitted to the Board for review. Approved by the Board. Apart from independent directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal.
2020/6/17 (9-3) Retirement of Operation Division manager and appointment as President's Offce consultant 2020/6/17 (9-2) Approved by all committee members in attendance. Approved by the Board. Approved by all directors in attendance.
2020/7/15 (9-4) Suggestions regarding individual remuneration adjustments for independent directors on the 9th Board of Directors 2020/7/14 (9-3) Apart from committee members who recused themselves from participating in discussions and voting according to legal requirements, the remaining committee members in attendance approved the proposal. Approved by the Board. Apart from directors who recused themselves from participating in discussions and voting according to legal requirements, the remaining directors in attendance approved the proposal.
2020/8/5 (9-5) Revival of 2020 salary adjustment plans 2020/8/3 (9-4) Approved by all committee members in attendance. Approved by the Board. Approved by all directors in attendance.
2020/8/5 (9-5) Suggestions for strengthening links between non- fxed remuneration and operational performance for THSRC chairman and president 2020/8/3 (9-4) Approved by all Remuneration Committee members in attendance; the managerial department was instructed to reference opinions proposed by attending committee members and include supplementary explanations for submission to the Board for review. Handled in accordance with Remuneration Committee resolutions and submitted to the Board for approval. The managerial department was instructed to formulate revised standards for payment of performance bonuses for submission to the Remuneration Committee and Board for review.

084

==> picture [483 x 669] intentionally omitted <==

----- Start of picture text -----

Remuneration
The Corporation's
Board Meeting Committee
Remuneration Committee Responses to Board
Date Session Agenda Content Meeting Date
Resolutions Remuneration Resolutions
(Term-Sitting) Session
Committee Opinions
(Term-Sitting)
2020/8/5 Suggestions for official 2020/8/3 Approved by all committee members in Approved by the Board. Approved by
(9-5) appointment granted to (9-4) attendance. all directors in
acting head of Finance attendance.
Division
2020/9/16 Suggestions for strengthening 2020/9/15 Approved by committee members in Approved by the Board. Approved by
(9-6) links between non- (9-5) attendance. all directors in
fixed remuneration and attendance.
operational performance
for THSRC chairman and
president
2020/9/16 Suggestions regarding 2020/9/15 Approved by committee members in Approved by the Board. Approved by
(9-6) distribution of "special (9-5) attendance. all directors in
autumn festival bonuses" for attendance.
2020
2020/9/16 Revision of the Corporation's 2020/9/15 Approved by committee members in Approved by the Board. Approved by
(9-6) consultant appointment (9-5) attendance. all directors in
guidelines attendance.
2020/9/16 Renewal of President's Office 2020/9/15 Approved by committee members in Approved by the Board. Approved by
(9-6) consultant contract (9-5) attendance. all directors in
attendance.
2020/10/14 Recommendation that 2020/10/13 Approved by all committee members in Approved by the Board. Approved by
(9-7) overtime pay rates for (9-6) attendance. all directors in
"national holidays" in 2021 attendance.
should continue to comply
with overtime pay rates for
"rest days"
2020/10/14 Suggestions regarding 2020/10/13 Approved by all committee members in Approved by the Board. Approved by
(9-7) distribution of Chinese New (9-6) attendance. all directors in
Year subsidies for 2021 attendance.
2020/10/14 Formulation of Remuneration 2020/10/13 Approved by all committee members in Approved by the Board. Approved by
(9-7) Committee work plans for (9-6) attendance. all directors in
2021 attendance.
2020/11/4 Suggestions regarding 2020/11/2 Approved by all committee members in Approved by the Board. Approved by
(9-8) performance goals for (9-7) attendance. all directors in
managers in 2021 (Note 1) attendance.
2020/11/4 Suggestions regarding 2020/11/2 Approved by all committee members in Approved by the Board. Approved by
(9-8) promotion of Head of (9-7) attendance. all directors in
Information Technology attendance.
Division and Head of
Operation Safety Office
2020/12/16 Suggestions regarding 2020/12/15 Approved by all committee members in Approved by the Board. Approved by
(9-9) additional year-end bonuses (9-8) attendance. all directors in
for 2020 attendance.
2020/12/16 Continued appointment of 2020/12/15 Attending committee members Handled in accordance Approved by
(9-9) Corporation President's Office (9-8) recommended that the managerial with the resolutions all directors in
senior consultant contract department revise the content of this of the Remuneration attendance.
proposal in accordance with prior Board Committee.
resolutions and submit the revised
proposal to the Board for review.
----- End of picture text -----

085

Corporate Governance

==> picture [484 x 201] intentionally omitted <==

Note: Proposals that are periodic reviews of performance evaluations or remuneration.

If the Board declines to adopt, or modifies, a recommendation of the Remuneration Committee, the date of said Board meeting, session number, proposal content, Board resolutions, and the Corporation's responses to Remuneration Committee opinions should be recorded (if the remuneration passed by the Board exceeds the recommendation of the Remuneration Committee, the circumstances and cause for the difference shall be specified):

Board Meeting Date Session (Term-Sitting)	Agenda Content	Remuneration Committee Meeting Date Session (Term-Sitting)	The Circumstances and Cause for the Difference Between Board Resolutions and Remuneration Committee Suggestions	The Corporation's Responses to Remuneration Committee Opinions
2020/8/5 (9-5) Suggestions for strengthening links between non- fxed remuneration and operational performance for THSRC chairman and president 2020/8/3 (9-4) 1.Difference: The Remuneration Committee approved the original proposal, but the Board instructed the managerial department to formulate revised standards for payment of performance bonuses for submission to the Remuneration Committee and Board for review. 2.Cause: Following discussion of this proposal, the Board instructed the managerial department to formulate revised standards for payment of performance bonuses. This resolution did not exceed the suggestions made by the Remuneration Committee. Handled in accordance with the resolutions of the Board.

Other instances where committee members expressed objections or reservations on record or through written opinions regarding Remuneration Committee proposals, and date of said Remuneration Committee meeting, session, proposal content, opinions of all committee members, and response to committee member opinions: None.

(4) Operational Status of Corporate Governance & Nomination Committee

1) The Corporation's Corporate Governance & Nomination Committee is composed of five to seven committee members, and more than half of committee members should be composed of independent directors. Following election of Board members by the shareholders' general meeting on May 24, 2017, the 8th committee members served until May 23, 2020. There were five committee members, three of which were independent directors, and Chairman Yao-Chung Chiang was elected as convener by all committee members. Additionally, following election of Board members by the shareholders' general meeting on May 21, 2020, the 9th committee members will serve until May 20, 2023; there are five members on the committee, three of which were independent directors, and Chairman YaoChung Chiang was elected as convener by all committee members. The committee operates according to the "Charter of the Corporate Governance & Nominating Committee" and convenes at least four times every year.

086

2) More than half of Corporate Governance & Nominating Committee members are independent directors. Of the five committee members, excepting the three independent directors who respectively possess expertise in legal affairs, finance and accounting, industrial knowledge, and operational insights, Chairman Yao-Chung Chiang and Director Kuo-Chih Liu both have significant management experience as a chairperson or president of publicly listed companies, possess professional corporate governance and management capabilities, have sufficient experience to assess the professional criteria necessary for directors and managers, and are capable of planning and reviewing implementation of corporate governance, thereby meeting the professional requirements for this committee.

==> picture [483 x 84] intentionally omitted <==

----- Start of picture text -----

Title Name Professional Abilities
Chairman (Convener) Yao-Chung Chiang Corporate governance, operational management
Independent Director Kenneth Huang-Chuan Chiu Law
Independent Director Pai-Ta Shih Finance
Independent Director Yung-Cheng (Rex) Lai Industry knowledge
Director Kuo-Chih Liu Corporate governance, operational management
----- End of picture text -----

3) The main duties of the committee and focuses for 2020 included: review diverse background and independent standards including professional knowhow, technical knowledge, expertise, and gender of independent directors, non-independent directors, and managers; plan composition of the Board and functional committees; review succession plans for directors and managers; conduct performance evaluations of the Board, committees, directors, and managers; nominate independent directors and non-independent directors; research and analyze corporate governance systems; and review effectiveness of corporate governance systems and implementation of information disclosures. (Please refer to Chapter Three of this report for details regarding the main duties of the Corporate Governance & Nomination Committee).
4) The Corporate Governance & Nominating Committee convened 12 times in 2020, and the operational status of the committee was as follows:
A. Operational Status of 8th Corporate Governance & Nominating Committee in 2020:

==> picture [483 x 136] intentionally omitted <==

----- Start of picture text -----

Actual Required Attendance Rate
Title Name By Proxy Remarks
Attendances Attendances (%)
Chairman (Convener) Yao-Chung Chiang 5 0 5 100
Independent Director Kung-Wha Ding 5 0 5 100
Independent Director Kenneth Huang-Chuan Chiu 5 0 5 100
Independent Director Da-Wei (David) Poo 5 0 5 100
Director Kuo-Chih Liu 5 0 5 100
Average actual attendances of 8th Corporate Governance
& Nomination Committee members in 2020 (%) 25 0 25 100
(Total actual attendances/Total required attendances)
----- End of picture text -----

B. Operational Status of 9th Corporate Governance & Nominating Committee in 2020:

==> picture [483 x 136] intentionally omitted <==

----- Start of picture text -----

Actual Required Attendance Rate
Title Name By Proxy Remarks
Attendances Attendances (%)
Chairman (Convener) Yao-Chung Chiang 7 0 7 100
Independent Director Kenneth Huang-Chuan Chiu 7 0 7 100
Independent Director Pai-Ta Shih 7 0 7 100
Independent Director Yung-Cheng (Rex) Lai 7 0 7 100
Director Kuo-Chih Liu 7 0 7 100
Average actual attendances of 9th Corporate Governance
& Nomination Committee members in 2020 (%) 35 0 35 100
(Total actual attendances/Total required attendances)
----- End of picture text -----

C. Combined average 8th and 9th Corporate Governance & Nominating Committee member attendance rates were 100% in 2020.

087

Corporate Governance

Other matters required to be recorded:

Matters discussed and resolved during Corporate Governance & Nominating Committee meetings in 2020, and the Corporation's responses to Corporate Governance & Nominating Committee opinions:

==> picture [483 x 485] intentionally omitted <==

----- Start of picture text -----

Corporate
Governance &
The Corporation's Responses
Board Meeting Nominating Corporate Governance &
to Corporate Governance Board
Date Session Agenda Content Committee Nominating Committee
& Nominating Committee Resolutions
(Term-Sitting) Meeting Date Resolutions
Opinions
Session
(Term-Sitting)
2020/1/15 Implementation status of 2020/1/14 Approved by all committee Approved by the Board. Approved by
(8-34) Corporate Governance & (8-27) members in attendance. all directors in
Nominating Committee in 2019 attendance.
2020/1/15 Evaluation and suggestions 2020/1/14 Approved by all committee Approved by the Board. Approved by
(8-34) regarding Board and Committee (8-27) members in attendance. all directors in
performance in 2019 attendance.
2020/2/19 Results of manager 2020/2/17 Approved by all committee Approved by the Board. Approved by
(8-35) performance audits for 2019 (8-28) members in attendance. all directors in
attendance.
2020/2/19 Suggestions regarding 2020/2/17 Approved by all committee Approved by the Board. Approved by
(8-35) performance goals for new (8-28) members in attendance. all directors in
managers in 2020 attendance.
2020/2/19 Report of implementation 2020/2/17 Approved by all committee Approved by the Board. Approved by
(8-35) status of corporate governance (8-28) members in attendance. all directors in
attendance.
2020/2/19 Discussion of director (and 2020/2/17 Approved by all committee Approved by the Board. Approved by
(8-35) independent director) seats for (8-28) members in attendance. all directors in
the 9th Board attendance.
2020/2/19 Suggestions for Special 2020/2/17 All attending committee Handled in accordance Approved by
(8-35) Committee member (8-28) members nominated with Corporate Governance all directors in
composition as THSRC Director Tao-I Kwan as a & Nominating Committee attendance.
Institutional Director Taiwan Special Committee member, resolutions and submitted to
Sugar Corporation appointed with term of office set to the Board for approval.
a new director representative, conclude at the end of the
resulting in Director Chao- 8th Board's term.
Yih Chen leaving office and
resigning as a member of the
Special Committee.
2020/3/18 Board nominations for the four 2020/3/18 Approved by all committee Approved by the Board. Approved by
(8-36) independent directors and nine (8-29) members in attendance. all directors in
non-independent directors of attendance.
the 9th Board
----- End of picture text -----

088

==> picture [483 x 686] intentionally omitted <==

----- Start of picture text -----

Corporate
Governance &
The Corporation's Responses
Board Meeting Nominating Corporate Governance &
to Corporate Governance Board
Date Session Agenda Content Committee Nominating Committee
& Nominating Committee Resolutions
(Term-Sitting) Meeting Date Resolutions
Opinions
Session
(Term-Sitting)
2020/3/18 Formulation of proposal 2020/3/18 Approved by all committee Approved by the Board. Approved by
(8-36) regarding "Revisions to the (8-29) members in attendance. all directors in
Corporation's 'Ethical Corporate attendance.
Management Best Practice
Principles' and establishment
of the Corporation's 'Procedures
for Ethical Management and
Guidelines for Conduct' and
'Declaration of Compliance
with Ethical Management
Policies'" for submission and
discussion at shareholders'
general meeting on May 21,
2020
2020/3/18 Formulation of proposal 2020/3/18 Approved by all committee Approved by the Board. Approved by
(8-36) regarding "Revisions to (8-29) members in attendance. all directors in
the Corporation's 'Rules of attendance.
Procedure for Shareholders'
Meetings'" for submission and
discussion at shareholders'
general meeting on May 21,
2020
2020/4/8 Submission of "Removal of 2020/4/8 Approved by all committee Approved by the Board. Approved by
(8-37) non-competition restrictions for (8-30) members in attendance. all directors in
the Corporation's 9th Board" attendance.
proposal for discussion at the
shareholders' general meeting
on May 21, 2020
2020/5/6 Revisions to the Corporation's 2020/5/4 The stipulations regarding Handled in accordance Approved by
(8-38) "General Delegation of (8-31) responsibilities and with Corporate Governance all directors in
Responsibility and Authority" authority for donated & Nominating Committee attendance.
items were not revised. resolutions and submitted to
The remainder of the the Board for approval.
proposal was approved and
submitted to the Board for
review.
Nomination of Corporate 2020/6/3 All attending committee - -
Governance & Nominating (9-1) members nominated
Committee convener for the 9th Chairman Yao-Chung
Board Chiang as the Corporate
Governance & Nominating
Committee convener for the
9th Board.
2020/6/3 Suggestions for Remuneration 2020/6/3 All attending committee Handled in accordance Approved by
(9-2) Committee and Special (9-1) members provided with Corporate Governance all directors in
Committee members for the suggestions regarding & Nominating Committee attendance.
9th Board Remuneration Committee resolutions and submitted to
and Special Committee the Board for approval.
members for the 9th Board.
----- End of picture text -----

089

Corporate Governance

==> picture [483 x 674] intentionally omitted <==

----- Start of picture text -----

Corporate
Governance &
The Corporation's Responses
Board Meeting Nominating Corporate Governance &
to Corporate Governance Board
Date Session Agenda Content Committee Nominating Committee
& Nominating Committee Resolutions
(Term-Sitting) Meeting Date Resolutions
Opinions
Session
(Term-Sitting)
2020/6/17 Retirement of Operation 2020/6/17 Approved by all committee Approved by the Board. Approved by
(9-3) Division manager and (9-2) members in attendance. all directors in
appointment as President's attendance.
Office consultant
2020/8/5 Suggestions for official 2020/8/3 Approved by all committee Approved by the Board. Approved by
(9-5) appointment granted to acting (9-3) members in attendance. all directors in
head of Finance Division attendance.
2020/8/5 Suggestions for Special 2020/8/3 All attending committee Handled in accordance Approved by
(9-5) Committee member (9-3) members nominated with Corporate Governance all directors in
composition as THSRC Director Yueh-Hsiang Chen & Nominating Committee attendance.
Institutional Director Ministry as a Special Committee resolutions and submitted to
of Transportation and member, with term of office the Board for approval.
Communications appointed a set to conclude at the end
new director representative, of the 9th Board's term.
resulting in Director Min-Ching
Liu leaving office and resigning
as a member of the Special
Committee.
2020/9/16 Suggestions for simplifying 2020/9/15 Approved by all committee Handled in accordance Approved by
(9-6) Board submission procedures (9-4) members in attendance. with Corporate Governance all directors in
for procurement contract Additionally, for sensitive & Nominating Committee attendance.
proposals (as opposed to procurement proposals resolutions and submitted to
previous review-and-approval that fall outside the scope the Board for approval.
procedures for proposals) for Board review, the
managerial department
can consider submitting
procurement strategy
suggestions prior to bidding
procedures for discussion
by the Board.
2020/9/16 Suggestions for renewal of 2020/9/15 Approved by all committee Approved by the Board. Approved by
(9-6) director (supervisor) and officer (9-4) members in attendance. all directors in
liability insurance attendance.
2020/9/16 Revisions to the Corporation's 2020/9/15 Approved by all committee Approved by the Board. Approved by
(9-6) "Regulations of Responsibility (9-4) members in attendance. all directors in
& Authority" attendance.
2020/9/16 Revision of the Corporation's 2020/9/15 Attending committee Handled in accordance Approved by
(9-6) consultant appointment (9-4) members suggested with Corporate Governance all directors in
guidelines revising meeting agenda & Nominating Committee attendance.
descriptions before resolutions and submitted to
submission to the Board for the Board for approval.
review.
2020/9/16 Renewal of President's Office 2020/9/15 Approved by all committee Approved by the Board. Approved by
(9-6) consultant contract (9-4) members in attendance. all directors in
attendance.
2020/9/16 Appointment of acting 2020/9/15 Approved by all committee Approved by the Board. Approved by
(9-6) Operation Senior Vice President (9-4) members in attendance. all directors in
attendance.
----- End of picture text -----

090

==> picture [483 x 593] intentionally omitted <==

----- Start of picture text -----

Corporate
Governance &
The Corporation's Responses
Board Meeting Nominating Corporate Governance &
to Corporate Governance Board
Date Session Agenda Content Committee Nominating Committee
& Nominating Committee Resolutions
(Term-Sitting) Meeting Date Resolutions
Opinions
Session
(Term-Sitting)
2020/10/14 Formulation of Corporate 2020/10/13 Approved by all committee Approved by the Board. Approved by
(9-7) Governance & Nominating (9-5) members in attendance. all directors in
Committee work plans for 2021 attendance.
2020/11/4 Suggestions regarding 2020/11/2 Approved by all committee Approved by the Board. Approved by
(9-8) performance goals for (9-6) members in attendance. all directors in
managers in 2021 attendance.
2020/11/4 Suggestions regarding 2020/11/2 Approved by all committee Approved by the Board. Approved by
(9-8) promotion of Head of (9-6) members in attendance. all directors in
Information Technology attendance.
Division and Head of Operation
Safety Office
2020/12/16 Revisions to the Corporation's 2020/12/15 Approved by all committee Approved by the Board. Approved by
(9-9) "THSRC Organizational (9-7) members in attendance. all directors in
Regulation" and attendance.
"Organizational Structure,"
and suggestions regarding
manpower adjustment
2020/12/16 Continued appointment of 2020/12/15 Attending committee Handled in accordance Approved by
(9-9) Corporation President's Office (9-7) members recommended with Corporate Governance all directors in
senior consultant contract that the managerial & Nominating Committee attendance.
department revise the resolutions and submitted to
content of this proposal and the Board for approval.
submit the revised proposal
to the Board for review.
2020/12/16 Continued appointment of 2020/12/15 Approved by all committee Approved by the Board. Approved by
(9-9) Corporation Core Technology (9-7) members in attendance. all directors in
Development Department attendance.
consultant
2020/12/16 Suggestions for official 2020/12/15 Approved by all committee Approved by the Board. Approved by
(9-9) appointment granted to acting (9-7) members in attendance. all directors in
Operation Senior Vice President attendance.
2020/12/16 Appointment of acting Head 2020/12/15 Approved by all committee Approved by the Board. Approved by
(9-9) of Maintenance Management (9-7) members in attendance. all directors in
Division and acting Head of attendance.
Legal Office
2020/12/16 Appointment adjustment of 2020/12/15 Approved by all committee Approved by the Board. Approved by
(9-9) Head of Human Resource (9-7) members in attendance. all directors in
Division attendance.
2020/12/16 Revisions to the Corporation's 2020/12/15 Approved by all committee Approved by the Board. Approved by
(9-9) "Rules of Procedure for Board (9-7) members in attendance. all directors in
of Directors Meetings" attendance.
----- End of picture text -----

091

Corporate Governance

==> picture [483 x 185] intentionally omitted <==

If the Board declines to adopt, or modifies, a recommendation of the Corporate Governance & Nominating Committee, the date of said Board meeting, session number, proposal content, Board resolutions, and the Corporation's responses to Corporate Governance & Nominating Committee opinions should be recorded: None.
Other instances where committee members expressed objections or reservations on record or through written opinions regarding Corporate Governance & Nominating Committee proposals: None.

(5) Operational Status of Special Committee

1) The Corporation's Special Committee is composed of five to seven members, at least one of whom must be an independent director. Following election of Board members by the shareholders' general meeting on May 24, 2017, the 8th committee members served until May 23, 2020. There were seven committee members, and all committee members elected Independent Director David Da-Wei Poo as convener. Additionally, following election of Board members by the shareholders' general meeting on May 21, 2020, the 9th committee members will serve until May 20, 2023; there are six members on the committee and Director Mao-Hsiung Huang was elected as convener by all committee members. The committee operates according to the "Charter of the Special Committee."
2) The main duties of the committee and focuses for 2020 included providing advice on the Corporation's major legal or contractual disputes and important system reforms; assisting the Board in supervising implementation of decisions by managers; and reviewing the Corporation's procurement-related proposals to be submitted to the Board as required by Corporation bylaws. (Please refer to Chapter Three of this report for details regarding the main duties of the Special Committee).
3) The Special Committee convened 12 times in 2020, and the operational status of the committee was as follows:
A. Operational Status of 8th Special Committee in 2020:

==> picture [483 x 187] intentionally omitted <==

----- Start of picture text -----

Actual Required Attendance Rate
Title Name By Proxy Remarks
Attendances Attendances (%)
Independent Director (Convener) Da-Wei (David) Poo 5 0 5 100
Director Min-Ching Liu 5 0 5 100
Director Mao-Hsiung Huang 5 0 5 100
Director Huang-Liang Tsai 5 0 5 100
Director Shyi-Chin Wang 2 3 5 40
Elected to office on
Director Tao-I Kwan 1 2 3 33
2020/2/19
Former Director Chao-Yih Chen 1 0 1 100 Left office on 2020/2/14
Director Shien-Quey Kao 5 0 5 100
Average actual attendances of 8th Special Committee 29 5 34 85
members in 2020 (%)
(Total actual attendances/Total required attendances)
----- End of picture text -----

092

B. Operational Status of 9th Special Committee in 2020:

==> picture [484 x 188] intentionally omitted <==

----- Start of picture text -----

Actual Required Attendance Rate
Title Name By Proxy Remarks
Attendances Attendances (%)
Director (Convener) Mao-Hsiung Huang 7 0 7 100
Independent Director Duei Tsai 7 0 7 100
Independent Director Yung-Cheng (Rex) Lai 7 0 7 100
Elected to office
Director Yueh-Hsiang Chen 4 0 4 100
on 2020/8/5
Left office on
Former Director Min-Ching Liu 2 0 2 100
2020/7/23
Director Chao-Yih Chen 3 4 7 43
Director Shien-Quey Kao 4 3 7 57
Average actual attendances of 9th Special Committee
members in 2020 (%) 34 7 41 83
(Total actual attendances/Total required attendances)
----- End of picture text -----

C. Combined average 8th and 9th Special Committee member attendance rates were 84% in 2020.
Other matters required to be recorded:
Matters discussed and resolved during Special Committee meetings in 2020, and the Corporation's responses to Special Committee opinions:

==> picture [483 x 319] intentionally omitted <==

093

Corporate Governance

==> picture [484 x 545] intentionally omitted <==

----- Start of picture text -----

Special
Committee The Corporation's
Board
Meeting Responses
Meeting Special Committee
Agenda Content Date to Special Board Resolutions
Date Session Resolutions
Session Committee
(Term-Sitting)
(Term- Opinions
Sitting)
2020/2/19 Suggestions for platform gate installation 2020/2/15 Approved by all committee Handled in Approved by
(8-35) at all HSR stations and improvements (8-33) members in attendance; the accordance with all directors in
for existing platform gates at HSR Taipei managerial department was Special Committee attendance.
Station instructed to formulate better resolutions and
designs and corresponding submitted to
plans for implementation the Board for
of subsequent procurement approval.
strategies.
2020/3/18 Procurement and bid selection suggestions 2020/3/13 Approved by all committee Approved by the Approved by
(8-36) for contract from 2020 to 2023 for HSR (8-34) members in attendance. Board. all directors in
security personnel services attendance.
(Contract number: S1-19-050 to S1-19-057)
2020/3/18 Procurement contract for KHI supply of 2020/3/13 Approved by all committee Approved by the Approved by
(8-36) rolling stock PM maintenance materials (8-34) members in attendance. Board. all directors in
from 2021 to 2022 attendance.
(Contract number: PCDD-21-0001)
2020/3/18 Bidding strategies for "THSRC media lease 2020/3/13 Attending committee Handled in Approved by
(8-36) contract" (8-34) members instructed the accordance with all directors in
managerial department to Special Committee attendance.
revise the content of this resolutions and
proposal in accordance submitted to
with opinions of attending the Board for
committee members and approval.
submit the revised proposal to
the Board for review.
2020/4/8 Procurement contract for inertial track 2020/4/6 Approved by all committee Approved by the Approved by
(8-37) geometry inspection vehicles (8-35) members in attendance. Board. all directors in
(Contract number: E5-19-001) attendance.
2020/4/8 Procurement strategy suggestions for HSR 2020/4/6 Approved by all committee Approved by the Approved by
(8-37) shuttle bus affiliated marketing services (8-35) members in attendance. Board. all directors in
from 2020 to 2021 attendance.
2020/5/6 Suggestions for temporary solutions 2020/5/4 Approved by all committee Approved by the Approved by
(8-38) relating to bidding strategies for THSRC (8-36) members in attendance. Board. all directors in
media outsourcing contract attendance.
2020/5/6 Suggestions for supplementary agreement 2020/5/4 Approved by all committee Approved by the Approved by
(8-38) of HSR station parking lot outsourcing (8-36) members in attendance. Board. all directors in
management contract attendance.
----- End of picture text -----

094

==> picture [483 x 601] intentionally omitted <==

----- Start of picture text -----

Special
Committee The Corporation's
Board
Meeting Responses
Meeting Special Committee
Agenda Content Date to Special Board Resolutions
Date Session Resolutions
Session Committee
(Term-Sitting)
(Term- Opinions
Sitting)
2020/5/6 Procurement and bid selection suggestions 2020/5/4 All attending committee Handled in All attending directors
(8-38) for upgrading of mainframe for Traffic (8-36) members approved contracts accordance with approved contracts
Control System (TCS) Package 2 E221, E223, and E224, but the resolutions E221, E223, and
(Contract numbers: E221 and E223 to E225) instructed the managerial of the Special E224, but instructed
department to negotiate a Committee. the managerial
reasonable price for contract department to
E225, then resubmit the negotiate a reasonable
proposal to the Special price for contract
Committee and the Board for E225, then resubmit
review. the proposal to the
Special Committee and
the Board for review.
2020/5/6 Procurement and bid selection 2020/5/4 Apart from committee Approved by the Apart from directors
(8-38) suggestions for civil engineering design (8-36) members who recused Board. who recused
and construction supervisory consultant themselves from participating themselves from
services for second rolling stock inspection in discussions and participating in
and maintenance shop at Zuoying depot voting according to legal discussions and voting
(Contract number: C2-19-003) requirements, the remaining according to legal
committee members in requirements, the
attendance approved the remaining directors in
proposal. attendance approved
the proposal.
2020/6/17 Procurement contract for HSR shuttle bus 2020/6/15 Approved by all committee Approved by the Approved by
(9-3) affiliated marketing services from 2020 to (9-1) members in attendance. Board. all directors in
2021 attendance.
(Contract numbers: S1-20-016 to S1-20-024)
2020/6/17 Procurement and bid selection suggestions 2020/6/15 Approved by all committee Approved by the Approved by
(9-3) for upgrading of mainframe for Traffic (9-1) members in attendance. Board. all directors in
Control System (TCS) Package 2 attendance.
(Contract number: E225)
2020/7/15 Procurement contract for OCC Radio 2020/7/13 Approved by all committee Approved by the Approved by
(9-4) Mobile Switching Office equipment (9-2) members in attendance. Board. all directors in
upgrade (Contract number: E251) attendance.
2020/7/15 Procurement strategy suggestions for 2020/7/13 Approved by all committee Approved by the Approved by
(9-4) "Replacement of existing turnout control (9-2) members in attendance. Board. all directors in
boxes with THSRC self-developed turnout attendance.
control boxes"
2020/7/15 Procurement strategy suggestions for 2020/7/13 Approved by all committee Approved by the Approved by
(9-4) supplementary agreement of second (9-2) members in attendance. Board. all directors in
(Contract number: E4-18-005) tender bids attendance.
for Passenger Information System (PIS)
replacement project
----- End of picture text -----

095

Corporate Governance

==> picture [484 x 671] intentionally omitted <==

----- Start of picture text -----

Special
Committee The Corporation's
Board
Meeting Responses
Meeting Special Committee
Agenda Content Date to Special Board Resolutions
Date Session Resolutions
Session Committee
(Term-Sitting)
(Term- Opinions
Sitting)
2020/7/15 Procurement and re-bidding strategy 2020/7/13 Apart from committee Approved by the Apart from directors
(9-4) suggestions for construction of Yanchao (9-2) members who recused Board. who recused
Main Workshop automated painting shop themselves from participating themselves from
equipment in discussions and participating in
voting according to legal discussions and voting
requirements, the remaining according to legal
committee members in requirements, the
attendance approved the remaining directors in
proposal. attendance approved
the proposal.
2020/7/15 Procurement strategy suggestions for 2020/7/13 Apart from committee Approved by the Apart from directors
(9-4) THSRC headquarters office and parking (9-2) members who recused Board. who recused
lease agreement themselves from participating themselves from
in discussions and participating in
voting according to legal discussions and voting
requirements, the remaining according to legal
committee members in requirements, the
attendance approved the remaining directors in
proposal. attendance approved
the proposal.
2020/8/5 Procurement contract for "THSRC media 2020/7/31 Approved by all committee Approved by the Approved by
(9-5) outsourcing contract" (9-3) members in attendance. Board. all directors in
(Contract number: 01-20-007(EU)) attendance.
2020/9/16 Suggestions for simplifying Board 2020/9/11 Approved by all committee Approved by the Approved by
(9-6) submission procedures for procurement (9-4) members in attendance. Board. all directors in
contract proposals (as opposed to previous attendance.
review-and-approval procedures for
proposals)
2020/10/14 Procurement and bid selection suggestions 2020/10/12 Apart from committee Approved by the Apart from directors
(9-7) for "Phase 3 Nangang Software Park Office (9-5) members who recused Board. who recused
Building Lease from 2021 to 2023" contract themselves from participating themselves from
(Contract number: PCDD-20-0945) and in discussions and participating in
"Phase 3 Nangang Software Park Parking voting according to legal discussions and voting
Space Lease from 2021 to 2023" contract requirements, the remaining according to legal
(Contract number: PCDD-20-0946) committee members in requirements, the
attendance approved the remaining directors in
proposal. attendance approved
the proposal.
2020/11/4 Procurement strategy suggestions for ATP6 2020/10/30 Approved by all committee Approved by the Apart from directors
(9-8) electrical substation core system power (9-6) members in attendance. Board. who recused
equipment control and relay panel (CRP) themselves from
research and development project participating in
discussions and voting
according to legal
requirements, the
remaining directors in
attendance approved
the proposal.
----- End of picture text -----

096

==> picture [483 x 418] intentionally omitted <==

----- Start of picture text -----

Special
Committee The Corporation's
Board
Meeting Responses
Meeting Special Committee
Agenda Content Date to Special Board Resolutions
Date Session Resolutions
Session Committee
(Term-Sitting)
(Term- Opinions
Sitting)
2020/11/4 Procurement strategy suggestions for new- 2020/10/30 Approved by all committee Approved by the Approved by
(9-8) generation network architecture designs (9-6) members in attendance. Board. all directors in
and solutions attendance.
2020/11/4 Suggestions for supplementary agreement 2020/10/30 Approved by all committee Approved by the Approved by
(9-8) of "HSR security personnel services (on (9-6) members in attendance. Board. all directors in
trains) contract from 2020 to 2023" attendance.
(Contract number: S1-19-051)
2020/11/4 Suggestions for supplementary agreement 2020/10/30 Approved by all committee Approved by the Approved by
(9-8) of "Rail grinding car supply contract" (9-6) members in attendance. Board. all directors in
(Contract number: E5-18-001) attendance.
2020/12/16 Procurement strategy suggestions for 2020/12/11 Attending committee Handled in Approved by
(9-9) "THSRC self-developed turnout monitoring (9-7) members instructed the accordance with all directors in
system replacement contract" managerial department Special Committee attendance.
to assess the feasibility of resolutions and
shortening construction submitted to
periods required for this the Board for
contract. approval.
2020/12/16 Procurement strategy suggestions for HSR 2020/12/11 Attending committee Handled in Approved by
(9-9) station cleaning and greenery maintenance (9-7) members instructed the accordance with all directors in
services contract from 2021 to 2024 managerial department to Special Committee attendance.
further analyze and review this resolutions and
proposal before submission to submitted to
the Board for review. the Board for
approval.
2020/12/16 Revisions to the Corporation's "Charter of 2020/12/11 Approved by all committee Approved by the Approved by
(9-9) the Special Committee" (9-7) members in attendance. Board. all directors in
attendance.
----- End of picture text -----

If the Board declines to adopt, or modifies, a recommendation of the Special Committee, the date of said Board meeting, session number, proposal content, Board resolutions, and the Corporation's responses to Special Committee opinions should be recorded: None.
Other instances where committee members expressed objections or reservations on record or through written opinions regarding Special Committee proposals: None.

097

Corporate Governance

(6) Corporate Governance Implementation Status and Deviations from "the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies":

==> picture [483 x 441] intentionally omitted <==

----- Start of picture text -----

Deviations from
Implementation Status "the Corporate
Governance Best-
Evaluation Item Practice Principles
for TWSE/TPEx
Yes No Abstract Illustration
Listed Companies"
and Reasons
1. Does the company  ■ The Corporation has established "Guidelines for Corporate Governance" which None.
establish and disclose the are disclosed on the "Investor Relations" and the "Corporate Governance" sections
Corporate Governance Best- of our corporate website, as well as on the Market Observation Post System.
Practice Principles based on Revisions to our "Guidelines for Corporate Governance" were approved at the 23rd
"Corporate Governance Best- meeting of the 8th Board (convened on February 20, 2019) and a shareholders'
Practice Principles for TWSE/ general meeting (convened on May 30, 2019).
TPEx Listed Companies"?
2. Shareholding structure &  ■ The Corporation has a shareholder services unit that is responsible for providing None.
shareholders' rights shareholder services, handling shareholder recommendations, and responding
(1) Does the company to shareholder queries, while our legal unit handles shareholder disputes and
establish an internal litigation matters. All related matters are handled according to our operating
operating procedure to procedures. All related matters are handled according to our operating procedures.
deal with shareholders'
suggestions, doubts,
disputes and litigations, and
implement based on the
procedure?
(2) Does the company  ■ The Corporation regularly maintains a list of its major shareholders as well as None.
possess the list of its major the ultimate owners of those shares. At present, most of our major shareholders
shareholders as well as the are board members or financial institutions, and the list of major shareholders
ultimate owners of those and ultimate owners can be viewed at any time to ensure the stability of the
shares? Corporation's operating policies.
(3) Does the company  ■ The Corporation currently has no affiliated businesses. Additionally, to avoid None.
establish and execute the conflicts of interest, the Corporation has established "Regulation of Related Party
risk management and Transaction" and our Audit Committee is responsible for auditing transactions of
firewall system within its related parties and other avoidances of conflicts of interest.
conglomerate structure?
(4) Does the company  ■ The Corporation has established "Regulations for Management of the Prevention None.
establish internal rules of Insider Trading" which stipulate that corporate insiders and quasi-insiders
against insiders trading with must abide by the provisions of the Securities and Exchange Act, and any trade
undisclosed information? of securities conducted using undisclosed information is prohibited. Additionally,
Article 11 of our "Code of Ethical Conduct" and Subparagraph (d), Paragraph 3,
Article 6.1.2 of our "Code of Conduct" also contains stipulations inhibiting insider
trading.
----- End of picture text -----

098

Deviations from Implementation Status "the Corporate Governance BestEvaluation Item Practice Principles for TWSE/TPEx Yes No Abstract Illustration Listed Companies" and Reasons  ■Article 14, Chapter 2 of the Corporation's "Charter of the Corporate Governance & None. Nominating Committee" (Structural Composition of the Board and its Committees and Performance Assessments) stipulates a diversification policy for board member composition and overall capabilities of board members. Article 17 of the Charter also stipulates succession plans for directors.

==> picture [41 x 608] intentionally omitted <==

----- Start of picture text -----


----- End of picture text -----

==> picture [73 x 608] intentionally omitted <==

----- Start of picture text -----

None.
----- End of picture text -----

Composition and Responsibilities of the Board of Directors

(1) Does the Board develop and implement a diversified policy for the composition of its members?

■ The Corporation's diversification policy for board member composition states that appropriate diversification standards for the Board should be set according to operations, mode of operation, and development needs, including but not limited to the following: 1.Basic qualifications and values: gender, age, nationality, and culture. 2.Level of contribution to businesses or in other professional areas. 3.Personality, professional expertise and skills. Professional expertise and skills include professional backgrounds (such as in finance, accounting, legal practice, marketing, technology, business management, and so on), as well as professional skills and industry experience.

4.Willingness and time to participate in corporate affairs. 5.Concurrent director and manager positions held at other companies. ■ Overall, the Board as a whole should possess the following capabilities: 1. Operational insight capabilities.

Accounting and financial analysis capabilities.
Management capabilities.
Crisis management capabilities.
Industry knowledge.
International outlook.
Leadership and decision-making ability. ■ THSRC has established a Corporate Governance & Nominating Committee which is responsible for reviewing the diversified standards of professional knowledge, techniques, experience, and gender distribution required by directors to ensure that the Board possesses appropriate professional knowledge and expertise. The committee is also responsible for conducting regular evaluations of Board performance, reviewing director training plans, and reviewing manager succession plans. ■ Composition of the Corporation's 9th Board complies with our "Articles of Incorporation"; nominated candidates are selected, nominated, and elected through the rigorous processes stipulated in the Corporation's "Charter of the Corporate Governance & Nominating Committee" and "Rules for the Election of Directors," thus ensuring diversification and independence of board members. ■ The Board is currently composed of 13 directors, including 4 independent directors and 9 non-independent directors. Our current directors are all industrial or academic experts, with management experience in listed companies or in government institutes. Apart from possessing leadership and decision-making capabilities, crisis management capabilities, and an international outlook, our four independent directors also have expertise in legal affairs, finance and accounting, industrial knowledge, and operational insights: Independent Director Kenneth Huang-Chuan Chiu is a partner at Kew & Lord, Independent Director Duei Tsai served as the Minister of Transportation and Communications, Independent Director Pai-Ta Shih is a full-time professor at the National Taiwan University Department of Finance, and Independent Director Yung-Cheng (Rex) Lai is a professor at the National Taiwan University Railway Technology Research Center. Additionally, of the other nine non-independent directors, directors YuehHsiang Chen and Shien-Quey Kao both have finance and accounting expertise; Director Kwo-Tsai Wang is currently the Deputy Minister of Transportation and Communications and the Chairman of China Aviation Development Foundation; and Chairman Yao-Chung Chiang and directors Lee-Ching Ko, Chao-Tung Wong, Chao-Yih Chen, Mao-Hsiung Huang, and Kuo-Chih Liu all have significant management experience as a chairperson or president of listed companies in industries spanning from technology, construction, automobiles, steel, airlines, manufacturing, and services; they therefore possess capabilities relating to marketing, technology, management, industrial knowledge, and operational insight.

099

Corporate Governance

==> picture [483 x 657] intentionally omitted <==

----- Start of picture text -----

Deviations from
Implementation Status "the Corporate
Governance Best-
Evaluation Item Practice Principles
for TWSE/TPEx
Yes No Abstract Illustration
Listed Companies"
and Reasons
■ The Corporation sets the 4Ts (Transport, Technology, Taiwan, and Taiwan) as
our main developmental goal and selects directors based on their management
experience and expertise. Our current directors possess knowledge on corporate
governance, the latest industrial insights, and expertise in business, finance,
accounting, and corporate matters, fulfilling the goals set out by our 4Ts.
■ The Corporation strives to maintain gender equality in the composition of
Board members. Our goal is to increase our ratio of female directors to 1/3 (33%).
Currently, we have 77% (10) male directors and 23% (3) female directors. In future,
we hope to add other female directors to achieve our goal.
■ Currently, one of our four independent directors was reelected following a full
term (approximately four years) and the remaining three are all newly appointed
independent directors who have served for approximately one year. We currently
have 13 Board members, of which 15% (2) are under 60 years old, 23% (3) are
between 60 to 65 years old, and 62% (8) are over 65 years old.
■ Board members are all active in attending Board meetings, with average
attendance rates for 2019 and 2020 reaching 92%, showing that our Board is
indeed exercising its supervisory duties.
■ Overall, our Board possesses capabilities aligned with the Corporation's future
development, and our policy of board diversification has been well implemented.
(See Note 1 for details on the implementation status of our board diversification
policy.) Additionally, the "Corporate Governance Implementation Status" sub-
section under the "Corporate Governance" section of our corporate website has
also disclosed details of our board diversification policy and implementation
status.
(2) Does the company  ■ The Corporation has established a Remuneration Committee and Audit None.
voluntarily establish other Committee in accordance with law, and we have also voluntarily established
functional committees in other functional committees including our Corporate Governance & Nomination
addition to the Remuneration Committee and Special Committee in consideration of corporate matters and
Committee and the Audit development. The Audit Committee and Remuneration Committee are convened
Committee? by independent directors. The Audit Committee and Remuneration Committee are
composed of independent directors, while more than half of the members in the
Corporate Governance & Nomination Committee are independent directors. All
functional committees are well operated, exercise sound supervisory duties, and
strengthen the functions of the Board.
(3) Does the company  ■ On March 21, 2017, the Corporation's "Regulation of Self-Evaluation of the Board None.
establish a standard to of Directors" was passed at the 27th meeting of the 7th Board. The Corporation's
measure the performance of Corporate Governance & Nomination Committee serves as the implementation unit
the Board, and implement it for these evaluations, and the Secretariat Division of the Board of Directors assists
annually? the Corporate Governance & Nomination Committee in collecting information
And have the results of on Board activities at the end of each year for internal self-assessments of Board
performance assessments performance. Self-assessments on Board operations, Board members, and all
been submitted to the Board functional committees (including the Corporate Governance & Nominating
and used as a reference Committee, Audit Committee, Remuneration Committee, and Special Committee)
for the remuneration and are conducted via surveys. Survey results are organized and submitted to the
continued nomination of Board as a basis for review and improvement. Additionally, assessment results
individual directors? on the Board and its functional committees serve as a reference for selecting or
nominating directors (and independent directors), while assessment results on
individual directors may be used in future as a reference when setting salaries and
remuneration. Furthermore, the aforementioned Corporation bylaw stipulates that
an external assessment should take place at least once every three years.
■ Assessment indicators for the Corporation's Board includes the following five
aspects:
1. Participation in corporate operations.
2. Enhancement of Board decision-making quality.
3. Board composition and structure.
4. Director elections and continued training.
5. Internal control.
----- End of picture text -----

100

Deviations from Implementation Status "the Corporate Governance BestEvaluation Item Practice Principles for TWSE/TPEx Yes No Abstract Illustration Listed Companies" and Reasons ■ Assessment indicators of the Corporation's directors includes the following six . aspects: 1. Understanding of corporate goals and tasks. 2. Recognition of director responsibilities. 3. Participation in corporate operations. 4. Internal relations and communication. 5. Director knowledge and continued training. 6. Internal control. ■ Self-assessment indicators for functional committee members include the following five aspects: 1. Participation in corporate operations. 2. Recognition of functional committee responsibilities. 3. Enhancement of functional committee decision-making quality. 4. Composition of functional committees and election of committee members. 5. Internal control. ■ The Corporation completed all self-assessments of the Board, Board members, and functional committee members for 2020 in January 2021. The full score for assessments was 100. The Board and Board members received self-assessment scores of 97.31 and 98.34 (the scores were 96.41 and 95.74 in 2019). Additionally, overall self-assessment scores for functional committee members were as follows: 98.6 for the Corporate Governance & Nominating Committee, 98.5 for the Audit Committee, 98.67 for the Remuneration Committee, and 96.66 for the Special Committee (the scores were 99.40 for the Corporate Governance & Nominating Committee, 99.67 for the Audit Committee, 99.34 for the Remuneration Committee, and 94.57 for the Special Committee in 2019). Assessment results were the same as for the previous year: "Significantly exceeded standards." ■ The aforementioned assessment results were submitted to the 9th Remuneration Committee meeting of the 9th Board on January 19, 2021 and the 8th Corporate Governance & Nomination Committee meeting of the 9th Board on January 19, 2021, and were reported at the 10th meeting of the 9th Board on January 20, 2021. Suggestions for improvement and future strengthening were as follows: 1.Board of Directors: (1) "Participation in corporate operations": Strengthen risk assessments for important proposals to provide a reference for the Board when making decisions. (2) "Enhancement of Board decision-making quality": Strengthen follow-up of Board meeting resolutions and implementation of director suggestions and opinions. (3) "Director knowledge and continued training": Enrich materials provided to new directors so as to help them understand Corporation operations and environments. (4) "Internal control": Strengthen proposals for internal control systems and risk management so as to help directors evaluate and supervise the implementation of relevant operations.

Board members:

(1) "Understanding of corporate goals and tasks": Strengthen mid- to long-term plans and report major changes to the Board where appropriate so as to help directors fully understand relevant matters and build consensus within the Board. 3. Functional committees:

(1) "Participation in corporate operations": Strengthen timeliness, relevance, and comprehensiveness of answers provided by our management team when interacting with directors so as to ensure that director suggestions and questions are appropriately handled.

(2) "Enhancement of functional committee decision-making quality": Improve the quality of meeting materials provided to the Board so that directors can better understand proposals, strengthen risk assessments for important proposals to provide a reference for functional committees when making decisions, and regularly review proposals submitted to functional committees and appropriateness of meeting frequencies.

101

Corporate Governance

==> picture [483 x 640] intentionally omitted <==

----- Start of picture text -----

Deviations from
Implementation Status "the Corporate
Governance Best-
Evaluation Item Practice Principles
for TWSE/TPEx
Yes No Abstract Illustration
Listed Companies"
and Reasons
■ According to the stipulations of our "Regulation of Self-Evaluation of the
Board of Directors," an evaluation of Board performance should be conducted
by external units at least once every three years. The Corporation commissioned
the "Taiwan Corporate Governance Association" to evaluate Board effectiveness
and performance. The most recent external evaluation of Board performance was
completed in February 2019. The Taiwan Corporate Governance Association and
evaluating experts were independent units that had no business dealings with the
Corporation; a report on Board performance was issued on April 19, 2019. The
aforementioned results of external evaluations were submitted to the 27th meeting
of the 8th Board on June 19, 2019. Implementation details were as follows:
1. Evaluation duration: March 1, 2018 to February 28, 2019.
2. Evaluation method: The Taiwan Corporate Governance Association conducted
reviews of the relevant documents submitted by the Corporation for evaluations,
and also commissioned three experts to conduct on-site evaluations and interviews
with the Corporation's Chairman, President, independent directors, corporate
governance officer, head of corporate planning office, and accountants on March
28, 2019.
3. Evaluation standards: Standards included the eight aspects of board composition,
board guidance, board authority, board supervision, board communication,
internal control and risk management, self-discipline of the board, and others
(board meetings, support systems, and so on). Experts conducting the evaluations
referenced information provided by the Corporation and publicly available
information regarding implementation for each indicator and carried out on-site
interviews before submitting evaluation reports.
4. Overall evaluation results:
(1) The Corporation formed an appropriate Board based on the needs of our
business development and changes in shareholding structure. Our directors have
expertise in law, finance, rail transport, and business management, and Board
members all prioritize the interests of the Corporation, helping us to realize our
operating advantages as a publicly owned private enterprise.
(2) The Corporation has kept abreast of the times and established functional
committees to fulfill our needs at different stages and to help our Board overcome
difficult challenges relating to procurement, finance, and other issues. Our
Chairman encourages directors to raise different perspectives regarding various
issues, thus creating an open atmosphere for discussion.
(3) The Corporation upholds a mission and vision "To be the platform for
advancement and enjoyment, and to become one of the top ten brands in
Taiwan." Additionally, we have established mid- and long-term strategy plans in
response to international and domestic economic trends and conditions in the
transportation market, and have submitted these plans to our Board and Audit
Committee for review so that the Board can fully exercise their authority.
(4) The Corporation has established the "Law Compliance Management Regulation."
We make quarterly reviews of changes in applicable laws and regulations, and
assess response mechanisms and subsequent revisions in accordance with these
changes, and we also periodically compile information on legal compliance
systems and implementation status, which are then presented to the Audit
Committee and the Board. Our emphasis on legal compliance is clear for all to see.
5. Implementation of evaluation recommendations and improvement items:
(1) It was recommended that our Corporate Governance & Nominating Committee
formulate training and succession plans for Board directors and senior managers
according to the Corporation's mid- to long-term development strategies. The
implementation status of these plans should be periodically submitted to the
Board for review so that the Board can fully understand succession strategies and
achieve the goal of sustainable operations. ---The Corporation has since formulated
succession plans for Board directors and senior managers, and submitted these to
the Board for approval.
----- End of picture text -----

102

==> picture [483 x 707] intentionally omitted <==

----- Start of picture text -----

Deviations from
Implementation Status "the Corporate
Governance Best-
Evaluation Item Practice Principles
for TWSE/TPEx
Yes No Abstract Illustration
Listed Companies"
and Reasons
(2) Currently, performance assessments for audit managers are approved by our
Chairman before submission to the Board for approval. It was recommended that
this mechanism be revised so that our Chairman provides preliminary assessments
which are then submitted to the Audit Committee for review before submission
to the Board for official approval. ---Audit manager performance targets for 2020
and results of performance assessments for 2019 have been submitted to our Audit
Committee for review and to our Board for official approval.
(3) The Corporation's "Regulation of Whistle-Blowing System for Unlawful,
Unethical Conduct and Dishonesty Behavior" stipulates that the audit department
is responsible for investigating grievance reports. It was recommended that
we establish communication channels that allow for direct contact with our
independent directors so that they can realize their supervisory responsibilities. ---
The Corporation has established a mailbox to contact our Audit Committee on the
Stakeholder section of our external website, creating a communication channel for
stakeholders to directly contact the Audit Committee.
(4) It was recommended that the Corporation compile existing operational
procedures relating to operational risks, information security, environmental
hazards, and financial risks into a comprehensive set of risk management
procedures which can be submitted to the Board for review. Implementation status
on risk management should be periodically reported to the Audit Committee and
the Board by the management team so that Board members can be regularly
updated on the Corporation's risk management status. ---The Corporation
has formulated relevant regulations governing risk management which have
been reviewed and approved by the Board. Additionally, the Corporation has
also established a mechanism for periodic reporting of risk management
implementation to the Audit Committee and to the Board.
■ The Corporation has disclosed our "Regulation of Self-Evaluation of the Board of
Directors" on the Market Observation Post System and on our corporate website.
Results of performance evaluations for the Board have also been disclosed on
the "Corporate Governance Implementation Status" page under the "Corporate
Governance" section of our corporate website.
(4) Does the company  ■ According to Article 5-3-06 of the Corporation's Guidelines for Corporate None.
regularly evaluate the Governance, the Audit Committee shall conduct assessments of CPA
independence of CPAs? professionalism, independence, and reasonableness of audit fees at the end of
each fiscal year, and these assessments shall be submitted to the Board. CPA
assessment results for 2020 were approved by the 9th Board at the 9th Audit
Committee meeting held on February 23, 2021 and the 11th Board meeting
held on February 24, 2021, confirming that accountants Mei-Yen Chiang and
Kwan-Chung Lai of Deloitte & Touche both fulfilled the assessment standards for
independence and competency (Note 2). A letter of declaration was provided by
Deloitte and Touche (Note 3).
4. Does the company set  ■ The Corporation established the Secretariat Division under the Board of Directors None.
up an appropriate number as the unit responsible for corporate governance, and set up an appropriate
of suitable personnel number of qualified corporate governance personnel according to Article 3-08
responsible for corporate of the Corporation's Guidelines for Corporate Governance. The qualifications and
governance matters and duties of the Board Secretariat manager complies with the criteria for corporate
appoint a corporate governance officers. On March 20, 2019, Board Secretariat Secretary Senior Vice
governance manager President Barret Wang was appointed the Corporation's corporate governance
responsible for corporate officer at the 24th meeting of the 8th Board to protect shareholder rights and
governance matters (including strengthen Board functions as he possesses legal qualifications and served in
but not limited to providing managerial capacities for more than three years, handling the legal, shareholding,
information for directors and corporate governance affairs of listed companies. The main duties of the
to perform their functions, corporate governance officer are to handle Board and shareholder meeting matters
assisting directors with legal in accordance with law, prepare meeting handbooks for Board and shareholder
compliance, handling work meetings, assist directors in taking office and continued training, provide directors
related to meetings of the with information necessary for implementation of business matters, and assist
board of directors and the directors in complying with laws and regulations. The implementation status of
shareholders' meetings in corporate governance within the Corporation was reported at the 11th meeting of
accordance with law, and the 9th Board on February 24, 2021, and will be periodically reported to the Board
producing minutes of board every year. Main implementations for 2020 included:
meetings and shareholders'
meetings)?
----- End of picture text -----

103

Corporate Governance

==> picture [483 x 674] intentionally omitted <==

----- Start of picture text -----

Deviations from
Implementation Status "the Corporate
Governance Best-
Evaluation Item Practice Principles
for TWSE/TPEx
Yes No Abstract Illustration
Listed Companies"
and Reasons
(1) Assisting the Board or its committees with drawing up annual work plans and
meeting agendas, and collecting, researching, analyzing, or providing related
materials.
(2) Providing analysis and opinions on the legality, appropriateness, and feasibility
of proposals to be deliberated by the Board or its committees, for reference by the
Board and its committees during deliberations.
(3) Ensuring that the operations of the Corporation's shareholders' meetings, Board
meetings, and committees do not violate laws or regulations, the Corporation's
Articles of Incorporation, shareholders' meeting resolutions, and the Corporation's
Guidelines for Corporate Governance.
(4) Assisting with deliberation, supervision, or other processes relating to the
planning and review of systems for liaison and interaction between the Corporation
and shareholders, employees, consumers, stakeholders, and the general public.
(5) Assisting with the general administrative affairs of shareholders' meetings and
the calling of, notices for, holding of, and record-keeping for Board meetings and
committee meetings.
(6) Ensuring that Board members have timely knowledge of material information
by notifying Board members upon publication of such information.
(7) Formulating Board meeting agendas and notifying directors seven days in
advance of meetings, convening meetings and providing meeting information,
providing prior reminders of conflicts of interest, and compiling Board meeting
handbooks within 20 days of meetings.
(8) Organizing at least six hours of director training courses within the corporate
offices and assisting directors in organizing other training plans and courses.
(9) Assessing and taking out appropriate D&O liability insurance for directors,
supervisors, and managers.
(10) Conducting performance assessments in accordance with the Corporation's
Regulation of Self-Evaluation of the Board of Directors.
■ Training undertaken by the Corporation's corporate governance officers in 2020
were as follows:
Training Hosting Course Training
Date Organization Title Hours
2020/2/7 Taiwan Corporate Corporate governance personnel 3
Governance views on corporate governance and
Association board operations
Taiwan Corporate Corporate governance personnel 3
2020/2/18 Governance roles under corporate governance
Association strategic blueprints
2020/3/6 Taiwan Corporate Shareholder meeting organization 3
Governance and case studies
Association
2020/4/8 Securities and Futures Director responsibilities and 3
Institute risk management under latest
Corporate Governance Roadmap
2020/7/10 Taiwan Corporate To give or not to give? A discussion 3
Governance of director information rights
Association
2020/8/5 Securities and Futures A discussion of intellectual property 3
Institute management from the perspective
of the board
Accumulated training hours in 2020: 18 hours
■ The Corporation has established a shareholder services unit under the Finance
Department; this unit is responsible for providing shareholder services, handling
matters relating to shareholders' meetings, making changes to Corporation
registration details, and publishing information on shareholder matters in
accordance with law.
----- End of picture text -----

104

==> picture [483 x 534] intentionally omitted <==

----- Start of picture text -----

Deviations from
Implementation Status "the Corporate
Governance Best-
Evaluation Item Practice Principles
for TWSE/TPEx
Yes No Abstract Illustration
Listed Companies"
and Reasons
5. Does the company establish  ■ A "Stakeholders Communications" sub-section has been established under the None.
a communication channel "Corporate Social Responsibility" section of our corporate website to uphold the
and build a designated rights of stakeholders by periodically assessing stakeholder categories, establishing
section on its website for designated units and communication channels for stakeholders, using appropriate
stakeholders (including but communication measures to understand the reasonable expectations and needs
not limited to shareholders, of stakeholders, and providing fitting responses to major CSR issues of concern.
employees, customers, and Communication with stakeholders and handling of major disputes for 2020 were
suppliers), as well as handle reported to the Corporation's 3rd meeting of the 9th Board on June 17, 2020, and
all the issues they care for will continue to be reported to the Board on an annual basis.
in terms of corporate social ■ For more comprehensive information on stakeholders, please refer to the
responsibilities? "Stakeholders Communications" sub-section in the "Corporate Social Responsibility"
section of our corporate website and the "Material Issues and Stakeholders" section
in our CSR report.
6. Does the company appoint  ■ The Corporation has appointed Fubon Securities Transfer Agency Department as None.
a professional shareholder our professional shareholder service agency.
service agency to deal with
shareholder affairs?
7. Information Disclosure  ■ The Corporation's corporate website has an "Investor Relations" section and None.
(1) Does the company have a a "Corporate Governance" section which both disclose information regarding
corporate website to disclose the Corporation's finances, business matters, and corporate governance. This
both financial standings information is updated periodically and in a timely manner.
and the status of corporate
governance?
(2) Does the company  ■When disclosing information, the Corporation not only publishes the information None.
have other information on our annual reports and prospectuses in accordance with law, but also publicly
disclosure channels (e.g. discloses and files the information to websites designated by governing authorities
building an English website, and on our corporate website. Additionally, information is also disclosed in the
appointing designated following ways:
people to handle information (1) The Corporation has established an English language website (https://en.thsrc.
collection and disclosure, com.tw/) to disclose important information on the Corporation's finances, business
creating a spokesman matters, and corporate governance.
system, webcasting investor (2) The Corporation has implemented a spokesperson system.
conferences)? (3) The Corporation's Investor Conference notices and related information are
disclosed on our corporate website.
(3) Did the company publicly  ■ The Corporation publicly disclosed and filed our financial report for 2020 None.
disclose and file its financial on February 24, 2021, and our financial reports for the first, second, and third
report within two months quarters of 2020 and monthly operational status reports for the same year were
of the end of the fiscal year publicly disclosed and filed prior to the time limits set by regulations.
and publicly disclose and file
financial reports for the first,
second, and third quarters
and monthly operational
status reports prior to the
time limits set by regulations?
----- End of picture text -----

105

Corporate Governance

==> picture [483 x 560] intentionally omitted <==

----- Start of picture text -----

Deviations from
Implementation Status "the Corporate
Governance Best-
Evaluation Item Practice Principles
for TWSE/TPEx
Yes No Abstract Illustration
Listed Companies"
and Reasons
8. Is there any other important  ■ Since going public, the Corporation has been ranked among the top 5% of None.
information to facilitate a publicly listed companies by the TWSE Corporate Governance Evaluations for three
better understanding of consecutive years (from 2017 to 2019).
the company's corporate ■ The Corporation was awarded a "Platinum" certification by the Taiwan Corporate
governance practices (e.g., Governance Association under the CG6012 (2019) Corporate Governance System
including but not limited to Assessment on July 28, 2020, the certification period being from July 9, 2020 to July
employee rights, employee 8, 2022. The Corporation previously participated in the CG6011 (2017) Corporate
wellness, investor relations, Governance System Assessment and was awarded an "Excellent" certification.
supplier relations, rights of ■ The Corporation continued to be included in the "FTSE4Good TIP Taiwan ESG
stakeholders, directors' and Index" and was granted the right to use the "FTSE4Good TIP Taiwan ESG Index
supervisors' training records, exclusive label" from December 21, 2020 to June 20, 2021, highlighting this
the implementation of risk recognition of our sustainability actions relating to E (Environment), S (Society), and
management policies and G (Corporate Governance).
risk evaluation measures, ■ The Corporation participated in the "2020 13th TCSA Award" hosted by the
the implementation of Taiwan Institute for Sustainable Energy and received the "Top Ten Most Prestigious
customer relations policies, Sustainability Awards (Service Industry Category)" and the "Platinum Corporate
and purchasing insurance for Sustainability Report Award" in November 2020.
directors and supervisors)? ■ The Corporation was awarded first place in Outstanding Enterprises by the 17th
National Brand Yushan Awards in October 2020.
■ The Corporation's "Charter of the Corporate Governance & Nominating
Committee" stipulates succession plans for Board of Director members. In order
to pass on the professionalism and experiences of our Board members, the
Corporation has organized plans for director successors through a variety of
appropriate methods and has placed a list of director candidates in our talent
pool database; nominees are submitted to the Board for review when appropriate
and serve as a reference for the Board to nominate director candidates. For more
information, please refer to the "Succession Plan for Board of Director Members"
page under "Board of Directors" sub-section in the "Corporate Governance"
section of our corporate website. Additionally, the Corporation plans annual
training courses for directors in accordance with changes in external and internal
environmental conditions and development needs to enhance the professional
knowledge of new and returning directors and strengthen Board capabilities.
■ The Corporation has also established succession plans for senior management
in accordance with the"Succession Plan for Senior Management" passed by the
33rd meeting of the 8th Board on December 18, 2019, which is implemented
through five stages (identification of key skills, availability of current talent,
development of successors, evaluation of successors, and approval of management
personnel), the purpose being to ensure sustainable management and growth, and
establish a succession system for important management personnel to pass on the
professionalism and experiences of important management personnel. In order
to cultivate successors, the Corporation will conduct evaluations of management
skills for all department managers, and will conduct management training
courses once evaluations have concluded. Depending on availability of important
management positions, operational goals, and organizational needs, these will be
submitted to the Board for review following approval from the Chairman. For more
information, please refer to the "Succession Plan for Senior Management" page
under "Corporation Governance and Organizational Structure" sub-section in the
"Corporate Governance" section of our corporate website.
----- End of picture text -----

106

Deviations from Implementation Status "the Corporate Governance BestEvaluation Item Practice Principles for TWSE/TPEx Yes No Abstract Illustration Listed Companies" and Reasons

==> picture [142 x 595] intentionally omitted <==

==> picture [73 x 595] intentionally omitted <==

■ The Corporation's Guidelines for Corporate Governance stipulate that the Corporation shall devote attention to public policy, economic development, consumer rights and interests, community concerns, environmental protection and sanitation, public safety, and other public interest issues, to enhance the Corporation's image, and to faithfully fulfill its social responsibilities. The Corporation participates in social contribution through a number of measures, for example through subsidies to preserve jacanas and other wildlife, providing care to communities alongside the HSR line, and support of other environmental hygiene and public policies.

■ The Corporation has established "Ethical Corporate Management Best Practice Principles," "Code of Ethical Conduct," "Code of Conduct," "Regulation of WhistleBlowing System for Unlawful, Unethical Conduct and Dishonesty Behavior," "Regulations for Management of the Prevention of Insider Trading," "Reward and Discipline Regulation," "Grievance Regulation," and "Procurement Staff Ethical Regulation," which not only govern the ethical standards and codes of conduct for Corporation personnel when carrying out their duties, but also ensure that the corporate activities of the Corporation do not interfere with social contributions, thus maintaining the rights of the Corporation and our shareholders, fulfilling our corporate social responsibilities, and helping our stakeholders to understand relevant regulations.

■ The Corporation has established an Occupational Safety and Health Policy and is committed to compliance with government health and safety laws, regulations, and procedures to ensure the safety of passengers, employees, and other members of the public. We periodically conduct employee health checks, promote healthenhancing activities, and implement health management every year to enhance the physical and mental health of employees.

■ The Corporation has established a Safety Policy, relevant procedures, and implementation results, which are regularly reviewed each year to further our goal of continued improvements to safety. All employees have to undergo training in accordance with our safety regulations and operating procedures so that they can continue to present and be equipped with attention to and recognition of safety measures when carrying out daily tasks. Our contractors are carefully selected, supervised, and managed to ensure that their operations fulfill the Corporation's safety goals.

■ The Corporation is committed to appropriate utilization of internationally recognized risk assessments and safety management methods in our safety management system to actualize control and minimize hazards. We are committed to maintaining the highest quality control standards and are active in exercising safety management policies as we strive to implement various health and safety measures.

■ The Corporation has established a Supply Chain Management Policy which states that when collaborating with suppliers, we should gradually integrate environmental, social, and corporate governance needs into our supplier regulations in hopes of creating a more sustainable collaboration with our suppliers. Our management policies are disclosed on our corporate website.

■ Since 2004, the Corporation has complied with the "Guidelines for Corporate Governance" approved by the shareholders' meeting and taken out liability insurance for all directors, supervisors, and managers with respect to their liability under the law for their actions when exercising their duties. D&O liability insurance policies for 2020 and 2021 were approved by the 30th meeting of the 8th Board on September 18, 2019 and the 6th meeting of the 9th Board on September 16, 2020. Insurance application procedures have since been completed, and the total insurance amount came to NT$ 0.9 billion. Additionally, the insurance amount for environmental pollution defense costs came to NT$ 3 million.

■ The continued education of all current Corporation directors complies with the number of training hours stipulated by the Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies. In 2020, Corporation directors underwent a total of 121 hours of training as detailed in Note 4.

107

Corporate Governance

Please explain the improvements which have been made in accordance with the results of the Corporate Governance Evaluation System released by the Corporate Governance Center, Taiwan Stock Exchange, and provide the priority enhancement measures:

The Corporation was ranked among the top 5% listed companies in the 6th Corporate Governance Evaluations (2019). We list improvements to unachieved evaluation items below:

==> picture [483 x 562] intentionally omitted <==

----- Start of picture text -----

Item Evaluation Indicators Improvements
Did the company's board members include at least one female director? The Corporation's 9th Board currently includes three female
[If directors of each gender accounted for at least one-fourth of all of the directors but no female independent directors. In future, we
2.6 directors, and furthermore there is at least one female independent director will seek to increase the number of female directors so as to
among the directors, one additional point will be added to the total score. ] achieve gender equality and raise the ratio of female directors
and independent directors.
Did the company voluntarily appoint more independent directors than is The Corporation's 9th Board has four independent directors,
required by laws? (More than four independent directors) [If the company's which complies with the requirements of this indicators, but
2.7
independent directors reached one-half or more of all of the directors, one does not fulfill the criteria for additional points.
additional point will be added to the total score. ]
Has the company appointed a company secretary and disclosed on the The Corporation has appointed the Head of Secretariat Division
company's website and in its annual report the scope of the company under the Board of Directors as our corporate governance
secretary's authority, the key tasks carried out by the company secretary officer. The corporate governance officer holds other concurrent
2.21 that fiscal year, and the status of the company secretary's continuing positions within the Corporation, and therefore does not fulfill
education? [If the post of company secretary is filled by a person not serving the criteria for additional points.
in any other position in the company, one additional point will be added to
the total score. ]
Was the annual financial report in English filed to the MOPS by 7 days As a company with more than NT$ 10 billion of paid-in capital,
before the AGM? [If the company voluntarily prepared and filed an English the Corporation is required to disclose English versions of
3.5
version of the financial report, one additional point will be added to the financial reports, and therefore does not fulfill the criteria for
total score. ] additional points.
Did the company voluntarily disclose its financial forecast quarterly, without The Corporation currently has no plans to publish financial
having any corrections ordered by the competent authority or having any forecast reports for the fourth quarter, and will discuss
3.8
demerits imposed by the TWSE or TPEx? the necessity of disclosing financial forecast reports when
appropriate.
Did the company voluntarily disclose in the annual report the amount and The Corporation has already disclosed the amount and nature
nature of any non-audit fees paid to the external auditor and its affiliates in of non-audit fees paid to external auditors in our annual
addition to audit fees? report for 2019. However, as the amount of non-audit fees
3.15
was more than 1/4 of audit fees, this did not constitute a
voluntary disclosure, and therefore does not fulfill the criteria
for additional points.
Did the company's annual report disclose the individual remuneration The Corporation temporarily maintains summary disclosures
3.21 details of the general manager (chief executive officer) and assistant general for remuneration of our president and managers ranking
manager(s)? above vice president.
Did the company, following internationally recognized guidelines, prepare As a company with more than NT$5 billion of paid-in capital,
and publish reports such as its corporate social responsibility report to the Corporation is required to prepare and publish corporate
disclose non-financial information of the company? [If the company social responsibility reports, and therefore does not fulfill the
4.4
voluntarily prepared and published reports such as its corporate social criteria for additional points.
responsibility report to disclose non-financial information of the company,
one additional point will be added to the total score. ]
Did the company sign a collective agreement with the labor union in The Corporation is currently in discussion to sign agreements
4.7
accordance with the Collective Agreement Act? with our labor union.
Was the company ISO 14001 or ISO50001 certified or accredited with similar The Corporation obtained ISO 14001 verification on September
4.13 environmental or energy management system certification? 25, 2020, valid from September 25, 2020 to September 24,
2023.
----- End of picture text -----

108

Note 1: Implementation of board diversification policy

==> picture [484 x 257] intentionally omitted <==

----- Start of picture text -----

Core Composition Professional Background and Capabilities
Diversification Industrial Crisis
Leadership
Items Finance Knowledge Management
Legal Marketing, Operational and
Nationality Gender and and and
Practice Technology Management Decision-
Director Accounting Operational International
Making
Name Judgment Outlook
Yao-Chung Chiang R.O.C. M     
Kenneth Huang-Chuan Chiu R.O.C. M   
Duei Tsai R.O.C. M   
Pai-Ta Shih R.O.C. M    
Yung-Cheng (Rex) Lai R.O.C. M   
Wen-Jong Chi R.O.C. M   
Yueh-Hsiang Chen R.O.C. F   
Lee-Ching Ko R.O.C. F     
Chao-Tung Wong R.O.C. M     
Chao-Yih Chen R.O.C. M     
Mao-Hsiung Huang R.O.C. M     
Shien-Quey Kao R.O.C. F   
Kuo-Chih Liu R.O.C. M     
----- End of picture text -----

Note 2: Independence assessment indicators of CPA

==> picture [483 x 365] intentionally omitted <==

----- Start of picture text -----

Passed Independence
No. Evaluation Item Evaluation Results
Assessment?
As of the most recent audit, there have been no instances where CPA remained unchanged
1 Yes Yes
for 7 years, or where CPA was reassigned to the Corporation within 2 years.
2 CPA has no direct or indirect major financial stake in the Corporation. Yes Yes
CPA is not involved in any financing or financial guarantee agreements involving the
3 Yes Yes
Corporation or Corporation directors.
4 CPA does not have any potential employment relationship with the Corporation. Yes Yes
Accounting firm of CPA is not overly reliant on funds from any single client, including the
5 Yes Yes
Corporation.
CPA and members of the audit team are not currently serving as Corporation directors,
6 managers, or in positions that have major impact on Corporation audits, and have not done Yes Yes
so over the past 2 years.
Non-audit services provided by CPA to the Corporation have no direct impact on the major
7 Yes Yes
items of audit services provided.
8 CPA does not promote or sell shares or other securities issued by the Corporation. Yes Yes
9 CPA is not representing the Corporation in litigation of a third party or other disputes. Yes Yes
CPA and members of the audit team have no familial relationships with directors,
10 managers, or people in positions that have major impact on Corporation audits at the Yes Yes
Corporation.
CPA has not served as company director, manager, or in positions that have major impact
11 Yes Yes
on Corporation audits within 1 year of termination.
The Corporation has not requested that members of the audit team accept improper
12 accounting practices or improper disclosures on financial statements made by the Yes Yes
Corporation.
The Corporation has not pressured accountants and facilitated improper reduction of audit
13 Yes Yes
duties in order to reduce audit fees.
14 CPA is not involved in decision-making managerial duties at the Corporation. Yes Yes
----- End of picture text -----

109

Corporate Governance

Note 3: Letter of declaration from Deloitte & Touche

Date: December 31,2020

Recipient：Taiwan High Speed Rail Corporation

Subject：With respect to the audit of the Corporation's financial statements for the year ended in 2020, our audit team confirms that we have complied with the following requirements without impairing auditor independence, in compliance with "The Bulletin of Norm of Professional Ethics for Certified Public Accountant of the Republic of China No. 10, Integrity, Objectivity and Independence" of the National Federation of CPA Associations of the R.O.C.

Gentlemen：

Our audit team members, their spouses and relatives entitled to maintenance do not have the following circumstances:
a. Holding any direct or material indirect financial interests of the Corporation.
b. Maintaining an independence-impairing business relationship with the audit client and/or its directors or managers.
During the audit and engagement period, our audit team members, their spouses and relatives entitled to maintenance do not serve as a director, a manager of the audit client or hold any position to exercise direct and material influence over the audit of the financial statements.
Our audit team members do not have any spouse, linear family members by blood or marriage and/or a collateral relative to second degree who takes a position as a director or a manager of the audit client.
Our audit team members do not accept significant gifts and hospitality from the audit client and/or its directors, managers, or major shareholders. (The value of gifts and hospitality should not exceed the normal social practice.)
Our audit team has performed necessary independence/conflict check procedures to assure no independence impairment or unsolved conflicts.

==> picture [175 x 73] intentionally omitted <==

Deloitte & Touche Taipei, Taiwan Republic of China

110

Note 4: Director training programs in 2020

==> picture [483 x 672] intentionally omitted <==

----- Start of picture text -----

Date of Training
Director Name Course
Attendance Time (Hours)
2020/12/28 Outlook on sustainable corporate development: From 2050 vision to 2020 actions 3
2020/08/05 A discussion of intellectual property management from the perspective of the board 3
2020/07/08 Corporate governance advancements in Taiwan 3
Yao-Chung Chiang
How directors and supervisors oversee companies, detect and prevent fraud, and establish
2020/06/08 1
whistleblower mechanisms to strengthen corporate governance
2020/04/08 Director responsibilities and risk management under latest corporate governance strategies 3
2020/10/23 Corporate governance and regulations relating to securities 3
Kenneth Huang-
2020/08/04 Strategies and management of corporate upgrading and transformation 3
Chuan Chiu
2020/04/22 5G key technologies and opportunities for application 3
2020/10/21 Ethical management and ISO37001 3
2020 Corporate governance and corporate ethics promotion conference for directors and
2020/10/16 3
Duei Tsai supervisors
2020/09/30 A discussion of shareholder activism and management disputes 3
2020/08/05 A discussion of intellectual property management from the perspective of the board 3
2020/12/22 Insurance industry response strategies for IFRS17 transitions 3
2020/11/10 Analysis of anti-corruption case studies in the private sector 1
Pai-Ta Shih
2020/08/05 A discussion of intellectual property management from the perspective of the board 3
2020/06/23 Analysis of Treating Customer Fairly Principle 1
2020/08/05 A discussion of intellectual property management from the perspective of the board 3
Yung-Cheng (Rex)
2020/07/28- Practical seminar for directors and supervisors (including independent directors) and corporate
Lai 12
2020/07/29 governance officers
2020/08/25- Practical seminar for directors and supervisors (including independent directors) and corporate
Yueh-Hsiang Chen 12
2020/08/26 governance officers
2020/12/28 Outlook on sustainable corporate development: From 2050 vision to 2020 actions 3
Kwo-Tsai Wang 2020/07/08 Corporate governance advancements in Taiwan 3
(Former Director) How directors and supervisors oversee companies, detect and prevent fraud, and establish
2020/06/08 1
whistleblower mechanisms to strengthen corporate governance
Min-Ching Liu
2020/04/08 Director responsibilities and risk management under latest corporate governance strategies 3
(Former Director)
2020/10/07 Corporate governance blueprint 3.0 and director responsibilities 3
Lee-Ching Ko New theories of corporate governance by the board: Advanced measures and implementations of
2020/07/31 3
information and network security
2020/11/06 Case studies of insider trading and legal liabilities 3
Chao-Tung Wong
2020/08/03 Climate change and TCFD (Task Force on Climate-related Financial Disclosures) 3
Forum on "Corporate governance 3.0 and blueprint for sustainable development" in public
2020/09/21 3
Chao-Yih Chen companies
2020/08/05 A discussion of intellectual property management from the perspective of the board 3
2020/12/22 Trends in corporate governance 3
Mao-Hsiung
2020/08/14 Post-COVID-19 macroeconomic analysis and global impacts and responses to Sino-US tech war 3
Huang
2020/08/05 A discussion of intellectual property management from the perspective of the board 3
2020/12/08 Trends and challenges in information security governance 3
Shien-Quey Kao
2020/11/26 Artificial intelligence and technology laws 3
2020/12/17 Corporate governance and legal compliance 3
Kuo-Chih Liu
2020/08/05 A discussion of intellectual property management from the perspective of the board 3
Huang-Liang Tsai
2020/04/08 Director responsibilities and risk management under latest corporate governance strategies 3
(Former Director)
Director training hours for 2020 121
----- End of picture text -----

111

Corporate Governance

(7) Corporate Social Responsibility and Deviations from "the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies" and Reasons

==> picture [484 x 74] intentionally omitted <==

1. Does the		■In order to build a complete risk management system; strengthen effectiveness of corporate	None.
company conduct		governance; ensure comprehensiveness, effectiveness, and reasonableness of risk management,
risk assessment		as well as effectively evaluate and oversee risk-bearing capabilities of the Corporation to
on environmental,		determine risk response strategies and implementation of risk management procedures, the
social, and		Corporation's "Risk Management Regulation" and related "Risk Management Policies" were
corporate		established following approval of the 27th meeting of the 8th Board on June 19, 2019 to provide
governance		reasonable assurance of the Corporation's mid- to long-term strategic plans and achievement of
issues, related to		targets.
the company's		■The Corporation has inventoried and identifed, in a proactive and cost-effective manner,
operations and		possible risks that may impact operations and profts due to Corporation business and
establish related		operational activities, the main considerations being business environments, operations,
risk management		fnances, hazardous incidents, and other aspects. We have also reviewed comprehensiveness
policies or		of corporate risk management procedures and effectiveness of risk management controls, and
strategies?		conducted risk evaluations of major environmental, social, and corporate governance issues
		relating to operations; these evaluations are used to establish implementation systems and
		identify main risk categories (Note 1). For more information regarding these risks and relevant
		response measures, please refer to the following table (Note 2).
		■The Corporation's various committees (such as the Audit Committee, Safety Committee,
		Information Security Committee, Corporate Social Responsibility Team under the Corporate
		Governance Promotion Committee, and so on) all participated in establishing the
		aforementioned risk management measures, issues, evaluations, and polices, and are assisting
		in promotion thereof.
		■Implementation status
		The Corporation began actively promoting risk management procedures in 2018 and reports on
		implementations to the Board once every year. Main implementations in recent years include:
		•2018
		Risk management report was acknowledged by the Board at the 21st meeting of the 8th Board
		on December 13, 2018.
		•2019
		1. Established Risk Management Regulation and risk management policies in 2019.
		2. Annual risk management report (including risk management implementations and progress
		report) was acknowledged by the Board at the 30th meeting of the 8th Board on September 18,
		2019.
		•2020
		1.Presented annual risk management report (including risk management implementations
		and progress report) to the Board at the 6th meeting of the 9th Board on September 16, 2020,
		encompassing the Corporation's risk categories, important items for risk management, and risk
		assessments. Units responsible for management of different risk categories have all adopted
		appropriate response measures and made suitable records of risk management procedures and
		implementation results.
		2.To strengthen risk management mechanisms, risk management courses have been organized
		for relevant personnel. A total of 383 personnel underwent 1,245 hours of training to strengthen
		their corporate risk management awareness and understanding.

112

==> picture [484 x 684] intentionally omitted <==

----- Start of picture text -----

Deviations from "the
Implementation Status
Corporate Social
Responsibility Best-
Evaluation Item Practice Principles
Yes No Abstract Illustration for TWSE/TPEx Listed
Companies"
and Reasons
2. Does the  ■ The Corporation established a "Corporate Governance Promotion Committee" which is
company establish overseen by our Chairman and chaired by our President. Executives from our managerial
exclusively (or departments serve as committee members and meetings are convened every two months or
concurrently) as needed to discuss specific topics. The Committee drafts optimization strategies for corporate
dedicated first- governance systems and functions, formulates measures to strengthen corporate governance,
line managers and reviews corporate social responsibility policies to provide a reference for decision-makers
authorized by the within the Corporation. Additionally, the Committee makes annual reports of overall corporate
board to be in governance promotion and implementation status to the Board, and conducts risk evaluations
charge of proposing and management work of environmental, social, and corporate governance issues relating to
the corporate operations by principle of materiality every year.
social responsibility ■ The Corporate Governance Planning Team, Corporate Social Responsibility Team, and
policies and Ethical Management Team have been established under the Corporate Governance Promotion
reporting to the Committee, and committee structure and implementation status were reported to the 3rd
board? meeting of the 9th Board on June 17, 2020. The main annual work plans and duties of the
Corporate Governance Promotion Committee are as follows:
1.Review appropriateness and effectiveness of the Corporation's organizational efficiency and
ensure consistency with management duties.
2.Review effectiveness of internal risk management, audits, and control procedures, and
implement control measures for potential risks.
3.Review operational procedures for Corporation information and disclosures to ensure the
accuracy and transparency of information disclosed to the public.
4.Review legal compliance of operational processes and implement control strategies.
5.Formulate and review the Corporation's implementation of corporate social responsibility,
ethical management policies, guidelines, and specific promotion plans.
6.Formulate plans for activities to enhance investor relations.
7.Track the Corporation's preparations for and implementation of corporate governance
evaluations.
8.Track Board resolutions relating to corporate governance.
9.Formulate plans for other major corporate governance strategies.
Details on the operational status of the Corporate Governance Promotion Committee can be
found on our corporate website in the "Corporation Governance and Organizational Structure"
sub-section under our "Corporate Governance" section.
■ The Corporation fulfills corporate social responsibilities in accordance with our "Corporate
Social Responsibility Best Practice Principles" approved by the Board of Directors in March
2016, and is active in promotion of corporate governance, social welfare, and environmental
sustainability, concepts which are integrated in our operational strategies and management
goals. Additionally, the Corporate Social Responsibility Team of the Corporate Governance
Promotion Committee is convened by the vice president of our Corporate Planning Office, and
composed of representatives from all departments; the team is responsible for planning and
promoting activities relating to corporate social responsibility, compiling annual corporate
social responsibility reports, and convening every quarter to discuss matters of corporate social
responsibility promotion. The team is also responsible for making annual reports to the Board
about the results of specific performance and promotion of our corporate social responsibilities.
A report on specific implementation and promotion performance of corporate social
responsibilities for 2020 was presented to the 3rd meeting of the 9th Board on June 17 2020. The
main annual work plans and duties of the Corporate Social Responsibility team include:
1.Coordinating the Corporation's recent developments and goals in corporate sustainability.
2.Formulating future long-term strategies and guidelines for corporate social responsibility
promotion.
3.Overseeing internal units responsible for planning and proposing annual corporate social
responsibility strategies and plans in their specific area of business.
4.Coordinating various departments in implementing corporate social responsibility activities
and projects.
5.Reviewing and finalizing CSR report.
6.Other tasks relating to review or compilation of corporate social responsibility matters.
Details on the operational status of the Corporate Social Responsibility Team can be found on
our corporate website in the "Corporation Governance and Organizational Structure" sub-section
under the "Corporate Governance" section.
■ The Corporation's Corporate Planning Office is also responsible for planning and promoting
concepts relating to corporate social responsibility to all entry-level personnel along the HSR
line.
----- End of picture text -----

113

Corporate Governance

==> picture [484 x 376] intentionally omitted <==

114

==> picture [484 x 83] intentionally omitted <==

Evaluation Item Yes (3) Does the 	Practice Principles for TWSE/TPEx Listed Companies" and Reasons No Abstract Illustration ■The Corporation actively faces the impacts of climate change. With regard to the None.
company assess the	"Adaptation Strategy to Climate Change in Taiwan" proposed by the National Development
potential risks and	Council, we continue to assist the Institute of Transportation, Ministry of Transportation
opportunities of	and Communications (MOTC) in conducting research related to climate change adaptation,
climate change for	participate in the development of the railway and highway climate change adaptation
the company now	information platform and the expansion of its functions, and strengthen the analytical functions
and in the future,	regarding vulnerability and risk of the information platform, with a view to supporting decision-
and take action	making analysis of climate change by railway and highway competent authorities. Furthermore,
on climate-related	the Corporation has also signed the "Memorandum of Cooperation on Cross-border Disaster
issues?	Prevention" with the Central Weather Bureau, Ministry of Transportation and Communications
	(MOTC) to enhance meteorological interpretation capabilities through mutual cooperation, while
	serving as an important reference for the Corporation to make traffc dispersion decisions and
	assess track safety during disasters.
	■Since 2013, the Corporation has cooperated with the government to promote renewable
	energy policies by leasing out rooftop areas of Wuri and Zuoying maintenance depots and the
	Yanchao Main Workshop to energy suppliers for the installation of solar power equipment with
	a total power generation capacity of 5,359 kW. We sequentially set up solar power generation
	systems at Liujia depot, Wuri depot, Zuoying depot, Taoyuan Station, Chiayi Station, and Tainan
	Station to utilize upper areas of depot food basins, station rooftops, and outdoor parking lots.
	Total power generation capacity was approximately 3,811 kW. The Corporation also established
	connections with Taiwan Power Company's power generation equipment in 2020.
	■Additionally, we installed solar panels on the rooftops and as sun and rain shelters at Miaoli,
	Changhua, and Yunlin stations with a total power generation capacity of 258 KW to generate
	electricity for use at these stations. In 2018, THSRC also applied for and obtained Renewable
	Electricity Certifcates for the solar energy generated at these three stations.
	■The main risks brought about by climate change include severe weather phenomenon such
	as extreme high temperatures; rising sea levels; increased rainfall, rainfall intensity, typhoons,
	cyclones, and lightning, which have increased in frequency and intensity, enhancing vulnerability
	levels of the railway industry and impacting our operations. At present (in 2018~2022), our
	adaptive actions toward climate change impact include:
	1. Establish trackside slope safety warning systems.
	2. Strengthen safety measures at trackside slopes near tunnel openings.
	3. Scour risk assessments and design of safety measures for HSR viaducts.
	■For information on the potential risks, opportunities, and corresponding measures of climate
	change for the Corporation now and in the future, please see Note 3. More details are disclosed
	on the "Disaster Prevention " page of "Intelligent Transportation " sub-section under our
	"Corporate Social Responsibility" section of our corporate website.

115

Corporate Governance

Evaluation Item	Implementation Status	Implementation Status	Implementation Status
	Yes	No	Abstract Illustration
(4) Does the company count the greenhouse gas emissions, water consumption and total weight of waste in the past two years, and formulate policies for energy conservation and carbon reduction, greenhouse gas reduction, water consumption or other waste management?	 ■The Corporation continues to promote its four major energy-saving programs (self-managed energy saving, reduction of power consumption, transfer of peak power demands, and reasonable power usage), and has established energy-saving goals for each station (reduction of at least 0.86% average annual power consumption per passenger). The Corporation's water resource management policy includes water conservation, water reduction, and water recycling measures, and set an annual water-saving goal of at least 3.42% reduction of "water consumption per passenger." Additionally, in order to quantify carbon emissions trends and current conditions associated with the Corporation's overall energy consumption, we have established a "passenger- kilometer emissions" indicator, and aim to reduce our carbon emissions by at least 1.5% every year. ■Passenger volumes decreased in 2020 due to impacts from the coronavirus (COVID-19) pandemic, and annual energy-saving targets for 2020 were adjusted following approval from the Chairman. Target achievement rates for 2020 were as follows: "station energy-saving rate": 8.94% (>0.86%); "station water-saving rate": 5.34% (>3.42%); and "carbon emissions rate": 11.18% (>1.50%). ■The Corporation calculates greenhouse gas emissions, water usage, and total weight of solid waste every year, and discloses these in our annual "Corporate Social Responsibility Report." Statistical data for the past two years (2019~2020) are as follows: Item/ Year Greenhouse Gas Emissions (ton CO2e) Water Usage (m 3) Solid Waste (ton) 2019 319,844.04 723,602 7,235.92 2020 312,636.50 688,002 9,321.92 Additionally, the Corporation voluntarily conducted greenhouse gas (GHG) surveys and external verifcations for all 12 stations in 2016~2019, and obtained an ISO14064 Verifcation Opinion Statement. (Survey and verifcation of station GHG emissions for 2020 are scheduled to be completed byDecember 2021). None.
4. Preserving Public Welfare (1) Does the company formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights?	 ■Article 18, Chapter 4 (Maintaining social welfare) in the Corporation's "Corporate Social Responsibility Best Practice Principles" stipulates compliance with the International Bill of Human Rights in gender equality, right to work, and prohibition of discrimination, and establishment of relevant management policies and procedures. ■The Corporation complies with the spirit of the International Bill of Human Rights and established a "Human Rights Policy" in 2018, which is disclosed on our corporate website and in Chapter 4 of this report. We adhere to the principles and spirit underlying the UN's Universal Declaration of Human Rights, the Guiding Principles on Business and Human Rights, the UN Global Compact, and the International Labor Organization's Declaration on Fundamental Principles and Rights at Work, including freedom of association, care for vulnerable groups, prohibition of child labor, elimination of all forms of forced labor, elimination of employment discrimination, and confrm that our human resource utilization policies do not discriminate on the basis of gender, race, social class, age, marriage status, religion, and political affliation. The Corporation has established various regulations for corporate governance, environmental protection, public affairs, procurement and human resources. ■We have also built sound management systems in compliance with the Personal Information Protection Act to protect the privacy of our employees, passengers, and all stakeholders. We have specifc regulations relating to human rights policies to serve as a basis for identifying important human rights issues and to promote risk-reducing measures. The Corporation's "Supply Chain Management Policy" stipulates that in addition to procurement quality, costs, delivery date, and services, the Corporation should also take issues such as reasonable profts, social responsibility, labor safety, human rights, and environmental protection into consideration when making management and implementation decisions. When inviting bids, the Corporation stipulates that companies submitting bids should not discriminate on the basis of gender, discriminate against indigenous people or vulnerable groups, and should not use child labor. We actively contribute to society and participate in local activities to the best of our limited abilities, in hopes of maintaining sustainable interactions with our collaborating organizations to implement social care and strengthening of local culture. The Corporation has provided effective and appropriate grievance mechanisms for matters that infringe upon labor rights to ensure the equality and transparency of grievance regulation. Relevant human rights concerns and specifc management plans and actions are detailed in Chapter 7 of this annual report. Additional information is disclosed on the "Human Rights Policy" and "Implementation of Mitigation Measures for Human Rights Risks" pages under "Policy" sub-section in the "About Us" section of our corporate website. None.

116

==> picture [484 x 424] intentionally omitted <==

117

Corporate Governance

==> picture [484 x 83] intentionally omitted <==

----- Start of picture text -----

Deviations from "the
Implementation Status
Corporate Social
Responsibility Best-
Evaluation Item Practice Principles
Yes No Abstract Illustration for TWSE/TPEx Listed
Companies"
and Reasons
(3) Does the  ■ To provide employees with safe and healthy work environments, the Corporation conducted None.
----- End of picture text -----

Evaluation Item Yes (3) Does the 	Practice Principles for TWSE/TPEx Listed Companies" and Reasons No Abstract Illustration ■To provide employees with safe and healthy work environments, the Corporation conducted None.
company provide	environment monitoring at corporate headquarters, the OMC building, 12 HSR stations, and 4
a healthy and	maintenance depots.
safe working	■Every year, the Corporation establishes Annual Health and Safety Education Training Plan
environment and	which includes relevant EHS training courses; training completion rates exceeded 100%.
organize training on	Additionally, the Corporation hosts a number of promotional activities on health and safety
health and safety	standards, operational procedures, and regulations for new recruits and existing personnel to
for its employees on	enhance their awareness and capabilities. A total of 576 activities were hosted in 2020.
a regular basis?	■We established "The Prevent Plan for Wrongful Physical or Mental Harm during the
	Execution of Job Duties" in accordance with the Occupational Safety and Health Act and guided
	implementation in all departments to ensure occupational health and safety.
	■The Corporation implemented annual occupational health and safety audits to assess whether
	audited units had fulflled their responsibilities and were operating in accordance with relevant
	regulations. We conducted 11 audits in 2020.
	■The Corporation has established "Employee Safety and Health Work Instructions,"
	"Occupational Safety and Health Management Plan," "Railway Operation Safety Rulebook,"
	"THSRC Operation Regulation," "THSRC Operation Rules," and "Operation Control Center/Station
	Control Room/Depot Control Room Working Manual" to serve as a reference for operational and
	safety management. These procedures are updated at least every three years in accordance with
	stipulated regulations.
	■The Corporation established an incentive program to encourage our colleagues to report false
	alarms and violations occupational health and safety, thus enhancing awareness of occupational
	health and safety.
	■The Corporation hosted a number of traffc safety management events, for example traffc safety lectures; traffc safety quizzes; safe-driving promotional training for Yamaha and KYMCO
	motorcycles; and the Hsinchu, Taichung, Kaohsiung shuttle bus program.
	■The Corporation provides health checks for train personnel and regular staff members beyond
	those mandated by regulations. Employees aged above 45 under annual health checks, while
	those under 45 undergo health checks every two years. Additional health items were provided
	to senior staff (those above 45 years old who have worked at the Corporation for more than 10
	years) beginning in 2018. In 2020, annual health check attendance for train personnel was 100%,
	and above 95% for regular employees.
	■We established an online occupational health check reservation system to maximize service
	accessibility. Occupational health physicians provided hazard assessments, health consultations,
	home and work injury care, assessments for returning workers and worker ftness for 147 on-site sessions, ensuring comprehensive healthcare benefts for employees.
	■THSRC corporate headquarters, OMC building, 12 HSR stations, and 4maintenance depots
	are all equipped with the health rooms with nurses to provide employees, passengers, and
	contractors with health care resources for emergency injury care. We also stipulated the relevant
	work safety rules, and implemented the countermeasures for the personal safety and working
	environment of employees.
	■Every two years, we implement programs relating to prevention of hazards related to human
	factors, prevention of disorders brought on by abnormal workloads, maternal health protection,
	and so on. We also conduct health management surveys to analyze employee health risks
	and provide timely interventions and special preventive measures for preventive care and
	management.
	■In terms of preventive care for mental health, we have established hotlines and dedicated
	emails to provide multiple communication channels and care for our employees.
	■Conducted safety management audits and investigations of operational incidents to maintain
	HSR operational safety.
	■Provided training associated with identifcation of hazardous items and safety response
	measures for a total of 102 frontline personnel.
	■Conducted evaluations of security contractors and periodic audits of access management at
	all stations/depots/workshops along the HSR line.
	■Organized a variety of emergency drills and training sessions to help employees familiarize
	themselves with necessary response procedures and skills.
	■Organized training for HSR on-site emergency response commanders and engineers to help
	employees develop skills to coordinate with response command personnel.
	■Organized 6 personal information awareness training sessions for new employees; a total of
	4,609 employees participated in annual retraining sessions.
	■The Corporation established and has maintained an occupational health and safety
	management system since its Construction Stage. THSRC successfully passed LRQA audits in July
	2017 and completed TOSHMS (Taiwan Occupational Safety and Health Management System) CNS
	15506 and OHSAS (Occupational Health and Safety Assessment Series) 18001 verifcations. In June 2020, THSRC passed BSI (British Standards Institution) audits and completed transfer verifcations
	for (TOSHMS) CNS 45001 and ISO 45001. The Corporation's current (TOSHMS) CNS 45001 and ISO
	45001 certifcates are valid fromJuly19,2020 toJuly18,2023.

118

==> picture [484 x 603] intentionally omitted <==

If the company has established the corporate social responsibility principles based on "the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies," please describe any discrepancy between the Principles and their implementation: The business operations of THSRC follow the Corporate Social Responsibility Best Practice Principle.

119

Corporate Governance

==> picture [484 x 73] intentionally omitted <==

7.Other important information to facilitate better understanding of the company's corporate social responsibility practices:

(1) THSRC participated in the "2020 Taiwan Corporate Sustainability Awards (TCSA)"and won the "Top 10 Domestic Companies Sustainability Model Awards (Service Industry)" and the "Premium Corporate Sustainability Report Awards" from the Taiwan Institute for Sustainable Energy (TAISE). (2) To implement environmental protection and energy-saving policies, THSRC buildings are designed with sustainable environment concepts encompassing "ecosystem, energy-saving, waste-saving, and heath." HSR Miaoli, Changhua, and Yunlin stations are equipped with solar power facilities which generate power for station usage, and have applied for Renewable Electricity Certificates (RECs). These three stations respectively received Diamond Level, Gold Level and Gold Level Green Building Certificates from the MOI and Green Building Certification plaques.

(3) In 2020, we applied to the Environmental Protection Agency to extend the 5-year validity period of the "High-speed Rail Transportation Service Carbon Footprint Label" (from December 17, 2020 to December 16, 2025), and was awarded a renewed carbon footprint label certificate (Certificate label No. 2014910001). Our carbon footprint was verified to be 32 gCO2e per passenger per kilometer (per passenger-kilometer), and our commitment to reduce carbon emissions by more than 3% within 3 years (carbon reduction of 4.92%) was awarded again the "Carbon Footprint Reduce Label" (Certificate label No. R2014910001).

(4) On October 6, 2017, THSRC received the ISO14064 certification issued by the third party verification unit for all HSR station GHG emissions in 2016. On December 26, 2018, THSRC received ISO14064 certification for all HSR station GHG emissions in 2017. On November 22, 2019, THSRC received ISO14064 certification for all HSR station GHG emissions in 2018. On September 14, 2020, THSRC received ISO14064 certification for all HSR station GHG emissions in 2019.

(5) The solar power facilities of Miaoli, Changhua, and Yunlin stations generated 202.6 MWh in 2020, and 202 RECs were obtained.

(6) Since its initiation in 2010, the High-Speed Educational Endowment Program has accumulated 148 million NTD over 12 years and is estimated to have helped more than 27,000 disadvantaged schoolchildren achieve their dreams of learning.

(7) The THSRC Smiling Train Program project was initiated in 2009 and collaborates with local educational and charitable institutes to help the disadvantaged fulfill their dreams of taking a ride on the punctual and convenient high-speed rail. A total of 803 disadvantaged groups and 143,181 people have participated in this program over the course of 13 years.

(8) The THSRC Winter Outreach Blood Drive was initiated in 2012 and helps hospitals all over Taiwan store sufficient amounts of blood for use in time of medical emergency. THSRC hosted 12 blood drives in 2020 and has collected 13,767 bags of blood over the course of 9 years.

(9) The THSR ART Together Program was initiated in 2015, connecting HSR stations to local communities through art performances. Over the course of 5 years, 573 groups and 17,052 people have performed at 9 stations (Taoyuan, Hsinchu, Miaoli, Taichung, Changhua, Yunlin, Chiayi, Tainan, and Zuoying), winning great praise from the general public and HSR passengers.

(10) The THSR Museum was inaugurated on January 5, 2017 and displays cultural assets to illustrate the 3 spatial revolutions in the history of Taiwan's railway industry, the subsequent development of high-speed rail policies, BOT vendor selection and negotiation, the founding of THSRC, and the process of THSR construction and operation, allowing visitors to learn about THSRC's path through history. As of year-end 2020, a total of 373 groups, 33,810 people have visited the museum.

(11) For more information on our corporate social responsibilities, please refer to the "Corporate Social Responsibility" section on our corporate website.

Note 1: Implementation structure for risk management

==> picture [445 x 276] intentionally omitted <==

----- Start of picture text -----

Board of Directors Corporate Governance &
Nomination Committee
Audit Committee
Chairman
Remuneration Committee
Corporate Audit Office Special Committee
Operational Safety President
Committee
Information Security Sa fety Committee Corporate Governance
Management Committee Promotion Committee
Senior Hazard Review Occupational Safety and
Group Committee Health Committee Corporate Governance
Planning Team
Environmental Management Corporate Social
Committee Responsibility Team
Ethical Management Team
Main Risk Categories
Responsible Unit Operational Safety Information Security Environmental Financial
Risks Risks Risks Risks
Operation Safety Office Information Technology Operation Safety Office Finance Division
Occupational Safety & Division Facility Engineering
Health Office Department
Quality Assurance Office
----- End of picture text -----

120

Note 2: Main risk categories and response measures and actions

Material Issues	Main Risk Categories	Risk Assessments	Risk Management Strategies and Related Response Measures
Environmental	Environmental Risks Assess various environmental risks (such as global warming, extreme weather conditions, earthquakes, land subsidence, and formation of new fault lines) can cause revisions in laws and regulations, system damages, regional power cuts, and water shortages, which may affect service quality and increase maintenance and operation costs. 1. Established environmental policies and implemented management according to our environment management manual. We have applied for ISO14001 certifcation and are seeking to establish environment management systems that adhere to these standards. 2. Identifed climate change risks and estimated future mid-to long- term climate change risks to formulate plans and strategies for saving energy. We also collaborated with professional institutions to analyze and formulate response strategies to climate change, effectively decreasing possible impacts to our operations from climate change. 3. Collaborated with professional institutions to establish an early- warning system for earthquakes. 4. Conducted assessments on land subsidence, new fault lines, food prevention, and earthquake prevention capabilities to formulate improvement measures. 5. Gained a full understanding of environmental hazards through DWS hazard warning systems, and conducted annual hazard prevention audits and regular and irregular drills.
Social	Operational Safety Risks Assess HSR systems that may be affected by internal and external factors such as malfunctions of facilities and equipment, human error, intentional sabotage, or other external factors, which may affect train safety; cause injury to our employees, passengers, contractors, or the general public; or cause delay or cessation of rail operations. 1. Established our safety and health, corporate quality, and confguration management policies, and implemented management according to our operational safety plan, occupational safety and health management manual, corporate quality manual, high-speed rail system confguration management manual, corporate RAMS manual, management plan for rail security, and assurance plan for corporate safety. 2. Established an Operational Safety Committee which convenes every quarter, and also an Occupational Safety and Health Committee which convenes every quarter. 3. Implemented internal audits and safety inspections of rail operation safety, occupational safety and health, quality management, confguration management, and system assurance. 4. Implemented rail safety training, education and training for occupational safety and health, hazard management training, and hazard prevention and response drills and training.
Corporate Governance	Information Security Risks THSRC is a Critical Information Infrastructure provider, and also a Level-A Cyber Security Responsibility Unit. Assess all HSR information systems and take into account various aspects including confdentiality, comprehensiveness, accessibility, and legal compliance. 1. Formulated information security policy and software intellectual property rights protection policy, and implemented management according to information security management manual. 2. Established Information Security Committee and convened information security review meetings once every six months. 3. Established management procedures and systems according to international ISO27001 information security system. 4. Implemented internal information security audits, drills and evaluations, information security inspections, penetration testing, defense-in-depth mechanisms, and education and training in accordance with requirements for Level-A Cyber Security Responsibility Units.
	Financial Risks Assess changes in domestic and overseas economic and fnancial conditions that may impact our income, maintenance and operation costs, interest rates, and exchange rates, which in turn may affect our proftability and cash fows. 1. Adhered to "International Financial Reporting Standards (IFRS)," "International Accounting Standards (IAS)," and government regulations. 2. Underwent annual fnancial audits by competent authorities. 3. Our managerial departments underwent monthly budgeting and accounting reviews and presented these to the Board every six months. 4. Periodically issue quarterly and annual fnancial reports. 5. Our Board conducted reviews of important fnancial activities in accordance with relevant regulations and internal control systems.

121

Corporate Governance

Note 3: The potential climate change risks, opportunities and corresponding measures of the Corporation

==> picture [483 x 52] intentionally omitted <==

----- Start of picture text -----

Current and potential future climate change risks, opportunities, and corresponding measures of the Corporation
Corresponding measures in
Climate risks Potential financial impacts Climate opportunities Potential financial impacts
2020
----- End of picture text -----

(1) Extreme high	(1) Occurrence of extreme	(1) THSRC signed the	(1) Strengthen climate	(1) Establish trackside slope
temperatures.	weather events increase	"Memorandum of	response capabilities,	safety warning systems.
(2) Increased rainfall	damages and impacts to	Cooperation on Cross-	reducing operational	(2) Strengthen safety
volumes and	railway equipment, raising	border Disaster	interruptions and possible	measures at trackside
intensity.	maintenance costs.	Prevention" with	losses.	slopes near tunnel
(3) Typhoons, cyclone,	(2) Impacts to operations	the Central Weather	(2) Save energy and reduce	openings.
lightning.	reduce revenues.	Bureau, Ministry of	carbon emissions to	(3) Scour risk assessments and
(4) Unstable water and	(3) Power usage increases	Transportation and	reduce costs.	design of safety measures
power supply.	with rising temperatures,	Communications (MOTC)	(3) Increase usage of	for HSR viaducts.
(5) Impacts to HSR	raising operational costs	to enhance meteorological	renewable energy.	(4) Complete establishment of
operations.	and carbon emissions.	interpretation capabilities.		parking spaces at Zuoying
		(2) Collaborated with power		depot and Chiayi Station,
		companies to set up		as well as leased rooftop
		leased solar power		solar power generator
		generation systems at our		systems at Taoyuan
		maintenance bases and		Station.
		stations.
		(3) Set up self-use solar power
		generation systems at
		Miaoli, Changhua, and
		Yunlin stations, and
		applied for renewable
		energy certifcates.

(8) Implementation of Ethical Corporate Management and Deviations from "Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies" and Reasons

==> picture [483 x 95] intentionally omitted <==

----- Start of picture text -----

Implementation Status Deviations from
"Ethical Corporate
Management Best
Evaluation Item Practice Principles
Yes No Abstract Illustration
for TWSE/TPEx Listed
Companies"
and Reasons
1. Establishment of Ethical  ■ The Corporation adheres to the five core values of Discipline, Integrity, None.
----- End of picture text -----

Evaluation Item Yes 1. Establishment of Ethical 	Practice Principles for TWSE/TPEx Listed Companies" and Reasons No Abstract Illustration ■The Corporation adheres to the fve core values of Discipline, Integrity, None.
Corporate Management Policies	Effciency, Innovation, and Sensibility, and has established ethical policies and
and Programs	a corporate culture of ethical management based on our operational principles
(1) Does the company establish	of Honesty, Transparency, and Responsibility. We have also established our Code
ethical corporate management	of Ethical Conduct; Ethical Corporate Management Best Practice Principles;
policies and procedures, approved	Regulation of Whistle-Blowing System for Unlawful, Unethical Conduct and
by the Board, in its guidelines and	Dishonesty Behavior; Regulations for Management of the Prevention of
external documents, as well as	Insider Trading; Reward and Discipline Regulation; Grievance Regulation; and
commitment from its Board and	Procurement Staff Ethical Regulation for our employees to abide by.
senior management to implement	■The Corporation established the "Ethical Corporate Management Best Practice
the policies?	Principles" following approval at the 11th meeting of the 7th Board on June 19,
	2016, and these Principles were revised following approval at the 36th meeting
	of the 8th Board on March 18, 2020 to stipulate that directors and managers
	shall exercise due care of good administrators when carrying out business duties,
	rigorously execute their duties, and implement the commitments of ethical
	management policies.
	■Additionally, the Corporation's "Procedures for Ethical Corporate Management
	and Guidelines for Conduct" were established following approval at the 36th
	meeting of the 8th Board on March 18, 2020, and contain specifc stipulations
	regarding compliance with ethical management policy items by Corporation
	personnel.

122

==> picture [483 x 438] intentionally omitted <==

----- Start of picture text -----

Implementation Status Deviations from
"Ethical Corporate
Management Best
Evaluation Item Practice Principles
Yes No Abstract Illustration
for TWSE/TPEx Listed
Companies"
and Reasons
(2) Does the company establish  ■ In addition to our "Code of Ethical Conduct" and "Code of Conduct," we have None.
assessment mechanisms against also established "Ethical Corporate Management Best Practice Principles" and
risks from unethical conduct, "Regulation of Whistle-Blowing System for Unlawful, Unethical Conduct and
periodically analyze and assess Dishonesty Behavior" to provide clear and detailed guidelines for operating
operational activities with high procedures, behaviors, education and training, disciplinary violations, and
potential for unethical conduct, appeals systems. The formulation and implementation of integrity management
and use these to establish solutions policies are overseen by our audit department, which periodically reports to the
for prevention of unethical Board.
behaviors that at least encompass ■ The Corporation has also established "Procedures for Ethical Corporate
the preventive measures stated Management and Guidelines for Conduct" to serve as our policy for guiding
in Article 2, Paragraph 7 of the ethical management, stating in clear detail specific ethical management
Ethical Corporate Management measures and preventive measures for unethical conduct.
Best Practice Principles for TWSE/
TPEx Listed Companies?
(3)Does the company establish  ■ The Corporation has also established "Procedures for Ethical Corporate None.
policies to prevent unethical Management and Guidelines for Conduct" to serve as our policy for guiding
conduct with clear statements ethical management, stipulating operational procedures, codes of conduct,
regarding relevant procedures, disciplinary actions for violations, and appeals systems, and we periodically
guidelines of conduct, punishment review and revise whether preventive measures are operating effectively.
for violation, rules of appeal, and ■ The Corporation has established "Procurement Regulation" containing articles
commitment to implement the relating to business confidentiality and conflicts of interests in procurement
policies, and periodically assess staff, and employees that exhibit dishonest behaviors are subject to disciplinary
said policies? actions under the "Rules Governing Rewards and Disciplinary Action" depending
on severity of the cases.
■ The Corporation's "Code of Ethical Conduct," "Code of Conduct," and "Work
Rules" contain stipulations relating to business confidentiality and conflicts of
interests in staff conduct, and employees that conduct dishonest behaviors are
subject to disciplinary actions under the "Reward and Discipline Regulation"
depending on severity of the cases.
2. Fulfillment of Operations  ■ The Corporation has established an assessment system for suppliers and None.
Integrity Policy business partners. During contract negotiation, the rights and obligations of both
(1) Does the company evaluate parties are well documented, and confidentiality clauses are contained in all
business partners' ethical records contracts.
and include ethics-related clauses
in business contracts?
----- End of picture text -----

123

Corporate Governance

==> picture [483 x 95] intentionally omitted <==

Evaluation Item Yes (2) Does the company establish 	Practice Principles for TWSE/TPEx Listed Companies" and Reasons No Abstract Illustration ■In order to fulfll our supervisory obligations of ethical management, the None.
an exclusively (or concurrently)	Corporation has established a Corporate Governance Nomination Committee,
dedicated unit in charge of	an Audit Committee, and a Remuneration Committee to supervise compliance
corporate integrity and to be	with ethical management. Additionally, the Ethical Management Team, which
supervised by the Board, which	is established under the "Corporate Governance Promotion Committee," is
regularly (at least once a year)	convened by the vice president of the Corporate Planning Offce and composed
reports implementation status to	of representatives from the Legal Offce, the Audit Offce, the Human Resources
the Board?	Division, the Secretariat Division of the Board of Directors, and the Corporate
	Planning Offce. The Ethical Management Team is responsible for reviewing and
	improving ethical management policies and implementing measures, assessing
	ethical management developments both domestically and overseas, convening
	quarterly to discuss implementation of ethical management, and making
	annual reports on specifc performance and promotion measures of ethical
	management to the Board. The specifc performance and promotion measures
	of ethical management for 2020 were reported at the 3rd meeting of the 9th
	Board on June 17, 2020. The main annual work plans and duties of the Ethical
	Management Team are as follows:
	1.Integrate ethical values into the Corporation's operational strategies and
	establish measures to ensure ethical management in accordance with laws and
	regulations.
	2.Establish programs containing standard operating procedures and behavioral
	guidelines for work duties to prevent unethical behavior.
	3.Plan internal organization, preparation, and job duties for mutual supervision
	and balance of operational activities at high risk of unethical behavior.
	4.Promote and coordinate ethical management policies and training.

5.Plan systems for reporting ethical violations to ensure effective implementation. 6.Assist the Board and management in reviewing and assessing effective operation of ethical management measures, and periodically assess and report on adherence of relevant processes. ■ Implementations of the Ethical Management Team for 2020 included the following: 1.Review of systems and establishment of preventive measures for ethical management in accordance with laws and regulations. 2.Revised the Corporation's "Ethical Corporate Management Best Practice Principles" and formulated the "Procedures for Ethical Corporate Management and Guidelines for Conduct" and "Ethical Management Policy Statement." 3.Established programs for prevention of unethical behaviors, including associated standard operating procedures and codes of conduct.
Promoted and ensured implementation of the "Ethical Corporate Management Best Practice Principles" according to the duties of each unit.
Conduct periodic reviews of legal compliance in internal audits, accounting procedures, and internal controls. Additionally, all units conduct monthly surveys of regulatory changes and have established relevant management systems. The Legal Office hosts quarterly meeting for legal compliance representatives to discuss implementations and promote important regulations.
The Corporation has implemented ethical corporate management policies
in accordance with corporate governance, business strategies, and operating procedures. Ethical management training, attendees, and training hours for 2020, as well as specific implementations of ethical management were as follows:

124

Evaluation Item	Implementation Status	Implementation Status	Implementation Status
	Yes	No	Abstract Illustration
	1.Nine Board members received communications and training in anti-corruption policies, accounting for 69% of current Board members. 2.Additionally, 203 new recruiting employees received communications and training in anti-corruption policies, accounting for 4.3% of total employees. 3.In 2020, we hosted ethical management training programs for all employees for a total of 4,818 participants and ran for a total of 2,409 hours. 4.Seven Board members received insider trading prevention training, accounting for 54% of current Board members. 5.In 2020, we hosted training courses for prevention of insider trading for all employees for a total of 4,818 participants and ran for a total of 2,409 hours. 6.A total of 63 internal staff and new recruits attended insider trading prevention promotions which ran for a total of 31.5 hours. 7.The Corporation upholds principles of ethical management and initiated the "Promotion Plan for Legal Compliance" in 2016 for comprehensive management of compliance with regulating authorities and Corporation regulations laid out in the Corporation Charter. Additionally, relevant regulations and rulings of regulating authorities are reviewed and presented every quarter, and legal compliance meetings are held to ensure that Corporation employees adhere to relevant regulations. 8.Confdentiality of tender information, protection of intellectual property rights, and commitment of corporate social responsibility are enclosed on tender instructions and affdavits, and prevention of unjust enrichment and conficts of interests are stated in the main body of the contract. 9.We established an Audit Committee mailbox in the "Stakeholders" section of our corporate website to serve as a direct communication channel between stakeholders and the Audit Committee. 10.We established internal and external whistle-blowing channels (including phone, fax, and mailbox channels) and set up a dedicated team for reviewing and investigating reported cases, and tracking management mechanisms. ■Detailed information on the Ethical Management Team can be found under the "Corporation Governance and Organizational Structure" sub-section of the Corporate Governance section, and the "Ethical Governance" page under the "Sustainable Development" sub-section in the "Corporate Social Responsibility" section of our corporate website.
(3) Does the company establish and implement policies to prevent conficts of interest and provide appropriate communication channels?  ■The Corporation's regulations stipulate that managers of all levels are responsible for assisting the Corporation President in promoting ethical management policies. All conficts of interest should be reported to department heads. The Corporation has also established "Grievance Regulation" and "Regulation of Whistle-Blowing System for Unlawful, Unethical Conduct and Dishonesty Behavior" to provide timely and appropriate channels for making statements and reports toprevent conficts of interest. None.
(4) Has the company established effective systems for both accounting and internal control to facilitate ethical corporate management, with internal audit units formulating audit plans based on risk assessments of unethical conduct which are used to review compliance with measures for preventing unethical conduct, or which are audited by CPAs?  ■In order to implement ethical management, regulation compliance at the Corporation is periodically reviewed by internal auditing, accounting, and internal control systems. ■The Corporation implements internal control mechanisms on an annual basis. The Quality Assurance Offce acts as a secretariat unit in executing internal control systems and self-inspection of administrative procedures. Each offce carries out self-inspections that are reviewed by the Audit Offce. Finally, CPAs are responsible for issuing review reports on internal control systems. ■The accounting system at THSRC has been effectively implemented for many years. Every year, certifed accountants conduct an audit and issue an audit report. ■The Corporation's "Ethical Corporate Management Best Practice Principles" stipulate that internal audit units should formulate audit plans based on risk assessments of unethical conduct which can be used to review compliance with measures for preventing unethical conduct, and which may be audited by CPAs. Assistance maybe obtained fromprofessionals when necessary. None.

125

Corporate Governance

==> picture [483 x 429] intentionally omitted <==

----- Start of picture text -----

Implementation Status Deviations from
"Ethical Corporate
Management Best
Evaluation Item Practice Principles
Yes No Abstract Illustration
for TWSE/TPEx Listed
Companies"
and Reasons
(5) Does the company regularly  ■ The Corporation's Ethical Corporate Management Best Practice Principles None.
hold internal and external stipulate that the Corporation should host periodic training and promotion
educational trainings on activities for Board directors, managers, employees, and fiduciaries s to help
operational integrity? them understand the Corporation's determination in implementing ethical
management, related policies, prevention solutions, and consequences of ethical
violations
3. Operation of the Integrity  ■ The Corporation has established our "Code of Conduct," "Grievance None.
Channel Regulation," and "Regulation of Whistle-Blowing System for Unlawful, Unethical
(1)Does the company establish Conduct and Dishonesty Behavior." Related matters are handled by dedicated
both a reward/punishment system units and service hotlines have been set up to handle feedback in accordance
and an integrity hotline? Can with established processes.
the accused be reached by an
appropriate person for follow-up?
(2) Does the company establish  ■ The Corporation's "Code of Conduct," "Grievance Regulation," and "Regulation None.
standard operating procedures of Whistle-Blowing System for Unlawful, Unethical Conduct and Dishonesty
and subsequent procedures of Behavior" have clear stipulations on the appeals process and reviewing units,
following investigations and and commit to confidentiality for appeal makers and related evidence.
relevant confidential mechanism?
(3) Does the company provide  ■ The Corporation's "Code of Conduct," "Grievance Regulation," and "Regulation None.
proper whistleblower protection? of Whistle-Blowing System for Unlawful, Unethical Conduct and Dishonesty
Behavior" clearly stipulate that if reported persons threaten or retaliate against
whistleblowers, the Corporation will take disciplinary action according to
relevant regulations.
4. Enhancing Information  ■ The Corporation's "Ethical Corporate Management Best Practice Principles" None.
Disclosure and relevant standards are publicly available for review on our internal and
Does the company discloses its external websites. When revisions are made, these are announced to all staff
ethical corporate management members and information on our website is simultaneously updated.
policies and the results of its ■ The Corporation has established a "Regulations of Disclosure Information"
implementation on the company's and "Regulation for Posting Information on the 'Market Observation Post
website and MOPS? System," allowing us to fulfill our responsibilities and obligations of information
disclosures and disclose important information in a timely manner. Additionally,
voluntary disclosures are posted to the Market Observation Post System and
our corporate website to strengthen information transparency and enhance
timeliness, symmetry, and fairness of information disclosures.
----- End of picture text -----

5.If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the policies and their implementation? None.

6.Other important information to facilitate a better understanding of the company's ethical corporate management policies (e.g., review and amend its policies).

To implement the basics of ethical corporate management policies, the Corporation operates under the Corporation Act, Securities and Exchange Act, Businesses Entity Accounting Act, related regulations for TWSE/TPEx-Listed Companies, and other laws and decrees concerning business transactions.

126

(9) Corporate Governance Guidelines, Regulations, and methods to access these information

The Corporation's "Guidelines for Corporate Governance" is our principle rule of corporate governance which refers the OECD Principles of Corporate Governance; the S&P Corporate Governance Score-Criteria, Methodology and Definitions; the NYSE Listed Company Manual Sec303A; the Infosys Corporate Governance Report, corporate governance guidelines of established domestic and overseas companies; national laws and regulations; regulations set out by the Taiwan Stock Exchange Corporation; and the Corporate Governance Best-Practice Principles for TSEC/TPEx Listed Companies. In order to keep pace with regulation changes and adhere to the promotion schedule and goals of our Corporate Governance Blueprint (2018-2020), we revised 17 articles in our Guidelines for Corporate Governance in May 2019, and these were approved by our 2019 shareholders' general meeting.

In addition, to ensure effectively performance of the directors' functions, to protect and promote shareholders' participation, and to guide and rule the procedures and activities of the election of directors, the shareholders' meeting, the Board, and committees, the Corporation has also established the "Rules of Procedure for Shareholders Meetings," "Rules of Procedure for Board of Directors Meetings," "Regulation of Self-Evaluation of the Board of Directors," "Rules for the Election of Directors," "Charter of Audit Committee," "Charter of Corporate Governance and Nominating Committee," "Charter of Remuneration Committee," "Charter of Special Committee," and other relevant regulations; in order to deepen our corporate culture of compliance and ethical management; prevent, promptly detect, and properly respond to internal illegal acts, we also established the "Code of Ethical Conduct," "Ethical Corporate Management Best Practice Principles," "Corporate Social Responsibility Best Practice Principles," "Regulations Governing the Prevention of Insider Trading," "Regulations Governing the Procedure of Processing the Reported Cases of Illegal, Unethical or Dishonesty Acts," and "Regulations Governing the Transactions with Related Persons"; all these aforementioned regulations are our regulations relevant to corporate governance.

The aforementioned corporate governance regulations are fully disclosed on the "Investor Relations" section and the "Corporate Governance" section on our corporate website (https://www.thsrc.com.tw) for immediate access.

(10) Other Important Information for Further Understanding Implementation Status of Corporate Governance

Besides publishing material information on the MOPS (https://mops.twse.com.tw/mops/web/index) in accordance with laws and regulations, all other material information for further understanding our implementation status of corporate governance is regularly updated on the "Investor Relations" section on our corporate website in a timely manner along with other information relating to the Corporation's finances, business matters and corporate governance.

Additionally, the Corporation has established 7 core policies (Environmental Policy, Risk Management Policy, Information Security Policy, Human Rights Policy, Supply Chain Management Policy, Safety and Health Policy, and Corporate Quality Policy). All have been signed by the Chairman of the Board, fully implemented and disclosed on the "Policy" page under the "About Us" section on our corporate website. Through the announcement of these core policies, all colleagues can work together to continuously strengthen corporate governance and achieve the goal of sustainable business operations.

127

Corporate Governance

安全衛生政策 Safety and Health Policy

安全是台灣高鐵的基石—沒有安全就沒有台灣高鐵。本公司所有決策與行動均應以安全為最高指導原則，並將維持主動積極的安全衛生管理，全員持續參與改善，以達零災害、零事故的目標。並承諾：

Safety is the cornerstone of THSRC – Without safety, there is no THSRC. All decisions and actions of THSRC are based on safety as the highest guiding principle. THSRC will maintain proactive safety and health management with staff participation on improvements to achieve zero disaster and accident goals. THSRC's commitments are:

一、恪遵法令、規章與程序，明訂各層級員工安全責任，確保員工、所服務的對象與維護管理的高鐵資產，都被安全保護。

Comply with the laws, regulations, and procedures, for each staff to have a clear responsibility to protect his personal safety, the service objects, and the management of THSRC's assets.

二、妥善運用國際認同之風險評估方法於安全及健康管理系統中，於合理可行的範圍內控制及降低危害的風險至最低等級。

Apply international recognized risk assessment for safety and health management system effectively in controlling and reducing risk hazards as low as reasonably practicable.

三、提供必要之訓練，以及安全與健康之資訊給所有工作者，使其於執行日常業務時，皆能正確安全的執行作業，並具備對於安全關注與認知。

Provide all staff with required training, as well as safety and health information to keep the concern and awareness of safety and health in performance of all their daily duties.

四、妥慎選擇、監督及管理承包商及供應商，確保其作業或機械、設備、器具、物料等供應均能符合法令以及公司安全管理要求。

Select, supervise, and manage contractors and suppliers carefully to ensure that their operations, machinery, equipment, tools, and materials comply with the laws of Taiwan and THSRC's safety management requirements.

五、建立及維持優質之作業及營運環境，並協調必要之外部支援系統，以維護員工、旅客及大眾之安全與健康。

Establish and maintain a high-quality working environment and operational management measures, and coordinate with required external assistance to keep all staff's physical and mental health.

六、本公司將定期檢討安全衛生政策、規章、程序與執行績效，以提升管理績效並達持續改善安全之目的。

THSRC will review the safety and health policy, rules, procedures, and executive performance regularly to enhance management performance and achieve continuous improvement of safety.

董事長： Chairman______

日期： Date_____

128

資訊安全政策 Information Security Policy

為建構安全的智慧化高速鐵路運輸系統及保護本公司所有資通系統之相關資訊資產，包括實體環境、軟硬體設施、網路、資料、資訊、人員等安全，免於因內部或外在之威脅，遭受破壞、遺失、洩密或不當控制等資通安全風險，特制訂本政策。

THSRC formulates the Information Security Policy to establish a secured Intelligent High Speed Rail Transportation System and to protect all THSRC's information and communication systems and related information assets that include physical environment, software and hardware facilities, network, data, information, and personnel, from cybersecurity risks such as damage, loss, information leakage or improper control resulted from internal or external threats.

本公司應採取以下措施：

THSRC should adopt the following actions :

恪遵法令訂定相關資訊安全管理規章，對本公司資訊資產提供適當的保護措施，以確保其機密性、完整性、可用性及法律遵循性。

Comply with the laws to ensure the confidentiality, integrity, availability, compliance of the information assets, it is necessary to establish the correlative information security regulation to provide the appropriate protection.

定期評估各種人為及天然災害對本公司資訊資產之影響，並訂定重要資訊資產及關鍵性業務之防災對策及災變復原計畫，以確保本公司業務持續運作。

Evaluate the influence of the negligence or natural disaster on the information assets regularly, and establish the precaution solution and disaster recovery plan to ensure the continuity of business operation.

督導本公司同仁落實資訊安全防護工作，建立「資訊安全、人人有責」觀念，提升各業務部門及人員對資訊安全之認知。

Guide all employees to carry out information security protection, and set up "Information Security Is Everyone's Responsibility" to raise all units' and employees' understanding of information security.

要求本公司全體同仁以及連結本公司資通系統或提供服務之往來廠商，應確實遵守本公司資訊安全相關規定，如有違反者，視其情形分別依本公司規定懲處或依契約罰責辦理外，情節嚴重者另將受相關法律之訴追。

Demand employees and contractors who connect to the THSRC's information and communication systems or provide service should comply with the related information security regulation. The violator will be punished according to the THSRC's regulation or contract. And if it is serious, the violator will be sued by law.

董事長：日期： Chairman___ Date___

129

Corporate Governance

環境政策 Environmental Policy

環境保護是台灣高速鐵路股份有限公司善盡企業社會責任重要的一環，我們利用高速鐵路高運量、速度快、低污染的特點，致力推動環境管理、節能減碳、省水減廢、綠能建築、生態保育、環境教育、綠色採購及在地環境關懷，融入國際環境保護趨勢，共同追求企業永續經營。

一、以運輸 (Transportation)、科技 (Technology)、在地 (Taiwan) 及關懷 (Touch) 之 4T 作為發展主軸，積極擴展綠色運具服務效能，透過智慧運輸管理與創造需求提升運量，打造低碳運輸形象，使台灣高鐵成為引領進步，創造美好生活平台。
二、確保台灣高鐵各面向均符合環保法規，並履行環評承諾。
三、強化員工、廠商及旅客環境保護觀念。
四、推動綠色低碳運輸服務效能。
五、致力於提升環境績效，制定並定期審查環境目標，確保日常營運時，利用適當之流程及資源，預防或減低對環境之衝擊。

Environmental protection is an important part of THSRC's social responsibility. We treat the environmental issues such as environmental management, energy saving, water saving, waste reduction, green building, ecological conservation, environmental education, green procurement and local environmental care seriously. With the integration of international trends on environmental protection, THSRC pursue a sustainable business operation.

Define our core business as 4T of Transportation, Technology, Taiwan and Touch, as we strive to provide green and intelligent service and seek to be the platform for advancement and enjoyment.
Ensure that all corporate activities comply with environmental regulations and fulfill the commitments of environmental impact assessment.
Strengthen the environmental protection concept for employees, contractors and passengers.
Promote the effectiveness of green low-carbon transportation services.
Commit to improving environmental performance, developing and regularly reviewing environmental objectives to ensure that daily operations are carried out with appropriate processes and resources to prevent or mitigate environmental impacts.

董事長：日期： Chairman___ Date___

130

風險管理政策 Risk Management Policy

本公司為確保風險管理的完整性、有效性與合理性，特訂定風險管理政策如下，作為本公司風險管理的最高指導原則：

To ensure integrity, effectiveness, and rationality of company's risk management, Taiwan High Speed Rail Corporation has established the following Risk Management Policy as the highest guiding principles:

1. 公司之經營管理應具備風險意識，並依經營及營運活動進行主要風險類別之定義。

THSRC operation managements should be risk-aware and define major risk categories based on managerial and operational activities.

2. 針對主要風險類別應建立辨識、評估、監督、控管之管理及風險應變機制，並訂定衡量標準。

Standard measurement mechanism and metrics should be established, for identifying, assessing, monitoring, managing, and responding to major risk categories.

各風險類別之管理權責單位依其業務範疇與規模，應分別訂定適當的風險管理制度，並持續檢視與確保各業務執行單位推動時，確實能有效管理其所承擔之各類風險。

Management units of each risk categories should establish proper risk management systems, based on their business scopes and scales, for reviewing and ensuring the effectiveness of promoting business activities and managing various risks.

董事長：日期： Chairman___ Date________

131

Corporate Governance

人權政策

本公司恪遵國內勞動暨相關法規，支持並遵循聯合國《世界人權宣言》、《商業與人權指導原則》、《全球盟約》與國際勞工組織《工作基本原則與權利宣言》等國際人權公約所揭櫫之原則與精神，包括結社自由、關懷弱勢族群、禁用童工、消除各種形式之強迫勞動、消除僱傭與就業歧視等，杜絕任何侵犯及違反人權的行為，有尊嚴的對待現職所有員工，特制定本政策及相關執行方針：

一、提供安全與健康的工作環境：為避免軌道運輸業之工作型態帶來的潛在健康安全風險，本公司定期檢視員工健康、工作環境安全風險，並依辨識結果進行改善計畫。
二、尊重職場人權：落實職場多元性，不因個人性別、性傾向、種族、階級、年齡、婚姻、語言、思想、宗教、黨派、籍貫、出生地、容貌、五官、身心障礙或工會會員為由，而為差別待遇或任何形式之歧視。
三、支持結社自由：員工得依法籌組及加入工會行使勞動權；本公司並與工會及員工維持暢通的溝通管道，定期勞雇協商，召開勞雇會議確保雙方權益，致力建構勞雇關係和諧之職場環境。
四、定期檢視及評估相關規範、制度及作為。

The Corporation complies with domestic labor regulations and adheres to the principles and spirit underlying the UN’s Universal Declaration of Human Rights, the Guiding Principles on Business and Human Rights, the UN Global Compact, and the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work, including freedom of association, care for vulnerable groups, banning of child labor, elimination of all forms of forced labor, elimination of employment discrimination, elimination of human rights violations, and dignified treatment for all employees. In light of this, we have established this policy and the following implementation guidelines:

Provision of safe and healthy work environment: to prevent potential health and safety risks brought on by rail transport work, the Corporation regularly reviews the health of its employees and safety risks in work environments, and implements improvement plans based on identified results.
Respect for human rights in the workplace: we have implemented a diversified workplace and do not give preferential treatment or discriminate based on gender, sexual orientation, race, social class, age, marriage status, language, ideology, religious belief, political affiliation, nationality, place of birth, appearance, facial features, disability, or union affiliation.
Support freedom of association: employees may organize and join trade unions to exercise their labor rights in accordance with the law. The Corporation strives to build a work environment with harmonious labor-management relations, maintaining an open communication channel with labor unions and employees, regularly conducting labor-management negotiations, and convening labor-management meetings to protect the interests of both parties.
Conduct regular review and assessments of relevant regulations, systems, and procedures.

董事長：日期： Chairman___ Date___

Note: The original version of this regulation is published in Chinese. In case of discrepancy between the Chinese and English version the Chinese version shall prevail.

132

供應鏈管理政策 Supply Chain Management Policy

台灣高速鐵路股份有限公司為邁向永續經營，我們承諾在環境保護、人權與勞動實務、商業倫理及社會公益等議題，持續與不同供應鏈夥伴進行溝通，建構完善的管理機制，並致力推展及持續改善：

To maintain a sustainable development, Taiwan High Speed Rail Corporation is committed to continuously communicate with supply chain partners on matters concerning environmental protection, human rights and labor practices, business ethics and social welfare; and build up a flawless management mechanism. In addition, we will endeavor to promote and constantly improve on the following:

恪遵法令、規章與程序，與供應商共同推動社會責任，以經濟、環境、社會三大面向，作為共同發展的核心，達到本公司永續性發展之擘畫，創造雙贏。

Abide by the laws, by-laws and control procedures. Work with suppliers to promote social responsibility. Focusing on the economy, environment and society as the core of mutual development in order to achieve sustainable development initiatives, and move toward a win-win relationship.

保障利害關係人權益，除要求採購的品質、成本、交期與服務 (QCDS)，同時納入合理利潤、社會責任、勞工安全、人權及環境保護等議題，做為管理決策及執行依據。

Protect the interests of stakeholders. Apart from pursuing good quality, cost, delivery and service (QCDS) in the procurement process, matters including reasonable profits, social responsibility, labor safety, human rights and environmental protection shall also be considered to serve as the basis for management decision and implementation.

視商業倫理與道德、機會平等與公平交易為供應鏈互動之最高指導原則，杜絕非法利益，嚴懲違法行為。
Make business ethics, moral principles, equal opportunity and fair trade as the primary guiding principles of supply chain interaction. Eradicating all forms of unlawful interests and sternly punish any illegal act.
協助我國合格供應商進行高速鐵路物料開發及技術轉移，將產業鏈由國內擴展至國際軌道業，提升技術及國際競爭力，達到扶植國內產業之企業社會責任。

Assist local qualified Suppliers to carry out material development and technology transfer, bring and expand the local railway industry supply chain to international counterparts. Promote Supplier's technical abilities and international competitiveness in order to fulfill our Corporate Social Responsibility to support the local industry development.

董事長：日期： Chairman____ Date___

133

Corporate Governance

公司品質政策 Corporate Quality Policy

本公司承諾遵守品質管理系統的要求，全面落實並持續改進其有效性。

、、 安全可靠效率 與 顧客滿意 為本公司的品質目標。為達成此品質目標，本公司確保於各相關單位與層級建立主要績效指標，並定期檢討。

本公司將每年審議品質政策之持續適用性。

The Corporation is committed to comply with the requirements of the quality management system, implement it corporatewide and continually improve its effectiveness.

The Corporation's quality objectives are Safety , Reliability , Efficiency and Customer Satisfaction . To achieve these quality objectives, the Corporation ensures that key performance indicators are established at relevant functions and levels and regularly reviewed.

The Quality Policy is reviewed annually for continuing suitability.

==> picture [132 x 62] intentionally omitted <==

董事長 Chairman 日期 Date:

134

2. Implementation Status of Internal Control System

(1) Internal Control System Letter of Declaration

Taiwan High Speed Rail Corporation

Statement of Internal Control System

Date: Feb 24, 2021

Based on the findings of a self-assessment, Taiwan High Speed Rail Corporation (THSRC) states the following with regard to its internal control system during the period from January 1, 2020 to December 31, 2020:

THSRC is fully aware that establishing, operating and maintaining an internal control system are the responsibilities of its Board of Directors and management. THSRC has established such a system aimed at providing reasonable assurance regarding the achievement of objectives in the following categories: (1) effectiveness and efficiency of operations (including profitability, performance, and safeguarding of assets), (2) reliability, timeliness, and transparency of reporting in compliance with the relevant specifications, and (3) compliance with applicable laws and regulations.
An internal control system has its inherent limitations. No matter how carefully designed, an effective internal control system can only provide reasonable assurance of accomplishing the three objectives mentioned above. Moreover, the effectiveness of an internal control system may be subject to changes in environment or circumstances. Nevertheless the internal control system of THSRC contains self-monitoring mechanisms, and THSRC takes corrective actions whenever a deficiency is identified or an enhancement is necessary.
THSRC evaluates the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations Governing the Establishment of Internal Control Systems by Public Companies (hereinafter referred to as the "Regulations") of the Republic of China. The Regulations identify five components of internal control based on the process of management control: (1) control environment, (2) risk assessment, (3) control activities, (4) information and communication, and (5) monitoring. Each component further contains several elements. Please refer to the Regulations for details.
THSRC has evaluated the design and operating effectiveness of its internal control system according to the aforementioned criteria.
Based on the results of the evaluation mentioned in the preceding paragraph, THSRC believes that during the period from January 1, 2020 to December 31, 2020, the design and operation of its internal control system have reasonably achieved the objectives mentioned in item 1 above, including monitoring of operational effectiveness and efficiency, and reliability, timeliness, and transparency of reporting in compliance with the relevant specifications, and compliance with applicable laws and regulations.
This Statement is an integral part of THSRC's Annual Report for the period from January 1, 2020 to December 31, 2020, and Prospectus, and is a public document. Any falsehood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171 and 174 of the Securities and Exchange Law.
This Statement has been passed by the Board of Directors at the meeting held on Feb 24, 2021, with the contents of this Statement affirmed by all the 13 members present in the meeting.

==> picture [491 x 92] intentionally omitted <==

----- Start of picture text -----

Taiwan High Speed Rail Corporation
Chairman of the Board of Directors: President:
----- End of picture text -----

Notice to Readers

For the convenience of readers, the Statement has been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language Statement shall prevail.

(2) Items to be disclosed in the CPA's audit report relating to evaluations of internal controls system entrusted to CPA: None.

135

Corporate Governance

3. Important Governance Information for 2020 and as of Publication Date of This Annual Report

(1) Details of penalties, major faults, and improvement measures against the corporation or internal staff due to violations of legal requirements, or carried out by the corporation against its own staff due to violations of internal control regulations during the past year and as of publication date of the Annual Report.

Discipline has always been a core value for the Corporation. In 2020 and up to the publication date of this report, various disciplinary actions were taken against employees for violations of operational procedures in accordance with our Reward and Discipline Regulation. Memorandums announcing said violations were issued to all staff members for reference purposes and were supplemented with education, training, and case sharing to correct behaviors and promote accurate concepts. No material adverse impacts on corporate operations occurred as a result of the aforementioned violations. Relevant behaviors have all been improved, and all regulations and manuals are regularly reviewed and amended to fulfill our operational needs.

In 2020 and up to the publication date of this report, the Corporation incurred two administrative penalties due to late payments of overtime pay for vacation days and national holidays, resulting in violation of Paragraph 2, Article 24 and Article 39 of the Labor Standards Act, and incurring NT$ 220,000 fine from the Taipei City Government Department of Labor. Managers of responsible units were also required to be attentive of approval schedules for overtime procedures to prevent similar incidents from occurring. The incident did not have any material impact on overall operations, stockholders' equity or prices of securities.

(2) Important Resolutions of Shareholders' Meetings and the Board of Directors during current year and up to the publication date of the annual report:
1) Important resolutions of Shareholders' Meetings and implementation status in 2020:

Proposals

Proposal No. 1: Proposed by the Board

Proposal: Proposals of the 2019 Annual Business Report and financial statements of the Corporation.

Resolution: Attending shareholders represented more than one-half of the total number of outstanding Company shares, and voting rights in favor came to 96.33%. The proposal was approved.

Implementation status: Implemented in accordance with proposal resolutions.

Proposal No. 2: Proposed by the Board

Proposal: Proposals of 2019 profit distribution of the Corporation.

Resolution: Attending shareholders represented more than one-half of the total number of outstanding Company shares, and voting rights in favor came to 96.39%. The proposal was approved.

Implementation status: Cash dividends per share were NT$ 1.2101, the ex-dividend date was set as July 14, 2020, and cash dividend distribution date was set as August 12, 2020.

Discussion

Proposal No. 1: Proposed by the Board

Proposal: Revision of "Rules of Procedure for Shareholders' Meetings"

Resolution: Attending shareholders represented more than one-half of the total number of outstanding Company shares, and voting rights in favor came to 96.09%. The proposal was approved.

136

Implementation status: Implemented in accordance with proposal resolutions. Revisions were posted to the Market Observation Post System and our corporate website on May 22, 2020.

Proposal No. 2: Proposed by the Board

Proposal: Revision of "Operational Procedures for Endorsements and Guarantees"

Resolution: Attending shareholders represented more than one-half of the total number of outstanding Company shares, and voting rights in favor came to 96.09%. The proposal was approved.

Implementation status: Implemented in accordance with proposal resolutions. Revisions were posted to the Market Observation Post System and our corporate website on May 25, 2020.

Proposal No. 3: Proposed by the Board

Proposal: Revision of "Operational Procedures for Loaning Funds to Others"

Resolution: Attending shareholders represented more than one-half of the total number of outstanding Company shares, and voting rights in favor came to 96.09%. The proposal was approved.

Implementation status: Implemented in accordance with proposal resolutions. Revisions were posted to the Market Observation Post System and our corporate website on May 25, 2020.

Election Matters

Election of the 9th term board of directors' office of the Corporation.

Voting results:

Elected non-independent directors:

==> picture [484 x 268] intentionally omitted <==

----- Start of picture text -----

Shareholder
Shareholder Name Received Votes (Including Electronic Votes)
Account No.
China Aviation Development Foundation 7,194,202,942
51400
Representative: Yao-Chung Chiang (Including 6,073,800,442 electronic votes)
Ministry of Transportation and Communications 6,465,141,460
92268
Representative: Kwo-Tsai Wang (Including 5,638,103,420 electronic votes)
Ministry of Transportation and Communications 6,339,699,036
92268
Representative: Min-Ching Liu (Including 5,697,549,036 electronic votes)
China Aviation Development Foundation 6,188,505,166
51400
Representative: Lee-Ching Ko (Including 5,897,248,166 electronic votes)
China Steel Corporation 5,967,065,801
43831
Representative: Chao-Tung Wong (Including 4,215,272,772 electronic votes)
Taiwan Sugar Corporation 5,869,968,488
5762
Representative: Chao-Yih Chen (Including 3,269,931,488 electronic votes)
TECO Electric
5,717,389,251
11 & Machinery Co., Ltd.
(Including 5,717,344,251 electronic votes)
Representative: Mao-Hsiung Huang
Management Committee of National Development Fund, Executive Yuan 5,616,031,858
38578
Representative: Shien-Quey Kao (Including 5,156,168,858 electronic votes)
Taipei Fubon Commercial Bank Co., Ltd. 5,509,255,598
6
Representative: Kuo-Chih Liu (Including 4,564,033,798 electronic votes)
----- End of picture text -----

137

Corporate Governance

Elected independent directors:

==> picture [483 x 119] intentionally omitted <==

----- Start of picture text -----

ID Number Name Received Votes (Including Electronic Votes)
1,408,207,209
E1005XXXXX Kenneth Huang-Chuan Chiu
(Including 1,408,141,209 electronic votes)
1,334,524,343
L1009XXXXX Duei Tsai
(Including 1,334,481,343 electronic votes)
1,275,302,511
U1201XXXXX Pai-Ta Shih
(Including 1,275,240,511 electronic votes)
1,237,521,762
M1215XXXXX Yung-Cheng (Rex) Lai
(Including 1,237,485,762 electronic votes)
----- End of picture text -----

Implementation status: Approved and registered by the Ministry of Economic Affairs under Official Letter No. 10901094230 on June 10, 2020. The listed of elected directors was also disclosed on the Market Observation Post System.

Other Discussion Items

Proposal: Removal of Non-Competition Restriction Against the Corporation's 9th Board of Directors

Resolution: Attending shareholders represented more than two-thirds of the total number of outstanding Company shares, and voting rights in favor for all propositions exceeded more than one-half of total voting rights. The proposal for removal of non-Competition restrictions against institutional directors and their representatives was approved.

Implementation status: The proposal was made effective following the resolution of the shareholders' meeting.

2) Important Board resolutions for January 2020-April 2021

==> picture [483 x 276] intentionally omitted <==

----- Start of picture text -----

Session
Date Important Resolutions
(Term-Sitting)
1. Distribution suggestions for 2019 employee compensation and bonuses
2. Distribution suggestions for 2019 director remuneration
3. Procurement strategy suggestions for civil engineering design and construction supervisory consultant services for
second rolling stock inspection and maintenance shop at Zuoying depot
2020/1/15 8-34 4. Donation and sponsorship plan for 2020
5. First stage of equipment upgrading and asset changes for Traffic Control System (TCS) at traffic control center
6. Implementation status of Corporate Governance & Nomination Committee, Audit Committee, and Remuneration
Committee in 2019
7. Formulation of suggestions for assessing implementation status of board and functional committees in 2019
1. Formulation of 2019 financial report
2. 2019 CPA audits
3. Non-audit services plans for 2020 and follow-up of contracted and invoiced non-audit services
4. Procurement and bid selection suggestions for contract from 2022 to 2027 regarding HSR passenger credit card
ticketing payment acquisition services (Contract number: O1-19-017)
5. Results of manager performance audits for 2019
6. Suggestions regarding performance goals for new managers in 2020
2020/2/19 8-35 7. Self-assessment results of internal control system for 2019
8. Formulation of 2019 Business Report
9. Report of implementation status of corporate governance
10. Discussion of director (and independent director) seats for the 9th Board
11. Formulation of 2020 shareholder's general meeting date, venue, and main topics
12. Suggestions for Special Committee member composition as THSRC Institutional Director Taiwan Sugar Corporation
appointed a new director representative, resulting in Director Chao-Yih Chen leaving office and resigning as a
member of the Special Committee.
----- End of picture text -----

138

==> picture [483 x 590] intentionally omitted <==

----- Start of picture text -----

Session
Date Important Resolutions
(Term-Sitting)
1. Procurement and bid selection suggestions for contract from 2020 to 2023 for HSR security personnel services
(Contract number: S1-19-050 to S1-19-057)
2. Procurement contract for KHI supply of rolling stock PM maintenance materials from 2021 to 2022 (Contract
number: PCDD-21-0001)
3. Procurement and bid selection suggestions for rolling stock PM maintenance materials supplied by the National
Chung-Shan Institute of Science and Technology (Contract number: PCDD-20-0012 and PCDD-20-0013)
4. Procurement strategy and bid selection suggestions for HSR meal boxes (Contract number: PCDD-19-1413)
5. Proposal for approval to sign "First Amended Agreement to Land Use Contract for Taiwan North-South High-Speed
Rail Traffic Facilities"
6. Board nominations for the four independent directors and nine non-independent directors of the 9th Board
2020/3/18 8-36 7. Suggestions regarding distributable surpluses for 2019
8. Formulation of proposal regarding "Revisions to the Corporation's 'Operational Procedures for Loaning Funds to
Others'" for submission and discussion at shareholders' general meeting on May 21, 2020
9. Formulation of proposal regarding "Revisions to the Corporation's 'Operational Procedures for Endorsements and
Guarantees'" for submission and discussion at shareholders' general meeting on May 21, 2020
10. Formulation of proposal regarding "Revisions to the Corporation's 'Ethical Corporate Management Best Practice
Principles' and establishment of the Corporation's 'Procedures for Ethical Management and Guidelines for Conduct'
and 'Declaration of Compliance with Ethical Management Policies'" for submission and discussion at shareholders'
general meeting on May 21, 2020
11. Formulation of proposal regarding "Revisions to the Corporation's 'Rules of Procedure for Shareholders' Meetings'"
for submission and discussion at shareholders' general meeting on May 21, 2020
1. Procurement contract for inertial track geometry inspection vehicles (Contract number: E5-19-001)
2. Procurement strategy suggestions for HSR shuttle bus affiliated marketing services from 2020 to 2021
3. Submitted HSR Financial Resolution Plan 2019 implementation status table to MOTC
4. Suggestions regarding revisions to distributable surpluses for 2019
2020/4/8 8-37
5. Submission of "Removal of non-competition restrictions for the Corporation's 9th Board" proposal for discussion at
the shareholders' general meeting on May 21, 2020
6. Revisions to the Corporation's "Regulation of Whistle-Blowing System for Unlawful, Unethical Conduct and
Dishonesty Behavior"
1. Implementation of 2019 discount fare marketing campaigns
2. Suggestions regarding annual performance bonuses for 2019
3. Revisions to the Corporation's "General Delegation of Responsibility and Authority"
4. Formulation of plans for issuance of unsecured ordinary corporate bonds
5. Revisions to the Corporation's "Assets for Operation and Equipment Management Regulation"
2020/5/6 8-38 6. Suggestions for temporary solutions relating to bidding strategies for THSRC media outsourcing contract
7. Suggestions for supplementary agreement of HSR station parking lot outsourcing management contract
8. Procurement and bid selection suggestions for upgrading of mainframe for Traffic Control System (TCS) Package 2
(Contract numbers: E221 and E223 to E225)
9. Procurement and bid selection suggestions for civil engineering design and construction supervisory consultant
services for second rolling stock inspection and maintenance shop at Zuoying depot (Contract number: C2-19-003)
1. Chairman election by the 9th Board of Directors
2. Nomination of committee members for the 9th Corporate Governance & Nominating Committee
2020/5/21 9-1
3. Proposal for approval to sign THSRC "Industry-academia collaboration agreement" and "Academic rebate
agreement"
2020/6/3 9-2 Suggestions for Remuneration Committee and Special Committee members for the 9th Board
1. Procurement contract for HSR shuttle bus affiliated marketing services from 2020 to 2021 (Contract numbers: S1-20-
016 to S1-20-024)
2. Procurement and bid selection suggestions for upgrading of mainframe for Traffic Control System (TCS) Package 2
(Contract number: E225)
2020/6/17 9-3 3. Extension of quota for derivative assets that expired during the second half of 2020
4. Extension or transfer of letters of credit that expired during the second half of 2020
5. Establishment of 2019 surplus distribution ex-dividend date and cash dividend distribution date.
6. Retirement of Operation Division manager and appointment as President's Office consultant
7. Suggestions regarding remuneration adjustments for directors on the 9th Board of Directors
----- End of picture text -----

139

Corporate Governance

Date	Session (Term-Sitting)	Important Resolutions
2020/7/15 9-4 1. Procurement contract for OCC Radio Mobile Switching Offce equipment upgrade (Contract number: E251) 2. Procurement strategy suggestions for "Replacement of existing turnout control boxes with THSRC self-developed turnout control boxes" 3. Procurement strategy suggestions for supplementary agreement of second (Contract number: E4-18-005) tender bids for Passenger Information System (PIS) replacement project 4. Procurement and re-bidding strategy suggestions for construction of Yanchao Main Workshop automated painting shop equipment 5. Procurement strategy suggestions for THSRC headquarters offce and parking lease agreement 6. Suggestions regarding individual remuneration adjustments for independent directors on the 9th Board of Directors
2020/8/5 9-5 1. Procurement contract for "THSRC media outsourcing contract" (Contract number: 01-20-007(EU)) 2. Revival of 2020 salary adjustment plans 3. Suggestions for strengthening links between non-fixed remuneration and operational performance for THSRC chairman and president 4. Suggestions for offcial appointment granted to acting head of Finance Division 5. 2020 Q2 Financial Report 6. Revisions to the Corporation's "Internal Control System" 7. Suggestions for Special Committee member composition as THSRC Institutional Director Ministry of Transportation and Communications appointed a new director representative, resulting in Director Min-Ching Liu leaving offce and resigning as a member of the Special Committee.
2020/9/16 9-6 1. Suggestions for simplifying Board submission procedures for procurement contract proposals (as opposed to previous review-and-approval procedures for proposals) 2. Suggestions for renewal of director (supervisor) and offcer liability insurance 3. Suggestions for strengthening links between non-fixed remuneration and operational performance for THSRC chairman and president 4. Suggestions regarding distribution of "special autumn festival bonuses" for 2020 5. Revisions to the Corporation's "Regulations of Responsibility & Authority" 6. Revision of the Corporation's consultant appointment guidelines 7. Renewal of President's Offce consultant contract 8. Appointment of acting Operation Senior Vice President
2020/10/14 9-7 1. Provision of HSR employee discount tickets in 2021 2. Recommendation that overtime pay rates for "national holidays" in 2021 should continue to comply with overtime pay rates for "rest days" 3. Suggestions regarding distribution of Chinese New Year subsidies for 2021 4. Procurement and bid selection suggestions for "Phase 3 Nangang Software Park Offce Building Lease from 2021 to 2023" contract (Contract number: PCDD-20-0945) and "Phase 3 Nangang Software Park Parking Space Lease from 2021 to 2023" contract (Contract number: PCDD-20-0946) 5. Formulation of 2021 audit report for auditing offce 6. Formulation of Corporate Governance & Nominating Committee, Audit Committee, and Remuneration Committee work plans for 2021
2020/11/4 9-8 1. Formulation of the Corporation's budget for 2021 2. Revisions to the Corporation's "Accounting System" 3. Collaboration plans for THSRC and China Airlines joint tickets 4. Procurement strategy suggestions for ATP6 electrical substation core system power equipment control and relay panel (CRP) research and development project 5. Procurement strategy suggestions for new-generation network architecture designs and solutions 6. Suggestions for supplementary agreement of "HSR security personnel services (on trains) contract from 2020 to 2023" (Contract number: S1-19-051) 7. Suggestions for supplementary agreement of "Rail grinding car supply contract" (Contract number: E5-18-001) 8. Suggestions regarding performance goals for managers in 2021 9. Suggestions regarding promotion of Head of Information Technology Division and Head of Operation Safety Offce

140

==> picture [483 x 629] intentionally omitted <==

----- Start of picture text -----

Session
Date Important Resolutions
(Term-Sitting)
1. Renewal of operating insurance for 2021
2. Extension of quota for derivative assets that expired during the first half of 2021
3. Extension or transfer of letters of credit that expired during the first half of 2021
4. Submitted budget figures and financial modules for 2021 to MOTC
5. Formulation of the Corporation's "Report on subscriptions for corporate bonds"
6. Suggestions regarding additional year-end bonuses for 2020
7. Revisions to the Corporation's "THSRC Organizational Regulation" and "Organizational Structure," and suggestions
regarding manpower adjustment
8. Continued appointment of Corporation President's Office senior consultant contract
2020/12/15 9-9 9. Continued appointment of Corporation Core Technology Development Department consultant
10. Suggestions for official appointment granted to acting Operation Senior Vice President
11. Appointment of acting Head of Maintenance Management Division and acting Head of Legal Office
12. Adjustment of Head of Human Resource Division
13. Procurement strategy suggestions for "THSRC self-developed turnout monitoring system replacement contract"
14. Procurement strategy suggestions for HSR station cleaning and greenery maintenance services contract from 2021
to 2024
15. Revisions to the Corporation's "Rules of Procedure for Board of Directors Meetings"
16. Revisions to the Corporation's "Charter of the Corporate Governance & Nominating Committee," "Charter of the
Audit Committee," "Charter of the Remuneration Committee," and "Charter of the Special Committee"
1. Addition of usance letters of credit and increased quota for derivative assets
2. Distribution suggestions for 2020 employee compensation and bonuses
3. Distribution suggestions for 2020 director remuneration
4. Procurement procedures and bid review results for HSR trainset retendering (Contract number: E321)
5. Suggestions for expansion of HSR meal box procurement agreement (Contract number: PCDD-19-1413)
6. Procurement and bid selection suggestions for "Construction of Yanchao Main Workshop automated painting
2021/1/20 9-10 shop equipment consulting services contract" (Contract number: C2-19-002) and "Construction of Yanchao Main
Workshop automated painting shop equipment contract" (Contract number: T2-20-009)
7. Donation and sponsorship plan for 2021
8. Revisions to the Corporation's "Regulations for Management of the Prevention of Insider Trading"
9. Implementation status of Corporate Governance & Nomination Committee, Audit Committee, and Remuneration
Committee in 2020
10. Formulation of suggestions for assessing implementation status of board and functional committees in 2020
1. 2020 financial report
2. 2020 CPA audits
3. Non-audit services plans for 2021 and follow-up of contracted and invoiced non-audit services.
4. Submitted applications for import duty guarantees to be submitted to the Ministry of Finance Customs
Administration Kaohsiung Customs due to the Corporation's need for post-release duty payments when handling
imported cargo
5. Procurement strategy suggestions for localization of "Second overhaul and maintenance following 3,000 uses of
electricity system generator circuit-breakers (GCB) and maintenance of electricity system high and low voltage GIS
equipment for 2021-2023" (Contract number: M4-20-014)
6. Procurement and bid selection suggestions for "Research and development of ATP6 electrical substation control &
relay panel" (Contract number: E4-20-005)
7. Procurement and bid selection suggestions for "Upgrading of core system power equipment control and relay panel
(CRP)" (Contract number: E241)
2021/2/24 9-11 8. Procurement strategy suggestions for train cleaning services contract for HSR Nangang Station, Zuoying Station, and
Taichung Station from 2021 to 2024
9. Third supplementary agreement of train cleaning services contract for HSR Nangang Station, Zuoying Station, and
Taichung Station from 2019 to 2021
10. Suggestions relating to results of manager performance audits for 2020
11. Suggestions regarding performance goals for new managers, dismissal of part-time workers, and optimization of
manager performance management procedures in 2021
12. Revision of the Corporation's "consultant appointment guidelines"
13. Revisions to the Corporation's "General/Specific Delegation of Responsibility and Authority"
14. Self-assessment results of internal control system for 2020
15. 2020 Business Report
16. Revisions to the Corporation's "Corporate Social Responsibility Best Practice Principles"
17. Report of implementation status of corporate governance
18. Formulation of 2021 shareholder's general meeting date, venue, and main topics
----- End of picture text -----

141

Corporate Governance

==> picture [483 x 195] intentionally omitted <==

----- Start of picture text -----

Session
Date Important Resolutions
(Term-Sitting)
1. Suggestions regarding distributable surpluses for 2020
2. Procurement strategy suggestions for HSR shuttle bus affiliated marketing services from 2021 to 2022
3. Formulation of proposal submission to shareholders' general meeting on May 27, 2021 "Revisions to the
Corporation's 'Guidelines for Corporate Governance'" for discussion
2021/3/17 9-12 4. Formulation of proposal submission to shareholders' general meeting on May 27, 2021 "Revisions to the
Corporation's 'Rules of Procedure for Shareholders' Meetings'" for discussion
5. Formulation of proposal submission to shareholders' general meeting on May 27, 2021 "Revisions to the
Corporation's 'Rules for the Election of Directors'" for discussion
6. Revisions to the Corporation's "Regulations of Disclosure Information"
1. The Corporation's donations to the TRA Taroko Express incident on April 2, 2021
2. Submission of HSR Financial Resolution Plan 2020 implementation status table to MOTC
3. The Corporation's plans to utilize working capital for advanced settlement of syndicated loan principal payments
2021/4/14 9-13 4. Formulation of plans for issuance of unsecured corporate bonds
5. Formulation of plans for issuance of unsecured commercial papers
6. Bid solicitation strategies for "Operation and management of HSR station parking lots"
7. Revisions to the Corporation's "THSRC Organizational Regulation" and "Organization Structure"
----- End of picture text -----

(3) Any Recorded or Written Dissenting Opinions of Directors in the Current Year and up to the Publication Date of the Annual Report in Relation to Important Resolutions and the Content of Said Dissenting Opinion: None.
(4) Resignation or Dismissal of the Company's Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D in the Current Year and up to the Publication Date of the Annual Report:

Title	Name	Date Effective	Date of Termination	Reasons for Resignation or Dismissal
Head of Finance Eleanore New 2006/06/01 2020/01/15 Retired

4. Information on CPA Professional Fees

(1) Audit Fees

==> picture [483 x 162] intentionally omitted <==

----- Start of picture text -----

Accounting Firm Name of CPA Period Covered by CPA's Audit Remarks
Deloitte & Touche Mei-Yen Chiang Kwan-Chung Lai 2020.01.01~2020.12.31
Fee Items
Audit Fee Non-Audit Fee Total
Fee Range
1 Lower than NT$ 2,000,000
2 NT$2,000,000 (Included) ~ NT$4,000,000 V
3 NT$4,000,000 (Included) ~ NT$6,000,000 V
4 NT$6,000,000 (Included) ~ NT$8,000,000
5 NT$8,000,000 (Included) ~ NT$10,000,000 V
6 Above NT$10,000,000
----- End of picture text -----

142

(2) If Non-Audit Fees Paid to the Certified Public Accountant, the Accounting Firm of the Certified Public Accountant, and/or Any Affiliated Enterprise of Such Accounting Firm Surpass One Quarter of Audit Fees Paid Thereto, the Amounts of Both Audit and Non-Audit Fees as Well as Details of Non-Audit Services Should be Disclosed:

Unit: NT$ in thousands

Accounting Firm		i	Non-Audit Fee	Non-Audit Fee	Non-Audit Fee	Non-Audit Fee	Non-Audit Fee	Period Covered by CPA's Audit	Remarks
	Name of CPA	Audt Fee	System Design	Company Registration	Human Resources	Others	Subtotal
Deloitte & Touche Mei-Yen Chiang Kwan-Chung Lai 4,477			- - - 3,675 3,675 2020.01.01 ~2020.12.31 Other non-audit fees included ISO 27001 implementation and third- party validation services, fnancial advisory services and accounting consulting services.

(3) In the Event of a Change in Accounting Firm Where the Audit Fees Paid for the Fiscal Year in Which Such Change Took Place are Lower Than Those for the Previous Fiscal Year, the Amount of Audit Fees Before and After Said Change and The Reasons Should Be Disclosed: None.
(4) In the Event Where Audit Fees Paid for the Current Fiscal Year are Lower Than Those of the Previous Fiscal Year by More Than 10 Percent, Reductions in the Amount of Audit Fees, Reduction Percentage, and Reason(S) Should be Disclosed: None.

5. Replacement of CPA: None

6. In the Event Where the Corporate Chairperson, General Manager, or Any Managerial Officer in Charge of Finance or Accounting Matters Has in the Most Recent Year Held a Position at the Accounting Firm of its Certified Public Accountant or at an Affiliated Enterprise of Said Accounting Firm, the Name and Position of the Person, and the Period During Which the Position was Held, Should be Disclosed: None.

7. Information on Share Transfers and Pledge Changes

Changes in shareholding and pledge holdings of directors, managers, and shareholders holding more than 10% of shares in the current year and up to the publication date of this annual report. If the shares were traded with related parties, the name of the transferee, relationship between transferee and directors, managers and major shareholders, and obtained or pledged shares should be disclosed.

(1) Changes in Shareholding of Directors, Managers and Major Shareholders

Unit: thousand shares

==> picture [483 x 49] intentionally omitted <==

----- Start of picture text -----

2020 As of 2021/03/31
Title Name Holding Increase Pledged Holding Holding Increase Pledged Holding
(Decrease) Increase (Decrease) (Decrease) Increase (Decrease)
－－－－－－
----- End of picture text -----

(2) Shares Trading with Related Parties

Unit: thousand shares

Name	Reason for Transfer	Date of Transaction	Transferee	Relationship between Transferee and Directors, Managers and Major Shareholders	Shares	Transaction Price (NT$)
－－－－－－－

Note: Not applicable as no shares were traded with related parties.

(3) Shares Pledge with Related Parties: None

143

Corporate Governance

8. Information Disclosing the Spouse, Kinship within the Second Degree, and Relationship between any of the Top Ten Shareholders:

Information Relating to Relationships Between Any of the Top Ten Shareholders

Unit: thousand shares, % (as of 2021/03/29)

==> picture [484 x 570] intentionally omitted <==

----- Start of picture text -----

Name and Relationship
Shareholding Between the Company's Top
Current Spouse's/Minor's
Name by Nominee Ten Shareholders, or Spouses
Shareholding Shareholding Remarks
(Note1) Arrangement or Relatives Within Two
Degrees of Kinship
Shares % Shares % Shares % Name Relationship
Ministry of
Transportation and Corporation
2,420,000 43.00 0 0 0 0 None None
Communications, institutional director.
R.O.C.
Representative
Wen-Jong Chi 0 0 0 0 0 0 None None of Corporation
institutional director.
Representative
Yueh-Hsiang Chen 0 0 0 0 0 0 None None of Corporation
institutional director.
China Aviation
Corporation
Development 260,040 4.62 0 0 0 0 None None
institutional director.
Foundation
Representative
Yao-Chung Chiang 0 0 0 0 0 0 None None of Corporation
institutional director.
Representative
Lee-Ching Ko 0 0 0 0 0 0 None None of Corporation
institutional director.
China Steel Corporation
242,148 4.30 0 0 0 0 None None
Corporation institutional director.
Representative
Chao-Tung Wong 0 0 0 0 0 0 None None of Corporation
institutional director.
Taiwan Sugar Corporation
200,000 3.55 0 0 0 0 None None
Corporation institutional director.
Representative
Chao-Yih Chen 0 0 0 0 0 0 None None of Corporation
institutional director.
TECO Electric & Corporation
190,060 3.38 0 0 0 0 None None
Machinery Co., Ltd. institutional director.
Representative
Mao-Hsiung Huang 0 0 0 0 0 0 None None of Corporation
institutional director.
Corporation
Cathay Life
163,809 2.91 0 0 0 0 None None institutional
Insurance Co.,Ltd.
shareholder.
Chairman of Cathay Life
Tiao-Kuei Huang 0 0 0 0 0 0 None None
Insurance Co.,Ltd.
----- End of picture text -----

144

==> picture [483 x 403] intentionally omitted <==

Note 1: Names of institutional shareholders and representatives should be listed separately.

Note 2: Shareholding ratio is calculated as the total number of shares held by the shareholder, spouses, minors, or held in the name of other individuals.

9. Shareholding of Corporation Director, Management and the Business that is Controlled by the Corporation Directly or Indirectly on Re-Invested Enterprises and Total Shareholding Ratio: None.

145

Corporate Governance

5 Financing Information

146

==> picture [596 x 619] intentionally omitted <==

147

Financing Information

1. Capital and Share Information

(1) Sources of Capital

==> picture [484 x 633] intentionally omitted <==

----- Start of picture text -----

Authorized Capital Paid-Up Capital Remarks
Year/ Issue Collateral of
Shares Shares
Month Price Amount (NT$ Amount (NT$ Capital Source assets other than
(thousand (thousand Other
thousand) thousand) (NT$ thousand) cash provided
shares) shares)
for shares
1998/5 10 5,000,000 50,000,000 1,250,000 12,500,000 Founding capital stock - -
12,500,000
1999/4 10 5,000,000 50,000,000 2,000,000 20,000,000 Cash capital increase - -
7,500,000
1999/8 10 5,000,000 50,000,000 2,017,350 20,173,500 Surplus to capital increase - -
173,500
2000/5 10 5,000,000 50,000,000 3,017,350 30,173,500 Cash capital increase - -
10,000,000
2000/7 10 5,000,000 50,000,000 4,072,100 40,721,000 Cash capital increase - -
10,547,500
2001/9 10 5,000,000 50,000,000 4,999,900 49,999,000 Cash capital increase - Note 2
9,278,000
2003/1 10 10,000,000 100,000,000 7,689,900 76,899,000 Cash capital increase 26,900,000 - -
(Series A Registered Preferred Stock)
2003/9 10 10,000,000 100,000,000 7,824,149.5 78,241,495 Cash capital increase 1,342,495 - -
(Series B Registered Preferred Stock)
Cash capital increase 1,613,000
2004/1 9.3 10,000,000 100,000,000 7,985,449.5 79,854,495 (Type I Series C Registered Preferred - -
Stock)
Cash capital increase 1,514,000
2004/2 9.3 10,000,000 100,000,000 8,136,849.5 81,368,495 (Type 2 Series C Registered Preferred - -
Stock)
Cash capital increase 746,000
2004/3 9.3 10,000,000 100,000,000 8,211,449.5 82,114,495 (Type 3 Series C Registered Preferred - -
Stock)
Cash capital increase1,076,200
2004/4 9.3 10,000,000 100,000,000 8,319,069.5 83,190,695 (Type 4 Series C Registered Preferred - -
Stock)
Cash capital increase 6,370,770
2004/8 9.3 10,000,000 100,000,000 8,956,146.5 89,561,465 (Type 5 Series C Registered Preferred - -
Stock)
Cash capital increase 645,000
2004/9 9.3 10,000,000 100,000,000 9,020,646.5 90,206,465 (Type 6 Series C Registered Preferred - -
Stock)
----- End of picture text -----

148

==> picture [483 x 455] intentionally omitted <==

----- Start of picture text -----

Authorized Capital Paid-Up Capital Remarks
Year/ Issue Collateral of
Shares Shares
Month Price Amount (NT$ Amount (NT$ Capital Source assets other than
(thousand (thousand Other
thousand) thousand) (NT$ thousand) cash provided
shares) shares)
for shares
Cash capital increase 370,100
2004/11 9.3 10,000,000 100,000,000 9,057,656.5 90,576,565 (Type 7 Series C Registered Preferred - -
Stock)
Cash capital increase 6,459,000
2005/4 9.3 11,500,000 115,000,000 9,703,556.5 97,035,565 (Type 8 Series C Registered Preferred - -
Stock)
Cash capital increase 8,065,000
2005/9 9.3 12,000,000 120,000,000 10,510,056.5 105,100,565 (Type 9 Series C Registered Preferred - -
Stock)
332.85
2008/4 10 12,000,000 120,000,000 10,510,089.8 105,100,898 First investor application of conversion - -
for convertible unsecured overseas
corporate bonds in 2007
221,345
2008/6 10 12,000,000 120,000,000 10,532,224 105,322,243 First investor application of conversion - -
for convertible unsecured overseas
corporate bonds in 2007
10 Capital reduction
2015/8 12,000,000 120,000,000 6,513,232 65,132,326 (40,189,917) - -
9.3
(Withdrawal of preferred shares)
Capital reduction
2015/10 10 12,000,000 120,000,000 2,605,293 26,052,930 (39,079,396) - Note 3
(Withdrawal of common stock)
Cash capital increase
2015/11 10 12,000,000 120,000,000 5,605,293 56,052,930 30,000,000 - -
(Privately placed common stock)
2016/10 10 12,000,000 120,000,000 5,628,293 56,282,930 Cash capital increase - Note 4
230,000
----- End of picture text -----

Note:1. The Corporation completed effective registration as a public company under reissued Securities & Futures Institute (90) Tai Tsai Cheng (1) No. 120792 decree.
Effective date and decree of 2001/9 cash capital increase: 2001/7/6 Tai Tsai Cheng (1) No. 144286.
Effective date and decree of 2015/10 common stock capital reduction: 2015/10/2 Financial-Supervisory-Securities-Fa No. 1040039751.
Effective date and decree of 2016/10 cash capital increase: 2016/9/12 Tai-Zheng-Shang-Yi-Zi No. 1051804339.
Current issued stocks in circulation are: 5,628,293,058 shares of common stock, including 2,628,293,058 shares of publicly issued common stock and 3,000,000,000 shares of privately placed common stock.

(2) Share Types

Unit: thousand shares (As of 2021/3/29)

Share Type	Authorized Capital	Authorized Capital	Authorized Capital	Remarks
	Issued Shares	Unissued Shares	Total Shares
Common shares	2,628,293 6,371,707 12,000,000 3,000,000			Publicly issued
				Privately placed

Note: The Corporation went public on 2016/10/27.

Information for Shelf Registration: Not applicable.

149

Financing Information

(3) Shareholding Structure

Common shares

Units: people, thousand shares, % (As of 2021/3/29)

==> picture [484 x 97] intentionally omitted <==

----- Start of picture text -----

Foreign
Shareholders Domestic
Government Public Financial Other Juridical Institutions
Natural Total
Agencies Institutions Institutions Persons & Natural
Quantity Persons
Persons
Number of Shareholders 2 1 16 377 131,042 648 132,086
Shareholding 2,540,000 200,000 520,142 943,908 850,753 573,490 5,628,293
Shares ratio 45.13 3.55 9.24 16.77 15.12 10.19 100.00
----- End of picture text -----

Note: According to Article 47 of the Audit Act (Definition of public enterprises), the following public enterprises and institutions shall be audited by an auditing agency: 1. Sole government ownership.
Joint government and private ownership with the government holding over 50 percent of the stock.
Reinvestment by the enterprises described in paragraphs 1 and 2, which accounts for over 50 percent of the total capital of the reinvested enterprise.

(4) Distribution of Shares

Common shares

Units: people, shares (face value of each share being NT$10) (As of 2021/3/29)

==> picture [484 x 358] intentionally omitted <==

----- Start of picture text -----

Share Breakdown Number of Shareholders Shareholding Shareholding Ratio (%)
1 to 999 21,009 3,982,574 0.071%
1,000 to 5,000 80,661 181,681,010 3.228%
5,001 to 10,000 15,656 125,343,305 2.227%
10,001 to 15,000 4,651 59,499,372 1.057%
15,001 to 20,000 3,428 64,002,253 1.137%
20,001 to 30,000 2,267 58,467,356 1.039%
30,001 to 50,000 2,108 84,697,244 1.505%
50,001 to 100,000 1,262 91,797,980 1.631%
100,001 to 200,000 506 72,589,065 1.290%
200,001 to 400,000 225 63,805,921 1.134%
400,001 to 600,000 83 41,192,507 0.732%
600,001 to 800,000 51 35,648,368 0.633%
800,001 to 1,000,000 35 32,134,422 0.571%
1,000,001 to 1,200,000 21 23,233,883 0.413%
1,200,001 to 1,400,000 13 17,093,648 0.304%
1,400,001 to 1,600,000 13 19,209,400 0.341%
1,600,001 to 1,800,000 9 15,344,948 0.272%
1,800,001 to 2,000,000 8 15,622,228 0.277%
Over 2,000,001 80 4,622,947,574 82.138%
Total 132,086 5,628,293,058 100.000%
----- End of picture text -----

150

(5) List of Major Shareholders

(5) List of Major Shareholders	(5) List of Major Shareholders	(5) List of Major Shareholders
Unit: thousand shares (As of 2021/3/29)
Shareholding Shareholder's Name	Shareholding	Shareholding Ratio (%)
MOTC 2,420,000 43

Note1: Shareholders holding more than 5% of shares.

Note2: For more information on the top ten shareholders by shareholding ratio, shareholding, and shareholding ratio, please refer to Chapter 4 (Corporate Governance) of this report.

(6) Market Price, Net Worth, Earnings, and Dividends per Share

==> picture [483 x 388] intentionally omitted <==

----- Start of picture text -----

Unit: NT$/thousand shares
Year
2019 2020 2021/1/1-2021/3/31
Item
Market Price per Share
Highest Market Price 47.00 39.95 31.45
Lowest Market Price 29.85 25.95 28.80
Average Market Price 37.45 33.30 30.25
Net Worth per Share
Before distribution 12.63 12.45 -
After distribution 11.42 (Note 1) -
Earnings per Share
-
Weighted Average Shares (thousand shares) 5,628,293 5,628,293
Earnings per Share 1.42 1.04 -
Dividends per Share
Cash Dividends 1.2101 1.05(Note 1) -
Stock Dividends - - -
・ - - -
Dividends from Retained Earnings
・ - - -
Dividends from Capital Surplus
Accumulated Undistributed Dividends - - -
Return on Investment
Price/Earnings Ratio (Note 2) 26.37 32.02 -
Price/Dividend Ratio (Note 3) 30.95 31.71 (Note 1) -
Cash Dividend Yield (Note 4) 3.23% 3.15% (Note 1) -
----- End of picture text -----

Note 1: The amount of dividends for 2020 is currently pending stockholders' approval. Note 2: Price/Earnings Ratio = Average market price / Earnings per share. Note 3: Price/Dividend Ratio = Average market price / Cash dividends per share. Note 4: Cash Dividend Yield = Cash dividends per share/ Average market price.

(7) The Corporation's Dividend Policy and Implementation Status

1) Dividend Policy in Articles of Incorporation

If the final annual accounts of the Corporation show a net profit for a given year, the profit-sharing compensation to employees and Directors shall first be allocated from the net profit pursuant to Article 35-1. If the Board of Directors then resolves to make distributions, it shall prepare an earnings distribution proposal, including therein the amount of any accumulated undistributed earnings and the amount equaling to the remainder of the net profit for the given year after further deduction for the payment of all taxes required by

151

Financing Information

law, the allocation of the 10 percent legal reserve (no such allocation is necessary if the legal reserve is maintained at the level of the paid-in capital of the Corporation), and the provision or reversal for the special reserve pursuant to law or regulation, and submit the proposal to a shareholders; meeting for resolution on the distribution of dividends to shareholders.

When forming its dividend policy, the Corporation considers various factors such as its plans relating to current and future development, the overall investment environment, its financial needs, competition in the domestic and foreign markets, as well as the interest of shareholders and the principles of stability and balance in the distribution of dividends. Each year it will set aside as shareholder dividends an amount of not less than 60% percent of the earnings available for distribution; however, is not obligatory if the earnings cumulatively available for distribution is less than 0.5 percent of its paid-in capital. Dividends to shareholders may be distributed in cash or shares, but in any event the amount of cash dividends may not be less than 50% of the total dividends.

2) Implementation Status

The proposal for the distribution of 2020 profits was passed at the meeting of the Board of Directors:

The proposed distribution of cash dividends is NT$ 1.05 per share to a total of NT$ 5,909,708 thousand. An ex-dividend date will be set following approval by the shareholders' general meetings.

(8) Effect upon Business Performance and Earnings per Share of Any Stock Dividend Distribution Proposed or Adopted at the Most Recent Shareholders' Meeting:

Not applicable. The shareholders' meeting has not proposed any stock dividend distribution.

(9) Employee Compensation and Director Remuneration

1) The percentage or range with respect to employee and director compensation, as set forth in the Corporation's Articles of Incorporation:
If the final annual accounts of the Corporation show a net profit for a given year, it shall allocate not less than 1 percent of the net profit as profit-sharing compensation to employees and not more than 1 percent as profit-sharing compensation to directors; provided, however, that if the Corporation still has any accumulated loss, it shall first set aside the amount to offset the loss before such allocation.
2) The basis for estimating the amount of employee and director compensation, for calculating the number of shares to be distributed as employee compensation, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period.
A. In 2020, 2% of net profit was set as employee compensation, amounting to NT$111,165 thousand in cash; 0.5% of net profit was set as director remuneration, amounting to NT$27,791 thousand in cash.
B. Material differences between estimated amounts and amounts resolved by the Board of Directors on or before the date that annual financial statements are approved are adjusted in the year where compensation and remuneration were recognized. If a change in resolved amounts occurs after annual financial statements were approved, the differences are recorded as a change in accounting estimates and adjusted in the following year.
3) Board resolutions on employee and director compensation distributions:
A. Amount of any employee compensations distributed in cash or stocks and amount of compensation for directors; if there are any discrepancies between these amounts and estimated figures for the fiscal year where these expenses are recognized, the discrepancies, their causes, and accounting treatment should be disclosed.
On January 20 and February 24, 2021, the Board approved a resolution for employee compensation of NT$ 111,165 thousand and director remuneration of NT$ 27,791 thousand, payable in cash, for the year ended December 31, 2020.

152

There was no difference between such amounts and the respective amounts recognized in the financial statements for the year ended December 31, 2020.

B. The amount of any employee compensation distributed in stock and the size of that amount as a percentage of the sum of the aftertax net income stated in individual financial reports for the current period and total employee compensation:

Not applicable. There are no plans to pay employee compensation in stock.

4) Information on 2019 distribution of compensation for employees and directors (with an indication of the number of shares, monetary amount, and stock price of the shares distributed) and, if there is any discrepancy between the actual distribution and the recognized employee or director compensation, additionally the discrepancy, cause, and how it is treated:

Employee compensation of NT$ 159,489 thousand and director remuneration of NT$ 39,872 thousand for 2019 was distributed in 2020 in cash. There was no discrepancy between said amounts and respective amounts recognized in the financial statements for 2019.

(10) Corporate buy-back of corporation shares: None.

2. Information on Corporate Debts

(1) Unpaid domestic corporate bonds:

==> picture [483 x 415] intentionally omitted <==

----- Start of picture text -----

Issuance of Corporate Bonds
Issuance 1st unsecured corporate bond for 2019
Issuing Date 2019/11/14
Denomination NT$ 10 million
Issuance and Transaction Location Not Applicable
Offering Price Par
Total Amount NT$ 8 billion
Coupon Rate Fixed Rate: 1.60%
Maturity 30 years maturity: 2049/11/14
Guarantor None
Trustee Taishin International Bank
Underwriter Yuanta Securities
Legal Counsel LCS & PARTNERS
Auditor Deloitte & Touche
Repayment Bullet
Outstanding NT$ 8 billion
Redemption or Early Repayment Clause None
Covenants None
Taiwan Ratings Corp.
Credit Rating Date: 2019/10/7
Rating: twAA+ (Issuer rating)
Amount of Converted or Exchanged Common Shares, ADRs
None
Other Rights of Bondholders or other securities
Conversion Right None
Dilution Effect and Other Adverse Effects on Existing Shareholders None
Custodian None
----- End of picture text -----

153

Financing Information

==> picture [484 x 403] intentionally omitted <==

----- Start of picture text -----

Issuance 1st unsecured corporate bond for 2020
Issuing Date 2020/7/1
Denomination NT$10 million
Issuance and Transaction Location Not Applicable
Offering Price Par
Total Amount NT$10.5 billion
Coupon Rate Fixed Rate: 1.30%
Maturity 30 years maturity: 2050/7/1
Guarantor None
Trustee Taishin International Bank
Underwriter Yuanta Securities
Legal Counsel LCS & PARTNERS
Auditor Deloitte & Touche
Repayment Bullet
Outstanding NT$10.5 billion
Redemption or Early Repayment Clause None
Covenants None
Taiwan Ratings Corp.
Credit Rating Date: 2019/10/7
Rating: twAA+ (Issuer rating)
Amount of Converted or Exchanged Common Shares,
None
Other Rights of Bondholders ADRs or other securities
Conversion Right None
Dilution Effect and Other Adverse Effects on Existing Shareholders None
Custodian None
----- End of picture text -----

(2) Current corporate bonds: None.

3. Information on Preferred Stock

(1) Preferred stock in circulation: None.

(2) Current preferred stock: None.

4. Information on Overseas Depositary Receipts: None.

5. Information on Employee Stock Option Certificates: None.

6. Information on Restricted Stock Awards: None.

7. Information on Mergers or Acquisitions and Issuance of New Shares Due to Share Acquisitions from Other Companies: None.

8. Implementation of Capital Utilization Plans

Up until the quarter prior to the publication of this annual report, the Corporation has not completed previous issuance or private placement of securities, or had any project completed in the last three years where project benefits have not become apparent.

154

==> picture [596 x 619] intentionally omitted <==

6 Operational Overview

155

Operational Overview

1. Operations Scope and Review of Current Operations

(1) Business Scope

Our main scope of business encompasses high-speed rail operations and affiliated businesses.

1) High-speed rail operations

THSRC operations adhere to the principle of providing passengers with safe and speedy transportation. After more than 10 years of effort, we have now become the transportation backbone of Taiwan's western corridor. THSRC provides intercity high-speed rail services via 12 stations: Nangang, Taipei, Banqiao, Taoyuan, Hsinchu, Miaoli, Taichung, Changhua, Yunlin, Chiayi, Tainan, and Zuoying, and we are constantly enhancing passenger services through service planning, promotional activities, and multiple ticket-purchase channels to expand market share. In 2020, due to the COVID-19 pandemic, our passenger volumes declined by 15.09% compared to 2019. The total passenger volumes in 2020 reached 57.24 million.

2) Operation of affiliated business services

To enhance HSR value and increase revenues from affiliated business, THSRC operates a number of affiliated business, encompassing retail space leasing (including convenience stores, restaurants, and service counters), station parking lots, advertisement media leasing (including lightboxes, column space, wall space, product displays, and train decorations), retail, trolley sales, and others.

(2) Results of Operations

1) Operational overview
A. Passenger service

In 2020, THSRC carried over 57.24 million passengers, a decrease of 15.09% over the prior year, making for a total of 9,912 million passenger-kilometers. We ran a total of 53,076 trains, a decrease of 1.21% over the prior year, resulting in a total of 17,407 million seat-kilometers. We ran up to 166 north- and south-bound trains daily depending on peak or off-peak days of the week and provided maximum traffic volumes amounting to as many as 210 daily runs on one consecutive holiday. Our loading factor was 56.94%, a decrease of 11.09% over the prior year, and punctuality was 99.71%, a decrease of 0.17% over the prior year.

Measures of Operation Performance, 2019-2020

==> picture [483 x 121] intentionally omitted <==

----- Start of picture text -----

2019 2020
1. Train Services 53,727 53,076
2. Ridership (in millions) 67.41 57.24
3. Seat-kilometers (in millions) 17,630 17,407
4. Passenger-kilometers (in millions) 11,994 9,912
5. Punctuality (as % of trains arriving within five minutes of scheduled time) 99.88% 99.71%
6. Loading factor (passenger-km/seat-km) 68.03% 56.94%
----- End of picture text -----

156

HSR Operational Growth Index 2016~2020

==> picture [482 x 164] intentionally omitted <==

----- Start of picture text -----

Index Base period: Year 2016＝100
200
160
120 113.04 119.13
107.04
100.00 101.15
80
40
0
2016 2017 2018 2019 2020 Year
----- End of picture text -----

Monthly Ridership in 2020

==> picture [483 x 164] intentionally omitted <==

----- Start of picture text -----

Ridership(Millions)
7.00
6.00 6.23 5.72 5.79
5.49 5.47
5.00 4.98 5.01
4.43
4.00 3.97
3.53 3.67
3.00 2.95
2.00
1.00
0.00
01 02 03 04 05 06 07 08 09 10 11 12 Month
----- End of picture text -----

157

Operational Overview

Monthly passenger kilometers, seat kilometers, and loading factor in 2020

==> picture [484 x 164] intentionally omitted <==

----- Start of picture text -----

Passenger-km(in millions) Seat-km(in millions) Load factor
3,300 100%
3,000 90%
2,700 70.79% 80%
2,400 64.12% 63.87% 65.34% 67.25% 70%
60.91% 61.39% 58.98%
2,100 60%
48.59%
111,,,800500200900 1,144 1,615 1,407 1,48639.87% 1,45834.49% 1,363 45.61% 785 1,288 866 1,410 9521,485 8501,442 9901,549 933 1,429 9921,475 50%40%30%20%
600 683 593 621 10%
503
300 0%
01 02 03 04 05 06 07 08 09 10 11 12 Month
----- End of picture text -----

B. Multiple booking and ticketing options

We offer a number of channels to make booking and paying for tickets easy and convenient. Passengers can choose to purchase tickets at ticket counters, vending machines and convenient stores, or via an internet reservation system, the T Express Mobile App, an interactive voice reservation system, or a joint ticketing program with travel agents. Passengers can also board trains using contactless smartcards such as EasyCard co-branded credit cards and iPass co-branded credit cards.

Booking and Ticket Purchase by Channels in 2020

==> picture [262 x 242] intentionally omitted <==

==> picture [115 x 116] intentionally omitted <==

----- Start of picture text -----

Vending Machines 29.0%
Ticket Counters 27.7%
T Express Mobile App 21.7%
Periodic Tickets/ Multi-Ride Tickets 10.1%
Convenient Stores 8.0%
Co-Branded Contactless Smart Cards 2.8%
Travel Agents 0.7%
----- End of picture text -----

158

C. Maintenance

In order to provide passengers with a safe and comfortable experience, we ensure that all repairs and maintenance work comply with a comprehensive Rolling Stock Maintenance Plan. Our maintenance cycle for rolling stock is as follows:

(a) Daily inspection (Level 1 inspection): every 2 days
(b) Monthly inspection (Level 2 inspection): every 30 days or every 30,000 km
(c) Bogie inspection (Level 3 inspection): every 18 months or every 600,000 km
(d) General inspection (Level 4 inspection): every 3 years of operations or every 1,200,000 km

Note: Maintenance frequency is determined by the condition that occurs first.

Monthly trainset availability in 2020

==> picture [484 x 141] intentionally omitted <==

----- Start of picture text -----

100%
93.64% 91.08% 90.51% 92.55% 90.42% 89.80% 92.31% 91.08% 93.04% 91.75% 93.43% 93.45%
90%
80%
70%
60%
01 02 03 04 05 06 07 08 09 10 11 12 Month
----- End of picture text -----

D. Operational safety

The primary objective of THSRC is to build, manage, and maintain high-speed rail operations that meet international safety and reliability standards. To achieve this objective, we established a risk assessment and safety management system that facilitates continuous improvements in safety and provides our customers with fast, punctual, and highly reliable transportation services.

(a) Safety management system

The Corporation has built upon a foundation of risk management to establish a safety management system which adheres to domestic and international best practices and standards. The system is used to identify and manage potential risks of the HSR system and rail personnel, thus ensuring continued safety and excellence of our operations, repairs, and services. This safety management system encompasses 12 safety management elements which can be systemically implemented to effectively promote the Corporation's safety policies. This system has also integrated PDCA (Plan-Do-Check-Act) cycle principles for efficient achievement of organizational policy targets.

The Corporation's Chairman signed our new "Safety and Hygiene Policy" on November 9, 2020 to showcase our commitment to safety management, strategies for implementation, and our plans for achieving safety targets. To implement our safety management system, all units formulated safety plans and associated mechanisms in accordance with our 12 safety management elements as well as their own missions, operational characteristics, and scope of duties. The managers of each unit review and

159

Operational Overview

confirm that the activities and operations of said unit adhere to the Corporation's Safety and Hygiene Policy. The Corporation has also established safety committees with different functions at different levels to provide a platform for managers and employees to jointly participate in reviews of safety performance, safety management implementations, and related improvement measures, thereby ensuring rail safety while protecting the safety of our employees, passengers, and the general public.

(b) Train operation and passenger safety

Up until December 31, 2020, there has been no record of passenger casualties caused by railway operation accidents since THSRC commenced operations. We are constantly seeking to improve and enhance passenger services through equipment updates and strive to prevent accidents such as falls or collisions from occurring at stations or on trains due to personal carelessness.

In order to maintain our high reliability, punctuality, and operational safety, any operational events that cause delays of more than 5 minutes in scheduled arrival time or abnormal operational events (including natural disasters) that senior executives deem worthy of investigation are immediately submitted for investigation by the Operation Safety Office of THSRC. Investigations cover the various aspects of train operation and dispatch, passenger services, emergency repairs and maintenance work, original designs and construction concepts, and so on. Possible causes are cross-checked and analyzed, and the resulting suggestions and improvement measures for the incident are reported to all supervisors during weekly management meetings. In addition, further investigations are conducted to identify the causes of the incident, and various improvement measures, contingency techniques, or follow-ups are discussed in relevant safety management meetings.

In order to review whether relevant operational safety implementations are consistent with announced and written procedures, the Operation Safety Office of THSRC conducted 4 audits of railway operation safety in internal operation and maintenance units in 2020. Audits covered train operation and dispatch, passenger services, facility maintenance, disaster prevention preparation, and so on. Improvements were already made to all relevant audit findings prior to publication of audit reports.

Hazard management serves as an important cornerstone to THSRC's successful establishment of a safety management system. Continuous encouragement and our reward system have incentivized employees to actively report hazards and false alarms. Monthly hazard review meetings have put forward systematic management suggestions for operation, maintenance, and engineering projects for reducing hazard levels to reasonable ranges and to ensure the safety of high-speed rail operations and passengers.

(d) HSR line security

In order to ensure smooth operation of passenger services and to protect the safety of passengers and THSRC assets, we commissioned a professional security company that works with railway police and local police to patrol trains, stations, depots, and all areas serviced by the HSR.

We continually reviewed our safety and security procedures in response to the many domestic and overseas incidents and events that have occurred in the past, such as the fatal stabbing of a police officer by a TRA passenger that occurred at Chiayi Station in 2019, the assault of a train conductor whilst checking tickets on board a train in 2020, in-station protests, or major annual activities. We collaborated with the police to assess the number of surveillance cameras at all stations, as well as installation locations and camera angles. We also introduced smart surveillance cameras at several stations, the mainline areas along the high-speed railway and in maintenance facility rooms; increased the number of on-train security personnel; and established a tripartite security intelligence and information exchange platform with the Railway Bureau (MOTC) and the Railway Police Bureau.

Every year, in order to obtain the latest and most critical information on infrastructure protection and preventive measures for new threats and attacks, the Corporation dispatches staff members to participate in drills, lectures, seminars, and symposiums organized by government and academic units such as the Executive Yuan's Office of Homeland Security, the Ministry of Transportation, and the Railway Bureau. The Corporation subsequently formulated response and notification procedures in accordance with governmental assistance and suggestions for protection, working with government units to establish joint

160

prevention systems that ensure adequate protections for critical infrastructures and operational units while facilitating timely responses to maintain our operational capabilities.

(e) Disaster response preparations

At the end of each year, THSRC reviews operational responses and evacuation work for various emergency domestic and foreign railway events and begins planning for major events and activities likely to occur in the following year. We planned and promoted various disaster prevention training and rescue drills in collaboration with local police and firefighters, as well as environmental protection, medical, and special external supporting units so that they could all familiarize themselves with our "HSR overall disaster prevention and contingency plan" (including joint disaster relief operation procedures and response command mechanisms for various types of major disaster events), develop a tacit understanding, enhance on-site rescue competency, and work together to prepare for disaster prevention and damage control.

To instill command and response capabilities in our staff, we held an internal refresher training course for site commanders and incident engineers in 2020. A total of 395 staff members participated in this training. Additionally, three seminars for Emergency service providers (firefighters; police; medical units; environmental protection units; North, Central, South District medical response centers; EPA Toxic and Chemical Substances Bureau; and incident specialist teams from the North, Central, South Districts) were held on November 19, November 25, and December 8. A total of 120 people participated in these seminars, which familiarized potential instructors from each supporting unit with priority disaster relief work for HSR.

Furthermore, to familiarize staff with emergency escape exits and emergency routes along the high-speed railway, we requested that each station invite ESP and emergency shuttle bus transport operators to jointly survey the 184 emergency escape exits along HSR line every year. Survey work for 2020 was completed from August to September, and we also examined the emergency routes and available parking spaces for large-scale rescue vehicles; this information was used as a basis for revising the emergency maps which were subsequently provided to relevant ESP.

In 2020, we completed 78 disaster prevention drills exercises at various stations, depots, and on the mainline, as shown in the following table. We also conducted two joint training events as described below.

Number of disaster prevention drills in 2020

Location	Station/Depot Area	Mainline Area	HQ & OMC Buildings	No-Warning Response Test	Other	Total
Frequency 59 7 5 5 2 78

I. We held an "emergency drill for passenger injuries resulting from indiscriminate killings on trains" on the evening of September 17 at the Hsinchu elevated section, teaching attendees how to use safety defensive equipment recently installed on trains to ensure passenger safety. Additionally, railway police now patrol in pairs and carry personal equipment such as stun guns and pepper spray. In accordance with these new regulations, we strengthened our collaboration with the railway police and identified the mechanisms of the THSRC Care and Support Team (CST). In addition to mobilizing THSRC staffs to participate in the drill, we also mobilized the Hsinchu County Fire Department, the Hsinchu County Police Department, the Hsinchu County Health Bureau (Chang Gung Memorial Hospital, the designated response hospital for the region), and the Railway Police. More than 200 people participated in this drill.
II. We held an "emergency drill for serious safety incidents and fires at Tainan station" on the evening of November 12 to simulate station fire response procedures, emergency response, passenger evacuation, and rescue and recovery. In addition to mobilizing relevant THSRC staffs to participate in this drill, we also invited the Railway Bureau, Railway Police, the Tainan City ESP (Police Department, Fire Department, Environmental Protection, Health Bureau), Tainan Municipal Hospital, National Cheng Kung University Hospital, and the Criminal Investigation Corps. More than 200 people are participated in this drill.

161

Operational Overview

E. Training

We have put in place various training initiatives to ensure that our operations and maintenance staff obtain the proper competencies and knowledge.

The participation of first-time or recurrent training courses in 2020 was as follows: 5,834 attendances for employees and external partners, who received general training on High Speed Rail Operations Regulations (HSROR); 12,652 attendances in 593 sessions for controller, train, and station staff; and 12,281 attendances in 964 sessions for staff responsible for maintenance of rolling stock, signaling and communications, power, overhead catenary systems (OCS), and tracks. There were a total of 1,557 training classes and 24,933 attendances.

==> picture [440 x 203] intentionally omitted <==

Supervisor, instructor, and trainee group photo at the Train Driver (G26) Professional Training Certificate Award Ceremony

(2) Marketing Events

1) Plans for product events
A. Our TGo membership program was launched in October 2017 and the number of members exceeded 1.61 million persons by December 2020. We continue to increase member retention, activity participation, and other sources of income; we not only implemented exclusive member offers, provided discount programs for designated trains, and organized bonus points promotion programs on designated dates, but also participated in cross-branded point exchange and affiliate programs as well as THSRC's member TGo 365 point redeem programs, using a variety of marketing activities to boost membership numbers and member contributions.
B. We continue to plan exclusive offers for corporate members, including our cumulative transaction amount rewards program which helped us build closer relationships with our corporate members, and special discounts for off-peak trains which helped to increase ridership on those trains.
C. In accordance with the "Epidemic New Life Movement," a revitalization plan was launched in June 2020 for different customer groups, with promotions including student tickets, periodic tickets, and multi-ride tickets to motivate travel, achieving ridership growth and increase in revenues.
D. We continue to promote a variety of integrated T Holiday packages, hotel packages, tour packages, transportation packages, event packages and other discounts and promotions. Additionally, we also reviewed and made adjustments to our multiple programs to increase traveling ridership and enhance overall revenue.

162

2) Plans for service improvement
A. Our "AI customer service (AICS)" was launched at the end of 2020. AICS integrated data analysis methods, natural language processing, machine learning, and other technologies to offer 24/7 service for all our passengers, answering frequently asked questions, as well as providing personalized services and inquiry services.
B. Free wireless internet access was made available in all HSR public service areas via the iTaiwan Wi-Fi network.
C. We cooperated with "Hami Book City" to provide "Fixed-Point Mobilized Reading" service at all HSR stations and on all trains, so that passengers can enjoy the fun of reading while taking HSR.

(3) Five Years in Review

This section provides a review of THSRC operations and performance for the past five years, from 2016 to 2020:

▇ Provided a total of 262,097 train services
▇ Average reliability rate: 100%
▇ Achieved a total of 55.06 billion passenger-kilometers and 85.84 billion seat-kilometers. Average loading factor: 64.13%.
▇ Average punctuality rate: 99.63%.

==> picture [273 x 232] intentionally omitted <==

----- Start of picture text -----

Average Service Reliability >Average Punctuality for
for 2016-2020 2016-2020
100 [%] 99.63 [%]
----- End of picture text -----

163

Operational Overview

Key Operating Statistics, 2016-2020

==> picture [484 x 145] intentionally omitted <==

----- Start of picture text -----

Punctuality
Year/Key Loading Factor
Total Ridership Train Services (as % of Trains Arriving Passenger-Kilometers Seat-Kilometers
Performance (Passenger-Kilometers/
(in Millions) per Year Within Five Minutes of (in Millions) (in Millions)
Indicator Seat-Kilometers)
Scheduled Time)
2016 56.59 51,106 63.52% 99.43% 10,488 16,513
2017 60.57 51,751 65.16% 99.72% 11,103 17,040
2018 63.96 52,437 67.01% 99.43% 11,559 17,250
2019 67.41 53,727 68.03% 99.88% 11,994 17,630
2020 57.24 53,076 56.94% 99.71% 9,912 17,407
----- End of picture text -----

Total Ridership, 2016-2020

==> picture [484 x 164] intentionally omitted <==

----- Start of picture text -----

(in millions)
70
67.41
63.96
60 60.57
56.59 57.24
50
40
30
20
10
0
2016 2017 2018 2019 2020 Year
----- End of picture text -----

Punctuality, 2016-2020

(shown as % of trains arriving within five minutes of scheduled time)

==> picture [484 x 148] intentionally omitted <==

----- Start of picture text -----

100% 99.43% 99.72% 99.43% 99.88% 99.71%
98%
96%
94%
92%
90%
2016 2017 2018 2019 2020 Year
----- End of picture text -----

164

Passenger-Kilometers and Seat-Kilometers for 2016-2020

==> picture [483 x 164] intentionally omitted <==

----- Start of picture text -----

Passenger-km(in millions) Seat-km(in millions) Load factor
18,000 17,040 17,250 17,630 17,407 80%
16,000 63.52% 16,513 65.16% 67.01% 68.03% 70%
14,000 56.94% 60%
12,000 11,559 11,994 50%
11,103
10,000 10,488 9,912 40%
8,000 30%
6,000 20%
4,000 10%
2,000 0%
2016 2017 2018 2019 2020 Year
----- End of picture text -----

2. Industrial Overview & Development

(1) Operational Overview

1) Current industry conditions and development

Intercity travel service providers in Taiwan mainly include THSRC, TRA, and freeway buses. In 2020, passenger volumes decreased in THSRC, TRA, and freeway buses due to the COVID-19 pandemic.

Passenger index for main public transportation

==> picture [483 x 166] intentionally omitted <==

----- Start of picture text -----

Index 2018 2019 2020 Base period: Year 2018＝100
140%
120%
100% 100 [105.4] 100 102.1 100
89.5 95.2
88
80%
74.8
60%
40%
20%
0%
THSRC TRA Freeway buses
----- End of picture text -----

165

Operational Overview

Domestic economic forecasts released by the Directorate-General of Budget, Accounting and Statistics, Executive Yuan on November 27, 2020, predict that Taiwan's export capabilities will rise in 2021 due to increasing demand for technology applications, restructuring of global supply chains, and expansion of Taiwan's production lines, as well as continuing development of competitively advantageous advanced manufacturing processes for semiconductors. In terms of private consumption, with the domestic epidemic properly controlled, the number of domestic consumers have increased and economic stimulus measures have been introduced. Therefore, we believe that growth in domestic consumption will offset negative impacts and the expected economic growth rate for 2021 is estimated to be 3.83%. Despite these changes in our external economic environment, we will continue to formulate suitable operational strategies to achieve our business targets.

Looking at overall operational conditions, THSRC will face challenges from the COVID-19 pandemic in the short term, as well as economic depression, decreasing birth rates, and aging populations in the mid to long term. In addition, challenges such as abnormal climate changes and aging operation equipment will cause maintenance costs to increase. However, we will continue to focus on developing smart transportation, increasing safety and efficiencies of emergency responses, establishing local maintenance capabilities, developing localization materials, and formulating other strategic plans. Additionally, we will continue to enhance our strengths through industry cooperation and integrate local cultures to provide our passengers with better and safety transportation quality and establish a foundation for long-term sustainability.

In terms of the transportation industry environment, local markets have undergone a major shift since THSRC entered the transportation industry in 2007. To sustain operations, each transport operator has had to use its strengths and opportunities to overcome its weaknesses and threats, and collaborate with others to find suitable positioning and operational developments in the market.

Transportation operators are actively seeking to create differentiation and create value according to passenger needs and expand niche markets. Industry competition mainly serves to enhance the core capabilities of these operators, forming a virtuous cycle.

2) Industry supply chain

THSRC mainly provides passenger transportation services. Our upstream industries mainly provide rolling stock, civil work, track work, and other services related to the manufacturing and maintenance of service facilities and equipment. Midstream industries not only include THSRC, but also other supporting operators such as parking lot management, freeway bus services, car rental services, and taxi services. Downstream industries comprise clients or sales channels that provide services to railway companies, including passengers who purchase tickets, and travel agencies that sell THSRC vacation packages.

==> picture [337 x 230] intentionally omitted <==

----- Start of picture text -----

Train manufacturing industry
Upstream Civil work industry
industries Track work industry
Electrical engineering industry
Midstream Taxi industry Cleaning services industry
industries Car rental industry Power supply industry
THSRC Freeway bus industry
Parking lot management industry
Downstream Travel agencies
industries Consumers
----- End of picture text -----

166

3) Development of various products

In response to growing passenger demand, clear disparities in ridership during peak and off-peak times, continued growth in the elderly population, advances in mobile and digital technologies, and to enhance customer relations, we have developed the following strategic plan for our products.

A. Continued provision of varied travel packages, services, and promotions to satisfy needs of different customer segments.
B. Differentiation of promotions for peak and off-peak times to enhance overall revenue.
C. Establishment of digitalized sales platforms, introducing the automated ID automotive validation ticketing service for seniors and passengers with disabilities, providing interactive native language processing (NLP) ticketing systems, and expanding mobile electronic payments to increase convenience of ticketing services.
D. Use of gradual promotions and diversified redemption programs to enhance TGo membership economy.
4) Competitive status

THSRC provides intercity passenger transportation services along Taiwan's western corridor. Transportation providers in this market include THSRC, TRA, airlines, and freeway buses, as well as passenger cars. Currently, there are no airline passenger transport services along Taiwan's western corridor. The market competitive status of each transportation is as shown in the image below:

Market advantages of each transportation type

==> picture [441 x 375] intentionally omitted <==

----- Start of picture text -----

Capacity
High
Railways High-Speed Rail
Freeway buses
Low Airlines (no service)
Passenger cars
100 300 600
Speed (km/hour)
----- End of picture text -----

167

Operational Overview

The advantages and disadvantages of the transportation along Taiwan's western corridor is analyzed in the table below:

==> picture [484 x 220] intentionally omitted <==

----- Start of picture text -----

Advantages Disadvantages
Passenger cars • Not limited by fixed routes, stations, or schedules, • Easily affected by road conditions; travel time is difficult to control
and therefore have the highest accessibility and • Physical and mental fatigue on long trips
convenience • Higher risk of accidents compared to railways
• Fixed total costs, variable costs of fuel do not increase • Holding cost is high
exponentially with passenger figures, suitable for
multiple passengers
TRA • Stations are located in city centers, and therefore • Longer travel time and travel fatigue during long-term travel
provides convenient access • Addition of commuting stations and shuttle trains affect intercity
• Mid-range fare prices passenger car capacity and travel time
Freeway buses • Many stations and intercity routes, providing higher • Longer travel time
accessibility compared to TRA and THSRC • Easily affected by traffic conditions; travel time is difficult to control
• Lower fare prices • Higher risk of accidents compared to railways
• Some routes operate 24 hours a day
THSRC • Fast, comfortable, punctual, reliable, and safe • Most stations are not located in city centers, and therefore provide lower
• Varied services to fulfill the needs of different levels of accessibility
passengers • Higher fare prices
----- End of picture text -----

THSRC implements the following strategies in response to the advantages and disadvantages of the aforementioned competing transportation tools:

A. Provision of varied products and diverse marketing activities such periodic tickets, college student discounts, early bird discounts, and so on, targeting specific consumers and specific trains to enhance competitiveness in mid-length travel markets and price-sensitive consumer segments.
B. Maintain suitable frequency of services, optimization of ticketing channels, and shuttle services to enhance convenience.
C. Integrate shuttle transport services and form travel ecosystems through alliances to provide HSR vacation packages, assisting passengers in solving the two big issues of transport and accommodation, enhancing product scope, revitalizing varied travel experiences, and developing new markets.
D. Develop membership economy systems to enhance customer loyalty and increase marginal revenue gains from members.

According to the "2018 Observations of Inter-city Transportation Growth and Decline (2020)" published by the MOTC Institute of Transportation, the weekday/weekend passenger car, TRA, freeway bus, and THSRC market share for varying distances is as shown below:

Weekday market share

==> picture [484 x 163] intentionally omitted <==

----- Start of picture text -----

Passenger car TRA Freeway buses THSRC
100%
80% 83.97 84.98
65.09
60%
40% 39.84
34.60
20% 13.76 16.22 12.11 12.78
6.23 [9.80] 4.66 8.88 4.93
0% 0 1.49
Under 20 km 20-100 km 100-200 km Above 200 km
----- End of picture text -----

168

Holiday market share

==> picture [484 x 163] intentionally omitted <==

----- Start of picture text -----

Passenger car TRA Freeway buses THSRC
100%
88.98 89.65
80%
71.05
60%
45.52
40%
29.86
20%
13.0310.38 12.84 11.33
0% 3.98 [7.04] 0 3.24 6.21 0.89 5.55
Under 20 km 20-100 km 100-200 km Above 200 km
----- End of picture text -----

(2) Market Analysis

1) Market scope and market share

According to statistical data from the MOTC, average passenger volumes in 2020 for on-road public transportation was close to 5.542 million passengers (including 2.657 million intercity bus passengers, 1.895 million MRT passengers, 0.278 million freeway bus passengers, 0.556 million TRA passengers, and 0.156 million HSR passengers), a decrease of 17% from 6.675 million passengers in 2019. After deducting passenger volumes for intercity bus and MRT systems, HSR accounted for 16% of passenger volume in 2020, the same as in 2019. In terms of private transport, an average of 14.694 million cars travel through freeway pay-as-you-go toll systems every day, an increase of 2.18% from 14.381 million in 2019.

2) Future demand and supply and market growth

We estimate a passenger volume target of 65.78 million in 2021 (14.9% growth compared to 2020) based on domestic and overseas economic environments, growth in THSRC capacity, and promotion of products and services.

(3) Competitive Capabilities, Advantages and Disadvantages of Future Development, and Response Measures:

The "One-day living circle" effect continues to thrive, and taking north- and south-bound trips via the HSR has been integrated into the lives of the general public. Gradually improving living functions and the rise of large-scale commercial entertainment and leisure complexes around HSR stations have increased the number of large exhibitions and activities held around HSR stations, driving tourism transportation demands. International trading conditions and impacts of the COVID-19 pandemic have accelerated the return of Taiwanese businessmen and establishment of domestic factories, increasing the demands for industrial sites, factory offices, and corporate headquarters. Furthermore, these returning suppliers prefer to set up near HSR stations due to convenience of transportation, bringing more business customers and long-term benefits for HSR development. However, in the short term, the impacts of the COVID-19 pandemic are likely to slow growth of travel demands. In the future, the impacts of abnormal climates and increases in asset usage times may cause a rise in equipment maintenance costs. In response to the aforementioned opportunities and barriers, THSRC will continue to expand our membership economy and integrate smart transportation technology to strengthen travel information services and enhance security and efficiency of response measures. We will also continue to build autonomous maintenance capabilities and develop localized materials to establish a foundation for sustainable operations.

169

Operational Overview

(4) Main Purpose of Products and Production Process

The main product provided by THSRC is convenient and high-quality railway passenger transport services. These constitute part of the transport service industry, are not part of the manufacturing industry, and therefore have no production processes.

(5) Main Supply Conditions for Raw Materials

THSRC is a transportation service provider and requires no raw materials for manufacturing. Our main energy source is electricity supplied by the Taiwan Power Company (TPC).

Each mainline bulk substation (BSS) has a double feeder power supply comprising of a regular line and a standby line. The BSS for the Wurih and Zuoying Depots is fed from a single circuit, but this is for depot maintenance use only and provides sufficient amounts of power.

(6) Major Clients with Procurement (Sales) Amounts Exceeding 10% for Any Given Year Over the Past Two Years, Procurement (Sales) Amounts and Ratios, and the Reasons for Changes in Said Amounts and Ratios.

We provide high speed rail services for passengers, rather than a manufacturing business. Our operating costs primarily include depreciation and amortization expenses, personnel expenses, power expenses, costs of materials and maintenance. Consequently, there are no reportable major customers and vendors.

The Corporation provides railroad transportation service to the public rather than specific sales targets. Total ridership declined in 2020 due to the COVID-19 pandemic.

(7) Production in the Last Two Years

==> picture [484 x 62] intentionally omitted <==

----- Start of picture text -----

Seat-Kilometers (Million) Passenger- Kilometers (Million) Loading Factor (%) Total Ridership (Thousand)
2019 17,630 11,994 68.03% 67,411
2020 17,407 9,912 56.94% 57,239
----- End of picture text -----

(8) Sales in the Last Two Years

==> picture [484 x 145] intentionally omitted <==

----- Start of picture text -----

2019 2020
Sales/ Year Quantity (Million Quantity (Million
Amount Rate Amount Rate
Passenger- Passenger-
(NT$ Thousands) (%) (NT$ Thousands) (%)
Kilometers) Kilometers Million)
Railroad
11,994 46,107,656 97.05 9,912 37,903,849 96.85
Transportation
Goods － 210,947 0.45 － 132,516 0.34
Rental & Others － 1,188,787 2.50 － 1,100,840 2.81
Total 11,994 47,507,390 100.00 9,912 39,137,205 100.00
----- End of picture text -----

170

3. Analysis of Macroeconomic Environments

According to domestic economic forecasts released by the Directorate-General of Budget, Accounting and Statistics, Executive Yuan on November 27, 2020, rising domestic production capacity spurred by continuing investment of dominant semiconductor manufacturing and reshoring companies will support Taiwan's export and investment growth. In terms of domestic demand, effective control of the COVID-19 epidemic and government-issued stimulus vouchers have increased domestic consumption, offsetting some of the negative effects of the pandemic. The economic growth rate in 2021 is predicted to be 3.83%. Despite these challenges, we will continue to launch new products and provide high-quality services to achieve ridership and revenue growth targets.

4. Long- and Short-Term Business Development Plans

(1) Short-Term Business Development Plans

1) In order to increase revenues, we will focus on providing a variety of products through utilization of big data, and continue to fulfill our corporate social responsibilities. Additionally, we have also set "Establishment of Autonomous Maintenance Capabilities" and "Localization of Maintenance Materials" as our corporate goals.
2) Our corporate vision adheres to our 4T program of Transportation, Technology, Taiwan and Touch, and our mid- and long-term business plans are as follows:

Transportation

A. To strengthen station and train operational facilities, and improve service quality through addition or improvement of various station equipment or systems.
B. To improve operational process and ensure maximum transportation capacity.
C. To provide a variety of products that increase ridership during off-peak hours and optimize related application systems.
D. To strengthen maintenance and ensure system stability, safety, and reliability, and establish autonomous maintenance capabilities.

Technology

A. To digitize ticket channels and develop mobile/e-payment channels and electronic tickets.
B. To utilize big data in the promotion of membership economy and expand membership benefits.
C. To utilize information technology that strengthens operational services and efficiency.

Taiwan

A. To enhance local development capabilities and increase the percentage of local equipment and materials.
B. To promote localization of railway industry and explore potential suppliers and alternative materials.
C. To integrate technical railway resources, evaluate possibilities for re-investment or technical exportation, and form strategic alliances with transportation operators.

171

Operational Overview

Touch

A. To build a corporate governance culture that fulfills corporate social responsibilities, participate in corporate governance evaluations, continue to promote railway culture, and care about underprivileged groups.
B. To promote environmental protection, energy efficiency, and carbon reduction, and to implement energy conservation programs and environmental protection measures.
C. To promote talent development, strengthen employee training, and implement a job rotation system.
3) Facilitation of timely train service adjustments to maintain adaptability of seating supply and demand in response to growth in passenger numbers. We will improve the efficiency of revenue management to enhance overall revenue.
4) We continue to develop diversified products based on different customer characteristics to meet customer needs. In addition to normal products, we launched projects based on seasonality, festivals, topics, and current events to attract more passengers and build the THSR brand image.
5) We promote the "Journey with THSR, Discover Taiwan" brand through a variety of integrated T Holiday packages and bundle tickets combining hotel stays and different kinds of transportation to attract more passengers.
6) Enhance TGo membership system and related services through data analysis and provision of customer-based recommendations to increase purchase frequency, customer loyalty, ridership, and quality of customer relationships. Furthermore, we will build TGo point cross-industry alliances and develop TGo membership reward programs to expand benefits for members and increase ticket and nonticket revenues.
7) THSRC plans to utilize passenger flows to develop an affiliate business with shops, parking lots, advertising, and other businesses. We will also continue to develop retail products and expand sales channels to enrich passenger experiences and increase non-ticket revenues.
8) We continue to enhance our ticketing services through our online-offline integration strategy, and work with different industries to increase ticket utilization and enhance ticketing convenience. Additionally, we continue to introduce innovative payment technologies and applications into our ticketing channels and are assessing the feasibility of mobile credit card transactions, travel cards, and cloudbased ticketing systems. For elderly and disabled passengers, we plan to provide a mobile interactive ticketing system which uses Natural Language Processing (NLP) to increase convenience of ticketing services.
9) We continue to collaborate with the famous Japanese illustrator Kanahei and release limited editions of our highly popular "Piske and Usagi" themed products.

(2) Long-Term Business Development Plans

1) Enhance corporate brand image

To achieve our goal of leading progress and life improvement as one of Taiwan's top ten companies, we continue to integrate our 4Ts (Transportation, Technology, Taiwan, and Touch) into development of multiple products and promotional activities to strengthen brand promotion and attract different passenger segments, thus enhancing passenger volumes and revenue growth.

172

Relevant projects in development include: strengthening of social medial marketing for all future product promotions in response to advances in information and communications equipment and environments; provision of more payment options at all ticketing channels in response to trends in mobile payment; continued updating and strengthening of THSRC app functionality and content; and enhancement of TGo member services.

2) Strengthen revenue growth

We will continue to enhance the efficiency of revenue management, increase ridership during off-peak hours, improve convenience of ticket utilization and payment, expand the scope of cross-industry cooperation, and shape local tourism through rail travel. In addition, we plan to add overseas ticketing channels to increase brand awareness and integrate innovative technology and applications such as digital HSR services to enhance convenience of ticket purchasing. We also plan to set up a membership platform and promote our membership program by implementing precision marketing strategies, big data analytics, and a membership points economy.

==> picture [429 x 363] intentionally omitted <==

----- Start of picture text -----

Yield
management
Price/Quantity
control
Segmented Cross-industry
marketing collaboration
Off-peak promotions Development of travel
markets
Precision marketing to CorpMembers & TGo members
Adaptation of supply and demand, scheduling reviews
Increase product awareness Increase brand preference and identification
Advertisement Promotion: Trigger travel demands
Ticketing channels Enhance sales force Transfer services Enhance accessibility products and services Enhance loyalty
----- End of picture text -----

173

Operational Overview

5. Important Contracts

==> picture [484 x 580] intentionally omitted <==

----- Start of picture text -----

Signing
Contract Type Contracting Party Summary Restrictive Covenants
Date
Taiwan North-South High Ministry of 1998/07/23 35-year high-speed rail Build- Operate- THSRC assets and equipment
Speed Rail Construction and Transportation and Transfer (BOT) contract from Taipei (Xizhi) obtained for the construction
Operation Contract Communication R.O.C. to Kaohsiung (Zuoying) with Ministry of and operation of the
Transportation and Communication, and high-speed rail cannot
Union Passenger Terminal be transferred, leased
contracts with Taiwan Railway Administration or reallocated without
and Mass Rapid Transit. approval from the Ministry
of Transportation and
Communication.
Taiwan North-South High Ministry of 2010/01/08 In order to protect the rights of the financing There are certain restrictions
Speed Rail Construction Transportation and institutions, this agreement is signed in on the Corporation's assets
and Operation Tripartite Communications and accordance with the provisions of the Taiwan and equipment quality and
Agreement Bank of Taiwan North-South High-Speed Rail Construction the change of Syndicated Loan
and Operation Agreement. Agreement.
Taiwan North-South High 8 Syndicated loan 2010/01/08 In order to reduce the financial risks of the There are certain restrictions
Speed Rail Construction and banks, including Bank Corporation, the leading bank was appointed on the Corporation's assets
Operation Project NT$382 of Taiwan to form a bank syndicate to provide a and equipment quality, and its
billion Syndicated Loan syndicated loan of no more than NT$382 increase in debt and principal
Agreement billion. The lending banks shall provide interest coverage.
credit to the Corporation within the scope
of their individual credit lines in accordance
with the provisions of the Syndicated Loan
Agreement.
Construction of HSR Changhua Joint venture between 2013/01/08 Construction of HSR Changhua Station Confidentiality
Station No. S260 TECO Corporation and
Century Development
Corporation
Core System for PLS (Provided Toshiba Digital Media 2014/02/20 Integration and installation of PLS core Confidentiality
Later Stations) No. E203 Network Taiwan system
Corporation
Credit card payment service for Taishin International 2015/07/28 Credit card payment service for passenger Confidentiality
passenger tickets (2017~2022) Commercial Bank Co., tickets
No. O1-15-012 Ltd.
Upgrade of TCS and Related Toshiba Electronic 2017/05/18 Upgrading of core IT equipment for TCS and Confidentiality
Subsystems, Package 1-OCC: Components Taiwan Related Subsystems First stage-OCC: SCADA,
SCADA, MMIS(O), CFS, CEDS, TIS Corporation MMIS(O), CFS, CEDS, TIS and CN
and CN No. E211
Upgrade of TCS and Related Mitsubishi Heavy 2017/05/18 Upgrading of core IT equipment for TCS and Confidentiality
Subsystems, Package 1-OCC: Industries, Ltd. Related Subsystems First stage-OCC: Signaling
Signaling and PMC (Supply and PMC (Supply Contract)
Contract) No. E213
Upgrade of TCS and Related Mitsubishi Heavy 2017/05/18 Upgrading of core IT equipment for TCS and Confidentiality
Subsystems, Package 1-OCC: Industries, Ltd. Related Subsystems First stage-OCC: Signaling
Signaling and PMC (Installation and PMC (Installation Contract)
Contract) No. E214
----- End of picture text -----

174

Contract Type	Contracting Party	Signing Date	Summary	Restrictive Covenants
Upgrade of TCS and Related Subsystems, Package 1-OCC: TCS and UC No. E215 Taiwan Hitachi Asia Pacifc Co., Ltd. 2017/05/18 Upgrading of core IT equipment for TCS and Related Subsystems First stage-OCC: TCS and UC Confdentiality
Modifcation of THSRC AFCS software system and maintenance contract. No. M7-17-007 IBM Co. 2017/06/12 AFCS software system maintenance Confdentiality
Supply and Manufacturing of Maintenance Vehicles No. E5- 18-003 China Steel Co. 2018/08/10 Manufacturing and supply of Maintenance Vehicles Confdentiality
Bogie Running Tester Manufacture and Supply Contract No. L1-18-039 Industrial Technology Research Institute (ITRI) 2019/03/29 Manufacture and supply of bogie running testers which help THSRC technicians in judging the condition of the bogie during operations and in early detection of potential hazard factors. Confdentiality
Upgrade of TCS and Related Subsystems Package 3 FTC- OCC: ARS/ TD Contract No. E231 Taiwan Hitachi Asia Pacifc Co., Ltd. 2019/04/23 Upgrades to Taiwan High Speed Rail OCC traffc control system main computer, including software porting and modifcation and hardware upgrades. Confdentiality
Manufacturing and Supply of Three Diesel Shunters Contract No. E2-18-022 Taiwan Rolling Stock, Co., Ltd. (TRS) 2019/07/03 Manufacturing and supply of three diesel shunters. Confdentiality
700T 7GI Spare Parts Contract No. PCDD-19-0749 Toshiba Electronic Components Taiwan Corporation 2019/07/26 7GI turnover equipment and repairable parts for 700T trainsets. Confdentiality
Credit card payment service for passenger tickets (2022~2027) No. O1-19-017 Taishin International Commercial Bank Co., Ltd. 2020/03/26 Credit card payment service for passenger tickets Confdentiality
Insurance broker contract Marsh Ltd., Taiwan Branch 2020/09/23 Insurance broker service for MOIP Confdentiality
Insurance contract Fubon Insurance Company Ltd.; ShinKong Insurance Company Ltd.; Cathay Century Insurance Company Ltd.; Chung Kuo Insurance Company Ltd.; Taiwan Fire & Marine Insurance Company Ltd. 2020/12/10 Master Operational Insurance Program (MOIP) Confdentiality

175

Operational Overview

6. Status of Technological Research and Development

Research and development for 2020 were as follows:

Category	R&D project	R&D project content	Benefts of R&D	R&D results
Communication System Research	Localization of Tel IP Server for Direct Line Telephone system Localization to replace foreign products. Maintains system function while reducing maintenance costs. Development has been completed and product is gradually being put into use.
	R&D on Intelligent Passenger Information System (PIS) To strengthen the real-time passenger information and corporate operation effciency of our Passenger Information System (PIS) and to remove R&D dependence on overseas companies, we developed new PIS products with creative technologies. The 1st phase aimed to upgrade the control server and software. The 2nd phase replaced existing display units in lobbies and platforms. The 3rd phase aims to add new display units on platforms beside carriage doors for stations north of Taichung (included). The 4th phase aims to add new display units on platforms beside carriage doors for stations south of Taichung. This project, when completed, will enhance passenger riding experience and corporate operation effciency with new technologies & products. The 1st and 2nd phases were started on 2018/12/27. R&D was completed in 2019, and construction began in 2020. Construction has since been completed at Taoyuan Station, Banqiao Station, and Hsinchu Station. The 3rd and 4th phases were started on 2019/12/11. Our goal is to complete PIS/PIDS deployment for all original 8 stations by the end of 2021, and complete deployment for all 12 stations by the end of 2024.
Electronic Service Center (ESC)	Diagnostic system of TDS-Slave Clock Ensure the quality of repair service for TDS-Slave Clock Maintains system function while reducing maintenance costs. A prototype has been developed and testing.
	Diagnostic system of Train Vestibule Sliding Door Unit Ensure the quality of repair service for Train Vestibule Sliding Door Unit Maintains system function while reducing maintenance costs. A prototype has been developed and testing.
	Diagnostic system of BBS PCU Ensure the quality of repair service for BBS PCU Maintains system function while reducing maintenance costs. A prototype has been developed and testing.
Signaling System Research	Research of new type detection slides for point machines Cooperated with an academic institute to develop a new type detection slides for point machines. Maintains system function while reducing maintenance costs. Development has been completed and domestic companies have commenced mass production.
	R&D on Railway Turnout Controller We conducted R&D on alternative PLC turnout controllers using new technologies, using high reliability PLC modules to replace traditional relay modules and fulfll sequential control functions. This will reduce the number of relays and also enhance the reliability of existing turnout controllers, decreasing reduce impacts to customer service. A prototype developed under the "Programmable Logic Control (PLC) Turnout Controller Development Project" was completed in 2018. Following on- site verifcation over 1 year and 8 months, the equipment has been confrmed to be reliable. We extended mass production of this prototype controller to the whole running line by awarding the contract E4- 20-003 "Turnout Controller Replacement Project" at the end of 2020. This fve-year contract for the replacement of 142 sets of present turnout controllers across the entire line is expected to be completed in 2025.
	R&D on Railway Turnout Monitoring System (TMS) In order to improve the early warning capability for detecting turnout failures, we implemented R&D for newer technology products to build a turnout monitoring system to replace the original monitoring system built by foreign companies. We used a new type of industrial controller to replace old PCB modules so as to increase environmental resistance and stability. Monitor value changes for turnout sensors for analysis and predictions to perform maintenance and adjustments in advance of potential abnormalities, thus preventing turnouts from breaking down during service hours. In 2016, a prototype was developed and tested and installed on the main line. After 4 years of successful reliability testing, we plan to replace the existing system by modifying 82 sets of TMS under the "Turnout Monitoring System Replacement Project" contract starting from 2021. It is expected that replacements will be completed in 2025.

176

Category	R&D project	R&D project content	Benefts of R&D	R&D results
Rolling Stock System	Trainset EMI improvement project. Used insulating materials to coat interference source. Reduction of train ATC BPU (protection control unit) control system failure events caused by EMI problems. EMI improvements were implemented on 30 E101 trains in October 2019, and we are planning subsequent implementation on E301 trains. We will continue working with NCSIST on EMI attenuation detection and monitoring for E101 trains to schedule future replacement and maintenance.
	CCTV surveillance system Installation and confguration of CCTV surveillance systems at both ends of all train carriages. Improve passenger service satisfaction. Progress in 2020 has reached 98.8%.
	Train Speedometer Tester Develop a measurement system to capture speedometer signals and perform data analysis. Improve maintenance effciency, reduce costs, and expand local supplier sources. The project was completed on 2020/11/17 by ITRI.
	Lightning arrester test system Develop a measurement system to output high voltage and constant current, thus confrming that the arrester can withstand high voltage surges. Improve maintenance effciency, reduce costs, and expand local supplier sources. The project was completed on 2020/7/7 by ITRI.
Track & Power system	Collaboration with NCSIST on development of automatic measurement system for rolling stock vibrations Rolling stock automatic vibration measurement and report system Measurement data can automatically be delivered via internet to offces for real-time monitoring of track alignment conditions Progress in 2020: (1) Integration testing, system optimization, and submission of as-built documents. (2) The project was completed at the end of March, with a warranty period of 1 year.
	Localization of OCS maintenance vehicles 8 MV type vehicles and 2 sets of CS vehicles (4 vehicles) Consolidate existing Japanese/German vehicles from 6 to 2 vehicles, avoiding multiple vehicle investment and improving maintenance effciency and personnel safety. Progress in 2020: Assembly of 2 MV and 1 set (2) of CS vehicles. We completed assembly of booms, generators, cabs (cabins), driving consoles, and couplings, and we expect to be delivered in June 2021.
	Intelligent Rail Scooter (phase 2) Commissioned ITRI to replace 16 old four-seater, engine-powered rail scooters. A total of 38 rail scooters were required for the main line according to our "Improvement actions for inspections and patrols after disasters." A total of 22 scooters were dispatched in Phase 1, and we plan to replace the remaining 16 units (old four-seater, engine-powered rail scooters) in Phase 2. Contract period from 2020/2/1 to 2021/1/31, to replace 16 old four-seat engine-powered rail scooters.
	Localization of main transformer cooling fan motors The technologies to develop materials and perform replacement work were entrusted to an external frm. Cooling fan motors of the main transformers at substations must be replaced every 6 years. As the original manufacturers were requesting high costs, we began promoting localization to reduce costs. A total of 82 cooling fan motors were replaced for BSS1~7 during December 2019 to February 2020.
	Rail Lubricator Instrument Development The project was developed by an academic institute. To improve weather resistance of the H-type tread lubricators and lower I-type gauge-side lubricator shut-down risks due to parts shortages, and to introduce localized development. (1) The contract period was from 2018/11/15 to 2020/11/14. (2) The project was completed as scheduled, and progress in 2020 included: equipment installation and testing, spare parts delivery, as- built documents submission, and MS4 acceptance.
	OCS Composite Insulator Aging and Mainline Polluted Area Investigations Research and investigations were carried out by an academic institute. This project intends to study the life cycles of composite insulators along the THSR line, develop a system to record inspection data, establish a model to predict aging level, and rationalize maintenance schedules. (1) The contract period is from 2020/9/15 to 2022/9/14. (2) Progress in 2020: Completed Phase 1 of initial analysis and planning report for composite insulator aging (MS1).

177

Operational Overview

==> picture [484 x 611] intentionally omitted <==

----- Start of picture text -----

Category R&D project R&D project content Benefits of R&D R&D results
Developing Crew The original CUPS has been used (1) Improve automation and reduce (1) Generate Train Crew Utilization Paths.
Utilization Plan since 2007. Its functionalities are occurrence of manual errors. (2) Generate Train Crew Utilization Path
System (CUPS) no longer sufficient for current (2) Amend the defects of the existing Order.
operation requirements and system manual rostering system and reduce (3) Generate and publish Train Crew
maintenance and modification rostering processing times. Rosters.
costs are expensive. Furthermore, (4) Generate Train Crew Duty Tags.
the system is highly reliant on
manual processing. In order to
effectively improve the efficiency of
rostering processes and to reduce
the errors of manual operations,
THSRC began developing a new
CUPS in 2018 to replace the old
rostering system. Our new CUPS
service, which utilizes optimization
software, replaced our existing
Excel rostering system in December
2020.
Implementation of Rapid advances in Internet and (1) Common and highly repetitive (1) Utilized Natural Language Processing
Artificial Intelligent mobile communications have questions are answered by robots who technology to parse passenger
Customer Service increased self-service functions and provide passengers with 24-hour, year- questions, identify passenger question
(AICS) social media usage, leading to more round consultation services, as well as topics, and use a knowledge base of
diversification in customer service personalized service application and more than 3,000 common questions to
needs. THSRC hopes to provide call inquiry services. select appropriate answers for passenger
center personnel and passengers (2) Shorten online waiting time for questions.
with direct and rapid consultation passengers. (2) Identified the intent of passenger
channels to improve overall service (3) Provide direct and quick consultation questions, compile applications
efficiency through use of artificial channels for call center personnel and for individual passenger needs in a
intelligence. AICS implementation passengers to improve overall service question-and-answer format, and
started in September 2019, and the efficiency. connect existing THSR services with
service was officially launched on personalized passenger needs.
System Research December 26, 2020. (3) Introduced STT (Speech to Text) and
& Development TTS (Text to Speech) speech recognition
technologies, combined frequently
asked questions and personalized
service application functionalities,
making it possible to access services
through oral and aural functions.
(4) Combined intelligent technologies with
live chat online services. Customer
service staff help to handle complex
passenger needs, while the system
constantly provides suggestions to
improve service efficiency.
Replacement and Architecture design plans were (1) Time for checking and repairing (1) Equipment abnormalities can be
upgrading of L2 completed in March 2020, and the network obstacles was shortened from directly monitored to avoid prolonged
Switches for the fiber interface card replacement of 3 to 0.5 hours. inspection and repair times.
Electronic Data the station's payment flow network (2) Provided stable ticketing service (2) Reduce equipment maintenance times.
Capture (EDC) system equipment was completed in quality for credit card transactions, (3) Enhance stability of station ticketing
of station payment December 2020. and strengthening passenger trust in services and corporate image.
flow networks THSRC.
Ticket Window THSRC developed new-generation (1) The system design integrated original (1) Developed and integrated system
Equipment Ticket Window Equipment stable modules with more flexibility to in Taiwan, with 100% grasp of core
application applications which are fully effectively reduce enhancement and technologies.
architecture compatible with our current AFCS maintenance costs. (2) New human-machine interface provides
enhancements (Automatic Fare Collection System). (2) The aim of this project is committed more convenient user operation and
to protecting the rights of investors reduces human error.
and shareholders while improving (3) Multi-processing mechanisms provide
passenger service satisfaction. flexibility for future hardware module
upgrading.
(4) Provide new functions for better
customer service.
(5) Enhance the depth of information
security defenses.
----- End of picture text -----

178

==> picture [596 x 619] intentionally omitted <==

7 Value Propositions

179

Value Propositions

Environmental

1. Establishing a Sustainable Environment

In order to implement comprehensive environmental protection throughout construction to operation processes, THSRC continues to promote multiple aspects of environmental care (including the establishment of an environmental management system, and the formulation of environmental policies, the establishment of an environmental management organization, the evaluation of related goals and implementation strategies). We encourage environmental actions such as environmental management, energy saving, waste reduction, green construction, ecological conservation, environmental education, and green procurement, and we strive to adapt to the impacts of climate change. Furthermore, in 2019, we established our Environmental Management Committee, which is responsible for supervising the implementation and periodic review of environmental objectives, and communicating environmental management system related affairs. Our environmental management system obtained 14001:2015 verification in 2020, making us the first rail company in Taiwan to obtain this vertification.

(1) Green Buildings

THSRC strives to integrate the four pillars of "ecology, energy saving, waste reduction, and health" with the nine indicators of green buildings as we build new sustainable green buildings that can become potential landmarks.

HSR Miaoli, Changhua, and Yunlin stations were designed in accordance with the "Green Chapter of the Building Construction Regulations" and the "Green Building Evaluation Manual," and in 2013 received Green Building Candidate Certificates. Green designs were implemented during construction, and we applied for the Green Building Certificate in 2016 after completion of construction. The Green Building Certificate is valid for 5 years, and we plan to implement renewal processes in March 2021.

==> picture [106 x 152] intentionally omitted <==

Miaoli station applied for 7 indicators, including biodiversity, greenery, soil water content, energy saving, CO2 emission reduction, water resources, and sewage and garbage improvement, and was awarded a Diamond level certificate from the Ministry of the Interior (MOI). Changhua and Yunlin stations applied for 6 indicators, including greenery, soil water content, energy saving, indoor environment, water resources, and sewage and garbage improvement. Both stations were awarded a Gold level certificate from the MOI.

==> picture [99 x 90] intentionally omitted <==

(2) Energy Saving and Carbon Reduction

1) Energy Management

In order to improve energy consumption efficiency and promote energy conservation measures at HSR stations and maintenance depots, we have established an "Energy Conservation Project Team" which convenes regular "Energy Conservation Meetings" every three months to track implementation of energy management measures, review electricity usage in each quarter, and formulate energy management indicators and targets.

==> picture [484 x 113] intentionally omitted <==

----- Start of picture text -----

Annual average electricity conservation rate
Indicator
per passenger served
Energy Target >0.86%
Management Performance item 2018 2019 2020
Total Depots & Stations of electricity consumption (10 MWh) 9,970.198 9,890.733 9,616.699
Average electricity consumption per passenger served (kWh) 1.559 1.467 1.680
Electricity savings (MJ) 20,011.766 2,860.740 9,865.251
----- End of picture text -----

180

2) High-Speed Rail Carbon Footprint

In 2020, we petitioned the Environmental Protection Agency to extend the 5-year validity period of our "Carbon Footprint Label Certificate of High Speed Rail Transportation Services" (from December 17, 2020 to December 16, 2025), and was awarded a renewed carbon footprint label certificate (Certificate label No. 2014910001). Our carbon footprint was verified to be 32g CO2e per passenger per kilometer (per passenger-kilometer), and we received another "Carbon Footprint Reduction Label" (Certificate label No. R2014910001) due to our achievement of reducing carbon emissions by more than 3% (4.92%) within 3 years. A comparison with other transportation vehicles indicates that this emission level is one-third that of cars, one-half of buses, and one-eighth of national airlines. In 2020, THSRC passenger traffic volume was 9,912 million passenger-kilometers, 822,701 tons of carbon emissions lower than that of small vehicles with similar passenger-transport volume. This reduction level is equivalent to the carbon absorption level of 2,115 Daan Forest Parks.

==> picture [423 x 127] intentionally omitted <==

3) CO2 or other Greenhouse Gas Emissions

We continue to promote our four major energy-saving programs (self-managed energy saving, reduction of power consumption, transfer peak power demands, and reasonable power usage), set a power saving target to reduce at least 0.86% of "averaged electricity consumption per passenger" each year, and also established an index of the "carbon emissions per Passenger-Kilometer" for the purpose of quantifying the tendency and status of carbon emissions generated by overall energy consumption. The target of carbon reduction is set to exceed 1.5% annually. In 2020, the Corporation"s greenhouse gas emissions were 312,636.50 tons of CO2e, with 99% coming from purchased electricity.

We voluntarily conducted greenhouse gas (GHG) inventory for our 12 stations in 2017~2019 and obtained an ISO14064 Verification Opinion Statement issued by a third party. The relevant verification information is as follows:

==> picture [483 x 111] intentionally omitted <==

----- Start of picture text -----

Scope 1: Direct greenhouse gas emissions Scope 2: Indirect greenhouse gas emissions from
(the source of emissions from the usage of energy purchased and consumed
Year Verification Unit
diesel, gasoline and refrigerant) (the source of emissions from the purchased
(CO2e tons) electricity) (CO2e tons )
2017 1,435.9965 50,533.9868 DNV GL Business Assurance Co., Ltd.
2018 1,754.6352 50,119.8128 DNV GL Business Assurance Co., Ltd.
2019 1,132.1510 47,738.7367 SGS Taiwan Ltd..
----- End of picture text -----

Carbon-reducing efficiency of electronic documentation system:

Signing rates for documents in the electronic documentation exchange system was more than 99%.
The number of electronic documents in 2020 was 46,473, saving 557,676 pieces of paper, conserving 67 trees, and reducing 804 kgs of carbon emissions.

181

Value Propositions

Indicator	Annual average carbon reduction rate per passenger-kilometer	Annual average carbon reduction rate per passenger-kilometer	Annual average carbon reduction rate per passenger-kilometer
Target	>1.5%
Performance item	2018	2019	2020
Total emissions (metric tons CO2e)	328,689.25	319,844.04	312,636.50
Average carbon dioxide emissions per passenger- kilometer (g CO2/passenger-kilometer)	28.436	26.666	31.541

(3) Adaptation to Climate Change Impact

The main risks from climate change include severe weather phenomenon such as extreme high temperature; rising sea level; increased rainfall, rainfall intensity, typhoons, cyclones, and lightning, which have increased in frequency and intensity, enhancing vulnerability levels of the railway industry and impacting our operations. We actively face the impact of climate change. With regard to the "Adaptation Strategy to Climate Change in Taiwan" proposed by the National Development Council, we continue to assist the Institute of Transportation, Ministry of Transportation and Communications (MOTC) in conducting research related to climate change adaptation, participate in the development of the railway and highway climate change adaptation information platform and the expansion of its functions, and strengthen the analytical functions regarding vulnerability and risk of the information platform, with a view to supporting decisionmaking analysis of climate change by railway and highway competent authorities. Furthermore, we have also signed the "Memorandum of Cooperation on Cross-Border Disaster Prevention" with the Central Weather Bureau, MOTC to enhance meteorological interpretation capabilities through mutual cooperation, while serving as an important reference for THSRC to make traffic dispersion decisions and assess track safety during disasters. All the facilities built by THSRC for "flood prevention, earthquake prevention and wind damage prevention" comply with domestic and international regulations.

At present (2018~2022), our adaptive actions toward climate change impact include:

(1) Establishment of warning system for slope safety.
(2) Strengthening protection of tunnel portal slopes.
(3) Risk assessment and protection design for scoured cross-river bridges.

(4) Water Resources Management

We implemented water conservation, water reduction and water recycling as our water resources management policy, and set an annual water-saving goal to reduce at least 3.42% of "water consumption per passenger." We established sewage treatment plants at each maintenance depot and station, and test and report regularly on the quality of discharged water every month to ensure that it meets standards for discharged water and can be recycled for sprinkling. We also track the implementation status of water-saving measures through quarterly review meetings to check water usage volumes, analyze reasons for increments or decrements in water consumption, and promote water saving measures to reduce our water usage. Additionally, our water supply is completely sourced from tap water and uses no groundwater. The Corporation's total tap water consumption was 688,002 m3 (including total Depots & Stations of water consumption) in 2020. Recovered rainwater and waste water is used for plant irrigation to reduce tap water usage. At depots, rainwater and discharged waste water is first discharged to a retention pond prior to usage. The station buildings at Miaoli, Changhua, and Yunlin stations are specially equipped with underground water storage tanks to store rainwater and waste water for reuse.

Indicator	Annual average water conservation rate per passenger served	Annual average water conservation rate per passenger served	Annual average water conservation rate per passenger served
Target	>3.42%
Performance item	2018	2019	2020
Total Depots & Stations of water consumption (cubic meter)	703,600	718,890	682,713
Average water consumption per passenger served (cubic meter)	0.0110	0.0107	0.0119

182

(5) Air Pollution Prevention and Control

We set up facilities for air pollution control at our train painting station located in the Yanchao Main Workshop. These facilities include pulse-jet bag filter, activated carbon filter, and catalyst incinerator, and help to treat the dust and volatile organic compounds (VOCs) generated from painting cars. We obtained a permit for stationary pollution source installation on October 19, 2017 and an operation permit on January 31, 2019.

(6) Waste Management

Our waste management policy promotes the concepts of recovery and recycling, reduces waste at the source, and strengthens waste separation and recycling. Most waste generated from our operations, including passenger waste, is industrial waste which we entrust to qualified disposal companies for transport to incinerators. Furthermore, we promote waste recycling (including waste paper, waste plastic, scrap iron, waste wood, scrap copper, aluminum scrap, waste lighting sources, waste lead storage batteries, and waste glass containers) at stations and through workshops, which has effectively reduced our waste volume. Our total waste disposal volume was 9,321.92 tons in 2020, including 4,034.78 tons of recycled waste.

(7) Noise Prevention and Control

Our noise prevention and control targets comply with government regulations and commitments set out in THSR EIA Reports, and we have responded effectively to noise complaints from local residents. A team of dedicated staff members are responsible for communication with the environmental authorities, and standard procedures have been developed for handling noise petitions and noise complaints. Additionally, to reduce the impact of noise made by our trains, we use noise barriers and soundproof windows or doors for better noise control.

(8) Information on Environmental Expenses

Loss and penalty caused by environmental pollution during the most recent year and up to the printing date of this annual report. Necessary measures and actions to be taken in the future:

1) No losses or penalties occurred as a result of environment pollution during 2020 or up to the printing date of this report.

2) Major capital of environmental protection estimated for the next three years:

Unit: NT$ thousands

==> picture [483 x 96] intentionally omitted <==

----- Start of picture text -----

Year
2020 2021 2022 2023
Item
Monitoring of Environmental Quality 2,730 2,730 2,730 2,730
Research for Environmental Impact 5,458 3,486 3,486 2,340
Environmental Pollution Prevention 62,509 90,159 83,104 78,104
Total 70,697 96,375 89,320 83,174
----- End of picture text -----

183

Value Propositions

3) Investment in main facilities for prevention and control of environmental pollution, as well as the usage and benefits, previous work and expenditures, and plans to be implemented within three years:

Unit: NT$ thousands

==> picture [484 x 241] intentionally omitted <==

----- Start of picture text -----

Item Year Amounts Use and Benefits
Recovery of artificial Jacana habitat 2018~2020 3,429 Compliance with the commitments set in the THSRC EIA Report
and highlighting our concern for ecological conservation.
Noise prevention project (including noise improvement 2018~2020 2,468 Implementation of noise prevention and control according to EIA
of surrounding residential buildings) reports and regulations.
Measurement of noise and vibration in the sensitive 2018~2020 6,287 Compliance with commitments set in THSRC EIA Report and
areas along HSR analysis of noise prevention and control measures to be taken
pre- and post-development.
Environmental monitoring in Miaoli, Changhua, Yunlin , 2018~2020 1,819 Compliance with commitments set in THSRC EIA Report and
and Nangang Stations during the operation stages analysis of measures to be taken pre- and post-development.
Treatment of the waste and waste water generated from 2018~2020 176,714 Treatment of the waste and waste water from stations and
HSR stations, workshops and relevant operations and workshops in accordance with relevant regulations.
maintenance
Verification of Carbon Footprint for High Speed Rail 2018~2020 5,331 Obtained EPA Carbon Footprint Label Certificate of High Speed
Transportation Services, and GHG survey on overall 12 Rail Transportation Services, and ISO14064 Verification Opinion
stations Statement issued by a third party.
Establishment of ISO14001 Environmental Management 2018~2020 3,147 Making the ISO14001 Environmental Management System
System with continuous improvement and consultation run more effectively and . ensuring normal operation and
maintenance.
Total 199,195
----- End of picture text -----

Social

2. Quality Services

(1) Frequent, Convenient, Punctual, and Reliable Train Services

In order to meet the varying travel destinations and needs of passengers, and to ensure provision of fast intercity transportation services, THSRC offers the following train stopping patterns:

Train stopping patterns

==> picture [484 x 186] intentionally omitted <==

----- Start of picture text -----

Total run time
Nangang Taipei Banqiao Taoyuan Hsinchu Miaoli Taichung Changhua Yunlin Chiayi Tainan Zuoying
(minutes)
105
110
130
130
76
72
145
----- End of picture text -----

184

THSRC provides up to 166 services a day depending on peak or off-peak days of the week. The number of train runs are increased during consecutive holidays in order to provide frequent and convenient services that fulfill passenger needs.

(2) Multiple Convenient Ticket Booking and Purchasing Channels

Currently, passengers can book, purchase, and pick up their tickets through ticket windows, ticket vending machines, internet reservation systems, convenience store ticketing systems, the T Express App, interactive voice reservations, and travel agencies. Passengers can also board trains using contactless smartcards such as EasyCard co-branded credit cards and iPass co-branded credit cards.

THSRC upholds principles of innovative service and continues to establish multiple ticket purchasing channels so as to provide our passengers with convenient ticketing services.

(3) Convenient Station Services

1) Modernized and artfully designed stations and enthusiastic station service personnel provide a wide range of services and amenities to ensure ease of travel, including ticket counters and automated ticket vending machines, passenger information systems, information desks, guidance for elderly and disabled passengers travelling alone, disabled facilities, nursery rooms, drinking fountains, convenience stores, and restaurants. Wi-Fi is also available in all stations so passengers can quickly retrieve any information they need.
2) HSR station shuttle services include: buses, taxis, rental cars, drop-off and pick-up zones, and parking lots. Nine of our stations (Nangang, Taipei, Banqiao, Taoyuan, Hsinchu, Miaoli, Taichung, Tainan, and Zuoying) are connected to other rail (TRA or subway) services.
3) In order to provide our passengers with convenient access to and from our stations, the Corporation works with express bus companies to provide free shuttle bus services under joint marketing campaigns. In 2020, we offered 329,838 free shuttle bus trips to 3,500,487 passengers. The following is a summary of bus routes operated in 2020:

Distribution of HSR Shuttle Bus Routes

==> picture [483 x 46] intentionally omitted <==

----- Start of picture text -----

HSR station Taoyuan Hsinchu Miaoli Taichung Changhua Yunlin Chiayi Tainan
Number of
bus routes 2 1 1 1 1 1 1 2
----- End of picture text -----

(4) Comfortable Train Travel

1) Disabled access services: The seventh carriage of HSR trains are designated as disabled-access carriages, and four seats are reserved for carers, allowing them to stay close to and take care of disabled passengers. A disabled accessible toilet is also provided at the vestibule of the seventh carriage. Call-for-aid buttons are provided at each disabled seat and in the disabled toilet. Disabled passengers requiring assistance can notify train personnel by activating the call-for-aid button at any time. Charging sockets have also been installed on trains for electric wheelchair users.
2) Friendly and helpful train personnel:

Train attendants

Train attendants sell goods from our train trolleys, assist disabled passengers and passengers who have applied for assistance to get on and off trains, and help to manage on-train lactation rooms. They are attentive to the needs of wheelchair-riding, disabled, elderly, and pregnant passengers, and ensure that passenger luggage is placed in appropriate locations. Additionally, train attendants also help to maintain on-train comfort and noise levels, thus enhancing safety and service quality for passengers. Furthermore, attendants also respond to passenger queries, accept passenger feedback, and assist the trainmaster with emergency responses to ensure the safety of on train passengers.

185

Value Propositions

The train master

The train master is not only responsible for driving the train when necessary and inspection of operational safety equipment, but also conducts ticket inspections and fare charges. For passengers who have boarded the wrong train or who have changed their plans at short notice, the train master provides transportation transfer details and guidance, helping passengers to board the right trains. Additionally, the train master also provides lost and found services, assists passengers who have applied for guidance assistance at short notice, and responds to passenger queries. The train master not only maintains trains safety, but is also committed to providing highquality passenger transportation services.

3) Mother- and infant-friendly areas: Fifth-carriage vestibules of all trains are equipped with lactation rooms that provide a private and safe space for nursing, pumping, and breastfeeding mothers. If passengers need to use lactation rooms, train personnel will guide them through the usage of available facilities which offer a mother- and infant-friendly travel environment and passenger services.
4) Free Wi-Fi services: In consideration of the increasing popularity of mobile communication devices and passenger needs, passengers can use their mobile phones, tablets, laptops, and other communications devices to connect to the Internet via the "iTaiwan" network (requires login account) and use the free internet services provided by this network, as well as free charging services. In addition, free onboard charging services are provided in the telephone booths of the fourth and twelfth carriages of every train for the convenience of passengers who wish to charge their mobile devices.

(5) Real-Time Customer Support

The THSRC customer service center provides Chinese, Taiwanese, and English customer phone support, wheelchair-accessible seating reservations, passenger guidance, and lost & found services from 06:00 to 24:00.

THSRC continuously enhances its tangible and intangible facilities to facilitate smooth communications and better alignment with passenger needs. We launched our digital customer support services in December 2020 to assist passengers with frequently asked questions, provide personalized service applications and inquiry services, and extend our service hours (24 hours a day, all year round).

==> picture [365 x 290] intentionally omitted <==

----- Start of picture text -----

Knowledge
Backup base
Customer Customer
service
Frequently asked Digital customer Inquiries
questions
support (AICS)
Personalized
services
Applications
----- End of picture text -----

186

(6) Maintenance of Passenger Relations

1) Innovative, Digital, and Real-Time Communication

We have installed passenger information displays in lobbies and waiting areas at HSR stations to announce timely operational information, notices, and precautions, as well as promotional videos for HSR services. We have also set up our own Facebook Page to provide the latest product, service, and brand information. In 2020, THSRC's Facebook Page cumulatively garnered 419,000 fans and garnered a total of 33,000 new fans within the year. Posts on the THSRC Facebook Page reached 37.52 million people and generated 1.18 million interactions.

With regard to the enhancement of digital communications, THSRC not only offers professional personalized ticketing services through the T Express App, but has also launched the Taiwan High Speed Rail App, which mainly focuses on multi-functional travel services and provides customers with more comprehensive digital services. As of December 2020, the Taiwan High Speed Rail app has been downloaded more than 950,000 times, accumulating more than 730,000 TGo members.

2) Current Feedback Collection Channels and Customer Service Processes

Passengers who wish to convey their expectations, feedback, and suggestions to THSRC can do so by utilizing a diverse range of customer feedback platforms, including customer suggestion forms, the email address listed on our corporate website, our digital customer support services, station and train staff, our customer service hotline, and other channels.

Passenger feedback is investigated, handled, and responded to by relevant THSRC departments within specified time limits, and improvement measures are tracked to achieve effective two-way communication and ensure protection of customer and Corporation interests.

Additionally, THSRC regularly commissions external institutes to conduct HSR customer service satisfaction surveys to identify items that should be refined and improved. We establish a virtuous cycle which continually improves and enhances our service quality by adjusting our service strategies and setting annual quality targets. In 2020, our customer service center handled a total of 22,000 customer service cases and 650,000 customer phone inquiries, mainly relating to ticketing services, TGo membership, and promotions.

3. Friendly Work Environment

(1) Talent Development

1) Labor conditions
A. Talent retention and appropriate placement:

THSRC provides career advancement opportunities for talented employees based on organizational needs and individual development to enhance professionalism and achieve our target of incentivizing and retaining talent. Qualified employees that meet company requirements and wish to hold managerial positions can further their career development and fully realize their potential through positional promotions.

Additionally, THSRC prioritizes internal application channels when filling in-house positions. We train employees in multiple skills through different job opportunities in line with our policies to realize talent potential, provide appropriate placements, and cultivate talent.

B. Competitive remuneration:

THSRC annually reviews the competitiveness of our salary structure and assesses necessity for salary adjustments. Additionally, we achieve our goals of prioritizing employees, incentivizing talent, and profit sharing by providing bonuses based on corporate and individual performance.

187

Value Propositions

Salary structure and salary adjustment mechanisms

	Salary structure	Salary structure		Salary adjustment mechanisms	Salary adjustment mechanisms	Salary adjustment mechanisms	Salary adjustment mechanisms
Basic salary Allowances/subsidies	Annual	bonus	Performance bonus	Market salary levels	Performance		Promotion
Set according	Set according to		According to the	Annual salary	Salary adjustments		Salary adjustments
to employee	corporate fnancial		Company Charter,	adjustments are	are considered on		are conducted
experience, job	and operational		if the Company is	considered based on	a basis of corporate		according
duties, personal	status, and		proftable in a given	overall assessment	operational		to corporate
capabilities, and	individual	work	year, more than 1%	of economic	performance and		promotion
work performance.	performance.		of profts should	status, salary	individual	work	principles when
			be set as employee	competitiveness,	performance.		employees are
			compensation and	operational			promoted.
			allocated according	performance, and
			to individual work	other factors
			performance.

==> picture [484 x 42] intentionally omitted <==

----- Start of picture text -----

Year 2015 2016 2017 2019 2020
Adjustment 3.0% 3.2% 3.1% 3.5% 3.42%
----- End of picture text -----

Note: Salary adjustments for 2019 were implemented on November 2018. Average overall salary adjustments for the year amounted to 3.5% (not including salary adjustments for promoted personnel).

2) Learning and development

We implement the Managerial Assessment of Proficiency for each manager to find out the gap of managerial proficiency while establishing the talent development plan and thus make the available resources more focusing on the high potential persons.

We also establish the career path for specific positions to develop the professional talents through the exchanging or rotation of different jobs. Additionally, we establish the knowledge management mechanism as well using the list of company’s knowledge management as a blueprint, and classify knowledge documents into then following types: integrated materials, LFE learning from experience, maintenance database, operation database and general knowledge, to keep and maintain the necessary knowledge for achieving the targets of operation and maintenance, and facilitate the experience sharing on operation, maintenance, construction and service of the company.

(2) Concern for Human Rights

Human rights policies and implementation of measures to alleviate human rights risks:

==> picture [484 x 161] intentionally omitted <==

----- Start of picture text -----

Human Rights Implementation of Mitigation Measures for International Human Rights
Stakeholders Human Rights Policy
Issues Human Rights Risks Conventions
Freedom of Employees We ensure employees 1. We support freedom of association for our 1. Article 22 of the International
Association have freedom to form employees, who have currently established Covenant on Civil and Political
associations for various more than one hundred different clubs. Rights
purposes, and to 2. We protect our employees' right to organize. 2. Article 8 of the International
participate or refrain Currently, two labor unions (a corporate Covenant on Economic, Social
from participating in union and an industry union) have been and Cultural Rights
association composition formed within the Corporation. The 3. International Labour
and related affairs. Corporation periodically convenes meetings Convention No. 87: Freedom
with these unions to build harmonious and of Association and Protection
strong labor-management relationships. of the Right to Organize
Convention
----- End of picture text -----

188

==> picture [484 x 575] intentionally omitted <==

----- Start of picture text -----

Human Rights Implementation of Mitigation Measures for International Human Rights
Stakeholders Human Rights Policy
Issues Human Rights Risks Conventions
Care for Employees/ We focus on public policy 1. We hire disabled and indigenous individuals Article 9 of the Convention on the
Disadvantaged Employee and various charities, in accordance with law, and provide group Rights of Persons with Disabilities:
Groups Family and participate in the insurance, compensation payments, and Accessibility
Members/ community development relief payments for hospitalization, medical
Passengers/ and education activities care, and major hazards.
Community of civic organizations, 2. We provide passenger guidance services as
Residents charitable organizations, well as accessible seating, elevators, parking
and local governmental spaces, and toilets as part of our commitment
institutes. to offer a friendly and accessible environment
for our passengers, and we have formulated
a comprehensive service program.
3. Our "High-Speed Educational Endowment
Program" provides educational opportunities
for economically disadvantaged groups; our
"THSRC Smiling Train Program" works with
various educational and charitable institutes
to help disadvantaged groups obtain free
or discounted HSR tickets; and our "Winter
Outreach Blood Drive" helps to relieve blood
shortages during the winter season.
Prohibition of Legal hiring and We do not employ any To protect children's right to education, we filter Article 10 of the International
Child Labor employment child laborers younger out child laborers under 15 years of age when Covenant on Economic, Social and
procedures than 15 years of age. assessing job candidates. The Corporation does Cultural Rights
No employment not currently employ any child laborers.
of child labor
Eradication of Employees We prohibit use of 1. We do not retain personal identification 1. Article 8 of the International
Forced Labor any form of forced documents of personnel reporting for work Covenant on Civil and Political
labor through abuse, and also do not require prior payment of any Rights
intimidation, detainment, fees. 2. International Labour
or other illegal means. 2. All wages are paid in full, save where Convention No. 100: Equal
otherwise provided by law (legally withheld Remuneration Convention
funds, health insurance and labor pension
co-payments, employee welfare funds, union
fees, and so on).
3. Employees provide their services voluntarily.
Eradication Employees/Job We avoid discrimination 1. The Corporation does not discriminate in any 1. Article 7 of the International
of Hiring and Candidates and differential treatment way during the hiring process. Covenant on Economic, Social
Employment in all forms to realize 2. We provide employee lactation rooms to and Cultural Rights
Discrimination diversity and enhance support breastfeeding policies. 2. International Labour
equality in the workplace. Convention No. 111:
Discrimination (Employment
and Occupation) Convention
3. International Labour
Convention No. 183: Maternity
Protection Convention
----- End of picture text -----

189

Value Propositions

==> picture [484 x 595] intentionally omitted <==

----- Start of picture text -----

Human Rights Implementation of Mitigation Measures for International Human Rights
Stakeholders Human Rights Policy
Issues Human Rights Risks Conventions
Abolish Violations Employees We ensure that individual 1. We have formulated preventive measures Article 2 of the International
of Human Rights employees have and grievance reporting procedures for Covenant on Civil and Political
appropriate channels sexual harassment and publicly disclosed Rights
for clarification and these within the workplace; additionally, our
grievance reporting when two-tiered grievance processing mechanism
their legitimate rights and solidifies our internal grievance system and
interests are infringed ensures that the problems of each employee
upon, and make sure are appropriately handled.
that they are not subject 2. Our appraisals and penalties for violations
to any form of adverse or noncompliance of laws, regulations,
treatment. and internal Corporation rules are handled
in accordance with regulations governing
rewards and disciplinary actions.
3. We provided training for protection of human
rights (406 hours on legal compliance, 753
hours on prevention of workplace bullying,
11,622 hours on occupational safety, 2,409
hours on ethics and morals, and 2,409 hours
on prevention of insider trading); the total
number of training hours for 2020 was
20,008 hours.
Friendly Workplace Employees/ We help our employees to 1. We disclosed remuneration information for Article 11 of the International
Employee find a balance between full-time non-managerial employees: average Covenant on Economic, Social and
Family work-life conflicts so as to remuneration for 2019 was NT$922,000, a Cultural Rights
Members build a friendly workplace 3.83% increase over the previous year. We
and enhance employee annually review the competitiveness of our
loyalty. remuneration so that our employees can
receive reasonable compensation.
2. We provide employees with appropriate
leisure spaces and facilities such as softball
fields, basketball courts, badminton courts,
gym equipment, and so on. We host a variety
of sports competitions and invite family
members of employees to participate.
3. Our "HSR Family Day Activity" gives employee
family members a chance to visit our
maintenance depots and other places of
work, providing a fun experience within
the workplace and bringing our employees
together.
4. Each department hosts birthday celebrations
and dinner parties to enhance employee
relationships.
5. We have established mechanisms to protect
the physical and mental health of our
employees and to build a healthy and
friendly work environment.
----- End of picture text -----

190

==> picture [484 x 619] intentionally omitted <==

----- Start of picture text -----

Human Rights Implementation of Mitigation Measures for International Human Rights
Stakeholders Human Rights Policy
Issues Human Rights Risks Conventions
Safe Work Employees We protect employee 1. We formulated and executed annual 1. Article 7 of the International
Environment safety and strive to programs for occupational health and safety Covenant on Economic, Social
prevent workplace management reviews and rewards, including and Cultural Rights
hazards from occurring. our "Rewards Program for Occupational 2. International Labour
Health and Safety Management" and our Convention No. 155:
"Rewards Program for Reporting Near Misses Occupational Safety and Health
of Occupational Health and Safety Hazards." Convention
2. We organized safety promotion activities 3. International Labour
including safety culture assessments, check- Convention No. 161:
ups of employee scooters, free shuttle buses Occupational Health Services
for areas with high traffic hazard risks, and Convention
traffic safety lectures. In order to reduce 4. International Labour
traffic hazards, we submitted proposals for Conventions No. 187:
improvements, hosted safety awareness Promotional Framework for
competitions, and created promotional Occupational Safety and Health
materials. Convention
3. We obtained certification of our occupational
health and safety management systems and
follow-up procedures; impartial reviews
from third parties allow the Corporation's
occupational health and safety management
system to operate sustainably and continue to
improve, allowing us to achieve our ultimate
target of zero hazards and zero accidents.
Promotion of Employees Enhance employee 1. We continue to evaluate employee health Article 25 of the Universal
Employee Health health. check items. The frequency and number of Declaration of Human Rights
items included in our employee health checks
exceed that required by law. Starting from
2018, we also added advanced microscopy
and imaging inspection items for senior
employees (those above 45 years of age and
who have worked at the Corporation for more
than 10 years), and provided flexible health
check programs according to individual
needs.
2. We advanced our employee health
management system. Apart from evaluations
by medical personnel, health check
results were compiled and analyzed by
a personalized "EHM Employee Health
Management Platform," and analysis results
were used to plan and manage various
health promotion activities suitable for our
employees.
3. Every year, we host health promotion
activities such as lectures on healthy diets,
weight loss, and smoking cessation; influenza
vaccines; and health and physical fitness
inspection activities.
----- End of picture text -----

191

Value Propositions

==> picture [484 x 222] intentionally omitted <==

----- Start of picture text -----

Human Rights Implementation of Mitigation Measures for International Human Rights
Stakeholders Human Rights Policy
Issues Human Rights Risks Conventions
Supply Chain Suppliers To achieve our target 1. Our tender notices stipulate that we oppose
Management for sustainable all discriminatory behaviors (include
operations, we continue discrimination towards women, indigenous
to communicate with people, and disadvantaged groups). Major
different partners violators of this policy, if discovered, are
in our supply chain blacklisted.
regarding establishment 2. When submitting bids, suppliers have to
of comprehensive submit Corporate Social Responsibility
management measures Commitment Declarations, and ensure
for human rights issues adherence with relevant labor laws and
(such as prohibited use of internationally accepted labor rights.
child labor, compliance
with legal work hours,
equality in hiring
procedures, and freedom
of association).
----- End of picture text -----

Training for protection of human rights:

In order to establish a high-quality work environment and reduce risks relating to human rights, the Corporation has implemented information assimilation, sexual harassment courses, promotion to prevent workplace bullying, and comprehensive workplace safety training in accordance with relevant regulations. Attendances in these courses and total training hours are as shown below:

==> picture [484 x 53] intentionally omitted <==

----- Start of picture text -----

Item 2016 2017 2018 2019 2020
Attendees 1,689 16,041 13,354 14,153 18,782
Total training time (hours) 4,180 36,651 17,719 18,569 20,008
----- End of picture text -----

(3) Occupational Safety and Health

THSRC periodically reviews company safety policies, procedures, and implementation results to achieve our goal of continued safety improvement. We worked with external professional units to conduct safety culture assessments for 2017 as a way of reviewing overall safety implementation results and to provide a reference for senior management. We also conducted a series of corporate safety activities to strengthen autonomous management of health and safety, effectively reducing occupational hazard risks and enhancing protection of employee health and safety.

Additionally, we became an accredited Health Promotion Administration "Healthy Workplace Accreditation-Health Promotion Certificate" workplace starting in 2019, and are actively establishing smoke-free environments, promoting health-enabling measures, and building healthy work environments.

In 2020, THSRC continued promotion of the Ministry of Labor's Operation Directions for the Performance Recognition of the Occupational Safety and Health Management Systems of Business Entities to ensure that the Corporation's occupational safety and health management measures can operate efficiently in line with international safety and health voluntary management standards, and help to protect worker safety and health.

192

4. Mutually Beneficial Society

(1) Social Contributions

THSRC upholds operational principles of sustainable development and strives to fulfill our corporate social responsibilities. We continue to expend our corporate resources to support all sorts of social contributions, environmental issues, and art performances, hoping to enhance public recognition of the Corporation, provide support to those in need, and to build a richer and better society in Taiwan through delivery of sincere care.

1) High-Speed Educational Endowment Program

The THSRC "High-Speed Educational Endowment Program," which has been hosted consecutively for 12 years, was once again initiated on New Year's Day of 2020. In order to help disabled and disadvantaged children bridge learning gaps, THSRC Chairman Yao-Chung Chiang and Down Syndrome Foundation Chairman Cheng-Hsia Lin jointly hosted the "2021 High-Speed Educational Endowment Program" press conference on December 17, 2020 at HSR Nangang Station, and also collaborated with Goodwill Ambassador Pink Yang in inviting HSR passengers and the general public to understand the importance of early intervention for developmentally delayed children. Donations collected on HSR trains and in stations were used to spread warmth and care to disadvantaged children in need of care.

THSRC has hosted the "High-Speed Educational Endowment Program" annually since 2010. Over the years, we have raised more than NT$148 million and helped with the learning and growth of more than 27,000 disadvantaged schoolchildren. We hope passengers can continue to show love for others; every single donation is used to provide hope and new opportunities that can help developmentally delayed children and Down syndrome patients change their lives.

==> picture [459 x 225] intentionally omitted <==

2) THSRC Smiling Train Program

THSRC works with charitable organizations and enterprises to provide HSR rides for disadvantaged groups. We leveraged our advantages to launch the "THSRC Smiling Train Program," collaborating with local educational and charitable organizations to help disadvantaged groups. Since 2009, THSRC has worked with local educational and charitable organizations to help others achieve their dreams, hoping that the relatively underprivileged in society can be positively encouraged by the warmth of others.

As of 2020, a total of 803 disadvantaged groups and 143,181 individuals have participated in the THSRC Smiling Train Program program. THSRC will continue to promote the THSRC Smiling Train Program in hopes of offering love, care, and encouragement to those in need, providing them with opportunities to travel around Taiwan and enjoy the beautiful sights.

193

Value Propositions

Free HSR tickets sponsored for Keelung TFCF Youths

==> picture [221 x 165] intentionally omitted <==

HSR Nangang Station sponsored round-trip Nangang-Zuoying HSR tickets to youths cared for and supported by the Keelung TFCF (Taiwan Fund for Children and Families) Center. Accompanied by social workers, photographers, and guides, these youths traveled to the Shikeng hot spring area in Kaohsiung via the HSR for three days and two nights of heavy-duty hiking and forest photography. The trip helped these youths enjoy the outdoors and challenge their psychical limits. Despite the COVID-19 pandemic, the TFCF teachers and students still decided to continue with their planned trip, although they took precautions by wearing masks throughout the journey and adopting thorough preventive measures, allowing each child the chance to enjoy a happy and healthy trip that created unforgettable memories.

HSR Trips for Yufeng Aboriginal Schoolchildren

==> picture [221 x 153] intentionally omitted <==

Located in Jianshi Township at Hsinchu County, Yufeng Elementary School is a school composed entirely of aboriginal students from the Atayal tribe. Many students hail from agricultural backgrounds, and the ratio of students from skipped-generation, single-parent, or disadvantaged families are as high as 90%. Due to their families' lack of economic resources, this group of aboriginal children had few opportunities to travel, but THSRC-sponsored tickets helped them achieve their dream of taking the HSR to the Jianan region for a threeday cultural visit. The children were so delighted that they performed Kavalan dances and Atayal songs in the station lobby before their trip to express their sincere gratitude.

HSR trips sponsored for Nantou Holy Rosary Special Needs Center

==> picture [221 x 142] intentionally omitted <==

A total of 18 families with developmentally challenged members who supported by the Holy Rosary Special Needs Center in Zhushan Township, Nantou County, traveled to Taoyuan on the HSR with the help of THSRC. These developmentally challenged individuals mostly hailed from low-income, skipped-generation, single-parent, or other types of economically disadvantaged families; some of these individuals had never had traveled on the HSR before. We hope our HSR ticket donations helped us fulfill our corporate social responsibilities and gave these developmentally challenged individuals a chance to experience the convenience and speed of the HSR, expand their horizons, and bring more beautiful memories to their lives.

194

HSR Tainan Station sponsored HSR trips for Anping Rehabilitation Center

To provide mentally challenged patients a chance to broaden their horizons and experience the comfort and convenience of the HSR, HSR Tainan Station organized a day trip to Hsinchu for residents of the Anping Rehabilitation Center, fulfilling a dream they had long cherished. In order to express their gratitude, these residents arrived at Tainan Station well before their trip to present THSRC with

a meticulously crafted certificate of

appreciation, and also performed songs ("Friends" and "The Most Dazzling Folk Style") and accompanying dances which they had practiced for a long time. This day trip marked the residents' first HSR journey and gave them an opportunity to see the world, understand social etiquette and social norms, learn about HSR"s convenient and excellent services, and create different life experiences.

==> picture [333 x 142] intentionally omitted <==

3) Annual THSRC Winter Outreach Blood Drive

THSRC launched the Winter Outreach Blood Drive initiative in 2012 and has consecutively hosted this annual blood drive at 11 HSR stations and corporation headquarters ever since. This initiative always attracts enthusiastic participation from THSRC staff and the general public. This year, our blood drive attracted 2,522 participants and successfully raised 3,699 bags of donated blood, providing supplies for those in need.

==> picture [244 x 175] intentionally omitted <==

==> picture [246 x 175] intentionally omitted <==

195

Value Propositions

4) THSRC Arts and Culture Feast

THSRC is highly active in local development and continued fulfillment of corporate social responsibilities. We responded to the government's "Epidemic New Life Movement" initiative by hosting a large-scale performance of "Wu Song Fights the Tiger" in collaboration with the Paper Windmill Arts and Educational Foundation as part of the THSRC Charitable Arts and Culture Fest; this performance was held at the HSR Taichung Station "HSR Station Zone" on the evening of Father's Day in 2020, and reflected on the significance of human life, animals, and nature through children"s theater. The event attracted more than 6,000 participants.

==> picture [483 x 220] intentionally omitted <==

5) Internal T Living Online Events

In 2020, due to the COVID-19 pandemic, the government called on the general public to stay at home and avoid gatherings in public spaces. To encourage our colleagues to exercise, maintain their health, and bring creativity and fun to their home lives, we organized several internal T Living online events, including "Epidemic Prevention & Exercise," "Home & Cooking," and "Summer Marathon Diet Challenge." Through internal online exchanges, our colleagues were able to share their personal exercise progress and cuisine creations. The "Epidemic Prevention & Exercise" event attracted 284 posts and the "Home & Cooking" event attracted 265 posts, which respectively garnered 520,000 and 410,000 views. These events not only successfully brought our colleagues together during the pandemic, but also triggered lively internal discussions.

(2) Environmental Protection

"Explore Green Lifestyles" corporate environmental education experience course: online

interactive course/offline 5 senses camp

THSRC actively implements the 4Ts that make up our sustainable care strategy as we fulfill our corporate social responsibilities. We continued to implement the environmental education concepts from our "Explore the Beauty of Taiwan" event from 2019, and invited the Society of Wilderness to assist our staff in exploring low-carbon lifestyles and implementing green measures in the fourth quarter of 2020. (The Society of Wilderness has long promoted environmental education and was responsible for turning off the lights in HSR stations for Earth Day.)

We organized an online interactive course ("Green and energy-efficient lifestyle") which attracted 4,230 participants (90% of our staff) and facilitated enthusiastic sharing of personal energy-saving tips from our colleagues. Our offline experience camp attracted 1,246 participants. The "Have you eaten? Green meals on the dining table" course allowed our colleagues to discuss the carbon footprints of different foods while

196

==> picture [483 x 209] intentionally omitted <==

enjoying stainless steel bento box meals made using local ingredients. Our "Go! Animal adventure" course allowed our colleagues and their families to explore a simulated seaside foraging habitat of the world's largest seabird (the albatross), encouraging all participants to be an example for others and embrace the green movement.

Pheasant-Tailed Jacana Preservation

In 1998, the pheasant-tailed jacana, a Level 2 protected species also known as the "water chestnut bird" and the "ripple fairy," faced a survival crisis as HSR's mainline passed through their habitat in Hulubei of Guantian District in Tainan. In order to conserve the pheasant-tailed jacana, THSRC worked with relevant units and, starting from 2000, invested more than NT$50 million to build the first artificial habitat recovery ground in Guantian under a three-way collaboration project involving the government, construction units, and civil organizations. Many volunteers have participated in the processes of habitat assessment, land rental, and construction, and many professionals and academics have also been involved in this work, causing the number of jacanas to rise from 9 in 2000 to 1,723 in 2020. The area of the jacana habitat was gradually increased; in 2007, we renamed the recovered habitat Jacana Park and opened it to the public. More than 230,000 visitors have been recorded to date. To strengthen the educational value of this park, we created tour devices, galleries, and interactive displays to present the results of our native species restoration efforts and help the public better understand wildlife conservation. This project has also drawn the attention of international environmental units and conservation activists, serving as one of the few successful cases where economic development and conservation were able to coexist.

==> picture [483 x 203] intentionally omitted <==

197

Value Propositions

(3) Exchanges and Events

HSR Camps

THSR is responsible for providing transportation along Taiwan's western corridor, connecting major cities at speeds of up to 300 kilometers per hour and providing safe, comfortable, convenient, and high-quality travel for passengers. As passenger numbers continued to rise, THSRC launched a railway camp during the winter and summer vacations starting in 2008 as part of its corporate social responsibilities. The camps provide a variety of courses for students of different ages, and include visits to our Operational Control Center, Maintenance Base, and the THSR Museum. Detailed briefings and tours provided participants with moving descriptions

==> picture [247 x 182] intentionally omitted <==

of THSRC's history, maintenance procedures, and operations. This fun and comprehensive learning journey firmly embedded knowledge of the railroad industry and THSRC culture into the hearts of participants of all different ages.

We made some adjustments to our HSR camp activities in 2020 due to COVID-19 conditions. During the summer and winter vacations, we hosted 1 round of activities for a total of 4 elementary school/junior high school/high school/college groups. Almost 2,000 people signed up for the camp waiting lists, and 221 students participated in the 2020 HSR summer and winter vacation camps.

THSR ART Together Program

THSRC launched the "THSR ART Together Program" in 2015, providing free space in part of HSR stations for group performances as well as individual singing, dancing, or musical performances. In 2017 and 2019, THSRC was respectively awarded the "13th Arts and Business Awards (Cultural Development)" and the "14th Arts and Business Awards (Permanent Awards Category)" by the Ministry of Culture. As of year-end 2020, 573 groups and 17,052 individuals have performed at 9 HSR stations (Taoyuan, Hsinchu, Miaoli, Taichung, Changhua, Yunlin, Chiayi, Tainan, and Zuoying). THSRC hopes that the "THSR ART Together Program" can allow passengers to appreciate the beauty of the arts while traveling with the HSR.

==> picture [235 x 141] intentionally omitted <==

198

Preserving Railway Culture - THSR Museum

The THSR Museum opened its doors in 2017. Planned and established around the rich cultural railway assets taken from the planning, construction, and operational stages of the HSR, the collection at the Museum looks back on the three revolutions of Taiwan's railroad industry, moving sequentially through policy planning for the HSR, BOT contractor selection and contract negotiation, founding of THSRC and its five original shareholders, as well as the construction and operational stages of the HSR. The display and introduction of these items help the general public easily understand our history, and serve as an important platform for THSRC external communications. In 2020, we suspended our railway culture lectures due to the COVID-19 pandemic. From July to December, we replaced these lectures with in-depth guided tours that promoted national tourism and railway culture to 44 groups and 1,961 participants. In total, 373 groups and 33,810 participants visited the THSR Museum in 2020.

2020 Taipei Marathon

The Taipei Marathon is the only IAAF bronze label international marathon event in Taiwan. Although the event was affected by the COVID-19 pandemic in 2020, it still attracted 28,000 participants from 12 countries. Taiwan was one of the few countries able to complete this event as planned under the theme of "Dare to Breathe," encouraging participants to run without fear and set aside their pandemic worries. This was the first time that THSRC formed a team to join this international marathon event, the largest in Taiwan. We encourage our colleagues to establish good exercise habits and adhere to national sports policies promoted by the government. We also hosted a "Like us on Facebook to receive a gift" event themed around Kanahei's Small Animals at the marathon finish line, generating lively interactions with marathon participants.

(4) Technical Exchanges and Visitations

Group Field Visits

THSRC continues to maintain good relations with its peers in the transportation and rail industries; we were involved in 18 public associations in 2020. We ensure continued updating and innovation of our services and operational strategies through academic and experience exchanges with academic societies. THSRC has accumulated many achievements and experiences through continued and steady learning. Starting from 2006, we opened our doors to groups from government units, rail transportation peers, and industryacademia collaboration projects in order to allow industrial, governmental, and academic representatives and transportation companies from countries all around the world a chance to obtain a more complete understanding of THSRC's spirit and operations. We have organized tours of HSR stations, as well as our Maintenance Base and Operations Building. Visitors have included a state legislature visiting group from northeast America, as well as groups from the Academy for the Judiciary, the Taoyuan Metro Company, the System Operation Control Division of China Airlines, and the Japan Railway (JR) Companies (West Japan, East Japan, and Hokkaido). Due to the COVID-19 pandemic, we only welcomed 9 groups and 280 visitors in 2020. Notable visitors included groups from the Shinkansen Engineering Company, Northern Region Branch Office, Freeway Bureau, MOTC and the Ministry of Justice Investigation Bureau (Taoyuan City Field Division).

199

Value Propositions

Governance

5. Effectiveness of Corporate Governance System

(1) Preliminary Review by Functional Committees

In accordance with the GCG, functional committees discuss respective proposals submitted by Management, perform relevant duties, and actively fulfill their preview role for the Board of Directors.

(2) Independence and Professionalism of Independent Directors

When discussing official business with the Board of Directors and functional committees, independent directors frequently express their opinions, exert their independence and professionalism, and contribute to discussion efficiency and quality of decision making.

(3) Management Implementation

The Management fully understands the framework and spirit of corporate governance, and complies with applicable by-laws and regulations and resolutions of shareholder or Board meetings when carrying out their duties and fulfilling their duty of care.

(4) Strengthen Information Disclosure

For the convenience of shareholders and stakeholders, our corporate governance information is disclosed on the Market Observation Post System (https://mops.twse.com.tw). In addition, we release our corporate governance information on our corporate website (https://corp. thsrc.com.tw/corp/governance) in both Chinese and English to further enhance transparency. Material information is disclosed on the Market Observation Post System in both Chinese and English so that domestic and overseas investors can receive timely updates on the latest Company information. Furthermore, we not only communicate all issues of concern to our stakeholders through multiple channels, but also established a stakeholder section and stakeholder contacts on our corporate website. Appropriate communication allows us to understand the reasonable expectations and needs of our stakeholders and respond accordingly to major issues of concern.

Since going public, the Corporation has participated in the 4th to 6th TWSE Corporate Governance Evaluations (for 2017 to 2019) and was consecutively ranked among the top 5% of publicly listed companies. In order to enhance our corporate governance, we participated in the Taiwan Corporate Governance Association CG6011 corporate governance evaluations (for 2017) and received an "Excellent" certification in 2018. In 2020, we participated in the CG6012 corporate governance evaluations (for 2019), and received a "Premium" certification. We were also awarded first place in Outstanding Enterprises by the 17th National Brand Yushan Awards in 2020. In future, we will focus on the ongoing influence of functional committees and independent directors. Furthermore, we will uphold the principles of enterprise autonomy, consistently review the framework and mechanisms of corporate governance, and embrace corporate governance evaluations in order to build a sound corporate governance system and set Taiwan High Speed Rail Corporation as a benchmark for corporate governance.

Details of our corporate governance implementations can be found in Chapter Four of this report or on the "Corporate Governance" section of our website.

200

(5) Fulfill corporate social responsibilities and implement sustainable operations

Since our establishment, we have set fulfillment of corporate social responsibilities as the foundation of our core services. We continue to invest efforts in social care, environmental protection, and corporate governance, and view corporate social responsibility as one of our core values for promoting economic, social, environmental, and ecological balance and sustainability to achieve our goal of sustainable operations.

In 2017, we drafted a strategic roadmap using our 4Ts (Transportation, Technology, Taiwan, and Touch) as the main pillars of our sustainable management strategy. We reviewed our strategic roadmapin 2019 in accordance with our operational strategies and future prospects to strengthen the consistency between our goals and our core operations.

THSRC participated in the "2020 Taiwan Corporate Sustainability Awards" hosted by the Taiwan Institute for Sustainable Energy and received the highest honor for comprehensive performance, the "The Most Prestigious Sustainability Awards –Top Ten Domestic Companies (Service Industry Category)"; and the highest award for corporate sustainability reports, the "Platinum Corporate Sustainability Report Award." The awards were presented by

President Tsai Ing-wen, and Chairman YaoChung Chiang received the awards on behalf of THSRC.

In future, we will continue to reference international trends and local demands, using our 4Ts to formulate our short-, mid, and long-term goals and action plans. We use various assessment mechanisms to periodically track the development and performance of various issues, and to promote and implement our sustainable concepts. Our short-term goals include reducing greenhouse gas emissions, assisting the Guantian District in Tainan with conservation of pheasant-tailed jacana, and strengthening waste classification and recycling; mid-term goals include reducing carbon emissions, and reducing energy and water usage in stations; long-term goals include Corporation-wide inventory and verification of greenhouse gases, and strengthening of energy management to gradually solidify our determination and commitment to sustainable operations as we actively realize our corporate vision "To be the platform for advancement and enjoyment."

==> picture [300 x 183] intentionally omitted <==

The President, THSRC Chairman (left 1, third row), and recipients of the 17th National Brand Yushan Awards

==> picture [301 x 178] intentionally omitted <==

201

Financial Overview

Financial Overview 8

202

1. Five-Year Financial Summary

(1) Condensed Balance Sheet

Unit: NT$ thousands

==> picture [483 x 531] intentionally omitted <==

----- Start of picture text -----

Year
Financial Summary for The Last Five Years
2016 2017 2018 2019 2020
Item
Current Assets 28,728,282 20,090,816 22,796,549 42,710,136 38,621,107
Property, Plant and Equipment 65,305 107,354 98,085 125,047 109,729
Operating Concession Asset 426,020,379 413,166,373 401,168,964 390,113,063 378,291,412
Other Assets 6,393,406 6,695,914 8,993,471 10,111,356 10,544,722
Total Assets 461,207,372 440,060,457 433,057,069 443,059,602 427,566,970
Before Distribution 19,815,494 6,549,408 13,814,046 13,278,906 7,067,221
Current Liabilities
After Distribution 23,192,470 10,770,628 20,117,734 20,089,703 (Note 1)
Non-Current Liabilities 380,328,197 370,492,700 349,830,010 358,703,427 350,413,093
Before Distribution 400,143,691 377,042,108 363,644,056 371,982,333 357,480,314
Total Liabilities
After Distribution 403,520,667 381,263,328 369,947,744 378,793,130 (Note 1)
Capital Stock 56,282,930 56,282,930 56,282,930 56,282,930 56,282,930
Capital Surplus 172,981 172,981 172,981 172,981 172,981
Before Distribution 4,607,077 6,561,953 12,957,102 14,621,358 13,630,745
Retained Earnings
After Distribution 1,230,101 2,340,733 6,653,414 7,810,561 (Note 1)
Other Equity 693 485 - - -
Before Distribution 61,063,681 63,018,349 69,413,013 71,077,269 70,086,656
Total Equity
After Distribution 57,686,705 58,797,129 63,109,325 64,266,472 (Note 1)
----- End of picture text -----

Note 1: Pending shareholders' approval.

203

Financial Overview

(2) Condensed Statement of Comprehensive Income

Unit: NT$ thousands

Except Basic Earnings Per Share

==> picture [484 x 304] intentionally omitted <==

----- Start of picture text -----

Year
Financial Summary for The Last Five Years
2016 2017 2018 2019 2020
Item
Operating Revenue 40,610,906 43,435,042 45,415,007 47,507,390 39,137,205
Gross Profit 14,637,733 18,821,397 20,333,613 21,744,703 13,042,151
Income from Operations 13,699,496 17,754,984 19,144,964 20,511,953 11,806,685
Non-Operating Income and Expenses (8,701,921) (11,276,484) (11,833,141) (12,736,845) (6,387,374)
Income Before Income Tax 4,997,575 6,478,500 7,311,823 7,775,108 5,419,311
Net Income 4,149,098 5,339,905 10,696,381 8,007,033 5,843,037
Other Comprehensive Income (47,679) (8,261) (80,497) (39,089) (22,853)
Total Comprehensive Income for the Year 4,101,419 5,331,644 10,615,884 7,967,944 5,820,184
Basic Earnings Per Share (NT$) 0.74 0.95 1.90 1.42 1.04
----- End of picture text -----

(3) Auditors' Opinions from 2016 to 2020

==> picture [484 x 168] intentionally omitted <==

----- Start of picture text -----

Year Accounting Firm Name of CPA Audit Opinion
Jui-Hsuan Ho and
2016 Deloitte & Touche Unmodified Opinion
Kwan-Chung Lai
Jui-Hsuan Ho and
2017 Deloitte & Touche Unmodified Opinion
Kwan-Chung Lai
Mei-Yen Chiang and
2018 Deloitte & Touche Unmodified Opinion
Kwan-Chung Lai
Mei-Yen Chiang and
2019 Deloitte & Touche Unmodified Opinion
Kwan-Chung Lai
Mei-Yen Chiang and
2020 Deloitte & Touche Unmodified Opinion
Kwan-Chung Lai
----- End of picture text -----

204

2. Five-Year Financial Analysis

==> picture [483 x 597] intentionally omitted <==

----- Start of picture text -----

Year Financial Analysis for the Last Five Years
Item (Note) 2016 2017 2018 2019 2020
Debt ratio 86.76 85.68 83.97 83.96 83.61
Financial
Ratio of long-term capital to property, plant and
Structure 675,892.93 403,814.53 427,428.27 343,695.33 383,216.61
equipment
(%)
Ratio of long-term capital to operating
103.61 104.92 104.51 110.17 111.16
concession asset
Current ratio (%) 144.98 306.76 165.02 321.64 546.48
Solvency Quick ratio (%) 130.55 263.76 143.81 296.44 498.03
Times interest earned (times) 1.60 1.87 2.10 2.20 1.92
Accounts receivable turnover (times) 106.84 96.81 106.50 113.29 142.01
Average collection days 3.41 3.77 3.42 3.22 2.57
- - - - -
Inventory turnover (times)
- - - - -
Accounts payable turnover (times)
Operating
Performance
- - - - -
Average days in sales
Property, plant and equipment turnover (times) 596.20 503.13 442.13 425.82 333.40
Operating concession assets turnover (times) 0.09 0.10 0.11 0.12 0.10
Total asset turnover (times) 0.08 0.10 0.10 0.11 0.09
Return on total assets (%) 2.29 2.55 4.25 3.35 2.81
Return on total equity (%) 6.84 8.61 16.15 11.40 8.28
Profitability Pre-tax income to paid-in capital ratio (%) 8.88 11.51 12.99 13.81 9.63
Profit ratio (%) 10.22 12.29 23.55 16.85 14.93
Earning per share (NT$) 0.74 0.95 1.90 1.42 1.04
Cash flow ratio 29.93 329.89 189.78 214.98 (21.67)
Cash Flow
Cash flow adequacy ratio 310.89 338.04 345.23 320.17 229.34
(%)
Cash flow reinvestment ratio 19.66 111.18 185.72 68.81 (24.23)
Operating leverage ratio 2.73 2.25 2.18 2.13 2.99
Leverage
Financial leverage ratio 2.57 1.73 1.53 1.46 2.01
----- End of picture text -----

205

Financial Overview

Analysis of differences over 20% for the last two years:

The increase in current ratio and quick ratio were mainly due to decrease of current liabilities in 2020.
The increase in accounts receivable turnover and decrease in average collection days were mainly due to decrease of average accounts receivable balance in 2020.
The decrease in property, plant and equipment turnover and profitability and the increase in leverage were mainly due to decrease of net sales in 2020.
The decrease in cash flow ratios were mainly due to the net operating activities cash outflow in 2020. Note: The above financial analysis ratios were calculated using the following equations:
Financial structure
(1) Debt ratio = Total liabilities / Total assets
(2) Ratio of long-term capital to property, plant and equipment ratio = (Total equity + non-current liabilities) / Net property, plant and equipment
(3) Ratio of long-term capital to operating concession assets = (Total equity + non-current liabilities) / Net operating concession assets
1. Solvency
(1) Current ratio = Current assets / Current liabilities
(2) Quick ratio = (Current assets - inventory - prepaid expenses) / Current liabilities
(3) Times interest earned = Net income before tax and interest expenses / Interest expenses
Operating performance (1) Accounts receivable turnover = Net sales / Average account receivable balance
(2) Average collection days = 365/ Receivable turnover
(3) Inventory turnover = Cost of goods sold / Average inventory
(4) Accounts payable turnover = Cost of goods sold / Average account payable balance
(5) Average days in sales = 365 / Inventory turnover
(6) Property, plant and equipment turnover = Net sales / Average net property, plant and equipment
(7) Operating concession asset turnover = Net sales / Average net operating concession assets
(8) Total asset turnover = Net sales / Average total assets
Profitability (1) Return on total assets = [Net income after tax + interest expense * (1 - interest rate)] / Average total assets
(2) Return on total equity = Net income after tax / Average stockholders' equity
(3) Profit ratio = Net income / Net sales

(4) Earnings per share = (Net income - preferred stock dividends) / Weighted average number of stocks outstanding 5. Cash flow (1) Cash flow ratio = Net cash flow provided by operating activities / Current liabilities (2) Cash flow adequacy ratio = Five-year sum of cash from operations / Five-year sum of capital expenditures, inventory additions, and cash dividends (3) Cash flow reinvestment ratio = (Cash provided by operating activities - cash dividends) / (Gross property, plant and equipment + long-term investments + other non-current assets + working capital) 6. Leverage

(1) Operating leverage ratio = (Operating revenue - variable costs and expenses) / Operating income

(2) Financial leverage ratio = Operating income / (Operating income - interest expenses)

206

3. Audit Committee's Review Report for Most Recent Financial Statement

Audit Committee's Review Report

The Board of Directors has prepared the Corporation's 2020 Business Report and Financial Statements. The CPA of Deloitte & Touche, Mei-Yen Chiang and Kwan-Chung Lai, were retained to audit the Financial Statements of Taiwan High Speed Rail Corporation and have issued an audit report relating to the Financial Statements. The Business Report and Financial Statements have been reviewed and determined to be correct and accurate by the Audit Committee members of Taiwan High Speed Rail Corporation. According to Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act, we hereby submit this report.

Taiwan High Speed Rail Corporation Chairman of the Audit Committee: Duei Tsai

==> picture [166 x 64] intentionally omitted <==

February.24.2021

207

Financial Overview

Audit Committee's Review Report

The Board of Directors has prepared the Corporation's 2020 proposal for allocation of profits, and the proposal has been reviewed and determined to be correct and accurate by the Audit Committee members of Taiwan High Speed Rail Corporation. According to Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act, we hereby submit this report.

Taiwan High Speed Rail Corporation Chairman of the Audit Committee: Duei Tsai

==> picture [194 x 76] intentionally omitted <==

March.17.2021

208

4. Financial Statements and Independent Auditors’ Report in the Most Recent Year

(1) Financial Statements for the Years Ended December 31, 2020 and 2019 and Independent Auditor Reports

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders Taiwan High Speed Rail Corporation

Opinion

We have audited the accompanying financial statements of Taiwan High Speed Rail Corporation (the “Corporation”), which comprise the balance sheets as of December 31, 2020 and 2019, and the statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the Financial Supervisory Commission (FSC) of the Republic of China (ROC).

Basis of Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the ROC. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Corporation in accordance with The Norm of Professional Ethics for Certified Public Accountant of the ROC, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matter

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The descriptions of the key audit matter of the 2020 financial statements are as follows:

Provision for Stabilization Reserve

Refer to Note 4.o. for further information on accounting policy on provision for stabilization reserve; Note 5.b. for further information on the accounting uncertainty associated with the judgments, and estimates and assumptions about provision for stabilization reserve. Refer to Note 17 for the details of such provision.

According to the Taiwan North-South High Speed Rail Construction and Operation Agreement (“C&O Agreement”), which was amended on July 27, 2015, the Corporation established the financial stabilization mechanism (“FSM”) in 2016 in order to serve the purpose of returning the major portion of the excess earnings, which is defined under the C&O Agreement, to the ROC government. Started in 2017, the Corporation reports the status of the implementation of the aforementioned FSM to the Ministry of Transportation and Communications (“MOTC”), including the provision, contribution, and accumulated balance of the stabilization reserve in accordance with the C&O Agreement. Because 1) the provision for the stabilization reserve is related to the profitability of the remaining concession period under the C&O Agreement, 2) the reserve amount

209

Financial Overview

is material and can vary significantly, depending on the expiration or termination of the C&O Agreement, and 3) the implementation of the FSM involves critical accounting judgments and estimates, the recognition of provision for stabilization reserve is deemed a key audit matter. Since earnings to be made in the remaining concession period, which will end in the year 2068 or any year where the C&O Agreement might be early terminated, cannot be reliably estimated, the stabilization reserve, totaling NT$10,885,959 thousand as of December 31, 2020, was provided based on the earnings achieved in 2020 and on the requirements as stipulated in the C&O Agreement.

We evaluated that the measurement method used by the management for making the accounting estimates related to the abovementioned provision was reasonable. In addition, on a sampling basis, we: (1) reviewed the C&O Agreement related to the movement of the provision, (2) recalculated the amount of the provision confirmed the accuracy of the balance, and (3) inspected the movement of the provision from the balance sheet date to the report date and verified that the balance of the provision at the balance sheet date was appropriately accrued.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the FSC of the ROC, and for such internal controls as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Corporation’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Corporation or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the audit committee, are responsible for overseeing the Corporation’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the ROC will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit performed in accordance with auditing standards generally accepted in the ROC, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Corporation to cease to continue as a going concern.

210

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 2020 financial statements and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Mei-Yen Chiang and Kwan-Chung Lai.

==> picture [148 x 62] intentionally omitted <==

==> picture [132 x 57] intentionally omitted <==

Deloitte & Touche Taipei, Taiwan Republic of China

February 24, 2021

Notice to Readers

The accompanying financial statements are intended only to present the financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and financial statements shall prevail.

211

Financial Overview

TAIWAN HIGH SPEED RAIL CORPORATION

BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

	December 31	December 31
2020	% - 4 - - 1 4 - 9 - - 88 - 2 1 - 91 100	2019
Amount $ 651,769 15,218,000 218,092 - 2,068,950 19,086,463 1,377,833 38,621,107 109,729 712,169 378,291,412 83,252 7,673,251 2,070,857 5,193 388,945,863 $ 427,566,970		Amount $ 16,271,676 330,443 333,092 166,783 2,056,045 22,207,764 1,344,333 42,710,136 125,047 628,988 390,113,063 54,413 7,316,212 2,102,503 9,240 400,349,466 $ 443,059,602	%
			4 - - - 1 5 -
			10
			- - 88 - 2 - -
			90
			100

212

	December 31	December 31
2020	% - - - 1 - - 1 - 2 4 60 3 - 2 13 - 82 84 13 - 1 2 3 16 100	2019
Amount $ 57,091 274,778 541,931 3,262,861 823,666 104,256 1,169,238 833,400 7,067,221 18,478,720 257,607,483 10,000,000 522,976 7,383,683 55,869,665 550,566 350,413,093 357,480,314 56,282,930 172,981 3,270,422 10,360,323 13,630,745 70,086,656 $ 427,566,970		Amount $ 64,980 256,338 777,511 3,197,362 942,141 194,722 6,367,937 1,477,915 13,278,906 7,990,329 276,100,317 10,000,000 447,175 8,450,080 55,263,201 452,325 358,703,427 371,982,333 56,282,930 172,981 2,469,719 12,151,639 14,621,358 71,077,269 $ 443,059,602	%
			- - - 1 - - 2 -
			3
			2 62 2 - 2 13 -
			81
			84
			13
			-
			- 3
			3
			16
			100

The accompanying notes are an integral part of the financial statements.

213

Financial Overview

TAIWAN HIGH SPEED RAIL CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
2020	% 100 (67) 33 (3) 30 - (15 ) (2 ) 1 (16) 14 1 15 - - - 15	2019
Amount $ 39,137,205 (26,095,054) 13,042,151 (1,235,466) 11,806,685 134,848 (5,919,211 ) (885,959 ) 282,948 (6,387,374) 5,419,311 423,726 5,843,037 (28,566 ) 5,713 (22,853) $ 5,820,184		Amount $ 47,507,390 (25,762,687) 21,744,703 (1,232,750) 20,511,953 162,700 (6,454,624 ) (6,523,761 ) 78,840 (12,736,845) 7,775,108 231,925 8,007,033 (48,861 ) 9,772 (39,089) $ 7,967,944	%
			100 (54)
			46 (3)
			43
			- (13 ) (14 ) -
			(27)
			16 1
			17
			- -
			-
			17

214

TAIWAN HIGH SPEED RAIL CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
2020	%	2019
Amount $ 1.04		Amount $ 1.42	%

The accompanying notes are an integral part of the financial statements.

215

Financial Overview

TAIWAN HIGH SPEED RAIL CORPORATION

STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars, Except Dividends Per Share)

BALANCE AT JANUARY 1, 2020 Appropriations of 2019 earnings Legal reserve Cash dividends to stockholders - NT$1.2101 per share Net income for the year ended December 31, 2020 Other comprehensive loss for the year ended December 31, 2020 Total comprehensive income for the year ended December 31, 2020 BALANCE AT DECEMBER 31, 2020 BALANCE AT JANUARY 1, 2019 Appropriations of 2018 earnings Legal reserve Cash dividends to stockholders - NT$1.12 per share Net income for the year ended December 31, 2019 Other comprehensive loss for the year ended December 31, 2019 Total comprehensive income for the year ended December 31, 2019 BALANCE AT DECEMBER 31, 2019	Capital Stock Common Stock $ 56,282,930 - - - - - - $ 56,282,930 $ 56,282,930 - - - - - - $ 56,282,930	Capital Surplus
		$ 172,981 - -
		-
		- -
		-
		$ 172,981
		$ 172,981 - -
		-
		- -
		-
		$ 172,981

The accompanying notes are an integral part of the financial statements.

216

	Retained Earnings	Total Equity
Legal Reserve $ 2,469,719 800,703 - 800,703 - - - $ 3,270,422 $ 1,400,081 1,069,638 - 1,069,638 - - - $ 2,469,719	Unappropriated Earnings $ 12,151,639 (800,703 ) (6,810,797) (7,611,500) 5,843,037 (22,853) 5,820,184 $ 10,360,323 $ 11,557,021 (1,069,638 ) (6,303,688) (7,373,326) 8,007,033 (39,089) 7,967,944 $ 12,151,639
		$ 71,077,269 - (6,810,797)
		(6,810,797)
		5,843,037 (22,853)
		5,820,184
		$ 70,086,656
		$ 69,413,013 - (6,303,688)
		(6,303,688)
		8,007,033 (39,089)
		7,967,944
		$ 71,077,269

217

Financial Overview

TAIWAN HIGH SPEED RAIL CORPORATION

STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation Amortization Write-downs (reversal) of inventories Interest expense Interest income Loss on foreign currency exchange, net Stabilization reserve expenses Others Changes in operating assets and liabilities Financial assets at fair value through proft or loss Notes and accounts receivable Inventories Other current assets Other non-current assets Accounts payable Other payables Provisions Other current liabilities Other non-current liabilities Cash generated from operations Interest received Interest paid Interest paid with respect to operating concession liabilities Income tax refunded (paid) Net cash (used in) generated from operating activities	For the Years Ended December 31	For the Years Ended December 31
	2020 $ 5,419,311 212,319 13,963,256 (23,026 ) 5,919,211 (134,848 ) 509 885,959 14,704 (14,887,557 ) 115,000 10,121 (58,816 ) (376 ) 17,728 86,930 (6,084,658 ) (658,161 ) 2,074 4,799,680 160,259 (5,862,879 ) (777,511 ) 148,717 (1,531,734)	2019
		$ 7,775,108 202,294 13,798,850 22,650 6,454,624 (162,700 ) 11,878 6,523,761 (2,700 ) (2,997 ) 172,473 (49,770 ) (403,292 ) 2,571 (16,575 ) 150,065 - 625,036 (5,618)
		35,095,658 149,679 (5,772,857 ) (731,182 ) (194,844)
		28,546,454

218

CASH FLOWS FROM INVESTING ACTIVITIES Decrease (increase) in other fnancial assets Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Proceeds from disposal of intangible assets Net cash generated from (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Net decrease in short-term borrowings Proceeds from issuance of bonds Repayment of long-term debt Repayment of long-term bills payable Repayment of the principal portion of lease liabilities Increase in other non-current liabilities Cash dividends Net cash used in fnancing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	For the Years Ended December 31	For the Years Ended December 31
	2020 $ 3,155,976 (30,066 ) - (2,312,760 ) 8,165 821,315 (9,122 ) 10,500,000 (18,500,000 ) - (157,180 ) 67,624 (6,810,797) (14,909,475) (13) (15,619,907 ) 16,271,676 $ 651,769	2019
		$ (10,366,158 ) (67,192 ) 1 (2,328,694 ) 1,266
		(12,760,777)
		(79,700 ) 8,000,000 - (8,000,000 ) (148,863 ) 70,231 (6,303,688)
		(6,462,020)
		169
		9,323,826 6,947,850
		$ 16,271,676

The accompanying notes are an integral part of the financial statements.

219

Financial Overview

TAIWAN HIGH SPEED RAIL CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL

Taiwan High Speed Rail Corporation (the “Corporation”) was incorporated in Taipei City on May 11, 1998. Under the Taiwan North-South High Speed Rail Construction and Operation Agreement (“C&O Agreement”) and the Taiwan North-South High Speed Rail Station Zone Development Agreement (“SZD Agreement”) entered into between the Corporation and the Ministry of Transportation and Communications (“MOTC”) on July 23, 1998, the Corporation was granted the authority to construct and operate the high speed rail (“HSR”) and relevant ancillary facilities. Under the Fourth Amendment to the C&O Agreement and the Taiwan North-South High Speed Rail Station Zone Development Termination Agreement (“SZD Termination Agreement”) entered into between the Corporation and the MOTC on July 27, 2015, effective on October 30, 2015, the construction and operation concession period of the HSR was extended from 35 years to 70 years until the year of 2068.

On January 5, 2007, the Corporation started its commercial operations from the Banqiao Station to the Zuoying Station. On March 2, 2007, the Corporation started operating its railway service at the Taipei Station. On December 1, 2015, the Corporation started operating its railway service at the Miaoli, Changhua and Yunlin stations. On July 1, 2016, the Corporation started operating its railway service at the Nangang Station.

The Corporation’s stock has been listed and traded on the Taiwan Stock Exchange since October 27, 2016.

2. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the board of directors on February 24, 2021.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC).

Effective Date Announced by IASB January 1, 2020 January 1, 2020 January 1, 2020 June 1, 2020	New IFRSs
	Amendments to IFRS 3 “Defnition of a Business” Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark Reform” Amendments to IAS 1 and IAS 8 “Defnition of Material” Amendment to IFRS 16 “Covid-19 - Related Rent Concessions”

Except for the following, the initial application of the IFRSs endorsed and issued into effect by the FSC did not have material impact on the Corporation’s accounting policies:

Amendment to IFRS 16 “Covid-19 - Related Rent Concessions”

The Corporation elected to apply the practical expedient provided in the amendment to IFRS 16 with respect to rent concessions negotiated with the lessors as a direct consequence of the Covid-19. In Note 4, it states the related accounting policies. Before the application of the amendment, the Corporation was required to determine whether the abovementioned rent concessions are lease modifications and, if yes, accounting for lease modifications will apply.

220

The Corporation applied the amendment since January 1, 2020. Retrospective application of the amendment has no impact on the retained earnings as of January 1, 2020.

b. The IFRSs endorsed by the FSC for application starting from 2021

Effective Date Announced by IASB Effective immediately upon promulgation by the IASB January 1, 2021	New IFRSs
	Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9” Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform - Phase 2”

As of the date the financial statements were authorized for issue, the Corporation assessed that the amendments of relevant standards and interpretations have no material impact on the Corporation’s financial positions and financial performance.

c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

Effective Date
Announced by IASB(Note 1)
January 1, 2022 (Note 2)
January 1, 2022 (Note 3)
January 1, 2022 (Note 4)
January 1, 2022 (Note 5)
January 1, 2023
January 1, 2023 (Note 6)
January 1, 2023 (Note 7)
January 1, 2023
January 1, 2023
To be determined by IASB

New IFRSs

“Annual Improvements to IFRS Standards 2018-2020”
Amendments to IFRS 3 “Reference to the Conceptual Framework”
Amendments to IAS 16 “Property, Plant and Equipment - Proceeds before Intended Use”
Amendments to IAS 37 “Onerous Contracts-Cost of Fulflling a Contract”
Amendments to IAS 1 “Classifcation of Liabilities as Current or Non-current”
Amendments to IAS 1 “Disclosure of Accounting Policies”
Amendments to IAS 8 “Defnition of Accounting Estimates”
IFRS 17 “Insurance Contracts”
Amendments to IFRS 17
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between An Investor and
Its Associate or Joint Venture”

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual reporting periods beginning on or after their respective effective dates.

Note 2: The amendments to IFRS 9 will be applied prospectively to modifications and exchanges of financial liabilities that occur on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IAS 41 “Agriculture” will be applied prospectively to the fair value measurements on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IFRS 1 “First-time Adoptions of IFRSs” will be applied retrospectively for annual reporting periods beginning on or after January 1, 2022.

Note 3: The amendments are applicable to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2022.

Note 4: The amendments are applicable to property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021.

Note 5: The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022.

Note 6: The amendments will be applied prospectively for annual reporting periods beginning on or after January 1, 2023.

Note 7: The amendments are applicable to changes in accounting estimates and changes in accounting policies that occur on or after the beginning of the annual reporting period beginning on or after January 1, 2023.

As of the date the financial statements were authorized for issue, the Corporation is continuously assessing the possible impact that the application of relevant standards and interpretations will have on the Corporation’s financial position and financial performance and will disclose relevant impact when the assessment is completed.

221

Financial Overview

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

The financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by the FSC.

b. Basis of preparation

The financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

c. Classification of current and non-current assets and liabilities

Current assets include cash, cash equivalents, assets held for trading purposes and assets that are expected to be converted into cash or consumed within 12 months from the balance sheet date; assets other than current assets are non-current assets. Current liabilities include liabilities incurred for trading purposes and obligations that are expected to be settled within 12 months from the balance sheet date; liabilities other than current liabilities are non-current liabilities.

d. Foreign currencies

Foreign-currency transactions other than derivative contracts are recorded in the New Taiwan dollars at the rates of exchange in effect when the transactions occur. Gains or losses resulting from application of different exchange rates when foreign-currency assets and liabilities are converted or settled are recognized in profit or loss in the year of conversion or settlement. At year-end, balances of monetary foreign-currency assets and liabilities are restated using prevailing exchange rates and the resulting differences are recognized in profit or loss.

e. Cash equivalents

Cash equivalents include time deposits and repurchase agreement collateralized by government bonds with original maturities within

3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

f. Financial assets at fair value through profit or loss

Financial asset is classified as at FVTPL when the financial asset is mandatorily classified or it is designated as at FVTPL.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on re-measurement recognized in profit or loss. The net gain or loss recognized in profit or loss contains any dividend or interest earned on the financial asset.

The fair values of open-end money market funds are determined using net asset values at balance sheet date.

g. Equity instruments

Debt and equity instruments issued by the Corporation are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments issued by the Corporation are recognized at the proceeds received, net of direct issue costs.

h. Impairment of accounts receivable

Receivables are mainly generated from customers who purchased tickets and merchandise through credit cards; these receivables are assessed for lifetime Expected Credit Loss (i.e. ECL).

222

Expected credit loss reflects the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECL represents the expected credit loss that will result from all possible default events over the expected life of a financial instrument.

i. Inventories

Inventories, consisting of consumptive and non-consumptive spare parts and supplies for internal operation and merchandise for sale, are stated at the lower of weighted-average cost or net realizable value.

j. Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation. Major additions, replacement and improvements are capitalized, while maintenance and repairs are expensed currently.

Depreciation is recognized so as to write off the cost of the assets less their residual values over their useful lives. Depreciation is computed using the straight-line method over the following estimated useful lives: Machinery and equipment - 3 to 5 years; transportation equipment - 4 years; office equipment - 3 to 10 years; leasehold improvements - 2 to 5 years; other equipment - 3 to 35 years.

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

k. Intangible assets

1) Operating concession assets

The Corporation was granted authority to construct and operate the HSR and relevant ancillary facilities under the C&O Agreement and therefore the Corporation’s operation is under the scope of IFRIC 12 “Service Concession Arrangements”. According to the C&O Agreement, the Corporation is required to share profit with the MOTC for the development and construction of HSR infrastructure and facilities, thus profit sharing payments are considered as an acquisition cost of the concession. The minimum commitment to profit sharing payments was discounted and recognized as intangible assets - operating concession assets with corresponding operating concession liabilities.

The Fourth Amendment of the C&O Agreement was effective on October 30, 2015. The construction and operation concession period of the HSR was extended from 35 years to 70 years until the year 2068. Receivable due from shortfall charges with respect to statutory concession tickets is considered as cost of the extension of concession period and recognized as operating concession assets - period extension cost.

The cost less residual value of the operating concession assets are amortized on a straight-line basis over the estimated useful lives which range as follows: Land improvements - 15 to 61.5 years; buildings - 10 to 61.5 years; machinery and equipment - 2 to 35 years; transportation equipment - 3 to 35 years; other equipment - 5 years; profit sharing payments - 61.5 years; period extension cost (shortfall charge with respect to statutory concession tickets) - 52.75 years (the remaining concession period started from October 2015).

Operating concession assets are measured initially at cost model and then amortized during the concession period. Major additions, replacement and improvements are capitalized, while maintenance and repairs are expensed currently. On de-recognition of operating concession assets, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

223

Financial Overview

2) Computer software

Computer software is amortized on a straight-line basis over 5 years.

l. Operating concession liabilities

According to the C&O Agreement, the Corporation is required to share profit with the MOTC for the development and construction of HSR infrastructure and facilities; thus, profit sharing payments are considered as an acquisition cost of the concession. The acquisition cost is recognized as operating concession assets (an intangible asset described in item j.1) above) with corresponding operating concession liabilities. The liability was measured at the discounted amount of the profit sharing payments at the date of HSR commercial operation. Subsequent interest is computed by using the effective interest method.

The Fourth Amendment of the C&O Agreement and the SZD Termination Agreement were effective on October 30, 2015. As the value of returned superficies is allowed to offset profit sharing payable each year, it is recognized as a deduction of the operating concession liabilities (value of returned superficies for offset of profit sharing payable).

m. Impairment of assets

The Corporation estimates the recoverable amount of an asset at the balance sheet date if there was an indication that it might be impaired.

Recoverable amount is the higher of value in use and fair value less costs to sell. When the carrying amount of an asset exceeds its value in use, the Corporation further estimates its fair value less costs to sell. If the carrying amount of an asset exceeds its fair value less costs to sell, an impairment loss will be recognized as the excess of the carrying amount over the higher of value in use or fair value less costs to sell.

When an impairment loss is subsequently reversed, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized on the asset in prior years.

n. Hedge accounting

Hedging financial instruments are measured at fair value. Related gains and losses are recognized in profit or loss in current year.

o. Provisions

Provisions are recognized when the Corporation has a present obligation (legal or constructive) as a result of a past event, it is probable that the Corporation will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

p. Revenue recognition

Passenger fares received or receivable are recognized as revenue when transport services are provided. Amounts received for passenger tickets sold but not used are recorded as contract liabilities.

Sales of tickets that grant reward credits to customers under the Corporation’s reward scheme are accounted for as multiple element revenue transactions and the fair value of the consideration received or receivable is allocated between the tickets sold and the reward credits granted. The transaction price of the reward credits is allocated to the contract’s performance obligations based on the relatively separate sales price. Such consideration is not recognized as revenue at the time of the initial sale transaction but is recognized as contract liabilities; revenue is recognized when the reward credits are redeemed and the Corporation’s obligations have been fulfilled.

224

q. Leases

At the inception of a contract, the Corporation assesses whether the contract is, or contains, a lease. For a contract that contains a lease component and non-lease components, the Corporation allocates the consideration in the contract to each component on the basis of the relative stand-alone price and accounts for each component separately.

1) The Corporation as lessor

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

2) The Corporation as lessee

The Corporation recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms. Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives received. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any re-measurement of the lease liabilities.

Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms.

Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, the Corporation uses the lessee’s incremental borrowing rate.

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms.

The Corporation negotiates with the lessor for rent concessions as a direct consequence of the Covid-19 to change the lease payments originally due by June 30, 2021, that results in the revised consideration for the lease less than the consideration for the lease immediately preceding the change. There is no substantive change to other terms and conditions. The Corporation elects to apply the practical expedient to all of these rent concessions, and therefore, does not assess whether the rent concessions are lease modifications. Instead, the Corporation recognizes the reduction in lease payment in profit or loss in the period in which the events or conditions that trigger the concession occurs, and makes a corresponding adjustment to the lease liabilities.

r. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Other than the borrowing costs described above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

s. Government grants

Government grants are not recognized until there is reasonable assurance that the Corporation will comply with the conditions attached to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Corporation recognizes as expenses the related costs for which the grants are intended to compensate.

225

Financial Overview

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Corporation with no future related costs are recognized in profit or loss in the period in which they become receivable.

t. Retirement benefit costs

Payments of contributions to a defined contribution plan are recognized as an expense when employees have rendered service entitling them to the contributions. Defined benefit costs under a defined benefit plan are recognized based on actuarial calculations.

u. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

Current tax payable depends on the current taxable income. Taxable income is different from the net income before tax on the statement of comprehensive income for the reason that certain revenue and expenses are taxable or deductible items in other period, or not taxable or deductible items pursuant to related Income Tax Act. The Corporation’s current tax liabilities are calculated by the legislated tax rate on the balance sheet date.

Pursuant to the Income Tax Act, an additional tax at 5% of unappropriated earnings is provided for as income tax in the year the stockholders approve to retain the earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable income. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carryforwards and personnel training expenditures to the extent that it is probable that taxable income will be available against which those deductible temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable income will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liabilities are settled or the assets are realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Corporation expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Corporation’s accounting policies which are described in Note 4, the management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

226

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

a. Controversial overtime payments

As of December 31, 2020 and 2019, provisions for controversial overtime payments recognized by the Corporation were both $283,279 thousand. The estimated provision could differ from the actual amount payable, which is subject to the result of the administrative judgment or the agreement to be settled with the employees. Refer to Note 17 for further information.

b. Stabilization reserve

As of December 31, 2020 and 2019, the Corporation recognized a provision for stabilization reserve for $10,885,959 thousand and $16,084,658 thousand, respectively, in accordance with the stabilization mechanism under the C&O Agreement. The actual payment for the stabilization reserve may change and is subject to the profitability for the remaining concession period, which ends in the year 2068 or earlier if so terminated. Refer to Note 17 and Note 29.a.3) for further information.

c. Income taxes

Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available against which those deferred tax assets can be utilized. Assessment of the realization of the deferred tax assets includes consideration of future revenue growth, amount of tax credits that can be utilized and feasible tax planning strategies.

As of December 31, 2020 and 2019, the carrying amounts of deferred tax assets in relation to deductible temporary differences were $7,673,251 thousand and $7,316,212 thousand, respectively. As of December 31, 2020 and 2019, the deductible temporary tax differences of $171,614 thousand and $1,181,032 thousand, respectively, were not recognized as deferred tax assets according to the assessment of the realizability of deferred tax assets. Refer to Note 23.d. for further information.

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts Demand deposits Time deposits Repurchase agreement collateralized by government bonds	December 31	December 31
	2020 $ 105,723 1 74,045 - 472,000 $ 651,769	2019
		$ 88,890 10 481,618 8,158 15,693,000
		$ 16,271,676

227

Financial Overview

The interest rate intervals of cash and cash equivalents at the end of the reporting periods were as follows:

Demand deposits Time deposits Repurchase agreement collateralized by government bonds	December 31	December 31
	2020 0.001%-0.05% - 0.23%-0.30%	2019
		0.001%-0.33% 0.62% 0.50%-0.56%

7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Open-end money market funds	December 31	December 31
	2020 $ 15,218,000	2019
		$ 330,443

The financial assets at FVTPL are mandatorily classified as FVTPL.

8. INVENTORIES

Spare parts and supplies Merchandise	December 31	December 31
	2020 $ 2,054,835 14,115 $ 2,068,950	2019
		$ 2,044,649 11,396
		$ 2,056,045

As of December 31, 2020 and 2019, allowance for inventory valuation losses amounted to $619,822 thousand and $642,848 thousand, respectively.

9. OTHER FINANCIAL ASSETS

Repurchase agreement collateralized by government bonds Time deposits Demand deposits Other performance guarantee Current Non-current	December 31	December 31
	2020 $ 12,496,000 8,634,730 21,259 5,331 $ 21,157,320 $ 19,086,463 2,070,857 $ 21,157,320	2019
		$ 20,433,000 3,848,118 24,901 4,248
		$ 24,310,267
		$ 22,207,764 2,102,503
		$ 24,310,267

228

a. The interest rate intervals of other financial assets at the end of the reporting periods were as follows:

he interest rate intervals of other fnancial assets at the end of the reportingp	eriods were as follows:	eriods were as follows:
Repurchase agreement collateralized by government bonds Time deposits Demand deposits	December 31
	2020 0.20%-0.30% 0.07%-1.025% 0.01%-0.04%	2019
		0.53%-0.58% 0.15%-2.65% 0.03%-0.08%

b. Refer to Note 28 for the information of other financial assets pledged as collateral.

10. PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT
Land Machinery and equipment Transportation equipment Offce equipment Leasehold improvements Other equipment	December 31
	2020 $ 28 61,153 - 15,013 278 33,257 $ 109,729	2019
		$ 28 69,091 - 11,846 710 43,372
		$ 125,047

229

Financial Overview

Cost Balance at January 1, 2020 Additions Disposals Transfer Balance at December 31, 2020 Accumulated depreciation Balance at January 1, 2020 Depreciation Disposals Balance at December 31, 2020 Cost Balance at January 1, 2019 Additions Disposals Transfer Balance at December 31, 2019 Accumulated depreciation Balance at January 1, 2019 Depreciation Disposals Transfer Balance at December 31, 2019	Land $ 28 - - - 28 - - - - $ 28 $ 28 - - - 28 - - - - - $ 28	Machinery and Equipment $ 317,209 19,667 (10,009 ) 309 327,176 248,118 27,914 (10,009) 266,023 $ 61,153 $ 275,437 47,573 (5,801 ) - 317,209 231,151 22,743 (5,776 ) - 248,118 $ 69,091	Transportation Equipment $ 87 - - - 87 87 - - 87 $ - $ 155 - (68 ) - 87 155 - (68 ) - 87 $ -	Offce Equipment $ 119,610 5,684 (3,309 ) 1,999 123,984 107,764 4,516 (3,309) 108,971 $ 15,013 $ 121,048 4,449 (5,579 ) (308) 119,610 109,613 4,038 (5,579 ) (308) 107,764 $ 11,846	Leasehold Improvements $ 80,528 - - - 80,528 79,818 432 - 80,250 $ 278 $ 80,448 80 - - 80,528 79,395 423 - - 79,818 $ 710	Other Equipment $ 266,001 4,715 (110 ) 242 270,848 222,629 15,072 (110) 237,591 $ 33,257 $ 252,813 15,090 (1,902 ) - 266,001 211,530 13,001 (1,902 ) - 222,629 $ 43,372	Total
							$ 783,463 30,066 (13,428 ) 2,550
							802,651
							658,416 47,934 (13,428)
							692,922
							$ 109,729
							$ 729,929 67,192 (13,350 ) (308)
							783,463
							631,844 40,205 (13,325 ) (308)
							658,416
							$ 125,047

230

11. LEASE ARRANGEMENTS

a. Right-of-use assets

Right-of-use assets
Cost Balance at January 1, 2020 Additions Deduction Balance at December 31, 2020 Accumulated depreciation Balance at January 1, 2020 Depreciation Deduction Balance at December 31, 2020 Cost Balance at January 1, 2019 Additions Balance at December 31, 2019 Accumulated depreciation Balance at January 1, 2019 Depreciation Balance at December 31, 2019	Buildings $ 254,865 183,102 (84) 437,883 $ 81,897 83,301 (70) 165,128 $ 272,755 $ 251,857 3,008 254,865 - 81,897 81,897 $ 172,968	Machinery and Equipment $ 497,473 - (500) 496,973 $ 61,881 61,581 (500) 122,962 $ 374,011 $ 497,473 - 497,473 - 61,881 61,881 $ 435,592	Transportation Equipment $ 37,254 64,500 (29,977) 71,777 $ 17,321 19,030 (29,977) 6,374 $ 65,403 $ 30,659 6,595 37,254 - 17,321 17,321 $ 19,933	Other Equipment $ 1,485 - (1,485) - $ 990 473 (1,463) - $ - $ 1,433 52 1,485 - 990 990 $ 495	Total
					$ 791,077 247,602 (32,046)
					1,006,633
					$ 162,089 164,385 (32,010)
					294,464
					$ 712,169
					$ 781,422 9,655
					791,077
					- 162,089
					162,089
					$ 628,988

b. Lease liabilities

Lease liabilities
Buildings Machinery and equipment Transportation equipment Other equipment Less: Recognized as current lease liabilities Lease liabilities - non-current	Lease Term 2-10 years 2-9 years 3-5 years 1.5-3 years	December 31
		2020 $ 269,501 354,897 65,454 - 689,852 (166,876) $ 522,976	2019
			$ 169,049 410,876 19,983 497
			600,405 (153,230)
			$ 447,175

231

Financial Overview

Range of discount rate for lease liabilities was as follows:

ange of discount rate for lease liabilities was as follows:
Buildings Machinery and equipment Transportation equipment Other equipment	December 31
	2020 0.54%-0.87% 0.87% 0.54%-0.73% -	2019
		0.66%-0.87% 0.59%-0.87% 0.59%-0.73% 0.59%

c. Material lease terms

The Corporation leased an office building from Century Development Corporation with the lease term from January 2018 to December 2020 and renewed the lease contract to December 2023 after the lease term expires.

The Corporation leased a parking lot for rental business in Zuoying Station from Cargo Service Headquarters of the Taiwan Railroad Administration Bureau, MOTC with the lease term from January 2017 to January 2027.

The Corporation leased a host of automatic ticketing system for operating from IBM Taiwan Corporation with the lease term from February 2018 to January 2027.

d. Other lease information

Expenses relating to short-term leases Expenses relating to low-value asset leases Total cash outfows for leases	2020 $ 3,255 $ 516 $ (165,564)	2019
		$ 4,060
		$ 277
		$ (158,791)

The Corporation’s lease of certain space which qualifies as short-term leases of certain office equipment and other equipment qualify as low-value asset leases. The Corporation has elected to apply the recognition exemption and thus, did not recognize right-of-use assets and lease liabilities for these leases.

12. INTANGIBLE ASSETS

Operating concession assets Computer software, net	December 31	December 31
	2020 $ 378,291,412 83,252 $ 378,374,664	2019
		$ 390,113,063 54,413
		$ 390,167,476

232

a. Movements of the intangible assets

Operating Concession Assets

Operating Assets $ 476,122,275 300,220 (3,022,428 ) 998,092	Proft Sharing Payments $ 69,972,043 - - -	Period Extension Cost $ 12,701,819 - - -	Construction in Progress $ 739,116 1,862,942 - (1,032,270)	Total $ 559,535,253 2,163,162 (3,022,428 ) (34,178)	Computer Software, Net $ 446,577 29,854 - 26,741	Total $ 559,981,830 2,193,016 (3,022,428 ) (7,437)
474,398,159	69,972,043	12,701,819	1,569,788	558,641,809	503,172	559,144,981
151,660,749 12,592,676 (3,002,870)	16,738,071 1,097,607 -	1,023,370 240,794 -	- - -	169,422,190 13,931,077 (3,002,870)	392,164 27,756 -	169,814,354 13,958,833 (3,002,870)
161,250,555	17,835,678	1,264,164	-	180,350,397	419,920	180,770,317
$313,147,604	$52,136,365	$11,437,655	$ 1,569,788	$378,291,412	$ 83,252	$378,374,664
$ 473,162,271 328,170 (379,352 ) 3,011,186	$ 69,972,043 - - -	$ 12,701,819 - - -	$ 1,355,857 2,393,311 - (3,010,052)	$ 557,191,990 2,721,481 (379,352 ) 1,134	$ 428,411 16,706 - 1,460	$ 557,620,401 2,738,187 (379,352 ) 2,594
476,122,275	69,972,043	12,701,819	739,116	559,535,253	446,577	559,981,830
139,599,984 12,437,907 (377,450 ) 308	15,640,464 1,097,607 - -	782,578 240,792 - -	- - - -	156,023,026 13,776,306 (377,450 ) 308	374,166 17,998 - -	156,397,192 13,794,304 (377,450 ) 308
151,660,749	16,738,071	1,023,370	-	169,422,190	392,164	169,814,354
$324,461,526	$53,233,972	$11,678,449	$ 739,116	$390,113,063	$ 54,413	$390,167,476

233

Financial Overview

b. Operating assets and construction in progress are as follows:

Operating assets and construction in progress are as follows:
Operating assets, net Land improvements Buildings Machinery and equipment Transportation equipment Other equipment Construction in progress Prepayments for equipment	December 31
	2020 $ 161,599,299 27,092,694 25,756,415 98,673,349 25,847 $ 313,147,604 $ 1,569,788	2019
		$ 165,016,977 27,558,084 27,012,524 104,848,364 25,577
		$ 324,461,526
		$ 739,116

c. Operating concession - rental

According to the HSR Right-of-Way Map and the HSR Overpass/Underpass Superficies Space Map appended to the C&O Agreement, the Corporation acquired superficies from the MOTC on the land of transportation infrastructure and pays the rental every year, including routes, maintenance bases, and stations. The rental is governed by the Public-owned Land Rent Preferential Treatment Scheme under the Statute for Encouragement of Private Participation in Transportation Infrastructure Projects, and is subject to the changes in the future reported price of public-owned land and usage of such public-owned land and other relevant factors. The Corporation prepays the rental for the following year by the end of each year, and if the reported price of public-owned land is adjusted, the discrepancies due to that should be paid off in the same year. As of December 31, 2020, the superficies encompasses northern area to southern area of Taiwan, from Land Lot No. 1042-0001 of Tongxing Section, Xizhi District, New Taipei City located on the north to Land Lot No. 04190002 of Subsection 6, Hsinchuang Section, Zuoying District, Kaohsiung City located on the south. The term of such acquired superficies is from the date of their registration to the date of expiration or termination of the C&O Agreement.

13. OTHER ASSETS

Other current assets Prepayments Others Other non-current assets Others	December 31	December 31
	2020 $ 1,355,197 22,636 $ 1,377,833 $ 5,193	2019
		$ 1,290,402 53,931
		$ 1,344,333
		$ 9,240

234

14. BORROWINGS

a. Short-term borrowings

hort-term borrowings
Japanese yen (“JPY”) letters of credit he range of interest rates at the end of the reporting periods was as follows: JPY letters of credit ong-term debt Syndicated loan Tranche A1 Facility (from May 4, 2010 to May 4, 2049) Tranche A2 Facility (from May 4, 2010 to May 4, 2048) Less: Unamortized cost of long-term debt	December 31
	2020 2019 $ 57,091 $ 64,980 December 31	2019
		$ 64,980
	2020 2019 0.63%-0.85% 0.62%-0.74% December 31	2019
	2020 $ 112,200,000 145,505,117 257,705,117 (97,634) $ 257,607,483	2019
		$ 120,000,000 156,205,117
		276,205,117 (104,800)
		$ 276,100,317

The range of interest rates at the end of the reporting periods was as follows:

b. Long-term debt

The Corporation entered into the Taiwan North-South High Speed Rail Construction and Operation Tripartite Agreement (the “Tripartite Agreement”) with the MOTC and Bank of Taiwan on January 8, 2010, and the NT$382 billion Syndicated Loan Agreement with respect to Taiwan North-South High Speed Rail Construction and Operation Project (the “Syndicated Loan Agreement”) with a group of eight syndicated banks. The syndicated banks of the Syndicated Loan Agreement consist of Bank of Taiwan, Mega International Commercial Bank, Taiwan Cooperative Bank, Land Bank of Taiwan, First Commercial Bank, Taiwan Business Bank, Chang Hwa Commercial Bank, and Hua Nan Commercial Bank. The significant terms are as follows:

1) The syndicated loan includes Tranches A1, A2, A3, B, C and D with different credit facilities. Tranches A1, A2, C and D are credit facilities, Tranche A3 is corporate bond guarantee facility, and Tranche B is performance guarantee facility. Tranche A3, C and D were fully redeemed and cannot be issued afterwards.
2) The Corporation provided assets (refer to assets to be transferred to the MOTC under the C&O Agreement) as collateral for the syndicated loan (the Corporation’s assets are not required to be registered with the syndicated banks for creating rights attached to the Corporation’s such assets). When the value of the collateral is less than the balance of the outstanding syndicated loan, the Corporation shall negotiate with Bank of Taiwan and the MOTC for solutions. However, if an agreement cannot be reached within 45 days after the date of the negotiation notice issued by Bank of Taiwan, the Corporation should redeem the difference immediately. The aforementioned collateral is inspected in May and November every year. The re-assessment mechanism for collateral value is inactive when Tranche B Facility is not utilized.
3) According to the Syndicated Loan Agreement, the Corporation opened capital account and reserve account at Bank of Taiwan for deposits and financial instruments. The Corporation is free to use the capital account; however, the reserve account is restricted and pledged as collateral to Bank of Taiwan, and is recorded as other financial assets. Refer to Notes 9 and 28 for further information.

235

Financial Overview

4) The repayment schedule and interest rates of the Syndicated Loan Agreement are as follows: a) Repayment schedule

Repayment schedule
Tranche A1 Facility Tranche A2 Facility	Repayment Schedule May 4, 2021- November 4, 2040 May 4, 2041- November 4, 2049 May 4, 2050 May 4, 2021- November 4, 2040 May 4, 2041- November 4, 2049 May 4, 2050	Ratio of Repayment 1.5% per installment 2.0% per installment 4.0% per installment 1.5% per installment 2.0% per installment 4.0% per installment	Repayment schedule after Early Repayment May 4, 2023- November 4, 2040 May 4, 2041- May 4, 2049 May 4, 2023.5.4- November 4, 2040 May 4, 2041- May 4, 2048	Number of Semi-annual Installment Repayment after Early Repayment
				Installments 05-40 Installments 41-57 Installments 05-40 Installments 41-55

On March 3, 2020, the Corporation made early repayment for $8 billion and repaid interest differences for $276,433 thousand due to early repayment of the loan.

On July 2, 2020, the Corporation made early repayment for $10.5 billion and repaid interest differences for $358,420 thousand due to early repayment of the loan.

b) Interest rates

The interest rates (including 5% VAT) of the Tranche A1 Facility and Tranche A2 Facility are determined as the reference rate (1year time deposit floating rate of Chunghwa Post Co., Ltd.) plus spread as listed on the table below. Due to the step-up spread mechanism, the Corporation shall make up for the deficit of the interests below the agreed interest rate to the syndicated banks if early redemption occurs. As of December 31, 2020 and 2019, the reference rates were 0.81% and 1.06%, respectively.

Syndicated Period May 4, 2010 - May 3, 2012 May 4, 2012 - May 3, 2013 May 4, 2013 - May 3, 2014 May 4, 2014 - May 3, 2015 May 4, 2015 - May 3, 2016 May 4, 2016 - May 3, 2017 May 4, 2017 - May 3, 2018 May 4, 2018 - May 3, 2040 May 4, 2040 - May 4, 2049	Markup Interest Rates
	0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% 0.92% 1.08%

236

5) The interest on Tranche A1 and A2 Facilities is calculated based on the Syndicated Loan Agreement. The Corporation computes interest expense by the effective interest method. Interest payment that is due longer than one year is recognized as long-term interest payable according to the agreement. The effective interest rates, accrued interest expense, and interest expense were summarized as follows:

a) Effective interest rates

Tranche A1 Facility Tranche A2 Facility b) Accrued interest expense (included in other payables) Syndicated loan Tranche A1 Facility Tranche A2 Facility c) Long-term interest payable Syndicated loan Tranche A1 Facility Tranche A2 Facility d) Interest expense Syndicated loan Interest expense	December 31	December 31
	2020 2019 1.66% 1.91% 1.67% 1.92% December 31	2019
	2020 2019 $ 173,538 $ 212,417 225,051 276,505 $ 398,589 $ 488,922 December 31	2019
		$ 212,417 276,505
		$ 488,922
	2020 2019 $ 3,408,809 $ 3,870,760 3,974,874 4,579,320 $ 7,383,683 $ 8,450,080 For the Year Ended December 31	2019
		$ 3,870,760 4,579,320
		$ 8,450,080
	2020 $ 4,560,970	2019
		$ 5,285,003

237

Financial Overview

15. BONDS PAYABLE

Domestic unsecured bond Issued 30-year bond on November 14, 2019, interest payable at 1.6% per annum Issued 30-year bond on July 1, 2020, interest payable at 1.3% per annum Less: Unamortized issuance cost	December 31	December 31
	2020 $ 8,000,000 10,500,000 18,500,000 (21,280) $ 18,478,720	2019
		$ 8,000,000 -
		8,000,000 (9,671)
		$ 7,990,329

The trustee of the abovementioned corporate bonds’ creditors is Taishin International Bank.

16. OPERATING CONCESSION LIABILITIES

Operating concession liabilities Value of returned superfcies for offset of proft sharing payable Current Non-current	December 31	December 31
	2020 $ 79,337,100 (22,925,504) $ 56,411,596 $ 541,931 55,869,665 $ 56,411,596	2019
		$ 78,516,696 (22,475,984)
		$ 56,040,712
		$ 777,511 55,263,201
		$ 56,040,712

According to the C&O Agreement, the Corporation is required to share profit with the MOTC for the development and construction of HSR infrastructure and facilities. Refer to Note 29.a.2.) for further information. The minimum commitment to profit sharing payments of $108 billion was discounted and recognized as operating concession assets and operating concession liabilities, and related amortization expense and interest expense, respectively, are recognized during the concession period. The information about the amortization expense of operating concession assets and the interest expense of operating concession liabilities during the concession period is summarized as follows:

Year Up to December 31, 2020 2021 (estimate) 2022 (estimate) 2023 (estimate) 2024 (estimate) 2025-2033 (estimate) 2034-2068 (estimate)	Amortization Expense $ 17,835,678 1,097,608 1,097,608 1,097,608 1,097,608 9,878,473 37,867,460 $ 69,972,043	Interest Expense $ 21,521,600 1,629,873 1,662,470 1,395,720 1,423,634 10,394,660 - $ 38,027,957	Total
			$ 39,357,278 2,727,481 2,760,078 2,493,328 2,521,242 20,273,133 37,867,460
			$ 108,000,000

238

According to the Financial Resolution Plan, the Fourth Amendment of the C&O Agreement and the SZD Termination Agreement that became effective on October 30, 2015, the Corporation used the appraised fair value of returned superficies of $22,613,234 thousand to proportionally offset the operating concession liabilities (profit sharing payable), which is payable to the MOTC at the end of every five years. The estimated offset amount is $29,784,855 thousand. Refer to Note 29 a. 2) for further details. The information on actual and estimated profit or loss recognized on the value of returned superficies for offset of profit sharing payable within the concession period is summarized as follows:

summarized as follows:
Year Up to December 31, 2020 2021 (estimate) 2022 (estimate) 2023 (estimate) 2024 (estimate) 2025-2033 (estimate)	Other Gain $ 22,613,234 - - - - - $ 22,613,234	Deduction of Interest Expense $ 2,315,791 458,510 467,680 391,989 399,829 3,137,822 $ 7,171,621	Total
			$ 24,929,025 458,510 467,680 391,989 399,829 3,137,822
			$ 29,784,855

As of December 31, 2020, the Corporation’s accumulated profit sharing payments paid to the MOTC amounted to $10,153,022 thousand (or accumulated profit sharing payments for $12,156,543 thousand less the deductible amount of returned superficies for $2,003,521 thousand).

17. PROVISIONS

a. Provisions

Provisions
Current Provision for controversial overtime pay Provision for stabilization reserve Non-current Provision for stabilization reserve	December 31
	2020 $ 283,279 885,959 $ 1,169,238 $ 10,000,000	2019
		$ 283,279 6,084,658
		$ 6,367,937
		$ 10,000,000

239

Financial Overview

b. Movements in provisions were as follows:

Movements in provisions were as follows:
Current Provision for controversial overtime pay Provision for stabilization reserve Non-current Stabilization reserve Current Provision for controversial overtime pay Provision for stabilization reserve Non-current Provision for stabilization reserve	Balance at January 1, 2020 Addition $ 283,279 $ - 6,084,658 885,959 $ 6,367,937 $ 885,959 $ 10,000,000 $ - Balance at January 1, 2019 $ 283,279 $ - $ 283,279 $ $ 9,560,897 $		Usage	Balance at December 31, 2020 $ 283,279 885,959 $ 1,169,238 $ 10,000,000 Balance at December 31, 2019	Balance at December 31, 2020
			$ - (6,084,658)		$ 283,279 885,959
			$ (6,084,658)		$ 1,169,238
			$ -		$ 10,000,000
			Addition - 6,084,658 6,084,658 439,103
		$		$ 283,279 6,084,658
		$		$ 6,367,937
		$		$ 10,000,000

1) Controversial overtime pay

Part of the Corporation’s employees are required to work in shifts due to the nature of the Corporation’s business. The national holidays are adjusted to regular holidays for employees who work in shifts and the combination of adjusted national holidays and regular holidays has been excluded in the calculation of regular working hours for the entire year. However, the Taiwan High Speed Rail Corporation Labor Union (the “THSRC Labor Union”) claimed that overtime should be paid if employees working in shifts worked on national holidays. Concerning the controversy over the calculation of overtime hours in every two consecutive weeks, and the improvement of policy on recess during regular days and holidays, in January 2016, the THSRC Labor Union proclaimed that employees working in shifts should cease to work overtime on Chinese New Year Holidays. In order to uphold the rights of both the passengers and employees, the Corporation has reached an agreement regarding the aforementioned controversy with the THSRC Labor Union on January 21, 2016. The Corporation shall finish the calculation of overtime hours and overtime pay on the abovementioned adjusted national holidays and working hours of two consecutive weeks, and after confirmation of the calculated amount of overtime, the Corporation shall sign agreements with employees individually, and half of the overtime pay shall be paid as an incentive bonus. The Corporation and the THSRC Labor Union agreed to settle the litigation on the Taipei City Government Labor Sanction in the Taipei High Administrative Court. In the final judgment, if the Corporation loses the lawsuit, the abovementioned incentive bonus shall be considered as part of the overtime pay to the employees; if the Corporation wins the lawsuit, the abovementioned incentive bonus shall remain in its nature as incentive bonus and does not need to be returned to the Corporation. This administrative litigation was rejected by Taipei High Administrative Court in June 2018. After the Corporation lodged an appeal against the verdict, the Supreme Administrative Court has decided that the original judgment be remanded to the Taipei High Administrative Court in October 2019. In December 2020, the Taipei High Administrative Court reversed the original ruling regarding violation of Article 24 of the Labor Standards Act. As for the unfavorable ruling on the parts related to Article 37 of the Labor Standards Act, the Corporation has filed an appeal by the end of the statutory appealing period.

240

As of December 31, 2020, the Corporation evaluated the most likely result and recognized the provision for controversial overtime pay for $283,279 thousand.

2) Stabilization reserve

Please refer to Note 29.a.3) regarding the recognition and use of provision for stabilization reserve. For the years ended December 31, 2020 and 2019, additional provision for the stabilization reserve expenses amounted to $885,959 thousand and $6,523,761 thousand, respectively. In August 2020, the Corporation contributed $6,084,658 thousand to the Stabilization Mechanism Account in accordance with the C&O agreement, and was in compliance with MOTC’s policies to utilize the funds. As of December 31, 2020, balance of the stabilization reserve account was $10,885,959 thousand recognized and the Stabilization Mechanism Account has a zero balance.

18. OTHER LIABILITIES

Other payables Accrued expenses Accrued interest expense Business tax payable Others Other current liabilities Contract liabilities (Note 21) Lease liabilities (Note 11) Receipts under custody Rent received in advance Others Other non-current liabilities Net defned beneft liability (Note 19) Guarantee deposits received Deferred revenue	December 31	December 31
	2020 $ 2,500,143 483,522 243,108 36,088 $ 3,262,861 $ 607,606 166,876 29,014 3,936 25,968 $ 833,400 $ 281,448 257,469 11,649 $ 550,566	2019
		$ 2,362,196 505,382 304,910 24,874
		$ 3,197,362
		$ 1,233,056 153,230 28,929 49,813 12,887
		$ 1,477,915
		$ 256,562 189,868 5,895
		$ 452,325

241

Financial Overview

19. RETIREMENT BENEFIT PLANS

a. Defined contribution plan

The Corporation adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, the Corporation makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

b. Defined benefit plan

The Corporation also adopted a defined benefit plan under the Labor Standards Act (the “LSA”). Under the LSA, pension benefits are calculated based on the length of service and average monthly salaries of the six months before retirement. The Corporation contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committees’ name. Before the end of each year, the Corporation assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the following year, the Corporation is required to fund the difference in a one-time appropriation that shall be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the Corporation has no right to influence the investment policy and strategy.

Through the defined benefit plans under the LSA, the Corporation is exposed to the following risks:

1) Investment risk

The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be lower than the interest rate for a 2-year time deposit with local banks.

2) Interest risk

A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the value on the plan’s debt investments.

3) Salary risk

The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The amounts included in the balance sheets in respect of the Corporation’s obligations under its defined benefit plan are as follows:

Present value of defned beneft obligation Fair value of plan assets Net defned beneft liability	December 31	December 31
	2020 $ (887,099 ) 605,651 $ (281,448)	2019
		$ (844,479 ) 587,917
		$ (256,562)

242

Movements in net defined benefit liability were as follows:

Balance at January 1, 2019 Current service cost Net interest income (expense) Recognized in proft or loss Remeasurement Return on plan assets Actuarial loss - experience adjustments Actuarial loss - changes in fnancial assumptions Recognized in other comprehensive income Contributions from the employer Benefts paid Balance at December 31, 2019 Current service cost Net interest income (expense) Recognized in proft or loss Remeasurement Return on plan assets Actuarial loss - experience adjustments Actuarial loss - changes in fnancial assumptions Recognized in other comprehensive income Contributions from the employer Benefts paid Balance at December 31, 2020	Present Value of the Defned Beneft Obligation $ (782,888) (13,714 ) (10,827) (24,541) - (42,224 ) (24,482) (66,706) - 29,656 (844,479) (13,036) (9,450) (22,486) - (11,688 ) (34,256) (45,944) - 25,810 $ (887,099)	Fair Value of the Plan Assets $ 572,190 - 7,999 7,999 17,845 - - 17,845 19,539 (29,656) 587,917 - 6,612 6,612 17,378 - - 17,378 19,554 (25,810) $ 605,651	Net Defned Beneft Liability
			$ (210,698)
			(13,714 ) (2,828)
			(16,542)
			17,845 (42,224 ) (24,482)
			(48,861)
			19,539
			-
			(256,562)
			(13,036)
			(2,838)
			(15,874)
			17,378 (11,688 ) (34,256)
			(28,566)
			19,554
			-
			$ (281,448)

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate Expected salary growth rate	Measurement Date	Measurement Date
	December 31
	2020 0.8% 2.25%	2019
		1.15% 2.25%

243

Financial Overview

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as shown on the table below. The sensitivity analysis may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Discount rate Increase 0.5% Decrease 0.5% Expected salary growth rate Increase 0.5% Decrease 0.5%	December 31	December 31
	2020 $ (48,506) $ 52,446 $ 51,794 $ (48,413)	2019
		$ (47,993)
		$ 52,067
		$ 51,587
		$ (48,047)

An analysis of the average duration of the defined benefit obligation was as follows:

The expected contributions to the plan for the next year The average duration of the defned beneft obligation	December 31	December 31
	2020 $ 33,931 10.0 years	2019
		$ 45,398
		10.6 years

c. Please refer to Note 22.a. for the expenses of defined contribution plan and defined benefit plan recorded as pension costs in comprehensive income for the years ended December 31, 2020 and 2019.

20. EQUITY

a. Capital stock

apital stock
Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Share capital issued and outstanding	December 31
	2020 12,000,000 $ 120,000,000 5,628,293 $ 56,282,930	2019
		12,000,000
		$ 120,000,000
		5,628,293
		$ 56,282,930

A holder of issued common stock with par value of $10 is entitled to vote and to receive dividends.

On November 26, 2015, the Corporation conducted capital injection and issued 3,000,000 thousand shares of common stock through a private placement at par value of $10, or a total of $30,000,000 thousand. The rights and obligations of the aforementioned privately placed common stock are the same as other common stock issued, except that such common stock has not yet been applied to be listed and traded on the Taiwan Stock Exchange.

244

b. Capital surplus

apital surplus
Issuance of common stock Forfeited employee share options	December 31
	2020 $ 171,885 1,096 $ 172,981	2019
		$ 171,885 1,096 $ 172,981

The capital surplus generated from shares issued in excess of par may be used to offset an accumulated deficit, if any; in addition, when the Corporation has no accumulated deficit, such capital surplus may be transferred to share capital or distributed in cash. Capitalization of such capital surplus is limited to once a year and a certain prescribed percentage of the Corporation’s paid-in capital. The capital surplus generated from forfeited employee share options may not be used for any purpose except for offsetting an accumulated deficit.

c. Legal reserve and appropriation of earnings

Under the dividend policy set forth in the Articles, after the resolution of the board of directors to distribute employees’ compensation and remuneration to directors, and payments for all taxes and duties, 10% of the remaining after-tax profit is set aside as legal reserve. However, when the legal reserve equals the Corporation’s paid-in capital, further appropriation of earnings to legal reserve will no longer be required. Furthermore, after reversal or appropriation of special reserve according to related regulations, the remainder together with any accumulated unappropriated earnings may be distributed to stockholders as proposed by the board of directors and ultimately resolved by the stockholders.

The Corporation’s dividend policy takes into account current and future development projects, consideration of investment environment, demand for funds and situations of domestic and international competitions, and consideration of stockholders’ benefits and other relevant factors to determine earnings distribution. The Corporation adopts a stable and balanced dividend policy. Distributable earnings shall be appropriated at the rate no less than 60% to stockholders as dividends; however, when accumulated unappropriated earnings are lower than 0.5% of paid-in capital, no appropriation shall be made. Dividends to be distributed shall be paid either in cash or in share, and cash dividends shall be no less than 50% of total dividends.

For the information on the appropriation policy, actual distributions of employees’ compensation and remuneration to directors, refer to Note 22.a.

The appropriations of earnings for 2019 and 2018 approved in the stockholders’ meetings on May 21, 2020 and May 30, 2019, respectively, were as follows:

Legal reserve Cash dividends	Appropriation	of Earnings For Fiscal Year 2018 $ 1,069,638 6,303,688 $ 7,373,326	Dividends Per Share(NT$)	Dividends Per Share(NT$)
	For Fiscal Year 2019 $ 800,703 6,810,797 $ 7,611,500		For Fiscal Year 2019 $ 1.2101	For Fiscal Year 2018
				$ 1.1200

Information on the appropriations of earnings, which is resolved by the board of directors and stockholders, is available at the Market Observation Post System website of the Taiwan Stock Exchange.

245

Financial Overview

21. REVENUE

REVENUE
Revenue from contracts with customers Railroad transportation revenue Other operating revenue	For the Year Ended December 31
	2020 $ 37,903,849 1,233,356 $ 39,137,205	2019
		$ 46,107,656 1,399,734
		$ 47,507,390

a. Contract balances

Notes and accounts receivable Contract liabilities Railroad transportation revenue Customer loyalty program Others	December 31, 2020 $ 218,092 $ 491,626 107,989 7,991 $ 607,606	December 31, 2019 $ 333,092 $ 1,163,968 62,629 6,459 $ 1,233,056	January 1, 2019
			$ 505,565
			$ 534,736 120,467 10,338
			$ 665,541

The changes in the balances of contract liabilities primarily result from the timing difference between the Corporation’s performance and the customer’s payment.

Revenue of the current year recognized from the beginning balance of contract liability is as follows:

From the beginning balance of contract liability Railroad transportation revenue Customer loyalty program Others	For the Year Ended December 31	For the Year Ended December 31
	2020 $ 1,156,393 54,160 6,179 $ 1,216,732	2019
		$ 529,513 108,738 10,336
		$ 648,587

b. Revenue from contracts with customers

The Corporation is engaged only in the operation of HSR and related facilities. Consequently, there is no other reportable segment. Revenue is railroad transportation revenue.

246

c. Partially completed contracts

For the performance obligations that are not fully satisfied, the expected timings for recognition of revenue are as follows.

Railroad transportation revenue In 2021 In 2022 Customer loyalty program In 2021 In 2022 Others In 2021	December 31, 2020
	$ 486,674 4,952
	491,626
	96,738 11,251
	107,989
	7,991
	$ 607,606

22. INCOME BEFORE INCOME TAX

Income before income tax was as follows:

a. Employee benefit expense

mployee beneft expense
Post-employment benefts Defned contribution plan Defned beneft plan Short-term employee benefts Payroll Insurance Others An analysis of employee beneft expense by function Operating costs Operating expenses	For the Year Ended December 31
	2020 $ 190,370 15,874 206,244 4,392,124 366,055 193,038 4,951,217 $ 5,157,461 $ 4,283,589 873,872 $ 5,157,461	2019
		$ 188,484 16,542
		205,026
		4,256,287 358,744 193,872
		4,808,903
		$ 5,013,929
		$ 4,156,369 857,560
		$ 5,013,929

For the years ended December 31, 2020 and 2019, the professional service fee was $2,138 thousand and $5,677 thousand, respectively.

247

Financial Overview

Under the Corporation’s Articles of Incorporation, if there is any after-tax profit at the end of the year, the Corporation shall first make up for accumulated losses and then distribute employees’ compensation and remuneration to directors at the rates not less than 1% and not higher than 1%, respectively, of remaining distributable profit. The employees’ compensation and remuneration to directors of the Corporation were calculated based on income before income tax (net of the employees’ compensation and remuneration to directors) according to the above policy. For the years ended December 31, 2020 and 2019, the estimated employees’ compensation in cash was $111,165 thousand and $159,489 thousand, and the estimated remuneration to directors in cash was $27,791 thousand and $39,872 thousand, respectively.

Material differences between estimated amounts and the amounts resolved by the board of directors on or before the date the annual financial statements are approved are adjusted in the year the compensation and remuneration were recognized. If there is a change in the resolved amounts after the annual financial statements were approved, the differences are recorded as a change in accounting estimate and adjusted in the following year.

The board of directors had resolved the employees’ compensation of $111,165 thousand and the remuneration to directors of $27,791 thousand for the year ended December 31, 2020 payable in cash on January 20, 2021 which were the same amounts recognized in the financial statements for the year ended December 31, 2020.

The board of directors had resolved the employees’ compensation of $159,489 thousand and the remuneration to directors of $39,872 thousand for the year ended December 31, 2019 payable in cash on January 15, 2020 which were the same amounts recognized in the financial statements for the year ended December 31, 2019.

Information on the employees’ compensation and remuneration to directors resolved by the board of directors and reported in the stockholders’ meeting is available at the Market Observation Post System website of the Taiwan Stock Exchange.

b. Depreciation and amortization

epreciation and amortization
Property, plant and equipment Right-of-use assets Intangible assets Other non-current assets An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating costs Operating expenses	For the Year Ended December 31
	2020 $ 47,934 164,385 13,958,833 4,423 $ 14,175,575 $ 187,110 25,209 $ 212,319 $ 13,957,127 6,129 $ 13,963,256	2019
		$ 40,205 162,089 13,794,304 4,546
		$ 14,001,144
		$ 179,923 22,371
		$ 202,294
		$ 13,794,118 4,732
		$ 13,798,850

248

c. Interest income

nterest income
Interest income of repurchase agreement collateralized by government bonds Interest income of bank deposits Others	For the Year Ended December 31
	2020 $ 94,132 40,682 34 $ 134,848	2019
		$ 122,118 40,550 32
		$ 162,700

d. Interest expense

nterest expense
Interest on bank loans Interest on operating concession liabilities Interest on bonds payable Interest on long-term bills payable Others	For the Year Ended December 31
	2020 $ 4,567,779 1,148,395 197,008 - 6,029 $ 5,919,211	2019
		$ 5,292,487 1,125,877 16,491 13,130 6,639 $ 6,454,624

e. Other gains and losses

Other gains and losses
COVID-19 relief of bill payment assistance (Note) Liquidated damages and termination compensation Gains on fnancial assets at FVTPL Compensation gain Government grants Foreign exchange (loss) gain, net Loss on disposal of intangible assets, net Others	For the Year Ended December 31
	2020 $ 190,095 60,824 30,111 15,921 11,274 (25,180 ) (11,393 ) 11,296 $ 282,948	2019
		$ - 12,510 1,832 52,346 3,554 4,816 (636 ) 4,418 $ 78,840

Note: Mainly composed of the electricity payment reduction and other relief package that the Corporation applied to and obtained from the government.

249

Financial Overview

23. INCOME TAX

a. Income tax recognized in profit or loss

ncome tax recognized in proft or loss
Current tax In respect of the current year Income tax on unappropriated earnings Adjustments for prior years Deferred tax In respect of the current year Income tax beneft	For the Year Ended December 31
	2020 $ (33,594 ) (17,822 ) 123,816 351,326 $ 423,726	2019
		$ (104,333 ) (162,152 ) 103 498,307
		$ 231,925

A reconciliation of income before income tax and income tax benefit was as follows:

Income tax expense calculated at the statutory rate Nondeductible expenses in determining taxable income Change in unrecognized deductible temporary differences Income tax on unappropriated earnings Income tax exemption effect Adjustments for prior years Others Income tax beneft recognized in proft or loss	For the Year Ended December 31	For the Year Ended December 31
	2020 $ (1,083,862 ) (4,091 ) 1,009,418 (17,822 ) 391,239 123,816 5,028 $ 423,726	2019
		$ (1,555,021 ) (9,590 ) (1,181,032 ) (162,152 ) 3,119,694 103 19,923
		$ 231,925

Under the amendment to the ROC Statute of Industrial Innovation in 2019, the amounts of unappropriated earnings in 2018 and thereafter that are reinvested in the construction or purchase of certain assets or technologies are allowed as deduction when computing the income tax on unappropriated earnings.

According to Article 28 of the Statute for Encouragement of Private Participation in Transportation Infrastructure Projects, the Corporation applied for a five-year income tax exemption. On April 13, 2018, the Ministry of Finance approved the application for income tax exemption, and the qualified exemption income is railroad and freight transportation income according to Article 3, Section 1, Item 1 of the Regulations Governing Application of Profit-seeking Enterprise Income Tax Exemption to Private Institutions Participating in Transportation and Communication Infrastructure Projects. The Corporation chose to start and has started its consecutive five-year income tax exemption period from January 1, 2017 according to Article 28, Section 2 of the Statute for Encouragement of Private Participation in Transportation Infrastructure Projects.

b. Income tax recognized in other comprehensive income

ncome tax recognized in other comprehensive income
Deferred tax In respect of the current year Remeasurement of defned beneft plan	For the Year Ended December 31
	2020 $ 5,713	2019
		$ 9,772

250

c. Deferred tax assets

For the year ended December 31, 2020

Beginning Balance Deferred tax assets Temporary differences Proft sharing payments $ 5,154,291 Provisions 2,092,556 Deferred revenue 12,526 Defned beneft obligation 47,597 Others 9,242 $ 7,316,212 For the year ended December 31, 2019 Beginning Balance Deferred tax assets Temporary differences Proft sharing payments $ 4,774,930 Provisions 1,968,835 Deferred revenue 24,094 Defned beneft obligation 37,825 Others 2,449 $ 6,808,133	Recognized in Proft or Loss $ 376,362 (30,322 ) 9,072 - (3,786) $ 351,326 Recognized in Proft or Loss $ 379,361 123,721 (11,568 ) - 6,793 $ 498,307	Recognized in Other Comprehensive Income $ - - - 5,713 - $ 5,713 Recognized in Other Comprehensive Income $ - - - 9,772 - $ 9,772	Ending Balance
			$ 5,530,653 2,062,234 21,598 53,310 5,456
			$ 7,673,251
			Ending Balance
Deferred tax assets Temporary differences Proft sharing payments Provisions Deferred revenue Defned beneft obligation Others
			$ 5,154,291 2,092,556 12,526 47,597 9,242
			$ 7,316,212

d. Items for which no deferred tax assets have been recognized

Deductible temporary differences Provision

December 31	December 31
2020 $ 171,614	2019
	$ 1,181,032

e. Income tax assessments

The tax authorities have assessed the tax returns through 2017.

251

Financial Overview

24. EARNINGS PER SHARE

EARNINGS PER SHARE
Basic earnings per share (NT$)	For the Year Ended December 31
	2020 $ 1.04	2019
		$ 1.42

The net income and weighted average number of common stock outstanding that were used in the computation of earnings per share were as follows:

were as follows:
Earnings attributable to common stockholders Weighted average number of common stock in the computation of basic earnings per share (in thousands)	For the Year Ended December 31
	2020 $ 5,843,037 5,628,293	2019
		$ 8,007,033
		5,628,293

25. CAPITAL MANAGEMENT

The Corporation manages its capital in a manner to ensure that it has sufficient and necessary financial resources to fund its needs, including working capital needs within 12 months, capital expenditure during the concession period, profit sharing payments, repayments of long-term and short-term debt, repayments of unsecured domestic bonds and other operating needs.

26. FINANCIAL INSTRUMENTS

a. Financial instruments

Financial instruments
Financial assets Financial assets at FVTPL Financial assets at amortized cost Other fnancial assets Others (Note 1) Financial liabilities Financial liabilities at amortized cost (Note 2)	December 31
	2020 $ 15,218,000 21,157,320 879,191 342,965,616	2019
		$ 330,443 24,310,267 16,641,362 351,625,069

Note 1: The balances included financial assets measured at amortized cost, which comprised cash and cash equivalents, notes and accounts receivable, and other receivables (included in other current assets).

Note 2: The balances included financial liabilities measured at amortized cost, which comprised short-term borrowings, accounts payable, operating concession

liabilities, other payables, payable for construction, bonds payable, long-term debt, long-term interest payable and guarantee deposits received (included in other non-current liabilities). However, short-term employee benefits payable and business tax payable were not included.

252

b. Fair value of financial instruments

1) Fair value of financial instruments that are not measured at fair value

Management believes the carrying amounts of financial assets and financial liabilities not measured at fair value approximate their fair values.

2) Fair value of financial instruments that are measured at fair value on a recurring basis The following table provides an analysis of financial instruments that are measured at fair value subsequent to initial recognition. The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable as follows:
a) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
b) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
c) Level 3 inputs are unobservable inputs for the asset or liability.

December 31, 2020 Financial assets at FVTPL Open-end money market funds December 31, 2019 Financial assets at FVTPL Open-end money market funds	Level 1 $ 15,218,000 Level 1 $ 330,443	Level 2 $ - Level 2 $ -	Level 3 $ - Level 3 $ -	Total
				$ 15,218,000
				Total
				$ 330,443

There were no transfers between Level 1 and Level 2 for the years ended December 31, 2020 and 2019.

3) Valuation techniques and assumptions applied for measuring fair value

The fair values of financial assets and financial liabilities were determined. The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active markets are determined with reference to quoted market prices.

c. Financial risk management objectives and policies

The Corporation’s major financial risk management goal is to manage risks that relate to operating activities. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. In order to lower relevant financial risks, the Corporation identifies and assesses the risks and takes actions to manage uncertainty of the market.

The board of directors in accordance with related regulations and internal controls, reviews the Corporation’s important financial activities. The Corporation also established related financial transaction procedures in accordance with the Corporation’s overall financial risk management and segregation of duties.

253

Financial Overview

1) Market risk

a) Foreign currency risk

The Corporation’s deposits, accounts payable and payable for construction denominated in foreign currencies exposed the Corporation to foreign currency risk. To control decline in value or fluctuations in future cash flows due to changes in exchange rates, the Corporation enters into forward exchange contracts to hedge foreign exchange risk. Hedging financial instruments can partially, but not entirely, reduce the impact arising from changes in foreign exchange rates.

The Corporation’s foreign-currency financial assets and liabilities were as follows (in thousands of respective foreign currencies or New Taiwan dollars):

	December 31, 2020
Foreign Currencies $ 22,626 16 874,469	Exchange Rate 28.48 0.2764 0.2764 December 31, 2019	New Taiwan Dollars
		$ 644,388 4 241,703
Foreign Currencies $ 22,319 4,931 889,301	Exchange Rate 30.106 0.2770 0.2770	New Taiwan Dollars
		$ 671,940 1,366 246,337

The Corporation was mainly exposed to USD and JPY foreign currency exchange risks. The sensitivity analysis related to foreign currency exchange rate risk was mainly calculated for foreign currency monetary items at the balance sheet date. If the U.S. dollar weakened against the New Taiwan dollar by 1%, income before income tax would have decreased by $6,444 thousand and $6,719 thousand, respectively, for the years ended December 31, 2020 and 2019. If the JPY strengthened against the New Taiwan dollar by 1%, the income before income tax would have decreased by $2,417 thousand and $2,450 thousand for the years ended December 31, 2020 and 2019, respectively.

254

The significant unrealized exchange gain and loss were as follows:

For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
2020 Exchange Rate Exchange (Loss) Gain, Net 28.48 $ 3,123 0.2764 (3,598 )	2019
Exchange Rate 28.48 0.2764	Exchange Rate 30.106 0.2770	Exchange (Loss) Gain, Net
		$ (20,788 ) 8,894

b) Interest rate risk

As of December 31, 2020 and 2019, the Corporation’s syndicated loan with floating interest rates amounted to $257,705,117 thousand and $276,205,117 thousand. If the market interest rate increased by 1% and all other variables were held constant, the income before income tax of the Corporation would have decreased by $2,577,051 thousand and $2,762,051 thousand, for the years ended December 31, 2020 and 2019, respectively.

c) Other price risk

The investments in open-end money market funds (recorded as financial assets at FVTPL) exposed the Corporation to equity price risk. If the price of the funds decreased by 1%, income before income tax would have decreased by $152,180 thousand and $3,304 thousand for the years ended December 31, 2020 and 2019, respectively.

2) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Corporation. Financial assets with positive fair values at the balance sheet date are evaluated for credit risk. At the end of the reporting period, the Corporation’s maximum exposure to credit risk which will cause a financial loss to the Corporation due to failure of counterparties to discharge an obligation could arise from the carrying amount of the respective recognized financial assets as stated in the balance sheets.

The Corporation only transacts with financial institutions and companies with good credit ratings. Therefore, no significant credit risk is anticipated.

3) Liquidity risk

The Corporation manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Corporation’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of financing facilities and ensures compliance with loan covenants.

255

Financial Overview

The following table details the Corporation’s remaining contractual maturity for its long-term debt and interest on long-term debt (please refer to Note 14. b.), operating concession liabilities, lease liabilities and bonds payable based on the undiscounted cash flows (excluding non-hedging financial liabilities that are to be settled within one year from the balance sheet date): December 31, 2020

December 31, 2020
Repayment Period 2021.1.1-2021.3.31 2021.4.1-2021.12.31 2022 2023 2024 2025 2026-2033 2034-2050	Long-term Debt $ - - - 9,058,460 9,186,153 9,186,153 73,489,228 156,785,123 $257,705,117	Interest on Long-term Debt $ 1,338,263 4,014,788 7,291,395 7,982,218 7,949,231 7,721,809 52,942,424 44,000,844 $133,240,972	Operating Concession Liabilities $ - 541,931 8,049,281 116,525 182,113 142,002 59,030,271 - $68,062,123	Lease Liabilities $ 42,167 125,333 157,423 149,576 74,021 73,278 81,954 - $ 703,752	Principal and Interest on Bonds Payable $ - 264,500 264,500 264,500 264,500 264,500 2,116,000 22,868,500 $26,307,000	Total
						$ 1,380,430 4,946,552 15,762,599 17,571,279 17,656,018 17,387,742 187,659,877 223,654,467
						$486,018,964

December 31, 2019

Repayment Period 2020.1.1-2020.3.31 2020.4.1-2020.12.31 2021 2022 2023 2024 2025-2033 2034-2049	Long-term Debt $ - - 9,186,153 9,186,153 9,186,153 9,186,153 82,675,382 156,785,123 $276,205,117	Interest on Long-term Debt $ 1,638,182 4,914,546 9,039,422 8,952,193 8,620,899 8,633,009 65,225,341 47,259,388 $154,282,980	Operating Concession Liabilities $ - 777,511 731,700 7,859,512 116,525 182,113 59,172,273 - $68,839,634	Lease Liabilities $ 40,536 113,297 84,745 74,570 74,449 74,021 155,232 - $ 616,850	Principal and Interest on Bonds Payable $ - 128,000 128,000 128,000 128,000 128,000 1,152,000 10,048,000 $11,840,000	Total
						$ 1,678,718 5,933,354 19,170,020 26,200,428 18,126,026 18,203,296 208,380,228 214,092,511
						$511,784,581

27. TRANSACTIONS WITH RELATED PARTIES

The MOTC under the Executive Yuan owns 43% equity interests in the Corporation’s outstanding common stock. Under IAS 24, the Corporation is a government-related entity, which is significantly influenced by the central government. The Corporation is a related party with the government-related entities (e.g., government-owned businesses) which are controlled by the Executive Yuan. However, the Corporation is not a related party with those government-related entities, which are only significantly influenced but not controlled by the Executive Yuan.

256

The Corporation is not required to disclose transactions and outstanding balances with the government-related entities. In addition to the C&O Agreement entered into with MOTC as stated in Note 29, the names of related parties, relationships, and the nature and amounts of the significant transactions were summarized as follows:

a. Name of related party and relationship

Related Party
MOTC
Bank of Taiwan and seven other
syndicated banks
National Chung-Shan Institute of
Science & Technology
China Steel Corporation
Century Development Corporation
InfoChamp Systems Corporation
Others

Relationship with the Corporation

An investor with signifcant infuence over the Corporation
A government-related entity controlled by the central government
A government-related entity controlled by the central government
A legal entity as director of the Corporation
An entity controlled by the legal entity as directors of the Corporation
An entity controlled by the legal entity as directors of the Corporation
Individual and legal entity as directors of the Corporation, and individuals and entities
controlled by the directors, key management personnel and their relatives, and related parties
in substance

b. Operating revenue

The Corporation is mainly engaged in the operation of the North-South High Speed Railway. According to the fare rate standard, timing and procedures of fare adjustment as prescribed in the C&O Agreement and regulated by the MOTC, the Corporation’s ticket price setting and adjustment shall be reported to the MOTC before they are announced and implemented. The transportation services and ticket prices provided to related parties were the same as those provided to general public passengers.

c. Operating costs

1) Profit sharing payments

According to the C&O Agreement, during the operating period, the Corporation shall make profit sharing payments at 10% of the net income before income tax to the MOTC each year for the development and construction of HSR infrastructure and facilities. The minimum commitment to profit sharing payments of $108 billion was discounted and recognized as intangible assets - operating concession assets and operating concession liabilities, and related amortization expense and interest expense, respectively, are recognized during the concession period. Please refer to Note 16 and Note 29.a.2.) for further information.

2) Operating concession - rental

The transactions between the Corporation and the MOTC were as follows, and, as for the nature, refer to Note 12.c. for further details:

a) Rental expense

Related Party Name Railway Bureau, MOTC Taiwan Railways Administration, MOTC	For the Year Ended December 31	For the Year Ended December 31
	2020 $ 779,030 50,194 $ 829,224	2019
		$ 786,036 48,346
		$ 834,382

257

Financial Overview

b) Prepaid rentals (included in other current assets)

		December 31	December 31
Related Party Name		2020		2019
Railway Bureau, MOTC	$	777,492	$	785,906
Taiwan Railways Administration, MOTC		50,194		48,325
	$	827,686	$	834,231
urchases of inventories
		For the Year Ended December 31
Related Party Name		2020		2019
National Chung-Shan Institute of Science & Technology	$	101,454	$	65,209

3) Purchases of inventories

Terms of the foregoing purchases with related parties were not significantly different from transactions with non-related parties.

d. Non-operating income and expenses

1) Interest expense

Refer to Note 16 for the interest expense recognized on the operating concession liabilities, and the deduction of interest expense recognized on the value of returned superficies for offset of profit sharing payable using the effective interest method due to termination of the SZD Agreement.

2) Performance delay income (included in other gain or loss)

Related Party Name InfoChamp Systems Corporation Payables to related parties 1) Accounts payable Related Party Name National Chung-Shan Institute of Science & Technology 2) Payable for construction Related Party Name InfoChamp Systems Corporation Acquisition of intangible assets - operating concession assets Related Party Name InfoChamp Systems Corporation	For the Year Ended December 31	For the Year Ended December 31
	2020 2019 $ 6,526 $ - December 31	2019
		$ -
	2020 2019 $ 11,917 $ 2,456 December 31	2019
		$ 2,456
	2020 2019 $ 2,804 $ 160,932 Purchase Price	2019
		$ 160,932
	For the Year Ended December 31
	2020 $ 2,236	2019
		$ 193,005

e. Payables to related parties

1) Accounts payable
2) Payable for construction

f. Acquisition of intangible assets - operating concession assets

258

g. Intangible assets - construction in progress of the operating concession assets

Intangible assets - construction in progress of the operating concession assets	Intangible assets - construction in progress of the operating concession assets	Intangible assets - construction in progress of the operating concession assets
Related Party Name China Steel Corporation InfoChamp Systems Corporation Disposal of intangible assets - operating concession assets Proceeds For the Year Ended December Related Party Name 2020 2019 InfoChamp Systems Corporation $ 2,000 $			For the Year Ended December 31
				2020 117,333 7,267 124,600 Gain	2019
			$ $ 31 -		$ 29,333 -
					$ 29,333
					on Disposal
	For the Year Ended December			For the Year Ended December 31
	2020 $ 2,000	2019		2020 $ 528		2019
		$				$ -

h. Disposal of intangible assets - operating concession assets

i. Lease arrangements

The transactions between the Corporation with Cargo Service Headquarters of the Taiwan Railroad Administration Bureau, MOTC and Century Development Corporation were as follows:

Related Party Name Century Development Corporation Line Item Related Party Lease liabilities (Note 11) Century Development Corporation Cargo Service Headquarters of the Taiwan Railroad Administration Bureau, MOTC	Acquisition of right-of-use assets	Acquisition of right-of-use assets
	For the Year Ended December 31
	2020 2019 $ 183,102 $ - December 31	2019
		$ -
	2020 $ 177,859 80,284 $ 258,143	2019
		$ 53,243 93,000
		$ 146,243

j. Long-term debt

The Corporation has entered into the Tripartite Agreement with the MOTC and Bank of Taiwan. In addition, the Corporation has entered into the Syndicated Loan Agreement with Bank of Taiwan and seven other syndicated banks. If an early termination of the C&O Agreement occurs, the MOTC shall assume the remaining obligations under Tranche A Facility of the Syndicated Loan Agreement. Please refer to Note 14. b. for further information on the major terms, the term of loan, repayment method, interest rates, and early repayment of loan with respect to the Syndicated Loan Agreement.

k. The Corporation was in compliance with MOTC’s policies to utilize the funds of the Stabilization Mechanism Account. Please refer

to Note 17.b.2) for further information.

259

Financial Overview

l. Compensation of key management personnel

Compensation of key management personnel was as follows:

ompensation of key management personnel was as follows:
Short-term employee benefts Post-employment benefts	For the Year Ended December 31
	2020 $ 90,299 942 $ 91,241	2019
		$ 103,008 878
		$ 103,886

28. PLEDGED ASSETS

Pledged Assets Other fnancial assets - current: Repurchase agreement collateralized by government bonds Time deposits Time deposits Time deposits Time deposits Time deposits Demand deposits Demand deposits Demand deposits Other fnancial assets - non-current: Time deposits Time deposits Time deposits Time deposits Time deposits Time deposits	Pledged to Secure Syndicated loan Trust deposit of unearned revenue Guarantee for oil purchase Guarantee for customs duties Guarantee for offce lease Guarantee for project subsidy Trust deposit of unearned revenue Syndicated loan Project subsidy Performance guarantee for the C&O Agreement Guarantee for customs duties Guarantee for offce lease Guarantee for parking lease Trust deposit of unearned revenue Guarantee for oil purchase	December 31	December 31
		2020 $ 1,243,000 68,000 3,120 - - - 19,064 2,195 - 1,335,379 2,000,000 42,045 16,278 7,203 - - 2,065,526 $ 3,400,905	2019
			$ 1,577,000 - - 22,442 16,278 10,520 21,676 1,224 2,001
			1,651,141
			2,000,000 20,000 - 7,134 68,000 3,120
			2,098,254
			$ 3,749,395

260

29. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

a. Construction and operation agreement

The significant provisions of the C&O Agreement were as follows:

1) The concession period, including the construction period and operating period, for the construction and operation of HSR is 70 years from the date of agreement, and can be extended pursuant to the C&O Agreement.
2) During the operating period, the Corporation shall make profit sharing payments at 10% of the net income before income tax to the MOTC each year for the development and construction of HSR infrastructure and facilities. However, if the accumulated amount of the profit sharing payments is less than the amount listed in the table below, the latter shall prevail.

As of the	end	of the ffth year of full operation	2 billion
As of the	end	of the tenth year of full operation	10 billion
As of the	end	of the ffteenth year of full operation	25 billion
As of the	end	of the twentieth year of full operation	48 billion
As of the	end	of the twenty-ffth year of full operation	75 billion
As of July	23,	2033	108 billion

According to the SZD Termination Agreement, the Corporation and MOTC engaged impartial and professional appraisal firms to appraise the fair value of the superficies returned to the MOTC for $22,613,234 thousand. The value of the returned superficies is allowed by the MOTC to offset the profit sharing payments for $29,784,855 thousand at the end of every five years as follows:

As of the	end	of the tenth year of full operation	2,003,521 thousand
As of the	end	of the ffteenth year of full operation	4,252,245 thousand
As of the	end	of the twentieth year of full operation	6,520,109 thousand
As of the	end	of the twenty-ffth year of full operation	7,654,041 thousand
As of July	23,	2033	9,354,939 thousand

Starting from 2013, the Corporation prepares its financial statements in accordance with IFRSs endorsed by the FSC. Refer to Note 16 for the recognition of profit sharing payments as operating concession liabilities.

3) The Corporation should establish a financial stabilization mechanism starting from 2016.
a) From 2016 to the year the stabilization reserve is calculated, if the annual average of net income (loss) and the effect of retrospective adjustments that resulted from the change in accounting policies exceed $3.5 billion, the stabilization reserve should be provided as described below:
- i. If the Corporation’s EBT in the current year is higher than A1 but less than A2, the EBT is regarded as operation incentive and no stabilization reserve should be provided (refer to the note below for the definitions of EBT, A1, A2 and A3).
- ii. If the Corporation’s EBT in the current year is higher than A2 but less than A3, the stabilization reserve should be provided in the current year as follows:
  - (EBT - A2) × 50%
- iii. If the Corporation’s EBT in the current year is higher than A3, the stabilization reserve should be provided in the current year as follows:
  - (A3 - A2) × 50% + (EBT - A3) × 70%

EBT = Income (loss) before income tax, net of the stabilization reserve and the compensation and remuneration set out in Article 235-1 of the Company Act.

A1 = Net income of $3.5 billion ÷ (1 - The statutory tax rate)

A2 = Net income of $4.0 billion ÷ (1 - The statutory tax rate)
A3 = Net income of $4.5 billion ÷ (1 - The statutory tax rate)

261

Financial Overview

b) If the Corporation’s EBT in the current year is less than A1, the reversal of the accumulated stabilization reserve should be (A1 - EBT), but only to the extent of the accumulated stabilization reserve equals zero.
c) The Corporation should open a “Taiwan High Speed Rail Stabilization Mechanism Account” (the “Stabilization Mechanism Account”) at Bank of Taiwan.
i. If the accumulated stabilization reserve, net of the balance in the Stabilization Mechanism Account, exceeds $10 billion at the end of any year, the Corporation shall contribute the excess amount (net of tax, if any) to the Stabilization Mechanism Account within one month from the date the MOTC confirms the execution report submitted by the Corporation. The stabilization reserve should also be provided in the same amount for the interest income generated from the Stabilization Mechanism Account.
ii. The MOTC may request the Corporation to use the funds of the Stabilization Mechanism Account under the following circumstances:
- i) Fare discount or fare reduction,
- ii) Construction of HSR infrastructure and facilities, and

iii) In compliance with the government’s policies.

iii. The accumulated stabilization reserve shall be deducted by the same amount of funds used from the Stabilization Mechanism Account.
iv. Except for payment of tax levied on the Stabilization Mechanism Account, the Corporation cannot use the funds of the Stabilization Mechanism Account, unless the Corporation obtains the approval from the MOTC.
d) Treatments of the stabilization reserve and the Stabilization Mechanism Account upon expiration or early termination of the concession period
i. If the accumulated stabilization reserve exceeds the balance of the Stabilization Mechanism Account at the end of the concession period, the Corporation shall contribute the excess amount (net of tax, if any) to the Stabilization Mechanism Account, and the remaining balance of the Stabilization Mechanism Account (net of tax, if any) shall be transferred to a specific account designated by the MOTC.
ii. If the C&O Agreement is terminated due to mutual agreement, force majeure or excluded events, the remaining balance of the Stabilization Mechanism Account (net of tax, if any) as of the termination date shall be transferred to a specific account designated by the MOTC, and the excess of the accumulated stabilization reserve over the balance of the Stabilization Mechanism Account shall be allocated to the Corporation.
iii. According to the C&O Agreement, if the termination is due to the reasons attributable to the Corporation, all of the accumulated stabilization reserve, including the balance of the Stabilization Mechanism Account, shall be allocated to the MOTC.
iv. According to the C&O Agreement, if the termination is due to government’s policies, all of the accumulated stabilization reserve, including the balance of the Stabilization Mechanism Account, shall be allocated to the Corporation.

262

e) Starting from 2017, the following year after the mechanism became effective, the Corporation shall submit to the MOTC an execution report audited by independent auditors, including provision, contribution, accumulated balance of the stabilization reserve, and the utilization and balance of the Stabilization Mechanism Account within one month from the date the stockholders approved the annual financial statements.

The Corporation complied with MOTC’s policies to utilize the funds of the Stabilization Mechanism Account. Please refer to Note 17.b) for further information.

4) When the concession period expires, the assets which are purchased under the consent of the MOTC within five years before the concession period expires, and are not fully depreciated and remain usable for normal operations upon the expiry of the concession period, are transferred to MOTC with consideration. The transfer price is the undepreciated value of the assets determined based on the fixed percentage of declining method over the minimum useful lives prescribed by the Executive Yuan. Except for the assets mentioned above, the ownership and rights of all other assets shall be transferred to the MOTC or the third party designated by the MOTC without consideration.
5) When the C&O Agreement is terminated before the expiration of the concession period, the value of the operating assets and construction in progress should be appraised by impartial professional appraisal organizations with their actual costs, usage, value in use, remaining concession period, and related articles of the C&O Agreements taken into consideration.
6) The Corporation provided a $5 billion performance bond as a guarantee for fulfillment of responsibilities of the HSR operations. The guarantee ends on the date six months after the expiry of concession period or early termination of the C&O Agreement. Starting from the date the Corporation commenced its commercial operations, if there is no breach of agreements, $0.5 billion of the performance bond can be returned each year. However, the total returned amount could not exceed $3 billion.

As of December 31, 2020 and 2019, the amount of the aforementioned performance bond remained unchanged at $2 billion, and was recognized as other financial assets.

b. As of December 31, 2020, unused letters of credit amounted to JPY4,547,569 thousand and EUR9,083 thousand.

c. The residents of Chengbei, Tongxiao Township, Miaoli claimed that the Corporation did not install a complete set of facility for preventing noise and vibration. The residents asserted that they suffered from the noise and vibration intrusion for a long time, and damage were brought to the buildings and their health. Therefore, the residents claimed for the damage compensation. In June 2015, the Environmental Protection Administration Public Nuisance Arbitration Committee decided that the Corporation should compensate the residents of $8,338 thousand. In July 2015, the Corporation disagreed with the ruling and filed an appeal to Taiwan Miaoli District Court. On November 23, 2018, Taiwan Miaoli District Court declared that the Corporation won the first instance, and the defendant has filed an appeal to the Taiwan High Court. The Taiwan High Court (the Taichung Branch Court) has dismissed the appeal on December 4, 2019, to which the residents further appealed to the court of third instance at first and then voluntarily dropped the case on August 27, 2020. On December 17, 2018, the residents filed a claim under the same reason, and requested for reducing the train noise and a payment of $5,700 thousand, and later changed their claims by requesting the Corporation should build a noise barrier in accordance with their required standards. The Taiwan Miaoli District Court has decided in favor of the Corporation on December 12, 2019 to which the residents filed appeal to the court of second instance. In order close the dispute to end successfully, the parties signed an agreement on September 23, 2020 and thereafter the appeal was withdrawn by the residents on September 29, 2020. The Corporation will promote the installation of soundproof walls as soon as possible based on the consideration of its corporate social responsibility.

263

Financial Overview

d. In July 2019, the Corporation entered into an equipment procurement contract, and the total amounts of the contract (business tax included) were JPY2,626,531 thousand and NT$120,955 thousand. As of December 31, 2020, payments for the contract amounted to JPY551,038 thousand and NT$27,514 thousand were recognized as construction in progress of the operating concession assets under intangible assets.
e. In August 2018, the Corporation entered into the “OCS Maintenance Vehicle Manufacturing and Supply Procurement Contract” with China Steel Corporation, and the contract value, including business tax, was $1,232,000 thousand. As of December 31, 2020, payments for the contract amounted to $117,333 thousand.
f. In response to the aging equipment such as 700T train electronic control, the Corporation expects to update the equipment during the train maintenance period from 2021 to 2023 and purchase the relevant components. Therefore, the Corporation entered into a procurement contract “700T Spare Parts of 7GI” with Toshiba Electronic Components Taiwan Corporation, Ltd (subsidiary of Toshiba Corporation in Taiwan) in July 2019 and the total amounts of the contract (business tax and import tariffs excluded) were JPY11.6 billion. As of December 31, 2020, payments for the contract made were JPY1.16 billion.

30. OTHER ITEMS

Due to the impact of the Covid-19 pandemic, ridership from February to December 2020 declined resulting a decrease of approximately 8.370 billion (about 17.62%) for the year ended December 31 of 2020, in operating revenue as compared to the same period of prior year. In response to the impact of the epidemic, the Corporation continues to adjust its operating strategies, and has established a “Disease Control Response Group” to carry out various disease control initiatives, including implementing train schedule adjustments, manpower scheduling planning, business project execution inspection and other countermeasures relating to expense reduction plans without affecting safety and service quality.

In terms of financing strategy, the Corporation continues to optimize its long-term financial structure, strengthen its capital sources and issued 10.5 billion unsecured domestic bonds in July 2020 to make early repayments of long-term debt.

With the epidemic slowing in June 2020, ridership has gradually recovered. The Corporation has resumed 1016 train services weekly from August 1, 2020, and will continue to pay attention to the development of the epidemic and implement agile actions in time. Therefore, the Corporation assessed that the epidemic has no material impact on the impairment of its assets or its ability as a going concern after the aforementioned actions and subsequent operation recovery.

31. SIGNIFICANT EVENTS AFTER REPORTING PERIOD

Except for those separately disclosed in other notes, the Corporation had the following significant events after the reporting period:

a. On January 20, 2021, the board of directors approved the procurement of “the Automated Construction Equipment of Paint Shop in Yanchao Main Workshop” and the total amount of the contract was $741,395 thousand.
b. On February 24, 2021, the board of directors approved the procurement of “Upgrade of CRP and Related Subsystems Tender Package 1” and the total amount of the contract was about JPY7,612,500 thousand.

264

32. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

For the information on the Corporation’s significant financial assets and liabilities denominated in foreign currencies, refer to Note 26.c.

33. SEPARATELY DISCLOSED ITEMS

Except for Tables 1, 2, and 3 as attached, there were no other significant transactions, information on investees and investments in mainland China required for disclosure. Information of major stockholder for Table 4 as attached.

34. SEGMENT INFORMATION

The Corporation is engaged only in the operation of HSR and related facilities. Consequently, there is no other reportable segment.

265

Financial Overview

TAIWAN HIGH SPEED RAIL CORPORATION

MARKETABLE SECURITIES HELD

DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars)

==> picture [484 x 543] intentionally omitted <==

----- Start of picture text -----

Relationship with the
Holding Company Type and Name of Marketable Securities Line Item
Holding Company
-
The Corporation FSITC Taiwan Money Market Fund Financial assets at fair value through
profit or loss
- "
FSITC Money Market Fund
- "
Franklin Templeton Sinoam Money Market Fund
- "
Prudential Financial Money Market Fund
- "
Yuanta De-Li Money Market Fund
- "
Taishin 1699 Money Market Fund
- "
Jih Sun Money Market Fund
- "
Taishin Ta Chong Money Market Fund
- "
Shin Kong Chi-Shin Money-market Fund
- "
Hua Nan Phoenix Money Market Fund
Central Government Bonds 2003-3 - Cash and cash equivalents
- "
Issue Of NTD 4,000,000,000 0.92 Per Cent. Notes
Due 19 November 2026 by Ørsted Wind Power TW
Holding A/S Guaranteed by Ørsted A/S
Central Government Bonds 2018-9 - Other financial assets - current
Central Government Bonds 2017-4 - "
Central Government Bonds 2016-11 - "
Central Government Bonds 2012-9 - "
Central Government Bonds 2011-9 - "
Central Government Bonds 2011-5 - "
Central Government Bonds 2004-9 - "
Central Government Bonds 2004-6 - "
Central Government Bonds 2003-3 - "
Central Government Bonds 2001-8 - "
Central Government Bonds 2001-4 - "
Central Government Bonds 2001-B 1st - "
- "
Second Issuance Of Unsecured Corporate Bonds Of
Cathay FHC In 2020_Series C
- "
First Issuance Of Unsecured Corporate Bonds Of
Cathay FHC In 2019_Series B
- "
Hon Hai Precision Industry Co., Ltd. 1ST Unsecured
Corporate Bonds-B Issuance In 2018
- "
Taiwan Power Company 3RD Unsecured Bond-B
Issue In 2019
- "
CTBC Financial Holding Co., Ltd. 2nd Unsecured
Corporate Bonds-Tranche B Issue In 2020
----- End of picture text -----

266

TABLE 1

==> picture [484 x 543] intentionally omitted <==

----- Start of picture text -----

December 31, 2020
Units/Face Value Note
Carrying Amounts Percentage of Ownership Fair Value
(In Thousands)
-
119,088 $ 1,837,945 $ 1,837,945
-
9,126 1,641,386 1,641,386
-
86,901 906,242 906,242
-
53,195 848,715 848,715
-
75,642 1,243,472 1,243,472
-
298,317 4,070,801 4,070,801
-
67,413 1,007,826 1,007,826
-
57,708 826,402 826,402
-
110,915 1,731,024 1,731,024
-
67,387 1,104,187 1,104,187
-
$ 355,000 372,000 372,000
-
100,000 100,000 100,000
-
1,681,000 1,799,000 1,799,000
-
569,000 605,000 605,000
-
5,012,000 5,226,000 5,226,000
-
1,012,000 1,063,000 1,063,000
-
390,600 434,000 434,000
-
408,600 454,000 454,000
-
336,000 336,000 336,000
-
891,000 891,000 891,000
-
279,000 294,000 294,000
-
110,000 110,000 110,000
-
702,900 781,000 781,000
-
83,700 93,000 93,000
-
195,000 195,000 195,000
-
10,000 10,000 10,000
-
107,100 107,100 107,100
-
80,800 80,800 80,800
-
17,100 17,100 17,100
----- End of picture text -----

267

Financial Overview

TAIWAN HIGH SPEED RAIL CORPORATION

MARKETABLE SECURITIES ACQUIRED OR DISPOSED OF AT COSTS OR PRICES OF

AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars)

==> picture [484 x 585] intentionally omitted <==

----- Start of picture text -----

Beginning Balance
Company
Name Type and Name of Marketable Securities Line Item Counterparty Relationship Units/Face Value Carrying
(In Thousands) Amount
The FSITC Taiwan Money Market Fund Financial assets - - 3,907 $ 60,000
Corporation at FVTPL
FSITC Money Market Fund " - - - -
Franklin Templeton Sinoam Money Market Fund " - - 9,671 100,000
Prudential Financial Money Market Fund " - - 3,968 63,000
Yuanta De-Li Money Market Fund " - - 6,538 107,000
Taishin 1699 Money Market Fund " - - - -
CTBC Hua Win Money Market Fund " - - - -
Jih Sun Money Market Fund " - - - -
Taishin Ta Chong Money Market Fund " - - - -
Shin Kong Chi-Shin Money-market Fund " - - - -
Hua Nan Phoenix Money Market Fund - -
Central Government Bonds 2019-9 Note - - $ - -
Central Government Bonds 2018-12 " - - - -
Central Government Bonds 2018-3 " - - - -
Central Government Bonds 2018-9 " - - - -
Central Government Bonds 2017-9 " - - 1,230,000 1,308,000
Central Government Bonds 2017-4 " - - - -
Central Government Bonds 2016-11 " - - 5,297,000 5,649,000
Central Government Bonds 2015-12 " - - 2,688,700 2,987,333
Central Government Bonds 2013-10 " - - - -
Central Government Bonds 2013-8 " - - - -
Central Government Bonds 2013-6 " - - - -
Central Government Bonds 2012-9 " - - 1,224,000 1,303,000
Central Government Bonds 2012-5 " - - - -
Central Government Bonds 2012-B 2nd " - - - -
Central Government Bonds 2011-9 " - - 252,200 278,000
Central Government Bonds 2011-7 " - - 705,600 784,000
Central Government Bonds 2011-5 " - - 819,900 911,000
Central Government Bonds 2010-8 " - - 252,900 281,000
Central Government Bonds 2010-7 " - - 877,500 975,000
Central Government Bonds 2008-5 " - - - -
Central Government Bonds 2005-8 " - - 954,900 1,061,000
Central Government Bonds 2004-9 " - - 92,000 100,000
Central Government Bonds 2004-6 " - - 2,145,500 2,383,889
Central Government Bonds 2003-3 " - - 133,000 140,000
Central Government Bonds 2002-7 " - - 1,609,200 1,788,000
Central Government Bonds 2001-8 " - - 4,455,000 4,637,778
Central Government Bonds 2001-4 " - - 699,800 758,000
Central Government Bonds 2001-2 " - - 1,127,000 1,137,000
Central Government Bonds 2001-B 1st " - - 3,158,200 3,199,000
Central Government Bonds 2000-13 " - - 1,285,500 1,325,000
Central Government Bonds 2000-B 1st " - - 4,326,400 4,622,000
----- End of picture text -----

Note: The above repurchase agreement collateralized by government bonds is included in cash and cash equivalents and other financial assets - current.

268

TABLE 2

==> picture [484 x 585] intentionally omitted <==

----- Start of picture text -----

Acquisition Disposal Ending Balance
Gain on
Units/Face Value Carrying Units/Face Value Amount Carrying Gain on Valuation Units/Face Value Carrying
(In Thousands) Amount (In Thousands) Amount Disposal (In Thousands) Amount
- - - -
115,181 $ 1,774,000 $ $ $ $ 3,945 119,088 $ 1,837,945
- - - -
9,126 1,639,000 2,386 9,126 1,641,386
- - - -
77,230 803,000 3,242 86,901 906,242
- - - -
49,227 783,000 2,715 53,195 848,715
- - - -
69,104 1,134,000 2,472 75,642 1,243,472
305,656 4,162,000 7,339 100,000 99,931 69 8,732 298,317 4,070,801
- - -
209,748 2,326,000 209,748 2,328,363 2,326,000 2,363
- - - -
67,413 1,006,000 1,826 67,413 1,007,826
140,990 2,017,000 83,282 1,191,441 1,191,000 441 402 57,708 826,402
207,038 3,228,000 96,123 1,498,750 1,498,000 750 1,024 110,915 1,731,024
67,387 1,104,000 - - - - 187 67,387 1,104,187
$ 309,000 309,000 $ 309,000 309,067 309,000 67 - $ - -
300,000 302,000 300,000 302,136 302,000 136 - - -
700,000 700,000 700,000 700,268 700,000 268 - - -
1,981,000 2,099,000 300,000 300,075 300,000 75 - 1,681,000 1,799,000
- - -
769,000 811,000 1,999,000 2,121,672 2,119,000 2,672
-
13,292,400 14,198,000 12,723,400 13,600,809 13,593,000 7,809 569,000 605,000
-
12,265,200 12,942,300 12,550,200 13,381,672 13,365,300 16,372 5,012,000 5,226,000
- - -
10,343,200 10,953,778 13,031,900 13,953,011 13,941,111 11,900
- - -
1,050,000 1,166,556 1,050,000 1,168,291 1,166,556 1,735
315,000 350,000 315,000 350,397 350,000 397 - - -
400,100 444,444 400,100 444,509 444,444 65 - - -
-
3,212,000 3,459,333 3,424,000 3,704,841 3,699,333 5,508 1,012,000 1,063,000
1,733,000 1,805,556 1,733,000 1,806,313 1,805,556 757 - - -
578,300 642,444 578,300 643,264 642,444 820 - - -
390,600 434,000 252,200 278,329 278,000 329 - 390,600 434,000
- - -
1,750,000 1,944,333 2,455,600 2,731,630 2,728,333 3,297
-
408,600 454,000 819,900 912,223 911,000 1,223 408,600 454,000
- - -
1,269,700 1,410,778 1,522,600 1,694,856 1,691,778 3,078
- - - - -
877,500 976,160 975,000 1,160
420,800 467,556 420,800 468,136 467,556 580 - - -
- - -
1,329,000 1,476,444 2,283,900 2,540,197 2,537,444 2,753
-
1,424,000 1,435,000 1,180,000 1,200,034 1,199,000 1,034 336,000 336,000
-
963,000 971,000 2,217,500 2,466,741 2,463,889 2,852 891,000 891,000
-
3,194,500 3,376,000 2,693,500 2,852,164 2,850,000 2,164 634,000 666,000
- - -
855,900 951,000 2,465,100 2,742,557 2,739,000 3,557
-
4,858,000 5,035,778 9,203,000 9,573,289 9,563,556 9,733 110,000 110,000
-
1,080,900 1,201,000 1,077,800 1,179,331 1,178,000 1,331 702,900 781,000
- - - - -
1,127,000 1,138,488 1,137,000 1,488
-
7,177,200 7,245,444 10,251,700 10,361,514 10,351,444 10,070 83,700 93,000
- - -
286,200 318,000 1,571,700 1,644,685 1,643,000 1,685
- - -
301,000 301,000 4,627,400 4,928,901 4,923,000 5,901
----- End of picture text -----

269

Financial Overview

TAIWAN HIGH SPEED RAIL CORPORATION

TABLE 3

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO

AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Buyer	Related Party	Relationship	Transaction Details	Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Accounts Payable	Accounts Payable	Note
			Purchase/ Sale	Amount	% of Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total
The Corporation National Chung-Shan Institute of Science and Technology A government-related entity controlled by the central government Purchase $ 101,454 6.82 60 days - - $ 11,917 4.34

TAIWAN HIGH SPEED RAIL CORPORATION

TABLE 4

INFORMATION OF MAJOR STOCKHOLDERS

DECEMBER 31, 2020

Name of Major Stockholder	Shares	Shares
	Number of Shares	Percentage of Ownership (%)
MOTC	2,420,000,000 43

Note: The table discloses stockholding information of stockholders whose ownership percentages are more than 5%. The Taiwan Depository & Clearing Corporation calculates the total number of common stocks and special stocks (including treasury stocks) that have completed the dematerialized registration and delivery on the last business day of the quarter. The stocks reported in the financial statements and the actual number of stocks that have completed the dematerialized registration and delivery may be different due to the basis of calculation.

270

TAIWAN HIGH SPEED RAIL CORPORATION

THE CONTENTS OF STATEMENTS OF MAJOR ACCOUNTING ITEMS

Item
Schedule of Accounts in Assets, Liabilities and Equity
Statement of cash and cash equivalents
Statement of fnancial assets at fair value through proft or loss
Statement of inventories
Statement of other current assets
Statement of changes in property, plant and equipment
Statement of changes in accumulated depreciation of property, plant and equipment
Statement of changes in right-of-use assets
Statement of changes in accumulated depreciation of right-of-use assets
Statement of changes in intangible assets
Statement of deferred tax assets
Statement of other non-current assets
Statement of short-term borrowings
Statement of accounts payable
Statement of other payables
Statement of payable for construction
Statement of provisions
Statement of other current liabilities
Statement of bonds payable
Statement of long-term debt
Statement of lease liabilities
Statement of other non-current liabilities
Schedule of Accounts in Proft or Loss
Statement of operating revenue
Statement of operating costs
Statement of operating expenses
Statement of interest income
Statement of interest expense
Statement of other gains and losses
Statement of summary of employee beneft, depreciation and amortization expense by function

Schedule Index

1
2
3
Note 13
Note 10
Note 10
Note 11
Note 11
Note 12
Note 23
Note 13
4
5
Note 18
6
Note 17
Note 18
Note 15
Note 14
Note 11
Note 18
7
8
9
Note 22
Note 22
Note 22
10

271

Financial Overview

SCHEDULE 1

TAIWAN HIGH SPEED RAIL CORPORATION

STATEMENT OF CASH AND CASH EQUIVALENTS

DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars)

Item Cash Cash on hand Checking accounts Demand deposits Cash equivalents Repurchase agreement collateralized by government bonds	Description Interest rate: 0.001%-0.05% Can be redeemed between February and March 2021; interest rate: 0.23%-0.30%	Amount
		$ 105,723 1 74,045 472,000 $ 651,769 SCHEDULE 2

TAIWAN HIGH SPEED RAIL CORPORATION

STATEMENT OF FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Name of Funds Open-end money market funds Taishin 1699 Money Market Fund FSITC Taiwan Money Market Fund Shin Kong Chi-Shin Money-market Fund FSITC Money Market Fund Yuanta De-Li Money Market Fund Hua Nan Phoenix Money Market Fund Jih Sun Money Market Fund Franklin Templeton Sinoam Money Market Fund Prudential Financial Money Market Fund Taishin Ta Chong Money Market Fund	Units (In Thousands) 298,317 119,088 110,915 9,126 75,642 67,387 67,413 86,901 53,195 57,708	Acquisition Cost $ 4,062,069 1,834,000 1,730,000 1,639,000 1,241,000 1,104,000 1,006,000 903,000 846,000 826,000 $ 15,191,069	Net Value (NT$) 13.6459 15.4335 15.6068 179.8500 16.4389 16.3858 14.9500 10.4284 15.9549 14.3204	Total Amount
				$ 4,070,801 1,837,945 1,731,024 1,641,386 1,243,472 1,104,187 1,007,826 906,242 848,715 826,402 $ 15,218,000

272

SCHEDULE 3

TAIWAN HIGH SPEED RAIL CORPORATION

STATEMENT OF INVENTORIES

DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars)

Item Spare parts and supplies Merchandise Less: Allowance for inventory valuation losses	Amount
	$ 2,674,630 14,142 2,688,772 (619,822) $ 2,068,950 SCHEDULE 4

TAIWAN HIGH SPEED RAIL CORPORATION

STATEMENT OF SHORT-TERM BORROWINGS

DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars)

Type of Loans JPY letters of credit	Name of Creditors Bank of Taiwan Mega International Commercial Bank Chang Hwa Commercial Bank Taichung Commercial Bank Taiwan Business Bank Cathay United Bank	Ending Balance $ 27,355 8,905 8,539 5,399 4,877 2,016 $ 57,091	Credit Period 2020.12.14-2021.3.29 2020.12.18-2021.3.29 2020.12.29-2021.3.29 2020.12.9-2021.3.15 2020.12.14-2021.3.18 2020.12.24-2021.3.24	Interest Rate(%) 0.63 0.74 0.63 0.63 0.63-0.85 0.70	Loan Commitments $ 1,425,400 427,620 855,240 142,540 456,128 855,240 $ 4,162,168	Collateral None None None None None None

Note: The credit line is recorded at the exchange rate of JPY1:0.2764 at December 31, 2020.

273

Financial Overview

SCHEDULE 5

TAIWAN HIGH SPEED RAIL CORPORATION

STATEMENT OF ACCOUNTS PAYABLE

DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars)

Supplier Name Kawasaki Heavy Industries, Ltd. Others (Note)	Amount
	$ 25,546 249,232
	$ 274,778

Note: The amount of individual suppliers in others does not exceed 5% of the total account balance.

SCHEDULE 6

TAIWAN HIGH SPEED RAIL CORPORATION

STATEMENT OF PAYABLE FOR CONSTRUCTION DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars)

Supplier Name Industrial Technology Research Institute Taiwan Shinkansen Corporation Toshiba Electronic Components Taiwan Corporation Panasonic Sales Taiwan Co., Ltd. Others (Note)	Amount
	$ 162,425 69,838 59,138 58,993 473,272
	$ 823,666

Note: The amount of individual suppliers in others does not exceed 5% of the total account balance.

274

SCHEDULE 7

TAIWAN HIGH SPEED RAIL CORPORATION

STATEMENT OF OPERATING REVENUE FOR THE YEAR ENDED DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars)

Item Railroad transportation revenue Others	Quantity 9,912 million passenger - kilometers;57.24 million passengers	Amount
		$ 37,903,849 1,233,356
		$ 39,137,205
		SCHEDULE 8

TAIWAN HIGH SPEED RAIL CORPORATION

TAIWAN HIGH SPEED RAILCORPORATION
STATEMENT OF OPERATING COSTS FOR THE YEAR ENDED DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars) Item Amortization expense Employee beneft expense Electricity fee Spare parts and supplies Repair and maintenance expense Others	Amount
	$ 13,957,127 4,283,589 1,830,846 1,405,247 1,234,663 3,383,582
	$ 26,095,054

SCHEDULE 9

TAIWAN HIGH SPEED RAIL CORPORATION

STATEMENT OF OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2020 (In Thousands of New Taiwan Dollars)

Item Employee beneft expense Professional service expense Advertisement expense Repair and maintenance expense Others	Amount
	$ 873,872 88,385 55,184 54,065 163,960
	$ 1,235,466

275

Financial Overview

SCHEDULE 10

TAIWAN HIGH SPEED RAIL CORPORATION

STATEMENT OF SUMMARY OF EMPLOYEE BENEFIT, DEPRECIATION AND AMORTIZATION EXPENSE BY FUNCTION

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

(In Thousands of New Taiwan Dollars)

	2020		2019
Operating Costs $ 3,663,463 313,329 174,935 - 131,862 $ 4,283,589 $ 187,110 $13,957,127	Operating Expenses $ 687,314 52,726 31,309 41,347 61,176 $ 873,872 $ 25,209 $ 6,129	Operating Costs $ 3,549,937 308,428 172,066 - 125,938 $ 4,156,369 $ 179,923 $13,794,118	Operating Expenses $ 652,553 50,316 32,960 53,797 67,934 $ 857,560 $ 22,371 $ 4,732	Total
				$ 4,202,490 358,744 205,026 53,797 193,872
				$ 5,013,929
				$ 202,294
				$13,798,850

Note 1: The number of employees for December 31, 2020 and 2019 was 4,671 and 4,608, respectively, while the number of non-employee directors was 13 and 12, respectively.

Note 2: The amount of average employee benefit expense for the years ended December 31, 2020 and 2019 was $1,098 thousand and $1,079 thousand, respectively. The amount of average payroll for the years ended December 31, 2020 and 2019 was $934 thousand and $914 thousand, respectively.

Note 3: The average payroll has increased by 2.19% in 2020 compared with 2019.

Note 4: The Corporation’s audit committee consists of independent directors instead of the supervisors.

Note 5: The Corporation’s remuneration policies:

Remuneration policy for the directors

According to Article 27-1 of the Articles of Incorporation, remuneration for individual board directors should be determined by the Board based on the level of participation, value contributed, and remuneration levels of similar companies. In addition, in accordance with Article 35-1 of the Corporation’s Articles of Incorporation, if the Corporation is profitable in a given year, it shall allocate not more than 1% of the net profit as profit sharing compensation. Independent directors receive fixed monthly compensation as determined by the Board and are not entitled to the aforementioned profit sharing.

Managerial officers and employees

In accordance with the Corporation’s “Charter of Remuneration Committee,” THSRC shall periodically review the performance of directors and managers, policies, systems, standards, structure and general compensation levels of the industry. To ensure there is a competitive and motivational remuneration scheme, employee compensation is determined by considering the factors such as corporate financial status, business performance, and policies, as well as the work duties, work abilities, and performance of the positions held. In addition, according to Article 35-1 of the Corporation’s Articles of Incorporation, “if the Corporation is profitable in a given year, it shall allocate not less than 1% of the net profit as profit sharing compensation to employees.”

The Corporation has established “Regulations for Remuneration Management” as the basis of employees’ salary assessment, and there is a regular review of the Corporation salary level and remuneration policies, setting out salary allowances and bonuses according to the Corporation “Remuneration Payment Procedures” to reward employees’ contributive work. Bonus levels are based on the considerations of corporate financial status, operating conditions, and individuals’ work performance. According to business performance, THSRC distributes year-end bonuses and performance bonuses as incentive, and has set salary adjustment policies to enhance employee compensation and welfare.

276

(2) Consolidated Financial Statements and Independent Auditors' Report: None.

5. In the Event That the Company or Its Affiliates Have Experienced Financial Difficulties in the Most Recent Fiscal Year or During the Current Fiscal Year Up to the Date of Publication of the Annual Report, Said Annual Report Shall Explain How Said Difficulties Will Affect the Company's Financial Situation: None.

6. Review of Financial Conditions, Financial Performance, and Risk Management

(1) Analysis of Financial Status

Unit: NT$ thousands

==> picture [483 x 371] intentionally omitted <==

----- Start of picture text -----

Year
2020 2019 Difference %
Item
Current Assets 38,621,107 42,710,136 (4,089,029) (9.57)
Property, Plant and Equipment 109,729 125,047 (15,318) (12.25)
Operating Concession Asset 378,291,412 390,113,063 (11,821,651) (3.03)
Other Assets 10,544,722 10,111,356 433,366 4.29
Total Assets 427,566,970 443,059,602 (15,492,632) (3.50)
Current Liabilities 7,067,221 13,278,906 (6,211,685) (46.78)
Non-Current Liabilities 350,413,093 358,703,427 (8,290,334) (2.31)
Total Liabilities 357,480,314 371,982,333 (14,502,019) (3.90)
- -
Capital Stock 56,282,930 56,282,930
- -
Capital Surplus 172,981 172,981
Retained Earnings 13,630,745 14,621,358 (990,613) (6.78)
Total Equity 70,086,656 71,077,269 (990,613) (1.39)
----- End of picture text -----

Analysis of differences over 20%:

The decrease in current liabilities was mainly due to the payment of provision for stabilization reserve.

277

Financial Overview

(2) Analysis of Financial Performance

Unit: NT$ thousands

==> picture [484 x 270] intentionally omitted <==

----- Start of picture text -----

Year
2020 2019 Difference %
Item
Operating Revenue 39,137,205 47,507,390 (8,370,185) (17.62)
Operating Costs 26,095,054 25,762,687 332,367 1.29
Gross Profit 13,042,151 21,744,703 (8,702,552) (40.02)
Operating Expenses 1,235,466 1,232,750 2,716 0.22
Income from Operations 11,806,685 20,511,953 (8,705,268) (42.44)
Non-Operating Income and Expenses (6,387,374) (12,736,845) 6,349,471 49.85
Income Before Income Tax 5,419,311 7,775,108 (2,355,797) (30.30)
Income Tax Benefit 423,726 231,925 191,801 82.70
Net Income 5,843,037 8,007,033 (2,163,996) (27.03)
Other Comprehensive Income (22,853) (39,089) 16,236 41.54
Total Comprehensive Income for the Year 5,820,184 7,967,944 (2,147,760) (26.96)
----- End of picture text -----

Analysis of differences over 20%:

The decrease in gross profit and income from operations were mainly due to the impact of the COVID-19 pandemic resulting a decrease in operating revenue.
The variation in non-operating income and expenses was mainly due to the decrease of stabilization reserve expense resulting from lower profit in 2020.
The increase in income tax benefit was mainly due to decrease in income and the application for income tax exemption in 2020.
The decrease in income before income tax, net income, and total comprehensive income were mainly due to the net impact of the decrease in operating revenue and nonoperating expenses.
The variation in other comprehensive income was mainly due to the adjustment of remeasurement of defined benefit plans based on actuarial calculations in 2020.

(3) Analysis of Cash Flow

1) Cash flow analysis for the current year:
A. Net cash used in operating activities was NT$ 1,531,734 thousand, mainly from increase of the investments in open-end money market funds (recorded as financial assets at FVTPL).
B. Net cash generated from investing activities was NT$ 821,315 thousand, mainly from decrease of other financial assets and purchase of operating concession assets.
C. Net cash used in financing activities was NT$ 14,909,475 thousand, mainly from repayment of syndicated loan and cash dividend payments.
2) Improvement plan for insufficient liquidity: Not applicable.
3) Cash flow analysis for the coming year:

==> picture [485 x 77] intentionally omitted <==

----- Start of picture text -----

Unit: NT$ thousands
Estimated Net Cash Flow Estimated Cash Surplus Expected Remedies for Insufficient Cash
Beginning Balance Estimated Annual Cash
from Annual Operating (Insufficient) Amount
(1) Outflow (3)
Activities (2) (1)+(2)-(3) Investment Plan Financial Plan
651,769 25,215,000 24,583,769 1,283,000 －－
----- End of picture text -----

278

(4) The Impact of Recent Major Capital Expenditures on Financial Operations

1) The utilization of major capital expenditures and sources of funding

Unit: NT$ thousands

==> picture [483 x 68] intentionally omitted <==

----- Start of picture text -----

Actual or Scheduled Use Of Funds
Actual or Expected Source of Actual or Expected Completion Total Funds
Project
Funding Date Required 1997-2019 2020 2021
High-speed rail
Private funds and bank loans 2006.12 485,793,316 476,734,556 2,312,760 6,746,000
project
----- End of picture text -----

Note: The high-speed rail corporation was completed and began officially operating in January 2007. Major capital expenditures for the year 2020 and 2021 were mainly equipment replacement and spare parts maintenance. The above capital expenditure does not include non-capitalization cost of during the construction period.

2) Expected benefits generated:

The Taiwan North-South High-Speed Railway commenced operations on January 5, 2007; the number of passengers broke the benchmark of 600 million on January 17, 2020, and the number of passengers continued to grow; as of December 31, 2020, a total of more than 653 million passenger travel services were provided. Also, we transported 57.23 million passengers in 2020, and an average of 156 thousand passengers travelled the western corridor of Taiwan via high-speed rail every day. The Corporation is market-oriented, and adopts marketing strategies to adjust train frequencies to promote revenue growth based on passengers' demand. We will also strive to implement various plans for cost reduction; moreover, in order to live up to the expectations of the public, the Corporation will continue improving operation quality to offer passengers with safe, reliable, comfortable, and convenient travel services.

In addition to providing fast and safe transportation services, the construction and operation of high-speed rail projects has external benefits such as saving time and costs, increasing government revenue, creating employment opportunities, integrating community development, and maintaining environmental resources.

(5) The Most Recent Annual Investment Policy, the Main Reason for Its Profit or Loss, the Improvement Plan and the Investment Plan for the Next Year: None.

7. Analysis of Risk Management

(1) Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation on Corporate Finance, and Future Response Measures
1) Interest rates

The domestic interest rate market was affected by the coronavirus (COVID-19) pandemic in 2020, and the central bank interest rate was reduced by 0.25 percentage points starting from March 20, though the discount rate remained at 1.125% per annum following the reduction. THSRC is engaged in capital-intensive construction and operation of public infrastructure, and our operations are regulated by related concession contracts. Interest payments for bank loans in 2020 were NT$ 4,567,779 thousand, accounting for 11.67% of the Corporation's operating revenue. Looking forward, the short-term interest rate of the NT dollar still remains at a relatively low level, which is conducive to reduction of interest burdens for financing loans. The Corporation also continues to decrease liabilities and interest expenses through various measures. In future, we will make timely adjustments to utilization of funds according to changes in interest rates.

2) Foreign exchange rates

The exchange rate of the NT dollar continued to appreciate due to factors such as US Federal Reserve Board (FED) cuts in interest rates, foreign capital inward remittances, and rise in domestic stock markets. It is expected that exchange rates for the NT dollar will continue to be influenced by the US dollar, the Korean won, and the Chinese RMB. In 2020, the Corporation's ratio for foreign currency exchange profit (loss) to operating revenue was -0.06%, indicating that exchange rate changes have little impact on our revenue and operations. In line with foreign currency payments required by various contracts, the Corporation uses forward exchange contracts to reduce exchange

279

Financial Overview

rate risks. In future, we will continue to seek favorable opportunities to hedge against the impact of exchange rate changes.

3) Inflation

In terms of current inflation conditions, the Directorate-General of Budget, Accounting, and Statistics estimated that the annual growth rate of the consumer price index (CPI) in Taiwan for 2020 was -0.23%, and domestic prices for relevant products are holding stable. The Corporation's fares are adjusted in accordance with inflation rates, and therefore the impacts of inflation are low.

(2) Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-Risk, HighLeveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions

The Corporation so far has not been involved in the lending of funds to others; our sole endorsement guarantee involves guarantees of customs duties handled by the Corporation itself, and our balance as of December 31, 2020 was NT$ 62,000 thousand, while our balance as of March 31, 2021 was NT$ 46,000 thousand.

The Corporation's transactions in derivative products adhere to our internal management regulations ("Handling Procedure to Engage in the Transaction of Derivative Products"), and are used for hedging purposes. We do not engage in speculative financial operations and each transaction is audited by certified public accountants. We will continue to deal in derivative products when it is appropriate to hedge risks.

(3) Future Research & Development Projects and Corresponding Budget

In future, we plan to continue investment in development of various systems. In terms of civil construction facilities projects, we cooperated with the ITRI to build a service platform for inspection of HSR viaducts using artificial intelligence drones. We hope these measures can help to provide a better understanding of drone technology and facilitate the use of drones in future inspection and maintenance of high-speed rail facilities and for disaster prevention and surveillance purposes. We placed dampers on viaducts in the Tainan section to prevent seismic displacement, and conducted research on amplification of seismic responses at viaducts in the Chiayi section to reduce lateral relative displacement between differing structural constructs on specific viaducts, prevent repeated earthquake damage, and ensure operational safety. We also selected viaduct positions with structural constructs that display differing vertical forces for installation of accelerometers to check validity of anti-lifting devices and serve as a basis for improvement.

Our developments in communication systems include localization of our TEL IP Server for Direct Line Telephone System, which we hope can help us to establish self-reliant maintenance capabilities and promote local industries.

For our rolling stock system, we are continuing to work in collaboration with national universities and local companies to develop maintenance equipment. Our localization of maintenance equipment not only reduces costs and single-sourcing risks, but also helps to improve inventory management efficiency, enhance timeliness of emergency component purchase, and facilitate technology transfers to local manufacturers.

For our track and power system, we are continuing to work with the NCSIST on the development of an automatic measurement system for rolling stock vibrations, and with the CSC on OCS maintenance vehicles manufactured locally in Taiwan.

280

As of 2021, estimated future R&D investments amount to NT$ 4,105 million. Relevant R&D projects and investments are as follows:

==> picture [483 x 59] intentionally omitted <==

----- Start of picture text -----

Expected
Future
Category R&D project R&D project content Benefits of R&D Current progresses Investments
(NT$ in
Thousands)
----- End of picture text -----

Category	R&D project R&D project content Benefts of R&D Current progresses Expected Future Investments (NT$ in Thousands)
Civil Construction Facilities Research	Use of artifcial intelligence drones for inspection of HSR viaducts Cooperated with ITRI on this project, which was implemented in three phases over three years. Provide a better understanding of drone technology, which can be further applied to the inspection and maintenance of high-speed rail facilities and surveys for disaster prevention. The second phase of this project (research and development) was implemented in 2019 and completed in 2020. The third phase will commence in 2021. As of 2020: 3,352 2021: 1,117
	Relevant research on reduction of seismic displacement after implementation of dampers on viaducts in the Tainan section Viscous dampers will be designed and implemented in three sections on viaducts to reduce lateral relative displacement between different structures. Reduce lateral relative displacement between different structures of a specifc bridge to avoid repeated earthquake damage to rail tracks and ensure operational safety. The planning and design work of one section was completed in 2019. Construction of the section started in 2020, and we plan to complete the project in 2021. 2021: 8,000 2022: 60,000 2023: 18,000
	Research and surveillance on seismic and amplifcation responses on viaducts of the Chiayi section Measured ground surface, bridge pier, and bridge deck vibrations to study amplifcation effects on the bridge in the event of an earthquake. Selected a position where the bridge structure transmits differing vertical forces between piers and decks to install accelerometers for checking the validity and improvement basis of our anti- pulling device. Installation of measuring instruments was completed in 2019, and a three-year automated measuring operation has since been started. 2019~2022: 4,142

281

Financial Overview

==> picture [484 x 457] intentionally omitted <==

----- Start of picture text -----

Expected
Future
Category R&D project R&D project content Benefits of R&D Current progresses Investments
(NT$ in
Thousands)
Localization of Localization to Maintains system function Completed development of 953
Tel IP Server replace products while reducing maintenance replacement system in 2020 and
for Direct Line purchased from costs. installed 6 sets. Installation will be
Telephone Germany. completed in 2021.
System
R&D on To strengthen the This project, when completed, The 1st and 2nd phases were (Not including
Intelligent real-time passenger will enhance passenger riding started on 2018/12/27. R&D the 4 new
Passenger information and experience and corporate was completed in 2019, and stations)
Information corporate operation operation efficiency with new construction began in 2020. 2021: 348,166
System (PIS) efficiency of our technologies & products. Construction has since been 2022: 2,231
Passenger completed at Taoyuan Station, 2023: 2,231
Information System Banqiao Station, and Hsinchu 2024: 2,231
(PIS) and to remove Station.
R&D dependence on The 3rd and 4th phases were
overseas companies, started on 2019/12/11. Our goal is
we developed new PIS to complete PIS/PIDS deployment
products with creative for all original 8 stations by
technologies. the end of 2021, and complete
Communication The 1st phase aimed deployment for all 12 stations by
System to upgrade the the end of 2024.
Research control server and
software.
The 2nd phase
replaced existing
display units in
lobbies and
platforms.
The 3rd phase aims
to add new display
units on platforms
beside carriage doors
for stations north of
Taichung (included).
The 4th phase aims
to add new display
units on platforms
beside carriage doors
for stations south of
Taichung.
----- End of picture text -----

282

==> picture [483 x 59] intentionally omitted <==

----- Start of picture text -----

Expected
Future
Category R&D project R&D project content Benefits of R&D Current progresses Investments
(NT$ in
Thousands)
----- End of picture text -----

Category

R&D project
R&D project content
Benefts of R&D
Current progresses
Expected
Future
Investments
(NT$ in
Thousands)

Signaling
System Research

R&D on Railway
Turnout
Controller
We conducted R&D
on alternative PLC
turnout controllers
using new
technologies, using
high reliability PLC
modules to replace
traditional relay
modules and fulfll
sequential control
functions.
This will reduce the number
of relays and also enhance the
reliability of existing turnout
controllers, decreasing impacts to
customer service.
A prototype developed under the
"Programmable Logic Control (PLC)
Turnout Controller Development
Project" was completed in 2018.
Following on-site verifcation
over 1 year and 8 months, the
equipment has been confrmed
to be reliable. We extended mass
production of this prototype
controller to the whole running
line by awarding the contract
E4-20-003 "Turnout Controller
Replacement Project" at the end
of 2020. This fve-year contract
for the replacement of 142 sets of
present turnout controllers across
the entire line is expected to be
completed in 2025.
2021: 53,809
2022: 107,618
2023: 107,618
2024: 107,618
2025: 161,432

R&D on Railway
Turnout
Monitoring
System (TMS)
In order to improve
the early warning
capability for
detecting turnout
failures, we
implemented R&D
for newer technology
products to build a
turnout monitoring
system to replace the
original monitoring
system built by
foreign companies.
We used a new
type of industrial
controller to replace
old PCB modules
so as to increase
environmental
resistance and
stability.
Monitor value changes for turnout
sensors for analysis and predictions
to perform maintenance and
adjustments in advance of
potential abnormalities, thus
preventing turnouts from breaking
down during service hours.
In 2016, a prototype was
developed and tested and installed
on the main line. After 4 years of
successful reliability testing, we
plan to replace the existing system
by modifying 82 sets of TMS
under the "Turnout Monitoring
System Replacement Project"
contract starting from 2021. It is
expected that replacements will
be completed in 2025.
2021: 28,300
2022: 84,900
2023: 56,600
2024: 56,600
2025: 56,600

283

Financial Overview

Category	R&D project	R&D project content	Benefts of R&D	Current progresses	Expected Future Investments (NT$ in Thousands)
Rolling Stock Improvement	Luggage racks Install luggage racks in the 3rd, 5th, 9th, and 11th carriages of each train by removing 3 passenger seats. Improve passenger satisfaction. In progress. Installation for all trains is scheduled to be completed in Q2 of 2021. 2021: 54,936
	Rolling Stock Intelligent Maintenance Information System Cooperated with ITRI to develop a database system for RS maintenance. Improve passenger satisfaction and reduce paper consumption. In progress. Project is scheduled to be completed in Q2 of 2022. 2021: 7,204
	Wireless Train Axle Box Temperature Monitoring System Develop and design wireless axle box temperature sensor and monitoring system. Collecting trainset axle temperature measurement data and performing preventive maintenance an help to reduce operating delays caused by temperature sensor failures. In discussion and development. The project is in the discussion stage and no budget has yet been set.
	Wireless Train Bogie Vibration Monitoring System Development and design of wireless bogie vibration sensor and monitoring system. Collecting bogie vibration data can improve the accuracy of troubleshooting and train operation safety. In discussion and development. The project is in the discussion stage and no budget has yet been set.
	Investigation and improvement of traction motor insulation degradation Use precision instruments to measure coil insulation conditions of the traction motor. Improve the reliability of trainsets. In discussion and development. The project is in the discussion stage and no budget has yet been set.
Localization of Materials	Diesel locomotives Commissioned from local manufacturers Improvement of maintenance effciency and shortening of repair/rescue time in the event of accidents. In progress. 355,795
	Automatic painting equipment for Yanchao Maintenance Depot Commissioned from local manufacturers Increase revenue and train availability. In progress. 733,237
	BRT (Bogie Running Tester) Commissioned from local manufacturers Improve maintenance effciency. In progress. 371,290

284

==> picture [483 x 396] intentionally omitted <==

----- Start of picture text -----

Expected
Future
Category R&D project R&D project content Benefits of R&D Current progresses Investments
(NT$ in
Thousands)
Localization 8 MV type vehicles Consolidate existing Japanese/ Progress in 2020: 2018~2024:
of OCS and 2 sets of CS German vehicles from 6 to 2 Assembly of 2 MV and 1 set (2) 1,232,000
maintenance vehicles (4 vehicles) vehicles, avoiding multiple of CS vehicles. We completed
vehicles. vehicle investment and improving assembly of booms, generators,
maintenance efficiency and cabs (cabins), driving consoles,
personnel safety. and couplings, and we expect 4
vehicles to be delivered in June
2021.
Intelligent Rail Commissioned ITRI A total of 38 rail scooters were Contract period from 2020/2/1 to Total contract
Scooter (phase to replace 16 old required for the main line 2021/1/31, to replace 16 old four- amount:
2) four-seater, engine- according to our "Improvement seat engine-powered rail scooters. 18,359
powered rail scooters. actions for inspections and patrols
after disasters." A total of 22
scooters were dispatched in Phase
1, and we plan to replace the
Track & Power remaining 16 units (old four-seater,
System engine-powered rail scooters) in
Phase 2.
Localization The technologies to Cooling fan motors of the main A total of 82 cooling fan motors Total amount
of main develop materials and transformers at substations must were replaced for BSS1~7 during for 6-year
transformer perform replacement be replaced every 6 years. As December 2019 to February 2020. localization:
cooling fan work were entrusted the original manufacturers were 6,489
motors to an external firm. requesting high costs, we began
promoting localization to reduce
costs.
OCS Composite Research and This project intends to study the (1) The contract period is from 2020-2022:
Insulator Aging investigations were life cycles of composite insulators 2020/9/15 to 2022/9/14. 11,374
and Mainline carried out by an along the THSR line, develop a (2) Progress in 2020: Completed
Polluted Area academic institute. system to record inspection data, Phase 1 of initial analysis and
Investigations establish a model to predict aging planning report for composite
level, and rationalize maintenance insulator aging (MS1).
schedules.
----- End of picture text -----

285

Financial Overview

==> picture [484 x 59] intentionally omitted <==

----- Start of picture text -----

Expected
Future
Category R&D project R&D project content Benefits of R&D Current progresses Investments
(NT$ in
Thousands)
----- End of picture text -----

System Research & Development	Phase 1 of Advanced Open Reservation System The project was launched in April 2020, and implementation is expected to be completed in April 2021. (1) Available seats and fare information is updated and provided for the large number of train and fare inquires which occur irregularly during holiday periods. (2) Establish a new offine system outside the seat reservation system, which is available 24/7, and can provide train number and fare information for each booking channel. (3) Reduce the loading on the ticket reservation system and reduce setup time required for temporarily increased system resources. Project completion percentage (approximate): 79%; system integration tests and UAT are in progress and project progress is on schedule. 26,610
	Main Computer System External Interface Gateway of Automatic Fare Collection System The project was launched in November 2020, and the implementation is expected to be completed in November 2021. (1) Integrate AFCS back-end parameter control and service interface into a common service platform. (2) Connect AFCS back-end subsystem interfaces with the AFCS main reservation system and services, and merge these with the main computer system to provide modular service functions. (3) Users no longer need to adjust parameters from different subsystems, and the unifed interface provided by the platform increases the reuse rate of modular services and reduces need for repetitive user tasks. Bidding is underway and project progress is on schedule. 10,019
	Automatic program deployment and verifcation (CI/CD) The project was launched in September 2020, and the implementation is expected to be completed in June 2021. (1) Improve work effciency and accuracy, reducing continuous manpower growth despite increased demand. (2) Reduce proportion of system bugs. DEV/UAT has been delivered for CD, and the designs and fows are being discussed for CI/CD. Project progress is on schedule. 13,161
	Voice- activated ticket reservation mechanism of T Express The project was launched in February 2020, and the implementation is expected to be completed in August 2021. (1) Improve passenger ticket reservation experience. (2) Strengthen the corporate image of smart transportation. Confrming requirements. Project progress is on schedule. 1,940
	Mobile renewal service for periodic & multi-ride tickets The project was launched in September 2020, and the implementation is expected to be completed in December 2021. (1) Passengers no longer need to queue at station ticket windows for ticket renewals as they can apply for renewals using their mobile phones, which is an improvement for our passenger services. (2) Relieve ticket window staff workloads. Reviewing and confrming system architecture designs. Project progress is on schedule. 19,455

286

(4) Effects and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales:

In terms of major policy, the government is emphasizing the development of railway transportation and transportation safety in order to improve regional resource circulation efficiency and reduce regional gaps. The recent establishment and operation of the "Railway Bureau, MOTC," "Taiwan Transportation Safety Board," and "Railway Technology Research and Certification Center" have effectively concentrated authority, integrated resources, accelerated scientific and technological development, and promoted accident investigation and prevention; in addition, the continued implementation of 38 railway infrastructure plans stipulated in the 5 main schemes of the "Forward-Looking Railway Infrastructure Project," also have specific benefits on formulating the HSR and TRA railway transit network; strengthening transfer services and regional integration, improving traffic volume and transport capacity, and expanding limits of our operations. Thus, these major policies are all creating a favorable environment for our operations.

In terms of laws and regulations amendments this year relevant to our operating activity, the "Special Act for Prevention, Relief and Revitalization Measures for Severe Pneumonia with Novel Pathogens" was established in response to the coronavirus (COVID-19) pandemic, and the Corporation has accordingly taken relevant epidemic prevention measures. Also, the "Railway Act" was amended to stipulate that railway institutions shall simultaneously report major traffic accidents or serious delays to the Taiwan Transportation Safety Board, and also effectively train and manage employees to ensure that they possess railway safety expertise and epidemic prevention skills. All of these amendments have had positive effects on improving the development of the railway industry and ensuring transportation safety.

All units should identify, comply, and conform to all relevant laws and regulations in compliance with our "Law Compliance Management Regulation," and continue to track policy trends. We are able to keep abreast of all major policies and statutory changes. Over the past year, all these changes have had no significant adverse impacts to our business operations.

(5) Effects and Response to Changes in Technology and the Industry Relating to Corporate Finance and Sales:

Technological Changes:

THSRC has integrated new technologies into various facets of passenger service since the commencement of operations. For example, the convenience store ticketing system launched in February 2010, the seat management information system launched in March 2011, and the T Express mobile ticketing app released in October of that same year. Moreover, in November 2017, T Express app added Apple Pay and Google Pay as payment options so customers could pay for tickets with in-app payments. Meanwhile, Apple Pay, Google Pay, and Samsung Pay have been accepted at THSR station ticket windows and ticket vending machines since August 2017. Further, in November 2018, the THSRC online booking system added "Taiwan Pay" as a payment method, enabling customers to pay with debit cards online. In July 2020, the "TGo 365 point redeem program" was added to member benefits, providing an O2O (online to off line) service that allowed TGo members to easily redeem points online and pick up hundreds of products offline. The launch of these services shows that THSRC not only adapts well to technological advancements, but also has the ability to use new technologies to create innovative value in passenger services. THSRC, a pioneer in the Taiwan rail industry and also a lifestyle service provider, will continue to utilize cloud management and transportation efficiency advances in technology, while expanding our 4T program (Transportation, Technology, Taiwan, and Touch) to provide better services to the public in the future.

Industrial Changes:

THSRC has completely revolutionized public transport in Taiwan's western corridor by providing passengers a better service of convenience, comfort, safety, high quality, efficiency, and punctuality. THSR now serves as the main form of transport for passengers travelling over long distances, and is used in combination with TRA, buses, taxis, or rental cars. THSRC has shortened the distance between the northern and southern regions, and continues to see steady increases in ridership. In the future, THSRC will continue to improve the systems and equipment to provide passengers with better service. In addition, THSRC will adhere to all safety regulations and procedures, and implement appropriate risk evaluation and safety management mechanisms to minimize potential passenger injuries or operational accidents.

287

Financial Overview

(6) The Impact of Changes in Corporate Image on Corporate Risk Management, and the Corporation's Response Measures:

THSRC's core business of transportation adheres to the highest standards of safety. We have established transparent channels for external communication through our corporate website, spokesperson, and public email address, and we periodically publish corporate social responsibility reports to maintain a good corporate image and convey important information to domestic and foreign mass media, consumers, our shareholders, governmental units, and other stakeholders. Additionally, we assimilate relevant information to fully understand potential crises and to fulfill our duties of prevention and warning. As of the publication of this annual report, there have been no incidents jeopardizing our corporate image.

(7) Expected Benefits from, Risks Relating to and Response to Merger and Acquisition Plans: None.

(8) Expected Benefits, Possible Risks and Response Measures for Plant Expansion:

1) Expected Benefits
A. Based on current operating schedules, track layouts, and shunting limitations, the addition of Zuoying Depot's second vehicle maintenance plant is expected to increase maintenance capacity by a maximum of 9 trainsets. Our increased inspection and maintenance capacity will be sufficient to fulfill future maintenance requirements caused by fleet size expansions.
B. Number of trainsets can satisfy the needs of consecutive holidays, and the entire fleet can be put into service if necessary.
C. Simultaneous provision of train inspection tracks, repair tracks, and train stabling points, bringing more flexibility and multiple functions to trainset utilization.
(a) Satisfy fleet expansion needs in the future.
(b) Provide sufficient tracks for trainset refurbishments and other specific activities (such as trainset painting, material development and testing, and so on), shortening operational schedules.
2) Possible Risks and Response Measures
A. Possible risks:

The construction area is close to the high-speed rail and existing buildings, so it is necessary to ensure safety and prevent interference to train operations. The chosen locale for this plant is within the Zuoying Depot, close to the high-speed railway track, the first maintenance plant, the main warehouse, and the substation. An important challenge of this project is to ensure the safety of the train track, neighboring buildings, and construction sites during construction and excavation periods to avoid affecting HSR operations and maintenance.

B. Response Measures:
(a) Properly plan construction flows and barrier facilities.
(b) Strictly comply with the relevant regulations of the Occupational Safety and Health Management Measures for Railway Operation and Maintenance.

(d) Carefully formulate prevention measures for excavation in adjacent areas and set up a safety monitoring system to provide warnings.
(e) Implement on-site construction safety policies.

288

(9) Risks and Countermeasures in the Concentration of Incoming Goods or Sales: None.
(10) Effects of, Risks Relating to and Response to Large Share Transfers or Changes in Shareholdings by Directors or Shareholders with Shareholdings of over 10%:

Over the past year, there were no incidences where a major quantity of shares belonging to a director or shareholder holding more than a 10 percent stake in the Corporation was transferred.

(11) Expected Impacts, Possible Risks, and Response Measures for Changes in Management Rights:

Over the past year, there were no incidences relating to changes in management rights.

The Corporation has a stable equity structure, and has appointed a sufficient number of independent directors, adopted the candidate nomination system, implemented diversity of directors, and ensured effective functioning of the Board and all committees in accordance with laws and regulations, our Articles of Incorporation, Guidelines for Corporate Governance, and other relevant regulations. We have also implemented comprehensive internal control and risk management policies, which help establish a sound corporate governance system, and protect and promote shareholder participation. Therefore, we are able to avoid significant adverse impacts due to changes of Board members or operating rights.

(12) Litigious and Non-Litigious Matters. List Major Litigious, Non-Litigious or Administrative Disputes (That Have Been Concluded by Means of A Final and Unappealable Judgment, or are Still Under Litigation) That Involve the Company and/or Any Company Director, the General Manager, Any Person with Actual Responsibility for the Firm, Any Major Shareholder Holding A Stake of Greater Than 10 Percent, and/or Any Company or Companies Controlled by the Company; Where Such A Dispute Could Materially Affect Shareholders' Equity or the Prices of the Company's Securities, the Annual Report Shall Disclose the Facts of the Dispute, Amount of Money at Stake in the Dispute, the Date of Litigation Commencement, the Main Parties to the Dispute, and the Status of the Dispute As of the Date of Publication of the Annual Report.

1) List of current open lawsuits, non-litigation disputes, or administrative proceedings:

==> picture [483 x 37] intentionally omitted <==

----- Start of picture text -----

Impact on
Parties
No. Year Case Summary Case Status Corporation
Involved
Finances
----- End of picture text -----

Plaintiff:	Public nuisance dispute lawsuit with	1. The Taiwan Miaoli District Court confrmed the invalidity of
THSRC	Wu and 54 other residents of Chengbei,	claims fled by local residents on November 19, 2018, fnding
Defendant:	Tongxiao Township, Miaoli. A public	in favor of THSRC and ruling that litigations costs should be
Wu and 26	ruling by the EPA found that 26 people	borne by the defendants.
others	had been impacted from the period	2. Defendants fled appeal on December 10, 2018.
	of February 2007 to August 2014 and	3. The case was adjudicated by Taiwan High Court Taichung
	ordered THSRC to pay compensation of	Branch Court under 2019 Zhong-Shang-Zi No. 9.
	NT$ 8,338,000.	4. Taiwan High Court Taichung Branch Court dismissed the
	THSRC disagreed with the ruling and	appeal on December 4, 2019 and ruled that the costs of the
	fled an appeal of declaratory judgment	case shall be borne by the appellant.
	counterclaim for invalidity on July 14,	5. The appellant fled an appeal within the statutory period.
	2015.	6. The appellant withdrew the appeal on August 28, 2020.
		7. The court verdict has been confrmed.

289

Financial Overview

No.	Year	Parties Involved	Case Summary	Case Status	Impact on Corporation Finances
2 2015 Plaintiff: THSRC Defendant: Taipei City Government The Taipei City Government found THSRC in violation of laws relating to overtime pay and vacation days and imposed a fne of NT$ 300,000 (and order to publish names of disciplined persons) on March 3, 2015. THSRC disagreed with the ruling and fled an appeal which was later rejected. THSRC fled administrative proceedings in November 2015. 1. Currently in trial at the Taipei High Administrative Court. 2. The Taipei High Administrative Court rejected plaintiff's appeal under 2016 Su-Zi No. 342 on June 7, 2018. 3. THSRC fled an appeal on July 6, 2018. 4. The Supreme Administrative Court reversed the decision by Taipei High Administrative Court on October 17, 2019 and remanded the case to the same court. 5. On December 23, 2020, the Taipei High Administrative Court revoked the previous decision regarding the plaintiff's violation of Article 24 of the Labor Standards Law and the penalty of NT$150,000 under 2019 Su-Keng-Yi No.88, and confrmed that publishing the name of the plaintiff and the person in charge in accordance with Article 24 of the Labor Standards Law under the original penalty was illegal, while the remainder of the appeal was dismissed. The plaintiff was ordered to bear half of the litigation expenses of the frst instance and remand for retrial, with remaining fees to be borne by the defendant. 6. THSRC fled an appeal on January 15, 2021. None.
3 2018 Plaintiff: Wu and 26 others Defendant: THSRC Plaintiffs fled civil tort claims against THSRC for damages of NT$ 5,700,000 due to infringements caused from the period of September 2014 to October 2018 based on the 2014 public nuisance dispute lawsuit fled against the residents of Chengbei, Tongxiao Township, Miaoli. 1. The case was adjudicated by the Taiwan Miaoli District Court under 2018 Su-Zi No. 586. 2. The Taiwan Miaoli District Court dismissed the case on December 12, 2019. 3. The plaintiff fled an appeal within the statutory period. 4. The appellant withdrew the appeal on September 29, 2020. 5. The court verdict has been confrmed. None.

2) Concluded or ongoing major litigious, non-litigious, or administrative disputes that may have significant impact upon shareholder interests or share prices that involve Corporation directors, general managers, any person with actual responsibility for the firm, any major shareholder holding a stake of greater than 10 percent, and/or any company or companies controlled by the Corporation that occurred over the past two years and up the publication date of our prospectus:
Current list of major lawsuits, non-litigation disputes or administrative proceedings concerning juristic-person directors of THSRC (Source: taken from 2019 and 2020 Q2 financial reports of the relevant juristic-person directors).

Juristic-person director: Taiwan Sugar Corporation:

==> picture [484 x 30] intentionally omitted <==

----- Start of picture text -----

Case summary and amount
Parties involved Case status
under dispute
----- End of picture text -----

Taiwan	Taiwan Sugar Corporation was involved in a	1. Following defeat in the court of second instance, Taiwan Sugar Corporation
Cooperative	contractual dispute with Celerity Pacemaker	fled an appeal to the Supreme Court. On October 13, 2016, the Supreme
Bank	Logistics Inc. (hereinafter "Celerity") and	Court reversed the previous ruling and remanded the case to the Taiwan High
	requested the return of fnes, royalties, rent,	Court.
	default fnes, and unjust enrichment equivalent	2. On May 2, 2017, the Taiwan High Court rejected Taiwan Sugar Corporation's
	to rent. Taiwan Sugar Corporation was awarded	appeal in a remanded trial and ruled that Celerity should pay NT$
	damages in March 2012 so sought to recover its	590,400,054 to Taiwan Sugar Corporation. Simultaneously, Taiwan Sugar
	claims from Celerity. The Taiwan Cooperative	Corporation should pay NT$ 121,527,053 to Celerity, of which annual
	Bank fled a subrogation lawsuit against Taiwan	interest rates of 5% would be calculated starting on January 19, 2004 for NT$
	Sugar Corporation for nonpayment of "system	114,027,053, and starting on March 30, 2013 for the remaining NT$ 750,000;
	usage fees" to Celerity and requested return of	payment would be collected by the Taiwan Cooperative Bank based on its
	NT$ 114,027,000 in "system usage fees" from	subrogation right. Both parties fled an appeal to the Supreme Court.
	the period of June 2001 to April 2003 and NT$	3. The Supreme Court reversed and remanded the previous ruling on July 20,
	7,500,000 in performance bonds.	2018.
		4. On August 13, 2019, the Taiwan High Court dismissed the appeal and ruled
		that Celerity should pay NT$ 590,400,054 to Taiwan Sugar Corporation.
		Simultaneously, Taiwan Sugar Corporation should pay NT$121,527,053 to
		Celerity, of which annual interest rates of 5% would be calculated starting
		on January 19, 2004 for NT$ 114,027,053, and starting on March 30, 2013
		for the remaining NT$ 750,000; payment would be collected by the Taiwan
		Cooperative Bank based on its subrogation right. The case is currently pending
		in the Supreme Court.

290

==> picture [483 x 186] intentionally omitted <==

----- Start of picture text -----

Case summary and amount
Parties involved Case status
under dispute
Department of The Department of Environmental Protection, On November 7, 2013, The EPA ordered Taiwan Sugar Corporation to comply
Environmental New Taipei City Government announced on with the proceedings announced by the Dept. of Environmental Protection, New
Protection, September 11, 2013 that land held by a company Taipei City Government. Taiwan Sugar Corporation disagreed with the order
New Taipei City acquired by Taiwan Sugar Corporation in and filed an appeal to the Supreme Court which was dismissed on December
Government 1984 (portions of said land were sold in 1989) 11, 2014. Taiwan Sugar thereafter filed administrative proceedings on April
constituted part of a soil pollution control 12, 2019 seeking to revoke the previous administrative action. The Taipei High
zone. Taiwan Sugar Corporation was therefore Administrative Court dismissed the case on July 9, 2020, and Taiwan Sugar
identified as a "polluter" and was requested to Corporation plans to file an appeal against this decision. Pollution investigation
propose follow-up measures. and evaluation plans must be reviewed and approved by the Department
of Environmental Protection, New Taipei City Government, and pollution
remediation plans must be submitted for approval based on investigation
results. Therefore, as of June 30, 2020, it is not yet possible to estimate the costs
of remediation.
----- End of picture text -----

Since the aforementioned juristic-person directors are financially independent from the Corporation, all the aforementioned litigation, non-litigation, or administrative disputes do not have significant impact on the Corporation's shareholder equity or share prices.

3) In the past two years and as of the publication date of our prospectus, were there any directors, supervisors, managers, and major shareholders holding more than 10% of shares in violation of the provisions in Article 157 of the Securities and Exchange Act, and if yes, the response measures taken by the company: None.

(13) Other Major Risks:

As of March 31, 2020, the COVID-19 (novel coronavirus) pandemic has caused a 18.38% decrease in our operating income for the first quarter of 2020 as compared with the previous year. Net income before tax for the first quarter decreased by 49.98% as compared with the previous year. In order to control the spread of COVID-19, the Corporation continues to deploy advanced prevention measures, details of which can be found on the "Government epidemic prevention measures" section on our corporate website (www.thsrc.com.tw).

8. Other Important Disclosure Items

(1) Management measures relating to information security implemented in 2020 were as follows:

1) Information Security Management System: In order to ensure information security is effectively implemented within daily operations, the Corporation established an "Information Security Management Committee" to review information security management strategies, missions, and operations, and comply with the requirements of the Cyber Security Management Act. The Committee is convened by the CISO (Chief Information Security Officer) who is joined by a Corporation Information Security Representative along with the heads of each department who act as Information Security Management Committee members. The Corporation Information Security Representative is responsible for managing and overseeing the planning, promotion, and implementation of information security operations, as well as compliance with the requirements of the Cyber Security Management Act. Implementation results for 2020 are as follows:
A. The head of Information Technology Division acts as the CISO and the chairman of information security management audit meetings. Regular meetings are held every 6 months to assess information security developments and strategies, ensuring that information security management systems can continue to operate in a stable manner, and the implementation performance is periodically reported to the Board of Director every year.
B. Each office and department unit assigns an information security representative, and the head of the System Operation Department in the Information Technology Division acts as the Information Security Management Representative. These representatives convened an "Information Security Representative Meeting" every quarter to report information security plans under development and implementation results, and to promote relevant information security policies and implementation highlights.
C. Relevant information security management report and implementation results were submitted to the 3th meeting of the 9th Board on June 17, 2020.

291

Financial Overview

Information Security Management Structure

==> picture [416 x 291] intentionally omitted <==

----- Start of picture text -----

President
Cyber security management Chief Information Security
committee Officer(CISO)
Cyber Security
Operations Audit Team
The cross functional colleagues who
receive an ISO 27001 Lead Auditor
Unit Cyber security Cyber security management certification
management representative representative
Cyber security Cyber security management Cyber Security Cyber Security
planning unit unit(3) unit(2) unit(1) Incident Response Team Incident Forensic Team
Functional organizations Task groupings
Division Division Division Division Division Division Division
Core Technology Core Technology
Cyber Security Vendor
Information Technology Information Technology Information Technology Information Technology
Development Department Maintenance Management Development Department Maintenance Management Maintenance Management
----- End of picture text -----

2) Information Security Policies: The Corporation periodically assesses its information security policies every year. Following approval from our Chairman on May 27, 2019, these policies were published on our corporate website. More details can be found in Chapter 4 of this report.
3) Specific Management Plans:
A. The Corporation has established its "Regulations for Governing Information Security" to ensure that our hardware, software, data, and personnel adhere to the principles of C (Confidentiality), I (Integrity), A (Accessibility), and C (legal Compliance). Our information security system is built on the three aspects of maintaining operations, information security challenges, and legal compliance, and we are gradually improving relevant management measures.

==> picture [483 x 116] intentionally omitted <==

----- Start of picture text -----

Maintaining operations Cyber security challenges Legal compliance
Maintain stability and availability of Formulate responses and defenses to trends Comply with regulations of the Information
corporate systems and services in information security issues and Communications Safety Act
(1) Replacement of old equipment (1) Access control (1) Management aspects
(2) System upgrades and function (2) Information and operational safety (2) Technical aspects
improvements (3) Risk control and audit training (3) Cognition and training
(3) System and service availability
----- End of picture text -----

292

B. In 2020, the Corporation took out electronics equipment insurance policies for operational assets relating to maintenance of information systems and network equipment; security monitoring measures were also put in place to prevent incidents of theft and malicious destruction.
C. The Corporation is committed to deploy information security protection on information services such as network, personal computers, servers, and data as well as committed to prevent any malignant cyber attack or hacking. However, the Corporation can neither claim nor guarantee total invincibility against cyber attacks such as APT (Advanced Persistent Threat) attacks, DDoS (Distributed Denial of Service) attacks, ransomware, social engineering attacks, and information theft that could result in disruption to information service systems. The Corporation also evaluates taking on cyber-insurance as an additional backing. In light of the fact that cyberinsurance is a new type of insurance policies, and in consideration of all issues relating to insurance scope, claim scope for damages, identification of damages, and qualification of identification institutes, the Corporation decides to respond to current information security challenges through annual external audit & internal audit, information security regulation review, and information security implementation procedure review. The following strategies have been adopted:
□v Continued annual review of trends in information environments and technical information in accordance with our corporate information security policies, and establishment of protective measures and solutions.
□v Implementation of annual security checks, information and communication security health checks, and social engineering and information breach scenario exercise to strengthen employee awareness of information security crises and response capabilities, in hopes of efficiently preventing and detecting threats and halting proliferation at the first instance.
□v Conducted quarterly information security training, monthly social engineering scenario exercises, and non-periodic promotional activities for information security targeted to all employees to strengthen employee awareness of information security crises and response capabilities.
□v Established cybersecurity incident notification and response protocols to regulate incident notification to external and internal units, creation of incident response teams, assessment of incident impact scope, damage control, and post-incident investigation in the event of a cybersecurity incident, so as to minimize impact on service coverage and service time and prioritize passenger rights.
D. The Corporation passed the annual check for ISO27001 information security management systems in October 2020. Our previous ISO27001 certificate was valid through December 27, 2020, and our renewed ISO27001 certificate will be valid from December 28, 2020 to December 27, 2023.

(2) Intellectual Property Management Plan And Implementation Related to The Operational Goals In 2020:

1) Intellectual property management plan

The Corporation has formulated an intellectual property management plan which is linked with our operational strategies. We promote localized intellectual property development by setting policy objectives, establishing management systems, providing and maintaining resources, estimating risk and opportunities, and building mechanisms for continuous improvement. We aim to fulfill our corporate social responsibilities by sharing the fruits of our intellectual property.

A. Intellectual property development strategy:

We set "Transportation, Technology, Taiwan, and Touch (4T)" as our vision and strategic goals. In accordance with our "Taiwan" goal, we have implemented multiple business plans to promote localization of the railway industry, enhance local development, and augment local supply capabilities for equipment/materials, dedicating our efforts to research and development of facility construction, rolling stock systems, signaling and communication systems, and information technology systems. We have also established the "Railway Industries Localization Project Team" to promote local production of rolling stock, track and power, and signal and communication systems. We hope to inspire intellectual property achievements, which we will manage and protect as necessary, through the aforementioned processes.

293

Financial Overview

B. Intellectual property related risks and countermeasures:

In the era of globalization and knowledge-based economy, we should focus on the utilization and value-adding effect of intellectual property, and deal with the risks and challenges that come along with it. The risks that we may face during the life cycle of intellectual property, in addition to the costs or damages incurred due to illegal infringement, also include the risk that internal and external stakeholders (such as internal officials, employees or external contractors, industry-academia cooperation institutions) are unable to fully recognize the importance, timeliness, and essential protection measures which should be adopted for intellectual property protection, which may mean that newly-produced intellectual property achievements may not be protected in a timely manner, and may further affect the competitiveness or operating performance of the Corporation.

C. Intellectual property management systems:

In order to prevent the risks mentioned above, the Corporation identifies opportunities or risks related to operational strategies and intellectual property management based on changes in internal and external environments, and formulates relevant response measures which include establishment of regulations, training, management of confidential information, inventory maintenance, and infringement protection, so as to effectively eliminate and reduce the risk of damage. Moving forward, we will continue to comply with the aforementioned strategic goals and regulations, develop an "Intellectual Property Management Plan," and report the content and implementation status of said plan to the Board at least once a year.

(a) Patent and trademark management
In accordance with the Corporation's "Regulations for Handling Matters of Intellectual Property" and related rules, our operational units continually evaluate and propose the needs and necessities of intellectual property rights, working with the internal legal department and external counsels to handle the application, maintenance, protection, and authorization of intellectual property rights.
(b) Trade secrets and copyright management
According to the Corporation's "Employees Employment Regulation," "Information Disclosure Management Regulations," and other related regulations, all employees bear the following obligations.
I. Document management: Employees are required to enforce document confidentiality, including classification of confidentiality levels, labelling, control, and authorization, to ensure the confidentiality of undisclosed intellectual properties.
II. Confidentiality: Employees are required to observe confidentiality regulations regarding technologies, manufacturing processes, designs, operational strategies, R&D designs or plans, and other undisclosed information that is conducive to the Corporation's competitive advantage. Vendors are also required to sign a confidentiality agreement when working with THSRC.
2) Intellectual property achievements and implementation status:
A. The Corporation continues to implement intellectual property management procedures. Our main implementations in recent years include:
(a) In 2019, we formulated the "Regulations for Handling Matters of Intellectual Property."
(b) In 2020, employees handling intellectual property affairs in the internal legal department participated in an external "Intellectual Property and Compliance Course."
(c) In 2020, the legal department held an online training course on "How to Protect Intellectual Property Rights," which was mandatory for all Corporation employees. A total of 4,735 people completed 2,285 hours of training.
(d) In 2020, we established the Intellectual Property Management Task Force. The 2020 Annual Intellectual Property Management Plan and annual implementation status were formulated after three meetings and reported to the 8th meeting of the 9th Board on November 4, 2020.

294

B. Intellectual property achievements: (As of March 31, 2021)

==> picture [483 x 270] intentionally omitted <==

----- Start of picture text -----

Categories Numbers
Patent 1. A total of 48 patents, including:
(1) Invention patents: We already hold a total of 16 patents, including the "A turnout monitoring system and its method" and
"Train seat query system" patents.
(2) Utility model patents: We already hold a total of 26 patents, including the "Fire and smoke detector diagnosing device"
and "Push notification device for railway information" patents. We obtained 6 patents in 2020, including the "Photography
system for train power equipment" and "Mobile track image recording device" patents.
2. A total of 10 patents under review:
(1) Invention patents: 7
(2) Utility model patents: 3
Trademark 1. We already hold a total of 165 trademarks.
2. A total of 1 trademark under review: After launching the "TGo 365 point redeem program" online, the Corporation submitted
a trademark application for the "365 logo and image" in 2020.
Other intellectual property rights:
• Copyright: The Corporation attaches great importance to research and publication relating to our brand, marketing, program, and system
development. We publish works, mainly articles and photographs, relating to THSRC on a monthly basis. In addition to preserving historical data,
we have established the "Regulation of Product Authorization Procedure" and "THSRC Intellectual Properties Licensing Guideline (Video & Audio)"
to regulate authorized use of our goods and videos. Furthermore, we have also established the "Procedure for Handling the External Invitation to
Provide an Interview, a Speech, a Contribution, an Award, or a Contest," which allows Corporation employees to express their opinions on external
visits, speeches, submissions, participation in awards or competitions, or other similar channels. These regulations and precautionary measures
help us protect our intellectual property rights and reduce infringement risks.
----- End of picture text -----

• Trade secret: Our trade secrets are mainly produced by the Maintenance Management Division. In addition to prevention of theft and online leakage, we have stipulated related obligations to our "Code of Conduct and Work Rules" and provide training courses to ensure that employees fulfill their confidentiality obligations.

295

Special Disclosures

9 Special Disclosures

296

1. Information on Affiliated Businesses: None.

2. Information on Private Placement of Securities in the most recent year and up to the Publication Date of this Annual Report

==> picture [483 x 611] intentionally omitted <==

----- Start of picture text -----

Private placement in 2015
Project
Issue date: November 26, 2015
Private placement
Common shares
securities
Date and amount
approved by the September 10, 2015 / No more than 3,000,000 thousand shares
shareholders' meeting
1. The Board of Directors of the Corporation set November 12, 2015 as the pricing date. According to the resolution of the
shareholders' meeting held on September 10, 2015, the private placement price of common stock should not be less than
80% of the reference price.
2. The reference price shall be determined by the higher of the following conditions: (a) The share price calculated as the sum
of all transaction amounts of Corporation common shares in the Emerging Stock Computerized Price Negotiation and Click
Basis and rationality of System in each business day for 30 business days prior to the price determination date, divided by the sum of the number
price setting of shares traded in each business day, after adjustments for any distribution of stock dividend, cash dividend, or capital
reduction; (b) The net worth per share shown on the financial report audited and certified or reviewed by a certified public
accountant (CPA) for the period closest to the price determination date.
3. The privately placed common stock reference price is set at NT$ 10.15, and the issue price is set at NT$ 10, consistent with
the resolution of the shareholders' temporary meeting stating that the private placement price shall not be lower than 80%
of the reference price.
The persons or funds selected for this private placement fulfill the qualifications set out by the resolutions of the Legislation
Selection of qualified
Yuan and Article 43-6. Paragraph 1 of the Securities and Exchange Act and Rule No. 091003455 of the Securities and Futures
persons
Bureau of Financial Supervisory Commission dated June 13, 2002.
The percentage of government holdings in the Corporation was increased in order to implement the "High-Speed Rail
Financial Resolution Plan" and in accordance with relevant resolutions taken by the Legislative Yuan. Additionally, private
Necessity for private placements are characterized by quick and convenient access, and Corporation common shares issued through private
placement placement are not freely transferable within the first 3 years, ensuring a long-term equity relationship between the
Corporation and government entities. The Corporation placed common shares with specific parties according to the provisions
of Article 43-6 of the Securities and Exchange Act.
Payment completion
November 26, 2015
date
Participation in
Relationship
Private placement entity Qualifications Subscription quantity Corporation's
with THSRC
operations
THSRC director, largest
THSRC director,
Ministry of Transportation and shareholder, and
Paragraph 1 2,420,000 thousand shares Government-
Communications, R.O.C. governing authority of
related entity
THSRC
China Aviation Development
Paragraph 3 260,000 thousand shares THSRC director THSRC director
Foundation
Applicants
Mega International Commercial
Paragraph 1 71,100 thousand shares None None
Bank
First Commercial Bank Paragraph 1 53,300 thousand shares None None
Hua Nan Commercial Bank Paragraph 1 53,300 thousand shares None None
Taiwan Corporative Bank Paragraph 1 53,300 thousand shares None None
Chang Hwa Commercial Bank Paragraph 1 44,500 thousand shares None None
Taiwan Business Bank Paragraph 1 44,500 thousand shares None None
----- End of picture text -----

297

Special Disclosures

==> picture [483 x 253] intentionally omitted <==

----- Start of picture text -----

Private placement in 2015
Project
Issue date: November 26, 2015
Actual subscription (or
NT$10 per share
conversion) price
The difference between
actual subscription (or
The actual subscription price was $10 per share, 98.25% of the reference price set at $10.15.
conversion) price and
reference price
Impacts of private
placement on A total of 3 billion privately placed common stock was issued, generating stock income of $30 billion, and bringing paid-
shareholders' equity in capital to $56,052,930,580, which will help the Corporation stabilize its operations and development, and bring positive
(for example, increase benefits to shareholders' equity.
of cumulative losses)
Fund utilization of
Collected private equity funds were used to enrich working capital, purchase machinery and equipment, and implement
private placement
preferred stock compensation schemes. In the second quarter of 2016, $14.3 billion was used to enrich working capital,
and project
$600 million was used to purchase machinery and equipment, and $15.1 billion was used for preferred stock compensation
implementation
programs.
progress
Private placement Enrich the Corporation's funds, improve the Corporation's financial structure, aid implementation of preferred stock
benefits compensation programs, and stabilize the Corporation's operations and development.
----- End of picture text -----

3. Information on Shares Held or Sold by Subsidiaries in the most recent year and up to Publication Date of Annual Report: None

4. Other Supplementary Information Required: None.

5. Has the corporation experienced any events as described in Item 2, Paragraph 3, Article 36, of the Securities and Exchange Act that have had major impacts on shareholders' equity or share prices in the most recent year and up to the publication date of this Annual Report: None.

298

Headquarters

Address: 13F., No.66, Jingmao 2nd Rd., Nangang District, Taipei, Taiwan, R.O.C.

Website: www.thsrc.com.tw Tel: +886-2-8789-2000

THSRC Spokesperson: Johnson Sun

Title: Business Senior Vice President Tel: +886-2-8789-2000 Ext. 72710 Email: [email protected]

THSRC Deputy Spokesperson: Elaine Tsou

Title: Assistant Vice President

Tel: +886-2-8789-2000 Ext. 72710 Email: [email protected]

Share Transfer Agent and Registrar

Company: Fubon Securities Transfer Agency Department

Address: 2F., No.17, Shu Chung St., Chungchen District, Taipei, Taiwan, R.O.C.

Website: www.fubon.com.tw

Tel: +886-2-2361-1300

Auditors of Current Financial Report

Auditor Names: Mei-Yen Chiang, Kwan-Chung Lai

Company: Deloitte & Touche

Address: 20F., No.100, Songren Rd., Xinyi District, Taipei, Taiwan, R.O.C.

Website: www.deloitte.com.tw Tel: +886-2-2725-9988

Public listings and securities trading in overseas stock exchanges: None.

TAIWAN HIGH SPEED RAIL CORPORATION

CHAIRMAN

==> picture [195 x 79] intentionally omitted <==

==> picture [596 x 184] intentionally omitted <==

AI assistant

THSRC — Annual Report 2020

52174_rns_2021-08-30_08993263-02f8-4694-91ae-2939827c17c3.pdf

THSRC Milestones

Key Operating Statistics for 2020

Table of Contents

Business Report and Future Prospects

1. Business Report for 2020

(1) Operational Performance

1) Rail Operations

(2) Budget Implementation

(3) Revenue, Expenditure, and Profitability Analysis

Financial Data

(4) Research and Development

1) Civil Facilities:

2. Business Plan for 2021

(1) Management Guidelines

(2) Expected Sales Volumes

(3) Major Production and Marketing Initiatives

3. Future strategies

4. Impacts of External Environment, Legal Environment, and Overall Business Environment

1. Business Strategy and Vision

Our Vision & Mission--

"To be the platform for advancement and enjoyment"

Our Values

Innovation

Sensibility

Our Attributes

Real

Progressive

Passionate

Premium

2. Historical Milestones

1. Organizational Structure

(1) Corporation Organizational Structure

(2) Business Operations of Major Departments

3) Remuneration Committee

4) Special Committee

1) Secretariat Division of the Board of Directors

2) Corporate Audit Office

3) Corporate Planning Office

4) Legal Office

10) Finance Division

11) Human Resource Division

12) Information Technology Division

13) Business Division

14) Travel and Business Development Division

15) Public Affairs Division

16) Operation Division

18) Procurement Division

20) Core Technology Development Department

21) Facility Engineering Department

22) Operation Planning Department

2. Board of Directors

(1) Directors

(2) Major Shareholders of Institutional Shareholders

(3) Independence Analysis of Directors

3. Management Team

4. Remuneration to Directors and Department Heads

2) Remuneration of President and vice presidents

3) Remuneration range table

4) Names of managers who received employee compensation and status of distribution

2) Remuneration policies, standards, and packages

3) Procedures for determining remuneration

5. Human Resources

(2) Employee Benefits and Rights

Retirement conditions:

(3) Labor-Management Negotiations

1. Corporate Governance Status

(1) Status of Board Operations

1) Director attendance records for meetings of the 8th Board in 2020

Implementation Status of Board Evaluations:

(2) Operational Status of Audit Committee

(3) Composition, Duties, and Operational Status of Remuneration Committee

1) Remuneration Committee Members

(4) Operational Status of Corporate Governance & Nomination Committee

(5) Operational Status of Special Committee

B. Operational Status of 9th Special Committee in 2020:

Corporate Governance

Date: December 31,2020

THSRC Annual Report 2020

本公司為確保風險管理的完整性、有效性與合理性，特訂定風險管理政策如下，作為本公司風險管理的最高指導原則：

台灣高速鐵路股份有限公司為邁向永續經營，我們承諾在環境保護、人權與勞動實務、商業倫理及社會公益等議題，持續與不同供應鏈夥伴進行溝通，建構完善的管理機制，並致力推展及持續改善：