EVA Airways Corporation 376, Sec. 1, Hsin-nan Rd. Luchu, Taoyuan County, Taiwan Tel: Internet Address:

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2 EVA Airways Corporation 376, Sec. 1, Hsin-nan Rd. Luchu, Taoyuan County, Taiwan Tel: Internet Address: Taipei Office 117, Sec. 2, Chang-an E. Rd., Taipei, Taiwan Tel: Spokesman Kuo-Wei Nieh Executive Vice President, Public Relation Division Tel: Deputy Spokesperson Katherine Ko Junior Vice President, Public Relation Division Tel: Shareholder Services Address: 2F, 166, Sec. 2, Minsheng E. Rd., Taipei, Taiwan Tel: Internet Address: Auditors KPMG 68F, 7, Sec. 5, Xinyi Road, Taipei, Taiwan (TAIPEI 101 Tower) Tel: Internet Address: Financial Calendar Year ended December 31, 2010

3 Contents Financial and Operating Highlights 1 To Shareholders Result Preview 5 Future Development Strategies 6 Competition, Legal Issues and Operating Environment 6 The Company 8 Major Milestones 8 Calendar of 2010 Events 10 Directors and Supervisors 11 Principal Officers 18 Capital and Shares 25 EVA Air People 29 The Fleet 31 The Network 35 Principal Subsidiaries 36 Important Resolutions by Shareholders and BOD 37 Financial and Operating Results 39 Financial Results 39 Operating Results 45 Financial Statements 46 Independent Auditors Report 47 Balance Sheets 49 Statements of Operations 50 Statements of Changes in Stockholders' Equity 51 Statements of Cash Flows 52 Notes to Financial Statements 53 Consolidated Balance Sheets 99 Consolidated Statements of Operations 100 Consolidated Statements of Changes in Stockholders' Equity 101 Consolidated Statements of Cash Flows 102

4 Financial and Operating Highlights % Change Financial Income Statement Revenue NT$ thousand 104,410,011 73,279, % Passenger Revenue NT$ thousand 56,397,432 43,950, % Cargo Revenue NT$ thousand 41,293,552 24,207, % Total Costs NT$ thousand 91,761,263 76,099, % Operating Profit NT$ thousand 12,648,748 (2,820,224) (548.50%) Net Profit NT$ thousand 12,016,736 (2,844,254) (522.49%) EPS NT$ 4.06 (1.14) (456.14%) Profit Margin % 11.51% (3.88%) 15.39ppt Balance Sheet Total Assets NT$ thousand 148,029, ,936,736 (1.27%) Total Liabilities NT$ thousand 107,394, ,909,623 (8.92%) Total Equity NT$ thousand 40,635,262 32,027, % Total Capital NT$ thousand 29,626,772 29,626,772 - Book Value per Share NT$ % Debt Ratio % 72.55% 78.64% (6.09ppt) Operating Overall Capacity Thousand 8,838,400 7,188, % Overall Traffic Thousand 7,294,269 5,672, % Overall Load Factor % 82.53% 78.91% 3.62ppt Overall Yield NT$ % Passenger Capacity Thousand 29,632,492 29,311, % Passenger Traffic Thousand 23,627,111 22,689, % Passengers Carried No. of Passengers 6,435,807 6,021, % Passenger Load Factor % 79.73% 77.41% 2.32ppt Passenger Yield NT$ % Cargo Capacity Thousand 6,171,476 4,550, % Cargo Traffic Thousand 5,167,829 3,630, % Cargo Carried Tons 850, , % Cargo Load Factor % 83.74% 79.78% 3.96ppt Cargo Yield NT$ % Unit Cost NT$ (1.93%) Number of Employees 5,121 4, % Capacity per Employee Thousand 1,726 1, % Traffic per Employee Thousand 1,424 1, % Revenue per Employee NT$ thousand 20,389 16, % 1

5 To Shareholders 2010 Result In 2010, we carried a total of 6.44 million passengers and 850,000 tons of cargo, with a total load factor of 83%. Audited financial statement shows annual operating revenue for the year was NT$ billion, an increase of 43% compared to 2009, and annual after-tax net profit of NT$12.02 billion. Passenger revenue reached NT$56.4 billion, an increase of 28% to NT$12.5 billion over 2009 The global economic recovery and robust passenger demand led to stronger pricing power while increased cross-strait flight frequency and added destinations boosted passenger revenue. Fuel prices were also less volatile, contributing to a stunning profit over the previous year s loss and record revenue. Cargo revenue reached NT$41.3 billion, up 71% to NT$17.1 billion over 2009 Economic recovery also spurred a rebound in the airfreight market. The roll out of a new generation of 3C products for smartphones strengthened the upswing, encouraging inventory policy reviews and a jump in demand for re-stocking. Accommodating market dynamics, EVA increased capacity and cargo turnover, resulting in profitability and growth. Expanded fleet to 56 aircraft and continued to replace older models At year-end 2010, the Company operated a 56-aircraft fleet made up of 39 passenger jets and 17 freighters. The types of aircraft in the fleet are shown in the table below: Aircraft Type Quantity B B Combi 4 B (Freighter) 9 MD-11 (Freighter) 8 MD-90 6 B ER 15 A Total 56 Aircraft in the Company s second-generation fleet include 11 Airbus aircraft, currently in operation, and 15 Boeing ERs that are 2 also fully deployed in EVA took delivery of the last of its brand-new B777s in December Aviation safety and quality services acclaimed for excellence EVA is dedicated to safety and service quality. The Company has been consistently recognized for our outstanding aviation safety record and we fly a young fleet of Airbus A and Boeing B ER aircraft. We began taking delivery of our brand-new A s in 2003 and deployed the first of our B ERs in Our passengers enjoy exceptionally comfortable flights in state-of-the-art cabins. In the Premium Laurel Class top cabins, they travel in ultra-long hard-shell seats with a roomy 61-inch pitch, 10.4-inch LCD touch-panel AVODs, have a short message service right at their fingertips, check in for their flights at a dedicated counter and have the option of pre-ordering meals from an extensive menu as late as 24 hours before departure. Along with the Company s outstanding aviation safety record, our excellent service is widely recognized at home and globally. In October 2009, EVA was designated as the official carrier for the 2010 Taipei International Flora EXPO, enlisting the Evergreen Group s global aerial network to join us in conveying news of this significant event to every corner of the world. Starting around the same time, a strategic alliance with the Shanghai Municipal Tourism Administration promoted not only travel to the Yangtze River Delta region but also international tourism to both the Shanghai International Expo and the Taipei Flora Expo. Results Compared to Projections Our 2010 operating revenue forecast was NT$98.03 billion, actual operating revenue was NT$ billion, and our achievement ratio was %. Expected pre-tax net profit was NT$7.53 billion and actual pre-tax net profit was NT$12.05 billion. Analysis of Financial Results and Profitability Total revenue: NT$ billion Total operating revenue in 2010 reached NT$ billion, a jump of 43% over Due to the bounce back of the business travel and

6 tourism markets, passenger revenue rose 28% over the previous year. And as the global economy regained strength, the cargo market surged, picking up 71% in cargo revenue over the previous year. Total expenses: NT$93.84 billion Annual operating expense for 2010 were NT$91.76 billion, an increase of 20.58% over 2009 attributable to a relative increase in operating revenue. Profitability analysis: Return on total assets: 9.05% Return on shareholders equity: 33.08% Ratio of operating profit to paid-in capital: 42.69% Return on sales: 11.51% Earnings per share: NT$4.06 Research and development Responding to the Taiwan government s cross-strait direct link open policy, the Company has strategically developed destinations in China and established an extended service network. To effectively align our e-services with operation of China services, we have focused on building our system, code sharing and e-commerce development on each route. Our objective is to quickly establish an EVA presence in firstand second-tier cities connected by multiple routes. The Company is also strategically pursuing cooperative partnerships with China s leading carriers to leverage services and strengthen our competitive position in cross-strait markets. To enhance efficiency of collaboration between EVA and travel agents, we have expanded the scope of our B2B sales and services features to favor proliferation of e-commerce. We have also simplified and sped up the process to provide fast, convenient reservations and ticket issuing channels, saving manpower in sales, ticketing and reservations and achieving top-notch results. The Company has extended sales and passenger services by introducing self-service kiosks, upgrading service quality and saving manpower and resources. Following positive results from self-service kiosks we initiated at Taoyuan International Airport in 2009, EVA have also installed them in Taipei s Songshan International Airport, using Common Use Self-Service (CUSS) software applications and getting extremely positive results. As a service to our internet-savvy passengers, we introduced website check-in in Passengers simply go to our EVA website to check in online and print their boarding passes. At the airport, they can go directly to the gate and avoid the inconvenience of standing in line at the check-in counter to get their boarding passes for flights to some destinations. The Company s air freight e-commerce system is poised to provide a business-contact platform link to forwarders. Building on this pipeline will enhance service quality and fortify sales channels. In addition, development of e-booking enables agents or shippers to control freight-space allotments in an environment they can access from their own computers. Our e-freight system also enables EVA to give air cargo customers seamless services and prompt response to inquiries about flight schedules, shipment status and billing information. Applications for our powerful Electronic Data Warehouse (EDW) system give us tools to analyze our business units in real time, make sound business decisions quickly and maximize revenue. We used EDW in 2010 to closely monitor route P&Ls, perform comprehensive network analyses and give us a framework for both passenger and cargo operational strategies with multiple dimensions and variables. This depth of analysis facilitates route segmentation and fare adjustments, enabling us to project the most advantageous combinations of operational efficiencies balanced against future route contributions and optimize flight schedules. The Company is uncompromising towards even a hint of a threat to aviation safety and EVA s ability to maintain our zero incident record. We strengthened flight-safety incident management and safety-margin risk analysis in 2010 by integrating flight-safety incident reports, including aircraft ground incident management, flight management incidents, cabin safety incidents and aviation security event management with all applicable management mechanisms into one 3

7 comprehensive information platform. This system identifies problems or threats and produces an essential risk enhancement plan, equipping us to achieve effective incident prevention and strengthen overall aviation safety. 4

8 2011 Preview Operation Guidelines We will uphold the Company s philosophy of providing reliable aviation safety, convenience and friendly, comprehensive services. We further upgraded service quality in 2010 by taking delivery of the last of the 15 advanced B ERs, elevating passenger safety and ensuring exceptionally comfortable flight experiences. We are utilizing fleet resources to improve route competitiveness and flexibility, and to positively influence our bottom line. Estimated Air Traffic and Basis Passenger service: We forecast carrying 7.09 million passengers in 2011, a 10.1% increase compared to 6.44 million passengers in Estimation Basis: The 2011 passenger market focus will expand in the Mainland China market and our flight quota will gradually be increased to a total of 370 per week. At the same time, the quota for tourists from Mainland China arriving in Taiwan will increase from 3,000 per day to 4,000. Individual Mainland China travel programs will also become available during the first half of Combined with visa-exempt programs in Europe and Canada, we anticipate a higher volume of sales. Mainland China has now opened 37 regular flight destinations. EVA is serving nine of them, including Beijing, Shanghai Pudong, Shanghai Hongqiao, Guangzhou, Hangzhou, Tianjin, Ningbo, Zhengzhou and Jinan. Going forward, we will continue to evaluate feasibility of serving additional destinations in China and add routes based on market demand and progress of cross-strait negotiations. The Company will continually seek cross-strait business/passenger sources and strive to develop Taoyuan International Airport into a global hub. Cargo service: We forecast carrying 885,000 tons of airfreight in 2011, an increase of 4.12% compared to 850,000 tons in Estimation Basis: Starting in November 2010, as it has become apparent that the economy is recovering in Asia, we have initiated freight service to thriving cities such as Nanjing, Xiamen and Chongqing. And we will continue to focus on market expansion in Mainland China and Asia. We have also returned an MD11 freighter to service, deploying it on existing long-haul routes and networks to the US and Europe. We expect greater freight-traffic growth in Key Marketing Strategies Passenger Service In 2011, we are operating a total of 15 B ERs. We plan to place three leased A aircraft in service during the fourth quarter of As the Company optimizes opportunities in the recovering global economy, the fuel-saving advantages and advanced cabin amenities of our fleet are expected to boost our operating profits. We will continue to develop e-services, such as online check-in, self-print boarding passes, etc. to further reduce our operating costs. We will adjust destinations, reconfigure aircraft and fine-tune flight schedules to most effectively capture market demand, leverage fleet capacity and boost route profitability. We will continue to strengthen code-sharing relationships with other major airlines such as American Airlines, Continental, US Airways, All Nippon Airways, Qantas, Air China, Hainan Airlines, Bangkok Airways, etc. As an example, we are expanding our code-sharing with All Nippon Airways to serve 12 destinations in Japan s domestic market with 37 flights. We will proceed toward our goal of joining global alliances and tap into any available opportunities to form strategic alliances with regional proxy carriers. We will respond to the administration s cross-strait open policies and closely monitor any changes, relaxation or amendment in travel requirements. We will also concentrate on capturing potential incoming individual travelers from Mainland China. Cargo service Now that the regular cross-strait flights have been established, we will make full use of bellyhold space aboard passenger aircraft to increase destinations and routes. In addition to maintaining cooperation with Air China 5

9 Cargo to swap regular cross-strait cargo space on the Taoyuan - Shanghai route, we are aggressively seeking cooperation on regular cross-strait freight service with other carriers. The Company will continue to strengthen code-sharing relationships with the objective of doubling service frequencies and actively seek new alliances to add destinations. As the ASEAN Plus One free trade zone is integrated and China becomes an even greater economic force, catalyzing excess market demand, we will continue to strengthen our existing Europe/US market share and work to nurture the import market in Asia. IATA has ranked EVA ninth among 31 e-freight carriers participating in its environmental protection and carbon reduction campaign. The Company is also participating in IATA s e-awb program to improve overall airfreight efficiency and cut costs effectively. Future Development Strategies The Company has extended our flight network globally, linking major cities in Europe, America, Asia and Oceania. We will use our far-reaching route network to provide convenient air services, and commit to developing Taoyuan International Airport into a global hub within the near future. In response to the open policy of cross-strait regular service, our company has actively engaged with the expansion of direct link service network and acting flexibly upon the amendment of the flight agreement to capture potential passenger and cargo markets to retain our utmost competitiveness. After acquiring the last of 15 new-generation fuel-saving B ER aircraft in 2010, we ve also upgraded cabin equipment on these aircraft to give our passengers safer and more comfortable flight services. In 2011 we plan to take delivery of three A aircraft equipped with the latest seat technology, inflight entertainment and much more. These fleet additions will strengthen our regional presence. As we continue to focus on safety and service quality, we will also review our fleet portfolio and identify opportunities to optimize capacity as the cross-strait market continues its high-growth development. Currently, the Company is jointly cooperating with 11 airlines, including American Airlines, Continental, US Airways, All Nippon Airways, Qantas, Air China, Hainan Airlines, Bangkok Airways, British Airways (cargo), Air China Cargo, FedEx (cargo). We are committed to joining a key global alliance. And we will continue to expand and strengthen our cooperation with other airlines, combining flight networks and beneficial advantages, driving down operating costs in order to diversify risk and giving our passengers faster, more convenient flight services. Competition, Legal Issues and Operating Environment Competition The global economic recovery continues to be somewhat murky and has impacted corporate business travel budgets, affecting business and leisure markets, passenger volume and fare levels. Low-cost carriers are entering the passenger market with rock-bottom fares and Taiwan s high-speed rail has driven domestic airlines to transform themselves. These factors are affecting the competitive landscape and the supply-demand balance in regional passenger and cargo markets. The outcome has skewed regional short-haul supply-demand dynamics. More nations are deregulating aviation policies. As an example, the United States and Japan have adopted an open-sky policy that is likely to intensify competition for regional and inter-continental passengers and uplift capacity. China s growing demand for air transport is expected to continue to dominate Asian markets. In addition to cross-strait passenger and cargo volumes that repeatedly reach new highs, related businesses such as aviation products manufacturing, aviation personnel and maintenance are also thriving. This trend creates significant opportunities for Taiwanese companies alike. 6

10 Legal Environment Political and economic stability has a direct impact on the ups and downs of passenger and cargo markets. It s critical that the airline industry be vigilant and ready to respond to changes as cross-strait open policies on direct flights are still in initial stages and support measures remain somewhat fragmented, Increasing consumer awareness and changes in regulations are burdening the airline industry. A prime example is the penalty imposed by the European Union for overselling airline seats and inclusion of the industry in the EU s Emission Trading Scheme (ETS) that takes effect in Mainland China s opening up of its passenger transit policy would affect international transit network competitiveness for Taiwan s carriers. Operating Environment The global economy is on its way to emerge from the deepest downturn since the Great Depression and the liquidity crunch has limited increases in demand. World-trade volumes aren t yet stable but Mainland China s economic development has continued in an encouraging pattern likely to provide momentum for economic growth. Still, confidence in the market is lagging. The gradual economic recovery and expansion of emerging markets in Asia, the Middle East and South America have sustained growth in both passenger and freight market in At the same time, sluggish growth in Europe and US markets and stubbornly high unemployment levels create uncertainty for airline prospects. Repeated catastrophes stemming from climate change are impacting the operating environment for air transport. Volatile international fuel prices affect profitability for the airline industry. Though the Company s 2010 performance was stunning, fuel-price spikes, climate change and political unrest are severe challenges that the airline industry faces in the coming year. Along with widening market exposure, strengthening business management procedures and further improving cost management and risk controls, the Company will sustain steady growth in direct cross-strait service flights. EVA will also identify opportunities associated with the ROC s Centennial Celebrations and take advantage of EU countries visa-exemptions. With these measures and the flexibility to respond quickly to changes in the market, we are confident that we can address the challenges we face and achieve another peak performance in 2011 again. 7

11 The Company EVA Air was founded in March 1989 as a 100% privately owned Taiwan-based airline. It is an affiliate of Evergreen Marine Corporation, the world s leading container-shipping line. From its maiden flight on July 1, 1991, EVA Air has grown steadily and today, serves more than 50 major destinations on four continents and in Oceania with a fleet of 56 aircraft (as of December 2010). The carrier has flourished as it has continued to expand its fleet and operation network. In 1997, after carefully nurturing an environment where faultless service quality and flight safety are the standard, EVA Air became the first airline in Taiwan to achieve official ISO 9002 Certification in three areas at the same time -- passenger, cargo and maintenance operations. Diligently upholding these objectives, EVA Air earned ISO-9001:2000 Certification for all categories of operation in In addition, EVA has ensured quality, smooth ongoing operations and reduced costs by investing capital and expertise in airline-related companies, including Evergreen Sky Catering Corporation, Evergreen Airline Services Corporation, Evergreen Air Cargo Service Corporation, and other selected subsidiaries. Operating strategies developed by the carrier are far-reaching. Company goals place equal importance on its passenger and cargo services, and it works in cooperation with affiliated carriers to maximize mutual efficiencies and effectively compete on a global scale. Its worldwide hub of operations at Taoyuan International Airport in Taiwan has proven to be both successful and strategic. EVA Air listed its stock on Taiwan s TAISDAQ Market in October 1999, and moved to the main board, TSE, in September Major Milestones 1988~1990 On September 1, 1988 at the celebration for the 20 th birthday of Evergreen Marine Corporation, Group Chairman Y. F. Chang announced that Evergreen would launch an international airline. EVA Air was officially formed in March After careful deliberation, the fledgling airline signed a contract with Boeing/McDonnell Douglas for 26 aircraft at a total purchase value of US$3.6 billion, and immediately captured the attention of the global airline market EVA Air accepted delivery of its first two B ERs in April, and made its inaugural flight on July 1. Within that first week, the new airline opened five destinations in Asia -- Bangkok, Seoul, Jakarta, Kuala Lumpur and Singapore The comprehensive EVA Training Center opened in July, and the carrier s first two all-passenger B s were delivered in November. EVA used the first flights of the new aircraft to launch its Taipei-Los Angeles route and introduce its four classes of cabin service, including the debut of its trend-setting Evergreen Deluxe Class in-between Economy and Super Business EVA Air set new standards and heightened expectations by expanding its network to more than half a dozen new destinations, and by launching service to London, Paris, Seattle, New York, San Francisco, Brisbane, Sydney and Dubai EVA made the greatest number of new aircraft additions to its fleet this year, purchasing a total of eight, including three MD-11s, one B and four B s. The airline also added Bali, Fukuoka and Auckland routes to its network. 8

12 1995 The carrier purchased three MD-11 freighters and began to vigorously develop air cargo operations. It set goals emphasizing passenger and cargo services equally. And it used joint operations and land transportation to successfully extend EVA Cargo services worldwide Enhancing the high quality of its operations, EVA applied for ISO-9002 certification. Within the next year, its passenger service, cargo service and aviation maintenance operations were all three granted ISO-9002 international certifications simultaneously. EVA achieved ISO-9001:2000 certification in Ensuring consistent service quality, EVA and Singapore Airlines formed Evergreen Sky Catering Corporation as a joint venture and in February, began providing in-flight catering services Promoting air safety, EVA signed a joint-venture contract with General Electric and established Evergreen Aviation Technologies Corporation on February 24. That same day, a powerful new engine test cell was placed in operation, and the new joint venture began an aggressive campaign to raise the standards of the aircraft maintenance business Earning brilliant results with both passenger and cargo service, EVA produced outstanding operating performances for five successive years. The Securities and Futures Commission (SFC) of Taiwan approved its admission to the exchange, and on October 27, EVA Air shares began to be traded on the over-the-counter market In anticipation of future needs and to expand its fleet, EVA signed a purchase contract in June with the Boeing Company for 15 B X/300Xs that included a firm order for seven of the aircraft and an option for eight more. Deliveries began in The carrier relocated its hub to the brand-new Terminal 2 at Taoyuan International Airport at the end of July EVA committed to add more new, technologically advanced aircraft to its fleet in March by signing a purchase contract for eight Airbus A s and making plans to start taking deliveries in EVA Air also secured approval to transfer its stock listing from OTC and on 17 September, moved its shares to the Taiwan Security Exchange (TSE) EVA launched its online booking system on January 9. It gained approval to add 24 passenger flights on its thriving Hong Kong route and to begin new freighter service. It also introduced a new slogan Just relax, your home in the air EVA debuted stylish new cabin-crew uniforms on April 1, took delivery of its first A on June 26 and introduced its new generation of a top cabin class, Premium Laurel, along with an upgraded economy class and an awesome, state-of-the-art Audio/Video on Demand system EVA Air exercised an option for eight B777s that was part of the firm purchase contract executed with Boeing in June 2000, expanding its fleet by a total of 15 brand-new B777s. Deliveries of the new aircraft started in 2005 and will continue through EVA took delivery of its first two of 15 B777s and introduced the extra-roomy, exceptionally comfortable new aircraft to passengers on the Bangkok and London with an inviting new slogan, Sharing the World, Flying Together EVA Air opened its new Southern China Cargo Center in Hong Kong, enabling it more efficiently and quickly to move air freight shipments in and out of the region EVA Air received 2007 The Richard Teller Crane Founder s Award from the international 9

13 Flight Safety Foundation for its corporate leadership in aviation safety programs and its superb safety records. In the five years since the coveted award was established, EVA is the first Asian airline and only the second airline among all recipients to receive it Readers selected EVA Air as the Best Airline for Premium Economy in Global Traveler magazine s fifth annual GT Tested Survey. The international business-travel publication surveyed its readers between Jan. 1 and Aug. 31, 2008, inviting them to identify the best in 55 categories of business and luxury travel. Readers returned 31,457 completed questionnaires EVA Air rated as one of World s Best International Airlines Prestigious Travel & Leisure readers survey identified top-ten carriers. Results of the publication s prestigious annual survey place EVA in ninth position, barely one-tenth of a point behind number six Using cabin comfort, in-flight service, customer service and value as rating characteristics. Calendar of 2010 Events February EVA and US Airways expanded co-sharing services. The agreement extended trans-pacific routes to Charlotte, Philadelphia and Phoenix on February 12, March EVA resumed its freighter service, Taipei to Vienna with two flights weekly which significantly lifted Central and Eastern European airfreight export capacity on March 18, EVA expanded Canada service and launched nonstop Toronto passenger service with three flights weekly on March 29, June EVA added new service from Taipei s Songshan Airport to Shanghai s Hongqiao International Airport started from June 14, It complemented EVA s current nine flights a week between Taoyuan International Airport and Pudong International Airport. September EVA passengers got convenience of self-print boarding passes service now available at 17 gateways around the world. Departing passengers who are not checking luggage can print their boarding passes and go directly to the EVA and UNI gates 30 minutes before scheduled take-off. October EVA/UNI Air teamed up with Air China/Shenzhen Air to increase China service started from October 31, The arrangement was doubling the frequency of EVA and UNI flights on eight Taiwan-China routes. EVA initiated the new service on October 31, 2010 with two flights a day plus two more through a code share with Air Nippon Airways (ANA) between the close-in airports in both cities, Taipei's Songshan International Airport and Tokyo's Haneda Airport. December EVA introduced regularly scheduled flights to Zhengzhou on December 10, 2010 and UNI Air will start flying to Ningbo on December 20, EVA also initiated passenger service to Jinan on December 18, 2010 with weekly charters. May EVA and Bangkok Airways started code-sharing to Thai vacation destinations and new service extended EVA routes from Bangkok to Phuket, Koh Samui, Chiang Mai started from May 3,

14 Directors and Supervisors Title Chairman Vice Chairman Name Evergreen Marine Corp. Representative: Lin Bou-Shiu Chang Yung-Fa Foundation Representative: Jeng Kung-Yeun Date of Election (Inauguration) Tenure Date of Initial Election, Appointment Shareholding When Elected Present Shareholdings Shares Held by Spouses & Dependents Shares Held by Third Parties Education & Experience Concurrent Positions in Other Companies April 30, 2011 Other Managers, Directors or Supervisors Related by Marriage or Within Second-degree Blood Relationship of Each Other Number (%) Number (%) Number (%) Number (%) Title Name Relationship Years ,571, ,257, President, EVA Airways Corp. Tamkang University Years , , Years , , Chairman, Uni Airways Corp. PhD in Traffic and Transportation, Years , National Chiao-Tung University Director Chang Yung-Fa Years ,810, ,418, ,867, Chairman, Evergreen Marine Corp. Taipei Commercial High School Director, Uni Airways Corp. Director, Evergreen Sky Catering Corp. Director, Evergreen Aviation Technologies Corp. Director, Evergreen Airline Services Corp. Chairman, Hsiang-Li Investment Corp. Director, Evergreen Sky Catering Corp. Director, Evergreen Aviation Technologies Corp. Director, Evergreen Air Cargo Service Corp. Director, Hsiang-Li Investment Corp. Director, Evergreen Marine Corp. Director, Evergreen International. Corp Director Chang Kuo-Hua Son Director Chang Yung-Fa Foundation Representative: Lin, Sun-San Years , , Chairman, Evergreen Marine Corp. National Taipei University Years Director, Evergreen Marine Corp. Director, Evergreen International Storage & Transport Corp Director Evergreen Marine Corp. Representative: Lin, Long-Hwa Years ,571, ,257, Executive Vice President, Evergreen Shipping Agency Years 10 months ,536, , (America) Corp. National Kaohsiung Normal University Director, Evergreen Security Corp. Director Chang Yung-Fa Second-degree relatives 11

15 Director Director Supervisor Supervisor Supervisor Chang Yung-Fa Foundation Years , , President, Evergreen International. Corp. Representative: Years Chang, Ming-Yuh Evergreen Marine Corp. Representative: Chang, Kuo-Hua Evergreen International Corp. Representative: Ko Li-Ching Evergreen International Corp. Representative: Wu Kuang-Hui Evergreen International Corp. National Chiao-Tung University Years ,571, ,257, Vice Chairman, Evergreen Marine Corp. Taipei College of Years ,733, ,500, Maritime Technology Years ,289, ,926, Executive Vice President, Evergreen International Corp Years , Keelung Girls Senior High School Years ,289, ,926, Executive Vice President, EVA Airways Corp Year 7 Months , MBA, Sun Yat Sen University Years ,289, ,926, President, Italia Marittima S.p.A. Soochow University Senior Vice Representative: Years , , Chen Cheng-Pang Vice Chairman, Evergreen Airline Services Corp. Director, GRETEC Construction Corp. Director, Evergreen Marine Corp. Director, Evergreen International Storage & Transport Corp. Director, Evergreen International. Corp. Director, Taiwan High Speed Rail Corp. Supervisor, Evergreen Marine Corp. Supervisor, Evergreen International Storage & Transport Corp. Supervisor, Evergreen International Corp. Supervisor, Uni Airways Corp. Chief Financial Officer, Evergreen Marine Corp. Supervisor, Evergreen International Storage & Transport Corp. Supervisor, Central Reinsurance Corp. Senior Vice President, Evergreen International Storage & Transport Corp Director Chang Yung-Fa Father Note 1: As of April 30, 2011 the Company has issued 2,962,677,277 shares 12

16 Major Shareholder of EVA Air s Institutional Shareholder Name of Institutional Shareholder Evergreen Marine Corp. April 30, 2011 Major Shareholders of Institutional Shareholder Evergreen International S.A. (Panama)(10.64%), Chang Kuo-Hua (7.56%), Evergreen International Corp. (7.16%), Chang Yung-Fa (6.00%), Ultra International Investments Ltd. (4.25%), Chang Kuo-Cheng (4.24%), Chang Kuo-Ming (3.17%), Cheng Shen-Chin (2.12%), Chang Shu-Hua (2.02%), Cathay Life Insurance Co., Ltd. (1.99%) Chang Yung-Fa Foundation Non-profit organization Evergreen International Corp. Chang Yung-Fa Foundation (28.86%), Chang Kuo-Cheng (16.67%), Chang Kuo-Hua (12.90%), Chang Kuo-Ming (12.19%), Lee Yu-Mei (7.14%), Chen Hui-Chu (5.81%), Yang Mei-Chen (5.10%), Chang, Lin Ching-Chi (5.00%), Chang Yung-Fa (5.00%), Tseng Chiung-Hui (1.33%) If the Above-mentioned Shareholders of Major Shareholder of EVA Air s Institutional Shareholder are Corporations, the Principal Shareholders of these Corporations are as follows: April 30, 2011 Name of Institutional Shareholders Evergreen International S.A.(Panama) Chang Yung-Fa (20%), Chang Kuo-Hua (20%), Chang Kuo-Ming (20%), Chang Kuo-Cheng (20%), Pieca Corp. (20%) Ultra International Investments Ltd. Major Shareholders of Institutional Shareholders 100% shareholders of bearer share certificates Cathay Life Insurance Co., Ltd. Cathay Financial Holding Co., Ltd. (100%) Chang Yung-Fa Foundation Non-profit organization 13

17 Name Criteria for Expertise and Independence of Directors and Supervisors Qualifications Meet One of the Following Qualification Requirements, Together with at Least Five Years Work Experience An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialists Who Has Passed a National Examination and Been Awarded a Certificate in a Profession Necessary for the Business of the Company Have Work Experience in the Area of Commerce, Law, Finance, or Otherwise Necessary for the Business of the Company 14 Independence Criteria Concurrently Serving as an Independent Director/ Number of Other Public Companies Lin Bou-Shiu - Chang Yung-Fa - Lin, Sun-San - Lin, Long-Hwa - Chang, Ming-Yuh - Jeng, Kung-Yeun - Chang, Kuo-Hua - Ko Li-Ching - Wu Kuang-Hui - Chen Cheng-Pang - (1) Not an employee of the Company or any of affiliated companies. (2) Not a director or supervisor of the Company or any of its affiliates. The same does not apply, however, in case where the person is an independent director of the company, its parent company or any subsidiary in which the company holds, directly or indirectly, more than 50% of the voting shares. (3) Not an individual 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 company or ranking in the top 10 in holdings. (4) Not a spouse, relative within the second degree of kinship, or lineal relative within the fifth degree of kinship, of any of the persons in the preceding three subparagraphs. (5) Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of issued shares of the company or that holds shares ranking in the top five in holdings. (6) Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution that has a financial relationship with the company. (7) Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or any affiliate of the company, or a spouse thereof. (8) Not having a marital relationship, or a relative within the second degree of kinship to any other director of the company. (9) Not been a person of any conditions defined in Article 30 of the Company Code. (10) Not a government, institutional person or its representative as defined in Article 27 of the Company Code.

18 Compensation for Directors Title Name EVA Remuneration Paid to Directors Directors Salary, Pension, Compensation Earned as Employee of EVA or EVA Subsidiary Affiliates Salary Pension Compensation Allowance Compensation, Employee Stock and Allowance as Salary, Bonus etc. Pension Employee Profit Sharing Option % 2009 Net Profit Consolidate d Subsidiaries of EVA EVA Consolidate d Subsidiarie s of EVA EVA Consolidated Subsidiaries of EVA EVA Consolidated Subsidiaries of EVA EVA Consolidat ed Subsidiarie s of EVA EVA Consolidated Subsidiaries of EVA EVA Consolidated Subsidiaries of EVA EVA Cash Stock Cash Consolidated Subsidiaries of EVA Stock EVA Consolidate d Subsidiaries of EVA December 31, 2010 NT$(Thousand) Total Compensation Paid to Directors as % 2009 Net Profit EVA Consolidat ed Subsidiarie s of EVA Other Compensa tion from Non-Subs idiary Affiliates Chairman Director Evergreen Marine Corp. Lin Bou-Shiu Chang Yung-Fa Director Director Director Director Director Chang Yung-Fa Foundation Lin, Sun-San Evergreen Marine Corp. Lin, Long-Hwa Chang Yung-Fa Foundation Chang, Ming-Yuh Chang Yung-Fa Foundation Jeng, Kung-Yeun Evergreen Marine Corp. Chang, Kuo-Hua 3,324 3, ,000 46, ,000 3, ,302 15

19 Compensation for Supervisors Remuneration paid to Directors Salary Pension Compensation Allowance Supervisors Salary, Pension, Compensation, and Allowance as % of 2009 Net Profit December 31, 2010 NT$ (Thousand) Title Name EVA Consolidated Subsidiaries of EVA EVA Consolidated Subsidiaries of EVA EVA Consolidated Subsidiaries of EVA EVA Consolidated Subsidiaries of EVA EVA Consolidated Subsidiaries of EVA Other Compensation from Non-Subsidiary Affiliates Supervisor Supervisor Supervisor Supervisor Evergreen International Corp. Ko Li-Ching Evergreen International Corp. Owng Rong-Jong (Note) Evergreen International Corp. Wu Kuang-Hui (Note) Evergreen International Corp. Chen Cheng-Pang ,000 13, ,183 Note: Evergreen International Corp. appointed Mr. Wu Kuang-Hui as supervisor on December 1,

20 Principal Officers April 30, 2011 Title Name Date of Inauguration Shareholding Spouse & Dependent Shareholding Shares Held by Other Nominal Holder Education and Experience Concurrent Positions with Other Companies Manager Related by Marriage or Within Second-degree Kinship of Each Other Number (%) Number (%) Number (%) Title Name Relationship President Chang Kuo-Wei Executive Vice President, Flight Operations Div. Executive Vice President, Public Relations Div. Executive Vice President, Safety & Security Div. Executive Vice President, Legal & Insurance Div. Executive Vice President, Engineering & Maintenance Div. Executive Vice President, Computer Div. Yuen Ping-Yu Nieh Kuo-Wei , Ho Ching-Sheng , Tai Jiin-Chyuan , Master of Arts in Economics, California State University, Long Beach Executive Vice President, Evergreen Aviation Technologies Corp. Bachelor degree in Electrical Engineering, Cheng Kung University Master degree in Communications, Shih Hsin University Manager, Evergreen International. (UK) Ltd. Master degree in Flight Safety, University of Missouri Master degree in Maritime Law, National Taiwan Ocean University Manager, Evergreen International Corp. Liou Jen-Chih , Bachelor degree in Marine Engineering, National Taiwan Ocean University 0 Vice Chairman, Evergreen Aviation Technologies Corp. Bachelor degree in Computer Science, Feng Fang Chia University , Gwo-Shiang Deputy Junior Vice President, Evergreen IT Corp. Director, Uni Airways Corp. Director, Evergreen Sky Catering Corp. Director, Evergreen Aviation Technologies Corp. Director, Evergreen Airline Services Corp. Director, Evergreen Air Cargo Service Corp. Director, Hsiang-Li Investment Corp

21 Executive Vice President, International Biz Div. Li Shyn-Liang , Bachelor degree in Traffic and Transportation Management, Feng Chia University Executive Vice President, Project Div. Executive Vice President, (Financial Officer) Finance Div. Executive Vice President, Taoyuan Airport Div. Executive Vice President, Cargo Div. Senior Vice President, Personnel Div. Senior Vice President, Passenger Div. Senior Vice President, Cargo Div. Senior Vice President, Corporate Coordination Div. Senior Vice President, Auditing Div. Senior Vice President, Computer Div. Senior Vice President, Inflight Service Div. Deputy Senior Vice President, Passenger Div. Cheng Chuan-Yi Tsai Ta-Wei Chen Yeou-Yuh Sun Chia-Ming , Lu Yu-Chuan Chen Chi-Hung Yang Yung-Heng , Soong Allen Li Ping-Yin , Hou Hsien-Yu , Liu Ying , Wu Su-Shin , Bachelor degree in International Trade, Tunghai University Bachelor degree in Accounting, Chinese Cultural University Bachelor degree in Maritime Science, Tamkang University Bachelor degree in International Trade, Chinese Cultural University Bachelor degree in Business Administration, Fu Jen University Junior Vice President, Evergreen Aviation Technologies Corp. Department of Mechanical Engineering Hsinpu Institute of Technology Bachelor degree in Business Administration, Chinese Cultural University Department of Tourism, World College of Journalism Master degree in Management, Yuan Ze University Manager, Evergreen Heavy Industry Corp. Master degree in Information Management, National Taiwan University Master degree in Graduate Institute of Human Resource Management, National Central University Bachelor degree in Sociology, Fu Jen University Supervisor, Central Reinsurance Corp. Supervisor, Evergreen Sky Catering Corp. Supervisor, Evergreen Aviation Technologies Corp. Supervisor, Hsiang-Li Investment Corp

22 Deputy Senior Vice President, Project Div. Chai Chien-Hua Bachelor degree in International Trade, Chung Yuan Christian University Deputy Senior Vice President, International Biz Div. Chuang Shih-Hsiung Bachelor degree in Animal Science and Biotechnology, Tunghai University Deputy Senior Vice President, Taoyuan Airport Div. Chen Yao-Min , Department of Tourism, World College of Journalism Deputy Senior Vice President, Taoyuan Airport Div. Chang Chun-Huei Bachelor degree in English Language and Literature, Soochow University Deputy Senior Vice President, Uni Airways Corp Deputy Senior Vice President, Taoyuan Airport Div. Yang Hsiu-Huey Department of Radio & Television, World College of Journalism Deputy Senior Vice President, Corporate Coordination Div. Tao Shin-Chien , Bachelor degree in Business Administration, National Chung Hsing University Deputy Senior Vice President, Corporate Coordination Div. Tsai Zu-Ming , Department of Navigation Technology, National Taiwan College of Marine Science and Technology Deputy Senior Vice President, Cargo Div. Lin Tsung-Yen Department of Navigation Technology, National Taiwan College of Marine Science and Technology Deputy Senior Vice President, Engineering & Maintenance Div. Deputy Senior Vice President, Cabin Service Div. Yeh Ching-Far , Chang Lih-Lih Master degree in Business Administrations, National Cheng Chi University Master degree in Mechanical Engineering, Tatung College of Technology Bachelor degree in Statistics, Tamkang University Deputy Senior Vice President, Evergreen Sky Catering Corp

23 Junior Vice President, (Accounting Officer) Finance Div. Chen Chi-Ming Bachelor degree in Public Finance, National Cheng Chi University

24 Compensation for President and Executive Vice Presidents December 31, 2010 NT$ (Thousand) Title Name EVA Salary Pension Bonus & Perquisite Employee Profit Sharing Consolidated Subsidiaries of EVA EVA Consolidated Subsidiaries of EVA EVA Consolidated Subsidiaries of EVA EVA Consolidated Subsidiaries of EVA Cash Stock Cash Stock Total Compensation to President & EVPs as % of 2009 Net Profit EVA Consolidated Subsidiaries of EVA Employee Stock Options EVA Consolidated Subsidiaries of EVA Compensation from Investments Other than Subsidiaries President Jeng Kung-Yeun Chief Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Chang Kuo-Wei Yuen Ping-Yu Nieh Kuo-Wei Ho Ching-Sheng Tai Jiin-Chyuan Liou Jen-Chih Fang Gwo-Shiang Li Shyn-Liang Lin Jy-Jong Wu Kuang-Hui (Note) Note: Mr. Wu Kuang-Hui departed from the post on December 1, ,834 17,834 2,674 2,674 6,520 6,

25 Net Changes in Shareholdings and Shares Pledged by Directors, Supervisors, Managers and Major Shareholders Title Chairman Vice Chairman Name Increase (Decrease) in Shareholding 2010 As of April 30, 2011 Increase (Decrease) in Shares Pledged Increase (Decrease) in Shareholding Increase (Decrease) in Shares Pledged Evergreen Marine Corp Representative: Lin Bou-Shiu Chang Yung-Fa Foundation Representative: Jeng Kung-Yeun 58,611 (0) Director Chang Yung-Fa Evergreen Marine Corp Director Director Supervisor Major Shareholder Major Shareholder Representative: 0 Lin, Long-Hwa (232,000) Representative: Chang, Kuo-Hua Chang Yung-Fa Foundation 58,611 (0) Representative: Lin, Sun-San Representative: Chang, Ming-Yuh Evergreen International Corp. 51,102,462 (0) Representative: Ko Li-Ching Representative: Wu Kuang-Hui Representative: Chen Cheng-Pang Evergreen Marine Corp ,102,462 Evergreen International Corp. (0) President Chang Kuo-Wei Executive Vice President Yuen Ping-Yu 0 (30,000)

26 Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Senior Vice President Senior Vice President, Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President, Deputy Senior Vice President Deputy Senior Vice President Deputy Senior Vice President Nieh Kuo-Wei Ho Ching-Sheng 0 (40,000) Tai Jiin-Chyuan 0 0 (36,000) 0 0 Liou Jen-Chih Fang Gwo-Shiang 0 (18,000) Li Shyn-Liang 0 (10,000) Cheng Chuan-Yi Tsai Ta-Wei Chen Yeou-Yuh 0 (15,000) Sun Chia-Ming Lu Yu-Chuan (10,000) (8,000) 0 0 Chen Chi-Hung (26,000) Yang Yung-Heng (9,000) Soong Allen Li Ping-Yin 0 (27,000) Hou Hsien-Yu Liu Ying 0 (108,000) Wu Su-Shin 0 (94,000) Tao Shin-Chien Lin Tsung-Yen

27 Deputy Senior Vice President Deputy Senior Vice President Deputy Senior Vice President Deputy Senior Vice President Deputy Senior Vice President Deputy Senior Vice President Deputy Senior Vice President, Deputy Senior Vice President, Junior Vice President, Yeh Ching-Far 0 (105,000) Tsai Zu-Ming Chai Chien- Hua Chuang Shih-Hsiung Chang Lih-Lih Chang Chun-Huei Chen Yao-Min Yang Hsiu-Huey Chen Chi-Ming Information on Stock Transfer: Nil Information on Stock Pledged: Nil 24

28 Capital and Shares As of December 31, 2010, EVA Air had authorized share capital of 4,000,000,000 in common stock at NT$10 par value per share with 2,962,677,277 shares issued and outstanding. History of Capitalization Authori zed Capital Issued Capital Non- M o nth /Ye ar Pr ic e Shares ( 000) Amount ( 000) Shares ( 000) Amount ( 000) Sources of Capital ( 000) Monetary Capital Expansion 03/ ,000,000 40,000,000 3,749,887 Cash offering 37,498,869 3,600,000 Corp orate bond 09/ ,000,000 40,000,000 3,874,979 38,749,794 con version 1,250,925 03/ ,000,000 40,000,000 3,906,815 Corp orate bond 39,068,150 con version 318,356 04/ ,000,000 40,000,000 3,942,677 Corp orate bond 39,426,773 con version 358,623 07/ ,000,000 40,000,000 2,262,677 Capital Reduction 22,626,773 16,800,000 09/ ,000,000 40,000,000 2,962,677 Cash offering 29,626,773 7,000, Status of Shareholders Item Number of Shareholders As of April 12, 2011 Foreign Government Financial Other Legal Domestic Institution or Total Agency Institution Entity Individual Individual , ,827 Shareholdings 36,437, ,170,045 1,171,161,025 1,194,399, ,509,689 2,962,677,277 Holding Percentage

29 Range of Shareholdings Distribution of Common Shares Number of Shareholders Number of Shares % As of April 12, ,442 12,086, ,000-5,000 57, ,154, ,001-10,000 15, ,729, ,001-15,000 4,546 58,092, ,001-20,000 3,564 67,287, ,001-30,000 2,649 69,104, ,001-50,000 2,256 92,686, , ,000 1, ,346, , , ,722, , , ,636, , , ,644, , , ,139, ,001-1,000, ,899, ,000,001 and above 118 2,020,148, Total 125,827 2,962,677,

30 Market Price, Net Worth, Earnings and Dividends per Share for Most Recent Two Years Year Items (Distributed in 2010) (Distributed in 2011) (As of April 30) Market Price per Share Net Worth per Share Highest NT$15.00 NT$33.27 NT$37.30 Lowest NT$5.90 NT$9.82 NT$21.80 Average NT$10.07 NT$21.37 NT$27.92 Before Distribution NT$10.81 NT$13.72 NT$13.75 After Distribution - NT$ Weighted Average Shares 2,496,011,000 shares 2,962,677,000 shares 2,962,677,000 shares Earnings per Share Earnings per Share Before Adjustment NT$(1.14) NT$4.06 NT$0.09 After Adjustment - NT$ Dividends per Share Return on Investment Stock Dividends Cash Dividends - NT$ Dividends from Retained Earnings - NT$ Dividends from Capital Surplus Price/Earnings Ratio (Note 1) Price/Dividend Ratio (Note 2) Cash Dividend Yield Rate (Note 3) % - Note 1: Price/Earnings Ratio = Average Share Price at Market Close for Current Fiscal Year/Earnings per Share Note 2: Price/Dividend Ratio = Average Share Price at Market Close for Current Fiscal Year/Cash Dividend per Share. Note 3: Cash Dividend Yield Rate = Cash Dividend per Share/Average Market Closing Share Price for Current Fiscal Year. 27

31 Dividend Policy and Implementation Status Dividend Policy In accordance with Article 26 of EVA s Articles of Incorporation, any earning from the annual settlement should first be used to offset accumulated deficits for previous years, after deducting all applicable taxes and, second, 10% of the balance should be set aside in a legal reserve; any remainder will be added to undistributed earnings from the prior period for distribution after the board of directors proposes a distribution program with employee bonuses of no less than 1% and director/supervisor compensation that does not exceed 5% of the distributed amount and submits the program at a shareholders meeting for resolution. Since achieving growth status, EVA has adopted a remainder appropriation method as its dividend policy to accommodate future operations and expansion, distributing cash dividends that range from 0 to 50% and stock dividends from 100% to 50% alternately. To maintain profitability and govern the impact of stock dividends on its operating performance, EVA may adjust the distribution rate for cash dividends to 100%~50% and stock dividends to 0~50% in accordance with capital status if estimated earnings per share for the current fiscal year are 20% lower than those of the previous year. Dividend Distribution in Current Year The board adopted a proposal for 2010 dividend distribution at its meeting on March 22, 2011 that the Company plans to pay a stock dividend of 100 shares for every 1,000 shares held by investors which amounts to NT$2,962,677,280, along with a cash dividend of NT$1 per share which amounts to NT$2,962,677,277. Employee Bonuses and Compensation Paid to Directors and Supervisors Range or Percentage of Employee Bonuses and Compensation Paid to Directors and Supervisors Specified in Article 26 of EVA s Articles of Incorporation: Earnings, if any, from the annual settlement should first offset accumulated deficits for previous years after all applicable taxes are deducted and, second, 10% of the balance should be set aside in a legal reserve; any remainder will be added to undistributed earnings from the prior period for distribution after the board of directors proposes a distribution program with employee bonuses of no less than 1% and director/supervisor compensation that does not exceed 5% of the distributed amount and submits the program at a shareholders meeting for resolution. Proposed Employee Bonus Plan Approved by Board of Directors Employee Cash Bonus: NT$100,000,000 Employee Stock Bonus: Nil Compensation Paid to Directors and Supervisors: NT$53,000,000 Number of shares proposed for distribution to employees and the percentage of the shares above capitalized earnings: 0 share, 0% Estimated EPS after deduction of employee bonuses and compensation to directors and supervisors: Not applicable. Status of Stock Repurchased by EVA: N/A 28

32 EVA Air People Pilots Cabin Crew 1,289 1,421 No. of Employees Dispatchers Maintenance Other 2,413 2,859 Total 4,486 5,121 Average Age Average Seniority Doctorate 0.11% 0.10% Education Profile Distribution Master s 4.42% 5.27% Bachelor s 88.27% 88.35% High School 6.71% 5.87% Other 0.49% 0.41% 29

33 Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Public Relations Div. Personnel Div. General Affairs Dept. Legal & Insurance Div. Clinic Div. Finance Div. Safety & Security Div. Labor Safety & Health Div. Corporate Coordination Div. International Business Div. Passenger Div. Cargo Div. Service Co-ordination Div. Flight Operations Div. Inflight Service Div. Cabin Service Div. Engineering & Maintenance Div. Taoyuan Airport Div. Computer Div. Foreign Branches Finance Dept. Revenue Audit Dept. Operation Management Dept. Information Management Dept. Passenger Management Dept. Cargo Management Dept. Reservation Dept. Ticketing Dept. Business Dept. Taichung Office Kaohsiung Office Business Dept. Cargo Operation Dept. Flight Control Dept. Flight Management Dept. Pilot Administration Dept. Flight Training Dept. Cabin Crew Training Dept. Cabin Crew Administration Dept. Cabin Supply & Provision Dept. Procurement Dept. Quality Assurance Dept. Engineering Dept. Passenger Service Dept. Loading Operation Dept. Software Designing Dept. I Software Designing Dept. II Software Designing Dept. III System Management Dept. Organization Shareholders Supervisors Board of Directors Chairman Vice Chairman Auditing Div. President Service Quality Committee Safety Promotion Committee Corporate Planning Committee Executive Vice President Project Div. 30

34 The Fleet June 2010 one MD-11 put back into service. December took delivery of 15 th B ER. As of Dec Aircraft Type Owned Capital Lease Operating Lease Total On Order (Delivery date) B B Combi A MD MD-11 Freighter B Freighter B ER Total

35 The Market Region Passenger Operations No. of Passenger RPK (Million) Revenue (Million) % % % America 1,108,358 1,085, % 11,915 11, % 22,016 17, % Europe 550, , % 4,175 4,255 (1.88%) 7,291 6, % Asia 4,729,434 4,332, % 7,212 6, % 26,469 19, % Oceania 47,946 60,585 (20.86%) (20.78%) (1.58%) Total 6,435,951 6,021, % 23,627 22, % 56,397 43, % Region Cargo Operations Cargo carried (Tons) FTK (Million) Revenue (Million) % % % America 304, , % 3,637 2, % 26,708 15, % Europe 74,852 54, % % 5,536 3, % Asia 469, , % % 8,976 5, % Oceania 1,859 1,968 (5.54%) (2.67%) Total 850, , % 5,168 3, % 41,293 24, % Major Competitors and Market Shares Item EVA Airways 28,599 37,807 Number of Flights Taiwan 127, ,982 Market Share (%) EVA Airways 5,507,837 6,267,704 Number of Passengers Taiwan 24,339,515 29,556,305 Market Share (%) EVA Airways 438, ,693 Tons of Cargo Taiwan 1,240,226 1,812,829 Data Source: Monthly Digest of Statistics, CAA Market Share (%)

36 2011 Outlook Increased cross-strait trade, gradual relaxation of policy limitations on visitors from Mainland China and frequent, regularly scheduled cross-strait flights will lead to higher volumes of business and leisure travel. Prospects for EVA s major routes are described in the paragraphs that follow. American routes The Company operates 45 direct passenger flights to the United States and Canada weekly: 18 to Los Angeles, four to New York, 12 to San Francisco, five to Seattle, three to Vancouver and three to Toronto. We effectively extend these routes in the respective domestic markets by code sharing with other leading airlines, including American Airlines, Continental Airlines and US Airways. EVA s freighter service to North America is our major source of cargo revenue. Starting with the 2011 summer schedule, we allocated 38 cargo flights a week to the North American market. In addition to existing airfreight gateways on the East and West Coasts and in Middle America, i.e., Los Angeles, Atlanta, Chicago, Dallas, Houston and New York etc. we will add freighter stops in Seattle or San Francisco. The additional cargo gateways will enhance the flexibility of our existing freighter routes, accommodate customer demands and strengthen our cargo network between Asia and North America. The Company will also increase our North American freighter frequency to most effectively meet market demand, improve our operating efficiency and upgrade our cargo network density in the respective regions. The International Air Transport Association (IATA) forecasts that the North American market for international airfreight will grow 7.6% over We anticipate results in this region that will continue to be positive for EVA Air Cargo. European routes EVA has 16 scheduled nonstop passenger flights a week to Europe, including three to Amsterdam, three to Vienna, three to Paris and seven to London. We give our passengers on 33 these routes comfortable and convenient service. Starting with the 2011 summer schedule, we allocated seven airfreight services a week to London, Brussels and Frankfurt etc.; The Company also has collaborated with global celebrated carriers, British Airways, to offer regular all-cargo joint services to extend the European cargo network and upgrade the overall operational performance in the region. According to IATA, the European air cargo market is projected to grow 6.5% during the periods, suggesting slower growth than in Asia Pacific and North American regions. While IATA s forecast is cautiously positive, it does point to recovery momentum in the European economy. Besides operating seven all-freighter services a week, The Company has also collaborated with global celebrated carriers including British Airways (BA) and Lufthansa (LH) to offer regular joint services to expand our European air cargo network. In addition, the Company exercised recently granted traffic rights to increase our Vietnam - Europe air freight service. Using strategies such as these enables us to upgrade our overall operational performance on European routes. Australian routes EVA s Australian route serves the tourism market in particular. Taking into account of market demand and operating costs, the Company will continue our three weekly Taipei - Brisbane flights and ongoing code-sharing with Qantas Airlines. Asian routes Following our inauguration of regular cross-strait services on August 31, 2009, EVA and our regional subsidiary, UNI Air, have operated 76 scheduled weekly flights between Taiwan and China. We serve 17 destinations: Beijing, Shanghai Pudong, Shanghai Hongqiao, Guangzhou, Shenzhen, Fuzhou, Xiamen, Hangzhou, Nanjing, Ningbo, Tianjin, Dalian, Qingdao, Chongqing, Chengdu, Zhengzhou and Jinan. In addition to three-to-four regular weekly freighter flights to Shanghai and Guangzhou, the Company added one-to-two regular weekly

37 freight flights to Nanjing, Xiamen and Chongqing. We anticipate that this level of capacity and service will contribute positively and substantially to cross-strait cultural, economic, tourism and logistics efficiency to deliver more profitability. Taiwan s geographic location makes it an ideal pivot point for traffic between North America and Southeast Asia. The Company is leveraging this geography superiority and, at the same time, supporting the government s goal of establishing Taiwan as the leading Asia Pacific Operations Center with our extensive route network connecting North America and Southeast Asia. In summary, gradual but steady economic recovery combined with additions of more regular cross-strait flights point to an optimistic outlook for EVA. At the same time, we will increase profitability by optimizing our network and strategically extending our routes through joint cooperation with other leading carriers Assuming global economic recovery, IATA forecasts 9.8% growth in the international freight market over the periods for five major Asian markets including Japan, Korea, Hong Kong, China and Taiwan. This is the highest growth rate IATA projects for international freight in any market or region. Among them China is the dominant growth driver for the international freight market in the Asia-Pacific region. The Company will continue to optimize opportunities such as those created by the Economic Cooperation Framework Agreement (ECFA) in the summer of Catalyzing with the acceleration of domestic demand in China and identifiable advantages stemming from the ASEAN-Plus-One free-trade zone, The Company will strategically seeks greater shares of the China and Asia markets. 34

38 The Network EVA Air resumed Taipei - Vienna freighter service in March EVA Air launched Taipei (Songshan) - Shanghai (Hongqiao) passenger service in June EVA Air launched Taipei - Xiamen freighter service in September EVA Air launched Taipei (Songshan) - Tokyo (Haneda) passenger service in October EVA Air launched Taipei - Nanjing freighter service in November EVA Air launched Taipei - Zhengzhou passenger service in December EVA Air launched Taipei - Jinan passenger service in December EVA Air launched Taipei Chongqing freighter service in December As of Dec North America Oceania Los Angeles San Francisco Seattle Anchorage Atlanta Chicago Dallas Vancouver JFK Newark Houston Toronto Brisbane Europe Vienna London Frankfurt Amsterdam Brussels Paris Osaka Fukuoka Taipei Kaohsiung Hong Kong Macau Bangkok Kuala Lumpur Penang Jakarta Bali Surabaya Asia Singapore Ho Chi Minh City Seoul Manila Tokyo (Narita) Sapporo Phnom Penh Sendai Hanoi Delhi Nagoya Komatsu Tokyo (Haneda) Mainland China Shanghai (Pudong) Shanghai (Hongqiao) Beijing Guangzhou Hangzhou Tianjin Ningbo Xiamen Nanjing Jinan Zhengzhou Chongqing Air cargo destination only Total 56 destinations 35

39 Principal Subsidiaries Company Principal Activities Location Date Founded Capital As of Dec Share% Evergreen Airline Services Corp. Evergreen Aviation Technologies Co., Ltd. Evergreen Air Cargo Service Corp. Ground handling Aircraft repair and maintenance Cargo terminal operation Taiwan Oct NT$ million 56.33% Taiwan Nov NT$4.14 billion 80.00% Taiwan Mar NT$1.2 billion 60% Evergreen Sky Catering Corp. Airline catering Taiwan Oct NT$1 billion 49.80% Hsiang-Li Investment Corp. Evergreen Airways Service (Macau) Ltd. Investment business Air transport and investment business Taiwan Jan NT$25 million 100% Macau Dec US$12, % Green Siam Air Services Co., Ltd. RTW Air Services(S) Pte. Ltd. PT Perdana Andalan Air Service Travel business Thailand May 1990 THB20 million 49.00% Travel business Singapore Oct SG$1.5 million 49.00% Travel business Indonesia May 1991 IDR1.6 billion 51% Sky Castle Investment Ltd. Investment business Samoa Feb US$5.5 million 100% Concord Pacific Ltd. Investment business Samoa Apr US$23.8 million 100% Sino Gain Limited Aircraft Leasing Samoa Aug US$25, % 36

40 Important Resolutions by Shareholders and BOD Date of Meeting June 14, 2010 Important Shareholders Resolutions Summary of Important Proposals 1. Distribution of retained earnings: 2009 net deficit after tax is NT$2,844,253,944. Including previous accumulated deficit, accumulated deficit reached to NT$2,915,074,321. The Company resolved to make up the aforementioned deficit via capital surplus which result in NT$0 available retained earnings for distribution. After making up deficiencies there is no distributable earning for dividends, remuneration for directors and supervisors and employee bonuses as well. 2. To amend the Procedures for Fund Lending to others and Endorsements/Guarantees. Result of Resolutions Accepted by all present shareholders with unanimous consent. Accepted by all present shareholders with unanimous consent. Execution Being executed in accordance with the resolution. EVA operates in accordance with amended Procedures for Fund Lending to others and Endorsements/ Guarantees. Important Resolutions by the Board of Directors Date of Meeting March 19, 2010 April 28, 2010 Important Proposals 1. To accept 2009 Report of Operation and 2009 Financial Statements. 2. To accept 2009 internal control and present a Declaration of Internal Control. 3. To accept 2010 Operation Plan. 4. To stipulate date and location for convening 2010 Annual General Shareholders' meeting. 1. To accept 2009 Consolidated Financial Statements. 2. To approve the Company's 2009 surplus/deficit appropriation. 3. To issue new shares NT$5 billion. 4. To enter sale and installment buyback agreement with Octostar B Limited to procure one brand new B ER(B-16717) passenger aircraft. 37

41 Date of Meeting April 28, 2010 August 16, 2010 October 29, 2010 November 18, 2010 December 15, 2010 March 22, 2011 April 29, 2011 Important Proposals 5. To amend the Procedures for Fund Lending and Endorsements/Guarantees. 6. To amend the Procedures for Internal Material Information Handling. 7. To amend Internal Control Procedures and Detailed Rules for the Internal Auditor. 1. To accept 20101H Financial Statements and Consolidated Financial Statements. 2. To rescind unsecured corporate bond issue. To issue 15 th secured corporate bond 1. To rescind issuance of new share plan. 2. To establish branches in Mainland China. 3. To reconfigure 15 B ER fleet plan. 4. To appoint Mr. Tsai Ta-Wei and Mr. Chen Chi-Ming as Financial Officer and Accounting Officer respectively effective from December 1, To participate with capital increase & capitalization of capital surplus of China Cargo Airlines via capital increase on an affiliate, Concord Pacific Limited. 2. To rescind indirect investment of Shanghai International Cargo Ltd. via an affiliate, Concord Pacific Limited. 3. To amend 2011 Internal Audit Plan. 4. To elect Mr. Jeng Kung-Yeun as Vice Chairman 5. To re-appoint Mr. Chang Kuo-Wei as President and Taipei Branch Manager. 1. To accept 2010 Report of Operation and Financial Statement. 2. To accept 2010 Profit Distribution proposal. 3. To accept new share issuance through capitalization of earnings. 4. To accept 2010 Declaration of Internal Control. 5. To amend Internal Control Procedures & Detailed Rules for Internal Auditor. 6. To accept 2011 Operation Plan. 7. To amend the Procedures for Fund Lending to others and Endorsements/Guarantees. 8. To re-elect Directors and Supervisors. 9. To release re-electing Directors and Supervisors from non-competition activities. 10.To stipulate date and location for 2011 Annual General Shareholders' meeting. 1. To amend Article of Incorporation. 2. To amend election rule of Directors and Supervisors. 3. To amend 2011 Annual General Shareholder Meeting agendas and notices. 38

42 Financial and Operating Results Financial Results Balance Sheet NT$ (Thousand) Item Year Variance Amount % Current Assets 34,373,857 25,588,374 8,785, Funds and Investments 11,850,022 11,211, , Fixed Assets 91,105, ,606,655 (11,500,744) (11.21) Intangible Assets 149, ,093 (88,460) (37.15) Other Assets 10,550,096 10,292, , Total Assets 148,029, ,936,736 (1,907,217) (1.27) Current Liabilities 36,392,207 37,732,901 (1,340,694) (3.55) Long-Term Liabilities 69,054,677 78,143,293 (9,088,616) (11.63) Other Liabilities 1,947,373 2,033,429 (86,056) (4.23) Total Liabilities 107,394, ,909,623 (10,515,366) (8.92) Common Stock 29,626,772 29,626, Capital Surplus 2,649,436 5,564,505 (2,915,069) (52.39) Retained Earnings(Deficit) 12,016,736 (2,915,074) 14,931,810 (512.23) Other Adjustments (3,657,682) (249,090) (3,408,592) 1, Total Stockholders Equity 40,635,262 32,027,113 8,608,

43 Income Statement NT$(Thousand) Item Year Increase (Decrease) Amount Change (%) Operating Revenue 104,410,011 73,279,511 31,130, Operating Cost 84,789,200 70,191,396 14,597, Gross Profit from Operations 19,620,811 3,088,115 16,532, Operating Expenses 6,972,063 5,908,339 1,063, Operating Income 12,648,748 (2,820,224) 15,468,972 (548.50) Non-Operating Income and Gain 1,476,477 1,124, , Non-Operating Expense and Loss 2,079,958 2,029,783 50, Income before Income Tax 12,045,267 (3,725,333) 15,770,600 (423.33) Income Tax Benefit (Expense) (28,531) 881,079 (909,610) (103.24) Net Income 12,016,736 (2,844,254) 14,860,990 (522.49) Analysis of deviation of more than 20% in gross profit margin: NT$(Thousand) Before and After Period Favorable (Unfavorable) Variance Item of Increase (Decrease) Variance in Variance in Variance in Sales Variance in Change Amount Sales Price Cost Price Segmentation Volume Other Passenger 9,164,335 10,209,337 (1,695,383) 527, ,230 - Cargo 8,436,002 5,434, ,735 2,260, ,292 - Other (1,067,641) (1,067,641) Total 16,532,696 15,643,503 (1,352,648) 2,787, ,522 (1,067,641) Variance in sales price: The price increase stemming from global economic recovery led to a favorable result amounting to NT$15,643,503,000. Variance in cost price: Fuel price spike led to a negative result amounting to NT$1,352,648,000. Variance in sales segmentation: Acceleration of passenger and cargo volume and higher route profit margin fueled by economic recovery led to a favorable result amounting to NT$2,787,960,000. Variance in volume: Passenger: The increase of China and US routes passengers led to a positive result amounting to NT$123,230,

44 Item Cargo: Economic recovery spurred a rebound in every airfreight market led to a favorable result amounting to NT$398,292,000. Integrating the above variances led to positive results amounting to NT$521,522,000. Other: Increase in miscellaneous and other operating cost led to an unfavorable result Cash Flow Analysis amounting to NT$1,067,641,000. Changes in cash flow analysis over recent two years Year Change (%) Ratio of Cash Flow (%) Cash Flow Adequacy Ratio (%) Ratio of Re-investment for Cash (%) Global recovery in 2010 has contributed a net cash inflow from operating activity as compared with a net cash outflow in The results lead to relatively increases in the Ratio of Cash Flow, Cash Flow Adequacy Ratio and Ratio of Re-investment for Cash. Remedy Measures for Inadequate Liquidity EVA expects to cut bond-like mutual fund short-term investment, financing through mid and long-term mortgage loans and unsecured loans. Initial Cash Balance (1) Liquidity Analysis for the Coming Year Net Cash Flow Cash Outflows Cash Balance from Operations During This Year (Negative) During This Year (3) (1)+(2)-(3) (2) NT$(Thousand) Remedy Measures for Negative Cash Balance Investment Plans Financing Plans 14,145,427 10,633,539 25,993,945 (1,214,979) 2,333,937 7,100,000 Operating activities: The Company estimated cash flow from operations in the next one year accumulate to NT$10,633,539,000. Investment activities: The estimated long-term equity investment and equipment purchase reach NT$2,711,201,000. Financing activities: The estimated both mid and long-term mortgage loans and cash dividend payout reach NT$23,282,774,

45 Remedy Measures for Inadequate Cash Liquidity Operating activities: The Company redeemed monetary-like mutual fund estimated NT$2,333,937,000. Financing activities: The Company structured mid- and long-term mortgage loans and issue secured corporate bond which estimated to obtain NT$7,100,000,000 approximately. Impact of Major Capital Expenditures on Financial Operations in Recent Years The Company entered aircraft procurement agreement with Boeing Company to purchase 15 Boeing 777 passenger aircrafts in June, 2000 and April, 2004 which have been fully delivered by 2010 and settled down the payment accordingly. Recent Reinvestment Policy, Major Reason of Profit & Loss, Remedy Actions and Forward Investment Plan The recent reinvestments entered mainly concentrate on integration of aviation relative business to ensure service quality. Stemming from outstanding operating performance of subsidiaries including Evergreen Aviation Technologies Co., Ltd., Evergreen Sky Catering Corp., Evergreen Airline Services Corp., and Evergreen Air Cargo Service Corp., the Company booked investment income of NT$1,055,194,000. The Board resolution convened on December 15, 2010 announced that the Company acquired 16% stake of China Cargo Airlines Ltd. for RMB328 million via its affiliate, Concord Pacific Limited, to participate with capital increasing of China Cargo Airlines. 42

46 Concise Balance Sheet for NT$(Million) Item Current Assets 34,374 25,588 21,412 27,700 28,646 Fixed Assets 91, ,607 97,874 94,867 78,892 Total Assets 148, , , , ,150 Current Liabilities 36,392 37,733 41,228 31,486 31,233 Long-term Liabilities 69,055 78,143 74,085 70,767 58,641 Total Liabilities 107, , , ,950 92,010 Share Capital 29,627 29,627 39,427 38,750 38,750 Shareholders Equity 40,635 32,027 25,742 44,188 46,141 Concise Income Statement for NT$(Million) Item Operating Revenue 104,410 73,280 90,656 93,103 93,904 Operating Costs 91,761 76,100 99,262 95,377 97,242 Operating Profit 12,649 (2,820) (8,607) (2,274) (3,338) Non-operating Income 1,476 1, ,623 3,101 Non-operating Expenses and Loss 2,080 2,030 9,749 2,307 2,027 Income before Tax 12,045 (3,725) (17,390) (1,958) (2,264) Tax (29) Net Income 12,017 (2,844) (16,890) (1,872) (1,687) Earnings Per Share (EPS) 4.06 (1.14) (4.30) (0.48) (0.45) Revenue by Business Segment NT$(Million) Year Passenger Cargo Other Total ,397 54% 41,294 40% 6,719 6% 104, % ,950 60% 24,207 33% 5,123 7% 73, % ,057 55% 35,310 39% 5,288 6% 90, % ,956 53% 38,238 41% 5,909 6% 93, % ,326 49% 41,382 44% 6,196 7% 93, % 43

47 Financial Ratio Item Type of ratio Financial Structure (%) Solvency (%) Debt Ratio Ratio of Long-Term Liabilities and Stockholders Equity to Fixed Assets Current Ratio Quick Ratio Times Interest Earned Ratio(Times) 6.97 (0.83) (4.82) Average Collection Turnover (Times) Average Collection Days for Receivables Operating Performance Average Inventory Turnover (Times) Average Days for Sale of Goods Fixed Assets Turnover (Times) Total Assets Turnover (Times) Return on Total Assets (%) 9.05 (0.93) (10.15) (0.15) (0.16) Return on Stockholders Equity (%) (9.85) (48.30) (4.14) (3.74) Profitability Operating Income to Paid -in Capital (%) (9.52) (21.83) (5.87) (8.61) Return on Sales (%) (3.88) (18.63) (2.01) (1.80) Earnings per Share (NTD) 3.69 (1.14) (7.49 ) (0.48) (0.45) Ratio of Cash Flows Cash Flow Cash Flow Adequacy Ratio Ratio of Re-Investment for Cash Leverage Degree of Operating Leverage (660.86) (146.81) (9.65) (1.70) Financial Leverage Note: (1) Debt Ratio: Total Liabilities/Total Assets (2) Ratio of Long-term Liabilities and Stockholders Equity to Fixed Assets: (Net Stockholder Equity + Long-term Liabilities) / Net Fixed Assets (3) Current Ratio: Current Assets/Current Liabilities (4) Quick Ratio: Liquid Assets/Current Liabilities (5) Times Interest Earned Ratio (Times): Earning Before Taxes and Interest Expense/Interest Expense (6) Fixed Assets Turnover: Net Sales/ Fixed Assets (7) Total Assets Turnover: Net Sales/Total Assets (8) Return on Total Assets: (Income after Tax + Interest Expenses)/Total Assets (9) Return on Stockholders Equity: Income after Tax/Average Stockholders Equity (10) Operating Income to Paid -in Capital: Operating Income/Capital (11) Return on Sales: Income after Tax/ Net Sales (12) Ratio of Cash Flows: Fund from Operating/Current Liability (13) Cash Flow Adequacy Ratio: 5-Year Sum of Cash from Operation/5-Year Sum of Capital Expenditures, Incremental Inventory, and Cash Dividends (14) Ratio of Re-investment for Cash: (FFO- Cash Dividend)/ (Gross Fixed Assets + Long-term Investment + Other Assets + Working Capital) (15) Degree of Operating Leverage: (Net Sales Operating Variable Cost and Expense) / Operating Income (16) Financial Leverage: Operating Income / (Operating Income Interest Expense) 44

48 Operating Results Item Overall Capacity (Million) 8,838 7,188 7,957 8,986 9,778 Overall Traffic (Million) 7,294 5,672 6,142 6,954 7,344 Overall Load Factor (%) Overall Yield (NT$) Passenger Capacity (Million) 29,632 29,311 28,853 29,785 30,367 Passenger Traffic (Million) 23,627 22,689 22,944 24,226 24,277 Passengers Carried ( 000) 6,436 6,022 5,788 6,181 6,172 Passenger Load Factor (%) Passenger Yield (NT$) Cargo Capacity (Million) 6,171 4,550 5,360 6,305 7,045 Cargo Traffic (Million) 5,168 3,630 4,077 4,774 5,160 Cargo Carried (Tons) 850, , , , ,952 Cargo Load Factor (%) Cargo Yield (NT$) Unit Cost (NT$) Number of Aircraft Number of Employees 5,121 4,486 4,772 5,153 5,312 Capacity per Employee (Thousand) Traffic per Employee (Thousand) Revenue per Employee (Thousand) 1,726 1,602 1,667 1,744 1,841 1,424 1,264 1,287 1,350 1,383 20,389 16,335 18,997 18,068 17,678 45

49 EVA AIRWAYS CORP. Financial Statements December 31, 2010 and 2009 (With Independent Auditors' Report Thereon) Address: No. 376 Hsin-nan Road, Sec. 1, Luchu, Taoyuan Hsien, Taiwan Telephone No.: 886(03)

50 Independent Auditors Report The Board of Directors EVA Airways Corp.: We have audited the balance sheets of EVA Airways Corp. (the Company ) as of December 31, 2010 and 2009, and the related statements of operations, changes in stockholders equity, and cash flows for the years ended. These financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain non-consolidated investee companies. The Company s investments in these companies as of December 31, 2010 and 2009, were evaluated using the equity method, and the resulting book values of these investments amounted to NT$3,295,808 thousand (US$ 113,141thousand), constituting 2.23% of total assets, and NT$2,995,084 thousand (US$93,509 thousand), constituting 2.00% of total assets, respectively. The cumulative translation adjustments from the aforementioned investments amounted to NT$5,683 thousand (US$195 thousand) and NT$9,495 thousand (US$296 thousand), respectively. The resulting investment gains amounted to NT$417,043 thousand (US$13,231 thousand), constituting 3.46% of income before income tax, and NT$233,430 thousand (US$7,065 thousand), constituting (6.27)% of loss before income tax, for the years 2010 and 2009, respectively. The financial statements of these companies were audited by other auditors, whose reports were furnished to us, and our opinion, insofar as it relates to these amounts included for the said investee companies, is based solely on the reports of the other auditors. We conducted our audits in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and auditing standards generally accepted in Republic of China. Those standards and regulations require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of the other auditors, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years ended, in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the related financial accounting standards of the Business Entity Accounting Act and of the Regulation on Business Entity Accounting Handling, and accounting principles generally accepted in Republic of China. 47

51 The Company adopted newly issued SFASs, the effects of which are as stated in note 3 to the accompanying financial statements. The accompanying financial statements as of and for the years ended December 31, 2010 and 2009, have been translated into United States dollars. We have audited the translation, and in our opinion, the financial statements expressed in New Taiwan dollars have been translated into United States dollars on the basis set forth in note 2(c) of the notes to the accompanying financial statements. Taipei, Taiwan (the Republic of China) March 10, 2011 Note to Readers The accompanying financial statements are intended only to present the financial position, results of operations and cash flows in accordance with the 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. This document is an English translation of a report originally issued in Chinese. In the event of a conflict between the English translation and the original Chinese version, the Chinese language auditors report shall prevail. 48

52 EVA AIRWAYS CORP. Balance Sheets December 31, 2010 and 2009 (Expressed in Thousands of New Taiwan Dollars and U.S. Dollars) Assets NT dollars US dollars NT dollars US dollars Current assets: Cash and cash equivalents (note 4(a)) $ 14,145, ,597 4,218, ,712 Financial assets at fair value through profit or loss-current (note 4(b)) , Available-for-sale financial assets-current (note 4(b)) 1,943,977 66,735 4,491, ,230 Notes receivable 230,608 7, ,200 9,029 Accounts receivable, net 7,441, ,445 6,805, ,471 Accounts receivable-related parties (note 5) 190,539 6, ,968 5,088 Other receivables 75,538 2,593 22, Other receivables-related parties (note 4(d) and 5) 74,920 2, ,923 3,307 Inventories (notes 4(c), 5 and 6) 8,526, ,690 8,690, ,320 Other prepayments 499,163 17, ,048 17,610 Deferred income tax assets-current (note 4(m)) 1,210,647 41, ,042 6,214 Other current assets 35,853 1,231 21, Total current assets 34,373,857 1,180,016 25,588, ,888 Funds and investments: Available-for-sale financial assets-noncurrent (note 4(b) and 6) 991,131 34, ,472 27,427 Financial assets carried at cost-noncurrent (note 4(b)) 2,251,437 77,289 2,252,588 70,327 Long-term equity investments under equity method (note 4(d)) 8,607, ,484 8,079, ,263 Total funds and investments 11,850, ,797 11,211, ,017 Property, plant and equipment (notes 4(e), 4(f), 6 and 7): Land 1,869,572 64,180 1,869,572 58,369 Buildings 4,543, ,966 4,543, ,845 Machinery and equipment 7,165, ,992 6,771, ,421 Aircraft 98,145,977 3,369, ,316,455 3,163,174 Leased assets 14,736, ,890 16,198, , ,461,160 4,341, ,699,752 4,080,542 Less: accumulated depreciation (46,652,712) (1,601,535) (42,209,332) (1,317,806) Advances for purchases of equipment 11,297, ,829 14,116, ,719 Net property, plant and equipment 91,105,911 3,127, ,606,655 3,203,455 Intangible assets: Deferred pension cost (note 4(l)) 149,633 5, ,093 7,433 Other assets: Refundable deposits (note 7) 1,733,899 59,523 1,696,935 52,979 Deferred charges (note 4(g) and 5) 4,765, ,581 3,981, ,306 Deferred income tax assets-noncurrent (note 4(m)) 3,332, ,418 3,624, ,165 Other assets (note 6) 718,076 24, ,434 30,891 Total other assets 10,550, ,173 10,292, , Liabilities and Stockholders Equity NT dollars US dollars NT dollars US dollars Current liabilities: Short-term borrowings (note 4(h)) $ ,994 30,596 Financial liabilities at fair value through profit or loss-current (note 4(b)) ,797 21,411 Derivative financial liabilities for hedge purposes-current (note 4(p)) ,196 28,011 Accounts payable 1,589,218 54,556 1,168,413 36,479 Accounts payable-related parties (note 5) 2,473,943 84,928 1,078,180 33,661 Accrued expenses 7,234, ,335 5,856, ,848 Other payables-related parties (note 5) 153,394 5, ,940 4,650 Other payables (notes 4(k), 5 and 6) 3,520, ,840 3,483, ,743 Unearned revenue 6,620, ,266 5,980, ,707 Current portion of long-term liabilities (notes 4(i), 4(j) and 6) 11,756, ,590 14,563, ,696 Other current liabilities (note 4 (f)) 3,044, ,522 2,890,618 90,247 Total current liabilities 36,392,207 1,249,303 37,732,901 1,178,049 Long-term liabilities: Bonds payable (note 4(j)) 5,000, ,644 9,000, ,987 Long-term borrowings (notes 4(i) and 6) 38,237,583 1,312,653 47,319,280 1,477,342 Installment accounts payable (notes 4(k), 5 and 6) 15,460, ,746 9,622, ,429 Lease liability-noncurrent (note 4(f)) 10,356, ,526 12,201, ,932 Total long-term liabilities 69,054,677 2,370,569 78,143,293 2,439,690 Other liabilities: Accrued employee retirement liabilities (note 4(l)) 398,222 13, ,961 8,397 Other liabilities 1,549,151 53,181 1,764,468 55,088 Total other liabilities 1,947,373 66,851 2,033,429 63,485 Total liabilities 107,394,257 3,686, ,909,623 3,681,224 Stockholders equity (notes 4(b), 4(l), 4(m), 4(n) and 4(p)): Common stock 29,626,772 1,035,332 29,626,772 1,035,332 Capital surplus 2,649,436 82,625 5,564, ,675 Retained earnings (accumulated deficit) 12,016, ,242 (2,915,074) (111,306) Other stockholders equity adjustments: Cumulative translation adjustments (3,554,690) (105,448) 423,833 (84,439) Net loss not yet recognized as net pension cost (511,128) (16,846) (157,412) (4,703) Unrealized gains or losses on financial instruments 408,136 18,058 (515,511) (13,649) Total other stockholders equity adjustments (3,657,682) (104,236) (249,090) (102,791) Total stockholders equity 40,635,262 1,394,963 32,027, ,910 Commitments and contingencies (notes 5 and 7) Total assets $ 148,029,519 5,081, ,936,736 4,681,134 Total liabilities and stockholders equity $ 148,029,519 5,081, ,936,736 4,681,134 49

53 EVA AIRWAYS CORP. Statements of Operations For the years ended December 31, 2010 and 2009 (Expressed in Thousands of New Taiwan Dollars and U.S. Dollars, Except Earnings per Share) NT dollars US dollars NT dollars US dollars Operating revenue (note 5) $ 104,410,011 3,312,500 $ 73,279,511 2,217,903 Operating cost (notes 4(c), 4(l), 5 and 10) (84,789,200) (2,690,013) (70,191,396) (2,124,437) Gross profit from operations 19,620, ,487 3,088,115 93,466 Operating expenses (notes 4(l), 5 and 10) (6,972,063) (221,195) (5,908,339) (178,824) Operating income (loss) 12,648, ,292 (2,820,224) (85,358) Non-operating income and gains: Interest income 83,542 2,650 31, Investment income (note 4(d) 1,055,194 33, ,177 8,420 Gains on disposal of property, plant and equipment 23, ,672 1,594 Gains on valuation of financial liabilities (note 4(q)) 5, ,026 19,311 Other income (note 4(b)) 308,796 9, ,545 3,769 1,476,477 46,843 1,124,674 34,040 Non-operating expenses and losses: Interest expenses (notes 4(e) and 5) (1,767,564) (56,077) (1,973,576) (59,733) Exchange losses, net (286,872) (9,101) (21,184) (641) Other losses (25,522) (810) (35,023) (1,060) (2,079,958) (65,988) (2,029,783) (61,434) Income (loss) from continuing operations before income tax 12,045, ,147 (3,725,333) (112,752) Income tax benefit (expenses) (note 4(m)) (28,531) (905) 881,079 26,667 Net income (loss) $ 12,016, ,242 $ (2,844,254) (86,085) Income before Loss before income tax Net income income tax Net loss NT US NT US NT US NT US dollars dollars dollars dollars dollars dollars dollars dollars Basic earnings (losses) per share $ (expressed in dollars) (note 4(o)): (1.49) (0.05) (1.14) (0.03) Diluted earnings per share (expressed in dollars) (note 4(o)): $ See accompanying notes to financial statements. 50

54 EVA AIRWAYS CORP. Statements of Changes in Stockholders' Equity For the years ended December 31, 2010 and 2009 (Expressed in Thousands of New Taiwan Dollars and U.S. Dollars) NT Dollars US Dollars Common Stock Capital Surplus Legal Reserve Retained Earnings (Accumulated Deficit) Cumulative Translation Adjustments Net Loss Not Yet Recognized As Net Pension Cost Unrealized Gains or losses on Financial Instruments Total Common Stock Capital Surplus Legal Reserve Retained Earnings (Accumulated Deficit) Cumulative Translation Adjustments Net Loss Not Yet Recognized As Net Pension Cost Unrealized Gains or losses on Financial Instruments Total Balance on January 1, 2009 $ 39,426,772 4,866,753 18,864 (16,889,684) 1,491,895 (162,517) (3,009,945) 25,742,138 1,332, , (535,670) (74,754) (4,862) (91,527) 783,388 Make-up of accumulated deficit by capital reduction (16,800,000) ,800, (509,863) , Make-up of accumulated deficit - - (18,864) 18, (586) Cash subscription 7,000, , ,420, ,025 12, ,806 Share options granted to employees - 282, ,100-8, ,585 Increase in net equity due to change in percentage of capital surplus in long-term equity investments under equity method - (4,348) (4,348) (136) (136) Increase in net equity due to recording net loss not yet recognized as net pension cost in long-term equity investments under equity method ,744-18, Recognized net loss not yet recognized as net pension cost (13,639) - (13,639) (426) - (426) Increase in net equity due to change in percentage of unrealized gains or losses on financial instruments in long-term equity investments under equity method ,034 18, Change in unrealized gains on financial instruments ,476,400 2,476, ,315 77,315 Net loss for the year ended December 31, (2,844,254) (2,844,254) (86,085) (86,085) Translation adjustments for the year ended December 31, (1,068,062) - - (1,068,062) (9,685) - - (9,685) Balance on December 31, ,626,772 5,564,505 - (2,915,074) 423,833 (157,412) (515,511) 32,027,113 1,035, ,675 - (111,306) (84,439) (4,703) (13,649) 999,910 Make-up of accumulated deficit - (2,915,074) - 2,915, (111,306) - 111, Increase in net equity due to change in percentage of capital surplus in long-term equity investments under equity method Increase in net equity due to recording net loss not yet recognized as net pension cost in long-term equity investments under equity method (44,828) - (44,828) (1,539) - (1,539) Recognized net loss not yet recognized as net pension cost (308,888) - (308,888) (10,604) - (10,604) Increase in net equity due to change in percentage of unrealized gains or losses on financial instruments in long-term equity investments under equity method ,217 18, Change in unrealized gains on financial instruments , , ,082 31,082 Net gain for the year ended December 31, ,016, ,016, , ,242 Translation adjustments for the year ended December 31, (3,978,523) - - (3,978,523) - 15, (21,009) - - (5,753) Balance on December 31, 2010 $ 29,626,772 2,649,436-12,016,736 (3,554,690) (511,128) 408,136 40,635,262 1,035,332 82, ,242 (105,448) (16,846) 18,058 1,394,963 See accompanying notes to financial statements. 51

55 EVA AIRWAYS CORP. Statements of Cash Flows For the years ended December 31, 2010 and 2009 (Expressed in Thousands of New Taiwan Dollars and U.S. Dollars) NT dollars US dollars NT dollars US dollars Cash flows from operating activities: Net income (loss) $ 12,016, ,242 (2,844,254) (86,085) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 8,159, ,867 8,144, ,502 Amortization and maintenance expense 1,142,167 36,236 1,239,578 37,517 Investment losses (income) (1,055,194) (33,477) (278,177) (8,420) Proceeds from cash dividends on long-term equity investments 367,650 11, ,916 3,448 Losses on disposal and obsolescence of property, plant and equipment 6, , Deferred income tax benefit - - (901,698) (27,291) Amortization expense recorded as interest expenses 83,158 2,638 33,728 1,021 Amortization of other deferred gain (53,636) (1,702) (129,598) (3,922) Losses (gains) on sale of investments (3,376) (107) (6,419) (194) Salary expenses-share options granted to employees ,100 8,538 Changes in operating assets and liabilities, net: Changes in operating assets, net: Financial assets at fair value though profit or loss 17, ,773 12,342 Notes receivable 58,592 1,859 (90,516) (2,739) Accounts receivable (635,663) (20,167) (996,228) (30,152) Accounts receivable-related parties (27,571) (875) 2, Other-receivable (53,089) (1,684) 159,500 4,827 Other receivables-related parties 111,059 3,523 (111,474) (3,374) Inventories 164,314 5,213 (59,548) (1,802) Other prepayments 64,885 2,059 48,365 1,464 Other current assets (14,480) (459) 1, Changes in operating liabilities, net: Financial liabilities at fair value through profit or loss (685,797) (21,757) (5,100,887) (154,385) Accounts payable 420,805 13, ,858 6,957 Accounts payable-related parties 315,284 10, ,437 10,576 Accrued expenses 1,377,397 43,699 76,654 2,320 Other payables-related parties 4, (98,752) (2,989) Other payables (3,138,768) (99,580) 41,587 1,259 Unearned revenue 640,056 20,306 (532,017) (16,102) Other current liabilities 163,804 5,197 (467,178) (14,140) Accrued employee retirement liabilities (147,321) (4,674) (135,498) (4,101) Other liabilities (26,266) (833) 24, Net cash provided by (used in) operating activities 19,272, ,423 (589,714) (17,848) Cash flows from investing activities: Decrease (increase) in available-for-sale financial assets-current 2,625,966 83,311 (3,614,340) (109,393) Payments for purchase of long-term equity investments under equity method - - (253,559) (7,674) Withdrawal of financial assets carried at cost 12, , Payments for purchase of property, plant and equipment (3,215,793) (102,024) (14,167,167) (428,788) Proceeds from disposal of property, plant and equipment 1, , Decrease (increase) in refundable deposits (144,692) (4,591) 3,148,396 95,290 Increase in deferred charges (928,437) (29,455) (477,787) (14,461) Decrease (increase) in other assets 271,358 8,609 (187,637) (5,679) Net cash used in investing activities (1,377,576) (43,705) (15,521,067) (469,766) Cash flows from financing activities: Decrease in short-term borrowings (979,994) (31,091) (1,319,052) (39,923) Issuance of bonds payable - - 5,000, ,332 Redemption of bonds payable (3,100,000) (98,350) (2,646,700) (80,106) Increase in long-term borrowings (including installment accounts payable) 20,791, ,626 21,604, ,876 Redemption of long-term borrowings (including installment accounts payable) (23,222,197) (736,745) (11,545,521) (349,441) Redemption of lease liability (1,457,006) (46,225) (1,411,331) (42,716) Cash subscription - - 7,420, ,576 Net cash provided by (used in) financing activities (7,967,797) (252,785) 17,101, ,598 Effect of exchange rate changes on cash - 38,952-3,490 Net increase in cash and cash equivalents 9,926, , ,661 33,474 Cash and cash equivalents at beginning of year 4,218, ,712 3,228,087 98,238 Cash and cash equivalents at end of year $ 14,145, ,597 4,218, ,712 Additional disclosure of cash flow information: Interest paid $ 1,894,742 60,112 2,153,844 65,189 Less: capitalized interest 214,189 6, ,600 4,389 Interest paid (excluding capitalized interest) $ 1,680,553 53,317 2,008,838 60,800 Income tax paid $ 32,676 1,037 23, Supplemental schedule of noncash investing and financing activities: Current portion of long-term liabilities and bonds payable $ 11,756, ,590 14,563, ,696 Inventory transferred from fixed assets $ Translation adjustments $ (3,978,523) (21,009) (1,068,062) (9,685) Unrealized gains or losses on financial instruments (including investee) $ 923,647 31,707 2,494,434 77,878 Increase in deffered charges $ 2,008,916 63, ,787 14,461 Less: Accounts payable-related parties (1,080,479) (34,279) - - Cash paid for deffered charges $ 928,437 29, ,787 14,461 52

56 EVA AIRWAYS CORP. Notes to Financial Statements December 31, 2010 and 2009 (Expressed in Thousands of New Taiwan Dollars and U.S. Dollars Unless Otherwise Specified) 1. Organization and Business Scope EVA Airways Corp. (the Company) was incorporated on April 7, 1989, as a corporation limited by shares under special permission of the Ministry of Transportation and Communications and under the Company Act of the Republic of China (ROC). The Company commenced commercial operations on July 1, The Company s business activities are 1.1 to engage in fixed-wing aircraft transport business, scheduled air transport business, and nonscheduled air transport business; 1.2 to carry on the business of freight agent, including operation, transportation and maintenance; 1.3 to repair and maintain fuselages, aircraft engines, navigational instruments and related equipment, etc.; 1.4 to carry on the business of marketing aircraft facilities, equipment, and fittings; 1.5 to process and manufacture machinery and spare parts; 1.6 to publish magazines in the field of aviation; 1.7 to provide on-the-job training delegated by other organizations and entities (no recruitment from the general public is allowed); 1.8 to engage in maintaining flying facilities for navigational training; 1.9 to engage in import and export trading for the foregoing activities (excluding businesses requiring a permit); 1.10 to provide consultant services for business operation and management; 1.11 to provide general advertising services; 1.12 to engage in the retailing of tobacco and alcohol; 1.13 to engage in general merchandise activities; 1.14 to engage in the retailing of food and beverages; 1.15 to engage in the retailing of apparel; 1.16 to engage in the retailing of umbrellas; 1.17 to engage in the retailing of hats and caps; 1.18 to engage in the retailing of books and stationery; 1.19 to engage in the retailing of sporting goods; 1.20 to engage in the retailing of toys and amusement goods; 53 (Continued)

57 EVA AIRWAYS CORP. Notes to Financial Statements 1.21 to engage in the retailing of watches and clocks; 1.22 to engage in the retailing of glasses; 1.23 to engage in the retailing of weights and measures; 1.24 to engage in the retailing of jewelry and precious metals; 1.25 to engage in the retailing of telecommunication equipment; 1.26 to engage in the retailing of photographic equipment; 1.27 to carry out any business which is not forbidden or restricted by the applicable laws and regulations, excluding those requiring licensing. As of December 31, 2010 and 2009, the Company had 5,121 and 4,486 employees, respectively. 2. Summary of Significant Accounting Policies The financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the English and Chinese language financial statements, the Chinese version shall prevail. The Company prepared the accompanying financial statements in accordance with ROC generally accepted accounting principles. The preparation of financial statements in conformity with the aforementioned guidelines, the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the Business Entity Accounting Act and the Regulation on Business Entity Accounting Handling. The major accounting policies and basis of measurement used in preparing the financial statements are summarized below. (a) Use of estimates The preparation of the accompanying financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. (b) Foreign currency transactions and translations The Company maintains its books in New Taiwan dollars. Foreign currency transactions during the year are translated at the exchange rates on the transaction dates. Foreign currency-denominated assets and liabilities are translated into New Taiwan dollars at the exchange rate prevailing on the balance sheet date, and the resulting translation gains or losses are recognized as non-operating income or expenses. In accordance with amended Statement of Financial Accounting Standards (SFAS) No. 14 The Effects of Changes in Foreign Exchange Rates, non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into NT dollars at foreign exchange rates ruling at the dates the fair value was determined. If the financial assets or liabilities are evaluated at fair value through profit or loss, the resulting unrealized exchange income (loss) from such translations is reflected in the accompanying statements of operations. If the adjustments of 54 (Continued)

58 EVA AIRWAYS CORP. Notes to Financial Statements financial assets or liabilities are evaluated at fair value through stockholders equity, the resulting unrealized exchange income (loss) from such translations is recorded as a separate component of stockholders equity. For equity investments in foreign companies which are accounted for by the equity method, the translation differences resulting from translating foreign financial statements from the functional currency into the reporting currency are reported as cumulative translation adjustments. Cumulative translation adjustments are reported as a separate component of stockholders equity. (c) Convenience translation into U.S. dollars The financial statements are stated in New Taiwan dollars. Assets and liabilities are translated at the rate of exchange at the balance sheet date. Statement of operations accounts are translated at the average rates during the year. The related translation adjustments are reported as a component of shareholders equity. (d) Translation of foreign currency for foreign operating units The Company regards the aircraft purchased with its own US dollar funds and US dollar loans and operated for international passenger and cargo transportation business as foreign operating units. The US dollar-denominated aircraft purchase costs and the related US dollar loans at the balance sheet date are translated into New Taiwan dollars at the exchange rates prevailing on the balance sheet date. The US dollar-denominated aircraft depreciation amounts are translated into New Taiwan dollars at the current year s average exchange rate. The translation differences resulting from these translations are reported as cumulative translation adjustments. The US dollar-denominated lease assets and lease liability arising from capital lease of aircraft at the balance sheet date are translated into New Taiwan dollars at the exchange rates prevailing on the balance sheet date. The US dollar-denominated leased aircraft depreciation amounts are translated into New Taiwan dollars at the current year s average exchange rate. The translation differences resulting from these translations are reported as cumulative translation adjustments. In addition, the translation differences resulting from the translation of refundable deposits for aircraft leases into New Taiwan dollars at the exchange rate prevailing on the balance sheet date are also reported as cumulative translation adjustments. 55 (Continued)

59 EVA AIRWAYS CORP. Notes to Financial Statements (e) Classification of current and noncurrent assets and liabilities Cash or cash equivalents, and assets that will be held primarily for the purpose of being traded or are expected to be realized within 12 months after the balance sheet date are classified as current assets; all other assets shall be classified as noncurrent. Liabilities that will be held primarily for the purpose of being traded or are expected to be settled within 12 months after the balance sheet date are classified as current liabilities; all other liabilities shall be classified as noncurrent. (f) Asset impairment The Company assesses at each balance sheet date whether there is any indication that an asset (individual asset or cash-generating unit) may have been impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. The Company recognizes impairment loss for an asset whose carrying value is higher than the recoverable amount. The Company reverses an impairment loss recognized in prior periods for assets other than goodwill if there is any indication that the impairment loss recognized no longer exists or has decreased. The carrying value after the reversal should not exceed the recoverable amount or the depreciated or amortized balance of the assets assuming no impairment loss was recognized in prior periods. The Company assesses the goodwill and intangible assets that have indefinite lives or that are not yet available for use on an annual basis and recognizes an impairment loss on the carrying value in excess of the recoverable amount. (g) Cash and cash equivalents Cash and cash equivalents includes cash on hand, savings and checking deposits, fixed time deposits, miscellaneous petty cash. Cash equivalents represent highly liquid debt instruments, such as commercial paper and bank acceptances with original maturities of three months or less. Cash equivalents also include other highly liquid investments which do not have a significant level of market risk related to potential interest rate changes. (h) Financial instruments The Company adopted transaction-date accounting for financial instrument transactions. At the beginning of recognition, financial instruments are evaluated at fair value. Except for financial instruments held for trading, acquisition cost or issuance cost is added to the original recognized amount. 56 (Continued)

60 EVA AIRWAYS CORP. Notes to Financial Statements The financial instruments the Company held or issued are classified into the following accounts in accordance with the purpose of holding or issuing after the original recognition. 1. Financial assets/liabilities at fair value through profit or loss: The main purposes of the financial instruments are selling or repurchasing in the short term. Except for the derivatives that the Company held for hedging purposes and are considered to be effective, all derivatives should be classified into this account. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. 2. Available-for-sale financial assets: These are measured at fair value, and changes therein, other than impairment losses and foreign exchange gains and losses on available-for-sale monetary items, are recognized directly in equity. When an investment is derecognized, the cumulative gain or loss in equity is transferred to profit or loss. If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized in earnings. If, in a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to equity; for debt securities, the amount of the decrease is recognized in profit or loss, provided that the decrease is clearly attributable to an event which occurred after the impairment loss was recognized. 3. Financial assets carried at cost: Equity investments which cannot be evaluated at fair value are booked at original cost. If there is evidence of impairment, impairment loss should be recognized, and the impairment amount cannot be reversed. (i) Hedge accounting Derivative financial instruments held by the Company were to manage the fluctuation risk of foreign exchange rate, interest rate and fuel prices exposure on operating, investing, financing activities of the company. According to this policy, derivative financial instruments held or issued by the Company were for hedging. When derivative financial instruments are no longer for hedging, they are treated as financial instruments held for trading. Hedge accounting recognizes the offsetting effects on profit or loss of changes in the fair values of the hedging instrument and the hedged item. If hedging relationships meet the criteria for hedge accounting, they are accounted for as follows: 1. Fair value hedges Changes in the fair value of a hedging instrument designated as a fair value hedge are recognized in profit or loss. The hedged item also is stated at fair value in respect of the risk being hedged, with any gain or loss being recognized in profit or loss. 57 (Continued)

61 EVA AIRWAYS CORP. Notes to Financial Statements 2. Cash flow hedges Changes in the fair value of the hedging instrument designated as a cash flow hedge are recognized directly in equity. If a hedge of a forecasted transaction subsequently results in the recognition of an asset or a liability, the amount recognized in equity is reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss. For hedges other than those covered by the preceding statement, the associated cumulative gain or loss that had been recognized in equity shall be reclassified to profit or loss in the same period or periods during which the hedged forecast transaction affects profit or loss. 3. Hedge of net investment in foreign operation (j) Inventories Changes in the fair value of the hedging instrument are recognized directly in equity. The gain or loss on the hedging instrument relating to the effective portion of the hedge that has been recognized directly in equity is recognized in profit or loss on disposal of the foreign operation. Inventories represent parts and supplies for maintenance of aircraft, and merchandise to sell during flights. Except for merchandise, which is stated at the lower of cost or market value, parts and supplies are stated at cost less allowance for slow-moving and obsolete items. Cost is calculated by the weighted-average method, and market value represents net realizable value. (k) Long-term equity investments Long-term equity investments in which the Company owns more than 20% or less than 20% of the investee s voting shares but is able to exercise significant influence over the investee s operating and financial policies are accounted for by the equity method. In accordance with ROC SFAS No.23 Interim Financial Reporting, the Company recognizes investment gains/ losses under the equity method quarterly. The difference between the selling price and the book value of the long-term equity investments under the equity method is recognized as disposal gain or loss in the accompanying non-consolidated statements of operations. If there is capital surplus or cumulative translation adjustments resulting from long-term equity investments, the capital surplus or cumulative translation adjustments should be debited/credited to disposal gain/loss based on the disposal ratio. 58 (Continued)

62 EVA AIRWAYS CORP. Notes to Financial Statements If the differences between investment cost and shareholding equity come from assets that can be depreciated, depleted or amortized, the Company shall amortize such differences over estimated remaining economic lives. If the differences come from discrepancies between the carrying amounts of assets and their fair market values, the Company shall offset all unamortized differences when conditions making such over- or under-valuation are no longer present. When the investment cost exceeds the fair value of identifiable net assets acquired, the excess should be recorded as goodwill. When the fair value of identifiable net assets acquired exceeds the cost, the difference should be assigned to non-current assets acquired proportionate to their respective fair values. If these assets are all reduced to zero value, the remaining difference should be recognized as extraordinary gain. If an investee company issues new shares and original shareholders do not purchase or acquire new shares proportionately, the investment percentage, the equity in net assets for the investment that an investor company has invested, will be changed. Such difference shall be used to adjust the additional paid-in capital and the long-term investments accounts. If the adjustment stated above is to debit the additional paid-in capital account and the book balance of additional paid-in capital from long-term investments is not enough to be offset, the difference shall be debited to the retained earnings account. Unrealized gains or losses resulting from inter-company transactions between the Company and its investees accounted for by the equity method are deferred. Unrealized gains or losses derived from transactions involving depreciable or amortizable assets are amortized over the useful lives of the related assets. Gains or losses from other transactions are recognized when realized. If the stockholders equity of an investee company becomes negative, and the Company guaranteed the investee company s liability or made financial commitments to the investee company, or the deficit appears to be short term, the Company continues to record investment losses thereon; if the book value of long-term investment is insufficient to offset against investment losses, the Company offsets it against accounts receivable and recognizes liabilities. When the Company has significant influence, according to ROC SFAS No. 7 Consolidated Financial Statements, consolidated financial statements should be provided at the end of the first quarter, half-year, third quarter and fiscal year. (l) Property, plant, and equipment, and related depreciation Property, plant, and equipment are stated at acquisition cost. For construction of buildings and purchase of machinery and equipment, the Company capitalizes as part of the costs of related assets the related interest costs incurred before commencing to use such assets. Routine repair and maintenance are charged to current operations. Major repairs and maintenance, additions, enhancements and replacements, and the costs of dismantling and removing the items and restoring the site on which they are located, are capitalized in the cost of related assets. 59 (Continued)

63 EVA AIRWAYS CORP. Notes to Financial Statements The Company accrues for the removal and recovery costs for fixed assets during the non-production period in accordance with Interpretation (97) 340 issued by the Accounting Research and Development Foundation (ARDF). When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The Company evaluates the useful lives and depreciation method at the end of every year. Any changes in the useful lives and depreciation method are accounted for as changes in accounting estimates. Depreciation of plant and equipment is provided over the estimated useful lives of the respective assets using the straight-line method. Leasehold improvements are depreciated over the shorter of the lease term or estimated useful lives using the straight-line method. The useful lives of main property, plant and equipment are as follows: Buildings: 55 years Machinery and equipment: 3~18 years Aircraft: 7~18 years Other equipment: 5~18 years Gains (losses) on disposal of such asset are presented as non-operating income and gains (expenses and losses). (m) Lease The leased property is valued at the smaller of the following two values: (a) the present value of all future rental payments (less the lessor s executor costs) plus the bargain purchase price or the lessee s guaranteed residual value and (b) the market value of leased property at the inception date of the lease. All leased properties under capital leases are depreciated. If the lease contract contains a bargain purchase option or allows the transfer of ownership at the end of the term, the properties under this type of lease are depreciated based on the leased property s useful economic life, otherwise the lease term is used. 60 (Continued)

64 EVA AIRWAYS CORP. Notes to Financial Statements The lessee s periodic rental payment covers two parts: (i) the purchase price of the leased property and (ii) the interest expense due to long-term or installment financing. Therefore, the lessee recognizes both a lease liability and interest expense in each period. The interest expense is determined using the following rules: a) If the value of the leased property is determined using the maximum borrowing rate for nonfinancial institutions (determined by the ROC Ministry of Finance) on the inception date of the lease, the interest expense is calculated based on the beginning balance of the lease payable and the maximum borrowing rate. b) If the value of the leased property is determined by its market price, the interest expense is also calculated based on the beginning balance of the lease payable and the maximum borrowing rate. However, a service charge is calculated based on the beginning balance of the lease payable and the difference between the lessor s interest rate implicit in the lease and the maximum borrowing rate. If there is any unguaranteed residual value at the end of the lease term, the lessee calculates the imputed interest expense based on the rental payments, the guaranteed residual value, and the leased property s market value using the rules described in the two paragraphs above. The lessee s lease payable is determined by subtracting the interest expense and the service charge from the periodic rental payment. The lease liability is classified as either a current liability or long-term liability, depending on the expiration date. The Company sold and leased back aircraft under operating lease agreements. If the translation differences resulting from the translation of the foreign currency cost of the aircraft and the related US dollar loans into New Taiwan dollars at the exchange rate prevailing on the selling date and historical rates and the gains or losses from disposal of the aircraft resulting from the translation of the US dollar selling price and US dollar book value of aircraft at the exchange rate prevailing on the selling date were net gains, these gains should be deferred using the unearned gain on salesleaseback account according to ROC SFAS No. 2 Leases, otherwise they should be taken as a loss. The amortization of unearned gain on sales-leaseback depends on the nature of the lease. For operating leases, the unearned gain is amortized to rental expense using the lease term. For capital leases, however, the unearned gain is amortized to depreciation expense using the leased property s useful economic life or lease term based on the nature of those transactions. 61 (Continued)

65 EVA AIRWAYS CORP. Notes to Financial Statements (n) Deferred charges Deferred charges principally include the capitalized costs for computer software, leasehold improvements, D check maintenance for aircraft and engines and others. These costs are amortized using the straight-line method over the shorter of the estimated years in which such assets are economically beneficial to the Company s operation or the lease terms. In accordance with SFAS No. 37, an intangible asset shall be measured initially at cost. After initial recognition, an intangible asset shall be measured at its cost less any accumulated amortization and any accumulated impairment losses. (o) Employee retirement plan The Company has established an employee noncontributory defined benefit retirement plan (the Plan ) covering full-time employees in the ROC. In accordance with the Plan, employees are eligible for retirement or are required to retire after meeting certain age or service requirements. Payments of retirement benefits are based on an employee s average monthly salary for the last six months before the employee s retirement and the number of points accumulated by the employee according to his/her years of service. Each employee receives 2 points for each service year from year 1 to year 15, and 1 point thereafter. A lump-sum retirement benefit is paid through the retirement fund. Under this retirement plan, the Company is responsible for making the entire pension payment. Starting from July 1, 2005, the enforcement rules of the newly enacted Labor Pension Act (the New Act ) require the following categories of employees to adopt the New Act s defined contribution plan: (i) employees who were covered by the Plan and opted to be subject to the pension mechanism under the New Act; and (ii) employees who commenced working after the enforcement date of the New Act. In accordance with the New Act, the rate of the employer s monthly contribution to an individual labor pension fund account per month shall not be lower than 6% of the worker s monthly wages. The Company adopted ROC SFAS No. 18 Accounting for Pensions for its retirement plan. SFAS No. 18 requires a company to have an actuarial calculation of its pension liability using the balance sheet date as the measurement date. The excess of accumulated benefit obligation over the fair value of pension plan assets is deemed as the minimum pension liability and is recognized as accrued pension liability. The Company provides contributions to the retirement fund monthly equal to 11.9% of the paid salaries and wages. The funds are deposited with Bank of Taiwan. 62 (Continued)

66 EVA AIRWAYS CORP. Notes to Financial Statements For the portion of the retirement plan adopting the defined contribution scheme, in accordance with the New Act, the Company provides monthly contributions to the Bureau of Labor Insurance equal to 6% of the worker s monthly wages. The amount of contribution is recognized as expense of the current period. (p) Revenue recognition Ticket sales for passengers and cargo are recorded as unearned revenue, included in current liabilities, and recognized as revenue when the services are provided. (q) Employee bonuses and directors and supervisors remuneration Employee bonuses and directors and supervisors remuneration appropriated after January 1, 2008, are accounted for by Interpretation (96) 052 issued by the Accounting Research and Development Foundation. The Company estimates the amount of employee bonuses and directors and supervisors remuneration according to the Interpretation and recognizes it as expenses. Differences between the amount approved in the shareholders meeting and recognized in the financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss. In addition, the number of shares distributed to employees as employees bonuses is calculated based on the closing price on the day before the shareholders resolution date, and the closing price is adjusted retroactively for dividends that had been distributed. (r) Income tax The Company adopted ROC SFAS No. 22 Income Taxes. Under this method, the amounts of deferred income tax assets or liabilities are recognized for future tax effects attributable to temporary differences, loss carryforwards, and investment tax credits. The measurement of deferred income tax assets or liabilities is based on provisions of enacted tax law. A valuation allowance is provided on deferred income tax assets that may not be realized in the future. When a change in the tax laws is enacted, the deferred tax liability or asset should be recomputed accordingly in the period of change. The difference between the new amount and the original amount, that is, the effect of changes in the deferred tax liability or asset, should be reported as an adjustment to income tax expense (benefit) for income from continuing operations currently. Deferred income tax assets or liabilities are classified as current or noncurrent based on the classification of the related assets or liabilities. If no assets or liabilities are related, deferred income tax assets or liabilities are classified according to the period of realization. The tax imputation system was adopted in accordance with the amendment of the ROC Income Tax Law. Under the new system, the Company may retain the earnings after December 31, 1997, by paying a 10% surtax on such undistributed earnings, and the surtax is accounted for as income tax expenses in the following year when the shareholders approved a resolution not to distribute the earnings. The Company adopted ROC SFAS No. 12 Accounting for Income Tax Credits, whereby income tax is reduced by investments tax credits in the year when the credit arises. (s) Earnings per share (EPS) 63 (Continued)

67 EVA AIRWAYS CORP. Notes to Financial Statements The earnings per share are computed by dividing the amount of net income attributable to common stock outstanding for the period by the weighted-average number of common shares outstanding during the period. The convertible bonds issued by the Company belong to potential common stock. When computing diluted EPS, potential common shares are included in the denominator if they are dilutive. Antidilutive potential common shares are ignored in calculating diluted EPS. The calculation of diluted EPS is consistent with the calculation of basic EPS while giving the effects of all dilutive potential common shares that were outstanding during the reporting period. When calculating diluted EPS, the net income attributable to common stockholders and the weightedaverage number of shares outstanding are adjusted for the effects of all dilutive potential common shares. The weighted-average number of common shares outstanding shall be adjusted currently and retroactively for the increase in common shares outstanding from stock issuance through the capitalization of retained earnings, additional paid-in capital, or employees bonuses. For calculation of diluted EPS, all employees bonus accrued at the end of reporting period are deemed to be distributable in the form of shares, and bonuses are included in the calculation of the weightedaverage number of shares at market price on the balance sheet date. 3. Reason for and Effect of Accounting Changes The Company adopted the amended ROC SFAS No. 10 Inventories issued by the Accounting Research and Development Foundation commencing from January 1, There were no impacts on the financial statements for the year ended December 31, (Continued)

68 EVA AIRWAYS CORP. Notes to Financial Statements 4. Important Accounts (a) Cash and cash equivalents The components as of December 31, 2010 and 2009, were as follows: NT dollars US dollars NT dollars US dollars Cash on hand $ 101,216 3,475 99,811 3,116 Cash in bank 14,044, ,122 4,118, ,596 $ 14,145, ,597 4,218, ,712 (b) Financial instruments (including derivative and non-derivative) The components as of December 31, 2010 and 2009, were as follows: NT dollars US dollars NT dollars US dollars Available-for-sale financial assets-current: Mutual funds $ 1,943,977 66,735 4,491, ,230 For the years ended December 31, 2010 and 2009, gains on disposal of available-for-sale financial assets-current amounted to NT$7,597 (US$241) and NT$6,419 (US$194), respectively, which were recorded under other income NT dollars US dollars NT dollars US dollars Available-for-sale financial assets-noncurrent: Trade-Van Information Services Co., Ltd. $ 171,749 5, ,049 5,309 Central Reinsurance Corp. 631,090 21, ,022 13,957 U.S. Treasury notes 188,292 6, ,401 8,161 $ 991,131 34, ,472 27,427 For the years ended December 31, 2010, loss on disposal of U.S. Treasury notes which were recorded as available-for-sale financial assets-noncurrent was NT$4,221 (US$134), and was recorded as a reduction of other income. On September 18, 2009, Trade-Van Information Services Co., Ltd. decreased issued stock by 24%, and the Company withdrew NT$27,052 (US$819) in cash in proportion to the Company s ownership percentage. As of December 31, 2010 and 2009, the changes in fair value of available-for-sale financial assets from subsequent remeasurement were NT$380,897 (US$13,076) and NT$193,224 (US$6,033), respectively, and were recorded as other stockholders equity adjustment. The Company s investment in U.S. Treasury notes is for contract performance guaranties. The pledge for the investment is disclosed in note 6. (Continued)

69 EVA AIRWAYS CORP. Notes to Financial Statements Financial assets carried at cost-noncurrent: Investee Shareholding Book value Shareholding Book value percentage percentage (%) NT dollars US dollars (%) NT dollars US dollars Taiwan High Speed Rail Corp $ 1,246,549 42, ,246,549 38,918 Evergreen Development Corp ,000 29, ,000 27,162 Abacus International Holding Ltd ,743 3, ,743 3,614 Technology Partner II Venture Capital Corp , , Chung Hwa Express Co., Ltd , , Pan-Pacific Venture Capital Co., Ltd , , Total $ 2,251,437 77,289 2,252,588 70,327 The Company s investments in Taiwan High Speed Rail Corp., Evergreen Development Corp., etc., had no publicly traded prices, and their fair values were difficult to determine. Therefore, the investments were stated at cost. On June 11, 2010, Pan-Pacific Venture Capital Co., Ltd. decreased issued stock by 33%, and the Company withdrew NT$1,151 (US$36) in cash in proportion to the Company s ownership percentage. On September 30, 2009, Evergreen Development Corp. merged with Green Steel Structure Corp. and increased issued shares from 403,409 thousand to 408,402 thousand, which caused the Company s ownership percentage to decrease to 9.35%. As of December 31, 2010 and 2009, the components of derivative financial instruments were as follows: Nominal Amount Nominal Book Value Amount Book Value NT dollars US dollars NT dollars US dollars Derivative financial assets: FX swap agreements USD - $ - - USD 60,000 17, Derivative financial liabilities: Fuel option agreements $ ,797 21, (Continued)

70 EVA AIRWAYS CORP. Notes to Financial Statements Details of derivative financial assets and liabilities as of December 31, 2010 and 2009, were as follows: NT dollars US dollars NT dollars US dollars Financial assets at fair value through profit or loss-current $ , Financial liabilities at fair value through profit or loss-current $ ,797 21,411 (c) Inventories The components as of December 31, 2010 and 2009, were as follows: NT dollars US dollars NT dollars US dollars Aircraft spare parts $ 7,764, ,548 8,123, ,619 Consumables for use and merchandise for sale during flight 537,651 18, ,388 10,971 Fuel for aircraft 223,866 7, ,575 6,730 $ 8,526, ,690 8,690, ,320 For the years ended December 31, 2010 and 2009, the movement of allowance for obsolete inventories was as follows: NT dollars US dollars NT dollars US dollars Beginning balance $ 951,909 29, ,221 22,831 Addition 1,188,484 37, ,059 17,859 Write-off (901,563) (28,603) (388,371) (11,755) Effect of exchange rate - 3, Ending balance $ 1,238,830 42, ,909 29,719 For the years ended December 31, 2010 and 2009, the Company recognized related losses on inventories as follows: NT dollars US dollars NT dollars US dollars Losses on inventory obsolescence $ 1,188,484 37, ,059 17,859 The pledge for these inventories is disclosed in note 6. (d) Long-term equity investments under equity method Details as of and for the years ended December 31, 2010 and 2009, were as follows: 67 (Continued)

71 EVA AIRWAYS CORP. Notes to Financial Statements Investee Shareholding percentage (%) NT dollars 2010 Book value Investment income (loss) US dollars NT dollars US dollars Evergreen Airline Services Corp $ 638,909 21,933 81,997 2,601 RTW Air Services (S) Pte. Ltd , , Green Siam Air Services Co., Ltd , , Evergreen Sky Catering Corp ,536 31, ,706 4,401 Evergreen Airways Service (Macau) Ltd ,363 3,823 41,967 1,331 Uni Airways Corp ,642 17,049 73,401 2,329 Evergreen Aviation Technologies Corp ,830, , ,220 13,744 Evergreen Security Corp ,345 2,655 3, Evergreen Air Cargo Services Corp ,046,689 35,932 98,669 3,130 Hsiang-Li Investment Corp ,453 1,732 3, PT Perdana Andalan Air Service ,511 2,455 6, Concord Pacific Ltd ,795 1, ,155 4,003 Sky Castle Investment Ltd ,190 9,447 33,515 1,063 SINO GAIN LIMITED $ 8,607, ,484 1,055,194 33, (Continued)

72 EVA AIRWAYS CORP. Notes to Financial Statements Investee 2009 Book value Investment income (loss) Shareholding percentage (%) NT dollars US dollars NT dollars US dollars Evergreen Airline Services Corp $ 586,165 18,300 85,622 2,591 RTW Air Services (S) Pte. Ltd , (1,342) (41) Green Siam Air Services Co., Ltd , , Evergreen Sky Catering Corp ,530 26,492 90,121 2,728 Evergreen Airways Service (Macau) Ltd ,933 5,462 8, Uni Airways Corp ,602 13,319 28, Evergreen Aviation Technologies Corp ,603, , ,715 9,949 Evergreen Security Corp ,920 2,308 9, Evergreen Air Cargo Services Corp ,482 29,644 19, Hsiang-Li Investment Corp ,666 1,394 (589) (18) PT Perdana Andalan Air Service ,614 2,111 (5,317) (161) Concord Pacific Ltd (80,056) (2,499) (324,998) (9,836) Sky Castle Investment Ltd ,180 8,154 33,037 1,000 SINO GAIN LIMITED (99) (3) Add: recorded as reduction of account receivables-related parties 7,999, , ,177 8,420 80,056 2,499 $ 8,079, ,263 As of December 31, 2010 and 2009, the cumulative translation adjustment were NT$4,508 (US$155) and NT$30,347 (US$947), respectively. Details of increases in long-term equity investments under the equity method of the Company in 2010 and 2009 were as follows: Unit: thousands of shares 2009 Investee Shares NT dollars US dollars Concord Pacific Ltd. 7,500 $ 252,750 7,650 SINO GAIN LIMITED $ 253,559 7,674 There was no such transaction in (Continued)

73 EVA AIRWAYS CORP. Notes to Financial Statements On June 30, 2010, Hsiang-Li Investment Corp. s stockholders resolved to make up deficiencies from the decrease issued stock and cash subscription. Hsiang-Li Investment Corp. decreased issued stock by 94.57% on July 5, 2010, and the Company withdrew NT$11,720 (US$372) in cash in proportion to the Company s ownership percentage. (e) Property, plant and equipment For the years ended December 31, 2010 and 2009, the Company capitalized the interest expenses on purchase of assets amounting to NT$214,189 (US$6,795) and NT$145,006 (US$4,389), respectively. The monthly interest rates on the above transactions were 0.13%~0.14% and 0.13%~0.20%, respectively. The pledge for this property, plant and equipment is disclosed in note 6. (f) Leased assets The details were as follows: Present value of leased assets at the transaction date Lease item Leaser Lease term Terms of lease contract NT dollars US dollars NT dollars US dollars Aircraft GECAS ~ Aircraft Computer equipment C&L Leasing Co., Ltd. The rent is payable monthly, and the lease term is equal to 75% or more of the total estimated economic life of the leased property ~ The rent is payable every three months, and the present value of payment for future rental is higher than 90% of the fair value of the leased asset IBM ~ $ 5,516, ,391 6,066, ,391 9,169, ,764 10,081, ,764 The rent is payable monthly, and the lease transfers ownership of the leased property by the end of the lease term 50,555 1,735 50,555 1,578 14,736, ,890 16,198, ,733 Less: accumulated depreciation (3,495,270) (119,988) (2,628,835) (82,074) The discount rate for leased assets was 1.18%~6.93%. $ 11,241, ,902 13,569, ,659 The abovementioned aircraft was financed under sale and leaseback arrangements. The differences (treated as unrealized gain on sale and leaseback) between sales price and book value of equipment are recorded as a reduction of depreciation expenses over the lease term. As of December 31, 2010 and 2009, the book value and present value of lease liability were as follows: Year due NT dollars US dollars NT dollars US dollars January 1, 2010~December 31, 2010 $ - - 2,083,324 65,043 January 1, 2011~December 31, ,976,611 67,855 2,060,131 64,319 January 1, 2012~December 31, ,953,912 67,076 2,037,432 63, (Continued)

74 EVA AIRWAYS CORP. Notes to Financial Statements January 1, 2013~December 31, ,930,224 66,262 2,013,744 62,870 January 1, 2014~December 31, ,902,231 65,301 1,985,751 61,996 January 1, 2015~December 31, ,874,238 64,340 1,957,758 61,123 And after 4,412, ,463 4,485, ,027 Book value 14,049, ,297 16,623, ,988 Less: unrealized interest expenses (2,255,929) (77,443) (2,975,297) (92,891) Present value 11,793, ,854 13,647, ,097 Less: current portion (1,436,940) (49,328) (1,446,636) (45,165) $ 10,356, ,526 12,201, ,932 The current portion of lease liability was recorded under other current liabilities. (g) Deferred charges As of December 31, 2010 and 2009, deferred charges, net of amortization, consisted of the following: NT dollars US dollars NT dollars US dollars Leasehold improvements $ 1,950,981 66,975 2,273,097 70,968 Major overhaul for aircraft and engines 2,707,252 92,937 1,629,231 50,866 Others 106,892 3,669 79,206 2,472 $ 4,765, ,581 3,981, , (Continued)

75 EVA AIRWAYS CORP. Notes to Financial Statements (h) Short-term borrowings The components as of December 31, 2010 and 2009, were as follows: NT dollars US dollars NT dollars US dollars Unsecured loans $ ,000 22,791 Commercial paper issued (net of prepaid interest of NT$6 (US$-) ,994 7,805 $ ,994 30,596 The interest expense on the aforementioned short-term borrowings and commercial paper payable is calculated based on floating interest rates. For the year ended December 31, 2009, the interest rates were 0.80%~2.95%. As of December 31, 2010 and 2009, the unused credit line amounted to approximately NT$8,361,864 (US$287,053) and NT$5,067,683 (US$158,217), respectively. (i) Long-term borrowings As of December 31, 2010 and 2009, the details of long-term borrowings were as follows: Nature Interest rate Interest rate (%) NT dollars US dollars (%) NT dollars US dollars Secured loans: Land and buildings 0.89~1.35 $ 2,514,286 86, ~2.96 1,628,571 50,845 Aircraft 0.94~ ,463,071 1,320, ~ ,251,471 1,412,784 Engines 1.31~2.30 1,997,000 68, ~2.75 3,184,609 99,426 Subtotal 42,974,357 1,475,262 50,064,651 1,563,055 Unsecured loans: 1.19~2.26 3,019, , ~2.86 8,718, ,199 Total 45,994,157 1,578,928 58,783,188 1,835,254 Less: current portion (7,756,574) (266,275) (11,463,908) (357,912) $ 38,237,583 1,312,653 47,319,280 1,477, (Continued)

76 EVA AIRWAYS CORP. Notes to Financial Statements As of December 31, 2010, the remaining balances of the borrowings were due as follows: Year due NT dollars US dollars January 1, 2011~December 31, 2011 $ 7,756, ,275 January 1, 2012~December 31, ,562, ,291 January 1, 2013~December 31, ,632, ,686 January 1, 2014~December 31, ,900, ,221 January 1, 2015~December 31, ,786, ,331 And after 15,355, ,124 $ 45,994,157 1,578,928 As of December 31, 2010 and 2009, the unused credit lines for long-term borrowings both amounted to NT$0 (US$0). The pledge for these long-term borrowings is disclosed in note 6. (j) Bonds payable Details of bonds payable as of December 31, 2010 and 2009, were as follows: Description Guaranteed by Annual interest rate Issue date NT dollars US dollars NT dollars US dollars Bonds payable Bank of Taiwan 2.11% $ - - $ 500,000 15,610 Taiwan Cooperative Bank 2.11% ,000 15,610 Bonds payable Far-Eastern International Bank 1.85% ,000 15,610 Shanghai Commercial & 1.85% ,000 15,610 Savings Bank Chinatrust Commercial Bank 1.85% ,000 18,733 Hua Nan Bank 1.85% ,000 15,610 Bonds payable Cathay United Bank 2.08% ,000,000 68,658 2,000,000 62,442 Bonds payable Hua Nan Bank 2.29% ,000 17, ,000 15,610 Taipei Fubon Bank 2.29% ,000 17, ,000 15,610 Bank of Taiwan 2.29% ,000 17, ,000 15,610 Taiwan Cooperative Bank 2.29% ,000 17, ,000 15,610 Ordinary corporate bonds payable issued in private 2.00% ,000, ,645 5,000, ,106 placement Subtotal 9,000, ,959 12,100, ,771 Less: current portion (4,000,000) (137,315) (3,100,000) (96,784) $ 5,000, ,644 $ 9,000, , (Continued)

77 EVA AIRWAYS CORP. Notes to Financial Statements (k) Installment accounts payable The Company purchased aircraft, engines and inventories by installments. As of December 31, 2010 and 2009, the details were as follows: NT dollars US dollars NT dollars US dollars Aircraft payable $ 17,996, ,812 11,496, ,915 Others 932,333 32,006 1,595,500 49,813 18,929, ,818 13,091, ,728 Less: current portion (3,468,571) (119,072) (3,468,815) (108,299) $ 15,460, ,746 9,622, ,429 The current portion of aircraft payable was recorded as other payables. As of December 31, 2010, the remaining balances of installment accounts payable were due as follows: Year due NT dollars US dollars January 1, 2011~December 31, 2011 $ 3,468, ,072 January 1, 2012~December 31, ,130, ,475 January 1, 2013~December 31, ,621,226 89,984 January 1, 2014~December 31, ,599,864 54,922 January 1, 2015~December 31, ,347,092 46,244 And after 6,761, ,121 $ 18,929, ,818 The interest expenses of the aforementioned installment payable are calculated based on floating interest rates. For the years ended December 31, 2010 and 2009, the average interest rates were 0.25%~6.77% and 0.28%~6.77%, respectively. The pledges for the aircraft payable are disclosed in note (Continued)

78 EVA AIRWAYS CORP. Notes to Financial Statements (l) Retirement plans Net retirement plan liabilities based on the actuarial computation on December 31, 2010 and 2009, were as follows: NT dollars US dollars NT dollars US dollars Benefit obligation: Vested benefit obligation $ 302,470 10, ,502 6,291 Nonvested benefit obligation 2,572,508 88,311 2,322,531 72,511 Accumulated benefit obligation 2,874,978 98,694 2,524,033 78,802 Projected effects of salary adjustments 1,062,009 36, ,214 9,779 Projected benefit obligation 3,936, ,152 2,837,247 88,581 Plan assets at fair value (2,476,756) (85,024) (2,255,072) (70,405) Projected benefit obligation in excess of plan assets 1,460,231 50, ,175 18,176 Unrecognized net transition obligation (27,300) (937) (54,594) (1,704) Unrecognized pension loss (1,565,704) (53,749) (451,865) (14,108) Unrecognized prior service cost (122,333) (4,200) (183,499) (5,729) Pension liabilities that need to be accrued 653,328 22, ,744 11,762 Accrued employee retirement liabilities $ 398,222 13, ,961 8,397 Actuarial assumptions at December 31, 2010 and 2009, were as follows: Discount rate 1.75% 2.25% Rate of increase in future compensation levels 1.50%~3.00% 0.59%~3.275% Expected long-term rate of return on plan assets 1.75% 2.25% As of and for the years ended December 31, 2010 and 2009, the details of the retirement plans were as follows: NT dollars US dollars NT dollars US dollars Balance of the retirement fund: Bank of Taiwan $ 2,476,756 85,024 2,255,072 70, (Continued)

79 EVA AIRWAYS CORP. Notes to Financial Statements The components of pension cost under defined benefit pension plan were as follows: NT dollars US dollars NT dollars US dollars Service cost $ 115,250 3, ,346 3,612 Interest cost 63,691 2,021 72,313 2,189 Actual return on plan assets (36,616) (1,162) (14,139) (428) Unrecognized net transition obligation 78,741 2,498 1, Net pension cost $ 221,066 7, ,842 5,413 The pension cost under defined contribution plan $ 135,468 4, ,024 3,330 (m) Income tax (1) For the years ended December 31, 2010 and 2009, the components of estimated income tax benefits (expenses) were as follows: NT dollars US dollars NT dollars US dollars Income tax expenses-current $ (28,531) (905) (20,619) (624) Income tax benefits-deferred ,698 27,291 $ (28,531) (905) 881,079 26, (Continued)

80 EVA AIRWAYS CORP. Notes to Financial Statements The deferred income tax benefits were as follows: NT dollars US dollars NT dollars US dollars Loss carryforwards $ (1,960,521) (62,199) 1,795,822 54,353 Investment tax credits 177,853 5,642 74,015 2,240 Unrealized exchange losses (gains) 4, (1,482) (45) Provision for loss on inventory market price decline 166,155 5,271 20, Purchase of fixed assets in installments, adjusted for tax purposes (31,241) (991) (22,879) (692) Accrued employee retirement liabilities (27,642) (877) (29,157) (883) Unrealized losses (gains) on financial instruments (113,654) (3,605) (1,014,797) (30,714) Effect of change in income tax rate on valuation allowance for deferred income tax assets (914,212) (29,004) (1,371,765) (41,518) Others 170,405 5,406 (4,892) (148) Valuation allowance for deferred income tax assets 2,528,773 80,228 1,456,778 44,091 $ ,698 27, (Continued)

81 EVA AIRWAYS CORP. Notes to Financial Statements (2) According to the announcement of the revised ROC Income Tax Act on May 27, 2009, the Company is subject to an income tax rate of 20% commencing in Also, according to the announcement of the latest revised ROC Income Tax Act on June 15, 2010, the income tax rate will be decreased from 20% to 17% commencing in Therefore, for the year ended December 31, 2010 and 2009, the Company was subject to ROC income tax at a maximum rate of 17% and 25%, respectively, and calculated the amounts of the basic tax in accordance with the Income Basic Tax Act. The differences between expected income tax benefit at statutory rates and income tax benefit (expense) as reported in the accompanying financial statements for the year ended December 31, 2010 and 2009, were as follows: NT dollars US dollars NT dollars US dollars Income tax benefits calculated on pretax $ (2,047,695) (64,965) 931,333 28,188 financial loss at statutory income tax rate Gain on disposal of investments 1, , Investment income recognized under equity method-unrealized 179,383 5,691 69,544 2,105 Dividend income 5, (28,481) (862) Increase in investment tax credits 210,580 6,681 47,168 1,428 Exchange losses recorded as translation adjustments (19,330) (613) 4, Effect of change in statutory income tax rate (914,212) (29,004) (1,523,687) (46,116) Others 27, (77,682) (2,351) Valuation allowance for deferred income tax assets 2,528,773 80,228 1,456,778 44,091 $ (28,531) (905) 881,079 26, (Continued)

82 EVA AIRWAYS CORP. Notes to Financial Statements (3) The components of the deferred income tax assets (liabilities) as of December 31, 2010 and 2009, were as follows: Deferred income tax assets-current Amount Tax effect Amount Tax effect NT dollars US dollars NT dollars US dollars NT dollars US dollars NT dollars US dollars Allowance for obsolete inventories $ 3,605, , ,921 21,041 2,628,035 82, ,607 16,410 Unused investment tax credits 1,253,630 43,036 1,253,630 43, ,139 8, ,139 8,091 Unused loss carryforwards 3,367, , ,390 19, Unrealized exchange losses 64,265 2,206 10, ,240 1,256 8, Unrealized losses on financial instruments ,550 20, ,710 4,174 Others 3, ,420 8,942 57,284 1,788 2,450,383 84, ,788 30,714 Less: Valuation allowance for deferred income tax assets (1,239,736) (42,559) (784,746) (24,500) Deferred income tax assets, netcurrent $ 1,210,647 41, ,042 6,214 Deferred income tax assets (liabilities) -noncurrent: Unused investment tax credits $ 1,773,258 60,874 1,773,258 60,874 $ 2,589,896 80,858 2,589,896 80,858 Accrued employee retirement liabilities (255,106) (8,756) (43,368) (1,489) (92,505) (2,888) (18,501) (578) Purchase of fixed assets in installments, adjusted for tax purposes 2,878,906 98, ,414 16,801 3,062,675 95, ,535 19,124 Unused loss carryforwards 8,377, ,577 1,424,112 48,888 23,276, ,713 4,655, ,342 Cumulative translation adjustments 4,282, , ,069 24, ,790 16, ,958 3,308 Others 2,505,341 86, ,908 14, ,140 19, ,628 3,985 4,797, ,689 8,072, ,039 Less: Valuation allowance for deferred income tax assets (1,464,397) (50,271) (4,448,160) (138,874) Deferred income tax assets, netnoncurrent $ 3,332, ,418 3,624, ,165 (4) The Company was granted investment tax credits for investment in certain high-tech industries, for purchases of automatic machinery and equipment, and for expenditures in research and development and employee training. These investment tax credits can be used to reduce the income tax liability in the current year and in the following four years at an amount not exceeding 50% of the income tax liability for each year during the first four years, with full utilization of the balance of the remaining unused investment tax credits in the final year. 79 (Continued)

83 EVA AIRWAYS CORP. Notes to Financial Statements As of December 31, 2010, unused investment tax credits available to the Company were as follows: Year granted Unused investment tax credits Expiry year NT dollars US dollars 2007 $ 1,253,630 43, ,622 21, ,151,636 39, $ 3,026, ,910 (5) The Company s income tax returns have been examined by the local tax authorities through According to a new amendment to the Income Tax Act, the loss carryforward tax credit period is extended from 5 years to 10 years. As of December 31, 2010, unused loss carryforward tax credits available to the Company were as follows: Year Unused loss carryforward Expiry year NT dollars US dollars 2008 $ 3,367, , ,377, , $ 11,744, ,162 (6) Imputation credit account (ICA) and creditable ratio: NT dollars US dollars NT dollars US dollars Unappropriated earnings before 1997 $ Unappropriated earnings after ,016, ,242 (2,915,074) (111,306) $ 12,016, ,242 (2,915,074) (111,306) ICA $ 1,035,572 35, ,664 28, Creditable ratio for earnings distribution to domestic shareholders 8.62% (estimated) - (actual) 80 (Continued)

84 EVA AIRWAYS CORP. Notes to Financial Statements (n) Stockholders equity (1) Common stock As of December 31, 2010 and 2009, the Company s authorized share capital consisted of 4,000,000 thousand shares of common stock, at NT$10 par value per share, of which 2,962,677 thousand shares, were issued and outstanding. On June 16, 2009, the Company s stockholders approved a resolution to make up the accumulated deficit by capital reduction amounting to NT$16,800,000 (US$509,863). On August 14, 2009, the board of directors approved a cash subscription amounting to NT$7,000,000 (US$213,025) by issuing 700,000 thousand shares at NT$10.6 per share. The aforementioned capital reduction and cash subscription were approved by and registered with the government authorities. (2) Capital surplus, legal reserve, and restrictions on appropriations of earnings The details of capital surplus as of December 31, 2010 and 2009, were as follows: NT dollars US dollars NT dollars US dollars Cash subscription in excess of par value of shares $ 29,672 1,008 2,934,333 96,756 Share options granted to employees 282,100 8, ,100 8,585 Additional paid-in capital from bond conversion 1,411,829 43,699 1,422,243 44,001 Gain on disposal of property, plant and equipment of investee company 1, , Increase in net equity due to investee company issuing new shares and the Company not purchasing proportionately 50,318 1,531 50,318 1,531 Increase in net equity due to change in percentage of ownership in long-term investments under equity method 225,369 7, ,363 7,161 Donated assets 648,480 20, ,480 20,588 $ 2,649,436 82,625 5,564, ,675 The ROC Company Act stipulates that realized capital surplus should not be credited to capital except for making up deficiencies of the Company. The realized capital surplus includes the premiums from issuance of shares in excess of par value and gifts received. In addition, the capital surplus which is credited to capital should not exceed 10 percent of the amount of paid-in capital in one year in accordance with the Criteria Governing the Offering and Issuance of Securities by Securities Issuers. The ROC Company Act stipulates that the Company must retain 10% of its annual earnings, as defined in the Act, until such retention equals the amount of authorized share capital. This retention is accounted for by transfers to legal reserve, upon approval at the stockholders meeting. Legal reserve may be used to offset an accumulated deficit and cannot be distributed as cash dividends to stockholders. However, one-half of legal reserve may be converted to share 81 (Continued)

85 EVA AIRWAYS CORP. Notes to Financial Statements capital when it reaches an amount equal to one-half of issued share capital, upon approval by the Company s stockholders. The Company s articles of incorporation stipulate that the Company must appropriate employees bonuses of not less than 1% of estimated earnings of each year, and less than 5% of estimated earnings of each year for remuneration of directors and supervisors. Such appropriations can only be made after offsetting accumulated deficit, and appropriation of legal reserve, and appropriation of special reserve from unappropriated earnings at an amount equal to the net debit balance of those accounts in stockholders equity. To promote long-term development, the Company has adopted a steady dividend policy, in which a cash dividend of around 0~50% of the appropriated dividend is distributed and a stock dividend of around 50%~100% of the appropriated dividend is distributed. However, if the expected earnings per share in the year when stock dividends are distributed decline to 20% or working capital is low, a cash dividend of 50%~100% of the appropriated dividend is distributed and a stock dividend of 0~50% of the appropriated dividend is distributed. For the year ended December 31, 2010, the Company recognize the amount of employee bonus and directors and supervisors remuneration, NT$100,000 (US$3,173) and NT$53,000 (US$1,681), respectively. According to the Interpretation (96) 052 issued by meeting and these amounts recognized in the financial statements, if any, will be accounted for as changes in accounting estimates and recognized in profit or loss in the following year. The appropriation for the 2010 employee bonuses and directors and supervisors remuneration is subject to the resolutions of the Company s directors and stockholders. Moreover, the Company did not estimate stockholders bonuses, employees bonuses, and directors and supervisors remuneration for the year ended December 31, 2009 because of the accumulated deficit. Information related to the appropriation of employee bonuses and remuneration for directors and supervisors can be found on web sites such as the Market Observation Post System after the stockholders meeting. On June 14, 2010, the Company s stockholders resolved to make up deficiencies from capital surplus of NT$2,915,074 (US$111,306) and not to appropriate dividends, employees bonuses, and directors and supervisors remuneration. On June 16, 2009, the Company s stockholders resolved to make up deficiencies from legal reserve of NT$18,864 (US$586) and from a decrease in capital of NT$16,800,000 (US$509,863). Therefore, the Company did not appropriate dividends, employees bonuses, and directors and supervisors remuneration. (3) Cumulative translation adjustments According to the accounting treatment of note 2(d), the cumulative translation adjustments had a debit balance of NT$3,559,198 (US$122,183) and a credit balance of NT$393,486 (US$12,285) as of December 31, 2010 and 2009, respectively. (o) Earnings (Loss) per share 82 (Continued)

86 EVA AIRWAYS CORP. Notes to Financial Statements For the years ended December 31, 2010 and 2009, earnings (losses) per share were calculated as follows: Basic (losses) earnings per share: Before Income Tax NT dollars 2010 After Income Tax Before Income Tax US dollars 2010 After Income Tax Before Income Tax NT dollars 2009 After Income Tax Before Income Tax US dollars 2009 After Income Tax Net income (loss) $ 12,045,267 12,016, , ,242 (3,725,333) (2,844,254) (112,752) (86,085) Weighted-average number of shares outstanding during the year (thousand shares) 2,962,677 2,962,677 2,962,677 2,962,677 2,496,011 2,496,011 2,496,011 2,496,011 Basic EPS (dollars) $ (1.49) (1.14) (0.05) (0.03) Diluted (losses) earnings per share: Net income (loss) for calculating diluted EPS Weighted-average number of shares outstanding during the year (thousand shares) Employees bonus that may be settled in shares (thousand shares) Weighted-average number of shares outstanding for calculating diluted EPS (thousand shares) $ 12,045,267 12,016, , ,242 2,962,677 2,962,677 2,962,677 2,962,677 2,717 2,717 2,717 2,717 (note) 2,965,394 2,965,394 2,965,394 2,965,394 Diluted EPS (dollars) $ (note) The Company did not calculate the diluted EPS due to the net loss in the year of (p) Hedge accounting The Company needs fuel for operating, and the future cash flows for fuel fluctuate due to the floating market prices, and therefore cash flow risk occurs. The Company evaluates the risk as significant, and thus hedges the risk by signing fuel option or swap agreements. 83 (Continued)

87 EVA AIRWAYS CORP. Notes to Financial Statements As of December 31, 2010 and 2009, the cash flow hedging items and derivative financial hedging instruments were as follows: Hedging Fair value of assigned hedging instrument Period of generating Hedged item instrument cash flow Account NT dollars US dollars NT dollars US dollars Floating price of fuel Fuel option agreements $ - - (897,196) (28,011) 2009~2010 Derivative financial liabilities for hedge purposes-current As of December 31, 2010 and 2009, the unrealized valuation loss on financial instruments due to hedging of cash flow amounted to NT$0 (US$0) and NT$897,196 (US$28,011), respectively, recorded under stockholders equity. (q) Disclosure of financial instruments (1) Fair value of financial instruments The details of financial instruments as of December 31, 2010 and 2009, were as follows: Book value 2010 NT dollars Fair value Public quote Assessment value value Book value US dollars Fair value Public quote Assessment value value Financial assets: Cash and cash equivalents $ 14,145,427-14,145, , ,597 Notes and accounts receivable (including receivables from related parties) 7,862,263-7,862, , ,902 Other receivables (including receivables from related parties) 150, ,458 5,165-5,165 Available-for-sale financial assets-current 1,943,977 1,943,977-66,735 66,735 - Available-for-sale financial assetsnoncurrent-stock 802, ,839-27,560 27,560 - Available-for-sale financial assetsnoncurrent-treasury notes 188, ,292-6,464 6,464 - Financial assets carried at cost-noncurrent 2,251, , Other assets 718, ,076 24,651-24,651 Financial liabilities: Accounts payable (including payable from related parties) 4,063,161-4,063, , ,484 Accrued expenses 7,234,011-7,234, , ,335 Other payable (including payable from related parties) 204, ,893 7,034-7,034 Bonds payable (including current portion) 9,000,000 2,015,043 7,032, ,959 69, ,428 Long-term borrowings (including current portion) 45,994,157-45,994,157 1,578,928-1,578,928 Installment accounts payable (including current portion) 18,929,201-19,202, , ,190 Lease liability (including current portion) 11,793,404-12,223, , ,621 Off-balance-sheet financial instruments: Letters of credit - - 1,685, ,869 Guaranteed borrowings - - 1,420, , (Continued)

88 EVA AIRWAYS CORP. Notes to Financial Statements Book value NT dollars Public quote value Assessment value Book value US dollars Public quote value Assessment value Financial assets: Cash and cash equivalents $ 4,218,748-4,218, , ,712 Notes and accounts receivable (including receivables from related parties) 7,257,621-7,257, , ,588 Other receivables (including receivables from related parties) 128, ,372 4,008-4,008 Available-for-sale financial assets-current 4,491,553 4,491, , ,230 - Available-for-sale financial assetsnoncurrent-stock 617, ,071-19,266 19,266 - Available-for financial assets-noncurrent- Treasury notes 261, ,401-8,161 8,161 - Financial assets carried at cost-noncurrent 2,252, , FX swap agreements 17,247-17, Other assets 989, ,434 30,891-30,891 Financial liabilities: Short-term borrowings 979, ,994 30,596-30,596 Accounts payable (including payable from related parties) 2,246,593-2,246,593 70,140-70,140 Accrued expenses 5,856,614-5,856, , ,848 Other payables (including payable from related parties) 163, ,151 5,094-5,094 Bonds payable (including current portion) 12,100,000 5,136,439 7,166, , , ,759 Long-term borrowings (including current portion) 58,783,188-58,783,188 1,835,254-1,835,254 Installment accounts payable (including current portion) 13,091,551-13,491, , ,226 Lease liability (including current portion) 13,647,913-14,278, , ,780 Fuel option agreements 1,582,993-1,582,993 49,422-49,422 Off-balance-sheet financial instruments: Letters of credit - - 1,356, ,357 Guaranteed borrowings - - 2,081, , (Continued)

89 EVA AIRWAYS CORP. Notes to Financial Statements (2) Methods and assumptions to measure the fair value of financial instruments i) The maturity dates of short-term financial instruments, including cash and cash equivalents, notes and accounts receivable/payable (including related parties), other receivables (including related parties), other assets, short-term borrowings, accrued expenses, and other payables (including related parties), are within one year of the balance sheet date, and therefore, their book value is equal to their fair value. ii) If public quoting of financial assets and liabilities is available, the quote price will be the fair value. If market value is not available, an assessment method will be used. The assumptions used should be the same as those used by the financial market traders when quoting their prices. iii) The assessed value of bonds payable, long-term borrowings, installment accounts payable and lease liability is the discounted future cash flows, and the discount rates during the years ended December 31, 2010 and 2009, were 0.25%~6.77% and 0.28%~6.93% p.a., respectively. iv) The fair value of letters of credit is based on the amount of the contract. v) The fair value of guaranteed borrowings is based on the amount of the contract. (3) For the years ended December 31, 2010 and 2009, the evaluation gain or loss on financial assets at fair value through profit or loss amounted to gains of NT$5,151 (US$164) and losses of NT$638,026 (US$19,311), respectively. (4) Disclosure of financial risks (i) Market risk As of December 31, 2010 and 2009, the bonds payable, installment accounts payable, and lease liability with the risk arising from floating interest rates amounted to NT$16,622,697 (US$570,638) and NT$22,251,251 (US$694,700), respectively. The Company s securities were recorded as available-for-sale financial assets and measured at fair value. The Company had the risk of changes in market price. The Company is exposed to foreign currency risk on accounts receivable which are denominated in a currency other than New Taiwan dollars. The above foreign currency risk will be offset by the same risk related to those accounts payable which are denominated in a foreign currency. Therefore, the Company believes its exposure to foreign currency risk is low. 86 (Continued)

90 EVA AIRWAYS CORP. Notes to Financial Statements (ii) Credit risk The Company has major credit risk involving cash and cash equivalents, securities, and accounts receivable. The Company deposited the cash in different financial institutions. The Company owns securities by purchasing publicly traded bonds and stocks. Derivative counterparties are limited to high-credit-quality financial institutions. The Company is exposed to credit risk in every financial institution. However, the credit risk involving cash, derivatives and securities is not significant. The Company guarantees bank loans of an investee which is 100% owned by the Company, and therefore the Company concluded that it was not exposed to credit risk for this transaction. Accounts receivable were due from many customers. Therefore, there was no concentration of credit risk. In order to decrease the credit risk of accounts receivable, the Company continually evaluated each client s financial situation and requested clients to provide guaranties. (iii) Liquidity risk The Company s capital, operating funds and financing are sufficient to fulfill all obligations. Therefore, the Company did not have liquidity risk. The Company s derivative financial instruments are expected to sell at the rational price. Therefore, liquidity risk is not significant. The Company s available-for-sale financial assets had publicly traded prices and were expected to be sold promptly at close to their fair values. Therefore, liquidity risk is not significant. Liquidity risk resulted from financial assets carried at cost that had no publicly traded price. (iv) Cash flow risk related to the fluctuation of interest rates The Company s short-term and long-term borrowings, installment accounts payable, lease liability carried floating interest rates. As a result, the effective interest rate changes along with the fluctuation of the market interest rate and thereby influences the Company s future cash flow. As of December 31, 2010 and 2009, the financial liabilities with the risk arising from floating interest rates amounted to NT$69,094,065 (US$2,371,921) and NT$76,351,395 (US$2,383,746), respectively. 5. Transactions with Related Parties (a) Name and relationship of related parties Name Relationship with the Company Evergreen Marine Corp. Major shareholder 87 (Continued)

91 EVA AIRWAYS CORP. Notes to Financial Statements Name Relationship with the Company Evergreen International Corp. Major shareholder Falcon Investment Services Ltd. Major shareholder Evergreen International Storage & Transport Corp. Major shareholder Evergreen Airline Services Corp. Subsidiary Evergreen Sky Catering Corp. Subsidiary Evergreen Aviation Technologies Corp. Subsidiary Evergreen Air Cargo Services Corp. Subsidiary Hsiang-Li Investment Corp. Subsidiary RTW Air Services (S) Pte. Ltd. Subsidiary Green Siam Air Services Co., Ltd. Subsidiary Evergreen Airways Service (Macau) Ltd. Subsidiary PT Perdana Andalan Air service Subsidiary Concord Pacific Ltd. Subsidiary SINO GAIN LIMITED Subsidiary Uni Airways Corp. Investee company accounted for by equity method Evergreen Security Corp. Investee company accounted for by equity method Evergreen Reinsurance Company Limited Investee company of the Company s major shareholders Greencompass Marine S.A. Grand-investee company of the Company s major shareholders Evergreen International S.A. Investee company of the Company s shareholders Shanghai Airlines Cargo International Co., Ltd. Investee company of the Company s subsidiary Chang Yung-Fa Charity Foundation Directors Chang Yung-Fa Foundation It s chairman being the Company s directors Directors, Supervisors, and Managers The Company s directors, supervisors and major management 88 (Continued)

92 (b) Significant transactions with related parties (1) Revenue, cost and expenses EVA AIRWAYS CORP. Notes to Financial Statements During the years ended December 31, 2010 and 2009, the Company s transactions with related parties were as follows: Revenue NT dollars US dollars Percentage NT dollars US dollars Percentage Uni Airways Corp. $ 515,504 16, ,407 9, Evergreen Aviation Technologies Corp. 365,217 11, ,730 10, Shanghai Airlines Cargo International Co., Ltd 60,530 1, ,340 3, Evergreen International Corp. 41,835 1, , Evergreen Air Cargo Services Corp. 15, , Others 3, , $ 1,002,646 31, ,052 23, Uni Airways Corp. leased aircraft from the Company to operate cross-strait scheduled flights between mainland China and Taiwan. The rental is charged by actual flight hours and recorded under operating revenue. Cost NT dollars US dollars Percentage NT dollars US dollars Percentage Evergreen Aviation Technologies Corp. $ 4,783, , ,905,394 87, Evergreen Sky Catering Corp. 1,140,946 36, ,750 29, Evergreen Airline Services Corp. 951,580 30, ,542 25, Uni Airways Corp. 671,454 21, ,466 19, Evergreen Air Cargo Services Corp. 285,774 9, ,008 6, Shanghai Airlines Cargo International Co., Ltd 220,018 6, ,111 2, Evergreen Reinsurance Company Limited 207,922 6, ,600 6, Others 49,300 1, ,339 1, $ 8,310, , ,900, , (Continued)

93 EVA AIRWAYS CORP. Notes to Financial Statements Expenses NT dollars US dollars Percentage NT dollars US dollars Percentage Evergreen International Corp. $ 136,957 4, ,625 3, Uni Airways Corp. 86,936 2, ,608 1, Green Siam Air Services Co., Ltd. 72,606 2, ,075 1, RTW Air Services (S) Pte. Ltd. 50,521 1, , Evergreen Security Corp. 41,682 1, ,229 1, PT Perdana Andalan Air Service 38,944 1, , Evergreen Airline Services Corp. 28, , Evergreen Sky Catering Corp. 22, , Evergreen Aviation Technologies Corp. 8, , Others 101,560 3, , $ 588,074 18, ,881 11, Evergreen International Storage & Transport Corp. provides public transportation services. There were no differences on the services and prices between the related parties and non-related parties. Therefore, the expenses were recorded but not disclosed. The Company sold spare parts to Evergreen Aviation Technologies Corp. amounting to NT$438,716 (US$13,919) and NT$153,887 (US$4,658) for the years ended December 31, 2010 and 2009, respectively. Evergreen Aviation Technologies Corp. provides maintenance services for aircraft and engines for the Company. As of December 31, 2010 and 2009, the aforementioned balance amounted to NT$2,707,252 (US$92,937) and NT$1,629,231 (US$50,866), respectively, recorded under differed charges. (2) Financing from related parties The Company engaged in financings from Evergreen International Corp. and certain related parties. The interest expense was calculated based on floating rates. For the year ended December 31, 2009, the maximum balance and the interest expense were NT$8,729,942 (US$272,555) and NT$97,270 (US$2,944), respectively. As of December 31, 2009, the aforementioned financings had been redeemed. There was no such transaction in (Continued)

94 EVA AIRWAYS CORP. Notes to Financial Statements (3) Property transaction The Company sold two aircraft for US$97,067 to SINO GAIN LIMITED on November 27, 2009, and immediately bought them back by installments. There were no gains or losses on disposal recorded for this sale and buyback transaction. As for the years ended December 31, 2010, and 2009 installment payments amounted to NT$1,420,088 (US$48,750) and NT$2,081,950 (US$65,000), respectively, recorded under installment accounts payable. (4) Endorsement and guarantees As of December 31, 2010, and 2009, the details of guarantees to related parities were as follows: NT dollars US dollars NT dollars US dollars SINO GAIN LIMITED $ 1,420,088 48,750 2,081,950 65,000 (5) The abovementioned transactions with related parties were made with no significant difference from those with non-related parties, but sometimes the payments were overdue. Receivables and payables as of December 31, 2010 and 2009, resulting from the aforementioned transactions were as follows: NT dollars US dollars NT dollars US dollars Accounts receivable-related parties: Uni Airways Corp. $ 138,108 4,741 73,829 2,305 Evergreen Aviation Technologies Corp. 27, ,930 1,247 Shanghai Airlines Cargo International Co., Ltd 19, ,108 1,408 Evergreen International Corp. 3, , Others 2, $ 190,539 6, ,968 5,088 Other receivables-related parties: Uni Airways Corp. $ 36,825 1,264 56,972 1,779 Shanghai Airlines Cargo International Co., Ltd 29,878 1, ,747 3,208 Evergreen Aviation Technologies Corp. 7, , Others , ,920 2, ,979 5,806 Less: credit to long-term equity investments under equity method - - (80,056) (2,499) $ 74,920 2, ,923 3, (Continued)

95 EVA AIRWAYS CORP. Notes to Financial Statements Note: As of December 31, 2010 and 2009, the overdue accounts receivable transferred to other receivables. The aging for the abovementioned overdue accounts receivable is shown below: Name Amount 2010 Aging for overdue accounts receivable NT dollars US dollars Over 7-12 Over one Over 1-6 months year Amount months Over 1-6 months Over 7-12 months Over one year Shanghai Airlines Cargo International Co., Ltd. $ 28,755 16,112 2,303 10, Name Amount 2009 Aging for overdue accounts receivable NT dollars US dollars Over 7-12 Over one Over 1-6 months year Amount months Over 1-6 months Over 7-12 months Over one year Shanghai Airlines Cargo International Co., Ltd. $ 96,345 43,098 31,565 21,682 3,008 1, NT dollars US dollars NT dollars US dollars Accounts payable-related parties: Evergreen Aviation Technologies Corp. $ 1,892,867 64, ,669 18,285 Evergreen Sky Catering Corp. 177,885 6, ,214 5,595 Evergreen Airline Services Corp. 164,878 5, ,683 4,642 Uni Airways Corp. 82,979 2,848 47,125 1,471 Shanghai Airlines Cargo International Co., Ltd. 54,880 1,884 15, Evergreen Air Cargo Services Corp. 53,385 1,833 57,447 1,794 Green Siam Air Services Co, Ltd. 12, , RTW Air Services (S) Pte Ltd. 10, , Evergreen International Corp. 9, , Others 14, , $ 2,473,943 84,928 1,078,180 33,661 Other payables-related parties: Evergreen Airline Services Corp. $ 78,873 2,708 60,571 1,891 Evergreen International Corp. 34,371 1,180 27, Uni Airways Corp. 15, , Evergreen Air Cargo Services Corp. 8, , Evergreen Aviation Technologies Corp. 8, ,784 1,055 Evergreen Security Corp. 3, , Others 4, , $ 153,394 5, ,940 4,650 (c) Summary of payroll and remuneration of the Company s directors, supervisors and major management For the years ended December 31, 2010 and 2009, the related information about payroll and remuneration of major management, such as directors, supervisors and managers, received from the Company was as below: (Continued)

96 EVA AIRWAYS CORP. Notes to Financial Statements NT dollars US dollars NT dollars US dollars Salaries $ 76,832 2,438 20, Bonus and extra payment 8, , Employee bonus For the details of the estimated remuneration of directors and supervisors and employee bonus, please see note 4(n). 6. Pledged Assets The book values of the pledged assets as of December 31, 2010 and 2009, were as follows: Pledged assets Object NT dollars US dollars NT dollars US dollars Land Long-term borrowings $ 1,863,910 63,986 1,863,910 58,193 Buildings Long-term borrowings 2,172,929 74,594 2,235,703 69,800 Aircraft Long-term borrowings, Installment accounts payable 55,652,842 1,910,499 63,542,064 1,983,830 Simulators-included in machinery and equipment Engines-included in machinery and equipment Advances for purchases of equipment Time deposit-included in other assets Installment accounts payable 438,801 15, ,000 15,704 Long-term borrowings 2,733,104 93,824 3,103,851 96,904 Long-term borrowings 10,924, ,032 5,423, ,337 Customs duty and contract performance guaranties 718,076 24, ,434 30,891 Spare parts-included in inventories Installment accounts payable 1,000,062 34,331 1,300,081 40,589 US treasury note-included in available-for-sale financial assets-noncurrent Contract performance guaranties 188,292 6, ,401 8,161 $ 75,692,690 2,598,445 79,223,293 2,473, (Continued)

97 7. Commitments and Contingencies EVA AIRWAYS CORP. Notes to Financial Statements (a) The Company entered into aircraft, and building lease contracts using the operating lease or capital lease method. As of December 31, 2010, the Company had paid NT$1,487,169 (US$51,053) as refundable deposits. According to these contracts, future lease payments in the following five years are as follows: Year due NT dollars US dollars January 1, 2011~December 31, 2011 $ 7,083, ,184 January 1, 2012~December 31, ,494, ,955 January 1, 2013~December 31, ,048, ,642 January 1, 2014~December 31, ,025, ,846 January 1, 2015~December 31, ,799, ,081 And after 11,580, ,534 $ 43,032,059 1,477,242 (b) As of December 31, 2010, the details of guarantees to related parties are disclosed in note 5(b). (c) The Company is the subject of investigations by the related authorities of the United States, and these investigations are focused on air cargo competition and oil surcharges. The Company has been cooperating with the United States government and appointed a legal counsel in connection with these investigations. On December , the investigations are ongoing, and the results are uncertain. 8. Important Damage Losses: none 9. Important Subsequent Events: none 94 (Continued)

98 EVA AIRWAYS CORP. Notes to Financial Statements 10. Others (a) Total personnel expenses, depreciation and amortization for the years ended December 31, 2010 and 2009, were as follows: 2010 By function NT dollars US dollars Operating Operating Operating Operating By item cost expenses Total cost expenses Total Personnel expenses Salaries $ 3,322,531 2,833,038 6,155, ,410 89, ,291 Insurance 153, , ,578 4,856 3,982 8,838 Pension 230, , ,534 7,318 3,993 11,311 Others (meal allowances, etc) 1,123, ,227 1,298,471 35,636 5,559 41,195 Depreciation 8,024, ,160 8,159, ,579 4, ,867 Amortization 1,081,617 60,550 1,142,167 34,315 1,921 36, By function NT dollars US dollars Operating Operating Operating Operating By item cost expenses Total cost expenses Total Personnel expenses Salaries $ 3,036,856 2,526,968 5,563,824 91,915 76, ,397 Insurance 130, , ,648 3,940 3,586 7,526 Pension 169, , ,866 5,133 3,610 8,743 Others (meal allowances, etc) 1,048, ,505 1,250,783 31,728 6,129 37,857 Depreciation 7,991, ,777 8,144, ,878 4, ,502 Amortization 1,142,363 97,215 1,239,578 34,575 2,942 37,517 (b) Reclassification Certain amounts in the financial statements for the year ended December 31, 2009, have been reclassified to conform with the presentations of the financial statements for the year ended December 31, 2010, for purposes of comparison. These reclassifications do not have a significant impact on the financial statements. 95 (Continued)

99 EVA AIRWAYS CORP. Notes to Financial Statements (c) The information of significant foreign currency of financial assets and liabilities Local Amount Exchange Local Exchange NT dollars Financial assets Rate NT dollars Amount Rate Currency USD $ 114, ,341,473 83, ,665,230 EUR 3, ,783 3, ,522 JPY 465, , , ,784 HKD 248, , , ,437 CNY 848, ,751, , ,077,152 8,329,927 4,763,125 Long-term equity investment under equity method USD 14, ,098 11, ,400 Financial liabilities Local Amount Exchange Local Exchange Rate NT dollars Amount Rate NT dollars Currency USD 189, ,530, , ,517,315 EUR 7, ,176 5, ,814 JPY 1,597, , , ,868 HKD 26, ,465 31, ,070 CNY 107, ,149 59, ,245 6,960,901 4,451, Segment Financial Information (a) Diversified industry: The Company mainly operates an international air transportation business. 96 (Continued)

100 EVA AIRWAYS CORP. Notes to Financial Statements (b) Geographic area information: Asia: NT dollars US dollars NT dollars US dollars Operating revenue $ 39,790,741 1,262,397 24,994, ,478 Gain (loss) from operations $ 4,820, ,933 (961,916) (29,114) Identifiable assets $ 816,677 28, ,546 29,708 North America: Operating revenue $ 21,483, ,582 16,907, ,731 Gain (loss) from operations $ 2,602,614 82,570 (650,703) (19,694) Identifiable assets $ 133,152 4, ,405 8,567 Other foreign areas: Operating revenue $ 6,151, ,176 5,482, ,942 Gain (loss) from operations $ 745,278 23,644 (211,007) (6,387) Identifiable assets $ 197,208 6, ,162 3,470 Domestic: Operating revenue $ 36,983,853 1,173,345 25,895, ,752 Gain (loss) from operations $ 4,480, ,145 (996,598) (30,163) Identifiable assets $ 135,032,460 4,635, ,388,589 4,289,372 Total operating revenue $ 104,410,011 3,312,500 73,279,511 2,217, (Continued)

101 EVA AIRWAYS CORP. Notes to Financial Statements NT dollars US dollars NT dollars US dollars Income (loss) from operations $ 12,648, ,292 (2,820,224) (85,358) Investment income, net 1,055,194 33, ,177 8,420 General income 108,889 3, ,290 23,919 Interest expenses (1,767,564) (56,077) (1,973,576) (59,733) Income (loss) before income tax $ 12,045, ,147 (3,725,333) (112,752) Total identifiable assets $ 136,179,497 4,674, ,725,702 4,331,117 Long-term equity investments 11,850, ,797 11,211, ,017 Total assets $ 148,029,519 5,081, ,936,736 4,681,134 (c) Major customer information - The Company operates an air transportation business with no specific major customers. (d) Export sales information - The main business of the Company is to provide international air transportation services. Consequently, it is not practical to separate export and domestic sales. 98

102 EVA AIRWAYS CORP. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2010 and 2009 (Expressed in Thousands of New Taiwan Dollars) NT dollars NT dollars NT dollars NT dollars Assets Liabilities and Stockholders Equity Current assets: Current liabilities: Cash and cash equivalents $ 16,575,505 6,619,728 Short-term borrowings $ 3,004,087 2,916,401 Financial assets at fair value through profit or loss-current 1,628 27,304 Financial liabilities at fair value through profit or loss-current - 690,979 Available-for-sale financial assets-current 2,136,713 4,734,650 Derivative financial liabilities for hedge purposes-current - 897,196 Notes receivable 527, ,421 Accounts payable 2,317,139 2,169,883 Accounts receivable, net 9,722,132 7,983,598 Accounts payable-related parties 156,693 81,090 Accounts receivable-related parties 420, ,180 Tax payables 157, ,081 Other receivables 162, ,955 Accrued expenses 7,954,527 6,413,811 Other receivables-related parties 292, ,630 Other payables-related parties 80,501 67,734 Inventories 12,601,237 11,643,967 Other payables 3,375,244 2,982,190 Other prepayments 788,339 1,221,039 Unearned revenue 7,131,673 6,291,354 Deferred income tax assets-current 1,324, ,393 Current portion of long-term liabilities 13,679,723 15,634,058 Other current assets 43,081 44,059 Other current liabilities 3,114,936 2,997,058 Total current assets 44,595,513 33,904,924 Total current liabilities 40,971,867 41,382,835 Funds and investments: Available-for-sale financial assets-noncurrent 1,040, ,272 Long-term liabilities: Financial assets carried at cost-noncurrent 2,255,826 2,257,414 Bonds payable 5,000,000 9,000,000 Long-term equity investments under equity method 929, ,742 Long-term borrowings 41,860,567 51,901,811 Total funds and investments 4,225,198 4,056,428 Installment accounts payable 14,513,905 8,061,274 Lease liability-noncurrent 10,356,464 12,201,687 Property, plant and equipment: Total long-term liabilities 71,730,936 81,164,772 Land 2,550,924 2,550,924 Buildings 13,361,864 13,355,457 Other liabilities: Machinery and equipment 12,692,031 12,080,066 Accrued employee retirement liabilities 613, ,874 Aircraft 98,145, ,316,455 Other liabilities 1,270,175 1,461,802 Leased assets 14,739,099 16,201,120 Total other liabilities 1,883,398 1,937, ,489, ,504,022 Total liabilities 114,586, ,485,283 Less: accumulated depreciation (53,839,916) (48,703,865) Advances for purchases of equipment 11,303,772 14,118,078 Stockholders equity: Net property, plant and equipment 98,953, ,918,235 Common stock 29,626,772 29,626,772 Capital surplus 2,649,436 5,564,505 Intangible assets: Retained earnings(accumulated deficit) 12,016,736 (2,915,074) Deferred pension cost 188, ,810 Other stockholders equity adjustments: Cumulative translation adjustments (3,554,690) 423,833 Other assets: Net loss not yet recognized as net pension cost (511,128) (157,412) Refundable deposits 1,759,269 1,706,336 Unrealized gains or losses on financial instruments 408,136 (515,511) Deferred charges 4,783,235 4,052,074 Total other stockholders equity adjustments (3,657,682) (249,090) Accounts receivable-related parities-noncurrent 79, ,844 Total stockholders equity 40,635,262 32,027,113 Deferred income tax assets-noncurrent 3,354,468 3,676,788 Minority interest 3,470,038 3,222,238 Other assets 752,208 1,018,195 Total stockholders equity and minority interst 44,105,300 35,249,351 Total other assets 10,728,553 10,592,237 Total assets $ 158,691, ,734,634 Total liabilities and stockholders equity $ 158,691, ,734,634 99

103 EVA AIRWAYS CORP. AND SUBSIDIARIES Consolidated Statements of Operations For the years ended December 31, 2010 and 2009 (Expressed in Thousands of New Taiwan Dollars, Except Earnings per Share) NT dollars NT dollars Operating revenue $ 114,054,453 81,496,329 Operating cost 92,496,725 76,795,004 Gross profit from operations 21,557,728 4,701,325 Operating expenses 7,383,397 6,400,945 Operating income (loss) 14,174,331 (1,699,620) Non-operating income and gains: Interest income 93,714 42,912 Investment income 280,688 - Gains on disposal of property, plant and equipment 12,713 52,823 Gains on valuation of financial liabilities 10, ,844 Other income 363, , , ,916 Non-operating expenses and losses: Interest expenses 1,839,710 2,058,221 Investment losses - 188,001 Exchange losses, net 318,497 33,690 Other losses 64, ,113 2,222,235 2,402,025 Income (loss) from continuing operations before income tax 12,713,110 (3,109,729) Income tax benefit (expenses) (289,262) 524,723 Net income (loss) $ 12,423,848 (2,585,006) Income (loss) attributable to: Parent company 12,016,736 (2,844,254) Minority interest 407, ,248 $ 12,423,848 (2,585,006) Basic earnings (losses) per share (expressed in New Taiwan dollars) Diluted earnings per share (expressed in New Taiwan dollars) Net income Net loss NT dollars NT dollars $ 4.06 (1.14) $

104 EVA AIRWAYS CORP. AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity For the years ended December 31, 2010 and 2009 (Expressed in Thousands of New Taiwan Dollars) Common Stock Capital Surplus Legal Reserve Retained Earnings (Accumulate Deficit) Cumulative Translation Adjustments Net Loss Not Yet Recognized As Net Pension Cost Unrealized Gains or Losses on Financial Instruments Minority Interest Total Balance on January 1, 2009 $ 39,426,772 4,866,753 18,864 (16,889,684) 1,491,895 (162,517) (3,009,945) 2,966,638 28,708,776 Make-up of accumulated deficit by capital reduction (16,800,000) ,800, Make-up of accumulated deficit - - (18,864) 18, Cash subscription 7,000, , ,420,000 Share options granted to employees - 282, ,100 Increase in net equity due to change in percentage of capital surplus in longterm equity investments under equity method Increase in net equity due to recording net loss not yet recognized as net pension cost in long-term equity investments under equity method - (4,348) (4,348) , ,744 Recognized net loss not yet recognized as net pension cost (13,639) - - (13,639) Increase in net equity due to change in percentage of unrealized gains or losses on financial instruments in long-term equity investments under equity method ,034-18,034 Change in unrealized gains on financial instruments ,476,400-2,476,400 Decrease in minority interest (3,648) (3,648) Net income (loss) for the year ended December 31, (2,844,254) ,248 (2,585,006) Translation adjustments for the year ended December 31, (1,068,062) (1,068,062) Balance on December 31, ,626,772 5,564,505 - (2,915,074) 423,833 (157,412) (515,511) 3,222,238 35,249,351 Make-up of accumulated deficit - (2,915,074) - 2,915, Increase in net equity due to change in percentage of capital surplus in longterm equity investments under equity method Increase in net equity due to recording net loss not yet recognized as net pension cost in long-term equity investments under equity method (44,828) - - (44,828) Recognized net loss not yet recognized as net pension cost (308,888) - - (308,888) Increase in net equity due to change in percentage of unrealized gains or losses on financial instruments in long-term equity investments under equity method ,217-18,217 Change in unrealized gains on financial instruments , ,430 Decrease in minority interest (159,312) (159,312) Net gain for the year ended December 31, ,016, ,112 12,423,848 Translation adjustments for the year ended December 31, (3,978,523) (3,978,523) Balance on December 31, 2010 $ $29,626,772 2,649,436-12,016,736 (3,554,690) (511,128) 408,136 3,470,038 44,105,

105 EVA AIRWAYS CORP. AND SUBSIDIARIES Consolidated Statements of Cash Flows For the years ended December 31, 2010 and 2009 (Expressed in Thousands of New Taiwan Dollars) NT dollars NT dollars Cash flows from operating activities: Net income (loss) $ 12,423,848 (2,585,006) Adjustments to reconcile net income (loss) to net cash flow provided by (used in) operating activities: Depreciation 8,873,711 8,906,010 Amortization and maintenance expense 1,227,270 1,311,730 Investment loss (income) (280,688) 188,001 Proceeds from cash dividends on long-term equity investments 89,016 78,115 Losses on disposal and obsolescence of property, plant and equipment 4,866 15,927 Gains on sale of investments, net (3,711) (8,807) Deferred income tax benefit 31 (912,751) Impairment loss - 56,719 Amortization expense recorded as interest expenses 83,158 33,728 Amortization expense recorded as other expenses Amortization of other deferred gain (53,636) (129,598) Salary expenses-share options granted to employees - 282,100 Changes in operating assets and liabilities, net: Changes in operating assets, net: Financial assets at fair value though profit or loss 25, ,346 Notes receivable 6,340 (334,372) Accounts receivable (1,738,534) (775,893) Accounts receivable-related parties 125,462 (253,844) Other receivable 5,143 42,451 Other receivables-related parties (168,675) (41,115) Inventories (957,257) (778,865) Other prepayments 432,700 (445,838) Other current assets ,735 Accounts receivable-related parities-noncurrent 59,471 (89,561) Changes in operating liabilities, net: Financial liabilities at fair value through profit or loss (690,979) (5,095,705) Accounts payable 147, ,420 Accounts payable-related parties (1,004,876) 18,358 Tax payable (83,737) 133,906 Accrued expenses 1,540,716 68,625 Other payables-related parties 12,767 5,791 Other payables (1,573,760) (85,660) Unearned revenue 840,319 (424,084) Other current liabilities 127,164 (375,160) Accrued employee retirement liabilities (177,565) (171,372) Other liabilities 94,002 (19,548) Net cash provided by (used in) operating activities 19,386,630 (326,063) Cash flows from investing activities: Decrease (increase) in available-for-sale financial assets 2,682,135 (3,574,971) Withdrawal of financial assets carried at cost 1,151 27,052 Payments for purchase of long-term equity investments under equity method - (234,367) Payments for purchase of property, plant and equipment (3,447,180) (14,421,777) Proceeds from disposal of property, plant and equipment 3,826 6,533 Decrease (increase) in refundable deposits (160,661) 3,156,148 Increase in deferred charges (961,264) (509,936) Decrease (increase) in other assets 265,987 (168,608) Net cash provided by (used in) investing activities (1,616,006) (15,719,926) Cash flows from financing activities: Increase (decrease) in short-term borrowings 87,686 (1,562,696) Issuance of bonds payable - 5,000,000 Redemption of bonds payable (3,100,000) (2,646,700) Increase in long-term borrowings (including installment accounts payable) 21,919,400 24,663,996 Redemption of long-term borrowings (including installment accounts payable) (24,930,109) (14,231,408) Redemption of lease liability (1,457,006) (1,411,733) Decrease in minority interest (159,312) (3,648) Cash subscription - 7,420,000 Net cash provided by (used in) financing activities (7,639,341) 17,227,811 Effect of exchange rate changes on cash (175,506) 43,597 Net increase (decrease) in cash and cash equivalents 9,955,777 1,225,419 Cash and cash equivalents at beginning of year 6,619,728 5,394,309 Cash and cash equivalents at end of year $ 16,575,505 6,619,728 Additional disclosure of cash flow information: Interest paid $ 1,975,770 2,240,511 Less: capitalized interest 214, ,006 Interest paid (excluding capitalized interest) $ 1,761,581 2,095,505 Income tax paid $ 378, ,990 Supplemental schedule of noncash investing and financing activities: Current portion of long-term liabilities and bonds payable $ 13,679,723 15,634,058 Inventory transferred from fixed assets $ Unrealized gains or losses on financial instruments (including investee) $ 923,647 2,494,434 Translation adjustments $ (3,978,523) (1,068,062) 102

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