1 — Financial and Operating Highlights

2 — To Shareholders 2003 in Review...... 2 2004 Preview ...... 4

6 — The Company Major Milestones...... 7 Calendar of 2003 Events...... 10 Directors and Supervisors...... 12 Principal Officers...... 16 Capital and Shares...... 22 EVA Air People...... 26 The Fleet...... 28 The Market...... 29 The Network...... 44 Principal Subsidiaries...... 45 Litigation or Non-litigious Proceedings...... 46 Important Resolution by Shareholders and BOD...... 46 Corporate Governance...... 48

48 — Financial and Operating Statistics Financial Results ...... 49 Operating Results...... 52

54 — Financial Statements Auditors' Report...... 54 Balance Sheets...... 55 Statements of Income...... 56 Statements of Changes in Stockholders' Equity...... 57 Statements of Cash Flows ...... 58 Notes to the Accounts...... 60 Financial and Operating Highlights

2003 2002 % Change Financial Income Statement Revenue NT$ thousand 65,387,596 64,577,407 1.3% Passenger revenue NT$ thousand 29,196,261 32,514,264 -10.2% revenue NT$ thousand 31,570,153 27,518,537 14.7% Total costs NT$ thousand 62,893,909 59,519,817 5.7% Operating profit NT$ thousand 2,493,687 5,057,590 -50.7% Net profit NT$ thousand 1,396,182 2,637,479 -47.1% EPS NT$ 0.55 1.19 -53.8% Profit margin % 3.8% 7.8% -4.0ppt Balance Sheet Total assets NT$ thousand 114,668,211 115,513,173 -0.7% Total liabilities NT$ thousand 76,455,172 80,467,152 -5.0% Total equity NT$ thousand 38,213,039 35,046,021 9.0% Total capital NT$ thousand 27,534,330 24,250,000 13.5% Book value per share NT$ 13.88 14.45 -4.0% Debt ratio % 66.7% 69.70% -3.0ppt Operating Overall capacity Thousand 8,727,248 7,757,530 12.5% Overall traffic Thousand 6,345,044 5,882,083 7.9% Overall load factor % 72.7% 75.80% -3.1ppt Overall yield NT$ 9.58 10.21 -6.2% Passenger capacity thousand 25,022,555 25,184,316 -0.6% Passenger traffic thousand 18,133,406 19,508,449 -7.0% Passengers carried no. of passengers 4,321,395 4,793,847 -9.9% Passenger load factor % 72.5% 77.50% -5.0ppt Passenger yield NT$ 1.61 1.67 -3.6% Cargo capacity thousand 6,475,218 5,490,942 17.9% Cargo traffic thousand 4,713,037 4,126,323 14.2% Cargo carried tons 734,900 619,435 18.6% Cargo load factor % 72.8% 75.1% -2.3ppt Cargo yield NT$ 6.70 6.67 0.4% Unit cost NT$ 7.21 7.67 -6.0% Break-even load factor % 75.2% 75.1% 0.1ppt Number of employees 4,417 4,394 0.5% Capacity per employee thousand 1,976 1,765 11.9% Traffic per employee thousand 1,437 1,339 7.3% Revenue per employee NT$ thousand 14,804 14,697 0.7%

1 To Shareholders

2003 In Review

2003 Review The Company's 2003 operations were adversely affected during the first half of the year by the SARS outbreak, which caused the passenger market to shrink. EVA Air reacted quickly, reducing flights to cut operating costs. During the second half, the passenger market steadily recovered pre-SARS strength. At the same time, shipping markets boomed, giving air cargo services added momentum and pushing this business to new heights during the second half of the year. EVA Air was proactive, consolidating marketing strategies and maintaining flexibility in fleet deployment, and ultimately, generating higher operating revenue and reaching our financial forecast for 2003. Audited reports show NT$ 65.3 billion in total revenue for 2003, an annual growth rate of 1%, and an increase of NT$800 million over the same period of the previous year (2002). Annual income after tax was NT$1.39 billion, meeting the forecast and delivering positive financial results for fiscal 2003. EVA launched new routes in rapid succession: -Seoul and Taipei-Hanoi were introduced in August and September. Starting in late October 2003, we increased flight frequency to London, Brisbane, Auckland and . We added the first two A330-200s to our fleet in July of last year and used the debut of new aircraft to upgrade services to Tokyo, and Macau. We advanced operating efficiencies by devising a program that correlates service frequency with market demand. And we improved the service network in southern by appointing as our general passenger service agent in the area. EVA elevated air cargo capacity by converting two McDonnell Douglas MD-11 passenger aircraft into freighters. We expanded our cooperative agreement with Shanghai Air on August 6 to better serve that carrier's airfreight customers in Mainland China. And we officially established the EVA Air Cargo Center, in , Belgium to integrate logistics services and better meet demands of escalating shipping opportunities in Europe. Beginning in late October, We opened new EVA freighter routes to Vienna, Frankfurt and Delhi. We demonstrated the power and professionalism of our freight services by introducing a special "16-foot plate" at our Taipei facilities that has enhanced loading technology and accommodated huge pieces of machinery such as a high, wide, 60-ton TFT- LCD Generation 5 system that we transported to Taiwan on one flight. EVA also sponsored air transportation for priceless Egyptian artifacts on loan from the Louvre Museum for a special exhibition in Taipei, once again confirming the reliability of our services and our never-ending commitment to cultural and spiritual growth.

2 Results Compared to Projections NT$(Thousand) Items Budget Actual Hit Ratio Operating revenue 65,217,281 65,387,596 100.3% Operating cost 56,833,367 56,835,812 100.0% Gross profit 8,383,914 8,551,784 102.0% Operating expense 5,994,246 6,058,097 101.1% Net Profit 2,389,668 2,493,687 104.4% Non-operating income 868,253 904,507 104.2% Non-Operating expense 2,185,951 2,182,012 99.8% Income before tax 1,071,970 1,216,182 113.5% Income tax benefit 80,000 180,000 225.0% Net income 1,151,970 1,396,182 121.2%

3 To Shareholders

Income and Earning Total Revenue: NT$ 66,292,103 thousand Total operating income for the year ending December 31, 2003 was NT$ 65,387,596 thousand, up 1% from the year before (2002). Due to the SARS outbreak, operating revenue for passenger services decreased by 10% while a vigorous market demand and fleet expansion led to a 15% increase in cargo operating revenue. Total annual non-operating income reached NT$ 904,507 thousand, a 53% jump primarily due to growing investment income and exchange benefits. Total Expense: NT$ 65,075,921 thousand Total operating expense for the year ending December 31, 2003 was NT$ 62,893,909 thousand, rising 6% over the previous year (2002) mainly because of fleet expansion and growth in cargo loading volume. Non-operating expense was slashed by 33% due to lower interest costs.

Profitability Analysis: Return on assets (%): 2.61% Return on shareholders' equity (%): 4% Ratio of operating profit to paid-in capital (%): 9% Return on sales (%): 2% Earnings per share: NT$ 0.55

Research and Development Responding to e-Business opportunities, EVA built a "Data Warehouse" and Internet ticketing services. We improved cargo service quality and invigorated our ability to compete on October 1, 2002 by deploying an AMS (Automatic Manifest System) and streamlining U.S. Customs requirements.

2004 Preview

Operating Guidelines: Throughout the fiscal year ending on December 31, 2004, EVA Air is continuing to uphold our commitment to "safe, punctual flights with friendly, professional service." We are making every effort to provide the most convenient and efficient cargo and transportation services possible for the gateways we serve. We are enhancing this effort with the scheduled introduction of four -new all-passenger -200s, which will increase our fleet size to 49 aircraft and give us greater flexibility for raising income and sustaining continuous growth.

Sales Forecast Estimated passenger volume for 2004, with the expectation that there will be a full economic recovery, is 5.46 million people. Deliveries of the four A330-200s are being paced over February, April and November and will boost the EVA passenger capacity by 9.5%. Estimated cargo volume for 2004, based on a global recovery, is 820,000 tons. Anticipating that the market in Mainland China will continue its rapid growth, EVA Air is proactively working to

4 boost cargo volume by maximizing business opportunities. We are securing more cargo sources and reinforcing our market niche. We are wet leasing a McDonnell-Douglas MD-11 freighter to our cargo fleet in March and converting another of these aircraft for airfreight operations in August, raising our cargo transportation capacity by 6.8% compared with the prior year.

Key Marketing Strategies: Passenger Market • Introducing four Airbus 330-200s on routes to Vienna, Brisbane, Osaka and Sydney. • During the summer schedule March 28 through October 30, EVA Air is code sharing with to lift frequency from three to five flights per week on Vancouver service. • Expanding frequency to Hong Kong from 40 to 49 flights per week, effective March 28. • Dry-leasing a McDonnell Douglas MD-90 for - service, effective May 15. • Leasing an MD-90 through a wet leasing agreement to increase service on the Kaohsiung - Macau route to two flights per day upon the April 30 expiration of a lease agreement with Far Eastern Air Corp. Cargo Market • Wet-leasing an MD-11 freighter in March to respond to the strong demand for cargo service in the Mainland China market. • Taking delivery of a converted MD-11 in August to raise cargo capacity on Macau, Europe and routes. • Adding freighter flights on the Osaka route and again expanding joint operations to Mainland China, extending the range of our cargo services and giving customers more options and convenience. • Enhancing lateral and vertical business cooperation and enhancing existing high-profit services. Also initiating research and development to refine high-efficiency products tailored for specific market segments.

5 The Company

EVA Air was founded in March 1989 as a 100% privately owned Taiwan-based . 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 as of December 2003, serves 43 major destinations on four continents and in with a fleet of 45 aircraft. The carrier has flourished as it has continued to expand its fleet and operations 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 2001. 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 Air- line 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 Chiang Kai-Shek 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 2001.

6 Major Milestones

1988~1990 On September 1, 1988 at the celebration of the 20th 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 1989. After careful deliberation, the fledgling airline signed a contract with /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.

7 The Company

1991 EVA Air accepted delivery of our first two B767-300ERs in April, and made our inaugural flight on July 1. Within that first week, we opened five destinations in -- , Seoul, Jakarta, Kuala Lumpur and Singapore.

1992 The comprehensive EVA Training Center was inaugurated in July, and our first two all- passenger B747-400s were delivered in November. We used the first flights of the new aircraft to launch our Taipei-Los Angeles route, and also to introduce all four of our innovative classes of cabin service, debuting our pace-setting option in-between Economy and Super Business, the acclaimed "Evergreen Deluxe Class."

1993 EVA Air set new standards and heightened expectations by expanding our network to more than half a dozen destinations and launching service to London, Paris, Seattle, New York, San Francisco, Brisbane, Sidney, and Dubai.

1994 EVA added the greatest number of new aircraft to our fleet during this year, purchasing a total of eight, including three MD-11s, one B747-400, and four B767-200s. We also enlarged our network with new routes to Bali, Fukuoka, and Auckland.

1995 EVA purchased three MD-11 freighters, and began to vigorously develop air cargo operations. We set goals emphasizing passenger and cargo services equally. And we used joint operations and land transportation to successfully extend EVA Cargo services worldwide.

1996 Enhancing the high quality of our operations, EVA applied for ISO-9002 certification. Within the next year, our passenger service, cargo service and aviation maintenance operations were all three granted ISO-9002 international certifications simultaneously. EVA achieved ISO-9001:2000 certification in 2001.

1997 Ensuring consistent service quality, EVA and Singapore Air formed Evergreen Sky Catering Corporation as a joint venture, and in February, began providing in-flight catering services.

1998 Promoting air safety, EVA signed a joint-venture contract with 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.

8 1999 Earning brilliant results with both passenger and cargo services, EVA produced outstanding operating performances for five successive years. The Securities and Futures Commission (SFC) of Taiwan approved our admission to the exchange, and on October 27, EVA Air shares began to be traded on the over-the-counter market.

2000 In anticipation of future needs and to expand our fleet, EVA signed a purchase contract in June with the Boeing Company for fifteen B777-200X/300X aircraft. Deliveries for these aircraft are scheduled to begin in 2005. We relocated our hub to the brand-new Terminal 2 at Chiang Kai-Shek International Airport at the end of July.

2001 EVA committed to add more new, technologically advanced aircraft to our fleet in March by signing a purchase contract for eight Airbus A330-200s, and making plans to start taking deliveries in 2003. We also secured approval to transfer our stock listing from OTC, and on 17 September, moved EVA Air shares to the Taiwan Security Exchange (TSE).

2002 EVA launched our online booking system on January 9. We gained approval to add 24 passenger flights on our thriving Hong Kong route, and to begin new freighter service. And we introduced a new slogan "Just relax, your home in the air."

2003 EVA debuted stylish new cabin-crew uniforms on April 1, and took delivery of our first A330-200 on June 26, unveiling our new generation of top cabin service, Premium Laurel, and upgrading .

9 The Company

Calendar of 2003 Events

January Responding to a lift in the 54-year-old ban on direct travel across the Taiwan Straight by the governments of Taiwan and Mainland China for the Chinese New Year, EVA flew 380 Taiwanese businessmen between Chiang Kai-Shek International Airport in Taipei and Pudong International Airport in Shanghai, completing the return trip on January 29.

April EVA debuted stylish new cabin-crew uniforms on April 1.

June At EVA Air's annual general meeting on June 11, shareholders voted to distribute a stock dividend of NT$0.2 per share and a cash dividend of NT$0.2. EVA issued our first local convertible bond in early June in the amount of NT$5 billion with a zero coupon rate and five-year maturity date. EVA took delivery of our first A330-200 on June 26, showcasing the new generation of our top cabin class, Premium Laurel, and an upgraded Economy Class.

10 August EVA Air launched new charter service to Seoul that started on August 1. Beginning on August 6, EVA Air and Shanghai began working together on Shanghai- Macau-Taipei cargo services. A through-transportation agreement expands capacity on the route from 100 to 1,600 tons per month, shrinks delivery time for air cargo from Shanghai to the West Coast of the United States to less than 24 hours, and reduces costs. On August 15, EVA entered into a cargo code-sharing arrangement with TransAsia Airways on the Taipei-Macau segment of the route, increasing weekly frequency from three to six flights. The EVA Air Cargo Center, Europe, a dedicated air freight hub located in Brussels, Belgium, opened in mid-August. The new Cargo Center maximizes advantages of Brussels' excellent location and sophisticated truck transport system and extends our reach throughout Europe.

September EVA Air launched services from Taipei to Hanoi, the largest city in northern Vietnam, on September 17 with four flights per week. We initiated the new Hanoi service with an MD-90 aircraft leased from UNI Airways.

December EVA Air launched cargo services to Delhi.

11 The Company

Directors and Supervisors

Date of Date of Shares Held by Initial Shareholding Present Election Spouses, Title Name Tenure Election, When Elected Shareholding (Inaugu- Dependents Appoint- ration) ment Number (%) Number (%) Number (%) Chairman Chang Kuo-Cheng 2002.06.18 Expires 1989.03.31 558,461,973 25.33 660,454,669 22.75 - - (Note 1) 2004.04.18 (Note 3)

Director Chang Yung-Fa 2001.04.19 3 years 1989.03.31 531,867,594 24.12 660,454,669 22.75 22,796,303 0.79 (Note 1) (Note 3)

Director Chang Kuo-Wei 2001.04.19 3 years 1993.03.27 283,584,568 12.86 359,208,364 12.37 - - (Note 2) --

Director Kitty Yen 2002.06.18 Expires 2002.06.18 226,980 0.01 207,559 0.00 - - 2004.04.18

Director Lin Ching-En 2002.04.19 3 years 2001.04.19 3,205,656 0.15 3,690,013 0.13 - -

Director Lin Shin-I 2002.06.18 Expires 2002.06.18 ------2004.04.18

Director Kao Ruey-Perng 2002.06.18 Expires 2002.06.18 250 0.00 275 0.00 - - 2004.04.18 Supervisor Ko Li-Ching 2001.04.19 3 years 1993.03.27 283,584,568 12.86 359,208,364 12.37 - - (Note 2)

Supervisor Owng Rong-Jong 2002.06.18 Expires 1989.03.31 558,461,973 25.33 660,454,669 22.75 - - (Note 1) 2004.04.18

Supervisor Chen Cheng-Pang 2001.04.19 3 years 2001.04.19 5,000 0.00 5,770 0.00 - -

Note 1: Representative of Evergreen Marine Corp. Note 2: Representative of Evergreen International Corp. Note 3: Representative of Evergreen Marine Corp.; did not serve as a Director or Supervisor for the Company April 30, 1993 - March 20, 1996. Note 4: As of April 30, 2004 the Company has issued 2,903,534,623 shares.

12 April 30, 2004

Other Managers, Directors or Compensation Share Held by Supervisors Related by Marriage or Concurrent Positions Last year in Third Parties Education & Experience Within Second-degree Blood in Other Companies Ralationship of Each Other Thousands NTD Number (%) Title Name Relationship - - BA, Boston University Director, Evergreen Intl. Director Chang Yung-Fa Father 4,013 Chairman, Storage & Transport Corp. Director Chang Kuo-Wei Brother Evergreen International Corp. Dircector, Evergreen Sky Catering Corp - - Taipei Commercial High School Director, Evergreen Marine Chairman Chang Kuo-Cheng Son 3,000 Chairman, Evergreen Marine Corp. Director Chang Kuo-Wei Son Corp. Director, Evergreen Intl. Corp. - - Master of Arts in Economics, Chief Exec.VP, EVA Director Chang Yung-Fa Father 2,422 - - California State University, Airways Corp. Chairman Chang Kuo-Cheng Brother Long Beach Director, Evergreen Sky Chief Executive VP, Catering Corp. EVA Airways Corp. Director, Evergreen Airline Service Corp. - - BA in Journalism, Chairman, Evergreen Sky - - - 1,079 Chinese Culture Univ. Catering Corp. President, EVA Airways Corp. - - MBA, Kobe Univ. Japan Chairman, Evergreen - - - 50 VP, EVA Airways, America. Air Cargo Service Corp. - - BA, Taiwan University Chairman, United Director, China Development Holdings Corp. - - - 50 Industrial Bank - - Director, Evergreen Container Director, Chang Yung-Fa - - - 50 Terminal Corp. Charitable Fund - - Keelung Girl's Senior High School Supervisor, Evergreen - - - - Executive VP, Marine Corp. Evergreen International Corp. Supervisor , Evergreen Intl. Storage & Transport Corp. Supervisor , Central Reinsurance Corp. - - EMBA, Department of Business Exec.VP, Evergreen - - - - Administration, College of Marine Corp. Business, Supervisor , Evergreen Intl. National Taipei University Storage & Transport Corp. Executive Vice President, Evergreen Marine Corp. - - BA, Soochow University VP, Lloyd Triestino Di - - - 50 Senior VP, Uniglory Marine Corp. Navigazione S.P.A

13 The Company

Major EVA Air Institutional Shareholders

April 30, 2004 Name of Institutional Shareholder Major Holder of Institutional Shares Evergreen Marine Corp. Evergreen International SA (Panama) Evergreen International Corp. Chang Yung-Fa Charitable Fund ,Chang Kuo-Cheng, Chang Kuo-Hua, Chang Kuo-Ming, Chang Kuo-Wei

Representatives with Major Holdings of Institutional Investors

As of April 30, 2004 Name of Institutional Shareholder Major Shareholder of Institutional Shareholder Evergreen International SA Chang Yung-Fa, Chang Kuo-Hua, Chang Kuo-Ming, (Panama) Chang Kuo-Cheng and Chang Kuo-Wei

14 Criteria for Expertise and Independence of Directors and Supervisors

Qualification More than 5 years of Independence Criteria experience in business, law, (Note 1) Remarks Name finance or areas relevant to the mission of the Company 1234567 Chang Kuo-Cheng √ Chang Yung-Fa √√ Chang Kuo-Wei √√√ Kitty Yen √√√√√√√ Lin Ching-En √√√√√√√ Lin Shin-I √√√√√√√√ Kao Ruey-Perng √√√√√√√√ Owng Rong-Jong √√√√√ Ko Li-Ching √√√√ Chen Cheng-Pang √√√√√√√√

Note 1: Check marks designate the items of criteria met by each Director or Supervisor. (1) Not an employee of the Company or a director, supervisor or employee of affiliated companies; but an independent director or independent supervisor of the Company's parent company or affiliated companies would not be subject to this criteria. (2) Not an individual shareholder directly or indirectly holding 1% or more of the total shares issued by the Company or one of the top 10 individual shareholders. (3) Not a spouse or relative of the second-degree or closer to persons referenced in the previous two columns. (4) Not a director, supervisor or employee of the institutional shareholder directly or indirectly holding 5% or more of the total stocks issued by the company or a director, supervisor or employee of one of the top five institutional shareholders. (5) Not a director, supervisor, manager or a shareholder holding 5% or more of the outstanding shares issued by certain companies or institutions that have financial or business relationships with the Company. (6) Not an owner, partner, director, supervisor or manager of any sole proprietorship, partnership, company or institution and his/her spouse, or a specialist and his/her spouse who has provided financial, commerce, or legal consultation and services to the Company or affiliated companies within one year. (7) Not an institutional body or its representative as described in Article 27 of the Company Law.

15 The Company

Principal Officers

Spouse & Shares Held Date of Shareholding Dependent by Other Title Name Inauguration Shareholding Nominal Holder Number (%) Number (%) Number (%) President Lin Bou-Shiu 2003.01.01 236,587 0.008 16,361 0.001 -- --

Chief Executive Vice Chang Kuo-Wei 2003.07.01 70,977,610 2.445 ------President

Executive Vice President, Chiu Ke-Tai 2001.04.19 163,773 0.006 ------CKS Airport Div.

Executive Vice President, Chen Hsing-Te 2002.01.01 217,512 0.007 ------Passenger Div.

Executive Vice President, Lin Chen-Tsai 2002.01.01 155,195 0.005 ------Cargo Div.

Executive Vice President, Yuen Ping-Yu 2004.01.01 9,632 0 ------Flight Operations Div. Executive Vice President, Kao Wan-Shin 2003.07.01 10,577 0 ------Corporate Planning Div. Senior Vice President, Chen Wei-Chou 2000.01.01 143,663 0.005 ------Flight Operations Div.

Senior Vice President, Nieh Kuo-Wei 2001.01.01 7,529 0 3,433 0 -- -- Public Relations Div.

Senior Vice President, Tai Jiin-Chyuan 2003.01.01 1,567 0 ------Legal & Insurance Div. Senior Vice President, Ho Ching-Sheng 2002.07.01 366,112 0.013 ------Flight Safety Div. Senior Vice President, Han Jei-Li 2003.01.01 81 0 2,037 0 -- -- Flight Operations Div.

16 April 30, 2004

Concurrent Manager Related by Marriage Salary, Bonus and Number of Other Compensation Positions with or Within Second-Degree Blood Employee Education and Experience to President and Vice Relationship of Each Other Stock Options Other President Last Year, Companies Title Name Relationship NT$thousand Granted Tamkang Univ. 2,889 President, Evergreen Airline Services Corp. Master of Arts in Economics, 2,422 California State Univ., Long Beach Junior Vice President, Evergreen Marine Corp. BA in Politics, Cultural Univ. 2,414 Junior Vice President, Evergreen Construction Corp. BA in Shipping Management, 2,530 Chiao-Tung Univ. Senior Vice President, Evergreen Intl. Corp. BA in International Trade, Tunghai Univ. 2,470 Senior Vice President, Evergreen Marine Corp BA in Electrical Engineering, 1,934 Cheng Kung Univ. BA in French, Fu Jen Univ. 2,257 Senior Vice President, UNI AIR BA in Maritime Science, Ocean College Manager, Evergreen Marine Corp. Graduate School of Communications, Shih Hsin Univ. Manager, Evergreen Intl.(UK) Ltd Graduate Institute of Maritime Law, Ocean Univ. Manager, Evergreen Intl. Corp. Graduate Institute of Flight Safety, Univ. of Missouri BA in Soil & Water Conservation, Tamkang Univ.

17 The Company

Spouse & Shares Held Date of Shareholding Dependent by Other Title Name Inauguration Shareholding Nominal Holder Number (%) Number (%) Number (%) Senior Vice President, Chuang Leng-Yuan 2003.01.01 95,639 0.003 ------Computer Div.

Senior Vice President, Fang Gwo-Shiang 2004.01.01 57,504 0.002 ------Computer Div.

Senior Vice President, Kuo Sheng-Yih 2003.01.01 26,707 0.001 22 0 -- -- Engineering & Maintenance Div. Senior Vice President, Chang Lih-Lih 2004.01.01 108,811 0.004 ------Inflight Service Div. Senior Vice President, Kou Jin-Cheng 2002.01.01 227,170 0.008 ------Cabin Service Div. Deputy Senior Vice President, Chao Kuo-Shui 2001.01.01 10,741 0 ------CKS Airport Div. Deputy Senior Vice President, Chen Yeou-Yuh 2002.05.01 1,210 0 ------Corporate Planning Div. Deputy Senior Vice President, Yu Ching-Hsi 2002.07.01 24,646 0.001 ------Passenger Div. Deputy Senior Vice President, Wu Kuang-Hui 2002.07.01 21,632 0.001 ------Finance Div. Deputy Senior Vice President, Li Jen-Ling 2004.01.01 10,000 0 5,000 0 -- -- Corporate Planning Div. Deputy Senior Vice President, Lin Jyh-Jong 2004.01.01 120,785 0.004 ------Corporate Planning Div.

Deputy Senior Vice President, Lu Yu-Chuan 2004.01.01 925 0 ------Personnel Div.

Junior Vice President, Li Ping-Yin 2000.01.01 10,582 0 ------Auditing Div.

18 Concurrent Manager Related by Marriage Salary, Bonus and Number of Other Compensation Positions with or Within Second-Degree Blood Employee Education and Experience to President and Vice Relationship of Each Other Stock Options Other President Last Year, Companies Title Name Relationship NT$thousand Granted BA in Applied Mathematics, Cheng Chi Univ. Deputy Manager, Evergreen IT Corp. BA in Computer Science, Feng Chia Univ. Deputy Junior Vice President, Evergreen IT Corp. Dept. of Marine Engineering, Kaohsiung Institute of Marine Technology BA in Statistics, Tamkang Univ. Secretary, Evergreen Intl. Corp. BA in Maritime Science, Ocean Univ. Vice President, Evergreen Sky Catering Corp. BA in English Literature, Cultural Univ.

BA in Maritime Science, Tamkang Univ.

BA in German, Tamkang Univ. Manager, Evergreen Intl. Corp. MBA, Sun Yat Sen Univ. Junior VP, Evergreen Intl.Corp. BA in Industrial & Business Management, Taiwan University Graduate School of Maritime Science, Cultural Univ. Deputy Manager, Evergreen America Corp. (US) BA in Business Administration, Fu Jen Univ. Junior Vice President, Evergreen Aviation Technologies Corp. Dept. of Mechanical Engineering, Pingtung Agricultural College Manager, Evergreen Heavy Industry Corp.

19 The Company

Net Change in Shareholdings and Shares Pledged by Directors, Supervisors, Managers and Major Shareholders

FY 2003 As of April 30, 2004 Increase Increase Increase Increase Title (Note 1) Name (Decrease) (Decrease) (Decrease) (Decrease) in in Shares in in Shares Shareholding Pledged Shareholding Pledged

Chairman Chang Kuo-Cheng, 11,492,011 0 46,382,189 0 Representative of Evergreen Marine Corp. Director Chang Yung-Fa 11,492,011 0 46,382,189 0 Representative of Evergreen Marine Corp. Director Chang Kuo-Wei 29,386,338 0 0 0 Representative of Evergreen Intl. Corp. Director Kitty Yen (12,353) 0 (72,000) 0 Director Lin Ching-En 68,165 0 (10,000) 0 Director Lin Shin-I 0 0 0 0 Director Kao Ruey-Perng 5 0 0 0 Supervisor Ko Li-Ching 29,386,338 0 0 0 Representative of Evergreen Intl. Corp. Supervisor Owng Rong-Jong 11,492,011 0 46,382,189 0 Representative of Evergreen Marine Corp. Supervisor Chen Cheng-Pang 106 0 0 0 Major shareholder Evergreen Marine Corp. 11,492,011 0 46,382,189 0 Major shareholder Evergreen Intl. Corp. 29,386,338 0 0 0 President Lin Bou-Shiu 4,358 0 0 0 Chief Executive Chang Kuo-Wei 1,307,615 0 0 0 Vice President Senior Vice President Nieh Kuo-Wei (143,204) 0 (58,000) 0 Deputy Senior Lu Yu-Chuan(Note 3) -- -- 0 0 Vice President Senior Vice President Tai Jiin-Chyuan (59,050) 0 0 0 Deputy Senior Wu Kuang-Hui 1,393 0 (54,000) 0 Vice President Executive Vice Kao Wan-Shin 194 0 0 0 President

20 Deputy Senior Chen Yeou-Yuh (47,333) 0 (4,000) 0 Vice President Deputy Senior Li Jen-Ling(Note 3) -- -- 0 0 Vice President Deputy Senior Lin Jyh-Jong(Note 3) -- -- (19,000) 0 Vice President Executive Vice Chen Hsing-Te 4,007 0 0 0 President Deputy Senior Yu Ching-Hsi (15,833) 0 (75,000) 0 Vice President Executive Vice Lin Chen-Tsai (36,220) 0 (10,000) 0 President Senior Vice President Ho Ching-Sheng 6,910 0 (9,000) 0 Senior Vice President Chen Wei-Chou 2,646 0 0 0 Executive Vice Yuen Ping-Yu (63,565) 0 0 0 President Senior Vice President Han Jei-Li 1 0 0 0 Senior Vice President Chang Lih-Lih 2,041 0 0 0 Senior Vice President Kou Jin-Cheng 5,658 0 (80,000) 0 Senior Vice President Kuo Sheng-Yih (24,085) 0 0 0 Executive Vice Chiu Ke-Tai 3,017 0 0 0 President Deputy Senior Chao Kuo-Shui (115,471) 0 (14,000) 0 Vice President Senior Vice President Chuang Leng-Yuan (7,073) 0 0 0 Senior Vice President Fang Gwo-Shiang 1,169 0 (6,000) 0

Note 1: Shareholders holding more than 10% of the Company's stock are noted as "major shareholders" and listed respectively. Note 2: The following form should be submitted if the counterpart of a stock transfer or share pledge is a related party. Note 3: Deputy Senior Vice President Lu Yu-Chuan, Li Chen-Ling and Lin Lyh-Jong were inaugurated on January 1, 2004.

Information on Stock Transfer: Nil

Information on Stock Pledged: Nil

21 The Company

Capital and Shares As of 31 December, 2003, EVA Air had authorized share capital of 3,000,000,000 in common stock, valued at NT$10 par value per share with 2,753,433,007 shares issued and outstanding.

History of Capitalization

Authorized Capital Issued Capital Non- Month/ Sources of Capital Monetary Price Shares Amount Shares Amount Year ('000) Capital ('000) ('000) ('000) ('000) Expansion

03/1989 10 1,000,000 10,000,000 250,000 2,500,000 Cash founding 2,500,000 - 10/1990 10 1,000,000 10,000,000 350,000 3,500,000 Cash offering 1,000,000 - 08/1991 10 1,000,000 10,000,000 700,000 7,000,000 Cash offering 3,500,000 - 05/1992 10 1,000,000 10,000,000 1,000,000 10,000,000 Cash offering 3,000,000 - 10/1992 10 1,800,000 18,000,000 1,200,000 12,000,000 Cash offering 2,000,000 - 08/1993 10 1,800,000 18,000,000 1,400,000 14,000,000 Cash offering 2,000,000 - 05/1994 10 1,800,000 18,000,000 1,800,000 18,000,000 Cash offering 4,000,000 - 09/1995 10 2,000,000 20,000,000 1,500,000 15,000,000 Capital reduction - (6,300,000) Cash offering 3,300,000 06/1996 10 2,000,000 20,000,000 1,800,000 18,000,000 Cash offering 3,000,000 - 06/1997 10 2,000,000 20,000,000 2,000,000 20,000,000 Cash offering 2,000,000 - 07/2000 10 2,400,000 24,000,000 2,100,000 21,000,000 Capital surplus 300,000; - Capitalization of profit 700,000 08/2001 10 2,400,000 24,000,000 2,205,000 22,050,000 Capitalization of Profit - 1,050,000 12/2002 10 3,000,000 30,000,000 2,425,000 24,250,000 Cash offering 2,200,000 - 10/2003 10 3,000,000 30,000,000 2,632,580 26,325,800 Capitalization of profit 485,000 Corporate bond conversion 1,590,800 - 12/2003 10 3,000,000 30,000,000 2,753,433 27,534,330 Corporate bond conversion 1,208,530 - 03/2004 10 3,000,000 30,000,000 2,892,904 28,929,038 Corporate bond conversion 1,394,708 -

22 Shareholders Structure

Status of Shareholders As of 16 April, 2004

Government Financial Other Legal Foreign Institution Domestic Total Agency Institution Entity & Natural Person Natural Person

Number of shareholders 0 0 126 760 63,123 64,009 Shareholdings 0 0 1,183,751,715 508,081,490 1,211,701,418 2,903,534,623 Holding percentage 0 0 40.77 17.50 41.73 100

Distribution of Common Shares

As of 16 April, 2004 Range of shareholdings Number of shareholders Number of shares % 1-999 15,646 3,676,100 0.1266 1,000-5,000 26,094 64,056,370 2.2062 5,001-10,000 9,265 74,806,369 2.5764 10,001-15,000 3,552 43,747,683 1.5067 15,001-20,000 2,461 46,083,777 1.5872 20,001- 30,000 2,201 55,517,462 1.9121 30,001-50,000 2,118 85,409,495 2.9416 50,001-100,000 1,609 113,520,227 3.9097 100,001-200,000 560 78,659,087 2.7091 200,001-400,000 228 62,281,154 2.1450 400,001-600,000 63 32,077,761 1.1048 600,001-800,000 28 20,275,859 0.6983 800,001-1,000,000 29 26,728,026 0.9205 1,000,001 and above 155 2,196,695,253 75.6559 Total 64,009 2,903,534,623 100.0000

23 The Company

Market Price, Net Worth, Earnings and Dividends Per Share for Most Recent Two Years

Year 2002 2003 As of April Items (Distributed in 2003) (Distributed in 2004) 30, 2004 Market Highest NT$17.20 NT$17.60 NT$22.5 Price Per Lowest NT$9.00 NT$9.30 NT$13.55 Share Average NT$12.94 NT$13.11 NT$17.26 Net Worth Before Distribution NT$14.45 NT$13.88 - Per Share After Distribution NT$14.44 NT$13.32 - Weighted Average Shares 2,425,000 2,528,790 - Earnings Per thousand shares thousand shares Share Earnings Before Adjustment NT$1.19 NT$0.55 - Per Share After Adjustment NT$1.17 - - Cash Dividends NT$0.187687 - - Dividends from NT$0.187687 NT$0.4 - Dividends Stock Retained Earnings (Note 1) Per Share Dividends Dividends from - - - Capital Surplus Price/Earnings Ratio (Note 2) 11.06 23.84 - Return on Price/Dividend Ratio (Note 3) 68.94 - - Investment Cash Dividend Yield Rate 1.45% - - (Note 4)

Note 1: According to the dividend distribution program proposed by the board of directors on March 30, 2004 and submitted at the general shareholders' meeting of 2004 for resolution. Note 2: Price/Earnings Ratio = Average Share Price at Market Close for Current Fiscal Year/Earnings Per Share Note 3: Price/Dividend Ratio = Average Share Price at Market Close for Current Fiscal Year/Cash Dividend Per Share. Note 4: Cash Dividend Yield Rate = Cash Dividend Per Share/Average Market Closing Share Price for Current Fiscal Year.

Company's Dividend Policy and Implementation Status

■ Company's Dividend Policy In accordance with Article 26 of EVA's Articles of Incorporation, any earnings from the annual settlement should first be used to offset accumulated deficits from 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.

24 Since achieving growth status, the Company has adopted a residual dividen policy to accommodate future operations and expansion, distributing cash dividends and stock dividends alternately with cash dividends that range from 0 to 50% and stock dividends from 100% to 50%. To maintain profitability and govern the impact of stock dividends on its operating performance, the Company 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 It was resolved in the dividend distribution program, which was proposed by the board of directors on March 30, 2004 and passed at the general shareholders' meeting in 2004, that stock dividends will be distributed to shareholders at NT$ 0.4 per share .

■ Impact of Proposed Stock Dividends on Company Operating Results and Earnings Per Share In addition to the balance of cash and stock dividends, the dividend distribution program also accounted for a potential dilution effect that could result from increased capital. The Company's 2003 operating income was expected to reach NT$76,778,361 thousand, up 17.4% compared to the prior year (2003). Current paid-in capital is NT$29,035,346 thousand. Capitalization of profit is estimated at NT$1,121,073 thousand . After capitalization, paid-in capital will amount to NT$30,156,419 thousand. A preliminary calculation of net after-tax income indicates earnings per share of approximately NT$ 0.96 before distribution and NT$ 0.93 after distribution with a 3.13% dilution level.

■ 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$ 29,001,860 Employee Stock Bonus: 0 Compensation Paid to Directors and Supervisors: NT$ 10,000,000 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 bonus and compensation to directors and supervisors: NT$ 0.54

25 The Company

Distribution of Employee Bonus and Compensation Paid to Directors and Supervisors in Prior Year: Employee Cash Bonus: NT$ 25,129,534 Employee Stock Bonus: 0 Compensation Paid to Directors and Supervisors: NT$ 10,000,000 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 bonus and compensation to directors and supervisors: NT$ 1.15

Status of Stock Repurchase by the Company: Nil

EVA Air People

2003 2002 Pilots 687 644 Cabin Crew 1,196 1,254 No. of Dispatchers 41 42 Employees Maintenance 77 75 Others 2,468 2,379 Total 4,469 4,394 Average Age 32.7 32.5 Average Seniority 7.2 6.2 Doctorate 0.07% 0.07% Master's 2.67% 2.62% Education Bachelor 80.91% 81.2% High school 10.87% 10.86% Other 5.48% 5.25%

26 Organization

27 The Company

The Fleet

■ In June and July 2003, EVA took delivery of its first two A330-200's with the new generation of top cabin class, Premium Laurel, and an upgraded Economy class.

■ In July and November 2003, EVA converted two of its MD-11 passenger aircraft into freighters.

■ In September 2003,EVA leased two MD-90 from UNI Airways and returned one B757-200 to Far Eastern Airways Corp.

■ In December 2003,EVA converted one B747-400 Combi into an all-passenger aircraft.

■ In March 2004, EVA wet leased one MD-11 freighter from World Airways.

■ EVA Air exercised its option and firmed an order for eight B777-300ERs with Boeing Commercial Aircraft Group on 13 April, 2004. The option was part of a June 2000 purchase contract for seven of these aircraft. The action will add a total of 15 B777s to the EVA fleet.

Age DailyAvg. Aircraft Type Owned Operating Total (as of On Order (delivery date) Utilization Lease Dec.03) (hrs)-2003 B747-400 1 5 6 8.30 13.06 B747-400Combi 1 8 9 9.42 14.41 B767-300ER 0 4 4 12.07 8.81 B767-200 4 0 4 9.87 6.98 MD-11 0 1 1 9.09 11.52 MD-11Freighter 9 2 11 7.06 14.88 B747-400Freighter 3 1 4 2.23 15.43 B777-200LR 3(March, June 2008/March 2009) NA 12(July, August 2005/May,Oct. B777-300ER 2006/Jan.,April,July,Dec.,2007/ NA May,July,Oct.,2008/Jun.,2009) ( Feb., April, Nov., 2004/April, NA A330-200 0 2 2 0.51 May, July, Nov., 2005) B757-200 0 1 1 3.93 3.58 MD-90 0 3 3 4.96 4.96 Total 18 27 45 7.15

28 The Market

Industry Overview

Current Position and Industry Development At year end on December 31, 2003, there were six domestic airlines that are qualified to provide international air transportation services in Taiwan, China Air, EVA Air, Trans Asia Airways, Far Easter Air, UNI Air and Mandarin Air, along with nearly 20, mostly Asia-based foreign carriers. As the spread of SARS was controlled and people learned how to prevent it, the global economy stopped falling and began to recover. Once again, business travel and tourism are significantly growing markets. In addition, the Taiwan electronics industry has more orders and a greater shipping backlog than it had a year ago. These factors contributed to upbeat Q1 2004 forecasts for Taiwan's major airlines. Growing passenger volume and stable ticket prices are expected to lift the market further in the future. Higher disposable income among Taiwanese people and the growing popularity of individual optional travel has made it necessary for airlines to adapt quickly to a changing marketplace. Today's successful airline serves individual travel needs with flexible pricing policies and flight schedules that include charter services to selected destinations. Traditional price and service competition among carriers has been replaced by product design with stable costs and multiple options for diverse needs now taking priority. Though fuel prices recently shot upwards, EVA Air had already taken protective measures to minimize adverse effects. The expectation that Taiwan and the global economy are quickly recovering from the recession in combination with benefits gained by effectively reducing costs, and employing strategies such as system-wide flexibility, performing adjustments in operating strategies whenever needed, and increasing frequency on strong routes such as Taiwan-Japan and Taiwan-Hong Kong set the stage for an optimistic outlook. EVA Air's revenue and profit performance for 2004 are forecast to be significantly better than 2003.

Relationships between Upstream, Midstream and Downstream Industries The goal of the airline business is to provide passenger and cargo transportation services. The operator with superior services that meets customers' needs requires an endless flow of support and coordination from upstream, midstream and downstream industries. The following chart illustrates the relationships between these upstream, midstream and downstream enterprises.

29 The Company

Upstream Midstream Downstream

Aircraft Manufacturing Air Transportation Public

Aircraft Engine Manufacturing Travel Agency

Manufacturing of Ground Industry Petroleum Maintenance Aircraft Catering Sky Service Ground Service Transportation Ground Cargo Forwarders Service Equipment

Express Delivery Leasing Company

■ Upstream Industries Aircraft Manufacturing: The EVA fleet features aircraft from the world's leading commercial aircraft manufacturers, e.g. Boeing Corp., McDonnell Douglas (both merged into Boeing Commercial Airplanes Group in 1997), and Airbus Corp. We can expand and renew our fleet by purchasing or leasing aircraft, whichever is the most advantageous strategy for us in each transaction. As we define various relationships, the aircraft charter service should also be viewed as an upstream industry. Aircraft Engine Manufacturing: The engine powers the aircraft, gives it range and efficiency, and is its most important part. Major engine manufacturers in the world today are Pratt & Whitney, GE and Rolls & Royce. Carriers usually select engines and the suppliers that best fit their own aircraft specifications, budgets, technologies and maintenance standards. Ground Service Equipment Manufacturers: Tractors, trailers and similar implements used in apron operation are classified as ground service equipment. ■ Midstream Industries Petroleum Companies: Fuel expenses account for a significant portion of airline operating costs. Fuel prices are influenced by factors that include changing international conditions, reduced production by petroleum exporting countries, and fluctuating foreign exchange rates. This

30 makes it difficult to control fuel costs. To counter these variables and effectively control its costs, EVA signed long-term contracts with the world's major fuel providers and when appropriate, uses futures instruments to hedge prices. Aircraft Maintenance: Regular and irregular (in an emergency or exceptional situation) inspection and maintenance are crucial to flight safety. When it started operations, the Company made a sizeable investment and established a huge, modern aircraft maintenance hangar, later transformed into Evergreen Aviation Technology Corp (EGAT). EGAT earned multiple FAA certifications and ISO-9002 designations early on. EGAT also entered into an alliance with GE, strengthening its aircraft and engine maintenance technology and giving EVA Air added safety assurance. Sky Catering Industry: Sky catering quality is closely linked to airlines and is a vital part of operations. EVA ensured consistency and quality in our inflight food service by appointing Evergreen Sky Catering Corp. as the supplier in Taipei and by applying the strictest guidelines to selection of sky caterers in other gateways. Ground Service Industry: Part of airport operations, ground service includes a variety of activities such as passenger check-in at airport counters, apron operations (aircraft landing and departure navigation), handling and transportation of luggage, cargo and mail, packing, loading and unloading, and more. We ensure the quality of these operations in Taiwan by appointing Evergreen Air Service Corp. as our service provider and at our international gateways, we only select operators that meet the highest standards. Ground Transportation Service: Further enhancing service quality, EVA Air has appointed Evergreen International Storage & Transport Corp. to transport crew and passenger luggage in Taiwan. ■ Downstream Industries Public: As trade has developed and personal income has risen, the public has gained more opportunities to travel abroad for business and leisure. These members of the public are our target customers. Travel Agencies: We often participate in joint marketing efforts with travel agencies. Travel agencies organize tourism groups that they send to selected destinations aboard chartered flights. Recent demand for charter flights has boomed and the service has proven to be a profitable business opportunity for us. Cargo forwarders: The business model for a cargo forwarder may include import/export transportation, freight transit services and land transportation for airfreight, and customs declarations. Cargo forwarders may also provide ground transportation for shipments, e.g. Federal Express, TNT, etc. In

31 The Company

addition to goods and products, EVA has also transported priceless art collections for important international exhibitions. Such services not only provide profits but also enhance EVA's reputation in the international marketplace and demonstrate our reliability. Express Delivery: The combination of express delivery services via land and air will lead to greater emphasis on convenience and immediacy and a wider array or products in the future.

Product Development Trends ■ Formation of International Strategic Alliances Due to constraints in markets and traffic rights, airlines commonly form strategic alliances in cooperation with other carriers, implementing joint transportation or maintenance services on designated routes to expand service networks and provide more efficient services for travelers. By sharing operating resources and applying the economic benefits of scale, these alliances reduce costs and also facilitate air cargo transportation. Today, four large alliance groups hold 60% of the global market share.

Major Groups One World Sky Team Air Canada AerLingus AeroMexico Air Liberte Air Littoral Air Portugal LOT Polish British Midland Swissair LOT Polish Airlines LanChile SAS Data Source: Star Alliance Web site

■ Liberalization of International and Domestic Aviation Markets Liberalization is the trend for long-term development of the international airline market. The United States is now the most liberalized market. The US government does impose necessary controls concerning free competition and consumer rights protection. Because of out-flow effects of US government policies and powerful influences of market demand, most countries

32 around the world are gradually releasing their limitations on the airline market, too. The market in Taiwan has not yet been fully liberalized nor have its various controls been lifted. The government should eliminate barriers for entrance into this field and allow qualified companies to upgrade and move toward liberalization and internationalization.

■ Continuous Growth of Passenger and Cargo Transportation Markets • According to estimates provided by Airbus Corp., a well-known commercial aircraft manufacturer, the total number of aircraft seats is increasing from 1,852,600 in 1999 to 4,168,700 in 2019, growing 2.25 times. Airbus also forecasts that demand for aircraft will jump from 10,349 in 1999 to 19,173 by 2019 and that the average number of seats installed per aircraft will expand from 179 in 1999 to 217 in 2019. A detailed forecast follows below.

Passenger Aircraft Only End 1999 End 2009 End 2019

World RPKs (billion) 3,080.1 5,100.2 7,985.7 World RPKs (billion) 4,378.5 7,076.9 10,864.2 Number of Aircraft 10,349 14,815 19,173 Number of Installed Seats 1,852,641 2,834,332 4,168,701 Seats Per Aircraft 179 191 217 Seats Per Departure 158 168 190 Average Flight Distance (km) 1,370 1,414 1,444 Block Hour Per Aircraft Per Year 3,502 3,636 3,736

• The pivotal locations of both Northeast and in addition to Taiwan's powerful international trade leadership, high per capita income, and advantageous geographic location will spur a continuous rise in demand for passenger seats and import/export cargo capacity year after year. As anticipated by Airbus, air transportation will grow faster in Asia-Pacific regions and Mainland China than in other areas. In 1999, for example, the average number of seats on each aircraft in this area was 242, according to an analysis of the number of aircraft owned and seat demand, exceeding the world average of 179 seats by 63. Within the next 20 years, the per plane seat average is estimated to rise to 307. This growth creates abundant opportunity for EVA's continuing development of services in the Asia- Pacific region and Mainland China.

• The Boeing Corp. estimates the annual global growth rate for cargo transportation at 6% for the first 20 years of the 21st Century (2000-2020). The Asia-Pacific market, especially cross- strait areas (Taiwan and Mainland China) have tremendous potential for development. A Boeing analysis released in December 2000 forecasts global transportation volume of 470 billion RTKs (Revenue, Ton, Km) in 2019, more than three times the volume in 1999 (137.1 billion RTKs). Boeing's projections show the number of aircraft increasing from 13,670 (1999) to 31,755 (2019).

33 The Company

An International Air Transport Association (IATA) report released in October 2000 shows steady growth in global air transportation for many years to come. From 2000 to 2004, passenger services annually expanded by an average of 5.6% and cargo services by 6.7%. And the industry may grow in spurts due to financial crises similar to those that have beset Asia-Pacific economies in past years. But long-term, the potential for a significantly increased volume of air transportation services is there as it expands in recovering economies accompanied by higher national living standards and greater business and tourism travel opportunities. EVA Air has created a timetable for inaugurating new routes, introducing new destinations and launching new aircraft that is designed to meet this continuous market demand. By using advanced aircraft with unprecedented performance capabilities, our goal will continue to be to provide customers with the most convenient and secure services. It won't be long before the cross-strait cargo market is flourishing now that Taiwan and Mainland China have both entered the WTO. The following tables summarize the IATA forecast.

Passenger Services Annual Growth Rate (%) 2000 2001 2002 2003 2004 Average Trans-Pacific 4.2 3.8 3.9 4.0 4.3 4.0 Europe-Far East 6.0 6.0 6.3 6.0 6.1 6.1 South Pacific-Far East 5.8 6.3 5.9 5.8 5.8 6.1 Within Far East 7.3 7.2 7.2 6.4 6.2 6.2

Freight Services Annual Growth Rate (%) 2000 2001 2002 2003 2004 Average Trans-Pacific 11.4 8.4 8.5 8.5 8.4 9.0 Europe-Far East 7.9 7.1 7.1 6.6 6.7 7.1 South Pacific-Far East 10.8 7.8 7.3 7.2 7.3 8.1 Within Far East 7.7 7.3 7.6 7.5 7.2 7.4

• Extension of Continuous-Flight Capability and Maximizing Cabin Potential The convenience and speed of air for transporting passengers and cargo is a great incentive to use airplanes to travel and move cargo. The latest aerospace technology makes it possible to whisk loads of passengers and cargo as heavy as 100 tons across continents. But this capability is not enough to meet demand on some busy routes between large metropolitan areas and in regions with booming economies. Aircraft manufacturers will address this demand by building airplanes that are even larger. These huge, new aircraft will serve booming markets as they fly continuous and distant transcontinental routes while passengers enjoy the maximized cabins of the future.

• High Quality Service Business travelers, tourists and shippers are paying more attention to service quality. They are demanding more convenient, comfortable, safe and punctual air transportation

34 services. Airlines can best meet this expectation by maintaining a perfect flight safety record, reliable service, comfortable cabin spaces with excellent facilities, and punctual arrivals and departures, all in addition to providing air transportation. Only companies that meet or exceed these expectations can survive in this fiercely competitive market.

• Integration of Related Airline Service Industries The success of every flight is made possible by the support of other operating divisions such as air catering, ground handling services and apron operations, maintenance and aircraft testing, ground transportation, coordination by travel agencies, and more. These support functions are critical and airlines are seeking partners that share similar operating strategies or who will join in alliances to reinvestment in ventures integrated at different levels of the industry to deliver high quality services, cut operating costs and increase revenue. For example, reinvested in Taoyuan International Airport Service Company Limited (TIAS); China Airlines and Pratt & Whitney jointly set up ACTS; China Airlines formed CPCS with Cathay Pacific Airways; TransAsia Airways established TransAsia Air-Catering Company, etc. As international air transportation markets develop further, airlines will continue to make investments in related industries.

Review of Operations

■ Passenger Operations

ASK (Million) RPK (Million) Load factor (%) 2003 2002 % 2003 2002 % 2003 2002 % America 12,226 11,973 2.1 9,029 9,523 -5.2 73.9 79.6 -5.8 Europe 4,561 4,542 0.4 3,318 3,565 -6.9 72.8 78.5 -5.8 Asia 7,187 7,539 -4.7 5,009 5,636 -11.1 69.7 74.8 -5.1 Oceania 1,049 1,131 -7.2 778 783 -0.6 74.2 69.2 5.0 Total 25,022 25,184 -0.6 18,134 19,508 -7.0 72.5 77.5 -5.0

35 The Company

Passenger no. Revenue (Million) Yield (NT$) 2003 2002 % 2003 2002 % 2003 2002 % America 837,690 878,220 -4.6 10,402 11,646 -10.7 1.15 1.22 -5.7 Europe 412,034 447,227 -7.9 5,140 5,217 -1.5 1.55 1.46 6.2 Asia 2,967,302 3,370,688 -12.0 12,527 14,522 -13.7 2.5 2.58 -3.1 Oceania 104,579 97,712 7.0 1,127 1,128 -0.1 1.45 1.44 0.7 Total 4,321,605 4,793,847 -9.9 29,196 32,514 -10.2 1.61 1.67 -3.6

■ Cargo Operations

AFTK (Million) FTK (Million) Load factor (%) 2003 2002 % 2003 2002 % 2003 2002 % America 3,988 3,505 13.8 2,800 2,557 9.5 70.2 73 -2.8 Europe 1,435 1,053 36.3 1,191 929 28.2 83 88.2 -5.2 Asia 1,016 893 13.8 690 608 13.5 67.9 68.1 -0.2 Oceania 36 40 -10.0 32 32 0.0 88.9 81.3 7.6 Total 6,475 5,491 17.9 4,713 4,126 14.2 72.8 75.2 -2.4

Cargo carried ( Tons) Revenue (Million) Yield (NT$) 2003 2002 % 2003 2002 % 2003 2002 % America 238,211 223,126 6.8 17,736 15,948 11.2 6.33 6.24 1.4 Europe 119,290 92,461 29.0 7,586 5,952 27.5 6.37 6.41 -0.6 Asia 372,975 299,448 24.6 6,072 5,457 11.3 8.8 8.98 -2.0 Oceania 4,424 4,401 0.5 176 162 8.6 5.42 4.99 8.6 Total 734,900 619,436 18.6 31,570 27,519 14.7 6.7 6.67 0.4

■ Major Competitors and Market Shares Year 2002 2003 Item EVA Airways 22,206 21,765 Number of Flights Taiwan 126,533 112,168 Market Share (%) 17.55 19.40 EVA Airways 4,554,321 4,028,470 Number of Passengers Taiwan 24,006,934 19,089,442 Market Share (%) 18.97 21.10 EVA Airways 389,244 440,526 Tons of Cargo Taiwan 1,457,744 1,566,605 Market Share (%) 26.70 28.12 Data Source: 1. Taiwan: Monthly Digest of Statistics, CAA 2. EVA Airways: Provided by EVA Airways

36 2004 outlook The global economic recovery combined with surging cross-strait economic currents and the inevitable release of the ban against travel from Mainland China to Taiwan will create a burgeoning business and tourism travel market. Analyses of growth potential for EVA within this future market shows: ■ America EVA Air now has 41direct passenger flight to the US and Canada every week. During the summer season (March 28-October 30), EVA and Air Canada are raising frequency on the Vancouver route from three to five flights per week through ongoing joint operations. EVA Air also has cooperative relationships with American Airlines, Air Canada, and that give passengers convenient transit service to domestic destinations throughout the US and Canada. To aggressively expand cargo capacity between the West and East Coasts of the US, we will wet-lease an additional MD-11 freighter in 2004. The 37 weekly cargo flights we now have to America serve customers' growing demands for airfreight services between Mainland China and the US and Canada. In August when our third converted MD-11 freighter is ready for use, we will raise our weekly cargo frequency to North America to 39 flights. ■ Europe We added a fifth weekly flight on the Taipei-London route on October 19, 2003 and upgraded the equipment to a luxurious B747 for three of these trips, increasing passenger capacity at the same time and giving more passengers the opportunity to enjoy the convenience of transit service between Europe and destinations throughout Southeast Asia. On March 5, 2004, we introduced a brand-new Airbus A330-200s on our Vienna route, using it for three flights a week of the schedule. EVA began flying 13 freighter trips a week to Europe in March 2004, adding frequency and capacity. Our lift capabilities in this market are further expanded by joint operating alliances with the European leading carriers, British Airways (BA) and Lufthansa Airlines (LH) in Germany. Our quality service and seamless network within the region have made EVA Air the first choice for cargo transport between Taiwan & Europe. This market leadership has been enhanced by our operation of the EVA Cargo Center, Europe in Belgium, officially established on August 18, 2003 and enabling us to serve cargo customers throughout Europe. ■ New Zealand and Australia In addition to its allure as a destination for students and immigrants, Oceania is an attractive tourist destination with tremendous potential for development. After a review of market demand, convenience and operating costs, EVA Air resumed operation of Sydney service on November 20, 2002 and at the same time, retained our joint operating relationship with Qantas Airways. During the 2004 peak summer season, we will serve our Auckland route though a "seat-blocking" code- sharing arrangement on 3-4 flights per week with Air New Zealand. In addition, we will put new A330-200s into service on our Brisbane and Sydney routes by the end of 2004, deploying them as they are delivered.

37 The Company

■ Asia EVA Air enhanced efficiency in Southeast Asia and addressed sluggish demand by evaluating all regional service in the area, keeping profitable flights and suspending unprofitable ones. We cancelled Penang passenger service in March 2004 and concentrated capacity and service on routes to Tokyo, Hong Kong and Macau, selecting these markets for the debut deployment of our innovative new A330-200s. Another of these advanced aircraft will be introduced into service on Osaka trips. To accommodate the increase in Hong Kong frequency from 40 weekly flights to 49, we are redeploying aircraft this summer and will begin serving Phnom Penh with one of our B767s. Asia recently gained recognition as the fastest growing air transportation market in the world. The ICAO projects that in the future, Asia will become the world's largest air transportation market. With Taiwan located at a pivotal point between America and Southeast Asia, EVA Air is developing strategies to make full use of geographic advantages in combination with our seamless services between Asia and America and the unexplored potential of links between the huge markets on either side of the Pacific Ocean. The likelihood of Three Direct Links between Taiwan and Mainland China gives EVA Air tremendous growth potential. As 2002, EVA Air was the only airline flying from Taiwan to Osaka and Fukuoka. Having a joint service agreement with All Nippon Airways, we increased service to two flights per day to Narita International Airport in Tokyo on April 2002. As Tokyo's gateway for international airlines, service to this airport links EVA to more than 40 domestic destinations in Japan. It also makes it easy for passengers to reach downtown Tokyo within approximately 60 minutes by bus via TCAT (Tokyo City Air Terminal), or by Narita Express or Skyliner. We upgraded flights to Hokkaido from charters to scheduled three-times-a-week service on March 30, 2003. Future plans for maximizing EVA Air profits include more charter flights to selected destinations in of Japan from both Taipei and Kaohsiung. EVA Air launched dedicated cargo flight to Osaka on March 5, 2004, extending our freighter reach in Northeast Asia. It is clear that the vigor of the international air transportation market directly relates to global economic strength. As soon as the ban against direct cross-strait flights is lifted, Taiwan, Mainland China and Hong Kong markets will skyrocket, but until then, the restrictive conditions will continue to inhibit air transport industry performance. According to an economic statistic report published by Executive Yuan of the Mainland Affairs Council (Taiwan), approximately 3.66 million Taiwanese people visited Mainland China in 2003. This high volume of travel is due to frequent cross-strait economic activity and points to ongoing growth in passenger volume. The release of the Great Three Direct Links will save these travelers tremendous amounts of time and money, and will lead to a surge in the demand for passenger and cargo transportation across the strait. Competition Niche ■ Excellent Flight Safety Record From the day it was formed, EVA Air has been guided by the 's 36 years of experience in international transportation, and has upheld that legacy by giving passengers

38 convenient, secure and comfortable flights with quality service. We promote flight safety with regular Joint Security Committee and monthly fly safe meetings where staff and crewmembers review all safety-related issues to ensure top awareness of "safety" concepts. Comprehensive Air Safety Investigations conducted by the U.S. Federal Aviation Administration (FAA) and Taiwan's Civil Aeronautic Administration (CAA) have ranked EVA Air's safety standards and practices among the best in the airline industry. EVA has upheld that finding by establishing an excellent flight safety record. This exceptional record qualifies EVA for reduced rates on fleet insurance every year, helping to bring down costs and build the company's safety reputation at the same time. ■ New Aircraft, an Advanced Fleet and Worldwide Service Network By the end of 2003, the EVA Air fleet held 45 aircraft averaging 7.15 years in age. To maintain our fleet as one of the most advanced in the industry, retain our competitive edge, and continue to give our customers the most comfortable and reliable flight services available, we began introducing brand-new Airbus A330-200s into our fleet in June 2003. By the end of next year, we will have added a total of 10 A330s and will have begun to start taking delivery of the first of 15 Boeing B777s. We will set a higher industry standard with this fleet of technologically advanced, high performance aircraft. The fleet is the key to our steadily expanding route network. Today, we serve more than 40 major destinations in Europe, America, Asia and Oceania, and have built an efficient, effective service network for passenger and cargo transportation. We are creating the infrastructure and deploying the equipment to not only meet customer needs by providing the best services available, but also to produce greater business opportunities and a better operating environment for the transportation industry as a whole. ■ Professional Management with a Wealth of Experience "A comfortable flight comes with assurance of flight safety." Combining a wealth of experience with a highly trained staff, EVA is dedicated to providing the very best in-flight service. From organizational management and risk management to actively hosting air safety seminars and workshops, EVA aggressively promotes staff and crew awareness of flight safety. We also use an advanced monitoring system to help standardize flight operations and provide a targeted and comprehensive approach to air safety. And we established the Evergreen Aviation Training Center in the days when we were just getting started. The training courses available today include the latest in Aviation Training, Flight Crew Training, Ground Handling Service Training and Maintenance Training. Together, these professional training courses form a framework for our quality services. Advantages and Disadvantages of Future Development and Response Measures ■ Cross-Strait Air Transportation Opportunities The economy and international trade market in Mainland China are growing fast and creating a high demand for air transportation. Numerous airlines from countries all over the world are pursuing the obvious business opportunities. In anticipation of the possibility that the Taiwan government may lift its ban against cross-strait air transportation within the near future, EVA Air is preparing to jump into this market by developing plans for fleet

39 The Company

adjustment, aircraft maintenance and aviation technologies so that we can quickly expand our operating scale. ■ Facing International Competition and Rising to Opportunity In contrast with the giant international carriers, Taiwan's airlines are small and lack experience in international operations. To effectively serve passengers traveling to and from Taiwan, service quality and air transportation networks must be upgraded. Market liberalization will bring stiff competition for Taiwan's carriers. But the rapidly increasing numbers of passengers visiting Taiwan and Taiwanese tourists traveling abroad are obvious targets for future market development. And Taiwan's excellent geographic position makes is an ideal traffic center for the Western Pacific region. ■ Fuel Price Fluctuation Fuel expenses are a big part of the operating costs for air transportation. Fuel price fluctuation has a direct bearing on an airline's operations and profits. Early on, EVA Air adopted successful fuel-hedging strategies, and we have been able to exercise some control over our fuel costs. Technology and R&D ■ Successfully Developed Technology and Products: To adapt and respond to the opportunities presented by the e-Business trend, EVA Air built a "Data Warehouse" and our Internet ticketing services. And on October 1, 2003, EVA Air Cargo introduced our Automated Manifest System (AMS), certified by United States Customs, to streamline and speed service and to strengthen our competitive position within the airfreight market. ■ R&D Programs for the Future EVA Air will seek out and expand cooperative alliances with other airlines, developing joint operations that extend reach and convenience for both passengers and shippers. We are developing plans to invest in airline-related businesses in Mainland China. We have a timetable for retiring aircraft in our fleet and deploying the most advanced new aircraft available. We are engaged in a continuous process of improving pilot and crew training, further improving service quality at the same time. Our implementation of ISO-9001 standards is ongoing. And we look forward to the fulfillment of company wide training programs that will not only benefit the broad scope of our services but also develop professional talents within our staff. Long- and Short-Term Business Development Plans ■ Short Term Plans We will cut operating costs by seeking joint operations opportunities with other carriers. The International Civil Aviation Organization (ICAO) has predicted that Asia will become the world's largest air transportation market and offers vast potential. Unfortunately, the SARS crisis and global economic downturn slowed market demand. Anticipating this dramatic and encouraging development, EVA Air has made it a priority to review Asian route development and to explore more cooperative relationships with other airlines that will help reduce costs further.

40 Regularly initiate customer satisfaction surveys to ensure response to needs and expectations, and to uphold our high service quality standards. Implement service quality and flight safety standards system-wide, following ISO-9001 procedures. The EVA Air commitment to flight safety standards and high service quality will not waiver. We have made huge investments in crew training programs and state-of-the-art training facilities. And we have established flight safety as the most important EVA Air training program. This priority and these high standards earned ISO 9001 certification for EVA Air, after we had already been awarded ISO 9002 certification.. ■ Long-Term Plans •Adjust the fleet to meet business development and market demands As the passenger and cargo transportation business flourishes in Taiwan and around the world, EVA Air will adjust the equipment and scale of our fleet so that we can most effectively benefit from future political and economic developments and maximize our benefits from developing business opportunities in Asia. by year end 2003, EVA owned 45 aircraft, including 15 Boeing B747-400s, two Airbus A330-200s, eight Boeing B-767s, a McDonnell Douglas MD-11, a Boeing B-757, three McDonnell Douglas MD-90 passenger aircraft, 11-MD-11freighters, and four all-cargo B747-400s. EVA is adding more A330s in 2004, and in 2005, will begin to introduce a fleet of B-777s in 2005 that will be used to replace aircraft now in use. We will remain in the forefront of our industry with our efficient, modern fleet. • Reinvest in related air transportation industries EVA's efforts to investment in related businesses such as air catering, ground handling, maintenance and air transportation that provide lateral and vertical services is ongoing. By crafting a complete air transportation infrastructure, we can cap operating costs at lower levels, and achieve maximum operating performance. • Work with related tourism industries EVA meets the demand for high-quality tourism services by forming strategic relationships with businesses such as well-known resorts, leading travel agencies, etc, and working together to create products, share resources and in the process, maximize efficiencies. We have also developed our own full-service capabilities to ensure that we are prepared to react to advantageous business opportunities as they arise. • Risk management The international air transportation industry is vulnerable to risks related to numerous variables including weather, international politics, and more. Strong risk management policies and procedures must be in place to ensure that EVA remains in continuous operation in the event of a risk event and that we keep our competitive edge. Risk management measures that are in place, ready for immediate implementation, include insurance for our fleet, passengers and staff, loss prevention strategies, training in loss prevention, security management and risk response.

41 The Company

法蘭克福 Frankfurt

42 Frankfurt

43 The Company

The Network

■ EVA Air launched a new charter service to Seoul starting on August 1, 2003.

■ The EVA Air Cargo Center, Europe, a dedicated air freight hub located in Brussels, Belgium, opened in mid-August. The new Cargo Center maximizes advantages of Brussels' excellent location and sophisticated truck transport system.

■ EVA Air launched services to Hanoi, the largest city in northern Vietnam, starting on September 17, 2003 with four flights per week from Taipei. EVA initiated the new Hanoi service with an MD-90 aircraft that we leased from UNI Airways.

■ EVA Air launched cargo services to Delhi in December 2003.

Los San Seattle Anchorage North Angeles Francisco America Vancouver JFK Newark

South Brisbane Sydney Auckland Pacific

Vienna London Paris Amsterdam Brussels Milan Europe Frankurt

Osaka Fukuoka Taipei Kaohsiung Hong Kong Macau

Kuala Denpasar- Bangkok Penang Jakarta Surabaya Lumpur Bali Asia Ho Chi Singapore Bombay Manila Tokyo Sapporo Minh City

Phnom Penh Hanoi Seoul Delhi

Middle Dubai East

Air cargo destination only Total 43 destinations

44 Principal Subsidiaries

EVA holds interests in the companies presented in the following table.

Company Principal Activities Location Founded date Capital Share % Evergreen Ground handling Taiwan Oct. 1990 TWD361.75 million 56.33% Airline Services Corp. RTW Air Travel business Singapore Oct. 1989 SGD1.5 million 49.00% Services(S) Pte. Ltd. Green Siam Air Travel business Thailand Mar. 1996 THB20 million 49.00% Services Co., Ltd. Evergreen catering Taiwan Oct. 1993 TWD1 billion 49.80% Catering Corp. Evergreen Air transport and Airways Service Macau Dec. 1994 USD5.67 million 99.00% aircraft leasing (Macau) Ltd. UNI Airways Corp. Domestic airline Taiwan Aug. 1988 TWD3.16 billion 17.92% Evergreen Aviation Aircraft repair and Taiwan Nov. 1997 TWD2.8 billion 80.00% Technologies Co.,Ltd. maintenance Hsiang-Li Investment business Taiwan Jan. 2001 TWD1 billion 100% Investment Corp. Evergreen Security services Taiwan Apr. 1998 TWD80 million 31.25% Security Co., Ltd. Evergreen Air Cargo terminal Taiwan Mar.2000 TWD1.2 billion 60% Cargo Service Co. operation UNI Japan Co.,Ltd Travel business Japan Feb.2002 JPY10 million 49.50%

45 The Company

Litigation or Non-Litigious Proceedings:

Definitive judgment or pending litigation, non-litigious proceedings or administrative proceedings of the Company within two years which may have great impact on shareholder equity or the Company stock price: From September 2001, EVA laid off quite a few flight attendants in succession. These laid-off employees then filed lawsuits in Taiwan Taoyuan District Court arguing the validity of their dismissal and the criteria of separation pay. These lawsuits are currently lodged in Taiwan Taoyuan District Court and Taiwan High Court. The approximate amount of indemnity is NT$ 44,950,000 which causes minor impact on shareholder equity or the Company stock price. Definitive judgment or pending litigation, non-litigious proceedings or administrative proceedings of the subsidiaries within two years: Evergreen Airline Services Corp. After having terminated the labor contracts with Evergreen Airline Services Corp., fourteen former employees who worked for Kaohsiung office filed a lawsuit in March 2001 claiming indemnity for overtime work. In November 2003, judgment awarded that Evergreen Airline Services Corp. was to pay NT$ 1,814,248. Twelve of the plaintiffs also filed a lawsuit for separation pay in March 2001. The court decided against the plaintiffs in August 2002, however, one of the plaintiff appealed. A former employee who worked for Kaohsiung office filed a lawsuit in March 2003 for keeping continuing the labor relationship, claiming indemnity of NT$ 1,509,162 and a monthly indemnity of NT$ 45,504 from May 19, 2003 until the employment is resumed. This proceedings is still in Taiwan High Court.

Important Resolutions by Shareholders and BOD

Important shareholders' resolutions: Proposed earnings distribution for 2002: With after-tax net income of NT$2,637,479,388 for the year and retained earnings from investment gains derived from the disposal of fixed assets, our company had distributable earnings of NT$2,637,541,743 for this fiscal year. After deducting allowed retained earnings amounting to NT$263,754,174, the earnings distribution made in accordance with corporate law and the company's bylaws included: stock dividends of 20 shares per 1,000 shares valued at NT$485,000,000; cash dividends NT$0.2 per share, totaling NT$ 485,000,000; directors' compensation of NT$10,000,000; and employee bonuses of NT$25,129,534. Important resolutions made by the board of directors: ■ Feb. 2nd, 2003: Disposed of all holdings in Evervoyage Transportation Corp. selling 6,550,000 shares at NT$16.7 each for a total of NT$109,385,000. ■ Mar. 19th, 2003: Issued the company's first local convertible bond raising NT$5 billion, paying off loans and improving financial structure.

46 ■ Aug. 27th, 2003: Oct. 19th, 2003 was established as the base date for stock dividends, capital increases, and cash dividends, Oct 15th to Oct 19th as the closing period, and Nov. 18th as the cash dividend distribution date. ■ Sept. 24th, 2003: On Oct. 19th, 2003, the conversion price of the first issue of local convertable bond was adjusted to NT$10.78 for the issue the 48,500,000 shares from earnings. Outstanding shares for the first issue of local convertable bond were converted into 159,079,942 in common stock by creditors. The stock dividend rate was adjusted to 18.7687 shares per 1,000 and the cash dividend became NT$ 0.187687 per share. ■ Dec. 8th, 2003: The 9th secured bond was issued to raise mid- and long-term capital to pay down debt, lower interest costs, and strengthen financial structure. ■ Mar. 25th, 2004: Further upgrading the aircraft in our fleet, we proceeded to buy back five Boeing 747-400 aircraft from Chailease Finance Co., Ltd., Chong-Chin Leasing Co., Ltd., Fu-Chan Leasing Co., Ltd., and Fu-Li Leasing Co., Ltd. at a total cost of NT$10,290,855,909. ■ Apr. 13th, 2004: Making additional upgrades to our fleet, lowering financing costs, improving financial structure, and enhancing competitive abilities, we approved the lease of six Boeing 747- 400 and three -300ER aircraft immediately after selling them to GECAS AIRCRAFT LEASING NETHERLANDS B.V. Sale price was US$381,648,000 and US$560,310,000, respectively. Enhancing both our fleet and operating abilities, we agreed to buy eight B777-300ER aircraft from Boeing Co., Ltd., USA at a cost of US$1,491,496,000.

47 The Company

Corporate Governance

Variation from Corporate Governance Best- Practice Principles for Items Governance TSEC/GTSM Listed Companies and Reasons for Variation 1. Shareholder structure and shareholder's rights (1) Procedures for handling shareholder's propositions or to The Company's stock affairs department handles settle their disputes. shareholder's opinions. (2) Major shareholders with actual control over the Company Designated departments are responsible for these and the controlling party(ies) of the major shareholders. functions. (3) Risk management mechanism and firewall from affiliated Risk management procedures have been stipulated enterprises. within the operating system for internal control. 2. Formation and duties of the board of directors (1) Independent directors The requirement for independent directors is still under consideration. (2) Regular assessment of the independence of CPAs. The Company assesses the independence of its CPAs every year. 3. Formation and duties of Supervisors (1) Independent supervisors The requirement for independent supervisors is still under consideration. (2) Communication between supervisors and employees / Employees and shareholders may directly or indirectly shareholders submit proposals to supervisors orally or in writing. 4. Establishment of communication channels with stakeholders Certain departments are responsible for stakeholders. 5. Disclosure of Information (1) Disclosure of financial and corporate governance The Web site has been constructed and the information through the Company's Web site. information has been disclosed according to applicable regulations. (2) Disclosure of information (e.g. constructing an English Web The Company has appointed responsible personnel site, appointing personnel responsible for the Company's and has also established a spokesman system. information collection and disclosure, establishing a spokesperson system, or summarizing details of an institutional investor meeting on the Web site) 6. Operation of functional committees, e.g. an audit Formation of an audit committee is still under committee, etc., established by the Company consideration. 7. If the company has stipulated corporate governance rules according to Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies, please specify the governance and the variation in any of the rules EVA Air has stipulated above. The Company hasn't stipulated the corporate governance rules yet so far. 8. Other important information helpful for better understanding of corporate governance (such as continuous education of directors and supervisors, attendance of directors or attendance of supervisors as non-voting delegates to BOD meetings, risk management policies and standards for risk assessment, consumers' rights protection, abstention of directors from interest-related proposals, purchase of liability insurance for directors and supervisors): (1) Chairman Chang Kuo-Cheng attended the "Forum on Newly Revised Corporate Governance Best-Practice Principles for TSE/GTSM Listed Companies and other related regulations" meeting held by TSE on March 8, 2004. Director Lin -Shin-I attended the "Rules and Orientation of Corporate Governance" and "The Function of BOD in Corporate Governance and Equalization System" meetings held by the Chinese Security Association on October 22, 2003 and November 13, 2003, respectively. Supervisor Ko Li-Ching attended the "Forum on the Newly Revised Corporate Governance Best-Practice Principles for TSE/GTSM Listed Companies and other related regulations" meeting held by TSE on March 8, 2004. Supervisor Wong Rong-Jong attended the "Taipei Corporate Governance Forum" meeting held by the Security & Futures Committee of Ministry of Finance on November 26, 2003. (2) Attendance of directors and attendance of supervisors as non-voting delegates at BOD meetings is in accordance with applicable laws and regulations. (3) If an action is in any way related to any interests of directors, they are required to abstain and avoid conflict of interest. (4) EVA Air has not yet purchased liability insurance for directors and supervisors, and the Company will purchase it in the future if necessary. (5) EVA Air has made donations to charitable and educational foundations to sponsoring public welfare campaigns.

Note 1: For continuous education of directors and supervisors, please refer to TSE "RE-education Guidelines for Directors and Supervisors of TSE/GTSM Listed Companies. " Note 2: Risk management measures, risk assessment criteria and consumers' rights protection policies will be specified for securities, trust investment consulting and future businesses.

48 Financial and Operating Statistics

Financial Results

Balance Sheet NT$(Million) 2003 2002 2001 2000 1999 1998 1997 1996 1995 Current assets 24,694 22,417 20,938 18,715 15,598 14,555 11,941 8,731 7,072 Fixed assets 59,102 62,019 62,075 64,017 60,021 53,949 54,882 56,095 55,739 Total assets 114,668 115,513 113,402 107,874 96,869 85,919 79,310 70,220 67,218 Current liabilities 28,863 28,687 28,409 21,944 18,732 20,579 19,118 16,910 15,554 Long-term liabilities 45,165 49,782 52,725 52,191 40,609 32,478 31,887 33,759 37,093 Total liabilities 76,455 80,467 83,736 76,273 69,673 58,794 51,006 50,670 52,647 Share capital 27,534 24,250 22,050 21,000 20,000 20,000 20,000 18,000 15,000 Shareholders' equity 38,213 35,046 29,665 31,601 27,196 27,124 28,304 19,550 14,571

Income Statement NT$(Million) 2003 2002 2001 2000 1999 1998 1997 1996 1995 Operating revenue 65,388 64,577 52,451 54,529 48,077 42,927 38,626 35,187 28,859 Operating costs 62,894 59,520 52,123 49,570 44,149 40,952 35,459 32,244 26,457 Operating profit 2,494 5,058 329 4,959 3,929 1,975 3,167 2,943 2,402 Non-operating income 905 593 772 1,425 1,199 1,740 663 469 1,129 Non-operating expenses and loss 2,182 3,233 4,385 3,860 3,779 3,389 2,849 3,103 4,433 Income before tax 1,216 2,417 (3,285) 2,523 1,348 326 980 310 (902) Tax 180 220 110 (12) (184) (251) (91) 160 1,100 Net income 1,396 2,637 (3,175) 2,511 1,165 75 889 470 198 Earnings per share (EPS) 0.55 1.19 (1.44) 1.2 0.58 0.04 0.47 0.28 0.16

49 Financial and Operating Statistics

Operating Revenue

NT$(Million) Passenger Cargo Other Total 2003 29,196 45% 31,570 48% 4,621 7% 65,388 100% 2002 32,514 50% 27,519 43% 4,545 7% 64,577 100% 2001 29,550 56% 20,643 39% 2,258 5% 52,451 100% 2000 29,405 54% 23,433 43% 1,691 3% 54,529 100% 1999 26,078 54% 20,463 43% 1,536 3% 48,077 100% 1998 24,494 57% 17,078 40% 1,354 3% 42,927 100% 1997 24,313 63% 12,909 33% 1,404 4% 38,626 100% 1996 23,189 66% 10,766 31% 1,232 3% 35,187 100% 1995 18,839 65% 8,976 31% 1,043 4% 28,858 100%

Operating Costs

NT$(Million) 2003 2002 2001 2000 1999 1998 1997 1996 1995 Fuel 15,300 13,637 12,348 12,393 8,394 7,040 7,014 6,343 4,403 Staff 7,009 6,324 6,328 6,291 6,031 6,096 5,619 5,195 4,482 Lease rental 8,384 7,442 6,838 6,241 5,981 6,024 3,604 3,413 2,686 Depreciation and 4,813 4,734 4,734 4,184 3,876 3,865 4,147 3,616 3,330 amortization Commissions 6,188 5,853 4,719 4,955 4,892 4,260 3,629 3,183 2,921 Landing, parking and 7,515 7,121 6,283 5,557 5,121 4,972 4,474 4,019 3,296 routes Maintenance 5,283 5,703 3,805 2,955 3,635 2,167 1,203 1,105 618 Other 8,402 8,706 7,068 6,994 6,218 6,528 5,769 5,370 4,720 Total 62,894 59,520 52,123 49,570 44,148 40,952 35,459 32,244 26,457

50 Financial Ratio Analysis

Item Year 2003 2002 2001 2000 1999 1998 1997 1996 1995 Financial Debt ratio 66.68 69.66 74 71 73 68 64 72 78 Structure(%) Ratio of long-term liabilities and 141 137 133 131 113 110 110 95 93 stockholders' equity to fixed assets Solvency (%) Current ratio 86 78 74 85 83 71 62 52 46 Quick ratio 51 45 38 39 25 29 26 22 20 Interest safety factor 153 178 10 161 137 105 124 109 69 Management Receivables turnover (times) ------ability Average collection days for ------receivables Inventory turnover (times) ------Average days for sale of goods ------Fixed assets turnover (times) 1.08 1.04 0.85 0.85 0.80 0.80 0.7 0.63 0.53 Total assets turnover (times) 0.57 0.56 0.46 0.51 0.51 0.50 0.49 0.5 0.45 Profitability Return on total assets (%) 2.61 4.21 - 5 4 3 4 4 4 Return on stockholders' equity (%) 4 8 (10) 9 4 - 4 3 2 Ratio of operating profit to paid-in 9 21 1 24 20 10 16 16 16 capital (%) Return on sales (%) 2 4 (6) 5 2 - 2 1 1 Earnings per share 0.55 1.19 (1.44) 1.2 0.58 0.04 0.47 0.28 0.16 Cash flow Ratio of cash flows 25 33 2 32 33 7 19 20 18 Ratio of fair for net cash flow 233 136 43 60 37 22 17 10 5 Ratio of re-investment for cash 6 8 - 7 7 5 5 5 5 Degree of Degree of operating leverage 21 10 125 9 14 5 4 4 4 leverage Financial leverage 7.14 2.35 (0.10) 4 4.94 (2) 8 17 (4) Note: (1) Debt Ratio: Total Liabilities/Total Assets

51 Financial and Operating Statistics

(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) Interest Safety Factor: 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) Ratio of Operating Profit-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) Ratio of the Fair For Net Cash Flow: 5- Year Sum Of Cash From Operation / 5 Year Sum of Capital expenditures, Inventor, Additions, 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 Leaverage: Operating Income/(Operating Income - Interest Expense)

Operating Results

2003 2002 2001 2000 1999 1998 1997 1996 1995 Overall capacity (million) 8,727 7,758 6,791 6,718 6,170 5,401 4,575 5,489 4,777 Overall traffic (million) 6,345 5,882 4,879 5,273 4,786 4,043 3,579 3,387 3,058 Overall load factor (%) 72.7 75.8 71.8 78.5 77.6 74.9 78.2 61.7 64.0 Overall yield (NT$) 9.58 10.21 10.28 10.02 9.72 10.28 10.4 10.02 9.1 Passenger capacity (million) 25,023 25,184 23,728 25,297 24,334 23,859 22,695 21,970 20,380 Passenger traffic (million) 18,133 19,508 17,777 19,105 18,151 16,670 16,205 16,167 14,686 Passengers carried ('000) 4,321 4,794 4,179 4,108 3,866 3,664 4,159 4,237 3,123 Passenger load factor (%) 72.5 77.5 74.9 75.5 74.6 69.9 71.4 73.6 72.1 Passenger yield (NT$) 1.61 1.67 1.66 1.54 1.44 1.47 1.5 1.43 1.28 Cargo capacity (million) 6,475 5,491 4,656 4,441 3,980 3,254 2,532 3,512 2,943 Cargo traffic (million) 4,713 4,126 3,279 3,554 3,152 2,543 2,121 1,932 1,736 Cargo carried (tons) 734,900 619,435 486,915 512,556 460,346 367,092 314,512 275,456 222,222 Cargo load factor (%) 72.8 75.1 70.4 80.0 79.2 78.2 83.8 55.0 59 Cargo yield (NT$) 6.70 6.67 6.3 6.59 6.49 6.72 6.09 5.57 5.17 Unit cost (NT$) 7.21 7.67 7.67 7.38 7.17 7.58 7.75 5.87 5.53 Breakeven load factor (%) 75.2 75.1 74.6 73.7 73.8 73.8 74.5 55.6 60.8 Number of aircraft 45 42 37 36 35 33 30 26 25 Number of employees 4,417 4,394 4,552 5,290 4,977 5,060 5,929 5,663 5,241 Capacity per employee (thousand) 1,976 1,765 1,492 1,270 1,240 1,067 772 969 911 Traffic per employee (thousand) 1,437 1,339 1,072 997 962 799 604 598 583 Revenue per employee (thousand) 14,804 14,697 11,523 10,308 9,660 8,484 6,515 6,213 5,506

52 53 Financial Statements

Auditors’ Report

The Board of Directors EVA Airways Corp.: We have audited the balance sheets of EVA Airways Corp. as of December 31, 2003 and 2002, and the related statements of operations, changes in stockholders’ equity, and cash flows for the years then 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, 2003 and 2002, were evaluated using the equity method, and the resulting book values of these investments amounted to NT$2,117,640 thousand (US$62,320 thousand) and NT$2,250,331 thousand (US$64,757 thousand), respectively. The resulting investment losses amounted to NT$22,745 thousand (US$660 thousand) and NT$203,339 thousand (US$5,879 thousand) for the years 2003 and 2002, 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 other auditors. We conducted our audits in accordance with Republic of China generally accepted auditing standards and the Republic of China Guidelines for Certified Public Accountants’ Examinations and Reports on Financial Statements. Those standards and guidelines 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 of EVA Airways Corp. referred to in the first paragraph present fairly, in all material respects, the financial position of EVA Airways Corp. as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended, in conformity with Republic of China generally accepted accounting principles.

February 13, 2004

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.

54 New Taiwan dollars US dollars 2,427,014 1,998,680 71,425 57,516 28,863,454 28,686,511 849,425 825,511 45,164,704 49,781,961 1,329,155 1,432,574 76,455,172 80,467,152 2,250,005 2,315,601 38,213,039 35,046,021 1,124,574 1,008,519 Total retained earingsTotal 3,028,595 2,637,542 87,690 76,252 Total current liabilities Total long-term liabilities Total liabilities Total stockholders' equity Total other stockholders' equity adjustmentsTotal 5,050,373 5,806,400 (21,103) (23,208) Legal reserveRetained earnings 2,764,841 263,754 2,637,542 80,054 - 76,252 7,636 - (notes 11, 12 and 21) 8,018,157 7,279,795 235,967 209,491 Short-term (note 10) borrowings paper (note 10)Payable on commercial Notes payableAccounts payableAccounts payable-related parties (note 20)Accrued expenses (note 19)Other payables-related parties (note 20) $ 3,360,000 819,516Other payables (notes 13 and 14)Unearned revenue 305,792 3,552,000 1,238,792 portion of long-termCurrent borrowings 98,882 24,117Other current liabilities (note 19) 280,230 579,696 102,216 35,649 4,898,068 3,520,779 8,999Bonds payable (note 12) 1,607,623 436,574Long-term borrowings (notes 11 and 21) 3,805 4,828,578Other installments payable (note 13) 2,973,304 8,064 1,838,985 17,060 payable (note 14)Aircraft 144,146 103,613 12,563 47,311 426,614 5,323,404 914 138,952 21,458,585 liabilities (note 15)Accrued employee retirement 85,563 52,920 Other liabilities (note 19) 5,803,402 453,937 24,601,499 1,673,641Total other liabilities 112 817,121 156,663 6,410,500 631,506 12,555 1,490,147 167,004 707,957 15,621,978 26 5,660,000 781,693 13,063 49,254 188,655 18,030,315 24,047 42,882 162,877 459,740 22,495 1,609,893 518,858 1,216,987 47,378 35,021 Common stockCapital surplusRetained earnings: Other stockholders' equity adjustments: creditDeferred Cumulative translation adjustmentsNet loss not yet recognized as net pension cost 27,534,330 (132,724) 2,599,741 24,250,000 4,989,232 (96,898) 2,352,079 970,537 5,788,070 (3,833) 875,214 87,450 (23,015) (2,779) 193,865 80,261 (23,860) 115,228 5,745 3,431 Liabilities and Stockholders' Equity 2003 2002 2003 2002 Current liabilities: Long-term liabilities: Other liabilities: Stockholders' equity (note 17): Commitments and contingencies (notes 19, 20 22) Total liabilities and stockholders' equity $ 114,668,211 115,513,173 3,374,579 3,324,120 Balance Sheets EVA AIRWAYS CORP. December 31, 2003 and 2002 (expressed in thousands of dollars) New Taiwan dollars US dollars 10,527,106 10,322,185 309,803 297,041 86,618,677 86,538,181 2,549,10859,102,361 2,490,307 62,018,595 1,739,328 1,784,708 20,344,309 20,755,019 598,714 597,267 24,694,435 22,417,374 726,734 645,104 Assets 2003 2002 2003 2002 Net property, plant and equipment Total assets $ 114,668,211 115,513,173 3,374,579 3,324,120 Total other assets Net long-term equity investments Total current assets LandBuildingsMachinery and equipmentAircraftRotable parts 5,955,661Deferred pension cost (note 15)Refundable deposits (note 22) 5,115,771Deferred charges (note 9) 175,270 1,869,784Deferred income tax assets-noncurrent (note 16) 4,391,446Other assets (notes 19 and 21) 147,216 1,869,784 73,956,316 4,393,733 445,470 336,499 129,236 74,512,938 55,026 218,358 645,955 16,203,593 2,176,466 126,438 432,378 53,807 2,144,257 13,110 16,607,830 245,652 2,883,421 9,903 476,857 18,589 702,438 6,426 2,685,388 12,443 477,923 783,771 7,069 84,856 20,672 77,277 22,555 Less: accumulated depreciationConstruction in progress of equipmentAdvances for purchases (29,740,205) 2,219,021 (25,921,952) (875,227) 1,397,498 (745,955) 4,868 65,304 40,216 4,868 143 140 Cash and cash equivalents (note 3)Short-term investments (note 4)Notes receivableAccounts receivable, net parties (note 20)Accounts receivable-related $ 1,700,082Other receivables-related parties (note 20)Other financial assets-current (note 5) 1,544,397Inventories (note 6) 63,034Prepaid expenses 6,243,203 50,032Other prepayments 175,347Deferred income tax assets-current (note 16) 3,864,537 44,443 116,398Other current assets (note 19) 5,757,424 167,863 183,731 209,499 1,855 388,354 111,210 6,480,787 973,875Long-term equity investments under method 5,160 104,968 3,349 Long-term equity investments under cost method 169,436 313,545 6,246,480 674,279 6,029 4,940 186,498 6,983,468 4,280,626 11,429 6,062,023 28,660 1,679,889 3,020 196,188 6,748,439 4,260,162 183,828 365,708 9,023 19,404 1,782,022 205,517 125,975 174,447 193,673 384,830 194,200 122,594 49,438 5,774 10,762 51,281 5,573 11,074 Property, plant and equipment (notes 8, 21 22): Other assets: Current assets: Long-term equity investments (note 7):

55 Financial Statements

EVA AIRWAYS CORP. Statements of Operations For the years ended December 31, 2003, and 2002 (expressed in thousands of dollars, except earnings per share)

New Taiwan dollars US dollars 2003 2002 2003 2002

Operating revenue (note 20) $ 65,387,596 64,577,407 1,898,595 1,866,939

Operating cost (notes 19, 20 and 23) (56,835,812) (53,282,923) (1,650,285) (1,540,414) Gross profit from operations 8,551,784 11,294,484 248,310 326,525

Operating expenses (notes 20 and 23) (6,058,097) (6,236,894) (175,903) (180,309) Operating income 2,493,687 5,057,590 72,407 146,216

Non-operating income and gains: Interest income (note 20) 12,068 62,569 351 1,809 Investment income, net (note 7) 303,001 141,376 8,798 4,087 Exchange gains, net (note 19) 112,808 - 3,275 - Recovery of unrealized loss on short-term investments 62,236 - 1,807 - Other income 414,394 388,924 12,033 11,244 904,507 592,869 26,264 17,140

Non-operating expenses and losses: Interest expenses, net of capitalized interest of NT$56,556 thousand (US$1,642 thousand) and NT$88,849 thousand (US$2,569 thousand) in 2003 and 2002, respectively (notes 8 and 19) (2,144,560) (2,907,829) (62,269) (84,066) Exchange losses, net (note 19) - (252,461) - (7,299) Other loss (37,452) (72,690) (1,088) (2,101) (2,182,012) (3,232,980) (63,357) (93,466)

Income before income tax 1,216,182 2,417,479 35,314 69,890

Income tax benefit (note 16) 180,000 220,000 5,226 6,360

Net income $ 1,396,182 2,637,479 40,540 76,250

Earnings per share (expressed in dollars) (note 18): Basic earnings per share: Income before income tax $ 0.48 1.07 0.01 0.03 Net income $ 0.55 1.17 0.02 0.03 Diluted earnings per share: Income before income tax $ 0.45 1.07 0.01 0.03 Net income $ 0.52 1.17 0.02 0.03

See accompanying notes to financial statements.

56 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 3 － － － － － － － (38) 110 845 570 294 (185) (290) (728) 2,314 88,545 40,540 66,265 19,395 76,250 Total (14,042) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) － － － － － － － － － － － － － － － － － － － － － － 294 (1,054) (1,054) (1,806) (1,806) Yet As Net Recognized Net Loss Not Pension Cost ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) － － － － － － － － － － － － － － － － － － － － － － － 845 13,434 (23,015) (3,833) 1,124,574 (23,860) (2,779) 1,008,519 Translation Cumulative Adjustments ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) － － － － － － － － － － － － － － － － － － － － － － － 5,745 2,314 3,431 19,395 Credit (Debit) Deferred ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 2 － － － － － － － － － － － － (290) (728) 4,968 (7,636) 80,054 40,540 66,655 11,048 76,252 76,250 (14,042) (14,042) (79,294) (15,964) (37,294) (1,267) 847,586 (12,864) Deficits) Earnings Retained (Accumulated ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) － － － － － － － － － － － － － － － － － － － － － － － － － － US dollars 9,487 (9,487) 9,487 Special Reserve ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) － － － － － － － － － － － － － － － － － － － － － － － － 7,636 7,636 11,048 (11,048) Legal Reserve ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 3 (2) － (38) 110 (185) (4,968) (66,655) Surplus Capital －－ － －－ －－ －－ － －－ －－ －－ －－ － － －－ －－ － － － －－ －－ －－ －－ －－ 14,042 81,281 7,264 63,110 3,155 970,537 87,450 812,104 148,766 875,214 80,261 Stock Common ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) － － － － － － － 113 3,728 (6,236) (1,295) 78,637 10,204 (10,000) (25,129) 673,985 (485,000) (798,838) (187,212) Total 3,049,500 1,396,182 2,310,000 2,637,479 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) － － － － － － － － － － － － － － － － － － － － － － 10,204 Yet (35,826) (35,826) (44,359) 29,665,490 (96,898) 35,046,021 (62,743) (62,743) (132,724) 38,213,039 As Net Net loss not Recognized Pension Cost ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) － － － － － － － － － － － － － － － － － － － － － － － (798,838) (187,212) 4,989,232 5,788,070 Translation Cumulative Adjustments ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) － － － － － － － － － － － － － － － － － － － － － － － 78,637 193,865 115,228 673,985 Credit (Debit) Deferred ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) － － － － － － － － － － － － － 62 EVA AIRWAYS CORP. (10,000) (25,129) 155,458 351,213 (485,000) (485,000) (263,754) 2,764,841 1,396,182 1,845,667 2,637,542 2,637,479 Deficits) Earnings Retained (2,669,971) (558,757) 5,975,282 (Accumulated ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) － － － － － － － － － － － － － － － － － － － － － － － － － － New Taiwan dollars 317,634 (317,634) 317,634 Special Reserve ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) － － － － － － － － － － 263,754 Legal (351,213) Reserve －－ Statements of Changes in Stockholders' Equity (62) 113 3,728 (6,236) (1,295) (155,458) Surplus Capital (1,845,667) － －－－ －－－ －－－ －－－ － －－－ －－－ －－－ － － －－ －－ －－－ － － － －－－ －－－ －－－ －－－ －－－ Stock 24,250,000 2,352,079 Common $ 22,050,000 4,244,448 351,213 For the years ended December 31, 2003 and 2002 (expressed in thousands of dollars) $ 27,534,330 2,599,741 263,754 term - term － premium arising from － term equity investments under method - Capital surplus Legal reserve Special reserve equity investments under method percentage of ownership in long net pension cost conversion option exercised to capital surplus conversion option exercised 31, 2003 disposal of equipment to retained earnings in percentage of ownership in long in percentage equity investments under method under equity method to capital surplus disposal of equipment investee company under equity method to retained earnings not yet recognized as net pension cost in long net pension cost December 31, 2002 (note 17) December 31, 2003 Decrease in net equity due to the change Recognized net loss not yet recognized as Balance on December 31, 2003 Cash dividends Directors' and supervisors' remuneration Employees' bonuses Convertible bonds converted into common stock 2,799,330 250,170 Transfer of interest Transfer Deferred credit Net income for the year ended December Translation adjustments for the year ended Translation Stock dividends 485,000 Cash subscription 2,200,000 110,000 Transfer of capital surplus arising from gains on Transfer Appropriation of earnings (note 17): Legal reserve Make-up of deficiencies the Company (note 17) Decrease in net equity due to the change Transfer of donated assets investee company Transfer Transfer of capital surplus arising from gains on Transfer Increase in net equity due to recording loss Balance on December 31, 2001 See accompanying notes to financial statements. Balance on December 31, 2002 Recognized net loss not yet recognized as Deferred credit Net income for the year ended December 31, 2002 Translation adjustments for the year ended Translation

57 Financial Statements

EVA AIRWAYS CORP. Statements of Cash Flows For the years ended December 31, 2003, and 2002 (expressed in thousands of dollars) New Taiwan dollars US dollars 2003 2002 2003 2002 Cash flows from operating activities: Net income $ 1,396,182 2,637,479 40,540 76,250 Adjustments to reconcile net income to net cash flow provided by operating activities: Depreciation 4,436,303 4,270,786 128,813 123,469 Amortization and maintenance expense 1,118,123 1,123,095 32,466 32,469 Gain on donated stock - (13,510) - (391) Provision for loss on devaluation of long-term investments - 4,000 - 116 Provision for (recovery of) loss on devaluation of short-term investments (62,236) 21,892 (1,807) 633 Gain on disposal of short-term investments (14,131) (41,674) (410) (1,205) Loss on disposal and obsolescence of property, plant and equipment 20,402 11,743 592 339 Gain on disposal of long-term equity investments (1,869) (10,050) (54) (291) Provision for unrealized exchange loss from long-term borrowings 1,774 7,294 52 211 Investment income (303,001) (141,376) (8,798) (4,087) Amortization of deferred gain from sale and leaseback of fixed assets (231,566) (670,256) (6,724) (19,377) Amortization of other deferred gain (168,815) (34,721) (4,902) (1,004) Proceeds from cash dividends of long-term equity investments 94,811 221,963 2,753 6,417 Deferred income tax benefit (203,717) (254,693) (5,915) (7,363) Decrease (increase) in notes receivable (74,809) 2,330 (2,202) 67 Decrease (increase) in accounts receivable (including related parties) 694,693 (1,508,874) 20,444 (43,420) Decrease in other receivables from related parties 116,186 108,860 3,419 3,134 Decrease (increase) in inventories (178,875) 1,076,609 (5,264) 30,982 Decrease (increase) in prepaid expenses 102,133 (226,611) 3,006 (6,521) Decrease (increase) in other prepayments 19,122 (23,639) 563 (680) Decrease (increase) in other financial assets-current (62,895) 78,946 (1,851) 2,272 Increase in other current assets (6,939) (51,736) (204) (1,488) Increase (decrease) in notes and accounts payable (including related parties) (202,909) 350,325 (5,971) 10,081 Increase (decrease) in other payables (including related parties) 163,987 (17,953) 4,826 (517) Increase in accrued expenses 69,490 1,029,677 2,045 29,631 Increase (decrease) in unearned revenue (479,998) 1,248,129 (14,126) 35,917 Increase (decrease) in other current liabilities (30,661) 139,380 (902) 4,011 Increase in accrued employee retirement liabilities 26,896 55,771 792 1,605 Increase (decrease) in other liabilities 1,055,576 (12,584) 31,065 (361) Net cash provided by operating activities 7,293,257 9,380,602 212,246 270,899

58 Cash flows from investing activities: Increase in short-term investments (2,302,299) (1,130,841) (67,755) (32,542) Proceeds from disposal of long-term equity investments 112,330 20,855 3,306 600 Payments for purchase of long-term equity investments (122,545) (174,009) (3,606) (5,007) Withdrawal of prepaid long-term equity investments - 7,962 - 229 Proceeds from disposal of property, plant and equipment 8,521 191,454 251 5,509 Payments for purchase of property, plant and equipment (2,564,886) (231,638) (75,482) (6,666) Decrease (increase) in refundable deposits and other assets 217,956 (577,179) 6,414 (16,609) Increase in deferred charges (1,316,156) (1,073,015) (38,733) (30,878) Net cash used in investing activities (5,967,079) (2,966,411) (175,605) (85,364) Cash flows from financing activities: Increase in short-term borrowings 23,037,158 18,174,263 677,962 523,000 Increase in long-term borrowings 6,684,804 4,888,650 196,728 140,681 Installment payments for purchase of property, plant and equipment (2,035,148) (733,715) (59,893) (21,114) Payments of cash dividends (485,000) - (14,042) - Repayment of short-term borrowings (23,648,434) (23,368,759) (695,951) (672,482) Repayment of long-term borrowings (5,422,456) (10,637,935) (159,578) (306,128) Installment payments for purchase of inventories (932,288) (321,246) (27,436) (9,244) Proceeds from disposal of inventories 1,666,000 2,677,041 49,029 77,037 Proceeds from issuance of common stock - 2,310,000 - 66,265 Payment of employees' bonuses and directors' remuneration (35,129) - (1,018) - Net cash used in financing activities (1,170,493) (7,011,701) (34,199) (201,985) Effect of exchange rate changes on cash - - 3,147 (304) Net increase (decrease) in cash and cash equivalents 155,685 (597,510) 5,589 (16,754) Cash and cash equivalents at beginning of year 1,544,397 2,141,907 44,443 61,197 Cash and cash equivalents at end of year $ 1,700,082 1,544,397 50,032 44,443 Additional disclosure of cash flow information: Cash payments of interest (excluding capitalized interest expense) $ 2,261,506 3,017,449 65,665 87,235 Cash payments of income tax $ 23,489 46,407 682 1,342 Supplemental schedule of noncash investing and financing activities: Current portion of long-term borrowings $ 8,018,157 7,279,795 235,967 209,491 Inventory transferred from fixed assets $ 56,154 89,944 1,653 2,588 Translation adjustments $ (798,838) (187,212) 845 13,434 Outstanding balance of other payables and aircraft payable resulting from purchase of property, plant and equipment $ - 4,356,196 - 125,358 Short-term investments transferred to long-term equity investments $ - 141,659 - 4,077 Deferred credit $ 193,865 115,228 5,745 3,431

See accompanying notes to financial statements.

59 Financial Statements

EVA AIRWAYS CORP. Notes to Financial Statements December 31, 2003 and 2002 (amounts not otherwise specified are expressed in thousands of dollars)

(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 Law of the Republic of China (ROC). The Company commenced operations on July 1, 1991.

The Company's business activities are

1.1 to engage in fixed-wing aircraft transport business, helicopter transport business, scheduled air transport business, and nonscheduled air transport business; 1.2 to carry on the business of freight agent, including operations, 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, and of leasing aircraft; 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 deal with airport ground business; 1.10 to handle civil aviation airport terminal business (including passenger and cargo flight businesses); 1.11 to engage in import and export trading for the foregoing activities (excluding businesses requiring a permit); 1.12 to provide consultant services for business operation and management; 1.13 to provide general advertising services; 1.14 to engage in the retailing of tobacco and alcohol; 1.15 to engage in general merchandise activities; 1.16 to engage in the retailing of food and beverages; 1.17 to engage in the retailing of apparel; 1.18 to engage in the retailing of umbrellas; 1.19 to engage in the retailing of hats and caps;

60 1.20 to engage in the retailing of books and stationery; 1.21 to engage in the retailing of sporting goods; 1.22 to engage in the retailing of toys and amusement goods; 1.23 to engage in the retailing of watches and clocks; 1.24 to engage in the retailing of glasses; 1.25 to engage in the retailing of weights and measures; 1.26 to engage in the retailing of jewelry and precious metals; 1.27 to carry out any business which is not prohibited or restricted by the applicable laws and regulations, excluding those requiring licensing.

As of December 31, 2003 and 2002, the Company had hired 4,469 and 4,394 employees, respectively.

(2) Summary of Significant Accounting Policies

The Company prepared the accompanying financial statements in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and ROC generally accepted accounting principles. The major accounting policies and basis of measurement used in preparing the financial statements are summarized below.

(a) Foreign currency transactions and translation

The Company maintains its books in New Taiwan dollars. Transactions negotiated and settled in foreign currencies are recorded in New Taiwan dollars at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into New Taiwan dollars at the exchange rates prevailing on the balance sheet date, and unrealized exchange gains or losses are reflected in the statement of operations.

For equity investments in foreign subsidiary companies which are accounted for by the equity method, the translation differences resulting from translating foreign financial statements from the functional currency to the reporting currency are reported as cumulative translation adjustments. Cumulative translation adjustments are reported as a separate component of stockholders' equity.

(b) US dollar financial statement presentation

Financial statements stated in New Taiwan dollars are translated into US dollars at the exchange rates prevailing on the balance sheet date, with the exception of stockholders' equity accounts, which are translated at historical rates, and revenues, costs, and expenses, which are translated at the average exchange rates during the

61 Financial Statements

reporting period. Translation differences resulting from translation of the financial statements into US dollars are recorded as cumulative translation adjustments, a separate component of stockholders' equity.

(c) 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 aircraft 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 translation differences resulting from the translation of the aircraft and the related US dollar loans into New Taiwan dollars at the exchange rate prevailing on the balance sheet date and historical rates are reported as cumulative translation adjustments. The aircraft stated in US dollars are depreciated by using the same method and the same useful lives, and the resulting US dollar depreciation amounts are translated into New Taiwan dollars at the current year's average exchange rate. In addition, the translation differences resulting from the translation of the refundable deposits for aircraft leases into New Taiwan dollars at the exchange rate prevailing on the balance sheet date and historical rates are also reported as cumulative translation adjustments.

(d) Sale and leaseback

The Company sold and leased back aircraft under operating lease agreements. The gains on the sales of the aircraft are deferred and amortized using the straight-line method over the lease terms.

(e) Cash and cash equivalents

Cash includes cash on hand, savings and checking deposits, fixed time deposits, cash equivalents, etc. The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

(f) Short-term investments

Short-term investments are stated at the lower of aggregate cost or market value on the balance sheet date. Cost is determined by using the weighted-average method.

(g) Inventories

62 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.

(h) Long-term equity investments

Long-term equity investments are accounted for by the equity method where the percentage of ownership in an investee is 20% or more. Otherwise, long-term equity investments are accounted for by the cost method.

For a long-term equity investment accounted for by the equity method, where the investment cost is different from the Company's net equity in the investee company upon the investment, the difference is amortized over a period of 5 to 20 years. The period of amortization is assessed and determined on a case-by-case basis.

When an investee issues new shares and the Company fails to subscribe to the new shares in proportion to the Company's ownership percentage in the investee, thus resulting in a change of net equity in the investee, the resulting difference is accounted for as an increase or a decrease in capital surplus (or retained earnings, whenever there is no capital surplus resulting from long-term equity investment to be deducted) and long-term equity investment.

Unrealized transaction gains or losses 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.

The Company does not prepare consolidated financial statements to include the accounts of its subsidiaries over which the Company has, directly or indirectly, over 50% ownership and has controlling influence over their operating and financial policies and decisions. This is because all such controlled subsidiaries have total assets and operating revenues not exceeding 10% of the Company's non-consolidated total assets and operating revenues and thus are not consolidated in accordance with the ruling of the ROC Securities and Futures Commission (SFC). Under ROC SFC requirements, beginning in 1995, if the combined revenues and total assets of all such unconsolidated subsidiaries exceed 30 percent of the Company's unconsolidated total assets and operating revenues, then each individual subsidiary with total assets or operating revenues greater than 3 percent of the Company's respective unconsolidated amount shall be

63 Financial Statements

consolidated. Such subsidiaries shall be included in the consolidated financial statements thereafter, unless the percentage of the combined total amounts of such subsidiaries decreases to less than 20 percent of the Company's respective unconsolidated amounts. As of December 31, 2003, the Company's non-consolidated subsidiaries included Evergreen Airline Services Corp., Evergreen Aviation Technologies Corp., Evergreen Airways Service (Macau) Ltd., Evergreen Air Cargo Service Corp., and Hsiang-Li Investment Corp..

(i) 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 related interest costs incurred prior to commencement of the use of such assets and includes such capitalized interest costs in the cost of related assets. Routine repair and maintenance are charged to current operations. Major repairs and maintenance, additions, enhancements and replacements are capitalized in the cost of related assets.

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 estimate useful lives using the straight- line method. If the depreciable assets are still in use when the useful lives have expired, such assets can be depreciated by their scrap value over the estimated remaining useful lives. The useful lives of main property, plant and equipment were as follows:

Buildings: 55 years Machinery and equipment: 3~18 years Aircraft: 18 years Rotable parts: 5~18 years

Gains (losses) on disposal of such asset are presented as non-operating income and gains (expenses and losses).

(j) Deferred charges

Deferred charges principally include costs for computer software, leasehold improvements, trademarks, air route development, training of navigators and aircraft maintenance personnel, and "D" check maintenance for aircraft and engines. 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.

64 (k) Derivative financial instruments

All derivatives are to be recognized as assets or liabilities on the balance sheet and measured at fair value. Change in the fair value of derivatives should be recognized either in net income or in deferred debit or credit (a separate component of stockholders' equity), depending on the designated purpose of the derivatives.

(l) Other financial assets

Other financial assets are financial assets other than cash and cash equivalents, accounts receivable and other receivables, long-term equity investments, and refundable deposits.

(m) Employee retirement plan

The Company has established a retirement plan pursuant to the ROC Labor Standards Law and contributed retirement funds consisting of 10.7% of total salaries from January 2002 to April 2003, and 11.9% of total salaries from May 2003, on a monthly basis to an account maintained by the government-designated institution.

The Company implemented ROC Statement of Financial Accounting Standards (SFAS) No. 18, "Accounting for Pensions". SFAS No. 18 requires the Company to recognize a minimum pension liability, as of the balance sheet date, equal to the amount by which the actuarial present value of the accumulated benefit obligation exceeds the fair value of the retirement plan's assets, and to recognize net periodic pension costs. The net transition assets or obligations are amortized using the straight-line method over 15 years.

(n) Convertible bonds

The discount or premium on convertible bonds, which is measured as the difference between the issued price and par value, should be amortized over the period from issuance to maturity by using the interest method. The discount or premium on convertible bonds with a put option should be amortized over the period from its issuance date to the expiry date of the put option. The interest-premium of puttable convertible bonds, which is the difference between the specified put price and the par value, should be amortized by using the interest method and recognized as a liability over the period from the issuance date of the bonds to the expiry date of the put option.

When the holder exercises the conversion option, the issuer should write off the unamortized discount or premium, issued costs, interest payable, pay-back interest from

65 Financial Statements

the holder, recognized interest-premium, and par value of the convertible bonds. The difference of the net written-off carrying amount of the convertible bonds over the par value of the common stock exchange certificate should be recognized as additional paid-in capital.

If the holder of convertible bonds with a put option does not exercise the put option by the expiry date, the issuer should amortize the interest premium, which has been recognized as a liability, over the period from the expiry date to the maturity date by using the interest method. However, if the market price of exchangeable common stock is higher than the specified put price of the bond, the issuer should reclassify the interest- premium liability as additional paid-in capital.

(o) Revenue recognition

Passenger ticket sales are recorded as unearned revenue, included in current liabilities, and recognized as revenue when the services are provided.

(p) Income tax

The Company adopted ROC SFAS No. 22, "Accounting for Income Tax". Under this method, the amounts of deferred tax liabilities or assets are recognized for future tax effects attributable to temporary differences, loss carryforwards, and investment tax credits. The measurement of deferred tax assets or liabilities is based on provisions of enacted tax law. A valuation allowance is provided on deferred tax assets that may not be realized in the future.

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 when due.

(q) Earnings per share

The amount of earnings per share is 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.

66 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. On the contrary, anti-dilutive potential common shares are ignored in calculating dilutive 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 (or loss) attributable to common stockholders and the weighted-average number of shares outstanding shall be 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 (capitalization of retained earnings, additional paid-in capital, or employees' bonus).

(r) Criterion to classify assets and liabilities as current or noncurrent

Current assets are cash and other assets that a business will convert to cash or use up in a relatively short period of time, one year or one operating cycle, whichever is longer. Current liabilities are debts due within one year or one operating cycle, whichever is longer.

(3) Cash and Cash Equivalents

The components as of December 31, 2003 and 2002, are summarized below:

New Taiwan dollars US dollars 2003 2002 2003 2002 Cash on hand $ 61,411 47,482 1,807 1,366 Cash in bank 1,638,671 1,496,915 48,225 43,077 $ 1,700,082 1,544,397 50,032 44,443

(4) Short-term Investments

The components as of December 31, 2003 and 2002, are summarized below:

67 Financial Statements

New Taiwan dollars US dollars 2003 2002 2003 2002 Mutual funds $ 6,193,776 3,877,346 182,277 111,578 Publicly traded stock 49,427 49,427 1,454 1,423 6,243,203 3,926,773 183,731 113,001 Less: provision for investment devaluation - (62,236) - (1,791) $ 6,243,203 3,864,537 183,731 111,210

(5) Other Financial Assets-Current

The components as of December 31, 2003 and 2002, are summarized below:

New Taiwan dollars US dollars 2003 2002 2003 2002 Tax refund receivable $ 85,450 13,191 2,515 379 Non-operating revenues receivable 2,609 15,210 77 438 Other receivables 118,201 102,287 3,478 2,943 206,260 130,688 6,070 3,760 Less: provision for doubtful accounts (38,397) (25,720) (1,130) (740) $ 167,863 104,968 4,940 3,020

(6) Inventories

The components as of December 31, 2003 and 2002, are summarized below:

New Taiwan dollars US dollars 2003 2002 2003 2002 Rotable and expendable parts $ 7,718,824 7,137,766 227,158 205,403 Consumables for use and merchandise for sale during flight 403,957 380,631 11,888 10,954 Fuel for aircraft 29,362 2,188 864 63 Allowance for obsolete inventories (1,168,675) (772,146) (34,393) (22,220) $ 6,983,468 6,748,439 205,517 194,200

The above inventories were fully insured.

(7) Long-term Equity Investments

Details as of and for the years ended December 31, 2003 and 2002, were as follows:

68 2003 Book value Investment income (loss) Shareholding New Taiwan US New Taiwan US Investee percentage(%) dollars dollars dollars dollars Accounted for by the equity method: Evergreen Airline Service Corp. 56.33 $ 367,818 10,825 54,142 1,572 RTW Air Services(s) Pte. Ltd. 49.00 16,533 486 1,729 50 Green Siam Air Services Co., Ltd. 49.00 22,495 662 12,056 350 Evergreen Sky Catering Corp. 49.80 627,535 18,468 32,729 950 Evergreen Airways Service (Macau) Ltd. 99.00 597,193 17,575 121,838 3,538 Uni Airways Corp. 17.92 275,717 8,114 (242,185) (7,032) Evergreen Aviation Technologies Corp. 80.00 2,517,315 74,082 182,678 5,304 Evergreen Security Corp. 31.25 30,746 905 5,087 148 Evergreen Air Cargo Service Corp. 60.00 775,532 22,823 113,770 3,304 Hsiang-Li Investment Corp. 100.00 1,014,332 29,851 21,230 616 Uni Japan Co., Ltd. 49.50 1,264 37 (73) (2) 6,246,480 183,828 303,001 8,798 Accounted for by the cost method: Publicly traded securities Trade-Van Information Services Co., Ltd. 5.95 96,074 2,827 - - Central Reinsurance Corp. 3.96 164,032 4,828 - - 260,106 7,655 - - - Non-publicy traded securities Abacus International Holding Ltd. 2.11 115,743 3,406 - - SunShing Corp. 19.50 40,365 1,188 - - Corp. 1.62 1,250,000 36,786 - - Hsin-Tao Power Corp. 9.69 484,612 14,262 - - Technology Partner II Venture Capital Corp. 5.88 20,000 589 - - Chung Hwa Express Co., Ltd. 10.00 20,000 589 - - Taiwan Fixed Network Corporation 1.30 1,200,000 35,315 - - Evergreen Development Corp. 9.47 870,000 25,603 - - Pan-Pacific Venture Capital Co., Ltd. 1.50 19,800 582 - - 4,020,520 118,320 - - 4,280,626 125,975 - - Total $ 10,527,106 309,803 303,001 8,798

69 Financial Statements

2002 Book value Investment income (loss) Investee Shareholding New Taiwan US New Taiwan US percentage(%) dollars dollars dollars dollars Accounted for by the equity method: Evergreen Airline Service Corp. 56.33 $ 344,243 9,906 47,452 1,372 RTW Air Services(s) Pte. Ltd. 49.00 20,824 599 6,789 196 Green Siam Air Services Co., Ltd. 49.00 21,077 607 17,038 492 Evergreen Sky Catering Corp. 49.80 639,626 18,406 54,751 1,583 Evergreen Airways Service (Macau) Ltd. 99.00 488,014 14,044 148,119 4,282 Uni Airways Corp. 18.09 475,402 13,681 (316,746) (9,157) Ever Voyage Transport Corp. (Note) 43.67 112,552 3,239 8,532 247 Evergreen Aviation Technologies Corp. 80.00 2,334,636 67,184 203,798 5,892 Evergreen Security Corp. 31.25 25,659 738 7,721 223 Evergreen Air Cargo Service Corp. 55.80 610,364 17,564 (27,591) (798) Hsiang-Li Investment Corp. 99.99 993,042 28,577 (7,202) (208) Uni Japan Co., Ltd. 49.50 584 17 (1,285) (37) 6,066,023 174,562 141,376 4,087 Accounted for by the cost method: Publicly traded securities Trade-Van Information Services Co., Ltd. 6.10 97,983 2,820 - - Central Reinsurance Corp. 4.07 141,659 4,076 - - 239,642 6,896 - - Non-publicly traded securities Abacus International Holding Ltd. 2.11 115,743 3,331 - - SunShing Corp. 19.50 40,365 1,162 - - Taiwan High Speed Rail Corp. 2.53 1,250,000 35,971 - - Hsin-Tao Power Corp. 9.69 484,612 13,946 - - Technology Partner II Venture Capital Corp. 5.88 20,000 575 - - Chung Hwa Express Co., Ltd. 10.00 20,000 575 - - Taiwan Fixed Network Corporation 1.30 1,200,000 34,532 - - Evergreen Development Corp. 9.47 870,000 25,036 - - Pan-Pacific Venture Capital Co., Ltd. 1.50 19,800 570 - - 4,020,520 115,698 - - 4,260,162 122,594 - - Less: provision for long-term investments devaluation - (4,000) (115) - - Total $ 10,322,185 297,041 141,376 4,087

(Note) The Company disposed of long-term equity investment - Ever Voyage Transport Corp.-in February 2003.

70 Details of increases in long-term equity investments of the Company in 2003 and 2002 were as follows:

Unit: thousands of shares 2003 2002 Amounts Amounts Investee Shares New Taiwan US Shares New Taiwan US dollars dollars dollars dollars Accounted for by the equity method: Uni Japan Co., Ltd. - $ - - - 2,702 77 Evergreen Air Cargo Service Corp. 5,039 51,398 1,512 - - - Uni Airways Corp. 4,871 48,714 1,434 16,586 165,857 4,773 Evergreen Aviation Technologies Corp - - - 500 5,450 157 Hsiang-Li Investment Corp. 6 60 2 - - - 100,172 2,948 174,009 5,007

Accounted for by the cost method: Central Reinsurance Corp. 2,029 22,373 658 - - - Abacus International Holding Ltd. - - - 12 13,510 389 22,373 658 13,510 389 $ 122,545 3,606 187,519 5,396

Details of selling long-term equity investments of the Company in 2003 and 2002 were as below:

Unit: thousands of shares 2003 Gain on disposal of Cost long-term investments Investee Shares New Taiwan US New Taiwan US dollars dollars dollars dollars Accounted for by the equity method: Ever Voyage Transport Corp. 6,550 $ 108,552 3,195 834 24 Accounted for by the cost method: Trade-Van Information Services Co., Ltd. 234 1,909 56 1,035 30 $ 110,461 3,251 1,869 54

2002 Gain on disposal of Cost long-term investments Investee Shares New Taiwan US New Taiwan US dollars dollars dollars dollars Accounted for by the equity method: Green Siam Air services Co., Ltd. 4 $ 504 15 432 13 RTW Air Services(s) Pte. Ltd. 30 758 22 256 7 Uni Japan Co., Ltd. - 882 25 577 17 2,144 62 1,265 37

71 Financial Statements

Accounted for by the cost method: Trade-Van Information Services Co., Ltd. 934 7,621 219 9,191 266 e' Com International Inc. 104 1,040 30 (406) (12) Travel Exchange Asia Holdings Ltd. - 7,962 229 - - 16,623 478 8,785 254 $ 18,767 540 10,050 291

(8) Property, Plant and Equipment

In 2003 and 2002, the Company capitalized the interest expenses on construction of building and purchase of aircraft amounting to NT$56,556 thousand (US$1,642 thousand) and NT$88,849 thousand (US$2,569 thousand), respectively. The monthly interest rates on the above transactions were 0.24%~0.30% and 0.31%~0.40%, respectively.

As of December 31, 2003 and 2002, insurance coverage for property, plant and equipment amounted to approximately NT$42,577,424 thousand (US$1,253,014 thousand) and NT$53,622,762 thousand (US$1,543,101 thousand), respectively.

(9) Deferred Charges

As of December 31, 2003 and 2002, deferred charges, net of amortization, consisted of the following: New Taiwan dollars US dollars 2003 2002 2003 2002 Computer software $ 244,614 251,911 7,199 7,249 Leasehold improvements 79,998 99,383 2,354 2,860 Air flight route development cost 43,329 92,204 1,275 2,653 Navigator training costs 107,594 195,431 3,166 5,624 Maintenance for aircraft and engines 2,328,620 1,991,467 68,529 57,308 Others 79,266 54,992 2,333 1,583 $ 2,883,421 2,685,388 84,856 77,277

(10)Short-term Borrowings and Payable on Commercial Paper

Details were as follows: New Taiwan dollars US dollars 2003 2002 2003 2002 Unsecured loans $ 3,360,000 3,552,000 98,882 102,216 Payable on commercial paper, net of prepaid interest of NT$484 thousand (US$14 thousand) for 2003 and NT$1,208 thousand (US$35 thousand) for 2002 819,516 1,238,792 24,117 35,649 $ 4,179,516 4,790,792 122,999 137,865

72 The interest expenses on the aforementioned short-term borrowings were calculated based on floating interest rates. For the years ended December 31, 2003 and 2002, the interest rates were 0.74%~1.47% and 1.02%~2.30%, respectively. As of December 31, 2003 and 2002, the unused credit lines amounted to approximately NT$5,293,521 thousand (US$155,783 thousand) and NT$6,941,510 thousand (US$199,756 thousand), respectively.

(11)Long-term Borrowings

As of December 31, 2003 and 2002, the details of long-term borrowings were as follows:

Annual Nature Interest rate New Taiwan dollars US dollars (%) 2003 2002 2003 2002 Secured loans: Land and buildings 3.25~6.00% $ 1,820,000 2,240,000 53,561 64,461 Aircraft NT$ loans 1.22~5.83% 6,246,285 7,403,424 183,822 213,048 US$ loans 1.95~2.72% 4,907,551 6,678,522 144,425 192,188 11,153,836 14,081,946 328,247 405,236 Engines and simulators NT$ loans 4.55~5.43% 500,000 500,000 14,714 14,388 US$ loans 1.69~1.78% 338,295 193,438 9,956 5,567 838,295 693,438 24,670 19,955 Sub-total 13,812,131 17,015,384 406,478 489,652 Unsecured loans: 1.30~6.50% 14,464,611 13,565,910 425,680 390,386 Total 28,276,742 30,581,294 832,158 880,038 Less: current portion (6,818,157) (5,979,795) (200,652) (172,081) $ 21,458,585 24,601,499 631,506 707,957

As of December 31, 2003, the remaining balances of the loans were due as follows:

Year due New Taiwan dollars US dollars 2004 $ 6,818,157 200,652 2005 8,809,519 259,256 2006 4,465,030 131,402 2007 1,787,049 52,591 2008 1,016,960 29,928 2009 and after 5,380,027 158,329 $ 28,276,742 832,158

Pursuant to the syndication loan agreement signed with Chiao-Tung Bank and fourteen other banks, the Company's liabilities-to-equity ratio and current ratio must be maintained at 300%

73 Financial Statements

and 75%, respectively, at the year-end. If any aircraft purchased with the financing of such loans is disposed of or sold, the Company must repay the loan immediately. As of December 31, 2003 and 2002, the unused credit lines for long-term borrowings amounted to NT$1,094,000 thousand (US$32,195 thousand) and NT$339,000 thousand (US$9,755 thousand), respectively. The pledges for long-term borrowings are disclosed in note 21.

(12)Bonds Payable

Details of bonds payable as of December 31, 2003 and 2002, are as follows:

Description New Taiwan dollars US dollars Annual Issue Guaranteed by interest rate date 2003 2002 2003 2002 Bonds payable Taiwan Cooperative Bank 7.400% 1998.10 $ - 500,000 - 14,388 Bonds payable Bank of Taiwan 6.450% 1999.01 500,000 500,000 14,714 14,388 Bonds payable Central Trust of China 5.750%~ 6.080% 1999.07 300,000 400,000 8,829 11,511 Bank of Taiwan 5.750%~ 6.080% 1999.07 400,000 600,000 11,772 17,267 Bonds payable Industrial Bank of Taiwan 5.330% 2000.01 - 500,000 - 14,388 Farmers Bank 5.525% 2000.01 160,000 160,000 4,709 4,605 Bank of Taiwan 5.525% 2000.01 400,000 400,000 11,772 11,511 Bonds payable Shanghai Commercial & Savings Bank 5.470% 2000.07 300,000 300,000 8,829 8,633 Chinatrust Commerical Bank 5.480% 2000.07 500,000 500,000 14,714 14,388 Bank of Panhsin 5.640% 2000.07 300,000 300,000 8,829 8,633 Grand Commerical Bank 5.530% 2000.07 500,000 500,000 14,714 14,389 Bonds payable International Commerical Bank of China 5.250% 2000.12 500,000 500,000 14,714 14,388 5.250% 2000.12 500,000 500,000 14,714 14,388 Bank of Taiwan 5.250% 2000.12 400,000 400,000 11,772 11,511 Farmers Bank 5.250% 2000.12 400,000 400,000 11,772 11,511 Bonds payable Taipei Bank 3.700% 2001.07 500,000 500,000 14,714 14,388 Convertible bonds payable - 2003.06 1,950,500 - 57,402 - Subtotal 7,610,500 6,960,000 223,970 200,287 Less: current portion (1,200,000) (1,300,000) (35,315) (37,410) $ 6,410,500 5,660,000 188,655 162,877

74 The Company issued NT$5 billion Taiwan Domestic Covertible Bonds on June 6, 2003, for which the final terms and conditions were as follows:

(a) Coupon rate: 0%

(b) Issue period: From June 6, 2003, to June 5, 2008

(c) Redemption: Except for bonds that have already been redeemed, converted, or purchased and cancelled, the bonds can be redeemed on the fifth anniversary of the issue date at par value.

(d) Redemption at the option of the Company: The Company may redeem the bonds in whole, but not in part, provided that (1) the closing price of the common shares on the for 30 consecutive trading days is at least 150% of the conversion price then in effect, or (2) the bonds outstanding are less than 10% of the issue amount.

(e) Redemption at the option of the bondholders: The Company will, at the option of the bondholders, redeem such bonds on the third anniversary of the issue date at 100.6%.

(f) Conversion

(i) The bondholders can ask the Company to convert the convertible bonds to common stock during the period from three months after the issue date to ten days before the maturity date.

(ii) Conversion price

The conversion price is set at NT$10.98, which is a premium of 104% of the base price. The base price is defined as the average of the closing prices of the issuer's common shares traded on the Taiwan Stock Exchange for a period of 10, 15 or 20 trading days, whichever is the lowest, immediately preceding but excluding the pricing date, which is May 9, 2003. The conversion price will be subject to adjustments in the event that change occurs to the capital structure. As of December 31, 2003, the conversion price was NT$10.78.

(13)Other Installments Payable

The Company purchased aircraft spare parts by installments. As of December 31, 2003 and 2002, the details were as follows:

75 Financial Statements

New Taiwan dollars US dollars 2003 2002 2003 2002 Installment amount payable $ 3,089,507 2,355,795 90,921 67,793 Less: current portion (1,415,866) (865,648) (41,667) (24,911) $ 1,673,641 1,490,147 49,254 42,882

The current portion of other installments payable was recorded as other payables. As of December 31, 2003, the remaining balances of other installments payable were due as follows:

Year due New Taiwan dollars US dollars 2004 $ 1,415,866 41,667 2005 1,179,736 34,719 2006 493,905 14,535 $ 3,089,507 90,921

The interest expenses of the aforementioned installments are calculated based on floating interest rates. For the years ended December 31, 2003 and 2002, the average interest rates were 2.11%~3.91% and 3.40%~4.49%, respectively.

(14)Aircraft Payable

The Company purchased aircraft by installments. As of December 31, 2003 and 2002, the details were as follows:

New Taiwan dollars US dollars 2003 2002 2003 2002

Aircraft payable $ 17,651,552 20,083,497 519,469 577,942 Less: current portion (2,029,574) (2,053,182) (59,729) (59,084) $ 15,621,978 18,030,315 459,740 518,858

The current portion of aircraft payable was recorded as other payables. As of December 31, 2003, the remaining balances of the aircraft payables were due as follows:

Year due New Taiwan dollars US dollars 2004 $ 2,029,574 59,729 2005 2,016,618 59,347 2006 2,242,479 65,994 2007 1,923,731 56,613 2008 1,835,969 54,031 2009 and after 7,603,181 223,755 $ 17,651,552 519,469

76 The interest expenses of the aforementioned aircraft payable are calculated based on floating interest rates. For the years ended December 31, 2003 and 2002, the average interest rates were 1.11%~6.77% and 1.80%~6.77%, respectively. The pledges for the aircraft payable are disclosed at note 21.

(15)Retirement Plans

Net retirement plan liabilities based on the actuarial computation at December 31, 2003 and 2002, are detailed as follows:

2003 2002 New Taiwan US New Taiwan US dollars dollars dollars dollars Benefit obligation: Vested benefit obligation $ (70,741) (2,082) (18,736) (539) Nonvested benefit obligation (1,358,455) (39,978) (1,179,622) (33,946) Accumulated benefit obligation (1,429,196) (42,060) (1,198,358) (34,485) Projected effects of salary adjustments (568,309) (16,725) (492,630) (14,176) Projected benefit obligation (1,997,505) (58,785) (1,690,988) (48,661) Plan assets at fair value 612,075 18,013 416,665 11,990 Projected benefit obligation in excess of plan assets (1,385,430) (40,772) (1,274,323) (36,671) Unrecognized net transition obligation 218,358 6,426 245,652 7,069 Unrecognized pension loss 666,878 19,626 555,373 15,982 Pension liabilities that need to be accrued (316,927) (9,327) (308,395) (8,875) Accrued employee retirement liabilities $ (817,121) (24,047) (781,693) (22,495)

The components of net pension cost are summarized as follows:

2003 2002 New Taiwan US New Taiwan US dollars dollars dollars dollars Service cost $ 205,001 5,952 175,440 5,072 Interest cost 62,288 1,809 62,865 1,817 Actual return on plan assets (7,261) (211) (7,202) (208) Amortization: Unrecognized net transition obligation 34,323 997 32,668 945 Net pension cost $ 294,351 8,547 263,771 7,626

Actuarial assumptions at December 31, 2003 and 2002, are summarized as follows:

77 Financial Statements

2003 2002 Discount rate 3.50% 3.75% Rate of increase in future compensation levels 2.50% 2.50% Expected long-term rate of return on plan assets 3.50% 3.75%

As of December 31, 2003 and 2002, the retirement fund deposited in the Central Trust of China was NT$604,814 thousand (US$17,799 thousand) and NT$409,464 thousand (US$11,783 thousand), respectively.

(16)Income Tax

(a) The Company's earnings are subject to a maximum income tax rate of 25%. For the years ended December 31, 2003 and 2002, the components of estimated income tax benefits were as follows: 2003 2002 New Taiwan US New Taiwan US dollars dollars dollars dollars Income tax expense-current $ (23,717) (689) (34,693) (1,003) Income tax benefit-deferred 203,717 5,915 254,693 7,363 $ 180,000 5,226 220,000 6,360

(b) For the years ended December 31, 2003 and 2002, the differences between expected income tax expenses at statutory rates and income tax benefits as reported in the accompanying financial statements were as follows:

2003 2002 New Taiwan US New Taiwan US dollars dollars dollars dollars Expected income tax expense $ (304,046) (8,828) (604,370) (17,472) Gain on disposal of investments 8,344 242 15,209 440 Investment income recognized under equity method-unrealized 75,750 2,199 34,344 993 Surtax on undistributed earnings (89,832) (2,608) - - Dividend income 19,016 552 (27,708) (801) Permanent difference in depreciation expenses (133,421) (3,874) (138,394) (4,001) Exchange losses recorded as translation adjustments 115,724 3,360 164,145 4,745 Increase in investment tax credits 97,952 2,844 552,166 15,963 Valuation allowance for deferred tax assets, net 222,461 6,459 595,246 17,208 Others 168,052 4,880 (370,638) (10,715) $ 180,000 5,226 220,000 6,360

78 (c) For the years ended December 31, 2003 and 2002, the deferred income tax benefits were as follows: 2003 2002 New Taiwan US New Taiwan US dollars dollars dollars dollars Loss carryforwards $ (353,052) (10,251) (350,460) (10,132) Unrealized exchange losses (9,295) (270) (5,349) (155) Investment tax credits (40,394) (1,173) (292,434) (8,454) Provision for reducing inventory to market price 99,132 2,878 158,927 4,595 Purchase of fixed assets by installments, adjusted for tax purposes 134,887 3,917 135,357 3,913 Deferred gains on disposal of fixed assets, adjusted for tax purposes 166,537 4,836 8,928 258 Valuation allowance for deferred tax assets, net 222,461 6,459 595,246 17,208 Others (16,559) (481) 4,478 130 $ 203,717 5,915 254,693 7,363

(d) The components of the deferred income tax assets as of December 31, 2003 and 2002, are summarized as follows: 2003 2002 New Taiwan US New Taiwan US dollars dollars dollars dollars Deferred income tax assets - current: Unrealized exchange losses $ 46,356 1,364 55,651 1,601 Loss carryforwards 522,588 15,379 300,000 8,633 Investment tax credits 112,772 3,319 109,042 3,138 Allowance for obsolete inventories 292,159 8,598 193,027 5,555 Others - - 16,559 477 $ 973,875 28,660 674,279 19,404 Deferred income tax assets - noncurrent: Loss carryforwards $ - - 575,640 16,565 Investment tax credits - - 44,124 1,270 Purchase of fixed assets by installments, adjusted for tax purposes 504,544 14,848 369,657 10,638 Deferred gains on disposal of fixed assets, adjusted for tax purposes 299,584 8,817 133,047 3,828 Less: valuation allowance for deferred income tax assets (467,629) (13,762) (690,090) (19,858) $ 336,499 9,903 432,378 12,443

79 Financial Statements

The expiration years of the remaining investment tax credits and loss carryforwards as of December 31, 2003, are summarized as follows:

Tax benefit Investment tax credits Loss carryforwards New Taiwan New Taiwan Expiry year dollars US dollars dollars US dollars 2005 $ 14,820 436 - - 2006 241 7 522,588 15,379 2007 97,711 2,876 - - $ 112,772 3,319 522,588 15,379

The Company's income tax returns have been examined and assessed through 2000 by the ROC income tax authority.

(17)Stockholders' Equity

(a) Common stock

As of December 31, 2003, the Company's authorized share capital consisted of 3,000,000 thousand shares of common stock, at NT$10 par value per share, of which 2,753,433 thousand shares were issued and outstanding.

On June 18, 2002, the Company's stockholders resolved to make up deficiencies from a special reserve of NT$317,634 thousand (US$9,487 thousand), legal reserve of NT$351,213 thousand (US$11,048 thousand), and capital surplus of NT$1,845,667 thousand (US$66,655 thousand). In addition, the Company transferred retained earnings from capital surplus of NT$155,458 thousand (US$4,968 thousand) arising before 2000 from gains on disposal of equipment.

Furthermore, the Company resolved to issue 220,000 thousand shares of common stock with an issuance price of NT$10.5 per share. The stock issuance was authorized by and registered with the government authorities on December 26, 2002.

On June 11, 2003, the Company's stockholders resolved to transfer unappropriated earnings of NT$485,000 thousand by issuing 48,500 thousand shares of common stock, at NT$10 par value per share. The stock issuance was authorized by and registered with the government authorities on October 19, 2003.

(b) Capital surplus, legal reserve, and restrictions on appropriations of earnings

80 The details as of December 31, 2003 and 2002, were as follows:

2003 2002 New Taiwan US New Taiwan US dollars dollars dollars dollars Cash subscription in excess of par value of shares $ 1,464,333 52,084 1,464,333 52,084 Gain on disposal of property, plant and equipment of investee company 1,668 53 1,668 53 Additional paid-in capital from bond conversion 253,898 7,374 - - Increase in net equity due to change in percentage of ownership in long-term investments under equity method $ 231,138 6,714 237,374 6,899 Donated assets 648,704 21,225 648,704 21,225 $ 2,599,741 87,450 2,352,079 80,261

The ROC Company Law stipulates that realized capital surplus should not be credited to capital except for making up deficiencies of the Company. The realized capital surplus on the aforementioned includes the premiums on shares issued above their par value and earnings from gifts received. In addition, the transferred capital surplus from issuance of shares or other events in accordance with Article 8 of the ROC Securities and Exchange Law and the ROC Company Law can be credited to capital upon the condition that the aforementioned capital surplus has been approved by and registered with the competent authority in the previous year.

Furthermore, the amount of the capital surplus from the premiums on shares issued above their par value and earnings from gifts received credited to capital should not exceed 10 percent of the amount of paid-in capital in one year.

The ROC Company Law stipulates that the Company must retain 10% of its annual earnings, as defined in the Law, 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 capital when it reaches an amount equal to one-half of issued share capital, upon approval by the Company's stockholders. When the legal reserve reaches over fifty percent of the authorized capital, the Company may distribute the amount in excess as dividends.

81 Financial Statements

The Company's articles of incorporation stipulate that the Company must appropriate employees' bonuses of not less than 1% of estimated earnings to appropriate of each year, and remuneration of directors and supervisors of not more than 5% of estimated earrings to appropriate of each year. Such appropriations can only be made after offsetting accumulated deficit and appropriation of legal reserve, and must be accounted for as a reduction in retained earnings.

To promote long-term development, the Company has adopted a steady dividend policy, in which a cash dividend of around 0~50% of the par value is distributed and a stock dividend of around 50%~100% of the par value is distributed. However, if the predicted earnings per share of a year in which stock dividends are distributed decline to 20% or working capital is low, a cash dividend of 50%~100% of the par value is distributed and a stock dividend of 0~50% of the par value is distributed.

The related information on employees' bonuses and directors' and supervisors' remuneration appropriated from 2002 earnings was as follows:

2002 New Taiwan dollars US dollars

Employees' bonuses-cash $ 25,129 728 Directors' and supervisors' remuneration 10,000 290 $ 35,129 1,018

If the related expenditures listed above were taken as expenses incurred in 2002, the related imputed earnings per share (after tax) would be NT$1.15 (US$0.03).

According to ROC SFC regulations, beginning 2002, information related to the appropriation of employees' bonuses and bonuses for directors and supervisors can be found on web sites such as the Market Observation Post System after the stockholders' meeting.

(c) Unappropriated earnings, imputation credit account, and creditable ratio

The details of unappropriated earnings as of December 31, 2003 and 2002, were as follows: 2003 2002 New Taiwan US New Taiwan US dollars dollars dollars dollars Unappropriated earnings after 1998 $ 2,764,841 80,054 2,637,542 76,252

82 As of and for the years ended December 31, 2003 and 2002, details of the ICA and the related creditable ratio were as follows: 2003 2002 New Taiwan US New Taiwan US dollars dollars dollars dollars ICA $ 158,274 4,658 128,749 3,705 Creditable ratio 5.72% 4.90% (estimated)

(d) Cumulative translation adjustments

According to note 2(c), the Company recorded cumulative translation adjustments amounting to NT$4,924,150 thousand and NT$5,713,871 thousand as of December 31, 2003 and 2002, respectively, and booked these as components of stockholders' equity.

(18)Earnings per Share

New Taiwan dollars 2003 US dollars 2003 Dollars Shares Earnings per Share Dollars Shares Earnings per Share Before After Before After Before After Before After Income Income Income Income Income Income Income Income Tax Tax Tax Tax Tax Tax Tax Tax Net income $1,216,182 1,396,182 35,314 40,540 Basic earnings per share: Net income belonging to common stockholders $1,216,182 1,396,182 2,528,790 $0.48 0.55 35,314 40,540 2,528,790 0.01 0.02 Diluted earnings per share: Net income belonging to common stockholders $1,216,182 1,396,182 2,528,790 35,314 40,540 2,528,790 Effect in the period of dilutive potential common shares 6,827 6,827 180,937 198 198 180,937 $1,223,009 1,403,009 2,709,727 $0.45 0.52 35,512 40,738 2,709,727 0.01 0.02

New Taiwan dollars 2002 US dollars 2002 Dollars Shares Earnings per Share Dollars Shares Earnings per Share Before After Before After Before After Before After Income Income Income Income Income Income Income Income Tax Tax Tax Tax Tax Tax Tax Tax Net income $2,417,479 2,637,479 69,890 76,250 Basic earnings per share: Net income belonging to common stockholders $2,417,479 2,637,479 2,257,116 $1.07 1.17 69,890 76,250 2,257,116 0.03 0.03 Diluted earnings per share: Net income belonging to common stockholders $2,417,479 2,637,479 2,257,116 69,890 76,250 2,257,116 Effect in the period of dilutive potential common shares ------$2,417,479 2,637,479 2,257,116 $1.07 1.17 69,890 76,250 2,257,116 0.03 0.03

83 Financial Statements

(19)Financial Instruments

(a) Derivative financial instruments

(i) As of December 31, 2003 and 2002, the nominal amounts and market value of derivative financial instruments were as follows:

2003 2002 Nominal Market Nominal Market Amount Value Amount Value Interest rate swap agreements NTD 700,000 NTD(3,339) USD 177,335 USD(4,081) (recorded as other current liabilities) NTD 400,000 Option agreements (recorded as other liabilities) USD 13,000 USD 136 USD 30,000 USD 128 Fuel price option agreements (recorded as other current assets and other assets) - USD 5,804 - USD 3,557

(ii) The Company entered into derivative financial instruments for the years ended December 31, 2003 and 2002. Details were as follows:

2003 2002 New Taiwan US New Taiwan US dollars dollars dollars dollars Interest rate swap agreements: Interest expenses (recorded as nonoperating expenses and losses - interest expenses) $ 125,431 3,642 212,424 6,141 Interest payable (recorded as accrued expenses) 1,234 36 18,100 521 Option agreements: Gain (loss) on derivatives [recorded as nonoperating income and gains or nonoperating expenses and losses - exchange gain (losses)] 6,183 180 (3,955) 114 Future net cash outflow 101,940 3,000 - - Future net cash inflow 103,650 3,050 - - Fuel price option agreements: Net gains (recorded as adjustment of operating cost) 1,081,494 31,402 315,016 9,107

84 (iii) Purposes and risks of operating derivative financial instruments

(1) Interest rate swap agreements

For the years ended December 31, 2003 and 2002, the Company had several interest rate swap agreements to hedge its exposure to fluctuations in interest rates on long-term borrowings.

The counter-parties to the swap transactions were international financial institutions with excellent reputations. Management believed that the risk of loss due to non-performance of the counter-parties was remote.

(2) Option agreements

The Company entered into several interest rate and currency option agreements for hedging purposes.

(3) Fuel price option agreements

The Company entered into several fuel price option agreements to hedge the risk of fluctuations in fuel price.

(b) Fair value of non-derivative financial instruments

There were no significant differences between the book value and the fair value for cash, notes and accounts receivable (including related parties), other receivables (including related parties), prepaid expenses, other prepayments, other current assets, short-term borrowings, notes and accounts payable (including related parties), other payables (including related parties), accrued expenses, unearned revenue, other current liabilities, and current portion of long-term borrowings because of the proximity of their due dates.

The details of other non-derivative instruments as of December 31, 2003 and 2002, are summarized as follows:

85 Financial Statements

2003 New Taiwan dollars US dollars Non-derivative financial instruments Book value Fair value Book value Fair value Assets: Short-term investments $ 6,243,203 6,277,873 183,731 184,752 Long-term equity investments: Fair value can be estimated in fact 260,106 321,515 7,655 9,462 Fair value can not be estimated in fact 10,267,000 - 302,148 -

Long-term liabilities: Bonds payable 6,410,500 6,730,239 188,655 198,065 Long-term borrowings 21,458,585 21,458,585 631,506 631,506 Other installments payable 1,673,641 1,673,641 49,254 49,254 Aircraft payable 15,621,978 15,621,978 459,740 459,740 Off-balance-sheet financial instruments: Letters of credit - 206,015 - 6,063 Financing guaranty - 80,000 - 2,354

2002 New Taiwan dollars US dollars Non-derivative financial instruments Book value Fair value Book value Fair value Assets: Short-term investments $ 3,864,537 3,864,537 111,210 111,210 Long-term equity investments: Fair value can be estimated in fact 239,642 284,421 6,896 8,185 Fair value can not be estimated in fact 10,082,543 - 290,145 - Long-term liabilities: Bonds payable 5,660,000 5,035,071 162,877 144,894 Long-term borrowings 24,601,499 24,601,499 707,957 707,957 Other installments payable 1,490,147 1,490,147 42,882 42,882 Aircraft payable 18,030,315 18,030,315 518,858 518,858 Off-balance-sheet financial instruments: Letters of credit - 8,796 - 253 Financing guaranty - 80,000 - 2,302

(c) Methods and assumptions to measure the fair value of financial instruments

(1) The fair value of short-term investments is market value.

86 (2) The fair value of long-term equity investments is market value if they are traded on the public market.

(3) The fair value of convertible bonds is market value.

(4) The fair value of long-term liabilities (except convertible bonds) is the discounted future cash flows, and the discount rates during 2003 and 2002 were 3.18% and 4.16%, respectively.

(5) The fair value of letters of credit and financing guaranty is based on contract.

(6) The fair value of the derivative instruments is based on the receipt or payment if the Company terminates the contracts on the balance sheet date, and generally includes the unrealized gain or loss of the unexpired contracts. Most of the derivative financial instruments have quotations from financial institutions.

(d) Off-balance-sheet credit risk financial instruments

Financing guaranty: As of December 31, 2003 and 2002, the Company had provided a guaranty for an investee company amounting to NT$80,000 thousand. The guaranty was used to guarantee financial borrowings, which have an off-balance-sheet credit risk. Credit risk means the probable accounting loss from a counter-party who violates the contract and/or a significant decrease in the value of a mortgage. If the credit line of the guarantee is used up and the borrowing still cannot be redeemed, the Company's credit risk is equal to the amount of the contract. The counter-party did not provide a mortgage when the Company promised to provide the financing guaranty.

(e) Concentrations of credit risk

The Company's primary potential credit risk is accounts receivable. However, there was no concentration of credit risk because there were more than one counter-party. To decrease the credit risk of accounts receivable, the Company continually evaluated the collectibility of accounts receivable and recognized allowance for doubtful accounts. All bad debts were within management's expectations.

(20)Transactions with Related Parties

(a) Name and relationship of related parties

87 Financial Statements

Name Relationship with the Company Evergreen Marine Corp. Major shareholder Evergreen International Corp. Major shareholder Uniglory Marine Corp. (merged with Evergreen International Storage & Transport Corp. on November 1, 2002) Ex-major shareholder Evergreen International Storage & Transport Corp. Investee company of the Company's major shareholders Evergreen Development Corp. Investee company of the Company's major shareholders Evergreen Construction Corp. Investee company of the Company's major shareholders Evermaster Development Corp. Investee company of the Company's shareholders Ever Voyage Transport Corp. (merged with Evergreen International Storage & Transport Corp. on May 1, 2003) Ex-investee company accounted for by equity method Evergreen Airline Service Corp. Investee company accounted for by equity method RTW Air Services(s) Pte. Ltd. Investee company accounted for by equity method Green Siam Air Services Co., Ltd. Investee company accounted for by equity method Uni Airways Corp. Investee company accounted for by equity method Evergreen Sky Catering Corp. Investee company accounted for by equity method Evergreen Aviation Technologies Corp. Investee company accounted for by equity method Evergreen Security Corp. Investee company accounted for by equity method Evergreen Air Cargo Services Corp. Investee company accounted for by equity method Hsiang-Li Investment Corp. Investee company accounted for by equity method Uni Japan Co., Ltd. Investee company accounted for by equity method Evergreen Airways Service (Macau) Ltd. Investee company accounted for by equity method

(b) Significant transactions with related parties

(1) Contracts and payables

The Company engaged related parties to construct its new overhaul shop for training equipment and a new warehouse, and to install new security systems for the new office building and for training equipment. The transactions for the years ended December 31, 2003 and 2002, are summarized as follows:

88 2003 New Taiwan dollars Contract Amount Payable on Related party Project price paid of period-end Evergreen Construction Construction of a new Corp. overhaul shop for training equipment $ 378,740 374,953 3,787 Evergreen Construction Construction of a new 233,755 215,565 18,190 Corp. warehouse Evergreen Construction Construction of a new Corp. warehouse (Note) 2,298 2,068 230 Evergreen Security Corp. Installation of a new security system for new warehouse 4,620 4,286 334 Evergreen Security Corp. Installation of a new security system for training equipment 4,080 4,039 41 $ 623,493 600,911 22,582

2003 US dollars Contract Amount Payable on Related party Project price paid of period-end Evergreen Construction Construction of a new Corp. overhaul shop for training equipment $ 11,14611,034 112 Evergreen Construction Construction of a new Corp. warehouse 6,879 6,344 535 Evergreen Construction Construction of a new Corp. warehouse (Note) 68 61 7 Evergreen Security Corp. Installation of a new security system for new warehouse 136 126 10 Evergreen Security Corp. Installation of a new security system for training equipment 120 119 $ 18,349 17,684 665

89 Financial Statements

2002 New Taiwan dollars Contract Amount Payable on Related party Project price paid of period-end Evergreen Construction Construction of a new Corp. overhaul shop for training equipment $ 378,740374,953 3,787 Evergreen Construction Construction of a new Corp. warehouse 233,755 215,565 18,190 Evergreen Construction Construction of a new warehouse (Note) 2,298 2,068 230 Evergreen Security Corp. Installation of a new security system for new warehouse 4,620 4,286 334 Evergreen Security Corp. Installation of a new security system for training equipment 4,080 4,039 41 $ 623,493 600,911 22,582

2002 US dollars Contract Amount Payable on Related party Project price paid of period-end Evergreen Construction Construction of a new Corp. overhaul shop for training equipment $ 10,899 10,790 109 Evergreen Construction Construction of a new Corp. warehouse 6,727 6,203 524 Evergreen Construction Construction of a new Corp. warehouse (Note) 66 60 6 Evergreen Security Corp. Installation of a new security system for new warehouse 133 123 10 Evergreen Security Corp. Installation of a new security system for training equipment 117 116 1 $ 17,942 17,292 650

Note: During 2001, the contract was terminated. Payment amounted to NT$2,068 thousand (US$61 thousand), and according to the contract, the Company had to pay the related retention money of NT$230 thousand (US$7 thousand).

(2) Revenue, cost and expenses

During the years ended December 31, 2003, and 2002, the Company's transactions with related parties were as follows:

90 New Taiwan dollars US dollars Percentage Revenue 2003 2002 2003 2002 2003 2002 Evergreen Airline Service Corp. $ 1,812 628 53 18 - - Uni Airways Corp. 36,175 52,291 1,050 1,512 0.06 0.08 Evergreen Aviation Technologies Corp. 244,954 354,230 7,113 10,241 0.37 0.55 Evergreen Air Cargo Services Corp. 14,124 2,216 410 64 0.02 - Evergreen International Corp. 4,279 3,013 124 87 0.01 0.01 Others 2,390 2,324 69 67 - - $ 303,734 414,702 8,819 11,989 0.46 0.64

New Taiwan dollars US dollars Percentage Cost 2003 2002 2003 2002 2003 2002 Evergreen International Corp. $ 60,350 49,911 1,752 1,443 0.11 0.10 Evergreen International Storage & Transport Corp. 60,404 - 1,754 - 0.10 - Ever Voyage Transport Corp. - 49,905 - 1,443 - 0.09 Evergreen Airline Service Corp. 778,477 747,728 22,604 21,617 1.37 1.40 Evergreen Sky Catering Corp. 711,913 670,986 20,671 19,398 1.25 1.26 Uni Airways Corp. 476,859 479,086 13,846 13,850 0.84 0.90 Evergreen Aviation Technologies Corp. 4,018,645 3,516,304 116,686 101,657 7.07 6.60 Evergreen Air Cargo Services Corp. 244,663 104,671 7,104 3,026 0.43 0.20 Others 3,044 516 88 15 0.01 - $ 6,354,355 5,619,107 184,505 162,449 11.18 10.55

New Taiwan dollars US dollars Percentage Expenses 2003 2002 2003 2002 2003 2002 Evergreen International Corp. $ 99,411 104,778 2,886 3,029 1.64 1.68 Evergreen International Storage & Transport Corp. 15,814 - 459 - 0.26 - Ever Voyage Transport Corp. - 12,137 - 351 - 0.19 Evergreen Airline Service Corp. 24,081 23,693 699 685 0.40 0.38 Evergreen Sky Catering Corp. 19,518 21,269 567 615 0.32 0.34 Uni Airways Corp. 4,916 5,366 143 155 0.08 0.09 Evergreen Aviation Technologies Corp. 12,847 13,180 373 381 0.21 0.21 Evergreen Security Corp. 43,288 40,151 1,257 1,161 0.72 0.64 RTW Air Services(s) Pte. Ltd. 40,165 54,798 1,166 1,584 0.66 0.88 Green Siam Air Services Co., Ltd. 68,873 77,945 2,000 2,254 1.14 1.25 Others 4,396 4,194 128 121 0.07 0.07 $ 333,309 357,511 9,678 10,336 5.50 5.73

91 Financial Statements

(3) Financing to others

The Company's financing to a related party for the year ended December 31, 2003, was as follows:

Maximum balance Ending balance Interest revenue New New New Taiwan US Taiwan US rate Taiwan US Date dollars dollars dollars dollars (p.a.) dollars dollars

Uni Airways Corp. 2003.06.27~ $150,000 4,414 - - 4.0% 1,496 43 2003.09.26

There were no such transactions during the year ended December 31, 2002.

There was no mortgage for abovementioned transaction.

(4) Guaranty

As of December 31, 2003 and 2002, the Company had provided a guaranty for Uni Airways Corp. amounting to NT$80,000 thousand (US$2,354 thousand).

(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, 2003 and 2002, resulting from the aforementioned transactions are summarized as follows:

New Taiwan dollars US dollars 2003 2002 2003 2002 Accounts receivable-related parties: Uni Airways Corp. $ 35,689 30,050 1,050 865 Evergreen Aviation Technologies Corp. 25,302 86,038 745 2,475 Others 2,043 310 60 9 63,034 116,398 1,855 3,349 Other receivables-related parties: Uni Airways Corp. 142,217 171,506 4,185 4,935 Evergreen Air Cargo Services Corp. 3,996 1,281 117 37 Evergreen Aviation Technologies Corp. 25,103 32,146 739 926 Others 4,031 4,566 119 131 175,347 209,499 5,160 6,029 Total receivables-related parties $ 238,381 325,897 7,015 9,378

92 Accounts payable-related parties: Evergreen International Corp. $ 19,208 3,677 565 106 Evergreen Airline Service Corp. 73,380 68,262 2,159 1,964 Evergreen Sky Catering Corp. 64,672 55,718 1,903 1,603 Uni Airways Corp. 56,733 56,431 1,670 1,624 Evergreen Aviation Technologies Corp. 50,854 62,085 1,497 1,787 Evergreen Air Cargo Services Corp. 29,346 20,079 864 578 Green Siam Air Services Co., Ltd. 6,635 7,957 195 229 RTW Air Services(s) Pte. Ltd. 3,328 5,534 98 159 Others 1,636 487 48 14 305,792 280,230 8,999 8,064 Other payables-related parties: Evergreen International Corp. 24,033 13,707 707 395 Evergreen Construction Corp. - 3,976 - 114 Ever Voyage Transport Corp. - 4,530 - 130 Evergreen Airline Service Corp. 100,587 91,262 2,960 2,626 Evergreen Sky Catering Corp. 69,658 43,570 2,050 1,254 Uni Airways Corp. 59,753 41,901 1,759 1,206 Evergreen Aviation Technologies Corp. 313,898 218,846 9,238 6,298 Evergreen Air Cargo Services Corp. 2,356 18,432 69 530 Others 9,411 350 277 10 579,696 436,574 17,060 12,563 Total payables-related parties $ 885,488 716,804 26,059 20,627

(21)Pledged Assets

The book values of the pledged assets as of December 31, 2003 and 2002, were as follows:

New Taiwan dollars US dollars Pledged assets Object 2003 2002 2003 2002 Land Long-term borrowings $ 1,864,122 1,864,122 54,859 53,644 Buildings Long-term borrowings 2,766,601 2,862,622 81,419 82,378 Aircraft Long-term borrowings 43,818,771 47,678,237 1,289,546 1,372,035 Engines-included in Long-term borrowings 1,210,719 1,702,064 35,630 48,980 machinery and equipment Simulators-included in Long-term borrowings 602,274 317,749 17,724 9,144 machinery and equipment Time deposit-included in Customs duty and contract 475,297 614,198 13,988 17,675 other assets performance guaranties $ 50,737,784 55,038,992 1,493,166 1,583,856

93 Financial Statements

(22)Commitments and Contingencies

(a) As of December 31, 2003, the outstanding contracts for purchases of aircraft were as follows:

Total price of Entering date Type of aircraft Quantity contract Prepayments (Note) June 2000 Boeing-777 7 US$ 1,260,851 NT$ 490,523 (US$14,436) March 2001 Airbus (A330-200) 2 US$ 234,269 NT$ 1,389,779 (US$40,900)

Note: The prepayments were recorded as advances for purchases of equipment.

(b) As of December 31, 2003, the Company had issued a total of NT$11,400 million (US$335 million) in promissory notes to banks for obtaining guaranties for credit lines. As of December 31, 2003, the Company had obtained guaranties from ABN-AMRO Bank, , Bank of America, and HSBC amounting to NT$577,505 thousand (US$16,995 thousand).

(c) The Company entered into aircraft and land lease contracts by using the operating lease method. As of December 31, 2003, the Company had paid US$473,455 thousand as refundable deposits. According to the contracts, future lease payments in the following five years are as follows:

Year due New Taiwan dollars US dollars 2004 $ 9,276,111 272,988 2005 8,716,628 256,522 2006 6,961,628 204,874 2007 4,378,089 128,843 2008 2,456,875 72,304 $ 31,789,331 935,531

(d) On June 5, 2003, according to the procedures for lending of capital and providing a guaranty to others, the Company's board of directors resolved to issue promissory notes for Uni Airways Corp.'s renewal of the NT$80 million loan with Taipei Commercial Bank.

(23)Others

(a) Total personnel, depreciation and amortization expenses for the years ended December 31, 2003 and 2002, are summarized below:

94 New Taiwan dollars By function 2003 2002 Operating Operating Operating Operating By item cost expenses Total cost expenses Total Personnel expenses Salaries $ 2,939,446 2,305,920 5,245,366 2,713,818 2,289,352 5,003,170 Insurance 112,253 100,296 212,549 97,362 92,462 189,824 Pension 154,728 139,623 294,351 127,652 136,119 263,771 Others (meal allowances, etc.) 1,051,435 195,271 1,246,706 953,374 184,585 1,137,959 Depreciation 4,226,426 209,877 4,436,303 4,067,252 203,534 4,270,786 Amortization 867,837 250,286 1,118,123 831,817 291,278 1,123,095

US dollars By function 2003 2002 Operating Operating Operating Operating By item cost expenses Total cost expenses Total Personnel expenses Salaries 85,350 66,954 152,304 78,457 66,185 144,642 Insurance 3,260 2,912 6,172 2,815 2,673 5,488 Pension 4,493 4,054 8,547 3,691 3,935 7,626 Others (meal allowances, etc.) 30,529 5,670 36,199 27,562 5,336 32,898 Depreciation 122,719 6,094 128,813 117,585 5,884 123,469 Amortization 25,199 7,267 32,466 24,048 8,421 32,469

(b) Reclassification

Certain amounts of the financial statements for the year ended December 31, 2002, have been reclassified to conform with the presentation of the financial statements for the year ended December 31, 2003, for purposes of comparison. These reclassifications do not have a significant impact on the financial statements.

(24)Segment Financial Information

(a) Diversified industry:

The Company mainly operates an international air transportation business.

(b) Geographic area information:

95 Financial Statements

New Taiwan dollars US dollars 2003 2002 2003 2002 South East Asia: Operating revenue $ 20,125,540 19,673,030 584,365 568,749 Income from operations $ 941,137 1,579,247 27,327 45,656 Identifiable assets $ 635,261 673,223 18,695 19,373 North America: Operating revenue $ 8,657,559 9,525,885 251,381 275,394 Income from operations $ 404,856 764,688 11,755 22,107 Identifiable assets $ 281,181 368,168 8,275 10,595

Other foreign areas: Operating revenue $ 10,639,722 8,076,407 308,935 233,490 Income from operations $ 497,549 648,330 14,447 18,744 Identifiable assets $ 499,877 294,535 14,711 8,476 Domestic: Operating revenue $ 25,964,775 27,302,085 753,914 789,306 Income from operations $ 1,214,199 2,191,667 35,256 63,362 Identifiable assets $ 102,724,786 103,855,062 3,023,095 2,988,635 Total operating revenue $ 65,387,596 64,577,407 1,898,595 1,866,939 Income from operations $ 3,057,741 5,183,932 88,785 149,869 Investment income, net 303,001 141,376 8,798 4,087 Interest expenses (2,144,560) (2,907,829) (62,269) (84,066) Income before income tax $ 1,216,182 2,417,479 35,314 69,890 Total identifiable assets $ 104,141,105 105,190,988 3,064,776 3,027,079 Long-term equity investments 10,527,106 10,322,185 309,803 297,041 Total assets $ 114,668,211 115,513,173 3,374,579 3,324,120

(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 international air transportation services. Consequently, it is not practical to separate export and domestic sales.

96 EVA Airways Corporation 376 Hsin-nan Rd. Sec. 1 Luchu, Taoyuan Hsien, Taiwan Tel:886-3-351-5151 Internet Address:http://www.evaair.com

Taipei Office 117 Sec.2, Chang-an E. Rd.,Taipei, Taiwan Tel:886-2-8500-2345

Spokesman Kuo-Wei Nieh Senior Vice President , Public Relations Division Tel:886-2-2500-1122 e-mail:[email protected]

Deputy Spokesperson Katherine Ko Deputy Junior Vice President, Public Relations Division Tel: 886-2-2500-1122 email: [email protected]

Shareholder Service Address:B1,No.114,Sec.2 Cheng-kuo N. Rd. Taipei. Tel: 02-2509-8720 Fax: 02-2509-9180 Internet Address:http://stock.evergreen.com.tw

Auditors KPMG 6F,156, Sec.3, Min-sheng E. Rd. Taipei, Taiwan Tel:886-2-2715-9999 Internet Address:http://www.kpmg.com.tw

Financial Calendar Year ended 31st December 2003