stock code - eva air per employee thousand 1,896 1,941 -2.3% ... deliver a stellar performance. ......
TRANSCRIPT
Stock Code:
1
Financial and Operating Highlights 2
To Shareholders 3
2006 in Review 3
2007 Preview 8
Future Core Strategies 11
Competition, Changing Regulations and Macro Economy 12
The Company 14
Major Milestones 14
Calendar of 2006 Events 17
Directors and Supervisors 18
Principal Officers 28
Capital and Shares 37
EVA Air People 43
The Fleet 45
The Market 46
The Network 52
Principal Subsidiaries 53
Important Resolutions by Shareholders and BOD 54
Financial and Operating Results 56
Financial Results 56
Operating Results 63
Financial Statements 65
Independent Auditors' Report 65
Balance Sheets 67
Statements of Operations 68
Statements of Changes in Stockholders' Equity 69
Statements of Cash Flows 70
Notes to Financial Statements 72
Consolidated Balance Sheets 124
Consolidated Statements of Operations 125
Consolidated Statements of Changes in Stockholders' Equity 126
Consolidated Statements of Cash Flows 127
2
Financial and Operating Highlights
2006 2005 % ChangeFinancial
Income Statement
Revenue NT$ thousand 93,903,564 88,518,249 6.1%
Passenger Revenue NT$ thousand 46,325,605 42,652,809 8.6%
Cargo Revenue NT$ thousand 41,382,151 39,931,818 3.6%
Total Costs NT$ thousand 97,241,348 87,667,249 10.9%
Operating Profit NT$ thousand (3,337,784) 851,000 -
Net Profit NT$ thousand (1,686,585) 1,326,060 -
EPS NT$ (0.45) 0.39 -
Profit Margin % -3.55% 0.96% -4.51ppt
Balance Sheet
Total Assets NT$ thousand 141,168,129 128,523,279 9.8%
Total Liabilities NT$ thousand 95,027,526 84,547,407 12.4%
Total Equity NT$ thousand 46,140,603 43,975,872 4.9%
Total Capital NT$ thousand 38,749,794 33,898,869 14.3%
Book Value per Share NT$ 11.91 12.97 -8.2%
Debt Ratio % 67.32% 65.78% 1.5ppt
Operating
Overall Capacity Thousand 9,778,493 9,893,897 -1.2%
Overall Traffic Thousand 7,344,465 7,364,227 -0.3%
Overall Load Factor % 75.11% 74.43% 0.7ppt
Overall Yield NT$ 11.94 11.21 6.5%
Passenger Capacity Thousand 30,366,618 29,348,257 3.5%
Passenger Traffic Thousand 24,277,090 23,098,868 5.1%
Passengers Carried No. of Passengers 6,172,267 5,904,419 4.5%
Passenger Load Factor % 79.95% 78.71% 1.2ppt
Passenger Yield NT$ 1.91 1.85 3.2%
Cargo Capacity Thousand 7,045,497 7,252,554 -2.9%
Cargo Traffic Thousand 5,159,527 5,285,329 -2.4%
Cargo Carried Tons 829,952 844,099 -1.7%
Cargo Load Factor % 73.23% 72.88% 0.4ppt
Cargo Yield Nt$ 8.02 7.56 6.1%
Unit Cost Nt$ 9.94 8.86 12.2%
Number of Employees 5,158 5,098 1.2%
Capacity per Employee Thousand 1,896 1,941 -2.3%
Traffic per Employee Thousand 1,424 1,445 -1.4%
Revenue per Employee NT$ thousand 18,205 17,363 4.8%
2006 In Review2006 Operations Review
Overall in 2006, the global aviation
industry was stuck in an operational
dilemma caused by soaring fuel prices
that showed no sign of easing. At the
same time, EVA carried 6.17 million pas-
sengers and 830,000 tons of freight, and
achieved an overall load factor of 75.11%
through proactive marketing strategies
and flexible fleet deployment. Audited
financial results showed total operating
revenues of NT$93.904 billion, up by
6.08% or NT$5.385 billion over 2005.
Although operating revenues reached an
all-time high, they were overshadowed
by the daunting fuel costs. The yearly
loss after income tax was NT$1.687 bil-
lion.
■ Passenger revenue rose by 8.61% or
NT$3.673 bill ion over 2005 to
NT$46.326 billion.
Market demand on European and
American routes remained robust.
Japan's visa-free admission policy
spurred traffic on existing routes and
encouraged service increases. We
launched service from Taipei to Nagoya
on 10 July, 2006 and introduced our sec-
ond Airbus 330-200 EVA Hello Kitty Jet in
October 2006, fanning tourism fever for
Japan. To expand our participation in
3
To Shareholders
the Indian market, we introduced Taipei -
Mumbai (Bombay) passenger service on
10 December, 2006. We also maintained
stable growth on routes to other regions.
Our strategic flight network linking
Europe, Asia and America, combined
with aggressive marketing, enabled us to
deliver a stellar performance.
■ Cargo revenue grew by 3.63% or
NT$1.45 bill ion over 2005 to
NT$41.382 billion.
EVA expanded freight business in
Indochina and upgraded service quality
by initiating code-share arrangements
with Vietnam Airlines on the route from
Hanoi to Ho-Chi-Minh City (Saigon), and
with Far Eastern Air on service from
Taipei to Phnom Penh. We strengthened
our cargo network in Northeast Asia and
added capacity on our Osaka route by
boosting freighter service to four flights a
week, and by code-sharing on other
routes with Air Nippon (ANK). In
Mainland China, EVA expanded code-
sharing cooperation. We also exercised
our flexibility by adjusting existing route,
scrutinizing less-profitable routes and
taking disciplined steps to increase our
operating revenue.
■ Replaced older aircraft with new mod-
els and kept fleet size at 49.
To increase availability of state of the
4
98.8%. The net loss forecast for 2006
before taxes was NT$ 1.173 billion, but
actual results totaled NT$1.687 billion.
Analysis of Financial Results
Total Revenues: NT$ 97.005 billion
Annual operating revenues reached
NT$ 93.904 billion in 2006, up by 6.08%
compared to 2005. Passenger revenue
grew by 8.61% compared to 2005 due to
the robust demand on European and
American routes and the launch of the
second EVA Hello Kitty Jet, which boost-
ed tourism to Japan. Cargo business,
through cooperative service with other
airlines and flexible adjustments in exist-
ing routes, was up by 3.63% compared to
last year. Our 2006 non-operating income
reached NT$ 3.101 bill ion, jumping
49.69% over 2005, and came about pri-
marily through the disposal of investment
gains.
Total Expenses: NT$ 99.269 billion
Total yearly operating expenses in
2006 amounted to NT$ 97.241 billion, an
increase of 10.92% compared to 2005.
The increase was caused by soaring fuel
costs and rising expenses associated with
expanded operations. Non-operating
expenses mounted to NT$ 2.028 billion,
or up by 13.51% compared to last year,
due to higher interest costs.
art and most innovative service features
for further enhancing passenger comfort,
we placed two brand-new Boeing 777-
300ERs in use on our Los Angeles route
in June and November 2006. We added
our 11th Airbus 330-200 passenger jet in
May, and retired the remaining two
Boeing 767-300ER passenger jets. In
April, the lease term ended for one MD-
90 passenger jet. This kept the size of
our passenger fleet at a constant 34 air-
craft. We sold one MD-11 freighter and
the lease agreement ended for another,
reducing our freighter fleet to 15 aircraft.
At the end of 2006, EVA was operating a
fleet of 49 aircraft, detailed in the follow-
ing chart:
Results Compared to Projections
Operating revenue forecast for
2006 was NT$ 95.045 billion, compared
to actual results of NT$ 93.904 billion,
giving us an achievement ratio of
Aircraft Type Quantity
B747-400 6
B747-400 Combi 9
B747-400 Freighter 3
MD-11 Freighter 12
MD-90 4
B777-300ER 4
A330-200 11
Total 49
5
service as early as 24 hours and as late
as three hours before their flight's
scheduled departure. This service is
via EVA's Global Information Network,
and will soon be expanded to Hong
Kong, Macau and Bangkok.
■ In December 2005, we began introduc-
ing a Short Message Service on our
brand-new B777-300ERs and newest
A330-200s. The Short Message Service
in English and Chinese offers passen-
gers a more economical option than
the satellite phone, and provided two-
way communication with family, friends
and colleagues on the ground.
■ EVA has partnered with 12 airlines for
interline e-ticketing services, including
Profitability Analysis
Return on total assets: - 0.16%
Return on shareholders' equity: - 3.74%
Ratio of operating profit to paid-in capi-
tal: - 8.61%
Return on sales: - 1.8%
Loss per share: NT$ 0.45
Research and Development
■ In addition to user-friendly services
such as online pre-flight meal selec-
tion, lost-and-found and seat selection,
EVA introduced online check-in for
passengers departing from Taiwan in
April 2006. After making reservations
and buying tickets, passengers can use
our fast, convenient online check-in
6
SMS helps EVA control over potential
threats with preventive measures that
eliminate factors causing possible safe-
ty concerns. This program strengthens
risk management procedures for the
entire organization and creates a
sound safety-related system.
■ The Line Operation Safety Audit
(LOSA) program, developed and con-
ducted by the University of Texas is
used for snapshot audits. EVA has set
up a Line Observation Program (LOP)
based on the LOSA structure.
Qualified observers, using frontal per-
spectives, are allowed to participate in
each stage of flights on all routes,
including pre-flight briefings, pre-flight
preparations, flying the route, landing,
etc. The observer is asked to thor-
oughly document all activities and to
provide this data to management.
Management then analyzes all the
data using a digitized management
Singapore Airlines, Thai Airways, Air
Canada and British Airways. We have
also strengthened our code-share ties
with leading carriers such as Pacific
Airlines, Qantas and All Nippon to give
our passengers flight services that are
speedy and convenient.
■ We entered the second stage of plat-
form for our évasion packages, giving
passengers greater flexibility in plan-
ning their itineraries. From selecting
seats on a flight to reserving hotel and
renting cars, passengers can tailor their
trip to meet their individual needs and
preferences. We also completed our
new "évasion Management System"
so that all functions of the évasion pro-
gram are standardized and automated.
Internal controls have also been
strengthened so that we can respond
more quickly to passengers and satisfy
their demands.
■ As recommended by ICAO and
required by the Aviation Bureau, EVA
has established Safety Management
Systems (SMS) that fit our organization
and its operational characteristics. The
Safety Work Team, a cross-departmen-
tal unit, and the promotion of the SMS
concept have enabled all departments
to identify hazards and apply risk man-
agement procedures in policy making
and operations. The establishment of
system provides risk appraisal analysis
for every flight so that flight crews have
an up-to-date risk coefficient for a
flight of their assignment. It also gives
management a reference for policy
making and elevates flight safety.
■ EVA completed the automation of
printing process for maintenance work
sheets, merging words and graphs,
selecting colored paper stock for dif-
ferent pages and binding it into a com-
plete package for approval. As part of
the printing process, different colored
papers are selected to visualize for dif-
ferent functions in work-sheet printing.
This reduces human error by enabling
the maintenance crew to easily and
program. Results are used to identify
risks before they advance and immedi-
ately take appropriate corrective
actions. This program strengthens
flight safety.
■ EVA partnered with the U.S. Navy
Meteorological Lab to establish our
Flight Operation Risk Assessment
System (FORAS). This system inte-
grates and systematically analyzes real-
time weather information, flight-crew
experience, airport facilities, aircraft
equipment and other data to provide a
quantified index appraisal. This quanti-
fied index appraisal is used by flight
crews and management for real-time
risk management during flights. The
7
8
cabins of three B747-400 aircraft. With
these improvements, our passengers will
enjoy safer and more comfortable flight
experiences.
EVA Air Traffic Projections
Passenger service
The estimated 2007 passenger count
is 6.27 million, compared to 6.17 million
in 2006, projected to grow by 1.62%.
Estimation basis:
Our 2007 seat capacity will be similar
as it was in 2006 and the market is fore-
casted to grow moderately. EVA will
adopt a far more flexible approach to
meeting market demand by strategically
deploying aircraft on routes in expecta-
tion of continuous growth.
Cargo service
Estimated 2007 cargo volume is
750,000 tons compared to 830,000 tons
in 2006, with 9.64% shrinkage.
quickly determine what needs to be
done based on color. Improved
processes have also helped save time
and reduce the workforce, paring
costs, lifting maintenance quality and
strengthening safety.
■ E-communications have been
improved with a multi-function intranet
system that includes electronic bul-
letins, a new e-mail platform and real-
time messaging, enabling EVA's global
workforce to communicate without
time constrain. The system's powerful
database and searching engine allow
staffs to efficiently store, share and
search for information and documents.
2007 PreviewOperations Guidelines
EVA keeps our long-standing com-
mitment to safety and excellent service.
To advance our service quality, we will
add four new B777-300ERs in 2007 and
upgrade furnishings in the passenger
■ A total of 14 cross-strait chartered
flights will be operated to accommo-
date demand during the Chinese
Lunar New Year holiday, Tomb-sweep-
ing Day, the Dragon-boat Festival and
the Mid-autumn Festival.
■ Starting from June, passenger-cabin
furnishings on three B747-400s will be
upgraded and the renovated aircraft
have been scheduled to serve on
Taipei-Vancouver and Taipei-London
routes.
■ One MD-90 will be added to the fleet
in July. Flights on the Taipei-Hanoi
route will be resumed with five flights
per week. Frequency between Taipei
and Phnom Penh will be raised to 12
Estimation basis:
EVA's cargo capacity will contract
due to retiring and replacing cargo air-
craft, and expiring leases for two MD-11
freighters. Global economic outlook indi-
cates moderate for 2007, but suggests
vigorous growth for Mainland China,
Vietnam and India. EVA is expanding
operations and exploring new opportuni-
ties in Mainland China, Vietnam and
India. Through efficient use of existing
cargo space and cooperative services
with other carriers, our goal is to increase
cargo business.
Key Marketing Strategies
Passenger service
9
10
Company are cooperating on the
Pudong - Hong Kong freighter service.
EVA is also proactively seeking to
extend our reach into China via part-
nerships with other carriers.
■ Beginning on 25 March, EVA is
expanding cooperation with Air
Nippon to enhance freighter services
to Tokyo, Nagoya and Osaka. This
move demonstrates our commitment
to optimizing our cargo service net-
work in Japan. EVA is continuing
efforts to expand the European market
by cooperating with Lufthansa on the
Brussels route. We will also work with
Thai Airways on a cargo space
flights per week.
■ Brand-new B777-300ERs will be intro-
duced and serve all flights on the
Taipei - Los Angeles route.
■ Continue Code-share operations with
American Airlines, Continental Airlines,
Air Canada, Air Nippon, Qantas, Air
India and more.
■ Ad-hoc chartered service to destina-
tions such as Guam and Saipan.
■ In step with relaxing policies, plan to
operate cross-strait chartered service
on specific holidays and weekends.
Cargo service
■ Beginning on 1 March, EVA and
Shanghai Airlines Cargo International
mizing fleet utilization. At the same
time, we will sharpen our competitive
edge by nurturing potential passenger
and cargo markets such as Northeast
Asia, Mainland China and Central Asia,
and by continually monitoring traffic
rights amendments.
■ EVA will add more new-generation,
fuel-saving B777-300ERs and upgrade
cabin furnishings on B747-400s to give
passengers more comfortable and reli-
able services. As remaining B747-400s
are gradually retired, we will modify
the passenger cabins to freighter serv-
ices and optimize our fleet utilization.
Consistency in our ability to provide
safe air transportation and quality serv-
ice, EVA also strengthens management
of controllable costs through enhanc-
ing fleet utilization, upgrading soft-
ware and hardware to maximize oper-
ating profitability.
■ EVA has established alliances with 15
airlines, including American Airlines,
Air Canada, Air Nippon, Qantas,
British Airways (World Cargo),
Lufthansa Cargo and more. In addi-
tion, we are expanding and exploring
cooperative services with other Asian
carriers. By joining networks and form-
ing reciprocal operating environments
with carriers, we can reduce costs and
spread risks, and give all our cus-
exchange on Frankfurt and Los
Angeles routes to reduce operating
costs and extend our cooperation net-
work.
■ Looking carefully at soaring fuel prices,
we have withdrawn two MD-11
freighters from leasing agreements. To
ensure effective cost controls and step
up revenues, we are aiming to meet
cargo market demands by being more
efficient in how we deploy our fleet.
■ In response to relaxing policies, we are
in the process of planning cross-strait
chartered cargo services.
Looking ahead at 2007 and taking a
careful look at the fierce competition
within the aviation industry, EVA will hold
fast to our corporate culture of team-
work, service and innovation as we press
onward in promoting operating efficien-
cies and reducing costs so that we can
better meet the business challenges
ahead of us.
Future Core Strategies■ EVA will stick with Taipei, Taiwan as the
center of our network connecting
major cities in Europe, the Americas
and Asia to continue to provide fre-
quent and convenient flight services.
EVA will meet market demand by
effectively adjusting capacity on routes
of highly profitable markets and opti-
11
transit have minimized the impact. But
China's open-sky policy has led it to
purchase aircraft, build airports and
infrastructure, and open traffic rights to
European and American carriers, in
addition to easing its qualification
requirement on freighters. These
moves have significantly impacted
Taiwan's cargo market.
■ Development of the transportation
infrastructure within Taiwan, e.g., the
east-west highway and the high-speed
rail, is expected to force domestic car-
riers transform to international and
affect the supply and demand balance
within passenger and cargo markets
■ Rapid economic growth in the Asia
Pacific region and aviation deregula-
tion, e.g., Canada's open-sky policy, in
addition to the rapid emergence of
low-cost carriers has increased both
passenger and cargo capacities
between regions and continents.
Whether market demand will grow
with the capacity affects the market
fare.
■ Mainland China, the world's factory, is
encouraging air cargo development.
There has been a surge of newly-
established China-based freighters,
which has created huge cargo capacity
and eroded the profits of the aviation
industry.
tomers fast and convenient services.
■ Electronic Services
•EVA's e-ticketing system has covered
80% of total ticket issuance. Starting
interline electronic ticketing with
Continental Airlines in September 2005,
we have completed e-ticketing partner-
ships with 16 carriers and will continue
seeking these relationships with more.
•E-communications, including electronic
bulletins, documentation have made it
easier and faster to deliver information
promptly and accurately and creates a
working environment with less paper.
•Online seat selection, introduced in
April 2006, makes the process even
easier, giving our passengers better
service, and saving EVA operating time
and costs.
Competition, Changing Regula-tions and Macro EconomyCompetition
■ Low cost carriers have shared part of
market with the allure of their fares and
affected the supply and demand of
short-haul market.
■ Rapid economic growth in Mainland
China and offshore migration of
Taiwanese manufacturing directly
impacts Taiwan's air cargo market. For
now, China's limited air cargo capacity
and heavy reliance on Taiwan for cargo
12
worldwide, leaving the aviation indus-
try to face a potential slide in traveling
demand as well as escalating costs.
■ Global warming has caused climate
changes, resulting in floods, blizzards
and hurricanes, etc. Threats of terrorist
attacks or the outbreak of contagious
diseases could also devastate the air
transport market.
■ The outlook for the global economy is
stable, though the United States is
expected to grow slowly with revived
economies in Europe and Japan
expected to offset its slowing pace.
Mainland China will continue to be a
leading driver for the world economy
and keep its growth momentum at a
projected 10%. Other emerging
economies will continue their strong
growth. In Taiwan, economic growth
for 2007 is expected to surpass 4%.
Balancing influences beyond our
control, EVA Air will proceed with plans
for strategic market expansion, imple-
ment cost controls, cautiously work to
advance liberalized policies and laws,
and practice financial hedging to
enhance our competitiveness.
Changing Regulations
■ Development of the air transport mar-
ket goes hand-in-hand with the politi-
cal and economic stability.
■ Uncertainty over Taiwan's cross-strait
policies related to admission of
Mainland Chinese tourists into Taiwan,
investment in China, sea-to-inland
transit, cargo charter flights, direct
links and relevant bilateral policies,
leave the evaluation of market trend
and demand open to ongoing scrutiny.
■Holding fuel surcharges at levels below
those allowed by foreign governments
creates an unfavorable operating envi-
ronment for Taiwan carriers.
■ Rising consumer consciousness has
caused some related policies to
become burdensome to the aviation
industry, e.g., the penalty code enact-
ed by the European Union that sets
compensation for over-booking.
Macro Economy
■ High fuel prices that show no sign of
letting up have created ripples by way
of slowed economic growth, inflation
and stagnant consumer spending
13
14
cooperation with affiliated carriers to
maximize mutual efficiencies and effec-
tively compete on a global scale. Its
worldwide hub of operations at Taoyuan
International Airport in Taiwan has proven
to be both successful and strategic.
EVA Air listed its stock on Taiwan's
TAISDAQ Market in October 1999, and
moved to the main board, TSE, in
September 2001.
Major Milestones1988~1990
On September 1, 1988 at the celebra-
tion for 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
Boeing/McDonnell Douglas for 26 aircraft
at a total purchase value of US$3.6 billion,
and immediately captured the attention
of the global airline market.
1991EVA Air accepted delivery of its first
two B767-300ERs in April, and made its
inaugural flight on July 1. Within that first
week, the new airline opened five desti-
nations in Asia -- Bangkok, Seoul, Jakarta,
Kuala Lumpur and Singapore.
1992The comprehensive EVA Training
Center opened in July, and the carrier's
first two all-passenger B747-400s were
EVA Air was founded in March 1989
as a 100% privately owned Taiwan-based
airline. It is an affiliate of Evergreen
Marine Corporation, the world's leading
container-shipping line.
From its maiden flight on July 1,
1991, EVA Air has grown steadily and
today, serves more than 40 major destina-
tions on four continents and in Oceania
with a fleet of 49 aircraft (as of December
2006). The carrier has flourished as it has
continued to expand its fleet and opera-
tion network.
In 1997, after carefully nurturing an
environment where faultless service quali-
ty 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 opera-
tion 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 Airline Services Corporation,
Evergreen Air Cargo Service Corporation,
and other selected subsidiaries.
Operating strategies developed by
the carrier are far-reaching. Company
goals place equal importance on its pas-
senger and cargo services, and it works in
The Company
three MD-11s, one B747-400 and four
B767-200s. The airline also added Bali,
Fukuoka and Auckland routes to its net-
work.
1995The carrier purchased three MD-11
freighters and began to vigorously devel-
op air cargo operations. It set goals
emphasizing passenger and cargo servic-
es equally. And it used joint operations
and land transportation to successfully
extend EVA Cargo services worldwide.
1996Enhancing the high quality of its
operations, EVA applied for ISO-9002 cer-
tification. Within the next year, its pas-
senger service, cargo service and aviation
maintenance operations were all three
delivered in November. EVA used the
first flights of the new aircraft to launch its
Taipei-Los Angeles route and introduce
its four classes of cabin service, including
the debut of its trend-setting Evergreen
Deluxe Class in-between Economy and
Super Business.
1993EVA Air set new standards and
heightened expectations by expanding
its network to more than half a dozen new
destinations, and by launching service to
London, Paris, Seattle, New York, San
Francisco, Brisbane, Sydney and Dubai.
1994EVA made the greatest number of
new aircraft additions to its fleet this year,
purchasing a total of eight, including
15
16
craft and an option for eight more.
Deliveries began in 2005. The carrier
relocated its hub to the brand-new
Terminal 2 at Chiang Kai-Shek
International Airport at the end of July.
2001EVA committed to add more new,
technologically advanced aircraft to its
fleet in March by signing a purchase con-
tract for eight Airbus A330-200s and mak-
ing plans to start taking deliveries in 2003.
EVA Air also secured approval to transfer
its stock listing from OTC and on 17
September, moved its shares to the
Taiwan Security Exchange (TSE).
2002EVA launched its online booking sys-
tem on January 9. It gained approval to
add 24 passenger flights on its thriving
Hong Kong route and to begin new
freighter service. It also introduced a new
slogan "Just relax, your home in the air."
granted ISO-9002 international certifica-
tions simultaneously. EVA achieved ISO-
9001:2000 certification in 2001.
1997Ensuring consistent service quality,
EVA and Singapore Air formed Evergreen
Sky Catering Corporation as a joint ven-
ture and in February, began providing in-
flight catering services.
1998Promoting air safety, EVA signed a
joint-venture contract with General
Electric and established Evergreen
Aviation Technologies Corporation on
February 24. That same day, a powerful
new engine test cell was placed in opera-
tion, and the new joint venture began an
aggressive campaign to raise the stan-
dards of the aircraft maintenance busi-
ness.
1999Earning brilliant results with both pas-
senger and cargo service, EVA produced
outstanding operating performances for
five successive years. The Securities and
Futures Commission (SFC) of Taiwan
approved its admission to the exchange,
and on October 27, EVA Air shares began
to be traded on the over-the-counter
market.
2000In anticipation of future needs and to
expand its fleet, EVA signed a purchase
contract in June with the Boeing
Company for 15 B777-200X/300Xs that
included a firm order for seven of the air-
its intercontinental fl ights between
Taiwan and the Dutch city.
MayEVA Air opened its new Southern
China Cargo Center in Hong Kong,
enabling it to more efficiently and quickly
moving air freight shipments in and out of
the region. The strategically located
Center enhances EVA's highly reliable
cargo services and is especially designed
to meet the needs of Taiwanese manufac-
turers with operations in the Southern
China region.
JuneShareholders voted at their 2006
annual shareholders' meeting to distrib-
ute a cash dividend of NT$0.2, in addition
to allocating NT$52.32 million for
employee bonuses and NT$10.9 million
for supervisors and directors.
JulyEVA Air launched a new service Taipei
- Nagoya service on July 10, 2006 with
five scheduled flights per week. Nagoya
is the carrier's sixth destination in Japan.
SeptemberEVA invested US$ 5 million and
acquired a 100% stake in Sky Castle
Investment Ltd.
EVA invested US$ 4 million and
acquired a 100% stake in Concord Pacific
Ltd.
DecemberEVA introduced Taipei - Mumbai
(Bombay) passenger service on 10
December, 2006 with three weekly flights.
2003EVA debuted stylish new cabin-crew
uniforms on April 1, took delivery of its
first A330-200 on June 26 and introduced
its new generation of a top cabin class,
Premium Laurel, along with an upgraded
economy class and an awesome, state-of-
the-art Audio/Video on Demand system.
2004EVA Air exercised an option for eight
B777s that was part of the firm purchase
contract executed with Boeing in June
2000, expanding its fleet by a total of 15
brand-new B777s. Deliveries of the new
aircraft started in 2005 and will continue
through 2009.
2005EVA took delivery of its first two of 15
B777s and introduced the extra-roomy,
exceptionally comfortable new aircraft to
passengers on the Bangkok and London
with an inviting new slogan, "Sharing the
World, Flying Together."
2006EVA Air opened its new Southern
China Cargo Center in Hong Kong,
enabling it to more efficiently and quickly
move air freight shipments in and out of
the region.
Calendar of 2006 EventsMarch
Amsterdam Airport Schiphol selected
EVA Air to receive its 2005 Efficient Airline
Award in recognition of the carrier's
effective use of ground-support time for
17
18
Directors and Supervisors
ShareholdingWhen Elected
PresentShareholdings
Date ofElection
(Inauguration)
Date ofInitial
Election,Appointment
Shares Held bySpouses,
DependentsName Tenure
Number (%) Number (%) Number (%)Lin Bou-Shiu 2004.06.15 3 Years 2004.06.15 236,587 0 402,619 0.01 19,667 0
Hsu Po-Jung 2004.06.15 3 Years 2006.12.26 660,454,669 22.75 750,571,262 19.37 32,050 0
(Note 1)
Chang Kuo-Cheng 2004.06.15 3 Years 1989.03.31 660,454,669 22.75 750,571,262 19.37 0 0
(Note 1)
Director Lin Ching-En 2004.06.15 3 Years 2001.04.19 3,690,013 0.13 4,099,354 0.11 0 0
(Note 1)
Director Lin Shin-I 2004.06.15 3 Years 1998.05.06 0 0 0 0 0 0
Director Kao Jui-Peng 2004.06.15 3 Years 2002.06.18 275 0 1,048 0 0 0
Supervisor Ko Li-Ching 2004.06.15 3 Years 1992.05.02 136,887 0 143,509 0 0 0
Supervisor Owng Rong-Jong 2004.06.15 3 Years 1996.03.21 660,454,669 22.75 750,571,262 19.37 0 0
(Note 1)
Supervisor Chen Cheng-Pang 2004.06.15 3 Years 2001.04.19 5,770 0 6,398 0 6,351 0
Title
Chairman
Vice Chairman
Director
Director
Supervisor
Note 1: Representative of Evergreen Marine Corp.
Note 2: As of April 30, 2007, the Company has issued 3,874,979,444 shares.
19
April 30, 2007
Shares Held byThird Parties Education & Experience
Concurrent Positions
in Other Companies
Other Managers, Directors or Supervisors Related by Marriage or
Within Second-degree BloodRelationship of Each Other
Number (%) Title Name Relationship0 0 Department of Computer, Director, Uni Airways Corp.
Tamkang University Director, Evergreen Sky Catering Corp. - - -
President, EVA Airways Corp. Chairman, Hsiang-Li Investment Corp.
0 0 Department of Mechanical Director, Evergreen Aviation
Engineering,National Taipei Technologies Corp.
Institute of Technology - - -
Vice Chairman, Evergreen
Aviation Technologies Corp.
0 0 BA, Boston University Director, Evergreen Marine Corp.
Chairman, Evergreen Director, Evergreen Intl.
International Corp. Storage & Transport Corp.
Director, Evergreen Intl. Corp.- - -
Director, Evergreen Sky Catering Corp.
Director,Hsin-Tao Power Corp.
0 0 MBA, Kobe University, Japan Chairman, Evergreen Air Cargo
EVP, EVA Airways Corp., Service Corp. - - -
America.
0 0 BA in Political Science, NTU Chairman, United Holdings
Director, China Development Corp. - - -
Industrial Bank
0 0 Keelung Commercial School Executive Consultant of Chang Yung-Fa
Director, Evergreen Container Foundation - - -
Terminal Corp.
0 0 Keelung Girls' Senior High School Supervisor, Evergreen Marine Corp.
Executive VP, Evergreen Supervisor, Evergreen Intl.
International Corp. Storage & Transport Corp.
Supervisor, Central Reinsurance Corp.- - -
Supervisor, Uni Airways Corp.
Supervisor, Hsin-Tao Power Corp.
0 0 E.M.B.A, Department of Chief Financial Officer,
Business Administration, Evergreen Marine Corp.
College of Business, National Supervisor, Evergreen Intl.
Taipei University Storage & Transport Corp.- - -
Executive Vice President, Director , Central Reinsurance Corp.
Evergreen Marine Corp.
0 0 BA, Soochow University Senior VP, Italia- - -Senior VP, Uniglory Marine Corp. Marittima S.P.A.
20
Major Shareholder of EVA Air's Institutional Shareholder
April 30, 2007
Name of Institutional Shareholder Major Shareholders of Institutional ShareholderEvergreen Marine Corp. Evergreen International S.A.(Panama)(11.49%),
Chang Kuo-Hua(8.16%), Chang Yung-Fa(6.48%),
Ultra International Investments Ltd.(4.59%),
Falcon Investment Services Ltd.(4.58%), Chang
Kuo-Cheng(4.58%), Chang Kuo-Ming(3.43%),
Cheng Shen-Chin(2.29%), Chang Shu-Hua
(2.18%), Management Board of Public Service
Pension Fund(1.72%)
21
If the Above-mentioned Shareholders of Major Shareholder of EVA Air's
Institutional Shareholder are Corporations, the Principal Shareholders
of these Corporations are as follows:
April 30, 2007
Name of Institutional Shareholders Major Shareholders of Institutional ShareholdersChang Yung-Fa(20%), Chang Kuo-Hua(20%),
Evergreen International S.A.(Panama) Chang Kuo-Ming(20%),
Chang Kuo-Cheng(20%),Pieca Corp.(20%)
Ultra International Investments Ltd. 100% shareholders of bearer share certificates
Falcon Investment Services Ltd. 100% shareholders of bearer share certificates
Management Board of Public Service Pension Fund Non-profit organization
22
Criteria for Expertise and Independence of Directors and Supervisors
(1) Not an employee of the Company or any of its affiliated companies;
(2) Not a director or supervisor of the Company's or any of its affiliates. The same does not apply, however , in case
where the person is an independent director of the company , its parent company or any subsidiary in which the
company holds, direct or indirectly, more than 50% of the voting shares.
(3) Not an individual shareholder who holds shares, together with those held by the person's spouse, minor children,
or held by the person under others' names, in an aggregate amount of 1% or more of the total number of issued
shares of the company or ranking in the top 10 in holdings.
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the fifth degree of kinship, of any
of the persons in the preceding three subparagraphs.
(5) Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total num-
ber of issued shares of the company or that holds shares ranking in the top five in holdings.
Lin Bou-Shiu √ √ √ √ √ √ √ √ √ √ Nil
Hsu Po-Jung √ √ √ √ √ √ √ √ √ Nil
Chang Kuo-Cheng √ √ √ √ √ √ Nil
Lin Ching-En √ √ √ √ √ √ √ √ √ √ Nil
Lin Shin-I √ √ √ √ √ √ √ √ √ √ Nil
Kao Jui-Peng √ √ √ √ √ √ √ √ √ √ Nil
Ko Li-Ching √ √ √ √ √ √ √ √ √ Nil
Owng Rong-Jong √ √ √ √ √ √ √ √ Nil
Chen Cheng-Pang √ √ √ √ √ √ √ √ √ √ Nil
1 2 3 4 5 6 7 8 9 10
Qualifications
Name
Independence Criteria
CocurrentlyServing as anIndependentDirector/Number ofOther PublicCompanies
An Instructoror HigherPosition in aDepartmentof Commerce,Law, Finance,Accounting, orOtherAcademicDepartmentRelated to theBusinessNeeds of theCompany in aPublic or PrivateJunior College,College orUniversity
A Judge,PublicProsecutor, Attorney, Certified Public Accountant, or OtherProfessional or Technical Specialists Who Has Passed a NationalExaminationand Been Awarded a Certificate in a Profession Necessary for the Business ofthe Company
Have Work Experience in the Area of Commerce, Law, Finance, or Otherwise Necessary for the Business ofthe Company
Meet One of the Following QualificationRequirements, Together with at Least Five
Years Work Experience
23
(6) Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or insti-
tution that has a financial or business relationship with the company.
(7) Not a professional individual who, or an owner , partner, director, supervisor, or officer of a sole proprietorship, part-
nership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to
the company or any affiliate of the company, or a spouse thereof.
(8) Not having a marital relationship, or a relative within the second degree of kinship to any other director of the com-
pany.
(9) Not been a person of any condition defined in Article 30 of the Company Code.
(10) Not a government, institutional person or its representative as defined in Article 27 of the Company Code.
24
Chairman Lin Bou-Shiu
Vice Evergreen Marine Corp.
Chairman Hsu Po-Jung
DirectorEvergreen Marine Corp.
Chang Kuo-Cheng 3,566 9,629 0 4,500 0 0 (0.21) (1.08)
Director Lin Ching-En
Director Lin Shin-I
Director Kao Jui-Peng
Compensation for Directors
Compensation AllowanceSalary
Directors Salary,Compensation, and
Allowance as %2006 Net Profit
Title Name
EVAConsolidatedSubsidiaries
of EVAEVA
ConsolidatedSubsidiaries
of EVAEVA
ConsolidatedSubsidiaries
of EVAEVA
ConsolidatedSubsidiaries
of EVA
Remuneration Paid to Directors
25
Compensation Earned as Employee of EVA or EVA Subsidiary Affiliates
Salary, Bonus etc. Employee Profit Sharing Employee StockOption
Total CompensationPaid to Directors as% 2006 Net Profit
OtherCompensation from
Non-SubsidiaryAffiliates
0 0 0 0 0 0 0 0 (0.21) (1.08) Yes
Dec. 31, 2006
NT$ (Thousand)
ConsolidatedSubsidiaries
of EVAEVA
ConsolidatedSubsidiaries
of EVAEVA
ConsolidatedSubsidiaries
of EVAEVA
EVAConsolidatedSubsidiaries
of EVA
Cash Stock Cash Stock
26
Supervisor Ko Li-Ching
Evergreen
Supervisor Marine Corp. 0 0 0 750 0 0
Owng Rong-Jong
Supervisor Chen Cheng-Pang
Compensation for Supervisors
Title NameCompensationSalary
Remuneration paid to Supervisors
EVAConsolidatedSubsidiaries of
EVAEVA
ConsolidatedSubsidiaries of
EVA
Allowance
EVAConsolidatedSubsidiaries of
EVA
27
Supervisors Salary, Compensation, and Allowance as %of 2006 Net Profit
Other Compensation fromNon-Subsidiary Affiliates
EVA Consolidated Subsidiaries of EVA
0 (0.06) -
Dec. 31, 2006
NT$ (Thousand)
28
Principal Officers
President Chen Hsing-Te 2006.07.01 339,930 0.009 0 0 0 0
Chief Executive Kao Wan-Hsin 2007.01.01 92,220 0.002 0 0 0 0
Vice President
Executive Vice President, Chiu Ke-Tai 2001.04.19 253,017 0.007 0 0 0 0
Taoyuan Airport Div.
Executive Vice President, Yuen Ping-Yu 2004.01.01 37,041 0.001 0 0 0 0
Flight Operations Div.
Executive Vice President, Nieh Kuo-Wei 2005.01.01 50,456 0.001 125 0 0 0
Public Relations Div.
Executive Vice President, Ho Ching-Sheng 2005.01.01 450,101 0.012 0 0 0 0
Safety & Security Div.
Executive Vice President, Tai Jiin-Chyuan 2005.07.01 90,843 0.002 0 0 0 0
Legal & Insurance Div.
Executive Vice President Yang I-Teng 2006.07.01 12,682 0 296 0 0 0
Cabin Service Div.
Executive Vice President, Wu Kuang-Hui 2006.07.01 127,964 0.003 0 0 0 0
Finance Div.
Executive Vice President, Fang Gwo-Shianng 2007.01.01 164,058 0.004 0 0 0 0
Computer Div.
Executive Vice President, Kuo Sheng-Yih 2007.01.01 53,398 0.001 885 0 0 0
Engineering &
Maintenance Div.
Executive Vice President, Chang Lih-Lih 2007.01.01 156,340 0.004 0 0 0 0
Inflight Service Div.
Spouse & Shares Held Shareholding Dependent by Other
Shareholding Nominal Holder
Number (%) Number (%) Number (%)
Title NameDate of
Inauguration
29
April 30, 2007
Bachelor degree in Transportation Director, Evergreen
Technology & Management, Chiao-Tung Sky Catering Corp.- - -
University Director,
Senior Vice President, Evergreen Intl. Corp. Hsiang-Li Investment Corp.
Bachelor degree in French, Fu Jen
University - - - -
Senior Vice President, Uni Airways Corp.
Bachelor degree in Politics, Chinese Cultural
University - - - -
Junior Vice President, Evergreen Securities Corp.
Bachelor degree in Electrical Engineering,- - - -
Cheng Kung University
Master degree in Communications, Shih Hsin
University - - - -
Manager, Evergreen Intl. (UK) Ltd
Master degree in Flight Safety,- - - -
University of Missouri
Master degree in Maritime Law, National
Taiwan Ocean University - - - -
Manager, Evergreen Intl. Corp.
Department of Chemical Engineering, Minghsin
Institute - - - -
Senior Vice President, Evergreen Sky Catering Corp.
MBA, Sun Yat Sen University- - - -
Junior Vice President, Evergreen Intl. Corp.
Bachelor degree in Computer Science, Feng Chia
University - - - -
Deputy Junior Vice President, Evergreen IT Corp.
Department of Marine Engineering, Kaohsiung
Institute of Marine Technology - - - -
Chief Engineer, Evergreen Marine Corp.
Bachelor degree in Statistics, Tamkang University- - - -
Secretary, Evergreen Intl. Corp.
Manager Related by Marriage or Within Second-degree Kinship of Each Other
Title Name Relationship
Concurrent Positionswith OtherCompanies
Education and Experience
30
Title NameDate of
Inauguration
Spouse & Shares Held Shareholding Dependent by Other
Shareholding Nominal Holder
Number (%) Number (%) Number (%)
Senior Vice President, Han Jei-Li 2003.01.01 765 0 0 0 0 0
Flight Operations Div.
Senior Vice President, Li Shyn-Liang 2005/11/14 96,634 0.002 22 0 0 0
Passenger Div.
Senior Vice President, Sun Chia-Ming 2006.01.01 83,461 0.002 0 0 0 0
Corporate Planning Div.
Senior Vice President, Cheng Chuan-Yi 2006.01.01 252 0 0 0 0 0
Corporate Planning Div.
Senior Vice President, Lee Jen-Ling 2006.01.01 84,958 0.002 0 0 0 0
Corporate Planning Div.
Senior Vice President, Lu Yu-Chuan 2006.01.01 43,050 0.001 0 0 0 0
Personnel Div.
Senior Vice President, Yang Yung-Heng 2006.04.15 57,652 0.001 0 0 0 0
Cargo Div.
Senior Vice President, Tsai Ta-Wei 2006.07.01 749 0 828 0 0 0
Finance Div.
Senior Vice President, Soong Allen 2007.01.01 12,310 0 0 0 0 0
Corporate Planning Div.
Deputy Senior Vice President, Li Ping-Yin 2005.01.01 115,558 0.003 891 0 0 0
Auditing Div.
Deputy Senior Vice President, Wu Su-Shin 2006.01.01 103,944 0.003 0 0 0 0
Service Co-ordination Div.
Deputy Senior Vice President, Tsai Zu -Ming 2007.01.01 11,184 0 0 0 0 0
Corporate Planning Div.
Deputy Senior Vice President, Hou Hsien-Yu 2007.01.01 0 0 0 0 0 0
Computer Div.
Deputy Senior Vice President, Chen Shen-Chi 2007.01.01 30,507 0 0 0 0 0
Taoyuan Airport Div.
31
Manager Related by Marriage or Within Second-degree Kinship of Each Other
Title Name Relationship
Concurrent Positionswith OtherCompanies
Education and Experience
Department of Soil & Water Conservation,- - - -
Tamkang College of Arts and Sciences
Bachelor degree in Traffic and Transportation
Management, Feng Chia University- - - -
Bachelor degree in International Trade,
Chinese Cultural University- - - -
Bachelor degree in International Trade,- - - -
Tunghai University
Bachelor degree in Industrial & Business- - - -
Management, National Taiwan University
Bachelor degree in Business Administration,
Fu Jen University
Junior Vice President,- - - -
Evergreen Aviation Technologies Corp.
Bachelor degree in Business Administration,- - - -
Chinese Cultural University
Bachelor degree in Accounting,- - - -
Chinese Cultural University
Department of Tourism, World College of- - - -
Journalism
Graduate School of Management,
Yuan Ze University - - - -
Manager, Evergreen Heavy Industry Corp.
Bachelor degree in Sociology,- - - -
Fu Jen University
Department of Navigation Technology, National- - - -
Taiwan College of Marine Science and Technology.
Department of Industrial Management, Taiwan
College of Science and Technology- - - -
Department of Tourism, World College of- - - -
Journalism
32
Compensation for President and Executive Vice Presidents
President Chen Hsing-Te
Executive Vice President Kao Wan-Hsin
Executive Vice President Chiu Ke-Tai
Executive Vice President Yuen Ping-Yu
Executive Vice President Nieh Kuo-Wei 20,424 20,424 1,269 1,269
Executive Vice President Ho Ching-Sheng
Executive Vice President Tai Jiin-Chyuan
Executive Vice President Yang I-Teng
Executive Vice President Wu Kuang-Hui
Salary Bonus & Perquisite
Title Name
EVAConsolidated
Subsidiaries ofEVA
EVAConsolidated
Subsidiaries ofEVA
33
Dec. 31, 2006
NT$ (Thousand)
Total Compensation toPresident &EVPs as %
of 2006 Net Profit
Employee StockOptions
Compensationfrom
InvestmentsOther thanSubsidiariesEVA
ConsolidatedSubsidiaries
of EVAEVA
ConsolidatedSubsidiaries
of EVA
0 0 0 0 (1.29) (1.66) 0 0 -
Employee Profit Sharing
EVAConsolidated
Subsidiaries of EVA
Cash Stock Cash Stock
34
Management Team Granted Employee Bonuses, Distribution
The board adopted a proposal for 2006 earning distribution at its meeting on April19, 2007 that no employee bonuses will be distributed.
35
Net Changes in Shareholdings and Shares Pledged by Directors, Supervisors,
Managers and Major Shareholders
2006 As of April 30,2007
Title Name
Chairman Lin Bou-Shiu 31,197 0 0 0
Evergreen Marine Corp. 58,158,835 0 0 0
Vice Chairman Representative:0 0 0 0
Hsu Po-Jung(Note 2)
Evergreen Marine Corp. 58,158,835 0 0 0
Director Representative:9,200,540 0 0 0
Chang Kuo-Cheng
Director Lin Ching-En 127,789 0 (50,000) 0
Director Kao Jui-Peng 0 0 0 0
Director Lin Shin-I 0 0 0 0
Supervisor Ko Li-Ching 0 0 0 0
Evergreen Marine Corp. 58,158,835 0 0 0
Supervisor Representative:0 0 0 0
Owng Rong-Jong
Supervisor Chen Cheng-Pang 0 0 0 0
Major Shareholder Evergreen Marine Corp. 58,158,835 0 0 0
Major Shareholder Evergreen International Corp. 31,636,754 0 0 0
President Chen Hsin-Te 82,465 0 (10,000) 0
Chief Executive
Vice PresidentKao Wan-Hsin 47,736 0 0 0
Executive Vice President Nieh Kuo-Wei 5,754 0 0 0
Executive Vice President Yuen Ping-Yu (24,130) 0 0 0
Executive Vice President Chiu Ke-Tai 30,000 0 0 0
Executive Vice President Ho Ching-Sheng 44,101 0 0 0
Executive Vice President Tai Jiin-Chyuan 25,489 0 0 0
Executive Vice President Chang Lih-Lih 21,339 0 0 0
Executive Vice President Kuo Sheng-Yih 20,595 0 (10,000) 0
Executive Vice President Fang Gwo-Shianng 68,985 0 0 0
Executive Vice President Wu Kuang-Hui 40,358 0 0 0
Executive Vice President Yang I-Teng 0 0 0 0
Senior Vice President Lu Yu-Chuan 47,081 0 (5,000) 0
Senior Vice President Lee Jen-Ling 46,251 0 0 0
Senior Vice President Sun Chia-Ming 0 0 0 0
Increase(Decrease)
in Shareholding
Increase(Decrease) in
Shares Pledged
Increase(Decrease) in
Shares Pledged
Increase(Decrease)
in Shareholding
36
2006 As of April 30,2007
Title Name
Increase(Decrease)
inShareholding
Increase(Decrease) in
SharesPledged
Increase(Decrease) in
SharesPledged
Increase(Decrease)
inShareholding
Senior Vice President Cheng Chuan-Yi 19 0 0 0
Senior Vice President Soong Allen 10,000 0 0 0
Senior Vice President Li Shyn-Liang 62,838 0 0 0
Senior Vice President Han Jei-Li 59 0 0 0
Senior Vice President Yang Yung-Heng 0 0 0 0
Senior Vice President Tsai Ta-Wei (5,942) 0 0 0
Deputy Senior
Vice PresidentLi Ping-Yin 73,530 0 0 0
Deputy Senior
Vice PresidentWu Su-Shin 44,954 0 0 0
Deputy Senior
Vice PresidentTsai Zu -Ming(Note 3) 0 0 0 0
Deputy Senior
Vice PresidentHou Hsien-Yu(Note 3) 0 0 0 0
Deputy Senior
Vice PresidentChen Shen-Chi(Note 3) 0 0 0 0
Note 1: Shareholders holding more than 10% of the Company's stock are noted as "major shareholders" and listed
respectively.
Note 2: Director Hsu Po-Jung was appointed as the representative of Evergreen Marine Corp. on December 26,2006.
Note 3: Deputy Senior Vice President Tsai Zu -Ming, Hou Hsien-Yu, Chen Shen-Chi were inaugurated on January 1,
2007.
Information on Stock Transfer: Nil
Information on Stock Pledged: Nil
37
Authorized Capital Issued Capital Non-Month/
Price Shares Amount Shares AmountSources of Capital Monetary
Year('000) ('000) ('000) ('000)
('000) Capital 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 -
07/2004 10 3,000,000 30,000,000 2,934,369 29,343,694 Corporate bond conversion 414,656 -
08/2004 10 4,000,000 40,000,000 3,046,477 30,464,767 Capitalization of profit 1,121,073 -
09/2004 10 4,000,000 40,000,000 3,266,477 32,664,767 Cash offering 2,200,000 -
common stock at NT$10 par value per
share with 3,874,979,444 shares issued and
outstanding.
Capital and SharesAs of December 31, 2006, EVA Air had
authorized share capital of 4,000,000,000 in
History of Capitalization
Number of Shareholders 0 1 145 81,566 720 82,432
Shareholdings 0 559 1,394,847,518 1,453,879,740 1,026,251,627 3,874,979,444
Holding Percentage 0 0 36 37.52 26.48 100
38
Shareholder Structure
Status of Shareholders
As of April 15,2007
EvergreenMarine Corp.
(Taiwan)19%
Other 32%
Chang Family12%
ForeignInstitution &
Individual26%
Evergreen Intl.Corp.11%
Government Financial Other Legal DomesticForeign
Agency Institution Entity IndividualInstitution & Total
Individual
Authorized Capital Issued Capital Non-Month/
Price Shares Amount Shares AmountSources of Capital Monetary
Year('000) ('000) ('000) ('000)
('000) CapitalExpansion
12/2004 10 4,000,000 40,000,000 3,271,426 32,714,259 Corporate bond conversion 49,492 -
03/2005 10 4,000,000 40,000,000 3,304,390 33,043,895 Corporate bond conversion 329,636 -
06/2005 10 4,000,000 40,000,000 3,356,745 33,567,445 Corporate bond conversion 523,550 -
08/2005 10 4,000,000 40,000,000 3,389,667 33,896,675 Capitalization of profit 329,230 -
12/2005 10 4,000,000 40,000,000 3,389,887 33,898,869 Corporate bond conversion 2,194 -
03/2006 10 4,000,000 40,000,000 3,749,887 37,498,869 Cash offering 3,600,000 -
09/2006 10 4,000,000 40,000,000 3,874,979 38,749,794 Corporate bond conversion 1,250,925 -
39
Distribution of Common Shares
As of April 15,2007
Range of Shareholdings Number of Shareholders Number of Shares %
1-999 22,922 4,811,720 0.1242
1,000-5,000 29,960 71,541,774 1.8462
5,001-10,000 11,470 86,367,304 2.2288
10,001-15,000 5,461 65,273,792 1.6845
15,001-20,000 2,835 51,592,493 1.3314
20,001-30,000 3,231 79,824,650 2.0600
30,001-50,000 2,765 108,830,181 2.8085
50,001-100,000 2,224 156,040,198 4.0269
100,001-200,000 878 119,614,597 3.0868
200,001-400,000 342 93,505,864 2.4131
400,001-600,000 81 39,840,294 1.0281
600,001-800,000 57 39,234,835 1.0125
800,001-1,000,000 24 22,345,147 0.5767
1,000,001 and above 182 2,936,156,595 75.7723
Total 82,432 3,874,979,444 100.0000
40
Market Price, Net Worth, Earnings and Dividends per Share for Most Recent Two
Years
Note 1: Price/Earnings Ratio = Average Share Price at Market Close for Current Fiscal Year/Earnings per Share
Note 2: Price/Dividend Ratio = Average Share Price at Market Close for Current Fiscal Year/Cash Dividend per Share.
Note 3: Cash Dividend Yield Rate = Cash Dividend per Share/Average Market Closing Share Price for Current Fiscal
Year.
Year 2005 2006As of April 30, 2007
Items (Distributed in 2006) (Distributed in 2007)
Market PriceHighest NT$17.45 NT$15.30 NT$15.00
per ShareLowest NT$12.05 NT$12.10 NT$13.05
Average NT$14.66 NT$13.24 NT$14.00
Net Worth Before Distribution NT$12.97 NT$11.91 NT$11.96
per Share After Distribution NT$12.73 - -
Weighted Average Shares 3,395,071,000 shares 3,723,419,000 shares 3,874,979,000 shares
Earnings perBefore
NT$0.39 NT$(0.45) NT$(0.09)
ShareEarnings Adjustment
Per Share After NT$0.39 - -
Adjustment
Cash Dividends NT$0.19354357 - -
Dividends from
DividendsStock
Retained - - -
per ShareDividends
Earnings
Dividends from - - -
Capital Surplus
Price/Earnings Ratio37.21 - -
(Note 1)
Return on Price/Dividend Ratio 74.97 - -
Investment (Note 2)
Cash Dividend Yield Rate1.33% - -
(Note 3)
41
tor/supervisor compensation that does
not exceed 5% of the distributed
amount and submits the program at a
shareholders' meeting for resolution.
Since achieving growth status, EVA has
adopted a remainder appropriation
method as its dividend policy to
accommodate future operations and
expansion, distributing cash dividends
that range from 0 to 50% and stock div-
idends from 100% to 50% alternately.
To maintain profitability and govern the
impact of stock dividends on its oper-
ating performance, EVA may adjust the
distribution rate for cash dividends to
100%~50% and stock dividends to
0~50% in accordance with capital sta-
Dividend Policy and Implementation
Status
Dividend Policy
In accordance with Article 26 of EVA's
Articles of Incorporation, any earning
from the annual settlement should first
be used to offset accumulated deficits
from previous years, after deducting all
applicable taxes and, second, 10% of
the balance should be set aside in a
legal reserve; any remainder will be
added to undistributed earnings from
the prior period for distribution after
the board of directors proposes a dis-
tribution program with employee
bonuses of no less than 1% and direc-
42
Proposed Employee Bonus Plan
Approved by Board of Directors
Employee Cash Bonus: Nil
Employee Stock Bonus: Nil
Compensation Paid to Directors and
Supervisors: Nil
Number of shares proposed for distri-
bution to employees and the percent-
age of the shares above capitalized
earnings: 0 shares, 0%
Estimated EPS after deduction of
employee bonuses and compensation
to directors and supervisors: Not
applicable.
Distribution of Employee Bonus and
Compensation Paid to Directors and
Supervisors in Prior Year:
Employee Cash Bonus: NT$ 52,320,000
Employee Stock Bonus: Nil
Compensation Paid to Directors and
Supervisors: NT$ 10,900,000
Number of shares proposed for distri-
bution to employees and the percent-
age of the shares above capitalized
earnings: 0 shares, 0%.
Estimated EPS after deduction of
employee bonus and compensation to
directors and supervisors: NT$ 0.38
Status of Stock Repurchased by EVA:
N/A
tus if estimated earnings per share for
the current fiscal year are 20% lower
than those of the previous year.
Dividend Distribution in Current Year
The board adopted a proposal for 2006
dividend distribution at its meeting on
April 19, 2007 that no dividend will be
distributed to shareholders.
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 undis-
tributed earnings from the prior period
for distribution after the board of direc-
tors proposes a distribution program
with employee bonuses of no less than
1% and director/supervisor compensa-
tion that does not exceed 5% of the
distributed amount and submits the
program at a shareholders' meeting for
resolution.
43
EVA Air People
2005 2006
Pilots 738 748
Cabin Crew 1,471 1,543
No. of EmployeesDispatchers 31 29
Maintenance 106 114
Other 2,752 2,724
Total 5,098 5,158
Average Age 33.4 33.8
Average Seniority 7.4 8.8
Doctorate 0.08% 0.1%
Master's 3.60% 3.63%
Education Bachelor's 86.39% 87.26%
High School 9.30% 8.43%
Other 0.63% 0.58%
44
Organization
Shareholders
Foreign Branches
Labor Safety & H
ealth Div.
Clinic D
iv.
Com
puter Div.
Taichung Office
Taoyuan Airport D
iv.
Engineering & M
aintenance Div.
Cabin Service D
iv.
Inflight Service Div.
Flight Operations D
iv.
Safety & Security D
iv.
Cargo D
iv.
Passenger Div.
Service Co-ordination D
iv.
Corporate Planning D
iv.
Finance Div.
Legal & Insurance D
iv.
Personnel Div.
General A
ffairs Dept.
Public Relations Div.
Supervisors
Auditing Div.
President
Corporate Planning Committee
Safety Promotion Committee
Service Quality Committee
Chief Executive Vice President
Board of DirectorsChairman
Vice Chairman
45
■ September 2006 -retired one 767-
300ER and bought back one MD-11.■ November 2006 -took delivery of our
fourth B777-300ER and sold one MD-
11.■ December 2006 -ended a lease with
WOA for one MD-11.
The Fleet■ March 2006 - returned one MD-90.■ March 2006 - terminated lease contract
and buy back two 767-300ER■ May 2006 - took delivery of our
eleventh A330-200.■ June 2006 - sold one 767-300ER,
leased our third B777-300ER and
bought back one leased B747-400.
Aircraft TypeFinancial Operating Age On Order
Daily Avg.
OwnedLease Lease
Total(as of Dec. 06) (Delivery Date)
Utilization
(hrs) - 2006
B747-400 1 3 2 6 11.30 13.66
B747-400 Combi 2 0 7 9 12.42 13.46
A330-200 3 0 8 11 2.21 9.91
MD-90 0 0 4 4 9.72 5.80
MD-11 Freighter 9 0 3 12 9.69 14.35
B747-400 Freighter 3 0 0 3 5.46 15.03
2
( JuneB777-200LR 0 0 0 0
2009/NA
March 2010)
9
(Feb.,
May,Aug.,
Dec. 2007/B777-300ER 1 0 3 4 0.66
Mar.,May,13.49
July,
Oct.2008/Jun.
2009)
Total 19 3 27 49 7.52 11.86
AFTK (Million) FTK (Million) Load Factor (%)
2006 2005 % 2006 2005 % 2006 2005 %
America 4,763 4,877 -2.34% 3,401 3,421 -0.58% 71.4 70.1 1.3
Europe 1,125 1,258 -10.57% 973 1,072 -9.24% 86.5 85.2 1.3
Asia 1,108 1,065 4.04% 756 753 0.40% 68.2 70.7 -2.5
Oceania 49 53 -7.55% 30 39 -23.08% 61.2 73.6 -12.4
Total 7,045 7,253 -2.86% 5,160 5,285 -2.37% 73.2 72.9 0.3
46
Passenger Operations
ASK (Million) RPK (Million) Load Factor (%)
2006 2005 % 2006 2005 % 2006 2005 %
America 14,230 13,548 5.03% 11,905 11,171 6.57% 83.7 82.5 1.2
Europe 5,603 5,441 2.98% 4,461 4,151 7.47% 79.6 76.3 3.3
Asia 9,223 8,786 4.97% 6,964 6,656 4.63% 75.5 75.8 -0.3
Oceania 1,311 1,573 -16.66% 947 1,121 -15.52% 72.2 71.3 0.9
Total 30,367 29,348 3.47% 24,277 23,099 5.10% 79.9 78.7 1.2
Passenger No. Revenue (Million) Yield (NT$)
2006 2005 % 2006 2005 % 2006 2005 %
America 1,113,575 1,046,656 6.39% 16,928 15,182 11.50% 1.42 1.36 4.63%
Europe 580,346 523,735 10.81% 7,844 6,963 12.65% 1.76 1.68 4.82%
Asia 4,355,848 4,185,380 4.07% 20,005 18,801 6.40% 2.87 2.82 1.70%
Oceania 122,498 148,648 -17.59% 1,549 1,707 -9.26% 1.64 1.52 7.42%
Total 6,172,267 5,904,419 4.54% 46,326 42,653 8.61% 1.91 1.85 3.34%
2006 Passeng Revenue Composition
37%
17%3%
43% America
Europe
Oceania
Asia
2006 Cargo Revenue Composition
19%1%
17% 63%
America
Europe
Oceania
Asia
The Market
Cargo Operations
47
Cargo Carried ( Tons) Revenue (Million) Yield (NT$)
2006 2005 % 2006 2005 % 2006 2005 %
America 285,286 288,946 -1.27% 26,235 24,801 5.78% 7.71 7.25 6.40%
Europe 101,536 111,602 -9.02% 7,195 7,467 -3.64% 7.39 6.97 6.16%
Asia 439,136 438,269 0.20% 7,734 7,411 4.36% 10.23 9.84 3.94%
Oceania 3,994 5,282 -24.38% 218 253 -13.83% 7.27 6.49 12.02%
Total 829,952 844,099 -1.68% 41,382 39,932 3.63% 8.02 7.56 6.14%
Major Competitors and Market Shares
Data Source: Monthly Digest of Statistics, CAA
Item \ year 2006 2005
EVA Airways 27,885 27,090
Number of Flights Taiwan 146,249 139,194
Market Share (%) 19.07 19.46
EVA Airways 5,769,005 5,467,933
Number of Passengers Taiwan 27,437,098 26,144,974
Market Share (%) 21.03 20.91
EVA Airways 387,857 468,536
Tons of Cargo Taiwan 1,356,284 1,768,402
Market Share (%) 28.60 26.49
48
and plans to gradually replace theB747-400s fleet with this newer, morecomfortable and fuel efficient aircrafton America routes. The addition of theB777-300ERs to our operations pro-vides our passengers with comfortablecabins featuring up-to-date technolo-gy, and further enhances our standardsof service. Over 40 weekly cargo flights provide anintense network between Great Chinaarea and North America to meet ourcustomer's needs. To further enhanceoperating efficiency, we will increasecargo frequency, subject to marketdemand.
EuropeStarting from the end of 2007, we willbegin operating B747-400s in our newthree-class configuration on Londonroute and introduce B777-300ER on ourParis route, giving passengers a new in-flight experience and the mostadvanced cabins available, and furtherelevating our service quality. Our European routes have allied withworld renowned carriers i.e. BritishAirways (BA), Lufthansa Airlines (LH)and Austrian Airlines (OS).Through EVAEuropean Cargo Center in Belgium, wehave gradually integrated cargo net-work in Europe. In addition, 3 weeklyB747-400 combi flights to Mumbai pro-vide a stable passenger belly cargocapacity to explore long haul market in
2007 OutlookConsistent with global economic pros-perity, cross-strait business and tradeare growing persistently while the gov-ernment is lifting the ban on Chinesetourists. The charter-flight programbetween Taiwan and Mainland Chinacontinues to be an overwhelming suc-cess which is mainly contributed by thestrong demand of cross-strait travel.The forecast of growth on EVA's flightroutes sustains positive.
AmericaEVA now operates 39 direct passengerflights per week to the US and Canada.As of our 2007 summer schedule (March 25 - October 27), EVA is flying 17flights a week to Los Angeles, 12 flightsper week to San Francisco, four weeklynon-stop flights to Seattle and threeweekly to Seattle-New York. Our code-share relationship with Air Canada onVancouver route helps to increase fre-quency from three to five flights perweek to meet the demands of the peakseason (the third week of June throughthe end of August). In addition, bycode-sharing with American Airlines,Air Canada, Continental Airlines andUS Airways, we share our routes andenhance the connection to and fromcities of North America. EVA introduced our first brand-newBoeing 777-300ER in service on BR16Los Angeles flight on June 26, 2006,
49
mental Asia-Pacific Regional OperationsCenter, EVA has built a strong networklinking Southeast Asia and America, andthere is great potential for further devel-opment among these markets.Our code-sharing arrangement with AirNippon Airways (ANK) includesfreighters to Tokyo, Osaka and Nagoya,extending our cargo network to NorthEast Asia. We are also evaluating ourfleet deployment so that we can relo-cate our capacity on profitable routeswhen it's appropriate.In sum, the thriving global economy isseen positive to the aviation market. Asour operation of charter-flight toMainland China for the Chinese NewYear and other holidays matures andthe government actively involves innegotiating passenger and cargo char-ter flights, all these will translate intorevenue for EVA. As we await thisbecomes reality, EVA will remain opti-mistic and be prepared to respondquickly as we well planned.
between India and America. To nurtureIndia market, our European-bondfreighters have served stop-over inMumbai and Deli to generate moresectors revenue to lift overall Europeanroutes operational effectiveness.
Australia and New ZealandMarket demand and operating costshave dictated that EVA concentratespassenger services for this region toBrisbane since 2006 summer scheduleby code-sharing with Qantas Airwaysand maintains two weekly flights toAuckland.
AsiaThe International Civil AviationOrganization (ICAO) forecasts that the airtransport market in the Asia Pacific regionwill outperform other areas. Taiwan'slocation makes it ideal as pivot point fortraffic between America and South EastAsia. To maximize geographic advan-tages and harmonize with the govern-
50
INDIAN OCEANINDIAN OCEANSOUTHSOUTHATLANTIC ATLANTICOCEANOCEAN
NORTHNORTHATLANTIC ATLANTICOCEANOCEAN
ARCTIC OCEANARCTIC OCEAN
RED SEA
REDSEA
台灣TaiwanTaiwan
長榮航空飛航路線圖 EVA AIR ROUTE MAPEVA AIR ROUTE MAP
阿姆斯特丹 AmsterdamAmsterdam
赫爾辛基 HelsinkiHelsinki
斯德哥摩爾 StockholmStockholm
哥本哈根 CopenhagenCopenhagen
倫敦 LondonLondon
巴黎 ParisParis法蘭克福 FrankfurtFrankfurt
羅馬 RomeRome
突尼斯 TunisTunis
開羅 CairoCairo
雅典 AthensAthens
安卡拉 AnkaraAnkara
耶路撒冷 JerusalemJerusalem
米蘭 MilanMilan馬德里 MadridMadrid
莫斯科 MoscowMoscow
貝魯特 BeirutBeirut
杜拜 DubaiDubai
清邁 Chiang MaiChiang Mai
仰光 YangonYangon
曼谷 BangkokBangkok
金邊 Phnom PenhPhnom Penh普吉島 PhuketPhuket可倫坡 ColomboColombo
孟買 MumbaiMumbai
德里 DelhiDelhi
檳城 PenangPenang
吉隆坡 Kuala LumpurKuala Lumpur
新加坡 SingaporeSingapore
雅加達 JakartaJakarta泗水 SurabayaSurabaya
峇里島 BaliBali
永珍 VientianeVientiane
河內 HanoiHanoi澳門 MacauMacau香港 Hong KongHong Kong廣州 GuanzhouGuanzhou
北京 BeijingBeijing
首爾 SeoulSeoul
上海 ShanghaiShanghai
札幌 SapporoSapporo
東京 TokyoTokyo
馬達加斯加
Mad
agas
car I
s.
Mad
agas
car I
s.
開普敦 柏斯 PerthPerth
阿得萊德 AdeladeAdelade
墨爾本 MeMel
雪梨
黃布
客運服務航線 Passenger routePassenger route
貨運服務航線 Freighter routeFreighter route
聯營航線 Code-sharing service operated by partner airlinesCode-sharing service operated by partner airlines
聯營航線 Code-sharing service operated by both EVA Air and partner airlinesCode-sharing service operated by both EVA Air and partner airlines
航線資料僅供參考,如需最新資訊請上網查詢 The information in these pages is for general reference only.The information in these pages is for general reference only.For further details please refer to EVA Air's internet Website:For further details please refer to EVA Air's internet Website:http://www.evaair.com http://www.evaair.com
仙台 SendaiSendai 大阪 OsakaOsaka
福岡 FukuokaFukuoka
布魯賽爾 BrusselsBrussels
台北 TaipeiTaipei
高雄 KaohsiungKaohsiung
馬尼拉 ManilaManila
胡志明市 Ho Chi Minh CityHo Chi Minh City
維也納 ViennaVienna
名古屋 NagoyaNagoya
51
YELLOWYELLOWSEASEA
PACIFIC OCEANPACIFIC OCEAN
SOUTH PACIFIC OCEANSOUTH PACIFIC OCEAN
NORTH PACIFIC OCEANNORTH PACIFIC OCEAN
ARCTIC OCEANARCTIC OCEAN
名古屋 NagoyaNagoya
台灣TaiwanTaiwan
INDIAN OCEANINDIAN OCEAN
BAY OF BAY OFBENGALBENGAL
溫哥華 VancouverVancouver
西雅圖 SeattleSeattle
elbourneMelbourne
梨 SydneySydney
黃金海岸 Gold CoastGold Coast布里斯本 BrisbaneBrisbane
奧克蘭 AucklandAuckland
舊金山 San FranciscoSan Francisco
聖荷西 San JoseSan Jose
奧斯汀 AustinAustin
墨西哥城 Mexico CityMexico City
丹佛 DenverDenver
拉斯維加斯 Las VegasLas Vegas
洛杉磯 Los AngelesLos Angeles鳳凰城 PhoenixPhoenix
安克拉治 AnchorageAnchorage
羅徹斯特 RochesterRochester
芝加哥 ChicagoChicago 水牛城 BuffaloBuffalo
克里夫蘭 ClevelandCleveland
夏威夷 HawaiiHawaii
達拉斯 DallasDallas
亞特蘭大 AtlantaAtlanta
波士頓 BostonBoston
哈瓦那 HavanaHavana
巴拿馬 PanamaPanama
邁阿密 MiamiMiami
里奇蒙 RichmondRichmond華盛頓 Washington D.C.Washington D.C.
雪城 SyracuseSyracuse
紐約 New YorkNew York費城 PhiladelphiaPhiladelphia巴爾的摩 BaltimoreBaltimore
聖地亞哥 SantiagoSantiago
聖保羅 San PauloSan Paulo
布宜諾斯艾利斯 Buenos AiresBuenos Aires
福岡 FukuokaFukuoka
台北 TaipeiTaipei
高雄 KaohsiungKaohsiung
札幌 SapporoSapporo
大阪 OsakaOsaka
東京 TokyoTokyo
曼谷 BangkokBangkok
檳城 PenangPenang
新加坡 SingaporeSingapore
泗水 SurabayaSurabaya
胡志明市 Ho Chi Minh CityHo Chi Minh City
河內 HanoiHanoi
台北 TaipeiTaipei
高雄 KaohsiungKaohsiung
馬尼拉 ManilaManila
峇里島BaliBali
雅加達 JakartaJakarta
台灣TaiwanTaiwan
多倫多 TorontoToronto
休士頓HoustonHouston
匹茲堡 PittsburghPittsburgh
仙台 SendaiSendai
ai
首爾 SeoulSeoul
吉隆坡 Kuala LumpurKuala Lumpur
永珍 VientianeVientiane
金邊 Phnom PenhPhnom Penh
聖路易 St. LouisSt. Louis
香港 Hong KongHong Kong
澳門 MacauMacau
52
■ Taipei - Honolulu service was suspend-
ed in September 2006.■ EVA introduced Taipei - Mumbai
(Bombay) passenger service on 10
December, 2006 with three flights per
week .
The Network■ EVA suspended service to Vientiane,
Laos in January 2006.■ Sydney service was suspended from
March 2006.■ EVA Air launched a new service Taipei -
Nagoya service with five scheduled
flights per week in July.
Air cargo destination only
Total 42 destinations
Los San Seattle Anchorage Atlanta Chicago
North Angeles Francisco
AmericaDallas Vancouver JFK Newark
SouthBrisbane Auckland
Pacific
Europe Vienna London Paris Amsterdam Brussels Frankfurt
Osaka Fukuoka Taipei Kaohsiung Hong Kong Macau
BangkokKuala
Penang JakartaDenpasar
Surabaya
AsiaLumpur Bali
SingaporeHo Chi
Bombay Manila Tokyo SapporoMinh City
PhnomSendai Seoul Delhi Nagoya
Penh
MiddleDubai
East
53
100% holdings.■ EVA invested in Concord Pacific Ltd.
with US$4,000,000 and obtained 100%
holdings.
EVA subsidiary companies are presented in
the following table.
Principal Subsidiaries■ Uni Japan Co., Ltd. stopped operating
and went into liquidation from June 2,
2006 to August 29, 2006. The liquida-
tion had been authorized by the local
government.■ EVA invested in Sky Castle Investment
Ltd. with US$5,000,000 and obtained
CompanyPrincipal
Location Date Founded Capital Share %Activities
Evergreen Airline GroundTaiwan Oct. 1990 NT$361.75 million 56.33%
Services Corp. handling
RTW AirTravel business Singapore Oct. 1989 SG$1.5 million 49.00%
Services(S) Pte. Ltd.
Green Siam Air Travel business Thailand May 1990 THB20 million 49.00%
Services Co., Ltd.
Evergreen Sky Airline catering Taiwan Oct. 1993 NT$1 billion 49.80%
Catering Corp.
Evergreen Air transport
Airways Service and aircraft Macau Dec. 1994 US$12,488 99.00%
(Macau) Ltd. leasing
Evergreen Aviation Aircraft repair
Technologies Co., and Taiwan Nov. 1997 NT$3.4 billion 80.00%
Ltd. maintenance
Hsiang-Li InvestmentTaiwan Jan. 2001 NT$1 billion 100%
Investment Corp. business
Evergreen Air Cargo terminalTaiwan Mar. 2000 NT$1.2 billion 60%
Cargo Service Corp. operation
PT Perdana
Andalan Air Travel business Indonesia May 1991 IDR 1.6 billion 49%
Service
Sky Castle InvestmentSamoa Feb. 2005 USD 5 million 100%
Investment Ltd. business
Concord Pacific InvestmentSamoa Apr. 2005 USD 4 million 100%
Ltd. business
Dec. 31, 2006
54
Important Resolutions by Shareholders and BOD
Summary of Important
Proposals1. Distribution of retained earn-
ings:
(1) NT$0.2 in cash dividends
will be distributed for each
share, amounting to
NT$749,977,384.
(2) Remuneration for directors
and supervisors amounted
to NT$10,900,000.
(3) Employee bonuses were
NT$52,320,000.
2. To amend the Articles of
Incorporation.
3. To amend Procedures for
Loaning Funds to Others and
Endorsements/Guarantees.
4. To amend Procedures for
Engaging in Derivatives Trad-
ing.
Result of
ResolutionAll shareholders present
agreed unanimously.
All shareholders present
agreed unanimously.
All shareholders present
agreed unanimously.
All shareholders present
agreed unanimously.
1. A resolution by the Board of Directors on
June 28, 2006 set August 2, 2006 as the
date of record for dividend distribution
and September 13 as the date for cash
dividend distribution.
2. By resolution of the Board of Directors
on July 11, 2006, EVA adjusted the cash-
dividend rate for shareholders to
NT$ 0.19354357 per share.
3. Remuneration for directors and supervi-
sors, and employee bonuses were dis-
tributed on July 31, 2006.
EVA operates in
accordance with amended
Articles of Incorporation.
EVA operates in
accordance with amended
Procedures for Loaning
Funds to Others and
Endorsements/Guarantees.
EVA operates in
accordance with amended
Procedures for Engaging in
Derivatives Trading.
Date of
Meeting
June 14, 2006
Important Shareholders' Resolutions
Execution
55
Important ProposalsProposal 1: To stipulate the converting-base date for the second unsecured convertible bond dur-
ing the last quarter of 2005.Proposal 2: To amend the subscribing ratio to 83.9945 shares for every 1,000 in holdings and set
the issue price to be NT$12 per share.Proposal 3: To amend the price of the second unsecured convertible bond to NT$13.51 on 26
January 2006.Proposal 1: To amend the Procedures for Loaning Funds to Others and Endorsements/
Guarantees.Proposal 2: EVA convened its shareholders' meeting on June 14, 2006 (Wednesday), and no stocks
could be transferred during the period of April 16 through June 14, as stipulated bylaw. In addition, EVA's second unsecured convertible bond could not be transferredduring this period.
To purchase two B767-300ERs from Fortune Leasing Co., Ltd. for NT$1,750,000,000.Proposal 1: President Chang Kuo-Wei is on leave without pay and deputized by Chief EVP Chen
Hsing-Te.Proposal 2: To accept the 2005 Financial Report.Proposal 3: To appoint SVP Wu Kuang-Hui and DSVP Tsai Ta-Wei to be Financial Manager and
Chief Accountant.Proposal 1: An audit of Internal Controls was in agreement and presented a Declaration of Internal
Control.Proposal 2: To accept the 2005 Consolidated Financial Report.Proposal 3: To accept the plan for distributing 2005 retained earnings.Proposal 4: To amend the proposal arrangement in the Rules of Shareholders' MeetingsProposal 5: To amend the Articles of Incorporation.Proposal 6: To amend Procedures for Engaging in Derivatives Trading.Proposal 1: To change the counterparty of the sale and leaseback for the third 777-300ER to Allco
Rentals (UK) Ltd. The selling price was US$155,000,000.Proposal 2: To sell two B767-300ERs to Aviation Financial Services at US$ 48,500,000.Proposal: To purchase one B747-400 from Forth Leasing Co., Ltd. For US$ 58,623,377.83.Proposal 1: To purchase 25% of shares in Shanghai International Cargo Ltd. for US$3,880,000 from
Sino Prime Ltd. through Concord Pacific Ltd.Proposal 2: To issue the 14th secured corporate bond.Proposal: President Chang Kuo-Wei is replaced by Chen Hsing-Te, effective on July 1,2006.EVA set August 2, 2006 as the date of record for dividend distribution with no stocks to be trans-ferred from July 29 through August 2, as stipulated by law. It also set September 13 as the date forcash-dividend distribution.Proposal 1: As the bondholder of the second unsecured convertible bond converted the corpo-
rate bond into common stock and increased the number of shares outstanding, EVAresolved to adjust cash dividend to NT$ 0.19354357 per share.
Proposal 2: To appoint JVP Richard Lee as Accountant.To purchase one MD-11 from Wells Fargo Bank Northwest N.A. for US$ 46,862,144.51.To stipulate the converting-base date for the second unsecured convertible bond during the thirdquarter of 2006.
To sell one MD-11 to Celestial Aviation Trading 17 Limited for US$ 55,000,000.
Proposal 1: To elect Hsu Po-Jung as Vice Chairman.Proposal 2: To sell 48,461,170 shares of Hsin Tao Power Company to Pieca Corporation at NT$25
per share, amounting to NT$ 1,211,529,250.Proposal 3: To purchase one spare engine from General Electric Company (GE) for approximately
US$ 22,000,000.
Date of Meeting
Important Resolutions by the Board of Directors
January 3, 2006
March 16, 2006
March 21, 2006
March 30, 2006
April 24, 2006
May 24, 2006
June 8, 2006
June 12, 2006
June 19, 2006
June 28, 2006
July 11, 2006
September 6, 2006
October 2, 2006
November 15,2006
December 28,2006
Operating Revenue 93,903,564 88,518,249 5,385,315 6 Operating Cost 90,334,648 80,858,499 9,476,149 12 Gross Profit from 3,568,916 7,659,750 (4,090,834) (53)OperationsOperating Expenses 6,906,700 6,808,750 97,950 1 Operating Income (3,337,784) 851,000 (4,188,784) (492)Non-Operating 3,101,477 2,071,997 1,029,480 50Income and GainsNon-Operating 2,027,617 1,786,306 241,311 14Expenses and Losses Income before Income (2,263,924) 1,136,691 (3,400,615) (299)TaxIncome Tax 416,648 189,369 227,279 120Benefit (Expenses) Cumulative effect of 160,691 - 160,691 -changes in accountingprincipleNet Income (1,686,585) 1,326,060 (3,012,645) (227)
56
Financial and Operating Results
The above differences had no major impact on EVA' s financial position.
Financial Results
Balance Sheet
ItemYear 2006 2005 Difference
Amount %Current Assets 31,663,684 26,424,512 5,239,172 19.83
Fixed Assets 78,892,242 67,946,716 10,945,526 16.11 Other Assets 18,845,517 22,811,541 (3,966,024) (17.39)Total Assets 141,168,129 128,523,279 12,644,850 9.84 Current Liabilities 34,250,760 31,374,815 2,875,945 9.17 Long-Term Liabilities 58,640,800 50,969,101 7,671,699 15.05 Other Liabilities 2,135,966 2,203,491 (67,525) (3.06)Total Liabilities 95,027,526 84,547,407 10,480,119 12.40 Common Stock 38,749,794 33,898,869 4,850,925 14.31Capital Surplus 4,580,118 3,424,986 1,155,132 33.73 Retained Earnings 1,890,782 4,390,564 (2,499,782) (56.94)
Funds and 11,766,686 11,340,510 426,176 3.76Investments
Total Stockholders' 46,140,603 43,975,872 2,164,731 4.92Equity
NT$(Thousand)
Income Statement
Item
Year2006 2005
Increase (Decrease)
Amount
Change
(%)
NT$(Thousand)
57
■ Analysis of deviation of more than 20% in gross profit margin:
Before and After Period
of Increase (Decrease)
Change Amount
Favorable (Unfavorable) VarianceVariance in
Sales Price
Variance in
Cost Price
Variance in Sales
Segmentation
Variance in
Volume
Other
Passenger (2,187,153) 1,449,904 (3,639,470) (102,090) 104,503 -Cargo (2,031,737) 2,524,806 (4,568,366) 58,195 (46,372) -Other 128,056 - - - - 128,056 Total (4,090,834) 3,974,710 (8,207,836) (43,895) 58,131 128,056
•Variance in sales price: The price increase this year led to positive results amountingto NT$ 3,974,710,000.
•Variance in cost price: The relentless climb in oil prices this year led to negativeresults amounting to NT$8,207,836,000.
•Variance in sales segmentation: Higher fuel costs for long- haul routes led to negativeresults amounting to NT$43,895,000.
•Variance in volume:Passenger: The addition of new routes led to positive results amounting toNT$104,503,000.Cargo: Decreased code-sharing frequency with other airlines led to negative resultsamounting to NT$46,372,000. Integrating the above variance led to positive results amounting to NT$58,131,000.
•Other:Higher income from in-flight sales led to positive results amounting to a total ofNT$128,056,000.
■ Lower net operating income was a result from the same reason as gross profit mar-
gins.■ Increased gain from disposal of equity investment contributed higher investment
income to EVA.
Cash Flow Analysis
Changes in Cash Flow Analysis Over Recent Two Years
ItemYear 2006 2005
Increase (Decrease)
Ratio%Ratio of Cash Flow(%) 13.00 13.00 (00.00)%Cash Flow Adequacy Ratio (%) 82.00 147.00 (44.22)%Ratio of Re-investment for Cash(%) 3.00 2.00 50.00 %
With higher operating revenue and reduced distribution of cash dividend, cash flow
from financing activities increased, and led to a higher ratio of re-investment for cash.
Remedy Measures for Negative Cash Balance
EVA expects to pay the capital expenditures by reducing investment on bond fund and
by increasing bank loans.
NT$(Thousand)
58
Cash Liquidity Analysis for the Coming Year
NT$(Thousand)
■ Operating activities: Oil prices for 2007 are expected to stay relatively low and loweroperating cost, so we estimated cash flow from operating activities to be higher thanin 2006.
■ Investment activities: We expect to decrease short-term bond-fund investments.■ Financing activities: For the newly delivered aircraft of 2007, we will increase both
long-term and short-term bank loans to pay the capital expenditures as well as repayloans and improve financial structure.
Net Cash Flow Remedy Measures for Negative
from Operating Cash Balance
Activities Cash Outflows Cash
Initial Cash During This During This Balance Investment Financing
Balance Year Year (Negative) Plans Plans
(1) (2) (3) (1)+(2)-(3)
2,997,459 6,600,000 24,859,738 (15,262,279) - 16,848,000
Impact of Major Capital Expenditures on Financial Operations in Recent Years
Capital Utilization and Major Capital Expenditure Resources
NT$(Thousand)Actual or Actual or Total
Expected Expected Capital
Resources Finish Date Required2007 2008 2009 2010
Purchase Financing 2010.12.31 50,000 30,000 - - 20,000
of ULD
(Unit Load
Devices)
Equipment
Purchase Financing 2010.12.31 200,000 150,000 - - 50,000
of Other
Equipment
Purchase Financing 2010.03.01 40,171,354 17,843,197 14,469,232 5,589,694 2,269,231
of
Aircraft
Expected future benefits■ By purchasing new A330-200, B777-300ER and B777-200LR aircraft, we estimate that
we can increase annual revenue by NT$1,385,000,000, NT$1,840,000,000 andNT$1,404,000,000 respectively for each model.
■ Entitling to tax incentives provided by the Statute for Upgrading Industries of ROC,an investment tax credit is available for the delivery of newly purchased aircraft.
Items
Actual or Expected Capital Utilization
2006 2005 2004 2003 2002
Operating Revenue 93,904 88,518 82,655 65,387 64,577
Operating Costs 97,241 87,667 77,940 62,894 59,520
Operating Profit (3,338) 851 4,715 2,493 5,058
Non-operating Income 3,101 2,072 1,122 905 593
Non-operating Expenses
and Loss2,028 1,786 2,154 2,182 3,233
Income before Tax (2,264) 1,137 3,683 1,216 2,417
Tax 417 189 440 180 220
Net Income (1,687) 1,326 3,243 1,396 2,637
Earnings per Share (EPS) (0.45) 0.39 1.06 0.55 1.19
2006 2005 2004 2003 2002
Current Assets 31,664 26,425 25,762 24,694 22,417
Fixed Assets 78,892 67,947 60,493 59,102 62,019
Total Assets 141,168 128,523 117,705 114,668 115,513
Current Liabilities 34,251 31,375 33,975 28,863 28,687
Long-term
Liabilities58,641 50,969 37,937 45,165 49,782
Total Liabilities 95,028 84,547 74,597 76,455 80,467
Share Capital 38,750 33,899 32,714 27,534 24,250
Shareholders'
Equity46,141 43,976 43,108 38,213 35,046
59
Condensed Balance Sheet for 2002 - 2006
NT$(Million)
Condensed Income Statement for 2002 - 2006
NT$(Million)
60
Revenue by Business Segment
NT$(Million)
Passenger Cargo Other Total
2006 46,326 49% 41,382 44% 6,196 7% 93,904 100%
2005 42,653 48% 39,932 45% 5,934 7% 88,518 100%
2004 38,349 46% 38,534 47% 5,772 7% 82,655 100%
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%
Revenue and Operating Margin
2002 2003 2004 20062005
Million
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
Revenue
ProfitMargin
100.000
90.000
80.000
70.000
60.000
50.000
40.000
30.000
20.000
10.000
0
Total Revenue-2006
Passenger Services49%
Cargo Services44%
Other7%
61
Operating Costs
NT$(Million)
2006 2005 2004 2003 2002
Fuel 39,636 32,080 23,474 15,300 13,637
Staff 7,930 7,548 8,050 7,009 6,324
Lease Rental 10,393 10,600 9,406 8,384 7,442
Depreciation and Amortization 6,409 4,721 4,863 4,813 4,734
Commissions 7,223 7,399 7,240 6,188 5,853
Landing, Parking and Routes 8,909 8,904 8,764 7,515 7,121
Maintenance 5,667 5,694 5,835 5,283 5,703
Other 11,075 10,721 10,308 8,402 8,706
Total 97,241 87,667 77,940 62,894 59,520
Costs-2006
8%
41%
6%7%7%
11%
9%11%
Staff Fuel Maintenance
Commission Depreciation & Amortization Lease Rental
Landing,Parking& Routes Other
62
Financial Ratio Analysis
Item Year 2006 2005 2004 2003 2002
Financial StructureDebt Ratio 67.32 65.77 63.38 66.68 69.66
(%)Ratio of Long-term Liabilities and
132.82 139 134 141 137Stockholders' Equity to Fixed Assets
Current Ratio 92.45 85 76 86 79
Solvency (%) Quick Ratio 54.23 42 44 51 45
Times Interest Earned Ratio(Times) 0.05 2.70 2.75 1.53 1.78
Average Collection Turnover (Times) - - - - -
Operating Average Collection Days for Receivables - - - - -
Performance Average Inventory Turnover (Times) - - - - -
Analysis Average Days for Sale of Goods - - - - -
Fixed Assets Turnover (Times) 1.28 1.37 1.38 1.08 1.04
Total Assets Turnover (Times) 0.67 0.69 0.70 0.57 0.56
Return on Total Assets (%) (0.16) 2.14 4.01 2.61 4.21
Return on Stockholders' Equity (%) (3.74) 3 8 4 8
ProfitabilityOperating Income to Paid -in
(8.61) 1 14 9 21Capital (%)
Return on Sales (%) (1.8) 2 4 2 4
Earnings per Share (NTD) (0.45) 0.39 1.06 0.55 1.19
Ratio of Cash Flows 13.00 13 25 25 33
Cash Flow Cash Flow Adequacy Ratio 82.00 147 235 233 136
Ratio of Re-Investment for Cash 3.00 2 8 6 8
Degree of Operating(1.7) 61 14 21 10
Degree of Leverage Leverage
Financial Leverage 0.63 (0.31) 1.67 7.14 2.35
Note:(1) Debt Ratio: Total Liabilities/Total Assets(2) Ratio of Long-term Liabilities and Stockholders' Equity to Fixed Assets:
(Net Stockholder Equity + Long-term Liabilities) / Net Fixed Assets(3) Current Ratio: Current Assets/Current Liabilities(4) Quick Ratio: Liquid Assets/Current Liabilities(5) Times Interest Earned Ratio (Times): Earning Before Taxes and Interest Expense/Interest Expense(6) Fixed Assets Turnover: Net Sales/ Fixed Assets(7) Total Assets Turnover: Net Sales/Total Assets(8) Return on Total Assets: (Income after Tax + Interest Expenses)/Total Assets(9) Return on Stockholders' Equity: Income after Tax/Average Stockholders' Equity(10) Operating Income to Paid -in Capital: Operating Income/Capital(11) Return on Sales: Income after Tax/ Net Sales(12) Ratio of Cash Flows: Fund from Operating/Current Liability(13) Cash Flow Adequacy Ratio: 5-Year Sum of Cash from Operation/5-Year Sum of Capital Expenditures, Incremental
Inventory, and Cash Dividends(14) Ratio of Re-investment for Cash: (FFO- Cash Dividend)/ (Gross Fixed Assets + Long-term Investment + Other
Assets + Working Capital)(15) Degree of Operating Leverage: (Net Sales - Operating Variable Cost and Expense) / Operating Income(16) Financial Leverage: Operating Income / (Operating Income - Interest Expense)
63
Operating Results
2006 2005 2004 2003 2002
Overall Capacity (Million) 9,778 9,894 9,884 8,727 7,758
Overall Traffic (Million) 7,344 7,364 7,439 6,345 5,882
Overall Load Factor (%) 75.1 74.4 75.3 72.7 75.8
Overall Yield (NT$) 11.94 11.21 10.33 9.58 10.21
Passenger Capacity (Million) 30,367 29,348 27,353 25,023 25,184
Passenger Traffic (Million) 24,277 23,099 21,755 18,133 19,508
Passengers Carried ('000) 6,172 5,904 5,438 4,321 4,794
Passenger Load Factor (%) 80.0 78.7 79.5 72.5 77.5
Passenger Yield (NT$) 1.91 1.85 1.76 1.61 1.67
Cargo Capacity (Million) 7,045 7,253 7,423 6,475 5,491
Cargo Traffic (Million) 5,160 5,285 5,481 4,713 4,126
Cargo Carried (Tons) 829,952 844,099 858,989 734,900 619,435
Cargo Load Factor (%) 73.2 72.9 73.9 72.8 75.1
Cargo Yield (NT$) 8.02 7.56 7.03 6.70 6.67
Unit Cost (NT$) 9.94 8.86 7.89 7.21 7.67
Number of Aircraft 49 51 50 45 42
Number of Employees 5,158 5,098 4,934 4,469 4,394
Capacity per Employee
(Thousand)1,896 1,941 2,003 1,953 1,765
Traffic per Employee
(Thousand)1,424 1,445 1,508 1,420 1,339
Revenue per Employee
(Thousand)18,205 17,363 16,752 14,631 14,697
Passengers Carried and Load Factor
3 ,0 0 0
3 ,5 0 0
4 ,0 0 0
4 ,5 0 0
5 ,0 0 0
5 ,5 0 0
6 ,0 0 0
6 ,5 0 0
2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6
( '0 0 0 )
5 0
5 5
6 0
6 5
7 0
7 5
8 0
8 5
%
P ax L /F
64
Cargo Carried and Load Factor
1 0 0
2 0 0
3 0 0
4 0 0
5 0 0
6 0 0
7 0 0
8 0 0
9 0 0
2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6
T on s( '0 0 0 )
5 0
5 5
6 0
6 5
7 0
7 5
8 0
8 5
%
C argo T o n s L /F
Staff Productivity
0
500
1000
1500
2000
2500
2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6
T-km
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
NT$'000
Capacity per employee Traff ic per employee Revenue per employee
Yield, Unit Cost and Load Factors
5
6
7
8
9
10
11
12
13
2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6
NT$/t-km
55
60
65
70
75
80
85
%
Unit Cost Overall Yield Overall Load Factor
65
Financial Statements
Independent Auditors' Report
The Board of Directors
EVA Airways Corp.:
We have audited the balance sheets of EVA Airways Corp. (the "Company") as of
December 31, 2006 and 2005, and the related statements of operations, changes in
stockholders' equity, and cash flows for the years then ended. These financial state-
ments 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, 2006 and 2005, were
evaluated using the equity method, and the resulting book values of these investments
amounted to NT$2,435,421 thousand (US$74,706 thousand) constituting 1.73% of total
assets and NT$2,325,362 thousand (US$70,788 thousand) constituting 1.81% of total
assets, respectively. The resulting investment gains amounted to NT$306,578 thou-
sand (US$9,433 thousand) constituting (13.54)% of loss before income tax and
NT$292,026 thousand (US$9,078 thousand) constituting 25.69% of income before
income tax for the years 2006 and 2005, 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 com-
panies, is based solely on the reports of the other auditors.
We conducted our audits in accordance with the "Regulations Governing Auditing
and Certification of Financial Statements by Certified Public Accountants" and
Republic of China generally accepted auditing standards. Those standards and regu-
lations require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the reports of the
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the
financial statements referred to in the first paragraph present fairly, in all material
respects, the financial position of the Company as of December 31, 2006 and 2005,
and the results of its operations and its cash flows for the years then ended, in con-
formity with Republic of China generally accepted accounting principles.
The Company adopted newly issued SFASs, the effects of which as of and for the
years ended December 31, 2006 and 2005, are as stated in note 3 to the accompany-
ing financial statements.
The accompanying financial statements as of and for the year ended December
31, 2006 and 2005, have been translated into United States dollars. We have audited
the translation, and in our opinion, the financial statements expressed in New Taiwan
dollars have been translated into United States dollars on the basis set forth in note
2(t) of the notes to the accompanying financial statements.
Taipei, Taiwan (the Republic of China)
February 16, 2007
Note to Readers
The accompanying non-consolidated financial statements are intended only to
present the financial position, results of operations and cash flows in accordance with
the accounting principles and practices generally accepted in the Republic of China
and not those of any other jurisdictions. The standards, procedures and practices to
audit such financial statements are those generally accepted and applied in the
Republic of China.
This document is an English translation of a report originally issued in Chinese. In
the event of a conflict between the English translation and the original Chinese ver-
sion, the Chinese language auditors' report shall prevail.
66
67
2006
2005
Liab
ilitie
s and
Sto
ckho
lder
s' Eq
uity
NT
dolla
rsUS
dol
lars
NT
dolla
rsUS
dol
lars
Curre
nt li
abilit
ies:
Shor
t-ter
m b
orro
wing
s (no
te 4
(i))
$
500,
000
15,3
372,
400,
000
73,0
59Pa
yabl
e on
com
mer
cial p
aper
(not
e 4(
i))-
-69
9,66
221
,299
Acco
unts
pay
able
1,66
9,67
451
,217
1,43
9,30
743
,815
Acco
unts
pay
able
-rela
ted
parti
es (n
ote
5)76
2,25
123
,382
898,
053
27,3
38Ac
crue
d ex
pens
es6,
910,
351
211,
974
6,66
3,85
920
2,85
7Fi
nanc
ial l
iabi
lity a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss-c
urre
nt(n
ote
4(b)
)25
5,28
47,
831
--
Oth
er p
ayab
les-
rela
ted
parti
es (n
ote
5)45
,659
1,40
186
,018
2,61
8D
eriva
tive
finan
cial l
iabi
litie
s for
hed
ge p
urpo
ses-
curre
nt
(not
e 4(
r))35
611
--
Oth
er p
ayab
les (
note
s 4(l)
, 4(
m) a
nd 6
)2,
419,
945
74,2
313,
345,
582
101,
844
Unea
rned
reve
nue
9,48
4,66
429
0,94
18,
290,
712
252,
381
Curre
nt p
ortio
n of
long
-term
liab
ilitie
s (no
tes 4
(j), 4
(k),
6 an
d 7)
9,10
4,85
227
9,29
05,
860,
213
178,
393
Leas
e lia
bilit
y-cu
rrent
(not
e 4(
g))
1,85
8,27
157
,002
879,
098
26,7
61O
ther
cur
rent
liab
ilitie
s1,
239,
453
38,0
2081
2,31
124
,728
Tota
l cur
rent
liab
ilitie
s34
,250
,760
1,05
0,63
731
,374
,815
955,
093
Long
-term
liab
ilitie
s:Fi
nanc
ial l
iabi
litie
s at f
air v
alue
thro
ugh
prof
it or
loss
-no
ncur
rent
(not
e 4(
b))
768,
482
23,5
7333
6,71
510
,250
Bond
s pay
able
(not
e 4(
k))
9,10
0,00
027
9,14
18,
383,
754
255,
213
Long
-term
bor
rowi
ngs (
note
s 4(j)
, 6 a
nd 7
)27
,464
,642
842,
474
17,9
07,5
3254
5,13
1D
eriva
tive
finan
cial l
iabi
litie
s for
hed
ge p
urpo
ses-
nonc
urre
nt
(not
e 4(
r))23
,197
712
21,3
5865
0Ai
rcra
ft pa
yabl
e (n
otes
4(m
) and
6)
14,4
98,8
9844
4,75
117
,038
,221
518,
667
Leas
e lia
bilit
y (no
te 4
(g))
6,78
5,58
120
8,14
77,
281,
521
221,
660
Tota
l lon
g-te
rm li
abilit
ies
58,6
40,8
001,
798,
798
50,9
69,1
011,
551,
571
Oth
er li
abilit
ies:
Accr
ued
empl
oyee
retir
emen
t lia
bilit
ies (
note
4(n
))82
8,01
225
,399
666,
386
20,2
86O
ther
liab
ilitie
s 1,
307,
954
40,1
211,
537,
105
46,7
91To
tal o
ther
liab
ilitie
s2,
135,
966
65,5
202,
203,
491
67,0
77To
tal l
iabi
litie
s95
,027
,526
2,91
4,95
584
,547
,407
2,57
3,74
1St
ockh
olde
rs' e
quity
(not
e 4(
p)):
Com
mon
stoc
k38
,749
,794
1,31
0,32
533
,898
,869
1,16
0,60
7Ca
pita
l sur
plus
4,58
0,11
814
8,28
63,
424,
986
112,
603
Reta
ined
ear
ning
s:Le
gal r
eser
ve86
0,27
225
,530
727,
666
21,4
08Re
tain
ed e
arni
ngs
1,03
0,51
028
,277
3,66
2,89
810
9,57
2To
tal r
etai
ned
earn
ings
1,
890,
782
53,8
074,
390,
564
130,
980
Oth
er st
ockh
olde
rs' e
quity
adj
ustm
ents
:D
efer
red
cred
it-
-19
2,63
15,
864
Cum
ulat
ive tr
ansla
tion
adju
stm
ents
1,43
8,22
8(8
1,33
8)2,
291,
327
(64,
723)
Net
loss
not
yet r
ecog
nize
d as
net
pen
sion
cost
(not
e 4(
n))
(585
,306
)(1
7,77
3)(2
22,5
05)
(6,6
44)
Unre
alize
d ga
ins o
r los
ses o
n fin
ancia
l ins
trum
ents
(not
es 4
(b)
and
4(r))
66,9
872,
049
--
Tota
l oth
er st
ockh
olde
rs' e
quity
adj
ustm
ents
919,
909
(97,
062)
2,26
1,45
3(6
5,50
3)To
tal s
tock
hold
ers'
equi
ty46
,140
,603
1,41
5,35
643
,975
,872
1,33
8,68
7Co
mm
itmen
ts a
nd c
ontin
genc
ies (
note
7)
Tota
l lia
bilit
ies a
nd st
ockh
olde
rs' e
quity
$
141
,168
,129
4,33
0,31
112
8,52
3,27
93,
912,
428
2006
2005
Asse
tsN
T do
llars
US d
olla
rsN
T do
llars
US d
olla
rs
Curre
nt a
sset
s:Ca
sh a
nd c
ash
equi
vale
nts (
note
4(a
))$
2,99
7,45
991
,947
1,84
4,19
656
,140
Fina
ncia
l ass
ets a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss-c
urre
nt
(not
e 4(
b)21
,684
665
495,
590
15,0
87Av
aila
ble-
for-s
ale
finan
cial a
sset
s-cu
rrent
(not
e 4(
b))
6,73
3,67
020
6,55
42,
713,
075
82,5
90N
otes
rece
ivabl
e39
1,74
012
,016
390,
325
11,8
82Ac
coun
ts re
ceiva
ble,
net
8,
263,
629
253,
486
8,01
9,96
824
4,13
9Ac
coun
ts re
ceiva
ble-
rela
ted
parti
es (n
ote
5)46
,855
1,43
730
,486
928
Oth
er re
ceiva
bles
-rela
ted
parti
es (n
ote
5)11
9,61
63,
669
207,
460
6,31
5O
ther
fina
ncia
l ass
ets-
curre
nt (n
ote
4(c)
)24
1,88
17,
420
880,
688
26,8
09In
vent
orie
s (no
te 4
(d))
8,69
9,64
226
6,86
07,
893,
426
240,
287
Prep
aid
expe
nses
3,07
6,74
494
,379
2,78
8,74
784
,893
Oth
er p
repa
ymen
ts60
6,68
118
,610
722,
793
22,0
03D
efer
red
inco
me
tax
asse
ts-c
urre
nt (n
ote
4(o)
)39
7,12
612
,182
363,
357
11,0
61O
ther
cur
rent
ass
ets
66,9
572,
054
74,4
012,
265
Tota
l cur
rent
ass
ets
31,6
63,6
8497
1,27
926
,424
,512
804,
399
Fund
s and
inve
stm
ents
:Fi
nanc
ial a
sset
s at f
air v
alue
thro
ugh
prof
it or
loss
-non
curre
nt(n
ote
4(b)
)64
,955
1,99
255
,114
1,67
8Av
aila
ble-
for-s
ale
finan
cial a
sset
s-no
ncur
rent
(not
e 4(
b))
557,
654
17,1
0645
3,19
313
,796
Fina
ncia
l ass
ets c
arrie
d at
cos
t-non
curre
nt (n
ote
4(b)
)3,
165,
889
97,1
133,
655,
768
111,
286
Long
-term
equ
ity in
vest
men
ts u
nder
equ
ity m
etho
d(n
ote
4(e)
)7,
978,
188
244,
730
7,17
6,43
521
8,46
1To
tal f
unds
and
inve
stm
ents
11,7
66,6
8636
0,94
111
,340
,510
345,
221
Prop
erty
, pla
nt a
nd e
quip
men
t (no
tes 4
(f), 4
(g),
6 an
d 7)
:La
nd1,
869,
784
57,3
551,
869,
784
56,9
19Bu
ildin
gs4,
543,
278
139,
364
4,39
1,44
613
3,68
2M
achi
nery
and
equ
ipm
ent
4,64
8,51
014
2,59
24,
119,
563
125,
405
Airc
raft
74,7
09,8
372,
291,
713
65,2
54,5
861,
986,
441
Rota
ble
parts
309,
389
9,49
133
7,39
010
,270
86,0
80,7
982,
640,
515
75,9
72,7
692,
312,
717
Less
: acc
umul
ated
dep
recia
tion
(30,
671,
065)
(940
,830
)(2
6,58
5,64
9)(8
09,3
04)
Leas
ed a
sset
s, ne
t8,
810,
202
270,
252
8,20
3,50
924
9,72
6Ad
vanc
es fo
r pur
chas
es o
f equ
ipm
ent
14,6
72,3
0745
0,07
110
,356
,087
315,
254
Net
pro
perty
, pla
nt a
nd e
quip
men
t78
,892
,242
2,42
0,00
867
,946
,716
2,06
8,39
3In
tang
ible
ass
ets:
Def
erre
d pe
nsio
n co
st (n
ote
4(n)
)13
6,47
64,
186
163,
770
4,98
5O
ther
ass
ets:
Refu
ndab
le d
epos
its (n
ote
7)10
,907
,844
334,
596
15,6
69,7
7947
7,01
0D
efer
red
char
ges (
note
4(h
))5,
968,
599
183,
086
5,07
1,93
415
4,39
7D
efer
red
inco
me
tax
asse
ts-n
oncu
rrent
(not
e 4(
o))
1,25
3,24
038
,443
1,37
4,16
041
,831
Oth
er a
sset
s (no
te 6
)57
9,35
817
,772
531,
898
16,1
92To
tal o
ther
ass
ets
18,7
09,0
4157
3,89
722
,647
,771
689,
430
Tota
l ass
ets
$ 1
41,1
68,1
294,
330,
311
128,
523,
279
3,91
2,42
8
EV
A A
IRW
AY
S C
OR
P.B
alan
ce S
heet
sD
ecem
ber
31,
200
6 an
d 2
005
(Exp
ress
ed in
Tho
usan
ds
of
New
Tai
wan
Do
llars
and
U.S
. Do
llars
)
68
Income (loss) Net income Income beforebefore income tax (loss) income tax Net income
NT US NT US NT US NT USEarnings per share (expressed in dollars) (note 4(q)): dollars dollars dollars dollars dollars dollars dollars dollars
Basic earnings per share:Income (loss) before cumulative effect of changes
in accounting principle $ (0.61) (0.02) (0.49) (0.01) 0.33 0.01 0.39 0.01Cumulative effect of changes in accounting principle 0.06 - 0.04 - - - - -Net income (loss) $ (0.55) (0.02) (0.45) (0.01) 0.33 0.01 0.39 0.01Diluted earnings per share:Income before cumulative effect of changes inaccounting principle - - - - 0.31 0.01 0.37 0.01Cumulative effect of changes in accounting principle - - - - - - -Net income $ - - - - 0.31 0.01 0.37 0.01
EVA AIRWAYS CORP.Statements of Operations
For the years ended December 31, 2006 and 2005(Expressed in Thousands of New Taiwan Dollars and U.S. Dollars, Except Earnings per Share)
2006 2005NT dollars US dollars NT dollars US dollars
Operating revenue (note 5) $ 93,903,564 2,889,341 88,518,249 2,751,577
Operating cost (notes 5 and 10) (90,334,648) (2,779,528) (80,858,499) (2,513,475)Gross profit from operations 3,568,916 109,813 7,659,750 238,102
Operating expenses (notes 5 and 10) (6,906,700) (212,514) (6,808,750) (211,649)Operating income (loss) (3,337,784) (102,701) 851,000 26,453
Non-operating income and gains:Interest income (note 4(s)) 163,130 5,019 108,262 3,365Investment income (note 4(e)) 1,009,463 31,061 796,799 24,769Gains on disposal of property, plant and equipment, net 217,392 6,689 763,659 23,738Gains on sale of investments, net (note 4(b)) 793,944 24,429 106,340 3,306Exchange gains, net 583,321 17,948 31,169 969Other income 334,227 10,284 265,768 8,261
3,101,477 95,430 2,071,997 64,408
Non-operating expenses and losses:Interest expenses, net of capitalized interest of NT$410,770
(US$12,639) and NT$315,476 (US$9,807) in 2006 and 2005,respectively (notes 4(f) and 4(s)) (1,961,357) (60,349) (1,749,587) (54,386)
Losses on valuation of financial assets (4,972) (153) - -Other losses (note 4(b)) (61,288) (1,886) (36,719) (1,141)
(2,027,617) (62,388) (1,786,306) (55,527)
Income (loss) before income tax (2,263,924) (69,659) 1,136,691 35,334
Income tax benefit (note 4(o)) 416,648 12,820 189,369 5,886
Income (loss) before cumulative effect of changes in accountingprinciple (1,847,276) (56,839) 1,326,060 41,220
Cumulative effect of changes in accounting principle (net of income tax expenses of NT$53,564 (US$1,648) (notes 3 and 4(o)) 160,691 4,944 - -
Net income (loss) $ (1,686,585) (51,895) 1,326,060 41,220
69
EV
A A
IRW
AY
S C
OR
P.St
atem
ents
of
Cha
nges
in S
tock
hold
ers'
Eq
uity
For
the
year
s en
ded
Dec
emb
er 3
1, 2
006
and
200
5(E
xpre
ssed
in T
hous
and
s o
f N
ew T
aiw
an D
olla
rs a
nd U
.S. D
olla
rs)
70
EVA AIRWAYS CORP.Statements of Cash Flows
For the years ended December 31, 2006 and 2005(Expressed in Thousands of New Taiwan Dollars and U.S. Dollars)
2006 2005
NT dollars US dollars NT dollars US dollars
Cash flows from operating activities:
Net income (loss) $ (1,686,585) (51,895) 1,326,060 41,220
Adjustments to reconcile net income (loss) to net cash
flow provided by operating activities:
Depreciation 6,113,356 188,103 4,436,702 137,914
Amortization and maintenance expense 1,198,250 36,869 1,215,966 37,798
Amortization expense recorded as interest expenses 24,766 762 15,710 488
Gains on sale of investments, net (793,944) (24,429) (106,340) (3,306)
Gains on disposal and obsolescence of property, plant
and equipment, net (187,038) (5,755) (733,276) (22,794)
Exchange gains arising from disposal of foreign operating units (369,383) (11,366) - -
Provision for unrealized exchange gain from long-term borrowings (11,402) (351) (9,156) (285)
Investment income (1,009,463) (31,061) (796,799) (24,769)
Amortization of deferred gain from sale and leaseback of fixed assets (952) (29) (89,765) (2,790)
Amortization of other deferred gain (166,564) (5,125) (417,913) (12,991)
Proceeds from cash dividends on long-term equity investments 466,740 14,361 158,139 4,916
Deferred income tax benefit (414,587) (12,757) (326,923) (10,162)
Decrease in financial assets at fair value thought profit or loss-current 473,906 14,582 - -
Decrease (increase) in notes receivable (1,415) (44) 6,838 213
Increase in accounts receivable (including related parties) (260,030) (8,001) (743,069) (23,098)
Decrease in other receivables (including related parties) 87,844 2,703 34,722 1,079
Increase in inventories (806,211) (24,806) (646,643) (20,101)
Increase in prepaid expenses (287,997) (8,861) (320,622) (9,966)
Decrease (increase) in other prepayments 116,112 3,573 (434,179) (13,496)
Decrease (increase) in other current assets 7,444 229 (48,502) (1,508)
Increase in financial assets at fair value through profit or loss-noncurrent (9,841) (303) - -
Increase in financial liabilities at fair value through profit or loss-current 255,284 7,855 - -
Increase in financial liabilities at fair value through profit or loss-noncurrent 431,767 13,285 - -
Decrease in tax payable - - (514,559) (15,994)
Increase in notes and accounts payable (including related parties) 94,565 2,910 39,733 1,235
Increase (decrease) in other payables (including related parties) (960,410) (29,551) 452,869 14,077
Increase in accrued expenses 246,492 7,584 899,772 27,969
Increase in unearned revenue 1,193,952 36,737 860,362 26,744
Decrease (increase) in other financial assets-current 638,807 19,656 (535,294) (16,640)
Increase in other current liabilities 427,142 13,143 291,978 9,076
Decrease in accrued employee retirement liabilities (132,057) (4,063) (122,280) (3,801)
Increase in other liabilities 4,643 143 225,640 7,014
Cumulative effect of changes in accounting principle (214,255) (6,592) - -
Net cash provided by operating activities 4,468,936 137,506 4,119,171 128,042
71
Cash flows from investing activities:
Decrease (increase) in available-for-sale financial assets-current (3,951,045) (121,571) 2,743,292 85,275
Withdrawal of long-term equity investments, net 6,480 200 152,937 4,556
Proceeds from sale of available-for-sale financial assets-noncurrent 162 4 - -
Proceeds from sale of financial assets carried at cost-noncurrent 1,211,529 37,278 - -
Payments for purchase of available-for-sale financial assets-noncurrent - - (46,354) (1,459)
Payments for purchase of long-term equity investments under
equity method (295,438) (9,091) (2,566) (81)
Proceeds from disposal of property, plant and equipment 7,006,173 215,575 3,869,120 120,271
Payments for purchase of property, plant and equipment (22,013,123) (677,327) (5,848,187) (181,790)
Decrease (increase) in other assets (47,460) (1,461) 73,852 2,296
Decrease (increase) in refundable deposits 4,905,640 150,943 (99,033) (3,079)
Increase in deferred charges (2,119,681) (65,221) (2,689,690) (83,609)
Net cash used in investing activities (15,296,763) (470,671) (1,846,629) (57,620)
Cash flows from financing activities:
Increase in short-term borrowings 20,040,000 616,615 11,919,662 370,521
Increase in long-term borrowings 23,105,000 710,923 11,662,169 362,517
Redemption of short-term borrowings (22,639,662) (696,605) (10,519,958) (327,011)
Redemption of long-term borrowings (7,873,735) (242,269) (9,480,175) (294,690)
Installment payments for purchase of property, plant and equipment (2,389,495) (73,523) (2,266,687) (70,460)
Installment payments for purchase of inventories - - (746,530) (23,206)
Redemption of lease liability (1,767,821) (54,394) (751,707) (23,367)
Payments of cash dividends (749,977) (23,313) (1,646,147) (49,330)
Cash subscription 4,320,000 133,087 - -
Payment of employees' bonuses and directors' and
supervisors' remuneration (63,220) (1,965) (71,574) (2,145)
Net cash provided by (used in) financing activities 11,981,090 368,556 (1,900,947) (57,171)
Effect of exchange rate changes on cash - 416 - (3,249)
Net increase in cash and cash equivalents 1,153,263 35,807 371,595 10,002
Cash and cash equivalents at beginning of year 1,844,196 56,140 1,472,601 46,138
Cash and cash equivalents at end of year $ 2,997,459 91,947 1,844,196 56,140
Additional disclosure of cash flow information:
Cash payments of interest (excluding capitalized interest expense) $ 1,818,517 55,954 1,560,229 48,500
Cash payments of income tax $ 12,817 394 808,321 25,127
Supplemental schedule of noncash investing and financing activities:
Current portion of long-term borrowings $ 9,104,852 279,290 5,860,213 178,393
Inventory transferred from fixed assets $ 5 - 150 5
Translation adjustments $ (853,500) (16,627) 223,373 (34,840)
Unrealized gains or losses on financial instruments $ 39,802 1,221 (141,644) (4,280)
72
1. Organization and Business Scope
EVA Airways Corp. (the Company) was incorporated on April 7, 1989, as a corpora-
tion limited by shares under special permission of the Ministry of Transportation
and Communications and under the Company Act of the Republic of China (ROC).
The Company commenced commercial operations on July 1, 1991.
The Company's business activities are
1.1 to engage in fixed-wing aircraft transport business, scheduled air transport
business, and nonscheduled air transport business;
1.2 to carry on the business of freight agent, including operation, transportation
and maintenance;
1.3 to repair and maintain fuselages, aircraft engines, navigational instruments
and related equipment, etc.;
1.4 to carry on the business of marketing aircraft facilities, equipment, and fit-
tings;
1.5 to process and manufacture machinery and spare parts;
1.6 to publish magazines in the field of aviation;
1.7 to provide on-the-job training delegated by other organizations and entities
(no recruitment from the general public is allowed);
1.8 to engage in maintaining flying facilities for navigational training;
1.9 to engage in import and export trading for the foregoing activities (excluding
businesses requiring a permit);
1.10 to provide consultant services for business operation and management;
1.11 to provide general advertising services;
1.12 to engage in the retailing of tobacco and alcohol;
1.13 to engage in general merchandise activities;
1.14 to engage in the retailing of food and beverages;
1.15 to engage in the retailing of apparel;
EVA AIRWAYS CORP.Notes to Financial Statements
December 31, 2006 and 2005(Expressed in Thousands of New Taiwan Dollars and U.S. Dollars Unless Otherwise Specified)
73
1.16 to engage in the retailing of umbrellas;
1.17 to engage in the retailing of hats and caps;
1.18 to engage in the retailing of books and stationery;
1.19 to engage in the retailing of sporting goods;
1.20 to engage in the retailing of toys and amusement goods;
1.21 to engage in the retailing of watches and clocks;
1.22 to engage in the retailing of glasses;
1.23 to engage in the retailing of weights and measures;
1.24 to engage in the retailing of jewelry and precious metals;
1.25 to engage in the retailing of telecommunication equipment;
1.26 to engage in the retailing of photographic equipment;
1.27 to carry out any business which is not forbidden or restricted by the applica-
ble laws and regulations, excluding those requiring licensing.
As of December 31, 2006 and 2005, the Company had 5,158 and 5,098 employees,
respectively.
2. Summary of Significant Accounting Policies
The Company prepared the accompanying financial statements in accordance with
ROC generally accepted accounting principles. The preparation of financial state-
ments in conformity with the aforementioned guidelines and principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities
as at the date of the financial statements and the amount of revenue and expenses
reported during the reporting period. Actual results could differ from those
assumptions and estimates.
The major accounting policies and basis of measurement used in preparing the
financial statements are summarized below.
(a) Foreign currency transactions and translations
The Company maintains its books in New Taiwan dollars. Foreign currency
74
transactions during the year are translated at the exchange rates on the trans-
action dates. Foreign currency-denominated assets and liabilities are translat-
ed into New Taiwan dollars at the exchange rate prevailing on the balance
sheet date, and the resulting translation gains or losses are recognized as non-
operating income or expenses. In accordance with amended Statement of
Financial Accounting Standards (SFAS) No. 14 "The Effects of Changes in
Foreign Exchange Rates", commencing from January 1, 2006, non-monetary
assets and liabilities that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign currencies that are
stated at fair value are translated into NT dollars at foreign exchange rates rul-
ing at the dates the fair value was determined. If the financial assets or liabili-
ties are evaluated at fair value through profit or loss, the resulting unrealized
exchange income (loss) from such translations is reflected in the accompany-
ing non-consolidated statements of income. If the adjustments of financial
assets or liabilities are evaluated at fair value through stockholders' equity, the
resulting unrealized exchange income (loss) from such translations is recorded
as a separate component of stockholders' equity.
For equity investments in foreign subsidiary companies which are accounted
for by the equity method, the translation differences resulting from translating
foreign financial statements from the functional currency into the reporting
currency are reported as cumulative translation adjustments. Cumulative
translation adjustments are reported as a separate component of stockhold-
ers' equity.
(b) Convenience translation into U.S. dollars
The financial statements are stated in New Taiwan dollars. Assets and liabil-
ities are translated at the rate of exchange at the balance sheet date.
Income statement accounts are translated at the average rates during the
year. The related translation adjustments are reported as a component of
shareholders' equity.
75
(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 trans-
portation business as "foreign operating units".
The US dollar-denominated aircraft purchase costs and the related US dollar
loans at the balance sheet date are translated into New Taiwan dollars at the
exchange rates prevailing on the balance sheet date. The US dollar aircraft
depreciation amounts are translated into New Taiwan dollars at the current
year's average exchange rate. The translation differences resulting from these
translations are reported as cumulative translation adjustments.
The lease assets and lease liability arising from capital lease of aircraft at the
balance sheet date are translated into New Taiwan dollars at the exchange
rates prevailing on the balance sheet date. The US dollar leased aircraft
depreciation amounts are translated into New Taiwan dollars at the current
year's average exchange rate. The translation differences resulting from these
translations are reported as cumulative translation adjustments.
In addition, the translation differences resulting from the translation of refund-
able deposits for aircraft leases into New Taiwan dollars at the exchange rate
prevailing on the balance sheet date are also reported as cumulative transla-
tion adjustments.
(d) 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.
(e) Asset impairment
76
In accordance with Statement of Financial Accounting Standards No. 35,
"Impairment of Assets", the Company assesses at each balance sheet date
whether there is any indication that an asset (individual asset or cash-generat-
ing unit) other than goodwill may have been impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. The
Company recognizes impairment loss for an asset whose carrying value is
higher than the recoverable amount.
The Company reverses an impairment loss recognized in prior periods for
assets other than goodwill if there is any indication that the impairment loss
recognized no longer exists or has decreased.
The carrying value after the reversal should not exceed the recoverable
amount or the depreciated or amortized balance of the assets assuming no
impairment loss was recognized in prior periods.
The Company assesses the cash-generating unit to which goodwill is allocated
on an annual basis and recognizes an impairment loss on the carrying value in
excess of the recoverable amount.
(f) 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.
(g) Financial assets
The Company adopted Statement of Financial Accounting Standard No. 34
"Financial Instruments: Recognition and Measurement" commencing from
January 1, 2006. Financial assets are classified into three accounts: financial
assets at fair value through profit or loss; available-for-sale financial assets; and
financial assets carried at cost.
77
The Company adopted transaction-date accounting for financial instrument
transactions. At the beginning of recognition, financial instruments are evalu-
ated at fair value. Except for trading-purpose financial instruments, acquisition
cost or issuance cost is added to the original recognized amount.
The financial instruments the Company held or issued are classified into the
following accounts in accordance with the purpose of holding or issuing after
the original recognition.
1. Financial assets at fair value through profit or loss: The main purposes of
the financial instruments are selling or repurchasing in the short term.
Except for the derivatives that the Company held for hedging purposes
and are considered to be effective, all derivatives should be classified
into this account.
2. Available-for-sale financial assets: These are evaluated at fair value, and any
changes are recorded as a separate component of stockholders' equity. If
there is evidence of impairment, impairment loss should be recognized. If
the impairment losses decrease subsequently, the decreased amount of
impairment for equity financial instruments cannot be reversed. If the
impairment loss on debt financial instruments decreases and is apparently
related to events that occurred after the impairment, the decreased amount
of impairment loss should be reversed and recognized in the accompany-
ing non-consolidated statements of income.
3. Financial assets carried at cost: Equity investments which cannot be evaluat-
ed at fair value are booked at original cost. If there is evidence of impair-
ment, impairment loss should be recognized, and the impairment amount
cannot be reversed.
The investments of the Company as of December 31, 2005, are classified into
short-term investments and long-term investments, in accordance with their
holding purposes. Investments are accounted for at acquisition cost and are
evaluated at the lower of cost or market value. The market value used for pub-
78
licly listed stocks is the average closing price of the last month of the period.
The market value of open-end mutual funds is based on the net asset value of
the mutual funds at the balance sheet date. Devaluation loss on long-term
investments is recorded under stockholders' equity. Devaluation loss on short-
term investments is recorded in the accompanying non-consolidated state-
ments of income.
(h) Derivative financial instruments and hedging
Derivative financial instruments held by the Company were to manage foreign
exchange rate and interest rate risk exposure on foreign-currency-denominat-
ed assets and liabilities. According to this policy, derivative financial instru-
ments held or issued by the Company were for hedging. When derivative
financial instruments no longer are for hedging, they are treated as financial
instruments held for trading.
Fair value hedges, cash flow hedges, and hedges of a net investment in a for-
eign operation that met all the conditions of hedge accounting were netted,
with the resulting amount presented as gain or loss. The Company adopted
cash flow hedges, and gain or loss from hedging instruments was recognized
as an adjustment to stockholders' equity.
(i) Inventories
Inventories represent parts and supplies for maintenance of aircraft, and
merchandise to sell during flights. Except for merchandise, which is stat-
ed 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 calculat-
ed by the weighted-average method, and market value represents net
realizable value.
(j) Long-term equity investments
Long-term equity investments in which the Company owns 20% or less than
79
20% of the investee's voting shares but is able to exercise significant influence
over the investee's operating and financial policies are accounted for by the
equity method.
The difference between the selling price and the book value of the long-term
equity investments under the equity method is recognized as disposal gain or
loss in the accompanying non-consolidated statements of income. If there is
capital surplus resulting from long-term equity investments, the capital surplus
should be debited to disposal gain/loss based on the disposal ratio.
When the Company owns more than 50% of an investee's voting stock, it
becomes the parent of its subsidiary. For general-purpose financial reporting,
a parent and its subsidiaries present consolidated financial statements at the
end of the half-year and the end of the fiscal year.
The Company adopted amended SFAS No. 5 "Long-term Investments under
Equity Method" commencing from January 1, 2006. If the differences come
from the assets that can be depreciated, depleted or amortized, then the
Company shall amortize such differences over estimated remaining economic
lives. If the differences come from discrepancies between the carrying
amounts of assets and their fair market values, then the Company shall offset
all unamortized differences when conditions making such over- or under-valua-
tion are no longer present. When the investment cost exceeds the fair value
of identifiable net assets acquired, the excess should be recorded as goodwill.
When the fair value of identifiable net assets acquired exceeds the cost, the
difference should be assigned to non-current assets acquired proportionate to
their respective fair values. If these assets are all reduced to zero value, the
remaining difference should be recognized as extraordinary gain.
Unrealized gains or losses resulting from inter-company transactions between the
Company and its investees accounted for by the equity method are deferred.
Unrealized gains or losses derived from transactions involving depreciable or
amortizable assets are amortized over the useful lives of the related assets. Gains
or losses from other transactions are recognized when realized.
80
If the stockholders' equity of an investee company becomes negative, and
the Company guaranteed the investee company's liability or made financial
commitments to the investee company, or the deficit appears to be short
term, then the Company continues to record investment losses thereon; if
the book value of long-term investment is insufficient to offset against
investment losses, the Company offsets it against accounts receivable and
deferred credits.
(k) 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 capital-
izes as part of the costs of related assets the related interest costs incurred
before commencing to use such assets. Routine repair and maintenance are
charged to current operations. Major repairs and maintenance, additions,
enhancements and replacements 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 estimated
useful lives using the straight-line method. The useful lives of main property,
plant and equipment are as follows:
Buildings: 55 years
Machinery and equipment: 3~18 years
Aircraft: 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).
81
(l) Lease
The Company sold and leased back aircraft under operating lease agree-
ments. If the translation differences resulting from the translation of the for-
eign currency cost of the aircraft and the related US dollar loans into New
Taiwan dollars at the exchange rate prevailing on the selling date and histori-
cal rates and the gains or losses from disposal of the aircraft resulting from the
translation of the US dollar selling price and US dollar book value of aircraft at
the exchange rate prevailing on the selling date were net gains, these gains
should be deferred using the unearned gain on sales-leaseback account
according to ROC Statement of Financial Accounting Standards (SFAS) No. 2,
"Leases", otherwise they should be taken as a loss.
The amortization of unearned gain on sales-leaseback depends on the nature
of the lease. For operating leases, the unearned gain is amortized to rental
expense using the lease term. For capital leases, however, the unearned gain
is amortized to depreciation expense using the leased property's useful eco-
nomic life or lease term based on the nature of those transactions.
The leased property is valued at the smaller of the following two values: (a) the
present value of all future rental payments (less the lessee's executory costs)
plus the bargain purchase price or the lessee's guaranteed residual value and
(b) the market value of leased property at the inception date of the lease.
All leased properties under capital leases are depreciated. If the lease con-
tract contains a bargain purchase option or allows the transfer of ownership
at the end of the term, then the properties under this type of lease are
depreciated based on the leased property's useful economic life, otherwise
the lease term is used.
The lessee's periodic rental payment covers two parts: (i) the purchase price
of the leased property and (ii) the interest expense due to long-term or
installment financing. Therefore, the lessee recognizes both a lease liability
82
and interest expense in each period. The interest expense is determined
using the following rules:
a) If the value of the leased property is determined using the maximum bor-
rowing rate for nonfinancial institutions (determined by the ROC Ministry of
Finance) on the inception date of the lease, then the interest expense is cal-
culated based on the beginning balance of the lease payable and the maxi-
mum borrowing rate.
b) If the value of the leased property is determined by its market price, then
the interest expense is also calculated based on the beginning balance of
the lease payable and the maximum borrowing rate. However, a service
charge is calculated based on the beginning balance of the lease payable
and the difference between the lessor's interest rate implicit in the lease
and the maximum borrowing rate.
If there is any unguaranteed residual value at the end of the lease term, the
lessee calculates the imputed interest expense based on the rental payments,
the guaranteed residual value, and the leased property's market value using
the rules described in the two paragraphs above.
The lessee's lease payable is determined by subtracting the interest expense
and the service charge from the periodic rental payment.
The lease liability is classified as either a current liability or long-term liability,
depending on the expiry date.
(m) Deferred charges
Deferred charges principally include the capitalized costs for computer soft-
ware, leasehold improvements, "D" check maintenance for aircraft and
engines and others. These costs are amortized using the straight-line method
over the shorter of the estimated years in which such assets are economically
beneficial to the Company's operation or the lease terms.
83
(n) Other financial assets
Other financial assets are financial assets other than cash and cash equivalents,
financial assets at fair value through profit and loss, accounts receivable and
other receivables, funds and investments, and refundable deposits.
(o) Convertible bonds payable
In accordance with ROC SFAS No. 36, paragraph 124, for compound equity
financial instruments issued prior to the effective date (January 1, 2006) of the
statement, the equity component cannot be separated from the financial
instruments, and calculation of accumulated changes in accounting policies is
not required. The Company's convertible bonds payable were issued in
August 2004.
The Company's convertible bonds payable are with a resell option. Therefore,
the difference between issue price and face value is amortized between the
issue date and maturity date of the resell option. The unamortized amount
was recorded as a contra account of convertible bonds payable.
The cost of issuing convertible bonds is capitalized as deferred costs and amor-
tized as interest expense over the period between the issuing date and reselling
date. When the bondholders exercise the reselling right, the unamortized
amount is recorded as interest expense based on the reselling ratio.
When bondholders exercise the conversion right, the number of shares the
bond is converted into is calculated based on the face value of the convertible
bond and the conversion price on the conversion date. The conversion price
in excess of the par value and the unamortized bond issuance costs are
recorded as capital surplus.
The Company's adopted SFAS No. 34 "Financial Instruments: Recognition and
Measurement" on January 1, 2006. Convertible bonds were recorded as finan-
cial liabilities-convertible bonds, and reclassified as current liabilities two years
84
after the issuance date.
(p) Employee retirement plan
The Company has established an employee noncontributory defined benefit
retirement plan (the "Plan") covering full-time employees in the ROC. In
accordance with the Plan, employees are eligible for retirement or are required
to retire after meeting certain age or service requirements. Payments of retire-
ment benefits are based on an employee's average monthly salary for the last
six months before the employee's retirement and the number of points accu-
mulated by the employee according to his/her years of service. Each employ-
ee receives 2 points for each service year from year 1 to year 15, and 1 point
thereafter. A lump-sum retirement benefit is paid through the retirement fund.
Under this retirement plan, the Company is responsible for making the entire
pension payment.
Starting from July 1, 2005, the enforcement rules of the newly enacted Labor
Pension Act (the "New Act") require the following categories of employees to
adopt the New Act's defined contribution plan:
(i) employees who were covered by the Plan and opted to be subject to the pen-
sion mechanism under the New Act; and
(ii) employees who commenced working after the enforcement date of the New Act.
In accordance with the New Act, the rate of the employer's monthly contribu-
tion to an individual labor pension fund account per month shall not be lower
than 6% of the worker's monthly wages.
The Company adopted ROC SFAS No. 18, "Accounting for Pensions", for its
retirement plan. SFAS No. 18 requires a company to have an actuarial calcula-
tion of its pension liability using the balance sheet date as the measurement
date. The excess of accumulated benefit obligation over the fair value of pen-
sion plan assets is deemed as the minimum pension liability and is recognized
85
as accrued pension liability. The Company provides contributions to the retire-
ment fund monthly equal to 11.9% of the paid salaries and wages. The funds
are deposited with the Central Trust of China.
For the portion of the retirement plan adopting the defined contribution
scheme, in accordance with the New Act, the Company provides monthly
contributions to the Bureau of Labor Insurance equal to 6% of the worker's
monthly wages. The amount of contribution is recognized as expense of
the current period.
(q) Revenue recognition
Passenger ticket sales are recorded as unearned revenue, included in current
liabilities, and recognized as revenue when the services are provided.
(r) Income tax
The Company adopted ROC SFAS No. 22, "Income Taxes". Under this
method, the amounts of deferred income tax assets or liabilities are recog-
nized for future tax effects attributable to temporary differences, loss carryfor-
wards, and investment tax credits. The measurement of deferred income tax
assets or liabilities is based on provisions of enacted tax law. A valuation
allowance is provided on deferred income tax assets that may not be realized
in the future.
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 lia-
bilities are related, deferred income tax assets or liabilities are classified
according to the period of realization.
The tax imputation system was adopted in accordance with the amendment of
the ROC Income Tax Law. Under the new system, the Company may retain the
earnings after December 31, 1997, by paying a 10% surtax on such undistributed
earnings, and the surtax is accounted for as income tax expenses in the following
86
year when the shareholders approved a resolution not to distribute the earnings.
(s) Earnings per share (EPS)
The earnings per share are computed by dividing the amount of net income
attributable to common stock outstanding for the period by the weighted-
average number of common shares outstanding during the period.
The convertible bonds issued by the Company belong to potential common
stock. When computing diluted EPS, potential common shares are included in
the denominator if they are dilutive. Anti-dilutive potential common shares are
ignored in calculating diluted EPS.
The calculation of diluted EPS is consistent with the calculation of basic EPS
while giving the effects of all dilutive potential common shares that were out-
standing during the reporting period. When calculating diluted EPS, the net
income attributable to common stockholders and the weighted-average num-
ber of shares outstanding are adjusted for the effects of all dilutive potential
common shares.
The weighted-average number of common shares outstanding shall be adjust-
ed currently and retroactively for the increase in common shares outstanding
from stock issuance through the capitalization of retained earnings, additional
paid-in capital, or employees' bonuses.
3. Reason for and Effect of Accounting Changes
(a) Income effects of changes in accounting principle
The Company adopted SFAS No. 34 "Financial Instruments: Recognition and
Measurement" and SFAS No. 36 "Financial Instruments: Disclosure and
Presentation" on January 1, 2006. The effects on net loss and basic earnings
per share (EPS) for the year ended December 31, 2006, were as follows:
87
Nature of change in accounting Decrease in net loss Decrease in basic EPS
principle NT dollars US dollars NT dollars US dollars
Accounting for financial instruments 702,846 21,626 0.19 0.01
The accounting for financial instruments is recorded in accordance with SFAS
No. 34 and No. 36. The changes are stated in note 4(b).
(b) Cumulative effect of changes in accounting principle and stockholders' equity
adjustment
The Company adopted SFAS No. 34 "Financial Instruments: Recognition and
Measurement" on January 1, 2006. The financial assets and liabilities at the
beginning of the period should be evaluated at fair market value and cost
after amortization. After reclassification and re-evaluation, the cumulative
effects of changes in accounting principle, the effect of changes in accounting
principle on earnings per share, and the stockholders' equity adjustment
resulting from the changes in accounting principle were NT$160,691
(US$4,944), NT$0.04 (US$0.001), and NT$27,185 (US$828), respectively, for the
year ended December 31, 2006.
(c) The Company adopted the newly amended SFAS No.1 "Conceptual
Framework of Financial Accounting and Preparation of Financial Statements"
and SFAS No. 5 "Long-term Investments under Equity Method" commencing
from January 1, 2006. There were no significant impacts to the financial state-
ments for the year ended December 31, 2006.
(d) The Company adopted Statement of Financial Accounting Standards No. 35,
"Impairment of Assets", in 2005. After performing an impairment test on
those assets which had an indication of impairment, the Company determined
that no impairment loss need be recognized as of December 31, 2005.
4. Important Accounts
(a) Cash and cash equivalents
88
The components as of December 31, 2006 and 2005, were as follows:
2006 2005
NT dollars US dollars NT dollars US dollars
Cash on hand $ 91,119 2,795 90,548 2,756
Cash in bank 2,906,340 89,152 1,753,648 53,384
$ 2,997,459 91,947 1,844,196 56,140
(b) Financial instruments (including derivative and non-derivative)
The components as of December 31, 2006 and 2005, were as follows:
2006 2005
NT dollars US dollars NT dollars US dollars
Available-for-sale financial assets–current:
Mutual funds $ 6,733,670 206,554 2,713,075 82,590
Following the interpretation of the ROC Accounting Research and
Development Foundation, the Company reclassified its 2005 financial state-
ments in accordance with SFAS No. 34. As of December 31, 2005, investments
originally accounted for under the cost or lower-of-cost-or-market methods
amounting to NT$2,713,075 (US$82,590) were reclassified as available-for-
sale–current amounting to NT$2,713,075 (US$82,590).
2006 2005
NT dollars US dollars NT dollars US dollars
Available-for-sale-financial assets
–noncurrent:
Trade-Van Information Services Co., Ltd. $ 177,533 5,446 94,490 2,877
Central Reinsurance Corp. 380,121 11,660 358,703 10,919
$ 557,654 17,106 453,193 13,796
Details of increases in available-for-sale financial assets-noncurrent of the
Company for the years ended December 31, 2006 and 2005, were as follows:
89
Unit: thousands of shares
2006 2005
Investee Shares NT dollars US dollars Shares NT dollars US dollars
Central Reinsurance Corp. - $ - - 4,019 46,354 1,459
Details of selling available-for-sale financial assets-noncurrent of the Company
for the years ended December 31, 2006 and 2005, were as follows:
Unit: thousands of shares
2006 2005
Gain on disposal of financial Gain on disposal of financial
assets carried at cost- financial assets carried at cost-
Cost noncurrent Cost noncurrent
Investee Shares NT dollars US dollars NT dollars US dollars Shares NT dollars US dollars NT dollars US dollars
Trade-Van Information
Services Co., Ltd. 10 $ 81 2 81 2 - - - - -
Financial assets carried at cost–noncurrent:
2006 2005
Shareholding Book value Shareholding Book value
percentage percentage
Investee (%) NT dollars US dollars (%) NT dollars US dollars
Taiwan High Speed Rail Corp. 1.21 $ 1,250,000 38,343 1.21 1,250,000 38,052
Evergreen Development Corp. 9.47 870,000 26,687 9.47 870,000 26,484
Taiwan Fixed Network Corporation 1.30 840,000 25,767 1.30 840,000 25,571
Hsin-Tao Power Corp. - - - 9.69 484,612 14,752
Abacus International Holding Ltd. 2.11 115,743 3,550 2.11 115,743 3,523
Sun Shine Corp. 19.50 40,365 1,238 19.50 40,365 1,228
Technology Partner II Venture Capital Corp. 5.88 20,000 614 5.88 20,000 609
Chung Hwa Express Co., Ltd. 10.00 20,000 614 10.00 20,000 609
Pan-Pacific Venture Capital Co., Ltd. 2.30 9,781 300 2.14 15,048 458
Total $ 3,165,889 97,113 3,655,768 111,286
90
The Company's investments in Taiwan High Speed Rail Corp., Evergreen
Development Corp., Taiwan Fixed Network Corporation, etc., had no publicly
traded prices, and their fair values were difficult to determine. Therefore, the
investments were stated at cost.
Details of selling financial assets carried at cost–noncurrent of the Company for
the years ended December 31, 2006 and 2005, were as follows:
Unit: thousands of shares
2006 2005
Gain (loss) on disposal of Gain (loss) on disposal of
financial assets carried at financial assets carried at
Cost cost-noncurrent Cost cost-noncurrent
Investee Shares NT dollars US dollars NT dollars US dollars Shares NT dollars US dollars NT dollars US dollars
Pan-Pacific Venture Capital
Co., Ltd. (Note 1) 479 $ 5,267 162 (479) (15) 432 4,752 143 (432) (13)
Hsin-Tao Power Corp 48,461 484,612 14,911 726,917 22,367 - - - - -
489,879 15,073 726,438 22,352 4,752 143 (432) (13)
Note1: On July 26, 2006, Pan-Pacific Venture Capital decreased issued stock by
35%, and the Company withdrew NT$4,788 (US$147) in cash in propor-
tion to the Company's ownership percentage, which caused losses
amounting to NT$479 (US$15).
On December 21, 2005, Pan-Pacific Venture Capital decreased issued
stock by 24%, and the Company withdrew NT$4,320 (US$132) in cash in
proportion to the Company's ownership percentage, which caused loss-
es amounting to NT$432 (US$13).
As of December 31, 2006 and 2005, the components of derivative financial
instruments were as follows:
91
2006 2005
Nominal Nominal
Amount Book Value Amount Book Value
NT dollars US dollars NT dollars US dollars
Derivative financial assets:
Fuel option agreements $ 21,684 665 495,590 15,087
Interest rate swap agreements NTD 3,000,000 64,955 1,992 NTD 2,400,000 55,114 1,678
USD 120,000 USD 120,000
$ 86,639 2,657 550,704 16,765
2006 2005
Nominal Nominal
Amount Book Value Amount Book Value
NT dollars US dollars NT dollars US dollars
Derivative financial liabilities:
Fuel option agreements $ 1,017,183 31,202 316,608 9,638
Interest rate swap agreements NTD 1,100,000 6,583 202 NTD 1,700,000 20,107 612
$ 1,023,766 31,404 336,715 10,250
Details of derivative financial assets and liabilities as of December 31, 2006 and
2005, were as follows:
2006 2005
NT dollars US dollars NT dollars US dollars
Financial assets at fair value through
profit or loss-current $ 21,684 665 495,590 15,087
Financial assets at fair value through
profit or loss-noncurrent $ 64,955 1,992 55,114 1,678
Financial liabilities at fair value through
profit or loss-current $ 255,284 7,831 - -
Financial liabilities at fair value through
profit or loss-noncurrent $ 768,482 23,573 336,715 10,250
92
(c) Other financial assets–current
The components as of December 31, 2006 and 2005, were as follows:
2006 2005
NT dollars US dollars NT dollars US dollars
Tax refund receivable $ 177,189 5,435 230,024 7,002
Non-operating revenues receivable 16,372 502 10,390 316
Other receivables 48,320 1,483 640,274 19,491
$ 241,881 7,420 880,688 26,809
(d) Inventories
The components as of December 31, 2006 and 2005, were as follows:
2006 2005
NT dollars US dollars NT dollars US dollars
Aircraft spare parts $ 9,596,308 294,365 8,705,281 265,001
Consumables for use and merchandise
for sale during flight 424,257 13,014 467,002 14,216
Fuel for aircraft 20,092 616 63,593 1,936
Less: allowance for obsolete inventories (1,341,015) (41,135) (1,342,450) (40,866)
$ 8,699,642 266,860 7,893,426 240,287
(e) Long-term equity investments under equity method
Details as of and for the years ended December 31, 2006 and 2005, were
as follows:
93
2006
Book value Cost Investment income
Shareholding
Investee percentage NT dollars US dollars NT dollars US dollars NT dollars US dollars
(%)
Evergreen Airline Services Corp. 56.33 $ 460,178 14,116 111,174 3,410 96,519 2,970
RTW Air Services (S) Pte. Ltd. 49.00 25,024 767 13,217 405 5,509 170
Green Siam Air Services Co., Ltd. 49.00 27,864 855 9,421 289 12,741 392
Evergreen Sky Catering Corp. 49.80 722,741 22,170 498,000 15,276 97,762 3,008
Evergreen Airways Service (Macau) Ltd. 99.00 647,600 19,865 327 10 151,841 4,672
Uni Airways Corp. 17.92 195,978 6,012 1,124,845 34,505 1,886 58
Evergreen Aviation Technologies Corp. 80.00 3,590,811 110,148 2,000,450 61,364 456,067 14,033
Evergreen Security Corp. 31.25 48,385 1,484 25,000 767 7,558 232
Evergreen Air Cargo Services Corp. 60.00 925,457 28,388 726,098 22,273 73,477 2,261
Hsiang-Li Investment Corp. 100.00 1,006,192 30,865 1,000,000 30,675 89,949 2,768
Uni Japan Co., Ltd. - - - - - 135 4
PT Perdana Andalan Air Service 49.00 29,794 914 2,566 79 10,991 338
Sky Castle Investment Ltd. 100.00 165,880 5,088 163,818 5,025 3,150 97
Concord Pacific Ltd. 100.00 132,284 4,058 131,620 4,037 1,878 58
$ 7,978,188 244,730 5,806,536 178,115 1,009,463 31,061
2005
Book value Cost Investment income (loss)
Shareholding
Investee percentage NT dollars US dollars NT dollars US dollars NT dollars US dollars
(%)
Evergreen Airline Services Corp. 56.33 $ 394,154 11,999 111,174 3,384 36,000 1,119
RTW Air Services (S) Pte. Ltd. 49.00 22,585 688 13,217 402 6,229 194
Green Siam Air Services Co., Ltd. 49.00 27,029 823 9,421 287 17,174 534
Evergreen Sky Catering Corp. 49.80 674,779 20,541 498,000 15,160 56,001 1,741
Evergreen Airways Service (Macau) Ltd. 99.00 762,254 23,204 327 10 197,370 6,135
Uni Airways Corp. 17.92 197,594 6,015 1,124,845 34,242 19,180 596
Evergreen Aviation Technologies Corp. 80.00 3,174,790 96,645 2,000,450 60,897 342,515 10,647
Evergreen Security Corp. 31.25 40,827 1,243 25,000 761 6,895 214
Evergreen Air Cargo Services Corp. 60.00 959,036 29,194 726,098 22,104 144,971 4,506
Hsiang-Li Investment Corp. 100.00 914,029 27,824 1,000,000 30,441 (35,112) (1,091)
Uni Japan Co., Ltd. 49.50 1,689 51 1,820 55 473 15
PT Perdana Andalan Air Service 49.00 7,669 234 2,566 78 5,103 159
$ 7,176,435 218,461 5,512,918 167,821 796,799 24,769
94
Details of increases in long-term equity investments under equity method of
the Company in 2006 and 2005 were as follows:
Unit: thousands of shares
2006 2005
Investee Shares NT dollars US dollars Shares NT dollars US dollars
PT Perdana Andalan Air Service - $ - - 39 2,566 81
Concord Pacific Ltd. 4,000 131,620 4,050 - - -
Sky Castle Investment Ltd. 5,000 163,818 5,041 - - -
$ 295,438 9,091 2,566 81
Details of selling long-term equity investments under equity method of the
Company in 2006 and 2005 were as follows:
Unit: thousands of shares
2006
Gain on disposal of
long-term investments
Cost under equity method
Investee Shares NT dollars US dollars NT dollars US dollars
Uni Japan Co., Ltd. (Note) 99 $ 1,824 56 562 17
Note: Uni Japan Co., Ltd. stopped operating on June 1, 2006, and went intoliquidation from June 2, 2006 to August 29, 2006. The Company withdrewNT$1,775 (US$54). The difference between book value amounting to NT$1,824(US$56) and credit balance of cumulative translation adjustments amounting toNT$611 (US$19) was gain on disposal of long-term investments under equitymethod amounting to NT$562 (US$17), which was recorded as other income.The liquidation had been authorized by the local government.
There was no such transaction during 2005.
(f) Property, plant and equipment
In 2006 and 2005, the Company capitalized the interest expenses on purchaseof aircraft amounting to NT$410,770 (US$12,639) and NT$315,476 (US$9,807),respectively. The monthly interest rates on the above transactions were0.26%~0.27% and 0.25%~0.27%, respectively.
(g) Lease assets
The details were as follows:
Present value of leased assets at the transaction date
2006 2005
Discount rate of
Lease item Quantity Lessor Lease term Terms of lease contract leased assets NT dollars US dollars NT dollars US dollars
Boeing 747 4 GECAS 2004.4.13~ The rent is payable monthly 2.86%~7.10% $ 8,681,960 266,318 8,748,540 266,318
aircraft 2016.11.12 and the lease term is equal to
75% or more of the total
estimated economic life of
the leased property
Boeing 747 2 GECAS 2006.4.26~ The rent is payable monthly, 6.82% 2,325,052 71,321 - -
aircraft 2008.3.25 and the lease term is equal to
75% or more of the total
estimated economic life of
the leased property
Engines 6 Taiwan Life 2004.6.29~ The rent is payable every 1.76% 540,296 16,573 540,296 16,447
Financing 2011.6.28 three months, and the lease
Co., Ltd. transfers ownership of the
leased property by the end of
the lease term
Computers 1 IBM 2004.7.25~ The rent is payable monthly, 2.50% 46,638 1,431 41,844 1,274
2009.7.24 and the lease transfers owner-
ship of the leased property by
the end of the lease term
Less: accumulate depreciation (2,783,744) (85,391) (1,127,171) (34,313)
$ 8,810,202 270,252 8,203,509 249,726
The abovementioned aircraft and engines were financed under sale and lease-
back arrangements. The differences (deemed as unrealized gain on sale and
leaseback) between sales price and book value of equipment are recorded as a
reduction of depreciation expenses over the lease term.
95
96
As of December 31, 2006 and 2005, the book value and present value of leaseliability were as follows:
2006 2005
Year due NT dollars US dollars NT dollars US dollars
January 1, 2006~December 31, 2006 $ - - 1,221,019 37,170
January 1, 2007~December 31, 2007 2,268,017 69,571 926,355 28,200
January 1, 2008~December 31, 2008 1,155,015 35,430 964,033 29,346
January 1, 2009~December 31, 2009 992,040 30,431 998,062 30,382
January 1, 2010~December 31, 2010 985,778 30,238 992,671 30,218
January 1, 2011~December 31, 2011 1,208,251 37,063 1,215,321 36,996
And after 4,009,800 123,000 3,843,450 117,000
Book value 10,618,901 325,733 10,160,911 309,312
Less: unrealized interest expenses (1,975,049) (60,584) (2,000,292) (60,891)
Present value 8,643,852 265,149 8,160,619 248,421
Less: current portion (1,858,271) (57,002) (879,098) (26,761)
$ 6,785,581 208,147 7,281,521 221,660
(h) Deferred charges
As of December 31, 2006 and 2005, deferred charges, net of amortization, con-
sisted of the following:
2006 2005
NT dollars US dollars NT dollars US dollars
Computer software $ 213,837 6,559 288,062 8,769
Leasehold improvements 2,947,980 90,429 1,874,462 57,061
Major overhaul for aircraft and engines 2,424,528 74,372 2,482,515 75,571
Others 382,254 11,726 426,895 12,996
$ 5,968,599 183,086 5,071,934 154,397
(i) Short-term borrowings and payable on commercial paper
The components as of December 31, 2006 and 2005, were as follows:
97
2006 2005NT dollars US dollars NT dollars US dollars
Unsecured loans $ 500,000 15,337 2,400,000 73,059Payable on commercial paper, net ofprepaid interest of NT$338 (US$10) for 2005 - - 699,662 21,299
$ 500,000 15,337 3,099,662 94,358
The interest expenses on the aforementioned short-term borrowings are calcu-lated based on floating interest rates. For the years ended December 31, 2006and 2005, the interest rates were 1.40%~1.81% and 1.15%~1.48%, respectively.As of December 31, 2006 and 2005, the unused credit lines amounted toapproximately NT$7,591,615 (US$232,872) and NT$5,903,733 (US$179,718),respectively.
(j) Long-term borrowings
As of December 31, 2006 and 2005, the details of long-term borrowings wereas follows:
2006 2005Nature Interest rate Interest rate
(%) NT dollars US dollars (%) NT dollars US dollarsSecured loans:
Land and buildings 2.02~2.42 $ 2,800,000 85,889 2.05~2.43 2,800,000 85,236
Aircraft
NT$ loans 1.95~3.06 17,151,600 526,123 1.95~2.77 4,637,000 141,157
US$ loans - - - 2.70~5.47 1,503,966 45,783
17,151,600 526,123 6,140,966 186,940
Simulators
US$ loans 4.71~6.10 288,344 8,845 2.58~4.71 290,591 8,846
288,344 8,845 290,591 8,846
Subtotal 20,239,944 620,857 9,231,557 281,022
Unsecured loans: 1.63~2.65 14,757,000 452,669 1.55~4.62 14,036,188 427,281
Total 34,996,944 1,073,526 23,267,745 708,303
Less: current portion (7,532,302) (231,052) (5,360,213) (163,172)
$ 27,464,642 842,474 17,907,532 545,131
98
As of December 31, 2006, the remaining balances of the loans were due as follows:
Year due NT dollars US dollarsJanuary 1, 2007~December 31, 2007 $ 7,532,302 231,052January 1, 2008~December 31, 2008 7,103,969 217,913January 1, 2009~December 31, 2009 6,448,946 197,821January 1, 2010~December 31, 2010 6,177,113 189,482January 1, 2011~December 31, 2011 2,516,879 77,205And after 5,217,735 160,053
$ 34,996,944 1,073,526
As of December 31, 2006 and 2005, the unused credit lines for long-term bor-rowings amounted to NT$900,000 (US$27,607) and NT$900,000 (US$27,397),respectively. The pledges for long-term borrowings are disclosed in note 6.
(k) Bonds payable
Details of bonds payable as of December 31, 2006 and 2005, were as follows:
Description 2006 2005Annual Issue
Guaranteed by interest rate date NT dollars US dollars NT dollars US dollarsBonds payable Taiwan Fubon Bank 3.70% 2001.07 $ - - 500,000 15,221Bonds payable Taiwan Cooperative Bank Floating 2004.02 500,000 15,337 500,000 15,221Bonds payable Land Bank 2.25% 2004.07 500,000 15,337 500,000 15,221
Chang Hwa Bank 2.25% 2004.07 500,000 15,337 500,000 15,221Taipei Fubon Bank 2.25% 2004.07 500,000 15,337 500,000 15,221
Bonds payable Bank of Taiwan 2.11% 2005.01 500,000 15,337 500,000 15,221Taiwan Cooperative Bank 2.11% 2005.01 500,000 15,337 500,000 15,221
Bonds payable Far-Eastern International 1.85% 2005.08 500,000 15,337 500,000 15,221BankShanghai Commercial & Savings Bank 1.85% 2005.08 500,000 15,337 500,000 15,221Chinatrust Commercial 1.85% 2005.08 600,000 18,405 600,000 18,263BankHua Nan Bank 1.85% 2005.08 500,000 15,337 500,000 15,221
Bonds payable Cathay United Bank 2.08% 2006.01 2,000,000 61,355 - -Bonds payable Hua Nan Bank 2.29% 2006.07 500,000 15,337 - -
Taipei Fubon Bank 2.29% 2006.07 500,000 15,337 - -Bank of Taiwan 2.29% 2006.07 500,000 15,337 - -Taiwan Cooperative Bank 2.29% 2006.07 500,000 15,337 - -
Convertible bonds payable 0.00% 2004.08 1,572,550 48,238 3,283,754 99,961Subtotal 10,672,550 327,379 8,883,754 270,434Less: current portion (1,572,550) (48,238) (500,000) (15,221)
$ 9,100,000 279,141 8,383,754 255,213
99
(l) Second convertible bonds payable
The Company issued NT$4.5 billion worth of Taiwan domestic convertible
bonds on August 9, 2004, for which the final terms and conditions were as fol-
lows:
(i) Coupon rate: 0%
(ii) Issue period: From August 9, 2004, to August 8, 2009
(iii)Redemption: Except for the bonds that have already been redeemed, con-
verted, or purchased and cancelled, the bonds can be redeemed on the
fifth anniversary of the issue date at par value.
(iv)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 Taiwan Stock Exchange 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.
(v) Redemption at the option of the bondholders: The Company will, at the
option of the bondholders, redeem such bond on the third anniversary of
the issue date at par value.
(vi)Conversion
A) The bondholders can ask the Company to convert the convertible bonds
to common stock during the period from one month after the issue date
to ten days before the maturity date.
B) Conversion price:
The conversion price is set at NT$14.50, which is a premium of 111%
over 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 1, 3 or 5 trading days, whichever is chosen,
100
immediately preceding but excluding the pricing date, which is July 26,
2004. The conversion price will be subject to adjustments in the event
that any change occurs to the capital structure. As of December 31,
2006, the conversion price was NT$13.51.
(l) Other installments payable
The Company purchased aircraft spare parts, in installments. As of December
31, 2005, the details were as follows:
2005
NT dollars US dollars
Installment amount payable $ 427,105 13,002
Less: current portion (427,105) (13,002)
$ - -
The current portion of other installments payable was recorded as other
payables.
The interest expenses of the aforementioned installments are calculated based
on floating interest rates. For the year ended December 31, 2005 the average
interest rates were 2.33%~2.61%.
There was no such transaction for the year ended December 31, 2006.
(m) Aircraft payable
The Company purchased aircraft by installments. As of December 31, 2006 and
2005, the details were as follows:
2006 2005
NT dollars US dollars NT dollars US dollars
Aircraft payable $ 16,908,554 518,667 19,453,463 592,191
Less: current portion (2,409,656) (73,916) (2,415,242) (73,524)
$ 14,498,898 444,751 17,038,221 518,667
101
The current portion of aircraft payable was recorded as other payables. As ofDecember 31, 2006, the remaining balances of the aircraft payables were dueas follows:
Year due NT dollars US dollarsJanuary 1, 2007~December 31, 2007 $ 2,409,656 73,916January 1, 2008~December 31, 2008 2,351,857 72,143January 1, 2009~December 31, 2009 2,408,189 73,871January 1, 2010~December 31, 2010 2,440,329 74,857January 1, 2011~December 31, 2011 1,945,982 59,692And after 5,352,541 164,188
$ 16,908,554 518,667
The interest expenses of the aforementioned aircraft payable are calculatedbased on floating interest rates. For the years ended December 31, 2006 and2005, the average interest rates were 4.14%~6.77% and 2.06%~6.77%, respec-tively. The pledges for the aircraft payable are disclosed in note 6.
(n) Retirement plans
Net retirement plan liabilities based on the actuarial computation at December31, 2006 and 2005, were as follows:
2006 2005NT dollars US dollars NT dollars US dollars
Benefit obligation:Vested benefit obligation $ 178,289 5,469 66,876 2,035Nonvested benefit obligation 2,201,791 67,539 1,808,946 55,067Accumulated benefit obligation 2,380,080 73,008 1,875,822 57,102Projected effects of salaryadjustments 331,983 10,183 268,833 8,184
Projected benefit obligation 2,712,063 83,191 2,144,655 65,286Plan assets at fair value (1,552,068) (47,609) (1,209,436) (36,817)Projected benefit obligation in
excess of plan assets 1,159,995 35,582 935,219 28,469Unrecognized net transition
obligation (136,476) (4,186) (163,770) (4,985)Unrecognized pension loss (840,818) (25,792) (456,691) (13,902)Pension liabilities that need to be
accrued 645,311 19,795 351,628 10,704Accrued employee retirement
liabilities $ 828,012 25,399 666,386 20,286
102
The components of net pension cost were as follows:
2006 2005
NT dollars US dollars NT dollars US dollars
Service cost $ 160,823 4,949 168,481 5,237
Interest cost 74,256 2,285 67,372 2,095
Actual return on plan assets (36,358) (1,119) (15,311) (476)
Unrecognized net transition
obligation 28,223 868 18,726 582
Net pension cost $ 226,944 6,983 239,268 7,438
Actuarial assumptions at December 31, 2006 and 2005, were as follows:
2006 2005
Discount rate 2.75% 3.50%
Rate of increase in future compensation levels 1.00% 1.00%
Expected long-term rate of return on plan assets 2.75% 3.50%
As of and for the years ended December 31, 2006 and 2005, the details of the
retirement plans were as follows:
2006 2005
NT dollars US dollars NT dollars US dollars
Balance of the retirement fund:
The Central Trust of China $ 1,552,068 47,609 1,209,436 36,817
Periodic pension cost:
Defined benefit pension plan cost 226,944 6,983 239,268 7,438
Defined contribution pension plan cost 91,274 2,808 39,331 1,222
(o) Income tax
(1) For the years ended December 31, 2006 and 2005, the components of esti-
mated income tax benefits were as follows:
103
2006 2005
NT dollars US dollars NT dollars US dollars
Income tax benefits (expenses)-current $ 2,061 63 (137,554) (4,276)
Income tax benefits-deferred 414,587 12,757 326,923 10,162
$ 416,648 12,820 189,369 5,886
The deferred income tax benefits were as follows:
2006 2005
NT dollars US dollars NT dollars US dollars
Loss carryforwards $ 822,581 25,310 - -
Unrealized exchange losses (21,260) (654) (51,288) (1,595)
Investment tax credits 264,869 8,150 350,098 10,883
Provision for loss on inventory market
price decline (359) (11) (40,138) (1,248)
Purchase of fixed assets by installments,
adjusted for tax purposes 48,818 1,502 85,952 2,672
Deferred gains on disposal of fixed assets,
adjusted for tax purposes (41,784) (1,285) (96,390) (2,996)
Accrued employee retirement liabilities (35,025) (1,078) 78,689 2,446
Unrealized loss on financial instruments 234,282 7,209 - -
Other 2,465 76 - -
Valuation allowance for deferred income
tax assets (860,000) (26,462) - -
$ 414,587 12,757 326,923 10,162
(2) The Company is subject to ROC income tax at a maximum rate of 25%. The
Company was subject to the "minimum tax statutes" commencing from
January 1, 2006. The differences between expected income tax benefit
(expense) at statutory rates and income tax benefit as reported in the
accompanying financial statements for the years ended December 31, 2006
and 2005, were as follows:
104
2006 2005NT dollars US dollars NT dollars US dollars
Income tax benefits (expenses) $ 565,981 17,415 (284,173) (8,833)
calculated on pre-tax financial income (loss) at
statutory income tax rate of 25%
Surtax on undistributed earnings - - (134,147) (4,170)
Gain on sale of investments 197,577 6,079 26,585 826
Investment income recognized under
equity method–unrealized 252,366 7,765 199,200 6,192
Dividend income (31,352) (964) 34,130 1,061
Permanent difference in depreciation
expenses (47,309) (1,456) (45,573) (1,417)
Exchange losses recorded as translation
adjustments $ 161,643 4,974 29,238 909
Increase in investment tax credits 264,869 8,150 460,237 14,306
Cumulative effect of changes in
accounting principle (53,564) (1,648) - -
Others (33,563) (1,033) (96,128) (2,988)
Valuation allowance for deferred income
tax assets (860,000) (26,462) - -
$ 416,648 12,820 189,369 5,886(3) The components of the deferred income tax assets (liabilities) as of
December 31, 2006 and 2005, were as follows:
2006 2005
Amount Tax effect Amount Tax effect
NT dollars US dollars NT dollars US dollars NT dollars US dollars NT dollars US dollars
Deferred income tax assets–current
Allowance for obsolete inventories 1,341,015 41,135 335,254 10,284 1,342,450 40,866 335,613 10,216
Unrealized exchange losses 25,936 796 6,484 199 110,976 3,378 27,744 845
Unrealized loss on financial
instruments 211,692 6,494 52,923 1,623 - - - -
Others 9,860 302 2,465 76 - - - -
Deferred income tax assets, net
–current 397,126 12,182 363,357 11,061
105
2006 2005
Amount Tax effect Amount Tax effect
NT dollars US dollars NT dollars US dollars NT dollars US dollars NT dollars US dollars
Deferred income tax assets (liabilities)
–noncurrent
Unrealized loss on financial
instruments 725,436 22,253 181,359 5,563 - - - -
Unrealized investment tax credits - - 614,967 18,864 - - 350,098 10,657
Accrued employee retirement
liabilities 174,656 5,358 43,664 1,339 314,756 9,582 78,689 2,395
Purchase of fixed assets on installments,
adjusted for tax purposes 3,065,124 94,022 766,281 23,505 2,869,852 87,362 717,463 21,841
Unused loss carryforwards 3,290,326 100,930 822,581 25,233 - - - -
Others (1,262,448) (38,725) (315,612) (9,681) 911,640 27,752 227,910 6,938
2,113,240 64,823 1,374,160 41,831
Less: Valuation allowance for deferred
income tax assets (860,000) (26,380) - -
Deferred income tax assets, net
–noncurrent 1,253,240 38,443 1,374,160 41,831
(4) The Company was granted investment tax credits for investment in certainhigh-tech industries, for purchases of automatic machinery and equipment,and for expenditures in research and development and employee training.These investment tax credits can be used to reduce the income tax liabilityin the current year and in the following four years at an amount not exceed-ing 50% of the income tax liability for each year during the first four years,with full utilization of the balance of the remaining unused investment taxcredits in the final year.
As of December 31, 2006, unused investment tax credits available to theCompany were as follows:
Year granted Unused investment tax credits Expiry yearNT dollars US dollars
2005 $ 375,313 11,513 20092006 239,654 7,351 2010
$ 614,967 18,864
106
(5) As of December 31, 2006, unused loss carryforward tax credits available to
the Company were as follows:
Year Unused loss carryforward Expiry year
NT dollars US dollars
2006 $ 3,290,326 100,930 2011
(6) Imputation credit account (ICA) and creditable ratio:
2006 2005
NT dollars US dollars NT dollars US dollars
Unappropriated earnings before 1997 $ - - - -
Unappropriated earnings after 1998 1,030,510 28,277 3,662,898 109,572
$ 1,030,510 28,277 3,662,898 109,572
ICA $ 577,626 17,719 595,268 18,121
2006 2005
Creditable ratio for earnings distribution
to domestic shareholders - (estimated) 17.27% (actual)
(7) The Company' s income tax returns have been examined through 2003 by
the ROC income tax authority. The Company was assessed additional 2001,
2002 and 2003 Corporate Income Tax of NT$51,496 (US$1,584). This amount
was due to the tax authority' s rejection of the Company' s meal allowance.
The Company did not agree with this decision and filed an application for a
second review. In addition, the Company did not recognize income tax
because of investment tax credits.
(p) Stockholders' equity
(1) Common stock
As of December 31, 2006, the Company's authorized share capital consisted
of 4,000,000 thousand shares of common stock, at NT$10 par value per
107
share, of which 3,874,979 thousand shares were issued and outstanding.
As of December 31, 2005, the Company's authorized share capital consisted
of 4,000,000 thousand shares of common stock, at NT$10 par value per
share, of which 3,389,887 thousand shares were issued and outstanding.
On June 16, 2005, the Company's stockholders approved a resolution to
capitalize the unappropriated earnings of NT$329,229 by issuing 32,923
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 the date of record for capital increasing is August 22, 2005.
On November 21, 2005, the Company's board of directors approved a reso-
lution for cash subscription by issuing 360,000 thousand shares of common
stock at issuance price of NT$12 per share. The stock issuance was author-
ized by and registered with the government authorities. The date of record
for subscription is March 21, 2006.
(2) Capital surplus, legal reserve, and restrictions on appropriations of earnings
The details as of December 31, 2006 and 2005, were as follows:
2006 2005NT dollars US dollars NT dollars US dollars
Cash subscription in excess of
par value of shares $ 2,514,333 83,975 1,794,333 61,794
Additional paid-in capital from bond
conversion 1,184,621 36,334 745,546 22,711
Gain on disposal of property, plant and
equipment of investee company 1,668 53 1,668 53
Increase in net equity due to change in
percentage of ownership in long-term
investments under equity method 230,167 6,682 234,600 6,816
Donated assets 649,329 21,242 648,839 21,229
$ 4,580,118 148,286 3,424,986 112,603
108
The ROC Company Act stipulates that realized capital surplus should not be
credited to capital except for making up deficiencies of the Company. The
realized capital surplus includes the premiums from issuance of shares in
excess of par value. In addition, the capitalization of capital surplus or other
events in accordance with Article 8 of the ROC Securities and Exchange Law
and the ROC Company Act can be credited to capital on the condition that
the aforementioned capital surplus has been approved by and registered
with the competent authority in the previous year.
Furthermore, the capital surplus from the issuance of shares in excess of par
value and from gifts received which are credited to capital should not
exceed 10 percent of the amount of paid-in capital in one year.
The ROC Company Act stipulates that the Company must retain 10% of its
annual earnings, as defined in the Act, until such retention equals the
amount of authorized share capital. This retention is accounted for by trans-
fers to legal reserve, upon approval at the stockholders' meeting. Legal
reserve may be used to offset an accumulated deficit and cannot be distrib-
uted 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.
The Company's articles of incorporation stipulate that the Company must
appropriate employees' bonuses of not less than 1% of estimated earnings
of each year, and not more than 5% of estimated earnings of each year for
remuneration of directors and supervisors. Such appropriations can only be
made after offsetting accumulated deficit and appropriation of legal
reserve, and must be accounted for as a reduction of 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 appropri-
ated dividend is distributed and a stock dividend of around 50%~100% of
the appropriated dividend is distributed. However, if the expected earnings
per share in the year when stock dividends are distributed decline to 20% or
109
working capital is low, a cash dividend of 50%~100% of the appropriated
dividend is distributed and a stock dividend of 0~50% of the appropriated
dividend is distributed.
The related information on employees' bonuses and directors' and supervi-
sors' remuneration appropriated from 2005 earnings was as follows:
NT dollars US dollars
Employees' bonuses-cash $ 52,320 1,626
Directors' and supervisors' remuneration 10,900 339
$ 63,220 1,965
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.
(q) Earnings per share
For the years ended December 31, 2006 and 2005, earnings per share were cal-
culated as follows:
NT dollars US dollars
2006 2006
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
Basic earnings per share:
Income (loss) before
cumulative effect of changes in
accounting principle $ (2,263,924) (1,847,276) $ (0.61) (0.49) (69,659) (56,839) (0.02) (0.01)
Cumulative effect of changes in
accounting principle 214,255 160,691 0.06 0.04 6,592 4,944 - -
Net loss $ (2,049,669) (1,686,585) 3,723,419 $ (0.55) (0.45) (63,067) (51,895) 3,723,419 (0.02) (0.01)
110
NT dollars US dollars
2005 2005
Income Shares Earnings per Share Income 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
Basic earnings per share $ 1,136,691 1,326,060 3,395,071 $ 0.33 0.39 35,334 41,220 3,395,071 0.01 0.01
Diluted earnings per share $ 1,136,691 1,326,060 3,632,913 (note)$ 0.31 0.37 35,334 41,220 3,632,913 0.01 0.01
(note): Effect in the period of 237,842 thousand dilutive potential common
shares arising from convertible bonds.
(r) Derivative financial instruments and hedging
(1) Cash flow hedging
The Company holds floating rate assets and obligations. The future cash
flows of assets and liabilities fluctuate according to floating market rates.
This results in risk. The Company evaluates the risk as significant; thus, it has
hedged the risk by signing interest rate swap agreements.
The Company needs fuel for operating. The future cash flows of fuel cost
fluctuate according to floating market price. This results in risk. The
Company evaluates the risk as significant; thus, it has hedged the risk by
signing fuel swap agreements.
As of December 31, 2006, the cash flow hedging items and derivative finan-
cial hedging instruments were as follows:
Period of related
gain or loss
Period of recognized in
Hedging Fair value of assigned generating income
Hedging item instrument hedging instrument cash flow statement Account
NT dollars US dollars
Floating interest Interest rate swap (23,197) (712) 2004~2009 2004~2009 Derivative
rate of bonds agreements financial
payable liabilities for
hedge purposes
-noncurrent
Floating price of Fuel swap (356) (11) 2007 2007 Derivative
fuel agreements financial
liabilities for
hedge purposes
-current
As of December 31, 2006, the unrealized valuation loss on financial instruments
due to hedging of cash flow amounted to NT$23,553(US$722), recognized as
adjustments to stockholders' equity.
(s) Disclosure of financial instruments
(1) Fair value of financial instruments
The details of financial instruments as of December 31, 2006 and 2005, were
as follows:
111
2006NT dollars US dollars
Book value Fair value Book value Fair value
Financial assets:
Available-for-sale financial assets-current $ 6,733,670 6,733,670 206,554 206,554
Available-for-sale financial assets-noncurrent 557,654 557,654 17,106 17,106
Financial assets carried at cost-noncurrent 3,165,889 - 97,113 -
Interest rate swap agreements 64,955 64,955 1,992 1,992
Fuel option agreements 21,684 21,684 665 665
Financial liabilities:
Current portion of long-term liabilities 9,104,852 9,259,577 279,290 284,036
Bonds payable 9,100,000 8,263,399 279,141 253,478
Interest rate swap agreements 29,780 29,780 913 913
Fuel swap agreement 356 356 11 11
Fuel option agreements 1,017,183 1,017,183 31,202 31,202
Off-balance-sheet financial instruments:
Letters of credit - 687,264 - 21,082
2005NT dollars US dollars
Book value Fair value Book value Fair value
Financial assets:
Available-for-sale financial assets-current 2,713,075 2,720,864 82,590 82,827
Available-for-sale financial assets-noncurrent 453,193 460,564 13,796 14,020
Financial assets carried at cost-noncurrent 3,655,768 - 111,286 -
Interest rate swap agreements 55,114 55,114 1,678 1,678
Fuel option agreements 495,590 495,590 15,086 15,086
Financial liabilities:
Current portion of long-term liabilities 5,860,213 5,860,213 178,393 178,393
Bonds payable 8,383,754 8,327,745 255,213 253,508
Interest rate swap agreements 20,107 20,107 612 612
Fuel option agreements 316,608 316,608 9,638 9,638
Off-balance-sheet financial instruments:
Letters of credit - 286,248 - 8,714
112
(2) Methods and assumptions to measure the fair value of financial instruments
i) The maturity dates of short-term financial instruments, including cash
and cash equivalents, notes and accounts receivable/payable (including
related parties), other financial assets-current, short-term borrowings,
accrued expenses, and other payables, are within one year of the bal-
ance sheet date, their book value is equal to their fair value.
ii) If public quoting of financial assets and liabilities is available, then the
quote price will be the fair value. If market value is not available, an
assessment method will be used. The assumptions used should be the
same as those used by the financial market traders when quoting their
prices.
iii) The fair value of bonds payable, long-term borrowings, aircraft payable,
and lease liability is the discounted future cash flows, and the discount
rates during the years ended December 31, 2006 and 2005, were
1.63%~7.10% p.a. and 1.18%~6.93% p.a., respectively.
iv) The fair value of letters of credit and financing guaranty is based on the
contract.
(3) The fair values of financial assets and liabilities evaluated by public quoting
and the assessment method by the Company were as follows:
2006
Public quote value Assessment value
NT dollars US dollars NT dollars US dollars
Financial assets:
Cash and cash equivalents - - 2,997,459 91,947
Available-for-sale financial assets-current 6,733,670 206,554 - -
Notes and accounts receivable
(including receivables from related parties) - - 8,821,840 270,608
Other financial assets-current - - 241,881 7,420
113
Available-for-sale financial assets-noncurrent 557,654 17,106 - -
Interest rate swap agreements - - 64,955 1,992
Fuel option agreements - - 21,684 665
Financial liabilities:
Short-term borrowings - - 500,000 15,337
Notes and accounts payable
(including payables to related parties) - - 2,477,584 76,000
Accrued expenses - - 6,910,351 211,974
Other payables - - 2,419,945 74,231
Current portion of long-term liabilities - - 9,259,577 284,036
Bonds payable - - 8,263,399 253,478
Long-term borrowings - - 27,464,642 842,474
Aircraft payable - - 14,498,898 444,751
Lease liability - - 6,785,581 208,147
Interest rate swap agreements - - 29,780 913
Fuel swap agreements - - 356 11
Fuel option agreements - - 1,017,183 31,202
Off-balance-sheet financial instruments :
Letters of credit - - 687,264 21,082
(4) For the year ended December 31, 2006, the evaluation gain on financial
assets at fair value through profit or loss amounted to NT$4,972 (US$153).
(5) As of December 31, 2006, the bonds payable with the risk arising from float-
ing interest rates amounted to NT$8,600,000 (US$263,804).
(6) For the year ended December 31, 2006, the interest income and interest
expenses arising from financial assets/liabilities at fair value through profit or
loss without valuation by fair value amounted to NT$163,130 (US$5,019) and
NT$1,961,357 (US$60,349), respectively.
(7) Disclosure of financial risks
(i) Market risk
114
The Company's bonds payable carried a fixed interest rate. If the mar-
ket interest rate increases by 1%, the fair value of bonds payable would
decrease by approximately NT$241,104 (US$7,396).
The Company's securities were recorded as available-for-sale financial
assets and measured at fair value. The Company had the risk of
changes in market price.
(ii) Credit risk
The Company has major credit risk involving cash and cash equivalents,
securities, and accounts receivable. The Company deposited the cash
in different financial institutions. The Company owns securities by pur-
chasing publicly traded bonds and stocks. The Company is exposed to
credit risk in every financial institution. However, the credit risk involving
cash and securities is not significant.
(iii) Liquidity risk
The Company's capital and operating funds are sufficient to reimburse
all the obligations. Therefore, the Company did not have liquidity risk.
(iv) Cash flow risk related to the fluctuation of interest rates
The Company's short-term and long-term borrowings carried floating
interest rates. As a result, the effective rate changes along with the fluc-
tuation of the market interest rate and thereby influences the
Company's future cash flow. If the market interest rate increases by 1%,
the Company's future cash outflow would increase by approximately
NT$354,969 (US$10,922).
5. Transactions with Related Parties
(a) Name and relationship of related parties
115
Name Relationship with the Company
Evergreen Marine Corp. Major shareholder
Evergreen International Corp. Major shareholder
Evergreen International Storage & Transport Corp. Investee company of the Company's major shareholders
Evergreen Airline Services Corp. Subsidiary
RTW Air Services (S) Pte. Ltd. Subsidiary
Green Siam Air Services Co., Ltd. Subsidiary
Evergreen Sky Catering Corp. Subsidiary
Evergreen Aviation Technologies Corp. Subsidiary
Evergreen Air Cargo Services Corp. Subsidiary
Hsiang-Li Investment Corp. Subsidiary
Uni Japan Co., Ltd. Subsidiary (the company was liquidated on
August 29, 2006)
Evergreen Airways Service (Macau) Ltd. Subsidiary
PT Perdana Andalan Air Service Subsidiary
Uni Airways Corp. Investee company accounted for by equity method
Evergreen Security Corp. Investee company accounted for by equity method
(b) Significant transactions with related parties
(1) Revenue, cost and expenses
During the years ended December 31, 2006, and 2005, the Company's trans-
actions with related parties were as follows:
2006 2005
Revenue NT dollars US dollars Percentage NT dollars US dollars Percentage
Evergreen Airline Services Corp. $ 1,618 50 - 1,754 55 -
Uni Airways Corp. 24,275 747 0.03 32,428 1,008 0.04
Evergreen Aviation Technologies Corp. 133,421 4,105 0.14 146,784 4,563 0.17
Evergreen Air Cargo Services Corp. 15,355 472 0.02 17,298 538 0.02
Evergreen International Corp. 16,116 496 0.02 11,615 361 0.01
Others 5,293 163 - 4,264 132 -
$ 196,078 6,033 0.21 214,143 6,657 0.24
116
2006 2005
Cost NT dollars US dollars Percentage NT dollars US dollars Percentage
Evergreen International Corp. $ 61,680 1,898 0.07 53,925 1,676 0.07
Evergreen International Storage &
Transport Corp. 75,499 2,323 0.08 75,081 2,334 0.09
Evergreen Airline Services Corp. 866,204 26,653 0.96 844,988 26,266 1.04
Evergreen Sky Catering Corp. 921,226 28,345 1.02 880,886 27,382 1.09
Uni Airways Corp. 891,197 27,421 0.99 944,139 29,349 1.17
Evergreen Aviation Technologies Corp.4,284,992 131,846 4.74 4,599,514 142,975 5.69
Evergreen Air Cargo Services Corp. 343,796 10,578 0.38 345,149 10,729 0.43
Others 1,234 38 - 1,607 50 -
$ 7,445,828 229,102 8.24 7,745,289 240,761 9.58
2006 2005
Expenses NT dollars US dollars Percentage NT dollars US dollars Percentage
Evergreen International Corp. $ 119,300 3,671 1.73 140,383 4,364 2.06
Evergreen International Storage &
Transport Corp. 18,930 583 0.27 19,195 597 0.28
Evergreen Airline Services Corp. 31,475 968 0.46 27,167 844 0.40
Evergreen Sky Catering Corp. 23,847 734 0.34 23,107 718 0.34
Uni Airways Corp. 60,956 1,876 0.88 78,652 2,445 1.16
Evergreen Aviation Technologies Corp. 18,285 563 0.26 22,012 684 0.32
Evergreen Security Corp. 43,724 1,345 0.63 48,697 1,514 0.72
RTW Air Services (S) Pte. Ltd. 48,830 1,502 0.71 51,108 1,589 0.75
Green Siam Air Services Co., Ltd. 79,847 2,457 1.16 71,885 2,235 1.06
Uni Japan Co., Ltd. 8,820 271 0.13 25,185 783 0.37
PT Perdana Andalan Air Service 31,587 972 0.46 25,775 801 0.38
Others 1,535 47 0.02 969 30 -
$ 487,136 14,989 7.05 534,135 16,604 7.84
117
(2) The abovementioned transactions with related parties were made with no sig-
nificant difference from those with non-related parties, but sometimes the pay-
ments were overdue. Receivables and payables as of December 31, 2006 and
2005, resulting from the aforementioned transactions were as follows:
2006 2005
NT dollars US dollars NT dollars US dollars
Accounts receivable-related parties:
Uni Airways Corp. $ 12,084 371 11,406 347
Evergreen Aviation Technologies Corp. 28,267 867 14,722 448
Evergreen International Corp. 2,447 75 594 18
Evergreen Marine Corp. 1,877 57 2,070 63
Evergreen Air Cargo Service Corp. 1,800 55 1,429 44
Others 380 12 265 8
46,855 1,437 30,486 928
2006 2005
NT dollars US dollars NT dollars US dollars
Other receivables-related parties:
Uni Airways Corp. $ 115,454 3,542 133,242 4,056
Evergreen International Corp. 1,706 52 5,933 181
Evergreen Air Cargo Services Corp. 900 28 6,971 212
Evergreen Aviation Technologies Corp. - - 38,689 1,178
Evergreen Airline Services Corp. 733 22 17,050 519
Evergreen Sky Catering Corp. 115 3 3,198 97
Others 708 22 2,377 72
119,616 3,669 207,460 6,315
Total receivables-related parties $ 166,471 5,106 237,946 7,243
118
119
2006 2005NT dollars US dollars NT dollars US dollars
Accounts payable-related parties:Evergreen Airline Services Corp. $ 143,752 4,409 172,359 5,247Evergreen International Corp. 13,125 403 8,429 257Evergreen Sky Catering Corp. 74,358 2,281 144,195 4,389Uni Airways Corp. 142,480 4,371 131,136 3,992Evergreen Aviation Technologies Corp. 298,310 9,151 355,065 10,809Evergreen Air Cargo Services Corp. 58,102 1,782 61,819 1,882Evergreen International Storage &Transport Corp. 5,887 180 6,807 207
Green Siam Air Services Co, Ltd. 8,729 268 6,474 197RTW Air Services (S) Pte Ltd. 8,848 271 5,989 182PT Perdana Andalan Air Service 8,561 263 3,535 108Others 99 3 2,245 68
762,251 23,382 898,053 27,338Other payables-related parties:
Evergreen International Corp. 15,828 486 15,565 474Evergreen Airline Services Corp. 9,263 284 42,931 1,307Evergreen Sky Catering Corp. 1,465 45 1,871 57Uni Airways Corp. 8,766 269 7,486 228Evergreen Aviation Technologies Corp. 2,949 90 8,706 265Evergreen Air Cargo Services Corp. 1,490 46 3,940 120Evergreen International Storage &Transpor Corp. 1,037 32 1,071 32
Evergreen Security Corp. 4,766 146 4,395 134Others 95 3 53 1
45,659 1,401 86,018 2,618Total payables-related parties $ 807,910 24,783 984,071 29,956
6. Pledged Assets
The book values of the pledged assets as of December 31, 2006 and 2005, were asfollows:
2006 2004
Pledged assets Object NT dollars US dollars NT dollars US dollars
Land Long-term borrowings $ 1,864,122 57,182 1,864,122 56,747
Buildings Long-term borrowings 2,482,271 76,143 2,573,809 78,350
Aircraft Long-term borrowings, 42,677,297 1,309,119 38,452,290 1,170,542
Aircraft payable
Engines-included in Long-term borrowings 104,390 3,202 121,051 3,685
machinery and equipment
Simulators-included in Long-term borrowings 283,753 8,704 313,487 9,543
machinery and equipment
Time deposit-included in Customs duty and contract 579,358 17,772 531,389 16,176
other assets performance guarantees
$ 47,991,191 1,472,122 43,856,148 1,335,043
7. Commitments and Contingencies
(a) As of December 31, 2006, 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 3 US$ 1,260,851 NT$1,776,855 (US$54,505)
April 2004 Boeing 777 8 US$ 1,491,496 NT$12,446,263 (US$381,787)
Note: The prepayments were recorded as advances for purchases of equipment
(b) As of December 31, 2006, the Company had issued a total of NT$5,247,242
(US$160,958) in promissory notes to banks for obtaining guaranties for credit
lines. As of December 31, 2006, the Company had obtained guaranties from
ABN-AMRO Bank, Citibank, Calyon Corporate and Investment Bank, Mizuho
Corporate Bank, Bank of America and HSBC Bank amounting to NT$689,280
(US$21,144).
(c) The Company entered into aircraft, land, engine and aircraft parts lease con-
120
tracts using the operating lease or capital lease method. As of December 31,
2006, the Company had paid $10,905,805 (US$334,534) as refundable deposits.
According to the contracts, future lease payments in the following five years
are as follows:
Year due NT dollars US dollarsJanuary 1, 2007~December 31, 2007 $ 10,319,093 316,537
January 1, 2008~December 31, 2008 8,166,145 250,495
January 1, 2009~December 31, 2009 6,666,205 204,485
January 1, 2010~December 31, 2010 5,482,765 168,183
January 1, 2011~December 31, 2011 5,362,058 164,480
And after 24,340,756 746,649
$ 60,337,022 1,850,829
8. Important Damage Losses: none
9. Important Subsequent Events: none
10. Others
(a) Total personnel, depreciation and amortization expenses for the years ended
December 31, 2006 and 2005, were as follows:
2006By function NT dollars US dollars
Operating Operating Operating OperatingBy item cost expenses Total cost expenses Total
Personnel expenses
Salaries $ 3,244,963 2,616,014 5,860,977 99,845 80,493 180,338
Insurance 143,584 116,666 260,250 4,418 3,590 8,008
Pension 186,747 131,471 318,218 5,746 4,045 9,791
Others (meal
allowances, etc) 1,232,724 257,482 1,490,206 37,930 7,922 45,852
Depreciation 5,903,066 210,290 6,113,356 181,633 6,470 188,103
Amortization 990,250 208,000 1,198,250 30,469 6,400 36,869
121
2005
By function NT dollars US dollars
Operating Operating Operating Operating
By item cost expenses Total cost expenses Total
Personnel expenses
Salaries $ 3,217,212 2,647,551 5,864,763 100,006 82,299 182,305
Insurance 132,828 111,169 243,997 4,129 3,456 7,585
Pension 164,380 114,219 278,599 5,110 3,550 8,660
Others (meal
allowances, etc) 940,608 219,902 1,160,510 29,239 6,835 36,074
Depreciation 4,224,112 212,590 4,436,702 131,306 6,608 137,914
Amortization 994,308 221,658 1,215,966 30,908 6,890 37,798
(b) Reclassification
Certain amounts in the financial statements for the year ended December 31,
2005, have been reclassified to conform with the presentation of the financial
statements for the year ended December 31, 2006, for purposes of comparison
These reclassifications do not have a significant impact on the financial state-
ments.
11. Segment Financial Information
(a) Diversified industry:
The Company mainly operates an international air transportation business.
(b) Geographic area information:
122
2006 2005NT dollars US dollars NT dollars US dollars
South East Asia:Operating revenue $ 31,006,957 954,060 30,565,351 950,120Income (loss) from operations $ (1,102,136) (33,912) 293,850 9,134
Identifiable assets $ 323,666 9,928 281,371 8,565North America:
Operating revenue $ 14,742,859 453,627 13,738,032 427,045Income (loss) from operations $ (524,032) (16,124) 132,075 4,106
Identifiable assets $ 440,186 13,503 433,780 13,205Other foreign areas:
Operating revenue $ 20,940,495 644,323 16,296,210 506,565Income (loss) from operations $ (744,326) (22,902) 156,669 4,870
Identifiable assets $ 1,268,771 38,919 1,160,655 35,332Domestic:
Operating revenue $ 27,213,253 837,331 27,918,656 867,847Income (loss) from operations $ (967,290) (29,763) 268,406 8,343
Identifiable assets $ 127,433,775 3,909,012 115,362,077 3,511,783Total operating revenue $ 93,903,564 2,889,341 88,518,249 2,751,577
Income (loss) from operations $ (3,337,784) (102,701) 851,000 26,453Investment income, net 1,009,463 31,061 796,799 24,769General income 2,025,754 62,330 1,238,479 38,498Interest expenses (1,961,357) (60,349) (1,749,587) (54,386)Income (loss) before income tax $ (2,263,924) (69,659) 1,136,691 35,334Total identifiable assets $ 129,466,398 3,971,362 117,237,883 3,568,885Long-term equity investments 11,701,731 358,949 11,285,396 343,543
Total assets $ 141,168,129 4,330,311 128,523,279 3,912,428
(c) Major customer information - The Company operates an air transportationbusiness with no specific major customers
(d) Export sales information - The main business of the Company is intern-ational air transportation services. Conseque-ntly, it is not practical to separate export and domestic sales.
123
124
2006
2005
Liab
ilitie
s and
Sto
ckho
lder
s' Eq
uity
NT
dolla
rsUS
dol
lars
NT
dolla
rsUS
dol
lars
Curre
nt li
abilit
ies:
Shor
t-ter
m b
orro
wing
s$
2,04
3,13
662
,673
4,33
9,30
813
2,09
4Ac
coun
ts p
ayab
le2,
656,
732
81,4
952,
418,
507
73,6
22Ac
coun
ts p
ayab
le-re
late
d pa
rties
16
5,53
95,
078
149,
630
4,55
5Ta
x pa
yabl
e24
6,22
87,
553
142,
161
4,32
8Ac
crue
d ex
pens
es7,
534,
703
231,
126
7,28
1,45
022
1,65
8Fi
nanc
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t fai
r val
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h pr
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nt
255,
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7,83
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ther
pay
able
s-re
late
d pa
rties
14
6,33
94,
489
56,0
021,
705
Der
ivativ
e fin
ancia
l lia
bilit
ies f
or h
edge
pur
pose
s-cu
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35
611
--
Oth
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2,45
0,32
175
,163
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8,47
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4,67
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286
291,
113
8,29
4,39
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por
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of lo
ng-te
rm li
abilit
ies
9,57
9,57
729
3,85
26,
306,
957
191,
993
Leas
e lia
bilit
y-cu
rrent
1,
858,
595
57,0
1287
9,09
826
,761
Oth
er c
urre
nt li
abilit
ies
1,25
6,87
038
,554
834,
106
25,3
91To
tal c
urre
nt li
abilit
ies
37,6
83,9
661,
155,
950
34,1
40,0
851,
039,
272
Long
-term
liab
ilitie
s:Fi
nanc
ial l
iabi
litie
s at f
air v
alue
thro
ugh
prof
it or
loss
-non
curre
nt
768,
482
23,5
7333
6,71
510
,250
Bond
s pay
able
9,
100,
000
279,
141
8,38
3,75
425
5,21
3Lo
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rm b
orro
wing
s 30
,576
,628
937,
933
20,8
88,0
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3D
eriva
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finan
cial l
iabi
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s for
hed
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444,
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17,0
38,2
2151
8,66
7Le
ase
liabi
lity
6,78
7,13
420
8,19
47,
281,
521
221,
660
Tota
l lon
g-te
rm li
abilit
ies
61,7
54,3
391,
894,
305
53,9
49,6
681,
642,
303
Oth
er li
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ies:
Accr
ued
empl
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retir
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t lia
bilit
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1,03
7,07
031
,812
855,
223
26,0
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s 1,
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32,0
971,
247,
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tal o
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liab
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s2,
083,
431
63,9
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102,
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63,9
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tal l
iabi
litie
s10
1,52
1,73
63,
114,
164
90,1
92,0
532,
745,
572
Stoc
khol
ders
' equ
ity:
Com
mon
stoc
k38
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,794
1,31
0,32
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,869
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727,
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tain
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arni
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0,51
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3,66
2,89
810
9,57
2To
tal r
etai
ned
earn
ings
1,89
0,78
253
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4,39
0,56
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stoc
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' equ
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djus
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Def
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d cr
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--
192,
631
5,86
4Cu
mul
ative
tran
slatio
n ad
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men
ts1,
438,
228
(81,
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2,29
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et lo
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et p
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n co
st(5
85,3
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(17,
773)
(222
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)(6
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)Un
real
ized
gain
s or l
osse
s on
finan
cial i
nstru
men
ts
66,9
872,
049
--
Tota
l oth
er st
ockh
olde
rs' e
quity
adj
ustm
ents
919,
909
(97,
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1,45
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5,50
3)To
tal s
tock
hold
ers'
equi
ty46
,140
,603
1,41
5,35
643
,975
,872
1,33
8,68
7M
inor
ity in
tere
st2,
746,
749
84,2
562,
546,
061
77,5
06To
tal s
tock
hold
ers'
equi
ty a
nd m
inor
ity in
ters
t48
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,352
1,49
9,61
246
,521
,933
1,41
6,19
3Co
mm
itmen
ts a
nd c
ontin
genc
ies
Tota
l lia
bilit
ies a
nd st
ockh
olde
rs' e
quity
$
150
,409
,088
4,61
3,77
613
6,71
3,98
64,
161,
765
2006
2005
Asse
tsN
T do
llars
US d
olla
rsN
T do
llars
US d
olla
rs
Curre
nt a
sset
s:Ca
sh a
nd c
ash
equi
vale
nts
$
4,
619,
554
141,
704
3,33
2,79
610
1,45
5Fi
nanc
ial a
sset
s at f
air v
alue
thro
ugh
prof
it or
loss
-cur
rent
49
3,28
415
,131
778,
244
23,6
91Av
aila
ble-
for-s
ale
finan
cial a
sset
s-cu
rrent
7,
005,
214
214,
884
2,72
3,66
582
,912
Not
es re
ceiva
ble
392,
787
12,0
4939
3,13
011
,967
Acco
unts
rece
ivabl
e, n
et
9,82
5,31
730
1,39
08,
943,
129
272,
241
Acco
unts
rece
ivabl
e-re
late
d pa
rties
12
4,86
53,
830
107,
912
3,28
5O
ther
rece
ivabl
es-re
late
d pa
rties
12
0,28
83,
690
144,
039
4,38
5O
ther
fina
ncia
l ass
ets-
curre
nt
362,
484
11,1
1995
0,90
028
,947
Inve
ntor
ies
10,8
42,9
1833
2,60
59,
383,
799
285,
656
Prep
aid
expe
nses
3,19
5,50
598
,022
3,16
4,71
096
,338
Oth
er p
repa
ymen
ts68
7,96
821
,103
781,
984
23,8
05D
efer
red
inco
me
tax
asse
ts-c
urre
nt
425,
989
13,0
6738
2,69
411
,650
Rest
ricte
d as
sets
-cur
rent
2,99
092
2,99
091
Oth
er c
urre
nt a
sset
s14
0,79
44,
319
101,
514
3,09
0To
tal c
urre
nt a
sset
s38
,239
,957
1,17
3,00
531
,191
,506
949,
513
Fund
s and
inve
stm
ents
:Fi
nanc
ial a
sset
s at f
air v
alue
thro
ugh
prof
it or
loss
-non
curre
nt
64,9
551,
992
55,1
141,
678
Avai
labl
e-fo
r-sal
e fin
ancia
l ass
ets-
nonc
urre
nt
587,
246
18,0
1448
0,57
114
,629
Fina
ncia
l ass
ets c
arrie
d at
cos
t-non
curre
nt
3,32
4,68
910
1,98
43,
930,
665
119,
655
Long
-term
equ
ity in
vest
men
ts u
nder
equ
ity m
etho
d 1,
084,
398
33,2
641,
078,
710
32,8
37To
tal f
unds
and
inve
stm
ents
5,06
1,28
815
5,25
45,
545,
060
168,
799
Prop
erty
, pla
nt a
nd e
quip
men
t:La
nd2,
551,
136
78,2
562,
551,
136
77,6
60Bu
ildin
gs12
,531
,858
384,
412
12,1
51,6
9236
9,91
4M
achi
nery
and
equ
ipm
ent
8,46
0,94
625
9,53
87,
595,
355
231,
213
Airc
raft
74,7
09,8
372,
291,
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98,8
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EV
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Bal
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125
2006 2005NT dollars US dollars NT dollars US dollars
Operating revenue $ 99,105,024 3,049,385 92,414,223 2,872,684
Operating cost (93,478,578) (2,876,264) (83,117,006) (2,583,681)Gross profit from operations 5,626,446 173,121 9,297,217 289,003
Operating expenses (7,347,318) (226,071) (7,237,123) (224,965)Operating income (loss) (1,720,872) (52,950) 2,060,094 64,038
Non-operating income and gains:Interest income 198,846 6,119 126,792 3,942Investment income 153,564 4,725 200,906 6,245Gains on disposal of property, plant and equipment, net 203,001 6,246 747,864 23,247Gains on sale of investments, net 860,959 26,491 116,940 3,635Exchange gains, net 571,946 17,598 31,950 993Other income 364,654 11,220 349,486 10,864
2,352,970 72,399 1,573,938 48,926
Non-operating expenses and losses:Interest expenses, net of capitalized interest of NT$416,104 (US$12,803)and NT$319,830 (US$9,841) in 2006 and 2005,respectively (2,080,177) (64,005) (1,858,908) (57,784)Impairment loss (11,130) (343) (55,075) (1,712)Losses on valuation of financial assets (5,050) (155) - -Other losses (74,408) (2,290) (61,172) (1,902)
(2,170,765) (66,793) (1,975,155) (61,398)
Income (loss) before income tax (1,538,667) (47,344) 1,658,877 51,566
Income tax benefit 74,811 2,302 4,858 151
Income (loss) before cumulative effect of changes in accountingprinciple (1,463,856) (45,042) 1,663,735 51,717
Cumulative effect of changes in accounting principle (net ofincome tax expenses of NT$53,564 (US$1,648) 160,691 4,945 - -
Net income (loss) $ (1,303,165) (40,097) 1,663,735 51,717
Income attributable to:Parent company (1,686,585) (51,895) 1,326,060 41,220Minority interest 383,420 11,798 337,675 10,497
$ (1,303,165) (40,097) 1,663,735 51,717
Net income (loss) Net incomeEarnings per share (expressed in dollars): NT dollars US dollars NT dollars US dollars
Basic earnings per share:Income (loss) before cumulative effect of changes
in accounting principle $ (0.49) (0.01) 0.39 0.01Cumulative effect of changes in accounting principle 0.04 - - -
Net income (loss) $ (0.45) (0.01) 0.39 0.01Diluted earnings per share:
Income before cumulative effect of changesin accounting principle $ - - 0.37 0.01
Cumulative effect of changes in accounting principle - - - -Net income $ - - 0.37 0.01
EVA AIRWAYS CORP. AND SUBSIDIARIESConsolidated Statements of Operations
For the years ended December 31, 2006 and 2005(Expressed in Thousands of New Taiwan Dollars and U.S. Dollars, Except Earnings per Share)
126
EV
A A
IRW
AY
S C
OR
P. A
ND
SU
BSI
DIA
RIE
SC
ons
olid
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Sta
tem
ents
of
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in S
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For
the
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5
(Exp
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Tho
usan
ds
of
New
Tai
wan
Do
llars
and
U.S
. Do
llars
)
127
EVA AIRWAYS CORP. AND SUBSIDIARIESConsolidated Statements of Cash Flows
For the years ended December 31, 2006 and 2005(Expressed in Thousands of New Taiwan Dollars and U.S. Dollars)
2006 2005
NT dollars US dollars NT dollars US dollars
Cash flows from operating activities:
Net income (loss) $ (1,686,585) (51,895) 1,326,060 41,220
Income for minority interest 383,420 11,798 337,675 10,497
Adjustments to reconcile net income (loss) to net cash
flow provided by operating activities:
Depreciation 6,845,194 210,621 5,118,214 159,099
Impairment loss 11,130 343 55,075 1,712
Amortization and maintenance expense 1,247,188 38,375 1,260,913 39,195
Amortization expense recorded as interest expenses 24,766 762 15,710 488
Amortization expense recorded as other expenses 154 5 -
Exchange gains arising from disposal of foreign operating units (369,383) (11,366) - -
Gains on disposal and obsolescence of property, plant and equipment, net (184,244) (5,669) (730,756) (22,715)
Amortization of deferred gain from sale and leaseback of fixed assets (952) (29) (89,765) (2,790)
Amortization of other deferred gain (166,564) (5,125) (417,913) (12,991)
Gains on sale of investments, net (860,959) (26,491) (116,940) (3,635)
Provision for unrealized exchange gain from long-term borrowings (11,402) (351) (9,156) (285)
Investment income (153,564) (4,725) (200,906) (6,245)
Proceeds from cash dividends on long-term equity investments 110,273 3,393 298,419 9,276
Deferred income tax benefit (423,372) (13,027) (344,300) (10,703)
Decrease (increase) in financial assets at fair value thought profit or
loss–current 284,960 8,768 (282,941) (8,795)
Increase in financial assets at fair value through profit or loss–noncurrent (9,841) (303) - -
Decrease in notes receivable 343 10 4,033 125
Increase in accounts receivable (including related parties) (899,141) (27,666) (1,743,656) (54,201)
Decrease in other receivables (including related parties) 23,751 731 98,143 3,051
Decrease (increase) in other financial assets–current 588,416 18,105 (605,506) (18,822)
Increase in inventories (1,459,112) (44,896) (2,137,016) (66,429)
Increase in prepaid expenses (30,795) (948) (696,585) (21,653)
Decrease (increase) in other prepayments 94,016 2,893 (493,370) (15,336)
Increase in other current assets (39,280) (1,209) (75,616) (2,351)
Increase in deferred pension cost - - (76,244) (2,370)
Increase in accounts receivable–related parties–noncurrent 40,589 1,249 (86,548) (2,690)
Increase in financial liabilities at fair value through profit or loss–current 255,284 7,855 - -
Increase in financial liabilities at fair value through profit or loss–noncurrent 431,767 13,285 - -
Decrease in tax payable 104,067 3,202 (372,398) (11,576)
Increase in notes and accounts payable (including related parties) 254,134 7,820 270,510 8,409
Increase (decrease) in other payables (including related parties) (1,037,223) (31,915) 534,112 16,603
Increase in accrued expenses 338,887 10,427 1,517,917 47,184
Increase in unearned revenue 1,195,894 36,797 864,042 26,859
128
Increase in other current liabilities 422,764 13,008 294,852 9,165
Increase (decrease) in other liabilities 33,077 1,108 (64,388) (2,001)
Decrease in accrued employee retirement liabilities (83,212) (2,560) 66,557 2,069
Cumulative effect of changes in accounting principle (214,255) (6,592) - -
Net cash provided by operating activities 5,060,190 155,698 3,518,228 109,364
Cash flows from investing activities:
Decrease (increase) in available-for-sale financial assets–current (4,212,198) (129,606) 2,743,590 85,284
Withdrawal of long-term equity investments, net 13,105 403 4,752 148
Increase in restricted assets-current - - (2,990) (93)
Proceeds from sale of available-for-sale financial assets–noncurrent 162 5 - -
Proceeds from sale of financial assets carried at cost–noncurrent 1,374,029 42,278 - -
Payments for purchase of available-for-sale financial assets–noncurrent - - (49,883) (1,551)
Payments for purchase of long-term equity investments under equity method - - (51,623) (1,605)
Payments for purchase of property, plant and equipment (22,940,854) (705,872) (7,024,412) (218,352)
Proceeds from disposal of property, plant and equipment 7,009,625 215,681 3,873,905 120,420
Decrease (increase) in refundable deposits 4,907,869 151,011 (128,590) (3,997)
Decrease (increase) in other assets (53,812) (1,656) 33,144 1,030
Increase in deferred charges (2,133,883) (65,658) (2,731,256) (84,901)
Net cash used in investing activities (16,035,957) (493,414) (3,333,363) (103,617)
Cash flows from financing activities:
Increase in short-term borrowings 21,583,136 664,096 13,199,308 410,299
Increase in long-term borrowings 23,967,000 737,446 15,625,334 485,711
Redemption of short-term borrowings (23,879,308) (734,748) (10,559,958) (328,255)
Redemption of long-term borrowings (8,576,335) (263,887) (10,461,773) (325,203)
Installment payments for purchase of property, plant and equipment (2,389,495) (73,523) (2,266,687) (70,460)
Installment payments for purchase of inventories - - (746,530) (23,206)
Redemption of lease liability (1,768,270) (54,408) (751,707) (23,367)
Increase (decrease) in minority interest (182,732) (5,048) 2,208,386 67,009
Payments of cash dividends (749,977) (23,313) (1,646,147) (49,330)
Payment of employees' bonuses and directors' and supervisors' remuneration (63,220) (1,965) (71,574) (2,145)
Cash subscription 4,320,000 133,087 - -
Net cash provided by financing activities 12,260,799 377,737 4,528,652 141,053
Effect of exchange rate changes on cash 1,726 228 (7,192) (3,011)
Effect of subsidiaries initial consolidation - - (2,846,130) (88,472)
Net increase in cash and cash equivalents 1,286,758 40,249 1,860,195 55,317
Cash and cash equivalents at beginning of year 3,332,796 101,455 1,472,601 46,138
Cash and cash equivalents at end of year $ 4,619,554 141,704 3,332,796 101,455
Additional disclosure of cash flow information:
Cash payments of interest (excluding capitalized interest expense) $ 1,962,394 60,381 1,671,214 51,949
Cash payments of income tax $ 241,052 7,417 1,085,127 33,731
Supplemental schedule of noncash investing and financing activities:
Current portion of long-term borrowings $ 9,579,557 293,851 6,306,957 191,993
Inventory transferred from fixed assets $ 7 - 150 5
Translation adjustments $ (853,500) (16,627) 223,373 (34,840)
Unrealized gains or losses on financial instruments $ 39,802 1,221 (141,644) (4,280)
EVA Airways Corporation376 Sec. 1, Hsin-nan Rd., Luchu, Taoyuan HsienTaiwanTel: 886-3-351-5151 Internet Address: http://www.evaair.com
Taipei Office117 Sec. 2, Chang-an E. Rd., Taipei, Taiwan Tel: 886-2-8500-2345
SpokesmanKuo-wei Nieh Executive Vice President, Public Relations DivisionTel: 886-2-2500-1122e-mail: [email protected] SpokespersonKatherine KoJunior Vice President, Public Relations Division Tel: 886-2-2500-1122email: [email protected]
Shareholder ServicesAddress: 8F, 100 Sec. 2, Chang-an E. Rd.Taipei, TaiwanTel: 02-2509-8720Fax: 02-2509-9180Internet Address: http://stock.evergreen.com.tw
AuditorsKPMGAddress: 68F, 7 Sec. 5, Xinyi Rd., Taipei, Taiwan Tel: 886-2-8101-6666Internet Address: http://www.kpmg.com.tw
Financial CalendarYear ended December 31, 2006