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Corporate Information
Spokesperson
Chitung Liu
Chief Financial Officer
886 (2) 2700 6999
[email protected]
Deputy Spokesperson
Sandy Yen
The Chairman and CEO Office
Senior Manager
886 (2) 2700 6999
[email protected]
Bowen Huang
Finance Division
Senior Manager
886 (2) 2700 6999
[email protected]
Headquarters
No.3 Li-Hsin 2nd Rd., Hsinchu Science
Park, Hsinchu, Taiwan 30078, R.O.C.
886 (3) 578 2258
Taipei Office
3F, No.76, Sec. 2, Tunhwa S. Rd.,
Taipei, Taiwan 10683, R.O.C.
886 (2) 2700 6999
Fab 6A
No.10 Innovation 1st Rd., Hsinchu
Science Park, Hsinchu, Taiwan 30076,
R.O.C.
886 (3) 578 2258
Fab 8A
No.3 Li-Hsin 2nd Rd., Hsinchu Science
886 (3) 578 2258
Fab 8B
No.5 Li-Hsin 2nd Rd., Hsinchu
R.O.C.
886 (3) 578 2258
Fab 8C
No.6 Li-Hsin 3rd Rd., Hsinchu Science
886 (3) 578 2258
Fab 8D
No.8 Li-Hsin 3rd Rd., Hsinchu Science
886 (3) 578 2258
Fab 8E
No.17 Li-Hsin Rd., Hsinchu Science
886 (3) 578 2258
Fab 8F
No.3 Li-Hsin 6th Rd., Hsinchu Science
886 (3) 578 2258
Fab 8S
No.16 Creation 1st Rd., Hsinchu
R.O.C.
886 (3) 578 2258
Fab 12A
No.18 Nan-Ke 2nd Rd., Tainan Science
Park, Sinshih, Tainan, Taiwan 74147,
R.O.C.
886 (6) 505 4888
Singapore Branch
Fab 12i
No.3 Pasir Ris Drive 12, Singapore
519528
65 6213 0018
ADR Exchange Marketplace
New York Stock Exchange, Inc.
11 Wall Street
New York, NY 10005, U.S.A.
1 (212) 656 3000
www.nyse.com
Ticker/Search Code: UMC
Exchangeable Bond Exchange
Marketplace
Luxembourg Stock Exchange
11, av de la Porte-Neuve
L-2227 Luxembourg
352 (47) 79 36 - 1
www.bourse.lu
Ticker: UniMicElexCorp
EB Search Code: ISIN XS0147090533
ECB Search Code: ISIN XS0231460709
Auditors
Ernst & Young
James Wang, MY Lee
9th Fl., 333 Keelung Rd., Sec.1
Taipei 11012, Taiwan , R.O.C.
www.ey.com/tw
886 (2) 2720 4000
UMC Website
www.umc.com
Securities Dealing Institute
Horizon Securities Co., Ltd.
Stock Registration Department
3F, No.236 Hsin-Yi Rd. Sec. 4, Taipei,
Taiwan 10680, R.O.C.
886 (2) 2326 8818
www.honsec.com.tw
ADR Depositary and Registrar
Citibank, N.A.
Depositary Receipt Services
14F, 388 Greenwich Street,
New York, NY 10013, U.S.A.
1 (877) 248 4237 (Toll-free)
Stockholder Service Representatives
are available Monday through Friday,
8:30a.m. to 6:00p.m., Eastern Time.
http://wwss.citissb.com/adr/www/
[email protected]
UMC ANNUAL REPORT INFORMATION CAN BE ACCESSED FROM THE FOLLOWING WEBSITES:
www.umc.com
newmops.tse.com.tw
Printed on March 15, 2007
TSE Code : 2303
NYSE Symbol : UMC
United Microelectronics Corporation | Annual Report 2006
Table of Contents
Letter to Shareholders
Operation Overview
65 Business Scope
Corporate Overview
11 Corporate Profile
12 Milestones
66 Research & Development Achievements and Plans
68 Market and Sales Conditions
72 Employee Analysis
Corporate Governance Report
73 Environmental Protection Information
16 Corporate Organization
75 Major Agreements
18 Directors’, Supervisors’ and Managers’ Information
33 Corporate Governance Practices
35 Status of Internal Control
37 Auditing Notes
74 Labor Relations
Review of Financial Position, Operating Results, Risk Management
and Evaluation
38 Change in Shareholding of Directors, Supervisors, Managers and Major Shareholders
79 Analysis of Financial Position
39 Information Disclosuring the Relationship Between
Any of the Company’s Top Ten Shareholders
81 Liquidity Analysis
40 Total Percentage of Ownership of Investees
Capital Overview
43 Capital and Shares
50 Corporate Bonds
55 Preferred Stock
56 American Depositary Receipts
58 Employee Stock Option Certificates
63 Mergers and Acquisitions
63 Financing Plans and Execution Status
65 Industry Scope
80 Analysis of Operating Results
81 Major Capital Expenditures and Sources of Funding
82 Analysis for Investment
83 Risk Management and Evaluation
Special Disclosures
Financial Review Unconsolidated
87 Summary of Affiliated Enterprises
101 Condensed Balance Sheets
92 Acquisition or Disposal of UMC Shares by
Subsidiaries
93
Disclosures of Events which May Have a Significant
Influence on Stockholders’ Equity or Share Price, in
Compliance with Item 2, Paragraph 2 in Article 36
of the Securities and Exchange Law of the R.O.C.
102 Condensed Statements of Income
103 Financial Analysis
104 Supervisors’ Report
106 Report of Independent Auditors
107 Balance Sheets
108 Statements of Income
Disclosure According to US Security Authorities Regulation
109 Statements of Changes in Stockholders’ Equity
95 Disclosure Committee
112 Notes to Financial Statements
95 Audit Committee
160 Attachments to Notes
95 Corporate Governance Difference
110 Statements of Cash Flows
95 Code of Ethics
Financial Review Consolidated
95 Employee Code of Conduct
198 Representation Letter
95 US GAAP Financial Information
96 Consolidated Balance Sheets
98 Consolidated Statements of Income
202 Consolidated Statements of Changes in
Stockholders’ Equity
203 Consolidated Statements of Cash Flows
205 Notes to Consolidated Financial Statements
Dear Shareholders,
In 2006, UMC achieved revenues of NTD 104.10
65-nanometer, with four products in pilot production
billion, which was 14.7% above the previous year’s
and more than 10 products taped out for various ap-
performance. Net income was NTD 32.62 billion
plications ranging from handset baseband to FPGA,
or 364% above 2005. The positive gains and growth
graphics and broadband. Yield improvement for our
can be attributed to stronger demand across all ap-
65-nanometer volume production technology has
plications, especially for the communications sec-
been even faster than for the 90-nanometer genera-
tor, and an improvement in product mix resulting
tion.
in a higher percentage of revenue from leading-edge
process technologies.
Strategic Expansion
UMC has accelerated the expansion of its 300mm fab
Technology Leadership
UMC’s strong 2006 performance was highlighted
by our large percentage of sales from 0.13-micron
and below technologies, which accounted for 40% of
UMC’s total revenue. Sales from our volume production 90-nanometer technology reached 17% for
the year. Particularly exciting was the rollout of our
65-nanometer process technology, which entered
volume production for several customer products. By
the end of 2006, UMC had 9 customers engaged at
complex in the Tainan Science Park to accommodate
the next generation of advanced process technologies, most recently by adding a new R&D center for
nanometer technologies, the first of its kind in the
Tainan Science Park. The center will become UMC’s
new R&D headquarters after its scheduled completion in April 2007. In 2006, we also began full-scale
construction on our second 300mm fab at UMC’s
Tainan site, which will give UMC a total of three
advanced 300mm fabs to serve our customers’ manufacturing needs. The new fab will add an additional
50,000 wafer capacity (300 mm) to the site and will
techniques, and ultra low-k dielectrics (k=2.5).
cost approximately USD 5 billion when fully completed and equipped.
The 45-nanometer node is a challenging technology
generation that simultaneously introduces new mate-
The new fab and R&D center are being constructed
rials and process modules. UMC’s wealth of experi-
adjacent to UMC’s Fab 12A to allow for the easy
ence in semiconductor R&D and manufacturing put
transfer of engineering resources, technology, and
us among the first companies in the world to produce
equipment among the facilities, which will facili-
working 45-nanometer silicon, with encouraging
tate a more efficient ramp up for leading-edge 65-
yield results realized for the initial 45-nanometer
nanometer, 45-nanometer, and below processes.
wafer lots. UMC will continue to build on its 45-
Once the new fab is completed and ready for produc-
nanometer momentum to prepare the technology for
tion, the transition to mainstream manufacturing is
adoption by our foundry customers.
expected to be seamless since there is no new learning curve to master; the production lines will be
directly expanded from the neighboring Fab 12A.
Next Generation Process Technology
Enhancing Shareholder Value
In addition to UMC’s commitment to improving
process technology and manufacturing, we are also
taking proactive measures to increase shareholders’
In 2006, UMC also successfully produced functional
value. For example, UMC’s Board of Directors passed
45-nanometer SRAM chips. UMC’s independently
a resolution to carry out a capital reduction of NTD
developed 45-nanometer logic process uses sophisti-
57.394 billion with the cancellation of 5.739 billion of
cated immersion lithography for its 12 critical layers
its outstanding shares. The measure, which is expect-
and incorporates the latest technology advancements
ed to be ratified at our Annual General Shareholders
such as ultra shallow junction, mobility enhancement
meeting, will result in an NTD 3 cash return
Jackson Hu,
Chairman and CEO
per share to shareholders. Upon completion of the
In 2007, our 300mm fabs in Taiwan and Singapore
capital reduction, the paid-in capital of the company
will begin high-volume production for 65-nanometer
will be approximately NTD 133.92 billion. This ac-
products. We will continue preparing our 45-
tion will contribute positively to shareholders’ equity
nanometer process for pilot production in 2008.
through the improvement of the company’s capital
Resources will be dedicated to strengthening our
structure. Going forward, we will continue to pursue
position as the SoC Solution Foundry, with emphasis
maximum benefits for UMC’s shareholders, employ-
on IP, EDA, and Design-for-Manufacturing (DFM)
ees, and our many partners in the global and domestic
solutions to ease our customers’ SoC design-in. These
semiconductor industry.
efforts will increase the competitiveness of UMC’s
coming years, and further solidify our position as a
Moving Forward
Moving forward, we anticipate even closer cooperation with our IDM customers and fabless partners.
The trend towards IDMs adopting a “Fab-lite” or
fabless strategy is accelerating, underscored by TI
and NXP announcing their new fab-lite strategies.
Another example of this trend is Cypress Semiconductor’s new partnership with UMC for 65-nanometer
leader in the foundry industry.
I would like to thank you for supporting UMC over
the years, and look forward to further building UMC’s
strengths to create maximum benefits for our customers and shareholders.
Sincerely,
production and future process development, the first
time that Cypress has chosen an external foundry for
manufacturing of its flagship SRAM products. This
increased outsourcing trend will help contribute to
UMC’s long-term growth prospects.
Corporate Overview
11 Corporate Profile
12 Milestones
10
Corporate Overview
Corporate Profile
UMC is a world-leading semiconductor foundry that
manufactures advanced process ICs for applications
spanning every major sector of the semiconductor industry.
The Company’s cutting-edge foundry technologies enable
the creation of faster and more powerful System-on-Chip
ICs for today’s demanding applications. UMC’s technology
includes a wide range of advanced processes, 90-nanometer,
65-nanometer, embedded memories, and Mixed-Signal/RF
CMOS. As an industry pioneer, UMC was the first foundry
to manufacture wafers using copper materials, produce chips
using 90-nanometer process technology, produce chips on
300mm wafers, and deliver functional 65-nanometer ICs to
its customers.
UMC led the development of the commercial semiconductor industry in Taiwan. It was the first local company to offer
foundry services, as well as the first semiconductor company
to list on the Taiwan Stock Exchange (1985). UMC is responsible for many local industry innovations,
including the introduction of the employee share bonus
system, often credited as a primary factor in the development
of a prominent electronics industry in Taiwan. UMC employs
approximately 13,000 people worldwide. With sales and
customer service offices in Taiwan, Japan, Singapore, Europe,
and the United States, UMC has an extensive service network
to meet the needs of its global clientele. In the future, UMC
will continue to offer world leading production processes and
the most comprehensive support structure for our customers
to strengthen its competitive advantages in a rapidly changing
industry.
Date of Incorporation May 22, 1980
11
Milestones
1980 MAY UMC established.
1985 JUL. Becomes the first IC company to list on the Taiwan Stock Exchange.
1995 JUL. Begins transformation into a pure-play foundry.
JUL. Establishes joint venture foundry USC.
AUG.Establishes joint venture foundry UICC.
SEP. Establishes joint venture foundry USIC.
SEP. 200mm fab begins production.
1996 JAN. 0.35-micron volume production.
1997 OCT. 0.25-micron volume production.
1998 APR. Acquires Holtek Semiconductor.
DEC. Acquires Nippon Steel Semiconductor Corp.; renamed Fab UMCJ in 2001.
1999 MAR.0.18-micron volume production.
NOV. Begins construction of 300mm fab in Taiwan’s Tainan Science Park, Fab 12A.
12
Corporate Overview
2000 JAN. Completes consolidation of five companies: UMC, USC, UTEK, USIC and UICC.
MAR.Ships first foundry chips using copper process.
MAY Produces foundry industry’s first 0.13-micron integrated circuits.
SEP. Makes its debut on the New York Stock Exchange.
DEC. Announces plan to establish advanced 300mm foundry in Singapore (UMCi).
2003 JAN. Announces equipment move-in at UMCi.
MAR.Delivers foundry’s first customer ICs built on 90-nanometer.
2004 MAR.UMCi moves to full-scale 300mm production.
MAY 90-nanometer full qualification and volume production.
JUL. Completes acquisition of SiS Microelectronics Corp.
DEC. Fully acquires its subsidiary UMCi; renamed UMC Fab 12i.
2005 JUN. Delivered the foundry industry’s first 65-nanometer customer products.
AUG. Achieves record milestone of over 100,000 90-nanometer wafer shipments.
2006 JUN. Becomes first IC company to achieve QC 080000 IECQ HSPM qualification
for all fabs.
NOV. Produces working 45-nanometer ICs.
2007 JAN. Expands advanced technology complex in Tainan Science Park.
13
14
16 Corporate Organization
18 Directors’, Supervisors’ and Managers’ Information
33 Corporate Governance Practices
35 Status of Internal Control
37 Auditing Notes
38 Change in Shareholding of Directors, Supervisors, Managers and Major Shareholders
39 Information Disclosing the Relationship Between Any of the Company’s Top Ten Shareholders
40 Total Percentage of Ownership of Investees
15
Corporate Organization
Customer
American
Business Group
Japan
Business Group
Asia
Business Group
Europe
Business Group
The Chairman and CEO Office
Board of Directors
16
New Business
Development
Group
Corporate Marketing and Central Sales Operation Divisions
Responsible for corporate marketing affairs
Intellectual Property Development & Design Support Division
Responsible for intellectual property development & design support affairs
Central R&D and Specialty Technology Divisions
Responsible for research and development of new processes and technologies
Fab 6A, Fab 8AB, Fab 8C, Fab 8D, Fab 8E, Fab 8F, Fab 8S, Fab 12A, Fab 12i, 12B
Plant Construction Team, Central Manufacturing Planning, Facility
Operation & Construction, Group Risk Management & Environmental Safety & Health, Information Technology, Operations Support and Equipment
Resources Integration Divisions, and Manufacturing Technology Division
Responsible for Fab production, manufacturing, and operational support
Mask Engineering & Service, Product Engineering, Quality Assurance,
Reliability Technology & Assurance and Test & Package Engineering Service
Divisions, and TQM Committee
Responsible for mask engineering, testing and packaging service, and product quality
Intellectual Property Rights Division
Responsible for intellectual property rights protection and legal affairs
Finance and Accounting Divisions
Responsible for finance and accounting
Human Resources Division
Responsible for HR and general affairs
Auditing Division
Responsible for auditing
March 21, 2005
17
Directors’ and Supervisors’ Information
Name
Title
Date Elected
[Date Assumed]
(Date First Elected)
Term
(Yrs.)
2006.6.12 (1995.6.21)
Jackson Hu
Chairman and CEO
Shareholding
when Elected
Present
Shareholding
Spouse & Minor
Shareholding
Common
Shares
%
Common
Shares
%
Common
Shares
%
3
599,696,356
3.02
605,830,368
3.17
-
-
2006.6.12 (2004.2.4)
3
1,875,943
0.01
2,045,131
0.01
-
-
Peter Chang
Managing
Director
2006.6.12 (2001.5.30)
3
8,617,440
0.04
8,855,583
0.05
771,640
0.00
Ching-Chang Wen
Managing
Director
2006.6.12 (2001.5.30)
3
5,614,913
0.03
5,822,345
0.03
10,401
0.00
Fu-Tai Liou
Director
2006.6.12 (2001.5.30)
3
5,527,407
0.03
5,483,944
0.03
-
-
2006.6.12 (2005.6.13)
3
428,511,368
2.16
432,894,409
2.26
-
-
Shih-Wei Sun
Director
2006.6.12 (2006.6.12)
3
15,192,341
0.08
14,502,644
0.08
1,033,471
0.01
Stan Hung
Director
2006.6.12 (2001.5.30)
3
17,404,005
0.09
17,732,022
0.09
2,036,700
0.01
Chun-Yen Chang
Independent Director
2006.6.12 (2006.6.12)
3
-
-
-
-
1,435
0.00
Chung Laung Liu
2006.6.12 (2006.6.12)
3
-
-
-
-
-
-
Paul S.C. Hsu
2006.6.12 (2004.6.1)
3
-
-
-
-
-
-
Hsun Chieh Investment Co., Ltd.
2006.6.12 (1995.6.21)
3
599,696,356
3.02
605,830,368
3.17
-
-
2006.6.12 (2002.3.14)
3
19,650,715
0.10
19,851,712
0.10
209,158
0.00
2006.6.12 (2005.6.13)
3
428,511,368
2.16
432,894,409
2.26
-
-
2006.6.12 (2006.6.12)
3
-
-
-
-
-
-
2006.6.12 (2006.6.12)
3
16,182,403
0.08
16,947,925
0.09
-
-
Representatives
Silicon Integrated Systems Corp.
Representatives
Representatives
Tzyy-Jang Tseng
Supervisor
Representatives
Ting-Yu Lin
Supervisor
Ta-Hsing Wang
Supervisor
Notes (1) Present shareholding figures are actual number of shares held on February 28, 2007.(2) Directors’ and Supervisors’ election date is the same date they
assumed their positions. (3) Directors and Supervisors are not spouses or siblings of other managers, directors, and supervisors. (4) Directors and Supervisors did
not hold shares through other parties. (5) Fu-Tai Liou, Shih-Wei Sun, and Stan Hung were elected as Directors at the Annual General Meeting on June 12, 2006.
(6) Ta-Hsing Wang and Ting-Yu Lin were elected as Supervisors at the Annual General Meeting on June 12, 2006.
18
Experience
Education
Also Serves Concurrently as
-
-
Chairman and CEO, UMC
Ph.D. of Computer Science,
University of Illinois at Urbana-Champaign
Independent Director, Compal Communications, Inc.
Director, UMC
Master of Electrical Engineering,
University of Texas at Austin
-
Director, UMC
Ph.D. of Electrical Engineering,
University of Pennsylvania
Director and President, UMC Japan
Director, UMC
Ph.D. of Material Science & Engineering,
State University of New York at Stony Brook
-
-
-
Director, UMC
Ph.D. of Electronic Materials,
Northwestern University
-
Director, UMC
Bachelor of Accounting,
Tamkang University
Independent Director, A-DATA Technology Co., Ltd.; Director, Fortune
Venture Capital Corporation; Director, United Microdisplay Optronics
Corporation; Director, TLC Capital Co., Ltd.; Supervisor, Novatek Microelectronics Corp., Ltd.; Supervisor, SpringSoft, Ltd.
Academician, Academia Sinica
Ph.D. of Electronics Engineering,
National Chiao Tung University
-
Honorary Chair Professor, National Tsing Hua University
Sc. D. of Massachusetts Institute of Technology
Independent Director, Macronix International Co., Ltd.; Independent
Director, Anpec Electronics Corporation; Independent Director, Lightronik
Technology Inc.; Independent Director, Mototech Inc.
Far East Group Chair Professor of Management, Yuan-Ze University
Ph.D. of Business Administration,
University of Michigan
Chairman, Taiwan Assessment and Evaluation Association; Independent
Director, Faraday Technology Corp.; Independent Director, Taiwan Chi
Cheng Enterprise Co., Ltd.; Supervisor, Far Eastern International Bank
-
-
Chairman, Unimicron Technology Corp.
Master of Physics,
National Tsing Hua University
Chairman, Unimicron Technology Corp.; Director, Harvatek Corp.;
Chairman, Subtron Technology Co., Ltd.; Supervisor, Fortune
Venture Capital Corporation
-
-
Director, Pacific Technology Group
MBA,
Columbia University
-
Chairman, Sunrox International Inc.
Master of International Finance,
Meiji University
-
19
List of Major Shareholders of UMC’s Institutional Shareholders
UMC’s Institutional Shareholders
Major Shareholders of UMC’s Institutional Shareholders (Holding Percentage)
Hsieh Yong Capital Co., Ltd.(63.48%), United Microelectronics Corporation(36.49%)
United Microelectronics Corporation(16.09%); Buddhist Compassion Relief Tzu Chi
Foundation Taiwan(1.53%); Crédit Agricole (Suisse) SA (1.29%); Morgan Stanley & Co. International Limited(1.20%); Chuin Li Investment Corporation(1.15%); Shin-Sen Liu(1.12%);
Chuin Tsie Investment Corporation(1.10%); HSBC, as the representative of HKIT-Pacific
Glory Finance One Ltd.(1.06%); Samuel Liu(0.81%); R.O.C. Public Service Pension
Fund(0.50%)
List of Institutional Shareholders of the Major Shareholders
Institutional Shareholders
Major Shareholders of the Institutional Shareholders (Holding Percentage)
Hsieh Yong Capital Co., Ltd.
Unimicron Technology Corp.(16.67%), Silicon Integrated Systems Corp. (16.67%), Novatek
Microelectronics Corp., Ltd. (15.15%), Faraday Technology Corporation(12.12%), King
Yuan Electronics Co., Ltd.(7.58%)
Buddhist Compassion Relief Tzu Chi Foundation Taiwan
Not Applicable.
Chuin Li Investment Corporation
Robert H.C. Tsao(27.69%), John Hsuan(15.89%)
Chuin Tsie Investment Corporation
Robert H.C. Tsao(36.00%), John Hsuan(13.33%)
R.O.C. Public Service Pension Fund
Not Applicable.
20
Directors’ and Supervisors’ Professional Knowledge and Independence Information
Name
Five or more Years Experience or
Professional Qualification
Lecturer or
Above in Business, Law,
Finance,
Accounting or
Corporate
Business Related
Fields
Qualification of
Justice, Procurator,
Attorney, CPA,
Specialist or
Technician of
National Examination in Corporate
Business Related
Fields
Independence Status (Note)
2
3
4
5
6
7
8
9
Number of
Companies
also Serves
10 as Independent Director for
Experience in
Business, Law,
Finance,
Accounting or
Corporate
Business
Related Fields
1
Jackson Hu
Yes
-
-
-
1
Peter Chang
Yes
-
-
-
-
Ching-Chang Wen
Yes
-
-
-
-
Fu-Tai Liou
Yes
-
-
-
-
Shih-Wei Sun
Yes
-
-
-
-
Stan Hung
Yes
-
-
-
1
Chun-Yen Chang
Yes
Yes
-
Chung Laung Liu
Yes
Yes
4
Paul S.C. Hsu
Yes
Yes
2
Tzyy-Jang Tseng
Yes
Ta-Hsing Wang
Yes
Ting-Yu Lin
Yes
-
-
-
-
-
-
Notes For those directors and supervisors who match the condition listed below during and two years before assuming period, “ ” is marked in the appropriate
space. (1) Is not an employee of the Company or its affiliates. (2) Is not a director or supervisor of the Company or its affiliates. Does not include the independent
directors or supervisors in the parent companies and subsidiaries. (3) Does not directly or indirectly own more than 1% of the Company’s outstanding shares; nor
is one of the top ten non-institutional shareholders of the Company. (4) Is not a spouse or of immediate relation (child, parent, grandchild, grandparent, or sibling) to any person specified in the preceding two columns. (5) Is not a director, supervisor, or employee of a legal entity which directly owns more than 5% of the
Company’s issued shares, nor a director, supervisor or employee of the top five legal entities which are owners of the Company’s issued shares. (6) Is not a director,
supervisor, or manager of a company which has a business relationship with the Company, nor a shareholder who owns more than 5% of such a company. (7) Is not
an owner, partner, director, supervisor, manager or spouse of any sole proprietor business, partnership, company or institution which has provided the Company
and its affiliates with financial, business consulting, or legal services in 2006. (8) Is not a spouse or of immediate relation (child, parent, grandchild, grandparent, or
sibling) to any of the directors. (9) Is not under any condition pursuant to Article 30 of the ROC Company Law. (10) Is not a legal entity owner or its representative
pursuant to Article 27 of the ROC Company Law.
21
Managers’ Information
Title
Name
Date Elected
(Date Assumed)
Present Shareholding
Spouse & Minor
Shareholding
Common Shares
%
Common Shares
%
Chairman and CEO
Jackson Hu
2006.1.9
2,045,131
0.01
-
-
Vice Chairman
Peter Chang
2000.1.3
8,855,583
0.05
771,640
0.00
Business Group President
Ching-Chang Wen
2000.1.3
5,822,345
0.03
10,401
0.00
Fu-Tai Liou
2002.12.17
5,483,944
0.03
-
-
Executive Vice President
Shih-Wei Sun
2003.7.29
14,502,644
0.08
1,033,471
0.01
Senior Vice President
Stan Hung
2005.10.21
17,732,022
0.09
2,036,700
0.01
Henry Liu
2003.9.16
11,572,588
0.06
19,861
0.00
Tai-Sheng Feng
2004.2.23
1,638,510
0.01
-
-
Vice President
Nick Nee
2000.9.1
2,910,236
0.02
-
-
Vice President
Wen-Yang Chen
1998.1.1
3,047,599
0.02
54,265
0.00
Vice President
Ying-Chih Wu
1999.2.1
11,982,001
0.06
334,020
0.00
Vice President
Chia-Pin Lee
2004.9.14
926,010
0.00
28,136
0.00
Vice President
Lee Chung
2004.10.18
411,546
0.00
-
-
Vice President
Shan-Chieh Chien
2004.11.23
4,135,193
0.02
3
0.00
Vice President
Po-Wen Yen
2005.10.21
1,022,551
0.01
-
-
Vice President
Tsung-Hsi Ko
2006.2.28
3,660,076
0.02
66,915
0.00
CFO
Chitung Liu
2005.10.21
928,871
0.00
222,841
0.00
Notes (1) Shareholding figures are actual number of shares held on February 28, 2007. (2) Managers did not hold shares through other parties. (3) Managers are
not spouses or siblings of other managers. (4) Managers’ election date is the same date they assumed their positions.
22
Experience
Education
Also Serves Concurrently as
Chairman and CEO, UMC
Ph.D. of Computer Science, University of Illinois at Urbana-Champaign
Independent Director, Compal Communications, Inc.
Director, UMC
Master of Electrical Engineering, University of Texas at Austin
-
Director, UMC
Ph.D. of Electrical Engineering, University of Pennsylvania
Director and President, UMC Japan
Director, UMC
Ph.D. of Material Science & Engineering,
State University of New York at Stony Brook
-
Director, UMC
Ph.D. of Electronic Materials, Northwestern University
-
Director, UMC
Bachelor of Accounting, Tamkang University
Independent Director, A-DATA Technology Co., Ltd.; Director, Fortune
Venture Capital Corporation; Director, United Microdisplay Optronics
Corporation; Director, TLC Capital Co., Ltd.; Supervisor, Novatek Microelectronics Corp., Ltd.; Supervisor, SpringSoft, Ltd.
Senior Vice President, UMC
Bachelor of Electronics Engineering,
National Taiwan University of Science and Technology
-
Senior Vice President, UMC
Master of Electrical Engineering, University of Utah
-
Vice President, UMC
Bachelor of Marine Engineering, National Taiwan Ocean University
-
Vice President, UMC
Master of Electronics Engineering, National Chiao Tung University
Director, UMC Japan
Vice President, UMC
Bachelor of Physics, National Changhua University
-
Vice President, UMC
MBA, University of Oregon State
-
Vice President, UMC
Master of Materials Science, University of California, L.A.
-
Vice President, UMC
Bachelor of Chemical Engineering, National Taiwan University
-
Vice President, UMC
Master of Chemical Engineering, National Taiwan University
-
Vice President, UMC
EMBA, National Chiao Tung University
-
CFO, UMC
National Taiwan University EMBA candidate
Director, Novatek Microelectronics Corp., Ltd.;
Supervisor, UMC Japan; Supervisor, TLC Capital Co., Ltd.
23
The Compensation of Directors, Supervisors and Managers
Directors’ Compensation
Allowance
UMC
Directors’
Remuneration
Operating
Expenses
UMC’s
Consolidated
Companies
UMC
UMC’s
Consolidated
Companies
UMC
UMC’s
Consolidated
Companies
UMC
UMC’s
Consolidated
Companies
-
13,015
13,015
390
390
0.04
0.04
-
Title
Name
Representatives
Director
Jackson Hu
Peter Chang
Ching-Chang Wen
Fu-Tai Liou
Director
Shih-Wei Sun
Stan Hung
Chun-Yen Chang
Chung Laung Liu
Paul S.C. Hsu
Note Fu-Tai Liou, Shih-Wei Sun, and Stan Hung were elected as Directors at the Annual General Meeting on June 12, 2006.
24
The Percentage of
to EAIT (%)
In thousand NTD
Managers’ Compensation
Salaries
UMC
22,190
UMC’s
Consolidated
Companies
28,341
Employees’ Bonus
UMC
Cash
Stock
45,000
-
UMC’s
Consolidated
Companies
Cash
Stock
45,000
-
The Percentage of
Total Compensation to
Employee Stock
EAIT (%)
Options (Shares)
UMC
UMC’s
Consolidated
Companies
UMC
UMC’s
Consolidated
Companies
-
-
0.25
0.27
Levels of Amounts of Compensation
Compensation
from Other
UMC Investee
Companies
None
Number of Directors
Total Compensation
UMC
UMC’s Consolidated
Companies
UMC
Companies
Lower than NTD 2,000,000
6
6
-
-
NTD 2,000,000~NTD 4,999,999
3
3
3
3
NTD 5,000,000~NTD 9,999,999
-
-
-
-
NTD 10,000,000~NTD 14,999,999
-
-
5
5
NTD 15,000,000~NTD 29,999,999
-
-
1
1
NTD 30,000,000~NTD 49,999,999
-
-
-
-
NTD 50,000,000~NTD 99,999,999
-
-
-
-
NTD 100,000,000 or More
-
-
-
-
Total
9
9
9
9
25
The Compensation of Directors, Supervisors and Managers (cont.)
Supervisors’ Compensation
Supervisors’ Compensation
Allowance
UMC
Supervisors’ Remuneration
Operating Expenses
UMC UMC’s Consolidated Companies
UMC’s Consolidated Companies
UMC
-
2,479
2,479
-
Title
Name
Representatives
Supervisor
Tzyy-Jang Tseng
Supervisor
Ta-Hsing Wang
Supervisor
Ting-Yu Lin
Note Ta-Hsing Wang and Ting-Yu Lin were elected as Supervisors at the Annual General Meeting on June 12, 2006.
26
120
120
In thousand NTD
The Percentage of Supervisors’ Compensation to EAIT (%)
UMC
0.01
Compensation from other UMC investee companies
0.01
None
Number of Supervisors
Total Compensation
UMC
3
3
NTD 2,000,000~NTD 4,999,999
-
-
NTD 5,000,000~NTD 9,999,999
-
-
NTD 10,000,000~NTD 14,999,999
-
-
NTD 15,000,000~NTD 29,999,999
-
-
NTD 30,000,000~NTD 49,999,999
-
-
NTD 50,000,000~NTD 99,999,999
-
-
NTD 100,000,000 or More
-
-
Total
3
3
27
Managers’ Compensation
Salaries
UMC
Companies
34,544
40,695
Bonus and Special Allowance
UMC
Companies
37,116
Title
Name
Chairman and CEO
Jackson Hu
Vice Chairman
Peter Chang
Former President
Hong-Jen Wu
Ching-Chang Wen
Fu-Tai Liou
Shih-Wei Sun
Stan Hung
Henry Liu
Tai-Sheng Feng
Vice President
Nick Nee
Vice President
Wen-Yang Chen
Vice President
Ying-Chih Wu
Vice President
Chia-Pin Lee
Vice President
Lee Chung
Vice President
Shan-Chieh Chien
Vice President
Po-Wen Yen
Vice President
Tsung-Hsi Ko
CFO
Chitung Liu
Note Hong-Jen Wu retired on June 30, 2006.
28
Employees’ Bonus
37,116
UMC
Companies
Cash
Stock
Cash
Stock
98,280
-
98,280
-
In thousand NTD
The Percentage of Total
Compensation to EAIT (%)
UMC
Employee Stock Options(Shares)
Companies
UMC
Companies
0.54
-
-
0.52
Compensation from other
UMC investee companies
None
Number of Managers
UMC
-
-
NTD 2,000,000~NTD 4,999,999
1
1
NTD 5,000,000~NTD 9,999,999
10
10
NTD 10,000,000~NTD 14,999,999
5
5
NTD 15,000,000~NTD 29,999,999
2
2
NTD 30,000,000~NTD 49,999,999
-
-
NTD 50,000,000~NTD 99,999,999
-
-
NTD 100,000,000 or More
-
-
18
18
Total
29
Managers’ Bonus
Stock Bonus
In thousand NTD
Cash Bonus
Total
The Percentage of Total Bonus to EAIT (%)
-
98,280
98,280
0.30
Title
Name
Chairman and CEO
Jackson Hu
Vice Chairman
Peter Chang
Former President
Hong-Jen Wu
Ching-Chang Wen
Fu-Tai Liou
Shih-Wei Sun
Stan Hung
Henry Liu
Tai-Sheng Feng
Vice President
Nick Nee
Vice President
Wen-Yang Chen
Vice President
Ying-Chih Wu
Vice President
Chia-Pin Lee
Vice President
Lee Chung
Vice President
Shan-Chieh Chien
Vice President
Po-Wen Yen
Vice President
Tsung-Hsi Ko
CFO
Chitung Liu
30
Comparison of Compensation for Directors, Supervisors and Managers in the Past Two Years
2006
2005
UMC
Consolidated
UMC
Consolidated
32,619,313
32,619,313
7,026,692
7,026,692
The Percentage of Directors’ and
Supervisors’ Compensation to EAIT
0.05
0.05
0.10
0.10
The Percentage of Managers’
Compensation to EAIT
0.52
0.54
1.36
1.51
EAIT (Thousand NTD)
Notes (1) The directors’ and supervisors’ compensation includes allowance, remuneration and operating expenses; the managers’ compensation includes salaries, special allowance and employees’ bonus. (2) On March 15, 2007, the Company’s Board proposed to distribute NTD 15,494,130 as Directors’ and Supervisors’ remuneration and NTD 2,324,119,405 as employee cash bonus from retained earnings of 2006 and previous years.
The Company’s compensation for Directors, Supervisors and Managers is based on the Company’s Article and formulations,
and is distributed in proper ratios.
Compensation Policy for Directors, Supervisors and Managers
Policy for Directors’ and Supervisors’ Compensation
The Company’s Article has stated that Directors’ and Supervisors’ Compensation is the allocation of 0.1% of the residual
amount from net profit after being deducted by payment of
taxes, making up loss for preceding years and setting aside
10% for legal reserve.
Policy for Managers’ Compensation
The Company annually evaluates its salary level with similar
industries to ensure the Company’s salary is competitive.
The Company’s salary structure can be divided into fixed
and variable. The compensation is set to fully reflect the
achievements for individuals and teams.
31
Information of Board Meeting Operation
Board meetings were held 12 times in 2006; attendances of directors and supervisors are as follows:
Name
Title
Attendance
Proxy
Attendance
Attendance Rate (%)
(Note)
Remarks
Representatives: Jackson Hu
Chairman
11
91.67
Representatives: Peter Chang
Managing Director
11
91.67
Representatives: Ching-Chang Wen
Managing Director
5
41.67
Representatives: Fu-Tai Liou
Director
3
75.00
Elected on 2006.6.12
Representatives: Shih-Wei Sun
Director
3
75.00
Representatives: Stan Hung
Director
4
100.00
Chun-Yen Chang
Independent
Director
3
75.00
Chung Laung Liu
Independent
Director
4
100.00
Paul S.C. Hsu
Independent
Director
10
83.33
Supervisor
8
66.67
Supervisor
3
75.00
Ting-Yu Lin
Supervisor
3
75.00
Robert H.C. Tsao
Former Chairman
2
100.00
Resigned on 2006.1.9
John Hsuan
Former Vice Chairman
2
100.00
Resigned on 2006.1.9
Jack K.C. Wang
Former Director
8
100.00
Expired on 2006.6.11
Mao-Chung Lin
Former Director
8
100.00
Former Director
5
62.50
Former Supervisor
3
37.50
1
Representatives: Tzyy-Jang Tseng
Representatives: Ta-Hsing Wang
1
Chuin Tsie Investment Corporation
Representatives: Tsing-Yuan Hwang
Other disclosures: The board resolved the proportion of directors’ and supervisors’ compensation distribution for 2006 on December 28, 2006; all
directors were agreed upon except for Chun-Yen Chang, Chung Laung Liu and Paul S.C. Hsu, who abstained due to their independent status.
Note Attendance rate = Number of meetings each board member actually attends / total number of board meetings held within his or her service period.
Information Regarding Audit Committee Operation
Not Applicable. The audit committee of the Company was instituted under US securities authorities regulation.
32
Corporate Governance Practices
Item
Actions
The Reasons for the
Differences between the
Company’s Governance
and Recognized Corporate
Governance
Corporate Shareholder Structure and Shareholders’ Rights:
(a)How the Company handles shareholders’ The Company has designated a specific body and established an email
recommendations or disputes:
address to handle shareholders’ recommendations or disputes.
-
(b)How the Company regularly monitors
There is no single shareholder who holds more than 10% of the
the list of key shareholders who have
Company’s total outstanding shares.
management control of the Company,
or those who have ultimate control of key shareholders:
-
(c) How the Company establishes proper
risk control mechanisms and firewalls between the Company and its affiliated
enterprises:
The obligations and rights between the Company and its affiliated enterprises have been clearly defined. Any transaction between the Company and its affiliated enterprises complies with related regulations.
The Structure and Responsibilities of the Board:
(a) Independent directors on the
Company’s Board:
The Company has instituted three independent directors.
-
(b)How the Company periodically evaluates
the independence of its auditors:
The Company’s auditor is one of the largest and best regarded in its
industry. The auditor assiduously avoids conflicts of interests.
-
The Composition and Responsibilities of Supervisors:
(a) How the Company institutes independent supervisors:
The Company currently has
no independent supervisors.
(b)How the supervisors communicate with
the Company’s employees and
shareholders:
At any time, a supervisor may individually investigate the business and financial conditions of the Company, and may ask the Board of Directors or executive managers to prepare a report.
The Company’s Communication Channels
for its Stakeholders:
The Company has designated a specific unit and established an email
address to handle stakeholders’ concerns.
-
Information Disclosure:
(a) How the Company establishes a website
to disclose financial and corporate
governance information:
The Company regularly publishes up-to-date detailed financial and corporate governance information on its website in both Chinese and
English.
(b)Other channels for the disclosure of
the Company’s information:
The Company has designated a specific body to collect and disclose information about the Company. In addition, the Company has established
standard procedures for an authorized spokesperson to make statements
on behalf of the Company. The Company has one main spokesperson
and two deputy spokespersons. To ensure the quality of information
disclosure, the Company has set up a Disclosure Committee designed
to provide and control information for government officials in a timely
and accurate manner, thus achieving the goal and responsibility to thoroughly disclose corporate information.
33
Corporate Governance Practices (cont.)
Item
Actions
The Reasons for the
Differences between the
Company’s Governance
and Recognized Corporate
Governance
The operation of functional committee
work within the Board of Directors of the
Company:
The Company has instituted an audit committee. The operation
details are disclosed on page 95.
-
The comparison between the Company’s corporate governance mechanism and the recognized corporate governance principles:
The Company bases its corporate governance structures and practices on Taiwan’s Company Law, the Securities and Exchange Law, and their related
rules and regulations. The Company’s corporate governance mechanism follows recognized corporate governance principles.
The Company’s policy and efforts to be socially responsible:
When UMC was founded, its long-term policy stated that the Company should contribute to society in addition to focusing on its core business. Therefore, providing public services to address current society issues has become part of UMC’s goals. UMC’s public service scope includes the Company
itself, its employees, employees’ families, the local community, and various other social entities. UMC’s public service aspects include education, environmental protection, cultural activities and childcare. The Company’s public services are handled by two major organizations: the UMC Candlelight
Charity Club, whose purpose is to assist disadvantaged minorities, and the UMC Science and Culture Foundation, whose purpose is to support affairs
regarding education, culture, sports and environmental protection. The Company also established a “Policy and Procedures for Refraining from
Insider Trading” in May 2005 to provide a guideline for the Company’s related parties to prevent insider trading. The descriptions about labor relationships, environmental protection and relationships with suppliers are disclosed in the Operations Overview section.
Other information disclosures:
(a) Has the Company established any educational programs for its board members?
The Company provides information related to professional educational opportunities to all board members.
(b) The attendance of directors and supervisors to the board meeting:
In 2006, the attendance rate of directors was 84%; the attendance rate of supervisors was 61%.
(c) Has the Company established a risk management policy and standards for evaluating risk and implementing its risk management policy?
Not Applicable.
(d) Has the Company established policies to protect consumers or its customers and does it regularly evaluate the policies’ implementation?
Not Applicable.
(e) Is there a policy to ensure board members avoid introducing topics of discussion that would advance their own vested interests?
The board is well disciplined and enforces a strict policy of separating personal and company interests amongst its members.
(f) Has the Company purchased liability insurance for its directors and supervisors?
The Company has purchased liability insurance for its directors since 2000.
(g) The Corporate Governance Statement: http://www.umc.com/english/investors/corp_gov.asp
The result, material deficiency (or suggestion) and improvement of corporate governance assessed by internal audit or professional institutions:
None.
34
Status of Internal Control
Statement of Internal Control
The self-assessment of UMC’s internal control was conducted for the year ended December 31, 2006 based on UMC’s
internal control system. The results are described as follows:
1.UMC acknowledges that the Board of Directors and the
management are responsible for establishing, executing,
and maintaining a sufficient internal control system,
which is already in place. The purposes of the internal
control system are to provide a reasonable assurance of
achieving the goals of efficiency and effectiveness of the
operations, such as profitability, performance and the
safeguard of the assets, the reliability of the financial
reports and the compliance with applicable laws and
regulations.
2.The internal control system has its inherent constraints,
and can only provide reasonable assurances of achiev ing the three goals mentioned above no matter how well it
has been designed. The effectiveness of the internal
control system is subject to changes in the environment
and circumstances. UMC has established an internal
control system with the function of self-monitoring, which
is designed to take corrective actions whenever a
shortcoming is identified.
3.UMC’s assessment of the effectiveness of the design and
execution of the internal control system is based on the
Regulations Governing Establistment of Internal Control
Systems by Public Companies (the Regulations) currently
in effect in the Republic of China (“R.O.C.”), which specify
the judgement items for evaluating the effectiveness of
internal control.
The internal control is divided into five components,
based on the process of management control, according
to the judgement items for internal control employed by
the Regulations, such as: (1) Control Environment, (2) Risk
Assessments, (3) Control Activities, (4) Information and
Communication, and (5) Monitoring. Each component
consists of certain items, which could be referred to the
Regulations.
4.UMC has employed the judgement items mentioned above
to evaluate the effectiveness of the design and execution of
the internal control system.
5.UMC believes that the effectiveness of the design and
execution of its internal control system (including
subsidiaries) during the above mentioned assessment
period provides reasonable assurance of achieving the
goals of efficiency and effectiveness of operations, the
reliability of financial reports and the compliance with
applicable R.O.C. laws and regulations.
6.The Statement of Internal Control will be an integral part
of UMC’s annual report and prospectus that are open to
the public, and within which any illegal acts, such as
misstatement or concealment, would be subject to the legal
liabilities of Code 20, Code 32, Code 171 and Code 174 of
the Securities Exchange Laws.
7.UMC’s Board of Directors approved the Statement of
Internal Control (the Statement) on March 15, 2007.
Nine directors attended and agreed with the content of the
Statement.
Jackson Hu,
Chairman and CEO
March 15, 2007
The Company was not required to engage with a CPA to attest to the internal control system under R.O.C. regulations; therefore, there is no CPA audit report on internal control to be disclosed for 2006 in this annual report.
35
Major Resolutions of the Shareholders’ Meeting and the Board of Directors’ Meetings
Shareholders’ Meeting
The Company’s 2006 Shareholders’ Meeting was held at
UMC Recreation Center in Hsinchu Science Park on June
12, 2006. The shareholders present in person or by proxy approved the following resolutions:
1.Acceptance of the 2005 business report and financial
statement.
2.Distribution of 2005 retained earnings.
3.Capitalization of retained earnings and additional paid-in
capital from 2005 and previous years.
4.Amendment of the Company’s Articles of Incorporation,
Endorsements and Guarantees Procedure and Financial
Derivatives Transaction Procedure.
5.Election of the Company’s 10th term of Directors and
Supervisors.
Board of Directors’ Meetings
The major resolutions from the Board of Directors from
January 1, 2006 to the printing day are summarized below:
1.The election of Jackson Hu as Chairman.
2.The disposal of 63.48% of the equity of its subsidiary Hsun
Chieh Investment Co., Ltd. to Hsieh Yong Capital Co., Ltd.
3.The 10th share buyback program.
statement.
5. Distribution of 2005 retained earnings.
6. Capitalization of retained earnings from 2005 and
previous years and additional paid-in capital.
7. Modify the term “Audit Committee” in Chinese to
avoid misinterpretation under Taiwan Laws.
8. The election of the 10th term of Directors and
Supervisors.
9. Cancellation of 1,000,000,000 treasury shares.
10.The 11th share buyback program.
11.The election of Managing Directors.
12. The election of Audit Committee members.
13. The execution of ADS conversion sales program for
UMC’s common shareholders.
14. The authorization of Audit Committee to review and
approve the compensation for CEO.
15. The Adoption of the Conduct of Board Meeting.
16.Issuance of employee stock options.
17. Capital Reduction.
statement.
19.Distribution of 2006 retained earnings.
20.Investment related to mainland China.
Description of Violations/Infringement of Regulations and the Company’s Response
On December 1, 2006, the Company dismissed an employee
for violating IT safety regulations of the Company Employee
Discipline Rules and breaching of the confidentiality clause
of the Company’s Employment Agreement. The Company
implemented related preventive actions including promoting
IT safety regulations.
Directors’ or Supervisors’ Objections on the Important Resolution of Board Meetings
None.
Information of Resignation or Dismission of the Persons Related to Financial Reports
None.
36
Auditing Notes
Disclosure of Auditing Fee
(a) The amount of non-auditing relevant fees charged by
the appointed independent auditors and the related
parties reaches 25% of the Company’s annual auditing expenses: Not Applicable.
(b) If there is any change in the appointed independent
auditors and the Company’s annual auditing expenses
decreased simultaneously, information regarding the
amount, percentage and reasons for the decrease in
auditing expenses shall be disclosed: Not Applicable.
(c) Auditing expenses decreased by 15% in comparison
to the previous year, information regarding the amount,
percentage and reasons for the decrease in auditing
expenses shall be disclosed: Not Applicable.
Changes in Independent Auditors
Kim Chang and MY Lee from Ernst & Young were the
Company’s appointed independent auditors. As requested by
Ernst & Young for its internal job rotation purpose, James
Wang and MY Lee became the Company’s independent
auditors since fourth quarter of 2005.
The Company’s chairman, presidents, CFO or
Accounting division director have not worked in the accounting firm of the appointed independent auditors or the
related parties within the past year.
37
Change in Shareholding of Directors, Supervisors, Managers and Major Shareholders
Unit: share
Title
Name
2007
2006
Holding
Increase
(Decrease)
Pledged
Holding
Increase
(Decrease)
Holding
Increase
(Decrease)
Pledged
Holding
Increase
(Decrease)
Chairman, Supervisor
-
-
6,134,012
5,000,000
Director, Supervisor
-
-
4,383,041
-
Chun-Yen Chang
-
-
-
-
Chung Laung Liu
-
-
-
-
Paul S.C. Hsu
-
-
-
-
Supervisor
Ting-Yu Lin
-
-
765,522
-
Chairman and CEO
Jackson Hu
-
-
169,188
-
Vice Chairman
Peter Chang
-
-
238,143
-
Ching-Chang Wen
-
-
207,432
-
Fu-Tai Liou
-
(13,463)
-
Shih-Wei Sun
-
-
(756,686)
-
Stan Hung
-
-
328,017
-
Henry Liu
-
(10,803)
-
Tai-Sheng Feng
-
-
165,071
-
Vice President
Nick Nee
-
-
(1,460,332)
Vice President
Wen-Yang Chen
-
-
(5,829,656)
-
Vice President
Ying-Chih Wu
-
-
(745,038)
-
Vice President
Chia-Pin Lee
-
-
93,515
-
Vice President
Lee Chung
-
-
(94,922)
-
Vice President
Shan-Chieh Chien
2,300,000
1,300,000
Vice President
Po-Wen Yen
-
-
(317,686)
220,000
Vice President
Tsung-Hsi Ko
-
-
236,045
100,000
CFO
Chitung Liu
-
-
88,594
-
(30,000)
(70,000)
117,568
(1,100,000)
1,800,000
Notes (1) No shareholder owns 10% or more of UMC shares. (2) The data represented for 2007 was gathered until February 28, 2007. (3) Counterparts of the shareholding transferred or pledged are not related parties. (4) The share changes for Chun-Yen Chang, Chung Laung Liu, Ting-Yu Lin, Po-Wen Yen, Tsung-Hsi Ko, and Chitung
Liu are calculated starting from the assumed date.
38
Information Disclosing the Relationship Between Any of the Company’s Top Ten
Shareholders
None.
39
Total Percentage of Ownership of Investees
Investees
UMC Investments
Investments from Directors,
Supervisors, Managers, and
Directly or Indirectly Controlled Businesses
Total Investments
Shares
%
Shares
%
Shares
%
18,460,153
16.60
-
-
18,460,153
16.60
202,366,540
19.89
24,115,891
2.37
226,482,431
22.26
55,611,441
17.27
-
-
55,611,441
17.27
499,994,000
99.99
-
-
499,994,000
99.99
33,624,110
36.49
-
-
33,624,110
36.49
Pacific Venture Capital Co., Ltd.
30,000,000
49.99
-
-
30,000,000
49.99
Novatek Microelectronics Corp.
60,072,615
11.54
4,123,999
0.79
64,196,614
12.33
ITE Tech. Inc.
24,229,364
21.80
-
-
24,229,364
21.80
Holtek Semiconductor Inc.
51,939,380
24.45
-
-
51,939,380
24.45
AMIC Technology Corporation
16,200,000
11.86
23,464,808
17.18
39,664,808
29.04
United Microdisplay Optronics Corp.
64,313,176
81.76
-
-
64,313,176
81.76
228,955,885
16.09
-
-
228,955,885
16.09
16,437,500
100.00
-
-
16,437,500
100.00
495,650
50.09
57,880
5.85
553,530
55.94
UMCi Ltd.
880,006,287
100.00
-
-
880,006,287
100.00
UMC Capital Corp.
124, 000,000
100.00
-
-
124, 000,000
100.00
280,000
100.00
-
-
280,000
100.00
9,000
100.00
-
-
9,000
100.00
Unitech Capital Inc.
21,000,000
42.00
-
-
21,000,000
42.00
XGI Technology Inc.
8,757,580
16.48
8,318,744
15.65
17,076,324
32.13
TLC Capital Co.,Ltd.
600,000,000
100.00
-
-
600,000,000
100.00
MediaTek Inc.
14,979,499
1.55
1,928
0.00
14,981,427
1.55
AU Optronics Corp.
78,265,799
1.03
126,155
0.00
78,391,954
1.03
United Fu Shen Chen Technology Corp.
Unimicron Technology Corp.
Faraday Technology Corp.
Fortune Venture Capital Corporation
UMC Group (USA)
UMC Japan
United Microelectronics Corp. (Samoa)
United Microelectronics (Europe) B.V.
Notes (1) The companies listed above are UMC’s funds and investments. (2) Shareholding figures are actual number of shares held on December 31, 2006.
40
Investees
UMC Investments
Investments from Directors,
Supervisors, Managers, and
Directly or Indirectly Controlled Businesses
Total Investments
Shares
%
Shares
%
Shares
%
3,082,877
4.40
674,702
0.96
3,757,579
5.36
Sino-Aerospace Investment Corp.
28,500,000
11.11
-
-
28,500,000
11.11
TECO Nanotech Co., Ltd.
11,000,757
4.56
-
-
11,000,757
4.56
United Industrial Gases Co., Ltd.
13,185,529
7.80
-
-
13,185,529
7.80
Mega Financial Holding Company
95,576,810
0.86
508
0.00
95,577,318
0.86
1,056,795
0.02
-
-
1,056,795
0.02
118,302,849
4.95
-
-
118,302,849
4.95
Subtron Technology Co., Ltd.
11,520,000
4.79
10,156,900
4.22
21,676,900
9.01
Taiwan High Speed Rail Corporation
Preferred Stock
30,000,000
-
-
-
30,000,000
-
Billionton Systems Inc.
2,047, 819
2.63
-
-
2,047, 819
2.63
PixTech, Inc.
9,883,470
17.63
-
-
9,883,470
17.63
Pacific Technology Partners, L.P.
-
-
-
-
-
-
Pacific United Technology, L.P.
-
-
-
-
-
-
Chipbond Technology Corporation
12,329,742
4.15
7,817,152
2.63
20,146,894
6.78
Epitech Technology Corporation
37,221,421
10.06
28,627,486
7.74
65,848,907
17.80
Highlink Technology Corp.
28,500,000
18.97
17,514,550
11.66
46,014,550
30.63
-
45.00
-
-
-
45.00
MTIC Holdings Pte Ltd.
4,000,000
49.94
-
-
4,000,000
49.94
MTIC Holdings Pte Ltd. Preferred Stock
4,000,000
-
-
-
4,000,000
-
Springsoft, Inc.
9,466,515
4.78
-
-
9,466,515
4.78
35,007,928
3.21
-
-
35,007,928
3.21
1,753,020
0.51
20,163,440
5.84
21,916,460
6.35
C-Com Corporation
Hon Hai Precision Industry Co., Ltd.
Industrial Bank of Taiwan Corp.
Mega Mission Limited Partnership
King Yuan Electronics Co., Ltd.
Rechi Precision Co., Ltd.
41
Capital Overview
43 Capital and Shares
50 Corporate Bonds
55 Preferred Stock
56 American Depositary Receipts
58 Employee Stock Option Certificates
63 Mergers and Acquisitions
63 Financing Plans and Execution Status
42
Capital Overview
Capital and Shares
Source of Capital
Date
Issue Price
(Per share)
Authorized Shares
Issued Shares
Remarks
Shares
Total
Shares
Total Source of Assets other Other
(In thousands) (In thousand NTD) (In thousands) (In thousand NTD)
Capital
than Cash
Used for
Capital
January, 2006
NTD 10
26,000,000
260,000,000
19,794,703
197,947,033
Note 1
-
-
April, 2006
NTD 10
26,000,000
260,000,000
19,845,234
198,452,341
Note 2
-
-
June, 2006
NTD 10
26,000,000
260,000,000
18,845,234
188,452,341
Note 3
-
-
July, 2006
NTD 10
26,000,000
260,000,000
19,070,111
190,701,112
Note 4
-
-
October, 2006
NTD 10
26,000,000
260,000,000
19,085,310
190,853,097
Note 5
-
-
January, 2007
NTD 10
26,000,000
260,000,000
19,131,193
191,311,927
Note 6
-
-
Notes (1) On January 16, 2006, the Science Park Administration approved the issuance of NTD 288,445 thousand from the execution of employee stock options during
the 4th quarter of 2005. The Company’s paid-in capital was increased to NTD 197,947,033 thousand. (2) On April 6, 2006, the Science Park Administration approved
the issuance of NTD 505,308 thousand from the execution of employee stock options during the 1st quarter of 2006. The Company’s paid-in capital was increased to
NTD 198,452,341 thousand. (3) On June 2, 2006, the Science Park Administration approved the capital reduction of NTD 10,000,000 thousand due to cancellation
of treasury shares. The Company’s paid-in capital was decreased to NTD 188,452,341 thousand. (4) On July 11, 2006, the R.O.C. FSC approved the issuance of NTD
2,248,771 thousand from the capitalization of retained earnings and additional paid-in capital. The Company’s paid-in capital was increased to NTD 190,701,112
thousand. (5) On October 14, 2006, the Science Park Administration approved the issuance of NTD 151,985 thousand from the execution of employee stock options
during the 3rd quarter of 2006. The Company’s paid-in capital was increased to NTD 190,853,097 thousand. (6) On January 16, 2007, the Science Park Administration approved the issuance of NTD 458,830 thousand from the execution of employee stock options during the 4th quarter of 2006. The Company’s paid-in capital was
increased to NTD 191,311,927 thousand.
Unit: share
Share Type
Common stock
Authorized Shares
Issued Shares
Un-issued Shares
Total
Allotment for
Convertible
Bonds
19,131,192,690
6,868,807,310
26,000,000,000
1,500,000,000
Allotment for Stock
Option Certificates
(Units)
2,000,000,000
Securities under General Application System
Not applicable.
43
Capital and Shares (cont.)
Status of Shareholders
Item
Stock: common share
Government
Agencies
Financial
Institutions
Other Legal
Entities
Domestic
Individuals
Foreign
Institutions &
Individuals
Total
21
39
1,016
849,042
1,109
851,227
27,731,900
262,007,234
3,777,439,768
7,972,544,290
7,030,387,998
19,070,111,190
0.14
1.37
19.81
41.81
36.87
100.00
Number of shareholders
Shareholding (Shares)
Percentage (%)
Note The data shown above was recorded on August 8, 2006, which was the record date for the distribution of 2005 stock dividends.
Distribution of Common Shares
Class of Shareholding (Unit: Share)
Number of Shareholders
Shareholding (Shares)
%
1~
999
246,819
91,068,242
0.48
1,000 ~
5,000
338,221
825,523,709
4.33
5,001 ~
10,000
117,291
812,198,939
4.26
10,001 ~
15,000
56,790
676,797,401
3.55
15,001 ~
20,000
23,791
410,420,036
2.15
20,001 ~
30,000
27,432
656,512,957
3.44
30,001 ~
40,000
12,546
428,552,736
2.25
40,001 ~
50,000
6,611
292,776,398
1.53
50,001 ~
100,000
12,431
833,846,481
4.37
100,001 ~
200,000
5,331
710,697,195
3.73
200,001 ~
400,000
2,126
568,453,555
2.98
400,001 ~
600,000
561
270,684,876
1.42
600,001 ~
800,000
279
192,002,576
1.01
800,001 ~
1,000,000
139
123,552,092
0.65
Over
1,000,001
859
12,177,023,997
63.85
851,227
19,070,111,190
100.00
Total
Preferred Stock
None.
44
Capital Overview
List of Major Shareholders
Shareholder’s Name
Shareholding
Common Shares
%
1,398,258,888
7.33
605,830,368
3.18
Xilinx Holding Three Ltd.
441,396,924
2.31
432,894,409
2.27
TECO Electric & Machinery Co., Ltd.
200,110,944
1.05
JP Morgan Chase Bank N.A., Taipei Branch, in custody of the Oppenheimer
Developing Markets Fund managed by Oppenheimer Fund
181,412,798
0.95
Administrative Committee, Yao Hua Glass Co., Ltd.
149,494,020
0.78
iSHARES Inc.
133,395,262
0.70
Deutsche Bank AG
132,562,233
0.70
Citicorp Financial Service Ltd., as representative of
the Singapore Government Fund
125,767,460
0.66
Citicorp Financial Service Ltd., as representative of holders of the ADRs and as
nominee for Citibank, N.A., as Depositary, pursuant to a Deposit Agreement,
dated as of September 21, 2000 among United Microelectronics Corporation, the
Depositary and holders and beneficial owners from time to time of the ADRs
issued thereunder
45
Market Price, Net Worth, Earnings, and Dividends per Share
Unit: NTD
Item
2007 (Note 7)
2006
2005
22.40
22.90
25.25
–
22.61
22.37
18.50
17.35
16.35
–
17.18
15.59
20.32
19.36
20.23
Adjusted average market price (Note 1)
–
19.11
17.92
Before distribution
–
16.39
14.17
After distribution
–
*
13.59
Weighted average shares
–
18,050,962,111
shares
18,410,921,978
shares
Earnings per share (Note 2)
–
1.81
0.38
Earnings per share (Note 3)
–
*
0.38
Cash dividends
–
*
0.40
Dividends from retained earnings
–
*
0.05
Dividends from additional paid–in capital
–
*
0.05
Accumulated unappropriated dividends
–
–
–
Price / Earnings ratio (Note 4)
–
10.59
53.42
Price / Dividends ratio (Note 5)
–
*
50.75
Cash dividends yield rate (Note 6)
–
*
0.02
Market price per share Highest market price
Adjusted highest market price (Note 1)
Lowest market price
Adjusted lowest market price (Note 1)
Average market price
Net worth per share
Earnings per share
Dividends per share
Stock dividends
Return on investment
* Subject to change following the 2007 shareholders’ meeting resolution.
Notes (1) The calculation of adjusted market price was based on retroactive adjustment for capitalization of unappropriated earnings, additional paid-in capital and
bonus to employees. (2) The calculation of EPS was based on weighted average shares outstanding for the year. (3) The calculation of EPS was based on retroactive
adjustment for capitalization of unappropriated earnings, additional paid-in capital and bonus to employees. (4) Price / Earnings ratio = Average closing price /
Earnings per share. (5) Price / Dividends ratio = Average closing price / Cash dividends per share. (6) Cash dividends yield rate = Cash dividends per share / Average
closing price. (7) The data represented for 2007 was gathered until March 15, 2007. (8) The average closing prices for years 2005, 2006 and 2007 were NTD 20.30, NTD
19.17, and NTD 19.98, respectively.
46
Capital Overview
Dividend Policy and Status
Dividend Policy in the Company’s
Articles of Incorporation
According to the Company’s Articles of Incorporation,
current year’s earnings, if any, shall be distributed in the
following order:
(a) Payment of all taxes and dues;
(b)Offset prior years’ operating losses;
(c)Set aside 10% of the remaining amount after deducting
items (a) and (b) as a legal reserve;
(d)Set aside 0.1% of the remaining amount after deducting
items (a), (b), and (c) as directors’ and supervisors’ remuneration; and
(e) After deducting items (a), (b), and (c) above from the
current year’s earnings, no less than 5% of the remaining
amount together with the prior years’ unappropriated
earnings is to be allocated as employees’ bonus which
will be settled through issuance of new Company shares
or cash. Employees of the Company’s subsidiaries, meeting certain requirements determined by the board of
directors, are also eligible for the employees’ bonus.
(f) The distribution of the remaining portion, if any, will be
recommended by the board of directors and approved
through the shareholders’ meeting.
The Company is in its growth stage; the policy for dividend distribution should reflect factors such as the current
and future investment environment, fund requirements, domestic and international competition and capital budgets; as
well as the benefit of shareholders, share bonus equilibrium,
and long-term financial planning. The board of directors
shall make the distribution proposal annually and present
it at the shareholders’ meeting. The Company’s Articles of
Incorporation further provide that no more than 80% of the
dividends to shareholders, if any, must be paid in the form of
stock dividends. Accordingly, at least 20% of the dividends
must be paid in the form of cash.
Proposed Distribution of Dividend
The Company’s proposal for 2006 earnings distribution
was passed on the 6th board meeting of the 10th term. This
proposal, a cash dividend of NTD 0.70 per share, will be
discussed at the annual shareholders’ meeting.
Impact of Stock Dividends on Operating Results, EPS and ROE
Not Applicable.
47
Employee Bonus and Directors’ & Supervisors’ Remuneration
According to the Company’s Articles of Incorporation,
current year’s earnings, if any, shall be distributed in the
manner described on page 47.
Information on the earnings per share and amount of employee bonus and remuneration to directors and supervisors passed by the board of directors:
The Company’s resolution on earnings distribution was
passed on the 6th board meeting of the 10th term. Details
regarding earnings distribution are as follows:
(a) A cash bonus for employees of NTD 2,324,119,405. The
remuneration paid to directors and supervisors is
NTD 15,494,130.
(b)In consideration of employee bonus and remuneration
to directors and supervisors, pro forma diluted EPS is
NTD 1.68.
Details of the 2005 employee bonus settlement and directors’ & supervisors’ remuneration are as follows:
For the year ended December 31, 2005
Details
Settlement of employees’ bonus by issuance
of new shares
As Approved at the As Recommended by the
Shareholders’ Meeting
Board of Directors
Number of shares (In thousands)
Differences Reasons for
Differences
45,846
45,846
–
–
458,455
458,455
–
–
0.24
0.24
–
–
305,636
305,636
–
–
6,324
6,324
–
–
Basic
0.38
0.38
–
–
Diluted
0.38
0.38
–
–
Basic
0.34
0.34
–
–
Diluted
0.34
0.34
–
–
Amount (In thousand NTD)
Percentage on total number of outstanding
shares at year end
Settlement of employees’ bonus by cash
(In thousand NTD)
Remuneration paid to directors and supervisors
(In thousand NTD)
Effect on earnings per
Earnings per share (NTD)
share before retroactive
adjustments
Pro forma earnings per share taking into consideration employees’
bonus and directors’ & supervisors’ remuneration (NTD)
48
Capital Overview
Share Buy-back History
Instance
11th Round
10th Round
Purpose
To transfer to employees
To maintain the Company’s credit and
shareholders’ equity
Buy-back period
2006.5.23~2006.7.22
2006.2.16~2006.4.15
Price range (NTD)
13.90~32.15
12.35~27.50
Classification and volume (Shares)
400,000,000
Common Shares
1,000,000,000
Common Shares
Amount (NTD)
7,648,334,032
19,640,228,401
Cancellation and transfer volume (Shares)
-
1,000,000,000
Cumulative cancellation and transfer volume (Shares)
1,335,462,000
1,335,462,000
Cumulative holding (Shares)
1,342,067,000
942,067,000
Cumulated holding as a percentage of total issued shares
7.02
4.92
Note The data shown above includes transactions from January 1, 2006 to March 15, 2007.
49
Corporate Bonds
Type
Unsecured Corporate Bonds
Issue date
2001.4.16~2001.4.27
Face amount
NTD 1,000,000
Listing exchange
R.O.C. OTC Securities Exchange
Issue amount
NTD 1,000,000
Issue size
NTD 15 billion
Coupon rate
1A01~1A10: 5.1850%
1A11~1A19: 5.1195%
1B01~1B10: 5.2850%
1B11~1B19: 5.2170%
Maturity
1A–5 years; 2006.4.16~2006.4.27
1B–7 years; 2008.4.16~2008.4.27
Guarantor
-
Trustee
Trust Dept., Mega International Commercial Bank Co., Ltd.
Address of trustee
2F, 550, Sec. 4, Chung Hsiao E. Road, Taipei, Taiwan R.O.C.
Underwriter
-
Registrar, principal paying, conversion and
transfer agent
-
Address of agent
-
Legal counsel
Chen & Lin Attorneys-at-Law
Auditor
Diwan, Ernst & Young
Redemption
1A is a five-year term, and total size is NTD 7.5 billion. Principal will be paid after three, four,
and five years at 30%, 30%, and 40% respectively. 1B is a seven-year term, and total size is NTD
7.5 billion. Principal will be paid after five, six, and seven years at 30%, 30%, and 40% respectively. Interest will be paid annually.
Principal payable
NTD 5.25 billion
Redemption
-
Covenant
-
Name of rating company,
date and result of rating
Taiwan Ratings Corporation,
2001.3.8, twAA
Other obligation
-
Effect due to dilution
-
Name of custodian
-
50
Capital Overview
Corporate Bonds (cont.)
Type
Zero Coupon Exchangeable Bonds Due 2007
Issue date
2002.5.10
Face amount
USD 10,000
Listing exchange
Luxembourg Stock Exchange
Issue amount
USD 10,000
Issue size
USD 235,000,000
Coupon rate
0%
Maturity
5 years; 2007.5.10
Guarantor
-
Trustee
Citibank, N.A.
Address of trustee
Cottons Centre, Hays Lane, London SE1 2QT, United Kingdom
Underwriter
Lehman Brothers Inc.
Registrar, principal paying, exchange and
transfer agent
Citibank, N.A.
Address of agent
5 Carmelite Street, London EC4Y 0PA, United Kingdom
Legal counsel
Simpson Thacher & Bartlett
Auditor
Redemption
On the maturity date, the issuer will redeem the bonds at their principal amount, unless,
prior to such date:(a) The issuer shall have redeemed the bonds at the option of the issuer, or
the bonds shall have been redeemed at the option of the bondholders.(b) The bondholders
shall have exercised the conversion right before maturity; or (c) The bonds shall have been
purchased by the issuer and cancelled.
Principal payable
USD 93,830,000
Redemption or early redemption clause
(a) The issuer has the option to call all or any portion of the bonds on or at any time after
three months after the issue date and prior to the maturity date based on the price to be agreed
upon, if the closing price of the common shares on the Taiwan Stock Exchange in US dollars,
calculated at the prevailing exchange rate, for each of the 20 consecutive trading days, the last
of which occurring not more than 10 days prior to the date of the notice of such redemption, is
at least 120% of the exchange price in effect on each such trading day translated into US dollars
at the rate of exchange established on the pricing date.(b) The Company may redeem the outstanding bonds in whole, but not in part, at their principal amount in the event that 90% of the
bonds have been previously exchanged, redeemed or purchased and cancelled.(c) The issuer
may redeem all, but not part of, the bonds at their principal amount in the event of changes in
Covenant
R.O.C. taxation resulting in additional costs to the issuer.
-
Name of rating company, date and result of rating
-
Other obligation
Balance of amount
The balance of amount exchanged to common shares of AU Optronics Corp. (“AUO”) is USD
converted to (exchangeable or
6,060,000. The balance of amount exchanged to ADSs of AUO is USD 135,110,000.
warrant) shares, ADSs, or other
types of securities as of printing
date
Policy of issuing or converting
(a) Bondholders have the right hereunder to exchange the bonds into common shares or ADSs of
(exchangeable or warrant)
AUO.(b) The bondholders may, from 40 days after the last issue date to the 30 days prior to the
maturity date, exchange the bonds into the common shares or ADSs of AUO as a substitute for
the issuer’s cash redemption. The detailed exchanging procedures and the rights and obligations
of bondholders who exchange within five business days prior to and during the closed period
will be subject to the indenture and the paying, exchange and registrar agency agreement.
Effect on the current shareholders due to dilution
The bonds are eligible to be exchanged into common shares or ADSs of AUO. This will not
result in any dilution effect to UMC shareholders.
Name of custodian
Citibank, N.A.
51
Type
Unsecured Corporate Bonds
Issue date
2003.5.21~2003.6.24
Face amount
NTD 5,000,000
Listing exchange
R.O.C. OTC Securities Exchange
Issue amount
NTD 5,000,000
Issue size
NTD 15 billion
Coupon rate
3A: The annual coupon rate is 4.0% minus the floating rate, but no less than 0%. The rate is
adjusted annually based on the “floating rate” of the second London business date prior to the
issued date of each “interest accrued period”. The interest is calculated per annum. 3B: The
annual coupon rate is 4.3% minus the floating rate, but no less than 0%. The rate is adjusted
annually based on the “floating rate” of the second London business date prior to the issued
date of each “interest accrued period”. The interest is calculated per annum. “Interest accrued
period” is the period starting from a year prior to the interest payout date to one day prior to
the interest payout date. “Interest accrued method” is defined as the coupon rate times the
number of days in the interest period divided by actual days of the year. The rate is calculated
to five figures after the decimal point. “Business date” is referred to the London financial business date, or is otherwise referred to the Taiwan, Taipei and Kaohsiung financial business date.
“Floating rate” is referred to the USD 12-Month LIBOR rate shown on London time 11am,
Moneyline Telerate pg. 3750. The initial interest pricing date is set as the second London business date prior to the bond issuance date.
Maturity
3A – 5 years; 2008.5.21~2008.6.24
3B – 7 years; 2010.5.21~2010.6.24
Guarantor
-
Trustee
Trust Dept., Mega International Commercial Bank Co., Ltd.
Address of trustee
2F, 550, Sec. 4, Chung Hsiao E. Road, Taipei, Taiwan R.O.C.
Underwriter
-
Registrar, principal paying,
conversion and transfer agent
-
Address of agent
-
Legal counsel
Chen & Lin Attorneys-at-Law
Auditor
Redemption
3A is a five-year term, and total size is NTD 7.5 billion. Principal will be paid in full at maturity. 3B is a seven-year term, and total size is NTD 7.5 billion. Principal will be paid in full at
maturity. Interest will be paid annually.
Principal payable
NTD 15 billion
Redemption
-
Covenant
-
2003.4.24, twAA-
Other obligation
-
-
Name of custodian
-
52
Capital Overview
Type
Euro Convertible Bonds Due 2008
Issue date
2005.10.05
Face amount
USD 10,000
Listing exchange
EuroMTF Market of the Luxembourg Stock Exchange
Issue amount
USD 10,000
Issue size
USD 381,400,000
Coupon rate
0%
Maturity
2008.2.15
Guarantor
-
Trustee
Citibank, N.A.
Address of trustee
Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, United Kingdom
Underwriter
Morgan Stanley Services Limited and Lehman Brothers International (Europe)
Registrar, principal paying,
conversion and transfer agent
Citibank, N.A.
Address of agent
5 Carmelite Street, London EC4Y 0PA, United Kingdom
Legal counsel
Simpson Thacher & Bartlett
Auditor
Redemption
The bonds will be redeemed at 100% of their principal amount by the Company on the
maturity date unless:(a) The issuer shall have redeemed the bonds at the option of the issuer,
or the bonds shall have been redeemed at the option of the bondholders.(b) The bondholders
shall have exercised the conversion right before maturity; or (c) The bonds shall have been
purchased by the issuer and cancelled.
Principal payable
USD 381,400,000
Redemption or early redemption clause
(a)On or at any time after April 5, 2007, if the closing price of the ADSs listed on the NYSE has
been at least 130% of either the conversion price or the last adjusted conversion price, for 20 out
of 30 consecutive ADS trading days, the Company may redeem all, but not some only, of the
bonds. (b)If at least 90% in principal amount of the bonds has already been redeemed, repurchased, cancelled or converted, the Company may redeem all, but not some only, of the bonds.
(c)In the event that the Company’s ADSs or shares officially cease to be listed or admitted for
trading on the New York Stock Exchange or the Taiwan Stock Exchange, as the case may be,
each bondholder shall have the right, at such bondholder’s option, to require the Company to
repurchase all, but not in part of, such bondholder’s bonds at their principal amount. (d)In the
event of certain changes in taxation in the R.O.C. resulting in the Company becoming required
to pay additional amounts, the Company may redeem all, but not part of, the bonds at their
principal amount. Bondholders may elect not to have their bonds redeemed by the Company
in such event, in which case the bondholders shall not be entitled to receive payments of such
additional amounts. (e)If a change of control occurs with respect to the Company, each bondholder shall have the right at such bondholder’s option, to require the Company to repurchase
all, but not in part of, such bondholder’s bonds at their principal amount.
53
Type
Covenant
-
2005.8.15, twAA
Other obligation
Balance of amount converted
to (exchangeable or warrant)
shares, ADSs, or other types of
securities as of printing date
-
Policy of issuing or converting
(exchangeable or warrant)
(a) Bondholders have the right hereunder to convert the bonds into the Company’s ADSs.(b)
The bondholders may from November 4, 2005 to February 5, 2008 convert the bonds into the
Company’s ADSs as a substitute for the issuer’s cash redemption. In addition, the bondholders
will not be able to effect conversions into ADSs during any closed period.
The underlying conversion for ECB is treasury shares. If the ECB is fully converted, the dilution ratio to original shareholders is 2.6%. The impact to the dilution is minimal.
Name of custodian
Citibank, N.A.
54
Capital Overview
Exchangeable Bonds Information
Zero Coupon Exchangeable Bonds Due 2007
2007
2006
2005
2002
2002. 5.10
(Issue Date)
73,380,144
74,836,861
73,566,140
66,109,143 148,271,262 139,769,528
137,202,140
NTD 44.30
NTD 44.30
NTD 46.10
NTD 51.30
NTD 54.91
NTD 58.25
NTD 59.34
High
117.50
123.50
121.50
156.00
109.56
100.00
-
Low
107.50
109.00
101.50
104.00
94.50
92.65
-
Average
113.90
117.75
112.81
115.88
99.59
95.18
-
The quantity of holding exchanged securities
2004
2003
(Common shares)
Exchangeable price
Market price
Reference shares
Common Shares or ADSs of AU Optronics Corp.
Note The data represented for 2007 was gathered until March 15, 2007.
Euro Convertible Bonds Information
Zero Coupon Convertible Bonds Due 2008
2007
2006
2005
2005. 10.05
(Issue Date)
500,000,000
500,000,000
500,000,000
500,000,000
USD 3.693
USD 3.693
USD 3.814
USD 3.814
High
110.84
112.50
105.25
-
Low
103.22
98.38
97.50
-
Average
106.15
103.65
102.12
-
The quantity of holding converted securities
(Common shares)
Convertible price
Market price
Reference shares
UMC ADS
Warrant Bonds Information
None.
Preferred Stock
None.
55
American Depositary Receipts
Issue Date
2006.11.6
2006.9.1
2005.9.1
2005.1.20
2004.11.16
2004.8.19
Listing exchange
New York Stock
Exchange
New York Stock
Exchange
New York Stock
Exchange
New York Stock
Exchange
New York Stock
Exchange
New York Stock
Exchange
Issue amount
USD 108.2 million
Stock dividend
Stock dividend
USD 84.2 million USD 76.3 million Stock dividend
Listing price / unit
USD 3.05
-
-
USD 3.33
USD 3.47
-
Issue units
35,456,000
2,831,464
25,833,137
25,290,000
22,000,000
15,088,684
Underlying representing shares
UMC common
shares
UMC common
shares
UMC common
shares
UMC common
shares
UMC common
shares
UMC common
shares
Number of equivalent local
shares per ADS
5 shares
5 shares
5 shares
5 shares
5 shares
5 shares
Rights and obligations of ADS
holder
Same as the common shareholder
Same as the com- Same as the com- Same as the com- Same as the com- Same as the common shareholder mon shareholder mon shareholder mon shareholder mon shareholder
Trustee
N/A
N/A
N/A
N/A
N/A
N/A
Depositary bank
Citibank, N.A.
Citibank, N.A.
Citibank, N.A.
Citibank, N.A.
Citibank, N.A.
Citibank, N.A.
Custodian bank
Citibank, N.A.
Taipei Branch
Citibank, N.A.
Taipei Branch
Citibank, N.A.
Taipei Branch
Citibank, N.A.
Taipei Branch
Citibank, N.A.
Taipei Branch
Citibank, N.A.
Taipei Branch
Outstanding balance (Units)
The total outstanding balance is 315,107,776 units.
Issuing expenses and
maintenance fees
Except for IPO and dividends, the issuing expenses will be borne by the selling shareholders. The maintenance fees will
be borne by the Company.
Important terms and conditions of depositary agreement and
custodian agreement
-
-
-
-
-
Note The data shown above was gathered until March 15, 2007.
American Depositary Receipt Trading Data
Closing Price per Share (USD)
2007
High
Low
Average
High
Low
Average
3.83
3.12
3.44
3.94
2.79
3.22
56
2006
Capital Overview
2004.1.2
2003.12.23
2003.8.15
2002.9.9
2002.3.19
2001.8.17
2000.9.19
New York Stock
Exchange
New York Stock
Exchange
New York Stock
Exchange
New York Stock
Exchange
New York Stock
Exchange
New York Stock
Exchange
New York Stock
Exchange
USD 13.8 million
USD 24.4 million
Stock dividend
Stock dividend
USD 439.7 million
Stock dividend
USD 1,291.5 million
USD 4.92
USD 4.75
-
-
USD 9.25
-
USD 14.35
2,804,000
5,146,000
6,965,107
22,655,667
47,537,780
13,500,000
90,000,000
UMC common
shares
UMC common
shares
UMC common
shares
UMC common
shares
UMC common
shares
UMC common
shares
UMC common
shares
5 shares
5 shares
5 shares
5 shares
5 shares
5 shares
5 shares
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Citibank, N.A.
Citibank, N.A.
Citibank, N.A.
Citibank, N.A.
Citibank, N.A.
Citibank, N.A.
Citibank, N.A.
Citibank, N.A.
Taipei Branch
Citibank, N.A.
Taipei Branch
Citibank, N.A.
Taipei Branch
Citibank, N.A.
Taipei Branch
Citibank, N.A.
Taipei Branch
Citibank, N.A.
Taipei Branch
Citibank, N.A.
Taipei Branch
The total outstanding balance is 315,107,776 units.
Except for IPO and dividends, the issuing expenses will be borne by the selling shareholders. The maintenance fees will be borne by the Company.
-
-
-
-
-
-
-
57
Employee Stock Option Certificates
Status of Stock Option Plan and Impact on Stockholders’ Equity
Type
3rd Issued,
1st Round 2005
2nd Issued,
1st Round 2005
1st Issued,
1st Round 2005
Date of approval
2005.12.22
2005.12.22
2005.12.22
Issue date
2006.8.24
2006.5.22
2006.1.4
Units issued
28,140,000
42,058,000
39,290,000
Ratio of issue shares to outstanding shares (%)
0.15
0.22
0.21
Option duration
2006.8.24~2012.8.23
2006.5.22~2012.5.21
2006.1.4~2012.1.3
Method for performance of contract
The issue of new shares
Vesting schedule
The grant period for employee options is six years. Employees may exercise up to 50% of
the options after two years, up to 75% after three years and up to 100% after four years.
Exercised shares
-
-
-
Exercised amount
-
-
-
Un-exercised shares
28,140,000
42,058,000
39,290,000
Exercise price
NTD 18.35
NTD 19.80 (Original)
NTD 19.16 (After Dividend)
Ratio of un-exercised shares to outstanding shares (%)
0.15
0.22
0.21
Effect on current shareholders due to dilution
The strike price for the shares is the market price at the time of issuance and the vesting
period for employee options is from two years to four years. The dilution effect to current
shareholders is insignificant.
Notes (1) The data shown above was gathered until March 15, 2007. (2) The date of approval refers to the date when the R.O.C. FSC approved the Stock Option Plan.
(3) Each unit of the stock option entitles the recipient to subscribe to one share of the Company’s common shares.
58
Capital Overview
Employee Stock Option Certificates (cont.)
Type
4th Issued,
1st Round 2004
3rd Issued,
1st Round 2004
2nd Issued,
1st Round 2004
Date of approval
2004.9.30
2004.9.30
2004.9.30
Issue date
2005.9.29
2005.8.16
2005.4.29
Units issued
51,990,000
54,350,000
23,460,000
0.27
0.28
0.12
Option duration
2005.9.29~2011.9.28
2005.8.16~2011.8.15
2005.4.29~2011.4.28
Vesting schedule
The grant period for employee options is six years. Employees may exercise up to 50% of the
options after two years, up to 75% after three years and up to 100% after four years.
Exercised shares
-
-
-
Exercised amount
-
-
-
Un-exercised shares
51,990,000
54,350,000
23,460,000
Exercise price
NTD 21.9 (Original)
NTD 18.4 (Original)
0.28
0.12
Ratio of un-exercised shares to outstanding shares (%) 0.27
The strike price for the shares is the market price at the time of issuance and the vesting period
for employee options is from two years to four years. The dilution effect to current shareholders
is insignificant.
59
Type
1st Issued,
1st Round 2004
3rd Issued,
1st Round 2003
2nd Issued,
1st Round 2003
Date of approval
2004.9.30
2003.10.8
2003.10.8
Issue date
2004.10.13
2004.7.1
2004.3.23
Units issued
20,200,000
56,590,000
33,330,000
0.11
0.30
0.17
Option duration
2004.10.13~2010.10.12
2004.7.1~2010.6.30
2004.3.23~2010.3.22
Vesting schedule
Exercised shares
907,000
-
-
Exercised amount
16,144,600
-
-
Un-exercised shares
19,293,000
56,590,000
33,330,000
Exercise price
NTD 20.0 (Original)
NTD 25.2 (Original)
NTD 27.9 (Original)
Ratio of un-exercised shares to outstanding shares (%)
0.10
0.30
0.17
The strike price for the shares is the market price at the time of issuance and the vesting
period for employee options is from two years to four years. The dilution effect to current
shareholders is insignificant.
60
Capital Overview
Type
1st Issued,
1st Round 2003
2nd Issued,
1st Round 2002
1st Issued,
1st Round 2002
Date of approval
2003.10.8
2002.9.11
2002.9.11
Issue date
2003.11.26
2003.1.3
2002.10.7
Units issued
57,330,000
61,000,000
939,000,000
0.30
0.32
4.91
Option duration
2003.11.26~2009.11.25
2003.1.3~2009.1.2
2002.10.7~2008.10.6
Vesting schedule
Exercised shares
-
1,849,000
261,866,750
Exercised amount
-
33,129,900
4,294,284,525
Un-exercised shares
57,330,000
59,151,000
677,133,250
Exercise price
NTD 30.2 (Original)
NTD 22.5 (Original)
NTD 20.0 (Original)
0.31
3.54
Ratio of un-exercised shares to outstanding shares (%) 0.30
The strike price for the shares is the market price at the time of issuance and the vesting period
for employee options is from two years to four years. The dilution effect to current shareholders
is insignificant.
61
List of Managers and Top 10 Employees Participating in Employee Stock Option Plan
Units Granted
95,300,000
-
Units
Granted / Total
Outstanding Shares (%)
Exercised Units
Exercise Price
(NTD)
Exercised Amount
(In thousand NTD)
0.50
850,000
15.9
13,515
-
2,300,000
15.7
36,110
5,000,000
0.03
-
-
-
2,000,000
0.01
-
-
-
15,000,000
0.08
-
-
-
Title
Name
Chairman and CEO
Jackson Hu
Vice Chairman
Peter Chang
Former President
Hong-Jen Wu
Ching-Chang Wen
Fu-Tai Liou
Shih-Wei Sun
Stan Hung
Henry Liu
Tai-Sheng Feng
Vice President
Nick Nee
Vice President
Wen-Yang Chen
Vice President
Ying-Chih Wu
Vice President
Chia-Pin Lee
Vice President
Lee Chung
Vice President
Shan-Chieh Chien
Vice President
Po-Wen Yen
Vice President
Tsung-Hsi Ko
CFO
Chitung Liu
Notes (1) The data shown above was gathered until March 15, 2007. (2) Employees listed in this table are the top 10 holders of stock options and each subscription
amount exceeds NTD 30 million. (3) Hong-Jen Wu retired on June 30, 2006 and the data represented his acquisition until June 30, 2006.
62
Capital Overview
Units
Exercised / Total
Un-exercised Units
Exercise Price
(NTD)
Un-exercised Amount
(In thousand NTD)
Units Un-exercised/Total
0.01
92,150,000
15.7
1,446,755
0.48
0.01
-
-
-
-
-
5,000,000
17.7
88,500
0.03
-
2,000,000
22.9
45,800
0.01
-
15,000,000
24.7
370,500
0.08
Mergers and Acquisitions or the Issue of New Shares to Acquire Another
Company’s Shares
None.
Financing Plans and Execution Status
Plan Description
Plan Title
Issue Date
Estimated Plan
Completion Date
Capital Purpose
Changes
of Plan
Date for Announcement
on MOPS
October 5, 2005
September 30, 2006
Purchasing raw
materials overseas
None
September 29, 2005
Capital Execution Summary
Quarterly Capital Execution Report
2nd Quarter, 2006
Planned Capital Execution in 2nd Quarter, 2006
NTD 4,280,100 thousand, 34.01% Completed
Actual Capital Execution in 2nd Quarter, 2006
Planned Accumulated Capital Execution
Actual Accumulated Capital Execution
Reasons for Capital Execution Discrepancies
No significant differences from the plan
63
Operation Overview
65 Business Scope
65 Industry Scope
66 Research & Development Achievements and Plans
68 Market and Sales Conditions
72 Employee Analysis
73 Environmental Protection Information
74 Labor Relations
75 Major Agreements
64
Operation Overview
Business Scope
Major Business
Full Service Semiconductor Wafer Foundry.
Current Products and Services
UMC provides a variety of services to fit individual
customer’s needs, including silicon intellectual property
(IP), IC design support, design verification, mask tooling,
wafer fabrication, and testing. Wafer fabrication accounts
for 97% of 2006 revenues.
Future Products and Services
Advanced 65-nanometer and 45-nanometer Processes
UMC has reached world-class manufacturing levels and
leads most of the major semiconductor companies in the
introduction of advanced deep sub-micron processes. UMC
has been in volume production for advanced 65-nanometer
technology since 1Q 2006. Furthermore, with 45-nanometer
test wafers produced in 4Q 2006, UMC is actively developing 45-nanometer process technologies for customer
product validation to significantly increase the competitive
advantages of its customers.
SoC Process Technologies
In response to the growing trend towards System-on-Chip
(SoC) products, UMC continues to develop resources
for SoC designers including embedded memory macros,
Mixed-Signal/RF CMOS processes, and other system integration technologies used for SoC designs.
Industry Scope
Current Industry Products & Development
The functions of electronic products increase and evolve on
a daily basis, leading to an enormous increase in design and
process complexity for today’s semiconductors. As far as
manufacturing efficiency is concerned, wafer sizes have also
migrated to the next generation of larger 300mm wafers.
The combination of both advancing technologies and larger
wafers has somewhat slowed overall development, while
investment has increased to bring these new technologies to
maturity.
This trend has increased the challenges involved in semiconductor design, production, packaging, and testing. For
the most part, semiconductor companies find it difficult to
manage every aspect of the IC supply chain, adding to the attraction of the vertically disintegrated business model.
The Relationship Between Up-, Mid-, and Down-stream
Supply Chain Services
The semiconductor industry has continuously evolved in
order to support down-stream (end-user) electronic products. Therefore, IC manufacturers must develop new process technologies early to enable up-stream chip developers’
sophisticated designs for more powerful ICs. This in turn
allows down-stream companies to innovate new applications and products that can take advantage of the better
performing semiconductors.
Development Trends
Advanced technologies have enabled electronic products, especially those in the Computer, Communication,
and Consumer sectors, to merge their functions in ways
previously unseen. Networking capabilities have allowed
electronic products such as computers, cell phones, televisions, PDAs, CD-ROMs, and digital cameras to communicate with each other to exchange information. More
powerful chips are required to drive multimedia functions (processing visual data, etc.) and to resolve network
bandwidth issues. At the same time, the trend towards
more personalized electronic devices means that products
are becoming smaller and consuming less power. Process
technology must also shrink aggressively to accommodate
this trend to integrate more functions, reduce the number
of parts needed to operate, and lower IC power consumption. Dedicated semiconductor foundries will need to
achieve this process improvement, and at the same
time develop multiple process technologies to satisfy
the varying needs of Computer, Communication, and
Consumer applications.
A Competitive Market
The double-digit growth rate that is seen every year for the
foundry industry has attracted more and more competitors,
including IDM companies such as Samsung, and pureplay foundries like China’s SMIC and HHNEC and Korea’s
Dongbu. With the increasing number of competitors, the
Company has enhanced its competitiveness by expanding
300mm wafer capacity strategically and effectively. Meanwhile, the Company continuously strengthens its advantage
through on-going development in advanced and specialty
process technologies.
65
Research & Development Achievements and Plans
UMC’s research and development group is committed to
pushing the forefront of technology and providing the latest market-driven, customer-focused and cost effective
System-On-Chip (SoC) foundry technology solutions.
UMC’s commitment to R&D can be illustrated by the
Company’s 2006 R&D expenditures, which reached 8.88%
of corporate revenues. The Company is also constructing a new R&D center for nanometer technologies in the
Tainan Science Park, the first of its kind at the southern
Taiwan site, along with a new 300mm wafer plant that
will host 32-nanometer technology development. The
R&D center will be completed in April 2007, while the
new fab will be ready in early 2008. These are all strong
testimonies for UMC’s commitment to develop the most
advanced SoC solutions for our customers. Going forward, the Company will continue to dedicate its most
significant resources to further process technology development.
UMC delivered the foundry industry’s first 65nanometer customer products in June of 2005. During the
course of 2006, competitive progress was made in perfecting
65-nanometer technology for production. The technology
has gained widespread acceptance from a variety of customers including leading-edge manufacturers of cell phones,
FPGA, graphics and broadband, many of which are currently in volume production. This was highlighted with
UMC’s delivery of the world’s largest 65-nanometer FPGAs
to one of its customers. The enhanced product features a 65
percent logic capacity increase over previous generation
FPGAs to enable the industry’s highest gate count, with
approximately 1.1 billion transistors. The chips, which
feature triple gate oxide technology and 11 copper metal
layers, have demonstrated excellent yields and are expected
to be ready for full production in early 2007. In addition,
UMC is in the final process optimization of a shrink version of its 65-nanometer process technology, called the
UMC 55SP process (shrinking L65 feature sizes to 90% of
its original size). This offering is expected to help customers migrate their 65-nanometer products for more density
and performance while delivering more competitive cost
incentives to further extend their product life.
On the 45-nanometer development front, UMC has successfully produced functional SRAM chips that feature an
impressive bit cell size of less than 0.25um2. The process used
sophisticated immersion lithography for its 12 critical layers
and incorporated the latest technology advancements such
as ultra shallow junction, mobility enhancement techniques,
and ultra low-k dielectrics (k=2.5). The 45-nanometer node
is a challenging technology generation that simultaneously
introduces new materials and process modules. UMC is
66
among the first companies in the world to produce working
45-nanometer silicon, with successful results realized for the
initial 45-nanometer wafer lots. UMC will continue to build
on its 45-nanometer momentum to enhance yields and prepare the technology for adoption by our foundry customers
during 2008.
In terms of memory development, UMC’s embedded 6T-SRAM exhibits an industry leading footprint with
excellent performance and functionality at the lowest possible sustaining voltage, which has always been the key
yield driver for leading 65-nanometer and 45-nanometer
processes. Furthermore, a high density, low cost fully logiccompatible embedded memory solution has been developed
to replace traditional embedded DRAM that was used up
until 90-nanometer. UMC completed its process and design
IP offerings for the 90-nanometer technology node in 2006,
with the 65-nanometer node scheduled for 2007. Embedded 0.18-micron flash (e-Flash) memory cells featuring 1.7
megabit macro functionality and 25 nanosecond access
time performance are also in production for multiple customer products for the automotive, MCU and PC security
applications. In addition, a 0.13-micron e-Flash macro
is in the final stage of reliability verification for product
applications. The 0.13 e-Flash process has been successfully integrated into customer products to produce the
industry’s lowest power field-programmable gate arrays
(FPGAs) that feature power consumption as low as 5mW,
a new standard for the industry.
On the specialty technology front, UMC’s 0.18-micron
high voltage (HV) technology targeted for the growing
portable liquid crystal display (LCD) driver market is now
in mass production. To improve overall HV process performance, UMC is piloting 0.162-micron HV chips and further
developing its advanced 0.135-micron node. Supplementing UMC’s LCD driver process is its “super high voltage
(≥600V)” process, which is in development for customers
designing for special applications such as transformers and
frequency conversion motors. UMC has also completed the
development of its CMOS Image Sensor (CIS) technology at
the 0.13-micron process node. This technology enables highresolution camera phones to operate more cost effectively by
allowing higher density sensors within the same area.
SoC designers today require proven design support solutions to help overcome the challenges encountered during
the design cycle in the deep sub-micron era. UMC continuously introduces new design support resources, such as the
most updated Reference Design Flow with silicon-proven
design methodologies in 90-nanometer and 65-nanometer
technologies, and in particular adding more focus on Design
for Manufacturing (DFM) support. UMC provides opti-
Operation Overview
Research & Development Achievements and Plans (cont.)
mized DFM resources that customers can easily incorporate
into their existing design environments to address issues
such as timing closure, signal integrity and leakage power.
UMC’s enhanced DFM solutions include Lithography Process Check (LPC), Critical Area Analysis (CAA), Litho and
Chemical Metal Polishing (CMP) variation aware extraction,
thermal impact analysis and Static Statistical Timing Analysis (SSTA). To develop its comprehensive 65-nanometer
offering, UMC partnered with every major EDA vendor as
well as newer DFM companies that provide specialized DFM
solutions. In addition, UMC successfully developed a series
of reliable, high-quality design intellectual properties (IP),
including DFM-compliant, process-tuned 90-nanometer
and 65-nanometer libraries, ultra high-speed PLL, and various state-of-the-art analog mixed-signal IP for advanced
audio/video applications. They can be utilized in customers’
SoC designs to help them shorten the product design cycle
with the shortest time-to-market capability.
UMC has always actively pursued new inventions
throughout its technology advancement. For 2006, UMC
filed 524 patent applications, and has been granted 298 patents in the same period of time; the total of granted patents
has reached 8,417. This reflects UMC’s commitment to innovation and intellectual properties during its technology development stage. Additionally, over the past few years, UMC
has won numerous awards from the R.O.C. government for
its outstanding achievements in semiconductor technology
research. UMC is strongly positioned in the foundry industry through its continuous innovation.
R&D Expenditures
In thousand NTD
Expenditures
2007
2006
1,655,036
9,237,616
Note The data represented for 2007 was gathered until March 15, 2007; the figure represented was unaudited.
Long-term and Short-term Business Development Plan
UMC operates as the SoC Solution Foundry, dedicated to
providing comprehensive SoC solutions for its customers.
This approach involves collaborating closely with customers as well as partners throughout the entire supply chain,
including equipment, EDA tool, IP and test and packaging
vendors to work synergistically towards each customer’s SoC
silicon success. This strategy has resulted in a broad range
of resources available to SoC designers, including silicon
validated reference flows, a broad IP portfolio, free-of-charge
libraries and extensive test and packaging capabilities. Combine these with UMC’s advanced process technology and
state-of-the-art 300mm manufacturing, and the result is
shortened time-to-market for customers’ SoC products.
67
Market and Sales Conditions
Major Sales Regions
UMC’s technologies and services have proven themselves by
contributing to the success of its customers, many of whom
are major players in the global IC industry. Currently, the
majority of the Company’s customers are located in North
America and Asia, with Europe following closely behind.
Japanese customers’ orders primarily go to UMC’s subsidiary in Japan, UMCJ, although a few customers deal directly
with UMC. UMC will enhance its partnerships with worldclass customers around the globe by continuing to develop
customers’ high-end products to ensure the steady growth
of UMC for the mid- and long-terms.
than the overall semiconductor industry.
Competitive Advantages
IC design companies in Taiwan are performing well, and are
second only to North American IC design firms. UMC has
a high market share in the Taiwan market and can directly
enjoy the advantages accompanying the rapid growth of
Taiwan’s IC design companies.
The IC industry in Taiwan is well structured and is
very competitive in terms of efficiency and cost. UMC’s
technology leadership leveraged with the advantages of
Taiwan’s IC industry will result in greater competitiveness for the Company.
Market Share
UMC is a leading company in the foundry industry, with a
2006 sales revenue figure of USD 3.196 billion. UMC possessed a global pure-play foundry market share of 19%.
TSMC, SMIC and Chartered are considered major competitors. Together in 2006, UMC, TSMC, SMIC and Chartered
are estimated to account for approximately 84% of the
pure-play foundry market share. In 2006, sales revenues for
TSMC, SMIC and Chartered were USD 9.662 billion, USD
1.465 billion and USD 1.414 billion, respectively. TSMC,
SMIC and Chartered had a market share of 50%, 8% and 7%
respectively (market share information and revenues of the
competitors are based on their financial releases and data
from IC Insights).
Positive Factors Relating to Future Development
Considering the long-term steady growth of the IC industry, the relative advantages of foundry manufacturing, and
UMC’s technical excellence, we believe that the following
factors will contribute positively to the future development
of the Company:
UMC has distinguished itself as a top-tier company in the foundry industry. The trend towards increased disintegra-
tion within the industry will create new opportunities for the Company as the market for foundry services
continues to grow.
Major IDMs are shifting their strategy to increase their
use of external foundry services, which will help the
growth of the foundry service market.
UMC maintains stable long-term orders through its
strategic alliances with global industry leaders.
UMC has an exceptional management team that strongly emphasizes the research and development of advanced process technologies.
UMC is the industry leader in the implementation of 300mm wafer production. The Company has two 300mm facilities, Fab 12A in the Tainan Science Park, and Fab 12i in Singapore. Furthermore, a third 300mm facility is under construction in the Tainan
Science Park. UMC’s aggressive expansion into
300mm manufacturing will help attract more
outsourcing orders from IDMs and fabless companies.
Future Market Supply, Demand, and Growth Potential
According to reports by the World Semiconductor Trade
Statistics (WSTS), the Semiconductor Industry Association (SIA), Dataquest, and In-Stat and IC Insights, the
global semiconductor market in 2007 is estimated to exhibit
growth in the range of 12% to 14%, following growth of 8%
in 2006.
To provide an indicator of future market supply, demand and growth potential by industry breakdown, Fabless
design companies have historically outperformed the overall
semiconductor market. Furthermore, increasing numbers of
Integrated Device Manufacturers (IDMs) are adopting the
strategy of using external foundry services. Therefore, the
foundry service market is expected to grow at a faster rate
68
Operation Overview
Market and Sales Conditions (cont.)
UMC is in volume production for 65-nanometer process
technology. UMC is one of the few foundries in the
world t hat is capable of providing this technology
capability. As the Company produces more advanced
technology products, the Company reaps higher profits
while offering customers value-added benefits.
In response to the trend of producing greater numbers
of SoC products, UMC continues to develop embedded
memory macros, Mixed-Signal/RF CMOS processes,
and other system integration technologies used in SoC
designs to meet customers’ needs and firmly establish the company’s leading position for the development of SoC
technologies.
As the need continues to rise for consumer products such as digital televisions, LCD televisions, DVD players, MP3 players and smart phones, the semiconductor industry is expected to enter another growth stage.
Negative Factors Relating to Future Development
Today’s trend has seen softening demand for personal computers (PC), which may cause a negative impact to the industry’s growth.
The recent prosperity of the foundry market has at tracted many new competitors into the market; this may
negatively impact the market balance.
Adaptations to Market Situation
In response to other foundry market entrants, UMC will
build on its competitive advantages, such as leading-edge
technologies, high manufacturing yields, and comprehen sive customer services. This will widen the gap with these
new competitors, and differentiate UMC from the
rest of the industry. This strategy will ensure UMC
remains a primary choice for foundry customers.
The Company will strive to provide the most advanced technologies for various IC applications and simultane-
ously meet high performance and low power consump-
tion needs while helping customers to reduce overall
costs.
UMC will strengthen its marketing effectiveness,
strive for service excellence, and continue with efforts
to increase customer satisfaction.
UMC will strengthen its partnerships with existing
customers to facilitate enhanced growth for both the
Company and its customers.
Applications of Major Processes
CMOS logic processes: Chips for logic-calculation
functions, e.g. graphics chips, audio chips, and micro processors.
Mixed-Signal processes: Chips for processing analog/
digital mixed signals, e.g. broadband communications
and optical storage chips.
RF CMOS processes: Chips for wireless communications,
e.g. cellular phones, WLAN, and Bluetooth chips.
Embedded memory processes: Chips combining logic and
memory functions for high performance, low power
consumption chips, e.g. graphics and router chips.
High Voltage processes: for manufacturing LCD Driver
ICs and Power Management ICs.
CMOS Image Sensor processes: for manufacturing CMOS
Image Sensors used in digital cameras, cell phones and
PC cameras.
Product Manufacturing Process
The IC manufacturing process can be broken down into five
major steps including circuit design, mask tooling, wafer
fabrication, assembly and test. UMC excels in the research
and development of pioneering IC process technologies, and
provides leading manufacturing technologies, materials and
equipment for its customers to rapidly realize their designs
in silicon.
69
Major Raw Materials Status
Material Categories Major Vendors
Vendors’ Market Position
UMC’s Procurement Strategies
Raw Silicon Wafers
UMC’s vendors are major raw silicon wafer suppliers to the world.
Their factories, located in the U.S.,
Japan, Taiwan and throughout
Southeast Asia, can consistently
supply high-quality silicon wafers
in sizes ranging from 150mm to
300mm.
(a) UMC maintains good relationships with the world’s major silicon wafer suppliers to assure a stable supply.
(b) UMC’s decision to procure wafers made locally has not only reduced logistical risks, but has also reduced costs.
(c) UMC allocates procurement among its
vendors according to their overall perfor-
mance, which is evaluated quarterly by UMC’s internal Suppliers Management Com-
mittee.
S.E.H.
(manufactured in the U.S., Japan,
Taiwan and Malaysia)
MEMC
(manufactured in the U.S. and Taiwan)
SUMCO Group
(manufactured in Japan and Taiwan)
Major Vendors and Customers
Major Vendors
In thousand NTD
2006
Name
Amount
Percentage of
Net Purchases
Shin-Etsu Handotai Taiwan
Co., Ltd.
3,353,721
13
2005
Name
Amount
Percentage of
Net Purchases
Shin-Etsu Handotai Taiwan
Co., Ltd.
2,611,052
11
Reasons for changes in procurement amount: UMC’s purchasing amount with Shin-Etsu increased in 2006 due to an increase in quantity purchased to reflect a rise
in 300mm wafer demand.
Major Customers
In thousand NTD
2006
Name
UMC Group (USA)
Amount
Percentage of
Net Operating
Revenues
54,476,329
52
2005
Name
UMC Group (USA)
Amount
Percentage of
Net Operating
Revenues
43,226,036
48
Reasons for changes in sales amount: Sales to UMC Group (USA) accounted for more than 10% of net operating revenues in 2006. This resulted primarily from the
recovery of the semiconductor industry in 2006 and the increased in demand of communication, consumer and computer products.
70
Operation Overview
Production and Sales Figures
Production Figures
2006
Wafers (Pcs)
Chips (In thousands)
Packaged ICs (In thousands)
2005
Quantity
Quantity
3,030,999
76,232,056
2,669,672
74,201,369
84,918
6,635,478
64,807
4,971,589
599
43,148
1,192
125,226
Total amount
79,298,184
82,910,682
Capacity (Pcs)
3,855,000
4,017,000
Note Wafer quantity and capacity are expressed in 200mm wafer equivalents.
Sales Figures
2006
Wafers (Pcs)
2005
Quantity
Quantity
Domestic
1,372,006
32,839,086
1,388,520
34,285,040
Export
1,618,731
62,001,889
1,257,667
49,530,126
56
58,508
685
141,548
84,807
5,677,686
64,150
4,156,586
Chips
(In thousands)
Domestic
Packaged ICs
(In thousands)
Domestic
374
26,803
2
74
Export
203
16,579
1,189
109,147
Others
Domestic
122,026
81,655
Export
570,829
635,819
Domestic
33,046,423
34,508,317
Export
68,266,983
54,431,678
Total
Export
Note Wafer quantity is expressed in 200mm wafer equivalents.
71
Employee Analysis
Number of Employees
2007
2006
2005
6,837
6,774
5,745
559
550
582
61
60
70
5,855
5,881
5,671
13,312
13,265
12,068
2007
2006
2005
30.7
30.6
30.3
2007
2006
2005
5.6
5.4
5.2
2007
2006
2005
1.2
1.2
1.3
Masters degree
21.9
21.8
20.9
Bachelors / Associate degree
48.2
48.7
48.3
Secondary school and others
28.7
28.3
29.5
Engineers
Administrators
Clerks
Technicians
Total
Average Age
Average age
Average Years of Employment
Average number of years
Level of Education (%)
Ph.D.
72
Operation Overview
Environmental Protection Information
UMC considers CSR as an integral part of its corporate value
and operation strategies. UMC’s multi-dimensional CSR
program is integrated into every aspect of our operations
and is also the foundation of the Company’s sustainable
development. This commitment is illustrated through the
Company’s award of the runner up position for Environmental Excellence from the Asian Institute of Management
at their 2004 Asian CSR Awards held in Kuala Lumpur,
Malaysia, the 5th Industrial Sustainable Excellence Award
from the Industry Development Bureau in 2004, and the 2nd
Taiwan Sustainable Development Award from the National
Council for Sustainable Development, Executive Yuan in
2005. In addition, UMC gained the highest “5 heart” rating by CommonWealth Magazine in their 2006 Enterprise
Citizen Investigation for environmental protection, public
welfare and contributions to education. These honors affirm
UMC’s performance in environmental protection and social
responsibility. UMC’s environmental protection policy is
guided by the Company’s belief in the importance of corporate integrity and commitment to long-term partnerships
with its customers and the community. The Company takes
proactive actions and has comprehensive environmental
protection programs in place to ensure that sustainable
growth and development is environmentally friendly at the
same time.
UMC’s environmental protection and pollution control
plan addresses all aspects of the environment. In 2006, capital expenditures for pollution control equipment were NTD
317 million and the average monthly operating cost was
NTD 28 million. Monthly waste disposal fees were NTD 4.2
million and the annual cost for the environmental monitoring program was NTD 3.2 million. Major environmental
protection expenses in the future will include: (a) the costs
required to maintain or upgrade existing systems; (b) operating costs for pollution control equipment (NTD 28 million per month); (c) waste disposal fees (NTD 4 million per
month); and (d) the cost for the environmental monitoring
program (NTD 4 million annually).
In the past year, UMC met all environmental regulation
standards and distinguished itself with its environmental
protection performance. Over the years, UMC has received
many honors such as the Enterprises Environmental Protection Award of the R.O.C., the Water Conservation Award,
Excellent Performance in Waste Management and Resource
Reduction, Recycle and Reuse, the Tainan Science Park’s Excellent Performance in Environmental Protection for both
company and professionals and Top Honors in Hsinchu Science Park’s “Protection of the Environment” Competition.
73
Labor Relations
UMC places great importance on employee salaries and
benefits, employee development, the enforcement of all labor
laws, and the protection of employee rights, in an effort to
provide the best possible working environment.
UMC makes every effort to develop a positive working
relationship between employees and management. Employees can communicate with their superiors through many
channels, including departmental meetings, colleague
symposiums, and opinion boxes. The mental and physical
well-being of UMC employees are equally as important, and
the Company offers employee-counseling services and has a
health clinic on-site.
UMC has its own employee recreation center to provide
its employees with a facility to improve their quality of life
and encourage social interaction among company personnel. The employee recreation center is equipped to support a
variety of activities, such as sports, entertainment, arts, and
community meetings.
UMC follows a training policy that is implemented to
not only benefit the Company, but also cultivate individual
74
growth and development.
To protect the rights and interests of employees, UMC
follows the Labor Standards Law. UMC’s employee retirement policy also corresponds with existing related labor
laws.
The Council of Labor Affairs and other organizations
have recognized UMC’s efforts in developing good labor
relations. These organizations awarded UMC the honors of
Model Institution for the Promotion of Labor Welfare, Model Enterprise for the Promotion of Labor Education, and the
Model Enterprise for Industrial Relations distinctions.
In recent years, up to the publish date of the annual report, there have been no disputes between employees and
employers, nor has the Company realized any financial
impact resulting from disputes between employees and employers. Disputes within the organization or financial loss
could be averted by following the complete administrative
practices listed above and through constant efforts to avoid
such circumstances.
Operation Overview
Major Agreements
Major Long-term Supply and Marketing Agreements
In order to maintain a worldwide marketing presence, UMC
has entered into long-term distribution, sales, service and
support agreements with the companies listed below. In
addition, UMC has maintained long-term supply business
relationships with major wafer material suppliers. The major
contents of these agreements are described below:
Company Name
Contract Period
Major Contents
Limitations
UMC Group (USA)
2006.1.1~2007.12.31
Semiconductor products sales and relevant services
None material
2005.1.1~2006.12.31
None material
UMC Japan
2006.1.1~2007.12.31
None material
Shin-Etsu Handotai Taiwan Co., Ltd.
Indefinite period
150mm, 200mm and 300mm raw wafer supply
None material
Major License Agreements
UMC is committed to the protection and enhancement of
intellectual property. Based on more than 20 years of investment, UMC holds a leading position among independent
foundries worldwide for our number of US patents issued
in the semiconductor field. UMC also has cross-licensing
agreements with major semiconductor patent holders to
ensure that customers do not face infringement claims as a
result of UMC services. Some of the major licenses include:
Cross License (Company Name)
License Period
Fields of Protection
Limitations
Agere Systems Inc.
2004.1.1~2008.12.31
Process and topography
None material
International Business Machines Corporation 2006.1.1~2010.12.31
Process, topography and design
None material
Texas Instruments Incorporated
1998.8.28~2007.12.31
Process, topography and memory content
None material
Freescale Semiconductor, Inc.
2005.12.7~2010.12.31
None material
Renesas Technology Corp.
2006.1.1~2010.12.31
None material
75
Major Agreements (cont.)
Major Construction Agreements
Company Name
Contract Period
Various construction or engineering compa2006.1.1~2007.12.31
nies, such as: Yih-Shin Construction Co., Ltd.,
Yuan Lih Electrical Engineering Co., Ltd.,
GO-IN Engineering Co., Ltd.
Major Long-term Loan Agreements
UMC is committed to building and maintaining state-ofthe-art wafer fabrication facilities that will allow UMC to
maintain its position as a premier independent wafer
Major Contents
Limitations
UMC has contracts with major construction and
engineering companies to expand semiconductor
facilities in the Tainan Science Park. Total contract
amounts exceed NTD 0.8 billion.
None material
foundry and maintain the capacity needed to support its
continued growth. In order to provide the necessary capital
required to support such projects, UMC has, from time to
time, obtained loans from commercial banks. Some of these
loans include:
Company Name
Contract Period
Major Contents
Mega International Commercial Bank Co., Ltd.
and 17 other participant banks.
(Note This case had been paid off in 2004)
1996.9.20~2005.5.26
None material
arranged the syndicated loan and the facility amount
was approximately NTD 12.3 billion. The loan was for
Fab 8C’s capital expenditure.
1998.2.18~2005.9.18
Fab 8E’s capital expenditure.
None material
1999.11.22~2007.9.25
Fab 8E’s capital expenditure.
None material
(Note This case had been paid off in April of
2005)
2000.1.28~2007.1.28
was approximately NTD 8 billion. The loan was for
Fab 8F’s capital expenditure.
None material
76
Limitations
Financial Report
Financial Report 2006
78 Review of Financial Position, Operating Results, Risk Management
and Evaluation
86 Special Disclosures
94 Disclosure According to US Security Authorities Regulation
100Financial Review Unconsolidated
196 Financial Review Consolidated
77
Review of Financial Position,
Operating Results, Risk Management
and Evaluation
79 Analysis of Financial Position
80 Analysis of Operating Results
81 Liquidity Analysis
81 Major Capital Expenditures and Sources of Funding
82 Analysis for Investment
83 Risk Management and Evaluation
78
Review of Financial Position, Operating Results, Risk Management and Evaluation
Analysis of Financial Position
In thousand NTD
2006
2005
118,430,216
128,267,746
82,746,430
39,238,167
142,647,435
149,809,616
(7,162,181)
(5)
7,659,590
7,970,867
(311,277)
(4)
355,228,793
329,391,074
25,837,719
8
Current liabilities
30,060,546
28,303,962
1,756,584
6
Long-term interest-bearing liabilities
30,383,076
36,009,055
(5,625,979)
(16)
Total liabilities
64,063,922
71,107,521
(7,043,599)
(10)
191,323,332
197,983,633
(6,660,301)
(3)
Additional paid-in capital
67,707,287
85,381,599
(17,674,312)
(21)
Retained earnings
34,795,993
26,572,792
8,223,201
31
291,164,871
258,283,553
32,881,318
13
Current assets
Funds and investments
Property, plant and equipment
Other assets
Total assets
Capital
Total equity
Explanation for significant changes (over 20%) in financial
position include:
1. The increase in funds and investments is mainly due to
an effect of the subsequent valuation in “Available-for-sale
financial assets, noncurrent” originated from the implementation of ROC SFAS No. 34, “Financial Instruments:
Difference
(9,837,530)
43,508,263
% Change
(8)
111
Recognition and Measurement”.
2. The decrease in additional paid-in capital mainly resulted
from the adjustment of funds and investments disposal for
2006.
3. The increase in retained earnings mainly resulted from
the increase in net income over the previous year.
79
Analysis of Operating Results
In thousand NTD
2006
2005
Difference
% Change
102,023,597
90,780,340
11,243,257
12
(1,840,345)
1,130,154
(61)
101,313,406
88,939,995
12,373,411
14
2,785,205
1,835,444
949,761
52
Net operating revenues
104,098,611
90,775,439
13,323,172
15
Operating costs
(83,419,400)
(79,614,153)
(3,805,247)
5
20,679,211
11,161,286
9,517,925
85
14,261
34,264
Gross profit-net
20,693,472
11,195,550
Operating expenses
(14,569,334)
(13,864,269)
Operating (loss) income
6,124,138
(2,668,719)
8,792,857
(329)
Non-operating income
33,871,592
13,871,542
20,000,050
144
Non-operating expenses
(2,979,691)
(4,175,293)
1,195,602
(29)
Income from continuing operations before income tax
37,016,039
7,027,530
29,988,509
427
Income tax expense
(3,208,211)
Cumulative effect of changes in accounting principles
(1,188,515)
Net income
32,619,313
Sales revenues
Sales returns and discounts
(710,191)
Net sales
Other operating revenues
Gross profit
Realized (unrealized) intercompany profit
Explanation for significant changes (over 20%) in operating results include :
(a) Net operating revenues:
The increase in net operating revenues primarily resulted
from the recovery of the semiconductor industry, and subsequently the increased number of orders received.
(b) Gross profit analysis:
The increase in gross profit for 2006 was due primarily to
increases in sales quantity and the capacity utilization rate,
and a decrease in the product unit cost. Reasons for difference in gross profit are as follows:
In thousand NTD
Reasons for Difference
Average selling price
Unit cost
Product mix
Quantity
Others
Difference
80
(838)
7,026,692
(20,003)
9,497,922
(58)
85
(705,065)
5
(3,207,373)
382,741
(1,188,515)
-
25,592,621
364
(c) Non-operating income and expenses:
Mainly resulted from an increase in gain on disposal of
investments, and Investment gain accounted for under the
equity method.
(d) Cumulative effect of changes in accounting principles:
Resulted from the implementation of ROC SFAS No. 34,
“Financial Instruments: Recognition and Measurement” to
account for the financial instruments effective January 1,
2006.
(e) Income tax expense:
The increase of income tax expense resulted from the increase in sales revenues and the net income for 2006, and the
impact of The Income Basic Tax Act of the R.O.C.
Gross Profit
299,724
7,937,397
1,366,350
(85,546)
9,517,925
Estimated Sales Quantities
With the industry shifting towards the vertical disintegration business model, UMC, with its position as an industry
leader and pioneer in 300mm manufacturing and SoC
(System-on-Chip) technologies, should be able to reach a
revenue growth rate higher than that of the overall semiconductor industry. Based on our capacity and customers’
demand forecast, the estimated sales quantity for 2007 is
approximately 3.70 million 200mm wafer equivalents.
Liquidity Analysis
Analysis of Cash Flows for 2006
Cash Balance at
Beginning of Year
In thousand NTD
Net Cash Provided by
Operating Activities
96,596,623
46,049,174
Net Cash Used in
Investing and
Financing Activities
Cash Balance at End
of Year
(59,250,995)
83,394,802
Source of Funding in case of
Cash Shortfall
Investing Plan
Financing Plan
-
-
Note Net cash used in investing and financing activities includes factoring for currency exchange, which amounts to (85,133) thousand.
(a) Cash inflows from operating activities are the result of
net income reconciled to net cash with depreciation as the
largest adjustment.
(b) Cash outflows from investing activities are attributed to
the increase of capital expenditures, while cash inflows from
investing activities are attributed to proceeds from available-
for-sale financial assets and long-term investment under the
equity method.
(c) Cash outflows from financing activities resulted from the
repayment of bonds payable, purchase of treasury stocks and
payment of cash dividends.
Projected Cash Flows for 2007
Cash Balance at
Beginning of Year
83,394,802
In thousand NTD
Projected Cash Inflows
from Operating
Activities
Projected Cash
Outflows from
investing and
financing activities
Projected Cash
Balance at End of
Year
44,222,821
(98,068,887)
29,548,736
Source of Funding in case of
Cash Shortfall
Investing Plan
Financing Plan
-
-
Impact on the Company’s Financial Operations and
Contingency Action Regarding Major Capital Expenditures
Execution Status of Major Capital Expenditures and Sources of Funding
Project
Actual or Expected Sources of Funding
In thousand NTD
Completion
Status
(up to 2006)
Total
Amount
(up to 2006)
Capital Expenditures Plan
2006
2005
Production Equipment
Cash flows generated from operations, bank loans and
issuance of bonds
Completed
44,632,783
28,132,964
16,499,819
R&D Equipment
Cash flows generated from operations, bank loans and
issuance of bonds
Completed
5,158,223
3,071,455
2,086,768
Expected Benefit from Capital Expenditures
Starting from 2007, production capability for the Company’s
0.25-micron and below technologies will increase to 68% or
more as a percentage of total production capacity due to the
above mentioned capital expenditures.
81
Investment Policy, Causes of Profit /Loss and Future Investment Plans
The Company held a meeting of its Board of Directors on
January 27, 2006, and passed a resolution to sell 63.48% of
the equity of its subsidiary, Hsun Chieh Investment Co., Ltd.
(Hsun Chieh), to Hsieh Yong Capital Co., Ltd. (Hsieh Yong).
Before this transaction, the Company held a 99.97%
stake in Hsun Chieh. After completing the sale of a 63.48%
stake to Hsieh Yong, the Company holds a 36.49% stake
in Hsun Chieh and retains one of the three seats on the
Company’s Board of Directors. After the transaction, Hsun
Chieh Investments Co., Ltd. was no longer a subsidiary of
the Company and thus any share of the Company held by
Hsun Chieh Investments Co., Ltd. shall be reclassified from
treasury stocks to long-term investments in the Company’s
books, of which NTD 10,881 million was recorded in effect
82
under long-term investments and stockholders’ equity,
respectively.
Both the Company and Hsieh Yong set the terms of the
sale, in consideration of the future prospects of the industry,
and the technical and management capabilities of Hsun
Chieh’s invested companies. The companies that make up
Hsun Chieh’s investment portfolio come from a wide range
of sectors within the electronics supply chain. Over 97% of
the value of Hsun Chieh’s investment portfolio is in publicly
listed companies. The value of Hsun Chieh was determined
based on the closing stock price of its portfolio companies at
the end of trading on January 25, 2006 and was reviewed by
securities and accounting specialists, confirming the reasonableness of this transaction.
Risk Management and Evaluation
Impact on Corporate Profitability from Fluctuating Interest Rates, Exchange Rates, and Inflation
The impact on the Company from fluctuating interest rates,
exchange rates, and inflation has been minimal due to effective monitoring and control. The Company will continue
to watch market movement with regard to interest and
exchange rates to avoid losses.
Profit or Loss from Activities in High Risk and Highly
Leveraged Investments, Loans Provided to Others, Endorsements and Guarantees, and Derivatives
Starting from November 2005, the Company provided
guarantees of NTD 7.5 billion to its subsidiary, UMCJ.
The guarantees had expired on October 31, 2006.
The Company has not engaged in any transaction of
high risk and highly leveraged investments. Any derivatives transaction is to elevate the Company’s operating
performance and reduce operating and financial risks.
Upcoming R&D Plans and Their Status
UMC is determined to maintain its position as a semiconductor industry leader by addressing the challenges of semiconductor scaling and continuing the advancement of transistor technology. The accomplishments being unveiled at
65-nanometer and 45-nanometer development demonstrate
UMC’s capabilities and confidence in the development and
delivery of advanced process technologies for 45-nanometer
and beyond. With the upcoming completion of UMC’s new
R&D center and new wafer plant for nanometer technologies
in Tainan, Taiwan, the development momentum moving
to 45-nanometer, 40-nanometer (shrunk version of 45nanometer) and 32-nanometer is accelerating, with extraordinary achievements expected in the coming year.
65-nanometer product ramp is on track for several
customers for 2007 and 55-nanometer technology qualification is expected to be completed during the second half
of 2007. The development pace for 45-nanometer technology is accelerating as well. Continued enhancements to
process margin and volume production windows will be
the Company’s current focus for UMC’s 45-nanometer Low
Leakage process. Further mobility enhancement for the high
performance chip segment is an on-going challenge that has
been determined to be resolved in 2007. The 45-nanometer
release schedule has been aligned with UMC’s strategic
customers’ product roadmap for 2008. The definition of
32-nanometer technology and device specification discussion have been initiated with UMC’s leading customers.
The Company is also co-working with a leading technology
company at Advanced Technology Development Facility
(ATDF) to develop leading-edge transistor structures incorporating new materials (high-k dielectrics and metal gate
electrode, Silicon-on-insulator (SOI) and non-classical
CMOS schemes (multiple-gate field emission transistor)
for future generation devices on new technology.
UMC will continue to strengthen its silicon validated
intellectual property portfolio, with a particular emphasis
on increasing 65-nanometer and 90-nanometer IP. For 65nanometer design support, the foundation will be built upon
DFM compliance libraries, memory compilers and reference
design flows. State-of-the-art analog mixed-signal IP will
further complement customers’ SoC design needs, especially those supporting industry standards (such as PCI-E,
SATA, HDMI, etc.), advanced video, audio and consumer
applications. UMC will leverage its success in delivering 90nanometer libraries and analog mixed-signal devices to develop 65-nanometer solutions while expanding its partnership base with the world’s IP community to offer the most
comprehensive design support resources for SoC designs.
As the SoC Solution Foundry, UMC continues to
develop innovative yet practical technology solutions
to help SoC designers maximize the competitiveness
of their products. UMC’s continuous advancements in
leading-edge and emerging technology areas are critical for customers’ product success. UMC will complete
its specialized R&D center and continue to build its
methodology designed to accelerate leading-edge nanoelectronic technology to the marketplace.
Impact on the Company’s Financial Operations and Contingency Action Regarding Recent Changes in Domestic
and International Policies and Regulations
The Company strictly follows governing policies and regulations. All of the related departments constantly monitor any
changes in related policies and regulations, and adjust internal operating procedures and business activities accordingly
so that business operations continue smoothly.
As to the revisions of ROC “Business Entity Accounting
Law” announced on May 24, 2006, Financial Supervisory
Commission, Executive Yuan (FSC) proposed a policy of
“identification of employee dividend and bonus payouts as
expenses” (the “Policy”) to be enforced from January 1,
2008. The Company’s financial/business impact from this
new Policy and action measures for resolution will be:
(1) Impact: the Company will follow the Policy and related
accounting principles and regulations in financial reporting.
(2) Action Measures: related regulations and principles of
the Policy have not been proposed by FSC; as such the
Company will monitor them and consult with its accounting service firm for an implementation plan for the
Policy.
Impact on the Company’s Financial Operations and Contingency Action Regarding Recent Changes in Technology
The Company has been sharply focused on the development
of advanced technology. In 2006, the Company’s R&D expenses were approximately NTD 9.2 billion. The Company
has taken the lead position in the foundry industry in both
volume production of 90-nanometer and the development
of 65-nanometer technologies. The Company has migrated
90-nanometer chips to mainstream volume production; 90nanometer and below chips represented 21% of total revenue
83
Risk Management and Evaluation (cont.)
in the 4th quarter, 2006; 65-nanometer chips represented 1%
of total revenue in 2006. The Company’s current financial
situation is sound and cash on hand is sufficient for future
technology development.
Impact on the Company’s Risk Management and Contingency Action Regarding Recent Changes in Corporate
Image
To ensure the long-term success of the Company and to further the corporate goal of building long-term partnerships
with our customers and our community, the Company holds
Shareholder Meetings and Investor Conferences regularly
to maintain a high-level of financial transparency. The
Company consistently meets its obligations as an exemplary
corporate citizen by participating in a wide range of public
activities that benefit the community and society as a whole.
In addition, the Company has established a comprehensive
and robust set of response procedures aimed at addressing
the needs of a highly diverse range of emergency conditions,
reducing management uncertainty to the lowest achievable
level.
Risk from the Company Encountering an Economic Downturn during Expansion by Acquisition or Merger
Through future acquisitions, UMC is expected to integrate
resources, lower operating costs, widen its business scope,
raise profitability and add to its overall international competitiveness, which will help the Company to contend in a
capital and technology intensive industry that is constantly
changing.
The cyclical fluctuation in the semiconductor industry is volatile and uncertain. Once a company encounters
an economic downturn during expansion by acquisition
or merger, there would exist the possibility of an excess
capacity situation. The risk might temporarily damage the
Company’s profitability but such a situation would also help
to eliminate companies with poor operations and restructure the industry composition. The other possible risk would
be that the acquired company would encounter difficulties
when integrating with the acquiring company. Factors such
as unsuccessful production integration or issues brought
by differences in corporate culture would partly offset the
contribution from the acquired company.
To avoid the negative effects from improper acquisition,
for future operations, the Company will conduct thorough
evaluations to prevent unfavorable acquisition conditions
caused by improper information disclosure. Following
any acquisition, the Company’s corporate culture will be
introduced to its new employees to create a unified team that
will work hard towards the common goal of increasing the
Company’s competitiveness.
84
Risk of Excess Capacity from Fluctuating Economic Conditions
The Company increases its production capabilities through
fab expansion in order to accommodate more customer
orders, thus providing the means to increase revenue,
profits and market share. When production capacity reaches
economies of scale, manufacturing costs can be dramatically
reduced. However, the significant potential for fluctuations
in the semiconductor industry economic cycle creates financial risk, as any excess capacity still must be accounted for
under depreciation of plants and equipment during demand
softening caused by economic conditions. This risk would be
considered a burden to the Company.
The Company’s capacity expansion is under deliberate
capital expenditure plans, which focus on satisfying customers’ needs while optimizing capital utilization. Disciplined capital expenditure can help to develop a healthy
industry environment.
Risk and Countermeasures of the Company Encountering Material Shortage from Suppliers Failing to Provide
Materials due to Circumstances Created by Natural or
Unnatural Factors
The Risk of Material Shortage:
Material shortage may result from suppliers encountering
situations such as insufficient capacity, industrial accidents
in factories or natural disasters.
Solution for Material Shortage:
UMC currently uses consignment contracts to offset its risk.
Risk of Profit Loss if Sales are Concentrated on a Single
or a Few Customers, and a Major Customer Reduces its
Orders
UMC has established long-term and steady partnerships
with numerous world-class customers. The combined
strengths of both UMC and these customers will ensure the
long-term steady growth of the Company. The ten largest customers of UMC accounted for 63% of sales in 2006.
UMC mitigates its risk through dispersed sales to lower the
potentially significant impact that a single or a few customers may cause.
Risk of Change of Control and Stock Price Fluctuation
from Large Scale Transfer of Shares
If Company’s directors, supervisors or major shareholders
holding more than 10% of issued and outstanding shares
transfer a significant portion of their shareholdings in the
Company, then a change of control may occur. Furthermore,
such transfer may give rise to investor concerns on the operation of the Company and may cause the market price
of Company shares to fluctuate.
The share withholding status of the Company’s directors, supervisors and managers have been reported based on
official regulations and laws. Meanwhile, there has been no
significant share transfer activity.
Risk Management and Evaluation (cont.)
Risk of the Company Losing One or More Key Personnel
without Adequate Replacement Due to Any Change of
Company Control
UMC’s future success depends to a large extent on the continued service of the Company’s Chairman and key executive officers. If the Chairman or key executive officers leave
their positions as a result of a change in Company control,
and qualified replacement personnel cannot be found and
integrated in a short period of time, operations may be
adversely affected.
The Company’s management focuses its operations with
the intent to maximize value for its shareholders, thus gaining their trust and recognition. If there were a replacement
of management, the succeeding personnel would have to
recognize corporate culture, be qualified to assume professional duties, and be able to execute the Company’s policy.
Litigation and Non-litigated Incidents
On February 15, 2005, Taiwan’s Hsinchu District Court
Prosecutor’s Office conducted a search at UMC offices,
assertively investigating whether there was any evidence of
violation of Taiwan Securities and Exchange Act. UMC’s
former Chairman, Mr. Robert H.C. Tsao, and former Vice
Chairman, Mr. John Hsuan, had received summons as the
defendants. On the afternoon of January 9, 2006, Taiwan’s
Hsinchu District Court Prosecutor’s Office announced that
UMC’s former Chairman, Mr. Robert H.C. Tsao, and former Vice Chairman, Mr. John Hsuan, had been prosecuted
due to their violations of Article 71 of Business Entity Accounting Act and Article 342 paragraph 1 of Criminal Law.
In actuality, Mr. Robert H.C. Tsao and Mr. John Hsuan had
both resigned from their director positions from the Board
of Directors on the morning of the same day. This case is
waiting for Taiwan Hsinchu District Court’s trial.
On July 12, 2005, one of UMC’s Taiwan shareholders,
Mr. T.Y. Huang brought a civil litigation action against UMC
and the other Taiwan listed companies and claimed that all
of the resolutions in this aforesaid companies’ 2005 annual
shareholders meetings were null and void. This case had
been overruled by Taiwan Hsinchu District Court on March
7, 2006. Mr. T.Y. Huang appealed. On September 12, 2006,
Taiwan High Court ruled in favor of UMC. Mr. T.Y. Huang
did not appeal to Taiwan Supreme Court within the statutory time limit; this case is closed.
On February 13, 2006, Taiwan Hsinchu District Court
delivered a notice to UMC and informed UMC that Taiwan
Power Company (“TPC”) had filed a civil litigation case
against UMC and other Taiwan companies. TPC claimed: (1)
UMC and the other Taiwan companies should collectively
pay NTD 13,348,056 with interest to TPC for electrical fees,
and (2) UMC should pay NTD 21,210,000 to TPC for the
electrical line’s fees. Up until this Annual Report’s editing
deadline, UMC had provided the defense documents. This
case is under Taiwan Hsinchu District Court’s trial.
On February 15, 2006, Taiwan Ministry of Economic
Affairs, Executive Yuan (MOEA) fined UMC NTD 5 million
for UMC’s alleged violation of Governing Relations between
Peoples of the Taiwan Area and the Mainland Area Act
(Article 35, failure to gain government’s approval for conducting investment in China Mainland). UMC had filed an
administrative appeal against MOEA on March 16, 2006. On
October 19, 2006, Executive Yuan denied the administrative
appeal filed by UMC. Up until this Annual Report’s editing
deadline, UMC had filed an administrative litigation case
against MOEA on December 8, 2006.
UMC’s Singapore Branch (as UMCi Ltd., prior to the
conversion of that business to UMC Singapore Branch) as
plaintiffs issued a Writ of Summons against Tokio Marine &
Fire Insurance Company (Singapore) Pte. Ltd. as defendants
on June 6, 2005 under a marine cargo insurance policy for
the replacement cost of a 300mm Endura System damaged
in transit. UMC’s Singapore Branch believes a chamber of
that equipment was damaged in shipment, incurring a cost
of approximately USD 1.2 million to replace the damaged
chamber. UMC’s Singapore Branch filed suit to recover
under the insurance policy on the grounds that the equipment was damaged in shipment as a result of rough handling or conditions. Tokio Marine has denied the incident
was a covered event under the policy. Discovery has been
completed and the parties are preparing their affidavits of
evidence-in-chief for exchange. Based on results to date,
UMC feels its Singapore Branch has a meritorious case. Trial
is expected for the first half of 2007. Although it is too early
to determine the possible outcome, the maximum exposure
to UMC’s Singapore Branch would be the loss of its claim for
reimbursement plus no more than a few hundred thousand
dollars more in assessments, fees and costs.
Mr. C.F. Shih, a workman of a subcontractor hired by
Yih-Shin Construction Co., Ltd. (“Yih-Shin”), one of companies engaged by UMC for Fab 12A dormitory construction,
was severely injured during construction. Mr. C.F. Shih’s
wife filed a request to Taiwan Tainan Prosecutors’ Office
to file charges against UMC and other related parties for
personal injury. Taiwan Tainan Prosecutor’s Office denied
this request. On March 30, 2006, Mr. C.F. Shih also filed a
civil litigation case against Yih-Shin, UMC and other related
parties. Mr. C.F. Shih claimed that Yih-Shin, UMC and
other related parties should collectively pay NTD 20,967,400.
Mr. C.F. Shih’s mother and wife each requested for compensatory damages in the amount of NTD 300,000 and Mr.
C.F. Shih’s three children each requested for compensatory
damages in the amount of NTD 100,000. Mr. Shih and his
families also claimed that an annual interest rate of 5% to
be accrued for the claimed damages. This case is waiting for
Taiwan Tainan District Court’s trial.
Other Important Risks
None.
Other Necessary Supplements
None.
85
Special Disclosures
87 Summary of Affiliated Enterprises
92 Acquisition or Disposal of UMC Shares by Subsidiaries
93
86
Disclosures of Events which May Have a Significant Influence on Stockholders’ Equity or Share Price, in Compliance
with Item 2, Paragraph 2 in Article 36 of the Securities and Exchange Law of the R.O.C.
Special Disclosures
Summary of Affiliated Enterprises
Organization Chart
United Microelectronics Corporation
TLC Capital Co., Ltd.
100.00%
99.99%
UMC Group (USA)
Unitruth Investment Corporation
100.00%
100.00%
UMC Japan
50.09%
UMC Capital Corp.
100.00%
UMC Capital (USA)
100.00%
UMCi Ltd.
100.00%
ECP VITA Ltd.
100.00%
100.00%
100.00%
81.76%
Basic Data of Affiliated Enterprises
In thousand NTD
Name of Corporation
Date of
Address
Establishment
Capital
Fortune Venture Capital
Corporation
1993.9.21
2F, 76, Sec. 2, Tunhwa S. Rd.,
5,000,000
Unitruth Investment Co.
2004.7.22
800,000
2005.10.14
6,000,000
UMC Group (USA)
1997.8.11
488 De Guigne Drive,
Sunnyvale, CA 94085, USA
UMC Japan
1984.5.15
1580, Yamamoto,
Tateyama-City, Chiba 294-8502, Japan
UMC Capital Corp.
2001.1.16
P.O. Box 1034GT,
Grand Cayman, Cayman Islands
UMC Capital (USA)
2001.2.13
UMCi Ltd.
2001.1.18
535
(USD16,437.5)
7,588,397
(JPY27,140,188,000)
Major Business /
Production Items
Consulting and planning for
investment in new business
Investment holding
IC sales
Sales and manufacturing of
integrated circuits
4,033,472
(USD124,000,000)
Investment holding
488 De Guigne Drive,
Sunnyvale, CA 94085, USA
6,506
(USD200,000)
Investment holding
3 Pasir Ris Drive 12,
Singapore 519528
28,625
(USD880,006)
integrated circuits
United Microelectronics Corp. 2000.10.12
(Samoa)
Offshore Chambers, P.O. Box 217,
Apia, Samoa
9,108
(USD280,000)
Investment holding
United Microelectronics
(Europe) B.V.
World Trade Center, H-Tower,
Schipholboulevard 243 1118 BH Schiphol,
The Netherlands
1989.5.23
United Microdisplay Optronics 2002.9.11
Corporation
2F, 3, Li-Hsin 2nd Rd.,
Hsinchu Science Park, Taiwan 30078, R.O.C.
ECP VITA Ltd.
Romasco Place, Wickhams Cay 1,
P.O. Box 3140, Road Town,
Tortola, British Virgin Islands
2005.7.27
126,056
(USD3,875,309)
786,584
32,528
(USD1,000,000)
IC sales
LCOS
Insurance
Notes (1) USD:NTD =1:32.528; JPY:NTD = 1:0.2796. (2) The data is dated December 31,2006.
87
Summary of Affiliated Enterprises (cont.)
Data for Common Shareholders of Treated-as Controlled Companies and Affiliates
None.
Business of United Microelectronics Corporation (UMC) and its Affiliated Enterprises
The business of UMC and its affiliated enterprises includes semiconductor wafer manufacturing, electronics, optronics, investment activities, insurance and trade.
88
Special Disclosures
Directors, Supervisors and Presidents of Affiliated Enterprises
Name of Corporation
Title
Name or Representative
Shares
%
499,994,000
99.99
-
-
499,994,000
99.99
-
-
499,994,000
99.99
-
-
499,994,000
99.99
-
-
499,994,000
99.99
-
-
499,994,000
99.99
Representative: Tzyy-Jang Tseng
-
-
President
Duen-Chian Cheng
-
-
Chairman
80,000,000
100.00
-
-
80,000,000
100.00
-
-
80,000,000
100.00
-
-
80,000,000
100.00
-
-
600,000,000
100.00
-
-
600,000,000
100.00
-
-
600,000,000
100.00
-
-
600,000,000
100.00
-
-
Chairman
Representative: Robert H.C. Tsao
Director
Representative: John Hsuan
Director
Representative: Stan Hung
Director
Representative: Duen-Chian Cheng
Director
Representative: Isabel Liu
Supervisor
Unitruth Investment Co.
Director
Representative: Jean Tien
Director
Supervisor
Representative: Isabel Liu
Shareholding
Chairman
Director
Representative: Jean Tien
Director
Supervisor
Representative: Chitung Liu
89
Name of Corporation
UMC Group (USA)
UMC Japan
UMC Capital Corp.
UMC Capital (USA)
UMCi Ltd.
United Microdisplay Optronics Corporation
Title
Shares
%
Director
Peter J. Courture
-
-
Director
Tony Yu
-
-
Chairman
Jackson Hu
-
-
Director and President
Ching-Chang Wen
-
-
Director
Robert H.C. Tsao
-
-
Director
John Hsuan
-
-
Director
Wen-Yang Chen
-
-
Director
Oliver Chang
-
-
Director
Toshiji Sugawara
920
0.09
Director
Masahide Tanihira
40
0.00
Director
T.Y. Hwang
-
-
Supervisor
Chitung Liu
-
-
Supervisor
Yoshihiro Matsumoto
210
0.02
Supervisor
Eiichi Arakawa
172
0.02
Supervisor
Grace Li
-
-
Director
124,000,000
100.00
-
-
Peter J. Courture
-
-
Director
Stan Hung
-
-
Director
Robert H.C. Tsao
-
-
Director
Jackson Hu
-
-
Peter Chang
-
-
Director
Po-Wen Yen
-
-
Director
Peter J. Courture
-
-
Director
280,000
100.00
-
-
Director
Robert H.C. Tsao
-
-
Director
John Hsuan
-
-
Chairman
64,313,176
81.76
-
-
64,313,176
81.76
-
-
64,313,176
81.76
-
-
64,313,176
81.76
-
-
Representative: John Hsuan
Director
Director
Supervisor
90
Shareholding
Special Disclosures
Directors, Supervisors and Presidents of Affiliated Enterprises
Name of Corporation
ECP VITA Ltd.
Title
Shareholding
Shares
%
Director
Angel Sun
-
-
Director
Stan Hung
-
-
Director
Chitung Liu
-
-
Note The data is dated December 31, 2006.
Summarized Operation Results of Affiliated Enterprises
Name of Corporation
In thousand NTD
Capital
Total
Assets
Total
Liabilities
Net
Income
(Loss)
Earnings
(Loss) Per
Share
(NTD)
6,000,000
7,061,109
61,372
6,999,737
2,253,785
359,631
329,178
0.68
Fortune Venture Capital Corp.
5,000,000
11,724,554
13,108
11,711,446
1,729,901
397,527
374,046
0.75
535
6,647,947
5,623,910
1,024,037
55,616,919
216,468
260,573
15.85
UMC Japan
7,588,397
18,933,989
6,120,617
12,813,372
9,624,737
(861,313)
(833,067)
(841.87)
UMC Capital Corp.
4,033,472
3,615,733
1,349
3,614,384
144,017
(49,736)
(49,736)
(0.60)
28,625
19,239,995
-
19,239,995
-
(1,664)
12,463
0.01
9,108
8,556
74
8,482
-
(5,626)
(5,588)
(5.77)
126,056
1,032,890
754,034
278,856
8,564,771
8,126
7,058
786,584
270,913
66,398
204,515
10,830
(165,395)
(186,142)
(2.58)
Unitruth Investment Corp.
800,000
743,543
333
743,210
84,737
(44,005)
(44,024)
(0.70)
6,506
11,291
685
10,606
22,842
1,088
974
4.87
32,528
62,512
12,108
50,404
8,731
7,039
9,295
9.30
UMC Group (USA)
UMCi Ltd.
UMC Capital (USA)
ECP VITA Ltd.
Net
Net Operating
Worth Operating
Income
Revenues
(Loss)
784.17
Note USD:NTD = 1:32.528; JPY:NTD = 1:0.2796
91
Issuance of Private Placement Securities
None.
Acquisition or Disposal of UMC Shares by Subsidiaries
Subsidiary
Fortune Venture
Capital
Corporation
Paid-in
Capital
Source of
Capital
Holding Acquisition
% by the or Disposal
Company Date
5,000,000 New shares
for cash
Shares Acquired
and Amount
In thousand NTD, Shares
Disposal
Shares and
Amount
Profit/
Loss
As of Annual Report
Printing Date
Shares
Amount
99.99 2006
223,456 (Note 1)
None
None
22,069,842
446,914
2007
None
None
None
22,069,842
446,914
Notes (1) 223,456 shares were distributed as dividends in 2006. (2) Data represented for 2007 was gathered up until March 15, 2007. (3) None of the above companies
pledged UMC shares as collateral. (4) The Company did not provide endorsements or guarantees to these subsidiaries. (5) The Company did not provide loans to these
subsidiaries.
Other Necessary Supplements
None.
92
Special Disclosures
Disclosures of Events which may Have a Significant Influence on Stockholders’ Equity
or Share Price, in Compliance with Item 2, Paragraph 2 in Article 36 of the Securities
and Exchange Law of the R.O.C.
On February 15, 2005, the Hsinchu District Prosecutor’s
Office conducted a search of the Company’s facilities. On
February 18, 2005, the Company’s former Chairman, Mr.
Robert H.C. Tsao, released a public statement explaining
that its assistance to Hejian Technology Corp. (Hejian)
did not involve any investment or technology transfer .
Furthermore, from the very beginning, there was a verbal
indication that, at the proper time, the Company would be
compensated appropriately for its assistance, and circumstances permitting, at some time in the future, it will push
through the merger between two companies. However, no
promise was made by the Company and no written agreement was made and executed. Upon the Company’s request
to materialize the said verbal indication by compensating in
the form of either cash or equity, the Chairman of the holding company of Hejian offered 15% of the approximately
700 million outstanding shares of the holding company of
Hejian in return for the Company’s past assistance and for
continued assistance in the future.
Immediately after the Company had received such offer,
it filed an application with the Investment Commission of
the Ministry of Economic Affairs on March 18, 2005 (Ref.
No. 94-Lian-Tung-Tzu-0222), for their executive guidance
for the successful transfer of said shares to the Company.
The shareholders meeting dated June 13, 2005 resolved that
to the extent permitted by law the Company shall try to
get the 15% of the outstanding shares offered by the holding company of Hejian as an asset of the Company. The
holding company of Hejian offered 106 million shares of its
outstanding common shares in return for the Company’s
assistance. The holding company of Hejian has put all such
shares in escrow. The Company was informed of such escrow on August 4, 2006. The subscription price per share of
the holding company of Hejian in the last offering was USD
1.1. Therefore, the total market value of the said shares is
worth more than USD 110 million. However, the Company
may not acquire the ownership of nor exercise the rights of
the said shares with any potential stock dividend or cash
dividend distributed in the future until the R.O.C. laws and
regulations allow the Company to acquire and exercise. In
the event that any stock dividend or cash dividend is distributed, the Company’s stake in the holding company of
Hejian will accumulate accordingly.
On February 15, 2006, the Company was fined in the
amount of NTD 5 million on the grounds of unauthorized
investment activities in Mainland China, implicating the
violation of Article 35 of the Act “Governing Relations Between Peoples of the Taiwan Area and the Mainland Area”
by the R.O.C. Ministry of Economic Affairs (MOEA). However, as the Company believes it was illegally and improperly fined, the Company had filed an administrative appeal
against MOEA to the Executive Yuan on March 16, 2006.
The Company’s administrative appeal was dismissed by the
Executive Yuan, R.O.C. on October 19, 2006. The Company
filed an administrative action against the R.O.C. Ministry
of Economic Affairs to Taipei High Administrative Court
on December 8, 2006. As of December 31, 2006, the result of
such administrative action has not been finalized.
The company has entered a stage of sustained growth.
The Company determined that cash flows generated from
UMC’s future operations will be sufficient for the research
and development of advanced process technologies and the
continued expansion of advanced manufacturing capacity,
including the second 300mm fab in Taiwan’s Tainan Science
Park. In order to avoid future cash levels becoming excessive and to better respond to the expectations of today’s
capital markets, the Company has resolved to carry out a
capital reduction of NTD 57,394 million with the cancellation of 5,739 million of its outstanding shares, following a
resolution passed at a meeting of the Board of Directors. The
board of directors will decide the date of the capital reduction after the approval at the stockholders’ meeting and the
authorization of the government. The exact exchange ratio
for shares and the amount of the capital reduction is to be
set on the record date for capital reduction.
93
Disclosure According to US Security
Authorities Regulation
95 Disclosure Committee
95 Audit Committee
95 Corporate Governance Difference
95 Code of Ethics
95 Employee Code of Conduct
95 US GAAP Financial Information
94
Disclosure Committee
The primary purpose of the Disclosure Committee is to assist the Company in establishing and maintaining “disclosure controls and procedures” designed to ensure the quality of filing reports on a timely basis.
Audit Committee
To meet the requirement of Section 404 of the Sarbanes-Oxley Act, UMC’s Audit Committee was established in March 2005,
with the purpose of assisting the Board of Directors in fulfilling its responsibility relating to the Company‘s accounting and
reporting practices and quality and integrity of financial reporting. The Committee shall have the responsibilities regarding the
oversight of independent auditors and reviewing internal audits, the annual external audit, and the financial statements.
According to the Audit Committee Charter, the Committee is authorized to conduct or authorize investigations or special
audits into any matters within the scope of the Committee’s responsibilities. The Committee shall communicate directly with
the management, independent auditors and internal auditors respectively, and receive anonymous submissions by employees of
the Company regarding concerns related to questionable accounting or auditing matters.
As of March 2007, there were three members in the Committee; all of which were independent directors of UMC. The
Committee shall meet and determine the future meeting frequency and intervals needed to carry out its duties and
responsibilities.
Disclosure of the Differences between UMC’s Corporate Governance Practices and
Those Required of Domestic Companies under NYSE Listing Standards
http://www.umc.com/english/investors/Corp_gov_difference.asp
Disclosure of the UMC Code of Ethics for Directors, Supervisors and Managers
http://www.umc.com/english/pdf/Code_of_Ethics.pdf
Disclosure of the UMC Employee Code of Conduct
http://www.umc.com/english/pdf/Code_of_Conduct.pdf
US GAAP Financial Information
The Company’s complete 2006 US GAAP reconciled financial statements and footnotes will be available in the Form 20-F,
which will be filed to the US Securities and Exchange Commission (“SEC”) on or before June 30, 2007, and be accessible on
both the SEC and UMC websites.
95
Consolidated Balance Sheets
As of December 31,
Assets
NTD
Current assets
Cash and cash equivalents
Financial assets at fair value through profit or loss, current
Available-for-sale financial assets, current
Held-to-maturity financial assets, current
Notes receivable
Notes receivable - related parties
Accounts receivable, net
Accounts receivable - related parties, net
Other receivables
Inventories, net
Prepaid expenses
Deferred income tax assets, current
Restricted deposits
Total current assets
Financial assets at fair value through profit or loss, noncurrent
Available-for-sale financial assets, noncurrent
Held-to-maturity financial assets, noncurrent
Financial assets measured at cost, noncurrent
Long-term investments accounted for under the equity method
Prepaid long-term investments
Total funds and investments
Land
Buildings
Machinery and equipment
Transportation equipment
Furniture and fixtures
Leasehold improvements
Total cost
Less : Accumulated depreciation
Add : Construction in progress and prepayments
Property, plant and equipment, net
Intangible assets
Goodwill
Technological know-how
Other intangible assets
Total intangible assets
Other assets
Deferred charges
Deferred income tax assets, noncurrent
Other assets-others
Total other assets
Total assets (as reported under ROC GAAP)
US GAAP Adjustments:
Goodwill
Treasury stock
Compensation
Equity Investments
Change in fair value of investments in securities
Income tax effect
Total assets (as reported under US GAAP)
2006
2005
USD
NTD
93,853,208
8,538,007
1,110,422
3,733
50,648
14,028,084
323,645
849,742
10,878,182
762,799
1,945,082
132,343,552
2,879,816
261,982
34,073
115
1,554
430,441
9,931
26,074
333,789
23,406
59,683
4,060,864
108,626,800
2,468,968
2,414,153
193
62,136
13,628,434
1,420,977
891,058
10,712,535
694,669
3,386,790
555,800
144,862,513
474,738
52,311,172
7,515,945
11,662,599
71,964,454
14,567
1,605,130
230,621
357,858
2,208,176
6,812,103
1,116,806
6,574,800
16,262,856
30,000
30,796,565
1,879,442
21,076,844
415,225,873
90,706
2,964,369
42,968
441,280,202
(311,696,923)
22,244,850
151,828,129
57,669
646,727
12,740,898
2,783
90,960
1,319
13,540,356
(9,564,189)
682,567
4,658,734
1,893,522
21,260,902
386,920,282
89,580
2,804,967
43,037
413,012,290
(269,508,148)
15,609,497
159,113,639
3,498,687
1,330
3,500,017
107,354
41
107,395
3,491,072
359,556
182,793
4,033,421
1,501,064
4,184,091
2,332,154
8,017,309
367,653,461
46,059
128,386
71,560
246,005
11,281,174
2,034,569
4,012,314
2,196,238
8,243,121
347,049,259
38,301,535
(4,476,369)
105,426
44,350
401,628,403
1,175,255
(137,354)
3,234
1,361
12,323,670
38,283,481
62,336
2,079,220
38,869,884
361,441
426,705,621
Notes (1) The USD amounts are presented solely for the convenience of the readers and were translated at the noon buying rate of NTD 32.59 to USD 1.0 in effect on
December 29, 2006 at the Federal Reserve, the central bank of the United States. (2) Certain comparative amounts have been reclassified to conform to the current
year’s presentation.
96
In thousands
Liabilities and Stockholder's Equity
NTD
Liabilities
Current liabilities
Short-term loans
Financial liabilities at fair value through profit or loss, current
Accounts payable
Income tax payable
Accrued expenses
Other payables
Payable on equipment
Current portion of long-term liabilities
Deferred income tax liabilities, current
Other current liabilities
Total current liabilities
Long-term liabilities
Bonds payable
Total long-term liabilities
Other liabilities
Accrued pension liabilities
Deposits-in
Deferred income tax liabilities, noncurrent
Deferred credits - intercompany profits
Other liabilities - others
Total other liabilities
Total liabilities (as reported under ROC GAAP)
Compensation
Pension
Income tax effect
Convertible / Exchangeable bond liabilities
Derivative instruments
Total liabilities (as reported under US GAAP)
Minority interests (as reported under ROC GAAP)
Consolidation of not wholly-owned subsidiaries
Minority interests (as reported under US GAAP)
Stockholders’ equity
Capital
Common stock
Capital collected in advance
Additional Paid-in Capital
Premiums
Treasury stock transactions
Change in equities of long-term investments
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Adjustment items to stockholders’ equity
Cumulative translation adjustment
Unrealized gain or loss on financial instruments
Treasury stock
Total stockholders’ equity (as reported under ROC GAAP)
Goodwill
Treasury stock
Compensation
Equity investments
Pension
Convertible / exchangeable bond liabilities
Income tax effect
Total stockholders’ equity (as reported under US GAAP)
Total liabilities and stockholders’ equity (as reported under US GAAP)
401,628,403
2006
2005
USD
NTD
342,549
985,267
4,864,771
2,071,394
7,025,328
77,319
10,130,367
9,068,283
62
1,538,450
36,103,790
10,511
30,232
149,272
63,559
215,567
2,372
310,843
278,254
2
47,206
1,107,818
6,136,336
95,634
5,501,159
277,953
7,932,949
140,735
5,315,695
10,250,000
1,309,579
36,960,040
30,383,076
30,383,076
932,282
932,282
41,692,159
41,692,159
3,115,420
12,282
52,585
13,245
570,174
3,763,706
70,250,572
95,594
377
1,614
407
17,495
115,487
2,155,587
3,014,998
18,664
51,870
691,290
3,776,822
82,429,021
790,200
153,081
32,328
71,226,181
6,238,018
24,247
4,697
992
2,185,523
191,409
6,324
182,045
702,299
623,410
83,943,099
6,336,685
2,189
6,240,207
67
191,476
842
6,337,527
191,311,927
11,405
5,870,265
350
197,947,033
36,600
61,070,555
8,938
6,627,794
1,873,905
274
203,369
64,600,076
20,781,523
16,699,508
322,150
17,774,335
512,412
9,885
545,392
15,996,839
1,744,171
8,831,782
(824,922)
27,557,845
(29,394,664)
291,164,871
(25,312)
845,592
(901,954)
8,934,178
(241,153)
(80,989)
(51,332,329)
258,283,553
38,113,709
(4,476,369)
(684,774)
209,354
(164,776)
324,162,015
1,169,491
(137,354)
(21,012)
6,424
(5,056)
9,946,671
38,113,709
56,012
2,247,379
38,869,884
(702,299)
(623,410)
180,167
336,424,995
12,323,670
426,705,621
97
Consolidated Statements of Income
For the years ended December 31,
In thousands
Contents
Operating revenues
Sales revenues
Less : Sales returns and discounts
Net Sales
Operating costs
Cost of goods sold
Other operating costs
Operating costs
Gross profit
Unrealized intercompany profit
Realized intercompany profit
Gross profit - net
Operating expenses
Sales and marketing expenses
General and administrative expenses
Research and development expenses
Subtotal
Operating income (loss)
Interest revenue
Investment gain accounted for under the equity method, net
Dividend income
Gain on disposal of property, plant and equipment
Gain on disposal of investments
Exchange gain, net
Gain on recovery of market value of inventories
Gain on valuation of financial assets
Gain on valuation of financial liabilities
Other income
Subtotal
Interest expense
Loss on disposal of property, plant and equipment
Loss on decline in market value and obsolescence of inventories
Financial expenses
Impairment loss
Other losses
Subtotal
Income tax expense
Income from continuing operations
(the net amount after deducted tax expense $0)
Minority interests loss
Net income (as reported under ROC GAAP)
Treasury stock
Compensation
Equity investments
Convertible / Exchangeable bond liabilities
Income tax effect
Goodwill
Net lncome (as reported under US GAAP)
2006
2005
NTD
USD
NTD
109,857,465
(867,150)
108,990,315
3,013,504
112,003,819
3,370,895
(26,608)
3,344,287
92,467
3,436,754
97,172,846
(1,959,994)
95,212,852
5,103,130
100,315,982
(88,452,676)
(2,198,540)
(90,651,216)
21,352,603
(105,892)
118,815
21,365,526
(2,714,105)
(67,461)
(2,781,566)
655,188
(3,249)
3,646
655,585
(86,409,480)
(4,266,217)
(90,675,697)
9,640,285
(118,815)
151,192
9,672,662
(3,365,678)
(3,422,340)
(9,418,877)
(16,206,895)
5,158,631
(103,273)
(105,012)
(289,011)
(497,296)
158,289
(3,738,469)
(4,387,406)
(9,633,607)
(17,759,482)
(8,086,820)
1,562,704
1,178,103
950,546
331,767
28,651,109
316,006
750,378
306,140
862,750
34,909,503
47,950
36,149
29,167
10,180
879,138
9,696
23,025
9,394
26,473
1,071,172
1,055,138
1,096,985
1,051,813
177,397
10,276,618
295,179
837,315
58,853
1,038,821
15,888,119
(648,408)
(107,962)
(1,089,490)
(230,757)
(1,330,293)
(73,799)
(3,480,709)
36,587,425
(3,261,622)
33,325,803
(1,188,515)
(19,896)
(3,313)
(33,430)
(7,081)
(40,819)
(2,264)
(106,803)
1,122,658
(100,080)
1,022,578
(36,469)
(1,098,854)
(218,525)
(268,985)
(460,542)
(148,606)
(2,195,512)
5,605,787
(67,052)
5,538,735
(112,898)
482,025
32,619,313
14,790
1,000,899
1,600,855
7,026,692
(10,842,272)
(2,106,043)
1,126,322
1,117,384
199,389
(180,167)
(137,196)
-
(332,686)
(64,622)
34,560
34,286
6,118
(5,528)
(4,210)
-
101,955
(2,441,003)
(1,611,969)
571,228
(39,287)
(232,428)
288,388
(19,332,968)
21,796,730
668,817
(15,669,392)
Notes (1) The USD amounts are presented solely for the convenience of the readers and were translated at the noon buying rate of NTD 32.59 to USD 1.0 in effect on
December 29, 2006 at the Federal Reserve, the central bank of the United States. (2) Certain comparative amounts have been reclassified to conform to the current
year’s presentation.
98
99
101 Condensed Balance Sheets
102 Condensed Statements of Income
103 Financial Analysis
104 Supervisors’ Report
107 Balance Sheets
108 Statements of Income
109 Statements of Changes in Stockholders’ Equity
110 Statements of Cash Flows
112
Notes to Financial Statements
100
Condensed Balance Sheets
In thousand NTD
2006
2005
2004
2003
2002
118,430,216
128,267,746
110,373,653
122,306,834
86,658,337
82,746,430
39,238,167
71,568,002
72,218,479
56,246,744
142,647,435
149,809,616
137,355,251
117,184,749
146,075,886
Intangible assets
3,745,122
4,104,678
1,214,956
6,956
18,880
Other assets
7,659,590
7,970,867
7,747,985
7,527,580
8,332,799
355,228,793
329,391,074
329,563,491
320,113,838
297,332,646
30,060,546
28,303,962
23,277,031
32,751,363
20,949,418
*
35,777,189
25,062,773
32,763,981
20,955,068
30,383,076
36,009,055
33,607,029
48,552,355
55,066,424
3,620,300
6,794,504
6,296,677
6,568,196
3,883,441
64,063,922
71,107,521
63,180,737
87,871,914
79,899,283
*
78,580,748
64,966,479
87,884,532
79,904,933
191,323,332
197,983,633
177,923,859
161,407,435
154,748,456
67,707,287
85,381,599
84,933,195
80,074,184
81,875,491
34,795,993
26,572,792
42,401,701
26,794,291
20,004,054
*
17,745,952
21,055,740
13,446,116
13,339,425
27,557,845
(9,527,362)
(9,871,086)
(9,537,237)
(10,795,621)
(824,922)
(241,153)
(1,319,452)
Current assets
Total assets
Current liabilities
Before distribution
After distribution
Long-term interest-bearing liabilities
Other liabilities
Total liabilities
Before distribution
After distribution
Capital
Additional paid-in capital
Retained earnings
Before distribution
After distribution
Unrecognized pension cost, contra equity account,
charge to stockholders’ equity (excess of additional
pension liability over unrecognized prior service
cost)
Total equity
Before distribution
After distribution
913,877
728,851
-
-
-
-
-
291,164,871
258,283,553
266,382,754
232,241,924
217,433,363
*
250,810,326
264,597,012
232,229,306
217,427,713
*Subject to change following resolutions decided during the 2007 shareholders’ meeting.
101
Condensed Statements of Income
In thousand NTD
2006
2005
2004
2003
2002
104,098,611
90,775,439
117,311,840
84,862,070
67,425,745
20,693,472
11,195,550
35,820,944
19,442,269
11,195,150
6,124,138
(2,668,719)
24,454,992
9,936,334
140,971
33,871,592
13,871,542
14,895,451
9,033,180
10,483,535
2,979,691
4,175,293
7,473,153
4,154,145
3,540,412
Income from continuing operations before
income tax
37,016,039
7,027,530
31,877,290
14,815,369
7,084,094
33,807,828
7,026,692
31,843,381
14,020,257
7,072,032
Discontinued operations
-
-
-
-
-
Extraordinary items
-
-
-
-
-
-
-
-
-
Gross profit
Cumulative effect of change in accounting principle
(1,188,515)
Net income
32,619,313
7,026,692
31,843,381
14,020,257
7,072,032
1.81
0.38
1.68
0.75
0.38
Note The EPS calculations for 2002-2005 were based on the retroactive adjustment for capitalization of unappropriated earnings, additional paid-in capital and
bonuses to employees, and the EPS calculation for 2006 was based on weighted average shares outstanding for the period.
Auditors’ Opinion
Year
CPA
Auditors’ Opinion
2002
James Wang, Thomas Yue
A modified unqualified opinion
2003
James Wang, Thomas Yue
2004
Kim Chang, MY Lee
2005
James Wang, MY Lee
2006
James Wang, MY Lee
102
Financial Analysis
Capital structure analysis (%)
Liquidity analysis (%)
2006
2005
2004
2003
2002
18.03
21.59
19.17
27.45
26.87
Long-term funds to fixed assets
225.41
196.44
218.40
239.62
186.55
Current ratio
393.97
453.18
474.17
373.44
413.66
Quick ratio
351.82
404.71
421.28
340.19
359.62
57.80
7.01
23.58
9.58
4.32
8.42
7.87
9.45
7.23
8.12
43
46
39
50
45
Debts ratio
Times interest earned
Operating performance analysis
Average collection turnover (times)
Average collection days
Average inventory turnover (times)
8.17
8.51
10.01
8.45
8.40
Average payable turnover (times)
20.21
18.43
18.61
18.77
21.58
Average inventory turnover days
Profitability analysis (%)
45
43
36
43
43
Fixed assets turnover (times)
0.71
0.63
0.92
0.64
0.45
Total assets turnover (times)
0.30
0.28
0.36
0.27
0.22
Return on total assets
Return on equity
Operating income(loss) to capital
10.08
4.84
2.65
2.68
12.77
6.24
3.14
3.20
(1.35)
13.74
6.16
0.09
18.73
3.55
17.92
9.18
4.58
Net income to sales
31.34
7.74
27.14
16.52
10.49
1.81
0.38
1.68
0.75
0.38
Cash flow ratio
153.19
156.32
296.49
139.22
133.89
Cash flow adequacy ratio
151.32
148.68
115.97
105.92
87.59
6.32
7.73
13.64
10.37
7.06
12.58
(24.95)
3.66
6.65
421.35
0.74
1.05
1.14
Cash flow reinvestment ratio
Leverage
2.34
Income before income tax to capital
Cash Flow (%)
9.67
11.87
Operating leverage
Financial leverage
Explanation for significant changes (over 20%) in financial
analysis include:
1. Times interest earned: Mainly resulted from an increase in
earnings before interest and taxes over the previous year.
2. Return on total assets: Mainly resulted from an increase in
net income over the previous year.
3. Return on equity: Mainly resulted from an increase in net
income over the previous year.
4. Operating income to capital: Mainly resulted from an increase in operating income over the previous year.
5. Income before income tax to capital: Mainly resulted from
1.11
(0.11)
an increase in income before income tax over the previous
year.
6. Net income to sales: Mainly resulted from an increase of
operating income over the previous year.
7. Earnings per share (NTD): Mainly resulted from the increase of net income over the previous year.
8. Operating leverage: Mainly resulted from the operating
loss for 2005.
9. Financial leverage: Mainly resulted from the operating loss
for 2005.
Notes (1) The EPS calculations for 2002-2005 were based on the retroactive adjustment for capitalization of unappropriated earnings and bonus to employees; the
EPS calculation for 2006 was based on weighted average shares outstanding for the period. (2) The calculation formulas of financial analysis are listed as follows
Capital structure analysis
(1) Debts ratio = Total liabilities / Total assets (2) Long-term funds to fixed assets = (Stockholders’ equity + Long-term interest-bearing liabilities) / Net fixed assets
Liquidity analysis
(1) Current ratio = Current assets / Current liabilities (2) Quick ratio= (Current assets - Inventories - Prepaid expenses - Current deferred income tax assets ) /
Current liabilities (3) Times interest earned = Earnings before interest and taxes / Interest expense
Operating performance analysis
(1) Average collection turnover (times)=Net sales / Average trade receivables (2) Average collection days=365 / Average collection turnover (times) (3) Average
inventory turnover (times)=Cost of goods sold / Average inventory (4) Average payable turnover (times)=Cost of goods sold / Average trade payables (5) Average
inventory turnover days=365 / Average inventory turnover (times) (6) Fixed assets turnover (times)=Net sales / Average fixed assets (7) Total assets turnover
(times)=Net sales / Average total assets
Profitability analysis
(1) Return on total assets={Net income+Interest expense × (1-Tax rate)} / Average total assets (2) Return on equity=Net income / Average stockholders’ equity (3)
Operating income to capital=Operating income / Capital (4) Income before income tax to capital=Income before income tax / Capital (5) Net income to sales=Net
income / Net sales (6) Earnings per share=(Net income-Preferred stock dividend) / Weighted average number of shares outstanding
Cash flow
(1) Cash flow ratio=Net cash provided by operating activities / Current liabilities (2) Cash flow adequacy ratio=Five-year sum of cash from operation / Five-year
sum of capital expenditures, Inventory additions, and Cash dividends (3) Cash flow reinvestment ratio=(Cash provided by operating activities-Cash dividends) /
(Gross fixed assets+Long-term investments+Other assets+Working capital)
Leverage
(1) Operating leverage=(Net sales-Variable cost) / Operating income (2) Financial leverage=Operating income(loss) / (Operating income(loss)-Interest expense)
103
Supervisors’ Report
The board of directors has prepared and submitted to us the
Company’s 2006 financial statements. These statements have
been audited by Ernst & Young. The financial statements
present fairly the financial position of the Company and the
results of its operations and cash flows. We, as the Supervisors of the Company, have reviewed these statements, the
report of operations and the proposals relating to distribution of net profit. According to article 219 of the Company
Law, we hereby submit this report.
Supervisors:
Tzyy-Jang Tseng
Ta-Hsing Wang
Ting-Yu Lin
March 15, 2007
104
UNITED MICROELECTRONICS CORPORATION
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT AUDITORS
FOR THE YEARS ENDED
DECEMBER 31, 2006 AND 2005
Address: No. 3 Li-Hsin Road II, Hsinchu Science Park, Hsinchu City, Taiwan, R.O.C.
Telephone: 886-3-578-2258
The reader is advised that these financial statements have been prepared originally in Chinese. In the event of
a conflict between these financial statements and the original Chinese version or difference in interpretation
between the two versions, the Chinese language financial statements shall prevail.
105
REPORT OF INDEPENDENT AUDITORS
English Translation of a Report Originally Issued in Chinese
To United Microelectronics Corporation
We have audited the accompanying balance sheets of United Microelectronics Corporation as of December 31, 2006 and
2005, and the related statements of income, statements of changes in stockholders’ equity, and cash flows for the years ended
December 31, 2006 and 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. As described in Note 4(10) to the financial
statements, certain long-term investments were accounted for under the equity method based on financial statements as of
December 31, 2006 and 2005 of the investees, which were audited by other auditors. Our opinion insofar as it relates to the
investment income amounting to NT$911 million and NT$821 million for the years ended December 31, 2006 and 2005,
respectively, and the related long-term investment balances of NT$1,186 million and NT$5,898 million as of December 31,
2006 and 2005, respectively, is based solely on the reports of the other auditors.
We conducted our audits in accordance with auditing standards generally accepted in the Republic of China and
“Guidelines for Certified Public Accountants’ Examination and Reports on Financial Statements”, which 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, assessing the accounting principles used and significant estimates made by management, and
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 other auditors, the financial statements referred to above present
fairly, in all material respects, the financial position of United Microelectronics Corporation as of December 31, 2006 and
2005, and the results of its operations and its cash flows for the years ended December 31, 2006 and 2005, in conformity with
the “Business Entity Accounting Law”, “Guidelines Governing the Preparation of Financial Reports by Securities Issuers” and
accounting principles generally accepted in the Republic of China.
As described in Note 3 to the financial statements, effective from January 1, 2006, United Microelectronics Corporation
has adopted the ROC Statement of Financial Accounting Standards No. 34, “Financial Instruments:Recognition and
Measurement” and No. 36, “Financial Instruments:Disclosure and Presentation” to account for the financial instruments.
As described in Note 3 to the financial statements, effective from January 1, 2005, United Microelectronics Corporation
has adopted the ROC Statement of Financial Accounting Standards No. 35, “Accounting for Asset Impairment” to account
for the impairment of its assets. Effective from January 1, 2006, goodwill is no longer subject to amortization.
We have also audited the consolidated financial statements of United Microelectronics Corporation as of and for the years
ended December 31, 2006 and 2005, and have expressed an unqualified opinion with explanatory paragraph on such financial
statements.
February 9, 2007
Taipei, Taiwan
Republic of China
Notice to Readers
The accompanying audited financial statements are intended only to present the financial position and results of operations and cash flows in accordance with
accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.
106
2
2, 4 (22)
2, 4 (12), 4 (13), 6
Other assets
Deferred charges
Other assets - others
Total other assets
Total assets
2, 3
2, 4(13)
2, 4 (11), 7
2, 3, 4 (8), 4(13)
2, 3, 4 (4)
2, 3, 4 (9)
2, 3, 4 (10), 4(13)
2, 4 (22)
2, 4 (1)
2, 3, 4 (2)
2, 3, 4 (3)
2, 3, 4 (4)
4 (5)
5
2, 4 (6)
2, 5
2
2, 4 (7)
Notes
Intangible assets
Goodwill
Land
Buildings
Total cost
Current assets
Notes receivable
Other receivables
Inventories, net
Prepaid expenses
Assets
$
$
$
Total liabilities
Other liabilities
Deposits-in
Bonds payable
329,391,074
Total liabilities and stockholders' equity
1,132,576 Capital
16,287,803
Common stock
366,982,250
88,413 Additional Paid-in Capital
2,199,773
Premiums
386,690,815
(252,474,004)
15,592,805 Retained earnings
149,809,616
Legal reserve
Special reserve
3,745,122 Adjusting items in stockholders' equity
359,556
4,104,678
Treasury stock
Total stockholders' equity
1,963,950
4,001,394
2,005,523
7,970,867
5,513,284
977,856
2,265,467
30,481,560
39,238,167
96,596,623
2,468,968
2,414,153
193
62,136
6,200,228
6,097,343
708,552
9,963,253
421,787
3,334,510
128,267,746
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable
Income tax payable
Accrued expenses
The accompanying notes are an integral part of the financial statements.
355,228,793
1,465,645
4,159,214
2,034,731
7,659,590
3,745,122
3,745,122
1,132,576
16,274,780
394,330,240
79,117
2,369,060
414,185,773
(293,766,593)
22,228,255
142,647,435
41,218,780
2,285,326
39,242,324
82,746,430
$
As of December 31,
2005
83,394,802
8,538,007
974,272
3,733
50,648
6,262,985
6,048,376
486,242
10,119,521
638,117
1,913,513
118,430,216
2006
English Translation of Financial Statements Originally Issued in Chinese
BALANCE SHEETS
December 31, 2006 and 2005
(Expressed in Thousands of New Taiwan Dollars)
2, 4 (10), 4 (17), 4 (19)
2, 4 (8)
4 (17), 4 (20)
2, 4 (17)
2, 4 (17), 4 (18), 4 (20)
2
2, 4 (10)
2, 4 (16)
2, 4 (15)
2, 4 (15)
2
2, 3, 4 (14)
Notes
$
$
355,228,793
(824,922)
27,557,845
(29,394,664)
291,164,871
16,699,508
322,150
17,774,335
61,070,555
8,938
6,627,794
191,311,927
11,405
64,063,922
3,086,774
14,448
3,579
515,499
3,620,300
30,383,076
30,383,076
$
$
329,391,074
(241,153)
(9,527,362)
(41,885,956)
258,283,553
15,996,839
1,744,171
8,831,782
64,600,076
20,781,523
197,947,033
36,600
71,107,521
3,003,778
20,827
9,806
3,760,093
6,794,504
36,009,055
36,009,055
95,634
4,100,708
60,389
7,596,727
5,277,863
10,250,000
922,641
28,303,962
As of December 31,
2005
985,267
4,018,368
2,018,673
6,245,411
10,101,767
5,355,883
1,335,177
30,060,546
2006
107
STATEMENTS OF INCOME
For the years ended December 31, 2006 and 2005
(Expressed in Thousands of New Taiwan Dollars, Except for Earnings per Share )
For the year ended December 31,
2006
2005
Notes
Operating revenues
Sales revenues
Net sales
Operating costs
Cost of goods sold
Operating costs
Gross profit
Gross profit-net
Operating expenses
Sales and marketing expenses
Subtotal
Interest revenue
Dividend income
Exchange gain, net
Other income
Subtotal
Interest expense
Investment loss accounted for under the equity method, net
Financial expenses
Impairment loss
Other losses
Subtotal
Income tax expense
Net income from continuing operations
Net income
2, 5
Earnings per share-basic (NTD)
Net income
2, 4 (23)
Earnings per share-diluted (NTD)
Net income
2, 4 (23)
Pro forma information on earnings as if subsidiaries' investment in
the Company is not treated as treasury stock
Net income
2, 4 (23)
$
102,023,597
(710,191)
101,313,406
2,785,205
104,098,611
90,780,340
(1,840,345)
88,939,995
1,835,444
90,775,439
4 (21), 5
2
2
(81,618,123)
(1,801,277)
(83,419,400)
20,679,211
(105,892)
120,153
20,693,472
(78,836,403)
(777,750)
(79,614,153)
11,161,286
(120,153)
154,417
11,195,550
(2,601,671)
(2,730,047)
(9,237,616)
(14,569,334)
6,124,138
(2,280,674)
(3,225,165)
(8,358,430)
(13,864,269)
(2,668,719)
1,453,040
1,873,777
860,977
133,212
27,501,643
296,044
660,106
306,140
786,653
33,871,592
945,610
922,562
62,884
10,096,375
252,303
919,884
671,924
13,871,542
(630,738)
(32,480)
(918,253)
(229,602)
(1,103,812)
(64,806)
(2,979,691)
37,016,039
(3,208,211)
33,807,828
(1,188,515)
(918,173)
(2,677,263)
(81,544)
(258,110)
(160,191)
(80,012)
(4,175,293)
7,027,530
(838)
7,026,692
-
4 (21), 5
2, 5
2, 4 (10)
2
2
2, 10
2
2
2
4 (11)
2, 4 (10)
2
2
2, 4(13)
2, 4 (22)
3
$
32,619,313
$
7,026,692
Pre-tax
Post-tax
Pre-tax
Post-tax
$ 2.05
(0.06)
$ 1.99
$ 1.87
(0.06)
$ 1.81
$ 0.38
$ 0.38
$ 1.98
(0.06)
$ 1.92
$ 1.81
(0.06)
$ 1.75
$
$
$
32,686,223
1.80
1.75
108
$
-
-
$ 0.38
$ 0.38
$ 0.37
$ 0.37
-
-
$ 0.37
$ 0.37
$
$
$
7,026,692
0.36
0.36
-
2, 4 (19)
Cancellation of treasury stock
-
-
Adjustment of funds and investments disposal
Changes in unrealized gain on financial instruments of investees
Exercise of emloyee stock options
2
4 (17)
Changes in cumulative translation adjustment
Balance as of December 31, 2006
Common stock transferred from capital collected in advance
2
2, 4 (18)
Changes in unrealized gain on available-for-sale financial assets
191,311,927
-
36,600
1,079,523
-
-
2, 4 (8)
Cash dividends allocated to subsidaries
2
-
Adjustment of additional paid-in capital accounted for under the equity method 2
(10,000,000)
Net income in 2006
2, 4 (17), 4 (19)
-
2, 4 (19)
Purchase of treasury stock
895,158
Adjustment of treasury stock due to loss of control over subsidiary
4 (17)
Additional paid-in capital transferred to common stock
458,455
Employee bonus - stock
Stock dividends
Employee bonus - cash
895,158
Cash dividends
-
-
Remuneration to directors and supervisors
-
Special reserve
-
197,947,033
-
4,040
Legal reserve
4 (20)
Appropriation of 2005 retained earnings
2
4 (17)
2
3 (3)
2, 4 (18)
Exercise of emloyee stock options
The effect of adopting SFAS NO. 34
-
2
Changes in unrealized loss on long-term investments of investees
954,095
-
Adjustment of additional paid-in capital accounted for under the equity method 2
-
Net income in 2005
(491,140)
1,972,855
2, 4 (19)
Employee bonus-stock
$
-
$
$
67,707,287
-
-
634,737
-
-
66,910
(14,091,043)
(62,686)
-
(57,972)
(3,269,100)
-
(895,158)
-
-
-
-
-
-
-
-
85,381,599
-
-
654,314
-
(28,491)
-
(177,419)
-
-
-
-
-
-
-
84,933,195
Additional
Paid-in Capital
$
$
16,699,508
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
702,669
-
15,996,839
-
-
-
-
-
-
-
-
-
-
-
-
-
3,184,338
12,812,501
Legal Reserve
$
$
322,150
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,422,021)
-
-
1,744,171
-
-
-
-
-
-
-
-
-
-
-
-
1,653,300
-
90,871
Special Reserve
Retained Earnings
11,405
-
(36,600)
11,405
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,600
-
(4,040)
36,600
-
-
-
-
-
-
17,587,364
Stock dividends
-
-
-
4,040
-
-
Cash dividends
$
Collected in
Advance
-
-
-
177,919,819
Common Stock
Special reserve
$
$
Legal reserve
4 (20)
Notes
4 (17)
Balance as of January 1, 2005
Capital
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
$
$
17,774,335
-
-
-
-
-
-
-
-
32,619,313
(9,198,144)
(6,371,128)
-
-
(458,455)
(305,636)
(6,324)
(895,158)
(7,161,267)
1,422,021
(702,669)
-
8,831,782
-
-
-
-
-
7,026,692
(1,509,640)
-
(1,972,855)
(27,006)
(17,587,364)
(1,758,736)
(1,653,300)
(3,184,338)
29,498,329
Unappropriated
Earnings
$
$
27,557,845
-
-
-
9,301,230
1,664,839
-
-
-
-
2,620,135
-
-
-
-
-
-
-
-
-
-
23,499,003
(9,527,362)
-
-
-
343,724
-
-
-
-
-
-
-
-
-
-
(9,871,086)
Unrealized
Gain/Loss on
Finanaical
Instruments
$
$
(824,922)
(603,486)
-
-
-
-
-
8,170
-
-
-
-
-
-
-
-
-
-
-
-
-
11,547
(241,153)
1,078,299
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,319,452)
Cumulative
Translation
Adjustment
$ (29,394,664)
-
-
-
-
-
-
-
-
-
20,137,403
19,640,228
(27,286,339)
-
-
-
-
-
-
-
-
-
(41,885,956)
-
-
-
-
-
-
2,178,199
(16,378,692)
-
-
-
-
-
-
$ (27,685,463)
Treasury Stock
$
$
291,164,871
(603,486)
-
1,725,665
9,301,230
1,664,839
66,910
(14,082,873)
(62,686)
32,619,313
13,501,422
-
(27,286,339)
-
-
(305,636)
(6,324)
-
(7,161,267)
-
-
23,510,550
258,283,553
1,078,299
-
1,645,009
343,724
(28,491)
7,026,692
-
(16,378,692)
-
(27,006)
-
(1,758,736)
-
-
266,382,754
Total
109
STATEMENTS OF CASH FLOWS
2006
2005
Cash flows from operating activities:
Net income
$
32,619,313
$
7,026,692
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation
42,512,610
46,129,225
Amortization
1,780,590
2,387,679
ΓBad debt reversal
Loss (gain) on decline (recovery) in market value and obsolescence of inventories
Cash dividends received under the equity method
Investment (gain) loss accounted for under the equity method
Loss on valuation of financial assets and liabilities
Transfer of property, plant and equipment to losses and expenses
Impairment loss
(164,908)
(151,042)
918,253
(919,884)
1,076,020
(1,873,777)
724,510
2,677,263
222,269
-
-
9,370
1,103,812
160,191
(27,501,643)
(10,096,375)
Loss (gain) on disposal of property, plant and equipment
Exchange gain on financial assets and liabilities
(100,732)
(13,009)
(2,352)
Exchange (gain) loss on long-term liabilities
(126,106)
65,827
Amortization of bond discounts
94,896
Amortization of deferred income
(99,210)
18,660
(89,762)
Changes in assets and liabilities:
Financial assets and liabilities at fair value through profit or loss, current
(5,803,828)
46,605
Notes and accounts receivable
159,629
(658,907)
Other receivables
270,444
(128,727)
Inventories
(1,071,401)
104,968
Prepaid expenses
(220,048)
(108,025)
Accounts payable
(1,624,382)
(1,087,713)
Accrued expenses
2,135,234
Capacity deposits
Net cash provided by operating activities
407,389
(547,542)
(57,471)
(5,200)
(193,249)
82,996
313,267
1,269,963
263,017
46,049,174
45,886,225
Cash flows from investing activities:
Cash proceeds from merger
Acquisition of available-for-sale financial assets
Proceeds from disposal of available-for-sale financial assets
Proceeds from disposal of held-to-maturity financial assets
Acquisition of financial assets measured at cost
Proceeds from disposal of financial assets measured at cost
Acquisition of long-term investments accounted for under the equity method
Proceeds from disposal of long-term investments accounted for under the equity method
Proceeds from liquidation of long-term investments
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in deferred charges
Increase in other assets - others
Increase in other receivables
Net cash used in investing activities
110
(296,823)
15,788,568
(85,080)
254,261
(7,437,443)
943,862
(2,013,681)
7,705,917
707,820
(385,477)
92,457
(6,298,288)
7,801,029
3,354,361
150,000
13,346,789
(31,204,419)
248,962
(1,082,648)
(17,391)
(15,880,984)
(18,586,587)
129,468
(1,356,305)
(161,341)
(5,137,760)
(7,658,765)
STATEMENTS OF CASH FLOWS
2006
2005
(continued)
Cash flows from financing activities:
Decrease in short-term loans, net
$
-
$
-
Repayment of long-term loans
Redemption of bonds
(16,153,714)
(10,250,000)
Issuance of bonds
(2,820,004)
-
Cash dividends
12,478,603
(7,155,865)
Payment of employee bonus
(1,758,736)
-
(305,636)
(6,324)
Exercise of employee stock options
Decrease in deposits-in
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
(1,904,400)
(27,006)
1,725,665
1,642,009
(27,286,339)
(16,378,692)
(6,379)
(1,255)
(43,284,878)
(24,923,195)
(85,133)
(54,971)
Increase (decrease) in cash and cash equivalents
(13,201,821)
13,249,294
Cash and cash equivalents at beginning of year
96,596,623
83,347,329
Cash and cash equivalents at end of year
$
83,394,802
$
96,596,623
Cash paid for interest
$
953,685
$
1,334,219
Cash paid (refunded) for income tax
$
27,260
$
$
36,028,323
$
Supplemental disclosures of cash flow information:
(163,469)
Investing activities partially paid by cash:
Add: Payable at beginning of year
5,277,863
4,704,299
-
Payable transferred in from the Branch at beginning of year
Less: Payable at end of year
1,573,637
(10,101,767)
Cash paid for acquiring property, plant and equipment
17,586,514
(5,277,863)
$
31,204,419
$
18,586,587
$
69,621
$
-
Investing and financing activities not affecting cash flows:
Principal amount of exchangeable bonds exchanged by bondholders
Book value of available-for-sale financial assets delivered for exchange
(20,242)
Elimination of related balance sheet accounts
Recognition of gain on disposal of investments
-
15,302
$
64,681
$
-
111
NOTES TO FINANCIAL STATEMENTS
(Expressed in Thousands of New Taiwan Dollars unless Otherwise Specified)
1.HISTORY AND ORGANIZATION
United Microelectronics Corporation (the Company) was incorporated in May 1980 and commenced operations in April
1982. The Company is a full service semiconductor wafer foundry, and provides a variety of services to satisfy customer
needs.
These services include intellectual property, embedded IC design, design verification, mask tooling, wafer
fabrication, and testing. The Company’s common shares were publicly listed on the Taiwan Stock Exchange (TSE) in July 1985
and its American Depositary Shares (ADSs) were listed on the New York Stock Exchange (NYSE) in September 2000.
Based on the resolution of the board of directors’ meeting on February 26, 2004, the effective date of the Company’s merger
with SiS MICROELECTRONICS CORP. (SiSMC) was July 1, 2004. The Company was the surviving company, and SiSMC
was the dissolved company. The merger was approved by the relevant government authorities. All the assets, liabilities,
rights, and obligations of SiSMC have been fully incorporated into the Company since July 1, 2004.
Based on the resolution of the board of directors’ meeting on August 26, 2004, UMCI LTD had transferred its businesses,
operations, and assets to the Company’s Singapore branch (the Branch) since April 1, 2005.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements were prepared in conformity with the “Business Entity Accounting Law”, “Guidelines Governing
the Preparation of Financial Reports by Securities Issuers” and accounting principles generally accepted in the Republic of
China (R.O.C.).
Summary of significant accounting policies is as follows:
Use of Estimates
The preparation of the Company’s Financial Statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that will affect the amount of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses
during the reported period. Actual results may differ from those estimates.
112
Foreign Currency Transactions
Transactions denominated in foreign currencies are remeasured into the local functional currencies and recorded based
on the exchange rates prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies
are remeasured into the local functional currencies at the exchange rates prevailing at the balance sheet date, with the
related exchange gains or losses included in the statements of income. Translation gains or losses from investments in foreign
entities are recognized as cumulative translation adjustment in stockholders’ equity.
Non-monetary assets and liabilities denominated in foreign currencies that are reported at fair value with changes in fair
value charged to the statements of income, are remeasured at the exchange rate at the balance sheet date, with related
exchange gains or losses recorded in the statements of income. Non-monetary assets and liabilities denominated in foreign
currencies that are reported at fair value with changes in fair value charged to stockholders’ equity, are remeasured at the
exchange rate at the balance sheet date, with related exchange gains or losses recorded as adjustment items to
stockholders’ equity. Non-monetary assets and liabilities denominated in foreign currencies and reported at cost are
remeasured at historical exchange rates.
Translation of Foreign Currency Financial Statements
The financial statements of the Branch are translated into New Taiwan Dollars using the spot rates as of each financial
statement date for asset and liability accounts, average exchange rates for profit and loss accounts. The cumulative
translation effects from the Branch using functional currencies other than the New Taiwan Dollars are included in the
cumulative translation adjustment in stockholders’ equity.
Cash Equivalents
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and with
maturity dates that do not present significant risks on changes in value resulting from changes in interest rates, including
commercial paper with original maturities of three months or less.
Financial Instruments
In accordance with ROC Statement of Financial Accounting Standard (SFAS) No. 34, “Financial Instruments: Recognition
and Measurement” and the “Guidelines Governing the Preparation of Financial Reports by Securities Issuers”, financial
assets are classified as either financial assets at fair value through profit or loss, held-to-maturity financial assets, financial
assets measured at cost, or available-for-sale financial assets. Financial liabilities are recorded at fair value through profit or
loss.
113
The Company accounts for purchase or sale of financial instruments as of the trade date, which is the date the Company
commits to purchasing or selling the asset or liability. Financial assets and financial liabilities are initially recognized at fair
value plus acquisition or issuance costs. Accounting policies prior to December 31, 2005 are described in Note 3.
a.Financial instruments at fair value through profit or loss
Financial instruments held for short-term sale or repurchase purposes, and derivative financial instruments not qualified
for hedge accounting, are classified as financial assets or liabilities at fair value through profit or loss.
This category of financial instruments is measured at fair value, and changes in fair value are recognized in the statements
of income. Stock of listed companies, convertible bonds, and close-end funds are measured at closing prices as of the
balance sheet date. Open-end funds are measured at the unit price of the net assets as of the balance sheet date. The fair
value of derivative financial instruments is determined by using valuation techniques commonly used by market
participants.
b.Held-to-maturity financial assets
Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity
financial assets if the Company has both the positive intention and ability to hold the financial assets to maturity.
Investments intended to be held to maturity are measured at amortized cost.
The Company recognizes an impairment loss if objective evidence of impairment loss exists. However, the impairment
loss may be reversed if the value of asset recovers subsequently and the Company concludes the recovery is related to
improvements in events or factors that originally caused the impairment loss. The new cost basis as a result of the reversal
cannot exceed the amortized cost prior to the impairment.
c.Financial assets measured at cost
Unlisted stock, funds, and other securities without reliable market prices are measured at cost. When objective evidence
of impairment exists, the Company recognizes an impairment loss, which cannot be reversed in subsequent periods.
114
d.Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial instruments not classified as financial assets at fair value
through profit or loss, held-to-maturity financial assets, loans and receivables. Subsequent measurement is calculated at
fair value. Investments in listed companies are measured at closing prices as of the balance sheet date. Any gain or loss
arising from the change in fair value, excluding impairment loss and exchange gain or loss arising from monetary
financial assets denominated in foreign currencies, is recognized as an adjustment to stockholders’ equity until such
investment is reclassified or disposed of, upon which the cumulative gain or loss previously charged to stockholders’
equity will be recorded in the statement of income.
The Company recognizes an impairment loss when objective evidence of impairment exists. Any reduction in the loss of
equity investments in subsequent periods will be recognized as an adjustment to stockholders’ equity. The impairment
loss of a debt security may be reversed and recognized in the current year’s statement of income if the security recovers
and the Company concludes the recovery is clearly related to improvements in the factors or events that originally caused
the impairment.
Allowance for Doubtful Accounts
An allowance for doubtful accounts is provided based on management’s judgment of the collectibility and aging analysis of
accounts and other receivables.
Inventories
Inventories are accounted for on a perpetual basis. Raw materials are recorded at actual purchase costs, while the work in
process and finished goods are recorded at standard costs and adjusted to actual costs using the weighted-average method at
the end of each month. Inventories are stated individually by category at the lower of aggregate cost or market value as of the
balance sheet date. The market values of raw materials and supplies are determined on the basis of replacement cost while
the market values of work in process and finished goods are determined by net realizable values. An allowance for loss on
decline in market value or obsolescence is provided, when necessary.
Long-term Investments Accounted for Under the Equity Method
Long-term investments are initially recorded at acquisition cost. Investments acquired by the contribution of technological
know-how are credited to deferred credits among affiliates, which will be amortized to income over a period of 5 years.
Investments in which the Company has ownership of at least 20% or exercises significant influence on operating decisions
are accounted for under the equity method. Prior to January 1, 2006, the difference of the acquisition cost and the
underlying equity in the investee’s net assets as of acquisition date was amortized over 5 years; however, effective January
1, 2006, arising differences from new acquisitions are analyzed and accounted for under the ROC SFAS No. 25, “Business
Combination – Accounting Treatment under Purchase Method”, where goodwill is no longer to be amortized.
115
The change in the Company’s proportionate share in the net assets of an investee resulting from its acquisition of additional
stock issued by the investee at a rate not proportionate to its existing equity ownership is charged to the additional paid-in
capital and long-term investments accounts.
Unrealized intercompany gains and losses arising from sales from the Company to equity method investees are eliminated
in proportion to the Company’s year end ownership percentage until realized through transactions with third parties.
Intercompany gains and losses arising from transactions between the Company and majority-owned (above 50%)
subsidiaries are eliminated entirely until realized through transactions with third parties.
Unrealized intercompany gains and losses due to sales from equity method investees to the Company are eliminated
in proportion to the Company’s weighted-average ownership percentage of the investee until realized through transactions
with third parties.
Unrealized intercompany gains and losses arising from transactions between two equity method investees are eliminated
in proportion to the Company’s multiplied weighted-average ownership percentage with the investees until realized through
transactions with third parties.
Those intercompany gains and losses arising from transactions between two
majority-owned subsidiaries are eliminated in proportion to the Company’s weighted-average ownership percentage in the
subsidiary that incurred the gain or loss.
If the recoverable amount of investees accounted for under the equity method is less than its carrying amount, the difference
is to be recognized as impairment loss in the current period.
The total value of an investment and related receivables cannot be negative. If, after the investment loss is recognized,
the net book value of the investment is less than zero, the investment is reclassified to other liabilities-others on the balance
sheet.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Interest incurred on loans used to finance the construction of property,
plant and equipment is capitalized and depreciated accordingly. Maintenance and repairs are charged to expense as incurred.
Significant renewals and improvements are treated as capital expenditures and are depreciated over their estimated useful
lives. When property, plant and equipment are disposed, their original cost and accumulated depreciation are written off
and the related gain or loss is classified as non-operating income or expense. Idle assets are classified as other assets at the
lower of net book or net realizable value, with the difference charged to non-operating expenses.
116
Depreciation is recognized on a straight-line basis using the estimated economic life of the assets less salvage value, if any.
If the main property, plant and equipment are fully depreciated and sub property, plant and equipment are still in use , the
depreciation is based on the newly estimated remaining useful life. The estimated economic life of the property, plant and
equipment is as follows: buildings – 20 to 55 years; machinery and equipment – 5 years; transportation equipment – 5 years;
furniture and fixtures – 5 years.
Intangible Assets
Effective January 1, 2006, goodwill generated from business combinations is no longer subject to amortization.
Technological know-how is stated at cost and amortized over its estimated economic life using the straight-line method.
An impairment loss will be recognized when the decreases in fair value of intangible assets are other than temporary. The
book value after recognizing the impairment loss is recorded as the new cost.
Deferred Charges
Deferred charges are stated at cost and amortized on a straight-line basis as follows: intellectual property license fees—select
the shorter term of contract or estimated economic life of the related technology; and software—3 years.
Prior to December 31, 2005, the issuance costs of convertible and exchangeable bonds were classified as deferred charges
and amortized over the life of the bonds. Effective January 1, 2006, the unamortized amounts as of December 31, 2005 were
reclassified as a bond discount and recorded as a deduction to bonds payable. The amounts are amortized using the
effective interest method over the remaining life of the bonds. If the difference between the straight-line method and the
effective interest method is immaterial, the amortization of the bond discount may be amortized using the straight-line
method and recorded as the adjustment of interest expenses.
Convertible and Exchangeable Bonds
The excess of the stated redemption price over par value is accrued as interest payable and expensed over the redemption
period using the effective interest method.
When convertible bondholders exercise their conversion rights, the book value of the bonds is credited to common stock at
an amount equal to the par value of the common stock with the excess credited to additional paid-in capital. No gain or loss is
recognized on bond conversion.
117
When exchangeable bondholders exercise their right to exchange their bonds for reference shares, the book value of the
bonds is offset against the book value of the investments in reference shares and the related stockholders’ equity accounts,
with the difference recognized as a gain or loss on disposal of investments.
In accordance with ROC SFAS No. 34, “Financial Instruments: Recognition and Measurement,” effective as of January 1,
2006, since the economic and risk characteristics of the embedded derivative instrument and the host contract are not
clearly and closely related, derivative financial instruments embedded in exchangeable bonds shall be bifurcated and
accounted as financial liabilities at fair value through profit or loss.
Pension Plan
All regular employees are entitled to a defined benefit pension plan that is managed by an independently administered
pension fund committee. Fund assets are deposited in the committee’s name in the Central Trust of China and hence, not
associated with the Company. Therefore, fund assets are not to be included in the Company’s financial statements. Pension
benefits for employees of the Branch are provided in accordance with the local regulations.
The Labor Pension Act of the ROC (the Act), which adopts a defined contribution plan, became effective on July 1, 2005.
Employees subject to the Labor Standards Law, a defined benefit plan, were allowed to choose to either elect the pension
calculation under the Act or continue to be subject to the pension calculation under the Labor Standards Law. Those
employees that elected to be subject to the Act will have their seniority achieved under the Labor Standards Law retained
upon election of the Act, and the Company will make monthly contributions of no less than 6% of these employees’ monthly
wages to the employees’ individual pension accounts.
The accounting for the Company’s pension liability is computed in accordance with ROC SFAS No.18. Net pension costs
of the defined benefit plan are recorded based on an actuarial valuation. Pension cost components such as service cost,
interest cost, expected return on plan assets, the amortization of net obligation at transition, pension gain or loss, and prior
service cost, are all taken into consideration by the actuary. The Company recognizes expenses from the defined
contribution pension plan in the period in which the contribution becomes due.
Employee Stock Option Plan
The Company uses intrinsic value method to recognize compensation cost for its employee stock options issued since
January 1, 2004. Under the intrinsic value method, the Company recognizes the difference between the market price of the
stock on date of grant and the exercise price of its employee stock option as compensation cost. The Company also discloses
pro forma net income and earnings per share under the fair value method for options granted since January 1, 2004.
118
Treasury Stock
The Company adopted ROC SFAS No. 30, “Accounting for Treasury Stocks” which requires that treasury stock held by
the Company to be accounted for under the cost method. The cost of treasury stock is shown as a deduction to stockholders’
equity, while any gain or loss from selling treasury stock is treated as an adjustment to additional paid-in capital. The
Company’s stock held by its subsidiaries is also treated as treasury stock.
Revenue Recognition
The Company recognizes revenue when persuasive evidence of an arrangement exists, the product or service has been
delivered, the seller’s price to the buyer is fixed or determinable and collectibility is reasonably assured. Most of the
Company’s sales transactions have shipping terms of Free on Board (FOB) or Free Carrier (FCA) shipment in which title and
the risk of loss or damage is transferred to the customer upon delivery of the product to a carrier approved by the
customer.
Allowance for sales returns and discounts are estimated taking into consideration customer complaints, historical
experiences, management judgment and any other known factors that might significantly affect collectibility. Such
allowances are recorded in the same period in which sales are made.
Capital Expenditures Versus Operating Expenditures
An expenditure is capitalized when it is probable that the Company will receive future economic benefits associated with
the expenditure and the expenditure amount exceeds a predetermined amount. Otherwise, the expenditure is expensed as
incurred.
Income Tax
The Company adopted ROC SFAS No. 22, “Accounting for Income Taxes” for inter-period and intra-period income tax
allocation. The provision for income taxes includes deferred income tax assets and liabilities that are a result of temporary
differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes, loss carry-forward and investment tax credits. A valuation allowance on deferred income tax assets is
provided to the extent that it is more likely than not that the tax benefits will not be realized. A deferred tax asset or liability
is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a
deferred tax asset or liability does not relate to an asset or liability in the financial statements, then it is classified as either
current or noncurrent based on the expected reversal date of the temporary difference.
According to ROC SFAS No. 12, “Accounting for Income Tax Credits”, the Company recognizes the tax benefit from the
purchase of equipment and technology, research and development expenditure, employee training, and certain equity
investment by the flow-through method.
Income tax (10%) on unappropriated earnings is recorded as expense in the year in which the shareholders have resolved
that the earnings shall be retained.
119
The Income Basic Tax Act of the R.O.C. (the IBTA) became effective on January 1, 2006. Set up by the Executive Yuan, the
IBTA is a supplemental 10% tax that is payable if the income tax payable determined by the ROC Income Tax Act is below
the minimum amount as prescribed by the IBTA. The IBTA is calculated based on taxable income as defined by the IBTA,
which includes most income that is exempted from income tax under various legislations. The impact of the IBTA has been
considered in the Company’s income tax for the current reporting period.
Earnings per Share
Earnings per share is computed according to ROC SFAS No. 24, “Earnings Per Share.” Basic earnings per share is
computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the current
reporting period. Diluted earnings per share is computed by taking basic earnings per share into consideration plus
additional common shares that would have been outstanding if the dilutive share equivalents had been issued. Net income
(loss) is also adjusted for interest and other income or expenses derived from any underlying dilutive share equivalents. The
weighted-average of outstanding shares is adjusted retroactively for stock dividends and bonus share issues.
Asset Impairment
Pursuant to ROC SFAS No. 35, the Company assesses indicators of impairment for all its assets (except for goodwill)
within the scope of the standard at each balance sheet date. If impairment is indicated, the Company compares the asset’s
carrying amount with the recoverable amount of the assets or the cash-generating unit (CGU) associated with the asset
and writes down the carrying amount to the recoverable amount where applicable. The recoverable amount is defined as
the higher of fair value less the costs to sell and the values in use. For previously recognized losses, the Company assesses at
the balance sheet date any indication that the impairment loss no longer exists or may have diminished. If there is any such
indication, the Company recalculates the recoverable amount of the asset, and if the recoverable amount has increased as
a result of the increase in the estimated service potential of the assets, the Company reverses the impairment loss so that the
resulting carrying amount of the asset does not exceed the amount (net of amortization or depreciation) that would
otherwise result had no impairment loss been recognized for the assets in prior years.
In addition, a goodwill-allocated CGU or group of CGUs is tested for impairment each year, regardless of whether
impairment is indicated. If an impairment test reveals that the carrying amount, including goodwill, of CGU or group of
CGUs is greater than its recoverable amount, there is an impairment loss. The loss is first recorded against the CGU’s
goodwill, with any remaining loss allocated to other assets on a pro rata basis proportionate to their carrying amounts. The
write-down of goodwill cannot be reversed in subsequent periods under any circumstances.
Impairment losses and reversals are classified as non-operating loss and income, respectively.
120
3.ACCOUNTING CHANGES
Asset Impairment
The Company adopted ROC SFAS No. 35, “Accounting for Asset Impairment” to account for the impairment of its assets
for its financial statements effective January 1, 2005. No retroactive adjustment is required under the standard. This change
in accounting principles did not have any impact on the Company’s net income, or basic earnings per share after tax for the
year ended December 31, 2005. Adoption of this standard did not have any impact on total assets as of December 31, 2005.
Goodwill
The Company adopted the amendments to ROC SFAS No. 1, “Conceptual Framework of Financial Accounting and
Preparation of Financial Statements,” SFAS No. 5, “Long-Term Investments in Equity Securities,” and SFAS No. 25,
“Business Combinations—Accounting Treatment under Purchase Method,” all of which have discontinued the amortization
of goodwill effective January 1, 2006. As a result of adopting the revised SFAS No.1, revised SFAS No.5 and revised SFAS
No.25 on January 1, 2006, the Company’s total assets as of December 31, 2006 are NT$ 859 million higher than if it had
continued to account for goodwill under the prior year’s requirements. The net income and earnings per share
for the year ended December 31, 2006, are NT$ 859 million and NT$ 0.05 higher, respectively, than if the Company had
continued to account for goodwill under the prior year’s requirements.
(1) The Company adopted ROC SFAS No. 34, “Financial Instruments: Recognition and Measurement” and SFAS No. 36,
“Financial Instruments: Disclosure and Presentation” to account for the financial instruments effective January 1, 2006.
Some prior year items have been reclassified as required by ROC “Guidelines Governing the Preparation of Financial
Reports by Securities Issuers,” SFAS No. 34 and No. 36 to conform with current year’s presentation.
(2) The accounting policies prior to December 31, 2005 are as follows:
a. Marketable Securities
Marketable securities were recorded at cost at acquisition and were stated at the lower of aggregate cost or market
value as of the balance sheet date. Cash dividends were recognized as dividend income at the point of receipt. Costs
of money market funds and short-term notes were identified specifically while other marketable securities were
determined by the weighted-average method. The market values of listed debts, equity securities and closed-end
funds were determined by the average closing price during the last month of the fiscal year. The market value for
open-end funds was determined by the net asset value as of the balance sheet date. The amount by which the
aggregate cost exceeded the market value was reported as a loss in the current year. In subsequent periods, recovery
of the market value was recognized as a gain to the extent that the market value did not exceed the original aggregate
cost of the investment.
121
b. Long-Term Investment – Cost Method or Lower of Cost or Market Value Method
Investments of less than 20% of the outstanding voting rights in listed investees, where significant influence on
operating decisions of the investees does not reside with the Company, were accounted for by the lower of aggregate
cost or market value method. The unrealized loss resulting from the decline in market value of investments that
were held for the purpose of long-term investment was deducted from the stockholders’ equity. The market value as
of the balance sheet date was determined by the average closing price during the last month of the reporting period.
Investments of less than 20% of the outstanding voting rights in unlisted investees were accounted for under the cost
method. The Company recognized an impairment loss on investments if objective evidence existed demonstrating
an other than temporary decline in fair value. The book value of the investment was written down to its fair
market value.
c. Derivative Financial Instruments
The net receivables or payables resulting from interest rate swap and forward contracts were recorded under current
assets or current liabilities before December 31, 2005.
(3) The above changes in accounting principles increased the Company’s total assets, total liabilities, and stockholders’
equity as of January 1, 2006 by NT$23,648 million, NT$1,326 million, and NT$22,322 million, respectively, and
resulted in an unfavorable cumulative effect of changes in accounting principles of NT$1,189 million deducted from
net income, thereby reducing earnings per share by NT$0.06 for the year ended December 31, 2006.
4.CONTENTS OF SIGNIFICANT ACCOUNTS
(1) CASH AND CASH EQUIVALENTS
As of December 31,
2006
2005
$1,865
$1,697
874,866
2,201,585
Time deposits
75,294,424
83,180,150
Subtotal
76,171,155
85,383,432
7,223,647
11,213,191
$83,394,802
$96,596,623
Cash:
Cash on hand
Checking and savings accounts
Cash equivalents
Total
122
(2) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS, CURRENT
As of December 31,
Held for trading
Listed stocks
Convertible bonds
Total
2006
2005
$8,094,274
$1,250,280
443,733
1,218,688
$8,538,007
$2,468,968
During the year ended December 31, 2006, net gain arising from the changes in fair value of financial assets at fair value
through profit or loss, current, was NT$712 million.
(3) AVAILABLE-FOR-SALE FINANCIAL ASSETS, CURRENT
As of December 31,
2006
2005
Common stock
$-
$1,004,878
Preferred stock
-
1,409,275
$-
$2,414,153
Total
(4) HELD-TO-MATURITY FINANCIAL ASSETS
As of December 31,
Credit-linked deposits and repackage bonds
2006
2005
$974,272
$977,856
-
(977,856)
$974,272
$-
Less: Non-current portion
Total
(5) NOTES RECEIVABLE
As of December 31,
Notes receivable
2006
2005
$3,733
$193
(6) ACCOUNTS RECEIVABLE, NET
As of December 31,
Accounts receivable
Less: Allowance for sales returns and discounts
Less: Allowance for doubtful accounts
Net
2006
2005
$6,550,304
$6,417,633
(287,319)
(148,825)
-
(68,580)
$6,262,985
$6,200,228
123
(7) INVENTORIES, NET
As of December 31,
2006
2005
$1,089,684
$266,949
Supplies and spare parts
1,733,527
1,708,187
Work in process
6,740,834
7,561,310
Finished goods
1,524,270
995,654
11,088,315
10,532,100
(968,794)
(568,847)
$10,119,521
$9,963,253
Raw materials
Total
Less: Allowance for loss on decline in market
value and obsolescence
Net
Inventories were not pledged.
(8) AVAILABLE-FOR-SALE FINANCIAL ASSETS, NONCURRENT
As of December 31,
Common stock
2006
2005
$41,218,780
$5,513,284
During the year ended December 31, 2006, the Company recognized a net gain of NT$1,665 million due to the changes
in fair value as an adjustment to stockholders’ equity.
(9) FINANCIAL ASSETS MEASURED AT COST, NONCURRENT
As of December 31,
2006
2005
Common stock
$1,458,246
$1,458,246
Preferred stock
385,080
300,000
Funds
442,000
507,221
$2,285,326
$2,265,467
Total
124
(10)LONG-TERM INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD
a. Details of long-term investments accounted for under the equity method are as follows:
As of December 31,
2006
Investee Companies
Listed companies
UMC JAPAN
HOLTEK SEMICONDUCTOR INC.
ITE TECH. INC.
FARADAY TECHNOLOGY CORP. (Note A)
SILICON INTEGRATED SYSTEMS CORP.
(Note A)
NOVATEK MICROELECTRONICS CORP.
(Note A)
UNIMICRON TECHNOLOGY CORP.
(UNIMICRON)(Note B)
Subtotal
Unlisted companies
UMC GROUP (USA)
UNITED MICROELECTRONICS (EUROPE) B.V.
UMC CAPITAL CORP.
UNITED MICROELECTRONICS CORP. (SAMOA)
UMCI LTD. (Note C)
TLC CAPITAL CO., LTD.
FORTUNE VENTURE CAPITAL CORP. (Note D)
UNITED MICRODISPLAY OPTRONICS CORP.
(UMO) (Note E)
PACIFIC VENTURE CAPITAL CO., LTD.
MTIC HOLDINGS PTE LTD
MEGA MISSION LIMITED PARTNERSHIP
UNITECH CAPITAL INC.
HSUN CHIEH INVESTMENT CO., LTD.
(HSUN CHIEH)(Note F)
HIGHLINK TECHNOLOGY CORP. (Notes G)
XGI TECHNOLOGY INC. (Note G)
AMIC TECHNOLOGY CORP. (Note G)
TOPPAN PHOTOMASKS TAIWAN LTD.
(formerly DUPONT PHOTOMASKS TAIWAN
LTD.)
THINTEK OPTRONICS CORP. (THINTEK)
(Notes E)
Subtotal
Total
Amount Percentage of
Ownership or
Voting Rights
$5,949,999
878,747
341,268
-
50.09
24.45
21.80
-
7,170,014
2005
Amount
Percentage of
Ownership or
Voting Rights
$6,341,144
818,681
329,704
864,928
3,921,878
48.95
24.81
22.66
18.50
16.59
1,409,421
11.74
4,015,626
20.43
17,701,382
1,006,496
284,084
3,613,491
8,480
86
6,999,737
11,114,198
167,217
100.00
100.00
100.00
100.00
100.00
100.00
99.99
81.76
753,519
279,834
2,051,350
14,179
9,484
2,991,258
4,200,105
318,151
100.00
100.00
100.00
100.00
100.00
100.00
99.99
86.72
127,379
81,402
2,699,491
959,542
4,674,311
49.99
49.94
45.00
42.00
36.49
296,218
638,946
-
49.99
42.00
99.97
225,624
53,710
57,062
-
18.97
16.48
11.86
-
82,807
60,520
1,063,671
16.53
11.86
45.35
-
-
20,136
14.26
32,072,310
$39,242,324
12,780,178
$30,481,560
125
Note A: In the beginning of 2006 as the Company determined it did not have significant influence over the investee, and in
accordance with ROC SFAS No. 34, the investee was classified as available-for-sale financial asset.
Note B: As the Company did not have significant influence after decreasing its percentage of ownership in UNIMICRON in
2006, the investee was classified as available-for-sale financial asset.
Note C: Based on the resolution of the board of directors’ meeting on August 26, 2004, UMCI has transferred its business,
operations, and assets to the Branch effective April 1, 2005.
Note D: As of December 31, 2006 and 2005, the cost of the investment was NT$11,286 million and NT$4,372 million,
respectively. After deducting the Company’s stock held by the subsidiary (treated as treasury stock by the
Company) of NT$172 million in both years, the residual book values totalled NT$11,114 million and NT$ 4,200
million as of December 31, 2006 and 2005, respectively.
Note E: THINTEK was merged into UMO on October 1, 2006. The exchange ratio was 2.31 to 1.
Note F: As of January 27, 2006, the Company sold 58.5 million shares of HSUN CHIEH. The Company’s ownership
percentage decreased from 99.97% to 36.49%. As HSUN CHIEH ceased to be a subsidiary, the Company’s stock
held by HSUN CHIEH was reclassified from treasury stock to long-term investments accounted for under the
equity method. The reclassification increased long-term investments accounted for under the equity method and
stockholders’ equity by NT$10,881 million.
The ending balance as of December 31, 2005 of NT$(3,170) million recorded under other liabilities was computed
by deducting the Company’s stock held by the investee (treated as treasury stock by the Company), amounting to
NT$20,137 million from the cost of investment balance at period-end of NT$16,967 million.
Note G: The equity method was applied for investees, in which the total ownership held by the Company and its subsidiaries
is over 20%.
b.Total gain and loss arising from investments accounted for under the equity method were NT$1,874 million and NT$2,677
million for the years ended December 31, 2006 and 2005, respectively. Among which, investment income amounted to
NT$911 million and NT$821 million for the years ended December 31, 2006 and 2005, respectively, and the related
long-term investment balances of NT$1,186 million and NT$5,898 million as of December 31, 2006 and 2005,
respectively, were determined based on the investees’ financial statements audited by other auditors.
c.Long-term equity investments were not pledged.
126
(11) PROPERTY, PLANT AND EQUIPMENT
As of December 31, 2006
Land
Buildings
Cost
Accumulated
Depreciation
Book Value
$1,132,576
16,274,780
394,330,240
79,117
2,369,060
$(5,396,847)
(286,527,429)
(58,812)
(1,783,505)
$1,132,576
10,877,933
107,802,811
20,305
585,555
22,228,255
-
22,228,255
$436,414,028
$(293,766,593)
$142,647,435
Construction in progress and
prepayments
Total
Land
Buildings
Construction in progress and
prepayments
Total
Cost
Accumulated
Depreciation
Book Value
$1,132,576
16,287,803
366,982,250
88,413
2,199,773
$(4,668,161)
(246,233,155)
(62,501)
(1,510,187)
$1,132,576
11,619,642
120,749,095
25,912
689,586
15,592,805
-
15,592,805
$402,283,620
$(252,474,004)
$149,809,616
a. Total interest expense before capitalization amounted to NT$631 million and NT$1,133 million for the years ended
December 31, 2006 and 2005, respectively.
Details of capitalized interest are as follows:
Other property, plant and equipment
Total interest capitalized
Interest rates applied
2006
2005
$$210,689
4,397
$$215,086
-
2.86%~4.20%
b. Property, plant, and equipment were not pledged.
127
(12)OTHER ASSETS-OTHERS
As of December 31,
Leased assets
Deposits-out
Others
Total
2006
$1,333,029
642,584
59,118
$2,034,731
2005
$1,366,695
579,710
59,118
$2,005,523
Please refer to Note 6 for deposits-out pledged as collateral.
(13)IMPAIRMENT
As of December 31,
Available for sale financial assets, noncurrent
Long-term investment accounted for under the
equity method
Technology know how
Other assets
Total
2006
$825,863
2005
$-
21,807
100,191
256,142
$1,103,812
60,000
$160,191
(14)FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS, CURRENT
As of December 31,
Interest rate swaps
Derivatives embedded in exchangeable bonds
Total
2006
$626,230
359,037
$985,267
2005
$95,634
$95,634
During the year ended December 31, 2006, net gain arising from the changes in fair value of financial liabilities at fair
value through profit or loss, current, was NT$312 million.
(15)BONDS PAYABLE
As of December 31,
Unsecured domestic bonds payable
Convertible bonds payable
Exchangeable bonds payable
Less: discounts on bonds payable
Total
Less: Current portion
Net
128
2006
$20,250,000
12,441,268
3,122,060
(74,369)
35,738,959
(5,355,883)
$30,383,076
2005
$30,500,000
12,540,432
3,218,623
46,259,055
(10,250,000)
$36,009,055
a. On April 27, 2000, the Company issued five-year secured bonds amounting to NT$3,990 million. The interest was
paid semi-annually with a stated interest rate of 5.6%. The bonds were repaid in installments every six months from
April 27, 2002 to April 27, 2005. On April 27, 2005, the bonds were fully repaid.
b. During the period from April 16 to April 27, 2001, the Company issued five-year and seven-year unsecured bonds
totaling NT$15,000 million, each with a face value of NT$7,500 million. The interest is paid annually with stated
interest rates of 5.1195% through 5.1850% and 5.2170% through 5.2850%, respectively. The five-year bonds and
seven-year bonds are repaid starting from April 2004 to April 2006 and April 2006 to April 2008, respectively, both
in three yearly installments at the rates of 30%, 30% and 40%. On April 27, 2006, the five-year bonds were fully
repaid.
c. During the period from October 2 to October 15, 2001, the Company issued three-year and five-year unsecured
bonds totaling NT$10,000 million, each with a face value of NT$5,000 million. The interest was paid annually with
stated interest rates of 3.3912% through 3.420% and 3.4896% through 3.520%, respectively. On October 15, 2006 and
2004, the five-year bonds and the three-year bonds were fully repaid, respectively.
d. On May 10, 2002, the Company issued zero coupon exchangeable bonds listed on the EuroMTF Market of the
Luxembourg Stock Exchange (LSE). The terms and conditions of the bonds are as follows:
(a)Issue Amount: US$235 million
(b)Period: May 10, 2002 ~ May 10, 2007
(c)Redemption
i. The Company may redeem the bonds, in whole or in part, after three months of the issuance and prior to the
maturity date, at their principal amount if the closing price of the AU Optronics Corp (AUO) common shares
on the TSE, translated into US dollars at the prevailing exchange rate, for a period of 20 consecutive trading
days, the last of which occurs not more than 10 days prior to the date upon which notice of such redemption is
published, is at least 120% of the exchange price then in effect translated into US dollars at the rate of
NT$34.645=US$ 1.00.
ii. The Company may redeem the bonds, in whole, but not in part, if at least 90% in principal amount of the bonds
has already been exchanged, redeemed or purchased and cancelled.
129
iii.The Company may redeem all, but not part, of the bonds, at any time, in the event of certain changes in the
ROC tax rules which would require the Company to gross up for payments of principal, or to gross up for
payments of interest or premium.
iv.The Company will, at the option of the bondholders, redeem such bonds on February 10, 2005 at its principal
amount.
(d)Terms of Exchange
i.Underlying securities: ADSs or common shares of AUO.
ii. Exchange Period: The bonds are exchangeable at any time on or after June 19, 2002 and prior to April 10, 2007,
into AUO common shares or AUO ADSs; provided, however, that if the exercise date falls within 5 business
days from the beginning of, and during, any closed period, the right of the exchanging holder of the bonds to
vote with respect to the shares it receives will be subject to certain restrictions.
iii.Exchange Price and Adjustment: The exchange price is NT$44.3 per share, determined on the basis of a fixed
exchange rate of NT$34.645=US$1.00. The exchange price will be subject to adjustments upon the occurrence
of certain events set out in the indenture.
(e)Exchange of the Bonds
As of December 31, 2006 and 2005, certain bondholders have exercised their rights to exchange their bonds with
the total principal amount of US$139 million and US$137 million into AUO shares, respectively. Gains arising
from the exercise of exchange rights during the year ended December 31, 2006 amounted NT$65 million and was
recognized as gain on disposal of investment. No bonds were exchanged during the year ended December 31,
2005.
e.During the period from May 21 to June 24, 2003, the Company issued five-year and seven-year unsecured bonds
totaling NT$15,000 million, each with a face value of NT$7,500 million. The interest is paid annually with stated
interest rates of 4.0% minus USD 12-Month LIBOR and 4.3% minus USD 12-Month LIBOR, respectively. Stated
interest rates are reset annually based on the prevailing USD 12-Month LIBOR. The five-year bonds and seven-year
bonds are repayable in 2008 and 2010, respectively, upon the maturity of the bonds.
f.On October 5, 2005, the Company issued zero coupon convertible bonds on the LSE. The terms and conditions of
the bonds are as follows:
(a)Issue Amount: US$381.4 million
130
(b)Period: October 5, 2005 ~ February 15, 2008 (Maturity date)
(c)Redemption:
i.
On or at any time after April 5, 2007, if the closing price of the ADSs listed on the NYSE has been at least 130% of
either the conversion price or the last adjusted conversion price, for 20 out of 30 consecutive ADS trading days,
the Company may redeem all, but not some only, of the bonds.
ii. If at least 90% in principal amount of the bonds have already been redeemed, repurchased, cancelled or
converted, the Company may redeem all, but not some only, of the bonds.
iii. In the event that the Company’s ADSs or shares have officially ceased to be listed or admitted for trading on the
New York Stock Exchange or the Taiwan Stock Exchange, as the case may be, each bondholder shall have the
right, at such bondholder’s option, to require the Company to repurchase all, but not in part, of such
bondholder’s bonds at their principal amount.
iv. In the event of certain changes in taxation in the R.O.C. resulting in the Company becoming required to pay
additional amounts, the Company may redeem all, but not part, of the bonds at their principal amount;
bondholders may elect not to have their bonds redeemed by the Company in such event, in which case the
bondholders shall not be entitled to receive payments of such additional amounts.
v. If a change of control occurs with respect to the Company, each bondholder shall have the right at such
bondholder’ soption, to require the Company to repurchase all, but not in part, of such bondholder’s bonds at
their principal amount.
vi. The Company will pay the principal amount of the bonds at its maturity date, February 15, 2008.
(d) Conversion:
i. Conversion Period: Except for the closed period, the bonds may be converted into the Company’s ADSs on or
after November 4, 2005 and on or prior to February 5, 2008.
ii. Conversion Price and Adjustment: The conversion price is US$3.693 per ADS. The applicable conversion price
will be subject to adjustments upon the occurrence of certain events set out in the indenture.
131
g.Repayments of the above-mentioned bonds in the future years are as follows:
(assuming the convertible bonds and exchangeable bonds are both paid off upon maturity)
Bonds repayable in
2007
2008
2009
2010
2011
Total
Amount
$5,372,060
22,941,268
7,500,000
$35,813,328
(16)PENSION FUND
a. The Labor Pension Act of the R.O.C. (the Act), which adopts a defined contribution plan, became effective on July 1,
2005. Employees subject to the Labor Standards Law, a defined benefit plan, were allowed to choose to either elect the
pension calculation under the Act or continue to be subject to the pension calculation under the Labor Standards
Law. Those employees that elected to be subject to the Act will have their seniority achieved under the Labor Standards
Law retained upon election of the Act, and the Company will make monthly contributions of no less than 6% of
these employees’ monthly wages to the employees’ individual pension accounts. The Company has made monthly
contributions based on each individual employee’s salary or wage to employees’ pension accounts beginning July 1,
2005, and totaled NT$367 million and NT$170 million as of December 31, 2006 and 2005, respectively. Pension
benefits for employees of the Branch are provided in accordance with the local regulations, and the Company has
contributed the amount of NT$86 million and NT$50 million as of December 31, 2006 and 2005, respectively.
b. The defined benefit plan under the Labor Standards Law is disbursed based on the units of service years and the average
salary in the last month of the service year. Two units per year are awarded for the first 15 years of services while one
unit per year is awarded after the completion of the fifteenth year. The total units shall not exceed 45 units. In
accordance to the plan, the Company contributes an amount equivalent to 2% of the employees’ total salaries and
wages on a monthly basis to the pension fund deposited at the Central Trust of China in the name of an administered
pension fund committee. The unrecognized net asset or obligation at transition based on actuarial valuation is
amortized on a straight-line basis over 15 years.
c. Change in benefit obligation during the year:
Projected benefit obligation at beginning of year
Service cost
Interest cost
Benefits paid
Gain (loss) on projected benefit obligation
Projected benefit obligation at end of year
132
2006
2005
$(4,142,309)
$(3,790,299)
(72,312)
(302,509)
(124,234)
(132,660)
10,024
10,883
(126,122)
72,276
$(4,454,953)
$(4,142,309)
d. Change in pension assets during the year:
Fair value of plan assets at beginning of year
Actual return on plan assets
Contributions from employer
Benefits paid
Fair value of plan assets at end of year
2006
2005
$1,077,661
$959,325
28,140
14,632
107,626
114,587
(10,024)
(10,883)
$1,203,403
$1,077,661
e. The funding status of the pension plan is as follows:
Benefit obligation
Vested benefit obligation
Non-vested benefit obligation
Accumulated benefit obligation
Effect from projected salary increase
Projected benefit obligation
Fair value of plan assets
Funded status
Unrecognized net transitional benefit obligation
Unrecognized loss (gain)
Accrued pension liabilities recognized on the balance sheet
2006
As of December 31,
2005
$(55,213)
(1,853,757)
(1,908,970)
(2,545,983)
(4,454,953)
1,203,403
(3,251,550)
112,670
52,106
$(3,086,774)
$(39,069)
(1,671,097)
(1,710,166)
(2,432,143)
(4,142,309)
1,077,661
(3,064,648)
140,837
(79,967)
$(3,003,778)
f. The components of the net periodic pension cost are as follows:
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized transitional net benefit
obligation
Net periodic pension cost
2006
2005
$72,312
$302,509
124,234
132,660
(34,091)
(35,482)
28,167
28,167
$190,622
$427,854
The actuarial assumptions underlying are as follows:
Discount rate
Rate of salary increase
2006
2.75%
4.50%
2.50%
2005
3.00%
4.50%
3.00%
133
(17)CAPITAL STOCK
a. The Company had 26,000 million common shares authorized to be issued, and 19,795 million common shares were
issued as of December 31, 2005, each at a par value of NT$10.
b. The Company had issued a total of 277 million ADSs which were traded on the NYSE as of December 31, 2005. The
total number of common shares of the Company represented by all issued ADSs was 1,384 million shares as of
December 31, 2005. One ADS represents five common shares.
c. On April 26, 2005, the Company cancelled 49 million shares of treasury stock, which were bought back during the
period from February 20 to April 19, 2002 for transfer to employees.
d. As recommended by the board of directors, and approved by the shareholders on the meeting held on June 13, 2005,
the Company issued 1,956 million new shares from capitalization of retained earnings that amounted to NT$19,560
million, of which NT$17,587 million was stock dividend and NT$1,973 million was employee bonus. The issuance
process through the authority had been completed.
e. Among the employee stock options issued by the Company on October 7, 2002 and January 3, 2003, 96 million shares
were exercised during the year ended December 31, 2005. The issuance process through the authority had been
completed.
f. The Company had 26,000 million common shares authorized to be issued, and 19,131 million was issued as of
December 31, 2006, each at a par value of NT$10.
g. Among the employee stock options issued by the Company on October 7, 2002, January 3, 2003 and October 13, 2004,
109 million shares were exercised during the year ended December 31, 2006. The exercise of employee stock options of
47 million shares, 16 million shares and 46 million shares were issued on March 15, 2006, September 25, 2006, and
December 27, 2006, respectively. The issuance process through the authority had been completed.
h. On May 22, 2006 the Company cancelled 1,000 million shares of treasury stock, which were bought back during the
period from February 16, 2006 to April 11, 2006 for retention of the Company’s creditability and stockholders’
interests.
134
i. As recommended by the board of directors, and approved by the shareholders on the meeting held on June 12, 2006,
the Company issued 225 million new shares from capitalization of retained earnings and additional paid-in capital
that amounted to NT$2,249 million, of which NT$895 million was stock dividend, NT$459 million was employee
bonus, and NT$895 million was additional paid-in capital. The issuance process through the authority had been
completed.
j.The Company had issued a total of 315 million ADSs which were traded on the NYSE as of December 31, 2006. The total
number of common shares of the Company represented by all issued ADSs was 1,576 million shares as of December 31,
2006. One ADS represents five common shares.
(18)EMPLOYEE STOCK OPTIONS
On September 11, 2002, October 8, 2003, September 30, 2004, and December 22, 2005, the Company was authorized by
the Securities and Futures Bureau of the Financial Supervisory Commission, Executive Yuan, to issue employee stock
options with a total number of 1 billion, 150 million, 150 million, and 350 million units, respectively. Each unit entitles
an optionee to subscribe to 1 share of the Company’s common stock. Settlement upon the exercise of the options will be
made through the issuance of new shares by the Company. The exercise price of the options was set at the closing price
of the Company’s common stock on the date of grant. The contractual life is 6 years and an optionee may exercise
the option in accordance with certain schedules as prescribed by the plan starting 2 years from the date of grant.
Detailed information relevant to the employee stock options is disclosed as follows:
Date of grant
October 7, 2002
January 3, 2003
November 26, 2003
March 23, 2004
July 1, 2004
October 13, 2004
April 29, 2005
August 16, 2005
September 29, 2005
January 4, 2006
May 22, 2006
August 24, 2006
Total number of options granted
(in thousands)
Total number of options
outstanding (in thousands)
Exercise price
(NTD)
939,000
61,000
57,330
33,330
56,590
20,200
23,460
54,350
51,990
39,290
42,058
28,140
543,834
44,571
45,443
22,110
44,460
12,905
17,790
42,610
46,675
30,690
37,040
25,830
$15.7
$17.7
$24.7
$22.9
$20.7
$17.8
$16.4
$21.6
$19.7
$17.7
$19.2
$18.4
a. A summary of the Company’s stock option plans, and related information for the years ended December 31, 2006 and
2005, are as follows:
135
2005
2006
Option
(in thousands)
Weighted-average
Exercise Price
(NTD)
Option
(in thousands)
Weighted-average
Exercise Price
(NTD)
Outstanding at beginning of
period
975,320
$17.3
973,858
$16.8
Granted
Exercised
Forfeited
Outstanding at end of period
109,488
(109,093)
(61,757)
913,958
$18.4
$15.7
$18.8
$17.5
129,800
(95,814)
(32,524)
975,320
$19.9
$15.7
$18.5
$17.3
650,268
$16.6
528,373
$16.2
Exercisable at end of period
Weighted-average fair value of
options granted during the period
(NTD)
$5.7
$6.5
b. The information of the Company’s outstanding stock options as of December 31, 2006, is as follows:
Outstanding Stock Options
Authorization
Date
2002.09.11
2003.10.08
2004.09.30
2005.12.22
Range of
Option
Exercise (in thousands)
Price
$15.7~$17.7
$20.7~$24.7
$16.4~$21.6
$17.7~$19.2
588,405
112,013
119,980
93,560
913,958
Weightedaverage
Remaining
Contractual Life
(Years)
Exercisable Stock Options
WeightedOption
average (in thousands)
Exercise Price
(NTD)
1.78
3.20
4.53
5.33
2.68
$15.9
$22.8
$19.7
$18.5
$17.5
577,608
67,095
5,565
650,268
Weightedaverage
Exercise Price
(NTD)
$15.8
$23.1
$17.8
$16.6
c. The Company uses intrinsic value method to recognize compensation costs for its employee stock options issued since
January 1, 2004.
The compensation cost for the years ended December 31, 2006 and 2005 are nil because
the Company grants options with the exercise price equal to the current market price. Pro forma information
using the fair value method on net income and earnings per share is as follows:
136
Basic earnings per share
Diluted earnings per share
$32,619,313
$32,653,291
$1.81
$1.75
$32,193,259
$32,227,237
$1.78
$1.73
Net Income
Pro forma net income
Pro forma earnings per share (NTD)
For the year ended December 31, 2005 (retroactively adjusted)
$7,026,692
$7,035,187
$0.38
$0.37
$6,782,033
$6,790,528
$0.36
$0.36
Net Income
The fair value of the options granted was estimated at the date of grant using the Black-Scholes options pricing model
with the following weighted-average assumptions for the years ended December 31, 2006 and 2005:
Expected dividend yields
Volatility factors of the expected market
price
Risk-free interest rate
2006
1.37%~1.38%
2005
1.63%~1.64%
35.57%~41.14%
40.35%~43.39%
1.88%~2.28%
1.85%~2.24%
4~5 years
4~5 years
Weighted-average expected life of the
options
(19)TREASURY STOCK
a. The Company bought back its own shares from the open market during the years ended December 31, 2006 and
2005. Details of the treasury stock transactions are as follows:
(In thousands of shares)
Purpose
As of
January 1, 2006
Increase
Decrease
As of
December 31, 2006
For transfer to employees
442,067
400,000
-
842,067
For conversion of the convertible
bonds into shares
500,000
-
-
500,000
For retention of the Company’s
creditability and stockholder’s
interests
-
1,000,000
1,000,000
-
942,067
1,400,000
1,000,000
1,342,067
Total shares
137
Purpose
bonds into shares
Total shares
As of
January 1, 2005
Increase
Decrease
As of
December 31, 2005
241,181
250,000
49,114
442,067
-
500,000
-
500,000
241,181
750,000
49,114
942,067
b. According to the Securities and Exchange Law of the R.O.C., total shares of treasury stock should not exceed 10% of the
Company’s stock issued. Total purchase amount should not exceed the sum of the retained earnings, additional paid-in
capital-premiums, and realized additional paid-in capital. As such, the maximum number of shares of treasury stock
that the Company could hold as of December 31, 2006 and 2005, were 1,913 million shares and 1,979 million shares
with the ceiling of the amounts were NT$ 94,970 million and NT$90,851 million, respectively.
c. In compliance with Securities and Exchange Law of the R.O.C., treasury stock should not be pledged, nor should it be
entitled voting rights or receive dividends. Stock held by subsidiaries is treated as treasury stock. These subsidiaries
have the same rights as other stockholders except for subscription to new stock issuance. Starting June 22, 2005, stock
held by subsidiaries no longer have voting rights according to the revised Companies Act.
d. As of December 31, 2006, the Company’s subsidiary, FORTUNE VENTURE CAPITAL CORP., held 22 million shares
of the Company’s stock, with a book value of NT$ 20.25 per share. The closing price on December 31, 2006 was
NT$20.25.
As of December 31, 2005, the Company’s subsidiaries, HSUN CHIEH INVESTMENT CO., LTD. and FORTUNE
VENTURE CAPITAL CORP., held 600 million shares and 22 million shares, respectively, of the Company’s stock,
with a book value of NT$18.98 and NT$7.87 per share, respectively. The average closing price of the Company’s stock
during December 2005 was NT$18.98.
(20)RETAINED EARNINGS AND DIVIDEND POLICIES
According to the Company’s Articles of Incorporation, current year’s earnings, if any, shall be distributed in the following
order:
a. Payment of all taxes and dues;
b. Offset prior years’ operation losses;
c. Set aside 10% of the remaining amount after deducting items (a) and (b) as a legal reserve;
d. Set aside 0.1% of the remaining amount after deducting items (a), (b), and (c) as directors’ and supervisors’
remuneration; and
e. After deducting items (a), (b), and (c) above from the current year’s earnings, no less than 5% of the remaining amount
together with the prior years’ unappropriated earnings is to be allocated as employees’ bonus, which will be settled
138
through issuance of new shares of the Company, or cash. Employees of the Company’s subsidiaries, meeting certain
requirements determined by the board of directors, are also eligible for the employees’ bonus.
f. The distribution of the remaining portion, if any, will be recommended by the board of directors and subject to
shareholders’ approval.
The Company has entered a stage of sustained growth; the policy for dividend distribution should reflect
factors such as the current and future investment environment, fund requirements, domestic and international
competition and capital budgets, as well as the benefit of shareholders, share bonus equilibrium, and long-term financial
planning. The board of directors shall make the distribution proposal annually and present it at the shareholders’
meeting. The Company’s Articles of Incorporation further provide that no more than 80% of the dividends to
shareholders, if any, may be paid in the form of stock dividends. Accordingly, at least 20% of the dividends must be paid
in the form of cash.
The appropriation of 2006 retained earnings has not yet been recommended by the board of directors as of the date of the
Report of Independent Auditors. Information on the board of directors’ recommendations and shareholders’ approval
can be obtained from the “Market Observation Post System” on the website of the TSE.
Details of the 2005 employee bonus settlement and directors’ and supervisors’ remuneration are as follows:
As approved by
the shareholders’
meeting
1. Settlement of employees’ bonus by issuance of
new shares
a. Number of shares (in thousands)
b. Amount
c. Percentage on total number of outstanding
shares at year-end (%)
2. Settlement of employees’ bonus by cash
3. Remuneration paid to directors and supervisors
4. Effect on earnings per share before retroactive
adjustments
a. Basic and diluted earnings per share (NTD)
b. Pro forma basic and diluted earnings per
share taking into consideration employees’
bonus and directors’ and supervisors’
remuneration (NTD)
As recommended by
the board of directors
Differences
45,846
$458,455
0.24
45,846
$458,455
0.24
-
$305,636
$6,324
$305,636
$6,324
-
$0.38/0.38
$0.34/0.34
$0.38/0.38
$0.34/0.34
-
Pursuant to Article 41 of the Securities and Exchange Law of the R.O.C., a special reserve is set aside from the current
net income and prior unappropriated earnings for items that are accounted for as deductions to stockholders’ equity
such as unrealized loss on long-term investments and cumulative translation adjustments. However, there are the
following exceptions for the Company’s investees’ unrealized loss on long-term investments arising from a merger that
was recognized by the Company in proportion to the Company’s ownership percentage:
139
a. According to the explanatory letter No. 101801 of the Securities and Futures Commission (SFC), if the Company
recognizes the investees’ additional paid-in capital—excess from the merger in proportion to the ownership
percentage, then the special reserve is exempted for the amount originated from the acquisition of the long-term
investments.
b. If the Company and its investees transfer a portion of the additional paid-in capital to increase capital, a special
reserve equal to the amount of the transfer shall be provided according to the explanatory letter No.101801-1 of the
SFC.
c. In accordance with the explanatory letter No.170010 of the SFC applicable to listed companies, in the case where the
market value of the Company’s stock held by its subsidiaries at year-end is lower than the book value, a special reserve
shall be provided in the Company’s accounts in proportion to its ownership percentage.
For the 2005 appropriations approved by the shareholders’ meeting on June 12, 2006, unrealized loss on long-term
investments exempted from the provision of special reserve pursuant to the above regulations amounted to NT$18,208
million.
(21)OPERATING COSTS AND EXPENSES
The Company’s personnel, depreciation, and amortization expenses are summarized as follows:
2006
Personnel expenses
Salaries
Labor and health
insurance
Pension
Other personnel
expenses
Depreciation
Amortization
2005
Operating
costs
Operating
expenses
Total
Operating
costs
Operating
expenses
Total
$8,159,508
437,527
$2,749,890 $10,909,398
123,780
561,307
$6,252,412
410,228
$2,180,082
113,429
$8,432,494
523,657
496,293
154,729
651,022
488,932
159,427
648,359
85,210
46,176
131,386
67,096
27,928
95,024
40,377,798
187,146
2,122,344
1,593,444
42,500,142
1,780,590
44,221,133
176,459
1,888,140
2,119,210
46,109,273
2,295,669
The numbers of employees as of December 31, 2006 and 2005 were 13,265 and 12,068, respectively.
140
(22) INCOME TAX
a. Reconciliation between the income tax expense and the income tax calculated on pre-tax financial statement income
based on the statutory tax rate is as follows:
2006
2005
$9,366,541
$2,466,936
(7,280,874)
(2,523,713)
(1,255,913)
6,942,626
435,752
(6,885,849)
1,940,992
1,713
838
$3,208,211
$838
Income tax on pre-tax income at statutory tax rate
Permanent differences
Change in investment tax credit
Change in valuation allowance
Income Basic Tax
Income tax on interest revenue separately taxed
Income tax expense
b. Significant components of deferred income tax assets and liabilities are as follows:
As of December 31,
2005
Amount
Tax effect
Amount
2006
Tax effect
$3,815,034
3,083,578
732,523
$14,864,958
953,758
770,895
183,131
$14,671,930
3,001,282
779,688
$13,609,045
3,667,982
750,321
194,922
Allowance for loss on obsolescence of
inventories
685,023
171,256
252,855
63,214
Others
794,686
198,671
571,066
142,766
Deferred income tax assets
Investment tax credit
Loss carry-forward
Pension
Allowance on sales returns and discounts
Total deferred income tax assets
Valuation allowance
Net deferred income tax assets
Deferred income tax liabilities
Unrealized exchange gain
Depreciation
Others
Total deferred income tax liabilities
Total net deferred income tax assets
17,142,669
(9,111,113)
8,031,556
(291,144)
(5,005,315)
(2,538,858)
(72,786)
(1,251,329)
(634,714)
(1,958,829)
$6,072,727
18,428,250
(8,675,361)
9,752,889
(9,667,939)
-
(2,416,985)
(2,416,985)
$7,335,904
Deferred income tax assets - current
Deferred income tax liabilities - current
Valuation allowance
Net
$5,803,448
(278,284)
(3,611,651)
1,913,513
$6,354,040
Deferred income tax assets - noncurrent
Deferred income tax liabilities - noncurrent
Valuation allowance
11,339,221
(1,680,545)
(5,499,462)
4,159,214
$6,072,727
12,074,210
(2,416,985)
(5,655,831)
4,001,394
$7,335,904
Net
(3,019,530)
3,334,510
141
c. The Company’s income tax returns for all the fiscal years up to 2003 have been assessed and approved by the ROC Tax
Authority.
d. The Company was granted several four or five-year income tax exemption periods with respect to income derived from
the expansion of operations. The starting date of the exemption period attributable to the expansions in 2002 had not
yet been decided. The income tax exemption for other periods will expire on December 31, 2012.
e. The Company earns investment tax credits for the amount invested in production equipment, research and
development, and employee training.
As of December 31, 2006, the Company’s unused investment tax credit was as follows:
Expiration Year
Investment tax credits earned
2006
2007
2008
2009
2010
Total
$2,850,484
1,613,158
6,275,971
1,737,860
2,387,485
$14,864,958
Balance of unused investment
tax credits
$2,850,484
1,613,158
6,275,971
1,737,860
2,387,485
$14,864,958
f. Under the rules of the Income Tax Law of the ROC, net losses can be carried forward for 5 years. As of December 31,
2006, the unutilized accumulated losses were as follows:
Expiration Year
Accumulated loss
Unutilized accumulated loss
2006
$10,856,896
$-
2007
3,773,826
3,773,826
2008 (Transferred in from merger
with SiSMC)
2,283
2,283
2009 (Transferred in from merger
with SiSMC)
38,925
38,925
$14,671,930
$3,815,034
Total
g. The balance of the Company’s imputation credit accounts as of December 31, 2006 and 2005 were NT$95 million and
NT$29 million, respectively. The expected creditable ratio for 2006 and the actual creditable ratio for 2005 was 0.54%
and 0%, respectively.
h. The Company’s earnings generated in the year ended December 31, 1997 and prior years have been fully
appropriated.
142
(23)EARNINGS PER SHARE
a. The Company’s capital structure is composed mainly of zero coupon convertible bonds and employee stock options.
Therefore, in consideration of such complex structure, the calculated basic and diluted earnings per share for the years
ended December 31, 2006 and 2005, are disclosed as follows:
Amount
Income
before
income tax
Net income
Shares
expressed
in thousands
Income
before
income tax
Net income
18,050,962
$2.05
$1.87
Earning per share-basic (NTD)
Income from continuing
operations
Cumulative effect of changes in
accounting principles
$37,016,039
$33,807,828
(1,188,515)
(1,188,515)
(0.06)
(0.06)
Net income
$35,827,524
$32,619,313
$1.99
$1.81
$$33,978
$$33,978
108,122
516,383
$37,050,017
$33,841,806
18,675,467
$1.98
$1.81
(1,188,515)
(1,188,515)
(0.06)
(0.06)
$35,861,502
$32,653,291
$1.92
$1.75
Effect of dilution
Employee stock options
Earning per share-diluted:
Income from continuing
operations
Net income
Amount
Net income
Effect of dilution
Net income
Income
before
income tax
Net income
Shares
expressed
in thousands
Income
before
income tax
Net income
$7,027,530
$7,026,692
18,647,462
$0.38
$0.38
-
-
-
-
$7,027,530
$7,026,692
$0.38
$0.38
$$8,495
$$8,495
161,651
124,498
$7,036,025
$7,035,187
18,933,611
$0.37
$0.37
-
-
-
-
$7,036,025
$7,035,187
$0.37
$0.37
143
b. Pro forma information on earnings as if subsidiaries’ investment in the Company is not treated as treasury stock is set
out as follows:
(shares expressed in thousands)
For the year ended
December 31, 2006
Basic
$32,686,223
Diluted
$32,720,201
Beginning balance
Increase in capital through 2006 retained earnings and
additional paid-in capital at proportion of 1.3%
18,852,636
242,215
18,852,636
242,215
Purchase of 1,400,000 thousand shares of treasury stock in 2006
Net income
Weighted-average of shares outstanding:
(1,024,860)
(1,024,860)
Weighted-average shares of exercising employee stock options
48,029
48,029
Dilutive shares of employee stock options accounted for under
treasury stock method
Dilutive shares issued assuming conversion of bonds
Ending balance
Earnings per share
Net income (NTD)
-
108,122
18,118,020
516,383
18,742,525
$1.80
$1.75
For the year ended
December 31, 2005
(retroactively adjusted)
(shares expressed in thousands)
Basic
$7,026,692
Diluted
$7,035,187
17,550,801
17,550,801
247,368
247,368
Increase in capital through 2005 retained earnings at
proportion of 11.4%
Purchase of 750,000 thousand shares of treasury stock in 2005
Weighted-average shares of exercising employee stock options
2,009,072
2,009,072
(349,945)
43,762
(349,945)
43,762
Dilutive shares of employee stock options accounted for under
treasury stock method
Dilutive shares issued assuming conversion of bonds
Ending balance
-
161,651
19,501,058
124,498
19,787,207
$0.36
$0.36
Net income
Weighted-average of shares outstanding:
Beginning balance
Increase in capital through 2006 retained earnings at
proportion of 1.3%
Earnings per share
Net income (NTD)
144
5.RELATED PARTY TRANSACTIONS
(1) Name and Relationship of Related Parties
Name of related parties
UMC GROUP (USA) (UMC-USA)
UNITED MICROELECTRONICS (EUROPE) B.V. (UME BV)
UMC CAPITAL CORP.
UNITED MICROELECTRONICS CORP. (SAMOA)
FORTUNE VENTURE CAPITAL CORP. (FORTUNE)
HSUN CHIEH INVESTMENT CO., LTD. (HSUN CHIEH)
UMCI LTD. (UMCI)
UNITED MICRODISPLAY OPTRONICS CORP.
UMC JAPAN
HOLTEK SEMICONDUCTOR INC. (HOLTEK)
ITE TECH. INC.
AMIC TECHNOLOGY CORP.
XGI TECHNOLOGY INC.
HIGHLINK TECHNOLOGY CORP.
MTIC HOLDINGS PTE. LTD.
Relationship with the Company
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
TOPPAN PHOTOMASKS TAIWAN LTD. (formerly DUPONT
PHOTOMASKS TAIWAN LTD.) (TOPPAN) (Disposed in March 2006)
THINTEK OPTRONICS CORP. (merged into UMO since October 1,
2006)
FARADAY TECHNOLOGY CORP. (No longer an equity investee since
January 1, 2006)
NOVATEK MICROELECTRONICS CORP. (No longer an equity investee
since January 1, 2006)
UNIMICRON TECHNOLOGY CORP. (No longer an equity investee
since November, 2006)
UNITRUTH INVESTMENT CORP. (UNITRUTH)
UWAVE TECHNOLOGY CORP. (formerly UNITED RADIOTEK INC.)
UCA TECHNOLOGY INC.
AFA TECHNOLOGY, INC.
STAR SEMICONDUCTOR CORP.
USBEST TECHNOLOGY INC.
SMEDIA TECHNOLOGY CORP.
U-MEDIA COMMUNICATIONS, INC.
CRYSTAL MEDIA INC.
NEXPOWER TECHNOLOGY CORP.
MOBILE DEVICES INC.
ULI ELECTRONICS INC. (Disposed in February 2006)
AEVOE INC. (Disposed in October 2006)
CHIP ADVANCED TECHNOLOGY INC. (No longer an equity investee
since October, 2006)
DAVICOM SEMICONDUCTOR, INC. (No longer an equity investee
since December, 2006)
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
The Company’s director
Subsidiary’s equity investee
145
(2) Significant Related Party Transactions
a. Operating revenues
UMC-USA
Others
Total
2006
Percentage
52
15
67
Amount
$54,476,329
15,074,471
$69,550,800
2005
Amount
Percentage
$43,226,036
48
21,676,804
23
$64,902,840
71
The sales price to the above related parties was determined through mutual agreement based on the market
conditions. The collection period for overseas sales to related parties was net 60 days, while the terms for domestic
sales were month-end 45~60 days. The collection period for third party overseas sales was net 30~60 days, while the
terms for third party domestic sales were month-end 30~60 days.
b. Purchases
2006
Percentage
-
Amount
$-
UMCI
2005
Amount
Percentage
$1,244,347
5
The purchases from the above related parties were dealt with in the ordinary course of business similar to those from
third-party suppliers. The payment terms for purchases were net 60 days for related parties and net 30~90 days for
third-party suppliers.
c. Notes receivable
HOLTEK
Others
Total
2006
Percentage
92
1
93
Amount
$49,924
724
$50,648
Amount
$62,136
$62,136
As of December 31,
2005
Percentage
100
100
d. Accounts receivable
UMC-USA
Others
Total
Less:
Allowance for sales returns
and discounts
Less:
Allowance for doubtful
accounts
Net
146
Amount
$5,118,532
1,438,412
6,556,944
2006
Percentage
39
11
50
As of December 31,
2005
Amount
Percentage
$4,559,933
35
2,297,194
17
52
6,857,127
(506,572)
(663,397)
(1,996)
(96,387)
$6,048,376
$6,097,343
e. Financing activities
The Company did not conduct any financing activities with related parties during the year ended December 31,
2006.
Other receivables-related parties
Maximum balance
Amount
Month
UMCI
$5,137,760
2005.03
Ending
balance
Interest
rate
Interest
revenue
$-
2.74%~3.05%
$7,669
f. Significant asset transactions
The Company did not undertake any significant asset transactions with related parties during the year ended
December 31, 2006.
FORTUNE
FORTUNE
HSUN CHIEH
UNITRUTH
Total
Item
Amount
$140,231
Purchase of APTOS CORP. (TAIWAN) stock
Purchase of EPITECH TECHNOLOGY CORP. stock
185,840
97,658
16,495
$440,224
g. Other transactions
The Company was involved in several other transactions with related parties, including service charges, development
expenses of intellectual property, and commission, totaling NT$16 million and NT$721 million for the years ended
The Company purchased approximately NT$104 million and NT$476 million of masks from TOPPAN during the
years ended December 31, 2006 and 2005, respectively.
147
6.ASSETS PLEDGED AS COLLATERAL
Deposit-out
(Time deposit)
Amount
Party to which asset(s) was pledged
Purpose of pledge
$620,846
Customs
Customs duty
guarantee
Amount
Party to which asset(s) was pledged
Purpose of pledge
$520,730
Customs
Customs duty
guarantee
Deposit-out
(Time deposit)
7.COMMITMENTS AND CONTINGENT LIABILITIES
(1) The Company has entered into several patent license agreements and development contracts of intellectual property for
a total contract amount of approximately NT$19.67 billion. Royalties and development fees for future years are NT$5.77
billion as of December 31,2006.
(2) The Company signed several construction contracts for the expansion of its factory space. As of December 31, 2006,
these construction contracts have amounted to approximately NT$3.82 billion and the unpaid portion of the contracts,
which was not accrued, was approximately NT$1.9 billion.
(3) OAK Technology, Inc. (OAK) and the Company entered into a settlement agreement on July 31, 1997 concerning a
complaint filed with the United States International Trade Commission (ITC) by OAK against the Company and
others, alleging unfair trade practices based on alleged patent infringement regarding certain CD-ROM controllers (the
first OAK ITC case). On October 27, 1997, OAK filed a civil action in a California federal district court, alleging claims
for breach of the settlement agreement and fraudulent misrepresentation. In connection with its breach of contract and
other claims, OAK sought damages in excess of US$750 million. The Company denied the material allegations of the
complaint, and asserted counterclaims against OAK for breach of contract, intentional interference with economic
advantage and rescission and restitution based on fraudulent concealment and/or mistake. The Company also asserted
declaratory judgment claims for invalidity and unenforceability of the relevant OAK patent. On February 9, 2006, the
parties entered a settlement agreement in which the Company, OAK and Zoran (the successor to OAK) fully and finally
released one another from any and all claims and liabilities arising out of the facts alleged in the district court case. The
terms of settlement are confidential and, except for the obligation to keep the terms confidential, impose no obligation
on the Company.
148
(4) The Company entered into several operating lease contracts for land. These renewable operating leases are set to expire
in various years through to 2032. Future minimum lease payments under those leases are as follows:
2007
2008
2009
2010
2011
2012 and thereafter
Total
Amount
$179,049
176,165
176,321
176,696
177,085
1,606,543
$2,491,859
(5) The Company entered into several wafer-processing contracts with its principal customers. According to the contracts,
the Company shall guarantee processing capacity after receipts of customers’ deposits.
(6) The Company has entered into contracts for the purchase of materials and masks with certain vendors. These contracts
oblige the Company to purchase specified amounts or quantities of materials and masks. Should the Company fail to
fulfill the conditions set out in the contracts, the differences between the actual purchase and the required minimum
will be reconciled between the Company and its vendors.
(7) On February 15, 2005, the Hsinchu District Prosecutor’s Office conducted a search of the Company’s facilities. On
February 18, 2005, the Company’s former Chairman Mr. Robert H.C. Tsao, released a public statement, explaining that
its assistance to Hejian Technology Corp. (Hejian) did not involve any investment or technology transfer. Furthermore,
from the very beginning there was a verbal indication that, at the proper time, the Company would be compensated
appropriately for its assistance, and circumstances permitting, at some time in the future, it will push through the
merger between two companies. However, no promise was made by the Company and no written agreement was made
and executed. Upon the Company’s request to materialize the said verbal indication by compensating in the form of
either cash or equity, the Chairman of the holding company of Hejian offered 15% of the approximately 700 million
outstanding shares of the holding company of Hejian in return for the Company’s past assistance and for continued
assistance in the future.
Immediately after the Company had received such offer, it filed an application with the Investment Commission of the
Ministry of Economic Affairs on March 18, 2005 (Ref. No. 94-Lian-Tung-Tzu-0222), for their executive guidance for the
successful transfer of said shares to the Company. The shareholders meeting dated June 13, 2005 resolved that to the
extent permitted by law the Company shall try to get the 15% of the outstanding shares offered by the holding company
149
of Hejian as an asset of the Company. The holding company of Hejian offered 106 million shares of its outstanding
common shares in return for the Company’s assistance. The holding company of Hejian has put all such shares in
escrow. The Company was informed of such escrow on August 4, 2006. The subscription price per share of the holding
company of Hejian in the last offering was US$1.1. Therefore, the total market value of the said shares is worth more
than US$110 million. However, the Company may not acquire the ownership of nor exercise the rights of the said shares
with any potential stock dividend or cash dividend distributed in the future until the ROC laws and regulations allow
the Company to acquire and exercise. In the event that any stock dividend or cash dividend is distributed, the
Company’s stake in the holding company of Hejian will accumulate accordingly.
In April 2005, the Company’s former Chairman Mr. Robert H.C. Tsao was personally fined with in the aggregate amount
of NT$3 million by the Financial Supervisory Commission, Executive Yuan, R.O.C. (ROC FSC) for failure to disclose
material information relating to Hejian in accordance with applicable rules. As a result of the imposition of the fines
by the ROC FSC, the Company was also fined in the amount of NT$30,000 by Taiwan Stock Exchange (TSE) for the
alleged non-compliance with the disclosure rules in relation to the material information. The Company and its former
Chairman Mr. Robert H.C. Tsao have filed for administrative appeal and reconsideration with the Executive Yuan,
R.O.C. and TSE, respectively. Mr. Robert H.C. Tsao’s administrative appeal was dismissed by the Execution Yuan,
R.O.C. on February 21, 2006 and the ROC FSC transferred the case against Mr. Robert H.C. Tsao to the Administrative
Enforcement Agency for enforcement of the fine. Mr. Robert H.C. Tsao has filed an administrative action against the
ROC FSC with Taipei High Administrative Court on April 14, 2006. As of December 31, 2006, the result of such
reconsideration and administrative action has not been finalized.
For the Company’s assistance to Hejian Technology Corp., the Company’s former Chairman Mr. Robert H.C. Tsao,
former Vice Chairman Mr. John Hsuan, and Mr. Duen-Chian Cheng, the General Manager of Fortune Venture Capital
Corp., which is 99.99% owned by the Company, were indicted for violating the Business Accounting Law and breach
of trust under the Criminal Law by Hsinchu District Court’s Prosecutor’s Office on January 9, 2006. Mr. Robert H.C.
Tsao and Mr. John Hsuan had officially resigned from their positions of the Company’s Chairman, Vice Chairman and
directors prior to the announcement of the prosecution; for this reason, at the time of the prosecution, Mr. Robert H.C.
Tsao and Mr. John Hsuan no longer served as the Company’s directors and had not executed their duties as the
Company’s Chairman and Vice Chairman. In the future, if a guilty judgment is pronounced by the court, such
consequences would be Mr. Robert H.C. Tsao, Mr. John Hsuan and Mr. Duen-Chian Cheng’s personal concerns only;
the Company would not be subject to indictment regarding this case.
On February 15, 2006, the Company was fined in the amount of NT$5 million for unauthorized investment activities in
Mainland China, implicating violation of Article 35 of the Act “Governing Relations Between Peoples of the Taiwan
Area and the Mainland Area” by the R.O.C. Ministry of Economic Affairs (MOEA). However, as the Company believes
it was illegally and improperly fined, the Company had filed an administrative appeal against MOEA to the Executive
150
Yuan on March 16, 2006. The Company’s administrative appeal was dismissed by the Executive Yuan, R.O.C. on
October 19, 2006. The Company filed an administrative action against the R.O.C. Ministry of Economic Affairs to Taipei
High Administrative Court on December 8, 2006. As of December 31, 2006, the result of such administrative action has
not been finalized.
8. SIGNIFICANT DISASTER LOSS
None.
9. SIGNIFICANT SUBSEQUENT EVENT
The company has entered a stage of sustained growth. The Company determined that cash flows generated from UMC’s
future operations will be sufficient for the research and development of advanced process technologies and the continued
expansion of advanced manufacturing capacity, including the second 300mm fab in Taiwan’s Tainan Science Park. In
order to avoid future cash levels becoming excessive and to better respond to the expectations of today’s capital markets,
the Company has resolved to carry out a capital reduction of NT$ 57,394 million with the cancellation of 5,739 million of
its outstanding shares, following a resolution passed at a meeting of the Board of Directors on January 23, 2007. The board
of directors will decide the date of the capital reduction after the approval at the stockholders’ meeting and the authorization
of the government. The exact exchange ratio for shares and the amount of the capital reduction is to be set on the record date
for capital reduction.
10. OTHERS
(1)Certain comparative amounts have been reclassified to conform to the current year’s presentation.
(2)Financial risk management objectives and policies
The Company’s principal financial instruments, other than derivatives, is comprised of cash and cash equivalents,
common stock, preferred stock, convertible bonds, open-end funds, bank loans, and bonds payable. The main purpose
of these financial instruments is to manage financing for the Company’s operations. The Company also holds various
other financial assets and liabilities such as accounts receivable and accounts payables, which arise directly from its
operations.
The Company also enters into derivative transactions, including credit-link deposits, interest rate swaps and forward
currency contracts. The purpose of these derivative transactions is to mitigate interest rate risk and foreign currency
exchange risk arising from the Company’s operations and financing activities. As of December 31, 2006 and 2005,
none of the Company’s derivative transactions qualified for hedge accounting.
The main risks arising from the Company’s financial instruments include cash flow interest rate risk, foreign currency
risk, commodity price risk, credit risk, and liquidity risk.
151
Cash flow interest rate risk
The Company utilizes interest rate swap agreements to mitigate its cash flow interest rate risk on its counter-floating rate
of unsecured domestic bonds issued during the period from May 21 to June 24, 2003. The periods of the interest rate
swap agreements are the same as those of the domestic bonds, which are five and seven years. The floating rate is reset
annually.
Foreign currency risk
The Company has foreign currency risk arising from purchases or sales. The Company utilizes spot or forward
contracts to mitigate foreign currency risk. The Company buys or sells the same amount of foreign currency with hedged
items through forward contracts. In principal, the Company does not carry out any forward contracts for uncertain
commitments.
Commodity price risk
The Company’s exposure to commodity price risk is minimal.
Credit risk
The Company trades only with established and creditworthy third parties. It is the Company’s policy that all customers
who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are
monitored on an ongoing basis, which consequently minimizes the Company’s exposure to bad debts.
With respect to credit risk arising from the other financial assets of the Company, which are comprised of cash and
cash equivalents, available-for-sale financial assets and certain derivative instruments, the Company’s exposure to
credit risk arising from the default of counter-parties is limited to the carrying amount of these instruments.
Although the Company trades only with established third parties, it will request collateral to be provided by third
parties with less favorable financial positions.
Liquidity risk
The Company’s objective is to maintain a balance of funding continuity and flexibility through the use of financial
instruments such as cash and cash equivalents, bank loans and bonds.
152
(3) Information of financial instruments
a. Fair value of financial instruments
As of December 31,
2005
Book Value
Fair Value
Book Value
2006
Fair Value
$83,394,802
8,538,007
$83,394,802
8,538,007
$96,596,623
2,468,968
$96,596,623
2,438,668
Available-for-sale financial
assets, current
-
-
2,414,153
2,900,084
Held-to-maturity financial
assets, current
974,272
974,272
-
-
12,851,984
12,851,984
13,068,452
13,068,452
assets, noncurrent
41,218,780
41,218,780
5,513,284
26,748,545
Held-to-maturity financial
assets, noncurrent
-
-
977,856
977,856
2,285,326
-
2,265,467
-
39,242,324
40,209,680
30,481,560
53,544,605
642,584
642,584
579,710
579,710
$22,384,219
898,265
$22,384,219
898,265
$17,035,687
657,600
$17,035,687
657,600
35,738,959
36,739,231
46,259,055
47,028,153
$626,230
359,037
$626,230
359,037
$95,634
-
$730,191
-
Financial Assets
Non-derivative
Financial assets at fair value
through profit or loss,
current
Financial assets measured at
cost, noncurrent
Long-term investments
accounted for under the
equity method
Deposits-out
Financial Liabilities
Non-derivative
Payables
Capacity deposits (current
portion)
Bonds payable (current portion
included)
Derivative
Interest rate swaps
Derivatives embedded in
exchangeable bonds
153
b. The methods and assumptions used to measure the fair value of financial instruments are as follows:
i. The book value of short-term financial instruments approximates their fair value due to their short maturities.
Short-term financial instruments include cash and cash equivalents, notes receivable, accounts receivable,
short-term loans, current portion of capacity deposits, and payables.
ii. The fair value of financial assets at fair value through profit or loss and available-for-sale financial assets is based
on the quoted market price.
iii.The fair value of held-to-maturity financial assets is based on the quoted market prices. If market prices are
unavailable, the Company estimates the fair value based on the book value as the held-to-maturity financial assets
consist principally of credit-linked deposits agreements with maturity dates less than one year, as well as bonds
that can be easily liquidated in the secondary market.
iv.The fair value of financial assets measured at cost is unable to estimate since those unlisted investments are not
traded in the open market.
v. The fair value of deposits-out is based on their book value since the deposit periods are principally within one year
and renewed upon maturity.
vi.The fair value of bonds payable is determined by the market price.
vii.The fair value of derivative financial instruments is based on the amount the Company expects to receive
(positive) or to pay (negative) assuming that the contracts are settled in advance at the balance sheet date.
c. The fair value of the Company’s financial instruments is determined by the quoted prices in active markets, or if the
market for a financial instrument is not active, the Company establishes fair value by using a valuation technique:
Active Market Quotation
Non-derivative
Financial assets
current
154
Valuation Technique
2006.12.31
2005.12.31
2006.12.31
2005.12.31
$8,538,007
$2,438,668
$-
$-
asset, current
-
2,900,084
-
-
assets, noncurrent
41,218,780
26,748,545
-
-
Non-derivative
Long-term investments
accounted for under the
equity method
Financial liabilities
included)
Valuation Technique
2006.12.31
2005.12.31
2006.12.31
2005.12.31
$40,209,680
$53,544,605
$-
$-
36,739,231
47,028,153
-
-
$-
$-
$626,230
$730,191
-
-
359,037
-
Derivative Financial Instruments
Interest rate swaps
exchangeable bonds
d. The Company recognized a gain in NT$312 million arising from the changes in fair value of financial liabilities at fair
value through profit or loss for the year ended December 31, 2006.
e. The Company’s financial liability with cash flow interest rate risk exposure as of December 31, 2006 amounted to
NT$626 million.
f. During the year ended December 31, 2006, total interest revenue and interest expense for financial assets or liabilities
that are not at fair value through profit or loss were NT$1,453 million and NT$631 million, respectively, while
interest revenue and expense for the year period ended December 31, 2005 amounted to NT$946 million and NT$918
million, respectively.
(4) The Company and its subsidiary, UMC JAPAN, held credit-linked deposits and repackage bonds recognized as held to
maturity financial assets for the earning of interest income. The details are disclosed as follows:
a. Principal amount in original currency
The Company
Credit-linked deposits and repackage bonds referenced to
Amount
Due Date
SILICONWARE PRECISION INDUSTRIES CO., LTD.
European Convertible Bonds and Loans
NTD
400 million
2007.02.05
NTD
200 million
2007.02.05
UMC JAPAN European Convertible Bonds
ADVANCED SEMICONDUCTOR ENGINEERING INC.
JPY
NTD
640 million
200 million
2007.03.28
2007.09.25
155
UMC JAPAN
JPY
Amount
Due Date
500 million
2007.03.29
The Company
Amount
Due Date
NTD
400 million
2007.02.05
NTD
200 million
2007.02.05
JPY
640 million
2007.03.28
NTD
200 million
2007.09.25
JPY
Amount
500 million
Due Date
2007.03.29
UMC JAPAN
b. Credit risk
The counterparties of the above investments are major international financial institutions. The repayment in full of
these investments is subject to the non-occurrence of one or more credit events, which are referenced to the entities’
fulfillment of their own obligations as well as repayment of their corporate bonds. Upon the occurrence of one or
more of such credit events, the Company and its subsidiary, UMC JAPAN, may receive less than the full amount of
these investments or nothing. The Company and its subsidiary, UMC JAPAN, have selected reference entities with
high credit ratings to minimize the credit risk.
c. Liquidity risk
Early withdrawal is not allowed for the above investments unless called by the issuer. However, the anticipated
liquidity risk is low since most of the investments will either have matured within one year, or are relatively liquid in
the secondary market.
d. Market risk
There is no market risk for the above investments except for the fluctuations in the exchange rates of US Dollars and
Japanese Yen to NT Dollars at the balance sheet date and the settlement date.
156
(5) The Company and its subsidiary, UMC JAPAN, entered into interest rate swap and forward contracts for hedging the
interest rate risk arising from the counter-floating rate of domestic bonds and for hedging the exchange rate risk arising
from the net assets or liabilities denominated in foreign currency. The hedging strategy was developed with the
objective to reduce the market risk for non-trading purpose. The relevant information on the derivative financial
instruments entered into by the Company is as follows:
a. The Company utilized interest rate swap agreements to hedge its interest rate risk on its counter-floating rate of
unsecured domestic bonds issued during the period from May 21 to June 24, 2003. The periods of the interest rate
annually. The details of interest rate swap agreements are summarized as follows:
As of December 31, 2006 and 2005, the Company had the following interest rate swap agreements in effect:
Notional Amount
Contract Period
Interest Rate Received
Interest Rate Paid
NT$7,500 million
May 21, 2003 to June
24, 2008
4.0% minus USD
12-Month LIBOR
1.52%
NT$7,500 million
May 21, 2003 to June
24, 2010
4.3% minus USD
12-Month LIBOR
1.48%
b. Transaction risk
(a)Credit risk
There is no significant credit risk exposure with respect to the above transactions as the counter-parties are
reputable financial institutions with good global standing.
(b)Liquidity and cash flow risk
The cash flow requirements on the interest rate swap agreements are limited to the net interest payables or
receivables arising from the differences in the swap rates. The cash flow requirements on forward contracts are
limited to the net difference between the forward and spot rates at the settlement date. Therefore, no significant
cash flow risk is anticipated since the working capital is sufficient to meet the cash flow requirements.
(c)Market risk
Interest rate swap agreements and forward contracts are intended for hedging purposes. Gains or losses arising
from the fluctuations in interest rates and exchange rates are likely to be offset against the gains or losses from the
hedged items. As a result, no significant exposure to market risk is anticipated.
157
c. The presentation of derivative financial instruments on financial statements
The Company
As of December 31, 2006 and 2005, the interest rate swap agreements were classified as current liabilities amounting
to NT$626 million and NT$96 million, respectively.
The exchange loss arising from forward contracts was NT$415 million for the year ended December 31, 2005 and
recorded in non-operating expenses in the accompanying statement of income.
UMC JAPAN
The exchange (loss) gain arising from forward contracts was JPY$(7.5) million and JPY$25.4 million and recorded in
non-operating (expense) revenue in the accompanying statements of income for the years ended December 31, 2006
and 2005, respectively.
11. ADDITIONAL DISCLOSURES
(1)The following are additional disclosures for the Company and its affiliates as required by the ROC Securities and
Futures Bureau:
a. Financing provided to others for the year ended December 31, 2006: Please refer to Attachment 1.
b. Endorsement/Guarantee provided to others for the year ended December 31, 2006: Please refer to Attachment 2.
c. Securities held as of December 31, 2006: Please refer to Attachment 3.
d. Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$100 million or
20 percent of the capital stock for the year ended December 31, 2006: Please refer to Attachment 4.
e. Acquisition of individual real estate with amount exceeding the lower of NT$100 million or 20 percent of the capital
stock for the year ended December 31, 2006: Please refer to Attachment 5.
f. Disposal of individual real estate with amount exceeding the lower of NT$100 million or 20 percent of the capital
stock for the year ended December 31, 2006: Please refer to Attachment 6.
g. Related party transactions for purchases and sales amounts exceeding the lower of NT$100 million or 20 percent of
the capital stock for the year ended December 31, 2006: Please refer to Attachment 7.
h. Receivables from related parties with amounts exceeding the lower of NT$100 million or 20 percent of the capital
stock as of December 31, 2006: Please refer to Attachment 8.
158
i.Names, locations and related information of investees as of December 31, 2006: Please refer to Attachment 9.
j.Financial instruments and derivative transactions: Please refer to Note 10.
(2) Investment in Mainland China
None.
12. SEGMENT INFORMATION
(1)Operations in different industries
The Company operates principally in one industry, and the major business is operating as a full service semiconductor
foundry.
(2)Operations in different geographic areas
The Company has no foreign operations.
(3)Export sales
2006
2005
$54,538,785
$43,765,379
8,550,154
6,740,391
7,748,732
5,695,477
$70,837,671
$56,201,247
Area
North America
Europe
Asia, excluding Taiwan
Total export sales
(4)Major customers
Individual customers accounting for at least 10% of net sales for the years ended December 31, 2006 and 2005 are as
follows:
Customers
Customer A
Sales amount
$54,476,329
2006
Percentage
52
2005
Sales amount
Percentage
$43,226,036
48
159
160
Counter-party
UMC GROUP (USA) Former Employees Receivable from
employees
Lender
$-
Note 2 : Need for short-term financing.
‫ޓޓޓ‬2. The subsidiaries are coded consecutively beginning from "1" in the order presented in the table above.
‫ޓޓޓ‬1. The Company is coded "0".
USD 691
Financial statement Maximum balance for
Ending balance
account
the period
Note 1: The Company and its subsidiaries are coded as follows:
1
No.
(Note 1)
(Amount in thousand; Currency denomination in NTD unless otherwise specified)
ATTACHMENT 1 (Financing provided to others for the year ended December 31, 2006)
7%
Interest rate
Note 2
Nature of
financing
$-
Amount of sales to
(purchases from)
counter-party
Employee loan
Reason for
financing
$-
Allowance
for doubtful
accounts
-
Item
-
Value
Collateral
N/A
Limit of financing
amount for individual
counter-party
N/A
Limit of total
financing amount
UMC
0
UMC JAPAN
Receiving party
2
Relationship
(Note 2)
$7,501,548
JPY 10,400,000
Limit of
guarantee/endorsement
amount for receiving Maximum balance for the
period
party (Note 3)
$-
Ending balance
Note 1: The Company and its subsidiaries are coded as follows:
‫ޓ ޓޓ‬1. The Company is coded "0".
‫ޓ ޓޓ‬2. The subsidiaries are coded consecutively beginning from "1" in the order presented in the table above.
Note 2: According to the "Guidelines Governing the Preparation of Financial Reports by Securities Issuers" issued by the R.O.C. Securities and Futures Bureau,
receiving parties should be disclosed as one of the following:
1. An investee company that has a business relationship with UMC.
2. A subsidary in which UMC holds directly over 50% of equity interest.
3. An investee in which UMC and its subsidaries hold over 50% of equity interest.
4. An investee in which UMC holds directly and indirectly over 50% of equity interest.
5. An investee that has provided guarantees to UMC, and vice versa, due to contractual requirements.
6. An investee in which UMC conjunctly invests with other shareholders, and for which UMC has provided endorsement/guarantee in proportion to
its shareholding percentage.
Note 3: Limit of guarantee/endorsement amount for receiving party shall not exceed the lower of receiving party's capital stock or 10% of UMC's capital stock.
Note 4: Limit of total guarantee/endorsement amount equals 40% of UMC's capital stock as of December 31, 2006.
Endorsor/Guarantor
No.
(Note 1)
ATTACHMENT 2 (Endorsement/Guarantee provided to others for the year ended December 31, 2006)
$-
-
Percentage of accumulated
guarantee amount to net
Amount of collateral assets value from the latest
financial statement
$76,524,771
Limit of total
amount (Note 4)
161
162
UNITED MICROELECTRONICS (EUROPE)
B.V.
UMC CAPITAL CORP.
Stock
Stock
Stock
Stock
Stock
UNITED MICROELECTRONICS CORP.
(SAMOA)
UMCI LTD.
UMC GROUP (USA)
Stock
Stock
CHINA DEVELOPMENT FINANCIAL
HOLDING CORP.
SILICONWARE PRECISION INDUSTRIES
CO., LTD.
YANG MING MARINE TRANSPORT CORP.
Stock
Stock
MICRONAS SEMICONDUCTOR HOLDING
AG
ACTION ELECTRONICS CO., LTD.
Stock
CHANG WAH ELECTRONMATERIALS INC.
Convertible bonds
L&K ENGINEERING CO., LTD.
TATUNG CO.
Convertible bonds
Stock
FIRICH ENTERPRISES CO., LTD
Convertible bonds
PROMOS TECHNOLOGIES INC.
TOPOINT TECHNOLOGY CO., LTD.
Convertible bonds
Stock
EDOM TECHNOLOGY CO., LTD.
Convertible bonds
Name of securities
QUANTA STORAGE INC.
Convertible bonds
Type of securities
ATTACHMENT 3 (Securities held as of December 31, 2006)
Investee company
Investee company
Investee company
Investee company
Investee company
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
Financial statement account
Financial assets at fair value through
profit or loss, current
Long-term investments accounted for
under the equity method
880,006
280
124,000
9
16,438
3,254
5,395
23,538
16,270
280
1,683
477,374
500
402
340
380
60
1,000
Units (thousand)/
bonds/ shares
(thousand)
86
8,480
3,613,491
284,084
1,006,496
61,178
276,202
353,072
329,464
198,191
97,456
6,778,711
54,250
52,863
54,740
53,485
193,910
$34,485
Book value
100.00
100.00
100.00
100.00
100.00
0.14
0.19
0.21
0.44
0.86
0.99
7.77
-
-
-
-
-
-
Percentage of
ownership (%)
December 31, 2006
86
8,480
3,613,491
276,469
1,006,496
61,178
276,202
353,072
329,464
198,191
97,456
6,778,711
54,250
52,863
54,740
53,485
193,910
$34,485
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
FORTUNE VENTURE CAPITAL CORP.
UNITED MICRODISPLAY OPTRONICS
CORP.
UMC JAPAN
MTIC HOLDINGS PTE LTD.
ITE TECH. INC.
XGI TECHNOLOGY INC.
PIXTECH, INC.
FARADAY TECHNOLOGY CORP.
UNITED FU SHEN CHEN TECHNOLOGY
CORP.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Fund
Stock
Stock
Stock
Stock
Name of securities
Stock
Type of securities
Relationship
-
-
-
-
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Available-for-sale financial assets,
noncurrent
noncurrent
noncurrent
noncurrent
18,460
55,611
9,883
202,367
-
16,200
8,758
28,500
24,229
51,939
33,624
21,000
4,000
30,000
496
64,313
499,994
600,000
Units (thousand)/
bonds/ shares
(thousand)
128,667
4,382,181
321
9,096,376
2,699,491
57,062
53,710
225,624
341,268
878,747
4,674,311
959,542
81,402
127,379
5,949,999
167,217
11,114,198
$6,999,737
Book value
16.60
17.27
17.63
19.89
45.00
11.86
16.48
18.97
21.80
24.45
36.49
42.00
49.94
49.99
50.09
81.76
99.99
100.00
Percentage of
ownership (%)
December 31, 2006
128,667
4,382,181
321
9,096,376
2,699,491
82,750
53,710
225,624
896,486
3,282,569
4,532,186
959,542
81,402
131,879
3,480,760
167,217
11,711,305
$6,999,737
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
163
164
EPITECH TECHNOLOGY CORP.
SPRINGSOFT, INC.
C-COM CORP.
CHIPBOND TECHNOLOGY CORP.
KING YUAN ELECTRONICS CO., LTD.
BILLIONTON SYSTEMS INC.
MEDIATEK INC.
AU OPTRONICS CORP.
MEGA FINANCIAL HOLDING COMPANY
RECHI PRECISION CO., LTD.
HON HAI PRECISION INDUSTRY CO., LTD.
SINO-AEROSPACE INVESTMENT CORP.
UNITED INDUSTRIAL GASES CO., LTD.
INDUSTRIAL BANK OF TAIWAN CORP.
SUBTRON TECHNOLOGY CO., LTD.
TECO NANOTECH CO. LTD.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Name of securities
Stock
Type of securities
Relationship
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Company's director
Financial assets measured at cost,
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
11,001
11,520
118,303
13,185
28,500
1,057
1,753
95,577
78,266
14,979
2,048
35,008
12,330
3,083
9,467
37,221
60,073
228,956
Units (thousand)/
bonds/ shares
(thousand)
-
172,800
1,139,196
146,250
-
245,705
31,116
2,289,065
3,545,441
5,048,091
24,676
952,216
359,412
22,197
520,658
1,155,725
8,860,711
$4,556,222
Book value
4.56
4.79
4.95
7.80
11.11
0.02
0.51
0.86
1.03
1.55
2.63
3.21
4.15
4.40
4.78
10.06
11.54
16.09
Percentage of
ownership (%)
December 31, 2006
Note
Note
Note
Note
Note
245,705
31,116
2,289,065
3,545,441
5,048,091
24,676
952,216
359,412
22,197
520,658
1,155,725
8,860,711
$4,556,222
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
Stock-Preferred stock
AEVOE INTERNATIONAL LTD.
Stock
Stock
CRYSTAL MEDIA INC.
TERA XTAL TECHNOLOGY CORP.
Stock
Stock
UCA TECHNOLOGY INC.
Stock
WALTOP INTERNATIONAL CORP.
UWAVE TECHNOLOGY CORP.
Stock
Stock
ANOTO TAIWAN CORP.
Stock
Name of securities
UNITRUTH INVESTMENT CORP.
Stock
Type of securities
TAIWAN HIGH SPEED RAIL CORP.
PACIFIC UNITED TECHNOLOGY, L.P.
Fund
Name of securities
PACIFIC TECHNOLOGY PARTNERS, L.P.
Fund
Type of securities
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Relationship
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
-
-
4,493
5,200
6,000
2,500
10,212
800
11,285
10,187
3,920
80,000
Units (thousand)/
bonds/ shares
(thousand)
4,000
30,000
Units (thousand)/
bonds/ shares
(thousand)
37,429
88,134
88,093
12,610
17,224
11,976
42,288
33,531
32,622
$743,210
Book value
-
-
-
-
25.15
26.00
30.00
35.80
36.54
40.00
42.38
44.29
49.00
100.00
Percentage of
ownership (%)
December 31, 2006
85,080
300,000
161,154
$280,846
Book value
Percentage of
ownership (%)
December 31, 2006
37,429
54,301
37,081
10,133
17,224
11,976
32,905
33,531
32,622
$743,210
Market value/
Net assets value
N/A
N/A
N/A
N/A
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
None
None
None
None
Shares as
collateral
(thousand)
165
166
ALLIANCE OPTOTEK CORP.
MOBILE DEVICES INC.
HIGH POWER LIGHTING CORP.
XGI TECHNOLOGY INC.
DAVICOM SEMICONDUCTOR, INC.
BCOM ELECTRONICS INC.
KUN YUAN TECHNOLOGY CO., LTD.
CION TECHNOLOGY CORP.
HITOP COMMUNICATIONS CORP.
LIGHTUNING TECH. INC.
CHIP ADVANCED TECHNOLOGY INC.
UWIZ TECHNOLOGY CO., LTD.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Name of securities
Stock
Type of securities
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Relationship
-
-
-
-
-
-
-
Investee of UMC and
Fortune
Investee of UMC and
Fortune
Investee of UMC and
Fortune
-
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
4,230
3,340
2,660
4,340
2,268
6,650
17,675
12,848
55
6,281
23,405
4,525
5,457
5,000
3,500
6,033
3,646
9,045
Units (thousand)/
bonds/ shares
(thousand)
46,953
24,344
16,663
60,848
21,600
66,500
176,797
142,030
755
32,187
119,225
47,559
20,983
19,288
34,349
36,806
52,711
$37,525
Book value
13.22
14.06
14.94
16.07
17.05
19.00
19.64
19.89
0.04
11.83
17.08
18.10
19.41
20.84
21.21
21.42
21.45
23.57
Percentage of
ownership (%)
December 31, 2006
Note
Note
Note
Note
Note
Note
Note
Note
435
38,502
119,225
38,327
17,869
19,288
26,912
23,889
50,949
$35,960
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
GOLDEN TECHNOLOGY VENTURE
CAPITAL INVESTMENT CORP.
AMOD TECHNOLOGY CO., LTD.
ADVANCE MATERIALS CORP.
EVERGLORY RESOURCE TECHNOLOGY
CO., LTD.
NCTU SPRING I TECHNOLOGY VENTURE
EXCELLENCE OPTOELECTRONICS INC.
JMICRON TECHNOLOGY CORP.
ANDES TECHNOLOGY CORP.
CHINGIS TECHNOLOGY CORP.
SHIN-ETSU HANDOTAI TAIWAN CO., LTD.
ACTI CORP.
RISELINK VENTURE CAPITAL CORP.
NCTU SPRING VENTURE CAPITAL CO.,
LTD.
HIGH POWER OPTOELECTRONICS, INC.
SIMPAL ELECTRONICS CO., LTD.
COSMOS TECHNOLOGY VENTURE
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
YAYATECH CO., LTD.
Stock
Name of securities
VASTVIEW TECHNOLOGY INC.
Stock
Type of securities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
1,742
6,009
1,500
2,000
8,000
1,700
10,500
4,198
5,000
2,660
8,529
4,284
2,500
11,434
1,060
5,040
1,080
3,487
Units (thousand)/
bonds/ shares
(thousand)
15,964
70,179
15,000
13,600
76,640
17,306
105,000
37,156
62,500
47,880
85,291
27,160
21,875
113,017
10,421
49,280
36,180
$11,891
Book value
5.03
5.67
6.00
6.28
6.67
6.85
7.00
7.88
7.94
9.50
9.61
10.06
10.23
10.36
10.60
10.67
10.80
12.02
Percentage of
ownership (%)
December 31, 2006
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
167
168
LUMITEK CORP.
EE SOLUTIONS, INC.
TRENDCHIP TECHNOLOGIES CORP.
GIGA SOLUTION TECH. CO., LTD.
BEYOND INNOVATION TECHNOLOGY
CO., LTD.
PROSYS TECHNOLOGY INTEGRATION,
INC.
WAVEPLUS TECHNOLOGY CO., LTD.
FORTUNE SEMICONDUCTOR CORP.
PRINTECH INTERNATIONAL INC.
IBT VENTURE CORP.
IGLOBE PARTNERS FUND, L.P.
ANIMATION TECHNOLOGIES INC.
SUPERALLOY INDUSTRIAL CO., LTD.
CHIPSENCE CORP.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Fund
Stock
Stock
Stock
Stock
MEMOCOM CORP.
Stock
Name of securities
PARAWIN VENTURE CAPITAL CORP.
Stock
Type of securities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
1,750
5,000
1,480
-
7,614
9,317
540
1,504
1,200
409
1,183
3,930
1,249
1,300
1,750
2,450
5,000
Units (thousand)/
bonds/ shares
(thousand)
11,325
225,000
22,200
39,051
76,142
102,459
2,457
24,931
-
4,224
14,165
26,742
15,086
22,178
32,000
16,391
$41,900
Book value
2.93
3.08
3.16
3.45
3.81
3.88
3.98
4.00
4.00
4.08
4.11
4.65
4.72
4.85
4.89
4.90
5.00
Percentage of
ownership (%)
December 31, 2006
Note
Note
Note
N/A
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
ADVANCED CHIP ENGINEERING
TECHNOLOGY INC.
TAIMIDE TECHNOLOGY INC.
RALINK TECHNOLOGY CORP.
CRYSTAL INTERNET VENTURE FUND II
ARCADIA DESIGN SYSTEMS (TAIWAN),
INC.
AURORA SYSTEMS, INC.
ALPHA & OMEGA SEMICONDUCTOR LTD.
Stock
Stock
Fund
Stock
PIXART IMAGING INC.
UNITED ORTHOPEDIC CORP.
AVERLOGIC TECHNOLOGIES CORP.
AIMTRON TECHNOLOGY, INC.
SIMPLO TECHNOLOGY CO., LTD.
ATHEROS COMMUNICATION INC.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
SHENG-HUA VENTURE CAPITAL CORP.
Name of securities
Stock
Type of securities
-
-
Investor company
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
8
178
22,070
2,190
959
1,384
1,051
13,128
2,000
13,274
1,500
5,133
162
-
1,391
1,500
2,290
1,250
Units (thousand)/
bonds/ shares
(thousand)
5,536
21,004
446,914
63,846
69,827
50,930
16,560
407,627
27,600
6,504,255
46,313
59,317
-
9,342
15,590
16,095
24,419
$9,950
Book value
0.02
0.12
0.12
0.74
1.26
3.17
3.40
3.55
5.89
12.71
-
-
0.83
0.99
1.68
1.83
1.84
2.50
Percentage of
ownership (%)
December 31, 2006
5,536
21,004
446,914
63,846
69,827
50,930
16,560
407,627
27,600
6,504,255
N/A
N/A
Note
N/A
Note
Note
Note
Note
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
169
170
YUNG LI INVESTMENTS, INC.
ASIA PACIFIC MICROSYSTEMS, INC.
SERCOMM CORP.
HORIZON SECURITIES CO., LTD.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Type of securities
Name of securities
Convertible bonds
ALPHA NETWORKS INC.
Name of securities
Convertible bonds
Type of securities
Investee company
Investee company
Relationship
-
-
Relationship
profit or loss, noncurrent
-
-
-
-
-
-
-
-
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
Investee of UMC and TLC Long-term investments accounted for
10,413
5,220
16,858
6,192
20,163
5,430
10,650
10,000
17,460
7,084
0.20
Units (thousand)/
bonds/ shares
(thousand)
258
300
Units (thousand)/
bonds/ shares
(thousand)
323,324
615,960
118,849
168,408
357,901
395,317
479,250
100,000
134,999
99,220
$202,390
Book value
-
-
2.81
3.48
3.92
4.48
5.84
7.02
6.55
8.40
11.62
18.46
44.44
Percentage of
ownership (%)
December 31, 2006
36,314
$33,600
Book value
Percentage of
ownership (%)
December 31, 2006
323,324
615,960
118,849
168,408
357,901
395,317
Note
Note
138,221
28,166
$202,390
Market value/
Net assets value
36,314
$33,600
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
None
None
Shares as
collateral
(thousand)
TATUNG CO.
CORETRONIC CORP.
INPAQ TECHNOLOGY CO., LTD.
HUNG SHENG CONSTRUCTION LTD.
ORIENT SEMICONDUCTOR ELECTRONICS,
LTD.
ALI CORP.
POWERTECH INDUSTRIAL CO., LTD.
CHINA ELECTRIC MFG. CORP.
CHONG HONG CONSTRUCTION CO., LTD.
HANNSTAR DISPLAY CORP.
HOLDING CORP.
SHIHLIN ELECTRIC & ENGINEERING
CORP.
GOLDSUN DEVELOPMENT&
CONSTRUCTION CO., LTD.
KINSUS INTERCONNECT TECHNOLOGY
CORP.
KEE TAI PROPERTIES CO., LTD.
YUNGTAY ENGINEERING CO., LTD.
TAIWAN FERTILIZER CO., LTD.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
SYSTEX CORP.
Stock
Name of securities
AVERMEDIA TECHNOLOGIES, INC.
Stock
Type of securities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
800
400
300
566
2,060
950
23,596
14,000
343
895
248
1,050
4,764
3,300
500
6,007
38,152
800
4,085
Units (thousand)/
bonds/ shares
(thousand)
49,840
8,340
7,785
54,365
36,256
33,582
353,936
86,520
30,253
16,065
12,648
62,265
40,018
83,160
32,800
254,102
557,019
31,120
$163,196
Book value
0.08
0.10
0.11
0.15
0.17
0.18
0.21
0.23
0.23
0.23
0.27
0.41
0.54
0.59
0.74
0.90
0.91
0.96
2.16
Percentage of
ownership (%)
December 31, 2006
49,840
8,340
7,785
54,365
36,256
33,582
353,936
86,520
30,253
16,065
12,648
62,265
40,018
83,160
32,800
254,102
557,019
31,120
$163,196
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
171
172
NANTEX INDUSTRY.CO.,LTD.
FAR EASTERN INTERNATIONAL BANK
CHINATRUST FINANCIAL HOLDING
COMPANY LTD.
TA CHONG BANK LTD.
Stock
Stock
Stock
Stock
SOLAR APPLIED MATERIALS
TECHNOLOGY CORP.
Convertible bonds
CRYSTAL MEDIA INC.
Stock
Stock
Stock
Type of securities
Name of securities
Convertible bonds
Convertible bonds
Stock
CHINA INSURANCE INTL
Stock
Name of securities
PRINCE HOUSING & DEVELOPMENT
CORP.
YULON MOTOR CO., LTD.
Stock
Type of securities
Investee company
Investee company
Investee company
Relationship
-
-
-
-
-
-
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
1,587
1,800
2,000
Units (thousand)/
bonds/ shares
(thousand)
40
380
2,500
100
1,600
500
150
800
1,000
580
Units (thousand)/
bonds/ shares
(thousand)
13,220
20,816
$29,364
Book value
-
-
-
0.01
0.02
0.03
0.06
0.06
0.07
0.07
8.88
9.00
10.00
Percentage of
ownership (%)
December 31, 2006
4,604
53,485
293,250
1,095
43,600
7,800
3,150
32,614
39,500
$12,789
Book value
Percentage of
ownership (%)
December 31, 2006
13,220
18,797
$12,360
Market value/
Net assets value
4,604
53,485
293,250
1,095
43,600
7,800
3,150
32,614
39,500
$12,789
Market value/
Net assets value
None
None
None
Shares as
collateral
(thousand)
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
UCA TECHNOLOGY INC.
MOBILE DEVICES INC.
XGI TECHNOLOGY INC.
CO., LTD.
YAYATECH CO., LTD.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Name of securities
Stock
Type of securities
Relationship
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
-
-
-
-
-
-
Investee of UMC and
Unitruth
-
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
490
1,200
5,637
1,386
1,748
6,374
930
1,760
1,000
1,000
1,250
1,300
1,225
1,250
1,585
2,570
1,300
Units (thousand)/
bonds/ shares
(thousand)
16,415
10,500
62,427
3,059
25,850
63,739
7,920
10,788
3,960
3,292
4,093
2,193
12,875
4,822
7,840
17,085
$12,758
Book value
4.90
4.91
5.11
5.83
6.03
7.18
9.30
3.31
3.55
4.35
4.45
4.65
4.90
5.21
5.95
6.70
7.88
Percentage of
ownership (%)
December 31, 2006
Note
Note
Note
Note
Note
Note
Note
10,788
3,960
3,292
4,093
2,193
10,376
4,822
4,621
10,217
$9,996
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
173
174
EE SOLUTIONS, INC.
MEMOCOM CORP.
ACTI CORP.
CHIPSENCE CORP.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Name of securities
LUMITEK CORP.
Stock
Type of securities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
1,082
1,600
910
1,300
500
1,801
740
1,361
540
2,005
1,138
1,470
840
2,518
1,340
1,300
1,750
Units (thousand)/
bonds/ shares
(thousand)
14,932
72,000
5,889
14,570
5,000
12,256
11,100
17,747
2,457
13,416
13,747
16,317
5,262
31,218
8,844
14,755
$32,000
Book value
3.19
0.98
1.52
1.57
2.00
2.13
2.98
3.62
3.98
4.01
4.30
4.59
4.72
4.73
4.79
4.85
4.89
Percentage of
ownership (%)
December 31, 2006
14,932
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
PARADE TECHNOLOGIES, LTD.
MAXXAN SYSTEMS, INC.
AICENT, INC.
SPREADTRUM COMMUNICATIONS, INC.
SILICON 7, INC.
GCT SEMICONDUCTOR, INC.
INTELLON CORP.
FORTEMEDIA, INC.
UC FUND II
Fund
ACHIEVE MADE INTERNATIONAL LTD.
ECP VITA LTD.
Stock
UMC CAPITAL (USA)
Name of securities
Name of securities
Stock
Type of securities
UMC CAPITAL CORP.
Convertible bonds
Type of securities
-
-
-
-
-
-
-
Investee company
Investee company
Investee company
Investee company
Investee company
Relationship
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
10,066
5,235
1,571
1,678
1,649
2,000
2,537
3,125
5,000
508
1,000
200
Units (thousand)/
bonds/ shares
(thousand)
380
Units (thousand)/
bonds/ shares
(thousand)
326
948
USD 4,053
USD 4,381
USD 1,000
USD 2,000
USD 1,436
USD 1,000
USD 1,281
USD 2,016
USD 3,772
USD
USD 1,550
USD
Book value
-
-
-
-
-
-
-
-
23.30
35.45
44.44
100.00
100.00
Percentage of
ownership (%)
December 31, 2006
$53,485
Book value
Percentage of
ownership (%)
December 31, 2006
326
415
N/A
N/A
N/A
N/A
N/A
N/A
N/A
USD 1,113
USD 3,772
USD
USD 1,550
USD
Market value/
Net assets value
$53,485
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
None
Shares as
collateral
(thousand)
175
176
VERIPRECISE TECHNOLOGY, INC.
PACTRUST COMMUNICATION, INC.
LUMINUS DEVICES, INC.
REALLUSION HOLDING INC.
FORCE10 NETWORKS, INC.
QSECURE, INC.
KOTURA, INC.
Stock
PATENTOP, LTD.
EAST VISION TECHNOLOGY LTD.
Stock
DIBCOM, INC.
VENGLOBAL CAPITAL FUND III, L.P.
AMALFI SEMICONDUCTOR, INC.
Fund
WISAIR, INC.
MAGNACHIP SEMICONDUCTOR LLC
SMART VANGUARD LTD.
Stock
MAXLINEAR, INC.
Name of securities
Type of securities
UMC CAPITAL CORP.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
0.59
720
-
31
12,422
4,373
1,800
477
4,850
4,000
550
1,500
2,770
10
1,471
153
5,750
2,070
Units (thousand)/
bonds/ shares
(thousand)
242
555
USD
-
-
712
USD 1,094
USD 3,000
USD 4,500
USD
USD 3,000
USD 4,850
USD 4,000
USD
USD 3,375
USD 4,820
USD 1,186
USD 1,500
USD 1,596
USD 6,500
USD 4,052
Book value
0.00
18.00
-
0.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Percentage of
ownership (%)
December 31, 2006
Note
Note
N/A
Note
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
-
-
Relationship
noncurrent
noncurrent
750
301
Units (thousand)/
bonds/ shares
(thousand)
Note : The net asset values for unlisted investees classified as "Financial assets measured at cost, noncurrent" were not available as of December 31, 2006.
ZYLOGIC SEMICONDUCTOR CORP.
Name of securities
TERABURST NETWORKS
Type of securities
UMC CAPITAL CORP.
Book value
-
-
-
Percentage of
ownership (%)
December 31, 2006
N/A
N/A
Market value/
Net assets value
None
None
Shares as
collateral
(thousand)
177
178
CHINA
DEVELOPMENT
FINANCIAL
HOLDING CORP.
MEDIATEK INC.
Stock
Stock
PROMOS
TECHNOLOGIES
INC.
Stock
Available-forsale financial
assets,
noncurrent
Financial assets
at fair value
through profit or
loss, current
Financial assets
at fair value
through profit or
loss, current
loss, current
Financial assets
ACTION
ELECTRONICS CO., at fair value
through profit or
LTD.
Financial assets
at fair value
through profit or
loss, current
QUANTA STORAGE Financial assets
at fair value
INC.
through profit or
loss, current
Financial assets
TATUNG CO.
at fair value
through profit or
loss, current
SAMSON HOLDING Financial assets
at fair value
LTD.
through profit or
loss, current
Financial assets
SILICONWARE
at fair value
PRECISION
through profit or
INDUSTRIES CO.,
loss, current
LTD.
Stock
Stock
Stock
Convertible
bonds
Convertible
bonds
Convertible
bonds
Financial assets
at fair value
through profit or
loss, current
SILICONWARE
PRECISION
INDUSTRIES CO.,
LTD.
ACTION
ELECTRONICS CO.,
LTD.
Convertible
bonds
loss, current
Financial assets
KING YUAN
through profit or
LTD.
Name of the securities
Convertible
bonds
Type of
securities
Financial
statement
account
Open market
Open market
Open market
SILICONWARE
PRECISION
INDUSTRIES CO.,
LTD.
ACTION
ELECTRONICS
CO., LTD.
Open market
Open market
QUANTA
STORAGE INC.
SILICONWARE
PRECISION
INDUSTRIES CO.,
LTD.
ACTION
ELECTRONICS
CO., LTD.
KING YUAN
ELECTRONICS
CO., LTD.
Counter-party
-
-
53,916
3,700
-
-
37,872
-
-
-
-
-
4,500
-
-
10,000
-
-
8,000
800
-
-
Relationship
Units (thousand)/
bonds/
shares (thousand)
20,865,597
-
-
-
170,385
565,344
-
144,191
402,375
310,099
$340,912
Amount
(Note1)
Beginning balance
-
23,200
526,750
14,791
6,832
-
982
1,000
-
-
-
Units (thousand)/
bonds/
shares (thousand)
Addition
-
-
$-
-
298,433
6,831,114
434,127
(Note4)
291,714
(Note4)
-
111,540
32,578
Amount
42,407
-
49,376
-
6,150
37,872
580
4,500
10,000
8,000
800
Units (thousand)/
bonds/
shares (thousand)
ATTACHMENT 4 (Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$100 million or 20 percent of capital stock for the year ended December 31, 2006)
14,259,393
-
709,895
-
292,416
581,041
78,464
144,342
(Note5)
434,127
(Note4)
291,714
(Note4)
$309,884
(Note4)
Amount
Disposal
458,508
-
640,329
-
243,280
456,571
65,879
152,778
322,200
270,120
$271,600
Cost
(Note 2)
13,771,261
(Note9)
-
69,566
-
49,136
124,470
12,585
(8,436)
111,927
21,594
$38,284
14,979
(Note10)
23,538
(Note8)
477,374
16,270
(Note7)
5,395
(Note6)
-
402
1,000
-
-
-
-
-
$-
5,048,091
353,072
6,778,711
329,464
276,202
-
52,863
34,485
Amount
(Note1)
Ending balance
Gain (Loss) Units (thousand)/
from disposal
bonds/
(Note 3)
shares (thousand)
RECHI PRECISION
CO., LTD.
PREMIER IMAGE
TECHNOLOGY
CORP.
HON HAI
PRECISION
INDUSTRY CO.,
LTD.
Stock
Stock
Stock
HSUN CHIEH
INVESTMENT CO.,
LTD.
TOPPAN
PHOTOMASKS
TAIWAN LTD.
Stock
Stock
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
assets,
noncurrent
TOPPAN
PHOTOMASKS
TAIWAN LTD.
HSIEH YONG
CAPITAL CO.,
TAIWAN
CEMENT CORP.
StockTAIWAN CEMENT
Preferred stock CORP.
noncurrent
CHINATRUST
FINANCIAL
HOLDING CO.,
LTD.
HON HAI
PRECISION
INDUSTRY CO.,
LTD.
PREMIER IMAGE
TECHNOLOGY
CORP.
Open market
Proceeds from new
issues
KING YUAN
ELECTRONICS
CO., LTD.
Counter-party
Available-forStockCHINATRUST
sale financial
Preferred stock FINANCIAL
HOLDING CO., LTD. assets,
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
EPITECH
TECHNOLOGY
CORP.
Stock
noncurrent
Available-forKING YUAN
ELECTRONICS CO., sale financial
assets,
LTD.
Stock
Type of
securities
Financial
statement
account
106,621
-
4,810
-
92,124
-
-
-
3,497
-
44,530
12,412
-
-
23,729
23,040
-
-
Relationship
Units (thousand)/
bonds/
shares (thousand)
1,063,671
(3,169,837)
(Note15)
1,202,310
206,830
-
154,043
331,400
716,630
$828,272
Amount
(Note1)
Beginning balance
-
-
-
-
1,057
-
-
13,492
9,653
Units (thousand)/
bonds/
shares (thousand)
Addition
-
-
-
-
244,929
(Note14)
-
-
296,823
$309,884
(Note4)
Amount
106,621
58,500
44,530
4,810
-
3,602
(Note13)
12,677
-
-
Units (thousand)/
bonds/
shares (thousand)
-
$-
1,279,449
6,521,580
1,113,250
192,400
-
244,929
(Note14)
223,636
Amount
Disposal
-
$-
1,053,204
5,865,917
1,201,794
207,482
-
27,964
205,245
Cost
(Note 2)
197,633
(Note17)
13,152,475
(Note16)
(88,544)
(15,082)
-
216,965
18,391
-
$-
-
33,624
-
-
1,057
-
1,753
(Note12)
37,221
35,008
(Note11)
-
4,674,311
-
-
245,705
-
31,116
1,155,725
$952,216
Amount
(Note1)
Ending balance
from disposal
bonds/
(Note 3)
shares (thousand)
179
180
UMC JAPAN
TLC CAPITAL CO.,
LTD.
UMC CAPITAL
CORP.
MEGA MISSION
LIMITED
PARTNERSHIP
Stock
Stock
Stock
Fund
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
Financial
statement
account
Proceeds from new
issues
Proceeds from new
issues
Proceeds from new
issues
Open market
Proceeds from new
issues
Counter-party
-
484
300,000
74,000
-
-
-
-
-
-
Relationship
Units (thousand)/
bonds/
shares (thousand)
$-
-
2,051,350
2,991,258
6,341,144
Amount
(Note1)
(Note22)
50,000
300,000
12
28,500
Units (thousand)/
bonds/
shares (thousand)
Addition
2,222,100
1,665,000
3,000,000
132,462
$285,000
Amount
Note 1: The amounts of beginning and ending balances of financial assets at fair value through profit or loss and available for sale are recorded at the prevailing market prices.
Note 2: The disposal cost represents historical cost .
Note 3: Gain/Loss from disposal includes realized exchange gain/loss to which the ROC SFAS No. 34, "Financial Instruments: Recognition and Measurement'', is applied.
As for the gain/loss from disposal of financial assets at fair value through profit/loss transfers to gain/loss on the valuation of financial assets.
Note 4: Exercise of conversion rights of the Company's convertible bond classified as "Financial asset at fair value through profit or loss" on the balance sheet.
Note 5: Exercise of call back rights of the Company's convertible bond classified as "Financial asset at fair value through profit or loss" on the balance sheet.
Note 6: The ending balance includes stock dividend of 1,013 thousand shares.
Note 8: The ending balance includes stock dividend of 338 thousand shares.
Note 9: The gain/loss on disposal of investment includes adjustments to long-term investment additional paid-in capital of NT$(29,624) thousand.
HIGHLINK
TECHNOLOGY
CORP.
Stock
Type of
securities
Beginning balance
-
-
-
-
-
Units (thousand)/
bonds/
shares (thousand)
Amount
-
-
-
-
$-
Disposal
Cost
(Note 2)
-
-
-
-
$-
-
-
-
-
$-
(Note22)
124,000
600,000
496
28,500
from disposal
bonds/
(Note 3)
shares (thousand)
2,699,491
(Note22)
3,613,491
(Note21)
6,999,737
(Note20)
5,949,999
(Note19)
$225,624
(Note18)
Amount
(Note1)
Ending balance
Financial
statement
account
Counter-party
Relationship
Units (thousand)/
bonds/
shares (thousand)
Amount
(Note1)
Units (thousand)/
bonds/
shares (thousand)
Addition
Amount
Units (thousand)/
bonds/
shares (thousand)
Amount
Disposal
Cost
(Note 2)
from disposal
bonds/
(Note 3)
shares (thousand)
Amount
(Note1)
Ending balance
ULI ELECTRONICS
INC.
UNITRUTH
INVESTMENT
CORP.
TRIDENT
MICROSYSTEMS,
INC.
SIRF
TECHNOLOGY
HOLDINGS, INC.
Stock
Stock
Stock
Stock
Type of
securities
Financial
statement
account
assets,
noncurrent
assets,
noncurrent
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
Open market
Open market
Proceeds from new
issues
NVIDIA BVI
HOLDINGS LTD.
Counter-party
181
-
176,419
150,565
366,683
40,000
255
$252,307
Amount
(Note1)
12,655
-
Subsidiary
-
Relationship
Units (thousand)/
bonds/
shares (thousand)
Beginning balance
-
-
40,000
-
Units (thousand)/
bonds/
shares (thousand)
Addition
$-
-
-
400,000
Amount
181
255
-
12,655
Units (thousand)/
bonds/
shares (thousand)
185,353
218,469
-
$240,451
Amount
Disposal
24,652
71,775
-
$252,307
Cost
160,701
146,694
-
$(11,607)
(Note2)
-
-
80,000
-
Units (thousand)/
bonds/
Gain (Loss)
from disposal shares (thousand)
$-
-
-
743,210
(Note3)
Amount
(Note1)
Ending balance
Note 13: The disposal shares include stock dividend of 105 thousand shares.
Note 14: On December 1, 2006, Premier Image Technology Corporation merged into Hon Hai Precision Industry Co., Ltd.
Note 15: The ending balance of NT$(3,169,837) thousand is computed by deducting the Company's stocks held by Hsun Chieh (therefore accounted for as treasury stock) of NT$20,137,403 thousand from the Company's long-term investment beginning balance in Hsun Chieh of
NT$16,967,566 thousand.
Note 16: The gain/loss on disposal includes long-term investment additional paid-in capital adjustments of NT$14,149,221 thousand, cumulative translation adjustments of NT$(8,157) thousand, unrealized loss of available for sale NT$(1,644,252) thousand.
Note 17: The gain/loss on disposal includes long-term investment additional paid-in capital adjustments of NT$(28,612) thousand.
Note 18: The ending balance includes impairment loss of NT$(7,774) thousand, long-term investment loss of NT$(51,719) thousand and long-term investment additional paid-in capital adjustment of NT$117 thousand.
Note 19: The ending balance includes long-term investment loss of NT$(408,923) thousand, long-term investment additional paid-in capital adjustment of NT$1 thousand and cumulative translation adjustments of NT$(114,685) thousand.
Note 20: The ending balance includes long-term investment gain of NT$329,178 thousand, long-term investment additional paid-in capital adjustment of NT$2,543 thousand, cumulative translation adjustments of NT$10 thousand and unrealized gain on financial assets
of NT$676,748 thousand.
Note 21: The ending balance includes long-term investment loss of NT$(49,736) thousand, long-term investment additional paid-in capital adjustment of NT$930 thousand, cumulative translation adjustments of NT$(55,147) thousand and unrealized gain on financial assets
of NT$1,094 thousand.
Note 22: No shares since it belongs to partnership fund organization. The ending balance includes long-term investment loss of NT$504,936 thousand and cumulative translation adjustments of NT$(27,545) thousand.
Type of
securities
Beginning balance
181
182
EPITECH
TECHNOLOGY
CORP.
Stock
SUPERALLOY
INDUSTRIAL CO.,
LTD.
Financial assets
measured at cost,
noncurrent
Financial assets
measured at cost,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
Financial
statement
account
Counter-party
Taiwan Special
Opportunities Fund
III / Proceeds from
new issues
ANALOG
DEVICES
HOLDINGS B.V.
Open market
Open market
Open market
4,361
120
-
-
-
5,000
-
-
-
-
Relationship
$-
-
5,000
-
8,767
-
1,518
225,000
-
257,000
-
$128,913
Units (thousand)/
bonds/
shares (thousand) Amount
34,413
131,705
133,500
Units (thousand)/
bonds/
Amount
shares (thousand) (Note1)
Addition
-
240
(Note5)
-
5,461
(Note4)
1,340
-
232,190
-
111,552
$127,011
Units (thousand)/
bonds/
shares (thousand) Amount
Disposal
Cost
-
34,413
-
93,633
$113,977
-
197,777
-
17,919
$13,034
5,000
-
13,128
-
178
225,000
-
407,627
-
$21,004
Units (thousand)/
bonds/
Gain (Loss)
Amount
from disposal shares (thousand) (Note1)
Ending balance
Note 1: The amounts of beginning and ending balances of available-for-sale financial assets are recorded at the prevailing market prices.
Note 2: The loss on disposal of investment includes cumulative translation adjustments of NT$249 thousand.
Note 3: The ending balance includes long-term investment loss of NT$(44,024) thousand, additional paid-in capital adjustments of NT$17,428 thousand due to disproportionate changes in shareholding, cumulative translation adjustments of NT$(99) thousand, retained earning
adjustments of NT$246 thousand and unrealized loss of available-for-sale financial assets of NT$2,976 thousand.
Note 4: The disposal shares includes stock dividend of 461 thousand shares.
Note 5: 2 for 1 Stock splits.
Stock
StockINTEGRANT
Preferred stock TECHNOLOGIES,
INC.
RECHI PRECISION
CO., LTD.
Stock
SIMPLO
TCHNOLOGY CO.,
LTD.
Stock
Type of
securities
Beginning balance
ATTACHMENT 4 (Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$100 million or 20 percent of capital stock for the year December 31, 2006)
PROMOS
TECHNOLOGIES
INC.
Available-forSIMPLO
TECHNOLOGY CO., sale financial
assets,
LTD.
TATUNG CO.
EPITECH
TECHNOLOGY
CORP.
TXC CORP.
KINSUS
INTERCONNECT
TECHNOLOGY
CORP.
CORETRONIC
CORP.
Available-forA-DATA
assets,
LTD.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
noncurrent
assets,
noncurrent
assets,
noncurrent
CHINA
DEVELOPMENT
FINANCIAL
HOLDING CORP.
Stock
assets,
noncurrent
SERCOMM CORP.
Financial
statement
account
Stock
Type of
securities
Open market
Open market
Open market
Open market
Open market
Open market
Open market /
Private
Open market
Open market
Open market
Counter-party
-
-
-
-
-
-
-
-
-
-
Relationship
-
2,867
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$75,499
Amount
(Note1)
-
Units (thousand)/
bonds/
shares (thousand)
Beginning balance
1,741
5,983
1,300
4,208
10,413
47,372
5,520
19,500
23,025
5,077
Units (thousand)/
bonds/
shares (thousand)
Addition
211,155
245,799
126,049
166,996
298,327
583,045
330,234
238,307
292,259
$126,954
Amount
1,909
(Note8)
-
900
4,460
(Note4)
-
9,220
300
19,500
-
2,600
Units (thousand)/
bonds/
shares (thousand)
225,036
-
86,560
217,570
-
123,401
30,403
286,030
-
$70,109
Amount
Disposal
204,978
(Note9)
-
76,347
162,789
(Note5)
-
113,478
25,617
238,307
-
$59,874
Cost
20,058
-
10,213
54,781
-
9,923
4,786
47,723
-
$10,235
-
6,007
(Note7)
566
(Note6)
-
10,413
38,152
5,220
-
23,596
(Note3)
6,192
(Note2)
-
254,102
54,365
-
323,324
557,019
615,960
-
353,936
$168,408
Amount
(Note1)
Ending balance
Units (thousand)/
bonds/
Gain (Loss)
183
184
SMEDIA
TECHNOLOGY
CORP.
YUNG LI
INVESTMENTS,
INC.
ASIA PACIFIC
MICROSYSTEMS,
INC.
SUPERALLOY
INDUSTRIAL CO.,
LTD.
Stock
Stock
Stock
Stock
EPITECH
TECHNOLOGY
CORP.
Available-forTOPOINT
assets,
LTD.
Stock
Convertible
bonds
AVERMEDIA
TECHNOLOGIES,
INC.
Stock
Financial assets
at fair value
through profit or
loss, noncurrent
Financial assets
measured at cost,
noncurrent
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
Financial assets
measured at cost,
noncurrent
noncurrent
assets,
noncurrent
assets,
noncurrent
POWER QUOTIENT
INTERNATIONAL
CO., LTD.
Stock
assets,
noncurrent
ELITE MATERIAL
CO., LTD.
Financial
statement
account
Stock
Type of
securities
Open market
Taiwan Special
Opportunities Fund
III / Proceeds from
new issues
Proceeds from new
issues
Proceeds from new
issues
Proceeds from new
issues
Open market /
Proceeds from new
issues
Open market
Open market
Open market
Counter-party
-
-
-
-
-
-
-
-
-
Relationship
-
-
-
-
-
-
-
-
-
144,832
2,263
-
-
-
-
-
Amount
(Note1)
-
-
Units (thousand)/
bonds/
shares (thousand)
Beginning balance
2,500
10,650
10,000
0.20
7,084
2,778
5,012
12,483
6,874
Units (thousand)/
bonds/
shares (thousand)
Addition
250,000
479,250
100,000
200,000
106,266
145,609
179,713
207,004
$102,424
Amount
-
-
-
-
-
-
927
12,483
6,874
Units (thousand)/
bonds/
shares (thousand)
-
-
-
-
-
-
36,788
306,400
$114,860
Amount
Disposal
-
-
-
-
-
-
33,239
204,961
(Note10)
$102,424
Cost
-
-
-
-
-
-
3,549
101,439
$12,436
2,500
10,650
10,000
0.20
7,084
5,430
(Note11)
4,085
-
-
-
$-
293,250
479,250
100,000
202,390
(Note13)
99,220
(Note12)
395,317
163,196
Amount
(Note1)
Ending balance
Units (thousand)/
bonds/
Gain (Loss)
Financial
statement
account
Counter-party
Relationship
Units (thousand)/
bonds/
shares (thousand)
Amount
(Note1)
Units (thousand)/
bonds/
shares (thousand)
Addition
Amount
StockFORCE10
Preferred stock NETWORKS, INC.
Type of
securities
UMC CAPITAL CORP.
Financial assets
measured at cost,
noncurrent
Financial
statement
account
Proceeds from new
issues
Counter-party
-
Relationship
-
Units (thousand)/
bonds/
shares (thousand)
Amount
(Note1)
Beginning balance
$-
4,373
Units (thousand)/
bonds/
shares (thousand)
Addition
USD 4,500
Amount
Note1: The amounts of beginning and ending balances of financial assets at fair value through profit or loss and available for sale are recorded at the prevailing market prices.
Note2: The ending balance includes stock dividend of 848 thousand shares.
Note4: The disposal shares include stock dividend of 252 thousand shares.
Note5: The disposal cost includes cash dividend of NT$(4,207) thousand.
Note12: The ending balance includes long-term investment loss of NT$(7,057) thousand and cumulative translation adjustments of NT$11 thousand.
Note13: The ending balance includes long-term investment gain of NT$2,390 thousand.
Type of
securities
Beginning balance
-
Units (thousand)/
bonds/
shares (thousand)
Units (thousand)/
bonds/
shares (thousand)
Amount
$-
Disposal
Amount
Disposal
Cost
Cost
$-
4,373
Units (thousand)/
bonds/
Gain (Loss)
$-
Amount
(Note1)
USD 4,500
Amount
(Note1)
Ending balance
Units (thousand)/
bonds/
Gain (Loss)
Ending balance
185
186
None
Name of properties
Transaction date
Transaction
amount
Payment
status
Counter-party
Relationship
Former holder of
property
Relationship
between former
holder and acquirer
of property
Date of
transaction
Transaction
amount
Where counter-party is a related party, details of prior transactions
ATTACHMENT 5 (Acquisition of individual real estate with amount exceeding the lower of NT$100 million or 20 percent of capital stock for the year ended December 31, 2006)
Price reference
Date of acquisition
Other
and status of
commitments
utilization
None
Names of properties
Transaction date
Date of original
acquisition
Book value
Transaction
amount
Status of
proceeds
collection
Gain (Loss) from
disposal
Counter-party
Relationship
ATTACHMENT 6 (Disposal of individual real estate with amount exceeding the lower of NT$100 million or 20 percent of capital stock for the year ended December 31, 2006)
Reason of disposal
Price reference
Other commitments
187
188
Related party
UNITED MICROELECTRONICS
CORPORATION
Investor company
Relationship
Subsidiary's investee company
Purchases
Purchases (Sales)
USD 260,578
Amount
144,859
Sales
Net 60 Days
Net 60 Days
Net 60 Days
Term
100.00
Net 60 Days
Term
0.14 Month-end 45 Days
2.72
8.12
52.33
Transactions
Percentage of total
purchases (sales) (%)
226,662
688,955
Sales
Investee company
322,726
Sales
Investee company
ITE TECH. INC.
2,046,127
2,835,621
8,455,595
$54,476,329
Amount
Transactions
Percentage of total
Sales
Sales
Sales
Investee company
SILICON INTEGRATED SYSTEMS
CORP.
Sales
Investee company
Sales
Investee company
Purchases (Sales)
(EUROPE) B.V.
UMC JAPAN
Relationship
UMC GROUP (USA)
Related party
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Term
N/A
Unit price
N/A
Term
Details of non-arm's length
transaction
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Unit price
transaction
ATTACHMENT 7 (Related party transactions for purchases and sales amounts exceeding the lower of NT$100 million or 20 percent of capital stock for the year ended December 31, 2006)
0.10
0.45
0.32
0.88
0.75
3.05
5.58
38.89
USD 22,584
100.00
Notes and accounts receivable (payable)
Percentage of total
Balance
Note
receivables (%)
12,869
59,860
41,829
115,670
98,861
401,039
734,440
$5,118,532
Percentage of total
Balance
Note
receivables (%)
Investor company
Investee of UMC
UMC GROUP(USA)
Relationship
CORPORATION
Related party
Investee of UMC
UMC JAPAN
UMC JAPAN
Investor company
Relationship
CORPORATION
Related party
UMC GROUP (USA)
Sales
Purchases
Purchases (Sales)
Purchases
Purchases
Purchases (Sales)
JPY
463,508
JPY 9,881,648
1.35
55.48
Percentage of total
0.23
99.77
Percentage of total
Transactions
3,927
Amount
USD
USD 1,673,665
Amount
Transactions
Net 55 Days
Net 60 Days
Term
Net 55 Days
Net 60 Days
Term
N/A
N/A
Term
N/A
N/A
Unit price
N/A
N/A
Term
transaction
N/A
N/A
Unit price
transaction
ATTACHMENT 7 (Related party transactions for purchases and sales amounts exceeding the lower of NT$100 million or 20 percent of capital stock for the year December 31, 2006)
617
0.39
99.50
Percentage of total
receivables (%)
Note
JPY
73,364
JPY 1,458,726
Balance
0.78
33.05
Percentage of total
receivables (%)
Note
USD
USD 157,396
Balance
189
190
98,861
CORP.
-
Investee company
401,039
65,746
-
Investee company
734,440
$5,118,532
Accounts
receivable
1,299
-
318
4
$-
Other
receivables
Ending balance
49,924
-
Investee company
$-
(EUROPE) B.V.
UMC JAPAN
Relationship
Investee company
Notes
receivable
UMC GROUP (USA)
Related party
Total
100,160
115,670
401,357
734,444
$5,118,532
3.07
5.90
7.72
13.22
11.26
Turnover rate
(times)
-
-
Collection status
-
-
7 Credit Collecting
-
$-
20,475 Credit Collecting
Amount
Overdue receivables
ATTACHMENT 8 (Receivables from related parties with amounts exceeding the lower of NT$100 million or 20 percent of capital stock as of December 31, 2006)
40,741
99,735
175,792
531,115
$4,900,961
-
-
1,996
-
$-
Amount received
in subsequent
Allowance for
period
doubtful accounts
Taipei, Taiwan
Taipei, Taiwan
FORTUNE VENTURE CAPITAL
CORP.
UNITED MICRODISPLAY
OPTRONICS CORP.
UMC JAPAN
British Virgin
Islands
Taipei, Taiwan
HSUN CHIEH INVESTMENT CO.,
LTD.
HOLTEK SEMICONDUCTOR INC. Hsinchu Science
Park, Taiwan
ITE TECH. INC.
Hsinchu Science
Park, Taiwan
PACIFIC VENTURE CAPITAL CO., Taipei, Taiwan
LTD.
Singapore
Hsinchu Science
Park, Taiwan
Chiba, Japan
Singapore
Cayman, Cayman
Islands
Apia, Samoa
Address
Sunnyvale,
California, USA
The Netherlands
CORP. (SAMOA)
UMCI LTD.
(EUROPE) B.V.
UMC CAPITAL CORP.
Investee company
UMC GROUP (USA)
357,628
186,898
IC design and production
integrated circuits
21,000 USD
4,000 SGD
150,000
20,994,400 JPY
1,008,078
4,999,940
6,000,000
839,880 USD
1,000 USD
124,000 USD
5,421 USD
186,898
357,628
921,241
21,000
-
300,000
20,537,634
1,008,078
4,999,940
3,000,000
839,880
1,000
74,000
5,421
Ending balance
Beginning balance
16,438 USD
16,438
336,241
USD
SGD
JPY
USD
USD
USD
USD
USD
Investment holding
Investment holding
LCOS
integrated circuits
Investment holding
integrated circuits
Investment holding
Investment holding
IC Sales
Main businesses and products
IC Sales
Initial Investment (Note 1)
ATTACHMENT 9 (Names, locations and related information of investee companies as of December 31, 2006)
24,229
51,939
33,624
21,000
4,000
30,000
496
64,313
499,994
600,000
880,006
280
124,000
9
21.80
24.45
36.49
42.00
49.94
49.99
50.09
81.76
99.99
100.00
100.00
100.00
100.00
100.00
Percentage
Number of
of
shares
ownership
(thousand)
(%)
16,438
100.00
341,268
878,747
4,674,311
959,542
81,402
127,379
5,949,999
167,217
11,114,198
6,999,737
86
8,480
3,613,491
284,084
Book value
$1,006,496
Investment as of December 31, 2006
251,307
1,058,371
215,305
306,447
(5,097)
(32,936)
(833,067)
(186,142)
374,046
329,178
12,463
(5,588)
(49,736)
7,058
Net income
(loss) of
investee
company
$260,573
47,559
233,441
81
128,708
(2,545)
(20,964)
(408,923)
(158,511)
379,890
329,178
12,463
(5,588)
(49,736)
7,058
Investment
income
(loss)
recognized
$260,573
Note2
Note
191
192
Investment holding
USD
67,500 USD
-
135,000
248,795
248,795
135,000
Beginning balance
$-
Ending balance
$285,000
-
16,200
8,758
45.00
11.86
16.48
Percentage
Number of
of
shares
ownership
(thousand)
(%)
28,500
18.97
2,699,491
57,062
53,710
Book value
$225,624
NEXPOWER TECHNOLOGY
CORP.
UCA TECHNOLOGY INC.
Taipei County,
Taiwan
Hsinchu, Taiwan
Taoyuan County,
Taiwan
Hsinchu, Taiwan
ANOTO TAIWAN CORP.
Address
Taipei, Taiwan
Investee company
solar power batteries
Design of MP3 player chip
Tablet transmission systems
and chip-set
RF IC Design
Investment holding
8,000
99,311
85,471
39,200
Ending balance
$800,000
8,000
49,311
85,471
-
Beginning balance
$400,000
Initial Investment
800
11,285
10,187
3,920
40.00
42.38
44.29
49.00
Percentage
Number of
of
shares
ownership
(thousand)
(%)
80,000
100.00
11,976
42,288
33,531
32,622
Book value
$743,210
Note 1: Initial investment amounts denominated in foreign currencies are expressed in thousands.
Note 2: Based on the resolution of the board of directors meeting on August 26, 2004, the businesses, operations and assets of UMCI LTD. were transferred to the Branch as of April 1, 2005.
Note 3: No shares since it belongs to partnership fund organization.
Hsinchu Science
Park, Taiwan
Cayman Islands
MEGA MISSION LIMITED
PARTNERSHIP
electronic parts
Cartography chip design and
production
IC design, production and sales
Investee company
Address
HIGHLINK TECHNOLOGY CORP. Miao-Li County,
Taiwan
XGI TECHNOLOGY INC.
Hsinchu, Taiwan
9,983
(84,925)
(69,000)
(13,425)
Net income
(loss) of
investee
company
$(44,024)
1,247,081
(61,367)
(175,804)
Net income
(loss) of
investee
company
$(277,489)
3,995
(36,459)
(30,559)
(6,578)
Investment
income
(loss)
recognized
$(44,024)
504,936
(2,519)
(29,020)
Investment
income
(loss)
recognized
$(51,719)
Note
Note3
Note
Hsinchu, Taiwan
Taoyuan County,
Taiwan
Hsinchu, Taiwan
Hsinchu, Taiwan
Hsinchu, Taiwan
Taipei County,
Taiwan
Hsinchu County,
Taiwan
Hsinchu, Taiwan
WALTOP INTERNATIONAL
CORP.
TERA XTAL TECHNOLOGY
CORP.
CRYSTAL MEDIA INC.
Hsinchu, Taiwan
XGI TECHNOLOGY INC.
Taiwan
Hsinchu Science
Park, Taiwan
MOBILE DEVICES INC.
U-MEDIA COMMUNICATIONS,
INC.
Hsinchu County,
Taiwan
Taipei County,
Taiwan
Samoa
Address
Hsinchu, Taiwan
Investee company
Design and manufacturing of
cartography chip
electronic parts
PHS &GSM/PHS dual mode
B/B Chip
High brightness LED package
and Lighting module R&D and
manufacture
LED
WLAN, Broadband, Digital
Home ODM
Design, manufacturing and
sales of IC
IC design
Design of VOIP network
phones
Multimedia co-processor
Lithium Tantalate and Niobate,
Optical Grade Lithium Niobate
Lithium Tetraborate and
Sapphire
Tablet PC module, Pen LCD
Monitor/module
Design of VOIP Telephone
USD
792
270,483
291,621
54,300
56,102
45,750
39,900
64,544
41,645
93,478
50,629
85,200
90,000
912
-
270,483
291,621
-
50,000
45,750
-
53,340
54,208
90,240
17,206
-
-
-
Beginning balance
$44,129
Initial Investment
Ending balance
$91,194
55
6,281
23,405
4,525
5,457
5,000
3,500
6,033
3,646
9,045
4,493
5,200
6,000
2,500
0.04
11.83
17.08
18.10
19.41
20.84
21.21
21.42
21.45
23.57
25.15
26.00
30.00
35.80
755
32,187
119,225
47,559
20,983
19,288
34,349
36,806
52,711
37,525
37,429
88,134
88,093
12,610
Percentage
Number of
of
shares
ownership
(thousand)
(%)
Book value
10,212
36.54
$17,224
(277,489)
(175,804)
(61,367)
(57,062)
(140,837)
(46,892)
(41,909)
(83,173)
37,313
(145,821)
(20,383)
2,015
(13,516)
(32,976)
Net income
(loss) of
investee
company
$(84,661)
(37)
(18,775)
(3,624)
(6,743)
(28,677)
(10,143)
(7,108)
(19,674)
8,974
(41,037)
(5,154)
2,934
(1,907)
(17,175)
Investment
income
(loss)
recognized
$(28,052)
Note
193
194
Taoyuan County,
Taiwan
Hsinchu, Taiwan
Hsinchu County,
Taiwan
Hsinchu, Taiwan
Taipei County,
Taiwan
Hsinchu, Taiwan
Investee company
CORP.
CORP.
CRYSTAL MEDIA INC.
UCA TECHNOLOGY INC.
INC.
Address
Hsinchu, Taiwan
Home ODM
LED
phones
Monitor/module
Sapphire
electronic parts
Miao-Li County,
Taiwan
Hsinchu, Taiwan
Investment
Address
Taipei, Taiwan
Investee company
221,920
106,266
174,596
13,800
11,910
24,057
14,820
16,493
19,800
Ending balance
$30,000
13,800
5,390
24,057
-
4,688
-
Beginning balance
$-
Initial Investment
Beginning balance
$-
Initial Investment
Ending balance
$200,000
11.62
18.46
134,999
99,220
1,250
1,585
2,570
1,300
1,587
1,800
5.21
5.95
6.70
7.88
8.88
9.00
4,822
7,840
17,085
12,758
13,220
20,816
Percentage
Number of
of
shares
ownership
(thousand)
(%)
Book value
2,000
10.00
$29,364
17,460
7,084
Percentage
Number of
of
shares
ownership
(thousand)
(%)
Book value
0.20
44.44
$202,390
(46,892)
(84,925)
(145,821)
(41,909)
(20,383)
2,015
Net income
(loss) of
investee
company
$(13,516)
(277,489)
(145,821)
Net income
(loss) of
investee
company
$5,378
(2,536)
(5,189)
(11,692)
(2,640)
(1,820)
1,016
Investment
income
(loss)
recognized
$(636)
(35,899)
(7,057)
Investment
income
(loss)
recognized
$2,390
Note
Note
Hsinchu, Taiwan
Hsinchu County,
Taiwan
Hsinchu, Taiwan
Taipei County,
Taiwan
Hsinchu, Taiwan
MOBILE DEVICES INC.
British Virgin
Islands
U.S.A.
UC FUND II
ACHIEVE MADE
INTERNATIONAL LTD.
ECP VITA LTD.
Address
Sunnyvale,
California, U.S.A.
British Virgin
Islands
British Virgin
Islands
Investee company
UMC CAPITAL (USA)
UMC CAPITAL CORP.
XGI TECHNOLOGY INC.
Address
Taipei County,
Taiwan
Investee company
IC design
Investment holding
Internet Content Provider
Insurance
Investment holding
cartography chip
IC design
RF IC Design
B/B chip
manufacture
USD
USD
USD
USD
USD
26,400
5,600
6,950
11,463
6,617
2,500 USD
3,850 USD
1,000 USD
2,500
3,850
-
1,000
Beginning balance
200 USD
200
1,000 USD
Ending balance
Initial Investment
26,400
5,600
6,950
11,463
6,617
Beginning balance
$-
Initial Investment
Ending balance
$14,700
3.31
3.55
4.35
4.45
4.65
10,788
3,960
3,292
4,093
2,193
3,125
5,000
508
1,000
23.30
35.45
44.44
100.00
USD
USD
USD
USD
2,016
3,772
948
1,550
Percentage
Number of
of
shares
ownership
(thousand)
(%)
Book value
200
100.00 USD
326
1,760
1,000
1,000
1,250
1,300
Percentage
Number of
of
shares
ownership
(thousand)
(%)
Book value
1,225
4.90
$12,875
USD
USD
USD
USD
USD
(2,168) USD
(918) USD
(118)
(515)
(326)
(52)
286
Investment
income
(loss)
recognized
USD
30
(5,835)
(3,051)
(3,000)
(6,812)
(4,225)
Investment
income
(loss)
recognized
$(1,825)
286 USD
Net income
(loss) of
investee
company
USD
30
(175,804)
(83,173)
(69,000)
(140,837)
(84,661)
Net income
(loss) of
investee
company
$(57,062)
Note
Note
195
198 Representation Letter
202 Consolidated Statements of Changes in Stockholders’ Equity
203 Consolidated Statements of Cash Flows
205 Notes to Consolidated Financial Statements
196
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT AUDITORS
FOR THE YEARS ENDED
DECEMBER 31, 2006 AND 2005
Address: No. 3 Li-Hsin Road II, Hsinchu Science Park, Hsinchu City, Taiwan, R.O.C.
Telephone: 886-3-578-2258
The reader is advised that these financial statements have been prepared originally in Chinese. In the event of
a conflict between these financial statements and the original Chinese version or difference in interpretation
between the two versions, the Chinese language financial statements shall prevail.
197
Letter of Representation
We confirm, to the best of our knowledge and belief, the following representations:
1. The companies represented in the consolidated financial statements of “United Microelectronics Corporation and
its Affiliated Enterprises” for the year ended December 31,
2006 made in accordance with “The Rules Governing Preparation of Affiliated Enterprises Consolidated Operating
Report, Affiliated Enterprises Consolidated Financial Statements and Relationship Report” are the identical companies
represented in the consolidated financial statements of
“United Microelectronics Corporation and Subsidiaries” for
the year ended December 31, 2006 made in accordance with
ROC Statement of Financial Accounting Standards No. 7.
2. The disclosures to the consolidated financial statements of “United Microelectronics Corporation and Its
Affiliated Enterprises” for the year ended December 31, 2006
made in accordance with “The Rules Governing Preparation
of Affiliated Enterprises Consolidated Operating Report,
Affiliated Enterprises Consolidated Financial Statements
and Relationship Report” are fully presented in the consoli-
198
dated financial statements of “United Microelectronics Corporation and Subsidiaries” for the year ended December 31,
2006 made in accordance with ROC Statement of Financial
Accounting Standards No. 7.
3. Accordingly, we will not present separately a set of
consolidated financial statements of “United Microelectronics Corporation and Its Affiliated Enterprises” for the year
ended December 31, 2006 made in accordance with “The
Rules Governing Preparation of Affiliated Enterprises Consolidated Operating Report, Affiliated Enterprises Consolidated Financial Statements and Relationship Report”.
Jackson Hu
Chairman
February 9th, 2007
REPORT OF INDEPENDENT AUDITORS
English Translation of a Report Originally Issued in Chinese
To the Board of Directors and Stockholders of
We have audited the accompanying consolidated balance sheets of United Microelectronics Corporation and Subsidiaries as
of December 31, 2006 and 2005, and the related consolidated statements of income, change in stockholders’ equity and cash
flows for the years ended December 31, 2006 and 2005. The consolidated financial statements are the responsibility of United
Microelectronics Corporation’s management. Our responsibility is to express an opinion on these financial statements
based on our audits. As described in Note 4(11) to the consolidated financial statements, certain long-term investments were
accounted for under the equity method based on the December 31, 2006 and 2005 financial statements of the investees, which
were audited by other auditors. Our opinion insofar as it relates to the investment income amounting to NT$848 million and
NT$1,031 million for the years ended December 31, 2006 and 2005, respectively, and the related long-term investment balances
of NT$1,719 million and NT$6,253 million as of December 31, 2006 and 2005, respectively, is based solely on the reports of the
other auditors.
We conducted our audits in accordance with auditing standards generally accepted in the Republic of China and
“Guidelines for Certified Public Accountants’ Examination and Reports on Financial Statements”, which 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,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall
consolidated 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 other auditors, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial position of United Microelectronics Corporation and
Subsidiaries as of December 31, 2006 and 2005, and the results of their consolidated operations and their consolidated cash
flows for the years ended December 31, 2006 and 2005, in conformity with the “Business Entity Accounting Law”, “Guidelines
Governing the Preparation of Financial Reports by Securities Issuers” and accounting principles generally accepted in the
Republic of China.
As described in Note 3 to the consolidated financial statements, effective from January 1, 2006, United Microelectronics
Corporation and Subsidiaries have adopted the ROC Statement of Financial Accounting Standards No. 34, “Financial
Instruments: Recognition and Measurement” and No. 36, “Financial Instruments: Disclosure and Presentation” to account for
the financial instruments.
Corporation and Subsidiaries have adopted the ROC Statement of Financial Accounting Standards No. 35, “Accounting for Asset
Impairment” to account for the impairment of its assets. Effective from January 1, 2006, goodwill is no longer subject to amortization.
Corporation and Subsidiaries have adopted the amendments to the ROC Statement of Financial Accounting Standards No. 5,
“Accounting for Long-term Equity Investment”.
February 9, 2007
Taipei, Taiwan
Republic of China
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows
in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards,
procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China.
199
200
2
2, 4 (24)
2, 4 (13), 4 (14), 6
Other assets
Deferred charges
Other assets - others
Total other assets
Total assets
2, 3
2, 4 (14)
2
2, 3, 4 (12), 7
2, 3, 4 (8)
2, 3, 4 (9), 4 (14)
2, 3, 4 (4)
2, 3, 4 (10), 4 (14)
2, 3, 4 (11), 4 (14)
2, 4 (24)
6
2, 4 (1)
2, 3, 4 (2)
2, 3, 4 (3)
2, 3, 4 (4)
4 (5)
5
2, 4 (6)
2,5
2
2, 4 (7)
Notes
Intangible assets
Goodwill
Other intangible assets
Land
Buildings
Total cost
Financial assets at fair value through profit or loss, noncurrent
Current assets
Notes receivable
Other receivables
Inventories, net
Prepaid expenses
Restricted deposits
Assets
$
$
$
$
Other liabilities
Deposits-in
Deferred income tax liabilities, noncurrent
Bonds payable
347,049,259
Total liabilities and stockholders' equity
Total liabilities
1,893,522
21,260,902 Capital
386,920,282
Common stock
89,580
2,804,967 Additional Paid-in Capital
43,037
Premiums
413,012,290
(269,508,148)
15,609,497 Retained earnings
159,113,639
Legal reserve
Special reserve
3,491,072 Adjustment items to stockholders' equity
359,556
182,793
4,033,421 Treasury stock
Total stockholders' equity of holding company
Minority interests
2,034,569
Total stockholders' equity
4,012,314
2,196,238
8,243,121
6,812,103
1,116,806
6,574,800
16,262,856
30,000
30,796,565
108,626,800
2,468,968
2,414,153
193
62,136
13,628,434
1,420,977
891,058
10,712,535
694,669
3,386,790
555,800
144,862,513
Liabilities and Stockholders' Equity
Current liabilities
Short-term loans
Accounts payable
Income tax payable
Accrued expenses
Other payables
Deferred income tax liabilities, current
The accompanying notes are an integral part of the consolidated financial statements.
367,653,461
1,501,064
4,184,091
2,332,154
8,017,309
3,498,687
1,330
3,500,017
1,879,442
21,076,844
415,225,873
90,706
2,964,369
42,968
441,280,202
(311,696,923)
22,244,850
151,828,129
474,738
52,311,172
7,515,945
11,662,599
71,964,454
93,853,208
8,538,007
1,110,422
3,733
50,648
14,028,084
323,645
849,742
10,878,182
762,799
1,945,082
132,343,552
As of December 31,
2006
2005
English Translation of Consolidated Financial Statements Originally Issued in Chinese
UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
2, 4 (11), 4 (19), 4 (21), 6
2, 4 (9)
4 (19), 4 (22)
2, 4 (19)
2, 4 (19), 4 (20), 4 (22)
2, 4 (24)
2
2, 4 (18)
2, 4 (17)
2, 4 (17)
2, 4 (24)
7
2
4 (15), 6
2, 3, 4 (16)
Notes
$
$
367,653,461
(824,922)
27,557,845
(29,394,664)
291,164,871
6,238,018
297,402,889
16,699,508
322,150
17,774,335
61,070,555
8,938
6,627,794
191,311,927
11,405
70,250,572
3,115,420
12,282
52,585
13,245
570,174
3,763,706
30,383,076
30,383,076
342,549
985,267
4,864,771
2,071,394
7,025,328
77,319
10,130,367
9,068,283
62
1,538,450
36,103,790
$
$
347,049,259
(241,153)
(80,989)
(51,332,329)
258,283,553
6,336,685
264,620,238
15,996,839
1,744,171
8,831,782
64,600,076
20,781,523
197,947,033
36,600
82,429,021
3,014,998
18,664
51,870
691,290
3,776,822
41,692,159
41,692,159
6,136,336
95,634
5,501,159
277,953
7,932,949
140,735
5,315,695
10,250,000
1,309,579
36,960,040
As of December 31,
2006
2005
CONSOLIDATED STATEMENTS OF INCOME
(Expressed in Thousands of New Taiwan Dollars, Except for Earnings per Share )
Operating revenues
Sales revenues
ΓΓNet Sales
ΓΓNet operating revenues
Operating costs
Cost of goods sold
Operating costs
Gross profit
ΓΓGross profit-net
Operating expenses
ΓSales and marketing expenses
ΓΓSubtotal
Interest revenue
Dividend income
Exchange gain, net
Other income
ΓΓSubtotal
Interest expense
Financial expenses
Impairment loss
Other losses
Subtotal
Income tax expense
Net income
Attributable to:
Shareholders of the parent
Minority interests
Net income
2005
2006
Notes
2, 5
$109,857,465
(867,150)
108,990,315
3,013,504
112,003,819
$97,172,846
(1,959,994)
95,212,852
5,103,130
100,315,982
(88,452,676)
(2,198,540)
(90,651,216)
21,352,603
(105,892)
118,815
21,365,526
(86,409,480)
(4,266,217)
(90,675,697)
9,640,285
(118,815)
151,192
9,672,662
(3,365,678)
(3,422,340)
(9,418,877)
(16,206,895)
5,158,631
(3,738,469)
(4,387,406)
(9,633,607)
(17,759,482)
(8,086,820)
1,562,704
1,178,103
950,546
331,767
28,651,109
316,006
750,378
306,140
862,750
34,909,503
1,055,138
1,096,985
1,051,813
177,397
10,276,618
295,179
837,315
58,853
1,038,821
15,888,119
(648,408)
(107,962)
(1,089,490)
(230,757)
(1,330,293)
(73,799)
(3,480,709)
36,587,425
(3,261,622)
33,325,803
(1,188,515)
(1,098,854)
(218,525)
(268,985)
(460,542)
(148,606)
(2,195,512)
5,605,787
(67,052)
5,538,735
(112,898)
4 (23)
2
2
4 (23), 5
2, 4 (11)
2
2
2
2
2
2
4 (12)
2
2
2, 3, 4 (14)
2
2, 4 (24)
3
Pre-tax
Net income attributable to shareholders of the parent
2, 4 (25)
2, 4 (25)
$32,137,288
$5,425,837
$32,619,313
(482,025)
$32,137,288
$7,026,692
(1,600,855)
$5,425,837
Post-tax
Pre-tax
Post-tax
$
1.99
$
1.81
$
0.38
$
0.38
$
1.92
$
1.75
$
0.37
$
0.37
201
202
17,587,364
Stock dividends
-
2, 4 (19), 4 (21)
2, 4 (19), 4 (21)
(10,000,000)
-
-
2
Adjustment of additional paid-in capital accounted for under the equity method
Adjustment of funds and investments disposal
Changes in minority interests
4 (19)
2
2
2, 4 (20)
-
Changes in unrealized gain on available-for-sale financial assets
$
$
11,405
-
-
(36,600)
11,405
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,600
-
-
(4,040)
36,600
-
-
-
-
-
-
-
-
-
-
-
4,040
Collected in
Advance
$
$
67,707,287
-
-
-
634,737
-
-
66,910
(14,091,043)
(62,686)
-
(57,972)
(3,269,100)
-
(895,158)
-
-
-
-
-
-
-
-
85,381,599
-
-
-
654,314
-
(28,491)
-
(177,419)
-
-
-
-
-
-
-
84,933,195
Additional
Paid-in Capital
$ 16,699,508
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
702,669
-
15,996,839
-
-
-
-
-
-
-
-
-
-
-
-
-
3,184,338
$ 12,812,501
Legal Reserve
$
$
322,150
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,422,021)
-
-
1,744,171
-
-
-
-
-
-
-
-
-
-
-
-
1,653,300
-
90,871
Special Reserve
Retained Earnings
$ 17,774,335
-
-
-
-
-
-
-
-
-
32,619,313
(9,198,144)
(6,371,128)
-
-
(458,455)
(305,636)
(6,324)
(895,158)
(7,161,267)
1,422,021
(702,669)
-
8,831,782
-
-
-
-
-
7,026,692
(1,509,640)
-
(1,972,855)
(27,006)
(17,587,364)
(1,758,736)
(1,653,300)
(3,184,338)
$ 29,498,329
Unappropriated
Earnings
$ 191,311,927
-
-
36,600
1,079,523
-
2, 4 (9)
Cash dividends allocated to subsidaries
-
2
Net income in 2006
-
2, 4 (21)
895,158
Adjustment of treasury stock due to loss of control over subsidiary
4 (19)
Additional paid-in capital transferred to common stock
458,455
Employee bonus - cash
895,158
Stock dividends
-
-
Cash dividends
-
-
4 (22)
Special reserve
3 (3)
The effect of adopting SFAS NO. 34
197,947,033
-
-
4,040
954,095
-
Legal reserve
4 (19)
Changes in minority interests
2
2, 4 (20)
-
2
2
Adjustment of additional paid-in capital accounted for under the equity method
-
Net income in 2005
(491,140)
1,972,855
2, 4 (21)
-
-
Cash dividends
-
177,919,819
-
$
Special reserve
4 (22)
Balance as of January 1, 2005
Common Stock
Legal reserve
Notes
4 (19)
Capital
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
$
$
27,557,845
-
-
-
-
9,301,230
1,066,672
-
-
-
-
(6,826,238)
-
-
-
-
-
-
-
-
-
-
24,097,170
(80,989)
-
-
-
343,724
-
-
-
-
-
-
-
-
-
-
(424,713)
Unrealized Gain/Loss
on Financial
Instruments
$
$
(824,922)
-
(603,486)
-
-
-
-
-
8,170
-
-
-
-
-
-
-
-
-
-
-
-
-
11,547
(241,153)
1,078,299
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,319,452)
Cumulative
Translation
Adjustment
$ (29,394,664)
-
-
-
-
-
-
-
-
-
-
29,583,776
19,640,228
(27,286,339)
-
-
-
-
-
-
-
-
-
8,878
(51,332,329)
-
-
-
-
-
-
2,178,199
(16,378,692)
-
-
-
-
-
-
$ (37,140,714)
Treasury Stock
$
$
6,238,018
383,358
-
-
-
-
-
-
-
-
(482,025)
-
-
-
-
-
-
-
-
-
-
-
-
(791,337)
6,336,685
-
-
-
-
-
(1,600,855)
-
-
-
-
-
-
-
-
8,728,877
Minority
Interests
Total
$ 297,402,889
383,358
(603,486)
-
1,725,665
9,301,230
1,066,672
66,910
(14,082,873)
(62,686)
32,137,288
13,501,422
-
(27,286,339)
-
-
(305,636)
(6,324)
-
(7,161,267)
-
-
24,108,717
(782,459)
264,620,238
1,078,299
-
1,645,009
343,724
(28,491)
5,425,837
-
(16,378,692)
-
(27,006)
-
(1,758,736)
-
-
$ 275,102,753
CONSOLIDATED STATEMENTS OF CASH FLOWS
2006
Cash flows from operating activities:
Net loss attributable to minority interests
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation
Amortization
ΓBad debt reversal
Loss (gain) on decline (recovery) in market value and obsolescence of inventories
Loss (gain) on valuation of financial assets and liabilities
Investment gain accounted for under the equity method
Cash dividends received under the equity method
Loss (gain) on disposal of property, plant and equipment
Transfer of property, plant and equipment to losses and expenses
Gain on reacquisition of bonds
Amortization of bond discounts (premiums)
Exchange gain on financial assets and liabilities
Exchange (gain) loss on long-term liabilities
Amortization of deferred income
Impairment loss
Effect from subsidiaries over which significant control is no longer held
Changes in assets and liabilities:
Financial assets and liabilities at fair value through profit or loss, current
Other receivables
Inventories
Prepaid expenses
Other current assets
Notes payable
Accounts payable
Income tax payable
Accrued expenses
Other payables
Capacity deposits
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of financial assets and liabilities at fair value through profit or loss
Acquisition of available-for-sale financial assets
Acquisition of financial assets measured at cost
Acquisition of long-term investments accounted for under the equity method
Proceeds from disposal of financial assets at fair value through profit or loss
Proceeds from disposal of available-for-sale financial assets
Proceeds from disposal of financial assets measured at cost
Proceeds from disposal of long-term investments accounted for under the equity method
Proceeds from disposal of held-to-maturity financial assets
Proceeds from capital reduction and liquidation of long-term investments
Proceeds from disposal of property, plant and equipment
Increase in deferred charges
Decrease (increase) in restricted deposits
Decrease (increase) in other assets
Net cash used in investing activities
$
2005
32,619,313
(482,025)
$
7,026,692
(1,600,855)
44,255,730
1,826,622
(164,908)
1,089,490
131,997
(1,178,103)
1,086,996
(28,651,109)
(223,805)
(18,465)
87,369
(13,009)
(127,179)
(99,210)
1,330,293
-
51,366,170
3,278,290
(149,407)
(837,315)
(58,853)
(984,087)
870,694
(10,276,618)
41,128
9,370
(133,042)
(9,569)
(2,352)
77,021
(89,762)
460,542
(264,467)
(5,803,828)
783,372
97,674
(1,262,091)
(78,560)
(2,793)
13,924
(1,676,068)
(106,504)
2,053,791
51,232
183,773
110,883
46,605
(1,668,590)
(243,280)
17,184
(342,885)
54,604
(14,612)
(167,875)
(333,824)
34,104
(691,806)
14,366
(732,210)
301,796
(4,953)
(193,249)
1,248,502
47,078,351
242,200
45,046,108
(427,202)
(5,145,237)
(2,281,596)
(3,524,941)
74,092
18,697,235
903,019
8,202,027
204,352
(33,239,978)
587,904
(1,095,114)
555,800
(20,958)
(16,510,597)
(3,126,417)
(2,834,658)
(2,211,922)
9,755,644
2,323,314
7,178,638
1,708,260
50,725
(22,162,708)
3,084,714
(1,377,043)
(555,800)
679,908
(7,487,345)
203
CONSOLIDATED STATEMENTS OF CASH FLOWS
2006
2005
(continued)
Cash flows from financing activities:
Increase in short-term loans
$
204,265
Repayment of long-term loans
Issuance of bonds
Redemption of bonds
Reacquisition of bonds
$
499,929
-
(20,382,214)
-
12,478,603
(10,250,000)
(2,820,004)
(1,844,683)
(2,662,226)
(6,324)
(27,006)
Decrease in deposits-in
(6,379)
(204,474)
(7,155,865)
(1,758,736)
Cash dividends
(305,636)
Employee bonus
Increase (decrease) in minority shareholders
-
(27,286,339)
(16,378,692)
1,725,665
1,642,008
(130,269)
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Effect of subsidiaries change
20,826
(45,055,565)
(29,591,986)
(247,242)
(1,536,358)
(38,539)
Net increase (decrease) in cash and cash equivalents
(14,773,592)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
108,626,800
814,408
7,244,827
101,381,973
$
93,853,208
$
108,626,800
Cash paid for interest
$
971,038
$
1,379,098
Cash paid (refunded) for income tax
$
167,433
$
$
38,054,650
$
19,407,024
5,315,695
8,071,379
$
(10,130,367)
33,239,978
$
(5,315,695)
22,162,708
Supplemental disclosures of cash flow information:
(129,057)
Investing activities partially paid by cash:
Add: Payable at beginning of year
Less: Payable at end of year
Cash paid for acquiring property, plant and equipment
Investing and financing activities not affecting cash flows:
Principal amount of exchangeable bonds exchanged by bondholders
$
$
15,302
64,681
204
$
(20,242)
Book value of available-for-sale financial assets delivered for exchange
Elimination of related balance sheet accounts
Recognition of gain on disposal of available-for-sale financial assets
69,621
-
$
-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Thousands of New Taiwan Dollars unless Otherwise Specified)
1.HISTORY AND ORGANIZATION
United Microelectronics Corporation (“UMC”) was incorporated in May 1980 and commenced operations in
April 1982. UMC is a full service semiconductor wafer foundry, and provides a variety of services to satisfy customer
needs.
These services include intellectual property, embedded IC design, design verification, mask tooling, wafer
fabrication, and testing. UMC’s common shares were publicly listed on the Taiwan Stock Exchange (TSE) in July
1985 and its American Depositary Shares (ADSs) were listed on the New York Stock Exchange (NYSE) in September 2000.
Based on the resolution of the board of directors’ meeting on February 26, 2004, the effective date of UMC’s merger with
SiS MICROELECTRONICS CORP. (SiSMC) was July 1, 2004. UMC was the surviving company, and SiSMC was the dissolved
company. The merger was approved by the relevant government authorities. All the assets, liabilities, rights, and obligations
of SiSMC have been fully incorporated into UMC since July 1, 2004.
Based on the resolution of the board of directors’ meeting on August 26, 2004, UMCI LTD. had transferred its businesses,
operations, and assets to UMC’s Singapore branch (the Branch) since April 1, 2005.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements were prepared in conformity with the “Business Entity Accounting Law”, “Guidelines
Governing the Preparation of Financial Reports by Securities Issuers” and accounting principles generally accepted in the
Republic of China (R.O.C.).
Summary of significant accounting policies is as follows:
General Descriptions of Reporting Entities
(1) Principles of Consolidation
Effective January 1, 2005, investees in which UMC, directly or indirectly, holds more than 50% of voting rights or
de facto control with less than 50% of voting rights, are consolidated into UMC’s financial statements in accordance
with the amended ROC Statements of Financial Accounting Standards (SFAS) No. 7, “Consolidation of Financial
Statements” (UMC and the consolidated entities are hereinafter referred to as “the Company”.)
Transactions between consolidated entities are eliminated in the consolidated financial statements.
Prior to
January 1, 2006, the difference between the acquisition cost and the net equity of a subsidiary as of the acquisition date
was amortized over 5 years; however effective January 1, 2006, goodwill arising from new acquisitions is analyzed
and accounted for under the ROC SFAS No. 25, “Business Combination – Accounting Treatment under Purchase
Method”, and goodwill is no longer to be amortized.
205
(2) The consolidated entities are as follows:
Investor
Subsidiary
Percentage of
ownership (%)
UMC
UMC GROUP (USA) (UMC-USA)
IC Sales
100.00
UMC
B.V. (UME BV)
UMC CAPITAL CORP.
IC Sales
100.00
Investment holding
100.00
Investment holding
100.00
UMC
(SAMOA)
TLC CAPITAL CO., LTD. (TLC)
Investment holding
100.00
UMC
UMCI LTD. (UMCI) (Note 1)
integrated circuits
100.00
UMC
(FORTUNE)
Consulting and planning
for investment in new
business
99.99
UMC
CORP. (UMO)(Note 2)
Sales and manufacturing
of LCOS
81.76
UMC
UMC JAPAN (UMCJ)
Sales and manufacturing
of integrated circuits
50.09
UMC and UMO
THINTEK OPTRONICS CORP. (THINTEK)
(Note 2)
LCOS design, production
and sales
-
FORTUNE
(UNITRUTH)
Investment holding
100.00
UMC CAPITAL
CORP.
UMC CAPITAL (USA)
Investment holding
100.00
UMC CAPITAL
CORP.
ECP VITA LTD.
Insurance
100.00
UMC
UMC
206
Business nature
Percentage of
ownership (%)
Investor
Subsidiary
Business nature
UMC
UMC
UMC
UMC-USA
UME BV
UMC CAPITAL CORP.
IC Sales
IC Sales
Investment holding
100.00
100.00
100.00
UMC
(SAMOA)
TLC
Investment holding
100.00
Investment holding
100.00
UMC
UNITED FOUNDARY SERVICE, INC.
(Note 3)
Supervising and monitoring
group projects
-
UMC
UMCI (Note 1)
integrated circuits
100.00
UMC
FORTUNE
Consulting and planning
for investment in new
business
99.99
UMC
(HSUN CHIEH) (Note 4)
Investment holding
99.97
UMC
UMO
LCOS
86.72
UMC
CORP.(SIS) (NOTE5)
Sale and manufacturing of
integrated circuit
16.59
UMC and UMO
THINTEK
LCOS design, production
and sales
54.26
UMC, HSUN
CHIEH
UMCJ
integrated circuits
53.49
UMC, UNITRUTH XGI TECHNOLOGY INC. (XGI) (Note 5)
and FORTUNE
FORTUNE
UNITRUTH
Cartography chip design,
production and sales
Investment holding
31.70
100.00
UMC CAPITAL
CORP.
UMC CAPITAL (USA)
Investment holding
100.00
UMC CAPITAL
CORP.
ECP VITA LTD.
Insurance
100.00
SIS
(SIS-HK) (Note 5)
IC sales
100.00
SIS
(SIS-USA) (Note 5)
IC sales
100.00
SIS
INVESTAR CPU VENTURE CAPITAL
FUND, INC. LDC (IVCF) (Note 6)
Investment holding
-
XGI
XGI TECHNOLOGY INC. (CAYMAN)
(Note 5)
Investment holding
100.00
XGI
XGI TECHNOLOGY INC. (USA) (Note 5)
Cartography chip design
and production
100.00
UMC
207
Note 1: Based on the resolution of the board of directors’ meeting on August 26, 2004, UMCI has transferred its
businesses, operations, and assets to the Branch since April 1, 2005.
Note 2: THINTEK was merged into UMO on October 1, 2006. The exchange ratio was 2.31 to 1.
Note 3: UNITED FOUNDRY SERVICE, INC. completed the liquidation process in April 2005.
Note 4: UMC has ceased to consolidate the gains and losses of the subsidiary and its investees in preparing the
consolidated financial statements since January 2006 as UMC no longer possessed control over the subsidiary.
Note 5: In conformity with the ROC SFAS No. 7, “Consolidated Financial Statements”, UMC has ceased to
consolidate the gains and losses of the subsidiary and its investees in preparing the consolidated financial
statements since June 27, 2005 as UMC no longer possessed control over the subsidiary.
Note 6: Based on the resolution of the board of directors meeting in November 2002, IVCF was to be liquidated. The
liquidation process was completed during the first quarter of 2005.
Foreign Currency Transactions
Transactions denominated in foreign currencies are remeasured into the local functional currencies and recorded based on
the exchange rates prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are
remeasured into the local functional currencies at the exchange rates prevailing at the balance sheet date, with the related
exchange gains or losses included in the consolidated statements of income. Translation gains or losses from investments in
foreign entities are recognized as cumulative translation adjustment in consolidated stockholders’ equity.
Non-monetary assets and liabilities denominated in foreign currencies that are reported at fair value with changes in fair value
charged to the consolidated statements of income, are remeasured at the exchange rate at the balance sheet date, with related
exchange gains or losses recorded in the consolidated statements of income. Non-monetary assets and liabilities denominated
in foreign currencies that are reported at fair value with changes in fair value charged to consolidated stockholders’equity, are
remeasured at the exchange rate at the balance sheet date, with related exchange gains or losses recorded as adjustment items
to consolidated stockholders’ equity. Non-monetary assets and liabilities denominated in foreign currencies and reported at
cost are remeasured at historical exchange rates.
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that will affect the amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the
reported period. Actual results may differ from those estimates.
208
Translation of Foreign Currency Financial Statements
The financial statements of foreign subsidiaries and the Branch are translated into New Taiwan Dollars using the spot rates as
of each financial statement date for asset and liability accounts, average exchange rates for profit and loss accounts, historical
exchange rates for equity accounts, and exchange rates on dividend declaration date for dividends. The cumulative translation
effects from the subsidiaries and the Branch using functional currencies other than New Taiwan Dollars are included in the
cumulative translation adjustment in consolidated stockholders’ equity.
Cash Equivalents
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and with
maturity dates that do not present significant risks on changes in value resulting from changes in interest rates, including
commercial paper with original maturities of three months or less.
In accordance with ROC SFAS No. 34, “Financial Instruments: Recognition and Measurement” and the “Guidelines Governing the Preparation of Financial Reports by Securities Issuers”, financial assets are classified as either financial assets at fair
value through profit or loss, held-to-maturity financial assets, financial assets measured at cost, or available-for-sale financial
assets. Financial liabilities are recorded at fair value through profit or loss.
The Company accounts for purchase or sale of financial instruments as of the trade date, which is the date that the Company
commits to purchasing or selling the asset or liability. Financial assets and financial liabilities are initially recognized at fair
value plus acquisition or issuance costs. Accounting policies prior to December 31, 2005 are described in Note 3.
a.Financial instruments at fair value through profit or loss
Financial instruments held for short-term sale or repurchase purposes, and derivative financial instruments not qualified
for hedge accounting, are classified as financial assets or liabilities at fair value through profit or loss.
This category of financial instruments is measured at fair value, and changes in fair value are recognized in the
consolidated statements of income. Stock of listed companies, convertible bonds, and close-end funds are measured at
closing prices as of the balance sheet date. Open-end funds are measured at the unit price of the net assets as of the
balance sheet date. The fair value of derivative financial instruments is determined by using valuation techniques
commonly used by market participants.
b.Held-to-maturity financial assets
Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity
financial assets if the Company has both the positive intention and ability to hold the financial assets to maturity.
Investments intended to be held to maturity are measured at amortized cost.
The Company recognizes an impairment loss if objective evidence of impairment loss exists. However, the impairment loss
may be reversed if the value of asset recovers subsequently and the Company concludes the recovery is related to
improvements in events or factors that originally caused the impairment loss. The new cost basis as a result of the reversal
cannot exceed the amortized cost prior to the impairment.
209
c.Financial assets measured at cost
Unlisted stock, funds, and other securities without reliable market prices are measured at cost. When objective evidence
of impairment exists, the Company recognizes an impairment loss, which cannot be reversed in subsequent periods.
d.Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial instruments not classified as financial assets at fair value
through profit or loss, held-to-maturity financial assets, loans and receivables. Subsequent measurement is calculated at
fair value. Investments in listed companies are measured at closing prices as of the balance sheet date. Any gain or loss
arising from the change in fair value, excluding impairment loss and exchange gain or loss arising from monetary financial
assets denominated in foreign currencies, is recognized as an adjustment to consolidated stockholders’ equity until such
investment is reclassified or disposed of, upon which the cumulative gain or loss previously charged to consolidated
stockholders’ equity will be recorded in the consolidated statement of income.
The Company recognizes an impairment loss when objective evidence of impairment exists. Any reduction in the loss
of equity investments in subsequent periods will be recognized as an adjustment to consolidated stockholders’ equity. The
impairment loss of a debt security may be reversed and recognized in the current year’s consolidated statement of income
if the security recovers and the Company concludes the recovery is clearly related to improvements in the factors or events
that originally caused the impairment.
Allowance for Doubtful Accounts
An allowance for doubtful accounts is provided based on management’s judgment of the collectibility and aging analysis of
accounts and other receivables.
Inventories
Inventories are accounted for on a perpetual basis. Raw materials are recorded at actual purchase costs, while the work in
process and finished goods are recorded at standard costs and adjusted to actual costs using the weighted-average method at
the end of each month. Inventories are stated individually by category at the lower of aggregate cost or market value as of the
balance sheet date. The market values of raw materials and supplies are determined on the basis of replacement cost while the
market values of work in process and finished goods are determined by net realizable values. An allowance for loss on decline
in market value or obsolescence is provided, when necessary.
Long-term Investments Accounted for Under the Equity Method
Long-term investments are initially recorded at acquisition cost. Investments acquired by the contribution of technological
know-how are credited to deferred credits among affiliates, which will be amortized to income over a period of 5 years.
Investments in which the Company has ownership of at least 20% or exercises significant influence on operating decisions are
accounted for under the equity method. Prior to January 1, 2006, the difference of the acquisition cost and the underlying
equity in the investee’s net assets as of acquisition date was amortized over 5 years; however, effective January 1, 2006, arising
differences from new acquisitions are analyzed and accounted for under the ROC SFAS No. 25, “Business Combination – Accounting Treatment under Purchase Method”, where goodwill is no longer to be amortized.
210
The change in the Company’s proportionate share in the net assets of an investee resulting from its acquisition of additional
stock issued by the investee at a rate not proportionate to its existing equity ownership is charged to the additional paid-in
capital and long-term investments accounts.
Unrealized intercompany gains and losses arising from sales from the Company to equity method investees are eliminated
in proportion to the Company’s year end ownership percentage until realized through transactions with third parties. Intercompany gains and losses arising from transactions between the Company and majority-owned (above 50%) subsidiaries are
eliminated entirely until realized through transactions with third parties.
Unrealized intercompany gains and losses due to sales from equity method investees to the Company are eliminated in proportion to the Company’s weighted-average ownership percentage of the investee until realized through transactions with
third parties.
Unrealized intercompany gains and losses arising from transactions between two equity method investees are eliminated in
proportion to the Company’s multiplied weighted-average ownership percentage with the investees until realized through
transactions with third parties. Those intercompany gains and losses arising from transactions between two majority-owned
subsidiaries are eliminated in proportion to the Company’s weighted-average ownership percentage in the subsidiary that
incurred the gain or loss.
If the recoverable amount of investees accounted for under the equity method is less than its carrying amount, the difference
is to be recognized as impairment loss in the current period.
The total value of an investment and related receivables cannot be negative. If, after the investment loss is recognized, the net
book value of the investment is less than zero, the investment is reclassified to other liabilities on the consolidated balance
sheet.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Interest incurred on loans used to finance the construction of property, plant
and equipment is capitalized and depreciated accordingly. Maintenance and repairs are charged to expense as incurred. Significant renewals and improvements are treated as capital expenditures and are depreciated over their estimated useful lives.
When property, plant and equipment are disposed, their original cost and accumulated depreciation are written off and the
related gain or loss is classified as non-operating income or expense. Idle assets are classified as other assets at the lower of net
book or net realizable value, with the difference charged to non-operating expenses.
Depreciation is recognized on a straight-line basis using the estimated economic life of the assets less salvage value, if any.
If the main property, plant and equipment are fully depreciated and sub property, plant and equipment are still in use, the
depreciation is based on the newly estimated remaining useful life. The estimated economic life of the property, plant and
equipment is as follows: buildings – 3 to 55 years; machinery and equipment – 5 to 6 years; transportation equipment – 4 to
5 years; furniture and fixtures – 2 to 20 years; leased assets and leasehold improvements – the lease period or estimated economic life, whichever is shorter.
211
Intangible Assets
Effective January 1, 2006, goodwill generated from business combinations is no longer subject to amortization.
Technological know-how is stated at cost and amortized over its estimated economic life using the straight-line method.
An impairment loss will be recognized when the decreases in fair value of intangible assets are other than temporary. The
book value after recognizing the impairment loss is recorded as the new cost.
Deferred Charges
Deferred charges are stated at cost and amortized on a straight-line basis as follows: intellectual property license fees—select
the shorter term of contract or estimated economic life of the related technology; and software—3 years.
Prior to December 31, 2005, the issuance costs of convertible and exchangeable bonds were classified as deferred charges and
amortized over the life of the bonds. Effective January 1, 2006, the unamortized amounts as of December 31, 2005 were reclassified as a bond discount and recorded as a deduction to bonds payable. The amounts are amortized using the effective interest method over the remaining life of the bonds. If the difference between the straight-line method and the effective interest
method is immaterial, the amortization of the bond discount may be amortized using the straight-line method and recorded
as the adjustment of interest expenses.
Convertible and Exchangeable Bonds
The excess of the stated redemption price over par value is accrued as interest payable and expensed over the redemption period using the effective interest method.
When convertible bondholders exercise their conversion rights, the book value of the bonds is credited to common stock at
an amount equal to the par value of the common stock with the excess credited to additional paid-in capital. No gain or loss
is recognized on bond conversion.
When exchangeable bondholders exercise their right to exchange their bonds for reference shares, the book value of the bonds
is offset against the book value of the investments in reference shares and the related consolidated stockholders’ equity accounts, with the difference recognized as a gain or loss on disposal of investments.
In accordance with ROC SFAS No. 34, “Financial Instruments: Recognition and Measurement” effective as of January 1, 2006,
since the economic and risk characteristics of the embedded derivative instrument and the host contract are not clearly and
closely related, derivative financial instruments embedded in exchangeable bonds shall be bifurcated and accounted as financial liabilities at fair value through profit or loss.
212
Pension Plan
All regular employees are entitled to a defined benefit pension plan that is managed by an independently administered pension
fund committee. Fund assets are deposited in the committee’s name in the Central Trust of China and hence, not associated
with UMC. Therefore, fund assets are not to be included in UMC’s consolidated financial statements. Pension benefits for
employees of the Branch and overseas subsidiaries are provided in accordance with the local regulations.
The Labor Pension Act of the ROC (the Act), which adopts a defined contribution plan, became effective on July 1, 2005. Employees subject to the Labor Standards Law, a defined benefit plan, were allowed to choose to either elect the pension calculation under the Act or continue to be subject to the pension calculation under the Labor Standards Law. Those employees that
elected to be subject to the Act will have their seniority achieved under the Labor Standards Law retained upon election of
the Act, and UMC will make monthly contributions of no less than 6% of these employees’ monthly wages to the employees’
individual pension accounts.
The accounting for UMC’s pension liability is computed in accordance with ROC SFAS No.18. Net pension costs of the defined benefit plan are recorded based on an actuarial valuation. Pension cost components such as service cost, interest cost,
expected return on plan assets, the amortization of net obligation at transition, pension gain or loss, and prior service cost,
are all taken into consideration by the actuary. UMC recognizes expenses from the defined contribution pension plan in the
period in which the contribution becomes due.
Employee Stock Option Plan
The Company uses intrinsic value method to recognize compensation cost for its employee stock options issued since January
1, 2004. Under the intrinsic value method, the Company recognizes the difference between the market price of the stock on
date of grant and the exercise price of its employee stock option as compensation cost. The Company also discloses pro forma
net income and earnings per share under the fair value method for options granted since January 1, 2004.
Treasury Stock
The Company adopted ROC SFAS No. 30, “Accounting for Treasury Stocks” which requires that treasury stock held by the
Company to be accounted for under the cost method. The cost of treasury stock is shown as a deduction to consolidated stockholders’ equity, while any gain or loss from selling treasury stock is treated as an adjustment to additional paid-in capital. The
Company’s stock held by its subsidiaries is also treated as treasury stock.
Revenue Recognition
The Company recognizes revenue when persuasive evidence of an arrangement exists, the product or service has been delivered, the seller’s price to the buyer is fixed or determinable and collectibility is reasonably assured. Most of the Company’s
sales transactions have shipping terms of Free on Board (FOB) or Free Carrier (FCA) shipment in which title and the risk of
loss or damage is transferred to the customer upon delivery of the product to a carrier approved by the customer.
213
Allowance for sales returns and discounts are estimated taking into consideration customer complaints, historical experiences, management judgment and any other known factors that might significantly affect collectibility. Such allowances are
recorded in the same period in which sales are made.
Capital Expenditure versus Operating Expenditure
An expenditure is capitalized when it is probable that the Company will receive future economic benefits associated with
the expenditure and the expenditure amount exceeds a predetermined amount. Otherwise, the expenditure is expensed as
incurred.
Income Tax
The Company adopted ROC SFAS No. 22, “Accounting for Income Taxes” for inter-period and intra-period income tax allocation. The provision for income taxes includes deferred income tax assets and liabilities that are a result of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes, loss carry-forward and investment tax credits. A valuation allowance on deferred income tax assets is provided
to the extent that it is more likely than not that the tax benefits will not be realized. A deferred tax asset or liability is classified
as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred tax asset or
liability does not relate to an asset or liability in the financial statements, then it is classified as either current or noncurrent
based on the expected reversal date of the temporary difference.
According to ROC SFAS No. 12, “Accounting for Income Tax Credits”, the Company recognizes the tax benefit from the purchase of equipment and technology, research and development expenditure, employee training, and certain equity investment
by the flow-through method.
Income tax (10%) on unappropriated earnings is recorded as expense in the year in which the shareholders have resolved that
the earnings shall be retained.
The Income Basic Tax Act of the R.O.C. (the IBTA) became effective on January 1, 2006. Set up by the Executive Yuan, the
IBTA is a supplemental 10% tax that is payable if the income tax payable determined by the ROC Income Tax Act is below the
minimum amount as prescribed by the IBTA. The IBTA is calculated based on taxable income as defined by the IBTA, which
includes most income that is exempted from income tax under various legislations. The impact of the IBTA has been considered in the Company’s income tax for the current reporting period.
Earnings per Share
Earnings per share is computed according to ROC SFAS No. 24, “Earnings Per Share.” Basic earnings per share is computed
by dividing net income (loss) by the weighted-average number of common shares outstanding during the current reporting
period. Diluted earnings per share is computed by taking basic earnings per share into consideration plus additional common
shares that would have been outstanding if the dilutive share equivalents had been issued. Net income (loss) is also adjusted
for interest and other income or expenses derived from any underlying dilutive share equivalents. The weighted-average of
outstanding shares is adjusted retroactively for stock dividends and bonus share issues.
214
Asset Impairment
Pursuant to ROC SFAS No. 35, the Company assesses indicators of impairment for all its assets (except for goodwill) within
the scope of the standard at each balance sheet date. If impairment is indicated, the Company compares the asset’s carrying
amount with the recoverable amount of the assets or the cash-generating unit (CGU) associated with the asset and writes
down the carrying amount to the recoverable amount where applicable. The recoverable amount is defined as the higher of
fair value less the costs to sell and the values in use. For previously recognized losses, the Company assesses at the balance
sheet date any indication that the impairment loss no longer exists or may have diminished. If there is any such indication,
the Company recalculates the recoverable amount of the asset, and if the recoverable amount has increased as a result of the
increase in the estimated service potential of the assets, the Company reverses the impairment loss so that the resulting carrying amount of the asset does not exceed the amount (net of amortization or depreciation) that would otherwise result had no
impairment loss been recognized for the assets in prior years.
In addition, a goodwill-allocated CGU or group of CGUs is tested for impairment each year, regardless of whether
impairment is indicated. If an impairment test reveals that the carrying amount, including goodwill, of CGU or group of
CGUs is greater than its recoverable amount, there is an impairment loss. The loss is first recorded against the CGU’s
goodwill, with any remaining loss allocated to other assets on a pro rata basis proportionate to their carrying amounts. The
write-down of goodwill cannot be reversed in subsequent periods under any circumstances.
Impairment losses and reversals are classified as non-operating loss and income, respectively.
3.ACCOUNTING CHANGES
Asset Impairment
The Company adopted the ROC SFAS No. 35, “Accounting for Asset Impairment” to account for the impairment of its assets
for its financial statements effective January 1, 2005. No retroactive adjustment is required under the standard. With such a
change, the Company’s consolidated net income was reduced by NT$370 million and the consolidated earnings per share was
decreased by NT$0.02.
Goodwill
The Company adopted the amendments to ROC SFAS No. 1, “Conceptual Framework of Financial Accounting and
Preparation of Financial Statements,” SFAS No. 5, “Long-Term Investments in Equity Securities,” and SFAS No. 25, “Business
Combinations—Accounting Treatment under Purchase Method,” all of which have discontinued the amortization of goodwill
effective on January 1, 2006. As a result of adopting the revised SFAS No.1, revised SFAS No.5 and revised SFAS No.25 on
January 1, 2006, the Company’s total assets as of December 31, 2006 are NT$ 856 million higher than if it had continued to
account for goodwill under the prior year’s requirements. The consolidated net income and earnings per share for the year
ended December 31, 2006, are NT$856 million and NT$0.05 higher, respectively, than if the Company had continued to
account for goodwill under the prior year’s requirements.
215
(1) The Company adopted ROC SFAS No. 34, “Financial Instruments: Recognition and Measurement” and SFAS No. 36,
“Financial Instruments: Disclosure and Presentation” to account for the financial instruments effective January 1, 2006.
Some prior year items have been reclassified as required by ROC “Guidelines Governing the Preparation of Financial
Reports by Securities Issuers,” SFAS No. 34 and No. 36 to conform with current year’s presentation.
(2) The accounting policies prior to December 31, 2005 are as follows:
a. Marketable Securities
Marketable securities were recorded at cost at acquisition and were stated at the lower of aggregate cost or market
value as of the balance sheet date. Cash dividends were recognized as dividend income at the point of receipt. Costs
of money market funds and short-term notes were identified specifically while other marketable securities were
determined by the weighted-average method. The market values of listed debts, equity securities and closed-end
funds were determined by the average closing price during the last month of the fiscal year. The market value for
open-end funds was determined by the net asset value as of the balance sheet date. The amount by which the
aggregate cost exceeded the market value was reported as a loss in the current year. In subsequent periods, recovery of
the market value was recognized as a gain to the extent that the market value did not exceed the original aggregate
cost of the investment.
b. Long-Term Investment – Cost Method or Lower of Cost or Market Value Method
Investments of less than 20% of the outstanding voting rights in listed investees, where significant influence on
operating decisions of the investees does not reside with the Company, were accounted for by the lower of aggregate
cost or market value method. The unrealized loss resulting from the decline in market value of investments that
were held for the purpose of long-term investment was deducted from the consolidated stockholders’ equity. The
market value as of the balance sheet date was determined by the average closing price during the last month of the
reporting period. Investments of less than 20% of the outstanding voting rights in unlisted investees were accounted
for under the cost method. The Company recognized an impairment loss on investments if objective evidence
existed demonstrating an other than temporary decline in fair value. The book value of the investment was written
down to its fair market value.
c. Derivative Financial Instruments
The net receivables or payables resulting from interest rate swap and forward contracts were recorded under current
assets or current liabilities before December 31, 2005.
216
(3) The above changes in accounting principles increased the Company’s total assets, total liabilities, and stockholders’
equity as of January 1, 2006 by NT$24,246 million, NT$1,326 million, and NT$22,920 million, respectively; and
resulted in an unfavorable cumulative effect of changes in accounting principles of NT$1,189 million to be deducted
from consolidated net income, thereby reducing basic earnings per share by NT$0.06 for the year ended December 31,
2006.
Gains and Losses of Equity Method Investees
Pursuant to revised ROC SFAS No.5, “Accounting for Long-term Investment” effective on January 1, 2005, certain gains or
losses of equity investees were recognized based on the gains or losses incurred in the current period and could not be
deferred to the next year. As a result of the amendment, the consolidated net income and the basic earnings per share for
the year ended December 31, 2005 were reduced by NT$113 million and NT$0.01, respectively.
4.CONTENTS OF SIGNIFICANT ACCOUNTS
(1) CASH AND CASH EQUIVALENTS
Cash:
Cash on hand
Checking and savings accounts
Time deposits
Subtotal
Cash equivalents
Total
2006
As of December 31,
2005
$2,665
4,527,578
80,909,065
85,439,308
$2,814
4,150,657
91,976,196
96,129,667
8,413,900
$93,853,208
12,497,133
$108,626,800
(2) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS, CURRENT
Held for trading
Listed stocks
Convertible bonds
Total
2006
$8,094,274
443,733
$8,538,007
As of December 31,
2005
$1,250,280
1,218,688
$2,468,968
through profit or loss, current, was NT$712 million.
217
(3) AVAILABLE-FOR-SALE FINANCIAL ASSETS, CURRENT
Common stock
Preferred stock
Total
2006
$$-
As of December 31,
2005
$1,004,878
1,409,275
$2,414,153
2006
$1,110,422
$1,110,422
As of December 31,
2005
$1,116,806
(1,116,806)
$-
2006
$3,733
As of December 31,
2005
$193
2006
$14,824,524
(794,444)
(1,996)
$14,028,084
As of December 31,
2005
$14,459,202
(681,449)
(149,319)
$13,628,434
(4) HELD-TO-MATURITY FINANCIAL ASSETS
Credit-linked deposits and repackage bonds
Less: Non-current portion
Total
(5) NOTES RECEIVABLE
Notes receivable
(6) ACCOUNTS RECEIVABLE, NET
Accounts receivable
Less: Allowance for sales returns and discounts
Less: Allowance for doubtful accounts
Net
218
(7) INVENTORIES, NET
2006
As of December 31,
2005
Raw materials
Supplies and spare parts
Work in process
Finished goods
Total
$1,157,909
1,974,417
7,220,955
1,636,365
11,989,646
$310,393
1,917,444
8,141,427
1,140,774
11,510,038
Less: Allowance for loss on decline in market value and
obsolescence
Net
(1,111,464)
(797,503)
$10,878,182
$10,712,535
Inventories were not pledged.
(8) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS, NONCURRENT
Convertible bonds
2006
$474,738
As of December 31,
2005
$-
through profit or loss, noncurrent, was NT$90 million.
(9) AVAILABLE-FOR-SALE FINANCIAL ASSETS, NONCURRENT
Common stock
2006
$52,311,172
As of December 31,
2005
$6,812,103
During the year ended December 31, 2006, the Company recognized a net gain of NT$8,282 million due to the changes
in fair value as an adjustment to consolidated stockholders’ equity.
(10)FINANCIAL ASSETS MEASURED AT COST, NONCURRENT
Common stock
Preferred stock
Funds
Total
2006
$4,614,880
2,387,508
513,557
$7,515,945
As of December 31,
2005
$3,982,342
1,957,968
634,490
$6,574,800
219
(11)LONG-TERM INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD
a. Details of long-term investments accounted for under the equity method are as follows:
Investee Companies
2006
Ownership
or Voting
Rights
As of December 31,
2005
Ownership or
Voting Rights
Listed companies
$878,747
24.45
$818,681
24.81
341,268
-
21.80
-
329,704
4,370,256
22.66
22.26
FARADAY TECHNOLOGY CORP. (Note B)
-
-
864,928
18.50
(Note B)
-
-
3,921,878
16.59
HARVATEK CORP. (Note C)
-
-
346,020
16.50
(Note B)
-
-
1,538,740
12.54
SERCOMM CORP. (Note C)
-
-
267,807
12.15
ITE TECH. INC.
(UNIMICRON)(Note A)
Subtotal
12,458,014
1,220,015
Unlisted companies
127,379
49.99
296,218
49.99
81,402
49.94
-
-
ANOTO TAIWAN CORP.
32,622
49.00
-
-
153,830
48.73
71,848
38.32
36,823
48.64
74,937
48.64
UCA TECHNOLOGY INC.
50,128
48.33
34,881
45.53
2,699,491
45.00
-
-
202,390
44.44
-
-
30,845
44.44
-
-
959,542
42.00
638,946
42.00
19,417
41.19
30,962
33.47
117,457
40.00
-
-
11,976
40.00
7,982
40.00
4,674,311
36.49
-
-
12,610
35.80
-
-
(HSUN CHIEH) (Note D)
220
Investee Companies
UC FUND II
2006
Ownership
or Voting
Rights
As of December 31,
2005
Ownership or
Voting Rights
$122,648
35.45
$133,217
35.45
108,950
35.00
-
-
CRYSTAL MEDIA INC.
50,649
34.03
12,803
34.36
XGI TECHNOLOGY INC.
96,685
31.62
150,477
31.70
361,378
30.63
208,833
22.18
47,107
29.09
-
-
176,287
28.94
186,010
28.95
24,110
26.05
36,524
26.26
40,766
24.97
38,157
30.46
MOBILE DEVICES INC.
25,076
23.86
48,555
26.28
65,560
23.30
81,949
24.63
60,434
23.00
-
-
52,711
21.45
69,973
33.80
AEVOE INC.
-
-
6,674
39.47
(Note E)
-
-
145,649
21.56
(Note E)
-
-
30,740
21.91
TOPPAN PHOTOMASKS TAIWAN LTD.
(formerly DUPONT PHOTOMASKS
TAIWAN LTD.)
-
-
1,063,671
45.35
ULI ELECTRONICS INC.
-
-
452,203
26.77
PATENTOP, LTD (Note C, F)
-
-
1,245
18.00
Subtotal
Elimination of upstream and intercompany
10,442,584
3,822,454
-
(17,612)
$11,662,599
$16,262,856
transaction (Note G)
Total
Note A:As UMC did not have significant influence after decreasing its percentage of ownership in UNIMICRON
in 2006, the investee was classified as available-for-sale financial asset.
Note B:In the beginning of 2006 as UMC determined it did not have significant influence over the investee, and in
accordance with ROC SFAS No. 34, the investee was classified as available-for-sale financial asset.
221
Note C:The equity method was applied for investees in which the Company held the highest percentage of the
outstanding voting rights and had significant influence on operating decisions.
Note D:As of January 27, 2006, UMC sold 58.5 million shares of HSUN CHIEH. UMC’s ownership percentage
decreased from 99.97% to 36.49%. As HSUN CHIEH ceased to be a subsidiary, UMC’s stock held by HSUN
CHIEH was reclassified from treasury stock to long-term investments accounted for under the equity method.
The reclassification increased long-term investments accounted for under the equity method and stockholders’
equity by NT$10,881 million.
Note E:As the Company did not have significant influence after decreasing its percentage of ownership, these
investments were classified as financial assets measured at cost in 2006.
Note F:In the beginning of 2006, as the Company determined it did not have significant influence over the investee,
and in compliance with the ROC SFAS No. 34, the investment in the investee was classified as financial assets
measured at cost.
Note G:This balance represents the unrealized balance of deferred gains or losses arising from the transfer of equity
investment ownership among the affiliated companies including downstream, upstream, and intercompany
transactions. The amount will be realized upon disposal of the affiliate, transactions with a third party, or the
change of percentage of ownership.
b.The total gains arising from investments accounted for under the equity method were NT$1,178 million and NT$1,097
million for the years ended December 31, 2006 and 2005, respectively. Among which, investment income amounted to
NT$848 million and NT$1,031 million for the years ended December 31, 2006 and 2005, respectively, and the related
long-term investment balances of NT$1,719 million and NT$6,253 million as of December 31, 2006 and 2005,
respectively, were determined based on the investees’ financial statements audited by other auditors.
c.Pursuant to the revised ROC SFAS No. 5, “Accounting for Long-term Investments” effective on January 1, 2005,
investment income (loss) of UWAVE TECHNOLOGY CORP., SERCOMM CORP., HARVATEK CORP., PATENTOP,
LTD., UC FUND II, RIRA ELECTRONICS, INC., VISTAPOINT, INC., AFA TECHNOLOGY, INC., STAR
SEMICONDUCTOR CORP., USBEST TECHNOLOGY INC., UCA TECHNOLOGY INC., CRYSTAL MEDIA INC.,
U-MEDIA COMMUNICATIONS, INC., AMOD TECHNOLOGY CO., LTD., SMEDIA TECHNOLOGY CORP., and
AEVOE INC. was recognized based on the gain or loss incurred in the current period, instead of the prior period. As a
result of the adoption of the amendment, the consolidated net income, and the basic earnings per share for the year of
2005 were reduced by NT$113 million and NT$0.01, respectively.
d.The long-term equity investments were not pledged.
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(12)PROPERTY, PLANT AND EQUIPMENT
Land
Buildings
Construction in progress and prepayments
Total
Cost
Accumulated
Depreciation
Book Value
$1,879,442
21,076,844
415,225,873
90,706
2,964,369
42,968
22,244,850
$463,525,052
$(6,807,389)
(302,547,942)
(61,056)
(2,240,443)
(40,093)
$(311,696,923)
$1,879,442
14,269,455
112,677,931
29,650
723,926
2,875
22,244,850
$151,828,129
Land
Buildings
Construction in progress and prepayments
Total
Cost
Accumulated
Depreciation
Book Value
$1,893,522
21,260,902
386,920,282
89,580
2,804,967
43,037
15,609,497
$428,621,787
$(5,969,469)
(261,499,341)
(63,214)
(1,936,607)
(39,517)
$(269,508,148)
$1,893,522
15,291,433
125,420,941
26,366
868,360
3,520
15,609,497
$159,113,639
a.Total interest expense before capitalization amounted to NT$648 million and NT$1,364 million for the years
ended December 31, 2006 and 2005, respectively.
Details of capitalized interest are as follows:
Other property, plant and equipment
Total interest capitalized
Interest rates applied
2006
$$-
2005
$260,294
4,397
$264,691
-
2.86%~4.20%
b. Property, plant, and equipment were not pledged.
223
(13)OTHER ASSETS - OTHERS
Leased assets
Deposits-out
Others
Total
2006
$1,333,029
738,696
260,429
$2,332,154
As of December 31,
2005
$1,366,695
678,929
150,614
$2,196,238
Please refer to Note 6 for deposits-out pledged as collateral.
(14)IMPAIRMENT
Long-term investment accounted for under the equity
method
Technology know-how
Other assets
Total
2006
$825,863
As of December 31,
2005
$3,848
33,217
250,435
215,071
256,142
$1,330,293
86,259
120,000
$460,542
(15)SHORT-TERM LOANS
Secured bank loans
Unsecured bank loans
Total
Interest rates
2006
$342,549
$342,549
3.25%~5.85%
As of December 31,
2005
$6,066,478
69,858
$6,136,336
1.5%~4.88%
a.The Company’s unused short-term lines of credits amounted to NT$13,057 million and NT$14,658 million in 2006
and 2005, respectively.
b.Assets pledged as collateral to secure these loans are detailed in Note 6.
224
(16)FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS, CURRENT
Interest rate swaps
Derivatives embedded in exchangeable bonds
Total
2006
$626,230
359,037
$985,267
As of December 31,
2005
$95,634
$95,634
During the year ended December 31, 2006, net gain arising from the changes in fair value of financial liabilities at
fair value through profit or loss, current, was NT$312 million.
(17)BONDS PAYABLE
2006
As of December 31,
2005
$-
$3,000,000
5,250,000
7,500,000
Issued in October 2001 and due on October 2006,
3.4896% ~ 3.520% interest payable annually
-
5,000,000
Issued in May ~ June 2003 and due on May ~ June
2008, 4.0% minus USD 12-Month LIBOR interest
payable annually
7,500,000
7,500,000
Issued in May ~ June 2003 and due on May ~ June
2010, 4.3% minus USD 12-Month LIBOR interest
payable annually
7,500,000
7,500,000
1,484,268
2,579,385
Issued in November 2003 and due on November
2013
2,225,020
3,103,719
Issued in October 2005 and due on February 2008
12,441,268
12,540,432
Zero coupon exchangeable bonds:
Issued in May 2002 and due on May 2007
3,122,060
3,218,623
(Discounts) premiums on convertible bonds
Subtotal
Less: Current portion
Net
(71,257)
39,451,359
(9,068,283)
$30,383,076
51,942,159
(10,250,000)
$41,692,159
Domestic unsecured bonds:
Issued in April 2001 and due on April 2006,
Issued in April 2001 and due on April 2008,
Zero coupon convertible bonds:
Issued in March 2002 and due on March 2007
225
a.On April 27, 2000, UMC issued five-year secured bonds amounting to NT$3,990 million. The interest was paid
semi-annually with a stated interest rate of 5.6%. The bonds were repaid in installments every six months from April
27, 2002 to April 27, 2005. On April 27, 2005, the bonds were fully repaid.
b.During the period from April 16 to April 27, 2001, UMC issued five-year and seven-year unsecured bonds totaling
NT$15,000 million, each with a face value of NT$7,500 million. The interest is paid annually with stated interest rates
of 5.1195% through 5.1850% and 5.2170% through 5.2850%, respectively. The five-year bonds and seven-year bonds are
repaid starting from April 2004 to April 2006 and April 2006 to April 2008, respectively, both in three yearly
installments at the rates of 30%, 30% and 40%. On April 27, 2006, the five-year bonds were fully repaid.
c.During the period from October 2 to October 15, 2001, UMC issued three-year and five-year unsecured bonds totaling
NT$10,000 million, each with a face value of NT$5,000 million. The interest was paid annually with stated interest rates
of 3.3912% through 3.420% and 3.4896% through 3.520%, respectively. On October 15, 2006 and 2004, the five-year
bonds and the three-year bonds were fully repaid, respectively.
d.On May 10, 2002, UMC issued zero coupon exchangeable bonds listed on the EuroMTF Market of the Luxembourg
Stock Exchange (LSE). The terms and conditions of the bonds are as follows:
(a)Issue Amount: US$235 million
(b)Period: May 10, 2002 ~ May 10, 2007
(c)Redemption
i. UMC may redeem the bonds, in whole or in part, after three months of the issuance and prior to the maturity date,
at their principal amount if the closing price of the AU Optronics Corp (AUO) common shares on the TSE,
translated into US dollars at the prevailing exchange rate, for a period of 20 consecutive trading days, the last of
which occurs not more than 10 days prior to the date upon which notice of such redemption is published, is at least
120% of the exchange price then in effect translated into US dollars at the rate of NT$34.645=US$ 1.00.
ii. UMC may redeem the bonds, in whole, but not in part, if at least 90% in principal amount of the bonds has already
been exchanged, redeemed or purchased and cancelled.
iii.UMC may redeem all, but not part, of the bonds, at any time, in the event of certain changes in the ROC tax
rules which would require UMC to gross up for payments of principal, or to gross up for payments of interest or
premium.
iv.UMC will, at the option of the bondholders, redeem such bonds on February 10, 2005 at its principal amount.
226
(d)Terms of Exchange
i. Underlying securities: ADSs or common shares of AUO.
ii. Exchange Period: The bonds are exchangeable at any time on or after June 19, 2002 and prior to April 10, 2007,
into AUO common shares or AUO ADSs; provided, however, that if the exercise date falls within 5 business days
from the beginning of, and during, any closed period, the right of the exchanging holder of the bonds to vote with
respect to the shares it receives will be subject to certain restrictions.
iii.Exchange Price and Adjustment: The exchange price is NT$44.3 per share, determined on the basis of a fixed
exchange rate of NT$34.645=US$1.00. The exchange price will be subject to adjustments upon the occurrence of
certain events set out in the indenture.
(e)Exchange of the Bonds
As of December 31, 2006 and 2005, certain bondholders have exercised their rights to exchange their bonds with the
total principal amount of US$139 million and US$137 million into AUO shares, respectively. Gains arising from the
exercise of exchange rights during the year ended December 31, 2006 amounted NT$65 million and was
recognized as gain on disposal of investment. No bonds were exchanged during the year ended December 31,
2005.
e.During the period from May 21 to June 24, 2003, UMC issued five-year and seven-year unsecured bonds totaling
NT$15,000 million, each with a face value of NT$7,500 million. The interest is paid annually with stated interest rates
of 4.0% minus USD 12-Month LIBOR and 4.3% minus USD 12-Month LIBOR, respectively. Stated interest rates are
reset annually based on the prevailing USD 12-Month LIBOR. The five-year bonds and seven-year bonds are repayable
in 2008 and 2010, respectively, upon the maturity of the bonds.
f. On October 5, 2005, UMC issued zero coupon convertible bonds on the LSE. The terms and conditions of the bonds are
as follows:
(a)Issue Amount: US$381.4 million
(b)Period: October 5, 2005 ~ February 15, 2008 (Maturity date)
(c)Redemption:
i. On or at any time after April 5, 2007, if the closing price of the ADSs listed on the NYSE has been at least 130% of
either the conversion price or the last adjusted conversion price, for 20 out of 30 consecutive ADS trading days,
UMC may redeem all, but not some only, of the bonds.
ii. If at least 90% in principal amount of the bonds have already been redeemed, repurchased, cancelled or converted,
UMC may redeem all, but not some only, of the bonds.
227
iii. In the event that UMC’s ADSs or shares have officially ceased to be listed or admitted for trading on the New York
Stock Exchange or the Taiwan Stock Exchange, as the case may be, each bondholder shall have the right, at
such bondholder’s option, to require UMC to repurchase all, but not in part, of such bondholder’s bonds at their
principal amount.
iv. In the event of certain changes in taxation in the R.O.C. resulting in UMC becoming required to pay additional
amounts, UMC may redeem all, but not part, of the bonds at their principal amount; bondholders may elect not
to have their bonds redeemed by UMC in such event, in which case the bondholders shall not be entitled to
receive payments of such additional amounts.
v. If a change of control occurs with respect to UMC, each bondholder shall have the right at such bondholder’s
option, to require UMC to repurchase all, but not in part, of such bondholder’s bonds at their principal
amount.
vi. UMC will pay the principal amount of the bonds at its maturity date, February 15, 2008.
(d)Conversion:
i. Conversion Period: Except for the closed period, the bonds may be converted into UMC’s ADSs on or after
November 4, 2005 and on or prior to February 5, 2008.
ii. Conversion Price and Adjustment: The conversion price is US$3.693 per ADS. The applicable conversion price will
be subject to adjustments upon the occurrence of certain events set out in the indenture.
g.On March 25, 2002, UMC’s subsidiary, UMC JAPAN (UMCJ), issued LSE-listed zero coupon convertible bonds with
an aggregate principal amount of JPY17,000 million and the issue price was set at 101.75% of the principal amount. The
terms and conditions of the bonds are as follows:
(a)Final Redemption
Unless previously converted, purchased and cancelled or redeemed, the bonds must be redeemed on March 26, 2007
at their principal amount.
(b)Redemption at the Option of UMCJ
i. On or at any time after March 25, 2005, UMCJ may redeem all, but not part, of the bonds if the closing price of
the shares on the Japan OTC Market is at least 120% of the conversion price then in effect for at least 20 out of
30 consecutive trading days ending on the trading day immediately prior to the date of the notice of redemption;
or if the principal amount that has not been redeemed, repurchased and cancelled or converted is equal to or less
than 10% of original aggregate principal amount.
ii. In case of a corporate split or share exchange share transfer, UMCJ may redeem all, but not part, of the bonds on
or prior to the effective date of the transaction, provided that UMCJ is not able to ensure that the bondholders
have the right to receive shares which they would have received had the conversion rights been exercised prior to
the transaction.
228
iii.If a change in who controls UMCJ occurs, bondholders will be able to require UMCJ to redeem their bonds on the
date that is 85 days after the change of control occurs.
(c)Conversion Period
At any time on or after May 3, 2002 to and including March 19, 2007.
(d)Conversion Price
The conversion price was set at JPY400,000 per share, subject to adjustments upon the occurrence of certain events
set out in the indenture.
(e)Reacquisition of the Bonds
As of December 31, 2006, UMCJ has reacquired and cancelled JPY11,630 million of the bonds from the open market.
The corresponding gain on the reacquisition amounting to JPY28 million as other income during the year ended
December 31, 2006.
As of December 31, 2005, UMCJ has reacquired and cancelled JPY7,850 million and JPY7,650 million, respectively,
of the bonds from the open market. The corresponding gain on the reacquisition amounting to JPY6 million was
recognized as other income during the year ended December 31, 2005.
h.On November 25, 2003, UMCJ issued its second LSE-listed zero coupon convertible bonds with an aggregate principal
amount of JPY21,500 million and the issue price was set at 101.25% of the principal amount. The terms and conditions
of the bonds are as follows:
(a)Final Redemption
Unless previously converted, purchased and cancelled or redeemed, the bonds must be redeemed on November 25,
2013 at their principal amount.
(b)Redemption at the Option of UMCJ
i. On or at any time after November 27, 2006, UMCJ may redeem all, but not part, of the bonds if the closing price of
the shares on the Japan OTC Market is at least 120% of the conversion price then in effect for at least 20 out of 30
consecutive trading days ending on the trading day immediately prior to the date of the notice of redemption; or if
the principal amount that has been redeemed, repurchased and cancelled or converted is equal to or less than 10%
of original aggregate principal amount.
ii. In case of a corporate split or share exchange share transfer, UMCJ may redeem all, but not part, of the bonds on
prior or to the effective date of the transaction, provided that UMCJ is not able to ensure that the bondholders
have the right to receive shares which they would have received had the conversion rights been exercised prior
to the transaction.
iii.If a change in who controls UMCJ occurs, bondholders will be able to require UMCJ to redeem their bonds on the
date that is 70 days after the change of control occurs.
229
iv.UMCJ will, at the option of the bondholders, redeem such bonds on November 26, 2007 at its principal amount.
(c) Conversion Period
The conversion period may be any time on or after January 5, 2004 and on or prior to November 11, 2013.
(d) Conversion Price
The conversion price was set at JPY187,500 per share, subject to adjustment upon the occurrence of certain events set
out in the indenture.
(e) Reacquisition of the Bonds
As of December 31, 2006, UMCJ has reacquired and cancelled JPY13,450 million and JPY4,160 million of the bonds
from the open market. The corresponding gain on the reacquisition amounting to JPY38 million and it was
recognized as other income.
As of December 31, 2005, UMCJ had reacquired JPY10,490 million of bonds from the open market. The corresponding
gain on the reacquisition amounting to JPY449 million and it was recognized as other income.
i. Repayments of the above bonds in the future years are as follows:
(Assuming the convertible bonds and exchangeable bonds are both paid off upon maturity.)
Bonds repayable in
2007
2008
2009
2010
2011 and thereafter
Total
Amount
$9,081,348
22,941,268
7,500,000
$39,522,616
(18)PENSION FUND
a.The Labor Pension Act of the R.O.C. (the Act), which adopts a defined contribution plan, became effective on July 1, 2005.
Employees subject to the Labor Standards Law, a defined benefit plan, were allowed to choose to either elect the pension
calculation under the Act or continue to be subject to the pension calculation under the Labor Standards Law. Those
employees that elected to be subject to the Act will have their seniority achieved under the Labor Standards Law retained
upon election of the Act, and UMC will make monthly contributions of no less than 6% of these employees’ monthly
wages to the employees’ individual pension accounts.
UMC and its domestic subsidiaries have made monthly
contributions based on each individual employee’s salary or wage to employees’ pension accounts beginning July 1, 2005,
and totaled NT$372 million and NT$173 million as of December 31, 2006 and 2005, respectively. Pension benefits for
employees of the Branch and subsidiaries overseas are provided in accordance with the local regulations, and the
Company has contributed the amount of NT$97 million and NT$74 million as of December 31, 2006 and 2005,
respectively.
230
b.The defined benefit plan under the Labor Standards Law is disbursed based on the units of service years and the average
salary in the last month of the service year. Two units per year are awarded for the first 15 years of services while one unit
per year is awarded after the completion of the fifteenth year. The total units shall not exceed 45 units. In accordance to
the plan, UMC contributes an amount equivalent to 2% of the employees’ total salaries and wages on a monthly basis to
the pension fund deposited at the Central Trust of China in the name of an administered pension fund committee. The
unrecognized net asset or obligation at transition based on actuarial valuation is amortized on a straight-line basis over
15 years.
c.Change in benefit obligation during the year:
Projected benefit obligation at beginning of year
Service cost
Interest cost
Benefits paid
Gain (loss) on projected benefit obligation
Projected benefit obligation at end of year
2006
2005
$(4,778,045)
$(4,354,361)
(128,775)
(360,107)
(136,780)
(143,058)
38,829
24,128
(85,973)
55,353
$(5,090,744)
$(4,778,045)
d.Change in pension assets during the year:
Fair value of plan assets at beginning of year
Actual return on plan assets
Contributions from employer
Benefits paid
Others
Fair value of plan assets at end of year
2006
2005
$1,620,201
$1,404,130
62,850
81,453
172,475
200,167
(38,829)
(24,128)
5,625
(41,421)
$1,822,322
$1,620,201
e.The funding status of the pension plan is as follows:
2006
Benefit obligation
Vested benefit obligation
Non-vested benefit obligation
Accumulated benefit obligation
Effect from projected salary increase
Projected benefit obligation
Fair value of plan assets
Funded status
Unrecognized net transitional benefit obligation
Unrecognized loss (gain)
Adjustment required to recognize minimum liabilities
Accrued pension liabilities recognized on the consolidated
balance sheet
As of December 31,
2005
$(55,213)
(2,376,276)
(2,431,489)
(2,659,255)
(5,090,744)
1,822,322
(3,268,422)
118,332
36,656
(1,986)
$(39,069)
(2,188,642)
(2,227,711)
(2,550,334)
(4,778,045)
1,620,201
(3,157,844)
181,481
(29,043)
(9,592)
$(3,115,420)
$(3,014,998)
231
f. The components of the net periodic pension cost are as follows:
2006
2005
$128,775
$360,107
136,780
143,059
(44,778)
(39,577)
Service cost
Interest cost
Amortization of unrecognized transitional net benefit
obligation
Amortization of unrecognized pension gain
Pension costs from subsidiaries over which significant control
is no longer held
Net periodic pension cost
60,441
39,232
(891)
(88)
-
6,978
$280,327
$509,711
The actuarial assumptions underlying are as follows:
Discount rate
UMC
FORTUNE
UMO
2.75%
4.50%
2.50%
2.75%
2.00%
2.75%
3.75%
4.00%
2.75%
UMC
JAPAN
2.00%
2.68%
2.00%
Discount rate
UMC
UMO
3.00%
4.50%
3.00%
3.75%
4.00%
2.75%
UMC
JAPAN
2.00%
2.68%
1.00%
Thintek
3.75%
4.00%
2.75%
(19)CAPITAL STOCK
a.UMC had 26,000 million common shares authorized to be issued, and 19,795 million common shares were issued as of
December 31, 2005, each at a par value of NT$10.
b.UMC had issued a total of 277 million ADSs that were traded on the NYSE as of December 31, 2005. The total number
of common shares of UMC represented by all issued ADSs was 1,384 million shares as of December 31, 2005. One ADS
represents five common shares.
232
c.On April 26, 2005, UMC cancelled 49 million shares of treasury stocks, which were bought back during the period from
February 20 to April 19, 2002 for transfer to employees.
d.As recommended by the board of directors, and approved by the shareholders on the meeting held on June 13, 2005,
UMC issued 1,956 million new shares from capitalization of retained earnings that amounted to NT$19,560 million, of
which NT$17,587 million was stock dividend and NT$1,973 million was employee bonus. The issuance process through
the authority had been completed.
e.Among the employee stock options issued by UMC on October 7, 2002 and January 3, 2003, 96 million shares were
exercised during the year ended December 31, 2005. The issuance process through the authority had been completed.
f. UMC had 26,000 million common shares authorized to be issued, and 19,131 million was issued as of December 31,
2006, each at a par value of NT$10.
g.Among the employee stock options issued by UMC on October 7, 2002, January 3, 2003 and October 13, 2004, 109
million shares were exercised during the year ended December 31, 2006. The exercise of employee stock options of 47
million shares, 16 million shares and 46 million shares were issued on March 15, 2006, September 25, 2006, and
December 27, 2006, respectively. The issuance process through the authority had been completed.
h.On May 22, 2006 UMC cancelled 1,000 million shares of treasury stock, which were bought back during the period
from February 16, 2006 to April 11, 2006 for retention of UMC’s creditability and stockholders’ interests.
i. As recommended by the board of directors, and approved by the shareholders on the meeting held on June 12, 2006,
UMC issued 225 million new shares from capitalization of retained earnings and additional paid-in capital that
amounted to NT$2,249 million, of which NT$895 million was stock dividend, NT$459 million was employee bonus,
and NT$895 million was additional paid-in capital. The issuance process through the authority had been completed.
j. UMC had issued a total of 315 million ADSs, which were traded on the NYSE as of December 31, 2006. The total
number of common shares of UMC represented by all issued ADSs was 1,576 million shares as of December 31, 2006.
One ADS represents five common shares.
233
(20)EMPLOYEE STOCK OPTIONS
On September 11, 2002, October 8, 2003, September 30, 2004, and December 22, 2005, the Company was authorized by the
Securities and Futures Bureau of the Financial Supervisory Commission, Executive Yuan, to issue employee stock options
with a total number of 1 billion, 150 million, 150 million, and 350 million units, respectively. Each unit entitles an
optionee to subscribe to 1 share of the Company’s common stock. Settlement upon the exercise of the options will be made
through the issuance of new shares by the Company. The exercise price of the options was set at the closing price of the
Company’s common stock on the date of grant. The contractual life is 6 years and an optionee may exercise the options
in accordance with certain schedules as prescribed by the plan starting 2 years from the date of grant. Detailed
information relevant to the employee stock options is disclosed as follows:
Date of grant
October 7, 2002
January 3, 2003
November 26, 2003
March 23, 2004
July 1, 2004
October 13, 2004
April 29, 2005
August 16, 2005
September 29, 2005
January 4, 2006
May 22, 2006
August 24, 2006
Total number of
options granted
(in thousands)
Total number of
options outstanding
(in thousands)
Exercise price
(NTD)
939,000
61,000
57,330
33,330
56,590
20,200
23,460
54,350
51,990
39,290
42,058
28,140
543,834
44,571
45,443
22,110
44,460
12,905
17,790
42,610
46,675
30,690
37,040
25,830
$15.7
$17.7
$24.7
$22.9
$20.7
$17.8
$16.4
$21.6
$19.7
$17.7
$19.2
$18.4
a.A summary of the Company’s stock option plans, and related information for the years ended December 31, 2006 and 2005,
are as follows:
2006
Option
(in thousands)
234
Weighted-average
Exercise Price
(NTD)
2005
Option
(in thousands)
Weighted-average
Exercise Price
(NTD)
Outstanding at beginning of period
975,320
$17.3
973,858
$16.8
Granted
109,488
$18.4
129,800
$19.9
Exercised
(109,093)
$15.7
(95,814)
$15.7
Forfeited
(61,757)
$18.8
(32,524)
$18.5
Outstanding at end of period
913,958
$17.5
975,320
$17.3
2005
2006
Exercisable at end of period
Option
(in thousands)
Weighted-average
Exercise Price
(NTD)
Option
(in thousands)
Weighted-average
Exercise Price
(NTD)
650,268
$16.6
528,373
$16.2
Weighted-average fair value of
options granted during the
period
(NTD)
$5.7
$6.5
b.The information of the Company’s outstanding stock options as of December 31, 2006, is as follows:
Authorization
Date
2002.09.11
2003.10.08
2004.09.30
2005.12.22
Range of
Option
Exercise (in thousands)
Price
$15.7~$17.7
$20.7~$24.7
$16.4~$21.6
$17.7~$19.2
588,405
112,013
119,980
93,560
913,958
Outstanding Stock Options
Exercisable Stock Options
WeightedWeightedOption
Weightedaverage
average (in thousands)
average
Remaining Exercise Price
Exercise Price
Contractual
(NTD)
(NTD)
Life (Years)
1.78
3.20
4.53
5.33
2.68
$15.9
$22.8
$19.7
$18.5
$17.5
577,608
67,095
5,565
650,268
$15.8
$23.1
$17.8
$16.6
c.The Company uses intrinsic value method to recognize compensation costs for its employee stock options issued since
January 1, 2004.
The compensation cost for the years ended December 31, 2006 and 2005 are nil because
the Company grants options with the exercise price equal to the current market price.
Pro forma information
using the fair value method on net income and earnings per share is as follows:
Net Income
$32,619,313
$32,653,291
$1.81
$1.75
$32,149,409
$32,183,387
$1.78
$1.72
(retroactively adjusted)
Net Income
$7,026,692
$0.38
$6,776,219
$0.36
$7,035,187
$0.37
$6,784,714
$0.36
235
The fair value of the options granted was estimated at the date of grant using the Black-Scholes options pricing model with
the following assumptions for the years ended December 31, 2006 and 2005:
Expected dividend yields
Volatility factors of the expected
market price
Risk-free interest rate
2006
1.37%~1.38%
2005
1.63%~1.64%
35.57%~41.14%
40.35%~43.39%
1.88%~2.28%
1.85%~2.24%
4~5 years
4~5 years
Weighted-average expected life of
the options
(21)TREASURY STOCK
a.UMC bought back its own shares from the open market during the years ended December 31, 2006 and 2005.
Details of the treasury stock transactions are as follows:
Purpose
As of
January 1, 2006
Increase
Decrease
As of
December 31, 2006
442,067
400,000
-
842,067
bonds into shares
500,000
-
-
500,000
For retention of UMC’s
creditability and stockholder’s
interests
Total shares
-
1,000,000
1,000,000
-
942,067
1,400,000
1,000,000
1,342,067
As of
January 1, 2005
Increase
Decrease
As of
December 31, 2005
241,181
250,000
49,114
442,067
-
500,000
-
500,000
241,181
750,000
49,114
942,067
Purpose
bonds into shares
Total shares
b.According to the Securities and Exchange Law of the R.O.C., total shares of treasury stock should not exceed 10% of
UMC’s stock issued. Total purchase amount should not exceed the sum of the retained earnings, additional paid-in
capital-premiums, and realized additional paid-in capital. As such, the maximum number of shares of treasury stock
that UMC could hold as of December 31, 2006 and 2005, were 1,913 million shares and 1,979 million shares with the
ceiling of the amounts were NT$ 94,970 million and NT$90,851 million, respectively.
236
c.In compliance with Securities and Exchange Law of the R.O.C., treasury stock should not be pledged, nor should it be
entitled voting rights or receive dividends. Stock held by subsidiaries is treated as treasury stock. These subsidiaries
have the same rights as other stockholders except for subscription to new stock issuance. Starting June 22, 2005, stock
held by subsidiaries no longer have voting rights according to the revised Companies Act. d.As of December 31, 2006, UMC’s subsidiary, FORTUNE VENTURE CAPITAL CORP., held 22 million shares of UMC’s
stock, with a book value of NT$ 20.25 per share. The closing price on December 31, 2006 was NT$20.25.
As of December 31, 2005, UMC’s subsidiaries, HSUN CHIEH INVESTMENT CO., LTD. and FORTUNE VENTURE
CAPITAL CORP., held 600 million shares and 22 million shares, respectively, of UMC’s stock, with a book value
of NT$18.98 and NT$7.87 per share, respectively. The average closing price of UMC’s stock during December 2005 was
NT$18.98.
(22)RETAINED EARNINGS AND DIVIDEND POLICIES
According to UMC’s Articles of Incorporation, current year’s earnings, if any, shall be distributed in the following order:
a.Payment of all taxes and dues;
b.Offset prior years’ operation losses;
c.Set aside 10% of the remaining amount after deducting items (a) and (b) as a legal reserve;
d.Set aside 0.1% of the remaining amount after deducting items (a), (b), and (c) as directors’ and supervisors’
remuneration; and
e.After deducting items (a), (b), and (c) above from the current year’s earnings, no less than 5% of the remaining amount
together with the prior years’ unappropriated earnings is to be allocated as employees’ bonus, which will be settled
through issuance of new shares of UMC, or cash. Employees of UMC’s subsidiaries, meeting certain requirements
determined by the board of directors, are also eligible for the employees’ bonus.
f. The distribution of the remaining portion, if any, will be recommended by the board of directors and subject to
shareholders’ approval.
UMC has entered a stage of sustained growth; the policy for dividend distribution should reflect factors such
as the current and future investment environment, fund requirements, domestic and international competition and
capital budgets; as well as the benefit of shareholders, share bonus equilibrium, and long-term financial planning. The
board of directors shall make the distribution proposal annually and present it at the shareholders’ meeting. UMC’s
Articles of Incorporation further provide that no more than 80% of the dividends to shareholders, if any, may be paid
in the form of stock dividends. Accordingly, at least 20% of the dividends must be paid in the form of cash.
The appropriation of 2006 retained earnings has not yet been recommended by the board of directors as of the date of
the Report of Independent Auditors. Information on the board of directors’ recommendations and shareholders’
approval can be obtained from the “Market Observation Post System” on the website of the TSE.
237
Details of the 2005 employee bonus settlement and directors’ and supervisors’ remuneration are as follows:
1. Settlement of employees’ bonus by issuance of
new shares
a. Number of shares (in thousands)
b. Amount
c. Percentage on total number of outstanding
shares at year-end (%)
2. Settlement of employees’ bonus by cash
3. Remuneration paid to directors and supervisors
4. Effect on earnings per share before retroactive
adjustments
a. Basic and diluted earnings per share (NTD)
b. Pro forma basic and diluted earnings per
share taking into consideration employees’
bonus and directors’ and supervisors’
remuneration (NTD)
As approved by
the shareholders’
meeting
As recommended
by the board of
directors
Differences
45,846
$458,455
0.24
45,846
$458,455
0.24
-
$305,636
$6,324
$305,636
$6,324
-
$0.38/0.38
$0.34/0.34
$0.38/0.38
$0.34/0.34
-
Pursuant to Article 41 of the Securities and Exchange Law of the R.O.C., a special reserve is set aside from the current
net income and prior unappropriated earnings for items that are accounted for as deductions to consolidated
stockholders’ equity such as unrealized loss on long-term investments and cumulative translation adjustments.
However, there are the following exceptions for UMC’s investees’ unrealized loss on long-term investments arising from
a merger that was recognized by UMC in proportion to UMC’s ownership percentage:
a.According to the explanatory letter No. 101801 of the Securities and Futures Commission (SFC), if UMC recognizes
the investees’ additional paid-in capital—excess from the merger in proportion to the ownership percentage, then the
special reserve is exempted for the amount originated from the acquisition of the long-term investments.
b.If UMC and its investees transfer a portion of the additional paid-in capital to increase capital, a special reserve equal
to the amount of the transfer shall be provided according to the explanatory letter No.101801-1 of the SFC.
c.In accordance with the explanatory letter No.170010 of the SFC applicable to listed companies, in the case where the
market value of UMC’s stock held by its subsidiaries at year-end is lower than the book value, a special reserve shall be
provided in UMC’s accounts in proportion to its ownership percentage.
For the 2005 appropriations approved by the shareholders’ meeting on June 12, 2006, unrealized loss on long-term
investments exempted from the provision of special reserve pursuant to the above regulations amounted to NT$18,208
million.
238
(23)OPERATING COSTS AND EXPENSES
The Company’s personnel, depreciation, and amortization expenses are summarized as follows:
2006
2005
Operating
costs
Operating
expenses
Total
Operating
costs
Operating
expenses
Total
$9,003,173
$3,616,996
$12,620,169
$7,532,447
$3,421,537
$10,953,984
Labor and health
insurance
546,631
192,257
738,888
538,484
206,941
745,425
Pension
571,888
184,781
756,669
566,739
191,476
758,215
99,293
72,899
172,192
247,754
155,343
403,097
42,059,492
197,673
2,183,770
1,621,260
44,243,262
1,818,933
49,260,694
935,126
2,085,525
2,250,407
51,346,219
3,185,533
Personnel expenses
Salaries
Other personnel
expenses
Depreciation
Amortization
The numbers of employees as of December 31, 2006 and 2005 were 14,251 and 13,278, respectively.
(24)INCOME TAX
a.Reconciliation between the income tax expense and the income tax calculated on pre-tax financial statement income
based on the statutory tax rate is as follows:
Income tax on pre-tax income at statutory tax rate
Permanent and temporary differences
Change in investment tax credit
Change in loss carry-forward
Change in valuation allowance
Income Basic Tax
Change in tax rate
Estimated 10% income tax on unappropriated earnings
Adjustment of prior year’s tax expense
Income tax on interest revenue separately taxed
Others
Income tax expense
2006
2005
$9,254,650
$768,584
(7,303,879)
(2,469,797)
(1,335,540)
6,930,316
(105,508)
885,837
(5,295,125)
2,021,375
1,269
35,501
(164,111)
20,371
1,713
1,415
5,816
75,787
$3,261,622
$67,052
239
b.Significant components of deferred income tax assets and liabilities are as follows:
Amount
Investment tax credit
Loss carry-forward
Pension
Allowance on sales returns and discounts
Allowance for loss on obsolescence of
inventories
Others
Total deferred income tax assets
Valuation allowance
Net deferred income tax assets
Deferred income tax liabilities
Unrealized exchange gain
Depreciation
Others
Total deferred income tax liabilities
240
2006
Tax effect
As of December 31,
2005
Amount
Tax effect
$9,559,235
3,124,419
753,074
$14,992,731
3,138,465
785,660
191,304
$19,854,167
3,009,911
790,132
$13,755,893
5,585,640
751,611
199,060
827,079
220,309
317,488
79,372
1,960,409
535,280
19,863,749
(11,775,747)
$8,088,002
3,209,106
1,021,304
21,392,880
(11,576,791)
$9,816,089
$ (291,391)
(5,005,315)
(2,673,529)
$ (72,848)
(1,251,329)
(687,299)
(2,011,476)
$6,076,526
$(9,667,939)
(51,870)
$(2,416,985)
(51,870)
(2,468,855)
$7,347,234
Deferred income tax assets - current
Deferred income tax liabilities - current
Valuation allowance
Net
$5,933,725
(278,346)
(3,710,359)
1,945,020
$6,555,306
(3,168,516)
3,386,790
Deferred income tax assets - noncurrent
Deferred income tax liabilities - noncurrent
Valuation allowance
Net
13,930,024
(1,733,130)
(8,065,388)
4,131,506
$6,076,526
14,837,574
(2,468,855)
(8,408,275)
3,960,444
$7,347,234
c.UMC’s income tax returns for all the fiscal years up to 2003 have been assessed and approved by the Tax Authority.
d.UMC was granted several four or five-year income tax exemption periods with respect to income derived from the
expansion of operations. The starting date of the exemption period attributable to the expansions in 2002 had not yet
been decided. The income tax exemption for other periods will expire on December 31, 2012.
e.The Company earns investment tax credits for the amount invested in production equipment, research and
development, employee training, and investment in high technology industry and venture capital.
As of December 31, 2006, the Company’s unused investment tax credit was as follows:
Expiration Year
2006
2007
2008
2009
2010
Total
Investment tax credits earned
Balance of unused
investment tax credits
$2,879,909
1,638,333
6,298,009
1,780,805
2,395,675
$14,992,731
$2,879,909
1,638,333
6,298,009
1,780,805
2,395,675
$14,992,731
f. As of December 31, 2006, the unutilized accumulated losses for the Company were as follows:
Expiration Year
2006
2007
2008
2009
2010
2011
2012
2013
Total
Accumulated loss
$11,892,614
3,832,326
208,335
447,237
254,854
173,728
3,404,642
921,604
$21,135,340
Unutilized accumulated loss
$316,509
3,832,326
208,335
447,237
254,854
173,728
3,404,642
921,604
$9,559,235
g.The balance of UMC’s imputation credit accounts as of December 31, 2006 and 2005 were NT$95 million and NT$29
million, respectively. The expected creditable ratio for 2006 and the actual creditable ratio for 2005 was 0.54% and 0%,
respectively.
h.UMC’s earnings generated in the year ended December 31, 1997 and prior years have been fully appropriated.
241
(25)EARNINGS PER SHARE
The Company’s capital structure is composed mainly of zero coupon convertible bonds and employee stock options.
Therefore, in consideration of such complex structure, the calculated basic and diluted earnings per share for the years
ended December 31, 2006 and 2005, are disclosed as follows:
Amount
Income before
income tax
Net income Shares expressed
in thousands
Income before
income tax
Net income
$2.05
$1.87
Income from operations of
continued segments attributable to
shareholders of the parent
accounting principles attributable
to shareholders of the parent
Net income attributable to
$37,067,932
$33,807,828
18,050,962
(1,188,515)
(1,188,515)
(0.06)
(0.06)
$35,879,417
$32,619,313
$1.99
$1.81
$1.98
$1.81
Effect of dilution
$-
$-
108,122
$33,978
$33,978
516,383
$37,101,910
$33,841,806
18,675,467
(1,188,515)
(1,188,515)
(0.06)
(0.06)
$35,913,395
$32,653,291
$1.92
$1.75
242
Amount
Income before
income tax
Net income Shares expressed
in thousands
18,647,462
Income before
income tax
Net income
$0.39
$0.39
$7,174,027
$7,138,239
(111,547)
(111,547)
(0.01)
(0.01)
$7,062,480
$7,026,692
$0.38
$0.38
$-
$-
161,651
$8,495
$8,495
124,498
$7,182,522
$7,146,734
18,933,611
$0.38
$0.38
(111,547)
(111,547)
(0.01)
(0.01)
$7,070,975
$7,035,187
$0.37
$0.37
Effect of dilution
243
5.RELATED PARTY TRANSACTIONS
(1) Name and Relationship of Related Parties
244
Name of related parties
HOLTEK SEMICONDUCTOR INC. (HOLTEK)
ITE TECH. INC.
XGI TECHNOLOGY INC.
MTIC HOLDINGS PTE. LTD.
Relationship with UMC
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Equity Investee
Eq.uity Investee
Equity Investee
Equity Investee
Equity Investee
TOPPAN PHOTOMASKS TAIWAN LTD. (formerly DUPONT
PHOTOMASKS TAIWAN LTD.) (TOPPAN) (Disposed in March
2006)
Equity Investee
FARADAY TECHNOLOGY CORP. (No longer an equity investee
since January 1, 2006)
Equity Investee
NOVATEK MICROELECTRONICS CORP. (NOVATEK) (No longer
an equity investee since January 1, 2006)
Equity Investee
UNIMICRON TECHNOLOGY CORP. (No longer an equity investee
since November, 2006)
SILICON INTEGRATED SYSTEMS CORP. (SIS)
Equity Investee
UWAVE TECHNOLOGY CORP. (formerly UNITED RADIOTEK
INC.)
UCA TECHNOLOGY INC.
CRYSTAL MEDIA INC.
MOBILE DEVICES INC.
ULI ELECTRONICS INC. (Disposed in February 2006)
AEVOE INC. (Disposed in October 2006)
CHIP ADVANCED TECHNOLOGY INC. (No longer an equity
investee since October, 2006)
DAVICOM SEMICONDUCTOR, INC. (No longer an equity investee
since December, 2006)
UMC’s director
(2) Significant Related Party Transactions
a. Operating revenues
SIS
NOVATEK
Others
Total
Amount
$2,046,127
2,029,429
$4,075,556
2006
Percentage
2
2
4
2005
Amount
Percentage
$2,352,259
2
6,159,104
6
3,970,927
4
$12,482,290
12
The sales price to the above related parties was determined through mutual agreement based on the market
conditions. The collection period for overseas sales to related parties was net 60 days, while the terms for domestic
sales were month-end 30~60 days. The collection period for third party overseas sales was net 30~60 days, while the
terms for third party domestic sales were month-end 30~60 days.
b. Notes receivable
HOLTEK
Others
Total
Amount
$49,924
724
$50,648
2006
Percentage
92
1
93
As of December 31,
2005
Amount
Percentage
$62,136
100
$62,136
100
2006
Percentage
1
1
2
As of December 31,
2005
Amount
Percentage
$1,235,010
8
226,282
1
9
1,461,292
c. Accounts receivable, net
SIS
Others
Total
Less: Allowance for sales
returns and discounts
Less: Allowance for doubtful
accounts
Net
Amount
$99,333
231,978
331,311
(7,666)
(24,649)
-
(15,666)
$323,645
$1,420,977
245
d. Other transactions
The Company was involved in several other transactions with related parties, including service charges and
development expenses of intellectual property, totaling NT$8 million and NT$518 million for the years ended
The Company purchased approximately NT$105 million and NT$486 million of masks from TOPPAN during the
years ended December 31, 2006 and 2005, respectively.
6.ASSETS PLEDGED AS COLLATERAL
The assets pledged of the Company were as follows:
Deposit-out (Time deposit)
Amount Party to which asset(s) was
pledged
Purpose of pledge
$625,846 Customs
Customs duty guarantee
Amount Party to which asset(s) was
pledged
Purpose of pledge
$525,730 Customs
Customs duty guarantee
As of December 31,2005
Deposit-out (Time deposit)
Restricted deposits
(Time deposit)
Deposits-out (Time deposit)
The stocks of UMC held by
the subsidiaries
Total
555,800 The International Commercial
Bank of China (Tokyo branch)
2,500 The Farmer Bank of China
21,712,280 Chinatrust Commercial Bank
Short-term loans
Payment guarantee
Short-term loans
$22,796,310
7.COMMITMENTS AND CONTINGENT LIABILITIES
(1) UMC has entered into several patent license agreements and development contracts of intellectual property for a total
contract amount of approximately NT$19.67 billion. Royalties and development fees for future years are NT$5.98
billion as of December 31, 2006.
(2) UMC signed several construction contracts for the expansion of its factory space. As of December 31, 2006, these
construction contracts have amounted to approximately NT$3.82 billion and the unpaid portion of the contracts, which
was not accrued, was approximately NT$1.9 billion.
(3) OAK Technology, Inc. (OAK) and UMC entered into a settlement agreement on July 31, 1997 concerning a complaint
filed with the United States International Trade Commission (ITC) by OAK against UMC and others, alleging unfair
trade practices based on alleged patent infringement regarding certain CD-ROM controllers (the first OAK ITC case).
On October 27, 1997, OAK filed a civil action in a California federal district court, alleging claims for breach of the
settlement agreement and fraudulent misrepresentation. In connection with its breach of contract and other claims,
246
OAK sought damages in excess of US$750 million. UMC denied the material allegations of the complaint, and asserted
counterclaims against OAK for breach of contract, intentional interference with economic advantage and rescission and
restitution based on fraudulent concealment and/or mistake. UMC also asserted declaratory judgment claims for
invalidity and unenforceability of the relevant OAK patent. On February 9, 2006, the parties entered a settlement
agreement in which UMC, OAK and Zoran (the successor to OAK) fully and finally released one another from any and
all claims and liabilities arising out of the facts alleged in the district court case. The terms of settlement are confidential
and, except for the obligation to keep the terms confidential, impose no obligation on UMC.
(4) The Company entered into several operating lease contracts for land. These renewable operating leases are set to expire
in various years through to 2032. Future minimum lease payments under those leases are as follows:
2007
2008
2009
2010
2011
2012 and thereafter
Total
Amount
$234,447
220,066
201,872
194,296
188,944
1,701,017
$2,740,642
(5) UMC entered into several wafer-processing contracts with its principal customers. According to the contracts, UMC
shall guarantee processing capacity after receipts of customers’ deposits.
(6) UMC has entered into contracts for the purchase of materials and masks with certain vendors. These contracts oblige
UMC to purchase specified amounts or quantities of materials and masks. Should UMC fail to fulfill the conditions set
out in the contracts, the differences between the actual purchase and the required minimum will be reconciled between
UMC and its vendors.
(7) On February 15, 2005, the Hsinchu District Prosecutor’s Office conducted a search of UMC’s facilities. On February
18, 2005, UMC’s former Chairman Mr. Robert H.C. Tsao, released a public statement, explaining that its assistance to
Hejian Technology Corp. (Hejian) did not involve any investment or technology transfer. Furthermore, from the very
beginning there was a verbal indication that, at the proper time, UMC would be compensated appropriately for its
assistance, and circumstances permitting, at some time in the future, it will push through the merger between two
companies. However, no promise was made by UMC and no written agreement was made and executed. Upon UMC’s
request to materialize the said verbal indication by compensating in the form of either cash or equity, the Chairman of
the holding company of Hejian offered 15% of the approximately 700 million outstanding shares of the holding
company of Hejian in return for UMC’s past assistance and for continued assistance in the future.
Immediately after UMC had received such offer, it filed an application with the Investment Commission of the
Ministry of Economic Affairs on March 18, 2005 (Ref. No. 94-Lian-Tung-Tzu-0222), for their executive guidance for the
successful transfer of said shares to UMC. The shareholders meeting dated June 13, 2005 resolved that to the extent
permitted by law UMC shall try to get the 15% of the outstanding shares offered by the holding company of Hejian as 247
an asset of UMC. The holding company of Hejian offered 106 million shares of its outstanding common shares in return
for UMC’s assistance. The holding company of Hejian has put all such shares in escrow. UMC was informed of such
escrow on August 4, 2006. The subscription price per share of the holding company of Hejian in the last offering was
US$1.1. Therefore, the total market value of the said shares is worth more than US$110 million. However, UMC may
not acquire the ownership of nor exercise the rights of the said shares with any potential stock dividend or cash dividend
distributed in the future until the ROC laws and regulations allow UMC to acquire and exercise. In the event that any
stock dividend or cash dividend is distributed, UMC’s stake in the holding company of Hejian will accumulate
accordingly.
In April 2005, UMC’s former Chairman Mr. Robert H.C. Tsao was personally fined with in the aggregate amount of
NT$3 million by the Financial Supervisory Commission, Executive Yuan, R.O.C. (ROC FSC) for failure to disclose
material information relating to Hejian in accordance with applicable rules. As a result of the imposition of the fines by
the ROC FSC, UMC was also fined in the amount of NT$30,000 by Taiwan Stock Exchange (TSE) for the alleged
non-compliance with the disclosure rules in relation to the material information. UMC and its former Chairman Mr.
Robert H.C. Tsao have filed for administrative appeal and reconsideration with the Executive Yuan, R.O.C. and TSE,
respectively. Mr. Robert H.C. Tsao’s administrative appeal was dismissed by the Execution Yuan, R.O.C. on February
21, 2006 and the ROC FSC transferred the case against Mr. Robert H.C. Tsao to the Administrative Enforcement
Agency for enforcement of the fine. Mr. Robert H.C. Tsao has filed an administrative action against the ROC FSC
with Taipei High Administrative Court on April 14, 2006. As of December 31, 2006, the result of such reconsideration
and administrative action has not been finalized.
For UMC’s assistance to Hejian Technology Corp., UMC’s former Chairman Mr. Robert H.C. Tsao, former Vice
Chairman Mr. John Hsuan, and Mr. Duen-Chian Cheng, the General Manager of Fortune Venture Capital Corp.,
which is 99.99% owned by UMC, were indicted for violating the Business Accounting Law and breach of trust under the
Criminal Law by Hsinchu District Court’s Prosecutor’s Office on January 9, 2006. Mr. Robert H.C. Tsao and Mr. John
Hsuan had officially resigned from their positions of UMC’s Chairman, Vice Chairman and directors prior to the
announcement of the prosecution; for this reason, at the time of the prosecution, Mr. Robert H.C. Tsao and Mr. John
Hsuan no longer served as UMC’s directors and had not executed their duties as UMC’s Chairman and Vice Chairman.
In the future, if a guilty judgment is pronounced by the court, such consequences would be Mr. Robert H.C. Tsao, Mr.
John Hsuan and Mr. Duen-Chian Cheng’s personal concerns only; UMC would not be subject to indictment regarding
this case.
248
On February 15, 2006, UMC was fined in the amount of NT$5 million for unauthorized investment activities in
Mainland China, implicating violation of Article 35 of the Act “Governing Relations Between Peoples of the Taiwan
Area and the Mainland Area” by the R.O.C. Ministry of Economic Affairs (MOEA). However, as UMC believes it was
illegally and improperly fined, UMC had filed an administrative appeal against MOEA to the Executive Yuan on March
16, 2006. UMC’s administrative appeal was dismissed by the Executive Yuan, R.O.C. on October 19, 2006. UMC filed
an administrative action against the R.O.C. Ministry of Economic Affairs to Taipei High Administrative Court on
December 8, 2006. As of December 31, 2006, the result of such administrative action has not been finalized.
8. SIGNIFICANT DISASTER LOSS
None.
9. SIGNIFICANT SUBSEQUENT EVENTS
UMC has entered a stage of sustained growth. UMC determined that cash flows generated from UMC’s future operations
will be sufficient for the research and development of advanced process technologies and the continued expansion of
advanced manufacturing capacity, including the second 300mm fab in Taiwan’s Tainan Science Park. In order to avoid
future cash levels becoming excessive and to better respond to the expectations of today’s capital markets, UMC has
resolved to carry out a capital reduction of NT$ 57,394 million with the cancellation of 5,739 million of its outstanding
shares, following a resolution passed at a meeting of the Board of Directors on January 23, 2007. The board of directors will
decide the date of the capital reduction after the approval at the stockholders’ meeting and the authorization of the
government. The exact exchange ratio for shares and the amount of the capital reduction is to be set on the record date for
capital reduction.
10. OTHERS
(1) Certain comparative amounts have been reclassified to conform to the current year’s presentation.
(2) Financial risk management objectives and policies
UMC’s principal financial instruments, other than derivatives, is comprised of cash and cash equivalents, stock,
convertible bonds, open-end funds, bank loans, and bonds payable. The main purpose of these financial instruments
is to manage financing for UMC’s operations. UMC also holds various other financial assets and liabilities such as
accounts receivable and accounts payables, which arise directly from its operations.
249
UMC also enters into derivative transactions, including credit-link deposits, interest rate swaps and forward currency
contracts. The purpose of these derivative transactions is to mitigate interest rate risk and foreign currency exchange
risk arising from UMC’s operations and financing activities.
The main risks arising from UMC’s financial instruments include cash flow interest rate risk, foreign currency risk,
commodity price risk, credit risk, and liquidity risk.
Cash flow interest rate risk
UMC utilizes interest rate swap agreements to mitigate its cash flow interest rate risk on its counter-floating rate of
unsecured domestic bonds issued during the period from May 21 to June 24, 2003. The periods of the interest rate
annually.
Foreign currency risk
UMC has foreign currency risk arising from purchases or sales. UMC utilizes spot or forward contracts to mitigate
foreign currency risk. UMC buys or sells the same amount of foreign currency with hedged items through forward
contracts. In principal, UMC does not carry out any forward contracts for uncertain commitments.
Commodity price risk
UMC’s exposure to commodity price risk is minimal.
Credit risk
UMC trades only with established and creditworthy third parties. It is UMC’s policy that all customers who wish to
trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on
an ongoing basis, which consequently minimizes UMC’s exposure to bad debts.
With respect to credit risk arising from the other financial assets of UMC, which are comprised of cash and cash
equivalents, available-for-sale financial assets and certain derivative instruments, UMC’s exposure to credit risk
arising from the default of counter-parties is limited to the carrying amount of these instruments.
Although UMC trades only with established third parties, it will request collateral to be provided by third parties with
less favorable financial positions.
250
Liquidity risk
UMC’s objective is to maintain a balance of funding continuity and flexibility through the use of financial
instruments such as cash and cash equivalents, bank loans and bonds.
(3) Information of financial instruments
a. Fair value of financial instruments
As of December 31,
2006
Financial Assets
Non-derivative
2005
Book Value
Fair Value
Book Value
Fair Value
$93,853,208
$93,853,208
$108,626,800
$108,626,800
8,538,007
8,538,007
2,468,968
2,438,668
current
-
-
2,414,153
2,900,084
Held-to-maturity financial assets,
current
1,110,422
1,110,422
-
-
Notes receivable , accounts
receivable and other receivables
Restricted deposits
15,255,852
15,255,852
16,002,798
16,002,798
-
-
555,800
555,800
474,738
474,738
-
-
noncurrent
52,311,172
52,311,172
6,812,103
30,124,523
Held-to-maturity financial assets,
noncurrent
-
-
1,116,806
1,126,018
noncurrent
7,515,945
-
6,574,800
-
Long-term investments accounted
for under the equity method
Deposits-out
11,662,599
14,234,042
16,262,856
33,755,273
738,696
738,696
30,000
678,929
30,000
678,929
through profit or loss, current
251
As of December 31,
2005
Book Value
Fair Value
Financial Liabilities
Non-derivative
Short-term loans
Payables
Capacity deposits (current portion)
Book Value
2006
Fair Value
$342,549
24,169,179
898,265
$342,549
24,169,179
898,265
$6,136,336
19,168,491
657,600
$6,136,336
19,168,491
657,600
included)
39,451,359
40,362,245
51,942,159
52,517,633
$626,230
$626,230
$95,634
$730,191
359,037
359,037
-
-
Derivative
Interest rate swaps
exchangeable bonds
b. The methods and assumptions used to measure the fair value of financial instruments are as follows:
i. The book value of short-term financial instruments approximates their fair value due to their short maturities.
Short-term financial instruments include cash and cash equivalents, notes receivable, accounts receivable, other
receivables, restricted deposits, short-term loans, current portion of capacity deposits, and payables.
ii. The fair value of financial assets at fair value through profit or loss and available-for-sale financial assets is based
on the quoted market prices.
iii.The fair value of held-to-maturity financial assets is based on the quoted market prices. If market prices are
unavailable, UMC estimates the fair value based on the book value as the held-to-maturity financial assets consist
principally of credit-linked deposit agreements with maturity dates less than one year, as well as bonds that can
be easily liquidated in the secondary market.
iv. The fair value of financial assets measured at cost is unable to estimate since those unlisted investments are not
traded in the open market.
v. The fair value of deposits-out is based on their book value since the deposit periods are principally within one year
and renewed upon maturity.
vi. The fair value of bonds payable is determined by the market price.
vii.The fair value of derivative financial instruments is based on the amount UMC expects to receive (positive) or to
pay (negative) assuming that the contracts are settled in advance at the balance sheet date.
252
c. The fair value of UMC’s financial instruments is determined by the quoted prices in active markets, or if the market
for a financial instrument is not active, UMC establishes fair value by using a valuation technique:
Non-derivative
Valuation Technique
2006.12.31
2005.12.31
2006.12.31
2005.12.31
through profit or loss, current
$8,538,007
$2,438,668
$-
$-
Available-for-sale financial asset,
current
-
2,900,084
-
-
474,738
-
-
-
noncurrent
52,311,172
30,124,523
-
-
14,234,042
33,755,273
-
-
40,362,245
52,517,633
-
-
$-
$-
$626,230
$730,191
-
-
359,037
-
Financial assets
noncurrent
included)
Derivative Financial Instruments
Interest rate swaps
exchangeable bonds
d. UMC recognized a gain of NT$312 million arising from the changes in fair value of financial liabilities at fair value
through profit or loss for the year ended December 31, 2006.
e. UMC’s financial liability with cash flow interest rate risk exposure as of December 31, 2006 amounted to NT$626
million.
f. During the year ended December 31, 2006, total interest revenue and interest expense for financial assets or liabilities
that are not at fair value through profit or loss were NT$1,563 million and NT$648 million, respectively, while interest
revenue and expense for the year ended December 31, 2005 amounted to NT$1,055 million and NT$1,099 million,
respectively.
253
(4) UMC and its subsidiary, UMC JAPAN, held credit-linked deposits and repackage bonds recognized as held-to maturity financial assets for the earning of interest income. The details are disclosed as follows:
a. Principal amount in original currency
UMC
Amount
Due Date
NTD
400 million
2007.02.05
NTD
200 million
2007.02.05
JPY
640 million
2007.03.28
NTD
200 million
2007.09.25
Amount
Due Date
500 million
2007.03.29
UMC JAPAN
JPY
UMC
Amount
Due Date
NTD
400 million
2007.02.05
NTD
200 million
2007.02.05
JPY
640 million
2007.03.28
NTD
200 million
2007.09.25
JPY
Amount
500 million
Due Date
2007.03.29
UMC JAPAN
254
b. Credit risk
The counterparties of the above investments are major international financial institutions. The repayment in full of
these investments is subject to the non-occurrence of one or more credit events, which are referenced to the entities’
fulfillment of their own obligations as well as repayment of their corporate bonds. Upon the occurrence of one or
more of such credit events, UMC and its subsidiary, UMC JAPAN, may receive less than the full amount of these
investments or nothing. UMC and its subsidiary, UMC JAPAN, have selected reference entities with high credit
ratings to minimize the credit risk.
c. Liquidity risk
Early withdrawal is not allowed for the above investments unless called by the issuer. However, the anticipated
liquidity risk is low since most of the investments will either have matured within one year, or are relatively liquid
in the secondary market.
d. Market risk
There is no market risk for the above investments except for the fluctuations in the exchange rates of US Dollars and
Japanese Yen to NT Dollars at the balance sheet date and the settlement date.
(5) UMC and its subsidiary, UMC JAPAN, entered into interest rate swap and forward contracts for hedging the interest
rate risk arising from the counter-floating rate of domestic bonds and for hedging the exchange rate risk arising from
the net assets or liabilities denominated in foreign currency. The hedging strategy was developed with the objective to
reduce the market risk for non-trading purpose. The relevant information on the derivative financial instruments
entered into by UMC is as follows:
a. UMC utilized interest rate swap agreements to hedge its interest rate risk on its counter-floating rate of unsecured
domestic bonds issued during the period from May 21 to June 24, 2003. The periods of the interest rate swap
agreements are the same as those of the domestic bonds, which are five and seven years. The floating rate is reset
annually. The details of interest rate swap agreements are summarized as follows:
As of December 31, 2006 and 2005, UMC had the following interest rate swap agreements in effect:
Notional Amount
Contract Period
Interest Rate Received
Interest Rate Paid
NT$7,500 million
May 21, 2003 to June 24, 2008
4.0% minus USD
12-Month LIBOR
1.52%
NT$7,500 million
May 21, 2003 to June 24, 2010
4.3% minus USD
12-Month LIBOR
1.48%
255
b. Transaction risk
(a)Credit risk
There is no significant credit risk exposure with respect to the above transactions as the counter-parties are
reputable financial institutions with good global standing.
(b)Liquidity and cash flow risk
The cash flow requirements on the interest rate swap agreements are limited to the net interest payables or
receivables arising from the differences in the swap rates. The cash flow requirements on forward contracts are
limited to the net difference between the forward and spot rates at the settlement date. Therefore, no significant
cash flow risk is anticipated since the working capital is sufficient to meet the cash flow requirements.
(c)Market risk
Interest rate swap agreements and forward contracts are intended for hedging purposes. Gains or losses arising
from the fluctuations in interest rates and exchange rates are likely to be offset against the gains or losses from the
hedged items. As a result, no significant exposure to market risk is anticipated.
c. The presentation of derivative financial instruments on financial statements
UMC
As of December 31, 2006 and 2005, the interest rate swap agreements were classified as current liabilities amounting
to NT$626 million and NT$96 million, respectively.
The exchange loss arising from forward contracts was NT$415 million for the year ended December 31, 2005 and
recorded in non-operating expenses in the accompanying consolidated statement of income.
UMC JAPAN
The exchange (loss) gain arising from forward contracts was JPY$(7.5) million and JPY$25.4 million and recorded in
non-operating (expense) revenue in the accompanying consolidated statements of income for the years ended
(6) Significant intercompany transactions among consolidated entities for the years ended December 31, 2006 and 2005 are
disclosed in Attachment 1.
256
(7) Details of subsidiaries that hold UMC’s stock are as follows:
Subsidiary
No. of Shares
(in thousands)
Amount
Purpose
22,070
$446,914
Long-term investment
No. of Shares
(in thousands)
Amount
Purpose
599,696
$11,379,238
21,847
171,857
CORP.
Subsidiary
LTD.
CORP.
11. ADDITIONAL DISCLOSURES
(1) The following are additional disclosures for UMC and its affiliates as required by the ROC Securities and Futures
Bureau:
a. Financing provided to others for the year ended December 31, 2006: please refer to Attachment 2.
b. Endorsement/Guarantee provided to others for the year ended December 31, 2006: please refer to Attachment 3.
c. Securities held as of December 31, 2006: please refer to Attachment 4.
d. Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$100 million or
20 percent of capital stock for the year ended December 31, 2006: please refer to Attachment 5.
e. Acquisition of individual real estate with amount exceeding the lower of NT$100 million or 20 percent of capital
stock for the year ended December 31, 2006: please refer to Attachment 6.
f. Disposal of individual real estate with amount exceeding the lower of NT$100 million or 20 percent of capital stock
for the year ended December 31, 2006: please refer to Attachment 7.
g. Related party transactions for purchases and sales amounts exceeding the lower of NT$100 million or 20 percent
of capital stock for the year ended December 31, 2006: please refer to Attachment 8.
h. Receivables from related parties with amounts exceeding the lower of NT$100 million or 20 percent of capital stock
as of December 31, 2006: please refer to Attachment 9.
257
i.Names, locations and related information of investees as of December 31, 2006: please refer to Attachment 10.
j. Financial instruments and derivative transactions: Please refer to Note 10.
(2) Investment in Mainland China
None.
12. SEGMENT INFORMATION
(1) Operations in different industries
The Company’s major business is operating as a full service semiconductor foundry.
(2) Operations in different geographic areas
Sales to unaffiliated
customers
Sales between
geographic areas
Gross profit
Taiwan
Asia,
excluding
Taiwan
North
America
Europe and
others
Eliminations
Consolidated
$38,310,762
$9,511,367
$55,616,919
$8,564,771
$-
$112,003,819
50,953,904
14,961,088
-
-
(65,914,992)
-
$89,264,666
$20,276,206
$24,472,455
$46,601
$55,616,919
$992,481
$8,564,771
$88,680
$(65,914,992)
$(38,442)
$112,003,819
$21,365,526
Taiwan
Asia,
excluding
Taiwan
North
America
Europe and
Eliminations
Consolidated
others
Operating expenses
(16,206,895)
34,909,503
Non-operating
expenses
(3,480,709)
Income before income
tax and minority
interests
Identifiable assets
Funds and long-term
investments
Total assets
258
$36,587,425
$482,025
$217,650,324
$94,139,276
$6,646,311
$2,544,093
$(25,290,997)
$295,689,007
71,964,454
$367,653,461
Taiwan
Asia,
excluding
Taiwan
North
America
Europe and
others
Eliminations
Consolidated
Sales to unaffiliated
customers
$43,245,624
$6,627,031
$43,506,307
$6,937,020
$-
$100,315,982
Sales between
geographic areas
47,349,058
6,734,820
44,458
-
(54,128,336)
-
$90,594,682
$13,361,851
$43,550,765
$6,937,020
$(54,128,336)
$100,315,982
Gross profit
Operating expenses
$14,357,973
$(5,427,549)
$701,590
$64,214
$(23,566)
$9,672,662
(17,759,482)
15,888,119
Non-operating
expenses
(2,195,512)
Income before income
tax and minority
interests
Identifiable assets
$5,605,787
$247,228,232
$86,155,818
$5,968,463
$1,149,973
$(24,249,792)
Funds and long-term
investments
$1,600,855
$316,252,694
30,796,565
Total assets
$347,049,259
(3) Export sales
Export sales to unaffiliated customers is less than 10% of the total sales amount on the consolidated statements of
income; therefore disclosure is not required.
(4) Major customers
Individual customers accounting for at least 10% of net sales for the years ended December 31, 2006 and 2005 are as
follows:
Customer A
Customer B
Total
Sales amount
$24,475,058
10,243,818
$34,718,876
2006
Percentage
22
9
31
2005
Sales amount
Percentage
$17,844,440
18
10,528,973
10
$28,373,413
28
259
260
Sales
Accounts receivable
Sales
Accounts receivable
1
1
1
1
1
1
1
CORPORATION
CORPORATION
CORPORATION
CORPORATION
CORPORATION
CORPORATION
CORPORATION
CORPORATION
UMC JAPAN
CORP.
0
0
0
0
0
0
0
0
1
2
UMC GROUP (USA)
UMC JAPAN
UMC CAPITAL CORP.
UMC JAPAN
UMC JAPAN
B.V.
B.V.
UMC GROUP (USA)
Sales
3
3
1
CORPORATION
0
1
Accounts receivable
1
UMC GROUP (USA)
Sales
(Note 2)
UMC GROUP (USA)
Account
CORPORATION
Counterparty
0
Related Party
Relationship with
the Company
(Note1)
No.
ATTACHMENT 1 (Significant intercompany transactions between consolidated entities)
400,000
129,703
132,462
1,665,000
3,000,000
401,039
2,835,621
734,440
8,455,595
650,400
5,118,532
$54,476,329
Amount
-
Net 55
days
-
-
-
-
Net 60
days
-
Net 60
days
-
-
Net 60
days
Terms
(Note 3)
Transactions
-
-
-
-
1%
-
3%
-
8%
-
1%
49%
Percentage of consolidated operating
revenues or consolidated total assets
(Note 4)
Purchase
Sales
1
1
1
CORPORATION
CORPORATION
CORPORATION
CORPORATION
CORPORATION
CORPORATION
CORPORATION
CORPORATION
CORPORATION
CORP.
0
0
0
0
0
0
0
0
0
1
CORPORATION
CORP.
UMC CAPITAL CORP.
UMC JAPAN
UMC JAPAN
UMCI LTD.
B.V.
B.V.
Sales
noncurrent
1
2
1
1
1
Accounts receivable
1
CORPORATION
0
UMC GROUP (USA)
1
Sales
1
CORPORATION
0
Accounts receivable
1
CORPORATION
0
1
Accounts receivable
1
UMC GROUP (USA)
Sales
(Note 2)
UMC GROUP (USA)
Account
CORPORATION
Counterparty
0
Related Party
Relationship with
the Company
(Note1)
No.
-
-
-
-
Net 60
days
-
Net 60
days
-
Net 60
days
-
-
Net 60
days
Terms
(Note 3)
326,071
-
1,433,057 Month-end
45 Days
189,625
634,612
3,000,000
2,000,000
333,157
1,107,574
1,244,347
545,166
6,839,285
655,600
4,559,933
$43,226,036
Amount
Transactions
-
1%
-
-
1%
1%
-
1%
1%
-
7%
-
1%
43%
(Note 4)
261
262
noncurrent
noncurrent
noncurrent
3
3
3
3
3
3
LTD.
LTD.
LTD.
LTD.
LTD.
2
2
2
2
2
Note 4: The percentage with respect to the consolidated asset/liability for transactions of balance sheet items are based on each item's balance at period-end.
‫ޓ ޓޓ‬For profit or loss items, cumulative balances are used as basis.
Note 3: The sales price to the above related parties was determined through mutual agreement based on the market conditions.
‫ޓޓޓ‬3. Subsidiary to subsidiary.
‫ޓޓޓ‬2. Subsidiary to holding company.
‫ޓޓޓ‬1. The holding company to subsidiary.
Note 2: Transactions are categorized as follows㧦
Note 1: UMC and its subsidiaries are coded as follows:
‫ޓޓޓ‬1. UMC is coded "0".
UMC CAPITAL CORP.
UMC CAPITAL CORP.
noncurrent
(Note 2)
Account
CORP.
Counterparty
1
Related Party
Relationship with
the Company
(Note1)
No.
130,336
176,495
208,551
351,108
769,598
$140,794
Amount
-
-
-
-
-
-
Terms
(Note 3)
Transactions
-
-
-
-
-
-
(Note 4)
Counter-party
$-
Note 2 : Need for short-term financing.
‫ޓޓޓ‬1. UMC is coded "0".
USD 691
Financial statement Maximum balance for
Ending balance
account
the period
UMC GROUP (USA) Former Employees Receivable from
employees
Lender
1
No.
(Note 1)
ATTACHMENT 2 (Financing provided to others for the year ended December 31, 2006)
7%
Interest rate
Note 2
Nature of
financing
$-
Amount of sales to
(purchases from)
counter-party
Employee loan
Reason for
financing
$-
Allowance
for doubtful
accounts
-
Item
-
Value
Collateral
N/A
Limit of financing
amount for individual
counter-party
N/A
Limit of total
financing amount
263
264
UMC
0
UMC JAPAN
Receiving party
2
Relationship
(Note 2)
$7,501,548
JPY 10,400,000
Limit of
amount for receiving Maximum balance for the
period
party (Note 3)
$-
Ending balance
‫ޓ ޓޓ‬1. UMC is coded "0".
‫ޓ ޓޓ‬2. The subsidiaries are coded consecutively beginning from "1" in the order presented in the table above.
Note 2: According to the "Guidelines Governing the Preparation of Financial Reports by Securities Issuers" issued by the R.O.C. Securities and Futures Bureau,
receiving parties should be disclosed as one of the following:
1. An investee company that has a business relationship with UMC.
2. A subsidary in which UMC holds directly over 50% of equity interest.
3. An investee in which UMC and its subsidaries hold over 50% of equity interest.
4. An investee in which UMC holds directly and indirectly over 50% of equity interest.
5. An investee that has provided guarantees to UMC, and vice versa, due to contractual requirements.
6. An investee in which UMC conjunctly invests with other shareholders, and for which UMC has provided endorsement/guarantee in proportion to
its shareholding percentage.
Note 3: Limit of guarantee/endorsement amount for receiving party shall not exceed the lower of receiving party's capital stock or 10% of UMC's capital stock.
Note 4: Limit of total guarantee/endorsement amount equals 40% of UMC's capital stock as of December 31, 2006.
Endorsor/Guarantor
No.
(Note 1)
ATTACHMENT 3 (Endorsement/Guarantee provided to others for the year ended December 31, 2006)
$-
-
Percentage of accumulated
guarantee amount to net
Amount of collateral assets value from the latest
financial statement
$76,524,771
Limit of total
amount (Note 4)
UMC GROUP (USA)
B.V.
UMC CAPITAL CORP.
(SAMOA)
UMCI LTD.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
HOLDING CORP.
SILICONWARE PRECISION INDUSTRIES
CO., LTD.
YANG MING MARINE TRANSPORT CORP.
Stock
Stock
MICRONAS SEMICONDUCTOR HOLDING
AG
ACTION ELECTRONICS CO., LTD.
Stock
CHANG WAH ELECTRONMATERIALS INC.
Convertible bonds
L&K ENGINEERING CO., LTD.
TATUNG CO.
Convertible bonds
Stock
FIRICH ENTERPRISES CO., LTD
Convertible bonds
PROMOS TECHNOLOGIES INC.
Convertible bonds
Stock
EDOM TECHNOLOGY CO., LTD.
Convertible bonds
Name of securities
QUANTA STORAGE INC.
Convertible bonds
Type of securities
Investee company
Investee company
Investee company
Investee company
Investee company
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
880,006
280
124,000
9
16,438
3,254
5,395
23,538
16,270
280
1,683
477,374
500
402
340
380
60
1,000
Units (thousand)/
bonds/ shares
(thousand)
86
8,480
3,613,491
284,084
1,006,496
61,178
276,202
353,072
329,464
198,191
97,456
6,778,711
54,250
52,863
54,740
53,485
193,910
$34,485
Book value
100.00
100.00
100.00
100.00
100.00
0.14
0.19
0.21
0.44
0.86
0.99
7.77
-
-
-
-
-
-
Percentage of
ownership (%)
December 31, 2006
86
8,480
3,613,491
276,469
1,006,496
61,178
276,202
353,072
329,464
198,191
97,456
6,778,711
54,250
52,863
54,740
53,485
193,910
$34,485
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
265
266
CORP.
UMC JAPAN
ITE TECH. INC.
XGI TECHNOLOGY INC.
PIXTECH, INC.
FARADAY TECHNOLOGY CORP.
UNITED FU SHEN CHEN TECHNOLOGY
CORP.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Fund
Stock
Stock
Stock
Stock
Stock
Stock
Name of securities
Stock
Type of securities
Relationship
-
-
-
-
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
noncurrent
noncurrent
noncurrent
noncurrent
18,460
55,611
9,883
202,367
-
16,200
8,758
28,500
24,229
51,939
33,624
21,000
4,000
30,000
496
64,313
499,994
600,000
Units (thousand)/
bonds/ shares
(thousand)
128,667
4,382,181
321
9,096,376
2,699,491
57,062
53,710
225,624
341,268
878,747
4,674,311
959,542
81,402
127,379
5,949,999
167,217
11,114,198
$6,999,737
Book value
16.60
17.27
17.63
19.89
45.00
11.86
16.48
18.97
21.80
24.45
36.49
42.00
49.94
49.99
50.09
81.76
99.99
100.00
Percentage of
ownership (%)
December 31, 2006
128,667
4,382,181
321
9,096,376
2,699,491
82,750
53,710
225,624
896,486
3,282,569
4,532,186
959,542
81,402
131,879
3,480,760
167,217
11,711,305
$6,999,737
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
SPRINGSOFT, INC.
C-COM CORP.
KING YUAN ELECTRONICS CO., LTD.
BILLIONTON SYSTEMS INC.
MEDIATEK INC.
AU OPTRONICS CORP.
MEGA FINANCIAL HOLDING COMPANY
HON HAI PRECISION INDUSTRY CO., LTD.
SINO-AEROSPACE INVESTMENT CORP.
UNITED INDUSTRIAL GASES CO., LTD.
INDUSTRIAL BANK OF TAIWAN CORP.
TECO NANOTECH CO. LTD.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Name of securities
Stock
Type of securities
Relationship
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
-
172,800
11,520
11,001
1,139,196
146,250
-
245,705
31,116
2,289,065
3,545,441
5,048,091
24,676
952,216
359,412
22,197
520,658
1,155,725
8,860,711
$4,556,222
Book value
118,303
13,185
28,500
1,057
1,753
95,577
78,266
14,979
2,048
35,008
12,330
3,083
9,467
37,221
60,073
228,956
Units (thousand)/
bonds/ shares
(thousand)
4.56
4.79
4.95
7.80
11.11
0.02
0.51
0.86
1.03
1.55
2.63
3.21
4.15
4.40
4.78
10.06
11.54
16.09
Percentage of
ownership (%)
December 31, 2006
Note
Note
Note
Note
Note
245,705
31,116
2,289,065
3,545,441
5,048,091
24,676
952,216
359,412
22,197
520,658
1,155,725
8,860,711
$4,556,222
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
267
268
CRYSTAL MEDIA INC.
Stock
Stock
Stock
UCA TECHNOLOGY INC.
Stock
Stock
Stock
ANOTO TAIWAN CORP.
Stock
Stock
Name of securities
Stock
Type of securities
TAIWAN HIGH SPEED RAIL CORP.
PACIFIC UNITED TECHNOLOGY, L.P.
Fund
PACIFIC TECHNOLOGY PARTNERS, L.P.
Name of securities
Fund
Type of securities
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Relationship
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
-
-
4,493
5,200
6,000
2,500
10,212
800
11,285
10,187
3,920
80,000
Units (thousand)/
bonds/ shares
(thousand)
4,000
30,000
Units (thousand)/
bonds/ shares
(thousand)
37,429
88,134
88,093
12,610
17,224
11,976
42,288
33,531
32,622
$743,210
Book value
25.15
26.00
30.00
35.80
36.54
40.00
42.38
44.29
49.00
100.00
Percentage of
ownership (%)
-
-
-
-
Percentage of
ownership (%)
December 31, 2006
85,080
300,000
161,154
$280,846
Book value
December 31, 2006
37,429
54,301
37,081
10,133
17,224
11,976
32,905
33,531
32,622
$743,210
Market value/
Net assets value
N/A
N/A
N/A
N/A
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
None
None
None
None
Shares as
collateral
(thousand)
MOBILE DEVICES INC.
XGI TECHNOLOGY INC.
BCOM ELECTRONICS INC.
KUN YUAN TECHNOLOGY CO., LTD.
CION TECHNOLOGY CORP.
HITOP COMMUNICATIONS CORP.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Name of securities
Stock
Type of securities
Relationship
-
-
-
-
-
-
-
Investee of UMC and
Fortune
Investee of UMC and
Fortune
Investee of UMC and
Fortune
-
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
4,230
3,340
2,660
4,340
2,268
6,650
17,675
12,848
55
6,281
23,405
4,525
5,457
5,000
3,500
6,033
3,646
9,045
Units (thousand)/
bonds/ shares
(thousand)
46,953
24,344
16,663
60,848
21,600
66,500
176,797
142,030
755
32,187
119,225
47,559
20,983
19,288
34,349
36,806
52,711
$37,525
Book value
13.22
14.06
14.94
16.07
17.05
19.00
19.64
19.89
0.04
11.83
17.08
18.10
19.41
20.84
21.21
21.42
21.45
23.57
Percentage of
ownership (%)
December 31, 2006
Note
Note
Note
Note
Note
Note
Note
Note
435
38,502
119,225
38,327
17,869
19,288
26,912
23,889
50,949
$35,960
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
269
270
GOLDEN TECHNOLOGY VENTURE
CO., LTD.
NCTU SPRING I TECHNOLOGY VENTURE
ANDES TECHNOLOGY CORP.
SHIN-ETSU HANDOTAI TAIWAN CO., LTD.
ACTI CORP.
RISELINK VENTURE CAPITAL CORP.
NCTU SPRING VENTURE CAPITAL CO.,
LTD.
SIMPAL ELECTRONICS CO., LTD.
COSMOS TECHNOLOGY VENTURE
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
YAYATECH CO., LTD.
Stock
Name of securities
Stock
Type of securities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
1,742
6,009
1,500
2,000
8,000
1,700
10,500
4,198
5,000
2,660
8,529
4,284
2,500
11,434
1,060
5,040
1,080
3,487
Units (thousand)/
bonds/ shares
(thousand)
15,964
70,179
15,000
13,600
76,640
17,306
105,000
37,156
62,500
47,880
85,291
27,160
21,875
113,017
10,421
49,280
36,180
$11,891
Book value
5.03
5.67
6.00
6.28
6.67
6.85
7.00
7.88
7.94
9.50
9.61
10.06
10.23
10.36
10.60
10.67
10.80
12.02
Percentage of
ownership (%)
December 31, 2006
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
LUMITEK CORP.
EE SOLUTIONS, INC.
BEYOND INNOVATION TECHNOLOGY
CO., LTD.
PROSYS TECHNOLOGY INTEGRATION,
INC.
WAVEPLUS TECHNOLOGY CO., LTD.
IBT VENTURE CORP.
IGLOBE PARTNERS FUND, L.P.
ANIMATION TECHNOLOGIES INC.
CHIPSENCE CORP.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Fund
Stock
Stock
Stock
Stock
MEMOCOM CORP.
Stock
Name of securities
PARAWIN VENTURE CAPITAL CORP.
Stock
Type of securities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
1,750
5,000
1,480
-
7,614
9,317
540
1,504
1,200
409
1,183
3,930
1,249
1,300
1,750
2,450
5,000
Units (thousand)/
bonds/ shares
(thousand)
11,325
225,000
22,200
39,051
76,142
102,459
2,457
24,931
-
4,224
14,165
26,742
15,086
22,178
32,000
16,391
$41,900
Book value
2.93
3.08
3.16
3.45
3.81
3.88
3.98
4.00
4.00
4.08
4.11
4.65
4.72
4.85
4.89
4.90
5.00
Percentage of
ownership (%)
December 31, 2006
Note
Note
Note
N/A
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
271
272
AVERLOGIC TECHNOLOGIES CORP.
AIMTRON TECHNOLOGY, INC.
ATHEROS COMMUNICATION INC.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
ARCADIA DESIGN SYSTEMS (TAIWAN),
INC.
Fund
Stock
CRYSTAL INTERNET VENTURE FUND II
Stock
PIXART IMAGING INC.
Stock
Stock
ADVANCED CHIP ENGINEERING
TECHNOLOGY INC.
TAIMIDE TECHNOLOGY INC.
Stock
Name of securities
SHENG-HUA VENTURE CAPITAL CORP.
Stock
Type of securities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
-
-
Investor company
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
8
178
22,070
2,190
959
1,384
1,051
13,128
2,000
13,274
1,500
5,133
162
-
1,391
1,500
2,290
1,250
Units (thousand)/
bonds/ shares
(thousand)
5,536
21,004
446,914
63,846
69,827
50,930
16,560
407,627
27,600
6,504,255
46,313
59,317
-
9,342
15,590
16,095
24,419
$9,950
Book value
0.02
0.12
0.12
0.74
1.26
3.17
3.40
3.55
5.89
12.71
-
-
0.83
0.99
1.68
1.83
1.84
2.50
Percentage of
ownership (%)
December 31, 2006
5,536
21,004
446,914
63,846
69,827
50,930
16,560
407,627
27,600
6,504,255
N/A
N/A
Note
N/A
Note
Note
Note
Note
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
ASIA PACIFIC MICROSYSTEMS, INC.
SERCOMM CORP.
HORIZON SECURITIES CO., LTD.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Name of securities
Stock
Type of securities
Convertible bonds
Name of securities
ALPHA NETWORKS INC.
Convertible bonds
Type of securities
Investee company
Investee of UMC and TLC Long-term investments accounted
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
Relationship
-
-
Relationship
Investee company
10,413
5,220
16,858
6,192
20,163
5,430
10,650
10,000
17,460
7,084
0.20
Units (thousand)/
bonds/ shares
(thousand)
258
300
Units (thousand)/
bonds/ shares
(thousand)
323,324
615,960
118,849
168,408
357,901
395,317
479,250
100,000
134,999
99,220
$202,390
Book value
-
-
2.81
3.48
3.92
4.48
5.84
7.02
6.55
8.40
11.62
18.46
44.44
Percentage of
ownership (%)
December 31, 2006
36,314
$33,600
Book value
Percentage of
ownership (%)
December 31, 2006
323,324
615,960
118,849
168,408
357,901
395,317
Note
Note
138,221
28,166
$202,390
Market value/
Net assets value
36,314
$33,600
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
None
None
Shares as
collateral
(thousand)
273
274
TATUNG CO.
CORETRONIC CORP.
INPAQ TECHNOLOGY CO., LTD.
HUNG SHENG CONSTRUCTION LTD.
ORIENT SEMICONDUCTOR ELECTRONICS,
LTD.
ALI CORP.
POWERTECH INDUSTRIAL CO., LTD.
CHINA ELECTRIC MFG. CORP.
CHONG HONG CONSTRUCTION CO., LTD.
HANNSTAR DISPLAY CORP.
HOLDING CORP.
SHIHLIN ELECTRIC & ENGINEERING
CORP.
GOLDSUN DEVELOPMENT&
CONSTRUCTION CO., LTD.
KINSUS INTERCONNECT TECHNOLOGY
CORP.
KEE TAI PROPERTIES CO., LTD.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
YUNGTAY ENGINEERING CO., LTD.
TAIWAN FERTILIZER CO., LTD.
Stock
Stock
Stock
Stock
Stock
Stock
SYSTEX CORP.
Stock
Name of securities
AVERMEDIA TECHNOLOGIES, INC.
Stock
Type of securities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
800
400
300
566
2,060
950
23,596
14,000
343
895
248
1,050
4,764
3,300
500
6,007
38,152
800
4,085
Units (thousand)/
bonds/ shares
(thousand)
49,840
8,340
7,785
54,365
36,256
33,582
353,936
86,520
30,253
16,065
12,648
62,265
40,018
83,160
32,800
254,102
557,019
31,120
$163,196
Book value
0.08
0.10
0.11
0.15
0.17
0.18
0.21
0.23
0.23
0.23
0.27
0.41
0.54
0.59
0.74
0.90
0.91
0.96
2.16
Percentage of
ownership (%)
December 31, 2006
49,840
8,340
7,785
54,365
36,256
33,582
353,936
86,520
30,253
16,065
12,648
62,265
40,018
83,160
32,800
254,102
557,019
31,120
$163,196
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
CHINA INSURANCE INTL
NANTEX INDUSTRY.CO.,LTD.
FAR EASTERN INTERNATIONAL BANK
CHINATRUST FINANCIAL HOLDING
COMPANY LTD.
TA CHONG BANK LTD.
Stock
Stock
Stock
SOLAR APPLIED MATERIALS
TECHNOLOGY CORP.
Convertible bonds
CRYSTAL MEDIA INC.
Stock
Stock
Stock
Type of securities
Name of securities
Convertible bonds
Convertible bonds
Stock
Stock
Stock
Name of securities
PRINCE HOUSING & DEVELOPMENT
CORP.
YULON MOTOR CO., LTD.
Stock
Type of securities
Relationship
-
-
-
-
-
-
-
-
-
-
Relationship
Investee company
Investee company
Investee company
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
1,587
1,800
2,000
Units (thousand)/
bonds/ shares
(thousand)
40
380
2,500
100
1,600
500
150
800
1,000
580
Units (thousand)/
bonds/ shares
(thousand)
13,220
20,816
$29,364
Book value
-
-
-
0.01
0.02
0.03
0.06
0.06
0.07
0.07
8.88
9.00
10.00
Percentage of
ownership (%)
December 31, 2006
4,604
53,485
293,250
1,095
43,600
7,800
3,150
32,614
39,500
$12,789
Book value
Percentage of
ownership (%)
December 31, 2006
13,220
18,797
$12,360
Market value/
Net assets value
4,604
53,485
293,250
1,095
43,600
7,800
3,150
32,614
39,500
$12,789
Market value/
Net assets value
None
None
None
Shares as
collateral
(thousand)
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
275
276
UCA TECHNOLOGY INC.
MOBILE DEVICES INC.
XGI TECHNOLOGY INC.
CO., LTD.
YAYATECH CO., LTD.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Name of securities
Stock
Type of securities
Relationship
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
Investee company
-
-
-
-
-
-
-
Investee of UMC and
Unitruth
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
490
1,200
5,637
1,386
1,748
6,374
930
1,760
1,000
1,000
1,250
1,300
1,225
1,250
1,585
2,570
1,300
Units (thousand)/
bonds/ shares
(thousand)
16,415
10,500
62,427
3,059
25,850
63,739
7,920
10,788
3,960
3,292
4,093
2,193
12,875
4,822
7,840
17,085
$12,758
Book value
4.90
4.91
5.11
5.83
6.03
7.18
9.30
3.31
3.55
4.35
4.45
4.65
4.90
5.21
5.95
6.70
7.88
Percentage of
ownership (%)
December 31, 2006
Note
Note
Note
Note
Note
Note
Note
10,788
3,960
3,292
4,093
2,193
10,376
4,822
4,621
10,217
$9,996
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
EE SOLUTIONS, INC.
MEMOCOM CORP.
ACTI CORP.
CHIPSENCE CORP.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Name of securities
LUMITEK CORP.
Stock
Type of securities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
1,082
1,600
910
1,300
500
1,801
740
1,361
540
2,005
1,138
1,470
840
2,518
1,340
1,300
1,750
Units (thousand)/
bonds/ shares
(thousand)
14,932
72,000
5,889
14,570
5,000
12,256
11,100
17,747
2,457
13,416
13,747
16,317
5,262
31,218
8,844
14,755
$32,000
Book value
3.19
0.98
1.52
1.57
2.00
2.13
2.98
3.62
3.98
4.01
4.30
4.59
4.72
4.73
4.79
4.85
4.89
Percentage of
ownership (%)
December 31, 2006
14,932
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
277
278
Name of securities
MAXXAN SYSTEMS, INC.
AICENT, INC.
SPREADTRUM COMMUNICATIONS, INC.
SILICON 7, INC.
GCT SEMICONDUCTOR, INC.
INTELLON CORP.
FORTEMEDIA, INC.
UC FUND II
Fund
ECP VITA LTD.
Stock
UMC CAPITAL (USA)
Name of securities
Stock
Type of securities
UMC CAPITAL CORP.
Convertible bonds
Type of securities
-
-
-
-
-
-
-
Investee company
Investee company
Investee company
Investee company
Investee company
Relationship
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
10,066
5,235
1,571
1,678
1,649
2,000
2,537
3,125
5,000
508
1,000
200
Units (thousand)/
bonds/ shares
(thousand)
380
Units (thousand)/
bonds/ shares
(thousand)
326
948
USD 4,053
USD 4,381
USD 1,000
USD 2,000
USD 1,436
USD 1,000
USD 1,281
USD 2,016
USD 3,772
USD
USD 1,550
USD
Book value
-
-
-
-
-
-
-
-
23.30
35.45
44.44
100.00
100.00
Percentage of
ownership (%)
December 31, 2006
$53,485
Book value
Percentage of
ownership (%)
December 31, 2006
326
415
N/A
N/A
N/A
N/A
N/A
N/A
N/A
USD 1,113
USD 3,772
USD
USD 1,550
USD
Market value/
Net assets value
$53,485
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
None
Shares as
collateral
(thousand)
PACTRUST COMMUNICATION, INC.
LUMINUS DEVICES, INC.
REALLUSION HOLDING INC.
FORCE10 NETWORKS, INC.
QSECURE, INC.
KOTURA, INC.
VERIPRECISE TECHNOLOGY, INC.
Stock
PATENTOP, LTD.
Stock
EAST VISION TECHNOLOGY LTD.
VENGLOBAL CAPITAL FUND III, L.P.
DIBCOM, INC.
Fund
AMALFI SEMICONDUCTOR, INC.
MAGNACHIP SEMICONDUCTOR LLC
WISAIR, INC.
Stock
SMART VANGUARD LTD.
Name of securities
MAXLINEAR, INC.
Type of securities
UMC CAPITAL CORP.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Relationship
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
noncurrent
0.59
720
-
31
12,422
4,373
1,800
477
4,850
4,000
550
1,500
2,770
10
1,471
153
5,750
2,070
Units (thousand)/
bonds/ shares
(thousand)
242
555
USD
-
-
712
USD 1,094
USD 3,000
USD 4,500
USD
USD 3,000
USD 4,850
USD 4,000
USD
USD 3,375
USD 4,820
USD 1,186
USD 1,500
USD 1,596
USD 6,500
USD 4,052
Book value
0.00
18.00
-
0.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Percentage of
ownership (%)
December 31, 2006
Note
Note
N/A
Note
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Market value/
Net assets value
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
Shares as
collateral
(thousand)
279
280
-
-
Relationship
noncurrent
noncurrent
750
301
Units (thousand)/
bonds/ shares
(thousand)
Note : The net asset values for unlisted investees classified as "Financial assets measured at cost, noncurrent" were not available as of December 31, 2006.
ZYLOGIC SEMICONDUCTOR CORP.
Name of securities
TERABURST NETWORKS
Type of securities
UMC CAPITAL CORP.
Book value
-
-
-
Percentage of
ownership (%)
December 31, 2006
N/A
N/A
Market value/
Net assets value
None
None
Shares as
collateral
(thousand)
CHINA
DEVELOPMENT
FINANCIAL
HOLDING CORP.
MEDIATEK INC.
Stock
Stock
PROMOS
TECHNOLOGIES
INC.
Stock
assets,
noncurrent
Financial assets
at fair value
through profit or
loss, current
Financial assets
at fair value
through profit or
loss, current
loss, current
Financial assets
ACTION
through profit or
LTD.
Financial assets
at fair value
through profit or
loss, current
QUANTA STORAGE Financial assets
at fair value
INC.
through profit or
loss, current
Financial assets
TATUNG CO.
at fair value
through profit or
loss, current
SAMSON HOLDING Financial assets
at fair value
LTD.
through profit or
loss, current
Financial assets
SILICONWARE
at fair value
PRECISION
through profit or
INDUSTRIES CO.,
loss, current
LTD.
Stock
Stock
Stock
Convertible
bonds
Convertible
bonds
Convertible
bonds
Financial assets
at fair value
through profit or
loss, current
SILICONWARE
PRECISION
INDUSTRIES CO.,
LTD.
ACTION
ELECTRONICS CO.,
LTD.
Convertible
bonds
loss, current
Financial assets
KING YUAN
through profit or
LTD.
Financial
statement
account
Convertible
bonds
Type of
securities
Open market
Open market
Open market
SILICONWARE
PRECISION
INDUSTRIES CO.,
LTD.
ACTION
ELECTRONICS
CO., LTD.
Open market
Open market
QUANTA
STORAGE INC.
SILICONWARE
PRECISION
INDUSTRIES CO.,
LTD.
ACTION
ELECTRONICS
CO., LTD.
KING YUAN
ELECTRONICS
CO., LTD.
Counter-party
-
-
53,916
3,700
-
-
37,872
-
-
-
-
-
4,500
-
-
10,000
-
-
8,000
800
-
-
Relationship
Units (thousand)/
bonds/
shares (thousand)
20,865,597
-
-
-
170,385
565,344
-
144,191
402,375
310,099
$340,912
Amount
(Note1)
Beginning balance
-
23,200
526,750
14,791
6,832
-
982
1,000
-
-
-
Units (thousand)/
bonds/
shares (thousand)
Addition
-
-
$-
-
298,433
6,831,114
434,127
(Note4)
291,714
(Note4)
-
111,540
32,578
Amount
42,407
-
49,376
-
6,150
37,872
580
4,500
10,000
8,000
800
Units (thousand)/
bonds/
shares (thousand)
14,259,393
-
709,895
-
292,416
581,041
78,464
144,342
(Note5)
434,127
(Note4)
291,714
(Note4)
$309,884
(Note4)
Amount
Disposal
458,508
-
640,329
-
243,280
456,571
65,879
152,778
322,200
270,120
$271,600
Cost
(Note 2)
13,771,261
(Note9)
-
69,566
-
49,136
124,470
12,585
(8,436)
111,927
21,594
$38,284
14,979
(Note10)
23,538
(Note8)
477,374
16,270
(Note7)
5,395
(Note6)
-
402
1,000
-
-
-
from disposal
bonds/
(Note 3)
shares (thousand)
-
-
$-
5,048,091
353,072
6,778,711
329,464
276,202
-
52,863
34,485
Amount
(Note1)
Ending balance
281
282
RECHI PRECISION
CO., LTD.
PREMIER IMAGE
TECHNOLOGY
CORP.
HON HAI
PRECISION
INDUSTRY CO.,
LTD.
Stock
Stock
Stock
HSUN CHIEH
INVESTMENT CO.,
LTD.
TOPPAN
PHOTOMASKS
TAIWAN LTD.
Stock
Stock
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
assets,
noncurrent
TOPPAN
PHOTOMASKS
TAIWAN LTD.
HSIEH YONG
CAPITAL CO.,
TAIWAN
CEMENT CORP.
StockTAIWAN CEMENT
Preferred stock CORP.
noncurrent
CHINATRUST
FINANCIAL
HOLDING CO.,
LTD.
HON HAI
PRECISION
INDUSTRY CO.,
LTD.
PREMIER IMAGE
TECHNOLOGY
CORP.
Open market
Proceeds from new
issues
KING YUAN
ELECTRONICS
CO., LTD.
Counter-party
Available-forStockCHINATRUST
sale financial
Preferred stock FINANCIAL
HOLDING CO., LTD. assets,
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
EPITECH
TECHNOLOGY
CORP.
Stock
noncurrent
Available-forKING YUAN
ELECTRONICS CO., sale financial
assets,
LTD.
Financial
statement
account
Stock
Type of
securities
106,621
-
4,810
-
92,124
-
-
-
3,497
-
44,530
12,412
-
-
23,729
23,040
-
-
Relationship
Units (thousand)/
bonds/
shares (thousand)
1,063,671
(3,169,837)
(Note15)
1,202,310
206,830
-
154,043
331,400
716,630
$828,272
Amount
(Note1)
Beginning balance
-
-
-
-
1,057
-
-
13,492
9,653
Units (thousand)/
bonds/
shares (thousand)
Addition
-
-
-
-
244,929
(Note14)
-
-
296,823
$309,884
(Note4)
Amount
106,621
58,500
44,530
4,810
-
3,602
(Note13)
12,677
-
-
Units (thousand)/
bonds/
shares (thousand)
-
$-
1,279,449
6,521,580
1,113,250
192,400
-
244,929
(Note14)
223,636
Amount
Disposal
-
$-
1,053,204
5,865,917
1,201,794
207,482
-
27,964
205,245
Cost
(Note 2)
197,633
(Note17)
13,152,475
(Note16)
(88,544)
(15,082)
-
216,965
18,391
-
$-
-
33,624
-
-
1,057
-
1,753
(Note12)
37,221
35,008
(Note11)
from disposal
bonds/
(Note 3)
shares (thousand)
-
4,674,311
-
-
245,705
-
31,116
1,155,725
$952,216
Amount
(Note1)
Ending balance
UMC JAPAN
TLC CAPITAL CO.,
LTD.
UMC CAPITAL
CORP.
MEGA MISSION
LIMITED
PARTNERSHIP
Stock
Stock
Stock
Fund
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
Proceeds from new
issues
Proceeds from new
issues
Proceeds from new
issues
Open market
Proceeds from new
issues
Counter-party
-
484
300,000
74,000
-
-
-
-
-
-
Relationship
Units (thousand)/
bonds/
shares (thousand)
$-
-
2,051,350
2,991,258
6,341,144
Amount
(Note1)
Addition
(Note22)
50,000
300,000
12
28,500
Units (thousand)/
bonds/
shares (thousand)
2,222,100
1,665,000
3,000,000
132,462
$285,000
Amount
Note 1: The amounts of beginning and ending balances of financial assets at fair value through profit or loss and available for sale are recorded at the prevailing market prices.
Note 2: The disposal cost represents historical cost.
Note 3: Gain/Loss from disposal includes realized exchange gain/loss to which the ROC SFAS No. 34, "Financial Instruments: Recognition and Measurement'', is applied.
As for the gain/loss from disposal of financial assets at fair value through profit/loss transfers to gain/loss on the valuation of financial assets.
Note 4: Exercise of conversion rights of UMC's convertible bond classified as "Financial asset at fair value through profit or loss" on the balance sheet.
Note 5: Exercise of call back rights of the UMC's convertible bond classified as "Financial asset at fair value through profit or loss" on the balance sheet.
Note 8: The ending balance includes stock dividend of 338 thousand shares.
Note 9: The gain/loss on disposal of investment includes adjustments to long-term investment additional paid-in capital of NT$(29,624) thousand.
HIGHLINK
TECHNOLOGY
CORP.
Stock
Type of
securities
Financial
statement
account
Beginning balance
-
-
-
-
-
Units (thousand)/
bonds/
shares (thousand)
Amount
-
-
-
-
$-
Disposal
Cost
(Note 2)
-
-
-
-
$-
-
-
-
-
$-
(Note22)
124,000
600,000
496
28,500
2,699,491
(Note22)
3,613,491
(Note21)
6,999,737
(Note20)
5,949,999
(Note19)
$225,624
(Note18)
Amount
(Note1)
Ending balance
from disposal
bonds/
(Note 3)
shares (thousand)
283
284
Financial
statement
account
Counter-party
Relationship
Units (thousand)/
bonds/
shares (thousand)
Amount
(Note1)
Units (thousand)/
bonds/
shares (thousand)
Addition
Amount
Units (thousand)/
bonds/
shares (thousand)
Amount
Disposal
Cost
(Note 2)
from disposal
bonds/
(Note 3)
shares (thousand)
ULI ELECTRONICS
INC.
UNITRUTH
INVESTMENT
CORP.
TRIDENT
MICROSYSTEMS,
INC.
SIRF
TECHNOLOGY
HOLDINGS, INC.
Stock
Stock
Stock
Stock
Type of
securities
Financial
statement
account
assets,
noncurrent
assets,
noncurrent
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
Open market
Open market
Proceeds from new
issues
NVIDIA BVI
HOLDINGS LTD.
Counter-party
181
-
176,419
150,565
366,683
40,000
255
$252,307
Amount
(Note1)
12,655
-
Subsidiary
-
Relationship
Beginning balance
Units (thousand)/
bonds/
shares (thousand)
Addition
-
-
40,000
-
Units (thousand)/
bonds/
shares (thousand)
$-
-
-
400,000
Amount
181
255
-
12,655
Units (thousand)/
bonds/
shares (thousand)
185,353
218,469
-
$240,451
Amount
Disposal
24,652
71,775
-
$252,307
Cost
160,701
146,694
-
$(11,607)
(Note2)
-
-
80,000
-
Units (thousand)/
bonds/
Gain (Loss)
$-
-
-
743,210
(Note3)
Amount
(Note1)
Ending balance
Amount
(Note1)
Ending balance
Note 13: The disposal shares include stock dividend of 105 thousand shares.
Note 14: On December 1, 2006, Premier Image Technology Corporation merged into Hon Hai Precision Industry Co., Ltd.
Note 15: The ending balance of NT$(3,169,837) thousand is computed by deducting UMC's stocks held by Hsun Chieh (therefore accounted for as treasury stock) of NT$20,137,403 thousand from UMC's long-term investment beginning balance in Hsun Chieh of
NT$16,967,566 thousand.
Note 16: The gain/loss on disposal includes long-term investment additional paid-in capital adjustments of NT$14,149,221 thousand, cumulative translation adjustments of NT$(8,157) thousand, unrealized loss of available for sale NT$(1,644,252) thousand.
Note 17: The gain/loss on disposal includes long-term investment additional paid-in capital adjustments of NT$(28,612) thousand.
Note 18: The ending balance includes impairment loss of NT$(7,774) thousand, long-term investment loss of NT$(51,719) thousand and long-term investment additional paid-in capital adjustment of NT$117 thousand.
Note 19: The ending balance includes long-term investment loss of NT$(408,923) thousand, long-term investment additional paid-in capital adjustment of NT$1 thousand and cumulative translation adjustments of NT$(114,685) thousand.
Note 20: The ending balance includes long-term investment gain of NT$329,178 thousand, long-term investment additional paid-in capital adjustment of NT$2,543 thousand, cumulative translation adjustments of NT$10 thousand and unrealized gain on financial
assets of NT$676,748 thousand.
Note 21: The ending balance includes long-term investment loss of NT$(49,736) thousand, long-term investment additional paid-in capital adjustment of NT$930 thousand, cumulative translation adjustments of NT$(55,147) thousand and unrealized gain on financial
assets of NT$1,094 thousand.
Note 22: No shares since it belongs to partnership fund organization. The ending balance includes long-term investment loss of NT$504,936 thousand and cumulative translation adjustments of NT$(27,545) thousand.
Type of
securities
Beginning balance
RECHI PRECISION
CO., LTD.
EPITECH
TECHNOLOGY
CORP.
Stock
Stock
SUPERALLOY
INDUSTRIAL CO.,
LTD.
Financial assets
measured at cost,
noncurrent
Financial assets
measured at cost,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
Financial
statement
account
Taiwan Special
Opportunities Fund
III / Proceeds from
new issues
ANALOG
DEVICES
HOLDINGS B.V.
Open market
Open market
Open market
Counter-party
-
5,000
4,361
120
-
-
-
-
-
-
Relationship
Units (thousand)/
bonds/
shares (thousand)
$-
-
5,000
-
8,767
-
1,518
Units (thousand)/
bonds/
shares (thousand)
34,413
131,705
133,500
Amount
(Note1)
Addition
225,000
-
257,000
-
$128,913
Amount
-
240
(Note5)
-
5,461
(Note4)
1,340
Units (thousand)/
bonds/
shares (thousand)
-
232,190
-
111,552
$127,011
Amount
Disposal
-
34,413
-
93,633
$113,977
Cost
-
197,777
-
17,919
$13,034
5,000
-
13,128
-
178
225,000
-
407,627
-
$21,004
Amount
(Note1)
Ending balance
Units (thousand)/
bonds/
Gain (Loss)
Note 1: The amounts of beginning and ending balances of available-for-sale financial assets are recorded at the prevailing market prices.
Note 2: The loss on disposal of investment includes cumulative translation adjustments of NT$249 thousand.
Note 3: The ending balance includes long-term investment loss of NT$(44,024) thousand, additional paid-in capital adjustments of NT$17,428 thousand due to disproportionate changes in shareholding, cumulative translation adjustments of NT$(99) thousand,
retained earning adjustments of NT$246 thousand and unrealized loss of available-for-sale financial assets of NT$2,976 thousand.
Note 4: The disposal shares includes stock dividend of 461 thousand shares.
Note 5: 2 for 1 Stock splits.
Stock
StockINTEGRANT
Preferred stock TECHNOLOGIES,
INC.
SIMPLO
TCHNOLOGY CO.,
LTD.
Stock
Type of
securities
Beginning balance
285
286
CHINA
DEVELOPMENT
FINANCIAL
HOLDING CORP.
PROMOS
TECHNOLOGIES
INC.
SIMPLO
TECHNOLOGY CO.,
LTD.
TATUNG CO.
EPITECH
TECHNOLOGY
CORP.
TXC CORP.
KINSUS
INTERCONNECT
TECHNOLOGY
CORP.
CORETRONIC
CORP.
A-DATA
TECHNOLOGY CO.,
LTD.
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
Stock
SERCOMM CORP.
Stock
Type of
securities
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
Financial
statement
account
Open market
Open market
Open market
Open market
Open market
Open market
Open market /
Private
Open market
Open market
Open market
Counter-party
-
-
-
-
-
-
-
-
-
-
Relationship
-
2,867
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$75,499
Amount
(Note1)
-
Units (thousand)/
bonds/
shares (thousand)
Beginning balance
1,741
5,983
1,300
4,208
10,413
47,372
5,520
19,500
23,025
5,077
Units (thousand)/
bonds/
shares (thousand)
Addition
211,155
245,799
126,049
166,996
298,327
583,045
330,234
238,307
292,259
$126,954
Amount
1,909
(Note8)
-
900
4,460
(Note4)
-
9,220
300
19,500
-
2,600
Units (thousand)/
bonds/
shares (thousand)
225,036
-
86,560
217,570
-
123,401
30,403
286,030
-
$70,109
Amount
Disposal
204,978
(Note9)
-
76,347
162,789
(Note5)
-
113,478
25,617
238,307
-
$59,874
Cost
20,058
-
10,213
54,781
-
9,923
4,786
47,723
-
$10,235
-
6,007
(Note7)
566
(Note6)
-
10,413
38,152
5,220
-
23,596
(Note3)
6,192
(Note2)
Units (thousand)/
bonds/
Gain (Loss)
-
254,102
54,365
-
323,324
557,019
615,960
-
353,936
$168,408
Amount
(Note1)
Ending balance
AVERMEDIA
TECHNOLOGIES,
INC.
TOPOINT
TECHNOLOGY CO.,
LTD.
SMEDIA
TECHNOLOGY
CORP.
YUNG LI
INVESTMENTS,
INC.
ASIA PACIFIC
MICROSYSTEMS,
INC.
SUPERALLOY
INDUSTRIAL CO.,
LTD.
Stock
Stock
Stock
Stock
Stock
Stock
EPITECH
TECHNOLOGY
CORP.
POWER QUOTIENT
INTERNATIONAL
CO., LTD.
Stock
Convertible
bonds
ELITE MATERIAL
CO., LTD.
Stock
Type of
securities
Financial assets
at fair value
through profit or
loss, noncurrent
Financial assets
measured at cost,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
assets,
noncurrent
Long-term
investments
accounted for
under the equity
method
Long-term
investments
accounted for
under the equity
method
Financial assets
measured at cost,
noncurrent
Financial
statement
account
Open market
Taiwan Special
Opportunities Fund
III / Proceeds from
new issues
Proceeds from new
issues
Proceeds from new
issues
Proceeds from new
issues
Open market /
Proceeds from new
issues
Open market
Open market
Open market
Counter-party
-
-
-
-
-
-
-
-
-
Relationship
-
144,832
-
-
-
-
-
-
2,263
-
-
-
-
-
-
-
Amount
(Note1)
-
-
Units (thousand)/
bonds/
shares (thousand)
Beginning balance
2,500
10,650
10,000
0.20
7,084
2,778
5,012
12,483
6,874
Units (thousand)/
bonds/
shares (thousand)
Addition
250,000
479,250
100,000
200,000
106,266
145,609
179,713
207,004
$102,424
Amount
-
-
-
-
-
-
927
12,483
6,874
Units (thousand)/
bonds/
shares (thousand)
-
-
-
-
-
-
36,788
306,400
$114,860
Amount
Disposal
-
-
-
-
-
-
33,239
204,961
(Note10)
$102,424
Cost
-
-
-
-
-
-
3,549
101,439
$12,436
2,500
10,650
10,000
0.20
7,084
5,430
(Note11)
4,085
-
-
-
$-
293,250
479,250
100,000
202,390
(Note13)
99,220
(Note12)
395,317
163,196
Amount
(Note1)
Ending balance
Units (thousand)/
bonds/
Gain (Loss)
287
288
Financial
statement
account
Counter-party
Relationship
Units (thousand)/
bonds/
shares (thousand)
Amount
(Note1)
Beginning balance
Units (thousand)/
bonds/
shares (thousand)
Addition
Amount
StockFORCE10
Preferred stock NETWORKS, INC.
Type of
securities
UMC CAPITAL CORP.
Financial assets
measured at cost,
noncurrent
Financial
statement
account
Proceeds from new
issues
Counter-party
-
Relationship
-
Units (thousand)/
bonds/
shares (thousand)
Amount
(Note1)
Beginning balance
$-
4,373
Units (thousand)/
bonds/
shares (thousand)
Addition
USD 4,500
Amount
Note1: The amounts of beginning and ending balances of financial assets at fair value through profit or loss and available for sale are recorded at the prevailing market prices.
Note8: The disposal shares includestock dividend of 168 thousand shares.
Note12: The ending balance includes long-term investment loss of NT$(7,057) thousand and cumulative translation adjustments of NT$11 thousand.
Note13: The ending balance includes long-term investment gain of NT$2,390 thousand .
Type of
securities
-
Units (thousand)/
bonds/
shares (thousand)
Units (thousand)/
bonds/
shares (thousand)
Amount
$-
Disposal
Amount
Disposal
Cost
Cost
$-
4,373
Units (thousand)/
bonds/
Gain (Loss)
$-
Amount
(Note1)
USD 4,500
Amount
(Note1)
Ending balance
Units (thousand)/
bonds/
Gain (Loss)
Ending balance
None
Name of properties
Transaction date
Transaction
amount
Payment
status
Counter-party
Relationship
Former holder of
property
Relationship
between former
holder and acquirer
of property
Date of
transaction
Transaction
amount
Where counter-party is a related party, details of prior transactions
ATTACHMENT 6 (Acquisition of individual real estate with amount exceeding the lower of NT$100 million or 20 percent of capital stock for the year ended December 31, 2006)
Price reference
Date of acquisition
Other
and status of
commitments
utilization
289
290
None
Names of properties
Transaction date
Date of original
acquisition
Book value
Transaction
amount
Status of
proceeds
collection
Gain (Loss) from
disposal
Counter-party
Relationship
ATTACHMENT 7 (Disposal of individual real estate with amount exceeding the lower of NT$100 million or 20 percent of capital stock for the year ended December 31, 2006)
Reason of disposal
Price reference
Other commitments
CORPORATION
Related party
Investor company
Relationship
Purchases
Purchases (Sales)
USD 260,578
Amount
144,859
Term
Net 60 Days
Net 60 Days
Net 60 Days
100.00
Net 60 Days
Term
2.72
8.12
52.33
Transactions
Percentage of total
226,662
Sales
688,955
Sales
Investee company
322,726
Sales
Investee company
ITE TECH. INC.
2,046,127
2,835,621
8,455,595
$54,476,329
Amount
Transactions
Percentage of total
Sales
Sales
Sales
Investee company
CORP.
Sales
Investee company
Sales
Purchases (Sales)
(EUROPE) B.V.
UMC JAPAN
Relationship
Investee company
UMC GROUP (USA)
Related party
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Term
N/A
Unit price
N/A
Term
transaction
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Unit price
transaction
ATTACHMENT 8 (Related party transactions for purchases and sales amounts exceeding the lower of NT$100 million or 20 percent of capital stock for the year ended December 31, 2006)
0.10
0.45
0.32
0.88
0.75
3.05
5.58
38.89
USD 22,584
100.00
Percentage of total
Balance
Note
receivables (%)
12,869
59,860
41,829
115,670
98,861
401,039
734,440
$5,118,532
Percentage of total
Balance
Note
receivables (%)
291
292
Related party
CORPORATION
UMC GROUP(USA)
UMC JAPAN
CORPORATION
UMC JAPAN
Related party
UMC GROUP (USA)
Purchases
Sales
Investor company
Investee of UMC
Purchases (Sales)
Purchases
Investee of UMC
Relationship
Purchases
Purchases (Sales)
Investor company
Relationship
463,508
JPY 9,881,648
JPY
0.23
99.77
Percentage of total
1.35
55.48
Transactions
Percentage of total
3,927
Amount
USD
USD 1,673,665
Amount
Transactions
Net 55 Days
Net 60 Days
Term
Net 55 Days
Net 60 Days
Term
N/A
N/A
Term
N/A
N/A
Unit price
N/A
N/A
Term
transaction
N/A
N/A
Unit price
transaction
ATTACHMENT 8 (Related party transactions for purchases and sales amounts exceeding the lower of NT$100 million or 20 percent of capital stock for the year December 31, 2006)
617
0.39
99.50
Percentage of total
receivables (%)
Note
JPY
73,364
JPY 1,458,726
0.78
33.05
Percentage of total
Balance
Note
receivables (%)
USD
USD 157,396
Balance
98,861
CORP.
-
Investee company
401,039
65,746
-
Investee company
734,440
$5,118,532
Accounts
receivable
1,299
-
318
4
$-
Other
receivables
Ending balance
49,924
-
Investee company
$-
(EUROPE) B.V.
UMC JAPAN
Relationship
Investee company
Notes
receivable
UMC GROUP (USA)
Related party
Total
100,160
115,670
401,357
734,444
$5,118,532
3.07
5.90
7.72
13.22
11.26
Turnover rate
(times)
-
-
Collection status
-
-
7 Credit Collecting
-
$-
20,475 Credit Collecting
Amount
Overdue receivables
ATTACHMENT 9 (Receivables from related parties with amounts exceeding the lower of NT$100 million or 20 percent of capital stock as of December 31, 2006)
40,741
99,735
175,792
531,115
$4,900,961
-
-
1,996
-
$-
Amount received
in subsequent
Allowance for
period
doubtful accounts
293
294
Taipei, Taiwan
Taipei, Taiwan
CORP.
UNITED MICRODISPLAY
OPTRONICS CORP.
UMC JAPAN
British Virgin
Islands
Taipei, Taiwan
LTD.
HOLTEK SEMICONDUCTOR INC. Hsinchu Science
Park, Taiwan
ITE TECH. INC.
Hsinchu Science
Park, Taiwan
PACIFIC VENTURE CAPITAL CO., Taipei, Taiwan
LTD.
Singapore
Hsinchu Science
Park, Taiwan
Chiba, Japan
Singapore
Cayman, Cayman
Islands
Apia, Samoa
Address
Sunnyvale,
California, USA
The Netherlands
CORP. (SAMOA)
UMCI LTD.
(EUROPE) B.V.
UMC CAPITAL CORP.
Investee company
UMC GROUP (USA)
357,628
186,898
IC design and production
integrated circuits
21,000 USD
4,000 SGD
150,000
20,994,400 JPY
1,008,078
4,999,940
6,000,000
839,880 USD
1,000 USD
124,000 USD
5,421 USD
186,898
357,628
921,241
21,000
-
300,000
20,537,634
1,008,078
4,999,940
3,000,000
839,880
1,000
74,000
5,421
Ending balance
Beginning balance
16,438 USD
16,438
336,241
USD
SGD
JPY
USD
USD
USD
USD
USD
Investment holding
Investment holding
LCOS
integrated circuits
Investment holding
integrated circuits
Investment holding
Investment holding
IC Sales
IC Sales
24,229
51,939
33,624
21,000
4,000
30,000
496
64,313
499,994
600,000
880,006
280
124,000
9
21.80
24.45
36.49
42.00
49.94
49.99
50.09
81.76
99.99
100.00
100.00
100.00
100.00
100.00
Percentage
Number of
of
shares
ownership
(thousand)
(%)
16,438
100.00
341,268
878,747
4,674,311
959,542
81,402
127,379
5,949,999
167,217
11,114,198
6,999,737
86
8,480
3,613,491
284,084
Book value
$1,006,496
251,307
1,058,371
215,305
306,447
(5,097)
(32,936)
(833,067)
(186,142)
374,046
329,178
12,463
(5,588)
(49,736)
7,058
Net income
(loss) of
investee
company
$260,573
47,559
233,441
81
128,708
(2,545)
(20,964)
(408,923)
(158,511)
379,890
329,178
12,463
(5,588)
(49,736)
7,058
Investment
income
(loss)
recognized
$260,573
Note2
Note
Investment holding
USD
67,500 USD
-
135,000
248,795
248,795
135,000
Beginning balance
$-
Ending balance
$285,000
-
16,200
8,758
45.00
11.86
16.48
Percentage
Number of
of
shares
ownership
(thousand)
(%)
28,500
18.97
2,699,491
57,062
53,710
Book value
$225,624
NEXPOWER TECHNOLOGY
CORP.
UCA TECHNOLOGY INC.
Taipei County,
Taiwan
Hsinchu, Taiwan
Taoyuan County,
Taiwan
Hsinchu, Taiwan
ANOTO TAIWAN CORP.
Address
Taipei, Taiwan
Investee company
solar power batteries
Tablet transmission systems
and chip-set
RF IC Design
Investment holding
8,000
99,311
85,471
39,200
Ending balance
$800,000
8,000
49,311
85,471
-
Beginning balance
$400,000
Initial Investment
800
11,285
10,187
3,920
40.00
42.38
44.29
49.00
Percentage
Number of
of
shares
ownership
(thousand)
(%)
80,000
100.00
11,976
42,288
33,531
32,622
Book value
$743,210
Note 1: Initial investment amounts denominated in foreign currencies are expressed in thousands.
Note 2: Based on the resolution of the board of directors meeting on August 26, 2004, the businesses, operations and assets of UMCI LTD. were transferred to the Branch as of April 1, 2005.
Note 3: No shares since it belongs to partnership fund organization.
Hsinchu Science
Park, Taiwan
Cayman Islands
MEGA MISSION LIMITED
PARTNERSHIP
electronic parts
Cartography chip design and
production
Investee company
Address
Taiwan
XGI TECHNOLOGY INC.
Hsinchu, Taiwan
9,983
(84,925)
(69,000)
(13,425)
Net income
(loss) of
investee
company
$(44,024)
1,247,081
(61,367)
(175,804)
Net income
(loss) of
investee
company
$(277,489)
3,995
(36,459)
(30,559)
(6,578)
Investment
income
(loss)
recognized
$(44,024)
504,936
(2,519)
(29,020)
Investment
income
(loss)
recognized
$(51,719)
Note
Note3
Note
295
296
Hsinchu, Taiwan
Taoyuan County,
Taiwan
Hsinchu, Taiwan
Hsinchu, Taiwan
Hsinchu, Taiwan
Taipei County,
Taiwan
Hsinchu County,
Taiwan
Hsinchu, Taiwan
CORP.
CORP.
CRYSTAL MEDIA INC.
Hsinchu, Taiwan
XGI TECHNOLOGY INC.
Taiwan
Hsinchu Science
Park, Taiwan
MOBILE DEVICES INC.
INC.
Hsinchu County,
Taiwan
Taipei County,
Taiwan
Samoa
Address
Hsinchu, Taiwan
Investee company
cartography chip
electronic parts
B/B Chip
manufacture
LED
Home ODM
Design, manufacturing and
sales of IC
IC design
phones
Sapphire
Monitor/module
Design of VOIP Telephone
USD
792
270,483
291,621
54,300
56,102
45,750
39,900
64,544
41,645
93,478
50,629
85,200
90,000
912
-
270,483
291,621
-
50,000
45,750
-
53,340
54,208
90,240
17,206
-
-
-
Beginning balance
$44,129
Initial Investment
Ending balance
$91,194
55
6,281
23,405
4,525
5,457
5,000
3,500
6,033
3,646
9,045
4,493
5,200
6,000
2,500
0.04
11.83
17.08
18.10
19.41
20.84
21.21
21.42
21.45
23.57
25.15
26.00
30.00
35.80
755
32,187
119,225
47,559
20,983
19,288
34,349
36,806
52,711
37,525
37,429
88,134
88,093
12,610
Percentage
Number of
of
shares
ownership
(thousand)
(%)
Book value
10,212
36.54
$17,224
(277,489)
(175,804)
(61,367)
(57,062)
(140,837)
(46,892)
(41,909)
(83,173)
37,313
(145,821)
(20,383)
2,015
(13,516)
(32,976)
Net income
(loss) of
investee
company
$(84,661)
(37)
(18,775)
(3,624)
(6,743)
(28,677)
(10,143)
(7,108)
(19,674)
8,974
(41,037)
(5,154)
2,934
(1,907)
(17,175)
Investment
income
(loss)
recognized
$(28,052)
Note
Taoyuan County,
Taiwan
Hsinchu, Taiwan
Hsinchu County,
Taiwan
Hsinchu, Taiwan
Taipei County,
Taiwan
Hsinchu, Taiwan
Investee company
CORP.
CORP.
CRYSTAL MEDIA INC.
UCA TECHNOLOGY INC.
INC.
Address
Hsinchu, Taiwan
Home ODM
LED
phones
Monitor/module
Sapphire
electronic parts
Miao-Li County,
Taiwan
Hsinchu, Taiwan
Investment
Taipei, Taiwan
Address
Investee company
221,920
106,266
174,596
13,800
11,910
24,057
14,820
16,493
19,800
Ending balance
$30,000
13,800
5,390
24,057
-
4,688
-
Beginning balance
$-
Initial Investment
Beginning balance
$-
Initial Investment
Ending balance
$200,000
11.62
18.46
134,999
99,220
1,250
1,585
2,570
1,300
1,587
1,800
5.21
5.95
6.70
7.88
8.88
9.00
4,822
7,840
17,085
12,758
13,220
20,816
Percentage
Number of
of
shares
ownership
(thousand)
Book value
(%)
2,000
10.00
$29,364
17,460
7,084
Percentage
Number of
of
shares
ownership
(thousand)
(%)
Book value
0.20
44.44
$202,390
(46,892)
(84,925)
(145,821)
(41,909)
(20,383)
2,015
Net income
(loss) of
investee
company
$(13,516)
(277,489)
(145,821)
Net income
(loss) of
investee
company
$5,378
(2,536)
(5,189)
(11,692)
(2,640)
(1,820)
1,016
Investment
income
(loss)
recognized
$(636)
(35,899)
(7,057)
Investment
income
(loss)
recognized
$2,390
Note
Note
297
298
Hsinchu, Taiwan
Hsinchu County,
Taiwan
Hsinchu, Taiwan
Taipei County,
Taiwan
Hsinchu, Taiwan
MOBILE DEVICES INC.
British Virgin
Islands
U.S.A.
UC FUND II
ACHIEVE MADE
INTERNATIONAL LTD.
ECP VITA LTD.
Address
Sunnyvale,
California, U.S.A.
British Virgin
Islands
British Virgin
Islands
Investee company
UMC CAPITAL (USA)
UMC CAPITAL CORP.
XGI TECHNOLOGY INC.
Address
Taipei County,
Taiwan
Investee company
IC design
Investment holding
Internet Content Provider
Insurance
Investment holding
cartography chip
IC design
RF IC Design
B/B chip
manufacture
USD
USD
USD
USD
USD
26,400
5,600
6,950
11,463
6,617
2,500 USD
3,850 USD
1,000 USD
2,500
3,850
-
1,000
Beginning balance
200 USD
200
1,000 USD
Ending balance
Initial Investment
26,400
5,600
6,950
11,463
6,617
Beginning balance
$-
Initial Investment
Ending balance
$14,700
3.31
3.55
4.35
4.45
4.65
10,788
3,960
3,292
4,093
2,193
Book value
$12,875
3,125
5,000
508
1,000
23.30
35.45
44.44
100.00
USD
USD
USD
USD
2,016
3,772
948
1,550
Percentage
Number of
of
shares
ownership
(thousand)
(%)
Book value
200
100.00 USD
326
1,760
1,000
1,000
1,250
1,300
Percentage
Number of
of
shares
ownership
(thousand)
(%)
1,225
4.90
USD
USD
USD
USD
(2,168) USD
(918) USD
(118) USD
(515)
(326)
(52)
286
Investment
income
(loss)
recognized
USD
30
(5,835)
(3,051)
(3,000)
(6,812)
(4,225)
Investment
income
(loss)
recognized
$(1,825)
286 USD
Net income
(loss) of
investee
company
USD
30
(175,804)
(83,173)
(69,000)
(140,837)
(84,661)
Net income
(loss) of
investee
company
$(57,062)
Note
Note
UMC and Its Affiliated Enterprises Have Not Faced Financial Difficulties; Therefore,
There Has Been No Impact on UMC’s Financial Status.
299

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