UMC ANNUAL REPORT INFORMATION CAN BE ACCESSED FROM THE FOLLOWING WEBSITES:www.umc.comnewmops.tse.com.tw
Printed on March 15, 2007
Corporate Information
SpokespersonChitung LiuChief Financial Officer886 (2) 2700 [email protected]
Deputy SpokespersonSandy YenThe Chairman and CEO OfficeSenior Manager886 (2) 2700 [email protected]
Bowen HuangFinance Division Senior Manager886 (2) 2700 [email protected]
HeadquartersNo.3 Li-Hsin 2nd Rd., Hsinchu Science Park, Hsinchu, Taiwan 30078, R.O.C.886 (3) 578 2258
Taipei Office3F, No.76, Sec. 2, Tunhwa S. Rd., Taipei, Taiwan 10683, R.O.C. 886 (2) 2700 6999
Fab 6ANo.10 Innovation 1st Rd., Hsinchu Science Park, Hsinchu, Taiwan 30076, R.O.C. 886 (3) 578 2258
Fab 8ANo.3 Li-Hsin 2nd Rd., Hsinchu Science Park, Hsinchu, Taiwan 30078, R.O.C. 886 (3) 578 2258
Fab 8BNo.5 Li-Hsin 2nd Rd., Hsinchu Science Park, Hsinchu, Taiwan 30078, R.O.C. 886 (3) 578 2258
Fab 8CNo.6 Li-Hsin 3rd Rd., Hsinchu Science Park, Hsinchu, Taiwan 30078, R.O.C. 886 (3) 578 2258
Fab 8DNo.8 Li-Hsin 3rd Rd., Hsinchu Science Park, Hsinchu, Taiwan 30078, R.O.C. 886 (3) 578 2258
Fab 8ENo.17 Li-Hsin Rd., Hsinchu Science Park, Hsinchu, Taiwan 30078, R.O.C. 886 (3) 578 2258
Fab 8FNo.3 Li-Hsin 6th Rd., Hsinchu Science Park, Hsinchu, Taiwan 30078, R.O.C. 886 (3) 578 2258
Fab 8SNo.16 Creation 1st Rd., Hsinchu Science Park, Hsinchu, Taiwan 30077, R.O.C. 886 (3) 578 2258
Fab 12ANo.18 Nan-Ke 2nd Rd., Tainan Science Park, Sinshih, Tainan, Taiwan 74147, R.O.C. 886 (6) 505 4888
Singapore BranchFab 12iNo.3 Pasir Ris Drive 12, Singapore 51952865 6213 0018
Securities Dealing InstituteHorizon Securities Co., Ltd.Stock Registration Department 3F, No.236 Hsin-Yi Rd. Sec. 4, Taipei, Taiwan 10680, R.O.C. 886 (2) 2326 8818www.honsec.com.tw
ADR Depositary and RegistrarCitibank, N.A.Depositary Receipt Services14F, 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]
ADR Exchange MarketplaceNew York Stock Exchange, Inc.11 Wall StreetNew York, NY 10005, U.S.A.1 (212) 656 3000www.nyse.comTicker/Search Code: UMC
Exchangeable Bond Exchange MarketplaceLuxembourg Stock Exchange11, av de la Porte-NeuveL-2227 Luxembourg352 (47) 79 36 - 1www.bourse.luTicker: UniMicElexCorpEB Search Code: ISIN XS0147090533ECB Search Code: ISIN XS0231460709
AuditorsErnst & YoungJames Wang, MY Lee9th Fl., 333 Keelung Rd., Sec.1Taipei 11012, Taiwan , R.O.C.www.ey.com/tw886 (2) 2720 4000
UMC Websitewww.umc.com
TSE Code : 2303NYSE Symbol : UMC
United Microelectronics Corporation | Annual Report 2006
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Operation Overview
65 Business Scope65 Industry Scope66 Research & Development Achievements and Plans68 Market and Sales Conditions 72 Employee Analysis73 Environmental Protection Information74 Labor Relations75 Major Agreements
Review of Financial Position, Operating Results, Risk Management and Evaluation
79 Analysis of Financial Position80 Analysis of Operating Results81 Liquidity Analysis81 Major Capital Expenditures and Sources of Funding82 Analysis for Investment83 Risk Management and Evaluation
Table of Contents
Letter to Shareholders
Corporate Overview
11 Corporate Profile12 Milestones
Corporate Governance Report
16 Corporate Organization18 Directors’, Supervisors’ and Managers’ Information33 Corporate Governance Practices35 Status of Internal Control37 Auditing Notes38 Change in Shareholding of Directors, Supervisors, Managers and Major Shareholders39 Information Disclosuring the Relationship Between Any of the Company’s Top Ten Shareholders40 Total Percentage of Ownership of Investees
Capital Overview
43 Capital and Shares50 Corporate Bonds 55 Preferred Stock 56 American Depositary Receipts 58 Employee Stock Option Certificates63 Mergers and Acquisitions 63 Financing Plans and Execution Status
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Financial Review Unconsolidated
101 Condensed Balance Sheets102 Condensed Statements of Income103 Financial Analysis 104 Supervisors’ Report 106 Report of Independent Auditors107 Balance Sheets108 Statements of Income 109 Statements of Changes in Stockholders’ Equity110 Statements of Cash Flows112 Notes to Financial Statements 160 Attachments to Notes
Financial Review Consolidated
198 Representation Letter199 Report of Independent Auditors200 Consolidated Balance Sheets201 Consolidated Statements of Income202 Consolidated Statements of Changes in Stockholders’ Equity203 Consolidated Statements of Cash Flows205 Notes to Consolidated Financial Statements260 Attachments to Notes
Special Disclosures87 Summary of Affiliated Enterprises92 Acquisition or Disposal of UMC Shares by Subsidiaries93 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.
Disclosure According to US Security Authorities Regulation95 Disclosure Committee95 Audit Committee95 Corporate Governance Difference95 Code of Ethics95 Employee Code of Conduct 95 US GAAP Financial Information 96 Consolidated Balance Sheets98 Consolidated Statements of Income
United Microelectronics Corporation | Annual Report 2006
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Letter to Shareholders
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In 2006, UMC achieved revenues of NTD 104.10 billion, which was 14.7% above the previous year’s performance. Net income was NTD 32.62 billion or 364% above 2005. The positive gains and growth can be attributed to stronger demand across all ap-plications, especially for the communications sec-tor, and an improvement in product mix resulting in a higher percentage of revenue from leading-edge process technologies.
Technology LeadershipUMC’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 pro-duction 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
65-nanometer, with four products in pilot production and more than 10 products taped out for various ap-plications ranging from handset baseband to FPGA, graphics and broadband. Yield improvement for our 65-nanometer volume production technology has been even faster than for the 90-nanometer genera-tion.
Strategic ExpansionUMC has accelerated the expansion of its 300mm fab complex in the Tainan Science Park to accommodate the next generation of advanced process technolo-gies, 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 comple-tion 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’ manu-facturing needs. The new fab will add an additional
Dear Shareholders,
United Microelectronics Corporation | Annual Report 2006
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Letter to Shareholders
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50,000 wafer capacity (300 mm) to the site and will cost approximately USD 5 billion when fully com-pleted and equipped.
The new fab and R&D center are being constructed adjacent to UMC’s Fab 12A to allow for the easy transfer of engineering resources, technology, and equipment among the facilities, which will facili-tate a more efficient ramp up for leading-edge 65-nanometer, 45-nanometer, and below processes. Once the new fab is completed and ready for produc-tion, the transition to mainstream manufacturing is expected to be seamless since there is no new learn-ing curve to master; the production lines will be directly expanded from the neighboring Fab 12A.
Next Generation Process TechnologyIn 2006, UMC also successfully produced functional 45-nanometer SRAM chips. UMC’s independently developed 45-nanometer logic process uses sophisti-cated immersion lithography for its 12 critical layers and incorporates 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 mate-rials and process modules. UMC’s wealth of experi-ence in semiconductor R&D and manufacturing put us among the first companies in the world to produce working 45-nanometer silicon, with encouraging yield results realized for the initial 45-nanometer wafer lots. UMC will continue to build on its 45-nanometer momentum to prepare the technology for adoption by our foundry customers.
Enhancing Shareholder ValueIn addition to UMC’s commitment to improving process technology and manufacturing, we are also taking proactive measures to increase shareholders’ value. For example, UMC’s Board of Directors passed a resolution to carry out a capital reduction of NTD 57.394 billion with the cancellation of 5.739 billion of its outstanding shares. The measure, which is expect-ed to be ratified at our Annual General Shareholders meeting, will result in an NTD 3 cash return
United Microelectronics Corporation | Annual Report 2006
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Letter to Shareholders
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per share to shareholders. Upon completion of the capital reduction, the paid-in capital of the company will be approximately NTD 133.92 billion. This ac-tion will contribute positively to shareholders’ equity through the improvement of the company’s capital structure. Going forward, we will continue to pursue maximum benefits for UMC’s shareholders, employ-ees, and our many partners in the global and domestic semiconductor industry.
Moving ForwardMoving forward, we anticipate even closer coopera-tion 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 Semicon-ductor’s new partnership with UMC for 65-nanometer 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.
In 2007, our 300mm fabs in Taiwan and Singapore will begin high-volume production for 65-nanometer products. We will continue preparing our 45-nanometer process for pilot production in 2008. Resources will be dedicated to strengthening our position as the SoC Solution Foundry, with emphasis on IP, EDA, and Design-for-Manufacturing (DFM) solutions to ease our customers’ SoC design-in. These efforts will increase the competitiveness of UMC’s coming years, and further solidify our position as a 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 custom-ers and shareholders.
Sincerely,
Jackson Hu, Chairman and CEO
United Microelectronics Corporation | Annual Report 2006
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Corporate Overview
11 CorporateProfile
12 Milestones
Corporate Overview
11
Corporate ProfileUMC 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 semiconduc-tor 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 ��, 1��0
United Microelectronics Corporation | Annual Report 2006
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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.
Corporate Overview
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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.
United Microelectronics Corporation | Annual Report 2006
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Corporate Governance Report
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Corporate Governance Report
16 CorporateOrganization
18 Directors’,Supervisors’and Managers’Information
33 CorporateGovernancePractices
35 StatusofInternalControl
37 AuditingNotes
38 ChangeinShareholdingofDirectors, Supervisors,ManagersandMajor Shareholders
39 InformationDisclosingthe RelationshipBetweenAnyof theCompany’sTopTenShareholders
40 TotalPercentageofOwnershipof Investees
United Microelectronics Corporation | Annual Report 2006
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Corporate Organization
Japan Business Group
AsiaBusiness Group
Europe Business Group
New Business Development Group
American Business Group
Customer
The Chairman and CEO Office
Board of Directors
Corporate Governance Report
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March 21, 2005
Corporate Marketing and Central Sales Operation DivisionsResponsible for corporate marketing affairs
Intellectual Property Development & Design Support DivisionResponsible for intellectual property development & design support affairs
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 Safe-ty & Health, Information Technology, Operations Support and Equipment Resources Integration Divisions, and Manufacturing Technology DivisionResponsible 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 CommitteeResponsible for mask engineering, testing and packaging service, and product quality
Central R&D and Specialty Technology DivisionsResponsible for research and development of new processes and technologies
Intellectual Property Rights Division Responsible for intellectual property rights protection and legal affairs
Finance and Accounting DivisionsResponsible for finance and accounting
Human Resources DivisionResponsible for HR and general affairs
Auditing DivisionResponsible for auditing
United Microelectronics Corporation | Annual Report 2006
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NameTitle
Date Elected[Date Assumed](Date First Elected)
Term (Yrs.)
Shareholding when Elected
Present Shareholding
Spouse & Minor Shareholding
Common Shares
% Common Shares
% Common Shares
%
Hsun Chieh Investment Co., Ltd. 2006.6.12 (1995.6.21) 3 599,696,356 3.02 605,830,368 3.17 - -
Representatives Jackson HuChairman and CEO
2006.6.12 (2004.2.4) 3 1,875,943 0.01 2,045,131 0.01 - -
Peter ChangManaging Director
2006.6.12 (2001.5.30) 3 8,617,440 0.04 8,855,583 0.05 771,640 0.00
Ching-Chang WenManaging 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 - -
Silicon Integrated Systems Corp. 2006.6.12 (2005.6.13) 3 428,511,368 2.16 432,894,409 2.26 - -
Representatives 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 ChangIndependent Director
2006.6.12 (2006.6.12) 3 - - - - 1,435 0.00
Chung Laung Liu Independent Director
2006.6.12 (2006.6.12) 3 - - - - - -
Paul S.C. Hsu Independent Director
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 - -
Representatives Tzyy-Jang Tseng Supervisor
2006.6.12 (2002.3.14) 3 19,650,715 0.10 19,851,712 0.10 209,158 0.00
Silicon Integrated Systems Corp. 2006.6.12 (2005.6.13) 3 428,511,368 2.16 432,894,409 2.26 - -
Representatives Ta-Hsing Wang Supervisor
2006.6.12 (2006.6.12) 3 - - - - - -
Ting-Yu Lin Supervisor
2006.6.12 (2006.6.12) 3 16,182,403 0.08 16,947,925 0.09 - -
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.
Directors’ and Supervisors’ Information
Corporate Governance Report
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Experience Education
Also Serves Concurrently as
- -
Chairman and CEO, UMCPh.D. of Computer Science,University of Illinois at Urbana-Champaign
Independent Director, Compal Communications, Inc.
Director, UMCMaster of Electrical Engineering, University of Texas at Austin
-
Director, UMCPh.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 Micro-electronics 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
-
United Microelectronics Corporation | Annual Report 2006
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UMC’s Institutional Shareholders Major Shareholders of UMC’s Institutional Shareholders (Holding Percentage)
Hsun Chieh Investment Co., Ltd. Hsieh Yong Capital Co., Ltd.(63.48%), United Microelectronics Corporation(36.49%)
Silicon Integrated Systems Corp. United Microelectronics Corporation(16.09%); Buddhist Compassion Relief Tzu Chi Foundation Taiwan(1.53%); Crédit Agricole (Suisse) SA (1.29%); Morgan Stanley & Co. In-ternational 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%)
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.
List of Major Shareholders of UMC’s Institutional Shareholders
List of Institutional Shareholders of the Major Shareholders
Corporate Governance Report
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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 sib-ling) 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.
Name Five or more Years Experience or Professional Qualification
Independence Status (Note) Number of Companies also Serves as Indepen-dent Direc-tor for
Lecturer or Above in Busi-ness, Law, Finance, Accounting or Corporate Business Related Fields
Qualification of Justice, Procurator, Attorney, CPA, Specialist or Technician of National Examina-tion in Corporate Business Related Fields
Experience in Business, Law, Finance, Accounting or Corporate Business Related Fields
1 2 3 4 5 6 7 8 9 10
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 -
Directors’ and Supervisors’ Professional Knowledge and Independence Information
United Microelectronics Corporation | Annual Report 2006
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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
Business Group President 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
Senior Vice President Henry Liu 2003.9.16 11,572,588 0.06 19,861 0.00
Senior Vice President 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
Managers’ Information
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.
Corporate Governance Report
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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 Micro-electronics 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.
United Microelectronics Corporation | Annual Report 2006
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The Compensation of Directors, Supervisors and ManagersDirectors’ Compensation
Directors’ Compensation The Percentage of Directors’ Compensation
to EAIT (%)Allowance Directors’ Remuneration
Operating Expenses
UMC 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 Hsun Chieh Investment Co., Ltd. Jackson Hu
Peter Chang
Ching-Chang Wen
Fu-Tai Liou
Director Silicon Integrated Systems Corp. Shih-Wei Sun
Stan Hung
Independent Director Chun-Yen Chang
Independent Director Chung Laung Liu
Independent Director 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.
Corporate Governance Report
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Managers’ Compensation The Percentage of Total Compensation to
EAIT (%)
Compensation from Other
UMC Investee Companies
Salaries Employees’ Bonus Employee Stock Options (Shares)
UMC UMC’s Consolidated
Companies
UMC UMC’s Consolidated
Companies
UMC UMC’s Consolidated
Companies
UMC UMC’s Consolidated
CompaniesCash Stock Cash Stock
22,190 28,341 45,000 - 45,000 - - - 0.25 0.27 None
In thousand NTD
Levels of Amounts of Compensation Number of Directors
Directors’ Compensation Total Compensation
UMC UMC’s Consolidated Companies
UMC UMC’s Consolidated 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
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The Compensation of Directors, Supervisors and Managers (cont.)
Supervisors’ CompensationSupervisors’ Compensation
Allowance Supervisors’ Remuneration Operating Expenses
UMC UMC’s Consolidated Companies UMC UMC’s Consolidated Companies UMC UMC’s Consolidated Companies
- - 2,479 2,479 120 120
Title Name Representatives
Supervisor Hsun Chieh Investment Co., Ltd. Tzyy-Jang Tseng
Supervisor Silicon Integrated Systems Corp. 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.
Corporate Governance Report
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The Percentage of Supervisors’ Compensation to EAIT (%) Compensation from other UMC investee companies
UMC UMC’s Consolidated Companies
0.01 0.01 None
In thousand NTD
Levels of Amounts of Compensation Number of Supervisors
Total Compensation
UMC UMC’s Consolidated Companies
Lower than NTD 2,000,000 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
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Managers’ Compensation
Note Hong-Jen Wu retired on June 30, 2006.
The Compensation of Directors, Supervisors and Managers (cont.)
Salaries Bonus and Special Allowance Employees’ Bonus
UMC UMC’s Consolidated Companies
UMC UMC’s Consolidated Companies
UMC UMC’s Consolidated Companies
Cash Stock Cash Stock
34,544 40,695 37,116 37,116 98,280 - 98,280 -
Title Name
Chairman and CEO Jackson Hu
Vice Chairman Peter Chang
Former President Hong-Jen Wu
Business Group President Ching-Chang Wen
Business Group President Fu-Tai Liou
Executive Vice President Shih-Wei Sun
Senior Vice President Stan Hung
Senior Vice President Henry Liu
Senior Vice President 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
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In thousand NTD
The Percentage of Total Compensation to EAIT (%)
Employee Stock Options(Shares) Compensation from other UMC investee companies
UMC UMC’s Consolidated Companies
UMC UMC’s Consolidated Companies
0.52 0.54 - - None
Levels of Amounts of Compensation Number of Managers
UMC UMC’s Consolidated Companies
Lower than NTD 2,000,000 - -
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 - -
Total 18 18
United Microelectronics Corporation | Annual Report 2006
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Managers’ Bonus
Stock Bonus 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
Business Group President Ching-Chang Wen
Business Group President Fu-Tai Liou
Executive Vice President Shih-Wei Sun
Senior Vice President Stan Hung
Senior Vice President Henry Liu
Senior Vice President 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
The Compensation of Directors, Supervisors and Managers (cont.)
In thousand NTD
Corporate Governance Report
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Policy for Directors’ and Supervisors’ CompensationThe Company’s Article has stated that Directors’ and Super-visors’ 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’ CompensationThe 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.
2006 2005
UMC Consolidated UMC Consolidated
EAIT (Thousand NTD) 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
The Company’s compensation for Directors, Supervisors and Managers is based on the Company’s Article and formulations, and is distributed in proper ratios.
Comparison of Compensation for Directors, Supervisors and Managers in the Past Two Years
Compensation Policy for Directors, Supervisors and Managers
Notes (1) The directors’ and supervisors’ compensation includes allowance, remuneration and operating expenses; the managers’ compensation includes salaries, spe-cial allowance and employees’ bonus. (2) On March 15, 2007, the Company’s Board proposed to distribute NTD 15,494,130 as Directors’ and Supervisors’ remunera-tion and NTD 2,324,119,405 as employee cash bonus from retained earnings of 2006 and previous years.
United Microelectronics Corporation | Annual Report 2006
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Name Title Attendance Proxy Attendance
Attendance Rate (%) (Note)
Remarks
Hsun Chieh Investment Co., Ltd.
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
Silicon Integrated Systems Corp.
Representatives: Shih-Wei Sun Director 3 75.00 Elected on 2006.6.12
Representatives: Stan Hung Director 4 100.00 Elected on 2006.6.12
Chun-Yen Chang Independent Director
3 1 75.00 Elected on 2006.6.12
Chung Laung Liu Independent Director
4 100.00 Elected on 2006.6.12
Paul S.C. Hsu Independent Director
10 83.33
Hsun Chieh Investment Co., Ltd.
Representatives: Tzyy-Jang Tseng Supervisor 8 66.67
Silicon Integrated Systems Corp.
Representatives: Ta-Hsing Wang Supervisor 3 75.00 Elected on 2006.6.12
Ting-Yu Lin Supervisor 3 75.00 Elected on 2006.6.12
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 Expired on 2006.6.11
Silicon Integrated Systems Corp. Former Director 5 1 62.50 Expired on 2006.6.11
Chuin Tsie Investment Corporation
Representatives: Tsing-Yuan Hwang Former Supervisor 3 37.50 Expired on 2006.6.11
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.
Information of Board Meeting OperationBoard meetings were held 12 times in 2006; attendances of directors and supervisors are as follows:
Not Applicable. The audit committee of the Company was instituted under US securities authorities regulation.
Information Regarding Audit Committee Operation
Note Attendance rate = Number of meetings each board member actually attends / total number of board meetings held within his or her service period.
Corporate Governance Report
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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’ recommendations or disputes:
The Company has designated a specific body and established an email address to handle shareholders’ recommendations or disputes.
-
(b) How the Company regularly monitors the list of key shareholders who have management control of the Company, or those who have ultimate control of key shareholders:
There is no single shareholder who holds more than 10% of the Company’s total outstanding shares.
-
(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 en-terprises have been clearly defined. Any transaction between the Com-pany 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 Direc-tors 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 in-formation 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 thor-oughly disclose corporate information.
-
Corporate Governance Practices
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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. There-fore, 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, envi-ronmental 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 relation-ships, 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.
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Status of Internal Control
Statement of Internal Control The self-assessment of UMC’s internal control was conduct-ed 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 CEOMarch 15, 2007
The Company was not required to engage with a CPA to attest to the internal control system under R.O.C. regulations; there-fore, there is no CPA audit report on internal control to be disclosed for 2006 in this annual report.
United Microelectronics Corporation | Annual Report 2006
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Directors’ or Supervisors’ Objections on the Important Resolution of Board MeetingsNone.
Shareholders’ MeetingThe 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 ap-proved 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’ MeetingsThe 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.4. Acceptance of the 2005 business report and financial 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. 18. Acceptance of the 2006 business report and financial statement. 19. Distribution of 2006 retained earnings.20. Investment related to mainland China.
Major Resolutions of the Shareholders’ Meeting and the Board of Directors’ Meetings
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.
Description of Violations/Infringement of Regulations and the Company’s Response
Information of Resignation or Dismission of the Persons Related to Financial ReportsNone.
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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 ac-counting firm of the appointed independent auditors or the related parties within the past year.
Auditing Notes
United Microelectronics Corporation | Annual Report 2006
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Title Name 2007 2006
HoldingIncrease
(Decrease)
Pledged Holding Increase
(Decrease)
HoldingIncrease
(Decrease)
Pledged Holding Increase
(Decrease)
Chairman, Supervisor Hsun Chieh Investment Co., Ltd. - - 6,134,012 5,000,000
Director, Supervisor Silicon Integrated Systems Corp. - - 4,383,041 -
Independent Director Chun-Yen Chang - - - -
Independent Director Chung Laung Liu - - - -
Independent Director Paul S.C. Hsu - - - -
Supervisor Ting-Yu Lin - - 765,522 -
Chairman and CEO Jackson Hu - - 169,188 -
Vice Chairman Peter Chang - - 238,143 -
Business Group President Ching-Chang Wen - - 207,432 -
Business Group President Fu-Tai Liou (30,000) - (13,463) -
Executive Vice President Shih-Wei Sun - - (756,686) -
Senior Vice President Stan Hung - - 328,017 -
Senior Vice President Henry Liu (70,000) - (10,803) -
Senior Vice President Tai-Sheng Feng - - 165,071 -
Vice President Nick Nee - - (1,460,332) (1,100,000)
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 1,300,000 117,568 1,800,000
Vice President Po-Wen Yen - - (317,686) 220,000
Vice President Tsung-Hsi Ko - - 236,045 100,000
CFO Chitung Liu - - 88,594 -
Change in Shareholding of Directors, Supervisors, Managers and Major ShareholdersUnit: share
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 sharehold-ing 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.
Corporate Governance Report
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Information Disclosing the Relationship Between Any of the Company’s Top Ten ShareholdersNone.
United Microelectronics Corporation | Annual Report 2006
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Investees UMC Investments Investments from Directors, Supervisors, Managers, and
Directly or Indirectly Con-trolled Businesses
Total Investments
Shares % Shares % Shares %
United Fu Shen Chen Technology Corp. 18,460,153 16.60 - - 18,460,153 16.60
Unimicron Technology Corp. 202,366,540 19.89 24,115,891 2.37 226,482,431 22.26
Faraday Technology Corp. 55,611,441 17.27 - - 55,611,441 17.27
Fortune Venture Capital Corporation 499,994,000 99.99 - - 499,994,000 99.99
Hsun Chieh Investment Co., Ltd. 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
Silicon Integrated Systems Corp. 228,955,885 16.09 - - 228,955,885 16.09
UMC Group (USA) 16,437,500 100.00 - - 16,437,500 100.00
UMC Japan 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
United Microelectronics Corp. (Samoa) 280,000 100.00 - - 280,000 100.00
United Microelectronics (Europe) B.V. 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
Total Percentage of Ownership of Investees
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.
Corporate Governance Report
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Investees UMC Investments Investments from Directors, Supervisors, Managers, and
Directly or Indirectly Con-trolled Businesses
Total Investments
Shares % Shares % Shares %
C-Com Corporation 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
Hon Hai Precision Industry Co., Ltd. 1,056,795 0.02 - - 1,056,795 0.02
Industrial Bank of Taiwan Corp. 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
Mega Mission Limited Partnership - 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
King Yuan Electronics Co., Ltd. 35,007,928 3.21 - - 35,007,928 3.21
Rechi Precision Co., Ltd. 1,753,020 0.51 20,163,440 5.84 21,916,460 6.35
United Microelectronics Corporation | Annual Report 2006
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Capital Overview
43 CapitalandShares
50 CorporateBonds
55 PreferredStock
56 AmericanDepositaryReceipts
58 EmployeeStockOptionCertificates
63 MergersandAcquisitions
63 FinancingPlansandExecutionStatus
Capital Overview
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Date Issue Price(Per share)
Authorized Shares Issued Shares Remarks
Shares(In thousands)
Total(In thousand NTD)
Shares(In thousands)
Total(In thousand NTD)
Source of Capital
Assets other than Cash
Used for Capital
Other
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 - -
Capital and Shares
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 Administra-tion 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.
Source of Capital
Share Type Authorized Shares Allotment for Convertible
Bonds
Allotment for Stock Option Certificates
(Units)Issued Shares Un-issued Shares Total
Common stock 19,131,192,690 6,868,807,310 26,000,000,000 1,500,000,000 2,000,000,000
Unit: share
Securities under General Application SystemNot applicable.
United Microelectronics Corporation | Annual Report 2006
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Note The data shown above was recorded on August 8, 2006, which was the record date for the distribution of 2005 stock dividends.
Status of ShareholdersItem Government
AgenciesFinancial
InstitutionsOther Legal
EntitiesDomestic
IndividualsForeign
Institutions & Individuals
Total
Number of shareholders 21 39 1,016 849,042 1,109 851,227
Shareholding (Shares) 27,731,900 262,007,234 3,777,439,768 7,972,544,290 7,030,387,998 19,070,111,190
Percentage (%) 0.14 1.37 19.81 41.81 36.87 100.00
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
Total 851,227 19,070,111,190 100.00
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
Stock: common share
Capital and Shares (cont.)
Preferred Stock None.
Capital Overview
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Note The data shown above was recorded on August 8, 2006, which was the record date for the distribution of 2005 stock dividends.
List of Major Shareholders
Shareholder’s Name Shareholding
Common Shares %
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
1,398,258,888 7.33
Hsun Chieh Investment Co., Ltd. 605,830,368 3.18
Xilinx Holding Three Ltd. 441,396,924 2.31
Silicon Integrated Systems Corp. 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
United Microelectronics Corporation | Annual Report 2006
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Item 2007 (Note 7) 2006 2005
Market price per share Highest market price 22.40 22.90 25.25
Adjusted highest market price (Note 1) – 22.61 22.37
Lowest market price 18.50 17.35 16.35
Adjusted lowest market price (Note 1) – 17.18 15.59
Average market price 20.32 19.36 20.23
Adjusted average market price (Note 1) – 19.11 17.92
Net worth per share Before distribution – 16.39 14.17
After distribution – * 13.59
Earnings per share Weighted average shares – 18,050,962,111 shares
18,410,921,978shares
Earnings per share (Note 2) – 1.81 0.38
Earnings per share (Note 3) – * 0.38
Dividends per share Cash dividends – * 0.40
Stock dividends Dividends from retained earnings – * 0.05
Dividends from additional paid–in capital – * 0.05
Accumulated unappropriated dividends – – –
Return on investment 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, Net Worth, Earnings, and Dividends per ShareUnit: NTD
* 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.
Capital Overview
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Dividend Policy in the Company’s Articles of IncorporationAccording 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’ remu-neration; 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, meet-ing 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 divi-dend distribution should reflect factors such as the current and future investment environment, fund requirements, do-mestic 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 DividendThe 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.
Dividend Policy and Status
Not Applicable.
Impact of Stock Dividends on Operating Results, EPS and ROE
United Microelectronics Corporation | Annual Report 2006
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Details of the 2005 employee bonus settlement and directors’ & supervisors’ remuneration are as follows:
Details As Approved at the Shareholders’ Meeting
As Recommended by the Board of Directors
Differences Reasons for Differences
Settlement of employ-ees’ bonus by issuance of new shares
Number of shares (In thousands) 45,846 45,846 – –
Amount (In thousand NTD) 458,455 458,455 – –
Percentage on total number of outstanding shares at year end
0.24 0.24 – –
Settlement of employees’ bonus by cash
(In thousand NTD)
305,636 305,636 – –
Remuneration paid to directors and supervisors
(In thousand NTD)
6,324 6,324 – –
Effect on earnings per share before retroactive adjustments
Earnings per share (NTD) Basic 0.38 0.38 – –
Diluted 0.38 0.38 – –
Pro forma earnings per share tak-ing into consideration employees’ bonus and directors’ & supervi-sors’ remuneration (NTD)
Basic 0.34 0.34 – –
Diluted 0.34 0.34 – –
For the year ended December 31, 2005
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 em-ployee bonus and remuneration to directors and supervi-sors 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.
Capital Overview
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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
Share Buy-back History
Note The data shown above includes transactions from January 1, 2006 to March 15, 2007.
United Microelectronics Corporation | Annual Report 2006
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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; 2006.4.16~2006.4.271B–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% respec-tively. 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 -
Capital Overview
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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 Diwan, Ernst & Young
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 out-standing 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 R.O.C. taxation resulting in additional costs to the issuer.
Covenant -
Name of rating company, date and result of rating -
Other obligation Balance of amount converted to (exchangeable or warrant) shares, ADSs, or other types of securities as of printing date
The balance of amount exchanged to common shares of AU Optronics Corp. (“AUO”) is USD 6,060,000. The balance of amount exchanged to ADSs of AUO is USD 135,110,000.
Policy of issuing or converting (exchangeable or warrant)
(a) Bondholders have the right hereunder to exchange the bonds into common shares or ADSs of 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.
United Microelectronics Corporation | Annual Report 2006
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Corporate Bonds (cont.)
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 busi-ness 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 busi-ness 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 Diwan, Ernst & Young
Redemption 3A is a five-year term, and total size is NTD 7.5 billion. Principal will be paid in full at matu-rity. 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 -
Name of rating company, date and result of rating
Taiwan Ratings Corporation, 2003.4.24, twAA-
Other obligation -
Effect on the current shareholders due to dilution -
Name of custodian -
Capital Overview
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Corporate Bonds (cont.)
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 Diwan, Ernst & Young
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, repur-chased, 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 bond-holder 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.
United Microelectronics Corporation | Annual Report 2006
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Type Euro Convertible Bonds Due 2008
Covenant -
Name of rating company, date and result of rating
Taiwan Ratings Corporation, 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.
Effect on the current shareholders due to dilution The underlying conversion for ECB is treasury shares. If the ECB is fully converted, the dilu-tion ratio to original shareholders is 2.6%. The impact to the dilution is minimal.
Name of custodian Citibank, N.A.
Corporate Bonds (cont.)
Capital Overview
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Corporate Bonds (cont.)
Zero Coupon Exchangeable Bonds Due 2007 2007 2006 2005 2004 2003 2002 2002. 5.10 (Issue Date)
The quantity of holding exchanged securities (Common shares)
73,380,144 74,836,861 73,566,140 66,109,143 148,271,262 139,769,528 137,202,140
Exchangeable price NTD 44.30 NTD 44.30 NTD 46.10 NTD 51.30 NTD 54.91 NTD 58.25 NTD 59.34
Market price 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 -
Reference shares Common Shares or ADSs of AU Optronics Corp.
Exchangeable Bonds Information
Note The data represented for 2007 was gathered until March 15, 2007.
Zero Coupon Convertible Bonds Due 2008 2007 2006 2005 2005. 10.05 (Issue Date)
The quantity of holding converted securities (Common shares)
500,000,000 500,000,000 500,000,000 500,000,000
Convertible price USD 3.693 USD 3.693 USD 3.814 USD 3.814
Market price High 110.84 112.50 105.25 -
Low 103.22 98.38 97.50 -
Average 106.15 103.65 102.12 -
Reference shares UMC ADS
Euro Convertible Bonds Information
Note The data represented for 2007 was gathered until March 15, 2007.
None.Warrant Bonds Information
None.Preferred Stock
United Microelectronics Corporation | Annual Report 2006
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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 com- mon shareholder
Same as the com-mon shareholder
Same as the com-mon shareholder
Same as the com-mon shareholder
Same as the com-mon shareholder
Same as the com-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
- - - - - -
American Depositary Receipts
Note The data shown above was gathered until March 15, 2007.
Closing Price per Share (USD) 2007 2006
High Low Average High Low Average
3.83 3.12 3.44 3.94 2.79 3.22
American Depositary Receipt Trading Data
Note The data represented for 2007 was gathered until March 15, 2007.
Capital Overview
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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
Same as the com-mon shareholder
Same as the com-mon shareholder
Same as the com-mon shareholder
Same as the com-mon shareholder
Same as the com-mon shareholder
Same as the com-mon shareholder
Same as the com-mon shareholder
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.
- - - - - - -
United Microelectronics Corporation | Annual Report 2006
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Employee Stock Option Certificates
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.
Status of Stock Option Plan and Impact on Stockholders’ Equity
Type Employee Stock Option Certificates
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 The issue of new shares 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)
NTD 18.30 (Original) NTD 17.68 (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.
Capital Overview
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Type Employee Stock Option Certificates
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
Ratio of issue shares to outstanding shares (%) 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
Method for performance of contract The issue of new shares The issue of new shares 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 51,990,000 54,350,000 23,460,000
Exercise price NTD 19.95 (Original) NTD 19.71 (After Dividend)
NTD 21.9 (Original) NTD 21.6 (After Dividend)
NTD 18.4 (Original) NTD 16.4 (After Dividend)
Ratio of un-exercised shares to outstanding shares (%) 0.27 0.28 0.12
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.
Employee Stock Option Certificates (cont.)
United Microelectronics Corporation | Annual Report 2006
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Type Employee Stock Option Certificates
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
Ratio of issue shares to outstanding shares (%) 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
Method for performance of contract The issue of new shares The issue of new shares 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 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 17.8 (After Dividend)
NTD 25.2 (Original) NTD 20.7 (After Dividend)
NTD 27.9 (Original) NTD 22.9 (After Dividend)
Ratio of un-exercised shares to outstanding shares (%) 0.10 0.30 0.17
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.
Employee Stock Option Certificates (cont.)
Capital Overview
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Type Employee Stock Option Certificates
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
Ratio of issue shares to outstanding shares (%) 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
Method for performance of contract The issue of new shares The issue of new shares 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 - 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 24.7 (After Dividend)
NTD 22.5 (Original) NTD 17.7 (After Dividend)
NTD 20.0 (Original) NTD 15.7 (After Dividend)
Ratio of un-exercised shares to outstanding shares (%) 0.30 0.31 3.54
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.
Employee Stock Option Certificates (cont.)
United Microelectronics Corporation | Annual Report 2006
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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.
List of Managers and Top 10 Employees Participating in Employee Stock Option PlanUnits Granted Units
Granted / Total Outstanding Shares (%)
Exercised Units Exercise Price (NTD)
Exercised Amount (In thousand NTD)
95,300,000 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
Business Group President Ching-Chang Wen
Business Group President Fu-Tai Liou
Executive Vice President Shih-Wei Sun
Senior Vice President Stan Hung
Senior Vice President Henry Liu
Senior Vice President 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
Employee Stock Option Certificates (cont.)
Capital Overview
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Units Exercised / Total Outstanding Shares (%)
Un-exercised Units Exercise Price (NTD)
Un-exercised Amount (In thousand NTD)
Units Un-exercised/Total Outstanding Shares (%)
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 Title Issue Date Estimated Plan Completion Date
Capital Purpose Changes of Plan
Date for Announcement on MOPS
Euro Convertible Bonds Due 2008 October 5, 2005 September 30, 2006 Purchasing raw materials overseas
None September 29, 2005
Plan Description
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 NTD 5,248,093 thousand, 41.70% Completed
Planned Accumulated Capital Execution NTD 11,705,100 thousand, 92.99% Completed
Actual Accumulated Capital Execution NTD 13,948,090 thousand, 110.82% Completed
Reasons for Capital Execution Discrepancies No significant differences from the plan
Capital Execution Summary
United Microelectronics Corporation | Annual Report 2006
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Operation Overview
65 BusinessScope
65 IndustryScope
66 Research&DevelopmentAchievements andPlans
68 MarketandSalesConditions
72 EmployeeAnalysis
73 EnvironmentalProtectionInformation
74 LaborRelations
75 MajorAgreements
Operation Overview
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Major BusinessFull Service Semiconductor Wafer Foundry.
Current Products and ServicesUMC 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 ServicesAdvanced 65-nanometer and 45-nanometer ProcessesUMC 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 deve-loping 45-nanometer process technologies for customer product validation to significantly increase the competitive advantages of its customers.
SoC Process TechnologiesIn 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 inte-gration technologies used for SoC designs.
Business Scope
Current Industry Products & DevelopmentThe 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 semi-conductor 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 at-traction of the vertically disintegrated business model.
The Relationship Between Up-, Mid-, and Down-stream Supply Chain ServicesThe semiconductor industry has continuously evolved in order to support down-stream (end-user) electronic prod-ucts. Therefore, IC manufacturers must develop new pro-cess technologies early to enable up-stream chip developers’ sophisticated designs for more powerful ICs. This in turn allows down-stream companies to innovate new applica-tions and products that can take advantage of the better performing semiconductors.
Development TrendsAdvanced technologies have enabled electronic prod-ucts, 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, televi-sions, PDAs, CD-ROMs, and digital cameras to com-municate with each other to exchange information. More powerful chips are required to drive multimedia func-tions (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 consump-tion. 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 MarketThe 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 pure-play 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. Mean-while, the Company continuously strengthens its advantage through on-going development in advanced and specialty process technologies.
Industry Scope
United Microelectronics Corporation | Annual Report 2006
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UMC’s research and development group is committed to pushing the forefront of technology and providing the lat-est 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 construct-ing 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 for-ward, the Company will continue to dedicate its most significant resources to further process technology devel-opment.
UMC delivered the foundry industry’s first 65-nanometer 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 custom-ers including leading-edge manufacturers of cell phones, FPGA, graphics and broadband, many of which are cur-rently 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 ver-sion 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 custom-ers 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 suc-cessfully 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
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 pre-pare the technology for adoption by our foundry customers during 2008.
In terms of memory development, UMC’s embed-ded 6T-SRAM exhibits an industry leading footprint with excellent performance and functionality at the lowest pos-sible 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 logic-compatible 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. Embed-ded 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 cus-tomer 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 success-fully 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 perfor-mance, UMC is piloting 0.162-micron HV chips and further developing its advanced 0.135-micron node. Supplement-ing 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 high-resolution camera phones to operate more cost effectively by allowing higher density sensors within the same area.
SoC designers today require proven design support solu-tions to help overcome the challenges encountered during the design cycle in the deep sub-micron era. UMC continu-ously 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-
Research & Development Achievements and Plans
Operation Overview
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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 Pro-cess Check (LPC), Critical Area Analysis (CAA), Litho and Chemical Metal Polishing (CMP) variation aware extraction, thermal impact analysis and Static Statistical Timing Analy-sis (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 vari-ous 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 pat-ents in the same period of time; the total of granted patents has reached 8,417. This reflects UMC’s commitment to inno-vation and intellectual properties during its technology de-velopment 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 indus-try through its continuous innovation.
Note The data represented for 2007 was gathered until March 15, 2007; the figure represented was unaudited.
R&D Expenditures
2007 2006
Expenditures 1,655,036 9,237,616
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 custom-ers 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. Com-bine 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.
Research & Development Achievements and Plans (cont.)
In thousand NTD
United Microelectronics Corporation | Annual Report 2006
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Major Sales RegionsUMC’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 subsid-iary in Japan, UMCJ, although a few customers deal directly with UMC. UMC will enhance its partnerships with world-class 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.
Market ShareUMC is a leading company in the foundry industry, with a 2006 sales revenue figure of USD 3.196 billion. UMC pos-sessed a global pure-play foundry market share of 19%. TSMC, SMIC and Chartered are considered major competi-tors. 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).
Future Market Supply, Demand, and Growth PotentialAccording to reports by the World Semiconductor Trade Statistics (WSTS), the Semiconductor Industry Associa-tion (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, de-mand 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
than the overall semiconductor industry.Competitive AdvantagesIC 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 competitive-ness for the Company.
Positive Factors Relating to Future DevelopmentConsidering the long-term steady growth of the IC indus-try, 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.
Market and Sales Conditions
Operation Overview
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UMC is in volume production for 65-nanometer process technology. UMC is one of the few foundries in the world that 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 ProcessThe 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.
Market and Sales Conditions (cont.)
United Microelectronics Corporation | Annual Report 2006
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Major Raw Materials Status
Material Categories Major Vendors Vendors’ Market Position UMC’s Procurement Strategies
Raw Silicon Wafers 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)
UMC’s vendors are major raw sili-con 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.
Major Vendors and Customers
2006 2005
Name Amount Percentage of Net Purchases
Name Amount Percentage of Net Purchases
Shin-Etsu Handotai Taiwan Co., Ltd.
3,353,721 13 Shin-Etsu Handotai Taiwan Co., Ltd.
2,611,052 11
Major Vendors
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.
In thousand NTD
2006 2005
Name Amount Percentage of Net Operating
Revenues
Name Amount Percentage of Net Operating
RevenuesUMC Group (USA) 54,476,329 52 UMC Group (USA) 43,226,036 48
Major Customers
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.
In thousand NTD
Operation Overview
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Production and Sales Figures
2006 2005
Quantity Amount (In thousand NTD) Quantity Amount (In thousand NTD)
Wafers (Pcs) 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
Chips(In thousands)
Domestic 56 58,508 685 141,548
Export 84,807 5,677,686 64,150 4,156,586
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
Total Domestic 33,046,423 34,508,317
Export 68,266,983 54,431,678
Sales Figures
Note Wafer quantity is expressed in 200mm wafer equivalents.
2006 2005
Quantity Amount (In thousand NTD) Quantity Amount (In thousand NTD)
Wafers (Pcs) 3,030,999 76,232,056 2,669,672 74,201,369
Chips (In thousands) 84,918 6,635,478 64,807 4,971,589
Packaged ICs (In thousands) 599 43,148 1,192 125,226
Total amount 82,910,682 79,298,184
Capacity (Pcs) 4,017,000 3,855,000
Production Figures
Note Wafer quantity and capacity are expressed in 200mm wafer equivalents.
United Microelectronics Corporation | Annual Report 2006
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Note The data represented for 2007 was gathered until March 15, 2007.
2007 2006 2005
Engineers 6,837 6,774 5,745
Administrators 559 550 582
Clerks 61 60 70
Technicians 5,855 5,881 5,671
Total 13,312 13,265 12,068
Employee Analysis
2007 2006 2005
Average number of years 5.6 5.4 5.2
2007 2006 2005
Ph.D. 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
Number of Employees
Average Age
Average Years of Employment
Level of Education (%)
2007 2006 2005
Average age 30.7 30.6 30.3
Operation Overview
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Environmental Protection InformationUMC 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 Environ-mental 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” rat-ing 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 corpo-rate 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, capi-tal 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 monitor-ing 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) oper-ating costs for pollution control equipment (NTD 28 mil-lion 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 Pro-tection 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 Ex-cellent Performance in Environmental Protection for both company and professionals and Top Honors in Hsinchu Sci-ence Park’s “Protection of the Environment” Competition.
United Microelectronics Corporation | Annual Report 2006
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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. Employ-ees 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 person-nel. 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
growth and development. To protect the rights and interests of employees, UMC
follows the Labor Standards Law. UMC’s employee retire-ment 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, Mod-el 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 re-port, there have been no disputes between employees and employers, nor has the Company realized any financial impact resulting from disputes between employees and em-ployers. 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
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Major Agreements
Company Name Contract Period Major Contents Limitations
UMC Group (USA) 2006.1.1~2007.12.31 Semiconductor products sales and relevant services None material
United Microelectronics (Europe) B.V. 2005.1.1~2006.12.31 Semiconductor products sales and relevant services None material
UMC Japan 2006.1.1~2007.12.31 Semiconductor products sales and relevant services None material
Shin-Etsu Handotai Taiwan Co., Ltd. Indefinite period 150mm, 200mm and 300mm raw wafer supply None material
Major Long-term Supply and Marketing AgreementsIn 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:
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 Process and topography None material
Renesas Technology Corp. 2006.1.1~2010.12.31 Process and topography None material
Major License AgreementsUMC is committed to the protection and enhancement of intellectual property. Based on more than 20 years of invest-ment, 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:
United Microelectronics Corporation | Annual Report 2006
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Company Name Contract Period Major Contents Limitations
Various construction or engineering compa-nies, such as: Yih-Shin Construction Co., Ltd., Yuan Lih Electrical Engineering Co., Ltd., GO-IN Engineering Co., Ltd.
2006.1.1~2007.12.31 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
Major Construction Agreements
Company Name Contract Period Major Contents Limitations
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 Mega International Commercial Bank Co., Ltd. arranged the syndicated loan and the facility amount was approximately NTD 12.3 billion. The loan was for Fab 8C’s capital expenditure.
None material
Mega International Commercial Bank Co., Ltd. and 8 other participant banks. (Note This case had been paid off in 2004)
1998.2.18~2005.9.18 Mega International Commercial Bank Co., Ltd. arranged the syndicated loan and the facility amount was approximately NTD 4.3 billion. The loan was for Fab 8E’s capital expenditure.
None material
Mega International Commercial Bank Co., Ltd. and 13 other participant banks. (Note This case had been paid off in 2004)
1999.11.22~2007.9.25 Mega International Commercial Bank Co., Ltd. arranged the syndicated loan and the facility amount was approximately NTD 3.9 billion. The loan was for Fab 8E’s capital expenditure.
None material
Mega International Commercial Bank Co., Ltd. and 20 other participant banks. (Note This case had been paid off in April of 2005)
2000.1.28~2007.1.28 Mega International Commercial Bank Co., Ltd. arranged the syndicated loan and the facility amount was approximately NTD 8 billion. The loan was for Fab 8F’s capital expenditure.
None material
Major Long-term Loan AgreementsUMC is committed to building and maintaining state-of-the-art wafer fabrication facilities that will allow UMC to maintain its position as a premier independent wafer
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:
Major Agreements (cont.)
Financial Report
��
Financial Report �00�
78 ReviewofFinancialPosition,OperatingResults,RiskManagement andEvaluation
86 SpecialDisclosures94 DisclosureAccordingtoUSSecurityAuthoritiesRegulation
100FinancialReviewUnconsolidated
196 FinancialReviewConsolidated
United Microelectronics Corporation | Annual Report 2006
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Review of Financial Position, Operating Results, Risk Management and Evaluation
79 AnalysisofFinancialPosition
80 AnalysisofOperatingResults
81 LiquidityAnalysis
81 MajorCapitalExpendituresand SourcesofFunding
82 AnalysisforInvestment
83 RiskManagementandEvaluation
Review of Financial Position, Operating Results, Risk Management and Evaluation
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Analysis of Financial PositionIn thousand NTD
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 imple-mentation of ROC SFAS No. 34, “Financial Instruments:
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.
2006 2005 Difference % Change
Current assets 118,430,216 128,267,746 (9,837,530) (8)
Funds and investments 82,746,430 39,238,167 43,508,263 111
Property, plant and equipment 142,647,435 149,809,616 (7,162,181) (5)
Other assets 7,659,590 7,970,867 (311,277) (4)
Total assets 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)
Capital 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
Total equity 291,164,871 258,283,553 32,881,318 13
United Microelectronics Corporation | Annual Report 2006
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Analysis of Operating ResultsIn thousand NTD
Explanation for significant changes (over 20%) in operat-ing results include :(a) Net operating revenues:The increase in net operating revenues primarily resulted from the recovery of the semiconductor industry, and subse-quently 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 differ-ence in gross profit are as follows:
(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 in-crease in sales revenues and the net income for 2006, and the impact of The Income Basic Tax Act of the R.O.C.
Estimated Sales Quantities With the industry shifting towards the vertical disintegra-tion 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 semi-conductor industry. Based on our capacity and customers’ demand forecast, the estimated sales quantity for 2007 is approximately 3.70 million 200mm wafer equivalents.
In thousand NTD
Reasons for Difference Gross Profit
Average selling price 299,724
Unit cost 7,937,397
Product mix -
Quantity 1,366,350
Others (85,546)
Difference 9,517,925
2006 2005 Difference % Change
Sales revenues 102,023,597 90,780,340 11,243,257 12
Sales returns and discounts (710,191) (1,840,345) 1,130,154 (61)
Net sales 101,313,406 88,939,995 12,373,411 14
Other operating revenues 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
Gross profit 20,679,211 11,161,286 9,517,925 85
Realized (unrealized) intercompany profit 14,261 34,264 (20,003) (58)
Gross profit-net 20,693,472 11,195,550 9,497,922 85
Operating expenses (14,569,334) (13,864,269) (705,065) 5
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) (838) (3,207,373) 382,741
Cumulative effect of changes in accounting principles (1,188,515) - (1,188,515) -
Net income 32,619,313 7,026,692 25,592,621 364
Review of Financial Position, Operating Results, Risk Management and Evaluation
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Project Actual or Expected Sources of Funding 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
Impact on the Company’s Financial Operations and Contingency Action Regarding Major Capital Expenditures
In thousand NTDExecution Status of Major Capital Expenditures and Sources of Funding
Cash Balance at Beginning of Year
Net Cash Provided by Operating Activities
Net Cash Used in Investing and
Financing Activities
Cash Balance at End of Year
Source of Funding in case of Cash Shortfall
Investing Plan Financing Plan
96,596,623 46,049,174 (59,250,995) 83,394,802 - -
Liquidity AnalysisIn thousand NTDAnalysis of Cash Flows for 2006
Cash Balance at Beginning of Year
Projected Cash Inflows from Operating
Activities
Projected Cash Outflows from
investing and financing activities
Projected Cash Balance at End of
Year
Source of Funding in case of Cash Shortfall
Investing Plan Financing Plan
83,394,802 44,222,821 (98,068,887) 29,548,736 - -
In thousand NTDProjected Cash Flows for 2007
(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.
Expected Benefit from Capital ExpendituresStarting 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.
Note Net cash used in investing and financing activities includes factoring for currency exchange, which amounts to (85,133) thousand.
United Microelectronics Corporation | Annual Report 2006
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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
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 reason-ableness of this transaction.
Review of Financial Position, Operating Results, Risk Management and Evaluation
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Impact on Corporate Profitability from Fluctuating Inter-est Rates, Exchange Rates, and InflationThe impact on the Company from fluctuating interest rates, exchange rates, and inflation has been minimal due to ef-fective 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, En-dorsements and Guarantees, and DerivativesStarting 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 deriva-tives transaction is to elevate the Company’s operating performance and reduce operating and financial risks.
Upcoming R&D Plans and Their StatusUMC is determined to maintain its position as a semicon-ductor industry leader by addressing the challenges of semi-conductor scaling and continuing the advancement of tran-sistor 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 45-nanometer) and 32-nanometer is accelerating, with extraor-dinary achievements expected in the coming year. 65-nanometer product ramp is on track for several customers for 2007 and 55-nanometer technology qualifi-cation is expected to be completed during the second half of 2007. The development pace for 45-nanometer technol-ogy 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 discus-sion 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 incor-porating 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 65-nanometer 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, espe-cially those supporting industry standards (such as PCI-E, SATA, HDMI, etc.), advanced video, audio and consumer applications. UMC will leverage its success in delivering 90-nanometer libraries and analog mixed-signal devices to de-velop 65-nanometer solutions while expanding its partner-ship 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 criti-cal for customers’ product success. UMC will complete its specialized R&D center and continue to build its methodology designed to accelerate leading-edge nano-electronic technology to the marketplace.
Impact on the Company’s Financial Operations and Con-tingency Action Regarding Recent Changes in Domestic and International Policies and RegulationsThe Company strictly follows governing policies and regula-tions. All of the related departments constantly monitor any changes in related policies and regulations, and adjust inter-nal 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 re-porting.
(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 ac-counting service firm for an implementation plan for the Policy.
Impact on the Company’s Financial Operations and Con-tingency Action Regarding Recent Changes in TechnologyThe Company has been sharply focused on the development of advanced technology. In 2006, the Company’s R&D ex-penses 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; 90-nanometer and below chips represented 21% of total revenue
Risk Management and Evaluation
United Microelectronics Corporation | Annual Report 2006
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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 Con-tingency Action Regarding Recent Changes in Corporate ImageTo ensure the long-term success of the Company and to fur-ther 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 Down-turn during Expansion by Acquisition or MergerThrough future acquisitions, UMC is expected to integrate resources, lower operating costs, widen its business scope, raise profitability and add to its overall international com-petitiveness, which will help the Company to contend in a capital and technology intensive industry that is constantly changing. The cyclical fluctuation in the semiconductor indus-try 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 restruc-ture 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.
Risk of Excess Capacity from Fluctuating Economic Condi-tionsThe 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 finan-cial 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 cus-tomers’ needs while optimizing capital utilization. Disci-plined capital expenditure can help to develop a healthy industry environment.
Risk and Countermeasures of the Company Encounter-ing 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 OrdersUMC 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 larg-est 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 custom-ers may cause.
Risk of Change of Control and Stock Price Fluctuation from Large Scale Transfer of SharesIf 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 op-eration of the Company and may cause the market price of Company shares to f luctuate. The share withholding status of the Company’s direc-tors, 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.)
Review of Financial Position, Operating Results, Risk Management and Evaluation
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Risk of the Company Losing One or More Key Personnel without Adequate Replacement Due to Any Change of Company ControlUMC’s future success depends to a large extent on the con-tinued service of the Company’s Chairman and key execu-tive 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 gain-ing their trust and recognition. If there were a replacement of management, the succeeding personnel would have to recognize corporate culture, be qualified to assume profes-sional duties, and be able to execute the Company’s policy.
Litigation and Non-litigated IncidentsOn 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 for-mer Vice Chairman, Mr. John Hsuan, had been prosecuted due to their violations of Article 71 of Business Entity Ac-counting 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 statu-tory 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 con-ducting 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 equip-ment was damaged in shipment as a result of rough han-dling 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 compa-nies 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 com-pensatory 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 RisksNone.
Risk Management and Evaluation (cont.)
None.
Other Necessary Supplements
United Microelectronics Corporation | Annual Report 2006
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Special Disclosures
87 SummaryofAffiliatedEnterprises
92 AcquisitionorDisposalofUMCShares bySubsidiaries
93 DisclosuresofEventswhichMayHavea SignificantInfluenceonStockholders’ EquityorSharePrice,inCompliance withItem2,Paragraph2inArticle36 oftheSecuritiesandExchangeLawof theR.O.C.
Special Disclosures
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Summary of Affiliated Enterprises
United Microelectronics Corporation
TLC Capital Co., Ltd. 100.00%
Fortune Venture Capital Corporation 99.99% Unitruth Investment Corporation 100.00%
UMC Group (USA) 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%
United Microelectronics Corp. (Samoa) 100.00%
United Microelectronics (Europe) B.V. 100.00%
United Microdisplay Optronics Corp. 81.76%
Organization Chart
Name of Corporation Date of Establishment
Address Capital Major Business / Production Items
Fortune Venture Capital Corporation
1993.9.21 2F, 76, Sec. 2, Tunhwa S. Rd., Taipei, Taiwan 10683, R.O.C.
5,000,000 Consulting and planning for investment in new business
Unitruth Investment Co. 2004.7.22 2F, 76, Sec. 2, Tunhwa S. Rd., Taipei, Taiwan 10683, R.O.C.
800,000 Investment holding
TLC Capital Co., Ltd. 2005.10.14 2F, 76, Sec. 2, Tunhwa S. Rd., Taipei, Taiwan 10683, R.O.C.
6,000,000 Consulting and planning for investment in new business
UMC Group (USA) 1997.8.11 488 De Guigne Drive, Sunnyvale, CA 94085, USA
535(USD16,437.5)
IC sales
UMC Japan 1984.5.15 1580, Yamamoto, Tateyama-City, Chiba 294-8502, Japan
7,588,397(JPY27,140,188,000)
Sales and manufacturing of integrated circuits
UMC Capital Corp. 2001.1.16 P.O. Box 1034GT, Grand Cayman, Cayman Islands
4,033,472(USD124,000,000)
Investment holding
UMC Capital (USA) 2001.2.13 488 De Guigne Drive, Sunnyvale, CA 94085, USA
6,506(USD200,000)
Investment holding
UMCi Ltd. 2001.1.18 3 Pasir Ris Drive 12,Singapore 519528
28,625(USD880,006)
Sales and manufacturing of integrated circuits
United Microelectronics Corp. (Samoa)
2000.10.12 Offshore Chambers, P.O. Box 217, Apia, Samoa
9,108(USD280,000)
Investment holding
United Microelectronics (Europe) B.V.
1989.5.23 World Trade Center, H-Tower, Schipholboulevard 243 1118 BH Schiphol, The Netherlands
126,056(USD3,875,309)
IC sales
United Microdisplay Optronics Corporation
2002.9.11 2F, 3, Li-Hsin 2nd Rd., Hsinchu Science Park, Taiwan 30078, R.O.C.
786,584 Sales and manufacturing of LCOS
ECP VITA Ltd. 2005.7.27 Romasco Place, Wickhams Cay 1, P.O. Box 3140, Road Town, Tortola, British Virgin Islands
32,528(USD1,000,000)
Insurance
Basic Data of Affiliated Enterprises
Notes (1) USD:NTD =1:32.528; JPY:NTD = 1:0.2796. (2) The data is dated December 31,2006.
In thousand NTD
United Microelectronics Corporation | Annual Report 2006
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None.Data for Common Shareholders of Treated-as Controlled Companies and Affiliates
The business of UMC and its affiliated enterprises includes semiconductor wafer manufacturing, electronics, optronics, invest-ment activities, insurance and trade.
Business of United Microelectronics Corporation (UMC) and its Affiliated Enterprises
Summary of Affiliated Enterprises (cont.)
Special Disclosures
��
Name of Corporation Title Name or Representative Shareholding
Shares %
Fortune Venture Capital Corporation Chairman United Microelectronics Corporation 499,994,000 99.99
Representative: Robert H.C. Tsao - -
Director United Microelectronics Corporation 499,994,000 99.99
Representative: John Hsuan - -
Director United Microelectronics Corporation 499,994,000 99.99
Representative: Stan Hung - -
Director United Microelectronics Corporation 499,994,000 99.99
Representative: Duen-Chian Cheng - -
Director United Microelectronics Corporation 499,994,000 99.99
Representative: Isabel Liu - -
Supervisor United Microelectronics Corporation 499,994,000 99.99
Representative: Tzyy-Jang Tseng - -
President Duen-Chian Cheng - -
Unitruth Investment Co. Chairman Fortune Venture Capital Corporation 80,000,000 100.00
Representative: Stan Hung - -
Director Fortune Venture Capital Corporation 80,000,000 100.00
Representative: Jean Tien - -
Director Fortune Venture Capital Corporation 80,000,000 100.00
Representative: Duen-Chian Cheng - -
Supervisor Fortune Venture Capital Corporation 80,000,000 100.00
Representative: Isabel Liu - -
TLC Capital Co., Ltd. Chairman United Microelectronics Corporation 600,000,000 100.00
Representative: Stan Hung - -
Director United Microelectronics Corporation 600,000,000 100.00
Representative: Jean Tien - -
Director United Microelectronics Corporation 600,000,000 100.00
Representative: Duen-Chian Cheng - -
Supervisor United Microelectronics Corporation 600,000,000 100.00
Representative: Chitung Liu - -
Directors, Supervisors and Presidents of Affiliated Enterprises
Summary of Affiliated Enterprises (cont.)
United Microelectronics Corporation | Annual Report 2006
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Name of Corporation Title Name or Representative Shareholding
Shares %
UMC Group (USA) Director Peter J. Courture - -
Director Tony Yu - -
UMC Japan 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 - -
UMC Capital Corp. Director United Microelectronics Corporation 124,000,000 100.00
Representative: Robert H.C. Tsao - -
UMC Capital (USA) Director and President Peter J. Courture - -
Director Stan Hung - -
UMCi Ltd. Director Robert H.C. Tsao - -
Director Jackson Hu - -
Director and President Peter Chang - -
Director Po-Wen Yen - -
Director Peter J. Courture - -
United Microelectronics Corp. (Samoa) Director United Microelectronics Corporation 280,000 100.00
Representative: Stan Hung - -
United Microelectronics (Europe) B.V. Director Robert H.C. Tsao - -
Director John Hsuan - -
United Microdisplay Optronics Corporation Chairman United Microelectronics Corporation 64,313,176 81.76
Representative: John Hsuan - -
Director United Microelectronics Corporation 64,313,176 81.76
Representative: Robert H.C. Tsao - -
Director United Microelectronics Corporation 64,313,176 81.76
Representative: Stan Hung - -
Supervisor United Microelectronics Corporation 64,313,176 81.76
Representative: Duen-Chian Cheng - -
Summary of Affiliated Enterprises (cont.)
Special Disclosures
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Directors, Supervisors and Presidents of Affiliated Enterprises
Note The data is dated December 31, 2006.
Name of Corporation Title Name or Representative Shareholding
Shares %
ECP VITA Ltd. Director Angel Sun - -
Director Stan Hung - -
Director Chitung Liu - -
Summarized Operation Results of Affiliated Enterprises
Note USD:NTD = 1:32.528; JPY:NTD = 1:0.2796
Name of Corporation Capital Total Assets
Total Liabilities
Net Worth
Net Operating
Revenues
Operating Income
(Loss)
Net Income
(Loss)
Earnings (Loss) Per
Share (NTD)
TLC Capital Co., Ltd. 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
UMC Group (USA) 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)
UMCi Ltd. 28,625 19,239,995 - 19,239,995 - (1,664) 12,463 0.01
United Microelectronics Corp. (Samoa) 9,108 8,556 74 8,482 - (5,626) (5,588) (5.77)
United Microelectronics (Europe) B.V. 126,056 1,032,890 754,034 278,856 8,564,771 8,126 7,058 784.17
United Microdisplay Optronics Corp. 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)
UMC Capital (USA) 6,506 11,291 685 10,606 22,842 1,088 974 4.87
ECP VITA Ltd. 32,528 62,512 12,108 50,404 8,731 7,039 9,295 9.30
In thousand NTD
Summary of Affiliated Enterprises (cont.)
United Microelectronics Corporation | Annual Report 2006
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Subsidiary Paid-in Capital
Source of Capital
Holding % by the
Company
Acquisition or Disposal Date
Shares Acquired and Amount
Disposal Shares and
Amount
Profit/ Loss
As of Annual Report Printing Date
Shares Amount
Fortune Venture Capital Corporation
5,000,000 New shares for cash
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.
Issuance of Private Placement Securities
Acquisition or Disposal of UMC Shares by Subsidiaries
None.
In thousand NTD, Shares
Other Necessary SupplementsNone.
Special Disclosures
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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 circum-stances 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 agree-ment 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 hold-ing 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 hold-ing 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 es-crow 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 dis-tributed, 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 Be-tween Peoples of the Taiwan Area and the Mainland Area” by the R.O.C. Ministry of Economic Affairs (MOEA). How-ever, as the Company believes it was illegally and improper-ly 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 exces-sive 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 cancella-tion 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 reduc-tion 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.
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.
United Microelectronics Corporation | Annual Report 2006
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Disclosure According to US Security Authorities Regulation
95 DisclosureCommittee
95 AuditCommittee
95 CorporateGovernanceDifference
95 CodeofEthics
95 EmployeeCodeofConduct
95 USGAAPFinancialInformation
96 ConsolidatedBalanceSheets
98 ConsolidatedStatementsofIncome
Disclosure According to US Security Authorities Regulation
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The primary purpose of the Disclosure Committee is to assist the Company in establishing and maintaining “disclosure con-trols and procedures” designed to ensure the quality of filing reports on a timely basis.
Disclosure 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.
Audit Committee
http://www.umc.com/english/investors/Corp_gov_difference.asp
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/pdf/Code_of_Ethics.pdf
Disclosure of the UMC Code of Ethics for Directors, Supervisors and Managers
http://www.umc.com/english/pdf/Code_of_Conduct.pdf
Disclosure of the UMC Employee Code of Conduct
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.
US GAAP Financial Information
United Microelectronics Corporation | Annual Report 2006
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Consolidated Balance Sheets
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.
As of December 31,
Assets 2006 2005
NTD USD NTD Current assets
Cash and cash equivalents 93,853,208 2,879,816 108,626,800 Financial assets at fair value through profit or loss, current 8,538,007 261,982 2,468,968 Available-for-sale financial assets, current - - 2,414,153 Held-to-maturity financial assets, current 1,110,422 34,073 - Notes receivable 3,733 115 193 Notes receivable - related parties 50,648 1,554 62,136 Accounts receivable, net 14,028,084 430,441 13,628,434 Accounts receivable - related parties, net 323,645 9,931 1,420,977 Other receivables 849,742 26,074 891,058 Inventories, net 10,878,182 333,789 10,712,535 Prepaid expenses 762,799 23,406 694,669 Deferred income tax assets, current 1,945,082 59,683 3,386,790 Restricted deposits - - 555,800
Total current assets 132,343,552 4,060,864 144,862,513 Funds and investments
Financial assets at fair value through profit or loss, noncurrent 474,738 14,567 - Available-for-sale financial assets, noncurrent 52,311,172 1,605,130 6,812,103 Held-to-maturity financial assets, noncurrent - - 1,116,806 Financial assets measured at cost, noncurrent 7,515,945 230,621 6,574,800 Long-term investments accounted for under the equity method 11,662,599 357,858 16,262,856 Prepaid long-term investments - - 30,000
Total funds and investments 71,964,454 2,208,176 30,796,565 Property, plant and equipment
Land 1,879,442 57,669 1,893,522 Buildings 21,076,844 646,727 21,260,902 Machinery and equipment 415,225,873 12,740,898 386,920,282 Transportation equipment 90,706 2,783 89,580 Furniture and fixtures 2,964,369 90,960 2,804,967 Leasehold improvements 42,968 1,319 43,037
Total cost 441,280,202 13,540,356 413,012,290 Less : Accumulated depreciation (311,696,923) (9,564,189) (269,508,148)Add : Construction in progress and prepayments 22,244,850 682,567 15,609,497
Property, plant and equipment, net 151,828,129 4,658,734 159,113,639 Intangible assets
Goodwill 3,498,687 107,354 3,491,072 Technological know-how - - 359,556 Other intangible assets 1,330 41 182,793
Total intangible assets 3,500,017 107,395 4,033,421 Other assets
Deferred charges 1,501,064 46,059 2,034,569 Deferred income tax assets, noncurrent 4,184,091 128,386 4,012,314 Other assets-others 2,332,154 71,560 2,196,238
Total other assets 8,017,309 246,005 8,243,121 Total assets (as reported under ROC GAAP) 367,653,461 11,281,174 347,049,259 US GAAP Adjustments:
Goodwill 38,301,535 1,175,255 38,283,481 Treasury stock (4,476,369) (137,354) - Compensation 105,426 3,234 62,336 Equity Investments 44,350 1,361 2,079,220 Change in fair value of investments in securities - - 38,869,884 Income tax effect - - 361,441
Total assets (as reported under US GAAP) 401,628,403 12,323,670 426,705,621
Disclosure According to US Security Authorities Regulation
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In thousands
Liabilities and Stockholder's Equity 2006 2005
NTD USD NTDLiabilitiesCurrent liabilities
Short-term loans 342,549 10,511 6,136,336 Financial liabilities at fair value through profit or loss, current 985,267 30,232 95,634 Accounts payable 4,864,771 149,272 5,501,159 Income tax payable 2,071,394 63,559 277,953 Accrued expenses 7,025,328 215,567 7,932,949 Other payables 77,319 2,372 140,735 Payable on equipment 10,130,367 310,843 5,315,695 Current portion of long-term liabilities 9,068,283 278,254 10,250,000 Deferred income tax liabilities, current 62 2 - Other current liabilities 1,538,450 47,206 1,309,579
Total current liabilities 36,103,790 1,107,818 36,960,040 Long-term liabilities
Bonds payable 30,383,076 932,282 41,692,159 Total long-term liabilities 30,383,076 932,282 41,692,159
Other liabilitiesAccrued pension liabilities 3,115,420 95,594 3,014,998 Deposits-in 12,282 377 18,664 Deferred income tax liabilities, noncurrent 52,585 1,614 51,870 Deferred credits - intercompany profits 13,245 407 - Other liabilities - others 570,174 17,495 691,290
Total other liabilities 3,763,706 115,487 3,776,822 Total liabilities (as reported under ROC GAAP) 70,250,572 2,155,587 82,429,021 US GAAP Adjustments:
Compensation 790,200 24,247 6,324 Pension 153,081 4,697 - Income tax effect 32,328 992 182,045 Convertible / Exchangeable bond liabilities - - 702,299 Derivative instruments - - 623,410
Total liabilities (as reported under US GAAP) 71,226,181 2,185,523 83,943,099 Minority interests (as reported under ROC GAAP) 6,238,018 191,409 6,336,685 US GAAP Adjustments:
Consolidation of not wholly-owned subsidiaries 2,189 67 842 Minority interests (as reported under US GAAP) 6,240,207 191,476 6,337,527 Stockholders’ equityCapital
Common stock 191,311,927 5,870,265 197,947,033 Capital collected in advance 11,405 350 36,600
Additional Paid-in CapitalPremiums 61,070,555 1,873,905 64,600,076 Treasury stock transactions 8,938 274 - Change in equities of long-term investments 6,627,794 203,369 20,781,523
Retained earningsLegal reserve 16,699,508 512,412 15,996,839 Special reserve 322,150 9,885 1,744,171 Unappropriated earnings 17,774,335 545,392 8,831,782
Adjustment items to stockholders’ equityCumulative translation adjustment (824,922) (25,312) (241,153)Unrealized gain or loss on financial instruments 27,557,845 845,592 (80,989)
Treasury stock (29,394,664) (901,954) (51,332,329)Total stockholders’ equity (as reported under ROC GAAP) 291,164,871 8,934,178 258,283,553 US GAAP Adjustments:
Goodwill 38,113,709 1,169,491 38,113,709 Treasury stock (4,476,369) (137,354) - Compensation (684,774) (21,012) 56,012 Equity investments 209,354 6,424 2,247,379 Pension (164,776) (5,056) - Change in fair value of investments in securities - - 38,869,884 Convertible / exchangeable bond liabilities - - (702,299)Derivative instruments - - (623,410)Income tax effect - - 180,167
Total stockholders’ equity (as reported under US GAAP) 324,162,015 9,946,671 336,424,995 Total liabilities and stockholders’ equity (as reported under US GAAP) 401,628,403 12,323,670 426,705,621
United Microelectronics Corporation | Annual Report 2006
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Consolidated Statements of IncomeFor the years ended December 31, In thousands
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.
Contents 2006 2005
NTD USD NTDOperating revenues
Sales revenues 109,857,465 3,370,895 97,172,846 Less : Sales returns and discounts (867,150) (26,608) (1,959,994)
Net Sales 108,990,315 3,344,287 95,212,852 Other operating revenues 3,013,504 92,467 5,103,130
Net operating revenues 112,003,819 3,436,754 100,315,982 Operating costs
Cost of goods sold (88,452,676) (2,714,105) (86,409,480)Other operating costs (2,198,540) (67,461) (4,266,217)
Operating costs (90,651,216) (2,781,566) (90,675,697)Gross profit 21,352,603 655,188 9,640,285 Unrealized intercompany profit (105,892) (3,249) (118,815)Realized intercompany profit 118,815 3,646 151,192
Gross profit - net 21,365,526 655,585 9,672,662 Operating expenses
Sales and marketing expenses (3,365,678) (103,273) (3,738,469)General and administrative expenses (3,422,340) (105,012) (4,387,406)Research and development expenses (9,418,877) (289,011) (9,633,607)
Subtotal (16,206,895) (497,296) (17,759,482)Operating income (loss) 5,158,631 158,289 (8,086,820)Non-operating income
Interest revenue 1,562,704 47,950 1,055,138 Investment gain accounted for under the equity method, net 1,178,103 36,149 1,096,985 Dividend income 950,546 29,167 1,051,813 Gain on disposal of property, plant and equipment 331,767 10,180 177,397 Gain on disposal of investments 28,651,109 879,138 10,276,618 Exchange gain, net 316,006 9,696 295,179 Gain on recovery of market value of inventories - - 837,315 Gain on valuation of financial assets 750,378 23,025 58,853 Gain on valuation of financial liabilities 306,140 9,394 - Other income 862,750 26,473 1,038,821
Subtotal 34,909,503 1,071,172 15,888,119 Non-operating expenses
Interest expense (648,408) (19,896) (1,098,854)Loss on disposal of property, plant and equipment (107,962) (3,313) (218,525)Loss on decline in market value and obsolescence of inventories (1,089,490) (33,430) - Financial expenses (230,757) (7,081) (268,985)Impairment loss (1,330,293) (40,819) (460,542)Other losses (73,799) (2,264) (148,606)
Subtotal (3,480,709) (106,803) (2,195,512)Income from continuing operations before income tax 36,587,425 1,122,658 5,605,787 Income tax expense (3,261,622) (100,080) (67,052)Income from continuing operations 33,325,803 1,022,578 5,538,735 Cumulative effect of changes in accounting principles (the net amount after deducted tax expense $0)
(1,188,515) (36,469) (112,898)
Minority interests loss 482,025 14,790 1,600,855 Net income (as reported under ROC GAAP) 32,619,313 1,000,899 7,026,692 US GAAP Adjustments:
Treasury stock (10,842,272) (332,686) 101,955 Compensation (2,106,043) (64,622) (2,441,003)Derivative instruments 1,126,322 34,560 (1,611,969)Equity investments 1,117,384 34,286 571,228 Convertible / Exchangeable bond liabilities 199,389 6,118 (39,287)Income tax effect (180,167) (5,528) (232,428)Change in fair value of investments in securities (137,196) (4,210) 288,388 Goodwill - - (19,332,968)
Net lncome (as reported under US GAAP) 21,796,730 668,817 (15,669,392)
Disclosure According to US Security Authorities Regulation
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United Microelectronics Corporation | Annual Report 2006
100
Financial Review Unconsolidated
101 CondensedBalanceSheets
102 CondensedStatementsofIncome
103 FinancialAnalysis
104 Supervisors’Report
106 ReportofIndependentAuditors
107 BalanceSheets
108 StatementsofIncome
109 StatementsofChangesin Stockholders’Equity
110 StatementsofCashFlows
112 NotestoFinancialStatements
160 AttachmentstoNotes
Financial Review Unconsolidated
101
Condensed Balance Sheets
*Subject to change following resolutions decided during the 2007 shareholders’ meeting.
In thousand NTD
2006 2005 2004 2003 2002
Current assets 118,430,216 128,267,746 110,373,653 122,306,834 86,658,337
Funds and investments 82,746,430 39,238,167 71,568,002 72,218,479 56,246,744
Property, plant and equipment 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
Total assets 355,228,793 329,391,074 329,563,491 320,113,838 297,332,646
Current liabilities Before distribution 30,060,546 28,303,962 23,277,031 32,751,363 20,949,418
After distribution * 35,777,189 25,062,773 32,763,981 20,955,068
Long-term interest-bearing liabilities 30,383,076 36,009,055 33,607,029 48,552,355 55,066,424
Other liabilities 3,620,300 6,794,504 6,296,677 6,568,196 3,883,441
Total liabilities Before distribution 64,063,922 71,107,521 63,180,737 87,871,914 79,899,283
After distribution * 78,580,748 64,966,479 87,884,532 79,904,933
Capital 191,323,332 197,983,633 177,923,859 161,407,435 154,748,456
Additional paid-in capital 67,707,287 85,381,599 84,933,195 80,074,184 81,875,491
Retained earnings Before distribution 34,795,993 26,572,792 42,401,701 26,794,291 20,004,054
After distribution * 17,745,952 21,055,740 13,446,116 13,339,425
Unrealized gain or loss on financial instruments 27,557,845 (9,527,362) (9,871,086) (9,537,237) (10,795,621)
Cumulative translation adjustment (824,922) (241,153) (1,319,452) 913,877 728,851
Unrecognized pension cost, contra equity account, charge to stockholders’ equity (excess of additional pension liability over unrecognized prior service cost)
- - - - -
Total equity Before distribution 291,164,871 258,283,553 266,382,754 232,241,924 217,433,363
After distribution * 250,810,326 264,597,012 232,229,306 217,427,713
United Microelectronics Corporation | Annual Report 2006
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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.
In thousand NTD
Year CPA Auditors’ Opinion
2002 James Wang, Thomas Yue A modified unqualified opinion
2003 James Wang, Thomas Yue A modified unqualified opinion
2004 Kim Chang, MY Lee A modified unqualified opinion
2005 James Wang, MY Lee A modified unqualified opinion
2006 James Wang, MY Lee A modified unqualified opinion
Condensed Statements of Income
Auditors’ Opinion
2006 2005 2004 2003 2002
Net operating revenues 104,098,611 90,775,439 117,311,840 84,862,070 67,425,745
Gross profit 20,693,472 11,195,550 35,820,944 19,442,269 11,195,150
Operating income (loss) 6,124,138 (2,668,719) 24,454,992 9,936,334 140,971
Non-operating income 33,871,592 13,871,542 14,895,451 9,033,180 10,483,535
Non-operating expenses 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
Income from continuing operations 33,807,828 7,026,692 31,843,381 14,020,257 7,072,032
Discontinued operations - - - - -
Extraordinary items - - - - -
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
Earnings per share (NTD) 1.81 0.38 1.68 0.75 0.38
Financial Review Unconsolidated
10�
Financial Analysis
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 followsCapital 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 assetsLiquidity 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 expenseOperating 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 assetsProfitability 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 outstandingCash 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)
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 in-crease in operating income over the previous year.5. Income before income tax to capital: Mainly resulted from
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 in-crease 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.
2006 2005 2004 2003 2002
Capital structure analysis (%) Debts ratio 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
Liquidity analysis (%) Current ratio 393.97 453.18 474.17 373.44 413.66
Quick ratio 351.82 404.71 421.28 340.19 359.62
Times interest earned 57.80 7.01 23.58 9.58 4.32
Operating performance analysis Average collection turnover (times) 8.42 7.87 9.45 7.23 8.12
Average collection days 43 46 39 50 45
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 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
Profitability analysis (%) Return on total assets 9.67 2.34 10.08 4.84 2.65
Return on equity 11.87 2.68 12.77 6.24 3.14
Operating income(loss) to capital 3.20 (1.35) 13.74 6.16 0.09
Income before income tax to capital 18.73 3.55 17.92 9.18 4.58
Net income to sales 31.34 7.74 27.14 16.52 10.49
Earnings per share (NTD) 1.81 0.38 1.68 0.75 0.38
Cash Flow (%) 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
Cash flow reinvestment ratio 6.32 7.73 13.64 10.37 7.06
Leverage Operating leverage 12.58 (24.95) 3.66 6.65 421.35
Financial leverage 1.11 0.74 1.05 1.14 (0.11)
United Microelectronics Corporation | Annual Report 2006
10�
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 Supervi-sors of the Company, have reviewed these statements, the report of operations and the proposals relating to distribu-tion of net profit. According to article 219 of the Company Law, we hereby submit this report.
United Microelectronics CorporationSupervisors:
Tzyy-Jang Tseng
Ta-Hsing Wang
Ting-Yu Lin
March 15, 2007
Supervisors’ Report
Financial Review Unconsolidated
10�
UNITED MICROELECTRONICS CORPORATIONFINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT AUDITORSFOR 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.
United Microelectronics Corporation | Annual Report 2006
10�
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 respon-
sibility 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 prac-
tices to audit such financial statements are those generally accepted and applied in the Republic of China.
Financial Review Unconsolidated
10�
Engl
ish
Tran
slat
ion
of F
inan
cial
Sta
tem
ents
Orig
inal
ly Is
sued
in C
hine
seU
NIT
ED M
ICR
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ECTR
ON
ICS
CO
RPO
RA
TIO
N
BA
LAN
CE
SHEE
TSD
ecem
ber 3
1, 2
006
and
2005
(Exp
ress
ed in
Tho
usan
ds o
f New
Tai
wan
Dol
lars
)
As o
f Dec
embe
r 31,
As o
f Dec
embe
r 31,
Ass
ets
Not
es20
0620
05L
iabi
litie
s and
Sto
ckho
lder
s' E
quity
Not
es20
0620
05C
urre
nt a
sset
sC
urre
nt li
abili
ties
C
ash
and
cash
equ
ival
ents
2, 4
(1)
83,3
94,8
02$
96
,596
,623
$
F
inan
cial
liab
ilitie
s at f
air v
alue
thro
ugh
prof
it or
loss
, cur
rent
2, 3
, 4 (1
4)98
5,26
7$
95,6
34$
Fin
anci
al a
sset
s at f
air v
alue
thro
ugh
prof
it or
loss
, cur
rent
2, 3
, 4 (2
)8,
538,
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2,46
8,96
8
Acc
ount
s pay
able
4,
018,
368
4,10
0,70
8
A
vaila
ble-
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fina
ncia
l ass
ets,
curr
ent
2, 3
, 4 (3
)-
2,41
4,15
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me
tax
paya
ble
22,
018,
673
60,3
89
Hel
d-to
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urity
fina
ncia
l ass
ets,
curr
ent
2, 3
, 4 (4
)97
4,27
2-
A
ccru
ed e
xpen
ses
6,24
5,41
17,
596,
727
N
otes
rece
ivab
le4
(5)
3,73
319
3
Pay
able
on
equi
pmen
t10
,101
,767
5,27
7,86
3
Not
es re
ceiv
able
- re
late
d pa
rties
550
,648
62,1
36
Cur
rent
por
tion
of lo
ng-te
rm li
abili
ties
2, 4
(15)
5,35
5,88
310
,250
,000
A
ccou
nts r
ecei
vabl
e, n
et2,
4 (6
)6,
262,
985
6,20
0,22
8
Oth
er c
urre
nt li
abili
ties
1,33
5,17
792
2,64
1
Acc
ount
s rec
eiva
ble
- rel
ated
par
ties,
net
2, 5
6,04
8,37
66,
097,
343
Tot
al c
urre
nt li
abili
ties
30,0
60,5
46
28
,303
,962
O
ther
rece
ivab
les
248
6,24
270
8,55
2
Inve
ntor
ies,
net
2, 4
(7)
10,1
19,5
219,
963,
253
Lon
g-te
rm li
abili
ties
P
repa
id e
xpen
ses
638,
117
421,
787
B
onds
pay
able
2, 4
(15)
30,3
83,0
7636
,009
,055
D
efer
red
inco
me
tax
asse
ts, c
urre
nt2,
4 (2
2)1,
913,
513
3,33
4,51
0
T
otal
long
-ter
m li
abili
ties
30,3
83,0
76
36
,009
,055
Tot
al c
urre
nt a
sset
s11
8,43
0,21
612
8,26
7,74
6O
ther
liab
ilitie
sFu
nds a
nd in
vest
men
ts
Acc
rued
pen
sion
liab
ilitie
s2,
4 (1
6)3,
086,
774
3,00
3,77
8A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt2,
3, 4
(8),
4(13
)41
,218
,780
5,51
3,28
4
Dep
osits
-in14
,448
20,8
27
Hel
d-to
-mat
urity
fina
ncia
l ass
ets,
nonc
urre
nt2,
3, 4
(4)
- 97
7,85
6
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erre
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edits
- in
terc
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ny p
rofit
s2
3,57
99,
806
F
inan
cial
ass
ets m
easu
red
at c
ost,
nonc
urre
nt2,
3, 4
(9)
2,28
5,32
62,
265,
467
O
ther
liab
ilitie
s - o
ther
s2,
4 (1
0)51
5,49
93,
760,
093
L
ong-
term
inve
stm
ents
acc
ount
ed fo
r und
er th
e eq
uity
met
hod
2, 3
, 4 (1
0), 4
(13)
39,2
42,3
2430
,481
,560
Tot
al o
ther
liab
ilitie
s3,
620,
300
6,79
4,50
4
T
otal
fund
s and
inve
stm
ents
82,7
46,4
30
39
,238
,167
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al li
abili
ties
64,0
63,9
22
71
,107
,521
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erty
, pla
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quip
men
t2,
4 (1
1), 7
L
and
1,13
2,57
61,
132,
576
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ital
B
uild
ings
16,2
74,7
8016
,287
,803
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omm
on st
ock
2, 4
(17)
, 4 (1
8), 4
(20)
191,
311,
927
197,
947,
033
M
achi
nery
and
equ
ipm
ent
394,
330,
240
366,
982,
250
C
apita
l col
lect
ed in
adv
ance
11,4
0536
,600
T
rans
porta
tion
equi
pmen
t79
,117
88,4
13A
dditi
onal
Pai
d-in
Cap
ital
2, 4
(17)
F
urni
ture
and
fixt
ures
2,36
9,06
02,
199,
773
P
rem
ium
s61
,070
,555
64,6
00,0
76
T
otal
cos
t41
4,18
5,77
338
6,69
0,81
5
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asur
y st
ock
trans
actio
ns
8,93
8-
L
ess :
Acc
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ated
dep
reci
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66,5
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(252
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,004
)
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f lon
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vest
men
ts6,
627,
794
20,7
81,5
23
Add
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142,
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435
14
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9,61
6
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egal
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16,6
99,5
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serv
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2,15
01,
744,
171
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s
Una
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ted
earn
ings
17,7
74,3
358,
831,
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oodw
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122
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al in
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ass
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3,74
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2
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104,
678
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nrea
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27,5
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k2,
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ther
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Tot
al st
ockh
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quity
291,
164,
871
25
8,28
3,55
3
D
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char
ges
21,
465,
645
1,96
3,95
0
Def
erre
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com
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non
curr
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2, 4
(22)
4,15
9,21
44,
001,
394
O
ther
ass
ets -
oth
ers
2, 4
(12)
, 4 (1
3), 6
2,03
4,73
12,
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523
Tot
al o
ther
ass
ets
7,65
9,59
0
7,
970,
867
Tot
al a
sset
s35
5,22
8,79
3$
329,
391,
074
$
T
otal
liab
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stoc
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ders
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ity35
5,22
8,79
3$
329,
391,
074
$
The
acco
mpa
nyin
g no
tes a
re a
n in
tegr
al p
art o
f the
fina
ncia
l sta
tem
ents
.
United Microelectronics Corporation | Annual Report 2006
10�
English Translation of Financial Statements Originally Issued in ChineseUNITED MICROELECTRONICS CORPORATION
STATEMENTS OF INCOME For the years ended December 31, 2006 and 2005
(Expressed in Thousands of New Taiwan Dollars, Except for Earnings per Share )
NotesOperating revenues 2, 5 Sales revenues Less : Sales returns and discounts Net sales Other operating revenues Net operating revenuesOperating costs 4 (21), 5 Cost of goods sold Other operating costs Operating costsGross profitUnrealized intercompany profit 2Realized intercompany profit 2 Gross profit-netOperating expenses 4 (21), 5 Sales and marketing expenses General and administrative expenses Research and development expenses SubtotalOperating income (loss)Non-operating income Interest revenue 2, 5 Investment gain accounted for under the equity method, net 2, 4 (10) Dividend income Gain on disposal of property, plant and equipment 2 Gain on disposal of investments 2 Exchange gain, net 2, 10 Gain on recovery of market value of inventories 2 Gain on valuation of financial assets 2 Gain on valuation of financial liabilities 2 Other income SubtotalNon-operating expenses Interest expense 4 (11) Investment loss accounted for under the equity method, net 2, 4 (10) Loss on disposal of property, plant and equipment 2 Loss on decline in market value and obsolescence of inventories 2 Financial expenses Impairment loss 2, 4(13) Other losses SubtotalIncome from continuing operations before income taxIncome tax expense 2, 4 (22)Net income from continuing operationsCumulative effect of changes in accounting principles 3 (the net amount after deducted tax expense $0)Net income
Pre-tax Post-tax Pre-tax Post-taxEarnings per share-basic (NTD) 2, 4 (23) Income from continuing operations 2.05$ 1.87$ 0.38$ 0.38$ Cumulative effect of changes in accounting principles (0.06) (0.06) - - Net income 1.99$ 1.81$ 0.38$ 0.38$
Earnings per share-diluted (NTD) 2, 4 (23) Income from continuing operations 1.98$ 1.81$ 0.37$ 0.37$ Cumulative effect of changes in accounting principles (0.06) (0.06) - - Net income 1.92$ 1.75$ 0.37$ 0.37$
Pro forma information on earnings as if subsidiaries' investment in 2, 4 (23) the Company is not treated as treasury stock Net income Earnings per share-basic (NTD) Earnings per share-diluted (NTD)
The accompanying notes are an integral part of the financial statements.
(710,191)101,313,406
(81,618,123)
2,785,205104,098,611
2006For the year ended December 31,
2005
90,780,340$102,023,597$(1,840,345)88,939,995
1,835,44490,775,439
(1,801,277)(83,419,400)20,679,211
(78,836,403)(777,750)
(79,614,153)11,161,286
(105,892)120,153
20,693,472
(120,153)154,417
11,195,550
(2,601,671)(2,730,047)(9,237,616)
(2,280,674)(3,225,165)(8,358,430)
(14,569,334) (13,864,269)6,124,138 (2,668,719)
1,453,0401,873,777
860,977133,212
27,501,643296,044
-
306,140660,106
10,096,375252,303919,884
--
945,610-
922,56262,884
671,92413,871,542
(630,738)-
(918,173)(2,677,263)
786,65333,871,592
32,619,313$
(64,806)(2,979,691)37,016,039(3,208,211)33,807,828(1,188,515)
(32,480)
(229,602)(1,103,812)
(80,012)
-(918,253)
7,026,692$
(81,544)
(258,110)(160,191)
(4,175,293)7,027,530
(838)7,026,692
-
1.75$
7,026,692$0.36$0.36$
32,686,223$1.80$
Financial Review Unconsolidated
10�
Engl
ish
Tran
slat
ion
of F
inan
cial
Sta
tem
ents
Orig
inal
ly Is
sued
in C
hine
se
UN
ITED
MIC
RO
ELEC
TRO
NIC
S C
OR
POR
ATI
ON
STA
TEM
ENTS
OF
CH
AN
GES
IN S
TOC
KH
OLD
ERS'
EQ
UIT
Y
For t
he y
ears
end
ed D
ecem
ber 3
1, 2
006
and
2005
(Exp
ress
ed in
Tho
usan
ds o
f New
Tai
wan
Dol
lars
)
Not
esC
omm
on S
tock
Col
lect
ed i
n A
dvan
ceLe
gal R
eser
veSp
ecia
l Res
erve
Una
ppro
pria
ted
Earn
ings
Bal
ance
as o
f Jan
uary
1, 2
005
4 (1
7)17
7,91
9,81
9$
4,04
0$
84
,933
,195
$
12
,812
,501
$
90,8
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29,4
98,3
29$
(9
,871
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)$
(1,3
19,4
52)
$
(2
7,68
5,46
3)$
26
6,38
2,75
4$
App
ropr
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n of
200
4 re
tain
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arni
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4 (2
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egal
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rve
- -
- 3,
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- (3
,184
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)-
- -
-
S
peci
al re
serv
e-
- -
- 1,
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00)
- -
- -
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ash
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dend
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- -
- -
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- -
- (1
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)
S
tock
div
iden
ds17
,587
,364
- -
- -
(17,
587,
364)
- -
- -
R
emun
erat
ion
to d
irect
ors a
nd su
perv
isor
s -
- -
- -
(27,
006)
- -
- (2
7,00
6)
E
mpl
oyee
bon
us-s
tock
1,97
2,85
5-
- -
- (1
,972
,855
)-
- -
-
Purc
hase
of t
reas
ury
stoc
k2,
4 (1
9)-
- -
- -
- -
- (1
6,37
8,69
2)(1
6,37
8,69
2)
Can
cella
tion
of tr
easu
ry st
ock
2, 4
(19)
(491
,140
)-
(177
,419
)-
- (1
,509
,640
)-
- 2,
178,
199
-
Net
inco
me
in 2
005
- -
- -
- 7,
026,
692
- -
- 7,
026,
692
Adj
ustm
ent o
f add
ition
al p
aid-
in c
apita
l acc
ount
ed fo
r und
er th
e eq
uity
met
hod
2-
- (2
8,49
1)-
- -
- -
- (2
8,49
1)
Cha
nges
in u
nrea
lized
loss
on
long
-term
inve
stm
ents
of i
nves
tees
2
- -
- -
- -
343,
724
- -
343,
724
Exer
cise
of e
mlo
yee
stoc
k op
tions
2, 4
(18)
954,
095
36,6
0065
4,31
4-
- -
- -
- 1,
645,
009
Com
mon
stoc
k tra
nsfe
rred
from
cap
ital c
olle
cted
in a
dvan
ce2
4,04
0(4
,040
)-
- -
- -
- -
-
Cha
nges
in c
umul
ativ
e tra
nsla
tion
adju
stm
ent
2-
- -
- -
- -
1,07
8,29
9-
1,07
8,29
9
Bal
ance
as o
f Dec
embe
r 31,
200
54
(17)
197,
947,
033
36,6
0085
,381
,599
15,9
96,8
391,
744,
171
8,83
1,78
2(9
,527
,362
)(2
41,1
53)
(41,
885,
956)
258,
283,
553
The
effe
ct o
f ado
ptin
g SF
AS
NO
. 34
3 (3
)-
- -
- -
- 23
,499
,003
11,5
47-
23,5
10,5
50A
ppro
pria
tion
of 2
005
reta
ined
ear
ning
s4
(20)
L
egal
rese
rve
- -
- 70
2,66
9-
(702
,669
)-
- -
-
S
peci
al re
serv
e-
- -
-(1
,422
,021
)1,
422,
021
- -
- -
C
ash
divi
dend
s-
- -
--
(7,1
61,2
67)
- -
- (7
,161
,267
)
S
tock
div
iden
ds89
5,15
8-
- -
- (8
95,1
58)
- -
- -
R
emun
erat
ion
to d
irect
ors a
nd su
perv
isor
s -
- -
--
(6,3
24)
- -
- (6
,324
)
E
mpl
oyee
bon
us -
cash
-
- -
--
(305
,636
)-
- -
(305
,636
)
E
mpl
oyee
bon
us -
stoc
k45
8,45
5-
- -
- (4
58,4
55)
- -
- -
Add
ition
al p
aid-
in c
apita
l tra
nsfe
rred
to c
omm
on st
ock
4 (1
7)89
5,15
8-
(895
,158
)-
- -
- -
- -
Purc
hase
of t
reas
ury
stoc
k2,
4 (1
9)-
- -
--
- -
- (2
7,28
6,33
9)(2
7,28
6,33
9)
Can
cella
tion
of tr
easu
ry st
ock
2, 4
(17)
, 4 (1
9)(1
0,00
0,00
0)-
(3,2
69,1
00)
--
(6,3
71,1
28)
- -
19,6
40,2
28-
Adj
ustm
ent o
f tre
asur
y st
ock
due
to lo
ss o
f con
trol o
ver s
ubsi
diar
y-
- (5
7,97
2)-
- (9
,198
,144
)2,
620,
135
- 20
,137
,403
13,5
01,4
22
Net
inco
me
in 2
006
- -
- -
- 32
,619
,313
- -
- 32
,619
,313
Adj
ustm
ent o
f add
ition
al p
aid-
in c
apita
l acc
ount
ed fo
r und
er th
e eq
uity
met
hod
2-
- (6
2,68
6)-
- -
- -
- (6
2,68
6)
Adj
ustm
ent o
f fun
ds a
nd in
vest
men
ts d
ispo
sal
2-
- (1
4,09
1,04
3)-
- -
- 8,
170
- (1
4,08
2,87
3)
Cas
h di
vide
nds a
lloca
ted
to su
bsid
arie
s-
- 66
,910
--
- -
- -
66,9
10
Cha
nges
in u
nrea
lized
gai
n on
ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s2,
4 (8
)-
- -
--
- 1,
664,
839
- -
1,66
4,83
9
Cha
nges
in u
nrea
lized
gai
n on
fina
ncia
l ins
trum
ents
of i
nves
tees
2-
- -
--
- 9,
301,
230
- -
9,30
1,23
0
Exer
cise
of e
mlo
yee
stoc
k op
tions
2, 4
(18)
1,07
9,52
311
,405
634,
737
--
- -
- -
1,72
5,66
5
Com
mon
stoc
k tra
nsfe
rred
from
cap
ital c
olle
cted
in a
dvan
ce36
,600
(36,
600)
- -
- -
- -
- -
Cha
nges
in c
umul
ativ
e tra
nsla
tion
adju
stm
ent
2-
- -
--
- -
(603
,486
)-
(603
,486
)
Bal
ance
as o
f Dec
embe
r 31,
200
64
(17)
191,
311,
927
$
11
,405
$
67
,707
,287
$
16
,699
,508
$
322,
150
$
17,7
74,3
35$
27
,557
,845
$
(8
24,9
22)
$
(29,
394,
664)
$
291,
164,
871
$
The
acco
mpa
nyin
g no
tes a
re a
n in
tegr
al p
art o
f the
fina
ncia
l sta
tem
ents
.
Tota
l
Ret
aine
d Ea
rnin
gs
Add
ition
alPa
id-in
Cap
ital
Trea
sury
Sto
ck
Unr
ealiz
edG
ain/
Loss
on
Fina
naic
alIn
stru
men
ts
Cum
ulat
ive
Tran
slat
ion
Adj
ustm
ent
Cap
ital
United Microelectronics Corporation | Annual Report 2006
110
English Translation of Financial Statements Originally Issued in ChineseUNITED MICROELECTRONICS CORPORATION
STATEMENTS OF CASH FLOWSFor the years ended December 31, 2006 and 2005(Expressed in Thousands of New Taiwan Dollars)
2006 2005Cash 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
Bad debt reversal (164,908) (151,042) Loss (gain) on decline (recovery) in market value and obsolescence of inventories 918,253 (919,884) Cash dividends received under the equity method 1,076,020 724,510 Investment (gain) loss accounted for under the equity method (1,873,777) 2,677,263 Loss on valuation of financial assets and liabilities 222,269 - Transfer of property, plant and equipment to losses and expenses - 9,370 Impairment loss 1,103,812 160,191 Gain on disposal of investments (27,501,643) (10,096,375)
Loss (gain) on disposal of property, plant and equipment (100,732) 18,660 Exchange gain on financial assets and liabilities (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) (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 (547,542) Other current liabilities 407,389 (57,471) Capacity deposits (5,200) (193,249) Accrued pension liabilities 82,996 313,267 Other liabilities - others 1,269,963 263,017 Net cash provided by operating activities 46,049,174 45,886,225
Cash flows from investing activities: Cash proceeds from merger - 943,862 Acquisition of available-for-sale financial assets (296,823) (2,013,681) Proceeds from disposal of available-for-sale financial assets 15,788,568 7,705,917 Proceeds from disposal of held-to-maturity financial assets - 707,820 Acquisition of financial assets measured at cost (85,080) (385,477) Proceeds from disposal of financial assets measured at cost 254,261 92,457 Acquisition of long-term investments accounted for under the equity method (7,437,443) (6,298,288) Proceeds from disposal of long-term investments accounted for under the equity method 7,801,029 3,354,361 Proceeds from liquidation of long-term investments 150,000 13,346,789 Acquisition of property, plant and equipment (31,204,419) (18,586,587) Proceeds from disposal of property, plant and equipment 248,962 129,468 Increase in deferred charges (1,082,648) (1,356,305) Increase in other assets - others (17,391) (161,341) Increase in other receivables - (5,137,760) Net cash used in investing activities (15,880,984) (7,658,765)
For the year ended December 31,
Financial Review Unconsolidated
111
English Translation of Financial Statements Originally Issued in Chinese
UNITED MICROELECTRONICS CORPORATION
STATEMENTS OF CASH FLOWS
For the years ended December 31, 2006 and 2005
(Expressed in Thousands of New Taiwan Dollars)
2006 2005
(continued)
Cash flows from financing activities:
Decrease in short-term loans, net -$ (1,904,400)$
Repayment of long-term loans - (16,153,714)
Redemption of bonds (10,250,000) (2,820,004)
Issuance of bonds - 12,478,603
Cash dividends (7,155,865) (1,758,736)
Payment of employee bonus (305,636) -
Remuneration paid to directors and supervisors (6,324) (27,006)
Exercise of employee stock options 1,725,665 1,642,009
Purchase of treasury stock (27,286,339) (16,378,692)
Decrease in deposits-in (6,379) (1,255) Net cash used in financing activities (43,284,878) (24,923,195)
Effect of exchange rate changes on cash and cash equivalents (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$
Supplemental disclosures of cash flow information:
Cash paid for interest 953,685$ 1,334,219$ Cash paid (refunded) for income tax 27,260$ (163,469)$
Investing activities partially paid by cash:
Acquisition of property, plant and equipment 36,028,323$ 17,586,514$
Add: Payable at beginning of year 5,277,863 4,704,299
Payable transferred in from the Branch at beginning of year - 1,573,637
Less: Payable at end of year (10,101,767) (5,277,863)
Cash paid for acquiring property, plant and equipment 31,204,419$ 18,586,587$
Investing and financing activities not affecting cash flows:
Principal amount of exchangeable bonds exchanged by bondholders 69,621$ -$
Book value of available-for-sale financial assets delivered for exchange (20,242) -
Elimination of related balance sheet accounts 15,302 -
Recognition of gain on disposal of investments 64,681$ -$
The accompanying notes are an integral part of the financial statements.
For the year ended December 31,
United Microelectronics Corporation | Annual Report 2006
11�
UNITED MICROELECTRONICS CORPORATIONNOTES TO FINANCIAL STATEMENTS
December 31, 2006 and 2005(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.
Financial Review Unconsolidated
11�
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.
United Microelectronics Corporation | Annual Report 2006
11�
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.
Financial Review Unconsolidated
11�
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.
United Microelectronics Corporation | Annual Report 2006
11�
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.
Financial Review Unconsolidated
11�
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.
United Microelectronics Corporation | Annual Report 2006
11�
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.
Financial Review Unconsolidated
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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.
United Microelectronics Corporation | Annual Report 2006
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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.
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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.
Financial Instruments
(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.
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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
Cash:
Cash on hand $1,865 $1,697
Checking and savings accounts 874,866 2,201,585
Time deposits 75,294,424 83,180,150
Subtotal 76,171,155 85,383,432
Cash equivalents 7,223,647 11,213,191
Total $83,394,802 $96,596,623
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(2) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS, CURRENT
As of December 31,
Held for trading 2006 2005
Listed stocks $8,094,274 $1,250,280
Convertible bonds 443,733 1,218,688
Total $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
Total $- $2,414,153
(4) HELD-TO-MATURITY FINANCIAL ASSETS
As of December 31,
2006 2005
Credit-linked deposits and repackage bonds $974,272 $977,856
Less: Non-current portion - (977,856)
Total $974,272 $-
(5) NOTES RECEIVABLE
As of December 31,
2006 2005
Notes receivable $3,733 $193
(6) ACCOUNTS RECEIVABLE, NET
As of December 31,
2006 2005
Accounts receivable $6,550,304 $6,417,633
Less: Allowance for sales returns and discounts (287,319) (148,825)
Less: Allowance for doubtful accounts - (68,580)
Net $6,262,985 $6,200,228
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(7) INVENTORIES, NET
As of December 31,
2006 2005
Raw materials $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
Total 11,088,315 10,532,100
Less: Allowance for loss on decline in market value and obsolescence
(968,794) (568,847)
Net $10,119,521 $9,963,253
Inventories were not pledged.
(8) AVAILABLE-FOR-SALE FINANCIAL ASSETS, NONCURRENT
As of December 31,
2006 2005
Common stock $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
Total $2,285,326 $2,265,467
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(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 2005
Investee CompaniesAmount
Percentage of Ownership or Voting Rights
Amount
Percentage of Ownership or Voting Rights
Listed companiesUMC JAPAN $5,949,999 50.09 $6,341,144 48.95HOLTEK SEMICONDUCTOR INC. 878,747 24.45 818,681 24.81ITE TECH. INC. 341,268 21.80 329,704 22.66FARADAY TECHNOLOGY CORP. (Note A) - - 864,928 18.50SILICON INTEGRATED SYSTEMS CORP.
(Note A) - - 3,921,878 16.59
NOVATEK MICROELECTRONICS CORP. (Note A) - - 1,409,421 11.74
UNIMICRON TECHNOLOGY CORP. (UNIMICRON)(Note B) - -
4,015,626 20.43
Subtotal 7,170,014 17,701,382
Unlisted companiesUMC GROUP (USA) 1,006,496 100.00 753,519 100.00UNITED MICROELECTRONICS (EUROPE) B.V. 284,084 100.00 279,834 100.00UMC CAPITAL CORP. 3,613,491 100.00 2,051,350 100.00UNITED MICROELECTRONICS CORP. (SAMOA) 8,480 100.00 14,179 100.00UMCI LTD. (Note C) 86 100.00 9,484 100.00TLC CAPITAL CO., LTD. 6,999,737 100.00 2,991,258 100.00FORTUNE VENTURE CAPITAL CORP. (Note D) 11,114,198 99.99 4,200,105 99.99UNITED MICRODISPLAY OPTRONICS CORP.
(UMO) (Note E)167,217 81.76 318,151 86.72
PACIFIC VENTURE CAPITAL CO., LTD. 127,379 49.99 296,218 49.99MTIC HOLDINGS PTE LTD 81,402 49.94 - -MEGA MISSION LIMITED PARTNERSHIP 2,699,491 45.00 - -UNITECH CAPITAL INC. 959,542 42.00 638,946 42.00HSUN CHIEH INVESTMENT CO., LTD.
(HSUN CHIEH)(Note F) 4,674,311 36.49 - 99.97
HIGHLINK TECHNOLOGY CORP. (Notes G) 225,624 18.97 - -XGI TECHNOLOGY INC. (Note G) 53,710 16.48 82,807 16.53AMIC TECHNOLOGY CORP. (Note G) 57,062 11.86 60,520 11.86TOPPAN PHOTOMASKS TAIWAN LTD.
(formerly DUPONT PHOTOMASKS TAIWAN LTD.)
- - 1,063,671 45.35
THINTEK OPTRONICS CORP. (THINTEK) (Notes E)
- - 20,136 14.26
Subtotal 32,072,310 12,780,178Total $39,242,324 $30,481,560
United Microelectronics Corporation | Annual Report 2006
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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.
Financial Review Unconsolidated
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(11) PROPERTY, PLANT AND EQUIPMENTAs of December 31, 2006
Cost Accumulated Depreciation
Book Value
Land $1,132,576 $- $1,132,576Buildings 16,274,780 (5,396,847) 10,877,933Machinery and equipment 394,330,240 (286,527,429) 107,802,811Transportation equipment 79,117 (58,812) 20,305Furniture and fixtures 2,369,060 (1,783,505) 585,555Construction in progress and
prepayments 22,228,255 - 22,228,255
Total $436,414,028 $(293,766,593) $142,647,435
As of December 31, 2005
Cost Accumulated Depreciation
Book Value
Land $1,132,576 $- $1,132,576Buildings 16,287,803 (4,668,161) 11,619,642Machinery and equipment 366,982,250 (246,233,155) 120,749,095Transportation equipment 88,413 (62,501) 25,912Furniture and fixtures 2,199,773 (1,510,187) 689,586Construction in progress and
prepayments15,592,805 - 15,592,805
Total $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:For the year ended December 31,
2006 2005Machinery and equipment $- $210,689Other property, plant and equipment - 4,397Total interest capitalized $- $215,086
Interest rates applied - 2.86%~4.20%
b. Property, plant, and equipment were not pledged.
United Microelectronics Corporation | Annual Report 2006
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(12) OTHER ASSETS-OTHERS As of December 31,
2006 2005Leased assets $1,333,029 $1,366,695Deposits-out 642,584 579,710Others 59,118 59,118 Total $2,034,731 $2,005,523
Please refer to Note 6 for deposits-out pledged as collateral.
(13) IMPAIRMENTAs of December 31,
2006 2005Available for sale financial assets, noncurrent $825,863 $-Long-term investment accounted for under the
equity method 21,807 100,191
Technology know how 256,142 -Other assets - 60,000
Total $1,103,812 $160,191
(14) FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS, CURRENT
As of December 31,2006 2005
Interest rate swaps $626,230 $95,634Derivatives embedded in exchangeable bonds 359,037 -Total $985,267 $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 PAYABLEAs of December 31,
2006 2005Unsecured domestic bonds payable $20,250,000 $30,500,000Convertible bonds payable 12,441,268 12,540,432Exchangeable bonds payable 3,122,060 3,218,623Less: discounts on bonds payable (74,369) - Total 35,738,959 46,259,055Less: Current portion (5,355,883) (10,250,000) Net $30,383,076 $36,009,055
Financial Review Unconsolidated
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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.
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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
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(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.
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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 Amount2007 $5,372,0602008 22,941,2682009 -2010 7,500,0002011 -Total $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:For the year ended December 31,
2006 2005Projected benefit obligation at beginning of year $(4,142,309) $(3,790,299)Service cost (72,312) (302,509)Interest cost (124,234) (132,660)Benefits paid 10,024 10,883Gain (loss) on projected benefit obligation (126,122) 72,276Projected benefit obligation at end of year $(4,454,953) $(4,142,309)
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d. Change in pension assets during the year:For the year ended December 31,
2006 2005Fair value of plan assets at beginning of year $1,077,661 $959,325Actual return on plan assets 28,140 14,632Contributions from employer 107,626 114,587Benefits paid (10,024) (10,883)Fair value of plan assets at end of year $1,203,403 $1,077,661
e. The funding status of the pension plan is as follows:As of December 31,
2006 2005Benefit obligation
Vested benefit obligation $(55,213) $(39,069)Non-vested benefit obligation (1,853,757) (1,671,097)Accumulated benefit obligation (1,908,970) (1,710,166)Effect from projected salary increase (2,545,983) (2,432,143)Projected benefit obligation (4,454,953) (4,142,309)
Fair value of plan assets 1,203,403 1,077,661Funded status (3,251,550) (3,064,648)Unrecognized net transitional benefit obligation 112,670 140,837Unrecognized loss (gain) 52,106 (79,967)Accrued pension liabilities recognized on the balance sheet $(3,086,774) $(3,003,778)
f. The components of the net periodic pension cost are as follows:
For the year ended December 31,2006 2005
Service cost $72,312 $302,509Interest cost 124,234 132,660Expected return on plan assets (34,091) (35,482)Amortization of unrecognized transitional net benefit
obligation28,167 28,167
Net periodic pension cost $190,622 $427,854
The actuarial assumptions underlying are as follows:
For the year ended December 31,2006 2005
Discount rate 2.75% 3.00%Rate of salary increase 4.50% 4.50%Expected return on plan assets 2.50% 3.00%
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(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.
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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 Total number of options granted(in thousands)
Total number of options outstanding (in thousands)
Exercise price(NTD)
October 7, 2002 939,000 543,834 $15.7January 3, 2003 61,000 44,571 $17.7November 26, 2003 57,330 45,443 $24.7March 23, 2004 33,330 22,110 $22.9July 1, 2004 56,590 44,460 $20.7October 13, 2004 20,200 12,905 $17.8April 29, 2005 23,460 17,790 $16.4August 16, 2005 54,350 42,610 $21.6September 29, 2005 51,990 46,675 $19.7January 4, 2006 39,290 30,690 $17.7May 22, 2006 42,058 37,040 $19.2August 24, 2006 28,140 25,830 $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:
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For the year ended December 31,2006 2005
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 109,488 $18.4 129,800 $19.9Exercised (109,093) $15.7 (95,814) $15.7Forfeited (61,757) $18.8 (32,524) $18.5Outstanding at end of period 913,958 $17.5 975,320 $17.3
Exercisable at end of period 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:
Outstanding Stock Options Exercisable Stock Options
Authorization Date
Range of Exercise
Price
Option (in thousands)
Weighted-average
Remaining Contractual Life
(Years)
Weighted-average
Exercise Price(NTD)
Option(in thousands)
Weighted-average
Exercise Price(NTD)
2002.09.11 $15.7~$17.7 588,405 1.78 $15.9 577,608 $15.82003.10.08 $20.7~$24.7 112,013 3.20 $22.8 67,095 $23.12004.09.30 $16.4~$21.6 119,980 4.53 $19.7 5,565 $17.82005.12.22 $17.7~$19.2 93,560 5.33 $18.5 - -
913,958 2.68 $17.5 650,268 $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:
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For the year ended December 31, 2006Basic earnings per share Diluted earnings per share
Net Income $32,619,313 $32,653,291Earnings per share (NTD) $1.81 $1.75Pro forma net income $32,193,259 $32,227,237Pro forma earnings per share (NTD) $1.78 $1.73
For the year ended December 31, 2005 (retroactively adjusted)Basic earnings per share Diluted earnings per share
Net Income $7,026,692 $7,035,187Earnings per share (NTD) $0.38 $0.37Pro forma net income $6,782,033 $6,790,528Pro forma earnings per share (NTD) $0.36 $0.36
The fair value of the options granted was estimated at the date of grant using the Black-Scholes options pricing model
with the following weighted-average assumptions for the years ended December 31, 2006 and 2005:
2006 2005
Expected dividend yields 1.37%~1.38% 1.63%~1.64%
Volatility factors of the expected market price
35.57%~41.14% 40.35%~43.39%
Risk-free interest rate 1.88%~2.28% 1.85%~2.24%
Weighted-average expected life of the options
4~5 years 4~5 years
(19) TREASURY STOCK
a. The Company bought back its own shares from the open market during the years ended December 31, 2006 and
2005. Details of the treasury stock transactions are as follows:
For the year ended December 31, 2006
(In thousands of shares)
Purpose As of January 1, 2006
Increase Decrease As of December 31, 2006
For transfer to employees 442,067 400,000 - 842,067
For conversion of the convertible bonds into shares
500,000 - - 500,000
For retention of the Company’s creditability and stockholder’s interests
- 1,000,000 1,000,000 -
Total shares 942,067 1,400,000 1,000,000 1,342,067
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For the year ended December 31, 2005
(In thousands of shares)
Purpose As of January 1, 2005
Increase Decrease As of December 31, 2005
For transfer to employees 241,181 250,000 49,114 442,067
For conversion of the convertible bonds into shares
- 500,000 - 500,000
Total shares 241,181 750,000 49,114 942,067
b. According to the Securities and Exchange Law of the R.O.C., total shares of treasury stock should not exceed 10% of the
Company’s stock issued. Total purchase amount should not exceed the sum of the retained earnings, additional paid-in
capital-premiums, and realized additional paid-in capital. As such, the maximum number of shares of treasury stock
that the Company could hold as of December 31, 2006 and 2005, were 1,913 million shares and 1,979 million shares
with the ceiling of the amounts were NT$ 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
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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:
For the year ended December 31, 2005
As approved by the shareholders’
meeting
As recommended by the board of directors
Differences
1. Settlement of employees’ bonus by issuance of new sharesa. 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
45,846$458,455
0.24
$305,636$6,324
45,846$458,455
0.24
$305,636$6,324
---
-
4. Effect on earnings per share before retroactive adjustmentsa. 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)
$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:
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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: For the year ended December 31,
2006 2005Operating
costs Operating
expensesTotal Operating
costs Operating
expensesTotal
Personnel expenses Salaries $8,159,508 $2,749,890 $10,909,398 $6,252,412 $2,180,082 $8,432,494 Labor and health
insurance437,527 123,780 561,307 410,228 113,429 523,657
Pension 496,293 154,729 651,022 488,932 159,427 648,359
Other personnel expenses
85,210 46,176 131,386 67,096 27,928 95,024
Depreciation 40,377,798 2,122,344 42,500,142 44,221,133 1,888,140 46,109,273Amortization 187,146 1,593,444 1,780,590 176,459 2,119,210 2,295,669
The numbers of employees as of December 31, 2006 and 2005 were 13,265 and 12,068, respectively.
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(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:
For the year ended December 31,2006 2005
Income tax on pre-tax income at statutory tax rate $9,366,541 $2,466,936Permanent differences (7,280,874) (2,523,713)Change in investment tax credit (1,255,913) 6,942,626Change in valuation allowance 435,752 (6,885,849)Income Basic Tax 1,940,992 -Income tax on interest revenue separately taxed 1,713 838Income tax expense $3,208,211 $838
b. Significant components of deferred income tax assets and liabilities are as follows:As of December 31,
2006 2005Amount Tax effect Amount Tax effect
Deferred income tax assetsInvestment tax credit $14,864,958 $13,609,045Loss carry-forward $3,815,034 953,758 $14,671,930 3,667,982Pension 3,083,578 770,895 3,001,282 750,321Allowance on sales returns and discounts 732,523 183,131 779,688 194,922
Allowance for loss on obsolescence of inventories
685,023 171,256 252,855 63,214
Others 794,686 198,671 571,066 142,766
Total deferred income tax assets 17,142,669 18,428,250Valuation allowance (9,111,113) (8,675,361)
Net deferred income tax assets 8,031,556 9,752,889
Deferred income tax liabilitiesUnrealized exchange gain (291,144) (72,786) - -Depreciation (5,005,315) (1,251,329) (9,667,939) (2,416,985)
Others (2,538,858) (634,714) - -Total deferred income tax liabilities (1,958,829) (2,416,985)Total net deferred income tax assets $6,072,727 $7,335,904
Deferred income tax assets - current $5,803,448 $6,354,040Deferred income tax liabilities - current (278,284) -Valuation allowance (3,611,651) (3,019,530)
Net 1,913,513 3,334,510
Deferred income tax assets - noncurrent 11,339,221 12,074,210Deferred income tax liabilities - noncurrent (1,680,545) (2,416,985)Valuation allowance (5,499,462) (5,655,831)
Net 4,159,214 4,001,394Total net deferred income tax assets $6,072,727 $7,335,904
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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 Balance of unused investment tax credits
2006 $2,850,484 $2,850,4842007 1,613,158 1,613,1582008 6,275,971 6,275,9712009 1,737,860 1,737,8602010 2,387,485 2,387,485Total $14,864,958 $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 loss2006 $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
Total $14,671,930 $3,815,034
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.
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(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:
For the year ended December 31, 2006Amount Earnings per share (NTD)
Income before
income tax
Net income
Shares expressed
in thousands
Income before
income tax
Net income
Earning per share-basic (NTD)
Income from continuing operations
$37,016,039 $33,807,828 18,050,962 $2.05 $1.87
Cumulative effect of changes in accounting principles
(1,188,515) (1,188,515) (0.06) (0.06)
Net income $35,827,524 $32,619,313 $1.99 $1.81
Effect of dilutionEmployee stock options $- $- 108,122Convertible bonds payable $33,978 $33,978 516,383
Earning per share-diluted:
Income from continuingoperations
$37,050,017 $33,841,806 18,675,467 $1.98 $1.81
Cumulative effect of changes in accounting principles
(1,188,515) (1,188,515) (0.06) (0.06)
Net income $35,861,502 $32,653,291 $1.92 $1.75
For the year ended December 31, 2005 (retroactively adjusted)Amount Earnings per share (NTD)
Income before
income tax
Net income
Shares expressed
in thousands
Income before
income tax
Net income
Earning per share-basic (NTD)Income from continuing operations $7,027,530 $7,026,692 18,647,462 $0.38 $0.38
Cumulative effect of changes in accounting principles
- - - -
Net income $7,027,530 $7,026,692 $0.38 $0.38
Effect of dilutionEmployee stock options $- $- 161,651Convertible bonds payable $8,495 $8,495 124,498
Earning per share-diluted:Income from continuing operations $7,036,025 $7,035,187 18,933,611 $0.37 $0.37
Cumulative effect of changes in accounting principles
- - - -
Net income $7,036,025 $7,035,187 $0.37 $0.37
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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 DilutedNet income $32,686,223 $32,720,201Weighted-average of shares outstanding:
Beginning balance 18,852,636 18,852,636Increase in capital through 2006 retained earnings and
additional paid-in capital at proportion of 1.3%242,215 242,215
Purchase of 1,400,000 thousand shares of treasury stock in 2006 (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
- 108,122
Dilutive shares issued assuming conversion of bonds - 516,383Ending balance 18,118,020 18,742,525Earnings per share Net income (NTD) $1.80 $1.75
(shares expressed in thousands) For the year ended December 31, 2005
(retroactively adjusted)Basic Diluted
Net income $7,026,692 $7,035,187Weighted-average of shares outstanding:Beginning balance 17,550,801 17,550,801
Increase in capital through 2006 retained earnings at proportion of 1.3%
247,368 247,368
Increase in capital through 2005 retained earnings at proportion of 11.4%
2,009,072 2,009,072
Purchase of 750,000 thousand shares of treasury stock in 2005 (349,945) (349,945)Weighted-average shares of exercising employee stock options 43,762 43,762
Dilutive shares of employee stock options accounted for under treasury stock method
- 161,651
Dilutive shares issued assuming conversion of bonds - 124,498Ending balance 19,501,058 19,787,207
Earnings per share Net income (NTD) $0.36 $0.36
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5. RELATED PARTY TRANSACTIONS
(1) Name and Relationship of Related Parties
Name of related parties Relationship with the CompanyUMC GROUP (USA) (UMC-USA) Equity InvesteeUNITED MICROELECTRONICS (EUROPE) B.V. (UME BV) Equity InvesteeUMC CAPITAL CORP. Equity InvesteeUNITED MICROELECTRONICS CORP. (SAMOA) Equity InvesteeFORTUNE VENTURE CAPITAL CORP. (FORTUNE) Equity InvesteeHSUN CHIEH INVESTMENT CO., LTD. (HSUN CHIEH) Equity InvesteeUMCI LTD. (UMCI) Equity InvesteeUNITED MICRODISPLAY OPTRONICS CORP. Equity InvesteeUMC JAPAN Equity InvesteeHOLTEK SEMICONDUCTOR INC. (HOLTEK) Equity InvesteeUNITECH CAPITAL INC. Equity InvesteeITE TECH. INC. Equity InvesteeAMIC TECHNOLOGY CORP. Equity InvesteePACIFIC VENTURE CAPITAL CO., LTD. Equity InvesteeXGI TECHNOLOGY INC. Equity InvesteeTLC CAPITAL CO., LTD. Equity InvesteeHIGHLINK TECHNOLOGY CORP. Equity InvesteeMEGA MISSION LIMITED PARTNERSHIP Equity InvesteeMTIC HOLDINGS PTE. LTD. Equity Investee
TOPPAN PHOTOMASKS TAIWAN LTD. (formerly DUPONT PHOTOMASKS TAIWAN LTD.) (TOPPAN) (Disposed in March 2006)
Equity Investee
THINTEK OPTRONICS CORP. (merged into UMO since October 1, 2006)
Equity Investee
FARADAY TECHNOLOGY CORP. (No longer an equity investee since January 1, 2006)
Equity Investee
NOVATEK MICROELECTRONICS CORP. (No longer an equity investee since January 1, 2006)
Equity Investee
UNIMICRON TECHNOLOGY CORP. (No longer an equity investee since November, 2006)
Equity Investee
SILICON INTEGRATED SYSTEMS CORP. The Company’s directorUNITRUTH INVESTMENT CORP. (UNITRUTH) Subsidiary’s equity investeeUWAVE TECHNOLOGY CORP. (formerly UNITED RADIOTEK INC.) Subsidiary’s equity investeeUCA TECHNOLOGY INC. Subsidiary’s equity investeeAFA TECHNOLOGY, INC. Subsidiary’s equity investeeSTAR SEMICONDUCTOR CORP. Subsidiary’s equity investeeUSBEST TECHNOLOGY INC. Subsidiary’s equity investeeSMEDIA TECHNOLOGY CORP. Subsidiary’s equity investeeU-MEDIA COMMUNICATIONS, INC. Subsidiary’s equity investeeCRYSTAL MEDIA INC. Subsidiary’s equity investeeNEXPOWER TECHNOLOGY CORP. Subsidiary’s equity investeeMOBILE DEVICES INC. Subsidiary’s equity investeeULI ELECTRONICS INC. (Disposed in February 2006) Subsidiary’s equity investeeAEVOE INC. (Disposed in October 2006) Subsidiary’s equity investeeCHIP ADVANCED TECHNOLOGY INC. (No longer an equity investee
since October, 2006)Subsidiary’s equity investee
DAVICOM SEMICONDUCTOR, INC. (No longer an equity investee since December, 2006)
Subsidiary’s equity investee
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(2) Significant Related Party Transactions
a. Operating revenuesFor the year ended December 31,
2006 2005Amount Percentage Amount Percentage
UMC-USA $54,476,329 52 $43,226,036 48Others 15,074,471 15 21,676,804 23
Total $69,550,800 67 $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. PurchasesFor the year ended December 31,
2006 2005Amount Percentage Amount Percentage
UMCI $- - $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 receivableAs of December 31,
2006 2005Amount Percentage Amount Percentage
HOLTEK $49,924 92 $62,136 100Others 724 1 - -
Total $50,648 93 $62,136 100
d. Accounts receivableAs of December 31,
2006 2005Amount Percentage Amount Percentage
UMC-USA $5,118,532 39 $4,559,933 35Others 1,438,412 11 2,297,194 17
Total 6,556,944 50 6,857,127 52
Less: Allowance for sales returns and discounts
(506,572) (663,397)
Less: Allowance for doubtful accounts
(1,996) (96,387)
Net $6,048,376 $6,097,343
Financial Review Unconsolidated
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e. Financing activities
The Company did not conduct any financing activities with related parties during the year ended December 31,
2006.
Other receivables-related partiesFor the year ended December 31, 2005
Maximum balance Endingbalance
Interestrate
InterestrevenueAmount Month
UMCI $5,137,760 2005.03 $- 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.
For the year ended December 31, 2005
Item AmountFORTUNE Purchase of APTOS CORP. (TAIWAN) stock $140,231FORTUNE Purchase of EPITECH TECHNOLOGY CORP. stock 185,840HSUN CHIEH Purchase of EPITECH TECHNOLOGY CORP. stock 97,658UNITRUTH Purchase of EPITECH TECHNOLOGY CORP. stock 16,495
Total $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
December 31, 2006 and 2005, respectively.
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.
United Microelectronics Corporation | Annual Report 2006
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6. ASSETS PLEDGED AS COLLATERAL
As of December 31, 2006
Amount Party to which asset(s) was pledged Purpose of pledgeDeposit-out $620,846 Customs Customs duty
(Time deposit) guarantee
As of December 31, 2005
Amount Party to which asset(s) was pledged Purpose of pledgeDeposit-out $520,730 Customs Customs duty
(Time deposit) guarantee
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.
Financial Review Unconsolidated
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(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:
For the year ended December 31, Amount 2007 $179,0492008 176,1652009 176,3212010 176,6962011 177,0852012 and thereafter 1,606,543Total $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
United Microelectronics Corporation | Annual Report 2006
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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$5 million for unauthorized investment activities in
Mainland China, implicating violation of Article 35 of the Act “Governing Relations Between Peoples of the Taiwan
Area and the Mainland Area” by the R.O.C. Ministry of Economic Affairs (MOEA). However, as the Company believes
it was illegally and improperly fined, the Company had filed an administrative appeal against MOEA to the Executive
Financial Review Unconsolidated
1�1
Yuan on March 16, 2006. The Company’s administrative appeal was dismissed by the Executive Yuan, R.O.C. on
October 19, 2006. The Company filed an administrative action against the R.O.C. Ministry of Economic Affairs to Taipei
High Administrative Court on December 8, 2006. As of December 31, 2006, the result of such administrative action has
not been finalized.
8. SIGNIFICANT DISASTER LOSS
None.
9. SIGNIFICANT SUBSEQUENT EVENT
The company has entered a stage of sustained growth. The Company determined that cash flows generated from UMC’s
future operations will be sufficient for the research and development of advanced process technologies and the continued
expansion of advanced manufacturing capacity, including the second 300mm fab in Taiwan’s Tainan Science Park. In
order to avoid future cash levels becoming excessive and to better respond to the expectations of today’s capital markets,
the Company has resolved to carry out a capital reduction of NT$ 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.
United Microelectronics Corporation | Annual Report 2006
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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.
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(3) Information of financial instruments
a. Fair value of financial instrumentsAs of December 31,
2006 2005Financial Assets Book Value Fair Value Book Value Fair ValueNon-derivative
Cash and cash equivalents $83,394,802 $83,394,802 $96,596,623 $96,596,623Financial assets at fair value
through profit or loss, current
8,538,007 8,538,007 2,468,968 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 - -
Notes and accounts receivable 12,851,984 12,851,984 13,068,452 13,068,452
Available-for-sale financial assets, noncurrent
41,218,780 41,218,780 5,513,284 26,748,545
Held-to-maturity financial assets, noncurrent
- - 977,856 977,856
Financial assets measured at cost, noncurrent
2,285,326 - 2,265,467 -
Long-term investments accounted for under the equity method
39,242,324 40,209,680 30,481,560 53,544,605
Deposits-out 642,584 642,584 579,710 579,710
Financial LiabilitiesNon-derivative
Payables $22,384,219 $22,384,219 $17,035,687 $17,035,687Capacity deposits (current
portion)898,265 898,265 657,600 657,600
Bonds payable (current portion included)
35,738,959 36,739,231 46,259,055 47,028,153
DerivativeInterest rate swaps $626,230 $626,230 $95,634 $730,191Derivatives embedded in
exchangeable bonds359,037 359,037 - -
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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 Valuation Technique
Non-derivative Financial Instruments
2006.12.31 2005.12.31 2006.12.31 2005.12.31
Financial assets Financial assets at fair value
through profit or loss, current
$8,538,007 $2,438,668 $- $-
Available-for-sale financial asset, current
- 2,900,084 - -
Available-for-sale financial assets, noncurrent
41,218,780 26,748,545 - -
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Active Market Quotation Valuation Technique
Non-derivative Financial Instruments
2006.12.31 2005.12.31 2006.12.31 2005.12.31
Long-term investments accounted for under the equity method
$40,209,680 $53,544,605 $- $-
Financial liabilitiesBonds payable (current portion
included)36,739,231 47,028,153 - -
Derivative Financial Instruments
Financial liabilitiesInterest rate swaps $- $- $626,230 $730,191
Derivatives embedded in exchangeable bonds
- - 359,037 -
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
As of December 31, 2006
The CompanyCredit-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
SILICONWARE PRECISION INDUSTRIES CO., LTD. European Convertible Bonds and Loans
NTD 200 million 2007.02.05
UMC JAPAN European Convertible Bonds JPY 640 million 2007.03.28ADVANCED SEMICONDUCTOR ENGINEERING INC.
European Convertible Bonds and LoansNTD 200 million 2007.09.25
United Microelectronics Corporation | Annual Report 2006
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UMC JAPANCredit-linked deposits and repackage bonds referenced to Amount Due DateUMC JAPAN European Convertible Bonds JPY 500 million 2007.03.29
As of December 31, 2005
The CompanyCredit-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
SILICONWARE PRECISION INDUSTRIES CO., LTD. European Convertible Bonds and Loans
NTD 200 million 2007.02.05
UMC JAPAN European Convertible Bonds JPY 640 million 2007.03.28
ADVANCED SEMICONDUCTOR ENGINEERING INC. European Convertible Bonds and Loans
NTD 200 million 2007.09.25
UMC JAPANCredit-linked deposits and repackage bonds referenced to Amount Due DateUMC JAPAN European Convertible Bonds JPY 500 million 2007.03.29
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.
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(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
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, 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.
United Microelectronics Corporation | Annual Report 2006
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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.
Financial Review Unconsolidated
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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 salesFor the year ended December 31,
Area 2006 2005North America $54,538,785 $43,765,379Europe 8,550,154 6,740,391Asia, excluding Taiwan 7,748,732 5,695,477
Total export sales $70,837,671 $56,201,247
(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:
For the year ended December 31, 2006 2005
Customers Sales amount Percentage Sales amount PercentageCustomer A $54,476,329 52 $43,226,036 48
United Microelectronics Corporation | Annual Report 2006
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ies a
re c
oded
as f
ollo
ws:
1. T
he C
ompa
ny is
cod
ed "
0".
2. T
he su
bsid
iarie
s are
cod
ed c
onse
cutiv
ely
begi
nnin
g fr
om "
1" in
the
orde
r pre
sent
ed in
the
tabl
e ab
ove.
Not
e 2
: Nee
d fo
r sho
rt-te
rm fi
nanc
ing.
Col
late
ral
Financial Review Unconsolidated
1�1
ATT
AC
HM
ENT
2 (E
ndor
sem
ent/G
uara
ntee
pro
vide
d to
oth
ers f
or th
e ye
ar e
nded
Dec
embe
r 31,
200
6)
(A
mou
nt in
thou
sand
; Cur
renc
y de
nom
inat
ion
in N
TD u
nles
s oth
erw
ise
spec
ified
)
No.
(Not
e 1)
Endo
rsor
/Gua
rant
orR
ecei
ving
par
tyR
elat
ions
hip
(Not
e 2)
Lim
it of
gu
aran
tee/
endo
rsem
ent
amou
nt fo
r rec
eivi
ng
party
(Not
e 3)
Max
imum
bal
ance
for t
he
perio
d E
ndin
g ba
lanc
eA
mou
nt o
f col
late
ral
guar
ante
e/en
dors
emen
t
Perc
enta
ge o
f acc
umul
ated
gu
aran
tee
amou
nt to
net
as
sets
val
ue fr
om th
e la
test
fin
anci
al st
atem
ent
Lim
it of
tota
l gu
aran
tee/
endo
rsem
ent
amou
nt (N
ote
4)
0U
MC
UM
C JA
PAN
2$7
,501
,548
JPY
10,
400,
000
$-$-
-$7
6,52
4,77
1
Not
e 1:
The
Com
pany
and
its s
ubsi
diar
ies a
re c
oded
as f
ollo
ws:
1. T
he C
ompa
ny is
cod
ed "
0".
2. T
he su
bsid
iarie
s are
cod
ed c
onse
cutiv
ely
begi
nnin
g fr
om "
1" in
the
orde
r pre
sent
ed in
the
tabl
e ab
ove.
Not
e 2:
Acc
ordi
n g to
the
"Gui
delin
es G
over
ning
the
Prep
arat
ion
of F
inan
cial
Rep
orts
by
Secu
ritie
s Iss
uers
" is
sued
by
the
R.O
.C. S
ecur
ities
and
Fut
ures
Bur
eau,
re
ceiv
ing
parti
es sh
ould
be
disc
lose
d as
one
of t
he fo
llow
ing:
1. A
n in
vest
ee c
ompa
ny th
at h
as a
bus
ines
s rel
atio
nshi
p w
ith U
MC
.
2
. A su
bsid
ary
in w
hich
UM
C h
olds
dire
ctly
ove
r 50%
of e
quity
inte
rest
.
3
. An
inve
stee
in w
hich
UM
C a
nd it
s sub
sida
ries h
old
over
50%
of e
quity
inte
rest
.
4
. An
inve
stee
in w
hich
UM
C h
olds
dire
ctl y
and
indi
rect
ly o
ver 5
0% o
f equ
ity in
tere
st.
5. A
n in
vest
ee th
at h
as p
rovi
ded
guar
ante
es to
UM
C, a
nd v
ice
vers
a, d
ue to
con
tract
ual r
equi
rem
ents
.
6
. An
inve
stee
in w
hich
UM
C c
onju
nctly
inve
sts w
ith o
ther
shar
ehol
ders
, and
for w
hich
UM
C h
as p
rovi
ded
endo
rsem
ent/g
uara
ntee
in p
ropo
rtion
to
i
ts sh
areh
oldi
n gpe
rcen
tage
.N
ote
3: L
imit
of g
uara
ntee
/end
orse
men
t am
ount
for r
ecei
ving
party
shal
l not
exc
eed
the
low
er o
f rec
eivi
ngpa
rty's
capi
tal s
tock
or 1
0% o
f UM
C's
capi
tal s
tock
.N
ote
4: L
imit
of to
tal g
uara
ntee
/end
orse
men
t am
ount
equ
als 4
0% o
f UM
C's
capi
tal s
tock
as o
f Dec
embe
r 31,
200
6.
United Microelectronics Corporation | Annual Report 2006
1��
ATT
AC
HM
ENT
3 (S
ecur
ities
hel
d as
of D
ecem
ber 3
1, 2
006)
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ount
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ousa
nd; C
urre
ncy
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min
atio
n in
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unl
ess o
ther
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e sp
ecifi
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ITE
D M
ICR
OE
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CT
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S C
OR
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AT
ION
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ecur
ities
N
ame
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curit
ies
Rel
atio
nshi
pFi
nanc
ial s
tate
men
t acc
ount
Uni
ts (t
hous
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nds/
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es
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sand
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ook
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ePe
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tage
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rshi
p (%
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t val
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ets v
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llate
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sand
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RA
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INC
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ncia
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ets a
t fai
r val
ue th
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h pr
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ss, c
urre
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485
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one
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verti
ble
bond
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OM
TEC
HN
OLO
GY
CO
., LT
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nanc
ial a
sset
s at f
air v
alue
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ugh
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it or
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, cur
rent
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0-
193,
910
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e
Con
verti
ble
bond
sTO
POIN
T TE
CH
NO
LOG
Y C
O.,
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.-
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ncia
l ass
ets a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss, c
urre
nt38
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-53
,485
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e
Con
verti
ble
bond
sFI
RIC
H E
NTE
RPR
ISES
CO
., LT
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Fina
ncia
l ass
ets a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss, c
urre
nt34
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,740
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e
Con
verti
ble
bond
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G C
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ial a
sset
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air v
alue
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ugh
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it or
loss
, cur
rent
402
52,8
63-
52,8
63N
one
Con
verti
ble
bond
sC
HA
NG
WA
H E
LEC
TRO
NM
ATE
RIA
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ial a
sset
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air v
alue
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ugh
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it or
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rent
500
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50-
54,2
50N
one
Stoc
kPR
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OS
TEC
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OLO
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S IN
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sset
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air v
alue
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rent
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8,71
17.
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778,
711
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e
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kL&
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NG
INEE
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G C
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r val
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urre
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560.
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e
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ICR
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0.86
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191
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e
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ON
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., LT
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rent
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40.
44
329,
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e
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kC
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A D
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ING
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ncia
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ets a
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r val
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ss, c
urre
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353,
072
0.21
353,
072
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e
Stoc
kSI
LIC
ON
WA
RE
PREC
ISIO
N IN
DU
STR
IES
CO
., LT
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-Fi
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sset
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air v
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ugh
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it or
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rent
5,39
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20.
19
276,
202
Non
e
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kY
AN
G M
ING
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E TR
AN
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RT
CO
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sset
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air v
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ugh
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rent
3,25
461
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0.14
61,1
78N
one
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MC
GR
OU
P (U
SA)
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stee
com
pany
Long
-term
inve
stm
ents
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ount
ed fo
r un
der t
he e
quity
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hod
16,4
381,
006,
496
100.
00
1,00
6,49
6N
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ED M
ICR
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ICS
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RO
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B.V
.In
vest
ee c
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nyLo
ng-te
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men
ts a
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nted
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r the
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ity m
etho
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284,
084
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00
276,
469
Non
e
Stoc
kU
MC
CA
PITA
L C
OR
P.In
vest
ee c
ompa
nyLo
ng-te
rm in
vest
men
ts a
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nted
for
unde
r the
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ity m
etho
d12
4,00
03,
613,
491
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00
3,61
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1N
one
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ED M
ICR
OEL
ECTR
ON
ICS
CO
RP.
(S
AM
OA
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vest
ee c
ompa
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ng-te
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men
ts a
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nted
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ity m
etho
d28
08,
480
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00
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0N
one
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kU
MC
I LTD
.In
vest
ee c
ompa
nyLo
ng-te
rm in
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men
ts a
ccou
nted
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r the
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ity m
etho
d88
0,00
686
100.
00
86N
one
Dec
embe
r 31,
200
6
Financial Review Unconsolidated
1��
ATT
AC
HM
ENT
3 (S
ecur
ities
hel
d as
of D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
UN
ITE
D M
ICR
OE
LE
CT
RO
NIC
S C
OR
POR
AT
ION
Type
of s
ecur
ities
N
ame
of se
curit
ies
Rel
atio
nshi
pFi
nanc
ial s
tate
men
t acc
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es
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sand
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ook
valu
ePe
rcen
tage
of
owne
rshi
p (%
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arke
t val
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Net
ass
ets v
alue
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es a
s co
llate
ral
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sand
)
Stoc
kTL
C C
API
TAL
CO
., LT
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Inve
stee
com
pany
Long
-term
inve
stm
ents
acc
ount
ed fo
r un
der t
he e
quity
met
hod
600,
000
$6,9
99,7
3710
0.00
$6
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,737
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e
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kFO
RTU
NE
VEN
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E C
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TAL
CO
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pany
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-term
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ents
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499,
994
11,1
14,1
9899
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11,7
11,3
05N
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ED M
ICR
OD
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AY
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RO
NIC
S C
OR
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ee c
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ng-te
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ts a
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nted
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167,
217
81.7
616
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949,
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IC V
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9
1
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ents
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21,0
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ents
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33,6
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36.4
9 4,
532,
186
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R IN
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-term
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ents
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51,9
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pany
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ents
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24,2
2934
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821
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896,
486
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e
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IGH
LIN
K T
ECH
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Y C
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vest
ee c
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nyLo
ng-te
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men
ts a
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nted
for
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r the
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ity m
etho
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225,
624
18.9
7 22
5,62
4N
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Y IN
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pany
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-term
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ents
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ount
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8,75
853
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16.4
8 53
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e
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OLO
GY
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pany
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-term
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ents
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16,2
0057
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6 82
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Fund
MEG
A M
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ee c
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ts a
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nted
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r the
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ity m
etho
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-
2,69
9,49
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one
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ICR
ON
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OLO
GY
CO
RP.
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vaila
ble-
for-
sale
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ncia
l ass
ets,
nonc
urre
nt20
2,36
79,
096,
376
19.8
9 9,
096,
376
Non
e
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CH
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vaila
ble-
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ncia
l ass
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17.6
3 32
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one
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Y T
ECH
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Y C
OR
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Ava
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r-sa
le fi
nanc
ial a
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rent
55,6
114,
382,
181
17.2
74,
382,
181
Non
e
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U S
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CH
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ECH
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Y
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ble-
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ncia
l ass
ets,
nonc
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nt18
,460
128,
667
16.6
0 12
8,66
7N
one
Dec
embe
r 31,
200
6
United Microelectronics Corporation | Annual Report 2006
1��
ATT
AC
HM
ENT
3 (S
ecur
ities
hel
d as
of D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
UN
ITE
D M
ICR
OE
LE
CT
RO
NIC
S C
OR
POR
AT
ION
Type
of s
ecur
ities
N
ame
of se
curit
ies
Rel
atio
nshi
pFi
nanc
ial s
tate
men
t acc
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es
(thou
sand
)B
ook
valu
ePe
rcen
tage
of
owne
rshi
p (%
)M
arke
t val
ue/
Net
ass
ets v
alue
Shar
es a
s co
llate
ral
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sand
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Stoc
kSI
LIC
ON
INTE
GR
ATE
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YST
EMS
CO
RP.
The
Com
pany
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rect
orA
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
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urre
nt22
8,95
6$4
,556
,222
16.0
9 $4
,556
,222
Non
e
Stoc
kN
OV
ATE
K M
ICR
OEL
ECTR
ON
ICS
CO
RP.
-A
vaila
ble-
for-
sale
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ncia
l ass
ets,
nonc
urre
nt60
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8,86
0,71
111
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ncia
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Dec
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Dec
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6
United Microelectronics Corporation | Annual Report 2006
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Dec
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200
6
Financial Review Unconsolidated
1��
ATT
AC
HM
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3 (S
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6
United Microelectronics Corporation | Annual Report 2006
1��
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Financial Review Unconsolidated
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Dec
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6
United Microelectronics Corporation | Annual Report 2006
1�0
ATT
AC
HM
ENT
3 (S
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Dec
embe
r 31,
200
6
Dec
embe
r 31,
200
6
Financial Review Unconsolidated
1�1
ATT
AC
HM
ENT
3 (S
ecur
ities
hel
d as
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ecem
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1, 2
006)
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urre
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atio
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O.,
LT
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Type
of s
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ities
N
ame
of se
curit
ies
Rel
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nshi
pFi
nanc
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tate
men
t acc
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Uni
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Net
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Shar
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llate
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sand
)
Stoc
kA
VER
MED
IA T
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NO
LOG
IES,
INC
.-
Ava
ilabl
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le fi
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rent
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ble-
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ncia
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ets,
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urre
nt80
031
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rent
6,00
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9025
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CO
., LT
D.
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ble-
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l ass
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urre
nt50
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Non
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5440
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Ava
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14,0
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AN
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-
Ava
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23,5
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ncia
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S IN
TER
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rent
566
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UN
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NG
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G C
O.,
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Ava
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rent
400
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00.
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kTA
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ERTI
LIZE
R C
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rent
800
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0849
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Non
e
Dec
embe
r 31,
200
6
United Microelectronics Corporation | Annual Report 2006
1��
ATT
AC
HM
ENT
3 (S
ecur
ities
hel
d as
of D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
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ed)
TL
C C
API
TA
L C
O.,
LT
D.
Type
of s
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ities
N
ame
of se
curit
ies
Rel
atio
nshi
pFi
nanc
ial s
tate
men
t acc
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es
(thou
sand
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ook
valu
ePe
rcen
tage
of
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rshi
p (%
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arke
t val
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Net
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Shar
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llate
ral
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sand
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Stoc
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INC
E H
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G &
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PMEN
T C
OR
P.-
Ava
ilabl
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le fi
nanc
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sset
s, no
ncur
rent
580
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789
0.07
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789
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N M
OTO
R C
O.,
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rent
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39,5
00N
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Stoc
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A IN
SUR
AN
CE
INTL
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ble-
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ncia
l ass
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032
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UST
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Con
verti
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ITEC
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OR
P.
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nanc
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293,
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Non
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ble
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T TE
CH
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Y C
O.,
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Fina
ncia
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r val
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t38
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Con
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TER
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CH
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Y C
OR
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Fina
ncia
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r val
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4,60
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4,60
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one
UN
ITR
UT
H IN
VE
STM
EN
T C
OR
P.
Type
of s
ecur
ities
N
ame
of se
curit
ies
Rel
atio
nshi
pFi
nanc
ial s
tate
men
t acc
ount
Uni
ts (t
hous
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sand
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ook
valu
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tage
of
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p (%
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Net
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Shar
es a
s co
llate
ral
(thou
sand
)
Stoc
kW
ALT
OP
INTE
RN
ATI
ON
AL
CO
RP.
Inve
stee
com
pany
Long
-term
inve
stm
ents
acc
ount
ed fo
r un
der t
he e
quity
met
hod
2,00
0$2
9,36
410
.00
$12,
360
Non
e
Stoc
kTE
RA
XTA
L TE
CH
NO
LOG
Y C
OR
P.In
vest
ee c
ompa
nyLo
ng-te
rm in
vest
men
ts a
ccou
nted
for
unde
r the
equ
ity m
etho
d1,
800
20,8
169.
0018
,797
Non
e
Stoc
kC
RY
STA
L M
EDIA
INC
.In
vest
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nyLo
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ts a
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nted
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r the
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587
13,2
208.
8813
,220
Non
e
Dec
embe
r 31,
200
6
Dec
embe
r 31,
200
6
Financial Review Unconsolidated
1��
ATT
AC
HM
ENT
3 (S
ecur
ities
hel
d as
of D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
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ed)
UN
ITR
UT
H IN
VE
STM
EN
T C
OR
P.
Type
of s
ecur
ities
N
ame
of se
curit
ies
Rel
atio
nshi
pFi
nanc
ial s
tate
men
t acc
ount
Uni
ts (t
hous
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/ bo
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shar
es
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sand
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ook
valu
ePe
rcen
tage
of
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rshi
p (%
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arke
t val
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Net
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ets v
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Shar
es a
s co
llate
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(thou
sand
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Stoc
kA
LLIA
NC
E O
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CO
RP.
Inve
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pany
Long
-term
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stm
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met
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1,30
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2,75
87.
88$9
,996
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e
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kSM
EDIA
TEC
HN
OLO
GY
CO
RP.
Inve
stee
com
pany
Long
-term
inve
stm
ents
acc
ount
ed fo
r un
der t
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quity
met
hod
2,57
017
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6.70
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17N
one
Stoc
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CA
TEC
HN
OLO
GY
INC
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vest
ee c
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r the
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585
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05.
954,
621
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OM
MU
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C.
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Long
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Long
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pany
Long
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INC
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250
4,09
34.
454,
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VE
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HN
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RP.
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Long
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met
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1,00
03,
292
4.35
3,29
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one
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ECH
NO
LOG
Y, I
NC
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vest
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3,96
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553,
960
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C.
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MC
and
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nitru
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3110
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Y C
O.,
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Fina
ncia
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easu
red
at c
ost,
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urre
nt93
07,
920
9.30
Not
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one
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CEL
LEN
CE
OPT
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ECTR
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INC
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Fina
ncia
l ass
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374
63,7
397.
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ECH
NO
LOG
Y IN
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nanc
ial a
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t, no
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rent
1,74
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C.
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ial a
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rent
1,38
63,
059
5.83
Not
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DV
AN
CE
MA
TER
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CO
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nanc
ial a
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s mea
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d at
cos
t, no
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rent
5,63
762
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5.11
Not
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one
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kEV
ERG
LOR
Y R
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UR
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HN
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GY
C
O.,
LTD
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Fina
ncia
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ets m
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at c
ost,
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urre
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200
10,5
004.
91N
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e
Stoc
kY
AY
ATE
CH
CO
., LT
D.
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ial a
sset
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sure
d at
cos
t, no
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rent
490
16,4
154.
90N
ote
Non
e
Dec
embe
r 31,
200
6
United Microelectronics Corporation | Annual Report 2006
1��
ATT
AC
HM
ENT
3 (S
ecur
ities
hel
d as
of D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
UN
ITR
UT
H IN
VE
STM
EN
T C
OR
P.
Type
of s
ecur
ities
N
ame
of se
curit
ies
Rel
atio
nshi
pFi
nanc
ial s
tate
men
t acc
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es
(thou
sand
)B
ook
valu
ePe
rcen
tage
of
owne
rshi
p (%
)M
arke
t val
ue/
Net
ass
ets v
alue
Shar
es a
s co
llate
ral
(thou
sand
)
Stoc
kLU
MIT
EK C
OR
P.-
Fina
ncia
l ass
ets m
easu
red
at c
ost,
nonc
urre
nt1,
750
$32,
000
4.89
Not
eN
one
Stoc
kEE
SO
LUTI
ON
S, IN
C.
-Fi
nanc
ial a
sset
s mea
sure
d at
cos
t, no
ncur
rent
1,30
014
,755
4.85
Not
eN
one
Stoc
kJM
ICR
ON
TEC
HN
OLO
GY
CO
RP.
-Fi
nanc
ial a
sset
s mea
sure
d at
cos
t, no
ncur
rent
1,34
08,
844
4.79
Not
eN
one
Stoc
kC
HIN
GIS
TEC
HN
OLO
GY
CO
RP.
-Fi
nanc
ial a
sset
s mea
sure
d at
cos
t, no
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rent
2,51
831
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4.73
Not
eN
one
Stoc
kLI
GH
TUN
ING
TEC
H. I
NC
.-
Fina
ncia
l ass
ets m
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red
at c
ost,
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urre
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05,
262
4.72
Not
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one
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kU
WIZ
TEC
HN
OLO
GY
CO
., LT
D.
-Fi
nanc
ial a
sset
s mea
sure
d at
cos
t, no
ncur
rent
1,47
016
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4.59
Not
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one
Stoc
kTR
END
CH
IP T
ECH
NO
LOG
IES
CO
RP.
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nanc
ial a
sset
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sure
d at
cos
t, no
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Dec
embe
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200
6
United Microelectronics Corporation | Annual Report 2006
1��
ATT
AC
HM
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3 (S
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United Microelectronics Corporation | Annual Report 2006
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l ass
ets
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ir va
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ugh
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it or
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ss, c
urre
nt
Ope
n m
arke
t-
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-
982
111,
540
580
78,4
64
65,8
79
12,5
85
402
52,8
63
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ING
LT
D.
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l ass
ets
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ugh
prof
it or
lo
ss, c
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nt
Ope
n m
arke
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37,8
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4 -
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1 12
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it or
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SILI
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., LT
D.
-
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n m
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526,
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7,37
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ets
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arke
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23,2
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vaila
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rent
Ope
n m
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53,9
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-
-42
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14
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45
8,50
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14,9
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Financial Review Unconsolidated
1��
ATT
AC
HM
ENT
4 (I
ndiv
idua
l sec
uriti
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nt e
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0 pe
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r the
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ecem
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1, 2
006)
(Am
ount
in th
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urre
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unl
ess o
ther
wis
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AT
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ount
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ts (t
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ELEC
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I PR
ECIS
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rent
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n m
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12,4
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1,40
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12,6
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-3,
497
154,
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-
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244,
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27,9
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216,
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I PR
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UST
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Ava
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HO
N H
AI
PREC
ISIO
NIN
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Y C
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1,05
724
5,70
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INA
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STFI
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G C
O.,
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TAIW
AN
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ENT
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RP.
-44
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1,20
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0
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-
44,5
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544)
-
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IN
VES
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T C
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Long
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stm
ents
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unte
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etho
d
HSI
EH Y
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L C
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58,5
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6,52
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674,
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Long
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ents
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m
etho
d
TOPP
AN
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-10
6,62
11,
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671
- -
106,
621
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9,44
9 1,
053,
204
197,
633
(Not
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-
-
United Microelectronics Corporation | Annual Report 2006
1�0
ATT
AC
HM
ENT
4 (I
ndiv
idua
l sec
uriti
es a
cqui
red
or d
ispo
sed
of w
ith a
ccum
ulat
ed a
mou
nt e
xcee
ding
the
low
er o
f NT$
100
mill
ion
or 2
0 pe
rcen
t of c
apita
l sto
ck fo
r the
yea
r end
ed D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
UN
ITE
D M
ICR
OE
LE
CT
RO
NIC
S C
OR
POR
AT
ION
Beg
inni
ng b
alan
ceA
dditi
onD
ispo
sal
Endi
ng b
alan
ce
Type
of
secu
ritie
sN
ame
of th
e se
curit
ies
Fina
ncia
lst
atem
ent
acco
unt
Cou
nter
-par
ty R
elat
ions
hip
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Cos
t(N
ote
2)
Gai
n (L
oss)
fr
om d
ispo
sal
(Not
e 3)
Uni
ts (t
hous
and)
/ bo
nds/
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es (t
hous
and)
Am
ount
(Not
e1)
Stoc
kH
IGH
LIN
K
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HN
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GY
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RP.
Long
-term
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stm
ents
acco
unte
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r un
der t
he e
quity
m
etho
d
Proc
eeds
from
new
is
sues
-
-
$-
28,5
00
$285
,000
-
$
- $
- $
- 28
,500
$2
25,6
24(N
ote1
8)
Stoc
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MC
JAPA
NLo
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r the
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ity
met
hod
Ope
n m
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484
6,34
1,14
4 12
13
2,46
2 -
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- 49
6 5,
949,
999
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., LT
D.
Long
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ents
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m
etho
d
Proc
eeds
from
new
is
sues
-30
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0 2,
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258
300,
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- 60
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613,
491
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Fund
MEG
A M
ISSI
ON
LI
MIT
EDPA
RTN
ERSH
IP
Long
-term
inve
stm
ents
acco
unte
d fo
r un
der t
he e
quity
m
etho
d
Proc
eeds
from
new
is
sues
-
-
- -
(Not
e22)
2,22
2,10
0 -
- -
- -
(Not
e22)
2,69
9,49
1(N
ote2
2)
Not
e 1:
The
am
ount
s of b
egin
ning
and
end
ing
bala
nces
of f
inan
cial
ass
ets a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss a
nd a
vaila
ble
for s
ale
are
reco
rded
at t
he p
reva
iling
mar
ket p
rices
.N
ote
2: T
he d
ispo
sal c
ost r
epre
sent
s his
toric
al c
ost .
Not
e 3:
Gai
n/Lo
ss fr
om d
ispo
sal i
nclu
des r
ealiz
ed e
xcha
nge
gain
/loss
to w
hich
the
RO
C S
FAS
No.
34,
"Fi
nanc
ial I
nstru
men
ts: R
ecog
nitio
n an
d M
easu
rem
ent'',
is a
pplie
d.
As f
or th
e ga
in/lo
ss fr
om d
ispo
sal o
f fin
anci
al a
sset
s at f
air v
alue
thro
ugh
prof
it/lo
ss tr
ansf
ers t
o ga
in/lo
ss o
n th
e va
luat
ion
of fi
nanc
ial a
sset
s.N
ote
4: E
xerc
ise
of c
onve
rsio
n rig
hts o
f the
Com
pany
's co
nver
tible
bon
d cl
assi
fied
as "
Fina
ncia
l ass
et a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss"
on th
e ba
lanc
e sh
eet.
Not
e 5:
Exe
rcis
e of
cal
l bac
k rig
hts o
f the
Com
pany
's co
nver
tible
bon
d cl
assi
fied
as "
Fina
ncia
l ass
et a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss"
on th
e ba
lanc
e sh
eet.
Not
e 6:
The
end
ing
bala
nce
incl
udes
stoc
k di
vide
nd o
f 1,0
13 th
ousa
nd sh
ares
.N
ote
7: T
he e
ndin
g ba
lanc
e in
clud
es st
ock
divi
dend
of 1
,479
thou
sand
shar
es.
Not
e 8:
The
end
ing
bala
nce
incl
udes
stoc
k di
vide
nd o
f 338
thou
sand
shar
es.
Not
e 9:
The
gai
n/lo
ss o
n di
spos
al o
f inv
estm
ent i
nclu
des a
djus
tmen
ts to
long
-term
inve
stm
ent a
dditi
onal
pai
d-in
cap
ital o
f NT$
(29,
624)
thou
sand
.N
ote
10: T
he e
ndin
g ba
lanc
e in
clud
es st
ock
divi
dend
of 3
,470
thou
sand
shar
es.
Financial Review Unconsolidated
1�1
ATT
AC
HM
ENT
4 (I
ndiv
idua
l sec
uriti
es a
cqui
red
or d
ispo
sed
of w
ith a
ccum
ulat
ed a
mou
nt e
xcee
ding
the
low
er o
f NT$
100
mill
ion
or 2
0 pe
rcen
t of c
apita
l sto
ck fo
r the
yea
r end
ed D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
UN
ITE
D M
ICR
OE
LE
CT
RO
NIC
S C
OR
POR
AT
ION
Beg
inni
ng b
alan
ceA
dditi
onD
ispo
sal
Endi
ng b
alan
ce
Type
of
secu
ritie
sN
ame
of th
e se
curit
ies
Fina
ncia
lst
atem
ent
acco
unt
Cou
nter
-par
ty R
elat
ions
hip
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Cos
t(N
ote
2)
Gai
n (L
oss)
fr
om d
ispo
sal
(Not
e 3)
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Not
e 11
: The
end
ing
bala
nce
incl
udes
stoc
k di
vide
nd o
f 2,3
15 th
ousa
nd sh
ares
.N
ote
12: T
he e
ndin
g ba
lanc
e in
clud
es st
ock
divi
dend
of 2
,018
thou
sand
shar
es.
Not
e 13
: The
dis
posa
l sha
res i
nclu
de st
ock
divi
dend
of 1
05 th
ousa
nd sh
ares
.N
ote
14: O
n D
ecem
ber 1
, 200
6, P
rem
ier I
mag
e Te
chno
logy
Cor
pora
tion
mer
ged
into
Hon
Hai
Pre
cisi
on In
dust
ry C
o., L
td.
Not
e 15
: The
end
ing
bala
nce
of N
T$(3
,169
,837
) tho
usan
d is
com
pute
d by
ded
uctin
g th
e C
ompa
ny's
stoc
ks h
eld
by H
sun
Chi
eh (t
here
fore
acc
ount
ed fo
r as t
reas
ury
stoc
k) o
f NT$
20,1
37,4
03 th
ousa
nd fr
om th
e C
ompa
ny's
long
-term
inve
stm
ent b
egin
ning
bal
ance
in H
sun
Chi
eh o
f
NT$
16,9
67,5
66 th
ousa
nd.
Not
e 16
: The
gai
n/lo
ss o
n di
spos
al in
clud
es lo
ng-te
rm in
vest
men
t add
ition
al p
aid-
in c
apita
l adj
ustm
ents
of N
T$14
,149
,221
thou
sand
, cum
ulat
ive
trans
latio
n ad
just
men
ts o
f NT$
(8,1
57) t
hous
and,
unr
ealiz
ed lo
ss o
f ava
ilabl
e fo
r sal
e N
T$(1
,644
,252
) tho
usan
d.
Not
e 17
: The
gai
n/lo
ss o
n di
spos
al in
clud
es lo
ng-te
rm in
vest
men
t add
ition
al p
aid-
in c
apita
l adj
ustm
ents
of N
T$(2
8,61
2) th
ousa
nd.
Not
e 18
: The
end
ing
bala
nce
incl
udes
impa
irmen
t los
s of N
T$(7
,774
) tho
usan
d, lo
ng-te
rm in
vest
men
t los
s of N
T$(5
1,71
9) th
ousa
nd a
nd lo
ng-te
rm in
vest
men
t add
ition
al p
aid-
in c
apita
l adj
ustm
ent o
f NT$
117
thou
sand
.N
ote
19: T
he e
ndin
g ba
lanc
e in
clud
es lo
ng-te
rm in
vest
men
t los
s of N
T$(4
08,9
23) t
hous
and,
long
-term
inve
stm
ent a
dditi
onal
pai
d-in
cap
ital a
djus
tmen
t of N
T$1
thou
sand
and
cum
ulat
ive
trans
latio
n ad
just
men
ts o
f NT$
(114
,685
) tho
usan
d.N
ote
20: T
he e
ndin
g ba
lanc
e in
clud
es lo
ng-te
rm in
vest
men
t gai
n of
NT$
329,
178
thou
sand
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g-te
rm in
vest
men
t add
ition
al p
aid-
in c
apita
l adj
ustm
ent o
f NT$
2,54
3 th
ousa
nd, c
umul
ativ
e tra
nsla
tion
adju
stm
ents
of N
T$10
thou
sand
and
unr
ealiz
ed g
ain
on fi
nanc
ial a
sset
s
of N
T$67
6,74
8 th
ousa
nd.
Not
e 21
: The
end
ing
bala
nce
incl
udes
long
-term
inve
stm
ent l
oss o
f NT$
(49,
736)
thou
sand
, lon
g-te
rm in
vest
men
t add
ition
al p
aid-
in c
apita
l adj
ustm
ent o
f NT$
930
thou
sand
, cum
ulat
ive
trans
latio
n ad
just
men
ts o
f NT$
(55,
147)
thou
sand
and
unr
ealiz
ed g
ain
on fi
nanc
ial a
sset
s
of N
T$1,
094
thou
sand
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ote
22: N
o sh
ares
sinc
e it
belo
ngs t
o pa
rtner
ship
fund
org
aniz
atio
n. T
he e
ndin
g ba
lanc
e in
clud
es lo
ng-te
rm in
vest
men
t los
s of N
T$50
4,93
6 th
ousa
nd a
nd c
umul
ativ
e tra
nsla
tion
adju
stm
ents
of N
T$(2
7,54
5) th
ousa
nd.
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TU
NE
VE
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E C
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OR
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United Microelectronics Corporation | Annual Report 2006
1��
ATT
AC
HM
ENT
4 (I
ndiv
idua
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T$24
9 th
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nd.
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e 3:
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end
ing
bala
nce
incl
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long
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inve
stm
ent l
oss o
f NT$
(44,
024)
thou
sand
, add
ition
al p
aid-
in c
apita
l adj
ustm
ents
of N
T$17
,428
thou
sand
due
to d
ispr
opor
tiona
te c
hang
es in
shar
ehol
ding
, cum
ulat
ive
trans
latio
n ad
just
men
ts o
f NT$
(99)
thou
sand
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aine
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rnin
g
a
djus
tmen
ts o
f NT$
246
thou
sand
and
unr
ealiz
ed lo
ss o
f ava
ilabl
e-fo
r-sa
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nanc
ial a
sset
s of N
T$2,
976
thou
sand
.N
ote
4: T
he d
ispo
sal s
hare
s inc
lude
s sto
ck d
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end
of 4
61 th
ousa
nd sh
ares
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ote
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ATT
AC
HM
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4 (I
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mou
nt e
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f NT$
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or 2
0 pe
rcen
t of c
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l sto
ck fo
r the
yea
r Dec
embe
r 31,
200
6) (A
mou
nt in
thou
sand
; Cur
renc
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nom
inat
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in N
TD u
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s oth
erw
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spec
ified
)
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United Microelectronics Corporation | Annual Report 2006
1��
ATT
AC
HM
ENT
4 (I
ndiv
idua
l sec
uriti
es a
cqui
red
or d
ispo
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of w
ith a
ccum
ulat
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mou
nt e
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low
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100
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United Microelectronics Corporation | Annual Report 2006
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United Microelectronics Corporation | Annual Report 2006
1��
ATT
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9 (N
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ns a
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ased
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Add
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Mai
n bu
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1)In
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200
6
Endi
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Perc
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Net
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Net
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1��
ATT
AC
HM
ENT
9 (N
ames
, loc
atio
ns a
nd re
late
d in
form
atio
n of
inve
stee
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es a
s of D
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1, 2
006)
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nt in
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sand
; Cur
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in N
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nles
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STA
R S
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DU
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s$9
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TER
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ount
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CR
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sinc
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4
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C.
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ount
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64,5
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OR
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n an
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actu
ring
of
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39,9
00
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500
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134
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1,90
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)
U-M
EDIA
CO
MM
UN
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TIO
NS,
IN
C.
Hsi
nchu
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wan
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road
band
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ital
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DM
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50
45,7
50
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020
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88
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892)
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143)
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BIL
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EVIC
ES IN
C.
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nchu
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nty,
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PHS
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SM/P
HS
dual
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/B C
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56,1
02
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00
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20,9
83
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7)
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G C
OR
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nty,
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Hig
h br
ight
ness
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kage
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and
m
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re
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00
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047
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)
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NO
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Y C
OR
P.H
sinc
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cien
ce
Park
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wan
IC d
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n an
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119,
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XG
I TEC
HN
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sinc
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d m
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hy c
hip
270,
483
270,
483
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111
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32,1
87
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5)
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HLI
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HN
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GY
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RP.
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o-Li
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nty,
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iwan
Sale
s and
man
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turin
g of
el
ectro
nic
parts
792
- 55
0.
04
755
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)(3
7)
Net
inco
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(loss
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stee
com
pany
Inve
stm
ent
inco
me
(loss
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cogn
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Inve
stm
ent a
s of D
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006
Perc
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p(%
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ook
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ain
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ness
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nd p
rodu
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Initi
al In
vest
men
t
Endi
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alan
ce
Beg
inni
ng b
alan
ce
FOR
TU
NE
VE
NT
UR
E C
API
TA
L C
OR
P.
Inve
stee
com
pany
Add
ress
United Microelectronics Corporation | Annual Report 2006
1��
ATT
AC
HM
ENT
9 (N
ames
, loc
atio
ns a
nd re
late
d in
form
atio
n of
inve
stee
com
pani
es a
s of D
ecem
ber 3
1, 2
006)
(A
mou
nt in
thou
sand
; Cur
renc
y de
nom
inat
ion
in N
TD u
nles
s oth
erw
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spec
ified
)
Num
ber o
f sh
ares
(thou
sand
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ote
YU
NG
LI I
NV
ESTM
ENTS
, IN
C.
Taip
ei, T
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anIn
vest
men
t$2
00,0
00
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20
44.4
4 $2
02,3
90
$5,3
78$2
,390
SMED
IA T
ECH
NO
LOG
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OR
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sinc
hu, T
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esso
r10
6,26
6 -
7,08
4 18
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99,2
20
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)(7
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CO
RP.
Mia
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nty,
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Sale
s and
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174,
596
221,
920
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60
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2 13
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9 (2
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Num
ber o
f sh
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ote
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P IN
TER
NA
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NA
L C
OR
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sinc
hu, T
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blet
PC
mod
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Pen
LC
D
Mon
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e$3
0,00
0 $-
2,00
0 10
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$29,
364
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636)
TER
A X
TAL
TEC
HN
OLO
GY
C
OR
P.Ta
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n C
ount
y,
Taiw
anLi
thiu
m T
anta
late
and
Nio
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ptic
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rade
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etra
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hire
19,8
00
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800
9.00
20
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2,
015
1,01
6
CR
YST
AL
MED
IA IN
C.
Hsi
nchu
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wan
Des
ign
of V
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net
wor
k ph
ones
16,4
93
4,68
8 1,
587
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13
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0,38
3)(1
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)
ALL
IAN
CE
OPT
OTE
K C
OR
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sinc
hu C
ount
y,
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n an
d m
anuf
actu
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United Microelectronics Corporation | Annual Report 2006
1��
Financial Review Consolidated
198 RepresentationLetter
199 ReportofIndependentAuditors
200 ConsolidatedBalanceSheets
201 ConsolidatedStatementsofIncome
202 ConsolidatedStatementsofChangesin Stockholders’Equity
203 ConsolidatedStatementsofCashFlows
205 NotestoConsolidatedFinancial Statements
260 AttachmentstoNotes
Financial Review Consolidated
1��
UNITED MICROELECTRONICS CORPORATIONAND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTSWITH 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.
United Microelectronics Corporation | Annual Report 2006
1��
Letter of Representation
We confirm, to the best of our knowledge and belief, the fol-lowing representations:
1. The companies represented in the consolidated finan-cial statements of “United Microelectronics Corporation and its Affiliated Enterprises” for the year ended December 31, 2006 made in accordance with “The Rules Governing Prepa-ration of Affiliated Enterprises Consolidated Operating Report, Affiliated Enterprises Consolidated Financial State-ments 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 state-ments 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-
dated financial statements of “United Microelectronics Cor-poration 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 Microelectron-ics Corporation and Its Affiliated Enterprises” for the year ended December 31, 2006 made in accordance with “The Rules Governing Preparation of Affiliated Enterprises Con-solidated Operating Report, Affiliated Enterprises Consoli-dated Financial Statements and Relationship Report”.
Jackson HuChairmanUnited Microelectronics CorporationFebruary 9th, 2007
Financial Review Consolidated
1��
REPORT OF INDEPENDENT AUDITORS
English Translation of a Report Originally Issued in Chinese
To the Board of Directors and Stockholders of
United Microelectronics Corporation
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.
As described in Note 3 to the consolidated financial statements, effective from January 1, 2005, United Microelectronics
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 amor-
tization.
As described in Note 3 to the consolidated financial statements, effective from January 1, 2005, United Microelectronics
Corporation and Subsidiaries have adopted the amendments to the ROC Statement of Financial Accounting Standards No. 5,
“Accounting for Long-term Equity Investment”.
Notice to ReadersThe 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.
February 9, 2007 Taipei, Taiwan Republic of China
United Microelectronics Corporation | Annual Report 2006
�00
Engl
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Tran
slat
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As o
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422
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me
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22,
071,
394
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953
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1914
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Acc
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8413
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30,3
675,
315,
695
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420,
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C
urre
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-term
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00
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849,
742
891,
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579
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669
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90
36,9
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40
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4 (2
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945,
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3,38
6,79
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Res
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- 55
5,80
0L
ong-
term
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s
T
otal
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rent
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132,
343,
552
144,
862,
513
B
onds
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able
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83,0
7641
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,159
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41
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Fu
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vest
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Fin
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2, 3
, 4 (8
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4,73
8-
Oth
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Ava
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, 4 (9
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(14)
52,3
11,1
726,
812,
103
A
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ed p
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ties
2, 4
(18)
3,11
5,42
03,
014,
998
H
eld-
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atur
ity fi
nanc
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sset
s, no
ncur
rent
2, 3
, 4 (4
)-
1,11
6,80
6
Dep
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-in12
,282
18,6
64
Fin
anci
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sset
s mea
sure
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2, 3
, 4 (1
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(14)
7,51
5,94
56,
574,
800
D
efer
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s, no
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rent
2, 4
(24)
52,5
8551
,870
L
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ents
acc
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2, 3
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11,6
62,5
9916
,262
,856
D
efer
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cred
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inte
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fits
213
,245
-
Pre
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long
-term
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ents
- 30
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ther
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s57
0,17
469
1,29
0
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otal
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71,9
64,4
54
30,7
96,5
65
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763,
706
3,77
6,82
2
Prop
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3, 4
(12)
, 7
T
otal
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s70
,250
,572
82,4
29,0
21
Lan
d1,
879,
442
1,89
3,52
2
Bui
ldin
gs21
,076
,844
21,2
60,9
02C
apita
l2,
4 (1
9), 4
(20)
, 4 (2
2)
Mac
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quip
men
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5,22
5,87
338
6,92
0,28
2
Com
mon
stoc
k19
1,31
1,92
719
7,94
7,03
3
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nspo
rtatio
n eq
uipm
ent
90,7
0689
,580
C
apita
l col
lect
ed in
adv
ance
11,4
0536
,600
F
urni
ture
and
fixt
ures
2,96
4,36
92,
804,
967
Add
ition
al P
aid-
in C
apita
l 2,
4 (1
9)
Lea
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43,0
37
Pre
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61,0
70,5
5564
,600
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ost
441,
280,
202
413,
012,
290
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8,
938
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)(2
69,5
08,1
48)
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hang
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of l
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term
inve
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6,62
7,79
420
,781
,523
A
dd :
Con
stru
ctio
n in
pro
gres
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pre
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ents
22,2
44,8
5015
,609
,497
Ret
aine
d ea
rnin
gs4
(19)
, 4 (2
2)
P
rope
rty,
pla
nt a
nd e
quip
men
t, ne
t
151,
828,
129
159,
113,
639
L
egal
rese
rve
16,6
99,5
0815
,996
,839
S
peci
al re
serv
e32
2,15
01,
744,
171
Inta
ngib
le a
sset
s
Una
ppro
pria
ted
earn
ings
17,7
74,3
358,
831,
782
G
oodw
ill2,
33,
498,
687
3,49
1,07
2A
djus
tmen
t ite
ms t
o st
ockh
olde
rs' e
quity
2, 4
(9)
T
echn
olog
ical
kno
w-h
ow2,
4 (1
4)-
359,
556
C
umul
ativ
e tra
nsla
tion
adju
stm
ent
(824
,922
)(2
41,1
53)
O
ther
inta
ngib
le a
sset
s2
1,33
018
2,79
3
Unr
ealiz
ed g
ain
or lo
ss o
n fin
anci
al in
stru
men
ts27
,557
,845
(80,
989)
Tot
al in
tang
ible
ass
ets
3,50
0,01
7
4,
033,
421
Tre
asur
y st
ock
2, 4
(11)
, 4 (1
9), 4
(21)
, 6(2
9,39
4,66
4)(5
1,33
2,32
9)
T
otal
stoc
khol
ders
' equ
ity o
f hol
ding
com
pany
291,
164,
871
258,
283,
553
Oth
er a
sset
sM
inor
ity in
tere
sts
6,23
8,01
86,
336,
685
D
efer
red
char
ges
21,
501,
064
2,03
4,56
9
T
otal
stoc
khol
ders
' equ
ity
297,
402,
889
264,
620,
238
D
efer
red
inco
me
tax
asse
ts, n
oncu
rren
t2,
4 (2
4)4,
184,
091
4,01
2,31
4
Oth
er a
sset
s - o
ther
s2,
4 (1
3), 4
(14)
, 62,
332,
154
2,19
6,23
8
T
otal
oth
er a
sset
s8,
017,
309
8,24
3,12
1
Tot
al a
sset
s36
7,65
3,46
1$
34
7,04
9,25
9$
T
otal
liab
ilitie
s and
stoc
khol
ders
' equ
ity36
7,65
3,46
1$
34
7,04
9,25
9$
The
acco
mpa
nyin
g no
tes a
re a
n in
tegr
al p
art o
f the
con
solid
ated
fina
ncia
l sta
tem
ents
.
Financial Review Consolidated
�01
English Translation of Consolidated Financial Statements Originally Issued in ChineseUNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME For the years ended December 31, 2006 and 2005
(Expressed in Thousands of New Taiwan Dollars, Except for Earnings per Share )
NotesOperating revenues 2, 5 Sales revenues Less : Sales returns and discounts
Net Sales Other operating revenues
Net operating revenuesOperating costs 4 (23) Cost of goods sold Other operating costs Operating costsGross profitUnrealized intercompany profit 2Realized intercompany profit 2
Gross profit-netOperating expenses 4 (23), 5
Sales and marketing expenses General and administrative expenses Research and development expenses
SubtotalOperating income (loss) Non-operating income Interest revenue Investment gain accounted for under the equity method, net 2, 4 (11) Dividend income Gain on disposal of property, plant and equipment 2 Gain on disposal of investments 2 Exchange gain, net 2 Gain on recovery of market value of inventories 2 Gain on valuation of financial assets 2 Gain on valuation of financial liabilities 2 - Other income
SubtotalNon-operating expenses Interest expense 4 (12) Loss on disposal of property, plant and equipment 2 Loss on decline in market value and obsolescence of inventories 2 - Financial expenses Impairment loss 2, 3, 4 (14) Other losses 2 SubtotalIncome from continuing operations before income taxIncome tax expense 2, 4 (24)Income from continuing operationsCumulative effect of changes in accounting principles 3 (the net amount after deducted tax expense $0)Net income Attributable to: Shareholders of the parent Minority interests Net income
Pre-tax Post-tax Pre-tax Post-taxEarnings per share-basic (NTD) 2, 4 (25) Net income attributable to shareholders of the parent 1.99$ 1.81$ 0.38$ 0.38$
Earnings per share-diluted (NTD) 2, 4 (25) Net income attributable to shareholders of the parent 1.92$ 1.75$ 0.37$ 0.37$
The accompanying notes are an integral part of the consolidated financial statements.
(460,542)
2005
$97,172,846
306,140
(1,959,994)95,212,8525,103,130
100,315,982
(86,409,480)(4,266,217)
(90,675,697)9,640,285(118,815)151,192
9,672,662
(3,738,469)(4,387,406)(9,633,607)
(17,759,482)(8,086,820)
1,055,1381,096,9851,051,813
177,397
(1,098,854)(218,525)
10,276,618295,179
58,853837,315
$5,425,837
(112,898)
$5,425,837
$7,026,692(1,600,855)
2006
$109,857,465
(67,052)5,538,735
(268,985)
(148,606)(2,195,512)5,605,787
1,038,82115,888,119
(867,150)108,990,315
3,013,504112,003,819
(88,452,676)(2,198,540)
(90,651,216)21,352,603
(105,892)118,815
21,365,526
(3,365,678)(3,422,340)(9,418,877)
(16,206,895)5,158,631
1,562,7041,178,103
950,546331,767
28,651,109316,006
750,378-
(3,480,709)36,587,425
862,75034,909,503
(648,408)(107,962)
(1,089,490)
(1,330,293)
$32,619,313(482,025)
$32,137,288
For the year ended December 31,
(3,261,622)33,325,803(1,188,515)
$32,137,288
(230,757)
(73,799)
United Microelectronics Corporation | Annual Report 2006
�0�
Engl
ish
Tran
slat
ion
of C
onso
lidat
ed F
inan
cial
Sta
tem
ents
Orig
inal
ly Is
sued
in C
hine
se
UN
ITED
MIC
RO
ELEC
TRO
NIC
S C
OR
POR
ATI
ON
AN
D S
UB
SID
IAR
IES
CO
NSO
LID
ATE
D S
TATE
MEN
TS O
F C
HA
NG
ES IN
STO
CK
HO
LDER
S' E
QU
ITY
For t
he y
ears
end
ed D
ecem
ber 3
1, 2
006
and
2005
(Exp
ress
ed in
Tho
usan
ds o
f New
Tai
wan
Dol
lars
)
Not
esC
omm
on S
tock
Col
lect
ed in
A
dvan
ceLe
gal R
eser
veSp
ecia
l Res
erve
Una
ppro
pria
ted
Earn
ings
Min
ority
Inte
rest
sB
alan
ce a
s of J
anua
ry 1
, 200
54
(19)
177,
919,
819
$
4,
040
$
84
,933
,195
$
12
,812
,501
$
90,8
71$
29,4
98,3
29$
(4
24,7
13)
$
(1
,319
,452
)$
(37,
140,
714)
$
8,72
8,87
7$
275,
102,
753
$A
ppro
pria
tion
of 2
004
reta
ined
ear
ning
s4
(22)
L
egal
rese
rve
- -
- 3,
184,
338
- (3
,184
,338
)-
- -
- -
S
peci
al re
serv
e-
- -
- 1,
653,
300
(1,6
53,3
00)
- -
- -
-
C
ash
divi
dend
s-
- -
- -
(1,7
58,7
36)
- -
- -
(1,7
58,7
36)
S
tock
div
iden
ds17
,587
,364
- -
- -
(17,
587,
364)
- -
- -
-
R
emun
erat
ion
to d
irect
ors a
nd su
perv
isor
s-
- -
- -
(27,
006)
- -
- -
(27,
006)
E
mpl
oyee
bon
us -
stoc
k1,
972,
855
- -
- -
(1,9
72,8
55)
- -
- -
-
Purc
hase
of t
reas
ury
stoc
k2,
4 (2
1)-
- -
- -
- -
- (1
6,37
8,69
2)-
(16,
378,
692)
Can
cella
tion
of tr
easu
ry st
ock
2, 4
(19)
, 4 (2
1)(4
91,1
40)
- (1
77,4
19)
- -
(1,5
09,6
40)
- -
2,17
8,19
9-
-
Net
inco
me
in 2
005
- -
- -
- 7,
026,
692
- -
- (1
,600
,855
)5,
425,
837
Adj
ustm
ent o
f add
ition
al p
aid-
in c
apita
l acc
ount
ed fo
r und
er th
e eq
uity
met
hod
2-
- (2
8,49
1)-
- -
- -
- -
(28,
491)
Cha
nges
in u
nrea
lized
gai
n on
fina
ncia
l ins
trum
ents
of i
nves
tees
2
- -
- -
- -
343,
724
- -
- 34
3,72
4
Exer
cise
of e
mpl
oyee
stoc
k op
tions
2, 4
(20)
954,
095
36,6
0065
4,31
4-
- -
- -
- -
1,64
5,00
9
Com
mon
stoc
k tra
nsfe
rred
from
cap
ital c
olle
cted
in a
dvan
ce4,
040
(4,0
40)
- -
- -
- -
- -
-
Cha
nges
in c
umul
ativ
e tra
nsla
tion
adju
stm
ent
2-
- -
- -
- -
1,07
8,29
9-
- 1,
078,
299
Cha
nges
in m
inor
ity in
tere
sts
- -
- -
- -
- -
8,87
8(7
91,3
37)
(782
,459
)B
alan
ce a
s of D
ecem
ber 3
1, 2
005
4 (1
9)19
7,94
7,03
336
,600
85,3
81,5
9915
,996
,839
1,74
4,17
18,
831,
782
(80,
989)
(241
,153
)(5
1,33
2,32
9)6,
336,
685
264,
620,
238
The
effe
ct o
f ado
ptin
g SF
AS
NO
. 34
3 (3
)-
- -
- -
- 24
,097
,170
11,5
47-
- 24
,108
,717
App
ropr
iatio
n of
200
5 re
tain
ed e
arni
ngs
4 (2
2)
L
egal
rese
rve
- -
- 70
2,66
9-
(702
,669
)-
- -
- -
S
peci
al re
serv
e-
- -
- (1
,422
,021
)1,
422,
021
- -
- -
-
C
ash
divi
dend
s-
- -
- -
(7,1
61,2
67)
- -
- -
(7,1
61,2
67)
S
tock
div
iden
ds89
5,15
8-
- -
- (8
95,1
58)
- -
- -
-
R
emun
erat
ion
to d
irect
ors a
nd su
perv
isor
s-
- -
- -
(6,3
24)
- -
- -
(6,3
24)
E
mpl
oyee
bon
us -
cash
-
- -
- -
(305
,636
)-
- -
- (3
05,6
36)
E
mpl
oyee
bon
us -
stoc
k45
8,45
5-
- -
- (4
58,4
55)
- -
- -
-
Add
ition
al p
aid-
in c
apita
l tra
nsfe
rred
to c
omm
on st
ock
4 (1
9)89
5,15
8-
(895
,158
)-
- -
- -
- -
-
Purc
hase
of t
reas
ury
stoc
k2,
4 (2
1)-
- -
- -
- -
- (2
7,28
6,33
9)-
(27,
286,
339)
Can
cella
tion
of tr
easu
ry st
ock
2, 4
(19)
, 4 (2
1)(1
0,00
0,00
0)-
(3,2
69,1
00)
- -
(6,3
71,1
28)
- -
19,6
40,2
28-
-
Adj
ustm
ent o
f tre
asur
y st
ock
due
to lo
ss o
f con
trol o
ver s
ubsi
diar
y-
- (5
7,97
2)-
- (9
,198
,144
)(6
,826
,238
)-
29,5
83,7
76-
13,5
01,4
22
Net
inco
me
in 2
006
- -
- -
- 32
,619
,313
- -
- (4
82,0
25)
32,1
37,2
88
Adj
ustm
ent o
f add
ition
al p
aid-
in c
apita
l acc
ount
ed fo
r und
er th
e eq
uity
met
hod
2-
- (6
2,68
6)-
- -
- -
- -
(62,
686)
Adj
ustm
ent o
f fun
ds a
nd in
vest
men
ts d
ispo
sal
2-
- (1
4,09
1,04
3)-
- -
- 8,
170
- -
(14,
082,
873)
Cas
h di
vide
nds a
lloca
ted
to su
bsid
arie
s-
- 66
,910
- -
- -
- -
- 66
,910
Cha
nges
in u
nrea
lized
gai
n on
ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s2,
4 (9
)-
- -
- -
- 1,
066,
672
- -
- 1,
066,
672
Cha
nges
in u
nrea
lized
gai
n on
fina
ncia
l ins
trum
ents
of i
nves
tees
2-
- -
- -
- 9,
301,
230
- -
- 9,
301,
230
Exer
cise
of e
mpl
oyee
stoc
k op
tions
2,
4 (2
0)1,
079,
523
11,4
0563
4,73
7-
- -
- -
- -
1,72
5,66
5
Com
mon
stoc
k tra
nsfe
rred
from
cap
ital c
olle
cted
in a
dvan
ce36
,600
(36,
600)
- -
- -
- -
- -
-
Cha
nges
in c
umul
ativ
e tra
nsla
tion
adju
stm
ent
2-
- -
- -
- -
(603
,486
)-
- (6
03,4
86)
Cha
nges
in m
inor
ity in
tere
sts
- -
- -
- -
- -
- 38
3,35
838
3,35
8
Bal
ance
as o
f Dec
embe
r 31,
200
64
(19)
191,
311,
927
$
11
,405
$
67
,707
,287
$
16
,699
,508
$
322,
150
$
17,7
74,3
35$
27
,557
,845
$
(824
,922
)$
(2
9,39
4,66
4)$
6,
238,
018
$
29
7,40
2,88
9$
The
acco
mpa
nyin
g no
tes a
re a
n in
tegr
al p
art o
f the
con
solid
ated
fina
ncia
l sta
tem
ents
.
Ret
aine
d Ea
rnin
gs
Add
ition
alPa
id-in
Cap
ital
Cap
ital
Tota
lTr
easu
ry S
tock
Cum
ulat
ive
Tran
slat
ion
Adj
ustm
ent
Unr
ealiz
ed G
ain/
Loss
on
Fin
anci
al
Inst
rum
ents
Financial Review Consolidated
�0�
English Translation of Consolidated Financial Statements Originally Issued in ChineseUNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2006 and 2005(Expressed in Thousands of New Taiwan Dollars)
2006 2005Cash flows from operating activities: Net income attributable to shareholders of the parent 32,619,313$ 7,026,692$ Net loss attributable to minority interests (482,025) (1,600,855) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 44,255,730 51,366,170 Amortization 1,826,622 3,278,290
Bad debt reversal (164,908) (149,407) Loss (gain) on decline (recovery) in market value and obsolescence of inventories 1,089,490 (837,315) Loss (gain) on valuation of financial assets and liabilities 131,997 (58,853) Investment gain accounted for under the equity method (1,178,103) (984,087) Cash dividends received under the equity method 1,086,996 870,694 Gain on disposal of investments (28,651,109) (10,276,618) Loss (gain) on disposal of property, plant and equipment (223,805) 41,128 Transfer of property, plant and equipment to losses and expenses - 9,370 Gain on reacquisition of bonds (18,465) (133,042) Amortization of bond discounts (premiums) 87,369 (9,569) Exchange gain on financial assets and liabilities (13,009) (2,352) Exchange (gain) loss on long-term liabilities (127,179) 77,021 Amortization of deferred income (99,210) (89,762) Impairment loss 1,330,293 460,542 Effect from subsidiaries over which significant control is no longer held - (264,467) 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 783,372 (1,668,590) Other receivables 97,674 (243,280) Inventories (1,262,091) 17,184 Prepaid expenses (78,560) (342,885) Deferred income tax assets (2,793) 54,604 Other current assets 13,924 (14,612) Notes payable - (167,875) Accounts payable (1,676,068) (333,824) Income tax payable (106,504) 34,104 Accrued expenses 2,053,791 (691,806) Other payables 51,232 14,366 Other current liabilities 183,773 (732,210) Accrued pension liabilities 110,883 301,796 Capacity deposits (4,953) (193,249) Other liabilities - others 1,248,502 242,200 Net cash provided by operating activities 47,078,351 45,046,108
Cash flows from investing activities: Acquisition of financial assets and liabilities at fair value through profit or loss (427,202) - Acquisition of available-for-sale financial assets (5,145,237) (3,126,417) Acquisition of financial assets measured at cost (2,281,596) (2,834,658) Acquisition of long-term investments accounted for under the equity method (3,524,941) (2,211,922) Proceeds from disposal of financial assets at fair value through profit or loss 74,092 - Proceeds from disposal of available-for-sale financial assets 18,697,235 9,755,644 Proceeds from disposal of financial assets measured at cost 903,019 2,323,314 Proceeds from disposal of long-term investments accounted for under the equity method 8,202,027 7,178,638 Proceeds from disposal of held-to-maturity financial assets - 1,708,260 Proceeds from capital reduction and liquidation of long-term investments 204,352 50,725 Acquisition of property, plant and equipment (33,239,978) (22,162,708) Proceeds from disposal of property, plant and equipment 587,904 3,084,714 Increase in deferred charges (1,095,114) (1,377,043) Decrease (increase) in restricted deposits 555,800 (555,800) Decrease (increase) in other assets (20,958) 679,908 Net cash used in investing activities (16,510,597) (7,487,345)
For the year ended December 31,
United Microelectronics Corporation | Annual Report 2006
�0�
English Translation of Consolidated Financial Statements Originally Issued in ChineseUNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2006 and 2005(Expressed in Thousands of New Taiwan Dollars)
2006 2005(continued)
Cash flows from financing activities:
Increase in short-term loans 204,265$ 499,929$
Repayment of long-term loans - (20,382,214)
Issuance of bonds - 12,478,603
Redemption of bonds (10,250,000) (2,820,004) Reacquisition of bonds (1,844,683) (2,662,226)
Remuneration paid to directors and supervisors (6,324) (27,006)
Decrease in deposits-in (6,379) (204,474)
Cash dividends (7,155,865) (1,758,736)
Employee bonus (305,636) -
Purchase of treasury stock (27,286,339) (16,378,692)
Exercise of employee stock options 1,725,665 1,642,008 Increase (decrease) in minority shareholders (130,269) 20,826 Net cash used in financing activities (45,055,565) (29,591,986)Effect of exchange rate changes on cash and cash equivalents (247,242) (1,536,358)Effect of subsidiaries change (38,539) 814,408Net increase (decrease) in cash and cash equivalents (14,773,592) 7,244,827
Cash and cash equivalents at beginning of year 108,626,800 101,381,973Cash and cash equivalents at end of year 93,853,208$ 108,626,800$
Supplemental disclosures of cash flow information: Cash paid for interest 971,038$ 1,379,098$ Cash paid (refunded) for income tax 167,433$ (129,057)$
Investing activities partially paid by cash: Acquisition of property, plant and equipment 38,054,650$ 19,407,024$
Add: Payable at beginning of year 5,315,695 8,071,379
Less: Payable at end of year (10,130,367) (5,315,695) Cash paid for acquiring property, plant and equipment 33,239,978$ 22,162,708$
Investing and financing activities not affecting cash flows: Principal amount of exchangeable bonds exchanged by bondholders 69,621$ -$
Book value of available-for-sale financial assets delivered for exchange (20,242) -
Elimination of related balance sheet accounts 15,302 - Recognition of gain on disposal of available-for-sale financial assets 64,681$ - $
For the year ended December 31,
The accompanying notes are an integral part of the consolidated financial statements.
Financial Review Consolidated
�0�
UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006 and 2005(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.
United Microelectronics Corporation | Annual Report 2006
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(2) The consolidated entities are as follows:
As of December 31, 2006Investor Subsidiary Business nature Percentage of
ownership (%)
UMC UMC GROUP (USA) (UMC-USA) IC Sales 100.00
UMC UNITED MICROELECTRONICS (EUROPE) B.V. (UME BV)
IC Sales 100.00
UMC UMC CAPITAL CORP. Investment holding 100.00
UMC UNITED MICROELECTRONICS CORP. (SAMOA)
Investment holding 100.00
UMC TLC CAPITAL CO., LTD. (TLC) Investment holding 100.00
UMC UMCI LTD. (UMCI) (Note 1) Sales and manufacturing of integrated circuits
100.00
UMC FORTUNE VENTURE CAPITAL CORP. (FORTUNE)
Consulting and planning for investment in new business
99.99
UMC UNITED MICRODISPLAY OPTRONICS 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 CORP. (UNITRUTH)
Investment holding 100.00
UMC CAPITAL CORP.
UMC CAPITAL (USA) Investment holding 100.00
UMC CAPITAL CORP.
ECP VITA LTD. Insurance 100.00
Financial Review Consolidated
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As of December 31, 2005
Investor Subsidiary Business nature Percentage of ownership (%)
UMC UMC-USA IC Sales 100.00UMC UME BV IC Sales 100.00UMC UMC CAPITAL CORP. Investment holding 100.00
UMC UNITED MICROELECTRONICS CORP. (SAMOA)
Investment holding 100.00
UMC TLC Investment holding 100.00
UMC UNITED FOUNDARY SERVICE, INC. (Note 3)
Supervising and monitoring group projects
-
UMC UMCI (Note 1) Sales and manufacturing of integrated circuits
100.00
UMC FORTUNE Consulting and planning for investment in new business
99.99
UMC HSUN CHIEH INVESTMENT CO., LTD. (HSUN CHIEH) (Note 4)
Investment holding 99.97
UMC UMO Sales and manufacturing of LCOS
86.72
UMC SILICON INTEGRATED SYSTEMS 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 Sales and manufacturing of integrated circuits
53.49
UMC, UNITRUTH and FORTUNE
XGI TECHNOLOGY INC. (XGI) (Note 5) Cartography chip design, production and sales
31.70
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
SIS SILICON INTEGRATED SYSTEMS CORP. (SIS-HK) (Note 5)
IC sales 100.00
SIS SILICON INTEGRATED SYSTEMS CORP. (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
United Microelectronics Corporation | Annual Report 2006
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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 contin-
gent 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.
Financial Review Consolidated
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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.
Financial Instruments
In accordance with ROC SFAS No. 34, “Financial Instruments: Recognition and Measurement” and the “Guidelines Govern-
ing 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.
United Microelectronics Corporation | Annual Report 2006
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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 – Ac-
counting Treatment under Purchase Method”, where goodwill is no longer to be amortized.
Financial Review Consolidated
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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. Inter-
company 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 pro-
portion 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. Sig-
nificant 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 eco-
nomic life, whichever is shorter.
United Microelectronics Corporation | Annual Report 2006
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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 reclas-
sified as a bond discount and recorded as a deduction to bonds payable. The amounts are amortized using the effective inter-
est 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 pe-
riod 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 ac-
counts, 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 finan-
cial liabilities at fair value through profit or loss.
Financial Review Consolidated
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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. Em-
ployees subject to the Labor Standards Law, a defined benefit plan, were allowed to choose to either elect the pension calcula-
tion 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 de-
fined 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 stock-
holders’ 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 deliv-
ered, 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.
United Microelectronics Corporation | Annual Report 2006
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Allowance for sales returns and discounts are estimated taking into consideration customer complaints, historical experi-
ences, 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 al-
location. The provision for income taxes includes deferred income tax assets and liabilities that are a result of temporary dif-
ferences 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 pur-
chase 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 consid-
ered 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.
Financial Review Consolidated
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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 carry-
ing 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.
United Microelectronics Corporation | Annual Report 2006
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Financial Instruments
(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.
Financial Review Consolidated
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(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 EQUIVALENTSAs of December 31,
2006 2005Cash:
Cash on hand $2,665 $2,814Checking and savings accounts 4,527,578 4,150,657Time deposits 80,909,065 91,976,196Subtotal 85,439,308 96,129,667
Cash equivalents 8,413,900 12,497,133Total $93,853,208 $108,626,800
(2) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS, CURRENTAs of December 31,
Held for trading 2006 2005Listed stocks $8,094,274 $1,250,280Convertible bonds 443,733 1,218,688
Total $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.
United Microelectronics Corporation | Annual Report 2006
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(3) AVAILABLE-FOR-SALE FINANCIAL ASSETS, CURRENTAs of December 31,
2006 2005Common stock $- $1,004,878Preferred stock - 1,409,275 Total $- $2,414,153
(4) HELD-TO-MATURITY FINANCIAL ASSETSAs of December 31,
2006 2005Credit-linked deposits and repackage bonds $1,110,422 $1,116,806Less: Non-current portion - (1,116,806) Total $1,110,422 $-
(5) NOTES RECEIVABLEAs of December 31,
2006 2005Notes receivable $3,733 $193
(6) ACCOUNTS RECEIVABLE, NETAs of December 31,
2006 2005Accounts receivable $14,824,524 $14,459,202Less: Allowance for sales returns and discounts (794,444) (681,449)Less: Allowance for doubtful accounts (1,996) (149,319)
Net $14,028,084 $13,628,434
Financial Review Consolidated
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(7) INVENTORIES, NETAs of December 31,
2006 2005Raw materials $1,157,909 $310,393Supplies and spare parts 1,974,417 1,917,444Work in process 7,220,955 8,141,427Finished goods 1,636,365 1,140,774
Total 11,989,646 11,510,038
Less: Allowance for loss on decline in market value and obsolescence
(1,111,464) (797,503)
Net $10,878,182 $10,712,535
Inventories were not pledged.
(8) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS, NONCURRENTAs of December 31,
2006 2005Convertible bonds $474,738 $-
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, noncurrent, was NT$90 million.
(9) AVAILABLE-FOR-SALE FINANCIAL ASSETS, NONCURRENTAs of December 31,
2006 2005Common stock $52,311,172 $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, NONCURRENTAs of December 31,
2006 2005Common stock $4,614,880 $3,982,342Preferred stock 2,387,508 1,957,968Funds 513,557 634,490Total $7,515,945 $6,574,800
United Microelectronics Corporation | Annual Report 2006
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(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:
As of December 31,2006 2005
Investee Companies
Amount
Percentage of Ownership
or Voting Rights
Amount
Percentage of Ownership or Voting Rights
Listed companies
HOLTEK SEMICONDUCTOR INC. $878,747 24.45 $818,681 24.81
ITE TECH. INC. 341,268 21.80 329,704 22.66UNIMICRON TECHNOLOGY CORP.
(UNIMICRON)(Note A)- - 4,370,256 22.26
FARADAY TECHNOLOGY CORP. (Note B) - - 864,928 18.50
SILICON INTEGRATED SYSTEMS CORP. (Note B)
- - 3,921,878 16.59
HARVATEK CORP. (Note C) - - 346,020 16.50
NOVATEK MICROELECTRONICS CORP. (Note B)
- - 1,538,740 12.54
SERCOMM CORP. (Note C) - - 267,807 12.15
Subtotal 1,220,015 12,458,014
Unlisted companies
PACIFIC VENTURE CAPITAL CO., LTD. 127,379 49.99 296,218 49.99
MTIC HOLDINGS PTE LTD. 81,402 49.94 - -
ANOTO TAIWAN CORP. 32,622 49.00 - -
SMEDIA TECHNOLOGY CORP. 153,830 48.73 71,848 38.32
UWAVE TECHNOLOGY CORP. 36,823 48.64 74,937 48.64
UCA TECHNOLOGY INC. 50,128 48.33 34,881 45.53
MEGA MISSION LIMITED PARTNERSHIP 2,699,491 45.00 - -
YUNG LI INVESTMENTS, INC. 202,390 44.44 - -
ACHIEVE MADE INTERNATIONAL LTD. 30,845 44.44 - -
UNITECH CAPITAL INC. 959,542 42.00 638,946 42.00
STAR SEMICONDUCTOR CORP. 19,417 41.19 30,962 33.47
WALTOP INTERNATIONAL CORP. 117,457 40.00 - -
NEXPOWER TECHNOLOGY CORP. 11,976 40.00 7,982 40.00
HSUN CHIEH INVESTMENT CO., LTD. (HSUN CHIEH) (Note D)
4,674,311 36.49 - -
AEVOE INTERNATIONAL LTD. 12,610 35.80 - -
Financial Review Consolidated
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As of December 31,2006 2005
Investee Companies
Amount
Percentage of Ownership
or Voting Rights
Amount
Percentage of Ownership or Voting Rights
UC FUND II $122,648 35.45 $133,217 35.45
TERA XTAL TECHNOLOGY CORP. 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
HIGHLINK TECHNOLOGY CORP. 361,378 30.63 208,833 22.18
ALLIANCE OPTOTEK CORP. 47,107 29.09 - -
AMIC TECHNOLOGY CORP. 176,287 28.94 186,010 28.95
U-MEDIA COMMUNICATIONS, INC. 24,110 26.05 36,524 26.26
AFA TECHNOLOGY, INC. 40,766 24.97 38,157 30.46
MOBILE DEVICES INC. 25,076 23.86 48,555 26.28
PARADE TECHNOLOGIES, LTD. 65,560 23.30 81,949 24.63
HIGH POWER LIGHTING CORP. 60,434 23.00 - -
USBEST TECHNOLOGY INC. 52,711 21.45 69,973 33.80
AEVOE INC. - - 6,674 39.47
DAVICOM SEMICONDUCTOR, INC. (Note E)
- - 145,649 21.56
CHIP ADVANCED TECHNOLOGY INC. (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 10,442,584 3,822,454
Elimination of upstream and intercompany
transaction (Note G)
- (17,612)
Total $11,662,599 $16,262,856
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.
United Microelectronics Corporation | Annual Report 2006
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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.
Financial Review Consolidated
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(12) PROPERTY, PLANT AND EQUIPMENTAs of December 31, 2006
Cost AccumulatedDepreciation
Book Value
Land $1,879,442 $- $1,879,442Buildings 21,076,844 (6,807,389) 14,269,455Machinery and equipment 415,225,873 (302,547,942) 112,677,931Transportation equipment 90,706 (61,056) 29,650Furniture and fixtures 2,964,369 (2,240,443) 723,926Leasehold improvements 42,968 (40,093) 2,875Construction in progress and prepayments 22,244,850 - 22,244,850
Total $463,525,052 $(311,696,923) $151,828,129
As of December 31, 2005
Cost AccumulatedDepreciation
Book Value
Land $1,893,522 $- $1,893,522Buildings 21,260,902 (5,969,469) 15,291,433Machinery and equipment 386,920,282 (261,499,341) 125,420,941Transportation equipment 89,580 (63,214) 26,366Furniture and fixtures 2,804,967 (1,936,607) 868,360Leasehold improvements 43,037 (39,517) 3,520Construction in progress and prepayments 15,609,497 - 15,609,497
Total $428,621,787 $(269,508,148) $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:For the year ended December 31,
2006 2005Machinery and equipment $- $260,294Other property, plant and equipment - 4,397
Total interest capitalized $- $264,691
Interest rates applied - 2.86%~4.20%
b. Property, plant, and equipment were not pledged.
United Microelectronics Corporation | Annual Report 2006
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(13) OTHER ASSETS - OTHERSAs of December 31,
2006 2005Leased assets $1,333,029 $1,366,695Deposits-out 738,696 678,929Others 260,429 150,614
Total $2,332,154 $2,196,238
Please refer to Note 6 for deposits-out pledged as collateral.
(14) IMPAIRMENTAs of December 31,
2006 2005Available-for-sale financial assets, noncurrent $825,863 $3,848
Long-term investment accounted for under the equity method
33,217 250,435
Financial assets measured at cost, noncurrent 215,071 86,259Technology know-how 256,142 -Other assets - 120,000
Total $1,330,293 $460,542
(15) SHORT-TERM LOANSAs of December 31,
2006 2005Secured bank loans $- $6,066,478Unsecured bank loans 342,549 69,858Total $342,549 $6,136,336Interest rates 3.25%~5.85% 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.
Financial Review Consolidated
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(16) FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS, CURRENTAs of December 31,
2006 2005Interest rate swaps $626,230 $95,634Derivatives embedded in exchangeable bonds 359,037 -Total $985,267 $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
As of December 31,2006 2005
Domestic unsecured bonds:Issued in April 2001 and due on April 2006,5.1195% ~ 5.1850% interest payable annually
$- $3,000,000
Issued in April 2001 and due on April 2008,5.2170% ~ 5.2850% interest payable annually
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
Zero coupon convertible bonds:Issued in March 2002 and due on March 2007 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 (71,257) -Subtotal 39,451,359 51,942,159
Less: Current portion (9,068,283) (10,250,000)Net $30,383,076 $41,692,159
United Microelectronics Corporation | Annual Report 2006
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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.
Financial Review Consolidated
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(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.
United Microelectronics Corporation | Annual Report 2006
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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.
Financial Review Consolidated
���
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.
United Microelectronics Corporation | Annual Report 2006
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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 Amount2007 $9,081,3482008 22,941,2682009 -2010 7,500,0002011 and thereafter -Total $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.
Financial Review Consolidated
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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: For the year ended December 31,
2006 2005Projected benefit obligation at beginning of year $(4,778,045) $(4,354,361)Service cost (128,775) (360,107)Interest cost (136,780) (143,058)Benefits paid 38,829 24,128Gain (loss) on projected benefit obligation (85,973) 55,353Projected benefit obligation at end of year $(5,090,744) $(4,778,045)
d. Change in pension assets during the year: For the year ended December 31,
2006 2005
Fair value of plan assets at beginning of year $1,620,201 $1,404,130
Actual return on plan assets 62,850 81,453
Contributions from employer 172,475 200,167
Benefits paid (38,829) (24,128)
Others 5,625 (41,421)
Fair value of plan assets at end of year $1,822,322 $1,620,201
e. The funding status of the pension plan is as follows: As of December 31,
2006 2005Benefit obligation
Vested benefit obligation $(55,213) $(39,069)Non-vested benefit obligation (2,376,276) (2,188,642)Accumulated benefit obligation (2,431,489) (2,227,711)Effect from projected salary increase (2,659,255) (2,550,334)Projected benefit obligation (5,090,744) (4,778,045)
Fair value of plan assets 1,822,322 1,620,201Funded status (3,268,422) (3,157,844)Unrecognized net transitional benefit obligation 118,332 181,481Unrecognized loss (gain) 36,656 (29,043)Adjustment required to recognize minimum liabilities (1,986) (9,592)
Accrued pension liabilities recognized on the consolidated balance sheet
$(3,115,420)
$(3,014,998)
United Microelectronics Corporation | Annual Report 2006
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f. The components of the net periodic pension cost are as follows:For the year ended December 31,
2006 2005Service cost $128,775 $360,107Interest cost 136,780 143,059Expected return on plan assets (44,778) (39,577)
Amortization of unrecognized transitional net benefit obligation
60,441 39,232
Amortization of unrecognized pension gain (891) (88)
Pension costs from subsidiaries over which significant control is no longer held
- 6,978
Net periodic pension cost $280,327 $509,711
The actuarial assumptions underlying are as follows:For the year ended December 31, 2006
UMC FORTUNE UMO UMC JAPAN
Discount rate 2.75% 2.75% 3.75% 2.00%Rate of salary increase 4.50% 2.00% 4.00% 2.68%Expected return on plan assets 2.50% 2.75% 2.75% 2.00%
For the year ended December 31, 2005
UMC UMO UMC JAPAN
Thintek
Discount rate 3.00% 3.75% 2.00% 3.75%Rate of salary increase 4.50% 4.00% 2.68% 4.00%Expected return on plan assets 3.00% 2.75% 1.00% 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.
Financial Review Consolidated
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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.
United Microelectronics Corporation | Annual Report 2006
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(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 Total number of options granted
(in thousands)
Total number of options outstanding
(in thousands)
Exercise price(NTD)
October 7, 2002 939,000 543,834 $15.7January 3, 2003 61,000 44,571 $17.7November 26, 2003 57,330 45,443 $24.7March 23, 2004 33,330 22,110 $22.9July 1, 2004 56,590 44,460 $20.7October 13, 2004 20,200 12,905 $17.8April 29, 2005 23,460 17,790 $16.4August 16, 2005 54,350 42,610 $21.6September 29, 2005 51,990 46,675 $19.7January 4, 2006 39,290 30,690 $17.7May 22, 2006 42,058 37,040 $19.2August 24, 2006 28,140 25,830 $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:For the year ended December 31,
2006 2005
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 $16.8Granted 109,488 $18.4 129,800 $19.9Exercised (109,093) $15.7 (95,814) $15.7Forfeited (61,757) $18.8 (32,524) $18.5Outstanding at end of period 913,958 $17.5 975,320 $17.3
Financial Review Consolidated
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For the year ended December 31,2006 2005
Option (in thousands)
Weighted-average Exercise Price
(NTD)
Option (in thousands)
Weighted-average Exercise Price
(NTD)
Exercisable at end of period 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:Outstanding Stock Options Exercisable Stock Options
Authorization Date
Range of Exercise
Price
Option(in thousands)
Weighted-average
Remaining Contractual Life (Years)
Weighted-average
Exercise Price(NTD)
Option(in thousands)
Weighted-average
Exercise Price(NTD)
2002.09.11 $15.7~$17.7 588,405 1.78 $15.9 577,608 $15.82003.10.08 $20.7~$24.7 112,013 3.20 $22.8 67,095 $23.12004.09.30 $16.4~$21.6 119,980 4.53 $19.7 5,565 $17.82005.12.22 $17.7~$19.2 93,560 5.33 $18.5 - -
913,958 2.68 $17.5 650,268 $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:For the year ended December 31, 2006
Basic earnings per share Diluted earnings per shareNet Income $32,619,313 $32,653,291Earnings per share (NTD) $1.81 $1.75Pro forma net income $32,149,409 $32,183,387Pro forma earnings per share (NTD) $1.78 $1.72
For the year ended December 31, 2005 (retroactively adjusted)
Basic earnings per share Diluted earnings per shareNet Income $7,026,692 $7,035,187Earnings per share (NTD) $0.38 $0.37Pro forma net income $6,776,219 $6,784,714Pro forma earnings per share (NTD) $0.36 $0.36
United Microelectronics Corporation | Annual Report 2006
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The fair value of the options granted was estimated at the date of grant using the Black-Scholes options pricing model with
the following assumptions for the years ended December 31, 2006 and 2005: 2006 2005
Expected dividend yields 1.37%~1.38% 1.63%~1.64%
Volatility factors of the expected market price
35.57%~41.14% 40.35%~43.39%
Risk-free interest rate 1.88%~2.28% 1.85%~2.24%
Weighted-average expected life of the options
4~5 years 4~5 years
(21) TREASURY STOCK
a. UMC bought back its own shares from the open market during the years ended December 31, 2006 and 2005.
Details of the treasury stock transactions are as follows:
For the year ended December 31, 2006
(In thousands of shares)
Purpose As of January 1, 2006
Increase Decrease As of December 31, 2006
For transfer to employees 442,067 400,000 - 842,067
For conversion of the convertible bonds into shares
500,000 - - 500,000
For retention of UMC’s creditability and stockholder’s interests
- 1,000,000 1,000,000 -
Total shares 942,067 1,400,000 1,000,000 1,342,067
For the year ended December 31, 2005
(In thousands of shares)
Purpose As of January 1, 2005
Increase Decrease As of December 31, 2005
For transfer to employees 241,181 250,000 49,114 442,067
For conversion of the convertible bonds into shares
- 500,000 - 500,000
Total shares 241,181 750,000 49,114 942,067
b. According to the Securities and Exchange Law of the R.O.C., total shares of treasury stock should not exceed 10% of
UMC’s stock issued. Total purchase amount should not exceed the sum of the retained earnings, additional paid-in
capital-premiums, and realized additional paid-in capital. As such, the maximum number of shares of treasury stock
that UMC could hold as of December 31, 2006 and 2005, were 1,913 million shares and 1,979 million shares with the
ceiling of the amounts were NT$ 94,970 million and NT$90,851 million, respectively.
Financial Review Consolidated
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c. In compliance with Securities and Exchange Law of the R.O.C., treasury stock should not be pledged, nor should it be
entitled voting rights or receive dividends. Stock held by subsidiaries is treated as treasury stock. These subsidiaries
have the same rights as other stockholders except for subscription to new stock issuance. Starting June 22, 2005, stock
held by subsidiaries no longer have voting rights according to the revised Companies Act.
d. As of December 31, 2006, UMC’s subsidiary, FORTUNE VENTURE CAPITAL CORP., held 22 million shares of UMC’s
stock, with a book value of NT$ 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.
United Microelectronics Corporation | Annual Report 2006
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Details of the 2005 employee bonus settlement and directors’ and supervisors’ remuneration are as follows:For the year ended December 31, 2005
As approved by the shareholders’
meeting
As recommended by the board of
directors
Differences
1. Settlement of employees’ bonus by issuance of new shares
a. Number of shares (in thousands)b. Amountc. Percentage on total number of outstanding
shares at year-end (%) 2. Settlement of employees’ bonus by cash3. Remuneration paid to directors and supervisors
45,846$458,455
0.24
$305,636$6,324
45,846$458,455
0.24
$305,636$6,324
---
--
4. Effect on earnings per share before retroactive adjustmentsa. 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)
$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.
Financial Review Consolidated
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(23) OPERATING COSTS AND EXPENSES
The Company’s personnel, depreciation, and amortization expenses are summarized as follows: For the year ended December 31,
2006 2005Operating
costs Operating
expensesTotal Operating
costs Operating
expensesTotal
Personnel expenses Salaries $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
Other personnel expenses
99,293 72,899 172,192 247,754 155,343 403,097
Depreciation 42,059,492 2,183,770 44,243,262 49,260,694 2,085,525 51,346,219Amortization 197,673 1,621,260 1,818,933 935,126 2,250,407 3,185,533
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:
For the year ended December 31,2006 2005
Income tax on pre-tax income at statutory tax rate $9,254,650 $768,584Permanent and temporary differences (7,303,879) (2,469,797)Change in investment tax credit (1,335,540) 6,930,316Change in loss carry-forward (105,508) -Change in valuation allowance 885,837 (5,295,125)Income Basic Tax 2,021,375 -Change in tax rate 1,269 -Estimated 10% income tax on unappropriated earnings - 35,501Adjustment of prior year’s tax expense (164,111) 20,371Income tax on interest revenue separately taxed 1,713 1,415Others 5,816 75,787Income tax expense $3,261,622 $67,052
United Microelectronics Corporation | Annual Report 2006
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b. Significant components of deferred income tax assets and liabilities are as follows:As of December 31,
2006 2005Amount Tax effect Amount Tax effect
Deferred income tax assetsInvestment tax credit $14,992,731 $13,755,893Loss carry-forward $9,559,235 3,138,465 $19,854,167 5,585,640Pension 3,124,419 785,660 3,009,911 751,611Allowance on sales returns and discounts 753,074 191,304 790,132 199,060
Allowance for loss on obsolescence of inventories
827,079 220,309 317,488 79,372
Others 1,960,409 535,280 3,209,106 1,021,304Total deferred income tax assets 19,863,749 21,392,880
Valuation allowance (11,775,747) (11,576,791)Net deferred income tax assets $8,088,002 $9,816,089
Deferred income tax liabilitiesUnrealized exchange gain $ (291,391) $ (72,848) $- $-Depreciation (5,005,315) (1,251,329) (9,667,939) (2,416,985)
Others (2,673,529) (687,299) (51,870) (51,870)Total deferred income tax liabilities (2,011,476) (2,468,855)Total net deferred income tax assets $6,076,526 $7,347,234
Deferred income tax assets - current $5,933,725 $6,555,306Deferred income tax liabilities - current (278,346) -Valuation allowance (3,710,359) (3,168,516)
Net 1,945,020 3,386,790
Deferred income tax assets - noncurrent 13,930,024 14,837,574Deferred income tax liabilities - noncurrent (1,733,130) (2,468,855)Valuation allowance (8,065,388) (8,408,275)
Net 4,131,506 3,960,444Total net deferred income tax assets $6,076,526 $7,347,234
Financial Review Consolidated
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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 Investment tax credits earnedBalance of unused
investment tax credits
2006 $2,879,909 $2,879,9092007 1,638,333 1,638,3332008 6,298,009 6,298,0092009 1,780,805 1,780,8052010 2,395,675 2,395,675Total $14,992,731 $14,992,731
f. As of December 31, 2006, the unutilized accumulated losses for the Company were as follows:Expiration Year Accumulated loss Unutilized accumulated loss2006 $11,892,614 $316,5092007 3,832,326 3,832,3262008 208,335 208,3352009 447,237 447,2372010 254,854 254,8542011 173,728 173,7282012 3,404,642 3,404,6422013 921,604 921,604Total $21,135,340 $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.
United Microelectronics Corporation | Annual Report 2006
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(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:For the year ended December 31, 2006
Amount Earnings per share (NTD)
Income before income tax
Net income Shares expressedin thousands
Income before income tax
Net income
Earning per share-basic (NTD)
Income from operations of continued segments attributable to shareholders of the parent
$37,067,932 $33,807,828 18,050,962 $2.05 $1.87
Cumulative effect of changes in accounting principles attributable to shareholders of the parent
(1,188,515) (1,188,515) (0.06) (0.06)
Net income attributable to shareholders of the parent
$35,879,417 $32,619,313 $1.99 $1.81
Effect of dilutionEmployee stock options $- $- 108,122Convertible bonds payable $33,978 $33,978 516,383
Earning per share-diluted:
Income from operations of continued segments attributable to shareholders of the parent
$37,101,910 $33,841,806 18,675,467 $1.98 $1.81
Cumulative effect of changes in accounting principles attributable to shareholders of the parent
(1,188,515) (1,188,515) (0.06) (0.06)
Net income attributable to shareholders of the parent
$35,913,395 $32,653,291 $1.92 $1.75
Financial Review Consolidated
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For the year ended December 31, 2005 (retroactively adjusted)Amount Earnings per share (NTD)
Income before income tax
Net income Shares expressedin thousands
Income before income tax
Net income
Earning per share-basic (NTD)Income from operations of
continued segments attributable to shareholders of the parent
$7,174,027 $7,138,239 18,647,462 $0.39 $0.39
Cumulative effect of changes in accounting principles attributable to shareholders of the parent
(111,547) (111,547) (0.01) (0.01)
Net income attributable to shareholders of the parent
$7,062,480 $7,026,692 $0.38 $0.38
Effect of dilutionEmployee stock options $- $- 161,651Convertible bonds payable $8,495 $8,495 124,498
Earning per share-diluted:
Income from operations of continued segments attributable to shareholders of the parent
$7,182,522 $7,146,734 18,933,611 $0.38 $0.38
Cumulative effect of changes in accounting principles attributable to shareholders of the parent
(111,547) (111,547) (0.01) (0.01)
Net income attributable to shareholders of the parent
$7,070,975 $7,035,187 $0.37 $0.37
United Microelectronics Corporation | Annual Report 2006
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5. RELATED PARTY TRANSACTIONS
(1) Name and Relationship of Related Parties
Name of related parties Relationship with UMCHSUN CHIEH INVESTMENT CO., LTD. Equity InvesteeHOLTEK SEMICONDUCTOR INC. (HOLTEK) Equity InvesteeUNITECH CAPITAL INC. Equity InvesteeITE TECH. INC. Equity InvesteeAMIC TECHNOLOGY CORP. Equity InvesteePACIFIC VENTURE CAPITAL CO., LTD. Equity InvesteeXGI TECHNOLOGY INC. Eq.uity InvesteeHIGHLINK TECHNOLOGY CORP. Equity InvesteeMEGA MISSION LIMITED PARTNERSHIP Equity InvesteeMTIC HOLDINGS PTE. LTD. 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)
Equity Investee
SILICON INTEGRATED SYSTEMS CORP. (SIS) UMC’s director
UWAVE TECHNOLOGY CORP. (formerly UNITED RADIOTEK INC.)
Subsidiary’s equity investee
UCA TECHNOLOGY INC. Subsidiary’s equity investeeAFA TECHNOLOGY, INC. Subsidiary’s equity investeeSTAR SEMICONDUCTOR CORP. Subsidiary’s equity investeeUSBEST TECHNOLOGY INC. Subsidiary’s equity investeeSMEDIA TECHNOLOGY CORP. Subsidiary’s equity investeeU-MEDIA COMMUNICATIONS, INC. Subsidiary’s equity investeeCRYSTAL MEDIA INC. Subsidiary’s equity investeeNEXPOWER TECHNOLOGY CORP. Subsidiary’s equity investeeMOBILE DEVICES INC. Subsidiary’s equity investeeULI ELECTRONICS INC. (Disposed in February 2006) Subsidiary’s equity investeeAEVOE INC. (Disposed in October 2006) Subsidiary’s equity investee
CHIP ADVANCED TECHNOLOGY INC. (No longer an equity investee since October, 2006)
Subsidiary’s equity investee
DAVICOM SEMICONDUCTOR, INC. (No longer an equity investee since December, 2006)
Subsidiary’s equity investee
Financial Review Consolidated
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(2) Significant Related Party Transactions
a. Operating revenuesFor the year ended December 31,
2006 2005Amount Percentage Amount Percentage
SIS $2,046,127 2 $2,352,259 2NOVATEK - - 6,159,104 6Others 2,029,429 2 3,970,927 4
Total $4,075,556 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 receivableAs of December 31,
2006 2005Amount Percentage Amount Percentage
HOLTEK $49,924 92 $62,136 100Others 724 1 - -
Total $50,648 93 $62,136 100
c. Accounts receivable, netAs of December 31,
2006 2005Amount Percentage Amount Percentage
SIS $99,333 1 $1,235,010 8Others 231,978 1 226,282 1
Total 331,311 2 1,461,292 9
Less: Allowance for sales returns and discounts
(7,666) (24,649)
Less: Allowance for doubtful accounts
- (15,666)
Net $323,645 $1,420,977
United Microelectronics Corporation | Annual Report 2006
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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
December 31, 2006 and 2005, respectively.
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:
As of December 31, 2006
Amount Party to which asset(s) was pledged
Purpose of pledge
Deposit-out (Time deposit) $625,846 Customs Customs duty guarantee
As of December 31,2005
Amount Party to which asset(s) was pledged
Purpose of pledge
Deposit-out (Time deposit) $525,730 Customs Customs duty guarantee
Restricted deposits (Time deposit)
555,800 The International Commercial Bank of China (Tokyo branch)
Short-term loans
Deposits-out (Time deposit) 2,500 The Farmer Bank of China Payment guaranteeThe stocks of UMC held by
the subsidiaries 21,712,280 Chinatrust Commercial Bank Short-term loans
Total $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,
Financial Review Consolidated
���
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:For the year ended December 31, Amount 2007 $234,4472008 220,0662009 201,8722010 194,2962011 188,9442012 and thereafter 1,701,017Total $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
United Microelectronics Corporation | Annual Report 2006
���
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.
Financial Review Consolidated
���
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.
United Microelectronics Corporation | Annual Report 2006
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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
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
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.
Financial Review Consolidated
��1
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 2005
Financial Assets Book Value Fair Value Book Value Fair ValueNon-derivative
Cash and cash equivalents $93,853,208 $93,853,208 $108,626,800 $108,626,800
Financial assets at fair value through profit or loss, current
8,538,007 8,538,007 2,468,968 2,438,668
Available-for-sale financial assets, 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
15,255,852 15,255,852 16,002,798 16,002,798
Restricted deposits - - 555,800 555,800
Financial assets at fair value through profit or loss, noncurrent
474,738 474,738 - -
Available-for-sale financial assets, 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
Financial assets measured at cost, noncurrent
7,515,945 - 6,574,800 -
Long-term investments accounted for under the equity method
11,662,599 14,234,042 16,262,856 33,755,273
Prepaid long-term investments - - 30,000 30,000Deposits-out 738,696 738,696 678,929 678,929
United Microelectronics Corporation | Annual Report 2006
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As of December 31,2006 2005
Financial Liabilities Book Value Fair Value Book Value Fair ValueNon-derivative
Short-term loans $342,549 $342,549 $6,136,336 $6,136,336Payables 24,169,179 24,169,179 19,168,491 19,168,491Capacity deposits (current portion) 898,265 898,265 657,600 657,600
Bonds payable (current portion included)
39,451,359 40,362,245 51,942,159 52,517,633
DerivativeInterest rate swaps $626,230 $626,230 $95,634 $730,191
Derivatives embedded in exchangeable bonds
359,037 359,037 - -
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.
Financial Review Consolidated
���
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:
Active Market Quotation Valuation Technique
Non-derivative Financial Instruments
2006.12.31 2005.12.31 2006.12.31 2005.12.31
Financial assets Financial assets at fair value
through profit or loss, current$8,538,007 $2,438,668 $- $-
Available-for-sale financial asset, current
- 2,900,084 - -
Financial assets at fair value through profit or loss, noncurrent
474,738 - - -
Available-for-sale financial assets, noncurrent
52,311,172 30,124,523 - -
Long-term investments accounted for under the equity method
14,234,042 33,755,273 - -
Financial liabilities Bonds payable (current portion
included)40,362,245 52,517,633 - -
Derivative Financial InstrumentsFinancial liabilities
Interest rate swaps $- $- $626,230 $730,191
Derivatives embedded in exchangeable bonds
- - 359,037 -
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.
United Microelectronics Corporation | Annual Report 2006
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(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
As of December 31, 2006
UMC
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
SILICONWARE PRECISION INDUSTRIES CO., LTD. European Convertible Bonds and Loans
NTD 200 million 2007.02.05
UMC JAPAN European Convertible Bonds JPY 640 million 2007.03.28
ADVANCED SEMICONDUCTOR ENGINEERING INC. European Convertible Bonds and Loans
NTD 200 million 2007.09.25
UMC JAPAN
Credit-linked deposits and repackage bonds referenced to Amount Due Date
UMC JAPAN European Convertible Bonds JPY 500 million 2007.03.29
As of December 31, 2005
UMC
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
SILICONWARE PRECISION INDUSTRIES CO., LTD. European Convertible Bonds and Loans
NTD 200 million 2007.02.05
UMC JAPAN European Convertible Bonds JPY 640 million 2007.03.28
ADVANCED SEMICONDUCTOR ENGINEERING INC. European Convertible Bonds and Loans
NTD 200 million 2007.09.25
UMC JAPANCredit-linked deposits and repackage bonds referenced to Amount Due DateUMC JAPAN European Convertible Bonds JPY 500 million 2007.03.29
Financial Review Consolidated
���
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%
United Microelectronics Corporation | Annual Report 2006
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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
December 31, 2006 and 2005, respectively.
(6) Significant intercompany transactions among consolidated entities for the years ended December 31, 2006 and 2005 are
disclosed in Attachment 1.
Financial Review Consolidated
���
(7) Details of subsidiaries that hold UMC’s stock are as follows:
As of December 31, 2006
Subsidiary No. of Shares(in thousands)
Amount Purpose
FORTUNE VENTURE CAPITAL CORP.
22,070 $446,914 Long-term investment
As of December 31, 2005
Subsidiary No. of Shares(in thousands)
Amount Purpose
HSUN CHIEH INVESTMENT CO., LTD.
599,696 $11,379,238 Long-term investment
FORTUNE VENTURE CAPITAL CORP.
21,847 171,857 Long-term investment
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.
United Microelectronics Corporation | Annual Report 2006
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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 areasFor the year ended December 31, 2006
Taiwan
Asia,
excluding Taiwan
North America
Europe and others
Eliminations
Consolidated
Sales to unaffiliated customers
$38,310,762 $9,511,367 $55,616,919 $8,564,771 $- $112,003,819
Sales between geographic areas
50,953,904 14,961,088 - - (65,914,992) -
Net operating revenues $89,264,666 $24,472,455 $55,616,919 $8,564,771 $(65,914,992) $112,003,819Gross profit $20,276,206 $46,601 $992,481 $88,680 $(38,442) $21,365,526
For the year ended December 31, 2006
Taiwan
Asia,
excluding Taiwan
North America
Europe and others
Eliminations
Consolidated
Operating expenses (16,206,895)Non-operating income 34,909,503
Non-operating expenses
(3,480,709)
Income before income tax and minority interests
$36,587,425
Minority interests loss $482,025Identifiable assets $217,650,324 $94,139,276 $6,646,311 $2,544,093 $(25,290,997) $295,689,007Funds and long-term
investments71,964,454
Total assets $367,653,461
Financial Review Consolidated
���
For the year ended December 31, 2005
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) -
Net operating revenues $90,594,682 $13,361,851 $43,550,765 $6,937,020 $(54,128,336) $100,315,982
Gross profit $14,357,973 $(5,427,549) $701,590 $64,214 $(23,566) $9,672,662Operating expenses (17,759,482)
Non-operating income 15,888,119
Non-operating expenses
(2,195,512)
Income before income tax and minority interests
$5,605,787
Minority interests loss $1,600,855Identifiable assets $247,228,232 $86,155,818 $5,968,463 $1,149,973 $(24,249,792) $316,252,694
Funds and long-term investments
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:For the year ended December 31,
2006 2005Sales amount Percentage Sales amount Percentage
Customer A $24,475,058 22 $17,844,440 18Customer B 10,243,818 9 10,528,973 10
Total $34,718,876 31 $28,373,413 28
United Microelectronics Corporation | Annual Report 2006
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ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NU
MC
JAPA
N1
Long
-term
inve
stm
ents
acc
ount
ed
for u
nder
the
equi
ty m
etho
d13
2,46
2-
-
1U
MC
JAPA
NU
MC
GR
OU
P (U
SA)
3Sa
les
129,
703
Net
55
days
-
2FO
RTU
NE
VEN
TUR
E C
API
TAL
CO
RP.
UN
ITR
UTH
INV
ESTM
ENT
CO
RP.
3Lo
ng-te
rm in
vest
men
ts a
ccou
nted
fo
r und
er th
e eq
uity
met
hod
400,
000
--
Tran
sact
ions
Acc
ount
Am
ount
Term
s(N
ote
3)
Perc
enta
ge o
f con
solid
ated
ope
ratin
g re
venu
es o
r con
solid
ated
tota
l ass
ets
(Not
e 4)
For t
he y
ear e
nded
Dec
embe
r 31,
200
6
Rel
ated
Par
tyC
ount
erpa
rtyR
elat
ions
hip
with
th
e C
ompa
ny
Financial Review Consolidated
��1
ATT
AC
HM
ENT
1 (S
igni
fican
t int
erco
mpa
ny tr
ansa
ctio
ns b
etw
een
cons
olid
ated
ent
ities
) (A
mou
nt in
thou
sand
; Cur
renc
y de
nom
inat
ion
in N
TD u
nles
s oth
erw
ise
spec
ified
)
No.
(Not
e1)
(Not
e 2)
0U
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NU
MC
GR
OU
P (U
SA)
1Sa
les
$43,
226,
036
Net
60
days
43%
0U
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NU
MC
GR
OU
P (U
SA)
1A
ccou
nts r
ecei
vabl
e4,
559,
933
-1%
0U
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NU
MC
GR
OU
P (U
SA)
1O
ther
cur
rent
liab
ilitie
s 65
5,60
0 -
-
0U
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NU
NIT
ED M
ICR
OEL
ECTR
ON
ICS
(EU
RO
PE)
B.V
.1
Sale
s6,
839,
285
Net
60
days
7%
0U
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NU
NIT
ED M
ICR
OEL
ECTR
ON
ICS
(EU
RO
PE)
B.V
.1
Acc
ount
s rec
eiva
ble
545,
166
--
0U
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NU
MC
I LTD
.1
Purc
hase
1,24
4,34
7N
et 6
0 da
ys1%
0U
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NU
MC
JAPA
N1
Sale
s1,
107,
574
Net
60
days
1%
0U
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NU
MC
JAPA
N1
Acc
ount
s rec
eiva
ble
333,
157
--
0U
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NFO
RTU
NE
VEN
TUR
E C
API
TAL
CO
RP.
1Lo
ng-te
rm in
vest
men
ts a
ccou
nted
fo
r und
er th
e eq
uity
met
hod
2,00
0,00
0 -
1%
0U
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NTL
C C
API
TAL
CO
., LT
D.
1Lo
ng-te
rm in
vest
men
ts a
ccou
nted
fo
r und
er th
e eq
uity
met
hod
3,00
0,00
0-
1%
0U
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NU
MC
CA
PITA
L C
OR
P.1
Long
-term
inve
stm
ents
acc
ount
ed
for u
nder
the
equi
ty m
etho
d63
4,61
2-
-
0U
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NU
NIT
ED M
ICR
OD
ISPL
AY
OPT
RO
NIC
S C
OR
P.1
Long
-term
inve
stm
ents
acc
ount
ed
for u
nder
the
equi
ty m
etho
d18
9,62
5-
-
0U
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RPO
RA
TIO
NSI
LIC
ON
INTE
GR
ATE
D S
YST
EMS
CO
RP.
1Sa
les
1,43
3,05
7M
onth
-end
45
Day
s1%
1FO
RTU
NE
VEN
TUR
E C
API
TAL
CO
RP.
UN
ITED
MIC
RO
ELEC
TRO
NIC
S C
OR
POR
ATI
ON
2A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt32
6,07
1-
-
For t
he y
ear e
nded
Dec
embe
r 31,
200
5
Cou
nter
party
Rel
atio
nshi
p w
ith
the
Com
pany
Rel
ated
Par
ty
Tran
sact
ions
Acc
ount
Am
ount
Term
s(N
ote
3)
Perc
enta
ge o
f con
solid
ated
ope
ratin
g re
venu
es o
r con
solid
ated
tota
l ass
ets
(Not
e 4)
United Microelectronics Corporation | Annual Report 2006
���
ATT
AC
HM
ENT
1 (S
igni
fican
t int
erco
mpa
ny tr
ansa
ctio
ns b
etw
een
cons
olid
ated
ent
ities
) (A
mou
nt in
thou
sand
; Cur
renc
y de
nom
inat
ion
in N
TD u
nles
s oth
erw
ise
spec
ified
)
No.
(Not
e1)
(Not
e 2)
1FO
RTU
NE
VEN
TUR
E C
API
TAL
CO
RP.
HSU
N C
HIE
H IN
VES
TMEN
T C
O.,
LTD
.3
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
$140
,794
--
2H
SUN
CH
IEH
INV
ESTM
ENT
CO
., LT
D.
FOR
TUN
E V
ENTU
RE
CA
PITA
L C
OR
P.3
Fina
ncia
l ass
ets m
easu
red
at c
ost,
nonc
urre
nt76
9,59
8-
-
2H
SUN
CH
IEH
INV
ESTM
ENT
CO
., LT
D.
FOR
TUN
E V
ENTU
RE
CA
PITA
L C
OR
P.3
Long
-term
inve
stm
ents
acc
ount
ed
for u
nder
the
equi
ty m
etho
d35
1,10
8-
-
2H
SUN
CH
IEH
INV
ESTM
ENT
CO
., LT
D.
UN
ITR
UTH
INV
ESTM
ENT
CO
RP.
3Fi
nanc
ial a
sset
s mea
sure
d at
cos
t, no
ncur
rent
208,
551
--
2H
SUN
CH
IEH
INV
ESTM
ENT
CO
., LT
D.
UM
C C
API
TAL
CO
RP.
3Fi
nanc
ial a
sset
s mea
sure
d at
cos
t, no
ncur
rent
176,
495
--
2H
SUN
CH
IEH
INV
ESTM
ENT
CO
., LT
D.
UM
C C
API
TAL
CO
RP.
3Lo
ng-te
rm in
vest
men
ts a
ccou
nted
fo
r und
er th
e eq
uity
met
hod
130,
336
--
Not
e 1:
UM
C a
nd it
s sub
sidi
arie
s are
cod
ed a
s fol
low
s:1.
UM
C is
cod
ed "
0".
2. T
he su
bsid
iarie
s are
cod
ed c
onse
cutiv
ely
begi
nnin
g fr
om "
1" in
the
orde
r pre
sent
ed in
the
tabl
e ab
ove.
Not
e 2:
Tra
nsac
tions
are
cat
egor
ized
as f
ollo
ws
1. T
he h
oldi
ng c
ompa
ny to
subs
idia
ry.
2. S
ubsi
diar
y to
hol
ding
com
pany
.3.
Sub
sidi
ary
to su
bsid
iary
.N
ote
3: T
he sa
les p
rice
to th
e ab
ove
rela
ted
parti
es w
as d
eter
min
ed th
roug
h m
utua
l agr
eem
ent b
ased
on
the
mar
ket c
ondi
tions
. N
ote
4: T
he p
erce
ntag
e w
ith re
spec
t to
the
cons
olid
ated
ass
et/li
abili
ty fo
r tra
nsac
tions
of b
alan
ce sh
eet i
tem
s are
bas
ed o
n ea
ch it
em's
bala
nce
at p
erio
d-en
d.Fo
r pro
fit o
r los
s ite
ms,
cum
ulat
ive
bala
nces
are
use
d as
bas
is.
Tran
sact
ions
Acc
ount
Am
ount
Term
s(N
ote
3)
Perc
enta
ge o
f con
solid
ated
ope
ratin
g re
venu
es o
r con
solid
ated
tota
l ass
ets
(Not
e 4)
For t
he y
ear e
nded
Dec
embe
r 31,
200
5
Rel
ated
Par
tyC
ount
erpa
rtyR
elat
ions
hip
with
th
e C
ompa
ny
Financial Review Consolidated
���
ATT
AC
HM
ENT
2 (F
inan
cing
pro
vide
d to
oth
ers f
or th
e ye
ar e
nded
Dec
embe
r 31,
200
6)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
No.
(Not
e 1)
Lend
erC
ount
er-p
arty
Fina
ncia
l sta
tem
ent
acco
unt
Max
imum
bal
ance
for
the
perio
d E
ndin
g ba
lanc
eIn
tere
st ra
teN
atur
e of
fin
anci
ng
Am
ount
of s
ales
to
(pur
chas
es fr
om)
coun
ter-
party
Rea
son
for
finan
cing
Allo
wan
cefo
r dou
btfu
l ac
coun
tsIte
mV
alue
Lim
it of
fina
ncin
g am
ount
for i
ndiv
idua
l co
unte
r-pa
rty L
imit
of to
tal
finan
cing
am
ount
1U
MC
GR
OU
P (U
SA)
Form
er E
mpl
oyee
sR
ecei
vabl
e fr
om
empl
oyee
sU
SD 6
91$-
7%N
ote
2$-
Empl
oyee
loan
$--
-N
/AN
/A
Not
e 1:
UM
C a
nd it
s sub
sidi
arie
s are
cod
ed a
s fol
low
s:
1. U
MC
is c
oded
"0"
.
2. T
he su
bsid
iarie
s are
cod
ed c
onse
cutiv
ely
begi
nnin
g fr
om "
1" in
the
orde
r pre
sent
ed in
the
tabl
e ab
ove.
Not
e 2
: Nee
d fo
r sho
rt-te
rm fi
nanc
ing.
Col
late
ral
United Microelectronics Corporation | Annual Report 2006
���
ATT
AC
HM
ENT
3 (E
ndor
sem
ent/G
uara
ntee
pro
vide
d to
oth
ers f
or th
e ye
ar e
nded
Dec
embe
r 31,
200
6)
(A
mou
nt in
thou
sand
; Cur
renc
y de
nom
inat
ion
in N
TD u
nles
s oth
erw
ise
spec
ified
)
No.
(Not
e 1)
Endo
rsor
/Gua
rant
orR
ecei
ving
par
tyR
elat
ions
hip
(Not
e 2)
Lim
it of
gu
aran
tee/
endo
rsem
ent
amou
nt fo
r rec
eivi
ng
party
(Not
e 3)
Max
imum
bal
ance
for t
he
perio
d E
ndin
g ba
lanc
eA
mou
nt o
f col
late
ral
guar
ante
e/en
dors
emen
t
Perc
enta
ge o
f acc
umul
ated
gu
aran
tee
amou
nt to
net
as
sets
val
ue fr
om th
e la
test
fin
anci
al st
atem
ent
Lim
it of
tota
l gu
aran
tee/
endo
rsem
ent
amou
nt (N
ote
4)
0U
MC
UM
C JA
PAN
2$7
,501
,548
JPY
10,
400,
000
$-$-
-$7
6,52
4,77
1
Not
e 1:
UM
C a
nd it
s sub
sidi
arie
s are
cod
ed a
s fol
low
s:1.
UM
C is
cod
ed "
0".
2. T
he su
bsid
iarie
s are
cod
ed c
onse
cutiv
ely
begi
nnin
g fr
om "
1" in
the
orde
r pre
sent
ed in
the
tabl
e ab
ove.
Not
e 2:
Acc
ordi
n g to
the
"Gui
delin
es G
over
ning
the
Prep
arat
ion
of F
inan
cial
Rep
orts
by
Secu
ritie
s Iss
uers
" is
sued
by
the
R.O
.C. S
ecur
ities
and
Fut
ures
Bur
eau,
re
ceiv
ing
parti
es sh
ould
be
disc
lose
d as
one
of t
he fo
llow
ing:
1. A
n in
vest
ee c
ompa
ny th
at h
as a
bus
ines
s rel
atio
nshi
p w
ith U
MC
.
2
. A su
bsid
ary
in w
hich
UM
C h
olds
dire
ctly
ove
r 50%
of e
quity
inte
rest
.
3
. An
inve
stee
in w
hich
UM
C a
nd it
s sub
sida
ries h
old
over
50%
of e
quity
inte
rest
.
4
. An
inve
stee
in w
hich
UM
C h
olds
dire
ctl y
and
indi
rect
ly o
ver 5
0% o
f equ
ity in
tere
st.
5. A
n in
vest
ee th
at h
as p
rovi
ded
guar
ante
es to
UM
C, a
nd v
ice
vers
a, d
ue to
con
tract
ual r
equi
rem
ents
.
6
. An
inve
stee
in w
hich
UM
C c
onju
nctly
inve
sts w
ith o
ther
shar
ehol
ders
, and
for w
hich
UM
C h
as p
rovi
ded
endo
rsem
ent/g
uara
ntee
in p
ropo
rtion
to
i
ts sh
areh
oldi
n gpe
rcen
tage
.N
ote
3: L
imit
of g
uara
ntee
/end
orse
men
t am
ount
for r
ecei
ving
party
shal
l not
exc
eed
the
low
er o
f rec
eivi
ngpa
rty's
capi
tal s
tock
or 1
0% o
f UM
C's
capi
tal s
tock
.N
ote
4: L
imit
of to
tal g
uara
ntee
/end
orse
men
t am
ount
equ
als 4
0% o
f UM
C's
capi
tal s
tock
as o
f Dec
embe
r 31,
200
6.
Financial Review Consolidated
���
ATT
AC
HM
ENT
4 (S
ecur
ities
hel
d as
of D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
UN
ITE
D M
ICR
OE
LE
CT
RO
NIC
S C
OR
POR
AT
ION
Type
of s
ecur
ities
N
ame
of se
curit
ies
Rel
atio
nshi
pFi
nanc
ial s
tate
men
t acc
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es
(thou
sand
)B
ook
valu
ePe
rcen
tage
of
owne
rshi
p (%
)M
arke
t val
ue/
Net
ass
ets v
alue
Shar
es a
s co
llate
ral
(thou
sand
)
Con
verti
ble
bond
sQ
UA
NTA
STO
RA
GE
INC
.-
Fina
ncia
l ass
ets a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss, c
urre
nt1,
000
$34,
485
-$3
4,48
5N
one
Con
verti
ble
bond
sED
OM
TEC
HN
OLO
GY
CO
., LT
D.
-Fi
nanc
ial a
sset
s at f
air v
alue
thro
ugh
prof
it or
loss
, cur
rent
6019
3,91
0-
193,
910
Non
e
Con
verti
ble
bond
sTO
POIN
T TE
CH
NO
LOG
Y C
O.,
LTD
.-
Fina
ncia
l ass
ets a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss, c
urre
nt38
053
,485
-53
,485
Non
e
Con
verti
ble
bond
sFI
RIC
H E
NTE
RPR
ISES
CO
., LT
D-
Fina
ncia
l ass
ets a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss, c
urre
nt34
054
,740
-54
,740
Non
e
Con
verti
ble
bond
sTA
TUN
G C
O.
-Fi
nanc
ial a
sset
s at f
air v
alue
thro
ugh
prof
it or
loss
, cur
rent
402
52,8
63-
52,8
63N
one
Con
verti
ble
bond
sC
HA
NG
WA
H E
LEC
TRO
NM
ATE
RIA
LS IN
C.
-Fi
nanc
ial a
sset
s at f
air v
alue
thro
ugh
prof
it or
loss
, cur
rent
500
54,2
50-
54,2
50N
one
Stoc
kPR
OM
OS
TEC
HN
OLO
GIE
S IN
C.
-Fi
nanc
ial a
sset
s at f
air v
alue
thro
ugh
prof
it or
loss
, cur
rent
477,
374
6,77
8,71
17.
776,
778,
711
Non
e
Stoc
kL&
K E
NG
INEE
RIN
G C
O.,
LTD
.-
Fina
ncia
l ass
ets a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss, c
urre
nt1,
683
97,4
560.
9997
,456
Non
e
Stoc
kM
ICR
ON
AS
SEM
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Financial Review Consolidated
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Dec
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6
United Microelectronics Corporation | Annual Report 2006
���
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HM
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Dec
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Financial Review Consolidated
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Dec
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6
United Microelectronics Corporation | Annual Report 2006
��0
ATT
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Dec
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200
6
Financial Review Consolidated
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HM
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4 (S
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Dec
embe
r 31,
200
6
United Microelectronics Corporation | Annual Report 2006
���
ATT
AC
HM
ENT
4 (S
ecur
ities
hel
d as
of D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
FOR
TU
NE
VE
NT
UR
E C
API
TA
L C
OR
P.
Type
of s
ecur
ities
N
ame
of se
curit
ies
Rel
atio
nshi
pFi
nanc
ial s
tate
men
t acc
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es
(thou
sand
)B
ook
valu
ePe
rcen
tage
of
owne
rshi
p (%
)M
arke
t val
ue/
Net
ass
ets v
alue
Shar
es a
s co
llate
ral
(thou
sand
)
Stoc
kSH
ENG
-HU
A V
ENTU
RE
CA
PITA
L C
OR
P.-
Fina
ncia
l ass
ets m
easu
red
at c
ost,
nonc
urre
nt1,
250
$9,9
502.
50N
ote
Non
e
Stoc
kA
DV
AN
CED
CH
IP E
NG
INEE
RIN
G
TEC
HN
OLO
GY
INC
.-
Fina
ncia
l ass
ets m
easu
red
at c
ost,
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urre
nt2,
290
24,4
191.
84N
ote
Non
e
Stoc
kTA
IMID
E TE
CH
NO
LOG
Y IN
C.
-Fi
nanc
ial a
sset
s mea
sure
d at
cos
t, no
ncur
rent
1,50
016
,095
1.83
Not
eN
one
Stoc
kR
ALI
NK
TEC
HN
OLO
GY
CO
RP.
-Fi
nanc
ial a
sset
s mea
sure
d at
cos
t, no
ncur
rent
1,39
1 15
,590
1.68
Not
eN
one
Fund
CR
YST
AL
INTE
RN
ET V
ENTU
RE
FUN
D II
-Fi
nanc
ial a
sset
s mea
sure
d at
cos
t, no
ncur
rent
- 9,
342
0.99
N/A
Non
e
Stoc
kA
RC
AD
IA D
ESIG
N S
YST
EMS
(TA
IWA
N),
INC
.-
Fina
ncia
l ass
ets m
easu
red
at c
ost,
nonc
urre
nt16
2
-
0.83
Not
eN
one
Stoc
k-Pr
efer
red
stoc
kA
UR
OR
A S
YST
EMS,
INC
. -
Fina
ncia
l ass
ets m
easu
red
at c
ost,
nonc
urre
nt5,
133
59,3
17
- N
/AN
one
Stoc
k-Pr
efer
red
stoc
kA
LPH
A &
OM
EGA
SEM
ICO
ND
UC
TOR
LTD
.-
Fina
ncia
l ass
ets m
easu
red
at c
ost,
nonc
urre
nt1,
500
46,3
13
- N
/AN
one
Stoc
kPI
XA
RT
IMA
GIN
G IN
C.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt13
,274
6,50
4,25
5
1
2.71
6,
504,
255
Non
e
Stoc
kU
NIT
ED O
RTH
OPE
DIC
CO
RP.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt2,
000
27,6
00
5.8
9 27
,600
Non
e
Stoc
kEP
ITEC
H T
ECH
NO
LOG
Y C
OR
P.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt13
,128
407,
627
3
.55
407,
627
Non
e
Stoc
kA
VER
LOG
IC T
ECH
NO
LOG
IES
CO
RP.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt1,
051
16,5
60
3.4
0 16
,560
Non
e
Stoc
kA
IMTR
ON
TEC
HN
OLO
GY
, IN
C.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt1,
384
50,9
30
3.1
7 50
,930
Non
e
Stoc
kTO
POIN
T TE
CH
NO
LOG
Y C
O.,
LTD
.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
959
69,8
27
1.2
6 69
,827
Non
e
Stoc
kC
HIP
BO
ND
TEC
HN
OLO
GY
CO
RP.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt2,
190
63,8
46
0.7
4 63
,846
Non
e
Stoc
kU
NIT
ED M
ICR
OEL
ECTR
ON
ICS
CO
RP.
Inve
stor
com
pany
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
22,0
7044
6,91
4
0.1
2 44
6,91
4N
one
Stoc
kSI
MPL
O T
ECH
NO
LOG
Y C
O.,
LTD
.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
178
21,0
04
0.1
2 21
,004
Non
e
Stoc
kA
THER
OS
CO
MM
UN
ICA
TIO
N IN
C.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt8
5,53
6
0.0
2 5,
536
Non
e
Dec
embe
r 31,
200
6
Financial Review Consolidated
���
ATT
AC
HM
ENT
4 (S
ecur
ities
hel
d as
of D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
FOR
TU
NE
VE
NT
UR
E C
API
TA
L C
OR
P.
Type
of s
ecur
ities
N
ame
of se
curit
ies
Rel
atio
nshi
pFi
nanc
ial s
tate
men
t acc
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es
(thou
sand
)B
ook
valu
ePe
rcen
tage
of
owne
rshi
p (%
)M
arke
t val
ue/
Net
ass
ets v
alue
Shar
es a
s co
llate
ral
(thou
sand
)
Con
verti
ble
bond
sA
LPH
A N
ETW
OR
KS
INC
.-
Fina
ncia
l ass
ets a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss, n
oncu
rren
t30
0$3
3,60
0
- $3
3,60
0N
one
Con
verti
ble
bond
sTO
POIN
T TE
CH
NO
LOG
Y C
O.,
LTD
.-
Fina
ncia
l ass
ets a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss, n
oncu
rren
t25
836
,314
-
36,3
14N
one
TL
C C
API
TA
L C
O.,
LT
D.
Type
of s
ecur
ities
N
ame
of se
curit
ies
Rel
atio
nshi
pFi
nanc
ial s
tate
men
t acc
ount
Uni
ts (t
hous
and)
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nds/
shar
es
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sand
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ook
valu
ePe
rcen
tage
of
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rshi
p (%
)M
arke
t val
ue/
Net
ass
ets v
alue
Shar
es a
s co
llate
ral
(thou
sand
)
Stoc
kY
UN
G L
I IN
VES
TMEN
TS, I
NC
.In
vest
ee c
ompa
nyLo
ng-te
rm in
vest
men
ts a
ccou
nted
fo
r und
er th
e eq
uity
met
hod
0.20
$202
,390
44.4
4$2
02,3
90N
one
Stoc
kSM
EDIA
TEC
HN
OLO
GY
CO
RP.
Inve
stee
com
pany
Long
-term
inve
stm
ents
acc
ount
ed
for u
nder
the
equi
ty m
etho
d7,
084
99,2
2018
.46
28,1
66N
one
Stoc
kH
IGH
LIN
K T
ECH
NO
LOG
Y C
OR
P.In
vest
ee o
f UM
C a
nd T
LCLo
ng-te
rm in
vest
men
ts a
ccou
nted
fo
r und
er th
e eq
uity
met
hod
17,4
6013
4,99
911
.62
138,
221
Non
e
Stoc
kA
SIA
PA
CIF
IC M
ICR
OSY
STEM
S, IN
C.
-Fi
nanc
ial a
sset
s mea
sure
d at
cos
t, no
ncur
rent
10,0
0010
0,00
08.
40N
ote
Non
e
Stoc
kSU
PER
ALL
OY
IND
UST
RIA
L C
O.,
LTD
.-
Fina
ncia
l ass
ets m
easu
red
at c
ost,
nonc
urre
nt10
,650
479,
250
6.55
Not
eN
one
Stoc
kTO
POIN
T TE
CH
NO
LOG
Y C
O.,
LTD
.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
5,43
039
5,31
77.
0239
5,31
7N
one
Stoc
kR
ECH
I PR
ECIS
ION
CO
., LT
D.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt20
,163
357,
901
5.84
357,
901
Non
e
Stoc
kSE
RC
OM
M C
OR
P.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
6,19
216
8,40
84.
4816
8,40
8N
one
Stoc
kH
OR
IZO
N S
ECU
RIT
IES
CO
., LT
D.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt16
,858
118,
849
3.92
118,
849
Non
e
Stoc
kSI
MPL
O T
ECH
NO
LOG
Y C
O.,
LTD
.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
5,22
061
5,96
03.
4861
5,96
0N
one
Stoc
kEP
ITEC
H T
ECH
NO
LOG
Y C
OR
P.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt10
,413
323,
324
2.81
323,
324
Non
e
Dec
embe
r 31,
200
6
Dec
embe
r 31,
200
6
United Microelectronics Corporation | Annual Report 2006
���
ATT
AC
HM
ENT
4 (S
ecur
ities
hel
d as
of D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
TL
C C
API
TA
L C
O.,
LT
D.
Type
of s
ecur
ities
N
ame
of se
curit
ies
Rel
atio
nshi
pFi
nanc
ial s
tate
men
t acc
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es
(thou
sand
)B
ook
valu
ePe
rcen
tage
of
owne
rshi
p (%
)M
arke
t val
ue/
Net
ass
ets v
alue
Shar
es a
s co
llate
ral
(thou
sand
)
Stoc
kA
VER
MED
IA T
ECH
NO
LOG
IES,
INC
.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
4,08
5$1
63,1
962.
16$1
63,1
96N
one
Stoc
kSY
STEX
CO
RP.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt80
031
,120
0.96
31,1
20N
one
Stoc
kTA
TUN
G C
O.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt38
,152
557,
019
0.91
557,
019
Non
e
Stoc
kC
OR
ETR
ON
IC C
OR
P.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
6,00
725
4,10
20.
9025
4,10
2N
one
Stoc
kIN
PAQ
TEC
HN
OLO
GY
CO
., LT
D.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt50
032
,800
0.74
32,8
00N
one
Stoc
kH
UN
G S
HEN
G C
ON
STR
UC
TIO
N L
TD.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt3,
300
83,1
600.
5983
,160
Non
e
Stoc
kO
RIE
NT
SEM
ICO
ND
UC
TOR
ELE
CTR
ON
ICS,
LT
D.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt4,
764
40,0
180.
5440
,018
Non
e
Stoc
kA
LI C
OR
P.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
1,05
062
,265
0.41
62,2
65N
one
Stoc
kPO
WER
TEC
H IN
DU
STR
IAL
CO
., LT
D.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt24
812
,648
0.27
12,6
48N
one
Stoc
kC
HIN
A E
LEC
TRIC
MFG
. CO
RP.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt89
516
,065
0.23
16,0
65N
one
Stoc
kC
HO
NG
HO
NG
CO
NST
RU
CTI
ON
CO
., LT
D.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt34
330
,253
0.23
30,2
53N
one
Stoc
kH
AN
NST
AR
DIS
PLA
Y C
OR
P.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
14,0
0086
,520
0
.23
86,5
20N
one
Stoc
kC
HIN
A D
EVEL
OPM
ENT
FIN
AN
CIA
L H
OLD
ING
CO
RP.
-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
23,5
9635
3,93
6
0.2
1 35
3,93
6N
one
Stoc
kSH
IHLI
N E
LEC
TRIC
& E
NG
INEE
RIN
G
CO
RP.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt95
033
,582
0
.18
33,5
82N
one
Stoc
kG
OLD
SUN
DEV
ELO
PMEN
T&
CO
NST
RU
CTI
ON
CO
., LT
D.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt2,
060
36,2
56
0.1
7 36
,256
Non
e
Stoc
kK
INSU
S IN
TER
CO
NN
ECT
TEC
HN
OLO
GY
C
OR
P.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
566
54,3
650.
1554
,365
Non
e
Stoc
kK
EE T
AI P
RO
PER
TIES
CO
., LT
D.
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt30
07,
785
0.11
7,78
5N
one
Stoc
kY
UN
GTA
Y E
NG
INEE
RIN
G C
O.,
LTD
.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
400
8,34
00.
108,
340
Non
e
Stoc
kTA
IWA
N F
ERTI
LIZE
R C
O.,
LTD
.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
800
49,8
400.
0849
,840
Non
e
Dec
embe
r 31,
200
6
Financial Review Consolidated
���
ATT
AC
HM
ENT
4 (S
ecur
ities
hel
d as
of D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
TL
C C
API
TA
L C
O.,
LT
D.
Type
of s
ecur
ities
N
ame
of se
curit
ies
Rel
atio
nshi
pFi
nanc
ial s
tate
men
t acc
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es
(thou
sand
)B
ook
valu
ePe
rcen
tage
of
owne
rshi
p (%
)M
arke
t val
ue/
Net
ass
ets v
alue
Shar
es a
s co
llate
ral
(thou
sand
)
Stoc
kPR
INC
E H
OU
SIN
G &
DEV
ELO
PMEN
T C
OR
P.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
580
$12,
789
0.07
$12,
789
Non
e
Stoc
kY
ULO
N M
OTO
R C
O.,
LTD
.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
1,00
039
,500
0.07
39,5
00N
one
Stoc
kC
HIN
A IN
SUR
AN
CE
INTL
-A
vaila
ble-
for-
sale
fina
ncia
l ass
ets,
nonc
urre
nt80
032
,614
0.06
32,6
14N
one
Stoc
kN
AN
TEX
IND
UST
RY
.CO
.,LTD
.-
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s, no
ncur
rent
150
3,15
0
0.0
6 3,
150
Non
e
Stoc
kFA
R E
AST
ERN
INTE
RN
ATI
ON
AL
BA
NK
-A
vaila
ble-
for-
sale
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United Microelectronics Corporation | Annual Report 2006
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Financial Review Consolidated
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Dec
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6
United Microelectronics Corporation | Annual Report 2006
���
ATT
AC
HM
ENT
4 (S
ecur
ities
hel
d as
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United Microelectronics Corporation | Annual Report 2006
���
ATT
AC
HM
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5 (I
ndiv
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0 1,
201,
794
(88,
544)
-
-
Stoc
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der t
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quity
m
etho
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HSI
EH Y
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G
CA
PITA
L C
O.,
-92
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69,8
37)
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58,5
00
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1,58
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der t
he e
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etho
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-10
6,62
11,
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- -
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621
1,27
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197
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ATT
AC
HM
ENT
5 (I
ndiv
idua
l sec
uriti
es a
cqui
red
or d
ispo
sed
of w
ith a
ccum
ulat
ed a
mou
nt e
xcee
ding
the
low
er o
f NT$
100
mill
ion
or 2
0 pe
rcen
t of c
apita
l sto
ck fo
r the
yea
r end
ed D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
UN
ITE
D M
ICR
OE
LE
CT
RO
NIC
S C
OR
POR
AT
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Beg
inni
ng b
alan
ceA
dditi
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ispo
sal
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ng b
alan
ce
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ritie
sN
ame
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e se
curit
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ncia
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atem
ent
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unt
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nter
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ty R
elat
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ts (t
hous
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nds/
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es (t
hous
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ount
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e1)
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ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Cos
t(N
ote
2)
Gai
n (L
oss)
fr
om d
ispo
sal
(Not
e 3)
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ts (t
hous
and)
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nds/
shar
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hous
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ount
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e1)
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IGH
LIN
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etho
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is
sues
-
-
$-
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00
$285
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ote1
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r the
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n m
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13
2,46
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sues
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etho
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2,22
2,10
0 -
- -
- -
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e22)
2,69
9,49
1(N
ote2
2)
Not
e 1:
The
am
ount
s of b
egin
ning
and
end
ing
bala
nces
of f
inan
cial
ass
ets a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss a
nd a
vaila
ble
for s
ale
are
reco
rded
at t
he p
reva
iling
mar
ket p
rices
.N
ote
2: T
he d
ispo
sal c
ost r
epre
sent
s his
toric
al c
ost.
Not
e 3:
Gai
n/Lo
ss fr
om d
ispo
sal i
nclu
des r
ealiz
ed e
xcha
nge
gain
/loss
to w
hich
the
RO
C S
FAS
No.
34,
"Fi
nanc
ial I
nstru
men
ts: R
ecog
nitio
n an
d M
easu
rem
ent'',
is a
pplie
d.
As f
or th
e ga
in/lo
ss fr
om d
ispo
sal o
f fin
anci
al a
sset
s at f
air v
alue
thro
ugh
prof
it/lo
ss tr
ansf
ers t
o ga
in/lo
ss o
n th
e va
luat
ion
of fi
nanc
ial a
sset
s.N
ote
4: E
xerc
ise
of c
onve
rsio
n rig
hts o
f U
MC
's co
nver
tible
bon
d cl
assi
fied
as "
Fina
ncia
l ass
et a
t fai
r val
ue th
roug
h pr
ofit
or lo
ss"
on th
e ba
lanc
e sh
eet.
Not
e 5:
Exe
rcis
e of
cal
l bac
k rig
hts o
f the
UM
C's
conv
ertib
le b
ond
clas
sifie
d as
"Fi
nanc
ial a
sset
at f
air v
alue
thro
ugh
prof
it or
loss
" on
the
bala
nce
shee
t.N
ote
6: T
he e
ndin
g ba
lanc
e in
clud
es st
ock
divi
dend
of 1
,013
thou
sand
shar
es.
Not
e 7:
The
end
ing
bala
nce
incl
udes
stoc
k di
vide
nd o
f 1,4
79 th
ousa
nd sh
ares
.N
ote
8: T
he e
ndin
g ba
lanc
e in
clud
es st
ock
divi
dend
of 3
38 th
ousa
nd sh
ares
.N
ote
9: T
he g
ain/
loss
on
disp
osal
of i
nves
tmen
t inc
lude
s adj
ustm
ents
to lo
ng-te
rm in
vest
men
t add
ition
al p
aid-
in c
apita
l of N
T$(2
9,62
4) th
ousa
nd.
Not
e 10
: The
end
ing
bala
nce
incl
udes
stoc
k di
vide
nd o
f 3,4
70 th
ousa
nd sh
ares
.
United Microelectronics Corporation | Annual Report 2006
���
ATT
AC
HM
ENT
5 (I
ndiv
idua
l sec
uriti
es a
cqui
red
or d
ispo
sed
of w
ith a
ccum
ulat
ed a
mou
nt e
xcee
ding
the
low
er o
f NT$
100
mill
ion
or 2
0 pe
rcen
t of c
apita
l sto
ck fo
r the
yea
r end
ed D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
UN
ITE
D M
ICR
OE
LE
CT
RO
NIC
S C
OR
POR
AT
ION
Beg
inni
ng b
alan
ceA
dditi
onD
ispo
sal
Endi
ng b
alan
ce
Type
of
secu
ritie
sN
ame
of th
e se
curit
ies
Fina
ncia
lst
atem
ent
acco
unt
Cou
nter
-par
ty R
elat
ions
hip
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Cos
t(N
ote
2)
Gai
n (L
oss)
fr
om d
ispo
sal
(Not
e 3)
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Not
e 11
: The
end
ing
bala
nce
incl
udes
stoc
k di
vide
nd o
f 2,3
15 th
ousa
nd sh
ares
.N
ote
12: T
he e
ndin
g ba
lanc
e in
clud
es st
ock
divi
dend
of 2
,018
thou
sand
shar
es.
Not
e 13
: The
dis
posa
l sha
res i
nclu
de st
ock
divi
dend
of 1
05 th
ousa
nd sh
ares
.N
ote
14: O
n D
ecem
ber 1
, 200
6, P
rem
ier I
mag
e Te
chno
logy
Cor
pora
tion
mer
ged
into
Hon
Hai
Pre
cisi
on In
dust
ry C
o., L
td.
Not
e 15
: The
end
ing
bala
nce
of N
T$(3
,169
,837
) tho
usan
d is
com
pute
d by
ded
uctin
g U
MC
's st
ocks
hel
d by
Hsu
n C
hieh
(the
refo
re a
ccou
nted
for a
s tre
asur
y st
ock)
of N
T$20
,137
,403
thou
sand
from
UM
C's
long
-term
inve
stm
ent b
egin
ning
bal
ance
in H
sun
Chi
eh o
f
NT$
16,9
67,5
66 th
ousa
nd.
Not
e 16
: The
gai
n/lo
ss o
n di
spos
al in
clud
es lo
ng-te
rm in
vest
men
t add
ition
al p
aid-
in c
apita
l adj
ustm
ents
of N
T$14
,149
,221
thou
sand
, cum
ulat
ive
trans
latio
n ad
just
men
ts o
f NT$
(8,1
57) t
hous
and,
unr
ealiz
ed lo
ss o
f ava
ilabl
e fo
r sal
e N
T$(1
,644
,252
) tho
usan
d.
Not
e 17
: The
gai
n/lo
ss o
n di
spos
al in
clud
es lo
ng-te
rm in
vest
men
t add
ition
al p
aid-
in c
apita
l adj
ustm
ents
of N
T$(2
8,61
2) th
ousa
nd.
Not
e 18
: The
end
ing
bala
nce
incl
udes
impa
irmen
t los
s of N
T$(7
,774
) tho
usan
d, lo
ng-te
rm in
vest
men
t los
s of N
T$(5
1,71
9) th
ousa
nd a
nd lo
ng-te
rm in
vest
men
t add
ition
al p
aid-
in c
apita
l adj
ustm
ent o
f NT$
117
thou
sand
.N
ote
19: T
he e
ndin
g ba
lanc
e in
clud
es lo
ng-te
rm in
vest
men
t los
s of N
T$(4
08,9
23) t
hous
and,
long
-term
inve
stm
ent a
dditi
onal
pai
d-in
cap
ital a
djus
tmen
t of N
T$1
thou
sand
and
cum
ulat
ive
trans
latio
n ad
just
men
ts o
f NT$
(114
,685
) tho
usan
d.N
ote
20: T
he e
ndin
g ba
lanc
e in
clud
es lo
ng-te
rm in
vest
men
t gai
n of
NT$
329,
178
thou
sand
, lon
g-te
rm in
vest
men
t add
ition
al p
aid-
in c
apita
l adj
ustm
ent o
f NT$
2,54
3 th
ousa
nd, c
umul
ativ
e tra
nsla
tion
adju
stm
ents
of N
T$10
thou
sand
and
unr
ealiz
ed g
ain
on fi
nanc
ial
ass
ets o
f NT$
676,
748
thou
sand
.N
ote
21: T
he e
ndin
g ba
lanc
e in
clud
es lo
ng-te
rm in
vest
men
t los
s of N
T$(4
9,73
6) th
ousa
nd, l
ong-
term
inve
stm
ent a
dditi
onal
pai
d-in
cap
ital a
djus
tmen
t of N
T$93
0 th
ousa
nd, c
umul
ativ
e tra
nsla
tion
adju
stm
ents
of N
T$(5
5,14
7) th
ousa
nd a
nd u
nrea
lized
gai
n on
fina
ncia
l
a
sset
s of N
T$1,
094
thou
sand
.N
ote
22: N
o sh
ares
sinc
e it
belo
ngs t
o pa
rtner
ship
fund
org
aniz
atio
n. T
he e
ndin
g ba
lanc
e in
clud
es lo
ng-te
rm in
vest
men
t los
s of N
T$50
4,93
6 th
ousa
nd a
nd c
umul
ativ
e tra
nsla
tion
adju
stm
ents
of N
T$(2
7,54
5) th
ousa
nd.
FOR
TU
NE
VE
NT
UR
E C
API
TA
L C
OR
P.B
egin
ning
bal
ance
Add
ition
Dis
posa
lEn
ding
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ance
Type
of
secu
ritie
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e se
curit
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ncia
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atem
ent
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unt
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nter
-par
ty R
elat
ions
hip
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Cos
tG
ain
(Los
s)
from
dis
posa
l
Uni
ts (t
hous
and)
/ bo
nds/
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hous
and)
Am
ount
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etho
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IDIA
BV
I H
OLD
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S LT
D.
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$252
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55$2
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51$2
52,3
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11,6
07)
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-term
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etho
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eeds
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is
sues
Subs
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366,
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40,0
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--
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STEM
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n m
arke
t-
255
150,
565
-
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25
521
8,46
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146,
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-
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TEC
HN
OLO
GY
HO
LDIN
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INC
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Ava
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ts,
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urre
nt
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n m
arke
t-
181
176,
419
-
-
18
118
5,35
324
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160,
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���
ATT
AC
HM
ENT
5 (I
ndiv
idua
l sec
uriti
es a
cqui
red
or d
ispo
sed
of w
ith a
ccum
ulat
ed a
mou
nt e
xcee
ding
the
low
er o
f NT$
100
mill
ion
or 2
0 pe
rcen
t of c
apita
l sto
ck fo
r the
yea
r Dec
embe
r 31,
200
6) (A
mou
nt in
thou
sand
; Cur
renc
y de
nom
inat
ion
in N
TD u
nles
s oth
erw
ise
spec
ified
)
FOR
TU
NE
VE
NT
UR
E C
API
TA
L C
OR
P.B
egin
ning
bal
ance
Add
ition
Dis
posa
lEn
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bal
ance
Type
of
secu
ritie
sN
ame
of th
e se
curit
ies
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ncia
lst
atem
ent
acco
unt
Cou
nter
-par
ty R
elat
ions
hip
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ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
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ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Cos
tG
ain
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s)
from
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posa
l
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ts (t
hous
and)
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nds/
shar
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hous
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ts,
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nt
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n m
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28,9
131,
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$127
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I PR
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n m
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-
13,1
28
407,
627
Stoc
k-Pr
efer
red
stoc
kIN
TEG
RA
NT
TEC
HN
OLO
GIE
S,IN
C.
Fina
ncia
l ass
ets
mea
sure
d at
cos
t, no
ncur
rent
AN
ALO
GD
EVIC
ESH
OLD
ING
S B
.V.
-12
034
,413
-
-
240
(Not
e5)
232,
190
34,4
1319
7,77
7
-
-
Stoc
kSU
PER
ALL
OY
IN
DU
STR
IAL
CO
., LT
D.
Fina
ncia
l ass
ets
mea
sure
d at
cos
t, no
ncur
rent
Taiw
an S
peci
al
Opp
ortu
nitie
s Fun
d II
I / P
roce
eds f
rom
ne
w is
sues
--
-
5,00
022
5,00
0
-
-
-
- 5,
000
225,
000
Not
e 1:
The
am
ount
s of b
egin
ning
and
end
ing
bala
nces
of
avai
labl
e-fo
r-sa
le fi
nanc
ial a
sset
s are
reco
rded
at t
he p
reva
iling
mar
ket p
rices
.N
ote
2: T
he lo
ss o
n di
spos
al o
f inv
estm
ent i
nclu
des c
umul
ativ
e tra
nsla
tion
adju
stm
ents
of N
T$24
9 th
ousa
nd.
Not
e 3:
The
end
ing
bala
nce
incl
udes
long
-term
inve
stm
ent l
oss o
f NT$
(44,
024)
thou
sand
, add
ition
al p
aid-
in c
apita
l adj
ustm
ents
of N
T$17
,428
thou
sand
due
to d
ispr
opor
tiona
te c
hang
es in
shar
ehol
ding
, cum
ulat
ive
trans
latio
n ad
just
men
ts o
f NT$
(99)
thou
sand
,
re
tain
ed e
arni
ng a
djus
tmen
ts o
f NT$
246
thou
sand
and
unr
ealiz
ed lo
ss o
f ava
ilabl
e-fo
r-sa
le fi
nanc
ial a
sset
s of N
T$2,
976
thou
sand
.N
ote
4: T
he d
ispo
sal s
hare
s inc
lude
s sto
ck d
ivid
end
of 4
61 th
ousa
nd sh
ares
.N
ote
5: 2
for 1
Sto
ck sp
lits.
United Microelectronics Corporation | Annual Report 2006
���
ATT
AC
HM
ENT
5 (I
ndiv
idua
l sec
uriti
es a
cqui
red
or d
ispo
sed
of w
ith a
ccum
ulat
ed a
mou
nt e
xcee
ding
the
low
er o
f NT$
100
mill
ion
or 2
0 pe
rcen
t of c
apita
l sto
ck fo
r the
yea
r Dec
embe
r 31,
200
6)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
TL
C C
API
TA
L C
O.,
LT
D.
Beg
inni
ng b
alan
ceA
dditi
onD
ispo
sal
Endi
ng b
alan
ce
Type
of
secu
ritie
sN
ame
of th
e se
curit
ies
Fina
ncia
lst
atem
ent
acco
unt
Cou
nter
-par
ty R
elat
ions
hip
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Cos
tG
ain
(Los
s)
from
dis
posa
l
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Stoc
kSE
RC
OM
M C
OR
P.A
vaila
ble-
for-
sale
fina
ncia
l as
sets
,no
ncur
rent
Ope
n m
arke
t-
2,86
7$7
5,49
95,
077
$126
,954
2,60
0$7
0,10
9$5
9,87
4$1
0,23
56,
192
(Not
e2)
$168
,408
Stoc
kC
HIN
A
DEV
ELO
PMEN
TFI
NA
NC
IAL
HO
LDIN
G C
OR
P.
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial
asse
ts,
nonc
urre
nt
Ope
n m
arke
t-
-
-
23,0
25
2
92,2
59
--
--
23,5
96(N
ote3
)35
3,93
6
Stoc
kPR
OM
OS
TEC
HN
OLO
GIE
SIN
C.
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial
asse
ts,
nonc
urre
nt
Ope
n m
arke
t-
-
-
19,5
00
2
38,3
07
19,5
0028
6,03
023
8,30
747
,723
-
-
Stoc
kSI
MPL
O
TEC
HN
OLO
GY
CO
., LT
D.
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial
asse
ts,
nonc
urre
nt
Ope
n m
arke
t /
Priv
ate
-
-
-5,
520
330
,234
30
030
,403
25,6
174,
786
5,22
061
5,96
0
Stoc
kTA
TUN
G C
O.
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial
asse
ts,
nonc
urre
nt
Ope
n m
arke
t-
-
-
47,3
72
5
83,0
45
9,22
012
3,40
111
3,47
89,
923
38,1
5255
7,01
9
Stoc
kEP
ITEC
H
TEC
HN
OLO
GY
CO
RP.
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial
asse
ts,
nonc
urre
nt
Ope
n m
arke
t-
-
-
10,4
13
2
98,3
27
--
--
10,4
1332
3,32
4
Stoc
kTX
C C
OR
P.A
vaila
ble-
for-
sale
fina
ncia
l as
sets
,no
ncur
rent
Ope
n m
arke
t-
-
-
4,20
8
1
66,9
96
4,46
0(N
ote4
)21
7,57
016
2,78
9(N
ote5
)54
,781
-
-
Stoc
kK
INSU
S IN
TER
CO
NN
ECT
TEC
HN
OLO
GY
CO
RP.
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial
asse
ts,
nonc
urre
nt
Ope
n m
arke
t-
-
-
1,30
0
1
26,0
49
900
86,5
6076
,347
10,2
1356
6(N
ote6
)54
,365
Stoc
kC
OR
ETR
ON
IC
CO
RP.
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial
asse
ts,
nonc
urre
nt
Ope
n m
arke
t-
-
-
5,98
3
2
45,7
99
--
--
6,00
7(N
ote7
)25
4,10
2
Stoc
kA
-DA
TA
TEC
HN
OLO
GY
CO
., LT
D.
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial
asse
ts,
nonc
urre
nt
Ope
n m
arke
t-
-
-
1,74
1
2
11,1
55
1,90
9(N
ote8
)22
5,03
620
4,97
8(N
ote9
)20
,058
-
-
Financial Review Consolidated
���
ATT
AC
HM
ENT
5 (I
ndiv
idua
l sec
uriti
es a
cqui
red
or d
ispo
sed
of w
ith a
ccum
ulat
ed a
mou
nt e
xcee
ding
the
low
er o
f NT$
100
mill
ion
or 2
0 pe
rcen
t of c
apita
l sto
ck fo
r the
yea
r Dec
embe
r 31,
200
6) (A
mou
nt in
thou
sand
; Cur
renc
y de
nom
inat
ion
in N
TD u
nles
s oth
erw
ise
spec
ified
)
TL
C C
API
TA
L C
O.,
LT
D.
Beg
inni
ng b
alan
ceA
dditi
onD
ispo
sal
Endi
ng b
alan
ce
Type
of
secu
ritie
sN
ame
of th
e se
curit
ies
Fina
ncia
lst
atem
ent
acco
unt
Cou
nter
-par
ty R
elat
ions
hip
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Cos
tG
ain
(Los
s)
from
dis
posa
l
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Stoc
kEL
ITE
MA
TER
IAL
CO
., LT
D.
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial
asse
ts,
nonc
urre
nt
Ope
n m
arke
t-
-
-
6,87
4$1
02,4
246,
874
$114
,860
$102
,424
$12,
436
-$-
Stoc
kPO
WER
QU
OTI
ENT
INTE
RN
ATI
ON
AL
CO
., LT
D.
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial
asse
ts,
nonc
urre
nt
Ope
n m
arke
t-
-
-
12,4
83
2
07,0
04
12,4
8330
6,40
020
4,96
1(N
ote1
0)10
1,43
9-
-
Stoc
kA
VER
MED
IA
TEC
HN
OLO
GIE
S,IN
C.
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial
asse
ts,
nonc
urre
nt
Ope
n m
arke
t-
-
-
5,01
2
1
79,7
13
927
36,7
8833
,239
3,54
94,
085
163,
196
Stoc
kTO
POIN
T TE
CH
NO
LOG
Y C
O.,
LTD
.
Ava
ilabl
e-fo
r-sa
le fi
nanc
ial
asse
ts,
nonc
urre
nt
Ope
n m
arke
t /
Proc
eeds
from
new
is
sues
-2,
263
144,
832
2,77
8
1
45,6
09
--
--
5,43
0(N
ote1
1)39
5,31
7
Stoc
kSM
EDIA
TE
CH
NO
LOG
YC
OR
P.
Long
-term
inve
stm
ents
acco
unte
d fo
r un
der t
he e
quity
m
etho
d
Proc
eeds
from
new
is
sues
- -
-7,
084
106
,266
-
--
-7,
084
99,2
20(N
ote1
2)
Stoc
kY
UN
G L
I IN
VES
TMEN
TS,
INC
.
Long
-term
inve
stm
ents
acco
unte
d fo
r un
der t
he e
quity
m
etho
d
Proc
eeds
from
new
is
sues
- -
-0.
20
2
00,0
00
--
--
0.20
202,
390
(Not
e13)
Stoc
kA
SIA
PA
CIF
IC
MIC
RO
SYST
EMS,
INC
.
Fina
ncia
l ass
ets
mea
sure
d at
cos
t, no
ncur
rent
Proc
eeds
from
new
is
sues
- -
-10
,000
100
,000
-
--
-10
,000
10
0,00
0
Stoc
kSU
PER
ALL
OY
IN
DU
STR
IAL
CO
., LT
D.
Fina
ncia
l ass
ets
mea
sure
d at
cos
t, no
ncur
rent
Taiw
an S
peci
al
Opp
ortu
nitie
s Fun
d II
I / P
roce
eds f
rom
ne
w is
sues
- -
-10
,650
479
,250
-
--
-10
,650
479,
250
Con
verti
ble
bond
sEP
ITEC
HTE
CH
NO
LOG
YC
OR
P.
Fina
ncia
l ass
ets
at fa
ir va
lue
thro
ugh
prof
it or
lo
ss, n
oncu
rren
t
Ope
n m
arke
t-
- -
2,50
0
2
50,0
00
--
--
2,50
029
3,25
0
United Microelectronics Corporation | Annual Report 2006
���
ATT
AC
HM
ENT
5 (I
ndiv
idua
l sec
uriti
es a
cqui
red
or d
ispo
sed
of w
ith a
ccum
ulat
ed a
mou
nt e
xcee
ding
the
low
er o
f NT$
100
mill
ion
or 2
0 pe
rcen
t of c
apita
l sto
ck fo
r the
yea
r Dec
embe
r 31,
200
6) (A
mou
nt in
thou
sand
; Cur
renc
y de
nom
inat
ion
in N
TD u
nles
s oth
erw
ise
spec
ified
)
TL
C C
API
TA
L C
O.,
LT
D.
Beg
inni
ng b
alan
ceA
dditi
onD
ispo
sal
Endi
ng b
alan
ce
Type
of
secu
ritie
sN
ame
of th
e se
curit
ies
Fina
ncia
lst
atem
ent
acco
unt
Cou
nter
-par
ty R
elat
ions
hip
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Cos
tG
ain
(Los
s)
from
dis
posa
l
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Not
e1: T
he a
mou
nts o
f beg
inni
ng a
nd e
ndin
g ba
lanc
es o
f fin
anci
al a
sset
s at f
air v
alue
thro
ugh
prof
it or
loss
and
ava
ilabl
e fo
r sal
e ar
e re
cord
ed a
t the
pre
vaili
ng m
arke
t pric
es.
Not
e2: T
he e
ndin
g ba
lanc
e in
clud
es st
ock
divi
dend
of 8
48 th
ousa
nd sh
ares
.N
ote3
: The
end
ing
bala
nce
incl
udes
stoc
k di
vide
nd o
f 571
thou
sand
shar
es.
Not
e4: T
he d
ispo
sal s
hare
s inc
lude
stoc
k di
vide
nd o
f 252
thou
sand
shar
es.
Not
e5: T
he d
ispo
sal c
ost i
nclu
des c
ash
divi
dend
of N
T$(4
,207
) tho
usan
d.N
ote6
: The
end
ing
bala
nce
incl
udes
stoc
k di
vide
nd o
f 166
thou
sand
shar
es.
Not
e7: T
he e
ndin
g ba
lanc
e in
clud
es st
ock
divi
dend
of 2
4 th
ousa
nd sh
ares
.N
ote8
: The
dis
posa
l sha
res i
nclu
dest
ock
divi
dend
of 1
68 th
ousa
nd sh
ares
.N
ote9
: The
dis
posa
l cos
t inc
lude
s cas
h di
vide
nd o
f NT$
(6,1
77) t
hous
and.
Not
e10:
The
dis
posa
l cos
t inc
lude
s cas
h di
vide
nd o
f NT$
(2,0
43) t
hous
and.
Not
e11:
The
end
ing
bala
nce
incl
udes
stoc
k di
vide
nd o
f 389
thou
sand
shar
es.
Not
e12:
The
end
ing
bala
nce
incl
udes
long
-term
inve
stm
ent l
oss o
f NT$
(7,0
57) t
hous
and
and
cum
ulat
ive
trans
latio
n ad
just
men
ts o
f NT$
11 th
ousa
nd.
Not
e13:
The
end
ing
bala
nce
incl
udes
long
-term
inve
stm
ent g
ain
of N
T$2,
390
thou
sand
.
UM
C C
API
TA
L C
OR
P.B
egin
ning
bal
ance
Add
ition
Dis
posa
lEn
ding
bal
ance
Type
of
secu
ritie
sN
ame
of th
e se
curit
ies
Fina
ncia
lst
atem
ent
acco
unt
Cou
nter
-par
ty R
elat
ions
hip
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
Cos
tG
ain
(Los
s)
from
dis
posa
l
Uni
ts (t
hous
and)
/ bo
nds/
shar
es (t
hous
and)
Am
ount
(Not
e1)
Stoc
k-Pr
efer
red
stoc
kFO
RC
E10
NET
WO
RK
S, IN
C.
Fina
ncia
l ass
ets
mea
sure
d at
cos
t, no
ncur
rent
Proc
eeds
from
new
is
sues
-
-
$-4,
373
USD
4,5
00
-$-
$-$-
4,37
3 U
SD
4,50
0
Financial Review Consolidated
���
ATT
AC
HM
ENT
6 (A
cqui
sitio
n of
indi
vidu
al re
al e
stat
e w
ith a
mou
nt e
xcee
ding
the
low
er o
f NT$
100
mill
ion
or 2
0 pe
rcen
t of c
apita
l sto
ck fo
r the
yea
r end
ed D
ecem
ber 3
1, 2
006)
(Am
ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
wis
e sp
ecifi
ed)
UN
ITE
D M
ICR
OE
LE
CT
RO
NIC
S C
OR
POR
AT
ION
Nam
e of
pro
perti
esTr
ansa
ctio
n da
teTr
ansa
ctio
nam
ount
Paym
ent
stat
usC
ount
er-p
arty
Rel
atio
nshi
pFo
rmer
hol
der o
f pr
oper
ty
Rel
atio
nshi
pbe
twee
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rmer
ho
lder
and
acq
uire
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e of
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nsac
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sact
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refe
renc
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Dat
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us o
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mm
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ts
Non
e
Whe
re c
ount
er-p
arty
is a
rela
ted
party
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ails
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rior t
rans
actio
ns
United Microelectronics Corporation | Annual Report 2006
��0
ATT
AC
HM
ENT
7 (D
ispo
sal o
f ind
ivid
ual r
eal e
stat
e w
ith a
mou
nt e
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ding
the
low
er o
f NT$
100
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apita
l sto
ck fo
r the
yea
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ed D
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1, 2
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nt in
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sand
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in N
TD u
nles
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ified
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UN
ITE
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CT
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S C
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ION
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es o
f pro
perti
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teD
ate
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rigin
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ook
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ount
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us o
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oss)
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easo
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ther
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��1
ATT
AC
HM
ENT
8 (R
elat
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sact
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urch
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s exc
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S C
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AT
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Rel
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par
tyR
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hip
Purc
hase
s (Sa
les)
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vest
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8,45
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ays
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401,
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N IN
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75
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vest
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ays
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Rel
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par
tyR
elat
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hip
Purc
hase
s (Sa
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ount
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enta
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f tot
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purc
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s (sa
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t pric
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alan
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tage
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otal
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ceiv
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ote
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ITED
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S C
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ON
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stor
com
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rcha
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ays
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00
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sact
ions
Det
ails
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th
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s rec
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able
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sact
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Det
ails
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on-a
rm's
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th
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actio
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able
)
United Microelectronics Corporation | Annual Report 2006
���
ATT
AC
HM
ENT
8 (R
elat
ed p
arty
tran
sact
ions
for p
urch
ases
and
sale
s am
ount
s exc
eedi
ng th
e lo
wer
of N
T$10
0 m
illio
n or
20
perc
ent o
f cap
ital s
tock
for t
he y
ear D
ecem
ber 3
1, 2
006)
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ount
in th
ousa
nd; C
urre
ncy
deno
min
atio
n in
NTD
unl
ess o
ther
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e sp
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UM
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)
Rel
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par
tyR
elat
ions
hip
Purc
hase
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les)
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ount
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cent
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tal
purc
hase
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les)
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t pric
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tage
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ays
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sact
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Financial Review Consolidated
���
ATT
AC
HM
ENT
9 (R
ecei
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om re
late
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rties
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ount
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illio
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Am
ount
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urre
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par
tyR
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erre
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tal
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UN
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NIC
S (E
UR
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.In
vest
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-
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United Microelectronics Corporation | Annual Report 2006
���
ATT
AC
HM
ENT
10 (N
ames
, loc
atio
ns a
nd re
late
d in
form
atio
n of
inve
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pani
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s of D
ecem
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mou
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in N
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nles
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) B.V
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pia,
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e2
TLC
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t in
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sinc
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42)
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00JP
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949,
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irgin
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vest
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sinc
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vest
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t (N
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Inve
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Net
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ng b
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inni
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ook
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e
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���
ATT
AC
HM
ENT
10 (N
ames
, loc
atio
ns a
nd re
late
d in
form
atio
n of
inve
stee
com
pani
es a
s of D
ecem
ber 3
1, 2
006)
(A
mou
nt in
thou
sand
; Cur
renc
y de
nom
inat
ion
in N
TD u
nles
s oth
erw
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spec
ified
)
UN
ITE
D M
ICR
OE
LE
CT
RO
NIC
S C
OR
POR
AT
ION
Num
ber o
f sh
ares
(thou
sand
)N
ote
HIG
HLI
NK
TEC
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OLO
GY
CO
RP.
Mia
o-Li
Cou
nty,
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iwa n
Sale
s and
man
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turin
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nic
parts
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18
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7,48
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19)
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I TEC
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sinc
hu, T
aiw
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arto
grap
hy c
hip
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gn a
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n24
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5 24
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9,02
0)
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IC T
ECH
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Y C
OR
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sinc
hu S
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ce
Park
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wan
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esig
n, p
rodu
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n an
d sa
les
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000
135,
000
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00
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A M
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ERSH
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-
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504,
936
Not
e3
Not
e 1:
Ini
tial i
nves
tmen
t am
ount
s den
omin
ated
in fo
reig
n cu
rren
cies
are
exp
ress
ed in
thou
sand
s.N
ote
2: B
ased
on
the
reso
lutio
n of
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boar
d of
dire
ctor
s mee
ting
on A
ugus
t 26,
200
4, th
e bu
sine
sses
, ope
ratio
ns a
nd a
sset
s of U
MC
I LTD
. wer
e tra
nsfe
rred
to th
e B
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���
ATT
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UMC and Its Affiliated Enterprises Have Not Faced Financial Difficulties; Therefore, There Has Been No Impact on UMC’s Financial Status.