Form 6-K

1934 Act Registration No. 1-15128


SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 


FORM 6-K

 


REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

Dated September 15, 2006

For the month of August 2006

 


United Microelectronics Corporation

(Translation of Registrant’s Name into English)

 


No. 3 Li Hsin Road II

Science Park

Hsinchu, Taiwan, R.O.C.

(Address of Principal Executive Office)

 


(Indicate by check mark whether the registrant files or will file annual reports under cover of form 20-F or Form 40-F.)

Form 20-F      V            Form 40-F              

(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes                      No      V    

(If “Yes” is marked, indicated below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable )

 



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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  United Microelectronics Corporation
Date: 9/15/2006   By  

/s/ Chitung Liu

    Chitung Liu
    Chief Financial Officer


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Exhibit

 

Exhibit  

Description

99.1   Announcement on August 16, 2006: To announce related materials on acquisition of machinery and equipment
99.2   Announcement on August 17, 2006: To announce related materials on acquisition of machinery and equipment
99.3   Announcement on August 17, 2006: To announce related materials on disposal of MediaTek Incorporation securities
99.4   Announcement on August 21, 2006: To announce related materials on acquisition of machinery and equipment
99.5   Announcement on August 22, 2006: To announce related materials on acquisition of Promos Technologies. common shares
99.6   Announcement on August 24, 2006: To announce related materials on disposal of MediaTek Incorporation securities
99.7   Announcement on August 24, 2006: Important Resolutions from 10th term 2nd Board Meeting
99.8   Announcement on August 25, 2006: To announce related materials on acquisition of Promos Technologies common shares
99.9   Announcement on August 29, 2006: To announce related materials on acquisition of machinery and equipment
99.10   Announcement on September 1, 2006: To announce related materials on disposal of MediaTek Incorporation securities
99.11   Announcement on September 6, 2006: To announce related materials on acquisition of machinery and equipment
99.12   Announcement on September 7, 2006: July Revenue
99.13   Announcement on September 8, 2006: To announce related materials on disposal of MediaTek Incorporation securities
99.14   Announcement on September 12, 2006: To announce related materials on acquisition of Promos Technologies. common shares
99.15   Announcement on September 14, 2006: To announce related materials on acquisition of Promos Technologies. common shares
99.16   Announcement on September 15, 2006: 1) the trading and pledge of UMC common shares by directors, supervisors, executive officers and 10% shareholders of UMC 2) the acquisition and disposition of assets by UMC
99.17   United Microelectronics Corporation (and Subsidiaries) Financial Statements With Report of Independent Auditors for the Six-Month Periods Ended June 30, 2006 And 2005


Exhibit 99.1

 

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To announce related materials on acquisition of machinery and equipment

 

1. Name and nature of the subject matter (e.g.land located at Sublot XX, Lot XX, North District, Taichung City): Machinery and equipment

 

2. Date of the occurrence of the event: 2006/08/10~2006/08/15

 

3. Transaction volume (e.g. XX square meters, equivalent to XX p’ing), unit price, total transaction price: Transaction volume: one lot; average unit price: $579,622,500 NTD; total transaction price:$ 579,622,500 NTD

 

4. Counterparty to the trade and its relationship with the company (if the trading counterpart is a natural person and is not an actual related party of the Company, the name of the trading counterpart is not required to be disclosed): ASML HONG KONG LTD. C/O; non-related party transaction

 

5. Where the counterpart to the trade is an actual related party, a public announcement shall also include the reason for choosing the related party as trading counterpart and the identity of the previous owner (including its relationship with the company and the trading counterpart), price of transfer and the date of acquisition: Not applicable

 

6. Where a person who owned the property within the past five years has been an actual related person of the company, a public announcement shall also include the dates and prices of acquisition and disposal by the related person and the person’s relationship to the company at those times: Not applicable

 

7. Anticipated loss or profit from the disposal (not applicable in cases of acquisition of assets) (where originally deferred, the status or recognition shall be stated and explained):Not applicable

 

8. Terms of delivery or payment (including payment period and monetary amount): 1)90% paid upon shipment;10% paid after acceptance 2)100% paid after acceptance

 

9. The manner of deciding on this transaction (such as tender invitation, price comparison, or price negotiation), the reference basis for the decision on price and the decision-making department: transaction: price negotiation; the reference basis for the decision on price: market price. The decision-making department: the Selection Meeting

 

10. Name of the professional appraisal institution and its appraisal amount: Not applicable

 

11. Reason for any significant discrepancy with the transaction amount, and opinion of the certifying CPA: Not applicable

 

12. Is the appraisal report price a limited price or specific price? Not applicable

 

13. Has an appraisal report not yet been obtained? Not applicable

 

14. Reason an appraisal report has not yet been obtained: Not applicable

 

15. Broker and broker’s fee: Not applicable

 

16. Concrete purpose or use of the acquisition or disposition: to produce integrated circuits

 

17. Do the directors have any objection to the present transaction? no

 

18. Any other matters that need to be specified: none


Exhibit 99.2

 

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To announce related materials on acquisition of machinery and equipment

 

1. Name and nature of the subject matter (e.g.land located at Sublot XX, Lot XX, North District, Taichung City): Machinery and equipment

 

2. Date of the occurrence of the event: 2006/08/04~2006/08/16

 

3. Transaction volume (e.g. XX square meters, equivalent to XX p’ing), unit price, total transaction price: Transaction volume: one lot; average unit price: $ 910,484,460 NTD; total transaction price:$ 910,484,460 NTD

 

4. Counterparty to the trade and its relationship with the company (if the trading counterpart is a natural person and is not an actual related party of the Company, the name of the trading counterpart is not required to be disclosed): APPLIED MATERIALS ASIA PACIFIC LTD; non-related party transaction

 

5. Where the counterpart to the trade is an actual related party, a public announcement shall also include the reason for choosing the related party as trading counterpart and the identity of the previous owner (including its relationship with the company and the trading counterpart), price of transfer and the date of acquisition: Not applicable

 

6. Where a person who owned the property within the past five years has been an actual related person of the company, a public announcement shall also include the dates and prices of acquisition and disposal by the related person and the person’s relationship to the company at those times: Not applicable

 

7. Anticipated loss or profit from the disposal (not applicable in cases of acquisition of assets) (where originally deferred, the status or recognition shall be stated and explained):Not applicable

 

8. Terms of delivery or payment (including payment period and monetary amount): 1)90% paid upon shipment;10% paid after acceptance 2)100% paid after acceptance

 

9. The manner of deciding on this transaction (such as tender invitation, price comparison, or price negotiation), the reference basis for the decision on price and the decision-making department: transaction: price negotiation; the reference basis for the decision on price: market price. The decision-making department: the Selection Meeting

 

10. Name of the professional appraisal institution and its appraisal amount: Not applicable

 

11. Reason for any significant discrepancy with the transaction amount, and opinion of the certifying CPA: Not applicable

 

12. Is the appraisal report price a limited price or specific price? Not applicable

 

13. Has an appraisal report not yet been obtained? Not applicable

 

14. Reason an appraisal report has not yet been obtained: Not applicable

 

15. Broker and broker’s fee: Not applicable

 

16. Concrete purpose or use of the acquisition or disposition: to produce integrated circuits

 

17. Do the directors have any objection to the present transaction? no

 

18. Any other matters that need to be specified: none


Exhibit 99.3

 

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To announce related materials on disposal of MediaTek Incorporation securities

 

1. Name of the securities: Common shares of MediaTek Incorporation

 

2. Trading date: 2006/08/14~2006/08/17

 

3. Trading volume, unit price, and total monetary amount of the transaction: trading volume: 1,200,000 shares; average unit price:$292.67 NTD; total amount:$351,207,500 NTD

 

4. Gain (or loss) (not applicable in case of acquisition of securities): $ 338,795,376 NTD

 

5. Relationship with the underlying company of the trade: MediaTek Incorporation, none.

 

6. Current cumulative volume, amount, and shareholding percentage of holdings of the security being traded (including the current trade) and status of any restriction of rights (e.g. pledges): cumulative volume: 34,334,499 shares; amount: 355,136,706 NTD; percentage of holdings: 3.55%; status of restriction of rights: no

 

7. Current ratio of long or short term securities investment (including the current trade) to the total assets and shareholder’s equity as shown in the most recent financial statement and the operational capital as shown in the most recent financial statement: ratio of total assets: 12.30%; ratio of shareholder’s equity: 15.20%; the operational capital as shown in the most recent financial statement: $96,736,519 thousand NTD

 

8. Concrete purpose/objective of the acquisition or disposal: financing operation

 

9. Do the directors have any objections to the present transaction? none

 

10. Any other matters that need to be specified: none


Exhibit 99.4

 

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To announce related materials on acquisition of machinery and equipment

 

1. Name and nature of the subject matter (e.g.land located at Sublot XX, Lot XX, North District, Taichung City): Machinery and equipment

 

2. Date of the occurrence of the event: 2006/08/18

 

3. Transaction volume (e.g. XX square meters, equivalent to XX p’ing), unit price, total transaction price: Transaction volume: one lot; average unit price: $ 576,985,950 NTD; total transaction price:$ 576,985,950 NTD

 

4. Counterparty to the trade and its relationship with the company (if the trading counterpart is a natural person and is not an actual related party of the Company, the name of the trading counterpart is not required to be disclosed): ASML HONG KONG LTD. C/O; non-related party transaction

 

5. Where the counterpart to the trade is an actual related party, a public announcement shall also include the reason for choosing the related party as trading counterpart and the identity of the previous owner (including its relationship with the company and the trading counterpart), price of transfer and the date of acquisition: Not applicable

 

6. Where a person who owned the property within the past five years has been an actual related person of the company, a public announcement shall also include the dates and prices of acquisition and disposal by the related person and the person’s relationship to the company at those times: Not applicable

 

7. Anticipated loss or profit from the disposal (not applicable in cases of acquisition of assets) (where originally deferred, the status or recognition shall be stated and explained):Not applicable

 

8. Terms of delivery or payment (including payment period and monetary amount): 1)90% paid upon shipment;10% paid after acceptance 2)100% paid after acceptance

 

9. The manner of deciding on this transaction (such as tender invitation, price comparison, or price negotiation), the reference basis for the decision on price and the decision-making department: transaction: price negotiation; the reference basis for the decision on price: market price. The decision-making department: the Selection Meeting

 

10. Name of the professional appraisal institution and its appraisal amount: Not applicable

 

11. Reason for any significant discrepancy with the transaction amount, and opinion of the certifying CPA: Not applicable

 

12. Is the appraisal report price a limited price or specific price? Not applicable

 

13. Has an appraisal report not yet been obtained? Not applicable

 

14. Reason an appraisal report has not yet been obtained: Not applicable

 

15. Broker and broker’s fee: Not applicable

 

16. Concrete purpose or use of the acquisition or disposition: to produce integrated circuits

 

17. Do the directors have any objection to the present transaction? no

 

18. Any other matters that need to be specified: none


Exhibit 99.5

 

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To announce related materials on acquisition of Promos Technologies common shares

 

1. Name of the securities: Common shares of Promos Technologies.

 

2. Trading date: 2006/08/16~2006/08/22

 

3. Trading volume, unit price, and total monetary amount of the transaction: trading volume: 30,498,000 shares; average unit price: $ 12.94 NTD; total amount: $ 394,644,660 NTD

 

4. Gain (or loss) (not applicable in case of acquisition of securities): Not applicable

 

5. Relationship with the underlying company of the trade: None

 

6. Current cumulative volume, amount, and shareholding percentage of holdings of the security being traded (including the current trade) and status of any restriction of rights (e.g. pledges): cumulative volume: 370,730,000 shares; amount:NTD 4,728,652,310; percentage of holdings: 6.12%; status of restriction of rights: no

 

7. Current ratio of long or short term securities investment (including the current trade) to the total assets and shareholder’s equity as shown in the most recent financial statement and the operational capital as shown in the most recent financial statement: ratio of total assets: 12.24% ratio of shareholder’s equity: 15.13%; the operational capital as shown in the most recent financial statement: $96,736,519 thousand NTD

 

8. Concrete purpose/objective of the acquisition or disposal: financial operation

 

9. Do the directors have any objections to the present transaction? none

 

10. Any other matters that need to be specified: none


Exhibit 99.6

 

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To announce related materials on disposal of MediaTek Incorporation securities

 

1. Name of the securities: Common shares of MediaTek Incorporation

 

2. Trading date: 2006/08/18~2006/08/24

 

3. Trading volume, unit price, and total monetary amount of the transaction: trading volume: 1,196,000 shares; average unit price: $ 295.65 NTD; total amount: $ 353,595,000 NTD

 

4. Gain (or loss) (not applicable in case of acquisition of securities): $ 341,224,250 NTD

 

5. Relationship with the underlying company of the trade: MediaTek Incorporation, none.

 

6. Current cumulative volume, amount, and shareholding percentage of holdings of the security being traded (including the current trade) and status of any restriction of rights (e.g. pledges): cumulative volume: 33,138,499 shares; amount: 342,765,956 NTD; percentage of holdings: 3.42%; status of restriction of rights: no

 

7. Current ratio of long or short term securities investment (including the current trade) to the total assets and shareholder’s equity as shown in the most recent financial statement and the operational capital as shown in the most recent financial statement: ratio of total assets: 12.50%; ratio of shareholder’s equity: 15.45%; the operational capital as shown in the most recent financial statement: $96,736,519 thousand NTD

 

8. Concrete purpose/objective of the acquisition or disposal: financing operation

 

9. Do the directors have any objections to the present transaction? none

 

10. Any other matters that need to be specified: none


Exhibit 99.7

 

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Important Resolutions from 10th term 2nd Board Meeting

 

1. Date of occurrence of the event:2006/08/24

 

2. Name of the company: United Microelectronics Corp.

 

3. Relationship to the company (listed company or affiliated company): Listed company

 

4. The shareholding ratios of mutual holding: N/A

 

5. Cause of occurrence:

The board meeting has approved important resolutions as the followings:

 

  (1) To approve the financial statements for the 1st half of 2006.

 

  (2) To approve a list of applicants for “UMC Conversion Sales Program”. The Company will assist the shareholders to issue and sell UMC ADRs.

 

6. Countermeasures: none

 

7. Any other matters that need to be specified: none


Exhibit 99.8

 

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To announce related materials on acquisition of Promos Technologies common shares

 

1. Name of the securities: Common shares of Promos Technologies.

 

2. Trading date: 2006/08/24~2006/08/25

 

3. Trading volume, unit price, and total monetary amount of the transaction: trading volume: 43,237,000 shares; average unit price: $12.98 NTD; total amount: $ 561,119,853 NTD

 

4. Gain (or loss) (not applicable in case of acquisition of securities): Not applicable

 

5. Relationship with the underlying company of the trade: None

 

6. Current cumulative volume, amount, and shareholding percentage of holdings of the security being traded (including the current trade) and status of any restriction of rights (e.g. pledges): cumulative volume: 413,967,000 shares; amount:NTD 5,289,772,163; percentage of holdings: 6.83%; status of restriction of rights: no

 

7. Current ratio of long or short term securities investment (including the current trade) to the total assets and shareholder’s equity as shown in the most recent financial statement and the operational capital as shown in the most recent financial statement: ratio of total assets: 12.42% ratio of shareholder’s equity: 15.34%; the operational capital as shown in the most recent financial statement: $96,736,519 thousand NTD

 

8. Concrete purpose/objective of the acquisition or disposal: financial operation

 

9. Do the directors have any objections to the present transaction? none

 

10. Any other matters that need to be specified: none


Exhibit 99.9

 

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To announce related materials on acquisition of machinery and equipment

 

1. Name and nature of the subject matter (e.g.land located at Sublot XX, Lot XX, North District, Taichung City): Machinery and equipment

 

2. Date of the occurrence of the event: 2006/08/25~2006/08/28

 

3. Transaction volume (e.g.XX square meters, equivalent to XX p’ing), unit price, total transaction price: Transaction volume: a batch; average unit price: $ 636,459,640 NTD; total transaction price: $ 636,459,640 NTD

 

4. Counterparty to the trade and its relationship with the company (if the trading counterpart is a natural person and is not an actual related party of the Company, the name of the trading counterpart is not required to be disclosed): TOKYO ELECTRON LIMITED; non-related party transaction

 

5. Where the counterpart to the trade is an actual related party, a public announcement shall also include the reason for choosing the related party as trading counterpart and the identity of the previous owner (including its relationship with the company and the trading counterpart), price of transfer and the date of acquisition: Not applicable

 

6. Where a person who owned the property within the past five years has been an actual related person of the company, a public announcement shall also include the dates and prices of acquisition and disposal by the related person and the person’s relationship to the company at those times: Not applicable

 

7. Anticipated loss or profit from the disposal (not applicable in cases of acquisition of assets) (where originally deferred, the status or recognition shall be stated and explained):Not applicable

 

8. Terms of delivery or payment (including payment period and monetary amount): 1) 90% paid upon shipment;10% paid after acceptance 2)100% paid after acceptance

 

9. The manner of deciding on this transaction (such as tender invitation, price comparison, or price negotiation), the reference basis for the decision on price and the decision-making department: transaction: price negotiation; the reference basis for the decision on price: market price. The decision-making department: the Selection Meeting

 

10. Name of the professional appraisal institution and its appraisal amount: Not applicable

 

11. Reason for any significant discrepancy with the transaction amount, and opinion of the certifying CPA: Not applicable

 

12. Is the appraisal report price a limited price or specific price? Not applicable

 

13. Has an appraisal report not yet been obtained? Not applicable

 

14. Reason an appraisal report has not yet been obtained: Not applicable

 

15. Broker and broker’s fee: Not applicable

 

16. Concrete purpose or use of the acquisition or disposition: to produce integrated circuits

 

17. Do the directors have any objection to the present transaction? no

 

18. Any other matters that need to be specified: none


Exhibit 99.10

 

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To announce related materials on disposal of MediaTek Incorporation securities

 

1. Name of the securities: Common shares of MediaTek Incorporation

 

2. Trading date: 2006/08/25~2006/09/01

 

3. Trading volume, unit price, and total monetary amount of the transaction: trading volume: 1,135,000 shares; average unit price: $ 301.49 NTD; total amount: $ 342,192,500 NTD

 

4. Gain (or loss) (not applicable in case of acquisition of securities): $ 330,452,699 NTD

 

5. Relationship with the underlying company of the trade: MediaTek Incorporation, none.

 

6. Current cumulative volume, amount, and shareholding percentage of holdings of the security being traded (including the current trade) and status of any restriction of rights (e.g. pledges): cumulative volume: 32,003,499 shares; amount: 331,026,155 NTD; percentage of holdings: 3.31%; status of restriction of rights: no

 

7. Current ratio of long or short term securities investment (including the current trade) to the total assets and shareholder’s equity as shown in the most recent financial statement and the operational capital as shown in the most recent financial statement: ratio of total assets: 13.18%; ratio of shareholder’s equity: 16.63%; the operational capital as shown in the most recent financial statement: $ 82,601,170 thousand NTD

 

8. Concrete purpose/objective of the acquisition or disposal: financing operation

 

9. Do the directors have any objections to the present transaction? none

 

10. Any other matters that need to be specified: none


Exhibit 99.11

 

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To announce related materials on acquisition of machinery and equipment

 

1. Name and nature of the subject matter (e.g.land located at Sublot XX, Lot XX, North District, Taichung City): Machinery and equipment

 

2. Date of the occurrence of the event: 2006/09/04~2006/09/05

 

3. Transaction volume (e.g. XX square meters, equivalent to XX p’ing), unit price, total transaction price: Transaction volume: one lot; average unit price: $ 798,611,650 NTD; total transaction price:$ 798,611,650 NTD

 

4. Counterparty to the trade and its relationship with the company (if the trading counterpart is a natural person and is not an actual related party of the Company, the name of the trading counterpart is not required to be disclosed): NOVELLUS SYSTEMS, INC.; non-related party transaction

 

5. Where the counterpart to the trade is an actual related party, a public announcement shall also include the reason for choosing the related party as trading counterpart and the identity of the previous owner (including its relationship with the company and the trading counterpart), price of transfer and the date of acquisition: Not applicable

 

6. Where a person who owned the property within the past five years has been an actual related person of the company, a public announcement shall also include the dates and prices of acquisition and disposal by the related person and the person’s relationship to the company at those times: Not applicable

 

7. Anticipated loss or profit from the disposal (not applicable in cases of acquisition of assets) (where originally deferred, the status or recognition shall be stated and explained):Not applicable

 

8. Terms of delivery or payment (including payment period and monetary amount): 1)90% paid upon shipment;10% paid after acceptance 2)100% paid after acceptance

 

9. The manner of deciding on this transaction (such as tender invitation, price comparison, or price negotiation), the reference basis for the decision on price and the decision-making department: transaction: price negotiation; the reference basis for the decision on price: market price. The decision-making department: the Selection Meeting

 

10. Name of the professional appraisal institution and its appraisal amount: Not applicable

 

11. Reason for any significant discrepancy with the transaction amount, and opinion of the certifying CPA: Not applicable

 

12. Is the appraisal report price a limited price or specific price? Not applicable

 

13. Has an appraisal report not yet been obtained? Not applicable

 

14. Reason an appraisal report has not yet been obtained: Not applicable

 

15. Broker and broker’s fee: Not applicable

 

16. Concrete purpose or use of the acquisition or disposition: to produce integrated circuits

 

17. Do the directors have any objection to the present transaction? no

 

18. Any other matters that need to be specified: none


Exhibit 99.12

 

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United Microelectronics Corporation

September 7, 2006

This is to report the changes or status of 1) Sales volume 2) Funds lent to other parties 3) Endorsements and guarantees 4) Financial derivative transactions for the period of August 2005

 

1) Sales volume (NT$ Thousand)

 

Period

  

Items

   2006    2005    Changes    %  
August    Invoice amount    8,277,724    8,220,082    57,642    0.70 %
2006    Invoice amount    62,005,406    53,693,930    8,311,476    15.48 %
August    Net sales    9,416,111    8,010,667    1,405,444    17.54 %
2006    Net sales    68,753,291    54,804,546    13,948,745    25.45 %

 

2) Funds lent to other parties (NT$ Thousand)

 

Balance as of period end

   This Month    Last Month    Limit of lending
UMC    0    0    38,140,222
UMC’s subsidiaries    22,653    22,749    539,824

 

3) Endorsements and guarantees (NT$ Thousand)

 

     Change in This Month     Balance as of period end    Limit of endorsements

UMC

   (252,149 )   2,025,923    76,280,445

UMC’s subsidiaries

   0     0    7,664,389

UMC endorses for subsidiaries

 

  0    0

UMC’s subsidiaries endorse for UMC

 

  0    0

UMC endorses for PRC companies

 

  0    0

UMC’s subsidiaries endorse for PRC companies

 

  0    0

 

4) Financial derivatives transactions

 

a Hedging purpose : NT$ thousand

 

Financial instruments

   Forwards    Interests SWAP
Deposit Paid    0    0
Royalty Income (Paid)    0    0
Unwritten-off Trading Contracts    0    0
Net Profit from Fair Value    0    0
Written-off Trading Contracts    0    0
Realized profit (loss)    0    0

 

b Trading purpose : NT$ thousand

 

Financial instruments

   Credit-linked Deposits  
Deposit Paid    0  
Unwritten-off Trading Contracts    19,130,863  
Net Profit from Market Value    (1,183,652 )
Written-off Trading Contracts    0  
Realized profit (loss)    0  


Exhibit 99.13

 

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To announce related materials on disposal of MediaTek Incorporation securities

 

1. Name of the securities: Common shares of MediaTek Incorporation

 

2. Trading date: 2006/09/04~2006/09/08
3. Trading volume, unit price, and total monetary amount of the transaction: trading volume: 1,070,000 shares; average unit price: $ 327.19 NTD; total amount: $ 350,098,000 NTD

 

4. Gain (or loss) (not applicable in case of acquisition of securities): $ 339,030,522 NTD

 

5. Relationship with the underlying company of the trade: MediaTek Incorporation, none.

 

6. Current cumulative volume, amount, and shareholding percentage of holdings of the security being traded (including the current trade) and status of any restriction of rights (e.g. pledges): cumulative volume: 30,933,499 shares; amount: 319,958,677 NTD; percentage of holdings: 3.19%; status of restriction of rights: no

 

7. Current ratio of long or short term securities investment (including the current trade) to the total assets and shareholder’s equity as shown in the most recent financial statement and the operational capital as shown in the most recent financial statement: ratio of total assets: 13.21%; ratio of shareholder’s equity: 16.67%; the operational capital as shown in the most recent financial statement: $ 82,601,170 thousand NTD

 

8. Concrete purpose/objective of the acquisition or disposal: financing operation

 

9. Do the directors have any objections to the present transaction? none

 

10. Any other matters that need to be specified: none


Exhibit 99.14

 

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To announce related materials on acquisition of Promos Technologies common shares

 

1. Name of the securities: Common shares of Promos Technologies.

 

2. Trading date: 2006/08/28~2006/09/12

 

3. Trading volume, unit price, and total monetary amount of the transaction: trading volume: 51,236,000 shares; average unit price: $ 13.60 NTD; total amount: $ 696,822,741 NTD

 

4. Gain (or loss) (not applicable in case of acquisition of securities): Not applicable

 

5. Relationship with the underlying company of the trade: None

 

6. Current cumulative volume, amount, and shareholding percentage of holdings of the security being traded (including the current trade) and status of any restriction of rights (e.g. pledges): cumulative volume: 465,203,000 shares; amount:NTD 5,986,594,904; percentage of holdings: 7.68%; status of restriction of rights: no

 

7. Current ratio of long or short term securities investment (including the current trade) to the total assets and shareholder’s equity as shown in the most recent financial statement and the operational capital as shown in the most recent financial statement: ratio of total assets: 13.01% ratio of shareholder’s equity: 16.41%; the operational capital as shown in the most recent financial statement: $ 82,601,170 thousand NTD

 

8. Concrete purpose/objective of the acquisition or disposal: financial operation

 

9. Do the directors have any objections to the present transaction? none

 

10. Any other matters that need to be specified: none


Exhibit 99.15

 

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To announce related materials on acquisition of Promos Technologies common shares

 

1. Name of the securities: Common shares of Promos Technologies.

 

2. Trading date: 2006/09/13~2006/09/14

 

3. Trading volume, unit price, and total monetary amount of the transaction: trading volume: 61,547,000 shares; average unit price: $ 13.72 NTD; total amount: $ 844,519,478 NTD

 

4. Gain (or loss) (not applicable in case of acquisition of securities): Not applicable

 

5. Relationship with the underlying company of the trade: None

 

6. Current cumulative volume, amount, and shareholding percentage of holdings of the security being traded (including the current trade) and status of any restriction of rights (e.g. pledges): cumulative volume: 526,750,000 shares; amount:NTD 6,831,114,382; percentage of holdings: 8.69%; status of restriction of rights: no

 

7. Current ratio of long or short term securities investment (including the current trade) to the total assets and shareholder’s equity as shown in the most recent financial statement and the operational capital as shown in the most recent financial statement: ratio of total assets: 13.20% ratio of shareholder’s equity: 16.65%; the operational capital as shown in the most recent financial statement: $ 82,601,170 thousand NTD

 

8. Concrete purpose/objective of the acquisition or disposal: financial operation

 

9. Do the directors have any objections to the present transaction? none

 

10. Any other matters that need to be specified: none


Exhibit 99.16

 

LOGO   www.umc.com

United Microelectronics Corporation

For the month of August, 2006

This is to report 1) the trading of directors, supervisors, executive officers and 10% shareholders of United Microelectronics Corporation (“UMC”) (NYSE: UMC) 2) the pledge and clear of pledge of UMC common shares by directors, supervisors, executive officers and 10% shareholders of UMC 3) the acquisition assets by UMC 4) the disposition of assets by UMC for the month of August, 2006.

 

1) The trading of directors, supervisors, executive officers and 10% shareholders

 

Title

  

Name

  

Number of shares
held as of

July 31, 2006

  

Number of shares
held as of

August 31, 2006

   Changes  
Director    Ting-Yu Lin    16,182,403    16,782,403    600,000  
Vice President    Shih-Wei Sun    15,183,341    15,083,341    (100,000 )
Vice President    Ing-Ji Wu    12,217,039    11,907,039    (310,000 )
Vice President    Wen-Yang Chen    6,877,255    4,377,255    (2,500,000 )
Vice President    Lee Chung    601,546    531,546    (70,000 )
Vice President    Po-Wen Yen    1,612,551    1,462,551    (150,000 )

Note: Shares transferred to children.

 

2) The pledge and clear of pledge of UMC common shares by directors, supervisors, executive officers and 10% shareholders :

 

Title

   Name   

Number of shares
pledge as of

July 31, 2006

  

Number of shares
pledge as of

August 31, 2006

   Changes

—  

   —      —      —      —  

 

3) The acquisition assets (NT$ Thousand)

 

Description of assets

   August    2006

Semiconductor Manufacturing Equipment

   3,978,470    15,763,431

Fixed assets

   45,697    259,788

 

4) The disposition of assets (NT$ Thousand)

 

Description of assets

   August    2006

Semiconductor Manufacturing Equipment

   24,151    197,865

Fixed assets

   0    0


Exhibit 99.17

 

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United Microelectronics Corporation (and Subsidiaries) Financial Statements With Report of Independent Auditors for the Six-Month Periods Ended June 30, 2006 And 2005


UNITED MICROELECTRONICS CORPORATION

FINANCIAL STATEMENTS

WITH REPORT OF INDEPENDENT AUDITORS

FOR THE SIX-MONTH PERIODS ENDED

JUNE 30, 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.


REPORT OF INDEPENDENT AUDITORS

English Translation of a Report Originally Issued in Chinese

To the Board of Directors and Shareholders of

United Microelectronics Corporation

We have audited the accompanying balance sheets of United Microelectronics Corporation as of June 30, 2006 and 2005, and the related statements of income, statements of changes in stockholders’ equity, and cash flows for the six-month periods ended June 30, 2006 and 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. As described in Note 4(10) to the financial statements, certain long-term investments were accounted for under the equity method based on financial statements as of June 30, 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$499 million and NT$144 million for the six-month periods ended June 30, 2006 and 2005, respectively, and the related long-term investment balances of NT$5,706 million and NT$5,559 million as of June 30, 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 June 30, 2006 and 2005, and the results of its operations and its cash flows for the six-month periods ended June 30, 2006 and 2005, in conformity with the “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 R.O.C. Statement of Financial Accounting Standards No. 34, “Accounting for Financial Instruments” and No. 36, “Disclosure and Presentation of Financial Instruments” 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 R.O.C. 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 six-month periods ended June 30, 2006 and 2005, and have expressed an unqualified opinion with explanatory paragraph on such financial statements.

July 19, 2006

Taipei, Taiwan

Republic of China

Notice to Readers

The accompanying audited financial statements are intended only to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.

 

1


English Translation of Financial Statements Originally Issued in Chinese

UNITED MICROELECTRONICS CORPORATION

BALANCE SHEETS

June 30, 2006 and 2005

(Expressed in Thousands of New Taiwan Dollars)

 

          As of June 30,  

Assets

  

Notes

   2006     2005  

Current assets

       

Cash and cash equivalents

   2, 4 (1)    $ 90,049,580     $ 68,065,457  

Financial assets at fair value through profit or loss, current

   2, 3, 4 (2)      1,506,063       2,286,070  

Available-for-sale financial assets, current

   2, 3, 4 (3)      —         772,509  

Held-to-maturity financial assets, current

   2, 3, 4 (4)      779,456       63,080  

Notes receivable

   4 (5)      2,755       288  

Notes receivable - related parties

   5      70,880       57,853  

Accounts receivable, net

   2, 4 (6)      5,308,537       5,082,399  

Accounts receivable - related parties, net

   2, 5      7,173,966       4,506,666  

Other receivables

   2, 5      722,558       611,559  

Inventories, net

   2, 4 (7)      10,383,292       7,898,701  

Prepaid expenses

        849,094       820,875  

Deferred income tax assets, current

   2, 4 (22)      2,720,051       3,413,529  
                   

Total current assets

        119,566,232       93,578,986  
                   

Funds and investments

       

Available-for-sale financial assets, noncurrent

   2, 3, 4 (8)      37,864,803       5,171,355  

Held-to-maturity financial assets, noncurrent

   2, 3, 4 (4)      200,000       1,153,028  

Financial assets measured at cost, noncurrent

   2, 3, 4 (9)      2,265,728       2,544,521  

Long-term investments accounted for under the equity method

   2, 3, 4 (10)      33,261,799       37,304,798  
                   

Total funds and investments

        73,592,330       46,173,702  
                   

Property, plant and equipment

   2, 3, 4 (11), 7     

Land

        1,132,576       1,132,576  

Buildings

        16,249,112       15,860,960  

Machinery and equipment

        380,689,179       348,877,930  

Transportation equipment

        78,461       88,095  

Furniture and fixtures

        2,300,342       2,119,552  
                   

Total cost

        400,449,670       368,079,113  

Less : Accumulated depreciation

        (274,361,684 )     (228,295,715 )

Add : Construction in progress and prepayments

        10,539,974       20,087,650  
                   

Property, plant and equipment, net

        136,627,960       159,871,048  
                   

Intangible assets

       

Goodwill

   2, 3      3,745,122       4,168,997  

Technological know-how

   2      299,877       399,178  
                   

Total intangible assets

        4,044,999       4,568,175  
                   

Other assets

       

Deferred charges

   2      1,627,918       1,800,209  

Deferred income tax assets, noncurrent

   2, 4 (22)      4,414,737       3,922,375  

Other assets - others

   2, 4 (12), 6      1,956,997       2,069,695  
                   

Total other assets

        7,999,652       7,792,279  
                   

Total assets

      $ 341,831,173     $ 311,984,190  
                   
          As of June 30,  

Liabilities and Stockholders’ Equity

  

Notes

   2006     2005  

Current liabilities

       

Short-term loans

   4 (13)    $ —       $ 1,645,280  

Financial liabilities at fair value through profit or loss, current

   2, 3, 4 (14)      1,188,290       27,475  

Accounts payable

        4,733,091       3,797,102  

Income tax payable

   2      1,188,953       60,389  

Accrued expenses

        5,781,758       5,274,099  

Dividend payable

   4 (20)      7,161,301       1,758,736  

Payable on equipment

        4,398,689       3,413,036  

Other payables

   4 (20)      311,960       27,006  

Current portion of long-term liabilities

   2, 4 (15)      10,312,904       5,250,000  

Other current liabilities

   7      1,888,116       820,413  
                   

Total current liabilities

        36,965,062       22,073,536  
                   

Long-term liabilities

       

Bonds payable

   2, 4 (15)      30,279,246       28,347,240  
                   

Total long-term liabilities

        30,279,246       28,347,240  
                   

Other liabilities

       

Accrued pension liabilities

   2, 4 (16)      3,044,682       2,962,723  

Deposits-in

        21,451       20,636  

Deferred credits - intercompany profits

   2      9,806       9,806  

Other liabilities - others

        551,252       510,637  
                   

Total other liabilities

        3,627,191       3,503,802  
                   

Total liabilities

        70,871,499       53,924,578  
                   

Capital

       

Common stock

   2, 4 (17), 4 (18), 4 (20)      188,452,341       177,794,314  

Stock dividends for distribution

        2,248,771       19,560,220  

Capital reserve

   2, 4 (17)     

Premiums

        60,712,685       64,227,411  

Change in equities of long-term investments

        6,655,250       20,786,958  

Retained earnings

   4 (17), 4 (20)     

Legal reserve

        16,699,508       15,996,839  

Special reserve

        322,150       1,744,171  

Unappropriated earnings

        3,434,838       3,622,790  

Adjusting items in stockholders’ equity

   2, 4 (8)     

Cumulative translation adjustment

        (855,518 )     (1,998,163 )

Unrealized gain or loss on financial instruments

        19,677,371       (9,597,290 )

Treasury stock

   2, 4 (10), 4 (17), 4 (19)      (26,387,722 )     (34,077,638 )
                   

Total stockholders’ equity

        270,959,674       258,059,612  
                   

Total liabilities and stockholders’ equity

      $ 341,831,173     $ 311,984,190  
                   

The accompanying notes are an integral part of the financial statements.

 

2


English Translation of Financial Statements Originally Issued in Chinese

UNITED MICROELECTRONICS CORPORATION

STATEMENTS OF INCOME

For the six-month periods ended June 30, 2006 and 2005

(Expressed in Thousands of New Taiwan Dollars, Except for Earnings per Share )

 

         

For the six-month period ended

June 30,

 
    

Notes

   2006     2005  

Operating revenues

   2, 5     

Sales revenues

      $ 49,078,075     $ 39,605,151  

Less : Sales returns and discounts

        (456,096 )     (729,298 )
                   

Net sales

        48,621,979       38,875,853  

Other operating revenues

        1,512,987       852,773  
                   

Net operating revenues

        50,134,966       39,728,626  
                   

Operating costs

   4 (21), 5     

Cost of goods sold

        (40,738,614 )     (36,279,398 )

Other operating costs

        (999,065 )     (266,257 )
                   

Operating costs

        (41,737,679 )     (36,545,655 )
                   

Gross profit

        8,397,287       3,182,971  

Unrealized intercompany profit

   2      (91,439 )     (68,741 )

Realized intercompany profit

   2      120,153       154,417  
                   

Gross profit-net

        8,426,001       3,268,647  
                   

Operating expenses

   4 (21), 5     

Sales and marketing expenses

        (1,373,023 )     (1,050,885 )

General and administrative expenses

        (1,207,715 )     (1,298,115 )

Research and development expenses

        (4,130,707 )     (3,956,436 )
                   

Subtotal

        (6,711,445 )     (6,305,436 )
                   

Operating income (loss)

        1,714,556       (3,036,789 )
                   

Non-operating income

       

Interest revenue

   2, 5      709,934       436,914  

Investment gain accounted for under the equity method, net

   2, 4 (10)      582,324       —    

Dividend income

        26,371       36,789  

Gain on disposal of property, plant and equipment

   2      93,923       33,840  

Gain on disposal of investments

   2      18,708,934       6,439,830  

Exchange gain, net

   2      90,800       41,233  

Gain on recovery of market value of inventories

   2      —         315,151  

Gain on valuation of financial liabilities

   2      89,197       —    

Other income

        440,236       390,360  
                   

Subtotal

        20,741,719       7,694,117  
                   

Non-operating expenses

       

Interest expense

   4 (11)      (397,415 )     (447,071 )

Investment loss accounted for under the equity method, net

   2, 4 (10)      —         (2,144,439 )

Loss on disposal of property, plant and equipment

   2      (23,501 )     (63,344 )

Loss on decline in market value and obsolescence of inventories

   2      (401,003 )     —    

Financial expenses

        (104,842 )     (149,905 )

Impairment loss

   2, 4 (10)      (21,807 )     —    

Loss on valuation of financial assets

   2      (590,466 )     —    

Other losses

        (36,390 )     (34,472 )
                   

Subtotal

        (1,575,424 )     (2,839,231 )
                   

Income from continuing operations before income tax

        20,880,851       1,818,097  

Income tax expense

   2, 4 (22)      (1,354,548 )     (397 )
                   

Net income from continuing operations

        19,526,303       1,817,700  

Cumulative effect of changes in accounting principles (the net amount after deducted tax expense $0)

   3      (1,188,515 )     —    
                   

Net income

      $ 18,337,788     $ 1,817,700  
                   
          Pre-tax     Post-tax     Pre-tax    Post-tax

Earnings per share-basic (NTD)

   2, 4 (23)          

Income from continuing operations

      $ 1.15     $ 1.08     $ 0.10    $ 0.10

Cumulative effect of changes in accounting principles

        (0.07 )     (0.07 )     —        —  
                                

Net income

      $ 1.08     $ 1.01     $ 0.10    $ 0.10
                                

Earnings per share-diluted (NTD)

   2, 4 (23)          

Income before income tax

      $ 1.11     $ 1.03     $ 0.10    $ 0.10

Cumulative effect of changes in accounting principles

        (0.06 )     (0.06 )     —        —  
                                

Net income

      $ 1.05     $ 0.97     $ 0.10    $ 0.10
                                

Pro forma information on earnings as if subsidiaries’ investment in the Company is not treated as treasury stock

   2, 4 (23)      

Net income

      $ 18,337,788    $ 1,817,700
                

Earnings per share-basic (NTD)

      $ 1.00    $ 0.09
                

Earnings per share-diluted (NTD)

      $ 0.97    $ 0.09
                

The accompanying notes are an integral part of the financial statements.

 

3


English Translation of Financial Statements Originally Issued in Chinese

UNITED MICROELECTRONICS CORPORATION

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the six-month periods ended June 30, 2006 and 2005

(Expressed in Thousands of New Taiwan Dollars)

 

        Capital           Retained Earnings    

Unrealized
Gain/Loss
on
Financial
Instruments

   

Cumulative
Translation
Adjustment

   

Treasury
Stock

   

Total

 
    Notes   Common
Stock
    Stock
Dividends
for
Distribution
  Collected
in
Advance
    Capital
Reserve
    Legal
Reserve
  Special
Reserve
    Unappropriated
Earnings
         

Balance as of January 1, 2005

  4 (17)   $ 177,919,819     $ —     $ 4,040     $ 84,933,195     $ 12,812,501   $ 90,871     $ 29,498,329     $ (9,871,086 )   $ (1,319,452 )   $ (27,685,463 )   $ 266,382,754  

Appropriation of 2004 retained earnings

  4 (20)                      

Legal reserve

      —         —       —         —         3,184,338     —         (3,184,338 )     —         —         —         —    

Special reserve

      —         —       —         —         —       1,653,300       (1,653,300 )     —         —         —         —    

Cash dividends

      —         —       —         —         —       —         (1,758,736 )     —         —         —         (1,758,736 )

Stock dividends

      —         17,587,365     —         —         —       —         (17,587,365 )     —         —         —         —    

Remuneration to directors and supervisors

      —         —       —         —         —       —         (27,005 )     —         —         —         (27,005 )

Employee bonus - stock

      —         1,972,855     —         —         —       —         (1,972,855 )     —         —         —         —    

Purchase of treasury stock

  2, 4 (19)     —         —       —         —         —       —         —         —         —         (8,570,374 )     (8,570,374 )

Cancellation of treasury stock

  2, 4 (19)     (491,140 )     —       —         (177,419 )     —       —         (1,509,640 )     —         —         2,178,199       —    

Net income in the first half of 2005

      —         —       —         —         —       —         1,817,700       —         —         —         1,817,700  

Adjustment of capital reserve accounted for under the equity method

  2     —         —       —         (20,055 )     —       —         —         —         —         —         (20,055 )

Changes in unrealized gain on financial instruments of investees

  2     —         —       —         —         —       —         —         273,796       —         —         273,796  

Exercise of employee stock options

  2, 4 (18)     361,595       —       —         278,648       —       —         —         —         —         —         640,243  

Common stock transferred from capital collected in advance

      4,040       —       (4,040 )     —         —       —         —         —         —         —         —    

Changes in cumulative translation adjustment

  2     —         —       —         —         —       —         —         —         (678,711 )     —         (678,711 )
                                                                                     

Balance as of June 30, 2005

    $ 177,794,314     $ 19,560,220   $ —       $ 85,014,369     $ 15,996,839   $ 1,744,171     $ 3,622,790     $ (9,597,290 )   $ (1,998,163 )   $ (34,077,638 )   $ 258,059,612  
                                                                                     

Balance as of January 1, 2006

  4 (17)   $ 197,947,033     $ —     $ 36,600     $ 85,381,599     $ 15,996,839   $ 1,744,171     $ 8,831,782     $ (9,527,362 )   $ (241,153 )   $ (41,885,956 )   $ 258,283,553  

The effect of adopting SFAS NO. 34

  3 (3)     —         —       —         —         —       —         —         23,499,003       11,547       —         23,510,550  

Appropriation of 2005 retained earnings

  4 (20)                      

Legal reserve

      —         —       —         —         702,669     —         (702,669 )     —         —         —         —    

Special reserve

      —         —       —         —         —       (1,422,021 )     1,422,021       —         —         —         —    

Cash dividends

      —         —       —         —         —       —         (7,161,267 )     —         —         —         (7,161,267 )

Stock dividends

      —         895,158     —         —         —       —         (895,158 )     —         —         —         —    

Remuneration to directors and supervisors

      —         —       —         —         —       —         (6,324 )     —         —         —         (6,324 )

Employee bonus - cash

      —         —       —         —         —       —         (305,636 )     —         —         —         (305,636 )

Employee bonus - stock

      —         458,455     —         —         —       —         (458,455 )     —         —         —         —    

Capital reserve transferred to common stock

  4 (17)     —         895,158     —         (895,158 )     —       —         —         —         —         —         —    

Purchase of treasury stock

  2, 4 (19)     —         —       —         —         —       —         —         —         —         (24,279,397 )     (24,279,397 )

Cancellation of treasury stock

  2, 4 (17), 4 (19)     (10,000,000 )     —       —         (3,269,100 )     —       —         (6,371,128 )     —         —         19,640,228       —    

Adjustment of treasury stock due to loss of control over subsidiary

      —         —       —         —         —       —         (9,256,116 )     2,620,135       —         20,137,403       13,501,422  

Net income in the first half of 2006

      —         —       —         —         —       —         18,337,788       —         —         —         18,337,788  

Adjustment of capital reserve accounted for under the equity method

  2     —         —       —         (15,280 )     —       —         —         —         —         —         (15,280 )

Adjustment of funds and investments disposal

  2     —         —       —         (14,110,993 )     —       —         —         —         8,171       —         (14,102,822 )

Changes in unrealized loss on available-for-sale financial assets

  2     —         —       —         —         —       —         —         (149,372 )     —         —         (149,372 )

Changes in unrealized gain on financial instruments of investees

  2     —         —       —         —         —       —         —         3,234,967       —         —         3,234,967  

Exercise of employee stock options

  2, 4 (18)     468,708       —       —         276,867       —       —         —         —         —         —         745,575  

Common stock transferred from capital collected in advance

      36,600       —       (36,600 )     —         —       —         —         —         —         —         —    

Changes in cumulative translation adjustment

  2     —         —       —         —         —       —         —         —         (634,083 )     —         (634,083 )
                                                                                     

Balance as of June 30, 2006

    $ 188,452,341     $ 2,248,771   $ —       $ 67,367,935     $ 16,699,508   $ 322,150     $ 3,434,838     $ 19,677,371     $ (855,518 )   $ (26,387,722 )   $ 270,959,674  
                                                                                     

The accompanying notes are an integral part of the financial statements.

 

4


English Translation of Financial Statements Originally Issued in Chinese

UNITED MICROELECTRONICS CORPORATION

STATEMENTS OF CASH FLOWS

For the six-month periods ended June 30, 2006 and 2005

(Expressed in Thousands of New Taiwan Dollars)

 

     For the six-month period ended
June 30,
 
     2006     2005  

Cash flows from operating activities:

    

Net income

   $ 18,337,788     $ 1,817,700  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation

     22,717,399       22,080,111  

Amortization

     921,607       1,111,695  

Bad debt expenses (reversal)

     7,825       (116,245 )

Loss (gain) on decline (recovery) in market value and obsolescence of inventories

     401,003       (315,151 )

Cash dividends received under the equity method

     —         7,500  

Investment loss (gain) accounted for under the equity method

     (582,324 )     2,144,439  

Loss on valuation of financial assets and liabilities

     1,689,784       —    

Impairment loss

     21,807       —    

Gain on disposal of investments

     (18,708,934 )     (6,439,830 )

Loss (gain) on disposal of property, plant and equipment

     (70,422 )     29,504  

Exchange loss (gain) on financial assets and liabilities

     (13,861 )     13,576  

Exchange gain on long-term liabilities

     (226,299 )     (9,789 )

Amortization of bond discounts

     48,280       —    

Amortization of deferred income

     (59,747 )     (26,732 )

Changes in assets and liabilities:

    

Financial assets and liabilities at fair value through profit or loss, current

     370,882       101,641  

Notes and accounts receivable

     (217,198 )     2,004,339  

Other receivables

     111,015       (46,543 )

Inventories

     (829,918 )     1,528,698  

Prepaid expenses

     (427,841 )     (510,188 )

Accounts payable

     (9,516 )     (920,209 )

Accrued expenses

     (3,706 )     (3,287,674 )

Other current liabilities

     470,496       (124,763 )

Capacity deposits

     (9,400 )     (201,216 )

Accrued pension liabilities

     40,904       272,212  

Other liabilities - others

     236,756       107,962  
                

Net cash provided by operating activities

     24,216,380       19,221,037  
                

Cash flows from investing activities:

    

Cash proceeds from merger

     —         943,862  

Acquisition of available-for-sale financial assets

     (296,823 )     (318,396 )

Proceeds from disposal of available-for-sale financial assets

     5,115,113       4,602,598  

Proceeds from disposal of held-to-maturity financial assets

     —         453,640  

Acquisition of financial assets measured at cost

     —         (323,616 )

Proceeds from disposal of financial assets measured at cost

     31,188       —    

Acquisition of long-term investments accounted for under the equity method

     (3,465,263 )     (1,685,256 )

Proceeds from disposal of long-term investments accounted for under the equity method

     7,801,029       2,627,313  

Proceeds from liquidation of long-term investments

     —         95,090  

Acquisition of property, plant and equipment

     (11,198,577 )     (7,812,374 )

Proceeds from disposal of property, plant and equipment

     100,882       78,242  

Increase in deferred charges

     (599,150 )     (686,340 )

Decrease (increase) in other assets - others

     60,117       (129,531 )

Increase in other receivables

     —         (5,137,760 )
                

Net cash used in investing activities

     (2,451,484 )     (7,292,528 )
                

 

5


English Translation of Financial Statements Originally Issued in Chinese

UNITED MICROELECTRONICS CORPORATION

STATEMENTS OF CASH FLOWS

For the six-month periods ended June 30, 2006 and 2005

(Expressed in Thousands of New Taiwan Dollars)

 

     For the six-month period ended
June 30,
 
     2006     2005  

(continued)

    

Cash flows from financing activities:

    

Decrease in short-term loans

   $ —       $ (259,120 )

Repayment of long-term loans

     —         (16,153,714 )

Redemption of bonds

     (5,250,000 )     (2,820,004 )

Increase (decrease) in deposits-in

     627       (1,437 )

Purchase of treasury stock

     (23,831,089 )     (8,570,374 )

Exercise of employee stock options

     745,575       640,243  
                

Net cash used in financing activities

     (28,334,887 )     (27,164,406 )
                

Effect of exchange rate changes on cash and cash equivalents

     22,948       (45,975 )
                

Decrease in cash and cash equivalents

     (6,547,043 )     (15,281,872 )

Cash and cash equivalents at beginning of period

     96,596,623       83,347,329  
                

Cash and cash equivalents at end of period

   $ 90,049,580     $ 68,065,457  
                

Supplemental disclosures of cash flow information:

    

Cash paid for interest

   $ 777,461     $ 1,130,964  
                

Cash paid (refunded) for income tax

   $ 78,693     $ (27,513 )
                

Investing activities partially paid by cash:

    

Acquisition of property, plant and equipment

   $ 10,319,403     $ 4,947,474  

Add: Payable at beginning of period

     5,277,863       4,704,299  

 Payable transferred in from the Branch at beginning of period

     —         1,573,637  

Less: Payable at end of period

     (4,398,689 )     (3,413,036 )
                

Cash paid for acquiring property, plant and equipment

   $ 11,198,577     $ 7,812,374  
                

Investing and financing activities not affecting cash flows:

    

Principal amount of exchangeable bonds exchanged by bondholders

   $ 69,621     $ —    

Book value of reference 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     $ —    
                

The accompanying notes are an integral part of the financial statements.

 

6


UNITED MICROELECTRONICS CORPORATION

NOTES TO FINANCIAL STATEMENTS

June 30, 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 individual 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 “Guidelines Governing the Preparation of Financial Reports by Securities Issuers” and accounting principles generally accepted in the Republic of China (R.O.C.).

Summaries of significant accounting policies are as follows:

Use of Estimates

The preparation of 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. The actual results may differ from those estimates.

 

7


Foreign Currency Transactions

Transactions denominated in foreign currencies are translated into New Taiwan Dollars at the exchange rates prevailing at the transaction dates. Receivables, other monetary assets, and liabilities denominated in foreign currencies are translated into New Taiwan Dollars at the exchange rates prevailing at the balance sheet date. Exchange gains or losses are included in the current reporting period’s results. However, exchange gains or losses from investments in foreign entities are recognized as a cumulative translation adjustment in stockholders’ equity.

Non-currency assets and liabilities denominated in foreign currencies and marked to market with changes in market value charged to the statement of income, are valued at the spot exchange rate at the balance sheet date, with arising exchange gains or losses recognized in the current reporting period. For similar assets and liabilities where the changes in market value are charged to stockholders’ equity, the spot exchange rate at the balance sheet date is used and any resulting exchange gains or losses are recorded as adjustment items to stockholders’ equity. The exchange rate at the date of transaction is used to record non-currency assets and liabilities which are denominated in foreign currencies and measured at cost.

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, and average exchange rates for profit and loss accounts. The cumulative translation effects from the Branch using functional currencies other than 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 Assets and Financial Liabilities

Based on the R.O.C. Statement of Financial Accounting Standard (SFAS) No. 34, “Accounting for Financial Instruments” and the “Guidelines Governing the Preparation of Financial Reports by Securities Issuers”, financial assets are classified as financial assets at fair value through profit or loss, held-to-maturity financial assets, financial assets measured at cost, and available-for-sale financial assets. Financial liabilities are classified as financial liabilities at fair value through profit or loss.

 

8


The Company’s purchases and sales of financial assets and liabilities are recognized on the trade date, the date that Company commits to purchasing or selling the asset and liability. Financial assets and financial liabilities are initially recognized at fair value plus the acquisition or issuance costs. Accounting policies prior to, and including, December 31, 2005 are described in Note 3.

 

  a. Financial assets and financial liabilities at fair value through profit or loss

Financial assets and financial liabilities held for short-term sale or repurchase purposes, and derivative financial instruments not qualified for hedging purposes are classified as either financial assets or financial liabilities at fair value through profit or loss.

Financial assets or financial liabilities are subsequently measured at fair value and changes in fair value are recognized as profit or loss. Stocks of listed companies, convertible bonds, and close-end funds are measured at closing prices at the balance sheet date. Open-end funds are measured at the unit price of the net assets at the balance sheet date. The fair value of derivative financial instruments is determined by using valuation techniques commonly used by market participants to price the instrument.

 

  b. Held-to-maturity financial assets

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity where the Company has the positive intention and ability to hold to maturity. Investments that are intended to be held to maturity are subsequently measured at amortized cost.

If there is any objective evidence of impairment, impairment loss is recognized by the Company. If subsequently the impairment loss has recovered, and such recovery is evidently related to improvements in events or factors that have originally caused the impairment loss, the Company shall reverse the amount, which will be recorded as profit in the current period. The new cost basis as a result of the reversal shall not exceed the amortized cost prior to the impairment.

 

  c. Financial assets measured at cost

Unlisted stocks, funds, and others without reliable market prices are measured at cost. Where objective evidence of impairment exists, the Company shall recognize impairment loss, which shall not be reversed in subsequent periods.

 

  d. Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets neither classified as financial assets at fair value through profit or loss, nor held-to-maturity financial assets, loans and receivables. Subsequent measurement is measured at fair value. Stocks of listed companies are measured at closing prices at the balance sheet date. The gain or loss arising from the change in fair value, excluding impairment loss and exchange gain or loss, 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 income statement.

 

9


The Company recognizes impairment loss when there is any objective evidence of impairment. Any reduction in the loss of equity investments in subsequent periods will be recognized as an adjustment to stockholders’ equity. For debt instruments, if the reduction is clearly related to improvements in the factors or events that have originally caused the impairment, the amount shall be reversed and recognized in the current period’s statement of income.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is provided based on management’s judgment and on the evaluation of 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 at the lower of aggregate cost or market value at the balance sheet date. The market values of raw materials and supplies are determined on the basis of replacement cost while work in process and finished goods are determined by net realizable values. An allowance for loss on decline in market value and obsolescence is provided when necessary.

Long-term Investments Accounted for Under the Equity Method

Long-term investments are recorded at acquisition cost. Investments acquired by contribution of technological know-how are credited to deferred credits among affiliates, which will be amortized to income over a period of 5 years.

Investment income or loss from investments in both listed and unlisted investees is accounted for under the equity method provided that the Company owns at least 20% of the outstanding voting rights of the investees or has significant influence on operating decisions of the investees. The difference of the acquisition cost and the underlying equity in the investee’s net assets is amortized over 5 years. However, effective from January 1, 2006, such a difference is no longer amortized. Arising differences from new acquisitions are analyzed and accounted for in the manner similar to the allocation of acquisition cost as provided in the R.O.C. SFAS No. 25, “Business Combination – Accounting Treatment under Purchase Method”, where goodwill is not subject to amortization.

The change in the Company’s proportionate share in the net assets of its investee resulting from its subscription to additional stock, issued by such investee, at a rate not proportionate to its existing equity ownership in such investee, is charged to the capital reserve and long-term investments account.

 

10


Unrealized intercompany gains and losses arising from downstream transactions with investees accounted for under the equity method are eliminated in proportion to the Company’s ownership percentage, while those from transactions with majority-owned (above 50%) subsidiaries are eliminated entirely.

Unrealized intercompany gains and losses arising from upstream transactions with investees accounted for under the equity method are eliminated in proportion to the Company’s ownership percentage. Unrealized intercompany gains and losses arising from transactions between investees accounted for under the equity method are eliminated in proportion to the Company’s ownership percentage, while those arising from transactions between majority-owned subsidiaries are eliminated in proportion to the Company’s ownership percentage in the subsidiary incurred with a 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.

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 expenditure and are depreciated accordingly. When property, plant and equipment are disposed, their original cost and accumulated depreciation are to be written off and the related gain or loss is classified as non-operating income or expenses. Idle assets are transferred to other assets according to the lower of net book or net realizable value, with the difference charged to non-operating expenses.

Depreciation is provided on a straight-line basis using the estimated economic life of the assets less salvage value, if any. When the estimated economic life expires, property, plant and equipment which are still in use, are depreciated over the newly estimated remaining useful life using the salvage value. 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 from January 1, 2006, goodwill generated from consolidation 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.

 

11


The Company assesses whether there is any indication of impairment other than temporary. If any such indication exists, the recoverable amount is estimated and impairment loss is recognized accordingly. 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: patent license fees - the term of contract or estimated economic life of the related technology; and software - 3 years.

Prior to, and including December 31, 2005, the issuance costs of convertible and exchangeable bonds were classified as deferred charges and amortized over the life of the bonds. Since January 1, 2006, the amortized amounts as of December 31, 2005 were reclassified as discount of bonds as a deduction to bonds payable. The amounts are amortized based on the interest method during remaining life of the bonds. Where the difference between straight-line method and interest method is slight, the bond discounts shall be amortized based on the straight-line method.

The Company assesses whether there is any indication of other than temporary impairment. If any such indication exists, the recoverable amount is estimated and impairment loss is recognized accordingly. The book value after recognizing the impairment loss is recorded as the new cost basis.

Convertible and Exchangeable Bonds

The excess of the stated redemption price over the par value is accrued as compensation interest payable over the redemption period, using the effective interest method.

When convertible bondholders exercise their conversion rights, the book value of bonds is credited to common stock at an amount equal to the par value of the common stock and the excess is credited to the capital reserve; no gain or loss is recognized on bond conversion.

When exchangeable bondholders exercise their rights to exchange for the reference shares, the book value of the bonds is to be offset against the book value of the investments in reference shares and the related stockholders’ equity accounts, with the difference recognized as gain or loss on disposal of investments.

Based on the R.O.C. SFAS No. 34, “Accounting for Financial Instruments”, as of January 1, 2006, derivative financial instruments embedded in convertible bonds shall be bifurcated and accounted as financial liabilities with changes in market value recognized in earnings if the economic and risk characteristics of the embedded derivative instrument and the host contract are not clearly and closely related.

 

12


Pension Plan

All regular employees are entitled to a defined benefit pension plan that is managed by an independently administered pension fund committee within the Company. The fund is deposited under the committee’s name in the Central Trust of China and hence, not associated with the Company. Therefore the fund shall not 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 R.O.C. (the Act), which adopts a defined contribution plan, became effective on July 1, 2005. In accordance with the Act, employees may choose to elect either the Act, by retaining their seniority before the enforcement of the Act, or the pension mechanism of the Labor Standards Law. For employees who elect the Act, the Company will make monthly contributions of no less than 6% of the employees’ monthly wages to the employees’ individual pension accounts.

The accounting for pension is computed in accordance with the R.O.C. SFAS No. 18. For the defined benefit pension plan, the net pension cost is calculated based on an actuarial valuation, and 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. For the defined contribution pension plan, the Company recognizes the pension amount as expense in the period in which the contribution becomes due.

Employee Stock Option Plan

The Company applies the intrinsic value method to recognize the difference between the market price of the stock and the exercise price of its employee stock option as compensation cost. Starting January 1, 2004, 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 the R.O.C. SFAS No. 30, “Accounting for Treasury Stocks”, which requires that treasury stock held by the Company to be accounted for under the cost method. Cost of treasury stock is shown as a deduction to stockholders’ equity, while gain or loss from selling treasury stock is treated as an adjustment to capital reserve. The Company’s stock held by its subsidiaries is also treated as treasury stock in the Company’s account.

Revenue Recognition

The main sales term of the Company is Free on Board (FOB) or Free Carrier (FCA). Revenue is recognized when the ownership and risk of the products have been transferred to customers and the possibility of sales collection is reasonably assured. Allowance for sales returns and discounts is estimated based on customer complaints and historical experiences. Such provisions are recognized in the reporting period the products are sold.

 

13


Capital Expenditure versus Operating Expenditure

Expenditure shall be capitalized when it is probable that future economic benefits associated with the expenditure will flow to the Company and the expenditure amount exceeds a predetermined level. Otherwise it is charged as expense when incurred.

Income Tax

The Company adopted the R.O.C. SFAS No. 22, “Accounting for Income Taxes” for inter-period and intra-period income tax allocation. Provision for income tax includes deferred income tax resulting from temporary differences, loss carry-forward and investment tax credits. Deferred income tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements using enacted tax rates and laws that will be in effect when the difference is expected to reverse. 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 the R.O.C. 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 when 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. The IBTA is a supplemental tax at 10% (set up by the Executive Yuan) that is payable if the income tax payable pursuant to the R.O.C. Income Tax Act is below the minimum amount as prescribed by the IBTA, and is calculated based on taxable income defined under 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 the R.O.C. 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. The net income (loss) would also be adjusted for the interest and other income or expenses derived from any underlying dilutive share equivalents. The weighted-average outstanding shares are adjusted retroactively for stock dividends and bonus share issues.

 

14


Asset Impairment

Pursuant to the R.O.C. 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 carrying amount with the recoverable amount of the assets or the cash-generating unit (CGU) 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, whether there is any indication that the impairment loss may no longer exist or may have diminished. If there is any such indication, the Company recalculates the recoverable amount of the asset. If the recoverable amount increases as a result of the increase in the estimated service potential of the assets, the Company reverses the impairment loss such that the resulting carrying amount of the asset shall 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. In allocating impairment losses, the portion of goodwill allocated is to be written down first. After goodwill has been written off, the remaining impairment loss, if any, is to be shared among other assets pro rata to their carrying amount. The write-down in goodwill cannot be reversed under any circumstance in subsequent periods.

Impairment loss (reversal) is classified as non-operating losses (income).

 

3. ACCOUNTING CHANGE

Asset Impairment

The Company adopted the R.O.C. SFAS No. 35, “Accounting for Asset Impairment” to account for the impairment of its assets for its financial statements effective on January 1, 2005. No retroactive adjustment is required under the standard. Such a change in accounting principles did not have any impact on the Company’s net income, basic earnings per share after tax for the six-month period ended June 30, 2005 as well as the total assets as of June 30, 2005.

Goodwill

The Company adopted the amendments to the R.O.C. 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”, which have all discontinued the amortization of goodwill effective on January 1, 2006. The above changes in accounting principles has increased the Company’s total assets as of June 30, 2006 by NT$ 429 million, and increased the Company’s net income and earnings per share by NT$429 million and NT$0.02, respectively, for the six-month period ended June 30, 2006.

 

15


Financial Instruments

 

  (1) The Company adopted the R.O.C. SFAS No. 34, “Accounting for Financial Instruments” and SFAS No. 36, “Disclosure and Presentation of Financial Instruments” to account for the financial instruments for its financial statements beginning on and after January 1, 2006. Some items have already been reclassified according to the R.O.C. “Guidelines Governing the Preparation of Financial Reports by Securities Issuers”, SFAS No. 34 and No. 36 for the six-month period ended June 30, 2005.

 

  (2) The accounting policies prior to, and including, December 31, 2005 are as follows:

 

  a. Marketable Securities

Marketable securities are recorded at cost at acquisition and are stated at the lower of aggregate cost or market value at the balance sheet date. Cash dividends are recognized as dividend income at the point of receipt. Costs of money market funds and short-term notes are identified specifically while other marketable securities are determined by the weighted-average method. The market values of listed debts, equity securities and closed-end funds are determined by the average closing price during the last month of the fiscal year. The market value for open-end funds is determined by the net asset value at the balance sheet date. The amount by which the aggregate cost exceeds the market value is reported as a loss in the current year. In subsequent periods, recoveries of the market value are recognized as a gain to the extent that the market value does 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, are 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 are held for the purpose of long-term investment is deducted from the stockholders’ equity. The market value at the balance sheet date is 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 are accounted for under the cost method. Impairment losses for the investees will be recognized if an other than temporary impairment is evident and the book value after recognizing the losses shall be treated as the new cost basis of such investment.

 

  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.

 

16


  (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 to be deducted from net income, thereby reducing earnings per share by NT$0.07 for the six-month period ended June 30, 2006.

 

4. CONTENTS OF SIGNIFICANT ACCOUNTS

 

  (1) CASH AND CASH EQUIVALENTS

 

     As of June 30,
     2006    2005

Cash:

     

Cash on hand

   $ 1,874    $ 1,617

Checking and savings accounts

     3,167,141      1,932,245

Time deposits

     79,104,197      57,396,748
             

Subtotal

     82,273,212      59,330,610
             

Cash equivalents:

     

Government bonds acquired under repurchase agreements

     7,776,368      8,734,847
             

Total

   $ 90,049,580    $ 68,065,457
             

 

  (2) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS, CURRENT

 

                     As of June 30,                 
Held for trading    2006    2005

Listed stocks

   $ 1,138,214    $ 628,747

Convertible bonds

     313,439      1,657,323

Open-end funds

     54,410      —  
             

Total

   $ 1,506,063    $ 2,286,070
             

During the six-month period ended June 30, 2006, net loss arising from the changes in fair value of financial assets at fair value through profit or loss, current, was NT$547 million.

 

  (3) AVAILABLE-FOR-SALE FINANCIAL ASSET, CURRENT

 

                 As of June 30,            
         2006            2005

Common stock

   $ —      $ 772,509
             

 

17


  (4) HELD-TO-MATURITY FINANCIAL ASSETS

 

                  As of June 30,               
     2006     2005  

Credit-linked deposits and repackage bonds

   $ 979,456     $ 1,216,108  

Less: Non-current portion

     (200,000 )     (1,153,028 )
                

Total

   $ 779,456     $ 63,080  
                

 

  (5) NOTES RECEIVABLE

 

                  As of June 30,             
     2006    2005

Notes receivable

   $ 2,755    $ 288
             

 

  (6) ACCOUNTS RECEIVABLE, NET

 

                   As of June 30,                
     2006     2005  

Accounts receivable

   $ 5,498,927     $ 5,190,555  

Less: Allowance for sales returns and discounts

     (133,071 )     (23,981 )

Less: Allowance for doubtful accounts

     (57,319 )     (84,175 )
                

Net

   $ 5,308,537     $ 5,082,399  
                

 

  (7) INVENTORIES, NET

 

     As of June 30,  
     2006     2005  

Raw materials

   $ 933,763     $ 126,994  

Supplies and spare parts

     1,691,672       1,734,764  

Work in process

     8,325,959       6,760,326  

Finished goods

     305,657       520,695  
                

Total

     11,257,051       9,142,779  

Less: Allowance for loss on decline in market value and obsolescence

     (873,759 )     (1,244,078 )
                

Net

   $ 10,383,292     $ 7,898,701  
                

Inventories were not pledged.

 

18


  (8) AVAILABLE-FOR-SALE FINANCIAL ASSETS, NONCURRENT

 

  a. Details of available-for-sale financial assets are as follows :

 

     As of June 30,
     2006    2005

Common stock

   $ 36,448,324    $ 5,171,355

Preferred stock

     1,416,479      —  
             

Total

   $ 37,864,803    $ 5,171,355
             

 

  b. The Company recognized net loss of NT$149 million due to the changes in fair value as an adjustment to stockholders’ equity for the six-month period ended June 30, 2006.

 

  (9) FINANCIAL ASSETS MEASURED AT COST, NONCURRENT

 

     As of June 30,
     2006    2005

Common stock

   $ 1,458,246    $ 1,758,239

Preferred stock

     300,000      300,000

Funds

     507,482      486,282
             

Total

   $ 2,265,728    $ 2,544,521
             

 

  (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 June 30,
     2006    2005

Investee Company

   Amount    Percentage of
Ownership or
Voting Rights
   Amount    Percentage of
Ownership or
Voting Rights

Listed companies

           

UMC JAPAN

   $ 6,134,625    50.09    $ 7,269,416    47.42

HOLTEK SEMICONDUCTOR INC.

     922,620    24.67      797,730    25.23

ITE TECH. INC.

     347,675    22.04      292,828    22.21

UNIMICRON TECHNOLOGY CORP.

     4,531,744    20.40      3,640,017    20.85

FARADAY TECHNOLOGY CORP. (Note A)

     —      —        907,782    18.38

SILICON INTEGRATED SYSTEMS CORP. (Note A)

     —      —        4,048,689    16.16

NOVATEK MICROELECTRONICS CORP. (Note A)

     —      —        1,428,604    13.24
                   

Subtotal

     11,936,664         18,385,066   
                   

 

19


     As of June 30,
     2006    2005

Investee Company

   Amount    Percentage of
Ownership or
Voting Rights
   Amount    Percentage of
Ownership or
Voting Rights

Unlisted companies

           

UMC GROUP (USA)

   $ 803,681    100.00    $ 708,829    100.00

UNITED MICROELECTRONICS (EUROPE) B.V.

     276,285    100.00      283,099    100.00

UMC CAPITAL CORP.

     2,140,698    100.00      1,306,287    100.00

UNITED MICROELECTRONICS CORP. (SAMOA)

     12,865    100.00      14,897    100.00

UMCI LTD. (Note B)

     23    100.00      14,604    100.00

TLC CAPITAL CO., LTD.

     6,030,797    100.00      —      —  

FORTUNE VENTURE CAPITAL CORP. (Note C)

     6,332,605    99.99      3,758,856    99.99

UNITED MICRODISPLAY OPTRONICS CORP.

     252,208    86.72      201,914    83.48

PACIFIC VENTURE CAPITAL CO., LTD.

     277,379    49.99      300,407    49.99

UNITECH CAPITAL INC.

     746,830    42.00      710,102    42.00

HSUN CHIEH INVESTMENT CO., LTD. (Note D)

     4,069,373    36.49      10,409,009    99.97

THINTEK OPTRONICS CORP. (THINTEK) (Notes E, F)

     11,837    27.82      30,383    14.26

HIGHLINK TECHNOLOGY CORP. (HIGHLINK) (Notes E, F)

     251,430    18.99      —      —  

XGI TECHNOLOGY INC. (Note E)

     65,721    16.50      —      —  

AMIC TECHNOLOGY CORP. (Note E)

     53,403    11.86      60,134    11.83

TOPPAN PHOTOMASKS TAIWAN LTD. (formerly DUPONT PHOTOMASKS TAIWAN LTD.)

     —      —        1,012,456    45.35

APTOS (TAIWAN) CORP. (Note E, G)

     —      —        108,755    9.72
                   

Subtotal

     21,325,135         18,919,732   
                   

Total

   $ 33,261,799       $ 37,304,798   
                   

Note A : In the beginning of 2006 as the Company determined it did not have significant influence over the investee, and in compliance with the R.O.C. SFAS No. 34, the investment in the investee was classified as available-for-sale financial asset.
Note B : 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 since April 1, 2005.
Note C : As of June 30, 2006 and 2005, the cost of investment was NT$6,504 million and NT$3,931 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$6,332 million and NT$3,759 million as of June 30, 2006 and 2005, respectively.

 

20


Note D : As of January 27, 2006, the Company sold 58,500 thousand shares of HSUN CHIEH INVESTMENT CO., LTD. The share ownership decreased from 99.97% to 36.49%. As the company ceased to be a subsidiary, the Company’s stock held by HSUN CHIEH INVESTMENT CO., LTD. was no longer treated as treasury stock. Consequently, the effect on the Company’s long-term investment accounted for under the equity method and stockholders’ equity simultaneously amounted to NT$10,881 million.

The ending balance as of June 30, 2005 of NT$10,409 million was computed by deducting the Company’s stock held by the investee (treated as treasury stock by the Company), amounting NT$20,137 million from the cost of investment balance at period-end of NT$30,546 million.

Note E : The equity method was applied for investees, in which the total ownership held by the Company and its subsidiaries is over 20%.
Note F : The book value of the Company’s investment in THINTEK OPTRONICS CORP. and HIGHLINK TECHNOLOGY CORP. exceeded the net equity by NT$14 million and NT$8 million, respectively. Equivalent amounts of impairment have been accordingly recognized.
Note G : As of September 1, 2005, the Company’s former investee, APTOS (TAIWAN) CORP. (accounted for under the equity method), merged into CHIPBOND TECHNOLOGY CORP. (accounted for as an available-for-sale financial asset). Three shares of APTOS (TAIWAN) CORP. were exchanged for one share of CHIPBOND TECHNOLOGY CORP.

 

  b. Total gain (loss) arising from investments accounted for under the equity method, based on the audited financial statements of the investees, were NT$582 million and NT$(2,144) million for the six-month periods ended June 30, 2006 and 2005, respectively. Among which, investment income amounting to NT$499 million and NT$144 million for the six-month periods ended June 30, 2006 and 2005, respectively, and the related long-term investment balances of NT$5,706 million and NT$5,559 million as of June 30, 2006 and 2005, respectively, were determined based on the investees’ financial statements audited by other auditors.

 

  c. The long-term equity investments were not pledged.

 

(11) PROPERTY, PLANT AND EQUIPMENT

 

     As of June 30, 2006
     Cost    Accumulated
Depreciation
    Book Value

Land

   $ 1,132,576    $ —       $ 1,132,576

Buildings

     16,249,112      (5,029,042 )     11,220,070

Machinery and equipment

     380,689,179      (267,628,301 )     113,060,878

Transportation equipment

     78,461      (57,351 )     21,110

Furniture and fixtures

     2,300,342      (1,646,990 )     653,352

Construction in progress and prepayments

     10,539,974      —         10,539,974
                     

Total

   $ 410,989,644    $ (274,361,684 )   $ 136,627,960
                     

 

21


     As of June 30, 2005
     Cost    Accumulated
Depreciation
    Book Value

Land

   $ 1,132,576    $ —       $ 1,132,576

Buildings

     15,860,960      (4,298,474 )     11,562,486

Machinery and equipment

     348,877,930      (222,554,924 )     126,323,006

Transportation equipment

     88,095      (57,657 )     30,438

Furniture and fixtures

     2,119,552      (1,384,660 )     734,892

Construction in progress and prepayments

     20,087,650      —         20,087,650
                     

Total

   $ 388,166,763    $ (228,295,715 )   $ 159,871,048
                     

 

  a. Total interest expense before capitalization amounted to NT$397 million and NT$643 million for the six-month periods ended June 30, 2006 and 2005, respectively.

Details of capitalized interest are as follows:

 

     For the six-month period ended
June 30,
           2006          2005

Machinery and equipment

   $ —      $ 192,785

Other property, plant and equipment

     —        2,922
             

Total interest capitalized

   $ —      $ 195,707
             

Interest rates applied

     —        2.88%~4.20%
             

 

  b. The property, plant, and equipment were not pledged.

 

(12) OTHER ASSETS – OTHERS

 

                           As of June 30,                       
     2006    2005

Leased assets

   $ 1,355,758    $ 1,363,681

Deposits-out

     542,121      584,339

Others

     59,118      122,675
             

Total

   $ 1,956,997    $ 2,069,695
             

Please refer to Note 6 for deposits-out pledged as collateral.

 

(13) SHORT-TERM LOANS

 

     As of June 30,
             2006            2005

Unsecured bank loans

   $ —      $ 1,645,280
             

Interest rates

     —        3.22%~3.73%
             

The Company’s unused short-term lines of credits amounted to NT$8,287 million and NT$8,872 million as of June 30, 2006 and 2005, respectively.

 

22


(14) FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS, CURRENT

 

                     As of June 30,                 
     2006    2005

Interest rate swaps

   $ 633,039    $ 11,059

Derivatives embedded in exchangeable bonds

     555,251      —  

Forward contracts

     —        16,416
             

Total

   $ 1,188,290    $ 27,475
             

 

  a. During the six-month period ended June 30, 2006, net gain arising from the changes in fair value of financial liabilities at fair value through profit or loss, current, was NT$99 million.

 

  b. As of June 30, 2006, interest receivable arising from credit-linked deposits, as well as the derivative financial liabilities embedded therein, both amounted to NT$14 million. The resulting net value was therefore NT$0.

 

(15) BONDS PAYABLE

 

     As of June 30,  
     2006     2005  

Unsecured domestic bonds payable

   $ 25,250,000     $ 30,500,000  

Convertible bonds payable

     12,361,174       —    

Exchangeable bonds payable

     3,101,961       3,097,240  

Less: discounts on bonds payable

     (120,985 )     —    
                

Total

     40,592,150       33,597,240  

Less: Current portion

     (10,312,904 )     (5,250,000 )
                

Net

   $ 30,279,246     $ 28,347,240  
                

 

  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 repayable in installments every six months from April 27, 2000 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 repayable 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.

 

23


  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 is paid annually with stated interest rates of 3.3912% through 3.420% and 3.4896% through 3.520%, respectively. The three-year bonds were repaid at 100% of its principal amount during the period from October 2 to October 15, 2004. The five-year bonds will be repayable in October 2006, upon the maturity of the bonds.

 

  d. On May 10, 2002, the Company issued LSE listed zero coupon exchangeable bonds. 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 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.

 

  iii. The Company may redeem all, but not part, of the bonds, at any time, in the event of certain changes in the R.O.C. 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 AU OPTRONICS CORP.

 

24


  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$46.10 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 June 30, 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 six-month period ended June 30, 2006 amounted NT$65 million and was recognized as gain on disposal of investment. No bonds were exchanged during the six-month period ended June 30, 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 EuroMTF Market of Luxembourg Stock Exchange (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, the Company may redeem all, but not some only, of the bonds.

 

25


  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 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.

 

  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’s option, 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$3.814 per ADS. The applicable conversion price will be subject to adjustments upon the occurrence of certain events set out in the indenture.

 

  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

   Amount

2006 (3rdquarter and thereafter)

   $ 5,000,000

2007

     5,351,961

2008

     22,861,174

2009

     —  

2010

     7,500,000
      

Total

   $ 40,713,135
      

 

26


(16) PENSION FUND

Pension costs amounting to NT$321 million and NT$344 million were recognized for the six-month periods ended June 30, 2006 and 2005, respectively. The corresponding balances of the pension fund were NT$1,135 million and NT$1,013 million as of June 30, 2006 and 2005, respectively.

 

(17) CAPITAL STOCK

 

  a. As of June 30, 2005, 22,000,000 thousand common shares were authorized to be issued and 17,779,431 thousand common shares were issued, each at a par value of NT$10.

 

  b. The Company has issued a total of 250,987 thousand ADSs which were traded on the NYSE as of June 30, 2005. The total number of common shares of the Company represented by all issued ADSs was 1,254,936 thousand shares (one ADS represents five common shares).

 

  c. On April 26, 2005 the Company cancelled 49,114 thousand 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 amended and approved by the shareholders on the meeting held on June 13, 2005, the Company issued 1,956,022 thousand 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.

 

  e. Among the employee stock options issued by the Company on October 7, 2002 and January 3, 2003, 36,563 thousand shares were exercised during the six-month period ended June 30, 2005.

 

  f. As of June 30, 2006, 26,000,000 thousand common shares were authorized to be issued and 18,845,234 thousand common shares were issued, each at a par value of NT$10.

 

  g. Among the employee stock options issued by the Company on October 7, 2002 and January 3, 2003, 50,531 thousand shares were exercised during the six-month period ended June 30, 2006.

 

27


  h. On May 22, 2006 the Company cancelled 1,000,000 thousand shares of treasury stocks, which were bought back during the period from February 16, 2006 to April 11, 2006 for retainment of the company’s creditability and stockholders’ interests.

 

  i. As recommended by the board of directors, and amended and approved by the shareholders on the meeting held on June 12, 2006, the Company issued 224,877 thousand new shares from capitalization of retained earnings and capital reserve 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 capital reserve.

 

  j. As of June 30, 2006, the Company has issued a total of 276,820 thousand ADSs which were traded on the NYSE. The total number of common shares of the Company represented by all issued ADSs was 1,384,102 thousand shares (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 grant period for the options 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    608,181    $ 15.9

January 3, 2003

   61,000    48,717    $ 17.9

November 26, 2003

   57,330    47,430    $ 25.0

March 23, 2004

   33,330    23,715    $ 23.2

July 1, 2004

   56,590    46,140    $ 20.9

October 13, 2004

   20,200    15,670    $ 18.0

April 29, 2005

   23,460    18,790    $ 16.6

August 16, 2005

   54,350    44,850    $ 21.9

September 29, 2005

   51,990    48,875    $ 20.0

January 4, 2006

   39,290    33,940    $ 18.3

May 22, 2006

   42,058    40,598    $ 19.8

 

28


  a. A summary of the Company’s stock option plans, and related information for the six-month periods ended June 30, 2006 and 2005, are as follows:

 

     For the six-month period ended June 30,
     2006    2005
    

Option

(in thousands)

   

Weighted-average

Exercise Price

(NTD)

   Option
(in thousands)
   

Weighted-average

Exercise Price

(NTD)

Outstanding at beginning of year

     975,320     $ 17.5      973,858     $ 17.0

Granted

     81,348     $ 19.1      23,460     $ 16.6

Exercised

     (50,531 )   $ 15.9      (36,563 )   $ 15.9

Forfeited

     (29,231 )   $ 19.3      (15,064 )   $ 17.9
                     

Outstanding at end of period

     976,906     $ 17.6      945,691     $ 17.0
                     

Exercisable at end of period

     502,264          357,276    
                     

Weighted-average fair value of options granted during the period (NTD)

   $ 5.9        $ 6.0    

 

  b. The information of the Company’s outstanding stock options as of June 30, 2006, is as follows:

 

          Outstanding Stock Options    Exercisable Stock Options

Authorization

Date

  

Range of

Exercise

Price

  

Option

(in thousands)

  

Weighted-average

Expected

Remaining Years

  

Weighted-average

Exercise Price

(NTD)

  

Option

(in thousands)

  

Weighted-average

Exercise Price

(NTD)

2002.09.11

   $15.9~$17.9    656,898    0.7    $ 16.1    466,219    $ 16.1

2003.10.08

   $20.9~$25.0    117,285    2.1    $ 23.0    36,045    $ 24.4

2004.09.30

   $16.6~$21.9    128,185    3.4    $ 19.9    —      $ —  

2005.12.22

   $18.3~$19.8    74,538    4.1    $ 19.1    —      $ —  
                     
      976,906    1.5    $ 17.6    502,264    $ 16.7
                     

 

  c. The Company has used the intrinsic value method to recognize compensation costs for its employee stock options issued since January 1, 2004. The compensation costs for the six-month periods ended June 30, 2006 and 2005 are NT$0. Pro forma information using the fair value method on net income and earnings per share is as follows:

 

     For the six-month period ended June 30, 2006
    

Basic earnings

per share

  

Diluted earnings

per share

Net Income

   $ 18,337,788    $ 18,264,169

Earnings per share (NTD)

   $ 1.01    $ 0.97

Pro forma net income

   $ 18,147,409    $ 18,073,790

Pro forma earnings per share (NTD)

   $ 1.00    $ 0.96

 

29


    

For the six-month period ended June 30, 2005

(retroactively adjusted)

    

Basic earnings

per share

  

Diluted earnings

per share

Net Income

   $ 1,817,700    $ 1,817,700

Earnings per share (NTD)

   $ 0.10    $ 0.10

Pro forma net income

   $ 1,741,162    $ 1,741,162

Pro forma earnings per share (NTD)

   $ 0.09    $ 0.09

The fair value of the options granted was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for the six-month periods ended June 30, 2006 and 2005: expected dividend yields of 1.37% and 1.63%; volatility factors of the expected market price of the Company’s common stock of 38.94% and 42.39%; risk-free interest rate of 2.09 % and 2.24%; and a weighted-average expected life of the options of 4.4 years.

 

(19) TREASURY STOCK

 

  a. The Company bought back its own shares from the open market during the six-month periods ended June 30, 2006 and 2005. Details of the treasury stock transactions are as follows:

For the six-month period ended June 30, 2006

(In thousands of shares)

 

Purpose

  

As of

January 1, 2006

   Increase    Decrease   

As of

June 30, 2006

For transfer to employees

   442,067    243,171    —      685,238

For conversion of the convertible bonds into shares

   500,000    —      —      500,000

For retainment of the Company’s creditability and stockholders’ interests

   —      1,000,000    1,000,000    —  
                   

Total shares

   942,067    1,243,171    1,000,000    1,185,238
                   

 

30


For the six-month period ended June 30, 2005

(In thousands of shares)

 

Purpose

  

As of

January 1, 2005

   Increase    Decrease   

As of

June 30, 2005

For transfer to employees

   241,181    374,960    49,114    567,027
                   

 

  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, capital reserve-premiums, and realized capital reserve. As such, the maximum number of shares of treasury stock that the Company could hold as of June 30, 2006 and 2005, was 1,884,523 thousand shares and 1,777,943 thousand shares while the ceiling of the amount was NT$80,233 million and NT$83,442 million, respectively. As of June 30, 2006 and 2005, the Company held 1,185,238 thousand shares and 567,027 thousand shares of treasury stock that amounted to NT$26,216 million and NT$13,768 million, respectively.

 

  c. In compliance with Securities and Exchange Law of the R.O.C., treasury stock should not be pledged, nor should it entitle voting rights or receive dividends.

 

  d. As of June 30, 2006, the Company’s subsidiary, FORTUNE VENTURE CAPITAL CORP., held 21,846 thousand shares of the Company’s stock, with a book value of NT$19.40 per share. The closing price on June 30, 2006 was NT$19.40.

As of June 30, 2005, the Company’s subsidiaries, HSUN CHIEH INVESTMENT CO., LTD. and FORTUNE VENTURE CAPITAL CORP., held 543,732 thousand shares and 19,808 thousand shares, respectively, of the Company’s stock, with a book value of NT$23.19 and NT$8.68 per share, respectively. The average closing price of the Company’s stock during June 2005 was NT$23.19.

 

(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

 

31


  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 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 approved through the shareholders’ meeting.

The Company is currently in its growth stage; the policy for dividend distribution should reflect factors such as the current and future investment environment, fund requirements, domestic and international competition and capital budgets; as well as the benefit of shareholders, share bonus equilibrium, and long-term financial planning. The board of directors shall make the distribution proposal annually and present it at the shareholders’ meeting. The Company’s Articles of Incorporation further provide that no more than 80% of the dividends to shareholders, if any, must be paid in the form of stock dividends. Accordingly, at least 20% of the dividends must be paid in the form of cash.

The distributions of retained earnings for the years 2005 and 2004 were approved at the shareholders’ meetings held on June 12, 2006 and June 13, 2005. The details of distribution are as follows:

 

     2005    2004

Cash dividend

   $ 0.40 per share    $ 0.10 per share

Stock dividend

   $ 0.05 per share    $ 1.03 per share

Employee bonus – cash (NTD thousands)

     305,636      —  

Employee bonus – stock (NTD thousands)

     458,455      1,972,855

Remuneration to directors and supervisors (NTD thousands)

     6,324      27,005

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 the merger which was recognized by the Company in proportion to the Company’s ownership percentage:

 

  a. According to the explanatory letter No. 101801 of the Securities and Futures Commission (SFC), if the Company recognizes the investees’ capital reserve–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.

 

32


  b. However, if the Company and its investees transfer a portion of the capital reserve 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 six-month period ended June 30,
     2006    2005
     Operating
costs
   Operating
expenses
   Total    Operating
costs
   Operating
expenses
   Total

Personnel expenses

                 

Salaries

   $ 3,401,756    $ 1,015,022    $ 4,416,778    $ 1,590,737    $ 707,813    $ 2,298,550

Labor and health insurance

     213,244      59,748      272,992      202,468      55,159      257,627

Pension

     249,115      72,347      321,462      254,043      89,986      344,029

Other personnel expenses

     41,122      11,869      52,991      29,028      8,065      37,093

Depreciation

     21,611,294      1,098,235      22,709,529      21,159,529      911,915      22,071,444

Amortization

     98,047      823,560      921,607      73,478      968,702      1,042,180

The numbers of employees as of June 30, 2006 and 2005, were 12,448 and 11,588, respectively.

 

(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 six-month period ended
June 30,
 
     2006     2005  

Income tax on pre-tax income at statutory tax rate

   $ 5,197,957     $ 831,762  

Permanent differences

     (4,438,925 )     (757,916 )

Change in investment tax credit

     (311,360 )     6,512,323  

Change in valuation allowance

     (246,556 )     (6,586,169 )

Tax accrual

     1,153,000       —    

Income tax on interest revenue separately taxed

     432       397  
                

Income tax expense

   $ 1,354,548     $ 397  
                

 

33


  b. Significant components of deferred income tax assets and liabilities are as follows:

 

     As of June 30,  
     2006     2005  
     Amount     Tax effect     Amount     Tax effect  

Deferred income tax assets

        

Investment tax credit

     $ 13,920,405       $ 15,124,463  

Loss carry-forward

   $ 10,005,826       2,501,456     $ 14,994,930       3,748,732  

Pension

     3,042,614       760,654       2,962,723       740,681  

Allowance on sales returns and discounts

     737,457       184,364       382,310       95,578  

Allowance for loss on obsolescence of inventories

     761,978       190,495       811,580       202,895  

Others

     812,027       203,007       282,944       70,736  
                    

Total deferred income tax assets

       17,760,381         19,983,085  

Valuation allowance

       (8,428,805 )       (8,975,040 )
                    

Net deferred income tax assets

       9,331,576         11,008,045  
                    

Deferred income tax liabilities

        

Unrealized exchange gain

     (461,337 )     (115,334 )     (548,978 )     (137,245 )

Depreciation

     (6,078,835 )     (1,519,709 )     (14,139,585 )     (3,534,896 )

Others

     (2,246,979 )     (561,745 )     —         —    
                    

Total deferred income tax liabilities

       (2,196,788 )       (3,672,141 )
                    

Total net deferred income tax assets

     $ 7,134,788       $ 7,335,904  
                    

Deferred income tax assets - current

     $ 6,089,901       $ 5,255,111  

Deferred income tax liabilities - current

       (320,832 )       (137,245 )

Valuation allowance

       (3,049,018 )       (1,704,337 )
                    

Net

       2,720,051         3,413,529  
                    

Deferred income tax assets - noncurrent

       11,670,480         14,727,974  

Deferred income tax liabilities - noncurrent

       (1,875,956 )       (3,534,896 )

Valuation allowance

       (5,379,787 )       (7,270,703 )
                    

Net

       4,414,737         3,922,375  
                    

Total net deferred income tax assets

     $ 7,134,788       $ 7,335,904  
                    

 

34


  c. The Company’s income tax returns for all the fiscal years up to 2003 have been assessed and approved by the R.O.C. Tax Authority.

 

  d. Pursuant to the R.O.C. “Statutes for the Establishment and Administration of Science Park”, the Company was granted several four-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 2001 had not yet been decided. The income tax exemption for other periods will expire on December 31, 2010.

 

  e. The Company earns investment tax credits for the amount invested in production equipment, research and development, and employee training.

As of June 30, 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    $ 2,850,484

2007

     1,613,158      1,613,158

2008

     6,275,971      6,275,971

2009

     1,737,860      1,737,860

2010

     1,442,932      1,442,932
             

Total

   $ 13,920,405    $ 13,920,405
             

 

  f. Under the rules of the Income Tax Law of the R.O.C., net loss can be carried forward for 5 years. As of June 30, 2006, the unutilized accumulated loss was as follows:

 

Expiration Year

   Accumulated loss    Unutilized accumulated
loss

2006

   $ 10,856,896    $ 6,190,792

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    $ 10,005,826
             

 

  g. The balance of the Company’s imputation credit amounts as of June 30, 2006 and 2005 were NT$9 million and NT$55 million, respectively. The expected creditable ratio for 2005 and the actual creditable ratio for 2004 was 0% and 0.35%, respectively.

 

  h. The Company’s earnings generated in the year ended December 31, 1997 and prior years have been fully appropriated.

 

35


(23) EARNINGS PER SHARE

 

  a. The Company’s capital structure is composed mainly of zero coupon convertible bonds and employee stock options. Therefore, under consideration of such complex structure, the calculated basic and diluted earnings per share for the six-month periods ended June 30, 2006 and 2005, are disclosed as follows:

 

     For the six-month period ended June 30, 2006  
     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

   $ 20,880,851     $ 19,526,303     18,148,981    $ 1.15     $ 1.08  

Cumulative effect of changes in accounting principles

     (1,188,515 )     (1,188,515 )        (0.07 )     (0.07 )
                                   

Net income

   $ 19,692,336     $ 18,337,788        $ 1.08     $ 1.01  
                                   

Effect of dilution

           

Employee stock options

   $ —       $ —       125,747     

Convertible bonds payable

   $ (73,619 )   $ (73,619 )   500,000     

Earning per share-diluted:

           

Income from continuing operations

   $ 20,807,232     $ 19,452,684     18,774,728    $ 1.11     $ 1.03  

Cumulative effect of changes in accounting principles

     (1,188,515 )     (1,188,515 )        (0.06 )     (0.06 )
                                   

Net income

   $ 19,618,717     $ 18,264,169        $ 1.05     $ 0.97  
                                   
    

For six-month period ended June 30, 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

   $ 1,818,097     $ 1,817,700     18,477,495    $ 0.10     $ 0.10  

Cumulative effect of changes in accounting principles

     —         —            —         —    
                                   

Net income

   $ 1,818,097     $ 1,817,700        $ 0.10     $ 0.10  
                                   

Effect of dilution

           

Employee stock options

   $ —       $ —       102,777     

Earning per share-diluted:

           

Income from continuing operations

   $ 1,818,097     $ 1,817,700     18,580,272    $ 0.10     $ 0.10  

Cumulative effect of changes in accounting principles

     —         —            —         —    
                                   

Net income

   $ 1,818,097     $ 1,817,700        $ 0.10     $ 0.10  
                                   

 

36


  b. Pro forma information on earnings as if subsidiaries’ investment in the Company is not treated as treasury stock is set out as follows:

 

    

For the six month period ended

June 30, 2006

 

(shares expressed in thousands)

 

   Basic     Diluted  

Net income

   $ 18,337,788     $ 18,264,169  
                

Weighted-average of shares outstanding:

    

Beginning balance

     18,852,636       18,852,636  

Purchase of 1,243,171 thousand shares of treasury stock from January 1 to June 30, 2006

     (623,210 )     (623,210 )

Exercise of 50,531 thousand units of employee stock options

     30,859       30,859  

Dilutive shares of employee stock options accounted for under treasury stock method

     —         125,747  

Dilutive shares issued assuming conversion of bonds

     —         500,000  
                

Ending balance

     18,260,285       18,886,032  
                

Earnings per share Net income (NTD)

   $ 1.00     $ 0.97  
                
     

For the six-month period ended

June 30, 2005

(retroactively adjusted)

 

(shares expressed in thousands)

 

   Basic     Diluted  

Net income

   $ 1,817,700     $ 1,817,700  
                

Weighted-average of shares outstanding:

    

Beginning balance

     17,550,801       17,550,801  

Purchase of 374,960 thousand shares of treasury stock from January 1 to June 30, 2005

     (39,313 )     (39,313 )

Exercise of 36,563 thousand units of employee stock options

     20,172       20,172  

Stock dividends and employees’ bonus at 11.4% in 2005

     2,006,882       2,006,882  

Dilutive shares of employee stock options accounted for under treasury stock method

     —         102,777  
                

Ending balance

     19,538,542       19,641,319  
                

Earnings per share Net income (NTD)

   $ 0.09     $ 0.09  
                

 

37


  c. Pro forma information on retroactively adjusted earnings per share, as if 2006 earnings and capital reserve transferred to common stock are distributed:

 

    

For the six-month period ended

June 30, 2006

     Basic    Diluted

Net income

   $ 18,337,788    $ 18,264,169
             

Weighted-average number of shares outstanding (increase in capital through 2006 retained earnings and capital reserve at proportion of 1.3%)

     18,380,084      19,007,433
             

Earnings per share (NTD)

   $ 1.00    $ 0.96
             
    

For the six-month period ended
June 30, 2005

(retroactively adjusted)

     Basic    Diluted

Net income

   $ 1,817,700    $ 1,817,700
             

Weighted-average number of shares outstanding (increase in capital through 2006 retained earnings and capital reserve at proportion of 1.3%)

     18,712,782      18,816,868
             

Earnings per share (NTD)

   $ 0.10    $ 0.10
             

 

5. RELATED PARTY TRANSACTIONS

 

  (1) Name and Relationship of Related Parties

 

Name of related parties

  

Relationship with the Company

UMC GROUP (USA) (UMC-USA)

   Equity Investee

UNITED FOUNDRY SERVICE, INC. (liquidated in April 2005)

   Equity Investee

UNITED MICROELECTRONICS (EUROPE) B.V. (UME BV)

   Equity Investee

UMC CAPITAL CORP.

   Equity Investee

UNITED MICROELECTRONICS CORP. (SAMOA)

   Equity Investee

FORTUNE VENTURE CAPITAL CORP. (FORTUNE)

   Equity Investee

HSUN CHIEH INVESTMENT CO., LTD. (HSUN CHIEH)

   Equity Investee

UMCI LTD. (UMCI)

   Equity Investee

UNITED MICRODISPLAY OPTRONICS CORP.

   Equity Investee

UMC JAPAN (UMCJ)

   Equity Investee

 

38


Name of related parties

  

Relationship with the Company

TOPPAN PHOTOMASKS TAIWAN LTD. (formerly DUPONT PHOTOMASKS TAIWAN LTD.) (TOPPAN) (Disposed in March 2006)

   Equity Investee

HOLTEK SEMICONDUCTOR INC. (HOLTEK)

   Equity Investee

UNITECH CAPITAL INC.

   Equity Investee

ITE TECH. INC.

   Equity Investee

UNIMICRON TECHNOLOGY CORP.

   Equity Investee

AMIC TECHNOLOGY CORP.

   Equity Investee

PACIFIC VENTURE CAPITAL CO., LTD.

   Equity Investee

APTOS (TAIWAN) CORP. (APTOS) (merged into CHIPBOND TECHNOLOGY CORP. on September 1, 2005)

   Equity Investee

THINTEK OPTRONICS CORP.

   Equity Investee

XGI TECHNOLOGY INC.

   Equity Investee

TLC CAPITAL CO., LTD.

   Equity Investee

HIGHLINK TECHNOLOGY CORP.

   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

SILICON INTEGRATED SYSTEMS CORP.

   The Company’s director

DAVICOM SEMICONDUCTOR, INC.

   Subsidiary’s equity investee

UNITRUTH INVESTMENT CORP. (UNITRUTH)

   Subsidiary’s equity investee

UWAVE TECHNOLOGY CORP. (formerly UNITED RADIOTEK INC.)

   Subsidiary’s equity investee

UCA TECHNOLOGY INC.

   Subsidiary’s equity investee

AFA TECHNOLOGY, INC.

   Subsidiary’s equity investee

STAR SEMICONDUCTOR CORP.

   Subsidiary’s equity investee

AEVOE INC.

   Subsidiary’s equity investee

USBEST TECHNOLOGY INC.

   Subsidiary’s equity investee

SMEDIA TECHNOLOGY CORP.

   Subsidiary’s equity investee

U-MEDIA COMMUNICATIONS, INC.

   Subsidiary’s equity investee

CHIP ADVANCED TECHNOLOGY INC.

   Subsidiary’s equity investee

CRYSTAL MEDIA INC.

   Subsidiary’s equity investee

ULI ELECTRONICS INC.

   Subsidiary’s equity investee

NEXPOWER TECHNOLOGY CORP.

   Subsidiary’s equity investee

MOBILE DEVICES INC.

   Subsidiary’s equity investee

 

39


(2) Significant Related Party Transactions

 

  a. Operating revenues

 

     For the six-month period ended June 30,
     2006    2005
     Amount    Percentage    Amount    Percentage

UMC-USA

   $ 24,239,799    48    $ 18,179,163    46

Others

     8,254,342    17      9,814,975    24
                       

Total

   $ 32,494,141    65    $ 27,994,138    70
                       

The sales price to the above related parties was determined through mutual agreement based on the market conditions. The collection period for overseas sales to related parties was net 60 days, while the terms for domestic sales were month-end 45~60 days. The collection period for third party overseas sales was net 30~60 days, while the terms for third party domestic sales were month-end 30~60 days.

 

  b. Purchases

 

     For the six-month period ended June 30,
     2006    2005
     Amount    Percentage    Amount    Percentage

UMCI

   $ —      —      $ 1,244,347    12
                       

The purchases from the above related parties were dealt with in the ordinary course of business similar to those from third-party suppliers. The payment terms for purchases were net 60 days for related parties and net 30~90 days for third-party suppliers.

 

  c. Notes receivable

 

     As of June 30,
     2006    2005
     Amount    Percentage    Amount    Percentage

HOLTEK

   $ 68,752    93    $ 57,853    100

Others

     2,128    3      —      —  
                       

Total

   $ 70,880    96    $ 57,853    100
                       

 

40


  d. Accounts receivable

 

     As of June 30,
     2006    2005
     Amount     Percentage    Amount     Percentage

UMC-USA

   $ 5,493,509     41    $ 3,550,827     35

UME BV

     1,366,652     10      704,927     7

Others

     1,062,689     8      719,430     7
                         

Total

     7,922,850     59      4,975,184     49
             

Less : Allowance for sales returns and discounts

     (636,457 )        (358,329 )  

Less : Allowance for doubtful accounts

     (112,427 )        (110,189 )  
                     

Net

   $ 7,173,966        $ 4,506,666    
                     

 

  e. Financial activities

The Company did not conduct any financial activities with related parties during the six-month period ended June 30, 2006.

Other receivables – related parties

 

     For the six-month period ended June 30, 2005
     Maximum balance    Ending
balance
  

Interest

rate

   Interest
revenue
     Amount    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 first half ended June 30, 2006.

 

    

For the six-month period ended June 30, 2005

    

Item

   Amount
FORTUNE    Purchase of APTOS CORP. (TAIWAN) stock    $ 140,231
FORTUNE    Purchase of “EPITECH TECHNOLOGY CORP.” stock      185,840
HSUN CHIEH    Purchase of “EPITECH TECHNOLOGY CORP.” stock      97,658
UNITRUTH    Purchase of “EPITECH TECHNOLOGY CORP.” stock      16,495
         

Total

      $ 440,224
         

 

41


  g. Notes provided for endorsements and guarantees

As of June 30, 2006 the amount of notes provided as endorsement and guarantee by the Company for its subsidiary, UMCJ, amounted NT$2,247 million.

 

  h. Other transactions

The Company has made several other transactions, including service charges, development expenses of intellectual property, and commission, totaling NT$8 million and NT$413 million for the six-month periods ended June 30, 2006 and 2005, respectively.

The Company has purchased approximately NT$104 million and NT$166 million of masks from TOPPAN during the six-month periods ended June 30, 2006 and 2005, respectively.

 

6. ASSETS PLEDGED AS COLLATERAL

As of June 30, 2006

 

     Amount    Party to which asset(s)
was pledged
   Purpose of pledge

Deposit-out (Time deposit)

   $ 520,846    Customs    Customs duty guarantee
            

As of June 30, 2005

 

     Amount    Party to which asset(s)
was pledged
   Purpose of pledge

Deposit-out (Time deposit)

   $ 523,730    Customs    Customs duty 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$20 billion. Royalties and development fees for future years are set out as follows:

 

For the year ended December 31,

   Amount

2006 (3rd quarter and thereafter)

   $