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 June 27, 2003

 

 

United Microelectronics Corporation

 

(Translation of Registrant’s Name into English)

 

No. 3 Li Hsin Road II

 

Science-Based Industrial 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    x

  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    x

 

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

 

This current report on Form 6-K is hereby incorporated by reference into our Registration Statement on Form F-3 filed with the Commission on January 2, 2002, as amended (File No.333-14256).


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:  

June 27, 2003


      By:  

/s/ Stan Hung


               

Stan Hung

Chief Financial Officer


UNITED MICROELECTRONICS CORPORATION

UNAUDITED FINANCIAL STATEMENTS

WITH REVIEW REPORT OF INDEPENDENT ACCOUNTANTS

FOR THE THREE-MONTH PERIODS ENDED

MARCH 31, 2003 AND 2002

 

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.

 


REVIEW REPORT OF INDEPENDENT ACCOUNTANTS

 

English Translation of a Report Originally Issued in Chinese

 

To the Board of Directors and Shareholders of

United Microelectronics Corporation

 

We have reviewed the accompanying balance sheets of United Microelectronics Corporation as of March 31, 2003 and 2002, and the related statements of income and cash flows for the three-month periods then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to issue a review report on these financial statements based on our reviews. As described in Note 4(6) to the financial statements, certain long-term investments were accounted for under the equity method based on the financial statements of the investees for the three-month periods ended March 31, 2003 and 2002, which were reviewed by other independent accountants. Our reviews insofar as it relates to the investment income amounting to NT$27 million and NT$82 million for the three-month periods ended March 31, 2003 and 2002, respectively, and the related long-term investment balances of NT$4,316 million and NT$4,383 million as of March 31, 2003 and 2002, respectively, is based solely on the review reports of the other independent accountants.

 

We conducted our reviews in accordance with the Statements of Auditing Standards No. 36, “Review of Financial Statements”, of the Republic of China . A review is limited primarily to applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

 

Based on our reviews, we are not aware of any material modifications or adjustments that should be made to the financial statements referred to above in order for them to be in conformity with accounting principles generally accepted in the Republic of China.

 

April 16, 2003

Taipei, Taiwan

Republic of China

 

Notice to Readers

 

The accompanying unaudited 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 review 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

UNAUDITED BALANCE SHEETS

March 31, 2003 and 2002

(Expressed in Thousands of New Taiwan Dollars)

 

          As of March 31,

Assets


   Notes

   2003

   2002

Current assets

                  

Cash and cash equivalents

   2,4(1)    $ 58,570,264    $ 60,812,323

Marketable securities, net

   2,4(2)      2,840,920      49,900

Notes receivable

   4(3)      99,233      98,623

Notes receivable—related parties

   5      72,653      97,557

Accounts receivable, net

   2,4(4)      4,641,119      2,594,918

Accounts receivable—related parties, net

   2,5      7,566,339      4,307,362

Other receivables

   2      963,257      551,674

Other receivables—related parties

   2,5      193,507      26,865

Inventories, net

   2,4(5)      8,147,585      6,532,628

Prepaid expenses

          459,754      600,754

Deferred income tax assets

   2,4(16)      2,233,659      3,507,296
         

  

Total current assets

          85,788,290      79,179,900
         

  

Funds and long-term investments

   2,4(6)              

Long-term investments accounted for under the equity method

          45,215,567      39,539,277

Long-term investments accounted for under the cost method

          15,496,828      18,099,517
         

  

Total funds and long-term investments

          60,712,395      57,638,794
         

  

Property, plant and equipment

   2,4(7),5,6,7              

Land

          1,618,731      1,639,376

Buildings

          12,312,057      11,806,322

Machinery and equipment

          234,222,275      202,577,053

Transportation equipment

          64,667      50,855

Furniture and fixtures

          1,996,393      1,369,770

Leased assets

          47,783      47,783

Leasehold improvements

          44,930      49,530
         

  

Total Cost

          250,306,836      217,540,689

Less: Accumulated depreciation

          (128,719,637)      (96,270,582)

Plus: Construction in progress and prepayments

          15,870,299      27,571,315
         

  

Property, plant and equipment, net

          137,457,498      148,841,422
         

  

Intangible assets

                  

Patents

   2      15,899      27,823
         

  

Total Intangible assets

          15,899      27,823
         

  

Other assets

                  

Assets leased to others

          167,352      221,774

Idle assets

   2      14,908      25,716

Deposits out

          828,101      521,860

Deferred charges

   2      1,836,025      2,226,031

Deferred income tax assets

   2,4(16)      5,781,488      4,507,851

Others

          122,651      495,975
         

  

Total other assets

          8,750,525      7,999,207
         

  

Total assets

        $ 292,724,607    $ 293,687,146
         

  

 

          As of March 31,

Liabilities and Stockholders' Equity


   Notes

   2003

   2002

Current liabilities                   

Accounts payable

        $ 2,557,064    $ 1,971,463

Accounts payable—related parties

   5      454,542      551,201

Income tax payable

   2      63,281      63,281

Accrued expenses

          3,907,210      5,368,908

Other payables

          5,081,039      9,884,587

Current portion of long-term interest-bearing liabilities

   4(9),4(10),5      16,031,764      6,009,410

Other current liabilities

   7      1,973,220      1,845,060
         

  

Total current liabilities

          30,068,120      25,693,910
         

  

Long-term interest-bearing liabilities                   

Bonds payable

   2,4(9)      34,890,352      38,476,440

Long-term loans

   4(10),5      7,868,940      13,155,198
         

  

Total long-term interest-bearing liabilities

          42,759,292      51,631,638
         

  

Other liabilities                   

Accrued pension liabilities

   2,4(11)      1,919,009      1,628,222

Capacity deposits and other deposits

   7      2,718      1,260,453

Deferred credits

   2      2,033,610      1,729,313
         

  

Total other liabilities

          3,955,337      4,617,988
         

  

Total liabilities

          76,782,749      81,943,536
         

  

Capital    4(12)              

Common stock

          154,748,456      133,356,954
Capital reserve                   

Premiums

          41,729,589      41,729,589

Gain on disposal of property, plant and equipment

          —        170,473

Change in equities of long-term investments

          23,060,047      23,098,719

Excess from merger

          17,152,454      17,152,454
Retained earnings    4(14)              

Legal reserve

          10,686,225      10,686,225

Special reserve

          631,982      2,242,284

Unappropriated earnings

          9,088,858      21,439,852
Adjusting items in stockholders’ equity                   

Unrealized loss on long-term investments

   2      (10,957,875)      (9,446,373)

Cumulative translation adjustment

   2      707,643      (120,329)
Treasury stock    2,4(13)      (30,905,521)      (28,566,238)
         

  

Total stockholders’ equity

          215,941,858      211,743,610
         

  

Total liabilities and stockholders’ equity         $ 292,724,607    $ 293,687,146
         

  

 

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

 

2


English Translation of Financial Statements Originally Issued in Chinese

 

UNITED MICROELECTRONICS CORPORATION

UNAUDITED STATEMENTS OF INCOME

For the three-month periods ended March 31, 2003 and 2002

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

 

         For the three-month
period ended March 31,


 
     Notes

  2003

    2002

 

Operating revenues

   2,5                

Sales revenues

       $ 17,122,049     $ 11,436,524  

Less : Sales returns and discounts

         (6,668 )     (71,500 )
        


 


Net sales

         17,115,381       11,365,024  

Other operating revenues

         783,255       793,816  
        


 


Net operating revenues

         17,898,636       12,158,840  
        


 


Operating costs

   4(15)                

Cost of goods sold

   5     (14,460,307 )     (10,909,718 )

Other operating costs

         (697,150 )     (608,519 )
        


 


Operating costs

         (15,157,457 )     (11,518,237 )
        


 


Gross profit

         2,741,179       640,603  

Unrealized intercompany profit

   2     (69,339 )     (38,457 )

Realized intercompany profit

   2     68,558       71,419  
        


 


Net

         2,740,398       673,565  
        


 


Operating expenses

   4(15)                

Selling expenses

         (265,654 )     (200,804 )

General and administrative expenses

         (510,180 )     (933,220 )

Research and development expenses

         (1,265,260 )     (1,991,394 )
        


 


Subtotal

         (2,041,094 )     (3,125,418 )
        


 


Operating income (loss)

         699,304       (2,451,853 )
        


 


Non-operating income

                    

Interest revenue

         270,725       364,629  

Investment income accounted for under the equity method

   2,4(6)     —         405,183  

Gain on disposal of property, plant and equipment

   2,5     50,591       1,548  

Gain on disposal of investments

         112,799       2,125,379  

Exchange gain

   2     68,954       69,886  

Written back of allowance for inventories

   2     —         187,113  

Other income

         39,558       103,993  
        


 


Subtotal

         542,627       3,257,731  
        


 


Non-operating expenses

                    

Interest expense

   4(7),5     (290,268 )     (424,729 )

Investment loss accounted for under the equity method

   2,4(6)     (123,998 )     —    

Loss on disposal of property, plant and equipment

   2     (48,337 )     (4,849 )

Loss on decline in market value and obsolescence of inventories

   2     (305,140 )     (75,806 )

Depreciation and loss on idle assets

   2     (10,134 )     (16,673 )

Other losses

         (59,722 )     (65,513 )
        


 


Subtotal

         (837,599 )     (587,570 )
        


 


Income before income taxes

         404,332       218,308  

Income tax expenses

   2,4(16)     (1,645 )     (2,326 )
        


 


Net income

       $ 402,687     $ 215,982  
        


 


Earnings per share-basic (in New Taiwan Dollars)

   2,4(17)                

Income before income taxes

       $ 0.03     $ 0.01  
        


 


Net income

       $ 0.03     $ 0.01  
        


 


Earnings per share-diluted (in New Taiwan Dollars)

   2,4(17)                

Income before income taxes

       $ 0.03     $ 0.01  
        


 


Net income

       $ 0.03     $ 0.01  
        


 


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

   2,4(17)                

Net income

       $ 402,687     $ 215,982  
        


 


Earnings per share-basic (in New Taiwan Dollars)

       $ 0.03     $ 0.01  
        


 


Earnings per share-diluted (in New Taiwan Dollars)

       $ 0.03     $ 0.01  
        


 


 

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

 

3


English Translation of Financial Statements Originally Issued in Chinese

 

UNITED MICROELECTRONICS CORPORATION

UNAUDITED STATEMENTS OF CASH FLOWS

For the three-month periods ended March 31, 2003 and 2002

(Expressed in Thousands of New Taiwan Dollars)

 

     For the three-month
period ended March 31,


 
     2003

    2002

 

Cash flows from operating activities:

                

Net income

   $ 402,687     $ 215,982  

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

                

Depreciation

     8,845,036       8,066,199  

Amortization

     318,977       628,739  

Bad debts expense

     58,249       20,954  

Loss on decline in market value and obsolescence of inventories (written back of allowance for inventories)

     305,140       (111,307 )

Long-term investment loss (income) accounted for under the equity method

     123,998       (405,183 )

Gain on disposal of investments

     (112,799 )     (2,125,379 )

(Gain) loss on disposal of property, plant and equipment

     (2,254 )     3,301  

Depreciation and loss on idle assets

     10,134       16,673  

Exchange gain on long-term loans

     (6,110 )     (131,732 )

Changes in assets and liabilities:

                

Notes receivable

     (86,515 )     19,512  

Accounts receivable

     (3,040,989 )     95,069  

Other receivables

     268,565       103,503  

Inventories

     (760,447 )     (1,231,187 )

Prepaid expenses

     267,715       136,620  

Accounts payable

     350,065       171,120  

Accrued expenses

     516,473       (293,929 )

Other current liabilities

     (13,038 )     (92,144 )

Other payables

     —         2,671,762  

Compensation interest payable

     19,861       19,881  

Capacity deposit

     (1,070 )     (308,061 )

Accrued pension liabilities

     (15,150 )     119,259  
    


 


Net cash provided by operating activities

     7,448,528       7,589,652  
    


 


Cash flows from investing activities:

                

(Increase) decrease in marketable securities, net

     (370,120 )     1,048,270  

Acquisition of long-term investments

     (4,861,576 )     (59,296 )

Proceeds from disposal of long-term investments

     386,163       2,228,014  

Acquisition of property, plant and equipment

     (2,826,577 )     (4,569,125 )

Proceeds from disposal of property, plant and equipment

     149,526       42,109  

Increase in deferred charges

     (92,088 )     (97,802 )

(Increase) decrease in deposits-out, net

     (6,761 )     3,157  
    


 


Net cash used in investing activities

     (7,621,433 )     (1,404,673 )
    


 


 

4


English Translation of Financial Statements Originally Issued in Chinese

 

UNITED MICROELECTRONICS CORPORATION

UNAUDITED STATEMENTS OF CASH FLOWS

For the three-month periods ended March 31, 2003 and 2002

(Expressed in Thousands of New Taiwan Dollars)

 

     For the three-month
period ended March 31,


 
     2003

    2002

 
(continued)                 

Cash flows from financing activities:

                

Decrease in short-term loans, net

   $ (100,000 )   $ —    

Repayment of long-term loans

     (1,858,217 )     (1,712,263 )

Increase in deposits-in, net

     20       709  

Purchase of treasury stock

     (1,777,653 )     (2,178,288 )
    


 


Net cash used in financing activities

     (3,735,850 )     (3,889,842 )
    


 


Net (decrease) increase in cash and cash equivalents

     (3,908,755 )     2,295,137  

Cash and cash equivalents at beginning of period

     62,479,019       58,517,186  
    


 


Cash and cash equivalents at end of period

   $ 58,570,264     $ 60,812,323  
    


 


Supplemental disclosures of cash flow information:

                

Cash paid for interest

   $ 86,365     $ 182,608  
    


 


Cash paid for income taxes

   $ 20,128     $ 25,931  
    


 


Investing activities partially paid by cash:

                

Acquisition of property, plant and equipment

   $ 891,708     $ 1,888,439  

Add: Payable at beginning of period

     7,015,908       9,893,511  

Less: Payable at end of period

     (5,081,039 )     (7,212,825 )
    


 


Cash paid for acquiring property, plant and equipment

   $ 2,826,577     $ 4,569,125  
    


 


 

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

 

5


UNITED MICROELECTRONICS CORPORATION

NOTES TO UNAUDITED FINANCIAL STATEMENTS

March 31, 2003 and 2002

(Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

 

1.   HISTORY AND ORGANIZATION

 

United Microelectronics Corporation (“United Microelectronics” or “the Company”) was incorporated in May 1980 and commenced operations in April 1982. The Company’s major business activity is providing dedicated semiconductor wafer foundry services. The Company provides a variety of services to fit individual customer’s needs, including 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 in July 1985 and its American Depositary Shares (“ADSs”) were listed on the New York Stock Exchange in September 2000.

 

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The financial statements were prepared in conformity with “Guidelines Governing the Preparation of Financial Reports by Securities Issuers” and accounting principles generally accepted in the Republic of China. Summary of significant accounting policies is as follows:

 

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.

 

Marketable Securities

 

Marketable securities are recorded at cost when acquired and are stated at the lower of aggregate cost or market value at the balance sheet date. The market value of listed equity securities, convertible bonds or closed-end funds is determined by the average closing price during the last month of the fiscal year. The market value for open-end funds is determined by their equity per unit at the balance sheet date. The amount by which aggregate cost exceeds market value is reported as a loss in the current year. In subsequent periods, recoveries of market value are recognized as a gain to the extent that the market value does not exceed the original aggregate cost of the investment.

 

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.

 

6


Inventories

 

Inventories are recorded at cost when acquired and stated at the lower of aggregate cost, based on the weighted average method, 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 the 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

 

Long-term investments are recorded at cost when acquired. 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 five years.

 

Investments in less than 20% owned listed and unlisted companies where significant influence on operational decisions of the investees does not reside with the Company, are accounted for by the lower of aggregate cost or market value method and the cost method, respectively. The market value is determined by the average closing price during the last month of the fiscal year and the unrealized loss resulting from the decline in market value of investments that are held for long-term investment purposes is deducted from the stockholders’ equity. Impairment losses for the investees will be recognized if an other than temporary impairment is evident.

 

Investment income or loss from investments in both listed and unlisted companies is accounted for under the equity method provided that the Company owns at least 20% of the outstanding voting shares of the investees and has significant influence on operational decisions of the investees. The difference of the acquisition cost and the underlying equity in the investee’s net assets is amortized over five years.

 

Unrealized intercompany gains and losses are eliminated under the equity method. Profit from sales of depreciable assets between the investee and the Company is amortized and recognized based on the assets’ economic service lives. Profit from other types of intercompany transactions is recognized when realized. The increase in the Company’s proportionate share in the net assets of its investee resulting from its subscription to additional shares of stock, issued by such investee, at the rate not proportionate to its existing equity ownership in such investee, is credited to a capital reserve account. Any decrease in the Company’s proportionate share in the net assets of the investee is debited against the existing balance of the similar capital reserve account, where the credit balance can only be offset to zero. If any excess amount exits, it will be debited against unappropriated retained earnings.

 

7


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.

 

Depreciation is provided on the straight-line basis using the economic service lives of the assets less any salvage value. When the economic service lives are completed, property, plant and equipment, which are still in use, are depreciated over the newly estimated remaining useful lives of the salvage value. The economic service lives of the property, plant and equipment are as follows: buildings—20 to 55 years; leased assets and leasehold improvements—the lease period, or economic service lives, whichever is shorter; others—5 years.

 

Maintenance and repairs are charged to expense as incurred. Significant renewals and improvements are treated as capital expenditures and are depreciated accordingly. When property, plant and equipment are disposed of, their original cost and accumulated depreciation are written off and the related gain or loss is included 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. The corresponding depreciation expenses provided are classified as non-operating expenses also.

 

Intangible Assets

 

Patents are stated at cost and amortized over their economic service lives using straight-line method.

 

Deferred Charges

 

Deferred charges are stated at cost and amortized on a straight-line basis as follows: intellectual property and technology license fee—the term of contract or economic lives of the related technology; software—3 years; and bonds issuance costs—over the life of the bonds.

 

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 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 bonds is to be offset with the book value of the investment in reference shares and the related stockholder’s equities accounts, with the difference recognized as gain or loss on disposal of investments.

 

8


Pension Plan

 

The Company has a funded defined benefit pension plan covering all regular employees and the pension fund is managed by an independently administered pension fund association. The net pension cost is computed based on an actuarial valuation in accordance with the provision of the Statements of Financial Accounting Standards of the Republic of China (“ROC SFAS”) No. 18, which requires consideration of pension cost components such as service cost, interest cost, expected return on plan assets and amortization of net obligation at transition.

 

Treasury Stock

 

The Company adopted the ROC SFAS No. 30, which requires that treasury stock held by the Company itself be accounted for under the cost method. Cost of treasury stock is shown as a deduction to stockholders’ equity, while gain or loss of selling treasury stock is treated as an adjustment to capital reserves. The Company’s stock held by its subsidiaries is also treated as treasury stock in United Microelectronic’s account.

 

Revenue Recognition

 

Revenue is recognized when title and liability for risk of loss or damage to the products have been transferred to customers usually upon shipment. Sales returns and discounts taking into consideration customers’ complaint and past experience are accrued in the same year of sales. The connected cost is to be deducted from the cost of goods sold.

 

Capital Expenditures versus Operating Expenditures

 

An expenditure is treated as an asset when it is probable that future economic benefits associated with the expenditure will flow to the Company, and the total amount exceeds certain level. Otherwise it is charged to expense as incurred.

 

Translation of Foreign Currency Transactions

 

The accounts of United Microelectronics are maintained in New Taiwan dollars, the functional currency. Transactions denominated in foreign currencies are translated into New Taiwan dollars at the exchange rates prevailing on 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 year’s results. The financial statements of foreign subsidiaries and investees are translated into New Taiwan dollars using the spot rates as of each financial statement date for asset and liability accounts, average exchange rates for profit and loss accounts and historical exchange rates for equity accounts. The cumulative translation effects for subsidiaries and investees using functional currencies other than the New Taiwan dollars are included in the cumulative translation adjustment in stockholders’ equity.

 

9


Income Tax

 

The Company adopted the ROC SFAS No. 22 “Accounting for Income Taxes” for inter-period and intra-period income tax allocation. Provision for income tax includes deferred tax resulting from temporary differences and investment tax credits. Deferred 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 tax assets is provided to the extent that it is more likely than not that the tax benefits will not be realized.

 

Income taxes (10%) on unappropriated earnings generated from January 1, 1998 are recorded as expense in the year when the shareholders have resolved that the earnings shall be retained.

 

According to the ROC SFAS No. 12, the Company recognized the tax benefit from the tax credit incurred at the year equipment acquired, or the year the expenditure arises from research and development.

 

Earnings Per Share

 

Earnings per share is calculated according to the ROC SFAS No. 24. Basic earnings per share is computed by dividing net income (loss) by weighted average number of shares outstanding during the year. Diluted earnings per share is calculated 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 derived from any underlying dilutive share equivalents. The weighted-average outstanding shares are restated for stock dividends and bonus share issues.

 

3.   ACCOUNTING CHANGE

 

None.

 

 

10


4. CONTENTS OF SIGNIFICANT ACCOUNTS

 

(1) CASH AND CASH EQUIVALENTS

 

     As of March 31,

     2003

   2002

Cash:

             

Cash on hand

   $ 1,528    $ 1,645

Checking and savings accounts

     1,350,962      12,698,223

Certificates of deposit (including credit-linked deposits)

     49,328,461      35,780,388
    

  

Subtotal

     50,680,951      48,480,256
    

  

Cash equivalents:

             

Commercial paper

     2,403,957      2,444,366

Repurchase obligations

     5,485,356      9,887,701
    

  

Subtotal

     7,889,313      12,332,067
    

  

Total

   $ 58,570,264    $ 60,812,323
    

  

 

Please refer to Note 10 for disclosures on risks of credit-linked deposits.

 

(2) MARKETABLE SECURITIES

 

     As of March 31,

     2003

   2002

Mutual funds

   $ —      $ 10,000

Convertible bonds

     2,840,920      39,900
    

  

Subtotal

     2,840,920      49,900

Less: Allowance for loss on decline in market value

     —        —  
    

  

Net

   $ 2,840,920    $ 49,900
    

  

 

(3)   NOTES RECEIVABLE

 

     As of March 31,

     2003

   2002

Notes receivable

   $ 99,233    $ 98,623
    

  

 

11


(4) ACCOUNTS RECEIVABLE, NET

 

     As of March 31,

 
     2003

     2002

 

Accounts receivable

   $ 4,709,947      $ 2,665,767  

Less: Allowance for sales returns and discounts

     (11,357 )      —    

Less: Allowance for doubtful accounts

     (57,471 )      (70,849 )
    


  


Net

   $ 4,641,119      $ 2,594,918  
    


  


 

(5) INVENTORIES, NET

 

     As of March 31,

 
     2003

     2002

 

Raw materials

   $ 192,651      $ 297,469  

Supplies and spare parts

     1,289,114        1,146,868  

Work in process

     6,636,632        4,816,186  

Finished goods

     491,677        744,476  
    


  


Subtotal

     8,610,074        7,004,999  

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

     (462,489 )      (472,371 )
    


  


Net

   $ 8,147,585      $ 6,532,628  
    


  


 

a. The insurance coverage for inventories was sufficient as of March 31, 2003 and 2002.

 

b. Inventories were not pledged.

 

12


(6) LONG-TERM INVESTMENTS

 

a. Details of long-term investments are as follows:

(Equity securities refer to common shares unless otherwise stated)

 

     As of March 31,

     2003

   2002

Invested Company


   Percentage of
Ownership or
Voting Rights


   Amount

   Percentage of
Ownership or
Voting Rights


   Amount

Investments accounted for under the equity method:

                       

UMC Group (USA)

   100.00    $ 469,865    100.00    $ 510,106

United Foundry Service, Inc.

   100.00      92,596    100.00      89,627

United Microelectronics (Europe) B.V.

   100.00      199,830    —        —  

UMC Capital Corporation

   100.00      1,022,326    100.00      345,766

United Microelectronics Corp. (Samoa)

   100.00      4,929    100.00      17,479

Fortune Venture Capital Corporation

   99.99      2,990,577    99.99      3,398,573

Hsun Chieh Investment Co., Ltd.

   99.97      10,354,482    99.97      11,961,021

United Microdisplay Optronics Corp.

   85.00      659,722    —        —  

Pacific Venture Capital Co., Ltd.

   49.99      307,407    49.99      352,392

UMCi Pte. Ltd.

   49.74      7,014,331    49.82      7,401,929

UMC Japan

   47.59      8,033,040    47.10      6,623,491

DuPont Photomasks Taiwan Ltd.

   45.51      1,126,882    46.26      1,116,231

Unitech Capital Inc.

   42.00      732,911    —        —  

Novatek Microelectronics Corp.

   25.93      1,298,692    26.70      1,081,296

Holtek Semiconductor Inc.

   25.61      582,067    28.76      564,520

Integrated Technology Express Inc.

   24.58      325,390    28.78      353,096

Unimicron Technology Corp.

   23.81      3,063,883    24.20      2,934,283

Applied Component Technology Corp.

   22.57      86,541    28.15      144,014

Faraday Technology Corp.

   19.71      609,233    20.31      455,805

Integrated Telecom Express, Inc.

   16.42      583,482    16.36      740,005

Silicon Integrated Systems Corp. (Note A)

   16.18      5,601,339    —        —  

AMIC Technology (Taiwan), Inc.

   13.62      56,042    13.62      73,251

Archtek Telecom Corporation

   13.24      —      —        —  

Trecenti Technologies, Inc.

   —        —      40.00      1,376,392

Broadmedia, Inc.

   —        —      32.60      —  
         

       

Subtotal

          45,215,567           39,539,277
         

       

Note A:

The Company’s investment in Silicon Integrated Systems Corp. (“SIS”) includes 14,030 thousand Global Depositary Shares, of which each representing 10 common shares of SIS, and another 76,136 thousand shares of common stock.

 

13


     As of March 31,

     2003

   2002

Invested Company


   Percentage of
Ownership or
Voting Rights


   Amount

   Percentage of
Ownership or
Voting Rights


   Amount

Investments accounted for under the cost method or the lower of cost or market value method:

                       

Pacific United Technology, L.P. (Fund)

   25.00      34,600    25.00      34,600

PixTech, Inc.

   17.63      —      17.63      561,080

MediaTek Incorporation

   13.13      1,206,670    14.27      1,259,866

AU Optronics Corp. (Note B)

   11.37      6,759,855    18.86      8,318,624

Sino-Aerospace Investment Corp.

   11.11      —      11.11      25,748

Pacific Technology Partners, L.P. (Fund)

   9.85      238,628    9.85      146,301

Aptos Corp.

   9.68      30,302    9.68      30,302

Vialta, Inc.

   8.90      622,835    —        622,835

United Industrial Gases Co., Ltd.

   8.44      146,250    8.52      146,250

TECO Nanotech Co., Ltd.

   8.05      —      8.05      145,654

Subtron Technology Co., Ltd.

   7.41      240,000    7.41      240,000

Industrial Bank of Taiwan Corp.

   5.00      1,150,000    5.00      1,150,000

TECO Electric & Machinery Co., Ltd.

   4.02      1,535,099    3.94      1,535,298

Billionton Systems Inc.

   3.93      30,948    —        —  

Mega Financial Holding Company

   0.83      3,108,655    3.07      3,108,655

Premier Image Technology Corporation

   0.64      27,964    0.70      27,964

SAMPO Corporation

   0.50      65,022    2.94      442,590

National Venture Capital Corp.

   —        —      11.09      60,000

Taiwan High Speed Rail Corporation (Preferred shares)

   —        300,000    —        —  

Tonbu, Inc. (Preferred shares)

   —        —      —        243,750
         

       

Subtotal

          15,496,828           18,099,517
         

       

Total

        $ 60,712,395         $ 57,638,794
         

       

 

Note B :

Among the shares held by the Company in AU Optronics Corp., approximately 139,770 thousand shares with the book value of NT$2,075 million were utilized as reference shares for the Company’s zero coupon exchangeable bonds issued in May 2002.

 

b.   Investment loss or income accounted for under the equity method, which was based on the reviewed financial statements of the investees, were NT$124 million and NT$405 million for the three-month periods ended March 31, 2003 and 2002, respectively. Among which, investment income amounting to NT$27 million and NT$82 million for the three-month periods ended March 31, 2003 and 2002, respectively, and the related long-term investment balances of NT$4,316 million and NT$4,383 million as of March 31, 2003 and 2002, respectively, were determined based on the investees’ financial statements reviewed by other independent accountants.

 

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

 

14


(7) PROPERTY, PLANT AND EQUIPMENT

 

  a.   Total interest expense before capitalization amounted to NT$431 million and NT$536 million for the three-month periods ended March 31, 2003 and 2002, respectively.

 

  b.   Details of capitalized interest are as follows:

 

    

For the three-month period ended

March 31,


     2003

   2002

Machinery and equipment

   $ 137,297    $ 111,060

Other property, plant and equipment

     3,178      701
    

  

Total interest capitalized

   $ 140,475    $ 111,761
    

  

Interest rates applied

     3.30~3.39%      3.46%~3.83%
    

  

 

  c.   The insurance coverage for property, plant and equipment was sufficient as of March 31, 2003 and 2002.

 

  d.   Please refer to Note 6 for property, plant and equipment pledged as collateral.

 

(8) SHORT-TERM LOANS

 

The Company’s unused short-term lines of credits amounted to NT$15,468 million and NT$16,796 million as of March 31, 2003 and 2002, respectively.

 

(9) BONDS PAYABLE

 

     As of March 31,

 
     2003

    2002

 

Secured domestic bonds payable

   $ 2,850,001     $ 3,990,000  

Unsecured domestic bonds payable

     25,000,000       25,000,000  

Euro convertible bonds payable

     10,526,544       10,602,144  

Exchangeable bonds payable

     8,180,350       —    

Compensation interest payable

     103,253       24,296  
    


 


Subtotal

     46,660,148       39,616,440  

Less: Current portion

     (11,769,796 )     (1,140,000 )
    


 


Net

   $ 34,890,352     $ 38,476,440  
    


 


 

  a.   On April 27, 2000, the Company issued five-year secured bonds amounting to NT$3,990 million with stated interest rate of 5.6%. The bonds are repayable in installments every six months from April 27, 2002 to April 27, 2005.

 

15


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, with face value of NT$7,500 million, and stated interest rates of 5.1850% through 5.1195% and 5.2850% through 5.2170%, 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%.

 

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 face value of NT$5,000 million, and with stated interest rates of 3.3912% through 3.420% and 3.4896% through 3.520%, respectively. The three-year bonds and five-year bonds are repayable in October 2004 and October 2006, respectively, upon the maturity of the bonds.

 

d.   On December 12, 2001, the Company issued zero coupon convertible bonds amounting to US$302.4 million on the Luxembourg Stock Exchange (“LSE”). The terms and conditions of the bonds are as follows:

 

  (a)   Final Redemption

 

Unless previously redeemed, repurchased, cancelled or converted, the bonds will be redeemed at 101.675% of their principal amount on March 1, 2004.

 

  (b)   Redemption at the Option of the Company

 

The Company may redeem all, but not some only, of the bonds, subject to giving no less than 30 nor more than 60 days’ advance notice, at the early redemption amount, provided that:

 

  i.   On or at any time after June 13, 2003, the closing price of the ADSs on the New York Stock Exchange or other applicable securities exchange on which the ADSs are listed on any ADS trading day for 20 out of 30 consecutive ADS trading days ending at any time within the period of five ADS trading days prior to the date of the redemption notice shall have been at least 130% of the conversion price or last adjusted conversion price, as the case may be, on each such day, or

 

  ii.   At any time prior to maturity at least 90% in principal amount of the bonds have already been redeemed, repurchased, cancelled or converted.

 

  (c)   Conversion Period

 

  i.   In respect of the Shares, on or after January 22, 2002 up to and including February 20, 2004 or

 

  ii.   In respect of the ADSs, on or after the later of January 22, 2002 and the date on which the shelf registration statement covering resales of certain ADSs issuable upon conversion of the bonds has been declared effective by the US SEC, up to and including February 20, 2004.

 

16


  (d)   Conversion Price

 

The conversion price

 

  i.   In respect of the Shares, will be NT$69.60 per Share, and

 

  ii.   In respect of the ADSs, will be US$10.098 per ADS.

 

The applicable conversion price will be subject to adjustment for, among other things, subdivision or consolidation of Shares, including Shares represented by ADSs, bonus issues, right issues, distributions of cash and stock dividends and other dilutive events.

 

e.   On May 10, 2002, the Company issued LSE listed zero coupon exchangeable bonds exchangeable for common shares or ADSs of AU Optronics Corp. (“AU”) with an aggregate principal amount of US$235 million. The terms and conditions of the bonds are as follows:

 

  (a)   Final Redemption

 

Unless previously redeemed, exchanged or purchased and cancelled, the bonds will be redeemed at their principal amounts in US dollars on May 10, 2007.

 

  (b)   Redemption at the Option of the Company

 

The Company may redeem the bonds, in whole or in part, in principal amount thereof, on or after August 10, 2002 and prior to May 10, 2007 at their principal amount, if the market price of the AU common shares, 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.

 

The Company may also redeem the bonds, in whole, but not in part, at their principal amount if at least 90% in principal amount of the bonds has already been exchanged, redeemed or purchased and cancelled.

 

  (c)   Redemption at the Option of Bondholders

 

The Company will, at the option of the holders, redeem such bonds on February 10, 2005 at its principal amount.

 

  (d)   Tax Redemption

 

The Company may redeem all, but not part, of the bonds, at any time at their principal amount in US dollars, in the event of certain changes in the ROC’s tax rules which would require the Company to gross up for payments of principal, or to gross up for payments of interest or premium, if any, at a rate exceeding 20%.

 

17


  (e)   Exchange

 

Subject to prior permitted redemption and as otherwise provided in the offering, the bonds are exchangeable at any time on or after June 19, 2002 and prior to April 10, 2007, into AU shares or AU ADSs at an exchange price of NT$58.25 per share, determined on the basis of a fixed exchange rate of NT$34.645=US$1.00; provided however, that if the exercise date falls within five 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 restriction.

 

The exchange price will be subject to adjustment upon the occurrence of certain events including free distribution of AU common shares by AU; subdivision, consolidation or reclassification of AU common shares, distribution of stock dividends by AU, right issues and other dilutive events.

 

(10) LONG-TERM LOANS

 

     As of March31,

 
     2003

    2002

 

Secured bank loans

   $ 12,130,908     $ 18,024,608  

Less: Current portion

     (4,261,968 )     (4,869,410 )
    


 


Net

   $ 7,868,940     $ 13,155,198  
    


 


Interest rates

     1.94%~3.35 %     2.69%~4.00 %
    


 


 

  a.   The above long-term loans will be repaid in installments with the last payment on May 14, 2009.

 

  b.   The Company’s long-term loans denominated in foreign currency amounted to US$97million and US$154 million as of March 31, 2003 and 2002, respectively.

 

  c.   Please refer to Note 6 for assets pledged for long-term loans.

 

(11) PENSION FUND

 

The net pension cost recognized for the three-month periods ended March 31, 2003 and 2002 was NT$6 million and NT$142 million, respectively, and the balances of the pension fund deposited at the Central Trust of China as of March 31, 2003 and 2002 were NT$774 million and NT$670 million, respectively.

 

18


(12) CAPITAL STOCK

 

  a.   As of March 31, 2003, 22,000,000,000 common shares were authorized to be issued and 15,474,845,646 common shares were issued, each at par of NT$10.

 

  b.   The Company has issued 173,693 thousand ADSs as of March 31, 2003. The number of common shares represented by the ADSs is 868,467 thousand shares.

 

  c.   On September 11, 2002, the Company was authorized by the relevant government authorities to issue Employee Stock Options. The total number of options to be granted under the plan is one billion units, with each unit entitling the optionee to subscribe for one share of the Company’s common stock. Settlement upon the exercise of the stock options will be made through the issuance of new shares by the Company. The grant period for options is six years and an optionee may exercise his/her options in accordance with certain schedules as prescribed by the plan starting from two years after the 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
(in NTD)


October 7, 2002

   939,000    909,157    $ 20.0

January 3, 2003

   61,000    55,780    $ 22.5

 

(13) TREASURY STOCK

 

The Company bought back its own shares from the open market. Details of the treasury stock transactions are as follows:

 

(In thousand shares)

 

Purpose


  

As of

January 1, 2003


   Increase

   Decrease

  

As of

March 31, 2003


For transfer to employees

   86,539    85,450    —      171,989

For conversion of the convertible bonds into shares

   149,728    —      —      149,728
    
  
  
  

Total shares

   236,267    85,450    —      321,717
    
  
  
  

 

19


According to Stock Exchange Regulations of Taiwan, total shares of treasury stock shall not exceed 10% of the Company’s stock issued. Total purchase amount shall not exceed sum of retained earnings and capital reserve-premiums and realized capital reserve. As such, the maximum number of shares of treasury stock that the Company can hold as of March 31, 2003 is 1,547,485 thousand shares while the ceiling of the amount is NT$54,125 million. As of March 31, 2003, the Company held 321,717 thousand shares of treasury stock, which amounted to NT$10,596 million.

 

Treasury stock shall not be pledged, nor does it possess voting rights or receive dividends, in compliance with Stock Exchange Regulations of Taiwan.

 

As of March 31, 2003, the Company’s subsidiaries, Hsun Chieh Investment Co., Ltd. and Fortune Venture Capital Corporation, held 484,045 thousand shares and 17,633 thousand shares of the Company’s stock, with a book value of NT$20.27 and NT$9.75 per share, respectively. As of March 31, 2003, the market value per share was NT$20.27.

 

(14) RETAINED EARNINGS

 

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;

 

  e.   After deducting items a, b, and c above from the current year’s earnings, any portion of the remaining amount together with the prior years’ unappropriated earnings is to be allocated as follows: no less than 5% as employees’ bonus which will be settled through issuance of new shares of the Company; and

 

  f.   The distribution of the remaining portion, if any, will be recommended by the board of directors and approved by the shareholders’ meeting.

 

The Company’s Articles of Incorporation further provides that at least 50% of the dividends to the Company’s shareholders, if any, must be paid in the form of stock dividends. Accordingly, no more than 50% of the dividends can be paid in the form of cash.

 

20


Details of the distribution of 2002 dividends and employees’ bonus recommended by the board of directors on March 25, 2003 and the distribution of 2001 dividends and employees’ bonus approved by the shareholders’ meeting on June 3, 2002 were as follows:

 

     2002

   2001

Cash dividends per share (in NTD)

   $ —      $ —  

Stock dividends per share (in NTD)

     0.4      1.5

Employees’ cash bonus (in thousand NTD)

     —        —  

Employees’ stock bonus (in thousand NTD)

     579,727      1,711,320

 

(15)   OPERATING COSTS AND EXPENSES

 

The Company’s personnel, depreciation, and amortization expenses are summarized as follows:

 

     For the three-month period ended March 31,

     2003

   2002

     Operating
costs


    Operating
expenses


   Total

   Operating
costs


   Operating
expenses


   Total

Personnel expenses

                                          

Salaries

   $ 1,187,587     $ 358,100    $ 1,545,687    $ 964,797    $ 375,571    $ 1,340,368

Personnel and health insurance

     79,568       23,352      102,920      60,901      28,897      89,798

Pension

     (32,117 )     37,873      5,756      92,410      49,118      141,528

Other personnel expenses

     7,870       2,582      10,452      11,241      4,201      15,442

Depreciation

     8,388,050       456,986      8,845,036      7,661,698      404,501      8,066,199

Amortization

     40,385       234,636      275,021      51,180      537,362      588,542

 

The numbers of employees as of March 31, 2003 and 2002 were 8,788 and 8,757, respectively.

 

21


(16)   INCOME TAX

 

Reconciliation between the income tax expense and the income tax calculated on pre-tax financial income based on the statutory tax rate is as follows:

 

     For the three-month period
ended March 31,


 
     2003

    2002

 

Tax on pre-tax income at statutory tax rate

   $ 101,083     $ 54,577  

Estimated temporary and permanent differences

     16,877       (654,018 )

Change in investment tax credit

     997,637       (1,767,151 )

Change in valuation allowance for deferred tax assets

     (1,115,597 )     2,366,592  

Tax on interest revenue separately taxed

     1,645       2,326  
    


 


Income tax expense

   $ 1,645     $ 2,326  
    


 


 

Deferred income tax assets and liabilities were as follows:

 

     As of March 31,

 
     2003

    2002

 

Deferred income tax assets—current

   $ 7,649,939     $ 6,832,108  

Deferred income tax liabilities—current

     (246,627 )     (75,280 )

Valuation allowance for deferred tax assets

     (5,169,653 )     (3,249,532 )
    


 


Net

   $ 2,233,659     $ 3,507,296  
    


 


Deferred income tax assets—noncurrent

   $ 18,308,400     $ 18,631,746  

Deferred income tax liabilities—noncurrent

     (5,440,000 )     (4,461,123 )

Valuation allowance for deferred tax assets

     (7,086,912 )     (9,662,772 )
    


 


Net

   $ 5,781,488     $ 4,507,851  
    


 


 

22


Significant components of deferred income tax assets and liabilities were as follows:

 

     As of March 31,

 
     2003

    2002

 
     Amount

    Tax effect

    Amount

    Tax effect

 

Current items:

                                

Temporary difference

                                

Unrealized exchange gain

   $ (986,509 )   $ (246,627 )   $ (301,119 )   $ (75,280 )

Amortization of organization cost

     412       103       90,866       22,717  

Allowance for loss on decline in market value and obsolescence of inventories

     462,490       115,622       472,371       118,093  

Allowance for sales returns and discounts

     356,963       89,241       48,607       12,152  

Others

     161,407       40,352       38,457       9,614  

Loss carryforward

     7,821,000       1,955,250       13,666,452       3,420,000  

Investment tax credits

             5,449,371               3,249,532  

Valuation allowance

             (5,169,653 )             (3,249,532 )
            


         


Net

           $ 2,233,659             $ 3,507,296  
            


         


Non-current items:

                                

Temporary difference

                                

Depreciation

   $ (21,759,998 )   $ (5,440,000 )   $ (17,837,568 )   $ (4,459,392 )

Pension

     1,807,268       451,817       1,516,480       379,120  

Others

     10,830       2,707       16,679       4,169  

Loss carryforward

     7,224,502       1,806,126       4,422,679       1,102,283  

Investment tax credits

             16,047,750               17,144,443  

Valuation allowance

             (7,086,912 )             (9,662,772 )
            


         


Net

           $ 5,781,488             $ 4,507,851  
            


         


 

The Company’s income tax returns for all fiscal years through 1999 have been assessed and approved by the Tax Authority.

 

Pursuant to the “Statute for the Establishment and Administration of Science-Based Industrial Park”, the Company was granted several four-year income tax exemption periods with respect to income derived from expansion of operations located in Hsinchu Science-Based Industrial Park. The starting date of the exemption period attributable to the expansion in 1999 has not yet been decided by the Company. The other exemption periods will expire in December 2007.

 

An enterprise earns an investment tax credit for the amount invested in production equipment, research and development expenditure, employee training expenditure and other related costs. This credit may be applied over a period of five years.

 

23


As of March 31, 2003, the Company’s unused investment tax credit is as follows:

 

Expiration Year


   Investment
tax credits


2003

   $ 3,974,393

2004

     5,899,913

2005

     3,393,150

2006

     5,946,406

2007

     2,283,259
    

     $ 21,497,121
    

 

Under the rules of Income Tax Law, operating loss can be carried forward for 5 years. As of March 31, 2003, the unutilized accumulative loss brought forward amounted to NT$15,046 million, which will expire in 2006 and 2007.

 

The new Taiwan imputation tax system requires that any undistributed current earnings, on tax basis of a company derived on or after January 1, 1998, be subject to an additional 10% corporate income tax if the earnings are not distributed before a specific time. This 10% additional tax on undistributed earnings paid by the Company can be used as tax credit by shareholders, including foreign shareholders, against the withholding tax on dividends. In addition, the domestic shareholders can claim a proportionate share in the Company’s corporate income tax as tax credit against its individual income tax liability effective 1998.

 

The ending balance of unappropriated earnings available for 2003 appropriation amounted to NT$8,686 million, of which NT$64 million was earned prior to January 1, 1998.

 

As of March 31, 2003, the balance of imputation credit account (“ICA”) was NT$92 million. The expected creditable ratio for the appropriation of 2002 retained earnings was 1.07% while the actual creditable ratio for the appropriation of 2001 retained earnings was 1.79%.

 

24


(17)   EARNINGS PER SHARE

 

  a.   The calculation of basic and diluted earnings per share, for the three-month periods ended March 31, 2003 and 2002, is disclosed as follows:

 

     For the three-month period
ended March 31,


     2003

   2002
(retroactively
adjusted)


     (shares expressed in thousands)

Income before income taxes

   $ 404,332    $ 218,308

Net income

     402,687      215,982

Effect of dilution:

             

Employee stock options

     —        —  

Adjusted income before income taxes assuming dilution

     404,332      218,308

Adjusted net income assuming dilution

     402,687      215,982

Weighted average number of shares

     14,726,503      14,786,324

Effect of dilution:

             

Employee stock options

     37,449      —  

Adjusted weighted average number of shares assuming dilution

     14,763,952      14,786,324

Earnings per share-basic and diluted (in NTD)

             

Income before income taxes

   $ 0.03    $ 0.01
    

  

Net income

   $ 0.03    $ 0.01
    

  

 

  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 three-month period
ended March 31, 2003


 
     Basic

    Diluted

 
     (shares expressed in thousands)  

Net income

   $ 402,687     $ 402,687  
    


 


Outstanding weighted average shares at beginning

     15,238,579       15,238,579  

Weighted average treasury stock purchased during the period

     (10,397 )     (10,397 )

Weighted average employee stock options accounted for under the treasury stock method

     —         37,449  
    


 


Outstanding weighted average shares

     15,228,182       15,265,631  
    


 


Earnings per share (in NTD)

                

Net income

   $ 0.03     $ 0.03  
    


 


 

25


     For the three-
month period ended
March 31, 2002


 
     Basic and diluted

 
     (shares expressed
in thousands)
 

Net income

   $ 215,982  
    


Outstanding weighted average shares at beginning

     15,315,821  

Weighted average treasury stock purchased during the period

     (22,147 )
    


Outstanding weighted average shares

     15,293,674  
    


Earnings per share (in NTD)

        

Net income

   $ 0.01  
    


 

5.    RELATED PARTY TRANSACTIONS

 

  (1)   Name and Relationship of Related Parties

 

Name of related parties


 

Relationship with the Company


UMC Group (USA) (UMC-USA)

  Investee company

UMC Japan (UMCJ)

  Investee company

DuPont Photomasks Taiwan Ltd. (DPT)

  Investee company

Holtek Semiconductor Inc. (Holtek)

  Investee company

Faraday Technology Corp. (Faraday)

  Investee company

MediaTek Incorporation (MediaTek)

  The Company is its supervisor

Industrial Bank of Taiwan Corp. (IBT)

  The Company is its major shareholder

Chiao Tung Bank (Chiao Tung)

  The Company is its parent company’s director and supervisor

Shin-Etsu Handotai Taiwan Co., Ltd. (Shin-Etsu)

  The Company’s investee is its director

 

  (2)   Significant Related Party Transactions

 

a.    Operating revenues

 

     For the three-month period ended March 31,

     2003

   2002

     Amount

   Percentage

   Amount

   Percentage

UMC-USA

   $ 7,064,406    39    $ 4,020,758    33

MediaTek

     1,708,418    10      1,958,637    16

Others

     2,931,012    16      1,801,734    15
    

  
  

  

Total

   $ 11,703,836    65    $ 7,781,129    64
    

  
  

  

 

26


The sales to the above related parties were dealt with in the ordinary course of business with the sales price made in the way similar to the sales to third-party customers. The collection period for overseas sales was net 45 days for the related parties and third-party customers, while the terms for domestic sales were month-end 30~60 days for both the related parties as well as the third-party customers.

 

b.   Purchases

 

     For the three-month period ended March 31,

     2003

   2002

     Amount

   Percentage

   Amount

   Percentage

Shin-Etsu

   $ 536,742    13    $ 607,758    21

Others

     39,861    1      60,982    2
    

  
  

  

Total

   $ 576,603    14    $ 668,740    23
    

  
  

  

 

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 purchase from overseas were net 30~90 days for the related parties and third-party suppliers, while the terms for domestic purchase were month-end 30~90 days for the related parties and third-party suppliers.

 

c.   Notes receivable

 

     As of March 31,

     2003

   2002

     Amount

   Percentage

   Amount

   Percentage

Holtek

   $ 71,432    41    $ 79,966    41

Others

     1,221    1      17,591    9
    

  
  

  

Total

   $ 72,653    42    $ 97,557    50
    

  
  

  

 

d.   Accounts receivable, net

 

     As of March 31,

     2003

   2002

     Amount

    Percentage

   Amount

    Percentage

UMC-USA

   $ 4,262,395     35    $ 1,901,826     28

MediaTek

     1,246,706     10      1,286,029     19

Others

     2,503,081     21      1,267,968     18
    


 
  


 

Subtotal

     8,012,182     66      4,455,823     65
            
          

Less: Allowance for sales returns and discounts

     (345,606 )          (48,607 )    

Less: Allowance for doubtful accounts

     (100,237 )          (99,854 )    
    


      


   

Net

   $ 7,566,339          $ 4,307,362      
    


      


   

 

27


e.   Other accounts receivable, net

 

     As of March 31,

     2003

   2002

     Amount

    Percentage

   Amount

    Percentage

UMCJ

   $ 140,067     12    $ 318     —  

Others

     55,658     5      26,986     5
    


 
  


 

Subtotal

     195,725     17      27,304     5
            
          

Less: Allowance for doubtful accounts

     (2,218 )          (439 )    
    


      


   

Net

   $ 193,507          $ 26,865      
    


      


   

 

f.   Accounts payable

 

     As of March 31,

     2003

   2002

     Amount

   Percentage

   Amount

   Percentage

Shin-Etsu

   $ 436,018    14    $ 518,333    21

Others

     18,524    1      32,868    1
    

  
  

  

Total

   $ 454,542    15    $ 551,201    22
    

  
  

  

 

g.   Loans

 

     For the three-month period ended March 31, 2003

     Maximum balance

  

Ending

balance


  

Interest

rate


  

Interest

expense


     Amount

   Month

        

Chiao Tung

   $ 868,195    January    $ 827,347    2.07% ~ 3.00%    $ 4,288

IBT

     783,296    January      467,841    2.54% ~ 2.89%      2,022
                

       

                 $ 1,295,188         $ 6,310
                

       

                                
     For the three-month period ended March 31, 2002

     Maximum balance

  

Ending

balance


  

Interest

rate


  

Interest

expense


     Amount

   Month

        

Chiao Tung

   $ 1,224,575    January    $ 1,198,417    3.88% ~ 4.00%    $ 11,963

IBT

     998,750    January      953,295    3.81% ~ 3.94%      9,394
                

       

                 $ 2,151,712         $ 21,357
                

       

 

h.   Disposal of property, plant and equipment

 

     For the three-month period ended March 31, 2003

     Item

   Proceeds

   Gain

UMCJ

   Machinery and equipment    $ 140,546    $ 1,565
         

  

 

28


The Company had no significant disposal of property, plant and equipment to related parties for the three-month period ended March 31, 2002.

 

i.   Other transactions

 

The Company has made several other transactions, including service charges, joint intellectual property development contracts, processing expenditures and commissions etc., with related parties for an approximate total of NT$56 million and NT$38 million for the three-month periods ended March 31, 2003 and 2002, respectively.

 

Among the transactions, the Company has entered into joint intellectual property development contracts, amounting to approximately NT$1,229 million, with Faraday. As of March 31, 2003, a total amount of NT$356 million was paid. In addition, the Company has purchased approximately NT$133 million and NT$232 million of supplies from DPT during the three-month periods ended March 31, 2003 and 2002, respectively.

 

6.   ASSETS PLEDGED AS COLLATERAL

 

     As of March 31,

    
     2003

   2002

   Subject of collateral

Land

   $ 452,915    $ 452,915    Long-term loans

Buildings

     2,495,015      3,664,502    Long-term loans

Machinery and equipment

     17,360,803      28,815,987    Long-term loans
    

  

    

Total

   $ 20,308,733    $ 32,933,404     
    

  

    

 

7.   COMMITMENTS AND CONTINGENT LIABILITIES

 

  (1)   The Company’s unused letters of credit for imports of machinery and equipment were approximately NT$327 million as of March 31, 2003.

 

  (2)   The Company has entered into contracts, amounting to approximately NT$15.7 billion, with third parties for rights to use patents registered by the third parties. The contract period is from 1995 to 2011. Royalty payables for the consecutive 5 years starting from April 1, 2003 are approximately NT$2.7 billion, NT$1.3 billion, NT$1.3 billion, NT$1.2 billion, and NT$1.3 billion, respectively.

 

  (3)   The Company has signed several construction contracts for the expansion of its factory. As of March 31, 2003, these construction contracts amounted to approximately NT$1.05 billion and the unaccrued portion of the contracts was approximately NT$0.2 billion.

 

29


(4)   On October 27, 1997, Oak Technology Inc. (“Oak”) filed a complaint seeking damages of US$750 million in the Northern District of California alleging that the Company breached a Settlement Agreement entered on July 31, 1997 with respect to a settlement of a dispute between the Company and Oak concerning certain CD ROM controller products made by the Company and a patent owned by Oak. The Company denied Oak’s allegations and on December 24, 1997, filed its answer and affirmative defenses refuting Oak’s claims. Based on the allegations that it is Oak which has breached the Settlement, the Company simultaneously filed a counterclaim against Oak, seeking damages and a return of the millions paid to Oak under the Settlement. In addition, the Company further seeks a declaration that the Oak patent is invalid and/or unenforceable. Though Oak filed a complaint later with the International Trade Commission (“ITC”) repeating the allegations made in the District Court, both the ITC and the Court of Appeals for the Federal Circuit issued a ruling affirming that there was no infringement and no violation.

 

Oak filed enforceable commitments that it would no longer seek recoveries in connection with the Oak patent and accordingly, the District Court concluded there was no longer dispute between Oak and United Microelectronics on the patent and the Company’s claim for a declaration of invalidity and unenforceability will be dismissed. The Company intends to continue to defend these matters vigorously. Furthermore, the management does not believe the Oak complaints will have any material adverse impact on the Company’s operations and/or financial performance.

 

(5)   The Company entered into several operating lease contracts for land. Future minimum lease payments under those leases with original maturities, which extend for more than one year as of March 31, 2003, are as follows:

 

        For the twelve-month period ended


 

Amount (in billion NTD)


March 31, 2004

  $0.12

March 31, 2005

    0.12

March 31, 2006

    0.12

March 31, 2007

    0.11

March 31, 2008

    0.10

April 1, 2008 and thereafter

    0.82
   

Total

  $1.39
   

 

(6)  

The Company entered into several wafer-processing contracts with its main clients. According to the contracts, the Company shall guarantee processing capacity, while the clients make deposits to the Company. In case the clients’ orders do not meet the capacity

 

30


 

guaranteed, the client needs to pay the Company penalties.

 

(7)   As a condition precedent to the making of the loan contemplated by a US$600 million Amortizing Term Loan Facility Agreement among UMCi Pte. Ltd. (UMCi), a subsidiary of the Company, and several financial institutions, the Company has provided a letter of undertaking to the financial institutions and Citicorp Investment Bank (Singapore) Ltd., the facility agent, to undertake that:

 

  a.   The Company shall continue to own and control, directly or indirectly, a minimum of 40% of the total issued and outstanding shares of UMCi. The Company shall also provide technical support to UMCi and maintain management control with no less than half of the seats of the board of directors.

 

  b.   The Company shall take necessary actions to ensure UMCi to have at least US$600 million of issued and paid-in capital in cash by December 31, 2003, to make investments necessary to complete the 300mm fab plant on time, and to meet all the obligations under the Facility Agreement.

 

8.   SIGNIFICANT DISASTER LOSS

 

None.

 

9.   SIGNIFICANT SUBSEQUENT EVENT

 

None.

 

10.   OTHERS

 

  (1)   Certain comparative amounts have been reclassified to conform to the current period’s presentation.

 

31


  (2)   Financial instruments

 

     As of March 31,

     2003

   2002

        Financial Assets


   Book Value

   Fair Value

   Book Value

   Fair Value

Cash and cash equivalents

   $ 58,570,264    $ 58,570,264    $ 60,812,323    $ 60,812,323

Marketable securities

     2,840,920      2,854,425      49,900      93,443

Receivables

     13,536,108      13,536,108      7,676,999      7,676,999

Long-term investments

     60,712,395      71,560,954      57,638,794      140,379,371

        Financial Liabilities


                   

Payables

     12,063,136      12,063,136      17,839,440      17,839,440

Bonds payable (current portion included)

     46,660,148      47,596,581      39,616,440      42,085,339

Long-term loans (current portion included)

     12,130,908      12,130,908      18,024,608      18,024,608

 

The methods and assumptions used to measure the fair value of financial instruments are as follows:

 

i.   The carrying amounts of short-term financial assets and liabilities (excluding marketable securities) approximate fair values due to their short maturities.

 

ii.   The fair values of marketable securities and long-term investments are based on the market value of the securities or, if market value is unavailable, the net equities of the investee companies are used as fair values.

 

iii.   The fair value of bonds payable is determined by the market value.

 

iv.   The carrying value of long-term loans approximates the fair value as the loans bear floating rates.

 

32


(3)   The Company held several credit-linked deposits principally for the earning of interest income. Details are disclosed as follows:

 

  a.   Principal amount in original currency (in thousands)

 

     As of March 31,

     2003

   2002

Credit-linked deposits referenced to


   Principal amount

   Principal amount

Domestic bonds (in NTD)

   $ 200,000    $ —  

Euro convertible bonds (in NTD)

     100,000      —  

Euro convertible bonds (in USD)

     147,500      70,000

Euro convertible bonds (in JPY)

     2,000,000      1,000,000

 

  b.   Credit Risk

 

The counter parties of the above investments are major international financial institutions. The repayment in full of these deposits is subject to the non-occurrence of one or more credit events, which are referenced to the entities’ fulfillment of their own obligations as well as repayment of their corporate bonds. Upon the occurrence of one or more of such credit events, the Company may receive nil or less than full amount of these deposits. The Company has undertaken to minimize the credit risk by selecting reference entities with high credit ratings.

 

  c.   Liquidity Risk

 

Though early withdrawal is not allowed for the above credit-linked deposits unless called by the issuer, the anticipated liquidity risk is low as most of the contracts are mature within one year.

 

  d.   Market Risk

 

There is no market risk for the above investments except for the fluctuations in the exchange rates of US dollars and Japanese Yen to NT dollars.

 

33


11.   ADDITIONAL DISCLOSURES

 

  (1)   The followings are the additional disclosures for United Microelectronics and its affiliates pursuant to ROC Securities and Futures Commission requirements:

 

  a.   Loans to others attributed to financial activities as of March 31, 2003: Please see Attachment-1.

 

  b.   The endorsements and guarantees provided to others as of March 31, 2003: Please see Attachment-2.

 

  c.   The ending balance of securities held as of March 31, 2003: Please see Attachment-3.

 

  d.   The cumulative buying or selling of one specific security exceeding the lower of NT$100 million or 20 percent of the capital stock for the three-month period ended March 31, 2003: Please see Attachment-4.

 

  e.   Acquisition of real estate with an amount exceeding the lower of NT$100 million or 20 percent of capital stock for the three-month period ended March 31, 2003: Please see Attachment-5.

 

  f.   Disposal of real estate with an amount exceeding the lower of NT$100 million or 20 percent of capital stock for the three-month period ended March 31, 2003: Please see Attachment-6.

 

  g.   Related party transactions for purchases and sales amounts exceeding the lower of NT$100 million or 20 percent of capital stock for the three-month period ended March 31, 2003: Please see Attachment-7.

 

  h.   Receivables from related parties exceeding the lower of NT$100 million or 20 percent of capital stock as of March 31, 2003: Please see Attachment-8.

 

  i.   Related information on investee companies as of March 31, 2003: Please see Attachment-9.

 

  j.   Financial instruments: Please see Note 10.

 

  (2)   Investment in Mainland China

 

None.

 

34


ATTACHMENT- 1 (Loans to others attributed to financial activities as of March 31, 2003) (Amounts in thousand NTD unless otherwise stated)

No.


 

Name of the
lending
company


  Name of the
borrowers


  Accounts
name


 

The highest balance
during the three-
month period ended

March 31, 2003


  Ending
balance


  Interest
rate


    Nature
of
financing


  Yearly amount
of sales to
(purchase from)
the borrower


  Reason of
lending


  Bad debt
allowance
provided


  Collateral

  Value of
collateral


  Credit limit
set up by
the Company
for its
respective
borrower


  Ceiling
of fund
financing


1

  UMC Group (USA)   Employees   Receivable from
employees’ loans
  USD 876K   USD 876K   7.00 %   Note 1   None   Employee loan   —     Securities   Higher than
loan amount
  N/A   N/A

2

  UMCi Pte. Ltd.   Infineon Technologies,
Asia Pacific Pte Ltd.
  Other receivable   USD 55,000K   USD 55,000K   Note 2     Note 1   None   Company’s loan   —     None   N/A   N/A   N/A

Note 1: Need for short-term financing.

Note 2: 1.32%, based on 3-month LIBOR.

 

35


ATTACHMENT-2 (The endorsements and guarantees provided by the Company to others as of March 31, 2003) (Amount in thousand NTD unless otherwise stated)

 

No.


   Guarantor

   Guarantee

   Relationship
with the
Company


   Limit of
guarantee
for such
party


  

The highest outstanding

guarantee amount during

the three-month period

ended March 31,2003


   Outstanding
guarantee amount
at March 31, 2003


   Amount of
guarantee with
collateral placed


   Ratio of accumulated
guarantee amount to
net value of the Company


  

Ceiling of the

outstanding
guarantee

for the
respective party


None

                                            

 

36


ATTACHMENT-3 (The ending balance of securities held by the Company as of March 31, 2003) (Amount in thousand NTD unless otherwise stated)

 

                March 31, 2003

   
Types of
marketable
securities


  Name of marketable securities

  Relationship of the
issuers with the
Company


  General ledger accounts

  Number of
shares/
units (in
thousands)


  Book value

  Percentage

  Market
value


  Shares as
collateral
(in
thousands)


United Microelectronics Corporation

                   

Convertible bonds

  China Development Financial Holding
Corporation
  None   Short-term investment   60,000   2,052,000   N/A   2,068,105   None

Convertible bonds

  SpringSoft Inc.   None   Short-term investment   12,000   418,800   N/A   416,520   None

Convertible bonds

  King Yuan Electronics Co., Ltd.   None   Short-term investment   —     370,120   N/A   369,800   None

Stock

  UMC Group (USA)   Investee company   Long-term investment   16,438   469,865   100.00   N/A   None

Stock

  United Foundry Service, Inc.   Investee company   Long-term investment   2,005   92,596   100.00   N/A   None

Stock

  UMC Capital Corporation   Investee company   Long-term investment   30,000   1,022,326   100.00   N/A   None

Stock

  United Microelectronics Corp.
(Samoa)
  Investee company   Long-term investment   500   4,929   100.00   N/A   None

Stock

  United Microelectronics (Europe)
B.V.
  Investee company   Long-term investment   9   199,830   100.00   N/A   None

Stock

  Fortune Venture Capital Corporation   Investee company   Long-term investment   299,994   2,990,577   99.99   N/A   None

Stock

  Hsun Chieh Investment Co., Ltd.   Investee company   Long-term investment   1,417,294   10,354,482   99.97   N/A   None

Stock

  United Microdisplay Optronics Corp.   Investee company   Long-term investment   76,499   659,722   85.00   N/A   None

Stock

  Pacific Venture Capital Co., Ltd.   Investee company   Long-term investment   30,000   307,407   49.99   N/A   None

Stock

  UMCi Pte. Ltd.   Investee company   Long-term investment   211,871   7,014,331   49.74   N/A   None

Stock

  UMC Japan   Investee company   Long-term investment   484   8,033,040   47.59   8,689,087   None

Stock

  DuPont Photomasks Taiwan Ltd.   Investee company   Long-term investment   99,748   1,126,882   45.51   N/A   None

Stock

  Unitech Capital Inc.   Investee company   Long-term investment   21,000   732,911   42.00   N/A   None

Stock

  Novatek Microelectronics Corp.   Investee company   Long-term investment   74,911   1,298,692   25.93   4,756,823   None

Stock

  Holtek Semiconductor Inc.   Investee company   Long-term investment   44,854   582,067   25.61   1,088,244   None

Fund

  Pacific United Technology, L.P.   None   Long-term investment   —     34,600   25.00   N/A   None

Stock

  Integrated Technology Express Inc.   Investee company   Long-term investment   24,111   325,390   24.58   545,033   None

Stock

  Unimicron Technology Corp.   Investee company   Long-term investment   168,930   3,063,883   23.81   2,631,757   None

Stock

  Applied Component Technology
Corp.
  Investee company   Long-term investment   11,512   86,541   22.57   123,234   None

Stock

  Faraday Technology Corp.   Investee company   Long-term investment   33,710   609,233   19.71   2,684,792   None

Stock

  PixTech, Inc.   None   Long-term investment   9,883   —     17.63   995   None

Stock

  Integrated Telecom Express, Inc.   Investee company   Long-term investment   7,000   583,482   16.42   455,982   None

GDS and stock

  Silicon Integrated Systems Corp.   Investee company   Long-term investment   216,435   5,601,339   16.18   5,438,045   None

Stock

  AMIC Technology (Taiwan), Inc.   Investee company   Long-term investment   16,200   56,042   13.62   N/A   None

Stock

  Archtek Telecom Corporation   Investee company   Long-term investment   7,100   —     13.24   N/A   None

Stock

  MediaTek Incorporation   The Company is
its supervisor
  Long-term investment   60,456   1,206,670   13.13   16,222,169   None

Stock

  AU Optronics Corp.   The Company is
its director and
supervisor
  Long-term investment   455,276   6,759,855   11.37   9,565,354   None

Stock

  Sino-Aerospace Investment Corp.   None   Long-term investment   28,500   —     11.11   N/A   None

 

37


ATTACHMENT-3 (The ending balance of securities held by the Company as of March 31, 2003) (Amount in thousand NTD unless otherwise stated)

 

                March 31, 2003

   
Types of
marketable
securities


  Name of marketable securities

  Relationship of the issuers
with the Company


  General ledger accounts

  Number of
shares/
units (in
thousands)


  Book
value


  Percentage

  Market
value


  Shares as
collateral
(in
thousands)


United Microelectronics Corporation

                   

Fund

  Pacific Technology Partners, L.P.   None   Long-term investment   —     238,628   9.85   N/A   None

Stock

  Aptos Corp.   None   Long-term investment   1,772   30,302   9.68   N/A   None

Stock

  Vialta, Inc.   None   Long-term investment   8,360   622,835   8.90   116,371   None

Stock

  United Industrial Gases Co., Ltd.   None   Long-term investment   13,185   146,250   8.44   N/A   None

Stock

  TECO Nanotech Co., Ltd.   None   Long-term investment   19,417   —     8.05   N/A   None

Stock

  Subtron Technology Co., Ltd.   None   Long-term investment   16,000   240,000   7.41   N/A   None

Stock

  Industrial Bank of Taiwan Corp.   The Company is its major
shareholder
  Long-term investment   119,425   1,150,000   5.00   N/A   None

Stock

  TECO Electric & Machinery Co.,
Ltd.
  The Company is its director
and supervisor
  Long-term investment   77,069   1,535,099   4.02   845,217   None

Stock

  Billionton Systems Inc.   None   Long-term investment   1,538   30,948   3.93   32,345   None

Stock

  Mega Financial Holding
Company
  The Company is its director
and supervisor
  Long-term investment   91,901   3,108,655   0.83   1,505,886   None

Stock

  Premier Image Technology
Corporation
  None   Long-term investment   2,940   27,964   0.64   141,867   None

Stock

  SAMPO Corporation   None   Long-term investment   5,158   65,022   0.50   60,510   None

Preferred stock

  Tonbu, Inc.   None   Long-term investment   938   —     —     N/A   None

Preferred stock

  Taiwan High Speed Rail
Corporation
  None   Long-term investment   30,000   300,000   —     N/A   None

Hsun Chieh Investment Co., Ltd.

                   

Stock

  Shanghai Fudan Microelectronics
Co., Ltd
  None   Short-term investment   7,280   20,530   1.17   20,530   None

Stock

  Sigence Inc.   Investee company   Long-term investment   1,880   18,795   94.00   N/A   None

Stock

  Chariotek Inc.   Investee company   Long-term investment   2,850   28,500   47.50   N/A   None

Stock

  Afa Technology, Inc.   Investee company   Long-term investment   2,365   20,567   47.30   N/A   None

Stock

  Star Semiconductor Corp.   Investee company   Long-term investment   2,203   21,659   46.82   N/A   None

Stock

  Ubit Technology Inc.   Investee company   Long-term investment   1,990   19,900   39.80   N/A   None

Stock

  VistaPoint, Inc.   Investee company   Long-term investment   2,852   18,294   35.65   N/A   None

Stock

  UC Fund II   Investee company   Long-term investment   5,000   164,162   35.45   N/A   None

Stock

  VastView Technology Inc.   Investee company   Long-term investment   5,210   62,215   34.73   N/A   None

Stock

  Accelerated Communications,
Inc.
  Investee company   Long-term investment   10,000   99,972   33.33   N/A   None

Stock

  RiRa Electronics Inc.   Investee company   Long-term investment   6,499   43,355   32.50   N/A   None

Stock

  United Radiotek Incorporation   Investee company   Long-term investment   2,937   21,796   29.37   N/A   None

Stock

  Ayuttha Technology Corp.   Investee company   Long-term investment   2,730   40,950   27.30   N/A   None

Stock

  Wiseware Technology
Corpporation
  Investee company   Long-term investment   3,750   37,500   25.00   N/A   None

Stock

  High Bandwidth Access, Inc   Investee company   Long-term investment   7,213   43,710   20.04   N/A   None

Stock

  Giga Solution Tech. Co., Ltd.   The Company is its director   Long-term investment   8,750   105,000   19.44   N/A   None

 

38


ATTACHMENT - 3 (The ending balance of securities held by the Company as of March 31, 2003) (Amount in thousand NTD unless otherwise stated)

 

                March 31, 2003

   
Types of
marketable
securities


  Name of marketable securities

  Relationship of the issuers
with the Company


  General ledger accounts

  Number of
shares/units
(in thousands)


  Book value

  Percentage

  Market value

  Shares as
collateral
(in thousands)


Hsun Chieh Investments Co., Ltd.

                       

Stock

  Harvatek Corp.   Investee company   Long-term investment   15,774   297,073   21.24   796,152   None

Stock

  Patentop, Ltd.   Investee company   Long-term investment   720   11,688   18.00   N/A   None

Stock

  Kits On Line Technology Corp.   The Company is its director   Long-term investment   3,200   38,656   16.41   N/A   None

Stock

  Aptos Corp.   None   Long-term investment   3,000   81,774   16.39   N/A   None

Stock

  InComm Technologies Co., Ltd.   The Company is its director   Long-term investment   3,200   44,480   16.00   N/A   None

Stock

  Advance Materials Corporation   Investee company   Long-term investment   14,994   166,443   15.78   N/A   None

Stock

  Everglory Resource Technology Co., Ltd.   None   Long-term investment   3,700   74,000   15.14   N/A   None

Stock

  Enovation Group Inc.   None   Long-term investment   1,148   11,809   14.34   N/A   None

Stock

  Unimicron Technology Corp.   Investee company to UMC   Long-term investment   88,440   1,566,383   12.47   1,377,799   None

Stock

  Integrated Photonics, Inc.   None   Long-term investment   300   —     11.46   N/A   None

Stock

  SerComm Corporation   Investee company   Long-term investment   8,367   173,513   11.13   236,587   None

Stock

  Golden Technology Venture Capital Investment Corp.   The Company is its director   Long-term investment   8,000   80,000   10.67   N/A   None

Stock

  PrintTek International Inc.   The Company is its director
and supervisor
  Long-term investment   3,000   30,000   10.53   N/A   None

Stock

  NCTU Spring I Technology Venture Capital
Investment Corp.
  None   Long-term investment   4,284   43,482   10.06   N/A   None

Stock

  Archtek Telecom Corporation   Investee company to UMC   Long-term investment   5,300   66,886   9.89   N/A   None

Stock

  RF Integration Corporation   The Company is its director   Long-term investment   3,900   98,610   9.76   N/A   None

Stock

  Ascend Semiconductor Corp.   The Company is its director
and supervisor
  Long-term investment   1,440   14,400   9.00   N/A   None

Stock

  Union Technolgy Corporation   None   Long-term investment   1,800   18,000   9.00   N/A   None

Stock

  Vialta, Inc.   None   Long-term investment   8,360   625,622   8.90   116,371   None

Stock

  Fortune Semiconductor Corporation   The Company is its director   Long-term investment   1,700   71,500   8.72   N/A   None

Stock

  ProSys Technology Integration, Inc.   None   Long-term investment   1,200   4,258   6.70   N/A   None

Stock

  NCTU Spring Venture Capital Co., Ltd.   The Company is its director   Long-term investment   2,000   20,000   6.28   N/A   None

Stock

  Faraday Technology Corp.   Investee company to UMC   Long-term investment   10,085   1,198,849   5.90   803,212   None

Stock

  Advanced Microelectronic Products, Inc.   None   Long-term investment   7,420   126,000   5.50   N/A   None

Stock

  Cosmos Technology Venture Capital Investment Corp.   The Company is its director   Long-term investment   4,000   40,000   5.03   N/A   None

Stock

  Parawin Venture Capital Corp.   The Company is its director   Long-term investment   5,000   50,000   5.00   N/A   None

Stock

  Leadtek Resarch Inc.   None   Long-term investment   5,707   99,875   4.78   100,363   None

Stock

  Coretronic Corporation   The Company is its director
and supervisor
  Long-term investment   14,865   276,192   4.59   378,429   None

Stock

  UMC Japan   Investee company to UMC   Long-term investment   45   777,392   4.41   805,102   None

 

39


ATTACHMENT-3 (The ending balance of securities held by the Company as of March 31, 2003) (Amount in thousand NTD unless otherwise stated)

 

                   March 31, 2003

    

Types of

marketable

securities


   Name of marketable securities

 

Relationship of the issuers with the

Company


   General ledger accounts

  

Number of

shares/units

(in thousands)


   Book
Value


   Percentage

   Market value

  

Shares as

collateral

(in
thousands)


Hsun Chieh Investment Co., Ltd.

                                 

Fund

   Taiwan Asia Pacific Venture Fund   None    Long-term investment    115    29,295    4.15    N/A    None

Stock

   IBT Venture Co.   The Company is its director    Long-term investment    9,000    90,000    3.81    N/A    None

Stock

   Ultra Chip Inc.   None    Long-term investment    2,000    38,000    3.70    N/A    None

Stock

   Subtron Technology Co., Ltd.   The Company is its director and supervisor    Long-term investment    7,800    99,000    3.61    N/A    None

Stock

   United Microelectronics Corporation   Investor company    Long-term investment    484,045    29,592,654    3.13    9,810,149    None

Stock

   Prokia Technology Co., Ltd.   None    Long-term investment    4,000    48,000    3.13    N/A    None

Stock

   Hantek Technology Co., Ltd.   None    Long-term investment    1,623    42,330    2.70    N/A    None

Stock

   Integrated Telecom Express, Inc.   Investee company to UMC    Long-term investment    1,113    132,726    2.61    72,501    None

Stock

   Sheng-Hua Venture Capital Corp.   None    Long-term investment    5,000    50,000    2.50    N/A    None

Stock

   Holtek Semiconductor Inc.   Investee company to UMC    Long-term investment    3,797    93,801    2.17    92,123    None

Stock

   Pixart Imaging Inc.   None    Long-term investment    780    10,140    1.95    N/A    None

Stock

   Largan Optoelectronics, Co., Ltd.   The Company is its director    Long-term investment    1,235    79,989    1.45    252,006    None

Stock

   TECO Nanotech Co., Ltd.   None    Long-term investment    2,926    —      1.21    N/A    None

Stock

   Ingenus Corp.   None    Long-term investment    240    29,812    0.62    12    None

Stock

   Novatek Microelectronics Corp.   Investee company to UMC    Long-term investment    1,500    100,066    0.52    95,250    None

Stock

   Mega Financial Holding Company   None    Long-term investment    57,249    1,882,974    0.52    938,088    None

Stock

   King Yuan Electronics Co., Ltd.   None    Long-term investment    1,600    70,000    0.35    21,128    None

Stock

   Lattice Semiconductor Corporation   None    Long-term investment    342    45,704    0.30    88,352    None

Stock

   Princeton Technology Corporation   None    Long-term investment    211    9,839    0.23    10,440    None

Stock

   Averlogic Corporation   None    Long-term investment    40    1,391    0.19    2,086    None

Stock

   Amkor Technology, Inc.   None    Long-term investment    218    101,696    0.13    37,964    None

Stock

   Broadcom Communications   None    Long-term investment    3    7,092    —      1,505    None

Stock

   Chip Express Corporation   None    Long-term investment    2,667    68,198    —      N/A    None

Stock

   AEM Technology Inc.   None    Long-term investment    1,760    —      —      N/A    None

Stock

   Alpha & Omega Semiconductor Inc.   None    Long-term investment    1,500    46,883    —      N/A    None

Stock

   Aurora Systems, Inc.   None    Long-term investment    550    72,226    —      N/A    None

Stock

   ChinaYES InfoMedia (Cayman), Inc.   None    Long-term investment    10,000    63,146    —      N/A    None

Stock

   Formerica International Holding, Inc.   The Company is its director    Long-term investment    2,000    30,898    —      N/A    None

Stock

   ForteMedia, Inc.   None    Long-term investment    4,000    65,000    —      N/A    None

Stock

   LightCross, Inc.   None    Long-term investment    3,896    206,880    —      N/A    None

Stock

   Linden Technologies, Inc.   None    Long-term investment    300    92,385    —      N/A    None

Stock

   NetEmpower Software Technologies, Inc.   None    Long-term investment    1,500    —      —      N/A    None

Stock

   Netlogic Microsystems, Inc.   None    Long-term investment    100    3,195    —      N/A    None

 

40


ATTACHMENT - 3 (The ending balance of securities held by the Company as of March 31, 2003) (Amount in thousand NTD unless otherwise stated)

 

                     

March 31, 2003


    

Types of marketable
securities


  

Name of marketable
securities


  

Relationship of the
issuers with the
Company


    

General ledger
accounts


  

Number of
shares/units
(in thousands)


    

Book value


  

Percentage


    

Market value


  

Shares as collateral
(in thousands)


Hsun Chieh Investment Co., Ltd.

                                        

Stock

   Primarion, Inc.    None      Long-term investment    500      38,816    —        N/A    None

Stock

   SandCraft, Inc.    None      Long-term investment    450      43,063    —        N/A    None

Stock

   Tonbu, Inc.    None      Long-term investment    2,000      —      —        N/A    None

Stock

   Triscend Corp.    None      Long-term investment    360      17,409    —        N/A    None

Fund

   VenGlobal Capital Fund III, L.P.    None      Long-term investment    —        33,195    —        N/A    None

UMC Capital Corporation

                                        

Stock

   UMC Capital (USA)    Investee company      Long-term investment    200      USD 234K    100.00      N/A    None

Stock

   Corrent Corp.    None      Long-term investment    1,732      USD 1,473K    —        N/A    None

Stock

   LightCross, Inc.    None      Long-term investment    649      USD 1,000K    —        N/A    None

Stock

   MaXXan Systems, Inc.    None      Long-term investment    1,655      USD 1,000K    —        N/A    None

Stock

   Leda Systems, Inc.    None      Long-term investment    1,600      USD 2,506K    —        N/A    None

Stock

   Virtual Silicon Technology, Inc.    None      Long-term investment    619      USD 1,000K    —        N/A    None

Stock

   Programmable Silicon Solutions    None      Long-term investment    216      USD 540K    —        N/A    None

Stock

   Integrated Optics Comm. Corp.    None      Long-term investment    2,000      USD 2,000K    —        N/A    None

Stock

   Aicent Technology, Inc.    The Company is its director      Long-term investment    2,000      USD 1,000K    —        N/A    None

Stock

   Spreadtrum Communications, Inc.    The Company is its director      Long-term investment    1,333      USD 1,000K    —        N/A    None

Stock

   WIS Technologies, Inc.    The Company is its director      Long-term investment    12,399      USD 2,000K    —        N/A    None

Stock

   Siscon 7, Inc.    The Company is its director      Long-term investment    1,203      USD 4,000K    —        N/A    None

Stock

   GCT Semiconductor, Inc.    None      Long-term investment    1,571      USD 1,000K    —        N/A    None

Fortune Venture Capital Corporation

                                        

Stock

   Aptos (Taiwan) Corporation    Investee company      Long-term investment    43,705      431,222    26.49      N/A    None

Stock

   Davicom Semiconductor, Inc.    Investee company      Long-term investment    12,200      117,206    22.96      N/A    None

Stock

   Pixart Imaging Inc.    The Company is its director      Long-term investment    6,530      105,409    16.32      N/A    None

Stock

   Thin Film Module, Inc.    The Company is its director and supervisor      Long-term investment    5,287      52,870    13.91      N/A    None

Stock

   Advance Materials Corporation    Investee company      Long-term investment    12,800      142,194    13.47      N/A    None

Stock

   AMIC Technology (Taiwan), Inc.    Investee company to UMC      Long-term investment    15,259      140,130    12.83      N/A    None

Stock

   Urex Precision, Inc.    None      Long-term investment    2,537      —      12.68      N/A    None

Stock

   High Bandwidth Access, Inc    Investee company      Long-term investment    4,308      45,017    11.97      N/A    None

Stock

   Epitech Corporation    The Company is its director and supervisor      Long-term investment    6,137      73,916    11.16      N/A    None

Stock

   Integrated Telecom Express, Inc.    Investee company to UMC      Long-term investment    4,000      334,004    9.38      260,561    None

Stock

   Shin-Etsu Handotai Taiwan Co., Ltd.    The Company is its director      Long-term investment    10,500      105,000    7.00      N/A    None

 

41


ATTACHMENT - 3 (The ending balance of securities held by the Company as of March 31, 2003) (Amount in thousand NTD unless otherwise stated)

 

                   

March 31, 2003


    

Types of marketable
securities


  

Name of marketable
securities


  

Relationship of the
issuers with the
Company


  

General ledger
accounts


  

Number of
shares/units
(in thousands)


  

Book value


  

Percentage


  

Market value


  

Shares as collateral
(in thousands)


Fortune Venture Capital Corporation

                                  

Stock

   Trident Technologies, Inc.    The Company is its director and supervisor    Long-term investment    1,350    —      6.75    N/A    None

Stock

   ProSys Technology Integration, Inc    None    Long-term investment    1,200    4,258    6.70    N/A    None

Fund

   Iglobe Partners Fund, L.P.    None    Long-term investment    —      80,603    6.30    N/A    None

Stock

   Programmable Microelectronics (Taiwan) Corp.    None    Long-term investment    3,392    33,920    6.17    N/A    None

Stock

   Averlogic Corporation    The Company is its director and supervisor    Long-term investment    1,148    24,820    5.58    59,840    None

Stock

   Vialta, Inc.    None    Long-term investment    4,180    313,205    4.45    58,186    None

Stock

   Archtek Telecom Corporation    Investee company to UMC    Long-term investment    1,800    22,716    3.36    N/A    None

Stock

   CTS Computer Technology System Corp.    None    Long-term investment    1,717    —      2.04    N/A    None

Stock

   Monterey Design Systems Inc.    None    Long-term investment    394    34,201    1.23    N/A    None

Fund

   Crystal Internet Venture Fund II    None    Long-term investment    —      41,757    0.99    N/A    None

Stock

   Cadence Design Systems, Inc.    None    Long-term investment    965    7,342    0.36    24,073    None

Stock

   United Microelectronics Corporation    Investor company    Long-term investment    17,633    171,857    0.11    357,375    None

Stock

   SpringSoft Inc.    None    Long-term investment    88    1,621    0.10    6,317    None

Stock

   Triscend Corporation    The company is its director    Long-term investment    3,500    469,902    —      N/A    None

Stock

   Aurora Systems, Inc.    None    Long-term investment    5,133    308,957    —      N/A    None

Stock

   Systematic Designs International Inc.    None    Long-term investment    1,300    —      —      N/A    None

Stock

   SiRF Technology Holdings, Inc.    None    Long-term investment    875    119,436    —      N/A    None

Stock

   Alpha & Omega Semiconductor Inc.    None    Long-term investment    1,500    46,313    —      N/A    None

Stock

   Velio Communications, Inc.    None    Long-term investment    110    30,817    —      N/A    None

Stock

   Arcadia Design Systems, Inc.    None    Long-term investment    162    26,204    —      N/A    None

Stock

   EPIC Technologies Inc.    None    Long-term investment    23    —      —      N/A    None

Stock

   Rise Technology Inc.    None    Long-term investment    500    —      —      N/A    None

Stock

   The 3CX U.S.A.    None    Long-term investment    513    —      —      N/A    None

UMC Japan

                                       
                                         

Bond

   Morgan Stanley Repackage Bond    None    Long-term investment    —      ¥2,000,000K    —      N/A    None

 

42


ATTACHMENT-4 (The cumulative buying or selling of one specific security exceeding the lower of NT$100 million or 20 percent of the capital stock for the three-month period ended March 31,2003)

 

(Amount in thousand NTD unless otherwise stated)

 

         Beginning balance

    Addition

    Disposal

  Ending balance

 
Types of
marketable
securities


   Name of the securities

  Number of shares
(in thousands)


  Amount

    Number of shares
(in thousands)


  Amount

    Number of shares
(in thousands)


  Amount

    Cost

    Gain (Loss)
from disposal


  Number of shares
(in thousands)


  Amount

 

United Microelectronics Corporation

                                                     

Convertible bonds

   King Yuan Electronics
Co., Ltd.
  —       —       —     370,120     —       —         —       —     —       370,120  

Stock

   UMC Japan   479     7,857,204     5   120,560     —       —         —       —     484     8,033,040 (Note 1)
GDS and stock    Silicon Integrated
Systems Corp.
  48,483     1,267,580     167,952   4,392,733     —       —         —       —     216,435     5,601,339 (Note 2)

Stock

   Taiwan High Speed
Rail Corporation
  —       —       30,000   300,000     —       —         —       —     30,000     300,000  

Stock

   SAMPO Corporation   17,773     224,044     —     —       12,615     179,695       159,022     20,673   5,158     65,022  

Hsun Chieh Investment Co., Ltd.

                                                     

Stock

   Novatek
Microelelctronics Corp.
  —       —       1,500   100,066     —       —         —       —     1,500     100,066  

Stock

   Smart Idea Holding
Limited
  6,000     205,069     —     —       6,000     211,226       205,069     6,157   —       —    

UMC Japan

                                                     

Bond

   Morgan Stanley
Repackage Bond
  —     ¥ 3,000,000 K   —     —       —     ¥ 1,000,000 K   ¥ 1,000,000 K   —     —     ¥ 2,000,000 K

UMC Capital

                                                     

Stock

   Silicon 7, Inc.   —       —       1,203   USD4,000 K   —       —         —       —     1,203     USD4,000 K

Note1:   The ending balance includes long-term equity investment income of NT$77,072K, unrealized loss in long-term investment of NT$(1,945K) and cumulative translation adjustment of NT$(19,851K).
Note2:   The ending balance includes long-term equity investment loss of NT$(111,910K), investment due to unproportionate changes in ownership of NT$54,044K, unrealized loss in long-term investment of NT$(1,107K) and cumulative translation adjustment of NT$(1K).

 

43


ATTACHMENT - 5 (Acquisition of real estate with an amount exceeding the lower of NT$100 million or 20 percent of the capital stock for the first quarter of 2003) (Amount in thousand NTD unless otherwise stated)

 

Name of the properties

  Date of transaction

  Transaction
amount


  Status of
payment


  Counter party

  Relationship with
the Company


  Original owner who
sold the property to
the counter party


  Relationship of the
original owner
with the Company


  Date of the
original
transaction


  Amount of
the original
transaction


  Bases or references used
in deciding the price


  Other
commitments


United Microelectronics Corporation

                                   

Recreation Center

  2003.03.04   131,031   not fully
paid
  Yih Shin
Constrution
Co.,Ltd.
  —     —     —     —     —     cost   2003.03.04

 

44


ATTACHMENT - 6 (Disposal of real estate with an amount exceeding the lower of NT$100 million or 20 percent of the capital stock for the three-month period ended March 31, 2003) (Amount in thousand NTD unless otherwise stated)

 

Names of the properties

  Date of transaction

  Acquisition date
of the properties


  Book value

  Transaction
amount


  Status of
payment
receiving


  Gain/Loss on
disposal


  Counter party

  Relationship
with the
Company


  Reason of disposal

  Bases or references
used in deciding the
price


  Other
commitments


None

                                           

 

45


ATTACHMENT-7( Related party transactions for purchases and sales amounts exceeding the lower of NT$100 million or 20 percent of the capital stock for the three-month period ended March 31, 2003) (Amount in thousand NTD unless otherwise stated)

 

             

Transactions


   Notes & accounts receivable (payable)

Name of related parties transactions


    

Relationship with the Company


    

Purchase (Sales)


     Amount

     Percentage of
purchase (sales)


    

Term


   Balance

  Percentage of
account


United Microelectronics Corporation

                                           

UMC Group (USA)

     Investee company      Sales      7,064,406      39.47      45days    4,262,395   33.06

United Microelectronics (Europe) B.V.

     Investee company      Sales      1,241,870      6.94      45days    1,195,981   9.28

Integrated Technology Express Inc.

     Investee company      Sales      105,017      0.59      45days    70,667   0.55

Novatek Microelectronics Corp.

     Investee company      Sales      723,195      4.04      45days    467,700   3.63

Faraday Technology Corp.

     Investee company      Sales      259,495      1.45      45days    191,861   1.49

AMIC Technology (Taiwan) Inc.

     Investee company      Sales      197,504      1.10      45days    142,752   1.11

MediaTek Incorporation

     The Company is its supervisor      Sales      1,708,418      9.54      45days    1,246,706   9.67

Shin—Etsu Handotai Taiwan Co., Ltd.

     The Company’s investee is its director      Purchase      536,742      13.49      60 ~ 90 days    436,018   14.48